exv10w4






Exhibit 10.4




EXECUTION COPY




LOAN SALE AGREEMENT




AMONG




SILVERLEAF FINANCE IV, LLC,




as Seller,




SILVERLEAF FINANCE VI, LLC,




as Purchaser




AND




SILVERLEAF RESORTS, INC., as Servicer




DATED AS OF JUNE 1, 2008




 









 





LOAN SALE AGREEMENT




          This LOAN SALE AGREEMENT (this “Agreement”), dated as of June 1, 2008, is among Silverleaf
Finance IV, LLC, a Delaware limited liability company (“Seller”), Silverleaf Finance VI, LLC, a
Delaware limited liability company (the “Purchaser”), Silverleaf Resorts, Inc., a Texas
corporation, in its capacity as servicer (the “Servicer”) and their respective permitted successors
and assigns.




W I T N E S S E T H:




          WHEREAS, the Purchaser has been established as a bankruptcy-remote entity for the purpose of
acquiring (i) a certain pool of timeshare loans (the “Mortgage Loans”) each evidenced by a
promissory note and secured by a first Mortgage on a fractional fee simple timeshare interest in a
Unit, (ii) a pool of timeshare loans (the “Oak N’ Spruce Loans”), each evidenced by a purchase and
finance agreement (a “Finance Agreement”) for the purchase of a certificate of beneficial interest
in the Oak N’ Spruce Resort Trust evidencing the right of the owner thereof to use and occupy a
fixed unit at Oak N’ Spruce Resort at a fixed period of time (the Mortgage Loans and Oak N’ Spruce
Loans, together, the “Timeshare Loans”), (iii) any Qualified Substitute Timeshare Loans and (iv)
all Related Security in respect of the Timeshare Loans. A “Timeshare Property” shall consist of
(i) in the case of a Timeshare Loan, a fractional fee simple timeshare interest in a residential
unit (a residential timeshare unit herein referred to as a “Unit”) in a Resort or (ii) in the case
of an Oak N’ Spruce Loan, a certificate of beneficial interest (“Oak N’ Spruce Certificate”) in the
Oak N’ Spruce Resort Trust. The Timeshare Loans, Timeshare Properties, Mortgage Note, any Related
Security and other conveyed property related thereto and additional collateral, collectively, are
the “Transferred Assets.”




          WHEREAS, on June 6, 2008 (the “Closing Date”) and on each Transfer Date, the Purchaser intends
to pledge such Transferred Assets acquired thereby to Wells Fargo Bank National Association, as
indenture trustee (in such capacity, the “Securitization Indenture Trustee”), custodian (in such
capacity, the “Securitization Custodian”) and backup servicer, pursuant to an indenture, dated as
of June 1, 2008 (the “Securitization Indenture”), by and among the Purchaser, the Servicer and the
Securitization Indenture Trustee, to secure the Purchaser’s (i) 6.222% Timeshare Loan-Backed Notes,
Series 2008-A, Class A Notes, (ii) 7.708% Timeshare Loan-Backed Notes, Series 2008-A, Class B
Notes, (iii) 8.000% Timeshare Loan-Backed Notes, Series 2008-A, Class C Notes, (iv) 8.000%
Timeshare Loan-Backed Notes, Series 2008-A, Class D Notes, (v) 8.000% Timeshare Loan-Backed Notes,
Series 2008-A, Class E Notes, (vi) 8.000% Timeshare Loan-Backed Notes, Series 2008-A, Class F
Notes, and (vii) 8.000% Timeshare Loan-Backed Notes, Series 2008-A, Class G Notes (collectively,
the “Securitization Notes”);




          WHEREAS, proceeds from the sale of the Securitization Notes will be used by the Purchaser, in
part, to (i) pay the Seller the purchase price for the Timeshare Loans and (ii) pay certain
expenses incurred in connection with the issuance of the Securitization Notes.




          WHEREAS, the Seller will derive an economic benefit from the transfer hereunder of the
Timeshare Loans to the Purchaser.




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               NOW, THEREFORE, in consideration of the mutual covenants set forth herein, and for other
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties
hereto covenant and agree as follows:




               SECTION 1. Definitions; Interpretation. Capitalized terms used herein but not defined
herein shall have the respective meanings specified in “Standard Definitions” attached hereto as
Annex A.




               SECTION 2. Acquisition of Timeshare Loans.




                    (a) Initial Timeshare Loans.




(i) Effective as of the Closing Date, but subject to the terms and
conditions of this Agreement (including, without limitation, subsection
(f) below), the Seller hereby sells (“Sells,” “Sale” or “Sold”) and
otherwise transfers, assigns, and conveys to the Purchaser, without recourse
(except for Defective Timeshare Loans to the extent specifically provided
herein), and the Purchaser hereby agrees to purchase and otherwise acquires,
all right, title and interest of the Seller in and to the Timeshare Loans
included on the schedule delivered to the Purchaser on the Closing Date (as
further described in subsection (g) below), together with the
Timeshare Properties, Related Security and other conveyed property related
thereto. In connection with the initial transfer, Seller shall transfer or
cause the deposit into the Lockbox Account of all amounts received by the
Seller on account of such Timeshare Loans, Timeshare Properties, Related
Security and other conveyed property related thereto and additional
collateral hereunder due on and after the Initial Cut-Off Date within two
(2) Business Days of the receipt thereof.




(ii) The Seller hereby acknowledges that each sale and conveyance to the
Purchaser hereunder is absolute and irrevocable, without reservation or
retention of any interest whatsoever by the Seller.



                    (b) [Intentionally Omitted].



                    (c) Delivery of Timeshare Loan Documents. In connection with the sale, transfer,
assignment and conveyance of any Timeshare Loans hereunder, the Purchaser hereby directs the
Seller, and the Seller hereby agrees to deliver or cause to be delivered to the Securitization
Custodian all related Timeshare Loan Files and to the Servicer all related Timeshare Loan Servicing
Files.



                    (d) Collections. The Seller shall deposit or cause to be deposited all collections in
respect of the Timeshare Loans received by the Seller or any of its Affiliates on and after the
related Cut-Off Date in the Lockbox Account.



                    (e) Limitation of Liability. Neither the Purchaser nor any subsequent assignee of the
Purchaser shall have any obligation or liability with respect to any Timeshare Loan nor shall the
Purchaser or any subsequent assignee have any liability to any Obligor in respect of any



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Timeshare Loan. No such obligation or liability is intended to be assumed by the Purchaser,
the Seller or any subsequent assignee herewith and any such liability is hereby expressly
disclaimed.




                    (f) Purchase Price. The price paid for Timeshare Loans, Timeshare Properties, Related
Security and other conveyed property related thereto and additional collateral which are Sold
hereunder shall be the Timeshare Loan Acquisition Price with respect thereto. Such Timeshare Loan
Acquisition Price shall be paid by means of an immediate cash payment to the Seller by wire
transfer on the applicable conveyance date to an account designated by the Seller on or before such
conveyance date.



                    (g) Schedule of Timeshare Loans. Upon the Seller’s Sale of the Timeshare Loans,
Timeshare Properties, Related Security and other conveyed property related thereto and additional
collateral to the Purchaser, the Seller shall deliver a Schedule of Timeshare Loans, which schedule
shall be attached hereto as Schedule III and made a part hereof. Each schedule so
delivered shall supersede any prior schedules so delivered.



