Document:

EX 10.4

    EXHIBIT
      10.4

     

     

    LOAN
      SALE
      AGREEMENT

     

    AMONG

     

    SILVERLEAF
      FINANCE IV, LLC, 

     

    as
      Seller,

     

    SILVERLEAF
      FINANCE V, L.P.,

     

    as
      Purchaser

     

    AND

     

    SILVERLEAF
      RESORTS, INC., as
      Servicer

     

    

     

    DATED
      AS
      OF AUGUST 1, 2006

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    LOAN
      SALE AGREEMENT

     

    This
      LOAN
      SALE AGREEMENT (this “Agreement”), dated
      as
      of August 1, 2006, is among Silverleaf Finance IV, LLC, a Delaware limited
      liability company (“Seller”),
      Silverleaf
      Finance V, L.P., a Delaware limited partnership (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
      Subsequent Timeshare Loans
      and (iv)
      all Related Security in respect of the Timeshare Loans and Oak N’ Spruce 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 August 29, 2006 (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 August 1, 2006 (the
      “Securitization
      Indenture”),
      by
      and among the Purchaser, Silverleaf Finance V, LLC, as the general partner
      of
      the Purchaser (the “General
      Partner”),
      the
      Servicer and the Securitization Indenture Trustee, to secure the Purchaser’s (i)
      5.760% Timeshare Loan-Backed Notes, Series 2006-A, Class A Notes, (ii) 5.909%
      Timeshare Loan-Backed Notes, Series 2006-A, Class B Notes, (iii) 6.456%
      Timeshare Loan-Backed Notes, Series 2006-A, Class C Notes, (iv) 7.249% Timeshare
      Loan-Backed Notes, Series 2006-A, Class D Notes, (v) 7.793% Timeshare
      Loan-Backed Notes, Series 2006-A, Class E Notes, (vi) 8.287% Timeshare
      Loan-Backed Notes, Series 2006-A, Class F Notes, and (vii) 10.000% Timeshare
      Loan-Backed Notes, Series 2006-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.

     

    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 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 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, Timeshare
      Properties, Related Security and other conveyed property related thereto and
      additional collateral, 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 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 General Partner, the

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    Servicer,
      the Backup Servicer and the Securitization Indenture Trustee shall have entered
      into the Securitization Indenture.

     

    (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 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. 

     

    (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 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. 

     

    (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
      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.

     

    (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;

     

    (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. 

     

    (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 August 29, 2006, pertaining to Georgia law matters, (II) Bulkley,
      Richardson and Gelinas, LLP, dated as of August 29, 2006, pertaining to
      Massachusetts law matters, (III) Stinson Morrison Hecker LLP, dated as of August
      29, 2006, pertaining to Missouri law matters, (IV) Mayer, Brown, Rowe & Maw
      LLP, dated as of August 29, 2006, pertaining to Illinois law matters, (V)
      Meadows, Owens, Collier, Reed, Cousins & Blau, L.L.P., dated as of August
      29, 2006, pertaining to Texas law matters, and (VI) Holland and Knight LLP,
      dated as of August 29, 2006, 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, Rowe & Maw LLP dated as of August 29, 2006 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 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.

     

    (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.

     

    (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 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.

     

    (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.

     

    (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.

     

    (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 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.

     

    (b)
      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 V, L.P.

    1221
      Riverbend Drive, Suite 120

    Dallas,
      Texas 75247

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

    Telecopier:
      214-631-4981

     

    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 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.

     

    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.

     

    SECTION
      18. 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 V, L.P., as Purchaser

     

    
      	 	By: 	
              SILVERLEAF
                FINANCE V, LLC,

              its
                general partner

            

      	 	 	 

      	 	By:	
              /S/
                HARRY J. WHITE, JR.

            

      	 	Name: 	Harry
              J. White, Jr.

      	 	Title:	Vice President, Treasurer and  Chief
              Financial Officer

    

     

     

    SILVERLEAF
      RESORTS, INC., as Servicer

     

    
      	 	
              By:

            	
              /S/
                HARRY J. WHITE, JR.

            

      	 	Name:	Harry
              J. White, Jr.

    

    
      	 	
              Title:

            	
              CFO

            

    

     

    

     

    [Signature
      Page to the Loan Sale Agreement]

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    List
      of
      Exhibits and Schedules to Agreement Not Filed Herewith:

     

    Schedule
      I

    Appendix
      A—Standard Definitions

    

    Schedule
      II—Exceptions

    Schedule
      II—Schedule of Timeshare Loans

    Exhibit
      A—ACH FormUnassociated Document

     

    Exhibit
      10.6 

    

    

    

      LOAN
        AND SECURITY AGREEMENT

       

      

       

      THIS
        LOAN
        AND SECURITY AGREEMENT, dated as of August 22, 2006, is entered into by and
        between Gener8Xion
        Entertainment, Inc., a Delaware corporation (“GNXE”),
        One
        Night With The King, Inc.,
        a
        California corporation (“ONWK”;
        ONWK,
        together with GNXE, collectively, “Borrowers”),
        Windfall Financial LLC, a Delaware limited liability company (“Lender”),
        and
        Hope, Direction and Encouragement Ministries, Inc., a Louisiana corporation
        (“HDEM”).

       

      WITNESSETH:

       

      WHEREAS,
        Lender has agreed to make loans to Borrowers in an aggregate principal amount
        of
        Six Million Dollars ($6,000,000.00) (the “P&A
        Commitment”),
        plus
        an “Additional P&A Commitment” (as defined herein) on the terms and
        conditions set forth in this Agreement, to be used by Borrowers for the sole
        purpose of paying (i) the cost of the release prints, advertising and promotion
        for the distribution of the motion picture presently referred to as “One Night
        with the King ” (the “Film”)
        in the
        Territory (as defined herein), (ii) customary marketing, releasing and
        distribution and sub-distribution costs approved by Lender (including, without
        limitation, marketing and media consultants, trailers, key-art, publicity
        firms,
        shipping and deliverable elements, costs and talent publicity services),
        and
        (iii) a Five Percent arrangement and advisory fee (the “Arrangement
        and Advisory Fee”)
        in the
        amount of Three Hundred Thousand Dollars ($300,000.00) and, in the event
        that
        Lender makes the Additional P&A Commitment, an additional fee of One Hundred
        Twenty-Five Thousand Dollars ($125,000), each payable to Richard Kiratsoulis,
        a.k.a. Crown Financial Management, and Peter Lopez, Esq.; and 

       

      WHEREAS,
        pursuant to that certain Consolidation Agreement, dated June 20, 2006, as
        amended, by and between Trinity Christian Center of Santa Ana, Inc., a church
        and California non-profit religious corporation doing business as Trinity
        Broadcasting Network (“TBN”)
        and
        Hope, Direction and Encouragement Ministries, Inc., a Louisiana corporation
        (“HDEM”),
        attached hereto as Exhibit
        A,
        TBN
        agreed to fund the production costs of the Film at a budget of Eight Million
        Dollars ($8,000,000.00) and the parties agreed that TBN would retain exclusive
        worldwide Christian television broadcast distribution rights in the Film
        and the
        Episodes in perpetuity; and 

       

      WHEREAS,
        pursuant to that certain Production and Distribution Agreement, dated January
        8,
        2004, by and between GNXE and HDEM, attached hereto as Exhibit
        B,
        HDEM
        has licensed to GNXE worldwide distribution rights in the Film and the Episodes
        in perpetuity; 

       

      WHEREAS,
        pursuant to that certain Worldwide Distribution Agreement, dated
        February 1, 2004, by and between HDEM and GNXE, attached hereto as
Exhibit
        C,
        HDEM
        has licensed to GNXE worldwide distribution rights in the Film in any and
        all
        languages, by all pay and free television and home video usages (with the
        exception of Christian Television) in perpetuity; and

       

      WHEREAS,
        pursuant to that certain Subdistribution Agreement for the Theatrical Release
        of
“One Night With The King,” dated July 20, 2006, by and among GNXE, Rocky
        Mountain Pictures, Inc., a Utah corporation (“Subdistributor”),
        Ron
        Rodgers and Randy Slaughter, Subdistributor has agreed to provide domestic
        theatrical distribution services for the Film; 

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

       

      NOW
        THEREFORE, in consideration of the mutual covenants and agreements contained
        herein, Borrowers and Lender hereby agree as follows:

       

      SECTION
        1. CERTAIN
        DEFINITIONS

       

      1.1 Defined
        Terms.
        All
        terms defined in this Agreement shall have the defined meanings when used
        herein
        or in any agreement, note, certificate, report, or other document made or
        delivered pursuant to this Agreement, unless otherwise defined or the context
        otherwise requires. The following terms shall have the following
        meanings:

       

      “Additional
        Distribution Agreements”
means
        Distribution Agreements other than the Existing Distribution Agreements and
        subject to Lender’s lien hereunder, that at all times meet all of the following
        criteria, as determined by Lender in its sole discretion:

       

      (a) Lender
        has received a copy of the Distribution Agreement and an original Notice
        of
        Irrevocable Authority and Direction to Pay, substantially in the form attached
        hereto as Exhibit
        L,
        which
        has been duly executed and delivered by each party thereto (other than
        Lender);

       

      (b) the
        Distribution Agreement complies with all of Borrowers’ representations,
        warranties and covenants under this Agreement with respect to Distribution
        Agreements; and

       

      (c) the
        Distributor is not subject to any insolvency proceedings under state or federal
        law.

       

      “Additional
        Distributor(s)”
shall
        mean each Distributor that enters into an Additional Distribution Agreement.
        

       

      “Additional
        P&A Commitment”
shall
        have the meaning set forth in Section 2.1.1 hereof. 

       

      “Additional
        P&A Commitment Secured Promissory Note”
shall
        have the meaning set forth in Section 2.1.1 hereof.

       

      “Affiliate”
shall
        mean with respect to any Person, any other Person directly or indirectly
        controlling, controlled by or under common control with such Person, and
        any
        other Person who or which, directly or indirectly, has an equity interest
        in
        excess of twenty percent (20%) in such Person, or is a director, officer
        or
        employee of such Person. 

       

      “Agreement”
shall
        mean this Loan and Security Agreement as originally executed and as the same
        may
        hereafter from time to time be amended, supplemented, modified, extended,
        renewed or replaced. 

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

       

      “Approved
        Budget”
shall
        mean the preliminary budget for the distribution expenses of the Film in
        the
        Territory, attached hereto as Schedule 1. 

       

      “Approved
        Distribution Plan”
shall
        mean the preliminary approved distribution plan for the distribution of the
        Film
        in the Territory, attached hereto as Schedule 2. 

       

      “Arrangement
        and Advisory Fee”
shall
        have the meaning set forth in Section 6.5 hereof. 

       

      “Base
        Rate”
shall
        mean, for any day, a rate per annum equal to the Prime Rate in effect on
        such
        day. Any change in the Base Rate due to a change in the Prime Rate shall
        be
        effective on the effective date of such change in the Prime Rate. 

       

      “Borrowing
        Certificate”
shall
        mean the certificate of Borrowers, substantially in the form attached hereto
        as
Exhibit
        D.
        

       

      “Business
        Day”
shall
        mean any day on which banks are open for business in Delaware. 

       

      “Cash”
shall
        mean demand deposits with Lender, certificates of deposit with Lender and
        such
        Cash Equivalents as Lender may from time to time approve. 

       

      “Cash
        Equivalents”
shall
        mean (a) marketable direct obligations issued or unconditionally guaranteed
        by
        the United States Government or issued by any agency thereof and backed by
        the
        full faith and credit of the United States, in each case maturing within
        thirty
        (30) days from the date of acquisition thereof, (b) marketable direct
        obligations issued by any state of the United States or any political
        subdivision of any such state or any public instrumentality thereof maturing
        within thirty (30) days from the date of acquisition thereof and, at the
        time of
        acquisition, having the highest rating obtainable from either Standard &
Poor’s Corporation or Moody’s Investors Service, Inc., (c) commercial paper
        maturing no more than thirty (30) days from the date of acquisition thereof
        and,
        at the time of acquisition, having a rating of A-l or higher from Standard
&
Poor’s Corporation or P-l or higher from Moody’s Investor’s Service, Inc., and
        (d) certificates of deposit or bankers’ acceptances maturing within thirty (30)
        days from the date of acquisition thereof issued by a bank reasonably acceptable
        to Lender. 

       

      “Chain-of-Title
        Documents”
shall
        mean the documents set forth on Schedule 3 hereto. 

       

      “Christian
        Television”
shall
        mean broadcast and cable television which airs predominantly Christian-based
        programming such as the Trinity Broadcasting Network and other similar faith
        based networks.

       

      “Closing
        Date”
shall
        mean the date of this Agreement.

       

      “Collateral”
shall
        have the meaning set forth in Section 5.1 hereof. 

       

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      

       

      “Collection
        Account”
shall
        mean account number ___________, established under the names of the parties
        which shall include the name “Gener8Xion Entertainment,” reference
“___________,” through Escrow Agent and into which all Gross Receipts from the
        exploitation of the Film (and/or any ancillary rights thereto) in the Territory
        shall be remitted. 

       

      “Copyright
        Mortgages and Assignments”
shall
        mean the Copyright Mortgage and Assignment with respect to the Film from
        HDEM in
        favor of Lender, substantially in the form attached hereto as Exhibit
        E,
        the
        Copyright Mortgage and Assignment with respect to the Episodes from HDEM
        in
        favor of Lender, substantially in the form attached hereto as Exhibit
        F,
        the
        Copyright Mortgage and Assignment with respect to the Film from GNXE in favor
        of
        Lender, substantially in the form attached hereto as Exhibit
        G,
        the
        Copyright Mortgage and Assignment with respect to the Episodes from GNXE
        in
        favor of Lender, substantially in the form attached hereto as Exhibit
        H,
        the
        Copyright Mortgage and Assignment with respect to the Film from ONWK in favor
        of
        Lender, substantially in the form attached hereto as Exhibit
        I,
        and the
        Copyright Mortgage and Assignment with respect to the Episodes from ONWK
        in
        favor of Lender, substantially in the form attached hereto as Exhibit
        J.
        

       

      “DBO”
shall
        have the meaning set forth in Section 2.1.1 hereof. 

       

      “Delivery”
to
        any
        Existing Distributor or Additional Distributor shall have the meaning set
        forth
        in the applicable Distribution Agreement, or the applicable Notice of
        Irrevocable Authority and Direction to Pay. 

       

      “Delivery
        Date”
shall
        mean with respect to any Existing Distributors and any Additional Distributors,
        the date set forth as the “delivery date” (if any) in the applicable Notice of
        Irrevocable Authority and Direction to Pay. 

       

      “Disbursement
        Account”
shall
        mean account number ___________, established under the names of the parties
        which shall include the name “Gener8Xion Entertainment,” reference
“___________,” established by the parties pursuant to Section 2.6 hereof,
        through Escrow Agent, and into which all Loan Proceeds shall be deposited
        and
        remitted to third parties pursuant to the instructions of the Borrowers as
        approved by two P&A Designees.

       

      “Distribution
        Agreement”
shall
        mean an agreement between Borrowers and a Distributor, or between a Distributor
        and a sub-distributor, solely with respect to the Territory or any part thereof,
        now or hereafter entered into, pursuant to which the Distributor has been
        granted, sold, conveyed, licensed, sub-licensed, leased, sub-leased, or
        otherwise transferred rights with respect to the distribution, sub-distribution,
        sale, rental, lease, sub-lease, licensing, sub-licensing, exhibition, telecast,
        broadcast, transmission (including, without limitation, by way of satellite
        or
        cable) or other use, exploitation or disposition of the Film or any elements
        thereof (including, but not limited to, all music and musical compositions;
        negatives; soundtracks; and Literary Property) and/or the copyright in any
        of
        the foregoing or any part thereof in any media existing now or in the future,
        specified therein (including, without limitation, motion picture, television,
        “home video” and all other audio-visual device rights, merchandising and
        commercial tie-ups, soundtrack album, music publishing, novelization and
        publishing rights, trailer rights, and all other allied, incidental, ancillary,
        and subsidiary rights), and any permitted amendments, modifications and
        supplements thereto. 

       

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      

       

      “Distributor”
shall
        mean a Person that regularly engages in the business of distributing,
        sub-distributing and/or otherwise exploiting feature length motion pictures
        and/or ancillary rights with respect thereto, and therefore shall include
        any
        sub-distributors.

       

      “Dollars”
or
“$”
        shall mean the lawful currency of the United States of America. 

       

      “Dollar
        Amount of P&A Loan Commitment”
shall
        mean the aggregate of the P&A Commitment and the Additional P&A
        Commitment. 

       

      “Episodes”
shall
        mean thirteen (13) episodes, 28:30 minutes in length, comprised of Mr. Tenney
        teaching from the book of Esther on location during the filming of the
        Film.

       

      “Escrow
        Agent”
shall
        mean Wells Fargo Bank.

       

      “Escrow
        Agreement - Collection Account”
shall
        have the meaning set forth in Section 2.5 hereof. 

       

      “Escrow
        Agreement - Disbursement Account”
shall
        have the meaning set forth in Section 2.6 hereof. 

       

      “Event
        of Default”
shall
        mean any of the events specified in Section 9 hereof. 

       

      “Excluded
        Property”
shall
        have the meaning, if any, set forth in Section 5.2 hereof. 

       

      “Existing
        Distribution Agreements”
shall
        mean any Distribution Agreement in existence as of the date of this Agreement,
        including, without limitation the Production and Distribution Agreement,
        the
        Worldwide Distribution Agreement, the Fox Agreement and the Sub-Distribution
        Agreement.

       

      “Existing
        Distributors”
shall
        mean any of the Distributors who are parties to the Existing Distribution
        Agreements. 

       

      “Film”
shall
        have the meaning first set forth in the first WHEREAS clause of this Agreement.
        

       

      “Fox”
shall
        mean Twentieth Century Fox Home Entertainment LLC.

