<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 March 31, 1999
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 RIVER BEND 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 May 13, 1999: 12,889,417
<PAGE> 2
SILVERLEAF RESORTS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION (Unaudited)
Item 1. Condensed Consolidated Statements of Income for the three months
ended March 31, 1999 and 1998....................................................... 1
Condensed Consolidated Balance Sheets as of March 31, 1999
and December 31, 1998............................................................... 2
Condensed Consolidated Statement of Shareholders' Equity for the
three months ended March 31, 1999................................................... 3
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1999 and 1998....................................................... 4
Notes to the Condensed Consolidated Financial Statements............................ 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................................................... 13
Signatures.......................................................................... 13
</TABLE>
<PAGE> 3
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
REVENUES:
Vacation Interval sales $ 41,327 $ 26,609
Sampler sales 1,245 450
---------- ----------
Total sales 42,572 27,059
Interest income 5,666 2,959
Interest income from affiliates 12 15
Management fee income 900 502
Other income 474 494
---------- ----------
Total revenues 49,624 31,029
COSTS AND OPERATING EXPENSES:
Cost of Vacation Interval sales 5,769 3,698
Sales and marketing 21,054 12,409
Provision for uncollectible notes 4,133 3,444
Operating, general and administrative 6,296 3,867
Depreciation and amortization 1,205 564
Interest expense 3,282 1,275
---------- ----------
Total costs and operating expenses 41,739 25,257
Income before provision for income taxes 7,885 5,772
Provision for income taxes (3,036) (2,198)
---------- ----------
NET INCOME $ 4,849 $ 3,574
========== ==========
NET INCOME PER COMMON SHARE:
BASIC $ 0.38 $ 0.32
========== ==========
DILUTED $ 0.38 $ 0.31
========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING:
BASIC 12,889,417 11,311,517
========== ==========
DILUTED 12,889,417 11,537,446
========== ==========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 4
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
--------- ---------
<S> <C> <C>
Cash and equivalents $ 13,240 $ 11,355
Restricted cash 873 873
Notes receivable, net of allowance for uncollectible notes of
$24,533 and $23,947, respectively 198,082 173,959
Amounts due from affiliates 5,036 4,115
Inventories 82,708 71,694
Land, equipment, buildings, and utilities, net 40,490 34,025
Prepaid and other assets 14,794 16,899
--------- ---------
TOTAL ASSETS $ 355,223 $ 312,920
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 14,813 $ 8,144
Unearned revenues 4,138 4,082
Income taxes payable 1,183 4,136
Deferred income taxes, net 22,856 21,524
Notes payable and capital lease obligations 90,458 58,108
Senior subordinated notes 75,000 75,000
--------- ---------
Total Liabilities 208,448 170,994
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common Stock, par value $0.01 per share, 100,000,000
shares authorized, 13,311,517 shares issued and
12,889,417 shares outstanding at March 31, 1999 and
December 31, 1998 133 133
Additional paid-in capital 109,339 109,339
Retained earnings 42,302 37,453
Treasury stock, at cost (422,100 shares at March 31, 1999
and December 31, 1998) (4,999) (4,999)
--------- ---------
Total Shareholders' Equity 146,775 141,926
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 355,223 $ 312,920
========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 5
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
------------------------
Number of $0.01 Additional Treasury Stock
Shares Par Paid-in Retained ----------------------
Issued Value Capital Earnings Shares Cost Total
---------- ----- --------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
January 1, 1999 13,311,517 $ 133 $ 109,339 $ 37,453 (422,100) $ (4,999) $ 141,926
Net income -- -- -- 4,849 -- -- 4,849
---------- ----- --------- -------- -------- -------- ---------
March 31, 1999 13,311,517 $ 133 $ 109,339 $ 42,302 (422,100) $ (4,999) $ 146,775
========== ===== ========= ======== ======== ======== =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 6
SILVERLEAF RESORTS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 4,849 $ 3,574
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,205 564
Deferred income taxes 1,332 1,669
Increase (decrease) in cash from changes in
assets and liabilities:
Amounts due from affiliates (921) (764)
Inventories (11,014) (5,949)
Prepaid and other assets 2,028 (1,154)
Accounts payable and accrued expenses 6,669 2,408
Unearned revenues 56 2,366
Income taxes payable (2,953) 529
-------- --------
Net cash provided by operating activities 1,251 3,243
-------- --------
INVESTING ACTIVITIES:
Purchases of land, equipment, buildings, and utilities (7,491) (2,081)
Sales of land, equipment, buildings, and utilities 4,494 --
Notes receivable, net (24,123) (17,802)
-------- --------
Net cash used in investing activities (27,120) (19,883)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings from unaffiliated entities 37,380 22,937
Payments on borrowings to unaffiliated entities (9,626) --
Payments on borrowings to affiliates -- (4,711)
-------- --------
Net cash provided by financing activities 27,754 18,226
-------- --------
Net increase in cash 1,885 1,586
CASH AND CASH EQUIVALENTS:
Beginning of period 11,355 4,970
-------- --------
End of period $ 13,240 $ 6,556
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 1,432 $ 1,502
Equipment acquired under capital lease or note $ 4,596 $ 749
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 7
SILVERLEAF RESORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BACKGROUND
These condensed consolidated financial statements of Silverleaf Resorts, Inc.
and subsidiaries ("the Company") presented herein do not include certain
information and disclosures 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. Operating results for the three months ended March 31, 1999 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 1999.
These condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and footnotes included in
the Company's Form 10-K for the year ended December 31, 1998 (File No.
001-13003) as filed with the Securities and Exchange Commission. The accounting
policies used in preparing these condensed consolidated financial statements
are the same as those described in such Form 10-K. Certain previously reported
amounts, however, have been reclassified to conform to the 1999 presentation.
SFAS No. 133 -- In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 is effective
for fiscal years beginning after June 15, 1999 and will be adopted for the
period ended December 31, 2000. SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in
the fair value of the derivatives are recorded each period in current earnings
or other comprehensive income depending on whether a derivative is designated
as part of a hedge transaction, and if it is, the type of hedge transaction.
The impact of SFAS No. 133 on the Company's results of operations, financial
position, or cash flows will be dependent on the level and types of derivative
instruments the Company will have entered into at the time the standard is
implemented. The Company currently has no derivative instruments.
SOP No. 98-5 -- On April 3, 1998, the Accounting Standards Executive Committee
issued Statement of Position 98-5, "Reporting on Costs of Start-Up Activities"
("SOP No. 98-5"), effective for fiscal years beginning after December 15, 1998.
SOP No. 98-5 requires that costs for start-up activities, including
organization costs, be charged to expense as incurred. The Company currently
follows the practice of charging start-up costs to expense as incurred. The
Company elected to early adopt SOP No. 98-5. At the time of its adoption, the
Company had no start-up costs capitalized and, therefore, the adoption had no
effect on results of operations or financial position of the Company.
NOTE 2 - EARNINGS PER SHARE
The following table illustrates the reconciliation between basic and diluted
weighted average shares outstanding for the three months ended March 31, 1999
and 1998:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1999 1998
---------- ----------
<S> <C> <C>
Weighted average shares outstanding - basic 12,889,417 11,311,517
Issuance of shares from stock options exercised -- 892,333
Repurchase of shares from stock options proceeds -- (666,404)
---------- ----------
Weighted average shares outstanding - diluted 12,889,417 11,537,446
========== ==========
</TABLE>
For the three months ended March 31, 1999, the weighted average shares
outstanding assuming dilution was anti-dilutive.
5
<PAGE> 8
NOTE 3 - DEBT
Loans, notes payable, capital lease obligations, and senior subordinated notes
as of March 31, 1999 and December 31, 1998 (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- ----------
<S> <C> <C>
$60 million revolving loan agreement, which contains certain financial
covenants, expires December 1999, principal and interest payable
from the proceeds obtained on customer notes receivable pledged
as collateral for the note, at an interest rate of LIBOR plus 2.55% .......... 31,401 11,210
$40 million revolving loan agreement, which contains certain financial
covenants, expires October 2005, principal and interest payable from the
proceeds obtained from customer notes receivable which are pledged
as collateral for the note, at an interest rate of LIBOR plus 2.5% ........... 36,267 29,856
$15 million revolving loan agreement which contains certain financial
covenants, expires November 2002, principal and interest payable from the
proceeds obtained from customer notes receivable which are pledged
as collateral for the note, at an interest rate of prime plus 2% ............. 12,176 13,638
$15 million revolving construction loan due October 2000, with drawings
permitted until April 1999, a variable rate of LIBOR plus 3.5% secured
by land, construction in process, and customer notes receivable .............. -- --
Various notes, due from December 1999 through October 2005,
collateralized by various assets with interest rates ranging from
4.2% to 14.0% ................................................................ 3,252 223
---------- ----------
Total notes payable .................................................... 83,096 54,927
Capital lease obligations ...................................................... 7,362 3,181
---------- ----------
Total notes payable and capital lease obligations ...................... 90,458 58,108
10 1/2% senior subordinated notes, due 2008, interest payable semi-
annually on April 1 and October 1, guaranteed by all of the Company's
present and future domestic restricted subsidiaries .......................... 75,000 75,000
---------- ----------
$ 165,458 $ 133,108
========== ==========
</TABLE>
At March 31, 1999, prime rate was 7.75% and the LIBOR rate was 5.0%. At
December 31, 1998, prime rate was 7.75% and LIBOR rates were from 5.15% to
5.28%.
Effective March 31, 1999, the Company reached a definitive agreement with a
lender to increase its $15 million revolving loan agreement, expiring in
November 2002, to a $75 million two-year revolving loan agreement. The credit
facility is based on an 85% advance rate against receivables compared to the
previous advance rate of 70%. Additionally, the interest rate on the amended
credit facility improved to LIBOR plus 3% from prime plus 2%.
NOTE 4 - SUBSIDIARY GUARANTEES
All subsidiaries of the Company have guaranteed the $75.0 million of senior
subordinated notes. The separate financial statements and other disclosures
concerning each guaranteeing subsidiary (each, a "Guarantor Subsidiary") are
not presented herein because the Company's management has determined that such
information is not material to investors. The guarantee of each Guarantor
Subsidiary is full and unconditional and joint and several, and each Guarantor
Subsidiary is a wholly-owned subsidiary of the Company, and together comprise
all direct and indirect subsidiaries of the Company.
Combined summarized operating results of the Guarantor Subsidiaries for the
three months ended March 31, 1999 and 1998, are as follows (in thousands):
6
<PAGE> 9
<TABLE>
<CAPTION>
March 31,
----------------------
1999 1998
------ ------
<S> <C> <C>
Revenues $ 1 $ 17
Expenses (45) (54)
------ ------
Net loss $ (44) $ (37)
====== ======
</TABLE>
Combined summarized balance sheet information as of March 31, 1999 for the
Guarantor Subsidiaries is as follows (in thousands):
<TABLE>
<CAPTION>
March 31,
1999
------
<S> <C>
Land, equipment, inventory, and utilities, net $ 6
Other assets 26
------
Total assets $ 32
======
Investment by parent (includes equity and
amounts due to parent) $ (29)
Other liabilities (3)
------
Total liabilities and equity $ (32)
======
</TABLE>
NOTE 5 - ACQUISITIONS
In January 1999, the Company acquired undeveloped land near The Villages resort
in Tyler, Texas, for approximately $1.0 million.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S 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 in the Company's Form 10-K for
the year ended December 31, 1998 (File No. 001-13003).
The Company currently owns and/or operates 22 resorts in various stages of
development. These resorts offer a wide array of country club-like amenities,
such as golf, swimming, horseback riding, boating, and many organized
activities for children and adults. The Company represents an owner base of
over 80,000 owners. The condensed consolidated financial statements of the
Company include the accounts of Silverleaf Resorts, Inc. and its subsidiaries,
all of which are wholly-owned.
RESULTS OF OPERATIONS
The following table sets forth certain operating information for the Company.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1999 1998
----- -----
<S> <C> <C>
As a percentage of total revenues:
Vacation Interval sales 83.3% 85.8%
Sampler sales 2.5% 1.4%
----- -----
Total sales 85.8% 87.2%
Interest income 11.4% 9.6%
Management fee income 1.8% 1.6%
Other income 1.0% 1.6%
----- -----
Total revenues 100.0% 100.0%
As a percentage of Vacation Interval sales:
Cost of Vacation Interval sales 14.0% 13.9%
Provision for uncollectible notes 10.0% 12.9%
As a percentage of total sales:
Sales and marketing 49.5% 45.9%
As a percentage of total revenues:
Operating, general and administrative 12.7% 12.5%
Depreciation and amortization 2.4% 1.8%
As a percentage of interest income:
Interest expense 57.8% 42.9%
</TABLE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Revenues
Revenues for the quarter ended March 31, 1999 were $49.6 million, representing
a $18.6 million or 60% increase over revenues of $31.0 million for the quarter
ended March 31, 1998. The increase was primarily due to a $14.7 million
increase in sales of Vacation Intervals and a $2.7 million increase in interest
income. The strong increase in Vacation Interval sales primarily resulted from
the addition of seven new sales offices since March 31, 1998.
