Document:

exv10w4

 

Ex. 10.4

SECOND AMENDMENT TO AMENDED AND RESTATED

LOAN, SECURITY AND AGENCY AGREEMENT (TRANCHE B)

     THIS SECOND AMENDMENT TO AMENDED AND RESTATED LOAN, SECURITY AND AGENCY AGREEMENT (TRANCHE B)
dated as of February 28, 2005 (the “Second Amendment”), is entered into by and among
SILVERLEAF RESORTS, INC., a Texas corporation (the “Borrower”), the parties, including
TEXTRON FINANCIAL CORPORATION (“TFC”), a Delaware corporation, which execute and deliver this
Agreement in their respective capacities as lenders hereunder (collectively, the “Lenders”
and each, individually, a “Lender”), and TEXTRON FINANCIAL CORPORATION as facility agent
and collateral agent (the “Agent”).

W I T N E S S E T H:

     WHEREAS, Agent and Borrower were parties to that certain Loan, Security and Agency Agreement
dated as of December 16, 1999 (the “Original Agreement”), pursuant to which the Borrower executed
its Secured Promissory Note in favor of the Agent, as agent for Lenders, in the amount of
$71,000,000.00, as amended to date (the “Original Note”);

     WHEREAS, Agent and Borrower entered into a First Amendment to Loan, Security and Agency
Agreement dated as of April 17, 2001 (the “First Amendment to Original Agreement”) to, among other
things, incorporate the terms of a certain Forbearance Agreement dated as of April 6, 2001;

     WHEREAS, pursuant to the First Amendment to Original Agreement the Original Note was replaced
by a Secured Promissory Note or Notes in the aggregate original principal amount of $71,000,000.00
in favor of Lenders;

     WHEREAS, TFC and Borrower further amended and restated the Original Agreement in its entirety
pursuant to an Amended and Restated Loan, Security and Agency Agreement (Tranche B) (as amended to
date and hereby, the “Loan Agreement”) dated April 30, 2002 to, among other things, restructure and
modify the Loan, including separating the Loan into two separate components – the Revolving Loan
Component in the original principal amount of up to $56,104,200.00 and the Term Loan Component in
the original principal amount of up to $14,895,800.00; to reduce the Commitment, as defined in the
Loan Agreement, to $63,022,400.00 less the outstanding principal balance of the Term Loan Component
from time to time and to reduce the aggregate Commitment under the Loan Agreement, under the
Additional Credit Facility and the Tranche C Facility, as such terms are defined in the Loan
Agreement, to $136,000,000.00 less the outstanding principal balance of the Term Loan Component and
the aggregate term loan component of the Additional Credit Facility and the Tranche C Facility from
time to time; and to replace the Amended Note with: (i) an Amended and Restated Secured Promissory
Note or Notes in the aggregate original principal amount of $56,104,200.00 in favor of Lenders
(singly and collectively the “Revolving Loan Component Note”) and (ii) a Secured Promissory Note or
Notes

 

 

in the aggregate original principal amount of $14,895,800.00 in favor of Lenders (singly and
collectively the “Term Loan Component Note”, and together with the Revolving Loan Component Note,
sometimes referred to herein singly and collectively as the “Note”);

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated June
12, 2002 to establish a definition for “modified Eligible Note Receivable”;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated
March 27, 2003 to reinstate the maximum allowable ratio of Marketing and Sales Expenses to the
Borrower’s net proceeds from the sale of Intervals to a ratio of .550 to 1;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Agreement dated
September 25, 2003 to exclude the $28,711,000 increase in Borrower’s allowance for doubtful
accounts during the quarter ended March 31, 2003 from the calculations of EBITDA, the Interest
Coverage Ratio and Consolidated Net Income under the Loan Agreement and to approve the retirement
of certain subordinated notes with a face value of $7,620,000;

     WHEREAS, Borrower entered into: (i) a Letter Agreement with TFC dated November 17, 2003 (the
“November Letter Agreement”); (ii) an amendment to the Heller Documents dated November 21, 2003;
and (iii) an amendment to the Sovereign Documents dated October 1, 2003; each for the purpose of,
among other things, waiving certain Events of Default that may have arisen under the Loan
Agreement, the Heller Documents and the Sovereign Documents described therein, respectively;

     WHEREAS, Agent and Borrower entered into a First Amendment to the Amended and Restated Loan,
Security and Agency Agreement dated as of December 19, 2003 (the “First Amendment”) to, among other
things, restructure and modify the Loan, including reducing the Commitment, as defined in the First
Amendment, to (i) $44,104,600.00 for the Revolving Loan Component; and (ii) $11,040,000.00 for the
Term Loan Component, for a total Commitment under this Agreement of $55,144,600.00 and to reduce
the aggregate Commitment under the Loan Agreement, the Additional Credit Facility and the Tranche C
Facility, as such terms are defined in the First Amendment, to $95,000,000.00 for the Revolving
Loan Component and $24,000,000.00 for the Term Loan Component; and to replace the Term Loan
Component Secured Promissory Note or Notes with an Amended Secured Promissory Note in the aggregate
original principal amount of $11,040,000.00 in favor of Lender (the “Term Loan Component Note”, and
together with the Revolving Loan Component Note, sometimes referred to herein singly and
collectively as the “Note”);

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated
March 5, 2004 to clarify the definition of “Inventory Loan” and the Maximum Obligation of TFC under
the Loan Agreement, the Additional Credit Facility, the Tranche C Credit Facility and the Inventory
Loan;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to two Letter Amendments dated
July 30, 2004 to (i) clarify the priority of security in the Silverleaf Finance II

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Stock and the Silverleaf Finance II Subordinated Note, and (ii) modify the definition of Collateral
in connection with the amendments to the Sovereign Facility dated as of July 30, 2004; and

     WHEREAS, in connection with the Loans to be made by Lenders pursuant to the Loan Agreement,
Textron Financial Corporation has agreed to act as facility agent and collateral agent for the
other Lenders and to perform such duties with respect to the Loans as are expressly set forth
herein;

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

1. Terms. All capitalized terms not otherwise defined herein shall have the meaning
ascribed to such term in the Loan Agreement.

2. Elimination of Requirement for Business Plan. The Loan Agreement is modified in part to
add the following provision:

“Elimination of Requirement for Business Plan. Provided no Event of Default
or condition, omission or act which, with the passage of time, notice or both, would
constitute an Event of Default, has occurred, the requirement for Borrower to
maintain and adhere to the Business Plan is eliminated in all respects from and
after the date that: (i) the Term Loan Component has been paid in full; and (ii)
Borrower has achieved the net income projection for the six months ending December
31, 2004 and exceeded by 10% the net income projection for the fiscal year ending
December 31, 2004, as those net income projections appear in the Business Model
dated November 13, 2003, such net income results to be evidenced by audited
Financial Statements delivered by Borrower to Agent.”

