<PAGE>   1
                                                              Chapman and Cutler
                                                         Draft of April 16, 1996



                           PURCHASE AND SALE AGREEMENT



                                     between



                            TRENDWEST FUNDING I, INC.
                                     ("TFI")



                                       and



                               TWH FUNDING I, INC.
                                     ("SPC")



                                       and



                             TRENDWEST RESORTS, INC.
                                  ("TRENDWEST")



                                       and



                          TRI FUNDING COMPANY I, L.L.C.
                                   ("Issuer")



                            Dated as of March 1, 1996
<PAGE>   2

                                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>
SECTION                                                         HEADING                                                       PAGE

<S>                     <C>                                                                                                     <C>
ARTICLE 1               DEFINITIONS..........................................................................................    2

       Section 1.01.        Defined Terms....................................................................................    2

ARTICLE 2               ACQUISITION OF PURCHASED ASSETS......................................................................    3

       Section 2.01.        Purchase Asset Acquisition.......................................................................    3
       Section 2.02.        Grant of Security Interest.......................................................................    3
       Section 2.03.        Purchased Asset Price............................................................................    4
       Section 2.04.        Delivery of Contracts; Filing of Financing Statements............................................    4
       Section 2.05.        Servicing of Contracts and Credits...............................................................    4
       Section 2.06.        Review of Contracts..............................................................................    4

ARTICLE 3               REPRESENTATIONS AND WARRANTEES.......................................................................    5

       Section 3.01.        Representations and Warranties of the Sellers....................................................    5
       Section 3.02.        Representations and Warranties of the Issuer.....................................................   12
       Section 3.03.        Purchase or Substitution Required upon Breach of Certain
                            Representations and Warranties...................................................................   13
       Section 3.04.        Requirements for Purchase or Substitution of Receivables; Upgrades...............................   14

ARTICLE 4               COVENANTS............................................................................................   16

       Section 4.01.        Seller and Trendwest Covenants...................................................................   16
       Section 4.02.        Issuer Covenants.................................................................................   20
       Section 4.03.        Assignment of Purchased Assets...................................................................   21

ARTICLE 5               CONDITIONS PRECEDENT.................................................................................   21

       Section 5.01.        Conditions to the Issuer's Initial Obligations...................................................   21
       Section 5.02.        Conditions to the Sellers' Obligations...........................................................   22

ARTICLE 6               TERM AND TERMINATION.................................................................................   23

       Section 6.01.        Term.............................................................................................   23
       Section 6.02.        Default by the Sellers or Trendwest..............................................................   23

ARTICLE 7               MISCELLANEOUS........................................................................................   23

       Section 7.01.        Amendments.......................................................................................   23
       Section 7.02.        Governing Law....................................................................................   23
       Section 7.03.        Notices..........................................................................................   23
       Section 7.04.        Separability Clause..............................................................................   23
       Section 7.05.        Assignment.......................................................................................   24
</TABLE>


                                      -i-
<PAGE>   3
<TABLE>
<S>                         <C>                                                                                                 <C>
       Section 7.06.        Further Assurances...............................................................................   24
       Section 7.07.        No Waivers; Cumulative Remedies..................................................................   24
       Section 7.08.        Binding Effect; Third Party Beneficiaries........................................................   24
       Section 7.09.        Set-Off..........................................................................................   24
       Section 7.10.        Counterparts.....................................................................................   24
</TABLE>


ANNEX A            --  FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS
EXHIBIT A          --  FORM OF CONTRACT
EXHIBIT B          --  FORM OF ASSIGNMENT
EXHIBIT C          --  FORM OF SUBORDINATED NOTE


                                      -ii-
<PAGE>   4
         THIS PURCHASE AND SALE AGREEMENT, dated as of March 1, 1996 (this
"Agreement"), by and among Trendwest Funding, Inc., a Delaware corporation
(herein, together with its permitted successors and assigns, "TFI"), TWH Funding
I, Inc., a Delaware corporation (herein, together with its permitted successors
and assigns, "SPC" and, together with TFI, the "Sellers"), Trendwest Resorts,
Inc., an Oregon corporation (herein, together with its permitted successors and
assigns, "Trendwest") and TRI Funding Company I, L.L.C., a Delaware limited
liability company (herein, together with its permitted successors and assigns,
the "Issuer").


                              PRELIMINARY STATEMENT

         The Issuer has entered into an Indenture, dated as of March 1, 1996 (as
amended and supplemented from time to time, the "Indenture"), with LaSalle
National Bank, as trustee (herein, together with its permitted successors and
assigns, the "Trustee"), and Trendwest, as servicer (herein, together with its
permitted successors and assigns, the "Servicer"), pursuant to which the Issuer
intends to issue its Notes (collectively, the "Notes") as provided in the
Indenture.

         In furtherance thereof, the Issuer, Trendwest, and the Sellers have
entered into this Agreement to provide for, among other things, the purchase by
the Issuer of all of the right, title and interest in and to the Purchased
Assets and a security interest in the Credits, which the Issuer is pledging with
the Trustee, and in which the Issuer will be granting to the Trustee a security
interest, as security for the Notes. As a precondition to the effectiveness of
this Agreement, the Issuer, the Trustee, the Subservicer and the Servicer will
enter into the Servicing Agreement, dated as of March 1, 1996 (as amended and
supplemented from time to time, the "Servicing Agreement"), to provide for the
administration and servicing of the Purchased Assets. In connection with the
issuance of the Notes and pursuant to this Agreement, the Sellers will sell the
Purchased Assets to the Issuer. The initial sale shall be effected by this
Agreement and an Assignment from the Seller to the Issuer, and the list of
Contracts relating to the Purchased Assets so conveyed shall be listed on
Schedule I to such Assignment.

         In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the Issuer's rights derived
under this Agreement and the Servicing Agreement, and the Sellers agree that all
covenants and agreements made by it in this Agreement with respect to the
Purchased Assets shall also be for the benefit and security of the Trustee and
all holders from time to time of the Notes. In consideration for the Purchased
Assets and its representations, warranties, covenants and other agreements under
this Agreement, the Sellers will receive payment from the Issuer of all of the
proceeds of the issuance of the Notes on the Closing Date and TFI will receive
the Subordinated Note and a membership interest in the Issuer.
<PAGE>   5
                                    ARTICLE 1

                                   DEFINITIONS

            Section 1.01. Defined Terms. For purposes of this Agreement the
following terms shall have the meanings specified herein. Capitalized terms used
herein but not otherwise defined shall have the respective meanings assigned to
such terms in the Indenture.

         "Assignment" shall mean the Assignment, substantially in the form
attached hereto as Exhibit B, which shall be entered into in connection with the
conveyance of the Purchased Assets from the Sellers to the Issuer on the Closing
Date.

         "Contract File" shall mean, with respect to each Contract, the
following documents:

                           (i) a copy of the Contract;

                           (ii) notice of assignment; and

                           (iii) any other documents or papers relating to
                  servicing the Receivables.

         "Custodian" shall mean Sage Systems, Inc. and its permitted successors
and assigns.

         "Custodian File" shall mean, with respect to each Contract, the
following documents:

                           (i) the original Contract; and

                           (ii) notice of assignment.

         "Cut-Off Date" shall having the meaning set forth in the Indenture.

         "Issuer Address" shall mean 3250 Lakeport Boulevard, Klamath Falls,
Oregon 97601.

         "Electronic Ledgers" shall mean the electronic master records of all
contracts of the Issuer or the Servicer similar to and including the Contracts.

         "Eligible Contract" shall mean a Contract that satisfies the selection
criteria set forth in Section 3.01(a) hereof and which is aged at least four
months, provided that with respect to any Substitute Contract, any reference in
such Section to Cut-Off Date shall be deemed to refer to the date as of which
the Substitute Receivable is conveyed to the Issuer in accordance with Section
3.04 hereof.

         "Indenture" shall mean the Indenture, dated as of March 1, 1996, by and
among the Issuer, the Trustee and the Servicer, as amended and supplemented from
time to time.


                                      -2-
<PAGE>   6
         "Purchased Asset Price" shall mean an amount equal to the aggregate
principal amount outstanding on the Contracts as of the Cut-Off Date plus
accrued interest through the Closing Date.

         "Purchased Assets" shall mean all of the Sellers' right, title and
interest in and to (a) the Contracts and the related Receivables, including the
proceeds of the Contracts and the related Receivables and all payments received
on or with respect to the Contracts and the related Receivables and due after
the Cut-Off Date, (b) the Contract Files and the Custodian Files, (c) the
Sellers' rights and interests in the related Credits, (d) the Servicing Charges
with respect to the Contracts, (e) all rights and interests of TFI under the
Receivables Purchase Agreement, and (f) all income and proceeds of the foregoing
or relating thereto.

         "Seller Address" shall mean 12301 N.E. 10th Place, Bellevue, Washington
98005.

         "Substitute Contract" shall have the meaning set forth in Section
3.04(b) hereof.

         "Substitute Receivable" shall mean the Receivable related to a
Substitute Contract.

         "Substitution Criterion" shall have the meaning set forth in Section
3.04(b) hereof.

         "Substitution Date" shall mean the date a Contract is purchased or
substituted pursuant to Section 3.03 hereof; such date shall occur on the 25th
of each month or on the next Business Day if the 25th is not a Business Day.

         "TFI Contracts" shall mean Contracts which are sold to the Issuer under
this Agreement by TFI.

