<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
Commission file number: 001-13003
SILVERLEAF RESORTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 75-2259890
(State of Incorporation) (I.R.S. Employer
Identification No.)
1221 RIVERBEND DRIVE, SUITE 120
DALLAS, TEXAS 75247
(Address of principal executive offices, including zip code)
214-631-1166
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Number of shares of common stock outstanding of the issuer's Common Stock,
par value $0.01 per share as of November 10, 1997: 11,311,517
<PAGE> 2
SILVERLEAF RESORTS, INC.
INDEX
<TABLE>
<CAPTION>
Page
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION (Unaudited)
Item 1 Condensed consolidated statements of income for the three months ended
September 30,1997 and 1996 ................................................... 1
Condensed consolidated statements of income for the nine months ended
September 30, 1997 and 1996 .................................................. 2
Condensed consolidated balance sheets as of September 30, 1997 and
December 31, 1996 ............................................................ 3
Condensed consolidated statement of shareholders' equity for the nine
months ended September 30, 1997............................................... 4
Condensed consolidated statements of cash flows for the nine months
ended September 30, 1997 and 1996 ............................................ 5
Notes to the condensed consolidated financial statements ..................... 6-8
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................... 9-13
PART II. OTHER INFORMATION
Item 5 Other Information ............................................................ 14-16
Item 6 Exhibits and reports on Form 8-K ............................................. 16
Signatures ................................................................... 17
</TABLE>
<PAGE> 3
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996
Actual Pro forma(a) Actual Pro forma(a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Vacation Interval sales $ 18,337 $ 18,337 $ 11,368 $ 11,368
Interest income 2,407 2,407 1,670 1,670
Interest income from affiliates 16 16 82 --
Management fee income 752 752 551 551
Lease income 278 278 430 430
Other income 1,112 1,112 501 501
----------- ----------- ----------- -----------
Total revenues 22,902 22,902 14,602 14,520
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales 1,916 1,916 852 852
Sales and marketing 8,219 8,219 5,617 5,617
Provision for uncollectible notes 2,523 2,523 2,117 2,117
Operating, general and administrative 3,401 3,401 2,245 2,433
Depreciation and amortization 471 471 319 319
Interest expense to affiliates -- -- 212 --
Interest expense to unaffiliated entities 463 463 1,025 22
----------- ----------- ----------- -----------
Total costs and operating expenses 16,993 16,993 12,387 11,360
----------- ----------- ----------- -----------
Income from continuing operations before
income taxes 5,909 5,909 2,215 3,160
Income tax expense 2,186 2,186 828 1,180
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 3,723 3,723 1,387 1,980
DISCONTINUED OPERATIONS:
Income from operations (less applicable income taxes
of $4 for the quarter ended September 30, 1996) -- -- 10 --
----------- ----------- ----------- -----------
NET INCOME $ 3,723 $ 3,723 $ 1,397 $ 1,980
=========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE FROM:
Continuing Operations $ 0.33 $ 0.33 $ 0.18 $ 0.19
Discontinued Operations -- -- -- --
----------- ----------- ----------- -----------
NET INCOME PER SHARE $ 0.33 $ 0.33 $ 0.18 $ 0.19
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 11,311,517 11,311,517(b) 7,711,517 10,496,503(b)
=========== =========== =========== ===========
</TABLE>
- ---------------------------
<TABLE>
<S> <C>
(a) The unaudited condensed consolidated pro forma statements of income give
effect to (i) the sale of 3,600,000 shares of stock at the offering price
of $16 per share, in the aggregate $51.2 million, net of underwriting
discounts, commissions and offering expenses; (ii) payment of all amounts
due to affiliates net of amounts due from affiliates and elimination of the
related interest; (iii) payment of $35.9 million of notes payable to third
parties and elimination of the related interest expense; (iv) estimate of
additional cost to be incurred as a public company of $0 and $188 thousand
for the three months ended September 30, 1997 and 1996, respectively; (v)
adjustment of the provision for income taxes for the effect of the pro
forma adjustments; and (vi) excludes discontinued operations. The unaudited
condensed consolidated pro forma statements of income are not necessarily
indicative of what the actual results of operations of the Company would
have been, nor do they purport to represent the Company's results of
operations for future periods.
(b) As required by Staff Accounting Bulletin No. 55, the weighted average
number of shares outstanding utilized in the pro forma earnings per share
computations assumes (i) the historical shares, as adjusted for the stock
split were outstanding for all periods presented, and (ii) an additional
number of shares were outstanding only in an amount sufficient to retire
the outstanding debt balances during the periods presented.
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
1
<PAGE> 4
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1997 September 30, 1996
Actual Pro forma(a) Actual Pro forma(a)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Vacation Interval sales $ 51,963 $ 51,963 $ 36,398 $ 36,398
Interest income 6,435 6,435 4,482 4,483
Interest income from affiliates 220 48 303 --
Management fee income 1,753 1,753 1,659 1,659
Lease income 1,153 1,153 1,318 1,318
Other income 2,347 2,347 1,082 1,082
----------- ----------- ----------- -----------
Total revenues 63,871 63,699 45,242 44,940
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales 5,131 5,131 2,040 2,040
Sales and marketing 21,720 21,720 16,702 16,702
Provision for uncollectible notes 8,048 8,048 6,897 6,897
Operating, general and administrative 8,506 8,694 7,637 8,200
Depreciation and amortization 1,255 1,255 881 881
Interest expense to affiliates 422 -- 656 --
Interest expense to unaffiliated entities 3,421 643 2,749 66
----------- ----------- ----------- -----------
Total costs and operating expenses 48,503 45,491 37,562 34,786
----------- ----------- ----------- -----------
Income from continuing operations before
income taxes 15,368 18,208 7,680 10,154
Income tax expense 5,687 6,738 2,868 3,791
----------- ----------- ----------- -----------
INCOME FROM CONTINUING OPERATIONS 9,681 11,470 4,812 6,363
DISCONTINUED OPERATIONS:
Loss from operations (less applicable income taxes
of $36 for the nine months ended September 30, 1996) -- -- (97) --
----------- ----------- ----------- -----------
NET INCOME 9,681 11,470 4,715 6,363
=========== =========== =========== ===========
INCOME (LOSS) PER COMMON SHARE FROM:
Continuing Operations $ 1.05 $ 1.02 $ 0.62 $ 0.63
Discontinued Operations -- -- (0.01) --
----------- ----------- ----------- -----------
NET INCOME PER SHARE $ 1.05 $ 1.02 $ 0.61 $ 0.63
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 9,247,048 11,284,959 (b) 7,711,517 10,176,108 (b)
=========== =========== =========== ===========
</TABLE>
- ------------------
<TABLE>
<S> <C>
(a) The unaudited condensed consolidated pro forma statements of income give
effect to (i) the sale of 3,600,000 shares of stock at the offering price
of $16 per share, in the aggregate $51.2 million, net of underwriting
discounts, commissions and offering expenses; (ii) payment of all amounts
due to affiliates net of amounts due from affiliates and elimination of the
related interest; (iii) payment of $35.9 million of notes payable to third
parties and elimination of the related interest expense; (iv) estimate of
additional cost to be incurred as a public company of $188 thousand and
$563 thousand for the nine months ended September 30, 1997 and 1996,
respectively; (v) adjustment of the provision for income taxes for the
effect of the pro forma adjustments; and (vi) excludes discontinued
operations. The unaudited condensed consolidated pro forma statements of
income are not necessarily indicative of what the actual results of
operations of the Company would have been, nor do they purport to represent
the Company's results of operations for future periods.
(b) As required by Staff Accounting Bulletin No. 55, the weighted average
number of shares outstanding utilized in the pro forma earnings per share
computations assumes (i) the historical shares, as adjusted for the stock
split were outstanding for all periods presented, and (ii) an additional
number of shares were outstanding only in an amount sufficient to retire
the outstanding debt balances during the periods presented.
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
2
<PAGE> 5
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------- --------
ASSETS
<S> <C> <C>
Cash and equivalents $ 3,532 $ 973
Restricted cash 200 --
Notes receivable, net 81,994 55,794
Amounts due from affiliates 1,997 6,237
Inventory 16,251 10,300
Land, equipment and utilities, net 17,420 12,633
Land held for sale 466 466
Prepaid and other assets 4,467 2,860
Net assets of discontinued operations 900 1,589
-------- --------
Total Assets $127,227 $ 90,852
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,299 $ 3,156
Amounts due to affiliates -- 14,765
Unearned revenues 1,573 1,790
Income taxes payable 4,340 3,650
Deferred income taxes, net 9,859 4,843
Notes payable and capital lease obligations 25,670 41,986
-------- --------
Total Liabilities 45,741 70,190
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, par value $0.01 per share,
100,000,000 shares authorized, 11,311,517 and 7,711,517 shares
issued and outstanding at September 30, 1997 and December 31,
1996, respectively 113 77
Additional paid-in capital 64,577 13,470
Retained earnings 16,796 7,115
-------- --------
Total Shareholders' Equity 81,486 20,662
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $127,227 $ 90,852
======== ========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
3
<PAGE> 6
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------------
Number of $0.01 Additional
Shares Par Paid-in Retained
Issued Value Capital Earnings Total
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
January 1, 1997 7,711,517 $ 77 $ 13,470 $ 7,115 $ 20,662
Issuance of common stock 3,600,000 36 51,107 -- 51,143
Net income -- -- -- 9,681 9,681
---------- ---------- ---------- ---------- ----------
September 30, 1997 11,311,517 $ 113 $ 64,577 $ 16,796 $ 81,486
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
4
<PAGE> 7
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 9,681 $ 4,715
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,255 881
Discontinued operations 917 3,386
Deferred tax provision 5,016 696
Increase (decrease) in cash and equivalents from changes in assets and
liabilities:
Restricted cash (200) --
Amounts due from affiliates 4,240 726
Inventory (5,951) (4,157)
Prepaid and other assets (1,607) (1,080)
Accounts payable and accrued expenses 1,143 892
Amounts due to affiliates 284 (619)
Unearned revenues (217) 713
Income taxes payable 690 2,172
-------- --------
Net cash provided by operating activities 15,251 8,325
-------- --------
INVESTING ACTIVITIES:
Purchase of land, equipment and utilities (4,649) (3,238)
Proceeds from sale of land, equipment and utilities 420
Notes receivable, net (26,200) (16,003)
-------- --------
Net cash used in investing activities (30,429) (19,241)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings from unaffiliated entities 27,279 17,306
Payments on borrowings to unaffiliated entities (45,408) (6,054)
Proceeds from borrowings from affiliates 25 210
Payments on borrowings to affiliates (15,074) (885)
Proceeds from public offering 51,143 --
Discontinued operations (228) (2,320)
-------- --------
Net cash provided by financing activities 17,737 8,257
-------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 2,559 (2,659)
CASH AND EQUIVALENTS
BEGINNING OF PERIOD 973 3,712
-------- --------
END OF PERIOD $ 3,532 $ 1,053
======== ========
SUPPLEMENTAL DISCLOSURES
Interest paid $ 3,019 $ 3,032
Income taxes paid $ -- $ --
Land and equipment acquired under capital leases $ 1,813 $ 588
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
5
<PAGE> 8
SILVERLEAF RESORTS, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
NOTE 1 - BACKGROUND
These condensed consolidated financial statements do not include certain
information and footnotes required by generally accepted accounting principles
for complete financial statements. However, in the opinion of management, all
adjustments considered necessary for a fair presentation have been included and
are of a normal recurring nature. Operating results for three months and nine
months ended September 30, 1997 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31, 1997.
These statements should be read in conjunction with the audited consolidated
financial statements and footnotes included in Amendment No. 3 of the Company's
Registration Statement on Form S-1 (File No. 333-24273) filed with the
Securities and Exchange Commission on June 6, 1997. The accounting policies used
in preparing these consolidated financial statements are the same as those
described in such Registration Statement on Form S-1.
NOTE 2 - RECLASSIFICATION
During 1997 the Company began classifying the components of the previously
reported provision for uncollectible notes into three categories based on the
nature of the item; credit losses, customer returns and customer releases
(customer releases represent voluntary cancellations of properly recorded sales
transactions which in the opinion of management is consistent with the
maintenance of overall customer goodwill). Provision pertaining to credit
losses, customer returns and customer releases are classified in Provision for
uncollectible notes, Vacation Interval sales and Operating, general and
administrative, respectively. The Company has reclassified these amounts within
the previously reported financial statements to conform to the classification
for the nine months ended September 30, 1997. This reclassification has no
balance sheet effect and has no effect on previously reported net income.
NOTE 3 - EARNINGS PER SHARE
Pro forma earnings per share is calculated based on the weighted average number
of shares of common stock outstanding and, if dilutive, common stock
equivalents, as if the Offering (which was consummated on June 6, 1997) had
occurred at the beginning of each period. The dilutive effect of common stock
equivalents was immaterial for each period presented. Options were not granted
or outstanding during the year ended December 31, 1996. During the three and
nine months ended September 30, 1997, options to purchase approximately 355,000
shares and 657,000 shares, respectively, of the Company's common stock were
granted to employees and directors of the Company, none of which was exercised
during the period.
In May 1997, the Board of Directors of the Company declared a stock dividend to
existing shareholders, which resulted in an increase in the number of shares of
common stock outstanding. The weighted average shares outstanding for all
periods presented give retroactive effect to the split of common shares.
NOTE 4 - STATEMENTS OF FINANCIAL STANDARDS
Statement of Financial Standards ("SFAS") No. 128, "Earnings Per Share"
specifies new computation, presentation and disclosure requirements. The
statement will be effective for both interim and annual periods ending after
December 15, 1997. Management believes that the adoption of this statement will
not have a material impact on the earnings per share presented.
SFAS No. 130 - In June 1997, the Financial Accounting Standards Board issued
SFAS No. 130, "Reporting on Comprehensive Income", which is effective for
periods beginning after December 15, 1997. SFAS No. 130 establishes standards
for reporting and presenting comprehensive income in the financial statements.
The Company will adopt this statement effective January 1, 1998. At present,
Management believes that the adoption of this statement will not have a material
impact on the Company's financial statements.
6
<PAGE> 9
SFAS No. 131 - In June 1997, the Financial Accounting Standards Board issued
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". SFAS No. 131 redefines how operating segments are determined and
requires disclosure of certain financial and descriptive information about a
company's operating segments. SFAS No. 131 may require additional disclosures
and will be effective for Silverleaf beginning January 1, 1998.
NOTE 5 - STOCK PLAN
The Company has established a stock option plan (the "1997 Stock Option Plan").
The 1997 Stock Option Plan provides for the award to directors, officers, and
key employees of nonqualified stock options and provides for the grant to
salaried key employees of incentive stock options. Nonqualified stock options
will provide for the right to purchase common stock at a specified price which
may be less than fair market value on the date of grant (but not less than par
value). Nonqualified stock options may be granted for any term and upon such
conditions determined by the board of directors of the Company. The Company has
reserved 1,100,000 shares of common stock for issuance pursuant to the Company's
1997 Stock Option Plan. As of September 30, 1997, 657,000 options were granted
as part of the 1997 Stock Option Plan. Such options are exercisable over a three
to four year period at $16.00 per share.
NOTE 6 - NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
Notes payable and capital lease obligations related to continuing operations at
September 30, 1997, and December 31, 1996, consist of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------- -------
<S> <C> <C>
$25 million revolving loan agreement, which contains certain financial
covenants, due January 2, 2001, principal and interest payable from the proceeds
obtained from timeshare notes receivable which are pledged as collateral for the
note, at an interest rate as defined in the agreement (10.53% at
September 30, 1997) ............................................................ $13,448 $20,139
$12 million revolving loan agreement which contains certain financial
covenants, due May 8, 2003, principal and interest payable from the
proceeds obtained from timeshare notes receivable which are pledged as
collateral for the note, at an interest rate of Base plus 2.75%
(11.25% at September 30, 1997) ................................................. 4,573 6,004
$7.5 million revolving line of credit, which contains certain financial
covenants, due December 31, 1999, secured by certain assets of the Company, with
monthly interest payments at Base plus 2.75%
(11.25% at September 30, 1997) ................................................. 714 4,000
$40 million revolving loan agreement, which contains certain financial
covenants, due October 9, 1998, principal and interest payable from
the proceeds obtained from timeshare notes receivable pledged as
collateral for the note, at an interest rate of LIBOR plus 4% (9.72%
at September 30,1997) .......................................................... 1,625 278
$15 million revolving loan agreement which contains certain financial covenants,
due November 30, 2002, principal and interest payable from the proceeds obtained
from timeshare notes receivable which are pledged as collateral for the note, at
an interest rate of Prime plus 2% .............................................. 2,198 4,278
$5.4 million note payable, which contains certain financial covenants, due
October 9, 1999, secured by certain assets of the Company, interest only
payments due through April 1, 1998, with payments of principal and interest due
monthly thereafter until maturity, at an interest rate of Prime plus 2% ........ -- 5,201
</TABLE>
7
<PAGE> 10
<TABLE>
<S> <C> <C>
Various notes, due from November, 1997, through October, 2002, collateralized by
various assets with interest rates ranging from 6% to 11 % ..................... 1,632 1,022
------- -------
Total notes payable ................................................ 24,190 40,922
Capital lease obligations ...................................................... 1,480 1,064
------- -------
Total Notes payable and capital lease obligations .................. $25,670 $41,986
======= =======
</TABLE>
Prime rate at September 30, 1997 was 8.5%. Substantially all assets of the
Company are pledged as collateral.
NOTE 7 - SUBSEQUENT EVENTS
In August 1997, the Company acquired certain land and amenities located near St.
Louis, Missouri, and Chicago, Illinois for $2.9 million. The Company intends to
develop these properties as Drive-to Resorts. Additionally, in August 1997, the
Company acquired certain land adjacent to the Hill Country Resort located in
Comal County, Texas, for $394. The Company intends to develop this land as an
expansion to the Hill Country Resort. Additionally, in November 1997, the
Company acquired a parcel of land in Las Vegas, Nevada for $2.7 million, as an
investment or potential resort development.
In July 1997, The Company entered into agreements to acquire 98 acres of land in
Galveston, Texas, for $480 and an adjoining tract for $1.2 million. If acquired,
the Company plans to develop the Galveston tracts as a new resort.
In July 1997, the Company entered into an employment agreement with an executive
officer of the Company. Either party may terminate the agreement upon 30 days
notice to the other. The agreement provides for an annual base salary, options
for the purchase of common stock, and other fringe benefits. Additionally, if
the officer is terminated without "good cause", the Company shall be obligated
to make severance payments to him in an amount equal to his annual base salary.
In connection with this officer's employment, in August 1997, the Company
purchased a house for $523 and leased the house to the officer for 13 months at
a rental rate equal to the Company's interest, insurance and taxes, currently
approximately $3 per month. The officer has the option to purchase the home at
the end of the 13 month term for $523 plus 8% per annum on the Company's down
payment for the house.
In October 1997, the Company amended its $25 million revolving loan agreement
to increase the available borrowing capacity to $40 million, to extend the
maturity to October 2005 and to amend the rate to LIBOR plus 2.5%. The revolving
loan agreement is secured by customer notes receivable. Additionally, the
Company terminated its $7.5 million revolving inventory loan and replaced it
with a similar, but new facility, which increased the available borrowing
capacity to $10 million, extended the maturity to November 2000, and changed
the rate to 3.5% plus Base. The new revolving inventory loan is secured by
construction in process, unsold Vacation Intervals, and customer notes
receivable.
8
<PAGE> 11
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Certain matters discussed throughout this Form 10-Q filing are forward looking
statements that are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. Such risks and uncertainties
include, but are not limited to, those discussed under "Risk Factors" in the
final prospectus which is a part of Company's Registration Statement on Form S-1
(No. 333-24273) which is incorporated herein by reference.
RESULTS OF OPERATIONS
The following table sets forth certain operating information for the Company.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
As a percentage of Total Revenues:
Vacation Interval sales 80.1% 77.9% 81.4% 80.5%
Interest income 10.6% 12.0% 10.4% 10.6%
Management fee income 3.3% 3.8% 2.7% 3.7%
Lease income 1.2% 2.9% 1.8% 2.9%
Other income 4.8% 3.4% 3.7% 2.3%
Total revenues 100.0% 100.0% 100.0% 100.0%
As a percentage of Vacation Interval sales:
Cost of Vacation Interval sales 10.4% 7.5% 9.9% 5.6%
Sales and marketing 44.8% 49.4% 41.8% 45.9%
Provision for uncollectible notes 13.8% 18.6% 15.5% 18.9%
As a percentage of Interest Income
Interest expense 19.1% 70.6% 57.7% 71.2%
As a percentage of Total Revenues:
Operating, general and administrative 14.9% 15.4% 13.3% 16.9%
Depreciation and amortization 2.1% 2.2% 2.0% 1.9%
Total costs and expenses 74.2% 84.8% 75.9% 83.0%
</TABLE>
9
<PAGE> 12
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996. Revenues in the third quarter 1997 were $22.9 million,
representing an $8.3 million or 56.8% increase over revenues of $14.6 million in
the third quarter of 1996. The increase was primarily due to a $7.0 million
increase in net sales of Vacation Intervals, a $0.7 million increase in interest
income and a $0.6 million increase in other income. The strong increase in
Vacation Interval revenues resulted from the Company's increased telemarketing
capacity arising from investments in computer and automated dialing technology.
Additionally, the Company has (i) increased its sales force, (ii) enhanced its
lead generation methods, and (iii) improved its techniques of marketing upgraded
Vacation Intervals.
In the third quarter of 1997, the number of vacation intervals sold, exclusive
of upgraded Vacation Intervals, increased 32.4% to 1,895 from 1,431 in the same
period of 1996, and the average price per interval increased 10.9% to $7,263
from $6,549. Total interval sales in the third quarter of 1997 included 518
biennial intervals (counted as 259 Vacation Intervals) compared to none in the
same period of 1996. The increase in average price per interval resulted from
the Company's increased sales of higher value rated intervals and biennial
intervals (whose sales price is more than half of an annual interval). In
addition the Company has increased revenues generated from sales of upgraded
intervals at the Existing Resorts through the continued implementation of
marketing and sales programs focused on selling upgraded intervals to Silverleaf
Owners. Upgrade sales accounted for 24.9% of Vacation Interval sales for the
third quarter of 1997 compared to 17.5% of the third quarter 1996.
Interest income increased 38.3% to $2.4 million for the quarter ended September
30, 1997, from $1.7 million for the quarter ended September 30, 1996. This
increase is due to a higher average receivable balance during the three months
ended September 30, 1997 compared to September 30, 1996.
Management fee income increased to $752,000 in the third quarter of 1997 from
$551,000 for the same period in the prior year. The increase in management fee
income was primarily the result of greater Master Club net income due to higher
dues income from an increased membership base.
Lease income, which relates to the Company's Sampler program, decreased 35.3% to
$278,000 for the third quarter of 1997 compared to $430,000 for the third
quarter of 1996. The decrease resulted from the Company's marketing of lower
cost biennial intervals as an alternative to the Sampler program.
Other income increased 122% to $1.1 million for the quarter ended September 30,
1997, from $501,000 for the quarter ended September 30, 1996. This increase was
due primarily to a higher amenity usage fee and higher water and sewer income
from resort utility operations.
Cost of sales as a percentage of gross Vacation Interval sales increased to
10.4% in the third quarter of 1997 from 7.5% in the same period of 1996. The
increase is due to a decline in the volume of sales of Vacation Intervals with a
low cost basis. Cost of sales for the third quarter of 1996 was lower primarily
as a result of the sale of low cost inventory acquired by the Company in 1995
and 1996 through its program to reacquire Vacation Intervals owned but not
actively used by Silverleaf owners. The Company anticipates that the number of
intervals acquired form Silverleaf owners in 1997 will be significantly lower
than the number in 1996. Additionally, the Company continues to deplete its
inventory of other low cost intervals. As a result of these factors and the
Company's construction program to build new inventory, the cost of sales average
is expected to increase in the future.
Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 44.8% for the third quarter of 1997 from 49.4% for the third quarter
of 1996. This decline is due mainly to the efficiencies in the telemarketing and
sales functions and economies of scale realized from higher sales volumes. The
reduction can also be attributed to an increase in upgrade sales which typically
require less sales effort and cost.
The provision for uncollectible notes as a percentage of Vacation Interval sales
decreased to 13.8% for the third quarter of 1997 from 18.6% during the same time
period of 1996, reflecting an increased focus on collection efforts for notes
receivable. The improvement can also be attributed to an increase in receivables
relating to upgrade sales which typically represent better performing accounts
resulting in fewer delinquencies.
Operating, general and administrative expenses as a percentage of total revenues
declined to 14.9% during the third quarter of 1997 from 15.4% for the same
quarter of 1996. The decrease was due to efficiencies realized from higher
10
<PAGE> 13
sales volumes. Overall, operating, general and administrative expenses
increased $1.1 million for the three months ended September 30, 1997 compared
to the same period in the prior year. The increase occurred primarily due to an
increase in corporate salaries and additional costs incurred as a public
company.
Depreciation and amortization expense, as a percentage of total revenue remained
relatively unchanged at 2.1% for the third quarter of 1997 versus 2.2% for the
third quarter of 1996.
Interest expense as a percentage of interest income decreased to 19.1% for the
quarter ended September 30, 1997 from 70.6% for the quarter ended September 30,
1996. This decrease was due to lower borrowing costs during the third quarter of
1997 mostly as a result of payment of indebtedness with proceeds of the Stock
Offering in June 1997.
Income from continuing operations before income taxes increased 167% to $5.9
million for the quarter ended September 30, 1997 from $2.2 million for the
quarter ended September 30, 1996 as a result of the above described operating
results.
Income tax expense as a percentage of income from continuing operations before
income taxes remained relatively unchanged at 37.0% for the third quarter of
1997 versus 37.4% for the third quarter of 1996.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1997 TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996. Revenues for the first nine months of 1997 were $63.9
million, representing an $18.7 million or 41.2% increase over revenues of $45.2
million for the first nine months of 1996. The increase was primarily due to a
$15.6 million increase in sales of Vacation Intervals, a $1.9 million increase
in interest income and a $1.3 million increase in other income. The strong
increase in Vacation Interval revenues resulted from the Company's increased
telemarketing capacity arising from investments in computer and automated
dialing technology. Additionally, the Company has (i) increased its sales force,
(ii) enhanced its lead generation methods, and (iii) improved its techniques of
marketing upgraded Vacation Intervals.
In the nine months of 1997, the number of Vacation Intervals sold, exclusive of
upgraded Vacation Intervals, increased 17.0% to 5,271 from 4,504 in the same
period of 1996, and the average price per interval increased 12.0% to $7,539
from $6,731. Total interval sales for the first nine months of 1997 included
1,422 biennial intervals (counted as 711 Vacation Intervals) compared to none in
the same period of 1996. The increase in average price per interval resulted
from the Company's increased sales of higher value rated intervals and biennial
intervals (whose sales price is more than half of an annual interval). In
addition the Company has increased revenues generated from sales of upgraded
intervals at the Existing Resorts through the continued implementation of
marketing and sales programs focused on selling upgraded intervals to Silverleaf
Owners. Upgrade sales accounted for 23.5% of Vacation Interval sales for the
nine months ended September 30, 1997 compared to 16.7% for the nine months ended
September 30, 1996.
Interest income increased 39.1% to $6.7 million for the nine months ended
September 30, 1997, from $4.8 million for the nine months ended September 30,
1996. This increase resulted primarily from a $26.2 million increase in notes
receivable, since December 31, 1996, net of allowance for uncollectible notes,
due to increased sales.
Management fee income increased 5.7% to $1.8 million for the nine months ended
September 30, 1997 from $1.7 million for the nine months ended September 30,
1996. The increase in management fee income was primarily the result of greater
Master Club net income due to higher dues income from an increased membership
base.
Lease income, which relates to the Company's Sampler program, decreased to $1.2
million for the first nine months of 1997 compared to $1.3 million for the first
nine months of 1996. The decrease resulted from the Company's marketing of lower
cost biennial intervals as an alternative to the Sampler program.
Other income increased 117.0% to $2.4 million for the nine months ended
September 30, 1997, from $1.1 million for the nine months ended September 30,
1996. This increase was due primarily to higher amenity usage fee and higher
water and sewer income from resort utility operations, as well as a litigation
recovery receipt of $219,000.
11
<PAGE> 14
Cost of sales as a percentage of gross Vacation Interval sales increased to 9.9%
in the first nine months of 1997 from 5.6% in the same period of 1996. The
increase is due to a decline in the volume of sales of Vacation Intervals with a
low cost basis. Cost of sales for the first nine months of 1996 was lower
primarily as a result of the sale of low cost inventory acquired by the Company
in 1995 and 1996 through its program to reacquire Vacation Intervals owned but
not actively used by Silverleaf Owners. The Company anticipates that the number
of intervals acquired from Silverleaf Owners in 1997 will be significantly lower
than the number in 1996. Additionally, the Company continues to deplete its
inventory of low cost intervals. As a result of these factors and the Company's
construction program to build new inventory, the cost of sales average is
expected to increase.
Sales and marketing costs as a percentage of gross Vacation Interval sales
declined to 41.8% for the nine months ended September 30, 1997 from 45.9% for
the nine months ended September 30, 1996. This decline is due mainly to
efficiencies in the telemarketing and sales functions and economies of scale.
The reduction can also be attributed to an increase in upgrade sales which
typically require less sales effort and cost.
The provision for uncollectible notes as a percentage of Vacation Interval sales
decreased to 15.5% for the first nine months of 1997 from 18.9% during the same
time period of 1996, reflecting an increased focus on collection efforts for
notes receivable. The improvement can also be attributed to an increase in
receivables relating to upgrade sales which typically represent better
performing accounts resulting in fewer delinquencies.
Operating, general and administrative expenses as a percentage of total revenues
declined to 13.3% during the first nine months of 1997 from 16.9% for the same
period of 1996. The decrease was due to efficiencies realized from higher sales
volumes. Overall, operating, general and administrative expenses increased
$869,000 for the nine months ended September 30, 1997 compared to the same
period in the prior year. The increase occurred primarily due to an increase in
corporate salaries and additional costs incurred as a public company.
Depreciation and amortization expense as a percentage of total revenue remained
relatively unchanged at 2.0% for the first nine months of 1997 versus 1.9% for
the same period of 1996.
Interest expense as a percentage of interest income decreased to 57.7% for the
nine months ended September 30, 1997 from 71.2% for the nine months ended
September 30, 1996. This decrease was due to lower borrowing costs during the
third quarter of 1997 mostly as a result of payment of indebtedness with
proceeds of the Stock Offering in June 1997.
Income from continuing operations before income taxes increased 100% to $15.4
million for the nine months ended September 30, 1997 from $7.7 million for the
nine months ended September 30, 1996 as a result of the above mentioned
operating results.
Income tax expense as a percentage of income from continuing operations before
income taxes remained relatively unchanged at 37.0% for the first nine months of
1997 versus 37.3% for the first nine months of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Sources of Cash. The Company generates cash primarily from the sale of Vacation
Intervals, the financing of customer notes receivable from Silverleaf owners,
management fees, Sampler sales, and resort and utility operations. During the
nine months ended September 30, 1997, cash provided by operations was $15.3
million. The Company generates cash from financing of customer notes receivable
(i) by borrowing at an advance rate of 70% of eligible customer notes receivable
and (ii) from the spread between interest received on customer notes receivable
and interest paid on the related borrowings. Because the Company uses
significant amounts of cash in the development and marketing of Vacation
Intervals, but collects cash on the customer notes receivable over a seven year
period, borrowing against receivables has historically been a necessary part of
normal operations.
For the nine months ended September 30, 1997 and 1996, net cash provided by
financing activities was $17.7 million and $8.3 million, respectively. During
the nine month period ended September 30, 1997, compared to the nine month
12
<PAGE> 15
period ended September 30, 1996, the $9.4 million increase in cash flow
provided by financing activities was due to proceeds of the Stock Offering and
increased borrowings, substantially offset by repayment of debt. The Company's
credit facilities provide for loans of up to $105.0 million, secured by
customer notes receivable. At September 30, 1997, approximately $22.6 million
of principal and interest related to advances under the credit facilities was
outstanding. For the nine months ended September 30, 1997, the weighted average
cost of funds for these borrowings was approximately 10.3%.
For regular Federal income tax purposes, the Company reports substantially all
of the Vacation Interval sales it finances under the installment method. Under
the installment method, the Company does not recognize income on sales of
Vacation Intervals until cash is received in the form of a down payment and as
installment payments on customer receivables are received by the Company. The
deferral of income tax liability conserves cash resources on a current basis.
Interest will be imposed, however, on the amount of tax attributable to the
installment payments for the period beginning on the date of sale and ending on
the date the related tax is paid. If the Company is otherwise not subject to tax
in a particular year, no interest is imposed since the interest is based on the
amount of tax paid in that year. The consolidated financial statements do not
contain an accrual for any interest expense which would be paid on the deferred
taxes related to the installment method as the interest expense is not
estimable. In addition, the Company is subject to current alternative minimum
tax ("AMT") as a result of the deferred income that results from the installment
sales treatment. Payment of AMT reduces future regular tax liability in respect
of installment sales, and creates a deferred tax asset. As of September 30,
1997, the Company estimates its total liability for AMT to be approximately $4.3
million, which is included in Income Taxes Payable. The Company's net operating
losses, which also may be used to offset installment sale income, expire
beginning 2007 through 2011. Realization of the deferred tax assets arising from
net operating losses is dependent on generating sufficient taxable income prior
to the expiration of the loss carryforwards and other factors.
Uses of Cash. Investing activities typically reflect a net use of cash because
of capital additions, property acquisitions and loans to customers in connection
with the Company's Vacation Interval sales. Net cash used in investing
activities for the nine months ended September 30, 1997, and September 30, 1996,
was $30.4 million and $19.2 million, respectively. The increase primarily
relates to an increase in net notes receivable of $26.2 million and $16.0
million for the nine month periods ended September 30, 1997 and 1996,
respectively.
The Company requires funds to finance the acquisitions of property for future
development and to further develop the existing resorts, as well as to make
capital improvements and support current operations. During the first nine
months of 1997, the Company has spent $1.7 million for the development of
additional roads, utilities and amenities at the existing resorts and the
acquisition of telemarketing equipment. The Company is also actively seeking
sites for new resorts. The Company completed a transaction on August 7, 1997, to
acquire two tracts of land in Missouri and Illinois for an aggregate purchase
price of approximately $2.9 million. The acquisition of the tracts of land was
completed with funds generated from operations and proceeds from borrowings
under the existing lines of credit. Future capital expenditures and acquisition
costs will be financed through a combination of cash flow from operations and
proceeds from anticipated borrowings.
Credit Facilities. At September 30, 1997, the Company had available certain
revolving credit facilities for financing customer notes receivable and for
construction and development activities. The net proceeds of the public offering
were used to pay down a substantial amount of the outstanding indebtedness under
these credit facilities. The Company intends to maintain each of the credit
facilities and to utilize such facilities to finance its operations.
In accordance with its growth strategy, the Company intends to accelerate the
development of the existing resorts and to acquire new properties for
development. The Company intends to finance such development in part with
existing credit facilities. Additional financing will be required. Any failure
to renew existing credit facilities or obtain adequate financing under new
facilities would have a material adverse effect on the Company's financial
position, results of operations or liquidity, and could significantly reduce the
Company's plans to acquire new properties and expand the existing resorts.
In the future, the Company may negotiate additional credit facilities, issue
corporate debt, issue equity securities, or any combination of the above. Any
debt incurred or issued by the Company may be secured or unsecured, may bear
interest at fixed or variable rates of interest, and may be subject to such
terms as management deems prudent. There is no assurance that the Company will
be able to secure additional corporate debt or equity at or beyond current
levels. The Company believes available borrowing capacity, together with cash
generated from operations, will be sufficient to meet the Company's liquidity,
operating and capital requirements for the next 12 months.
13
<PAGE> 16
PART II - OTHER INFORMATION
Item 5. Other Information
- --------------------------
On August 7, 1997, the Company purchased two tracts of land in
Illinois and Missouri, respectively, for an aggregate acquisition cost of
approximately $2.9 million. The Company is developing these two tracts as new
Drive-to Resorts serving the Chicago, Illinois and St. Louis, Missouri market
areas. The Company intends to market its new Chicago-area resort under the
name "Fox River" and its new St. Louis-area resort under the name "Timber
Creek".
Fox River is located on a 180 acre tract of land in Sheridan,
Illinois, approximately 70 miles northwest of Chicago. Existing amenities at
Fox River include a tennis court, swimming pool, and miniature golf course.
The Company plans to construct a new par three executive golf course and other
new amenities, and to develop approximately 570 timeshare units at Fox River,
which would yield 29,640 Vacation Intervals for sale. The Company has begun
construction of 24 timeshare units at Fox River to be completed by February
1998 and intends to begin sales of Vacation Intervals at Fox River in November
1997. The Company's projected cost to develop Fox River as a Drive-to Resort
(including acquisition costs and amenities, but excluding costs of construction
of timeshare units) is estimated to be $7.3 million. Engineering,
architectural and construction estimates have not been finalized by the
Company, and there can be no assurance that the Company will develop these
properties within the cost and timeshare unit numbers currently projected.
Timber Creek is located on a 308 acre tract of land in DeSoto,
Missouri approximately 50 miles south of St. Louis. Existing amenities at
Timber Creek include a 40-acre fishing lake, clubhouse, swimming pool, tennis
courts and a miniature golf course. The Company plans to construct a new par
three executive golf course and other new amenities, and to develop
approximately 600 timeshare units on this property, which would yield 31,200
Vacation Intervals for sale. The Company has begun construction of 24
timeshare units at Timber Creek to be completed by February 1998. Sales of
Vacation Intervals commenced at Timber Creek in October 1997. The projected
cost to develop the Timber Creek resort as a Drive-to Resort (including
acquisition costs and amenities, but excluding costs of constructing timeshare
units) is estimated to be approximately $6.3 million. Engineering,
architectural and construction estimates have not been finalized by the
Company, and there can be no assurance that the Company will develop these
properties within the cost and timeshare unit numbers currently projected.
In August 1997 the Company completed the acquisition of 15.8 acres of
land in Comal County, Texas adjacent to the Company's Hill County Resort. The
total acquisition cost for this parcel was approximately $394,000. The Company
intends to develop a portion of this land as an expansion to its Hill County
Resort.
The Company has also entered into agreements to acquire approximately
98 acres of land in Galveston, Texas for $480,000 and an adjoining parcel,
including beachfront, for $1.2 million for development as a new gulf coast
Destination Resort. These tracts are located approximately 50 miles south of
Houston, Texas. Amenities currently existing at this property include a lodge
with kitchen, sports court, and swimming pool. The Company plans to construct
a miniature golf course and other new amenities and to develop approximately
100 timeshare units which would yield 5,200 Vacation Intervals for sale. The
projected cost to acquire and develop this resort as a new Destination Resort
(excluding costs of constructing timeshare units) is estimated to be
approximately $4.1 million. There is no assurance that either of the Galveston
tracts will be acquired. Engineering, architectural and construction estimates
have not been finalized by the Company, and there can be no assurance that the
14
<PAGE> 17
will develop these properties within the cost and timeshare unit numbers
currently projected.
The Company entered into a contract in July, 1997 to acquire for $2.7
million, a 2.1 acre undeveloped parcel of land in Clark County, Nevada for
investment and possible future development, including development as a possible
Destination Resort. The Company has completed its due diligence on this
property and closed the acquisition in November 1997.
On October 31, 1997, the Company renegotiated and extended one of its
revolving credit facilities. The lender, Heller Financial Inc. ("Heller")
agreed to amend and restate the Company's existing $25 million revolving loan
agreement dated August, 1996 and increase the Company's line of credit to $40
million. This revolving credit facility matures in October, 2005 and is
collateralized by customer notes receivable which are secured by Vacation
Intervals.
In November 1997, the Company also executed a revolving construction
loan agreement with Heller which provides for loans to the Company of up to $10
million to finance construction. This loan facility is collateralized by
construction in process, certain unsold timeshare inventory and
cross-collateralized by customer notes receivable which are secured by Vacation
Intervals.