3. Definitions. Section 1.1 is hereby amended in part to add the following new paragraphs:

“(sssss) Backup Servicing Agreement. Shall mean that certain Backup
Servicing Agreement dated as of April 10, 2001, as amended by the First Amendment to
the Backup Servicing Agreement dated as of April 30, 2002.”

“(ttttt) Declarant Rights. Shall mean the rights of the declarant
described on Schedule 1.1(c) attached hereto.”

“(uuuuu) Management Agreement. Shall mean that certain Management
Agreement by and between Silverleaf Club and Silverleaf Resorts, Inc. dated as of
March 28, 1990 as amended to date.”

“(vvvvv) Utility Purchase Agreement. Shall mean that certain Asset
Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of
Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water
Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and
Algonquin Power Income Fund dated as of August 29, 2004.”

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“(wwwww) Utility Rights. Shall mean the Facilities, Real Property and
Utilities, as those terms are defined in the Utility Purchase Agreement, that are
part of the Additional Resort Collateral.”

4. Release of Utility Rights, Additional Resort Collateral and Sovereign Collateral.
Section 3 is hereby amended in part to add the following new Section 3.15:

“3.15 Release of Liens. Notwithstanding anything contrary in the Loan
Agreement, and provided no Event of Default or condition, omission or act which,
with the passage of time, notice or both, would constitute an Event of Default, has
occurred:

(a) the Utility Rights shall be released from the Lien of the security interest
granted to Agent hereunder on the date that: (i) the sale of the Utility Rights is
closed pursuant to the Utility Purchase Agreement; and (ii) the net proceeds of such
sale in an amount not less than thirteen million dollars ($13,000,000) is paid to
Agent;

(b) the Additional Resort Collateral, except for the Declarant Rights and the
Management Agreement, shall be released from the Lien of the security interest
granted to Agent hereunder on the date that the Term Loan Component has been paid in
full;

(c) all collateral securing the Sovereign Facility, which shall mean the Notes
Receivable and related Mortgages exclusively assigned to Sovereign in connection
with an advance under its loan documents, shall be released from the Lien of the
security interest granted to Agent hereunder on the date that: (i) the Term Loan
Component has been paid in full; (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and exceeded by 10% the net
income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to
Agent; and (iii) all Collateral is released from any lien granted to Sovereign
pursuant to the Sovereign Documents; and

(d) the Declarant Rights and the Management Agreement shall be released from the
Liens of the security interest granted to Agent hereunder on the date that: (i) the
Term Loan Component has been paid in full; (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and exceeded by 10% the net
income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to
Agent; (iii) Borrower files a negative pledge in a form acceptable to Agent on the
land records for each Resort that neither Declarant Rights nor the Management
Agreement will be assigned, transferred, or encumbered; and (iv) the Declarant
Rights and the Management Agreement are also released from any lien granted to
Sovereign pursuant to the Sovereign

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Documents. Notwithstanding anything herein to the contrary, to the extent that the
Declarant Rights or Management Agreement have not already been released from any
lien granted to Agent hereunder, on the date that the maximum aggregate Commitment
under this Agreement, the Additional Credit Facility, and the Tranche C Credit
Facility has been reduced to $82,000,000.00 for the Revolving Loan Component, the
Declarant Rights and Management Agreement shall be released from the Lien of the
security interest granted to Agent hereunder, provided that: (1) Borrower files a
negative pledge in a form acceptable to Agent on the land records for each Resort
that neither the Declarant Rights nor the Management Agreement will be assigned,
transferred, or encumbered and (2) the Declarant Rights and Management Agreement are
also released from any lien granted to Sovereign pursuant to the Sovereign
Documents.

5. Tangible Net Worth. Provided that: (i) no Event of Default or condition, omission or
act which, with the passage of time, notice or both, would constitute an Event of Default, has
occurred; and (ii) Tangible Net Worth as of December 31, 2004 meets or exceeds the requirement of
the existing Section 7.1(cc)(i) Tangible Net Worth Covenant, Section 7.1(cc)(i) will be deleted in
its entirety and replaced with the following new Section 7.1(cc)(i), on the date that: (1) the Term
Loan Component has been paid in full; and (2) Borrower has achieved the net income projection for
the six months ending December 31, 2004 and exceeded by 10% the net income projection for the
fiscal year ending December 31, 2004, as those net income projections appear in the Business Model
dated November 13, 2003, such net income results to be evidenced by audited Financial Statements
delivered by Borrower to Agent:

“(i) Tangible Net Worth. Borrower shall at all times have and maintain
Tangible Net Worth in an amount which shall not be less than an amount equal to the
Tangible Net Worth as stated in the annual audited financial statements as of
December 31, 2004 plus (A) fifty percent (50%) of the aggregate amount of proceeds
received by Borrower after December 31, 2004 in connection with (1) each issuance by
Borrower of any class or classes of capital stock after December 31, 2004, except
for stock issued to retire existing unsecured subordinated debt, and (2) each
incurrence of unsecured subordinated debt after December 31, 2004, except for
unsecured debt issued to retire existing unsecured subordinated debt, plus (B) fifty
percent (50%) of the aggregate amount of net income (calculated in accordance with
GAAP) of Borrower after December 31, 2004.”

6. Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer.
Section 7.1 is hereby amended in part to add the following new paragraph:

“7.1 (ff) Elimination of Requirement for Standby Manager, Resort Consultant and
Standby Servicer. Provided no Event of Default or condition, omission or act
which, with the passage of time, notice or both, would constitute an Event of
Default, has occurred, the Standby Management Agreement shall be released from the
security interest granted to Agent hereunder and Borrower may terminate the
agreement with the Standby Manager and Resort Consultant required under Section
7.1(y), and may amend the agreement with the Standby Servicer required under

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Section 7.1(y) to allow for Warm Backup, as that term is described in Exhibit B to
that certain Backup Servicing Agreement among Standby Servicer, Borrower, and Agent
dated as of April 10, 2001, as amended to date and, provided that: (i) the Term Loan
Component has been paid in full; (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and exceeded by 10% the net
income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to
Agent; (iii) any requirement for the Standby Manager or Resort Consultant is
eliminated from the Sovereign Documents; and (iv) the Standby Management Agreement
is also released from any security interest granted to Sovereign pursuant to the
Sovereign Documents.”

7. Limitation on Other Debt, Further Encumbrances. Provided no Event of Default or
condition, omission or act which, with the passage of time, notice or both, would constitute an
Event of Default, has occurred, Section 7.2(a) will be deleted in its entirety and replaced with
the following paragraph on the date that: (i) the Term Loan Component has been paid in full; and
(ii) Borrower has achieved the net income projection for the six months ending December 31, 2004
and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as
those net income projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to Agent:

“7.2(a) Limitation on Other Debt, Further Encumbrances. Borrower will not
obtain financing and grant liens with respect to the Collateral, except as hereafter
provided. Notwithstanding anything herein to the contrary, Borrower may, without
first obtaining the written consent of Agent obtain financing and grant liens with
respect to any of its assets or other property except for the Collateral and those
assets or property restricted by a negative pledge provided: (i) Borrower provides
ten days prior written notice to Agent setting forth the terms and conditions of
such financing; (ii) no Event of Default or condition, omission or act which, with
the passage of time, notice or both, would constitute an Event of Default, has
occurred; (iii) such financing does not result in an Event of Default hereunder or
under or under Heller Documents, the Sovereign Documents, DZ Documents, Bond Holder
Exchange Documents or the documents evidencing any other indebtedness of Borrower;
(iv) Agent is promptly provided a copy of the fully executed loan documents relating
thereto.”