         "Upgrade" shall have the meaning set forth in the Indenture.

         "Upgrade Contract" shall have the meaning set forth in the Indenture.


                                    ARTICLE 2

                         ACQUISITION OF PURCHASED ASSETS

            Section 2.01. Purchase Asset Acquisition. In return for the
Purchased Asset Price and other rights created by this Agreement, the Sellers
hereby transfer, assign, sell, and grant, without recourse except as provided in
Section 3.03 of this Agreement, on the Closing Date any and all of the Sellers'
respective right, title and interest in and to all of the Purchased Assets
relating to the Contracts set forth on Schedule I to the Assignment. The Sellers
hereby acknowledge that the transfer of the Purchased Assets to the Issuer is
absolute and irrevocable, without reservation or retention of any interest
whatsoever by the Sellers.

            Section 2.02. Grant of Security Interest. Each of the Sellers hereby
pledge, grant and assign to the Issuer its interest in the security interest in
the related Credits to secure the Sellers' performance of its obligations
hereunder and the payment of the obligations of the


                                      -3-
<PAGE>   7
Obligors under each Contract, and this Agreement shall constitute a security
agreement for such purpose under applicable law.

            Section 2.03. Purchased Asset Price. By the execution of the
Assignment, subject to all the terms and conditions of this Agreement and in
reliance upon the representations, warranties and covenants set forth in this
Agreement, on the Closing Date, the Issuer hereby agrees to pay the Purchased
Asset Price simultaneously with the issuance of the Notes, in the case of the
Closing Date. The Purchased Asset Price shall be paid in the form of cash or in
such other form as the Sellers and the Issuer may agree.

            Section 2.04. Delivery of Contracts; Filing of Financing Statements.
(a) In connection with the Issuer's acquisition of the Purchased Assets, the
Sellers, on behalf of the Issuer, shall deliver, or cause the delivery of, the
original Contracts to the Custodian so that the Custodian may retain possession
thereof as provided in the Transaction Documents. In addition, the Sellers agree
to execute and Trendwest agrees to record and file prior to the Closing Date, at
its own expense, financing statements (and thereafter timely continuation
statements with respect to such financing statements) with respect to the
applicable Purchased Assets, in accordance with Section 3.01(a)(viii) and
Section 4.01(c) hereof.

           (b) In connection with each such acquisition, Trendwest shall
promptly, at its own expense, cause any Electronic Ledger maintained by it or
either of the Sellers to be marked to show which Purchased Assets have been
acquired by the Issuer in accordance with this Agreement and pledged by the
Issuer to the Trustee in accordance with the Transaction Documents.

           (c) It is the intention of the Sellers and the Issuer that the Issuer
is acquiring full and absolute title to the Purchased Assets. If it is
determined, however, that the Sellers have transferred to the Issuer a security
interest in the Purchased Assets, then this Agreement shall constitute a
security agreement under applicable law, and the Sellers do hereby pledge, grant
and assign to the Issuer a security interest in the Purchased Assets.

            Section 2.05. Servicing of Contracts and Credits. The Servicer shall
service the Contracts, the related Credits and the other Purchased Assets for
the benefit of the Issuer (and its successors and assigns) in accordance with
the terms and conditions of the Transaction Documents. Notwithstanding the
foregoing, Trendwest acknowledges and agrees that its obligations under this
Agreement are independent of any obligations it may have under the other
Transaction Documents and that its obligations under this Agreement will
continue in full force and effect until termination of this Agreement in
accordance with Section 6.01 hereof, unless otherwise provided herein.

            Section 2.06. Review of Contracts. If either of Trendwest or the
Custodian (who shall thereupon notify Trendwest and the Trustee) discovers that
any Contracts are missing or defective (that is, mutilated, damaged, defaced,
incomplete, improperly dated, clearly forged or otherwise physically altered) in
any material respect, Trendwest shall correct or cure such omission, defect or
other irregularity within 30 days from the date Trendwest discovered such
omission or defect, or from the date Trendwest is notified by the Custodian


                                      -4-
<PAGE>   8
of such omission or defect. In the event Trendwest is unable to correct or cure
such omission, defect or irregularity within the 30 day period described in the
preceding sentence, Trendwest shall purchase or replace such Receivable from the
Issuer in accordance with Section 3.03 hereof.


                                   ARTICLE 3

                         REPRESENTATIONS AND WARRANTEES

            Section 3.01. Representations and Warranties of the Sellers. Each
Seller, with respect to itself and the Contracts, Receivables and interest in
the related Credits sold by such Seller, and Trendwest, with respect to all
Contracts, Receivables, the related Credits, and both Sellers, hereby make the
following representations and warranties to the Issuer for the benefit of the
Trustee and Holders of the Notes, on which the Issuer relies in acquiring the
Purchased Assets and on which the Holders of the Notes rely in purchasing the
Notes. Such representations and warranties shall survive any subsequent
transfer, assignment, contribution or conveyance of the Receivables and the
security interest in the related Credits and any issuance of Notes.

                   (a)     As to each Contract, as of the Closing Date:

                           (i) The information set forth in the Contract
                  Schedule is true and correct as of the Cut-Off Date.

                           (ii) The rights with respect to the Contract are
                  assignable by the lender thereunder and its successors and
                  assigns without the consent of any Person.

                          (iii) Trendwest or the applicable Seller has
                  heretofore provided to the Custodian the sole original
                  counterpart of the Contract, together with any amendments,
                  waivers and modifications thereto, except original executed
                  counterparts which have been marked to show that they have
                  been pledged by the Issuer to the Trustee under the Indenture,
                  and the terms of such Contract have not been amended, waived
                  or modified subsequent to the above being provided to the
                  Custodian.

                           (iv) The Electronic Ledgers have been marked as
                  provided in Section 2.04(b) hereof.

                            (v) The Contract was not originated in, nor is it
                  subject to the laws of, any jurisdiction, the laws of which
                  would make unlawful the sale, transfer or assignment of such
                  document under any of the Transaction Documents, including any
                  repurchase in accordance with the Transaction Documents.

                           (vi) The Contract is in full force and effect in
                  accordance with its respective terms, and none of Trendwest or
                  either Seller or any Obligor has or will have suspended or
                  reduced any payments or obligations due or to become


                                      -5-
<PAGE>   9
                  due thereunder by reason of a default by the other party to
                  such Contract; as of the Closing Date, no Scheduled Payment
                  with respect to such Contract has not been received and
                  remains unpaid for a period of 30 or more days (without regard
                  to advances, if any, made by the Servicer), and there are no
                  proceedings pending, or to the best of the knowledge of
                  Trendwest or either Seller, threatened asserting insolvency of
                  such Obligor; there has been no other default, breach or
                  violation and no event, other than relating to an Upgrade,
                  permitting acceleration under such Contract; there are no
                  proceedings pending, or to the best of the knowledge of
                  Trendwest or either Seller, threatened, wherein such Obligor
                  or any governmental agency has alleged that such Contract is
                  illegal or unenforceable; and none of the related Scheduled
                  Payments are subject to any set-off or credit of any kind.

                          (vii) The Contract is the valid, binding and legally
                  enforceable obligation of the parties thereto, enforceable in
                  accordance with its terms, subject, as to enforcement, to
                  applicable bankruptcy, insolvency, reorganization and other
                  similar laws of general applicability relating to or affecting
                  creditors' rights generally and to general principles of
                  equity regardless of whether enforcement is sought in a court
                  of law or equity.

                         (viii) All actions, filings (including UCC filings) and
                  recordings as are required by the Indenture and that may be
                  necessary to perfect a security interest of the Issuer and the
                  Trustee in, and the sale by Trendwest and TW Holdings to TFI
                  and the sale from TFI and SPC to the Issuer of, the Contract
                  and the related Receivables being acquired and the granting of
                  a security interest in the security interest in the related
                  Credits hereunder have been accomplished and are in full force
                  and effect.

                           (ix) The Contract is identical to one of the form
                  contracts attached as Exhibit A hereto, except for either (i)
                  such immaterial modifications or deviations from the form
                  contract which appear in such Contract, which immaterial
                  modifications or deviations will not have a material adverse
                  effect on the Holders of the Notes or (ii) such modifications
                  or deviations as set forth on Schedule I to the Assignment
                  related to such Contract.

                            (x) The Contract was originated by Trendwest in
                  Trendwest's ordinary course of business and meets Trendwest's
                  qualifications for originating vacation credit installment
                  contracts. The origination and collection practices used by
                  Trendwest and the applicable Seller with respect to such
                  Contract have been in all respects legal, proper, prudent and
                  customary in the vacation credit financing and servicing
                  business.

                           (xi) The Receivable is under a Contract that has a
                  term to the last Scheduled Payment Date of not more than 84
                  months and not less than one month.


                                      -6-
<PAGE>   10
                          (xii) The Contract obligates the related Obligor to
                  make all Scheduled Payments thereunder in full notwithstanding
                  the collection by Trendwest of a security deposit with respect
                  thereto. The calculation of the Collateral Value of the
                  related Receivable does not include any security deposits or
                  similar payments collected by or on behalf of Trendwest which
                  are applied to Scheduled Payments.

                         (xiii) All requirements of applicable federal, State
                  and local laws, and regulations thereunder, including, without
                  limitation, usury laws, if any, in respect of the Contract
                  have been complied with in all material respects, and such
                  Contract complied in all material respects at the time it was
                  originated or made and now complies in all material respects
                  with all legal requirements of the jurisdiction in which it
                  was originated.