       

      “Fox
        Agreement”
shall
        mean that certain Home Video Rights Acquisition Agreement by and between
        Fox and
        Borrowers, dated July 14, 2005, as amended by that certain First Amendment
        dated
        August 7, 2006. 

       

      “GNXE”
shall
        mean Gener8Xion Entertainment, Inc.

       

      “Governmental
        Regulation”
shall
        mean any (i) United States Federal, state or foreign law or regulation
        (including, without limitation, Regulation D); and (ii) the adoption, issuance,
        administration or making of any interpretation, application, directive, rule,
        order or request, or under any United States, Federal, state or any foreign
        law
        or regulation (whether or not having the force of law) by any court or by
        any
        governmental, central banking, monetary or taxing authority charged with
        the
        interpretation or administration of such law or regulation. 

       

      
        
           

        

        
          5

          
            

          

        

        
           

        

      

      

       

      “Gross
        Receipts”
shall
        mean any and all monies prior to any deduction or offset (with the exception
        of
        the international sales agent fee and any other Distributor’s or sales agent’s
        fees which pursuant to the Distribution Agreements as approved by two P&A
        Designees shall be deducted by the Distributor or sales agent prior to deposit
        of the gross receipts into the Collection Account) paid or payable to Borrowers,
        derived from the production, distribution and/or exploitation of the Film
        or the
        Episodes (and/or any ancillary rights thereto) in the Territory. 

       

      “Indebtedness”
for
        any
        Person shall mean all obligations, contingent and otherwise, which in accordance
        with generally accepted accounting principles should be classified upon the
        obligor’s balance sheet as liabilities for such Person, but in any event
        including liabilities secured by any Lien upon property owned or acquired
        by
        such obligor, whether or not the liability secured thereby shall have been
        assumed, obligations under leases required to be capitalized on the lessee’s
        balance sheet under generally accepted accounting principles and all guarantees,
        endorsements and other contingent obligations in respect of indebtedness
        of
        others whether or not reflected on the balance sheet of the
        obligor.

       

      “Individual
        Investor Agreements”
shall
        mean, collectively, that certain Post-Production Financing Agreement for
        the
        Film “One Night With The King” by and between ONWK and Richard Scrushy, dated
        September 21, 2005, as amended by that certain Addendum to Post-Production
        Agreement for the Film “One Night With The King,” as further amended by that
        certain Non-Injunctive Relief Supplement to Post-Production Financing Agreement
        Re “One Night With The King,” dated August 8, 2006; and that certain One Night
        With The King Investment Agreement by and between ONWK, GNXE and Denise Hopkins,
        dated March 1, 2006, as amended by that certain Non-Injunctive Relief Supplement
        to One Night With The King Investment Agreement, dated August 18, 2006, as
        further amended by that certain One Night With The King, Inc. Amendment to
        Investment Agreement, dated August 18, 2006.

       

      “Individual
        Investors”
shall
        mean Richard Scrushy and Denise Hopkins.

       

      “Instruments”
shall
        have the meaning set forth in Section 5.1.16 hereof.

       

      “Interest
        Accrual Date”
shall
        have the meaning set forth in Section 2.1.2.

       

      “Interest
        Deficit”
shall
        have the meaning set forth in Section 2.9 hereof. 

       

      “Interest
        Rate”
shall
        mean the Base Rate plus three percent (3%) until such time as the Interest
        Rate
        is adjusted pursuant to Section 2.1.2 hereof.

       

      “Laboratory”
shall
        mean any laboratory or laboratories approved by Lender which have entered
        into a
        Laboratory Agreement. 

       

      “Laboratory
        Access Letters(s)”
shall
        mean and include the Laboratory Access Letter(s) to be entered into with
        each
        laboratory, substantially in the form attached hereto as Exhibit
        K.
        

       

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      

       

      “Lender”
shall
        mean Windfall Financial LLC and each of its successors and assigns.

       

      “Liens”
shall
        mean any mortgage, deed of trust, pledge, hypothecation, assignment, charge,
        deposit arrangement, encumbrance, lien (statutory or other), security interest
        or preference, priority or other security agreement or preferential arrangement
        of any kind or nature whatsoever intended to assure payment of any Indebtedness
        or other obligation, including, without limitation, any conditional sale
        or
        other title retention agreement, the interest of a lessor under a capital
        lease,
        any financing lease having substantially the same economic effect as any
        of the
        foregoing, and the filing of any financing statement under the UCC or comparable
        law of any jurisdiction, naming the owner of the asset to which such Lien
        relates as debtor.

       

      “Literary
        Property”
shall
        have the meaning specified in Section 5.1.2 hereof. 

       

      “Loan”
        and “Loans”
shall
        have the meaning set forth in Section 2.1 hereof. 

       

      “Loan
        Documents”
shall
        mean and include this Agreement, the Escrow Agreement - Collection Account,
        the
        Escrow Agreement - Disbursement Account, the Laboratory Access Letter(s),
        the
        Copyright Mortgage and Assignments, the Chain-of-Title Documents, the P&A
        Subordination Agreement, the Notices of Irrevocable Authority and Direction
        to
        Pay, the
        Power
        of Sale, and
        any
        amendments, supplements, modifications, extensions, renewals and replacements
        to
        any such documents together with all exhibits, attachments, certificates
        and
        other documents related thereto or entered into in connection therewith.
        

       

      “Margin
        Stock”
shall
        have the meaning assigned thereto in Regulation U of the Federal Reserve
        Board.

       

      “Maturity
        Date”
shall
        have the meaning set forth in Section 2.3 hereof. 

       

      “Notes”
shall
        mean the Second Promissory Note and the Additional P&A Commitment Secured
        Promissory Note.

       

      “Notice
        of Irrevocable Authority and Direction to Pay”
shall
        mean a Notice
        of
        Irrevocable Authority and Direction to Pay,
        substantially in the form attached hereto as Exhibit
        L
        (or in
        such other form as is approved by Lender), executed, in each case, by Borrowers
        and the respective Distributor who are parties to the Existing Distribution
        Agreements or Additional Distribution Agreements, as applicable. 

       

      “Notice
        to Insurer”
shall
        mean that certain Notice to Insurer of even date herewith from Borrowers
        and
        Lender, substantially in the form of Exhibit
        M
        attached
        hereto. 

       

      “Obligations”
shall
        mean all of Borrowers’ obligations under this Agreement, including the due and
        punctual payment of all of the Loans outstanding from time to time, interest
        accrued thereon, all reasonable costs and attorneys’ fees and all other
        Indebtedness, liabilities and obligations of Borrowers hereunder, under any
        other Loan Document and any amendments, supplements, modifications, extensions,
        renewals and replacements thereof and with regard to any other transactions
        whatsoever arising out of this Agreement between Lender and Borrowers, and
        the
        performance of all representations, warranties, agreements, covenants and
        other
        obligations of Borrowers hereunder and under any other Loan Document.

       

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      

       

      “P&A
        Commitment”
shall
        have the meaning set forth in the first WHEREAS clause of this Agreement.
        

       

      “P&A
        Designees”
shall
        mean Richard Kiratsoulis (or his successor, appointed by Lender in Lender’s sole
        discretion) and Matthew Crouch who shall serve as advisors to the parties
        pursuant to Section 2.12. In the event of a disagreement between the two
        P&A
        Designees, then “P&A Designees” shall also include Peter Lopez,
        Esq. 

       

      “P&A
        Subordination Agreement”
shall
        mean that certain P&A Subordination Agreement, of even date herewith, among,
        Lender, Borrowers, TBN, HDEM and the Individual Investors, in the form attached
        hereto as Exhibit
        N.
        

       

      “Permitted
        Encumbrances”
shall
        mean (i) the rights of Lender under this Agreement, the other Loan Documents,
        the TBN Agreement, the Individual Investor Agreements, and (ii) the rights
        granted to the Existing Distributors and Additional Distributors under the
        Existing Distribution Agreements and Additional Distribution Agreements,
        respectively (including, without limitation, Liens granted thereunder), and
        (iii) statutory liens of landlords, carriers, warehousemen, mechanics,
        repairmen, workmen and materialmen, in each case incurred in the ordinary
        course
        of business for amounts not yet overdue; liens incurred in the ordinary course
        of business in connection with workers’ compensation, unemployment insurance and
        other types of social security, or to secure the performance of tenders,
        statutory obligations, leases, and other similar obligations (exclusive of
        obligations for the payment of borrowed money or other Indebtedness), so
        long as
        no foreclosure, sale or similar proceedings have been commenced with respect
        to
        any portion of the Collateral on account thereof; and liens in favor of customs
        and revenue authorities arising as a matter of law to secure payment of customs
        duties in connection with the importation of goods.

       

      “Person”
shall
        mean any natural person, corporation, partnership, limited liability company,
        joint venture, association, trust or unincorporated organization or any other
        entity, or a nation, state, government entity or any agency or political
        subdivision thereof. 

       

      “Physical
        Properties”
shall
        have the meaning set forth in Section 5.1.3 hereof. 

       

      “Power
        of Sale”
shall
        mean that certain Power of Sale of even date herewith to be delivered by
        Borrowers, substantially in the form of Exhibit
        W
        attached
        hereto. 

       

      “Prime
        Rate”
shall
        mean the rate of interest quoted in The Wall Street Journal, Money Rates
        Section
        as the Prime Rate (currently defined as the base rate on corporate loans
        posted
        by at least seventy five percent (75%) of the nation’s thirty (30) largest
        banks), as in effect from time to time or, in the event that such quotation
        ceases to be available, the rate of interest quoted by the Escrow Agent at
        its
“Prime Rate” or “Base Rate” for corporate loans. The Prime Rate is a reference
        rate and does not necessarily represent the lowest or best rate actually
        charged
        to any customer. Lender may make commercial loans or other loans at rates
        of
        interest at, above or below the Prime Rate. 

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      

       

      “Production
        and Distribution Agreement”
shall
        mean that certain Production and Distribution Agreement, dated January 8,
        2004,
        by and between HDEM and GNXE, attached hereto as Exhibit
        B.

       

      “Regulation
        D”
shall
        mean Regulation D of the Board of Governors of the Federal Reserve System
        as in
        effect from time to time. 

       

      “Regulatory
        Change”
shall
        mean, with respect to Lender, any change on or after the date hereof in any
        Governmental Regulations, including the introduction of any new Governmental
        Regulation or the rescission of any existing Governmental Regulation, such
        as,
        for example, but not limited to (i) a change in the basis of taxation of
        payments to Lender of the principal of or interest or any other amounts payable
        hereunder (except for changes in the rate of tax on, or determined by reference
        to, the net income or profits of Lender imposed by the jurisdiction in which
        its
        principal office is located) or (ii) a change in official reserve or capital
        adequacy requirements applicable to Lender. 

       

      “Repayment
        Amount”
shall
        have the meaning set forth in Section 2.3.

       

      “ROI
        Interest Accrual Date”
shall
        have the meaning set forth in Section 2.1.2.

       

      “ROI
        Theatrical Bumps”
shall
        have the meaning set forth in Section 2.4 hereof.

       

      “Russian
        Distribution Agreement”
shall
        have the meaning set forth in Section 2.11 hereof.

       

      “Secured
        Promissory Note”
shall
        have the meaning set forth in Section 2.1 hereof.

       

      “Subdistributor”
shall
        mean Rocky Mountain Pictures, Inc., a Utah corporation.

       

      “Subdistribution
        Agreement”
shall
        mean that certain Subdistribution Agreement, dated July 20, 2006, by and
        between
        GNXE, Subdistributor, Ron Rodgers and Randy Slaughter.

       

      “Subsidiary”
shall
        have the meaning set forth in Section 5.1.9 hereof. 

       

      “TBN”
shall
        mean Trinity Christian Center of Santa Ana, Inc., a church and California
        non-profit religious corporation doing business as Trinity Broadcasting
        Network.

       

      “TBN
        Agreement”
shall
        mean that certain Consolidation Agreement, dated June 20, 2006, by and
        between TBN and HDEM, attached hereto as Exhibit
        A.

       

      “Territory”
shall
        mean the world.

       

      “Worldwide
        Distribution Agreement”
shall
        mean that certain Worldwide Distribution Agreement, dated February 1, 2004,
        by
        and between HDEM and GNXE, attached hereto as Exhibit
        C.

       

      1.2 Approval.
        The
        word “approval” as used herein with reference to an approval right granted to
        Lender shall mean that Lender shall have the right, in Lender’s sole discretion,
        to approve or to withhold approval of the subject matter with respect to
        which
        the approval is required, provided that Lender agrees that it will exercise
        its
        approval rights in a diligent and timely manner reasonably and in good faith.
        

       

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      

       

      1.3 Accounting
        Terms.
        All
        accounting terms not specifically defined herein, and each accounting term
        partly defined herein to the extent not fully defined, shall be construed
        in
        accordance with generally accepted accounting principles consistently
        applied.

       

      SECTION
        2. AMOUNT
        AND TERMS OF LOAN

       

      2.1 Commitment
        to Lend.
        Subject
        to the terms and conditions of this Agreement, Lender hereby agrees to make
        a
        loan equal to the P&A Commitment to Borrowers, such loan shall be secured by
        a promissory note in substantially the form attached hereto as Exhibit
        U
        (the
“Secured
        Promissory Note”),
        and,
        if the conditions thereto specified herein are met, in the amount of the
        Additional P&A Commitment (each of which is herein sometimes called a “Loan”
and all of which are herein sometimes collectively called either “Loan”
or
        “Loans”
and
        in
        the aggregate herein sometimes called “Dollar
        Amount of P&A Commitment”).
        Subject to and upon fulfillment of the conditions set forth in Section 3
        hereof,
        which shall be applicable to each Loan, the Loan made pursuant to the Additional
        P&A Commitment shall be made upon written or faxed notice from Borrowers to
        Lender, specifying the date and amount of such Loan, which notice shall be
        substantially in the form of the Borrowing Certificate. Each Borrowing
        Certificate shall specify (i) the requested date of the proposed Loan, and
        (ii)
        the aggregate principal amount of the proposed Loan. Any Loan made hereunder
        and
        subsequently repaid or prepaid may not be re-borrowed.

       

      2.1.1 Additional
        P&A Commitment.
        In the
        event the Film shall gross Twelve Million Five Hundred Thousand Dollars
        ($12,500,000) or more of domestic theatrical box office as reported by Daily
        Variety (“DBO”)
        in its
        initial domestic theatrical release weekend, then Lender will, upon written
        request by Borrowers received within two (2) Business Days of the reporting
        of
        such DBO, finance an Additional P&A Commitment of Two Million Five Hundred
        Thousand Dollars ($2,500,000) (the “Additional
        P&A Commitment”),
        such
        loan shall be secured by a promissory note in substantially the form attached
        hereto as Exhibit
        V
        (the
“Additional
        P&A Commitment Secured Promissory Note”),
        under
        the same terms and conditions as the P&A Commitment. In the event the Film
        shall gross less than Twelve Million Five Hundred Thousand Dollars ($12,500,000)
        of DBO in its initial domestic theatrical release weekend, then Lender may
        in
        its sole and absolute discretion, upon written request by Borrowers received
        within two (2) Business Days of the reporting of such DBO, finance an Additional
        P&A Commitment of an amount less than Two Million Five Hundred Thousand
        Dollars ($2,500,000), under the same terms and conditions as the P&A
        Commitment. 

       

      2.1.2 Rate
        of Interest on the Loans and ROI Theatrical Bumps.
        The
        Repayment Amount shall bear interest on the unpaid portion thereof from the
        date
        (the “Interest
        Accrual Date”)
        which
        is nine months from the date of the funding of the initial Loan hereunder
        and
        the ROI Theatrical Bumps shall each bear interest on the unpaid amount thereof
        from the later of the date such obligations arise or the Interest Accrual
        Date
        (the “ROI
        Interest Accrual Date”)
        (i.e.,
        for the
        sake of clarity, interest shall begin accruing on the first day following
        the
        Interest Accrual Date or ROI Interest Accrual Date, as applicable), at the
        Interest Rate; provided, however, that upon the first anniversary of the
        Interest Accrual Date, such Interest Rate shall increase to the Base Rate
        plus
        four percent (4%), and that upon the second anniversary of the Interest Accrual
        Date, such Interest Rate shall increase to the Base Rate plus five percent
        (5%),
        and that the Interest Rate shall continue to increase by one percent (1%)
        on
        each anniversary of the Interest Accrual Date, until such time as the Repayment
        Amount, any ROI Theatrical Bumps and all Obligations are repaid. However,
        in no
        event, shall the Interest Rate exceed the maximum lawful interest rate, if
        any,
        that at any time or from time to time may be contracted for, charged, or
        received under the laws applicable to Lender which are presently in effect
        or,
        to the extent allowed by law, under such applicable laws which may hereafter
        be
        in effect and which allow a higher maximum non-usurious interest rate than
        applicable laws now allow. 

       

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      

       

      2.1.2.1 Withholding
        Gross Up.
        Lender’s agreement to lend funds to Borrowers at the Interest Rate and on the
        terms specified herein is based upon the understanding that all payments
        of
        interest will be made on the basis that they will receive, net of any tax
        or
        withholding obligations which may otherwise exist, at Lender’s office set forth
        in Section 11.5 hereof, the full amount of interest and fees set forth herein.
        In the event that Borrowers are obligated to withhold such sum, Borrowers
        shall
        pay to Lender, such additional sums as are necessary in order to result in
        Lender receiving the amount of fees and interest equal to that provided for
        in
        this Agreement. Borrowers shall indemnify and hold Lender harmless against,
        and
        shall reimburse Lender, upon demand, for any taxes, interest or penalties
        that
        may become payable by Lender as a result of any failure by Borrowers to pay
        the
        same when due. 

       

      2.2 Computation
        of Interest and Fees.
        All
        computations of interest and fees made or called for hereunder shall be
        calculated on the basis of a three hundred sixty (360) day year the actual
        number of days elapsed. In computing interest on any Loan, the date of the
        making of the Loan or the first day of an interest period, as the case may
        be,
        shall be included and the date of payment or the expiration date of an Interest
        Period, as the case may be, shall be excluded; provided, however, that if
        a Loan
        is repaid on the Interest Accrual Date, one (1) day’s interest shall be paid on
        that Loan. 

