Exhibit 10.7
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT (INVENTORY LOAN)
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (Inventory Loan)
dated as of December 19, 2003 (the "Third Amendment"), is entered into by and
between SILVERLEAF RESORTS, INC., a Texas corporation (the "BORROWER"), and
TEXTRON FINANCIAL CORPORATION, a Delaware corporation, ("TFC" or the "LENDER").
W I T N E S S E T H:
WHEREAS, Lender and Borrower are parties to that certain Loan and
Security Agreement dated as of December 16, 1999 (the "ORIGINAL LOAN
AGREEMENT"), pursuant to which the Borrower executed its Secured Promissory Note
in favor of the Lender in the amount of $10,000,000.00, (the "NOTE");
WHEREAS, Lender and Borrower, as a result of certain Events of Default
under the Original Agreement, entered into that certain Forbearance Agreement
dated as of April 6, 2001 (the "FORBEARANCE AGREEMENT");
WHEREAS, Lender and Borrower are parties to that certain First
Amendment to Loan and Security Agreement dated as of April 17, 2001 (the "FIRST
AMENDMENT", and together with the Original Agreement) which, among other things,
incorporated the terms of that certain Forbearance Agreement dated as of April
6, 2001;
WHEREAS, Lender and Borrower are parties to that certain Second
Amendment to Loan and Security Agreement dated as of April 30, 2002 (the "SECOND
AMENDMENT, and together with the First Amendment and the Original Loan
Agreement) which modified and restructured the Loan;
WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a
Letter Amendment dated March 27, 2003 to reinstate the maximum allowable ratio
of Marketing and Sales Expenses to the Borrower's net proceeds from the sale of
Intervals to a ratio of .550 to 1;
WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a
Letter Agreement dated September 25, 2003 to exclude the $28,711,000 increase in
Borrower's allowance for doubtful accounts during the quarter ended March 31,
2003 from the calculations of EBITDA, the Interest Coverage Ratio and
Consolidated Net Income under the Loan Agreement and to approve the retirement
of certain subordinated notes with a face value of $7,620,000;
WHEREAS, Borrower entered into: (i) four Letter Agreements with TFC
dated November 17, 2003 (the "November Letter Agreement"); (ii) an amendment to
the Heller Documents dated November 21, 2003; and (iii) an amendment to the
Sovereign Documents dated October 1, 2003; each for the purpose of, among other
things, waiving certain Events of Default that may have arisen under
the Loan Agreement, the Heller Documents and the Sovereign Documents described
therein, respectively;
WHEREAS, TFC and Borrower have agreed to enter into this Third
Amendment to Loan and Security Agreement (the "THIRD Amendment") to amend and
modify the Loan Agreement as set forth below;
WHEREAS, Borrower intends to convey and transfer certain assets to the
SPV, including the SPV Assets, in accordance with the terms of the Silverleaf
Finance II Documents, as such terms are hereafter defined and whereas in
connection with such transfer, the Commitment, as such term is hereafter
defined, shall be reduced as described herein; and
WHEREAS, all capitalized terms not otherwise defined herein shall have
the meaning ascribed to such term in the Loan Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. ADDITIONAL RESORT COLLATERAL. Section 1.1(uuu) is hereby deleted in its
entirety and in its place instead is substituted the following:
"(uuu) ADDITIONAL RESORT COLLATERAL. The term "Additional
Resort Collateral" shall mean singly and collectively, the
development rights, real property, fixtures and other personal
property, including all management agreements for the Resorts,
now owned or hereafter acquired by Borrower and described on
Schedule 1.1(uuu). "Additional Resort Collateral" shall not
include the promissory notes and other property of Silverleaf
Finance I, Inc., that constitutes "Pledged Assets" under the
DZ Documents OR THE PROMISSORY NOTES AND OTHER PROPERTY OF
SILVERLEAF FINANCE II, INC. THAT CONSTITUTE "CONVEYED ASSETS"
OR COLLATERAL UNDER THE SILVERLEAF FINANCE II DOCUMENTS."
2. BUSINESS PLAN. Section 1.1(iii) is hereby deleted in its entirety and in its
place instead is substituted the following:
"(iii) BUSINESS PLAN. The term "Business Plan" shall mean the
five (5) year "Stand Alone" business plan, more particularly
described as document "BS.IS.02-08.Lender.9-03.NS.1a2,"
prepared by Borrower and attached TO THE THIRD AMENDMENT as
Exhibit F-1. THE BUSINESS PLAN INCLUDES THE "IMPACT ON LENDERS
WORKSHEET" SETTING FORTH THE AMOUNTS TO BE ADVANCED BY EACH OF
THE LENDERS, HELLER AND SOVEREIGN PURSUANT TO THEIR RESPECTIVE
CREDIT FACILITIES (THE "SENIOR LENDER ADVANCE SCHEDULE")."
3. COLLATERAL. Section 1.1(i) is hereby amended in part to add the following new
paragraphs:
"(xiv) THE SILVERLEAF FINANCE II STOCK."
"(xv) THE SILVERLEAF FINANCE II SUBORDINATED NOTE."