Both of the Company's credit facilities with Heller contain customary
restrictive and financial covenants, including without limitation, covenants
relating to (i) the maintenance of a minimum net worth ranging up to $58
million, minimum liquidity, and debt to equity ratio of 2.5 to 1, (ii) certain
restrictions on liens against and dispositions of collateral, (iii)
restrictions on distributions to affiliates and prepayments of loans from
affiliates, (iv) restrictions on sales of substantially all of the assets of
the Company, and (vi) restrictions on mergers, consolidations or other
reorganizations of the Company. Both Heller credit facilities also include
customary events of default, including, without limitation, (i) failure to pay
principal, interest or fees when due, (ii) any representation or warranty being
materially incorrect when made, (iii) failure to perform or timely observe
covenants, (iv) cross-defaults to other indebtedness, (v) bankruptcy, and (vi)
certain changes in management of the Company.
The Company is currently evaluating the acquisition and/or development
of other undeveloped and partially developed properties which could be
developed by the Company into timeshare resorts, but currently has no material
binding contracts or capital commitments relating to any such properties.
The above description of the Company's recent acquisition and financing
activities contains certain statements of a forward looking nature relating to
future events or the future financial performance of the Company. Actual
results may be materially different than those results anticipated by the
Company. In evaluating such forward looking statements, various risk factors
should be considered. The Company is subject to specific risks associated with
the timeshare industry, the regulatory environment and various economic and
financial factors, including risks of increased leverage, restrictions imposed
by the Company's lenders, defaults by customers of the Company on notes
receivable secured by Vacation Intervals, and the economy generally.
Additionally, anticipated results are dependent upon the Company's ability
15
<PAGE> 18
to identify and acquire properties suitable for development under terms which
are beneficial to the Company and its shareholders. Other risk factors are
more fully discussed under "Risk Factors" in the registration statement filed
with the Securities and Exchange Commission in conjunction with the Company's
recent initial public offering of common stock.
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Reports on Form 8-K
The Company has not filed any Form 8-K reports for the quarter
ended September 30, 1997.
(b) Exhibits
The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<S> <C>
10.1 Contract of Sale between Thousand Trails, Inc. and
Registrant (approximately 98.475 acres, Galveston
County, Texas)
10.2 Contract of Sale between R.J. Novelli, Sr., et al
and Registrant (approximately 21.5 acres, Galveston
County, Texas)
10.3 Contract of sale between Harmon/Koval Limited
Liability Company and Registrant (2.1 acres, Clark
County, Nevada)
10.4 Second Amendment to Restated and Amended Loan and
Security Agreement between Heller Financial, Inc.
and Registrant ($40 million revolving credit
facility)
10.5 Construction Loan Agreement between Heller Financial
Inc. and Registrant ($10 million revolving
construction loan facility)
10.6 Employment Agreement between Registrant and Thomas
C. Franks.
10.7 Memorandum Agreement dated August 21, 1997 between
Registrant and Thomas C. Franks
10.8 Non-Qualified Stock Option Agreement (Thomas C.
Franks)
10.9 Non-Qualified Stock Option Agreement (Stuart M.
Bloch)
10.10 Non-Qualified Stock Option Agreement (James B.
Francis, Jr.)
10.11 Non-Qualified Stock Option Agreement (Michael A.
Jenkins)
10.12 Real Estate Contract of Sale dated September 30,
1997, between Registrant and Robert E. Mead
10.13 Master Club Agreement dated September 25, 1997
between Registrant and Timber Creek Resort Club
27.1 Financial Data Schedule
99.1 "Risk Factors" section excerpted from final
Prospectus dated June 5, 1997 for Registrant
(No. 333-24273) filed herewith pursuant to Rule
12b-23(a)(3) (incorporated by reference to Exhibit
99.1 to Registrant's Form 10-Q (File No. 001-13003)
for quarter ended June 30, 1997)
</TABLE>
16
<PAGE> 19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Dated: November 10, 1997 By: /s/ ROBERT E. MEAD
-----------------------------------------
Robert E. Mead, Chairman of the Board and
Chief Executive Officer
Dated: November 10, 1997 By: /s/ JOE W. CONNER
-----------------------------------------
Joe W. Conner, Chief Financial Officer
17
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
<S> <C>
10.1 Contract of Sale between Thousand Trails, Inc. and
Registrant (approximately 98.475 acres, Galveston
County, Texas)
10.2 Contract of Sale between R.J. Novelli, Sr., et al
and Registrant (approximately 21.5 acres, Galveston
County, Texas)
10.3 Contract of sale between Harmon/Koval Limited
Liability Company and Registrant (2.1 acres, Clark
County, Nevada)
10.4 Second Amendment to Restated and Amended Loan and
Security Agreement between Heller Financial, Inc.
and Registrant ($40 million revolving credit
facility)
10.5 Construction Loan Agreement between Heller Financial
Inc. and Registrant ($10 million revolving
construction loan facility)
10.6 Employment Agreement between Registrant and Thomas
Franks.
10.7 Memorandum Agreement dated August 21, 1997 between
Registrant and Thomas C. Franks
10.8 Non-Qualified Stock Option Agreement (Thomas
Franks)
10.9 Non-Qualified Stock Option Agreement (Stuart M.
Bloch)
10.10 Non-Qualified Stock Option Agreement (James B.
Francis, Jr.)
10.11 Non-Qualified Stock Option Agreement (Michael A.
Jenkins)
10.12 Real Estate Contract of Sale dated September 30,
1997, between Registrant and Robert E. Mead
10.13 Master Club Agreement dated September 25, 1997
between Registrant and Timber Creek Resort Club
27.1 Financial Data Schedule
99.1 "Risk Factors" section excerpted from final
Prospectus dated June 5, 1997 for Registrant
(No. 333-24273) filed herewith pursuant to Rule
12b-23(a)(3) (incorporated by reference to Exhibit
99.1 to Registrant's Form 10-Q (File No. 001-13003)
for quarter ended June 30, 1997)
</TABLE>
<PAGE> 1
EXHIBIT 10.1
CONTRACT OF SALE
This Agreement is entered into by and between THOUSAND TRAILS, INC., a
Delaware corporation ("Seller"), and SILVERLEAF RESORTS, INC., a Texas
corporation ("Purchaser").
WITNESSETH:
FOR AND IN CONSIDERATION of the promises, undertakings, and mutual
covenants of the parties herein set forth, Seller hereby agrees to sell and
Purchaser hereby agrees to purchase and pay for all that certain property
hereinafter described in accordance with the following terms and conditions:
ARTICLE I
PROPERTY
The conveyance by Seller to Purchaser shall include the following
described tracts or parcels of land, together with all and singular the rights
and appurtenances pertaining to such land including any right, title and
interest of Seller in and to adjacent strips or gores, streets, alleys, or
rights-of-way and all rights of ingress and egress thereto:
Those certain tracts of land located at 19320 West San Luis
Pass Road, Galveston, Galveston County, Texas, commonly known as "The
Galveston Island Preserve", containing approximately 98.475 acres,
more or less, and being more particularly described in Exhibit "A"
attached hereto and made a part hereof for all purposes.
Hereafter the aforesaid real property is referred to as the "Land."
The conveyance by Seller to Purchaser shall also include all buildings
and other improvements on the Land, including specifically, without limitation,
all campsites, recreational and community facilities, comfort centers, lakes
and parks located thereon (the foregoing property is herein referred to
collectively as the "Improvements").
The conveyance by Seller to Purchaser shall also include all fixtures
and personal property, tangible or intangible, of any kind whatsoever owned by
Seller and used in connection with the Land and/or Improvements, including but
not limited to, the following items:
a. All machinery, equipment, fixtures, furniture and
other personal property of every kind and character owned by Seller
and located on or used in connection with the operation of the Land
and Improvements but excluding any recreational vehicle trailers;
<PAGE> 2
b. If and to the extent owned by Seller, the name "The
Galveston Island Preserve," as used in the ownership or operation of
the Land and Improvements;
c. All licenses, franchises and permits used in or
relating to the ownership, occupancy or operation of the resort being
operated by Seller on the Land including, in particular, any water
permits or other utility permits, but not including any reciprocal use
rights to other lands owned by Seller; and
d. Any developer's, declarant's, or owner's interests
under any operating agreements or reciprocal easement agreements or
other similar agreements affecting and/or benefiting the Land.
The foregoing items are hereinafter collectively referred to as the "Resort
Assets."
Hereinafter all property being conveyed to Purchaser by Seller
pursuant to this Contract including the Land, the Improvements and the Resort
Assets are sometimes referred to collectively as the "Subject Property."
ARTICLE II
PURCHASE PRICE
The purchase price to be paid by Purchaser to Seller for the Subject
Property shall be the sum of Four Hundred Eighty Thousand and No/100 Dollars
($480,000.00). The purchase price shall be payable all in cash at the closing.
ARTICLE III
EARNEST MONEY
Within two (2) business days after final execution of this Contract by
all parties hereto, Purchaser shall deliver Purchaser's check in the amount of
Twenty Thousand and No/100 Dollars ($20,000.00) to Safeco Land Title of Dallas,
5220 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270, Attn: Bobbie
Irwin (the "Title Company"). The Title Company shall immediately cash the
earnest money check and deposit the proceeds thereof in an interest bearing
account, the earnings from which shall accrue to the benefit of Purchaser
(hereinafter the proceeds of the earnest money check shall be referred to as
the "earnest money"). If Purchaser does not terminate this Contract during the
Inspection Period (as defined in Article VI hereinbelow), then, within two (2)
business days after the expiration of the Inspection Period, the Title Company
shall immediately disburse the entire $20,000.00 earnest money deposit to
-2-
<PAGE> 3
Seller; upon such disbursement the $20,000.00 earnest money deposit shall be
non-refundable to the Purchaser except in the event of a default by Seller
hereunder, but, if this Contract closes, then the entire $20,000.00 earnest
money deposit shall be applied in partial satisfaction of the purchase price
payable at closing.
In the event that this Contract is not closed, then the earnest money
shall be disbursed in the manner provided for elsewhere herein. Notwithstanding
the foregoing or anything to the contrary contained elsewhere in this Contract,
it is understood and agreed that One Hundred Dollars ($100.00) of the earnest
money shall in all events be delivered to Seller as valuable consideration for
the Inspection Period described in Article VI hereinbelow and the execution of
this Contract by Seller.
ARTICLE IV
PRE-CLOSING OBLIGATIONS OF SELLER AND PURCHASER
Within thirty (30) days from the date of execution of this Contract,
Seller shall furnish to Purchaser, each of the following (a-e) (collectively,
the "Due Diligence Items"):
a. Copy of the most recent appraisal of the Subject
Property that is in the possession of Seller, if any;
b. Copies of all licenses, permits, applications,
authorizations, certificates of occupancy, governmental approvals and
other entitlements relating to the Subject Property and the operation
thereof in the possession of Seller, if any, including, in particular,
copies of all permits relating to utilities;
c. A schedule of all current or pending litigation with
respect to the Subject Property or any part thereof, if any, together
with a brief description of each proceeding;
d. An accurate and complete schedule reflecting with
respect to the resort being operated by Seller at the Subject Property
for the calendar year ending immediately preceding the date of this
Contract: (i) ad valorem taxes, (ii) expenses incurred for such period
for water, electricity, natural gas and other utility charges, and
(iii) all other income or expenses of operation of the resort being
operated on the Land by Seller. Said operating schedule shall be
accompanied by Seller's statement that said operating schedule is
true, complete and correct as of the date provided; and
e. All information of any kind whatsoever in the
possession of Seller concerning possible development of the Subject
Property including, but not limited to, any and all plans for the
development of the Subject Property, any engineering studies of the
Subject Property, any information relating to obtaining the approval
of local governing bodies for the development of the Subject Property,
any information as to when construction on the Subject Property may
commence, any information regarding present or future zoning of the
Subject Property, and any information concerning the availability of
utilities.
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During the Inspection Period (defined hereinbelow), Purchaser, at its
sole cost and expense, shall obtain and deliver to Seller copies of the
following (collectively, the "Purchaser Due Diligence Items"):
f. A current commitment (the "Title Commitment") for the
issuance of an owner's policy of title insurance to the Purchaser from
the Title Company, together with good and legible copies of all
documents constituting exceptions to Seller's title as reflected in
the Title Commitment;
g. Updated survey of the Land included within the
Subject Property dated subsequent to the date of execution of the
Contract and prepared by a licensed professional engineer or surveyor
acceptable to Purchaser, which survey shall: (a) include a metes and
bounds legal description of the Land; (b) accurately show all
improvements, encroachments and uses and accurately show all easements
and encumbrances visible or listed on the Title Commitment
(identifying each by recording reference if applicable); (c) recite
the number of gross acres included within the Land; (d) state whether
any portion of the Land lies within a flood zone, or flood prone area
or is designated as "wetlands," and identify the exact number of
square feet, if any, that lies within a flood zone or flood prone area
or is designated as "wetlands"; and (e) contain a certificate
verifying that the survey was made on the ground, that the survey is
correct, that there are no improvements, encroachments, easements,
uses or encumbrances except as shown on the survey plat, that the area
represented for the Land has been certified by the surveyor as being
correct, that no portion of the Land lies within any flood zone or
flood prone area, except as indicated thereon, and that the Land has
access to public streets as indicated thereon. Unless otherwise agreed
by Seller and Purchaser, the metes and bounds description contained in
the Survey shall be the legal description employed in the documents of
conveyance of the Subject Property provided that the Title Company
accepts such description; and
h. A Phase I Environmental Report for the Subject
Property.
ARTICLE V
TITLE INSPECTION PERIOD
Purchaser shall have a period of time commencing on the date of
execution of this Contract and expiring on the date of expiration of the
Inspection Period (as defined hereinbelow) within which to review and approve
the status of Seller's title to the Subject Property (the "Title Review
Period"). If the information to be provided to or obtained by Purchaser
pursuant to the provisions of Article IV.a.-e. hereinabove reflects or
discloses any defect, exception or other matter affecting the Subject Property
("Title Defects") that is unacceptable to Purchaser, then prior to the
expiration of the Title Review Period Purchaser shall provide Seller with
written notice of Purchaser's objections. Seller may, at its sole option, elect
to cure or remove the objections raised by Purchaser; provided, however, that
Seller shall have no obligation to do so. Should Seller elect to attempt to
cure or remove the objections, Seller shall have ten (10) days
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from the date of Purchaser's written notice of objections (the "Cure Period")
in which to accomplish the cure. In the event Seller either elects not to cure
or remove the objections or is unable to accomplish the cure prior to the
expiration of the Cure Period, then Seller shall so notify Purchaser in writing
specifying which objections Seller does not intend to cure, and then Purchaser
shall be entitled, as Purchaser's sole and exclusive remedies, either to
terminate this Agreement by providing written notice of termination to Seller
within ten (10) days from the date on which Purchaser receives Seller's no-cure
notice or waive the objections and close this transaction as otherwise
contemplated herein. If Purchaser shall fail to notify Seller in writing of any
objections to the state of Seller's title to the Subject Property as shown by
the Survey and Title Commitment, then Purchaser shall be deemed to have no
objections to the state of Seller's title to the Subject Property as shown by
the Survey and Title Commitment, and any exceptions to Seller's title which
have not been objected to by Purchaser and which are shown on the Survey or
described in the Title Commitment shall be considered to be "Permitted
Exceptions." It is further understood and agreed that any Title Defects which
have been objected to by Purchaser and which are subsequently waived by
Purchaser shall be Permitted Exceptions.
ARTICLE VI
INSPECTION PERIOD
Purchaser, at Purchaser's sole expense, shall have the right to
conduct a feasibility, environmental, engineering and physical study of the
Subject Property for a period of time commencing on the date of execution of
this Contract and expiring sixty (60) days from the date on which Purchaser
receives the last of the due diligence items to be provided to Purchaser by
Seller pursuant to Article IV.a.-e. hereinabove (the "Inspection Period").
Purchaser and Purchaser's duly authorized agents or representatives shall be
permitted to enter upon the Subject Property at all reasonable times during the
Inspection Period in order to conduct engineering studies, soil tests and any
other inspections and/or tests that Purchaser may deem necessary or advisable;
provided, however, that no drilling or other ground penetrations or physical
sampling in any building shall be done without Seller's prior written consent,
which consent shall not be unreasonably withheld or delayed. Purchaser further
agrees to indemnify and hold Seller
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harmless from any claims or damages, including reasonable attorneys' fees,
resulting from Purchaser's inspection of the Subject Property. In the event
that the review and/or inspection conducted by this paragraph shows any fact,
matter or condition to exist with respect to the Subject Property that is
unacceptable to Purchaser, in Purchaser's sole discretion, or if for any reason
Purchaser determines that purchase of the Subject Property is not feasible,
then Purchaser shall be entitled, as Purchaser's sole remedy, to cancel this
Contract by providing written notice of cancellation to Seller prior to the
expiration of the Inspection Period. If Purchaser shall provide written notice
of cancellation prior to the expiration of the Inspection Period, then this
Contract shall be cancelled, all earnest money (less $100.00) shall be
immediately returned to Purchaser by the Title Company, and thereafter neither
Seller nor Purchaser shall have any continuing obligations one unto the other.
If no notice of cancellation is provided by Purchaser prior to the expiration
of the Inspection Period, then this Contract shall remain in full force and
effect.
ARTICLE VII
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLER
Seller represents and warrants to Purchaser that at closing Seller
will have good and indefeasible fee simple title to the Subject Property free
and clear of all liens, encumbrances, covenants, restrictions, rights-of-way,
easements, and any other matters affecting title to the Subject Property except
for the Permitted Exceptions, and at closing, Seller or its subsidiaries will
be in a position to convey the Subject Property to Purchaser (free and clear of
all liens, encumbrances, and other such matters affecting title except for the
Permitted Exceptions).
Seller further covenants and agrees with Purchaser that, from
the date hereof until the closing, neither Seller nor its subsidiaries shall
sell, assign, or convey any right, title, or interest whatsoever in or to the
Subject Property, or create or permit to exist any lien, security interest,
easement, encumbrance, charge, or condition affecting the Subject Property
(other than the Permitted Exceptions) without promptly discharging the same
prior to closing.
Seller hereby further represents and warrants to Purchaser, to the
best of Seller's knowledge, as follows:
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a. There are no actions, suits, or proceedings pending
or, to the best of Seller's knowledge, threatened against Seller or
otherwise affecting any portion of the Subject Property, at law or in
equity, or before or by any federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency, or
instrumentality, domestic or foreign;
b. The execution by Seller of this Contract and the
consummation by Seller of the sale contemplated hereby have been duly
authorized, and do not, and, at the closing date, will not, result in
a breach of any of the terms or provisions of, or constitute a default
under any indenture, agreement, instrument, or obligation to which
Seller is a party or by which the Subject Property or any portion
thereof is bound, and do not, and at the closing date will not,
constitute a violation of any regulation affecting the Subject
Property;
c. Seller has not received any notice of any violation
of any ordinance, regulation, law, or statute of any governmental
agency pertaining to the Subject Property or any portion thereof;
d. The Subject Property and the current operation
thereof comply in all material respects with all laws, regulations,
ordinances, rules, orders and other requirements of all governmental
authorities having jurisdiction over the Subject Property or affecting
all or any part thereof or bearing on its construction or operation,
and with all private covenants or restrictions;
e. From the date of execution of this Contract through
the date of closing, Seller shall continue to maintain the Subject
Property in its present condition, subject to ordinary wear and tear
and Article XV hereof, and shall continue to manage the Subject
Property in the same manner as it is currently being managed; Seller
shall not remove any fixtures, equipment, furnishings or other
personal property from the Subject Property unless replaced with items
of equal or greater quality and quantity, nor shall Seller in any
manner neglect the Subject Property;
f. That, at closing, there will be no unpaid bills,
claims, or liens in connection with any construction or repair of the
Subject Property except for ones which will be paid in the ordinary
course of business or which have been bonded around or the payment of
which has otherwise been adequately provided for to the complete
satisfaction of Purchaser; and
g. That, at closing, the Subject Property will be
conveyed to Purchaser free and clear of any use rights of Seller's
members.
All of the foregoing representations and warranties of Seller are made
by Seller both as of the date hereof and as of the date of the closing
hereunder. Notwithstanding the foregoing or anything to the contrary contained
herein, it is understood and agreed that the representations and warranties set
forth hereinabove shall survive the closing of this Contract only for a period
of two (2) years following the closing date, but not thereafter, and Seller
shall have no liability of any kind whatsoever for any breach thereof except to
the extent a claim is asserted against Seller within such two (2) year period.
Purchaser agrees that, having had the opportunity to inspect the
Subject Property for defects and having had the right to terminate this
Contract in the event any defects are found,
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<PAGE> 8
Purchaser will accept at closing the Subject Property in an "as is, where is"
condition, and, except for the representations and warranties set forth
hereinabove, Seller shall not be required to give any further representations
or warranties at closing with respect to the condition of the Subject Property
or the income that may be generated by the Subject Property.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
The obligation of Purchaser to close this Contract shall, at the
option of Purchaser, be subject to the following conditions precedent:
a. All of the representations, warranties and agreements
of Seller set forth in this Contract shall be true and correct in all
material respects as of the date hereof and at closing, and Seller
shall not have on or prior to closing, failed to meet, comply with or
perform in any material respect any conditions or agreements on
Seller's part as required by the terms of this Contract;
b. There shall be no change in the matters reflected in
the Title Commitment, and there shall not exist any encumbrance or
title defect affecting the Subject Property not described in the Title
Commitment except for the Permitted Exceptions;
c. There shall be no changes in the matters reflected in
the Survey, and there shall not exist any easement, right-of-way,
encroachment, waterway, pond, flood plain, conflict or protrusion with
respect to the Subject Property not shown on the Survey; and
d. No material and substantial change shall have
occurred with respect to the Subject Property which would in any way
affect the findings made in the inspection of the Subject Property
described in Article VI hereinabove.
If any such condition is not fully satisfied by closing, Purchaser may
terminate this Contract by written notice to Seller whereupon this Contract
shall be cancelled, the earnest money deposit (less $100.00) shall be returned
to Purchaser and thereafter neither Seller nor Purchaser shall have any
continuing obligations one unto the other.
ARTICLE IX
CLOSING
The closing hereunder shall take place at the offices of the Title
Company. The closing shall occur on or before thirty (30) days from the date of
expiration of the Inspection Period. Purchaser shall notify Seller at least
five (5) days in advance of the exact time and date of closing.
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ARTICLE X
SELLER'S OBLIGATIONS AT CLOSING
At the closing, Seller shall do the following:
a. Deliver, or cause its subsidiary to deliver, to
Purchaser a deed covering the Subject Property, duly signed and
acknowledged by Seller, or its subsidiary, which deed shall be in form
reasonably acceptable to Purchaser for recording and shall convey to
Purchaser good and marketable title to the Subject Property, free and
clear of all liens, rights-of-way, easements, and other matters
affecting title to the Subject Property, except for the Permitted
Exceptions.
b. Deliver a bill of sale and a blanket assignment in
form reasonably acceptable to Purchaser, duly executed and
acknowledged by Seller or its subsidiary, conveying and/or assigning
to Purchaser the Resort Assets.
c. Deliver such evidence or other documents that may be
reasonably required by the Title Company evidencing the status and
capacity of Seller and the authority of the person or persons who are
executing the various documents on behalf of Seller in connection with
the sale of the Subject Property.
d. Deliver a non-withholding statement that will satisfy
the requirements of Section 1445 of the Internal Revenue Code so that
Purchaser is not required to withhold any portion of the purchase
price for payment to the Internal Revenue Service.
e. Deliver to Purchaser any other documents or items
necessary or convenient in the reasonable judgment of Purchaser to
carry out the intent of the parties under this Contract.
ARTICLE XI
PURCHASER'S OBLIGATIONS AT CLOSING
At the closing, Purchaser shall deliver to Seller the purchase price
in cash.
ARTICLE XII
COSTS AND ADJUSTMENTS
At closing, the following items shall be adjusted or prorated between
Seller and Purchaser:
a. Ad valorem taxes for the Subject Property for the
current calendar year shall be prorated as of the date of closing, and
Seller shall pay to Purchaser in cash at closing Seller's pro rata
portion of such taxes. Seller's pro rata portion of such taxes shall
be based upon taxes actually assessed for the current calendar year
or, if for any reason such taxes for the Subject Property have not
been actually assessed, such proration shall be based upon the amount
of such taxes for the immediately preceding calendar year, and
adjusted by cash settlement when exact amounts are available. However,
anything herein to the contrary notwithstanding, any tax abatement or
refund for a period of time prior to closing shall belong to Seller.
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b. All other closing costs, including but not limited
to, recording and escrow fees shall be divided equally between Seller
and Purchaser; provided, however, that Seller and Purchaser shall each
be responsible for the fees and expenses of their respective
attorneys.
Seller agrees to indemnify and hold Purchaser harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature (except those items which under the terms of this Contract specifically
become the obligation of Purchaser), brought by third parties and based on
events occurring on or before the date of closing and which are in any way
related to the ownership, maintenance, or operation of the Subject Property,
and all expenses related thereto, including, but not limited to, court costs
and attorneys' fees.
Purchaser agrees to indemnify and hold Seller harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature, brought by third parties and based on events occurring subsequent to
the date of closing and which are in any way related to the ownership,
maintenance or operation of the Subject Property, and all expenses related
thereto, including, but not limited to, court costs and attorneys' fees.
Notwithstanding anything to the contrary contained herein, the
indemnities set forth in this Article XII shall survive the closing hereunder.
ARTICLE XIII
ENTRY ON PROPERTY
Purchaser, Purchaser's agents, employees, servants, or nominees, are
hereby granted the right to enter upon the Subject Property at any time prior
to closing for the purpose of inspecting the Subject Property and conducting
such engineering and mechanical tests as Purchaser may deem necessary or
advisable, any such inspections and tests to be made at Purchaser's sole
expense. Purchaser agrees to indemnify and hold Seller harmless from and
against any and all losses, damages, costs, or expenses incurred by Seller as a
result of any inspections or tests made by Purchaser.
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ARTICLE XIV
POSSESSION OF PROPERTY
Possession of the Property free and clear of all uses and
encroachments, except the Permitted Exceptions, shall be delivered to Purchaser
at closing.
ARTICLE XV
DAMAGE OR DESTRUCTION PRIOR TO CLOSING
In the event that the Subject Property should be damaged by any
casualty prior to closing, then if the cost of repairing such damage, as
estimated by an architect or contractor retained pursuant to the mutual
agreement of Seller and Purchaser, is:
a. Less than Fifty Thousand Dollars ($50,000.00), then
at Purchaser's option, either (i) the Seller shall repair such damage
as promptly as is reasonably possible, restoring the damaged property
at least to its condition immediately prior to such damage; and, in
the event such repairs have not been completed prior to closing, then
the closing shall nevertheless proceed as scheduled, and Purchaser may
have the Title Company withhold from Seller the funds necessary to
make such repairs until Seller has repaired such damage pursuant to
the provisions hereof, at which time such funds shall be distributed
to Seller or (ii) Purchaser may take an assignment of Seller's
insurance proceeds and repair such damage itself;
or if said cost is:
b. greater than Fifty Thousand Dollars ($50,000.00),
then, at Purchaser's election, Seller shall pay to Purchaser, at
closing, all insurance proceeds payable for such damage, and the sale
shall be closed without Seller's repairing such damage, or, if
Purchaser does not elect to accept such insurance proceeds, then
either Seller or Purchaser may elect to terminate this Contract, in
which case the earnest money (less $ 100.00) shall be returned to
Purchaser and thereafter neither party shall have any further
obligations one unto the other. Purchaser acknowledges that the
deductible in Seller's insurance policy is $250,000 or more.
ARTICLE XVI
NOTICES
All notices, demands, or other communications of any type
given by the Seller to the Purchaser, or by the Purchaser to the Seller,
whether required by this Contract or in any way related to the transaction
contracted for herein, shall be void and of no effect unless given in
accordance with the provisions of this paragraph. All notices shall be in
writing and delivered to the person to whom the notice is directed, either in
person, by facsimile transmission, or by United States Mail, as a registered or
certified item, return receipt requested. Notices delivered
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<PAGE> 12
by mail shall be deemed given when deposited in a post office or other
depository under the care or custody of the United States Postal Service,
enclosed in a wrapper with proper postage affixed, addressed as follows:
Seller: Thousand Trails, Inc.
2711 LBJ Freeway, Suite 200
Dallas, Texas 75234
Attn: Kenneth E. Hendrycy, Vice President
Telephone No.: (972) 243-2228
Facsimile No.: (972) 488-5030
Purchaser: Silverleaf Resorts, Inc.
1221 Riverbend Drive
Suite 120
Dallas, Texas 75247
Attn: Robert E. Mead
Telephone No.: (214) 631-1166
Facsimile No.: (214) 905-0514
With Required Copy to: Meadows, Owens, Collier, Reed, Cousins & Blau,
L.L.P.
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
Attn: George R. Bedell, Esq.
Telephone No.: (214) 749-2448
Facsimile No.: (214) 747-3732
ARTICLE XVIII
REMEDIES
In the event that Seller fails to timely comply with all conditions,
covenants and obligations of Seller hereunder, such failure shall be an event
of default and Purchaser shall have the option (i) to terminate this Contract
by providing written notice thereof to Seller, in which event the earnest money
(less $100.00) shall be returned immediately to Purchaser and the parties
hereto shall have no further liabilities or obligations one unto the other;
(ii) to waive any defect or requirement and close this Contract; or (iii) to
sue Seller for specific performance. Except as otherwise set forth herein, in
no event shall Purchaser have the right to sue Seller for damages.
In the event that Purchaser fails to timely comply with all
conditions, covenants, and obligations Purchaser has hereunder, such failure
shall be an event of default, and Seller's sole remedy shall be to receive the
earnest money. The earnest money is agreed upon by and between the Seller and
Purchaser as liquidated damages due to the difficulty and inconvenience
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of ascertaining and measuring actual damages, and the uncertainty thereof, and
no other damages, rights, or remedies shall in any case be collectible,
enforceable, or available to the Seller other than in this paragraph defined,
and Seller shall accept the earnest money as Seller's total damages and relief.
ARTICLE XVIII
ASSIGNMENT
Purchaser shall not, without Seller's prior written consent, assign
this Contract. Notwithstanding the foregoing, the consent of Seller need not be
obtained for an assignment of this Contract made in connection with the merger,
consolidation or a combination of Purchaser into or with any other corporation
or entity, whether by operation of law or otherwise; however, Purchaser agrees
to furnish Seller with prior written notice thereof, and provided further that
any such assignee must abide by the covenants appearing in this Contract.
ARTICLE XIX
INTERPRETATION AND APPLICABLE LAW
This Agreement shall be construed and interpreted in accordance with
the laws of the State of Texas. Where required for proper interpretation, words
in the singular shall include the plural; the masculine gender shall include
the neuter and the feminine, and vice versa. The terms "successors and assigns"
shall include the heirs, administrators, executors, successors, and assigns, as
applicable, of any party hereto.
ARTICLE XX
AMENDMENT
This Contract may not be modified or amended, except by an agreement
in writing signed by the Seller and the Purchaser. The parties may waive any
of the conditions contained herein or any of the obligations of the other party
hereunder, but any such waiver shall be effective only if in writing and signed
by the party waiving such conditions and obligations.
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ARTICLE XXI
AUTHORITY
Each person executing this Contract warrants and represents that he is
fully authorized to do so.
ARTICLE XXII
ATTORNEYS' FEES
In the event it becomes necessary for either party to file a suit to
enforce this Contract or any provisions contained herein, the prevailing party
shall be entitled to recover, in addition to all other remedies or damages,
reasonable attorneys' fees and costs of court incurred in such suit.
ARTICLE XXIII
DESCRIPTIVE HEADINGS
The descriptive headings of the several paragraphs contained in this
Contract are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
ARTICLE XXIV
ENTIRE AGREEMENT
This Contract (and the items to be furnished in accordance herewith)
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith. No representation,
warranty, covenant, agreement, or condition not expressed in this Contract
shall be binding upon the parties hereto or shall affect or be effective to
interpret, change, or restrict the provisions of this Contract.
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ARTICLE XXV
MULTIPLE ORIGINALS ONLY
Numerous copies of this Contract may be executed by the parties
hereto. Each such executed copy shall have the full force and effect of an
original executed instrument.
ARTICLE XXVI
ACCEPTANCE
Seller shall have until 5:00 o'clock p.m., July 23, 1997, to execute
and return a fully executed original of this Contract to Purchaser, otherwise
this Contract shall become null and void. Time is of the essence of this
Contract. The date of execution of this Contract by Seller shall be the date of
execution of this Contract. If the final date of any period falls upon a
Saturday, Sunday, or legal holiday under the laws of the State of Texas, then
in such event the expiration date of such period shall be extended to the next
day which is not a Saturday, Sunday, or legal holiday under the laws of the
State of Texas.
ARTICLE XXVII
REAL ESTATE COMMISSION
Seller represents and warrants to Purchaser that Seller has not
contacted or entered into any agreement with any real estate broker, agent,
finder, or any other party in connection with this transaction, and that Seller
has not taken any action which would result in any real estate broker's,
finder's, or other fees or commissions being due and payable to any other party
with respect to the transaction contemplated hereby. Purchaser hereby
represents and warrants to Seller that Purchaser has not contracted or entered
into any agreement with any real estate broker, agent, finder, or any other
party in connection with this transaction, and that Purchaser has not taken any
action which would result in any real estate broker's, finder's, or other fees
or commissions being due or payable to any other party with respect to the
transaction contemplated hereby. Each party hereby indemnifies and agrees to
hold the other party harmless from any loss, liability, damage, cost, or
expense (including reasonable attorneys' fees) resulting to the other party by
reason of a breach of the representation and warranty made by such party
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<PAGE> 16
herein. Notwithstanding anything to the contrary contained herein, the
indemnities set forth in this Article XXVII shall survive the closing.
EXECUTED on this the 23rd day of July, 1997.
SELLER:
THOUSAND TRAILS, INC., a Delaware corporation
By: /s/ KENNETH A. HENDRYCY
--------------------------
Name: Kenneth A. Hendrycy
Its: Vice President
EXECUTED on this the 22nd day of July, 1997.
PURCHASER:
SILVERLEAF RESORTS, INC., a Texas corporation
By: /s/ ROBERT E. MEAD
--------------------------
Name: Robert E. Mead
Its: Chief Executive Officer
RECEIPT OF EARNEST MONEY AND ONE (1) EXECUTED COUNTERPART OF THIS CONTRACT IS
HEREBY ACKNOWLEDGED:
TITLE COMPANY:
SAFECO LAND TITLE OF DALLAS
By: /s/ BOBBIE G. IRWIN
-----------------------
Name: Bobbie G. Irwin
Its: Vice President
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<PAGE> 17
EXHIBIT "A"
THE SURFACE ONLY OF ALL THAT PARCEL OF LAND IN THE WEST ONE-HALF (1/2) OF THAT
CERTAIN TRACT OR PARCEL OF LAND OUT OF DIVISION FOUR (4) IN SECTION ELEVEN
(11) OF THE HALL AND JONES SURVEY OF GALVESTON ISLAND. IN GALVESTON COUNTY,
TEXAS, DESCRIBED IN DEED OF RECORD IN VOLUME 315, PAGE 849, IN THE OFFICE OF
THE COUNTY CLERK OF GALVESTON COUNTY, TEXAS THAT LIES NORTH OF THE SAN LUIS
PASS ROAD AND BEING THE WEST 698 FEET OF THE EAST 1396 FEET, BOTH MEASURED
PERPENDICULAR, OF DIVISION FOUR (4) IN SECTION ELEVEN (11), OF THE HALL
AND JONES SURVEY OF GALVESTON ISLAND, IN GALVESTON COUNTY, TEXAS, THAT LIES
NORTH OF THE SAN LUIS PASS ROAD, AND BEING THAT SAME TRACT OF LAND PARTITIONED
TO E. R. MICHAELIS BY PARTITION DEED OF RECORD IN VOLUME 2301, PAGE 39, IN THE
OFFICE OF THE COUNTY CLERK OF GALVESTON COUNTY, TEXAS.
<PAGE> 1
EXHIBIT 10.2
CONTRACT OF SALE
This Agreement is entered into by and between ROSS J. NOVELLI, SR., LORAINE P.
GARLAND, GARY D. MARTIN, and PATRICIA D. OWEN (collectively "Seller"), and
SILVERLEAF RESORTS, INC, a Texas corporation, and/or its assigns ("Purchaser").
WITNESSETH:
-----------
FOR AND IN CONSIDERATION of the promises, undertakings, and mutual
covenants of the parties herein set forth, Seller hereby agrees to sell and
Purchaser agrees to purchase and pay for all that certain property hereinafter
described in accordance with the following terms and conditions:
ARTICLE I
PROPERTY
--------
The conveyance by Seller to Purchaser shall be of all of the following
described real property, together with all right, title and interest of Seller
in and to any strips or gores, roads, easements, streets, and ways bounding
said property, and all rights of ingress and egress thereto, and shall include
all improvements and fixtures located or to be located on said property with
the exception of the house located on the bayside tract owned by
Novelli/Garland. Seller retains the right to have this house removed from the
property at Seller's sole expense within three (3) months after the closing of
this sale.
The surface only from Gulf of Mexico beach to
Galveston Bay being 635.2 ft. +or- wide out of
Division 4, Section 11 of the Hall & Jones Survey,
Galveston Island, Galveston County, Texas, to be more
particularly described by metes and bounds in the
Surveys described and defined in Article IV(a) and
(b) hereinbelow.
Hereinafter the aforesaid real property is referred to collectively as the
"Subject Property."
Article II
PURCHASE PRICE
--------------
The purchase price to be paid by Purchaser to Seller for the Subject
Property shall be sum of One Million One Hundred Eighty Seven Thousand Five
Hundred and No/100 Dollars ($1,187,500.00). The purchase price shall be
payable all in cash at the closing.
<PAGE> 2
ARTICLE III
EARNEST MONEY
-------------
Within two (2) business days after final execution of this Contract by
all parties hereto, Purchaser shall deliver Purchaser's check in the amount of
Fifty Thousand and No/100 Dollars ($50,000.00) to Stewart Title Company, 222
Kempner, Galveston, TX 77550 Att: Don Lera (the "Title Company"). The Title
Company shall immediately cash the earnest money check and deposit the proceeds
thereof in an interest bearing account, the earnings from which shall accrue to
the benefit of Purchaser (hereinafter the proceeds of the earnest money check
shall be referred to as the "earnest money").
In the event that this Contract is not closed, then the earnest money
shall be disbursed in the manner provided for elsewhere herein. Notwithstanding
the foregoing or anything to the contrary contained elsewhere in this Contract,
it is understood and agreed that One Hundred Dollars ($ 100.00) of the earnest
money shall in all events be delivered to Seller as valuable consideration for
the Inspection Period described in Article VI hereinbelow and the execution of
this Contract by Seller.
ARTICLE IV
PRE-CLOSING OBLIGATIONS OF SELLER
---------------------------------
Within seven (7) days from the date of execution of this Contract,
Seller shall furnish to Purchaser, each of the following (collectively, the
"Due Diligence Items"):
a. A survey of the beachfront portion (south of FM3005 known as
"Westwind Beach Estates") of the Subject Property prepared by
a licensed professional engineer or surveyor (Dale L. Hardy),
which Survey shall: (a) include a metes and bounds legal
description of the beachfront portion of the Subject Property;
(b) accurately show all improvements, encroachments and uses
and accurately show all easements and encumbrances visible or
listed on the Title Commitment (identifying each by recording
reference if applicable); (c) recite the number of acres
included in the beachfront portion of the Subject Property;
(d) state whether the beachfront portion of the Subject
Property (or any portion thereof) lies within a flood zone, or
flood prone area; (e) contain a certificate verifying that the
Survey was made on the ground, that the Survey is correct,
that there are no improvements, encroachments, easements, uses
or encumbrances except as shown on the survey plat, that the
area represented for the beachfront portion of the Subject
Property does not lie within any flood zone or flood prone
area, except as indicated thereon; (f) have been made in
accordance with the Texas Board of Professional Land Surveying
Properties Act, General Rules of Procedures and Practices,
Revised Sept. 1995, and shall be certified accordingly; and (g)
otherwise be in form
2
<PAGE> 3
sufficient for the amendment of the boundary exception by the
Title Company. Unless otherwise agreed by Seller and
Purchaser, the metes and bounds description contained in the
Survey shall be the legal description employed in the
documents of conveyance of the beachfront portion of the
Subject Property;
b. Its latest surveys as listed below of the bayside portion
(north of FM3005) of the Subject Property prepared by a
professional engineer or surveyor. Said surveys are at least
25 years old and Seller excepts from warranty any land now
submerged or subject to governmental or environmental controls
(Metes and bounds descriptions of the entire tract (comprising
both beachfront portion and bayside portion) are available
from present Deeds and will be presented to Purchaser upon
request).