       

      2.3 Repayment
        of Loans.
        In
        consideration of Lender’s agreement to provide the P&A Commitment and the
        Additional P&A Commitment, Borrowers shall pay to the Collection Account,
        for the benefit of Lender, on or before the earlier of the earliest dates
        when
        such amounts are available to be repaid out of the Gross Receipts of the
        Film in
        all media in the Territory in accordance with the Escrow Agreement - Collection
        Account as set forth in Section 2.5 hereof, but in any event no later than
        the
        date which is the earlier of (x) five (5) years after the initial theatrical
        release of the Film in the Territory, or (y) December 31, 2011 (the date
        when
        such Loan is required to be paid shall be the “Maturity
        Date”):
        

       

      (i) accrued
        interest at the Interest Rate on the Repayment Amount of each Loan and ROI
        Theatrical Bump still outstanding;

       

      (ii) 120%
        of
        the total principal amount of all of the Loans actually funded by Lender
        into
        the Disbursement Account, including the P&A Commitment and any Additional
        P&A Commitment (“Repayment
        Amount”);
        and

       

      (iii) any
        ROI
        Theatrical Bumps payable to Lender.

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      

      

       

      2.4 ROI
        Theatrical Bumps.
        In the
        event the Film reaches certain defined DBO targets, Borrower will pay Lender,
        as
        additional interest on the Loans, ROI Theatrical Bumps in the amounts calculated
        at the DBO level commencing at Sixty Million Dollars ($60,000,000) and
        thereafter set forth as follows:

       

      
        	
                DBO

              	 	
                ROI
                  Theatrical Bumps

              	 	
                Cumulative

                ROI
                  Theatrical Bumps

              
	
                 

                $60,000,000

              	 	
                $150,000

              	 	
                $150,000

              
	
                $70,000,000

              	 	
                $200,000

              	 	
                $350,000

              
	
                $80,000,000

              	 	
                $250,000

              	 	
                $600,000

              
	
                $90,000,000

              	 	
                $300,000

              	 	
                $900,000

              

      

      

       

      For
        example, in the event that DBO performance for the Film grosses Eighty Million
        Dollars ($80,000,000), Lender, upon giving notice to Borrowers, will be entitled
        to receive an additional sum of Six Hundred Thousand Dollars ($600,000) for
        financing the print and advertising costs of the Film to be paid on the same
        terms as the Repayment Amount.

       

      2.5 Escrow
        Agreement - Collection Account.
        Borrowers and Lender shall enter into an escrow agreement (“Escrow
        Agreement - Collection Account”)
        substantially in the form attached hereto as Exhibit
        O,
        and
        TBN, Fox, Subdistributor, HDEM and Borrowers shall each enter into a Notice
        of
        Irrevocable Authority and Direction to Pay with Lender pursuant to which
        100% of
        the Gross Receipts derived from the exploitation of the Film in all media
        in the
        Territory (including but not limited to any, theatrical, non-theatrical,
        free or
        pay television, home video and video on demand receipts and international
        presales and overages) from the first dollar (net of any adjustments actually
        made by the Distributors with theaters and other licensees) actually paid
        by
        Distributors, or their licensees, shall be paid by Distributors into the
        Collection Account managed by the Escrow Agent, until such time as the Escrow
        Agreement - Collection Account provides for such monies to be paid to a new
        collection account or the Escrow Agent receives unanimous and consistent
        written
        instructions to the contrary. Borrowers shall cause each of the Existing
        Distributors and each party to any Additional Distribution Agreements of
        the
        Film in the Territory and any other Person which has the right to exploit
        the
        Film or any part thereof in the Territory, to pay all amounts otherwise payable
        to Borrowers to the Escrow Agent. The Escrow Agent shall collect and pay
        such
        sums and remit them as follows: (i) first, to the Escrow Agent for the payment
        of the Escrow Agent’s fees, (ii) second, to Lender in the amount of all accrued
        interest at the Interest Rate on the Repayment Amount of each Loan still
        outstanding on the Interest Accrual Date, (iii) third, to the Lender until
        such
        time as the Repayment Amount of each Loan actually funded by Lender has been
        repaid in full, (iv) fourth, to the various subordinated lenders pursuant
        to the
        P&A Subordination Agreement, until such time as an ROI Theatrical Bump
        becomes due and payable to Lender, (v) fifth, to Lender in the amount of
        all
        accrued interest at the Interest Rate on ROI Theatrical Bumps payable to
        Lender
        still outstanding on the ROI Interest Accrual Date, (vi) sixth, to Lender
        until
        such time as the ROI Theatrical Bumps, if any, payable to Lender are paid
        in
        full, and (vii) seventh, to the various subordinated lenders pursuant to
        the
        P&A Subordination Agreement. Promptly following the execution and delivery
        of this Agreement and any Borrowing Certificates, and in any event no later
        than
        the date that each Loan is made pursuant to this Agreement, Lender and Borrowers
        shall execute and deliver to the Escrow Agent, a notice setting forth the
        exact
        total Repayment Amount of each Loan, provided that failure to deliver any
        such
        notice shall not in any way derogate from Borrowers’ Loan repayment obligations
        and other Obligations hereunder. 

       

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      

       

      2.5.1 Escrow
        Agent Reporting.
        Escrow
        Agent shall provide Lender and Borrowers with periodic reports of payments
        received and shall immediately notify Borrowers upon receipt of the total
        amount
        of all of Borrower’s Obligations, not including the ROI Theatrical Bumps and any
        interest accrued thereon, and then again upon the receipt of the total amount
        of
        all of Borrowers’ Obligations, including the ROI Theatrical Bumps and any
        interest accrued thereon.

       

      2.6 Escrow
        Agreement - Disbursement Account.
        Borrowers and Lender shall enter into an escrow agreement (“Escrow
        Agreement - Disbursement Account”)
        substantially in the form attached hereto as Exhibit
        P.
        Pursuant to the Escrow Agreement - Disbursement Account and the terms and
        conditions thereof, Lender shall pay all Loan amounts payable to Borrowers
        to
        the Escrow Agent for deposit in the Disbursement Account. Subject to the
        terms
        of this Agreement, the Escrow Agent shall collect and pay such sums and remit
        them pursuant to the terms of the Escrow Agreement - Disbursement
        Account.

       

      2.7 Mandatory
        Prepayments.
        Borrowers shall be required to prepay the Loans without penalty or
        premium:

       

      (i) in
        an
        amount equal to all payments, proceeds or other consideration received by
        Borrowers on account of any of the Collateral, including, without limitation,
        all sums, moneys, royalties, fees, commissions, charges, payments, deposits,
        advances, guarantees, income, profit, Gross Receipts and all other proceeds
        paid
        to or derived by or payable to Borrowers on account of the distribution and
        exploitation of the Film or on account of any other item of Collateral
        including, without limitation, Gross Receipts, deposits and all other proceeds
        under the Existing Distribution Agreements and Additional Distribution
        Agreements (inclusive, in each case, of all Distributor deposits), it being
        agreed that all payments under the Existing Distribution Agreements and
        Additional Distribution Agreements shall be paid directly into the Collection
        Account, and after payment to Lender pursuant to the Escrow Agreement -
        Collection Account, shall be applied to the repayment of the Loans and to
        Borrowers’ Obligations in accordance with Section 2.5 hereof; provided, however,
        that Lender shall have no obligation to convert any nonmonetary consideration
        received by Borrowers or Lender on account of any of the Collateral to Cash
        or
        Cash Equivalents or otherwise to credit any such nonmonetary consideration
        against the Obligations provided Lender returns such nonmonetary consideration
        to Borrowers; and

       

      (ii) as
        otherwise provided hereunder.

       

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      

       

      All
        prepayments under this Section 2.7 shall be paid directly to the Collection
        Account to be applied to the repayment of the Loans and to Borrowers’
Obligations in accordance with Section 2.3 hereof.

       

      2.8 Holiday
        Payments.
        Subject
        to Section 2.2 hereof, if any payment to be made by Borrowers hereunder shall
        become due on a day other than a Business Day, such payment shall be made
        on the
        next succeeding Business Day, and such extension of time shall be included
        in
        the computation of interest hereunder. 

       

      2.9 Interest
        Adjustments.
        If the
        provisions of this Agreement would at any time otherwise require payment
        to
        Lender of an amount of interest in excess of the maximum amount then permitted
        by the law applicable to the Loans, such interest payments to Lender shall
        be
        reduced to the extent necessary so as to ensure that Lender shall not receive
        interest in excess of such maximum amount. To the extent that, pursuant to
        the
        foregoing sentence, Lender shall receive interest payments hereunder in an
        amount less than the amount otherwise provided, such deficit (the “Interest
        Deficit”)
        will
        cumulate and will be carried forward (without interest) until the termination
        of
        this Agreement. Interest otherwise payable to Lender hereunder for any
        subsequent period shall be increased by the maximum amount of the Interest
        Deficit that may be so added without causing Lender to receive interest in
        excess of the maximum amount then permitted by the law applicable to the
        Loans.
        The amount of the Interest Deficit relating to the Loans shall be treated
        as a
        prepayment penalty and paid in full at the time of any optional prepayment
        by
        Borrowers to Lender of all the outstanding Loans. The amount of the Interest
        Deficit relating to the Loans at the time of any complete payment of the
        Loans
        at that time outstanding (other than an optional prepayment thereof) shall
        be
        canceled and not paid (and if previously paid shall be refunded to Borrowers).
        

       

      2.10 Security
        Interest.
        As
        security for the due and punctual performance of all of Borrowers’ Obligations,
        hereunder, under any other Loan Document and any amendments, supplements,
        modifications, extensions, renewals and replacements thereof (including,
        without
        limitation, the payment in full of the amounts set forth in Sections 2.3
        (i)
        through (iii) hereof, Borrowers and HDEM are concurrently herewith granting
        to
        Lender, or causing to be granted to Lender, a first priority security interest
        in the Collateral.

       

      2.11 Additional
        Consideration.
        As
        additional consideration for providing the P&A Commitment, Lender shall be
        granted in perpetuity the licensing and distribution rights in all media,
        excluding Christian Television, in the territory of Russia as defined by
        the
        Independent Film and Television Alliance pursuant to the terms of the Russian
        Distribution Agreement, the form of which is attached hereto as Exhibit
        Q.

       

      2.12 P&A
        Designees.
        The
        P&A Designees shall be responsible
        for the use of proceeds of the Loans. Two P&A Designees’ written approval
        shall be required in order to disburse the proceeds of the Loans from the
        Disbursement Account.

       

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      

       

      2.13 P&A
        Approvals.
        P&A
        Designees shall be entitled to review and approve any domestic subdistributor,
        including the terms of any subdistribution agreements, any marketing
        organization, and any international sales agent to be appointed by GNXE,
        along
        with the domestic theatrical release, booking and marketing plan. P&A
        Designees shall be entitled to review and approve each expenditure from the
        disbursement account. Decisions regarding the initial domestic theatrical
        release date, the release pattern, marketing, and promotional campaign of
        the
        Film, release plans following initial theatrical release and other substantive
        distribution, marketing, and promotional matters will be made mutually following
        meaningful good faith consultation between GNXE, Subdistributor, and P&A
        Designees. In the event of a disagreement between the foregoing parties,
        any two
        of the P&A Designees acting together will have the binding authority to make
        final decisions in all business, distribution, and marketing
        matters.

       

      SECTION
        3. CONDITIONS
        OF LENDING

       

      The
        obligation of Lender to make any Loan hereunder shall be subject to the
        following conditions precedent:

       

      3.1 Delivery
        to Lender of Documents.
        On or
        prior to the initial Loan hereunder, Lender shall have received, in form
        and
        substance reasonably satisfactory to Lender and its counsel, all of the
        following:

       

      (a) Duly
        executed copies of the following agreements together with all amendments,
        exhibits, schedules, attachments and supplementary documents thereto: this
        Agreement, the Secured Promissory Note, the Additional P&A Commitment
        Secured Promissory Note, the Russian Distribution Agreement, the TBN Agreement,
        all Notices of Irrevocable Authority and Direction to Pay with respect to
        the
        Existing Distribution Agreements, the P&A Subordination Agreement, the
        Escrow Agreement - Collection Account, the Escrow Agreement - Disbursement
        Account, the Copyright Mortgage and Assignments, and all other Loan
        Documents.

       

      (b) Copies
        of
        fully executed documentation in form and substance satisfactory to Lender
        and
        Lender’s counsel, including, without limitation, the Chain-of-Title Documents,
        evidencing that Borrowers and HDEM own all rights in and to the Film and
        its
        underlying and included properties throughout the world and all rights in
        connection therewith that are necessary for Borrowers to perform their
        obligations to TBN under the TBN Agreement, to the Existing Distributors
        and any
        Additional Distributors under the Existing Distribution Agreements and any
        Additional Distribution Agreements, and, if requested by Lender, evidence
        satisfactory to Lender to the effect that all appropriate documents in form
        and
        substance satisfactory to Lender and its counsel evidencing Borrowers’ said
        rights and Lender’s security interest in the Collateral, have been duly
        submitted to and accepted for recordation by the United States Register of
        Copyrights, accompanied by the required fees, or, if not yet submitted, are
        ready to be submitted, and, if accompanied by the required fees, will be
        so
        accepted, and that an examination of the records of the Register of Copyrights
        reveals no Lien that is or is reasonably likely to be contrary to the rights
        granted to Lender hereunder or under any other Loan Document. 

       

      (c) Uniform
        Commercial Code financing statements for Delaware and any other jurisdictions
        reasonably specified by Lender, evidencing Lender’s security interest in the
        Collateral, either ready to be filed with, or bearing filing marks from,
        the
        proper governmental authority, together with evidence satisfactory to Lender
        from the proper governmental authorities to the effect that there is no prior
        filing in any such jurisdiction with respect to the Collateral evidencing
        a
        prior or superior security interest of any other party in connection therewith.
        

       

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      

       

      (d) Certified
        copy of resolutions of the Board of Directors of each Borrowers and a consent
        of
        the shareholders of each Borrowers authorizing the execution, delivery and
        performance of this Agreement and the other Loan Documents, as applicable,
        as
        well as all of the transactions contemplated thereby, and such other documents
        relating thereto as Lender reasonably may request, and duly executed
        certificates, each dated a recent date prior to the date hereof, from the
        appropriate authorities in each Borrowers’ jurisdiction of organization and in
        each jurisdiction where each Borrowers conducts business confirming that
        such
        Borrowers is an organization in good standing and is duly qualified to conduct
        all business activities in each such jurisdiction.

       

      (e) True
        copies of the Certificate of Incorporation of each Borrower together with
        a
        certificate of the date of filing thereof, and the Bylaws of each Borrowers,
        certified by the Secretary of such Borrowers, and a Certificate of Good Standing
        from the appropriate authority of each jurisdiction in which each Borrowers
        is
        qualified to do business, each dated a recent date prior to the date hereof.
        

       

      (f) Signature
        and incumbency certificates of each Borrower’s officers who are authorized to
        execute this Agreement, the other Loan Documents, the Existing Distribution
        Agreements, and any Additional Distribution Agreements. 

       

      (g) The
        favorable written opinion of The Bayard Firm, special counsel for Borrowers,
        addressed to Lender, in the form attached hereto as Exhibit
        R.

       

      (h) The
        favorable written opinion of Stone Rosenblatt Cha PLC, counsel for GNXE,
        addressed to Lender, in the form attached hereto as Exhibit
        S.

       

      (i) The
        favorable written opinion of Richard P. Towne, counsel for ONWK, addressed
        to
        Lender, in the form attached hereto as Exhibit
        T.

       

      (j) Certificate(s)
        of insurance with respect to the insurance coverage required to be obtained
        and
        maintained by Borrowers pursuant to Section 7.14 hereof and an executed Notice
        to Insurer from Borrowers and Lender stating that Lender has a first priority
        security interest in, to and under all policies of insurance required and
        issued
        pursuant to Section 7.14 hereof and the proceeds thereof. 

       

      (k) A
        copy of
        the Approved Budget, signed by or otherwise approved in writing by each Borrower
        and two P&A Designees.

       

      (l) A
        copy of
        the Approved Distribution Plan, signed by or otherwise approved in writing
        by
        each Borrower and two P&A Designees.

       

      (m) A
        copyright and title search report on the Film, dated a recent date, acceptable
        to Lender and its counsel. 

       

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      

       

      (n) Certified
        copies of all consents or approvals of any governmental authority or other
        Person which Lender determines is required in connection with the transactions
        contemplated by this Agreement. 

       

      (o) Such
        other requirements or documents as Lender may reasonably request in order
        to
        effect fully the purposes of this Agreement and the other Loan
        Documents.

       

      3.2 Borrowing
        Certificate.
        Lender
        shall have received a request for each Loan in accordance with Section 2.1
        above
        and a fully executed Borrowing Certificate in connection with such Loan.
        Lender
        shall be entitled to rely conclusively on the authority of any person purporting
        to request a Loan on behalf of Borrowers until Lender receives written notice to
        the contrary. Lender shall have no duty to verify the authenticity of the
        signature appearing on any Borrowing Certificate. 

       

      3.3 Representations
        and Warranties.
        At the
        time of each Loan, Borrowers’ representations and warranties set forth in
        Section 6 hereof and in each other Loan Document shall be true and correct
        on
        and as of such date (except to the extent that such representations and
        warranties relate to an earlier date and except as affected by transactions
        expressly contemplated hereby) with the same effect as though such
        representations and warranties had been made on and as of the date of such
        Loan.

       

      3.4 No
        Default.
        At the
        time of such Loan, no Event of Default or event which upon the giving of
        notice
        or lapse of time or both would constitute such an Event of Default, shall
        have
        occurred and be continuing or would result from the making of such Loan.
        

