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<PAGE>
FOR INFORMATION ONLY
THIS REGISTRATION STATEMENT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. INFORMATION CONTAINED HEREIN IS
SUBJECT TO COMPLETION OR AMENDMENT.
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997
REGISTRATION NO. [ ]
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
WMS HOTEL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 36-3277019
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6063 EAST ISLA VERDE AVENUE 00979
CAROLINA, PUERTO RICO (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (787) 791-2000
------------------------
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH EACH CLASS IS
TO BE SO REGISTERED TO BE REGISTERED
<S> <C>
New York Stock Exchange
Common Stock, par value $.01 per share
New York Stock Exchange
Stock Purchase Rights pursuant to Stockholder Rights Agreement
</TABLE>
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
________________________________________________________________________________
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WMS HOTEL CORPORATION
ITEM 1. BUSINESS.
The information required by this item is contained under the Sections
'Summary of Certain Information,' 'Relationship Between the Company and WMS
After the Distribution,' 'Relationship Between the Company and the Company's
Subsidiaries After the Distribution,' 'Hotel Financings and Certain Contingent
Obligations,' 'Management's Discussion and Analysis of Financial Condition and
Results of Operations,' 'Industry Overview' and 'Business' of the Information
Statement of WMS Hotel Corporation (the 'Company') being furnished to the
stockholders of WMS Industries Inc., which is set forth as Exhibit 99 hereto
(the 'Information Statement'), and such Sections are incorporated herein by
reference.
ITEM 2. FINANCIAL INFORMATION.
The information required by this Section is contained under the Sections
'Summary of Certain Information,' 'Unaudited Pro Forma Condensed Consolidated
Financial Statements,' 'Selected Financial Data' and 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' of the
Information Statement and such Sections are incorporated herein by reference.
ITEM 3. PROPERTIES.
The information required by this Section is contained under the Section
'Business' of the Information Statement and such Section is incorporated herein
by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Section is contained under the Section
'Security Ownership of Certain Beneficial Owners and Management' of the
Information Statement and such Section is incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS.
The information required by this Section is contained under the Sections
'Management' and 'Liability and Indemnification of Officers and Directors of the
Company' of the Information Statement and such Sections are incorporated herein
by reference.
ITEM 6. EXECUTIVE COMPENSATION.
The information required by this Section is contained under the Section
'Management' of the Information Statement and such Section is incorporated
herein by reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Section is contained under the Section
'Related Party Transactions' of the Information Statement and such Section is
incorporated herein by reference.
ITEM 8. LEGAL PROCEEDINGS.
Not applicable.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The information required by this Section is contained under the Sections
'Summary of Certain Information,' 'The Distribution,' 'Risk Factors,'
'Dividends,' 'Security Ownership of Certain Beneficial Owners and Management'
and 'Description of the Company's Capital Stock' of the Information Statement
and such Sections are incorporated herein by reference.
1
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ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
The Company has not sold any of its securities within the past three years.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
The information required by this Section is contained under the Sections
'Purposes and Anti-Takeover Effects of Certain Provisions' and 'Description of
the Company's Capital Stock' of the Information Statement and such Sections are
incorporated herein by reference.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The information required by this Section is contained under the Section
'Liability and Indemnification of Officers and Directors of the Company' of the
Information Statement and such Section is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Section is contained under the Sections
'Summary of Certain Information,' 'Unaudited Pro Forma Condensed Consolidated
Financial Statements,' 'Selected Financial Data,' 'Management's Discussion and
Analysis of Financial Condition and Results of Operations' and 'Index to
Financial Statements' of the Information Statement and such Sections are
incorporated herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
See Index to Consolidated Financial Statements on page F-1 of the
Information Statement, which is incorporated herein by reference.
(b) Exhibits
See Exhibit Index.
2
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SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
WMS HOTEL CORPORATION
Dated: February 28, 1997 By: /s/ Louis J. Nicastro
...................................................
Name: Louis J. Nicastro
Title: Chairman of the Board and
Chief Executive Officer
</TABLE>
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQ.
NUMBER DESCRIPTION NO. PAGE
- -------- ---------------------------------------------------------------------------------------------- --------
<C> <S> <C>
*2.1 -- Plan of Reorganization and Distribution Agreement among WMS Industries Inc. ('WMS'),
Williams Hotel Corporation and WMS Hotel Corporation (the 'Company') (Draft)...............
*3.1 -- Amended and Restated Certificate of Incorporation of the Company (Draft)...................
*3.2 -- Amended and Restated Bylaws of the Company (Draft).........................................
*4.1 -- Specimen of Common Stock Certificate of the Company........................................
4.2 -- Rights Agreement dated , 1997 between the Company and The Bank of New York
(Draft)....................................................................................
4.3 -- Form of Certificate of Designation of Series A Preferred Stock (included as Exhibit A to
Exhibit 4.2 hereof)........................................................................
4.4 -- Specimen Form of Rights Certificate (included as Exhibit B to Exhibit 4.2 hereof)..........
4.5 -- Summary of Rights Plan (included as Exhibit C to Exhibit 4.2 hereof).......................
*4.6 -- Certificate of Designation of Series B Preferred Stock (Draft).............................
*4.7 -- Put and Call Agreement dated , 1997 between the Company and Louis J.
Nicastro...................................................................................
*10.1 -- Tax Sharing Agreement between the Company and WMS (Draft)..................................
*10.2 -- Employment Agreement between the Company and Louis J. Nicastro.............................
10.3 -- Employment Agreement between Williams Hospitality Group Inc. ('WHGI') and Brian R.
Gamache....................................................................................
*10.4 -- Employment Agreement between the Company and Brian R. Gamache..............................
*10.5 -- Employment Agreement between the Company and George R. Baker...............................
10.6 -- Employment Agreement between WHGI and Richard F. Johnson...................................
10.7 -- Stock Option Plan (Draft)..................................................................
10.8 -- Form of Indemnity Agreement authorized to be entered into between the Company and each
officer and director of the Company........................................................
10.9 -- Operating and Management Agreement dated as of September 23, 1983 between Posadas de Puerto
Rico Associates, Incorporated ('PPRA') and Posadas de America Central, Inc. (now known as
WHGI)......................................................................................
10.10 -- Operating Credit and Term Loan Agreement dated August 30, 1988 between PPRA and Scotiabank
de Puerto Rico, as amended June 12, 1989, September 28, 1990 and April 26, 1991............
10.11 -- Subordination Agreement dated August 30, 1988 between Williams Hospitality Management
Corporation (now known as WHGI), PPRA and Scotiabank de Puerto Rico........................
10.12 -- Posadas de San Juan Associates Joint Venture Agreement dated July 27, 1984 among ESJ Hotel
Corporation, Great American Industries, Inc., IHS Associates, Ltd. and MILTK Inc., as
amended as of October 15, 1984, September 30, 1986, December 30, 1989 and August 13, 1992..
10.13 -- Deed of Lease dated September 23, 1983 between Posadas de Flamboyan Associates, L.P. and
PPRA, as amended September 23, 1983........................................................
10.14 -- Deed of Subordination of Lease dated May 5, 1995 among Posadas de Flamboyan Associates,
L.P., PPRA and Scotiabank de Puerto Rico...................................................
10.15 -- Option Agreement dated May 5, 1995 between PPRA and Posadas de Flamboyan Associates, L.P.
and Letter Agreement dated May 5, 1992 between PPRA and Scotiabank de Puerto Rico related
thereto....................................................................................
10.16 -- Guaranty of Payment and Performance in favor of PPRA made by Burton I. Koffman and Richard
E. Koffman dated May 5, 1995...............................................................
10.17 -- Operating and Management Agreement dated as of July 31, 1984 between Posadas de San Juan
Associates ('PSJA') and Williams Hospitality Management Corporation (now known as WHGI), as
amended October 25, 1984 and October 1, 1986...............................................
10.18 -- Credit Agreement dated as of January 20, 1993 between PSJA and The Bank of Nova Scotia.....
10.19 -- Subordination Agreement dated January 20, 1993 between Williams Hospitality Management
Corporation (now known as WHGI), PSJA and The Bank of Nova Scotia..........................
</TABLE>
E-1
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<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQ.
NUMBER DESCRIPTION NO. PAGE
- -------- ---------------------------------------------------------------------------------------------- --------
<C> <S> <C>
10.20 -- WKA El Con Associates Joint Venture Agreement dated January 9, 1990 among WMS El Con Corp.,
International Textile Products of Puerto Rico, Inc., KMA Associates of Puerto Rico, Inc.
and Hospitality Investor Group, S.E., as amended as of January 31, 1990, January 18, 1991
and April 20, 1992.........................................................................
10.21 -- El Conquistador Partnership L.P. Venture Agreement dated July 12, 1990 between Kumagai
Caribbean, Inc. ('Kumagai') and WKA El Con Associates ('WKA'), as amended May 4, 1992......
10.22 -- El Conquistador Partnership L.P. Development Services and Management Agreement dated
January 12, 1990 between El Conquistador Partnership L.P. (the 'Partnership') and Williams
Hospitality Management Corporation (now known as WHGI), as amended as of September 30, 1990
and January 31, 1991.......................................................................
10.23 -- Loan Agreement dated February 7, 1991 between Puerto Rico Industrial, Medical, Educational
and Environmental Pollution Control Facilities Financing Authority ('AFICA') and the
Partnership................................................................................
10.24 -- Trust Agreement dated February 7, 1991 between AFICA and Banco Popular de Puerto Rico, as
Trustee....................................................................................
10.25 -- Letter of Credit and Reimbursement Agreement dated as of February 7, 1991 between the
Partnership and The Mitsubishi Bank, Limited, acting through its New York Branch (now known
as The Bank of Tokyo-Mitsubishi, Ltd.) (the 'Bank') and the Irrevocable Transferable
Standby Letter of Credit dated February 7, 1991 issued pursuant thereto....................
10.26 -- First Amendment to the Letter of Credit and Reimbursement Agreement dated as of May 5, 1992
between the Partnership, WKA, Kumagai and the Bank.........................................
10.27 -- Loan Agreement dated February 7, 1991 between The Government Development Bank for Puerto
Rico ('GDB') and the Partnership...........................................................
10.28 -- First Amendment to GDB Loan Agreement dated May 5, 1992 between GDB and the Partnership....
10.29 -- Second Amendment to GDB Loan Agreement dated as of October 4, 1996 between GDB and the
Partnership................................................................................
10.30 -- Management Agreement Subordination and Attornment Agreement dated as of February 7, 1991
between Williams Hospitality Management Corporation (now known as WHGI) and the Bank.......
10.31 -- Interest Rate and Currency Exchange Agreement dated as of February 7, 1991 between the Bank
and the Partnership........................................................................
10.32 -- Guaranty dated as of February 7, 1991 made by Kumagai and Williams Hospitality Management
Corporation (now known as WHGI) in favor of the Bank.......................................
10.33 -- Collateral Pledge Agreement dated as of February 7, 1991 among the Partnership, AFICA and
the Bank...................................................................................
10.34 -- Mortgage dated February 7, 1991 by the Partnership in favor of AFICA.......................
10.35 -- Deed of Mortgage dated February 7, 1991 by the Partnership in favor of GDB.................
10.36 -- Deed of Lease dated December 15, 1990 by Alberto Bachman Umpierre and Lilliam Bachman
Umpierre to the Partnership................................................................
10.37 -- Leasehold Mortgage dated February 7, 1991 by the Partnership in favor of AFICA.............
10.38 -- Deed of Leasehold Mortgage dated February 7, 1991 by the Partnership in favor of GDB.......
10.39 -- Credit Facility Agreement dated as of May 5, 1992 between GDB, Kumagai and WKA.............
10.40 -- Deed of Mortgage dated May 5, 1992 by the Partnership in favor of GDB......................
10.41 -- Partnership Loan Agreement dated as of May 5, 1992 among Kumagai, WKA and the
Partnership................................................................................
10.42 -- Williams Hospitality Management Corporation (now known as WHGI) Amended and Restated
Stockholders Agreement dated as of April 30, 1992 among the Company, Burton I. Koffman, as
nominee, Hugh A. Andrews and Williams Hospitality Management Corporation (now known as
WHGI)......................................................................................
10.43 -- Posadas de Puerto Rico Associates, Incorporated Stockholders' Agreement dated September 23,
1983 among Williams Hotel Corporation, Burton I. Koffman, as nominee, Hugh A. Andrews and
PPRA, as amended April 20, 1992............................................................
</TABLE>
E-2
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<TABLE>
<CAPTION>
EXHIBIT SEQ.
NUMBER DESCRIPTION NO. PAGE
- -------- ---------------------------------------------------------------------------------------------- --------
<C> <S> <C>
10.44 -- Put Option Agreement dated as of April 30, 1993, as extended, among American National Bank
and Trust Company of Chicago, WMS, Burton I. Koffman and Empire Hotel Corp.................
10.45 -- Loan Agreement dated as of October 21, 1993 between the Partnership and General Electric
Capital Corporation of Puerto Rico ('GECCPR'), as amended June 30, 1994....................
10.46 -- Corporate Guaranty dated October 21, 1993 by WHGI in favor of GECCPR and related
Guarantor's Consent dated as of June 30, 1994 by WHGI......................................
*10.47 -- Registration Rights Agreement dated as of , 1997 between the Company and
Louis J. Nicastro..........................................................................
21 -- List of Subsidiaries of the Company........................................................
23.1 -- Consent of Oppenheimer & Co., Inc..........................................................
23.2 -- Consent of Houlihan, Lokey, Howard & Zukin, Inc............................................
27 -- Financial Data Schedule (filed with EDGAR version only)....................................
99 -- Information Statement......................................................................
</TABLE>
- ------------
* To be filed by amendment.
E-3
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RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of _____, 1997 (the "Agreement"), between
WMS Hotel Corporation, a Delaware corporation (the "Company"), and The Bank of
New York (the "Rights Agent").
W I T N E S S E T H :
WHEREAS, the Board of Directors of the Company authorized and declared
a dividend of one right for each share of voting common stock, par value $.01
per share, of the Company (the "Common Stock") outstanding at the close of
business on the effective date of the distribution (the "Distribution") by WMS
Industries Inc. of the Company's Common Stock (the "Record Date"), and has
further authorized the issuance of one right (as such number may hereinafter be
adjusted pursuant to the provisions of Section 11(p) hereof) for each share of
Common Stock of the Company issued between the Record Date (whether originally
issued or delivered from the Company's treasury) and the earlier of the
Expiration Date or Rights Distribution Date, each Right initially representing
the right to purchase one one-hundredth (.01) of a share of Series A Preferred
Stock of the Company having the rights, powers and preferences set forth in the
form of Certificate of Designation, attached hereto as Exhibit A, upon the terms
and subject to the conditions hereinafter set forth (the "Rights");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of shares of Common Stock then outstanding, but
shall not include an Exempt Person.
<PAGE>
<PAGE>
(b) "Affiliate" and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
(c) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's
Affiliates or Associates,directly or indirectly, has the right to acquire
(whether such right is exercisable immediately or only after the passage
of time) pursuant to any agreement, arrangement or understanding, whether
or not in writing (other than customary agreements with and between underwriters
and selling group members with respect to a bona fide public offering of
securities), or upon the exercise of conversion rights, exchange rights,
rights (other than these Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," securities tendered pursuant to a tender or exchange offer
made by or on behalf of such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase or exchange;
(ii) which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote or
dispose of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," any security which: (A) arises solely from
a revocable proxy given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act, and (B) is not also then
reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person (or any Affiliate or Associate thereof) with
which such Person (or any Affiliate or Associate thereof) has any agreement,
arrangement or understanding, whether or not in writing, for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described
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in the proviso to subparagraph (ii) of this paragraph (c)) or disposing of any
voting securities of the Company; provided, however, that nothing in this
paragraph (c) shall cause a Person engaged in business as an underwriter of
securities to be the "Beneficial Owner" of, or to "beneficially own," any
securities acquired through such Person's participation in good faith in a firm
commitment underwriting until the expiration of 40 days after the date of such
acquisition.
(iv) Notwithstanding anything to the contrary
contained herein, no director or officer or other employee of the Company shall
be deemed the "Beneficial Owner" of, or to "beneficially own," any security
beneficially owned by any other director, officer or other employee by virtue of
the common status of such Persons as directors, officers or employees of the
Company, as the case may be.
(d) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00
P.M., New York City time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(f) "Common Stock" shall mean the Common Stock as defined in
the first whereas clause of this Agreement, except that "Common Stock" when used
with reference to any Person other than the Company shall mean the capital stock
of such other Person or the equity securities or other equity interest having
power to control or direct the management of such Person.
(g) "Continuing Director" shall mean (i) any member of the
Board of Directors of the Company immediately prior to the Rights Distribution
Date, and (ii) any Person who is subsequently elected to the Board if such
Person is recommended or approved by a majority of the persons described in
clause (i); provided, however, that the term shall not include an Acquiring
Person, or any Affiliate or Associate of an Acquiring Person, or any
representative of any of the foregoing.
3
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(h) "Exempt Person" shall mean (i) the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan; or (ii) any Person who is
the Beneficial Owner of 15% or more of the outstanding shares of Common Stock on
the date when-issued trading of the Common Stock begins trading on the New York
Stock Exchange in connection with the Distribution or on the Distribution Date,
until such time hereafter as such Person shall become the Beneficial Owner
(other than by means of a stock dividend or stock split or in connection with an
employee or other direct stock option program of the Company) of an additional
number of shares of Common Stock greater than one percent (1%) of the number of
such shares outstanding; or (iii) any Person who inadvertently acquired
Beneficial Ownership of 15% or more of the outstanding shares of Common Stock or
otherwise acquired Beneficial Ownership of shares of Common Stock without any
plan or intention to seek control of the Company and without knowledge that such
acquisition would make such Person an Acquiring Person, if, in either case, such
Person promptly divests (without exercising or retaining any power, including
voting, with respect to such shares) a sufficient number of shares of Common
Stock (or securities convertible into Common Stock) so that such Person ceases
to be the Beneficial Owner of a number of shares of Common Stock that would
otherwise cause such Person to be an Acquiring Person, after notice by the
Company (or, after the first Stock Acquisition Date, after notice by a majority
of the Continuing Directors) that such Person will be deemed by the Company to
be an Acquiring Person unless it makes such divestitures; or (iv) any Person
whose Beneficial Ownership of 15% or more of the outstanding shares of Common
Stock is approved in advance (but only to the extent of Beneficial Ownership
which is so approved) by the Board of Directors of the Company or, after the
first Stock Acquisition Date, by a majority of the Continuing Directors;
(i) "Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.
(j) "Final Expiration Date" shall have the meaning set forth
in Section 7(a) hereof.
(k) "Person" shall mean any individual, firm, corporation,
partnership or other entity.
4
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(l) "Preferred Stock" shall mean shares of Series A Preferred
Stock, par value $.01 per share, of the Company having the rights and
preferences set forth in the form of Certificate of Designation attached to this
Agreement as Exhibit A and, to the extent that there are not a sufficient number
of shares of Series A Preferred Stock authorized to permit the full exercise of
the Rights, any other series of Preferred Stock, par value $.01 per share, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Preferred Stock.
(m) "Rights Distribution Date" shall have the meaning set
forth in Section 3(a) hereof.
(n) "Section 11(a)(ii) Event" shall mean any event described
in Section 11(a)(ii) hereof.
(o) "Section 13 Event" shall have the meaning set forth in
Section 13(a) hereof.
(p) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such.
(q) "Subsidiary " shall mean, with reference to any Person,
any corporation, association, partnership, limited liability company or other
business entity of which more than 50% of the total voting power of shares of
capital stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by such Person, or otherwise controlled by such Person.
(r) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
2. APPOINTMENT OF RIGHTS AGENT. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint
5
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such Co-Rights Agents as it may deem necessary or desirable upon ten days' prior
written notice to the Rights Agent. The Rights Agent shall have no duty to
supervise, and shall in no event be liable for, the acts or omissions of any
such Co-Rights Agent.
3. ISSUE OF RIGHTS CERTIFICATES.
(a) Until the earlier of (i) the Close of Business on the
tenth day after the Stock Acquisition Date or (ii) the Close of Business on the
tenth Business Day (or such later day as may be determined by action of the
Board of Directors (but only if at the time of such determination there are then
in office not less than two Continuing Directors and such action is approved by
a majority of the Continuing Directors) prior to such time as any Person becomes
an Acquiring Person) after the date of commencement by any Person (other than an
Exempt Person) of, or of the first public announcement of the intention of any
Person (other than an Exempt Person) to commence, a tender or exchange offer, if
upon consummation thereof, such Person would be the Beneficial Owner of 15% or
more of the Common Stock then outstanding (the earlier of (i) and (ii) being
herein referred to as the "Rights Distribution Date"), the Rights will be
evidenced (subject to the provisions of paragraph (b) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders thereof
(which certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and will be transferable only in
connection with the transfer of the underlying shares of Common Stock. As soon
as practicable after the Rights Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Rights Distribution Date, at the
address of such holder shown on the records of the Company, one or more Rights
certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment in the number of Rights per share of Common Stock as has
been made pursuant to Section 11(p) hereof. At the time of distribution of the
Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of rights are distributed and cash
is paid in lieu of any fractional Rights. As of and
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after the Rights Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.
(b) A summary of this Agreement is contained in Exhibit C
annexed hereto (the "Summary of Rights") as well as in the Information Statement
contained in the Registration Statement on Form 10 filed by the Company with the
Securities and Exchange Commission in connection with the Distribution. With
respect to certificates for the Common Stock outstanding as of the Record Date,
until the Rights Distribution Date, the Rights will be evidenced by such
certificates for Common Stock and the registered holders of the Common Stock
shall also be the registered holders of the associated Rights. Until the earlier
of the Rights Distribution Date or the Expiration Date, the transfer of any
certificates representing shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the Rights associated with
such shares of Common Stock.
(c) Rights shall be issued in respect of all shares of Common
Stock which are issued after the Record Date but prior to the earlier of the
Rights Distribution Date or the Expiration Date. Certificates representing such
shares of Common Stock shall also be deemed to be certificates for Rights, and
shall bear the following legend:
This certificate also evidences and entitles the
holder hereof to certain Rights as set forth in
the Rights Agreement between WMS Hotel
Corporation, (the "Company") and The Bank of New
York (the "Rights Agent") dated as of __________,
1997 (the "Rights Agreement"), the terms of which
are hereby incorporated herein by reference and a
copy of which is on file at the principal offices
of the Rights Agent. Under certain circumstances,
as set forth in the Rights Agreement, such Rights
will be evidenced by separate certificates and
will no longer be evidenced by this certificate.
The Rights Agent will mail to the holder of this
certificate a copy of the Rights Agreement, as in
effect on the date of mailing, without charge
promptly after receipt of a written request
therefor. Under certain circumstances set forth
in the Rights Agreement, Rights issued to, or
held by, any Person who is or was an Acquiring
Person or any Affiliate or Associate thereof (as
such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such
Person or by any subsequent holder, may become
null and void.
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With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Rights Distribution Date or (ii) the Expiration Date, the
Rights associated with the Common Stock represented by such certificates shall
be evidenced by such certificates alone, and the surrender for transfer of any
of such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates.
4. FORM OF RIGHTS CERTIFICATE.
(a) The Rights Certificates (and the forms of election to
purchase and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Section 11
and Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of shares (in one one-hundredth (.01) of a share
increments) of Preferred Stock as shall be set forth therein at the price set
forth therein (the "Purchase Price"), but the amount and type of securities
purchasable upon the exercise of each Right and the Purchase Price thereof shall
be subject to adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or
Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring
Person or any Associate or Affiliate of an Acquiring Person or (ii) a transferee
of an Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, and any Rights Certificate
issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate
are or were beneficially owned by a Person who
was or is an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such terms
are defined in the Rights
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Agreement). Accordingly, this Rights Certificate
and the Rights represented hereby may become null
and void in the circumstances specified in
Section 7(e) of such Agreement.
The provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights Certificate.
5. COUNTERSIGNATURE AND REGISTRATION.
(a) The Rights Certificates shall be executed on behalf of the
Company by its Chairman of the Board, its President or any Vice President,
either manually or by facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Rights Certificates shall be manually or by facsimile signature
countersigned by the Rights Agent and shall not be valid for any purpose unless
so countersigned. In case any officer of the Company who shall have signed any
of the Rights Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the Person who signed such Rights Certificates had not ceased to be such officer
of the Company.
(b) Following the Rights Distribution Date, the Rights Agent
will keep or cause to be kept, at its office designated as the appropriate place
for surrender of Rights Certificates upon exercise or transfer, books for
registration and transfer of the Rights Certificates issued hereunder. Such
books shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the Close of Business on the Rights
Distribution Date, and at or prior to the Close of Business on the Expiration
Date, any Rights Certificate or Rights Certificates
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may be transferred, split up, combined or exchanged for another Rights
Certificate or Rights Certificates, entitling the registered holder to purchase
a like number of shares (in one one-hundredth (.01) of a share increments) of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Rights Certificates surrendered then entitled such holder (or former holder
in the case of a transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and signed the certificate contained in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Company shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e) and
Section 14 hereof, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Rights Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them, and upon surrender to
the Rights Agent and cancellation of the Rights Certificate if mutilated, the
Company will execute and deliver a new Rights Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Rights Certificate so lost, stolen, destroyed or mutilated.
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7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS.
(a) Subject to Section 7(e) hereof, the registered holder of
any Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein, including without limitation, the restrictions on
exercisability set forth in Section 9(c) Section 11(a)(iii), Section 23(a) and
Section 24(b) hereof) in whole or in part at any time after the Rights
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the principal office or offices of the Rights
Agent designated for such purpose, together with payment of the aggregate
Purchase Price with respect to the total number of shares (in one one-hundredth
(.01) of a share increments) of Preferred Stock (or other shares, securities,
cash or other assets, as the case may be) as to which such surrendered Rights
are then exercisable, at or prior to the earlier of (i) the close of business on
December 31, 2007 (the "Final Expiration Date"), or (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the earlier of (i) or (ii)
being herein referred to as the "Expiration Date").
(b) The Purchase Price of each one one-hundredth (.01) of a
share of Preferred Stock pursuant to the exercise of a Right shall initially be
one hundred dollars ($100.00), and shall be subject to adjustment from time to
time as provided in Sections and (a) hereof and shall be payable in accordance
with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase and the certificate
duly executed, accompanied by payment, with respect to each Right so exercised,
of the Purchase Price and an amount equal to any applicable transfer tax, the
Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of shares (in one one-hundredth (.01) of a
share increments) of Preferred Stock to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or
(B) if the Company shall have elected to deposit the total number of shares of
Preferred Stock issuable upon exercise of the Rights hereunder with a depository
agent, requisition from the depository agent of depository receipts representing
such number of shares
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(in one one-hundredth (.01) of a share increments) of Preferred Stock as are to
be purchased (in which case certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depository agent) and the Company hereby directs the depository agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash, if any, to be paid in lieu of fractional shares in accordance
with Section 14 hereof, (iii) after receipt of such certificate or depository
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, and (iv) when appropriate, after receipt thereof,
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) may be made in cash or by
certified bank check or bank draft payable to the order of the Company. In the
event that the Company is obligated to issue other securities (including Common
Stock) of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when appropriate.
(d) In case the registered holder of any Rights Certificate
shall exercise less than all the Rights evidenced thereby, a new Rights
Certificate evidencing Rights equivalent to the Rights remaining unexercised
shall be issued by the Rights Agent and delivered to, or upon the order of, the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, subject to the provisions of Section 14
hereof.
(e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Section 11(a)(ii) Event, any
rights beneficially owned by (i) an Acquiring Person or an Associate or
Affiliate of an Acquiring Person, or (ii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee after the
Acquiring Person becomes such, shall become null and void without any further
action and no holder of such Rights shall have any rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The Company shall use all reasonable efforts to insure that the
provisions of this Section 7(e) and Section 4(b) hereof are complied
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with, but shall have no liability to any holder of Rights Certificates or other
Person as a result of its failure to make any determinations hereunder with
respect to an Acquiring Person or its Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement to the
contrary, neither the Rights Agent nor the Company shall be obligated to
undertake any action with respect to a registered holder upon the occurrence of
any purported exercise as set forth in this Section 7 unless such registered
holder shall have (i) completed and signed the certificate contained in the form
of election to purchase set forth on the reverse side of the Rights Certificate
surrendered for such exercise and (ii) provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request.
8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES. All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any other Rights Certificates purchased or acquired by the Company
otherwise than upon the exercise thereof. The Rights Agent shall deliver all
cancelled Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK.
(a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock (and, following the occurrence of a Triggering Event, out of its
authorized and unissued shares of Common Stock and/or other securities or out of
its authorized and issued shares held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, Common
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Stock and/or other securities) that will be sufficient to permit the exercise in
full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following
the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable and deliverable upon the exercise of the Rights may be listed on any
national securities exchange or automated quotation system, the Company shall
use its best efforts to cause, from and after such time as the Rights become
exercisable, all shares reserved for such issuance to be listed on such exchange
or quotation system upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as
soon as practicable following the earliest date after the first occurrence of a
Section 11(a)(ii) Event on which the consideration to be delivered by the
Company upon exercise of the Rights has been determined in accordance with
Section 11(a)(iii) hereof, a registration statement under the Securities Act of
1933, as amended (the "Act"), with respect to the securities purchasable upon
exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the date of the expiration of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or "blue sky"laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time not
to exceed 90 days after the date set forth in clause (i) of the first sentence
of this Section 9(c), the exercisability of the Rights in order to prepare
and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended,
as well as a public announcement at such time as the suspension is no longer in
effect. In addition, if the Company shall determine that a registration
statement is required following the Rights Distribution Date, the Company
may temporarily suspend the exercisability of the Rights until such time as a
registration statement has been declared effective. Notwithstanding any
provision of this Agreement to the contrary, the Rights shall not be
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exercisable in any jurisdiction if the requisite qualification in such
jurisdiction shall not have been obtained or the exercise thereof shall not be
permitted under applicable law.
(d) The Company covenants and agrees that it will take such
action as may be necessary to ensure that all shares (in one one-hundredth (.01)
of a share increments) of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities) delivered upon exercise
of Rights shall, at the time of delivery of the certificates for such shares
(subject to payment of the Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable.
(e) The Company further covenants and agrees that it will pay
when due and payable any and all federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of shares (in one
one-hundredth (.01) of a share increments) of Preferred Stock (or Common Stock
and/or other securities, as the case may be) upon the exercise of Rights. The
Company shall not, however, be required to pay any transfer tax which may be
payable in respect of any transfer or delivery of Rights Certificates to a
person other than, or the issuance or delivery of a number of shares (in one
one-hundredth (.01) of a share increments) of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
shares (in one one-hundredth (.01) of a share increments) of Preferred Stock (or
Common Stock and/or other securities, as the case may be) in a name other than
that of the registered holder upon the exercise of any Rights until such tax
shall have been paid (any such tax being payable by the holder of such Rights
Certificates at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.
10. PREFERRED STOCK RECORD DATE. Each person in whose name any
certificate for a number of shares (in one one-hundredth (.01) of a share
increments) of Preferred Stock (or Common Stock and/or other securities, as the
case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of such fractional shares
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of Preferred Stock (or Common Stock and/or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Rights Certificate evidencing such Rights was duly surrendered and payment
of the Purchase Price (and all applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares (fractional or otherwise) on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities, as the case may be)
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Rights Certificate shall not be entitled to
any rights of a stockholder of the Company with respect to shares for which the
Rights shall be exercisable, including, without limitation, the right to vote,
to receive dividends or other distributions or to exercise any preemptive
rights, and shall not be entitled to receive any notice of any proceedings of
the Company, except as provided herein.
11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR NUMBER
OF RIGHTS. The Purchase Price, the number and kind of shares covered by each
Right and the number of rights outstanding are subject to adjustment from time
to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock into a
greater number of shares, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of Preferred Stock or
capital stock, as the case may be, issuable on such date, shall be
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proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred Stock or capital
stock as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Stock transfer books of the
Company were open, he or she would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) Subject to Section 24 of this Agreement, in the event
any Person, alone or together with its Affiliates and Associates, shall become
an Acquiring Person, unless the event causing such Person to become an Acquiring
Person is a transaction set forth in Section (a) hereof, then, promptly
following the date of the occurrence of such event, proper provision shall be
made so that each holder of a Right (except as provided below and in Section (e)
hereof) shall thereafter have the right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this Agreement, in
lieu of the number of shares (in one one-hundredth (.01) of a share increments)
of Preferred Stock, such number of shares of Common Stock of the Company as
shall equal the result obtained by (x) multiplying the then current Purchase
Price by the then number of shares (in one-one hundredth (.01) of a share
increments) of Preferred Stock for which a Right was exercisable immediately
prior to the first occurrence of a Section 11(a)(ii) Event, and (y) dividing
that product (which, following such first occurrence, shall thereafter be
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to
Section 11(d) hereof) per share of Common Stock on the date of such first
occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Common
Stock which are authorized by the Company's certificate of incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section
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11(a), the Company shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current Value")
over (2) the Purchase Price (such excess shall be referred to herein as the
"Spread"), and (B) with respect to each Right, make adequate provision to
substitute for the Adjustment Shares, upon payment of the applicable Purchase
Price, (1) cash, (2) a reduction in the Purchase Price, (3) Common Stock or
other equity securities of the Company (including, without limitation, shares or
units of shares of preferred stock which the Board of Directors of the Company
has deemed to have the same value as shares of Common Stock (such shares of
preferred stock shall be referred to herein as "common stock equivalents")), (4)
debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors of the Company
based upon the advice of a nationally-recognized investment banking firm
selected by the Board of Directors of the Company; provided, however, if the
Company shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the date on which the Company's right
of redemption pursuant to Section 23(a) expires (the "Section 11(a)(ii) Trigger
Date"), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it is likely that
sufficient additional shares of Common Stock could be authorized for issuance
upon exercise in full of the Rights, the 30 day period set forth above may be
extended to the extent necessary, but not more than 90 days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such period, as
it may be extended, shall be referred to herein as the "Substitution Period").
To the extent that the Company determines that some action need be taken
pursuant to the first and/or second sentences of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of
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distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on the
Section 11(a)(ii) Trigger Date and the value of any "common stock equivalent"
shall be deemed to have the same value as the Common Stock on such date.
(b) In case the Company shall fix a record date for the
issuance of rights, options or warrants to all holders of Preferred Stock
entitling them to subscribe for or purchase (for a period expiring within 45
calendar days after such record date) Preferred Stock (or shares having the same
rights, privileges and preferences as the shares of Preferred Stock ("equivalent
preferred stock")) or securities convertible into Preferred Stock or equivalent
preferred stock at a price per share of Preferred Stock or per share of
equivalent preferred stock (or having a conversion price per share, if a
security is convertible into Preferred Stock or equivalent preferred stock) less
than the current market price (as determined pursuant to Section 11(d) hereof)
per share of Preferred Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Preferred Stock
outstanding on such record date, plus the number of shares of Preferred Stock
which the aggregate offering price of the total number of shares of
Preferred Stock and/or equivalent preferred stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price, and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or
equivalent preferred stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible).
In case such subscription price may be paid by delivery of consideration part
or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of Directors of
the Company,
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whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and the holders of the Rights.
Shares of Preferred Stock owned by or held for the account of the Company or a
Subsidiary shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively whenever such a record
date is fixed, and in the event that such rights or warrants are not so issued,
the Purchase Price shall be adjusted to be the Purchase Price which would then
be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a
distribution to all holders of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the
continuing corporation) of evidences of indebtedness, cash (other than a cash
dividend out of the earnings or retained earnings of the Company), assets (other
than a dividend payable in Preferred Stock, but including any dividend payable
in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof), the Purchase Price to be
in effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on such record date, less the
fair market value (as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent) of the portion of the cash, assets or evidences of indebtedness so
to be distributed or of such subscription rights or warrants applicable to a
share of Preferred Stock and the denominator of which shall be such current
market price (as determined pursuant to Section 11(d) hereof) per share of
Preferred Stock. Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such distribution is not so made,
the Purchase Price shall be adjusted to be the Purchase Price which would have
been in effect if such record date had not been fixed.
(d) (i) For the purpose of any computation hereunder, other
than computations made pursuant to Section 11(a)(iii) hereof, the "current
market price" per share of Common Stock on any date shall be deemed to be the
average of the daily closing prices per share of such Common Stock for
the 30 consecutive Trading Days (as such term is hereinafter
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defined) immediately prior to such date, and for purposes of computations made
pursuant to Section 11(a)(iii) hereof, the "current market price" per share of
Common Stock on any date shall be deemed to be the average of the daily closing
prices per share of such Common Stock for the 10 consecutive Trading Days
immediately following such date; provided, however, that in the event that the
current market price per share of the Common Stock is determined during a period
following the announcement by the issuer of such Common Stock of (A) a dividend
or distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the Rights),
or (B) any subdivision, combination or reclassification of such Common Stock,
and prior to the expiration of the requisite 30 Trading Day or 10 Trading Day
period, as set forth above, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the "current market price" shall
be properly adjusted to take into account ex-dividend trading. The closing price
for each day shall be the last reported sales price as reported by the New York
Stock Exchange, Inc. ("NYSE"), or if the shares of Common Stock are not listed
or traded on the NYSE, the closing price for each day shall be the last reported
sales price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading or, if the shares of
Common Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, or, if on any such date
the shares of Common Stock are not quoted by the NYSE or any such other
organization and are not listed on a national securities exchange, the average
of the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of Directors of the
Company. If on any such date no market maker is making a market in the Common
Stock, the fair value of such shares on such date as determined in good faith by
the Board of Directors of the Company shall be used. The term "Trading Day"
shall mean a day on which the NYSE is open for the transaction of business or,
if the shares of Common Stock are not listed for quotation on the NYSE, a
Business Day. If the Common Stock
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is not publicly held or not so listed or traded, "current market price" per
share shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the
"current market price" per share of Preferred Stock shall be determined in the
same manner set forth for the Common Stock in clause (i) of this Section 11(d)
(other than the last sentence thereof). If the current market price per share of
Preferred Stock cannot be determined in the manner provided above or if the
Preferred Stock is not publicly held or listed or traded in a manner described
in clause (i) of this Section 11(d), then the "current market price" per share
of Preferred Stock shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalization with respect to the Common Stock occurring after
the date of this Agreement) multiplied by the current market price per share of
the Common Stock. If neither the Common Stock nor the Preferred Stock is
publicly held or so listed or traded, "current market price" per share of the
Preferred Stock shall mean the fair value per share as determined in good faith
by the Board of Directors of the Company, whose determination shall be described
in a statement filed with the Rights Agent and shall be conclusive for all
purposes. For all purposes of this Agreement, the "current market price" of one
one-hundredth (.01) of a share of Preferred Stock shall be equal to the "current
market price" of one share of Preferred Stock divided by 100.
(e) Anything herein to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this
Section 11(e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section
shall be made to the nearest cent or to the nearest ten-thousandth (.0001)
of a share of Common Stock or other share or one-millionth (.000001) of a share
of Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(e), any adjustment required by this Section
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11 shall be made no later than the earlier of (i) three (3) years from the date
of the transaction which mandates such adjustment, or (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11
(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Preferred Stock contained in
Section 11(a), (b), (c), (e), (g), (h), (i), (j), (k), and (m), and the
provisions of Section 7, 9, 10, 13 and 14 hereof with respect to the Preferred
Stock shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to
any adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of shares (in one
one-hundredth (.01) of a share increments) of Preferred Stock purchasable from
time to time hereunder upon exercise of the Rights, all subject to further
adjustment as provided herein.
(h) Unless the Company shall have exercised its election as
provided in Section 11(i), upon each adjustment of the Purchase Price as a
result of the calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
shares (in one one-hundredth (.01) of a share increments) of Preferred Stock
(calculated to the nearest one-millionth (.000001) of a share) obtained by (i)
multiplying (x) the number of shares (in one one-hundredth (.01) of a share
increments) covered by a Right immediately prior to such adjustment, by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any
adjustment of the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of shares (in one one-hundredth (.01) of a share
increments) of Preferred Stock purchasable upon the exercise of a Right. Each of
the Rights outstanding after the adjustment in the number of Rights
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shall be exercisable for the number of shares (in one one-hundredth (.01) of a
share increments) of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth (.0001)) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Rights Certificates have been issued, shall be at least 10 days later
than the date of the public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section 11
(i), the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase
Price or the number of shares (in one one-hundredth (.01) of a share increments)
of Preferred Stock issuable upon the exercise of the Rights, the Rights
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-hundredth (.01) of a share and the number of shares
(in one one-hundredth (.01) of a share increments) which were expressed in the
initial Rights Certificates issued hereunder.
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(k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then stated par value, if any, of the
number of shares (in one one-hundredth (.01) of a share increments) of Preferred
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue such number of fully paid and
nonassessable shares (in one one-hundredth (.01) of a share increments) of
Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of shares (in one one-hundredth (.01) of a share increments) of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise over and above the number of shares (in one
one-hundredth (.01) of a share increments) of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding,
the Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash or any shares
of Preferred Stock at less than the current market price, (iii) issuance wholly
for cash or shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
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(n) The Company covenants and agrees that it shall not, at any
time after the Rights Distribution Date, (i) consolidate with any other Persons
(other than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof), (ii) merge with or into any other Persons (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of
the Person who constitutes, or would constitute, the "Principal Party" for
purposes of Section 13(a) hereof shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Rights
Distribution Date, it will not, except as permitted by Section 23 or Section 26
hereof, take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the contrary
notwithstanding, in the event that the Company shall at any time after the
Rights Dividend Declaration Date and prior to the Rights Distribution Date (i)
declare a dividend on the outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
the number of Rights associated with each share of Common Stock then
outstanding, or issued or delivered thereafter but prior to the Rights
Distribution Date, shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common Stock following
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any such event shall equal the result obtained by multiplying the number of
Rights associated with each share of Common Stock immediately prior to such
event by a fraction the numerator of which shall be the total number of shares
of Common Stock outstanding immediately prior to the occurrence of the event and
the denominator of which shall be the total number of shares of Common Stock
outstanding immediately following the occurrence of such event.
12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail
a brief summary thereof to each holder of a Rights Certificate (or, if prior
to the Rights Distribution Date, to each holder of a certificate representing
shares of Common Stock) in accordance with Section 25 hereof. The Rights
Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained.
13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER.
(a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be th continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with
Section 11(o) hereof) shall consolidate with, or merger with or into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be
changed into or exchanged for stock or other securities of any other Person
or cash or any other property, or (z) the Company shall sell or otherwise
transfer (or one or more of its Subsidiaries shall sell or otherwise transfer),
in one transaction or a series of related transactions, assets or earning power
aggregating more than
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50% of the assets or earning power of the Company and its Subsidiaries (taken as
a whole) to any Person or Persons (other than the Company or any Subsidiary of
the Company in one or more transactions each of which complies with
Section 11(o) hereof) (any event described in (x), (y) or (z) being referred to
hereinafter as a "Section 13 Event"), then, and in each such case (except as
may be contemplated by Section 13(d) hereof), proper provisions shall be made so
that: (i) each holder of a Right, except as may be contemplated by
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the
terms of this Agreement, such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any
liens, encumbrances, rights of first refusal or other adverse claims, as shall
be equal to the result obtained by (1) multiplying the then current Purchase
Price by the number of shares (in one one-hundredth (.01) of a share
increments) of Preferred Stock for which a Right is exercisable immediately
prior to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii)
Event has occurred prior to the first occurrence of a Section 13 Event,
multiplying the number of shares (in one one-hundredth (.01) of a
share increments) for which a Right was exercisable immediately prior to the
first occurrence of a Section 11(a)(ii) Event by the Purchase Price in effect
immediately prior to such first occurrence), and (2) dividing the product
(which, following the first occurrence of a Section 13 Event, shall be
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the current market price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of such Principal
Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of the Company pursuant
to this Agreement; (iii) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions
of Section 11 hereof shall apply only to such Principal Party following the
first occurrence of a Section 13 Event; (iv) such Principal Party shall take
such steps (including, but not limited to, the reservation of a sufficient
number of shares of its Common Stock) in connection with the consummation of
any such transaction as may be necessary to ensure that the provisions hereof
shall thereafter be applicable, as nearly
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as reasonably may be, in relation to its shares of Common Stock thereafter
deliverable upon the exercise of the Rights; and (v) the provisions of Section
11(a)(ii) hereof shall be of no effect following the first occurrence of any
Section 13 Event. Notwithstanding anything in this Agreement to the contrary,
Section 13(a) shall not be applicable to a transaction described in clauses (x)
or (y) of Section 13(a) if (A) such transaction is consummated with a Person
or Persons who acquired shares of Common Stock pursuant to an all cash tender
offer for all of the Company's outstanding Common Stock which was approved
by the Board of Directors (or a wholly-owned subsidiary of any such Person or
Persons) or, after the first Stock Acquisition Date, a majority of the
Continuing Directors, (B) the price per share of Common Stock offered in such
transaction is not less than the price per share of Common Stock paid to all
holders of Common Stock whose shares were purchased pursuant to such tender
offer and (C) the form of consideration being offered to the remaining holders
of Common Stock is the same as the form of consideration paid pursuant to such
tender offer.
(b) "Principal Party" shall mean
(i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a), the Person that is the
issuer of any securities into which shares of Common Stock of the Company are
converted in such merger or consolidation, and if no securities are so issued,
the Person that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions; provided, however, that in any
such case, (1) if the Common Stock of such Person is not at such time and has
not been continuously over the preceding 12 month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, "Principal Party" shall refer to such other Person; and (2) in case
such person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
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(c) The Company shall not consummate any such consolidation,
merger, sale or transfer unless the Principal Party shall have a sufficient
number of authorized shares of its Common Stock which have not been issued or
reserved for issuance to permit the exercise in full of the Rights in accordance
with this Section 13 and unless prior thereto the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing for the terms set forth in paragraphs (a) and (b) of this
Section 13 and further providing that, as soon as practicable after the
date of any consolidation, merger or sale of assets mentioned in paragraph
(a) of this Section 13, the Principal Party will
(i) prepare and file a registration statement under
the Act, with respect to the Rights on an appropriate form, and will use its
best efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. In the event that a
Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the
contrary, Section 13 shall not be applicable to a transaction described in
subparagraphs (x), (y) or (z) o f Section 13(a) if such transaction is (i)
approved (whether or not the approval of the Board of Directors is required in
connection with such transaction) by a majority of the Board of Directors of
the Company (or, from and after the Stock Acquisition Date, a majority of
Continuing Directors), or (ii) a merger which follows a cash tender offer
approved by the Board of Directors (or, from and after the Stock Acquisition
Date, a majority of Continuing Directors) for all outstanding shares of Common
Stock so long as the consideration payable in the merger is the same in form
and not less than the amount as was paid in the tender offer, and (x) at the
time the Board of
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Directors approves such transaction, the Board of Directors is aware of the
identity of any Person (and the identities of all the Person's Affiliates and
Associates) whose beneficial ownership will equal or exceed 15% of the shares of
Common Stock of the Company both before and after such transaction and (y) the
number of shares of Common Stock beneficially owned by any such Person, together
with such Person's Affiliates and Associates both before and after such
transaction.
14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.
(a) The Company shall not be required to issue fractions of
Rights, except prior to the Rights Distribution Date as provided in
Section 11(p) hereof, or to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights, there shall be paid to
the registered holders of the Rights Certificates with regard to which such
fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right. For
purposes of this Section 14(a), the current market value of a whole Right shall
be the closing price of the Rights for the Trading Day immediately prior to
the date on which such fractional Rights would have been otherwise issuable.
The closing price of the Rights for any day shall be the last sales price or,
if not listed or traded on the NYSE, the average of the high bid and low asked
prices in the over-the-counter market, as reported by a NYSE member or such
other system then in use or, if on any such date the Rights are not quoted by
any organization, the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which the Rights are
listed or admitted to trading or, if on any such date the Rights are not quoted
by the NYSE or such other system then in use and are not listed or admitted to
trading on any national securities exchange, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company. If on any such date no
such market maker is making a market in the Rights the fair value of the Rights
on such date as determined in good faith by the Board of Directors of the
Company shall be used.
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(b) The Company shall not be required to issue fractions of
shares of Preferred Stock (other than fractions which are integral multiples of
one one-hundredth (.01) of a share of Preferred Stock) upon exercise of the
Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are integral multiples of one
one-hundredth (.01) of a share of Preferred Stock). In lieu of fractional shares
of Preferred Stock that are not integral multiples of one one-hundredth (.01) of
a share of Preferred Stock, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of one
one-hundredth (.01) of a share of Preferred Stock. For purposes of this Section
14(b), the current market value of one one-hundredth (.01) of a share of
Preferred Stock shall be one one-hundredth (.01) of the closing price of a share
of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Following the occurrence of a Triggering Event, the
Company shall not be required to issue fractions of shares of Common Stock upon
exercise of the Rights or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of fractional shares of Common Stock, the
Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one (1) share of Common Stock. For
purposes of this Section 14(c), the current market value of one (1) share of
Common Stock shall be the closing price of one (1) share of Common Stock (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.
(d) The holder of a Right by the acceptance of the Rights
expressly waives his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right, except as permitted by this Section
14.
15. RIGHTS OF ACTION. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Rights Distribution Date, the registered holders
of the Common Stock); and any registered holder of any Rights
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Certificate (or, prior to the Rights Distribution Date, of the Common Stock),
without the consent of the Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Rights Distribution Date, of the Common Stock),
may, in his or her own behalf and for his or her own benefit, enforce and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his or her right to exercise the Rights
evidenced by such Rights Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any person subject to this Agreement.
16. AGREEMENT OF RIGHTS HOLDERS. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Rights Distribution Date, the Rights will be
transferable only in connection with the transfer of Common Stock;
(b) from and after the Rights Distribution Date, the Rights
Certificates are transferable only on the registry books of the Rights Agent if
surrendered at the principal office or offices of the Rights Agent designated
for such purposes, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company
and the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Rights Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
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(d) notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of its inability to perform
any of its obligations under this Agreement by reason of any preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative agency
or commission, or any statute, rule, regulation or executive order promulgated
or enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
17. RIGHTS CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER. No holder, as
such, of any Rights Certificate shall be entitled to vote, receive dividends or
be deemed for any purpose the holder of the number of shares (in one
one-hundredth (.01) of a share increments) of Preferred Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
18. CONCERNING THE RIGHTS AGENT.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any
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loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including, without limitation, Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement, or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT.
(a) Any corporation into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the corporate trust business of the Rights Agent or any successor
Rights Agent, shall be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. In case at the time such successor Rights Agent shall succeed
to the agency created by this Agreement, any of the Rights Certificates shall
have been countersigned but not delivered, any such successor Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at the time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.
(b) In case at any time the name of the Rights Agent shall be
changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature
under its prior name and deliver Rights Certificates
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so countersigned; and in case at that time any of the Rights Certificates shall
not have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
20. DUTIES OF RIGHTS AGENT. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "current market price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by
the Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
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(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11 or Section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute,
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall not be liable for any action taken or suffered to be taken
by it in good faith in accordance with instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
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(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct; provided,
however, reasonable care was exercised in the selection and continued employment
thereof.
(j) No provision of this Agreement shall require the Rights
Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise of transfer without first consulting with the Company.
21. CHANGE OF RIGHTS AGENT. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days' notice in writing mailed to the Company, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail at the expense of the
Company. The Company may remove the Rights Agent or any successor Rights Agent
upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of 30 days after giving notice of such removal or
after it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of a Rights Certificate
(who shall, with such notice, submit his
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or her Rights Certificate for inspection by the Company), then the incumbent
Rights Agent or any registered holder of any Rights Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Company or by such a court,
shall be a corporation organized and doing business under the laws of the United
States or of the State of New York (or of any other state of the United States
so long as such corporation is authorized to do business as a banking
institution in the State of New York in good standing, having a principal office
in the State of New York which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50,000,000. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
that purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.
22. ISSUANCE OF NEW RIGHTS CERTIFICATES.
(a) Notwithstanding any of the provisions of this Agreement or
of the Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Rights Certificates made in accordance with the provisions of this
Agreement. In addition, in connection with the issuance or sale of shares of
Common Stock
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following the Rights Distribution Date and prior to the redemption or expiration
of the Rights, the Company (a) shall, with respect to shares of Common Stock so
issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.
23. REDEMPTION AND TERMINATION.
(a) The Board of Directors of the Company may, at its option,
at any time prior to the earlier of (i) the Stock Acquisition Date, or (ii) the
Final Expiration Date, redeem all but not less than all the then outstanding
Rights at a redemption price of $.01 per Right, as such amount may be
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being
hereinafter referred to as the "Redemption Price"), and the Company may, at its
option pay the Redemption Price in securities, cash or other assets, provided,
however, if the Board of Directors of the Company authorizes redemption of the
Rights on or after the time a Person becomes an Acquiring Person, then there
must be Continuing Directors then in office and such authorization shall require
the concurrence of a majority of such Continuing Directors. In the event a
majority of the Board of Directors of the Company is changed by vote of the
stockholders of the Company, the Rights shall not be redeemable for a period of
10 Business Days after the date that the new directors so elected take office
and it shall be a condition to such redemption that any tender or exchange offer
then outstanding be kept open within such 10 Business Day period.
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after
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the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired (as such time period may
be extended pursuant to this Agreement). The Company may, at its option, pay
the Redemption Price in cash, shares of Common Stock (based on the "current
market price" of the Common Stock at the time of redemption) or any other form
of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors ordering
the redemption of the Rights, the Company shall give notice of such redemption
to the Rights Agent and the holders of the then outstanding Rights by mailing
such notice to all such holders at each holder's last address as it appears upon
the registry books of the Rights Agent or, prior to the Rights Distribution
Date, on the registry books of the transfer agent for the Common Stock. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption Price will be made.
24. EXCHANGE.
(a) The Board of Directors of the Company, may, at its option,
at any time after any Person becomes an Acquiring Person, exchange all or part
of the then outstanding and exercisable Rights (which shall not include Rights
that have become void pursuant to the provisions of Section 7(e) hereof) for
Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").
(b) Immediately upon the action of the Board of Directors of
the Company ordering the exchange of any Rights pursuant to subsection (a) of
this Section 24 and without any further action and without any notice, the right
to exercise such Rights shall terminate and
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the only right thereafter of a holder of such Rights shall be to receive that
number of shares of Common Stock equal to the number of such Rights held by such
holder multiplied by the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the failure to give, or any
defect in, such notice shall not affect the validity of such exchange. The
Company promptly shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient Common
Stock issued but not outstanding or Common Stock authorized but unissued to
permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exchange of the Rights. In
the event the Company shall, after good faith effort, be unable to take all such
action as may be necessary to authorize such additional shares of Common Stock,
the Company shall substitute, for each share of Common Stock that would
otherwise be issuable upon exchange of a Right, common stock equivalents.
(d) The Company shall not be required to issue fractional
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, there
shall be paid to the registered holders of the Rights Certificates with regard
to which such fractional shares of Common Stock would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
share of Common Stock. For the purposes of this subsection (d), the current
market value of a whole share of Common Stock shall be the closing price of a
share of Common Stock
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(as determined pursuant to Section 11(d)(i) hereof for the Trading Day
immediately prior to the date of exchange pursuant to this Section 24.
(e) All actions and decisions by the Board of Directors of the
Company under this Section 24 shall require the affirmative vote of a majority
of the Continuing Directors.
25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose, at any time after the
Rights Distribution Date, (i) to pay any dividend payable in stock of any class
to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of
which complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible
and in accordance with Section 25 hereof, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding
up is to take place and the date of participation therein by the holders
of the shares of Preferred Stock, if any such date is to be fixed, and
such notice shall be so given in the case of any action covered by clause
(i) or (ii) above at least 20 days prior to the record date for determining
holders of the shares of Preferred
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Stock for purposes of such action, and in the case of any such other action, at
least 20 days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock
whichever shall be the earlier.
(b) In case any of the events set forth in Section 11(a)(ii)
hereof shall occur, then, in any such case, (i) the Company shall as soon as
practicable thereafter give to each holder of a Rights Certificate, to the
extent feasible and in accordance with Section 25 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.
26. NOTICES. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, or by overnight delivery service, addressed (until
another address is filed in writing with the Rights Agent) as follows:
WMS Hotel Corporation
6063 East Isla Verde Avenue
Carolina, Puerto Rico 00979
Attention: Chairman of the Board
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, or by overnight delivery service,
addressed (until another address is filed in writing with the Company) as
follows:
The Bank of New York
101 Barclay Street, 22W
New York, New York 10280
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Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Rights Distribution Date, to the holder of certificates
representing shares of Common Stock) shall be sufficiently given or made if sent
by first-class mail, postage prepaid, or by overnight delivery service,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
27. SUPPLEMENTS AND AMENDMENTS. Prior to the Rights Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement without the approval of any holders of
certificates representing shares of Common Stock. For any holder, and after the
Rights Distribution Date, the Company and the Rights Agent shall, if the Company
so directs, supplement or amend this Agreement without the approval of any
holders of Rights Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem necessary or desirable, provided that
no such amendment or supplement shall be made which (x) changes the Redemption
Price, the Final Expiration Date, the Purchase Price or the number of shares (in
one one-hundredth (.01) of a share increments) of Preferred Stock for which a
Right is exercisable or (y) adversely affects the interests of the holders of
Rights Certificates (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person); provided, however, that this Agreement may not be
supplemented or amended to lengthen, pursuant to clause (iii) of this sentence,
(A) a time period relating to when the Rights may be redeemed (x)
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at such time as the Rights are not then redeemable, or (y) without the approval
of a majority of the Continuing Directors, or (B) any other time period unless
such lengthening is for the purpose of protecting, enhancing or clarifying the
rights of, and/or the benefits to, the holders of Rights. Upon the delivery of a
certificate from an appropriate officer of the Company or, so long as there is
an Acquiring Person hereunder, from a majority of the Continuing Directors,
which states that the proposed supplement or amendment is in compliance with the
terms of this Section 27, the Rights Agent shall execute such supplement or
amendment. Prior to the Rights Distribution Date, the interests of the holders
of Rights shall be deemed coincident with the interests of the holders of Common
Stock.
28. SUCCESSORS. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.
29. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS, ETC. For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act. The Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the
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administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend this Agreement); provided, however, that from and after the first Stock
Acquisition Date, all references in this Section 29 to the Board of Directors
shall be deemed to refer to a majority of the Continuing Directors. All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights and all
other parties, and (y) not subject the Board to any liability to the holders of
the Rights.
30. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Rights
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Rights
Distribution Date, registered holders of the Common Stock).
31. SEVERABILITY. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this
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Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
32. GOVERNING LAW. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be performed entirely within such State; provided, however, that the
rights and obligations of the Rights Agent shall be governed by the law of the
State of New York.
33. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
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34. DESCRIPTIVE HEADINGS. Descriptive headings of the several sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: WMS HOTEL CORPORATION
By:________________________________ By:_____________________________
Name: Name:
Title: Title:
Attest: THE BANK OF NEW YORK
By:_________________________________ By:_____________________________
Name: Name:
Title: Title:
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Exhibit A
CERTIFICATE OF DESIGNATION OF THE VOTING
POWERS, DESIGNATION, PREFERENCES AND RELATIVE,
PARTICIPATING, OPTION OR OTHER SPECIAL RIGHTS AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS
OF THE SERIES A PREFERRED STOCK
------------------
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
------------------
We, Louis J. Nicastro, Chairman of the Board, and Barbara M. Norman,
Secretary of WMS HOTEL CORPORATION, a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), DO HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors of
the Corporation by its Amended and Restated Certificate of Incorporation (the
"Certificate"), and, pursuant to the provisions of Section 151 of the General
Corporation Law of the State of Delaware, said Board of Directors, at a duly
called meeting held on _______ __, ____, at which a quorum was present and acted
throughout, adopted the following resolutions, which resolutions remain in full
force and effect on the date hereof creating a series of ______ shares of
Preferred Stock having a par value of $.01 per share, designated as Series A
Preferred Stock (the "Series A Preferred Stock"), out of the total number of two
million (2,000,000) shares of preferred stock of the par value of $.01 per share
(the "Preferred Stock") authorized by the Certificate:
RESOLVED that pursuant to the authority vested in the Board of
Directors in accordance with the provisions of the Certificate, the Board of
Directors does hereby create, authorize and provide for the issuance of the
Series A Preferred Stock having the voting powers, designation, relative,
participating, optional and other special rights, preferences, and
qualifications, limitations and restrictions thereof that are set forth as
follows:
1. DESIGNATION AND AMOUNT. The shares of such shall be designated
as "Series A Preferred Stock" and the number constituting such series shall be
______.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to the
shares of Series A Preferred Stock with respect to dividends, if any, the
holders of shares of Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board of Directors out of funds legally
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available for the purpose, quarterly dividends payable in cash on the last day
of January, April, July and October in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to, subject to the provision for adjustment hereinafter set
forth, 100 times the aggregate per share amount of all cash dividends, and 100
times the aggregate per share amount (payable in kind) of all non-cash dividends
or other distributions other than a dividend payable in shares of common stock
or a subdivision of the outstanding shares of common stock (by reclassification
or otherwise), declared on the voting common stock, par value $.01 per share,
of the Corporation (the "Common Stock") since the immediately preceding
Quarterly Dividend Payment Date. In the event the Corporation shall at any time
after a Rights Declaration Date (the "Rights Declaration Date") (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock into a greater number of shares, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the preceding sentence shall be adjusted
by multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Series A Preferred Stock as provided in paragraph (A) above immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock).
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
Preferred Stock, unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which case dividends on
such shares shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividend shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on the shares of Series
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series A Preferred
Stock shall have the following voting rights:
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(A) Subject to the provisions for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock into a greater number
of shares, or (iii) combine the outstanding Common Stock into a smaller number
of shares, then in each such case the number of votes per share to which holders
of shares of Series A Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a fraction the numerator
of which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(B) Except as otherwise provided herein or by law, the holders
of shares of Series A Preferred Stock and the holders of Shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.
(C) Except as set forth herein, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote with holders of Common
Stock as set forth herein) for taking any corporate action.
4. CERTAIN RESTRICTIONS.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock, as provided in Section 2
hereof, are in arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other
distributions on, or redeem or purchase or otherwise acquire for consideration
any shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and all
such parity stock on which dividends are payable, or in arrears in proportion to
the total amounts to which the holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares
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of any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration
any shares of Series A Preferred Stock, or any shares of stock ranking on a
parity with the Series A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the
respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. REACQUIRED SHARES. Any shares of Series A Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock to be
created by resolution or resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made to the holders
of shares of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock unless, prior
thereto, the holders of shares of Series A Preferred Stock shall have received
$100.00 per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such payment (the
"Series A Preferred Liquidation Preference"). Following the payment of the full
amount of the Series A Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as
set forth in subparagraph C below to reflect such events as stock splits, stock
dividends and recapitalization with respect to the Common Stock) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the full amount
of the Series A Liquidation Preference and the Common Adjustment in respect of
all outstanding shares of Preferred Stock and Common Stock, respectively,
holders of Series A Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.
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(B) In the event, however, that there are not sufficient
assets available to permit payment in full of the Series A Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, which rank on a parity with the Series A Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.
(C) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock into a
greater number of shares, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
7. CONSOLIDATION, MERGER, ETC. In case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash and/or any other property, then in any such case the shares of Series A
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set forth)
equal to 100 times the aggregate amount of stock, securities, cash and/or any
other property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock into a greater number of shares, or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the amount
set forth in the preceding sentence with respect to the exchange or change of
shares of Series A Preferred Stock shall be adjusted by multiplying such amount
by a fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.
8. NO REDEMPTION. The shares of Series A Preferred Stock shall
not be redeemable.
9. RANKING. The Series A Preferred Stock shall rank senior to all
other series of the Corporation's Preferred Stock as to the payment of dividends
and the distribution of assets, unless the terms of any such series shall
provide otherwise.
10. AMENDMENT. The Certificate shall not be further amended in
any manner which would materially alter or change the powers, preferences or
special rights of the Series A Preferred Stock so as to affect them adversely
without the affirmative vote of the holders of a
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majority or more of the outstanding shares of Series A Preferred Stock, voting
separately as a class.
11. FRACTIONAL SHARES. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.
IN WITNESS WHEREOF, we have executed and subscribed this Certificate of
Designation and do affirm the foregoing as true under the penalties of perjury
this __ day of _______, ______.
WMS HOTEL CORPORATION
By: _________________________
Louis J. Nicastro,
Chairman of the Board
Attest:
______________________________________
Barbara M. Norman, Secretary
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Exhibit B
[Form of Rights Certificate]
Certificate No. R- _____Rights
NOT EXERCISABLE AFTER DECEMBER 31, 2007 OR EARLIER
UNDER CERTAIN CIRCUMSTANCES OR IF REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.01 PER RIGHT, ON THE TERMS
SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR IS AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]
Rights Certificate
WMS HOTEL CORPORATION
This certifies that , or registered assigns, is the registered owner
of the number of Rights set forth above, each of which entities the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of __________, 1997 (the "Rights Agreement"), between WMS
Hotel Corporation, a Delaware corporation (the "Company"), and The Bank of New
York (the "Rights Agent"), to purchase from the Company at any time prior to
5:00 P.M. (New York City time) on the earlier to occur of (i) December 31, 2007;
and (ii) the time at which the Rights are redeemed or exchanged as provided in
the Rights Agreement, at the office or offices of the Rights Agent, designated
for such purpose, or its successors as Rights Agent, one one-hundredth (.01) of
a fully paid, non-assessable share of Series A Preferred Stock (the "Preferred
Stock") of the Company, at a purchase price of $____ per one-one hundredth
(.01) of a share (the "Purchase Price"), upon presentation and surrender of this
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Rights Certificate with the Form of Election to Purchase and related Certificate
duly executed. The Purchase Price shall be paid in cash. The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of __________ __,
___, based on the Preferred Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined in the Rights
Agreement) or (ii) a transferee of any such Acquiring Person, Associate or
Affiliate, such Rights shall become null and void and no holder hereof shall
have any right with respect to such Rights from and after the occurrence of such
Section 11(a)(ii) Event.
As provided in the Rights Agreement, the Purchase Price and the number
and kind of shares of Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by this Rights Certificate
are subject to modification and adjustment upon the happening of certain events,
including Triggering Events (as such term is defined in the Rights Agreement).
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
reference to the Rights Agreement is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities hereunder of
the Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares (in one-hundredth (.01) of a
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share increments) of Preferred Stock as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised in part, the holder
shall be entitled to receive upon surrender hereof another Rights Certificate or
Rights Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.01 per Right in cash or in shares of voting Common Stock at any time
prior to the earlier of the close of business on (i) the tenth day following
the Stock Acquisition Date (as such time period may be extended pursuant to
the Rights Agreement), and (ii) the Final Expiration Date (as defined in the
Rights Agreement). Under certain circumstances set forth in the Rights
Agreement, the decision to redeem shall require the concurrence of a majority
of the Continuing Directors.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-hundredth (.01) of a share of Preferred Stock,
which may, at the election of the Company, be evidenced by depository receipts),
but in lieu thereof a cash payment will be made, as provided in the Rights
Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Preferred
Stock or any other securities of the Company which may at any time be issuable
on the exercise hereof, nor shall anything contained in the Rights Agreement or
herein be construed to confer upon the holder hereof, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or, to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
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This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
ATTEST: WMS HOTEL CORPORATION
_____________________________ By:________________________
Name:
Title:
Countersigned:
By:__________________________
Name:
Title:
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[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED______________________________________________________________
hereby sells, assigns and transfers unto________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _______________ Attorney, to
transfer the within Rights Certificate on the books of the within-named Company,
with full power of substitution.
Dated:____________________, ____
_____________________________
Signature
Signature Guaranteed:
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CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate of an Acquiring person.
Dated:__________________________, ____
_____________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
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FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights
represented by the Rights Certificate.)
TO: WMS HOTEL CORPORATION
The undersigned hereby irrevocably elects to exercise Rights represented
by this Rights Certificate to purchase the shares of Preferred Stock issuable
upon the exercise of the Rights (or such other securities of WMS Hotel
Corporation or of any other person which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares be issued in the name
of and delivered to:
Please insert social security or
other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
If such number of Rights shall not be all Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________________________________
(Please print name and address)
________________________________________________________________________________
Dated:_______________________, ____
_____________________________
Signature
Signature Guaranteed:
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CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Certificate [ ] are [ ] are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the Rights evidenced by this Rights
Certificate from any Person who is or was an Acquiring Person or an Affiliate or
Associate of an Acquiring person.
Dated:______________________, ____
_____________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to Purchase and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
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Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
The following is a brief description of the Company's Rights Agreement,
dated as of , 1997 (the "Rights Agreement"), between the Company and
The Bank of New York, as Rights Agent.
The Rights Agreement provides that one Right will be issued with each
share of the voting Common Stock, par value $.01 per share (the "Common
Stock"), issued (whether originally issued or from the Company's treasury) on
or after the effective date of the distribution of the Company's Common Stock
by WMS Industries Inc. (the "Distribution") and prior to the Rights
Distribution Date (as defined). The Rights are not exercisable after the RIGHTS
DISTRIBUTION Date and will expire at the close of business on December 31, 2007
(the "Final Expiration Date") unless previously redeemed by the Company as
described below. When exercisable, each right entitles the owner to purchase
from the Company one onehundredth (.01) of a share of the Company's Series A
Preferred Stock, par value $.01 per share (the "Preferred Stock"), at an
exercise pace of S100.00, subject to certain antidilution adjustments. The
Rights will not, however, be exercisable, transferable separately or trade
separately from the shares of Common Stock, until (a) the tenth business day
after the "Stock Acquisition Date" (i.e., the date of a public announcement
that a person or group is an "Acquiring Person") or (b) the tenth business day
(or such later day as the Company's Board of Directors, with the concurrence of
a majority of Continuing Directors (as defined), determines) after a person or
group announces a tender or exchange offer, which, if consummated, would result
in such person or group beneficially owning 15% or more of the Company's Common
Stock (the earlier of such dates being the "Rights Distribution Date").
In general, any person or group of affiliated persons (other than the
Company, any of its subsidiaries, certain of the Company's benefit plans and any
person or group of affiliated persons whose acquisition of 15% or more is
approved by the Board in advance or who is the
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Beneficial Owner of 15% or more of the outstanding shares of Common Stock on
the date when issued trading of the Company's Common Stock begins trading
on the New York Stock Exchange in connection with the Distribution or on the
Distribution Date) who, after the date of adoption of the Rights Agreement,
acquires beneficial ownership of 10% or more of the outstanding shares of
Common Stock will be considered an "Acquiring Person."
If a person or group of affiliated persons becomes an Acquiring Person,
then each Right (other than Rights owned by such Acquiring Person and its
affiliates and associates, which will be null and void) will entitle the holder
thereof to purchase, for the exercise price, a number of shares of the Company's
Common Stock having a then current market value of twice the exercise price.
Accordingly, at the original exercise price, each Right would entitle its
registered holder to purchase $200.00 worth of Common Stock for $100.00.
If at any time after the Stock Acquisition Date, (a) the Company merges
into another entity, (b) an acquiring entity merges into the Company and the
Common Stock of the Company is changed into or exchanged for other securities or
assets of the acquiring entity or (c) the Company sells more than 50% of its
assets or earning power, then each Right will entitle the holder thereof to
purchase, for the exercise price, the number of shares of common stock of such
other entity having a current market value of twice the exercise price. The
foregoing will not apply to (i) a transaction approved by a majority of the
Board of Directors (or from and after the Stock Acquisition Date, a majority of
the Continuing Directors) or (ii) a merger which follows a cash tender offer
approved by the Board of Directors (or after the Stock Acquisition Date, a
majority of Continuing Directors) for all outstanding shares of Common Stock so
long as the consideration payable in the merger is the same in form and not less
than the amount as was paid in the tender offer. A "Continuing Director" is a
director in office prior to the distribution of the Rights and any director
recommended or approved for election by such directors but does not include any
representative of an Acquiring Person.
Subject to the limitations summarized below, the Rights are redeemable at
the Company's option, at any time prior to the earlier of the Stock Acquisition
Date or the Final Expiration Date, for $.01 per Right, payable in cash or shares
of Common Stock. Under certain circumstances, the decision to redeem requires
the concurrence of a majority of the Continuing
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Directors. In the event a majority of the Board of Directors of the Company
is changed by vote of the Company's stockholders, the Rights shall not be
redeemable for a period of ten business days after the date that the new
directors so elected take office and it shall be a condition to such redemption
that any tender or exchange offer then outstanding be kept open within such ten
business day period. At any time after any person becomes an Acquiring Person,
the Board of Directors of the Company may exchange the Rights (other than Rights
owned by the Acquiring Person and associates, which will be null and void), in
whole or in part, for Common Stock on the basis of an exchange ratio of one
share of Common Stock for each Right (subject to adjustment).