8. Subordinated Obligations. Provided no Event of Default or condition, omission or act
which, with the passage of time, notice or both, would constitute an Event of Default, has
occurred, Section 7.2(f) will be amended by adding the following sentence to the end of such
section on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has
achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10%
the net income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income results to be
evidenced by audited Financial Statements delivered by Borrower to Agent.

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“Notwithstanding anything to the contrary in this Section 7.2(f), so long as
Borrower’s Tangible Net Worth remains in compliance with Section 7.1(cc)(i) Borrower
may: (i) retire unsecured subordinated debt with the proceeds from the issuance of
stock or the incurrence of unsecured debt, and/or (ii) declare dividends, buy back
stock, and perform other equity transactions.”

9. Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign
Documents, Silverleaf Finance II Documents and Other Debt Instruments. Provided no Event of
Default or condition, omission or act which, with the passage of time, notice or both, would
constitute an Event of Default, has occurred, Section 7.2(k) will be deleted in its entirety and
replaced with the following new Section 7.2(k), on the date that: (i) the Term Loan Component has
been paid in full; and (ii) Borrower has achieved the net income projection for the six months
ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending
December 31, 2004, as those net income projections appear in the Business Model dated November 13,
2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower
to Agent:

“(k) Modifications of Heller Documents, DZ Documents, Bond Holder Exchange
Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt
Instruments. Borrower may amend or modify the Sovereign Documents, the DZ
Documents, the Bond Holder Exchange Documents, the Silverleaf Finance II Documents
or the documents evidencing any other indebtedness of Borrower, and Borrower may
extend, modify, increase or terminate the DZ Facility, the Bond Holder Exchange
Transaction, the Sovereign Facility, the TFC Conduit Loan or any other credit
facility or loan, without the prior written consent of Agent, provided Borrower
provides Agent with (i) ten days prior written notice setting forth the terms and
conditions thereof and (ii) a copy of the fully executed loan documents thereof
promptly after execution.”

10. Conditions Precedent. This Amendment shall not be effective until all of the following
conditions have been satisfied:

(a) Approval of Documents. Borrower has delivered to Agent (with copies to
Agent’s counsel), and Agent has reviewed and approved in its sole discretion, the
form and content of all of the items specified in Subsections (i) through (vii)
below (the “Submissions”). Agent shall have the right to review and approve any
changes to the form of any of the Submissions. If Agent disapproves of any changes
to any of the Submissions, Agent shall have the right to require Borrower either to
cure or correct the defect objected to by Agent or to elect not to fund any Advance.
Under no circumstances shall Agent’s failure to approve or disapprove a change to
any of the Submissions be deemed to be an approval of such Submissions. All of the
Submissions shall be prepared at Borrower’s sole cost and expense.

(i) A certificate in the form attached to the Amendment as Exhibit A-1 to be
signed by the president, vice president or secretary of the Borrower;

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(ii) Copies of any amendments to the articles of incorporation/charter and
bylaws of Borrower not previously delivered to Agent, certified to be true,
correct and complete by Borrower and the Secretary of State of the State of
Texas and current certificates of good standing for Borrower for the State
of Texas and states where the Resorts are located, a current certificate of
authority to conduct business by the Secretary of State in each state in
which Borrower conducts business;

(iii) A certificate of the Secretary of Borrower certifying the adoption by
the Board of Directors of Borrower of a resolution authorizing Borrower to
enter into and execute the Amendment and all such documents requested by
Agent in the form attached to the Amendment as Exhibit B-1;

(iv) A certificate of the secretary or assistant secretary of Borrower
certifying the incumbency, and verifying the authenticity of the signatures
of the specified officers of Borrower authorized to sign this Amendment and
all such documents requested by Agent in the form attached to the Amendment
as Exhibit C-1;

(v) Fully executed closing documents from the sale of the utility rights
which comprise part of the Additional Resort Collateral pursuant to the
Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin
Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri,
Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water
Resources of America, Inc. and Algonquin Power Income Fund dated as of
August 29, 2004. Such sale will provide not less than thirteen million
dollars ($13,000,000) of net proceeds. Agent hereby authorizes Borrower to
consummate the sale of the utility rights subject to the terms and
conditions of this Amendment;

(vi) Closing Opinions of Counsels for Borrower;

(vii) Such other agreements, documents, instruments, certificates and
materials as Agent may request to evidence the Indebtedness, to evidence and
perfect the rights and Liens and security interests of Agent contemplated by
the Loan Documents as amended hereby, and to effectuate the transactions
contemplated in this Amendment.

(b) Conditions to Closing.

(i) Execution of this Amendment;

(ii) Execution of the amendments to the Additional Credit Facility, the
Tranche C Credit Facility and the Inventory Loan dated of even date
herewith;

(iii) Borrower shall have delivered to Agent the Inventory Term Loan Note;

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(iv) Agent shall have received evidence, in form and substance satisfactory
to Agent, that the consent of each party entitled to consent to this
Amendment has been obtained;

(v) Borrower shall have paid all fees of Agent and all Lenders in connection
with this Amendment; and

(vi) Agent shall have delivered originals of all releases of Liens
contemplated by this Amendment to Agent’s counsel to be held in escrow until
such time as Agent notifies Agent’s counsel that Borrower has satisfied all
conditions and is entitled to such releases.

11. Further Documentation. Borrower agrees to execute and deliver to Agent any and all
additional documentation as Agent may now or hereafter require in order to effectuate the terms and
conditions of this Amendment.

12. Effect of Amendment. The Loan Agreement, as herein amended, shall remain in full force
and effect.

13. Ratification and Confirmation. Except as herein expressly amended, Borrower hereby
ratifies, confirms, assumes and agrees to be bound by all of representations, warranties,
statements, covenants and agreements set forth in the Loan Agreement and the other Loan Documents,
as previously amended. The Borrower reaffirms, restates and incorporates by reference all of the
representations, warranties, covenants and agreements made in the Loan Documents as if the same
were made as of this date. The Borrower agrees to pay the Loan and all related expenses, as and
when due and payable in accordance with the Loan Agreement and the other Loan Documents, and to
observe and perform the Obligations, and do all things necessary which are not prohibited by law to
prevent the occurrence of any Event of Default. In addition, to further secure, and to evidence and
confirm the securing of, the prompt and complete payment and performance by the Borrower of the
Loan and all of the Obligations, for value received, Borrower unconditionally and irrevocably
assigns, pledges and grants to Agent and each Lender, and hereby confirms or reaffirms the prior
granting to Agent and each Lender of, a continuing First priority Lien, mortgage and security
interest in and to all of the Collateral, except as otherwise set forth herein, whether now
existing or hereafter acquired. Also, as provided in the Loan Documents, the Loan is and shall be
further secured by the Liens and security interests in favor of Agent and each Lender in the
properties and interests relating to Additional Eligible Resorts, which now or hereafter serve as
collateral security for any Obligations. Upon satisfaction of the requirements for approval by
Agent 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 Agent and each 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 Agent may deem
necessary to further evidence and perfect the Agent and each Lender’s Lien on the Collateral.