In the 1999 first quarter, the number of Vacation Intervals sold, exclusive of
upgraded Vacation Intervals, increased 45.7% to 3,879 from 2,662 in the same
period of 1998; the average price per interval increased 6.6% to $8,146 from
$7,639. Total interval sales for the first three months of 1999 included 1,417
biennial intervals (counted as 709 Vacation Intervals) compared to 679 (340
Vacation Intervals) in the first three months of 1998. The Company also
8
<PAGE> 11
increased sales of upgraded intervals through the continued implementation of
marketing and sales programs focused on selling upgraded intervals to the
Company's existing Vacation Interval owners. In the first quarter of 1999, the
2,248 upgraded Vacation Intervals were sold at an average price of $4,329
compared to 1,460 upgraded Vacation Intervals sold at an average price of
$4,297 during the comparable 1998 period.
Sampler sales increased $795,000 to $1.2 million for the period ended March 31,
1999, compared to $450,000 for the same period in 1998. The increase resulted
from increased sales of overnight samplers offered at new resorts, offset by an
increase in biennial interval sales, which are an alternative to the sampler
program. The increase also resulted from sales of the Company's Endless Escape
Program to owners of Vacation Intervals at eight resorts that have been managed
by the Company since May 1998.
Interest income increased 91% to $5.7 million for the quarter ended March 31,
1999, from $3.0 million for the same period of 1998. This increase primarily
resulted from an $88.2 million increase in notes receivable, net of allowance
for uncollectible notes, since March 31, 1998, due to increased sales.
Management fee income increased $398,000 for the 1999 first quarter, as
compared to the 1998 first quarter. This increase was primarily the result of
greater net income from the resorts' management clubs due to higher dues income
resulting from an increased membership base, partially offset by an increase in
operating expenses.
Other income consists of water and utilities income, condominium rental income,
marina income, golf pro shop income, and other miscellaneous items. Other
income remained relatively flat at $474,000 for the first three months of 1999
compared to $494,000 for the first three months of 1998. Increases in golf pro
shop income at Apple Mountain Resort were offset by the closing of the Oak N'
Spruce Resort restaurant.
Cost of Sales
Cost of sales as a percentage of Vacation Interval sales increased to 14.0% in
the first quarter of 1999, from 13.9% for the same period of 1998. As the
Company continues to deplete its inventory of low cost Vacation Intervals
acquired primarily in 1995 and 1996, the Company's sales mix has shifted to
more recently constructed units, which were built at a higher average cost per
Vacation Interval. Hence, the cost of sales as a percentage of Vacation
Interval sales has increased in comparison with the respective prior year
period.
Sales and Marketing
Sales and marketing costs as a percentage of total sales increased to 49.5% for
the quarter ended March 31, 1999, from 45.9% for the same period of 1998.
Several factors contributed to the increase in sales and marketing costs as a
percentage of sales. This increase, in part, is due to the implementation of new
marketing programs, including a vacation product whereby related revenues
received are deferred until the guest actually stays at the resort.
Additionally, the Company is incurring substantial marketing and start up costs
associated with two new sales offices and one expanded sales office in recently
opened markets where sales have not yet reached mature levels. Finally,
implementation costs associated with four new automated dialers contributed to
the increase.
Provision for Uncollectible Notes
The provision for uncollectible notes as a percentage of Vacation Interval
sales decreased to 10.0% for the first three months of 1999 from 12.9% for the
same period of 1998. This is the result of improvements in the Company's
collection efforts, including increased staffing, improved collections
software, the implementation of a program through which delinquent loans are
assumed by existing owners with a consistent payment history, and an increase
in receivables relating to upgrade sales, which typically represent better
performing accounts, resulting in fewer delinquencies.
Operating, General and Administrative
Operating, general and administrative expenses as a percentage of total
revenues increased to 12.7% for the quarter ended March 31, 1999, as compared
to 12.5% for the quarter ended March 31, 1998. The increase is primarily
attributable to additional salaries, legal and printing fees associated with
year-end reporting, and an increase in title and recording fees due to
increased borrowings against pledged notes receivable.
9
<PAGE> 12
Depreciation and Amortization
Depreciation and amortization expense as a percentage of total revenue increased
to 2.4% for the quarter ended March 31, 1999, compared to 1.8% for the quarter
ended March 31, 1998. Overall, depreciation and amortization expense increased
$641,000 for the first quarter of 1999, as compared to 1998, primarily due to
investments in new automated dialers, telephone systems, and a central marketing
facility.
Interest Expense
Interest expense as a percentage of interest income increased to 57.8% for the
first quarter of 1999, from 42.9% for the same period of 1998. This increase
was due to the interest expense generated by the $75.0 million 10.5% senior
subordinated notes placed in April 1998 offset by increased interest income
related to the previously discussed increase in notes receivable.
Income before Provision for Income Taxes
Income before provision for income taxes increased 36.6% to $7.9 million for
the quarter ended March 31, 1999, from $5.8 million for the quarter ended March
31, 1998 as a result of the above mentioned operating results.
Provision for Income Taxes
Income tax expense as a percentage of income before provision for income taxes
increased to 38.5% in the first quarter of 1999 as compared to 38.1% in the
first quarter of 1998. This increase resulted from an increase in state income
taxes, primarily due to additional operations commencing in Illinois, Missouri,
and Massachusetts.
Net Income
Net income increased $1.3 million, or 35.7%, to $4.9 million for the quarter
ended March 31, 1999, from $3.6 million for the quarter ended March 31, 1998,
as a result of the above mentioned operating results.
LIQUIDITY AND CAPITAL RESOURCES
SOURCES OF CASH. The Company generates cash primarily from down payments on the
sale of Vacation Intervals, sampler sales, collections of principal and
interest on customer notes receivable from Vacation Interval owners, management
fees, and resort and utility operations. During the three months ended March
31, 1999, cash provided by operations was $1.3 million, compared to $3.2
million for the same period of 1998. The decrease in cash provided by
operations was a result of increased construction of inventory in the first
quarter of 1999 compared to the first quarter of 1998. The Company typically
receives a 10% down payment on sales of Vacation Intervals and finances the
remainder by receipt of a seven to ten year customer promissory note. 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 related borrowings. Because the Company uses significant
amounts of cash in the development and marketing of Vacation Intervals, but
collects cash on customer notes receivable over a seven to ten year period,
borrowing against receivables has historically been a necessary part of normal
operations.
For the three months ended March 31, 1999 and 1998, cash provided by financing
activities was $27.8 million and $18.2 million, respectively. The increase in
net cash provided by financing activities was mainly attributable to increased
borrowings on the revolving credit facilities to support inventory construction
and customer notes receivable financing. As of March 31, 1999, the Company's
credit facilities provide for loans of up to $130.0 million. At March 31, 1999,
approximately $79.8 million of principal and interest related to advances under
the credit facilities was outstanding. For the three months ended March 31,
1999, the weighted average cost of funds for all borrowings, including the
senior subordinated debt, was approximately 9.1%.
Effective March 31, 1999, the Company reached a definitive agreement with a
lender to increase its $15 million revolving loan agreement, expiring in
November 2002, to a $75 million two-year revolving loan agreement. The credit
facility is based on an 85% advance rate against receivables compared to the
previous advance rate of 70%.
10
<PAGE> 13
Additionally, the interest rate on the amended credit facility improved to
LIBOR plus 3% from prime plus 2%.
For regular federal income tax purposes, the Company reports substantially all
of the Vacation Interval sales it finances under the installment method. Under
this method, income on sales of Vacation Intervals is not recognized until cash
is received, either in the form of a down payment or as installment payments on
customer notes receivable. 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. In addition, the
Company is subject to current alternative minimum tax ("AMT") as a result of
the deferred income which results from the installment sales treatment. Payment
of AMT reduces the future regular tax liability attributable to Vacation
Interval sales, and creates a deferred tax asset. In 1998, the Internal Revenue
Service approved a change in the method of accounting for installment sales
effective January 1, 1997. As a result, the Company's alternative minimum
taxable income for 1997 through 2000 was or will be increased each year by an
estimated amount of approximately $9.0 million per year for the pre-1997
adjustment, which will result in the Company paying substantial additional
federal and state taxes in those years. The Company's net operating loss
carryforwards, which also may be used to offset installment sales income,
expire beginning in 2007 through 2018. Realization of the deferred tax asset
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 as a
result of loans to customers in connection with the Company's Vacation Interval
sales, capital additions, and property acquisitions. Net cash used in investing
activities for the three months ended March 31, 1999 and 1998, was $27.1
million and $19.9 million, respectively. The increase was due to the increased
level of customer notes receivable resulting from higher sales volume and the
purchase of undeveloped land near The Villages resort in Tyler, Texas, for
approximately $1.0 million in January 1999.
YEAR 2000 COMPLIANCE
Many of the world's computer systems record years in a two-digit format. Such
computer systems will be unable to properly interpret dates beyond the year
1999, which could potentially lead to disruptions in the Company's operations.
The Company has conducted a review of its information technology ("IT") systems
currently utilized and is in the process of identifying and assessing non-IT
systems in order to determine its potential year 2000 deficiencies. This study
included reviewing all applicable reports, files, inquiry screens, maintenance
screens, batch programs, software, hardware, and other interactive
applications. Non-IT systems are generally more difficult to assess because
they often contain embedded technology that may be subject to year 2000
problems. In completing its assessment, the Company has identified several
primary computer systems that are currently not year 2000 compliant. Each of
these computer systems and its year 2000 compliance status are discussed below:
Marketing system - The current Marketing system requires modifications in order
to be year 2000 compliant. These modifications are anticipated to be completed
by June 1999.
Sales and Credit system - The Sales and Credit system will need to be
redeveloped in order to be year 2000 compliant. The redevelopment of the Sales
and Credit system is scheduled to be completed by June 1999.
Accounts Receivable system - The Accounts Receivable system will need to be
redeveloped in order to be year 2000 compliant. The redevelopment of the
Accounts Receivable system is scheduled to be completed by June 1999.
Inventory system - The Inventory system is currently being redeveloped to be
year 2000 compliant, among other enhancements. The redevelopment of the
Inventory system is scheduled to be completed by June 1999.
Finance Administration system - The Finance Administration system will need to
be redeveloped in order to be year 2000 compliant. The redevelopment of the
Finance Administration system is scheduled to be completed by June 1999.
Sales Commissions system - The Sales Commissions system is currently being
redeveloped to be year 2000 compliant, among other enhancements. The
redevelopment of the Sales Commissions system is scheduled to be completed by
June 1999.
11
<PAGE> 14
Predictive dialer software - The Company's predictive dialer software is
scheduled to be year 2000 compliant with an upgrade scheduled for the second
quarter of 1999.
Full implementation of all programs is anticipated to be completed by June
1999.
In the redevelopment phase of each module, the system being modified will be
tested by the appropriate programmers to ensure proper handling of dates. Test
procedures have already been developed as well as a complete test environment.
The necessary personnel and processing resources have been determined and
assigned to the appropriate projects. All major redeveloped systems will be run
parallel with the existing systems to ensure completeness and accuracy. All
redeveloped systems will be verified and accepted by the appropriate users
prior to eliminating the existing systems. Any other primary computer programs
currently utilized by the Company, that are not mentioned above, are already
year 2000 compliant.
In addition to the major computer systems described above, the Company
primarily utilizes standardized and upgraded Microsoft Office products that are
year 2000 compliant. All personal computer ("PC") applications that are not in
Microsoft Office are written in Visual Basic and programmed to handle year 2000
issues. All operating systems utilized by the Company, which include Novell
Intranetware, OS/400, Windows 95, and Windows NT, are year 2000 compliant. The
Company's AS400 hardware and related Network servers are year 2000 compliant as
well. The Company has evaluated all data communications equipment, including
PCs. The Company has located a minimal number of PCs requiring replacement and
no significant deficiencies of data communications equipment have been found.
The Company has identified non-IT systems that may be year 2000 sensitive,
including primarily access gates, alarms, irrigation systems, thermostats, and
utility meters and switches at its resorts. Although these systems vary by
resort, most of these systems are already year 2000 compliant or are not
reliant on a time-chip that would be affected by year 2000. The Company
anticipates that all these systems will be year 2000 compliant by the end of
the second quarter of 1999.
The Company has made inquiries of its major vendors, consisting primarily of
financial institutions, regarding their year 2000 compliance status and its
potential impact to the Company's business. Based on these discussions, the
Company does not anticipate year 2000 difficulties associated with its major
vendors. The Company, however, would change vendors if year 2000 problems at
its existing vendors create interruptions to its business.
Company management believes that the total cost of the aforementioned year 2000
computer system and equipment enhancements will be less than $430,000,
including an estimate of internal payroll committed to the projects, of which
approximately $290,000 has already been incurred. The Company will utilize both
internal and external resources to achieve year 2000 compliance. The Company
estimates that its identification and assessment activities are approximately
95% complete and that its remediation is approximately 90% complete.