               SECTION 3. Intended Characterization, Grant of Security Interest. It is the intention
of the parties hereto that the transfers of Timeshare Loans to be made pursuant to the terms hereof
shall constitute a sale and an absolute assignment by the Seller to the Purchaser and not a loan
secured by the Timeshare Loans. In the event, however, that a court of competent jurisdiction were
to hold that any such transfer constitutes a loan and not a sale, it is the intention of the
parties hereto that the Seller shall be deemed to have granted and does hereby grant to the
Purchaser as of the date hereof a first priority perfected security interest in all of Seller’s
right, title and interest in, to and under the Transferred Assets specified in Section 2 hereof and
that with respect to such conveyance, this Agreement shall constitute a security agreement under
applicable law. In the event of the characterization of any such transfer as a loan, the amount of
interest payable or paid with respect to such loan under the terms of this Agreement shall be
limited to an amount which shall not exceed the maximum non-usurious rate of interest allowed by
the applicable state law or any applicable law of the United States permitting a higher maximum
non-usurious rate that preempts such applicable state law, which could lawfully be contracted for,
charged or received (the “Highest Lawful Rate”). In the event any payment of interest on any such
loan exceeds the Highest Lawful Rate, the parties hereto stipulate that (a) to the extent possible
given the term of such loan, such excess amount previously paid or to be paid with respect to such
loan be applied to reduce the principal balance of such loan, and the provisions thereof
immediately be deemed reformed and the amounts thereafter collectible thereunder reduced, without
the necessity of the execution of any new document, so as to comply with the then applicable law,
but so as to permit the recovery of the fullest amount otherwise called for thereunder and (b) to
the extent that the reduction of the principal balance of, and the amounts collectible under, such
loan and the reformation of the provisions thereof described in the immediately preceding clause
(a) is not possible given the term of such loan, such excess amount will be deemed to have been
paid with respect to such loan as a result of an error and upon discovery of such error or upon
notice thereof by any party hereto such amount shall be refunded by the recipient thereof.




               The characterization of the Seller as “debtor” and the Purchaser as “secured party” in any
financing statement required hereunder is solely for protective purposes and shall in no way be
construed as being contrary to the intent of the parties that this transaction be




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treated as a sale to the Purchaser of such Seller’s entire right, title and interest in and to
the Transferred Assets.




               Each of the Seller, the Purchaser and any of their Affiliates hereby agrees to make the
appropriate entries in its general accounting records and to indicate that the Timeshare Loans have
been transferred to the Purchaser.




               SECTION 4. Conditions Precedent to Acquisition of Timeshare Loans by the Purchaser.
The obligations of the Purchaser to purchase any Timeshare Loans hereunder shall be subject to the
satisfaction of the following conditions:




                    (a) All representations and warranties of the Seller and the Servicer contained in Section 5
and in Schedule I hereof, and all information provided in the Schedule of Timeshare Loans
related thereto shall be true and correct as of the Closing Date or the Transfer Date, as
applicable, and each of the Seller and the Servicer shall have delivered to the Purchaser, the
Securitization Indenture Trustee and UBS Securities LLC (the “Initial Purchaser”) an officer’s
certificate (the “Officer’s Certificate”) to such effect.



                    (b) On or prior to the Closing Date or a Transfer Date, as applicable, the Seller (and, with
regard to a Transfer Date, the Servicer) shall have delivered or shall have caused the delivery of
(i) the related Timeshare Loan Files to the Securitization Custodian and the Securitization
Custodian shall have delivered a receipt therefore pursuant to the Custodial Agreement, (ii) the
Timeshare Loan Servicing Files to the Servicer, and (iii) all documents and certifications required
pursuant to the terms of the Custodial Agreement and the Escrow and Closing Agreement.



                    (c) The Seller shall have delivered or shall have caused to be delivered all other information
theretofore required or reasonably requested by the Purchaser to be delivered by the Seller or
performed or caused to be performed all other obligations required to be performed as of the
Closing Date, including all filings, recordings and/or registrations as may be necessary in the
reasonable opinion of the Purchaser or the Securitization Indenture Trustee to establish and
preserve the right, title and interest of the Purchaser or the Securitization Indenture Trustee, as
the case may be, in the related Timeshare Loans.



                    (d) With regard to each Transfer Date, the Servicer shall have delivered or shall have caused
to be delivered all other information theretofore required or reasonably requested by the Purchaser
to be delivered by the Servicer or performed or caused to be performed all other obligations
required to be performed as of such Transfer Date, including all filings, recordings and/or
registrations as may be necessary in the reasonable opinion of the Purchaser or the Securitization
Indenture Trustee to establish and preserve the right, title and interest of the Purchaser or the
Securitization Indenture Trustee, as the case may be, in the related Timeshare Loans.



                    (e) On or before the Closing Date, the Purchaser, the Servicer, the Backup Servicer and the
Securitization Indenture Trustee shall have entered into the Securitization Indenture.



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                    (f) The Securitization Notes shall be issued and sold on the Closing Date, and the Purchaser
shall receive the full consideration due it upon the issuance of the Securitization Notes, and the
Purchaser shall have applied such consideration to the extent necessary, to pay the Timeshare Loan
Acquisition Price for each Timeshare Loan.



                    (g) Each Timeshare Loan conveyed on a Transfer Date in accordance with Section 6(a) hereof
shall satisfy each of the criteria specified in the definition of “Qualified Substitute Timeshare
Loan” and each of the conditions herein and in the Securitization Indenture for substitution of
Timeshare Loans shall have been satisfied.



                    (h) The Purchaser shall have received such other certificates and opinions as it shall
reasonably request.



               SECTION 5. Representations and Warranties and Certain Covenants of Seller and
Servicer.



                    (a) The Seller represents and warrants to the Purchaser and the Securitization Indenture
Trustee for the benefit of the Securitization Noteholders, as of the Closing Date (with respect to
the Timeshare Loans transferred on the Closing Date) as follows:




     (i) Due Incorporation; Valid Existence; Good Standing. It is a limited liability
company duly organized and validly existing in good standing under the laws of the jurisdiction
of its incorporation; and is duly qualified to do business as a foreign entity and in good
standing under the laws of each jurisdiction where the character of its property, the nature of
its business or the performance of its obligations under this Agreement makes such qualification
necessary, except where the failure to be so qualified will not have a material adverse effect
on its business or its ability to perform its obligations under this Agreement or any other
related documents (the “Transaction Documents”) to which it is a party or under the transactions
contemplated hereunder or thereunder or the validity or enforceability of the Timeshare Loans.




     (ii) Possession of Licenses, Certificates, Franchises and Permits. It holds all
licenses, certificates, franchises and permits from all governmental authorities necessary for
the conduct of its business, except where the failure to hold such licenses, certificates,
franchises and permits would not materially and adversely affect its ability to perform its
obligations under this Agreement or any other Transaction Document to which it is a party or
under the transactions contemplated hereunder or thereunder or the validity or enforceability of
the Timeshare Loans, and has received no notice of proceedings relating to the revocation of any
such license, certificate, franchise or permit, which singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially and adversely affect its ability
to perform its obligations under this Agreement or any other Transaction Document to which it is
a party or under the transactions contemplated hereunder or thereunder or the validity or
enforceability of the Timeshare Loans.




     (iii) Limited Liability Company Authority and Power. It has, and at all times
during the term of this Agreement will have, all requisite limited liability company power and
authority to own its properties, to conduct its business, to execute and deliver this Agreement



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and all documents and transactions contemplated hereunder and to perform all of its
obligations under this Agreement and any other Transaction Document to which it is a party or
under the transactions contemplated hereunder or thereunder.




     (iv) Authorization, Execution and Delivery Valid and Binding. This Agreement and
all other Transaction Documents and instruments required or contemplated hereby to be executed
and delivered by the Seller have been duly authorized, executed and delivered by the Seller and,
assuming the due execution and delivery by, the other party or parties hereto and thereto,
constitute legal, valid and binding agreements enforceable against the Seller in accordance with
their respective terms subject, as to enforceability, to bankruptcy, insolvency, reorganization,
liquidation, dissolution, moratorium and other similar applicable laws affecting the
enforceability of creditors’ rights generally applicable in the event of the bankruptcy,
insolvency, reorganization, liquidation or dissolution, as applicable, of the Seller and to
general principles of equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.