1. Survey of Martin/Owen Tract. May 20, 1972 By Andrew
Jonson, Jr., Registered Public Surveyor.
2. Survey of Martin/Owen and Novelli/Garland 100
AcreTract. Sept., 1923 by C.C. Washington, Galveston
County Surveyor.
a. A current commitment (the "Title Commitment") for the issuance
of an owners policy of title insurance to the Purchaser from
the Title Company, at Purchaser's expense, together with good
and legible copies of all documents constituting exceptions to
Seller's title as reflected in the Title Commitment; and
b. All information of any kind whatsoever in the possession of
Seller concerning possible development of the Subject
Property, including, but not limited to, any and all plans for
the development of the Subject Property, any engineering
studies of the Subject Property, and information relating to
obtaining the approval of local governing bodies for the
development of the Subject Property, any information as to
when construction on this Subject Property may commence, any
information regarding present or future zoning of the Subject
Property, and any information concerning the availability of
utilities.
ARTICLE V
TITLE INSPECTION PERIOD
-----------------------
Purchaser shall have a period of sixty (60) days from the date hereof
in which to review and approve each such item (the "Title Review Period"). If
the information to be provided pursuant to subparagraphs (a), (b) and (c) of
Article IV reflects or discloses any defect, exception or other matter
affecting the Subject Property ("Title Defects") that is unacceptable to
Purchaser, then prior to the expiration of the Title Review Period Purchaser
shall provide Seller with written notice of Purchaser's objections. Seller may,
at its sole option, el ect to cure or remove the objections raised by
Purchaser, provided, however, that Seller shall have no obligation to do so.
3
<PAGE> 4
Should Seller elect to attempt to cure or remove the objection, Seller shall
have ten (10) days from the date of Purchaser's written notice of objections
(the "Cure Period") in which to accomplish the cure. In the event Seller either
elects not to cure or remove the objections or is unable to accomplish the cure
prior to the expiration of the Cure Period, then Seller shall so notify
Purchaser in writing specifying which objections Seller does not intend to
cure, and then Purchaser shall be entitled, as Purchaser's sole and exclusive
remedies, either to terminate this Agreement by providing written notice of
termination to Seller within ten (10) days from the date on which Purchaser
receives Seller's no-cure notice or waive the objections and close this
transaction as otherwise contemplated herein. If Purchaser shall fail to notify
Seller in writing of any objections to the state of Seller's title to the
Subject Property as shown by the Survey and Title Commitment, then Purchaser
shall be deemed to have no objections to the state of Seller's title to the
Subject Property as shown by the Survey and Title Commitment, and any
exceptions to Seller's title which have not been objected to by Purchaser and
which are shown on the Survey or described in the Title Commitment shall be
considered "Permitted Exceptions." It is further understood and agreed that any
Title Defects which have been objected to by Purchaser and which are
subsequently waived by Purchaser shall be Permitted Exceptions.
ARTICLE VI
INSPECTION PERIOD
-----------------
Purchaser, at Purchaser's sole expense, shall have the right to
conduct a feasibility, environmental, engineering and physical study of the
Subject Property for a period of time commencing on the date of execution of
this Contract and expiring sixty (60) days from the date hereof (the
"Inspection Period"). Purchaser and Purchaser's duly authorized agents or
representative shall be permitted to enter upon the Subject Property at all
reasonable times during this Inspection Period in order to conduct engineering
studies, surveys, soil tests and any other inspections and/or tests that
Purchaser may deem necessary or advisable, provided, however, that any such
tests or inspections must comply with all applicable governmental rules and
regulations. Purchaser further agrees to indemnify and hold Seller harmless
from any claims or damages, including reasonable attorney's fees, resulting
from Purchaser's inspection of the Subject Property. In the event that the
review and/or inspection conducted by this paragraph shows any fact, matter or
condition to exist with respect to the Subject Property that is unacceptable to
Purchaser, in Purchaser's sole discretion, or if for any reason Purchaser
determines that purchase of the Subject Property is not feasible, then
Purchaser shall be entitled, as Purchaser's sole remedy, to cancel this
Contract by providing written notice of cancellation to Seller prior to the
expiration of the Inspection Period. If Purchaser shall provide written notice
of cancellation prior to the expiration of the Inspection Period, then this
Contract shall be cancelled, all earnest money (less $100.00)
4
<PAGE> 5
shall be immediately returned to Purchaser by the Title Company, and
thereafter neither Seller nor Purchaser shall have any continuing
obligations one unto the other.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER
---------------------------------------------------
Seller represents and warrants to Purchaser that Seller will have at
closing good and indefeasible fee simple title to the Subject Property free and
clear of all liens, encumbrances, covenants, restrictions, rights-of-way,
easements, and any other matters affecting title to the Subject Property except
for Permitted Exceptions.
Seller further covenants and agrees with Purchaser that, from the date
hereof until the closing, Seller shall not sell, assign, or convey any right,
title, or interest whatsoever in or to the Subject Property, or create or
permit to exist any lien, security interest, easement, encumbrance, charge, or
condition affecting the Subject Property (other than the Permitted Exceptions)
without promptly discharging the same prior to closing.
Seller hereby further represents and warrants to Purchaser, to the
best of Seller's knowledge, as follows:
a. There are no actions suits, or proceedings pending or, to the
best of Seller's knowledge, threatened against Seller or
otherwise affecting any portion of the Subject Property, at
law or in equity, or before or by any federal, state,
municipal, or other governmental court, department,
commission, board, bureau, agency, or instrumentality,
domestic or foreign;
b. The execution by Seller of this Contract and the consummation
by Seller of the sale contemplated hereby have been duly
authorized, and do not, and, at the closing date, will not,
result in a breach of any of the terms or provisions of, or
constitute a default under any indenture, agreement,
instrument, or obligation to which Seller is a party or by
which the Subject Property or any portion thereof is bound,
and do not, and at the closing date will not, constitute a
violation of any regulation affecting the Subject Property;
and
c. Seller has not received any notice of any violation of any
ordinance, regulation, law, or statute of any governmental
agency pertaining to the Subject Property of any portion
thereof.
All of the foregoing representations and warranties of Seller are made by
Seller both as of the date hereof and as of the date of the closing hereunder
and shall survive the closing hereunder. If any representations and warranties
set forth herein are determined at any time on or before the date of closing to
be untrue or
5
<PAGE> 6
unfulfilled, then Purchaser, as Purchaser's sole and exclusive remedy, may
terminate this Contract by providing written notice of such termination to
Seller, in which event the earnest money (less $100.00) shall be returned to
Purchaser, and all surveys, test results and other information acquired by
Purchaser shall be provided to Seller, and thereafter neither Seller nor
Purchaser shall have any further liabilities or obligations one unto the other.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
The obligations of Purchaser to close this Contract shall, at the
option of Purchaser, be subject to the following conditions precedent:
a. All of the representations, warranties and agreements of
Seller set forth in this Contract shall be true and correct in
all material respects as of the date hereof and at closing,
and Seller shall not have on or prior to closing, failed to
meet, comply with or perform in any material respect any
conditions or agreements on Seller's part as required by the
terms of this Contract;
b. There shall be no change in the matters reflected in the Title
Commitment, and there shall not exist any encumbrance or title
defect affecting the Subject Property and detailed in the
Title Commitment except for the Permitted Exceptions;
c. There shall not exist any easement, right-of-way,
encroachment, waterway, pond, flood plain, conflict or
protrusion with respect to the Subject Property not shown on
the Survey; and
d. No material and substantial change shall have occurred with
respect to the Subject Property which would in any way affect
the findings made in the inspection of the Subject Property
described in Article VI hereinabove.
If any such condition is not fully satisfied by closing, Purchaser may
terminate this Contract by written notice to Seller whereupon this Contract
shall be cancelled, the earnest money deposit (less $100.00) shall be returned
to Purchaser by the Title Company and thereafter neither Seller nor Purchaser
shall have any continuing obligations one unto the other.
6
<PAGE> 7
ARTICLE IX
CLOSING
-------
The closing hereunder shall take place at the offices of the Title
Company or other location as mutually agreed upon. The closing shall occur on
or before the expiration of the Title Review Period, as defined and described
in Article V hereinabove. Purchaser shall notify Seller at least five (5) days
in advance of the exact time and date of the closing. If Purchaser fails to
close on or before the expiration of the Title Review Period, the $50,000.00
Earnest Money shall be forfeited and paid to Seller as liquidated damages as
set out in Article XVI. Purchaser shall have the right to obtain a thirty (30)
day primary extension ("First 30 Day Extension") of the deadline for closing by
delivering to Seller, prior to the then scheduled closing deadline, an
additional Twenty-Five Thousand and No/100 Dollars ($25,000.00) in
nonrefundable earnest money. If Purchaser exercises this right then the
deadline for closing of this Contract shall be extended by thirty (30) days;
the additional $25,000.00 in earnest money which is paid by Purchaser in order
to extend the deadline for closing of this Contract shall be non-refundable to
Purchaser except in the event of default by Seller hereunder; but, if this
Contract closes, then Twenty Thousand and No/100 Dollars ($20,000.00) of such
additional earnest money shall be applied in partial satisfaction of the
purchase price payable hereunder and Five Thousand and No/100 Dollars
($5,000.00) of such money shall be paid to Seller in addition to the purchase
price payable. Upon the expiration of the first thirty (30) day extension
period, Purchaser shall have the right to obtain a second thirty (30) day
extension ("Second 30 Day Extension") of the deadline for closing by delivering
to Seller, prior to the then scheduled closing deadline, an additional
Twenty-Five Thousand and No/100 Dollars ($25,000.00) in non-refundable earnest
money. If Purchaser exercises this right then the deadline for closing of this
Contract shall be extended by thirty (30) days; the additional $25,000.00 in
earnest money which is paid by Purchaser in order to extend the deadline for
closing of this Contract shall be non-refundable to Purchaser except in the
event of default by Seller hereunder, but, if this Contract closes, then Twelve
Thousand Five Hundred and No/100 Dollars ($12,500.00) of such additional
earnest money shall be applied in partial satisfaction of the purchase price
payable hereunder and Twelve Thousand Five Hundred and No/100 Dollars
($12,500.00) of such money shall be paid to Seller in addition to the purchase
price payable. Upon the expiration of the second thirty (30) day extension
period, Purchaser shall have the right to obtain a third thirty (30) day
extension ("Third 30 Day Extension") of the deadline for closing by delivering
to Seller, prior to the then scheduled closing deadline, an additional
Twenty-Five Thousand and No/100 Dollars ($25,000.00) in non-refundable earnest
money. If Purchaser exercises this right then the deadline for closing of this
Contract shall be extended by thirty (30) days; the additional $25,000.00 in
earnest money which is paid by Purchaser in order to extend the deadline for
closing of this Contract shall be non-refundable to Purchaser except in the
event of default by Seller hereunder, but, if this Contract closes, then such
additional earnest money shall not be applied in
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<PAGE> 8
partial satisfaction of the purchase price payable hereunder and Twenty Five
Thousand and No/100 Dollars ($25,000.00) of such money shall be paid to Seller
in addition to the purchase price payable.
ARTICLE X
SELLER'S OBLIGATIONS AT CLOSING
-------------------------------
At the closing, Seller shall do the following:
a. Deliver to Purchaser a Special Warranty Deed covering the
Subject Property, duly signed and acknowledged by Seller,
which deed shall be in form reasonably acceptable to Purchaser
for recording and shall convey to Purchaser good and
marketable title to the Subject Property, as is and where is
without warranty as to condition or suitability of any
particular purpose, free and clear of all liens,
rights-of-way, easements, and other matters affecting title to
the Subject Property, except for the Permitted Exceptions.
b. Deliver or cause to be delivered to Purchaser, at Purchaser's
expense, an Owner Policy of Title Insurance (the "Title
Policy") covering the Subject Property, in the amount of the
purchase price, in the form described by the Texas State Board
of Insurance.
c. Deliver such evidence or other documents that may be
reasonably required by the Title Company evidencing the status
and capacity of Seller and the authority of the person or
persons who are executing the various documents on behalf of
Seller in connection with the sale of the Subject Property.
d. Deliver a non-withholding statement that will satisfy the
requirements of Section 1445 of the Internal Revenue Code so
that Purchaser is not required to withhold any portion of the
purchase price for payment to the Internal Revenue Service.
e. Deliver to Purchaser any other documents or items necessary or
convenient in the reasonable judgment of Purchaser to carry
out the intent of the parties under this Contract.
ARTICLE XI
PURCHASER'S OBLIGATIONS AT CLOSING
----------------------------------
At the closing, Purchaser shall deliver to Seller the purchase price
for the Subject Property in cash.
8
<PAGE> 9
ARTICLE XII
COSTS AND ADJUSTMENTS
---------------------
At closing, the following items shall be adjusted or prorated
between Seller and Purchaser:
a. Ad valorem taxes for the Subject Property for the current
calendar year shall be prorated as of the date of closing, and
Seller shall pay to Purchaser in cash at closing Seller's
prorata portion of such taxes. Seller's prorata portion of
such taxes shall be based upon taxes actually assessed for the
current calendar year.
b. All other closing costs, including but not limited to,
recording and escrow fees shall be divided equally between
Seller and Purchaser; provided, however, that Seller and
Purchaser shall each be responsible for the fees and expenses
of their respective attorneys.
Seller agrees to indemnify and hold Purchaser harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature, except as herein provided, brought by third parties and based on events
occurring on or before the date of closing and which are in any way related to
the ownership, maintenance, or operation of the Subject Property, and all
expenses related thereto, including, but not limited to, court costs and
attorney's fees.
Purchaser agrees to indemnify and hold Seller harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature, brought by third parties and based on events occurring subsequent to
the date of closing and which are in any way related to the ownership,
maintenance or operation of the Subject Property, and all expenses related
thereto, including, but not limited to, court costs and attorney's fees.
ARTICLE XIII
ENTRY ON PROPERTY
-----------------
Purchaser, Purchaser's agents, employees, servants, or nominees, are
hereby granted the right to enter upon the Subject Property at any time prior
to the closing for the purpose of inspecting the Subject Property and
conducting such surveys and/or engineering and mechanical tests as Purchaser
may deem necessary or advisable, any such surveys, inspections and tests to be
made at Purchaser's sole expense. Purchaser agrees to indemnify and hold Seller
harmless from and against any and all losses, damages, costs, or expenses
incurred by Seller as a result of any surveys, inspections or tests made by
Purchaser. Seller, Seller's agents, employees, servants, or nominees, are
hereby granted the right to enter upon the Subject Property after the closing
for the purpose of removing the house from the Subject Property and relocating
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<PAGE> 10
same on another piece of property. Any such move is to be made at Seller's sole
expense. Seller agrees to indemnify and hold Purchaser harmless from and
against any and all losses, damages, costs, or expenses incurred by Purchaser
as a result of the house-moving by Seller.
ARTICLE XIV
POSSESSION OF PROPERTY
----------------------
Possession of the Property free and clear of all uses and
encroachments, except the Permitted Exceptions, shall be delivered to Purchaser
at closing.
ARTICLE XV
NOTICES
-------
All notices, demands or other communications of any type given by the
Seller to the Purchaser, or by the Purchaser to the Seller, whether required by
this Contract or in any way related to the transaction contracted for herein,
shall be void and of no effect unless given in accordance with the provisions
of this paragraph. All notices shall be in writing and delivered to the person
to whom the notice is directed, either in person, by facsimile transmission, or
by United States Mail, as a registered or certified item, return receipt
requested. Notices delivered by mail shall be deemed given when deposited in a
post office or other depository under the care or custody of the United States
Postal Service, enclosed in a wrapper with proper postage affixed, addressed as
follows:
Seller: Ross J. Novelli, Sr.
------ Loraine P. Garland
Gary D. Martin
Patricia D. Owen
c/o Bay Reef Realty
16708-C San Luis Pass Rd.
Galveston, TX 77554
Telephone No.: (409) 737-2300
Facsimile No.: (409) 737-1932
Purchaser: Silverleaf Resorts, Inc.
---------- 1221 Riverbend Drive
Suite 120
Dallas, TX 75247
Telephone No.: (214) 631-1166
Facsimile No.: (214) 905-0514
10
<PAGE> 11
ARTICLE XVI
REMEDIES
--------
In the event that Seller fails to timely comply with all conditions,
covenants and obligations of Seller hereunder, such failure shall be an event
of default and Purchaser shall have the option (i) to terminate this contract
by providing written notice thereof to Seller, in which event the earnest money
(less $ 100.00) shall be returned immediately to Purchaser by the Title Company
and the parties hereto shall have no further liabilities or obligations one
unto the other; (ii) to waive any defect or requirement and close this
Contract; or (iii) sue Seller for specific performance.
In the event that Purchaser fails to timely comply with all
conditions, covenants, and obligations Purchaser has hereunder, such failure
shall be an event of default, and Seller's sole remedy shall be to receive the
earnest money. The earnest money is agreed upon by and between the Seller and
Purchaser as liquidated damages due to the difficulty and inconvenience of
ascertaining and measuring actual damages, and the uncertainty thereof, and no
other damages, rights, or remedies shall in any case be collectible,
enforceable, or available to the Seller other than in this paragraph defined,
and Seller shall accept the earnest money as Seller's total damages and relief.
ARTICLE XVII
ASSIGNMENT
----------
This Contract may be assigned by the Purchaser to any person, firm,
corporation or other entity which the Purchaser may, at its sole discretion,
chose, but only on condition that any such assignee must assume and agree to
perform all of Purchaser's obligations hereunder. Purchaser shall promptly
provide Seller with written notice of any assignment made pursuant to this
paragraph.
ARTICLE XVIII
INTERPRETATION AND APPLICABLE LAW
---------------------------------
This Agreement shall be construed and interpreted in accordance with
the laws of the State of Texas. Where required for proper interpretation, words
in the singular shall include the plural; the masculine gender shall include
the neuter and the feminine, and vice versa. The terms "successors and assigns"
shall include the heirs, administrators, executors, successors, and assigns, as
applicable, of any party hereto.
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<PAGE> 12
ARTICLE XIX
AMENDMENT
---------
This Contract may not be modified or amended, except by an agreement
in writing signed by the Seller and the Purchaser. The parties may waive any of
the conditions contained herein or any of the obligations of the other party
hereunder, but any such waiver shall be effective only if in writing and signed
by the party waiving such conditions and obligations.
ARTICLE XX
AUTHORITY
---------
Each person executing this Contract warrants and represents that he is
full authorized to do so.
ARTICLE XXI
ATTORNEY'S FEES
---------------
In the event it becomes necessary for either party to file a suit to
enforce this Contract or any provisions contained herein, the prevailing party
shall be entitled to recover, in addition to all other remedies or damages,
reasonable attorney's fees and costs of court incurred in such suit.
ARTICLE XXII
DESCRIPTIVE HEADINGS
--------------------
The descriptive headings of the several paragraphs contained in this
Contract are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
ARTICLE XXIII
ENTIRE AGREEMENT
----------------
This Contract (and the items to be furnished in accordance herewith)
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith. No representation,
warranty, covenant, agreement, or condition not expressed in this Contract
shall be binding upon the parties hereto or shall affect or be effective to
interpret, change, or restrict the provisions of this Contract.
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ARTICLE XXIV
MULTIPLE ORIGINALS ONLY
-----------------------
Numerous copies of this Contract may be executed by the parties
hereto. Each such executed copy shall have the full force and effect of an
original executed instrument.
ARTICLE XXV
ACCEPTANCE
----------
Purchaser shall have until 5:00 p.m., September 12, 1997, to execute
and return a fully executed original of this Contract to Seller, otherwise this
Contract shall become null and void. Time is of the essence of this Contract.
The date of execution of this Contract by Purchaser shall be the date of
execution of this Contract. If the final date of any period falls upon a
Saturday, Sunday, or legal holiday under the laws of the State of Texas, then
in such event the expiration date of such period shall be extended to the next
day which is not a Saturday, Sunday, or legal holiday under the laws of the
State of Texas.
ARTICLE XXVI
REAL ESTATE COMMISSION
----------------------
In the event this Contract closes, but not otherwise, Seller agrees to
pay at closing a real estate commission in the agreed amount between Seller
and Broker, such commission to be paid to Century 21 Bay Reef Realty. Seller
represents and warrants to Purchaser that Seller has not contacted or entered
into any agreement with any other real estate broker, agent, finder, or any
other party in connection with this transaction, and that Seller has not taken
any action which would result in any other real estate broker's, finder's, or
other fees or commissions being due and payable to any other party with respect
to the transaction contemplated hereby. Purchaser hereby represents and
warrants to Seller that Purchaser has not contacted or entered into any
agreement with any other real estate broker, agent, finder, or any other party
in connection with this transaction, and that Purchaser has not taken any
action which would result in any other real estate broker's, finder's, or other
fees or commissions being due or payable to any other party with respect to the
transaction contemplated hereby. Each party hereby indemnifies and agrees to
hold the other party harmless from any loss, liability, damage, cost, or
expense (including reasonable attorney's fees) resulting to the other party by
reason of a breach of the representation and, warranty made by such party
herein. Notwithstanding anything to the contrary contained herein, the
indemnities set forth in this Article XXVI shall survive to the closing.
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<PAGE> 14
EXECUTED on this 13th day of September, 1997.
SELLER:
-------
/s/ ROSS J.NOVELLI,SR.
---------------------------------
Ross J.Novelli,Sr.
/s/ LORAINE P. GARLAND
---------------------------------
Loraine P. Garland
/s/ GARY D. MARTIN
---------------------------------
Gary D. Martin
/s/ PATRICIA D. OWEN
---------------------------------
Patricia D. Owen
EXECUTED on this 13th day of September, 1997.
PURCHASER:
----------
SILVERLEAF RESORTS, INC.
By: /s/ ROBERT MEAD
---------------------------------
Name: Robert Mead
---------------------------------
Its: CEO
---------------------------------
RECEIPT OF EARNEST MONEY AND ONE (1) EXECUTED COUNTERPART OF THIS
CONTRACT IS HEREBY ACKNOWLEDGED: Contract was received at approximately 10:00AM
on 9-17-97. Earnest Money received in form of Silverleaf Vacation Club, Inc.
check #036322 Texas Commerce Bank in amount of $50,000.00 on 9-18-97 at 1:00 PM
TITLE COMPANY:
- --------------
STEWART TITLE COMPANY /
Galveston Division By: /s/ D.N. LERA
---------------------------------
Name: D. N. Lera
---------------------------------
Its: Vice Chairman
---------------------------------
14
<PAGE> 1
EXHIBIT 10.3
CONTRACT OF SALE
This Agreement is entered into by and between HARMON/KOVAL LIMITED
LIABILITY COMPANY ("Seller"), and SILVERLEAF RESORTS, INC., a Texas corporation
("Purchaser").
W I T N E S S E T H :
- - - - - - - - - -
FOR AND IN CONSIDERATION of the promises, undertakings, and mutual
covenants of the parties herein set forth, Seller hereby agrees to sell and
Purchaser hereby agrees to purchase and pay for all that certain property
hereinafter described in accordance with the following terms and conditions:
ARTICLE I
PROPERTY
--------
The conveyance by Seller to Purchaser shall be of all the following
described real property, together with all right, title and interest of Seller
in and to any all strips or gores, roads, easements, streets, and ways bounding
said property, and all rights of ingress and egress thereto, and shall include
all improvements and fixtures located or to be located on said property:
2.1 acres of land, more or less, located at the southeast
corner of Koval Lane and Harmon Avenue in Las Vegas, Clark
County, Nevada, and being identified for tax purposes as Clark
County Assessor's Parcel #162-21-701-001.
Hereafter the aforesaid real property is referred to collectively as the
"Subject Property."
ARTICLE II
PURCHASE PRICE
--------------
The purchase price to be paid by Purchaser to Seller for the Subject
Property shall be the sum of Two Million Six Hundred Thousand and No/100
Dollars ($2,600,000.00). The purchase price shall be payable all in cash at
the closing.
<PAGE> 2
ARTICLE III
EARNEST MONEY
-------------
Within two (2) business days after final execution of this Contract by
all parties hereto, Purchaser shall deliver Purchaser's check in the amount of
One Hundred Thousand and No/100 Dollars ($100,000.00) to Nevada Title Company,
3800 Howard Hughes Parkway, Suite 920, Las Vegas, Nevada 89169, Attn: Tina
Stitt (the "Title Company"). The Title Company shall immediately cash the
earnest money check and deposit the proceeds thereof in an interest bearing
account, the earnings from which shall accrue to the benefit of Purchaser
(hereinafter the proceeds of the earnest money check shall be referred to as
the "earnest money"). If Purchaser does not terminate this Contract during the
Contingency Period (as defined in Article V hereinbelow), then the Title
Company shall immediately disburse the entire $100,000.00 earnest money deposit
to Seller; upon such disbursement the $100,000.00 earnest money deposit shall
be non- refundable to the Purchaser except in the event of a default by Seller
hereunder, but, if this Contract closes, then the entire $100,000.00 earnest
money deposit shall be applied in partial satisfaction of the purchase price
payable at closing.
ARTICLE IV
PRE-CLOSING OBLIGATIONS OF SELLER
---------------------------------
Within five (5) business days from the date of execution of this
Contract, Seller shall furnish to Purchaser, each of the following
(collectively, the "Due Diligence Items"):
a. A current commitment (the "Title Commitment") for the
issuance of an owner's policy of title insurance to the Purchaser from
the Title Company, together with good and legible copies of all
documents constituting exceptions to Seller's title as reflected in
the Title Commitment; and
b. All information of any kind whatsoever in the
possession of Seller concerning possible development of the Subject
Property including, but not limited to, any and all plans for the
development of the Subject Property, any engineering studies of the
Subject Property, and information relating to obtaining the approval
of local governing bodies for the development of the Subject Property,
any information as to when construction on the Subject Property may
commence, any information regarding present or future zoning of the
Subject Property, and any information concerning the availability of
the utilities.
The Due Diligence Items shall be delivered by Seller to the office of
Purchaser's broker, Golden West Real Estate, Inc., and, upon such delivery,
Purchaser shall be deemed to be in
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receipt thereof for the purpose of commencing the time within which Purchaser
shall conduct its inspection as provided in Article V hereinbelow.
ARTICLE V
CONTINGENCY PERIOD
------------------
Purchaser shall have a period of four (4) business days following the
date on which Seller delivers the Due Diligence Items to Purchaser's broker in
accordance with Article IV hereinabove in which to review and approve each such
item (the "Contingency Period"). If the information to be provided pursuant to
Article IV reflects or discloses any defect, exception or other matter
affecting the Subject Property that is unacceptable to Purchaser, then prior to
the expiration of the Contingency Period Purchaser shall provide the Title
Company and Seller with written notice of Purchaser's objections. If no
objections are made Purchaser prior to the expiration of the Contingency
Period, then all contingencies shall be deemed waived by Purchaser, and the
earnest money shall be immediately released to Seller. If written objections
are made by Purchaser in a timely manner, Seller may, at its sole option, elect
to cure or remove the objections raised by Purchaser; provided, however, that
Seller shall have no obligation to do so. Should Seller elect to attempt to
cure or remove the objections, Seller shall have ten (10) days from the date of
Purchaser's written notice of objections (the "Cure Period") in which to
accomplish the cure. In the event Seller either elects not to cure or remove
the objections or is unable to accomplish the cure prior to the expiration of
the Cure Period, then Seller shall so notify the Title Company and Purchaser in
writing specifying which objections Seller does not intend to cure, and then
Purchaser shall be entitled, as Purchaser's sole and exclusive remedies, either
to terminate this Contract by providing written notice of termination to Seller
within five (5) days from the date on which Purchaser receives Seller's no-cure
notice (in which case this Contract shall be cancelled, all earnest money shall
be immediately returned to Purchaser by the Title Company, and thereafter
neither Seller nor Purchaser shall have any continuing obligations one unto the
other) or waive the objections and close this transaction as otherwise
contemplated herein. If Purchaser shall fail to notify Seller in writing of
any objections to the state of Seller's title to the Subject Property as shown
by the Title
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<PAGE> 4
Commitment, then Purchaser shall be deemed to have no objections to the state
of Seller's title to the Subject Property as shown by the Title Commitment, and
any exceptions to Seller's title which have not been objected to by Purchaser
and which are shown in the Title Commitment shall be considered to be
"Permitted Exceptions." Failure to give notice of termination within the five
(5) day period shall constitute a waiver of all objections, and, in the event
of such waiver, the earnest money shall be immediately released to Seller by
the Title Company. It is further understood and agreed that any exceptions to
Seller's title which have been objected to by Purchaser and which are
subsequently waived by Purchaser shall be Permitted Exceptions.
ARTICLE VI
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLER
----------------------------------------------------
Seller represents and warrants to Purchaser that Seller will have at
closing good and indefeasible fee simple title to the Subject Property free and
clear of all liens, encumbrances, covenants, restrictions, rights-of-way,
easements, and any other matters affecting title to the Subject Property except
for the Permitted Exceptions.
Seller further covenants and agrees with Purchaser that, from the date
hereof until the closing, Seller shall not sell, assign, or convey any right,
title, or interest whatsoever in or to the Subject Property, or create or
permit to exist any lien, security interest, easement, encumbrance, charge, or
condition affecting the Subject Property (other than the Permitted Exceptions)
without promptly discharging the same prior to closing.
Seller hereby further represents and warrants to Purchaser, to the
best of Seller's knowledge, as follows:
a. There are no actions, suits, or proceedings pending
or, to the best of Seller's knowledge, threatened against Seller or
otherwise affecting any portion of the Subject Property, at law or in
equity, or before or by any federal, state, municipal, or other
governmental court, department, commission, board, bureau, agency, or
instrumentality, domestic or foreign;
b. The execution by Seller of this Contract and the
consummation by Seller of the sale contemplated hereby have been duly
authorized, and do not, and, at the closing date, will not, result in
a breach of any of the terms or provisions of, or constitute a default
under any indenture, agreement, instrument, or obligation to which
Seller is a party or by which the Subject Property or any portion
thereof is bound, and
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<PAGE> 5
do not, and at the closing date will not, constitute a violation of
any regulation affecting the Subject Property; and
c. Seller has not received any notice of any violation
of any ordinance, regulation, law, or statute of any governmental
agency pertaining to the Subject Property or any portion thereof.
All of the foregoing representations and warranties of Seller are made by
Seller both as of the date hereof and as of the date of the closing hereunder
and shall survive the closing hereunder. Notwithstanding the foregoing or
anything to the contrary contained herein, it is understood and agreed that the
representations and warranties set forth hereinabove shall survive the closing
of this Contract only for a period of two (2) years following the closing date,
but not thereafter, and Seller shall have no liability of any kind whatsoever
for any breach thereof except to the extent a claim is asserted against Seller
within such two (2) year period. If any representations and warranties set
forth herein are determined at any time on or before the date of closing to be
untrue or unfulfilled, then Purchaser, as Purchaser's sole and exclusive
remedy, may terminate this Contract by providing written notice of such
termination to Seller, in which event the earnest money shall be returned to
Purchaser and thereafter neither Seller nor Purchaser shall have any further
liabilities or obligations one unto the other.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
The obligation of Purchaser to close this Contract shall, at the
option of Purchaser, be subject to the following conditions precedent:
a. All of the representations, warranties and agreements
of Seller set forth in this Contract shall be true and correct in all
material respects as of the date hereof and at closing, and Seller
shall not have on or prior to closing, failed to meet, comply with or
perform in any material respect any conditions or agreements on
Seller's part as required by the terms of this Contract; and
b. There shall be no change in the matters reflected in
the Title Commitment, and there shall not exist any encumbrance or
title defect affecting the Subject Property not described in the Title
Commitment except for the Permitted Exceptions.
If any such condition is not fully satisfied by closing, Purchaser may
terminate this Contract by written notice to Seller whereupon this Contract
shall be cancelled, all earnest money shall be returned to Purchaser by Seller
and thereafter neither Seller nor Purchaser shall have any continuing
obligations one unto the other.
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ARTICLE VIII
CLOSING
-------
The closing hereunder shall take place at the offices of the Title
Company. The closing shall occur on or before August 7, 1997. Purchaser shall
notify Seller at least five (5) days in advance of the exact time and date of
closing.
Purchaser shall have the right to obtain three (3) successive thirty
(30) day extensions of the deadline for closing by delivering to Seller for
each such extension, prior to the then scheduled closing deadline, an
additional One Hundred Thousand and No/100 Dollars ($100,000.00) in
non-refundable earnest money. If Purchaser exercises this right, then the
deadline for closing of this Contract shall be extended by thirty (30) days in
each instance, and, in each such instance, the purchase price for the Subject
Property shall be increased by Thirty Thousand and No/100 Dollars ($30,000.00).
Each additional $100,000.00 in earnest money which is paid by Purchaser in
order to extend the deadline for closing of this Contract shall be delivered
directly to Seller and shall be non-refundable to Purchaser except in the event
of a default by Seller hereunder, but, if this Contract closes, then any
additional earnest money shall be applied in partial satisfaction of the
purchase price payable hereunder subject to the $30,000.00 increase in purchase
price for each such extension.
ARTICLE IX
SELLER'S OBLIGATIONS AT CLOSING
-------------------------------
At the closing, Seller shall do the following:
a. Deliver to Purchaser a grant bargain and sale deed
covering the Subject Property, duly signed and acknowledged by Seller,
which deed shall be in form reasonably acceptable to Purchaser for
recording and shall convey to Purchaser good and marketable title to
the Subject Property, free and clear of all liens, rights-of-way,
easements, and other matters affecting title to the Subject Property,
except for the Permitted Exceptions.
b. Deliver or cause to be delivered to Purchaser an ALTA
Standard Owner Policy of Title Insurance (the "Title Policy") insuring
Purchaser in the amount of the purchase price that Purchaser has
acquired good and marketable title to the Subject Property, subject
only to the standard printed exceptions and the Permitted Exceptions.
Purchaser shall be entitled to request the Title Company to provide at
Purchaser's sole cost and expense, such endorsements (or amendments)
to the Title Policy as Purchaser may reasonably require so long as
such endorsements or amendments are at no cost to Seller nor impose
additional liability on Seller nor delay the closing. Purchaser shall
be responsible for paying the cost of the Title Policy.
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<PAGE> 7
c. Deliver such evidence or other documents that may be
reasonably required by the Title Company evidencing the status and
capacity of Seller and the authority of the person or persons who are
executing the various documents on behalf of Seller in connection with
the sale of the Subject Property.
d. Deliver a non-withholding statement that will satisfy
the requirements of Section 1445 of the Internal Revenue Code so that
Purchaser is not required to withhold any portion of the purchase
price for payment to the Internal Revenue Service.
e. Deliver to Purchaser any other documents or items
necessary or convenient in the reasonable judgment of Purchaser to
carry out the intent of the parties under this Contract.
ARTICLE X
PURCHASER'S OBLIGATIONS AT CLOSING
----------------------------------
At the closing, Purchaser shall deliver to Seller the purchase price
for the Subject Property in cash.
ARTICLE XI
COSTS AND ADJUSTMENTS
---------------------
At closing, the following items shall be adjusted or prorated between
Seller and Purchaser:
a. Ad valorem taxes for the Subject Property for the
current calendar year shall be prorated as of the date of closing, and
Seller shall pay to Purchaser in cash at closing Seller's prorata
portion of such taxes. Seller's prorata portion of such taxes shall
be based upon taxes actually assessed for the current calendar year.
b. All other closing costs, including but not limited
to, recording and escrow fees shall be divided equally between Seller
and Purchaser; provided, however, that Seller and Purchaser shall each
be responsible for the fees and expenses of their respective
attorneys.
Seller agrees to indemnify and hold Purchaser harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature (except those items which under the terms of this Contract specifically
become the obligation of Purchaser), brought by third parties and based on
events occurring on or before the date of closing and which are in any way
related to the ownership, maintenance, or operation of the Subject Property,
and all expenses related thereto, including, but not limited to, court costs
and attorneys' fees.
Purchaser agrees to indemnify and hold Seller harmless of and from any
and all liabilities, claims, demands, suits, and judgments, of any kind or
nature, brought by third parties
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<PAGE> 8
and based on events occurring subsequent to the date of closing and which are
in any way related to the ownership, maintenance or operation of the Subject
Property, and all expenses related thereto, including, but not limited to,
court costs and attorneys' fees.
ARTICLE XII
ENTRY ON PROPERTY
-----------------
Purchaser, Purchaser's agents, employees, servants, or nominees, are
hereby granted the right to enter upon the Subject Property at any time prior
to closing for the purpose of inspecting the Subject Property and conducting
such engineering and mechanical tests as Purchaser may deem necessary or
advisable, any such inspections and tests to be made at Purchaser's sole
expense. Purchaser agrees to indemnify and hold Seller harmless from and
against any and all losses, damages, costs, or expenses incurred by Seller as a
result of any inspections or tests made by Purchaser. Purchaser agrees to
provide to Seller copies of any and all reports generated as a result of
Purchaser's inspections of the Subject Property.
ARTICLE XIII
POSSESSION OF PROPERTY
----------------------
Possession of the Property free and clear of all uses and
encroachments, except the Permitted Exceptions, shall be delivered to Purchaser
at closing.
ARTICLE XIV
NOTICES
-------
All notices, demands, or other communications of any type given by the
Seller to the Purchaser, or by the Purchaser to the Seller, whether required by
this Contract or in any way related to the transaction contracted for herein,
shall be void and of no effect unless given in accordance with the provisions
of this paragraph. All notices shall be in writing and delivered to the person
to whom the notice is directed, either in person, by facsimile transmission, or
by United States Mail, as a registered or certified item, return receipt
requested. Notices delivered by mail shall be deemed given when deposited in a
post office or other depository under the care
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or custody of the United States Postal Service, enclosed in a wrapper with
proper postage affixed, addressed as follows:
Seller: Harmon/Koval Limited Liability Company
------ c/o Compass Realty
3900 Paradise Road, Suite 185
Las Vegas, Nevada 89109
Purchaser: Silverleaf Resorts, Inc.
--------- 1221 Riverbend Drive
Suite 120
Dallas, Texas 75247
Telephone No.: (214) 631-1166
Facsimile No.: (214) 905-0514
ARTICLE XV
REMEDIES
--------
In the event that Seller fails to timely comply with all conditions,
covenants and obligations of Seller hereunder, such failure shall be an event
of default and Purchaser shall have the option (i) to terminate this Contract
by providing written notice thereof to Seller, in which event the earnest money
(less $100.00) shall be returned immediately to Purchaser by the Title Company
and the parties hereto shall have no further liabilities or obligations one
unto the other; (ii) to waive any defect or requirement and close this
Contract; or (iii) sue Seller for specific performance.
In the event that Purchaser fails to timely comply with all
conditions, covenants, and obligations Purchaser has hereunder, such failure
shall be an event of default, and Seller's sole remedy shall be to receive the
earnest money. The earnest money is agreed upon by and between the Seller and
Purchaser as liquidated damages due to the difficulty and inconvenience of
ascertaining and measuring actual damages, and the uncertainty thereof, and no
other damages, rights, or remedies shall in any case be collectible,
enforceable, or available to the Seller other than in this paragraph defined,
and Seller shall accept the earnest money as Seller's total damages and relief.