       

      3.5 Legality.
        The
        making of such Loan shall not contravene any law or Governmental Regulation
        applicable to Lender. 

       

      3.6 Proceedings;
        Receipt of Documents.
        All
        proceedings in connection with the making of the Loans and the other
        transactions contemplated by this Agreement, and all documents incidental
        thereto, shall be reasonably satisfactory to Lender and its counsel, and
        Lender
        and its counsel shall have received all information and such counterpart
        originals or certified or other copies of such documents as Lender or its
        counsel may reasonably request.

       

      SECTION
        4. DELIVERY
        OF THE FILM

       

      4.1 Delivery
        of the Film.
        Borrowers shall produce the Film and duly and timely deliver it to the
        Distributors on or before the Delivery Date (as the same may be defined and
        extended by the Distributors), in accordance with the Distribution Agreements,
        and otherwise consistent with the provisions of this Agreement, the TBN
        Agreement, the P&A Subordination Agreement, the Escrow Agreement -
        Collection Account, the Escrow Agreement Disbursement Account, and the Notice
        of
        Irrevocable Authority and Direction to Pay. Borrowers shall submit to Lender
        a
        copy of the Approved Budget and the Approved Distribution Plan for the Film
        as
        approved by, as applicable, Borrowers, two P&A Designees and any other
        parties having approval rights with respect thereto concurrently herewith
        and,
        in all events, not later than prior to the making of the initial Loan hereunder.
        Lender shall not have any obligation to make any Loan hereunder until, as
        applicable, Borrowers and any other third parties having approval rights
        with
        respect thereto have approved in writing the same Approved Budget and Approved
        Distribution Plan for the Film. Borrowers shall not, without the prior written
        consent of Lender, make, agree to make or permit to be made any variation
        or
        modification in any of the elements of the Film which are subject to Lender’s
        approval or consent pursuant to this Agreement or any other Loan Document
        or in
        the personnel or other details of production which are subject to such approval
        or consent, other than minor variations or modifications arising as a result
        of
        the normal exigencies of film production and not resulting in a material
        increase in the cost of production or a delay in Delivery of the Film or
        in a
        violation of this Agreement or any other Loan Document.

       

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      

       

      4.2 Authority
        to Collect.
        Borrowers agree to use best efforts to cause all sums, moneys, royalties,
        fees,
        commissions, charges, payments, advances, income, profit and other proceeds
        paid
        to or derived by or payable to or for the benefit of Borrowers on account
        of the
        distribution and exploitation of the Film in the Territory (including, without
        limitation, payments under the Existing Distribution Agreements and Additional
        Distribution Agreements), or on account of any other item of the Collateral,
        to
        be paid directly by the obligor thereof into the Collection Account to be
        applied to the payment of the Obligations until such Obligations are paid
        in
        full in accordance with Section 2.5 hereof. Upon receipt by Borrowers of
        any
        revenue, income, profits or other sums in which a security interest is granted
        hereunder, payable pursuant to any agreement or otherwise, or of any check,
        draft, note, trade acceptance or other instrument evidencing an obligation
        to
        pay any such sum, Borrowers agree to hold the same in trust for Lender and
        forthwith, without any notice or demand whatsoever (all such notices, demands
        or
        other actions being expressly waived), to endorse, transfer and deliver any
        such
        sums or instruments, or both, into the Collection Account to be applied to
        the
        payment of the Obligations in accordance with Section 2.5 hereof. 

       

      4.3 Attorney-in-Fact.
        Borrowers hereby constitute and appoint Lender as their true and lawful
        attorney, in their place and stead and with full power of substitution, either
        in Lender’s own name or in the name of Borrowers, upon the occurrence of any
        Event of Default to: ask for, demand, collect, receive, receipt and give
        acquittance for any and all monies due or to become due under and by virtue
        of
        any of the Collateral; execute, file and refile any or all of the documents
        recited in Section 6.7 hereof; and endorse checks, drafts, orders and other
        instruments for the payment of monies payable to Borrowers on account thereof,
        and to settle, compromise, prosecute or defend any action, claim or proceeding
        with respect thereto and to sell, assign, pledge, transfer and make any
        agreement respecting or affecting, or otherwise deal with, the same until
        the
        Obligations are paid in full; provided, however, that nothing herein contained
        shall be construed as requiring or obligating Lender to make any demand,
        or to
        make any inquiry as to the nature or sufficiency of any payment received
        by it,
        or to present or file any claim or notice or take any action with respect
        to any
        of the Collateral or the monies due or to become due thereunder or the property
        covered thereby, and no action taken or omitted to be taken by Lender with
        respect to any of the Collateral shall give rise to any defense, counterclaim
        or
        setoff in favor of Borrowers or to any claim or action against Lender; and
        further provided that any cost or expense borne by Lender pursuant to this
        Section 4.3 shall be immediately paid to Lender by Borrowers. Lender shall
        provide Borrowers with prior written notice if it intends to act as either
        Borrower’s attorney-in-fact pursuant hereto and shall promptly provide such
        Borrowers with copies of any documents or other instruments that Lender executes
        in such Borrower’s name. 

       

      
        
           

        

        
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      4.4 Remittances.
        Borrowers agree that all cash, proceeds and instruments received by Borrowers
        on
        account of any of the Collateral, or as a result of the sale, lease or other
        disposition of any of the Collateral, whether received by Borrowers in the
        exercise of their collection rights hereunder or otherwise, shall be remitted
        to
        the Collection Account in the form received (properly endorsed by Borrowers
        for
        deposit into the Collection Account or for collection in accordance with
        Lender’s instructions) not later than the Business Day following the day of
        receipt, to be applied against the Obligations as provided in Section 2.5
        hereof.

       

      SECTION
        5. PLEDGE
        AND GRANT OF SECURITY INTEREST

       

      5.1 As
        security for the due and punctual payment and performance of the Obligations,
        Borrowers and HDEM hereby pledge, hypothecate, assign, transfer, convey,
        deliver
        and set over unto Lender as security, and hereby grant to Lender a continuing
        first priority security interest in, all of Borrowers’ and HDEM’s right, title
        and interest of every kind and nature, if any, in and to the following, whether
        now owned or hereafter acquired or created, including all products and proceeds
        thereof, including insurance proceeds (collectively, the “Collateral”)
        (to
        the extent any materials and/or rights in and to the Film, the Episodes or
        any
        other Collateral are not yet in existence or not yet acquired, such materials
        and rights are (to the extent applicable) hereby assigned and conveyed to
        Lender
        by way of present assignment of future interests):

       

      5.1.1 All
        rights of Borrowers and HDEM of every kind and nature in and to the Film
        and the
        Episodes in the Territory and all collateral, allied, ancillary, subsidiary
        and
        merchandising rights therein, and all properties and things of value pertaining
        thereto and all products and proceeds thereof whether now in existence or
        hereafter made, acquired or produced (as used in this Section 5, the term
        the
“Film” and the term the “Episodes” shall mean and include the Film, the Episodes
        and all of the aforesaid rights and the rights and property set forth in
        subparagraphs 5.1.2 through 5.1.18 below) including, without
        limitation:

       

      5.1.2 All
        rights of Borrowers and HDEM in the Territory of every kind and nature
        (including, without limitation, copyrights) in and to the Approved Screenplay
        (copyright registration number ______________), any literary, musical, dramatic
        or other material of any kind or nature upon which, in whole or in part,
        the
        Film or the Episodes are or may be based, or from which they are or may be
        adapted or inspired, or which may be or has been used or included in the
        Film or
        the Episodes including, without limitation, all scripts, scenarios, screenplays,
        bibles, stories, treatments, outlines, titles, concepts or other properties
        or
        materials of any kind or nature in whatever state of completion and all drafts,
        versions and variations thereof, excluding the book “Hadassah” written by Tommy
        Tenney and any drafts thereof (collectively, the “Literary
        Property”);

       

      5.1.3 All
        rights of Borrowers and HDEM of every kind and nature in and to all physical
        properties of every kind or nature of or relating to the Film and the Episodes
        and all versions thereof, including, without limitation, all physical properties
        relating to the development, production, completion, delivery, exhibition,
        distribution or other exploitation of the Film and the Episodes, and all
        versions thereof or any part thereof, including, without limitation, the
        Literary Property, exposed film, developed film, positives, negatives, prints,
        answer prints, special effects, preprint materials (including interpositives,
        negatives, duplicate negatives, internegatives, color reversals, intermediates,
        lavenders, fine grain master prints and matrices and all other forms of preprint
        elements which may be necessary or useful to produce prints or other copies
        or
        additional pre-print elements, whether now known or hereafter devised),
        soundtracks, recordings, audio and video tapes and discs of all types and
        gauges, cutouts, trims and any and all other physical properties of every
        kind
        and nature relating to the Film in whatever state of completion, and all
        duplicates, drafts, versions, variations and copies of each thereof
        (collectively, the “Physical
        Properties”)
        needed
        for the exploitation of the Film in the Territory;

       

      
        
           

        

        
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      5.1.4 All
        rights of Borrowers and HDEM of every kind or nature in and to any and all
        music
        and musical compositions created for, used in or to be used in connection
        with
        the exploitation of the Film and/or the Episodes in the Territory including,
        without limitation, all copyrights therein and all rights to perform, copy,
        record, rerecord, produce, publish, reproduce or synchronize any or all of
        said
        music and musical compositions as well as all other rights to exploit such
        music
        including record, soundtrack recording, and music publishing rights in the
        Territory;

       

      5.1.5 All
        collateral, allied, ancillary, subsidiary, publishing and merchandising rights
        of Borrowers and HDEM of every kind and nature in the Territory, without
        limitation, derived from, appurtenant to or related to the Film or the Literary
        Property, including, without limitation, all production, exploitation, reissue,
        remake, sequel, serial or series production rights by use of film, tape or
        any
        other recording devices now known or hereafter devised, whether based upon,
        derived from or inspired by the Film and/or the Episodes, the Literary Property
        or any part thereof; all rights of Borrowers and HDEM to use, exploit and
        license others to use or exploit in the Territory any and all novelization,
        publishing, commercial tieups and merchandising rights of every kind and
        nature,
        including, without limitation, all novelization, publishing, merchandising
        rights and commercial tieups arising out of or connected with or inspired
        by the
        Film, the Episodes or the Literary Property, the title or titles of the Film
        or
        the Episodes, the characters appearing in the Film or the Episodes or said
        Literary Property and/or the names or characteristics of said characters,
        and
        including further, without limitation, any and all commercial exploitation
        in
        connection with or related to the Film and/or the Episodes, all remakes or
        sequels thereof and/or said Literary Property;

       

      5.1.6 All
        rights of Borrowers and HDEM of every kind or nature, present and future,
        in and
        to all agreements relating to the development, production, completion, delivery
        and exploitation of the Film and the Episodes in the Territory, including,
        without limitation, all agreements for personal services, including the services
        of writers, directors, cast, producers, special effects personnel, animators,
        cameramen and other creative, artistic and technical staff and agreements
        for
        the use of studio space, equipment, facilities, locations, animation services,
        special effects services and laboratory contracts;

       

      5.1.7 All
        copyrights, rights in copyrights, interests in copyrights and renewals and
        extensions of copyrights, heretofore or hereafter obtained upon the Film,
        the
        Episodes or the Literary Property or any part thereof, and the right (but
        not
        the obligation) to make publication thereof for copyright purposes, to register
        claims under copyright, and the right (but not the obligation) to renew and
        extend such copyrights, and the right (but not the obligation) after prior
        notice, to sue in the name of either Borrower or HDEM and/or in the name
        of
        Lender for past, present and future infringements of copyright in the
        Territory;

       

      
        
           

        

        
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      5.1.8 All
        rights to produce, acquire, release, sell, distribute, subdistribute, lease,
        sublease, market, license, sublicense, exhibit, broadcast, transmit, reproduce,
        publicize or otherwise exploit the Film, the Episodes, the Literary Property
        and
        any and all rights therein in the Territory (including, without limitation,
        the
        rights referred to in subsection 5.1.5 above) in perpetuity, without limitation,
        in any manner and in any media whatsoever throughout the universe, including,
        without limitation, by projection, radio, all forms of television (including,
        without limitation, free, pay, toll, cable, sustaining subscription, sponsored
        and direct satellite broadcast), in theatres, nontheatrically, on cassettes,
        cartridges and discs and by any and all other scientific, mechanical or
        electronic means, methods, processes or devices now known or hereafter
        conceived, devised or created;

       

      5.1.9 All
        rights of Borrowers and HDEM of any kind or nature, direct or indirect, to
        acquire, produce, develop, reacquire, finance, release, sell, distribute,
        subdistribute, lease, sublease, market, license, sublicense, exhibit, broadcast,
        transmit, reproduce, publicize, or otherwise exploit the Film or the Episodes
        in
        the Territory, or any rights in the Film or the Episodes, including, without
        limitation, pursuant to agreements between Borrowers and HDEM and any Person
        controlling, controlled by, or under common control with Borrowers and HDEM
        (each, a “Subsidiary”)
        which
        relate to the ownership, production or financing of the Film or the
        Episodes;

       

      5.1.10 All
        Contract rights and general intangibles which grant to any Person any right
        to
        acquire, produce, develop, reacquire, finance, release, sell, distribute,
        subdistribute, lease, sublease, market, license, sublicense, exhibit, broadcast,
        transmit, reproduce, publicize, or otherwise exploit the Film or the Episodes
        in
        the Territory or any rights in the Film or the Episodes in the Territory
        including, without limitation, all such rights pursuant to agreements between
        either Borrower or HDEM and any Subsidiary which relate to the ownership,
        production or financing of the Film or the Episodes;

       

      5.1.11 All
        rent,
        revenues, income, compensation, products, increases, proceeds and profits
        or
        other property obtained or to be obtained by Borrowers or HDEM from the
        production, release, sale, distribution, subdistribution, lease, sublease,
        marketing, licensing, sublicensing, exhibition, broadcast, transmission,
        reproduction, publication, ownership, exploitation or other uses or disposition
        of the Film or the Episodes in the Territory and the Literary Property in
        the
        Territory (or any rights therein or part thereof), in any and all media,
        including, without limitation, the properties thereof and of any collateral,
        allied, ancillary, merchandising and subsidiary rights therein and thereto,
        and
        amounts recovered as damages by reason of unfair competition, the infringement
        of copyright, breach of any contract or infringement of any rights, or derived
        therefrom in any manner whatever;

       

      5.1.12 Any
        and
        all accounts, accounts receivable, general intangibles, contract rights,
        chattel
        paper, documents, instruments and goods, including inventory (as those terms
        are
        defined in the Delaware Uniform Commercial Code), not elsewhere included
        in this
        definition, which may arise in connection with the creation, production,
        completion, delivery, financing, ownership, possession or exploitation of
        the
        Film or the Episodes in the Territory;

       

      
        
           

        

        
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      5.1.13 All
        accounts receivable, all contract rights, all general intangibles (as such
        terms
        are defined in the Delaware Uniform Commercial Code) in connection with or
        relating to the exploitation of the Film or the Episodes in the Territory
        including, without limitation, all accounts receivable, all contract rights
        and
        general intangibles constituting rights to receive the payment of money,
        or
        other valuable consideration, all receivables and all other rights to receive
        the payment of money including, without limitation, under present or future
        contracts or agreements (whether or not earned by performance), from the
        sale,
        distribution, exhibition, disposition, leasing, subleasing, licensing,
        sublicensing and other exploitation of the Film or the Episodes in the Territory
        or the Literary Property or any part thereof or any rights therein or related
        thereto in any medium, whether now known or hereafter developed, by any means,
        method, process or device in any market including, without limitation, all
        of
        Borrowers’ and HDEM right, title and interest in, to and under the Existing
        Distribution Agreements, the Additional Distribution Agreements, and any
        other
        existing or future agreements for the distribution or other exploitation
        of the
        Film or the Episodes in the Territory, as the same may presently exist or
        hereafter from time to time come into existence, be amended, renewed, modified,
        supplemented, extended or replaced, including Borrowers’ and HDEM’s rights to
        receive payments thereunder, and all other rights to receive film rentals,
        license fees, distribution fees, producer’s shares, royalties and other amounts
        of every description including, without limitation, from (a) theatrical
        exhibitors, nontheatrical exhibitors, television networks and stations and
        airlines, cable television systems, pay television operators, whether on
        a
        subscription, per program charge basis or otherwise, and other exhibitors,
        (b)
        Distributors, subdistributors, lessees, sublessees, licensees and sublicensees
        (including any Subsidiary) and (c) any other Person or entity that
        distributes, exhibits or exploits the Film, the Episodes or the Literary
        Property or elements or components of the Film, the Episodes or the Literary
        Property or rights relating thereto;

       

      5.1.14 All
        proceeds, products, additions and accessions (including insurance proceeds)
        of
        the Film and the Episodes, as defined and referred to in subsections 5.1.1
        through 5.1.13 above. 