     (v) No Violation of Law, Rule, Regulation, etc. The execution, delivery and
performance by the Seller of this Agreement and any other Transaction Document to which it is a
party do not and will not (A) violate any of the provisions of its certificate of formation or
limited liability company agreement, (B) violate any provision of any law, governmental rule or
regulation currently in effect applicable to it or its properties or by which it or its
properties may be bound or affected, including, without limitation, any bulk transfer laws,
where such violation would have a material adverse effect on its ability to perform its
obligations under this Agreement or any other Transaction Document to which it is a party or
under the transactions contemplated hereunder or thereunder or the validity or enforceability of
the Timeshare Loans, (C) violate any judgment, decree, writ, injunction, award, determination or
order currently in effect applicable to it or its properties or by which it or its properties
are bound or affected, where such violation would have a material adverse effect on its ability
to perform its obligations under this Agreement or any other Transaction Document to which it is
a party or under the transactions contemplated hereunder or thereunder or the validity or
enforceability of the Timeshare Loans, (D) conflict with, or result in a breach of, or
constitute a default under, any of the provisions of any indenture, mortgage, deed of trust,
contract or other instrument to which it is a party or by which it is bound where such violation
would have a material adverse effect on its ability to perform its obligations under this
Agreement or any other Transaction Document to which it is a party or under the transactions
contemplated hereunder or thereunder or the validity or enforceability of the Timeshare Loans or
(E) result in the creation or imposition of any Lien upon any of its properties pursuant to the
terms of any such indenture, mortgage, deed of trust, contract or other instrument.




     (vi) Governmental Consent. No consent, approval, order or authorization of, and no
filing with or notice to, any court or other Governmental Authority in respect of the Seller is
required which has not been obtained in connection with the authorization, execution, delivery
or performance by the Seller of this Agreement or any of the other Transaction Documents to
which Seller is a party or under the transactions contemplated hereunder or thereunder,
including, without limitation, the transfer of the Timeshare Loans and the creation of the
security interest of the Purchaser therein pursuant to Section 3 hereof.



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     (vii) Defaults. It is not in default under any material agreement, contract,
instrument or indenture to which it is a party or by which it or its properties is or are bound,
or with respect to any order of any court, administrative agency, arbitrator or governmental
body, in each case, which would have a material adverse effect on the transactions contemplated
hereunder or on its business, operations, financial condition or assets, and no event has
occurred which with notice or lapse of time or both would constitute such a default with respect
to any such agreement, contract, instrument or indenture, or with respect to any such order of
any court, administrative agency, arbitrator or governmental body.




     (viii) Insolvency. It is solvent and will not be rendered insolvent by the transfer
of Timeshare Loans hereunder. On and after the Closing Date, it will not engage in any business
or transaction the result of which would cause the property remaining with it to constitute an
unreasonably small amount of capital.




     (ix) Pending Litigation or Other Proceedings. There is no pending or, to its
Knowledge, threatened action, suit, proceeding or investigation before any court, administrative
agency, arbitrator or governmental body against or affecting it which, if decided adversely,
would materially and adversely affect (A) its condition (financial or otherwise), its business
or operations, (B) its ability to perform its obligations under, or the validity or
enforceability of, this Agreement or any other documents or transactions contemplated under this
Agreement including, without limitation, its ability to foreclose or otherwise enforce the Liens
of the Timeshare Loans, or (C) any Timeshare Loan or title of any Obligor to any related
Timeshare Property.




     (x) Information. No document, certificate or report furnished or required to be
furnished by or on behalf of it pursuant to this Agreement or any other Transaction Document,
contains or will contain when furnished any untrue statement of a material fact or fails or will
fail to state a material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances in which it was made. There are no facts known to it
which, individually or in the aggregate, materially adversely affect, or which (aside from
general economic trends) may reasonably be expected to materially adversely affect in the
future, its financial condition or assets or business, or which may impair its ability to
perform its obligations under this Agreement, which have not been disclosed herein or therein or
in the certificates and other documents furnished to the Purchaser by or on its behalf pursuant
hereto or thereto specifically for use in connection with the transactions contemplated hereby
or thereby.




     (xi) No Deficiency Accumulation. It is not aware of any outstanding “accumulated
funding deficiency” (as such term is defined under ERISA and the Code) with respect to any
“employee benefit plan” (as such term is defined under ERISA) sponsored by it.




     (xii) Taxes. It has filed all tax returns (federal, state and local) which it
reasonably believes are required to be filed and has paid or made adequate provision for the
payment of all taxes, assessments and other governmental charges due from it or is contesting
any such tax, assessment or other governmental charge in good faith through appropriate
proceedings or except where the failure to file or pay will not have a material adverse effect
on the rights and interests of the Purchaser or any of its subsequent assignees. It knows of no
basis for any



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material additional tax assessment for any fiscal year for which adequate reserves have not
been established. It shall pay all such taxes, assessments and governmental charges when due.




     (xiii) Place of Business. The principal place of business and chief executive
office where it keeps its records concerning the Timeshare Loans will be 1221 Riverbend Drive,
Suite 120, Dallas, Texas 75247 (or such other place specified by it by written notice to the
Purchaser and the Securitization Indenture Trustee). It is a limited liability company formed
under the laws of the State of Delaware.




     (xiv) Securities Laws. It is not an “investment company” or a company “controlled”
by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
No portion of the Timeshare Loan Acquisition Price for each of the Timeshare Loans will be used
by it to acquire any security in any transaction which is subject to Section 13 or Section 14 of
the Securities Exchange Act of 1934, as amended.




     (xv) Transactions in Ordinary Course. The transactions contemplated by this
Agreement are in the ordinary course of business of the Seller.




     (xvi) Name. The legal name of the Seller is as set forth in the signature page of
this Agreement and the Seller does not have any tradenames, fictitious names, assumed names or
“doing business as” names.




     (xvii) Custodial Files. The Seller shall, on or prior to the Closing Date, have
delivered or caused the delivery to the Securitization Custodian a Timeshare Loan File for each
Timeshare Loan, which Timeshare Loan File shall be complete and verified by the Securitization
Custodian in accordance with the Custodial Agreement.




     (xviii) No Conveyance. The Seller agrees not to convey and to ensure no party
under its control conveys any interest in a Resort relating to a Timeshare Loan without
obtaining Rating Agency Confirmation if such conveyance is reasonably likely to have a material
adverse affect on the Securitization Noteholders.



                    (b) The Servicer represents and warrants to the Purchaser and the Securitization Indenture
Trustee for the benefit of the Securitization Noteholders, as of the Closing Date (with respect to
the Timeshare Loans transferred on the Closing Date) and on each Transfer Date (with respect to
Qualified Substitute Timeshare Loans) as follows:





     (i) Due Incorporation; Valid Existence; Good Standing. It is a corporation duly
organized and validly existing in good standing under the laws of the jurisdiction of its
incorporation; and is duly qualified to do business as a foreign corporation and in good
standing under the laws of each jurisdiction where the character of its property, the nature of
its business or the performance of its obligations under this Agreement makes such qualification
necessary, except where the failure to be so qualified will not have a material adverse effect
on its business or its ability to perform its obligations under the Transaction Documents to
which it is a party or under the transactions contemplated hereunder or thereunder or the
validity or enforceability of the Timeshare Loans.



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     (ii) Possession of Licenses, Certificates, Franchises and Permits. It holds all
licenses, certificates, franchises and permits from all governmental authorities necessary for
the conduct of its business, except where the failure to hold such licenses, certificates,
franchises and permits would not materially and adversely affect its ability to perform its
obligations under this Agreement or any other Transaction Document to which it is a party or
under the transactions contemplated hereunder or thereunder or the validity or enforceability of
the Timeshare Loans, and has received no notice of proceedings relating to the revocation of any
such license, certificate, franchise or permit, which singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would materially and adversely affect its ability
to perform its obligations under this Agreement or any other Transaction Document to which it is
a party or under the transactions contemplated hereunder or thereunder or the validity or
enforceability of the Timeshare Loans.




     (iii) Corporate Authority and Power. It has, and at all times during the term of
this Agreement will have, all requisite corporate power and authority to own its properties, to
conduct its business, to execute and deliver this Agreement and all documents and transactions
contemplated hereunder and to perform all of its obligations under this Agreement and any other
Transaction Document to which it is a party or under the transactions contemplated hereunder or
thereunder.




     (iv) Authorization, Execution and Delivery Valid and Binding. This Agreement and
all other Transaction Documents and instruments required or contemplated hereby to be executed
and delivered by the Servicer have been duly authorized, executed and delivered by the Servicer
and, assuming the due execution and delivery by, the other party or parties hereto and thereto,
constitute legal, valid and binding agreements enforceable against the Servicer in accordance
with their respective terms subject, as to enforceability, to bankruptcy, insolvency,
reorganization, liquidation, dissolution, moratorium and other similar applicable laws affecting
the enforceability of creditors’ rights generally applicable in the event of the bankruptcy,
insolvency, reorganization, liquidation or dissolution, as applicable, of the Servicer and to
general principles of equity, regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.