The failure to correct a material year 2000 internal problem could result in an
interruption in, or failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity, and financial condition. Due to the general
uncertainty inherent in the year 2000 problem, resulting in part from the
uncertainty of year 2000 readiness of third party vendors, the Company is
unable to determine at this time whether the consequences of year 2000 failures
of third party vendors will have a material impact on the Company's results of
operations, liquidity, or financial condition. The Company believes, however,
that its year 2000 compliance plan and time line provide adequate staffing,
resources, and time to mitigate and proactively respond to any unforeseen year
2000 problems in a timely and preemptive manner. The cost of year 2000
compliance and the estimated date of completion of necessary modifications,
however, are based on the Company's best estimates, which were derived from
various assumptions of future events. There can be no assurance that these
estimates will be achieved and actual results could differ materially from
those anticipated.
In the event of a complete failure of the Company's information technology
systems, the Company would be able to continue the affected functions either
manually or through the use of non-year 2000 compliant systems. The primary
costs associated with such a necessity would be (1) increased time delays
associated with posting of information and (2) increased personnel to manually
process the information. The Company does not believe the increased costs
associated with such personnel would be significant. The Company currently does
not have a contingency plan in place. The Company will evaluate the need for a
plan during the remainder of 1999 as the Company progresses
12
<PAGE> 15
through the year 2000 conversion.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Contract of Sale dated August 5, 1998, among David M. Fender and Jane
M. Fender (or "Seller") and George R. Bedell (or "Purchaser").
10.2 Third Amendment to Loan and Security Agreement dated as of March 31,
1999, between the Company and Textron Financial Corporation.
27.0 Financial Data Schedule.
- -------
(b) Reports on form 8-K
None.
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 thereunto duly authorized.
Dated: May 13, 1999 By: /s/ ROBERT E. MEAD
-------------------------------------
Robert E. Mead
Chairman of the Board and
Chief Executive Officer
Dated: May 13, 1999 By: /s/ HARRY J. WHITE, JR.
-------------------------------------
Harry J. White, Jr.
Chief Financial Officer
13
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.1 Contract of Sale dated August 5, 1998, among David M. Fender and
Jane M. Fender (or "Seller") and George R. Bedell (or "Purchaser").
10.2 Third Amendment to Loan and Security Agreement dated as of March
31, 1999, between the Company and Textron Financial Corporation.
27.0 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
CONTRACT OF SALE
This Agreement is entered into by and between DAVID M. FENDER and JANE
M. FENDER (collectively "Seller"), and GEORGE R. BEDELL ("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 with the
exception of the crystal chandelier in the formal dining room of the residence
and the stained glass mosaic built into the north wall of the "summer house"
located closest to the water frontage of Lake Palestine on said property:
Six (6) parcels of land, located in Smith County, Texas, and being
described in Exhibit "A" attached hereto and made a part hereof for
all purposes.
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 One Million Forty Thousand and No/100 Dollars
($1,040,000.00). The purchase price shall be paid 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 Safeco Land Title of Dallas,
5220 Renaissance Tower, 1201 Elm Street, Dallas, Texas 75270, Attn: John Kerr
(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 closed, then all earnest money shall
be applied in partial satisfaction of the purchase price. 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
Ten Thousand Dollars ($10,000.00) 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
Within twenty (20) days from the date of execution of this Contract,
Seller shall furnish to Purchaser a survey of the Subject Property prepared in
1997 by John Cowan & Associates. If Purchaser desires additional survey work,
Purchaser must arrange for such work and pay all costs incurred in connection
therewith.
Within twenty (20) days from the date of execution of this Contract,
Purchaser shall obtain 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;
a copy of the Title Commitment shall be furnished to Seller.
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<PAGE> 3
ARTICLE V
TITLE INSPECTION PERIOD
Purchaser shall have a period of sixty (60) days following the date on
which Purchaser receives the survey to be provided to Purchaser pursuant to
Article IV hereinabove in which to review and approve the survey and the Title
Commitment to be obtained by Purchaser (the "Title Review Period"). If the
information to be provided pursuant to 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, 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 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. It is also understood and agreed that a two-thirds (2/3) interest
in the minerals in and under the Subject Property was reserved by the grantors
in a deed
- 3 -
<PAGE> 4
recorded in Volume 1328, Page 80 of the Deed Records of Smith County,
Texas. This mineral reservation and all easements to Texas Power & Light
Company across the Subject Property 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 items to be provided to Purchaser pursuant to Article
IV 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 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
$10,000.00) 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.
- 4 -
<PAGE> 5
ARTICLE VII
REPRESENTATIONS, WARRANTIES, AND COVENANTS OF SELLER
Seller represents and warrants to Purchaser that Seller will convey
the Subject Property to Purchaser at closing free and clear of all liens.
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 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
- 5 -
<PAGE> 6
this Contract by providing written notice of such termination to Seller, in
which event the earnest money (less $10,000.00) shall be returned to Purchaser
and thereafter neither Seller nor Purchaser shall have any further liabilities
or obligations one unto the other.
Notwithstanding the foregoing, or anything to the contrary contained
herein, it is understood and agreed that the improvements on the Subject
Property will be sold to Purchaser as is, with all faults, without any kind of
warranty as to the fitness of such improvements.
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 $10,000.00) shall be
returned to Purchaser by the Title Company and thereafter neither Seller nor
Purchaser shall have any continuing obligations one unto the other.
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.
- 6 -
<PAGE> 7
Purchaser shall notify Seller at least five (5) days in advance of the exact
time and date of closing. Seller and Purchaser hereby agree that Purchaser
shall have the right to obtain one (1) sixty (60) day extension of the deadline
for closing hereunder by delivering to Seller an additional Twenty-Five
Thousand Dollars ($25,000.00) in earnest money. If Purchaser exercises this
right, then the deadline for closing of this Contract shall be extended by
sixty (60) days; the additional $25,000.00 earnest money deposit that must be
made by Purchaser in order to extend the deadline for closing of this Contract
by sixty (60) days shall be non-refundable to Purchaser except in the event of
a default by Seller hereunder, but, if this Contract closes, shall be applied
in partial satisfaction of the purchase price payable hereunder.
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, 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 Owner Policy
of Title Insurance (the "Title Policy") covering the Subject
Property, in the amount of the purchase price, in the form prescribed
by the Texas State Board of Insurance. Such Title Policy may contain
as exceptions only the Permitted Exceptions and the standard printed
exceptions except that: (i) the exception relating to restrictions
against the Subject Property shall be deleted, except for such
restrictions as may be included in the Permitted Exceptions; (ii) the
exception relating to discrepancies, conflicts, or shortages in area
or boundary lines, or any encroachment or overlapping of improvements
which a survey might show shall be deleted except for shortages in
area; and (iii) the exception relating to standby fees and ad valorem
taxes shall except only to taxes owing for the current year and
subsequent assessments for prior years due to change in land usage or
ownership. The additional premium charged by the Title Company for
modifying the survey exception shall be paid by Purchaser.
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.
- 7 -
<PAGE> 8
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 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 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.
- 8 -
<PAGE> 9
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.
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: David M. Fender
116 E. Front Street
Tyler, Texas 71710
- 9 -
<PAGE> 10
Purchaser: George R. Bedell, Esq.
901 Main Street, Suite 3700
Dallas, Texas 75202
Telephone No.: (214) 744-3700
Facsimile No.: (214) 747-3732
ARTICLE XVI
REMEDIES
In the event that Seller fails to timely comply with all conditions,
covenants and obligations of Seller hereunder, it 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
$10,000.00) 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 or for actual damages; provided,
however, that, in the event that Seller violates its obligations pursuant to
this Contract and the closing does not occur as a result thereof, Purchaser's
right to obtain any damages hereunder shall be limited to the recovery of
Purchaser's out-of-pocket expenses, and in no event shall Purchaser have the
right to sue for any other damages, including consequential damages, lost
profits or punitive 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 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.
- 10 -
<PAGE> 11
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.
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.
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
fully authorized to do so.
- 11 -
<PAGE> 12
ARTICLE XXI
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 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.
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.
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<PAGE> 13
ARTICLE XXV
ACCEPTANCE
Seller shall have until 5:00 o'clock p.m., August 6, 1998, 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 XXVI
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 three
percent (3%) of the purchase price, such commission to be paid to Pirtle Real
Estate Services. 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 contracted 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 attorneys' fees)
resulting to the other party by reason of a breach of the representation and
warranty made by such party herein. Notwithstanding
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<PAGE> 14
anything to the contrary contained herein, the indemnities set forth in this
Article XXVI shall survive the closing.
EXECUTED on this the 5th day of August, 1998.
SELLER:
/s/ DAVID M. FENDER
-----------------------------------------
David M. Fender
/s/ JANE M. FENDER
-----------------------------------------
Jane M. Fender
EXECUTED on this the 1st day of August, 1998.
PURCHASER:
/s/ GEORGE R. BEDELL, ESQ.
-----------------------------------------
George R. Bedell, Esq.
RECEIPT OF EARNEST MONEY AND ONE (1) EXECUTED COUNTERPART OF THIS CONTRACT IS
HEREBY ACKNOWLEDGED:
TITLE COMPANY:
SAFECO LAND TITLE OF DALLAS
By: /s/ J. G. KERR
--------------------------
Name: J. G. Kerr
------------------------
Its: Vice President
-------------------------
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<PAGE> 1
EXHIBIT 10.2
THIRD AMENDMENT TO
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT dated as of March
31, 1999 (the "THIRD AMENDMENT"), is by and between TEXTRON FINANCIAL
CORPORATION, a Delaware corporation (the "LENDER"), and SILVERLEAF RESORTS, INC.
(formerly known as SILVERLEAF VACATION CLUB, INC.), a Texas corporation (the
"BORROWER")
W I T N E S S E T H:
WHEREAS, Borrower was formerly known as ASCENSION CAPITAL CORPORATION
(the "GUARANTOR"), the successor to ASCENSION RESORTS, LTD., a Texas limited
partnership (the "ORIGINAL BORROWER"), by merger of EQUAL INVESTMENT COMPANY, a
Texas corporation, ASCENSION RESORTS, LTD. and ASCENSION CAPITAL CORPORATION;
WHEREAS, Lender, Original Borrower and Guarantor were parties to that
certain Loan and Security Agreement dated as of August 15, 1995, pursuant to
which the Original Borrower executed its Secured Promissory Note in favor of the
Lender in the amount of $5,000,000.00, as amended to date (the "NOTE");
WHEREAS, on December 28, 1995 Ascension Resorts, Ltd. was merged into
the Guarantor and Guarantor was thereafter renamed Silverleaf Vacation Club,
Inc.;
WHEREAS, on December 28, 1995, Lender, Borrower and Guarantor amended
the Agreement, as such term is hereafter defined, pursuant to a First Amendment
to Loan and Security Agreement dated as of December 28, 1995 (the "FIRST
AMENDMENT") to, among other things, evidence Lender's approval of the merger of
Ascension Resorts, Ltd. into Ascension Capital Corporation and to reflect the
above-mentioned merger and name change;
WHEREAS, on October 31, 1996, Lender and Borrower further amended the
Agreement pursuant to a Second Amendment to Loan and Security Agreement dated as
of October 31, 1996 (the "SECOND AMENDMENT") to, among other things, increase
the amount of the Loan, decrease the interest rate, and extend the maturity date
of the Loan;
WHEREAS, pursuant to a commitment letter dated January 26, 1999, Lender
and Borrower agreed, among other things, to further modify the terms of the
Agreement to, among other things, increase the amount of the Loan, decrease the
interest rate, extend the maturity date of the Loan and to reflect the change in
Borrower's name to Silverleaf Resorts, Inc.; and
WHEREAS, Lender and Borrower have agreed to enter into this Third
Amendment to Loan and Security Agreement dated as of March 31, 1999 (the "THIRD
AMENDMENT") to amend the Agreement as provided in the January 26, 1999
commitment letter.
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. ADDITIONAL ELIGIBLE RESORTS. Section 1.1 (Definitions) is hereby amended in
part to add the following new paragraph:
"(a) ADDITIONAL ELIGIBLE RESORTS or "ADDITIONAL ELIGIBLE RESORT.
The terms "Additional Eligible Resorts" and "Additional Eligible
Resort" shall have the meanings ascribed to such terms in Section
2.8 hereof."
2. AGREEMENT. Section 1.1(c) (Agreement) is hereby amended to read as follows:
"(d) AGREEMENT. This Loan and Security Agreement by and among the
Borrower and the Lender (including the Exhibits and Schedules
attached hereto), as amended by the First Amendment, the Second
Amendment and the Third Amendment, as it may be further amended
from time to time."
3. BORROWING BASE. Section 1.1(e) (Borrowing Base) is hereby amended to read as
follows:
"(f)BORROWING BASE. With respect to Eligible Notes Receivable
pledged to the Lender in connection with each Advance, including
any Advance made prior to the date of the Third Amendment, an
amount equal to eighty-five percent (85%) of the remaining
principal balance of each such Eligible Note Receivable for each
Advance."
4. BUSINESS DAY. Section 1.1(f) (Business Day) is hereby amended to read as
follows:
"(g) BUSINESS DAY. Each day which is not a Saturday, a Sunday or a
legal holiday under the laws of the State of Rhode Island, the
State of Connecticut or the State of Texas."
