EXHIBIT 10.7
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
(INVENTORY LOAN)
between
SILVERLEAF RESORTS, INC.
(as Borrower)
and
TEXTRON FINANCIAL CORPORATION
(as Lender)
As of April 30, 2002
SECOND AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of April 30,
2002 (the "SECOND AMENDMENT"), is by and between TEXTRON FINANCIAL CORPORATION,
a Delaware corporation (the "LENDER"), and SILVERLEAF RESORTS, INC., a Texas
corporation (the "BORROWER")
WITNESSETH:
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 Loan Agreement, 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 have agreed to enter into this Second
Amendment to Loan and Security Agreement (the "SECOND AMENDMENT") to restructure
and modify the Loan; and
WHEREAS, Borrower acknowledges, agrees and confirms that if Borrower fails
to satisfy any of the conditions set forth in Paragraph 60 hereof, as determined
by Lender, in its sole and absolute discretion, on or before May 31, 2002, then
this Second Amendment, and the obligations of Lender hereunder, shall be null
and void in all respects ab initio. In such event, the terms and conditions of
the Original Agreement, as modified by the Forbearance Agreement and the
Extension Letter, shall continue to control with respect to the Loan; Borrower
further acknowledges, confirms and agrees that until such time as Borrower has
satisfied all of the conditions set forth in Paragraph 60 hereof, as determined
by Lender, in its sole and absolute discretion, the Loan shall continue to be
governed by the terms and provisions set forth in the Original Agreement, as
modified by the Forbearance Agreement and the Extension Letter.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Second Amendment, and for other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the parties
to this Second Amendment, intending to be legally bound, agree as follows:
1. ADDITIONAL CREDIT FACILITY. Section 1.1(a) is hereby restated and
amended to read as follows:
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"(a) ADDITIONAL CREDIT FACILITY. The term "Additional Credit Facility"
shall mean that certain $10,200,000 credit facility provided by Lender to
Borrower pursuant to that certain Loan and Security Agreement dated April 17,
2001 by and between Borrower and Lender, as amended by the First Amendment to
Loan and Security Agreement dated April 30, 2002, and as it may be further
amended from time to time (the "ADDITIONAL CREDIT LOAN AGREEMENT")."
2. AGREEMENT. Section 1.1(e) is hereby restated and amended to read as
follows:
"(e) AGREEMENT. This Loan and Security Agreement by and between the
Borrower and the Lender (including the Exhibits and Schedules attached hereto),
as amended by the First Amendment to Loan and Security Agreement dated as of
April 17, 2001 (the "FIRST AMENDMENT"), as further amended by a Second Amendment
to Loan and Security Agreement dated as of April 30, 2002 (the "SECOND
AMENDMENT"), and as it may be further amended from time to time."
3. COLLATERAL. Section 1.1(i) is hereby restated and amended to read as
follows:
"(i) COLLATERAL. Collectively, all now owned or hereafter acquired right,
title and interest of Borrower, in all of the following:
(i) The Inventory;
(ii) Documents, instruments, accounts, chattel paper, and general
intangibles relating to the Inventory;
(iii) Pledged Notes Receivable (including all Notes Receivable
comprising the Ineligible Notes Portfolio) and all proceeds of or from
them;
(iv) the mortgages securing such Pledged Notes Receivable and all
proceeds of or from them;
(v) Documents, instruments, accounts, chattel paper, and general
intangibles relating to the Pledged Notes Receivable, (including any
relating to the Ineligible Note Portfolio) and the mortgages securing
such Pledged Notes Receivable;
(vi) the Land;
(vii) the Additional Resort Collateral;
(viii) the Silverleaf Finance I, Inc. Stock;
(ix) the Standby Servicing Agreement;
(x) the Standby Management Agreement;
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(xi) All collateral under the Additional Credit Facility, the
▇▇▇▇▇▇ Facility, the Sovereign Facility and the Existing Credit
Facilities, as each such term is herein defined;
(xii) All books, records, reports, computer tapes, disks and
software relating to the Collateral; and
(xiii) Extensions, additions, improvements, betterments,
renewals, substitutions and replacements of, for or to any of the
Collateral, wherever located, together with the products, proceeds,
issues, rents and profits thereof, and any replacements, additions or
accessions thereto or substitutions thereof."
4. EXISTING CREDIT FACILITY. Section 1.1(u) is hereby restated and amended
to read as follows:
"(u) EXISTING CREDIT FACILITIES. The term "Existing Credit Facilities"
shall mean singly and collectively: (i) that certain $75,000,000 credit facility
provided by Lender to Borrower pursuant to that certain Amended and Restated
Loan and Security Agreement dated as of April 30, 2002 (the "TRANCHE A LOAN
AGREEMENT") and (ii) that certain $71,000,000 credit facility provided by Lender
to Borrower pursuant to that certain Amended and Restated Loan, Security and
Agency Agreement dated as of April 30, 2002 (the "TRANCHE B LOAN AGREEMENT)."
5. FINAL MATURITY DATE. Section 1.1(x) is hereby restated and amended to
read as follows:
"(x) FINAL MATURITY DATE. March 31, 2007."
6. LAND MORTGAGES OR LAND MORTGAGES. Section 1.1(qqq) is hereby restated
and amended as follows:
"(qqq) LAND MORTGAGE OR LAND MORTGAGES. The term "Land Mortgage" or "Land
Mortgages" shall mean singly and collectively, a properly recorded, first
priority mortgage, deed of trust, deed to secure debt, assignment of beneficial
interest or other security instrument encumbering all of the right, title and
interest of Borrower in the Land and securing the Loan, as modified and amended
by mortgage modifications, in the form attached hereto as Exhibit A."
7. LOAN DOCUMENTS. Section 1.1(ii) is hereby restated and amended as
follows:
"(ii) LOAN DOCUMENTS. Collectively, this Agreement and the following
documents and instruments listed below as such agreements, documents,
instruments or certificates may be amended, renewed, extended, restated or
supplemented from time to time.
(i) The Original Agreement, as amended by the First Amendment and
this Second Amendment;
(ii) The Amended and Restated Note;
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(iii) The Mortgages;
(iv) The Environmental Indemnification Agreement;
(v) Borrower's Certificate and Request for Advance;
(vi) The Land Mortgages;
(vii) The Additional Resort Collateral Mortgages;
(viii) The Additional Resort Collateral Assignment;
(ix) The Stock Pledge Agreement;
(x) The Standby Management Agreement Assignment;
(xi) The Assignment of Management Agreements;
(xii) The Assignment of Mortgages;
(xiii) Financing Statements; UCC financing statements covering
the Collateral, to be filed with the Texas Secretary of State and the
Secretary of State and/or such other office where UCC financing
statements are required to be filed pursuant to the Code; and
(xiv) Other Items; Such other agreements, documents, instruments,
certificates and materials as Agent may request to evidence the
Obligations; to evidence and perfect the rights and Liens and security
interests of Lenders, contemplated by the Loan Documents, and to
effectuate the transactions contemplated herein, as such agreements,
documents, instruments or certificates may be hereafter amended,
renewed, extended, restated or supplemented from time to time."
8. LOAN YEAR. Section 1.1(jj) is hereby restated and amended to read as
follows:
"(jj) LOAN YEAR. The period from the date that Lender determines in its
sole discretion that all conditions set forth in Paragraph 60 hereof have been
satisfied, which date shall not be later than May 31, 2002, through March 31,
2003 and each twelve (12) calendar month period thereafter."
9. BUSINESS PLAN. Section 1.1(iii) is hereby restated and amended to read
as follows:
"(iii) BUSINESS PLAN. The term "Business Plan" shall mean the five (5) year
"Stand Alone" business plan prepared by Borrower and attached hereto as Exhibit
F. The Business Plan includes the "Impact on Lenders Worksheet" setting forth
the amounts to be advanced by each of the Lenders, ▇▇▇▇▇▇ and Sovereign pursuant
to their respective credit facilities (the "Senior Lender Advance Schedule")."
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10. DEFINITIONS. Section 1.1 (Definitions) is hereby amended in part to add
the following new paragraphs:
"(ttt) ADDITIONAL ELIGIBLE RESORTS OR ADDITIONAL ELIGIBLE RESORT. The terms
"Additional Eligible Resorts" and "Additional Eligible Resort" shall have the
meanings ascribed to such terms in Section 3.12 hereof.
(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 or hereafter acquired by Borrower and listed on Schedule
1.1(uuu). For the avoidance of doubt, "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.
(vvv) ADDITIONAL RESORT COLLATERAL MORTGAGES. A properly recorded, first
priority mortgage, deed of trust, deed to secure debt or other security
instrument, as applicable, executed and delivered by the Borrower to Lender,
encumbering all of the right, title and interest of Borrower in that portion of
the Additional Resort Collateral constituting real property.
(www) ADDITIONAL RESORT COLLATERAL ASSIGNMENTS. The term "Additional Resort
Collateral Assignments" shall mean singly and collectively: (i) a first priority
security agreement executed and delivered by Borrower to Lender granting to
Lender, a first priority security interest in that portion of the Additional
Resort Collateral constituting personal property, and (ii) a first priority
security agreement executed and delivered by Borrower to Lender, granting to
Lender, a first priority security interest in that portion of the Additional
Resort Collateral constituting development rights.
(xxx) ASSIGNMENT OF MANAGEMENT AGREEMENTS. The term "Assignment of
Management Agreements" shall mean the assignment, in the form attached hereto as
Exhibit A, by Borrower to Lender, of all of Borrower's rights under each
management agreement for the Resorts.
(yyy) BOND HOLDER EXCHANGE TRANSACTION. The term "Bond Holder Exchange
Transaction" shall mean that certain senior subordinate note holder exchange
transaction on the terms and conditions outlined in that certain term sheet
dated October 19, 2001 (the "BOND HOLDER EXCHANGE TRANSACTION LETTER"), a copy
of which is attached hereto as Exhibit E, and which is to be consummated
pursuant to the documents listed on Schedule 1.1(yyy) hereto (the "BOND HOLDER
EXCHANGE DOCUMENTS").
(zzz) CASH AND CASH EQUIVALENTS. Unrestricted (i) cash; (ii) marketable
direct obligations issued or unconditionally guaranteed by the United States
government and backed by the full faith and credit of the United States
government; and (iii) domestic and Eurodollar certificates of deposit and time
deposits, bankers' acceptances and floating rate certificates of deposit issued
by any commercial bank organized under the laws of the United States, any state
thereof, the District of Columbia, any foreign bank, or its branches or agencies
(fully protected against currency fluctuations), which, at the time of
acquisition, are rated A-1 (or better) by
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Standard & Poor's Rating Group or P-1 (or better) by ▇▇▇▇▇'▇ Investor Service,
Inc. provided that the maturities of such Cash and Cash Equivalents shall not
exceed one year.
(aaaa) DZ FACILITY. The term "DZ Facility" shall mean that certain note
purchase facility to be provided by DZ Bank Deutsche Genossenschaftsbank, AG, 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 (collectively, the "DZ LETTER AGREEMENT")
and evidenced by the documents listed on Schedule 1.1(aaaa) hereto (the "DZ
DOCUMENTS").