4. DZ FACILITY. Section 1.1(aaaa) is hereby deleted in its entirety and in its
place instead is substituted the following:
"(aaaa) DZ FACILITY. The term "DZ Facility" shall mean that
certain note purchase facility to be provided by DZ Bank AG
Deutsche Zentral Genossenschaftsbank, as agent for Autobahn
Funding Company, LLC ("DZ") to Borrower, on the terms outlined
in the DZ Letter Agreement, dated December 12, 2001 as
supplemented by that certain letter agreement by and between
Borrower and DZ dated February 7, 2002, and attached hereto as
Exhibit G AS MAY BE HEREAFTER AMENDED FROM TIME TO TIME
(collectively, the "DZ LETTER AGREEMENT") and evidenced by the
documents listed on Schedule 1.1(aaaa) hereto (the "DZ
DOCUMENTS")"
5. FACILITY FEE. Section 1.1(jjj) is hereby deleted in its entirety and in its
place instead is substituted the following:
"(jjj) FACILITY FEE. Shall mean the facility fee set forth in
the Fee Letter, which shall be payable in accordance with
Section 2.6(c). IN ADDITION TO THE FEES SET FORTH IN THE FEE
LETTER, THE FACILITY FEE SHALL INCLUDE A FEE IN THE AMOUNT OF
ONE-HALF OF ONE PERCENT (1/2%) OF THE TOTAL AMOUNT OF THE
MAXIMUM AGGREGATE COMMITMENT FOR BOTH THE REVOLVING LOAN
COMPONENT AND THE TERM LOAN COMPONENT UNDER THIS AGREEMENT,
THE TRANCHE A CREDIT FACILITY, THE TRANCHE B CREDIT FACILITY
AND THE TRANCHE C CREDIT FACILITY."
6. DEFINITIONS. Section 1.1 is hereby amended in part to add the following new
paragraphs:
"(ssss) THIRD AMENDMENT. SHALL MEAN THAT CERTAIN THIRD
AMENDMENT TO LOAN AND SECURITY AGREEMENT (INVENTORY LOAN )
DATED AS OF DECEMBER 19, 2003 BY AND AMONG SILVERLEAF RESORTS,
INC., A TEXAS CORPORATION, AS BORROWER, AND TEXTRON FINANCIAL
CORPORATION, A DELAWARE CORPORATION, AS LENDER."
"(tttt) THIRD AMENDMENT EFFECTIVE DATE. SHALL MEAN THE DATE ON
WHICH: (i) THE CLOSING OF THE TFC CONDUIT LOAN OCCURS; AND
(ii) LENDER DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION,
THAT EACH OF THE CONDITIONS SET FORTH IN SECTION 21 OF THE
THIRD AMENDMENT HAVE BEEN SATISFIED."
"(uuuu) SILVERLEAF FINANCE II DOCUMENTS. SHALL MEAN THE SPV
LOAN AGREEMENT, THE DEVELOPER TRANSFER AGREEMENT, THE DEMAND
NOTES AND ALL OTHER AGREEMENTS OR DOCUMENTS EXECUTED IN
CONNECTION WITH THE TFC CONDUIT LOAN, AS EACH MAY BE AMENDED,
RESTATED OR OTHERWISE MODIFIED FROM TIME TO TIME."
"(vvvv) SILVERLEAF FINANCE II STOCK. SHALL MEAN ALL EQUITY
INTERESTS IN SILVERLEAF FINANCE II, INC., ALL DOCUMENTS,
CERTIFICATES OR INSTRUMENTS REPRESENTING ANY OF THE FOREGOING
AND ALL CASH, SECURITIES, DIVIDENDS, RIGHTS AND OTHER PROPERTY
AT ANY TIME
RECEIVED OR RECEIVABLE IN RESPECT OF OR IN EXCHANGE FOR THE
FOREGOING, AND ALL PROCEEDS OF THE FOREGOING."
"(wwww) "SILVERLEAF FINANCE II SUBORDINATED NOTE. SHALL MEAN
THE SUBORDINATED NOTE, DATED AS OF DECEMBER 19, 2003, PAYABLE
BY SPV TO THE ORDER OF SILVERLEAF RESORTS, INC., AND ANY OTHER
PROMISSORY NOTE ISSUED IN REPLACEMENT OR RESTATEMENT THEREOF,
OR OTHERWISE ISSUED TO EVIDENCE SPV'S OBLIGATION TO PAY THE
DEFERRED PURCHASE PRICE OF RECEIVABLES UNDER THE DEVELOPER
TRANSFER AGREEMENT WHICH IS PART OF THE SILVERLEAF FINANCE II
DOCUMENTS, IN EACH CASE AS AMENDED OR OTHERWISE MODIFIED FROM
TIME TO TIME, AND ALL PROCEEDS OF THE FOREGOING."
"(xxxx) SILVERLEAF FINANCE II STOCK AND SUBORDINATED NOTE
PLEDGE AGREEMENT. SHALL MEAN THE AGREEMENT IN THE FORM
ATTACHED TO THE THIRD AMENDMENT AS EXHIBIT A-1, PURSUANT TO
WHICH THE SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF
FINANCE II SUBORDINATED NOTE IS PLEDGED TO LENDER, AS SECURITY
FOR THE LOAN."
"(yyyy) SPV. SHALL MEAN SILVERLEAF FINANCE II, INC., A
DELAWARE CORPORATION."
"(zzzz) SPV ASSETS. SHALL MEAN ALL ASSETS SOLD OR CONVEYED BY
BORROWER TO THE SPV PURSUANT TO THE SILVERLEAF FINANCE II
DOCUMENTS."
"(aaaaa) SPV SUBORDINATION AGREEMENT. SHALL MEAN THAT CERTAIN
SUBORDINATION AGREEMENT RELATING TO TFC'S INTEREST IN THE
SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF FINANCE II
SUBORDINATED NOTE, DATED AS OF DECEMBER 19, 2003 BY AND AMONG
TEXTRON FINANCIAL CORPORATION, IN ITS CAPACITY AS LENDER AND
IN ITS CAPACITY AS LENDER UNDER THE GROUP TWO DOCUMENTS (AS
SUCH TERM IS DEFINED IN THE SPV SUBORDINATION AGREEMENT), AS
MAY BE AMENDED, RESTATED OR MODIFIED FROM TIME TO TIME."
"(bbbbb) TFC CONDUIT LOAN. SHALL MEAN THAT CERTAIN LOAN
FACILITY TO BE PROVIDED BY TEXTRON FINANCIAL CORPORATION
("TFC") TO SPV IN ACCORDANCE WITH THE TERMS OF THE SILVERLEAF
FINANCE II DOCUMENTS."