     (v) No Violation of Law, Rule, Regulation, etc. The execution, delivery and
performance by the Servicer of this Agreement and any other Transaction Document to which it is
a party do not and will not (A) violate any of the provisions of its articles of incorporation
or bylaws, (B) violate any provision of any law, governmental rule or regulation currently in
effect applicable to it or its properties or by which it or its properties may be bound or
affected, including, without limitation, any bulk transfer laws, where such violation would have
a material adverse effect on its ability to perform its obligations under this Agreement or any
other Transaction Document to which it is a party or under the transactions contemplated
hereunder or thereunder or the validity or enforceability of the Timeshare Loans, (C) violate
any judgment, decree, writ, injunction, award, determination or order currently in effect
applicable to it or its properties or by which it or its properties are bound or affected, where
such violation would have a material adverse effect on its ability to perform its obligations
under this Agreement or any other Transaction Document to which it is a party or under the
transactions contemplated hereunder or thereunder or the validity or enforceability of the
Timeshare Loans, (D) conflict with, or result in a breach of, or constitute



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a default under, any of the provisions of any indenture, mortgage, deed of trust, contract
or other instrument to which it is a party or by which it is bound where such violation would
have a material adverse effect on its ability to perform its obligations under this Agreement or
any other Transaction Document to which it is a party or under the transactions contemplated
hereunder or thereunder or the validity or enforceability of the Timeshare Loans or (E) result
in the creation or imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, mortgage, deed of trust, contract or other instrument.




     (vi) Governmental Consent. No consent, approval, order or authorization of, and no
filing with or notice to, any court or other Governmental Authority in respect of the Servicer
is required which has not been obtained in connection with the authorization, execution,
delivery or performance by the Servicer of this Agreement or any of the other Transaction
Documents to which the Servicer is a party or under the transactions contemplated hereunder or
thereunder.




     (vii) Defaults. It is not in default under any material agreement, contract,
instrument or indenture to which it is a party or by which it or its properties is or are bound,
or with respect to any order of any court, administrative agency, arbitrator or governmental
body, in each case, which would have a material adverse effect on the transactions contemplated
hereunder or on its business, operations, financial condition or assets, and no event has
occurred which with notice or lapse of time or both would constitute such a default with respect
to any such agreement, contract, instrument or indenture, or with respect to any such order of
any court, administrative agency, arbitrator or governmental body.




     (viii) Pending Litigation or Other Proceedings. Other than as described in the
Offering Circular, there is no pending or, to its Knowledge, threatened action, suit, proceeding
or investigation before any court, administrative agency, arbitrator or governmental body
against or affecting it which, if decided adversely, would materially and adversely affect (A)
its condition (financial or otherwise), its business or operations, (B) its ability to perform
its obligations under, or the validity or enforceability of, this Agreement or any other
documents or transactions contemplated under this Agreement including, without limitation, its
ability to foreclose or otherwise enforce the Liens of the Timeshare Loans, or (C) any Timeshare
Loan or title of any Obligor to any related Timeshare Property.




     (ix) Information. No document, certificate or report furnished or required to be
furnished by or on behalf of it pursuant to this Agreement or any other Transaction Document,
contains or will contain when furnished any untrue statement of a material fact or fails or will
fail to state a material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances in which it was made. There are no facts known to it
which, individually or in the aggregate, materially adversely affect, or which (aside from
general economic trends) may reasonably be expected to materially adversely affect in the
future, its financial condition or assets or business, or which may impair its ability to
perform its obligations under this Agreement, which have not been disclosed herein or therein or
in the certificates and other documents furnished to the Purchaser by or on its behalf pursuant
hereto or thereto specifically for use in connection with the transactions contemplated hereby
or thereby.



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     (x) No Deficiency Accumulation. It is not aware of any outstanding “accumulated
funding deficiency” (as such term is defined under ERISA and the Code) with respect to any
“employee benefit plan” (as such term is defined under ERISA) sponsored by it.




     (xi) Taxes. It has filed all tax returns (federal, state and local) which it
reasonably believes are required to be filed and has paid or made adequate provision for the
payment of all taxes, assessments and other governmental charges due from it or is contesting
any such tax, assessment or other governmental charge in good faith through appropriate
proceedings or except where the failure to file or pay will not have a material adverse effect
on the rights and interests of the Purchaser or any of its subsequent assignees. It knows of no
basis for any material additional tax assessment for any fiscal year for which adequate reserves
have not been established. It shall pay all such taxes, assessments and governmental charges
when due.




     (xii) Securities Laws. It is not an “investment company” or a company “controlled”
by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.




     (xiii) Transactions in Ordinary Course. The transactions contemplated by this
Agreement are in the ordinary course of business of the Servicer.




     (xiv) Foreign Tax Liability. It is not aware of any Obligor under a Timeshare Loan
who has withheld any portion of payments due under such Timeshare Loan because of the
requirements of a foreign taxing authority, and no foreign taxing authority has contacted it
concerning a withholding or other foreign tax liability.




     (xv) Oak N’ Spruce Loans. With respect to Timeshare Loans that are Oak N’ Spruce
Loans:




     (A) The Oak N’ Spruce Trust is a trust duly, formed, validly existing, and in
good standing under the laws of the Commonwealth of Massachusetts. The Oak N’
Spruce Trust is authorized to transact business in no other state;




     (B) Silverleaf possesses all requisite franchises, operating rights, licenses,
permits, consents, authorizations, exemptions and orders as are necessary to
discharge its obligations under the Finance Agreement;




     (C) Silverleaf holds all right, title and interest in and to all of the
Timeshare Properties related to the Oak N’ Spruce Loans solely for the benefit of
the beneficiaries referred to in, and subject in each case to the provisions of,
the Finance Agreement and the other documents and agreements related thereto;




     (D) There are no actions, suits, proceedings, orders or injunctions pending
against the Oak N’ Spruce Trust or Oak N’ Spruce Trustee, at law or in equity, or
before or by any governmental authority which, if adversely determined, could
reasonably be expect to have a material adverse effect on the Trust Estate or the
Oak N’ Spruce Trustee’s ability to perform its obligations under the Trust
Documents;



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     (E) Neither the Oak N’ Spruce Trust nor the Oak N’ Spruce Trustee has incurred
any indebtedness for borrowed money (directly, by guarantee, or otherwise);




     (F) All ad valorem taxes and other taxes and assessments against the Oak N’
Spruce Trust and/or its trust estate have been paid when due and neither the
Servicer nor the Oak N’ Spruce Trustee knows of any basis for any additional taxes
or assessments against any such property. The Oak N’ Spruce Trust has filed all
required tax returns and has paid all taxes shown to be due and payable on such
returns, including all taxes in respect of sales of Owner Beneficiary Rights (as
defined in the Finance Agreement);




     (G) The Oak N’ Spruce Trust and the Oak N’ Spruce Trustee are in compliance
with all applicable laws, statutes, rules and governmental regulations applicable
to it and in compliance with each instrument, agreement or document to which it is
a party or by which it is bound, including, without limitation, the Finance
Agreement except where the failure to comply herein would not materially and
adversely affect its ability to perform its obligations under this Agreement or any
other Transaction Document to which it is a party or under the transactions
contemplated hereunder or thereunder or the validity or enforceability of the
Timeshare Loans;




     (H) Silverleaf shall continue to control and manage the Oak N’ Spruce Trust,
and Silverleaf shall not take any action to cause the Oak N’ Spruce Trustee to
control or manage the Oak N’ Spruce Trust;




     (I) The Oak N’ Spruce Trustee is a wholly-owned subsidiary of Silverleaf and
is controlled by Silverleaf. Silverleaf shall cause Silverleaf Berkshires, Inc. to
remain the Oak N’ Spruce Trustee and a wholly-owned subsidiary of Silverleaf, and
Silverleaf shall maintain the existence of Silverleaf Berkshires, Inc. as a Texas
corporation, with all the requisite corporate powers and authority as exists on the
Closing Date; and




     (J) Silverleaf shall comply, and shall cause the Oak N’ Spruce Trustee to
comply, with all the terms and conditions of the Oak N’ Spruce Trust Agreement and
all other related documents.