(bbbb) EBITDA. The term EBITDA means, with respect to any Person for any
period, (a) the sum of (i) net income (but excluding any extraordinary gains or
losses or any gains or losses from the sale or disposition of assets other than
in the ordinary course of business), (ii) interest expense, (iii) depreciation
and amortization and other non-cash items properly deducted in determining net
income, and (iv) federal, state and local income taxes, in each case for such
Person for such period, computed and calculated in accordance with GAAP minus
(b) non-cash items properly added in determining net income, in each case for
the corresponding period.
(cccc) EFFECTIVE DATE. The term "Effective Date" shall have the meaning
given in paragraph 64 of this Second Amendment.
(dddd) EXTENSION LETTER. The term "Extension Letter" shall mean that
certain extension letter dated April 15, 2002, which extended the Revolving Loan
Period of the Loan to May 31, 2002, subject to the terms and conditions
contained therein.
(eeee) INELIGIBLE NOTE PORTFOLIO. The term "Ineligible Note Portfolio"
shall mean certain of Borrower's Notes Receivable and Mortgages which are not
currently pledged to any other Person, which are listed in Exhibit K attached
hereto and which shall be held by Borrower, as agent for and on behalf of
Lender, unless and until an Event of Default shall occur, in which case the
Ineligible Note Portfolio shall be delivered to Lender in accordance with
Section 3.7 hereof.
(ffff) MARKETING AND SALES EXPENSES. Shall mean all promotion, lead
generation, sales commissions and all other marketing expenses incurred or paid
by Borrower pursuant to any marketing agreements or otherwise.
(gggg) NET SECURITIZATION CASH FLOW. All right, title and interest of
Silverleaf Finance I, Inc., a wholly owned subsidiary of Borrower, in any excess
cash flow derived from the Notes Receivable sold by Silverleaf Finance I, Inc.
to DZ pursuant to the DZ Documents.
(hhhh) NOTE RECEIVABLE. A promissory note executed in favor of Borrower in
connection with a Purchaser's acquisition of an Interval.
(iiii) OPERATING EXPENSES. Shall mean the total of all expenditures,
computed in accordance with Generally Accepted Accounting Principles, of
whatever kind relating to the ownership, operation, maintenance and management
of the Resorts that are incurred on a regular
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monthly or other periodic basis, including, without limitation, utilities,
ordinary and capital repairs and maintenance, insurance premiums, license fees,
property taxes and assessments, management fees, payroll and related taxes,
computer processing charges, operational equipment or other lease payments as
approved by Lender, and other similar costs.
(jjjj) PLEDGED NOTES RECEIVABLE. Any Note Receivable which at any time has
been pledged to Lender by Borrower pursuant to this Agreement or any of the Loan
Documents, including an Ineligible Note Receivable.
(kkkk) REVENUES. Shall mean all proceeds from the sale of Intervals,
regardless of whether such proceeds are in the form of cash or Notes Receivable.
(llll) STOCK PLEDGE AGREEMENT. Shall mean the agreement in the form
attached hereto as Exhibit A, pursuant to which all issued and outstanding
shares of Silverleaf Finance I, Inc.'s capital stock and all right, title and
interest in such shares, all certificates, instruments or other documents
evidencing or representing the same and all dividends and distributions
therefrom, including dividends and distributions paid in stock (the "SILVERLEAF
FINANCE I, INC. STOCK") are pledged to Lender as security for the Loan.
(mmmm) STANDBY MANAGER. Shall mean the Person selected by Borrower, and
acceptable to Lender, in its sole discretion, to act as standby manager of
Borrower's Resorts in accordance with this Agreement. Subject to the review and
approval of the Standby Management Agreement by Lender, in its sole discretion,
Lender hereby approves J&J Limited, Inc. as the initial Standby Manager.
(nnnn) STANDBY MANAGEMENT AGREEMENT. Shall mean the agreement to be entered
into between the Standby Manager and Borrower providing for the management of
Borrower's business and the Resorts on the occurrence of an Event of Default
hereunder.
(oooo) STANDBY MANAGEMENT AGREEMENT ASSIGNMENT. Shall mean the assignment,
in the form attached hereto as Exhibit A, by Borrower to Lender, of all of
Borrower's rights under the Standby Management Agreement.
(pppp) TANGIBLE NET WORTH. Tangible Net Worth means, with respect to any
Person, the amount calculated in accordance with GAAP as (i) the consolidated
net worth of such Person and its consolidated subsidiaries, plus (ii) to the
extent not otherwise included in such consolidated net worth, unsecured
subordinated debt of such Person and its consolidated subsidiaries, the terms
and conditions of which are reasonably satisfactory to Lender, minus (iii) the
consolidated intangibles of such Person and its consolidated subsidiaries,
including, without limitation, goodwill, trademarks, tradenames, copyrights,
patents, patent allocations, licenses and rights in any of the foregoing and
other items treated as intangible in accordance with GAAP. Notwithstanding the
foregoing, if subsequent to the Effective Date deferred sales are no longer
considered an asset under GAAP, Lender agrees, at the request of Borrower, to
determine, in its reasonable discretion, whether deferred sales should continue
to be considered an asset for purposes of determining Borrower's Tangible Net
Worth.
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(qqqq) TAX REFUND. The term "Tax Refund" means that certain corporate tax
refund of Borrower for the 1998 and 1999 tax years in the estimated amount of
$5,000,000.
(rrrr) TOTAL INTEREST EXPENSE. For any period, the aggregate amount of
interest required to be paid or accrued by Borrower and its subsidiaries during
such period on all indebtedness of Borrower and its subsidiaries outstanding
during all or any part of such period, whether such interest was or is required
to be reflected as an item of expense or capitalized, including payments
consisting of interest in respect of any capitalized lease, or any synthetic
lease and including commitment fees, agency fees, facility fees, balance
deficiency fees and similar fees or expenses in connection with the borrowing of
money."
11. REVOLVING LOAN AND LENDING LIMITS. Section 2.1 is hereby restated and
amended to read as follows:
"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, 2004. 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, ▇▇▇▇▇▇ and
Sovereign dated of even date herewith. 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.
Borrower acknowledges, agrees and confirms that Lender's obligation to
Borrower and Borrower's right to borrow under this Agreement is subject to the
satisfaction of the conditions set forth in Paragraph 60 hereof on or before May
31, 2002. Until such time as Lender determines that the conditions set forth in
Paragraph 60 hereof have been satisfied, all of Borrower's rights with respect
to Advances shall be governed by and construed in accordance with the terms and
conditions of the Original Agreement, as modified by the Forbearance Agreement
and the Extension Letter. If the conditions set forth in Paragraph 60 are not
satisfied on or before May 31, 2002, then this Second Amendment, and the
respective rights and obligations of the parties hereto, shall be null and void
ab initio and of no further force and effect and the respective rights and
obligations of Borrower and Lender shall be governed by the terms and conditions
of the Original Agreement, as modified by the Forbearance Agreement and the
Extension Letter.
Notwithstanding anything herein to the contrary, the obligation of Lender
to make any Advance under this Agreement shall be subject to and conditioned
upon ▇▇▇▇▇▇ making advances
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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 ▇▇▇▇▇▇ terminates its facility 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."
12. FACILITY FEE. Section 2.6(c) is hereby deleted in its entirety.
13. LOAN TERM. Section 2.7 is hereby restated and amended to read as
follows:
"2.7 LOAN TERM. The term of the Loan shall commence on the Effective Date
and shall terminate on March 31, 2007"
14. MAXIMUM OBLIGATION OF LENDER UNDER THE LOAN, THE ADDITIONAL CREDIT
FACILITY AND THE EXISTING CREDIT FACILITIES. Section 2.8 is hereby deleted in
its entirety.
15. CHANGE IN CONTROL. Section 2.9(b) is hereby restated and amended to
read as follows:
"(b) CHANGE IN CONTROL. If there shall occur a change, singly or in the
aggregate, of more than fifty percent (50%) of the executive management of
Borrower as described in Schedule 2.10(b) hereto, Lender shall have no
obligation to make any Advances hereunder, unless within thirty (30) days prior
thereto Borrower provides Lender with written information setting forth the
replacement executive management personnel of Borrower together with a
description of those Persons' experience, ability and reputation, and Lender,
acting in good faith, determines that the replacement management personnel's
experience, ability and reputation is equal to or greater than that of Borrower
as set forth on Schedule 2.10(b). Notwithstanding the foregoing, the makeup of
the Borrower's Board of Directors may be altered in accordance with the Bond
Holder Exchange Documents, provided that Lender shall have no obligation to make
any Advances hereunder if more than two (2) of the five (5) Board of Directors'
positions are controlled by the Bond Holders."
16. SUSPENSION OF ADVANCES. Section 2.9 is hereby amended in part to add
the following new paragraph:
"(c) FAILURE TO ADHERE TO BUSINESS PLAN/DEFAULT OR EVENT OF DEFAULT. Lender
shall not be obligated to fund any Advance hereunder if: (i) Borrower shall fail
to substantially adhere to the Business Plan (including the Senior Lender
Advance Schedule) as determined by Lender in its sole and absolute discretion or
(ii) a Default or Event of Default shall have occurred and be continuing."
17. GRANT OF SECURITY INTEREST. Section 3.1 is hereby restated and amended
to read as follows:
"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
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grants to Lender a continuing first priority security interest in and to the
Collateral 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 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 Standby Management
Agreement.
Notwithstanding anything herein to the contrary, Borrower acknowledges
and agrees as follows:
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
(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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Facility" and
"collateral securing the Sovereign Facility" shall mean the Notes Receivable and
related mortgages exclusively assigned to ▇▇▇▇▇▇ or Sovereign in connection with
an advance under their respective loan documents."
18. INSURANCE. Section 3.3 is hereby restated and amended to read as
follows:
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"3.3 INSURANCE. Insurance coverage with respect to the Resort(s) is
provided by the Timeshare Owners' Association. Borrower shall furnish Lender,
upon request, with satisfactory evidence that the Units, Buildings and Resorts
are adequately insured. Borrower shall furnish to Lender evidence of insurance
coverage with respect to the Land, that portion of the Additional Resort
Collateral constituting real property and such other portion of the Additional
Resort Collateral as Lender may reasonably request. Such insurance coverage
shall insure against such risks, be in such amounts, with such companies and on
such other terms as Lender may reasonably require. Each such policy shall name
Lender as an additional insured and loss payee, as their respective interests
may appear. In the event of a loss or damage to any portion of the Additional
Resort Collateral constituting real property. Borrower shall, unless an Event of
Default exists, apply the proceeds of any such insurance policy to restoration
and repair of the Additional Resort Collateral in question in accordance with
the applicable Declaration. If an Event of Default has occurred, Lender may, in
its sole discretion, apply the proceeds of any such insurance policy to
restoration and repair of such Additional Resort Collateral in question in
accordance with the applicable Declaration or to the repayment of the Loan in
accordance with Section 2.4 hereof."
19. CROSS COLLATERALIZATION. Section 3.5 is hereby restated and amended to
read as follows:
"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 ▇▇▇▇▇▇ 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."
