Document:

ex10_2.htm

Exhibit 10.2

EXECUTION COPY

STANDARD DEFINITIONS

“Account Intermediary” shall have the meaning specified in the preamble to the Indenture.

“Accumulation Interval” shall have the meaning specified in the definition of “Cash Accumulation Event”.

“ACH Form” shall mean the ACH authorization form executed by Obligors substantially in the form attached as Exhibit C to the Transfer Agreement.

“Act” shall have the meaning specified in Section 1.4 of the Indenture.

“Additional Principal Payment” shall equal, for any Payment Date (determined after giving effect to the payments of the Principal Distribution Amounts with respect to all Classes of Notes on such Payment Date), the amount sufficient to cause the Post-Additional Principal Payment Overcollateralization Percentage to equal 23.00%.

“Additional Servicing Compensation” shall mean any late fees related to late payments on the Timeshare Loans, any non-sufficient funds fees, any processing fees and any Liquidation Expenses collected by the Servicer and any unpaid out-of-pocket expenses incurred by the Servicer during the related Due Period.

“Adjusted Note Balance” shall equal, on any Payment Date, for any Class of Notes, the Outstanding Note Balance of such Class of Notes immediately prior to such Payment Date, less any Note Balance Reduction Amounts applied to such Class of Notes immediately prior to such Payment Date; provided, however, to the extent that for purposes of consents, approvals, voting or other similar act of the Noteholders under any of the Transaction Documents, “Adjusted Note Balance” shall exclude Notes which are held by Silverleaf or any Affiliate thereof.

“Adverse Claim” shall mean any claim of ownership or any lien, security interest, title retention, trust or other charge or encumbrance, or other type of preferential arrangement having the effect or purpose of creating a lien or security interest, other than the interests created under the Indenture in favor of the Indenture Trustee and the Noteholders.

“Affiliate” shall mean any Person: (a) which directly or indirectly controls, or is controlled by, or is under common control with such Person; (b) which directly or indirectly beneficially owns or holds five percent (5%) or more of the voting stock of such Person; or (c) for which five percent (5%) or more of the voting stock of which is directly or indirectly beneficially owned or held by such Person.  The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

  

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“Aggregate Initial Note Balance” is equal to the sum of the Initial Note Balances for all Classes of Notes.

“Aggregate Loan Balance” means the sum of the Loan Balances for all Timeshare Loans (except Defaulted Timeshare Loans).

“Aggregate Outstanding Note Balance” is equal to the sum of the Outstanding Note Balances for all Classes of Notes.

“Assignment of Mortgage” shall mean, with respect to a Mortgage Loan, a written assignment of one or more Mortgages from the related Originator or Seller to the Indenture Trustee, for the benefit of the Noteholders, relating to one or more Timeshare Loans in recordable form, and signed by an Authorized Officer of all necessary parties, sufficient under the laws of the jurisdiction wherein the related Timeshare Property is located to give record notice of a transfer of such Mortgage and its proceeds to the Indenture Trustee.

“Association” shall mean the timeshare owners’ association responsible for managing a Resort.

“Assumption Date” shall have the meaning specified in the Backup Servicing Agreement.

“Authorized Officer” shall mean, with respect to any corporation, limited liability company or partnership, the Chairman of the Board, the President, any Vice President, the Secretary, the Treasurer, any Assistant Secretary, any Assistant Treasurer, Managing Member and each other officer of such corporation or limited liability company or the general partner of such partnership specifically authorized in resolutions of the Board of Directors of such corporation or managing member of such limited liability company to sign agreements, instruments or other documents in connection with the Transaction Documents on behalf of such corporation, limited liability company or partnership, as the case may be.

“Available Funds” shall mean for any Payment Date, (A) all funds on deposit in the Collection Account after making all transfers and deposits required from (i) the Lockbox Account pursuant to the Lockbox Agreement, (ii) the General Reserve Account pursuant to Section 3.2(b) of the Indenture, (iii) the Originator or the Servicer, as the case may be, pursuant to Section 4.5 of the Indenture, and (iv) the Servicer pursuant to the Indenture, plus (B) all investment earnings on funds on deposit in the Collection Account from the immediately preceding Payment Date through and including the day immediately preceding such Payment Date, less (C) amounts on deposit in the Collection Account related to collections related to any Due Periods subsequent to the Due Period related to such Payment Date, less (D) any Additional Servicing Compensation or misdirected payments on deposit in the Collection Account.

“Backup Servicer” shall mean Wells Fargo Bank, National Association, a national association, and its permitted successors and assigns.

“Backup Servicing Agreement” shall mean the backup servicing agreement, dated as of June 1, 2010, by and among the Issuer, the Servicer, the Backup Servicer and the Indenture Trustee, as the same may be amended, supplemented or otherwise modified from time to time.

  

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“Backup Servicing Fee” shall on each Payment Date be equal to the greater of (i) $2,500 or (ii) the product of one-twelfth of 0.04% and the Aggregate Loan Balance as of the first day of the related Due Period.

“Bankruptcy Code” shall mean the federal Bankruptcy Code, as amended (Title 11 of the United States Code).

“Benefit Plan” shall mean (A) an “employee benefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA, (B) a “plan” as defined in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, (C) an entity whose underlying assets are deemed to include “plan assets” of any of the foregoing under United States Department of Labor Regulation 29 C.F.R. §2510.3-101 (as modified by Section 3(42) of ERISA) by reason of a direct or indirect investment by an employee benefit plan or plan in such entity or (D) any plan that is subject to any Similar Law.

“Benefit Plan Investor” shall mean (A) an “employee benefit plan” within the meaning of Section 3(3) of ERISA that is subject to Title I of ERISA, (B) any “plan” described in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code or (C) any entity whose underlying assets include “plan assets” of any of the foregoing under United States Department of Labor Regulation 29 C.F.R. §2510.3-101 (as modified by Section 3(42) of ERISA) by reason of an employee benefit plan’s or other plan’s direct or indirect investment in such entity.

“Book-Entry Note” shall mean a beneficial interest in the Notes, ownership and transfers of which shall be made through book-entries by the Depository.

“Business Day” shall mean any day other than (i) a Saturday, a Sunday, or (ii) a day on which banking institutions in New York City, the State of Texas, the city in which the Servicer is located or the city in which the Corporate Trust Office of the Indenture Trustee is located are authorized or obligated by law or executive order to be closed.

“Cash Accumulation Event” shall exist on any Determination Date, if (i) the Three Month Rolling Average of Timeshare Loan Delinquency Ratios exceeds 10.0% or (ii) the Cumulative Default Level as of the last day of any Due Period specified below exceeds the following parameters (each indicated 3-Due Period interval, an “Accumulation Interval”):

	
Due Period

	
Cumulative Default Level %

	
1-3

	
0.68%

	
4-6

	
3.57%

	
7-9

	
6.30%

	
10-12

	
8.31%

	
13-15

	
9.96%

	
16-18

	
11.86%

	
19-21

	
13.71%

	
22-24

	
14.82%

	
25-27

	
15.71%

	
28-30

	
16.55%

	
31-33

	
17.57%

	
34-36

	
18.21%

	
37-39

	
18.66%

	
40-42

	
19.01%

	
43 and thereafter

	
19.10%

  

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The Cash Accumulation Event described in clause (i) above will continue until, on the last day of each of the two Due Periods immediately following the Due Period during which such Cash Accumulation Event occurred, the Three Month Rolling Average of Timeshare Loan Delinquency Ratios does not exceed 10.0%.  The Cash Accumulation Event described in clause (ii) above shall be deemed to be continuing until, on the last Business Day of each of the two Accumulation Intervals immediately following the Accumulation Interval during which such Cash Accumulation Event occurred, the Cumulative Default Level remains below the limits described above.

“Cede & Co.” shall mean the initial registered holder of the Notes, acting as nominee of The Depository Trust Company.

“Class” shall mean, as the context may require, any of the Class A Notes, Class B Notes or Class C Notes.

“Class A Notes” shall have the meaning specified in the Recitals of the Issuer in the Indenture.

“Class A Principal Distribution Amount” shall mean, with respect to any Payment Date, the Principal Distribution Amount payable to the Holders of the Class A Notes on such Payment Date.

“Class B Notes” shall have the meaning specified in the Recitals of the Issuer in the Indenture.

“Class B Principal Distribution Amount” shall mean, with respect to any Payment Date, the Principal Distribution Amount payable to the Holders of the Class B Notes on such Payment Date.

“Class C Notes” shall have the meaning specified in the Recitals of the Issuer in the Indenture.

“Class C Principal Distribution Amount” shall mean, with respect to any Payment Date, the Principal Distribution Amount payable to the Holders of the Class C Notes on such Payment Date.

  

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“Clearstream” shall mean Clearstream Banking, société anonyme, a limited liability company organized under the laws of Luxembourg.

“Closing Date” shall mean June 8, 2010.

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor statute, together with the rules and regulations thereunder.

“Collateral” shall have the meaning specified in the Granting Clause of the Indenture.

“Collateral Liquidation Event” shall have the meaning specified in Section 6.6(b) of the Indenture.

“Collection Account” shall mean the account established and maintained by the Indenture Trustee pursuant to Section 3.2(a) of the Indenture.

“Collection Policy” shall mean the collection policies of the initial servicer in effect on the Closing Date, as may be amended from time to time in accordance with the Servicing Standard.

“Completed Unit” shall mean a Unit at a Resort which has been fully constructed and furnished, has received a valid permanent certificate of occupancy (if required under applicable laws, rules or regulations), is ready for occupancy and is subject to a time share declaration.

“Confidential Information” means information obtained by any Noteholder including, without limitation, the Preliminary Confidential Offering Circular dated May 21, 2010 or the Confidential Offering Circular dated June 1, 2010 related to the Notes and the Transaction Documents, that is proprietary in nature and that was clearly marked or labeled as being confidential information of the Issuer, the Servicer or their Affiliates, provided that such term does not include information that (a) was publicly known or otherwise known to the Noteholder prior to the time of such disclosure, (b) subsequently becomes, publicly known through no act or omission by such Noteholder or any Person acting on its behalf, (c) otherwise becomes known to the Noteholder other than through disclosure by the Issuer, the Servicer or their Affiliates, (d) any other public disclosure authorized by the Issuer or the Servicer, the U.S. Federal income tax treatment of the offering of the notes and any fact that may be relevant to understanding the tax treatment (the “Tax Structure”) and all materials of any kind (including opinions or other tax analyses) that are provided to the Issuer, the Initial Purchaser and each prospective investor relating to such tax treatment and Tax Structure.