                          (xiv) The Contract is not and will not be subject to
                  any right of rescission, set-off, counterclaim or defense,
                  including the defense of usury, whether arising out of
                  transactions concerning such Contract or otherwise, and the
                  operation of any of the terms of such Contract or the exercise
                  by the applicable Seller or the Obligor of any right under
                  such Contract will not render such Contract unenforceable in
                  whole or in part, and no such right of rescission, set-off,
                  counterclaim or defense has been asserted with respect
                  thereto, except that certain rights or defenses may exist
                  under applicable law which, individually or in the aggregate,
                  do not make the remedies available to the applicable Seller
                  with respect to such Contract inadequate for the practical
                  realization of the benefits provided thereby.

                           (xv) Each of the Sellers and Trendwest has duly
                  fulfilled all obligations on the lender's part to be fulfilled
                  under or in connection with the Contract, including, without
                  limitation, giving any notices or consents necessary to effect
                  the acquisition of the Purchased Assets by the Issuer and has
                  done nothing to impair the rights of the Issuer and the
                  Noteholders in such Contract or payments with respect thereto.

                          (xvi) The Contract and the related Seller's interest
                  in the related Credits have not been sold, transferred,
                  assigned or pledged by the Seller to any Person other than the
                  Issuer (except for such interests in the Purchased Assets
                  which shall be terminated on or prior to the Closing Date),
                  and upon execution and delivery hereof and of the Assignment
                  by the related Seller and the payment by the Issuer of the
                  related Purchased Asset Price, the Issuer will have all of the
                  right, title and interest in and to such Seller's interest in
                  the Contract related Receivable and a security interest in the
                  related Credits, free and clear of all liens and encumbrances,
                  except for the interests of the Obligor pursuant to such
                  Contract. Such Contract has not been satisfied, subordinated
                  or rescinded.


                                      -7-
<PAGE>   11
                           (xvii) Neither the relevant Seller nor Trendwest has
                  any specific knowledge that the Contract will not be fully
                  performed in accordance with its terms.

                           (xviii) The Obligor has made the first Scheduled
                  Payment (which payment may be an advance payment under such
                  Contract) due under the Contract within the time set forth in
                  such Contract.

                           (xix) The related Obligor is located in the United
                  States of America or Canada, and the related Scheduled
                  Payments are payable in U.S. dollars.

                           (xx) Except for changes due to Upgrades, the related
                  Scheduled Payments were established at the time such Contract
                  was originated.

                           (xxi) There are no unpaid brokerage or other fees
                  owed to third parties relating to the origination of the
                  Contract.

                           (xxii) The Contract cannot be rescinded pursuant to
                  applicable consumer finance laws.

                           (xxiii) The contract was originated in compliance
                  with the requirements of all federal, state and local laws,
                  rules and regulations applicable to the origination of the
                  Contract (including, without limitation, the Federal
                  Truth-in-Lending Act, the Equal Credit Opportunity Act, the
                  Fair Credit Billing Act, the Fair Credit Reporting Act, the
                  Fair Debt Collection Practices Act, the Federal Trade
                  Commission Act, the Magnuson-Moss Warranty Act, the Federal
                  Reserve Board's Regulations "B" and "Z", the Soldiers' and
                  Sailors' Civil Relief Act of 1940, and any other federal,
                  state and local laws relating to interest, usury, consumer
                  credit, equal credit opportunity, fair credit reporting,
                  privacy, consumer protection, false or deceptive trade
                  practices and disclosure, the Mail Fraud statute and any
                  timeshare disclosure), non-compliance with which could have a
                  material adverse effect on the enforceability or value of the
                  Contract.

                           (xxiv) All Scheduled Payments are due and payable
                  monthly and such Scheduled Payments are level payments
                  throughout the terms of the Contracts.

                   (b) As to the aggregate pool of Contracts as of the Closing
         Date neither Trendwest nor either Seller used any selection procedures
         that identified the Contracts as being less desirable or valuable than
         other comparable vacation credit installment contracts originated by
         Trendwest.

                   (c)     As to each Seller as of the Closing Date:

                           (i) Each Seller has been duly organized and is
                  validly existing and in good standing as a corporation under
                  the laws of the State of Delaware with corporate power and
                  authority to own its properties and to transact the business


                                      -8-
<PAGE>   12
                  in which it is now engaged, and each Seller is duly qualified
                  to do business in and is in good standing under the laws of
                  each State in which its business is located or is not required
                  under applicable law to effect such qualification, except
                  where failure to so qualify would not have a material adverse
                  effect on the ability of such Seller to perform its
                  obligations under the Transaction Documents or on any of the
                  Contracts, the Receivables or the Credits or on the ability of
                  the Seller, the Issuer or the Trustee to realize upon or
                  enforce the same.

                           (ii) The performance of the obligations of each
                  Seller under this Agreement and the other Transaction
                  Documents and the consummation of the transactions herein and
                  therein contemplated will not conflict with or result in any
                  breach of any of the terms or provisions of, or constitute
                  with or without notice, lapse of time or both, a default under
                  the Certificate of Incorporation or Bylaws of such Seller, or
                  any material indenture, agreement, mortgage, deed of trust or
                  other instrument to which such Seller is a party or by which
                  it is bound, or result in the creation or imposition of any
                  lien, charge or encumbrance (except the lien created by the
                  Transaction Documents) upon any of the property or assets of
                  such Seller pursuant to the terms of such indenture, mortgage,
                  deed of trust, or other agreement or instrument to which such
                  Seller is a party or by which such Seller is bound or to which
                  any of such Seller's property or assets is subject, nor will
                  such action result in any violation of the provisions of the
                  Seller's Certificate of Incorporation or By-laws or any
                  statute or any order, rule or regulation of any court or any
                  regulatory authority or other governmental agency or body
                  having jurisdiction over such Seller or any of its properties;
                  and no consent, approval, authorization, order, registration
                  or qualification of or with or other action of any court, or
                  any such regulatory authority or other governmental agency or
                  body is required for consummation of the transactions
                  contemplated by this Agreement and the other Transaction
                  Documents except such consents, approvals and authorizations
                  which have been obtained or such registrations or
                  qualifications which have been made.

                           (iii) This Agreement and any other Transaction
                  Document to which the Seller is a party have been duly
                  authorized, executed and delivered by each Seller by all
                  necessary corporate action and such agreements are the valid
                  and legally binding obligations of such Seller, enforceable
                  against such Seller in accordance with their respective terms,
                  subject as to enforcement to applicable bankruptcy,
                  insolvency, reorganization and other similar laws of general
                  applicability relating to or affecting creditors' rights
                  generally and to general principles of equity regardless of
                  whether enforcement is sought in a court of law or equity.

                           (iv) Each Seller Address is the chief executive
                  office, principal place of business and the office where such
                  Seller keeps its records concerning the Contracts, Receivables
                  and the related Credits. Such Seller has not used any address
                  other than its Seller Address in the previous five-year
                  period. Such


                                      -9-
<PAGE>   13
                  Seller's legal name is as set forth in this Agreement. Such
                  Seller has not used or done business under any other name in
                  the previous six-year period.

                            (v) Each Seller does not believe, nor does it have
                  any reasonable cause to believe, that it cannot perform each
                  and every covenant contained in this Agreement.

                           (vi) The transactions contemplated by the Transaction
                  Documents are being consummated by each Seller in furtherance
                  of its ordinary business purposes, with no contemplation of
                  insolvency and with no intent to hinder, delay or defraud any
                  of its present or future creditors.

                          (vii) The consideration received by each Seller
                  pursuant to this Agreement is fair consideration having value
                  reasonably equivalent to or in excess of the value of the
                  performance of each Seller's obligations hereunder.

                         (viii) Neither on the date of the transactions
                  contemplated by the Transaction Documents or immediately
                  before or after such transactions, nor as a result of the
                  transactions, will either Seller:

                                    (A) be insolvent such that the sum of its
                           debts is greater than all of its respective property,
                           at a fair valuation;

                                    (B) be engaged in, or about to engage in,
                           business or a transaction for which any property
                           remaining with such Seller will be an unreasonably
                           small capital or the remaining assets of such Seller
                           will be unreasonably small in relation to its
                           respective business or the transaction; and

                                    (C) have intended to incur, or believed it
                           would incur, debts that would be beyond its
                           respective ability to pay as such debts mature or
                           become due. Such Seller's assets and cash flow enable
                           it to meet its present obligations in the ordinary
                           course of business as they become due.

                           (ix) Both immediately before and after the
                  transactions contemplated by the Transaction Documents (a) the
                  present fair salable value of each Seller's assets was or will
                  be in excess of the amount that will be required to pay its
                  probable liabilities as they then exist and as they become
                  absolute and matured; and (b) the sum of such Seller's assets
                  was or will be greater than the sum of its debts, valuing its
                  assets at a fair salable value.

                            (x) The acquisition of the Purchased Assets by the
                  Issuer pursuant to this Agreement is not subject to the bulk
                  transfer or any similar statutory provisions in effect in any
                  applicable jurisdiction.


                                      -10-
<PAGE>   14
                           (xi) There are no proceedings or investigations
                  pending or, to the knowledge of each Seller or Trendwest,
                  threatened against or affecting such Seller in or before any
                  court, governmental authority or agency or arbitration board
                  or tribunal which, individually or in the aggregate, involve
                  the possibility of materially and adversely affecting the
                  properties, business, prospects, profits or condition
                  (financial or otherwise) of such Seller, or the ability of
                  such Seller to perform its obligations under this Agreement or
                  the other Transaction Documents. Such Seller is not in default
                  with respect to any order of any court, governmental authority
                  or agency or arbitration board or tribunal.