     (xvi) Servicing. It is the initial Servicer and has been servicing the Timeshare
Loans in accordance with the Servicing Standard.




     (xvii) Certified Copy of Contract for Sale. It represents and warrants that each
Contract for Sale contained in a Timeshare Loan File is a true, correct and accurate copy of the
original Contract for Sale.




     (xviii) No Conveyance. Silverleaf agrees not to convey and to ensure no party
under its control conveys any interest in a Resort relating to a Timeshare Loan without
obtaining Rating Agency Confirmation if such conveyance is reasonably likely to have a material
adverse affect on the Securitization Noteholders.



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     (xix) Timeshare Loan Documents. The Servicer represents and warrants that all of
the documents evidencing each of the Timeshare Loans are identical in all material respects to
the form determined to be valid, binding and enforceable in the applicable state by the
corresponding local counsel opinion issued by (I) Weinstock & Scavo, P.C., dated as of June 6,
2008, pertaining to Georgia law matters, (II) Bulkley, Richardson and Gelinas, LLP, dated as of
June 6, 2008, pertaining to Massachusetts law matters, (III) Stinson Morrison Hecker LLP, dated
as of June 6, 2008, pertaining to Missouri law matters, (IV) Mayer Brown LLP, dated as of June
6, 2008, pertaining to Illinois law matters, (V) Meadows, Collier, Reed, Cousins & Blau, L.L.P.,
dated as of June 6, 2008, pertaining to Texas law matters, and (VI) Holland and Knight LLP,
dated as of June 6, 2008, pertaining to Florida law matters (collectively, the “Local
Counsel Opinions”).




     (xx) Timeshare Marketing Materials and Disclosure Statements. The Servicer
represents and warrants that it has provided each of the law firms issuing the Local Counsel
Opinions all of the existing marketing materials and disclosure statements in connection with
the respective Resort. Moreover, no other marketing materials and disclosure statements exist
except for those provided to the respective law firm issuing the Local Counsel Opinion.




     (xxi) Local Counsel Opinions. The facts regarding Silverleaf, the Resorts, the
Timeshare Loans and related matters set forth or assumed in the Local Counsel Opinions are true
and correct in all material respects.




     (xxii) Bankruptcy Opinion. The facts regarding Silverleaf, the Purchaser, the
Resorts, the Timeshare Loans and related matters set forth or assumed in the opinion issued by
Mayer Brown LLP dated as of June 6, 2008 pertaining to bankruptcy law matters are, and shall
continue to be so long as the Securitization Notes are outstanding, true and correct in all
material respects.




     (xxiii) Custodial Files. The Servicer shall, on or prior to each Transfer Date,
have delivered or caused the delivery to the Securitization Custodian a Timeshare Loan File for
each Timeshare Loan, which Timeshare Loan File shall be complete and verified by the
Securitization Custodian in accordance with the Custodial Agreement.




     (xxiv) Escrow Documents. The Servicer shall, on or prior to the ninetieth day
following the Closing Date and each Transfer Date, as applicable, deliver or cause the delivery
to the Securitization Custodian of the following: (I) with respect to each Mortgage Loan and
pre-July 2004 Oak N’ Spruce Loan listed on the Schedule of Prior Secured Party’s Collateral
provided by the Seller, an original recorded Reassignment of Mortgage (which may be a part of a
blanket reassignment of more than one Mortgage Loan or pre-July 2004 Oak N’ Spruce Loan),
showing a complete chain of title from the Prior Secured Party to Seller to the Securitization
Indenture Trustee on behalf of the Securitization Noteholders signed by an Authorized Officer of
the Seller, Purchaser and each intervening party with evidence of proper recordation or evidence
from a third party that submitted such assignment for recording that such assignment has been
submitted for recordation, (II)(a) with respect to each pre-July 2004 Oak N’ Spruce Loan listed
on the Schedule of Prior Secured Party’s Collateral provided by the Seller, a file-stamped Oak
N’ Spruce Financing Statement Amendment evidencing the security interest of the Securitization
Indenture Trustee and its



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assigns by naming the Obligor with respect to the related pre-July 2004 Oak N’ Spruce Loan
as debtor, the Securitization Indenture Trustee on behalf of the Securitization Noteholders as
the secured party/assignee, and “Wells Fargo Bank, National Association as Trustee for UBS Real
Estate Securities Inc., as Noteholder,” as the assignor, and (b) with respect to each post-July
2004 Oak N’ Spruce Loan listed on the Schedule of Prior Secured Party’s Oak N’ Spruce Loans
provided by the Seller, a file-stamped Oak N’ Spruce Financing Statement Amendment evidencing
the security interest of the Securitization Indenture Trustee and its assigns by naming the
Obligor with respect to the related post-July 2004 Oak N’ Spruce Loan as debtor, the
Securitization Indenture Trustee on behalf of the Securitization Noteholders as the secured
party/assignee, and “Wells Fargo Bank, National Association as Trustee for UBS Real Estate
Securities Inc., as Noteholder,” as the assignor (or, in the alternative, such Oak N’ Spruce
Financing Statement Amendment may be in the form of an electronic spreadsheet submitted to the
Custodian directly by a third party service company listing the filing number, date of filing,
debtor and secured party and accompanied by a certification of filing by the third party service
company), and (III) all other recorded and/or filed documents provided under the Escrow
Agreement.




     (xxv) Prior Secured Parties’ Documents. In accordance with the Escrow Agreement,
the Servicer shall deliver or cause the delivery to the Escrow Agent of the Paydown Letters,
Direction Letters, Prior Secured Party Allonges and any other documents required in respect of
the Seller.




     (xxvi) Title Policies. In accordance with the Escrow Agreement, the Servicer shall
deliver or cause the delivery of the Title Policies (as defined in the Escrow Agreement) within
90 days of the Closing Date and each Transfer Date, as applicable.



               (c) The Servicer hereby makes the representations and warranties relating to the Timeshare
Loans contained in Schedule I hereto for the benefit of the Purchaser and its assignees as of the
Closing Date (with respect to each Timeshare Loan transferred on the Closing Date) and as of each
Transfer Date (with respect to each Qualified Substitute Timeshare Loan transferred on such
Transfer Date), as applicable.



               (d) It is understood and agreed that the representations, warranties and covenants set forth
in this Section 5 shall survive the (i) transfer of each Timeshare Loan to the Purchaser and (ii)
the subsequent pledge of such Timeshare Loans and rights and remedies hereunder to the
Securitization Indenture Trustee on behalf of the Securitization Noteholders and shall continue so
long as any such Timeshare Loans shall remain outstanding or until such time as such Timeshare
Loans are repurchased, purchased or a Qualified Substitute Timeshare Loan is provided pursuant to
Section 6 hereof. Each of the Seller and the Servicer acknowledges that it has been advised that
the Purchaser intends to pledge, transfer, assign and convey all of its right, title and interest
in and to each Timeshare Loan and its rights and remedies under this Agreement to the
Securitization Indenture Trustee on behalf of the Securitization Noteholders. The Seller and the
Servicer agree that, upon any such assignment, the Securitization Indenture Trustee may enforce
directly, without joinder of the Purchaser (but subject to any defense that Seller or the Servicer,
as applicable, may have under this Agreement) all rights and remedies hereunder.



14









 





                    (e) With respect to any representations and warranties contained in Section 5 which are made
to the Servicer’s Knowledge, if it is discovered that any representation and warranty is inaccurate
and such inaccuracy materially and adversely affects the value of a Timeshare Loan or the interests
of the Purchaser or any subsequent assignee thereof, then notwithstanding such lack of Knowledge of
the accuracy of such representation and warranty at the time such representation or warranty was
made (without regard to any Knowledge qualifiers), such inaccuracy shall be deemed a breach of such
representation or warranty for purposes of the repurchase or substitution obligations described in
Sections 6(a)(i) or (ii) below.



               SECTION 6. Repurchases and Substitutions.