       

      5.1.15 The
        following personal property, whether now owned or hereafter acquired: (i)
        the
        title or titles of the Film and the Episodes and all of Borrowers’ and HDEM’s
        rights to the exclusive use thereof including rights protected pursuant to
        trademark, service mark, unfair competition and/or other laws, rules or
        principles of law or equity or industry practice, and (ii) all inventions,
        processes, formulae, licenses, patents, patent rights, trademarks, trademark
        rights, service marks, service mark rights, trade names, trade name rights,
        logos, indicia, corporate and Borrowers and HDEM names, business source or
        business identifiers and renewals and extensions thereof, domestic and foreign,
        whether now owned or hereafter acquired, and the goodwill and other like
        business property rights relating to the exploitation of the Film or the
        Episodes in the Territory, and the right (but not the obligation) to register
        claims in the Territory under trademark or patent and to renew and extend
        such
        trademarks or patents and the right (but not the obligation) to sue in the
        name
        of either Borrower or HDEM or in the name of Lender for past, present or
        future
        infringement of trademark or patent;

       

      5.1.16 All
        Cash
        and Cash Equivalents of Borrowers and HDEM derived from or relating to the
        exploitation of the Film or the Episodes in the Territory and all drafts,
        checks, certificates of deposit, notes, bills of exchange and other writings
        derived from or relating to the Film or the Episodes which evidence a right
        to
        the payment of money and are not themselves security agreements or leases
        and
        are of a type which is in the ordinary course of business transferred by
        delivery with any necessary endorsement or assignment whether now owned or
        hereafter acquired (all such drafts, checks, certificates of deposit, notes,
        bills of exchange and other writings, whenever acquired, collectively are
        called
“Instruments”);

       

      
        
           

        

        
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      5.1.17 To
        the
        extent not included in the items described in subsections 5.1.1 through 5.1.16
        above, all accounts, contract rights, general intangibles, documents,
        instruments, chattel paper, goods, inventory and equipment (as such terms
        are
        defined in the Delaware Uniform Commercial Code) now owned or hereafter acquired
        by Borrowers or HDEM in connection with the exploitation of the Film or the
        Episodes in the Territory, and the proceeds and products thereof.

       

      5.1.18 All
        security interests granted by this Agreement shall terminate upon payment
        in
        full of all of Borrowers’ Obligations. At such time Lender shall take all
        necessary steps to terminate such security interests by filing appropriate
        documentation wherever necessary.

       

      5.2 Notwithstanding
        anything to the contrary contained in subsections 5.1.1 through 5.1.17 above,
        there shall be excluded from the Collateral described in this Section 5:
        (a) the
        interest of Borrowers or HDEM, whether as owner or lessee, in any property
        constituting real property under the laws of the jurisdiction in which such
        property is located, (b) the written work entitled, “Hadassah - One Night With
        The King” (the “Book”),
        by
        Tommy Tenney (the “Author”),
        first
        published in the United States by Bethany House Publishers (the “Publisher”),
        (c)
        any publication rights to the Book, (d) the right to sell, distribute or
        license
        for sale or resale of a graphic novelization, comic book version, picture
        book,
        children's edition, study guides or any other text, print or display
        exploitation based on the Book, and (e) any other so-called “Subsidiary Rights”
granted to the Publisher by HDEM pursuant to the Publishing Agreement, as
        amended, entered into between HDEM and the Publisher on or about December
        17,
        2001 (“Excluded
        Property”).

       

      5.3 Additional
        Distribution Agreements.
        Until
        payment and Borrowers’ performance in full of the Obligations hereunder and
        under the other Loan Documents, with respect to any proposed Additional
        Distribution Agreement:

       

      5.3.1 Borrowers
        shall send or shall cause to be sent to Lender a copy of each Additional
        Distribution Agreement, within five (5) days of the entering into of such
        Additional Distribution Agreement.

       

      5.3.2 As
        a
        condition to Borrowers entering into any Additional Distribution Agreement,
        and
        concurrently therewith, Borrowers shall cause each such Additional Distributor
        to (1) execute and deliver to Lender a Notice of Irrevocable Authority and
        Direction to Pay, substantially in the form attached hereto as Exhibit
        L,
        and (2)
        enter into a deal memo or long-form agreement in the forms furnished to,
        and
        approved by, Lender and Lender’s counsel (or enter into such other form of deal
        memo agreement as shall be approved in writing by Lender and Lender’s
        counsel).

       

      
        
           

        

        
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      5.4 Benefits
        Only.
        Upon
        the assignment to Lender for security purposes of all of Borrowers’ and HDEM’s
        right, title and interest in and to the Distribution Agreements, and all
        other
        agreements subject to Lender’s security interest hereunder, Lender shall take an
        assignment only of the benefits of and shall not assume the obligations and
        liabilities under any such agreement, and Borrowers shall (and hereby agree
        to)
        perform or cause to be performed all of Borrowers’ obligations under each such
        agreement, and Borrowers shall not be released from such obligations by making
        such assignment.

       

      5.5 The
        respective rights of the parties with respect to the Collateral are subject
        to
        the TBN Agreement, the P&A Subordination Agreement, the Existing
        Distribution Agreements, the Escrow Agreement - Collection Account, the Escrow
        Agreement - Disbursement Account and the other Loan Documents.

       

      SECTION
        6. BORROWERS’
        REPRESENTATIONS AND WARRANTIES

       

      In
        order
        to induce Lender to enter into this Agreement, each of ONWK and GNXE
        makes the
        following representations and warranties, each of which shall be deemed to
        be
        made again as of the date of each request for a Loan hereunder:

       

      6.1 Existence
        and Rights.
        GNXE is
        a Delaware corporation, and ONWK is a California corporation, and each is
        duly
        organized, validly existing and in good standing under the laws of applicable
        laws of such jurisdictions, and each maintains its respective chief executive
        office at the address listed in Section 11.5 hereof. Each Borrower has all
        necessary powers and authority, rights and franchises to own its properties
        and
        to carry on its business as now conducted, and is duly qualified to do business
        and is in good standing in each jurisdiction in which the conduct of its
        business or the ownership of its properties makes such qualification necessary.
        Each Borrower possesses or will possess, as the case may be, all necessary
        licenses or permissions necessary to conduct its business as now conducted
        or as
        such business may be conducted, as the case may be; and each Borrower has
        all
        requisite right, power and authority to enter into, deliver and perform its
        obligations under this Agreement and the other Loan Documents.

       

      6.2 Film.
        The
        Film is based on the book “Hadassah” by Tommy Tenney and screenplay by Stephan
        Blinn, and features an ensemble cast including Peter O’Toole, Omar Sharif, John
        Rhys-Davies, and Tiffany Dupont as Esther; the Film was photographed on 35mm
        color film in the English language and will have an MPAA rating of “PG” and will
        not exceed one hundred twenty five (125) minutes in length including main
        and
        end titles.

       

      6.3 Agreement,
        Loan Document and Related Agreements Authorized.
        The
        execution, delivery and performance of this Agreement, the Existing Distribution
        Agreements, the P&A Subordination Agreement, the Escrow Agreement -
        Collection Account, the Escrow Agreement - Disbursement Account, the Notices
        of
        Irrevocable Authority and Direction to Pay and the other Loan Documents to
        which
        Borrowers are parties, and the payment of principal of and interest on the
        Loans, have been duly authorized by Borrowers by all necessary action of
        Borrowers’ directors and shareholders, and do not and will not (i) require the
        consent or approval of any governmental body or other regulatory authority,
        (ii)
        violate any provision of any law, rule, regulation, order, writ, judgment,
        injunction, decree, determination or award presently in effect having
        applicability to Borrowers, or (iii) contravene or conflict with any term
        or
        provision of Borrowers’ Certificates
        of Incorporation; and this Agreement, the Existing Distribution Agreements,
        the
        Additional Distribution Agreements, the P&A Subordination Agreement, the
        Escrow Agreement - Collection Account, the Escrow Agreement - Disbursement
        Account, the Notices of Irrevocable Authority and Direction to Pay and each
        other Loan Document to which Borrowers are parties, is, are, or will be and
        constitute, as the case may be, the legal, valid and binding obligations
        of
        Borrowers, enforceable in accordance with their respective terms. 

       

      
        
           

        

        
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      6.4 Security
        Interest.
        This
        Agreement creates a valid, first priority security interest and Lien in and
        to
        the Collateral securing the payment and performance of the Obligations to
        be
        secured hereby, and all action now required which can be taken by Borrowers
        to
        perfect Lender’s Lien in and to the Collateral has been or will be promptly
        following execution and delivery hereof taken and completed. Borrowers and
        HDEM
        are and will be the owner of all Collateral whenever acquired or arising
        free
        and clear of all Liens, of any kind and nature except for the Permitted
        Encumbrances. All rents, royalties and other amounts due and payable by
        Borrowers under contracts, leases, license agreements and other instruments
        relating to the Collateral, including, without limitation, contracts, leases or
        license agreements relating to the Film, the Episodes and the Literary Property,
        the services of all persons or entities rendering services in connection
        with
        the Film or the Episodes, and the furnishing of goods, processing, equipment
        and
        materials used in connection with the Film and the Episodes have been paid
        if
        due, or will be paid when due, and Borrowers are not in default under any
        such
        contract, lease, license agreement or other instrument; and Borrowers will
        appear in, contest and defend against any action or proceeding purporting
        to
        affect title to or any other interest in any portion of the Collateral, or
        the
        rights or powers of Lender, its successors or assigns, or the right or interest
        of Lender, legal or beneficial, in any portion of the Collateral; and will
        pay
        all reasonable costs and expenses, including costs of evidence of title and
        reasonable outside attorneys’ fees, in any such action or proceeding in which
        Lender may appear. Borrowers will not sell, offer to sell, hypothecate or
        otherwise dispose of any Collateral (including proceeds thereof) subject
        hereto,
        or any part thereof or interest therein, at any time, except for Permitted
        Encumbrances or with the prior written consent of Lender; provided that
        Borrowers may enter into licenses to exploit the Film or the Episodes in
        the
        Territory in the ordinary course of its business. 

       

      6.5 Arrangement
        and Advisory Fee.
        With
        respect to the loan transaction herein contemplated, no Person is entitled
        to
        any brokerage fee or other finder’s fee or commission and Borrowers agree to
        indemnify and hold Lender harmless against any and all such claims.
        Notwithstanding the foregoing, Borrowers shall pay a Five Percent fee in
        the
        amount of Three Hundred Thousand Dollars ($300,000.00) and, in the event
        that
        Lender makes the Additional P&A Commitment, an additional fee of One Hundred
        Twenty-Five Thousand Dollars ($125,000), each payable jointly to Richard
        Kiratsoulis, a.k.a. Crown Financial Management, and Peter Lopez, Esq. (the
        “Arrangement
        and Advisory Fee”)
        upon
        receipt of the respective Loans made under this Agreement.

       

      6.6 Compliance.
        Borrowers will comply with all laws, rules and regulations relating to, and
        shall pay, or cause to be paid, prior to delinquency, as applicable, all
        license
        fees, registration fees, taxes, guild or union pension, health and welfare
        payments, required guild or union residual, supplemental market, reuse and
        other
        required payments and assessments, and all other charges including, without
        limitation, non-governmental levies or assessments, which may be levied upon
        or
        assessed against, or which may become Liens on, the ownership, operation,
        possession, maintenance, exploitation, exhibition or use of the Collateral,
        or
        which create or may create a Lien upon the Collateral, or any part thereof.
        

       

      
        
           

        

        
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      6.7 Filings.
        Borrowers will execute at Lender’s request such financing statements,
        continuation statements, copyright assignments and other documents as Lender
        may
        deem necessary or appropriate in order to perfect or preserve Lender’s first
        priority security interest and Lien in the Collateral, and will deliver copies
        of such financing statements, continuation statements, copyright assignments
        and
        other documents to Lender. Borrowers hereby authorize Lender to file financing
        statements and amendments thereto and copyright assignments relative to all
        or
        any part of the Collateral where necessary or desirable in Lender’s judgment to
        perfect or to continue the Lien and first priority security interest granted
        herein without the signature of Borrowers where permitted by law, and agree
        to
        do such further acts and things and to execute and deliver to Lender such
        additional conveyances, assignments, agreements and instruments as Lender
        may
        require or deem advisable to carry into effect the purposes of this Agreement
        or
        to better assure and confirm unto Lender its rights, powers and remedies
        hereunder. 

       

      6.8 Inspection
        of Collateral.
        Borrowers will at all times keep accurate books and records with respect
        to the
        Collateral which are as complete and comprehensive as those customarily
        maintained by others engaged in the production of first-class theatrical
        motion
        pictures, and agrees to make available to Lender or its representatives on
        Lender’s reasonable request all books, records, contracts, production notes and
        other information and data of every kind relating to the Film, the Episodes,
        the
        Collateral and the production, distribution or exploitation thereof, and
        Lender
        shall have the right to examine such books, records, contracts and other
        information and to make abstracts therefrom or copies thereof. Borrowers
        further
        agree that Lender shall have access, at all reasonable times and upon notice,
        to
        any and all of Borrowers’ computer hardware or software, whether maintained by
        Borrowers or by third parties on behalf of Borrowers which pertains to, or
        reflects, such records. At such time or times as Lender may reasonably request,
        Borrowers will, at their cost and expense, prepare a list or lists in such
        form
        as shall be reasonably satisfactory to Lender, certified by a duly authorized
        officer of each Borrower, describing in such detail as Lender shall reasonably
        require, the Collateral, and specifying the location of such Collateral and
        Borrowers’ records pertaining thereto and permit Lender upon reasonable notice
        to inspect such Collateral or any part thereof at such place as the Collateral
        may be held or located or at such other reasonable place.

       

      6.9 No
        Conflict.
        The
        execution, delivery and performance of this Agreement and the other Loan
        Documents to which Borrowers are parties, the Existing Distribution Agreements,
        and the Additional Distribution Agreements will not result in a breach of
        or
        constitute a default under any agreement, indenture, loan, credit agreement,
        lease, undertaking or other instrument to which Borrowers are parties or
        by
        which it or any of its properties may be bound or affected, and such execution,
        delivery and performance will not result in or require the creation or
        imposition of (or the obligation to create or impose) any Lien of any nature
        upon or with respect to the Collateral or other property of Borrowers except
        for
        the Permitted Encumbrances. 

       

      6.10 Related
        Agreements.
        Borrowers have obtained and have delivered or will deliver to Lender by the
        Closing Date copies of true and complete fully executed copies of the Existing
        Distribution Agreements (and the Notices of Irrevocable Authority and Directors
        to pay relating thereto), the P&A Subordination Agreement, the Escrow
        Agreement - Collection Account, the Escrow Agreement - Disbursement Account,
        the
        Power of Sale, and the Chain-of-Title Documents. Each such document is a
        valid,
        binding and subsisting agreement. Each such document has been executed by
        all
        parties thereto and is in full force and effect. Borrowers will notify Lender
        of
        each proposed modification to the Existing Distribution Agreements and the
        Additional Distribution Agreements but only with respect to modifications
        which
        materially affect Lender’s rights hereunder or under any of the other Loan
        Documents). 

       

      
        
           

        

        
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      6.11 Claims.
        There
        is no pending or threatened action, suit or proceeding at law or in equity
        or by
        or before any governmental instrumentality or other agency or any investigation
        of the affairs of either Borrowers (or any Affiliate thereof) or any of either
        Borrower’s TV shareholders, directors, officers, properties or rights which, if
        adversely determined, would adversely affect (a) the ability of either Borrower
        to perform its obligations concerning the production and exploitation of
        the
        Film as contemplated hereby (including, but not limited to, the ability of
        either Borrower to perform its obligations under the Existing Distribution
        Agreements or the Additional Distribution Agreements or to conduct its business
        substantially as being conducted on the date hereof), (b) the financial
        condition of either Borrower, (c) the Liens granted to Lender hereunder and
        under any of the other Loan Documents, or (d) the Collateral; and Borrowers
        are
        not in default with respect to any judgment, writ, injunction, decree, rule
        or
        regulation of any court or governmental instrumentality or other agency which
        might impair the rights of Borrowers to carry on Borrowers’ business
        substantially as now being conducted or which might adversely affect the
        financial condition of Borrowers.

       

      6.12 Disclosure.
        None of
        the statements, representations or warranties made by Borrowers in this
        Agreement or any of the other Loan Documents to which either Borrower is
        a
        party, as of the respective dates of such statements, representations and
        warranties, contains any untrue statement of a material fact or omits any
        material fact necessary to make the statements made not misleading.

       

      6.13 Margin
        Stock.
        

       

      6.13.1 Borrowers
        are not engaged in the business of extending credit for the purpose of
        purchasing or carrying margin stock (within the meaning of Regulation U of
        the
        Board of Governors of the Federal Reserve System of the United States), and
        no
        part of the proceeds of any Loan will be used to purchase or carry any margin
        stock or to extend credit to others for the purpose of purchasing or carrying
        any margin stock.

       

      6.13.2 None
        of
        the proceeds from the Loans have been or will be used, directly or indirectly,
        for the purpose of purchasing or carrying any Margin Stock, for the purpose
        of
        reducing or retiring any indebtedness which was originally incurred to purchase
        or carry any Margin Stock or for any other purpose which might cause any
        of the
        Loans to be considered a “purpose credit” within the meaning of Regulation T, U
        or X of the Federal Reserve Board. 

       

      6.14 Breach
        of Related Agreements.
        Neither
        Borrower is in default under the Existing Distribution Agreements, the
        Additional Distribution Agreements, the Chain-of-Title Documents, or any
        other
        Loan Document to which Borrowers is a party. 

       

      
        
           

        

        
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      6.15 Rights
        in the Film, the Episodes and Collateral.
        Borrowers own all rights in the Film, the Episodes and the Collateral necessary
        to enable Borrowers to fully perform all of their Obligations, under this
        Agreement and the other Loan Documents to which a Borrower is a party. Borrowers
        and HDEM have acquired, now own and will own during production of the Film
        and
        the Episodes and continuing through satisfaction of all Obligations, all
        right,
        title and interest, including copyrights in and to the Film and the Episodes
        including all right, title and interest necessary to make, distribute, exhibit
        and otherwise exploit the Film and the Episodes worldwide, including, without
        limitation, all necessary rights in the literary, musical or other property
        or
        ideas used therein and the right to exhibit the Film and the Episodes in
        theatres, on television, by means of videocassettes and videodiscs and in
        each
        other media or manner contemplated by the Existing Distribution Agreements
        and
        any Additional Distribution Agreements, including, without limitation, all
        rights granted pursuant to the Existing Distribution Agreements (and to be
        granted pursuant to the Additional Distribution Agreements), subject to the
        Chain-of-Title Documents, payment of necessary performing rights fees in
        respect
        of the music in the Film and the Episodes and such rights as are granted
        pursuant to the Existing Distribution Agreements and any Additional Distribution
        Agreements. To the best of Borrowers’ knowledge, any and all material or matter
        used in or in connection with the Film and the Episodes, including dialogue,
        characters, titles, episodes and events, shall be original with or owned
        by or
        licensed to a Borrower, or in the public domain, and shall not infringe any
        copyrights, statutory or common law, and shall not constitute a libel, slander
        or invasion of privacy of any party, or otherwise infringe on or violate
        the
        rights of any other party whomsoever. 