“Confidential Offering Circular” shall mean the confidential offering circular dated June 1, 2010 related to the Notes and Transaction Documents.

“Continued Errors” shall have the meaning specified in Section 5.4(b) of the Indenture.

“Contribute” shall have the meaning specified in Section 2(a) of the Transfer Agreement.

“Contribution” shall have the meaning specified in Section 2(a) of the Transfer Agreement.

  

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“Controlling Person” shall mean a person (other than a Benefit Plan Investor) that has discretionary authority or control with respect to the assets of such entity, or who provides investment advice for a fee (direct or indirect) with respect to such assets, or any affiliate of such a person.

“Corporate Trust Office” shall mean the office of the Indenture Trustee located in the State of Minnesota, which office is at the address set forth in Section 13.3 of the Indenture.

“Credit Policy” shall mean the credit and underwriting policies of the Originator in effect on the Closing Date.

“Cumulative Default Level” shall mean for any Due Period, an amount equal to the sum of the Loan Balances of all Timeshare Loans that became Defaulted Timeshare Loans since the Initial Cut-Off Date (less the Loan Balances of Defaulted Timeshare Loans that subsequently became current prior to such date of determination which are still subject to the lien of the Indenture at such time), divided by the Cut-Off Date Aggregate Loan Balance (expressed as a percentage).

“Custodial Agreement” shall mean the custodial agreement, dated as of June 1, 2010 by and among the Issuer, the Servicer, the Backup Servicer, the Indenture Trustee and Custodian, as the same may be amended, supplemented or otherwise modified from time to time providing for the custody and maintenance of the Timeshare Loan Files relating to the Timeshare Loans.

“Custodian” shall mean Wells Fargo Bank, National Association, a national banking association, or its permitted successors and assigns.

“Custodian Fee” shall mean for each Payment Date, the fee payable by the Servicer to the Custodian in accordance with the Custodial Agreement.

“Cut-Off Date” shall mean, with respect to (i) the Initial Timeshare Loans, the Initial Cut-Off Date, and (ii) any Qualified Substitute Timeshare Loan, the related Subsequent Cut-Off Date.

“Cut-Off Date Aggregate Loan Balance” shall mean the aggregate of the Loan Balances, as of the Initial Cut-Off Date, of all Timeshare Loans pledged pursuant to the Indenture on the Closing Date.

“Cut-Off Date Loan Balance” shall mean the Loan Balance of a Timeshare Loan on the related Cut-Off Date.

“Default” shall mean an event which, but for the passage of time, would constitute an Event of Default under the Indenture.

“Default Acceleration Event” shall have the meaning specified in Section 6.6(b) of the Indenture.

“Defaulted Timeshare Loan” is any Timeshare Loan for which any of the earliest following events may have occurred: (i) the Servicer has commenced cancellation or forfeiture proceedings on the related Timeshare Loan after collection efforts have failed in accordance with its credit and collection policies, (ii) as of the last day of any Due Period, all or part of a scheduled payment under the Timeshare Loan is more than 120 days delinquent from the due date, or (iii) the Servicer obtains actual knowledge that a bankruptcy event has occurred with respect to the related Obligor.

  

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“Defective Timeshare Loan” shall have the meaning specified in Section 4.5 of the Indenture.

“Deferred Interest Amount” shall mean, with respect to a Class of Notes for which Note Balance Reduction Amounts have been applied and a Payment Date, the sum of (i) interest accrued at the related Note Rate during the related Interest Accrual Period on such Note Balance Reduction Amounts applied in respect of such Class (on the immediately preceding Payment Date) and (ii) any unpaid Deferred Interest Amounts from any prior Payment Date, together with interest thereon at the applicable Note Rate from the date any such Note Balance Reduction Amount was applied in respect of such Class, to the extent permitted by law.

“Definitive Note” shall have the meaning specified in Section 2.2 of the Indenture.

“Delinquent Timeshare Loan” means, with respect to any Timeshare Loan as of any date, a Timeshare Loan under which all or part of a scheduled payment is 31 or more days delinquent from the due date and which is not a Defaulted Timeshare Loan.

“Depository” shall mean an organization registered as a “clearing agency” pursuant to Section 17A of the Exchange Act.  The initial Depository shall be The Depository Trust Company.

“Depository Agreement” shall mean the letter of representations dated as of June 8, 2010, by and among the Issuer, the Indenture Trustee and the Depository.

“Depository Participant” shall mean a broker, dealer, bank, other financial institution or other Person for whom from time to time a Depository effects book-entry transfers and pledges securities deposited with the Depository.

“Determination Date” shall mean, with respect to a Payment Date, the day that is five Business Days prior to such Payment Date.

“Direction Letter” shall have the meaning set forth in the Escrow Agreement.

“DTC” shall mean The Depository Trust Company, and its permitted successors and assigns.

“Due Period” shall mean with respect to any Payment Date, the immediately preceding calendar month.

“Eligible Bank Account” shall mean a segregated account, which may be an account maintained with the Indenture Trustee, which is either (a) maintained with a depositary institution or trust company whose long-term unsecured debt obligations are rated at least “A” by Fitch and “A2” by Moody’s and whose short-term unsecured obligations are rated at least “A-1” by Fitch and “P-1” by Moody’s; or (b) a trust account or similar account maintained at the corporate trust department of the Indenture Trustee.

  

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“Eligible Investments” shall mean one or more of the following:

(a) obligations of, or guaranteed as to timely payment of principal and interest by, the United States or any agency or instrumentality thereof when such obligations are backed by the full faith and credit of the United States;

(b) federal funds, certificates of deposit, time deposits and bankers’ acceptances, each of which shall not have an original maturity of more than 90 days, of any depository institution or trust company incorporated under the laws of the United States or any state; provided that the long-term unsecured debt obligations of such depository institution or trust company at the date of acquisition thereof have been rated no lower than “A2” by Moody’s; and provided, further, that the short-term obligations of such depository institution or trust company shall be rated “A-1+” by S&P;

(c) commercial paper or commercial paper funds (having original maturities of not more than 90 days) of any corporation incorporated under the laws of the United States or any state thereof; provided that any such commercial paper or commercial paper funds shall be rated in the highest short-term rating category by each Rating Agency;

(d) any no-load money market fund rated (including money market funds managed or advised by the Indenture Trustee or an Affiliate thereof) “AAAm/AAAm-G” or higher by S&P; provided that, Eligible Investment obligations purchased from funds in the Eligible Bank Accounts shall include only such or securities that either may be redeemed daily or mature no later than the Business Day next preceding the next Payment Date;

(e) demand and time deposits in, certificates of deposit of, bankers’ acceptances issued by, or federal funds sold by any depository institution or trust company (including the Indenture Trustee or any Affiliate of the Indenture Trustee, acting in its commercial capacity) incorporated under the laws of the United States of America or any State thereof and subject to supervision and examination by federal and/or state authorities, so long as, at the time of such investment, the commercial paper or other short-term deposits of such depository institution or trust company are rated at least P-1 by Moody’s and at least A-1 by S&P;

and provided, further, that (i) no instrument shall be an Eligible Investment if such instrument evidences a right to receive only interest payments with respect to the obligations underlying such instrument, and (ii) no Eligible Investment may be purchased at a price in excess of par. Eligible Investments may include those Eligible Investments with respect to which the Indenture Trustee or an Affiliate thereof provides services.

“Eligible Timeshare Loan” shall mean a Timeshare Loan which meets all of the criteria set forth in Schedule I of the Transfer Agreement and Schedule I of the Loan Sale Agreement.

  

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“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended, together with the regulations thereunder.

“Errors” shall have the meaning specified in Section 5.4(b) of the Indenture.

“Escrow Agent” shall mean Stewart Vacation Ownership Title Agency, Inc., a Florida corporation.

“Escrow Agreement” shall mean the escrow and closing agreement, dated as of June 1, 2010, by and among the Servicer, the Issuer, the Indenture Trustee, the Custodian, and the Escrow Agent, as the same may be amended or supplemented from time to time.

“Euroclear” shall mean Euroclear Bank S.A./N.V., as operator of the Euroclear System, or its successor in such capacity.

“Event of Default” shall have the meaning specified in Section 6.1 of the Indenture.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Finance Agreement” shall mean a purchase and finance agreement between an Obligor and the Originator pursuant to which such Obligor finances the purchase of Oak N’ Spruce Certificates.

“Fitch” shall mean Fitch Ratings, a subsidiary of Fitch, Inc.

“Force Majeure Event” shall mean the occurrence at a single Resort of damage to over 25% of the Units as the result of a fire, hurricane, earthquake, flood, tornado, landslide, tsunami and/or other impact event.

“Force Majeure Loan” shall mean a Timeshare Loan that has been the subject of a Force Majeure Event.

“Force Majeure Purchase Limit” shall mean, with respect to the purchase of a Force Majeure Loan by the Originator, on any date, (x) 10% of the Cut-Off Date Aggregate Loan Balance less (y) the aggregate Loan Balances of the Force Majeure Loans previously purchased by the Originator.

“Force Majeure Purchase Price” shall mean the fair market value of a Force Majeure Loan as determined by the Originator in its commercially reasonable judgment.

“Foreclosure Property” shall have the meaning specified in Section 5.3(b) of the Indenture.

“General Reserve Account” shall mean the account maintained by the Indenture Trustee pursuant to Section 3.2(b) of the Indenture.

“General Reserve Account Initial Deposit” shall mean an amount equal to 5.00% of the Aggregate Loan Balance as of the Initial Cut-Off Date.

  

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“General Reserve Account Required Balance” shall mean the lesser of (I) (a) if no Cash Accumulation Event has occurred and is continuing, the greater of (x) 3.00% of the Cut-Off Date Aggregate Loan Balance or (y) 7.50% of the Aggregate Loan Balance at such time and (b) if a Cash Accumulation Event has occurred and is continuing, the greater of (x) 5.00% of the Cut-Off Date Aggregate Loan Balance or (y) the product of (i) the Aggregate Loan Balance as of the last day of the immediately preceding Due Period and (ii) 20.00% and (II) the Outstanding Note Balance immediately prior to such Payment Date.