As long as the Rights are attached to the Common Stock, each share of
Common Stock issued by the Company will also evidence one Right. Until the
Rights Distribution Date, the Rights will be represented by the Common Stock
certificates and will be transferred only with the Common Stock certificates;
separate certificates representing the Rights will be mailed, however, to
holders of the Common Stock as of the Rights Distribution Date. The holders of
Rights will not have any voting rights or be entitled to dividends until the
Rights are exercised.
The purchase price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution in the event of certain
stock dividends on, or subdivisions, combinations or reclassification of, the
shares of Common Stock prior to the Rights Distribution Date, and in certain
other events.
The Board of Directors of the Company may amend the Rights Agreement in
any manner prior to the Rights Distribution Date. After the Rights Distribution
Date, the Board may amend the Rights Agreement only to cure ambiguities, to
shorten or lengthen any time period (subject to certain limitations) or if such
amendment does not adversely affect the interests of the Rights holders and does
not relate to any principal economic term of the Rights.
A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 10 dated
February _, 1997 as amended. A copy of the Rights Agreement is available free of
charge from the Rights Agent. This summary description of the Rights does not
purport to be complete and is qualified in its
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entirety by reference to the Rights Agreement, which is incorporated herein by
reference.
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EMPLOYMENT AGREEMENT
AGREEMENT made as of the 27th day of October, 1996 by and between
WILLIAMS HOSPITALITY GROUP INC., a Delaware corporation (the "Company") with its
principal place of business at c/o El San Juan Hotel & Casino, 6063 East Isla
Verde Avenue, Carolina, Puerto Rico 00979 and BRIAN GAMACHE ("Executive")
residing at 7 Candina Street, Condado, Santurce, Puerto Rico 00907.
W I T N E S S E T H :
WHEREAS, the Company and Executive are parties to an employment
agreement dated October 27, 1994 which expires on October 27, 1996; and
WHEREAS, the Company and Executive desire to enter into a new
employment agreement on the terms and subject to the conditions hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties hereto agree as follows:
1. DUTIES.
1.1 The Company hereby employs Executive as an executive of the
Company to perform services as President and Chief Operating Officer or to
perform such other supervisory, managerial or executive duties on behalf of the
Company as the Board of Directors or the Chairman of the Board of the Company
may from time to time determine.
1.2 Executive hereby accepts such employment. Throughout the period
of his employment by the Company, Executive will devote his full time,
attention, knowledge and skills, faithfully, diligently and to the best of his
judgment and ability, to the performance of the duties assigned to him under
Section 1.1 hereof and in furtherance of the business of the Company and any
affiliate of the Company, and will observe and carry out such rules,
regulations, policies, directions and restrictions as the Company and any
affiliate of the Company shall from time to time establish. Executive shall at
all times conduct himself in a manner so as to remain eligible to perform his
duties under the laws of the Commonwealth of Puerto Rico, including laws, rules
and regulations relating to gambling. Executive will do such traveling as may be
reasonably required of him in the performance of his duties hereunder. At the
Company's request, Executive shall serve as an officer or director of the
Company or any affiliate of the Company without additional compensation.
1.3 Executive shall not, without the written approval of a majority
of the Company's Board of Directors first had and obtained in each instance,
directly or indirectly, accept employment or compensation from or perform
services of any nature for, any business enterprise other than the Company or
any affiliate of the Company. The foregoing shall not
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preclude Executive's participation in non-profit organizations and/or
associations related to the tourism and hotel industries that will directly or
indirectly benefit the Company.
2. TERM OF EMPLOYMENT. Executive shall be employed under this agreement
for an initial term of two years commencing October 27, 1996 and ending October
27, 1998; provided, however, that the term shall be deemed automatically
extended from time to time such that such term shall at no time be less than one
year and provided further that such term and Executive's employment hereunder
may be terminated earlier by either party as provided in Section 6 hereof.
3. BASE COMPENSATION. As base compensation for the performance by
Executive of his obligations under Section 1 hereof, the Company shall pay
Executive a salary at the rate of not less than $300,000 per year, payable in
accordance with the Company's customary payroll practices for senior executives.
4. ADDITIONAL BENEFITS. In addition to his base salary, Executive shall
be entitled to the following benefits:
(i) Executive shall be entitled to participate in bonus and
incentive plans generally available to senior executives of the Company which
may be in effect from time to time during the period of his employment
hereunder. The Company shall be under no obligation to institute or continue the
existence of any such plans. Executive's bonus for the fiscal year ended June
30, 1997 shall not be less than $50,000.
(ii) Executive shall be entitled to participate, to the extent he
is eligible under the terms and conditions thereof, in any health and life
insurance plans generally available to the executives of the Company which may
be in effect from time to time during the period of his employment hereunder.
The Company shall be under no obligation to institute or continue the existence
of any such plans; provided, however, that during the period of Executive's
employment hereunder, the Company shall, to the extent it is available at normal
rates, provide Executive with (i) $500,000 in term life insurance, and (ii)
additional whole life insurance, with respect to which executive shall be
entitled to the cash surrender value, in a face amount equal to the lesser of
$500,000 or such amount of whole life insurance as may be obtained by the
payment of annual premiums of $5,000. Executive shall be entitled to designate
the beneficiaries under each of such policies. Executive shall submit to any
physical examinations which may be necessary to obtain such insurance.
(iii) The Company shall reimburse Executive for reasonable and
necessary expenses incurred by him in connection with the business of the
Company, including, but not limited to, travel and lodging, in accordance with
the reimbursement policy followed by the Company with respect to its executives.
Executive will present receipts or vouchers for any requested reimbursements in
accordance with the Company's policies.
(iv) Executive shall be entitled to paid vacation each year
during the period of his employment hereunder in accordance with the Company's
customary practices, such vacations to be taken at times mutually agreeable to
Executive and the Board of Directors
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of the Company. Vacation time may not be accumulated and Executive shall not be
entitled to payment for unused vacation time if he voluntarily leaves the
employment of the Company or is terminated for cause. In other circumstances,
vacation time shall be prorated.
5. RESTRICTED ACTIVITIES.
5.1 During the period of his employment hereunder and a further
period of one year following the effective date of termination of such
employment, Executive shall not directly or indirectly, own, manage, operate,
invest in or otherwise participate in or be connected with, in any manner,
whether as an officer, director, employee, partner, investor or otherwise (i)
any entity which is engaged in the same or any similar business as the Company
or (ii) any entity which is engaged in any business which renders services to or
otherwise does business with the Company or any hotel or other facility owned or
managed by the Company; or (iii) any tenant of any hotel or other facility owned
or managed by the Company; or (iv) any entity which owns property which is
leased or utilized by the Company or any hotel or other facility owned or
managed by the Company or which may be necessary or desirable to or for the
Company or any hotel or other facility owned or managed by the Company. To the
extent the restrictions in this Section 5.1 apply after the period of
Executive's employment hereunder, the geographical area to which such
restrictions are applicable shall be the Commonwealth of Puerto Rico and the
Caribbean. Nothing herein contained shall be deemed to prohibit Executive from
passively investing his funds in securities of a company if the securities of
such company are listed for trading on a national stock exchange or traded in
the over-the-counter market and Executive's holdings therein represent less than
one percent of the total number of shares or principal amount of other
securities of such company outstanding.
5.2 During the period of his employment hereunder and for a further
period of one year following the effective date of termination of such
employment, Executive shall not, for himself or on behalf of any other person,
partnership, corporation or entity, directly or indirectly, (i) call on any
customer or client of the Company or any hotel or other facility owned or
managed by the Company for the purpose of soliciting, diverting or taking away
any customer or client from the Company or such hotel or facility or (ii)
induce, influence or seek to induce or influence any person who has been engaged
as an employee, representative, agent, independent contractor or otherwise by
the Company or any hotel or facility managed by the Company, to terminate his or
her relationship with the Company or such hotel or facility.
6. TERMINATION AND DEATH BENEFITS.
6.1 Executive may terminate his employment hereunder by providing
the Company at least 90 days' prior written notice designating his desired
termination date. In such event, Executive shall be entitled to continue to
receive all payments and benefits to which he is entitled hereunder, and
Executive shall continue to perform his obligations hereunder through the
effective date of the termination set forth in Executive's notice, or such
earlier date as the Company shall determine to terminate Executive's employment
as provided in this Section 6.1. If Executive has performed his obligations
through the effective date of termination, the Company shall also pay Executive
an amount equal to one year's base salary payable as follows: an amount equal to
three months' base salary shall be paid on the termination date, and the
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balance shall be paid in equal installments beginning on the first customary
salary payment date of the Company occurring after three months from the
termination date and ending on the customary salary payment date occurring 12
months from the termination date. If Executive shall commence new employment at
any time prior to one year after the termination date, the amount payable by the
Company under the preceding sentence shall be reduced by the amount of
compensation paid to or accrued by Executive with respect to such new employment
during such one year period, but in no event shall the amount payable by the
Company to Executive be less than three months' base salary. After receipt of
Executive's notice of termination, the Company shall have the right to terminate
Executive's employment at an earlier date then that set forth in Executive's
notice by providing written notice to Executive of such earlier date.
6.2 The Company may terminate Executive's employment hereunder
without cause by providing Executive at least 90 days' prior written notice
designating the desired termination date. In such event, Executive shall be
entitled to continue to receive all payments and benefits to which he is
entitled hereunder and shall continue to perform his obligations hereunder
through the effective date of such termination set forth in the Company's
notice. If Executive has performed his obligations through the effective date of
termination, the Company shall also pay Executive an amount equal to two years'
base salary, payable one-half on the termination date and the balance on the
first anniversary of the termination date.
6.3 The Company may also terminate Executive's employment hereunder
with cause by providing Executive at least ten days' prior written notice
designating the desired termination date. In such event, Executive shall be
entitled to continue to receive all payments and benefits to which he is
entitled hereunder and shall continue to perform his obligations hereunder
through the effective date of such termination set forth in the Company's
notice. For purposes hereof, cause shall only include: (i) the commission by
Executive of a felony or any act of dishonesty or act of infidelity to the
Company; (ii) the willful failure to follow lawful directions of the Board of
Directors of the Company; or (ii) the failure to maintain in good standing any
licenses or permits required by governmental authorities for the performance of
Executive's obligation. It is understood that the mere poor financial
performance of the Company shall not be deemed grounds for termination of
Executive for cause.
6.4 In the event Executive shall die during the period of
Executive's employment hereunder, the Company shall pay death benefits to
Executive's wife or to such other person or persons as he shall, at his option,
from time to time designate by written instrument delivered to the Company, each
subsequent designation to be deemed to revoke all prior designations, or if his
wife shall predecease him and no such designation is made, to his estate, in an
amount equal to one year's base salary, payable in a lump sum within 90 days
after Executive's death. In the event Executive shall die after the period of
Executive's employment hereunder but prior to the date payments are to be made
by the Company pursuant to Sections 6.1 through 6.3 above, such payments shall
nevertheless be made when due to Executive's beneficiary determined as provided
above in this Section 6.4.
7. ENTIRE AGREEMENT. This agreement supersedes any prior agreement or
understanding with respect to the subject matter hereof and constitutes the
entire agreement of
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the parties hereto. No amendment or modification hereof shall be valid or
binding unless made in writing and signed by the party against whom enforcement
thereof is sought.
8. NOTICES. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
certified mail, return receipt requested, postage and fees prepaid, or sent by
responsible overnight delivery service or transmitted by telephone facsimile to
either of the parties at such party's address set forth below, or to such other
address as such party may specify from time to time by notice to the other given
in accordance with the provisions hereof:
If to the Company:
Williams Hospitality Group Inc.
c/o El San Juan Hotel & Casino
6063 East Isla Verde Avenue
Carolina, Puerto Rico 00979
Attention: Chairman of the Board
If to Executive:
7 Candina Street
Condado
Santurce, PR 00907
The date of the giving of any notice sent by mail shall be the date two days
after the posting of the mail.
9. NO ASSIGNMENT. Neither this agreement nor the right to receive and
payments hereunder may be assigned by Executive. Neither this agreement nor the
right to Executive's services hereunder may be assigned by the Company. This
agreement shall be binding upon and shall inure to the benefit of Executive, his
heirs, executors and administrators and the Company, its successors and assigns.
10. NO WAIVER. No course of dealing nor any delay on the part of the
Company or Executive in exercising any rights hereunder shall operate as a
waiver of any such rights hereunder shall operate as a waiver of any such
rights. No waiver of any default or breach of this agreement shall be deemed a
continuing waiver or a waiver of any other breach or default.
11. GOVERNING LAW. This agreement shall be governed, interpreted and
construed in accordance with the laws of the Commonwealth of Puerto Rico
applicable to agreements entered into and to be performed entirely therein.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
duly executed on the day and year first above written.
WILLIAMS HOSPITALITY GROUP INC.
By:
----------------------------
Louis J. Nicastro, Chairman
----------------------------
BRIAN GAMACHE
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EMPLOYMENT AGREEMENT
AGREEMENT made this 11th day of February, 1997 by and between
WILLIAMS HOSPITALITY GROUP INC., a Delaware corporation (the "Company") with its
principal place of business at c/o El San Juan Hotel & Casino, 6063 East Isla
Verde Avenue, Carolina, Puerto Rico 00979 and RICHARD F. JOHNSON ("Executive")
residing at 90 Chapel Hill Terrace, Kinnelon, New Jersey 07405.
W I T N E S S E T H :
WHEREAS, the Company and Executive desire to enter into an employment
agreement on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. DUTIES.
1.1 The Company hereby employs Executive as an executive of
the Company to perform services as Senior Vice President -- Chief Financial
Officer and such other related supervisory, managerial or executive duties on
behalf of the Company as the Board of
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Directors, the President or the Chairman of the Board of the Company may from
time to time determine. Executive shall report directly to the President of the
Company.
1.2 Executive hereby accepts such employment. Throughout
the period of his employment by the Company, Executive will devote his full
time, attention, knowledge and skills, faithfully, diligently and to the best of
his judgment and ability, to the performance of the duties assigned to him under
Section 1.1 hereof and in furtherance of the Company's business, and will
observe and carry out such rules, regulations, policies, directions and
restrictions as the Company shall from time to time establish. Executive shall
sign and deliver to the Company such periodic statements of adherence to the
Company's policies as the Company shall require. Executive shall at all times
conduct himself in a manner so as to remain eligible to perform his duties under
the laws of the Commonwealth of Puerto Rico, including laws, rules and
regulations relating to gambling. Executive will do such traveling as may be
reasonably required of him in the performance of his duties hereunder.
1.3 Executive shall not, without the written approval of a
majority of the Company's Board of Directors first had and obtained in each
instance, directly or indirectly, accept employment or compensation from or
perform services of any nature for, any business enterprise other than the
Company. The foregoing shall not preclude Executive's participation in
non-profit organizations and/or associations related to the tourism and hotel
industries that will directly or indirectly benefit the Company. Executive
represents that (i) the resume of Executive
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attached hereto is true and correct, and (ii) he is not a party to any contract
or agreement which would prohibit or inhibit the performance of his duties
hereunder.
2. TERM OF EMPLOYMENT. Executive shall be employed under this
agreement for a term of two years commencing on a date mutually agreeable to the
Company and the Executive, but no later than March 1, 1997, and ending two years
from such commencement date. The term may be extended by mutual agreement of the
parties at the end of the first year of this agreement and each year thereafter.
The Company may also terminate Executive's employment under this agreement for
"cause" as provided in Paragraph hereof.
3. BASE COMPENSATION. As base compensation for the performance by
Executive of his obligations under Section 1 hereof, the Company shall pay
Executive a salary at the rate of not less than $185,000 per year, payable from
the date Executive's employment commences, in accordance with the Company's
customary payroll practices for senior executives.
4. ADDITIONAL BENEFITS. In addition to his base salary, Executive
shall be entitled to the following benefits:
(i) Executive shall be entitled to participate in
bonus, incentive and salary deferment plans generally available to senior
executives of the Company which may be in effect from time to time during the
period of his employment hereunder. Executive has been provided a copy of the
Company's bonus and incentive plan as currently in effect, which, among
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other matters, provides for senior management incentives up to 35% of salary on
the terms and conditions set forth in such plan.
(ii) Executive shall be entitled to participate, to
the extent he is eligible under the terms and conditions thereof, in any health,
medical, disability and life insurance plans generally available to the
executives of the Company which may be in effect from time to time during the
period of his employment hereunder.
(iii) The Company shall reimburse Executive for
reasonable and necessary expenses incurred by him in connection with the
business of the Company, including, but not limited to, travel and lodging, in
accordance with the reimbursement policy followed by the Company with respect to
its executives. Executive will present receipts or vouchers for any requested
reimbursements in accordance with the Company's policies. Executive shall also
be entitled to senior executive privileges at the hotels managed by the Company
as agreed to by the President of the Company.
(iv) Executive shall be entitled to paid vacation
each year during the period of his employment in accordance with the Company's
customary practices, such vacations to be taken at times mutually agreeable to
Executive and the Board of Directors of the Company. Vacation time may not be
accumulated from year to year.
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(v) For a period not to exceed 90 days from the
commencement date of Executive's employment under this agreement, Executive
shall be provided housing in one of the hotels managed by the Company at no cost
to Executive.
5. TERMINATION FOR CAUSE. Upon ten days prior written notice, the
Company may terminate this Agreement for "cause." "Cause" shall mean the
occurrence of any of the following: (i) the indictment of Executive for a
felony; (ii) the commission by Executive of any act of dishonesty or act of
infidelity toward the Company, including any embezzlement or misappropriation of
the Company's funds; (iii) a willful failure to follow lawful directions of the
Chief Operating Officer, Chief Executive Officer or the Board of Directors of
the Company or (iv) Executive's failure to maintain in force and in good
standing any and all licenses, permits and approvals required of Executive by
any relevant governmental authorities for the performance of Executive's
obligations.
6. RESTRICTED ACTIVITIES.
6.1 During the term of this agreement, Executive shall not
directly or indirectly, own, manage, operate, invest in or otherwise participate
in or be connected with, in any manner, whether as an officer, director,
employee, partner, investor or otherwise (i) any entity which is engaged in the
same or any similar business as the Company or (ii) any entity which is engaged
in any business which renders services to or otherwise does business with the
Company or any hotel or other facility owned or managed by the Company; or (iii)
any tenant
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of any hotel or other facility owned or managed by the Company; or (iv) any
entity which owns property which is leased or utilized by the Company or any
hotel or other facility owned or managed by the Company. Nothing herein
contained shall be deemed to prohibit Executive from passively investing his
funds in securities of a company if the securities of such company are listed
for trading on a national stock exchange or traded in the over-the-counter
market and Executive's holdings therein represent less than one percent of the
total number of shares or principal amount of other securities of such company
outstanding.
6.2 During the term of this agreement and for a period of
one year thereafter, Executive shall not, for himself or on behalf of any other
person, partnership, corporation or entity, directly or indirectly (i) call on
any customer or client of the Company or any hotel, casino or other facility
owned or managed by the Company for the purpose of soliciting, diverting or
taking away any customer or client from the Company or such hotel, casino or
facility, for the benefit of any other hotel, casino or other facility, or (ii)
induce, influence or seek to induce or influence any person who has been engaged
as an employee, representative, agent, independent contractor or otherwise by
the Company or any hotel, casino or facility managed by the Company, to
terminate his or her relationship with the Company or such hotel, casino or
facility to go to work for any other hotel, casino or other facility.
7. CHANGES IN OWNERSHIP. If during the term of this
agreement there shall be a change in the ownership of the Company such that the
current owners of the Company no longer own directly or indirectly at least 50%
thereof, and if within 45 days following such
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change of ownership Executive notifies the Company in writing of his intention
to terminate his employment under this agreement, the Company shall continue to
pay Executive's base salary and shall continue to provide health and life
insurance benefits to Executive from the date of such termination until the
earlier to occur of (i) the expiration of the term of this agreement; or (ii)
one year after the date of such change in ownership, or (iii) the date Executive
begins other employment. In such event and as a condition to such payments
Executive shall use reasonable efforts to obtain other employment as promptly as
possible. If Executive's compensation level at such other employment is less
than Executive's base salary under this agreement, the Company will pay
Executive an amount equal to such difference at the same time as Executive's
salary otherwise would have been paid under this agreement, such payment to be
continued until the earlier to occur of the events identified in clauses (i) and
(ii) above. If the change of ownership referred to in the first sentence of this
paragraph occurs and Executive desires to continue his employment hereunder but
the Company does not desire to so continue Executive's employment, the Company
may terminate this agreement on 30 days' prior notice to Executive and on the
effective date of such termination, the Company shall pay to Executive as
severance an amount equal to one year's base salary hereunder.
8. SEVERANCE PAYMENTS. If Executive shall not have been terminated
for cause or resigned his employment hereunder prior to one year from the date
hereof, and if this agreement is not renewed by the Company at the end of the
initial two year term, or if this agreement is terminated by the Company after
one year from the date hereof but prior to the end of the term for reasons other
than the causes specified in clauses (i) or (ii) of Paragraph 5,
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Executive shall receive severance pay equal to six months' base salary hereunder
along with continued medical and life insurance coverage for the same period.
9. INDEMNIFICATION. The Company agrees to indemnify Executive and
hold Executive harmless for any and all costs, expenses, damages, obligations or
losses incurred by Executive in the lawful performance of his duties hereunder.
10. RELOCATION. The Company will pay the cost of relocating
Executive's personal items, related incidental expenses and one car from New
Jersey to Puerto Rico, not to exceed $8,000. The Company will also pay the
excise tax of importing one car into Puerto Rico up to $5,000. If the Company's
corporate offices are relocated to the mainland United States while Executive is
employed hereunder, and Executive chooses to relocate his family to that new
location, the Company will pay Executive's cost of so relocating his family and
household goods, not to exceed $35,000. If the Company terminates this agreement
for reasons other than cause and Executive still resides in Puerto Rico, the
Company will pay the cost of relocating Executive back to the United States up
to $8,000.
11. ENTIRE AGREEMENT. This agreement supersedes any prior agreement
or understanding with respect to the subject matter hereof and constitutes the
entire agreement of the parties hereto. No amendment or modification hereof
shall be valid or binding unless made in writing and signed by the party against
whom enforcement thereof is sought.
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12. NOTICES. Any notice required, permitted or desired to be given
pursuant to any of the provisions of this agreement shall be deemed to have been
sufficiently given or served for all purposes if delivered in person or sent by
certified mail, return receipt requested, postage and fees prepaid, or sent by
responsible overnight delivery service or transmitted by telephone facsimile to
either of the parties at such party's address set forth below, or to such other
address as such party may specify from time to time by notice to the other given
in accordance with the provisions hereof:
If to the Company:
Williams Hospitality Group Inc.
c/o El San Juan Hotel & Casino
6063 East Isla Verde Avenue
Carolina, Puerto Rico 00979
Attention: President
If to Executive:
90 Chapel Hill Terrace
Kinnelon, New Jersey 07405
The date of the giving of any notice sent by mail shall be the date two days
after the posting of the mail.
13. SUCCESSORS AND ASSIGNS; NO ASSIGNMENT WITHOUT CONSENT. This
agreement shall inure to the benefit of and shall be binding upon the Company,
its successors and permitted assigns. Neither this agreement nor the right to
receive payments hereunder may be assigned by Executive without Executive's
prior consent. Neither this agreement nor the right to
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Executive's services hereunder may be assigned by the Company without
Executive's prior consent.
14. NO WAIVER. No course of dealing nor any delay on the part of
the Company or Executive in exercising any rights hereunder shall operate as a
waiver of any such rights hereunder. No waiver of any default or breach of this
agreement shall be deemed a continuing waiver or a waiver of any other breach or
default.
15. GOVERNING LAW. This agreement shall be governed, interpreted
and construed in accordance with the laws of the Commonwealth of Puerto Rico
applicable to agreements entered into and to be performed entirely therein.
IN WITNESS WHEREOF, the parties hereto have caused this agreement
to be duly executed on the day and year first above written.
WILLIAMS HOSPITALITY GROUP INC.
By:
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Brian R. Gamache, President
--------------------------------------
RICHARD F. JOHNSON
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WMS HOTEL CORPORATION
1996 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
The 1996 Stock Option Plan (the "Plan") is intended to provide a method
whereby "Employees," "Directors" and "Consultants and Advisers" of WMS Hotel
Corporation (the "Company") and its "Subsidiaries" (as such quoted terms are
hereinafter defined) may be encouraged to acquire a proprietary interest in the
Company and whereby such individuals may realize benefits from an increase in
the value of the shares of Voting Common Stock, $0.01 par value per share (the
"Common Stock"), of the Company; to encourage and provide such Employees,
Directors and Consultants and Advisers with greater incentive and to encourage
their continued provision of services to the Company; and, generally, to promote
the interests of the Company and all of its stockholders. Under the Plan, from
time to time on or before _________, 2007, options to purchase shares of Common
Stock and related Stock Appreciation Rights may be granted to such persons as
may be selected in the manner hereinafter provided on the terms and subject to
the conditions hereinafter set forth. Capitalized terms are defined in Article
XV hereof.
ARTICLE II
ADMINISTRATION OF THE PLAN
Section 1. Subject to the authority as described herein of the Board of
Directors (the "Board") of the Company, the Plan shall be administered by the
Compensation Committee of the Company's Board of Directors (the "Committee")
which is composed of at least two members of the Board who are Non-Employee
Directors. The Committee is authorized to interpret the Plan and may from time
to time adopt such rules and regulations for carrying out the Plan as it may
deem best. All determinations by the Committee shall be made by the affirmative
vote of a majority of its members but any determination reduced to writing and
signed by a majority of its members shall be fully enforceable and effective as
if it had been made by a majority vote at a meeting duly called and held.
Subject to any applicable provisions of the Plan, all determinations by the
Committee or by the Board pursuant to the provisions of the Plan, and all
related orders or resolutions of the Committee or the Board, shall be final,
conclusive and binding on all Persons, including the Company and its
stockholders, employees, directors and optionees.
SECTION 2. All authority delegated to the Committee pursuant to the
Plan, may also be exercised by the Board except with respect to matters which
under Rule 16b-3 and Section 16 of the 1934 Act or Section 162(m) of the Code
are required to be determined in the absolute discretion of the Committee.
Subject to the foregoing, in the event of any conflict or
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inconsistency between determinations, orders, resolutions or other actions of
the Committee and the Board, the actions of the Board shall control.
SECTION 3. With respect to Section 16 of the 1934 Act, transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the 1934 Act. To the extent any provision of the
Plan or action by the Committee fails to so comply, it shall be deemed null and
void to the extent permitted by law and deemed advisable by the Committee.
ARTICLE III
STOCK SUBJECT TO THE PLAN
Section 1. The shares to be issued or delivered upon exercise of options
or rights granted under the Plan shall be made available, at the discretion of
the Board, either from the authorized but unissued shares of Common Stock of the
Company or from shares of Common Stock reacquired by the Company, including
shares purchased by the Company in the open market or otherwise obtained.
SECTION 2. Subject to the provisions of Article X, the aggregate number
of shares of Common Stock which may be purchased pursuant to options granted at
any time under the Plan shall not exceed 900,000. Such number shall be reduced
by the aggregate number of shares covered by options in respect of which Stock
Appreciation Rights are exercised. The maximum number of shares with respect to
which options may be granted in any calendar year to any one employee shall be
500,000 as such number may be adjusted by the Committee in accordance with
Article X hereof. The Committee shall calculate such limit in a manner
consistent with Section 162(m) of the Code. Shares subject to any options which
are canceled, lapse or are otherwise terminated shall be immediately available
for reissuance under the Plan.
ARTICLE IV
PURCHASE PRICE OF OPTIONED SHARES
Unless the Committee shall fix a greater or lesser purchase price, the
purchase price per share of Common Stock under each option granted to Employees,
Directors, Consultants and Advisers shall not be less than one hundred percent
(100%) of the Fair Market Value (as hereinafter defined) of the Common Stock at
the time such option is granted, but in no case shall such price be less than
the par value of the Common Stock or 85% of the Fair Market Value of the Common
Stock as of the time of grant; provided, however, that in the case of an
Incentive Stock Option granted to an Employee who, at the time of the grant,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company (a "Ten Percent Stockholder"), such
purchase price per share shall be at least one hundred and ten percent (110%) of
the Fair Market Value.
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ARTICLE V
ELIGIBILITY OF RECIPIENTS
Options will be granted only to Persons who are Employees, Directors,
Consultants or Advisers of the Company or a Subsidiary.
ARTICLE VI
DURATION OF THE PLAN
Unless previously terminated by the Committee or the Board, the Plan
will terminate on _________, 2007. Such termination will not terminate any
option or Stock Appreciation Right then outstanding.
ARTICLE VII
GRANT OF OPTIONS TO EMPLOYEES,
DIRECTORS, CONSULTANTS AND ADVISERS
Section 1. Each option granted under the Plan to Employees shall
constitute either an Incentive Stock Option or a Non-Qualified Stock Option, as
determined in each case by the Committee and each option granted under the Plan
to Directors, Consultants and Advisers shall constitute a Non-Qualified Stock
Option. With respect to Incentive Stock Options granted to Employees, to the
extent that the aggregate Fair Market Value (determined at the time an option is
granted) of Common Stock of the Company with respect to which such Incentive
Stock Options are exercisable for the first time by any individual during any
calendar year (under the Plan and any other stock option plan of the Company)
exceeds $100,000, such Incentive Stock Options shall be treated as Non-Qualified
Stock Options to the extent of such excess. The foregoing rule shall be applied
by taking Incentive Stock Options into account in the order in which they were
granted. In the event outstanding Incentive Stock Options become immediately
exercisable under the terms hereof, such Incentive Stock Options will, to the
extent the aggregate Fair Market Value thereof exceeds $100,000, be treated as
Non-Qualified Stock Options.
SECTION 2. The Committee shall from time to time determine the
Employees, Directors, Consultants and Advisers to be granted options, it being
understood that options may be granted at different times to the same person,
provided, however, that no one person may receive an option or options under the
Plan covering more than fifty percent (50%) of the total number of shares
subject to the Plan. In addition, the Committee shall determine subject to the
terms of the Plan (a) the number of shares subject to each option, (b) the time
or times when the options will be granted, (c) whether such options shall be
Incentive Stock Options, Non-Qualified Stock Options or both, (d) whether Stock
Appreciation Rights will be granted in connection with the grant of options, (e)
the purchase price of the shares subject to each option, which price shall be
not less than that specified in Article , (f) the time or times when each option
and any
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related Stock Appreciation Rights may be exercised and (g) any other matters
which the Committee shall deem appropriate.
SECTION 3. All instruments evidencing options granted to Employees,
Directors, Consultants and Advisers under the Plan shall be in such form, which
shall be consistent with the Plan and any applicable determinations, orders,
resolutions or other actions of the Committee or the Board.
SECTION 4. The Committee, in its sole discretion, on the granting of an
option to an Employee, Director, Consultant or Adviser under the Plan may also
grant Stock Appreciation Rights relating to any number of shares but, except as
hereinafter provided, not more than fifty percent (50%) of the number of shares
covered by such option shall include Stock Appreciation Rights. Such options
shall be subject to such terms and conditions, not inconsistent with the Plan,
that the Committee shall impose, including the following:
(i) Stock Appreciation Rights may be granted only in writing and
only attached to an underlying option at the time of the grant of the
option;
(ii) Stock Appreciation Rights may be exercised only at the time
when the option to which it is attached is exercisable;
(iii) Stock Appreciation Rights shall entitle the optionee (or
any person entitled to act under the provisions of the Plan) to
surrender unexercised all or part of the then exercisable portion of the
option to which the Stock Appreciation Rights are attached to the
Company and to receive from the Company in exchange therefor a payment
in cash equal to the excess, if any, of the then value of one share
covered by such portion over the option price per share specified in
such option, multiplied by the number of shares covered by the portion
of the option so surrendered (which excess is herein called the
"Appreciated Value"). For purposes of computation of the Appreciated
Value, the value of one share shall be deemed to be the average Fair
Market Value of such share during the four-week period immediately
preceding the date of notice of exercise of the Stock Appreciation
Rights;
(iv) if Stock Appreciation Rights attached to an option are
exercised, such option shall be deemed to have been canceled to the
extent of the number of shares surrendered on exercise of the Stock
Appreciation Rights and no further options may be granted covering such
shares; and
(v) if an option to which Stock Appreciation Rights are attached
is exercised, such Stock Appreciation Rights shall be canceled to the
extent necessary to cause the number of shares to which such Stock
Appreciation Rights relate not to exceed the number of remaining shares
subject to such option.
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ARTICLE VIII
NON-TRANSFERABILITY OF OPTIONS
No Incentive Stock Option or any related Stock Appreciation Rights
granted under the Plan shall be transferable by the optionee otherwise than by
will or by the laws of descent and distribution, and any such Incentive Stock
Option or any related Stock Appreciation Rights shall be exercised during the
lifetime of the optionee solely by him or her. Any Non-Qualified Stock Option
granted under the Plan may be transferable by the optionee to the extent
specifically permitted by the Committee as specified in the instrument
evidencing the option as the same may be amended from time to time. Except to
the extent permitted by such instrument, no Non- Qualified Stock Option shall be
transferable except by will or by the laws of descent and distribution.
ARTICLE IX
EXERCISE OF OPTIONS
Section 1. Each option (and any related Stock Appreciation Rights)
granted under the Plan shall terminate on the date specified by the Committee
which date shall be not later than the expiration of ten years from the date on
which it was granted; provided, however, that in the case of an Incentive Stock
Option granted to an Employee who, at the time of the grant is a Ten Percent
Stockholder, such period shall not exceed five (5) years from the date of grant.
SECTION 2. Except to the extent otherwise provided in any instruments
evidencing an option and, if so specified in such instrument, in the cases
provided for in Article XII hereof, each option (and any related Stock
Appreciation Rights) granted under the Plan may be exercised only while the
optionee is an Employee or Director of the Company.
SECTION 3. A person electing to exercise an option or Stock Appreciation
Rights then exercisable shall give written notice to the Company of such
election and, if electing to exercise an option, of the number of shares of
Common Stock such person has elected to purchase. A person exercising an option
shall at the time of purchase tender the full purchase price of such shares,
which tender, except as provided in Section 4 of this Article ix, shall be made
in cash or cash equivalent (which may be such person's personal check) or, to
the extent permitted by applicable law, in shares of Common Stock already owned
by such person (which shares shall be valued for such purpose on the basis of
their Fair Market Value on the date of exercise), or in any combination thereof.
In the event of payment in shares of Common Stock already owned, such shares
shall be appropriately endorsed for transfer to the Company. The Company shall
have no obligation to deliver shares of Common Stock pursuant to the exercise
of any option, in whole or in part, until such payment in full of the purchase
price therefor is received by the Company. No optionee, or legal representative,
legatee, distributee or transferee of such optionee, shall be or be deemed to be
a holder of any shares of Common Stock subject to such option or entitled to any
rights of a stockholder of the Company in respect of any shares of
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Common Stock covered by such option until such shares have been paid for in full
and issued or delivered by the Company.
SECTION 4. In order to assist an optionee in the exercise of an option
granted under the Plan, the Committee or Board may, in its discretion,
authorize, either at the time of the grant of the option or thereafter (a) the
extension of a loan to the optionee by the Company, (b) the payment by the
optionee of the purchase price of the Common Stock in installments, (c) the
guarantee by the Company of a loan obtained by the optionee from a third party
or (d) make such other reasonable arrangements to facilitate the exercise of
options in accordance with applicable law. The Committee or Board shall
authorize the terms of any such loan, installment payment arrangement or
guarantee, including the interest rate (which, in the case of incentive stock
options, shall be not less than the higher of (i) the "prime rate" as from time
to time in effect at a commercial bank of recognized standing, and (ii) the rate
of interest from time to time imputed under Section 483 of the Code and terms of
repayment thereof, and shall cause the instrument evidencing any such option to
be amended, if required, to provide for any such extension of credit. Loans,
installment payment arrangements and guarantees may be authorized without
security, and the maximum amount of any such loan or guarantee shall be the
purchase price of the Common Stock being acquired, plus related interest
payments.
SECTION 5. Each option shall be subject to the requirement that if at
any time the Board shall in its discretion determine that the listing,
registration or qualification of the shares of Common Stock subject to such
option upon any securities exchange or under any state or Federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of or in connection with, the granting of such option
or the issuance or purchase of shares thereunder, such option may not be
exercised in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free from any
conditions not reasonably acceptable to the Board. Unless at the time of
exercise of an option and the issuance of Common Stock so purchased, there shall
be in effect as to such Common Stock a registration statement under the Act, the
holder of such option shall deliver a certification (a) acknowledging that such
shares of Common Stock may be "restricted securities" as defined in Rule 144
promulgated under the Act; and (b) containing such optionee's agreement that
such Common Stock may not be sold or otherwise disposed of except in compliance
with applicable provisions of the Act. In the event that the Common Stock is
then listed on a national securities exchange, the Company shall use its best
efforts to cause the listing of the shares of Common Stock subject to options
upon such exchange.
SECTION 6. All payments made by the Company pursuant to Section 4 of
this Article IX shall be subject to withholding in respect of such income or
other taxes as may be required by law to be paid or withheld. The Company may
establish appropriate procedures to provide for payment or withholding of such
income or other taxes as may be required by law to be paid or withheld in
connection with the exercise of options under the Plan, and to ensure that the
Company receives prompt advice concerning the occurrence of any event which may
create, or affect the timing or amount of, any obligation to pay or withhold any
such taxes or which may make available to the Company any tax deduction
resulting from the occurrence of such event.
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ARTICLE X
ADJUSTMENTS
SECTION 1. New option rights may be substituted for the options granted
under the Plan, or the Company's duties as to options outstanding under the Plan
may be assumed, by a corporation other than the Company, or by a parent or
subsidiary of the Company or such corporation, in connection with any merger,
consolidation, acquisition, separation, reorganization, liquidation or other
similar corporate transaction in which the Company is involved. Notwithstanding
the foregoing or the provisions of this Article X, in the event such
corporation, or parent or subsidiary of the Company or such corporation, does
not substitute new option rights for, and substantially equivalent to, the
options granted hereunder, or assume the options granted hereunder, the options
granted hereunder shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Company, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, where the Company will not be a surviving entity or (iii) upon a
transfer of substantially all of the assets of the Company or more than 80% of
the outstanding Common Stock in a single transaction; provided, however, that
each optionee shall have the right immediately prior to or concurrently with
such dissolution, liquidation, merger, consolidation, acquisition, separation,
reorganization or other similar corporate transaction, to exercise any unexpired
option granted hereunder whether or not then exercisable.
SECTION 2. In the event that the Committee determines that any dividend
or other distribution (whether in the form of cash, shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares or other securities of the Company, issuance
of warrants or other rights to purchase shares or other securities of the
Company, or other corporate transaction or event affects the shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then, the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number of shares of Common
Stock or other securities of the Company (or number and kind of other securities
or property) with respect to which options may be granted and any limitations
set forth in the Plan, (ii) the number of shares of Common Stock or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding options and (iii) the grant or exercise or target price
with respect to any option or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding option including, if necessary, the
termination of such an option; provided, in each case, that with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422 of the Code.
Without limiting the generality of the foregoing, any such adjustment shall be
deemed to have prevented any dilution and enlargement of an optionee's rights if
such optionee receives in any such adjustment rights which are substantially
similar (after taking into account the fact that the optionee has not paid the
applicable exercise price) to the rights the optionee would have received had he
exercised his outstanding options and become a stockholder of the Company
immediately prior to the event giving rise to such adjustment.
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SECTION 3. Adjustments and elections under this Article X shall be made
by the Committee whose determination as to what adjustments, if any, shall be
made and the extent thereof shall be final, binding and conclusive. Adjustments
required under this Article X shall also be deemed to increase by a like number
the aggregate number of shares authorized for purchase pursuant to options
granted under the Plan as set forth in Section 2 of Article III hereof.
ARTICLE XI
PRIVILEGES OF STOCK OWNERSHIP
No optionee shall be entitled to the privileges of stock ownership as to
any shares of Common Stock not actually issued and delivered to him or her.
ARTICLE XII
TERMINATION OF SERVICE OR EMPLOYMENT
SECTION 1. In the event that an optionee shall cease his or her
relationship with the Company or a Subsidiary by voluntarily terminating such
relationship without the written consent of the Company or a Subsidiary, or if
the Company or a Subsidiary shall terminate for cause such relationship, unless
otherwise provided in the instrument evidencing such option, the option and any
associated Stock Appreciation Rights held by such optionee shall terminate
forthwith.
SECTION 2. If the holder of an option shall voluntarily terminate his or
her relationship with the Company or a Subsidiary with the written consent of
the Company, which written consent expressly sets forth a statement to the
effect that options which are exercisable on the date of such termination shall
remain exercisable, or if the optionee's relationship with the Company or a
Subsidiary shall have terminated by the Company or a Subsidiary for reasons
other than cause, unless otherwise provided in the instrument evidencing such
option, such optionee may exercise his or her option to the extent exercisable
at the time of such termination, at any time prior to the expiration of three
months after such termination or the date of expiration of the option as fixed
at the time of grant, whichever shall first occur. Options granted under the
Plan to Employees shall not be affected by any change in the position of
employment so long as the holder thereof continues to be an Employee or a
Director.
SECTION 3. Should an optionee die during the existence of his or her
relationship with the Company, unless otherwise provided in the instrument
evidencing such option, all of the optionee's options shall be terminated except
that any option (and any related Stock Appreciation Rights) to the extent
exercisable by the optionee at the time of such death, may be exercised within
one year after the date of such death but not later than the expiration date of
the option solely in accordance with all of the terms and conditions of the Plan
by the optionee's personal representatives or by the person or persons to whom
the optionee's rights under the option shall pass by will or by the applicable
laws of descent and distribution.
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SECTION 4. Should an optionee die after cessation of the optionee's
relationship with the Company or a Subsidiary, unless otherwise provided in the
instrument evidencing such option, all of the optionee's options shall be
terminated except that any option (and any related Stock Appreciation Rights) to
the extent exercisable by the optionee at the time of such death may be
exercised within one year after the date of such death but not later than the
expiration of the option solely in accordance with all of the terms and
conditions of the Plan by the optionee's personal representatives or by the
person or persons to whom the optionee's rights under the option shall pass by
will or by the applicable laws of descent and distribution.
ARTICLE XIII
AMENDMENTS TO PLAN
The Board may at any time terminate or from time to time amend, modify
or suspend the Plan; provided, however, that no such amendment or modification
without the approval of the stockholders of the Company shall:
(i) materially increase the benefits accruing to participants
under the Plan;
(ii) materially increase the maximum number (determined as
provided in the Plan) of shares of Common Stock which may be purchased
pursuant to options granted under the Plan; or
(iii) materially modify the requirements as to eligibility for
participation in the Plan.
The amendment or termination of the Plan shall not, without the written consent
of an optionee, adversely affect any rights or obligations under any option
theretofore granted to such optionee under the Plan.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
The Plan shall be effective on _____, 1997.
ARTICLE XV
DEFINITIONS
For the purposes of this Plan, the following terms shall have the
meanings indicated:
Act: Shall mean the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder.
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Code: Shall mean the Internal Revenue Code of 1986, as amended and the
regulations promulgated thereunder.
Committee: Such term is defined in Article II, Section 1.
Common Stock: Such term is defined in Article I.
Consultants and Advisers: Such term shall include any third party
retained or engaged by the Company or any Subsidiary to provide services to the
Company or such Subsidiary, including any employee of such third party providing
such services.
Director: Such term shall include any director of the Company.
Employee: Such term shall include (i) any officer as well as any
full-time salaried key executive, managerial, professional, administrative, or
key employee of the Company or a Subsidiary. Such term shall also include an
employee on approved leave of absence provided such employee's right to continue
employment with the Company or a Subsidiary upon expiration of such employee's
leave of absence is guaranteed either by statute or by contract with or by a
policy of the Company or a Subsidiary and any consultant, independent
contractor, professional advisor or other person who is paid by the Company or a
Subsidiary for rendering services or furnishing materials or goods to the
Company or a Subsidiary.
Fair Market Value: The fair market value as of any date shall be
determined by the Committee or Board after giving consideration to the price of
the Common Stock in the public market and shall be determined otherwise in a
manner consistent with the provisions of the Code.
Incentive Stock Option: Such term means an option intended to qualify
under Section 422 of the Code.
1934 Act: Shall mean the Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.
Non-Employee Director: Such term shall mean any director of the Company
who is a Non-Employee Director as that term is defined in Rule 16b-3 promulgated
under the 1934 Act.
Non-Qualified Stock Option: Such term means an option which does not
qualify under Section 422 of the Code.
Person: Such term shall have the meaning ascribed to it under the 1934
Act.
Plan: Such term is defined in Article I and shall include all amendments
thereof.
Stock Appreciation Rights: Means the rights granted by the Committee
pursuant to Section 4 of Article hereof.
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Subsidiary: Means and includes a "Subsidiary Corporation" of the Company
as defined in Section 424 of the Code.
Ten Percent Stockholder: Such term is defined in Article IV.
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FORM OF INDEMNITY AGREEMENT
_____ __, 199_
TO:
Dear:
In consideration of your service as an officer or director of WMS Hotel
Corporation (the "Company"), the Company will, to the extent provided herein,
indemnify you and hold you harmless from and against any and all "Losses" (as
defined below) which you may incur by reason of your election or service as an
officer, director, employee, agent, fiduciary or representative of the Company
or any "Related Entity" (as defined below) to the fullest extent permitted by
law.
1. (a) "Losses" mean all liabilities, "Costs and Expense" (as defined
below), amounts of judgments, fines, penalties or excise taxes (or other amounts
assessed, surcharged or levied under the Employee Retirement Income Security Act
of 1974, as amended) and amounts paid in settlement of or incurred in defense of
any settlement in connection with any threatened, pending or completed claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether brought by or in the right of the Company or
otherwise, and appeals in which you may become involved, as a party or
otherwise, by reason of acts or omissions or in your capacity as and while
serving as an officer, director, employee, agent, fiduciary or representative of
the Company or any Related Entity.
(b) A "Related Entity" means any corporation, limited liability
company, partnership, joint venture, trust or other entity or enterprise in
which the Company is in any way interested, or in or as to which you are serving
at the Company's request or on its behalf, as an officer, director, employee,
agent, fiduciary or representative including, but not limited to, any employee
benefit plan or any corporation of which the Company or any Related Entity is,
directly or indirectly, a stockholder or creditor.
(c) "Costs and Expenses" means all reasonable costs and expenses
incurred by you in investigating, defending or appealing any threatened, pending
or completed claim, action, suit or proceeding including, without limitation,
counsel fees and disbursements.
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2. Costs and Expenses will be paid promptly by the Company as they are
incurred or, at your request, advanced on your behalf against delivery of
invoices therefor (prior to an ultimate determination as to whether you are
entitled to be indemnified by the Company on account thereof); provided,
however, that if it shall ultimately be determined by final decision of a court
of competent jurisdiction that you are not entitled to be indemnified on account
of any Costs or Expenses for which you have theretofore received payment or
reimbursement, you shall promptly repay such amount to the Company.
3. The Company shall indemnify you and hold you harmless from and
against any and all Losses which you may incur if you are a party to or
threatened to be made a party to or otherwise involved in any proceeding or
action (other than a proceeding or action by or in the right of the Company to
procure a judgment in its favor), unless it is determined that you did not act
in good faith and in a manner reasonably believed by you to be in, or not
opposed to, the best interest of the Company and, in the case of a criminal
proceeding or action, in addition, that you had reasonable cause to believe that
your conduct was unlawful.
4. The Company shall indemnify you and hold you harmless from and
against any and all Losses which you may incur if you are a party to or
threatened to be made a party to any proceeding or action by or in the right of
the Company to procure a judgment in its favor, unless it is determined that you
did not act in good faith, and in a manner reasonably believed by you to be in,
or not opposed to, the best interest of the Company, except that no
indemnification for Losses shall be made under this Paragraph 4 in respect of
any claim, issue or matter as to which you shall have been adjudged to be liable
to the Company, unless and only to the extent that any court in which such
action or proceeding was brought shall determine upon application that, despite
the adjudication of liability, but in view of all the circumstances of the
matter, you are fairly and reasonably entitled to indemnity for such expenses as
such court shall deem proper.
5. Anything hereinabove to the contrary notwithstanding, "Losses" shall
not include, and you shall not be entitled to indemnification under this
agreement for (i) amounts payable by you to the Company or any Related Entity in
satisfaction of any judgment or settlement in the Company's or such Related
Entity's favor (except amounts for which you shall be entitled to
indemnification pursuant to Paragraph 4), (ii) any amount payable on account of
profits realized by you in the purchase or sale of securities of the Company or
any Related Entity within the meaning of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or similar provisions of state law; (iii)
Losses in connection with which you are not entitled to indemnification as a
matter of law or public policy; or (iv) Losses to the extent you are indemnified
by the Company otherwise than pursuant to this agreement, including any Losses
for which payment is made to you under an insurance policy.
6. Termination of any action, suit or proceeding by judgment, order,
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settlement or conviction, upon a plea of nolo contendere or its equivalent will
not, of itself create any presumption that you did not act in good faith and in
a manner which you reasonably believed to be in or not opposed to the best
interest of the Company or a Related Entity and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that your conduct was
unlawful.
7. The determination on behalf of the Company that you are not entitled
to be indemnified for Losses hereunder by reason of the provisions of Paragraph
3 or 4 or clause (iii) of Paragraph 5 may be made either by the Company's Board
of Directors (by majority vote of disinterested directors or directors who are
not parties to or the subject of the same or any similar claim, action, suit or
proceeding) or by independent legal counsel (who may be the outside counsel
regularly employed by the Company), as the Company's Board of Directors shall
determine. Notwithstanding such determination, the right to indemnification or
advances of Costs and Expenses as provided in this agreement shall be
enforceable by you in any court of competent jurisdiction. The burden of proving
that indemnification is not appropriate shall be on the Company. Neither the
failure of the Company (including its Board of Directors or independent legal
counsel) to have made a determination prior to the commencement of such action
that indemnification is proper in the circumstances because you have met the
applicable standard of conduct, nor an actual determination by the Company
(including its Board of Directors or independent legal counsel) that you have
not met such applicable standard of conduct shall be a defense to the action or
create a presumption that you have not met the applicable standard of conduct.
Costs and expenses, including counsel fees, reasonably incurred by you in
connection with successfully establishing your right to indemnification, in
whole or in part, in any such action shall also be indemnified by the Company.
8. You agree to give prompt notice to the Company of any claim with
respect to which you seek indemnification and, unless a conflict of interest
shall exist between you and the Company with respect to such claim, you will
permit the Company to assume the defense of such claim with counsel of its
choice. Whether or not such defense is assumed by the Company, the Company will
not be subject to any liability for any settlement made without its consent. The
Company will not consent to entry of any judgment or enter into any settlement
that does not include as an unconditional term thereof the giving by the
claimant or plaintiff to you of a release from all liability with respect to
such claim or litigation. If the Company is not entitled to, or does not elect
to, assume the defense of a claim, the Company will not be obligated to pay the
fees and expenses of more than one counsel for you and any other directors or
officers of the Company who are indemnified pursuant to similar indemnity
agreements with respect to such claim, unless a conflict of interest shall exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the Company will be obligated to pay the
fees and expenses of an additional counsel for each indemnified party or group
of indemnified parties with whom a conflict of interest exists.
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9. The Company's obligation to indemnify you under this agreement is in
addition to any other rights to which you may otherwise be entitled by operation
of law, vote of the Company's stockholders or directors or otherwise and will be
available to you whether or not the claim asserted against you is based upon
matters which occurred before the date of this agreement.
10. The obligation of the Company to indemnify you with respect to
Losses which you may incur by reason of your service as an officer, director,
employee, agent, fiduciary or representative of the Company or a Related Entity,
as provided under this agreement, shall survive the termination of your service
in such capacities and shall inure to the benefit of your heirs, executors and
administrators.
11. If you are entitled under this agreement or otherwise to
indemnification by the Company for some or a portion of the Losses actually and
reasonably incurred by you but not, however, for the total amount thereof, the
Company shall nevertheless indemnify you for the portion of the Losses to which
you are entitled.
12. It is the intention of the parties to this agreement to provide for
indemnification in all cases under all circumstances where to do so would not
violate applicable law (and notwithstanding any limitations permitted, but not
required by statute) and the terms and provisions of this agreement shall be
interpreted and construed consistent with that intention. Nonetheless, if any
provision of this agreement or any indemnification made under this agreement
shall for any reason be determined by any court of competent jurisdiction to be
invalid, unlawful or unenforceable under current or future laws, such provision
shall be fully severable and, the remaining provisions of this agreement shall
not otherwise be affected thereby, but will remain in full force and effect and,
to the fullest extent possible, shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.
13. This agreement shall be governed by and interpreted and construed
in accordance with the laws of the State of Delaware applicable to contracts
executed and to be performed entirely within that State.
14. No amendment, modification, termination or cancellation of this
agreement shall be effective unless in writing signed by both the Company and
you.
15. Your signature below will evidence your agreement and acceptance
with respect to the foregoing.
Very truly yours,
WMS HOTEL CORPORATION
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By:
----------------------------
Name:
Title:
AGREED TO AND ACCEPTED:
- -----------------------------
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OPERATING AND MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 23rd day of September, 1983, by and
between POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED, a Delaware corporation
("Owner"), and POSADAS DE AMERICA CENTRAL, INC., a Delaware corporation
(formerly, Wilkoa Management Corporation) ("Manager").
W I T N E S S E T H:
WHEREAS, Owner owns a hotel in the Condado Beach area of San Juan,
Puerto Rico known as the Condado Holiday Inn Hotel;
WHEREAS, the Owner leases from Posadas de Flamboyan Associates, a New
York limited partnership ("Flamboyan"), the building known as the Laguna Wing
(the Condado Holiday Inn Hotel and Sands Casino and the Laguna Wing are
hereinafter collectively referred to as the "Condado") and
WHEREAS, the Condado has heretofore been managed by Posadas de America
Central, S.A., a Panama corporation, pursuant to a management agreement which
has been terminated on the date hereof; and
WHEREAS, the parties mutually desire Manager to assume the supervision,
direction and control of the operation and management of the Condado on behalf
of Owner;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereby agree as follows:
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1. Appointment of Manager.
1.1 Appointment and Term. Owner hereby appoints and employs Manager
to act as its agent for the supervision, direction and control of the operation
and management of the Condado on Owner's behalf, upon the terms and conditions
hereinafter set forth, for a term of 20 years beginning as of September 23, 1983
(the "Commencement Date") and ending September 22, 2003. Manager hereby accepts
such appointment and agrees to supervise, direct and control the operation and
management of the Condado during the term of this Agreement upon the terms and
conditions hereinafter set forth.
1.2 Relation of the Parties. Subject to the provisions of this
Agreement, Manager shall have complete control and discretion in the management
of the Condado and shall be free from interruption or disturbance in managing
the Condado. Notwithstanding anything herein to the contrary, in performing its
duties hereunder, (a) Manager shall observe and carry out such rules,
regulations, policies, directions and restrictions as the Board of Directors of
Owner shall from time to time establish, and (b) Manager shall act only as the
appointed agent or representative of Owner, and nothing in this Agreement shall
be construed as creating a tenancy, partnership, joint venture or any other
relationship between the parties hereto except that of principal and agent.
2. Budgets.
2.1 General Policy. It is the intention of the parties to operate
the Condado at all times in accordance with pre-established operating, capital
and cash flow budgets which will be prepared by Manager and reviewed and
approved by Owner. All budgeting, planning, accounting records and reports will
be based upon generally accepted accounting principles
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consistently applied and the Uniform System of Accounts for Hotels, copyrighted
by the Hotel Association for New York City, 7th edition of 1977, as amended from
time to time.
2.2 Fiscal Year. For all purposes under this Agreement, Condado's
fiscal year ("Fiscal Year") will be the twelve-month period ending on June 30 or
such other period as Owner shall designate.
2.3 Budgets. Manager has heretofore submitted to Owner preliminary
operating, capital and cash flow budget for the period commencing July 1, 1983
and ending June 30, 1984, which budgets are being reviewed by Owner. As promptly
as practicable after the Commencement Date, Manager shall prepare and submit to
Owner long-range operating, capital and cash flow budgets and a pro forma profit
projection ("Long-Range Budget") for the subsequent five Fiscal Years. The
Long-Range Budget will be updated and extended annually. The Long-Range Budget
is to be treated as a planning tool and is not to be regarded as final until
incorporated in an annual budget.
2.4 Annual Budgets. For each Fiscal Year hereunder after the first
Fiscal Year, Manager shall submit to Owner at least 60 days before the beginning
of such Fiscal Year, detailed operating, capital and cash flow budgets ("Annual
Budgets"). Manager may not implement the expenditures provided for in such
budgets until the Annual Budgets have been approved by the Board of Directors of
Owner, such approval to be evidenced by the minutes of the meeting of such Board
or the unanimous written consent of such Board. After such approval, Manager
may, if reasonably deemed by Manager to be in the best interests of the Condado,
exceed the expenditures provided in the capital budget and the discretionary
expenditures provided in the operating budget in each material category by up to
five percent
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for any Fiscal Year of operation hereunder without obtaining prior written
approval of Owner. The Annual Budgets will be updated semi-annually.
3. Operation.
3.1 Operational Standards, Etc. Manager shall, at the expense of
Owner, operate the Condado as a first class resort hotel in accordance with the
provisions of this Agreement and the guidelines and policies established by the
Owner.
Owner hereby warrants to Manager uninterrupted control and operation of
the Condado during the term of this Agreement, unless this Agreement is earlier
terminated pursuant to the provisions of Section 6 hereof. Owner shall not
interfere or involve itself with the day-to-day operation of the Condado.
Manager shall have absolute discretion in the determination of room rates, food
and beverage menu prices, and charges to guests for other services performed by
Condado for guests. Such absolute control and discretion shall extend to the use
of the Condado for all customary purposes, including, the terms of admittance to
the Condado for rooms, for commercial purposes, for privileges of entertainment,
the labor policies of the Condado and all phases of publicity and promotion.
Manager shall, on behalf of and with the cooperation of Owner and at
Owner's sole expense, obtain all necessary licenses, findings of suitability,
approvals and permits from the applicable governmental authorities (the "Puerto
Rico Authorities"), including the Secretary of the Treasury of the Commonwealth
of Puerto Rico and any other governmental body or agency having authority over
gaming, as may be required for the operation of the Condado as a hotel
throughout the term of this Agreement, including without limitation, such
liquor, bar, restaurant, gaming, sign and hotel licenses as may be required for
the operation of the Condado as a first
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class resort hotel. Manager undertakes to comply with the rules, regulations and
orders of the Puerto Rico Authorities and with any conditions set out in any
such licenses and permits and at all times to operate and manage the Condado in
accordance with such conditions and any other requirements of the law.
3.2 Personnel. Manager, as agent for Owner, shall hire, supervise,
direct the work of, discharge, and determine the compensation and other benefits
of all personnel working in the Condado, all of whom shall be in the sole employ
of Owner and not in the employ of Manager. Manager shall be the sole judge of
the fitness and qualifications of such personnel and shall have absolute
discretion in the hiring, supervision, direction, discharging and determination
of the compensation and other benefits of such personnel during the course of
their employment. Manager shall in no way be liable to such personnel for their
wages, compensation or other benefits (including, without limitation, severance,
and termination pay), nor to Owner, and Owner shall not interfere with or give
orders or instructions to personnel employed at the Condado for any act or
omission on the part of such personnel. Owner shall reimburse Manager for any
employee incentive programs that Manager institutes for its employees managing
the Condado upon prior notice to and consent by Owner to the institution of such
programs, which consent shall not be unreasonably withheld. Manager shall employ
a General Manager and such other key personnel as deemed necessary to be
employed by Manager for the successful operation of the Condado. Manager shall
pay the salary of such General Manager and other key personnel and other
compensation or other benefits, for which Manager shall be reimbursed by Owner.
If such personnel perform services for other hotels managed by Manager, such
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personnel's salary and other compensation and benefits shall be fairly allocated
as agreed by Owner and Manager.
The costs, fees, compensation or other expenses of any persons engaged
by Owner or Manager to perform duties of a specialist in nature, related to the
operation, maintenance or protection of the Condado, such as attorneys,
independent accountants and the like, shall be borne by Owner and shall not be
the responsibility of Manager.
3.3 Sales and Promotion. Manager may cause the Condado to
participate in sales and promotional campaigns and activities involving
complementary rooms and food and beverages to bona fide travel agents, tourist
officials and airline representatives. Manager shall have the right to grant
complementary rooms and food and beverages to the General Manager and other key
personnel and their families, or to others wherein such is customary in the
hotel industry.
Owner agrees that no influence will be brought on Manager or the
General Manager relating to the granting or extension of credit. Credit
facilities shall be given by Manager in its discretion and in accordance with
Manager's standard practice.
Manager may alter room rates or other charges without prior
consultation with Owner.
Manager, on behalf of Owner, shall institute and supervise a sales and
marketing program, and Manager shall coordinate with tour programs marketed by
airlines, travel agents and government tourist departments when Manager
determines such programs are in the best interest of Owner.
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3.4 Maintenance and Capital Replacement.
3.4.1 Owner and Manager recognize the necessity of a program of
replacement of furnishings and equipment and the need to cause the Condado to
continue to be furnished, equipped and landscaped as a first class resort hotel.
In furtherance of this purpose, Owner shall expend each year not less than
$1,2000,000 for a reserve (the "Capital Replacement and Improvement Reserve"),
provided there is sufficient "Cash Available from Operations." "Cash Available
from Operations" shall be determined by deducting from Gross Revenues (as
hereinafter defined) all operating expenses, including the deduction of the
Basic and Incentive Management Fees, including any Deferred Fees (as hereinafter
defined); rental payments for the Laguna Wing; all premiums for insurance
maintained pursuant to Sections 5.1 and 5.2 of this Agreement; any Condado
Operating Loss Carryforward (as hereinafter defined); property taxes and taxes
on income; interest charges and debt servicing for borrowed money; dividends and
redemption payments on the Class A preferred stock, without par value, of Owner
(the "Class A Preferred Stock"); and by further deducting from Gross Revenues
the amount of advances by way of loans or capital contributions, made for
purposes of funding the Capital Replacement and Improvement Reserve.
Expenditures in any year in excess of $1,200,000 shall be deemed credited
against subsequent years' requirements under this Section 3.4.1.
3.4.2 Manager is authorized to make and enter into in the name of,
for the account of, and at the expense of Owner all such reasonable contracts
and agreements as are consistent with the Annual Budget and are in Manager's
opinion necessary for the operation, supply and maintenance of the Condado and
to pay the same when due from the Condado's accounts. Manager shall be required
to obtain the consent of Owner before entering into any
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contract, agreement or purchase involving any structural repair, alteration or
rehabilitation of the Condado or the repair or replacement of any furnishings,
fixtures or equipment contained therein if not provided for in the Annual Budget
and if the amount payable under such contract exceeds the sum of $25,000.
3.5 Accounting Services. As an expense of Owner, Manager shall
maintain an accurate accounting system in connection with its management of the
Condado. The books and records shall be kept in accordance with Section 2.1 of
this Agreement, shall be maintained at the Condado, and shall be the property of
the Owner. Manager shall comply with all requirements in respect of internal
controls and accounting and shall prepare all required reports under the rules
and regulations of the Puerto Rico Authorities or any other applicable law
and/or regulation.
As an expense of Owner, a certified audit of the Condado shall be
performed annually by Ernst and Whinney or another independent accounting firm
mutually acceptable to Owner and Manager and at least one copy thereof shall be
furnished to each party. Nothing herein contained shall prevent Manager's or
Owner's shareholders or their duly authorized designees or their independent
accounting firms from examining the books and records of the Condado.
On or before the 25th day of each month, Manager shall furnish Owner
with a statement for the preceding calendar month of the gross income received
from rooms, food and beverages, gaming and other sources, guest room occupancy
percentage, average room rate and total expenses paid by category during the
said month, such statement to be prepared in accordance with Section 2.1 of this
Agreement. On or before the 25th day following each of the first three fiscal
quarters, Manager shall furnish Owner with such information as Owner shall
request and
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as shall be necessary for reports filed by Owner's parent corporations with the
Securities and Exchange Commission or other governmental entities.
3.6 Bank Accounts. Manager shall establish such bank accounts as
Manager and Owner deem appropriate for the operation of the Condado.
3.7 Concessions. Manager is authorized to consummate, in the name of
and for the benefit of Owner, reasonable arms' length arrangements and leases
with concessionaires, licensees, tenants and other intended users of any
facilities related to the Condado. Copies of all such arrangements and leases
shall be furnished to Owner.
4. Compensation of Manager.
4.1 Basic Compensation for Management Services. In consideration for
all services rendered by Manager hereunder, Owner shall pay to Manager, subject
to the provisions of Sections 4.3 of this Agreement, a basic management fee (the
"Basic Management Fee"). The Basic Management Fee, which shall be incurred on
behalf of hotel operations and shall be payable from solely hotel revenues,
shall be computed and paid based on 1.8% of Gross Revenues. The Basic Management
Fee shall be payable monthly based on the monthly operating statements prepared
in accordance with Section 3.5 of this Agreement, subject, however, to exceeding
base levels, adjustment and offset, as provided in Section 4.3 of this
Agreement, and subject to the provisions of the succeeding sentence. Anything
herein to the contrary notwithstanding, no payment of the Basic Management Fee
for any period shall be made to the extent such fee would reduce Condado Gross
Operating Profits for that period below zero. All Basic Management Fees which
are not so paid by reason of the preceding sentence ("Deferred Fees") shall be
carried forward and payable promptly, without interest, after receipt of audited
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financial statements for the next fiscal year which reflect Condado Gross
Operating Profits, but only to the extent of such profits if such profits are
less than the Deferred Fees, and all Deferred Fees then remaining unpaid shall
be similarly carried forward to succeeding years. For example, if for a Fiscal
Year the Basic Management Fee earned would be $700,000 and the Condado Operating
Loss (as hereinafter defined) would be $200,000, $500,000 of the Basic
Management Fee shall be paid and $200,000 shall be carried forward as a Deferred
Fee. If for the following fiscal year, the Condado Gross Operating Profits would
be $300,000 prior to giving effect to such Deferred Fee, the Deferred Fee shall
be paid in full, and the Condado Gross Operating Profits for such year for
purposes of determining the Incentive Management Fee (as hereinafter defined)
shall be $100,000.
4.2 Incentive Management Fees. Subject to the provisions of Section
4.3 of this Agreement, for each Fiscal Year while this Agreement is in effect
Owner shall pay Manager an incentive management fee (the "Incentive Management
Fee"), which shall be incurred on behalf of hotel operations and shall be
payable solely from hotel revenues, computed and paid based on 12% of Condado
Gross Operating Profits which Incentive Management fee shall be payable annually
promptly after receipt of audited financial statements for such Fiscal Year.
4.3 Base Levels; Fee Adjustment; Offset for Losses. No Basic
Management Fee or Incentive Management Fee shall be deemed earned or payable in
respect of a particular Fiscal Year unless the aggregate of the Basic Management
Fee and Incentive Management Fee for such Fiscal Year exceeds the base level for
that year set forth below, and then Manager shall be entitled only to fees in
excess of such base levels. The base levels are as follows:
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Fiscal Year Ended In Base Level
-------------------- ----------
1984 $724,000
1985 707,200
1986 690,400
1987 673,600
1988 656,800
1989 500,000
1990 and thereafter 0
For example, if for the Fiscal Year ended in 1985, Gross Revenues are
$40,000,000 (received $3,333,333 per month), and Condado Gross Operating Profits
are $6,000,000, the Basic Management and Incentive Management Fees shall be
calculated and paid as follows: (i) the Basic Management Fee would be $60,000
per month ($3,333,333 x 1.8%) (this would not be paid monthly since the 1985
base level would not be reached prior to year end); and (ii) the Incentive
Management Fee would be $720,000 ($6,000,000 x 12%). The actual fees payable for
the Fiscal Year Ended in 1985 would be $732,800 ($720,000 + $720,000 - $707,200)
which would be paid promptly after receipt of audited financial statements for
the Fiscal Year. Basic Management Fees paid or payable to Manager prior to the
end of any Fiscal Year will be subject to verification and adjustment after
receipt of the audited financial statements for the applicable fiscal year. The
Basic Management Fee, the Incentive Management Fee, the base levels and the
basis upon which they are predicated with respect to any short Fiscal Year shall
be prorated and calculated on a straight line basis (for example, five-twelfths
(5/12ths) for a five-month Fiscal Year). If the computation of Condado Gross
Operating Profits for any Fiscal Year during the term of this Agreement shall
result in a negative number (a "Condado Operating Loss Carryforward"), such
Condado Operating Loss Carryforward shall be carried forward and offset
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against Condado Gross Operating Profits of succeeding periods. Notwithstanding
anything herein to the contrary, (a) no Basic Management Fee in respect of any
month shall be payable until all of the principal and interest due and payable
during such month with respect to the $16,000,000 borrowed by Williams
Electronics, Inc. from Ponce Federal Savings and Loan Association of Puerto Rico
and participating banks, and guaranteed by Owner (the "Ponce Loan"), all
dividends and redemption payments on the Class A Preferred Stock and all rental
payments and other amounts the due to Flamboyan pursuant to the Lease Agreement,
dated the date hereof, between Owner and Flamboyan, shall have been paid or
provided for by Owner, and (b) no Incentive Management Fee in respect of any
Fiscal Year shall be payable until all principal and interest due and payable
during said Fiscal Year in respect of the Ponce Loan, all aforesaid Class A
Preferred Stock dividend and redemption payments and all rental payments and
other amounts then due to Flamboyan pursuant to the aforesaid Lease Agreement,
shall have been paid or provided for by Owner.
4.4 Certain Definitions. For purposes of this Agreement:
4.4.1 "Gross Revenues" shall mean all gross revenues from Condado
operations, such as rooms, food and beverage, telephone, telex, net wins and
other receipts (exclusive of tips, taxes collected and remitted to others, and
the value of complimentary rooms, food and beverages, except those purchased by
the casino) including, without limitation, rentals or other payments from
lessees, licensees, or concessionaires (but not including the concessionaires'
receipts), minus credits and refunds made to customers, guests or patrons.
Subject to the foregoing adjustments, Gross Revenues shall be determined in
accordance with generally accepted accounting principles and the Uniform System
of Accounts for Hotels as set
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forth in Section 2.1 of this Agreement, it being understood that Gross Revenues,
as used herein shall mean the same as "net sales" as defined in the said Uniform
System of Accounts for Hotels, except that in the event of conflict the
definition of "Gross Revenues" herein shall be controlling.
4.4.2 "Condado Gross Operating Profits" and "Condado Operating
Loss" shall be determined by deducting from the sum of Gross Revenues all
operating expenses, including the deduction of the Basic Management Fee earned
(including any deferred Fees), rental payments for the Laguna Wing, all premiums
for insurance maintained pursuant to Sections 5.1 and 5.2 of this Agreement and
previously unused Condado Operating Loss Carryforward, but prior to deducting
(i) depreciation of buildings, plants, furniture, fixtures and equipment; (ii)
bank interest charges and debt servicing incurred for capital expenditures, but
not bank interest charges and debt servicing incurred for working capital; (iii)
property taxes and taxes on income; (iv) capital expenditures including
replacement of furniture, fixtures and equipment; and (v) the Incentive
Management Fee.
5. Insurance.
Manager shall procure and maintain, on behalf of and at the expense
of Owner, at all times during the term hereof, the following insurance:
5.1 Adequate insurance to at least 80% of the full insurable value
of the Condado, with responsible companies, against loss or damage to the
Condado and its contents from fire, boiler explosion and such other extended
coverage risks and casualties as shall be customarily insured against in the
vicinity with respect to hotels of similar character.
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5.2 Business interruption insurance to cover profits lost as a
result of any such interruption, use and occupancy insurance against loss or
damage by fire and the hazards included in an extended coverage endorsement,
including riot, civil commotion and insurrection, all of said use and occupancy
coverage to be effective simultaneously with Owner's placing the other insurance
above.
5.3 Public and automobile liability insurance, elevator liability
insurance, and insurance against theft of or damage to guests' property, all in
such amounts as either Manager or Owner shall deem necessary;
5.4 Comprehensive Dishonesty, Disappearance, and Destruction (3-D)
Coverage, Insuring Agreement I - Employee Dishonesty and Insuring Agreement V -
Depositors Forgery, all in such amounts as either Manager or Owner shall deem
necessary, such insurance to cover employees on Manager's payroll.
5.5 Insurance against such other operating risks against which it is
now or hereafter may be customary to insure in the operation of similar
properties, and other insurance which ether Manager or Owner shall deem
advisable; and
5.6 Such Worker's Compensation, Employer's Liability or similar
insurance as may be required by law.