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ARTICLE XVI
ASSIGNMENT
----------
This Contract may be assigned by the Purchaser to any person, firm,
corporation or other entity which the Purchaser may, at its sole discretion,
chose, but only on condition that any such assignee must assume and agree to
perform all of Purchaser's obligations hereunder. Purchaser shall promptly
provide Seller with written notice of any assignment made pursuant to this
paragraph.
XVII
INTERPRETATION AND APPLICABLE LAW
---------------------------------
This Agreement shall be construed and interpreted in accordance with
the laws of the State of Nevada. Where required for proper interpretation,
words in the singular shall include the plural; the masculine gender shall
include the neuter and the feminine, and vice versa. The terms "successors and
assigns" shall include the heirs, administrators, executors, successors, and
assigns, as applicable, of any party hereto.
XVIII
AMENDMENT
---------
This Contract may not be modified or amended, except by an agreement
in writing signed by the Seller and the Purchaser. The parties may waive any
of the conditions contained herein or any of the obligations of the other party
hereunder, but any such waiver shall be effective only if in writing and signed
by the party waiving such conditions and obligations.
ARTICLE XIX
AUTHORITY
---------
Each person executing this Contract warrants and represents that he is
fully authorized to do so.
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ARTICLE XX
ATTORNEYS' FEES
---------------
In the event it becomes necessary for either party to file a suit to
enforce this Contract or any provisions contained herein, the prevailing party
shall be entitled to recover, in addition to all other remedies or damages,
reasonable attorneys' fees and costs of court incurred in such suit.
ARTICLE XXI
DESCRIPTIVE HEADINGS
--------------------
The descriptive headings of the several paragraphs contained in this
Contract are inserted for convenience only and shall not control or affect the
meaning or construction of any of the provisions hereof.
ARTICLE XXII
ENTIRE AGREEMENT
----------------
This Contract (and the items to be furnished in accordance herewith)
constitutes the entire agreement between the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith. No representation,
warranty, covenant, agreement, or condition not expressed in this Contract
shall be binding upon the parties hereto or shall affect or be effective to
interpret, change, or restrict the provisions of this Contract.
ARTICLE XXIII
MULTIPLE ORIGINALS ONLY
-----------------------
Numerous copies of this Contract may be executed by the parties
hereto. Each such executed copy shall have the full force and effect of an
original executed instrument.
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ARTICLE XXIV
ACCEPTANCE
----------
Seller shall have until 5:00 o'clock p.m., July 7, 1997, to execute
and return a fully executed original of this Contract to Purchaser, otherwise
this Contract shall become null and void. Time is of the essence of this
Contract. The date of execution of this Contract by Seller shall be the date
of execution of this Contract. If the final date of any period falls upon a
Saturday, Sunday, or legal holiday under the laws of the State of Nevada, then
in such event the expiration date of such period shall be extended to the next
day which is not a Saturday, Sunday, or legal holiday under the laws of the
State of Nevada.
ARTICLE XXV
REAL ESTATE COMMISSION
----------------------
In the event that this Contract closes, but not otherwise, Seller
agrees to pay at closing a real estate commission in the amount of eight
percent (8%) of the purchase price payable hereunder, such commission to be
divided equally between Compass Realty (Seller's representative) and Golden
West Real Estate, Inc. (Purchaser's Representative). Seller represents and
warrants to Purchaser that Seller has not contacted or entered into any
agreement with any real estate broker, agent, finder, or any other party in
connection with this transaction, and that Seller has not taken any action
which would result in any real estate broker's, finder's, or other fees or
commissions being due and payable to any other party with respect to the
transaction contemplated hereby. Purchaser hereby represents and warrants to
Seller that Purchaser has not contracted or entered into any agreement with any
real estate broker, agent, finder, or any other party in connection with this
transaction, and that Purchaser has not taken any action which would result in
any real estate broker's, finder's, or other fees or commissions being due or
payable to any other party with respect to the transaction contemplated hereby.
Each party hereby indemnifies and agrees to hold the other party harmless from
any loss, liability, damage, cost, or expense (including reasonable attorneys'
fees) resulting to the other party by reason of a breach of the representation
and warranty made by such party herein.
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Notwithstanding anything to the contrary contained herein, the indemnities set
forth in this Article XXV shall survive the closing.
EXECUTED on this the 7th day of July, 1997.
SELLER:
HARMON/KOVAL LIMITED LIABILITY COMPANY
LAGUANA CONSOLIDANTS, LLC
By: /s/ ROBERT SCHULMAN
----------------------------------
Name: Robert Schulman
----------------------------------
Its: President
----------------------------------
EXECUTED on this the 3rd day of July, 1997.
PURCHASER:
---------
SILVERLEAF RESORTS, INC.
By: /s/ ROBERT MEAD
----------------------------------
Name: Robert Mead
--------------------------------
Its: CEO
---------------------------------
RECEIPT OF EARNEST MONEY AND ONE (1) EXECUTED COUNTERPART OF THIS CONTRACT IS
HEREBY ACKNOWLEDGED:
TITLE COMPANY:
NEVADA TITLE COMPANY
By:
---------------------------------
Name:
--------------------------------
Its:
--------------------------------
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EXHIBIT 10.4
SECOND AMENDMENT TO RESTATED AND AMENDED LOAN AND SECURITY AGREEMENT
This Second Amendment to Restated and Amended Loan and Security
Agreement ("Amendment") dated this 31st day of October, 1997 is made by and
between Heller Financial, Inc., a Delaware corporation ("Lender"), whose
address is 500 West Monroe, Chicago, Illinois 60661 Attn: Portfolio Manager,
Vacation Ownership HFI Loan No. 94-117 and Silverleaf Resorts, Inc., a Texas
corporation f/k/a Silverleaf Vacation Club, Inc., f/k/a Ascension Capital
Corporation, successor by merger to Ascension Resorts, Ltd., a Texas limited
partnership d/b/a Silverleaf Resorts, Ltd. (Borrower"), whose address is 1221
Riverbend, Suite 120, Dallas, Texas 75247.
Recitals:
A. Borrower and Lender entered into that certain Loan and
Security Agreement dated as of October 11, 1994 pursuant to which Lender made
Borrower a $5,000,000 revolving receivables loan ("Loan").
B. The Loan was amended to reflect the merger of the Borrower
into its general partner pursuant to the Amendment to Loan and Security
Agreement between Borrower and Lender dated December 6, 1995.
C. The Loan was modified and increased by an additional
$5,000,000 to $10,000,000 pursuant to the Loan Modification Agreement between
Borrower and Lender dated April 19, 1995.
D. The Loan was modified and increased by an additional
$5,000,000 to $15,000,000 pursuant to the Restated and Amended Loan and
Security Agreement between Borrower and Lender dated December 27, 1995.
E. The Loan was amended to revise the procedure for making
advances and for a funding option pursuant to the Amendment to Restated and
Amended Loan and Security Agreement between Borrower and Lender dated February
28, 1996 ("February 1996 Amendment").
F. The Loan was modified and increased by an additional
$10,000,000 to $25,000,000 pursuant to the Amendment to Restated and Amended
Loan and Security Agreement ("Second Restated Agreement") between Borrower and
Lender dated August 15, 1996.
G. The Loan was amended to add provisions regarding Biennial
Time-Share Interests pursuant to a letter agreement between Maker and Holder
dated March 31, 1997.
H. The parties wish to amend the Second Restated Agreement and
the Documents (as defined in the Second Restated Agreement) to
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<PAGE> 2
increase the amount of the Loan by an additional $15,000,000 to $40,000,000
("Loan Increase") and make additional related changes on the terms and
conditions as set forth in this Amendment.
In consideration of the mutual covenants and promises set forth in
this Amendment, the receipt and adequacy of which are acknowledged, the parties
agree as follows:
1. The Recitals set forth above are true and correct and are
incorporated in this Amendment by reference.
2. The referenced definitions in Article 1 entitled "Definitions
are amended as follows:
a. Section 1.8 is deleted in its entirety and replaced
with the following:
1.8 "Borrower": Silverleaf Resorts, Inc., a Texas
corporation, formerly known as Silverleaf Vacation Club, Inc.,
a Texas corporation, formerly known as Ascension Capital
Corporation, successor by merger to Ascension Resorts, Ltd.,
a Texas limited partnership, d/b/a Silverleaf Resorts, Ltd. and
subject to the restrictions on merger, consolidation, and
assignment contained in the Documents, its successors and
assigns.
b. Section 1.8A is added as follows:
1.8A "Borrower Mortgage": a mortgage or deed of trust in form
and substance satisfactory to Lender from Borrower to Lender
pledging to Lender a first priority lien subject only to the
Permitted Encumbrances on Borrower's Fee Simple Time-Share
Interest in any Time-Share Interest which is subject to a
Contract for Deed and for which an Advance is given by Lender.
The form of the Borrower Mortgage will be substantially in the
form of Exhibit M attached to this Amendment.
C. Section 1.9A is added as follows:
1.9A "Breakage Fee": the breakage fee for the Loan
Increase shall be $100,000 payable by Borrower to Lender on
the Closing Date.
d. Section 1.10 is deleted in its entirety and replaced
with the following:
1.10 "Borrowing Term": the period commencing on the date
of this Amendment and ending on the close of Lender's normal
business hours on the date (or if not a Business Day, the
first Business Day thereafter) which is thirty-six (36) months
from the date of this Amendment.
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<PAGE> 3
e. Section 1.14 is amended to add the following: "The
Commitment Fee for the Loan Increase shall be $150,000 payable by Borrower to
Lender on the Closing Date."
f. Section 1.14A is added as follows:
1.14A "Construction Loan": the construction loan in the
amount up to $10,000,000 evidenced by the Construction Loan Agreement,
Promissory Note, Mortgage, and related documents from Borrower in favor of
Lender, all of even date herewith.
g. Section 1.14B is added as follows:
1.14B "Contract for Deed": an installment sales contract
between Borrower and a Purchaser pursuant to which the Purchaser is obligated,
among other things, to pay the entire purchase price for a Time-Share Interest
prior to delivery of a deed for such Time-share Interest.
h. Section 1.15 regarding "Custodian" is amended to
delete "Comerica Bank-Texas, a Texas banking corporation" and replace it with
"Heller Financial, Inc., a Delaware corporation."
i. Section 1.25 regarding "Fee Simple Time-Share
Interest" is amended to add "or 1/52" after "1/50" and to add "as provided in
the applicable Time-Share Declaration" after "Unit."
j. Section 1.28 regarding "Instrument" is amended to
add the phrase "or Contract for Deed" after "promissory note."
k. Section 1.33 is amended to delete "5.5(b)" and
replace it with "5.4(a)."
1. Section 1. 34 is deleted in its entirety and
replaced with the following:
1.34 "Management Agreement": (a) that certain Management Agreement entered
into as of March 28, 1990, by and between MEEC and Borrower as amended by First
Amendment to Management Agreement entered into as of January 1, 1993; and as
the same is to be amended to add the Resorts known as Timber Creek Resort and
Fox River Resort; and (b) that certain Master Club Agreement entered into as of
March 28, 1990, by and between MEEC and Ozark Mountain Resort Club, a Missouri
non-profit corporation, Holiday Hills Resort Club, a Missouri non-profit
corporation, Holly Lake Resort Club, a Texas non-profit unincorporated
association, Villages Resort Club, a Texas non-profit unincorporated
association, Piney Shores Resort Club, a Texas non-profit unincorporated
association, and Hill Country Resort Club, a Texas non-profit unincorporated
association, as amended by First Amendment to Master Club Agreement entered
into as of March 28, 1990, and as the same is to be amended to add the
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<PAGE> 4
Timber Creek Resort Club, a Missouri non-profit corporation and the Fox River
Resort Club, an Illinois non-profit corporation.
m. Section 1.36 is deleted in its entirety and replaced
with the following:
1.36 "Maturity Date": Sixty months following the,
expiration of the Borrowing Term.
n. Section 1.37 is amended to delete "Twenty-Five
Million United States Dollars ($25,000,000) "and replace it with "Forty
Million United States Dollars ($40,000,000)."
o. Section 1.39A is amended to delete "$25,000,000" and
replace it with "$40,000,000."
p. Section 1.41 is deleted in its entirety and replaced
with the following:
1.41 "Note": the promissory note evidencing the Loan in
the amount of $40,000,000 executed and delivered by Borrower to Lender
concurrently herewith and attached as Exhibit D.
q. Section 1.43 regarding "Opening Prepayment Date" is
deleted in its entirety.
r. Section 1.47 regarding "Prepayment Premium" is
deleted in its entirety.
s. Section 1.49 regarding "Purchaser Mortgage" is
deleted in its entirety and replaced with the following:
1.49 "Purchaser Mortgage": the purchase money mortgage or
purchase money deed of trust executed by a Purchaser,
encumbering all of the right, title, and interest of each such
Purchaser in and to its Fee Simple Time-Share Instrument as
security for such Purchaser's obligations under any
Instrument.
t. Section 1.51 is amended to add "or Contracts for
Deed" after "Purchaser Mortgages."
u. Section 1.52 is amended to add "or Contracts for
Deed" after "purchase agreements."
v. Section 1.54 is deleted in its entirety and replaced
with the following:
1.54 "Resorts": the projects legally described as the Real
Property and developed by Silverleaf Resorts, Inc., a Texas
corporation, formerly known as Silverleaf
-4-
<PAGE> 5
Vacation Club, Inc., a Texas corporation, formerly known as
Ascension Capital Corporation, successor by merger to
Ascension Resorts, Ltd., a Texas limited partnership, d/b/a
Silverleaf Resorts, Ltd. and which include the following
Time-Share Projects: Holly Lake; Piney Shores Resort; The
Villages; Hill Country Resort; Ozark Mountain Resort; Holiday
Hills Resort; Fox River Resort; and Timber Creek Resort.
w. Section 1.56 is deleted in its entirety and replaced
with the following:
1.56 "Revolving Receivables Loan": the $40,000,000 loan
evidenced by the Note from Borrower in favor of Lender in the
form of Exhibit D.
x. Section 1.64 is amended to add the following language
to the end of the sentence:
"Fox River Resort Club, an Illinois non-profit corporation,
and Timber Creek Resort Club, a Missouri non-profit
corporation."
y. Section 1.69 is amended to add "or Contract for Deed"
after "Purchaser Mortgage."
z. Section 1.72 is amended to delete "Purchaser
Mortgage."
aa. Section 1.73 is amended to delete "Purchaser Mortgage"
after "Title Policy" and to add "or Contract for Deed, as applicable" after
"Purchaser Mortgage."
2. All definitions as amended by this Amendment and used in the
Second Restated Agreement and in any of the Documents shall have the meaning
set forth in this Amendment.
3. Section 2.3 is amended to add to the end of the second
sentence "and to pay off the existing balance of the Revolving Inventory Loan."
4. Section 3.4 is added as follows:
3.4 To secure the Performance of all of the Obligations,
Borrower grants to Lender a Security Interest in and assigns to
Lender the collateral securing the Construction Loan. Such
Security Interest shall be absolute, continuing and applicable
to initial and subsequent Advances and to all of the
Obligations. In addition, to secure the Performance of
Borrower's obligations required pursuant to the documents
evidencing the Construction Loan, Borrower grants to Lender a
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<PAGE> 6
Security Interest in and assigns to Lender the Collateral.
5. Article 4 entitled "Advances" is amended as follows:
a. Section 4.1 is amended to delete "the Initial
Advance" and replace it with "all Advances."
b. Section 4.1(a) is amended to add the following to the
beginning of the sentence:
To the extent not previously delivered to Lender and approved
by Lender in writing or unless otherwise waived by Lender in
writing,
c. Section 4.1(b) is amended to add the following to the
beginning of the sentence:
To the extent not previously delivered to Lender and approved
by Lender in writing or unless otherwise waived by Lender in
writing,
d. Section 4.1(b)(i) is amended to delete "and its
General Partner, and," and to delete "their" and replace it with "its."
e. Section 4.1(b)(ii) is amended to delete "their
respective" and replace it with "its."
f. Section 4.1(b)(iv) is amended to delete "Purchaser
Mortgage."
g. Section 4.1(b)(xiv) is added as follows:
(xiv) a copy of the memorandum of contract for deed which
will be used by Borrower and which shall be in form and
substance approved by Lender.
h. Section 4.2 is amended to delete "General Partner of."
i. Section 4.5 is amended to add "also", before "shall."
j. Section 4.6 is deleted.
6. Section 5 entitled "Note, Maintenance of Borrowing Base; Payments;
Servicing and Collection" is amended as follows:
a. Section 5.3 is deleted in its entirety and replaced
with the following:
Maker may prepay the Loan in full at any time without
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<PAGE> 7
penalty. Provided, however, that during the Borrowing Term,
Maker shall maintain an average outstanding balance of the
principal on the Note of $5,000,000 to be calculated each
month ("Average Balance"). If Maker fails to maintain the
Average Balance for a given month, Holder shall notify Maker
and Maker shall, within thirty days ("Cure Period"), increase
the Average Balance to $5,000,000, failing which Maker shall
pay to Holder a fee of $10,000 on the first day of the month
following the Cure Period. Any payment of the $10,000 shall
not be construed as relieving the Maker's obligation to
maintain the Average Balance and shall not be applied to the
calculation of the Average Balance.
b. Section 5.7 is deleted in its entirety.
7. Article 6 entitled "Borrower's Representations, Warranties,
and Covenants" is amended as follows:
a. Section 6.3(b) is amended to add the following to the
end of the last sentence: ", and including, without limitation, all state and
federal land sales acts."
b. Section 6.7(d) is deleted in its entirety.
C. Section 6.7(e) is deleted in its entirety and
replaced with the following:
change in any material way the every day involvement of Robert
Mead as the Chief Executive Officer of Borrower, provided that
Lender will not unreasonably withhold its consent to such
change;
d. Section 6.11 is amended to add the following to the
end of the paragraph:
Borrower represents and warrants that there currently is no
indebtedness which must be subordinated to the obligations in
accordance with this Section.
e. Section 6.14(a) is amended to add the following to
the end of the second sentence:
Borrower shall pay an additional $150,000 Commitment Fee and
$100,000 Breakage Fee to Lender for the Loan Increase at the
time of execution of this Amendment.
f. Section 6.14(b) is deleted in its entirety and
replaced with the following:
6.14(b) Borrower shall pay Lender's attorneys, fees in the
amount of $30,000.00 in connection with the
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<PAGE> 8
Construction Loan and the increase in the Revolving
Receivables Loan contemporaneously with the execution of this
Amendment.
g. Section 6.16 is deleted in its entirety.
h. Section 6.17 is amended to delete "6,000,000" and
replace it with "$58,000,000."
i. Section 6.18 is deleted.
j. Section 6.21 is amended to add "or any other party"
after "Other Lenders."
k. Section 6.22 is deleted in its entirety and replaced
with the following:
6.22 At all times that this Revolving Receivables Loan is
outstanding, Borrower will maintain a minimum liquidity of
$5,000,000 in cash plus outstanding balances of unpledged
Contracts for Deed or Purchaser promissory notes and a maximum
ratio of senior institutional debt (which does not include
debt evidenced by the subordinated debentures) to net worth of
2.5:1, all in accordance with generally accepted accounting
principles ("GAAP"). For purposes of this section, (a) net
worth shall mean total assets less total liabilities as
determined in accordance with GAAP and (b) subordinated
debentures shall mean debentures with an aggregate principal
amount of not greater than $110,000,000 which have a maturity
date of not longer than ten years, issued by Borrower in a
single public offering which debentures shall be expressly
subordinate to the Construction Loan, this Loan, and other
indebtedness of Borrower to Lender from any source whatsoever.
l. Section 6.23 is added as follows:
6.23 Borrower acknowledges that Lender has not, with
regard to the Resorts, (a) participated in management; (b)
exercised any decision-making control over environmental
compliance issues or disposal practices; (c) assumed
responsibility for day-to-day decision-making with respect to
environmental matters; or (d) assumed responsibility for all
or substantially all operational functions as those terms are
used in the Asset Conservation, Lender Liability and Deposit
Insurance Protection Act of 1996 ("Act"). Borrower represents,
warrants, and agrees that it has responsibility for all
environmental compliance at the Resorts. Borrower
acknowledges and agrees that (a) any environmental inspections
or tests performed or provided at the request
-8-
<PAGE> 9
of Lender are related to the protection of the Lender's
security interests in the Collateral, and (b) that any actions
with respect to recommendations of or actions taken with
regard to environmental compliance by Lender, including the
prosecution of any and all permits, licenses, or approvals,
and compromise of any violations, would be made as part of an
effort to mitigate, prevent, or cure any decrease in value of
the Collateral, as those terms are used in the Act. These
representations, warranties, and agreements shall survive the
execution and termination or completion of this Agreement.
8. Borrower reaffirms and ratifies all of the representations,
warranties, and covenants set forth in Article 6 as amended by this Amendment.
9. Article 7 entitled "Default" is amended as follows:
a. Section 7.1(c) is amended to delete "6.18."
b. Section 7.1(e) is amended to add the following to the
end of the sentence: "or any and all documents evidencing the Construction
Loan."
c. Section 7.1(l) is deleted.
d. Section 7.1(m) is deleted in its entirety and
replaced with the following: "a default in any agreement between Borrower and
Lender evidencing, guaranteeing, or securing borrowed money."
d. Section 7.2(b) is amended to delete "prepayment
premiums and."
e. Section 7.6 is amended to delete the words "any
Guarantor."
10. Section 8 entitled "Construction and General Terms" is amended
as follows:
a. Section 8.5 is deleted.
b. Section 8.11 is amended to delete "8.5" and replace
it with "9.3" and to delete "Loan" before "Agreement."
11. Section 9.3 is amended to add "confirmed" before
"transmission."
12. Paragraph I of the February 1996 Amendment is deleted in its
entirety and replaced with the following:
1. Notwithstanding anything to the contrary contained in the
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<PAGE> 10
Loan Agreement and, in particular, in subparagraph (f) of Exhibit I to
the Loan Agreement, the parties agree that Lender, subject to the
conditions precedent to any Advance set forth in the Loan Agreement,
will make Advances without requiring Borrower to furnish a Title
Policy at the same time each Advance is made, but only on the
condition that, within sixty (60) days after each Advance has been
made, Borrower must provide Lender with a Title Policy insuring
Lender's interest in twenty percent (20%) of the Purchaser Mortgages
which have been assigned to Lender or Borrower Mortgages which have
been granted to Lender in connection with such Advance. Lender shall
have the right to designate which Purchaser Mortgages or Borrower
Mortgages shall be insured under such Title Policy, but only twenty
percent (20%) of the Purchaser Mortgages which have been assigned to
Lender or Borrower Mortgages which have been granted to Lender in
connection with such Advance will be insured. Notwithstanding the
foregoing, if Lender determines that title to the Purchaser Mortgages
which have been assigned to Lender or Borrower Mortgages which have
been granted to Lender in connection with any Advance is in any way
defective, then if Lender determines that such defect does not
constitute an Event of Default, in the future the Title Policy which
Borrower shall provide Lender within sixty (60) days of an Advance
must insure Lender's interest in one-hundred percent (100%) of the
Purchaser Mortgages or Borrower Mortgages covered thereby; provided,
however, that nothing in this paragraph shall be construed as Lender's
waiver of its rights as set forth in Article 7 or as obligating the
Lender to provide any additional Advance or Advances.
13. The List of Exhibits is deleted and replaced with the List of
Exhibits attached to this Amendment.
14. Schedule 1 is deleted in its entirety. Exhibits "A" through
"L" are deleted in their entirety and replaced with Exhibits "A" through "L"
attached to this Amendment. The Amended and Restated Environmental Certificate
With Representations, Covenants, and Warranties attached to this Amendment as
Exhibit "C" shall be executed by Borrower and delivered to Lender. The Note
evidencing the Loan in the principal amount of $40,000,000 attached to this
Amendment as Exhibit "D" shall be executed by Borrower and delivered to
Lender.
15. Borrower represents and warrants that to Lender that (i) all
Documents are valid and binding obligations of Borrower, enforceable in
accordance with their respective terms; and (ii) no payment of interest which
has been made to the Lender nor contracted to be made to Lender has resulted in
the computation or earning of interest in excess of the maximum lawful rate.
16. The Documents are ratified, confirmed, and approved in
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<PAGE> 11
all respects by Borrower.
17. Except as modified by this Amendment, all other terms and
conditions of the Second Restated Agreement and other Documents shall remain in
full force and effect.
18. This Amendment shall be governed by and construed in
accordance with the internal laws of the state of Illinois.
19. The invalidity, illegality, or unenforceablility of any
provision of this Amendment shall not affect or impair the validity, legality,
or enforceability of the remainder of this Amendment, and to this end, the
provisions of this Amendment are severable.
20. This Amendment shall be binding on, and shall inure to the
benefit of, the respective successors and assigns of the Borrower and the
Lender.
In witness whereof, the parties have executed this Amendment on the
date first written above.
WITNESSES HELLER FINANCIAL, INC.
/s/ KATE DARCY
- ----------------------------- By: /s/ ELISA NICELY
/s/ MARY GORMAN --------------------------
- -----------------------------
Title: Assistant Vice President
SILVERLEAF RESORTS, INC.
/s/ SANDRA CEARLEY
- ----------------------------- By: /s/ ROBERT MEAD
--------------------------
/s/ GEORGE R. BEDELL Robert Mead
- ----------------------------- Chief Executive Officer
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<PAGE> 12
<TABLE>
<CAPTION>
List of Exhibits
----------------
<S> <C>
Exhibit A Assignment of Contracts for Deed
Assignment of Deeds of Trust
Assignment of Mortgages
Exhibit B Conditions of Eligible Instrument
(Contract for Deed)
Conditions of Eligible Instrument
(Purchaser Mortgage)
Exhibit C Environmental Certificate
Exhibit D Promissory Note
Exhibit E Permitted Encumbrances
Exhibit F Description of Time-Share Projects
Exhibit G Borrower's Certificate
Exhibit H Re-Assignment of Contracts for Deed
Re-Assignment of Deeds of Trust
Re-Assignment of Mortgages
Exhibit I Additional Conditions to Advances
(Contract for Deed)
Additional Conditions to Advances
(Purchaser Mortgage)
Exhibit J Request for Advance and Certification
Exhibit K Real Property Description
Exhibit L Personal Property Description
Exhibit M Borrower Mortgage (IL, MO, TX)
</TABLE>
[The above listed Exhibits are omitted from this filing. Registrant agrees to
furnish supplementally a copy of any Exhibit to the Commission upon request.]
<PAGE> 1
EXHIBIT 10.5
CONSTRUCTION
LOAN AGREEMENT
BETWEEN HELLER FINANCIAL, INC., AS LENDER
AND
SILVERLEAF RESORTS, INC., AS BORROWER
October 31, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
TABLE OF CONTENTS TO BE MODIFIED
<S> <C>
SECTION 1 ADVANCES OF THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Commitment of Lender; Advances . . . . . . . . . . . . . . . . . . . . . . . . . 1
a. Construction Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(i) Advance Request Procedures . . . . . . . . . . . . . . . . . . . . . . 1
(ii) Limitations on Advances . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Maximum Construction Loan Balance . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Term of Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Conditions Precedent to First Advances . . . . . . . . . . . . . . . . . . . . . 3
a. Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
b. Other Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Conditions Precedent to Subsequent Advances . . . . . . . . . . . . . . . . . . 6
a. Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
C. No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
d. Representations and Warranties . . . . . . . . . . . . . . . . . . . . 7
e. Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
f. Costs, Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . 8
1.7 Conditions Precedent to Final Advances . . . . . . . . . . . . . . . . . . . . . 8
a. Completion Certificate . . . . . . . . . . . . . . . . . . . . . . . . 8
b. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
C. No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
d. Lien Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
e. Final Plat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.8 Changes in Plans and Specifications, Approved Budget or Approved
Construction Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.9 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2 REPRESENTATIONS AND WARRANTIES OF BORROWER . . . . . . . . . . . . . . . . . . . . . . 9
2.1 Borrower Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 Suits, Actions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Valid and Binding Obligation, No Breach or Default . . . . . . . . . . . . . . 10
2.5 Title to the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
2.6 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 System Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.8 Submittals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.9 Utility Availability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Governmental Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.11 Property Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.12 Flood Hazards/Wetlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.13 Contracts with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.14 Other Liens and Assignments . . . . . . . . . . . . . . . . . . . . . . . . . 12
2.15 Inducement to Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3 COVENANTS AND AGREEMENTS OF BORROWER . . . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Mandatory Principal Payments . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Compliance With Governmental Requirements, Notice of Governmental
Authority, Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.3 Construction of the Buildings . . . . . . . . . . . . . . . . . . . . . . . . 13
3.4 Correction of Defects . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.5 Storage of Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Inspection of the Property and Books and Records . . . . . . . . . . . . . . . 14
3.7 Casualty, Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.8 Application of Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.9 Borrower's Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.10 Direct Disbursement and Application by Lender . . . . . . . . . . . . . . . . 16
3.11 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.12 Additional Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.13 No Liability of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.14 No Conditional Sale Contracts, Etc . . . . . . . . . . . . . . . . . . . . . . 17
3.15 Defense of Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Prohibition on Transfer of Property or Assignment of Borrower's Interest,
Change in Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 Payment of Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.18 Restrictions and Annexation . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19 Current Financial Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 18
a. Quarterly Financial Reports . . . . . . . . . . . . . . . . . . . . . 19
b. Year-end Financial Reports . . . . . . . . . . . . . . . . . . . . . 19
c. Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
d. Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
e. SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.20 Tax Receipts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
3.21 Notice of Litigation, Claims, and Financial Change . . . . . . . . . 19
3.22 No Occupancy Contrary to Builder's Risk Policy . . . . . . . . . . . 20
3.23 Hold Harmless . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.24 Cross Default, Cross Collateralization . . . . . . . . . . . . . . . 20
3.25 Modifications to Resort Documents . . . . . . . . . . . . . . . . . . 20
3.26 Subordinated Obligations . . . . . . . . . . . . . . . . . . . . . . 20
3.27 Approved POS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 4 RIGHTS AND REMEDIES OF LENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Rights of Lender. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Appointment of Lender as Attorney-in-Fact . . . . . . . . . . . . . . 21
4.3 Funds of Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 No Waiver or Exhaustion . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Marshalling Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 5 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.2 Entire Agreement and Modifications . . . . . . . . . . . . . . . . . 24
5.3 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.4 Election of Remedies . . . . . . . . . . . . . . . . . . . . . . . . 24
5.5 Form and Substance . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.6 Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . 24
5.7 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . 25
5.8 Borrower in Control . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.9 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.11 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Venue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.13 Jury Trial Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.16 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
APPENDIX: Defined Terms
</TABLE>
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EXHIBITS:
A. Application for Advance
B. Proforma Budget
C. Intentionally Deleted
D. Intentionally Deleted
E. Form Assignment of Construction Contract
F. Intentionally Deleted
G. Intentionally Deleted
H. Intentionally Deleted
I. Intentionally Deleted
J. Intentionally Deleted
K. Development Stage
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CONSTRUCTION LOAN AGREEMENT
THIS CONSTRUCTION LOAN AGREEMENT, dated November 5, 1997, is
made by and between HELLER FINANCIAL, INC., a Delaware corporation ("Lender"),
and SILVERLEAF RESORTS, INC., a Texas corporation ("Borrower"), in respect of a
revolving construction loan as set forth herein. All capitalized terms used
herein shall have the meanings ascribed thereto in the Appendix attached hereto
and made a part hereof by this reference.
SECTION 1 ADVANCES OF THE LOAN
1.1 COMMITMENT OF LENDER; ADVANCES.
a. Construction Loan. Provided the conditions precedent
to an Advance have been satisfied and there exists no Default or Event of
Default, and further provided that the outstanding principal balance of the
Construction Loan shall not exceed the maximum amount set forth in Section 1.2
below, Lender will make Advances to Borrower as follows:
(i) Advance Request Procedures. From time to
time, Borrower shall submit an Application for an Advance to Lender requesting
an Advance under the Construction Loan for the reimbursement of payment of
costs of labor, materials, and services supplied for the construction of a
particular Building and related facilities including landscaping, parking and
utility services ("Related Facilities"), as specified in the Approved Budget
for such Building. Borrower shall not submit Applications for an Advance more
than two times per month nor more frequently than once per week, and each
Application for Advance shall be for an amount not less than Seventy Five
Thousand Dollars and No/100 ($75,000.00). Each Advance shall be issued by
Lender within ten (10) days of Lender's receipt of Borrower's Application for
Advance, provided Borrower is in compliance with conditions to such Advance set
forth herein. In addition to the conditions set forth below, Lender's
obligation to make Advances shall be subject to the receipt by Lender, on a
monthly basis, of reports from Lender's Inspecting Architects/Engineers
certifying that the Building(s) are on schedule under the Approved Completion
Schedule(s) and are in compliance with the Approved Budget(s) and the Plans, as
applicable.
(ii) Limitations on Advances. Advances shall be
determined on a Building-by-Building basis, shall be limited to the amounts
shown in corresponding line items in the Approved Budget for each Building,
shall be limited to no more than four (4) Advances for each Building
corresponding to the Development Stages as shown on Exhibit "K", shall be
limited to the maximum amounts designated for each Development Stage and shall
not exceed
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in the aggregate for any single Building (A) eighty seven percent (87%) of (1)
the costs of labor, materials, and services incorporated into such Building or
the Related Facilities in a manner acceptable to Lender, plus (2) the purchase
price of all uninstalled materials to be utilized in the construction of the
Building or the Related Facilities and to be stored on the Property, less (B)
all prior Advances for payment of costs of labor, materials, and services for
the construction of the Building or the Related Facilities. Lender shall not be
obligated to make an Advance on any Building if at any time or pursuant to the
making of such Advance, (i) the outstanding principal balance of the promissory
note given by Borrower to Lender pursuant to the Interval Receivables Loan when
added to the amount representing eighty seven percent (87%) of the Approved
Budgets for all Buildings Lender has committed to make Advances upon that have
not been repaid would exceed Fifty Million Dollars and No/100 ($50,000,000.00)
or (ii) if the sum of eighty seven percent (87%) of the Approved Budget for any
Building upon which an Advance is sought when added to eighty seven percent
(87%) of the Approved Budgets for all Buildings for which Lender is either
committed to make an Advance upon or for which Lender has made an Advance or
Advances upon that have not been completely repaid exceeds $10,000,000.00. The
Advances under the Construction Loan shall be drawn by Borrower within eighteen
(18) months of the date hereof.
1.2 MAXIMUM CONSTRUCTION LOAN BALANCE. Unless the Lender, in its
sole and absolute discretion, elects otherwise, notwithstanding anything to the
contrary contained in this Loan Agreement or the Loan Documents, the
outstanding principal balance of the Construction Note (including all Advances)
shall never exceed Ten Million Dollars and No/100 ($10,000,000.00) in the
aggregate, and shall not exceed the amount of Five Million Dollars and No/100
($5,000,000.00) outstanding at any single Resort at any one time. Borrower
hereby agrees to pay a fee of 1.0% (one percent) for each dollar advanced
(without regard to repayment) to Borrower which in the aggregate exceeds Ten
Million Dollars and No/100 ($10,000,000.00) under this Loan Agreement.
1.3 INTEREST. Interest on the Loan, at the rate or rates specified
in the Construction Note, shall be computed on the unpaid principal balance
which exists from time to time and shall be computed with respect to each
Advance only from the date of such Advance. Such interest on the Loan shall be
paid by Borrower to Lender on a monthly basis as provided in the applicable
note. As a courtesy, Lender's practice is to send out monthly billing
statements on or about the twentieth (20th) day of the month prior to the month
in which such payment is due; however, the failure of Lender to send out such a
billing statement shall not relieve Borrower of its obligation to pay interest
in accordance with the applicable notes.
1.4 TERM OF LOAN. The Construction Loan, together with all
interest thereon and all other sums due and owing Lender hereunder or under any
of the Loan Documents, shall be due and payable on the Maturity Date.
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<PAGE> 8
1.5 CONDITIONS PRECEDENT TO FIRST ADVANCES. As a condition
precedent to the first Advance for each Building hereunder, Borrower shall
satisfy or deliver evidence of the satisfaction of the following requirements:
a. Deliveries. If not previously delivered to Lender,
Borrower will procure and deliver to Lender, at least fourteen (14) business
days prior to the delivery to Lender of an Application for Advance for the
first Advance for construction of any Building:
(i) The proposed budget which shall be
substantially the same as the Proforma Budget, but should provide Lender with
more specific detail of costs for such Building, proposed construction
schedule, Plans and Construction Contract for such Building.
(ii) A fully executed copy of the Assignment of
Construction Contract, and Assignment of Plans and Specifications for
construction of the Building.
(iii) A legal description, satisfactory to Lender
in its reasonable discretion, of the property upon which the Building or
Buildings are to be located.
(iv) A fully executed Mortgage or such
modification to the Mortgage as Lender may require to spread the lien of the
Mortgage to include the Building and underlying property for which the first
Advance is being applied for.
(v) A copy of the fully approved plat which
includes the property underlying the Building.
(vi) Letters satisfactory to Lender in its
reasonable discretion from service providers evidencing that all utility and
municipal services required for the construction, occupancy and operation of
the Buildings, including, but not limited to, water supply, storm and sanitary
sewer systems, electric and telephone facilities, are available for use and
tap-on at the boundaries of the Property and will be available in sufficient
amounts for the normal and intended use of the Buildings, and written
permission has been granted from the applicable utility companies or
municipalities to connect the Buildings into each of said services.
(vii) A certification from a licensed surveyor or
information based on a plat indicating the flood zone of the land upon which
the Building is to be constructed.
(viii) POS concerning the Resort for which the
Building is a part.
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<PAGE> 9
(ix) A commitment for title insurance to insure
the Mortgage as a first priority lien on the property on which the Building is
to be located, with legible copies of all exceptions attached with no title
exception other than those deemed by Lender to be Permitted Exceptions.
(x) A Mortgagor's Affidavit of Title in form
and substance acceptable to Lender and the title insurance company as assurance
against the existence of, or any outstanding rights which could form the basis
for, mechanics liens, unrecorded easements, claims of parties in possession or
any other standard exception to title insurance coverage which may be insured
over upon delivery of a sufficient affidavit.
(xi) An opinion of Borrower's counsel stating
that: (a) the Loan is not usurious under applicable laws; (b) that the Loan
Documents are validly executed, duly authorized and binding and enforceable in
accordance with their terms; (c) that the execution and delivery of the Loan
Documents and the performance of the transactions contemplated thereby do not
violate or contravene any law, court order, judgment or contract to which
Borrower is a party; and (d) such further opinions as Lender shall require. The
opinion of Borrower's counsel shall be from an independent counsel acceptable
to Lender.
(xii) A true and correct copy of instruments
evidencing Borrower's authorization to use any fictitious name applicable to
the Advance.
(xiii) Certified resolutions authorizing Borrower
to borrow the Advance and mortgage the Building and its underlying property.
(xiv) An environmental Phase I site assessment
and engineering report confirming the absence of toxic or hazardous substances
and acceptable soil conditions of the property underlying the Building and the
Resort.
(xv) Evidence of Insurance Policies applicable
to the Building and its underlying property.
(xvi) UCC searches of the applicable public
records concerning the Borrower, and the Building's underlying property to
verify that Lender will have a first and priority perfected lien and security
interest under the Loan Documents.
(xvii) Copies of all applicable governmental
permits, plats, approvals, consents and licenses for the proposed Building and
the intended use and operation of the Building as part of the Resort, including
the sale and marketing of Intervals, and including
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<PAGE> 10
evidence of compliance with applicable zoning and building laws or indicating
that there is no applicable zoning.
(xviii) A fully executed assignment to Lender of
all Plans and governmental permits, approvals, consents and licenses for
construction and operation of the Building.
(xix) Fully executed UCC-1 financing statements
for filing in appropriate state and local offices to perfect Lender's first
priority lien on all tangible and intangible property of Borrower related to
the Building.
(xx) Evidence that all taxes owed by or for
which Borrower is responsible for collection have been paid, including but not
limited to sales taxes, room occupancy taxes, payroll taxes, personal property
taxes, real property taxes and income taxes.