7. REVOLVING LOAN AND LENDING LIMITS. Section 2.1 is hereby deleted in its
entirety and in its place instead is substituted the following:
"2.1 REVOLVING LOAN AND LENDING LIMITS. Upon the terms and
subject to the conditions set forth in this Agreement,
including but not limited to Section 2.8 hereof, the Lender
shall make Advances to the Borrower, and the Borrower may
borrow, repay and reborrow during the Revolving Loan Period,
as such term is hereafter defined, principal under the Loan in
an amount not to exceed at any time the lesser of: (i) the
Loan to Retail Value Ratio of the Required Retail Value of the
Inventory or (ii) $10,000,000.00. The Revolving Loan period
shall terminate in all respects on MARCH 31, 2006. Borrower's
right to receive Advances hereunder shall also be subject to
the terms and conditions set forth in that certain
Intercreditor Agreement between Lender, Borrower, Heller and
Sovereign dated
of even date herewith, as amended hereafter. Notwithstanding
anything herein to the contrary, Borrower acknowledges,
confirms and agrees that it shall not be entitled to receive,
nor shall any Lender be required to make, any Advance if and
to the extent that: (i) Borrower has failed to substantially
adhere to the Business Plan, including the Senior Lender
Advance Schedule, as determined by Agent in its sole and
absolute discretion; or (ii) the most recent weekly flash
report delivered in accordance with Section 7.1(h)(vii) hereof
(a "WEEKLY FLASH REPORT"), indicates that Borrower has in
excess of five million dollars ($5,000,000) in available
unrestricted cash.
8. Notwithstanding anything herein to the contrary, the
obligation of Lender to make any Advance under this Agreement
shall be subject to and conditioned upon Heller making
advances to Borrower substantially in accordance with the
Business Plan, including the Senior Lender Advance Schedule,
which Lender agrees will be determined on a quarterly basis
commencing March 31, 2002. Lender shall have no obligation to
make any Advance hereunder to the extent that Heller
terminates its facility PRIOR TO MARCH 31, 2004 or fails to
make advances as provided in the Business Plan, including the
Senior Lender Advance Schedule, which Lender agrees will be
determined on a quarterly basis commencing March 31, 2002."
9. USE OF PROGRAM RESERVE ACCOUNT WITHDRAWALS AND SURPLUS UNDER THE TFC CONDUIT
LOAN. Section 2.4 is hereby amended in part to add the following new paragraph:
"(d) USE OF PROGRAM RESERVE ACCOUNT WITHDRAWALS AND
SURPLUS UNDER THE TFC CONDUIT LOAN. TO THE EXTENT THAT FUNDS
ARE MADE AVAILABLE TO SPV FROM THE PROGRAM RESERVE ACCOUNT IN
ACCORDANCE WITH SECTION 5.1(e) OF THE LOAN AND SECURITY
AGREEMENT WHICH IS PART OF THE SILVERLEAF FINANCE II
DOCUMENTS, TO THE EXTENT PERMITTED BY LAWS AND THE SILVERLEAF
FINANCE II DOCUMENTS, BORROWER SHALL CAUSE SPV TO DISTRIBUTE
SUCH FUNDS TO BORROWER AND BORROWER SHALL MAKE PAYMENT IN THE
AMOUNT OF SUCH DISTRIBUTION TO TFC AND SOVEREIGN TO BE APPLIED
IN THE ORDER SET FORTH IN THAT CERTAIN INTERCREDITOR AGREEMENT
BETWEEN TFC, BORROWER, HELLER AND SOVEREIGN DATED OF EVEN DATE
HEREWITH, AS AMENDED. TO THE EXTENT THAT BORROWER RECEIVES ANY
DISTRIBUTIONS FROM THE SPV IN RESPECT OF ANY SURPLUS PAYMENTS,
AS SUCH TERM IS DEFINED IN THE SILVERLEAF FINANCE II
DOCUMENTS, SUCH FUNDS SHALL BE USED BY BORROWER STRICTLY TO
FUND OPERATING EXPENSES IN ACCORDANCE WITH THE BUSINESS PLAN
AND FOR NO OTHER REASON, WITHOUT LENDER'S PRIOR WRITTEN
CONSENT."
10. GRANT OF SECURITY INTEREST. Section 3.1 is hereby deleted in its entirety
and in its place instead is substituted the following:
"3.1 GRANT OF SECURITY INTEREST. To secure the payment and
performance of the Obligations, for value received, Borrower
unconditionally and irrevocably assigns, pledges and grants to Lender a
continuing first priority security interest in and to the Collateral
(OTHER THAN THE SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF FINANCE
II
SUBORDINATED NOTE, AS TO WHICH LENDER IS GRANTED A JUNIOR SECURITY
INTEREST AS HEREINAFTER PROVIDED) to further secure the payment and
performance of the Obligations. To further secure the payment and
performance of the Obligations, Borrower shall also execute and deliver
Lender: (i) the modifications to the Land Mortgages in the applicable
form attached hereto as Exhibit A, granting Lender a first priority
mortgage lien on the Land and (ii) the Additional Resort Collateral
Mortgages, in the applicable form attached hereto as Exhibit A,
granting Lender, a first priority mortgage lien on that portion of the
Additional Resort Collateral consisting of real property. To further
secure the payment and performance of the Obligations, Borrower shall
further execute and deliver to Lender: (1) the Additional Resort
Collateral Assignment, in the applicable form attached hereto as
Exhibit A, granting Lender a first priority security interest on that
portion of the Additional Resort Collateral consisting of personal
property; (2) the Stock Pledge Agreement, in the applicable form
attached hereto as Exhibit A, granting Lender, and a first priority
security interest in the Silverleaf Finance I, Inc. Stock; and (3) the
Amended Standby Management Agreement Assignment, in the applicable form
attached hereto as Exhibit A, assigning to Lender, all of Borrower's
right, title and interest in the Amended Standby Management Agreement;
(4) THE SILVERLEAF FINANCE II STOCK AND SUBORDINATED NOTE PLEDGE
AGREEMENT, IN THE APPLICABLE FORM ATTACHED TO THE THIRD AMENDMENT AS
EXHIBIT A-1, GRANTING LENDER A JUNIOR AND SUBORDINATE SECURITY INTEREST
IN THE SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF FINANCE II
SUBORDINATED NOTE, SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE
SPV SUBORDINATION AGREEMENT.