Anything herein to the contrary notwithstanding, Owner shall
have the right annually to approve all insurance policies and carriers. Manager
shall submit to Owner at least 60 days before the beginning of each Fiscal year
a summary of the insurance coverage maintained by Manager with respect to the
Hotel, and Owner shall have 30 days thereafter to approve such insurance
coverage. If Manager receives no written notice from Owner within
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such 30 day period, the insurance program shall be deemed approved by Owner for
such Fiscal year.
6. Termination.
6.1 Casualty Damage. If the Condado is damaged and rendered
substantially unusable by fire or other casualty, and if owner elects, in its
sole discretion, not to restore and operate the Condado as a hotel thereafter,
this Agreement shall terminate as of the date of such total damage. Manager
shall have no right to any of the proceeds of insurance maintained by Owner with
respect to the Condado.
6.2 Condemnation. If any substantial part of the Condado is taken by
condemnation by competent authority, and if Owner elects, in its sole
discretion, not to continue to operate the Condado as a hotel thereafter, this
Agreement shall terminate as of the date of such taking. Manager shall have no
right to any award for any condemnation, whether a partial condemnation or a
condemnation of a substantial part of the Condado, made to Owner.
7. Miscellaneous.
7.1 Entire Agreement. This Agreement constitutes the entire
Agreement of the parties with respect to the subject matter hereof. No change,
modification, amendment, addition or termination of this Agreement or any part
thereof shall be valid unless in writing and signed by or on behalf of the party
to be charged therewith.
7.2 Counterparts. This Agreement may be executed in one or more
counterparts, and shall become effective when one or more counterparts has been
signed by each of the parties.
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7.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be given pursuant to any of the provisions
of this Agreement shall be deemed to have been duly given for all purposes if
sent by certified or registered mail, return receipt requested and postage
prepaid, hand delivered or sent by telegraph or telex as follows:
If to Owner, at:
c/o Williams Electronics, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Mr. Norman J. Menell
with a copy to:
Golenbock and Barell
645 Fifth Avenue
New York, New York 10022
Attention: Justin M. Golenbock, Esq.
If to Manager, at:
c/o Koffman
300 Plaza Drive
Binghampton, New York 13903
Attention: Mr. Burton I. Koffman
with copies to:
Mr. Hugh A. Andrews
c/o Condado Holiday Inn Hotel
999 Ashford Avenue
San Juan, Puerto Rico 00907
and
Beveridge & Diamond, P.C.
1333 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Attention: Albert J. Beveridge, III, Esq.
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or at such other address as any party may specify by notice given to other party
in accordance with this Section 7.3. The date of giving of any such notice shall
be the date of hand delivery, the date following the posting of the mail or
delivery to the telegraph company or when sent by telex.
7.4 Waivers. No waiver of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
7.5 Severability. Should any clause, section or part of this
Agreement be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this Agreement which can be effected without such
illegal clause, section or part shall nevertheless continue in full force and
effect.
7.6 Choice of Law. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York.
7.7 Non-Assignability. This Agreement and the various rights ad
obligations arising hereunder shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. This Agreement
shall not be assignable by any of the parties hereto without the prior written
consent of all other parties hereto and any attempt to assign this Agreement
shall be void and of no effect.
7.8 Captions. The headings or captions under sections of this
Agreement are for convenience and reference only and do not in any way modify,
interpret or construe the intent of the parties or effect any of the provisions
of this Agreement.
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IN WITNESS WHEREOF, the parties hereby have caused this Agreement to be
signed on the date and year first above written.
POSADAS DE PUERTO RICO ASSOCIATES,
INCORPORATED
By: /s/
------------------------------
Norman J. Menell, Chairman
of the Board and President
/s/
- ---------------------------
Assistant Secretary
[SEAL]
POSADAS DE AMERICA
CENTRAL, INC.
By: /s/
------------------------------
Hugh A. Andrews, President
/s/
- ----------------------------
Secretary
[SEAL]
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OPERATING CREDIT AND TERM LOAN AGREEMENT
US$35,500,000
between
Pasadas de Puerto Rico Associates, Incorporated
Borrower
and
Scotiabank de Puerto Rico
Lender
Dated: August 30, 1988
- ------------------------------------------------------------------------------
Brown, Newsom & Cordova
Plaza Scotiabank
273 Ponce de Leon Avenue
Hato Rey, Puerto Rico 00917
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OPERATING CREDIT AND TERM LOAN AGREEMENT
TABLE OF CONTENTS
PAGE
----
ARTICLE I - Terms and Conditions
Section 1.1. General................................................ 2
Section 1.2. Borrower's Representations and Warranties.............. 2
Section 1.3. Commission............................................. 9
Section 1.4. Eligible Activities.................................... 9
ARTICLE II - The Loan
Section 2.1. The Term Loan Advances................................. 9
Section 2.2. Making the Operating Credit Advances................... 10
Section 2.3. Fees................................................... 10
Section 2.4. Interest and Repayment................................. 11
Section 2.5. Optional Prepayments of the Term Loan Notes............ 15
Section 2.6. Mandatory Supplemental Prepayments and
Reserves............................................. 17
Section 2.7. Payments and Interest Computations..................... 19
Section 2.8. Business Day........................................... 20
Section 2.9. Funding Procedure...................................... 20
Section 2.10. Increased Costs........................................ 20
Section 2.11. Illegality............................................. 21
Section 2.12. Increase and Costs Limitation.......................... 21
Section 2.13. 936 Indemnity.......................................... 22
ARTICLE III - Conditions of Lending
Section 3.1. Conditions Precedent to Initial Advances............... 23
Section 3.2. Conditions Precedent to All Advances................... 26
ARTICLE IV - The Collateral
Section 4.1. The Security........................................... 27
ARTICLE V - Borrower's Affirmative Covenants
Section 5.1. Corporate Existence.................................... 27
Section 5.2. Business............................................... 27
Section 5.3. Licenses, Permits and Franchises....................... 28
Section 5.4. Properties............................................. 28
Section 5.5. Insurance.............................................. 28
(i)
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Section 5.6. Records - Financial Statements........................ 29
Section 5.7. Inspection............................................ 29
Section 5.8. Payment of Taxes...................................... 30
Section 5.9. Laguna Wing........................................... 30
Section 5.10. Statutory Compliance.................................. 30
Section 5.11. Contractual Compliance................................ 31
Section 5.12. Cost Overruns. ...................................... 31
Section 5.13. Full Compliance....................................... 31
Section 5.14. The Collateral Documentation. ....................... 31
Section 5.15. Preservation of Rank.................................. 31
ARTICLE VI - Borrower's Negative Covenants
Section 6.1. Liens................................................. 32
Section 6.2. Guarantees............................................ 33
Section 6.3. Properties............................................ 33
Section 6.4. Merger, Consolidated.................................. 33
Section 6.5. Conditional Sales..................................... 33
Section 6.6. Investments........................................... 33
Section 6.7. Leases................................................ 34
Section 6.8. Dividends............................................. 34
Section 6.9. Operation of Business................................. 34
ARTICLE VII - Notices
Section 7.1. Addresses............................................. 34
Section 7.2. Change of Address..................................... 35
Section 7.3. Borrower's Mandatory Notices and/or
Communications...................................... 36
Section 7.4. Waiver................................................ 38
ARTICLE VIII - Default
Section 8.1. Events of Default..................................... 39
Section 8.2. Acceleration.......................................... 42
Section 8.3. Other Remedies........................................ 43
ARTICLE IX - Charges and Expenses
Section 9.1. Fees and Expenses..................................... 44
Section 9.2. Collection Fees and Expenses.......................... 44
ARTICLE X - Miscellaneous
Section 10.1. Mortgage Title Insurance.............................. 45
(ii)
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Section 10.2. Borrower's Right to Contest........................... 45
Section 10.3. Set Off............................................... 45
Section 10.4. No Joint Venture...................................... 45
Section 10.5. Lender's Optional Right to Pay or Perform
in Borrower's Stead................................. 46
Section 10.6. Assignment and Participation.......................... 46
Section 10.7 No Waiver, Cumulative Remedies........................ 47
Section 10.8. Survival.............................................. 48
Section 10.9. Applicable Law........................................ 48
Section 10.10. Jurisdiction.......................................... 48
Section 10.11. Interpretation........................................ 48
Section 10.12. Modification, Amendment............................... 49
Section 10.13. Entire Understanding.................................. 49
(iii)
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LIST OF EXHIBITS
Exhibit Description
- ------- -----------
A Ocean Front Property Description
B Laguna Wing Property Description
C Permitted Exceptions
D List of Documents delivered by Borrower to Lender in
support of its Credit Application
E List of Concessions Agreements
F Fee Mortgage Deed
G Leasehold Mortgage Deed
H Subordination Agreement
I Deed of Attornment and Non Disturbances to Constitution
of Leasehold Mortgage
J Borrower's Counsel Legal Opinion
K Ruling Request
L 936 Representation Letter
(iv)
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OPERATING CREDIT AND TERM LOAN AGREEMENT
At San Juan, Puerto Rico, on the date stated at the end of this Loan
Agreement.
APPEAR
AS PARTY OF THE FIRST PART: POSADAS DE PUERTO RICO ASSOCIATES,
INCORPORATED, D/B/A CONDADO PLAZA HOTEL AND CASINO, a corporation organized and
existing under the laws of the State of Delaware, United States of America, duly
authorized to do business within the Commonwealth of Puerto Rico, with its
principal office and place of business in Puerto Rico at 999 Ashford Avenue
(Condado), Santurce, Puerto Rico 00902, as debtor herein, hereinafter
interchangeably referred to as "Borrower" and "Posadas", represented by its
President, Mister Norman Jules Menell, of legal age, married, a business
executive and resident of New York, New York.
AS PARTY OF THE SECOND PART: SCOTIABANK DE PUERTO RICO, a banking
institution organized and existing under the laws of the Commonwealth of Puerto
Rico, with main offices in the Plaza Scotiabank, 273 Ponce de Leon Avenue, Hato
Rey, San Juan, Puerto Rico 00917, hereinafter interchangeably referred to as the
"lender" and the "Bank", represented by its President, Mr. Arnold Van Der Kley,
of legal age, married, a business executive and resident of San Juan, Puerto
Rico.
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WITNESSETH
WHEREAS, Borrower is the owner in fee simple of the real estate property
more fully described in Exhibit A and the Lessee of the real estate property
more fully described in Exhibit V, which Exhibits are attached hereto and made a
part hereof, wherein it operates the hotel complex known as the Condado Plaza
Hotel and Casino;
WHEREAS, Borrower desires to borrow funds in order to liquidate an
existing debt and make certain payments to shareholders, capital expenditures,
and for general operating requirements;
WHEREAS, Borrower has requested a loan from the Lender in the aggregate
principal amount of US$35,500,000 consisting of a US$35,000,000 non-revolving
term facility and a US$500,000 operating credit, hereinafter collectively
referred to as the "Loan";
WHEREAS, the Lender is willing to extend the Loan requested by Borrower in
consideration of the various representations, warranties, covenants, collateral
security and other undertakings hereinafter set forth, made or agreed to by the
Borrower;
NOW, THEREFORE, the appearing parties covenant and agree to the following:
TERMS AND CONDITIONS
ARTICLE I
REPRESENTATIONS AND WARRANTIES
Section 1.1. General. In order to induce the Lender to grant the Loan
Borrower has agreed to enter into this Loan Agreement.
Section 1.2. Borrower's Representations and Warranties. Borrower states,
represents and warrants to the Lender that, except as otherwise stated in
Exhibit C, hereof:
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a. Borrower is a corporation duly organized, existing, and in good
standing under the laws of the State of Delaware, United States of America, with
a registered office in the City of Wilmington, County of New Castle, of said
State. Borrower is duly qualified to do business and is in current good standing
in every jurisdiction in which the nature of its business requires such
qualification, particularly in the Commonwealth of Puerto Rico. Borrower's
principal office and place of business is located at 999 Ashford Avenue, Condado
Ward, Santurce, Puerto Rico 00902.
b. Borrower's Charter does not limit the number of stockholders that
Borrower may have.
c. The borrowing made or to be made hereunder does not violate any
usury laws nor any other laws regulating the rate of interest as of the date of
this Loan Agreement.
d. Borrower has the necessary capacity and power to own its assets
and properties, to mortgage, lien and/or encumber the same, and to operate the
business being operated until this date, and more particularly, the hotel
complex known as the Condado Plaza Hotel and Casino.
e. Borrower has the necessary capacity and power to execute and
deliver this Loan Agreement and the other Loan Documents and to comply
thereafter with the terms and conditions thereof, and to perform under, the same
without consent or approval by any governmental entity or authority, or by any
third party, except as contemplated under this Loan Agreement.
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f. Borrower is not subject to any legal restriction of any kind that
may directly or indirectly prevent it from executing and delivering this Loan
Agreement and the other Loan Documents and/or, thereafter, from complying and
performing under the same.
g. Borrower further represents and warrants that the execution,
delivery and performance of this Loan Agreement and the other Loan Documents:
(i) has been duly authorized by the Borrower's Board of
Directors. All requisite corporate action has been duly taken. All resolutions
of the Borrower and/or its Board of Directors, and any signature on the Loan
Documents purporting to be the signature of its president, director and/or any
other officer, were, are and will properly and with due authority be passed,
executed and/or made;
(ii) Benefits itself, its businesses, stockholders,
affiliates, and subsidiaries since it has a substantial investment interest in
the success and/or proper financing of its operations;
(iii) Does not violate any provision of law or any applicable
regulations; nor its Charter or By-Laws; nor any judgment, resolution, order or
decree issued by any Court or any other governmental entity or authority; nor
any licenses, permits, grants (including tax exemption grants) and franchises
that it may enjoy, particularly those pertaining to the hotel and the casino it
currently operates;
(iv) Does not conflict with, nor violate, nor result in a
breach of, nor constitute (with or without notice and/or through the lapse of
time) a default or a breach of any indenture, agreement, contract or other
instrument to which it is a party or which may affect its assets or properties;
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(v) Shall not result in the creation of any lien or
encumbrance upon any of the assets or properties of the Borrower other than
those liens and encumbrances constituted pursuant to this Loan Agreement and the
other Loan Documents;
(vi) Shall validly bind the Borrower in accordance with their
terms and conditions.
h. The copy of: (i) Borrower's corporate documents, including its
Charter and By-Laws; (ii) Borrower's pro forma balance sheet as of March 31,
1988, and its audited financial statements of September 30, 1987 (said audited
financial statements hereinafter referred to as "Financial Statement") for the
year then ended, (such financial statement includes a balance sheet, statement
of income and an auditor's report); (iii) Laventhol & Horwath valuation report
dated May 1, 1987, regarding the real estate property described in Exhibit A
hereto; (iv) the lease agreement regarding the real estate property described in
Exhibit B hereto; (v) Borrower's casino license and (vi) the documents
identified in Exhibit D hereto, that the Borrower has delivered to the Lender,
are true, authentic and complete correct copies of the originals, together with
all amendments thereto up to the date of this Loan Agreement, and to Borrower's
knowledge, the originals were duly and properly approved, issued, executed,
made, authorized and/or signed.
i. The Financial Statement identified in the prior subparagraph
above was prepared in conformity with generally accepted accounting principles
applied on a basis consistent with that of the preceding fiscal year and in
accordance with the Uniform System of Accounts for Hotels adopted by the
American Hotel and Motel Association and accurately
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represents Borrower's financial condition as of its date and the results of its
operations for the periods then ended.
j. It does not have any material obligations and/or liabilities of
any nature or amount, neither accrued, absolute, contingent, or otherwise, other
than those shown in the aforesaid financial statements and/or reports, other
than those incurred since the date thereof in the ordinary course of business.
k. To the best of Borrower's knowledge, the valuation of the real
estate properties prepared by Laventhol & Horwath referred to in subparagraph
(h)(iii) above is accurate.
l. It has good and marketable title to all its assets and properties
as shown or reported in its Financial Statement and all such assets and
properties are free and clear of any liens, encumbrances, mortgages, pledges,
charges, leases, security interest and any other type of lien, encumbrance
and/or title restriction, except those reflected in the Financial Statement or
in Exhibit C hereto and those constituted pursuant to this Loan Agreement and
the other Loan Documents.
m. The condition of the real estate properties described on Exhibit
A and Exhibit V hereof it owns and/or leases conforms to all applicable laws and
regulations, federal, state and municipal, particularly those pertaining and/or
applicable to buildings, fire and other hazards, hotels, casinos, zoning and the
like, and no notice of any outstanding violations or complaints regarding the
same has been received by the Borrower.
n. The Borrower, has not received any notice nor has it any
knowledge of any default in the performance, observance or fulfillment of any of
its obligations under any
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material indenture, agreement, contract or other instrument that would entitle
the other parties to the same to accelerate the due date of any obligations
under, or to resolve, rescind and/or terminate the same.
o. The Borrower is in compliance as of this date with the terms,
conditions and requirements of its hotel permits, its casino licenses, its
franchises and the tax exemption grant that Borrower now enjoys. Borrower has
not incurred any act and to the knowledge of the Borrower no event has occurred
or is continuing that could warrant the cancellation and/or termination of said
licenses, permits, franchises or tax exemption grant.
p. Since the date of the Financial Statement and of pro forma
balance sheet to which reference is made in subparagaph (h) of this Section,
there has been no material adverse change in Borrower's business operations,
assets, properties or condition (financial or otherwise) because of any
statutory or regulatory change, condemnation, acquisition, renegotiation, price
determination, revocation of any license, permit, franchise, tax exemption grant
or right to do business, nor due to any loss or damage, nor because of any other
incident or accident.
q. There are no pending or, to the knowledge of Borrower,
threatened, proceedings, complaints, disputes, contests, charges, accusations
and/or investigations, neither judicial nor administrative, nor any arbitration
proceedings, by or before any governmental entity or authority, or before an
arbitrator, against or affecting Borrower, (i) seeking a money award in an
amount exceeding any insurance coverage or seeking a money award in an amount
exceeding $100,000; (ii) seeking to foreclose or realize upon its rights, assets
or properties, real or personal; (iii) affecting its licenses, permits and/or
franchises and/or its tax exemption grant;
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(iv) seeking a relief which might result, if granted, in a material adverse
change in its operations, business, assets, properties, licenses, permits,
franchises, tax exemption grant (subject to such changes as may result from the
on-going conversion of tax grant negotiations with the Secretary of the Treasury
of Puerto Rico) or in its condition, financial or otherwise, or (v) materially
affecting any of the collateral securing the Loan or the Loan Documents.
r. Borrower has filed all federal, state and municipal tax returns
which it was or it is required to file. Borrower has paid any and all federal,
state and municipal taxes, impositions, excise taxes, "patentes", fees and
assessments (including, but not limited to, any income taxes, real estate and
personal property taxes, social security, unemployment and State Insurance Fund
premiums) to the extent that the same have become due, except such items as may
be contested in good faith and subject to the provisions of Section 10.2 of this
Loan Agreement.
s. Borrower enjoys a long term lease, the extended term of which
expires on March 31, 2004, in connection with the property described in Exhibit
B hereto. The copy of the Deed of Lease regarding said real estate property that
Borrower has delivered to the Lender is a true and correct copy of the existing
lease agreement. Borrower is in full compliance with all of the terms and
conditions of the said lease agreement. It has not incurred any act that could
warrant the cancellation and/or termination of said lease agreement and to its
knowledge, no event that could warrant the cancellation of the same has
occurred; nor has Borrower received any notice as to any such act or event from
the landlord under the lease.
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t. There are no options to purchase and/or leases outstanding in
connection with the real estate property described in Exhibit A hereof, or any
of them, except those leases itemized in Exhibit E hereto.
Section 1.3. Commission. The parties hereto further represent and warrant
to each other that they have not entered into any agreement nor taken any action
which may cause anyone to become entitled to a commission as a finder's fee or
as a result of the granting or making of this Loan, except for fees payable to
Lender pursuant to Section and the commission that the Borrower is bound to pay
to Merrill Lynch Capital Markets.
Section 1.4. Eligible Activities. A portion of Term Credit Advances in the
amount of US$21,500,000 will be employed by Borrower in "eligible activities" as
per Section 2(j) of the Puerto Rico Industrial Incentives Act, and the Puerto
Rico Tax Incentives Act and the regulations promulgated thereunder. This is a
continuing representation, consequently, the Borrower will endeavor to continue
to conduct its operations in such a manner that the portion of the Term Loan
funded with 936 Funds will continue to qualify as an "eligible activity" failing
which the provisions of Section hereof shall apply.
ARTICLE II
THE LOAN
Section 2.1. The Term Loan Advances. The Lender agrees, on the terms and
conditions hereinabove and hereinafter set forth, to make a term loan advance
(the "Term Loan Advance") to the Borrower on the date of this Agreement in the
aggregate amount of US$35,000,000.
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Section 2.2. Making the Operating Credit Advances. The Lender agrees, on
the terms and conditions hereinabove and hereinafter set forth, to make
operating credit advances (each an "Operating Credit Advance", collectively the
"Operating Credit Advances", the Operating Credit Advance and the Term Loan
Advance are hereinafter sometimes collectively referred to as the "Advances") to
the Borrower from time to time during the period from the date hereof in an
aggregate principal amount not to exceed at any time outstanding the amount of
US$500,000. Each borrowing under this Section shall be in a principal amount of
not less than US$100,000.
Each Operating Credit Advance shall be made on at least one (1) Business
Day notice from the Borrower to the Bank specifying the date (which shall be a
Business Day) and amount thereof. Not later than 11:00 a.m. (San Juan, Puerto
Rico time) on the date of such Operating Credit Advance, the Bank shall make
available the Operating Credit Advance to the Borrower at its address referred
to in Section , hereof in immediately available funds.
Section 2.3. Fees.
a. The Borrower agrees to pay to the Bank at the date and time of
the closing a fee in respect to the Term Loan in the sum of US$375,000 which is
the balance owing of the front end fee of US$525,000, of which Borrower has paid
to the Lender the sum of US$150,000.
b. The Borrower agrees to pay to the Bank a standby fee on the
average daily unused portion of the Term Loan portion of the Loan from the date
of the Loan Agreement until maturity at the rate of 1/2% per annum, payable
monthly in arrears on the last day of each
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month. This provision shall not apply if on the date hereof Borrower takes down
the entire proceeds of the Term Loan.
Section 2.4. Interest and Repayment.
a. The Term Loan Advance made by the Bank to the Borrower shall be
evidenced by promissory notes to the order of the Bank in substantially the form
of Schedule I hereto (individually, the "Term Loan Note", collectively, the
"Term Loan Notes").
The Term Loan Notes shall be in the aggregate principal amount of
US$35,000,000.00 and shall be payable in 20 consecutive, semi-annual
installments commencing approximately 6 months from the date of the initial Term
Loan Advance as follows:
Aggregate
Installment Balance of
Installment Number and Date Amount Loan
--------------------------- ------ ----
(1) March 1, 1989 $500,000.00 $34,500,000
(2) September 1, 1989 500,000.00 34,000,000
(3) March 1, 1990 550,000.00 33,450,000
(4) September 1, 1990 550,000.00 32,900,000
(5) March 1, 1991 600,000.00 32,300,000
(6) September 1, 1991 600,000.00 31,700,000
(7) March 1, 1992 700,000.00 31,000,000
(8) September 1, 1992 700,000.00 30,300,000
(9) March 1, 1993 750,000.00 29,550,000
(10) September 1, 1993 750,000.00 28,800,000
(11) March 1, 1994 850,000.00 27,950,000
(12) September 1, 1994 850,000.00 27,100,000
(13) March 1, 1995 950,000.00 26,150,000
(14) September 1, 1995 950,000.00 25,200,000
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(15) March 1, 1996 1,050,000.00 24,150,000
(16) September 1, 1996 1,050,000.00 23,100,000
(17) March 1, 1997 1,200,000.00 21,900,000
(18) September 1, 1997 1,200,000.00 20,700,000
(19) March 1, 1998 1,350,000.00 19,350,000
(20) September 1, 1998 1,350,000.00 18,000,000
The residential balance outstanding on the Term Loan, ($18,000,000)
together with any and all the funds owed by the Borrower under this Agreement or
under the Loan Documents, shall be due and payable by the Borrower to the Lender
concurrently with the due date of the 20th installment of the Term Loan Notes.
For purposes of this Agreement the terms "936" Funds, "Base Rate",
"LIBOR", "Funding Period", and "Business Day", shall have the following
meanings:
"936" Funds are deposits of eligible funds by exempted businesses as per
the Puerto Rico Industrial Incentives Acts and the Puerto Rico Tax Incentive
Act, as amended.
"Base Rate" is the variable per annum referee rate of interest (as
announced and adjusted by The Bank of Nova Scotia from time to time in the City
of New York) for United States dollar loans made by said Bank in the United
States and Puerto Rico. No representation is made by the Lender that the said
rate is the lowest or most favoured rate offered by said bank or Scotiabank de
Puerto Rico.
"LIBOR" means the rate of interest per annum at which deposits of equal or
like amounts in USA dollars are offered by the principal office of The Bank of
Nova Scotia in London, England, to prime banks in the London interbank market at
11:00 A.M. (London time),
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2 business days before the first day of such Funding Period for a period equal
to such Funding Period.
"Business Day" means (i) as to the LIBOR funded portions of the Loan a day
of the year on which dealings are carried on in the London interbank market and
banks are open for business in London and not required or authorized to close in
Puerto Rico and (ii) as to the 936 Funds and Base Rate portions of the Loan, a
day in which the Bank is not required or authorized to close for business in
Puerto Rico.
"Funding Period" the period between the day hereof and the day of payment
in full of the principal amount of the Term Note shall be divided into
successive periods, the first such period to commence on the date hereof, each
such period being a Funding Period.
The Term Loan Note shall bear interest from the date hereof until full
payment of the unpaid balance of principal thereof at an annual rate of interest
quoted by the Lender not less than 2 days prior to the first day of a Funding
Period and chosen by the Borrower not later than 10:00 a.m. of the first day of
a Funding Period for such intervals quoted by the Bank and acceptable to the
Borrower. The Bank shall quote to the Borrower as aforesaid the following rates
of interest (i) subject to the availability to the Bank of 936 Funds, an
indication of a rate based on 2 percentage points over the Bank's net cost of
said 936 Funds and (ii) if 30, 60, 90 or 180 days LIBOR Funds are available to
the Bank for such Funding Period, 2 percentage points over and above LIBOR, and
(iii) a fluctuating annual rate equal to 1 1/2 percentage points over and above
Base Rate, each change in such fluctuating rate to take effect simultaneously
with the corresponding change in the Base Rate. In the event that Borrower does
not notify the Bank of the desired interest rate option by 10:00 a.m. of the
first day of a Funding Period, the rate
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applicable to such Funding Period shall be a fluctuating annual rate equal to 1
1/2 percentage points over and above the Base Rate, each change in such
fluctuating rate to take effect simultaneously with the corresponding change in
the Base Rate. The preceding notwithstanding, the parties hereto may agree to a
fixed rate of interest on the Term Loan or on a portion thereof.
Interest rates under this Section will be reduced by 1/2 of 1% on that
portion of the loan which is secured by the purchase and subsequent pledge of
The Bank of Nova Scotia and/or Scotiabank de Puerto Rico Certificates of Deposit
pursuant to the provisions of Section hereof.
Anything herein to the contrary notwithstanding, the interest rate
applicable to any overdue principal under the Term Loan Note after the
expiration of the 30 day grace period provided in Section (a) hereof, shall be a
fluctuating annual rate equal to 4 percentage points over and above the Base
Rate, each change in such fluctuating rate to take effect simultaneously with
the corresponding change in the Base Rate.
Interest due on the Term Loan Note shall be payable on the 22nd day of
each month in arrears.
Upon reaching an agreement with, or upon notifying the Bank as
contemplated in this Section as to the rate of interest which is to apply to a
particular Term Credit Advance or Funding Period, as the case may be, such
notice and agreement shall be irrevocable and binding on the Borrower.
b. Each Operating Credit Advances made by the Bank to the Borrower
shall be evidenced by a promissory note of the Borrower to the order of such
Bank in substantially
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the form of Schedule II hereto (an "Operating Credit Note"; the Operating Credit
Notes and the Term Loan Notes are hereinafter sometimes collectively referred to
as the "Notes").
Operating Credit Advances made under each Operating Credit Note
shall be payable on demand. The Operating Line of Credit is subject to: (i) the
Bank's favorable periodic (but not less frequent than annual) review to verify
Borrower's compliance with the terms and conditions of this Loan Agreement and
the Loan Documents, the favorable fluctuation of borrower's account and the
absence of materially adverse change to the Borrower's financial condition and
(ii) that said facility shall be covered at all times by inventory and good
accounts receivable (up to 90 days) with a 50% margin.
Each Operating Credit Advance made by the Bank under an Operating Credit
Note shall bear interest from its date until full payment on the unpaid balance
of principal existing from time to time at a fluctuating annual rate equal to
one (1) percentage point over and above the Base Rate, each change in such
fluctuating rate to take effect simultaneously with the corresponding change in
the Base Rate.
Interest due on each Operating Credit Note shall be payable on the 22nd
day of each month.
Section 2.5. Optional Prepayments of the Term Loan Notes.
a. The Borrower may, upon at least 5 Business Days' prior written
notice to the Bank, prepay the Base Rate funded portion of the Term Loan Notes,
in whole or ratably in part with accrued interest to the date of such prepayment
on the amount prepaid, provided, that each such partial prepayment shall be in
principal amount of not less than $50,000.00. The prepayment of the portion of
the Term Loan Notes funded with 936 Funds or LIBOR Funds may
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only be made on the last day of the corresponding Funding Period and only upon
at least 5 Business Days' prior written notice of the Borrower to the Bank.
Prepayments shall be applied to the principal installments of the Notes in the
inverse order of maturity.
Subject to the preceding paragraph, if the portion of the Loan being
prepaid consists of more than one interest rate option, the Borrower may
designate which portion of the Term Loan shall be prepaid.
b. In view of the fact that a prepayment by Borrower in whole or in
part of the Term Loan would result in an undue burden and cost to the Bank under
the terms of its commitment to secure funds, Borrower agrees that in the event
Borrower makes such a prepayment, or in the event that the Lender declares all
sums due and payable under Section hereof, then Borrower agrees to promptly
indemnify the Bank in an amount equal to the difference between (i) the interest
cost to the Bank expressed in basis points of the funds then being prepaid by
the Borrower, and (ii) the interest cost to the Bank expressed in basis points
at the time of such prepayment for like funds with (a) a maturity equal to the
maturity date of the Funding Period being prepaid and (b) for an amount
substantially equal to the amount being prepaid (New Loan). For the purpose of
determining such penalty, the excess of (i) over (ii) shall first be multiplied
by the amount of the prepayment, the product thereof divided by 360 days or 365
days as appropriate and quotient thereof in turn multiplied by the days
remaining of the applicable Funding Period.
c. Additional Prepayment Penalty.
The Borrower shall, in addition to any amounts due under subsection
(b) above, pay to the Lender a fixed one (1) percentage point prepayment penalty
on the amount prepaid.
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Section 2.6. Mandatory Supplemental Prepayments and Reserves. Anything in
this Loan Agreement or in the Term Loan Note(s) to the contrary notwithstanding,
in the event that there exists Excess Net Free Cash Flow, as said term is
hereinafter defined, as of the end of any of Borrower's fiscal years, Borrower
shall, (i) within 150 days after the end of each of said fiscal years, apply 30%
of the Excess Net Free Cash Flow up to a maximum of US$1,000,000 in any fiscal
year (the "Annual Amount") and up to an aggregate amount of US$8,000,000 during
the term of the Loan to the prepayment of the Term Loan Note, or (ii) place said
Annual Amount up to the aforesaid maximum amounts in Acceptable Investments, as
said term is hereinafter defined. In the event the Borrower elects to place the
Annual Amount in Acceptable Investments, Borrower shall furnish to Bank proof of
the purchase of such investments on or before the aforesaid 150th day and
thereafter on the 211th day after the end of Borrower's fiscal year pledge the
instruments evidencing such Acceptable Investments to the Bank pursuant to
pledge agreements in form of Schedule III hereof as security for the repayment
of the Term Loan.
Any prepayments of the term Loan Note made pursuant to this Section shall
be applied to the principal installments of the Term Loan Note in the inverse
order of maturity.
Subject to the preceding paragraph, if the portion of the Loan being
prepaid consists of more than one interest rate option, the Borrower may
designate which portion of the Loan shall be prepaid.
Borrower agrees that during each of Borrower's fiscal years during the
term of this Loan, Borrower shall utilize or hold in reserve as hereinafter
provided, an amount at least equal to 5% of Borrower's annual revenues (net of
promotional allowances) for the replacement of
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Borrower's furniture, fixtures and equipment (hereinafter "F.F.&E."). From the
date hereof and not later than 150 days after the end of each Borrower's fiscal
years, Borrower shall retain an amount, if any, equal to the difference between
the amount actually expended by Borrower in the prior fiscal year for F.F.&E.
and 5% of the Borrower's annual revenues (net of promotional allowances) as
shown on the audited financial statements required to be furnished by Borrower
to Bank pursuant to the provisions of Section (a) hereof, such funds to be held
by the Borrower as a separate reserve account on its books and records for the
future replacement of Borrower's F.F.&E. used in its hotel and casino operations
(the amount so expended in the prior fiscal year and the reserve money being
hereinafter collectively referred to as the "Replacement Reserve").
The term "Excess Net Free Cash Flow" means the amount of Borrower's net
after-tax profits for a given fiscal year, plus depreciation, less the debt
service of this Loan and the Banco de Ponce, Citibank N.A. and the Merrill Lynch
indebtedness and the amount of the Replacement Reserve.
"Fiscal Year" of the Borrower shall mean the period comprised between July
1 to June 30.
The term "Acceptable Investments" shall mean readily realizable securities
and instruments acceptable to the Bank carrying an AA or better rating assigned
to that given type of security by Standard & Poors Corporation or Moody's
Investor Service, Inc., provided however, that no single issue or security shall
account for more than 50% of the Acceptable Investments, excluding investments
in FDIC-insured bank certificates of deposit.
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Section 2.7. Payments and Interest Computations. The Borrower shall make
each payment of principal and/or interest due hereunder not later than 12:00
noon (San Juan, Puerto Rico time) on the Business Day when due in lawful money
of the United States of America to the Lender at its address referred to in
Section hereof, by checks drawn against banks having a local office.
The Borrower shall pay any taxes, levies, imposts, duties or other charges
of any nature, other than the Bank's income taxes or any tax, levy, impost, duty
or other charge in the nature of income tax, imposed on the Bank by reason of
its ownership of the Notes or the pledge to it of the Mortgages.
In the event that the Borrower is obligated at any time to make any
payment of additional amounts pursuant to this Section, the Lender shall give
notice thereof to Borrower, and Lender agrees thereupon promptly to negotiate in
good faith with the Borrower with a view to finding a satisfactory alternative
method of payment to avoid payment of such additional amounts. If at the end of
such negotiations the parties hereto have been unable to achieve a mutually
acceptable method to avoid such payments by the Borrower, then the Borrower
shall have the right to prepay the Term Loan Note in its entirety upon 30 days
notice to the Lender subject to the provisions of Section (b). This payment
provision shall survive the repayment of the Loan and shall remain in full force
and effect until the applicable statute of limitations has elapsed.
The Borrower hereby authorizes the Bank, after the occurrence of an Event
of Default if and to the extent payment owed to the Bank is not made when due
under any Loan Document to charge from to time against any account of the
Borrower with such Bank the amount so due.
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All computations of interest under the Notes and fees hereunder shall be
made by the Bank on the basis of a year of 360 days for the 936 and LIBOR funded
Advances and of a 365 day year for conventionally funded advances, both for the
actual number of days elapsed.
Section 2.8. Business Day. Whenever any payment to be made hereunder shall
be stated to be due, or whenever the last day of a Funding Period would
otherwise occur, on a day other than a Business Day, such payment may be made,
and the last day of such Funding Period shall occur, on the next succeeding
Business Day, and such extension of time shall in such case be included in the
computation of payment of interest or fees, as the case may be.
Section 2.9. Funding Procedure. The Borrower hereby acknowledges that, in
the even that any Advance is funded as hereinabove provided with LIBOR funds or
with 936 Funds, the Bank, at its discretion and in order to fund such Advance,
may purchase deposits consisting of LIBOR funds or 936 Funds, as the case may
be, in an aggregate amount equal to the Advance being so funded and with a
maturity coterminous with the maturity of such Advance or of the corresponding
Funding Period.
Section 2.10. Increased Costs. If, due to either (i) the introduction of
or any change (including, without limitation, any change by way of imposition or
increase of any reserve requirements) in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining Advances made to the Borrower hereunder, then the
Borrower shall from time to time, upon demand by the Bank, pay the Bank
additional amounts sufficient to indemnify the Bank against such increased cost.
A certificate supported with the
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appropriate data as to the amount of such increased cost submitted to the
Borrower by the Bank, absent manifest error, shall be conclusive and binding for
all purposes.
Section 2.11. Illegality. Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the interpretation of
any law or regulation shall make it unlawful, or any central bank or other
governmental authority shall assert that it is unlawful for the Bank to perform
its obligations hereunder to fund or maintain Advances hereunder with 936 Funds
or LIBOR Funds, as the case may be, then, on notice thereof and demand therefor
by the Bank to the Borrower, (i) the obligation of the Bank to fund or maintain
such Advances with 936 Funds or LIBOR Funds, as the case may be, shall terminate
and (ii) the Bank shall immediately convert all outstanding Advances funded with
936 Funds or LIBOR Funds, as the case may be, into Advances funded with funds
other than 936 Funds or LIBOR Funds.
In the event that the Bank suffers any loss or expense as a result of the
conversion of the Advances as aforesaid, the Borrower shall, upon demand by the
Bank, pay to the Bank additional amounts sufficient to cover said loss or
expense. A certificate, supported with appropriate data as to the amount of such
loss or expense submitted to the Borrower by the Bank, absent manifest error,
shall be conclusive and binding for all purposes.
Section 2.12. Increased Cost Exception. Nothing contained in Sections and
above shall be construed as requiring payment by the Borrower of (i) an amount
due thereunder and already paid by Borrower to Lender, or; (ii) an amount
otherwise due thereunder if the increased cost or the unlawfulness of the
performance is caused by the Lender's acts or omissions.
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Section 2.13. 936 Indemnity. In the event the use given by the Borrower to
the Term Credit Advances funded with 936 Funds or the conduct of its business
were to disqualify said portion of the Loan as an "eligible activity", the
Borrower shall indemnify the Lender for any and all taxes, damages, fees, costs
and expenses as may result from said disqualification.
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ARTICLE III
CONDITIONS OF LENDING
Section 3.1. Conditions Precedent to Initial Advances. The obligation of
Bank to make its initial Advance is subject to the conditions precedent that the
Bank shall have received on or before the day of the initial Advance the
following, each dated such day, all in form and substance satisfactory to the
Bank:
a. The Note(s) properly executed by the Borrower to the order of the
Bank.
b. The following security instruments, duly executed by the parties
identified below:
(i) a Collateral Assignment of the rents payable under the
concessions, agreements and leases listed in Exhibit E hereof and of Borrower's
accounts receivable creating a continuing first priority security interest
covering all of said assigned collateral and a corresponding Statement of
Assignment of Accounts Receivable;
(ii) a legally valid pledge of: (x) the first demand mortgage note
(the "Fee Mortgage Note") in the principal amount of US$30,000,000 secured by a
recordable first mortgage on real property described in Exhibit A hereof and (y)
the first demand mortgage note (the "Leasehold Mortgage Note") in the principal
amount of US$5,500,000 secured by a recordable first mortgage of the lease of
the real property described on Exhibit B hereof; said
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Leasehold Mortgage Note and Fee Mortgage Note, being hereinafter collectively
referred to as the "Mortgage Notes".
(iii) a recordable first mortgage (the "Fee Mortgage") substantially
in the form of Exhibit F hereof on the real property described in Exhibit A
hereof securing the Fee Mortgage Note.
(iv) a recordable first leasehold mortgage (the "Leasehold
Mortgage") substantially in the form of Exhibit G hereof on the lease of the
real property described on Exhibit B hereof securing the Leasehold Mortgage
Note.
(v) A subordination agreement from Williams Hospitality Management
Corp. ("Williams"), in form of Exhibit H hereof (the "Subordination Agreement").
(vi) A recordable Deed of Attornment and Non Disturbance and Consent
to Constitution of Leasehold Mortgage ("Deed of Attornment") in the form of
Exhibit I hereof.
All instruments listed in subparagraph (b)(i) through (vi) (both
inclusive) and any amendments, waivers or substitutions thereof, hereinafter
referred to as the "Loan Documents".
c. evidence that all other actions necessary or, in the opinion of the
Bank, desirable to perfect and protect the security interests created by the
foregoing security instruments have been taken.
d. Certified copies of the resolutions of the Board of Directors of the
Borrower approving the transaction contemplated hereunder and the execution and
delivery of the Loan Documents.
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e. A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of such Loan
Party authorized to sign each Loan Document to which it is a party and the other
documents to be delivered by it hereunder.
f. A favorable opinion of Messrs. Ledesma, Palou and Miranda, counsel for
the Borrower, in substantially the form of Exhibit J and as to such other
matters as the Bank may reasonably request.
g. A certified copy of the Management Agreement between Borrower and
Williams Hospitality Management Corp., with an unconditional acknowledgement
that (i) said Management Agreement is in full force and effect and that no event
of default has occurred thereunder and (ii) that said agreement may be
terminated by the Lender pursuant to the terms of the Subordination Agreement
appearing as Exhibit H hereof.
h. A certificate of good standing dated not more than 30 days prior to the
execution of this Agreement showing that Borrower is in good standing in the
jurisdiction of its incorporation and in all other jurisdictions in which it is
required to be qualified to transact business.
i. As to the portion of the Term Loan funded with 936 Funds, a copy of the
ruling issued by the Department of the Treasury of the Commonwealth of Puerto
Rico as requested by the Borrower under certain ruling request letter marked as
Exhibit K hereof.
j. Evidence of the insurance required by Section hereof in the form of
certified copies or duplicate originals thereof and a broker's certificate that
said policies are in full force and effect with the premiums prepaid and the
Standard Mortgage endorsements attached thereto.
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k. A duly executed 936 representation letter substantially in the form of
Exhibit L hereof.
Section 3.2. Conditions Precedent to All Advances.
(a) The obligations of the Bank to make an Advance on the occasion of each
borrowing (including the initial Advance) shall be subject to the further
conditions precedent that on the date of such Advance the following statements
shall be true and the Bank shall have received a certificate signed by the chief
executive officer or executive vice president of the Borrower, dated the date of
such Advance, stating that:
(i) The representations and warranties contained in Section of this
Agreement and in the Loan Documents to which it is a party are correct in all
material respects on and as of the date of such Advance as though made on and as
of such date, and
(ii) No event has occurred and is continuing, or would result from
such Advance, which constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or time lapse or both.
(b) The Bank shall have received such other approvals, opinions or
documents as the Bank may reasonable request.
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ARTICLE IV
THE COLLATERAL
Section 4.1. The Security. The Loan Documents shall secure the full and
complete payment of the Loan as evidenced by this Loan Agreement, the Notes, as
well as all interest thereon, any costs, expenses and reasonable attorneys' fees
that may become due and payable upon the occurrence of an Event of Default and
any other amounts payable and/or reimbursable to the Lender pursuant to this
Loan Agreement and the other Loan Documents. The Lender, with or without notice
to or consent of the Borrower, may take (but Borrower shall not be obligated to
furnish) from any other person or persons additional securities for the Loan,
without impairing, by so doing, any other collateral guarantees and securities
Lender may hold.
ARTICLE V
BORROWER'S AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that from the date hereof and until
payment in full of the principal of and the interest on the Loan, as evidenced
by the Notes and secured by the Mortgage Notes, and the discharge of all other
obligations hereunder and under the other Loan Documents, Borrower shall, unless
the Lender otherwise consents in writing:
Section 5.1. Corporate Existence. Preserve and keep in full force and
effect its corporate existence, its qualification to do business and its good
standing in the Commonwealth of Puerto Rico.
Section 5.2. Business. Continue to conduct and operate its business
substantially as conducted and operated during the present calendar year,
maintaining a substantial portion of
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its banking and banking related business with the Lender, it being understood
that Borrower's payroll accounts may be maintained at other banks.
Section 5.3. Licenses, Permits and Franchises. Maintain, preserve and
protect at all times all licenses, permits and franchises, particularly those
pertaining to the hotel and casino it currently operates and the tax exemption
grant it enjoys (subject to on-going tax grant conversion negotiations with the
Secretary of the Treasury of Puerto Rico). Comply with each and all of the
terms, conditions and requirements of such licenses, permits, franchises, and
grants.
Section 5.4. Properties. Preserve all of its assets and properties that
are used in the conduct of its business particularly those securing the Loan,
and keep the same in good repair, working order and condition, and from time to
time make or cause to be made all needed and proper repairs, renewals,
replacements, betterments and improvements thereto to preserve and maintain
their value, normal wear and tear excepted, so that the business carried on in
connection therewith may be properly conducted at all times.
Section 5.5. Insurance. Maintain all properties (real and personal)
insured at all times by responsible, reputable and financially sound insurance
companies or associations in such amounts and covering loss or damage by fire,
earthquake and windstorm, casualty, and such other risks as are usually carried
by companies engaged in similar businesses and owning similar properties in
Puerto Rico as the Borrower and maintain adequate (in the reasonable opinion of
the Bank) business interruption insurance and insurance against liability to
persons for such risks and hazards and in such amounts as are usually carried by
companies engaged in similar businesses; all such policies shall name the Bank
as insured party and provide for payment of
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the proceeds thereof to the Borrower and the Bank, and shall contain an
endorsement providing that the insurance shall not be cancelable except upon 10
days prior written notice to the Bank and from time to time at the request of
the Bank, Borrower shall deliver to the Bank a detailed schedule indicating all
insurance policies then in force; provided, however, that if an Event of Default
has not occurred hereunder, under the Notes or under the other Loan Documents,
proceeds received or to be received under the aforesaid policies shall be made
available to the Borrower for restoration subject to the relevant provisions of
the Fee Mortgage and/or the Leasehold Mortgage.
Section 5.6. Records - Financial Statements. Keep at all times in Puerto
Rico complete books of record and accounts, and an accounting system, in
conformity with generally accepted accounting principles and with the Uniform
System of Accounts for Hotels adopted by the American Hotel and Motel
Association, as revised from time to time, with full, true and correct entries
of all dealings and transactions in relation to its business and affairs.
Reasonably protect such books and accounts against loss or damage. During the
term of the Loan have its books and accounts audited and the financial
statements showing its financial condition and the results of its operations
during the preceding fiscal year, together with any supporting schedules,
certified by Ernst & Whinney or by an independent certified public accountants
of recognized national standing selected by Borrower and reasonably acceptable
to the Lender.
Section 5.7. Inspection. Permit the Lender, its agents and/or
representatives to visit and inspect at reasonable times, upon prior notice,
Borrower's assets, properties, books of record and accounts, and to discuss the
same with Borrower's chief operating officer.
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Section 5.8. Payment of Taxes. Timely file or cause to be filed any and
all federal, state and municipal tax returns and reports. Timely pay and
discharge or cause to be paid and discharged any and all taxes and assessments,
and any and all federal, state and municipal governmental impositions, fees,
charges and/or levies (including but not limited to: any income taxes, municipal
taxes, "patentes", real estate and personal property taxes, social security,
unemployment State Insurance Fund premiums, and the like) imposed upon itself,
its operations, or upon its income and profits, or upon any of its properties,
real, personal or mixed, or upon any part thereof, or upon its payroll, within
30 days from the date the pertinent invoice is issued or the last day on which
such taxes may be paid without incurring any penalty. Borrower shall provide
Lender with evidence acceptable to Lender of the aforesaid payments.
Notwithstanding this clause, Borrower shall have no obligation to pay such taxes
as long as it shall be contesting the validity or amount of any such taxes in
good faith and by appropriate proceedings pursuant to and in compliance with the
provisions of Section 10.2 hereof.
Section 5.9. Laguna Wing. Comply in all material respects with each and
all of the terms and conditions of the lease it enjoys in connection with the
real estate property described in Exhibit B hereto and do all things necessary
to keep and maintain such lease in full force and effect and free of defaults.
Section 5.10. Statutory Compliance. Comply in all material respects with
all applicable statutes, regulations, judgments, decrees, resolutions and orders
of, and all applicable restrictions imposed by, any and all governmental
entities and/or authorities, federal, state or municipal, judicial or
administrative, applicable to the conduct of its businesses and activities, the
ownership of its properties, its licenses, permits, franchises and/or its tax
exemption grants, and with the
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terms of the same, particularly those pertaining to the hotel and the casino it
currently operates, unless it is contesting by appropriate proceedings the
validity and/or enforceability of the same with respect to itself.
Section 5.11. Contractual Compliance. Pay and discharge all of its
indebtedness, trade bills and obligations promptly and in accordance with their
terms and/or the normal and customary trade terms unless it is contesting the
same by appropriate proceedings. Substantially comply with the terms and
conditions of any indentures, agreements, contracts or other instruments to
which it is a party or which may affect its assets or properties.
Section 5.12. Cost Overruns. Promptly pay and discharge from its own
resources any and all construction cost overruns incidental to the Casino
expansion project.
Section 5.13. Full Compliance. Comply with each and all of the terms of
this Loan Agreement and the other Loan Documents.
Section 5.14. The Collateral Documentation. Borrower, at its own cost and
expense, shall forthwith and without any delay, execute, deliver, file and
refile any certifications, statements, deeds, and other documents and
instruments that may be required, necessary and proper to record and perfect the
Loan Documents which are required to be recorded by this Loan Agreement and the
other Loan Documents, or delivered in connection with the same, and shall also
forthwith and without any delay take any required, necessary and/or proper
actions to attain such purposes, upon being informed of the need to do so or
upon being so required by the Registrar through the Lender or its counsel or
reasonably required by the Lender.
Section 5.15. Preservation of Rank. Borrower, at its own cost and expense,
shall forthwith and without any delay, take all required, necessary and proper
actions as may be
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required by the Registrar or reasonably required by the Lender to protect and
preserve the existence and first rank (subject to the Permitted Exceptions
listed in Exhibit C hereof and to the prior assignment of the incremental
revenue from slot machines made to Bancode Ponce dated June 28, 1988 under
affidavit 646 of notary W. Del Valle Armstrong) of the Loan Documents requiring
recordation by this Loan Agreement, other than Deed of Subordination and the
Deed of Attornment.
ARTICLE VI
BORROWER'S NEGATIVE COVENANTS
Borrower covenants and agrees that from the date hereof and until payment
in full of the principal of and the interest on the Loan as evidenced by the
Mortgage Notes, and all other obligations hereunder and under the other Loan
Documents, that Borrower shall not, unless the Lender otherwise consents to in
writing:
Section 6.1. Liens. Incur, create, assume or suffer to exist any real or
personal property mortgage, pledge, title retention lien, charge, security
interest, financing statement, or any other lien or encumbrance of any nature
whatsoever other than the Permitted Exceptions appearing on Exhibit C hereof,
any legal, voluntary, involuntary or consensual liens or encumbrances, on any of
its assets or properties now or hereafter owned with a rank preferential to any
liens and encumbrances securing the Loan, except liens incurred in the ordinary
course of its hotel and casino business and the pre-existing Merrill Lynch and
Banco de Ponce indebtedness of US$3,500,000 each and the Citibank, N.A.
indebtedness of US$715,000, provided, however, that the Borrower may refinance
said pre-existing indebtedness, said
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refinancing to be for the same amounts and substantially for similar terms and
conditions and prevailing interest rates.
Section 6.2. Guarantees. Except for the guarantee in favor of Banco de
Ponce in the principal amount of $2,000,000 currently outstanding, guarantee,
assume, endorse or otherwise become or be responsible in any way for the
obligations of any other person, natural or juridical without the prior written
consent of the Lender, which consent shall not be unreasonable withheld.
Section 6.3. Properties. Sell, lease, sublease, transfer or alienate in
any manner a substantial part of its assets or stock. Dispose of, alter,
destroy, abandon, remove or use its assets or properties for any purpose other
than that for which it is now used, unless in the ordinary course of its hotel
and casino business.
Section 6.4. Merger, Consolidation. Liquidate, dissolve, merge into or
consolidate with any other corporation or entity.
Section 6.5. Conditional Sales. Incur any obligations under a purchase or
otherwise acquire any property subject to any conditional sale or title
retention agreement, unless in the ordinary course of its hotel and casino
business.
Section 6.6. Investments. Except as provided in Section , invest in,
purchase or hold any stock, other securities or any other evidence of
indebtedness of, lend or advance monies or credit to, any other person, natural
or juridical in excess of US$1,000,000, except in the ordinary course of its
hotel and casino business and except for direct obligations of the United States
of America, the Commonwealth of Puerto Rico and/or banks with a recognized sound
financial condition with a maturity date of less than a year from the date of
acquisition.
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No such investment shall be made unless the payments of Sections and hereof are
current.
Section 6.7. Leases. Lease or assume any lease for the use of any property
of any other person, natural or juridical, or enter into a similar agreement,
except those leases, subleases and/or concessions listed in Exhibit C hereof, or
leases, subleases and/or concessions entered into in the ordinary course of its
hotel and casino business.
Section 6.8. Dividends. Borrower shall not pay or declare any dividends or
make any advances to any parent, shareholder or affiliate of Borrower unless the
Borrower is at the time of any such payment or advance in compliance with the
provisions of Section and hereof. The provisions of the preceding sentence shall
not apply to up to US$15,500,000 of the proceeds of this Loan or the collateral
being returned to Borrower in connection with the refinancing of the existing
loan held by Ponce Federal.
Section 6.9. Operation of Business. Lease to a third party the operation
of its hotel and/or casino.
ARTICLE VII
NOTICES
Section 7.1. Addresses. Any and all notices, requests demands and other
communications that may be necessary, proper and/or convenient under this Loan
Agreement or any of the other Loan Documents shall conclusively be deemed given,
when given in writing (including telex, telecopier or similar writing), on the
date it is delivered to the officer set forth
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below and receipt acknowledged or if by mail on the fifth day after it is
deposited in the mail, postage prepaid, certified-return receipt requested,
addressed as set forth below:
a. If to the Lender
Scotiabank de Puerto Rico
Plaza Scotiabank
273 Ponce de Leon Avenue
Hato Rey, Puerto Rico 00917
Attention: A. Van Der Kley, President
FAX Number (809) 756-5410
with a copy to:
Brown, Newsom & Cordova
Plaza Scotiabank - 6th Floor
273 Ponce de Leon Avenue
Hato Rey, Puerto Rico 00917
Attention: E. Cordova Diaz, Esq.
FAX Number (809) 758-1030
b. If to Borrower
Posadas de Puerto Rico Associates, Incorporated
999 Ashford Avenue (Condado)
Santurce, Puerto Rico 00902
Attention: H. Andrews
FAX Number (809) 721-0968
with a copy to:
WMS Industries Inc.
767 Fifth Avenue - 23rd Floor
New York, New York
Attention: Barbara M. Norman, Esq.
FAX Number (212) 319-9789
Section 7.2. Change of Address. Any of the parties may change the officer
and/or agent authorized to receive any notices, requests, demands and other
communication and/or its
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mailing address, by giving notice to the other party pursuant to this paragraph,
as long as the mailing address is within the United States of America.
Section 7.3. Borrower's Mandatory Notices and/or Communications. Borrower
shall, during the term of the Loan and until full and final payment of all
amounts due thereunder:
a. Furnish to the Lender, not later than 90 days after the end of
Borrower's fiscal year (currently, June 30th of each year), an audited financial
statement, including a balance sheet, a statement of income and auditor's
report, covering the operations of the Condado Plaza Hotel and Casino.
b. Furnish to the Lender, each year, beginning with the fiscal year
commencing July 1, 1988, with evidence from the Borrower's accounting records,
that the Borrower has filed all returns and paid all taxes except those being
contested pursuant to Section 10.2 hereof due on its properties and operations
for the prior year and with a letter issued by the Borrower's certified public
accountants and/or auditors to the effect that they have examined the accounting
records of the Borrower and based on their examination of such financial
accounting records have determined that all federal (if applicable), Puerto Rico
and municipal income and property tax returns were filed, and the corresponding
taxes due were paid. Further, that all additional assessments of which the
certified public accountants have been informed have been paid in full.
c. Furnish to the Lender a copy of its quarterly financial
statements within 45 days after the end of each quarter. Such interim statements
shall include a summarized aging of accounts receivable and inventories report,
a balance sheet and a statement of income and surplus for such quarter and for
the fiscal year to date, and shall, except for casino receivables,
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be in reasonable detail, subject to year end and audit adjustments, unaudited
but certified by Borrower's chief financial officer or chief operating officer.
The listing of casino accounts receivable shall be held by the Borrower and
remain, in the absence of the occurrence of an Event of Default hereunder,
confidential provided however, that if an Event of Default shall occur said list
shall be delivered to the Bank immediately upon demand.
d. Furnish to the Lender upon delivery of the annual and quarterly
financial statements, a certification issued and signed by its chief financial
officer or its chief operating officer to the effect that to the knowledge of
such officer no event of default specified in Article VIII hereof has occurred,
and that no event, which upon notice or lapse of time, or both, would constitute
an Event of Default as specified in said paragraph has occurred. In case that
any such Event of Default has occurred, the certification shall describe and
specify the nature of such condition, act or event, indicate when it occurred
and state the actions being taken or to be taken to cure the same.
e. Furnish to the Lender a copy of any pleadings and/or notices
within 10 days after receiving service of summons or written notice regarding
any proceedings, judicial or administrative, including any arbitration
proceedings, by or before any governmental entity or authority, or before an
arbitrator, against or affecting Borrower: (i) seeking a money award in excess
of US$100,000; (ii) seeking to foreclose or realize upon Borrower's rights,
assets or properties, real or personal; (iii) materially and adversely affecting
any licenses, permits and/or franchises (including the use of the bridge
connecting the properties described in Exhibit A and B hereof) and/or the tax
exemption grant that Borrower may enjoy; (iv) seeking a relief which might
result, if granted, in any material adverse change in Borrower's operations,
business,
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assets, properties, licenses, permits, franchises, tax exemption grant or in its
condition, financial or otherwise; or (v) materially and adversely affecting any
of the collateral or the Loan Documents securing the Loan.
f. Furnish to the Lender a broker or issuer certified copy or
duplicate originals of each of its insurance policies required under Section
hereof, together with any endorsements thereto.
g. Furnish promptly to the Lender any information related to this
Loan Agreement and/or the other Loan Documents it may reasonably request
regarding Borrower's operations, business affairs, financial condition, and/or
any of Borrower's covenants, agreements and/or undertakings under this Loan
Agreement and/or any of the Loan Documents and/or any proceedings mentioned in
subparagraph (e) hereinbefore.
h. Notify the Lender in writing of any condition, act or event which
constitutes an Event of Default under this Loan Agreement or any of the other
Loan Documents, or which with notice and/or lapse of time, would constitute an
Event of Default, within the 10 days following Borrower obtaining knowledge of
the occurrence of the same.
Section 7.4. Waiver. Except as provided in this Loan Agreement or in any
of the Loan Documents, Borrower, does hereby waive any right of presentment,
protest and/or demand for payment, any right to any notices of protest, default,
dishonor, payment, nonpayment, extension, change in the time of payment and/or
the manner, place or terms of payment, exchange, release and/or surrender of all
or any of the collateral securities or any parts thereof, compromise and/or
settlement with the debtors or any of them and/or any other person or persons,
or of subordination of any payments or any other rights under this Loan
Agreement or any of the
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other Loan Documents, or any part thereof, to the payment of any other
obligation, debt or claim which may at any time be due or owing to the Lender
and/or to any other person or persons, and/or of the sale and/or purchase of all
or any part of the collateral securities at any public, private or notarial sale
or at any broker's board, and any and all other formalities to which it might
otherwise be entitled to, subject to any notices required hereinafter.
ARTICLE VIII
DEFAULT
Section 8.1. Events of Default. Each of the following shall continue an
event of default (herein an "Event of Default"):
a. If the Borrower fails to pay any installment of principal and/or
interest for a term in excess of 30 days after its due date.
b. If Borrower fails to pay any monthly rent under the lease
agreement regarding the real estate property described in Exhibit B hereto when
required within applicable grace periods.
c. If Borrower's use permit regarding either the real estate
property described in Exhibit A or the lease it enjoys over the real estate
property described in Exhibit B hereto is cancelled and/or terminated.
d. If the casino license is cancelled or otherwise impaired or
terminated and Borrower is unable to have the same reissued or to obtain a new
one within the 6 months following such cancellation or termination.
e. Any material representation or warranty made by Borrower in any
of the Loan Documents or by Borrower (or any of its officers) in any
certificate, agreement, instrument
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or statement contemplated by or made or delivered pursuant to or in connection
with any of the Loan Documents, shall prove to have been incorrect in any
material respect when made;
f. Borrower shall fail to perform or observe any other term,
covenant or agreement contained in any of the Loan Documents on its part to be
performed or observed and any such failure remains unremedied for 30 days after
written notice thereof shall have been given to Borrower by the Lender, provided
however, that if Borrower has commenced and is actively pursuing the cure of the
default, and said delay does not otherwise materially adversely affect or impair
the Bank's position hereunder, said 30 day term shall be extended until such
term as may be reasonably required to cure said default; or
g. Borrower shall fail to pay any material indebtedness (other than
under the Loan Documents or other than representing the deferred purchase price
of property or services except where the obligation to pay such deferred
purchase price is evidenced by a promissory note or any other type of documented
suppliers credit) owing by Borrower, of any interest or premium thereon, when
due (or, if permitted by the terms of the relevant document, within any
applicable grace period), whether such indebtedness shall become due by
scheduled maturity, by required prepayment, by acceleration, by demand or
otherwise; or Borrower shall fail to perform any material term, covenant or
agremeent on its part to be performed under any material agreement or instrument
(other than the Loan Documents) evidencing or securing or relating to any
indebtedness owing by Borrower when required to be performed (or, if permitted
by the terms of the relevant document, within any applicable grace period), if
the effect of such failure is to accelerate, or to permit the holder or holders
of such indebtedness or the trustee or
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trustees under any such agreement or instrument to accelerate, the maturity of
such indebtedness;
or
h. Any of the Loan Documents shall, at any time after their
respective execution and delivery and for any reason, cease to be in full force
and effect or shall be declared to be null and beyond final appeal, or the
validity or enforceability thereof shall be successfully contested by the
Commonwealth of Puerto Rico, or any agency or instrumentality thereof; or
i. Borrower shall become insolvent, or admit in writing its
inability to pay its debts as they mature, or make any assignment for the
benefit or creditors, or Borrower shall apply for or consent to the appointment
of any receiver, trustee, or similar officer for it or for all or any
substantial part of its property, or such receiver, trustee or similar officer
shall be appointed without the application or consent of Borrower and such
appointment shall continue undischarged for a period of 60 days, or Borrower
shall institute (by petition, application, answer, consent or otherwise) any
bankruptcy, insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or similar proceeding relating to it under the laws of
any jurisdiction or any such proceeding shall be instituted (by petition,
application or otherwise) against Borrower and shall remain undismissed for a
period of 60 days, or any judgment, writ, warrant of attachment or execution or
similar process shall be issued or levied against material assets of Vorrower
and such judgment, writ or similar process shall not be released, vacated or
fully bonded within 30 days after its issue or levy; or
j. If the Borrower fails for a term in excess of 15 days after being
so requested in writing to reimburse to the Lender any amounts that the latter
has properly
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incurred, expended and/or disbursed becauseof the Borrower's failure to comply
with any of its obligations, covenants and/or undertakings under this Loan
Agreement or under the Mortgage.
k. Other than as may be reasonably required by an event of force
majeure or to restore and/or repair after a casualty loss, if Borrower's usual
hotel business and/or operation is liquidated, sold, would up, terminated or
suspended (including suspension due to construction of new facilities) or if
Borrower is otherwise unable to continue with the same.
l. If any judgment, injunction and/or decree is entered and/or
issued and becomes final and beyond appeal against Borrower, preventing the same
from continuing to operate a material part or all of its business affairs in the
normal course of business.
m. If any writ to secure the effectiveness of a judgment is issued
against Borrower affecting a material portion of its assets and/or properties or
preventing it from operating its business in the normal course, and Borrower
fails to have the same stayed, quashed, cancelled and/or set aside for a term in
excess of 60 days after being served with a copy of the same.
n. If a judgment, decree or order final and beyond appeal is entered
and/or issued against Borrower in an amount in excess of $100,000 remains
unsatisfied and becomes executory.
Section 8.2. Acceleration.
a. If Borrower fails to pay any installment of principal or interest
within the 30 days following its due date, the Lender may, at its option, during
the continuance of such dafault, notify the Borrower that it has accelerated the
due date of the Loan and, upon such notice, the balance of the Loan including
anya ccrued interest shall become immediately due,
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liquid and payable and the Lender may proceed thereafter to enforce collection
by summaryproceedings or otherwise and to foreclose any and all collateral
guarantees.
b. If an Event of Default occurs, except a failure to pay any
installment of principal or interest, the Lender may, at its option, during the
continuance of such Event of Default, notify the Borrower of its intention to
accelerate the due date of the Loan and, thus, to declare the balance of the
Loan as evidenced by the Mortgage Note to be due and payable. If the Event of
Default is not cured within the 10 days following the notice, then the balance
of the Loan, including any accrued interest, shall become immediately due and
payable and the Lender may proceeed thereafter to enforce collection by summary
proceedings or otherwise and to foreclose any and all collateral guarantees.
Section 8.3. Other Remedies. If an Event of Default occurs, in addition to
the remedies provided in the above Section the Lender shall also be entitled to:
a. Under court proceedings for the foreclosure of the Mortgage or a
collection action hereunder have a receiver appointed as a matter of right
withut regard to Borrower's solvency, without having to post a bond, which right
is hereby waived, for the purpose of preserving the hotel and casino and related
operations and/or any collateral securities and preventing any waste of assets.
All expneses incurred in connection with such appointment, or in the protection
and preservation fo the hotel and/or the casino and/or any of the collateral
securities shall be chargeable to and payable by the Borrower.
b. Refuse to disburse any amounts under this Loan Agreement that has
not been disbursed and/or to stop the payment of any checks issued pursuant to
the same that hasnot been cashed.
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c. Any other remedies and rights provided in this Loan Agreement or
any of the other Loan Documents.
d. Any other remedies at law or equity.
ARTICLE IX
CHARGES AND EXPENSES
Section 9.1. Fees and Expenses. Any and all legal fees, internal revenue
stamps and vouchers, notarial fees, charges and expenses directly or indirectly
related to the execution and/or the issuance of any certified copies and/or the
recordation in thepertinent REgistry of any deeds of mortgage, cancellation,
and/or subordination, of any aclaratory deeds related thereto or of any of the
other Loan Documents or related or incidental to this Loan Agreement and to the
issuance of any title-mortgage insurance policies, as well as any fees, charges
and expenses to be incurred in order to comply with the terms and conditions of
the Loan Agreement and the other Loan Documents, shall be for the exclusive
account of the Borrower and shall be due and payable at the closing fo this Loan
Agreement.
The Lender shall be entitled to select the Notary Public before whom any
deeds and documents shall be executed at the closing fo the Loan.
Section 9.2. Collection Fees and Expenses. In the event the Lender resorts
to any court to colelct in full or in part the principal amount of the Loan
and/or any interest accrued thereon or othermonies due thereunder, the Borrower
shall pay to the Lender the aggregate cost of the disbursements, expenses and
reasonable attorneys' fees which may be incurred by the Lender, which amount
shall immediately become payable upon the filing of the petition or complaint
and shall become due and payable upon the entry of judgment in favor of the
Lender.
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ARTICLE X
MISCELLANEOUS
Section 10.1. Mortgage Title Insurance. Prior to the disbursement of the
Loan, Borrower shall deliver to the Lender a mortgage title insurance policy in
favor of the Lender, issued by a title insurance company acceptable to the
Lender, free and clear of any exceptions and any prior liens, encumbrances,
clouds and/or defects on the title (except as may be otherwise stated in Exhibit
C hereof) for the full amount of the Mortgage Notes and any credits provided in
the Mortgage, provided however, that the mortgage title insurance applicable to
the Mortgage on the real property described in Exhibit A hereof shall be insured
by Chicago Title Insurance Company and reinsured with First American Title
Insurance Company, for 50% of the full amount of the Mortgage.
Section 10.2. Borrower's Right to Contest. Borrower's right to contest
hereunder shall be governed by the provisions of Paragraph TENTH of the Fee
Mortgage and related provisions.
Section 10.3. Set Off. Upon the occurrence of an Event of Default and upon
due acceleration of the Loan, or upon the maturity of the Loan or of any amount
due hereunder, the Lender may, at its option, with or without Borrower's
consent, set off against any interest or other amounts owed by the same and
thereafter to the principal of the Loan as evidenced by the Mortgage Note, any
and all obligations and/or liabilities of the Lender to the Borrower, direct or
indirect, absolute or contingent, now existing or hereafter arising.
Section 10.4. No Joint Venture. Nothing herein contained shall constitute
or be construed to be or to create a joint venture and/or a partnership between
the Borrower and the
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Lender. The Lender does not assume and shall not bear any business risks
directly or indirectly related to the Borrower.
Section 10.5. Lender's Optional Right to Pay or Perform in Borrower's
Stead. If the Borrower fails or has failed to make any payment or to perform any
act required to be made or performed under this Loan Agreement or any of the
other Loan Documents, the Lender may, subject to the provisions of Section
above, in the use of its sole discretion, upon 15 days prior notice to or demand
upon the Borrower, make such payment or perform such act. In such event, any
amounts properly paid and any expenses properly incurred by the Lender shall be
reimbursed by the Borrower with interest at a rate to be determined as provided
in this Loan Agreement for the principal balance, such payment by the Lender
shall not cure the Borrower's default because of its failure to make such
payment or to perform such act.
Section 10.6. Assignment and Participation.
a. The Lender may negotiate and/or assign the Notes and/or the
Mortgage Notes provided any such assignee, holder or participant is an "eligible
institution", as said term is defined in the Puerto Rico Tax Incentives Act and
regulations promulgated thereunder. In that event, the Lender shall give prompt
written notice of any such negotiation and/or assignment, specifying the
assignee's name and address, to the Borrower. If it does so, such negotiation
and/or assignment shall include all rights, powers, privileges and collateral
securities under this Loan Agreement and the other Loan Documents and Lender
shall obtain, and deliver a copy thereof to Borrower, the agreement of any such
assignee, participant or future holder to be bound by the terms and conditions
of this Loan AGreement as if said party were a "Lender" hereunder.
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b. Whenever any of the parties hereto is referred to in this
Loan AGreement and other Loan Documents, such reference shall be deemed to
include its successors and assigns.
c. This Loan Agreement and other Loan Documents shall bind an
dinure to the benefit of the Lender, its successors and assigns, and shall bind
and inure to the benefit of the Borrower, its successors and assigns and all
subsequent owners of the collateral.
d. The Lender shall have the unrestricted right to sell
participations in the Loan, the Notes and/or Mortgage Notes. Any such
participants shall comply with the provisons of Section (a) above and enjoy and
be protected in their respective participations by any collateral securities
and/or guarantees hereunder.
Section 10.7. No Waiver, Cumulative Remedies. No failure or delay by the
Lender in exercising any right, remedy, power and/or privilege under this Loan
Agreement or any of the other Loan Documents shall operate as a waiver thereof.
The partial or single exercise of any right, remedy, power and/or privilege
under this Loan Agremeent or any of the other Loan Documents shall not operate
as a waiver nor as a estoppel regarding any rights under the same. All rights
and remedies provided inthe Loan AGreement and the other Loan Documents are
cumulative and may be exercised contemporaneously or successively, and are in
addition and not exclusive of any other rights and remedies provided by law.
No waiver by the Lender shall be effective nor binding unless it is in
writing, signed by a duly authorized officer of the Lender and the specific
intent of waiving any rights, causes of action and privileges is stated therein.
Any such waiver shall not include any instances not specified therein nor any
acts or events that have not occurred as of the date thereof.
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Section 10.8. Survival. All representations and warranties made by the
Borrower in this Loan Agreement and the other Loan Documents, their covenants
and undertakings therein, shall survive the execution of the same and the
disbursements of the Loan, and shall continue in full force and effect until the
loan is paid in full.
Section 10.9. Applicable Law. The Loan Agreement and theother Loan
Documents shall be construed and enforced in accordance with, and governed by,
the laws of the Commonwealth of Puerto Rico.
Section 10.10. Jurisdiction. Each of the appearing parties submits itself
to the jurisdiction of the Superior Court of Puerto Rico, San Juan Part.