(xxi) Copies of agreements (including without
limitation leases) between Borrower and any affiliate of Borrower related in
any way to the Building or its underlying property and the applicable Resort.
(xxii) Certificate from an architect
satisfactorily evidencing to Lender that the Building as designed is in
compliance with the accessibility requirements of the state and federal Fair
Housing Acts and the Americans with Disabilities Act.
(xxiii) A fully executed construction loan
disbursement agreement with the Title Company.
(xxiv) A fully executed assignment of funds and
permits.
(xxv) Copies of all timeshare regime and
purchaser documents applicable to the use and operation of the Building and to
be used in the sale of Interval Units to be located in the Building, including,
but not limited to the following:
(1) Declaration of Conditions, Covenants
and Restrictions,
(2) credit applications and related
forms,
(3) form purchase contract,
(4) form note,
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<PAGE> 11
(5) form mortgage,
(6) form truth in lending disclosure,
(7) form contract for deed,
(8) evidence that the forms utilized meet
state and federal requirements,
(9) all governing documents, including
Timeshare Declaration, Owner's
Association Rules and Regulations,
Articles and Bylaws,
(10) evidence of state approval to sell
timeshares, and
(11) state timeshare filings.
(xxvi) If any of the foregoing are not
satisfactory to Lender in its reasonable discretion, Lender shall so notify
Borrower in writing within fourteen (14) days of Under's receipt of the
foregoing specifying Lender's objections and Borrower shall thereafter have ten
(10) days to cure such objections to Lender's reasonable satisfaction. Lender
shall have no obligation to make any Advance hereunder until such time as
Borrower has cured Lender's objection to Lender's reasonable satisfaction.
b. Other Conditions. All conditions precedent to
subsequent Advances set forth herein.
1.6 CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES. As a condition
precedent to each subsequent Advance hereunder, Borrower shall satisfy or
deliver evidence of the satisfaction of the following requirements:
a. Deliveries. Borrower will procure and deliver to Lender:
(i) A separate Application for Advance for each
Building or group of Buildings for which an Advance is sought;
(ii) An Affidavit of Borrower, including
Borrower's attestation that the Advance which is being requested relates to the
payment of the costs of labor, materials or services for the completed
construction of the Building through the specified Development Stage;
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<PAGE> 12
(iii) Releases or waivers of mechanics' liens
from any independent third parties providing labor, materials or supplies for
construction of the Buildings;
(iv) Copies of checks, paid bills or invoices
and purchase orders for all items in excess of One Thousand Dollars and No/100
($1,000.00) showing payment to all such third parties who have furnished
materials or services or performed labor of any kind in connection with the
construction of any of the Buildings covered by the Application for Advance;
(v) General ledger detail reports with respect to
such Application for Advance;
(vi) Copies of all building and other
construction or development permits and approvals issued through the date of
such Advance;
(vii) Reports from Lender's third party
consultants certifying to Lender that all construction performed through the
date of such Advance is in compliance with the Approved Budget, the Plans, and
the Construction Schedule and certifying that adequate funds remain under the
Approved Budget to complete construction of such Building.
b. Loan Documents. Borrower shall execute and deliver
to, procure for and deposit with, and, if appropriate, record in the proper
records with all filing and recording fees paid, the Loan Documents and such
other documents, instruments, and certificates as Lender or Title Company may
require.
c. No Default. There shall then exist no Default or
Event of Default.
d. Representations and Warranties. The representations
and warranties made in this Loan Agreement shall be true and correct in all
material respects on and as of the date of each Advance, with the same effect
as if made on that date. Borrower shall inform Lender of any changes or
revisions to the representations and warranties set forth herein by disclosing
such facts in the Affidavit of Borrower. If any such changes or revisions are
determined by Lender in its sole discretion to be materially adverse, Lender
may refuse to make the requested Advance.
e. Title Insurance. The Title Insurance shall be
endorsed and extended to the date of such Advance to cover each Advance subject
only to the Permitted Exceptions.
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<PAGE> 13
f. Costs, Expenses and Fees. Borrower shall have paid
all costs, expenses and fees then due in accordance with the terms of this Loan
Agreement and all of the other Loan Documents.
1.7 CONDITIONS PRECEDENT TO FINAL ADVANCES. As a condition
precedent to each final Advance for each Building hereunder, in addition to all
other requirements for subsequent Advances, completion of the Building shall
have occurred and Borrower must deliver the following items to Lender:
a. Completion Certificate. A completion certificate from
the Inspecting Architects/Engineers.
b. Compliance. Evidence that all Governmental
Requirements have been satisfied, including, but not limited to, delivery to
Lender, of (i) a certificate of occupancy (or its equivalent) if issued by
local Governmental Authorities, permitting the Building to be legally occupied
and (ii) an architect's certification that the Building is in compliance with
the accessibility requirements of the federal Fair Housing Act, the federal
Americans with Disabilities Act, and any applicable state law concerning fair
housing or accommodations for people with disabilities.
c. No Liens. Evidence that no mechanic's or
materialman's lien or other encumbrance has been filed and remains in effect
against the Property.
d. Lien Waivers. Final lien releases or waivers by the
Contractor, and all subcontractors, materialmen, and other independent third
parties who have supplied labor, materials, or services for the construction of
the Buildings, or who otherwise might be entitled to claim a contractual,
statutory, or constitutional lien against the Property, subject to retainage.
e. Final Plat. A final plat containing an as built
location of the Building showing no encroachment off the property or on any
easement or setback area.
1.8 CHANGES IN PLANS AND SPECIFICATIONS, APPROVED BUDGET OR
APPROVED CONSTRUCTION SCHEDULE. Without the prior written approval of Lender
there shall be no change in the Plans, the Approved Budget, the Approved
Construction Schedule, or any of the work or materials for any Building which
would (a) cause any line item or category of the cost breakdown (or any
detailed cost breakdown) to increase or decrease in cost in excess of ten (10)
percent; or (b) together with costs associated with prior changes in the Plans,
the Approved Budget, the Approved Construction Schedule, or any of the work or
materials for any Building, result in an increase in the total costs of such
changes in excess of ten (10) percent; or (c) regardless of cost, constitute a
material change in structure, design, function, or exterior
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<PAGE> 14
appearance of any of the Buildings; or (d) cause the estimated time to complete
the Building to extend beyond the Building Completion Date as set forth in the
Approved Construction Schedule; or (e) reduce the value of Lender's security;
or (f) extend any interim Building Completion Date by more than thirty (30)
days. Requested changes shall be submitted to Lender for approval on a form
acceptable to Lender accompanied by a copy of the plans and specifications or a
revised budget applicable to the changes. Lender shall review and approve or
disapprove any such change request within ten (10) days of receipt of such
written request from Borrower. As a condition to any such approval, Lender may
require, in its sole discretion, confirmation satisfactory to Lender of the
cost increase, if any, which would result from performance of the work
contemplated under such change. If it appears that performance of such work
shall result in such an increase, Lender may, in its sole discretion, condition
its approval upon a Borrower's Deposit of the amount of such increase or other
evidence satisfactory to Lender in its discretion that Borrower has the funds
necessary to provide for such cost increase.
1.9 NO WAIVER. No Advance shall constitute a waiver of any
condition precedent to the obligation of Lender to make any further Advance or
preclude Lender from thereafter declaring the failure of Borrower to satisfy
such condition precedent to be an Event of Default.
SECTION 2 REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants as follows:
2.1 BORROWER EXISTENCE. Borrower is a corporation, duly formed,
validly existing and in good standing under the laws of the State of Texas and
qualified to do business in the states of Illinois, Missouri and any other
state where such qualification is required in connection with Borrower's sales
of timeshare product, with its principal place of business and chief executive
offices at its address set forth herein.
2.2 FINANCIAL STATEMENTS. The Financial Statements are true,
correct, and complete in all material respects as of the dates specified
therein and the balance sheets, profit and loss statements and statements of
cash flow fairly present the financial condition of Borrower as of the dates
specified. No material adverse change has occurred in the financial condition
of Borrower since the dates of the Financial Statements.
2.3 SUITS, ACTIONS. There are no actions, suits, or proceedings
pending or, to the knowledge of Borrower, threatened, in any court or before or
by any Governmental Authority against or affecting Borrower or the Property,
which involve or may involve individually or in the aggregate a claim or claims
for or an amount in controversy of $100,000.00 or more or which, if adversely
determined, would have a material adverse effect on the Property or impair the
ability of Borrower to complete its obligation under the Loan Documents or
which involve
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<PAGE> 15
the validity, enforceability, or priority of any of the Loan Documents, at law
or in equity. Borrower covenants to disclose in writing to Lender any event or
occurrence which causes the foregoing representation and warranty to no longer
be true upon Borrower's gaining knowledge of such event or occurrence.
2.4 VALID AND BINDING OBLIGATION, NO BREACH OR DEFAULT. All of the
Loan Documents, and all other documents referred to herein to which Borrower is
a party, upon execution and delivery will constitute valid and binding
obligations of Borrower, enforceable in accordance with their terms except as
limited by Debtor Relief Laws. The consummation of the transactions
contemplated hereby, and the performance of any of the terms and conditions
hereof and of the other Loan Documents, will not result in a breach of, or
constitute a default in Borrower's organizational documents or in any mortgage,
deed of trust, lease, promissory note, loan agreement, credit agreement,
partnership agreement, or other agreement to which Borrower is a party or by
which Borrower may be bound or affected. To the best of its knowledge, Borrower
is not in default of any order of any court or any requirement of any
Governmental Authority.
2.5 TITLE TO THE PROPERTY. Borrower holds full legal and equitable
title to the Property, subject only to the Permitted Exceptions.
2.6 DISCLOSURE. There is no fact of which Borrower is aware that
Borrower has not disclosed to Lender in writing that could materially adversely
affect the property, business or financial condition of Borrower or the
Property. Borrower has furnished Lender with a true and complete copy of all
documents relating to construction of the Buildings.
2.7 SYSTEM COMPLIANCE. The storm and sanitary sewer system, water
system, all mechanical systems of the Property and other parts of the
Improvements do (or when constructed will) comply with all applicable
environmental, pollution control and ecological laws, ordinances, rules and
regulations, and all Governmental Authorities having jurisdiction of the
Property have issued or to the best of Borrower's knowledge will issue all
necessary permits, licenses or other authorizations for the construction of the
Buildings (specifically including the named systems).
2.8 SUBMITTALS. The Loan Documents and all Financial Statements,
Plans, budgets, schedules, opinions, certificates, confirmations, contractor's
statements, applications, rent rolls, affidavits, agreements, Construction
Contract and other materials submitted to the Lender in connection with or in
furtherance of the Loan Documents by or on behalf of the Borrower fully and
fairly state in all material respects the matters with which they purport to
deal, and neither misstate any material fact, nor, separately or in the
aggregate, fail to state any material fact necessary to make the statements
made not misleading; provided, however, that such
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<PAGE> 16
representation and warranty is made to the best of Borrower's knowledge with
respect to such materials submitted to Lender which were prepared by parties
other than Borrower or its employees.
2.9 UTILITY AVAILABILITY. All utility and municipal services
required for the construction, occupancy and operation of the Buildings and
Units, including, but not limited to, water supply, storm and sanitary sewer
systems, electric and telephone facilities, are available for use and tap-on at
the boundaries of the Property and will be available in sufficient amounts for
the normal and intended use of the Buildings and Units, and written permission
has been or will be obtained from the applicable utility companies or
municipalities to connect the Buildings and Units into each of said services.
2.10 GOVERNMENTAL REQUIREMENTS. The Property, the Buildings and the
Units are and at all times during the Loan will be constructed, operated and
sold in compliance with all zoning requirements, building codes, subdivision
improvement agreements, licensing requirements, all covenants, conditions and
restrictions of record, and all other Governmental Requirements and there are
no Governmental Requirements prohibiting the use and operation of the Property
for timeshare purposes. The zoning and subdivision approval of the Property and
the right and ability to construct, use or operate the Buildings are not in any
way dependent on or related to any real estate other than the Property. To
Borrower's knowledge, there are no, nor are there any alleged or asserted,
violations of Governmental Requirements, law, regulations, ordinances, codes,
permits, licenses, declarations, covenants, conditions, or restrictions of
record, or other agreements relating to the Property, the Buildings, the Units
or any part thereof. Borrower has obtained or is not aware of reasons why it
cannot obtain all necessary permits, licenses, consents and approvals to
develop and operate the Property as a timeshare project in accordance with the
requirements of this Agreement and to sell the Interval Units in full
compliance with applicable law.
2.11 PROPERTY ACCESS. The Property has adequate access through
fully improved private or dedicated roads.
2.12 FLOOD HAZARDS/WETLANDS. None of the Buildings shall be located
in areas designated as flood zones that are prone to flooding as defined in the
Flood Disaster Protection Act of 1973, as amended, and the Property is not
located within a wetlands as defined by any Governmental Authority.
2.13 CONTRACTS WITH AFFILIATES. Borrower owns no stock or interest
in any other Person and has no Affiliates which have any involvement or
interest in the Property in any way, and no such ownership or interest will be
acquired by Borrower during the term of the Loan.
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The representation and warranty made in this Section 2.13 shall remain true
throughout the term of the Loan.
2.14 OTHER LIENS AND ASSIGNMENTS. Borrower has not placed nor
permitted to be placed, nor will Borrower during the term of the Loan place nor
permit to be placed, upon any of the Property or any Resort, any first lien,
pledge or collateral assignment that encumbers an entire Resort or any
assignment of management contracts or any other contracts concerning the
operations of an entire Resort to any other lender extending a credit facility
or loan to Borrower for construction of new Interval Units, nor will Borrower,
for so long as Lender has a mortgage on a Building, pledge to any other lender
a security interest in any Notes Receivable, Deeds of Trust, purchase and sale
contracts, contracts for deed or any other receivable generated from the sale
of Interval Units in such Building.
2.15 INDUCEMENT TO LENDER. The representations and warranties in
this Section 2 and the covenants and agreements of Borrower set forth in
Section 3 below and contained in the Loan Documents are made by Borrower as an
inducement to Lender to make the Loan and Borrower understands that Lender is
relying on such representations, warranties, covenants and agreements which
shall be true and correct at all times while the Loan is outstanding and shall
survive any (a) bankruptcy proceedings involving Borrower or the Property, or
(b) foreclosure of the Mortgage, or (c) conveyance of title to the Property to
the Lender in lieu of foreclosure of the Mortgage.
Acceptance of each Advance constitutes reaffirmation, as of the date of such
acceptance, of the representations, warranties, covenants and agreements of
Borrower in the Loan Documents except as disclosed in the Affidavit of Borrower
(if accepted by Lender), on which Lender shall rely in making such Advance.
SECTION 3 COVENANTS AND AGREEMENTS OF BORROWER
Borrower hereby covenants and agrees as follows:
3.1 MANDATORY PRINCIPAL PAYMENTS. Borrower shall pay Lender the
Unit Release Payment for each Unit no later than the date upon which such Unit
is Released into the Timeshare Inventory, but in no event shall the Unit
Release Payment for a particular Unit be paid to Lender later than eighteen
(18) months from the commencement of construction of the Building within which
such Unit is located, which payments shall be applied under the Loan as set
forth herein and in the other Loan Documents. Commencing with the first month
after the commencement of construction of a Building, no later than the tenth
(10th) day of each month thereafter, Borrower shall deliver to Lender a sales
report for each Resort within which Lender is providing Advances for
construction of a Building showing all sales of Interval Units within
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any such Building, including any sales which occur prior to the completion of
construction of such Building, which sales report shall be certified by
Borrower as accurate. On or before the fifteenth (15th) day and the last day of
each month, Lender shall provide Borrower with partial releases from the lien
of the Mortgage for each Unit for which Lender has been paid the applicable
Unit Release Payment at least five (5) days prior to such date.
3.2 COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS, NOTICE OF
GOVERNMENTAL AUTHORITY, ESCROW. Borrower shall timely comply with all
Governmental Requirements applicable to the Borrower, the Buildings and the
Resorts. Borrower shall timely comply with and promptly furnish to Lender true
and complete copies of any notice or claim by any Governmental Authority
pertaining to the Property. Borrower shall timely and properly comply with all
Governmental Requirements regarding the escrow of sales proceeds of Interval
Units.
3.3 CONSTRUCTION OF THE BUILDINGS.
a. Borrower shall commence construction of the Buildings
on or before the date set forth for commencement of construction in the
Approved Construction Schedule and the construction of each Building shall be
prosecuted with diligence and continuity, in a good and workmanlike manner, and
in accordance with sound building and engineering practices, all applicable
Governmental Requirements, the Plans, the Approved Budget, the Approved
Construction Schedule, and shall comply with all covenants, conditions and
restrictions affecting the Property. Borrower shall not permit cessation of
work for a period in excess of thirty (30) days without the written consent of
Lender (unless such cessation is caused by strike, riot, shortage of materials
or acts of God, in which case such cessation shall not exceed sixty (60) days),
and shall complete construction of each Building on or before the applicable
Building Completion Date, free and clear of all liens other than the Permitted
Exceptions and the Loan Documents (except those as to which Borrower has
furnished a bond or other security acceptable to Lender and otherwise complied
with the requirements of Section 3.17 below).
b. Borrower hereby absolutely, unconditionally, and
irrevocably guarantees the completion of construction of each Building upon
which an Advance is made, and such guaranty (i) is independent of Borrower's
obligations under the Note, (ii) shall expressly survive foreclosure of any
Mortgage, and (iii) shall not be impaired or affected by any renewals or
extensions for payment of interest or principal under the Note or any
forbearance or delay in collecting interest or principal under the Note, or by
any waiver by Lender under the Mortgage or any other Loan Documents, or by
Lender's failure or election not to pursue any other remedies it may have
against Borrower, or by any change or modification in the Note, Mortgage or any
other Loan Documents, or by the acceptance by Lender of any additional security
or any increase, substitution or change therein, or by the release by Lender of
any security or any withdrawal thereof or decrease therein. Lender may at any
time enter into agreements with
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Borrower to amend and modify the Note, Mortgage or other Loan Documents, and
may waive or release any provision or provisions of the Note, Mortgage and
other Loan Documents, and, with reference to such instruments, may make and
enter into any such agreement or agreements as Lender and Borrower may deem
proper and desirable, without in any manner impairing or affecting Borrower's
completion guaranty or any of Lender's rights hereunder.
c. If for any reason or under any contingency (i)
Borrower shall abandon construction of any Building upon which an Advance has
been made, (ii) Borrower shall fail to complete any Building in accordance with
the Approved Construction Schedule, Governmental Requirements and the Approved
Budget and in the manner provided in, and in accordance with the terms of, this
Loan Agreement, and pay all costs thereof, (iii) Lender takes possession of the
any Building prior to the completion of construction by reason of any default
of Borrower under any Loan Document, or, (iv) the right of Borrower to receive
any other or further Advances under any Loan Document shall be terminated in
accordance with the terms thereof, then, in any such event, Lender shall have
the right, but no obligation, to enter into possession of such Building or
Buildings and take all actions necessary in Lender's opinion to effect the
completion of such Building or Buildings and, at Borrower's cost and expense,
to cause the Building or Buildings to be fully completed and to pay all costs
and expenses in connection with the construction of such Building or Buildings.
Notwithstanding the above, Lender, at Lender's sole option, shall have the
right to complete such Buildings with changes or modifications in the plans and
specifications therefor which Lender reasonably deems necessary for the
completion of such Buildings, and expend such sums as Lender deems proper in
order to complete such Buildings. The amount of any and all expenditures made
by Lender shall be immediately due and payable by Borrower to Lender.
3.4 CORRECTION OF DEFECTS. Borrower shall correct or cause to be
corrected (a) any defect in the Buildings, (b) any material departure in the
construction of the Buildings from the Plans, (c) any violation of any
Governmental Requirements, or any violation of any covenants, conditions and
restrictions affecting the Property, if applicable, and (d) any encroachment by
any part of the Buildings, or any structure located on the Property, on any
easement, property line, or restricted area, or any encroachment by any such
structure on any building setback line.
3.5 STORAGE OF MATERIALS. Borrower shall cause all materials
supplied for, or intended to be utilized in, the construction of the Buildings,
but not affixed to or incorporated into the Buildings or the Property, to be
stored on the Property, with adequate safeguards, as reasonably required by
Lender, to prevent loss, theft, damage, or commingling with other materials or
projects.
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3.6 INSPECTION OF THE PROPERTY AND BOOKS AND RECORDS. Borrower
shall permit Lender, and its agents and representatives, to enter upon the
Property and any location where materials intended to be utilized in the
construction of the Buildings are stored, for the purpose of inspection of the
Property and such materials at all reasonable times. Borrower shall permit
Lender at all reasonable times, upon five (5) days advance written notice to
Borrower, to examine and copy the books and records of Borrower pertaining to
the Loan and the Property, and all sales and marketing records, contracts,
statements, invoices, bills, and claims for labor, materials, and services
supplied for the construction of the Buildings.
3.7 CASUALTY, CONDEMNATION. Borrower shall promptly notify Lender
of any fire or other casualty or any notice of taking or eminent domain action
or proceeding affecting the Property, or the threat of any such action or
proceeding of which Borrower becomes aware. Provided no Event of Default then
exists and Borrower certifies as to same, the net insurance proceeds shall be
paid to Lender but shall be made available by Lender for the restoration or
repair of the Property if: (i) in Lender's reasonable judgment (a) restoration
or repair and the continued operation of the Resort is economically feasible,
and (b) the value of Lender's security is not reduced; (ii) the cost of
restoration or repair does not exceed the net insurance proceeds or Borrower or
the Association shall provide a Borrower's Deposit or other evidence
satisfactory to Lender in its sole discretion that Borrower or the Association
can pay all costs of restoration in excess of such net insurance proceeds;
(iii) the loss does not occur in the six (6) month period preceding the
Maturity Date as defined in the Construction Note; (iv) Borrower has sufficient
business interruption insurance to provide alternative accommodations for all
owners or users entitled to occupancy at the Project affected by such casualty
loss; and (v) Lender's Inspecting Architect/Engineers certify that the
restoration of the Property can be completed at least ninety (90) days prior to
the Maturity Date. Borrower or the Association shall pay all amounts, in
addition to the net insurance proceeds, necessary to pay in full the cost of
the restoration or repair.
Notwithstanding the foregoing, it shall be a condition precedent to
any disbursement of insurance proceeds held by Lender hereunder that Lender
shall have approved (x) all plans and specifications for any proposed repair or
restoration; (y) the construction schedule; and (z) the architect's and general
contractor's contracts for restoration. Lender may establish other conditions
it deems reasonably necessary to assure the work is fully completed in a good
and workmanlike manner free of all liens or claims by reason thereof, and in
compliance with all applicable laws, rules and regulations. At Lender's option,
the net insurance proceeds shall be disbursed pursuant to a construction escrow
acceptable to Lender. If an Event of Default then exists, or any of the
conditions set forth in this subsection have not been met or satisfied, the net
insurance proceeds (after deduction of Lender's reasonable costs and expenses,
if any, in collecting same) shall be applied to the Loan in such order and
manner as Lender may elect, whether or not due and payable, with any excess
paid to Borrower.
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The proceeds of any award, payment or claim for damages, direct or
consequential, in connection with any condemnation or other taking of any
Building or any portion of the Property, or for conveyances in lieu of
condemnation, are hereby assigned to and shall be paid to Lender. Lender is
authorized (but is under no obligation) to collect any such proceeds. The
proceeds of any such award shall be made available by Lender for repair or
restorations of the Property in the same manner and upon the same conditions as
those set forth above for net insurance proceeds.
Anything to the contrary herein notwithstanding, for so long as any
part of the Property is subject to the Declaration of CCRs, any and all
insurance proceeds arising from any damage or destruction to any part of the
Property and any and all awards and payments with respect to condemnation or
conveyances in lieu thereof received by Lender shall be delivered and paid out
by Lender to any insurance trustee under the Declaration of CCRs, to be
distributed and used in accordance with the provisions of the Declaration of
CCRs.
3.8 APPLICATION OF ADVANCES. Borrower shall apply all Advances for
reimbursement of costs and expenses specified in the Approved Budget, and for
no other purpose.
3.9 BORROWER'S DEPOSIT. In accordance with Sections 1.8 and 3.7
above, Lender may require a Borrower's Deposit to be made which Lender shall
place in an interest bearing account and disburse in accordance with Sections
1.8 or 3.7 as applicable.
3.10 DIRECT DISBURSEMENT AND APPLICATION BY LENDER. Upon an Event
of Default, Lender shall have the right, but not the obligation, to disburse
and directly apply the proceeds of any Advance or the unadvanced balance of the
Loan to the satisfaction of any of Borrower's obligations hereunder or under
any of the other Loan Documents. Any Advance by Lender for such purpose, except
Borrower's Deposit, shall be part of the Loan and shall be secured by the Loan
Documents. Borrower hereby authorizes Lender to hold, use, disburse, and apply
the Loan and the Borrower's Deposit, if any, for payment of costs of
construction of the Buildings, reasonable expenses incident to the Loan and the
Property, and the payment or performance of any obligation of Borrower
hereunder or under any of the other Loan Documents. Borrower hereby assigns
and pledges the proceeds of the Loan and the Borrower's Deposit to Under for
such purposes. Upon an Event of Default, Lender may advance and incur such
Costs as Lender reasonably deems necessary for the completion of construction
of the Buildings and to preserve the Property, and any other security for the
Loan, and such Costs, even though in excess of the amount of the Loan, shall be
secured by the Loan Documents and payable to Lender.
3.11 COSTS AND EXPENSES. Borrower shall pay when due all costs and
expenses required by this Loan Agreement, including, without limitation,
(a) all taxes and assessments applicable to the Property, (b) all fees, charges
and taxes in connection with filing or recording
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the Loan Documents, (c) all fees and commissions lawfully due to brokers,
salesmen, and agents in connection with the Loan or the Property, (d) the cost
of the plats and surveys, (e) all premiums for the Insurance Policies, and
(f) all other costs and expenses payable to third parties incurred by Borrower
in connection with the consummation of the transactions contemplated by this
Loan Agreement. Any costs and expenses to be paid by Borrower to Lender shall
be due as a condition precedent to any Advance, or at Lender's election, within
ten (10) days of Borrower's receipt of written notification of such costs and
expenses from Lender.
3.12 ADDITIONAL DOCUMENTS. Borrower shall execute and deliver to
Lender, from time to time as requested by Lender, such other documents as shall
reasonably be necessary to provide the rights and remedies to Lender granted or
provided for by the Loan Documents.
3.13 NO LIABILITY OF LENDER. Lender shall have no liability,
obligation, or responsibility whatsoever with respect to the construction of
the Buildings except to advance the Loan and the Borrower's Deposit pursuant to
this Loan Agreement. Lender shall not be obligated to inspect the Property or
the construction of the Buildings, nor be liable or responsible for any defect
in the Property or the Buildings by reason of Inspecting same, nor be liable
for the performance or default of Borrower, the Inspecting
Architects/Engineers, Contractor, or any other party, or for any failure to
construct, complete, protect, or insure the Buildings, or for the payment of
costs of labor, materials, or services supplied for the construction of the
Buildings, or for the performance of any obligation of Borrower whatsoever.
Nothing including without limitation any Advance or acceptance of any document
or instrument, shall be construed as a representation or warranty, express or
implied, to any party by Lender.
3.14 NO CONDITIONAL SALE CONTRACTS, ETC. No materials, equipment,
or fixtures shall be supplied, purchased, or installed for the construction of
the Buildings pursuant to security agreements, conditional sale contracts,
lease agreements, or other arrangements or understandings whereby a security
interest or title is retained by any party or the right is reserved or accrues
to any party to remove or repossess any materials, equipment, or fixtures
intended to be utilized in the construction or operation of the Buildings.
3.15 DEFENSE OF ACTIONS. Lender may (but shall not be obligated to)
commence, appear, in, or defend any action or proceeding purporting to affect
the Loan, the Property, or the respective rights and obligations of Lender and
Borrower pursuant to this Loan Agreement. Lender may (but shall not be
obligated to) pay all reasonable necessary expenses, including reasonable
attorneys' fees and expenses incurred in connection with such proceedings or
action, which Borrower agrees to repay to Lender on demand; provided, however,
in any action directly between Borrower and Lender, the provisions of Section
5.14 shall apply.
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3.16 PROHIBITION ON TRANSFER OF PROPERTY OR ASSIGNMENT OF
BORROWER'S INTEREST, CHANGE IN MANAGEMENT. Borrower, without the prior written
consent of Lender, shall not (a) transfer, lease or mortgage (i) all or any
part of the Property, or any interest therein or (ii) all or any interest in
management contracts relating to any Resort or any other contracts or
agreements regarding operations of any Resort except for (1) the sale of
Interval Units in arms length transactions, (2) the lien of the Loan Documents,
(3) the transfer of personal property permitted herein, or (4) the Permitted
Exceptions or (b) change in any material way the every day involvement of
Robert Mead as the Chief Executive Officer of Borrower, provided that Lender
will not unreasonably withhold its consent to such change.
3.17 PAYMENT OF CHARGES. Borrower shall promptly pay or cause to be
paid when due all costs and expenses incurred in connection with the Property
and the construction of the Buildings, and Borrower shall keep the Property
free and clear of any lien, tax, judgment, charge, or claim (the "CHARGES")
other than the encumbrances of the Mortgage, the Permitted Exceptions, and
other liens approved in writing by Lender. Notwithstanding anything to the
contrary contained in this Loan Agreement, Borrower may (a) discharge in
accordance with applicable law any such Charge or contest the validity or
amount of any claim of any contractor, consultant, architect, or other Person
providing labor, materials, or services with respect to the Property, (b)
contest any tax or special assessments levied by any Governmental Authority,
and (c) contest the enforcement of or compliance with any Governmental
Requirements. Any such contest on the part of Borrower shall not be an Event of
Default hereunder provided that (i) during the pendency of any such contest
Borrower shall, if requested by Lender, furnish to Lender and Title Company an
indemnity bond from a corporate surety satisfactory to Lender and Title
Company in an amount equal to one hundred fifty percent (150%) of the amount
being contested or other security reasonably acceptable to them; and (ii)
Borrower shall pay any amount adjudged by a court of competent jurisdiction
(including appellate courts) to be due, with all costs, interest, and penalties
thereon, before such judgment becomes a lien on the Property; and (iii)
Borrower fulfills all of Borrower's obligations under this Loan Agreement
during the pendency of any such contest.
3.18 RESTRICTIONS AND ANNEXATION. Other than the Permitted
Exceptions, Borrower shall not impose any covenants, easements or other
encumbrances upon the Property, execute or file any subdivision plat affecting
the Property, or consent to the annexation of the Property to any city without
the prior written consent of Lender, which shall not be unreasonably withheld.
3.19 CURRENT FINANCIAL REPORTS. So long as any portion of the Loan
remains outstanding, Borrower shall furnish the following to Lender:
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a. Ouarterly Financial Reports. Within forty-five (45)
days after the end of each fiscal quarterly period, unaudited financial
statements of Borrower and the Association, certified by the chief financial
officer of the subject thereof.
b. Year-End Financial Reports. As soon as available and
in any event within one hundred and twenty (120) days after the end of each
fiscal year of Borrower: (i) the balance sheet of Borrower as of the end of
such year and the related statements of income and cash flow for such Fiscal
Year; (ii) a schedule of all outstanding indebtedness of Borrower describing in
reasonable detail each such debt or loan outstanding and the principal amount
and amount of accrued and unpaid interest with respect to each such debt or
loan; and (iii) with respect to the financial statements of Borrower, copies of
reports from a firm of independent certified public accountants selected by
Borrower, which report shall be unqualified as to going concern and scope of
audit and shall state that such financial statements present fairly the
financial position of Borrower as of the dates indicated and the results of its
operations and cash flow for the periods indicated in conformity with GAAP.
c. Audit Reports. Promptly upon receipt thereof, one (1)
copy of each other report submitted to Borrower by independent public
accountants in connection with any annual, interim or special audit made by
them of the books of Borrower.
d. Other Reports. Such other reports, statements,
notices or written communications relating to the Borrower, any other party or
a Resort as Lender may require, in its reasonably discretion.
e. SEC Reports. Promptly upon their becoming available
one (1) copy of each financial statement, report, notice or proxy statement
sent by Borrower to security holders generally, and of each regular or periodic
report and any registration statement, prospectus or written communication
(other than transmittal letters) in respect thereof filed by Borrower with, or
received by Borrower in connection therewith from, any securities exchange or
the Securities and Exchange Commission or any successor agency.
3.20 TAX RECEIPTS. Borrower shall furnish Lender with receipts or
tax statements marked "Paid" to evidence the payment of all taxes levied on the
Property prior to the date such taxes become delinquent.
3.21 NOTICE OF LITIGATION, CLAIMS, AND FINANCIAL CHANGE. Borrower
shall promptly inform Lender of (a) any litigation against Borrower or
affecting the Property, which, if determined adversely, might have a material
adverse effect upon the financial condition of Borrower or upon the Property,
or might cause an Event of Default, (b) any claim or
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controversy which might become the subject of such litigation, and (c) any
material adverse change in the financial condition of Borrower.
3.22 NO OCCUPANCY CONTRARY TO BUILDER'S RISK POLICY. The Buildings
or any element thereof shall not be occupied until Borrower has obtained and
furnished to Lender (a) a certificate of occupancy (or its equivalent), if
applicable, issued by the local Governmental Authorities with jurisdiction over
construction of the Buildings, and (b) replacement coverage in the form of an
all-risk insurance policy upon the completed Buildings or element thereof,
which policy will not be impaired by the occupancy of the Buildings and is
reasonably satisfactory to Lender.
3.23 HOLD HARMLESS. Borrower shall defend, at its own cost and
expense, and hold Lender harmless from, any proceeding or claim in any way
relating to the Property or the Loan Documents. Subject to the provisions of
Section 5.14, all Costs incurred by Lender in protecting its interests
hereunder, including all court costs and reasonable attorney's fees and
expenses, shall be borne by Borrower. The provisions of this Section shall
survive the payment in full of the Loan and all other indebtedness secured by
the Mortgage and the release of the Mortgage as to events occurring and causes
of action arising before such payment and release.
3.24 CROSS DEFAULT, CROSS COLLATERALIZATION. The documents and
instruments evidencing and securing the Interval Receivables Loan shall also
secure the Loan. Any Event of Default under the Receivables Loan Agreement or
under the other Loan Documents shall be an Event of Default hereunder.
3.25 MODIFICATIONS TO RESORT DOCUMENTS. Borrower shall not, without
Lender's prior written consent, amend, modify or supplement the Declaration of
CCRs or any of the other documents relating to the creation or operation of the
timeshare project on any Resort (the "RESORT DOCUMENTS") unless such amendment,
modification or supplement is required either to cause additional Interval
Units to be annexed into the timeshare regime or by law, whereupon Borrower
shall implement same and give prompt written notice thereof to Lender.
3.26 SUBORDINATED OBLIGATIONS. All indebtedness of Borrower,
whether now existing or coming into existence while the Loan remains
outstanding, to any shareholder, Partner, or Affiliate of Borrower shall be
subordinated to the Construction Note, and to any indebtedness secured under
the Interval Receivables Loan. Borrower hereby represents and warrants to
Lender that there is no indebtedness or liability of Borrower to any
shareholder, Partner, or Affiliate of Borrower except for salaries and other
compensation due officers and directors as of the date of this Agreement.
Borrower agrees not to enter into or incur any debt to shareholders, Partners
or Affiliates during the term of the Loan without Lender's prior consent
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<PAGE> 26
and if such consent is given, Borrower and all other parties to such debt shall
properly execute a Debt Subordination Agreement with Lender.
Upon an Event of Default, Borrower will not, directly or indirectly,
(a) permit any payment to be made in respect of any indebtedness, liabilities
or obligations direct or contingent, to any Affiliates, which payments shall be
and are hereby made subordinate to the payment of principal of, and interest
on, the Construction Note, or any indebtedness secured under the Interval
Receivables Loan, or (b) permit the amendment, rescission or other modification
of any of Borrower's subordinated obligations in such a manner as to affect
adversely the lien priority of the Lender in any property, real or personal,
pledged to secure any of the foregoing Loan Documents.
3.27 APPROVED POS. Prior to engaging in the sale of any Intervals,
Borrower shall obtain approval of the POS from the states with jurisdiction
over approval of the POS. Borrower shall secure Lender's approval of all
amendments to any POS to incorporate the sale of Interval Units pursuant to
contracts for deed, and Borrower shall not engage in the sale of any Interval
Units by a contract for deed except pursuant to a POS approved by Lender and
the applicable Governmental Authorities.
SECTION 4 RIGHTS AND REMEDIES OF LENDER
4.1 RIGHTS OF LENDER. Upon the occurrence of an Event of Default,
Lender shall have the right, in addition to any other right or remedy of Lender
as set forth in the Loan Documents, but not the obligation, (a) to declare the
Loan immediately due and payable, (b) to terminate Lender's obligation to
disburse the Loan at the Borrower's Deposit and all other obligations of Lender
hereunder and under the Loan Documents, and (c) in its own name or in the name
of Borrower, to enter into possession of the Property, to perform all work
necessary to complete the construction of the Buildings substantially in
accordance with the Plans, Governmental Requirements, and the requirements of
any lessee, if applicable, and to employ watchmen and other safeguards to
protect the Property.
4.2 APPOINTMENT OF LENDER AS ATTORNEY-IN-FACT. Borrower hereby
appoints Lender as the attorney-in-fact of Borrower, with full power of
substitution, and in the name of Borrower, if Lender elects to do so, upon the
occurrence of an Event of Default, to (a) use such sums as are reasonably
necessary, including any proceeds of the Loan and the Borrower's Deposit, if
any, make such changes or corrections in the Plans, the construction of the
Buildings, the Approved Budget, the Approved Construction Schedule, and employ
such architects, engineers, and contractors as may be reasonably required for
the purpose of completing the construction of the Buildings substantially in
accordance with the Plans and Governmental Requirements; (b) execute all
applications and certificates in the name of Borrower which may
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be required for completion of construction of the Buildings; (c) endorse the
name of Borrower on any checks or drafts representing proceeds of the Insurance
Policies, or other checks or instruments payable to Borrower with respect to
the Property; (d) do every act with respect to the construction of the
Buildings which Borrower may do; and (e) prosecute or defend any action or
proceeding incident to the Property. The power of attorney granted hereby is a
power coupled with an interest and is irrevocable. Lender shall have no
obligation to undertake any of the foregoing actions, and, if Lender should do
so, it shall have no liability to Borrower for the sufficiency or adequacy of
any such actions taken by Lender.
4.3 FUNDS OF LENDER. Any funds of Lender used for any purpose
referred to in this Article 5 shall constitute Advances secured by the Loan
Documents and shall bear interest at the rate specified in the Construction
Note to be applicable after default hereunder.
4.4 NO WAIVER OR EXHAUSTION. No waiver by Lender of any of its
rights or remedies hereunder, in the other Loan Documents, or otherwise, shall
be considered a waiver of any other or subsequent right or remedy of Lender; no
delay or omission in the exercise or enforcement by Lender of any rights or
remedies shall ever be construed as a waiver of any right or remedy of Lender;
and no exercise or enforcement, of any such rights or remedies shall ever be
held to exhaust any right or remedy of Lender.
4.5 MARSHALLING WAIVER. Borrower waives any and all rights to
require the marshalling of assets in connection with the exercise of any of the
remedies hereunder.
SECTION 5 MISCELLANEOUS
5.1 NOTICES. Any notice or other communication required or
permitted to be given shall be in writing addressed to the respective party as
set forth below and may be personally served, telecopied, or sent by overnight
courier, or sent by registered or certified U.S. Mail return receipt requested,
and shall be deemed given: (a) if served in person, when served; (b) if
telecopied, on the date of transmission if before 3:00 p.m. (Chicago time) on a
business day otherwise, on the next business day; provided that a confirmation
of the receipt of any such telecopy is obtained and retained by the sending
party and that a hard copy of such notice is also sent pursuant to (c) or (d)
below; (c) if by overnight courier, on the first business day after delivery to
the courier; or (d) if by certified or registered U.S. Mail, return receipt
requested, on the fourth (4th) day after deposit in the mail postage prepaid.
