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
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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, exc
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