5. COMMITMENT. Section 1.1(j) (Commitment) is hereby amended to read as follows:
"(k) COMMITMENT. Collectively, (i) the Loan Commitment issued by
Lender to Borrower dated May 11, 1995 and accepted on May 26, 1995
(the "ORIGINAL COMMITMENT"); (ii) the Loan Commitment issued by
Lender to Borrower dated October 29, 1996 and accepted on December
27, 1996 (the "1996 COMMITMENT") and (iii) the Loan Commitment
issued by Lender to Borrower dated January 26, 1999 and accepted
on January 28, 1999 (the "1999 COMMITMENT")."
6. COMMITMENT FEE. Section 1.1(k) (Commitment Fee) is hereby amended to read as
follows:
"(l) COMMITMENT FEE. With respect to the Original Commitment, the
commitment fee in the amount of $50,000.00 described in the
Original
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<PAGE> 3
Commitment, which was paid in accordance with the terms of the
Original Commitment. With respect to the 1996 Commitment, the
commitment fee in the amount of $100,000.00 described in the 1996
Commitment, which was paid in accordance with the terms of the
1996 Commitment. With respect to the 1999 Commitment, the
commitment fee in the amount of $750,000 described in the 1999
Commitment, which is to be paid in accordance with the terms of
Section 2.7 hereof."
7. DIVISION. Section 1.1(q) (Division or Commission) is hereby amended to read
as follows:
"(r) DIVISION. The governmental authority of each state in which a
Resort is located, having jurisdiction over the establishment and
operation of the Resort in question and the sale of Intervals at
such Resort."
8. ELIGIBLE NOTES RECEIVABLE. Section 1.1(r) (Eligible Notes Receivable) is
hereby amended in part as follows:
(a) Section 1.1(s)(vii) is hereby amended to read as follows:
"(vii) which shall have an original term of no more than
eighty-four (84) months, provided, however, that up to but
not more than ten percent (10%) of all Eligible Notes
Receivable may at any time be comprised of Eligible Notes
Receivable having an original term of no more than one
hundred twenty (120) months;"
(b) Section 1.1(s)(xi) is hereby amended to read as follows:
"(xi) The rate of interest payable on the unpaid balance
is at least the rate required so that when the Advance is
made in respect of such Eligible Note Receivable the
average interest rate on all Eligible Notes Receivable in
respect of which Advances are outstanding shall not be
less than thirteen percent (13%) per annum at any time;"
(c) Section 1.1(r) is hereby amended in part to add the
following sentence:
Notwithstanding anything herein to the contrary, Lender
shall be under no obligation to accept Notes Receivable
from more than 681 intervals of the Crown Resorts, as
described in Schedule 4.6(c)(iii), other than the Quail
Hollow Resort and any other Crown Resort for which
Borrower delivers to Lender acceptable Mortgagee Title
Insurance Policy with respect to each Mortgage securing
such Notes Receivable.
9. ENVIRONMENTAL LAWS. Section 1.1(t) (Environmental Laws) is hereby amended to
read as follows:
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<PAGE> 4
"(u) ENVIRONMENTAL LAWS. Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended from time to time ("CERCLA"), the Resource
Conservation and Recovery Act of 1976, as amended from
time to time ("RCRA"), the Superfund Amendments and
Reauthorization Act of 1986, as amended, the federal Clean
Air Act, the federal Clean Water Act, the federal Safe
Drinking Water Act, the federal Toxic Substances Control
Act, the federal Hazardous Materials Transportation Act,
the federal Emergency Planning and Community Right to Know
Act of 1986, the federal Endangered Species Act, the
federal Occupational Safety and Health Act of 1970, the
federal Water Pollution Control Act, all state and local
environmental laws, rules and regulations of each state in
which a Resort is located, as all of the foregoing
legislation may be amended from time to time, and any
regulations promulgated pursuant to the foregoing;
together with any similar local, state or federal laws,
rules, ordinances or regulations either in existence as of
the date hereof, or enacted or promulgated after the date
of this Agreement, that concern the management, control,
storage, discharge, treatment, containment, removal and/or
transport of Hazardous Materials or other substances that
are or may become a threat to public health or the
environment; together with any common law theory involving
Hazardous Materials or substances which are (or alleged to
be) hazardous to human health or the environment, based on
nuisance, trespass, negligence, strict liability or other
tortious conduct, or any other federal, state or local
statute, regulation, rule, policy, or determination
pertaining to health, hygiene, the environment or
environmental conditions."
10. ENVIRONMENTAL INDEMNIFICATION AGREEMENT. Section 1.1 (Definitions) is hereby
amended in part to add the following new paragraph:
"(v) ENVIRONMENTAL INDEMNIFICATION AGREEMENT shall mean
the Environmental Indemnification Agreement, in the form
attached as Exhibit C, to be made by the Borrower to the
Lender pursuant to this agreement, as the same may be
amended from time to time."
11. EURODOLLAR BUSINESS DAY. Section 1.1 (Definitions) is hereby amended in part
to add the following new paragraph:
"(w) Eurodollar Business Day shall mean any day on which
commercial banks are open for international business
(including dealings in dollar deposits) in London,
England."
12. FINAL MATURITY DATE. Section 1.1(w) (Final Maturity Date) is hereby amended
to read as follows:
"(z) Final Maturity Date. April 1, 2005.
13. INTEREST RATE. Section 1.1(cc) (Interest Rate) is hereby amended to read as
follows:
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<PAGE> 5
"(ff) INTEREST RATE. The variable rate, adjusted as of
each LIBOR Determination Date, equal to the sum of LIBOR,
determined as of each LIBOR Determination Date, plus three
percent (3.0%) per annum."
14. INTERVAL. Section 1.1 (dd) (Interval) is hereby amended to read as follows:
"(gg) INTERVAL. With respect to each Resort the undivided
fractional fee interval ownership interest as a
tenant-in-common ((sometime referred to in the Timeshare
Documents as a Condoshare Interest or Condoshare Week) in
a Unit sold to a Purchaser by delivery of a deed for a
time-share period per calendar year (or, in the case of a
biennial use period, per alternate calendar year) of one
week (as defined in the Declaration), together with all
appurtenant rights and interests, including, without
limitation, appurtenant rights in and to Common Elements,
and easement, license, access and use rights in and to all
Resort facilities and amenities (as described in the
Declaration), all as more particularly described in the
Declaration or other Timeshare Documents. Notwithstanding
the foregoing, the term "Interval" shall also include,
with respect to the Oak `N Spruce Resort only, the
beneficial interest in the entity which owns each of the
Units at the Oak `N Spruce Resort, as evidenced by the
delivery to the Purchaser of any such beneficial interest
of a certificate of beneficial interest for a timeshare
period per calendar year (or, in the case of biennial use
period, per alternate calendar year) of one week (as
defined in the Oak N' Spruce Resort Declaration), together
with all pertinent rights and interests, including,
without limitation, a pertinent right in and to Common
Elements, and easements, license, access and use rights in
and to all Oak `N Spruce Resort facilities and amenities,
all as more particularly described in the Declaration or
other Timeshare Documents for the Oak `N Spruce Resort."
15. LIBOR. Section 1.1 (Definitions). is hereby amended in part to add the
following new paragraph:
"(hh) LIBOR shall mean, with respect to any LIBOR Rate
Period, the rate per annum (rounded upwards, if necessary,
to the nearest one-sixteenth (1/16th) of one percent (1%))
reported at 11:00 a.m. London time on the first day of
each LIBOR Rate Period (or if such date is not a
Eurodollar Business Day, the immediately preceding
Eurodollar Business Day) (such date, the "LIBOR
DETERMINATION DATE"), on Dow Jones Telerate Service Page
3750 (British Bankers Association Settlement Rate) as the
non-reserve adjusted London Interbank Offered Rate for
U.S. dollar deposits having a ninety (90) day term (or on
such other page as may replace said Page 3750 on that
service or such other service or services as may be
nominated by the British Bankers Association for the
purpose of displaying such rate, all as determined by
Lender in its sole but good faith discretion). In the
event that (i) more than one such LIBOR is provided, the
average of such rates shall apply, or (ii) no such LIBOR
is published, then LIBOR shall be determined from such
comparable financial
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<PAGE> 6
reporting company as Lender in its sole but good faith
discretion shall determine. LIBOR for any LIBOR Rate
Period shall be adjusted from time to time by increasing
the rate thereof to compensate Lender and any Participant
for any aggregate reserve requirements (including, without
limitation, all basic, supplemental, marginal and other
reserve requirements and taking into account any
transitional adjustments or other scheduled changes in
reserve requirements during any LIBOR Rate Period) which
are required to be maintained by Lender or such
Participant with respect to "Eurocurrency Liabilities" (as
presently defined in Regulation D of the Board of
Governors of the Federal Reserve System) of the same term
under Regulation D, or any other regulations of a
Governmental Authority having jurisdiction over Lender or
such Participant of similar effect."
16. LIBOR RATE PERIOD. Section 1.1 (Definitions). is hereby amended in part to
add the following new paragraph:
"(ii) LIBOR RATE PERIOD. shall mean each successive ninety
(90) period during the Term. The initial LIBOR Rate Period
shall commence on the date of the Third Amendment (or if
such day is not a Eurodollar Business Day, the immediately
preceding Eurodollar Business Day) and shall terminate on
a date which is ninety days thereafter (or if such day is
not a Eurodollar Business Day, the immediately preceding
Eurodollar Business Day). Each LIBOR Rate Period after the
initial LIBOR Rate Period shall commence on the first
Eurodollar Business Day immediately following the
expiration of the immediately preceding LIBOR Rate Period
and shall terminate ninety days thereafter (or if such day
is not a Eurodollar Business Day, the immediately
preceding Eurodollar Business Day)."
17. LOAN. Section 1.1 (ff) (Loan) is hereby amended to read as follows:
"(kk) LOAN. The $75,000,000.00 revolving term facility
described in this Agreement, subject to the limitations
set forth in Section 2.1 hereof. All references to
"$5,000,000.00" on the cover page, in Section 1.1(ff), and
in Section 2.1 in the Agreement and the First Amendment
and all references in the Second Amendment to
"$15,000,000.00" are hereby changed to "$75,000,000.00"."
18. LOAN DOCUMENTS. Section 1.1 (gg) (Loan Documents) is hereby amended to read
as follows:
"(ll) LOAN DOCUMENTS. Collectively, this Agreement, as
amended by the First Amendment, the Second Amendment and
the Third Amendment, the Note, the Guaranty, the
Environmental Indemnification Agreement, the Negative
Pledge Agreement, the Assignment of Notes Receivable and
Mortgages, the Lock Box Agreement, the UCC Financing
Statements and such other agreements, documents,
instruments, certificates and materials as Lender may
request to evidence the Obligations, to evidence and
perfect the rights and Liens and
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<PAGE> 7
security interests of Lender contemplated by the Loan
Documents and to effectuate the transactions contemplated
herein, as such agreements, documents, instruments or
certificates may be hereafter amended, renewed, extended,
restated or supplemented from time to time."
19. LOAN YEAR. Section 1.1 (hh) (Loan Year) is hereby amended to read as
follows:
"(mm) Loan Year. Effective commencing March 31, 1999, the
period from the date of the Third Amendment through the
last day of the next full twelve (12) calendar month
period and each twelve (12) calendar month period
thereafter."
20. LOCKBOX AGREEMENT. Section 1.1(jj) (Lockbox Agreement) is hereby amended to
read as follows: "
(oo) Lockbox Agreement. The Lockbox and Servicing
Agreement, dated as of August 15, 1995 between Borrower,
Lender, Servicing Agent and Lockbox Agent, as amended by
the First Amendment to Lock Box Agreement, dated as of
October 31, 1996, and the Second Amendment to Lock Box
Agreement, dated as of March 31, 1999, pursuant to which
Lockbox Agent is to provide lockbox, reporting and related
services and is to provide for the receipt of payments on
the Notes Receivable and disbursement of such payments to
Lender."
21. MORTGAGE. Section 1.1 (ll) (Mortgage) is hereby amended to read as follows:
"(qq) MORTGAGE A properly recorded, first priority
mortgage, deed of trust, deed to secure debt, assignment
of beneficial interest or other security instrument, as
applicable, executed and delivered by each Purchaser to
Borrower, securing a Pledged Note Receivable and
encumbering all of the right, title and interest of such
Purchaser in the related Encumbered Interval and Common
Elements, and related or appurtenant easement, access and
use rights and benefits."
22. NEGATIVE PLEDGE AGREEMENT. Section 1.1 (Definitions). is hereby amended in
part to add the following new paragraph:
"(rr) NEGATIVE PLEDGE AGREEMENT shall mean the Negative
Pledge Agreement, in the form attached as Exhibit C, made
by the Borrower and each applicable Affiliate to the
Lender pursuant to this Agreement, as the same may be
amended from time to time."
23. NOTE. Section 1.1(mm) (Note) is hereby amended to read as follows:
"(ss) NOTE. The Secured Promissory Note evidencing the
Loan dated the Closing Date executed and delivered by
Borrower to Lender concurrently with the Agreement, as
amended and restated by an Amended and Restated Secured
Promissory Note dated as of October 31, 1996 and as
further amended and restated by an Amended and Restated
Secured Promissory Note dated
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<PAGE> 8
March 31, 1999 executed and delivered by Borrower to
Lender concurrently with the Third Amendment, a copy of
which is attached hereto as Exhibit C."