“Global Note” shall have the meaning specified in Section 2.2 of the Indenture.

“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Grant” shall mean to grant, bargain, convey, assign, transfer, mortgage, pledge, create and grant a security interest in and right of set-off against, deposit, set over and confirm.

“Highest Lawful Rate” shall have the meaning specified in Section 3 of the Transfer Agreement and Section 3 of the Loan Sale Agreement, as applicable.

“Holder” or “Noteholder” shall mean a holder of a Class A Note, a Class B Note or a Class C Note.

“Indebtedness” means, with respect to any Person at any time, (a) indebtedness or liability of such Person for borrowed money whether or not evidenced by bonds, debentures, notes or other instruments, or for the deferred purchase price of property or services (including trade obligations); (b) obligations of such Person as lessee under leases which should be, in accordance with generally accepted accounting principles, recorded as capital leases; (c) current liabilities of such Person in respect of unfunded vested benefits under plans covered by Title IV of ERISA; (d) obligations issued for or liabilities incurred on the account of such Person; (e) obligations or liabilities of such Person arising under acceptance facilities; (f) obligations of such Person under any guarantees, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds to invest in any Person or otherwise to assure a creditor against loss; (g) obligations of such Person secured by any lien on property or assets of such Person, whether or not the obligations have been assumed by such Person; or (h) obligations of such Person under any interest rate or currency exchange agreement.

“Indemnified Amounts” shall have the meaning specified in Section 8 of the Transfer Agreement and Section 8 of the Loan Sale Agreement, as applicable.

“Indemnified Parties” shall have the meaning specified in Section 8 of the Transfer Agreement and Section 8 of the Loan Sale Agreement, as applicable.

“Indenture” shall mean the indenture, dated as of June 1, 2010, by and among the Issuer, the Servicer, the Backup Servicer and the Indenture Trustee.

  

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“Indenture Trustee” shall mean Wells Fargo Bank, National Association, a national banking association, not in its individual capacity but solely as Indenture Trustee under the Indenture, and any successor as set forth in Section 7.9 of the Indenture.

“Indenture Trustee Fee” shall mean for each Payment Date, the product of one-twelfth and $9,000.

“Initial Cut-Off Date” shall mean April 30, 2010.

“Initial Note Balance” shall mean with respect to the Class A Notes, the Class B Notes and the Class C Notes, $73,900,000, $28,100,000 and $49,500,000, respectively.

“Initial Payment Date” shall mean the Payment Date occurring in June, 2010.

“Initial Purchaser” shall mean UBS Securities LLC.

“Intended Tax Characterization” shall have the meaning specified in Section 4.2(b) of the Indenture.

“Interest Accrual Period” shall mean for each Class of Notes with respect to any Payment Date, the immediately preceding calendar month.

“Interest Distribution Amount” shall equal, for a Class of Notes and on any Payment Date, the sum of (i) interest accrued during the related Interest Accrual Period at the related Note Rate on the Outstanding Note Balance of such Class of Notes immediately prior to such Payment Date (or, if any Note Balance Reduction Amounts have been applied to such Class of Notes on prior Payment Dates, the Adjusted Note Balance of such Class) and (ii) the amount of unpaid Interest Distribution Amounts from prior Payment Dates for such Class of Notes, plus, to the extent permitted by applicable law, interest on such unpaid amount at the related Note Rate.  The Interest Distribution Amount shall be calculated on the basis of a 360-day year consisting of twelve 30-day months.

“Interest Expense” means the aggregate consolidated expense of Silverleaf and its consolidated subsidiaries for interest on Indebtedness, including, without limitation, amortization of original issue discount, incurrence fees (to the extent included in interest expense), the interest portion of any deferred payment obligation and the interest component of any capital lease obligation.

“Investment Company Act” shall have the meaning set forth in Section 2(l) of the Note Purchase Agreement.

“Issuer” shall mean Silverleaf Finance VII, LLC, a limited liability company formed under the laws of the State of Delaware.

“Issuer Order” shall mean a written order or request delivered to the Indenture Trustee and signed in the name of the Issuer by an Authorized Officer of the Issuer.

  

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“Knowledge” shall mean (a) as to any natural Person, the actual awareness of the fact, event or circumstance at issue or receipt of notification by proper delivery of such fact, event or circumstance and (b) as to any Person that is not a natural Person, the actual awareness of the fact, event or circumstance at issue by a Responsible Officer of such Person or receipt, by a Responsible Officer of such Person, of notification by proper delivery of such fact, event or circumstance.

“Lien” shall mean any mortgage, pledge, hypothecation, assignment for security, security interest, claim, participation, encumbrance, levy, lien or charge.

“Limited Liability Company Agreement” shall mean the liability company agreement of the Issuer, dated as of June 1, 2010.

“Liquidation” means with respect to any Timeshare Loan, the sale or compulsory disposition of the related Timeshare Property, following foreclosure, forfeiture or other enforcement action or the taking of a deed-in-lieu of foreclosure, to a Person other than the Servicer or an Affiliate thereof, except in accordance with Section 5.3(b)(iv) of the Indenture.

“Liquidation Expenses” shall mean, with respect to a Defaulted Timeshare Loan, as of any date of determination, any out-of-pocket expenses (exclusive of overhead expenses) incurred by the Servicer in connection with the performance of its obligations under Section 5.3(b) in the Indenture, including, but not limited to, (i) any foreclosure or forfeiture and other repossession expenses incurred with respect to such Timeshare Loan, (ii) actual commissions and marketing and sales expenses incurred by the Servicer with respect to the liquidation of the related Timeshare Property and (iii) any other fees and expenses reasonably applied or allocated in the ordinary course of business with respect to the Liquidation of such Defaulted Timeshare Loan (including any assessed and unpaid Association fees and real estate taxes).

“Liquidation Proceeds” means with respect to the Liquidation of any Timeshare Loan, the amounts actually received by the Servicer in connection with such Liquidation.

“Loan Balance” shall mean, for any date of determination, the outstanding principal balance due under or in respect of a Timeshare Loan (including a Defaulted Timeshare Loan).

“Loan Sale Agreement” shall mean the loan sale agreement, dated as of June 1, 2010, by and among Silverleaf Finance IV, LLC, the Servicer and the Issuer pursuant to which certain of the Timeshare Loans are transferred to the Issuer.

“Lockbox Account” shall mean the account maintained on behalf of the Indenture Trustee by the Lockbox Bank pursuant to the Lockbox Agreement, which shall be a non-interest bearing account.

“Lockbox Agreement” shall mean the Blocked Account Control Agreement, dated as of June 1, 2010, by and among the Lockbox Processor, the Issuer, the Servicer and the Indenture Trustee, as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, unless the Indenture Trustee shall cease to be a party thereunder, or such agreement shall be terminated in accordance with its terms, in which event “Lockbox Agreement” shall mean such other agreement, in form and substance acceptable to the Indenture Trustee, among the Servicer, the Issuer, the Lockbox Processor and any other appropriate parties.

  

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“Lockbox Bank” means as of any date a depository institution named by the Servicer and acceptable to the Indenture Trustee at which each Lockbox Account is established and maintained as of such date.

“Lockbox Fee” shall mean on each Payment Date, the fee payable by the Servicer to the Lockbox Bank in accordance with the Lockbox Agreement.

“Lockbox Processor” shall mean JPMorgan Chase Bank, N.A., a national banking association, and its successors and assigns.

“Management Agreement” shall mean that certain Management Agreement between the Managing Entity and each Association, dated as of March 28, 1990, as amended from time to time.

“Managing Entity” shall mean Silverleaf Club, a Texas not-for-profit corporation, in its capacity as manager for all Associations.

“Misdirected Deposits” shall mean such payments that have been deposited to the Collection Account in error.

“Monthly Servicer Report” shall have the meaning specified in Section 5.5 of the Indenture.

“Moody’s” shall mean Moody’s Investors Service, Inc.

“Mortgage” shall mean, with respect to a Mortgage Loan, any purchase money mortgage, deed of trust, purchase money deed of trust or mortgage deed creating a first lien on a Timeshare Property to secure debt granted by an Obligor to the Originator with respect to the purchase of such Timeshare Property and otherwise encumbering the related Timeshare Property to secure payments or other obligations under such Timeshare Loan.

“Mortgage Loan” shall mean a Timeshare Loan originated by the Originator and evidenced by a Mortgage Note and secured by a first Mortgage on a fractional fee simple timeshare interest in a Unit.

“Mortgage Note” shall mean, with respect to a Mortgage Loan, the original, executed promissory note evidencing the indebtedness of an Obligor under a Mortgage Loan, together with any rider, addendum or amendment thereto, or any renewal, substitution or replacement of such note.

“Net Liquidation Proceeds” shall mean with respect to a Liquidation, the positive difference between Liquidation Proceeds and Liquidation Expenses.

“Note Balance Reduction Amount” shall mean with respect to each Payment Date, an amount equal to the excess, if any, of the Aggregate Outstanding Note Balance (immediately after the distribution of Available Funds) over the Aggregate Loan Balance as of the end of the Due Period related to such Payment Date.

  

13

  

“Note Owner” shall mean, with respect to a Book-Entry Note, the Person who is the beneficial owner of such Book-Entry Note, as reflected on the books of the Depository or on the books of a Person maintaining an account with such Depository (directly or as an indirect participant, in accordance with the rules of such Depository).

“Note Purchase Agreement” shall mean that certain note purchase agreement dated June 1, 2010 by and among the Initial Purchaser, Silverleaf, the Issuer, and BB&T Capital Markets, a division of Scott & Stringfellow, LLC.

“Note Rate” shall mean with respect to the Class A Notes, the Class B Notes and the Class C Notes, 5.36%, 8.00% and 10.00% respectively.

“Note Register” shall have the meaning specified in Section 2.4(a) of the Indenture.

“Note Registrar” shall have the meaning specified in Section 2.4(a) of the Indenture.

“Noteholder” shall mean any holder of a Note of any Class.

“Notes” shall mean, collectively, the Class A Notes, the Class B Notes and the Class C Notes.

“Oak N’ Spruce Loan” shall mean a Timeshare Loan relating to the Oak N’ Spruce Resort and evidenced by a Finance Agreement.

“Oak N’ Spruce Certificate” shall mean a certificate of beneficial interest in Oak N’ Spruce Resort Trust which entitles the owner thereof the right to use and occupy a specifically designated Unit at a fixed period of time each year at the Oak N’ Spruce Resort in perpetuity.