Section 10.11. Interpreation.
a. The Loan Agreement and each of the other Loan Documents
supplement each other.
b. The titles of the paragraphs and sections of this Loan Agreement
and the other Loan Documents have been given for convenience only and shall not
be attributed any effect in its interpretation.
c. If any of the paragraphs, sections and/or clauses of this Loan
AGreement or of the other Loan Documents or any of the Loan Documents is
declared by judicial interpretation or construction to be null, void and/or
unenforceable in any respect, such paragraph, section, clause and/or document
shall be ineffective to the extent of such declaration without affecting the
remaining paragraphs, sectios and/or clauses of the same or the other documents.
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d. Whenever used in this Agreement, the term "Lender" includes
Scotiabank de Puerto Rico, its successors and assigns, and such participating
entity and the present or future owner, holder and/or bearer of the Notes or of
the Mortgage Note.
Section 10.12. Modification, Amendment. The Loan Agreement and the other
Loan Documents may not be modified, altered nor amended in any manner
whatsoever, except by another written agreement executed by the parties with the
same solemnities as the document being modified, altered and/or amended.
Section 10.13. Entire Understanding. The Loan Agreement and the other Loan
Documents contain all of the representations and warranties, undertakings,
covenants and agreements between the parties. All prior negotiations,
understandings, undertakings, covenants, representations and agreements, whether
oral or written, in connection wth the Loan aremerged herein.
This 30th day of August, 1988.
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POSADAS DE PUERTO RICO SCOTIABANK DE PUERTO RICO
ASSOCIATES
By: /s/ _________________________ By: /s/ ________________________
Affidavit Number: 2246
Subscribed to before me by Norman Jules Menell of legal age, married, as
President of Posadas de Puerto Rico Associates, Incorporated and a resident of
New York, New York, and Arnold Van Der Kley, of legal age, married, a resident
of San Juan, Puerto Rico, as President of Scitiabank de Puerto Rico, both to me
personally known. In San Juan, Puerto Rico this 30th day of August 1988.
/s/ _______________________________
Notary Public
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CERTIFICATE ISSUED BY BORROWER UNDER THE
PROVISIONS OF SECTION OF THE
OPERATING CREDIT AND TERM LOAN
The undersigned, as Executive Vice President of Posadas de Puerto Rico
Associates, Incorporated (the "Borrower"), DOES HEREBY CERTIFY, as follows:
The representatios and warranties of the Borrower contained in the
Operating Credit and Term Loan Agreement ("Loan Agreement") of even date between
the Borrowe and Scotiabank de Puerto Rico are to the best of undersigned's
knowledge and belief correct on and as of the date hereof, and no even thas
occurred and is continuing which constitutes an Event of Default under the Loan
Agreement and/or under the Loan Documents (as said term is defined in the Loan
Agreement) or would constitute an Event of Defult but for the requirement that
notice be given or time elapse of both.
IN WITNESS WHEREOF, I have hereunto set my hand this 30th day of August
1988.
POSADAS DE PUERTO RICO
ASSOCIATES, INCORPORATED
By: /s/ ___________________________
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AMENDMENT TO OPERATING CREDIT AND TERM LOAN AGREEMENT
AND TO COLLATERAL ASSIGNMENT OF ACCOUNTS RECEIVABLE AGREEMENT
This Amendment entered into in San Juan, Puerto Rico, this 12th day of
June, 1989, between POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED, a Delaware
Corporation with principal offices at 999 Ashford Avenue, Condado, Santurce,
Puerto Rico (the "Borrower") and SCOTIABANK DE PUERTO RICO, a Puerto Rico
banking institution with offices at 273 Ponce de Leon Ave., Hato Rey, Puerto
Rico, (the "Lender").
WITNESSETH
WHEREAS, the appearing parties entered into certain Operating Credit and
Term Loan Agreement (hereinafter, the "Loan Agreement") and a Collateral
Assignment of Accounts Receivable Agreement (the "Collateral Assignment"), both
dated August 30, 1988, whereby the Lender made available to the Borrower certain
credit facilities in the aggregate sum of US$35,500,000 and the Borrower secured
the same, pursuant to, among other collateral, the Collateral Assignment;
WHEREAS, the Borrower has requested and the Lender has agreed to amend
the Loan Agreement in order to increase the operating credit facilities
available to the Borrower under the Loan Agreement from US$500,000 to
US$1,000,000;
WHEREAS, the preceding Amendment requires an amendment to the Collateral
Agreement;
NOW THEREFORE, the parties hereto for good an valuable consideration
AMEND the Loan Agreement and the Collateral agreement as follows:
1. The parties agree that the operating credit facilities originally in
the amount of
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US$500,000 shall be increased as of the date hereof to a US$1,000,000 facility
under the same terms and conditions and to the same extent and force as if said
amend credit facilities had been originally incorporated in the Loan Agreement
as the operating credit facility referred to therein.
2. The parties agree that the security and, more particularly, the
Collateral Agreement afforded to the Lender under the provisions of Section 3 of
the Loan Agreement shall be deemed amended accordingly, and shall extend and be
applicable to the amended credit facilities made available pursuant to the
Agreement.
3. The parties agree that all the covenants, terms and conditions of the
Loan Agreement not expressly amended, deleted or substituted hereunder shall
remain in full force and effect and shall be deemed extensive to the credit
facilities made available to the Buyer pursuant to the terms of this Amendment
to Loan Agreement.
IN WITNESS WHEREOF, the parties execute the foregoing instrument at the
place and at the date above stated.
POSADAS DE PUERTO RICO SCOTIABANK DE PUERTO RICO
ASSOCIATES INCORPORATED
By: /s/ By: /s/
---------------------------------- ---------------------------
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AFFIDAVIT NO. 5206
Subscribed to before me by Hugh A. Andrews, of legal age, married,
executive and resident of San Juan, Puerto Rico, in his capacity as Executive
Vice President, of Posadas de Puerto Rico Associates, Incorporated, to me
personally known in San Juan, Puerto Rico, this 9th day of June, 1989.
/s/
-----------------------------
NOTARY PUBLIC
AFFIDAVIT NO. 12,275
Subscribed to before me by Carlos Irizarry -------------, of legal age,
married, executive and resident of San Juan, Puerto Rico, as authorized
signature for Scotiabank de Puerto Rico, this 12 day of June, 1989.
/s/
-----------------------------
NOTARY PUBLIC
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SECOND AMENDMENT TO OPERATING CREDIT AND
TERM LOAN AGREEMENT
This Second Amendment to the Loan Agreement, as amended, referred to
below, entered to in San Juan, Puerto Rico, this 28th day of September 1990,
between POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED, a Delaware corporation
with principal offices at 999 Ashford Avenue, Condado, Santurce, Puerto Rico
(the "Borrower") and SCOTIABANK DE PUERTO RICO, a Puerto Rico banking
institution with offices at 273 Ponce de Leon Avenue, Hato Rey, Puerto Rico,
(the "Lender").
WITNESSETH:
WHEREAS, the appearing parties entered into a certain Operating Credit and
Term Loan Agreement (hereinafter, the "Loan Agreement") dated August 30, 1988,
whereby the Lender made available to the Borrower certain credit facilities in
the aggregate sum of US$35,500,000 and the Borrower secured the same, with the
Collateral listed and as provided in the Loan Agreement.
WHEREAS, on June 9th, 1989 Lender and Borrower amended the Loan Agreement
by increasing the Operating Credit Facilities from US$500,000 to $1,000,000
under the same terms and conditions and secured by the same Collateral as the
original Operating Credit Facilities provided in the Loan Agreement.
WHEREAS, the Borrower has requested a further increase in the Operating
Credit Facilities available to the Borrower under the Loan Agreement from
US$1,000,000 to US$1,500,000;
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NOW, THEREFORE, the parties hereto for good and valuable consideration
AMEND the Loan Agreement, as amended as follows:
1. The parties agree that the Operating Credit Facilities originally in
the amount of US$500,000 increased to $1,000,000 by the First Amendment of June
9, 1989 shall be further increased to the total sum of US$1,500,000 under and
subject to the same terms and conditions and to the same extent and force as if
said Amended Credit Facilities so increased had been incorporated in the
original Loan Agreement as the Operating Credit Facility referred to therein.
2. Lender and Borrower agree that all the Collateral now constituted and
existing (or hereafter constituted) serving (or which may serve) as security for
the obligations of Borrower to Lender under the Loan Agreement shall extend and
apply to the increased Operating Credit Facilities made available to Borrower
hereunder as if said increased Operating Credit Facility had been incorporated
in the Loan Agreement of August 30, 1988 for the principal sum of US$1,500,000.
3. The parties agree that all the covenants, terms and conditions of the
Loan Agreement, as heretofore amended, not expressly amended, deleted or
substituted hereunder shall remain in full force and effect and shall be deemed
extensive to the credit facilities made available to the Borrower pursuant to
the terms of this Second Amendment to Loan Agreement.
IN WITNESS WHEREOF, the parties execute the foregoing instrument at the
place and at the date above stated.
POSADAS DE PUERTO RICO SCOTIABANK DE PUERTO RICO
ASSOCIATES INCORPORATED
By: _____________________________ By: _______________________________
Executive Vice President
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SECRETARY'S CERTIFICATE
The undersigned, Jose C. Arenas, the duly elected Secretary of Posadas de
Puerto Rico Associates, Incorporated, a Delaware corporation (the "Corporation")
hereby certifies that the Board of Directors of the Corporation duly and validly
adopted the following Resolution on September 10, 1990 and said Resolution is in
full force and effect and has not been modified, amended, or revoked in any
respect:
"Resolved that the President, N.J. Menell or the Executive Vice President,
H.A. Andrews, be and they are hereby authorized on behalf of the
Corporation, acting singly, to execute a Second Amendment to the Loan
Agreement of August 30th, 1988, as amended on June 9th, 1989 between the
Corporation and the Scotiabank de Puerto Rico (the "Bank") further
increasing the Operating Credit Facilities to the Corporation under said
Loan Agreement, as amended, to US$1,500,000.
Resolved, further that said officers, acting singly, may execute said
Second Amendment to the said Loan Agreement, as amended, under and subject
to the same terms and conditions and secured by the same collateral as
provided and listed in the Loan Agreement, as amended, and to take such
other action on behalf of the Corporation as they, acting singly, may deem
appropriate to complete this transaction."
IN WITNESS WHEREOF, I have hereto set may hand and affixed the seal of the
Corporation as of this 28 day of September 1990.
/s/ ____________________________
Secretary
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********************************************************************************
AMENDMENT TO OPERATING CREDIT AND TERM LOAN AGREEMENT
POSADAS DE PUERTO RICO ASSOCIATES INCORPORATED
Borrower
and
SCOTIABANK DE PUERTO RICO
Lender
********************************************************************************
Dated as of April 26, 1991
********************************************************************************
Brown, Newsom & Cordova
Plaza Scotiabank-Sixth Floor
273 Ponce de Leon Avenue
Hato Rey, Puerto Rico 00917
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AMENDMENT TO OPERATING CREDIT AND TERM LOAN AGREEMENT
This Amendment to Operating Credit and Term Loan Agreement dated as of
April 26, 1991, between POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED, a
corporation organized, existing and in good standing under the laws of the State
of Delaware, United States of America (the "Borrower") and SCOTIABANK DE PUERTO
RICO, a Puerto Rico banking corporation organized, existing and duly authorized
to do business in Puerto Rico (the "Bank").
W I T N E S S E T H
WHEREAS, the Borrower and the Bank entered into certain Operating Credit
and Term Loan Agreement dated August 30, 1988 (the "Operating Credit Agreement")
whereby the Bank granted the Borrower certain credit facilities more fully
described therein; and
WHEREAS, Borrower now desires to borrow additional funds from the Bank to
make certain inter-company loans, to cancel existing overdrafts and for working
capital purposes; and
WHEREAS, the Bank has agreed to make available to the Borrower a
non-revolving credit facility in the amount of $3,000,000 and an increase to the
existing operating facility up to $2,000,000, upon the terms and subject to the
conditions set forth in this Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the parties hereto hereby agree to amend the
Operating Credit Agreement as follows:
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ARTICLE 1. DEFINITIONS
Section 1.1. Certain Defined Terms.
As used in this Agreement, the following terms have the following meanings
(all other capitalized terms shall have the meanings given to them in the
Operating Credit Agreement):
"Additional Collateral Security" means the collateral security afforded by
the Borrower to the Bank under the Operating Credit Agreement and all
amendments, substitutions, supplements, additions or extensions thereof or
thereto, which collateral security shall constitute additional security for all
amounts as may be owed by the Borrower to the Bank under this Agreement.
"Advance" means the additional advances by the Bank to the Borrower
pursuant to the provisions of Article 2 hereof.
"Agreement" means this Amendment to Operating Credit and Term Loan
Agreement, including all amendments, modifications and supplements and any
exhibits and schedules hereto, and shall refer to this Agreement as the same may
be in effect at the time such reference becomes effective.
"Guarantee" means the limited guarantee in the principal amount of up to
$3,000,000 issued by the Guarantor, supported by the appropriate corporate
resolution.
"Guarantor" means WMS Industries Inc. a corporation organized and in good
standing under the laws of the State of Delaware, United States of America.
"Hazardous Substance" shall mean (a) any "hazardous substance",
"pollutant" or "contaminant" as said terms are defined by the Comprehensive
Environmental Response, Compensation and Liability Act; (b) any "hazardous
waste" as said term is defined in the Puerto
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Rico Environmental Quality Board Regulation for the Control of Hazardous and
Non-Hazardous Solid Waste, as amended from time to time; (c) any toxic or
hazardous substance, material or waste (whether solid, liquid or gaseous), or
(e) any other substance for which any Governmental Authority requires special
handling in its collection, storage, treatment or disposal.
"Lending Office" means the Bank's branch located at Plaza Scotiabank, 273
Ponce de Leon Avenue, Hato Rey, Puerto Rico.
"Line A" means a non-revolving, term credit facility in the principal
amount of $3,000,000 made available by the Bank to the Borrower hereunder for
the sole purpose of making certain inter-company loan to WMS Industries Inc. for
the purchase and cancellation of certain promissory note due by WMS Games, Inc.
to Bally Midway Manufacturing Co. and Bally Manufacturing and Distributing Corp.
"Line B" means an operating credit facility to be made available by the
Bank to the Borrower hereunder up to a maximum of $2,000,000 for working capital
proposes and for the cancellation of a $500,000 temporary overdraft facility.
"Loan Documents" means this Agreement, the Pledge Agreement, the Note(s),
the Mortgage Note and the Real Estate Mortgage, the Guarantee and all documents
and instruments to be delivered by the Borrower to the Lender pursuant to the
provisions of the Security Section hereof, including any and all amendments,
substitutions, supplements and replacements thereof.
"Mortgage Note" means the demand promissory note in the principal amount
of $4,000,000 encumbering the Property in favor of the Bank.
"Note" or "Notes" means promissory note(s) executed by the Borrower in
favor of and acceptable to the Bank for the principal amount of each Advance.
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"Pledge Agreement" means the Pledge Agreement of the Borrower pledging the
Mortgage Note, as the same may be hereafter amended, modified or supplemented
from time to time.
"Property" means the property described in Schedule I hereof, including a
certain 559 room hotel and casino facility located thereon and such improvements
or additions as may be hereafter constructed thereon.
"Real Property Mortgage" means the mortgage securing the payment of the
principal and interest and other credits under the Mortgage Note.
"Title Company" means Hato Rey Title Company, a Puerto Rico corporation,
as agent for Chicago Title Insurance Company.
"Title Policy" means the loan policy of title insurance in the amount of
$4,000,000, in form and substance satisfactory to Bank and issued by the Title
Company insuring that Bank has a third priority lien on and/or a security
interest in the Property with no exceptions to title, printed or otherwise,
which policy has an initial effective date on the execution date of the Loan
Documents.
ARTICLE 2. AMOUNTS AND TERMS OF THE ADDITIONAL ADVANCES
Section 2.1. The Additional Advances.
The Bank agrees, in addition to the advances made available to the
Borrower under the Operating Credit Agreement and on the terms and conditions
hereinafter set forth, to make Line A and Line B Advances to the Borrower from
time to time on any Business Day during the period from the date hereof until
__________, 19__, in aggregate amounts not to exceed the amount set forth in the
definition of the particular credit facility.
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Each Advance made to the Borrower by the Bank and the amount of principal
and the maturity thereof, shall be evidenced by a Note.
Section 2.2. Making the Additional Advances.
(a) Each advance shall be made on notice delivered by the Borrower to the
Bank not later than 11:00 A.M. (San Juan time) on the same Business Day of such
proposed borrowing.
Advances available hereunder shall at no time exceed the sum of $3,000,000
for the Line A facility and $2,000,000 for the Line B facility.
The Bank shall make available the amount of the Advance by crediting the
account of the Borrower at the Lending Office.
(b) Anything in Section 2.2(a) to the contrary notwithstanding, if the
Bank shall, at least one (1) Business Day before the first day of any requested
borrowing, notify the Borrower that the introduction of or any change in or in
the interpretation of any law or regulation makes it unlawful, or that a central
bank or other Governmental Authority asserts that it is unlawful for the Bank or
its Lending Office to perform its obligations hereunder, the right of the
Borrower to avail itself of an Advance hereunder shall be suspended until the
Bank shall notify the Borrower that the circumstances causing such suspension no
longer exist.
(c) Each notice of borrowing shall be irrevocable and binding on the
Borrower
Section 2.3. Fees.
(a) As to Line A, the Borrower agrees to pay the Bank a front end fee of
$60,000, of which the Bank has already received the sum of $30,000, and the
balance, to wit, the sum of $30,000, shall be due and payable simultaneously
with the execution of this Agreement.
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(b) As to Line B, the Borrower agrees to pay the Bank a front end fee of
$20,000 of which the Bank acknowledges receipt of $10,000 and the balance, the
sum of $10,000 to be payable at the closing of this Agreement.
(c) The Borrower shall pay the Bank a stand-by fee equal to 1/4 of 1% per
annum on the undrawn portion of the Line A facility, commencing 30 days from the
acceptance of the Commitment Letter, said amount to be paid monthly in arrears.
ARTICLE 3. PAYMENTS & INDEMNITIES
Section 3.1. Repayment.
The Borrower shall repay the Bank the outstanding principal amount due
hereunder in full as follows:
a) Advances made available under the Line A facility shall be repaid
in full within 5 years commencing two (2) years from the date of the
first Advance or commencing on the date of the repayment or
refinancing of the existing Ponce Federal loan currently having an
outstanding balance of $_____, whichever is earlier, in equal,
consecutive quarterly installments, the amount of which shall be
determined based upon the time remaining of the original five year
amortization, plus interest thereon. b) Advances made available
under Line B shall be repaid on demand and the account should show
satisfactory fluctuations.
Section 3.2. Interest.
The Borrower shall pay interest as follows:
a) Line A facility....11/2percentage points over the Base Rate.
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b) Line B facility....1 percentage point over the Base Rate.
Interest shall be payable to the Bank in arrears on the twenty second day of
each month calculated on the basis of the actual daily unpaid principal amount
of each Advance made by the Bank from the date of such Advance until the
principal amount thereof shall be paid in full at the Base Rate. Any such
fluctuation in the interest rate pursuant to the provisions hereof, shall be
effective simultaneously with the corresponding change in the Base Rate.
Section 3.3. Taxes on Payments.
Any and all payments by the Borrower hereunder or under the Note shall be
made, in accordance with the provisions hereof, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
franchise taxes and taxes imposed on the Bank's net or gross income. If the
Borrower shall be required by Law to deduct any taxes from or in respect of any
sum payable hereunder or under any Note, (i) the sum payable shall be increased
as may be necessary so that after making all required deductions, the Bank
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with the applicable Law. Notwithstanding, the
aforesaid, such gross-up provisions shall not apply to any tax withholding
requirement imposed as a result from any decision of the Bank to change its
place of business or surrender its authorization to conduct business in the
Commonwealth of Puerto Rico or otherwise due to any change in the manner in
which the Bank conducts its business in the Commonwealth of Puerto Rico.
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Section 3.4. Prepayments of Principal.
The Borrower may, without premium or penalty, prepay the outstanding
principal amount of the Line A and the Line B facilities Advances in whole or
ratably in part together with accrued interest to the date of such prepayment on
the principal amount so prepaid. Any such prepayments shall be applied and
credited to the outstanding balance hereunder in inverse order of their
maturities.
Section 3.5. Payments and Computations.
(a) All computations of rates of interest, additional interest and fees
shall be made by the Bank on the basis of a 365 day year for the actual number
of days elapsed.
Each determination by the Bank of an interest rate or fee hereunder shall
be, in the absence of manifest error, as determined by the Bank in its sole
discretion, conclusive and binding on the Borrower for all purposes.
(b) Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and in such case, such extension of time shall be
included in the computation of payment of interest.
Section 3.6. Capital Adequacy.
In the event that the Bank shall determine that the adoption of any
requirement of law regarding capital adequacy, reserve requirements, or any
change therein or in the interpretation or application thereof or compliance by
the Bank with any request or directive regarding capital adequacy (whether or
not having the force of law) from any central bank or other Governmental
Authority, does or shall have the effect of reducing the rate of return on the
Bank's capital as
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a consequence of its obligations hereunder to a level below that which the Bank
could have achieved but for such adoption, change or compliance (taking into
consideration the Bank's policies with respect to capital adequacy), then from
time to time, upon written demand by the Bank accompanied by a certificate by
the Bank in reasonable detail stating the basis for such determination, the
Borrower shall pay to the Bank such additional amount or amounts as will
compensate the Bank for such reduction as a consequence of its obligations
hereunder.
Section 3.7. General Indemnity.
The Borrower will at all times indemnify and hold harmless the Bank
against any and all losses, costs, damages, expenses and liabilities
(collectively referred to hereinafter as "Losses") of whatever nature (including
but not limited to reasonable attorneys' fees, litigation and court costs,
amounts paid in settlement, and amounts paid to discharge judgments) directly or
indirectly resulting from, arising out of, or related to one or more Claims, as
hereinafter defined. The word "Claims" as used herein shall mean all claims,
lawsuits, causes of action and other legal actions and proceedings, involving
bodily or personal injury or death of any person or damage to any property
(including but not limited to persons employed by the Borrower or any other
person) brought against the Bank or to which the Bank is a party (except any
such claim as may arise or be due to the Bank's negligence or that of its
officers, employees, or agents), that directly or indirectly result from, arise
out of, or relate to (a) the operation, use, occupancy, maintenance or ownership
of the Property or any part thereof or (b) the execution, delivery or
performance of the Loan Documents, or any related instruments or documents or
(c) any untrue statement or alleged untrue statement of a material fact
contained in this Agreement or in the Loan Documents (other than statements made
by the Bank), or in
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any application made in connection therewith or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
under which they were made. The obligations of the Borrower under this Section
3.6 shall apply to all Losses or Claims, or both which are asserted prior to
termination of this Agreement or thereafter. In case any action shall be brought
against the Bank in respect of which indemnity may be sought against the
Borrower, the Bank shall promptly notify the Borrower in writing and the
Borrower shall have the right to assume the investigation and defense thereof
including the employment of counsel and the payment of all expenses. The Bank
shall have the right to employ separate counsel in any such action and
participate in the investigation and defense thereof, and the fees and expenses
of such counsel shall be paid by the Borrower. The Borrower shall not be liable
for any settlement of any such action without its consent but, if any such
action is settled with the consent of the Borrower or if there be a final
unappealable judgment for the plaintiff in any such action, the Borrower agrees
to indemnify and hold harmless the Bank from and against any such Losses or
Claims. Nothing herein shall be construed as requiring the Bank to acquire or
maintain insurance of any form or nature with respect to the Property or any
portion thereof or with respect to any phrase, term, provision, condition or
obligation of this Agreement or any other matter in connection herewith.
The provisions of this Section shall survive the expiration or termination
of this Agreement.
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ARTICLE 4. THE SECURITY
Section 4.1. The Security.
All funds advanced to or owed by the Borrower pursuant to this Agreement
shall be secured by the following documents, all of which shall be duly executed
by the appropriate parties thereto and acceptable to the Bank:
a) The Mortgage Note.
b) The Real Property Mortgage.
c) The Pledge Agreement.
d) The Guarantee.
e) The Title Policy.
f) The Additional Collateral Security.
The aforesaid loan documents shall secure the full and complete payment of
the Line A and Line B facilities (except that the Guarantee shall secure the
Line A facility only) under this Agreement, the Notes, as well as all interest
thereon, any costs, expenses and reasonable attorneys' fees that may become due
and payable upon the occurrence of a Default or an Event of Default and any
other amounts payable and/or reimbursable to the Bank pursuant to this Agreement
and the other loan documents. The Bank, with or without notice to or consent of
the Borrower, may take (but Borrower shall not be obligated to furnish) from any
other person or persons additional securities for the Loan, without impairing,
by so doing, any other collateral guarantees and securities Bank may hold.
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ARTICLE 5. CONDITIONS OF LENDING
Section 5.1. Conditions Precedent to the Advances. This Agreement shall
become effective, when and only when the Borrower and the Bank have executed
this Agreement subject to the following conditions precedent:
(a) The Bank shall have received on the date of execution of this
Agreement, the following, each dated the closing date, in form and substance
satisfactory to the Bank:
(i) A Note to the order of the Bank, substantially in the form of Exhibit
"A" hereto;
(ii) certified copy of A) the pertinent Board of Director's resolution and
of such other consent, resolutions and documents as may have been approved
authorizing the negotiation, execution and delivery of this Agreement, the
Notes, the Loan Documents and all other documents to be delivered
hereunder or thereunder to which it is a party and other document and
instruments evidencing other necessary action, if any, with respect to
Loan Documents and B) certified copies of the Articles of Incorporation
and By Laws of the Borrower;
(iii) certificate of the Borrower certifying the names and true signatures
of the persons authorized to execute and deliver this Agreement and each
Loan Document to which it is a party and the other documents to be
delivered by it hereunder or thereunder;
(iv) favorable opinions of (a) outside counsel for the Borrower,
substantially in the form of Exhibit "B" hereto, and (b) of the Bank's
counsel as to the validity and enforceability of this Agreement;
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(v) the Financial Statements of the Borrower and the financial statements
of the Guarantor, for the last fiscal year; (vi) the Security instruments
listed and described in Article 4 of this Agreement;
(vi) As of the date of this Agreement, there shall have been no material
adverse change in the business, operations, properties, assets, prospects
or condition (financial or otherwise) of the Borrower, or litigation which
might have a material adverse effect thereon.
(vii) On or before the date of this Agreement, the Bank shall have
received such other approvals, opinions or documents as the Bank may
reasonably request.
(viii) the representations and warranties of the Borrower contained in
Article 6 hereof and in the Loan Documents are true and correct in all
material respects on and as of the date of such Advance as though made on
and as of such date; and
(ix) no event has occurred and is continuing, or would result from such
Advance, which constitutes a Default or an Event of Default.
Section 5.2. Additional Review Conditions to Advances and Maintaining of
Facility.
The Line A and Line B credit facilities made available hereunder are
subject to periodic (but not less frequent than annual) reviews by the Bank,
which include, but are not limited to, verification of Borrower's compliance
with the terms and conditions of this Agreement of same is dependent on no
materially adverse changes occurring in the Borrower's financial conditions;
provided, however, that a material adverse change in the Guarantor's financial
condition can only affect the Line A facility.
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ARTICLE 6. REPRESENTATIONS AND WARRANTIES
Section 6.1. Representations and Warranties of the Borrower.
The Borrower represents and warrants to the Bank that the representations
and warranties made by the Borrower under the Operating Credit Agreement remain
correct in all material respects on and as of this date and the Borrower
restates the aforesaid representations and warranties for purposes of this
Agreement.
ARTICLE 7. SPECIAL COVENANTS
Section 7.1. Covenants as to Environmental Compliance.
(a) Borrower covenants and agrees to Bank that it:
(i) has not and will not use, generate, treat, store, discharge,
spill, dispense, dispose or otherwise release any Hazardous Substance or
any waste of any kind in, on or under the Property and it will not cause,
suffer, allow or permit any other person or entity to do so, except as
provided in sub-paragraph (ii) below;
(ii) has not and will not generate, store or use any Hazardous
Substance in a manner so as to create any undue risk of its release on the
Property;
(iii) will promptly take all measures necessary to contain and
remove any and all on-site discharges, spills, disposals and other
releases of any Hazardous Substance or waste of any kind and remedy and
mitigate any and all threats to health, property and the environment in a
manner consistent with all applicable laws;
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(iv) will provide immediate verbal notice and written notice within
one week to bank of any and all discharges, spills, disposals or other
releases of any Hazardous Substance that are not completely cleaned up and
removed within one Business Day following such release on the Property;
(b) Borrower covenants and agrees to Bank that Bank and its authorized
representatives may enter an inspect and assess the Property at reasonable times
to determine Borrower's compliance with the above conditions. The cost of
performing such inspections and assessments shall be paid by the Borrower upon
demand by the Bank and any such obligations shall constitute an indebtedness
secured by this Agreement.
ARTICLE 8. MISCELLANEOUS
Section 8.1. Non-Revocation.
All the covenants, terms and conditions of Operating Credit Agreement not
expressly amended or otherwise in conflict with the provisions of this Agreement
(including the Events of Default provisions as the same may be deemed amended or
supplemented hereby) shall remain in full force and effect.
The parties hereto agree that the provisions of this Agreement supplement
the terms and conditions of the Operating Credit Agreement.
Section 8.2. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute one and the same
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agreement; provided, however, that the Borrower and the Bank shall execute and
deliver each such counterpart.
Section 8.3. Headings.
The headings contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not part of the
agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED
By: /S/________________________________
Hugh Alanson Andrews
SCOTIABANK DE PUERTO RICO
By: /S/________________________________
Arnold Francis Van Der Kley
Affidavit Number: 2765
Subscribed to before me by Hugh Alanson Andrews, of legal age, married and
resident of San Juan, Puerto Rico, as Vice-President of Posadas de Puerto Rico
Associates Incorporated and by A.F. Van Der Kley, of legal age, single, resident
of Rio Piedras, Puerto Rico, as Authorized Signatory of Scotiabank de Puerto
Rico, both to me personally known. At San Juan, Puerto Rico, this 26th day of
April, 1991
/S/______________________________
Notary
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SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, dated August 30, 1988, among WILLIAMS
HOSPITALITY MANAGEMENT CORP., a corporation organized and existing under the
laws of Delaware ("Williams"); POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED,
a corporation organized and existing under the laws of Delaware and authorized
to do business in the Commonwealth of Puerto Rico (the "Borrower"), in favor of
SCOTIABANK DE PUERTO RICO (the "Bank").
PRELIMINARY STATEMENTS
(1) The Bank has entered into an Operating Credit and Term Loan
Agreement dated of even date herewith with the Borrower (said agreement, as it
may hereafter be amended or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined) pursuant to which the Bank has agreed to
lend the Borrower the sum of U.S. $35,000,000 (the "Term Loan").
(2) The Borrower is now obligated to Williams pursuant to an Operating
and Management Agreement (the "Management Agreement", a copy of which is
attached hereto marked Schedule I hereof), dated September 23, 1983 to pay to
Williams various management fees and other sums including an Incentive
Management Fee (as said term is defined in the Management Agreement).
(3) Pursuant to the terms of the Credit Agreement, it is a condition
precedent to the making of the loan by the Bank to the Borrower that Williams
subordinate its future right to receive payment of the "Incentive Management
Fees" (as said term is defined in the Management Agreement) under the Management
Agreement to the Borrower's payment to the Bank when due of the principal and
interest payments to be made on the Loan as set forth in the Credit Agreement
and the "Term Loan Note" as said term is defined in the Credit Agreement and to
Borrower's compliance with the provisions of the Credit Agreement as they
pertain to the establishment of the "Replacement Reserve" as said term is
defined in the Credit Agreement.
(4) Further, it is a condition to the Credit Agreement that Williams
grant to the
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Bank the right, at the Bank's election, to terminate the Management Agreement in
the event of the Bank's foreclosure of its security and/or in the event the Bank
shall be entitled to request the appointment of a receiver pursuant to the terms
of the Credit Agreement.
The payment obligations of the Borrower as set forth in paragraph (3)
above are hereinafter collectively referred to as the "Secured Obligations".
NOW, THEREFORE, the Borrower, in consideration of the premises and in
order to induce the Bank to make Advances under the Credit Agreement, and
Williams, for good and valuable consideration (the receipt of which is hereby
acknowledged), each hereby agree as follows:
SECTION 1. Agreement to Subordinate. Williams and the Borrower each
agree that the future payment of the Incentive Management Fees under the
Management Agreement and the continuance of the Management Agreement are and
shall be subject to (to the extent and in the manner hereinafter set forth) the
timely payment and performance by the Borrower or Williams of the Secured
Obligations and to the absence of the institution by Bank of foreclosure and/or
receivership procedures under the Credit Agreement.
For the purposes of this Agreement, the obligations requiring payment
of the Secured Obligations shall not be deemed to have been complied with with
respect to any interest and/or principal payment unless the Bank shall have
received such payments as required under the Credit Agreement and thereafter
shall not be required to return such payments pursuant to any bankruptcy or
similar proceeding involving the Borrower.
SECTION 2. No Discharge on the Subordinated Obligation. Williams agrees
not to ask, demand, sue for, take or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any other manner
(including without limitation from or by way of collateral) payment of any of
the Incentive Management Fees payable to it under the Management Agreement,
while any of the Secured Obligations shall remain unpaid or unsatisfied;
provided, however that Williams may receive and the Borrower may pay such
Incentive Management Fees, on the stated dates of payment thereof if, at the
time of making any such payment no default as to the Secured Obligations exists
which default has not been cured by Borrower or Williams within the cure period
provided in the Credit Agreement.
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SECTION 3. In Furtherance of Subordination. Williams agrees, upon
receiving written notice from the Bank of Borrower's failure to pay or perform
the Secured Obligations (a "Notice of Default") that:
(a) Any payments or distributions of Incentive Management Fee's
which are received by Williams after the date of a Notice of Default
and which are not attributable to periods prior to the date of the
Notice of Default contrary to the provisions of this Agreement shall be
received in trust by Williams and held for the benefit of the Bank,
shall be segregated from other funds and property held by Williams and
shall be immediately on demand paid over to the Bank and applied by the
Bank to the payment of the Secured Obligations.
(b) The Bank is hereby authorized to demand specific performance of
this Agreement, whether or not the Borrower shall have complied with
any of the provisions hereof applicable to it, at any time when
Williams shall have failed to comply with any of the provisions of this
Agreement applicable to it.
SECTION 4. No Commencement of Any Proceeding. Williams agrees that, so
long as any of the Secured Obligations shall remain unpaid or unperformed, it
will not commence, or join with any creditor other than the Bank in a proceeding
to collect the Incentive Management Fees subordinated hereunder, but nothing
herein shall constitute a waiver by Williams of its claim against Borrower with
respect to such fees.
SECTION 5. Rights of Subrogation. Williams agrees that no payment or
distribution to the Bank pursuant to the provisions of this Agreement shall
entitle Williams to exercise any rights of subrogation in respect thereof until
the Secured Obligations shall have been paid in full.
SECTION 6. Subordination Instrument; Further Assurances. Williams and
the Borrower each will, at its expense and at any time and from time to time,
promptly execute and deliver all further deeds, instruments and documents, and
take all further action, that may be reasonably necessary or desirable, or that
the Bank may reasonably request, in order to protect the right or interest
granted or purported to be granted hereby or to enable the Bank to exercise and
enforce its rights and remedies hereunder.
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SECTION 7. No Change in or Disposition of Subordinated Obligation.
Williams agrees that so long as the Loan is unpaid:
(a) Any sale, assignment, pledge, encumbrance or other disposition
of its right to receive the Incentive Management Fees shall be subject
to the terms of this Agreement; and
(b) The Management Agreement shall not be changed in such a manner
as to have an adverse effect upon the rights or interests of the Bank
hereunder.
SECTION 8. Obligations Hereunder Not Affected. All rights and interests
of the Bank hereunder, and all agreements and obligations of Williams and the
Borrower under this Agreement, shall remain in full force and effect
irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, the Term Loan Note or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other
amendments or waiver of or any consent to departure from the Notes
or the Credit Agreement;
(iii) any exchange, release or non perfection of any collateral
given under the Credit Agreement; or
(iv) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Borrower in respect of
the Secured Obligations.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by the Bank upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made.
SECTION 9. Representations and Warranties.
(a) Williams hereby represents and warrants as follows:
(i) It is a corporation duly incorporated, validly existing and
in
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good standing under the laws of the jurisdiction indicated at the
beginning of this Subordination Agreement.
(ii) The execution, delivery and performance by it of this
Subordination Agreement are within Williams' corporate powers and
have been duly authorized by all necessary action and do not
contravene (1) its charter or by-laws or (2) any law or contractual
restriction binding on or affecting Williams.
(iii) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by
Williams of this Subordination Agreement.
(iv) This Subordination Agreement is the legal, valid and binding
obligation of Williams enforceable against Williams in accordance
with its terms.
(b) The Borrower hereby repeats, restates and reiterates herein all
of the representations and warranties of Borrower set forth in the
Credit Agreement all of which are hereby incorporated by reference
herein as if set forth at length herein.
SECTION 10. Amendments, Etc.. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by Williams or the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 11. Expenses. The Borrower agrees to pay, upon demand, to the
Bank and Williams the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Bank may incur in
connection with the exercise or enforcement of any of the rights or interests of
the Bank hereunder. No such fees or expenses shall be payable if judgment in any
proceeding instituted for the exercise or enforcement of such rights or
interests is rendered against the Bank.
SECTION 12. Addresses for Notices. All demands, notices and other
communications provided for hereunder shall be in writing, and, if to Williams,
mailed or
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telegraphed or delivered to it, addressed to it at:
WMS INDUSTRIES INC.
767 Fifth Avenue, 23rd Floor
New York, New York 10153
Attention: Barbara M. Norman, Esq.
FAX Number: (212) 319-9789
if to the Borrower or the Bank, mailed or delivered to it, addressed to it at
the address of the Borrower or the Bank specified in the Credit Agreement, or as
to each party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such demands, notices and other communications shall, when
mailed or telegraphed, be effective when received.
SECTION 13. No Waiver, Remedies. No failure on the part of the Bank to
exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 14. Continuing Agreement. This Agreement is a continuing
agreement and shall (i) remain in full force and effect until the Secured
Obligations shall have been paid in full, (ii) be binding upon Williams, the
Borrower and their respective successors and assigns, and (iii) inure to the
benefit of and be enforceable by the Bank, its successors, transferees and
assigns.
SECTION 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
SECTION 16. Reinstatement of Management Agreement. Borrower and
Williams agree, that if after the Bank shall have terminated the Management
Agreement, the Bank's foreclosure proceedings are terminated or withdrawn by
reason of settlement, compromise or otherwise, then and in such event the
Management Agreement shall be reinstated for all purposes as of the date of the
Bank's termination thereof.
IN WITNESS WHEREOF, Williams and the Borrower each has caused this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first
-6-
<PAGE>
<PAGE>
above written.
WILLIAMS HOSPITALITY
MANAGEMENT CORP.
By:
-------------------------------
POSADAS DE PUERTO RICO
ASSOCIATES, INCORPORATED
By:
-------------------------------
ACKNOWLEDGED
SCOTIABANK DE PUERTO RICO
By:
-----------------------------
Affidavit No. 11,733
Acknowledged and subscribed to before me Norman Jules Menell, of legal
age, married, executive and resident of New York, New York, as President of
Posadas de Puerto Rico Associates, Incorporated, and Hugh A. Andrews, of legal
age, married, executive and resident of San Juan, Puerto Rico, as of Williams
Hospitality Management Corporation, to me personally known. In San Juan, Puerto
Rico, this 30th day of August, 1988.
Notary
-7-
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<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
JOINT VENTURE AGREEMENT
Agreement made the 27th day of July, 1984 by and among ESJ HOTEL
CORPORATION, a Delaware corporation with offices at 767 Fifth Avenue, New York,
New York 10153 ("ESJ"), GREAT AMERICAN INDUSTRIES, INC., a Delaware corporation
with offices at 300 Plaza Drive, Binghampton, New York 13903 ("GAI"), IHS
ASSOCIATES, LTD., a Delaware corporation with offices at 100 West Tenth Street,
Wilmington, Delaware 19801, ("HIS") and MILTK INC., a Delaware corporation with
offices at 300 Plaza Drive, Binghampton, New York 13903 ("MILTK") (ESJ, GAI, IHS
and MILTK are hereinafter sometimes referred to collectively as the "Venturers"
and separately as a "Venturer").
W I T N E S S E T H:
WHEREAS, the Venturers desire to associate themselves and to form a
joint venture (the "Venture") for the purpose of acquiring, owning and operating
the facility now known as the El San Juan Hotel and Casino (the "Hotel") in San
Juan, Puerto Rico; and
WHEREAS, the parties desire their rights and obligations in connection
with the Venture and their participation in any profits or liabilities derived
therefrom be defined by an agreement in writing;
NOW, THEREFORE, the parties hereto agree as follows:
1. The Venture.
<PAGE>
<PAGE>
1.1. The Venturers hereby form the Venture under the general
partnership law of the State of New York for the purpose of engaging in the
business of acquiring, owning and operating the Hotel, and performing any and
all acts and services necessary or desirable in connection with the foregoing.
1.2. The name of the Venture shall be POSADAS DE SAN JUAN
ASSOCIATES. Promptly after the execution hereof, the Venturers shall execute and
cause to be filed a certificate of doing business under an assumed name as
required by Section 130 of the New York General Business Law and such other
documents as may be required by law to authorize the Venture to conduct its
business, including compliance with the applicable laws of the Commonwealth of
Puerto Rico.
1.3. The principal office of the Venture shall be located in such
place as the Venturers may agree.
1.4. The term of the Venture shall commence as of the date of this
Agreement and continue for 40 years from the date hereof, unless sooner
terminated as provided in Article 9 hereof.
1.5. The relationship between the Venturers shall be limited to the
performance of the specific purposes and objectives of the Venture as set forth
in this Agreement. Nothing herein shall be construed to create a general purpose
partnership between the Venturers; to authorize any Venturer to act as general
agent for any other; or to confer or grant to any Venturer any proprietary
interest in, or to subject any Venturer to any liability for or in respect of,
the business, assets, profits or obligations of any other Venturer, except only
to the extent contemplated by this Agreement.
2
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<PAGE>
2. Management of the Venture.
2.1. The business and affairs of the Venture shall be supervised by
a Venturers Committee (the "Committee"). The Committee shall consist of four
persons, two of whom shall be designated in writing by ESJ, and one of whom
shall be designated in writing by GAI, and one of whom shall be designated in
writing by IHS. The initial designees of the Venturers to serve on the Committee
shall be Louis J. Nicastro and Norman J. Menell for ESJ, Burton I. Koffman for
GAI and Hugh A. Andrews for IHS. Any Venturer may change its Committee designees
by notice given to the other Venturers not less than ten days prior to the
effective date of such change.
2.2. The Committee shall meet at times and places fixed by the
Committee as necessary for conducting the business of the Venture and mutually
convenient to the members of the Committee upon at least two days' notice. At
any meeting, a majority of the full number of members of the Committee shall be
required for any and all action to be taken by the Committee.
2.3. The Committee shall have authority to appoint and employ such
managers, employees, consultants and agents for the Venture as it shall deem
appropriate and may delegate to them any and all of its power and authority
hereunder. Concurrently herewith, Norman J. Menell has been appointed the
Manager of the Venture and Hugh A. Andrews has been appointed the Assistant
Manager of the Venture. Williams Hospitality Management Corporation, a Delaware
corporation ("Hospitality"), will be appointed to perform technical assistance
services in connection with the renovation and refurbishment of the Hotel and
will be appointed the agent of the Venture
3
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<PAGE>
for the supervision, direction and control of the operation and management of
the Hotel in the Venture's behalf commencing on the date the Hotel opens for
business pursuant to the terms of a Management Letter Agreement between the
Venture and Hospitality in substantially the form presented to the Venturers.
3. Capital Contributions and Liabilities.
3.1. Initial capital contributions to the Venture shall be made as
follows: On the date hereof, ESJ shall contribute $50,000 to the capitol of the
Venture, GAI shall contribute $30,000 to the capital of the Venture and IHS
shall contribute $10,000 to the capital of the Venture, MILTK shall contribute
$10,000 to the capital of the Venture.
3.2. Each Venturer shall, upon written request of the Committee from
time to time, make additional capital contributions to the Venture up to the
following maximum amounts: ESJ - $3,450,000; GAI - $2,070,000; MILTK - $690,000;
and IHS - $690,000. Such additional capital contributions shall be made within
two days after receipt of such written request.
3.3. No interest shall be payable to the Venturers by the Venture on
such capital contributions.
3.4. All liabilities of the Venture in excess of the assets of the
Venture shall be borne by each of the Venturers in proportion to their capital
accounts.
4. Books and Records, Reports, etc.
4.1. The Venture shall maintain at its principal office full and
proper records and books of account based upon generally accepted accounting
principles consistently applied and the Uniform System of Accounts for Hotels,
copyrighted by the
4
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<PAGE>
Hotel Association for New York City, 7th edition of 1977, as amended from time
to time. The fiscal year for the Venture shall be the twelve months ended
September 30 or such other fiscal year as shall be mutually determined by the
Venturers and permitted by law.
4.2. Each of the Venturers shall have the right at all reasonable
times to have any and all of the Venturer's records and books of account
inspected at its own expense by its own employees, attorneys or accountants.
4.3. Ernst & Whinney or such other firm as may hereafter audit the
financial statements of Williams Electronics, Inc., a Delaware corporation,
shall review or audit generally the Venture's financial statements and perform
such accounting services necessary in the day-to-day conduct of the operations
of the Venture (such firm being hereinafter referred to as the "General
Accountants"). ESJ is hereby designated as the Tax Matter Partner within the
meaning of Section 6231(a)(7) of the Internal Revenue Code of 1954, as amended.
4.4. The Venture shall maintain such bank accounts as shall be
approved by the Committee.
5. Profits/Losses and Distributions
5.1. Net profits and losses of the Venture shall be determined
annually by the General Accountants in accordance with generally accepted
accounting principles consistently applied. The General Accountants shall
prepare the income tax returns for the Venture as soon as possible after the end
of each of the Venture's fiscal years, and shall supply such tax returns to each
of the Venturers for their review and reasonable
5
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<PAGE>
approval prior to the filing thereof with the appropriate governmental agencies.
5.2. The net profits and losses of the Venture, together with any
investment or other tax credits available, shall be allocated to the Venturers
as follows: 50% to ESQ; 30% to GAI; 10% to MILTK; and 10% to IHS (the "Venturers
Percentage Interests").
5.3. Separate capital accounts shall be maintained for each
Venturer. All net profits and losses of the Venture, and all capital
contributions by, and all distributions to, the Venturers shall be credited or
charged, as the case may be, to the separate capital accounts of the Venturers
as the General Accountants may deem appropriate in accordance with the
provisions of this Agreement and applicable law and practice.
5.4. The Venture shall distribute to each Venturer such amounts at
such times as shall be determined by the Committee; provided, however, such
distributions shall be pro rata to the Venturers in proportion to the Venturers
Percentage Interests.
6. Restriction on Dispositions of Interests in the Venture.
For a period of five years from the date hereof, no Venturer may
sell, assign, transfer, pledge, encumber, hypothecate, mortgage or in any manner
dispose of all or any portion of its interest in the Venture without the prior
written consent of all other Venturers, and any attempted sale, assignment,
transfer, pledge, encumbrance, hypothecation, mortgage or other dispositions by
a Venturer without such consent shall be null and void.
7. Representations and Warranties.
6
<PAGE>
<PAGE>
Each Venturer represents and warrants to each other Venturer that:
7.1. Such Venturer is a corporation duly organized, validly existing
and in good standing under the laws of the State of its incorporation.
7.2. The execution, delivery and performance by such Venturer of
this Agreement have been duly authorized by all necessary corporate action on
the part of such Venturer, and no further action or approval is required in
order to constitute this Agreement as the valid and binding obligation of such
Venturer enforceable in accordance with its terms.
7.3. This Agreement constitutes the legal, valid and binding
obligation of such Venturer enforceable against such Venturer in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally.
7.4. Such Venturer is acquiring its interest in the Venture for its
own account and without a view to distribution other than in accordance with the
provisions of this Agreement and applicable securities laws.
8. Puerto Rico Gaming Authority Approvals; Tax Exemptions.
Each party hereto shall use its best efforts to obtain and
thereafter maintain all consents, approvals and authorizations which must be
obtained and maintained by such party in order to consummate the transactions
contemplated hereby, including all consents, approvals and authorizations from
the Treasury of the Commonwealth of Puerto Rico and any other governmental body
or agency having authority over licensing of gambling in the Commonwealth of
Puerto Rico and any tax exemption granted to the
7
<PAGE>
<PAGE>
Venture by the Commonwealth of Puerto Rico; provided, however, that nothing
contained in this Article 8 shall require any party to consent to modify any
provisions of this Agreement or any other document referred to herein in any
manner materially adverse to its best interests.
9. Termination and Liquidation.
9.1. The Venture may be terminated at any time by mutual agreement
of the Venturers.
9.2. Upon termination of the Venture for any reason, the Venture
shall continue its business solely for the purpose of winding up its affairs and
shall be liquidated as rapidly as business judgment permits. All decisions with
respect to disposition of Venture assets, collection or compromise of any
amounts receivable and payment or compromise of any amounts payable by the
Venture shall be made by the Committee. The assets of the Venture shall be
applied for the following purposes in the following order:
9.2.1. First, to the payment or provision for payment of all just
debts and obligations of the Venture to creditors other than the Venturers, and
for the expenses of winding up the affairs of the Venture.
9.2.2. Next, to the payment of all amounts due from the Venture
to the Venturers other than in respect of the Venturers' capital accounts.
9.2.3. All remaining assets of the Venture shall be distributed
pro rata to the Venturers in accordance with the Venturers Percentage Interests.
10. Miscellaneous.
8
<PAGE>
<PAGE>
10.1. All of the representations, warranties, covenants and
agreements made by the parties to this Agreement shall survive for the full
period of any applicable statute of limitations.
10.2. This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof. No change, modification, amendment,
addition or termination of this Agreement or any part thereof shall be valid
unless in writing and signed by or on behalf of the party to be charged
therewith.
10.3. This Agreement may be executed in one or more counterparts,
and shall become effective when one or more counterparts has been signed by each
of the parties.
10.4. Any and all notices or other communications or deliveries
required or permitted to be given pursuant to any of the provisions of this
Agreement shall be deemed to have been duly given for all purposes if sent by
certified or registered mail, return receipt requested and postage prepaid, hand
delivered or sent by telegraph or telex to the parties hereto at the address
specified at the head hereof or at such other address as any party may specify
by notice given to the other parties in accordance with this Section 10.4. The
date of giving of any such notice shall be the date of receipt.
10.5. No waiver of the provisions hereof shall be effective unless
in writing and signed by the party to be charged with such waiver. No waiver
shall be deemed a continuing waiver or waiver in respect of any subsequent
breach or default, either of similar or different nature, unless expressly so
stated in writing.
10.6. Should any clause, section or part of this Agreement be held
or
9
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<PAGE>
declared to be void or illegal for any reason, all other clauses, sections or
parts of this Agreement which can be effected without such illegal clause,
section or part shall nevertheless continue in full force and effect.
10.7. This Agreement shall be governed, interpreted and construed in
accordance with the laws of the State of New York.
10.8. Each of the parties hereto consents to the jurisdiction of the
Courts of the State of New York and the United States District Court for the
Southern District of New York with respect to any matter arising with respect to
this Agreement, shall subject itself to the jurisdiction of such courts and
agrees that service of process upon it may be made in any manner permitted by
the laws of the State of New York. Without limiting the generality of the
foregoing, service of process will be deemed sufficient if sent by registered or
certified mail to a party hereto at the address for such party set forth in
Section 10.4 hereof. In addition, the parties hereto agree that the venue for
any state court action shall be New York County.
10.9. This Agreement and the various rights and obligations arising
hereunder shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns. This Agreement shall not be
assignable by any of the parties hereto without the prior written consent of all
other parties hereto and any attempt to assign this Agreement shall be void and
of no effect.
10.10. The headings or captions under sections of this Agreement are
for convenience and reference only and do not in any way modify, interpret or
construe the intent of the parties or effect any of the provisions of this
Agreement.
10
<PAGE>
<PAGE>
IN WITNESS WHEREOF, this Agreement has been made and executed as of the
date and year first above written.
ESJ HOTEL CORPORATION
By: /s/
-------------------------------
[SEAL] Norman J. Menell, President
GREAT AMERICAN INDUSTRIES, INC.
[SEAL] By: /s/
-------------------------------
Burton I. Koffman, President
IHS ASSOCIATES, LTD.
[SEAL] By: /s/
-------------------------------
Hugh A. Andrews, Chairman of
the Board and President
MILTK INC.
By: /s/
-------------------------------
Milton Koffman, President
11
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
AMENDMENT OF JOINT VENTURE AGREEMENT
Agreement made as of the 15th day of October, 1984 by and among ESJ
HOTEL CORPORATION, a Delaware corporation with offices at 767 Fifth Avenue, New
York, New York 10153 ("ESJ"), GREAT AMERICAN INDUSTRIES, INC., a Delaware
corporation with offices at 300 Plaza Drive, Binghamton, New York 13902 ("Great
American"), IHS ASSOCIATES, LTD., a Delaware corporation with offices at 1209
Orange Street, Wilmington, Delaware 19801 ("IHS"), MILTK, INC., a Delaware
corporation with offices at 300 Plaza Drive, Binghamton, New York 13902
("MILTK"), MIDWEST PROPERTY CORP., a New York corporation with offices at 300
Plaza Drive, Binghamton, New York 13902 ("Midwest"), and MILTK ASSOCIATES, a New
York limited partnership with offices at 300 Plaza Drive, Binghamton, New York
13902 ("Associates").
W I T N E S S E T H :
WHEREAS, on July 27, 1984, ESJ, IHS, MILTK and Great American executed
a joint venture agreement (the "Agreement") organizing and creating POSADAS DE
SAN JUAN ASSOCIATES as a joint venture pursuant to the Partnership Law of the
State of New York (the "Venture");
WHEREAS, on the date hereof, Great American (a) transferred a
Twenty-five percent (25%) interest in the Venture to Midwest, an affiliate of
Burton and Richard Koffman, (b) transferred a Five percent (5%) interest in the
Venture to Associates, an affiliate of MILTK, and (c) withdrew as a venturer in
the Venture;
<PAGE>
<PAGE>
WHEREAS, on the date hereof, MILTK transferred all of its interest in
the Venture to Associates and withdrew as a venturer in the Venture;
WHEREAS, ESJ and IHS desire to continue the existence of the Venture
with Midwest and Associates as venturers; and
WHEREAS, the parties desire that the Agreement be amended to replace
Great American as a venturer in the Venture by Midwest and to replace MILTK as a
venturer in the Venture by Associates;
NOW, THEREFORE, the parties hereto agree as follows:
1. From and after the date hereof, Midwest shall be substituted for
Great American for all purposes as a venturer in the Venture and all references
in the Agreement to GAI shall be deemed to refer to Midwest, Midwest shall be
deemed included within the definition of Venturer for purposes of the Agreement,
and Midwest shall have all of the rights and obligations which Great American
would have had under the Agreement as an owner of an interest in the Venture.
2. From and after the date hereof, Associates shall be substituted for
MILTK for all purposes as a venturer in the Venture and all references in the
Agreement to MILTK shall be deemed to refer to Associates, Associates shall be
deemed included within the definition of Venturer for purposes of the Agreement,
and Associates shall have all of the rights and obligations which MILTK would
have had under the Agreement as an owner of an interest in the Venture.
3. Section 5.2 of the Agreement shall be deleted in its entirety and be
of no further force and effect and the following shall be substituted therefor:
2
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<PAGE>
"5.2 The net profits and losses of the Venture, together with any
investment or other tax credits available, shall be allocated to the
Venturers as follows: 50% to ESJ; 25% to Midwest; 15% to Associates;
and 10% to IHS (the "Venturers Percentage Interests")."
4. The Venture shall continue its existence and business uninterrupted
with Midwest and Associates following the execution of this Amendment on the
terms stated herein and in the Agreement, as amended.
IN WITNESS WHEREOF, this Agreement has been made and executed as of the
date and year first above written.
ESJ HOTEL CORPORATION
By: /s/
---------------------------------
[SEAL] Norman J. Menell, President
GREAT AMERICAN INDUSTRIES, INC.
By: /s/
---------------------------------
[SEAL] Burton I. Koffman, President
IHS ASSOCIATES, LTD.
By: /s/
---------------------------------
[SEAL] Hugh A. Andrews, Chairman of
the Board and President
MILTK, INC.
By: /s/
---------------------------------
[SEAL] Milton Koffman, President
3
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<PAGE>
MIDWEST PROPERTY CORP.
By: /s/
---------------------------------
[SEAL] Burton I. Koffman, President
MILTK ASSOCIATES
[SEAL] By: MILTK, INC., its general partner
By: /s/
---------------------------------
Milton Koffman, President
4
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POSADAS DE SAN JUAN ASSOCIATES
SECOND AMENDMENT OF JOINT VENTURE AGREEMENT
Agreement made as of the 30th day of September, 1986 to become
effective as of the close of business on the 30th day of September, 1986 by and
among ESJ HOTEL CORPORATION, a Delaware corporation with offices at 767 Fifth
Avenue, New York, New York 10153 ("ESJ"), IHS ASSOCIATES, LTD., a Delaware
corporation with offices at 1209 Orange Street, Wilmington, Delaware 19801
("IHS"), MIDWEST PROPERTY CORP., a New York corporation with offices at 300
Plaza Drive, Binghamton, New York 13902 ("Midwest"), MILTK ASSOCIATES, a New
York limited partnership with offices at 300 Plaza Drive, Binghamton, New York
13902 ("Associates") and MILTK, INC., a Delaware corporation with offices at 300
Plaza Drive, Binghamton, New York 13902 ("MILTK").
W I T N E S S E T H :
WHEREAS, on July 27, 1984, ESJ, IHS, MILTK, and Great American
Industries, Inc., a Delaware corporation ("Great American"), executed a joint
venture agreement (as heretofore amended, the "Agreement") organizing and
creating POSADAS DE SAN JUAN ASSOCIATES as a joint venture pursuant to the
Partnership Law of the State of New York (the "Venture");
WHEREAS, on October 15, 1984: (a) Great American (i) transferred a
Twenty- five percent (25%) interest in the Venture to Midwest, an affiliate of
Burton and Richard Koffman, (ii) transferred a Five percent (5%) interest in the
Venture to Associates, an affiliate of MILTK, and (iii) withdrew as a venturer
in the Venture; (b) MILTK transferred all of its interest in the Venture to
Associates and withdrew as a venturer in the Venture; and (c) the
<PAGE>
<PAGE>
Agreement was amended to reflect such transfers;
WHEREAS, at the close of business on September 30, 1986, Associates
shall transfer all of its interest in the Venture to MILTK, and withdraw as a
venturer in the Venture;
WHEREAS, ESJ, IHS, and Midwest desire to continue the existence of the
Venture with MILTK as a venturer; and
WHEREAS, the parties desire that the Agreement be amended, effective as
of September 30, 1986, to replace Associates as a venturer in the Venture by
MILTK;
NOW, THEREFORE, the parties hereto agree as follows:
1. From and after the close of business on September 30, 1986: MILTK
shall be substituted for Associates for all purposes as a venturer in the
Venture and all references in the Agreement to Associates shall be deemed to
refer to MILTK; MILTK shall be deemed included within the definition of Venturer
for purposes of the Agreement; and MILTK shall have all of the rights and
obligations which Associates would have had under the Agreement as an owner of
an interest in the Venture.
2. Section 5.2 of the Agreement shall be deleted in its entirety and be
of no further force and effect and the following shall be substituted therefor:
"5.2 The net profits and losses of the Venture, together with any
investment or other tax credits available shall be allocated to the
Venturers as follows: 50% to ESJ; 25% to Midwest; 15% to MILTK; and
10% to IHS (the "Venturers Percentage Interests").
3. The Venture shall continue its existence and business uninterrupted
with MILTK following the date this Amendment shall become effective on the terms
stated herein and in the Agreement, as amended.
2
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been made and executed as of the
date and year first above written.
ESJ HOTEL CORPORATION
By: /s/
---------------------------------
[SEAL] Norman J. Menell, President
IHS ASSOCIATES, LTD.
By: /s/
---------------------------------
[SEAL] Hugh A. Andrews, Chariman of
the Board and President
MILTK, INC.,
By: /s/
---------------------------------
[SEAL] Milton Koffman, President
MIDWEST PROPERTY CORP.
By: /s/
---------------------------------
[SEAL] Burton I. Koffman, President
MILTK ASSOCIATES
[SEAL] By: MILTK, INC., its general partner
By: /s/
---------------------------------
Milton Koffman, President
3
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POSADAS DE SAN JUAN ASSOCIATES
THIRD AMENDMENT OF JOINT VENTURE AGREEMENT
Agreement made as of the 30th day of December, 1989 to become effective
as of the close of business on November 1, 1986 by and among ESJ HOTEL
CORPORATION ("ESJ"), a Delaware corporation with offices at 767 Fifth Avenue,
New York, New York 10153, IHS ASSOCIATES, LTD. ("IHS"), a Delaware corporation
with offices at 300 Plaza Drive, Binghamton, New York 13902, MILTK, INC.
("MILTK"), a Delaware corporation with offices at 300 Plaza Drive, Binghamton,
New York 13902 and MILTK ASSOCIATES ("Associates"), a New York limited
partnership with offices at 300 Plaza Drive, Binghamton, New York 13902.
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Joint Venture Agreement dated
July 27, 1984, as amended October 15, 1984 and September 30, 1986 (the
"Agreement") of POSADAS DE SAN JUAN ASSOCIATES, a joint venture organized
pursuant to the Partnership Law of the State of New York (the "Venture"), the
partners of the Venture are as follows:
Partner Interest
------- --------
ESJ Hotel Corporation,
a Delaware corporation 50%
IHS Associates, Ltd.,
a Delaware corporation 10%
Midwest Property Corp.,
a New York corporation 25%
MILTK Inc.,
a Delaware corporation 15%
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<PAGE>
WHEREAS, Midwest desires to transfer Ten percent (10%) of its interest
in the Venture to Associates, an affiliate of MILTK and MILTK desires to
withdraw as a venturer in the Venture; and
WHEREAS, ESJ, IHS, and Midwest desire to continue the existence of the
Venture with Associates as a venturer; and
WHEREAS, the parties desire that the Agreement be amended, effective as
of November 1, 1986 ("Effective Date"), to replace MILTK as a venturer in the
Venture by Associates and effect the transfers noted above;
NOW, THEREFORE, the parties hereto agree as follows:
1. ESJ and IHS hereby consent to the transfer by Midwest of Ten percent
(10%) of its interest in the Venture to Associates and to the transfer by MILTK
of its entire Fifteen Percent (15%) interest in the Venture to Associates.
2. As of the Effective Date, Associates shall be substituted for MILTK
for all purposes as a venturer in the Venture and shall have all of the rights
and obligations of an owner of an interest in the Venture.
3. Section 5.2 of the Agreement shall be deleted as of the Effective
Date in its entirety and be of no further force and effect and the following
shall be substituted therefor:
"5.2 The net proceeds and losses of the Venture, together with
any investment or other tax credits available shall be allocated to
the Venturers as follows: 50% to ESJ; 25% to Associates; 15% to
Midwest; and 10% to IHS (the "Venturers Percentage Interests").
4. The Venture shall continue its existence and business uninterrupted
with the partners as set forth on the terms stated herein.
2
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<PAGE>
IN WITNESS WHEREOF, the undersigned hereunto affix the signature of an
authorized officer.
ESJ HOTEL CORPORATION
By: /s/
---------------------------------
Norman J. Menell, President
IHS ASSOCIATES, LTD.
By: /s/
---------------------------------
Hugh A. Andrews, Chairman of the
Board and President
MILTK, INC.
By: /s/
---------------------------------
Milton Koffman, President
MIDWEST PROPERTY CORP.
By: /s/
---------------------------------
Burton I. Koffman, President
MILTK ASSOCIATES
By: /s/
---------------------------------
Milton Koffman, Partner
3
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<PAGE>
CONSENT TO TRANSFER AND INDEMNIFICATION
Agreement made as of the 30th day of December, 1989 to become effective
as of the close of business on November 1, 1986 by and among ESJ HOTEL
CORPORATION ("ESJ"), a Delaware corporation with offices at 767 Fifth Avenue,
New York, New York 10153, IHS ASSOCIATES, LTD. ("IHS"), a Delaware corporation
with offices at 1209 Orange Street, Wilmington, Delaware 19801, MIDWEST PROPERTY
CORP. ("Midwest"), a New York corporation with offices at 300 Plaza Drive,
Binghamton, New York 13902, MILTK, Inc. ("MILTK"), a Delaware corporation with
offices at 300 Plaza Drive, Binghamton, New York 13902 and MILTK ASSOCIATES
("Associates"), a New York limited partnership with offices at 300 Plaza Drive,
Binghamton, New York 13902.
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Joint Venture Agreement dated
July 27, 1984, as amended October 15, 1984 and September 30, 1986 (the
"Agreement") of POSADAS DE SAN JUAN ASSOCIATES, a joint venture organized
pursuant to the Partnership Law of the State of New York (the "Venture"), the
partners of the Venture are as follows:
Partner Interest
------- --------
ESJ Hotel Corporation,
a Delaware corporation 50%
IHS Associates, Ltd.,
a Delaware corporation 10%
Midwest Property Corp.,
a New York corporation 25%
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MILTK Inc.,
a Delaware corporation 15%
WHEREAS, Midwest desires to transfer on the books and records of the
Venture Ten percent (10% of its interest in the Venture to Associates and MILTK
desires to transfer on the books and records of the Venture all of its interest
in the Venture to Associates, an affiliate of MILTK effective as of November 1,
1986 (hereinafter the foregoing transfers are referred to jointly as the
"Transfers"); and
WHEREAS, Midwest, MILTK and Associates desire to obtain the consent of
ESJ and IHS to the Transfers as required by Section 6 of the Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Midwest, MILTK and Associates hereby indemnify ESJ and IHS and hold
ESJ, IHS and their affiliates harmless from any and all losses, liabilities,
damages, costs and expenses (including reasonable attorneys' fees) incurred by
them by reason of the Transfers.
2. In consideration of the foregoing, ESJ and IHS hereby consent to the
Transfers.
IN WITNESS WHEREOF, the undersigned hereunto affix the signature of an
authorized officer.
ESJ HOTEL CORPORATION
By:/s/
---------------------------------
Norman J. Menell, President
IHS ASSOCIATES, LTD.
By:/s/
---------------------------------
Hugh A. Andrews, Chairman of the
Board and President
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MILTK, INC.
By:/s/
---------------------------------
Milton Koffman, President
MIDWEST PROPERTY CORP.
By:/s/
---------------------------------
Burton I. Koffman, President
MILTK ASSOCIATES
By: MILTK, INC., its general partner
By:/s/
---------------------------------
Milton Koffman, Partner
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POSADAS DE SAN JUAN ASSOCIATES
FOURTH AMENDMENT OF JOINT VENTURE AGREEMENT
Agreement made as of the 13th day of August, 1992 by and among ESJ
HOTEL CORPORATION ("ESJ"), a Delaware corporation with offices at______________,
IHS ASSOCIATES, LTD. ("IHS"), a Delaware corporation with offices at 1209 Orange
Street, Wilmington, Delaware 19801, MIDWEST PROPERTY CORP. ("Midwest"), a New
York corporation with offices at 300 Plaza Drive, Vestal, New York 13850, and
MILTK ASSOCIATES ("MILTK"), a New York limited partnership with offices at 300
Plaza Drive, Vestal, New York 13850.
W I T N E S S E T H :
WHEREAS, pursuant to the terms of the Joint Venture Agreement dated
July 27, 1984, as amended October 15, 1984 and September 30, 1986 and December
30, 1989 (the "Agreement") of POSADAS DE SAN JUAN ASSOCIATES, a joint venture
organized pursuant to the Partnership Law of the State of New York (the
"Venture"), the partners of the Venture are as follows:
WHEREAS, MILTK desires to transfer Ten percent (10%) of its interest in
the Venture to Midwest; and
WHEREAS, ESJ, IHS, and Midwest desire to continue the existence of the
Venture with MILTK as a venturer; and
WHEREAS, the parties desire that the Agreement be amended, effective
August 13, 1992 ("Effective Date");
NOW, THEREFORE, the parties hereto agree as follows:
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<PAGE>
1. ESJ and IHS hereby consent to the transfer by MILTK of Ten percent
(10%) of its interest in the Venture to Midwest.
2. Section 5.2 of the Agreement shall be deleted as of the Effective
Date in its entirety and be of no further force and effect and the following
shall be substituted therefor:
"5.2 The net profits and losses of the Venture, together with any
investment or other tax credits available shall be allocated to the
Venturers as follows: 50% to ESJ; 25% to Midwest; 15% to MILTK; and
10% to IHS (the "Venturers Percentage Interests").
3. The Venture shall continue its existence and business uninterrupted
with the partners set forth on the terms stated herein.
IN WITNESS WHEREOF, the undersigned hereunto affix the signature of an
authorized officer.
ESJ HOTEL CORPORATION
By:
---------------------------------
IHS ASSOCIATES, LTD.
By: /s/
---------------------------------
Hugh A. Andrews, Chairman of the
Board and President
MIDWEST PROPERTY CORP.
By: /s/
---------------------------------
Burton L. Koffman, President
MILTK ASSOCIATES
By: MILTK, Inc., its general partner
By: /s/
---------------------------------
Milton Koffman, Partner
<PAGE>
<PAGE>
CONSENT TO TRANSFER AND INDEMNIFICATION
Agreement made as of the 13th day of August, 1992 by and among ESJ
HOTEL CORPORATION ("ESJ"), a Delaware corporation with offices at
_________________________, IHS ASSOCIATES, LTD. ("IHS"), a Delaware corporation
with offices at 1209 Orange Street, Wilmington, Delaware 19801, MIDWEST PROPERTY
CORP. ("Midwest"), a New York corporation with offices at 300 Plaza Drive,
Vestal, New York 13850 and MILTK ASSOCIATES ("MILTK"), a New York limited
partnership with offices at 300 Plaza Drive, Vestal, New York 13850.
W I T N E S S E T H :
WHEREAS, pursuant to the terms of the Joint Venture Agreement dated
July 27, 1984, as amended October 15, 1984 and September 30, 1986 and December
30, 1989 (the "Agreement") of POSADAS DE SAN JUAN ASSOCIATES, a joint venture
organized pursuant to the Partnership Law of the State of New York (the
"Venture"), the partners of the Venture are as follows:
Partner Interest
ESJ Hotel Corporation 50%
a Delaware corporation
IHS Associates, Ltd. 10%
a Delaware corporation
Midwest Property Corp., 15%
a New York corporation
MILTK Associates 25%
a New York limited partnership
<PAGE>
<PAGE>
WHEREAS, MILTK desires to transfer on the books and records of the
Venture Ten Percent (10%) of its interest in the Venture to Midwest effective as
of August 13, 1992 (hereinafter the foregoing transfer is referred to jointly as
the "Transfer"); and
WHEREAS, Midwest and MILTK desire to obtain the consent of ESJ and IHS
to the Transfers as required by Section 6 of the Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Midwest and MILTK hereby indemnify ESJ and IHS and hold ESJ, IHS and
their affiliates harmless from any and all losses, liabilities, damages, costs
and expenses (including reasonable attorneys' fees) incurred by them by reason
of the Transfer.
2. In consideration of the foregoing ESJ and IHS hereby consent to the
Transfer.
IN WITNESS WHEREOF, the undersigned hereunto affix the signature of an
authorized officer.
ESJ HOTEL CORPORATION
By:
---------------------------------
IHS ASSOCIATES, LTD.
By: /s/
---------------------------------
Hugh A. Andrews, Chairman of the
Board and President
<PAGE>
<PAGE>
MIDWEST PROPERTY CORP.
By: /s/
---------------------------------
Burton I. Koffman, President
MILTK ASSOCIATES
By: MILTK, Inc., its general partner
By: /s/
---------------------------------
Milton Koffman, Partner
<PAGE>
<PAGE>
NUMBER FIFTEEN
DEED OF LEASE
In the City of San Juan, Commonwealth of Puerto Rico, this twenty third
day of September, Nineteen hundred eighty three.
BEFORE ME
EUGENIO OTERO SILVA
Notary Public and Attorney-at-Law in and for the Commonwealth of Puerto
Rico, with residence in the City of San Juan, Puerto Rico, and offices in the
nineteenth floor of the Popular Center Building, Hato Rey Ward of said City.