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14. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS MAY BE EXPRESSLY
PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF RHODE ISLAND, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES.

15. General Representations and Warranties. Borrower hereby represents and warrants to
Lender as follows:

(a) Organization, Standing, Qualification. Borrower: (a) is a duly
organized and validly existing Texas corporation duly organized, validly existing
and in good standing under the laws of the State of Texas, and (b) has all requisite
power, corporate or otherwise, to conduct its business and to execute and deliver,
and to perform its obligations under, the Loan Documents.

(b) Authorization, Enforceability, Etc

(i) The execution, delivery and performance by Borrower of the Loan
Documents has been duly authorized by all necessary corporate action by
Borrower and does not and will not: (1) violate any provision of the
certificate or articles of incorporation of Borrower, bylaws of Borrower, or
any agreement, law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect to which Borrower is a
party or is subject; (2) result in, or require the creation or imposition
of, any Lien upon or with respect to any asset of Borrower other than Liens
in favor of Lenders; or (3) result in a breach of, or constitute a default
by Borrower under, any indenture, loan or credit agreement or any other
agreement, document, instrument or certificate to which Borrower is a party
or by which it or any of its assets are bound or affected.

(ii) No approval, authorization, order, license, permit, franchise or
consent of, or registration, declaration, qualification or filing with, any
governmental authority or other Person, including without limitation, the
Division or the Timeshare Owners’ Association is required in connection with
the execution, delivery and performance by Borrower of any of the Loan
Documents.

(iii) The Loan Documents constitute legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.

(c) No Event of Default. No Event of Default or condition, omission or act
which, with the passage of time, notice or both, would constitute an Event of
Default, has occurred under the Loan Agreement as amended to date, Additional Credit
Facility, the Tranche C Credit Facility, the Inventory Loan, the Heller Facility,
the Sovereign Facility, DZ Facility, Bond Holder Exchange Facility or any other
indebtedness of Borrower.

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THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.

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     IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to be executed on
their behalf as of the day and year first written above.

	 	 	 	 	 	 	 
	Witnessed By:	 	TEXTRON FINANCIAL CORPORATION	 	 
	 
	 	 	 	 	 	 
	/S/ SEBASTIAN GROMAUDIN
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	By:
	 	/S/ JOHN D’ANNIBALE	 	 
	 	 	 	 	 	 	 
	/S/ LAURIE SPARVEN
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	Name:
	 	John D’Annibale	 	 
	

	 	Its:
	 	V.P.	 	 
	 
	 	 	 	 	 	 
	 	 	SILVERLEAF RESORTS, INC.	 	 
	 
	 	 	 	 	 	 
	/S/ MARK MORTENSON
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	By:
	 	/S/ HARRY J. WHITE, JR.	 	 
	 	 	 	 	 	 	 
	/S/ MIKE NORRIS
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	Name:
	 	Harry J. White, Jr.	 	 
	

	 	Its:
	 	CFO	 	 
	 
	 	 	 	 	 	 
	 	 	WEBSTER BANK, NATIONAL ASSOCIATION, fka

WEBSTER BANK	 	 
	 
	 	 	 	 	 	 
	/S/ AURTHUR V. LIPPENS
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	By:
	 	/S/ GORDON MASSAVE	 	 
	 	 	 	 	 	 	 
	Aurthur V. Lippens, V.P.

	 	Name:
	 	Gordon Massave	 	 
	 	 	 	 	 	 	 
	

	 	Its:
	 	Duly Authorized Signature	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF SCOTLAND	 	 
	 
	 	 	 	 	 	 
	/S/ KAREN WELCH
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	By:
	 	/S/ AMENA NABI	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	Name:
	 	Amenda Nabi	 	 
	

	 	Its:
	 	Assistant Vice President	 	 

 

 

	 	 	 	 	 	 	 
	STATE OF CONNECTICUT

	 	 	)	 	 	 
	

	 	 	)	 	 	ss: East Hartford
	COUNTY OF HARTFORD

	 	 	)	 	 	 

     At East Hartford in said County and State on this _24___day of
_February___, 2005, personally appeared _John T.
D’Annibale___, duly authorized _VP___of Textron
Financial Corporation, and he acknowledged the foregoing instrument by him signed and sealed to be
his free act and deed and the free act and deed of Textron Financial Corporation.

	 	 	 	 	 
	Before me:

	 	/S/ CHRISTINE M. CORDERA
	 	 
	 	 	 	 	 
	

	 	Notary Public in and for said State	 	 
	

	 	My Commission Expires: April 30, 2007	 	 
	

	 	Commissioner of the Superior Court	 	 

	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 	 	 
	

	 	 	)	 	 	ss:
	COUNTY OF DALLAS

	 	 	)	 	 	 

     At _Dallas, Texas___in said County and State on this 1st
day of ___March___, 2005, personally appeared ___Harry J. White, Jr. duly
authorized officer of SILVERLEAF RESORTS, INC., and he/she acknowledged the foregoing instrument by
him/her signed and sealed to be his/her free act and deed and the free act and deed of Silverleaf
Resorts, Inc., a Texas corporation, on behalf of the corporation.

	 	 	 	 	 
	Before me:

	 	/S/ TAMMY J. MARTIN	 	 
	 	 	 	 	 
	

	 	Notary Public in and for said State
	 	 
	

	 	My Commission Expires: 1-2-2009	 	 

	 	 	 	 	 	 	 
	STATE OF NEW YORK

	 	 	)	 	 	 
	

	 	 	)	 	 	ss:
	COUNTY OF NEW YORK

	 	 	)	 	 	 

     At ___New York___in said County and State on this _4th___day of
_March___, 2005, personally appeared ___Gordon Massave___, duly authorized
officer of ___Webster Bank___, and he/she acknowledged the foregoing
instrument by him/her signed and sealed to be his/her free act and deed and the free act and deed
of Webster Bank, National Association, fka Webster Bank, on behalf of the bank.

	 	 	 	 	 
	Before me:

	 	/S/ JOAN H. HIGHLAND	 	 
	 	 	 	 	 
	

	 	Notary Public in and for said State
	 	 
	

	 	My Commission Expires: August 5, 2005	 	 

 

 

	 	 	 	 	 	 	 
	STATE OF NEW YORK

	 	 	)	 	 	 
	

	 	 	)	 	 	ss:
	COUNTY OF NEW YORK

	 	 	)	 	 	 

     At ___in said County and State on this _7Tth___day of
_March___, 2005, personally appeared ___Amena Nabi , duly authorized officer
of Bank of Scotland and she acknowledged the foregoing instrument by her signed and sealed to be
his/her free act and deed and the free act and deed of Bank of Scotland, a corporation, on behalf
of the corporation.