                          (xii) All tax returns or extensions required to be
                  filed by each Seller in any jurisdiction have in fact been
                  filed, and all taxes, assessments, fees and other governmental
                  charges upon such Seller, or upon any of the respective
                  properties, income or franchises shown to be due and payable
                  on such returns have been, or will be, paid. All such tax
                  returns are true and correct, and such Seller has no knowledge
                  of any proposed additional tax assessment against it in any
                  material amount nor of any basis therefor. The provisions for
                  taxes on the books of such Seller are in accordance with
                  generally accepted accounting principles.

                         (xiii) Neither Seller (i) is in violation of any laws,
                  ordinances, governmental rules or regulations to which it is
                  subject, (ii) has failed to obtain any licenses, permits,
                  franchises or other governmental authorizations necessary to
                  the ownership of its property or to the conduct of its
                  business, and (iii) is in violation in any material respect of
                  any term of any agreement, charter instrument, bylaw or
                  instrument to which it is a party or by which it may be bound
                  which violation or failure to obtain might materially
                  adversely affect the business or condition (financial or
                  otherwise) of such Seller.

                          (xiv) It is the intention of each Seller that the
                  Purchased Assets are being or have been acquired by the Issuer
                  and that the beneficial interest in and title to the Purchased
                  Assets are not part of such Seller's estate in the event of
                  the filing of a bankruptcy petition by or against such Seller
                  under any bankruptcy law.

                           (xv) Immediately prior to the acquisition of the
                  Purchased Assets by the Issuer pursuant to this Agreement, the
                  Seller was the sole owner of such Purchased Assets at such
                  time and had a valid security interest (or a security interest
                  in a security interest) in the related Credits, and had good
                  and marketable title to such Purchased Assets, free and clear
                  of all liens, claims and encumbrances (except for the
                  Purchased Asset Price and security interests in the Purchased
                  Assets which shall be terminated on or prior to the Closing
                  Date); and the acquisition of the Purchased Assets by the
                  Issuer does not violate the terms or provisions of any
                  Contract.

                          (xvi) Each Seller will treat the transfer of the
                  Purchased Assets as a sale to the Issuer for federal, State
                  and local income tax reporting and accounting


                                      -11-
<PAGE>   15
                  purposes. The affiliated group of which such Seller is a
                  member within the meaning of Section 1504 of the Code shall
                  treat the Purchased Assets as owned by the Issuer for federal,
                  state and local income tax purposes.

                           (xvii) The transfer of the Purchased Assets pursuant
                  to this Agreement constitutes the valid transfer by each
                  Seller to the Issuer of all of such Seller's right, title and
                  interest in the Purchased Assets.

                           (xviii) Each Seller has valid business reasons for
                  selling the Purchased Assets to the Issuer pursuant to this
                  Agreement rather than obtaining a loan secured by the
                  Purchased Assets.

                           (xix) Each Seller will be operated generally so as to
                  not be substantively consolidated with the Issuer.

                           (xx) No event has occurred that adversely affects the
                  Seller's ability to perform the transactions contemplated by
                  the Transaction Documents.

                           (xxi) Each pension plan or profit sharing plan to
                  which either Seller is a party has been fully funded in
                  accordance with the obligations of such Seller as set forth in
                  such plan.

                           (xxii) Neither the acquisition nor the holding of the
                  Contracts and the related Receivables violates any federal or
                  State law, rule or regulation the non-compliance with which
                  could have a material adverse effect on the value of the
                  Contracts or the related Receivables.

            Section 3.02. Representations and Warranties of the Issuer. The
Issuer hereby makes the following representations and warranties for the benefit
of the Trustee and Holders of the Notes, on which the Seller relies in entering
into this Agreement with the Issuer and on which the Holders of the Notes rely
in purchasing the Notes; such representations and warranties speak as of the
Closing Date unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Purchased Assets:

                   (a) The Issuer has been duly organized and is validly
         existing in good standing as a limited liability company under the laws
         of the State of Delaware, with power and authority to own its
         properties, perform its obligations under the Transaction Documents and
         to transact the business in which it is now engaged or in which it
         proposes to engage; the Issuer is duly qualified to do business and is
         in good standing in each State in which the nature of its business
         requires it to be so qualified, except where failure to so qualify
         would not have a material adverse effect on the ability of the Issuer
         to perform its obligations under the Transaction Documents.

                  (b) The transfer to and receipt by the Issuer of each Seller's
         interest in the Receivables and a security interest in the related
         Credits pursuant to this Agreement and the consummation of the
         transactions contemplated herein and in the Transaction


                                      -12-
<PAGE>   16
         Documents will not conflict with or result in breach of any of the
         terms or provisions of, or constitute (with or without notice, lapse of
         time or both) a default under the Certificate of Formation or the
         Limited Liability Company Agreement of the Issuer or any material
         indenture, agreement, mortgage, deed of trust or other instrument to
         which the Issuer is a party or by which it is bound, or result in the
         creation or imposition of any lien, charge or encumbrance (except for
         the lien created by this Agreement and the Indenture) upon any of the
         property or assets of the Issuer pursuant to the terms of, such
         indenture, mortgage, deed of trust, or other agreement or instrument to
         which the Issuer is a party or by which it is bound or to which any of
         the property or assets of the Issuer is subject, nor will such action
         result in any violation of the provisions of the Certificate of
         Formation or the Limited Liability Company Agreement of the Issuer or
         any statute or any order, rule or regulation of any court or regulatory
         authority or other governmental agency or body having jurisdiction over
         the Issuer or any of its properties; and no consent, approval,
         authorization, order, registration or qualification of or with or other
         action of any court or any such regulatory authority or other
         governmental agency or body is required for the acquisition of the
         Purchased Assets hereunder.

                   (c) The Transaction Documents have been duly authorized,
         executed and delivered by the Issuer by all necessary action and
         constitute valid and legally binding obligations of the Issuer
         enforceable against the Issuer in accordance with their terms, subject
         as to enforcement to bankruptcy, insolvency, reorganization and other
         similar laws of general applicability relating to or affecting
         creditors' rights generally and to general principles of equity
         regardless of whether enforcement is sought in a court of equity or
         law.

                   (d) There are no proceedings or investigations to which the
         Issuer is a party pending or, to the knowledge of the Issuer,
         threatened, before any court, regulatory body, administrative agency or
         other tribunal or governmental instrumentality (a) asserting the
         invalidity of this Agreement, (b) seeking to prevent the issuance of
         the Notes or the consummation of any of the transactions contemplated
         by this Agreement, or (c) seeking any determination or ruling that
         would materially and adversely affect the performance by the Issuer of
         its obligations under, or the validity or enforceability of, this
         Agreement.

                   (e) All approvals, authorizations, consents, orders or other
         actions of any Person or of any court, governmental agency or body or
         official, required in connection with the execution and delivery of
         this Agreement, have been or will be taken or obtained on or prior to
         the Closing Date.

                  (f) The Issuer Address is the principal place of business and
         chief executive office of the Issuer.

            Section 3.03. Purchase or Substitution Required upon Breach of
Certain Representations and Warranties. Upon discovery by either Seller,
Trendwest or the Issuer of the breach of any representations or warranties set
forth in Section 3.01 or 3.02 hereof


                                      -13-
<PAGE>   17
which materially and adversely affects the value of a Contract, Receivable, the
related Credits, or the interests of the Holders of the Notes, or a breach of
any of the representations and warranties set forth in Sections 3.01(a)(v),
3.01(a)(vi), 3.01(a)(vii), 3.01(a)(xiii), 3.01(a)(xiv), 3.01(a)(xvi),
3.01(a)(xxii) or 3.01(a)(xxiii) hereof, the party discovering such breach shall
give prompt written notice to the other parties. TFI, with respect to TFI
Contracts or Trendwest, with respect to all Contracts shall, within 30 days from
the date such Person was notified of, or otherwise discovers, such breach, cure
such breach, or, (1) if the breach relates to a particular Contract and is not
cured, either (a) purchase the Issuer's interest in the related Receivable from
the Issuer at the Purchase Price or (b) provide a Substitute Receivable or (2)
if the breach relates to a representation or warranty regarding the selection
criteria of the Contracts as a whole and is not cured by TFI or Trendwest, as
applicable, either (a) purchase the Issuer's interest in such non-conforming
Contracts and the related Receivables from the Issuer or (b) provide Substitute
Receivables as set forth above, so that the representations and warranties with
respect to the selection criteria are correct, as evidenced by a certificate of
an officer of TFI or Trendwest. as applicable, to the Trustee. The Purchase
Price for a purchased Receivable shall be paid, and any Substitute Contract
shall be delivered, by such Seller or Trendwest to the Issuer in accordance with
Section 3.04(c) hereof. It is understood and agreed that the obligation of TFI
or Trendwest to cure or purchase or replace any Receivable related to a Contract
as to which such a breach has occurred shall constitute the sole remedy
respecting such breach available to the Issuer, the Holders of Notes or the
Trustee on behalf of such Holders (except for any indemnities provided under
Section 4.01(j) hereof or its obligations under the related Indenture) for any
losses, claims, damages and liabilities arising from the Issuer's interest in
such Receivable or the inclusion of the Issuer's interest in such Receivable in
the Trust Estate.