Notwithstanding anything herein to the contrary, Borrower
acknowledges and agrees as follows:
10.1 The Loan shall be secured by:
(i) a first priority security interest in the
Inventory;
(ii) a second priority security interest in the
Silverleaf Finance I, Inc. Stock and the Additional
Resort Collateral, subject only to the first priority
security interest securing the Term Loan Component of
the Additional Credit Facility and the Existing
Credit Facilities AND A SUBORDINATE SECURITY INTEREST
IN THE SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF
FINANCE II SUBORDINATED NOTE SUBJECT TO THE SECURITY
INTEREST SECURING THE TERM LOAN COMPONENT OF THE
ADDITIONAL CREDIT FACILITY AND THE EXISTING CREDIT
FACILITIES AND SUBJECT TO THE TERMS AND CONDITIONS
SET FORTH IN THE SPV SUBORDINATION AGREEMENT; and
(iii) a second priority security interest in the
Pledged Notes Receivable and the Ineligible Note
Portfolio and the mortgages securing the same,
subject only to the first priority security interest
securing the revolving loan component of the
Additional Credit Facility and the Existing Credit
Facilities.
In addition to the foregoing, Borrower acknowledges, agrees
and confirms that the security interest granted to Lender, in
all other Collateral to secure the Loan, including the Land,
the Standby Management Agreement and the other collateral
securing the Heller Facility, the Sovereign Facility, the
Additional Credit Facility and the Existing Credit Facilities
shall be equal in priority as between the Loan, the Additional
Credit Facility and the Existing Credit Facilities and, with
respect to the collateral securing the Heller Facility, the
Sovereign Facility, the Additional Credit Facility and the
Existing Credit Facilities, subject only to the security
interests securing such facilities. For purposes hereof, the
reference to "collateral securing the Heller Facility" and
"collateral securing the Sovereign Facility" shall mean the
Notes Receivable and related mortgages exclusively assigned to
Heller or Sovereign in connection with an advance under their
respective loan documents."
11. CROSS COLLATERALIZATION. Section 3.5 is hereby deleted in its entirety and
in its place instead is substituted the following:
"3.5 CROSS COLLATERALIZATION. The Collateral also secures
the Obligations of Borrower under the Additional Credit
Facility and the Existing Credit Facilities. Upon repayment of
this Loan and the satisfaction by Borrower of all of the
Obligations, the Collateral shall continue to secure the
Additional Credit Facility and the Existing Credit Facilities,
as provided in the documents evidencing and securing the
Additional Credit Facility and the Existing Credit Facilities.
Borrower further acknowledges and agrees that upon repayment
in full of the Heller Facility and/or the Sovereign Facility,
Lender's security interest in the collateral securing such
facilities shall automatically become a first priority
security interest for securing the Borrower's Obligations
hereunder and under the Additional Credit Facility and the
Existing Credit Facilities and Borrower shall take such steps
as Lender may request to deliver such collateral to Lender and
to confirm Lender's first priority security interest therein.
Notwithstanding the foregoing: (a) when the term loan
component of the Additional Credit Facility and the Existing
Credit Facilities and the Loan are paid in full, the
Additional Resort Collateral shall be released from the Lien
of the security interest granted to Lender hereunder provided:
(i) an Event of Default has not occurred; and (ii) the
Additional Resort Collateral is also released from any lien
granted to Sovereign pursuant to the Sovereign Documents; and
(b) when both the term loan component of the Additional Credit
Facility and the Existing Credit Facilities and the Loan are
paid in full, the Silverleaf Finance I, Inc., Stock shall be
released from the Lien of the security interest granted to
Lender hereunder provided: (i) an Event of Default has not
occurred; and (ii) the Silverleaf Finance I, Inc., Stock is
also released from any lien granted to Sovereign pursuant to
Sovereign Documents; (c) WHEN THE TERM LOAN COMPONENT, THE
REVOLVING LOAN COMPONENT AND THE INVENTORY LOAN ARE PAID IN
FULL, THE SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF
FINANCE II SUBORDINATED NOTE SHALL BE RELEASED FROM THE LIEN
OF THE SECURITY INTEREST GRANTED TO LENDER HEREUNDER PROVIDED:
(I) AN EVENT OF DEFAULT HAS NOT OCCURRED; AND (ii) THE
SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF
FINANCE II SUBORDINATED NOTE ARE ALSO RELEASED FROM ANY LIEN
GRANTED TO SOVEREIGN PURSUANT TO THE SOVEREIGN DOCUMENTS."
12. USE OF PROCEEDS/MARGIN STOCK. Section 6.11 is hereby deleted in its entirety
and in its place instead is substituted the following:
"6.11 USE OF PROCEEDS/MARGIN STOCK. (a) The proceeds of the
Loan, the Heller Loan, the Tax Refund, the Sovereign Loan, the
DZ Facility and any cash dividend or other cash distribution
Borrower receives from Silverleaf Finance I, Inc. OR
SILVERLEAF FINANCE II, INC. will be used strictly in
accordance with the Business Plan and for no other purpose and
(b) none of the proceeds of the Loan will be used to purchase
or carry any "margin stock" (as defined under Regulation U of
the Board of Governors of the Federal Reserve System, as in
effect from time to time), and no portion of the proceeds of
the Loan will be extended to others for the purpose of
purchasing or carrying margin stock. None of the transactions
contemplated in the Agreement (including, without limitation,
the use of the proceeds from the Loan) will violate or result
in the violation of Section 7 of the Securities Exchange Act
of 1934, as amended, or any regulations issued pursuant
thereto, including, without limitation, Regulations G, T, U
and X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter 11."