20. COLLATERAL. Section 3 is hereby amended in part to add the following
new paragraphs:
12
"3.6 TAX REFUND. Borrower agrees that it shall use the proceeds of the Tax
Refund strictly to fund Operating Expenses in accordance with the Business Plan
and for no other reason, without Lender's prior written consent. Borrower
further agrees to use the Tax Refund before any Advance hereunder. Upon request
of Lender, Borrower shall promptly provide to Lender such evidence as Lender may
request as to the manner in which the proceeds of the Tax Refund are being used.
3.7 SECURITY INTEREST IN ALL PLEDGED NOTES RECEIVABLE. Lender shall have a
continuing security interest in all of the Pledged Notes Receivable, including
all Notes Receivable in the Ineligible Note Portfolio and any Notes Receivable
pledged to ▇▇▇▇▇▇ or Sovereign and Lender may collect all payments made under or
in respect of all such Notes Receivable, including, without limitation, Eligible
Notes Receivable that are or may become ineligible, until any of the same may be
released by Lender, if at all, pursuant to Section 12.10 of the Tranche A Loan
Agreement or Section 7.2(a) below. Notwithstanding anything heretofore to the
contrary, unless and until an Event of Default shall occur, Borrower, as agent
for and on behalf of Lender, shall retain possession of and collect all payments
under or in respect of all Notes Receivable in the Ineligible Note Portfolio. By
executing this Agreement, Borrower acknowledges and agrees that it is holding
such Notes Receivable as bailee and agent for Lender. Borrower shall hold and
designate such Notes Receivable in a manner which clearly indicates that they
are being held by Borrower as bailee on behalf of Lender. Upon the occurrence of
an Event of Default, Borrower shall promptly deliver to Lender, for itself and
as agent for Sovereign and ▇▇▇▇▇▇, all original Notes Receivable comprising the
Ineligible Note Portfolio and to the extent not previously delivered to Lender,
the documents listed in Section 5.1(b) of the Tranche A Loan Agreement and with
respect thereto and after such Event of Default Lender shall have the right to
collect all proceeds therefrom and apply the same to payment of the Obligations
as set forth in Section 2.3(a) hereof.
To perfect the security interest of Lender in the Ineligible Note
Portfolio, Borrower agrees, subject to Lender's prior approval, to execute and
cause to be filed, at Borrower's sole cost and expense, UCC-1 financing
statement(s) with the appropriate state and local governmental authorities as
requested by Lender. Borrower also shall execute and deliver in escrow to
Lender, for itself and as agent on behalf of Sovereign and ▇▇▇▇▇▇, an assignment
of Mortgages in the form attached hereto as Exhibit A (the "Assignment of
Mortgages") and as approved by Lender, Sovereign and ▇▇▇▇▇▇ at their sole and
absolute discretion, assigning equally to Lender, ▇▇▇▇▇▇ and Sovereign all of
Borrower's rights, title and interests in each and all of the Mortgages relating
to the Notes Receivable in the Ineligible Note Portfolio. Borrower further
agrees to promptly execute and deliver modifications or additional Assignments
of Mortgages requested by Lender, ▇▇▇▇▇▇ and Sovereign in order to continue the
security interests of Lender, ▇▇▇▇▇▇ and Sovereign in the Ineligible Note
Portfolio. Borrower acknowledges and agrees that upon an Event of Default,
Lender, or a designee as designated by Lender, ▇▇▇▇▇▇ and Sovereign pursuant to
the terms of the Intercreditor Agreement, shall have the right to automatically
record, at Borrower's sole cost and expense, all such Assignments of Mortgages
executed by Borrower and delivered to Lender in accordance with the terms of
this Section 3.7."
21. UCC SEARCH. Section 4.5(e) is hereby restated and amended to read as
follows:
13
"(e) UCC SEARCH. Lender shall have obtained, at Borrower's cost, such
searches of the applicable public records as it deems necessary under all
applicable law to verify that it has a first or second, as applicable, and prior
perfected Lien and security interest covering all of the Collateral. Lender
shall not be obligated to fund any Advance if Lender determines that Lender does
not have a first or second, as applicable, and prior perfected lien and security
interest covering any portion of the Collateral."
22. REQUESTS FOR ADVANCES. Section 5(a)(iv) is hereby restated and amended
to read as follows:
"(iv) be delivered to the office of Lender at least five (5) Business Days
prior to the date of the requested Advance;"
23. LOAN DOCUMENTS/COLLATERAL: Section 5(b) is amended in part to read as
follows:
"(b) LOAN DOCUMENTS/COLLATERAL. Not less than five (5) Business Days prior
to the date of any Advance, Borrower shall have:"
24. FUNDING PROCEDURE. Section 5(c) (Other Conditions) is hereby restated
and amended in part to add the following new paragraph 5:
"(ix) ▇▇▇▇▇▇ funds its respective portion in accordance with 2.1 and as
provided in the Intercreditor Agreement;
(x) there are insufficient proceeds from the Tax Refund to pay Operating
Expenses as provided in the Business Plan; and
(xi) the most recent Weekly Flash Report indicates that Borrower has less
than five million dollars ($5,000,000) in available unrestricted cash."
25. FINANCIAL STATEMENTS AND BUSINESS CONDITION. Section 6.3 is hereby
restated and amended to read as follows:
"6.3 FINANCIAL STATEMENTS AND BUSINESS CONDITION. The Weekly Flash Reports,
the Monthly Financial Reports for the first ten (10) months of the calendar year
2001 and the Alternative Financial Models dated December 4, 2001 are, to the
best of Borrower's knowledge, accurate and fairly represent the financial
condition of the Borrower for the periods in question, subject to the written
qualifications set forth therein, including the fact that such statements and
reports are preliminary and subject to completion of the audit thereof and that
Borrower anticipates adjustments thereto which may significantly affect the
results thereof, including an estimated reduction in shareholder equity of
$63,000,000. To the best of Borrower's knowledge, there are no material
liabilities, direct or indirect, fixed or contingent, of Borrower, except as
disclosed to Lender in writing."
26. TAXES: Section 6.4 is hereby restated and amended to read as follows:
"6.4 TAXES. In accordance with the requirements set forth in the
Declaration, Borrower represents and warrants that Borrower or Timeshare Owners'
Association, as required, has paid or will have paid in full, prior to
delinquency, all ad valorem taxes and other taxes and
14
assessments against the Resort and the Collateral; and Borrower knows of no
basis for any additional taxes or assessments against the Resorts or the
Collateral. Borrower or the Timeshare Owners' Association, as the case may be,
has filed all tax returns required to have been filed by it and has paid or will
pay prior to delinquency, all taxes shown to be due and payable on such returns,
including interest and penalties thereon, and all other taxes which are payable
by it to the extent the same have become due and payable. Borrower has paid or
will have paid in full, prior to delinquency, all ad valorem taxes and other
assessments against that portion of the Additional Resort Collateral
constituting real property and against the Land, and Borrower knows of no basis
for any additional taxes or assessments against the Land or other such real
property."
27. TITLE TO PROPERTIES: PRIOR LIENS. Section 6.5 is hereby restated and
amended to read as follows:
"6.5 TITLE TO PROPERTIES: PRIOR LIENS. Borrower has good and marketable
title to all of the Collateral, and to all unsold Units and Intervals at each
Resort, and all rights, properties and benefits appurtenant to or benefiting
them. Borrower is not in default under any of the documents evidencing or
securing any indebtedness which is secured, wholly or in part, by any portion of
any Resort or any portion or all the Collateral and no event has occurred which
with the giving of notice, the passage of time or both, would constitute a
default under any of the documents evidencing or securing any such indebtedness.
Other than the Liens granted in favor of Lender, Sovereign and ▇▇▇▇▇▇, the Liens
granted to secure the Additional Credit Facility and the Existing Credit
Facility and the Liens described in Schedule 6.5 hereto, there are no liens or
encumbrances against the Collateral, or against any Resort."
28. ENVIRONMENTAL MATTERS. Section 6.9 is hereby restated and amended to
read as follows:
"6.9 ENVIRONMENTAL MATTERS. Except as otherwise noted on Schedule 6.9: (a)
neither the Land, any portion of the Additional Resort Collateral consisting of
real property or any Resort contains any Hazardous Materials, (b) no Hazardous
Materials are used or stored at or transported to or from the Resorts, the Land
or any portion of the Additional Resort Collateral consisting of real property,
(c) neither Borrower nor the Resorts nor any manager thereof or to Borrower's
knowledge, the Timeshare Owners' Associations, have received notice from any
governmental agency, entity or other Person with regard to Hazardous Materials
on, under or affecting any Resort, the Land or any portion of the Additional
Resort Collateral consisting of real property, and (d) neither Borrower nor the
Resorts, the Land or any portion of the Additional Resort Collateral consisting
of real property, nor any portion thereof, nor to Borrower's knowledge after
diligent inquiry, the Timeshare Owners' Associations, are in violation of any
Environmental Laws."
29. USE OF PROCEEDS/MARGIN STOCK. Section 6.11 is hereby restated and
amended to read as follows:
"6.11 USE OF PROCEEDS/MARGIN STOCK. (a) The proceeds of the Loan, the
▇▇▇▇▇▇ 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. 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
15
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."
30. NO DEFAULTS Section 6.12 is hereby restated and amended to read as
follows:
"6.12 DEFAULTS. Except for the Specified Events of Default (as defined in
the Forbearance Agreement) during the Forbearance Period (as defined in the
Forbearance Agreement), Borrower has no knowledge of any Default or Event of
Default not disclosed to Lender in writing except for the specified events of
default under the forbearance agreement between Borrower and ▇▇▇▇▇▇ or the
forbearance agreement between Borrower and Sovereign, Borrower has no knowledge
of any default or event of default under the ▇▇▇▇▇▇ Documents or the Sovereign
Documents, except as disclosed to Agent in writing, and neither ▇▇▇▇▇▇ nor
Sovereign has accelerated any loan obligation of Borrower on account of any such
specified default or event of default."
31. RESTRICTIONS OF BORROWER. Section 6.14 (Restrictions of Borrower) is
hereby restated and amended to read as follows:
"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 ▇▇▇▇▇▇ Documents and the Sovereign 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 ▇▇▇▇▇▇ Documents, the Bond
Holder Exchange Documents, the Sovereign Documents or the DZ Facility 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, in favor of ▇▇▇▇▇▇ and Sovereign, as applicable."
32. OPERATING CONTRACTS. Section 6.18(h) is hereby restated and amended to
read as follows:
"(h) OPERATING CONTRACTS. Borrower has entered into the contracts,
agreements, and arrangements necessary for the operation of the Resorts,
including but not limited to those with respect to utilities, maintenance,
management, services, marketing and sales (hereinbelow defined as "Operating
Contracts")."
16
33. ADDITIONAL REPRESENTATION AND WARRANTIES. Section 6.25 is hereby
restated and amended to read as follows:
"6.25 ADDITIONAL REPRESENTATIONS AND WARRANTIES. This Agreement, the
Original Agreement, the Note and the other Loan Documents constitute the legal,
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with their respective terms. Borrower ratifies and confirms each
covenant and agreement made under the Original Agreement and the other Loan
Documents, except as provided in the Forbearance Agreement."
34. GENERAL REPRESENTATIONS AND WARRANTIES. Section 6 is hereby restated
and amended in part to add the following new paragraphs:
"6.26 ADDITIONAL RESORT COLLATERAL.