            Section 3.04. Requirements for Purchase or Substitution of
Receivables; Upgrades. (a) If either TFI or Trendwest is required to purchase
the Issuer's interest in any Receivable under Section 3.03 hereof or if the
Issuer is required or elects to purchase the Trustee's interest in any
Receivable under Section 3.10 of the Servicing Agreement, such Receivable shall
be purchased by TFI or Trendwest at the Purchase Price. All purchases shall be
accomplished at the times specified in subsection (c) below.

           (b) If TFI or Trendwest is required to substitute any Receivable
related to a Contract under Section 3.03 hereof, or if the Issuer is required or
elects to substitute any Receivable related to a Contract under Section 3.10 of
the Servicing Agreement (a "Substitute Contract"), each such Substitute Contract
shall (i) be an Eligible Contract; (ii) be written on one of the standard forms
attached as Exhibit A to this Agreement; (iii) be accompanied by a supplement to
this Agreement substantially in the form of Annex A hereto subjecting such
Contract to the provisions hereof and providing with respect to such Substitute
Contract the information required in the Contract Schedule; (iv) not have been
selected using procedures that identified the Contracts as being less desirable
or valuable than other comparable vacation credit retail installment contracts
originated by Trendwest and (v) not have any Scheduled Payments that are due
after the Stated Maturity Date of the Notes. In addition, (i) such Substitute
Contracts shall have an aggregate Collateral Value at least equal to and not
materially greater than the aggregate



                                      -14-
<PAGE>   18
Collateral Value of the Contracts being withdrawn as of the date of withdrawal
(the "Substitution Criterion") and (ii) the representations and warranties set
forth in Sections 3.01 and 3.02 shall be true and correct with respect to such
Substitute Contract and the aggregate pool of Contracts as of the date the
Substitute Receivable is conveyed to the Issuer.

         Upon the substitution of any Substitute Receivable pursuant to the
provisions of this Section 3.04(b), TFI and Trendwest hereby agrees that such
Substitute Receivable will be subject to all the terms and provisions of this
Agreement, the Servicing Agreement, the Custodian Agreement and the Indenture
just as if such Substitute Receivable and the related Substitute Contract had
been one of the original Contracts the related Receivable of which was acquired
on the Closing Date. Upon the substitution of a Substitute Receivable pursuant
to this Section 3.04(b), the Issuer and the related Seller shall also comply
with the provisions and limitations set forth in the Indenture. All
substitutions shall be accomplished at the time specified in subsection (c)
below.

           (c) Any purchase or substitution of a Receivable related to a
Contract by the Seller in accordance with Section 3.03 hereof or this Section
3.04 or by the Issuer under Section 3.10 of the Servicing Agreement shall be
made either by remittance of the Purchase Price to the Subservicer for deposit
into the Clearing Account in accordance with Section 3.03(a) of the Servicing
Agreement or by substitution of a Substitute Receivable, as applicable, within
one Business Day following the expiration of the cure period set forth in
Section 3.03 hereof.

           (d) Any voluntary purchase or substitution of a Receivable related to
a Contract by the Issuer pursuant to the terms of the Servicing Agreement or
Indenture in the event of a default, delinquency or modification with respect to
such Contract shall satisfy the same requirements for a purchase or
substitution, as the case may be, as are set forth in this Section 3.04.

           (e) If an Obligor desires to enter into an Upgrade Contract,
Trendwest, as Servicer, shall inform the Issuer of such fact. In such event, if
the Issuer desires to enter into such Upgrade and so advises Trendwest,
Trendwest for the benefit of the Issuer may (but shall not be obligated to) to
enter into an Upgrade Contract with such Obligor and transfer such Upgrade
Contract to TFI, which shall simultaneously transfer such Upgrade Contract to
the Issuer, in exchange for the existing Contract with such Obligor and an
amount equal to the difference in the principal balance between the existing
Contract and the Upgrade Contract (which amount shall be paid to TFI by
increasing the amount owed by the Issuer under the Subordinated Note); provided,
however, that (i) such Upgrade Contract has an interest rate that is not more
than 1.0% per annum lower than the interest rate on the Contract that is being
replaced, (ii) each Scheduled Payment under the Upgrade Contract shall be the
equal to or greater than the Scheduled Payments on the existing Contract, (iii)
such Obligor has made all Scheduled Payments due on or before the date of such
Upgrade, (iv) such Upgrade Contract is written on one of the standard forms
attached as Exhibit A to this Agreement, (v) simultaneous with the execution of
the Upgrade Contract, Trendwest shall execute a form of assignment to TFI, which
will immediately execute an assignment to the Issuer


                                      -15-
<PAGE>   19
attached to such Upgrade Contract, and indicate on the face of the Upgrade
Contract that such contract is being sold to the Issuer and pledged to the
Trustee pursuant to the Indenture, (vi) such Upgrade Contract shall be delivered
by Trendwest to the Custodian immediately after execution of such contract by
the Obligor, WorldMark and Trendwest (and, in any event, prior to the release of
the original Contract), (vii) the transfer of the Upgrade Contract shall not be
effective (and the lien of the Trustee on the existing Contract and the related
Receivable shall not be released) until after any applicable rescission period
has expired and (viii) clauses (i)-(vii) above shall be representations and
warranties of Trendwest, and Trendwest shall be obligated to purchase from the
Issuer any Upgrade Contract that does not comply with such representations and
warranties. Simultaneous with the delivery of such Upgrade Contract to the
Custodian, TFI shall deliver to the Trustee a supplement to this Agreement
substantially in the form of Annex A hereto subjecting such Contract to the
provisions hereof and providing with respect to such Upgrade Contract the
information required on the Contract Schedule. TFI shall pay to Trendwest,
through an increase in the intercompany debt between TFI and Trendwest, for such
Upgrade Contract an amount equal to the difference between the principal balance
of the Upgrade Contract on the date of such Upgrade and the Collateral Value of
the Contract being canceled because of such Upgrade as of such date.

         Upon the acquisition by the Issuer of any Upgrade Contract pursuant to
the provisions of this Section 3.04(e), Trendwest hereby agrees that such
Upgrade Contract will be subject to all the terms and provisions of this
Agreement, the Receivables Purchase Agreement, the Servicing Agreement and the
Indenture just as if such Upgrade Contract had been one of the original
Contracts acquired on the Closing Date.


                                    ARTICLE 4

                                    COVENANTS

            Section 4.01. Seller and Trendwest Covenants. Each Seller (and
Trendwest, with respect to subsections (c), (j), (n) and (q) of this Section
4.01) hereby covenants and agrees with the Issuer as follows:

                   (a) Except as hereinafter provided, such Seller will keep in
         full effect its existence, rights and franchises as a corporation, and
         will obtain and preserve its qualification to do business as a foreign
         corporation in each jurisdiction in which such qualification is or
         shall be necessary to protect the validity and enforceability of this
         Agreement or any of the Contracts and to perform its duties hereunder.
         Any person into which such Seller may be merged or consolidated, or to
         whom such Seller has sold substantially all of its assets, or any
         corporation resulting from any merger, conversion or consolidation to
         which such Seller shall be a party, or any Person succeeding to the
         business of such Seller shall be the successor of such Seller
         hereunder, without the execution or filing of any paper or any further
         act on the part of any of the parties hereto, anything herein to the
         contrary notwithstanding; provided, however, that (w) immediately after
         giving effect to such transaction, no representation or warranty made
         pursuant to Section 3.01(c) hereof shall have been


                                      -16-
<PAGE>   20
         breached, (x) such successor executes an agreement of assumption, in
         form reasonably satisfactory to the Trustee, to perform every
         obligation under this Agreement, (y) such Seller shall have delivered
         to the Issuer a certificate of an officer of such Seller and an Opinion
         of Counsel each stating that such consolidation, merger, or succession
         and such agreement of assumption complies with this Section 4.01 and
         that all conditions precedent, if any, provided for in this Agreement
         relating to such transaction have been complied with, and (z) such
         Seller shall have delivered to the Issuer an Opinion of Counsel either
         (1) stating that, in the opinion of such counsel, all financing
         statements and continuation statements and amendments thereto have been
         executed and filed that are necessary fully to preserve and protect the
         interest of the Issuer in the Contracts and reciting the details of
         such filings, or (2) stating that, in the opinion of such counsel, no
         such action shall be necessary to preserve and protect such interest.

                   (b) Neither such Seller nor any of the directors, officers,
         employees or agents of such Seller shall be under any liability to the
         Issuer, the Trustee or the Holders of Notes for any action taken or for
         refraining from the taking of any action in good faith pursuant to this
         Agreement, or for errors in judgment not involving recklessness or
         negligence; provided, however, that this provision shall not protect
         such Seller against any breach of warranties or representations made
         herein, or failure to perform its obligations in strict compliance with
         this Agreement, or any liability which would otherwise be imposed by
         reason of any breach of the terms and conditions of this Agreement.
         Such Seller, and any director, officer, employee or agent of such
         Seller, may rely in good faith on any document of any kind prima facie
         properly executed and submitted by any Person respecting any matters
         arising hereunder. Such Seller shall not be under any obligation to
         appear in, prosecute, or defend any legal action that is not incidental
         to its obligations as the seller of the Purchased Assets under this
         Agreement and that in its opinion may involve it in any expense or
         liability.

