Ex. 10.5
THIRD AMENDMENT
TO
LOAN AND SECURITY AGREEMENT (TRANCHE C)
THIS THIRD AMENDMENT TO LOAN AND
SECURITY AGREEMENT (TRANCHE C) dated as of February 28, 2005
(the “ Third Amendment ”), is entered
into by and among SILVERLEAF RESORTS, INC ., a Texas
corporation (the “ Borrower ”), the
parties, including TEXTRON FINANCIAL CORPORATION
(“TFC”) , a Delaware corporation, which execute and
deliver this Agreement in their respective capacities as lenders
hereunder (collectively, the “ Lenders ”
and each, individually, a “ Lender ”),
and TEXTRON FINANCIAL CORPORATION as facility agent and
collateral agent (the “ Agent ”).
W I T N E S S E T
H:
WHEREAS, Borrower is engaged in the
business of acquiring, constructing, developing, owning, managing,
selling and otherwise dealing with Intervals at the Resorts (as
each such term is hereafter defined);
WHEREAS, Borrower and Lender are
parties to that certain Loan and Security Agreement dated as of
April 17, 2001, as amended and as amended hereby (the “
Loan Agreement ”), pursuant to which the Borrower
executed its Secured Promissory Note in favor of the Lender in the
amount of $10,200,000.00, (the “Original Note”
);
WHEREAS, Lender and Borrower amended
the Loan Agreement with the First Amendment to Loan and Security
Agreement dated as of April 30, 2002, (the “ First
Amendment ”), to, among other things:
(i) restructure and modify the Loan, including separating the
Loan into two separate components – the Revolving Loan
Component in the amount of up to $8,060,00.00 and the Term Loan
Component in the amount of up to $2,140,000.00; (ii) reduce
the amount of the Commitment; and (iii) replace the Original
Note with a Revolving Loan Component Note and a Term Loan Component
Note;
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) a Letter Agreement 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 entered
into a Second Amendment to Loan and Security Agreement dated as of
December 19, 2003 (the “Second Amendment”) to,
among other things, restructure and modify the Loan, including
reducing the Commitment, as defined in the First Amendment, to (i)
$6,245,400.00 for the Revolving Loan Component; and (ii)
$1,680,000.00 for the Term Loan Component, for a total Commitment
under this Agreement of $7,925,400.00 and to reduce the aggregate
Commitment under the Loan Agreement, the Tranche A Credit Facility,
the Tranche B Credit Facility, and the Tranche C Facility, as such
terms are defined in the Loan Agreement, to $95,000,000.00 for the
Revolving Loan Component and $24,000,000.00 for the Term Loan
Component;
WHEREAS, TFC and Borrower amended the
Loan Agreement pursuant to a Letter Amendment dated March 5,
2004 to clarify the definition of “Inventory Loan” and
the Maximum Obligation of TFC under the Loan Agreement, the Tranche
A Credit Facility, the Tranche B Credit Facility and the Inventory
Loan;
WHEREAS, TFC and Borrower amended the
Loan Agreement pursuant a Letter Amendment dated July 30, 2004 to
modify the definition of Collateral in connection with the
amendments to the Sovereign Facility dated as of July 30,
2004; and
NOW, THEREFORE, for good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1.
Terms . All capitalized terms not otherwise defined
herein shall have the meaning ascribed to such term in the Loan
Agreement.
2. Elimination
of Requirement for Business Plan . The Loan Agreement is
modified in part to add the following provision:
“
Elimination of Requirement for Business Plan .
Provided no Event of Default or condition, omission or act which,
with the passage of time, notice or both, would constitute an Event
of Default, has occurred, the requirement for Borrower to maintain
and adhere to the Business Plan is eliminated in all respects from
and after the date that: (i) the Term Loan Component has been
paid in full; and (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and exceeded
by 10% the net income projection for the fiscal year ending
December 31, 2004, as those net income projections appear in
the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered
by Borrower to Lender.”
3.
Definitions . Section 1.1 is hereby amended in
part to add the following new paragraphs:
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“(cccccc) Backup Servicing Agreement .
Shall mean that certain Backup Servicing Agreement dated as of
April 10, 2001, as amended by the First Amendment to the
Backup Servicing Agreement dated as of April 30,
2002.”
“(dddddd) Declarant Rights . Shall mean
the rights of the declarant described on Schedule 1.1(c)
attached hereto.”
“(eeeeee) Management Agreement . Shall
mean that certain Management Agreement by and between Silverleaf
Club and Silverleaf Resorts, Inc. dated as of March 28, 1990
as amended to date.”
“(ffffff) Utility Purchase Agreement .
Shall mean that certain Asset Purchase Agreement between Silverleaf
Resorts, Inc. and Algonquin Water Resources of Texas, Inc. and
Algonquin Water Resources of Missouri, Inc. and Algonquin Water
Resources of Illinois, Inc. and Algonquin Water Resources of
America, Inc. and Algonquin Power Income Fund dated as of
August 29, 2004.”