For purposes of this Agreement, the term "business day" shall mean a day on
which banks are open for business in Illinois.
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<PAGE> 28
Notices to Borrower: SILVERLEAF RESORTS, INC.
1221 Riverbend, Suite 120
Dallas, Texas
Attn: Robert Mead
Telecopy: 214/905-0514
With a copy to: Meadows, Owens, Collier, Reed,
Cousins & Blau, LLP
3700 NationsBank Plaza
901 Main Street
Dallas, Texas 75202
Telephone: 214/744-3200 or
1/800/451-0093
Facsimile: 214/747-3732
Notices to Lender: HELLER FINANCIAL, INC.
Attn: Portfolio Manager, Vacation Ownership
HFI Loan No. 94-117
500 West Monroe St.
Chicago, Illinois 60661
Telecopy: (312) 441-7924
With a copy to: HELLER FINANCIAL,INC.
Legal Services Department
Attn: General Counsel
HFI Loan No. 94-117
500 West Monroe St.
Chicago, Illinois 60661
Telecopy: (312) 441-7872
5.2 ENTIRE AGREEMENT AND MODIFICATIONS. The Loan Documents
constitute the entire understanding and agreement between the undersigned with
respect to the transactions arising in connection with the Loan and supersede
all prior written or oral understandings and agreements between the undersigned
in connection therewith. No provision of this Loan Agreement or the other Loan
Documents may be modified, waived, terminated, supplemented, changed or amended
except by a written instrument executed by both parties hereto.
5.3 SEVERABILITY. In case any of the provisions of this Loan
Agreement shall for any reason be held to be invalid, illegal, or
unenforceable, such invalidity, illegality, or
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<PAGE> 29
unenforceability shall not affect any other provision hereof, and this Loan
Agreement shall be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.
5.4 ELECTION OF REMEDIES. Lender shall have all of the rights and
remedies granted in the Loan Documents and available at law or in equity, and
these same rights and remedies shall be cumulative and may be pursued
separately, successively, or concurrently against Borrower or any property
encumbered by the Loan Documents, at the sole discretion of Lender. The
exercise or failure to exercise any of the same shall not constitute a waiver
or release thereof or of any other right or remedy, and the same shall be
nonexclusive.
5.5 FORM AND SUBSTANCE. All documents, certificates, insurance
policies, evidence, and other items required under this Loan Agreement to be
executed and/or delivered to Lender shall be in form and substance reasonably
satisfactory to Lender.
5.6 LIMITATION ON INTEREST. In no event whatsoever shall the
amount of interest paid or agreed to be paid to Lender pursuant to this Loan
Agreement, the Construction Note or any of the Loan Documents exceed the
highest lawful rate of interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this Loan Agreement,
the Construction Note and the other Loan Documents shall involve exceeding the
lawful rate of interest which a court of competent jurisdiction may deem
applicable hereto ("EXCESS INTEREST"), then ipso facto, the obligation to be
fulfilled shall be reduced to the highest lawful rate of interest permissible
under such law and if, for any reason whatsoever, Lender shall receive, as
interest, an amount which would be deemed unlawful under such applicable law,
such interest shall be applied to the outstanding principal balance of the Loan
(whether or not due and payable), and not to the payment of interest, or shall
be refunded to Borrower if such Loan has been paid in full. Neither Borrower
nor any endorser shall have any action against Lender for any damages
whatsoever arising out of the payment or collection of any such Excess
Interest.
5.7 NO THIRD PARTY BENEFICIARY. This Loan Agreement is for the
sole benefit of Lender and Borrower and is not for the benefit of any third
party.
5.8 BORROWER IN CONTROL. In no event shall Lender's rights and
interests under the Loan Documents be construed to give Lender the right to, or
be deemed to indicate that Lender is in control of the business, management or
properties of Borrower or has power over the daily management functions and
operating decisions made by Borrower.
5.9 NUMBER AND GENDER. Whenever used herein, the singular number
shall include the plural and the plural the singular, and the use of any gender
shall be applicable to all
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genders. The duties, covenants, obligations and warranties of Borrower in this
Loan Agreement shall be joint and several obligations of Borrower and of each
Borrower if more than one.
5.10 CAPTIONS. The captions, headings, and arrangements used in
this Loan Agreement are for convenience only and do not in any way affect,
limit, amplify, or modify the terms and provisions hereof.
5.11 APPLICABLE LAW. This Loan Agreement and the Loan Documents
shall be governed by and construed in accordance with the laws of the State of
Illinois and the laws of the United States applicable to transactions within
such state, except that the provisions of the laws of the states of Illinois,
Missouri and Texas shall be applicable to the creation, perfection and
enforcement of the lien created by the Mortgage in such state.
5.12 VENUE. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY
STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS AND
IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN
DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER
BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO
BORROWER, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL
BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.
5.13 JURY TRIAL WAIVER. BORROWER AND LENDER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. BORROWER AND LENDER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER WARRANT AND
REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS.
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5.14 ATTORNEYS' FEES. In any action hereunder between the
parties hereto the prevailing party shall be entitled to reasonable attorneys'
fees and costs including those for pretrial, trial and appellate proceedings.
5.15 COMMITMENT FEE. Borrower has agreed to pay Lender a commitment
fee in the amount of One Hundred Thousand Dollars and No/100 ($100,000.00) in
connection with the Loan which Borrower agrees is fully earned and payable,
plus an additional one percent (1.0%) of all funds advanced under the Loan in
excess of Ten Million Dollars and No\100 ($10,000,000.00).
5.16 COUNTERPARTS. This Agreement may be signed in multiple
counterparts which taken together shall constitute the entire agreement between
the parties.
IN WITNESS WHEREOF, the parties set their hands the date above first
written.
BORROWER: LENDER:
SILVERLEAF RESORTS, INC., HELLER FINANCIAL, INC., a Delaware
a Texas corporation corporation
By: /s/ ROBERT E. MEAD By: /s/ ELISA NICELY
-------------------------------------- -------------------------------
Robert E. Mead, Chief Executive Officer Its: Assistant Vice President
------------------------------
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APPENDIX
DEFINED TERMS
For purposes of this Loan Agreement, the following terms shall have
the respective meanings assigned to them:
ADVANCE. A disbursement by Lender of any of the proceeds of the Loan.
Each Advance shall be for reimbursement to Borrower of amounts paid by Borrower
through the date of such Advance in accordance with the Approved Budget.
AFFIDAVIT OF BORROWER. A sworn affidavit of Borrower (and such other
parties as Lender may require) to the effect that all statements, invoices,
bills, and other expenses incident to the construction of a Building incurred
to a specified date, whether or not specified in the Approved Budget, have been
paid in full, except for amounts retained pursuant to the Construction
Contract, also including Borrower's attestation that the Advance which is being
requested relates to the payment of the costs of labor, materials or services
for the completed construction of the specified Development Stage or
Development Stages of a particular Building or Buildings as indicated.
AFFILIATE. Any Person that (i) directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with Borrower or (ii) any officer, director, member, or partner of Borrower.
The term "Control" shall mean possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person
whether through ownership of voting securities, by contract or otherwise.
APPLICATION FOR ADVANCE. A written application, in the form of Exhibit
"A" attached hereto, by Borrower (and such other parties as Lender may require)
to Lender specifying by name of, current address of, and amount owed to all
independent third parties to whom Borrower is obligated for labor, materials,
or services supplied for the construction of a Building and all other expenses
incident to the Loan, the Property, and the construction of the Building and
specifying those budgeted items which have been performed by Borrower's
employees, requesting an Advance for reimbursement for the payment of such
items, containing an Affidavit of Borrower, accompanied by such schedules,
affidavits, releases, waivers, statements, invoices, bills, and other documents
as Lender and Title Company may reasonably request.
APPROVED BUDGET. Any budget for the construction of a Building at a
Resort as approved by Lender hereafter in writing pursuant to Section 1.5 above
and in form and
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substance substantially similar to the Proforma Budget. The term Approved
Budget shall also include any decreases or increases as permitted hereunder in
accordance with Section 1.8 hereof.
APPROVED CONSTRUCTION SCHEDULE. The schedule and order of construction
of a Building as set forth in such schedule as may be approved by Lender in
writing pursuant to Section 1.5 prior to an Advance for such Building, and any
modifications thereto permitted in accordance with Section 1.8.
ARCHITECT. [NAME OF PROJECT'S ARCHITECTURAL FIRM (INTENTIONALLY LEFT
BLANK)], the architect for design of the plans and specifications for the
Buildings.
ASSOCIATION. The associations, collectively, existing or to be created
at each Resort.
BORROWER'S DEPOSIT. Such cash sums as Lender may deem necessary
pursuant to Section 3.7 (for completion of repair or reconstruction of casualty
or condemnation loss) or Section 1.8 (for budget increases or changes to the
Plans).
BUILDING. A building located at a Resort, and including four or more
residential units, as described in the Plans, the Approved Budget and the
Approved Construction Schedule.
BUILDING COMPLETION DATE. The deadline for Completion of a Building as
set forth on the Approved Construction Schedule, but in no event later than
eighteen months from the commencement of construction of a Building.
COMPLETION. The substantial completion of a Building or Buildings in
accordance with the Approved Budget, the Approved Construction Schedule, the
Construction Contract and the Plans, as evidenced by (i) a certificate of
occupancy (or its equivalent), if applicable, permitting legal occupancy
thereof issued by the local Governmental Authorities with jurisdiction over
construction of Buildings, (ii) a certificate of the contractor in form and
substance satisfactory to Lender regarding completion of the Building or
Buildings, and (iii) a certificate of the Inspecting Architects/Engineers in
form and substance satisfactory to Lender.
CONSTRUCTION CONTRACT. All construction contracts executed by Borrower
for the construction of a Building or Buildings, including, without limitation,
contracts between Borrower and Contractor.
CONSTRUCTION LOAN. A revolving loan from Lender to Borrower to
facilitate Borrower's construction of the Buildings for which the outstanding
principal amount shall not at any time exceed Ten Million Dollars and No/100
($10,000,000.00); provided, however, at no time shall
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the principal balance outstanding at any single Resort exceed Five Million
Dollars and No/100 ($5,000,000-00).
CONSTRUCTION NOTE. The Revolving Construction Promissory Note of even
date herewith from Borrower to Lender in the original principal amount of Ten
Million Dollars and No/100 ($10,000,000.00), which Construction Note evidences
the Construction Loan.
CONTRACTOR. The general contractor or contractors to be retained by
Borrower for the construction of a Building. At least fourteen (14) days prior
to commencement of construction of a Building, Borrower shall submit to Lender
for approval the Plans and the fully executed Assignments of Construction
Contract substantially in the form attached as Exhibit "E" attached hereto or
such other form as Lender may reasonably accept.
COSTS. All reasonable expenditures and expenses which may be paid or
incurred by or on behalf of Lender including repair costs, payments to remove
or protect against liens, attorneys' fees for pre-trial, trial and appellate
matters (including fees of Lender's inside counsel), receivers' fees,
appraisers' fees, engineers' fees, accountants' fees, independent consultants'
fees (including environmental consultants), all costs and expenses incurred in
connection with any of the foregoing, Lender's out-of-pocket costs and expenses
related to any audit or inspection of the Property, outlays for documentary and
expert evidence, stenographers' charges, stamp taxes, intangible taxes,
publication costs, and costs (which may be estimates as to items to be expended
after entry of an order or judgment) for procuring all such abstracts of title,
title and UCC searches, and examination, title insurance policies, and similar
data and assurances with respect to title as Lender may deem reasonably
necessary either to prosecute any action or to evidence to bidders at any
foreclosure sale of the Property the true condition of the title to, or the
value of, the Property.
DEBTOR RELIEF LAWS. Any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar
laws affecting the rights or remedies of creditors generally, as in effect from
time to time.
DECLARATION OF CCRs. Collectively, the Declaration of Covenants,
Conditions and Restrictions at each Resort, and any supplements, amendment, or
modifications thereto to be created and recorded in the public records of the
county and state in which the Property is located.
DEFAULT. Any event which, with the giving of notice or the passage of
time or both, would become an Event of Default.
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DEVELOPMENT STAGE. A specific stage of development for a Building, as
set forth in Exhibit "K."
EVENT OF DEFAULT. Occurrence of any one of the following:
(a) Any indebtedness evidenced, governed or secured by
any of the Loan Documents is not paid within five (5) days of the date of
written notice to Borrower, whether such due date is by acceleration or
otherwise, except the Construction Note payment due at the Maturity Date for
which no grace period is allowed.
(b) Borrower's failure to maintain any of the Insurance
Policies or any transfer of or lien or encumbrance imposed upon the Property or
any part thereof or interest therein in violation of Sections 3.16 or 3.17 or
any other restriction on transfer or liens set forth in the Loan Documents.
(c) Any covenant in this Agreement, other than matters
governed by paragraphs (a) and (b) above, is not fully and timely performed,
and Borrower does not cure such failure to perform for a period of twenty (20)
days after written notice thereof from Lender to Borrower (provided, however,
that if any such failure concerning a non- monetary covenant or condition is
reasonably susceptible of cure but not within said twenty (20) day period, then
no Event of Default shall be deemed to exist hereunder so long as Borrower
commences such cure within said twenty (20) day period and diligently and in
good faith pursues such cure to completion within forty (40) days of said
written notice from Lender to Borrower).
(d) Any Default or Event of Default or any failure of
Borrower to abide by the terms of or fulfill its obligations under this Loan
Agreement and the other Loan Documents, after the passage of any applicable
cure period set forth therein.
(e) Any statement, representation or warranty in the Loan
Documents, any Financial Statements or any other writing delivered to Lender in
connection with the Loan is false, misleading or erroneous in any material
respect.
(f) Once construction has begun, the cessation of the
construction of a Building for more than thirty (30) days without the written
consent of Lender, unless such cessation is caused by strike, riot, shortage of
materials or acts of God, provided that an Event of Default shall exist if such
cessation continues for more than sixty (60) days for any reason.
(g) Failure of the construction of a Building or any
materials for which an Advance has been requested to substantially comply with
the Plans, the Approved Budget, the Approved Construction Schedule, or any
Governmental Requirements, which noncompliance is
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not cured to Lender's satisfaction within thirty (30) days after written notice
from Lender to Borrower.
(h) Completion of a Building has not occurred on the
applicable Building Completion Date as set forth in the Approved Construction
Schedule subject to strike, riot, shortage of materials, acts of God or other
matters beyond the control of Borrower; provided, however, that an Event of
Default shall exist if Completion is delayed for more than sixty (60) days for
any reason beyond the Final Completion Date.
(i) The Borrower:
(1) does not pay its debts as they become due or
admits in writing its inability to pay its debts or makes a general assignment
for the benefit of creditors; or
(2) commences any case, proceeding or other
action seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any Debtor Relief Laws; or
(3) in any involuntary case, proceeding or other
action commenced against it which seeks to have an order for relief entered
against it, as debtor, or seeks reorganization, arrangement, liquidation,
dissolution or composition of it or its debts under any Debtor Relief Laws, (i)
fails to obtain a dismissal of such case, proceeding or other action within
sixty (60) days of its commencement, or (ii) converts the case from one chapter
of the Federal Bankruptcy Code to another chapter, or (iii) is the subject of
an order for relief; or
(4) conceals, removes, or permits to be concealed
or removed any part of its property, with intent to hinder, delay or defraud
its creditors or any of them, or makes or suffers a transfer of any of its
property which may be fraudulent under any bankruptcy, fraudulent conveyance or
similar law; or makes any transfer of its property to or for the benefit of a
creditor at a time when other creditors similarly situated have not been paid;
or suffers or permits, while insolvent, any creditor to obtain a lien upon any
of its property through legal proceedings which is not vacated within sixty
(60) days from the date thereof; or
(5) has a trustee, receiver, custodian or other
similar official appointed for, or take possession of, all or any part of the
Property or any other of its property or has any court take jurisdiction of any
other of its property which continues for a period of sixty (60) days (except
where a shorter period is specified in the immediately following subparagraph
(6)); or
(6) fails to have discharged within a period of
thirty (30) days any attachment, sequestration, or similar writ levied upon any
property of such owner; or
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(7) fails to pay within thirty (30) days of
issuance or entry any final money judgment, after appeal, and subject to
Section 3.17 any tax, lien, or attachment in the amount of One Hundred Thousand
Dollars and No/100 ($100,000) or greater.
(j) Title to all or any part of the Property (other than
(i) obsolete or worn personal property replaced by adequate substitutes of
equal or greater value than the replaced items when new or (ii) personal
property no longer necessary for the operation of the Property, provided
removal of such personal property does not materially affect the value or
operation of the Property) shall become vested in any party other than the
Borrower, whether by operation of law or otherwise, except for the conveyance
of Interval Units in the ordinary course of business and in accordance with
this Loan Agreement and the other Loan Documents.
(k) Borrower records or permits to be recorded against
the Property a Notice of Limitation limiting future advances which may be made
under the Mortgage.
(l) Any default by Borrower under the documents and
instruments evidencing and securing the Interval Receivables Loan after the
passage of any applicable grace or cure period.
(m) Failure of the Borrower to maintain the minimum
Liquidity or Net Worth.
(n) Failure of the Borrower to remain below the maximum
Leverage.
(o) Change in any material way the every day involvement
of Robert Mead as the Chief Executive Officer of Borrower, provided that
Lender will not unreasonably withhold its consent to such change.
FINANCIAL STATEMENTS. All financial statements, reports, summaries and
other financial information delivered by Borrower to Lender as of the date of
this Agreement.
GAAP. Generally accepted accounting principles, applied on a
consistent basis, set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board which are applicable in the
circumstances as of the date in question; and the requisite that such
principles be applied on a consistent basis means that the accounting
principles in a current period are comparable in all material respects to those
applied in a preceding period, with any exceptions thereto noted.
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GOVERNMENTAL AUTHORITY. The United States of America, the states and
counties in which the Resorts are located, and any other governmental
authorities having jurisdiction over Borrower, the Property or the sale of
Interval Units.
GOVERNMENTAL REQUIREMENTS. All Federal, State and local rules,
regulations, ordinances, laws and statutes which affect the Property or
Borrower's right to sell Interval Units.
INSPECTING ARCHITECTS/ENGINEERS. Such employees, representatives and
agents of Lender or third parties, who will, from time to time, conduct
inspections of the Property, review Borrower's compliance with this Loan
Agreement and offer other services related thereto.
IMPROVEMENTS. The Buildings, Units, other units sold in connection
with providing occupancy of the Property and other improvements as described in
the Plans, the Approved Budget and the Approved Construction Schedule.
INSURANCE POLICIES. The following insurance policies:
(a) All-risk builder's risk insurance during the
construction of any Building, in an amount equal to 100% of the replacement
cost of the Building, providing all-risk coverage on such Building and
materials stored on the Property and elsewhere, and including the perils of
collapse, water damage and, if requested by Lender, flood, sinkhole,
earthquake, business interruption and other risks;
(b) All-risk insurance on the Buildings until the Loan is
paid in full, as determined by Lender, in the amount of at least 100% of the
replacement cost of the Buildings or in such amounts as Lender may reasonably
require, providing all-risk coverage on the Buildings, and, if requested by
Lender, to include the perils of flood, earthquake, business interruption and
other risks;
(c) Comprehensive General Liability Insurance for owners
and contractors, including blanket contractual liability, products and
completed operations, personal injury (including employees), independent
contractors and explosion, hazards for not less than Two Million Dollars and
No/100 ($2,000,000.00) arising out of any one occurrence or in any increased
amount reasonably required by Lender;
(d) Workers' Compensation Insurance for contractors for
statutory limits; and
(e) Such other insurance, including but not limited to
business interruption insurance, as Lender may reasonably require.
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All Insurance Policies shall be issued on forms and by companies
reasonably satisfactory to Lender and shall be delivered to Lender or in the
alternative, certificates of such insurance shall be delivered to Lender if
such insurance is obtained through blanket policies of Borrower. All-risk
Insurance Policies shall have loss made payable to Lender as mortgagee together
with the standard mortgage clause in a form satisfactory to Lender.
Comprehensive General Liability, Comprehensive Automobile Liability and
Workers' Compensation coverages shall have a provision giving Lender thirty
(30) days, prior notice of cancellation or material change of the coverage.
INTERVAL RECEIVABLES LOAN. The financing arrangements entered into
between Borrower and Lender whereby Lender is providing Borrower with financing
for certain receivables of Borrower generated from Borrower's sale of Interval
Units, which is evidenced by the Receivables Loan Agreement.
INTERVAL UNIT. The term "Interval Unit" shall have the same meaning as
the term "Fee Simple Time-Share Interest" in the Receivables Loan Agreement.
LEVERAGE. The ratio of senior institutional debt (which does not
include debt evidenced by the subordinated debentures, meaning debentures with
an aggregate principal amount of not greater than $110,000.00 which have a
maturity date of not longer than ten years, issued by Borrower in a single
public offering which debentures shall be expressly subordinate to this Loan,
the Interval Receivables Loan, and other indebtedness of Borrower to Lender
from any source whatsoever) to Net Worth of 2.5:1 as determined in accordance
with GAAP.
LIQUIDITY. The amount of cash plus the outstanding balances of
unpledged Contracts for Deed (as defined in the Receivables Loan Agreement) or
Purchaser (as defined in the Receivables Loan Agreement) promissory notes in
the amount of Five Million Dollars and No/100 ($5,000,000.00) as determined in
accordance with GAAP.
LOAN. The Construction Loan.
LOAN DOCUMENTS. This Loan Agreement, the Mortgage, the Construction
Note, the financing statements, and such other instruments evidencing,
securing, perfecting or pertaining to the Loan as shall, from time to time, be
executed and delivered by Borrower or any other party to Lender pursuant to
this Loan Agreement, including, without limitation, each Affidavit of Borrower,
each Application for Advance, and the Approved Budget.
MATURITY DATE. October 31, 2000.
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MORTGAGE. The mortgages and deeds of trust from Borrower to Lender
securing the payment of the Construction Note, and the payment and performance
of all obligations specified in the Mortgage and the Loan Documents, and
evidencing valid and enforceable liens on the Buildings and their underlying
property.
NET WORTH. Total assets less total liabilities in the amount of Fifty
Eight Million Dollars and No/ 100 ($58,000,000.00) as determined in accordance
with GAAP; provided, however, that tangible assets shall be the only assets
utilized in such calculation.
PERMITTED EXCEPTIONS. Those exceptions to and encumbrances on title to
the Property which Lender shall have approved in its sole, but reasonable
discretion prior to the first advance for any Building.
PERSON. Any individual, trust, estate, partnership, limited liability
company, corporation or any other incorporated or unincorporated organization.
PLANS. The final working drawings and specifications for the
construction of a Building, which have been prepared by an architect and
approved by Lender and as may be modified pursuant to Section 1.8.
POS. A public offering statement, permit, or other report covering a
Resort that includes all information, documents, and exhibits that are required
by the state or states where the Interval Units will be sold for the lawful
sale and marketing of timeshare intervals.
PROFORMA BUDGET. The preliminary budget of general application
attached as Exhibit "B" hereto, or such other proforma budget as may be
approved by Lender in writing.
PROPERTY. The land upon which the Building or Buildings are located
for which an Advance is being made together with all necessary easements for
utilities, roadway access and use and use rights in all amenities, as described
in a legal description delivered to, and satisfactory in Lender's reasonable
discretion, Lender prior the first Advance for such Building or Buildings,
together with, where the context requires, the Buildings and all other property
constituting the "Property," as described in the Mortgage.
RECEIVABLES LOAN AGREEMENT. That certain Loan and Security Agreement
between Indemnitor and Lender dated as of October 11, 1994; as amended by that
certain Amendment to Loan and Security Agreement dated December 6, 1995; that
certain Loan Modification Agreement dated April 19, 1995; that certain Amended
Loan and Security Agreement dated December 27, 1995; that certain Amendment to
Restated and Amended Loan and Security Agreement dated February 28, 1996; that
certain Amendment to Restated and Amended Loan
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and Security Agreement dated August 15, 1996; that certain letter agreement
dated March 31, 1997; that certain Second Amendment to Restated and Amended
Loan and Security Agreement of even date herewith; and as the same may be
further amended, modified, or supplemented from time to time.
RELEASED INTO THE TIMESHARE INVENTORY. With respect to a Unit, the
term "Released into Timeshare Inventory" shall mean the earlier of either the
(i) date one hundred fifty (150) days from the date of execution of a sales
contract for the first sale of an Interval Unit for such Unit or (ii) the date
of issuance of a certificate of occupancy or other evidence of completion or
readiness for occupancy (the "C.O."). In addition, any other Units in such
Building for which one or more sales contracts have been executed during said
one hundred fifty (150) day period shall be deemed Released into Timeshare
Inventory on the date one hundred fifty (150) days from the date of execution
of a sales contract for the first sale of any Interval Unit in such Building.
Once a C.O. for a Building has been issued, all Units shall thereafter be
deemed Released into Timeshare Inventory upon execution of the first sales
contract for an Interval Unit in such Unit.
RESORT. The following projects at the locations designated below:
Resort County State
------ ------ -----
a) Holly Lake Wood Texas
b) The Villages Smith Texas
c) Lake O'the Woods Smith Texas
d) Piney Shores Montgomery Texas
e) Hill Country Comal Texas
f) Ozark Mountain Stone Missouri
g) Holiday Hills Taney Missouri
h) Fox River* LaSalle Illinois
i) Timber Creek* Jefferson Missouri
* New Timeshare Projects
TITLE COMPANY. Seco Land Title Insurance Company.
TITLE INSURANCE. Title insurance policies issued in the amount of each
Advance and insuring that the Mortgage constitutes a valid first priority lien
covering the Buildings subject only to the Permitted Exceptions, issued by the
Title Company to Lender.
UNIT. A residential unit within a Building which shall be sold as
Interval Units.
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UNIT RELEASE PAYMENT. The mandatory payments of one hundred twenty
percent(120%) of the total dollar amount funded for an Unit to be applied first
to the principal balance and then to interest outstanding from time to time
under the Construction Loan, to be paid no later than the date upon which such
Unit is Released into the Timeshare Inventory, but in no event shall the Unit
Release Payment for a particular Unit be paid to Lender later than eighteen
(18) months from the commencement of construction of the Building within which
such Unit is located.
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$10,000,000 HELLER CONSTRUCTION LOAN AGREEMENT
LIST OF EXHIBITS
Exhibit A Application for Advance
Exhibit B Proforma Budget
Exhibit C Intentionally Deleted
Exhibit D Intentionally Deleted
Exhibit E Form of Assignment of Construction Contract
Exhibits F-J Intentionally Deleted
Exhibit K Development Stage
[The above listed Exhibits are omitted from this filing. Registrant agrees to
furnish supplementally a copy of any Exhibit to the Commission upon request.]
<PAGE> 44
[FORM OF REVOLVING CONSTRUCTION PROMISSORY NOTE]
Loan No. 94-117
REVOLVING CONSTRUCTION PROMISSORY NOTE
$10,000,000.00 _________, 1997
1. Promise to Pay.
FOR VALUE RECEIVED, SILVERLEAF RESORTS, INC., a Texas corporation
("Maker") whose address is 1221 Riverbend, Suite 120, Dallas, Texas _______,
promises to pay to the order of HELLER FINANCIAL, INC., a Delaware
corporation, and its successors and assigns ("Holder"), in lawful money of the
United States of America and in immediately available funds, the aggregate
unpaid principal amount of all Advances made by Holder to Maker (the "LOAN")
under the "Construction Loan" referenced in and in accordance with that certain
Construction Loan Agreement, dated _______, 1997, between Holder and Maker, as
amended, modified or supplemented from time to time in accordance with its
terms (the "Loan Agreement"); provided, however, in no event shall (i) the
outstanding principal balance of this Note, at any time, exceed more than
$10,000,000.00, (ii) the outstanding principal balance of this Note, at any
time, exceed more than $5,000,000.00 at any single Resort, (iii) the
outstanding principal balance of the promissory note given by Maker to Holder
pursuant to the Interval Receivables Loan when added to the amount representing
eighty seven percent (87%) of the Approved Budgets for all Buildings Holder has
made or has committed to make Advances upon that have not been repaid exceed
$50,000,000.00, (iv) Holder be obligated to make an Advance when the sum of
eighty seven percent (87%) of the Approved Budget for any Building upon which
an Advance is sought when added to eighty seven percent (87%) of the Approved
Budgets for all Buildings for which Holder is either committed to make an
Advance upon or for which Holder has made an Advance or Advances upon that have
not been completely repaid exceeds $10,000,000.00.
This is a revolving Note, the principal amount of which may increase
or decrease from time to time during the term of this Note. This Note shall
evidence Advances made under the Loan Agreement, notwithstanding that the total
aggregate of principal advances and repayments exceed the original maximum
principal amount hereof, and notwithstanding that the principal balance may be
zero at any time. Payments shall be made to Holder at 500 West Monroe Street,
Chicago, Illinois 60661 (or such other address as Holder may hereafter
designate in writing to Maker).
The repayment of the Loan evidenced by this Note is to be secured by
among other things (i) those certain Mortgages and Deeds of Trust
(collectively, the "Mortgage") to be executed in connection with Advances made
pursuant to the Loan Agreement
<PAGE> 45
encumbering, among other things, certain Buildings located at the following
properties commonly described as follows:
<TABLE>
<CAPTION>
Resort County State
<S> <C> <C> <C>
a) Holly Lake Wood Texas
b) The Villages Smith Texas
c) Lake O'the Woods Smith Texas
d) Piney Shores Montgomery Texas
e) Hill Country Comal Texas
f) Ozark Mountain Stone Missouri
g) Holiday Hills Taney Missouri
h) Fox River LaSalle Illinois
i) Timber Creek Jefferson Missouri.
</TABLE>
(collectively, the "Property"), and (ii) that certain Loan and Security
Agreement between Maker and Holder dated as of October 11, 1994; as amended by
that certain Amendment to Loan and Security Agreement dated December 6, 1995;
that certain Loan Modification Agreement dated April 19, 1995; that certain
Amended Loan and Security Agreement dated December 27, 1995; that certain
Amendment to Restated and Amended Loan and Security Agreement dated February
28, 1996; that certain Amendment to Restated and Amended Loan and Security
Agreement dated August 15, 1996; that certain letter agreement dated March 31,
1997; that certain Second Amendment to Restated and Amended Loan and Security
Agreement of even date herewith; and as the same may be further amended,
modified, or supplemented from time to time (the "Receivables Loan Agreement"),
pursuant to which Maker has assigned, pledged and granted a security interest
to Holder in certain receivables related to the sale of Interval Units and
other Collateral described therein. This Note, the Mortgage, the Receivables
Loan Agreement, the Loan Agreement and any other documents evidencing or
securing the Loan or executed in connection therewith, and any modification,
renewal or extension of any of the foregoing are collectively called the "Loan
Documents".
This Note has been issued pursuant to the Loan Agreement, and all of
the terms, covenants and conditions of the Loan Agreement (including all
Exhibits thereto) and all other instruments evidencing or securing the
indebtedness hereunder are hereby made a part of this Note and are deemed
incorporated herein in full. Defined terms used herein and not otherwise
defined shall have the meanings set forth in the Loan Agreement.
2. Principal and Interest.
So long as no Event of Default exists, interest shall accrue
on the principal balance hereof from time to time outstanding and,
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<PAGE> 46
Maker shall pay interest thereon at a floating rate of interest per annum equal
to three and one-half percent (3.50%) plus the Base Rate (the aggregate rate
referred to as the "Interest Rate"). "Base Rate" shall mean the rate published
each business day in the Wall Street Journal for deposits maturing three (3)
months after issuance under the caption "Money Rates, London Interbank Offered
Rates (Libor)". The Interest Rate for each calendar month shall be fixed based
upon the Base Rate published prior to and in effect on the first (1st) business
day of such month. Interest shall be calculated based on a 360 day year and
charged for the actual number of days elapsed.
Maker shall be entitled to Advances (as defined in the Loan Agreement)
under this Note during the first eighteen (18) months of the term of this Note;
provided, however, (i) at no time shall the outstanding principal balance under
this Note exceed $l0,000,000.00 in the aggregate, or $5,000,000.00 at any
single Resort and (ii) the aggregate of all Advances under this Note shall not
exceed $100,000,000.00. If, at any time, the outstanding balance hereunder
exceeds $10,000,000.00 in the aggregate, or $5,000,000.00 at any single Resort,
Maker shall pay such excess amount to Holder within five (5) business days
after notice from Holder.
3. Payments.
Commencing on ___________, 1997, Maker shall pay interest
computed at the Interest Rate monthly in arrears on the first day of each
month.
Maker shall pay Holder the Unit Release Payment for each Unit no later
than the date upon which such Unit is Released into the Timeshare Inventory (as
defined in the Loan Agreement), but in no event shall the Unit Release Payment
for a particular Unit be paid to Holder later than eighteen (18) months from
the commencement of construction of the Building within which such Unit is
located. The amount of each Unit Release Payment shall be applied first to the
outstanding principal balance of this Note, and then to the interest due and
payable hereunder.
In addition to the foregoing, Maker shall also be required to pay
Holder the amount of one percent (1.0%) for each dollar advanced to Maker in
excess of Ten Million Dollars ($10,000,000.00) (such amount being calculated by
aggregating all Advances made hereunder) which amount shall be payable out of
the applicable Advance.
The outstanding principal balance of this Note together with all
accrued interest shall be due and payable on or before the date occurring
thirty six (36) months from the date hereof, or any
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<PAGE> 47
earlier date on which the Loan shall be required to be paid in full, whether by
acceleration or otherwise (the "Maturity Date").
4. Prepayment.
Maker may prepay this Note in full or in part upon not less
than three (3) days prior written notice to Holder.
5. Default.
5.1 Events of Default.
Any of the following shall constitute an "Event of Default" under this
Note: (a) failure to pay within five (5) days of the date of written notice to
Borrower after the due date of any amounts owed pursuant to this Note, whether
such due date is by acceleration or otherwise, provided, however, that for the
payment due at the Maturity Date there is no grace period allowed; or (b) the
occurrence of any default under any of the other Loan Documents, after giving
effect to any applicable grace or cure period.
5.2 Remedies.
So long as an Event of Default remains outstanding: (a) interest shall
accrue at a rate equal to the Interest Rate plus four percent (4%) per annum
(the "Default Rate"); (b) Holder may, at its option and without notice (such
notice being expressly waived), declare the Loan immediately due and payable;
and (c) Holder may pursue all rights and remedies available under the Mortgage
or any other Loan Documents. Holder's rights, remedies and powers, as provided
in this Note and the other Loan Documents, are cumulative and concurrent, and
may be pursued singly, successively or together against Maker, any guarantor of
the Loan, the security described in the Loan Documents, and any other security
given at any time to secure the payment hereof, all at the sole discretion of
Holder. Additionally, Holder may pursue every other right or remedy available
at law or in equity without first exhausting the rights and remedies contained
herein, all in Holder's sole discretion. Failure of Holder, for any period of
time or on more than one occasion, to exercise its option to accelerate the
Maturity Date shall not constitute a waiver of the right to exercise the same
at any time during the continued existence of any Event of Default or any
subsequent Event of Default.
If any attorney is engaged: (i) to collect the Loan or any sums due
under the Loan Documents, whether or not legal proceedings are thereafter
instituted by Holder; (ii) to represent Holder in
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<PAGE> 48
any bankruptcy, reorganization, receivership or other proceedings affecting
creditors, rights and involving a claim under this Note; (iii) to protect the
liens of the Mortgage or any of the Loan Documents; (iv) to foreclose the
Mortgage or enforce any security interests under the Loan Documents; (v) to
represent Holder in any other proceedings whatsoever in connection with the
Mortgage or any of the Loan Documents, including post judgment proceedings to
enforce any judgment related to the Loan Documents; or (vi) in connection with
seeking an out-of-court workout or settlement of any of the foregoing, then
Maker shall pay to Holder all costs, attorneys' fees and expenses in connection
therewith, in addition to all other amounts due hereunder.
6. Late Charge.
If payments of principal and/or interest, or any other amounts
under the Loan or other Loan Documents are not timely made or remain overdue
for a period of five (5) days, Maker, without notice or demand by Holder,
promptly shall pay an amount ("Late Charge") equal to four percent (4%) of each
delinquent payment.
7. Governing Law: Severability.
This Note shall be governed by and construed in accordance
with the internal laws of the State of Illinois. The invalidity, illegality or
unenforceability of any provision of this Note shall not affect or impair that
validity, legality or enforceability of the remainder of this Note, and to this
end, the provisions of this Note are declared to be severable.
8. Waiver.
Maker, for itself and all endorsers, guarantors and sureties
of this Note, and their heirs, successors, assigns and legal representatives,
hereby waives presentment for payment, demand, notice of nonpayment, notice of
dishonor, protest of any dishonor notice of protest and protest of this Note,
and all other notices in connection with the delivery, acceptance, performance,
default or enforcement of the payment of this Note, and agrees that their
respective liability shall be unconditional and without regard to the liability
of any other party and shall not be in any manner affected by any indulgence,
extension of time, renewal, waiver or modification granted or consented to by
Holder. Maker, for itself and all endorsers, guarantors and sureties of this
Note, and their heirs, legal representatives, successors and assigns, hereby
consents to every extension of time, renewal, waiver or modification that may
be granted by Holder regarding obligations of guarantors, endorsers or sureties
with respect to the payment of,
-5-
<PAGE> 49
or other provisions of, this Note, and to the release of any makers, endorsers,
guarantors or sureties, and of any collateral given to secure the payment
hereof, or any part hereof, with or without substitution, and agrees that
additional makers, endorsers, guarantors or sureties may become parties hereto
without notice to Maker or to any endorser, guarantor or surety and without
affecting the liability of any of them.
9. Security, Application of Payments.
This Note is secured by the liens, encumbrances and
obligations created hereby and by the other Loan Documents and the terms and
provisions of the other Loan Documents are hereby incorporated herein. Payment
will be applied, at Holder's option, first to any fees, expenses or other costs
Maker is obligated to pay under this Note or the other Loan Documents, second
to interest due on the Loan and third to the outstanding principal balance of
the Loan.
10. Miscellaneous.
10.1 Amendments.
This Note may not be terminated or amended orally, but only by a
termination or amendment in writing signed by Holder and Maker.
10.2 Lawful Rate of Interest.
In no event whatsoever shall the amount of interest paid or agreed to
be paid to Holder pursuant to this Note or any of the Loan Documents exceed the
highest lawful rate of interest permissible under applicable law. If, from
any circumstances whatsoever, fulfillment of any provision of this Note and the
other Loan Documents shall involve exceeding the lawful rate of interest which
a court of competent jurisdiction may deem applicable hereto ("Excess
Interest"), then ipso facto, the obligation to be fulfilled shall be reduced to
the highest lawful rate of interest permissible under such law and if, for any
reason whatsoever, Holder shall receive, as interest, an amount which would be
deemed unlawful under such applicable law, such interest shall be applied to
the principal of the Loan (whether or not due and payable), and not to the
payment of interest, or refunded to Maker if such Loan has been paid in full.
Neither Maker nor any guarantor or endorser shall have any action against
Holder for any damages whatsoever arising out of the payment or collection of
any such Excess Interest.
-6-
<PAGE> 50
10.3 Captions.
The captions of the Paragraphs of this Note are for convenience of
reference only and shall not be deemed to modify, explain, enlarge or restrict
any of the provisions hereof.
10.4 Notices.
Notices shall be given under this Note in conformity with the terms
and conditions of the Loan Agreement.
10.5 Joint and Several.
The obligations of Maker under this Note shall be joint and several
obligations of Maker and of each Maker, if more than one, and of each Maker's
heirs, personal representatives, successors and assigns.
10.6 Time of Essence.
Time is of the essence of this Note and the performance of each of the
covenants and agreements contained herein.