13. RESTRICTIONS OF BORROWER. Section 6.14 is hereby deleted in its entirety and
in its place instead is substituted the following:
"6.14 RESTRICTIONS OF BORROWER. Except for this Agreement
and the Loan Documents, the Tranche A Loan Documents, the
Tranche B Loan Documents, the Tranche C Loan Documents, the
Heller Documents and the Sovereign Documents, THE DZ DOCUMENTS
OR THE SILVERLEAF FINANCE II DOCUMENTS, the Borrower will not
be, on or after the date hereof, a party to any contract or
agreement which restricts its right or ability to incur
indebtedness or prohibits Borrower's execution of or
compliance with the terms of this Agreement, the other Loan
Documents, the Tranche A Loan Documents, the Tranche B Loan
Documents, the Tranche C Loan Documents, the Heller Documents,
the Bond Holder Exchange Documents, the Sovereign Documents
the DZ Facility Documents or THE SILVERLEAF FINANCE II
DOCUMENTS. The Borrower has not agreed or consented to cause
or permit in the future (upon the happening of a contingency
or otherwise) any of the Collateral, whether now owned or
hereafter acquired, to be subject to a Lien except in favor of
Lender as provided herein, and, with respect to the Land, the
Additional Resort Collateral, the Silverleaf Finance I. Inc.,
Stock and the Ineligible Notes Receivable, THE SILVERLEAF
FINANCE II SUBORDINATED NOTE AND THE SILVERLEAF FINANCE II
STOCK, in favor of Heller, Sovereign AND TFC, as applicable."
14. STANDBY MANAGER, RESORT CONSULTANT AND STANDBY SERVICER. Section 7.1(x) is
hereby deleted in its entirety and in its place instead is substituted the
following:
"(x) STANDBY MANAGER AND RESORT CONSULTANT. Borrower will
enter into agreements for the Standby Manager and the Resort
Consultant on or before the Effective Date and will maintain
such agreements in full force and effect. IN THE EVENT THAT
SUCH AGREEMENTS FOR THE STANDBY MANAGER AND THE RESORT
CONSULTANT EXPIRE BEFORE THE FINAL MATURITY DATE, SUCH
AGREEMENTS SHALL BE EXTENDED OR SHALL BE REPLACED, BEFORE
THEIR EXPIRATION, WITH AGREEMENTS FOR A STANDBY MANAGER AND A
RESORT CONSULTANT THAT EXPIRE NO SOONER THAN THE FINAL
MATURITY DATE. Borrower will maintain the agreement for the
Standby Servicer in full force and effect. Borrower agrees
that upon the occurrence of a Default or Event of Default
hereunder: (1) Lender may, with the approval of a majority of
the Borrower's Board of Directors, which approval shall not be
unreasonably withheld or delayed, terminate any then existing
management agreements and replace any existing manager with
such manager as Lender may select, provided however, if: (x)
the obligations have become immediately due and payable in
accordance with Section 9.1 (a) hereof, or (y) Lender elects
to have J & J Limited, Inc. act as Standby Manager, then no
such approval of Borrower's Board of Directors shall be
required; and (2) The Standby Servicer will assume full
control over the servicing of all Pledged Notes Receivable,
reporting solely to Lender, as provided in Section 10.14
hereof."
15. HELLER FACILITY, SOVEREIGN FACILITY, DZ FACILITY AND BOND HOLDER EXCHANGE
TRANSACTION. Section 7.1(aa) is hereby deleted in its entirety and in its place
instead is substituted the following:
"(aa) HELLER FACILITY, SOVEREIGN FACILITY, DZ FACILITY, TFC
CONDUIT LOAN AND BOND HOLDER EXCHANGE TRANSACTION. Borrower
will comply with each of the terms and conditions of the
Heller Facility, the Sovereign Facility, the DZ Facility, THE
TFC CONDUIT LOAN and the Bond Holder Exchange Documents and
will promptly deliver to Lender, upon receipt by Borrower,
copies of any notices received by Borrower in connection with
any of the forgoing credit facilities."
16. PROFITABLE OPERATIONS. Section 7.1(bb)(v) is hereby deleted in its entirety
and in its place instead is substituted the following:
"(v) PROFITABLE OPERATIONS. Borrower will not permit
Consolidated Net Income (a) for any fiscal year, commencing
with the fiscal year ending December 31, 2002, to be less than
$1.00 and (b) for any two consecutive fiscal quarters
(reviewed on an individual rather than on an aggregate basis)
to be less than $1.00."