       

      6.16 Insurance.
        ONWK
        has obtained and, no later than when due, has paid or will pay the premiums
        for,
        and shall hereafter maintain in force, such insurance coverage relating to
        the
        Film as is required by Section 7.14
        hereof. 

       

      6.17 Additional
        Distribution Agreement Acceptance Process.
        GNXE
        shall use its best efforts, consistent with industry practice, to enter into
        Additional Distribution Agreements with respect to all customary media and
        ancillary rights in the Territory. Until the Obligations have been satisfied,
        Borrowers shall only enter into Additional Distribution Agreements which
        meet
        all of the requirements for an Additional Distribution Agreement. 

       

      
        
           

        

        
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      6.18 Additional
        Representations.
        (i) The
        Film is, or when delivered will be, completely finished, fully edited and
        titled
        and fully synchronized with language, dialogue, sound and music, recorded
        with
        sound equipment pursuant to valid licenses, and in all respects ready and
        of a
        first-class technical quality adequate for general release in all respective
        media in the Territory, (ii) Borrowers are, or will be the owners of, all
        rights, licenses and privileges to the Film and the Episodes and Borrowers
        are,
        or will be the owner of, all distribution rights and other exploitation rights
        in the Film and the Episodes in the Territory, (iii) as between Borrowers
        and
        Lender, all of the following have been fully paid or discharged, or will
        be
        fully paid or discharged by Borrowers: (a) all costs of producing and completing
        the Film for delivery, all claims and rights with respect to the use,
        distribution, synchronization, performance (other than sums payable to music
        performing rights societies, such as ASCAP and BMI, on account of the public
        performance of the Film), exhibition and exploitation of the Film, and any
        music
        or other element contained therein throughout the Territory, and (b) all
        such
        costs of producing and completing the Episodes, (iv) there are not, and will
        not
        be, outstanding at any time during the Term any Liens granted to, or contracts,
        licenses, arrangements or agreements with any Person, or any obligation (past,
        present or future), or any breaches of any contract, license, arrangement
        or
        agreement, which in any way will interfere with, impair, abrogate, or adversely
        affect Lender, and that (except to the extent hereinafter expressly provided,
        there are and will not be payments of any of any kind required to be made
        by
        Lender, in respect, or as a result, of any use of the Film or Episodes, (v)
        neither the Film or the Episodes, nor any part thereof, nor any materials
        contained therein or synchronized therewith, nor the title thereof, violates
        or
        will violate, or infringes or will infringe, any trademark, trade name,
        contract, license, arrangement, agreement, copyright (whether common law
        or
        statutory), patent, literary, artistic, dramatic, personal, private, civil,
        property or privacy right or “moral rights of authors” or any other right of (or
        slander or libel) any Person, (vi) Borrowers have not sold, assigned,
        transferred, encumbered or conveyed, and will not sell, assign, transfer
        or
        convey, to any party any right, title or interest in or to the Film or the
        Episodes inconsistent with the rights of Lender granted hereunder,
        (vii) Borrowers own and control, or will own and control, without any
        limitations or restrictions whatsoever, all motion picture, performance and
        other servicing rights of Borrowers in or to the Film and the Episodes and
        all
        the soundtracks thereof, and have obtained (or will obtain prior to delivery
        of
        each) all necessary licenses required for the production, synchronization,
        exhibition, performance, distribution, marketing and exploitation of the
        Film
        and the Episodes (including the music contained therein, subject only to
        the
        payment of such performing rights fees, if any, customarily payable by
        exhibitors to such performing rights society having jurisdiction) throughout
        the
        Territory and during the Term for all purposes licensed under any Distribution
        Agreement and by every means, method and device now or hereafter known or
        required for full, complete and unlimited exercise and enjoyment by the
        Distributors of the rights granted; the performing rights to all musical
        compositions contained in the Film and the Episodes are controlled by the
        American Society of Composers, Authors and Publishers (ASCAP), Broadcast
        Music,
        Inc. (BMI) or their affiliates, or in the public domain, or controlled by
        Borrowers, (viii) there will be no restrictions which would or could
        prevent the Distributors from distributing the Film or Episodes (other than
        customary name and likeness restrictions or approval rights for actors and
        director of which the Distributors shall have been notified as of the Delivery
        Date), and there are not and will not be any payments (out of any part of
        any
        revenues from the distribution or exploitation of the Film or Episodes or
        otherwise) which must be made to any actors, musicians, directors, writers
        or
        other persons who participated in the Film for any right to exhibit the Film
        or
        the Episodes or as compensation in connection with such exhibition or for
        any
        other use of the Film or Episodes or any of the rights granted under the
        Distribution Agreements, any such payments (including, without limitation,
        any
        participations in gross receipts or net profits) being solely the responsibility
        of Borrowers, (ix) the copyrights in the Film, and the Episodes and the
        literary, dramatic and musical material upon which they are based or which
        is
        contained in the Film and the Episodes will be valid and subsisting during
        the
        Term throughout the Territory, and the Film and the Episodes are not in the
        public domain anywhere in the Territory, and (x) Borrowers have provided
        in
        writing all material information in connection with the Film and the Episodes
        to
        Lender all of which is accurate and true. 

       

      6.19 Additional
        Distribution Agreement Terms and Conditions.
        

       

      (a) In
        connection with any and all Additional Distribution Agreements entered into
        by
        Borrowers after the date hereof, Borrowers shall deliver to Lender, a fully
        executed Notice of Irrevocable Authority and Direction to Pay. 

       

      
        
           

        

        
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      (b) No
        Additional Distribution Agreement will be entered into with an Affiliate
        of
        either Borrower, without the prior written consent of Lender.

       

      SECTION
        7. BORROWERS’
        AFFIRMATIVE COVENANTS

       

      Each
        Borrower covenants and agrees that, until payment and Borrowers’ performance in
        full of the Obligations hereunder and under the other Loan Documents to which
        either Borrower is a party, Borrowers shall:

       

      7.1 Legal
        Rights and Facilities.
        Maintain and preserve each Borrower’s legal existence and all rights,
        privileges, franchises and other authority adequate for the conduct of each
        Borrower’s business; maintain the Collateral in good order and repair; conduct
        its business in an orderly manner without interruption; and refrain from
        any
        material change in the nature of its business.

       

      7.2 Use
        of
        Loan Proceeds.
        Use the
        proceeds of the Loans made hereunder only for the purposes of paying those
        items
        of cost and expense included in the Approved Budget for the Film as each
        such
        expenditure is approved by two P&A Designees, or such other costs as are
        approved in writing by two P&A Designees or as the Lender and Borrowers may
        agree in writing.

       

      7.3 First
        Priority Security Interest.
        Maintain the security interests created pursuant to this Agreement and the
        other
        Loan Documents with respect to the Collateral at all times in place and
        perfected with first priority in favor of Lender. Borrowers shall not directly
        or indirectly create, incur or suffer to exist, and shall promptly discharge
        or
        cause to be discharged, any other Lien on or with respect to the Collateral
        other than the Permitted Encumbrances.

       

      7.4 Related
        Agreements.
        Perform
        and observe, and cause each Borrower’s employees to perform and observe, all
        agreements, covenants, representations and warranties of Borrowers under
        the
        Existing Distribution Agreements, the Additional Distribution Agreements,
        the
        Notices of Irrevocable Authority and Direction to Pay, the P&A Subordination
        Agreement, the Collection Account Agreement, and any other Loan Document
        to
        which a Borrower is a party. 

       

      7.5 Expenses
        and Fees.
        Pay to
        Lender, whether or not the Loans contemplated by this Agreement shall be
        consummated, all actual reasonable out-of-pocket costs and expenses, including
        the reasonable outside attorneys’ fees of Katten Muchin Rosenman LLP incurred by
        Lender in connection with this Agreement, the other Loan Documents and the
        Film,
        including, without limitation, all reasonable costs and expenses incurred
        in
        connection with the negotiation, preparation, execution, delivery, filing,
        recording and administration of this Agreement, the other Loan Documents
        and the
        other agreements and documents referred to herein and therein and in connection
        with the enforcement of the rights of Lender hereunder or thereunder, in
        connection with the making of the Loans or in connection with the realization
        upon any Collateral. Such costs and expenses (including, without limitation,
        court costs and outside attorneys’ fees and disbursements), shall be secured
        hereunder, provided that any attorneys’ fees and disbursements, court costs and
        out-of-pocket expenses incurred by Lender in connection with this Agreement,
        the
        other Loan Documents or the Film shall be payable by Borrower to Lender
        immediately upon demand by Lender.

       

      
        
           

        

        
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      7.6 Taxes
        and Other Liabilities.
        Pay and
        discharge, before the same become delinquent and before penalties accrue
        thereon, all taxes, assessments and governmental charges upon or against
        it or
        upon its income or profits or upon any of its properties, and all its other
        liabilities at any time existing, except to the extent and so long
        as:

       

      (i) the
        same
        are being contested in good faith and by appropriate proceedings in such
        manner
        as not to cause any materially adverse effect upon its financial condition
        or
        the loss of any right of redemption from any sale thereunder; and 

       

      (ii) it
        shall
        have set aside on its books reserves adequate with respect thereto; and further
        to pay all governmental charges or taxes (except income, franchise or other
        similar taxes on Lender) at any time payable or ruled to be payable in respect
        of the existence, execution or delivery of this Agreement or any other Loan
        Document by reason of any existing or hereafter enacted federal or state
        statute.

       

      7.7 Records
        and Reports.
        Permit
        representatives of Lender to have access to and to examine its Physical
        Properties, books and records during business hours and with reasonable notice
        to such Borrower; and furnish to Lender, at Borrowers’ expense, such other
        information relating to the affairs of Borrowers as Lender reasonably may
        request from time to time. Without limiting the generality of the foregoing,
        Borrowers shall, at any time when any Obligation remains unpaid or not performed
        hereunder, supply Lender promptly with, or cause Lender to be promptly supplied
        with monthly sales reports, setting forth the status of all presales entered
        into with respect to the Film.

       

      7.8 Notice
        of Certain Events.
        Promptly notify Lender in writing of the occurrence of any of the following:
        (a)
        any Event of Default hereunder or of any event which would be an Event of
        Default hereunder but for the giving of notice, the lapse of time, or both;
        (b)
        any default under any other agreement to which a Borrower is a party or by
        which
        a Borrower or any of its respective properties may be bound; or (c) the
        commencement of all actions, suits or proceedings which assert claims of
        infringement in respect of the Film or which are in an aggregate amount of
        greater than Fifty Thousand Dollars ($50,000.00) against either Borrower
        or with
        respect to its properties before or by any court, governmental department,
        commission, board, arbitrator, bureau, agency or instrumentality, domestic
        or
        foreign.

       

      7.9 Approvals.
        Obtain,
        from time to time, all approvals, permits and consents necessary to allow
        Borrowers to remit payments to Lender in Dollars from any and all appropriate
        governmental authorities having jurisdiction thereof.

       

      7.10 Accounting
        Methods and Financial Records.
        Maintain a system of accounting as customarily applied in the motion picture
        industry in Los Angeles, California to the production of first-class theatrical
        motion pictures and keep adequate records and books of account in which complete
        entries in accordance with such accounting principles will be made.

       

      
        
           

        

        
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      7.11 Compliance.
        Comply
        with all laws, rules and regulations relating to, and pay, or cause to be
        paid,
        prior to delinquency all license fees, registration fees, taxes, guild or
        union
        pension, health and welfare payments, supplemental market, reuse and other
        required payments and assessments, and all other charges, including without
        limitation non-governmental levies or assessments, which may be levied upon
        or
        assessed against, or which may become Liens on, the ownership, operation,
        possession, maintenance, exploitation, exhibition or use of, the Collateral,
        or
        which create or may create a lien upon the Collateral, or any part thereof.
        Borrowers shall pay, or cause to be paid, prior to delinquency all material
        required guild or union residual payments, if any, arising prior to Delivery
        and
        Borrowers shall cause Distributors to pay prior to delinquency all material
        required guild or union residual payments arising after Delivery. 

       

      7.12 Informational
        Covenants.
        Furnish
        or cause to be furnished to Lender such information relating to the distribution
        and exploitation of the Film in the Territory as Lender may reasonably request
        from Borrowers from time to time. 

       

      7.13 Indemnification.
        At all
        times defend and indemnify and hold Lender (which for the purposes of this
        paragraph shall include Lender’s, owners, members, shareholders, officers,
        directors, employees, consultants, brokers, representatives and agents),
        and
        their successors and assigns free and harmless from and against any and all
        liabilities, claims, demands, causes of action, losses, damages, settlements,
        judgments or recoveries resulting from any breach of any of the warranties,
        representations, agreements or covenants made by Borrowers herein or by reason
        of the occurrence of an Event of Default, and from any suit or proceeding
        of any
        kind or nature whatsoever against Lender arising from or connected with the
        transactions contemplated by this Agreement, any other Loan Document or any
        of
        the documents, instruments or agreements to be executed pursuant hereto or
        any
        of the rights and properties assigned to Lender hereunder, including reasonable
        outside attorneys’ fees and costs and expenses incurred by Lender, all of which
        shall be charged to and paid by Borrowers and shall be secured by the Collateral
        hereunder; provided, however, that Borrowers shall have no obligation under
        this
        Section 7.13 with respect to any such event resulting from an indemnified
        party’s gross negligence or willful misconduct. Lender shall consult with
        Borrowers with respect to the selection of attorneys to prosecute any such
        litigation and with respect to any settlement thereof, but Lender’s decision in
        such regard shall be final. 

       

      7.14 Insurance.

       

      7.14.1 “Producer’s
        Package” Coverage.
        Borrowers shall at their own cost and expense obtain and keep in full force
        and
        effect in amount, kind and form reasonably satisfactory to Lender and with
        insurers approved by Lender, the following types of insurance providing such
        coverage as is customarily provided by such types of insurance: Cast Insurance
        in an amount equal to at least the P&A Commitment covering the director, the
        producer and the principal cast members, among others; Negative Insurance
        in an
        amount equal to the amount of the Budget and projected interest hereunder;
        Faulty Stock, Camera and Processing Insurance; Props, Sets and Wardrobe
        Insurance; Miscellaneous Equipment Insurance; Property Damage Liability
        Insurance; Worker’s Compensation Insurance and any insurance coverage required
        by applicable collective bargaining agreements, and any Essential Element
        endorsements required by Lender.

       

      
        
           

        

        
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      7.14.2 Errors
        and Omissions Insurance.
        Borrowers shall at their own cost and expense obtain and keep in full force
        and
        effect in amount, kind and form reasonably satisfactory to Lender, and with
        insurers approved by Lender, Errors and Omissions Insurance covering, among
        other things, the legal liability and defense of the producer of the Film
        against lawsuits alleging the unauthorized use of title, format, ideas,
        characters, plots, plagiarism, copyright infringement and unfair competition.
        Such insurance shall also protect against alleged libel, slander, defamation
        of
        character and invasion of privacy. The Errors and Omissions Insurance shall
        be
        in the minimum amount of Five Million Dollars ($5,000,000.00) per occurrence
        and
        Five Million Dollars ($5,000,000.00) in the aggregate and a period of coverage
        of not less than three (3) years from the date of the first Loan.

       

      7.14.3 Naming
        Lender as “Additional Insured”.
        The
        insurance enumerated in subsection 7.14.2 shall name Lender (including Lender’s
        members, agents, officers, directors and employees) as an additional insured
        thereunder with a maximum deductible of Fifty Thousand Dollars ($50,000)
        and
        Lender shall be a first priority beneficiary.

       

      7.14.4 Payment
        of Premiums.
        The
        policies of insurance (or the Certificates of Insurance reflecting that such
        coverage is in effect) referred to in this Section 7.14 shall (a) contain
        an endorsement which negates the “other insurance” clause in said policies and a
        statement that the insurance being provided is primary and any insurance
        carried
        by Lender is neither primary nor contributory and (b) be delivered to Lender.
        Lender shall not have any liability to pay for any premiums or calls with
        respect to any of the insurance policies referred to in this Section
        7.14.

       

      7.15 Name
        and Location Changes.
        If (a)
        the title or titles of the Film or the name or any trade name of either Borrower
        is to be changed or modified in any manner, (b) either Borrower proposes
        to
        acquire or use a new trade name, (c) the chief executive office of either
        Borrower is to be relocated to a place other than its present address as
        stated
        in Section 11.5 hereof, or (d) there is proposed to be a change in location
        or
        name of any laboratory, special effects studio, sound studio, other processing
        or storage entity or any sound studio, other processing or storage entity
        or any
        bailee which holds, or which is expected to process, any original negative,
        sound, optical or other special effects material including, without limitation,
        the final, complete composite master negative of the Film, then Borrowers
        shall
        promptly so notify Lender in writing and, prior to taking any such action,
        shall
        execute and deliver to Lender such further documents and do such other acts
        and
        things as Lender may reasonably request in order to carry out the purposes
        of
        this Agreement including, without limitation, the execution and delivery
        of
        financing statements, amendments and copyright assignments and mortgages
        necessary or desirable to continue and/or perfect Lender’s first priority
        security interest in the Collateral. 

       

      7.16 Copyrights.
        If, at
        the time, there are any Obligations outstanding and unpaid, as soon as the
        copyright in the Film can be registered with the United States Copyright
        Office,
        Borrowers shall take any and all actions necessary to register such copyright
        in
        the Film in the name of Borrowers for the United States territory in conformity
        with the laws of the United States, and contemporaneously therewith to execute
        and record a copyright mortgage and assignment and power of attorney in favor
        of
        Lender for security with respect to the Collateral and Lender’s Lien thereon and
        Borrowers immediately shall in form and substance satisfactory to Lender
        deliver
        to Lender written evidence of any and all such copyright registrations and
        recording of said mortgages and assignments.