(a) FIRST LIEN. Subject to the other first lien rights of ▇▇▇▇▇▇ and
Sovereign as provided in the Intercreditor Agreement, upon execution and
delivery of the Additional Resort Collateral Assignments and execution and
recording of the Additional Resort Collateral Mortgages, Lender will have a
valid first lien in the Additional Resort Collateral.
(b) ACCESS. The portion of the Additional Resort Collateral constituting
real property has adequate legal rights of access to a public way.
(c) FLOOD ZONE. Except as is disclosed in the surveys of the portion of the
Additional Resort Collateral constituting real property that have been or will
be provided to Lender, no portion of such land is located in a flood hazard area
as defined by the Federal Insurance Administration.
(d) SEISMIC EXPOSURE. No portion of the Additional Resort Collateral
constituting real property is located in a zone 3 or zone 4 of the "Seismic Zone
Map of the U.S."
(e) CONDEMNATION. No portion of the Additional Resort Collateral
constituting real property has been taken in condemnation or other like
proceedings nor is any proceeding pending, threatened or known to be
contemplated for the partial or the total condemnation or taking of any portion
of such land.
(f) NO PURCHASE OPTIONS. No person or entity has an option to purchase any
portion of the Additional Resort Collateral, or any portion thereof, or any
interest therein.
6.27 ▇▇▇▇▇▇ AND SOVEREIGN FACILITIES. The modifications of the ▇▇▇▇▇▇
Facility and the Sovereign Facility on terms and conditions as provided in the
Business Plan, have closed and Lender has been provided with true and correct
copies of the ▇▇▇▇▇▇ Documents and the Sovereign Documents, as so modified.
There is no event of default or event which, with the passage of time, notice or
both, would constitute an event of default under either the ▇▇▇▇▇▇ Facility or
the Sovereign Facility and Borrower is in good standing under both of such
facilities.
6.28 BOND HOLDER EXCHANGE TRANSACTION. The Bond Holder Exchange Letter has
not been amended, modified or otherwise rescinded.
6.29 DZ FACILITY. The DZ Letter Agreement is in full force and effect and
has not been
17
amended, modified or otherwise rescinded."
35. PAYMENT AND PERFORMANCE OF OBLIGATIONS. Section 7.1(a) is hereby
restated and amended to read as follows:
"(a) PAYMENT AND PERFORMANCE OF OBLIGATIONS. Borrower shall pay all of the
Loan and related expenses when and as the same become due and payable, and
Borrower shall strictly observe and perform all of the Obligations, including
without limitation, all covenants, agreements, terms, conditions and limitations
contained in the Loan Documents, and will do all things necessary which are not
prohibited by law to prevent the occurrence of any Event of Default hereunder,
other than a Specified Event of Default (as defined in the Forbearance
Agreement); and Borrower will maintain an office or agency in the State of Texas
where notices, presentations and demands in respect of the Loan Documents may be
made upon Borrower. Such office or agency and the books and records of Borrower
shall be maintained at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
until such time as Borrower shall so notify Agent, in writing, of any change of
location of such office or agency."
36. CONSOLIDATION AND MERGER. Section 7.1(c) is hereby restated and amended
as follows:
"(c) CONSOLIDATION AND MERGER. Borrower will not consolidate with or merge
into any other Person or permit any other Person to consolidate with or merge
into it, unless: (i) Borrower is the continuing or surviving corporation in any
such consolidation or merger and (ii) prior to and immediately after such
consolidation or merger, Borrower shall not be in default hereunder."
37. MAINTENANCE OF INSURANCE. Section 7.1(d) is hereby restated and amended
to read as follows:
"(d) MAINTENANCE OF INSURANCE. Borrower, or if required pursuant to the
Declaration, the Timeshare Owners' Association, shall maintain (or Borrower
shall cause to be maintained) at all times during the term of this Agreement,
policies of insurance with premiums being paid when due, and shall deliver to
Lender originals of insurance policies issued by insurance companies, in
amounts, in form and in substance, and with expiration dates, all acceptable to
Lender and containing a waiver of subrogation rights by the insuring company, a
non-contributory standard mortgagee benefit clause, or their equivalents, and a
mortgagee loss payable endorsement in favor of and satisfactory to Lender, and
breach of warranty coverage, providing the following types of insurance on and
with respect to Borrower (or, as appropriate, the respective Associations) and
the Resort:
(i) Fire and extended coverage insurance (including lightning,
hurricane, tornado, wind and water damage, vandalism and malicious
mischief coverage) covering the improvements and any personal property
located in or on the Resort and any real property constituting part of
the Additional Resort Collateral, in an amount not less than the full
replacement value of such improvements and personal property, and said
policy of insurance shall provide for a deductible acceptable to
18
Lender, breach of warranty coverage, replacement cost endorsements
satisfactory to Lender, and shall not permit co-insurance;
(ii) Public liability and property damage insurance covering the
Resort in amounts and on terms satisfactory to Lender; and
(iii) Such other insurance on the Resort and any real property
constituting part of the Additional Resort Collateral or any
replacements or substitutions therefor including, without limitation,
flood insurance (if the Property is or becomes located in an area
which is considered a flood risk by the U.S. Emergency Management
Agency or pursuant to the National Flood Insurance program), in such
amounts and upon terms as may from time to time be reasonably required
by Lender.
To the extent any other timeshare receivable lender has any rights to
approve the form of insurance policies with respect to the Resort, the amounts
of coverage thereunder, the insurers under such policies, or the designation of
an attorney-in-fact for purposes of dealing with damage to any part of the
Resort or insurance claims or matters related thereto, or any successor to such
attorney-in-fact, or any changes with respect to any of the foregoing, Borrower
shall take all steps as may be necessary (and, after turnover, if any, of
control of the Resort to the Timeshare Owners' Association, Borrower shall use
its best efforts) to ensure that Lender shall at all times have a co-equal
right, with such other lender (including, without limitation, Borrower or any
third-party lender), to approve all such matters and any proposed changes in
respect thereof; and Borrower shall not cause or permit any changes with respect
to any insurance policies, insurers, coverage, attorney-in-fact, or insurance
trustee, if any, without Lender's prior written approval.
In the event of any insured loss or claim in respect of the Resort or
any real property comprising the Additional Resort Collateral, Borrower shall
apply (or cause to be applied), and Borrower covenants that the Timeshare
Owners' Association shall apply (or cause to be applied), all proceeds of such
insurance policies in a manner consistent with the Timeshare Documents and the
Timeshare Act.
All insurance policies required pursuant to this Agreement (or the
Timeshare Documents or Timeshare Act) shall provide that the coverage afforded
thereby shall not expire or be amended, canceled, modified or terminated without
at least thirty (30) days prior written notice to Lender. At least thirty (30)
days prior to the expiration date of each policy maintained pursuant to this
Section 7.1(d), a renewal or replacement thereof satisfactory to Lender shall be
delivered to Lender. Borrower shall deliver or cause to be delivered to Lender
receipts evidencing the payment for all such insurance policies and renewals or
replacements.
In the event of any fire or other casualty to or with respect to the
improvements on or at the Resort or any real property comprising the Additional
Resort Collateral, Borrower covenants that Borrower or the Timeshare Owners'
Association, as the case may be, will promptly restore or repair (or cause to be
restored, repaired or replaced) the damaged improvements and repair or replace
any other personal property to the same condition as immediately prior to such
fire or other casualty and, with respect to the improvements and
19
personal property on the Resort or any real property comprising the
Additional Resort Collateral, in accordance with the terms of the Timeshare
Documents or Timeshare Act. The insufficiency of any net insurance proceeds
shall in no way relieve Borrower or, as applicable, Borrower and Timeshare
Owners' Association, of its obligation to restore, repair or replace such
improvements and other personal property in accordance with the terms hereof, of
the Declaration or other Timeshare Documents or of the Timeshare Act, and
Borrower covenants that Borrower or, as the case may be, the Timeshare Owners'
Association, shall promptly comply and cause compliance with the provisions of
the Declaration and other Timeshare Documents, or of the Timeshare Act relating
to such restoration, repair or replacement. Borrower shall, unless an Event of
Default has occurred, apply all insurance proceeds payable to or received by it,
in accordance with the applicable Declaration. If an Event of Default has
occurred, Agent may, in its sole discretion, apply all insurance proceeds in
accordance with the applicable Declaration or to the repayment of the Loan in
accordance with Section 2.4 hereof."
38. MAINTENANCE OF SECURITY. Section 7.1(e) is hereby restated and amended
to read as follows:
"(e) MAINTENANCE OF SECURITY. Borrower shall execute and deliver (or cause
to be executed and delivered) to Lender all security agreements, financing
statements, assignments and such other agreements, documents, instruments and
certificates, and supplements and amendments thereto, and take such other
actions, as Lender deems necessary or appropriate in order to maintain as valid,
enforceable and perfected first or second priority liens and security interests,
as applicable, all Liens and security interests in the Collateral granted to
Lender to secure the Obligations. Borrower shall not grant extensions of time
for the payment of, compromise for less than the full face value or release in
whole or in part, any Purchaser or other Person liable for the payment of, or
allow any credit whatsoever except for the amount of cash to be paid upon, any
Collateral or any instrument, chattel paper or document representing the
Collateral."
39. ANNUAL FINANCIAL REPORTS. Section 7.1(h)(ii) is hereby restated and
amended to read as follows:
"(ii) ANNUAL FINANCIAL REPORTS. As soon as available and in any event
within ninety (90) days after the end of each calendar year or other fiscal year
as may be applicable with respect to Borrower (a "Fiscal Year"), a statement of
income and expense of Borrower for the annual period ended as of the end of such
Fiscal Year, and a balance sheet of Borrower as of the end of such Fiscal Year,
all in such detail and scope as may be reasonably required by Lender and
prepared in accordance with GAAP and on a basis consistent with prior accounting
periods. Notwithstanding the foregoing, Borrower shall deliver its annual
financial statements for Fiscal Years 2000 and 2001 within 90 days of the
Effective Date. Each annual financial statement of Borrower shall be prepared by
an independent certified public accountant and certified by Borrower to be true,
correct and complete, and shall otherwise be in form acceptable to Lender. In
the event that Lender, acting in good faith, is not satisfied with any such
Financial Statement, and if Borrower fails to provide Lender with new Financial
Statements acceptable to Lender within fifteen (15) days after Lender delivers
written notice of such dissatisfaction to Borrower, then, at Lender's request,
Borrower shall furnish to Lender copies of audited income statements and balance
sheets certified by an independent certified public accountant acceptable to
Lender
20
and prepared in accordance with GAAP and on a basis consistent with prior
accounting periods. Such audited annual statements shall also be in form and
content satisfactory to Lender. If the figures for net and total operating
income (as such terms are defined in accordance with GAAP) in the audited annual
statements do not vary by more than five percent (5%) from the figures in the
unaudited annual statements, Lender shall bear, pro rata based upon its Pro Rata
Percentage, the cost of the certified public accountant's audit. If, however,
such figures vary by more than five percent (5%), Borrower shall bear the cost
of such certified public accountant's audit;"
40. NOTICE OF CLAIMED DEFAULT. Section 7.1(h)(iii) is hereby restated and
amended to read as follows:
"(iii) NOTICE OF CLAIMED DEFAULT. Except for a Specified Event of
Default identified in the Forbearance Agreement, immediately upon becoming aware
of the existence of any condition or event which constitutes a Default or an
Event of Default, or upon becoming aware of any acceleration with respect to any
Specified Event of Default, a written notice specifying, as applicable, the
nature and period of existence thereof and what action Borrower is taking or
proposes to take with respect thereto;"
41. MATERIAL ADVERSE DEVELOPMENTS. Section 7.1(h)(vi) is hereby amended to
read as follows:
"(vi) MATERIAL ADVERSE DEVELOPMENTS. Except as provided in the
Business Plan , immediately upon becoming aware of any claim, action,
proceeding, development or other information which may materially and adversely
affect the Borrower, the Collateral, the Resort, the business, prospects,
profits or condition (financial or otherwise) of the Borrower, or the ability of
the Borrower to perform its Obligations under the Agreement, Borrower shall
provide Lender with telephonic or telegraphic notice, followed by telefaxed and
mailed written confirmation, specifying the nature of such development or
information and such anticipated effect;"
42. REPORTING REQUIREMENTS. Section 7.1(h) is hereby amended in part to add
the following new paragraphs:
"(viii) MONTHLY FINANCIAL REPORTS. As soon as available and in any
event within ten (10) days after the end of each calendar month, a report
showing (i) the trial balance of the Pledged Notes Receivable, (ii) an aging
report on the Pledged Notes Receivable, (iii) a report detailing the collections
on each of the Pledged Notes Receivable, (iv) a Borrowing Base Report, (v)
monthly reports from the Lockbox Agent required pursuant to the Lockbox
Agreement, and (vi) a report in form satisfactory to Lender indicating, among
other things, the conformity of the Borrower's business to the Business Plan and
any variances therefrom during the preceding calendar month.