17. RESTRICTIONS ON TRANSFERS. Section 7.2(b) is hereby deleted in its entirety
and in its place instead is substituted the following:
"(b) RESTRICTIONS ON TRANSFERS. Except as hereinafter
specifically provided, Borrower shall not, whether voluntarily
or involuntarily, by operation of law or otherwise, (I)
without obtaining the prior written consent of Lender (which
consent may be given, withheld or conditioned by Lender in
Lender's sole discretion), transfer, sell, pledge, convey,
hypothecate, factor or assign all or any portion of the
Collateral, the Encumbered Intervals, the Common Elements
relating to the Inventory or any Resort facilities or
amenities, or contract to do any of the foregoing, including,
without limitation, pursuant to options to purchase, and
so-called "installment sales contracts", "land contracts", or
"contracts for deed", PROVIDED THAT THE FOREGOING RESTRICTION
ON TRANSFERS SHALL NOT APPLY TO THE CONVEYANCE OF SPV ASSETS
TO THE SPV IN ACCORDANCE WITH THE SILVERLEAF FINANCE II
DOCUMENTS, (ii) without obtaining the prior written consent of
Lender (which consent may be given, withheld or conditioned by
Lender in Lender's sole discretion), lease or license all or
any portion of the Collateral, the Inventory, the Common
Elements relating to the Inventory or any Resort facilities or
amenities (EXCEPT FOR THE LICENSE CREATED IN FAVOR OF SPV
UNDER ANY LICENSE AGREEMENT WITH BORROWER, SILVERLEAF CLUB OR
ANY TIMESHARE OWNERS ASSOCIATION, TO USE OR ACCESS THE
RESERVATION SYSTEM OR RELATED COMPUTER HARDWARE OR SOFTWARE
FOR ANY RESORT), or change the legal or actual possession or
use thereof, (iii) permit the assignment, transfer,
delegation, change, modification or diminution of the duties
or responsibilities of Borrower, of any manager of the Resort
approved by Lender as manager of the Resort (except for an
assignment of such duties to a professional management company
or companies reasonably acceptable to Lender in advance)
without obtaining the prior written consent of Lender (which
consent shall not be unreasonably withheld), or (iv) without
obtaining the prior written consent of Lender (which consent
may be given, withheld or conditioned by Lender in Lender's
sole discretion), cause or permit the assignment, pledge or
other encumbrance of any of the Operating Contracts or all or
any portion of Borrower's right, title or interest in the
Declaration. Without limiting the generality of the preceding
sentence, and subject to the terms of this Agreement, the
prior written consent of Lender (as specified above) shall be
required for (A) any transfer of the Inventory, the Common
Elements relating to the Inventory or any Resort facilities or
amenities or any part thereof made to a subsidiary or
Affiliate or otherwise, (B) any transfer of all or any part of
the Inventory, the Common Elements relating to the Inventory
or any Resort facilities or amenities by Borrower to its
stockholders or Affiliates or vice versa, and (C) any
corporate merger or consolidation, disposition or other
reorganization, except as permitted in Section 7.1(c) hereof.
In the event that Lender is willing to consent to a transfer
which would otherwise be prohibited by this Section 7.2(b)
Lender may condition its consent on such terms as it desires,
including, without limitation, an increase in the Interest
Rate and the requirement that Borrower pay a transfer fee,
together with any expenses incurred by Lender in connection
with the granting of such consent (including, without
limitation, attorneys' fees and expenses). If Borrower
violates the terms of this Section 7.2(b), in addition to any
other rights or remedies which Lender may have herein, in any
other Loan Document, or at law or in equity, Lender may by
written notice to Borrower increase, effective immediately as
of the date of such violation, the Interest Rate to the
Default Rate
18. TRANSACTIONS WITH AFFILIATES. Section 7.2(d) is hereby deleted in its
entirety and in its place instead is substituted the following:
"(d) TRANSACTIONS WITH AFFILIATES. EXCEPT AS PROVIDED IN
THE SILVERLEAF FINANCE II DOCUMENTS, without the prior written
consent of Lender, which shall not unreasonably be withheld,
Borrower will not enter into any transaction with any
Affiliate in connection with the Resorts, including, without
limitation, relating to the purchase, sale or exchange any
assets or properties or the rendering of any service, except
in the ordinary course of, and pursuant to the reasonable
requirements of, the operations of the Resorts and upon fair
and reasonable terms."
19. TIMESHARE REGIME. Section 7.2(g) is hereby deleted in its entirety and in
its place instead is substituted the following:
"(g) TIMESHARE REGIME. Without Lender's prior written
consent, which consent shall not be unreasonably withheld as
to changes necessary to implement the Business Plan, Borrower
shall not amend, modify or terminate the Declarations or other
Timeshare Documents, or any other restrictive covenants,
agreements or easements regarding the Resorts (except for
routine non-substantive modifications which have no impact on
the Collateral AND EXCEPT FOR AMENDMENTS OR MODIFICATIONS OF
THE TIMESHARE DOCUMENTS AND/OR DECLARATIONS, A LIST OF WHICH
IS ATTACHED TO THE THIRD AMENDMENT AS EXHIBIT B-1). Except as
otherwise provided herein or in the Sovereign Documents,
Borrower shall not assign its rights as "developer" under the
Declarations without Lender's prior written consent, or file
or permit to be filed any additional covenants, conditions,
easements or restrictions against or affecting the Resorts (or
any portion thereof) without Lender's prior written consent,
which consent shall not be unreasonably withheld."
20. COLLATERAL. Section 7.2(i) is hereby deleted in its entirety and in its
place instead is substituted the following:
"(i) COLLATERAL. Borrower shall not take any action (nor
permit or consent to the taking of any action) which might
impair the value of the Collateral or any of the rights of the
Lenders in the Collateral, EXCEPT WITH RESPECT TO THE
SILVERLEAF FINANCE II STOCK AND THE SILVERLEAF FINANCE II
SUBORDINATED NOTE AS PROVIDED IN THE SILVERLEAF FINANCE II
DOCUMENTS, nor shall Borrower cause or permit any amendment to
or modification of the Timeshare Documents."
21. MODIFICATIONS OF HELLER DOCUMENTS, DZ DOCUMENTS, BOND HOLDER EXCHANGE
DOCUMENTS, SOVEREIGN DOCUMENTS, SILVERLEAF FINANCE II DOCUMENTS AND OTHER DEBT
INSTRUMENTS. Section 7.2(k) is hereby deleted in its entirety and in its place
instead is substituted the following:
"(k) MODIFICATIONS OF HELLER DOCUMENTS, DZ DOCUMENTS, BOND
HOLDER EXCHANGE DOCUMENTS, SOVEREIGN DOCUMENTS, SILVERLEAF
FINANCE II DOCUMENTS AND OTHER DEBT INSTRUMENTS. Borrower
shall not amend or modify the Heller Documents, the Sovereign
Documents, DZ Documents, Bondholder Exchange Documents, THE
SILVERLEAF FINANCE II DOCUMENTS or the documents evidencing
any
other indebtedness of Borrower, nor shall Borrower extend,
modify, increase or terminate the Heller Facility, DZ
Facility, the Bond Holder Exchange Transaction, the Sovereign
Facility, the TFC CONDUIT LOAN or any other credit facility or
loan, without the prior written consent of Lender, which
consent shall not be unreasonably withheld."