11. Sale of Loan.
Holder, at any time and without the consent of Maker, may
grant participations in or sell, transfer, assign and convey all or any portion
of its right, title and interest in and to the Loan, this Note, the Mortgage,
the Loan Agreement and the other Loan Documents, any guaranties given in
connection with the Loan and any collateral given to secure the Loan. In the
event Holder sells, transfers, conveys or assigns all of Holder's right, title
and interest in this Note or the Loan, Holder shall give notice thereof to
Maker and Holder shall thereupon be released from liability and obligations as
the Holder hereunder and under all other transferred Loan Documents from and
after the date of such transfer; provided such transferee agrees to be bound by
the obligations of Lender thereunder. Notice to Maker shall not be required for
any partial sale, transfer, assignment or conveyance of this Note.
12. Venue.
MAKER AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING DIRECTLY,
INDIRECTLY OR OTHERWISE IN CONNECTION WITH, OUT OF, RELATED TO OR FROM THIS
NOTE SHALL BE LITIGATED, AT HOLDER'S SOLE DISCRETION AND ELECTION, ONLY IN
COURTS HAVING A SITUS WITHIN THE COUNTY OF COOK, STATE OF ILLINOIS.
MAKER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY LOCAL, STATE OR
FEDERAL COURT LOCATED WITHIN SAID COUNTY AND STATE. MAKER HEREBY IRREVOCABLY
APPOINTS AND
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<PAGE> 51
DESIGNATES C T CORPORATION SYSTEM, WHOSE ADDRESS IS MAKER, C/O C T CORPORATION
SYSTEM, 208 S. LASALLE STREET, CHICAGO, ILLINOIS 60604, AS ITS DULY AUTHORIZED
AGENT FOR SERVICE OF LEGAL PROCESS AND AGREES THAT SERVICE OF SUCH PROCESS UPON
SUCH PARTY SHALL CONSTITUTE PERSONAL SERVICE OF PROCESS UPON MAKER PROVIDED A
COPY OF SUCH SERVICE OF PROCESS IS ALSO SENT WITHIN THREE (3) DAYS THEREAFTER
TO MAKER IN ACCORDANCE WITH THE NOTICE PROVISIONS IN THE RECEIVABLES LOAN
AGREEMENT AND IN THE CASE OF SERVICE OF PROCESS FOR ACTIONS WHEREIN MAKER'S
RESPONSE IS DUE IN LESS THAN 20 DAYS, A COPY OF SUCH PROCESS WILL BE SENT TO
MAKER ON THE SAME DAY AS SERVICE ON CT CORPORATION SYSTEM. IN THE EVENT
SERVICE IS UNDELIVERABLE BECAUSE SUCH AGENT MOVES OR CEASES TO DO BUSINESS IN
CHICAGO, ILLINOIS, MAKER SHALL, WITHIN TEN (10) DAYS AFTER HOLDER'S REQUEST,
APPOINT A SUBSTITUTE AGENT (IN CHICAGO, ILLINOIS) ON ITS BEHALF AND WITHIN SUCH
PERIOD NOTIFY HOLDER OF SUCH APPOINTMENT. IF SUCH SUBSTITUTE AGENT IS NOT
TIMELY APPOINTED, HOLDER SHALL, IN ITS SOLE DISCRETION, HAVE THE RIGHT TO
DESIGNATE A SUBSTITUTE AGENT UPON FIVE (5) DAYS NOTICE TO MAKER. MAKER HEREBY
WAIVES ANY RIGHT IT MAY HAVE TO TRANSFER OR CHANGE THE VENUE OF ANY LITIGATION
BROUGHT AGAINST IT BY HOLDER ON THE RECEIVABLES LOAN DOCUMENTS IN ACCORDANCE
WITH THIS PARAGRAPH.
13. Jury Trial Waiver.
MAKER, AND HOLDER BY ITS ACCEPTANCE OF THIS NOTE, HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR
RELATED TO, THE SUBJECT MATTER OF THIS NOTE AND THE BUSINESS RELATIONSHIP THAT
IS BEING ESTABLISHED. THIS WAIVER IS KNOWINGLY, INTENTIONALLY AND VOLUNTARILY
MADE BY MAKER AND BY HOLDER, AND MAKER ACKNOWLEDGES THAT NEITHER HOLDER NOR ANY
PERSON ACTING ON BEHALF OF HOLDER HAS MADE ANY REPRESENTATIONS OF FACT TO
INCLUDE THIS WAIVER OF TRIAL BY JURY OR HAS TAKEN ANY ACTIONS WHICH IN ANY
WAY MODIFY OR NULLIFY ITS EFFECT. MAKER AND HOLDER ACKNOWLEDGE THAT THIS WAIVER
IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT MAKER AND
HOLDER HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS NOTE AND THAT
EACH OF THEM WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. MAKER AND HOLDER FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED
(OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND
IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL.
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<PAGE> 52
IN WITNESS WHEREOF, Maker has executed this Note or has caused the
same to be executed; by its duly authorized representatives as of the date set
first forth above.
MAKER:
SILVERLEAF RESORTS, INC., a Texas
corporation
By:
-----------------------------
Robert E. Mead
Its: Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
WITH SILVERLEAF RESORTS, INC.
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made between SILVERLEAF
RESORTS, INC., a Texas corporation ("Silverleaf"), and THOMAS C. FRANKS (the
"Employee").
R E C I T A L S:
A. Silverleaf has agreed to employee Employee as an executive
employee; and
B. Silverleaf and Employee desire to set forth the terms of
Employee's proposed employment
NOW, THEREFORE, in consideration of the premises and terms hereinafter
set forth, the parties agree as follows:
A G R E E M E N T:
SECTION 1. EMPLOYMENT. Employee is hereby employed as an
executive employee of Silverleaf, effective as of the Effective Date and from
month to month thereafter, until terminated pursuant to the termination
provisions of this Agreement. Silverleaf and Employee will mutually agree on
Employee's title and office upon his actual commencement of employment.
Employee may not engage in other employment while he is in the employ of
Silverleaf pursuant to this Agreement.
SECTION 2. DUTIES. Employee agrees to devote such time,
attention and energies as are necessary to fulfill his duties as specified by
the Board of Directors of Silverleaf from time to time, including those initial
duties set forth in Exhibit "A" attached hereto. Employee further agrees that
he will promote the best interests and welfare of Silverleaf and shall perform
any and all duties to the best of his abilities. The Employee shall also:
(a) NON-COMPETITION: Not render to others, during his
employment with Silverleaf, service of any kind for compensation or
promote, participate or engage in any other business activity which
would conflict or interfere with the performance of his duties or
loyalty under this Agreement, including, but not limited to,
participating in the promotion or sale of products or services for a
competitor of Silverleaf or otherwise engage in business with such
competitor;
(b) REGULATORY LAWS: Abide by all applicable statutes,
rules and regulations of each State in which services may be rendered;
and
(c) SILVERLEAF RULES: Abide by all rules and regulations
issued by Silverleaf, which are pertinent to Employee's duties and
obligations.
<PAGE> 2
SECTION 3. COMPENSATION. As compensation for the services
rendered pursuant to this Agreement:
(a) BASE COMPENSATION: Silverleaf shall pay Employee base
compensation computed at the annual rate of Three Hundred Twenty Five
Thousand and No/100 Dollars ($325,000.00), payable in semi-monthly
payments on the 1st and 15th days of each month.
(b) INCENTIVE COMPENSATION: Upon commencement of
Employee's full-time employment, Employee shall be granted 100,000
Non- Qualified Stock Options pursuant to Silverleaf's 1997 Stock
Option Plan, one-quarter (1/4) of which will vest on the date which is
one (1) year after the grant and a like amount to vest on the same
date during each of the three years which follow thereafter, such
options to be exercisable for a period of 10 years from the date of
grant, at the price of SIXTEEN AND NO/100 DOLLARS ($16.00) per share
of Silverleaf's $0.01 par value common stock.
(c) MOVING EXPENSES: Silverleaf shall pay Employee's
reasonable moving expenses to Dallas, Texas, such expenses to be
approved in advance by Silverleaf.
(d) COMPANY VEHICLE: Silverleaf shall furnish Employee a
company owned vehicle for use by Employee in performing his duties,
and Silverleaf shall pay all expenses associated therewith.
(e) FRINGE BENEFITS: Silverleaf shall provide Employee
health insurance under its group plan as it may exist from time to
time. The cost of any coverage of any of the Employee's family members
under Silverleaf's group plan shall be paid by the Employee. The
Employee shall also be entitled to such vacation time, sick leave and
other fringe benefits as may be specified by the Board of Directors of
Silverleaf from time to time for its executive personnel.
SECTION 4. CONFIDENTIALITY.
(a) NONDISCLOSURE AND NONUSE: Employee acknowledges that
during his employment with Silverleaf, he may have access to and
become acquainted with Silverleaf Confidential Information, as defined
below. Except as Employee's duties during his employment with
Silverleaf may require or Silverleaf may otherwise consent in writing,
Employee agrees that he shall not at any time disclose or use,
directly or indirectly, either during or subsequent to his employment
with Silverleaf, any Silverleaf Confidential Information.
(b) CONFIDENTIAL INFORMATION: For purposes of the
foregoing provisions, "Silverleaf Confidential Information" shall mean
(1) any and all confidential and proprietary business information and
trade secrets concerning the business and affairs of Silverleaf and
its affiliates, including but not limited to all marketing, sales and
lead generation techniques, know-how and studies, customer and lead
lists, current and
2
<PAGE> 3
anticipated customer requirements, price lists, business plans,
training programs, computer software and programs, and computer
software and data-base technologies, systems, structures and
architectures (and related processes, formulae, compositions,
improvements, devices, know-how, inventions, discoveries, concepts,
ideas, designs, methods and information), (2) any and all information
concerning the business and affairs of Silverleaf and its affiliates
(including but not limited to their historical financial statements,
financial projections and budgets, historical and projected sales,
capital spending budgets and plans, the names and backgrounds of key
personnel, personnel training and techniques and materials, however
documented), and (3) any and all notes, analysis, compilations,
studies, summaries, and other material prepared by or for Silverleaf
and its affiliates containing or based, in whole or in part, on any
information included in the foregoing. Provided, however, "Silverleaf
Confidential Information" shall not include information that is not
unique to Silverleaf, information that is generally known in the
timeshare industry or information that was known by Employee prior to
his employment with Silverleaf.
SECTION 5. NON-INTERFERENCE. Employee further agrees that during
his employment and for a period of twelve (12) months thereafter, Employee
shall not, either on his own account or jointly with or as a manager, agent,
officer, employee, consultant, partner, joint venturer, owner or shareholder or
otherwise on behalf of any other person, firm or corporation: (1) carry on or
be engaged or interested directly or indirectly in, or solicit, the manufacture
or sale of goods or provision of services to any person, firm or corporation
which, at any time during his employment has been or is a customer or in the
habit of dealing with Silverleaf or its affiliates in their business, (2)
endeavor, directly or indirectly, to canvas or solicit in competition with
Silverleaf or its affiliates or to interfere with the supply of orders for
goods or services from or by any person, firm or corporation which during his
employment has been or is a supplier of goods or services to Silverleaf or its
affiliates, or (3) directly or indirectly solicit or attempt to solicit away
from Silverleaf or its affiliates any of its officers, employees or independent
contractors or offer employment or business to any person who, on or during the
6 months immediately preceding the date of such solicitation or offer, is or
was an officer, employee or independent contractor of Silverleaf or its
affiliates.
SECTION 6. INJUNCTIVE RELIEF. Employee acknowledges that a
breach of Sections 4 or 5 hereof would cause irreparable damage to Silverleaf
and/or its affiliates, and in the event of Employee's breach of the provisions
of Sections 4 or 5 hereof, Silverleaf shall be entitled to a temporary
restraining order and an injunction restraining Employee from breaching such
Sections without the necessity of posting bond or proving irreparable harm,
such being conclusively admitted by Employee. Nothing shall be construed as
prohibiting Silverleaf from pursuing any other available remedies for such
breach, including the recovery of damages from Employee. Employee acknowledges
that the restrictions set forth in Sections 4 or 5 hereof are reasonable in
scope and duration, given the nature of the business of Silverleaf and its
affiliates. Employee agrees that issuance of an injunction restraining
Employee from breaching such Sections in accordance with their terms will not
pose an unreasonable restriction on Employee's ability to obtain employment or
other work following the effective date of any Termination.
3
<PAGE> 4
SECTION 7. EMPLOYEE INVESTMENTS. Anything to the contrary herein
notwithstanding, Employee: (1) shall not be prohibited from investing his
assets in such form or such manner as will not, in the aggregate, detract from
the performance by Employee of his duties hereunder and will not violate the
provisions of Sections 4 or 5 hereof; and (2) shall not be prohibited from
purchasing stock in any publicly traded company solely as a stockholder so long
as Employee does not own (together or separately or through his affiliates)
more than two percent (2%) of the stock in any company, other than Silverleaf,
which is engaged in the timeshare business.
SECTION 8. EMPLOYEE'S REPRESENTATIONS. Employee represents that
he will take all reasonable efforts to secure the satisfactory termination of
his present employment, and Silverleaf and Employee agree that this Agreement
shall not be effective until such termination is obtained.
SECTION 9. TERMINATION. This Agreement shall terminate: (1) upon
written notice by either party, at any time and for any or no reason
whatsoever, at least thirty (30) days prior to the effective date of the
termination; or (2) as of the end of the month of Employee's death, incapacity
due to Employee's physical or mental illness as determined in Silverleaf's sole
discretion or Employee reaching Silverleaf's normal retirement age (the
"Termination"). In the event of Termination, Employee shall be entitled to the
following:
(a) VOLUNTARY TERMINATION, OR FOR GOOD CAUSE: If Employee
voluntarily terminates his employment, or if his employment is
terminated for Good Cause, Employee shall be entitled to no severance
pay. At the Termination, the payment to Employee of compensation
earned to date shall be in full satisfaction of all claims against
Silverleaf under this Agreement. Good Cause shall be deemed to exist
if the Employee's employment is terminated because Employee:
[1] Willfully breaches or habitually neglects the
duties that the Employee is required to
perform under the terms of this Agreement;
[2] Willfully violates reasonable and substantial
rules governing employee performance;
[3] Refuses to obey reasonable orders in a manner
that amounts to insubordination;
[4] Commits clearly dishonest acts toward
Silverleaf; or
[5] Becomes incapacitated as set forth above,
dies or reaches Silverleaf's normal
retirement age.
(b) INVOLUNTARY TERMINATION WITHOUT GOOD CAUSE: If
Silverleaf terminates Employee's employment, other than for Good
Cause, Employee shall also be paid severance pay equal to his base
compensation set forth in Section 3(a) of this Agreement,
4
<PAGE> 5
payable in semi-monthly payments on the 1st and 15th days of each
month for the 12 months following the Termination. Provided, however
upon Employee's full-time reemployment following such Termination, the
semi- monthly payments still due to Employee by Silverleaf shall be
decreased by the amount of Employee's semi-monthly salary from his
reemployment for the remaining period during which the semi-monthly
payments are otherwise due. For purposes of determining such decrease,
Employee's total salary and bonuses, exclusive of any fringe benefits,
for the first twelve months of his reemployment shall be divided by
twenty-four and the result shall be deemed to be Employee's
semi-monthly salary from his reemployment.
(c) CONTINGENCY: Payment of any amounts due under this
Section is also contingent upon return of all Silverleaf's property as
outlined below.
SECTION 10. RETURN OF MATERIALS AND VEHICLES. Employee
understands and agrees that any training manuals, sales and promotional
material, vehicles or other equipment provided to him by Silverleaf in
connection with this Agreement shall remain the sole property of Silverleaf,
and shall be used by the Employee exclusively for Silverleaf's benefit. Upon
termination of this Agreement, any such material, vehicles or other equipment
shall be immediately returned to Silverleaf.
SECTION 11. NON-BINDING ALTERNATE DISPUTE RESOLUTION. Except for
actions brought by Silverleaf pursuant to Section 6 hereof:
(a) AGREEMENT TO UTILIZE: The parties shall attempt to
settle any claim or controversy arising from this Agreement through
consultation and negotiation in good faith and a spirit of mutual
cooperation prior to the commencement of any legal action. If such
attempts fail, then the dispute shall be mediated by a mutually-
accepted mediator to be chosen by the parties within forty-five (45)
days after written notice demanding mediation is sent by one party to
the other party. Neither party may unreasonably withhold consent to
the selection of a mediator, and the parties shall share the costs of
the mediation equally. By mutual written agreement, however, the
parties may postpone mediation until they have completed some
specified but limited discovery regarding the dispute. The parties may
also agree to replace mediation with any other form of alternate
dispute resolution ("ADR") available in Texas, such as a mini-trial or
arbitration.
(b) FAILURE TO RESOLVE: Any dispute which the Parties
cannot resolve through negotiation, mediation or any other form of
ADR, within six (6) months of the date of the initial demand for
mediation, may then be submitted to the appropriate court for
resolution. The use of negotiation, mediation, or any other form of
ADR procedures will not be construed under the doctrines of laches,
waiver or estoppel to affect adversely the rights of either party.
SECTION 12. WAIVER. Silverleaf's failure at any time to require
performance by Employee of any of the provisions hereof shall not be deemed to
be a waiver of any kind nor
5
<PAGE> 6
in any way affect the rights of Silverleaf thereafter to enforce the provisions
hereof. In the event that either party to this Agreement waives any provision
of this Agreement or any rights concerning any breach or default of the other
party hereto, such waiver shall not constitute a continuing waiver of any such
provision or breach or default of the other party hereto.
SECTION 13. SUCCESSORS, ASSIGNS, BENEFIT.
(a) SILVERLEAF SUCCESSORS: The provisions of this
Agreement shall inure to the benefit of and be binding upon
Silverleaf, its successors, assigns and other affiliated entities,
including, but not limited to, any corporation which may acquire all
or substantially all of Silverleaf's assets or with or into which
Silverleaf may be consolidated, merged or reorganized. Upon any such
merger, consolidation or reorganization, the term "Silverleaf" as used
herein shall be deemed to refer to any such successor corporation.
(b) NO ASSIGNMENT BY EMPLOYEE: The parties hereto agree
that Employee's services hereunder are personal and unique, and that
Silverleaf is executing this Agreement in reliance thereon. This
Agreement shall not be assignable by Employee.
SECTION 14. SEVERABILITY. If one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
shall be deemed stricken and severed from this Agreement and the remaining
terms of this Agreement shall continue in full force and effect.
SECTION 15. GOVERNING LAW AND VENUE. This Agreement shall be
deemed to have been made and entered into in the State of Texas and its
validity, construction, breach, performance and operation shall be governed by
the laws of that state. The obligations hereunder of Silverleaf shall be
performable in Dallas County, Texas, and venue for any suit involving this
Agreement shall lie exclusively in Dallas County, Texas.
SECTION 16. ENTIRE UNDERSTANDING. This Agreement sets forth the
entire understanding between the parties with respect to the employment of
Employee, and no other representations, warranties or agreements whatsoever
have been made by Silverleaf to Employee. Further, this Agreement may not be
modified or amended except by another instrument in writing executed by both of
the parties.
SECTION 17. NOTICES. All notices and communications under this
Agreement shall be sent to the parties at the following addresses or such other
addresses that the parties may subsequently designate in writing.
6
<PAGE> 7
(a) SILVERLEAF:
Silverleaf Resorts, Inc.
Attention: Robert E. Mead, Chief Executive Officer
1221 Riverbend, Suite 120
Dallas, Texas 75247
(b) EMPLOYEE:
Thomas C. Franks
1504 Cottonwood Valley Circle North
---------------------------------------------------
Irving, Texas 75038
---------------------------------------------------
SECTION 18. SECTION HEADINGS. Section and paragraph headings are
inserted herein only for convenience and shall not be used to interpret any of
the provisions hereof.
SECTION 19. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same original.
SECTION 20. EFFECTIVE DATE. This Agreement is executed on the
date set forth below, but shall be effective following the satisfaction of the
requirements of Section 8 hereof and on a mutual convenient date agreed to by
Silverleaf and Employee (the "Effective Date"). If the requirements of Section
8 hereof are not satisfied by August 15, 1997, however, then this Agreement
shall be null and void for all purposes as of that date.
Executed this 7th day of July, 1997.
"SILVERLEAF"
SILVERLEAF RESORTS, INC.
By: /s/ ROBERT E. MEAD
----------------------------------------------
Robert E. Mead, Chief Executive Officer
"EMPLOYEE"
/s/ THOMAS C. FRANKS
------------------------------------------------------
THOMAS C. FRANKS
7
<PAGE> 8
EXHIBIT "A"
LIST OF INITIAL DUTIES
1. Shareholder and Other Investor Relations.
2. Supervision of Silverleaf's Investor Relations Consultant.
3. Planning and Management of Shareholder Meetings.
4. Communications with Stock Specialists.
5. Communications with Multiple State Regulatory Agencies in Each State
in Which Silverleaf Does Business.
6. ARDA Relations and Board Participation.
7. General Corporate Public Relations.
8. Financial Structuring and Other General Financial Matters.
<PAGE> 1
EXHIBIT 10.7
[SILVERLEAF RESORTS, INC. LETTERHEAD]
MEMORANDUM
DATE: August 21, 1997
TO: Sharon K. Brayfield and James B. Francis, Jr.
FROM: Robert E. Mead
RE: Tom Franks Home-1504 Cottonwood Valley Circle, Irving, Texas
==============================================================================
Per our discussion on Tuesday, august 19, 1997, Silverleaf Resorts, Inc.
entered into an agreement to purchase a house which would be rented to tom
Franks for a period of thirteen months for an amount that would cover monthly
principal, interest, homeowners associations dues, taxes and insurance. The
principal and interest will be deducted from Tom's payroll check monthly and
the homeowners associations dues, taxes and insurance will be reimbursed by Tom
to the company upon invoice.
Additionally, the house which cost $522,000.00 required a down payment of
$104,400.00 with a note payable of $417,600.00 at a favorable loan factor of
2.4 percentage points plus the Current Index which is the "Twelve Month Average
of One-Month LIBOR" rate as published each month by FNMA.
Tom will pay Silverleaf Resorts, Inc. eight percent (8%) interest on
$112,965.49 (down payment plus related closing costs of $14,857.93 less credits
of $6,292.44 for 1997 taxes) plus actual legal fees due to George Bedell of
approximately $500.00. This principal and interest will be due to Silverleaf on
the thirteenth month after closing.
Upon reaching the thirteenth month after closing. Tom will purchase the house
for the original purchase price or make other living arrangements.
This arrangement was necessary due to the lack of available housing in an
appropriate location on a lease basis.
Agreed: Agreed:
/s/ THOMAS C. FRANKS /s/ SHARON K. BRAYFIELD
- ----------------------- ------------------------------------------
Thomas C. Franks Sharon K. Brayfield, Executive Committee
/s/ JAMES B. FRANCIS, JR.
------------------------------------------
James B. Francis, Jr., Executive Committee
/s/ ROBERT E. MEAD
------------------------------------------
Robert E. Mead, Executive Committee
<PAGE> 1
EXHIBIT 10.8
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
THOMAS C. FRANKS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
GRANT OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Grant of Option . . . . . . . . . . . . . . . . . . 1
Section 1.2. Fair Market Value . . . . . . . . . . . . . . . . . 1
Section 1.3. Purchase Price . . . . . . . . . . . . . . . . . . 1
Section 1.4. Time for Exercise . . . . . . . . . . . . . . . . . 2
Section 1.5. Partial Exercise . . . . . . . . . . . . . . . . . 2
Section 1.6. Fractional Shares . . . . . . . . . . . . . . . . . 2
Section 1.7. Method of Exercise . . . . . . . . . . . . . . . . 2
Section 1.8. Termination of Option . . . . . . . . . . . . . . . 2
ARTICLE II
RESTRICTIONS AND LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Outstanding Options . . . . . . . . . . . . . . . . 3
Section 2.2. Effect on Other Agreements . . . . . . . . . . . . 3
Section 2.3. Shares as Investment . . . . . . . . . . . . . . . 3
Section 2.4. Reclassification, Consolidation, or Merger . . . . 4
Section 2.5. Limitations Upon Transfer of Option . . . . . . . . 4
Section 2.6. Limitations Upon Transfer of Shares . . . . . . . . 4
Section 2.7. Rights as Shareholder . . . . . . . . . . . . . . . 4
ARTICLE III
ADMINISTRATIVE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1. Notices . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2. Binding Effect . . . . . . . . . . . . . . . . . . 5
Section 3.3. Nonqualified Options . . . . . . . . . . . . . . . 5
Section 3.4. Incorporation of the Plan . . . . . . . . . . . . . 5
</TABLE>
(i)
<PAGE> 3
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
THOMAS C. FRANKS
This Nonqualified Stock Option Agreement (the "Option Agreement") is
made between SILVERLEAF RESORTS, INC., a Texas Corporation (the "Company"), and
THOMAS C. FRANKS ("Optionee") effective as of the date specified below.
RECITALS:
A. Optionee is an important and valuable Officer and Employee of
Silverleaf Resort Acquisitions, Inc., a subsidiary of the Company, with
recognized leadership and experience in the business of the Company, the
Company deems it to be in its interest and in the interest of its shareholders
to provide an incentive to Optionee by granting Optionee a proprietary interest
in the Company, and the Company desires to enter into this Option Agreement
with Optionee under the terms and conditions hereinafter set forth and to grant
Optionee an option to purchase common shares of the Corporation; and
B. The stock options granted hereunder are granted pursuant to
the terms of the 1997 Stock Option Plan for Silverleaf Resorts, Inc., which was
adopted by the Company and approved by the shareholders effective as of May 15,
1997, (the "Plan") and are intended to be Nonqualified Options as defined in
the Plan and not Incentive Options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"),
AGREEMENT:
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the Parties agree as follows:
ARTICLE I.
GRANT OF OPTION
SECTION 1.1. GRANT OF OPTION. The Company hereby grants to
Optionee the right and option to purchase from it, on the terms and conditions
following, all or any part of an aggregate of ONE HUNDRED THOUSAND (100,000)
shares of the authorized $0.01 par value common shares of the Company.
SECTION 1.2. FAIR MARKET VALUE. The fair market value of the
Company's $0.01 par value common shares on the date of this Option Agreement is
NINETEEN AND 1875/10,000ths DOLLARS ($19.1875) per share, as determined by the
Company's Board of Directors pursuant to Section 7.3 of the Plan.
SECTION 1.3. PURCHASE PRICE. The purchase price for each share
purchasable hereunder shall be SIXTEEN and NO/100 DOLLARS ($16.00).
<PAGE> 4
SECTION 1.4. TIME FOR EXERCISE. Optionee may elect to exercise
the options at the times and for the number of shares indicated as follows:
(a) On or after August 18, 1998, to and including August 17, 1999,
25,000 shares;
(b) On or after August 18, 1999, to and including August 17, 2000,
25,000 shares;
(c) On or after August 18, 2000, to and including August 17, 2001,
25,000 shares; and
(d) On or after August 18, 2001, to and including August 17, 2007
(the "Option Termination Date"), 25,000 shares.
However, if Optionee does not purchase the full number of shares to
which Optionee is entitled in either period (a), (b) or (c) above, Optionee is
permitted to purchase those remaining shares in a later period through and
including the Option Termination Date in addition to those shares which
Optionee may otherwise be entitled to purchase.
SECTION 1.5. PARTIAL EXERCISE. No partial exercise of such option
may be for less than 100 full shares.
SECTION 1.6. FRACTIONAL SHARES. In no event shall the Company be
required to transfer fractional shares to the Optionee.
SECTION 1.7. METHOD OF EXERCISE. The option shall be exercised by
Optionee as to all or part of the shares covered by the option by giving
written notice of such exercise to the Company, specifying the number of shares
to be purchased and specifying a business day not more than fifteen (15) days
from the date such notice is given, for the payment of the purchase price
against delivery of the shares being purchased. Such notice shall set forth a
statement, pursuant to Section 8.8 of the Plan and Section 2.4 of this Option
Agreement, that the shares are being acquired for investment.
Subject to any applicable laws or regulations and to the terms of
Sections 8.8, 11.5, and 12.1 of the Plan, the Company shall cause certificates
for the Shares so purchased to be delivered to Optionee at the principal
business office of the Company, against payment of the full purchase price, on
the date specified in the notice of exercise, such payment to be made in cash
or by certified check or by transfer and delivery of shares of the common stock
of the Company as provided in Section 7.4 of the Plan.
SECTION 1.8. TERMINATION OF OPTION. The option and all rights
granted by this Option Agreement, to the extent those rights have not been
exercised, will terminate and become null and void on the sooner of:
(a) Such date as is ten (10) years from the date of this Option
Agreement;
2
<PAGE> 5
(b) The Option Termination Date as defined in Section 1.4 hereof;
(c) The date which is three months after the date Optionee ceases
to continually serve as an Officer or Employee of the Company,
if such cessation is by disability, retirement, or dismissal
other than for cause, as defined in Section 9.4 of the Plan,
provided that in the event of Optionee's cessation of office
or employment under such terms, Optionee may exercise such
option only to the extent that Optionee was entitled to
exercise it on the date of Optionee's cessation of office or
employment;
(d) The date Optionee ceases to continually serve as an Officer or
Employee of the Company if such cessation is by voluntary
termination or dismissal for cause as defined in Sections 9.3
and 9.4 of the Plan; or
(e) The date which is one year following the death of Optionee if
Optionee dies while serving as an Officer or Employee of the
Company or within the three-month period following the
termination of such office or employment if such termination
was by disability, retirement, or dismissal other than for
cause. In the event of Optionee's death under such terms, the
person or persons to whom Optionee's rights under the option
shall pass, whether by will or by the applicable laws of
descent and distribution, may exercise such option pursuant to
Section 8.7 of the Plan only to the extent that Optionee was
entitled to exercise it on the date of Optionee's death.
For purposes of the foregoing provisions, serving as an Officer or Employee of
a subsidiary of the Company shall be deemed to be serving as an Officer or
Employee of the Company.
ARTICLE II
RESTRICTIONS AND LIMITATIONS
SECTION 2.1. OUTSTANDING OPTIONS. The option granted to Optionee
under this Option Agreement shall in no event be exercised while there is
outstanding any option previously granted to Optionee to purchase common shares
of the Company at a price higher than the option price under the option herein
granted to Optionee.
SECTION 2.2. EFFECT ON OTHER AGREEMENTS. Nothing herein contained
shall be deemed to modify the terms of any other agreement between the Company
and Optionee.
SECTION 2.3. SHARES AS INVESTMENT. By accepting this option,
Optionee acknowledges for Optionee, Optionee's heirs, and legatees that any and
all shares purchased under this Option Agreement shall be acquired for
investment and not for or with a view towards distribution, and upon the
transfer of any or all of the shares subject to the option granted hereunder,
Optionee, or Optionee's heirs or legatees receiving such shares, shall deliver
to the Company a
3
<PAGE> 6
representation in writing that such shares are being acquired in good faith for
investment and not for or with a view towards distribution.
SECTION 2.4. RECLASSIFICATION, CONSOLIDATION, OR MERGER.
Adjustments to the number of shares subject to the option and the option price
for them shall be proportionately adjusted, pursuant to Section 10.1 of the
Plan.
SECTION 2.5. LIMITATIONS UPON TRANSFER OF OPTION. During the
lifetime of Optionee, the option and all rights granted in this Option
Agreement shall be exercisable only by the Optionee, and except as Section
1.8(e) of this Option Agreement otherwise provides, the option and all rights
granted under this Option Agreement shall not be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of such
option or of such rights contrary to the provisions in this Option Agreement,
or upon the levy of any attachment or similar process upon such option or such
rights, such option and such rights shall immediately become null and void.
SECTION 2.6. LIMITATIONS UPON TRANSFER OF SHARES. No shares
acquired by Optionee pursuant to this Option Agreement shall be sold or
disposed of within six (6) months following the date of acquisition of such
shares, unless either the grant of this Non-Qualified Option is approved by the
Board of Directors, or a committee of the Board of Directors that is composed
solely of two or more non-employee directors as defined in Rule 16b-3 of the
Exchange Act, or the grant of this Non-Qualified Option is approved or
ratified, in compliance with section 14 of the Exchange Act, by either: the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated, or the written consent of the holders of a
majority of the securities of the Company entitled to vote, provided that such
ratification occurs no later than the date of the next annual meeting of the
shareholders. Any attempted sale, disposal or transfer of such shares shall be
without effect. All shares transferred to Optionee pursuant to the exercise of
the option granted hereby shall be clearly marked with the foregoing
restrictions on transfer.
SECTION 2.7. RIGHTS AS SHAREHOLDER. Neither Optionee nor
Optionee's executor, administrator, heirs, or legatees, shall be or have any
rights or privileges of a shareholder of the Company in respect of the shares
transferable upon exercise of the option granted under this Option Agreement,
unless and until certificates representing such shares shall have been
endorsed, transferred, and delivered and the Optionee, or the Optionee's
executor, administrator, heirs or legatees, as the case may be, has caused his
name to be entered as the shareholder of record on the books of the Company.
4
<PAGE> 7
ARTICLE III
ADMINISTRATIVE PROVISIONS
SECTION 3.1. NOTICES. Any notice to be given under the terms of
this Option Agreement shall be addressed to the Parties as follows:
If to the Company:
Silverleaf Resorts, Inc.
Attn: Robert E. Mead, Chief Executive Officer
1221 Riverbend Drive, Suite 120
P.O.Box 358
Dallas, Texas 75221
If to Optionee:
THOMAS C. FRANKS
1504 Cottonwood Valley Circle North
-------------------------------------------
Irving, TX 75038
-------------------------------------------
Any Party may change its address by giving notice in writing, stating
its new address, to the other Party as provided in the foregoing manner. Any
notice shall be deemed duly given when enclosed in a properly sealed envelope
or wrapper addressed as herein required certified and deposited (postage and
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government.
SECTION 3.2. BINDING EFFECT. This Option Agreement shall be
binding upon the heirs, executors, administrators, and successors of the
parties hereto.
SECTION 3.3. NONQUALIFIED OPTIONS. The options granted hereunder
are intended to be Nonqualified Options as defined in the Plan.
SECTION 3.4. INCORPORATION OF THE PLAN. The terms, conditions and
limitations contained in the Plan are incorporated herein by reference and such
provisions shall control to the extent they are not specifically contrary to a
provision of this Option Agreement.
5
<PAGE> 8
EXECUTED this 24th day of September, 1997, but EFFECTIVE the 18th day
of August, 1997.
SILVERLEAF RESORTS, INC., the Company
By: /s/ ROBERT E. MEAD
--------------------------------
ROBERT E. MEAD, Chief Executive
Officer
/s/ THOMAS C. FRANKS
-----------------------------------------
THOMAS C. FRANKS, Optionee
6
<PAGE> 1
EXHIBIT 10.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
STUART M. BLOCH
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
GRANT OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Grant of Option . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Fair Market Value . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4. Time for Exercise . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Partial Exercise . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6. Fractional Shares . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Method of Exercise . . . . . . . . . . . . . . . . . . . . 2
Section 1.8. Termination of Option . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
RESTRICTIONS AND LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Outstanding Options . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Effect on Other Agreements . . . . . . . . . . . . . . . . 3
Section 2.3. Shares as Investment . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Reclassification, Consolidation, or Merger . . . . . . . . 4
Section 2.5. Limitations Upon Transfer of Option . . . . . . . . . . . . 4
Section 2.6. Limitations Upon Transfer of Shares . . . . . . . . . . . . 4
Section 2.7. Rights as Shareholder . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
ADMINISTRATIVE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2. Binding Effect . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3. Nonqualified Options . . . . . . . . . . . . . . . . . . . 5
Section 3.4. Incorporation of the Plan . . . . . . . . . . . . . . . . . 5
</TABLE>
(i)
<PAGE> 3
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
STUART M. BLOCH
This Nonqualified Stock Option Agreement (the "Option Agreement") is
made between SILVERLEAF RESORTS, INC., a Texas Corporation (the "Company"), and
STUART M. BLOCH ("Optionee") effective as of the date specified below.
RECITALS:
A. Optionee is an important and valuable Director of the Company
with recognized leadership and experience, the Company deems it to be in its
interest and in the interest of its shareholders to provide an incentive to
Optionee by granting Optionee a proprietary interest in the Company, and the
Company desires to enter into this Option Agreement with Optionee under the
terms and conditions hereinafter set forth and to grant Optionee an option to
purchase common shares of the Corporation; and
B. The stock options granted hereunder are granted pursuant to
the terms of the 1997 Stock Option Plan for Silverleaf Resorts, Inc., which was
adopted by the Company and approved by the shareholders effective as of May 15,
1997, (the "Plan") and are intended to be Nonqualified Options as defined in
the Plan and not Incentive Options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"),
AGREEMENT:
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the Parties agree as follows:
ARTICLE I.
GRANT OF OPTION
SECTION 1.1. GRANT OF OPTION. The Company hereby grants to
Optionee the right and option to purchase from it, on the terms and conditions
following, all or any part of an aggregate of FORTY THOUSAND (40,000) shares of
the authorized $0.01 par value common shares of the Company.
SECTION 1.2. FAIR MARKET VALUE. The fair market value of the
Company's $0.01 par value common shares on the date of this Option Agreement is
EIGHTEEN AND 97/100 DOLLARS ($18.97) per share, as determined by the Company's
Board of Directors pursuant to Section 7.3 of the Plan.
SECTION 1.3. PURCHASE PRICE. The purchase price for each share
purchasable hereunder shall be SIXTEEN AND NO/100 DOLLARS ($16.00).
<PAGE> 4
SECTION 1.4. TIME FOR EXERCISE. Optionee may elect to exercise the
options at the times and for the number of shares indicated as follows:
(a) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 1998, to and including
the date of the Company's annual shareholders' meeting to be
held in the Month of May, 1999, 13,333 shares;
(b) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 1999, to and including
the date of the Company's annual shareholders' meeting to be
held in the Month of May, 2000, 13,334 shares; and
(c) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 2000, to and including
June 4, 2007 (the "Option Termination Date"), 13,333 shares.
However, if Optionee does not purchase the full number of shares to
which Optionee is entitled in either period (a) or (b) above, Optionee is
permitted to purchase those remaining shares in a later period through and
including the Option Termination Date in addition to those shares which
Optionee may otherwise be entitled to purchase.
SECTION 1.5. PARTIAL EXERCISE. No partial exercise of such option
may be for less than 100 full shares.
SECTION 1.6. FRACTIONAL SHARES. In no event shall the Company be
required to transfer fractional shares to the Optionee.
SECTION 1.7. METHOD OF EXERCISE. The option shall be exercised by
Optionee as to all or part of the shares covered by the option by giving
written notice of such exercise to the Company, specifying the number of shares
to be purchased and specifying a business day not more than fifteen (15) days
from the date such notice is given, for the payment of the purchase price
against delivery of the shares being purchased. Such notice shall set forth a
statement, pursuant to Section 8.8 of the Plan and Section 2.4 of this Option
Agreement, that the shares are being acquired for investment.
Subject to any applicable laws or regulations and to the terms of
Sections 8.8, 11.5, and 12.1 of the Plan, the Company shall cause certificates
for the Shares so purchased to be delivered to Optionee at the principal
business office of the Company, against payment of the full purchase price, on
the date specified in the notice of exercise, such payment to be made in cash
or by certified check or by transfer and delivery of shares of the common stock
of the Company as provided in Section 7.4 of the Plan.
SECTION 1.8. TERMINATION OF OPTION. The option and all rights
granted by this Option Agreement, to the extent those rights have not been
exercised, will terminate and become null and void on the sooner of:
2
<PAGE> 5
(a) Such date as is ten (10) years from the date of this Option
Agreement;
(b) The Option Termination Date as defined in Section 1.4 hereof;
(c) The date which is three months after the date Optionee ceases
to continually serve as a Director of the Company, if such
cessation is by disability, retirement, or dismissal other
than for cause, as defined in Section 9.4 of the Plan,
provided that in the event of Optionee's cessation of
directorship under such terms, Optionee may exercise such
option only to the extent that Optionee was entitled to
exercise it on the date of Optionee's cessation of
directorship;
(d) The date Optionee ceases to continually serve as a Director of
the Company if such cessation is by voluntary termination or
dismissal for cause as defined in Sections 9.3 and 9.4 of the
Plan; or
(e) The date which is one year following the death of Optionee if
Optionee dies while serving as a Director of the Company or
within the three-month period following the termination of
such directorship if such termination was by disability,
retirement, or dismissal other than for cause. In the event of
Optionee's death under such terms, the person or persons to
whom Optionee's rights under the option shall pass, whether by
will or by the applicable laws of descent and distribution,
may exercise such option pursuant to Section 8.7 of the Plan
only to the extent that Optionee was entitled to exercise it
on the date of Optionee's death.