(viv) OTHER INFORMATION. Borrower shall deliver to Lender: (i) within
five (5) days of the filing thereof with the United States Securities and
Exchange Commission, copies of each Form 8-K, 10-Q and 10-K filed by Borrower;
and (ii) any other information related to the Loan, the Collateral, the Resort
or Borrower as Lender may in good faith request."
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43. MANAGEMENT. Section 7.1(j) is hereby restated and amended to read as
follows:
"(j) MANAGEMENT. Borrower shall: (i) remain engaged in the active
management of the Resorts, (ii) unless Borrower notifies Lender in writing at
least thirty (30) days in advance of its new location, it will retain its
executive offices at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, and
(iii) will continue to perform duties substantially similar to those presently
performed as provided in the management agreement relating to each Resort. No
management agreement for any Resort shall be modified, assigned, extended,
terminated or entered into nor shall the current method of operation and
management of the Resorts be changed in any material manner, without the prior
written approval of Lender."
44. MAINTENANCE. Section 7.1(n) is hereby restated and amended as follows:
"(n) MAINTENANCE. Borrower shall maintain, or shall cause to be maintained,
or to the extent provided for pursuant to the Declaration, shall use its best
efforts to cause the Timeshare Owners' Association to maintain, the Resort and
that portion of the Additional Resort Collateral consisting of real property in
good repair, working order and condition and shall make all necessary
replacements and improvements to the Resort and that portion of the Additional
Resort Collateral consisting of real property so that the value and operating
efficiency of the Resort and that portion of the Additional Resort Collateral
consisting of real property will be maintained at all times and so that the
Resort and that portion of the Additional Resort Collateral consisting of real
property remains in compliance in all respects with the Timeshare Act, the
Timeshare Documents and other applicable law."
45. LOCAL LEGAL COMPLIANCE. Section 7.1(p)(i) is hereby restated and
amended as follows:
"(i) LOCAL LEGAL COMPLIANCE. Borrower will comply, and will cause the
Resort, the Land and each portion of the Additional Resort Collateral
constituting real property to comply, with all applicable servitudes,
restrictive covenants, applicable planning, zoning or land use ordinances and
building codes, all applicable health and Environmental Laws and regulations,
and all other applicable laws, rules, regulations, agreements or arrangements."
46. OTHER COMPLIANCE. Section 7.1(p)(iii) is hereby restated and amended as
follows:
"(iii) OTHER COMPLIANCE. Borrower has, in all material respects,
complied with and will comply with all laws and regulations of the United
States, the State of Texas, the each state in which an applicable Resort, the
Land or Collateral is located, any political subdivision of either such state
and any other governmental, quasi-governmental or administrative jurisdiction in
which Intervals have been sold or offered for sale, or in which sales, offers of
sale or solicitations with respect to the Resort have been or will be conducted,
including to the extent applicable, but not limited to: (1) the Timeshare Act;
(2) the Consumer Credit Protection Act; (3) Regulation Z of the Federal Reserve
Board; (4) the Equal Credit Opportunity Act; (5) Regulation B of the Federal
Reserve Board; (6) the Federal Trade Commission's 3-day cooling-off Rule for
Door-to-Door Sales; (7) Section 5 of the Federal Trade Commission Act; (8) ILSA;
(9) federal postal laws;
22
(10) applicable state and federal securities laws; (11) applicable usury laws;
(12) applicable trade practices, home and telephone solicitation, sweepstakes,
anti-lottery and consumer credit and protection laws; (13) applicable real
estate sales licensing, disclosure, reporting and escrow laws; (14) the ADA;
(15) RESPA; (16) all amendments to and rules and regulations promulgated under
the foregoing acts or laws; (17) the Federal Trade Commission's Privacy of
Consumer Financial Information Rule; (18) other applicable federal statutes and
the rules and regulations promulgated thereunder; and (19) any state law or law
of any state (and the rules and regulations promulgated thereunder) relating to
ownership, establishment or operation of the Resort, or the sale, offering for
sale, or financing of Intervals."
47. AFFIRMATIVE COVENANTS. Section 7.1 is hereby amended in part to add the
following new paragraphs:
"(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.
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."
(y) DZ FACILITY. The DZ Letter Agreement remains in full force and effect
and has not been amended, modified or rescinded and Borrower will diligently
commence and proceed to close the DZ Facility on or before May 31, 2002 as
contemplated in the DZ Letter Agreement, the Term Sheet and the Business Plan,
and will promptly provide Agent with true and correct copies of the DZ
Documents.
(z) BOND HOLDER EXCHANGE TRANSACTION. Borrower will act diligently and in
good faith to cause the requisite number of bond holders to accept the offer to
participate in the Bond Holder Exchange Transaction on the terms set forth in
the Bond Holder Exchange Letter and to close the Bond Holder Exchange
Transaction on or before May 31, 2002, and promptly provide Lender with true and
correct copies of all documents executed and/or delivered in connection with the
Bond Holder Exchange Transaction.
(aa) ▇▇▇▇▇▇ FACILITY, SOVEREIGN FACILITY, DZ FACILITY AND BOND HOLDER
EXCHANGE TRANSACTION. Borrower will comply with each of the terms and conditions
of the ▇▇▇▇▇▇ Facility, the Sovereign Facility, the DZ Facility 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.
(bb) FINANCIAL COVENANTS.
23
(i) TANGIBLE NET WORTH. Borrower shall at all times have and
maintain a Tangible Net Worth in an amount which shall not be
less than an amount equal to (A) the greater of (1)
$100,000,000 or (2) an amount equal to 90% of the Tangible Net
Worth of Borrower as of September 30, 2001 plus (B) one hundred
percent (100%) of the aggregate amount of proceeds received by
Borrower after January 1, 2002 in connection with (1) each
issuance by Borrower of any class or classes of capital stock
after January 1, 2002 and (2) each incurrence of Indebtedness
after January 1, 2002, other than Indebtedness which shall be
the most senior Indebtedness of Borrower plus (C) one hundred
percent (100%) of the aggregate amount of net income
(calculated in accordance with GAAP) of Borrower after January
1, 2002.
(ii) MARKETING AND SALES EXPENSES. Borrower will not permit as of
March 31, 2002 and as of the last day of each calendar quarter
thereafter the ratio of Marketing and Sales Expenses for any
calendar quarter, singly and on a cumulative basis, during the
specified period below (the "REFERENCE PERIOD") to Borrower's
net proceeds from the sale of Intervals for such Reference
Period to equal or exceed the ratio set forth opposite such
period described in the table below during such Reference
Period:
Period Ratio
------ -----
4/1/02 - 12/31/02 .550 to 1
1/1/03 - thereafter .525 to 1
(iii) MINIMUM LOAN DELINQUENCY. Borrower will not permit as of the
last day of each calendar quarter its over 30-day delinquency
rate on its entire Notes Receivable portfolio (including,
without limitation, all Pledged Notes Receivable pledged to
Lender hereunder, under the Additional Credit Facility and the
Existing Credit Facilities and all Notes Receivable pledged
pursuant to the ▇▇▇▇▇▇ Facility and the Sovereign Facility) to
be greater than twenty-five percent (25%). If, as of the last
day of each calendar quarter, Borrower's over 30-day
delinquency on its entire Pledged Notes portfolio (including,
without limitation, all Notes Receivable pledged to Lender
under the Additional Credit Facility and the Existing Credit
Facilities and all Notes Receivable pledged pursuant to the
▇▇▇▇▇▇ Facility and the Sovereign Facility) is greater than
twenty percent (20%), then Lender shall have the right to
conduct an audit, at Borrower's sole cost and expense, of all
Borrower's Notes Receivable pledged to Lender hereunder.
(iv) INTEREST COVERAGE. (i) For the calendar quarter of Borrower
ending June 30, 2002, the Interest Coverage Ratio for Borrower
shall be at least 1.1:1; (ii) for
24
the calendar quarter of Borrower ending September 30, 2002, the
average of the Interest Coverage Ratio of Borrower of such
calendar quarter and the Interest Coverage Ratio for the
immediately preceding calendar quarter shall be at least 1.1:1,
(iii) for the calendar quarter of Borrower ending December 31,
2002, the average of the Interest Coverage Ratio of Borrower
for such calendar quarter and the Interest Coverage Ratios for
the two immediately preceding calendar quarters shall be at
least 1.1:1; (iv) for each calendar quarter of Borrower
beginning with, and including, the calendar quarter ending
March 31, 2003 and for each calendar quarter of Borrower
thereafter, the average of the Interest Coverage Ratio of
Borrower for such calendar quarter and the Interest Coverage
Ratios for each of the three immediately preceding calendar
quarters shall be at least 1.25:1. The term Interest Coverage
Ratio means with respect to any Person for any calendar
quarter, the ratio of (a) EBITDA for such period less capital
expenditures as determined in accordance with GAAP, for such
period to (b) the interest expense minus all non-cash items
constituting interest expense for such period.
(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 (treated as a single
accounting period) to be less than $1.00.
(cc) NET SECURITIZATION CASH FLOW. Borrower will cause Silverleaf Finance
I, Inc. to declare, at least quarterly, a cash dividend payable to Borrower, in
an amount equal to the Net Securitization Cash Flow for such quarter. If no
Default or Event of Default has occurred, Borrower agrees to use such dividends
for payment of Operating Expenses as provided in the Business Plan and for no
other purpose. If a Default or Event of Default has occurred, then all such
dividends shall be paid directly to Lender and applied in accordance with the
Additional Credit Facility Loan Agreement, the Tranche A Loan Agreement and the
Tranche B Loan Agreement. Borrower agrees to provide Lender with written notice
prior to any such sale or securitization and agrees to deliver to Lender copies
of all documents executed in connection therewith. Any such sale or
securitization shall be acceptable to Lender in its sole and absolute
discretion. The proceeds received from any such securitization shall be used to
pay down the Loan in accordance with the Business Plan."