22. DEFAULT BY BORROWER IN OTHER AGREEMENTS. Section 8.1(l) is hereby deleted in
its entirety and in its place instead is substituted the following:
"(l) DEFAULT BY BORROWER IN OTHER AGREEMENTS. Except for
any Specified Event of Default (as provided in the Forbearance
Agreement), which Specified Events of Default shall include a
prior existing default under the Heller Facility or the
Sovereign Facility and for any "Waived Defaults" under the
November Letter Agreement, which Waived Defaults include prior
existing defaults under the Heller Facility or the Sovereign
Facility, any default AS DEFINED IN THE APPLICABLE LOAN
AGREEMENT, by Borrower (I) in the payment of any indebtedness
to any Lender, including any indebtedness owed to Lender under
the Heller Facility, DZ Facility, Sovereign Facility, Bond
Holder Exchange Transaction, Additional Credit Facility or the
Existing Credit Facilities, OR THE TFC CONDUIT LOAN; (ii) in
the payment or performance of other indebtedness for borrowed
money or obligations secured by any part of the Resort; (iii)
in the payment or performance of other material indebtedness
or obligations (material indebtedness or obligations being
defined for purposes of this provision as any indebtedness or
obligation in excess of $200,000) where such default
accelerates or permits the acceleration (after the giving of
notice or passage of time or both) of the maturity of such
indebtedness, or permits the holders of such indebtedness to
elect a majority of the board of directors of Borrower
(whether or not such default[s] have been waived by such
holder) or (iv) the acceleration by Heller, Sovereign, DZ or
the bondholders of their respective credit facilities OR THE
ACCELERATION OF THE TFC CONDUIT LOAN."
23. CONDITIONS PRECEDENT. This Third Amendment shall not be effective until all
of the following conditions have been satisfied:
(a) APPROVAL OF DOCUMENTS. Borrower has delivered to
Lender (with copies to Lender's counsel), and Lender has
reviewed and approved in its sole discretion, the form and
content of all of the items specified in Subsections (i)
through (iv) below (the "SUBMISSIONS"). Lender shall have the
right to review and approve any changes to the form of any of
the Submissions. If Lender disapproves of any changes to any
of the Submissions, Lender shall have the right to require
Borrower either to cure or correct the defect objected to by
Lender or to elect not to fund any Advance. Under no
circumstances shall Lender's failure to approve or disapprove
a change to any of the Submissions be deemed to be an approval
of such Submissions. All of the Submissions were and shall be
prepared at Borrower's sole cost and expense.
(i) A certificate in the form attached to THE
THIRD AMENDMENT as Exhibit C-1 to be signed by the
president, vice president or secretary of the
Borrower;
(ii) Copies of any amendments to the articles of
incorporation/charter and bylaws of Borrower not
previously delivered to Lender, certified to be true,
correct and complete by Borrower and the Secretary of
State of the State of Texas and current certificates
of good standing for Borrower for the State of Texas
and states where the Resorts are located, a current
certificate of authority to conduct business by the
Secretary of State in each state in which Borrower
conducts business;
(iii) A certificate of the Secretary of Borrower
certifying the adoption by the Board of Directors of
Borrower of a resolution authorizing Borrower to
enter into and execute the THIRD Amendment and all
such documents requested by Lender in the form
attached to THE THIRD AMENDMENT as Exhibit D-1; and
(iv) A certificate of the secretary or assistant
secretary of Borrower certifying the incumbency, and
verifying the authenticity of the signatures of the
specified officers of Borrower authorized to sign
this THIRD Amendment and all such documents requested
by Lender in the form attached to THE THIRD AMENDMENT
as Exhibit E-1.
(b) EXECUTION AND DELIVERY OF DOCUMENTS. Borrower shall
have delivered to Lender the following:
(i) The Silverleaf Finance II Documents;
(ii) Closing Opinions of Counsels for Borrower;
(iii) The Silverleaf Finance II Stock and
Subordinated Note Pledge Agreement;
(iv) Amended and Restated Term Loan Component
Note;
(v) Revised Form of Borrower's Certificate and
Request for Advance;
(vi) Bailee Agreement; and
(vii) Such other agreements, documents,
instruments, certificates and materials as Lender may
request to evidence the Indebtedness, to evidence and
perfect the rights and Liens and security interests
of Lender contemplated by the Loan Documents, and to
effectuate the transactions contemplated herein.
(c) EXECUTION OF AMENDMENTS BY SOVEREIGN AND DZ BANK.
Lender shall have received evidence, in form and substance
satisfactory to Lender, that Sovereign and DZ have executed
amendments to the Sovereign Documents and DZ Documents,
respectively, in connection with the TFC Conduit Loan and
Lender shall have consented to such amendments.
(d) NECESSARY CONSENTS OBTAINED. Lender shall have
received evidence, in form and substance satisfactory to
Lender, that the consent of each party entitled to consent to
this THIRD Amendment has been obtained.
(e) FEES. Borrower shall have paid all fees of all
Lenders in connection with the TFC Conduit Loan and this THIRD
Amendment.
24. FURTHER DOCUMENTATION. Borrower agrees to execute and deliver to Lender any
and all additional documentation as Lender may now or hereafter require in order
to effectuate the terms and conditions of this Third Amendment.
25. EFFECT OF AMENDMENT. The Loan Agreement, as herein amended, shall remain in
full force and effect.