       

      
        
           

        

        
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      7.17 Physical
        Properties and the Laboratory.
        All
        Physical Properties relating to the Film shall be deposited with a Laboratory.
        Prior to such deposit(s), Laboratory Access Letters shall be executed by
        each
        Laboratory and Borrowers and delivered to Lender promptly upon execution
        thereof. No print, preprint, sound or other Physical Properties of the Film
        shall be deposited at any laboratory or maintained at any place other than
        a
        Laboratory without the prior written consent of Lender (which consent shall
        not
        be unreasonably withheld) and compliance with the requirements of this Section
        7.17.

       

      SECTION
        8. BORROWERS’
        NEGATIVE COVENANTS

       

      Each
        Borrower covenants and agrees that, until all Obligations of Borrowers have
        been
        paid or performed hereunder and under the other Loan Documents to which a
        Borrower is a party, Borrowers shall not, without first having obtained the
        written consent of Lender:

       

      8.1 Indebtedness,
        Liens.
        Make
        any borrowing or incur any Indebtedness of any nature whatsoever for any
        purpose
        related to the Collateral, other than pursuant to this Agreement or create,
        assume or suffer to exist any security interest, mortgage, pledge, encumbrance,
        assignment, lien or charge of any kind upon the Collateral other than (i)
        the
        Permitted Encumbrances, (ii) indebtedness incurred in the ordinary course
        of
        business up to $50,000, and (iii) agreements by Borrowers on terms reasonably
        satisfactory to Lender, to pay any residuals, profit participations or other
        deferred compensation to any Person rendering services in connection with
        the
        production of the Film which arise in the ordinary course of production of
        the
        Film. There shall be no additional or secondary financing permitted with
        respect
        to the Collateral without Lender’s prior written approval which in any manner
        could result in any other Person having a right to receive any monies from
        the
        exploitation of the Film in the Territory in advance of Lender’s right to recoup
        in the first-priority position ahead of all other financiers of the Film,
        and
        Borrowers and Distributors shall not permit any Lien upon the Collateral,
        except
        liens which are subordinate in all respects to the Lien of Lender and as
        to
        which the holder of such Lien has entered into an intercreditor agreement
        with
        Lender on terms satisfactory to the Lender in its sole discretion. 

       

      8.2 Amendments.
        Amend,
        alter, supplement, renew, replace, terminate or modify (or consent to such
        amendment, alteration, supplementation, renewal, replacement, termination
        or
        modification of) the Existing Distribution Agreements or any future Distribution
        Agreements or enter into or do any of the foregoing with respect to any other
        agreement, that would adversely affect or lessen any of the rights granted
        to
        Lender under this Agreement, any other Loan Document or any instrument, document
        or agreement executed by Borrowers in connection therewith.

       

      8.3 Dissolution
        or Sale of Assets.
        Wind
        up, liquidate or dissolve its affairs, or sell, transfer, or otherwise dispose
        of or grant an interest in the Collateral or, without ten (10) business days’
prior written notice to Lender, change its corporate or trade name.

       

      8.4 Use
        of
        Proceeds.
        Use any
        Loans made by Lender hereunder for any purpose or thing other than the items
        set
        forth in Section 7.2 hereof.

       

      
        
           

        

        
          34

          
            

          

        

        
           

        

      

      

       

      8.5 Transactions
        With Affiliates.
        Effect
        any transaction with any Affiliate on a basis less favorable to Borrowers
        than
        would be the case if such transaction had been effected with a
        non-Affiliate.

       

      8.6 Consolidation
        or Merger.
        Consolidate with or merge into any other Person or entity.

       

      SECTION
        9. EVENTS
        OF
        DEFAULT

       

      Until
        all
        of the Obligations have been paid in full, the
        occurrence of any of the following events (each an “Event
        of Default”)
        shall,
        subject to Borrowers’ right to cure any such event within the applicable period,
        if any, following written notice thereof at the option of Lender,
        (i) terminate all obligations of the Lender in respect of the P&A
        Commitment and/or to make any Loan hereunder; and (ii) make all sums of
        principal and interest then remaining unpaid and all other amounts payable
        hereunder or under any of the Loan Documents, immediately due and payable,
        all
        without demand, presentment or notice, all of which hereby are expressly
        waived.
        For the avoidance of doubt, an Event of Default shall not be deemed to have
        occurred until the cure period set forth in the applicable paragraph below,
        if
        any, shall have expired.

       

      9.1 Failure
        to Pay.
        Failure
        to pay the principal of or the interest on any Loan or any fee or expense
        to
        Lender on the Maturity Date.

       

      9.2 Breach
        of this Agreement and/or Related Agreements.
        Any
        material failure by a Borrower to perform any agreement, covenant,
        representation or warranty under this Agreement, or any other Loan Document,
        which failure is not cured within thirty (30) days after notice thereof by
        Lender to Borrowers or such other party (with a copy to Borrowers), as
        applicable.

       

      9.3 Breach
        of Representation.
        Any of
        Borrowers’ representations in this Agreement, in any other Loan Document, or any
        statement, agreement or certificate at any time given in writing pursuant
        thereto or in connection therewith shall be false or misleading in any material
        respect when made.

       

      9.4 Insolvency,
        Receiver or Trustee.
        Either
        Borrower shall become insolvent; or shall be unable to or admit in writing
        its
        or their inability to pay its or their debts as they mature; or make an
        assignment for the benefit of creditors or to an agent authorized to liquidate
        any substantial amount of its or their properties or assets; or apply for
        or
        consent to the appointment of a receiver or trustee for it or them or for
        a
        substantial part of its or their property or business, or if such a receiver
        or
        trustee otherwise shall be appointed and shall not be discharged within sixty
        (60) days after such appointment.

       

      9.5 Judgments;
        Attachments.
        Any
        judgment, writ or warrant of attachment, reference proceeding award, or similar
        process shall be entered or filed against a Borrower or any material portion
        of
        a Borrower’s assets, or a Borrower enters into any settlement agreements with
        respect to any litigation or reference proceeding, in each of the foregoing
        events in an aggregate amount of greater than Two Hundred Fifty Thousand
        Dollars
        ($250,000.00) which shall remain unvacated, unbonded or unstayed for a period
        of
        thirty (30) days or in any event later than five (5) days prior to the date
        of
        any proposed sale thereunder.

       

      
        
           

        

        
          35

          
            

          

        

        
           

        

      

      

       

      9.6 Bankruptcy
        or Dissolution.
        Bankruptcy, insolvency, reorganization or liquidation proceedings or other
        proceedings for relief under any bankruptcy law or any law for the relief
        of
        debtors shall be instituted by or against a Borrower or any order, judgment
        or
        decree decreeing a party’s dissolution or division, which is not discharged
        within thirty (30) days thereafter (provided that Lender shall not be obligated
        to extend any Loans to such Borrower during such period) shall be entered
        against a Borrower. 

       

      9.7 Related
        Agreements.
        Any of
        the following events shall occur: this Agreement, any Existing Distribution
        Agreement or any other Loan Document, shall at any time after its execution
        and
        delivery and for any reason cease to be in full force and effect, or shall
        be
        declared to be null and void; or the validity or enforceability thereof shall
        be
        contested by any party thereto other than Lender, or any party other than
        Lender
        shall deny that it has any further obligation hereunder or thereunder or
        under
        any other instrument delivered hereunder or thereunder and such event is
        not
        cured within ten (10) Business Days after Borrowers have knowledge of such
        event.

       

      9.8 Cross-Default.
        Any
        material default occurs under any agreement in respect of Indebtedness of
        greater than Two Hundred Fifty Thousand Dollars ($250,000.00) of a Borrower
        or
        which a Borrower has guaranteed. 

       

      9.9 Lien
        Priority.
        Lender
        fails to have an enforceable first lien (except for Permitted Encumbrances)
        on
        the Collateral.

       

      9.10 Failure
        to Effect Delivery.
        Borrowers and HDEM shall have failed to notify, within five (5) business
        days
        following the date of the making of the initial Loan hereunder, all of the
        Existing Distributors to pay all amounts otherwise payable to Borrowers and
        HDEM
        pursuant to the Existing Distribution Agreements to the P&A Collection
        Account. 

       

      9.11 Abandonment
        of Production; Termination of Existing Distribution Agreements.
        The
        abandonment of the production of the Film or the termination of any Existing
        Distribution Agreement.

       

      9.12 Failure
        to Effect Delivery.
        The
        failure of Borrowers to effect Delivery of the Film and the required materials
        to the Distributors in accordance with the Distribution Agreements.

       

      SECTION
        10. REMEDIES
        ON DEFAULT

       

      10.1 Remedies.
        If any
        Event of Default shall occur and be continuing, then, and in every such event
        and at any time thereafter during the continuance of such Event of Default,
        Lender may by notice to the Borrowers, take either or both of the following
        actions, at the same or different times: (i) terminate the P&A Commitment
        and the Additional P&A Commitment, and (ii) declare the Loans then
        outstanding to be due and payable, and, thereupon, the Obligations shall
        become
        due and payable immediately, without presentment, demand, protest or other
        notice of any kind, all of which are hereby waived by Borrowers; and the
        principal of the Loans then outstanding, together with accrued interest thereon
        and all fees and other obligations of Borrowers accrued under this Agreement,
        shall automatically become due and payable, without presentment, demand,
        protest
        or other notice of any kind, all of which are hereby waived by Borrowers;
        and
        Lender shall be entitled to exercise, in respect of the Collateral, all of
        the
        rights and remedies available to a secured party upon default under the Delaware
        Uniform Commercial Code (or applicable Uniform Commercial Code) at the time
        which shall be applicable for the purpose of establishing the relative rights
        of
        Lender and of Borrowers, and under procedures to be followed in the event
        this
        Section shall become operative including, without limitation, the right to
        sell
        the Collateral or any portion thereof and, in addition thereto, the rights
        and
        remedies provided for herein and such other rights and remedies as may be
        provided by law or in equity. Lender shall in addition have the following
        rights
        and remedies which may, in Lender’s discretion, be exercised either cumulatively
        or in the alternative:

       

      
        
           

        

        
          36

          
            

          

        

        
           

        

      

      

       

      (i) Lender
        may require Borrowers to assemble the Collateral and make it available to
        Lender
        at a place or places to be designated by Lender and with respect to any
        Collateral consisting of intellectual property, on demand, Lender may cause
        the
        security interest therein to become an assignment, transfer and conveyance
        of
        any of or all such Collateral by Borrowers, or license or sublicense, whether
        general, special or otherwise, and whether on an exclusive or non-exclusive
        basis, any such Collateral throughout the Territory on such terms and conditions
        and in such manner as Lender shall determine (other than in violation of
        any
        then existing licensing arrangements to the extent that waivers cannot be
        obtained); 

       

      (ii) Lender
        may, in its sole discretion, in its name or in the name of Borrowers, or
        otherwise, demand, sue for, collect or receive any money or property at any
        time
        payable or receivable on account of or in exchange for, or make any compromise
        or settlement reasonably deemed desirable with respect to any of the Collateral,
        but shall be under no obligation so to do. Lender shall consult with Borrowers
        with regard to such matters, provided that in all cases Lender’s decision shall
        be final. Lender may extend the time of payment, arrange for payment in
        installments, or otherwise modify the term of, or release, any of the
        Collateral, without thereby incurring responsibility to, or discharging or
        otherwise affecting the liability of Borrowers, Lender shall not be required
        to
        take any steps to preserve any rights of or against any party which in any
        way
        relate to the Collateral. If Borrowers fails to make payment or take any
        action
        required under this Agreement, any other Loan Document, any Existing
        Distribution Agreement, or any Additional Distribution Agreement, and such
        failure results in the occurrence of an Event of Default, Lender may make
        such
        payments and take all such actions as Lender reasonably deems necessary to
        protect Lender’s security interests in the Collateral and/or the value thereof,
        and Lender is hereby authorized (without limiting the general nature of the
        authority hereinabove conferred) to pay, purchase, contest or compromise
        any
        Liens which in the good faith judgment of Lender appear to be equal to, prior
        to
        or superior to the security interests of Lender in the Collateral; 

       

      (iii) Lender
        may, without notice or demand or legal process, enter upon any premises,
        or
        wherever any portion of the Collateral may be, and take possession of the
        Collateral together with all additions and accessories thereto, demand and
        receive such possession from any person who has possession thereof, remove,
        keep
        and store the Collateral or any portion thereof, or put a custodian in charge
        thereof, and take such other measures as it reasonably may deem necessary
        or
        proper for the care or protection thereof; 

       

      
        
           

        

        
          37

          
            

          

        

        
           

        

      

      

       

      (iv) Lender
        may, with or without taking possession thereof, sell or cause to be sold,
        at
        such price or prices as Lender, in its sole and absolute discretion, shall
        determine, and for cash or on credit or for future delivery, without assumption
        of any credit risk, all or any portion of the Collateral, at any public or
        private sale for cash, upon credit or for future delivery, without demand
        of
        performance or notice of intention to sell or of time or place of sale;
        provided, however, that unless the Collateral in Lender’s possession is
        perishable or threatens to decline speedily in value or is of a type customarily
        sold on a recognized market, Lender shall give Borrowers reasonable notice
        of
        the time and place of any public sale thereof or of the time after which
        any
        private sale or other intended disposition thereof is to be made. The
        requirement of reasonable notice shall be met if notice of the sale or other
        intended disposition is delivered or mailed, by registered mail, postage
        prepaid, to Borrowers as set forth in this Agreement or such other address
        as
        Borrowers may by notice have furnished Lender in writing for such purpose,
        at
        least five (5) Business Days prior to the time of such sale or other intended
        disposition (which Borrowers agrees is reasonable notice within the meaning
        of
        Sections 9-610 and 9-611 of the Uniform Commercial Code as in effect in the
        State of Delaware or its equivalent in other jurisdictions). Such purchaser
        at
        any such sale (including, if applicable, Lender) shall hold the property
        sold
        absolutely free from any claim or right of whatever kind including any equity
        of
        redemption and Borrowers hereby waive (to the extent permitted by law) all
        rights of redemption, stay, valuation and/or appraisal which it now has or
        may
        have at any time in the future under any rule of law or statute now existing
        or
        hereafter enacted. Any public or private sale of the Collateral or any part
        thereof shall be held at such time or times within ordinary business hours
        and
        at such place or places as Lender may fix in the notice of such sale. At
        any
        such sale, the Collateral, or any portion thereof, to be sold may be sold
        in one
        lot as an entirety or in separate parcels, as Lender may (in its sole
        discretion) determine and, if permitted by law, Lender may bid (which bid
        may
        be, in whole or in part, in the form of cancellation of indebtedness) for
        and
        purchase the Collateral or any portion thereof for the account of Lender.
        Lender
        shall not be obligated to make any sale of the whole or any part of the
        Collateral if it shall determine not to do so, regardless of the fact that
        notice of sale of the Collateral may have been given. Lender may by announcement
        at the time and place fixed for sale, without prior notice or publication,
        adjourn any public or private sale of the Collateral or cause the same to
        be
        adjourned from time to time, and such sale may, without further notice, be
        made
        at the time and place to which the same was so adjourned. In case sale of
        all or
        any part of the Collateral is made on credit or for future delivery, the
        Collateral so sold may be retained by Lender until the sale price is paid
        by the
        purchaser or purchasers thereof, but Lender shall not incur any liability
        in
        case any such purchaser or purchasers shall fail to take up and pay for the
        Collateral so sold and, in case of any such failure, such Collateral may
        be sold
        again upon like notice. For purposes hereof, (i) a written agreement to
        purchase the Collateral or any portion thereof shall be treated as a sale
        thereof, (ii) Lender shall be free to carry out such sale pursuant to such
        agreement and (iii) Borrowers shall be entitled to the return of the
        Collateral or any portion thereof subject thereto, notwithstanding the fact
        that
        after Lender shall have entered into such an agreement all Events of Default
        shall have been remedied and the Obligations paid in full. Any sale pursuant
        to
        the provisions of this Section shall be deemed to conform to the commercially
        reasonable standards as provided in Sections 9-610 and 9-611 of the Uniform
        Commercial Code as in effect in the State of Delaware
        or its equivalent in other jurisdictions; 

       

      (v) Any
        laboratory which has possession of any of the Collateral is hereby constituted
        and appointed by Borrowers as pledgeholder for Lender and Lender may authorize
        each such pledgeholder to sell all or any portion of the Collateral upon
        the
        order and direction of Lender, and Borrowers hereby waive any and all claims
        for
        damages, or otherwise, for any action taken by such pledgeholder. Pursuant
        to
        this subsection, Lender, Borrowers and Laboratory shall enter into the
        Laboratory Access Letters; 

       

      
        
           

        

        
          38

          
            

          

        

        
           

        

      

      

       

      (vi) Lender
        shall be entitled to the appointment of a receiver to take possession of
        all or
        any portion of the Collateral and to exercise such powers as the court shall
        confer upon the receiver, and Borrowers, to the fullest extent permitted
        by law,
        hereby waive notice and the right to receive notice of any application by
        Lender
        for such appointment; provided, however, that Lender shall endeavor to send
        Borrowers a courtesy notice of such application although the failure to send
        such notice shall not affect Lender’s rights under this section or elsewhere
        hereunder and provided further that, notwithstanding any such application
        or
        appointment, Lender shall be entitled to apply, without notice to Borrowers,
        any
        cash or cash items constituting Collateral in the possession of Lender to
        payment of Borrowers’ Obligations; 

       

      (vii) Upon
        any
        sale of any item of Collateral by Lender hereunder (whether by virtue of
        the
        Power of Sale herein granted, pursuant to judicial process or otherwise),
        the
        receipt of Lender or the officer making the sale shall be a sufficient discharge
        to the purchaser or purchasers of such item or items of Collateral so sold
        and
        such purchaser or purchasers shall not be obligated to see to the application
        of
        any part of the purchase money paid over to Lender or such officer or be
        answerable in any way for the misapplication or nonapplication thereof;

       

      (viii) Lender
        is
        hereby authorized at any time and from time to time, without notice to Borrowers
        (any such notice being expressly waived by Borrowers), to set off and apply
        any
        and all deposits (general or special, time or demand, provisional or final)
        at
        any time held, including any certificate of deposit, and any other Indebtedness
        at any time owing by Lender to or for the credit or the account of Borrowers
        against any and all of the then due (including, but not limited to those
        due by
        reason of acceleration) Obligations of Borrowers now or hereafter existing
        under
        this Agreement or any other Loan Document, irrespective of whether or not
        Lender
        shall have made any demand under this Agreement or any other Loan Document.
        Lender agrees to promptly notify Borrowers after any such setoff and application
        made by it. The rights of Lender under this subsection are in addition to
        all
        other rights and remedies (including, without limitation, other rights of
        setoff) which Lender may have; and/or 

       

      (ix) Lender
        may, at its option, accelerate the maturity of any outstanding Loans and
        all
        interest thereon.