                   (c) Trendwest and the Sellers will from time to time, at
         Trendwest's expense, execute and file such additional financing
         statements (including continuation statements) as may be necessary or
         which the Trustee may deem appropriate to preserve the security
         interests and liens described in Section 3.01(a)(viii) hereof and are
         reasonably satisfactory in form and substance to the Issuer.

                   (d) Such Seller will not change its name, identity or
         corporate structure in any manner that would, could, or might make any
         financing statement or continuation statement misleading within the
         meaning of section 9-402(7) of the UCC, unless it shall have given the
         Issuer and the Trustee at least 30 days' prior written notice thereof.

                   (e) Such Seller will give the Issuer and the Trustee at least
         30 days' prior written notice of any relocation of its principal
         executive office if, as a result of such relocation, the applicable
         provisions of the UCC would require the filing of any


                                      -17-
<PAGE>   21
         amendment of any previously filed financing or continuation statement
         or of any new financing statement.

                   (f) Such Seller will duly fulfill all obligations on its part
         to be fulfilled under or in connection with each Contract and, except
         with respect to Upgrades, will not change or modify the terms of the
         Contracts except as expressly permitted by the terms of the Transaction
         Documents and will do nothing to impair the rights of the Issuer or the
         Trustee in the Purchased Assets. In the event that the rights of such
         Seller sold hereunder to the Issuer under any Contract or any guaranty
         of the related Obligor's obligations under any Contract are not
         assignable to the Issuer, such Seller will enforce such rights on
         behalf of the Issuer; the Seller is not aware of any such inability to
         assign any Contracts.

                   (g) Such Seller will comply, in all material respects, with
         all material acts, rules, regulations, orders, decrees and directions
         of any governmental authority applicable to the Purchased Assets or any
         part thereof; provided, however, that such Seller may contest any act,
         regulation, order, decree or direction in any reasonable manner which
         shall not materially and adversely affect the rights of the Issuer or
         the Trustee in the Purchased Assets.

                   (h) Such Seller will advise the Issuer and the Trustee
         promptly, in reasonable detail, of the occurrence of any breach by such
         Seller following discovery by such Seller of such breach of any of its
         representations, warranties and covenants contained herein.

                   (i) Such Seller will execute or endorse, acknowledge, and
         deliver to the Issuer and the Trustee from time to time such schedules,
         confirmatory assignments, conveyances, and other reassurances or
         instruments and take such further similar actions relating to the
         Purchased Assets, and the rights covered by the Transaction Documents,
         as the Issuer or the Trustee may reasonably request to preserve and
         maintain title to the Purchased Assets and the rights of the Trustee
         and the Holders of Notes therein against the claims of all persons and
         parties.

                   (j) Trendwest agrees to indemnify, defend and hold the Issuer
         harmless from and against any and all loss, liability, damage,
         judgment, claim, deficiency or expense (including interest, penalties,
         reasonable attorney's fees and amounts paid in settlement) that is
         caused by (i) a material breach at any time by any Seller or Trendwest
         of its representations, warranties and covenants contained in Section
         3.01 hereof or this Section 4.01 or (ii) any material information
         furnished by such Seller which is set forth in any schedule delivered
         hereunder, being untrue in any material respect when any such
         representation was made or schedule delivered, provided that neither
         Trendwest nor the Seller shall have any liability with respect to a
         representation or warranty as to any specific Contract, Receivable or
         the related Credits other than to purchase the related Receivable or
         substitute for such Receivable in accordance with Section 3.03 hereof
         unless such breach of representation or warranty is the result of the
         fraud, negligence, bad faith or willful misconduct of such


                                      -18-
<PAGE>   22
         Seller or Trendwest. Trendwest shall also indemnify the Trustee and the
         Servicer for any cost or expenses incurred by them in the enforcement
         of this Agreement. The obligations of Trendwest under this Section
         4.01(j) shall be considered to have been relied upon by the Issuer and
         shall survive the execution, delivery and performance of this
         Agreement, regardless of any investigation made by or on behalf of the
         Issuer, until termination of the Indenture. If either Trendwest or such
         Seller has made any indemnity payments pursuant to this Section 4.01(j)
         and thereafter the recipient collects any of such amounts from others,
         such party will promptly repay the amount collected to either Trendwest
         or such Seller, as applicable, without interest.

                   (k) Such Seller will do nothing to disturb or impair the
         acquisition hereunder by the Issuer of all of such Seller's right,
         title and interest in the Purchased Assets.

                   (l) Such Seller (i) will (A) maintain its books and records
         separate from the books and records of the Issuer and (B) maintain bank
         accounts separate from those of the Issuer and (ii) will not, prior to
         the payment of the Notes, (x) take any action that would cause the
         dissolution or liquidation of the Issuer, (y) guarantee (directly or
         indirectly), endorse or otherwise become contingently liable (directly
         or indirectly) for the obligations of the Issuer or (z) institute
         against the Issuer, or join any other person in instituting against the
         Issuer, any case, proceeding or other action under any existing or
         future bankruptcy, insolvency or similar laws.

                   (m) Such Seller shall notify the Issuer and the Trustee
         promptly after becoming aware of any Lien on any Purchased Asset.

                   (n) On each date as of which Trendwest or TFI substitutes a
         Receivable related to a Substitute Contract in accordance with Section
         3.03 hereof, Trendwest or TFI shall provide to the Issuer a supplement
         to this Agreement substantially in the form of Annex A hereto
         subjecting such Contract and the related Receivable to the provisions
         hereof and providing with respect to such Substitute Contract the
         information required in the Contract Schedule.

                   (o) The annual financial statements of such Seller will
         disclose the effects of the transactions contemplated by the
         Transaction Documents in accordance with generally accepted accounting
         principles. The resolutions, agreements and other instruments
         underlying the Transaction Documents will be continuously maintained by
         such Seller as official records.

                   (p) The affiliated group of which such Seller is a member
         within the meaning of Section 1504 of the Code shall treat the
         Contracts as owned by the Issuer for federal, state and local income
         tax purposes.

                   (q) Trendwest will, at its own cost and expense, (i) retain
         the Electronic Ledger as a master record of the Contracts and the
         related Credits and copies of all documents relating to each Contract
         (other than the original executed Contracts) as custodian for the
         Issuer and other Persons, if any, with interests in the Contracts and


                                      -19-
<PAGE>   23
         the related Credits and (ii) mark the Contracts and the Electronic
         Ledger to the effect that the Contracts and the related Receivables and
         a security interest in, the related Credits have been acquired by the
         Issuer and that they have been transferred and assigned to the Trustee
         pursuant to the Indenture.

                   (r) Such Seller will perform the transactions contemplated by
         this Agreement in a manner that is consistent with the Issuer's
         ownership interest in the Purchased Assets. The Seller will respond to
         all third party inquiries confirming the transfer of the Purchased
         Assets to the Issuer.

                   (s) Such Seller shall immediately transfer to Servicer for
         deposit in the Clearing Account any payment it receives relating to the
         Purchased Assets.

                   (t) Such Seller will not amend its Certificate of
         Incorporation or its By-laws without the prior written consent of the
         Trustee and the Holders of a majority in principal amount of Notes
         Outstanding.

         Section 4.02. Issuer Covenants. The Issuer hereby covenants and agrees
with each Seller as follows:

                   (a) The Issuer hereby acknowledges and agrees that its rights
         in the related Credits are expressly subject to the rights of the
         related Obligors in such Credits pursuant to the related Contract.

                   (b) On each date as of which any interest in any Contract is
         to be purchased or replaced by Trendwest or TFI pursuant to Section
         3.03 hereof, the Issuer shall submit to Trendwest or TFI an instrument
         of assignment assigning the Issuer's interest in such Receivable and
         the related Credits to Trendwest or TFI, as applicable, signed by the
         president, senior vice president or any vice president of the Issuer.
         Each such assignment shall operate as an assignment, without recourse,
         representation, or warranty, to Trendwest or TFI, as applicable, of all
         of the Issuer's right, title, and interest in and to such Receivable,
         the related Credits and any security documents relating thereto, such
         assignment being an assignment outright and not for security, and upon
         payment of the Purchase Price or delivery of a Substitute Contract,
         Trendwest or TFI, as applicable, will thereupon own such interest in
         the related Receivable and all such security and documents, free of any
         further obligation to the Issuer with respect thereto. If in any
         enforcement suit or legal proceeding it is held that Trendwest or TFI,
         as applicable, may not enforce such Contract on the ground that it is
         not a real party in interest or holder entitled to enforce such
         Contract, the Issuer shall, at the Issuer's expense, take such steps as
         the Issuer deems necessary to enforce such Contract, including bringing
         suit in the Issuer's name.

                   (c) The Issuer warrants that it will have a valid security
         interest in the related Credits and that it will warrant and defend
         such interest in such Credits against all Persons, claims and demands
         whatsoever. The Issuer shall not assign, sell, pledge, or


                                      -20-
<PAGE>   24
         exchange, or in any way encumber or otherwise dispose of the related
         Credits, except as permitted under the Indenture.

                   (d) The Issuer shall treat the Purchased Assets as owned by
         it for Federal, state and local income tax purposes, shall include in
         the computation of its gross income for such purposes the other income
         from the Purchased Assets, shall treat the Notes as its debt for such
         purposes and shall deduct the interest paid or accrued with respect to
         the Notes in accordance with its applicable method of accounting for
         such purposes.