	 	 	 	 	 
	Before me:

	 	/S/ SARA G. ALAIMO	 	 
	 	 	 	 	 
	

	 	Notary Public in and for said State
	 	 
	

	 	My Commission Expires: ___	 	 

List of Exhibits and Schedules Attached to Agreement and not filed herewith:

Schedule A: Amendments or Restatements to Documents

Schedule B: Existing Resorts

Schedule C: List of Stock and Equity Interests Owned by Borrower

Schedule D: List of Litigation, Suits, Actions, Complaints, Claims or Charges

Schedule E: List of Borrower’s Executive Management

Ex. B-1: Certificate of Corporate Resolutions of the Board of Directors of Silverleaf Resorts, Inc.

Ex. C-1: Certificate of Secretary of Silverleaf Resorts, Inc.exv10w5

 

Ex. 10.5

THIRD AMENDMENT TO

LOAN AND SECURITY AGREEMENT (TRANCHE C)

     THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (TRANCHE C) dated as of February 28, 2005
(the “Third Amendment”), is entered into by and among SILVERLEAF RESORTS, INC., a Texas
corporation (the “Borrower”), the parties, including TEXTRON FINANCIAL CORPORATION (“TFC”),
a Delaware corporation, which execute and deliver this Agreement in their respective capacities as
lenders hereunder (collectively, the “Lenders” and each, individually, a “Lender”),
and TEXTRON FINANCIAL CORPORATION as facility agent and collateral agent (the “Agent”).

W I T N E S S E T H:

     WHEREAS, Borrower is engaged in the business of acquiring, constructing, developing, owning,
managing, selling and otherwise dealing with Intervals at the Resorts (as each such term is
hereafter defined);

     WHEREAS, Borrower and Lender are parties to that certain Loan and Security Agreement dated as
of April 17, 2001, as amended and as amended hereby (the “Loan Agreement”), pursuant to which the
Borrower executed its Secured Promissory Note in favor of the Lender in the amount of
$10,200,000.00, (the “Original Note”);

     WHEREAS, Lender and Borrower amended the Loan Agreement with the First Amendment to Loan and
Security Agreement dated as of April 30, 2002, (the “First Amendment”), to, among other things:
(i) restructure and modify the Loan, including separating the Loan into two separate components –
the Revolving Loan Component in the amount of up to $8,060,00.00 and the Term Loan Component in the
amount of up to $2,140,000.00; (ii) reduce the amount of the Commitment; and (iii) replace the
Original Note with a Revolving Loan Component Note and a Term Loan Component Note;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated
March 27, 2003 to reinstate the maximum allowable ratio of Marketing and Sales Expenses to the
Borrower’s net proceeds from the sale of Intervals to a ratio of .550 to 1;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Agreement dated
September 25, 2003 to exclude the $28,711,000 increase in Borrower’s allowance for doubtful
accounts during the quarter ended March 31, 2003 from the calculations of EBITDA, the Interest
Coverage Ratio and Consolidated Net Income under the Loan Agreement and to approve the retirement
of certain subordinated notes with a face value of $7,620,000;

     WHEREAS, Borrower entered into: (i) a Letter Agreement with TFC dated November 17, 2003 (the
“November Letter Agreement”); (ii) an amendment to the Heller Documents dated November 21, 2003;
and (iii) an amendment to the Sovereign Documents dated October 1, 2003;

 

 

each for the purpose of, among other things, waiving certain Events of Default that may have
arisen under the Loan Agreement, the Heller Documents and the Sovereign Documents described
therein, respectively;

     WHEREAS, TFC and Borrower entered into a Second Amendment to Loan and Security Agreement dated
as of December 19, 2003 (the “Second Amendment”) to, among other things, restructure and modify the
Loan, including reducing the Commitment, as defined in the First Amendment, to (i) $6,245,400.00
for the Revolving Loan Component; and (ii) $1,680,000.00 for the Term Loan Component, for a total
Commitment under this Agreement of $7,925,400.00 and to reduce the aggregate Commitment under the
Loan Agreement, the Tranche A Credit Facility, the Tranche B Credit Facility, and the Tranche C
Facility, as such terms are defined in the Loan Agreement, to $95,000,000.00 for the Revolving Loan
Component and $24,000,000.00 for the Term Loan Component;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant to a Letter Amendment dated
March 5, 2004 to clarify the definition of “Inventory Loan” and the Maximum Obligation of TFC under
the Loan Agreement, the Tranche A Credit Facility, the Tranche B Credit Facility and the Inventory
Loan;

     WHEREAS, TFC and Borrower amended the Loan Agreement pursuant a Letter Amendment dated July
30, 2004 to modify the definition of Collateral in connection with the amendments to the Sovereign
Facility dated as of July 30, 2004; and

     NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:

1. Terms. All capitalized terms not otherwise defined herein shall have the meaning
ascribed to such term in the Loan Agreement.

2. Elimination of Requirement for Business Plan. The Loan Agreement is modified in part to
add the following provision:

“Elimination of Requirement for Business Plan. Provided no Event of Default
or condition, omission or act which, with the passage of time, notice or both, would
constitute an Event of Default, has occurred, the requirement for Borrower to
maintain and adhere to the Business Plan is eliminated in all respects from and
after the date that: (i) the Term Loan Component has been paid in full; and (ii)
Borrower has achieved the net income projection for the six months ending December
31, 2004 and exceeded by 10% the net income projection for the fiscal year ending
December 31, 2004, as those net income projections appear in the Business Model
dated November 13, 2003, such net income results to be evidenced by audited
Financial Statements delivered by Borrower to Lender.”

3. Definitions. Section 1.1 is hereby amended in part to add the following new paragraphs:

2

 

“(cccccc) Backup Servicing Agreement. Shall mean that certain Backup
Servicing Agreement dated as of April 10, 2001, as amended by the First Amendment to
the Backup Servicing Agreement dated as of April 30, 2002.”

“(dddddd) Declarant Rights. Shall mean the rights of the declarant
described on Schedule 1.1(c) attached hereto.”

“(eeeeee) Management Agreement. Shall mean that certain Management
Agreement by and between Silverleaf Club and Silverleaf Resorts, Inc. dated as of
March 28, 1990 as amended to date.”

“(ffffff) Utility Purchase Agreement. Shall mean that certain Asset
Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin Water Resources of
Texas, Inc. and Algonquin Water Resources of Missouri, Inc. and Algonquin Water
Resources of Illinois, Inc. and Algonquin Water Resources of America, Inc. and
Algonquin Power Income Fund dated as of August 29, 2004.”