24. PARTICIPANT. Section 1.1 (Definitions) is hereby amended in part to add the
following new paragraph:
"(ww) PARTICIPANT shall mean, singly and collectively, any
bank or other entity, which is indirectly or directly
funding Lender with respect to the Loan, in whole or in
part, including, without limitation, any direct or
indirect assignee of, or participant in, the Loan."
25. RESORT OR RESORTS. Section 1.1(xx) (Resort or Resorts) is hereby amended to
read as follows:
"(eee) RESORT OR RESORTS (ALSO "ELIGIBLE RESORT" OR
"ELIGIBLE RESORTS") . Individually and collectively, as
applicable, each or all of the interval ownership and
time-share projects consisting of: (i) (A) Holly Lake
Ranch, Hawkins, Texas; (B) Piney Shores Resort, Conroe,
Texas; (C) Lake O' The Woods, Flint, Texas; (D) Hill
Country Resort, Canyon Lake, Texas; (E) Ozark Mountain
Resort, Kimberling City, Missouri; and (F) Holiday Hills
Resort, Branson, Missouri (also sometime individually and
collectively referred to herein as the "EXISTING RESORTS")
and (ii) subject to Lender's prior written approval and
satisfaction by the Borrower of the conditions precedent
set forth in Sections 2.8 and 4.6 hereof, the Additional
Eligible Resorts. The term "Resort" or "Resorts" includes,
among other things, the undivided annual or (biennial)
timeshare ownership interests (Intervals) in the
respective Resorts, and the appurtenant exclusive rights
to use Units in one or more buildings or phases and all
appurtenant or related properties, amenities, facilities,
equipment, appliances, fixtures, easements, licenses,
rights and interests, including without limitation, the
Common Elements, as established by and more fully defined
and described in the respective Declarations, and the
other Timeshare Documents."
26. TERM. Section 1.1(bbb) (Term) is hereby amended to read as follows:
"(iii) TERM. A period of twenty four (24) months from the
date of the Third Amendment, plus the number of days from
the date of the Third Amendment to the end of the month in
which the Third Amendment is executed and delivered by the
Borrower and the Lender."
27. TIMESHARE ACT. Section 1.1(ccc) (Timeshare Act) is hereby amended to read as
follows:
"(jjj) TIMESHARE ACT. Any statute, act, regulation,
ordinance, rule or law applicable to the establishment and
operation of the Resorts and the sales of the Intervals."
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<PAGE> 9
28. TIMESHARE DOCUMENTS. Subparagraph (1) of Section 1.1(ddd) (Timeshare
Documents) is hereby amended to read as follows:
"(kkk) (1) Any registration statement required under any
Timeshare Act approving the establishment and operation of
the Resorts and the sales of Intervals."
29. UCC FINANCING STATEMENT. Section 1.1 (Definitions) is hereby amended in part
to add the following new paragraph:
"(nnn) UCC FINANCING STATEMENTS. The UCC-1 Financing
Statements, naming the Borrower or the Original Borrower
as debtor and the Lender as secured party, heretofore or
hereafter filed in connection with the Loans and all
amendments thereto."
30. REVOLVING LOAN. Section 2.1 (Revolving Loan) is hereby amended to read as
follows:
"Section 2.1 REVOLVING LOAN; LOAN PARTICIPATIONS;
PARTICIPANTS AND LENDING LIMITS;.
(a) REVOLVING LOAN. Upon the terms and subject to
the conditions set forth in this Agreement,
including, without limitation, the lending limits
set forth in section 2.1(c) hereof, Lender shall
advance to Borrower, and Borrower may borrow,
repay and reborrow during the Revolving Loan
Period, as such term is hereafter defined,
principal under the Loan in an amount not to
exceed at any time the lesser of: (i) the amount
of the Borrowing Base, or (ii) $75,000,000.00.
The Revolving Loan Period is shall mean the
period beginning on the date of the Third
Amendment and ending on March 31, 2001."
(b) LOAN PARTICIPATIONS AND PARTICIPANTS. Lender
shall have the right, without prior notice to
Borrower or Borrower's approval, to designate one
or more Participants and to sell or grant to such
Participants participation interests in the Loan,
and in the respective Loan Documents, and in the
Collateral, on terms and conditions satisfactory,
in its sole and absolute discretion, to Lender.
In the event that Lender so designates a
Participant and sells or grants such Participant
a participation interest in the Loan, such
Participant shall communicate and deal only with
Lender in respect to such Participant's interest
in the Loan, the Loan Documents and the
Collateral, and Borrower shall communicate and
deal only with Lender and not with any
Participant. Borrower agrees to, diligently and
in good faith, cooperate with Lender in
connection with Lender's consummation and
administration of a written participation
agreement or agreements with one or more
Participants or their successors and assigns, and
in complying with the terms of any such
participation agreement, including with respect
to
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periodic deliveries of accountings and reports
with respect to the Loan, the Loan Documents and
the Collateral.
(c) LENDING LIMITS. Borrower acknowledges, agrees
and confirms that Lender's obligation to fund
Advances under the Loan is limited to a maximum
aggregate principal amount at any time of
$50,000,000 (the "INITIAL FUNDING COMMITMENT)".
Lender and Borrower acknowledge that Lender has
entered or will enter into written participation
agreements which provide for Participant's
fundings in respect of up to $25,000,000 of the
Initial Funding Commitment. With respect to
Advances under the Loan that would cause the
aggregate outstanding principal balance of the
Loan to exceed $50,000,000, Lender's obligation
to make any such Advances is subject to and
conditioned upon a Participant's providing
funding to Lender in support of such Advances;
and therefore, Advances in excess of $50,000,000
at any time shall be subject to and conditioned
upon a Participant providing incremental funds
over $50,000,000 to Lender pursuant to a written
participation agreement acceptable to Lender in
its sole and absolute discretion. Advances in
excess of the Initial Funding Commitment are
hereinafter referred to as the "ADDITIONAL
FUNDING COMMITMENT". The maximum amount of the
Additional Funding Commitment shall, subject to
Section 2.1(a) hereof, be $25,000,000.
Lender agrees to use reasonable efforts to
procure one or more Participants to provide
funding for the Additional Funding Commitment,
and to use reasonable efforts to enter into and
maintain in good standing additional written
participation agreements satisfactory to Lender
in its sole and absolute discretion to the extent
necessary to provide for Advances up to the
maximum amount of the Additional Funding
Commitment, but in no event shall the total
outstanding principal balance of the Loan exceed
the amount determined in accordance with Section
2.1(a) hereof. If for any reason Lender does not
procure Participants for the Additional Funding
Commitment, or does procure such Participants but
does not enter into a written participation
agreement or agreements, acceptable to Lender in
its sole and absolute discretion, with any such
Participant for the Additional Funding
Commitment, or if such a participation agreement
is terminated, or if such a Participant fails to
fund to Lender its participation share of the
Loan as provided under its respective
participation agreement, then, notwithstanding
any provision in this Agreement, in the 1999
Commitment or in any Loan Document to the
contrary, Lender shall have no obligation to make
advances of principal under the Loans in excess
of $50,000,000 in the aggregate."
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31. VOLUNTARY PREPAYMENT. Section 2.4(a) (Voluntary Prepayment) of the Agreement
is hereby amended to read as follows:
"(a) VOLUNTARY PREPAYMENT. Borrower may not voluntarily
prepay the Loan, in whole or in part, except that: (i)
provided that no Event of Default shall have occurred and
be continuing and subject to Section 2.5 and Section 2.6
hereof, Borrower may, during the period from the date of
the Third Amendment to March 31, 2001 (the "REVOLVING LOAN
PERIOD"), upon thirty (30) days' prior written notice to
the Lender, prepay the Loan in whole or in part solely in
connection with the bulk sale, refinancing or
securitization in bulk, in minimum increments of
$5,000,000.00 or more, of Eligible Notes Receivable
relating to the Resorts, provided that any such bulk sale,
refinancing or securitization is not made to or with a
Warehouse Lender (For purposes hereof, a "Warehouse Lender"
means a Lender who agrees to refinance notes receivable for
a period of two (2) years or less); (ii) provided that no
Event of Default shall have occurred and be continuing and
subject to Section 2.6 hereof, Borrower may, on and after
April 1, 2001, upon thirty (30) days' prior written notice
to the Lender prepay the Loan in whole or in part and (iii)
at any time during the Term of the Loan, the Loan may be
prepaid in part in connection with any prepayment which
arises from the prepayment of one or more Eligible Notes
Receivable by its maker or makers.
32. PREPAYMENT PREMIUMS. Section 2.4(c) (Premiums) of the Agreement is hereby
amended to read as follows:
"(c) PREMIUMS. Subject to Sections 2.4(c)(ii), 2.5 and 2.6
hereof, no prepayment premium shall be required in
connection with: (x) any voluntary prepayment made in
accordance with Section 2.4(a)(i), (y) in connection with
any prepayment of the principal balance of the Loan which
arises from the prepayment of one or more Eligible Notes
Receivable by its maker or makers or (z) in connection with
any prepayment made in accordance with Section 2.4(b)(i).
Except as heretofore set forth, Borrower shall, in
connection with a prepayment, pay to the Lender:
(i) Any prepayment of the Loan pursuant to
Section 2.4(a)(ii) above must be accompanied
by a prepayment premium, calculated as of
the date immediately prior to such
prepayment, equal to one half percent (0.5%)
of the then outstanding principal balance of
the Loan.
(ii) Notwithstanding anything herein contained to
the contrary, any prepayment under this
Section 2.4 must include all accrued but
unpaid interest, and accrued but unpaid
contributions, taxes, insurance, loan
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<PAGE> 12
charges (including Minimum Loan Usage Fees,
if any), custodial fees, attorneys' and
paralegals' fees and expenses, amounts due
pursuant to Section 2.6 hereof as a result
of a Funding Loss and other fees or expenses
incurred by Lender or advanced to or on
behalf of Borrower by Lender pursuant to any
of the Loan Documents accrued but unpaid."
33. MINIMUM LOAN USAGE FEE. Section 2.5 (Minimum Loan Usage Fee) is hereby
amended to read as follows:
"2.5 MINIMUM LOAN USAGE FEE. In addition to the interest
payable pursuant to this Agreement, during the Revolving
Loan period Borrower shall pay to Lender with respect to
the six month period commencing on April 1, 1999 and
ending on September 30, 1999 and with respect to each six
month period thereafter during the Revolving Loan Period,
on the fifth day after every such six month period, IN
ARREARS, a fee (the "MINIMUM LOAN USAGE FEE") equal to the
product of: (a) the excess, if any of (i) $20,000,000.00
over (ii) the average daily outstanding principal balance
of the Note for such six month period; times (b) two
percent (2.00%)."
34. PAYMENT OF FUNDING LOSSES AND OTHER AMOUNTS RELATING TO LIBOR CONTRACT.
Section 2 (The Loan) of the Agreement is hereby amended in part to add the
following new Section 2.6 as follows:
"2.6 PAYMENT OF FUNDING LOSSES AND OTHER AMOUNTS RELATING
TO LIBOR CONTRACT, ETC.
(a) Funding Losses: Breaking of LIBOR
contract, Change in Law, Etc. Borrower hereby agrees to
pay to Lender any amount necessary to compensate Lender
and any Participant for any losses or costs (including,
without limitation, the costs of breaking any "LIBOR"
contract, if applicable, or funding losses determined on
the basis of Lender's or such Participant's reinvestment
rate and the interest rate thereon) (collectively,
"FUNDING LOSSES") sustained by Lender or any Participant:
(i) if the Loan, or any portion hereof, is prepaid for any
reason whatsoever on any date other than the Final
Maturity Date (including, without limitation, from
condemnation or insurance proceeds); (ii) upon the
conversion of the interest rate on the Loan to an interest
rate based on the Prime Rate in accordance with Section
2.6(b) hereof; (iii) as a consequence of the reduction of
any amounts received or receivable from Borrower, in
either case, due to the introduction of, or any change in,
law or applicable regulation or treaty (including the
administration or interpretation thereof), whether or not
having the force of law, or due to the compliance by
Lender or the Participant, as the case may be, with any
directive, whether or not having the force of law, or
request from any central bank or domestic or foreign
governmental authority, agency or instrumentality having
jurisdiction; (iv) as a consequence of the
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<PAGE> 13
breaking of any TLIBOR contract and/or (v) any other set
of circumstances not attributable to Lender's or a
Participant's acts. Payment of Funding Losses hereunder
shall be in addition to any obligation to pay any other
amounts due and owing under this Agreement or any other
Loan Documents.
(b) Conversion to Interest Rate Based on Prime Rate.