            Section 4.03. Assignment of Purchased Assets. Trendwest and each
Seller understand that the Issuer will assign to and grant to the Trustee a
security interest in all its right, title and interest to this Agreement, the
Contracts, the related Credits and the Purchased Assets. Trendwest and each
Seller consent to such assignment and grants and further agrees that all
representations, warranties, covenants and agreements Trendwest or such Seller
made herein shall also be for the benefit of and inure to the Trustee and all
Holders from time to time of the Notes.


                                    ARTICLE 5

                              CONDITIONS PRECEDENT

            Section 5.01. Conditions to the Issuer's Initial Obligations. The
obligations of the Issuer to execute and deliver the Assignment to each Seller
on the Closing Date pursuant to, and perform it obligations pursuant to, this
Agreement shall be subject to the satisfaction of the following conditions:

                   (a) All representations and warranties of each Seller and
         Trendwest contained in Sections 3.01(b) and 3.01(c) hereof and all
         information provided in the Contract Schedule shall be true and correct
         on the Closing Date, with the same effect as though such
         representations and warranties had been made on such date, and each
         Seller and Trendwest shall have delivered to the Issuer, the Trustee
         and each original purchaser of the Notes an Officer's Certificate to
         such effect;

                   (b) All representations and warranties of each Seller and
         Trendwest contained in Section 3.01(a) hereof shall be true and correct
         on the Closing Date with respect to the Contracts listed on the
         Contract Schedule, with the same effect as though such representations
         and warranties had been made on such date, and each Seller and
         Trendwest shall have delivered to the Issuer, the Trustee and each
         Holder of Notes an Officer's Certificate to such effect;

                   (c) Each Seller shall have delivered all other information
         theretofore required or reasonably requested by the Issuer to be
         delivered by such Seller hereunder, duly certified by an officer of
         such Seller, and the Seller shall have substantially performed all
         other obligations required to be performed as of the Closing Date by
         the provisions of this Agreement;


                                      -21-
<PAGE>   25
                   (d) On or prior to the Closing Date, each Seller shall have
         delivered, or caused the delivery of, the Custodian Files related to
         the Contracts identified in the Contract Schedule to the Custodian or
         its agent and, subject to Section 2.04 hereof, there shall have been
         made all filings, recordings and/or registrations, and there shall have
         been given, or taken, any notice or any other similar action, as may be
         necessary in the opinion of the Issuer, in order to establish and
         preserve the right, title and interest of the Issuer in the Purchased
         Assets;

                  (e) On or before the Closing Date, the Issuer, the Servicer,
         the Subservicer and the Trustee shall have entered into the Servicing
         Agreement;

                   (f) The Notes shall be issued and sold on the Closing Date,
         the Issuer shall receive the full consideration due it upon the
         issuance of the Notes, and the Issuer shall have applied such
         consideration, to the extent necessary, to pay the related Purchased
         Asset Price; and

                  (g) Each Seller shall have executed and delivered the
         Assignment.

            Section 5.02. Conditions to the Sellers' Obligations. The
obligations of each Seller to execute and deliver to the Issuer the Assignment,
and perform it obligations pursuant to, this Agreement on the Closing Date shall
be subject to the satisfaction of the following conditions:

                   (a) All representations and warranties of the Issuer
         contained in this Agreement shall be true and correct with the same
         effect as though such representations and warranties had been made on
         such date;

                  (b) The Issuer shall have executed and delivered the
         Assignment; and

                   (c) All company and legal proceedings and all instruments in
         connection with the transactions contemplated by this Agreement shall
         be satisfactory in form and substance to each Seller, and each Seller
         shall have received from the Issuer copies of all documents (including,
         without limitation, records of corporate proceedings) relevant to the
         transactions herein contemplated as each Seller may reasonably have
         requested.

         Trendwest's and TFI's obligations to repurchase the Contracts pursuant
to this Agreement shall not be affected by any failure of the Issuer to comply
with the provisions of clause (a) of this Section 5.02 subsequent to the Closing
Date.


                                      -22-
<PAGE>   26
                                    ARTICLE 6

                              TERM AND TERMINATION

            Section 6.01. Term. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the later of (i) payment with respect to the last Purchased Asset or (ii)
termination of the Indenture.

            Section 6.02. Default by the Sellers or Trendwest. If either Seller
or Trendwest shall be in default under this Agreement and such default shall not
have been cured for a period of 60 days, or if either Seller or Trendwest shall
become insolvent or make an assignment for the benefit of its creditors or have
a receiver appointed for all or substantially all of its properties, or if any
proceedings commenced, or consented to, by either Seller or Trendwest are not
stayed or dismissed within 90 days after being commenced against either Seller
or Trendwest under any bankruptcy, insolvency or other law for the relief of
debtors, the Issuer shall have the right, in addition to any other rights it may
have under any applicable law, to terminate this Agreement upon 30 days' prior
written notice to such Seller or Trendwest, as applicable; provided that any
termination of this Agreement shall not release such Seller or Trendwest, as
applicable from any obligation under this Agreement.


                                    ARTICLE 7

                                  MISCELLANEOUS

            Section 7.01. Amendments. This Agreement and the rights and
obligations of the parties hereunder may not be changed orally but only by an
instrument in writing signed by the party against which enforcement is sought.
This Agreement may be amended by the Issuer, Trendwest and the Sellers only with
the consent of the Holders of 66-2/3% in principal amount of Notes Outstanding.

            Section 7.02. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York, without regard to
choice of law principles.

            Section 7.03. Notices. All demands, notices and communications
hereunder shall be in writing and shall be delivered personally, mailed by
registered or certified United States mail, postage prepaid, or sent via
overnight air courier or facsimile communication and addressed, in the case of
Trendwest, to 12301 N.E. 10th Place, Bellevue, Washington 98005, in the case of
either Seller, to the applicable Seller Address, and in the case of the Issuer,
to the Issuer Address. All notices and demands shall be deemed to have been
given either at the time of the delivery thereof to any officer of the Person
entitled to receive such notices and demands at the address of such Person for
notices hereunder, or on the third day after the mailing thereof to such
address, as the case may be. Any Person may change the address for notices
hereunder by giving notice of such change to the other Person.

            Section 7.04. Separability Clause. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to


                                      -23-
<PAGE>   27
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.

            Section 7.05. Assignment. Except as provided in Section 4.01(a),
this Agreement may not be assigned or delegated by either Seller without the
prior written consent of the Issuer, the Trustee and the Holders of 66-2/3% in
principal amount of the Notes Outstanding and may not be assigned or delegated
by the Issuer without the prior written consent of the Sellers, Trustee and the
Holders of 66-2/3% in principal amount of the Notes Outstanding.

            Section 7.06. Further Assurances. Each of the Sellers and the Issuer
agrees to do such further acts and things and to execute and deliver to the
Trustee such additional assignments, agreements, powers and instruments as are
required by the Trustee to carry into effect the purposes of this Agreement or
to better assure and confirm unto the Trustee or the Holders of the Notes their
rights, powers or remedies hereunder. If any Obligor shall be in default under
any Contract, upon reasonable request from the Servicer, the Seller will take
all reasonable steps to assist in enforcing such Contract and preserving and
maintaining title to the Purchased Assets and the rights of the Trustee and the
Holders of the Notes therein against the claims of all persons and parties to
the extent each Seller is capable of performing such requested steps and the
Servicer reasonably determines that the assistance of the Seller is necessary to
effect the intent and purposes hereof.

            Section 7.07. No Waivers; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Issuer or either Seller,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any right, remedy, or
privilege hereunder preclude any other or further exercise hereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.

            Section 7.08. Binding Effect; Third Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties hereto,
the Holders of Outstanding Notes, and their respective successors and permitted
assigns.

            Section 7.09. Set-Off. (a) Trendwest and each Seller hereby
irrevocably and unconditionally waive all right of set-off that it may have
under contract (including this Agreement), applicable law or otherwise with
respect to any funds or monies of the Issuer at any time held by or in the
possession of such Seller.

           (b) The Issuer shall have the right to set-off against Trendwest and
each Seller any amounts to which such Seller may be entitled and to apply such
amounts to any claims the Issuer may have against such Seller from time to time
under this Agreement. Upon any such set-off the Issuer shall give notice of the
amount thereof and the reasons therefor.

            Section 7.10. Counterparts. This Agreement may be executed in one or
more counterparts all of which together shall constitute one original document.


                                      -24-
<PAGE>   28
         IN WITNESS WHEREOF, each Seller, Trendwest, and the Issuer have caused
this Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date and year first above written.



                                    TRENDWEST FUNDING I, INC., Seller



                                    By_________________________________
                                        Name:
                                        Title:



                                    TWH FUNDING I, INC., Seller



                                    By_________________________________
                                        Name:
                                        Title:


                                    TRENDWEST RESORTS, INC.



                                    By_________________________________
                                        Name:
                                        Title:


                                     TRI FUNDING COMPANY I, L.L.C., Issuer

                                     By:  TRENDWEST FUNDING I, INC., Member



                                       By_______________________________
                                          Name:
                                          Title:


                                      -25-
<PAGE>   29
                                     ANNEX A


                   FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS
                              AND UPGRADE CONTRACTS

         Pursuant to Section 3.04(b) and Section 3.04(e) of the Purchase and
Sale Agreement dated as of March 1, 1996 (the "Sale Agreement"), between
Trendwest Funding I, Inc. ("TFI"), TWH Funding I, Inc. (together, with TFI, the
"Sellers"), Trendwest Resorts, Inc., and TFI Funding Company I, L.L.C., attached
as Schedule I hereto is a Supplemental Schedule, which includes information
regarding Purchased Assets that are hereby sold, assigned, transferred and
delivered by ____________ to the Issuer in accordance with the Sale Agreement
and the Assignment and setting forth the Collateral Value of any Contract being
sold to TFI by the Issuer pursuant to an Upgrade or exchanged pursuant to a
substitution.