“Oak N’ Spruce Financing Statement” means, with respect to an Oak N’ Spruce Loan, a UCC financing statement (UCC-1) in recordable form which (i) names as “debtor” the Obligor on the underlying Oak N’ Spruce Loan, (ii) names Silverleaf as “secured party/assignor,” (iii) names as “secured party/assignee” the Indenture Trustee for the benefit of the Noteholders and (iv) is sufficient under applicable laws to give record notice of the pledge of such Oak N’ Spruce Loan and its proceeds to the Indenture Trustee and its assigns.

“Oak N’ Spruce Financing Statement Amendment” means, with respect to an Oak N’ Spruce Loan, a UCC financing statement amendment (UCC-3) in recordable form which (i) amends the initial UCC financing statement filed with respect to such Oak N’ Spruce Loan to evidence the assignment of the loan to the Indenture Trustee for the benefit of the Noteholders as “secured party/assignee,” (ii) names the Prior Secured Party as “assignor,” (iii) names the Obligor on the underlying Oak N’ Spruce Loan as “debtor,” and (iv) is sufficient under applicable laws to give record notice of a transfer of such Oak N’ Spruce Loan and its proceeds to the Indenture Trustee and its assigns.

  

14

  

“Oak N’ Spruce Resort” shall mean the timeshare resort and related facilities located in South Lee, Massachusetts and operated by the Originator.

“Oak N’ Spruce Resort Trust” shall mean the trust established under the Oak N’ Spruce Trust Agreement.

“Oak N’ Spruce Trust Agreement” shall mean, collectively, that certain Sixth Amended and Restated Declaration of Trust of Oak N’ Spruce Resort Trust, dated as of September 20, 2004, as amended, restated or otherwise modified from time to time, together with all other agreements, documents and instruments governing the operation of the Oak N’ Spruce Resort Trust, including without limitation, the Time Share Supplement to the Sixth Amended and Restated Declaration of Trust of Oak N’ Spruce Resort Trust, dated September 20, 2004 and the Recreation and Use Easement, dated September 20, 2000, as any such documents may be amended, restated or otherwise modified from time to time.

“Oak N’ Spruce Trustee” shall mean Silverleaf Berkshires, Inc., a Texas corporation, in its capacity as trustee under the Oak N’ Spruce Trust Agreement, and its permitted successors and assigns.

“Obligor” shall mean the related obligor under a Timeshare Loan.

“Officer’s Certificate” shall mean a certificate executed by a Responsible Officer of the related party.

“Opinion of Counsel” shall mean a written opinion of counsel, in each case acceptable to the addressees thereof.

“Optional Purchase Limit” shall mean, on any date, an amount equal to (x) 20% of the Cut-Off Date Aggregate Loan Balance less (y) the aggregate Loan Balances (as of the related purchase dates) of all Defaulted Timeshare Loans previously purchased by the Originator and the Servicer pursuant to the Transfer Agreement.

“Optional Redemption Date” shall mean the first date in which the Aggregate Outstanding Note Balance is less than or equal to 10% of the Aggregate Initial Note Balance.

“Originator” shall mean Silverleaf Resorts, Inc., in its capacity as the originator of the Timeshare Loans.

“Orlando Breeze Management Agreement” shall mean that certain Management Agreement between the Originator and the Association of the Orlando Breeze Resort, dated as of January 13, 2005, as amended from time to time.

“Outstanding” shall mean, with respect to the Notes, as of any date of determination, all Notes theretofore authenticated and delivered under the Indenture except:

(a)           Notes theretofore canceled by the Indenture Trustee or delivered to the Indenture Trustee for cancellation;

  

15

  

(b)           Notes or portions thereof for whose payment money in the necessary amount has been theretofore irrevocably deposited with the Indenture Trustee in trust for the holders of such Notes; and

(c)           Notes in exchange for or in lieu of other Notes, which other Notes have been authenticated and delivered pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a Person in whose hands the Note is a valid obligation; provided; however, that in determining whether the holders of the requisite percentage of the Outstanding Note Balance of the Notes have given any request, demand, authorization, direction, notice, consent, or waiver hereunder, Notes owned by the Issuer or any Affiliate of the Issuer shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent, or waiver, only Notes that a Responsible Officer of the Indenture Trustee actually has notice are so owned shall be so disregarded.

“Outstanding Note Balance” shall mean as of any date of determination and Class of Notes, the Initial Note Balance of such Class of Notes less payment of principal actually distributed to the Holders of such Class of Notes as of such date; provided, however, to the extent that for purposes of consents, approvals, voting or other similar act of the Noteholders under any of the Transaction Documents, “Outstanding Note Balance” shall exclude Notes which are held by Silverleaf or any Affiliate thereof.

“Paydown Letter” shall have the meaning set forth in the Escrow Agreement.

“Paying Agent” shall mean any Person authorized under the Indenture to make the distributions required under Section 3.4 of the Indenture, which such Person initially shall be Wells Fargo Bank, National Association.

“Payment Date” shall mean the 15th day of each month, or, if such date is not a Business Day, then the next succeeding Business Day, commencing on the Initial Payment Date.

“Payment Default Event” shall have occurred if (i) each Class of Notes shall become due and payable pursuant to Section 6.2(a) of the Indenture or (ii) each Class of Notes shall otherwise become due and payable following an Event of Default under the Indenture and the Aggregate Loan Balance of the Timeshare Loans is less than the Aggregate Outstanding Note Balance as a result of a default on one or more of the Timeshare Loans.

“Percentage Interest” shall mean, with respect to any Class of Notes as of any date of determination, the quotient, expressed as a percentage, the numerator of which is the Outstanding Note Balance of such Class of Notes as of the immediately preceding Payment Date and the denominator of which is the Aggregate Loan Balance at the beginning of the related Due Period.  The initial Percentage Interest with respect to the Class A Notes, the Class B Notes and the Class C Notes is equal to approximately 40.54%, 15.41% and 27.15%, respectively.

“Permitted Liens” shall mean (a) with respect to Timeshare Loans included in the Collateral, Liens for state, municipal or other local taxes if such taxes shall not at the time be due and payable, (ii) Liens in favor of the Issuer created pursuant to the Transaction Documents, and (iii) Liens in favor of the Indenture Trustee created pursuant to the Indenture; (b) with respect to the related Timeshare Property, materialmen’s, warehousemen’s, mechanic’s and other Liens arising by operation of law in the ordinary course of business for sums not due, (ii) Liens for state, municipal or other local taxes if such taxes shall not at the time be due and payable, (iii) Liens in favor of the Issuer pursuant to the Transfer Agreement and the Loan Sale Agreement and (iv) the Obligor’s interest in the Timeshare Property under the Timeshare Loan whether pursuant to the Oak N’ Spruce Trust Agreement or otherwise; and (c) with respect to Timeshare Loans and Related Security included in the Collateral, any and all rights of the Beneficiaries and the Other Beneficiaries referred to in the Oak N’ Spruce Trust Agreement under the Oak N’ Spruce Trust Agreement.

  

16

  

“Person” means an individual, general partnership, limited partnership, limited liability partnership, corporation, business trust, joint stock company, limited liability company, trust, unincorporated association, joint venture, Issuer, Governmental Authority, or other entity of whatever nature.

“Post-Additional Principal Payment Overcollateralization Percentage” shall mean, with respect to any Payment Date, a fraction, expressed as a percentage, the numerator of which is the excess of (i) the Aggregate Loan Balance as of the last day of the related Due Period over (ii) the Aggregate Outstanding Note Balance (determined after giving effect to the payments of the Principal Distribution Amounts and the Additional Principal Payment on such Payment Date), and the denominator of which is the Aggregate Loan Balance as of the last day of the related Due Period.

“Pre-Additional Principal Payment Overcollateralization Percentage” shall mean, with respect to any Payment Date, a fraction, expressed as a percentage, the numerator of which is the excess of (i) the Aggregate Loan Balance as of the last day of the related Due Period over (ii) the Aggregate Outstanding Note Balance (determined after giving effect to the payments of the Principal Distribution Amounts on such Payment Date), and the denominator of which is the Aggregate Loan Balance as of the last day of the related Due Period.

“Predecessor Servicer Work Product” shall have the meaning specified in Section 5.4(b) of the Indenture.

“Preliminary Confidential Offering Circular” shall mean the preliminary confidential offering circular dated May 21 related to the Notes and Transaction Documents.

“Prior Secured Party” shall have the meaning set forth in the Escrow and Closing Agreement.

“Principal Distribution Amount” shall equal for any Payment Date and Class of Notes, the sum of, without duplication, the following:

	
  

	
(i)

	
the product of (a) such Class’ Percentage Interest and (b) the amount of principal collected in respect of each Timeshare Loan during the related Due Period (including, but not limited to, principal in respect of scheduled payments, partial prepayments, prepayments in full, liquidations, Substitution Shortfall Amounts, Force Majeure Purchase Prices and Repurchase Prices, if any, but excluding principal received in respect of Timeshare Loans that became Defaulted Timeshare Loans during prior Due Periods) or, if the Transfer Date for a Qualified Substitute Timeshare Loan shall have occurred during the related Due Period, the amount of principal collected in respect of such Qualified Substitute Timeshare Loan after the related Cut-Off Date;

  

17

  

	
  

	
(ii)

	
the product of (a) such Class’ Percentage Interest and (b) the aggregate Loan Balance of all Timeshare Loans which became Defaulted Timeshare Loans during the related Due Period, less the principal portion of Repurchase Prices paid in respect of Defaulted Timeshare Loans during the related Due Period; and

	
  

	
(iii)

	
any unpaid Principal Distribution Amounts for such Class from prior Payment Dates.

“Prorata Payment Event” shall exist if (i) on any of the first 12 Payment Dates occurring after the Closing Date, the Pre-Additional Principal Payment Overcollateralization Percentage is less than 23.00% or (ii) on or after the 60th day following the Optional Redemption Date, the Servicer has not exercised its option to redeem the Notes; provided, however, that a Prorata Payment Event shall not exist on any Determination Date on which a Sequential Pay Event or a Default Acceleration Event exists.  A Prorata Payment Event occurring as a result of clause (i) above shall continue until the Post-Additional Principal Payment Overcollateralization Percentage is equal to 23.00%.  A Prorata Payment Event occurring as a result of clause (ii) above shall continue until the Notes have been paid in full.