APPEAR
AS PARTY OF THE FIRST PART: POSADAS DE FLAMBOYAN ASSOCIATES, L. P., a
limited partnership organized and existing under the laws of the State of
New York, United States of America, duly authorized to do business within the
Commonwealth of Puerto Rico, with its principal office in Binghamton, New York,
hereinafter referred to as the "LESSOR" and herein
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<PAGE>
represented by its general partner, Marco Industrial, Inc., a corporation
organized and existing under the laws of the State of New York, United States of
America, with its registered office in the City of New York, County of New York,
of said State herein represented by its President, Mister Richard Edward
Koffman, also known as Richard E. Koffman, of legal age, married, a business
executive and resident of Binghamton, New York, who states that he is duly
authorized to represent said limited partnership and binds himself to show such
authority whenever and wherever properly required to do so. AS PARTY OF THE
SECOND PART: POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED, D/B/A CONDADO
HOLIDAY INN, a corporation organized and existing under the laws of the State of
Delaware, United States of America, with its registered office in the City of
Wilmington, County of New Castle, of said State, duly authorized to do business
within the Commonwealth of Puerto Rico, with its principal office and place of
business in San Juan, Puerto Rico, hereinafter referred to as the "LESSEE" and
herein represented by its Chairman of the
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Board and President Mister Norman Jules Menell, also known as Norman J. Menell,
of legal age, married, a business executive and resident of New York, New York,
in transit in San Juan, Puerto Rico, who states that he is duly authorized to
represent said corporation and binds himself to show such authority whenever and
wherever properly required to do so; and I, the Notary, do hereby certify and
give faith that I am personally acquainted with the natural persons who appear
herein and from their statements and by belief, I also attest as to their age,
civil status, profession and residence. The appearing parties assure me of
their, and in my judgment they do have, the legal authority, capacity and
personal qualifications necessary to execute this Deed, and for such purpose
they freely and voluntarily
SET FORTH
FIRST: THE PROPERTY:
The LESSOR states and warrants that it is the sole owner with valid,
good and marketable fee simple title of the real estate property together with
all improvements
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presently situated thereon described in the Spanish language in the Registry of
Property of Puerto Rico as follows:
"URBANA: Parcela de terreno situada en el sitiodenominado 'El Condado'
de la Seccion Norte del Barrio Santurce de la ciudad de San Juan, Puerto Rico,
con un area superficial total de Cuatro Mil Setecientos Setentiocho metros
cuadrados con Seis Mil Cuatrocientos Treintidos diez milesimas de otro
(4,778.6432) colindando por el Norte en una distancia de ochentidos metros con
cincuenta centesimas de otro, que es su frente, con la Avenida Las Nereidas,
antes, hoy denominada `Dr. Ashford'; por el Sur, que es su fondo, en linea
irregular y en una distancia total de noventisiete metros con sesentinueve
centesimas de otro con la Ensenada o Laguna del Condado; por el Oeste, con
terrenos propiedad de Behn Brothers, antes, hoy Luis Tirado, en una distancia de
cuarenticuatro metros con ochentiocho centesimas de otro y por el Este, en una
distancia de sesentiun metros con sesentidos centesimas de otro con terrenos
propiedad de la Sucesion de Francisco Maria Franceschi, antes, luego propiedad
de Jack's Beach Resort, Incorporated, hoy John Rodriguez de Jesus."
"Enclava en dicho solar un edificio de varias plantas dedicado a
hotel".
Said real estate property is described in the English language as
follows:
"URBAN: Parcel of land located in the place denominated "Condado" of
Section North of the Santurce Ward of the City of San Juan, Puerto Rico, with a
total surface area of Four Thousand Seven Hundred Seventy Eight square meters
with Six Thousand Four Hundred Thirty Two Thousandths of another (4,778.6432),
adjacent by the North in a distance of eighty two meters with fifty hundreths of
another, which is its front, previously with Las Nereidas Avenue, denominated
today "Dr. Ashford"; by the South, which is its back, in an irregular line and
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with a total distance of ninety seven meters with sixty nine hundredths of
another with Ensenada or Condado Lagoon; by the West with land property
previously of Behn Brothers, today Luis Tirado, in a distance of forty four
meters with eighty eight hundredths of another and by the East, in a distance of
sixty one meters with sixty two hundredths of another with land property
previously of the Estate of Francisco Maria Franceschi, then property of Jack's
Beach Resort, Incorporated, today John Rodriguez de Jesus".
"Erected in said lot is a building of various stories dedicated to a
hotel."
Said real estate property, together with any and all easements, rights,
privileges and appurtenances thereto belonging or in anywise appertaining
together with all of the estate, right, title, interest, claim or demand
whatsoever of LESSOR therein and in and to the streets and ways adjacent
thereto, in possession or expectancy, now or hereafter acquired, is hereinafter
collectively referred to as the "REAL PROPERTY".
SECOND: TITLE:
The LESSOR states and warrants that said real estate property is
recorded at page two hundred eighteen of volume four hundred sixty two of
Santurce Norte, lot number seventeen thousand two hundred eighty six, of the
Registry of Property of Puerto Rico, First Section of San
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Juan and that it acquired the same pursuant to Deed Number One, executed on
September nineteen, nineteen hundred seventy seven before Notary Public Santiago
C. Soler Favale, subsequently clarified pursuant to Deed Number One, executed on
January thirty one, nineteen hundred seventy eight before Notary Public Carlos
Santos Correa, recorded at page seventy six of volume six hundred fifty six of
Santurce Norte, fourth entry of the aforesaid lot.
THIRD: LIENS AND ENCUMBRANCES:
The LESSOR states that according to the Registry of Property said real
estate property is subject by its origin to restrictive covenants and by itself
to the following two mortgages:
A. Mortgage guaranteeing the payment of three promissory notes in the
amounts of One Million Seven Hundred Thousand Dollars, One Million Dollars and
Five Hundred Thousand Dollars, with interest at the rate of four percent per
annum, payable to the bearer on December one, nineteen hundred ninety-seven,
constituted pursuant to Deed Number Sixty Two, executed on September nineteen,
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nineteen hundred seventy seven before Notary Public Alfredo Martinez Alvarez,
subsequently clarified pursuant to Deed Number four, executed on January thirty,
nineteen hundred seventy eight before said Notary Public, recorded at page
seventy three of volume six hundred fifty six of Santurce Norte, third entry of
the aforesaid lot which mortgage is hereinafter referred to as the "FIRST
MORTGAGE". The FIRST MORTGAGE is presently in the reduced amount of Two Million
Six Hundred Twelve Thousand One Hundred Seventy Dollars.
B. Mortgage guaranteeing the payment of a mortgage note in the principal
amount of One Million Dollars with interest at the rate of eight percent per
annum, payable on demand to the Puerto Rico Development Fund, or its order, with
interest at the rate of eight percent per annum, subscribed by Mister Hugh A.
Andrews, as representative of Marco Industrial, Inc., general partner of the
LESSOR, on February two, nineteen hundred seventy eight before Notary Public
Carlos Santos Correa, Affidavit Number eight thousand nine hundred seventy one,
which mortgage was constituted pursuant to Deed Number Two,
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executed before said Notary Public on the same date of said mortgage note,
recorded at page two hundred ninety three of volume seven hundred sixty eight of
Santurce Norte, fifth entry of the aforesaid lot which mortgage is hereinafter
referred to as the "SECOND MORTGAGE". The SECOND MORTGAGE is presently in the
reduced amount of Nine Hundred Fifty Five Thousand Nine Hundred Seventy Two
Dollars. The FIRST MORTGAGE and the SECOND MORTGAGE are hereinafter collectively
referred to as the "existing mortgages".
The LESSOR states and warrants that except as stated hereinbefore, the
aforesaid real estate property is free and clear of any other liens and
encumbrances and not be subject to any mortgages, liens and encumbrances with a
prior or an equal rank, except the restrictive covenants mentioned hereinbefore.
The LESSOR does hereby consent that the LESSEE's interest in the lease
which is the object of this Deed be assigned by LESSEE, including the assignment
to the PONCE FEDERAL SAVINGS and LOAN ASSOCIATION OF PUERTO RICO as a collateral
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guarantee for a Loan that said institution has agreed to grant to WILLIAMS
ELECTRONICS, INC., a corporation organized and existing under the laws of the
State of Delaware.
FOURTH: The appearing parties state that they have agreed to the lease
of the REAL PROPERTY together with the IMPROVEMENTS, as such term is hereinafter
defined, whereof they freely and voluntarily
EXECUTE
FIFTH: LEASE: In consideration of the mutual covenants hereinafter
contained, LESSOR hereby demises, lets and leases to LESSEE and LESSEE hereby
leases from LESSOR, the REAL PROPERTY together with all of the IMPROVEMENTS
thereto. The term "IMPROVEMENTS" shall mean all buildings and structures now or
hereafter located on the REAL PROPERTY and all fixtures and equipment installed
therein or appurtenant thereto and all alterations and improvements thereto and
replacements thereof including, without limitation, all heating, plumbing,
ventilating, air conditioning and electrical systems, all fixtures, equipment,
furnishings and other items of personal
9
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property now or hereafter installed therein. The REAL PROPERTY and the
IMPROVEMENTS are sometimes hereinafter collectively referred to as the "DEMISED
PREMISES".
SIXTH: TERM: The Term of this lease shall be TEN YEARS, commencing as of
October one, nineteen hundred eighty three and expiring, unless sooner
terminated pursuant to the provisions hereof, at midnight on September thirty,
nineteen hundred ninety three.
SEVENTH: RENTAL PAYMENTS: LESSEE shall pay to or upon the order of
LESSOR as rental payment for the leasing of the DEMISED PREMISES the following
amounts:
A. During the first five years of the term of this lease, to wit: the
period commencing October one, nineteen hundred eighty three and expiring
September thirty, nineteen hundred eighty eight, annual rent of Five Hundred
Sixty Six Thousand Dollars payable in equal monthly installments of Forty Seven
Thousand One Hundred Sixty Six Dollars and Sixty Seven Cents, said installments
being payable on the first day of each month
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commencing October one, nineteen hundred eighty three through and including
September one, nineteen hundred eighty eight; and
B. During the second five years of the term of this lease, to-wit: the
period commencing October one, nineteen hundred eighty eight and expiring
September thirty, nineteen hundred ninety three, an annual rent of Six Hundred
Twenty Two Thousand Dollars payable in equal monthly installments of Fifty One
Thousand Eight Hundred Thirty Three Dollars and Thirty Three Cents, said
installments being payable on the first day of each month commencing October
one, nineteen hundred eighty eight and on the first day of each succeeding month
through and including September one, nineteen hundred ninety three.
EIGHTH: EXTENSION: LESSEE shall have the option to extend this lease for
an additional term of ten and one-half years, commencing October one, nineteen
hundred ninety three and expiring, unless sooner terminated pursuant to the
provisions hereof, at midnight on March thirty one, two thousand four. LESSEE
may exercise such
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option by written notice given to LESSOR at any time prior to midnight on June
thirty, nineteen hundred ninety three.
LESSEE shall have the option to further extend this lease for an
additional term of four and one-half years, commencing April one, two thousand
four and expiring, unless sooner terminated pursuant to the provisions hereof,
at midnight on September thirty, two thousand eight. LESSEE may exercise its
option by written notice given to LESSOR not earlier than November one, two
thousand three and not later than December 31, 2003. LESSEE's right to exercise
such option shall be conditioned upon all of the following conditions existing
on the date that LESSEE gives its written notice of its exercise of such option
to extend the term of this lease:
A. The Sixteen Million Dollar obligation secured by the mortgage on the
Condado Holiday Inn Hotel and Sands Casino in favor of PONCE FEDERAL SAVINGS AND
LOAN ASSOCIATION OF PUERTO RICO and the other participating banks, said PONCE
FEDERAL SAVINGS AND LOAN ASSOCIATION OF PUERTO RICO and participating banks
together with their successors
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and assigns are hereinafter collectively referred to as the "MORTGAGEE", shall
remain unpaid; and
B. The MORTGAGEE shall have, in writing, requested LESSEE to exercise
such option.
If LESSEE exercises such first option and extends the term of this lease
for ten and one-half years, LESSEE shall pay to LESSOR as rental payment for the
leasing of the DEMISED PREMISES the following amounts:
(a) During the first five years of the first option period of this
lease, to-wit: the period commencing October one, nineteen hundred ninety three
and expiring September thirty, nineteen hundred ninety eight, an annual rent of
Six Hundred Eighty Four Thousand Dollars payable in equal monthly installments
of Fifty Seven Thousand Dollars, said installments being payable on the first
day of October, nineteen hundred ninety three and on the first day of each
succeeding month through and including September one, nineteen hundred ninety
eight; and
(b) During the second five years of the first option period of this
lease, to-wit: the period commencing October one, nineteen hundred ninety eight
and expiring
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September thirty, two thousand three, an annual rent of Seven Hundred Fifty Two
Thousand Dollars payable in equal monthly installments of Sixty Two Thousand Six
Hundred Sixty Six Dollars and Sixty Seven Cents, said installments being payable
on the first day of each month commencing October one, nineteen hundred ninety
eight and on the first day of each succeeding month through and including
September one, two thousand three; and
(c) During the final six months of the first option period of this
lease, to-wit: the period commencing October one, two thousand three and
expiring March thirty one, two thousand four, a total rent of Four Hundred
Thirteen Thousand Five Hundred Dollars payable in equal monthly installments of
Sixty Eight Thousand Nine Hundred Sixteen Dollars and Sixty Seven Cents, said
installments being payable on the first day of each month commencing October
one, two thousand three and on the first day of each succeeding month through
and including March one, two thousand four.
If LESSEE exercises such second option and further extends the term of
this lease for an additional four and
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one-half years, LESSEE shall pay to the LESSOR as rental payment for the leasing
of the DEMISED PREMISES during the final four and one-half year option term,
to-wit: the period commencing April one, two thousand four and expiring
September thirty, two thousand eight, an annual rent of Eight Hundred Twenty
Seven Thousand Dollars payable in equal monthly installments of Sixty Eight
Thousand Nine Hundred Sixteen Dollars and Sixty Seven Cents, said installments
being payable on the first day of each month commencing April one, two thousand
four and on the first day of each succeeding month through and including
September one, two thousand eight.
NINTH: EXISTING MORTGAGES - LESSEE'S RIGHT TO CURE DEFAULTS:
A. LESSOR warrants and represents to LESSEE in respect of the EXISTING
MORTGAGES as follows:
One. The unpaid balance as of August thirty one, Nineteen hundred eighty
three is: the FIRST MORTGAGE, two million six hundred twelve thousand one
hundred seventy dollars; the SECOND MORTGAGE,
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nine hundred fifty five thousand nine hundred seventy two dollars;
Two. The copy of Deed Number Sixty Two, executed before Notary Public
Alfredo Martinez Alvarez on September Nineteen, nineteen hundred seventy seven,
together with the copy of Deed Number Four executed before said Notary on
January thirty, nineteen hundred seventy eight, clarifying the same and the copy
of Deed Number One, executed before Notary Public Santiago C. Soler Favale on
September Nineteen, nineteen hundred seventy seven, together with the copy of
Deed Number One, executed before Notary Public Carlos Santos Correa on January
thirty one, nineteen hundred seventy eight, clarifying the same, that the LESSOR
has delivered to the LESSEE are true, complete and accurate in all respects and
contain all of the terms and conditions of the FIRST MORTGAGE as of this date
without any exception. Likewise, the copy of Deed Number Two, executed before
Notary Public Carlos Santos Correa on February two, nineteen hundred seventy
eight that the LESSOR has delivered to the LESSEE is also true, complete and
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accurate in all respects and contains all of the terms and conditions of the
SECOND MORTGAGE as of this date without any exception.
Three. The EXISTING MORTGAGES are in full force and effect, all payments
required to be made thereunder through the date of this lease have been made, no
uncured notice of default with respect thereto has been received by LESSOR
through the date of this lease and LESSOR has no knowledge as of the date of
this lease, of the existence or non-existence of any condition or state of
facts, the existence or non-existence of which constitutes or would, with the
passage of time, constitute or create a default under the EXISTING MORTGAGES.
B. LESSOR covenants and agrees with LESSEE that with respect to the
EXISTING MORTGAGES:
One. LESSOR shall pay when due all sums payable by Mortgagor pursuant to
the EXISTING MORTGAGES and shall promptly perform all acts and obligations
required to be performed by Mortgagor pursuant to the EXISTING MORTGAGES.
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Two. LESSOR will not cause, suffer or permit any default to exist or
remain uncured under the terms of the
EXISTING MORTGAGES.
Three. LESSOR shall direct the holders of the EXISTING MORTGAGES to send
all notices, demands and communications concerning the EXISTING MORTGAGES to
LESSEE as agent for receipt of such notices for LESSOR.
C. LESSEE may, at LESSEE's sole option, pay and perform all of LESSOR's
obligations under the EXISTING MORTGAGES and otherwise deal with the holders of
the EXISTING MORTGAGES in the name of and in place of LESSOR; in furtherance
thereof, LESSOR hereby appoints LESSEE as its attorney-in-fact, which
appointment shall be deemed coupled with an interest and irrevocable.
In the event LESSOR shall default in the payment or performance of any
of LESSOR'S obligations under the EXISTING MORTGAGES and provided such default
is not occasioned by LESSEE'S breach of its covenant set forth in subparagraph D
hereof, LESSEE shall have the right but
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not the obligation to deal directly with the holders of said EXISTING MORTGAGES
and to cure such defaults. In the event that the defaults are of such a nature
that same cannot be cured, LESSOR covenants and agrees with LESSEE that LESSOR
shall satisfy said EXISTING MORTGAGES and cause same to be discharged of record
prior to any public sale of said EXISTING MORTGAGES in foreclosure. In the event
LESSOR shall fail or refuse to satisfy and discharge the EXISTING MORTGAGES as
in the preceding sentence required then, and in such event, LESSEE or LESSEE'S
parent Williams Electronics, Inc. (WILLIAMS) or any affiliate (AFFILIATE) of
LESSEE or any third party designee (DESIGNEE) of LESSEE shall have the right to
pay off or purchase by assignment the EXISTING MORTGAGES or such of same as
shall be in default.
In the event that any of LESSEE, WILLIAMS, AFFILIATE OR DESIGNEE shall
advance funds to the holders of the EXISTING MORTGAGES to cure any default on
the part of LESSOR pursuant to the EXISTING MORTGAGES, including without
limitation, purchasing by
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assignment or satisfying said EXISTING MORTGAGES in the event that such default
cannot be cured, then in any such events LESSEE shall, if LESSEE shall advance
any such funds purchasing or satisfying said EXISTING MORTGAGES, have the
absolute right to offset against the next due installments of rent payable
hereunder the cost of curing such default or acquiring or satisfying such
EXISTING MORTGAGES, including, without limitation, the cost of all recording
fees, title charges, attorneys' fees and interest on all monies advanced or
expended in connection with curing such defaults or acquiring or satisfying such
EXISTING MORTGAGES.
In the event WILLIAMS, AFFILIATE OR designee shall pay off or acquire
such EXISTING MORTGAGES as above provided, then LESSEE shall have the absolute
right to pay the next due installments of rent payable hereunder to WILLIAMS,
AFFILIATE or DESIGNEE as the case may be, towards reimbursement of the cost of
curing such default or acquiring or paying off such EXISTING MORTGAGES
including, without limitation, the cost of all recording fees, title charges,
attorneys' fee and interest on
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all monies advanced or expended in connection with curing such defaults or
acquiring or satisfying such EXISTING MORTGAGES.
Interest on any of the aforesaid sums expended or advanced by LESSEE,
WILLIAMS, AFFILIATE or DESIGNEE to cure such defaults or pay off or acquire such
EXISTING MORTGAGES shall be calculated on the basis of the actual interest and
other costs charged to LESSEE, WILLIAMS, AFFILIATE or DESIGNEE by a third party
lender who shall lend to LESSEE, WILLIAMS, AFFILIATE or DESIGNEE the sums
necessary to finance the costs and expenses incurred in curing such default or
acquiring such EXISTING MORTGAGES. If LESSEE, WILLIAMS, AFFILIATE or DESIGNEE
shall pay such costs and expenses out of their own funds, interest on such funds
shall be calculated at rate equal to one percent above the highest published
prime rate of any of the three following New York City Banks: The Chase
Manhattan Bank, N.A., Citibank, N.A., and the Chemical Bank, N.A., such interest
rate to be adjusted monthly to take into
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account the increases or decreases in such prime rate; such adjustments to
automatically take effect on such dates.
Nothing herein contained shall be construed to limit or in any way
impair the right of LESSEE, WILLIAMS, AFFILIATE or DESIGNEE to foreclose the
EXISTING MORTGAGES by virtue of the defaults of LESSOR in the event that LESSEE,
WILLIAMS, AFFILIATE or DESIGNEE shall purchase by assignment the EXISTING
MORTGAGES. Any payments made by LESSEE to WILLIAMS, AFFILIATE or DESIGNEE shall
be applied first to the payment of interest on the monies so advanced by
WILLIAMS, AFFILIATE or DESIGNEE and the non reduction of principal. If LESSEE
shall advance the funds, repayment to LESSEE shall be made as in the preceding
sentence provided.
To further secure LESSOR'S covenant to satisfy the EXISTING MORTGAGES
prior to public sale as above set forth herein, Burton Irving Koffman and
Richard Edward Koffman are executing and delivering to LESSEE their joint and
several guaranty of LESSOR'S obligations and their agreement to indemnify LESSEE
from and against
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any and all loss, liability, cost or expenses incurred or sustained by LESSEE by
virtue of LESSOR's breach of its obligations set forth above in this
subparagraph C.
D. Notwithstanding anything contained herein to the contrary, LESSOR
agrees that LESSEE shall have the right to deduct from each monthly rent payment
due hereunder an amount of money equal to the regular monthly payments of
interest and principal due pursuant to the terms of the EXISTING MORTGAGES and
LESSEE covenants to pay such funds directly to the holders of said EXISTING
MORTGAGES.
TENTH: USE AND OPERATION: LESSEE shall have the complete right, control
and discretion in the operation of the DEMISED PREMISES for any lawful purpose.
Such right, control and discretion by LESSEE shall include, without limitation,
the use of the DEMISED PREMISES for all customary services as a hotel, the
charges to be made for and the terms and admittance to the hotel for rooms, for
privileges, for gaming, entertainment and amusement, for food and beverages, the
labor policies of the operation, and all phases of promotion and publicity.
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LESSEE shall at its sole expense cause the DEMISED PREMISES to comply at all
times with all applicable laws, ordinances, rules and regulations in force
during the term of this lease, including any renewal term. Nothing contained
herein shall constitute or be construed to be or create a partnership or joint
venture between LESSOR and LESSEE, their successors and assigns. Except as
otherwise provided herein, LESSEE shall bear all expenses of operating the
DEMISED PREMISES pursuant to this lease. LESSOR shall have the right upon
reasonable advance notice to LESSEE to inspect the DEMISED PREMISES.
ELEVENTH: ALTERATIONS: LESSEE shall have the right, from time to time,
during the term of this lease, at LESSEE's sole expense and discretion, to make
such non-structural alterations or improvements in or to the DEMISED PREMISES;
provided, however, that no alteration or improvement exceeding One Hundred
Thousand Dollars in any fiscal year shall be made without the prior written
consent of LESSOR, which consent shall not be unreasonably withheld or delayed.
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TWELFTH: GENERAL MAINTENANCE: LESSEE shall, at LESSEE'S sole expense,
maintain the DEMISED PREMISES in good repair, appearance, working order and
condition, and, except as hereinafter provided, make all necessary repairs,
renewals and replacements thereto. LESSOR shall, at LESSOR's sole expense, make
all necessary repairs to the structural components of the IMPROVEMENTS. Upon the
termination of this Agreement, LESSEE shall turn over to LESSOR the IMPROVEMENTS
in as good condition as when LESSEE took possession thereof, ordinary wear and
tear, acts of God or force majeure excepted.
THIRTEENTH: POSSESSION: LESSOR agrees that LESSEE, on the paying of rent
provided herein and performing all of its agreements under this lease, shall
peaceably and quietly hold the DEMISED PREMISES for the term aforesaid and any
renewal thereof, free from interruption or disturbance; subject, however, to all
the terms of this lease.
FOURTEENTH: PERMITS: LESSOR and LESSEE shall use their best endeavours
to obtain from the
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applicable Puerto Rico governmental authorities whatever permits, licenses,
consents, sanctions or authorities that may from time to time be required for
the operation and use of the DEMISED PREMISES as a hotel and casino, all at the
sole expense of LESSEE.
FIFTEENTH: INSURANCE: LESSEE shall, at its sole expense, procure and
maintain at all times during the term of this lease or any renewal thereof
adequate and appropriate insurance for the DEMISED PREMISES with solvent and
responsible insurance companies reasonably acceptable to LESSOR. Such insurance
policies shall be carried in favor of LESSOR and LESSEE.
If the DEMISED PREMISES or any part thereof shall be damaged by fire or
other casualty, LESSEE shall give immediate written notice thereof to LESSOR and
this lease shall continue in full force and effect except as hereinafter set
forth.
If the DEMISED PREMISES are partially damaged or rendered partially
unusable by fire or other casualty, the damages thereto shall be repaired by
LESSEE from the proceeds of insurance maintained pursuant to this lease.
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The rent shall be allocated between the damaged or unusable portion of the
DEMISED PREMISES and the balance of the DEMISED PREMISES, and the portion of the
rent allocated to the damaged or unused portion shall cease until the repairs
are completed while the rent for the balance of the DEMISED PREMISES shall
continue unabated.
If the DEMISED PREMISES, in LESSEE's reasonable judgment, are totally
damaged or rendered wholly unusable by fire or other casualty, then LESSEE shall
have the following options exercisable by written notice of LESSOR given within
ninety days after such fire or casualty:
A. LESSEE may elect to continue this lease in effect and may repair any
or all the damages from the proceeds of insurance maintained pursuant to this
lease. If such insurance proceeds exceed the costs of repair, the excess shall
be paid to LESSOR. If such proceeds are insufficient to restore the DEMISED
PREMISES to the condition that existed immediately prior to such fire or other
casualty, LESSEE may advance the additional costs
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of such repairs and restorations and such amounts advanced shall be a credit,
except as hereinafter provided, against all subsequently due rental payments up
to the full amount of such additional costs. The provisions of the preceding
sentence to the contrary notwithstanding, the credit that LESSEE shall be
entitled to take against subsequently due rental payments shall only be in an
amount equal to the difference between the rental payments due hereunder and the
regular monthly amounts payable to the holders of the EXISTING MORTGAGES. If
LESSEE elects to continue this lease in effect pursuant to this Section
ELEVENTH, the rent shall cease until the earlier to occur of the completion of
repairs, or twelve months after the fire or casualty; or
B. Not to repair the damages, in which event the rent shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the date when the DEMISED PREMISES shall have been repaired and restored
by LESSOR, if LESSOR elects timely to so repair and restore pursuant to the next
paragraph of this Lease,
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subject to LESSOR's right to elect not to restore the same as hereinafter
provided.
If the DEMISED PREMISES are damaged and rendered wholly unusable by the
fire or other casualty and if LESSEE has not undertaken to continue this lease
in effect as provided in this Section ELEVENTH, then, in such event LESSOR may
elect to terminate this LEASE by written notice to the LESSEE given within
thirty days after receipt of LESSEE's notice given pursuant to the preceding
paragraph of this lease which notice from the LESSOR shall specify a date for
the expiration of this lease, which date shall not be more than sixty days after
the giving of such notice, and upon the date specified in such notice the term
of this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this Lease and LESSEE shall forthwith
quit, surrender and vacate the DEMISED PREMISES without prejudice to LESSOR'S
rights and remedies against LESSEE under the provisions of this lease in effect
prior to such termination, and any rent owing shall be paid up to the date of
the fire or other casualty and any payments of rent made by
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LESSEE which were on account of any period subsequent to such date shall be
returned by LESSOR to LESSEE. The insurance proceeds received on account of the
fire or casualty which have not been utilized to repair or restore the DEMISED
PREMISES shall be paid to LESSOR. Unless LESSOR shall serve a termination notice
as provided for in this paragraph, LESSOR shall repair and restore all the
damages and the DEMISED PREMISES to a condition at least as good as that which
existed prior to such fire or casualty, with all reasonable expedition subject
to delays due to adjustment of insurance claims, labor troubles and causes
beyond LESSOR's control.
LESSEE and LESSOR hereby waive any rights they may have against each
other on account of any loss sustained as a result of a fire or other casualty
that is insured, it being understood that such insurance is for the benefit of
both LESSEE and LESSOR and no insurer shall have rights of subrogation against
the other.
SIXTEENTH: CONDEMNATION: LESSOR and LESSEE covenant and agree that in
the event of a taking by condemnation of all or any portion of the DEMISED
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PREMISES by a competent authority, which taking does not result in a termination
of this Lease, any award for such condemnation shall, subject to the rights of
the holders of the EXISTING MORTGAGES, be disposed of as follows:
A. If such taking by condemnation shall be of all or substantially all
of the DEMISED PREMISES, this lease shall terminate as of the date of such
taking and any rent owing shall be paid up to the date of such taking any
payments of rent made by LESSEE which were on account of any period subsequent
to such data shall be returned to LESSOR by LESSEE and LESSOR shall be entitled
to such award.
B. If such taking is of a part of the DEMISED PREMISES and LESSEE, in
its reasonable discretion, determines that it can continue to occupy the
remaining portion of the DEMISED PREMISES and use same for the purposes set
forth herein then, and in such event, this lease shall not terminate and the
award shall first be applied to the restoration of the remaining portion of the
DEMISED PREMISES into a single architectural unity and/or for the
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replacement and relocation, if practical, of any of the facilities or portions
of the DEMISED PREMISES so taken and the remainder of the award, if any, shall
be paid to LESSOR and the rent payable hereunder by LESSEE from and after the
date of such taking shall be reduced proportionately to reflect the reduced
value of the DEMISED PREMISES.
SEVENTEENTH: EMPLOYMENT POLICY: LESSEE shall use reasonable efforts to
employ local Puerto Rican personnel in the operation of the DEMISED PREMISES;
provided, however, that LESSEE shall have the right to employ such non-local
personnel as LESSEE in its sole discretion shall deem necessary or desirable.
EIGHTEENTH: SUBLEASE: LESSEE shall have the right to sublet any portion
of the DEMISED PREMISES; provided, however, that any sublease shall expire or
terminate not later than the expiration or termination of this lease unless
LESSOR otherwise agrees in writing. LESSEE will not sublease the whole or any
substantial portion of the DEMISED PREMISES without
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LESSOR'S written consent, which shall not be reasonably withheld or delayed.
NINETEENTH: DEFAULTS: If at any time, or from time to time, during the
term of this lease or any renewal term any of the following events of default,
hereinafter referred to as "EVENTS OF DEFAULT", shall occur and not be remedied
within the periods of time hereinafter specified, namely:
(a) If LESSEE shall default in the payment of any installment of rent or
any other sum or payment which may become due hereunder and such default shall
continue for thirty days after written notice that the same is due and payable;
If any of the following shall occur:
(b) The entry of a decree or order for relief by a court having
jurisdiction in the premises in respect of LESSEE in an involuntary case under
the federal bankruptcy laws, as now or hereafter constituted, or any other
applicable federal, state or commonwealth bankruptcy, insolvency or other
similar law, or appointing a receiver, liquidator, assignee, custodian, trustee,
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sequestrator (or other similar official) of LESSEE or for any substantial part
of its property, or ordering the winding-up or liquidation of its affairs and
the continuance of any such decree or order unstayed and in effect for a period
of sixty consecutive days; or
(c) The commencement by LESSEE of a voluntary case under the federal
bankruptcy laws, as now constituted or hereafter amended, or any other
applicable federal, state or commonwealth bankruptcy, insolvency or other
similar law, or the consent by it to the appointment of or taking possession by
a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of LESSEE or for any substantial part of its property, or the
making by it of any assignment for the benefit of creditors, or the failure of
LESSEE generally to pay its debts as such debts become due, or the taking of
corporate action by LESSEE in furtherance of any of the foregoing; or
(d) If LESSEE shall fail to materially perform, keep or fulfill any
other of the covenants, undertakings, obligations or conditions of this lease,
and any such default shall continue for a period of more than thirty days after
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written notice thereof is given by LESSOR to LESSEE; provided, however, that if
such default cannot be cured with due diligence within said thirty day period
and provided LESSEE has commenced to cure such default and is diligently and
expediously engaged in curing such default, LESSEE's time to cure such default
shall be extended for such period of time as may be required to cure such
default.
Upon the happening and continuance of any EVENT OF DEFAULT, LESSOR may
at its option terminate this lease on a date specified in writing to LESSEE and
upon the date so specified, the term of this lease shall expire as fully and
completely as if that day were the day herein definitely fixed for the
expiration of the term of this lease and LESSEE shall then quit and surrender
the DEMISED PREMISES to LESSOR, and LESSEE shall remain liable to LESSOR for the
payment of all rents due pursuant to this lease to the date of such termination,
but not thereafter.
TWENTIETH: INDEMNITY: LESSEE shall indemnify and hold LESSOR and its
partners, and all
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officers and directors, and controlling persons of such partners, harmless from
and against all liabilities, obligations, damages, penalties, claims, losses,
causes of action, costs, charges and expenses which may be imposed upon or
incurred by or asserted against them or either of them, or the DEMISED PREMISES,
or any part thereof, arising out of the operation of the DEMISED PREMISES or the
Condado Holiday Inn Hotel and Sands Casino by LESSEE pursuant to this Lease.
TWENTY FIRST: ENTIRE AGREEMENT: This lease constitutes the entire
agreement of the parties with respect to the subject matter hereof. No change,
modification, amendment, addition or termination of this lease or any part
thereof shall be valid unless in writing and signed by or on behalf of the party
to be charged therewith.
TWENTY SECOND: NOTICES: Any and all notices or other communications or
deliveries required or permitted to be given pursuant to any of the provisions
of this lease shall be deemed to have been duly given for all purposes if sent
by certified or registered mail, return
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receipt requested and postage prepaid, hand delivered or sent by telegraph or
telex as follows: If to LESSEE, at: c/o Williams Electronics, Inc., seven six
seven (767) Fifth Avenue, New York, New York one zero one five three (10153),
Attention: Mister Norman Menell, with copies to Golenbock and Barell, six four
five (645) Fifth Avenue, New York, New York one zero zero two (10022),
Attention: Justin Golenbock and Ponce Federal Savings and Loan Association of
Puerto Rico, P. O. Box one zero two four (1024), Ponce Puerto Rico zero zero
seven two three hyphen one zero two four (00723-1024); If to LESSOR, at: c/o
Koffman, three hundred (300) Plaza Drive, Binghamton, New York one three nine
zero three (13903), Attention: Mister Burton Koffman, with a copy to: Beveridge
& Diamond, one three three three (1333) New Hampshire Avenue, N.W., Washington,
D.C. two zero zero three six (20036), Attention: Albert Beveridge, III; or at
such other address as any party may specify by notice given to other party in
accordance with this Section Twenty Third. The date of giving of any such notice
shall be the date of hand delivery, the date following the posting of the
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mail or delivery to the telegraph company or when sent by telex.
TWENTY THIRD: SPECIAL COVENANTS RELATING TO BRIDGE:
LESSOR hereby grants to LESSEE a permanent right of support for the
existing bridge over Ashford Avenue, which bridge connects the REAL PROPERTY
with the real estate property owned by the LESSEE and known as the Condado
Holiday Inn. LESSEE shall have the obligation at all times to repair and
maintain said bridge and shall have the right at all times to come upon the REAL
PROPERTY for the purpose of maintaining, repairing OR REPLACING THE BRIDGE.
Lessee shall have the right, subject to requirements of law upon the termination
of this lease to seal off and close the bridge to all traffic by erecting a wall
or suitable barrier at such location on the bridge as LESSEE may determine.
The rights granted herein for support, repair, maintenance and
replacement shall survive the termination of this lease and shall run with the
land and be binding
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upon and inure to the benefit of the parties hereto, their successors and
assigns.
TWENTY FOURTH: LESSEE'S RIGHT OF FIRST REFUSAL: If at any time during
the term of this lease or any renewal term LESSOR receives a bona fide offer to
purchase the REAL PROPERTY together with the improvements thereon, which LESSOR
is willing to accept, LESSEE shall have a sixty (60) days first refusal option
to purchase the REAL PROPERTY on the same terms and conditions as LESSOR is
willing to accept from such bona fide purchaser. LESSOR shall promptly submit to
LESSEE a contract of sale executed by such third party together with a written
notice that LESSOR is willing to sell the REAL PROPERTY upon the terms and
conditions set forth in such contract. Thereafter, LESSOR shall have sixty (60)
days to enter into a contract with LESSOR upon the same or equivalent terms,
except that if said executed contract contemplates a consideration to be paid by
such purchaser to LESSOR other than a cash consideration then, and in such
event, such contract shall state a cash equivalent to the consideration to be
paid by such purchaser
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to LESSOR and LESSEE may pay the cash equivalent of such consideration to
LESSOR. If LESSEE fails to exercise the first refusal option granted herein, and
if LESSOR does not sell the REAL PROPERTY to the bona fide purchaser entering
into the contract with LESSOR within one hundred eighty (180) days after the
execution of such contract of sale then, and in such event, LESSOR shall be
required to repeat the foregoing procedure for any subsequent proposed sale
including a proposed sale to the same purchaser.
TWENTY FIFTH: ESTOPPEL CERTIFICATES:
A. LESSOR'S CERTIFICATE:
LESSOR shall, without charge, at any time and from time to time,
within ten (10) days after reasonable request by LESSEE, deliver a written
instrument to LESSEE or any other person, firm or corporation specified by
LESSEE, duly executed and acknowledged certifying:
(a) Whether LESSEE has faithfully and fully made all payments
then and theretofore due to LESSOR;
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(b) Whether this lease is unmodified and in full force and
effect; or if there has been any modification, whether this lease is in full
force and effect as modified, and stating any such modification;
(c) Whether LESSOR knows or does not know, as the case may be, of
any default by LESSEE in the performance by LESSEE of all agreements, terms,
covenants and conditions on LESSEE's part to be performed hereinunder. If LESSOR
certifies that he knows of any such default, he shall specify the same in said
written instrument; and
(d) The dates to which the basic rent, additional rent and other
charges hereunder have been paid.
B. LESSEE'S CERTIFICATE:
LESSEE shall, without charge, at any time and from time to time,
within ten (10) days after reasonable request by LESSOR, deliver a written
instrument to LESSOR or any other person, firm or corporation specified by
LESSOR, duly executed and acknowledged, certifying:
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(a) Whether this lease is unmodified and in full force and
effect, or, if there has been any modification, whether the same is in full
force and effect as modified, and stating any such modification;
(b) Whether or not there are then existing any setoffs or
defenses against the enforcement of any of the agreements, terms, covenants or
conditions of this lease and any modification thereof upon the part of LESSEE to
be performed or complied with, and if so, specifying the same; and
(c) The dates to which the basic rent, additional rent and other
charges hereunder have been paid.
TWENTY SIXTH: TAX EXEMPTION: LESSOR warrants and represents that
pursuant to the terms of an order (the "ORDER") signed by Carlos Romero Barcelo,
the Governor of Puerto Rico, on September seventh, nineteen hundred eighty
three, the REAL PROPERTY and the personal property utilized in the operation of
the REAL PROPERTY enjoys partial tax exemption on real and personal property
taxes, which tax exemption pursuant to the terms of the ORDER is for an initial
term of eight and
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one half (8 1/2) years expiring December thirty one, nineteen hundred eighty
seven, which term shall automatically be extended for ten (10) additional years
in accordance with the provisions of the ORDER. Anything in this lease to the
contrary notwithstanding, LESSOR covenants and agrees with LESSEE that LESSOR
shall, during the term of this Lease, pay and discharge when due Fifty percent
of any and all real or personal property taxes payable with respect to the REAL
PROPERTY and the personal property utilized in the operation of the REAL
PROPERTY and LESSEE shall pay and discharge the other Fifty percent.
TWENTY SEVENTH: PARTIAL INVALIDITY: Should any clause, section or part
of this lease be held or declared to be void or illegal for any reason, all
other clauses, sections or parts of this lease which can be effected without
such illegal clause, section or part shall nevertheless continue in full force
and effect.
TWENTY EIGHTH: GOVERNING LAW: This lease shall be governed, interpreted
and construed in accordance with the laws of the State of New York.
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TWENTY NINTH: ASSIGNMENT -- SUCCESSORS AND ASSIGNS: This lease and the
various rights and obligations arising hereunder shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.
THIRTIETH: CAPTIONS: The headings or captions under sections of this
lease are for convenience and reference only nd do not in any way modify,
interpret or construe the intent of the parties or effect any of the provisions
of this lease.
ACCEPTANCE
The appearing parties accept this Deed as drafted because it has been
drawn in accordance with their instructions and acknowledge that they duly
understand the English language.
I, the Notary, do hereby give faith and certify that I have advised the
appearing parties of the legal effects of this Deed and that they waived their
right to have attesting witnesses present in its execution after having been
duly advised of such right.
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I. the Notary, also give faith and certify that this Deed was read
personally by each of the appearing parties, who having found it in accordance
with their instructions, stipulations, terms and conditions, approve, ratify and
confirm the contents hereof; and that thereupon each of the appearing parties
affixed his initials on each and every page and signs the original of this Deed
before me, the Notary; of all of which, under my signature and seal, signing,
sealing, marking and flourishing the same according to law, I, the undersigned
Notary, ATTEST.
SIGNED: Richard Edward Koffman---Norman Jules Menell
SIGNED, FLOURISHED, MARKED AND SEALED: Eugenio Otero Silva
The initials of each of the signataries, the Notary's seal and flourish
appear on each of its pages.
The corresponding internal revenue stamps and that of the notarial tax
have been cancelled on the original.
I, the NOTARY, CERTIFY and GIVE FAITH that the foregoing is a true and
exact copy of its original which forms part of my protocol of public instruments
for the current year.
IN WITNESS WHEREOF, at the request of Posadas de Puerto Rico Associates,
Incorporated, d/b/a Condado Condado Holiday Inn and after annotating in the
original that it has been issued, I issue this FIRST Certified
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Copy, which I sign, flourish, mark and seal in the place and on the same date of
its execution, of all of which, I ATTEST.
NOTARY PUBLIC
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CERTIFIED, RETURN
RECEIPT REQUESTED
September 23, 1983
Posadas de Flamboyan
Associates, L.P.
c/o Koffman
300 Plaza Drive
Binghamton, NY 13903
ATTN: Mr. Burton Koffman
Re: Flamboyan Building
(Laguna Wing, Condado
Holiday Inn)
Dear Sirs:
Reference is made to the Deed of Lease executed by Posadas de Flamboyan
Associates, L.P. and Posadas de Puerto Rico Associates, Incorporated on this
same date before Notary Public Eugenio Otero Silva, Deed No. 15, specifically to
paragraph EIGHTH of the same.
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Posadas de Flamboyan Associates, L.P.
Setpember 23, 1983
Page -2-
September 23, 1983
Posadas de Puerto Rico Associates, Incorporated does hereby exercise its
option to extend the lease for an additional term and does hereby extend the
term of the lease for an additional ten and one-half years.
Cordially yours,
POSADAS DE PUERTO RICO
ASSOCIATES, INCORPORATED
By: /s/
----------------------
Norman J. Menell
Chairman of the Board
and President
cc: Beveridge & Diamond (Certified,
Return Receipt Requested)
1333 New Hamshire Avenue, N.W.
Washington, D.C. 20036
Attn: Albert Beveridge III
Ponce Federal Savings & Loan Association
Receipt Acknowledge. The term of the lease is hereby extended for an
additional term of ten and a half years, whereof the term of the lease shall be
twenty and a half years.
POSADAS DE FLAMBOYAN, L.P.
By: /s/
----------------------
Richard E. Koffman
Vice President - Marco
Industrial, Inc.
General Partner
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DEED NUMBER THREE (3)
DEED OF SUBORDINATION OF LEASE
In the City of San Juan, Commonwealth of Puerto Rico, this fifth (5th) day
of May, nineteen hundred ninety five (1995).
BEFORE ME
THELMA RIVERA LABOY
Attorney-At-Law and Notary in and for the Commonwealth of Puerto Rico, with
offices at the American International Plaza Building in the Hato Rey sector of
San Juan, Puerto Rico and residence in San Juan, Puerto Rico.
APPEAR
AS PARTY OF THE FIRST PART: POSADAS DE FLAMBOYAN ASSOCIATES, L.P.
(hereinafter, the "Mortgagor"), a limited partnership organized and existing
under the laws of New York, Employer Tax Identification Number 66-0373-092,
herein represented by its Managing Partner, MARCO INDUSTRIAL, INC., a Delaware
Corporation, which in turn is represented by its Vice President, Steven M.
Koffman, of legal age, married, businessman and resident of Carolina, Puerto
Rico.
AS PARTY OF THE SECOND PART: POSADAS DE PUERTO RICO ASSOCIATES, INC.
("Posadas") (Tax Employer Identification Number: 66-040-1424), a corporation
organized under the laws of Puerto Rico, herein represented by its Assistant
Secretary of Board of Directors, Manuel Osvaldo Peredo Lara, also known as Manny
Peredo, of legal age, married, Social Security Number ###-##-####, executive and
a resident of San Juan, Puerto Rico.
<PAGE>
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AS PARTY OF THE THIRD PART: SCOTIABANK DE PUERTO RICO (the "Bank") (Tax
Identification Employer Number: 66-037-2744), a banking corporation organized
and existing under the laws of Puerto Rico, herein represented by its Authorized
Officer, Nestor Vale, of legal age, married, banker and resident of Guaynabo,
Puerto Rico.
I, the Notary, hereby certify that I personally know the appearing parties
and from their statements I also attest as to their age, civil status,
occupation and residence. The appearing parties assure me that they have, and in
my judgment do have the legal capacity necessary for this act, and for that
purpose they voluntarily
STATE
FIRST: That the Borrower is the owner of record, with valid, good and
marketable fee simple title ("pleno dominio") of the property described in the
Spanish language as follows (the "Property"):
"URBANA: Parcela de terreno situada en el sitio denominado El Condado de la
Seccion Norte del Barrio de Santurce de la Ciudad de San Juan, Puerto Rico, con
un area superficial de cuatro mil setecientos setenta y ocho punto seis mil
cuatrocientos treinta y dos metros cuadrados (4,778.6432 m.c.), en lindes por el
Norte, en una distancia de ochenta y dos punto cincuenta metros (82.50 m.), que
es su frente, con la Avenida Las Nereidas antes, hoy denominada Dr. Ashford; por
el Sur, que es su fondo, en linea irregular y en una distancia total de noventa
y siete punto sesenta y nueve metros (97.69 m.), con la Ensenada o Laguna del
Condado; por el Oeste, con terrenos propiedad de Behn Brothers, en una distancia
de cuarenta y cuatro punto ochenta y ocho metros (44.88 m.); y por el Este, en
una distancia de sesenta y uno punto sesenta y dos metros (61.62 m.), con
terrenos de la Sucesion de Francisco Maria Franceschi antes, luego propiedad de
Jack's Beach Resort, Inc. Enclava un edificio de varias plantas, dedicado a
hotel y se conoce como Hotel Flamboyan."
Recorded at page 76, volume 656 of Santurce Norte, property number 17286.
SECOND: The Property is free and clear of liens and encumbrances,
except for the following:
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(a) Mortgage constituted by deed number sixty two (62), executed on
September nineteen (19), nineteen seventy seven (1977) before notary Alfred
Martinez Alvarez (hereinafter, the "Bearer Mortgage"), which mortgage secures
three bearer mortgage notes for the principal sums of One Million Seven Hundred
Thousand Dollars ($1,700,000.00), One Million Dollars ($1,000,000.00) and Five
Hundred Thousand Dollars ($500,000.00).
The Bearer Mortgage is recorded at page 73 of volume 656 of Santurce Norte,
property number 17286.
(b) Mortgage to secure a mortgage note for the principal sum of One Million
Dollars ($1,000,000.00) payable to Puerto Rico Development Fund (the "PRDF
Mortgage"), constituted by virtue of deed number Two (2), executed in San Juan,
on February two (2), nineteen hundred seventy eight (1978) before Notary Carlos
Santos Correa.
The PRDF Mortgage is recorded at page 293 of volume 768 of Santurce Norte,
property number 17286.
The PRDF Mortgage will be cancelled prior to the presentation of this Deed
of Subordination of Lease.
(c) Lease in favor of Posadas de Puerto Rico Associates, Inc. (the "Condado
Lease"), constituted by virtue of deed number fifteen (15) executed in San Juan,
on September twenty three (23), nineteen hundred eighty three (1983) before
Notary Eugenio Otero Silva, recorded at page 294 overleaf of volume 768 of
Santurce Norte, property number 17286.
(d) Leasehold mortgage (the "Leasehold Mortgage") to secure a mortgage note
for the principal sum of Five Million Five Hundred Thousand Dollars
($5,500,000.00) payable to Scotiabank de Puerto Rico, constituted by virtue of
deed number four hundred sixty three (463),
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executed in San Juan, on August thirty (30), nineteen hundred eighty eight
(1988). This mortgage properly affects the Condado Lease, and not the fee simple
to the Property.
The Leasehold Mortgage is recorded at page 296 overleaf of volume 768 of
Santurce Norte, property number 17286.
(e) Mortgage constituted by deed number two (2) executed on the fifth (5th)
day of May, nineteen ninety five (1995) before Notary Public Thelma Rivera Laboy
(hereinafter, the "Scotiabank Mortgage"), which secures a mortgage note payable
to the order of the Bank in the principal sum of Five Million Dollars
($5,000,000.00) plus interest at a rate of ten percent (10%) per annum, payable
on demand.
The Scotiabank Mortgage will be presented for recordation in the Registry
of the Property immediately before the presentation of this deed of
subordination of mortgage.
THIRD: Posadas has the leasehold right to the Condado Lease.
FOURTH: Posadas and the Bank wish to exchange, and hereby exchange,
the registration rank of the Condado Lease and the Leasehold Mortgage in the
Registry, so that the rank of such liens be subordinated to the rank of the
Scotiabank Mortgage. Since the Bearer Mortgage will not be affected, the rank of
the liens affecting the Property shall now be as follows: the Bearer Mortgage
will continue to be recorded in first rank; the Scotiabank Mortgage in second
rank; and the Condado Lease in third rank. Since the Leasehold Mortgage does not
properly affect the title to the Property, its rank with respect to the object
it encumbers (the Lease) will remain the same.
FIFTH: The Bank now delivers to me, the Notary, the original Leasehold
Mortgage Note. I, the Notary, am convinced that such is the true and original
mortgage note
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secured by the Leasehold Mortgage referred herein. I further certify that after
endorsing the Leasehold Mortgage Note secured by the Leasehold Mortgage with a
notation above my signature and seal stating that on this date and pursuant to
this deed the Leasehold Mortgage securing said note has been subordinated to the
Scotiabank Mortgage, I, the Notary, have returned the original Leasehold
Mortgage Note to its current holder as stated above.
SIXTH: The parties hereby requests the Registrar of the Property of
San Juan, First Section, to note this subordination in the Registry.
ACCEPTANCE
I, the Notary, do hereby certify that I advised the appearing party of the
legal effect of the present deed, who waived his right to have attesting
witnesses in this instrument, after having duly advised him of such right.
The appearing parties, having read this deed, ratify its contents, place
his initials on every page of this instrument and signs before me, the Notary
who certify as to my acquaintance with the appearing party, his personal
circumstances in accordance with his statements and all other things herein
contained.
/s/
/s/
/s/
/s/
5
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NUMBER THREE (3)
OPTION
In the City of San Juan, Puerto Rico, this fifth (5th) day of May,
nineteen hundred ninety five (1995).
BEFORE ME
SILVESTRE M. MIRANDA
Attorney-At-Law and Notary in and for the Commonwealth of Puerto Rico
with offices and residence located in San Juan, Puerto Rico.
APPEARS
AS PARTY OF THE FIRST PART: POSADAS DE PUERTO RICO ASSOCIATES
INCORPORATED, taxpayer number 66-040-1424, a Delaware corporation duly
authorized to do business in Puerto Rico, (hereinafter referred to as the
"Optionee"), represented in this act by its Assistant Treasurer, MANUEL PEREDO
LARA, Social Security Number ###-##-####, of legal age, married, executive and
resident of San Juan, Puerto Rico, who agrees to show evidence that he has been
authorized to appear on behalf and in representation of Optionee whenever and
wherever so required and
AS PARTY OF THE SECOND PART: POSADAS DE FLAMBOYAN ASSOCIATES L.P., a
limited partnership organized under the laws of the State of New York
(hereinafter referred to as the "Optionor"), representered herein by its
Managing Partner, Marco Industrial, Inc., a Delaware corporation duly authorized
to do business in the Commonwealth of Puerto Rico, taxpayer number 66-037-3092,
represented herein by its General Partner, Marco Industrial, Inc., a New York
corporation duly authorized to do business in Puerto Rico, taxpayer
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number 13-2922304, represented by its Vice President, STEVEN KOFFMAN, Social
Security Number ###-##-####, of legal age, single, and resident of San Juan,
Puerto Rico, who agrees to show evidence that he has been authorized to appear
on behalf and in representation of Optionor whenever and whereever so required.
I, the Notary, certify that I personally know the appearing parties as
through their statements also test to their age, civil status, professions and
residence. The appearing parties assure me that they have the legal capacity for
the execution of the present document and nothing to the contrary being known to
me, the appearing parties freely
STATE
FIRST: The Optionor is the owner of record, with valid good and
marketable fee simple title ("pleno dominio") of the property described in the
Spanish language as follows (the "Property"):
"URBANA: Parcela de terreno situada en sitio denominado El Condado de la
Seccion Norte del Barrio de Santurce de la Ciudad de San Juan, Puerto Rico, con
un area superficial de CUATRO MIL SETECIENTOS SETENTA Y OCHO METROS CUADRADOS
CON SEIS MIL CUATROCIENTOS TREINTA Y DOS DIEZ MILESIMAS DE METRO CUADRADO
(4,778.6432 m.c.), en lindes por el NORTE, en una distancia de Ochenta y Dos
punto Cincuenta Metros (82.50 m.), que es su frente, con la Avenida Las Nereidas
antes, hoy denominada Avenido Doctor Ashford; por el SUR, que es su fondo, en
linea irregular y con una distancia total de Noventa y Siete punto Sesenta y
Nueve metros (97.69 m.), con la Ensenada o Laguna del Condado; por el OESTE, con
terrenos propiedad de Behn Brothers, en una distancia de Cuarenta y Cuatro punto
Ochenta y Ocho metros (44.88 m.); y por el ESTE en una distancia de Sesenta y
Uno punto Sesenta y Dos metros (61.62 m.), con terrenos de la Sucesion de
Francisco Maria Franceschi, antes, luego propiedad de Jack's Beach Resort, Inc.
Enclava un edificio de varias plantas dedicado a hotel y se conoce como
Hotel Flamboyan."
SECOND: TITLE: The Optionor acquired the Property from the Puerto Rico
Tourism Company pursuant to the terms of Deed Number One (1), executed at San
Juan, Puerto Rico,
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on September nineteen (19), nineteen seventy seven (1977) before Notary Public
Santiago C. Soler Favale, and clarified Deed Number One (1) executed on January
thirty first (31st), nineteen seventy eight (1978) before Notary Public Carlos
Santos Correa, recorded at page seventy six (76) of volume six hundred and fifty
six (656) of Santurce North, property number seventeen thousand two hundred
eighty six (17,286), fourth (4th) inscription.
THIRD: LIENS AND ENCUMBRANCES: The Property is subject to the following
liens and encumbrances:
One: Mortgage in the amount of Three Million Two Hundred Thousand
Dollars ($3,200,000.00), securing a series of three (3) mortgages notes payable
to the bearer, in the amounts of One Million Seven Hundred Thousand Dollars
($1,700,000.00), One Million Dollars ($1,000,000.00) and Five Hundred Thousand
Dollars ($500,000.00), respectively, constituted by Deed Number Sixty Two (62)
executed at San Juan, Puerto Rico on September nineteen (19) nineteen seventy
seven (1977) before Notary Public Alfredo Martinez Alvarez and clarified by Deed
Number Four (4), executed at San Juan, Puerto Rico on January thirty (30),
nineteen seventy eight (1978), before the same Notary Public, recorded at page
seventy three (73), of volume six hundred fifty six (656), North Section of
Santurce, Property number seventeen thousand two hundred and eighty six
(17,286), (hereinafter, the "Existing Mortgage").
Two: Mortgage in the principal amount of One Million Dollars
($1,000,000.00) securing a mortgage note payable to the order of The Puerto Rico
Development Fund on demand, constituted pursuant to the terms of Deed Number Two
(2), executed at San Juan, Puerto Rico, on February second (2nd), nineteen
seventy eight (1978) before Notary Public Carlos Santos Correa, recorded at page
two hundred ninety three (293) of volume seven hundred
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sixty eight (768) of Santurce Norte, Property number seventeen thousand two
hundred and eighty six (17,286).
Three: Lease in favor of Posadas de Puerto Rico Associates, Inc.
(d/b/a Condado Holiday Inn), for a term of ten (10) years, commencing on October
first (1st), nineteen eighty three (1983) and ending on September thirty (30),
nineteen ninety three, renewable for ten and a half (10 1/2) additional years,
expiring on March thirty first (31st), two thousand and four (2004) and
renewable for four and half (4 1/2) additional years expiring on September
thirty (30) two thousand and eight (2008), constituted pursuant to Deed number
fifteen (15), executed at San Juan, Puerto Rico, on September twenty third (23)
nineteen eighty three (1983), before Notary Public Eugenio Otera Silva, recorded
at page two hundred ninety four (294) of volume seven hundred sixty eight (768)
of Santurce Norte, Property number seventeen thousand two hundred and eighty six
(17,286).
Four: Leasehold Mortgage in the principal amount of Five Million
Five Hundred Thousand Dollars ($5,500,000.00) securing a note payable to
Scotiabank de Puerto Rico or its order, constituted pursuant to Deed Number Four
Hundred Sixty Three (463), executed at San Juan, Puerto Rico on August thirty
(30) nineteen eighty eight (1988) before Notary Public Roberto L. Cordova,
recorded at page two hundred ninety six (296) of volume seven hundred sixty
eight (768) of Santurce Norte, Property number seventeen thousand two hundred
and eighty six (17,286).
Five: Mortgage in the principal amount of Five Million Dollars
($5,000,000.00) securing a promissory note in favor of American Express Bank
Limited constituted pursuant to Deed of protocolization Number Twenty Five (25)
executed in San Juan, Puerto Rico on August
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twenty third (23rd), nineteen ninety one (1991) before Notary Public Enel M.
Perez Montes, modified pursuant to Deeds Numbers eleven (11), executed in San
Juan, Puerto Rico, on August twenty fourth (24th) nineteen ninety two (1992)
before Notary Public Pablo L. Dardet and Deed Number Seven (7) executed in San
Juan, Puerto Rico, on April twenty first (21st), nineteen ninety four (1994)
before Notary Public Pablo L. Dardet. This mortgage is pending recording at
entry four hundred sixty five (465) of Book of Daily Entries eight hundred and
twelve (812) and the modifications thereto pending recording at entries two
hundred ninety four (294) and five hundred thirty eight (538) of book of daily
entries eight hundred twenty three (823) and eight hundred forty two (842),
respectively.
Six: Mortgage securing a note payable to Scotiabank de Puerto
Rico in the principal sum of Five Million Dollars ($5,000,000.00) plus interest
at ten percent (10%) per annum, constituted pursuant to the terms of Deed of
Mortgage Number Two (2), executed on May fifth (5th), nineteen hundred ninety
five (1995), before Notary Public Thelma Rivera Laboy, pending recording (the
"Scotiabank Mortgage").
The Optionor warrants and represents that concurrently with the
execution of this deed it will cancel the mortgages described in Sub-sections
Two (2) and Five (5).
FOURTH: GRANT OF OPTION; OPTION PRICE: The Optionor hereby grants
to the Optionee an exclusive option (the "Option") to purchase the Property
subject and pursuant to the terms set forth in this Deed, for a purchase price
of FIVE MILLION DOLLARS ($5,000,000.00) (the "Purchase Price"). This Option is
being granted in consideration of certain consents and other accommodations
being made by Optionee in connection with that certain loan agreement dated May
fifth (5th), nineteen hundred ninety five (1995) (the "Loan Agreement")
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between Optionor and Scotiabank de Puerto Rico ("Scotiabank") and the Scotiabank
Mortgage, which secures a mortgage note payable to the order of Scotiabank in
the principal sum of Five Million Dollars ($5,000,000.00) plus interest at a
rate of ten percent (10%) per annum (the foregoing documents and instruments,
together with all documents and instruments executed in connection therewith are
referred to herein as the "Scotiabank Loan Documents"). This Option shall expire
upon the earlier to occur of (i) payment in full and release of the Scotiabank
Mortgage or (ii) the subordination of the Scotiabank Mortgage to the Lease or
(iii) Optionee or its successors and assigns shall cease to be lessee of the
Property.
FIFTH: OPTION PERIOD: In the event that a default shall occur under any
of the Scotiabank Loan Documents, this Option shall become immediately
exercisable and shall remain exercisable for a period of sixty (60) days (the
"Option Period").
SIXTH: EXERCISE OF OPTION: The Option may be exercised by the
Optionee by giving written notice to the Optionor during the Option Period of
its election to exercise the Option. After the Option has been so exercised,
Optionee shall specify a closing date, which shall not be later than sixty (60)
days after the date of exercise of the Option. At the closing, Optionor shall
convey good and marketable title to the Property to Optionee or its designee,
free of all liens, claims and encumbrances other than those of Optionee, by deed
of purchase sale, subject only to real estate taxes not yet due and payable; and
Optionee shall pay the full Purchase Price by certified or official bank
check(s) or by wire transfer. The adjustment of real estate taxes and other
customary matters shall be made in accordance with local custom. Optionee shall
have the right to pay and apply the Purchase Price directly to the holders of
the Existing Mortgage and the Scotiabank Mortgage.
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SEVENTH: REPRESENTATION AND CONVENTS OF OPTIONOR: The Optionor
represents and warrants as follows:
(a) Prior to the expiration of this Option, the Optionor
will not incur any additional indebtedness, or encumber, transfer, convey, or
enter into any lease with respect to all or any portion of, or any interest in,
the Property except with Optionee.
(b) The Optionor shall not (i) without the prior written
consent of the Optionee, which shall not be unreasonably withheld, change the
present zoning classification of the Property or (ii) cause or knowingly permit
to be placed on occur on the Property any hazardous waste, toxic spill or other
environmental contamination.
(c) In the event Optionor does not within the five years
immediately following the date of this deed pay in full and release the
Scotiabank Mortgage or obtain the subordination of the Scotiabank Mortgage to
the Lease; and the Optionee or its successors and assignor continue to be the
lessee of the Property, then Optionor shall cause at its cost and expense, the
refiling of this deed for recording in the Registry of the Property, First
Section of San Juan.
EIGHTH: OPTION PRICE: For recording purposes only, the
parties agree that this option is extended for a consideration of One Thousand
Dollars ($1,000.00).
NINTH: RECORDING OF OPTION: Optionor shall promptly record
this Option at its expense in the proper registry.
TENTH: GENERAL PROVISIONS:
A. This Option shall be binding upon and inure to the
benefit of Optionor and Optionee and their respective successors and assigns.
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B. This Option Agreement may not be modified, amended or
terminated nor may any provision hereof be waived except by a writing signed by
the party against whom such amendment, modification, termination or waiver is to
be enforced.
C. This Option Agreement shall be construed in accordance
with the laws of the Commonwealth of Puerto Rico.
ACCEPTANCE
I, the Notary, do hereby certify that I advised the appearing
parties of the legal effect of the present deed, who waived their right to have
attesting witnesses in this instrument, after having duly advised them of such
right.
I, the Notary, also certify and attest that this document was
read by the parties and having found it in accordance with their wishes and
instructions they approve and ratify the contents thereof and sign before me
after placing their initials on each and every page of the original of this
deed.
I, the Notary, also certify and attest that the appearing parties
and I know and fully understand the English language and I attest as to my
personal knowledge of the persons appearing herein and to their personal
qualifications.
TO ALL OF WHICH, under my signature, sign and seal, signing and
sealing the same according to law, I, the undersigned Notary, ATTEST.
/s/
/s/
/s/
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SCOTIABANK
SCOTIABANK DE PUERTO RICO
Commercial Banking - Plaza Scotiabank, Hato Rey Branch, 2
PO Box 362649, San Juan PR 00936-2649
May 5, 1995
Posadas de Puerto Rico Associates, Inc.
c/o Williams Hospitality Group, Inc.
187 East Isla Verde Road
Isla Verde, Puerto Rico 00913
Gentlemen:
Reference is made to that certain credit agreement dated May 5, 1995 (the
"Credit Agreement") between Scotiabank de Puerto Rico ("Scotiabank") and Posadas
de Flamboyan Associates, L.P. Capitalized terms as used herein and not otherwise
defined shall have the same meaning ascribed to such terms in the Credit
Agreement.
In connection with the entry into the Credit Agreement and other Loan
Documents, Scotiabank has requested that you ("Posadas") consent to the
assignment by the borrower to Scotiabank, as collateral security, of the Lease
Agreement constituted by virtue of Deed No. 15 of September 23, 1983 before
Notary Public Eugenio Otero Silva, as amended (the "Lease") and any monies due
or to become due thereunder and to subordinate the Lease to the lien of
Scotiabank under the Mortgage constituted by deed number 2 executed on the 5th
day of May, 1995 before Notary Public Thelma Rivera Laboy (the "Scotiabank
Mortgage").
Scotiabank also acknowledges that it is the owner of that certain
leasehold mortgage (the "Leasehold Mortgage") with respect to the Lease to
secure a mortgage note for the principal sum of $5,500,000 payable to
Scotiabank, constituted by virtue of deed number 463, executed in San Juan on
August 30, 1988 before Notary Public Robert L. Cordova.
Scotiabank also acknowledges that it has been advised that in
consideration of certain concessions being made by Posadas in connection with
the Credit Agreement, the Borrower is granting to Posadas an option (the
"Option") to purchase the Property for $5 million in the event that there is a
default under the Credit Agreement or other Loan Documents.
In consideration for Posadas consenting to the subordination of the Lease
to the Scotiabank Mortgage, Scotiabank hereby agrees to give to Posadas a copy
of any and all notices
<PAGE>
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Posadas de Puerto Rico Associates, Inc
May 5, 1995
Page -2-
sent to the Borrower under the Loan Documents, including, without limitation,
the notice to the Borrower under Section 10.2 of the Credit Agreement.
In addition, Scotiabank agrees that for a period of thirty (30) days
following the occurrence of an Event of Default, other than an Event of Default
under Section 10.1(a) or 10.1(f) (as it relates to Borrower) of the Credit
Agreement, Scotiabank shall not commence proceedings to foreclose the Scotiabank
Mortgage or otherwise interfere with Posadas' possession of the Property under
the Lease. If Posadas shall notify Scotiabank in writing during such 30 day
period that Posadas has exercised the Option, then Scotiabank shall not, for a
period of 60 days from its receipt of such notice, commence proceedings to
foreclose the Scotiabank Mortgage or otherwise interfere with Posadas'
possession of the Property under the Lease. The obligation of Scotiabank as
aforesaid is expressly conditioned upon the continued payment of rent by Posadas
on a current basis as required by the Lease. If at any time during the first 30
day period or during the second 60 day period, any monetary defaults under the
Lease shall have occurred and are not cured, then Scotiabank will be entitled to
proceed with any and all of its available remedies under the Credit Agreement,
other Loan Documents or applicable law, including commencement of foreclosure
proceedings. Nothing herein is intended to limit or prevent Scotiabank from
giving any notice under Section 10.2 of the Credit Agreement or from pursuing
any other remedies which may be available to it.
Scotiabank's agreement to delay commencement of foreclosure proceedings is
intended to afford Posadas an opportunity to exercise the Option and after such
exercise, to close the purchase of the Property and apply the purchase price to
payment of the indebtedness under the Credit Agreement.
Scotiabank, as owner of the Leasehold Mortgage, hereby notifies Posadas,
pursuant to Section SEVENTH: (c) of the Leasehold Mortgage, that Posadas shall
not continue paying, when due, the principal amortization payments plus interest
to the holders of the notes securing the Existing Mortgages but shall instead
pay the full amount of the rent under the Lease to Scotiabank to be credited, to
Borrower's obligations under the Credit Agreement, as required pursuant to the
Assignment of lease. In addition, Scotiabank, as holder of the Leasehold
Mortgage, pursuant to Section EIGHT of the Leasehold Mortgage, hereby consents
to the execution and delivery by Posadas of all consents, deeds, documents and
instruments being executed by Posadas in connection with the Credit Agreement.
If the foregoing is in accordance with your agreement and understanding,
please execute a copy of this letter below under the words "Accepted and Agreed
To" and return it to the
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Posadas de Puerto Rico Associates, Inc
May 5, 1995
Page -3-
undersigned.
Very truly yours,
SCOTIABANK DE PUERTO RICO
By: /s/
-------------------------------
Nestor Vale
ACCEPTED AND AGREED TO:
POSADAS DE PUERTO RICO ASSOCIATES, INC.
By:
------------------------------------
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GUARANTY OF PAYMENT AND PERFORMANCE
The undersigned, Mr. Burton I. Koffman, also known as Burton Irving
Koffman, of legal age, married, a business executive and resident of Binghamton,
New York, and Richard Edward Koffman, of legal age, married, a business
executive and resident of New York, New York, for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged and
to induce Posadas de Puerto Rico Associates, Inc., d/b/a Condado Plaza Hotel &
Casino, a corporation organized and existing under the laws of the State of
Delaware, United States of America ("Posadas") to enter into a Deed of
Subordination of its lease (the "Lease") executed on September 23, 1983 before
Notary Public Eugenio Otero Silva, with Posadas de Flamboyan Associates, L.P., a
limited partnership organized and existing under the laws of the State of New
York, United States of America ("Flamboyan"), in favor of a mortgage constituted
by deed no. two executed on the 5th day of May, 1995 before Notary Public Thelma
Rivera Laboy (the "Scotiabank Mortgage") to secure a $5 million mortgage note
payable to ScotiaBank de Puerto Rico and to make certain other concessions in
connection with such financing, hereby unconditionally guaranty, jointly and
severally, to Posadas:
ONE: The obligation of Flamboyan to pay and perform pursuant to the
Lease all of Flamboyan's obligations with respect to those two mortgages, one in
the original principal amount of $3,200,000 and to the other in the original
principal amount of $1,000,000, encumbering the premises demised pursuant to the
Lease (the "Demised Premised"), which two mortgages are more particularly
described in the Lease and referred to therein and herein as the "Existing
Mortgages."
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TWO. The obligation of Flamboyan to pay off, satisfy and discharge of
record the Existing Mortgages in accordance with Flamboyan's obligations to pay
an discharge.
THREE. The obligation of Flamboyan to pay as and when due the Scotiabank
Mortgage in accordance therewith, the credit agreement dated May 5, 1995 between
Flamboyan and Scotiabank and the other documents and instruments executed in
connection therewith (the "Scotiabank Loan Documents").
FOUR. The obligations of Flamboyan under that certain Option Agreement
dated May 5, 1995 between Flamboyan and Posadas pursuant to which Flamboyan has
given Posadas an option to purchase the Demised Premises upon certain terms and
conditions.
The obligations of Flamboyan as set forth in paragraphs ONE, TWO, THREE
and FOUR above are hereinafter collectively referred to as the "Secured
Obligations."
The undersigned, and each of them, hereby guarantee jointly and
severally with Flamboyan to Posadas, and its successors or assigns, the punctual
payment and performance of each and all of the Secured Obligations together with
any interest as may accrue thereon either before or after any maturity(ies)
thereof, and all expenses which may be incurred by Posadas in enforcing any of
its rights hereunder or under the Lease with respect to same. Each of the
undersigned hereby waives notice of acceptance of this guaranty, and also
presentment, demand, protest, and notice of dishonor for non-acceptance or
non-payment of any and all of the Secured Obligations and likewise waives demand
for payment, and notice of non-payment of any and all of the Secured
Obligations, and promptness in commencing suit against any party liable therefor
or liability thereon and/or in giving any notice to or making any claim or
demand hereunder upon the undersigned.
2
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The undersigned hereby consent and agree that Posadas may at any time,
or from time to time, in its discretion, (1) with the consent of Flamboyan
extend or change the time of payment, and/or the manner, place or terms of
payment or performance of any of the Secured Obligations or any part or parts
thereof, or of any renewal thereof, (2) exchange, release, and/or surrender all
or any collateral security, or any part or parts thereof (by whomsoever
deposited) which may hereafter be held by Posadas in connection with this
guaranty, or any or all of the Secured Obligations, (3) sell and/or purchase all
or any part of such collateral at public or private or notarial sale, or at any
broker's board, (4) settle or compromise with Flamboyan, and/or any other person
or persons liable thereon, any and all of the Secured Obligations, the payment
and performance of which is hereby guaranteed by the undersigned and/or
subordinate the payment of the Secured Obligations or any part thereof to the
payment of any other debt or claim which may at any time be due or owing to
Posadas; all in such manner and upon such terms as Posadas may see fit, and
without notice to or further assent from any of the undersigned, who hereby
agree to be and remain bound upon this guaranty, irrespective of the existence,
value or condition of any collateral and notwithstanding any such exchange,
settlement, compromise, surrender, release, sale, application, renewal or
extension.