If Lender determines (which determination shall be
conclusive and binding upon Borrower, absent manifest
error) (i) that dollar deposits in an amount approximately
equal to the then outstanding principal balance of the
Loan are not generally available at such time in the
London Interbank Market for deposits in Eurodollars, (ii)
that the rate at which such deposits are being offered
will not adequately and fairly reflect the cost to Lender
or a Participant of maintaining the Interest Rate based on
LIBOR (or the portion of the Loan being funded by such
Participant), or of funding the same in such market for
such Interest Accrual Period, due to circumstances
affecting the London Interbank Market generally, (iii)
that reasonable means do not exist for ascertaining LIBOR,
(iv) that the Interest Rate based on LIBOR would be in
excess of the maximum interest rate which Borrower may by
law pay, then, in any such event, or (v) any LIBOR
contract is broken as a result of the sale, pledge,
refinancing or securitization in bulk of Eligible Notes
Receivable relating to the Resorts by Borrower, Lender
shall so notify Borrower and, as of the date of such
notification with respect to an event described in clauses
(ii), (iv) or (v) above, or as of the expiration of the
applicable LIBOR Rate Period with respect to an event
described in clause (i) or (iii) above, interest shall
accrue at a rate equal to the Prime Rate plus a sufficient
spread so that the resulting per annum interest rate is
approximately equal to what the rate would have been based
on LIBOR plus three percent (3.0%) per annum, which new
rate shall apply until such time as the situations
described above are no longer in effect, or as otherwise
provided herein; provided, however, if the situation
described in clause (ii) above occurs, (x) Borrower shall
have the option, to be exercised by written notice to
Lender, to pay Lender (in the manner reasonably required
by Lender) for such increased cost of maintaining the
Interest Rate based on LIBOR, and (y) if the same only
affects a portion of the Loan, then only such portion
shall have interest accrue at a rate equal to the Prime
Rate plus a sufficient spread so that the resulting per
annum interest rate is approximately equal to what the
rate would have been based on LIBOR plus three percent
(3.0%) per annum, and interest shall continue to accrue on
the remaining portion at the Interest Rate based on LIBOR.
(c) Back-Up Interest Rate Based on Prime Rate. If the
introduction of, or any change in, any law, regulation or
treaty, or in the interpretation thereof by any
governmental authority charged with the administration or
interpretation thereof, shall make it unlawful for Lender
or any Participant to maintain the Interest Rate based on
LIBOR with respect to the Loan, or any portion thereof, or
to fund the Loan, or any portion thereof, in Eurodollars
in the London Interbank Market, then, (i) the Loan (or
such portion of the Loan) shall
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<PAGE> 14
thereafter bear interest shall accrue at a rate equal to
the Prime Rate plus a sufficient spread so that the
resulting per annum interest rate is approximately equal
to what the rate would have been based on LIBOR plus three
percent (3.0%) per annum (unless the Default Rate shall be
applicable), and (ii) Borrower shall pay to Lender the
amount of Funding Losses (if any) incurred in connection
with such conversion. The accrual of interest shall accrue
at a rate equal to the Prime Rate plus a sufficient spread
so that the resulting per annum interest rate is
approximately equal to what the rate would have been based
on LIBOR plus three percent (3.0%) per annum, which new
rate shall continue until such date, if any, as the
situation described in this Section 2.6(c) is no longer in
effect.
(d) Capital Adequacy Events, Etc. If Lender or a
Participant, as the case may be, shall have determined
that the applicability of any law, rule, regulation or
guideline adopted pursuant to or arising out of the July
1988 report of the Basle Committee on Banking Regulations
and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards",
or the adoption of any other law, rule, regulation or
guideline (including, but not limited to, any United
States law, rule, regulation or guideline) regarding
capital adequacy, or any change becoming effective in any
of the foregoing or in the enforcement or interpretation
or administration of any of the foregoing by any court or
any domestic or foreign governmental authority, central
bank or comparable agency charged with the enforcement or
interpretation or administration thereof, or compliance by
Lender or its holding company or such Participant or its
holding company, as the case may be, with any request or
directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of
reducing the rate of return on the capital of Lender,
Lender's holding company, such Participant or such
Participant's holding company, as the case may be, to a
level below that which Lender or its holding company or
the Participant or its holding company, as the case may
be, could have achieved but for such applicability,
adoption, change or compliance (taking into consideration
Lender's or its holding company's or such Participant's or
its holding company's, as the case may be, policies with
respect to capital adequacy) (the foregoing being
hereinafter referred to as "CAPITAL ADEQUACY EVENTS"),
then, upon demand by Lender, Borrower shall pay to Lender,
from time to time, such additional amount or amounts as
will compensate Lender or such Participant for any such
reduction suffered.
(e) Payment of Amounts Due under Section 2.6. Any
amount payable by Borrower under Section 2.6(a) or 2.6(d)
hereof shall be paid to Lender within five (5) days of
receipt by Borrower of a certificate signed by an officer
of Lender setting forth the amount due and the basis for
the determination of such amount, which statement shall be
conclusive and binding upon Borrower, absent manifest
error. Failure on the part of Lender to demand payment
from Borrower for any such amount attributable to any
particular period shall not constitute a
14
<PAGE> 15
waiver of Lender's right to demand payment of such amount
for any subsequent or prior period. Lender shall use
reasonable efforts to deliver to Borrower prompt notice of
any event described in Sections 2.6(a) or 2.6(d) hereof
and of the amount to be paid under this Section 2.6(e) as
a result thereof; provided, however, any failure by Lender
to so notify Borrower shall not affect Borrower's
obligation to make the payments to be made under this
Section 2.6(e) as a result thereof. All amounts which may
become due and payable by Borrower in accordance with the
provisions of this Section 2.6(e) shall constitute
additional interest hereunder and shall be secured by this
Agreement and the other Loan Documents."
35. COMMITMENT FEE. Section 2 (The Loan) of the Agreement is hereby amended in
part to add the following new Section 2.7 as follows:
"2.7 COMMITMENT FEE. Borrower and Lender acknowledge and
agree that the Commitment Fees due and owing by the
Borrower to the Lender with respect to the Original
Commitment, the 1995 Commitment and the 1996 Commitment
have been paid by the Borrower. Borrower has paid to
Lender the sum of $20,000, constituting a portion of 1999
Commitment Fee of $750,000. Borrower shall pay an
additional $480,000 of the 1999 Commitment on the date of
the Third Amendment. As agreed by Lender and Borrower,
payment of the remaining $250,000 of the Commitment Fee or
pro rata portion thereof (the "ADDITIONAL FUNDING
COMMITMENT FEE"), is deferred until such time as Lender
enters into written participation agreements, in form and
substance acceptable to Lender in its sole and absolute
discretion, with Participants providing for Participant's
funding commitments in respect of the Additional Funding
Commitment. Subject only to the foregoing condition
regarding $250,000 of the Commitment Fee, Borrower agrees
that, in addition to other commitment fees earned by
Lender, Lender has earned the entire Commitment Fee with
respect to the 1999 Commitment, notwithstanding whether a
closing occurs under this Agreement with respect to the
1999 Commitment or whether the Loan or any portion thereof
is funded."
36. ADDITIONAL ELIGIBLE RESORT. Section 2 (The Loan) of the Agreement is hereby
amended in part to add the following new Section 2.8 as follows:
"2.8 ADDITIONAL ELIGIBLE RESORT. From time to time during
the Term, Borrower may propose to Lender that one or more
additional time-share plans and projects owned and
operated by Borrower be included among the Eligible
Resorts in respect of which Advances may be made. Any such
proposal will be in writing, and will be accompanied or
supported by the due diligence and supporting Borrower,
Affiliate, project, financial and related information
identified in Section 4.6 hereto, and such other
information as Lender may require. Borrower will
reasonably cooperate with Lender's underwriting and due
diligence, and Borrower will be responsible for payment
upon billing for
15
<PAGE> 16
Lender's out-of-pocket expenses in connection therewith.
Subject to Lender's and any Participant's satisfactory
underwriting and due diligence review, including
satisfaction of the conditions in Sections 4 and 5 hereof
as they relate to such additional time-share resorts,
Lender may, but shall not be required to, approve one or
more such additional time-share resorts, including future
phases or condominiums in an Existing Eligible Resort, as
an Eligible Resort qualifying for Advances under and
subject to the terms of this Agreement and the other Loan
Documents.
Subject in each instance to Lender's and each
Participant's acceptable underwriting and due diligence
review, and Lender's prior written approval, any project
as may be approved by Lender after the Closing Date, if
any, is hereinafter referred to as an "ADDITIONAL ELIGIBLE
RESORT". Any Advances hereunder with respect to any
Additional Eligible Resort will be subject to all terms an
conditions of this Agreement and the other Loan
Documents."
37. CONDITIONS PRECEDENT TO CLOSING OF THIRD AMENDMENT: Section 4 (Conditions
Precedent To The Closing) of the Agreement is hereby amended in part to add the
following new Section 4.5 as follows:
"Section 4.5 CONDITIONS PRECEDENT TO CLOSING OF THIRD
AMENDMENT. The obligation of Lender to enter into the
Third Amendment, and, in addition to all of the other
conditions precedent set forth in the Loan Agreements or
the other Loan Documents, to fund any further Advance
pursuant to the terms of the Loan Agreement, shall be
subject to the satisfaction of each of the following
conditions precedent:
(a) Representations, Warranties, Covenants and
Agreements. The representations and warranties
contained in the Loan Documents are and shall be true
and correct in all respects, and all covenants and
agreements have been complied with and correct in all
respects, and all covenants and agreements to have
been complied with and performed by Borrower shall
have been fully complied with and performed to the
satisfaction of Lender.
(b) No Prohibited Acts. Borrower shall not have taken
any action or permitted any condition to exist which
would have been prohibited by any provision of the
Loan Documents if such provision had been binding and
effective at all times during the period from May 11,
1995 to and including the date of the Third
Amendment.
(c) Execution by Borrower of the Third Amendment;
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<PAGE> 17
(d) Execution by Borrower of the Amended and Restated
Secured Promissory Note;
(e) Execution by Borrower of the Negative Pledge
Agreement;
(f) Execution by Borrower of the Amended and Restated
Escrow Instructions;
(g) Execution by Borrower of the Environmental
Indemnification Agreement;
(h) Execution by Borrower of the Second Amendment to
Lockbox Agreement;
(i) Execution by Borrower of the Borrowing Base
Certificate;
(j) Execution by Borrower of: the Borrower's
Affidavit with Respect to the Existing Resorts in the
form attached as Exhibit C;
(k) Execution by Borrower of the UCC Financing
Statements;
(l) Payment of the Commitment Fee in accordance with
Section 2.7 hereof;
(m) Delivery and/or satisfaction by the Borrower of
the conditions precedent set forth in Schedule 4.6
hereof;
(n) Execution, delivery and or satisfaction by
Borrower and its Affiliates of such other documents,
instruments, agreements, tests, reports, inspections
and conditions as Lender or any Participant may
request.
38. CONDITIONS PRECEDENT TO FUNDING OF ADVANCES WITH RESPECT TO ADDITIONAL
ELIGIBLE RESORTS. Section 4 (Conditions Precedent To The Closing) of the
Agreement is hereby amended in part to add the following new Section 4.6 as
follows:
"4.6 CONDITIONS PRECEDENT TO FUNDING OF ADVANCES WITH
RESPECT TO ADDITIONAL ELIGIBLE RESORTS. As provided in the
Section 2.8 hereof, Borrower may propose to Lender that
Lender approve one or more additional timeshare plans for
inclusion hereunder as an Additional Eligible Resort in
respect of which Advances may be made. The obligation of
Lender to fund any Advances on or after the date of the
Third Amendment with respect to an Additional Eligible
Resort shall be subject to
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<PAGE> 18
the satisfaction of each of the following conditions
precedent, in addition to all of the conditions precedent
set forth elsewhere in the Loan Documents:
(a) Representations, Warranties, Covenants and
Agreements. The representations and warranties
contained in the Loan Documents are and shall be true
and correct in all respects, and all covenants and
agreements have been complied with and correct in all
respects, and all covenants and agreements to have
been complied with and performed by Borrower shall
have been fully complied with and performed to the
satisfaction of Lender.
(b) No Prohibited Acts. Borrower shall not have taken
any action or permitted any condition to exist which
would have been prohibited by any provision of the
Loan Documents if such provision had been binding and
effective at all times during the period from May 11,
1995 to and including the date of the Third
Amendment.
(c) Approval of Documents Prior to Advance. Borrower
has delivered or caused to be delivered to Lender
(with copies to Lender's counsel), at least fifteen
(15) Business Days prior to the date of each Advance,
and Lender has reviewed and approved, at least five
(5) Business Days prior to the date of each Advance,
the form and content of all of the items specified in
each of the Submissions required pursuant to this
Section 4.6. Lender shall have the right to review
and approve any changes to the form of any of the
Submissions. If Lender disapproves of any changes to
any of the Submissions, Lender shall have the right
to require Borrower either to cure or correct the
defect objected to by Lender or to elect not to fund
the Loan or any Advance. Under no circumstances shall
Lender's failure to approve or disapprove a change to
any of the Submissions be deemed to be an approval of
such Submissions. All of the Submissions were and
shall be prepared at Borrower's sole cost and
expense, unless expressly stated to be an obligation
and expense of Lender. Lender shall have the right of
prior approval of any Preparer and may disapprove any
Preparer in its sole discretion, for any reason,
including without limitation, that Lender believes
that the experience, skill, reputation or other
aspect of the Preparer is unsatisfactory in any
respect. All Submissions required pursuant to this
Agreement shall be addressed to Lender and include
the following language: "THE UNDERSIGNED ACKNOWLEDGES
THAT TEXTRON FINANCIAL CORPORATION IS RELYING ON THE
WITHIN INFORMATION IN CONNECTION WITH ITS
DETERMINATION TO MAKE A LOAN TO SILVERLEAF RESORTS,
INC. IN CONNECTION WITH THE SUBJECT COLLATERAL."