                                     ______________________________________



                                     By____________________________________
                                        Name:
                                        Title:
<PAGE>   30
                                   SCHEDULE I


                 SUPPLEMENTAL SCHEDULE FOR SUBSTITUTE CONTRACTS
                              AND UPGRADE CONTRACTS
<PAGE>   31
                                    EXHIBIT A


                                FORM OF CONTRACT
<PAGE>   32
                                    EXHIBIT B


                               FORM OF ASSIGNMENT

         This Assignment Agreement ("Assignment") is made as of April 17, 1996
(the "Transfer Date"), by and between Trendwest Funding I, Inc., a Delaware
corporation, TWH Funding I, Inc., a Delaware corporation (each, an "Assignor"
and together, the "Assignors") and TFI Funding Company I, L.L.C., a Delaware
limited liability company (the "Assignee"), with reference to the following
facts:


                                    RECITALS:

            A. In connection with the sale of certain assets by the Assignors in
conjunction with the issuance of notes on the date hereof by the Assignee,
Assignee and the Assignors have executed the Purchase and Sale Agreement dated
as of March 1, 1996 (the "Sale Agreement").

            B. In connection with the Sale Agreement, each Assignor desires to
assign and transfer to Assignee all of such Assignor's right, title and interest
in and to each of the purchased assets described in Schedule I hereto, as
supplemented from time to time, and the corresponding paragraphs below (the
"Assigned Interests").

            C. Assignee desires to accept this Assignment and transfer of the
Assigned Interests.

            D. Terms used but not defined herein have the meanings ascribed to
them in the Sale Agreement.

         NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignors and Assignee hereby agree as follows:

            1. Assignment. Each Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Sale Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:

               1.1. Such Assignor's right, title and interest in and to the
            Receivables related to the Contracts described and listed on
            Schedule I hereto.

               1.2. A security interest in the vacation credits subject to such
            Contracts (the "Credits").

               1.3. All other Purchased Assets relating to such Contracts.
<PAGE>   33
            2. Further Assurance. The Assignors and Assignee each hereby agree
to provide such further assurances and to execute and deliver such documents and
to perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.

            3. Distinct Entities. The Assignors and Assignee hereby acknowledge
that for all purposes the Assignors and Assignee are each separate and distinct
legal entities. Accordingly, the Assignors shall not be liable to any third
party for the debts, obligations and liabilities of the Assignee; and Assignee
shall not be liable to any third party for the debts, obligations and
liabilities of the Assignors.

            4. Governing Law. This Assignment shall be governed by and
interpreted in accordance with the laws of the State of New York, and the
parties hereto hereby acknowledge and agree that this Assignment and the
transactions contemplated hereunder were negotiated and entered into in the
State of New York.

            5. Authority. The Assignors and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.

            6. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.

            7. Successors and Assigns. The Assignors and Assignee each agree
that this Assignment will be binding and will inure to the benefit of each
Assignor and its successors and assigns and the Assignee and its successors and
assigns.


                                      B-2
<PAGE>   34
         IN WITNESS WHEREOF, this Assignment has been executed as of the date
first above written.



                                TRENDWEST FUNDING I, INC., ASSIGNOR



                                By___________________________________
                                      Name:
                                      Title:



                                TWH FUNDING I, INC., ASSIGNOR



                                By___________________________________
                                      Name:
                                      Title:



                                TFI FUNDING COMPANY I, L.L.C., ASSIGNEE

                                By:  TRENDWEST FUNDING I, INC., MEMBER



                                By___________________________________
                                      Name:
                                      Title:

                                      B-3
<PAGE>   35
                                                                       EXHIBIT C

                            FORM OF SUBORDINATED NOTE



                                $_______________


                          TRI FUNDING COMPANY I, L.L.C.


                                SUBORDINATED NOTE



Date:  April 17, 1996                           Stated Maturity:  June 15, 2004

         TRI FUNDING COMPANY I, L.L.C., a limited liability company duly
organized and existing under the laws of the State of Delaware (the "Issuer,"
which term includes any successor entity under the Indenture referred to below),
for value received, hereby promises to pay to Trendwest Funding I, Inc. ("TFI"),
or its assigns, the principal sum of ___________________________________________
Dollars ($_____________) in monthly installments beginning on May 15, 1996 (the
"Initial Payment Date"), and to pay interest monthly in arrears on the unpaid
portion of said principal sum (and, to the extent that the payment of such
interest shall be legally enforceable, on any overdue installment of interest on
this Subordinated Note) on the fifteenth day of each calendar month or, if such
fifteenth day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), for the period from and including May 15, 1996 through
the last day of the Due Period immediately preceding the Initial Payment Date,
and thereafter, monthly from and including the first day through the last day of
the Due Period immediately preceding the applicable Payment Date, at the rate of
8.42% per annum (calculated on the basis of a 360-day year consisting of 12
months of 30 days each). Each monthly installment of principal payable on this
Subordinated Note shall be an amount equal to the cash available for
distribution pursuant to clause (xi) of Section 12.02(d) of the Indenture
(referred to herein as the "Indenture"), dated as of March 1, 1996, among the
Issuer, Trendwest Resorts, Inc., as Servicer, and LaSalle National Bank, as
Trustee until the principal amount owed hereunder, as adjusted as set forth
below, is paid in full. Any remaining unpaid portion of the principal amount of
this Subordinated Note shall be due and payable no later than the Stated
Maturity referred to above; provided, however, that if the Notes (as defined
below) are not paid in full on such date, no such amounts shall be due or
payable until the Notes are paid in full. All terms used in this Subordinated
Note which are defined in the Indenture shall have the meanings assigned to them
in the Indenture.

         The principal and interest on this Subordinated Note are payable by
check mailed by first-class mail to TFI or its assigns or by wire transfer in
immediately available funds to the account specified in writing to the Trustee
by TFI or its assigns received at least five Business Days prior to the Record
Date for the Payment Date on which wire transfers will commence, in such coin or
currency of the United States of America as at the time of
<PAGE>   36
payment is legal tender for payment of public and private debts. Funds
represented by checks returned undelivered will be held for payment to the
Person entitled thereto, subject to the terms of the Indenture, at the office or
agency in the United States of America designated as such by the Issuer for such
purpose pursuant to the Indenture.

         The principal owed on this Subordinated Note will be increased from
time to time in the event that TFI transfers an Upgrade Contract to the Issuer,
such amount to equal the difference between the principal balance of the Upgrade
Contract as of the date of such Upgrade and the Collateral Value on such date of
the Contract being replaced.

         This Subordinated Note and the Issuer's 7.42% Receivables-Backed Notes,
Series 1996-1 (the "Notes") are secured by certain Contracts, Receivables and
other Collateral described in the Indenture. The Trust Estate also secures the
payment of certain other amounts and certain other obligations as described in
the Indenture. Until the Notes are paid in full and the obligations of the
Issuer under the Indenture are satisfied, (i) the Subordinated Notes are payable
only at the time and in the manner provided in the Indenture and are not
redeemable or prepayable at the option of the Issuer before such time and (ii)
the holder of this Subordinated Note will not cause the filing of a bankruptcy
petition against the Issuer for any reason whatsoever, including, without
limitation, the failure of the Issuer to make any payments of principal of or
interest on this Subordinated Note until after a period equal to 10 days plus
the applicable preference period under the United States Bankruptcy Code has
passed since the Notes were paid in full.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the holder of this Subordinated Note under the
Indenture at any time by the Issuer, the Trustee and the Servicer with the
consent of the Holders of not less than 66-2/3% in principal amount of Notes
Outstanding under the Indenture. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Notes, at the time Outstanding under the Indenture, to waive compliance by
the Issuer with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. This Subordinated Note shall not be
amended without the consent of Holders of not less than 66-2/3% in principal
amount of the Notes Outstanding.

         No reference herein to the Indenture and no provision of this
Subordinated Note or of the Indenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Subordinated Note, but, so long as any Notes are Outstanding,
solely from the Collateral pledged to the Trustee under the Indenture at the
times, place and rate, and in the coin or currency, herein prescribed.
Notwithstanding anything else to the contrary contained in this Subordinated
Note or the Indenture, the obligation of the Issuer to pay the principal of and
interest on this Subordinated Note is not a general obligation of the Issuer,
nor its officers or directors, but, so long as any Notes are Outstanding, is
limited solely to the Collateral pledged under the Indenture.


                                      C-2
<PAGE>   37
         So long as the Notes are Outstanding, TFI shall not transfer this
Subordinated Note to any Person.

         This Subordinated Note and the Indenture shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to conflicts of laws principles.

            IN WITNESS WHEREOF, TRI Funding Company I, L.L.C. has caused this
Subordinated Note to be signed, manually, by the Treasurer of Trendwest Funding
I, Inc., as member.

                                    TRI FUNDING COMPANY I, L.L.C.

                                    By:  TRENDWEST FUNDING I, INC., as Member


                                    By:______________________________________
                                         Treasurer


                                      C-3
<PAGE>   38
                                   SCHEDULE I


                                CONTRACT SCHEDULE