                    (a) Mandatory Repurchases and Substitutions for Breaches of Representations and
Warranties. Upon the receipt of notice by the Servicer of a breach of any of its respective
representations and warranties (as of the date on which such representation or warranty was made)
or covenants in Section 5 which materially and adversely affects the value of a Timeshare Loan or
the interests of the Purchaser or any subsequent assignee of the Purchaser therein, the Servicer
shall, within 60 days of receipt of such notice, cure in all material respects the circumstance or
condition which has caused such representation or warranty to be incorrect or covenant to be
breached or either (i) repurchase the Purchaser’s or its assignee’s interest in such related
defective Timeshare Loan (the “Defective Timeshare Loan”) from the Purchaser or its assignee at the
Repurchase Price or (ii) provide one or more Qualified Substitute Timeshare Loans and pay the
related Substitution Shortfall Amounts, if any; provided, however, that with
respect to a breach of the representation contained in clause (d)(ii) in Schedule I hereto,
the Servicer shall either (i) repurchase the Issuer’s or its assignee’s interest in the related
Defective Timeshare Loan or (ii) provide one or more Qualified Substitute Timeshare Loans and pay
the related Substitution Shortfall Amounts, if any, within 30 days after the Closing Date.



                    (b) Payment of Repurchase Prices and Substitution Shortfall Amounts. The Purchaser
hereby directs and the Servicer hereby agrees to remit or cause to be remitted all amounts in
respect of Repurchase Prices and Substitution Shortfall Amounts payable during the related Due
Period in immediately available funds to the Securitization Indenture Trustee to be deposited in
the Collection Account on the related Transfer Date in accordance with the provisions of the
Securitization Indenture. In the event that more than one Timeshare Loan is substituted pursuant
to Section 6(a) hereof on any Transfer Date, the Substitution Shortfall Amounts and the Loan
Balances of Qualified Substitute Timeshare Loans shall be calculated on an aggregate basis for all
substitutions made on such Transfer Date.



                    (c) Schedule of Timeshare Loans. The Purchaser hereby directs and the Servicer hereby
agrees, on each date on which a Timeshare Loan has been repurchased or substituted to provide the
Purchaser and the Securitization Indenture Trustee with an electronic supplement to Schedule
III hereto and the Schedule of Timeshare Loans reflecting the removal or substitution of such
Timeshare Loans and subjecting any Qualified Substitute Timeshare Loans to the provisions of this
Agreement.



                    (d) Qualified Substitute Timeshare Loans. On the related Transfer Date, the Purchaser
hereby directs and the Servicer hereby agrees to deliver or to cause the delivery of the Timeshare
Loan Files of the related Qualified Substitute Timeshare Loans to the Securitization



15









 







Indenture Trustee or to the Securitization Custodian, at the direction of the Securitization
Indenture Trustee, on the related Transfer Date in accordance with the provisions of the
Securitization Indenture. As of such related Transfer Date, the Servicer does hereby transfer,
assign, sell and grant to the Purchaser, without recourse (except as provided in Section 6 and
Section 8 hereof), any and all of the Servicer’s right, title and interest in and to (i) each
Qualified Substitute Timeshare Loan conveyed to the Purchaser on such Transfer Date, (ii) the
Receivables in respect of the Qualified Substitute Timeshare Loans due after the related Cut-Off
Date, (iii) the related Timeshare Loan Documents (excluding any rights as developer or declarant
under the Timeshare Declaration, the Timeshare Program Consumer Documents or the Timeshare Program
Governing Documents), (iv) all Related Security in respect of such Qualified Substitute Timeshare
Loans, and (v) all income, payments, proceeds and other benefits and rights related to any of the
foregoing. Upon such sale, the ownership of each Qualified Substitute Timeshare Loan and all
collections allocable to principal and interest thereon since the related Cut-Off Date and all
other property interests or rights conveyed pursuant to and referenced in this Section 6(d) shall
immediately vest in the Purchaser, its successors and assigns. The Servicer shall not take any
action inconsistent with such ownership nor claim any ownership interest in any Qualified
Substitute Timeshare Loan for any purpose whatsoever other than consolidated financial and federal
and state income tax reporting. The Servicer agrees that such Qualified Substitute Timeshare Loans
shall be subject to the provisions of this Agreement.



                    (e) Officer’s Certificate. The Servicer shall, on each related Transfer Date, certify
in writing to the Purchaser and the Securitization Indenture Trustee that each new Timeshare Loan
meets all the criteria of the definition of “Qualified Substitute Timeshare Loan” and that (i) the
Timeshare Loan Files for such Qualified Substitute Timeshare Loans have been delivered to the
Securitization Custodian, and (ii) the Timeshare Loan Servicing Files for such Qualified Substitute
Timeshare Loans have been delivered to the Servicer.



                    (f) Release. In connection with any repurchase or substitution of one or more
Timeshare Loans contemplated by this Section 6, upon satisfaction of the conditions contained in
this Section 6, the Purchaser and the Securitization Indenture Trustee shall execute and deliver or
shall cause the execution and delivery of such releases and instruments of transfer or assignment
presented to it by the Servicer, in each case, without recourse, as shall be necessary to vest in
the Servicer or its designee (or to evidence the vesting in such Person of) the legal and
beneficial ownership of such released Timeshare Loans. The Purchaser shall cause the
Securitization Indenture Trustee to cause the Securitization Custodian to release the related
Timeshare Loan Files to Servicer or its designee and the Servicer to release the related Timeshare
Loan Servicing Files to itself or its designee.



                    (g) Sole Remedy. It is understood and agreed that the obligations of the Servicer
contained in Section 6(a) to cure a material breach, or to repurchase or substitute related
Defective Timeshare Loans and the obligation of the Servicer to indemnify pursuant to Section 8
shall constitute the sole remedies available to the Purchaser or its subsequent assignees for the
breaches of any of its representations or warranties of the Servicer contained in Section 5, and
such remedies are not intended to and do not constitute “credit recourse” to the Servicer.



               SECTION 7. Additional Covenants of the Seller and the Servicer.




16









 






          (a) The Seller hereby covenants and agrees with the Purchaser as follows:




     (i) It shall comply with all applicable laws, rules, regulations and orders applicable to
it and its business and properties except where the failure to comply will not have a material
adverse effect on its business or its ability to perform its obligations under this Agreement or
any other Transaction Document to which it is a party or under the transactions contemplated
hereunder or thereunder or the validity or enforceability of the Timeshare Loans.




     (ii) It shall preserve and maintain for itself its existence (corporate or otherwise),
rights, franchises and privileges in the jurisdiction of its organization and except where the
failure to so preserve and maintain will not have a material adverse effect on its business or
its ability to perform its obligations under this Agreement or any other Transaction Document to
which it is a party or under the transactions contemplated hereunder or thereunder or the
validity of enforceability of the Timeshare Loans.




     (iii) On or prior to the Closing Date, it shall indicate in its and any applicable
Affiliate’s computer files and other records that each Timeshare Loan has been sold to the
Purchaser.




     (iv) It shall respond to any inquiries with respect to ownership of a Timeshare Loan by
stating that such Timeshare Loan has been sold to the Purchaser and that the Purchaser is the
owner of such Timeshare Loan.




     (v) On or prior to the Closing Date, it shall file or cause to be filed, at its expense,
financing statements in favor of the Purchaser and the Securitization Indenture Trustee on
behalf of the Securitization Noteholders, with respect to the Timeshare Loans transferred
hereunder, in the form and manner reasonably requested by the Purchaser. It shall deliver
file-stamped copies of such financing statements to the Purchaser and the Securitization
Indenture Trustee on behalf of the Securitization Noteholders.




     (vi) It agrees from time to time, at its expense, promptly to execute and deliver all
further instruments and documents, and to take all further actions, that may be necessary, or
that the Purchaser or the Securitization Indenture Trustee may reasonably request, to perfect,
protect or more fully evidence the sale of the Timeshare Loans, or to enable the Purchaser or
the Securitization Indenture Trustee to exercise and enforce its rights and remedies hereunder
or under any Timeshare Loan including, but not limited to, powers of attorney, UCC financing
statements and assignments of mortgage.




     (vii) Any change in the legal name of the Seller and any use by it of any tradename,
fictitious name, assumed name or “doing business as” name occurring after the Closing Date shall
be promptly disclosed to the Purchaser and the Securitization Indenture Trustee in writing.