“(gggggg) Utility Rights. Shall mean the Facilities, Real Property and
Utilities, as those terms are defined in the Utility Purchase Agreement, that are
part of the Additional Resort Collateral.”

4. Release of Additional Resort Collateral and Sovereign Collateral. Section 3 is hereby
amended in part to add the following new Section 3.15:

“3.15 Release of Liens. Notwithstanding anything contrary in the Loan
Agreement, and provided no Event of Default or condition, omission or act which,
with the passage of time, notice or both, would constitute an Event of Default, has
occurred:

(a) the Utility Rights shall be released from the Lien of the security interest
granted to Lender hereunder on the date that: (i) the sale of the Utility Rights is
closed pursuant to the Utility Purchase Agreement; and (ii) the net proceeds of such
sale in an amount not less than thirteen million dollars ($13,000,000) is
transferred to Lender to be held in escrow until March 31, 2005, on which date
Lender shall apply such proceeds to the Revolving Component of this Loan, the
Tranche A Credit Facility, and the Tranche B Credit Facility, or sooner if required
by Lender to make a contractually obligated payment under the Loan Facilities;

(b) the Additional Resort Collateral, except for the Declarant Rights and the
Management Agreement, shall be released from the Lien of the security interest
granted to Lender hereunder on the date that the Term Loan Component has been paid
in full;

(c) all collateral securing the Sovereign Facility, which shall mean the Notes
Receivable and related Mortgages exclusively assigned to Sovereign in connection
with an advance under its loan documents, shall be released from the Lien of the
security interest granted to Lender hereunder on the date that: (i) the Term Loan

3

 

Component has been paid in full; (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and exceeded by 10% the net
income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to
Lender; and (iii) all Collateral is released from any lien granted to Sovereign
pursuant to the Sovereign Documents; and

(d) the Declarant Rights and the Management Agreement shall be released from the
Liens of the security interest granted to Lender hereunder on the date that: (i) the
Term Loan Component has been paid in full; (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and exceeded by 10% the net
income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to
Lender; (iii) Borrower files a negative pledge in a form acceptable to Lender in the
land records for each Resort that neither Declarant Rights nor the Management
Agreement will be assigned, transferred, or encumbered; and (iv) the Declarant
Rights and the Management Agreement are also released from any lien granted to
Sovereign pursuant to the Sovereign Documents. Notwithstanding anything herein to
the contrary, to the extent that the Declarant Rights or Management Agreement have
not already been released from any lien granted to Lender hereunder, on the date
that the maximum aggregate Commitment under this Agreement, the Tranche A Credit
Facility, and the Tranche B Credit Facility has been reduced to $82,000,000.00 for
the Revolving Loan Component, the Declarant Rights and Management Agreement shall be
released from the Lien of the security interest granted to Lender hereunder,
provided that: (1) Borrower files a negative pledge in a form acceptable to Lender
in the land records for each Resort that neither the Declarant Rights nor the
Management Agreement will be assigned, transferred, or encumbered and (2) the
Declarant Rights and Management Agreement are also released from any lien granted to
Sovereign pursuant to the Sovereign Documents.

5. Tangible Net Worth. Provided that: (i) no Event of Default or condition, omission or
act which, with the passage of time, notice or both, would constitute an Event of Default, has
occurred; and (ii) Tangible Net Worth as of December 31, 2004 meets or exceeds the requirement of
the existing Section 7.1(aa)(i) Tangible Net Worth Covenant, Section 7.1(aa)(i) will be deleted in
its entirety and replaced with the following new Section 7.1(aa)(i), on the date that: (1) the Term
Loan Component has been paid in full; and (2) Borrower has achieved the net income projection for
the six months ending December 31, 2004 and exceeded by 10% the net income projection for the
fiscal year ending December 31, 2004, as those net income projections appear in the Business Model
dated November 13, 2003, such net income results to be evidenced by audited Financial Statements
delivered by Borrower to Lender:

“(i) Tangible Net Worth. Borrower shall at all times have and maintain
Tangible Net Worth in an amount which shall not be less than an amount

4

 

equal to the Tangible Net Worth as stated in the annual audited financial statements
as of December 31, 2004 plus (A) fifty percent (50%) of the aggregate amount of
proceeds received by Borrower after December 31, 2004 in connection with (1) each
issuance by Borrower of any class or classes of capital stock after December 31,
2004, except for stock issued to retire existing unsecured subordinated debt, and
(2) each incurrence of unsecured subordinated debt after December 31, 2004, except
for unsecured debt issued to retire existing unsecured subordinated debt, plus (B)
fifty percent (50%) of the aggregate amount of net income (calculated in accordance
with GAAP) of Borrower after December 31, 2004.”

6. Elimination of Requirement for Standby Manager, Resort Consultant and Standby Servicer.
Section 7.1 is hereby amended in part to add the following new paragraph:

“7.1 (dd) Elimination of Requirement for Standby Manager, Resort Consultant and
Standby Servicer. Provided no Event of Default or condition, omission or act
which, with the passage of time, notice or both, would constitute an Event of
Default, has occurred, the Standby Management Agreement shall be released from the
security interest granted to Lender hereunder and Borrower may terminate the
agreement with the Standby Manager and Resort Consultant required under Section
7.1(w), and may amend the agreement with the Standby Servicer required under Section
7.1(w) to allow for Warm Backup, as that term is described in Exhibit B to that
certain Backup Servicing Agreement among Standby Servicer, Borrower, and Agent dated
as of April 10, 2001, as amended to date and, provided that: (i) the Term Loan
Component has been paid in full; (ii) Borrower has achieved the net income
projection for the six months ending December 31, 2004 and exceeded by 10% the net
income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to
Lender; (iii) any requirement for the Standby Manager or Resort Consultant is
eliminated from the Sovereign Documents; and (iv) the Standby Management Agreement
is also released from any security interest granted to Sovereign pursuant to the
Sovereign Documents.”

7. Limitation on Other Debt, Further Encumbrances. Provided no Event of Default or
condition, omission or act which, with the passage of time, notice or both, would constitute an
Event of Default, has occurred, Section 7.4(a) will be deleted in its entirety and replaced with
the following paragraph on the date that: (i) the Term Loan Component has been paid in full; and
(ii) Borrower has achieved the net income projection for the six months ending December 31, 2004
and exceeded by 10% the net income projection for the fiscal year ending December 31, 2004, as
those net income projections appear in the Business Model dated November 13, 2003, such net income
results to be evidenced by audited Financial Statements delivered by Borrower to Lender:

“7.4(a) Limitation on Other Debt, Further Encumbrances. Borrower will not
obtain financing and grant liens with respect to the Collateral, except as hereafter
provided. Notwithstanding anything herein to the contrary, Borrower may, without
first obtaining the written consent of Lender obtain financing and grant liens with

5

 

respect to any of its assets or other property except for the Collateral and those
assets or property restricted by a negative pledge provided: (i) Borrower provides
ten days prior written notice to Lender setting forth the terms and conditions of
such financing; (ii) no Event of Default or condition, omission or act which, with
the passage of time, notice or both, would constitute an Event of Default, has
occurred; (iii) such financing does not result in an Event of Default hereunder or
under or under Heller Documents, the Sovereign Documents, DZ Documents, Bond Holder
Exchange Documents or the documents evidencing any other indebtedness of Borrower;
(iv) Lender is promptly provided a copy of the fully executed loan documents
relating thereto.”