Posadas is hereby authorized, at its option, to apply on account of any
debt or liability of Flamboyan to Posadas, now existing or which may hereafter
arise with respect to the Secured Obligations, any money or other property, or
the proceeds thereof, which may now or hereafter be deposited or be left with
Posadas by the undersigned or any of them or in which the undersigned or any of
them have any interest.
No delay on Posadas' part, or that of any of its successors or assigns,
in exercising or
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enforcing any rights or lien hereunder or in taking any action to collect or
enforce any of the obligations hereby guaranteed, shall operate as a waiver of
any such rights or liens or prejudice in any manner the rights of Posadas
hereunder, as against the undersigned.
Upon the happening of any of the following events: the insolvency
(however evidenced) of Flamboyan, or suspension of business of Flamboyan, or the
making of Flamboyan of an assignment for the benefit of creditors or a trustee
or receiver being appointed for Flamboyan or for any of its property, or any
proceeding being commenced by or against Flamboyan under any bankruptcy,
reorganization, arrangement of debt, insolvency, readjustment of debt,
receivership, liquidation or dissolution law or statute, then and in any such
event, and at any time thereafter, Posadas may, without notice to Flamboyan or
any of the undersigned make the payment and discharge the Existing Mortgages
and/or the Scotiabank Mortgage, whether or not then due, and Posadas shall be
entitled to immediately enforce the obligations of the undersigned hereunder;
provided, that notwithstanding anything herein to the contrary, the undersigned
shall not be responsible for, and Posadas shall not be entitled to enforce the
obligations of the undersigned hereunder in the event of any default under the
Existing Mortgages or the Scotiabank Mortgage which is directly the result of
defaults by Posadas under the Lease including, without limitation, payment
defaults of Posadas under the Lease.
This is a continuing guaranty and shall remain in full force and effect
until Posadas has released the undersigned in writing of the undersigned's
obligations hereunder or until the Existing Mortgages and the Scotiabank
Mortgages have been paid in full by Flamboyan or its affiliates and such
mortgages have been removed of record against the Demised Premises. This
guaranty may not be cancelled or revoked in any other manner; and it is
expressly agreed that
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the fact that no use is made of this guaranty for a period or various periods of
time shall not be construed as amounting to a revocation or cancellation
thereof. No act or omission of any kind on Posadas' part in the premises shall
in any event affect or impair this guaranty, nor shall the same be affected by
any change which may arise by reason of the death, incapacity or insolvency of
any of the undersigned.
This guaranty shall be binding upon the undersigned, and each of them,
and their respective executors, administrators, successors and assigns, it being
understood that, until such time as all of the Secured Obligations shall have
been paid and performed in full, the undersigned agree that neither they, nor
any one of them, nor their affiliates or respective executors, administrators,
successors and/or assigns, shall exercise any rights to proceed against
Flamboyan, either under section 1742 of the Civil Code of Puerto Rico (1930 ed.)
or otherwise, nor shall the undersigned or any of their affiliates assert
against Posadas or Flamboyan, judicially or otherwise, any claim or right to be
subrogated with respect to any amount which may have been paid to Posadas or
Flamboyan, judicially or otherwise, any claim or right to be subrogated with
respect to any amount which may have been paid to Posadas by the undersigned,
their affiliates or any of them, under the provisions of this document; it being
the intention of the undersigned that, irrespective of the amounts which may at
any time be owing to Posadas by Flamboyan, the obligations to Posadas of the
undersigned hereunder shall not be diminished except as specifically provided
herein.
The undersigned, individually, severally and jointly agree to pay to
Posadas reasonable attorney fees, and all costs and expenses of collection
whenever Posadas employs an attorney to enforce any obligation of undersigned
under this guaranty, whether by suit or other means.
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If this guaranty is executed by more than one person, it shall be the
joint and several obligation of each and every one of such persons, among
themselves and with Flamboyan, and shall not be deemed to have been revoked or
diminished with respect to any of them by the death of all, some, or one of such
persons, or by the revocation or release of any obligations hereunder, by or
against all or any of such other persons, except as specifically provided
herein.
Executed this 5th day of May, 1995
-------------------------
Burton I. Koffman
-------------------------
Richard E. Koffman
The undersigned hereby acknowledges receipt of a complete and filled in
copy of the guaranty document.
Posadas de Puerto Rico Associates, Inc.
By_________________________
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OPERATING AND MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 31st day of July, 1984, by and between
POSADAS DE SAN JUAN ASSOCIATES, a joint venture formed pursuant to the general
partnership law of the State of New York ("Owner"), and WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION, a Delaware corporation ("Manager").
W I T N E S S E T H:
WHEREAS, Owner owns a hotel and casino in San Juan, Puerto Rico which
was formerly known as the El San Juan Hotel (the "Hotel"); and
WHEREAS, the Hotel is currently closed and will undergo extensive
remodeling, renovation and refurbishing (the "Renovation") prior to its
scheduled re-opening in September, 1985; and
WHEREAS, the parties mutually desire Manager to provide technical
assistance services during the Renovation and to control, supervise and direct
the operation and management of the Hotel on behalf of Owner after the opening
of the Hotel;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereby agree as follows:
1. PRE-OPENING PERIOD.
1.1 Technical Assistance Services. From the date hereof until the
Commencement Date (as hereinafter defined in Section 2.1) (the "Pre-Opening
Period"), Manager shall make available technical assistance services as are
reasonably required from time
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to time in connection with the Renovation, including providing advice, guidance
and supervision to Owner in connection with the planning, designing and
implementation of the Renovation.
1.2 Pre-Opening Program. In addition to providing technical
assistance services pursuant to Section 1.1 of this Agreement, during the
Pre-Opening Period, Manager shall (a) recruit and train the initial staff of the
Hotel using such training techniques as Manager shall reasonably deem advisable,
(b) organize the Hotel's operations and services, including licenses and
concessionaires, and (c) provide for the marketing program of the Hotel, which
shall include advertising, promotions, literature, travel, business
entertainment and opening celebration ceremonies.
1.3 Renovation. Owner shall proceed diligently to complete the
Renovation in accordance with the plans and specifications previously approved
by Owner and Manager so that the Hotel may be operated as a first class luxury
resort hotel.
1.4 Working Capital and Supplies. Prior to the Commencement Date,
Owner shall provide all necessary working capital and all necessary inventories
of chinaware, silverware, utensils, glasses, linens, towels, uniforms, food,
beverage, paper products, soap, cleaning supplies and other operating supplies
and consumables as Manager deems reasonably necessary to operate the Hotel as a
first class luxury resort hotel.
1.5 Expenses. All costs, fees and expenses incurred during the
Pre-Opening Period, including the cost of the Renovation, the cost of the
pre-opening program set forth in Section 1.2 of this Agreement and the cost of
the supplies set forth in Section 1.4 of this Agreement shall be borne by Owner
and shall not be the responsibility of Manager.
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2. APPOINTMENT OF MANAGER.
2.1 Appointment and Term. Owner hereby appoints and employs
Manager to act as its agent for the supervision, direction and control of the
operation and management of the Hotel on Owner's behalf, upon the terms and
conditions hereinafter set forth, for a term of 20 years beginning on the first
day Owner opens the Hotel to the general public and commences business as a
fully renovated first class luxury resort hotel (the "Commencement Date").
Manager hereby accepts such appointment and shall supervise, direct and control
the operation and management of the Hotel during the term of this Agreement upon
the terms and conditions hereinafter set forth.
2.2 Relation of the Parties. Subject to the provisions of this
Agreement, Manager shall have complete control and discretion in the management
of the Hotel and shall be free from interruption or disturbance in managing the
Hotel. Notwithstanding anything herein to the contrary, in performing its duties
hereunder, Manager shall act only as the appointed agent or representative of
Owner, and nothing in this Agreement shall be construed as creating a tenancy,
partnership, joint venture or any other relationship between the parties hereto
except that of principal and agent. All debts and liabilities incurred by
Manager in the course of the Pre-Opening Period and its management and operation
of the Hotel pursuant to this Agreement shall be the debts and obligations of
Owner only and shall be borne by Owner and shall not be the responsibility of
Manager.
3. BUDGETS.
3.1 General Policy. It is the intention of the parties to operate
the Hotel at all times in accordance with pre-established budgets which will be
prepared by Manager and
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reviewed and approved by Owner. All budgeting, planning, accounting records and
reports will be based upon generally accepted accounting principles consistently
applied and the Uniform System of Accounts for Hotels, copyrighted by the Hotel
Association for New York City, 7th edition of 1977, as amended from time to
time.
3.2 Fiscal Year. For all purposes under this Agreement, the
Hotel's fiscal year ("Fiscal Year") will be the twelve-month period ending on
September 30 or such other period as Owner shall designate, which period shall
be reasonably acceptable to Manager.
3.3 Annual Budgets. For each Fiscal Year hereunder commencing
with the Fiscal Year commencing on October 1, 1985, Manager shall submit to
Owner 60 days before the beginning of each such Fiscal Year, reasonably detailed
operating, capital and cash flow budgets (the "Annual Budgets"). If Owner does
not notify Manager in writing within 30 days from the receipt of such budgets
that it objects to such budgets, specifying its objections in reasonable detail,
the Annual Budgets shall be deemed approved by Owner. After such approval,
Manager may, if reasonably deemed by Manager to be in the best interests of the
Hotel, exceed the expenditures provided in the Annual Budgets by up to ten (10%)
percent for any Fiscal Year of operation hereunder without obtaining prior
written approval of Owner. If Owner disapproves the Annual Budgets for any
Fiscal Year, Manager may continue to operate the Hotel and make expenditures for
such Fiscal Year within the parameters of the Annual Budgets for the most recent
Fiscal Year approved by Owner.
3.4 No Guarantee. Manager makes no guarantee, warranty or
representation whatsoever with respect to the foregoing budgets, including
whether there will be profits or losses from the operation of the Hotel. Such
budgets are intended as estimates only.
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4. OPERATION.
4.1 Operational Standards, Etc. Manager shall, at the expense of
Owner, operate the Hotel as a first class luxury resort hotel in accordance with
the provisions of this Agreement.
Owner hereby warrants to Manager uninterrupted control and operation of
the Hotel during the term of this Agreement, unless this Agreement is earlier
terminated pursuant to the provisions of this Agreement. Owner shall not
interfere or involve itself with the day-to-day operation of the Hotel, and
Manager may operate the Hotel free of molestation, eviction, disturbance by
Owner or any third party claiming by, through or under Owner. Manager shall have
absolute discretion in the determination of room rates, food and beverage menu
prices, and charges to guests for other services performed by the Hotel for
guests and may alter room rates or other charges without prior consultation with
Owner. Such absolute control and discretion shall extend to the use of the Hotel
for all customary purposes, including, the terms of admittance to the Hotel for
rooms, for commercial purposes, for privileges of entertainment, the labor
policies of the Hotel and all phases of publicity and promotion. Owner agrees
that no influence will be brought on Manager relating to the granting or
extension of credit. Credit facilities shall be given by Manager in its
discretion and in accordance with Manager's standard practice.
4.2 Permits. Manager shall, on behalf of and with the cooperation
of Owner and at Owner's sole expense, obtain all necessary licenses, findings of
suitability, approvals and permits from the applicable governmental authorities
(the "Governmental Authorities"), including the Secretary of the Treasury of the
Commonwealth of Puerto Rico and any other governmental
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body or agency having authority over gaming, as may be required for the
operation of the Hotel throughout the term of this Agreement, including without
limitation, such liquor, bar, restaurant, gaming, sign and hotel licenses as may
be required for the operation of the Hotel as a first class luxury resort hotel.
Manager undertakes to comply in all material respects with the rules,
regulations and orders of the Government Authorities and with any conditions set
out in any such licenses and permits and at all times to operate and manage the
Hotel substantially in accordance with such conditions and any other
requirements of the law.
4.3 Personnel.
4.3.1 Manager, as agent for Owner, shall hire, supervise,
direct the work of, discharge, and determine the compensation and other benefits
of all personnel working in the Hotel during the term hereof and the Pre-Opening
Period, all of whom shall be in the sole employ of Owner and not in the employ
of Manager. Manager shall be the sole judge of the fitness and qualifications of
such personnel and shall have absolute discretion in the hiring, supervision,
direction, discharging and determination of the compensation and other benefits
of such personnel during the course of their employment. Manager shall in no way
be liable to such personnel for their wages, compensation or other benefits
(including, without limitation, severance, vacation and termination pay), nor to
Owner, and Owner shall not interfere with or give orders or instructions to
personnel employed at the Hotel.
Manager shall employ such of its personnel as deemed necessary by
Manager for the performance of its duties hereunder. During the term hereof and
the Pre-Opening Period, Manager shall be reimbursed by Owner for the salary and
out-of-pocket expenses of such personnel and other compensation or benefits. If
such personnel perform services for other
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hotels managed by Manager, such personnel's salary, expenses and other
compensation and benefits shall be fairly allocated by Manager. Manager shall
have the right to grant complementary rooms and food and beverages to key
personnel and their families, or to others wherein such is customary in the
hotel industry or in Manager's standard practice or policy.
4.3.2 The costs, fees, compensation or other expenses of any
persons engaged by Owner or Manager during the term hereof and the Pre-Opening
Period to perform duties of a specialist in nature related to the operation,
maintenance or protection of the Hotel, such as engineers, designers, attorneys,
independent accountants and the like, shall be borne by Owner and shall not be
the responsibility of Manager.
4.4 Sales and Promotion. Manager may cause the Hotel, on behalf
of Owner and at the sole expense of Owner, to participate in sales and
promotional campaigns and activities involving complementary rooms and food and
beverages to travel agents, tourist officials and airline representatives.
Manager, on behalf of Owner and at the sole expense of Owner, shall
institute and supervise a sales and marketing program.
4.5 Maintenance and Capital Replacement. Owner and Manager
recognize the necessity of a program of replacement of furnishings and equipment
and the need to cause the Hotel to be furnished, equipped and landscaped as a
first class luxury resort hotel.
4.6 Operating, Supply and Maintenance Contracts. Manager is
authorized to make and enter into in the name of, for the account of, and at the
expense of Owner all such contracts and agreements as are in Manager's opinion
necessary for the operation, supply and maintenance of the Hotel and to pay the
same when due from the Hotel's accounts. Manager
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shall be required to obtain the consent of Owner before entering into any
contract, agreement or purchase involving any structural repair, alteration or
rehabilitation of the Hotel or the repair or replacement of any furnishings,
fixtures or equipment contained therein if not provided for in the Annual
Budgets and if the amount payable under such contract exceeds the sum of
$50,000.
4.7 Accounting Services. As an expense of Owner, Manager shall
maintain an accurate accounting system in connection with its management of the
Hotel. The books and records shall be kept in accordance with Section 3.1 of
this Agreement, shall be maintained at the Hotel, and shall be the property of
Owner. As an expense of Owner, Manager shall comply with all requirements in
respect of internal controls and accounting and shall prepare all required
reports under the rules and regulations of the Government Authorities or any
other applicable law or regulation.
As an expense of Owner, a certified audit of the Hotel shall be
performed annually by Ernst and Whinney or another independent accounting firm
mutually acceptable to Owner and Manager and at least one copy thereof shall be
furnished to each party. Nothing herein contained shall prevent Manager's
shareholders or Owner's joint venturers or their duly authorized designees or
their independent accounting firms from examining the books and records of the
Hotel.
On or before the 25th day of each month, Manager shall furnish Owner
with a statement for the preceding calendar month of the gross income received
from rooms, food and beverages, gaming and other sources, guest room occupancy
percentage, average room rate and total
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expenses paid by category during the said month, such statement to be prepared
in accordance with Section 3.1 of this Agreement.
4.8 Bank Accounts. Manager shall establish such bank accounts as
Manager deems appropriate for the operation of the Hotel.
4.9 Concessions. Manager is authorized to consummate, in the name
of and for the benefit of Owner, arrangements and leases with concessionaires,
licensees, tenants and other intended users of any facilities related to the
Hotel. Copies of all such arrangements and leases shall be furnished to Owner.
4.10 Working Capital. Owner shall, at its sole expense, provide
Manager with sufficient working capital for the uninterrupted and efficient
operation of the Hotel in accordance with the Annual Budgets.
4.11 Legal Actions. Manager may institute, at its sole option, in
its name or Owner's name, but at the sole expense of Owner, legal actions or
other proceedings to collect charges or rents, to oust guests or tenants, or to
terminate leases or agreements.
4.12 Expenses.
4.12.1 All costs, expenses, funding of operating deficits
and working capital, debts, obligations and liabilities under this Agreement
("Owner's Financial Obligations") shall be the sole and exclusive responsibility
and obligation of Owner. It is understood that statements in this Agreement
indicating that Manager shall furnish, provide or otherwise supply, present or
contribute items or services hereunder shall not be interpreted or construed to
mean that Manager is liable or responsible to fund or pay for such items or
services.
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4.12.2 Owner shall reimburse Manager upon demand for any
money or other property which Manager may in its discretion pay out for any
reason whatsoever in performing its duties hereunder whether the payment is for
operating expenses or any other charges or debts, including, without limitation,
the payment of the principal and interest due pursuant to the Financing
Agreement (as hereinafter defined in Section 5.5); provided, however, that it is
understood and agreed that Manager shall have no obligation or duty to fund or
pay for any of Owner's Financial Obligations or advance any of its own funds for
the operation of the Hotel.
4.12.3 As agent for Owner and at Owner's sole expense,
Manager shall cause to be paid all taxes, fees and other charges due by Owner to
the Government Authorities and other federal, commonwealth, state and local
authorities in respect of the operation of the Hotel.
4.12.4 With respect to any deficits which may arise as a
result of operations of the Hotel, Owner shall be obligated to fund and pay such
deficits which are not covered by the Hotel income, within 10 days after written
request therefor by Manager. If Owner fails or delays in furnishing funds to
cover such deficits (by unreasonable failure to approve or delay in approving
the budgets provided for in Section 3.3 of this Agreement in a timely manner or
otherwise), Manager shall have no responsibility or liability, and Owner shall
indemnify and hold harmless Manager with respect to any liability, however
arising, which may arise out of or relate to, directly or indirectly, such
failure or delay in funding such deficits.
4.13 Consents and Approvals. In acting under this
Agreement in all matters relative to this Agreement and in approving or
consenting to any matter under this Agreement,
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Owner and Manager shall act in a reasonable manner. Owner shall take into
account Manager's advice stemming from its experience as a manager of hotel and
casino properties, and conditions prevailing generally in the hotel and casino
industry.
5. COMPENSATION OF MANAGER.
5.1 Compensation for Technical Assistance Services. In
consideration for all technical assistance services rendered by Manager during
the Pre-Opening Period pursuant to this Agreement, Owner shall pay to Manager a
fee of $30,000 per month on the first day of each month commencing August 1,
1984 until the Commencement Date, provided that such fee shall be prorated and
calculated on a straight line basis for any period less than one month.
5.2 Basic Compensation for Management Services. In consideration
for all services rendered by Manager pursuant to this Agreement on or after the
Commencement Date, Owner shall pay to Manager, subject to the provisions of
Sections 5.4 and 5.5 of this Agreement, a basic management fee (the "Basic
Management Fee") of five (5%) percent of Hotel and Casino Gross Revenues (as
hereinafter defined in Section 5.7). The Basic Management Fee shall be payable
monthly based on the monthly operating statements prepared in accordance with
Section 4.7 of this Agreement, subject, however, to adjustment as provided in
Section 5.4 of this Agreement.
5.3 Incentive Management Fees. Subject to the provisions of
Sections 5.4 and 5.5 of this Agreement, for each Fiscal Year during the term of
this Agreement, Owner shall pay Manager an incentive management fee (the
"Incentive Management Fee") of twelve (12%) percent of Hotel and Casino Gross
Operating Profits (as hereinafter defined in Section 5.7), which Incentive
Management Fee shall be payable annually on the earlier to occur of (a) five
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days after receipt of audited financial statements for such Fiscal Year or (b)
120 days after the end of such Fiscal Year.
5.4 Fee Adjustment. Basic Management Fees paid or payable to
Manager prior to the end of any Fiscal Year will be subject to verification and
adjustment after receipt of the audited financial statements for the applicable
Fiscal Year. The Basic Management Fee, the Incentive Management Fee and the
basis upon which they are predicated with respect to any short Fiscal Year shall
be prorated and calculated on a straight line basis (for example, five-twelfths
(5/12ths) for a five-month Fiscal Year).
5.5 Subordination of Fees. Notwithstanding anything herein to the
contrary, (a) during the three year period commencing on the Commencement Date,
no Basic Management Fee in respect of any month shall be payable until all of
the principal and interest due and payable during such month with respect to the
loan (the "Loan") to Owner pursuant to the Financing Agreement (the "Financing
Agreement") to be executed among Owner, the Government Development Bank for
Puerto Rico ("GDB") and participating lenders shall have been paid or provided
for by Owner, and (b) during the term of GDB's participation in the Loan, no
Incentive Management Fee in respect of any Fiscal Year shall be payable without
the prior written consent of GDB pursuant to the Financing Agreement.
Owner shall pay or provide for the payment, when due, of
all principal and interest pursuant to the Financing Agreement to enable the
Owner to pay the Basic and Incentive Management Fees provided for by this
Agreement, and if such payments pursuant to the Financing Agreement are not made
or provided for, Manager may make such payments on behalf of Owner and at
Owners' sole expense. Except for the Financing Agreement, Owner
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shall not, without the prior written consent of Manager, enter into any
agreement which requires Owner to subordinate the Basic Management Fee or the
Incentive Management Fee.
5.6 Losses. Losses in any Fiscal Year shall be borne exclusively
by Owner and shall not reduce the amount of any compensation which Manager may
be entitled to receive pursuant to this Agreement for any prior or subsequent
Fiscal Year. No part of such loss shall be charged against, recaptured out of or
otherwise serve to diminish or affect the Hotel and Casino Gross Operating
Profit for any prior or subsequent Fiscal Year.
5.7 Certain Definitions. For purposes of this Agreement:
5.7.1 "Hotel and Casino Gross Revenues" shall mean all
gross revenues from Hotel and casino operations, such as rooms, food and
beverage, telephone, telex, casino net wins and other receipts (exclusive of
tips, service charges added to a customer's bill or statement in lieu of
gratuities, which are payable to Hotel employees, taxes collected and remitted
to others, and the value of complementary rooms, food and beverages, except
those purchased by the casino) including, without limitation, rentals or other
payments from lessees, licensees, or concessionaires (but not including the
concessionaires' receipts), minus actual credits and refunds made to customers,
guests or patrons. Subject to the foregoing adjustments, Hotel and Casino Gross
Revenues shall be determined in accordance with generally accepted accounting
principles and the Uniform System of Accounts for Hotels as set forth in Section
3.1 of this Agreement, it being understood that Hotel and Casino Gross Revenues,
as used herein, shall mean the same as "net sales" as defined in the said
Uniform System of Accounts for Hotels, except that in the event of conflict the
definition of "Hotel and Casino Gross Revenues" herein shall be controlling.
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5.7.2 "Hotel and Casino Operating Profits" shall be
determined by deducting from the sum of Hotel and Casino Gross Revenues all
operating expenses, including the deduction of the Basic Management Fee, but
prior to deducting (i) premiums for insurance maintained pursuant to Section 6.1
of this Agreement; (ii) depreciation of buildings, plant, furniture, fixtures
and equipment; (iii) amortization of pre-opening expenses; (iv) financing costs,
including interest charges, principal payments and debt servicing; (v) property
taxes and taxes on income; (vi) capital expenditures, including replacement of
furniture, fixtures and equipment; and (vii) the Incentive Management Fee.
6. INSURANCE.
6.1 Insurance. Manager shall procure and maintain, on behalf of
and at the expense of Owner, at all times during the Pre-Opening Period and the
term of this Agreement, all such insurance as Manager and Owner shall deem
advisable.
6.2 Insurance Standards and Requirements. Owner shall advise
Manager in writing of the requirements of applicable laws, rules or regulations
and third parties having the right to determine insurance requirements for the
Hotel, including without limitation, the Financing Agreement, and if Owner so
notifies Manager, all insurance procured pursuant to Section 6.1 of this
Agreement shall meet or exceed any requirements of such applicable laws, rules
or regulations and third parties having the right to determine insurance
requirements for the Hotel. Insurance procured hereunder shall be placed with
reputable, financially sound insurance companies. All insurance hereunder shall
name Manager and Owner as co-insureds and/or additional insureds.
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6.3 Indemnification.
6.3.1 Indemnification of Manager. Owner shall defend and
promptly indemnify Manager and save and hold it harmless from, against, for and
in respect of and pay any and all damages, losses, obligations, liabilities,
claims, encumbrances, deficiencies, costs and expenses, including without
limitation, actual attorneys' fees and other costs and expenses incident to any
suit, action, investigation, claim or proceeding, suffered, sustained, incurred
or required to be paid by Manager by reason of (a) any breach or failure of any
observance or performance of any representation, warranty, covenant, agreement
or commitment made by Owner hereunder or relating to or as a result of any such
representation, warranty, covenant, agreement or commitment being untrue or
incorrect in any respect, (b) injury or death to persons or damage or
destruction of property due to any cause whatsoever, either in or about the
Hotel or elsewhere, as a result of the performance of this Agreement by Manager,
its agents, officers, directors or employees, or otherwise, irrespective of
whether alleged to be caused, wholly or partially, by Manager, its agents,
officers, directors or employees or (c) for any money or other property which
Manager is required to pay out for any reasons whatsoever in performing its
duties under this Agreement, whether the payment is for operating expenses or
any other charges or debts incurred or assumed by Manager or any other party, or
judgments, settlements, or expenses in defense of any claim, civil or criminal
action, proceeding, charge, or prosecution made, instituted or maintained
against Manager or Owner, jointly or severally, because of the condition or use
of the Hotel, or acts or failures to act of Manager, its agents, officers,
directors or employees, or arising out of or based upon any law, regulation,
requirement, contract or award. Notwithstanding the foregoing, Owner shall not
be liable to Manager pursuant to this
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Section 6.3.1 if any liability described above results from the willful
misconduct of Manager, its officers, directors or employees who are not employed
substantially full time in the management or operation of the Hotel.
6.3.2 Indemnification of Owner. Manager shall defend and
promptly indemnify Owner and save and hold it harmless from, against, for and in
respect of and pay any and all damages, losses, obligations, liabilities,
claims, encumbrances, deficiencies, costs and expenses, including without
limitation, actual attorneys' fees and other costs and expenses incident to any
suit, action, investigation, claim or proceeding, suffered, sustained, incurred
or required to be paid by Owner by reason of any injury or death of any person
or damage or destruction of property due to the willful misconduct of Manager,
its officers, directors or employees who are not employed substantially full
time in the management or operation of the Hotel.
6.3.3 Procedure for Indemnification. For purposes of this
Section 6.3, the party entitled to indemnification shall be known as the
"Injured Party" and the party required to indemnify shall be known as the "Other
Party." If the Other Party shall be obligated to the Injured Party pursuant to
this Section 6.3 or if a suit, action, investigation, claim or proceeding is
begun, made or instituted as a result of which the Other Party may become
obligated to the Injured Party hereunder, the Injured Party shall give prompt
written notice to the Other Party of the occurrence of such event. The Other
Party shall defend, contest or otherwise protect against any suit, action,
investigation, claim or proceeding at the Other Party's own cost and expense.
The Injured Party shall have the right, but not the obligation, to participate
at its own expense in the defense thereof by the counsel of its own choice. If
the Other Party fails timely
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to defend, contest or otherwise protect against any suit, action, investigation,
claim or proceeding, the Injured Party shall have the right to defend, contest
or otherwise protect against the same and upon ten days' written notice to the
Other Party may make any compromise or settlement thereof and recover the entire
cost thereof from the Other Party including without limitation, actual
attorneys' fees, disbursements and all amounts paid as a result of such suit,
action, investigation, claim or proceeding or compromise or settlement thereof.
7. DAMAGE TO HOTEL AND CONDEMNATION.
7.1 Casualty Damage.
7.1.1 Owner to Restore. Owner shall, subject to the
provisions of this Section 7.1, repair, restore, rebuild or replace any damage
to, or impairment or destruction of the Hotel from fire or other casualty. If
Owner fails to undertake such work within 90 days after the casualty, or shall
fail to complete the same diligently, Manager may, but shall not be obligated
to, undertake or complete such work for the account of Owner and shall be
entitled to repaid therefor, and the proceeds of insurance shall be made
available to Manager.
7.1.2 Limitation on Restoration. If the Hotel shall be
destroyed or substantially destroyed during the term of this Agreement by fire
or other casualty and the costs of repairing, restoring, rebuilding and
replacing the same shall exceed 120% of the proceeds of the insurance available
for such repairing, restoring, rebuilding or replacing, Owner shall have the
right and option, upon notice served upon Manager within 60 days after such fire
or other casualty, to decide not to make any repair, restoration, rebuilding or
replacement and to terminate this Agreement upon 30 days' written notice and the
insurance collected shall be distributed as follows: Manager shall be entitled
to Manager's Liquidation Share (as hereinafter
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defined in Section 7.3) determined at the date of damage and Owner shall be
entitled to the balance, if any. If the cost of repairing, restoring, rebuilding
or replacing the damage, impairment or destruction resulting from such fire or
other casualty shall be less than 120% of the proceeds of the insurance
available for such repairing, restoring, rebuilding or replacing, Owner shall
repair, restore, rebuild or replace such damage, impairment or destruction,
unless and to the the extent that Owner and Manager shall otherwise agree. If
Owner fails to undertake such work within 90 days after fire or other casualty,
or shall fail to complete the same diligently, Manager without prejudice to its
rights to repair, restore, rebuild or replace damage, impairment or destruction
for and on behalf of Owner and its rights and remedies upon undertaking any such
work provided for in this Section 7.1, may, at its election, terminate this
Agreement upon five days' notice to Owner and the balance of the insurance
collected not previously applied to such restoration, if any, shall be
distributed as follows: Manager shall be entitled to an amount equal to
Manager's Liquidation Share determined at the date of damage and Owner shall be
entitled to the balance, if any.
7.2 Condemnation.
7.2.1 Total Condemnation. If the whole of the Hotel shall
be taken or condemned in any eminent domain, condemnation, compulsory
acquisition or like proceeding by any competent authority for any public or
quasi-public use or purpose, of if such a portion thereof shall be taken or
condemned so as to make it imprudent or unfeasible, in Manager's opinion, to use
the remaining portion as a hotel of the type and class immediately preceding
such taking or condemnation, then in either case, at Manager's election, the
term of this Agreement shall cease and terminate as of the date of such taking
or condemnation, and any award for such
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taking or condemnation shall be distributed as follows: Manager shall be
entitled to an amount equal to Manager's Liquidation Share determined at the
date of such taking or condemnation and Owner shall be entitled to the balance,
if any.
7.2.2 Partial Condemnation. If only a part of the Hotel
shall be taken or condemned and the taking or condemnation of such part does not
make it unfeasible or imprudent, in Manager's opinion, to operate the remainder
as a hotel of the type and class immediately preceding such taking or
condemnation, this Agreement shall not terminate, but out of the condemnation
award, so much thereof as shall be reasonably necessary to repair any damage to
the Hotel, or any part thereof, or to alter or modify the Hotel, or any part
thereof, so as to render the Hotel a complete and satisfactory architectural
unit as a hotel and casino of the same type and class as it was immediately
preceding the taking or condemnation shall be used for that purpose. The balance
of the award, after deduction of the sum necessary for restoration as aforesaid,
shall be distributed as follows: Manager shall be entitled to an amount equal to
Manager's Liquidation Share at the date of the taking or condemnation multiplied
by a fraction, the numerator of which shall be the decrease in square footage of
the Hotel as a result of the taking or condemnation and the denominator of which
shall be the total square footage in the Hotel prior to such taking or
condemnation and Owner shall be entitled to the balance, if any.
7.3 Manager's Liquidation Share. For purposes of this Article 7,
"Manager's Liquidation Share" shall be an amount determined at the date of
determination ("Determination Date") as follows: (a) if less than one full
Fiscal Year shall have passed since the Commencement Date, Manager's Liquidation
Share shall be $5,000,000 or (b) if more than one
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full Fiscal Year shall have passed at the Determination Date, Manager's
Liquidation Share shall be an amount equal to 75% of the sum of the Individual
Year Amounts for each Fiscal Year or portion thereof remaining between the
Determination Date and the date occurring 20 years after the Commencement Date.
The "Individual Year Amount" for any Fiscal Year shall be an amount equal to the
average of the Basic Management Fees and the Incentive Management Fees payable
to Manager hereunder for the three full Fiscal Years which shall have passed
immediately prior to the Determination Date (or the average of all Fiscal Years
if at least three full Fiscal Years have not passed prior to the Determination
Date) discounted to the Determination Date assuming an 8% simple interest factor
and assuming further that each year's payment would have been made on the first
day of such year. The Individual Year Amount for any partial Fiscal Year shall
be prorated and calculated on a straight line basis.
8. TERMINATION.
8.1 Right of Termination. Notwithstanding anything herein to the
contrary, Manager may terminate this Agreement if Owner shall fail to keep,
observe or perform any covenant, agreement or provision of this Agreement
required to be kept, observed or performed by Owner, such termination to become
effective ten days after Manager served Owner notice of such failure, unless
cured by Owner within such period.
8.2 Payments. Upon termination of this Agreement for any cause,
all amounts owing from Owner to Manager pursuant to this Agreement for all
periods prior to the date of termination shall become immediately due and
payable and Owner shall immediately shall pay Manager an amount equal to
Manager's Liquidation Share at the date of termination.
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9. MISCELLANEOUS.
9.1 Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof. No change,
modification, amendment, addition or termination of this Agreement or any part
thereof shall be valid unless in writing and signed by or on behalf of the party
to be charged therewith.
9.2 Counterparts. This Agreement may be executed in one or more
counterparts, and shall become effective when one or more counterparts has been
signed by each of the parties.
9.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be given pursuant to any of the provisions
of this Agreement shall be deemed to have been duly given for all purposes if
sent by certified or registered mail, return receipt requested and postage
prepaid, hand delivered or sent by telegraph or telex as follows:
If to Owner, at
c/o ESJ Hotel Corporation
Williams Electronics, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Mr. Norman J. Menell
If to Manager, at:
c/o Mr. Hugh A. Andrews
Condado Plaza Hotel
999 Ashford Avenue
San Juan, Puerto Rico 00902
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with a copy to:
Golenbock and Barell
645 Fifth Avenue
New York, New York 10022
Attention: Jeffrey N. Siegel, Esq.
or at such other address as any party may specify by notice given to other party
in accordance with this Section 9.3. The date of giving of any such notice shall
be the date of receipt.
9.4 Waivers. No waiver of the provisions hereof shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver or waiver in respect of
any subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
9.5 Severability. Should any clause, section or part of this
Agreement be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this Agreement which can be effected without such
illegal clause, section or part shall nevertheless continue in full force and
effect.
9.6 Choice of Law. This Agreement shall be governed, interpreted
and construed in accordance with the laws of the State of New York.
9.7 Non-Assignability. This Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. This Agreement
shall not be assignable by any of the parties hereto without the prior written
consent of all other parties hereto and any attempt to assign this Agreement
shall be void and of no effect.
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9.8 Captions. The headings or captions under sections of this
Agreement are for convenience and reference only and do not in any way modify,
interpret or construe the intent of the parties or effect any of the provisions
of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
POSADAS DE SAN JUAN ASSOCIATES
(Owner)
By ESJ HOTEL CORPORATION,
a joint venturer
By: /s/
----------------------------------
Norman J. Menell, President
WILLIAMS HOSPITALITY MANAGEMENT
CORPORATION (Manager)
By: /s/
----------------------------------
Hugh A. Andrews, President
23
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POSADAS DE SAN JUAN ASSOCIATES
999 ASHFORD AVENUE
SAN JUAN, PUERTO RICO
October 25, 1984
Williams Hospitality Management Corporation
999 Ashford Avenue
San Juan, Puerto Rico 00907
Gentlemen:
Reference is made to the Operating and Management Agreement dated July
31, 1984 between Posadas de San Juan Associates and Williams Hospitality
Management Corporation.
Section 5.5(a) of such Agreement shall be deleted in its entirety and be
of no further force and effect and the following shall be substituted therefor:
"(a) during the four year period commencing on October 25, 1984 and
terminating on October 25, 1988, no Basic Management Fee in respect of
any month shall be payable until all of the principal and interest due
and payable during such month with respect to the loan (the "Loan") to
Owner pursuant to the Financing Agreement (the "Financing Agreement")
dated October 25, 1984 among Owner, the Government Development Bank for
Puerto Rico ("GDB"), First Federal Savings Bank, Banque Paribas and
Merrill Lynch, International Bank Incorporated shall have been paid or
provided for by Owner,".
If you are in agreement with the foregoing please execute this letter in
the space provided below.
Yours very truly,
POSADAS DE SAN JUAN ASSOCIATES
(Owner)
By ESJ HOTEL CORPORATION
a joint venturer
By: /s/
-----------------------------------
Norman J. Menell, President
<PAGE>
<PAGE>
AGREED TO AND ACCEPTED
THIS 25TH DAY OF OCTOBER, 1984
WILLIAMS HOSPITALITY MANAGEMENT
CORPORATION (Manager)
By: /s/
---------------------------------
Hugh A. Andrews, President
<PAGE>
<PAGE>
AMENDMENT OF MANAGEMENT AGREEMENT
THIS AMENDMENT OF MANAGEMENT AGREEMENT (this "Amendment"), dated
as of the 1st day of October 1986, by and between POSADAS de SAN JUAN
ASSOCIATES, a New York general partnership, having an office at 187 East Isla
Verde Road, Carolina, Puerto Rico (the "Owner") and WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION, a Delaware corporation having an office at 999 Ashford
Avenue, San Juan, Puerto Rico (the "Manager").
W I T N E S S E T H:
WHEREAS, the Owner and the Manager have entered into that certain
Operating and Management Agreement, dated as of July 31, 1984, as amended on
October 25, 1984 (the "Management Agreement") pursuant to which the Manager
agreed to, among other things, operate and manage the hotel, resort, casino and
other facilities commonly known as the El San Juan Hotel and Casino (together
with the real property on which the foregoing is located, collectively, the
"Hotel and Casino");
WHEREAS, pursuant to that certain Letter of Credit and
Reimbursement Agreement, dated as of October 1, 1986 (such agreement, as amended
and supplemented from time to time, is called the "Letter of Credit Agreement")
among Banque Paribas, a banking corporation organized under the laws of the
republic of France, acting through its Houston Agency (the "Bank"), the Puerto
Rico Industrial, Medical, Higher Education and Environmental Pollution Control
Facilities Financing Authority ("AFICA") and Merrill Lynch International Bank,
Incorporated, as agent, the Bank has agreed to issue its Letter of Credit to
provide for the payment of the Bonds in accordance with their terms;
<PAGE>
<PAGE>
WHEREAS, pursuant to that certain Loan Agreement (the "Loan
Agreement") between AFICA and the Owner, dated as of October 1, 1986, AFICA has
agreed to loan certain amounts to the Owner and the Owner has agreed to pay
certain amounts to AFICA;
WHEREAS, one of the conditions precedent to the obligation of the
Bank to issue the Letter of Credit is the agreement of the Owner and the Manager
to amend the Management Agreement in the manner hereinafter appearing;
WHEREAS, the financing of the Project, as contemplated by the
Loan Agreement and the Related Documents, is in furtherance of the purposes of
the Management Agreement.
NOW, THEREFORE, for and in consideration of the foregoing, the
mutual promises and covenants contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto further agree to amend the Management Agreement as follows:
The following section is hereby added to the Management
Agreement:
"SECTION 10. AMENDMENT AS OF OCTOBER 1, 1986.
10.1 Definitions.
All capitalized terms used in this Section 10 and not otherwise
defined shall have the meanings ascribed to such terms in the Loan Agreement
between AFICA and the Owner, dated as of October 1, 1996.
10.2 Incentive Management Fee.
The Manager and the Owner hereby agree that any and all amounts
due to the Manager as Incentive Management Fees, as defined in Section 5.3 of
this Agreement, shall be paid by the Owner to the Manager only from Profit
Available for Incentive Management Fees.
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To the extent that the Incentive Management Fee exceeds the Profit Available for
Incentive Management Fees in any fiscal year of the Owner, the payment of such
excess shall be deferred. Amounts so deferred shall be subject to the
subordination provisions of Section 6 of the Management Agreement Subordination
Agreement, and shall bear interest at a rate of ten percent (10%) per annum
compounded annually, and shall be payable in any subsequent fiscal year of the
Owner only from Profit Available for Incentive Management Fees.
10.3 FF&E Reserve.
(a) During each fiscal year of the Owner, the Manager shall
deposit for each calendar month included in such fiscal year an amount equal to
(i) one percent (1%) of Hotel Gross Revenues for such calendar month during the
fiscal year of the Owner ending in 1987; (ii) two percent (2%) of Hotel Gross
Revenues for such calendar month during the fiscal year ending in 1988; (iii)
three percent (3%) of Hotel Gross Revenues for such calendar month during the
fiscal years ending in 1989, 1990 and 1991; and (iv) four percent (4%) of Hotel
Gross Revenues for each calendar month thereafter, into a fund to be entitled
"Furniture, Fixtures and Equipment Reserve Fund," (the "Fund") which Fund shall
be maintained on deposit by the Manager in trust for the Owner in an
interest-bearing bank account and amounts in the Fund shall not at any time be
commingled with other funds of the Owner or the Manager. Interest earned from
the amounts on deposit in such Fund, after payment of taxes, if any, as provided
below shall be included in computing Profit Available for Incentive Management
Fees and shall be distributed to Owner monthly. To the extent that the Manager
shall be required to pay any income taxes on such interest as a fiduciary, the
same shall be payable out of such Fund. In addition to such payments into such
Fund, all proceeds from the sale of FF&E no longer needed
3
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for the operation of the Hotel which has not been replaced by similar FF&E shall
also be paid into such Fund. Proceeds from the sale of FF&E which is so replaced
need not be paid into the Fund.
(b) The Manager shall, prior to the commencement of each fiscal
year, prepare a plan (the "Plan") for the replacements of and additions to FF&E
for such year and a budget for the anticipated cost thereof. The Manager shall
be entitled to withdraw from such Fund any amounts required to pay the cost of
replacements of, and additions to, the FF&E made pursuant to the Plan or
otherwise reasonably deemed by the Manager to be necessary or desirable,
provided that monies in such Fund shall not be used to make contributions to the
cost of replacement or repair of, and additions to, the Operating Equipment. The
items of FF&E so replaced or added shall be and become, forthwith upon
acquisition and installation and without further act or action, the property of
the Owner and part of the Hotel and Casino. Any amounts remaining in such Fund
at the end of any fiscal year shall be retained and carried forward to the
succeeding fiscal year without reducing the obligation of the Manager to comply
with the requirements of subsection (a) of this subsection 10.3 in any
succeeding fiscal year.
(c) The Manager shall not, without the approval of the Owner
(which approval shall not be unreasonably withheld), expend any monies for
replacements of, or additions to, the FF&E in excess of the amount then existing
in the Fund and, notwithstanding anything else to the contrary in this Agreement
contained, the Manager's obligations with respect to additions to, or
replacements of, FF&E shall be excused to the extent that the amount in such
Fund is inadequate to meet such obligations. Amounts expended by the Manager or
the Owner for the replacement of or additions to FF&E other than from the Fund
shall reduce, dollar for dollar,
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<PAGE>
the amounts next required to be deposited into the Fund, provided that no such
reduction shall relieve the Manager of its obligation to make deposits into the
Fund for more than 12 consecutive months.
(d) Except to the extent prevented by causes beyond its
reasonable control (including force majeure causes), the Manager shall maintain
the Hotel and Casino as a first class luxury resort hotel and in good order and
operating condition and make all repairs thereto and shall replace or make
additions to Operating Equipment, all as may be necessary in the reasonable
judgment of the Manager.
(e) If structural repairs or changes to the Hotel or alterations,
additions or improvements of a non-recurring nature shall be required at any
time during the term of the Loan Agreement to maintain the Hotel and Casino in
good condition, or by reason of any laws, ordinances, rules or regulations now
or hereafter in force, or by order of any governmental or municipal power,
department, agency, authority or officer or otherwise, or because the Owner and
the Agent jointly agree upon the desirability thereof, then in such event all
such structural repairs or changes and/or alterations, shall be paid for by the
Owner, and shall be made with as little hindrance as possible to the operation
of the Hotel and Casino.
(f) For the purpose of this Section 10, (x) "Furniture, Fixtures
and Equipment" or "FF&E" shall mean all of the personal property, furniture,
furnishings, wall coverings, floor coverings, fixtures and other property and
equipment located on, or used in connection with the Hotel and Casino including
all equipment for the operation of kitchens, bars, laundries, office equipment
and material handling equipment, but not including Operating Equipment; (y)
"Operating Equipment" shall, without limiting its generality, include blankets,
linen, uniforms,
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silver, china, glassware, crockery, kitchen utensils, cleaning equipment, and
similar items; and (z) "Hotel Gross Revenue" for any period shall mean "Hotel
and Casino Gross Revenue" , as defined in Section 5.7.1 of this Agreement, minus
gross revenues from casino operations for such period.
10.4. No Other Changes.
Except as expressly set forth herein, all the terms, covenants
and conditions set forth in this Management Agreement shall continue in full
force and effect. In the event of any conflict between the terms or provisions
of this Section 10 and the terms or provisions of the rest of the Management
Agreement this Section 10 shall prevail."
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their respective officers thereunto duly authorized as of
the day and year first above written.
WILLIAMS HOSPITALITY MANAGEMENT
CORPORATION
By: /s/
-------------------------------------------
Name:
Title:
Date: October ____, 1986
POSADAS de SAN JUAN ASSOCIATES
By: /s/
-------------------------------------------
Name:
Title:
Date: October ____, 1986
6
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<PAGE>
SHACK & SIEGEL, P.C.
530 FIFTH AVENUE
NEW YORK, NY 10036
TEL: (212) 782-0700
FAX: (212) 730-1964
FACSIMILE TRANSMISSION
DATE: January 21, 1997
PLEASE DELIVER THE FOLLOWING 2 PAGES (INCLUDING THIS COVER PAGE) IMMEDIATELY.
To: Mr. Timothy J. Burton Fax: (201) 573-2588
Company: Mercedes-Benz of North America Tel: (201) 573-6809
cc: Mr. Alastair N. Gordon Fax: (203) 325-9800
COMPANY: Welbilt Corporation Tel: (203) 325-8300
cc: Mr. Andrew V. Noble Fax: 011-44-171-312-2501
COMPANY: Berisford plc Tel: 011-44-171-312-2500
COMMENTS:
The contract has been signed by Berisford, and a copy of the signature
page is sent herewith. Please advise when you will be wiring the deposit,
so that we can instruct The Bank of New York to look for it. As soon as the
deposit is received in our account, I'll release the contract and will
send you two originals by Federal Express. Before the contract is released,
I'll (i) sign it for this firm, as Escrow Agent; (ii) date it, and (iii)
fill in the closing date. Will you please confirm to me that the closing date
is to be 105 days from the date of release of the contract (90 day due
diligence period, plus 15 days).
Thanks.
FROM: Jeffrey B. Stone REFERENCE: 99220-002
<PAGE>
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CREDIT AGREEMENT
This Credit Agreement dated as of January 20th, 1993, between POSADAS DE
SAN JUAN ASSOCIATES, a New York partnership engaged in business in the
Commonwealth of Puerto Rico (the "Borrower") and THE BANK OF NOVA SCOTIA, a
Canadian banking corporation duly authorized to do business in Puerto Rico (the
"Bank").
WITNESSETH
WHEREAS, Borrower is the owner in fee simple of the real estate property
more fully described in SCHEDULE I hereof and improvements thereon and operates
a hotel complex known as the El San Juan Hotel and Casino;
WHEREAS, Borrower desires to borrow funds from the Bank to repay (i) an
existing indebtedness under certain Industrial Revenue Bonds, Series A (El San
Juan Hotel Project) issued by the Puerto Rico Industrial, Medial, Higher
Education and Environmental Pollution Control Facilities Financing Authority;
(ii) to repay certain indebtedness of the Borrower with Williams Hospitality
Management Corp.; (iii) for working capital purposes; and (iv) to pay fees and
expenses incidental to this financing facility; and
WHEREAS, the redemption and repayment of the aforesaid industrial
revenue bond indebtedness is expected to take place on April 15, 1993 and the
Borrower has requested the Bank to issue at this time a successor letter of
credit in favor of the Trustee under a certain Trust Agreement dated as of
October 1, 1986, as amended, in the principal amount of US$21,760.00, which
successor letter of credit will substitute for the letter of credit currently in
force issued by Banque Paribas pursuant to the terms of a certain Letter of
Credit and Reimbursement Agreement dated October 1, 1986, as amended; and
WHEREAS, the redemption and repayment of the aforesaid industrial
revenue bonds will
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2
be made to the Trustee by the Bank pursuant to the former's draw against the
successor letter of credit issued hereunder; and
WHEREAS, the Bank has agreed to make available to the Borrower a credit
facility in the aggregate amount of US$34,000,000 consisting of a US$33,000,000
non-revolving, term facility which includes payments to be made by the Bank
under its successor letter of credit totalling up to US$21,760,000, and a
US$1,000,000 operating credit facility, all upon the terms and subject to the
conditions set forth in this Credit Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained herein, the parties hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS
Section 1.1 Certain Defined Terms.
As used in this Agreement, the following terms have the following
meanings (such meanings being equally applicable to both the singular and plural
forms of the terms defined):
"936 DEPOSITS" means deposits of eligible funds by exempted businesses
as per the Puerto Rico Industrial Incentives Acts, the Puerto Rico Tax
Incentives Act and the regulations promulgated thereunder.
"936 OPTION RATE ADVANCE" means an Advance which bears interest at the
936 Option Rate.
"936 OPTION RATE" means, for each Interest Period for a 936 Option Rate
Advance, an interest rate per annum equal at all times to two (2) percentage
points over the internal net cost of 936 Deposits to the Bank as determined by
the Bank's lending unit.
"ADVANCE" means an advance by the Bank to the Borrower pursuant to the
provisions of Article 2 hereof and refers to a 936 Option Rate Advance, a Letter
of Credit Advance, a LIBOR Option Rate Advance or Base Rate Advance.
"AFFILIATE" means, with respect to any Person, any other Person or any
group acting in concert in respect of such Person that, directly or indirectly,
controls, is controlled by or is under common control with such Person. For the
purpose of this definition, "control" means the possession of the power to
direct or cause the direction of management and policies of such
<PAGE>
<PAGE>
3
Person, whether through the ownership of voting securities, by contract or
otherwise.
"AFICA" means the Puerto Rico Industrial, Medical, Higher Education and
Environmental Pollution Control Facilities Financing Authority.
"AFICA BONDS" means the Industrial Revenue Bonds, Series A (El San Juan
Project) issued by AFICA pursuant to a certain Loan Agreement dated as of
October 1, 1986, as amended, and other documentation related thereto.
"AFICA MORTGAGE" means two equal rank mortgages in the aggregate
principal amount of US$30,500,000 constituted by virture of Deed No. 23 of
October 1, 1986 before Notary Luis Morales Steinmann to secure the payment of
two mortgage notes issued by the Borrower in the principal sums of US$11,000,000
and US$19,500,000.
"AFICA NOTES" means the two mortgage notes in the principal amounts of
US$11,000,000 and US$19,500,000 secured by the AFICA Mortgage.
"AFICA PLEDGE" means the pledge agreement executed by AFICA pledging the
AFICA Notes.
"AGREEMENT" means this Credit Agreement, including all amendments,
modifications and supplements and any exhibits and schedules hereto, and shall
refer to this Agreement as the same may be in effect at the time such reference
becomes effective.
"ANNUAL GROSS REVENUES" means total sales and other revenues of the
Borrower, excluding casino revenues, adjusted for discounts, refunds and
allowances and excluding tips, service charges added to a customer's bill or
statement in lieu of gratuities which are payable to employees and taxes
collected and remitted to others.
"ASSIGNMENTS" means the assignments described in Section 4.1(c) and (e)
hereof.
"ASSIGNMENT OF RIGHTS AND RELATED AGREEMENTS" means the instrument of
assignment of even date herewith pursuant to which Banque Paribas and Merrill
Lynch Internaitonal Bank Incorporated are assigning their rights under the AFICA
Pledge and certain other documents.
"AUTHORIZED SIGNATORY" means each person at the itme designated to act
on behalf of the referenced Person by written certificate.
"BANK" has the meaning specified in the first paragraph hereof.
<PAGE>
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4
"BASE RATE ADVANCE" means an Advance which bears interest at the Base
Rate.
"BASE RATE" means a fluctuating interest rate per annum as shall be in
effect from time to time, which rate per annum shall at all times be equal to
one and one half (1 1/2) percentage points over the Bank of Nova Scotia Base
Rate in New York City fluctuating concurrently with any change in said Base
Rate.
"BORROWER" has the meaning specified in the first paragraph hereof.
"BUSINESS DAY" means (a) as to LIBOR funded portions of the loan, a day
of the year on which dealings are carried on in the London interbank market and
banks are open for business in London and not required or authorized to close in
Puerto Rico, and (b) as to the 936 Funds and Base Rate portions of the Loan, a
day in which the Bank is not required or authorized to close for business in
Puert Rico.
"CAPITAL EXPENDITURES" means, for any period and with respect to any
Person, the aggregate of all expenditures (including payment of lease
obligations which are required to be capitalized under generally accepted
accounting principles) by such Person and its subsidiaries for property, plant
and equipment (including renewals, improvements, replacements and capitalized
repairs) during such period which would be reflected as additions to property,
plant or equipment in a consolidated balance sheet of such Person and its
subsidiaries prepared in accordance with generally accepted accounting
principles.
"DAY" means any calendar day.
"DEBT" means, without duplication, indebtedness for borrowed money or
for the deferred purchase price of property or services (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured) or
obligations evidenced by notes, bonds, debentures or similar instruments except
accounts payable and accrued liabilities arising in the ordinary course of
business.
"DEFAULT" means any event which with the giving of notice, the passage
of time or both would become an Event of Default.
"EVENT OF DEFAULT" has the meaning specified in Article 9 hereof.
"EXCESS NET FREE CASH FLOW" means the sum of annual net income after
taxes, and
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5
depreciation, amortization and other non-cash charges, less, without
duplication, an amount equal to four (4) percent of Annual Gross Revenues as a
reserve for furniture, fixture, and equipment replacement, and debt service
requirements.
"FINANCIAL STATEMENTS" means the audited balance sheet and related
audited statement of income, retained earnings and statements of cash flows of
the Borrower (including auditor's notes and commets), audited and certified by a
certified public accountant acceptable to the Bank.
"FRANCHISE" means a franchise, license, authorization or right by
contract or otherwise, to construct, own, operate, promote, extend or otherwise
exploit the business to be operated by the Borrower granted by any Governmental
Authority, expressly including, but not limtied to, such tax exemption decrees
and licenses applicable to Borrower's hotel and casino operations, including
substitutions, amendments and extensions thereof.
"GOVERNMENTAL AUTHORITY" means (a) the United States of America, (b) the
Commonwealth of Puerto Rico, (c) any political subdivision of any jurisdiciton
referenced in clause (a) or (b) of this paragraph, and (d) any court, agency,
department, commission, board, bureau or instrumentality of any jurisdiction
referenced in clause (a), (b) or (c) of this sentence.
"INTEREST PERIOD" means, the period between the day of the Advance and
the day of payment in full of the principal amount of the Advance. An Interest
Period shall or may be divided into successive periods, each such period being
an Interest Period. The duration of each such Interest Period shall be (a) in
the case of 936 Option Rate Advances, subject to market availability, 30, 60, 90
days, or such other longer period(s) as may be available and agreeable to the
parties hereto, and (b) in the case of LIBOR Option Rate Advances 30, 60, 90, or
180 days or such other longer period(s) as may be available and agreeable to the
parties hereto, subject to availability; in each case as selected by the
Borrower upon notice received by the Bank not later than 11:00 A.M. (San Juan
time) the first day of such Interest Period; provided, however, that whenever
the first day of any Interest Period would otherwise occur on a day other than a
Business Day the notice deadline shall extend to the next succeeding Business
Day.
"INVESTMENT" means any advance, loan, extension of credit or capital
contribution used
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6
by the Borrower to purcahse, redeem or issue any stock, bonds, notes, warrants,
options, debentures or other securities of, or to acquire by purchase or
otherwise all or substantially all the business or assets, or any stock,
partnership interest or other evicence of beneficial ownership of, or make any
other investment in, any Person, except investments in accounts, contract rights
and chattel paper, investments qualifying as cash equivalent investments under
generally accepted accounting principles, notes receivable, arising or acquired
in the conduct of the business of the Borrower in the ordinary course and the
redemption of the AFICA Bonds.
"LENDING OFFICE" means the Bank's branch located at Plaza Scotiabank,
273 Ponce de Leon Avenue, Hato Rey, Puerto Rico.
"LETTER OF CREDIT" or "SUCCESSOR LETTER OF CREDIT" means the irrevocable
transferable successor letter of credit to be issued by The Bank of Nova Scotia
pursuant to the terms of this Agreement and under a certain Successor Letter of
Credit and Reimbursement Agreement of even date.
"LETTER OF CREDIT ADVANCE" means a Term Loan Advance (as said term is
defined in Section 2 hereof) by the Bank to the Borrower pursuant to the
provisions of Article 2 hereof covering funds made available to the Trustee
pursuant to a draw against the Letter of Credit issued by the Bank as security
for the payment of the AFICA Bonds.
"LIBOR" (London InterBank Offer Rate) means with respect to an Interest
Period for an Advance, the rate of interest per annum at which United States
dollar deposits of equal or like amounts in United States dollars are offered by
the principal office of The Bank of Nova Scotia in London, England, to prime
banks in the London interbank market at 11:00 a.m. (London time), two (2)
business days before the first day of such Interest Period for a period equal to
such Interest Period and adjusted for "patente" tax costs.
"LIBOR OPTION RATE" means an interest rate per annum equal at all times
to two (2) percentage points over the LIBOR.
"LIBOR OPTION RATE ADVANCE" means an Advance which bears interest at the
LIBOR Option Rate.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security
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7
interest or encumbrance of any kind in respect of such asset. For the purpose of
this Agreement, any Person shall be deemed to own, subject to a Lien, any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
"LOAN AMOUNT" means US$34,000,000 made or to be made available by the
Bank to the Borrower hereunder.
"LOAN DOCUMENTS" means this Agreement and all documents and instruments
to be delivered by the Borrower to the Lender pursuant to the provisions of
Section 4.1 hereof, including any and all amendments, substitutions, supplements
and replacements thereof.
"MORTGAGE NOTE" means the demand mortgage note in the principal amount
of $34,000 being made and delivered by the Borrower to the Bank under the Pledge
Agreement.
"NOTE" or "NOTES" means the Operating Credit Note and the Term Loan Note
executed by the Borrower hereunder.
"OBLIGATIONS" means the obligations of the Borrower hereunder, under the
Notes and under the other Loan Documents.
"OPERATING CREDIT ADVANCES" means the advances described in Section 2.3
hereof.
"OPERATING CREDIT FACILITY"means a US $1,000,000 revolving facility to
be made available by the Bank to the Borrower hereunder.
"OPERATING CREDIT NOTE" means the note issued by the Borrower evidencing
Operating Credit Advances made or to be made by the Bank.
"PERMITTED LIENS" means Liens existing on the date of this Agreement or
created pursuant to this Agreement, and Liens consisting of capitalized leases
or purchase money liens on Borrower's property or equipment incurred in
connection with the normal and usual business operations and equipment
maintenance and improvement activities at the El San Juan Hotel and Casino.
"PERSON" means an individual, corporation (including a business trust),
trust, unincorporated association, partnership, corporation, joint stock
company, joint venture or other entity, or a foreign state or political
subdivision thereof or any agency of such state or
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8
subdivision.
"PLEDGE AGREEMENT" means the Agreement pledging the Mortgage Notes as
described in Section 4.1( a).
"PROPERTY" or the "MORTGAGED PROPERTY" means the property described in
SCHEDULE I hereto and improvements now or hereafter constructed thereon.
"REAL PROPERTY MORTGAGE" means the mortgage on the Property of even date
securing the Mortgage Note.
"TERM LOAN ADVANCE" means the advances described in Section 2.2 hereof.
"TERM LOAN NOTE" means the note issued by the Borrower to evidence the
Term Loan Advances made by the Bank.
"THE BANK OF NOVA SCOTIA BASE RATE" means a variable per annum
reference rate of interest (as announced and adjusted by The Bank of Nova Scotia
from time to time) for United States dollar loans made by the Bank in the United
States and Puerto Rico. No representation is made by the Bank that said rate is
the lowest or most favorable rate offered or by the Bank.
"TITLE COMPANY" means Chicago Title Insurance Company.
"TITLE POLICIES" means two loan policies of title insurance each in the
amounts of US$34,000,000, in form and substance satisfactory to Bank and issued
and/or endorsed by the Title Company insuring that Bank has a first and secon
priority lien and/or a security interest in the Property with no other
exceptions to title, printed or otherwise.
ARTICLE 2. AMOUNTS AND TERMS OF THE ADVANCES
Section 2.1. The Advances.
Each Advance made to the Borrower by the Bank and the amount of
principal and the maturity thereof, shall be evidenced by a Note. The last
availment date for Term Loan Advances hereunder shall be May 1, 1993.
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9
Section 2.2. The Term Loan Advance.
The Bank agrees, subject to the terms and conditions hereinabove and
hereinafter set forth, to make Term Loan Advances to the Borrower under this
Agreement in the aggregate amount of US$33,000,000. A Letter of Credit Advance
shall be deemed a Term Loan Advance for purposes of this Agreement. The
provisions hereinafter set forth as to Term Loan Advances, to the extent
relevant to a Letter of Credit Advance, shall be deemed applicable to such an
Advance.
Section 2.3 The Operating Credit Advances.
The Bank agrees, subject to the terms and conditions hereinabove and
hereinafter set forth, to make Operating Credit Advances on a revolving basis to
the Borrower from time to time in an aggregate principal amount not to exceed at
any one time outstanding the sum of US$1,000,000. Each Operating Credit Advance
shall be in an amount of not less than US$50,000.
Section 2.4. Making the Operating Credit Advances.
Each Operating Credit Advance shall be made on written notice delivered
by the Borrower to the Bank not later than 11:00 A.M. (San Juan time) on the
date of such proposed borrowing.
Section 2.5. Borrower's Rate Selection Option.
At Borrower's request and prior to the date of a proposed Term Loan
Advance, the Bank shall promptly notify the Borrower of the available interest
rates and Interest Periods for the particular Advance. The Bank shall quote to
the Borrower as aforesaid the following rates of interest: (i) subject to the
availability to the Bank of 936 Deposits, and to the eligibility of the Advance
to be funded with 936 Deposits, the 936 Option Rate; (ii) subject to the
availability to the Bank of LIBOR funds for such Interest Period, the LIBOR
Option Rate; and (iii) the Base Rate.
Lender will make 936 Option Rate Advances subject to the terms and
conditions of this Agreement and induced and relying on the Borrower's warranty
that each such Advance will, for the purpose of complying with applicable 936
Deposits investment requirements, be used and
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10
invested in Puerto Rico in "eligible activities", as the term is defined in the
regulations promulgated under the Puerto Rico Industrial Incentive Acts.
Upon receipt of Borrower's notice selecting the interest rate applicable
to the particular Advance, the Bank shall make available the amount of the
Advance by crediting the account of the Borrower at the Lending Office.
Section 2.6. The Bank's Option to Suspend Borrowings (Pre-Funding
Conversion). Anything in this Section 2 to the contrary notwithstanding,
(i) if the Bank shall notify the Borrower that the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or that a central bank or other Governmental Authority asserts
that it is unlawful for (1) the Bank or its Lending Office to perform
its obligations hereunder to make 936 Option Rate Advances or LIBOR
Option Rate Advances, the right of the Borrower to select 936 Option
Rate Advacnes or LIBOR Option Rate Advances for such borrowing or any
subsequent borrowing, shall be suspended until the bank shall notify the
Borrower that the circumstances causing such suspension no longer exist,
and each Advance comprising the requested borrowing shall be deemed to
be and shall be a Base Rate Advance; and (ii) If 936 or LIBOR deposits
are not available, the right of the Borrower to select 936 or LIBOR
Option Rate Advances for such borrowing or any subsequent borrowing
shall be suspended until the Bank shall notify the Borrower that the
circumstances causing such suspension no longer exist, and each Advance
comprising the requested borrowing, shall be deemed to be and shall be
an Base Rate Advance. Each notice of borrowing shall be irrevocable and
binding on the Borrower.
Section 2.7. Borrower's Failure to give Notice.
Anything in this Agreement to the contrary notwithstanding, in the event
that the Borrower fails to deliver to the Bank its timely notice of Borrower's
election of the interest rate applicable to the new Advance, then, unless the
Borrower shall have informed the Bank on or before such date of its intent not
to incur Advances on such date, the Borrower hereby irrevocably requests and
authorizes the Bank to make Base Rate Advances in the aggregate
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11
principal amount of the 936 or LIBOR Option Rate Advances maturing on such date.
Section 2.8. Fees.
a) Front End Fee. The Borrower has paid to the Bank a front end fee
equal to one and three quarters (1 3/4) percent of the Loan Amount, to wit the
sum of US$577,500.
b) Standby Fee. The Borrower agrees to pay the Bank monthly in arrears
an amount equal to one quarter (1/4) percent per annum of the undrawn portion of
the Loan Amount, commencing on December 1, 1992. The standby fee is calculated
on a daily basis and payable as aforesaid. For purposes of calculating the
standby fee, the stated amount of the Letter of Credit outstanding shall be
deemed "drawn".
ARTICLE 3. PAYMENTS, INTEREST & INDEMNITIES
Section 3.1. Repayment.
(a) The Term Loan Advance.
The Term Loan Advances made by the Bank to the Borrower shall be
evidenced by the Term Loan Note.
Absent a prior demand for payment by the Bank under the terms of this
Agreement or of the Loan Documents, the principal of the Term Loan Note, i.e.,
the amount of US$33,000,000, shall be repaid pursuant to the repayment schedule
appearing thereon.
(b) Mandatory Supplemental Prepayments of Principal of the Term Loan
Note. Anything in this Agreement or in the Term Loan Note to the contrary
notwithstanding, in the event that there exists an Excess Net Free Cash Flow
as of the end of Borrower's fiscal year, i. e. June 30th of each year, Borrower
shall, within one hundred twenty (120) days after the end of such fiscal year
deliver to the Bank an amount equal to fifty (50) percent of said Excess Net
Free Cash Flow as a prepayment of the outstanding balance under the Term Loan
Note, to be applied to the cash installment (the 120th installment) on the
Term Loan Note until the balance of such installment is reduced to US$3,000,000
or less. The Borrower's obligation to make Mandatory Supplemental Prepayments
as aforesaid shall cease when the balance of the 120th installment of the
Term Loan Note is reduced to US$3,000,000 or less.
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12
(c) Voluntary Prepayments.
Voluntary Prepayments shall be allowed at the end of each Interest
Period in minimum amounts of US$500,000 upon 2 Business days prior written
notice given by the Borrower to the Bank. Any such voluntary prepayment shall be
applied to the outstanding balance in inverse order of maturities.
(d) F. F. & E. Reserve.
The Borrower agrees that during each of Borrower's fiscal years during
the term of this Agreement, the Borrower shall use or hold in reserve as
hereinafter provided, an amount at least equal to four (4) percent of its Annual
Gross Revenues for the replacement of Borrower's furniture, fixtures, and
equipment in its El San Juan Hote & Casino operations to be used in accordance
with past practices. The Borrower shall make a monthly deposit to a special
account maintained by the Borrower with the Bank of an amount equal to four (4)
percent of Borrower's revenues for the preceding month, less expenditures
incurred during such month for such replacement of furniture, fixtures and
equipment. The amount so deposited shall be held by the Borrower in a special
account at the Lending Office bearing the title of "Posadas de San Juan
Associates/F. F. & E. Reserve Account". The funds deposited in the F. F. & E.
Reserve Account shall, absent the Bank's institution of foreclosure or
receivership proceedings be available to the Borrower at all times for the
exclusive purpose of replacement of furniture, fixtures and equipment for the
operation of the El San Juan Hotel and Casino facilities.
(e) The Operating Credit Advances.
Each Operating Credit Advacne shall be evidenced by the Operating Credit
Note.
The Operating Credit Advances made under the Operating Credit Note shall
be payable on demand. The Operating Credit Facility is subject to: (i) the
Bank's favorable periodic (but not less frequent than annual) review to verify
Borrower's compliance with the terms and conditions of this Agreement and of
the Loan Documents, (ii) the favorable fluctuations of Borrower's account with
the Bank, (iii) the absence of a materially adverse change in the Borrower's
financial condition, and (iv) coverage of the then outstanding balance under the
Operating Credit Facility at all times by good receivables (up to ninety (90)
days ageing)
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13
providing a one hundred fifty percent (150%) coverage.
Section 3.2. Interest.
The Borrower shall pay interest on theAdvances made by the Bank
hereunder calculated on a daily basis and payable monthly on the twenty second
day of each month (unless otherwise stipulated by the Bank) on the actual daily
unpaid principal amount of each Advance made by the Bank from the date of such
Advance until the principal amount thereof shall be paid in full.
The interest on the Term Loan Advance shall be payable at the following
rates per annum:
a) If such Advance is a Base Rate Advance, at the Base Rate.
b) If such Advance is a 936 Option Rate Advance, at the 936 Option Rate.
c) If such Advance is a LIBOR Option Rate Advance, at the LIBOR Option
Rate.
The interest rate payable on the Operating Credit Advances shall be
equal to one (1) percentage point over The Bank of Nova Scotia Base Rate.
Section 3.3. Default Interest Rates.
a) As long as any Event of Default shall be continuing, all outstanding
Advances shall bear interest at a rate per annum equal at all times to two (2)
percentage ponts per annum above the rate of interest otherwise applicable to
such Advances in effect from time to time. This default interest rate shall be
effective as of the date of the occurrence of an Event of Default under the
Agreement and shall remain in effect until such time as the Event of Default is
fully remedied. The existence, payment and/or collection of default interest
rate(s) shall not constitute a waiver by the Bank of its rights under this
Agreement, the Loan Documents or applicable laws and shall not preclude the Bank
from:
(i) declaring an Event of Default; or
(ii) taking such action as may be available to it under the terms of
this Agreement, the Loan Documents or applicable laws and/or
regulations.
b) Maximum Interest Rate Payable.
This Agreement is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest at a rate which could subject
the Bank to either civil or
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14
criminal liability as a result of being in excess of the maximum interest rate
which Borrower is permitted by law to contract or agree to pay. If by the terms
of this Agreement, the Borrower is at any time required or obligated to pay
interest at a rate in excess of such maximum rate, the rate of interest shall be
deemed to be immediately reduced to such maximum rate and the interest payments
in excess of sucy maximum rate shall be applied and shall be deemed to have been
payments in reduciton of principal, in inverse order of maturity.
3.4. Funding Conversion, Maintenance of Loan.
Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful, or any central bank or other Governmental
Authority shall assert that it is unlawful for the Bank to perform its
obligations hereunder to maintain Advances hereunder with 936 Deposits or LIBOR
FUNDS, as the case may be, then, on notice thereof and demand therefor by the
Bank to the Borrower, (a) the obligation of the Bank to maintain such Advances
with 936 Deposits or LIBOR funds, as the case may be, shall terminate and (b)
the Bank immediately shall convert all outstanding Advances funded with 936
Deposits or LIBOR funds, as the case may be to Base Rate Advances.
In the event that the Bank suffers any loss or expense as a result of
the conversion of the Advances as aforesaid, the Borrower shall, upon demand by
the Bank, pay to the Bank additional amounts sufficient, as determined by the
Bank in its sole discretion, to cover said loss or expense. A certificate,
suppored with appropriate data as to the amount of such loss or expense
submitted to the Borrower by the Bank, absent manifest error, as determined by
the Bank in its sole discretion, shall be conclusive and binding for all
purposes.
Section 3.5. 936 Indemnity.