ARTICLE II
RESTRICTIONS AND LIMITATIONS
SECTION 2.1. OUTSTANDING OPTIONS. The option granted to Optionee
under this Option Agreement shall in no event be exercised while there is
outstanding any option previously granted to Optionee to purchase common shares
of the Company at a price higher than the option price under the option herein
granted to Optionee.
SECTION 2.2. EFFECT ON OTHER AGREEMENTS. Nothing herein contained
shall be deemed to modify the terms of any other agreement between the Company
and Optionee.
SECTION 2.3. SHARES AS INVESTMENT. By accepting this option,
Optionee acknowledges for Optionee, Optionee's heirs, and legatees that any and
all shares purchased under this Option Agreement shall be acquired for
investment and not for or with a view towards distribution, and upon the
transfer of any or all of the shares subject to the option granted hereunder,
Optionee, or Optionee's heirs or legatees receiving such shares, shall deliver
to the Company a representation in writing that such shares are being acquired
in good faith for investment and not for or with a view towards distribution.
3
<PAGE> 6
SECTION 2.4. RECLASSIFICATION, CONSOLIDATION, OR MERGER.
Adjustments to the number of shares subject to the option and the option price
for them shall be proportionately adjusted, pursuant to Section 10.1 of the
Plan.
SECTION 2.5. LIMITATIONS UPON TRANSFER OF OPTION. During the
lifetime of Optionee, the option and all rights granted in this Option
Agreement shall be exercisable only by the Optionee, and except as Section
1.8(e) of this Option Agreement otherwise provides, the option and all rights
granted under this Option Agreement shall not be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of such
option or of such rights contrary to the provisions in this Option Agreement,
or upon the levy of any attachment or similar process upon such option or such
rights, such option and such rights shall immediately become null and void.
SECTION 2.6. LIMITATIONS UPON TRANSFER OF SHARES. No shares
acquired by Optionee pursuant to this Option Agreement shall be sold or
disposed of within six (6) months following the date of acquisition of such
shares, unless either the grant of this Non-Qualified Option is approved by the
Board of Directors, or a committee of the Board of Directors that is composed
solely of two or more non-employee directors as defined in Rule 16b-3 of the
Exchange Act, or the grant of this Non-Qualified Option is approved or
ratified, in compliance with section 14 of the Exchange Act, by either: the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated, or the written consent of the holders of a
majority of the securities of the Company entitled to vote, provided that such
ratification occurs no later than the date of the next annual meeting of the
shareholders. Any attempted sale, disposal or transfer of such shares shall be
without effect. All shares transferred to Optionee pursuant to the exercise of
the option granted hereby shall be clearly marked with the foregoing
restrictions on transfer.
SECTION 2.7. RIGHTS AS SHAREHOLDER. Neither Optionee nor
Optionee's executor, administrator, heirs, or legatees, shall be or have any
rights or privileges of a shareholder of the Company in respect of the shares
transferable upon exercise of the option granted under this Option Agreement,
unless and until certificates representing such shares shall have been
endorsed, transferred, and delivered and the Optionee, or the Optionee's
executor, administrator, heirs or legatees, as the case may be, has caused his
name to be entered as the shareholder of record on the books of the Company.
ARTICLE III
ADMINISTRATIVE PROVISIONS
SECTION 3.1. NOTICES. Any notice to be given under the terms of
this Option Agreement shall be addressed to the Parties as follows:
4
<PAGE> 7
If to the Company:
Silverleaf Resorts, Inc.
Attn: Robert E. Mead, Chief Executive Officer
1221 Riverbend Drive, Suite 120
P.O.Box 358
Dallas, Texas 75221
If to Optionee:
STUART M. BLOCH
1401 16th Street N.W.
Washington, D.C. 20036
Any Party may change its address by giving notice in writing, stating
its new address, to the other Party as provided in the foregoing manner. Any
notice shall be deemed duly given when enclosed in a properly sealed envelope
or wrapper addressed as herein required certified and deposited (postage and
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government.
SECTION 3.2. BINDING EFFECT. This Option Agreement shall be
binding upon the heirs, executors, administrators, and successors of the
parties hereto.
SECTION 3.3. NONQUALIFIED OPTIONS. The options granted hereunder
are intended to be Nonqualified Options as defined in the Plan.
SECTION 3.4. INCORPORATION OF THE PLAN. The terms, conditions and
limitations contained in the Plan are incorporated herein by reference and such
provisions shall control to the extent they are not specifically contrary to a
provision of this Option Agreement.
EXECUTED this 31st day of July, 1997, but EFFECTIVE the 30th day of July, 1997.
SILVERLEAF RESORTS, INC., the Company
By: /s/ ROBERT E. MEAD
-----------------------------------
ROBERT E. MEAD, Chief Executive
Officer
/s/ STUART M. BLOCH
--------------------------------------------
STUART M. BLOCH, Optionee
5
<PAGE> 1
EXHIBIT 10.10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
JAMES B. FRANCIS, JR.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
GRANT OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Grant of Option . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Fair Market Value . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Purchase Price . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4. Time for Exercise . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Partial Exercise . . . . . . . . . . . . . . . . . . . . 2
Section 1.6. Fractional Shares . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Method of Exercise . . . . . . . . . . . . . . . . . . . 2
Section 1.8. Termination of Option . . . . . . . . . . . . . . . . . . 2
ARTICLE II
RESTRICTIONS AND LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Outstanding Options . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Effect on Other Agreements . . . . . . . . . . . . . . . 3
Section 2.3. Shares as Investment . . . . . . . . . . . . . . . . . . 3
Section 2.4. Reclassification, Consolidation, or Merger . . . . . . . 4
Section 2.5. Limitations Upon Transfer of Option . . . . . . . . . . . 4
Section 2.6. Limitations Upon Transfer of Shares . . . . . . . . . . . 4
Section 2.7. Rights as Shareholder . . . . . . . . . . . . . . . . . . 4
ARTICLE III
ADMINISTRATIVE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2. Binding Effect . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3. Nonqualified Options . . . . . . . . . . . . . . . . . . 5
Section 3.4. Incorporation of the Plan . . . . . . . . . . . . . . . . 5
</TABLE>
(i)
<PAGE> 3
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
JAMES B. FRANCIS, JR.
This Nonqualified Stock Option Agreement (the "Option Agreement") is
made between SILVERLEAF RESORTS, INC., a Texas Corporation (the "Company"), and
JAMES B. FRANCIS, JR. ("Optionee") effective as of the date specified below.
RECITALS:
A. Optionee is an important and valuable Director of the Company
with recognized leadership and experience, the Company deems it to be in its
interest and in the interest of its shareholders to provide an incentive to
Optionee by granting Optionee a proprietary interest in the Company, and the
Company desires to enter into this Option Agreement with Optionee under the
terms and conditions hereinafter set forth and to grant Optionee an option to
purchase common shares of the Corporation; and
B. The stock options granted hereunder are granted pursuant to
the terms of the 1997 Stock Option Plan for Silverleaf Resorts, Inc., which was
adopted by the Company and approved by the shareholders effective as of May 15,
1997, (the "Plan") and are intended to be Nonqualified Options as defined in
the Plan and not Incentive Options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"),
AGREEMENT:
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the Parties agree as follows:
ARTICLE I.
GRANT OF OPTION
SECTION 1.1. GRANT OF OPTION. The Company hereby grants to
Optionee the right and option to purchase from it, on the terms and conditions
following, all or any part of an aggregate of FORTY THOUSAND (40,000) shares of
the authorized $0.01 par value common shares of the Company.
SECTION 1.2. FAIR MARKET VALUE. The fair market value of the
Company's $0.01 par value common shares on the date of this Option Agreement is
EIGHTEEN AND 97/100 DOLLARS ($18.97) per share, as determined by the Company's
Board of Directors pursuant to Section 7.3 of the Plan.
SECTION 1.3. PURCHASE PRICE. The purchase price for each share
purchasable hereunder shall be SIXTEEN AND NO/100 DOLLARS ($16.00).
<PAGE> 4
SECTION 1.4. TIME FOR EXERCISE. Optionee may elect to exercise
the options at the times and for the number of shares indicated as follows:
(a) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 1998, to and including
the date of the Company's annual shareholders' meeting to be
held in the Month of May, 1999, 13,333 shares;
(b) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 1999, to and including
the date of the Company's annual shareholders' meeting to be
held in the Month of May, 2000, 13,334 shares; and
(c) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 2000, to and including
June 4, 2007 (the "Option Termination Date"), 13,333 shares.
However, if Optionee does not purchase the full number of shares to
which Optionee is entitled in either period (a) or (b) above, Optionee is
permitted to purchase those remaining shares in a later period through and
including the Option Termination Date in addition to those shares which
Optionee may otherwise be entitled to purchase.
SECTION 1.5. PARTIAL EXERCISE. No partial exercise of such option
may be for less than 100 full shares.
SECTION 1.6. FRACTIONAL SHARES. In no event shall the Company be
required to transfer fractional shares to the Optionee.
SECTION 1.7. METHOD OF EXERCISE. The option shall be exercised by
Optionee as to all or part of the shares covered by the option by giving
written notice of such exercise to the Company, specifying the number of shares
to be purchased and specifying a business day not more than fifteen (15) days
from the date such notice is given, for the payment of the purchase price
against delivery of the shares being purchased. Such notice shall set forth a
statement, pursuant to Section 8.8 of the Plan and Section 2.4 of this Option
Agreement, that the shares are being acquired for investment.
Subject to any applicable laws or regulations and to the terms of
Sections 8.8, 11.5, and 12.1 of the Plan, the Company shall cause certificates
for the Shares so purchased to be delivered to Optionee at the principal
business office of the Company, against payment of the full purchase price, on
the date specified in the notice of exercise, such payment to be made in cash
or by certified check or by transfer and delivery of shares of the common stock
of the Company as provided in Section 7.4 of the Plan.
SECTION 1.8. TERMINATION OF OPTION. The option and all rights
granted by this Option Agreement, to the extent those rights have not been
exercised, will terminate and become null and void on the sooner of:
2
<PAGE> 5
(a) Such date as is ten (10) years from the date of this Option
Agreement;
(b) The Option Termination Date as defined in Section 1.4 hereof;
(c) The date which is three months after the date Optionee ceases
to continually serve as a Director of the Company, if such
cessation is by disability, retirement, or dismissal other
than for cause, as defined in Section 9.4 of the Plan,
provided that in the event of Optionee's cessation of
directorship under such terms, Optionee may exercise such
option only to the extent that Optionee was entitled to
exercise it on the date of Optionee's cessation of
directorship;
(d) The date Optionee ceases to continually serve as a Director of
the Company if such cessation is by voluntary termination or
dismissal for cause as defined in Sections 9.3 and 9.4 of the
Plan; or
(e) The date which is one year following the death of Optionee if
Optionee dies while serving as a Director of the Company or
within the three-month period following the termination of
such directorship if such termination was by disability,
retirement, or dismissal other than for cause. In the event
of Optionee's death under such terms, the person or persons to
whom Optionee's rights under the option shall pass, whether by
will or by the applicable laws of descent and distribution,
may exercise such option pursuant to Section 8.7 of the Plan
only to the extent that Optionee was entitled to exercise it
on the date of Optionee's death.
ARTICLE II
RESTRICTIONS AND LIMITATIONS
SECTION 2.1. OUTSTANDING OPTIONS. The option granted to Optionee
under this Option Agreement shall in no event be exercised while there is
outstanding any option previously granted to Optionee to purchase common shares
of the Company at a price higher than the option price under the option herein
granted to Optionee.
SECTION 2.2. EFFECT ON OTHER AGREEMENTS. Nothing herein contained
shall be deemed to modify the terms of any other agreement between the Company
and Optionee.
SECTION 2.3. SHARES AS INVESTMENT. By accepting this option,
Optionee acknowledges for Optionee, Optionee's heirs, and legatees that any and
all shares purchased under this Option Agreement shall be acquired for
investment and not for or with a view towards distribution, and upon the
transfer of any or all of the shares subject to the option granted hereunder,
Optionee, or Optionee's heirs or legatees receiving such shares, shall deliver
to the Company a representation in writing that such shares are being acquired
in good faith for investment and not for or with a view towards distribution.
3
<PAGE> 6
SECTION 2.4. RECLASSIFICATION, CONSOLIDATION, OR MERGER.
Adjustments to the number of shares subject to the option and the option price
for them shall be proportionately adjusted, pursuant to Section 10.1 of the
Plan.
SECTION 2.5. LIMITATIONS UPON TRANSFER OF OPTION. During the
lifetime of Optionee, the option and all rights granted in this Option
Agreement shall be exercisable only by the Optionee, and except as Section
1.8(e) of this Option Agreement otherwise provides, the option and all rights
granted under this Option Agreement shall not be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of such
option or of such rights contrary to the provisions in this Option Agreement,
or upon the levy of any attachment or similar process upon such option or such
rights, such option and such rights shall immediately become null and void.
SECTION 2.6. LIMITATIONS UPON TRANSFER OF SHARES. No shares
acquired by Optionee pursuant to this Option Agreement shall be sold or
disposed of within six (6) months following the date of acquisition of such
shares, unless either the grant of this Non-Qualified Option is approved by the
Board of Directors, or a committee of the Board of Directors that is composed
solely of two or more non-employee directors as defined in Rule 16b-3 of the
Exchange Act, or the grant of this Non-Qualified Option is approved or
ratified, in compliance with section 14 of the Exchange Act, by either: the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated, or the written consent of the holders of a
majority of the securities of the Company entitled to vote, provided that such
ratification occurs no later than the date of the next annual meeting of the
shareholders. Any attempted sale, disposal or transfer of such shares shall be
without effect. All shares transferred to Optionee pursuant to the exercise of
the option granted hereby shall be clearly marked with the foregoing
restrictions on transfer.
SECTION 2.7. RIGHTS AS SHAREHOLDER. Neither Optionee nor
Optionee's executor, administrator, heirs, or legatees, shall be or have any
rights or privileges of a shareholder of the Company in respect of the shares
transferable upon exercise of the option granted under this Option Agreement,
unless and until certificates representing such shares shall have been
endorsed, transferred, and delivered and the Optionee, or the Optionee's
executor, administrator, heirs or legatees, as the case may be, has caused his
name to be entered as the shareholder of record on the books of the Company.
ARTICLE III
ADMINISTRATIVE PROVISIONS
SECTION 3.1. NOTICES. Any notice to be given under the terms of
this Option Agreement shall be addressed to the Parties as follows:
4
<PAGE> 7
If to the Company:
Silverleaf Resorts, Inc.
Attn: Robert E. Mead, Chief Executive Officer
1221 Riverbend Drive, Suite 120
P.O.Box 358
Dallas, Texas 75221
If to Optionee:
JAMES B. FRANCIS, JR.
8300 Douglas Avenue, Suite 800
Dallas, Texas 75225
Any Party may change its address by giving notice in writing, stating
its new address, to the other Party as provided in the foregoing manner. Any
notice shall be deemed duly given when enclosed in a properly sealed envelope
or wrapper addressed as herein required certified and deposited (postage and
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government.
SECTION 3.2. BINDING EFFECT. This Option Agreement shall be
binding upon the heirs, executors, administrators, and successors of the
parties hereto.
SECTION 3.3. NONQUALIFIED OPTIONS. The options granted hereunder
are intended to be Nonqualified Options as defined in the Plan.
SECTION 3.4. INCORPORATION OF THE PLAN. The terms, conditions and
limitations contained in the Plan are incorporated herein by reference and such
provisions shall control to the extent they are not specifically contrary to a
provision of this Option Agreement.
EXECUTED this 31st day of July, 1997, but EFFECTIVE the 30th day of July, 1997.
SILVERLEAF RESORTS, INC., the Company
By: /s/ ROBERT E. MEAD
------------------------------------
ROBERT E. MEAD, Chief Executive
Officer
/s/ JAMES B. FRANCIS, JR.
---------------------------------------------
JAMES B. FRANCIS, JR., Optionee
5
<PAGE> 1
EXHIBIT 10.11
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
MICHAEL A. JENKINS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I.
GRANT OF OPTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Grant of Option . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Fair Market Value . . . . . . . . . . . . . . . . . . . . . 1
Section 1.3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4. Time for Exercise . . . . . . . . . . . . . . . . . . . . . 2
Section 1.5. Partial Exercise . . . . . . . . . . . . . . . . . . . . . 2
Section 1.6. Fractional Shares . . . . . . . . . . . . . . . . . . . . . 2
Section 1.7. Method of Exercise . . . . . . . . . . . . . . . . . . . . 2
Section 1.8. Termination of Option . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
RESTRICTIONS AND LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1. Outstanding Options . . . . . . . . . . . . . . . . . . . . 3
Section 2.2. Effect on Other Agreements . . . . . . . . . . . . . . . . 3
Section 2.3. Shares as Investment . . . . . . . . . . . . . . . . . . . 3
Section 2.4. Reclassification, Consolidation, or Merger . . . . . . . . 4
Section 2.5. Limitations Upon Transfer of Option . . . . . . . . . . . . 4
Section 2.6. Limitations Upon Transfer of Shares . . . . . . . . . . . . 4
Section 2.7. Rights as Shareholder . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
ADMINISTRATIVE PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2. Binding Effect . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.3. Nonqualified Options . . . . . . . . . . . . . . . . . . . 5
Section 3.4. Incorporation of the Plan . . . . . . . . . . . . . . . . . 5
</TABLE>
(i)
<PAGE> 3
NONQUALIFIED STOCK OPTION AGREEMENT
BETWEEN
SILVERLEAF RESORTS, INC.
AND
MICHAEL A. JENKINS
This Nonqualified Stock Option Agreement (the "Option Agreement") is
made between SILVERLEAF RESORTS, INC., a Texas Corporation (the "Company"), and
MICHAEL A. JENKINS ("Optionee") effective as of the date specified below.
RECITALS:
A. Optionee is an important and valuable Director of the Company
with recognized leadership and experience, the Company deems it to be in its
interest and in the interest of its shareholders to provide an incentive to
Optionee by granting Optionee a proprietary interest in the Company, and the
Company desires to enter into this Option Agreement with Optionee under the
terms and conditions hereinafter set forth and to grant Optionee an option to
purchase common shares of the Corporation; and
B. The stock options granted hereunder are granted pursuant to
the terms of the 1997 Stock Option Plan for Silverleaf Resorts, Inc., which was
adopted by the Company and approved by the shareholders effective as of May 15,
1997, (the "Plan") and are intended to be Nonqualified Options as defined in
the Plan and not Incentive Options as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"),
AGREEMENT:
NOW, THEREFORE, in consideration of the promises and the mutual
agreements hereinafter contained, and for other good and valuable
consideration, the Parties agree as follows:
ARTICLE I.
GRANT OF OPTION
SECTION 1.1. GRANT OF OPTION. The Company hereby grants to
Optionee the right and option to purchase from it, on the terms and conditions
following, all or any part of an aggregate of FORTY THOUSAND (40,000) shares of
the authorized $0.01 par value common shares of the Company.
SECTION 1.2. FAIR MARKET VALUE. The fair market value of the
Company's $0.01 par value common shares on the date of this Option Agreement is
EIGHTEEN AND 97/100 DOLLARS ($18.97) per share, as determined by the Company's
Board of Directors pursuant to Section 7.3 of the Plan.
SECTION 1.3. PURCHASE PRICE. The purchase price for each share
purchasable hereunder shall be SIXTEEN AND NO/100 DOLLARS ($16.00).
<PAGE> 4
SECTION 1.4. TIME FOR EXERCISE. Optionee may elect to exercise
the options at the times and for the number of shares indicated as follows:
(a) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 1998, to and including
the date of the Company's annual shareholders' meeting to be
held in the Month of May, 1999, 13,333 shares;
(b) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 1999, to and including
the date of the Company's annual shareholders' meeting to be
held in the Month of May, 2000, 13,334 shares; and
(c) On or after the date of the Company's annual shareholders'
meeting to be held in the month of May, 2000, to and including
June 4, 2007 (the "Option Termination Date"), 13,333 shares.
However, if Optionee does not purchase the full number of shares to
which Optionee is entitled in either period (a) or (b) above, Optionee is
permitted to purchase those remaining shares in a later period through and
including the Option Termination Date in addition to those shares which
Optionee may otherwise be entitled to purchase.
SECTION 1.5. PARTIAL EXERCISE. No partial exercise of such option
may be for less than 100 full shares.
SECTION 1.6. FRACTIONAL SHARES. In no event shall the Company be
required to transfer fractional shares to the Optionee.
SECTION 1.7. METHOD OF EXERCISE. The option shall be exercised by
Optionee as to all or part of the shares covered by the option by giving
written notice of such exercise to the Company, specifying the number of shares
to be purchased and specifying a business day not more than fifteen (15) days
from the date such notice is given, for the payment of the purchase price
against delivery of the shares being purchased. Such notice shall set forth a
statement, pursuant to Section 8.8 of the Plan and Section 2.4 of this Option
Agreement, that the shares are being acquired for investment.
Subject to any applicable laws or regulations and to the terms of
Sections 8.8, 11.5, and 12.1 of the Plan, the Company shall cause certificates
for the Shares so purchased to be delivered to Optionee at the principal
business office of the Company, against payment of the full purchase price, on
the date specified in the notice of exercise, such payment to be made in cash
or by certified check or by transfer and delivery of shares of the common stock
of the Company as provided in Section 7.4 of the Plan.
SECTION 1.8. TERMINATION OF OPTION. The option and all rights
granted by this Option Agreement, to the extent those rights have not been
exercised, will terminate and become null and void on the sooner of:
2
<PAGE> 5
(a) Such date as is ten (10) years from the date of this Option
Agreement;
(b) The Option Termination Date as defined in Section 1.4 hereof;
(c) The date which is three months after the date Optionee ceases
to continually serve as a Director of the Company, if such
cessation is by disability, retirement, or dismissal other
than for cause, as defined in Section 9.4 of the Plan,
provided that in the event of Optionee's cessation of
directorship under such terms, Optionee may exercise such
option only to the extent that Optionee was entitled to
exercise it on the date of Optionee's cessation of
directorship;
(d) The date Optionee ceases to continually serve as a Director of
the Company if such cessation is by voluntary termination or
dismissal for cause as defined in Sections 9.3 and 9.4 of the
Plan; or
(e) The date which is one year following the death of Optionee if
Optionee dies while serving as a Director of the Company or
within the three-month period following the termination of
such directorship if such termination was by disability,
retirement, or dismissal other than for cause. In the event
of Optionee's death under such terms, the person or persons to
whom Optionee's rights under the option shall pass, whether by
will or by the applicable laws of descent and distribution,
may exercise such option pursuant to Section 8.7 of the Plan
only to the extent that Optionee was entitled to exercise it
on the date of Optionee's death.
ARTICLE II
RESTRICTIONS AND LIMITATIONS
SECTION 2.1. OUTSTANDING OPTIONS. The option granted to Optionee
under this Option Agreement shall in no event be exercised while there is
outstanding any option previously granted to Optionee to purchase common shares
of the Company at a price higher than the option price under the option herein
granted to Optionee.
SECTION 2.2. EFFECT ON OTHER AGREEMENTS. Nothing herein contained
shall be deemed to modify the terms of any other agreement between the Company
and Optionee.
SECTION 2.3. SHARES AS INVESTMENT. By accepting this option,
Optionee acknowledges for Optionee, Optionee's heirs, and legatees that any and
all shares purchased under this Option Agreement shall be acquired for
investment and not for or with a view towards distribution, and upon the
transfer of any or all of the shares subject to the option granted hereunder,
Optionee, or Optionee's heirs or legatees receiving such shares, shall deliver
to the Company a representation in writing that such shares are being acquired
in good faith for investment and not for or with a view towards distribution.
3
<PAGE> 6
SECTION 2.4. RECLASSIFICATION, CONSOLIDATION, OR MERGER.
Adjustments to the number of shares subject to the option and the option price
for them shall be proportionately adjusted, pursuant to Section 10.1 of the
Plan.
SECTION 2.5. LIMITATIONS UPON TRANSFER OF OPTION. During the
lifetime of Optionee, the option and all rights granted in this Option
Agreement shall be exercisable only by the Optionee, and except as Section
1.8(e) of this Option Agreement otherwise provides, the option and all rights
granted under this Option Agreement shall not be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment, or similar process. Upon any
attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of such
option or of such rights contrary to the provisions in this Option Agreement,
or upon the levy of any attachment or similar process upon such option or such
rights, such option and such rights shall immediately become null and void.
SECTION 2.6. LIMITATIONS UPON TRANSFER OF SHARES. No shares
acquired by Optionee pursuant to this Option Agreement shall be sold or
disposed of within six (6) months following the date of acquisition of such
shares, unless either the grant of this Non-Qualified Option is approved by the
Board of Directors, or a committee of the Board of Directors that is composed
solely of two or more non-employee directors as defined in Rule 16b-3 of the
Exchange Act, or the grant of this Non-Qualified Option is approved or
ratified, in compliance with section 14 of the Exchange Act, by either: the
affirmative votes of the holders of a majority of the securities of the Company
present, or represented, and entitled to vote at a meeting duly held in
accordance with the applicable laws of the state or other jurisdiction in which
the Company is incorporated, or the written consent of the holders of a
majority of the securities of the Company entitled to vote, provided that such
ratification occurs no later than the date of the next annual meeting of the
shareholders. Any attempted sale, disposal or transfer of such shares shall be
without effect. All shares transferred to Optionee pursuant to the exercise of
the option granted hereby shall be clearly marked with the foregoing
restrictions on transfer.
SECTION 2.7. RIGHTS AS SHAREHOLDER. Neither Optionee nor
Optionee's executor, administrator, heirs, or legatees, shall be or have any
rights or privileges of a shareholder of the Company in respect of the shares
transferable upon exercise of the option granted under this Option Agreement,
unless and until certificates representing such shares shall have been
endorsed, transferred, and delivered and the Optionee, or the Optionee's
executor, administrator, heirs or legatees, as the case may be, has caused his
name to be entered as the shareholder of record on the books of the Company.
ARTICLE III
ADMINISTRATIVE PROVISIONS
SECTION 3.1. NOTICES. Any notice to be given under the terms of
this Option Agreement shall be addressed to the Parties as follows:
4
<PAGE> 7
If to the Company:
Silverleaf Resorts, Inc.
Attn: Robert E. Mead, Chief Executive Officer
1221 Riverbend Drive, Suite 120
P.O.Box 358
Dallas, Texas 75221
If to Optionee:
MICHAEL A. JENKINS
2151 Ft. Worth Avenue
Dallas, Texas 75211-1812
Any Party may change its address by giving notice in writing, stating
its new address, to the other Party as provided in the foregoing manner. Any
notice shall be deemed duly given when enclosed in a properly sealed envelope
or wrapper addressed as herein required certified and deposited (postage and
certification fee prepaid) in a post office or branch post office regularly
maintained by the United States Government.
SECTION 3.2. BINDING EFFECT. This Option Agreement shall be
binding upon the heirs, executors, administrators, and successors of the
parties hereto.
SECTION 3.3. NONQUALIFIED OPTIONS. The options granted hereunder
are intended to be Nonqualified Options as defined in the Plan.
SECTION 3.4. INCORPORATION OF THE PLAN. The terms, conditions and
limitations contained in the Plan are incorporated herein by reference and such
provisions shall control to the extent they are not specifically contrary to a
provision of this Option Agreement.
EXECUTED this 31st day of July, 1997, but EFFECTIVE the 30th day of
July, 1997.
SILVERLEAF RESORTS, INC., the Company
By: /s/ROBERT E. MEAD
------------------------------------
ROBERT E. MEAD, Chief Executive
Officer
/s/ MICHAEL A. JENKINS
---------------------------------------------
MICHAEL A. JENKINS, Optionee
5
<PAGE> 1
EXHIBIT 10.12
REAL ESTATE CONTRACT OF SALE
THIS AGREEMENT is entered into by and between SILVERLEAF RESORTS,
INC., a Texas Corporation ("Seller"), and ROBERT E. MEAD ("Purchaser").
W I T N E S S E T H :
WHEREAS, on or about April 18, 1996, Seller purchased (i) certain
property in Mexico City, Mexico (the "Mexico Property"), and (ii) certain
property in Montgomery County, Texas (the "Woodlands Property"), from Mr.
Ricardo Enterria Diaz ("Diaz") for Four Hundred Nineteen Thousand Eight Hundred
Twenty-Four and 61/100 Dollars ($419,824.61) (the property described in (i) and
(ii) are hereinafter collectively referred to as the "Property");
WHEREAS, the appraised fair market value of the Woodlands Property is
One Hundred Two Thousand and No/100 Dollars ($102,000.00);
WHEREAS, Seller has not yet received an appraisal of the Mexico
Property; and
WHEREAS, Seller previously agreed to sell and Purchaser previously
agreed to purchase the Property for a purchase price of the greater of: (a) the
cost of the Property at the time said property was sold to Seller by Diaz, plus
fifteen (15%) percent per annum; or (b) the appraised value of the Property.
FOR AND IN CONSIDERATION of the promises, undertakings, and mutual
covenants of the parties herein set forth, Seller hereby agrees to sell and
Purchaser hereby agrees to purchase and pay for the Property in accordance with
the following terms and conditions:
1. Purchase Price. The purchase price to be paid by Purchaser to
Seller for the Property upon execution of this Contract shall be Five Hundred
Eight Thousand Four Hundred and Eighty-Seven and 38/100 Dollars ($508,487.38)
which amount represents the cost of the Property to the Seller ($419,824.61)
plus 15% per annum; provided, however, that upon receipt of an appraisal of the
Mexico Property, the purchase price will be adjusted if the fair market value
of the Mexico Property plus the fair market value of the Woodlands Property is
greater than $508,487.38.
2. Closing. The closing of the Woodlands Property shall occur
upon the execution of this agreement by both parties. The closing of the Mexico
Property shall take place at a
<PAGE> 2
location reasonably acceptable to both parties within ten (10) days of the
receipt of an appraisal of the fair market value of the Mexico Property.
3. Seller's Obligations at Closing. At closing of the Mexico
Property, Seller shall do the following:
(a) Deliver to Purchaser a special warranty deed covering
the Mexico Property, duly signed and acknowledged by Seller, which
deed shall be in form for recording and shall convey to Purchaser good
and indefeasible fee simple title to the Property free and clear of
all liens, but subject to all restrictions, rights-of-way, easements,
title exceptions, and other matters affecting title to the Property.
(b) Deliver all additional documents and instruments as
are reasonably necessary for the proper consummation of this
transaction.
4. Purchaser's Obligations at Closing. At the closing of the
Mexico Property, Purchaser shall deliver to Seller any additional amounts owed
pursuant to paragraph 1 herein.
5. Notices. All notices, demands, or other communications of any
type given by the Seller to the Purchaser, or by the Purchaser to the Seller,
whether required by this Contract or in any way related to the transaction
contracted for herein, shall be void and of no effect unless given in
accordance with the provisions of this paragraph. All notices shall be in
writing and delivered to the person to whom the notice is directed, either in
person or by United States Mail, as a registered or certified item, return
receipt requested, addressed as follows:
Purchaser: Robert E. Mead
1221 Riverbend, Suite 120
Dallas, TX 75247
Seller: Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 120
Dallas, Texas 75247
6. Interpretation and Applicable Law. This Agreement shall be
construed and interpreted in accordance with the laws of the State of Texas.
Where required for proper interpretation, words in the singular shall include
the plural; the masculine gender shall include the neuter and the feminine, and
vice versa. The terms "successors and assigns" shall include the heirs,
administrators, executors, successors, and permitted assigns, as applicable, of
any party hereto.
7. Amendment. This Contract may not be modified or amended,
except by an agreement in writing signed by the Seller and the Purchaser. The
parties may waive any of the conditions contained herein or any of the
obligations of the other party hereunder, but any such
-2-
<PAGE> 3
waiver shall be effective only if in writing and signed by the party waiving
such conditions and obligations.
8. Authority. Each person executing this Contract warrants and
represents that he is fully authorized to do so.
9. Attorneys' Fees. In the event it becomes necessary for either
party to file a suit to enforce this Contract or any provisions contained
herein, the prevailing party shall be entitled to recover, in addition to all
other remedies or damages, reasonable attorneys' fees and costs of court
incurred in such suit.
10. Descriptive Headings. The descriptive headings of the several
paragraphs contained in this Contract are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
11. Entire Agreement. This Contract (and the items to be furnished
in accordance herewith) constitutes the entire agreement between the parties
pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings of the parties in connection
therewith. No representation, warranty, covenant, agreement, or condition not
expressed in this Contract shall be binding upon the parties hereto or shall
affect or be effective to interpret, change, or restrict the provisions of this
Contract.
EXECUTED on this the 31st day of September, 1997.
SELLER:
SILVERLEAF RESORTS, INC., a Texas Corporation
By: /s/ SHARON K. BRAYFIELD
-----------------------------------------
Name: Sharon K. Brayfield
---------------------------------------
Its: President
----------------------------------------
EXECUTED on this the 31st day of September, 1997.
PURCHASER:
/s/ ROBERT E. MEAD
---------------------------------------------
ROBERT E. MEAD
- 3 -
<PAGE> 1
EXHIBIT 10.13
MASTER CLUB AGREEMENT
THIS MASTER CLUB AGREEMENT ("Agreement") is entered into as of the
25th day of September, 1997, by and between Master Club, a Texas non-profit
corporation (the "Master Club"), and Timber Creek Resort Club, a Missouri
non-profit corporation (the "Club").
R E C I T A L S :
WHEREAS, Silverleaf Resorts, Inc., a Texas corporation ("Silverleaf")
owns and operates six (6) resorts, four (4) of which are located in Texas and
are known as Hill Country Resort, Holly Lake, Piney Shores Resort and The
Villages and two (2) of which are located in Missouri and are known as Holiday
Hills Resort and Ozark Mountain Resort (collectively the "Resorts" and
individually a "Resort"); and
WHEREAS, each of the Resorts formed an association to govern, maintain
and administer each Resort and are known as Hill Country Resort Club, a Texas
non-profit unincorporated association, Holly Lake Resort Club, a Texas
non-profit unincorporated association, Piney Shores Resort Club, a Texas
non-profit unincorporated association, Villages Resort Club, a Texas non-profit
unincorporated association, Holiday Hills Resort Club, a Missouri non-profit
corporation, and Ozark Mountain Resort Club, a Missouri non-profit corporation
(the "Other Clubs");
WHEREAS, Silverleaf created and established a program referred to as
the Endless Escape Bonus Time Program (the "Program") pursuant to which each
member of the Other Clubs is entitled, at no additional charge, (i) to vacation
at each member's respective Resort more frequently and, under certain
circumstances, during use periods not already owned by that member, and (ii) to
vacation at the other Resorts owned by Silverleaf and participating in the
Program; and
WHEREAS, Silverleaf created the Master Club for the purpose of
implementing and administering the Program and more efficiently managing the
various Resorts owned by Silverleaf which participate in the Program;
WHEREAS, on March 28, 1990, the Master Club entered into a Master Club
Agreement with the Other Clubs setting forth the duties and responsibilities of
the Master Club with regard to the Other Clubs; and
WHEREAS, on September ___, 1997, pursuant to the Declaration of
Restrictions, Covenants and Conditions more particularly described in Exhibit
"A" attached hereto and made a part hereof for all purposes (the
"Declaration"), a seventh timeshare project was created called "Timber Creek
Resort" (the "Project"), and the Club
<PAGE> 2
was created for the care, maintenance and administration of the Project; and
WHEREAS, the Club desires to enter into a Master Club Agreement with
the Master Club similar to the March 28, 1990, Master Club Agreement between
the Master Club and the Other Clubs; and
WHEREAS, the Club acknowledges and agrees that membership in the
Master Club and the execution of this Agreement are to its benefit and
advantage; and
WHEREAS, the Club and the Master Club desire to enter into this
Agreement in order to set forth the responsibilities and duties of the Master
Club with regard to the Club and the Project;
NOW, THEREFORE, in order to carry out the desire of the Club and the
Master Club, and for and in consideration of Ten and No/100 Dollars ($10.00),
the covenants and agreements contained herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the Club and the Master Club hereby covenant and agree as follows:
1. The Master Club shall have the following responsibilities and
duties for the benefit of the Club and the Project governed
thereby:
(a) Maintain a centralized reservation system for the
Project and all Resorts;
(b) Achieve costs savings by purchasing goods and
services for the Project and all Resorts as a group
rather than having the Project and each Resort
purchase its goods and services on an individual
basis;
(c) Maintain a centralized management of the Project and
the entire Resort system;
(d) Provide accounting, legal and other administrative
services for the Project and entire Resort system;
(e) Implement and administer the Program in accordance
with the rules and regulations of the Program; and
(f) Pay all costs and expenses incurred at the Project
and each Resort individually as well as any
system-wide costs and expenses.
2. In order to enable the Master Club to perform the
responsibilities and duties described hereinabove, the Club
agrees to pay to the Master Club the following
- 2 -
<PAGE> 3
amounts as a fee to the Master Club for the services rendered
by the Master Club for the benefit of the Club: (i) all dues,
assessments, late charges and other amounts levied against and
collected from its respective members pursuant to the
Declaration, plus (ii) all other income generated by the Club.
The Master Club will use its fee collected from the Club to
pay (i) the individual common expenses of the Project, and
(ii) the system-wide costs and expenses of administering and
maintaining the Master Club and operating and managing the
Club including, but not limited to, expenses for accounting,
legal services, administration, payroll, and management of the
entire resort system.
3. This Agreement shall be in full force and effect in
perpetuity. Notwithstanding the foregoing, however, this
Agreement shall be terminated upon the cessation of legal
existence of the Master Club or, alternatively, of the Club,
and the surviving party or parties, if any, shall in such
event have no further obligations hereunder.
4. This Agreement inures to the benefit of, and is binding upon,
the Master Club and the Club and their respective successors,
legal representatives and assigns.
5. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same
instrument, and all such counterparts shall be deemed on and
the same instrument.
6. All capitalized terms not otherwise defined herein shall have
the meaning given to such terms in the Declarations.
MASTER CLUB:
MASTER CLUB, a Texas non-profit
corporation
By: /s/ ROBERT G. LEVY
----------------------------
Its: President
----------------------------
- 3 -
<PAGE> 4
CLUB:
TIMBER CREEK RESORT CLUB, a
Missouri non-profit corporation
By: /s/ HOWARD KITCHEN
----------------------------
Howard Kitchen, Director
By: /s/ ROBERT G. LEVY
----------------------------
Robert G. Levy, Director
By: /s/ JERRY YOUNG
----------------------------
Jerry Young, Director
By: /s/ DANA CALLAWAY
----------------------------
Dana Callaway, Director
By: /s/ MARIE RASSO
----------------------------
Marie Rasso, Director
- 4 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3,532
<SECURITIES> 0
<RECEIVABLES> 81,994
<ALLOWANCES> 0
<INVENTORY> 16,251
<CURRENT-ASSETS> 26,913
<PP&E> 22,281
<DEPRECIATION> 4,861
<TOTAL-ASSETS> 127,227
<CURRENT-LIABILITIES> 10,212
<BONDS> 0
0
0
<COMMON> 113
<OTHER-SE> 81,373
<TOTAL-LIABILITY-AND-EQUITY> 127,227
<SALES> 51,963
<TOTAL-REVENUES> 63,871
<CGS> 5,131
<TOTAL-COSTS> 36,612
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,048
<INTEREST-EXPENSE> 3,843
<INCOME-PRETAX> 15,368
<INCOME-TAX> 5,687
<INCOME-CONTINUING> 9,681
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,681
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