“Qualified Substitute Timeshare Loan” shall mean a Timeshare Loan (i) that, when aggregated with other Qualified Substitute Timeshare Loans being substituted on such Transfer Date, has a Loan Balance, after application of all payments of principal due and received during or prior to the month of substitution, not in excess of the Loan Balance of the Timeshare Loan being substituted on the related Transfer Date, (ii) that complies, as of the related Transfer Date, with each of the representations and warranties contained in the Transfer Agreement or the Loan Sale Agreement, as applicable, including that such Qualified Substitute Timeshare Loan is an Eligible Timeshare Loan, (iii) that shall not cause the weighted average coupon rate of the Timeshare Loans, after such substitution, to be less than the weighted average coupon rate of the Timeshare Loans as of the immediately preceding Determination Date, (iv) that shall not cause the weighted average FICO score of the Timeshare Loans, after such substitution, to be less than the weighted average FICO score of the Timeshare Loans as of the immediately preceding Determination Date, (v) that shall not cause the weighted average months of seasoning on the Timeshare Loans, after such substitution, to be less than 17 months and (vi) that does not have a stated maturity greater than 12 months prior to the Stated Maturity.

“Rating Agency” shall mean S&P.

“Rating Agency Confirmation” shall mean a written confirmation from the Rating Agency that the specified action therein shall not cause the then existing rating on any of the Notes to be negatively qualified, lowered or withdrawn.

“Receivables” means the payments required to be made pursuant to a Timeshare Loan.

  

18

  

“Record Date” shall mean, with respect to any Payment Date (except for the Initial Payment Date), the close of business on the last Business Day of the calendar month immediately preceding the month such Payment Date occurs.  With respect to the Initial Payment Date, the Record Date will be the Closing Date.

“Redemption Date” shall mean with respect to the redemption of the Notes on or after the Optional Redemption Date, the date fixed pursuant to Section 10.1 of the Indenture.

“Redemption Price” shall mean, with respect to each Class of Notes, the sum of the Outstanding Note Balance of such Class of Notes, together with interest accrued thereon at the applicable Note Rate up to and including the Redemption Date.

“Regulation S Global Note” shall have the meaning set forth in Section 2.2 of the Indenture.

“Related Security” shall mean with respect to any Timeshare Loan, (i) all of the Issuer’s interest in the Timeshare Property arising under or in connection with the related Mortgage, Financing Agreement, Oak N’ Spruce Certificate and the related Timeshare Loan Files, (ii) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Timeshare Loan, together with all mortgages, assignments and financing statements signed by an Obligor describing any collateral securing such Timeshare Loan, (iii) all guarantees, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Timeshare Loan, and (iv) all other security and books, records and computer tapes relating to the foregoing.

“Repurchase Price” shall mean with respect to any Timeshare Loan to be purchased by the Originator pursuant to the Transfer Agreement or the Servicer pursuant to the Loan Sale Agreement, an amount equal to the Loan Balance of such Timeshare Loan as of the date of such purchase or repurchase, as the case may be, together with all accrued and unpaid interest on such Timeshare Loan at the related Timeshare Loan Rate to, but not including, the due date in the then current Due Period.

“Request for Release” shall be a request for release of Timeshare Loan Files in the form required by the Custodial Agreement.

“Required Payments” shall mean each of the items described in (i) through (ix) of Section 3.4(a) of the Indenture.

“Residual Certificate” shall mean that certain membership certificate of the Issuer evidencing the limited liability company interest in the Issuer, the form of which is attached as Schedule F to the Limited Liability Company Agreement.

“Reservation System” shall mean the centralized reservation system for all Resorts.

“Resort” shall mean any of the following resorts: Holly Lake Resort, The Villages and Lake O’ The Wood Resorts, Piney Shores Resort, Timber Creek Resort, Fox River Resort, Apple Mountain Resort, Ozark Mountain Resort, Holiday Hills Resort, Oak N’ Spruce Resort, Silverleaf’s Seaside Resort, Hill Country Resort and Orlando Breeze Resort.

  

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“Responsible Officer” shall mean (a) when used with respect to the Indenture Trustee, any officer assigned to the Corporate Trust Office, including any Managing Director, Vice President, Assistant Vice President, Secretary, Assistant Secretary, Assistant Treasurer, any trust officer or any other officer such Person customarily performing functions similar to those performed by any of the above designated officers, and also, with respect to a particular matter, any other officer to whom such matter is referred because of such officer’s knowledge of and familiarity with the particular subject; (b) when used with respect to the Servicer, the Chief Financial Officer, a Vice President, an Assistant Vice President, the Chief Accounting Officer or the Secretary of the Servicer; and (c) with respect to any other Person, the chairman of the board, chief financial officer, the president, a vice president, the treasurer, an assistant treasurer, the secretary, an assistant secretary, the controller, general partner, trustee or the manager of such Person.

“Restricted Period” shall mean the 40-day period prescribed by Regulation S under the Securities Act commencing on the later of (a) the date upon which Notes are first offered to Persons other than the Initial Purchaser and any other distributor (as such term is described in Regulation S) of the Notes and (b) the Closing Date.

“Rule 144A Global Note” shall have the meaning specified in Section 2.2 of the Indenture.

“S&P” shall mean Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.

“Schedule of Timeshare Loans” shall mean the list of Timeshare Loans delivered pursuant to the Transfer Agreement and the Loan Sale Agreement, as amended from time to time to reflect repurchases, substitutions and Qualified Substitute Timeshare Loans conveyed pursuant to the terms of the Indenture, the Transfer Agreement and the Loan Sale Agreement, which list shall set forth the following information with respect to each Timeshare Loan as of the related Cut-Off Date, as applicable, in numbered columns:

	
1

	
Name of Obligor

	
2

	
Unit Ref/Loan Number

	
3

	
Interest Rate Per Annum

	
4

	
Date of Timeshare Loan Origination

	
5

	
Maturity

	
6

	
Sales Price

	
7

	
Monthly Payment

	
8

	
Original Loan Balance

	
9

	
Original Term

	
10

	
Outstanding Loan Balance

	
11

	
Down Payment

	
12

	
First Payment Date

	
13

	
Zip Code

	
14

	
Unit/Week

	
15

	
Resort Name

  

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“Securities Act” shall mean the Securities Act of 1933, as amended.

“Securitization Custodian” shall have the meaning specified the second “whereas” clause in the Transfer Agreement and the second “whereas” clause in the Loan Sale Agreement.

“Securitization Indenture” shall have the meaning specified the second “whereas” clause in the Transfer Agreement and the second “whereas” clause in the Loan Sale Agreement.

“Securitization Indenture Trustee” shall have the meaning specified the second “whereas” clause in the Transfer Agreement and the second “whereas” clause in the Loan Sale Agreement.

“Securitization Servicer” shall have the meaning specified the second “whereas” clause in the Transfer Agreement.

“Sells” shall have the meaning set forth in Section 2(a) of the Transfer Agreement and the Loan Sale Agreement, as applicable.

“Seller” shall mean Silverleaf Resorts, Inc. under the Transfer Agreement and Silverleaf Finance IV, LLC under the Loan Sale Agreement, as applicable.

“Sequential Pay Event” shall exist on any Determination Date if the Cumulative Default Level as of the last day of any Due Period specified below exceeds the following parameters:

	
Due Period

	
Cumulative Default Level %

	
1-3

	
0.76%

	
4-6

	
3.89%

	
7-9

	
6.86%

	
10-12

	
9.05%

	
13-15

	
10.84%

	
16-18

	
12.89%

	
19-21

	
14.90%

	
22-24

	
16.09%

	
25-27

	
17.06%

	
28-30

	
17.97%

	
31-33

	
19.08%

	
34-36

	
19.77%

	
37-39

	
20.25%

	
40-42

	
20.63%

	
43 and thereafter

	
20.73%

  

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“Servicer” shall initially mean Silverleaf in its capacity as servicer under the Indenture, the Backup Servicing Agreement and the Custodial Agreement, and its permitted successors and assigns.

“Servicer Event of Default” shall have the meaning specified in Section 5.4 of the Indenture.

“Servicer Termination Costs” shall mean any extraordinary out-of-pocket expenses incurred by the successor servicer associated with the transfer of servicing.

“Servicing Fee” shall mean for any Payment Date, the product of (i) one-twelfth of 1.75% and (ii) the Aggregate Loan Balance as of the first day of the related Due Period.

“Servicing Officer” shall mean those officers of the Servicer involved in, or responsible for, the administration and servicing of the Timeshare Loans, as identified on the list of Servicing Officers furnished by the Servicer to the Indenture Trustee and the Noteholders from time to time.

“Servicing Standard” shall mean, with respect to the Servicer a servicing standard which complies with applicable law, the terms of the respective Timeshare Loans and, to the extent consistent with the foregoing, in accordance with the customary and usual procedures employed by it with respect to comparable assets that the servicer services for itself or its Affiliates (and if Silverleaf is no longer the Servicer, in accordance with the customary standard of prudent servicers of loans secured by timeshare interests similar to the Timeshare Properties, employed by it when servicing loans for third parties), but without regard for (i) any relationship that it or any of its Affiliates may have with the related Obligor, and (ii) its right to receive compensation for its services under the Indenture or with respect to any particular transaction.

“Silverleaf” shall mean Silverleaf Resorts, Inc., a Texas corporation.

“Silverleaf Loans” shall mean the Timeshare Loans conveyed by Silverleaf to the Issuer pursuant to the Transfer Agreement.

“Silverleaf Serviced Timeshare Loan” means any timeshare loan (including any Timeshare Loan conveyed to the Issuer pursuant to the Transfer Agreement or the Loan Sale Agreement) serviced by Silverleaf or an Affiliate thereof for the benefit of the Noteholders, for Silverleaf’s own account, or for the accounts of any and all third parties.

“Similar Law” shall mean a provision of federal, state or local law that is substantially similar to the prohibited transaction rules under Section 406 of ERISA or Section 4975 of the Code.

“Stated Maturity” shall mean the Payment Date occurring in July 2022.

“Subsequent Cut-Off Date” shall mean with respect to any Transfer Date, (i) the close of business on the last day of the Due Period immediately preceding such Transfer Date or (ii) such other date designated by the Servicer.