     (viii) Upon the discovery or receipt of notice by a Responsible Officer of the Seller of a
breach of any of its representations or warranties and covenants contained herein, the Seller
shall promptly disclose to the Purchaser and the Securitization Indenture Trustee, in reasonable
detail, the nature of such breach.



17









 






     (ix) In the event that the Seller shall receive any payments in respect of a Timeshare Loan
after the Closing Date or Transfer Date, as applicable (including any insurance proceeds that
are not payable to the related Obligor), it shall, within two (2) Business Days of receipt,
transfer or cause to be transferred, such payments to the Lockbox Account.




     (x) The Seller will keep its principal place of business and chief executive office and the
office where it keeps its records concerning the Timeshare Loans at the address of the Seller
listed herein.




     (xi) In the event that the Seller or the Purchaser or any assignee of the Purchaser should
receive actual notice of any transfer taxes arising out of the transfer, assignment and
conveyance of a Timeshare Loan from the Seller to the Purchaser, on written demand by the
Purchaser, or upon the Seller otherwise being given notice thereof, the Seller shall pay, and
otherwise indemnify and hold the Purchaser, and any subsequent assignee harmless, on an
after-tax basis, from and against any and all such transfer taxes.




     (xii) The Seller authorizes the Purchaser and the Securitization Indenture Trustee to file
continuation statements, and amendments thereto, relating to the Timeshare Loans and all
payments made with regard to the related Timeshare Loans without the signature of the Seller
where permitted by law. A photocopy or other reproduction of this Agreement shall be sufficient
as a financing statement where permitted by law. The Purchaser confirms that it is not its
present intention to file a photocopy or other reproduction of this Agreement as a financing
statement, but reserves the right to do so if, in its good faith determination, there is at such
time no reasonable alternative remaining to it.




     (xiii) The Seller shall not prepare any financial statements or other statements (including
any tax filings) which shall account for the transactions contemplated by this Agreement in any
manner other than as the sale of the Timeshare Loans, Timeshare Properties, Related Security and
other conveyed property related thereto and additional collateral by the Seller to the
Purchaser.




          (b) The Servicer hereby covenants and agrees with the Purchaser as follows:




     (i) It shall comply with all applicable laws, rules, regulations and orders applicable to
it and its business and properties except where the failure to comply will not have a material
adverse effect on its business or its ability to perform its obligations under this Agreement or
any other Transaction Document to which it is a party or under the transactions contemplated
hereunder or thereunder or the validity or enforceability of the Timeshare Loans.




     (ii) It shall preserve and maintain for itself its existence (corporate or otherwise),
rights, franchises and privileges in the jurisdiction of its organization and except where the
failure to so preserve and maintain will not have a material adverse effect on its business or
its ability to perform its obligations under this Agreement or any other Transaction Document to
which it is a party or under the transactions contemplated hereunder or thereunder or the
validity of enforceability of the Timeshare Loans.



18









 






     (iii) On or prior to the Closing Date or a Transfer Date, as applicable, it shall indicate
in its and any applicable Affiliate’s computer files and other records that each Timeshare Loan
has been sold to the Purchaser.




     (iv) It shall respond to any inquiries with respect to ownership of a Timeshare Loan by
stating that such Timeshare Loan has been sold to the Purchaser and that the Purchaser is the
owner of such Timeshare Loan.




     (v) It agrees from time to time, at its expense, promptly to execute and deliver all
further instruments and documents, and to take all further actions, that may be necessary, or
that the Purchaser or the Securitization Indenture Trustee may reasonably request, to perfect,
protect or more fully evidence the sale of the Timeshare Loans, or to enable the Purchaser or
the Securitization Indenture Trustee to exercise and enforce its rights and remedies hereunder
or under any Timeshare Loan including, but not limited to, powers of attorney, UCC financing
statements and assignments of mortgage.




     (vi) Upon the discovery or receipt of notice by a Responsible Officer of the Servicer of a
breach of any of its representations or warranties and covenants contained herein, the Servicer
shall promptly disclose to the Purchaser and the Securitization Indenture Trustee, in reasonable
detail, the nature of such breach.




     (vii) In the event that the Servicer shall receive any payments in respect of a Timeshare
Loan after the Closing Date or Transfer Date, as applicable (including any insurance proceeds
that are not payable to the related Obligor), it shall, within two (2) Business Days of receipt,
transfer or cause to be transferred, such payments to the Lockbox Account.




     (viii) In the event that the Servicer or the Purchaser or any assignee of the Purchaser
should receive actual notice of any transfer taxes arising out of the transfer, assignment and
conveyance of a Timeshare Loan from the Servicer to the Purchaser, on written demand by the
Purchaser, or upon the Servicer otherwise being given notice thereof, the Servicer shall pay,
and otherwise indemnify and hold the Purchaser, and any subsequent assignee harmless, on an
after-tax basis, from and against any and all such transfer taxes.




     (ix) The Servicer authorizes the Purchaser and the Securitization Indenture Trustee to file
continuation statements, and amendments thereto, relating to the Timeshare Loans and all
payments made with regard to the related Timeshare Loans without the signature of the Servicer
where permitted by law. A photocopy or other reproduction of this Agreement shall be sufficient
as a financing statement where permitted by law. The Purchaser confirms that it is not its
present intention to file a photocopy or other reproduction of this Agreement as a financing
statement, but reserves the right to do so if, in its good faith determination, there is at such
time no reasonable alternative remaining to it.




     (x) The Servicer shall not prepare any financial statements or other statements (including
any tax filings) which shall account for the transactions contemplated by this Agreement in any
manner other than as the sale of the Timeshare Loans, Timeshare Properties, Related Security and
other conveyed property related thereto and additional



19









 







collateral by the Seller to the Purchaser and the substitution of the Qualified Substitute
Timeshare Loans by the Servicer.



               SECTION 8. Indemnification.




                    (a) (i) The Seller hereby agrees to indemnify the Purchaser, the Securitization Indenture
Trustee, the Securitization Noteholders and the Initial Purchaser (collectively, the “Indemnified
Parties”) against any and all claims, losses or liabilities (including reasonable legal fees and
related costs) that the Purchaser, the Securitization Indenture Trustee, the Securitization
Noteholders or the Initial Purchaser may sustain directly related to any breach of the
representations and warranties and covenants of the Seller under Section 5 hereof (the “Seller
Indemnified Amounts”) excluding, however (A) Seller Indemnified Amounts to the extent resulting
from the gross negligence or willful misconduct on the part of such Indemnified Party; (B) any
recourse for any uncollectible Timeshare Loan not related to a breach of representation or
warranty; or (C) income or similar taxes by such Indemnified Party arising out of or as a result of
this Agreement or the transfer of the Timeshare Loans.




     (ii) The Servicer hereby agrees to indemnify the Indemnified Parties against any and all
claims, losses or liabilities (including reasonable legal fees and related costs) that the
Purchaser, the Securitization Indenture Trustee, the Securitization Noteholders or the Initial
Purchaser may sustain directly related to any breach of the representations and warranties and
covenants of the Servicer under Section 5 hereof (the “Servicer Indemnified Amounts”) excluding,
however (A) Servicer Indemnified Amounts to the extent resulting from the gross negligence or
willful misconduct on the part of such Indemnified Party; (B) any recourse for any uncollectible
Timeshare Loan not related to a breach of representation or warranty; (C) recourse to the
Servicer for a related Defective Timeshare Loan so long as the same is cured, substituted or
repurchased pursuant to Section 6 hereof; or (D) income or similar taxes by such Indemnified
Party arising out of or as a result of this Agreement or the transfer of the Timeshare Loans.




     (iii) The parties hereto shall (A) promptly notify the other parties hereto, the
Securitization Indenture Trustee, and the Initial Purchaser if a claim is made by a third party
with respect to this Agreement or the Timeshare Loans, and relating to (1) the failure by the
Seller or the Servicer, as applicable, to perform its duties in accordance with the terms of
this Agreement or (2) a breach of the Seller’s or the Servicer’s representations, covenants or
warranties contained in this Agreement, (B) assume (with the consent of the Purchaser, the
Securitization Indenture Trustee, the Securitization Noteholders or the Initial Purchaser, as
applicable, which consent shall not be unreasonably withheld) the defense of any such claim and
pay all expenses in connection therewith, including legal counsel fees and (C) promptly pay,
discharge and satisfy any judgment, order or decree which may be entered against it or the
Purchaser, the Securitization Indenture Trustee, the Securitization Noteholders or the Initial
Purchaser in respect of such claim. If the Seller or the Servicer shall have made any indemnity
payment pursuant to this Section 8 and the recipient thereafter collects from another Person any
amount relating to the matters covered by the foregoing indemnity, the recipient shall promptly
repay such amount to the Seller or the Servicer, as applicable.