48. LIMITATION ON OTHER DEBT, FURTHER ENCUMBRANCES. Section 7.2(a) is
hereby restated and amended as follows:
"(a) LIMITATION ON OTHER DEBT, FURTHER ENCUMBRANCES. Borrower will not
obtain financing and grant liens with respect to the Collateral or any of its
other assets or property, except as hereafter provided. Prior to March 31, 2003,
Borrower will not obtain financing and grant liens with respect to any of
Borrower's unpledged Notes Receivable, except as provided in the Additional
Credit Facility, the Existing Credit Facilities, the ▇▇▇▇▇▇ Facility and the
Sovereign Facility, without the Lender's prior written consent, which consent
will not be unreasonably withheld. As a
25
condition to such consent, Lender may require that all proceeds of such
financing be applied in repayment of the Loan as provided in Section 2.3(a)
hereof or in repayment of the Additional Credit Facility or the Existing Credit
Facilities. At any time after March 31, 2003, Borrower may obtain financing and
grant liens with respect to any of Borrower's unpledged Notes Receivable in an
amount not to exceed twenty million dollars ($20,000,000.00), without Lender's
consent provided that: (i) no Default or Event of Default has occurred; (ii) and
such financing does not result in (x) Borrower's failure to substantially adhere
to the Business Plan or (y) an Event of Default; and (iii) Lender may require
advances to be funded from the Revolving Loan Component of the Additional Credit
Facility or the Existing Credit Facilities prior to advances from such other
financing. At any time after March 31, 2003, if Borrower wishes to obtain
financing in excess of twenty million dollars ($20,000,000.00) which will be
secured by any of Borrower's unpledged Notes Receivable, Borrower will obtain
Lender's written consent, which consent will not be unreasonably withheld.
Borrower may obtain unsecured financing provided: (i) Borrower provides prior
written notice to Lender setting forth the terms and conditions thereof; (ii)
Lender is provided a copy of the loan documents thereof; and (iii) such
financing does not result in Borrower's inability to substantially adhere to the
Business Plan, as determined by Lender in its sole and absolute discretion.
49. TIMESHARE REGIME. Section 7.2(g) is hereby restated and amended as
follows:
"(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). 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."
50. MODIFICATIONS OF ▇▇▇▇▇▇ DOCUMENTS, DZ DOCUMENTS, BOND HOLDER EXCHANGE
DOCUMENTS, SOVEREIGN DOCUMENTS AND OTHER DEBT INSTRUMENTS. Section 7.2(k) is
hereby restated and amended to read as follows:
"(k) MODIFICATIONS OF ▇▇▇▇▇▇ DOCUMENTS, DZ DOCUMENTS, BOND HOLDER EXCHANGE
DOCUMENTS, SOVEREIGN DOCUMENTS AND OTHER DEBT INSTRUMENTS. Borrower shall not
amend or modify the ▇▇▇▇▇▇ Documents, the Sovereign Documents, DZ Documents,
Bondholder Exchange Documents or the documents evidencing any other indebtedness
of Borrower, nor shall Borrower extend, modify, increase or terminate the ▇▇▇▇▇▇
Facility, DZ Facility, the Bond Holder Exchange Transaction, the Sovereign
Facility or any other credit facility or loan, without the prior written consent
of Lender, which consent shall not be unreasonably withheld."
51. NEGATIVE COVENANTS. Section 7.2 is hereby amended in part to add the
following new paragraphs:
"(l) COMPENSATION OF SENIOR MANAGEMENT. The compensation payable to the
senior
26
management of Borrower, as a group, shall not be increased by more than
twenty-five percent (25%) each year, with the increase in the first year
following the Effective Date being measured against the compensation payable to
the senior management of Borrower as of December 31, 2001, which compensation is
set forth on Schedule 7.2(l). The Borrower represents and warrants that Schedule
7.2(l) accurately sets forth such compensation.
(m) NO NEW CONSTRUCTION. Borrower will not, without Lender's prior written
approval, construct any improvements (excluding resort amenities) on any
Resorts, Land or any portion of the Additional Resort Collateral constituting
real property, unless such improvements are contemplated in the Business Plan."
52. COVENANTS. Section 7.3 is hereby restated and amended to read as
follows:
"7.3 OPERATION OF BORROWER'S BUSINESS. Borrower will operate its
business in substantial compliance with the Business Plan, including the Senior
Lender Advance Schedule."
53. EVENTS OF DEFAULT. Section 8.1(b) (Covenant Defaults) is hereby
restated and amended to read as follows:
"(b) COVENANT DEFAULTS. If Borrower shall fail to perform or observe any
covenant, agreement or warranty contained in this Agreement or in any of the
Loan Documents, (other than with respect to the failure to make timely payments
in respect of the Loan as provided in Section 8.1(a) or violation of (i) the
financial covenants in Section 7.1(bb) or (ii) any negative covenants in Section
7.2) and, such failure shall continue for fifteen (15) days after notice of such
failure is provided by Lender, provided however, that if Borrower commences to
cure such failure within such 15 day period, but, because of the nature of such
failure, cure cannot be completed within 15 days notwithstanding diligent effort
to do so, then, provided Borrower diligently seeks to complete such cure, an
Event of Default shall not result unless such failure continues for a total of
thirty (30) days."
54. ENFORCEABILITY OF LIENS. Section 8.1(d) is hereby restated and amended
as follows:
"(d) ENFORCEABILITY OF LIENS. If any lien or security interest granted by
Borrower to Lender in connection with the Loan is or becomes invalid or
unenforceable or is not, or ceases to be, a perfected first or second priority
lien or security interest, as applicable, in favor of Lender encumbering the
asset to which it is intended to encumber, and Borrower fails to cause such lien
or security interest to become a valid, enforceable, first or second, as
applicable, and prior lien or security interest in a manner satisfactory to
Lender within ten (10) days after Lender delivers written notice thereof to
Borrower."
55. EVENTS OF DEFAULT. Section 8.1(l) (Default by Borrower in Other
Agreements) is hereby restated and amended to read as follows:
"(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 ▇▇▇▇▇▇
Facility or the Sovereign Facility, any default
27
by Borrower (i) in the payment of any indebtedness to any Lender, including any
indebtedness owed to Lender under the ▇▇▇▇▇▇ Facility, DZ Facility, Sovereign
Facility, Bond Holder Exchange Transaction, Additional Credit Facility or the
Existing Credit Facilities, (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 ▇▇▇▇▇▇, Sovereign, DZ or the bondholders of their
respective credit facilities."
56. EVENTS OF DEFAULT. Section 8.1(o) (Violation of Financial Covenants) is
hereby restated and amended to read as follows:
"(o) VIOLATION OF FINANCIAL COVENANTS. Borrower violates any financial
covenants set forth in Section 7.1(bb):"
57. EVENTS OF DEFAULT. Section 8 is hereby amended in part to add the
following new paragraph:
"(r) FAILURE OF DZ FACILITY AND/OR BOND HOLDER EXCHANGE TRANSACTION TO
CLOSE. If either the DZ Facility or the Bond Holder Exchange Transaction shall
fail to close on the terms and conditions set forth, respectively, in the DZ
Letter Agreement and the Bond Holder Exchange Letter, on or before May 31,
2002."
58. REMEDIES UPON DEFAULT. Section 9 is hereby amended in part to add the
following new paragraph:
"(i) REPLACEMENT OF MANAGER. Without demand or notice of any nature
whatsoever, upon an Event of Default, Lender may: (1) terminate any then
existing management agreements and with the approval of a majority of the
Borrower's Board of Directors, which approval shall not be unreasonably withheld
or delayed, 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, then no such approval shall be required; and
(2) terminate any then existing servicing agreement and replace any then
existing Servicer with the Standby Servicer or such other servicer as Lender may
select in its sole and absolute discretion. Lender shall also have the right to
assume management of the Resorts."
59. TOTAL AGREEMENT. Section 12.11 (Total Agreement) is hereby restated and
amended to read as follows:
"12.11 TOTAL AGREEMENT. This Agreement and the other Loan Documents,
including the Exhibits and Schedules to them, is the entire agreement between
the parties relating to the subject matter hereof, incorporates or rescinds all
prior agreements and understandings between the parties hereto relating to the
subject matter hereof, cannot be changed or terminated
28
orally or by course of conduct, and shall be deemed effective as of the date it
is accepted by Lender at the offices set forth above. The documents evidencing
the Existing Credit Facilities and the Additional Credit Facility shall remain
in full force and effect."
60. CONDITIONS PRECEDENT. The obligation of Lender under this Second
Amendment and the obligation to fund any Advance hereunder shall be subject to
the satisfaction of each of the following conditions precedent, in addition to
all of the conditions precedent set forth elsewhere in the Loan Documents:
(a) EXECUTION AND DELIVERY OF LOAN DOCUMENTS. Borrower shall have delivered
to Lender, on or before the Effective Date, the following Loan Documents, each
of which shall be in the form of the respective Loan Documents attached hereto
as Exhibit A, and each of which when required, shall be in recordable form:
(i) THIS SECOND AMENDMENT.
(ii) CLOSING OPINIONS FOR BORROWER.
(iii) AMENDED AND RESTATED PROMISSORY NOTE.
(iv) ADDITIONAL RESORT COLLATERAL MORTGAGE.
(v) ADDITIONAL RESORT COLLATERAL ASSIGNMENTS.
(vi) STOCK PLEDGE AGREEMENT. Together with delivery of all original
stock certificates indorsed to Lender, for itself and as agent for
Sovereign.
(vii) ENVIRONMENTAL INDEMNITY AGREEMENT. An Environmental Indemnity
Agreement, executed by Borrower in favor of Lender.
(viii) MODIFICATION TO LAND MORTGAGES. Borrower shall have executed
and delivered to Lender, on or before the date hereof, modifications to the
Land Mortgages, each of which shall be in the form attached hereto as
Exhibit A, and each of which shall be in recordable form.
(ix) INTERCREDITOR AGREEMENT. Borrower, ▇▇▇▇▇▇ and Sovereign shall
have executed and delivered to Lender, on or before the date hereof, the
intercreditor agreement, in the form attached hereto as Exhibit A.
(x) FINANCING STATEMENTS. Original UCC financing statements covering
the Collateral, filed with the Secretary of State of Texas and the
Secretary of State of each state in which the Collateral is located.
(xi) STANDBY MANAGEMENT AGREEMENT ASSIGNMENT.
(xii) ASSIGNMENT OF MANAGEMENT AGREEMENTS.
(xiii) ASSIGNMENT OF MORTGAGES;
29
(xiv) OTHER ITEMS. Such other agreements, documents, instruments,
certificates and materials as Lender may request to evidence the
Obligations; 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.