In the event the use given by the Borrower to the 936 Option Rate
Advances or the conduct of its business and/or the use of the funds advanced
hereunder were to disqualify said portion of the loan as an "Eligible
Activitiy", as defined in Regulation Number 3582, as amended, as promulgated by
the Commission of Financial Institutions of the Commonwealth of Puerto Rico, the
Borrower shall indemnify the Bank for any and all taxes, damages, fees, costs
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15
and expenses as may result from said disqualification.
Section 3.6. Prepayments of Principal.
(a) Except as otherwise specifically provided in this Article 3, the
Borrower shall have no right to preay the principal amount of any Advance or any
portion thereof.
(b) The Borrower may, without premium or penalty, prepay the outstanding
principal amount of any Base Rate Advance in whole or ratably in part together
with accrued interest to the date of such prepayment on the principal amount so
prepaid.
(c) The Borrower understands that in connection with the Bank making any
936 or LIBOR Option Rate Advance, the Bank may enter into funding arrangements
with third parties on terms and conditions which could result in substantial
losses to the Bank if such Advance does not remain outstanding at the interest
rate therefor, as determined in accordance herewith, for the entire Interest
Period with respect thereto. Therefore, if either (i) after the Borrower and the
Bank have agreed in respect of a 936 or a LIBOR Option Rate Advance, such
Advance is not made on the first day of the Interest Period specified in such
notice of borrowing for any reason other than (A) a suspension under clause (i)
or (ii) of Section 2.6 of the right of the Borrower to select a 936 or LIBOR
Option Rate Advance, or (B) a breach by the Bank of its obligations hereunder,
or (ii) such Advance is repaid by the Borrower in whole or in part prior to the
last day of such Interest Period (whether pursuant to the provisions of Section
3.9, as a result of acceleration, by operation of law or otherwise), the
Borrower will pay to the Bank on the prepayment date, as liquidated damages and
not as a penalty an amount required to compensate the Bank for the actual cost,
if any, of any such early termination of its funding arrangements, said amount
to be determined by the Bank and notified to the Borrower in a certificate in
reasonable detail prepared by the Bank. The contents of said certificate shall,
absent manifest error, be considered conclusive and final.
(d) Borrower may repay 936 and LIBOR Rate Advances, without penalty, on
their respective Interest Period roll over dates.
In the event that Borrower's prepayment exceeds the sum of US$5,000,000,
Borrower shall give the Bank prior written notice of its intention to make such
prepayment not less than
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16
two (2) Business Days prior to the date of such prepayment.
Section 3.7. Payments, Authorization to Debit Account and Computations.
(a) The Borrower shall make each payment hereunder and under the Notes
not later than 2:30 P.M. (San Juan, Puerto Rico time) on the day when due, in
United States dollars to the Bank at its Lending Office.
(b) The Borrower hereby authorizes the Bank, if and to the extent
payment owed to the Bank is not made when due hereunder or under the Notes held
by the Bank, to charge from time to time against any or all of the Borrower's
accounts with the Bank any amount so due.
(c) All computations of rates of interest, additional interest and fees
shall be made by the Bank on the basis of
i) a 360 day year with respect to 936 Option Rate and LIBOR Advances and
ii) a 365 day year with respect to Base Rate Advances, both for the
actual number of days elapsed.
Each determination by the Bank of an interest rate of fee herunder shall
be, in the absence of manifest error, as determined by the Bank in its sole
discretion, conclusive and binding on the Borrower for all purposes.
(d) Whenever any payment hereunder or under the Notes shall be stated to
be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and in such case, such extension of time shall be
included in the computation of payment of interest.
Section 3.8. Capital Adequacy.
In the event of the adoption of any requirement of law regarding capital
adequacy, reserve requirements, or any change therein or in the interpretation
or application thereof or compliance by the Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) from any
central bank or other Governmental Authority, does or shall have the effect of
reducing the rate of return on the Bank's capital as a consequence of its
obligations hereunder to a level below that which the Bank could have achieved
but for such adoption, change or compliance (taking into consideration the
Bank's policies with respect to
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17
capital adequacy), then from time to time, upon written demand by the Bank
accompanied by a certificate by the Bank in reasonable detail stating the basis
for such determination, the Borrower shall pay to the Bank such additional
amount or amounts as will compensate the Bank for such reduction as a
consequence of its obligations hereunder.
Section 3.9. Change in Law.
(a) If any change in applicable law or regulations or in the
interpretation thereof by a court of justice or any Governmental Authority
charged with the adminstriation thereof shall make it unlawful for the Bank to
continue to maintain the Loan or for the Borrower to comply with its obligations
as contemplated by this Agreement, the Borrower shll forthwith, upon demand by
the Bank to the Borrower, prepay in full the Advances then outstanding, together
with accrued interest thereon and payment of any amounts required to compensate
the Bank for any additional direct cost or expense which it may incur as a
result of such prepayment.
(b) If any change in any applicable law or regulation or in the
interpretation thereof by a court of justice or any governmental authority
charged with the administration thereof shall:
(i) impose, modif, or deem applicable any reserve, special deposit or
similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds for
contributions by Bank; or
(ii) impose on Bank any other condition regarding this Agreement; or
(iii) subject Bank to any tax (including, without limitation, United
States interest equalization tax), levy, impost, duty, charge, fee,
deduction or withholding on or from payments due from the Borrower
hereunder; or
(iv) change the basis of taxation of payments due from the Borrower to
Bank hereunder (other than by a change in taxation of the overall net
income of Bank);
(v) change the law, rules and/or regulations applicable to the use,
location, taxes, availability, expenses and cost of funds made available
by United States Internal Revenue Code to Section 936 corporations;
and the result of any of the foregoing is to increase the cost to Bank of making
the 936 Option Rate Advances or to reduce the amount of principal or interest
received by Bank, as determined
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18
by the Bank in its sole discretion, then upon demand by Bank to the Borrower,
the Borrower shall pay to Bank from time to time, as specified by Bank,
additional amounts which shall compensate Bank for such increased cost or
reduced amount.
Section 3.10. General Indemnity
The Borrower will at all times indemnify and hold harmless the Bank
against any and all losses, costs, damages, expenses and liabilities
(collectively referred to hereinafter as "Losses") of whatever nature (including
but not limtied to reasonable attorneys' fees, litigation and court costs,
amounts paid in settlement, and amounts paid to discharge judgements) directly
or indirectly resulting from, arising out of, or related to one or more Claims,
as hereinafter defined. The word "Claims" as used herein shall mean all claims,
lawsuits, causes of action and other legal actions and proceedings brought
against the Bank or to which the Bank is a party, that directly or indirectly
result from, arise out of, or relate to (a) the operation, use, occupancy,
maintenance or ownership of the Property or any part thereof or (b) the
execution, delivery or performance of the Loan Documents, or any related
instruments or documents or (c) any untrue statement or alleged untrue statement
of a material fact contained in this Agreement or in the Loan Documents, or any
application made in connection therewith or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances under
which they were made. The obligations of the Borrower under this Section 3.10
shall apply to all Losses or Claims, or both which are asserted prior to
termination of this Agreement or thereafter and in each case arising from events
occurring for reasons other than the negligence of the Bank and which arose
prior to the Borrower ceasing to have possession and control of the Property. In
case any action shall be brought against the Bank in respect of which indemnity
may be sought against the Borrower, the Bank shall promptly notify the Borrower
in writing and the Borrower shall have the right to assume the investigation and
defense thereof including the engagement of counsel acceptable to the Bank and
the payment of all expenses. In the event counsel engaged by the Borrower were
not acceptable to the Bank, the Bank shall have the right to employ separate
counsel in any such action and participate in the investigation and defense
thereof, and the fees
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19
and expenses of such cousnel shall be paid by the Borrower. The Borrower shall
not be liable for any settlement of any such action without its consent but, if
any such action is settled with the consent of the Borrower, the Borrower agrees
to indemnify and hold harmless the Bank from and against any such Losses or
Claims. Nothing herein shall be construed as requiring the Bank to acquire or
maintain insuance of any form or nature with respect to the Property or any
portion thereof or with respect to any phrase, term, provisions, condition or
obligation of this Agreement or any othe rmatter in connection herewith.
The provisions of this Section 3.10 shall survive the expiration or
termination of this Agreement.
ARTICLE 4. THE SECURITY
Section 4.1. The Security.
All funds advances to or owed by the Borrower pursuant to this Agreement
shall be secured by the following documents, all of which shall be duly executed
by the appropriate parties thereto and acceptable to the Bank:
a) Pledge of the Mortgage Note payable to the Bank in the principal amount
of US$34,000,000 secured by the Real Property Mortgage on the Property,
including such furniture, fixtures, machinery and equipment as may be now
or hereinafter located thereon.
b) The Real Property Mortgage and Mortgage Note.
c) The Assignment of Rights and Related Agreements.
d) Valid mortgagee endorsements in favor of the Bank as to all insurance
policies covering all risks to the Property, including but not limtied to
business interruption, flood and personal property, and, valid endorsement
showing the Bank as additional insured, as to all public liability policies
held by the Borrower as to its operations on the Property.
e) Assignment of Borrower's present and future accounts receivable
(excluding slot machine receivables) and leases as security for Operating
Credit Advances.
f) The Title Policies.
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The Loan Documents shall except as set forth above secure the full and
complete payment of the Loan Amount as evidenced by this Agreement, the Notes,
as well as all interest thereon, any costs, expenses and reasonable attorneys'
fees that may become due and payable upon the occurrence of a Default or an
Event of Default and any other amounts payable and/or reimbursable to the Bank
pursuant to this Agreement and the other Loan Documents. The Bank, with or
without notice to or consent of the Borrower, may take (but Borrower shall not
be obligated to furnish) from any other person or persons additional securities
for the Loan, without impairing, by so doing, any other collateral guarantees
and securities the Bank may hold.
ARTICLE 5. CONDITIONS OF LENDING
Section 5.1 Conditions Precedent to the Effectiveness of the Agreement.
This Agreement shall become effective, when and ony when the Borrower
and the Bank have executed this Agreement subject to the following conditions
precedent:
The Bank shall have received on the Closing Date the following, each
dated the Closing Date, in form and substance satisfactory to the Bank:
(i) The Notes to the order of the Bank.
(ii) Certified copy of A) the resolution and of such other consent,
resolutions and documents as may have been approved authorizing the
negotiation, execution and delivery of this Agreement, the Notes, the
Loan Documents and all other documents to be delivered hereunder or
thereunder to which it is a party and other documents and instruments
evidencing other necessary action, if any, with respect to Loan
Documents and B) certified copies of the Deed of Partnership or such
other document(s) evidencing the creation and organization of the
Borrower.
(iii) Certificate of the Borrower certifying the names and true
signatures of the persons authorized to execute and deliver this
Agreement and each Loan Document to which it is a party and the other
documents to be delivered by it hereunder or thereunder.
(iv) A favorable opinion of outside counsel for the Borrower in form
satisfactory to the Bank.
(v) The Financial Statements of the Borrower for the last fiscal year.
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21
(vi) The Loan Documents listed and described in Article 4 of this
Agreement.
(vii) A duly executed letter of representation of the Borrower
acceptable to the Bank as to the use and eligibility of the 936 Option
Rate Advances to be made by the Bank hereunder and a Certificate from
Borrower's Assistant Manager confirmig that the proceeds of the AFICA
US$30,500,000 Industrial Revenue Bonds, Series A issued as of October 1,
1986 and of the U. S. $7,500,000 loan by Williams Hospitality Management
Corp. were used in an "Eligible Activity", as defined in Regulation
Number 3582, as amended, as promulgated by the Commissioner of Financial
Institutions of the Commonwealth of Puerto Rico.
(viii) Evidence that all insurance policies required by this Agreement
have been duly issued, in full force and effect with premiums prepaid
and have been endorsed to the Bank as co-insured or loss payee
thereunder, as applicable, with a 30-day prior notice to the Bank
pre-cancellation provision.
(ix) Certificate from Borrower's Assistant Manager attesting to the fact
that each consent, license and approval required in connection with the
execution, delivery, performance, validity and enforceability of each of
the Loan Documents, and the ownership, use or exploitation of the
Property shall be in full force and effect and shall be satisfactory in
form and substance to the Bank.
(x) Subordination Agreement executed by Williams Hospitality Management
Corp., substantially in the form of EXHIBIT "A" hereto.
(xi) As of the Closing Date, there shll have been no material adverse
change in the business, operations, properties, assets, prospects or
condition (financial or otherwise) of the Borrower, or litigation which
might have a material adverse effect thereon.
(xii) On or before the Closing Date the Bank shall have received such
other approvals, opinions or documents as the Bank may reasonably
request.
Section 5.2. Conditions to Each Advance.
The obligation of the Bank to make an Advance on the occasion of each
borrowing (including the initial borrowing) shall be subject ot the further
conditions that, on the date of
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22
such borrowing, the following statements shall be true:
(a) the representations and warranties of the Borrower contained in
Article 6 hereof and in the Loan Documents are true and correct in all
material respects on and as of the date of such borrowing as though
made on and as of such date; and
(b) no event has occurred and is continuing, or would result from such
borrowoing, which constitutes a Default or an Event of Default; and
(c) The Bank shall have received a written notice delivered by the
Borrower to the Bank borrowing pursuant to the provisions more
specifically set forth in Section 2.4 and 2.5 hereof.
Section 5.3. Additional Conditions to Each 936 Option Rate Advance.
The obligation of the Bank to make a 936 Option Rate Advance on the
occasion of each borrowoing shall be subject to the use of the proceeds from
such 936 Option Rate Advance by the Borrower for investments or purposes which
are "Eligible Activities" as defined in Regulation Nubmer 3582, as amended, as
promulgated by the Commissioner of Financial Institutions of the Commonwealth of
Puerto Rico, the afresaid use of the proceeds to be verified by a Certificate
issued by the Chief Financial Officer of the Borrower.
Section 5.4. Additional Review Conditions to Advances and Maintaining of
the Operating Credit Facility.
The Operating Credit Facility made available hereunder is subject to
periodic (but not less frequent than annual) reviews by the Bank, which includes
but is not limited to verification of Borrower's compliance with the terms and
conditions of this Agreement and continuation of same is dependent on no
materially adverse changes occurring in the Borrower's financial conditions.
Section 5.5. Additional Condition for Letter of Credit Advances.
The obligation of the Bank ot make the Letter of Credit Advance
shall be subject to the simultaneous execution by the Borrower of a Deed of
Subordination substantially in the form of EXHIBIT "B" hereof.
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23
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
Section 6.1. Representations and Warranties of the Borrower.
The Borrower represents and warrants to the Bank as follows:
(a) The Borrower is a duly organized and validly existing partnership
under the laws of the State of New York, and has the power and authority to own
its properties and to carry on its business as it is now being conducted and is
registered at the Mercantile Registry of the Commonwealth of Puerto Rico and
Borrower is not engaged in trade or business in the continental United States
for U.S. tax purposes.
(b) The execution, delivery and performance by the Borrower of this
Agreemeent and each Loan Document to which it is a party are within its powers,
have been duly authorized by all necessary partnership action, and do not
contravene any provision of the Borrower's partnership agreement, or any law or
contractual restriction binding on or affecting it.
(c) No authorization or approval or other action by, and no notice to or
filng with, any Governmental Authority or regulatory body is required for the
due execution, delivery and performance by the Borrower of this Agreement and
each Loan Document to which it is a party other than such authorizations and
approvals as have already been obtained and are in full force and effect.
(d) This Agreement, the Notes, and each of the Loan Documents signed by
the Borrower when delivered hereunder will be, duly executed and delivered and
constitute valid and binding obligations of the Borrower, enforceable against
the Borrower in accordacne with their respective terms.
(e) The Borrower is not in default of any provision of its partnership
agreement; nor is it in default in the payment or performance or observance of
any contract, agreement or other instrument to which it is a party or by which
it or any of its properties or assets may be bound, which individually, or
together with all other such defaults, could, now or in the future, have a
material adverse affect on the business, operations, properties, assets,
prospects or condition (financial or otherwise) of the Borrower or materially
impair the Borrower's ability to pay the Notes or perform or observe the
provisions of this Agreement or the Loan Documents.
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24
(f) The Borrower is not in violation of any law, rule or regulation of
any Governmental Authority, except where such violation cannot result in a
materially adverse effect on the business, operations, proprties, assets,
prospects or condition (financial or otherwise) of the Borrower, and to the best
of the Borrower's knowledge after due inquiry, there is no threatened action or
proceeding, affecting the Borrower before any court, governmental agency or
arbitrator, which may materially adversely affect the business, operations,
properties, assets, prospects or condition (financial or otherwise) of the
Borrower.
(g) No proceeds of any borrowing will be used to acquire any security in
any transaction which is subject ot the Securities Exchange Act of 1934.
(h) The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any borrowiong will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
(i) The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(j) Borrower has good title to the Property and the Real Property
Mortgage will, upon the subordination of the AFICA Mortgage, constitute a valid
first lien and perfected priorty security interest on and in the Property.
(k) The proceeds of the Advances consisting of 936 Option Rate Advances
shall be used by the Borrower only in "Eligible Activities" as said term is
defined in Regulation 3582, as amended, promulgated by the Commissioner of
Financial Institutions of Puerto Rico, and the proceeds of the borrowings
consisting of other Advances are being used by the Borrower for the stated
purposes of this loan.
(l) There has been no material adverse change in the business,
operations, properties, prospects, assets or condition (financial or otherwise)
of the Borrower since the date of the Borrower's Financial Statements.
(m) All Federal, Puerto Rico, and foreign tax returns reports and
statements
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25
(including, without limitation, those relating to income and property taxes
withholding, social security and unemployment taxes, sales and use taxes,
"patentes" and franchise taxes) required to be filed by the Borrower have been
properly filed with the appropriate Governmental Authorities in all
jurisdictions in which such returns, reports and statements are required to be
filed, which returns, reports and statements are complete and accurate and all
taxes and other impositions due and payable have been timely paid prior to the
date on which any fine, penalty, interest, late charge or loss may be added
thereto for non-payment thereof except where contested in good faith and by
appropriate proceedings. The Borrower has not filed with the appropriate
Governmental Authority any agreement or other document extending or having the
effect of extending the period for filing returns or the period for assessment
or collection of any Federal, Puerto Rico, or foreign taxes or other
impositions. All tax deficiencies asserted or assessments made as a result of
any examinations conducted by any applicable Governmental Authority relating to
the Borrower have been fully paid. Proper and accurate amounts have been
withheld by the Borrower from its employees for all periods to fully comply with
the tax, social security and unemployment withholding provisions of applicable
Federal, Puerto Rico and foreign law.
(n) The Borrower holds all Franchises required for its operations and
said Franchises are in full force and effect and no other approval, application,
filing, registration, consent or other action of any local, state or federal
authority is required to enable the Borrower to exploint any such Franchise. The
Borrower has not received any notice from the granting body or any other
Governmental Authority with respect to any breach of any covenant under, or any
default with respect to, any such Franchises. Before and upon giving effect to
this Agreement and the Loan Documents no default shall have occurred and be
continuing under any such Franchises. All material consents and approvals of,
filings and registration with, and all other actions in respect of, all
governmental agencies, authorities or instrumentalities required to maintain any
Franchises in full force and effect prior to the scheduled date of expiration
thereof have been, or, prior to the time when required, will have been,
obtained, given, filed or taken and are or will be in full force and effect.
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26
(o) All policies of insurance of any kind or nature owned by or issued
to the Borrower, including, without limitation, policies of life, fire, theft,
product liability, public liability, property damage, other casualty, employee
fidelity, worker's compensation, employee health and welfare, title, property
and liability insurance are of a nature and provide such coverage as is
sufficient and as is customarily carried by companies of the size and character
of the Borrower. The Borrower has not been refused insurance for which it
applied or had any policy of insurance terminated (other than at its request).
(p) There are no strikes or other material labor disputes or grievances
pending against the Borrower. To the knowledge of the Borrower, there are no
such strikes and no such disputes threatened which could materially and
adversely affect the business, properties, prospects, assets, operations or
condition (financial or otherwise) of the Borrower. There are no unfair labor
practice charges or grievances pending or in process or, to the knowledge of the
Borrower, threatened by or on behalf of any employee or group of employees of
the Borrower. There are no written complaints received by the Borrower, or, to
the knowledge of the Borrower, threatened, or with respect to unresolved
complaints, on file, with any Federal, state or local govermental agency
alleging employment discrimination by the Borrower. All payments due from the
Borrower pursuant to the provisions of any collective bargaining agreement have
been paid or accrued as a liability on the books of the Borrower.
(q) The Borrower's Financial Statements as of the dates and for the
periods therein indicated, present fairly the financial position, results of
operations and changes in cash flows of the Borrower and have been prepared in
accordance with the accepted accounting principles consistently applied.
(r) The Borrower has no liability (whehter absolute or contingent and
whether due or to become due) or loss contingency (as that term is defined in
the Statement of Financial Standards No. 5) which is required to be disclosed in
the Borrower Financial Statements which in accordance with generally accepted
accounting principles is not disclosed on the Borrower's Financial Statements.
(s) The Borrower is in compliance in all materials respects with labor
laws and
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27
regulations applicable to its operations.
(t) The Borrower has not engaged nor is Borrower obligated to any
investment banker broker, finder, or other intermediary in connection with this
Agreement.
(u) None of the representations or statements of the Borrower contained
in any Loan Document or in any certificate furnished to the Bank by or on behalf
of such Person pursuant to the provisions contained herein or therein contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements as a whole contained herein or therein not
misleading. There is no fact concerning the business, property or affairs of the
Borrower which the Borrower has not disclosed to the Bank in writing prior to
the execution of this Agreement which materially and adversely affects the
business, operations, assets, profits or condition (financial or otherwise) of
the Borrower
ARTICLE 7. COVENANTS OF THE BORROWER
Section 7.1. Affirmative Covenants.
As long as any Note shall remain unpaid, the Borrower will, unless the
Bank shall otherwise consent in writing:
7.1.1. Maintenance of Existence, Conduct of Business.
Preserve and maintain its legal existence and all of its rights,
privileges, licenses (including its Casino License) and Franchises necessary or
desirable in the normal conduct of its business, and
(a) conduct its business in a regular manner;
(b) use its reasonable efforts, in the ordinary course and consistent
with past practice to (i) preserve its goodwill and the business of the
customers, suppliers and others having business relations with the Borrower, and
(ii) keep available the services and goodwill of the present employees of the
Borrower; provided however that nothing herein shall be deemed to require
Borrower to maintain the services of any particular employee or give any
employee the right to be employed by Borrower;
(c) preserve all material registered trademarks, trade names and service
marks with respect to the Borrower; and
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28
(d) perform and observe, in all material respects, all the terms,
covenants and conditions required to be performed and observed by it under any
lease (including, without limitation, pay all rent and other charges payable
under any lease) or any other material contract to which it is a party or by
which it is bound, and shall do all things necessary to preserve and to keep
unimpaired its rights under the leases and such contracts.
7.1.2. Compliane with Laws, Etc.
Comply with all (a) applicable laws, rules, regulations and orders; and
(b) material licenses, permits and other instruments owned by it relating or
otherwise applicable to the operations of the Borrower, except where the failure
to comply would not have a material adverse effect on the business, properties,
operations, profits, prospects or conditions (financial or otherwise) of the
Borrower or on the rights and remedies of the Bank.
7.1.3. Taxes and Claims.
Pay and discharge all taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any property
belonging to it prior to the date on which penalties attach thereto, and all
lawful claims which, if unpaid, might become a Lien upon the property of the
Borrower, provided that no such tax, assessment, charge, levy or claim shall be
required to be paid if the payment of such is being contested in good faith and
by proper proceedings and reserves with respect thereto that are adequate in
Borrower's good faith judgment are maintained.
7.1.4. Maintenance of and Access to Books and Properties.
Keep proper books of records and account, in which full and correct
entries are made of all its financial transactions and its assets and business
in accordance with generally accepted accounting principles consistently applied
and sound business practices. Keep all of its properties necessary to its
business in good working order and condition, ordinary wear and tear excepted,
and permit representatives of the Bank to inspect such properties, and to
examine and make extracts from its books and recrods during normal business
hours upon reasonable notice.
7.1.5. Notice of Default and Litigation.
Promptly upon receipt of knowledge thereof deliver to the Bank notice of
any Default or
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29
Event of Default and of all litigation and of all proceedings before any court,
arbitrator or governmental or regulatory agency affecting the Borrower and/or
the Property, except litigation or proceedings which, if adversely determined,
could not materially and adversely affect the business, properties, prospects,
assets, operations or condition (financial or otherwise) of the Borrower.
7.1.6. Operating Accounts and Credit Card Business.
Maintain and operate its operating accounts and conduct its credit card
business at and with the Bank and use its best efforts to cause the Condado
Plaza Hotel and Casino to undertake similar action. Borrower's obligation under
this sub-section to be conditioned upon the Bank furnishing competitive services
at competitive prices.
7.1.6. Reporting Requirements.
Borrower shall deliver to the Bank:
(a) as soon as available and in any event within one hundred twenty
(120) days after the end of each fiscal year of the Borrower, (i) the
Financial Statements of the Borrower for such fiscal year, with a
certificate (without qualification) from Borrower's Chief Financial
Officer stating that, to the knowledge of said officer no Default or
Event of Default has occurred, or if, in the opinion of said officer,
a Default or an Event of Default has occurred, a statement as to the
nature thereof;
(b) as soon as available and in any event within forty five (45) days
after the end of each fiscal quarter of the Borrower, the un-audited
financial statements of the Borrower, certified by the latter's Chief
Financial Officer;
(c) promptly after the sending or filing thereof or upon their
becoming available, copies of all material reports and notices which
the Borrower files with or delivers to, or is required to file with or
deliver to, or receives from the Puerto Rico Department of the
Treasury, Department of Labor, Department of Tourism and the
Environmental Quality Board; the Internal Revenue Service, or the
United States Department of Labor or the Environmental Protection
Agency;
(d) as soon as available and in any event within one hundred twenty
(120) days after
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30
the end of each fiscal year, the annual profit and loss and Capitol
Expenditures Budget for Borrower's succeeding fiscal year;
(e) within thirty (30) days after the end of each month, a shcedule
showing the ageing of Borrower's accounts receivable;
(f) annual or semi-annual (as applicable) evidence of payment or
property taxes on the Property;
(g) such other information respecting the condition or operations,
financial or otherwise, of the Borrower as the Bank may from time to
time reasonably request.
Section 7.2. Negative Covenants
As long as any Note shall remain unpaid or any amount is due under this
Agrement, the Borrower shall not, unless otherwise authorized in writing by the
Bank:
7.2.1. Liens.
Create, suffer to exist or otherwise allow a Lien, encumbrance or charge
on its assets, or on the Property, except those incurred in the ordinary course
of business and Permitted Liens.
7.2.2. Debt.
Create or suffer to exist any Debt or other monetary obligation other
than (i) the Debt outstanding on the date hereof or created hereunder or
pursuant hereto, (ii) Debt (not to exceed US$500,000 in each case) incurred in
connection with the purchase of equipment for the El San Juan Hotel and Casino
in connection with the customary maintennce and improvements thereof and thereto
and (iii) trade debt incurred in the ordinary course of business or resulting
from accrued or unpaid basic or incentive management fees.
7.2.3. Investments.
Make or commit to make directly or indirectly any Investment except
Investments existing on the date hereof and Investments made with the consent of
the Bank which consent shall not be unreasonably withheld.
7.2.4. Mergers, Acquisitions, Etc.
Consolidate or merge with any Person; or sell, lease, assign, transfer
or otherwise dispose of all or any material part of its business or assets, or
any real property (other than non-
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31
materials leasehold interests) to any Person.
7.2.5. Contingent Liabilities.
Except to the extent existing on the date hereof or as expressly
permitted herein, or with the Bank's prior consent which consent shall not be
unreasonably withheld, assume, endorse, be or become liable for, or guarantee,
directly or indirectly, any Debt or obligation of any other Person, or in any
manner provide for the payment of any Debt of any other Person or otherwise
protect the holder of such Debt against loss (whether by virtue of corporate
arrangements, agreements to purchase assets, goods, securities or services, or
to take-or-pay otherwise) except for endorsements for collection or deposit in
the ordinary course of business.
7.2.6. Transactions with Affiliates.
Do, directly or indirectly, any of the following: (i) make any
investment in an Affiliate; (ii) transfer, sell, lease, assign or otherwise
dispose of any assets to an Affliate except in the ordinary course of Borrower's
business and consistent with past practices; (iii) merge into or consolidate
with or purchase or acquire assets from an Affiliate; (iv) repay any
indebtedness to an Affliate (other than existing unpaid basic and incentive
management fees and interest and others indebtedness payable to Williams
Hospitality Management Corp. and certain other Affiliates) not in the ordinary
course of business; or (v) enter into any other transaction directly or
indirectly with or for the benefit of any Affiliate (including, without
limitation, guarantees and assumptions of obligations of an Affiliate) except
the purchase, sale, lease or other exchange of equipment, services or products
in connection with the operation of the El San Juan Hotel and Casino; or make
advances to any Affiliate. The Bank expressly acknowledges and consents to
Borrower's repayment of a loan with interest due Williams Hospitality Management
Corporation out of proceeds from Term Loan Advances.
7.2.7. Accounting Changes.
Make any significant change in accounting treatment and reporting
practices except as required by generally accepted accounting principles.
7.2.8. Dividends, Capital Distributions and Management Fees.
Declare, distribute or pay capital contributions, dividends and/or
accrued and unpaid
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management fees (including interest thereon) in excess of fifty (50) percent of
the Excess Net Free Cash Flow prior to the last installment due under the Term
Loan Note being reduced to US$3,000,000 or less.
7.2.9. Time Sharing.
Allow the use of time sharing or other forms of interval ownership of
the El San Juan Hotel and Casino rooms and other facilities.
7.2.10. Management Agreement.
Allow or make amendments to the existing Management Agreement dated July
31, 1984, as amended, with Williams Hospitality Management Corp.
ARTICLE 8. SPECIAL COVENANTS
Section 8.1. Environmental Representation, Covenant and Indemnification.
The Borrower hereby represents and warrants taht the Mortgage Property
currently complies with and, to the Borrower's knowledge, has heretofore comlied
with, the laws, rules, regulations and ordinances of the Governmental
Authorities having jurisdiction on the matter where the Mortgaged Property is
located relating to the storage, use manufacutre, disposal, generation,
transportation, or treatment of any Hazardous Materials (as defined below). If
the presence of Hazardous Materials at, about, or, under or in the Mortgaged
Property has resulted in, or shall hereafter result in (i) contamination or
deterioration of air, water or soil to a level of contamination greater than the
levels permitted or established by any Governmental Authority having
jurisdiciton over such contamination or occurrence, or in violation of any
applicable law, rule or regulation, (ii) the termination or adverse modification
of any permit or authorization as to the use or occupancy of the Mortgaged
Property or (iii) the inability to obtain or maintain any required insurance
policies, then the Borrower covenants and agrees to promptly take any and all
action necessary to cure any such violation and/or clean up such contamination,
to the extent required by (and in compliance with the directives of) any
Governmental Authority or issuer of an insurance policy.
The Borrower covenants and agrees to indemnify the Bank, its affiliates
and nominees and all shareholders, directors, officers, and employees of any of
the foregoing (collectively, the
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33
"Indemnitees") and hold the Indemnitees harmless from any and all liabilities,
losses, costs, fees and/or expenses (collectively the "Losses") arising out of
or resultig from the existence, encapsulation or removal (required or
recommended by any law, ordinance, rule, regulations or guidelines of the United
States of America, the Commonwealth of Puerto Rico or any other governmental or
quasi-governmental entity, agency or instrumentality having jurisdiction over
the Mortgaged Property) of any Hazardous Materials at, about, on under or in the
Mortgaged Property or any part or parts thereof. The foregoing indemnity shall
survive any foreclosure sale or other disposition of the Mortgaged Property and
any delivery by the Borrower of a deed in lieu of foreclosure of the Mortgaged
Property. The foregoing indemnification shall not apply to any Losses (i)
arising from Hazardous Materials first placed at, about, on under or in the
Mortgaged Property or any part or parts thereof after the Borrower no longer has
title or possession to the Mortgaged Property as a result of a foreclosure sale
or deed in lieu of foreclosure, or (ii) arising solely and directly from the
gross negligence or willful misconduct of any of the Indemnitees. Procedures for
Borrower's obligation to provide indemnification shall be the same as those set
forth in Section 3.10.
For purposes hereof,"HAZARDOUS MATERIALS" shall mean, any flamable
explosives, radioactive materials, hazardous wastes, toxic substances or related
materials including, but not limited to, asbestos and all other substances
defined as "hazardous substances", "hazardous materials" or "toxic substances"
in the Comprehensive Environmental Response, Compensation and Liablility Act of
1980, as amended, 42 U.S.C. Section 9601 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1801 et seq., the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901 et seq., and those substances which, if
used, generated, manufactured, treated, stored or disposed of at, about, on,
under or in the Mortgaged Property or any parts thereof or transported to or
from the Mortgaged Property or the Improvements would give rise to liability to
the owner, operators, future owners, or future operators of the Mortgaged
Property or the Improvements under any other fedeal law, any state or local law,
ordinance or regulation or any law, ordinance or regulation of the Commonwealth
relating to the environmental condition or industrial hygiene of the Mortgaged
Property.
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34
The Bank reserves the right to require an environmental audit or other
review in connection with the credit facilities, in the event that (i) the
Borrower is notified by a Governmental Authority having jurisdiction, of a
violation of any environmental law, rule or regulation, and Borrower fails to
cure such violation within such longer term as may be afforded under judicial or
administrative proceedings, in which case the environmental audit shall be
limtied to the subject matter of the violation, or (ii) the Borrower is in
default of its obligations under the Loan Documents, such violation is not cured
within the term provided therefor and the Bank has notified the Borrower of its
intention to initiate foreclosure proceedings.
Section 8.2. Title to and Maintenance of Collateral.
8.2.1. Maintenance and Use of Collateral.
Borrower shall maintain, preserve, and keep all the collateral as
provided in the Loan Documents, and the materials, fixtures, and equipment
appurtenant thereto or used in connection therewith, and each and every part and
parcel thereof, in good repair and working order and in safe condition at all
times reasonable wear and tear excepted and subject to replacement. Without
limiting the foregoing and to the extent applicable, Borrower shall not, without
Bank's prior written consent, remodel, add to, reconstruct, improve, or demolish
any material part of the Property or other collateral.
8.2.2. Notice of Liens.
Borrower shall notify Bank in writing within ten (10) days thereof
should any mortgage, lien, encumbrance, charge or any other security instrument
whatsoever against the Property or the other collateral, or any part thereof, be
filed or otherwise come to Borrower's attention.
Section 8.3. Inspection, Audits and Information Regarding Collateral and
Advances.
(a) Borrower shall permit the Bank, and its representatives, agents, and
sub-agents, to enter upon the Property at any reasonable time during normal
business hours and to inspect the Property and the other collateral and shall
cooperate with the Bank and its representatives, agents, and sub-agents during
such inspections, including making available to the Bank and its
representatives, agents, and sub-agents access to the Property. All information
obtained by the Bank in the course of any such inspection shall be kept by the
Bank in strict confidence.
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35
(b) Borrower shall also permit the Bank and its representatives, agents,
and sub-agents to examine, copy and make extracts of the books, records,
accounting data, and other documents of Borrower that relate in any way to the
Property or the other collateral, including, without limitation, all permits,
licenses, consents, and approvals of all governmental authorities having
jurisdiction over Borrower or the Property. All such books, records, accounting
data and other documents shall be made available to the Bank and its
representatives, agents, and sub-agents promptly upon written demand therefor;
and, at the request of the Bank or its representatives, agents, or sub-agents,
Borrower shall provide convenient facilities for the foregoing purpose.
Section 8.4. Insurance.
Borrower shall obtain and maintain the insurance required under any Loan
Documents, and in addition shall obtain a comprehensive general liability
insurance policy obtained by Borrower from an insurance carrier acceptable to
the Bank, in an amount acceptable to Bank and with form and content acceptable
to Bank, and providing for thirty (30) days' prior written notice to Bank of
cancellation and evidence of payment of premiums thereon which shall be
delivered to Bank.
Section 8.5. Additional Documents.
Borrower shall from time to time at the Bank's request or as required by
the terms of the Loan Document:
(a) furnish to Bank all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and every
other document and instrument required to be furnished by the terms of the Loan
Documents, all at Borrower's expense;
(b) do and execute all and such further lawful and reasonable acts,
conveyances, and assurances for the better and more effective carrying out of
the intents and purposes of this Agreement as Bank shal reasonably require from
time to time.
Section 8.6. Easements and Restrictions.
All proposed easements (other than easements required by local
authorities and utilities for the purpose of serving the Property), which would
or might adversely affect the title to the
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Property shall be submitted to Bank prior to the execution thereof by Borrower,
accompanied by a survey showing the exact proposed location thereof and such
other information as Bank shall require. Borrower shall not subject the Property
or any part thereof to any restrictive covenant without the prior written
consent of Bank. Neither any provision hereof nor any express consent of Bank to
any matters contemplated by this Section shall constitute the Bank's
subordination of any collateral document or any other Loan Document to any such
matters.
Section 8.7. Compliance with Restrictive Covenants and Easements.
Borrower shall comply with all restrictive covenants and easements
affecting the Property or any of the other collateral.
ARTICLE 9. EVENTS OF DEFAULT
Section 9.1. Events of Default.
If any of the following events ("EVENTS OF DEFAULT") shall occur and
be continuing:
(a) The Borrower shall fail to pay to any installment of principal or
interest on any Note within ten (10) days from due date or shall fail
to pay any other amounts payable hereunder or under the Security
Documents within thirty (30) days from the due date; or
(b) A representation or warranty made by the Borrower in this
Agreement and/or in any Loan Document and/or in any certificate issued
hereunder, to which it is a party shall prove to have been incorrect
in any material respect when made; or
(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in any Loan Document on their respective parts
to be performed or observed at any time and such failure shall remain
unremedied for thirty (30) days after actual knowledge thereof is
obtained by Borrower or notice with respect thereto is delivered to
Borrower; or
(d) (i) the Borrower shall fail to make any payment (whether of
principal, interest or otherwise) when due or within the applicable
grace period, (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in respect of any material Debt or
(ii) any event shall occur or any condition shall exist in respect of
any
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37
material Debt under any agreement securing or relating to any such
Debt, the effect of which event or condition is to cause (or permit
any holder of such Debt or a trustee to cause) such Debt, or a portion
thereof, to become due prior to its stated maturity or prior to its
regularly scheduled dates of payment or (iii) any default or other
event shall occur or any condition shall exist under any amterial
lease entered into by Borrower which provides for payment of rentals
and the effect of such default, event or condition is to cause the
lessor under such lease to terminate such lease or the rights of
possession thereunder of the Borrower or to accelerate the maturity of
unaccrued rentals thereunder; or
(e) the Borrower shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against it
seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or
for any substantial part of its property or it shall take any action
to authorize any of the actions set forth above in this Section;
provided, however, that, in the case of any such proceeding instituted
against it by any Person other than an Affiliate thereof, such
institution shall not of itself constitute an Event of Default
hereunder if the proceedings shall be dismissed within sixty (60) days
following Borrower's obtaining of knowledge thereof; or
(f) any final judgment or order for the payment of money in an
aggregate amount in excess of US$1,000,000 not covered by insurance,
shall be rendered against the Borrower, and shall remain undischarged
and unstayed for a period of thirty (30) days from the date it became
final; or
(g) any material provision of the Loan Documents shall cease to be
valid or enforceable in accordance with its terms, or any Lien created
under the Loan Documents
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38
shall cease to be a valid and perfected security interest (except as
otherwise stated therein) for any reason other than the voluntary
relinquishment thereof by the holder thereof; or
(h) the Borrower shall fail to pay when due an amount or amounts which
it shall have become liable to pay under ERISA to the Pension Benefit
Guarantee Corp. or to a trust established pursuant to ERISA (or any
trustee thereof); or
(i) the Borrower shall default in the performance of any of its
respective obligations under a material Franchise and the effect of
such default is to permit or to cause the grantor of such Franchise to
terminate or revoke such Franchise, or any Franchise shall be
terminated or revoked prior to the scheduled date of expiration of
such Franchise; or
(j) there shall have occurred a condition or a change of circumstances
which has materially adverse effect on the business, assets,
properties or condition (financial or otherwise) of the Borrower; or
(k) an event of default entitling the Bank to accelerate shall have
occurred in any other obligation of the Borrower to the Bank;
then, and in any such event the Bank may, by notice delivered to the Borrower,
(i) declare the obligation of the Bank to make Advances hereunder to be
terminated, whereupon the same shall forthwith terminate and (ii) declare the
Notes, all interest thereon and all other amounts payable thereunder and under
this Agreement and/or under the Loan Documents, to be forthwith due and payable,
whereupon the Notes, all such interest and all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that, upon the occurrence of any event specified in Section
9.1 (e), the Notes, together with all interest thereon and all amounts payable
thereunder and under this Agreement, shall becime due and payable without any
declaration, notice or demand by the Bank.
Section 9.2. Additional Default Remedies.
If an Event of Default occurs, in addition to the remedies provided in
Section 9.1. supra, the Bank may:
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39
(a) Under court proceedings in a colelctin or foreclosure action
hereunder, have a receiver appointed as a matter of right without regard to
Borrower's solvency, and without having to post a bond, which requirement is
hereby waived, for the purpose of preserving the business operations and/or any
collateral securities and preventing any wast of assets. All expenses incurred
in connection with such appointment, or in the protection and preservation of
the business and/or any of the collateral securities shall be chargeable to and
payable by the Borrower.
(b) Refuse to disburse any amounts under this Agreement that have not
been disbursed and/or to stop the payment of any checks issued pursuant to the
same that have not been cashed.
(c) Any other remedies and rights provided in this Agreement or any of
the other Loan Documents.
(d) Any other remedies at law or equity.
Section 9.3. Limitation of Liability.
All the hereinabove or hereinafter stated to the contrary
notwithstanding, the parties agree that the Bank's sole recourse for recovery
for Borrower's obligations under this Agreement and under the Loan Documents
shall be the assets of the Borrower.
ARTICLE 10. MISCELLANEOUS
Section 10.1. Amendments, Waivers Etc.
No amendment or waiver of any provision of this Agreement or the Note,
nor consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given and shall not constitute nor be interpreted
as a waiver of any other breach. In no event shall an amendment, waiver or
consent, unless in writing and signed by the Bank, do any of the following: (a)
waive any of the conditions specified in Article V, (b) increase the commitment
of the Bank or subject the Bank to any additional obligations, (c) reduce the
principal of, or interest on, the Note or any fees or other amounts payable
hereunder, (d) postpone any date fixed for any payment of principal of, or
interest on, the Note or any fees or other amounts payable hereunder, (e)
release
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40
or discharge any Person liable for the performance of any obligations of the
Borrower, or (f) amend this Section.
Section 10.2. Notices, Etc.
All notices and other communications provided for hereunder shall be in
writing (including telefax communcation), and mailed, telefaxed or delivered:
if to the the Borrower, to its address at:
Posadas de San Juan Associates
P.O. Box 50053
San Juan, Puerto Rico 00902
Fax (809) 791-7500
Attention: Mr. Hugh A. Andrews
Williams Hospitality Management Corporation
El San Juan Hotel & Casino
187 E. Isla Verde Road
Isla Verde, Puerto Rico 00913
Attention: Mr. Hugh A. Andrews
Fax Number (809) 791-5000
WMS Industries, Inc.
North California Avenue
Chicago, Illinois
Attention: President
Fax Number (312) 539-2099
Copy to: Jeffrey N. Siegel, Esq.
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Fax Number (212) 351-3131
if to the Bank, to:
The Bank of Nova Scotia
Plaza Scotiabank Building
273 Ponce de Leon Avenue
Hato Rey, Puerto Rico 00917
Fax (809)
Attention: Mr. David F. Babensee
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41
or, as to each party, to such other address as shall be designated by such party
in a written notice to the other parties hereto. All such notices and
communications shall, when mailed, be effective when deposited in the mails
except that notices and communications made pursuant to Article 2 shall not be
effective until received by the Bank.
Section 10.3 No Waiver; Remedies Cumulative.
No failure on the part of the Bank to exercise, and no delay in
exercising any right hereunder or under any Note or any other document,
instrument or agreement shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder or under any Note preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
Section 10.4 Costs, Expenses, Fees, Taxes and Brokerage Commissions.
(a) The Borrower agrees to pay on demand all reasonable costs and
expenses in connection with the negotiation, closing, preparation, execution,
delivery and administration of the Agreement and the Loan Documents and other
documents to be delivered hereunder or thereunder and the consummation of the
transactions contemplated hereby and thereby, any amendments to any such
agreement, documents or any other Loan Document, and any consents under or
waivers of any of the provisions of any such agreements, documents or any other
Loan Document, including, without limitation, Title Policy premiums, reasonable
fees and out-of-pocket expenses of counsel for the Bank with respect thereto,
and all reasonable costs and expenses, if any (including counsel fees and
expenses) in connection with the enforcement of the Loan Documents and the other
documents to be delivered hereunder or thereunder. In additiona, the Borrower
shall pay or cause to be paid any and all stamp and other taxes payable or
determined to be payable in connection with the execution, delivery, filing,
recording, collection, cancellation and administration of the Loan Documents and
the other documents to be delivered hereunder or thereunder, and agrees to save
the Bank harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
The Borrower shall indemnify and save the Bank harmless from and against
all loss,
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42
damages, liability arising out of, or in connection with, brokerage comissions
or finder's fees due or alleged to be due by reason of acts of the Borrower in
connection with this loan transaction.
Section 10.5. Right of Setoff.
Upon the occurrence and during the continuance of any Event of Default,
the Bank is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Bank to or for the credit or the account
of the Borrower against any and all of the obligations of the Borrower, now or
hereafter existing under any Loan Document, irrespective of whether or not the
Bank shall have made any demand under any Loan Document and although such
obligations may be unmatured. The Bank agrees promptly to notify the Borrower of
any such setoff made by the Bank; provided, however, that the failure to give
such notice shall not affect the validity of such setoff. The rigths of the Bank
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of setoff) which the Bank may have.
Section 10.6. Entire Agreement; Assignment, Participations, Binding
Effect.
This Agreement represents the entire agreement among the parties hereto
with respect to the subject matter hereof and shall become effective when it
shall have been executed by the Borrower and the Bank and thereafter shall be
binding upon and inure to the benefit of the Borrower, the Bank and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein. The Bank may assign
to one or more banks or other entities all or any part of, or may grant
participations to one or more banks or other entities in or to all or any part
of, any Advance or Advances owning to Bank and/or of the Note held by Bank, and
to the extent of any such assignment (unless otherwise stated therein) the
assignee of such assignment shall have the same rights and benefits hereunder
and under such Note as it would have if it were the Bank hereunder.
Section 10.7. Governing Law.
This Agreement, the Notes and the Loan Documents shall be governed by,
and construed
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43
in accordance with, the laws of Puerto Rico.
Section 10.8. Execution in Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all of which when
taken together shall constitute one and the same agreement; provided, however,
that the Borrower and the Bank shall execute and deliver each such counterpart.
Section 10.9. Headings.
The headings contained in this Agreement are and shall be without
substantive meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
POSADAS DE SAN JUAN ASSOCIATES THE BANK OF NOVA SCOTIA
By:________________________________ By:________________________________
Hugh A. Andrews David F. Babensee
Affidavit Number: 2952 (copy)
Subscribed to before me by Hugh A. Andrews, of legal age, married and
resident of San Juan, Puerto Rico and by David F. Babensee, of legal age,
married, resident of San Juan, Puerto Rico as Authorized Signatories of Posadas
de San Juan Associates and The Bank of Nova Scotia respectively, both to me
personally known. At San Juan, Puerto Rico, this 20th day of January 1993.
Notary
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SUBORDINATION AGREEMENT
This Subordination Agreement, dated January 20, 1993, among WILLIAMS
HOSPITALITY MANAGEMENT CORP., a corporation organized and existing under the
laws of Delaware ("WILLIAMS"); POSADAS DE SAN JUAN ASSOCIATES, a New York
partnership engaged in business in the Commonwealth of Puerto Rico (the
"BORROWER"), and in favor of THE BANK OF NOVA SCOTIA (the "BANK").
PRELIMINARY STATEMENTS
1. The Bank has entered into a Credit Agreement dated as of even date
herewith with the Borrower (said agreement, as it may hereafter be amended or
otherwise modified from time to time, being the "CREDIT AGREEMENT", the terms
defined therein and not otherwise defined herein being used herein as therein
defined) pursuant to which the Bank has agreed to lend to the Borrower the
aggregate sum of US$34,000,000 (the "LOAN").
2. The Borrower is now obligated to Williams pursuant to an Operating
and Management Agreement dated July 31, 1984, as amended as of October 25, 1984
and October 1, 1986 (collectively, the "MANAGEMENT AGREEMENT"), copies of which
are attached hereto marked SCHEDULE I hereof), to pay to Williams a Basic
Management Fees, an Incentive Management Fee (as said terms are defined in the
Management Agreement (hereinafter individually, the "BASIC FEES" and the
"INCENTIVE FEES", and collectively referred to as the "FEES").
3. Pursuant to the terms of the Credit Agreement, it is a condition
precedent to the making of the loan by the Bank to the Borrower that Williams
subordinate its right (i) to receive payment of the Basic and Incentive Fees
under the Management Agreement in the event of
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arrears in the payments on the Term Loan Note or to the Furniture, Fixture and
Equipment Reserve Account under the Credit Agreement and (ii) to receive payment
of the Incentive Fees under the Management Agreement in the event any other
Event of Default under the Credit Agreement occurs and remains unremedied in
excess of 30 days from the date of the occurrence. The payment obligations of
the Borrower in respect of the Term Loan and the F. F. & R. Reserve Account as
set forth this paragraph 3 are hereinafter collectively referred to as the
"SECURED OBLIGATIONS".
4. Further, it is a condition to the Credit Agreement that Williams
grant to the Bank the right, at the Bank's election, to terminate the Management
Agreement in the event the Bank declares a default under the Term Loan or
Operating Credit facilities of the Credit Agreement and the Bank institutes
foreclosure or receivership proceedings as a result of such default.
NOW, THEREFORE, the Borrower, in consideration of the premises and in
order to induce the Bank to make Advances under the Credit Agreement, and
Williams, for good and valuable consideration (the receipt of which is hereby
acknowledged), each hereby agree as follows:
Section 1. Agreement to Subordinate. Williams and the Borrower each
agree that the future payment of the Basic Fees and the Incentive Fees under the
Management Agreement are and shall be subject to (to the extent and in the
manner hereinafter set forth) the timely payment and performance by the Borrower
or Williams of the Secured Obligations and future payment of Incentive Fees are
and shall be subject to (to the extent and in the manner hereinafter set forth)
the absence of the occurrence of an Event of Default other than non-payment of
the Secured Obligations which Event of Default shall remain uncured for 30 days.
2
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For purposes of this Agreement, the obligations requiring payment of the
Secured Obligations shall not be deemed to have been complied with respect to
any interest and/or principal payment unless the Bank shall have received such
payments as required under the Credit Agreement and thereafter shall not be
required to return such payments pursuant to any bankruptcy or similar
proceeding involving the Borrower.
Section 2. No Discharge on the Subordinated Obligation. Williams agrees
not to ask, demand, sue for, take or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any other manner
(including without limitation from or by way of collateral) payment of any of
the Fees payable to it under the Management Agreement, while any of the Secured
Obligations shall remain unpaid or unsatisfied when due; provided, however that
(i) Williams may receive and the Borrower may pay such Fees, on the stated dates
of payment thereof if, at the time of making any such payment no default as to
the Secured Obligations exist which default has not been cured by Borrower or
Williams, and (ii) that Williams may receive payments of Basic Fees if the event
of default that occurs under the Credit Agreement is not a failure to pay the
Secured Obligations when due.
Section 3. In Furtherance of Subordination.
Williams agrees, upon receiving written notice from the Bank of
Borrower's failure to pay or perform the Secured Obligations (a "NOTICE OF
DEFAULT") that:
(a) Any payments or distributions of Fees which are
received by Williams after the date of such Notice of Default
shall be received in trust by Williams and held for the benefit
of the Bank, shall be segregated from other funds and property
held by Williams and shall be immediately on demand paid
3
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over to the Bank and applied by the Bank to the payment of
the Secured Obligations.
(b) The Bank is hereby authorized to demand specific
performance of this Agreement, whether or not the Borrower shall
have complied with any of the provisions hereof applicable to it,
at any time when Williams shall have failed to comply with and
cure any such breach of the provisions of this Agreement
applicable to it.
Section 4. No Commencement of Any Proceeding. Williams agrees that, so
long as any of the Secured Obligations shall remain unpaid or unperformed when
due, it will not commence, or join with any creditor other than the Bank in a
proceeding to collect the Fees subordinated hereunder, but nothing herein shall
constitute a waiver by Williams of its claim against Borrower with respect to
such Fees.
Section 5. Rights of Subrogation. Williams agrees that no payment or
distribution to the Bank pursuant to the provisions of this Agreement shall
entitle Williams to exercise any rights or subrogation in respect thereof until
the Secured Obligations shall have been paid in full.
Section 6. Subordination Instrument; Further Assurances. Williams and
the Borrower each will, at its expense and at any time and from time to time,
promptly execute and deliver all further deeds, instruments and documents, and
take all further action, that may be reasonably necessary or desirable, or that
the Bank may reasonably request, in order to protect the right or interest
granted or purported to be granted hereby or to enable the Bank to exercise and
enforce its rights and remedies hereunder.
4
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Section 7. No Change in or Disposition of Subordinated
Obligation. Williams agrees that so long as the Loan is unpaid:
(a) Any sale, assignment, pledge, encumbrance or other
disposition of it's right to receive the Fees shall be subject to
the terms of this Agreement; and
(b) The Management Agreement shall not be changed in such
a manner as to have an adverse effect upon the rights or
interests of the Bank hereunder.
Section 8. Obligations Hereunder Not Affected. All rights and interests
of the Bank hereunder, and all agreements and obligations of Williams and the
Borrower under this Agreement, shall remain in full force and effect
irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, the Notes issued thereunder, or of any other agreement
or instrument relating thereto;
(ii) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Secured
Obligations, or any other amendments or waiver of or any consent
to departure from the Notes or the Credit Agreement;
(iii) any exchange, release or non perfection of any
collateral given under the Credit Agreement; or
(iv) any other circumstances which might otherwise
constitute a defense available to, or a discharge of, the
Borrower in respect of the Secured Obligations.
This Agreement shall continue to be effective or be reinstated, as the
case may be, if at any time payment of any of the Secured Obligations is
rescinded or must otherwise be returned
5
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by the Bank upon the insolvency, bankruptcy or reorganization of the Borrower or
otherwise, all as though such payment had not been made.
Section 9. Representations and Warranties.
(a) Williams hereby represents and warrants as follows:
(i) It is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction
indicated at the beginning of this Subordination Agreement;
(ii) The execution, delivery and performance by it of this
Subordination Agreement are within Williams' corporate powers and
have been duly authorized by all necessary corporate action and
do not contravene (1) its charter or by-laws or (2) any law or
contractual restriction binding on or affecting Williams.
(iii) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by Williams of this Subordination Agreement.
(iv) This Subordination Agreement is the legal, valid and
binding obligation of Williams enforceable against Williams in
accordance with its terms.
(b) The Borrower hereby repeats, restates and reiterates
herein all of the representations and warranties of Borrower set
forth in the Credit Agreement all of which are hereby
incorporated by reference herein as if set forth at length
herein.
6
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Section 10. Amendments, Etc. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Williams or the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 11. Expenses. The Borrower agrees to pay, upon demand, to the
Bank and Williams the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Bank may incur in
connection with the exercise or enforcement of any of the rights or interests of
the Bank hereunder. No such fees or expenses shall be payable if judgment in any
proceeding instituted for the exercise or enforcement of such rights or
interests is rendered against the Bank.
Section 12. Addresses for Notices. All demands, notices and other
communications provided for hereunder shall be in writing and, if to Williams,
mailed or telegraphed, faxed or delivered to it, addressed to it at:
Williams Hospitality Management Corporation
El San Juan Hotel & Casino
187 E. Isla Verde Road
Isla Verde, Puerto Rico 00913
Attention: Mr. Hugh A. Andrews
Fax Number (809) 791-5000
7
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WMS Industries, Inc.
North California Avenue
Chicago, Illinois
Attention: President
Fax Number (312) 539-2099
Copy to: Jeffrey N. Siegel, Esq.
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Fax Number: (212) 351-3131
if to the Borrower or the Bank, mailed or delivered to it, addressed to it at
the address of the Borrower or the Bank specified in the Credit Agreement, or as
to each party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such demands, notices and other communications shall, when
mailed or telegraphed, be effective when received.
Section 13. No Waiver, Remedies. No failure on the part of the Bank to
exercise and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
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Section 14. Continuing and Superseding Agreement. This Agreement is a
continuing agreement and shall (i) remain in full force and effect until the
Secured Obligations shall have been paid in full, (ii) be binding upon Williams,
the Borrower and their respective successors and assigns, and (iii) inure to the
benefit of and be enforceable by the Bank, its successors, transferees and
assigns. This Agreement supersedes any other agreements regarding the
subordination of the Basic and Incentive Fees and the termination of the
Management Agreement among the parties hereto or the AFICA Documents.
Section 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
Section 16. Reinstatement of Management Agreement. Borrower and Williams
agree, that if after Bank shall have terminated the Management Agreement, the
Bank's foreclosure proceedings are terminated or withdrawn by reason of
settlement, compromise or otherwise, then and in such event the Management
Agreement shall be reinstated for all purposes as of the date of the Bank's
termination thereof.
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IN WITNESS WHEREOF, Williams and the Borrower each has caused this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.
POSADAS DE SAN JUAN ASSOCIATES WILLIAMS HOSPITALITY
MANAGEMENT CORP.
By: ______________________________ By: ______________________________
Hugh A. Andrews Hugh A. Andrews
Authorized Party President
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Affidavit Number: 2954 (copy)
Subscribed to before me by Hugh A. Andrews, of legal age, married and
resident of San Juan, Puerto Rico, as authorized signatory of Posadas de San
Juan Associates and as President of Williams Hospitality Management Corp., who
is personally known to me, in San Juan, Puerto Rico on this 20th day of January,
1993.
-----------------------------------
Notary Public
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<PAGE>
WKA EL CON ASSOCIATES
JOINT VENTURE AGREEMENT
DATED JANUARY 9, 1990
<PAGE>
<PAGE>
WKA EL CON ASSOCIATES
JOINT VENTURE AGREEMENT
Agreement made the 9th day of January, 1990 by and among WMS EL CON
CORP., a Delaware corporation ("WMS"), International Textile Products of Puerto
Rico, Inc., a Puerto Rican corporation ("ITP"), KMA Associates of Puerto Rico,
Inc., a Puerto Rican corporation ("KMA") (ITP and KMA being referred to herein
collectively as the "Koffman Venturers") and Hospitality Investor Group, S.E., a
Puerto Rico Special Partnership ("HIG") (WMS, the Koffman Venturers and HIG are
hereinafter sometimes referred to collectively as the "Venturers" and separately
as a "Venturer").
W I T N E S S E T H:
WHEREAS, the Venturers desire to associate themselves and to form a
joint venture (the "Venture") for the purpose of becoming a general partner and
a limited partner of El Conquistador Partnership L.P. to be formed under the
terms of an agreement of limited partnership (the "El Conquistador Partnership
Agreement") between the Venture and Kumagai Caribbean, Inc., a Texas
Corporation; and
WHEREAS, the purpose of El Conquistador Partnership L.P. is to acquire,
own, renovate, construct, develop and operate the facility in Fajardo, Puerto
Rico formerly known as the El Conquistador Hotel as a first-class, luxury
destination mega-resort, all as more fully described in the El Conquistador
Partnership Agreement; and
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WHEREAS, the Venturers desire that their respective rights and
obligations in connection with the Venture and their respective participation in
the profits or liabilities derived therefrom be defined by an agreement in
writing;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions.
Capitalized terms used in this agreement and not otherwise
defined shall have the same meaning ascribed to such terms in the el
Conquistador Partnership Agreement.
1.1. "Appendix" means the Appendix attached to this agreement.
1.2. "Capital Account" is defined in Section hereof.
1.3. "Capital Contribution" means the amount to be contribute
to the Venture by any Venturer pursuant to Article hereof.
1.4. "Committee" is defined in Section hereof.
1.5. "Extraordinary Cashflow" means distributions to the Venture
from El Conquistador Partnership L.P. out of funds constituting Extraordinary
Cashflow under the El Conquistador Partnership Agreement plus the proceeds from
the sale or financing of all or any portion of the Venture's interest in El
Conquistador Partnership L.P. less all costs and expenses associated with such
sale or financings and any amounts reasonably reserved by the Committee.
1.6. "Gain from a Capital Transaction" means amounts constituting
a Gain from a Capital Transaction under the El Conquistador Partnership
Agreement allocated to the Venture and gain realized by the Venture from the
sale of all or any portion of the Venture's interest in the El Conquistador
Partnership L.P.
1.7. "Interest" is defined in Section hereof.
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1.8. "Operating Cashflow" means distributions to the Venture from
El Conquistador Partnership L.P. out of funds constituting Operating Cash Flow
under the El Conquistador Partnership Agreement and interest income received by
the Venture from the investment of funds less all cash expended or reserved for
currently due or maturing liabilities.
1.9. "Percentage Interest" is defined in Section hereof.
1.10. "Target Capital Account" means for any Venturer the
Capital Account of such Venturer (which may be positive or negative) as of the
most recently completed fiscal year which would equal the hypothetical
distribution that any such Venturer would receive if the Venture sold all of its
assets (including cash) for cash equal to the tax basis of such assets as of the
end of such fiscal year (or book value if any adjustment has been made pursuant
to Regulation Section 1.704-1(b)(2)(iv)(g)) and all liabilities allocable to
those assets were due and satisfied according to their terms (limited with
respect to each nonrecourse liability to the book basis of the assets securing
that liability, or book value if an adjustment has been made pursuant to
Regulation Section 1.704-1(b)(2)(iv)(g)) and all net assets of the Partnership
(including the proceeds from the disposition) were distributed pursuant to
Sections 10.2.3 and 10.2.4 hereof as of the last day of such fiscal year
reduced by each Venturer's share of Partnership Minimum Gain and Partner
Minimum Gain immediately prior to the hypothetical sale and such Venturer's
share of Distributable Cash of the El Conquistador Partnership L.P. which
is to be distributed to such Venturer which if taken into account hereunder
shall not be taken into account when distributed and increased by the amount
distributable to such Venturer pursuant to the last sentence of Section 10.3
and reduced by the Capital Contribution such Venturer would be required to
maKe to the Venture pursuant to Section 10.3.
3
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1.11. "Tax Matters Partner" is defined in Section 5.5 hereof.
1.12. "Unrecovered Capital" means with respect to each
Venturer the amount at any time of such Venturer's Capital Contribution actually
made to the Venture, reduced (but not below zero) by distributions to such
Venturer of (i) proceeds from El Conquistador Partnership L.P. which are treated
under the El Conquistador Partnership Agreement as a return of Unrecovered
Capital and (ii) proceeds from the sale or refinancing of the Venturer's
interest in El Conquistador Partnership L.P.
2. The Venture.
2.1. The Venturers hereby form the Venture under the general
partnership law of the State of New York for the purpose of becoming a general
partner and a limited partner of El Conquistador Partnership L.P., and to
perform any and all acts and services necessary or desirable in connection
therewith and the financing thereof.
2.2. The name of the Venture shall be WKA El Con Associates or
such other name as the Venturers may agree. Promptly after the execution hereof,
the Venturers shall execute and cause to be filed such certificates of doing
business under an assumed name or other documents as may be required by law to
authorize the Venture to conduct its business, including compliance with any
applicable laws of the Commonwealth of Puerto Rico.
2.3. The principal office of the Venture shall be located in
such place as the Venturers may agree.
2.4. The term of the Venture shall commence as of the date of
this agreement and continue for 50 years from the date hereof, unless sooner
terminated as provided in Article 10 hereof.
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2.5. The relationship among the Venturers shall be limited to the
performance of the specific purposes and objectives of the Venture as set forth
in this agreement. Nothing herein shall be construed to create a general purpose
partnership among the Venturers; to authorize any Venturer to act as general
agent for any other; or to confer or grant to any Venturer any proprietary
interest in, or to subject any Venturer to any liability for or in respect of,
the business, assets, profits or obligations of any other Venturer, except only
to the extent contemplated by this agreement.
3. Management of the Venture.
3.1. The business and affairs of the Venture shall be supervised
by and, except as otherwise provided herein, all acts and decisions of the
Venture in its capacity as general partner of El Conquistador Partnership L.P.
or otherwise shall be performed or made by a Venturers Committee (the
"Committee"). The Committee shall consist of six persons, three of whom shall be
designated in writing by WMS, two of whom shall be designated in writing by the
Koffman Venturers, and one of whom shall be designated in writing by HIG. The
initial designees of the Venturers to serve on the Committee shall be Louis J.
Nicastro, Norman J. Menell and Neil D. Nicastro for WMS, Burton I. Koffman and
Richard E. Koffman for the Koffman Venturers and Hugh A. Andrews for HIG. Any
Venturer may change its Committee designees by notice given to the other
Venturers not less than ten days prior to the effective date of such change.
3.2. The Committee shall meet in person or by telephone
conference call at times and places fixed by the Committee or by the WMS
designees as necessary for conducting the business of the Venture upon at least
24 hours' prior notice. At any meeting, a majority of
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the full number of members of the Committee shall be required for any and all
action to be taken by the Committee. In lieu of a meeting, any action to be
taken by the Committee may be taken by written consent executed by a majority of
the full number of members of the Committee. Any member of the Committee is
authorized to give written certification to any third party as to any action
taken by the Committee as aforesaid.
3.3. The Committee shall have authority to appoint and employ
such managers, employees, consultants and agents for the Venture as it shall
deem appropriate and may delegate to them any and all of its power and authority
hereunder.
3.4. The EL Conquistador Partnership Agreement in the form
annexed hereto as Exhibit A and all agreements annexed to such agreement or
referred to therein as being executed concurrently therewith are specifically
authorized and approved by each of the Venturers, and each Venturer, acting
alone, is authorized to execute such agreements on behalf of the Venture. The
Venturers authorize the Committee to cause the Venture to make capital
contributions to El Conquistador Partnership L.P. as and when required by the
Venture under the El Conquistador Partnership Agreement and to otherwise do all
things and execute all documents as may be necessary or desirable in connection
therewith and performance of the Venture's obligations thereunder.
4. Capital Contributions and Liabilities.
4.1. The Venturers shall contribute up to an aggregate of NINE
MILLION Dollars ($9,000,000) to the capital of the Venture in cash, in such
amounts and at such time or times as shall be determined by the Committee. The
maximum amount of each Venturer's
6
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capital contribution ("Capital Contribution') and each Venturer's percentage
interest in the Venture (the "Percentage Interest") shall be as follows:
MAXIMUM CAPITAL CONTRIBUTION PERCENTAGE INTEREST
<TABLE>
<S> <C> <C>
WMS $4,500,000.00 50%
ITP 1,800,000.00 20%
KMA 1,800,000.00 20%
HIG 900,000.00 10%
------------ ---
$9,000,000.00 100%
</TABLE>
; provided, however, that the Venturers are considering adjusting their capital
contributions and Percentage Interests in the Venture to increase HIG's interest
to 33 1/3 and reduce the interests of the other Venturers. Any such adjustment
will be effected only by a written amendment to this agreement.
Whenever Capital Contributions are to be made, each Venturer shall make such
Capital Contribution within 5 business days after its receipt of a written
notice therefor from the Committee and each Venturer's Capital Contribution
shall be made in the same proportion as such Venturer's Percentage Interest. No
Venturer shall be required to make a Capital Contribution in excess of its
Percentage Interest of the total Capital Contributions then being made.
Notwithstanding the foregoing, in addition to the Capital Contributions required
under this Section 4.1, the Koffman Venturers and HIG shall make the additional
contributions to the Venture, if any, required by Section 10.3 hereof.
4.2. No interest shall be payable to the Venturers by the
Venture on Capital Contributions.
4.3. All liabilities of the Venture in excess of the assets of
the Venture shall be borne by the Venturers in proportion to their Percentage
Interests.
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5. Books and Records, Reports, etc.
5.1. The Venture shall maintain at its principal office full and
proper records and books of account based upon generally accepted accounting
principles consistently applied.
5.2. The fiscal year of the Venture shall end on each June 30 or
such other fiscal year as shall be determined by the Committee.
5.3. Each of the Venturers shall have the right at all reasonable
times to have any and all of the Venture's records and books of account
inspected at its own expense by its own employees, attorneys or accountants.
5.4. Initially the firm of Ernst and Young shall serve as the
independent certified public accountants for the Venture.
5.5. WMS is hereby designated as the tax matters partner within
the meaning of Section 6231(a)(7) of the Internal Revenue Code of 1986, as
amended (the "Tax Matters Partner").
(A) Duties of Tax Matters Partner. To the extent and
in the manner provided by applicable law and regulations, the Tax Matters
Partner shall:
(1) furnish the name, address, interest in the
Venture and taxpayer identification number of each Venturer, including any
successor to a Venturer, to the Secretary of the Treasury or his delegate (the
"Secretary");
(2) keep each Venturer informed of any
administrative or judicial proceedings for the adjustment at the Venture level
of any item required to be taken into account by a Venturer for income tax
purposes (such administrative proceeding referred to
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hereinafter as a "tax audit" and such judicial proceeding referred to
hereinafter as "judicial review").
(B) Authority of Tax Matters Partner. Without the
consent of the other Venturers, the Tax Matters Partner shall not:
(1) enter into any settlement with the Internal
Revenue Service, the Secretary or other taxing authority;
(2) seek judicial review of any administrative
adjustment;
(3) file a request for an administrative adjustment
or a petition for judicial review with respect thereto;
(4) enter into any agreement with the Internal
Revenue Service or other taxing authority to extend the period for assessing any
tax which is attributable to any item required to be taken into account by a
Venturer for tax purposes, or an item affected by such item; or
(5) take any other action on behalf of the
Venturers or the Venture in connection with any tax audit or judicial review
regardless of whether or not permitted by applicable law or regulations.
(C) Participation by Other Venturers. The Tax Matters
Partner shall give reasonable advance notice to the other Venturers of all
meetings and discussions between the Venture and the Internal Revenue Service,
the Secretary and all other governmental authorities and courts asserting
jurisdiction with respect to tax matters and all agents and representatives of
the foregoing and the other Venturers shall have the right, together with the
Tax Matters Partner, to meet, discuss and negotiate with such persons and
entities.
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5.6. The Venture shall maintain such bank accounts as shall
be approved by the Committee.
6. Profits/Losses and Cash Distributions.
6.1. The Venture shall establish and maintain a "Capital Account"
for each Venturer throughout the full term of the Venture in accordance with
Treasury Regulation ("Treas. Reg.") 'SS'1.704-1(b)(2)(iv), as such regulation
may be amended from time to time. To the extent not inconsistent with such
rules, the following provisions shall apply (capitalized terms used in this
Article and not otherwise defined herein or in the Appendix shall have the
same meaning ascribed to such terms in the El Conquistador Partnership Agreement
as applied to the Venture and shall refer to those amounts or funds
constituting such defined terms under the El Conquistador Partnership
Agreement which are allocated to the Venture except that the term Net Loss
as used herein shall include Net Loss from a Capital Transaction):
The Capital Account of each Venturer shall be credited with (i)
such Venturer's Capital Contribution and (ii) such Venturer's share of Net
Income and Gain from a Capital Transaction (or items thereof) of the Venture.
The Capital Account of each Venturer shall be debited by (i) the amount of
distributions made to such Venturer and (ii) such Venturer's share of Net Loss
(or items thereof), including expenditures which can neither be capitalized nor
deducted for tax purposes.
6.2. Income and losses of the Venture for U.S. Federal income tax
purposes shall be allocated and charged to the Venturers' Capital Accounts as
provided in the Appendix annexed hereto.
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6.3. The Venture shall distribute cash in such amounts and at
such times as shall be determined by the Committee, to the Venturers in
proportion to their Percentage Interests, provided however that the Koffman
Venturers and HIG are required to restore certain distributions to the Venture
in connection with a liquidation of the Venture in accordance with Section
10.3 hereof and further provided that proceeds from the sale of substantially
all of the assets of the Venture or a distribution to the Venture representing
the liquidation of El Conquistador Partnership L.P. or the Interest of the
Venture in El Conquistador Partnership L.P. or the sale of substantially all
of the assets of El Conquistador Partnership L.P. shall be distributed in
accordance with Sections 10.2.3 and 10.2.4 hereof.