26. RATIFICATION AND CONFIRMATION. Except as herein expressly amended, Borrower
hereby ratifies, confirms, assumes and agrees to be bound by all of
representations, warranties, statements, covenants and agreements set forth in
the Loan Agreement and the other Loan Documents, as previously amended. The
Borrower reaffirms, restates and incorporates by reference all of the
representations, warranties, covenants and agreements made in the Loan Documents
as if the same were made as of this date. The Borrower agrees to pay the Loan
and all related expenses, as and when due and payable in accordance with the
Loan Agreement and the other Loan Documents, and to observe and perform the
Obligations, and do all things necessary which are not prohibited by law to
prevent the occurrence of any Event of Default. In addition, to further secure,
and to evidence and confirm the securing of, the prompt and complete payment and
performance by the Borrower of the Loan and all of the Obligations, for value
received, Borrower unconditionally and irrevocably assigns, pledges and grants
to Lender, and hereby confirms or reaffirms the prior granting to Lender of, a
continuing first priority Lien, mortgage and security interest in and to all of
the Collateral, except as otherwise set forth herein, whether now existing or
hereafter acquired. Also, as provided in the Loan Documents, the Loan is and
shall be further secured by the Liens and security interests in favor of Lender
in the properties and interests relating to Additional Eligible Resorts, which
now or hereafter serve as collateral security for any Obligations. Upon
satisfaction of the requirements for approval by Lender of Additional Resorts,
Borrower shall record, or cause to be recorded, such mortgages, deeds of trust,
deeds to secure debt, assignments, pledges, security agreements and UCC
Financing Statements in the appropriate public records of the state in which
each Resort is located to further evidence and perfect Lender's Lien on the
Collateral. Borrower agrees to deliver or cause to be delivered by its
Affiliates, such mortgages, deeds of trust, deeds to secure debt, assignments,
pledges, security agreements and UCC Financing Statements as Lender may deem
necessary to further evidence and perfect the Lender's Lien on the Collateral.
27. ESTOPPEL. Borrower acknowledges, agrees and confirms that: (a) Advances
under the Loan Agreement have been made prior to the date hereof; (b) all such
Advances made prior to the Closing Date were made in favor of the Original
Borrower and the Borrower in respect of the Existing Eligible Resorts; (c)
Advances made prior to the date of the Third Amendment are deemed as having been
made for the benefit of the Borrower and Borrower acknowledges and agrees that
Borrower received a direct and substantial financial benefit from such Advances
and (d) immediately prior to the date of the Third Amendment, and without giving
effect to any Advances that may be made pursuant to the Third Amendment, the
status of the Loan, including the outstanding principal balance thereof is as
reflected in the Loan Funding Report delivered to and approved by Lender in
connection with the closing of the Third Amendment.
The Loan constitutes valuable consideration to the Borrower, which
consideration is uninterrupted and continuous since the dates on which the Loan
was first made. This Third
Amendment and the other Loan Documents and the Loan modifications and
transactions provided for or contemplated hereunder or thereunder, shall in no
way adversely affect the Lien or perfection or priority of any Lien of Lender as
of the date hereof in and to any Collateral, and are not intended to constitute,
and do not constitute or give rise to, any novation, cancellation or
extinguishment of any of Borrower's Obligations existing as of the Closing Date
to Lender, or of any interests owned or held by Lender (and not previously
released) in and to any of the Collateral; it being the intention of the parties
that the transactions provided for or contemplated herein shall be effectuated
without any interruption in the continuity of the value and consideration
received by Borrower, and of the attachment, perfection, priority and
continuation in favor of Lender in and to all Collateral and proceeds.
28. EFFECTIVE DATE. Upon satisfaction of the conditions precedent set forth in
Section 21 hereof, this Third Amendment shall be effective as of the Third
Amendment Effective Date, as defined in the Loan Agreement as amended hereby.
29. MAXIMUM OBLIGATION OF LENDER UNDER THE LOAN, THE ADDITIONAL CREDIT FACILITY
AND THE INVENTORY LOAN. Borrower acknowledges, agrees and confirms that
notwithstanding anything to the contrary herein, in any other Loan Document or
in any document evidencing or securing the Additional Credit Facility or the
Inventory Loan, Lender shall not be obligated to fund any Advance hereunder,
which when taken together with the loans or advances made by the Lender to the
Borrower under this Agreement, the Additional Credit Facility or the Inventory
Loan, would cause the aggregate amount of such loans and advances by the Lender
to Borrower to exceed the maximum aggregate amount as set forth in the Loan
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be executed on their behalf as of the day and year first written above.
Witnessed By: TEXTRON FINANCIAL CORPORATION
[illegible]
- -----------------------------
By /S/ JOHN T. D'ANNIBALE
----------------------------
/S/ JESSICA CONCORD Name: John T. D'Annibale
- ----------------------------- Its: Vice President
SILVERLEAF RESORTS, INC.
/S/ GEORGE BEDELL
- -----------------------------
By: /S/ HARRY J. WHITE, JR.
----------------------------
/S/ LAINE CLOSE Name: Harry J. White, Jr.
- ----------------------------- Its: CFO
STATE OF CONNECTICUT )
) ss: East Hartford
COUNTY OF HARTFORD )
At East Hartford in said County and State on this 19th day of December
,2003, personally appeared John T. D'Annibale, duly authorized Vice President of
Textron Financial Corporation, and he acknowledged the foregoing instrument by
him signed and sealed to be his free act and deed and the free act and deed of
Textron Financial Corporation.
Before me: /S/ MATTHEW CARRANO
---------------------------------------
Notary Public in and for said State
My Commission Expires: ___________
Commissioner of the Superior Court
STATE OF Texas )
) ss:
COUNTY OF Dallas )
At Dallas in said County and State on this 19th day of December 2003,
personally appeared Harry J. White, Jr., duly authorized officer of SILVERLEAF
RESORTS, INC., and he/she acknowledged the foregoing instrument by him/her
signed and sealed to be his/her free act and deed and the free act and deed of
Silverleaf Resorts, Inc., a Texas corporation, on behalf of the corporation.
Before me: /S/ R. LAINE CLOSE
---------------------------------------
Notary Public in and for said State
My Commission Expires: ___________
List of Exhibits and Schedules:
Exhibit A-1 Stock and Subordinated Note Pledge Agreement
Exhibit B-1 Timeshare Document Amendments
Exhibit C-1 Borrower's Certificate
Exhibit D-1 Borrower's Resolution
Exhibit E-1 Incumbency Certificate
Exhibit F-1 Business Plan