(b) ▇▇▇▇▇▇ FACILITY AND SOVEREIGN FACILITY MODIFICATION. On or before the
Effective Date, Borrower shall deliver to Lender, evidence satisfactory to
Lender, that the ▇▇▇▇▇▇ Facility and the Sovereign Facility have each been
modified in a manner substantially similar to that set forth in the Term Sheet
and as previously been approved by Lender has been provided with copies of all
of the executed ▇▇▇▇▇▇ Documents modifications and the executed Sovereign
Documents modifications;
(c) EFFECTIVE DATE CONDITIONS. On or before the Effective Date, the
following conditions shall be satisfied:
(i) UCC SEARCH. Lender shall have obtained, at Borrower's cost, such
searches of the applicable public records as it deems necessary under
Texas, and other applicable law to verify that it has a first or second, as
applicable, and prior perfected Lien and security interest covering all of
the Collateral. Lender shall not be obligated to fund any Advance if Lender
determines that Lender does not have a first or second, as applicable, and
prior perfected lien and security interest covering any portion of the
Collateral, except as expressly provided herein.
(ii) LITIGATION SEARCH. Lender shall have obtained, at Borrower's
cost, an independent search to verify that there are no bankruptcy,
foreclosure actions or other material litigation or judgments pending or
outstanding against the Resorts, any portion of the Collateral, Borrower,
or any Affiliates of Borrower (each a "Material Party"). The term "other
material litigation" as used herein shall not include matters in which (i)
a Material Party is plaintiff and no counterclaim is pending or (ii) which
Lender determines, in its sole discretion exercised in good faith, are
immaterial due to settlement, insurance coverage, frivolity, or amount or
nature of claim. Lender shall not be obligated to fund any Advance if
Lender determines that any such litigation is pending.
(iii) TITLE SEARCHES. Title Searches for each real property comprising
the Additional Resort Collateral and each real property comprising the
Land, together with legible copies of each exception or matter noted
thereon.
(iv) TITLE INSURANCE POLICIES:
(1) Borrower shall deliver to Lender, with respect to each parcel
of real property comprising the Land, an endorsement to the existing
mortgagee's title insurance policy (the "Land Mortgage Title Policy
Endorsement") updating each applicable policy previously issued with
respect to the Land through the date hereof and indicating that the
applicable Land Mortgage, as modified to date, is a first priority
Lien on the land in question. Such Land Mortgage Title Policy
Endorsement shall be an amount equal to the fair market value of the
Land, and
30
issued by companies and in form and substance satisfactory to Lender
in its sole discretion.
(2) Borrower shall deliver to Lender, with respect to each parcel
of real property comprising the Additional Resort Collateral, a
mortgagee's title insurance policy (the "Additional Resort Collateral
Title Policy") in the full amount of the appraised value of each such
parcel, indicating that the applicable Additional Resort Mortgage is a
first priority Lien on the parcel in question. The title policy shall
be in form and substance, and contain such endorsements, as are
satisfactory to Lender in its sole discretion and shall be issued by a
title insurance company satisfactory to Lender.
(3) Borrower shall be responsible for the payment of all costs
and expenses of the foregoing title policies and endorsements.
(v) SURVEYS. To the extent not previously delivered to Lender,
Borrower shall deliver to Lender, at its sole cost and expense: (i) an ALTA
survey of each parcel comprising the Additional Resort Collateral and the
Land, which surveys shall be in form and substance satisfactory to Lender
and the applicable title company, and shall be certified by the surveyor to
Lender and the applicable title company, on such form of certification as
may be approved by Lender; or (ii) legible recorded plats of the parcel
comprising the Additional Resort Collateral and the Land, provided such
recorded plats are in form and substance reasonably satisfactory to Lender
and Title Company and are sufficient to remove the survey exception from
the title policy issued with respect thereto.
(vi) RECORDING OF MODIFICATIONS TO LAND MORTGAGES AND ADDITIONAL
COLLATERAL MORTGAGES. The Additional Resort Collateral Mortgages and
modifications to the Land Mortgages shall have been duly recorded in the
applicable land records for each state in which the Land and the Additional
Resort Collateral is located.
(vii) ENVIRONMENTAL REPORT. To the extent not previously delivered to
Lender, an Environmental Report or Reports covering the Land and that
portion of the Additional Resort Collateral which is real property
confirming:
(1) that soil conditions are sufficient to support all existing
and any contemplated improvements to such real property;
(2) the absence of Hazardous Materials on such real property;
(3) that the issuer of the report has obtained, reviewed and
included with its report a CERCLIS printout from the
Environmental Protection Agency (the "EPA"), statements from
the EPA and other applicable and state local authorities and
such other information as Lender may reasonably require,
including without limitation a Phase I environmental audit,
all of which information shall confirm that there are no
known or suspected Hazardous Materials located at, used or
stored on, or transported to or from the real property in
question, or
31
in such proximity thereto as to create a material risk of
contamination thereof.
(viii) INSURANCE. Evidence that Borrower is maintaining all
policies of insurance required by and in accordance with
Section 7.1(d) hereof, including copies of the most
current paid insurance premium invoices;
(ix) GOVERNMENTAL PERMITS. To the extent not previously
delivered to Lender, copies of all applicable government
permits, approvals, consents, licenses and certificates
with respect to the use and operation of the Resorts, the
Land and that portion of the Additional Resort Collateral
constituting real property;
(x) TAXES. Evidence satisfactory to Lender that all taxes and
assessments owed by or for which Borrower is responsible
for collection had been paid with respect to the Resorts
and the Collateral, including but not limited to sales
taxes, room occupancy taxes, payroll taxes, personal
property taxes, excise taxes, intangible taxes, real
property taxes and any assessments related to the resorts
or the Collateral. Copies of the most current tax bills
for the Resorts, the Land and that portion of the
Additional Resort Collateral constituting real property
shall be provided to Lender;
(xi) DZ FACILITY. Evidence satisfactory to Lender that the DZ
Facility has closed on terms and conditions set forth in
the DZ Letter Agreement and has been documented in form
and substance reasonably satisfactory to Lender and Lender
has been provided with copies of all the executed DZ
Documents.
(xii) STANDBY MANAGER. Borrower will have entered into the
Standby Management Agreement in form and substance
satisfactory to Lender, in its sole discretion, with the
Standby Manager. On and after an Event of Default, the
Standby Manager shall be responsible for, among other
things: (i) managing the operation of the Resorts, the
related amenities, the Additional Resort Collateral and
any other Collateral that Lender deems necessary, (ii)
monitoring or supervising the marketing, sale, resale and
financing of pledged Intervals at the Eligible Resorts and
(iii) Lender may request, from time to time, in its sole
discretion, such other duties and responsibilities related
to the operation of the Resorts and related amenities, the
Additional Resort Collateral, the Intervals and any other
Collateral that Lender deems necessary. Borrower shall
provide Lender with a list in form and substance
satisfactory to Lender, in its sole discretion, of the
duties and responsibilities associated with the operation
of the Resorts.
(xiii) FORBEARANCE AGREEMENT. All of the terms and conditions of
the Forbearance Agreement shall have been satisfied to the
satisfaction of
32
Lender and Lender shall have determined that no
Forbearance Termination Event shall have occurred and be
continuing.
(xiv) BOND HOLDER EXCHANGE TRANSACTION CONSUMMATION. Evidence
satisfactory to Lender in its sole discretion that the
Bond Holder Exchange Transaction outlined in the Bond
Holder Exchange Transaction Letter, a copy of which is
attached hereto as Exhibit E, as approved by Lender, has
been accepted by the requisite number of bond holders and
the Bond Holder Exchange Transaction shall have fully
closed. Lender shall be provided with copies of all of the
executed Bond Holder Exchange Documents.
(xv) ZONING. To the extent not previously provided by Borrower
to Lender, evidence that the use and operation of the
portions of the Additional Resort Collateral comprised of
real property comply with all applicable zoning, building,
health, safety and fire codes and regulations.
(xvi) RESORT CONSULTANT. The Borrower, at its own expense, shall
retain a consultant of recognized standing, acceptable to
Lender in its sole discretion (the "Resort Consultant").
The Resort Consultant shall have such duties and
responsibilities as Lender may request, in its sole
discretion, from time to time, including without
limitation: (1) preparation of a report evaluating
Borrower's business and the operation of the Resorts to be
delivered to Lender within ten (10) days after the
Effective Date; (2) on an ongoing basis, monitoring: (a)
the operations of Borrower including the offer and sale of
Intervals by Borrower and the financing by Borrower of
such sales, (b) Borrower's compliance with the Business
Plan, (c) Borrower's operation of the Silverleaf Club and
(d) Borrower's and/or Silverleaf's Club's management and
operation of the Resorts, the related amenities and the
Additional Resort Collateral; and (3) submission of weekly
written reports to Lender as to the foregoing. The
Agreement with the Resort Consultant shall be in form and
substance acceptable to Lender in its sole discretion and
shall be assigned by Borrower to Lender as security for
the Obligations. Notwithstanding the foregoing, Borrower
and Lender acknowledge and agree that the Resort
Consultant may also perform the duties of the Standby
Manager.
(xvi) ESTOPPEL LETTERS. Borrower shall deliver to Lender, with
respect to each Resort, an estoppel letter, executed by
the applicable Timeshare Owners' Association, in the form
attached hereto as Exhibit A.
(d) EFFECTIVE DATE ADVANCES. In the event that Borrower desires Lender to
make an Advance on the Effective Date, then, in addition to all of the
conditions precedent set forth in this Paragraph 60, Borrower shall have
complied with all of the requirements of Section 5 below at least five (5)
Business Days prior to the Effective Date.
33
(e) EXPENSES. Borrower shall have paid all fees and expenses required to be
paid pursuant to this Agreement. Lender shall have no obligation to fund any
Loan or make the initial Advance or any subsequent Advance unless (x) the amount
of the initial Advance together with any moneys paid by Borrower is sufficient
to satisfy all fees and expenses required to be paid pursuant to this Agreement,
and (y) the Advance will not be used for any of the prohibited uses set forth in
Section 6.11.
(f) MANAGEMENT OF RESORT. Borrower shall provide evidence satisfactory to
Lender that Borrower, or an Affiliate, is the manager or operator of each
Resort, pursuant to a written management or operating agreement, in form and
substance satisfactory to Lender, which with respect to all Resorts (other than
the Crown Resorts) shall have a term which shall expire no earlier April 1,
2009. With respect to each Crown Resort only, each such Resort may qualify as an
Additional Eligible Resort (subject to satisfaction by Borrower of the
conditions set forth in this Section 4.5), so long as Borrower, or an Affiliate,
is the manager or operator of each such Resort, pursuant to a written management
or operating agreement, in form and substance satisfactory to Lender. Borrower
agrees to provide an estoppel letter, in form and substance acceptable to
Lender, from the applicable Timeshare Owner's Association. Each such management
agreement constitutes a part of the Additional Resort Collateral and is assigned
to Lender, to secure the Obligations as provided herein.
(g) POST CLOSING LETTER. Lender and Borrower shall execute a "Post Closing
Letter" specifying which of the conditions set forth in this Paragraph 60 which
Lender has agreed may be satisfied after the Effective Date, and by the date
specified in the Post Closing Letter.