  

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“Substitution Shortfall Amount” shall mean with respect to any Transfer Date, an amount equal to the excess of the aggregate Loan Balances of the substituted Timeshare Loans over the aggregate Loan Balances of the Qualified Substitute Timeshare Loans.

“Temporary Regulation S Global Note” shall have the meaning specified in Section 2.2 of the Indenture.

“Three Month Rolling Average of Timeshare Loan Delinquency Ratios” means, as of any date of determination, a fraction (expressed as a percentage), (A) the numerator of which is the sum of the Aggregate Loan Balance of all Timeshare Loans which were Delinquent Timeshare Loans as of the last day of each of the three most recently ended Due Periods, divided by 3, and (B) the denominator of which is the sum of the Aggregate Loan Balance of all Timeshare Loans as of the last day of each of the three most recently ended Due Periods, divided by 3.

“Timeshare Declaration” shall mean the declaration or other document recorded in the real estate records of the applicable municipality or government office where a Resort is located for the purpose of creating and governing the rights of owners of Timeshare Properties related thereto, as it may be in effect from time to time.

“Timeshare Loan” shall mean a Mortgage Loan, Oak N’ Spruce Loan or a Qualified Substitute Timeshare Loan subject to the lien of the Indenture. As used in the Transaction Documents, the term “Timeshare Loan” shall include the related Mortgage Note, Mortgage, the Finance Agreement and other Related Security contained in the related Timeshare Loan Documents.

“Timeshare Loan Acquisition Price” shall mean with respect to any Timeshare Loan, an amount equal to the Loan Balance of such Timeshare Loan plus accrued and unpaid interest thereon up to and including the Initial Cut-Off Date.

“Timeshare Loan Documents” shall mean with respect to each Timeshare Loan and each Obligor, the related (i) Timeshare Loan Files, and (ii) Timeshare Loan Servicing Files.

“Timeshare Loan File(s)” shall mean, with respect to a Timeshare Loan, the Timeshare Loan and all documents related to such Timeshare Loan, including:

	
  

	
1.

	
a Contract for Sale (copy), which includes Truth in Lending Disclosure,

	
  

	
2.

	
a Note (original),

	
  

	
3.

	
an Allonge (copy) (or more than one Allonge that when taken together) shall show the transfer of title as set forth in the Custodial Agreement,

	
  

	
4.

	
for a post-July 2004 Oak N’ Spruce Loan – Oak N’ Spruce Resort Certificate of Beneficial Interest (original),

	
  

	
5.

	
one of the following: (a) for a Mortgage Loan – a Deed of Trust, Deed to Secure Debt or Mortgage with Property Description Addendum (original or file-stamped or certified copy), (b) for an Oak N’ Spruce Loan (pre-July 2004) – a Mortgage and Assignment of Beneficial Interest with Property Description Addendum (original or file-stamped or certified copy) or (c) for an Oak N’ Spruce Loan (post-July 2004) – an Assignment of Beneficial Interest with Property Description Addendum (not recorded or acknowledged),

  

23

  

	
  

	
6.

	
any assumption agreement, refinancing agreement, or general warranty deed evidencing a transfer of title, if any, (copy),

	
  

	
7.

	
(a)           in the case of Timeshare Loans purchased by the Issuer from Silverleaf Resorts, Inc., an original mortgagee title insurance policy or master policy referencing such Timeshare Loan naming as the insured thereunder (a) Silverleaf Resorts, Inc., (b) a Prior Secured Party or (c) Silverleaf Finance VII, LLC, as applicable, and in each case their respective successors and assigns and covering Silverleaf Finance VII, LLC, and its successors and assigns (which shall be delivered by (i) the Escrow Agent to the Custodian within 90 days of the Closing Date and (ii) by Silverleaf to the Custodian within 90 days of the related Transfer Date),

(b)           in the case of Timeshare Loans purchased by Issuer from Silverleaf Finance IV, LLC, an original mortgagee title insurance policy or master policy referencing such Timeshare Loan naming as the insured thereunder (a) Silverleaf Finance IV, LLC , (b) Silverleaf Finance VII, LLC or (c) the Prior Secured Party, as applicable, and in each case their respective successors and assigns and covering Silverleaf Finance VII, LLC, and its successors and assigns (which shall be delivered by (i) the Escrow Agent to the Custodian within 90 days of the Closing Date and (ii) by Silverleaf to the Custodian within 90 days of the related Transfer Date),

	
  

	
8.

	
an original of each guarantee, assumption, modification, substitution agreement, deferment letter, or other document, if any, which relates to the related Timeshare Loan (or copy thereof certified by an officer of the related originator to be a true and correct copy), and which shall cover both the Note and/or the Contract for Sale, and

	
  

	
9.

	
all related finance applications executed and delivered by the related Obligor with respect to the purchase of a Timeshare Property.

“Timeshare Loan Rate” shall mean with respect to any Timeshare Loan, the specified coupon rate thereon.

“Timeshare Loan Servicing Files” shall mean with respect to each Timeshare Loan and each Obligor, the portion of the Timeshare Loan Files necessary for the Servicer to service such Timeshare Loan including but not limited to (i) the original truth-in-lending disclosure statement executed by such Obligor, as applicable, (ii) all writings pursuant to which such Timeshare Loan arises or which evidences such Timeshare Loan and not delivered to the Custodian, (iii) all papers and computerized records customarily maintained by the Servicer in servicing timeshare loans comparable to the Timeshare Loans in accordance with the Servicing Standard and (iv) each Timeshare Program Consumer Document and Timeshare Program Governing Document, if applicable, related to the applicable Timeshare Property.

  

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“Timeshare Program” shall mean the program under which (1) an Obligor has purchased a Timeshare Property and (2) an Obligor shares in the expenses associated with the operation and management of such program.

“Timeshare Program Consumer Documents” shall mean, as applicable, the Finance Agreement, Mortgage Note, Mortgage or certificate of beneficial interest, credit disclosures, rescission right notices, final subdivision public reports/prospectuses/public offering statements, the Timeshare Project exchange affiliation agreement and other documents, disclosures and advertising materials used or to be used by an Originator in connection with the sale of Timeshare Properties.

“Timeshare Program Governing Documents” shall mean the articles of organization or articles of incorporation of each Association, the rules and regulations of each Association, the Timeshare Program management contract between each Association and a management company, and any subsidy agreement by which the Originator is obligated to subsidize shortfalls in the budget of a Timeshare Program in lieu of paying assessments, as they may be from time to time in effect and all amendments, modifications and restatements of any of the foregoing.

“Timeshare Property” shall mean (i) with respect to a Mortgage Loan, a fractional fee simple timeshare interest in a Unit in a Resort entitling the related Obligor to the use and occupancy of a Unit at the Resort for a specified period of time each year or every other year in perpetuity and (ii) with respect to an Oak N’ Spruce Loan, an Oak N’ Spruce Certificate.

“Title Commitment” shall have the meaning set forth in the Escrow Agreement.

“Title Policy” shall have the meaning set forth in the Escrow Agreement.

“Transaction Documents” shall mean the Indenture, the Transfer Agreement, the Loan Sale Agreement, the Lockbox Agreement, the Backup Servicing Agreement, the Custodial Agreement, the Escrow Agreement, the Note Purchase Agreement and all other agreements, documents or instruments delivered in connection with the transactions contemplated thereby.

“Transfer Agreement” shall mean the transfer agreement, dated as of June 1, 2010, between the Originator and the Issuer pursuant to which certain of the Timeshare Loans are transferred to the Issuer.

“Transfer Date” shall mean the date on which the Originator substitutes one or more Timeshare Loans in accordance with Section 4.5 of the Indenture.

“Treasury Regulations” shall mean the regulations, included proposed or temporary regulations, promulgated under the Code.  References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

  

25

  

“Trust Accounts” shall mean collectively, the Lockbox Account, the Collection Account and the General Reserve Account.

“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction, as amended from time to time.

“Unit(s)”: One individual air-space residential unit, cabin, villa, cottage or townhome within a Resort, together with all furniture, fixtures and furnishings therein, and together with any and all interests in common elements appurtenant thereto, as provided in the related Timeshare Program Governing Documents.

“Upgraded Timeshare Loan” shall mean a Timeshare Loan for which the related Obligor has elected to purchase a new upgraded Timeshare Property.

 

 

26ex10_3.htm

Exhibit 10.3

EXECUTION COPY

TRANSFER AGREEMENT

between

SILVERLEAF RESORTS, INC.

AND

SILVERLEAF FINANCE VII, LLC

DATED AS OF JUNE 1, 2010

  

  

  

TRANSFER AGREEMENT

This TRANSFER AGREEMENT (this “Agreement”), dated as of June 1, 2010, is between Silverleaf Resorts, Inc., a Texas corporation (the “Originator”) and Silverleaf Finance VII, LLC, a Delaware limited liability company (the “Issuer”), and their respective permitted successors and assigns.

W I T N E S S E T H:

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

WHEREAS, on June 8, 2010 (the “Closing Date”) and on each Transfer Date, the Issuer intends to pledge such Transferred Assets acquired thereby to Wells Fargo Bank National Association, as indenture trustee (in such capacity, the “Securitization Indenture Trustee”), custodian (in such capacity, the “Securitization Custodian”) and backup servicer, pursuant to an indenture, dated as of June 1, 2010 (the “Securitization Indenture”), by and among the Issuer, Silverleaf Resorts, Inc., in its capacity as servicer (the “Securitization Servicer”) and the Securitization Indenture Trustee, to secure the Issuer’s (i) 5.36% Timeshare Loan-Backed Notes, Series 2010-A, Class A Notes, (ii) 8.00% Timeshare Loan-Backed Notes, Series 2010-A, Class B Notes, and (iii) 10.00% Timeshare Loan-Backed Notes, Series 2010-A, Class C Notes (collectively, the “Securitization Notes”);

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

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

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 Originator hereby sells (“Sells,” “Sale” or “Sold”) or contributes (“Contribute” or “Contribution”) (in each case to the extent described in subsection (f) below) and otherwise transfers, assigns, and conveys to the Issuer, without recourse (except for Defective Timeshare Loans to the extent specifically provided herein), and the Issuer hereby agrees to purchase or accept a contribution of (in each case to the extent described in subsection (f) below) and otherwise acquires, all right, title and interest of the Originator in and to the Timeshare Loans included on the schedule delivered to the Issuer 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, the Originator shall transfer, or cause the deposit, into the Lockbox Account of all amounts received by the Originator 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 Originator hereby acknowledges that each sale, contribution and conveyance to the Issuer hereunder is absolute and irrevocable, without reservation or retention of any interest whatsoever by the Originator.