“(gggggg) Utility Rights . Shall mean
the Facilities, Real Property and Utilities, as those terms are
defined in the Utility Purchase Agreement, that are part of the
Additional Resort Collateral.”
4. Release of
Additional Resort Collateral and Sovereign Collateral .
Section 3 is hereby amended in part to add the following new
Section 3.15:
“
3.15 Release of Liens . Notwithstanding
anything contrary in the Loan Agreement, and provided no Event of
Default or condition, omission or act which, with the passage of
time, notice or both, would constitute an Event of Default, has
occurred:
(a) the Utility Rights shall be released from the Lien of the
security interest granted to Lender hereunder on the date that:
(i) the sale of the Utility Rights is closed pursuant to the
Utility Purchase Agreement; and (ii) the net proceeds of such
sale in an amount not less than thirteen million dollars
($13,000,000) is transferred to Lender to be held in escrow until
March 31, 2005, on which date Lender shall apply such proceeds
to the Revolving Component of this Loan, the Tranche A Credit
Facility, and the Tranche B Credit Facility, or sooner if required
by Lender to make a contractually obligated payment under the Loan
Facilities;
(b) the Additional Resort Collateral, except for the Declarant
Rights and the Management Agreement, shall be released from the
Lien of the security interest granted to Lender hereunder on the
date that the Term Loan Component has been paid in full;
(c) all collateral securing the Sovereign Facility, which
shall mean the Notes Receivable and related Mortgages exclusively
assigned to Sovereign in connection with an advance under its loan
documents, shall be released from the Lien of the security interest
granted to Lender hereunder on the date that: (i) the Term
Loan
3
Component
has been paid in full; (ii) Borrower has achieved the net
income projection for the six months ending December 31, 2004
and exceeded by 10% the net income projection for the fiscal year
ending December 31, 2004, as those net income projections
appear in the Business Model dated November 13, 2003, such net
income results to be evidenced by audited Financial Statements
delivered by Borrower to Lender; and (iii) all Collateral is
released from any lien granted to Sovereign pursuant to the
Sovereign Documents; and
(d) the Declarant Rights and the Management Agreement shall be
released from the Liens of the security interest granted to Lender
hereunder on the date that: (i) the Term Loan Component has
been paid in full; (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and
exceeded by 10% the net income projection for the fiscal year
ending December 31, 2004, as those net income projections
appear in the Business Model dated November 13, 2003, such net
income results to be evidenced by audited Financial Statements
delivered by Borrower to Lender; (iii) Borrower files a
negative pledge in a form acceptable to Lender in the land records
for each Resort that neither Declarant Rights nor the Management
Agreement will be assigned, transferred, or encumbered; and
(iv) the Declarant Rights and the Management Agreement are
also released from any lien granted to Sovereign pursuant to the
Sovereign Documents. Notwithstanding anything herein to the
contrary, to the extent that the Declarant Rights or Management
Agreement have not already been released from any lien granted to
Lender hereunder, on the date that the maximum aggregate Commitment
under this Agreement, the Tranche A Credit Facility, and the
Tranche B Credit Facility has been reduced to $82,000,000.00 for
the Revolving Loan Component, the Declarant Rights and Management
Agreement shall be released from the Lien of the security interest
granted to Lender hereunder, provided that: (1) Borrower files
a negative pledge in a form acceptable to Lender in the land
records for each Resort that neither the Declarant Rights nor the
Management Agreement will be assigned, transferred, or encumbered
and (2) the Declarant Rights and Management Agreement are also
released from any lien granted to Sovereign pursuant to the
Sovereign Documents.
5. Tangible
Net Worth . Provided that: (i) no Event of Default or
condition, omission or act which, with the passage of time, notice
or both, would constitute an Event of Default, has occurred; and
(ii) Tangible Net Worth as of December 31, 2004 meets or
exceeds the requirement of the existing Section 7.1(aa)(i)
Tangible Net Worth Covenant, Section 7.1(aa)(i) will be
deleted in its entirety and replaced with the following new
Section 7.1(aa)(i), on the date that: (1) the Term Loan
Component has been paid in full; and (2) Borrower has achieved
the net income projection for the six months ending
December 31, 2004 and exceeded by 10% the net income
projection for the fiscal year ending December 31, 2004, as
those net income projections appear in the Business Model dated
November 13, 2003, such net income results to be evidenced by
audited Financial Statements delivered by Borrower to Lender:
“(i)
Tangible Net Worth. Borrower shall at all times have
and maintain Tangible Net Worth in an amount which shall not be
less than an amount
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equal to
the Tangible Net Worth as stated in the annual audited financial
statements as of December 31, 2004 plus (A) fifty percent
(50%) of the aggregate amount of proceeds received by Borrower
after December 31, 2004 in connection with (1) each
issuance by Borrower of any class or classes of capital stock after
December 31, 2004, except for stock issued to retire existing
unsecured subordinated debt, and (2) each incurrence of
unsecured subordinated debt after December 31, 2004, except
for unsecured debt issued to retire existing
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