(i) a certificate, to be dated as of the date of
each such Advance and signed by the president,
vice president, or secretary of the Borrower,
certifying that the conditions specified in
Sections 4.6(a) and (b) above are true;
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(ii) copies of the articles of incorporation of
Borrower, together with any amendments thereto
certified to be true and complete by Borrower and
the Secretary of State of the State of Texas, a
current certificate of good standing for Borrower
issued by the Secretary of State of the State of
Texas, a current certificate of authority to
conduct business issued by the secretary of state
in each state in which the Borrower conducts
business, and copies of the by-laws of Borrower
certified to be true, correct and complete by the
secretary or assistant secretary of Borrower;
(iii) except for the Resorts listed on Schedule
4.6(c)(iii) (the "Crown Resorts"), a Survey for
each Additional Eligible Resort for which
Eligible Notes Receivable are being pledged to
the Lender in connection with the Advance in
question; and with respect to each Crown Resort,
a legible, full size copy of the recorded plat
for each such Resort;
(iv) a certificate of the secretary or assistant
secretary of Borrower certifying the adoption by
the board of directors thereof, respectively, of
a resolution authorizing the addition of the
Resort in question as an Additional Eligible
Resort and to authorize Borrower to enter into,
execute and deliver any Documents in connection
therewith;
(v) a certificate of the secretary or assistant
secretary of Borrower certifying the incumbency,
and verifying the authenticity of the signatures,
of the specified officers of Borrower authorized
to sign all documents required in connection with
such Additional Eligible Resort as required
pursuant to this Section 4.6;
(vi) an inspection report or reports covering
each Additional Eligible Resort for which
Eligible Notes Receivable are being pledged to
the Lender in connection with the Advance in
question, including without limitation all real
property and personal property subject to the
Declaration and all adjacent property,
confirming:
(1) the absence of Hazardous Materials on
the personal property and real property
comprising each such Additional Eligible
Resort;
(2) that the inspection firm has obtained,
reviewed and included within its report a
CERCLIS printout from the Environmental
Protection Agency (the "EPA"), statements
from the EPA and other applicable state and
local authorities and a Phase I
Environmental Audit, all of which
information shall confirm that there are no
known or suspected Hazardous Materials
located at, used or stored on, or
transported to or from each such Additional
Eligible Resort or in such proximity thereto
as to create a material risk of
contamination of each such Additional
Eligible Resort;
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<PAGE> 20
(vii) evidence that Borrower is maintaining all
policies of insurance required by and in
accordance with Section 7.1(d) hereof, including
copies of the most current paid insurance premium
invoices;
(viii) evidence that Borrower and the Timeshare
Documents for each Additional Eligible Resort for
which Eligible Notes Receivable are being pledged
to the Lender in connection with the Advance in
question are in compliance with all applicable
laws in connection with its sales of Intervals,
including without limitation, the Timeshare Acts;
(ix) a current preliminary title report or
certificate of title for each Additional Eligible
Resort for which Eligible Notes Receivable are
being pledged to the Lender in connection with
the Advance in question, with copies of all title
exceptions;
(x) copies of all applicable governmental
permits, approvals, consents, licenses, and
certificates for the establishment of each
Additional Eligible Resort for which Eligible
Notes Receivable are being pledged to the Lender
in connection with the Advance in question as
timeshare projects in accordance with the
applicable Timeshare Act, and for the occupancy
and intended use and operation of each such
Additional Eligible Resort, including the Units,
including a letter certification from Borrower
regarding zoning classification and compliance,
letters or other satisfactory evidence from
utility companies, governmental entities or other
persons confirming that water, sewer (sanitary
and storm), electricity, solid waste disposal,
telephone, police, fire and rescue services are
being provided to each Resort, and any business
licenses necessary for operation of each such
Additional Eligible Resort;
(xi) certified true, correct and complete copies
of all of the Timeshare Documents for each
Additional Eligible Resort for which Eligible
Notes Receivable are being pledged to the Lender
in connection with the Advance in question;
(xii) evidence satisfactory to Lender that all
taxes and assessments 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, excise taxes, intangibles taxes,
real property taxes, and income taxes, and any
assessments related to each Additional Eligible
Resort for which Eligible Notes Receivable are
being pledged to the Lender in connection with
the Advance in question and copies of the most
current paid tax bills for each such Additional
Eligible Resort evidencing that each such
Additional Eligible Resort have been segregated
from all other property on the applicable
municipal taxrolls;
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(xiii) written confirmation from an architect
covering each Additional Eligible Resort, other
than a Crown Resort, for which Eligible Notes
Receivable are being pledged to the Lender in
connection with the Advance in question as to the
physical condition of the improvements at each
such Additional Eligible Resort, including that
soil conditions are sufficient to support all
existing and any contemplated improvements to the
real property; which written confirmation shall
be in form and substance reasonably acceptable to
the Lender. Each architect rendering such written
confirmation shall be licensed as an architect in
the state of Texas;
(xiv) such credit references on Borrower as
Lender deems necessary in its sole discretion;
(xv) copies or other evidence of all loans to
Borrower from any officers, shareholders, or
Affiliates of Borrower, if any.
(xvi) a commitment to issue Mortgagee Title
Policies (as defined below) from Title Insurer
for each such Additional Eligible Resort.
Notwithstanding anything heretofore to the
contrary, Lender agrees that Borrower shall not
be required to provide such a commitment or a
Mortgagee Title Insurance Policy with respect to
any Crown Resort (other than the Quail Hollow
Resort), or, until such time as deeded Intervals
are permitted under local law governing the Oak
`N Spruce Resort, the Oak `N Spruce Resort in
order to qualify any such Resort as an Additional
Eligible Resort. With respect to the Oak `N
Spruce Resort only, Borrower shall deliver to
Lender, an opinion of counsel, in form and
substance acceptable to Lender, as to, among
other things, the creation and ownership of the
beneficial interests in the entity which owns
each of the Units at the Oak N' Spruce Resort
(the "Beneficial Interest"), the state of title
of each such Beneficial Interest and the creation
and perfection of the Lender's security interest
in each Beneficial Interest from which an
Eligible Note Receivable arises. Notwithstanding
anything heretofore to the contrary, if any
claim, lien, encumbrance, charge or other matter
arises with respect to any Interval or Intervals
for which an Eligible Note Receivable has been
pledged to the Lender pursuant to this Agreement,
then, in such event:
(a) The Note Receivable with respect to the
Interval in question shall cease to be an
Eligible Note Receivable and the Borrower
immediately shall either replace the Note
Receivable in question or make a Mandatory
Prepayment as provided in Section 2.4(b)
hereof; and
(b) The Resort at which the Interval in
question is located shall cease to be an
Additional Eligible Resort, unless and until
the Borrower shall cure any such claim,
lien, encumbrance, charge or other matter to
the satisfaction of the Lender. Furthermore,
any and
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all further requests for Advances in respect
of such Resort must be accompanied by
satisfactory Mortgagee Title Policies for
all Intervals with respect to which such
Advances are requested.
(xvii) the Financial Statements.
(xviii) to the extent not previously delivered,
Borrower will execute, or cause to be executed
with respect to each Additional Eligible Resort,
a Negative Pledge, a Collateral Assignment of
Notes Receivable and Interval Mortgages,
Borrower's Affidavit with Respect to the
Additional Eligible Resorts and an Environmental
Indemnification Agreement, each in the form
attached hereto as Exhibit C;
(xix) with respect to any improvements, including
any Units, constructed at a Resort within the
twenty-four month period prior to any Advance
with respect to an Additional Eligible Resort,
Borrower shall also deliver to Lender, for its
approval, such documents and instruments as
Lender may reasonably request in connection with
such newly constructed improvements, including,
without limitation, copies of building permits,
plans and specifications construction and
architectural contracts, title insurance insuring
over, among other things, mechanics liens,
certificates of occupancy and satisfactory
evidence of the completion of such improvements;
and
(xx) such other documents, instruments,
agreements, tests, reports and inspections as the
Lender may require with respect to the Borrower
or any applicable Affiliate, the Loan or any
Resort, including any Additional Eligible Resort.
(xxi) Upon request of the Lender, Borrower shall
deliver to the Lender evidence, satisfactory to
the Lender, that there is no material litigation,
written complaint, suit, action, written claim or
written charge pending against the Borrower or
any Affiliate with any court or with any
governmental authority with respect to the
Resort, the Timeshare Documents, any Eligible
Notes Receivable, any Interval, or any marketing,
offer or sale of any Interval.
(d) Physical Inspection. Lender shall be satisfied
with its physical inspection of the Additional
Eligible Resorts.
(e) UCC Search. Lender shall have obtained, at
Borrower's cost, such searches of the applicable
public records as it deems necessary under all
applicable law to verify that it has a first and
prior perfected Lien and security interest covering
all of the Collateral. Lender shall not be obligated
to fund any Advance if Lender determines that it does
not have a first and prior perfected lien and
security interest covering any portion of the
Collateral.
22
<PAGE> 23
(f) Litigation Search. Lender shall have obtained, at
Borrower's cost, an independent search to verify that
there are no bankruptcy, foreclosure actions or other
material litigation or judgments pending or
outstanding against the Additional Eligible Resorts,
any portion of the Collateral, Borrower, or any
Affiliate, (each a "MATERIAL PARTY"). The term "other
material litigation" as used herein shall not include
matters in which (i) a Material Party is plaintiff
and no counterclaim is pending or (ii) which Lender
determines, in its sole discretion exercised in good
faith, are immaterial due to settlement, insurance
coverage, frivolity, or amount or nature of claim.
Lender shall not be obligated to fund any Advance if
it determines that any such litigation is pending.
(g) Opinions of Borrower's Counsel. Borrower shall
deliver to Lender, at Borrower's sole cost and
expense, such opinions of counsel, including counsel
admitted in each state in which each Additional
Eligible Resort is located, as to such matters with
respect to the Borrower and each Additional Eligible
Resort as Lender may request, and in form and
substance acceptable to Lender in its sole
discretion.
(h) Funding Procedure. Borrower shall have complied
to Lender's satisfaction with each of the conditions
precedent to funding of an Advance set forth in
Section 5 hereof.
(i) Management of Resort. Borrower shall provide
evidence satisfactory to Lender that Borrower, or an
Affiliate, is the manager or operator of each Resort,
pursuant to a written management or operating
agreement, in form and substance satisfactory to
Lender, which with respect to all Resorts (other than
the Crown Resorts) shall have a term which shall
expire no earlier April 1, 2009. With respect to each
Crown Resort only, each such Resort may qualify as an
Additional Eligible Resort (subject to satisfaction
by Borrower of the conditions set forth in this
Section 4.6), so long the Borrower, or an Affiliate,
is the manager or operator of each such Resort,
pursuant to a written management or operating
agreement, in form and substance satisfactory to
Lender. Borrower agrees to provide an estoppel
letter, in form and substance acceptable to Lender,
from the applicable Timeshare Owner's Association.
(j) Other Items. Such other agreements, documents,
instruments, certificates and materials as Lender may
request to determine the acceptability of any such
Additional Eligible Resort, to evidence the
Obligations; to evidence and perfect the rights and
Liens and security interests of Lender contemplated
by the Loan Documents, and to effectuate the
transactions contemplated herein, including, without
limitation, true copies of all Resort Documents for
each such Additional Eligible Resort, all Timeshare
Documents and operating and management contracts and
agreements, evidence of with the applicable Timeshare
Act and other applicable laws, evidence of all
required governmental licenses and permits; title
searches; title commitments or policies, including.
Complete and legible copies of each title exception,
engineering, environmental and soil reports, evidence
of compliance with all applicable zoning and building
codes; each of which shall be satisfactory to Lender
in its sole and absolute discretion.
23
<PAGE> 24
39. GENERAL REPRESENTATIONS AND WARRANTIES.
a. Sections 6.1 (Organization, Standing, Qualification), Subparagraphs
(a) and (e) of Section 6.2 (Authorization, Enforceability, etc.) and
Subparagraph (a) of Section 6.13 (Compliance with Law) are hereby
amended to read as follows:
"6.1 ORGANIZATION, STANDING, QUALIFICATION. Borrower
(a) is a duly organized and validly existing Texas
corporation duly organized, validly existing and in
good standing under the laws of the State of Texas,
and (b) as all requisite power, corporate or
otherwise, to conduct its business and to execute and
deliver, and to perform its obligations under, the
Loan Documents."
6.2 AUTHORIZATION, ENFORCEABILITY, ETC.
"(a) The execution, delivery and performance by
Borrower of the Loan Documents has been duly
authorized by all necessary corporate action by
Borrower and does not and will not (i) violate any
provision of the certificate or articles of
incorporation of Borrower, bylaws of Borrower, or any
agreement, law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award
presently in effect to which Borrower is a party or
is subject; (ii) result in, or require the creation
or imposition of, any Lien upon or with respect to
any asset of Borrower other than Liens in favor of
Lender; or (iii) result in a breach of, or constitute
a default by Borrower under, any indenture, loan or
credit agreement or any other agreement, document,
instrument or certificate to which Borrower is a
party or by which it or any of its assets are bound
or affected."