(b)           Reserved.

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

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

(e)           Limitation of Liability.  None of the Issuer or any subsequent assignee of the Issuer shall have any obligation or liability with respect to any Timeshare Loan nor shall the Issuer 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 Issuer, the Originator or any subsequent assignee herewith and any such liability is hereby expressly disclaimed.

  

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(f)            Purchase Price/Capital Contribution.  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 Originator by wire transfer on the applicable conveyance date to an account designated by the Originator on or before such conveyance date or by means of proper accounting entries being entered upon the accounts and records of the Originator and the Issuer on the applicable conveyance date.  To the extent that the cash amount received for any Timeshare Loans, Timeshare Properties, Related Security and other conveyed property related thereto and additional collateral Sold by the Originator to the Issuer hereunder is less than the Timeshare Loan Acquisition Price of such property at the time of the applicable Sale, the shortfall shall be deemed to have been Contributed by the Originator to the capital of the Issuer on the applicable conveyance date.

(g)            Schedule of Timeshare Loans.  Upon the Originator’s Sale or Contribution of the Timeshare Loans, Timeshare Properties, Related Security and other conveyed property related thereto and additional collateral to the Issuer, the Originator 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/or contribution and an absolute assignment by the Originator to the Issuer 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 and/or contribution, it is the intention of the parties hereto that the Originator shall be deemed to have granted and does hereby grant to the Issuer as of the date hereof a first priority perfected security interest in all of Originator’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.

  

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The characterization of the Originator as “debtor” and the Issuer 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 and/or contribution to the Issuer of such Originator’s entire right, title and interest in and to the Transferred Assets.

Each of the Originator, the Issuer 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 Issuer.

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

(a)            All representations and warranties of the Originator 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 the Originator shall have delivered to the Issuer, 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 Originator 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 Securitization Servicer, and (iii) all documents and certifications required pursuant to the terms of the Custodial Agreement and the Escrow and Closing Agreement.

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

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

(e)            The Securitization Notes shall be issued and sold on the Closing Date, and the Issuer shall receive the full consideration due it upon the issuance of the Securitization Notes, and the Issuer shall have applied such consideration to the extent necessary, to pay that certain price (the “Timeshare Loan Acquisition Price”) for each Timeshare Loan, except to the extent that the Originator has made a Contribution to the Issuer pursuant to Section 2(f).

  

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(f)             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.

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

SECTION 5.            Representations and Warranties and Certain Covenants of the Originator.

(a)            The Originator represents and warrants to the Issuer 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 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 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)           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.

  

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(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 it have been duly authorized, executed and delivered by it and, assuming the due execution and delivery by, the other party or parties hereto and thereto, constitute legal, valid and binding agreements enforceable against it 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 it 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 it 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 it is required which has not been obtained in connection with the authorization, execution, delivery or performance by it of this Agreement or any of the other Transaction Documents to which it 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 Issuer therein pursuant to Section 3 hereof.

  

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

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

(ix)            Pending Litigation or Other Proceedings. 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.

(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 or the Originator’s ability to perform its respective obligations under this Agreement, which have not been disclosed herein or therein or in the certificates and other documents furnished to the Issuer by or on its behalf pursuant hereto or thereto specifically for use in connection with the transactions contemplated hereby or thereby.

  

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(xi)            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.

(xii)           No Deficiency Accumulation. To the Originator’s Knowledge:  (i) with respect to plan years beginning prior to January 1, 2008, neither the Originator nor any of its Commonly Controlled Affiliates (as defined below) has any “accumulated funding deficiency” (as such term is defined under ERISA and the Code), whether or not waived, with respect to any Employee Pension Benefit Plan (as defined below), and no event has occurred or circumstance exists that may result in any accumulated funding deficiency as of the last day of any plan year beginning before January 1, 2008 of any such plan; (ii) with respect to plan years beginning after December 31, 2007, neither the Originator nor any of its Commonly Controlled Affiliates has any unpaid “minimum required contribution” (as such term is defined under ERISA and the Code) with respect to any Employee Pension Benefit Plan, whether or not such unpaid minimum required contribution is waived, and no event has occurred or circumstance exists that may result in any unpaid minimum required contribution as of the last day of the current plan year of any such plan; (iii) the Originator and each of its Commonly Controlled Affiliates has no outstanding liability for any undisputed contribution required under any Originator Multiemployer Plan (as defined below); and (iv) the Originator and each of its Commonly Controlled Affiliates has no outstanding liability for any disputed contribution required under any Originator Multiemployer Plan that either individually or in the aggregate could cause a material adverse effect on the Originator or any of its Commonly Controlled Affiliates. To the Originator’s Knowledge: (a) neither the Originator nor any of its Commonly Controlled Affiliates has incurred any Withdrawal Liability (as defined below) and (b) no event has occurred or circumstance exists that could result in any Withdrawal Liability. To the Originator’s Knowledge, neither the Originator nor any of its Commonly Controlled Affiliates has received notification of the reorganization, termination, partition, or insolvency of any Originator Multiemployer Plan. For purposes of this subsection, “Commonly Controlled Affiliates” means those direct or indirect affiliates of the Originator that would be considered a single employer with the Originator under Section 414(b), (c), (m), or (o) of the Code; “Employee Pension Benefit Plan” means an employee pension benefit plan, as such term is defined in Section 3(2) of ERISA, that is sponsored, maintained or contributed to by the Originator or any of its Commonly Controlled Affiliates (other than an Originator Multiemployer Plan); “Multiemployer Plan” means a multiemployer plan as such term is defined in Section 3(37) of ERISA; “Originator Multiemployer Plan” means a Multiemployer Plan to which the Originator or any of its Commonly Controlled Affiliates contributes or in which the Originator or any of its Commonly Controlled Affiliates participates; and “Withdrawal Liability” means liability as determined under ERISA for the complete or partial withdrawal of the Originator or any of its Commonly Controlled Affiliates from a Multiemployer Plan.

  

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(xiii)          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 Issuer 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.

(xiv)         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 Issuer and the Securitization Indenture Trustee).  It is a corporation formed under the laws of the State of Texas.

(xv)          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 or the Originator 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.

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

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

  

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

(F)           All ad valorem taxes and other taxes and assessments against the Oak N’ Spruce Trust and/or its trust estate have been paid when due and neither the Originator 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)           It shall continue to control and manage the Oak N’ Spruce Trust, and Originator 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 it and is controlled by it.  It shall cause Silverleaf Berkshires, Inc. to remain the Oak N’ Spruce Trustee and a wholly-owned subsidiary of it, and it 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)             It 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.

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

(xviii)       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.

  

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(xix)          Transactions in Ordinary Course.  The transactions contemplated by this Agreement are in its ordinary course of business.

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

(xxi)          No Conveyance.  It 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.

(xxii)         Timeshare Loan Documents.  It represents and warrants that all of the documents evidencing each of the Timeshare Loans are identical in all material respects to the form determined to be valid, binding and enforceable in the applicable state by the corresponding local counsel opinion issued by (I) Weinstock & Scavo, P.C., dated as of June 8, 2010 , pertaining to Georgia law matters, (II) Bulkley, Richardson and Gelinas, LLP, dated as of June 8, 2010, pertaining to Massachusetts law matters, (III) Stinson Morrison Hecker LLP, dated as of June 8, 2010, pertaining to Missouri law matters, (IV) Mayer Brown LLP, dated as June 8, 2010, pertaining to Illinois law matters, (V) Meadows, Collier, Reed, Cousins, Crouch & Ungerman L.L.P., dated as June 8, 2010, pertaining to Texas law matters, and (VI) Holland and Knight LLP, dated as of June 8, 2010, pertaining to Florida law matters (collectively, the “Local Counsel Opinions”).

(xxiii)        Timeshare Marketing Materials and Disclosure Statements.  It 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.

(xxiv)        Local Counsel Opinions.  The facts regarding the Originator, 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.

(xxv)         Bankruptcy Opinion.  The facts regarding the Originator, the Issuer, the Resorts, the Timeshare Loans and related matters set forth or assumed in the opinion issued by Baker & McKenzie LLP dated as of June 8, 2010 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.

(xxvi)        Custodial Files.  It shall, on or prior to the Closing Date and 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.

  

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(xxvii)       Escrow Documents.  It 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 related Schedule of Mortgage Loans, an original recorded Assignment of Mortgage (which may be a part of a blanket assignment of more than one Mortgage Loan or pre-July 2004 Oak N’ Spruce Loan), showing a complete chain of title from Originator to the Securitization Indenture Trustee on behalf of the Securitization Noteholders signed by an Authorized Officer of the Originator 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) with respect to each post-July 2004 Oak N’ Spruce Loan listed on the related Schedule of Oak N’ Spruce Loans, a file-stamped Oak N’ Spruce Financing Statement 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, naming the Originator as secured party/assignor, and by naming the Securitization Indenture Trustee on behalf of the Securitization Noteholders as the secured party/assignee (or, in the alternative, in the form of an electronic spreadsheet submitted to the Securitization 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); (III) with respect to each Mortgage Loan and pre-July 2004 Oak N’ Spruce Loan listed on the related Schedule of Prior Secured Party’s Collateral, 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 the Originator to the Securitization Indenture Trustee on behalf of the Securitization Noteholders signed by an Authorized Officer of the Prior Secured Party, the Originator, Issuer 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; (IV)(a) with respect to each pre-July 2004 Oak N’ Spruce Loan listed on the related Schedule of Prior Secured Party’s Collateral, 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 the Prior Secured Party as the assignor, and (b) with respect to each post-July 2004 Oak N’ Spruce Loan listed on the related Schedule of Prior Secured Party’s Oak N’ Spruce Loans, 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 the Prior Secured Party as the assignor (or, with respect to clauses (IV)(a) and (b) hereof, such Oak N’ Spruce Financing Statement Amendment may be delivered in the form of an electronic spreadsheet submitted to the Securitization 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 (V) all other recorded and/or filed documents provided under the Escrow Agreement.

  

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(xxviii)      Prior Secured Parties’ Documents.  In accordance with the Escrow Agreement, it 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 each of the Prior Secured Parties.