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     (iv) The obligations of each of the Seller and the Servicer under this Section 8 to
indemnify the Purchaser, the Securitization Indenture Trustee, the Securitization Noteholders
and the Initial Purchaser shall survive the termination of this Agreement and continue until the
Notes are paid in full or otherwise released or discharged.



               SECTION 9. No Proceedings. Each of the Seller and Servicer hereby agrees that it will
not, directly or indirectly, institute, or cause to be instituted, or join any Person in
instituting, against the Purchaser or any Association, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy
or similar law so long as there shall not have elapsed one year plus one day since the latest
maturing Securitization Notes issued by the Purchaser. The Purchaser hereby agrees that it will
not, directly or indirectly, institute, or cause to be instituted, or join any Person in
instituting, against the Seller any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law
so long as there shall not have elapsed one year plus one day since the latest maturing
Securitization Notes issued by the Purchaser.




               SECTION 10. Notices, Etc. All notices and other communications provided for hereunder
shall, unless otherwise stated herein, be in writing and mailed or telecommunicated, or delivered
as to each party hereto, at its address set forth below or at such other address as shall be
designated by such party in a written notice to the other parties hereto. All such notices and
communications shall not be effective until received by the party to whom such notice or
communication is addressed.



Seller



Silverleaf Finance IV, LLC

1221 Riverbend Drive, Suite 120

Dallas, Texas 75247

Attention: Harry J. White, Jr., Chief Financial Officer

Telecopier: 214-631-4981



Servicer



Silverleaf Resorts, Inc.

1221 Riverbend Drive, Suite 120

Dallas, Texas 75247

Attention: Robert E. Mead, Chief Executive Officer

Telecopier: 214-905-0519



Purchaser



Silverleaf Finance VI, LLC

1221 Riverbend Drive, Suite 120

Dallas, Texas 75247

Attention: Robert M. Sinnott, Chief Financial Officer

Telecopier: 214-631-4981




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               SECTION 11. No Waiver; Remedies. No failure on the part of the Purchaser, the
Securitization Indenture Trustee or any assignee thereof to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any other remedies
provided by law.




               SECTION 12. Binding Effect; Assignability. This Agreement shall be binding upon and
inure to the benefit of the Seller, the Servicer, the Purchaser and their respective successors and
assigns. Any assignee shall be an express third party beneficiary of this Agreement, entitled to
directly enforce this Agreement. Each of the Seller and the Servicer may not assign any of its
rights and obligations hereunder or any interest herein without the prior written consent of the
Purchaser and any assignee thereof. The Purchaser may, and intends to, assign all of its rights to
the Securitization Indenture Trustee on behalf of the Securitization Noteholders, and each of the
Seller and the Servicer consents to any such assignments. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with its terms, and shall
remain in full force and effect until its termination; provided, however, that the rights and
remedies with respect to any breach of any representation and warranty made by the Seller or the
Servicer pursuant to Section 5, and the cure, repurchase or substitution and indemnification
obligations shall be continuing and shall survive any termination of this Agreement and the
resignation or termination of the Servicer pursuant to the Securitization Indenture, but such
rights and remedies may be enforced only by the Purchaser and the Securitization Indenture Trustee.




               SECTION 13. Amendments; Consents and Waivers. No modification, amendment or waiver of,
or with respect to, any provision of this Agreement, and all other agreements, instruments and
documents delivered thereto, nor consent to any departure by the Seller or the Servicer from any of
the terms or conditions thereof shall be effective unless it shall be in writing and signed by each
of the parties hereto, the written consent of the Securitization Indenture Trustee on behalf of the
Securitization Noteholders is given and confirmation from the Rating Agencies that such action will
not result in a downgrade, withdrawal or qualification of any rating assigned to a Class of Notes
is received. The Purchaser shall provide or cause to be provided to the Securitization Indenture
Trustee and the Rating Agencies any such proposed modifications, amendments or waivers. Any waiver
or consent shall be effective only in the specific instance and for the purpose for which given.
No consent to or demand by the Seller or Servicer in any case shall, in itself, entitle it to any
other consent or further notice or demand in similar or other circumstances. Each of the Seller
and the Servicer acknowledges that in connection with the intended assignment by the Purchaser of
all of its right, title and interest in and to each Timeshare Loan to the Securitization Indenture
Trustee on behalf of the Securitization Noteholders, the Purchaser intends to issue the Notes, the
proceeds of which will be used by the Purchaser, in part, to purchase the Timeshare Loans
hereunder.




               SECTION 14. Severability. In case any provision in or obligation under this Agreement
shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations, or of such provision or obligation,
shall not in any way be affected or impaired thereby in any other jurisdiction. Without limiting
the generality of the foregoing, in the event that a Governmental Authority determines that the




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Purchaser may not purchase or acquire Timeshare Loans, the transactions evidenced hereby shall
constitute a loan and not a purchase and sale, notwithstanding the otherwise applicable intent of
the parties hereto, and the Seller shall be deemed to have granted to the Purchaser as of the date
hereof, a first priority perfected security interest in all of the Seller’s right, title and
interest in, to and under such Timeshare Loans and the related property as described in Section 2
hereof.




               SECTION 15. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.




     (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO ITS PRINCIPLES OF CONFLICTS OF LAW.



     (B) THE PARTIES TO THIS AGREEMENT HEREBY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF
MANHATTAN IN NEW YORK CITY AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE DAYS
AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE PARTIES HERETO
EACH WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION
INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 15 SHALL AFFECT THE RIGHT OF THE PARTIES TO THIS
AGREEMENT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF ANY OF
THEM TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.



     (C) THE SELLER, SERVICER AND PURCHASER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE SELLER, SERVICER AND PURCHASER AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO TRIAL BY JURY WOULD
OTHERWISE ACCRUE OR EXIST. THE SELLER, SERVICER AND PURCHASER ARE HEREBY AUTHORIZED TO FILE A COPY
OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE SELLER, SERVICER
AND PURCHASER.



               SECTION 16. Heading. The headings herein are for purposes of reference only and shall
not otherwise affect the meaning or interpretation of any provision hereof.




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          SECTION 17. Execution in Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed shall be deemed to be an original
and both of which when taken together shall constitute one and the same agreement.




          IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective
officers thereunto duty authorized, as of the date first above written.




	 	 	 	 	 	 	 
	 	 	Very truly yours,
	 
	 	 	 	 	 	 
	 	 	SILVERLEAF FINANCE IV, LLC, as Seller
	 
	 	 	 	 	 	 
	 	 	By:	 	/S/ HARRY J. WHITE, JR.
	 	 	 	 	 
	 	 	Name:	 	Harry J. White, Jr.
	 	 	Title:	 	Vice President, Treasurer and Chief
	 	 	 	 	Financial Officer
	 
	 	 	 	 	 	 
	 	 	SILVERLEAF FINANCE VI, LLC., as Purchaser
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/S/ ROBERT M. SINNOTT
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Robert M. Sinnott
	 

	 	 	 	Title:
	 	Vice President, Treasurer and Chief
	 

	 	 	 	 	 	Financial Officer
	 
	 	 	 	 	 	 
	 	 	SILVERLEAF RESORTS, INC., as Servicer
	 
	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/S/ ROBERT M. SINNOTT
	 

	 	 	 	 	 	 
	 

	 	 	 	Name:
	 	Robert M. Sinnott
	 

	 	 	 	Title:
	 	Chief Financial Officer






     List of Exhibits and Schedules to Agreement Not Filed Herewith:



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Schedule I—Additional Representations and Warranties of Seller

Appendix A—Standard Definitions

Schedule II—Exceptions

Schedule III—Schedule of Timeshare Loans

Exhibit A—ACH Form





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