8. Subordinated Obligations. Provided no Event of Default or condition, omission or act
which, with the passage of time, notice or both, would constitute an Event of Default, has
occurred, Section 7.4(f) will be amended by adding the following sentence to the end of such
section on the date that: (i) the Term Loan Component has been paid in full; and (ii) Borrower has
achieved the net income projection for the six months ending December 31, 2004 and exceeded by 10%
the net income projection for the fiscal year ending December 31, 2004, as those net income
projections appear in the Business Model dated November 13, 2003, such net income results to be
evidenced by audited Financial Statements delivered by Borrower to Lender.

“Notwithstanding anything to the contrary in this Section 7.4(f), so long as
Borrower’s Tangible Net Worth remains in compliance with Section 7.1(aa)(i) Borrower
may: (i) retire unsecured subordinated debt with the proceeds from the issuance of
stock or the incurrence of unsecured debt, and/or (ii) declare dividends, buy back
stock, and perform other equity transactions.”

9. Modifications of Heller Documents, DZ Documents, Bond Holder Exchange Documents, Sovereign
Documents, Silverleaf Finance II Documents and Other Debt Instruments. Provided no Event of
Default or condition, omission or act which, with the passage of time, notice or both, would
constitute an Event of Default, has occurred, Section 7.4(k) will be deleted in its entirety and
replaced with the following new Section 7.4(k), on the date that: (i) the Term Loan Component has
been paid in full; and (ii) Borrower has achieved the net income projection for the six months
ending December 31, 2004 and exceeded by 10% the net income projection for the fiscal year ending
December 31, 2004, as those net income projections appear in the Business Model dated November 13,
2003, such net income results to be evidenced by audited Financial Statements delivered by Borrower
to Lender:

“(k) Modifications of Heller Documents, DZ Documents, Bond Holder Exchange
Documents, Sovereign Documents, Silverleaf Finance II Documents and Other Debt
Instruments. Borrower may amend or modify the Sovereign Documents, the DZ
Documents, the Bond Holder Exchange Documents, the Silverleaf Finance II Documents
or the documents evidencing any other indebtedness of Borrower, and Borrower may
extend, modify, increase or terminate the DZ Facility, the Bond Holder Exchange
Transaction, the Sovereign Facility, the TFC Conduit Loan or any other credit
facility or loan, without the prior written consent of Lender, provided Borrower
provides Lender with (i) ten

6

 

days prior written notice setting forth the terms and conditions thereof and (ii) a
copy of the fully executed loan documents thereof promptly after execution.”

10. Conditions Precedent. This Amendment shall not be effective until all of the following
conditions have been satisfied:

(a) Approval of Documents. Borrower has delivered to Lender (with copies to
Lender’s counsel), and Lender has reviewed and approved in its sole discretion, the
form and content of all of the items specified in Subsections (i) through (vii)
below (the “Submissions”). Lender shall have the right to review and approve any
changes to the form of any of the Submissions. If Lender disapproves of any changes
to any of the Submissions, Lender shall have the right to require Borrower either to
cure or correct the defect objected to by Lender or to elect not to fund any
Advance. Under no circumstances shall Lender’s failure to approve or disapprove a
change to any of the Submissions be deemed to be an approval of such Submissions.
All of the Submissions shall be prepared at Borrower’s sole cost and expense.

(i) A certificate in the form attached to the Amendment as Exhibit A-1 to be
signed by the president, vice president or secretary of the Borrower;

(ii) Copies of any amendments to the articles of incorporation/charter and
bylaws of Borrower not previously delivered to Lender, certified to be true,
correct and complete by Borrower and the Secretary of State of the State of
Texas and current certificates of good standing for Borrower for the State
of Texas and states where the Resorts are located, a current certificate of
authority to conduct business by the Secretary of State in each state in
which Borrower conducts business;

(iii) A certificate of the Secretary of Borrower certifying the adoption by
the Board of Directors of Borrower of a resolution authorizing Borrower to
enter into and execute the Amendment and all such documents requested by
Lender in the form attached to the Amendment as Exhibit B-1;

(iv) A certificate of the secretary or assistant secretary of Borrower
certifying the incumbency, and verifying the authenticity of the signatures
of the specified officers of Borrower authorized to sign this Amendment and
all such documents requested by Lender in the form attached to the Amendment
as Exhibit C-1;

(v) Fully executed closing documents from the sale of the utility rights
which comprise part of the Additional Resort Collateral pursuant to the
Asset Purchase Agreement between Silverleaf Resorts, Inc. and Algonquin
Water Resources of Texas, Inc. and Algonquin Water Resources of Missouri,
Inc. and Algonquin Water Resources of Illinois, Inc. and Algonquin Water
Resources of America, Inc. and Algonquin Power Income Fund dated as of
August 29, 2004. Such sale will provide not less

7

 

than thirteen million dollars ($13,000,000) of net proceeds. Lender hereby
authorizes Borrower to consummate the sale of the utility rights subject to
the terms and conditions of this Amendment;

(vi) Closing Opinions of Counsels for Borrower;

(vii) Such other agreements, documents, instruments, certificates and
materials as Lender may request to evidence the Indebtedness, to evidence
and perfect the rights and Liens and security interests of Lender
contemplated by the Loan Documents as amended hereby, and to effectuate the
transactions contemplated in this Amendment.

(b) Conditions to Closing.

(i) Execution of this Amendment;

(ii) Execution of the amendments to the Tranche A Credit Facility, the
Tranche B Credit Facility and the Inventory Loan dated of even date
herewith;

(iii) Borrower shall have delivered to Lender the Inventory Term Loan
Note;

(iv) Lender shall have received evidence, in form and substance
satisfactory to Lender, that the consent of each party entitled to consent
to this Amendment has been obtained;

(v) Borrower shall have paid all fees of all Lenders in connection with this
Amendment; and

(vi) Lender shall have delivered originals of all releases of Liens
contemplated by this Amendment to Lender’s counsel to be held in escrow
until such time as Lender notifies Lender’s counsel that Borrower has
satisfied all conditions and is entitled to such releases.

11. 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 Amendment.