(xxix)        Title Policies.  In accordance with the Escrow Agreement, it 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.

(b)           The Originator hereby makes the representations and warranties relating to the Timeshare Loans contained in Schedule I hereto for the benefit of the Issuer and its assignees as of the Closing Date (with respect to each Timeshare Loan transferred on the Closing Date).

(c)            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 Issuer 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.  The Originator acknowledges that it has been advised that the Issuer 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 Originator agrees that, upon any such assignment, the Securitization Indenture Trustee may enforce directly, without joinder of the Issuer (but subject to any defense that the Originator may have under this Agreement) all rights and remedies hereunder.

(d)            With respect to any representations and warranties contained in Section 5 which are made to the Originator’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 Issuer 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.

  

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SECTION 6.           Repurchases and Substitutions.

(a)            Mandatory Repurchases and Substitutions for Breaches of Representations and Warranties.  Upon the receipt of notice by the Originator 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 Issuer or any subsequent assignee of the Issuer therein, the Originator 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 Issuer’s or its assignee’s interest in such related defective Timeshare Loan (the “Defective Timeshare Loan”) from the Issuer 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)            Repurchase of Upgraded Timeshare Loans.  With respect to any Upgraded Timeshare Loan in the pool of Timeshare Loans that have been conveyed to the Issuer under this Agreement or the Loan Sale Agreement (the “Timeshare Loan Pool”), on any date, the Originator shall prepay such Upgraded Timeshare Loan on behalf of the related Obligor by depositing the related Repurchase Price in the Collection Account as set forth in Section 4.5(e) of the Indenture.

(c)            Optional Purchases of Defaulted Timeshare Loans. With respect to any Timeshare Loan that has become a Defaulted Timeshare Loan in the Timeshare Loan Pool, during the Due Period in which such Timeshare Loan became a Defaulted Timeshare Loan, the Originator shall have the option, but not the obligation, to purchase the Defaulted Timeshare Loan at a purchase price equal to the Repurchase Price; provided, however, that the option to purchase a Defaulted Timeshare Loan pursuant to this Section 6(c) is limited on any date to the Optional Purchase Limit.  If the Originator shall purchase Defaulted Timeshare Loans as provided herein, the Originator shall deposit the related Repurchase Price, in the Collection Account as set forth in Section 4.5(e) of the Indenture.

(d)            Optional Purchase of Force Majeure Loans.  If a Force Majeure Event occurs at a Resort, the Originator shall have the option, but not the obligation, to purchase the related Force Majeure Loans in the Timeshare Loan Pool, so long as such Timeshare Loans have not become Defaulted Timeshare Loans.  The Originator will have the option to purchase a Force Majeure Loan at the Force Majeure Purchase Price; provided, however, that (i) the Originator’s option to purchase a Force Majeure Loan is limited on any date to the Force Majeure Purchase Limit and (ii) the Originator shall have the right to exercise such purchase option for a Force Majeure Loan only if the related Force Majeure Purchase Price equals or exceeds the Loan Balance of such Force Majeure Loan as of the date of such purchase, plus all accrued and unpaid interest thereon.

(e)            Payment of Repurchase Prices and Substitution Shortfall Amounts. The Issuer hereby directs and the Originator hereby agrees to remit or cause to be remitted all amounts in respect of Repurchase Prices, Force Majeure Purchase 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 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.

  

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

(g)            Qualified Substitute Timeshare Loans. On the related Transfer Date, the Issuer hereby directs and the Originator 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 Originator does hereby transfer, assign, sell, contribute and grant to the Issuer, without recourse (except as provided in Section 6 and Section 8 hereof), any and all of the Originator’s right, title and interest in and to (i) each Qualified Substitute Timeshare Loan conveyed to the Issuer 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 and/or contribution, 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(g) shall immediately vest in the Issuer, its successors and assigns.  The Originator 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 Originator agrees that such Qualified Substitute Timeshare Loans shall be subject to the provisions of this Agreement.

(h)            Officer’s Certificate.  The Originator shall, on each related Transfer Date, certify in writing to the Issuer 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 Securitization Servicer.

(i)             Release.  In connection with any repurchase, purchase or substitution of one or more Timeshare Loans contemplated by this Section 6, upon satisfaction of the conditions contained in this Section 6, the Issuer 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 Originator, in each case, without recourse, as shall be necessary to vest in the Originator or its designee (or to evidence the vesting in such Person of) the legal and beneficial ownership of such released Timeshare Loans.  The Issuer shall cause the Securitization Indenture Trustee to cause the Securitization Custodian to release the related Timeshare Loan Files to the Originator or its designee and the Securitization Servicer to release the related Timeshare Loan Servicing Files to the Originator or its designee.

  

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

SECTION 7.           Additional Covenants of the Originator.

(a)            The Originator hereby covenants and agrees with the Issuer 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 Issuer.

(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 Issuer and that the Issuer is the owner of such Timeshare Loan.

(v)            On or prior to the Closing Date, it shall file at its own expense financing statements with respect to the Transferred Assets transferred hereunder, naming the Originator as debtor and naming as secured parties the Issuer and the Securitization Indenture Trustee on behalf of the Securitization Noteholders, in the form and manner reasonably requested by the Issuer.  It shall deliver file-stamped copies of such financing statements to the Issuer and the Securitization Indenture Trustee on behalf of the Securitization Noteholders.

  

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(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 Issuer or the Securitization Indenture Trustee may reasonably request, to perfect, protect or more fully evidence the sale or contribution of the Timeshare Loans, or to enable the Issuer 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 its legal name 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 Issuer and the Securitization Indenture Trustee in writing.

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

(ix)            In the event that it 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)             It will keep its principal place of business and chief executive office and the office where it keeps its records concerning the Timeshare Loans at its address listed herein.

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

(xii)           It authorizes the Issuer 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 its signature where permitted by law.  A photocopy or other reproduction of this Agreement shall be sufficient as a financing statement where permitted by law.  The Issuer 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.

  

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(xiii)          It 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, or a capital contribution of, the Timeshare Loans, Timeshare Properties, Related Security and other conveyed property related thereto and additional collateral by it to the Issuer.

SECTION 8.            Indemnification.

(a)            The Originator hereby agrees to indemnify the Issuer, 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 Issuer, 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 Originator under Section 5 hereof (the “Indemnified Amounts”) excluding, however (i) Indemnified Amounts to the extent resulting from the gross negligence or willful misconduct on the part of such Indemnified Party; (ii) any recourse for any uncollectible Timeshare Loan not related to a breach of representation or warranty; (iii) recourse to the Originator for a related Defective Timeshare Loan so long as the same is cured, substituted or repurchased pursuant to Section 6 hereof; or (iv) 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.  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 Originator to perform its duties in accordance with the terms of this Agreement or (2) a breach of the Originator’s representations, covenants or warranties contained in this Agreement, (B) assume (with the consent of the Issuer, 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 Issuer, the Securitization Indenture Trustee, the Securitization Noteholders or the Initial Purchaser in respect of such claim.  If the Originator 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 Originator.

(b)            The obligations of the Originator under this Section 8 to indemnify the Issuer, 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.  The Originator hereby agrees that it will not, directly or indirectly, institute, or cause to be instituted, or join any Person in instituting, against the Issuer 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 Issuer.

  

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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.

Issuer

Silverleaf Finance VII, LLC

1221 Riverbend Drive, Suite 274

Dallas, Texas 75247

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

Telecopier: 214-631-4981

Originator

Silverleaf Resorts, Inc.

1221 Riverbend Drive, Suite 120

Dallas, Texas  75247

Attention: Robert E. Mead, Chief Executive Officer

Telecopier: 214-905-0519

SECTION 11.         No Waiver; Remedies. No failure on the part of the Issuer, 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 Originator, the Issuer and their respective successors and assigns.  Any assignee shall be an express third party beneficiary of this Agreement, entitled to directly enforce this Agreement.  The Originator may not assign any of its rights and obligations hereunder or any interest herein without the prior written consent of the Issuer and any assignee thereof.  The Issuer may, and intends to, assign all of its rights to the Securitization Indenture Trustee on behalf of the Securitization Noteholders, and the Originator 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 Originator pursuant to Section 5, and the cure, repurchase or substitution and indemnification obligations shall be continuing and shall survive any termination of this Agreement, but such rights and remedies may be enforced only by the Issuer 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 Originator 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 Agency that such action will not result in a downgrade, withdrawal or qualification of any rating assigned to a Class of Notes is received.  The Issuer 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 Originator in any case shall, in itself, entitle it to any other consent or further notice or demand in similar or other circumstances.  The Originator acknowledges that in connection with the intended assignment by the Issuer 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 Issuer intends to issue the Notes, the proceeds of which will be used by the Issuer, in part, to purchase the Timeshare Loans hereunder.

  

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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 Issuer may not purchase or acquire Timeshare Loans, the transactions evidenced hereby shall constitute a loan and not a purchase and sale or contribution, notwithstanding the otherwise applicable intent of the parties hereto, and the Originator shall be deemed to have granted to the Issuer as of the date hereof, a first priority perfected security interest in all of the Originator’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 OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK.

(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.

  

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(C) SILVERLEAF AND ISSUER 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 ORIGINATOR AND ISSUER 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 ORIGINATOR AND ISSUER ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE ORIGINATOR AND ISSUER.

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.

  

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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 VII, LLC, as Issuer

	  	  	  	  
	  	  	  	  
	  	
By:

	
/S/  HARRY J. WHITE, JR.

	  	  	
Name:

	
Harry J. White, Jr.

	  	  	
Title:

	
Vice President, Treasurer and Chief

	  	  	  	
Financial Officer

	  	  	  	  
	  	  	  	  
	  	  	
SILVERLEAF RESORTS, INC.

	  	  	  	  
	  	  	  	  
	  	
By:

	
/S/  HARRY J. WHITE, JR.

	  	  	
Name:

	
Harry J. White, Jr.

	  	  	
Title:

	
Chief Financial Officer

List of Exhibits and Schedules to Agreement Not Filed Herewith:

Schedule I – Additional Representations and Warranties of Originator

Annex A – Standard Definitions (filed as Exhibit 10.2)

Schedule II – Exceptions

Schedule III – Schedule of Timeshare Loans

Exhibit A – ACH Form

[Signature Page to Transfer Agreement]

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