"(e) The execution and delivery of the Loan
Documents, the delivery and endorsement to Lender of
the Pledged Notes Receivable, the filing of the
UCC-1's with the with the office of the secretary of
state of the state in which the applicable Resort is
located and the Assignment of Notes Receivable and
Mortgages in the official records of the county in
which the applicable Resort is located, create in
favor of Lender a valid and perfected continuing
first priority security interest in the Collateral.
The Collateral shall secure the full payment and
performance of the Obligations."
6.13 Compliance with Law.
"(a) is not in violation, nor are any of its Resorts,
or the business operations in respect of any of the
Resorts, or to the Borrower's knowledge after
diligent inquiry, the Timeshare Owners' Association,
in violation, of the Timeshare Act, or any laws,
ordinances, governmental rules or regulations of any
state in which a Resort is located, any political
subdivision of said states or any other jurisdiction
to which the Borrower or
24
<PAGE> 25
the Resorts, or the business operations conducted in
respect of the Resorts, or the Timeshare Owners'
Association, are subject."
b. Borrower hereby makes the following additional representations and
warranties as of the date of the Third Amendment:
"(i) The Agreement, as amended by the First
Amendment, the Second Amendment and the Third
Amendment, the Note and the other Loan Documents
constitute the legal, valid and binding obligation of
the Borrower, enforceable against the Borrower in
accordance with their respective terms."
"(ii) Borrower acknowledges and agrees that it has
assumed all of the Obligations of the Original
Borrower under the Agreement and the Loan Documents
each as amended, and Borrower ratifies and confirms
that of as of the each warranty, representation,
covenant and agreement: (i) made by the Original
Borrower under the Agreement and the other Loan
Documents on August 15, 1995, (ii) made by the
Borrower under the First Amendment and the other Loan
Documents on December 28, 1995 and (iii) made by the
Borrower under the Second Amendment and the other
Loan Documents on October 31, 1996.
40. REPORTING REQUIREMENT. Section 7.1(h)(xi) (Other Information) of the
Agreement is hereby amended in part to add the following sentence as the
beginning of said section:
"Borrower shall deliver to Lender, within five (5) days of the
filing thereof with the United States Securities and Exchange
Commission, copies of each Form 8-K, 10-Q and 10-K filed by
Borrower.
41. MANAGEMENT. Section 7.1(j) (Management) of the Agreement is hereby deleted
in its entirety and substituting the following sentence in its place and stead:
"(j) MANAGEMENT. Borrower shall: (i) remain engaged in the active
management of the Resorts, (ii) unless Borrower notifies Lender in
writing at least thirty (30) days in advance of its new location,
it will retain its executive offices at 1221 Riverbend Drive,
Suite 120, Dallas, Texas 75221, and (iii) will continue to perform
duties substantially similar to those presently performed as
provided in the Management Agreement relating to each Resort."
42. GUARANTOR. Section 7.1(m) (Guarantor) is hereby deleted in its entirety.
43. OTHER COMPLIANCE. Section 7.1 (q)(iii) (Other Compliance) is hereby amended
in part to delete the phrase `the state of Missouri" in the third line of the
first sentence and substitute the following phrase in its place and stead:
"each state in which an applicable Resort is located,"
25
<PAGE> 26
44. MODIFICATION OF ELIGIBLE NOTES RECEIVABLE. Notwithstanding anything herein
to the contrary, Borrower shall have the right to modify the interest rate and
term only of the Eligible Notes Receivable without the Lender's prior consent,
provided that: (i) any such change in the rate of interest on any one or more
Eligible Notes Receivable shall not reduce the average interest rate on all
Eligible Notes Receivable to less than thirteen percent (13%) per annum at any
time; (ii) the term of no Eligible Notes Receivable shall be increased to a term
longer than one hundred twenty (120) months from its original date; (iii) at no
time may the Borrower so modify the terms of more than ten percent (10%) of the
outstanding principal balance of all Eligible Notes Receivable at any time and
(iv) provided that Borrower immediately provide Lender with notice of any such
modification together with any original documentation evidencing such
modification.
45. NOTICES. The notice address for the Borrower is changed to reflect the
change in name of the Borrower and the notice address for the Borrower set forth
in Section 12.1 is hereby changed to:
Silverleaf Resorts, Inc.
1221 Riverbend Drive, Suite 120
Dallas, TX 75221
Attn: Mr. Robert E. Mead, CEO
46. EXHIBITS AND SCHEDULE. Exhibits A, C and D and Schedules 1.1(n), 1.1(xx),
1.1(eee), 5, 6.9 and 6.19 are hereby deleted in their entirety and in their
place and stead is substituted Exhibits A, C, D, and E and Schedules 1.1(o),
1.1(eee), 1.1(lll), 4.6(c)(iii), 5, 6.9, 6.19 as attached to the Third
Amendment.
47. DEFINITIONS. Sections 1.1 (a), (b), (d), (g), (h), (i), (l), (m), (n), (o),
(p), (r), (s), (u), (v), (x), (y), (z), (aa), (bb), (ee), (ii), (kk), (nn),
(oo), (pp), (qq), (rr), (ss), (tt), (uu), (vv), (ww), (yy), (zz), (aaa), (eee),
(fff), and (ggg) are hereby redesignated as Sections 1.1 (b), (c), (e), (h),
(i), (j), (m), (n), (o), (p), (q), (s), (t), (x), (y), (aa), (bb), (cc), (dd),
(ee), (jj), (nn), (pp), (tt), (uu), (vv), (xx), (yy), (zz), (aaa), (bbb), (ccc),
(ddd), (fff), (ggg), (hhh), (lll), (mmm) and (ooo), respectively. All
capitalized terms used herein but not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
48. FURTHER DOCUMENTATION. Borrower agrees to execute and deliver to Lender any
and all additional documentation as Lender may now or hereafter require in order
to effectuate the terms and conditions of this Third Amendment.
49. EFFECT OF AMENDMENT. Except as herein expressly amended, the Agreement shall
remain in full force and effect.
50. RATIFICATION AND CONFIRMATION. Except as herein expressly amended, Borrower
hereby ratifies, confirms, assumes and agrees to be bound by all of
representations, warranties, statements, covenants and agreements set forth in
the Agreement and the other Loan Documents, as previously amended by the First
Amendment and the Second Amendment. The Borrower reaffirms, restates and
incorporates by reference all of the representations, warranties, covenants and
agreements made in the Loan Documents as if the same were made as of this date.
Without limiting the
26
<PAGE> 27
generality of the foregoing, all representations, warranties, covenants and
agreements relating to the Resorts are made applicable to each Additional
Eligible Resorts listed on Schedule 1.1(eee), and all are true and correct, and
being complied with and performed with respect to each Resort, including
Additional Eligible Resorts listed on Schedule 1.1(eee). The Borrower agrees to
pay the Loan and all related expenses, as and when due and payable in accordance
with the Loan Agreement and the other Loan Documents, and to observe and perform
the Obligations, and do all things necessary which are not prohibited by law to
prevent the occurrence of any Event of Default. In addition, to further secure,
and to evidence and confirm the securing of, the prompt and complete payment and
performance by the Borrower of the Loan and all of the Obligations, for value
received, Borrower unconditionally and irrevocably assigns, pledges and grants
to Lender, and hereby confirms or reaffirm the prior granting to Lender of, a
continuing first priority Lien, mortgage and security interest in and to all of
the Collateral, whether now existing or hereafter acquired. Also, as provided in
the Loan Documents, the Loan is and shall be further secured by the Liens and
security interests in favor of Lender in the properties and interests relating
to Additional Eligible Resorts, which now or hereafter serve as collateral
security for any Obligations. On the date of the Third Amendment and thereafter
upon satisfaction of the requirements for approval by Lender of Additional
Resorts, Borrower shall record, or cause to be recorded, such mortgages, deeds
of trust, deeds to secure debt, assignments, pledges, security agreements and
UCC Financing Statements in the appropriate public records of the state in which
each Resort is located to further evidence and perfect the Lender's Lien on the
Collateral. Borrower agrees to deliver or cause to be delivered by its
Affiliates, such mortgages, deeds of trust, deeds to secure debt, assignments,
pledges, security agreements and UCC Financing Statements as Lender may deem
necessary to further evidence and perfect the Lender's Lien on the Collateral.
51. ESTOPPEL. Borrower acknowledges, agrees and confirms that: (a) Advances
under the Loan Agreement have been made prior to the date of the Third
Amendment; (b) all such Advances made prior to the Closing Date were made in
favor of the Original Borrower and the Borrower in respect of the Existing
Eligible Resorts; (c) Advances made prior to the date of the First Amendment
under the Loan Agreement are deemed as having been made for the benefit of the
Borrower and Borrower acknowledges and agrees that Borrower received a direct
and substantial financial benefit from such Advances and (d) immediately prior
to the date of the Third Amendment, and without giving effect to any Advances
that may be made pursuant to the Third Amendment, the status of the Loan,
including the outstanding principal balance thereof is as reflected in the Loan
Funding Report delivered to and approved by Lender in connection with the
closing of the Third Amendment, a copy of which is attached as Exhibit E .
The Loan constitutes valuable consideration to the Borrower, which
consideration is uninterrupted and continuous since the dates on which the Loan
was first made. This Third Amendment and the other Loan Documents and the Loan
modifications and transactions provided for or contemplated hereunder or
thereunder, shall in no way adversely affect the Lien or perfection or priority
of any Lien of Lender as of the date hereof in and to any Collateral, and are
not intended to constitute, and do not constitute or give rise to, any novation,
cancellation or extinguishment of any of Borrower's Obligations existing as of
the Closing Date to Lender, or of any interests owned or held by Lender (and not
previously released) in and to any of the Collateral; it being the intention of
the parties that the transactions provided for or contemplated herein shall be
effectuated without any interruption in the continuity of the value and
consideration received by Borrower, and of the attachment, perfection, priority
and continuation in favor of Lender in and to all Collateral and proceeds.
27
<PAGE> 28
52. EFFECTIVE DATE. This Third Amendment shall be effective commencing as of the
later of: (1) March 31, 1999, or (2) the satisfaction of the terms of the 1999
Commitment and Section 4 of the Agreement, as amended (which satisfaction shall
be evidenced by notice from Lender or Lender's counsel to the Borrower or the
Borrower's counsel, respectively).
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be executed on their behalf as of the day and year first written above.
Witnessed By:
TEXTRON FINANCIAL CORPORATION
/s/ Ana Marie Castt Bray
- -----------------------------------
By /s/ JOHN T. DANNASALE
Norman H. Roos ---------------------------
- ----------------------------------- Name: John T. Dannasale
Its: AVP
SILVERLEAF RESORTS, INC.
/s/ SANDRA Cearley
- -----------------------------------
By /s/ ROBERT E. MEAD
/s/ PATRICIA PENNER ---------------------------
- ----------------------------------- Name: Robert E. Mead
Its: Chief Executive Officer
STATE OF CONNECTICUT)
) ss: East Hartford
COUNTY OF HARTFORD )
At East Hartford in said County and State on this 6th day of April,
1999, personally appeared John T. D'Haribale, duly authorized Asst. Vice
President of Textron Financial Corporation, and he acknowledged the foregoing
instrument by him signed and sealed to be his free act and deed and the free act
and deed of Textron Financial Corporation.
Before me: /s/ NORMAN H. ROOS
---------------------------------------
Notary Public in and for said State, Norman H. Roos
My Commission Expires: 10/31/99
STATE OF Texas)
) ss:
COUNTY OF Dallas )
At 1221 Riverbend in said County and State on this 2nd day of April,
1999, personally appeared Robert E. Mead, duly authorized officer of SILVERLEAF
RESORTS, INC., and he/she acknowledged the foregoing instrument by him/her
signed and sealed to be his/her free act and deed and the free act and deed of
Silverleaf Resorts, Inc., a Texas corporation, on behalf of the corporation.
Before me: /s/ CANDY SPEAKMAN
-----------------------------------------
Notary Public in and for said State
My Commission Expires: 4-2-2002
[SEAL]
28
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 14,005,000
<SECURITIES> 0
<RECEIVABLES> 222,615,000
<ALLOWANCES> 24,533,000
<INVENTORY> 82,708,000
<CURRENT-ASSETS> 117,416,000
<PP&E> 49,588,000
<DEPRECIATION> 9,098,000
<TOTAL-ASSETS> 355,988,000
<CURRENT-LIABILITIES> 23,878,000
<BONDS> 75,000,000
0
0
<COMMON> 133,000
<OTHER-SE> 146,642,000
<TOTAL-LIABILITY-AND-EQUITY> 355,988,000
<SALES> 42,572,000
<TOTAL-REVENUES> 49,624,000
<CGS> 5,769,000
<TOTAL-COSTS> 34,324,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,133,000
<INTEREST-EXPENSE> 3,282,000
<INCOME-PRETAX> 7,885,000
<INCOME-TAX> 3,036,000
<INCOME-CONTINUING> 4,849,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,849,000
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