       

      10.2 Application
        of Proceeds.
        Except
        as expressly provided elsewhere in this Agreement, all proceeds of the sale
        of
        Collateral by Lender hereunder, and all other monies received by Lender pursuant
        to the terms of this Agreement (whether through the exercise by Lender of
        its
        rights of collection or otherwise), including, without limitation, any awards
        or
        other amounts payable upon any condemnation or taking by eminent domain,
        shall
        be applied, as promptly as is practicable after the receipt thereof by Lender,
        as follows:

       

      
        
           

        

        
          39

          
            

          

        

        
           

        

      

      

       

      FIRST:
        to the
        equal and ratable payment of all reasonable fees, costs and expenses incurred
        by
        Lender or any custodian or nominee appointed hereunder which are payable
        by
        Borrowers hereunder, if any, if not previously paid by Borrowers, and all
        reasonable costs and expenses incurred by Lender in connection with any sale
        of
        Collateral, including, but not limited to, the expenses of taking, advertising,
        processing, preparing and storing the Collateral to be sold, all court costs
        and
        fees and expenses of outside counsel to Lender in connection therewith, and
        to
        the payment of all amounts for which Lender is entitled to indemnification
        hereunder and all Loans made by Lender hereunder to the account of Borrowers
        and
        the payment of all reasonable costs and expenses paid or incurred by Lender
        in
        connection with the exercise of any right or remedy hereunder, to the extent
        that such advances, costs and expenses shall not theretofore have been
        reimbursed to Lender by Borrowers;

       

      SECOND:
        to the
        payment to Lender of the interest then due and payable on the
        Loans;

       

      THIRD:
        to the
        payment to Lender of the Repayment Amount then due and payable on the Loans;
        and

       

      FOURTH:
        to the
        payment to Lender of any other amount owing to Lender under this Agreement
        and
        any other Loan Document.

       

      SECTION
        11. MISCELLANEOUS

       

      11.1 Survival
        of Warranties.
        All
        covenants, agreements, representations and warranties made under this Agreement
        or in any of the other Loan Documents shall survive the execution and delivery
        of this Agreement and the making of the Loans hereunder, and shall continue
        in
        full force and effect until the full and final payment and performance of
        all of
        the Obligations of Borrowers to Lender under this Agreement and all of the
        other
        Loan Documents.

       

      11.2 Appointment
        of Agents.
        Lender
        shall have the right to appoint or constitute one or more Persons to act
        as
        Lender’s agent in exercising any of Lender’s rights hereunder whenever Lender
        shall deem it necessary or desirable to do so; provided, however, that such
        appointment shall not increase Borrowers’ Obligations hereunder except to the
        extent: (a) such agent is required to enforce or protect Lender’s rights
        hereunder, or (b) the acts of the agent if undertaken directly by Lender
        would
        have resulted in an increase in Borrowers’ Obligations hereunder.

       

      11.3 Failure
        or Delay Not Waiver.
        No
        failure or delay on the part of Lender in the exercise of any power, right,
        remedy or privilege under this Agreement or any of the other Loan Documents
        shall operate as a waiver thereof, nor shall any single or partial exercise
        of
        any such power, right, remedy or privilege preclude any other or further
        exercise thereof or of any other right, power, remedy or privilege. All rights
        and remedies existing under this Agreement and the other Loan Documents are
        cumulative to, and not exclusive of, any rights or remedies otherwise available.
        

       

      11.4 Modification.
        This
        Agreement and each of the other Loan Documents shall constitute the entire
        agreement between the parties thereto with respect to the matters set forth
        therein and may not be amended, waived or modified in any manner without
        the
        written consent of Lender and Borrowers.

       

      11.5 Notices.
        Any
        notice, consent or other communication required or which may be given hereunder
        shall be in writing and shall be delivered personally, telecopied or sent
        by
        certified, registered or express mail or overnight courier service, postage
        prepaid, and shall be deemed given when delivered to the addresses, as
        follows:

       

      
        
           

        

        
          40

          
            

          

        

        
           

        

      

      

       

      
        	
                To
                  Borrowers:

              	
                Gener8Xion
                  Entertainment Inc. 

                3400
                  Cahuenga Blvd. West

                Los
                  Angeles, California 90068

                Attention:
                  Matthew Crouch

                Fax
                  No.: (323) 874 -5888

                And

                One
                  Night With The King, Inc

                3400
                  Cahuenga Blvd. West

                Los
                  Angeles, California 90068

                Attention:
                  Rich Cook

                Fax
                  No.: (323) 874 -5888

              
	 	 
	
                With
                  a Copy to:

              	
                Richard
                  P. Towne

                Law
                  Offices

                3400
                  Cahuenga Blvd. West

                Los
                  Angeles, California 90068

                Attention:
                  Richard P. Towne, Esq.

                Fax
                  No.: (323) 874-4045

              
	 	 
	
                To
                  HDEM:

              	
                If
                  via mail or fax:

                 

                Hope,
                  Direction and Encouragement Ministries

                P.O.
                  Box 3355 

                Pineville,
                  Louisiana 71360

                Attention:
                  Tommy Tenney

                Fax
                  No.: (318) 619-9539

                 

                If
                  via overnight courier:

                 

                Hope
                  Direction and Encouragement Ministries, Inc.

                602
                  Main Street

                Pineville,
                  Louisiana 71360

              
	 	 
	
                With
                  a Copy to:

              	
                Winters,
                  King & Associates, Inc. 

                2448
                  East 81st Street, Suite 5900 

                Tulsa,
                  Oklahoma 74137-4259

                Attention:
                  Thomas Winters, Esq.

                Fax
                  No.: (918) 491-6297 

              
	 	 
	
                To
                  Lender:

              	
                Windfall
                  Financial LLC

                1110
                  Brickell Avenue 

                Suite
                  310 

                Miami,
                  Florida 33131

                Attention:
                  Nelson Slosbergas, Esq.

                Fax
                  No.: (305) 374-2855

              

      

       

      
        
           

        

        
          41

          
            

          

        

        
           

        

      

      
        	 	 
	
                With
                  a Copy to:

              	
                Katten
                  Muchin Rosenman LLP

                2029
                  Century Park East, Suite 2600

                Los
                  Angeles, California 90067-3012

                Attn.
                  John C. McBride, Esq.

                Fax
                  No.: (310) 712-4471

              

      

      

       

      11.6 Severability.
        In case
        any provision of this Agreement or of any other Loan Document shall be invalid,
        illegal or unenforceable in any jurisdiction then, as to such jurisdiction
        only,
        such provision shall, to the minimum extent of such prohibition or
        unenforceability, be deemed severed from the remainder of such agreement,
        and
        the validity, legality and enforceability of the remaining provisions shall
        not
        in any way be affected or impaired thereby.

       

      11.7 Applicable
        Law.
        This
        Agreement, the other Loan Documents and all other agreements, documents and
        instruments provided for therein and the rights and obligations of the parties
        thereto shall be governed by and construed and enforced in accordance with,
        the
        laws of the State of Delaware.

       

      11.8 Service
        of Process.
        Each of
        the parties to this Agreement irrevocably consents to service of process
        in the
        manner provided for notices in Section 11.5 hereof. In addition, (i) ONWK
        hereby irrevocably designates and appoints Richard P. Towne, Esq., with an
        address at 3400 Cahuenga Boulevard West, Los Angeles, California 90068 as
        their
        agent for service of process in California; (ii) GNXE hereby irrevocably
        designates and appoints William Barnett, Esq., with an address at c/o Stone,
        Rosenblatt & Cha, PLC, 21550 Oxnard Street, Suite 200, Woodland Hills,
        California 91367 as their agent of service of process in California; and
        (iii) Borrowers hereby irrevocably designate and appoint Paracorp,
        Incorporated with an address at 40 East E Division Street, Suite A, Dover,
        Delaware 19901 as their agent for service of process in Delaware (collectively,
        the “Process
        Agents”)
        to
        accept legal process on behalf of Borrowers relating to any complaint, legal
        filing or response, or similar notice with respect to any claim or dispute
        arising out of or relating to this Agreement or any other Loan Document.
        Borrowers acknowledge and agree that Lender is relying upon Borrowers’ agreement
        to so designate and appoint the Process Agents on behalf of Borrowers before
        entering into this Agreement and establishing the terms herein and Borrowers
        agree that it is in the parties, mutual interests to establish a means in
        which
        their disputes may be more expeditiously resolved in Los Angeles, California
        as
        provided below. Borrowers will not change or terminate the Process Agents
        without the written consent of Lender. Nothing in this Agreement will affect
        the
        right of any party to this Agreement to serve process in any other manner
        permitted by law.

       

      11.9 WAIVER
        OF JURY TRIAL.
        EACH OF
        THE PARTIES TO THIS AGREEMENT WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION
        (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING
        TO
        THIS AGREEMENT OR ANY OTHER LOAN AGREEMENT IN THE NEGOTIATION, ADMINISTRATION,
        PERFORMANCE OR ENFORCEMENT HEREOF OR THEREOF AND FOR ANY COUNTERCLAIM
        THEREIN.

       

      
        
           

        

        
          42

          
            

          

        

        
           

        

      

      

       

      11.10 Assignability.
        Lender
        may assign any or all of its rights or obligations hereunder or any interest
        herein without the consent of Borrowers, so long as Lender remains primarily
        liable for its obligations hereunder. Borrowers may not assign any of their
        rights or obligations hereunder or any interest herein, or in or under any
        Loan
        Document, without the prior written consent of Lender and any purported
        assignment by a Borrower shall be void and of no force or effect. This Agreement
        shall be binding upon the parties hereto and their respective successors
        and
        assigns, and shall inure to the benefit of the parties hereto and the successors
        and assigns of Lender.

       

      11.11 Costs.
        If
        Lender incurs any out-of-pocket expenses in connection with administering
        or
        enforcing this Agreement, or any other Loan Document, or if Lender takes
        collection action under this Agreement or any other Loan Agreement, it is
        entitled to costs and reasonable outside attorneys’ fees.

       

      11.12 Attorneys’
        Fees.
        In the
        event of an arbitration proceeding with respect to this Agreement, the
        prevailing party is entitled to recover costs and reasonable outside attorneys’
fees incurred in connection with the proceeding, as determined by the
        arbitrator.

       

      11.13 One
        Agreement.
        This
        Agreement and any related security or other agreements required by this
        Agreement, collectively:

       

      (a) represent
        the sum of the understandings and agreements between Lender and Borrowers
        concerning the Loans; 

       

      (b) replace
        any prior oral or written agreements between Lender and Borrowers concerning
        the
        Loans; and 

       

      (c) are
        intended by Lender and Borrowers as the final, complete and exclusive statement
        of the terms agreed to by them.

       

      In
        the
        event of any conflict between this Agreement and any other agreements required
        by this Agreement, this Agreement will prevail. 

       

      11.14 Arbitration
        of Disputes.
        The
        parties agree that any dispute relating to this Agreement shall be resolved
        by
        binding arbitration with a single arbitrator (experienced in the entertainment
        industry) to be selected by mutual agreement of the parties, under arbitration
        rules of the American Arbitration Association, in Los Angeles, California,
        and
        that any arbitration award (including reimbursement of reasonable legal fees
        and
        costs) may be entered for judgment in Los Angeles County Superior
        Court.

       

      
        
           

        

        
          43

          
            

          

        

        
           

        

      

      

       

      11.15 Counterparts.
        This
        Agreement and the other Loan Documents may be executed in any number of
        counterparts, each of which when so executed and delivered shall be deemed
        to be
        an original and all of which taken together shall constitute one and the
        same
        instrument, respectively. Executed copies of the signature pages of this
        Agreement sent by facsimile or transmitted electronically in either Tagged
        Image
        Format Files (“TIFF”)
        or
        Portable Document Format (“PDF”)
        shall
        be treated as originals, fully binding and with full legal force and effect,
        and
        the parties waive any rights they may have to object to such treatment. Any
        party delivering an executed counterpart of this Agreement by facsimile,
        TIFF or
        PDF also shall deliver a manually executed counterpart of this Agreement
        but the
        failure to deliver a manually executed counterpart shall not affect the
        validity, enforceability, and binding effect of this Agreement.

       

      11.16 Section
        Headings.
        The
        various headings used in this Agreement are inserted for convenience of
        reference only and shall not affect the meaning or interpretation of this
        Agreement or any provision hereof.

       

      11.17 Further
        Assurances.
        At any
        time or from time to time upon the request of Lender, Borrowers will duly
        execute and deliver, or cause to be executed and delivered, at the cost and
        expense of Borrowers, such further documents and do such other acts and things
        as Lender may reasonably request in order to effect fully the purposes of
        this
        Agreement and the other Loan Documents and to provide for the payment and
        performance of the Obligations of Borrowers in accordance with the terms
        of this
        Agreement and the other Loan Documents.

       

      11.18 Further
        Documents.
        Each of
        the parties hereto shall execute such further documents, not inconsistent
        herewith, as may be necessary to effectuate the terms and provisions
        hereof.

       

      [SIGNATURES
        ON FOLLOWING PAGE]

       

      
        
           

        

        
          44

          
            

          

        

        
           

        

      

      WITNESS
        the due execution hereof as of the date first above written.

       

      

       

      
        	 	
                GENER8XION
                  ENTERTAINMENT, INC. 

              
	 	 
	 	
                By:
                  _________________________________

                Its:  _________________________________

              
	 	 
	 	
                ONE
                  NIGHT WITH THE KING, INC.

                 

              
	 	
                
                  By:
                    _________________________________

                  Its:  _________________________________    

                

              
	 	 
	 	
                WINDFALL
                  FINANCIAL LLC

              
	 	 
	 	
                By:
                  _________________________________

                Its:  _________________________________

              
	 	 
	 	
                HOPE,
                  DIRECTION AND ENCOURAGEMENT MINISTRIES, INC.

              
	 	 
	 	
                By:
                  _________________________________

                Its:  _________________________________

              

      

      

       

      
        
           

        

        
          45

          
            

          

        

        
           

        

      

      LIST
        OF EXHIBITS

       

      

       

      
        	
                EXHIBIT
                  A

              	
                TBN
                  Agreement

              
	
                EXHIBIT
                  B 

              	
                Production
                  and Distribution Agreement

              
	
                EXHIBIT
                  C

              	
                Worldwide
                  Distribution Agreement

              
	
                EXHIBIT
                  D

              	
                Form
                  of Borrowing Certificate

              
	
                EXHIBIT
                  E 

              	
                Form
                  of Copyright Mortgage and Assignment

              
	
                EXHIBIT
                  F 

              	
                Form
                  of Copyright Mortgage and Assignment

              
	
                EXHIBIT
                  G 

              	
                Form
                  of Copyright Mortgage and Assignment

              
	
                EXHIBIT
                  H 

              	
                Form
                  of Copyright Mortgage and Assignment

              
	
                EXHIBIT
                  I 

              	
                Form
                  of Copyright Mortgage and Assignment

              
	
                EXHIBIT
                  J 

              	
                Form
                  of Copyright Mortgage and Assignment

              
	
                EXHIBIT
                  K

              	
                Form
                  of Laboratory Access Letter

              
	
                EXHIBIT
                  L

              	
                Form
                  of Notice of Irrevocable Authority and

              
	 	
                Direction
                  to Pay

              
	
                EXHIBIT
                  M

              	
                Notice
                  to Insurer 

              
	
                EXHIBIT
                  N

              	
                Form
                  of P&A Subordination Agreement

              
	
                EXHIBIT
                  O

              	
                Form
                  of Escrow Agreement - Collection Account

              
	
                EXHIBIT
                  P

              	
                Form
                  of Escrow Agreement - Disbursement Account

              
	
                EXHIBIT
                  Q

              	
                Form
                  of Russian Distribution Agreement 

              
	
                EXHIBIT
                  R

              	
                Form
                  of Opinion of Special Counsel to Borrowers

              
	
                EXHIBIT
                  S

              	
                Form
                  of Opinion of Counsel to GNXE

              
	
                EXHIBIT
                  T

              	
                Form
                  of Opinion of Counsel to ONWK

              
	
                EXHIBIT
                  U

              	
                Form
                  of Secured Promissory Note

              
	
                EXHIBIT
                  V

              	
                Form
                  of Additional P&A Commitment Secured Promissory
                  Note

              
	
                EXHIBIT
                  W

              	
                Form
                  of Power of Sale

              

      

      
        
           

        

        
          46

          
            

          

        

        
           

        

      

      LIST
        OF
        SCHEDULES

      

       

      
        	
                SCHEDULE
                  1.

              	
                Approved
                  Budget

              
	
                SCHEDULE
                  2.

              	
                Approved
                  Distribution Plan

              
	
                SCHEDULE
                  3.

              	
                Chain
                  of Title Documents

              
	
                SCHEDULE
                  4.

              	
                P&A
                  Designee Fees

              

    

    
      
         

      

      
        47

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