(h) OTHER ITEMS. Such other agreements, documents, instruments,
certificates and materials as Lender may request to determine the acceptability
of any such Additional Eligible Resort, to evidence the Obligations; 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,
including, without limitation, true copies of all Resort Documents for each such
Additional Eligible Resort, all Timeshare Documents and operating and management
contracts and agreements, evidence of with the applicable Timeshare Act and
other applicable laws, evidence of all required governmental licenses and
permits; title searches; title commitments or policies, including. Complete and
legible copies of each title exception, engineering, environmental and soil
reports, evidence of compliance with all applicable zoning and building codes;
each of which shall be satisfactory to Lender in its sole and absolute
discretion.
IN THE EVENT THAT LENDER DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION,
THAT ANY OF THE CONDITIONS SET FORTH ABOVE OR OTHERWISE CONTAINED IN THIS SECOND
AMENDMENT OR SET FORTH IN THE ADDITIONAL CREDIT FACILITY LOAN AGREEMENT, THE
TRANCHE A LOAN AGREEMENT OR THE TRANCHE B LOAN AGREEMENT ARE NOT SATISFIED ON OR
BEFORE MAY 31, 2002, THEN THIS SECOND AMENDMENT, AND THE OBLIGATIONS OF LENDER
HEREUNDER, SHALL BE NULL AND VOID IN ALL RESPECTS AB INITIO. IN SUCH EVENT, THE
ORIGINAL AGREEMENT AND THE TERMS AND CONDITIONS THEREIN SET FORTH, AS MODIFIED
BY THE FORBEARANCE AGREEMENT AND THE EXTENSION LETTER, SHALL GOVERN AND CONTROL
BORROWER'S OBLIGATION WITH RESPECT TO REPAYMENT IN FULL OF THE OBLIGATIONS, AS
SUCH TERM IS DEFINED IN THE ORIGINAL AGREEMENT.
34
61. 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 Second Amendment.
62. LOAN DOCUMENTS. Notwithstanding anything to the contrary in the Loan
and Security Agreement dated as of December 16, 1999 as amended, all Loan
Documents shall be in a form attached hereto as Exhibit A.
63. EFFECT OF AMENDMENT. Except as herein expressly amended, the Original
Agreement shall remain in full force and effect.
64. RATIFICATION AND CONFIRMATION. Except as herein expressly amended,
Borrower hereby ratifies, confirms, assumes and agrees to be bound by all
covenants and agreements set forth in the Original Agreement and the other Loan
Documents. The Borrower reaffirms, restates and incorporates by reference all of
the 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 Original Agreement as amended
hereby, 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 reaffirm the prior granting to Lender of, a
continuing first priority Lien, mortgage and security interest in and to all of
the Collateral, 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. On the date of the Second Amendment and thereafter
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 the 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.
65. ESTOPPEL. Borrower acknowledges, agrees and confirms that: (a) Advances
under the Original Agreement have been made prior to the Effective Date; (b) all
such Advances made prior to the Effective Date were made in favor of the
Borrower and the Borrower in respect of the Existing Eligible Resorts; (c)
Advances made prior to the Effective Date under the Original Agreement 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 Effective
Date, and without giving effect to any Advances that may be made pursuant to the
Second Amendment, the status of the Loan, including the outstanding principal
balance thereof is as reflected in the Loan Funding Report
35
delivered to and approved by Lender in connection with the closing of the Second
Amendment, a copy of which is attached as Exhibit J.
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 Second 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 Effective 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.
66. DEFINITIONS. All capitalized terms used herein but not otherwise
defined shall have the meanings ascribed to such terms in the Agreement.
67. CROSS DEFAULT. Notwithstanding anything to the contrary in the
Agreement, any default by the Borrower under the Existing Credit Facility, the
Additional Credit Facility, the ▇▇▇▇▇▇ Facility and/or the Sovereign Facility
and/or termination of the Forbearance Agreement, ▇▇▇▇▇▇ forbearance agreement or
Sovereign forbearance agreement shall also be a default under this Agreement.
68. EFFECTIVE DATE. BORROWER ACKNOWLEDGES, AGREES AND CONFIRMS THAT THE
TERMS AND CONDITIONS OF THIS SECOND AMENDMENT, INCLUDING ANY OBLIGATION OF
LENDERS TO MAKE ANY ADVANCE HEREUNDER, SHALL NOT BECOME EFFECTIVE UNTIL THE
EFFECTIVE DATE, AS SUCH TERM IS HEREINAFTER DEFINED. FOR PURPOSES OF THIS SECOND
AMENDMENT, THE TERM "EFFECTIVE DATE" SHALL MEAN THE DATE ON WHICH LENDER
DETERMINES, IN ITS SOLE AND ABSOLUTE DISCRETION, THAT EACH OF THE CONDITIONS SET
FORTH IN PARAGRAPH 60 HEREOF HAVE BEEN SATISFIED, INCLUDING BUT NOT LIMITED TO:
(i) THE CLOSING OF THE DZ FACILITY IN ACCORDANCE WITH THE TERMS AND CONDITIONS
OUTLINED IN THE DZ LETTER AGREEMENT AND THE BUSINESS PLAN; (ii) THE CONSUMMATION
OF THE BOND HOLDER EXCHANGE TRANSACTION IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OUTLINED IN THE BOND HOLDER EXCHANGE LETTER AND THE BUSINESS PLAN;
AND (iii) THE CLOSING OF THE SOVEREIGN FACILITY AND ▇▇▇▇▇▇ FACILITY IN
ACCORDANCE WITH THE BUSINESS PLAN. IN THE EVENT THAT THE EFFECTIVE DATE DOES NOT
OCCUR ON OR BEFORE MAY 31, 2002, THEN THIS SECOND AMENDMENT, AND ALL OF THE
OBLIGATIONS OF LENDER HEREUNDER, INCLUDING THE OBLIGATION TO MAKE ANY ADVANCE
HEREUNDER SHALL BE VOID AB INITIO, AS IF THIS SECOND AMENDMENT WAS NEVER ENTERED
INTO. IN SUCH EVENT, THE LOAN, AND THE RIGHTS
36
AND OBLIGATIONS OF BORROWER WITH RESPECT THERETO, SHALL BE GOVERNED IN ALL
RESPECTS BY THE TERMS AND CONDITIONS SET FORTH IN THE ORIGINAL AGREEMENT, AS
MODIFIED BY THE FORBEARANCE AGREEMENT AND THE EXTENSION LETTER. BORROWER
EXPRESSLY ACKNOWLEDGES, AGREES AND CONFIRMS THAT TIME IS OF THE UTMOST ESSENCE
WITH RESPECT TO THE EFFECTIVE DATE OCCURRING ON OR BEFORE MAY 31, 2002. ON THE
EFFECTIVE DATE, AND SO LONG AS EACH CONDITION PRECEDENT SET FORTH IN THIS SECOND
AMENDMENT HAS BEEN SATISFIED, LENDER AGREES TO WAIVE ALL PRIOR DEFAULTS AND
EVENTS OF DEFAULT UNDER THE ORIGINAL AGREEMENT, INCLUDING BUT NOT LIMITED TO THE
SPECIFIED EVENTS OF DEFAULT PROVIDED IN THE FORBEARANCE AGREEMENT.
69. DZ BANK FACILITY CONDITIONS. Lender acknowledges and agrees that: (i)
the transfer of Notes Receivable to Silverleaf Finance I, Inc. in connection
with the DZ Facility is a true sale and not a financing transaction; (ii) Lender
will not consolidate Silverleaf Finance I, Inc. with the Borrower in the event
of a bankruptcy; and (iii) Lender will not take any action to the contrary in
the case of a bankruptcy of Borrower or otherwise.
70. RELEASE. IN ORDER TO INDUCE LENDER TO ENTER INTO THIS AGREEMENT,
BORROWER ACKNOWLEDGES AND AGREES THAT: (i) BORROWER HAS NO CLAIM OR CAUSE OF
ACTION AGAINST LENDER (OR ANY OF ITS RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES
OR AGENTS); (ii) BORROWER HAS NO OFFSET RIGHT, COUNTERCLAIM OR DEFENSE OF ANY
KIND AGAINST ANY OF ITS OBLIGATIONS, INDEBTEDNESS OR LIABILITIES TO LENDER; AND
(iii) LENDER HAS HERETOFORE PROPERLY PERFORMED AND SATISFIED IN A TIMELY MANNER
ALL OF ITS OBLIGATIONS TO BORROWER. BORROWER WISHES TO ELIMINATE ANY POSSIBILITY
THAT ANY PAST CONDITIONS, ACTS, OMISSIONS, EVENTS, CIRCUMSTANCES OR MATTERS
WOULD IMPAIR OR OTHERWISE ADVERSELY AFFECT LENDER'S RIGHTS, INTERESTS,
CONTRACTS, COLLATERAL SECURITY OR REMEDIES. THEREFORE, BORROWER UNCONDITIONALLY
RELEASES, WAIVES AND FOREVER DISCHARGES (A) ANY AND ALL LIABILITIES,
OBLIGATIONS, DUTIES, PROMISES OR INDEBTEDNESS OF ANY KIND OF LENDER TO BORROWER,
EXCEPT THE OBLIGATIONS TO BE PERFORMED BY LENDER ON OR AFTER THE DATE HEREOF AS
EXPRESSLY STATED IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND (B) ALL
CLAIMS, OFFSETS, CAUSES OF ACTION, SUITS OR DEFENSES OF ANY KIND WHATSOEVER (IF
ANY), WHETHER ARISING AT LAW OR IN EQUITY, WHETHER KNOWN OR UNKNOWN, WHICH
BORROWER MIGHT OTHERWISE HAVE AGAINST LENDER, OR ANY OF ITS DIRECTORS, OFFICERS,
EMPLOYEES OR AGENTS, IN EITHER CASE (A) OR (B), ON ACCOUNT OF ANY PAST OR
PRESENTLY EXISTING CONDITION, ACT, OMISSION, EVENT, CONTRACT, LIABILITY,
OBLIGATION, INDEBTEDNESS, CLAIM, CAUSE OF ACTION, DEFENSE, CIRCUMSTANCE OR
MATTER OF ANY KIND
37
IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be
duly executed and delivered effective as of the date first above written.
Witnessed By: BORROWER:
/s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ SILVERLEAF RESORTS, INC., a Texas
------------------------------ corporation
/s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
------------------------------ -----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: CFO
STATE OF TEXAS )
) ss:
COUNTY OF DALLAS )
The foregoing instrument was acknowledged before me this 24th day of April,
2002 by ▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., CFO of Silverleaf Resorts, Inc., a Texas
corporation, on behalf of the Corporation.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires: January 6, 2005
LENDER:
[illegible] TEXTRON FINANCIAL CORPORATION,
------------------------------ a Delaware corporation
[illegible] By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
------------------------------ ----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: VP
STATE OF CONNECTICUT )
) ss:
COUNTY OF HARTFORD )
The foregoing instrument was acknowledged before me this 26th day of April,
2002 by ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, VP of TEXTRON FINANCIAL CORPORATION, a Delaware
corporation, on behalf of the corporation.
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------------
Commissioner of the Superior Court
Notary Public
My Commission Expires: August 31, 2004
Exhibits:
Schedule 1.1 (oo) ▇▇▇▇▇▇ Documents
Schedule 1.1(rrr) Sovereign Documents
Schedule 6.7 Litigation