12. Effect of Amendment. The Loan Agreement, as herein amended, shall remain in full force
and effect.

13. Ratification and Confirmation. Except as herein expressly amended, Borrower hereby
ratifies, confirms, assumes and agrees to be bound by all of representations, warranties,
statements, covenants and agreements set forth in the Loan Agreement and the other Loan Documents,
as previously amended. The Borrower reaffirms, restates and incorporates by reference all of the
representations, warranties, covenants and agreements made in the Loan Documents as if the same
were made as of this date. The Borrower agrees to pay the Loan and all related expenses, as and
when due and payable in accordance with the Loan Agreement and

8

 

the other Loan Documents, and to observe and perform the Obligations, and do all things necessary
which are not prohibited by law to prevent the occurrence of any Event of Default. In addition, to
further secure, and to evidence and confirm the securing of, the prompt and complete payment and
performance by the Borrower of the Loan and all of the Obligations, for value received, Borrower
unconditionally and irrevocably assigns, pledges and grants to Lender, and hereby confirms or
reaffirms the prior granting to Lender of, a continuing First priority Lien, mortgage and security
interest in and to all of the Collateral, except as otherwise set forth herein, whether now
existing or hereafter acquired. Also, as provided in the Loan Documents, the Loan is and shall be
further secured by the Liens and security interests in favor of Lender in the properties and
interests relating to Additional Eligible Resorts, which now or hereafter serve as collateral
security for any Obligations. Upon satisfaction of the requirements for approval by Lender of
Additional Resorts, Borrower shall record, or cause to be recorded, such mortgages, deeds of trust,
deeds to secure debt, assignments, pledges, security agreements and UCC Financing Statements in the
appropriate public records of the state in which each Resort is located to further evidence and
perfect Lender’s Lien on the Collateral. Borrower agrees to deliver or cause to be delivered by
its Affiliates, such mortgages, deeds of trust, deeds to secure debt, assignments, pledges,
security agreements and UCC Financing Statements as Lender may deem necessary to further evidence
and perfect the Lender’s Lien on the Collateral.

14. GOVERNING LAW. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT AS MAY BE EXPRESSLY
PROVIDED THEREIN TO THE CONTRARY) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF RHODE ISLAND, EXCLUSIVE OF ITS CHOICE OF LAWS PRINCIPLES.

15. General Representations and Warranties. Borrower hereby represents and warrants to
Lender as follows:

(a) Organization, Standing, Qualification. Borrower: (a) is a duly
organized and validly existing Texas corporation duly organized, validly existing
and in good standing under the laws of the State of Texas, and (b) has all requisite
power, corporate or otherwise, to conduct its business and to execute and deliver,
and to perform its obligations under, the Loan Documents.

(b) Authorization, Enforceability, Etc

(i) The execution, delivery and performance by Borrower of the Loan
Documents has been duly authorized by all necessary corporate action by
Borrower and does not and will not: (1) violate any provision of the
certificate or articles of incorporation of Borrower, bylaws of Borrower, or
any agreement, law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect to which Borrower is a
party or is subject; (2) result in, or require the creation or imposition
of, any Lien upon or with respect to any asset of Borrower other than Liens
in favor of Lenders; or (3) result in a breach of, or constitute a default
by Borrower under, any indenture, loan or credit agreement or any other

9

 

agreement, document, instrument or certificate to which Borrower is a party
or by which it or any of its assets are bound or affected.

(ii) No approval, authorization, order, license, permit, franchise or
consent of, or registration, declaration, qualification or filing with, any
governmental authority or other Person, including without limitation, the
Division or the Timeshare Owners’ Association is required in connection with
the execution, delivery and performance by Borrower of any of the Loan
Documents.

(iii) The Loan Documents constitute legal, valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms.

(c) No Event of Default. No Event of Default or condition, omission or act
which, with the passage of time, notice or both, would constitute an Event of
Default, has occurred under the Loan Agreement as amended to date, the Tranche A
Credit Facility, the Tranche B Credit Facility, the Inventory Loan, the Heller
Facility, the Sovereign Facility, DZ Facility, Bond Holder Exchange Facility or any
other indebtedness of Borrower.

THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK

10

 

     IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment to be executed on
their behalf as of the day and year first written above.

	 	 	 	 	 	 	 
	Witnessed By:	 	 	 	TEXTRON FINANCIAL CORPORATION
	 
	 	 	 	 	 	 
	/S/ SEBASTIAN GROMOUDIN

	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	 	 	By:
	 	/S/ JOHN D’ANNIBALE
	 	 	 	 	 	 	 
	/S/ GINGER HAYES

	 	 	 	Name:
	 	John D’Annibale
	 	 	 	 	 	 	 
	

	 	 	 	Its:	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	SILVERLEAF RESORTS, INC.
	 
	 	 	 	 	 	 
	/S/ PATRICIA K. DOREY
	 	 	 	 	 	 
	 	 	 	 	 	 	 
	

	 	 	 	By:
	 	/S/ HARRY J. WHITE, JR.
	 	 	 	 	 	 	 
	/S/ PENNY J. PELHAM

	 	 	 	Name:
	 	Harry J. White, Jr.
	 	 	 	 	 	 	 
	

	 	 	 	Its:
	 	CFO

 

 

	 	 	 	 	 	 	 
	STATE OF CONNECTICUT

	 	 	)	 	 	 
	

	 	 	)	 	 	ss: East Hartford
	COUNTY OF HARTFORD

	 	 	)	 	 	 

     At East Hartford in said County and State on this _24___day of
_February___, 2005, personally appeared _John D’Annibale___, duly
authorized ___Vice President___of Textron Financial Corporation, and he acknowledged the
foregoing instrument by him signed and sealed to be his free act and deed and the free act and deed
of Textron Financial Corporation.

	 	 	 	 	 
	Before me:

	 	/S/ LAURA D’ANGELO	 	 
	 	 	 	 	 
	

	 	Notary Public in and for said State
	 	 
	

	 	My Commission Expires: February 28, 2009
	

	 	Commissioner of the Superior Court	 	 

	 	 	 	 	 	 	 
	STATE OF TEXAS

	 	 	)	 	 	 
	

	 	 	)	 	 	ss:
	COUNTY OF DALLAS

	 	 	)	 	 	 

     At _Dallas, Texas___in said County and State on this 1st day
of ___March___, 2005, personally appeared ___Harry J. White, Jr. duly
authorized officer of SILVERLEAF RESORTS, INC., and he/she acknowledged the foregoing instrument by
him/her signed and sealed to be his/her free act and deed and the free act and deed of Silverleaf
Resorts, Inc., a Texas corporation, on behalf of the corporation.

	 	 	 	 	 
	Before me:

	 	/S/ TAMMY J. MARTIN
	 	 
	 	 	 	 	 
	

	 	Notary Public in and for said State	 	 
	

	 	My Commission Expires: 1-6-2009	 	 

List of Exhibits and Schedules Attached to Agreement and not filed herewith:

Ex. A-1: Borrower’s Certificate

Schedule A: Amendments or Restatements to Documents

Schedule B: Existing Resorts

Schedule C: List of Stock and Equity Interests Owned by Borrower

Schedule D: List of Litigation, Suits, Actions, Complaints, Claims or Charges

Schedule E: List of Borrower’s Executive Management

Ex B-1: Certificate of Corporate Resolutions of the Board of Directors of Silverleaf Resorts, Inc.

Ex C-1: Certificate of Secretary of Silverleaf Resorts, Inc.

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