7. Restriction on Dispositions of Interests in the Venture.
No Venturer may assign, transfer, sell, pledge, hypothecate,
mortgage, exchange or otherwise transfer or dispose of (any of the foregoing
being referred to by the terms "Dispose" or "Disposition") all or any part of
its interest in the Venture (referred to herein as an "Interest"), without the
written consent of the other Venturers, except that each Venturer shall be
entitled to transfer all or any portion of its Interest to an affiliate which
transferee shall be admitted as a Venturer hereunder, provided such transfer
does not have an adverse tax impact on the other Venturers, and each Venturer
shall be entitled to pledge its interest in the Venture as collateral security
for obtaining financing in connection with such Venturer's Capital Contribution.
Any attempted Disposition by a Venturer in violation of this Section 7, without
such consent, shall be null and void.
8. Representations and Warranties.
Each Venturer represents and warrants to each other Venturer as
follows:
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8.1. WMS is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware.
8.2. Each of the Koffman Venturers is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Puerto Rico.
8.3. HIG is a special partnership (pursuant to Supplement P of
Puerto Rico Tax Act of 1954, as amended), organized and existing under the laws
of the Commonwealth of Puerto Rico, and HASN, Inc., a corporation organized and
existing under the laws of the Commonwealth of Puerto Rico is the sole general
partner thereof.
8.4. Each Venturer represents and warrants to the other Venturers
that the execution, delivery and performance by such Venturer of this agreement
have been duly authorized by all necessary corporate or partnership action on
the part of such Venturer, and no further action or approval is required in
order to constitute this agreement as the valid and binding obligation of such
Venturer enforceable in accordance with its terms.
8.5. Each Venturer represents and warrants to the other Venturers
that this agreement constitutes the legal, valid and binding obligation of such
Venturer, enforceable against such Venturer in accordance with its terms.
8.6. Such Venturer is acquiring its interest in the Venture for
its own account and not with a view to distribution or resale thereof other than
in accordance with the provisions of this agreement and applicable securities
laws.
9. Puerto Rico Gaming Authority Approvals; Tax Exemptions and
Elections.
9.1. Each Venturer shall use its best efforts to obtain and
thereafter maintain all consents, approvals and authorizations which are
necessary or appropriate to be obtained and
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maintained by such Venturer in order to effect the purposes of the Venture,
including all consents, approvals and authorizations from the Treasury of the
Commonwealth of Puerto Rico and any other governmental body or agency having
authority over licensing of gambling in the Commonwealth of Puerto Rico and any
tax exemption granted to the Venture by the Commonwealth of Puerto Rico;
provided, however, that nothing contained in this Article shall require any
party to consent to modify any provisions of this agreement or any other
document referred to herein in any manner materially adverse to its interests.
9.2. Promptly following the date hereof, the Venture shall file
appropriate documents with the taxing authorities or otherwise to elect to be
treated for Puerto Rican income tax purposes as a special purpose partnership.
The Venture and each of the Ventures shall prepare, execute and file appropriate
documents and returns with the taxing authorities of Puerto Rico or otherwise in
a manner so as to reduce, minimize or eliminate Puerto Rican income taxes
payable by the Venturers including, without limitation, the election by the
Venture to be treated for Puerto Rican income tax purposes as a special purpose
partnership. The Venture shall maintain separate books and records with respect
to allocations of income and loss and affects on each Venturer's Capital Account
for purposes of Puerto Rico income tax reporting requirements.
10. Termination and Liquidation.
10.1. The Venture shall terminate upon the occurrence of any of
the following events:
(A) The end of its term as provided in Section hereof.
(B) Mutual agreement of the Venturers.
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(C) The sale of all of the Venture's Interests in El
Conquistador Partnership L.P.
(D) The termination of El Conquistador Partnership L.P.
10.2. Upon termination of the Venture for any reason, the
Venture shall continue its business solely for the purpose of winding up its
affairs and shall be liquidated as rapidly as sound business judgment permits.
All decisions with respect to disposition of Venture assets, collection or
compromise of any amounts receivable and payment or compromise of any amounts
payable by the Venture shall be made by the Committee or, if the Committee has
ceased to exist, the Venturers having Percentage Interests in excess of 50%. The
assets of the Venture shall be applied for the following purposes in the
following order:
10.2.1. First, to the payment or provision for payment
of all just debts and obligations of the Venture to creditors other than the
Venturers, and for the expenses of winding up the affairs of the Venture.
10.2.2. Next, to the payment of all amounts due from
the Venture to the Venturers other than amounts due the Venturers under Sections
10.2.3, 10.2.4 and 10.2.5, and hereof.
10.2.3. Next to WMS in an amount equal to its Unrecovered
Capital.
10.2.4. Next to the Koffman Venturers and HIG in
proposition to their respective Percentage Interests in an amount equal to their
Unrecovered Capital.
10.2.5. Any remaining assets of the Venture shall be
distributed pro rata to the Venturers in proportion to their respective
Percentage Interests.
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10.3. In the event that the distribution to WMS under Section
10.2.3 is less than its Unrecovered Capital, the Koffman Venturers and HIG
shall each contribute to the Venture in proportion to their respective
Percentage Interests the lesser of (i) the balance of WMS's Unrecovered Capital
or (ii) an amount equal to all distributions to them of Extraordinary Cashflow
from the inception of the Venture.
11. Miscellaneous.
11.1. All of the representations, warranties, covenants and
agreements made by the parties to this agreement shall survive for the full
period of any applicable statute of limitations.
11.2. This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof. No change, modification,
amendment, addition or termination of this Agreement or any part thereof shall
be valid unless in writing and signed by or on behalf of the party to be charged
therewith.
11.3. This agreement may be executed in one or more counterparts,
and shall become effective when one or more counterparts has been signed by each
of the parties.
11.4. Any and all notices or other communications or deliveries
required or permitted to be given pursuant to any of the provisions of this
agreement shall be deemed sufficiently given or furnished for all purposes if in
writing and delivered personally to such Venturer; transmitted by confirmed fax;
sent by certified mail, in a sealed envelope, with postage prepaid; or sent by
responsible overnight delivery service addressed to such Venturer at its address
set forth on Exhibit C annexed hereto or at such other address as such Venturer
shall have previously designated by written notice as provided in this Section
to the other
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Venturers; and shall be effective when personally delivered or transmitted, five
business days after mailing or the next business day after delivery to a
responsible overnight delivery service.
11.5. No waiver of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, either of a similar or different nature, unless
expressly so stated in writing. No amendment of the provisions hereof shall be
effective unless in writing and signed by all of the parties hereto.
11.6. Should any clause, section or part of this agreement be
held or declared to be void or illegal for any reason, all other clauses,
sections or parts of this agreement which can be effected without such illegal
clause, section or part shall nevertheless continue in full force and effect.
11.7. This agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York.
11.8. Each of the parties hereto consents to the jurisdiction of
the Courts of the State of New York and the United States District Court for the
Southern District of New York with respect to any matter arising with respect to
this agreement, shall subject itself to the jurisdiction of such courts and
agrees that service of process upon it may be made in any manner permitted by
the laws of the State of New York. Without limiting the generality of the
foregoing, service of process will be deemed sufficient if sent by registered or
certified mail to a party hereto at the address for such party set forth in
Section 11.4 hereof. In addition, the parties hereto agree that the venue for
any state court action shall be New York County.
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11.9. This agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. Except for
Dispositions of Interests permitted by this agreement, this agreement shall not
be assignable by any of the parties hereto without the prior written consent of
all other parties hereto and any attempt to assign this agreement shall be void
and of no effect.
11.10. The headings or captions to sections of this agreement are
for convenience and reference only and do not in any way modify, interpret or
construe the intent of the parties or effect any of the provisions of this
agreement.
IN WITNESS WHEREOF, this agreement has been made and executed as
of the date and year first above written.
WMS EL CON CORP.
By:
-----------------------------------------
Norman J. Menell, President
INTERNATIONAL TEXTILE PRODUCTS OF
PUERTO RICO, INC.
By:
------------------------------------------
Richard E. Koffman
KMA ASSOCIATES OF PUERTO RICO, INC.
By:
------------------------------------------
Richard E. Koffman
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HOSPITALITY INVESTOR GROUP, S.E.
By: HASN, INC., general partner
By:
--------------------------------------
Hugh A. Andrews, President
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<PAGE>
APPENDIX
The following constitutes an Appendix to the WKS EL CON ASSOCIATES JOINT VENTURE
AGREEMENT dated January 9, 1990 and shall be deemed a part thereof as if fully
set forth therein.
The allocations to the Capital Account of each Venturer for Federal
income tax purposes of Net Income, Gain from a Capital Transaction, Net Loss,
and Depreciation or, where required, the allocation of items or elements of any
of the foregoing, and the allocation of gross income, if required, shall be made
in accordance with this Appendix. The Venturers wish to have the allocations
made in accordance with Article I of this Appendix but recognize that under
certain circumstances such allocations may diverge from allocations that may be
required to be made for tax purposes. Article II of this Appendix sets forth
certain targets which must be met by the allocations in Article I. To the extent
that there is divergence between the results of allocations under Article I and
Article II, Article I is subject to Article II. Article II prescribes the order
in which the allocations in Article I are to be adjusted if such adjustments
are required to bring the Article I allocations into conformity with the
results mandated by Article II. Article III sets forth certain provisions
required by the Regulations and both Article I and Article II are subject to
Article III.
I. ALLOCATIONS OF NET INCOME, NET LOSS AND GAIN
FROM A CAPITAL TRANSACTION AND DEPRECIATION
1. NET INCOME: For each fiscal year of the Venture for which the
Venture has Net Income represented by Operating Cash Flow an amount of Net
Income equal to the Operating
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Cash Flow which is to be distributed to each Venturer shall be allocated to such
Venturer, and the balance, if any, of such Net Income shall be allocated.
FIRST: To WMS to the extent its Capital Account is less than its
Unrecovered Capital after giving effect to the distribution of the cash.
SECOND: To the Koffman Venturers and HIG to the extent that their
respective Capital Accounts are less than their Unrecovered Capital in
proportion to their respective Percentage Interests until the Capital Account of
each Venturer equals its Unrecovered Capital.
THIRD: To WMS, Koffman and Andrews in proportion to their
respective Percentage Interests.
2. NET LOSS: For each year of the Venture with respect to which the
Venture has a Net Loss such Net Loss shall be allocated and charged to the
Capital Accounts of the Venturers in the following manner:
FIRST: 100% to the Koffman Venturers and HIG in proportion
to their respective Percentage Interests until the Capital Accounts of such
Venturers have been reduced to zero;
SECOND: To the Koffman Venturers and HIG in proportion to their
respective Percentage Interests to the extent that the sum of (i) prior
allocations to them of Net Loss under this Paragraph SECOND and Paragraph FIRST
of this Section 2 and (ii) prior allocations of Depreciation under Paragraphs
FIRST and SECOND of Section 4 of this Appendix are less than $4.5 million. (The
Koffman Venturers and HIG are each in effect required to restore a deficit in
its Capital Account attributable to allocation to them of Net Loss under this
Paragraph SECOND).
A-2
<PAGE>
<PAGE>
THIRD: To WMS until the Capital Account of WMS has been reduced
to zero.
FOURTH: To the Venturers in proportion to their respective
Percentage Interests.
Notwithstanding the foregoing, Nonrecourse Deductions shall be
allocated (a) 50% to WMS and (b) 50% to the Koffman Venturers and HIG in
proportion to their respective Percentage Interests.
3. GAIN FROM A CAPITAL TRANSACTION: Gain from a Capital Transaction
realized by the Venture after giving effect to Sections 3 and 4 of Article III
of this Appendix but prior to giving effect to any distribution of Extraordinary
Cashflow in respect of such transaction shall be allocated and credited to the
Capital Accounts of the Venturers as follows:
FIRST: To WMS to the extent its Capital Account is less than its
Unrecovered Capital;
SECOND: To the Koffman Venturers and HIG in proportion to their
Percentage Interests to the extent their Capital Accounts are less than their
Unrecovered Capital;
THIRD: To WMS, the Koffman Venturers and HIG in proportion
to their Percentage Interests.
4. ALLOCATION OF DEPRECIATION:
(A) For each fiscal year of the Venture there shall be charged to
the Capital Account of each Venturer, and allocated to each Venturer for income
tax purposes, an amount of the Depreciation (which is not a Nonrecourse
Deduction) as follows:
FIRST: To the Koffman Venturers and HIG in proportion to their
respective Percentage Interests until their Capital Accounts shall be reduced to
zero;
A-3
<PAGE>
<PAGE>
SECOND: To the Koffman Venturers and HIG in proportion to their
respective Percentage Interests to the extent that the sum of (i) current and
prior allocations of Net Loss under Paragraphs FIRST and SECOND of Section 2,
(ii) prior allocations of Depreciation under this Paragraph and Paragraph FIRST
of this Section 4 are less that $6 million. The Koffman Venturers and HIG shall
each be in effect required to restore any deficit in its Capital Accounts
attributable to depreciation allocated under this Paragraph;
THIRD: To WMS until its Capital Account shall be reduced to
zero; and
FOURTH: Subject to Section 2 of Article III of this Appendix,
any remaining Depreciation shall be allocated to the Venturers in proportion to
their Percentage Interests.
Notwithstanding the foregoing Paragraphs FIRST through FOURTH,
Depreciation which is a Nonrecourse Deduction shall be allocated to the
Venturers in accordance with the last sentence of Section 2 of this Article.
(B) Recapture shall be allocated to the Venturers as follows
(i.e., the portion of the gain allocated to a Venturer which constitutes
Recapture shall be determined as follows): to the extent possible, there shall
be allocated to each Venturer that portion of such Recapture which is equal to
the fraction, the numerator of which is the Depreciation deductions that
generated such Recapture allowable with respect to the property being sold
theretofore allocated to such Venturer (or a predecessor in interest to such
Venturer), and the denominator of which is the total Depreciation deductions
that generated such Recapture (or other items of deduction that generated such
Recapture) allowable with respect to the Venture property being sold theretofore
allocated to all Venturers provided, however, that under no circumstances shall
there
A-4
<PAGE>
<PAGE>
be allocated to any Venturer Recapture in excess of the Gain from a Capital
Transaction allocated to such Venturer (and such excess shall be allocated
instead to the other Venturers).
II. ALLOCATIONS TO CONFORM TO TARGET CAPITAL ACCOUNTS.
If the Capital Account of a Venturer at the end of any fiscal year as
determined by the application of Article I and III differs from that Venturer's
Target Capital Account, the allocations provided for in Article I of this
Appendix shall be modified so that each Venturer's Capital Account shall
equal its Target Capital Account. Modification pursuant to the preceding
sentence shall be subject to the requirements that (i) the ceiling rule as
set forth in Code Section 1.704-1(a)(2) as it may be applied by the Internal
Revenue Service will not be violated and (ii) the provisions of Article III of
this Appendix may not be violated. Subject to the foregoing, the modifications
required hereunder shall be made by first reallocating Net Income or Net Loss,
as the case may be, and then Gain from a Capital Transaction and next by
reallocating Depreciation and then, if necessary, by reallocating Items of
Net Income and Net Loss but the allocation of Non-recourse Deductions in Article
I shall not be modified.
III. EXCEPTIONS.
Notwithstanding anything to the contrary contained in this Appendix, the
following shall apply:
1. GENERAL LIMITATION: No allocation shall be made to a Venturer which
would cause such Venturer to have a deficit balance in its Adjusted Capital
Account which exceeds the sum of such Venturer's share of Partnership Minimum
Gain and such Venturer's Share of Minimum Gain Attributable to Partnership
Nonrecourse Debt and, in the case of the Koffman
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<PAGE>
<PAGE>
Venturers and HIG, the deficit balance in their Capital Accounts that they are
obligated to restore.
2. VENTURER NONRECOURSE DEDUCTIONS: Any and all items of Net Loss and
deduction and any and all expenditures described in Section 705(a)(2)(B) of the
Code (or treated as expenditures so described pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations) (collectively, "Partner Nonrecourse
Deductions") that are (in accordance with the principles set forth in Section
1.704-1T(b)(4)(iv)(h)(3) of the Regulations) attributable to Partner Nonrecourse
Debt shall be allocated to the Venturer that bears the Economic Risk of Loss for
such Partner Nonrecourse Debt. If more than one Venturer bears such Economic
Risk of Loss, such Partner Nonrecourse Deductions shall be allocated between or
among such Venturers in accordance with the ratios in which they share such
Economic Risk of Loss.
3. VENTURE MINIMUM GAIN: If there is a net decrease in Partnership
Minimum Gain for any fiscal year of the Venture, there shall be allocated to
each Venturer for such fiscal year, before any other allocation is made of
Venture items under Article I or Article II of this Appendix, items of income
and gain for such year (and, if necessary, for subsequent years) in proportion
to, and to the extent of, an amount equal to the greater of: (1) the portion of
such Venturer's share of the net decrease in Partnership Minimum Gain during
such fiscal year that is allocable (in accordance with the principles set forth
in Section 1.704-1T(b)(4)(iv)(e)(2) of the Regulations) to the sale or other
disposition of Venture property subject to one or more Nonrecourse Liabilities
of the Venture; or (2) the deficit balance in such Venturer's Adjusted Capital
Account at the end of such fiscal year (other than a deficit balance that such
Venturer is obligated to restore). The amount of such deficit balance which
needs to be eliminated shall
A-6
<PAGE>
<PAGE>
be reduced by the amount of such Venturer's share of Partnership Minimum Gain
and such Venturer's share of Minimum Gain Attributable to Partner Nonrecourse
Debt (computed, in each case, by reference to the amount of Partnership Minimum
Gain and Minimum Gain Attributable to Partnership Nonrecourse Debt after taking
into account any changes thereto during such fiscal year). Items of income and
gain to be allocated pursuant to the foregoing provisions of this Section 3
shall consist first of gains recognized from the disposition of items of Venture
property subject to one or more Nonrecourse Liabilities of the Venture to the
extent of the decrease in Partnership Minimum Gain attributable to the
disposition of such items of Venture property (or a proportionate share of each
such gain if such gains exceed the amount of income and gain required to be
allocated pursuant to the foregoing provisions of this Paragraph for such fiscal
year), and then of a pro rata portion of the other items of Venture income and
gain for that year.
4. MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT: If there is,
for any fiscal year of the Venture, a net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt, there shall be allocated to each
Venturer that has a share of Minimum Gain Attributable to Partner Nonrecourse
Debt at the beginning of such fiscal year before any other allocation under
Section 704(b) of the Code is made pursuant to this Appendix (other than an
allocation required pursuant to the provisions of Section 3 of this Article of
this Appendix) items of income and gain for such fiscal year (and, if necessary,
for subsequent years) in proportion to, and to the extent of, an amount equal to
the greater of: (i) the portion of such Venturer's share of the net decrease in
the Minimum Gain Attributable to Partner Nonrecourse Debt that is allocable (in
accordance with the principles set forth in Section 1.704- 1T(b)(4)(iv)(h)(4) of
the Regulations) to the sale or other disposition of Venture property subject
A-7
<PAGE>
<PAGE>
to such Partner Nonrecourse Debt; or (2) the deficit balance in such Venturer's
Adjusted Capital Account at the end of such fiscal year (other than a deficit
balance that such Venture is obligated to restore). The amount of such deficit
balance which needs to be eliminated shall be reduced by the amount of such
Venturer's Share of Partnership Minimum Gain and such Venturer's Share of
Minimum Gain Attributable to Partner Nonrecourse Debt (computed, in each case,
by reference to the amount of Partnership Minimum Gain and Minimum Gain
Attributable to Partner Nonrecourse Debt after taking into account any changes
thereto during such fiscal year). The determination of which items of income and
gain to be allocated pursuant to the foregoing provisions of this Paragraph of
this Section shall be made in a manner that is consistent with the principles
contained in Section 1.704-1T(b)(4)(iv)(e)(2) of the Regulations.
5. QUALIFIED INCOME OFFSET: In the event any Venturer unexpectedly
receives any adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Regulations (modified, as
appropriate, by Sections 1.704-1T(b)(4)(iv)(e)(3) and (h)(4) of the
Regulations), there shall be specially allocated to such Venturer such items of
Venture income and gain, at such times and in such amounts as will eliminate as
quickly as possible the deficit balance (if any) in its Capital Account (in
excess of the sum of such Venturer's share of Partnership Minimum Gain, such
Venturer's share of Minimum Gain Attributable to Partner Nonrecourse Debt and
the deficit balance that such Venturer is obligated to restore) created by such
adjustments, allocations or distributions.
6. For purposes of this Article the Venture shall take into account (1)
the sum of its share of Nonrecourse Deductions of El Conquistador Partnership
L.P. (which in this paragraph shall include any other partnership in which it
owns an interest) and distributions to
A-8
<PAGE>
<PAGE>
it of the Proceeds of a Nonrecourse Liability that are allocable to an increase
in the Partnership Minimum Gain of El Conquistador Partnership, (2) its share of
any net decrease in the Partnership Minimum Gain of El Conquistador Partnership
L.P., (3) its share of any net decrease in the Partnership Minimum Gain of El
Conquistador Partnership L.P. that is allocable to the disposition of property
of the El Conquistador Partnership subject to one or more Nonrecourse
Liabilities of El Conquistador Partnership L.P., (4) distributions to it by El
Conquistador Partnership L.P. of the proceeds of a Nonrecourse Liability that
are allocable to an increase in the Partnership Minimum Gain of EL Conquistador
Partnership L.P., (5) its share of El Conquistador Partnership L.P. Nonrecourse
Deductions, (6) its share of liabilities of El Conquistador Partnership L.P. all
in accordance with the provisions of Treasury Regulations Section
1.704-IT(b)(4)(iv)(j). This Section is intended to implement the provisions of
Regulations Section 1.704-IT and shall be implemented accordingly.
IV. SPECIAL ALLOCATION RULES AND VENTURE ELECTIONS.
1. Income, gain, loss and deduction with respect to property contributed
to the Venture by a Venturer (and with respect to other circumstances for which
Treas. Reg. 'ss' 1.704-1(b) requires Code Section 704(c) principles to be
applied) shall be allocated among the Venturers for tax purposes so as to take
account of the variation between the basis (within the meaning of Section 704(c)
of the Code) of the property to the Venture and its fair market value at the
time of contribution (or the variation between the basis and value or applicable
Capital Account at the time the principles of Section 704(c) of the Code are to
be applied).
2. In the event a Venturer transfers all or part of its interest in the
Venture, or in the event an interest in the Venture, or in the event an interest
in a Venturer that itself is a
A-9
<PAGE>
<PAGE>
venture is transferred, the Venture shall, upon request of the transferee,
elect, pursuant to Section 754 of the Code, to adjust the basis of the property
owned by the Venture in accordance with Section 743 of the Code.
3. The Venture shall elect the straight line method of depreciation and
the shortest permissible recovery periods (within the meaning of Section 168 of
the Code) with respect to the Resort.
4. Except as otherwise provided in this agreement, all other elections
required or permitted to be made by the Venture under the Code shall be made by
mutual agreement of all the Venturers.
A-10
<PAGE>
<PAGE>
EXHIBIT C
ADDRESSES FOR NOTICES
WMS
WMS EL CON CORP.
c/o WMS Industries Inc.
767 Fifth Avenue - 23rd Floor
New York, New York 10153
Attention: Norman J. Menell, President
Telecopy: (212) 319-9789
with copy to
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telecopy: (212) 351-3131
ITP
International Textile Products
of Puerto Rico, Inc.
c/o Richford American
950 Third Avenue - 19th Floor
New York, New York 10022
Attention: Burton I. Koffman
Telecopy: (212) 888-1155
KMA
KMA Associates of Puerto Rico, Inc.
c/o Richford American
950 Third Avenue - 19th Floor
New York, New York 10022
Attention: Burton I. Koffman
Telecopy: (212) 888-1155
HOSPITALITY
Mr. Hugh A. Andrews
Condado Plaza Hotel & Casino
Suite 501
999 Ashford Avenue
San Juan, Puerto Rico 00906
Telecopy: (809) 791-7955
<PAGE>
<PAGE>
FIRST AMENDMENT TO WKA EL CON
ASSOCIATES JOINT VENTURE AGREEMENT
FIRST AMENDMENT (the "First Amendment") dated as of January 31,
1990 by and among WMS EL CON CORP., a Delaware corporation ("WMS"),
INTERNATIONAL TEXTILE PRODUCTS OF PUERTO RICO, INC., a Puerto Rican corporation
("ITP"), KMA ASSOCIATES OF PUERTO RICO, INC., a Puerto Rican corporation ("KMA")
(ITP and KMA being referred to herein collectively as the "Koffman Venturers")
and HOSPITALITY INVESTOR GROUP, S.E., a Puerto Rico Special Partnership ("HIG")
(WMS, the Koffman Venturers and HIG being hereinafter sometimes referred to
collectively as the "Venturers" and separately as a "Venturer").
W I T N E S S E T H :
` WHEREAS, on January 9, 1990, the Venturers formed WKA El Con
Associates, a joint venture (the "Venture"), under the terms of a joint venture
agreement (the "Joint Venture Agreement"), for the purpose of becoming a general
partner and a limited partner of El Conquistador Partnership L.P., a Delaware
limited partnership; and
WHEREAS, the Venturers desire to amend the Joint Venture
Agreement to adjust their respective "Capital Contributions" and "Percentage
Interests" in the Venture.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined
shall have the same meanings ascribed to such terms in the Joint Venture
Agreement.
<PAGE>
<PAGE>
2. Section 4.1 of the Joint Venture Agreement is hereby amended
by deleting the table and proviso set forth therein and substituting in their
place the following:
<TABLE>
<CAPTION>
Maximum Capital Percentage
Contribution Interest
<S> <C> <C>
WMS $4,188,600.00 46.540%
ITP $1,675,350.00 18.615%
KMA $1,675,350.00 18.615%
HIG $1,460,700.00 16.230%
------------- ---------
$9,000,000.00 100.000%
</TABLE>
3. This First Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of the counterparts shall together constitute one and the same
instrument.
4. The amendment set forth herein is limited precisely as written
and shall not be deemed (a) to be a consent to any modification or waiver of any
other term or condition to the Joint Venture Agreement or any other documents
referred to therein.
5. This First Amendment, including the validity hereof and the
rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their respective duly authorized officers or
representatives as of the date first above written.
WMS EL CON CORP.
By:/s/
--------------------------
Norman J. Menell, President
<PAGE>
<PAGE>
INTERNATIONAL TEXTILE PRODUCTS
OF PUERTO RICO, INC.
By:/s/
---------------------------------
Richard E. Koffman
KMA ASSOCIATES OF PUERTO
RICO, INC.
By:/s/
----------------------------------
Richard E. Koffman
HOSPITALITY INVESTOR GROUP, S.E.
By: HASN, INC., general partner
By:/s/
----------------------------------
Hugh A. Andrews, President
3
<PAGE>
<PAGE>
SECOND AMENDMENT TO WKA EL CON
ASSOCIATES JOINT VENTURE AGREEMENT
SECOND AMENDMENT TO WKA EL CON ASSOCIATES JOINT VENTURE AGREEMENT (the
"Second Amendment") dated January 18, 1991 by and among WMS EL CON CORP., a
Delaware corporation ("WMS"), AMK CONQUISTADOR, S.E., a Puerto Rico special
partnership ("AMK"), and HOSPITALITY INVESTOR GROUP, S.E., a Puerto Rico Special
Partnership ("HIG") (WMS, AMK AND HIG being hereinafter sometimes referred to
collectively as the "Venturers" and separately as a "Venturer").
W I T N E S S E T H
WHEREAS, on January 9, 1990, WMS, HIG, International Textile Products of
Puerto Rico, Inc., a Puerto Rico corporation ("ITP"), and KMA Associates of
Puerto Rico, Inc., a Puerto Rico corporation ("KMS"), formed WKA El Con
Associates, a joint venture (the "Venture"), under the terms of a joint venture
agreement, amended by First Amendment dated as of January 31, 1990 (as amended,
the "Joint Venture Agreement") with the intent that the Venture become a general
partner and a limited partner of El Conquistador Partnership L.P., a Delaware
limited partnership (the "Partnership"); and
WHEREAS, immediately prior to the execution and delivery of this Second
Amendment, ITP and KMA formed AMK under the terms of a Deed of Constitution of a
Civil Partnership under the Provisions of the Special Partnership Act, pursuant
to which they have assigned to AMK their respective Interests in the Venture and
all their rights and obligations under the Joint Venture Agreement and AMK has
agreed to assume their obligations thereunder; and
<PAGE>
<PAGE>
WHEREAS, the Ventures desire to amend the Joint Venture Agreement to
reflect such assignment, the admittance of AMK as a new Venturer in the Venture
and the continuance of the Venture; and
WHEREAS, the Venturers also desire to amend the Joint Venture Agreement
to provide for certain changes in the Capital Contributions to be made by them
to the Venture.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined shall
have the same meanings ascribed to such terms in the Joint Venture Agreement.
2. Each of WMS and HIG hereby consent pursuant to Section 7 of the Joint
Venture Agreement to the assignment by ITP and KMA of their respective Interests
in the Venture to AMK, the withdrawal of ITP and KMA as Venturers, the
admittance of AMK as a new Venturer in the Venture and the assumption by AMK of
the obligations of the Koffman Venturers under the Joint Venture Agreement.
3. All references to "ITP," "KMA," "Koffman Venturer" and "Koffman
Venturers" in the Joint Venture Agreement shall henceforth be deemed to be
references to AMK, and AMK shall be bound by and entitled to the benefits of and
shall perform the obligations of such entities under the Joint Venture Agreement
as if it were an original party thereto:
4. Section 4.1 of the Joint Venture Agreement is hereby amended by
deleting the first two sentences thereof, including the table set forth therein,
and substituting in their place the following:
The Venturers shall contribute up to an aggregate of NINE MILLION
DOLLARS ($9,000,000) plus all WHMC Loan
2
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<PAGE>
Amounts (as hereinafter defined) to the capital of the Venture in
cash, in such amounts and at such time or times as shall be
determined by the Committee (each Venturer's portion of any such
amount being hereinafter referred to as a "Capital
Contribution"). The amount of each Venturer's Capital
Contribution with respect to such $9,000,000 and each Venturer's
percentage interest in the Venture (the "Percentage Interest" )
shall be as follows:
<TABLE>
<CAPTION>
Capital Percentage
Contribution Interest
<S> <C> <C>
WMS $4,188,600.00 46.54%
AMK $3,350,700.00 37.23%
HIG $1,460,700.00 16.23%
------------- ------
$9,000,000.00 100.00%
</TABLE>
The amount of each Venturer's Capital Contribution with respect
to each WHMC Loan Amount shall be determined by multiplying such
WHMC Loan Amount by such Venturer's Percentage Interest. As used
herein, the term "WHMC Loan Amount" means each of the following
amounts payable by the Venturer to Williams Hospitality
Management Corporation ("WHMC") pursuant to the Loan and
Reimbursement Agreement, dated as of June 30, 1990, between WHMC
and the Venture (the "WHMC Loan Agreement"), calculated as of the
date on which such amounts are paid or to be paid to WHMC: (a)
all interest due and payable to WHMC on the Loans (as defined in
the WHMC Loan Agreement), (b) all costs and expenses incurred by
WHMC in obtaining the ScotiaBank Loan (as defined in the WHMC
Loan Agreement), including, without limitation, the $190,000
commitment fee paid by WHMC to ScotiaBank de Puerto Rico in
connection with the ScotiaBank Loan, and (c) all principal due
and payable on the Carrying Cost Loan (as defined in the WHMC
Loan Agreement).
5. Representations and Warranties
AMK represents and warrants to WMS and HIG as follows:
(a) AMK is a special partnership duly organized, validly existing
and in good standing under the laws of the Commonwealth of Puerto Rico.
The sole partners of AMK are ITP and KMA.
3
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<PAGE>
(b) The execution and delivery of this Second Amendment and the
performance by AMK of its obligations under the Joint Venture Agreement,
as amended hereby, have been duly authorized by all necessary
partnership action on the part of AMK, and no further action or approval
is required in order to constitute the Joint Venture Agreement, as
amended hereby, the valid and binding obligation of AMK, enforceable in
accordance with its terms.
(c) Each of this Second Amendment and the Joint Venture
Agreement, as amended hereby, constitutes the legal, valid and binding
obligation of AMK, enforceable against AMK in accordance with its terms.
(d) AMK is acquiring its Interest for its own account and not
with a view to distribution or resale thereof other than in accordance
with the provisions of the Joint Venture Agreement, as amended hereby,
and applicable securities laws.
6. Each of WMS and HIG reconfirms for the benefit of AMK its respective
representations and warranties in Section 8 of the Joint Venture Agreement and
further represents and warrants to the other Venturers that
(a) the execution and delivery of this Second Amendment and the
performance by such Venturer of its obligations under the Joint Venture
Agreement, as amended hereby, have been duly authorized by all necessary
corporate or partnership action on the part of such Venturer, and no
further action or approval is required in order to constitute the Joint
Venture Agreement, as
4
<PAGE>
<PAGE>
amended hereby, the valid and binding obligation of such Venturer in
accordance with its terms.
(b) Each of this Second Amendment and the Joint Venture
Agreement, as amended hereby, constitutes the legal, valid and binding
obligation of such Venturer, enforceable against such Venturer in
accordance with its terms.
7. The Venturers reconfirm the Venture with AMK, WMS and HIG as
general partners of the Venture and agree that the Venture shall continue its
existence in accordance with the Joint Venture Agreement, as amended hereby.
8. This Second Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of the counterparts shall together constitute one and the same
instrument.
9. The amendment set forth herein is limited precisely as written and
shall not be deemed to be a consent to any modification or waiver of any other
term or condition of the Joint Venture Agreement or any other documents referred
to therein.
10. This Second Amendment, including the validity hereof and the rights
and obligations of the parties hereunder, shall be construed in accordance with
and governed by the law of the State of New York, without giving effect to the
choice of law provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be executed by their respective duly authorized officers or representatives
on the date first above written.
5
<PAGE>
<PAGE>
WMS EL CON CORP.
By /s/
----------------------------------
Name: Norman J. Menell
Title: President
AMK CONQUISTADOR, S.E.
By INTERNATIONAL TEXTILE
PRODUCTS OF PUERTO RICO, INC.,
Managing Partner
By /s/
----------------------------------
Name: Richard E. Koffman
Title: Authorized Representative
HOSPITALITY INVESTOR GROUP, S.E.
By HASN, INC., Managing Partner
By /s/
----------------------------------
Name: Hugh A. Andrews
Title: President
6
<PAGE>
<PAGE>
THIRD AMENDMENT TO WKA EL CON
ASSOCIATES JOINT VENTURE AGREEMENT
THIRD AMENDMENT TO WKA EL CON ASSOCIATES JOINT VENTURE AGREEMENT (the
"Third Amendment") dated as of April 20, 1992, by and among WMS EL CON CORP., a
Delaware corporation ("WMS"), AMK CONQUISTADOR, S.E., a Puerto Rico special
partnership ("AMK"), and HOSPITALITY INVESTMENT GROUP, S.E., a Puerto Rico
special partnership ("HIG") (WMS, AMK and HIG being hereinafter sometimes
referred to collectively as the "Venturers" and separately as a "Venturer").
W I T N E S S E T H
WHEREAS, on January 9, 1990, WMS, HIG, International Textile
Products of Puerto Rico, Inc., a Puerto Rico corporation, and KMA Associates of
Puerto Rico, Inc., a Puerto Rico corporation, formed WKA El Con Associates, a
joint venture (the "Venture"), under the terms of a joint venture agreement,
amended by First Amendment dated as of January 31, 1990 and amended by Second
Amendment dated as of January 18, 1991 (as amended, the "Joint Venture
Agreement") with the intent that the Venture become a general partner and a
limited partner of El Conquistador Partnership L.P., a Delaware limited
partnership (the "Partnership"); and
WHEREAS, the Venturers have heretofore paid $1,555,700.00 towards
their original Capital Contribution obligations of which $750,000.00 was
credited towards the original Capital Contribution to the Venture of $9,000,000
and $805,700.00 was credited towards WHMC Loan Amounts; and
WHEREAS, the Venturers desire to amend the Joint Venture
Agreement to provide for $8,000,000 of additional capital contributions by the
Venturers.
<PAGE>
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined shall
have the same meanings ascribed to such terms in the Joint Venture Agreement.
2. Section 4.1 of the Joint Venture Agreement is hereby further amended
by deleting the change made to such Section 4 by Section 4 of the Second
Amendment to the Joint Venture Agreement and substituting in its place the
following:
"4.1(a) The Venturers shall contribute up to an aggregate of SEVENTEEN
MILLION DOLLARS ($17,000,000) plus all WHMC Loan Amounts (as hereinafter
defined) to the capital of the Venture in cash, in such amounts and at
such time or times as shall be determined by the Committee or as set
forth below (each Venturer's portion of any such amount being
hereinafter referred to as a "Capital Contribution"). The amount of each
Venturer's Capital Contribution with respect to such $17,000,000 and
each Venturer's percentage interest in the Venture (the "Percentage
Interest") shall be as follows:
<TABLE>
<CAPTION>
Capital Percentage
Contribution Interest
<S> <C> <C>
WMS $ 7,911,800.00 46.54%
AMK $ 6,329,100.00 37.23%
HIG $ 2,759,100.00 16.23%
-------------- ------
$17,000,000.00 100.00%
</TABLE>
The amount of each Venturer's Capital Contribution with respect to each
WHMC Loan Amount shall be determined by multiplying such WHMC Loan
Amount by such Venturer's Percentage Interest. As used herein, the term
"WHMC Loan Amount" means each of the following amounts payable by the
Venturer to Williams Hospitality Management Corporation ("WHMC")
pursuant to the Loan and Reimbursement Agreement, dated as of June 30,
1990, between WHMC and the Venture (the "WHMC Loan Agreement"),
calculated as of the date on which such amounts are paid or to be paid
to WHMC: (a) all interest due and payable to WHMC on the Loans (as
defined in the WHMC Loan Agreement), (b) all costs and expenses incurred
by WHMC in obtaining the ScotiaBank Loan (as defined in the WHMC Loan
Agreement), including, without limitation, the $190,000 commitment fee
paid by WHMC to ScotiaBank de Puerto Rico in
2
<PAGE>
<PAGE>
connection with the ScotiaBank Loan, and (c) all principal due and
payable on the Carrying Cost Loan (as defined in the WHMC Loan Agreement)."
3. The Joint Venture Agreement is hereby further amended by adding a
new Section 4.1(b) to read as follows:
"4.1(b) Concurrently herewith the Venturers are paying an aggregate of
EIGHT MILLION DOLLARS ($8,000,000) of the Capital Contribution to the
capital of the Venture in cash in the same proportion as such Venturer's
Percentage Interest as follows:
<TABLE>
<S> <C> <C>
WMS $3,723,200 46.54%
AMK $2,978,400 37.23%
HIG $1,298,400 16.23%
---------- ------
$8,000,000 100.00%
</TABLE>
The Capital Contribution of $8 million paid to the capital of the
Venture pursuant to this Section 4.1(b) shall be credited towards the
total Capital Contribution of $17,000,000 described in Section 4.1(a)
above. It is intended that this $8,000,000 of the Capital Contribution
shall be used to satisfy the Venture's proportionate share of additional
Capital Contributions to be made to the Partnership or to otherwise
satisfy the loan balancing provisions of Section 9(k) of the Letter of
Credit and Reimbursement Agreement dated February 7, 1991 (the
"Reimbursement Agreement") between the Partnership and The Mitsubishi
Bank, Limited (the "Bank").
4. The Venturers reconfirm the Venture with WMS, AMK and HIG as general
partners of the Venture and agree that the Venture shall continue its existence
in accordance with the Joint Venture Agreement, as amended hereby.
5. The correct name of HIG is "Hospitality Investment Group, S.E." and
HIG confirms that any and all actions taken by HIG in the name "Hospitality
Investor Group, S.E." are the valid, legal and binding obligations of HIG.
6. This Third Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of the counterparts shall together constitute one and the same
instrument.
3
<PAGE>
<PAGE>
7. The amendments set forth herein are limited precisely as written and
shall not be deemed to be a consent to any modification or waiver of any other
term or condition of the Joint Venture Agreement or any other documents referred
to therein.
8. This Third Amendment, including the validity hereof and the rights
and obligations of the parties hereunder, shall be construed in accordance with
and governed by the law of the State of New York, without giving effect to the
choice of law provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Third Amendment
to be executed by their respective duly authorized officers or representatives
on the date first above written.
WMS EL CON CORP.
By
---------------------------------------
Name: Louis J. Nicastro
Title: Chairman
AMK CONQUISTADOR, S.E.
By /s/
---------------------------------------
Name: Sara Koffman
and
By /s/
-------------------------------------
Name: Ruthanne Koffman
HOSPITALITY INVESTMENT GROUP, S.E.
By HASN, INC., managing partner
By /s/
-------------------------------------
Name: Hugh A. Andrews
Title: President
4
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT
Dated January 12, 1990
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT
Table of Contents
ARTICLE PAGE
- ------- ----
1. DEFINED TERMS.......................................................... 1
1.01. Act........................................................... 2
1.02. Additional Loans.............................................. 2
1.03. Additional Projects........................................... 2
1.04. Adjusted Capital Account...................................... 2
1.05. Annual Budgets................................................ 2
1.06. Appendix...................................................... 2
1.07. Approved Budgets.............................................. 2
1.08. Bankruptcy.................................................... 2
1.09. Basic Management Fee.......................................... 3
1.10. Call Notice................................................... 3
1.11. Capital Accounts.............................................. 3
1.12. Capital Contribution.......................................... 3
1.13. Capital Transaction........................................... 3
1.14. Class A Limited Partner....................................... 3
1.15. Class B Limited Partner....................................... 3
1.16. Code.......................................................... 3
1.17. Commencement Date............................................. 4
1.18. Construction Management Agreement............................. 4
1.19. Construction Manager.......................................... 4
1.20. Construction Phase............................................ 4
1.21. Contribution Ratio............................................ 4
1.22. Deferred Preferred Return..................................... 4
1.23. Deficiency.................................................... 4
1.24. Deficiency Loan............................................... 4
1.25. Depreciation.................................................. 4
1.26. Development Budget............................................ 5
1.27. Development Committee......................................... 5
1.28. Distributable Cash............................................ 5
1.29. Distributable Cash from a Capital Transaction................. 5
1.30. Economic Risk of Loss......................................... 5
1.31. Extraordinary Cashflow........................................ 5
1.32. Final Completion Date......................................... 6
1.33. First Mortgage Loans.......................................... 6
1.34. First Mortgage Loan Documents................................. 6
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT
Table of Contents (Continued)
ARTICLE PAGE
- ------- ----
1.35. Fiscal Year.................................................... 6
1.36. Gain from a Capital Transaction................................ 6
1.37. General Partners............................................... 6
1.38. Hard Costs..................................................... 7
1.39. Incentive Management Fee....................................... 7
1.40. Interest ...................................................... 7
1.41. KG Loan........................................................ 7
1.42. KG General Partner............................................. 7
1.43. Limited Partner................................................ 7
1.44. Major Decision................................................. 7
1.45. Management Agreement........................................... 7
1.46. Minimum Gain Attributable to Partner Nonrecourse Debt.......... 7
1.47. Mitsubishi Credit Facility..................................... 8
1.48. Net Income..................................................... 8
1.49. Net Loss....................................................... 8
1.50. Net Loss from a Capital Transaction............................ 8
1.51. Nonrecourse Deductions......................................... 8
1.52. Nonrecourse Liability.......................................... 8
1.53. Offer.......................................................... 8
1.54. Offering Price................................................. 8
1.55. Operating Cashflow............................................. 8
1.56. Partner........................................................ 9
1.57. Partner Nonrecourse Debt....................................... 9
1.58. Partner Nonrecourse Deductions................................. 9
1.59. Partnership.................................................... 9
1.60. Partnership Minimum Gain....................................... 9
1.61. Partner's Share of Partnership Minimum Gain.................... 9
1.62. Partner's Share of Minimum Gain Attributable to Partner
Nonrecourse Debt............................................... 9
1.63. Plans and Specifications....................................... 9
1.64. Preferred Return............................................... 9
1.65. Pre-Opening Budgets............................................ 10
1.66. Pre-Opening Period............................................. 10
1.67. Project........................................................ 10
1.68. Recapture...................................................... 10
ii
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<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT
Table of Contents (Continued)
ARTICLE PAGE
- ------- ----
1.69. Regulations.................................................... 10
1.70. Residual Partnership Interest.................................. 10
1.71. Resort......................................................... 10
1.72. Resort Gross Revenues.......................................... 10
1.73. Resort Manager................................................. 11
1.74. Resort Operating Profits....................................... 11
1.75. Security Agreement............................................. 12
1.76. Selling Partner................................................ 12
1.77. Soft Costs..................................................... 12
1.78. Subordinated Mortgage Loan..................................... 12
1.79. Subordinated Mortgage Loan Documents........................... 12
1.80. Target Capital Account......................................... 12
1.81. Tax Matters Partner............................................ 12
1.82. Total Project Costs............................................ 13
1.83. Treas. Reg.'SS'................................................ 13
1.84. Unrecovered Capital............................................ 13
1.85. Venture Agreement.............................................. 13
1.86. WKA............................................................ 13
1.87. WKA General Partner............................................ 13
2. FORMATION AND ORGANIZATION.............................................. 13
2.01. Formation...................................................... 13
2.02. Name, Place of Business and Office............................. 13
2.03. Purpose........................................................ 14
2.04. Term........................................................... 15
3. PARTNERS AND CAPITAL.................................................... 15
3.01. General Partners............................................... 15
3.02. Limited Partners............................................... 16
3.03. Capital Contributions of the Partners.......................... 17
3.04. Contributions of Right to Acquire El Conquistador Land and
Buildings...................................................... 18
3.05. No Right to Return of Capital.................................. 18
3.06. No Obligation to Restore Deficits.............................. 18
iii
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT
Table of Contents (Continued)
ARTICLE PAGE
- ------- ----
4. MANAGEMENT OF THE PARTNERSHIP........................................... 19
4.01. Authority of General Partners.................................. 19
4.02. Operation of the Partnership................................... 22
4.03. Liability of Partners.......................................... 22
4.04. Major Decisions Requiring Consent.............................. 22
4.05. Consent of General Partners.................................... 25
4.06. Financial Information.......................................... 26
4.07. Accountants.................................................... 27
4.08. Tax Returns.................................................... 27
4.09. Fiscal Year.................................................... 27
4.10. Tax Matters Partner............................................ 27
4.11. Delegation of Authority........................................ 29
4.12. General Partners or Affiliates Dealing with the Partnership.... 29
4.13. Other Business Activities...................................... 30
4.14. Additional Projects............................................ 31
4.15. Initial Condominium Units...................................... 32
4.16. Additional Financial Information............................... 36
5. THE PRE-OPENING PERIOD.................................................. 37
5.01. The Development Committee...................................... 37
5.02. Reimbursement of Expenses...................................... 38
5.03. Conduct of Negotiations........................................ 38
5.04. Conditions to Acquiring the Project............................ 39
5.05. Contractors.................................................... 41
5.06. Cooperation.................................................... 41
6. LOANS TO THE PARTNERSHIP................................................ 42
6.01. Deficiency Loans............................................... 42
6.02. Additional Loans............................................... 43
6.03. KG Loans....................................................... 44
6.04. Repayment of Loans............................................. 46
6.05. Assumption of Letter of Credit Obligations..................... 47
7. CAPITAL ACCOUNTS; ALLOCATION OF PROFITS AND LOSSES...................... 47
7.01. Definitions.................................................... 47
iv
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT
Table of Contents (Continued)
ARTICLE PAGE
- ------- ----
7.02. Definition of Capital Accounts................................. 48
7.03. Allocations of Income and Loss................................. 49
7.04. Special Partnership Election................................... 50
8. PARTNERSHIP DISTRIBUTION................................................ 51
8.01. Distributable Cash from Operations............................. 51
8.02. Distributable Cash from a Capital Transaction.................. 52
9. TRANSFERABILITY OF PARTNERS' INTERESTS.................................. 54
9.01 No Transfer.................................................... 54
9.02. No Withdrawal.................................................. 56
9.03. Permitted Sales of Limited Partners' Interests................. 56
9.04. Permitted Security Interest.................................... 58
9.05. Withdrawal or Transfer by General Partner...................... 58
9.06. Effect of Bankruptcy, Death or Incompetence of a Limited
Partner........................................................ 60
9.07. Bankruptcy of a General Partner................................ 60
9.08. Effect of Transfer............................................. 61
10. RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS.............................. 62
10.01. Management of the Partnership.................................. 62
10.02. Limitation on Liability of Limited Partners.................... 62
10.04. Power of Attorney.............................................. 63
11. APPROVALS............................................................... 64
11.01. Puerto Rico Gaming Authority Approval.......................... 64
11.02. Approval of Japanese Ministry of Finance....................... 64
12. PARTNERSHIP OBLIGATIONS................................................. 65
12.01. Nature of Obligations.......................................... 65
12.02. Indemnities.................................................... 66
13. TERMINATION AND LIQUIDATION............................................. 68
13.01. Termination.................................................... 68
13.02. Winding Up..................................................... 68
v
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT
Table of Contents (Continued)
ARTICLE PAGE
- ------- ----
14. REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS.................... 70
14.01. Due Organization............................................... 70
14.02. Due Execution and Delivery..................................... 70
14.03. Binding Obligations............................................ 70
14.04. Investment..................................................... 70
14.05. Ownership of KG General Partner................................ 71
14.06. Ownership of WKA General Partner............................... 71
15. MISCELLANEOUS........................................................... 71
15.01. Further Assurances............................................. 71
15.02. Expenses....................................................... 71
15.03. Notices........................................................ 72
15.04. Equitable Remedies............................................. 72
15.05. Remedies Cumulative............................................ 72
15.06. Captions; Partial Invalidity................................... 73
15.07. Entire Agreement............................................... 73
15.08. Applicable Law................................................. 73
15.09. Counterparts................................................... 74
15.10. Successors..................................................... 74
15.11. Confidentiality................................................ 74
APPENDIX................................................................... A-1
I. Allocations of Net Income, Net Loss, Gain or Net Loss from a
Capital Transaction and Depreciation.......................... A-2
1. Net Income............................................... A-2
2. Net Loss................................................. A-2
3. Gain from a Capital Transaction.......................... A-4
4. Net Loss from a Capital Transaction...................... A-5
5. Allocation of Depreciation............................... A-6
II. Allocations to Conform to Target Capital Accounts............. A-8
III. Exceptions.................................................... A-8
1. General Limitation....................................... A-8
2. Partner Nonrecourse Deductions........................... A-9
3. Partnership Minimum Gain................................. A-9
4. Minimum Gain Attributable to Partner Nonrecourse Debt... A-10
5. Qualified Income Offset................................. A-11
IV. Special Allocation Rules and Partnership Elections:.......... A-12
vi
<PAGE>
<PAGE>
EXHIBITS
--------
Exhibit A Hard Costs
Exhibit B Project Description
Exhibit C Soft Costs
Exhibit D Signatures for Major Decisions
Exhibit E Costs Incurred and Commitments Made
Exhibit F Security Agreement
Exhibit G Assumption of Letter of Credit by Kumagai
Exhibit H Addresses for Notices
Exhibit I Kumagai Guaranty (Re: Capital Contributions and Deficiency Loans)
Exhibit J Kumagai Guaranty (Re: Letter of Credit)
Exhibit K Assumption of Letter of Credit by WKA
<PAGE>
<PAGE>
VENTURE AGREEMENT
OF
EL CONQUISTADOR PARTNERSHIP L.P.
THIS LIMITED PARTNERSHIP AGREEMENT (the "Venture Agreement") is made
the 12th day of January 1990, between KUMAGAI CARIBBEAN, INC., a Texas
corporation, having an office at 1585 Kapiolani Boulevard, Suite 1404, Honolulu,
Hawaii 96814 and WKA EL CON ASSOCIATES, a New York general partnership, having
an office at 767 Fifth Avenue, 23rd Floor, New York, New York 10153.
W I T N E S S E T H:
WHEREAS, the parties hereto desire to form a limited partnership for
the purpose of acquiring certain real property and improvements thereon located
in Fajardo, Puerto Rico, formerly known as "El Conquistador Hotel," (sometimes
referred to herein as the El Conquistador land and buildings) and to undertake
the renovation, improvement, construction and development thereof and to operate
the same as a first class, luxury destination mega-resort; and
WHEREAS, the parties desire to set forth the terms and understandings
of their association and their rights and obligations with respect to the
Partnership.
NOW THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants and conditions contained herein, the
parties hereto agree as follows:
ARTICLE ONE
DEFINED TERMS
The capitalized terms used in this Venture Agreement and the Appendix
shall,
<PAGE>
<PAGE>
unless the context otherwise requires, have the meanings specified in this
Article One. The singular shall include the plural and the masculine gender
shall include the feminine, the neuter and vice versa, as the context requires.
SECTION 1.01. "ACT" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. C, Section 17-101 et seq., as amended from time to time.
SECTION 1.02. "ADDITIONAL LOANS" means a loan or loans made to the
Partnership pursuant to Section 6.02 hereof.
SECTION 1.03. "ADDITIONAL PROJECTS" is defined in Section hereof.
SECTION 1.04. "ADJUSTED CAPITAL ACCOUNT" means the Capital Account of
a Partner reduced by any adjustments, allocations or distributions described in
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) of the Regulations.
SECTION 1.05. "ANNUAL BUDGETS" means the proposed operating and
capital budgets of the Resort which shall have been prepared and submitted by
the Resort Manager to the Partnership for its approval in respect of each fiscal
year of the Partnership pursuant to the terms of the Management Agreement.
SECTION 1.06. "APPENDIX" means the Appendix attached to this Venture
Agreement.
SECTION 1.07. "APPROVED BUDGETS" means the Annual Budgets as the same
shall have been approved by the Partnership as provided in the Management
Agreement.
SECTION 1.08. "BANKRUPTCY" means the initiation of any proceeding,
whether voluntary or involuntary, under the federal bankruptcy laws or any
state, local or foreign bankruptcy act, including without limitation, an
assignment for the benefit of creditors, if not
2
<PAGE>
<PAGE>
discharged, in the case of any involuntary proceeding, within sixty (60) days.
SECTION 1.09. "BASIC MANAGEMENT FEE" means the 3.5% of Resort Gross
Revenues payable to the Resort Manager as its basic compensation for management
services under the Management Agreement.
SECTION 1.10. "CALL NOTICE" is defined in Section 6.01 hereof.
SECTION 1.11. "CAPITAL ACCOUNTS" is defined in Section 7.02 hereof.
SECTION 1.12. "CAPITAL CONTRIBUTION" means the amount to be
contributed to the Partnership by any Partner pursuant to Article Three hereof.
SECTION 1.13. "CAPITAL TRANSACTION" means any sale, condemnation or
insured casualty loss of all or any substantial part of the Resort and, after
the Final Completion Date, refinancings of the Resort. Loans to be made by any
Partner under the terms hereof and the initial permanent financing arrangements
under the Mitsubishi Credit Facility to replace the construction financing under
such facility shall not be deemed a refinancing of the Resort.
SECTION 1.14. "CLASS A LIMITED PARTNER" means initially Kumagai
Caribbean, Inc. in its capacity as a limited partner of the Partnership and any
transferee of all or any portion of such limited partnership Interest who is
admitted to the Partnership as a Class A Limited Partner pursuant to the terms
of this Venture Agreement.
SECTION 1.15. "CLASS B LIMITED PARTNER" means initially WKA in its
capacity as a limited partner of the Partnership and any transferee of all or
any portion of such limited partnership Interest who is admitted to the
Partnership as a Class B Limited Partner pursuant to the terms of this Venture
Agreement.
SECTION 1.16. "CODE" means the Internal Revenue Code of 1986, as
amended.
3
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<PAGE>
SECTION 1.17. "COMMENCEMENT DATE" means the first day the Resort opens
to the general public and commences business.
SECTION 1.18. "CONSTRUCTION MANAGEMENT AGREEMENT" means the
construction management agreement of even date herewith entered into between the
Construction Manager and the Partnership pursuant to which the Construction
Manager will render services to the Partnership during the Construction Phase in
connection with the Project.
SECTION 1.19. "CONSTRUCTION MANAGER" means KG (Caribbean) Corporation,
a Texas corporation.
SECTION 1.20. "CONSTRUCTION PHASE" means the period from the date
hereof through the Final Completion Date.
SECTION 1.21. "CONTRIBUTION RATIO" means with respect to each Partner,
the ratio that such Partner's Capital Contribution as set forth in Sections 3.01
and 3.02 hereof bears to the Capital Contributions of a specified group of
Partners.
SECTION 1.22. "DEFERRED PREFERRED RETURN" means the amount of any
Preferred Return unpaid from all prior fiscal year(s) of the Partnership,
together with interest thereon at the rate of 10% per annum from the end of the
Fiscal Year to which such Preferred Return relates to the date of payment.
SECTION 1.23. "DEFICIENCY" is defined in Section 6.01 hereof.
SECTION 1.24. "DEFICIENCY LOAN" means a loan or loans made to the
Partnership pursuant to Section 6.01 hereof.
SECTION 1.25. "DEPRECIATION" means, for each fiscal year of the
Partnership, the deductions for depreciation under Sections 167 and 168 of the
Code (or any similar provision
4
<PAGE>
<PAGE>
hereafter enacted), with respect to the Project and amortization deductions
under Sections 195 and 709(b) of the Code.
SECTION 1.26. "DEVELOPMENT BUDGET" means the budgets for all phases of
the Project as the same shall be approved by the Partnership from time to time.
Initially the Development Budget consists of the Hard Costs and Soft Costs set
forth in Exhibits A and C annexed hereto, and shall hereafter mean such
Development Budget as the same shall be amended, changed, modified and refined
from time to time by the mutual agreement of the General Partners as provided in
Section 4.04 hereof.
SECTION 1.27. "DEVELOPMENT COMMITTEE" means the committee established
pursuant to Section 5.01 hereof to administer the Partnership from the date
hereof through the Final Completion Date in connection with the development of
the Project.
SECTION 1.28. "DISTRIBUTABLE CASH" means Operating Cashflow less all
payments made in respect of Deficiency Loans and Additional Loans.
SECTION 1.29. "DISTRIBUTABLE CASH FROM A CAPITAL TRANSACTION" means
Extraordinary Cashflow less all payments made in respect of Deficiency Loans and
Additional Loans.
SECTION 1.30. "ECONOMIC RISK OF LOSS" shall have the meaning set forth
in Section 1.704-1T(b)((4)(iv)(k)(1) of the Regulations.
SECTION 1.31. "EXTRAORDINARY CASHFLOW" means the gross cash proceeds
received by the Partnership resulting from a Capital Transaction, reduced by all
costs, expenditures, fees, amounts needed for any required debt repayments,
funds reserved for repair, replacement or reconstruction of the Project and any
other reserves established by mutual agreement of the
5
<PAGE>
<PAGE>
General Partners to meet obligations of the Partnership, but before providing
for the payment of (i) the Preferred Return and Deferred Preferred Return, (ii)
the Incentive Management Fee, and (iii) the Deficiency Loans and Additional
Loans.
SECTION 1.32. "FINAL COMPLETION DATE" means the date of final
completion of the last portion of the physical construction and renovation
aspects of the Project.
SECTION 1.33. "FIRST MORTGAGE LOANS" means the construction and
initial permanent loan for the Project, obtained by the Partnership with the
consent of both General Partners as provided in Section 4.04 hereof, repayment
of which is secured by a first mortgage lien on the Project, and any
refinancings or replacements thereof. It is contemplated that the First Mortgage
Loan shall initially be the Mitsubishi Credit Facility.
SECTION 1.34. "FIRST MORTGAGE LOAN DOCUMENTS" means all documents and
all instruments evidencing the Partnership's obligations under the First
Mortgage Loan including the notes, loan agreements, mortgages, and deeds of
trust relating to the construction or permanent financing thereof and all other
documents and instruments executed and delivered in connection therewith.
SECTION 1.35. "FISCAL YEAR" is defined in Section 4.09 hereof.
SECTION 1.36. "GAIN FROM A CAPITAL TRANSACTION" is defined in
paragraph (B) of Section 7.01 hereof.
SECTION 1.37. "GENERAL PARTNERS" means initially the KG General
Partner and the WKA General Partner in their capacities as general partners of
the Partnership, and their successors or transferees who are admitted as general
partners of the Partnership under the terms of this Venture Agreement.
6
<PAGE>
<PAGE>
SECTION 1.38. "HARD COSTS" means the cost for the items listed on
Exhibit A annexed hereto and such other items as may hereafter be included as
Hard Costs with the consent of both General Partners as provided in Section 4.09
hereof.
SECTION 1.39. "INCENTIVE MANAGEMENT FEE" means the 10% of Resort
Operating Profits payable to the Resort Manager under the Management Agreement.
SECTION 1.40. "INTEREST" means the entire ownership interest of a
Limited Partner or General Partner of the Partnership at any particular time,
including the right of any such Partner to any and all benefits to which such
Partner may be entitled under this Venture Agreement, together with the
obligations of such Partner to comply with all the terms and provisions of this
Venture Agreement and the Act.
SECTION 1.41. "KG LOAN" means a loan made by the KG General Partner to
the WKA General Partner pursuant to Section .
SECTION 1.42. "KG GENERAL PARTNER" means Kumagai Caribbean, Inc.
SECTION 1.43. "LIMITED PARTNER" means any Class A Limited Partner and
any Class B Limited Partner.
SECTION 1.44. "MAJOR DECISION" is defined in Section 4.04 hereof.
SECTION 1.45. "MANAGEMENT AGREEMENT" means the development services
and management agreement of even date herewith entered into between the
Partnership and the Resort Manager pursuant to which the Resort Manager will
render services to the Partnership during the Construction Phase and become
manager of the Resort on the Commencement Date.
SECTION 1.46. "MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT"
shall have the meaning set forth in Section 1.704-1T(b)(4)(iv)(h) of the
Regulations.
7
<PAGE>
<PAGE>
SECTION 1.47. "MITSUBISHI CREDIT FACILITY" means the credit facility
to be provided by Mitsubishi Bank, Ltd. in the principal amount of not less than
$113,400,000 to be available as construction financing and thereafter
"permanent" financing for the Project, the proceeds of which will constitute the
First Mortgage Loan.
SECTION 1.48. "NET INCOME" is defined in paragraph (A) of Section 7.01
hereof.
SECTION 1.49. "NET LOSS" is defined in paragraph (A) of Section 7.01
hereof.
SECTION 1.50. "NET LOSS FROM A CAPITAL TRANSACTION" is defined in
paragraph (B) of Section 7.01 hereof.
SECTION 1.51. "NONRECOURSE DEDUCTIONS" shall have the meaning set
forth in Section 1.704-1T-(b)(4)(iv)(b) of the Regulations.
SECTION 1.52. "NONRECOURSE LIABILITY" shall have the meaning set forth
in Section 1.704-1T-(b)(4)(iv)(k)(3) of the Regulations.
SECTION 1.53. "OFFER" is defined in paragraph (B) of Section 9.03
hereof.
SECTION 1.54. "OFFERING PRICE" is defined in paragraph (B) of Section
9.03 hereof.
SECTION 1.55. "OPERATING CASHFLOW" means all cash received by the
Partnership from all sources (including investment income from all reserves and
other liquid investments of the Partnership but excluding proceeds from a
Capital Transaction) less all cash expended or reserved for all due and maturing
liabilities, including debt service (principal and interest) on the First
Mortgage Loan and the Subordinated Mortgage Loan, capital and operating
expenditures, and other obligations of the Partnership whether or not secured by
the assets of the Partnership but no deductions shall be made for (i)
expenditures and reserves actually
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deducted in determining Extraordinary Cashflow, (ii) the Preferred Return and
Deferred Preferred Return, (iii) the Incentive Management Fee and (iv) the
Deficiency Loans and Additional Loans.
SECTION 1.56. "PARTNER" shall mean a General Partner, a Limited
Partner or both as the context shall refer.
SECTION 1.57. "PARTNER NONRECOURSE DEBT" shall have the meaning set
forth in Section 1.704-1T(b)(4)(iv)(k)(4) of the Regulations.
SECTION 1.58. "PARTNER NONRECOURSE DEDUCTIONS" is defined in paragraph
III 2. of the Appendix.
SECTION 1.59. "PARTNERSHIP" means the limited partnership formed by
this Venture Agreement.
SECTION 1.60. "PARTNERSHIP MINIMUM GAIN" shall have the meaning set
forth in Section 1.704-1T(b)(4)(iv)(c) of the Regulations.
SECTION 1.61. "PARTNER'S SHARE OF PARTNERSHIP MINIMUM GAIN" shall be
calculated as set forth in Section 1.704-1T(b)(4)(iv)(f) of the Regulations.
SECTION 1.62. "PARTNER'S SHARE OF MINIMUM GAIN ATTRIBUTABLE TO PARTNER
NONRECOURSE DEBT" shall be calculated as set forth in Section
1.704-1T(b)(4)(h)(5) of the Regulations.
SECTION 1.63. "PLANS AND SPECIFICATIONS" means the plans and
specifications relating to the renovation and construction of the Project as the
same shall be initially approved by both General Partners and thereafter
changed, amended, modified or refined from time to time as provided in Section
4.04 hereof.
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SECTION 1.64. "PREFERRED RETURN" means for any Fiscal Year or part
thereof an 8.5% annual rate of return on the amount of each Partner's
Unrecovered Capital calculated based upon the amount of each Partner's
Unrecovered Capital from day to day.
SECTION 1.65. "PRE-OPENING BUDGETS" means budgets and requests for
payment approvals submitted by the Resort Manager in connection with the
development of the Project and as provided in the Management Agreement. Once
approved by the Partnership, Pre-Opening Budgets shall be included within the
term Approved Budgets.
SECTION 1.66. "PRE-OPENING PERIOD" means from the date hereof through
and including the Commencement Date.
SECTION 1.67. "PROJECT" means all matters relating to the acquisition
of the El Conquistador land and buildings, all things associated with the
construction, renovation and completion of the Resort including equipping the
Resort and making it operational as a first class, luxury destination
mega-resort.
SECTION 1.68. "RECAPTURE" means that portion of the gain on any sale,
exchange or other disposition of Partnership property which is characterized as
ordinary income by virtue of the recapture rules of Section 1250 or Section 1245
of the Code.
SECTION 1.69. "REGULATIONS" means United States Treasury Regulations.
SECTION 1.70. "RESIDUAL PARTNERSHIP INTEREST" means for each Partner
the percentage set forth as such in Sections 3.01 and 3.02 hereof, as the same
may be amended from time to time.
SECTION 1.71. "RESORT" means the land and all buildings, property and
facilities resulting from completion of the Project as the same may exist from
time to time.
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SECTION 1.72. "RESORT GROSS REVENUES" shall mean all gross revenues
from all operations of the Resort, including, without limitation, all revenues
from rooms, golf course (including dues and the first $5,000 of each initiation
or membership fee but not amounts in excess thereof), marina, food and beverage,
telephone, telex, interest, casino net wins, condominium net rentals, rentals or
other payments from lessees, licensees, or concessionaires (but not including
the licensees' or concessionaires' receipts), proceeds of business interruption
insurance, and all other receipts (exclusive of tips, service charges added to a
customer's bill or statement in lieu of gratuities, which are payable to Resort
employees, taxes collected and remitted to others, and the value of
complimentary rooms, food and beverages, except those purchased by the casino),
minus actual credits and refunds made to customers, guests or patrons.
SECTION 1.73. "RESORT MANAGER" means Williams Hospitality Management
Corporation as the manager of the Resort including the hotel, casino, golf
course, marina, condominiums and related operations constituting the Resort
pursuant to the Management Agreement, and any permitted assignee thereof.
SECTION 1.74. "RESORT OPERATING PROFITS" shall mean Resort Gross
Revenues less all operating expenses of the Resort whether designated herein as
an obligation of Manager, the Partnership or the Resort, including, without
limitation, (a) the Basic Management Fee; (b) marketing expenses; (c) repair and
maintenance; (d) utility charges; (e) reserve for replacement of furniture,
fixtures and equipment; (f) administrative and general expenses (including bad
debt reserve); and (g) premiums for life, accident, workers compensation, health
and other insurance furnished to or for the benefit of employees of the Resort
and premiums for other insurance of a similar nature; but prior to deducting (i)
premiums for liability, property and casualty
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insurance; (ii) depreciation of building, plant, furniture, fixtures and
equipment; (iii) amortization of pre-opening expenses; (iv) financing costs
including interest charges, principal payment and debt service; (v) capital
expenditures and payments on leases other than amounts included in the reserve
for replacement of furniture, fixtures and equipment; (vi) property taxes and
taxes on income; (vii) the Incentive Management Fee; (viii) real property
rentals.
SECTION 1.75. "SECURITY AGREEMENT" is defined in Section 6.03(C).
SECTION 1.76. "SELLING PARTNER" is defined in Section 9.03 hereof.
SECTION 1.77. "SOFT COSTS" means the cost for the items listed on
Exhibit C annexed hereto and such other items as may hereafter be included as
Soft Costs by the consent of both General Partners as provided in Section 4.04
hereof.
SECTION 1.78. "SUBORDINATED MORTGAGE LOAN" means the construction and
permanent loan in an amount not less than $21,000,000 or such other amount as
the General Partners shall approval as provided in Section 4.04 hereof, made by
the Government Development Bank of Puerto Rico, secured by a second mortgage
lien on the Project and any refinancings or replacements thereof.
SECTION 1.79. "SUBORDINATED MORTGAGE LOAN DOCUMENTS" means all
documents and instruments evidencing the Partnership's obligations under the
Subordinated Mortgage Loan including the notes, loan agreements, mortgages, and
deeds of trust relating to the construction and permanent financing thereof and
all other documents and instruments executed and delivered in connection
therewith.
SECTION 1.80. "TARGET CAPITAL ACCOUNT" is defined in paragraph (B) of
Section 7.02 hereof.
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SECTION 1.81. "TAX MATTERS PARTNER" is defined in paragraph (A) of
Section 4.10 hereof.
SECTION 1.82. "TOTAL PROJECT COSTS" means the sum of the Hard Costs
and Soft Costs as the same are approved by both General Partners from time to
time as provided in Section 4.04 hereof.
SECTION 1.83. "TREAS. REG. 'SS' means Regulation Section.
SECTION 1.84. "UNRECOVERED CAPITAL" means with respect to each Partner
the amount at any time of such Partner's Capital Contribution actually made to
the Partnership, reduced by distributions made to such Partner pursuant to
paragraph (G) of Section 8.02 hereof.
SECTION 1.85. "VENTURE AGREEMENT" means this agreement of limited
partnership as the same may be amended or restated in writing from time to time.
SECTION 1.86. "WKA" means WKA El Con Associates.
SECTION 1.87. "WKA GENERAL PARTNER" means WKA El Con Associates, a New
York general Partnership.
ARTICLE TWO
FORMATION AND ORGANIZATION
SECTION 2.01. FORMATION. The parties hereto hereby form a limited
partnership under and pursuant to the laws of the State of Delaware and the Act
for the purposes set forth in Section 2.03 hereof. The rights, duties and
liabilities of the Partners shall be as provided by the laws of the State of
Delaware, except as otherwise expressly provided in this Venture Agreement.
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SECTION 2.02. NAME, PLACE OF BUSINESS AND OFFICE. The name of the
Partnership shall be EL CONQUISTADOR PARTNERSHIP L.P. The business of the
Partnership shall be conducted under that name or such other name as may be
mutually agreed to by the General Partners. The office and principal place of
business of the Partnership shall be such place or places as the General
Partners may from time to time mutually determine. The WKA General partner shall
promptly notify the Limited Partners of the location of and any change in the
location of the principal office of the Partnership. If required by applicable
law, the WKA General Partner shall file or record an assumed or fictitious name
certificate in the appropriate records in each place in which the nature of the
operations of the Partnership makes such filings or recordings necessary. The
General Partners shall promptly execute and cause to be filed with the Secretary
of State of the State of Delaware an appropriate certificate of limited
partnership as required by the Act. The WKA General Partner shall do all other
acts and things (including publication or periodic filings of any certificate)
that may now or hereafter be required for the perfection and continuing
maintenance of the Partnership as a limited partnership under the laws of the
State of Delaware.
SECTION 2.03. PURPOSE. the business and purpose of the Partnership
shall be to acquire, own, renovate, develop, improve, finance, refinance,
operate, lease and sell the Project and Resort as a first class, luxury
destination mega-resort and perform any and all acts and services necessary or
desirable in connection with the foregoing. The relationship between and among
the Partners shall be limited to the performance of the specific purposes of the
Partnership as set forth in this Venture Agreement. Nothing herein shall be
construed to create a general purpose partnership between or among the Partners
or any of them; to authorize any partner to
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act as general agent for any other; or to confer or grant to any Partner any
proprietary interest in, or to subject any Partner to any liability for or in
respect of, the business, assets, profits or obligations of any other Partner,
except only to the extent contemplated by this Venture Agreement.
SECTION 2.04. TERM. The Partnership shall commence on the date that
the certificate of limited partnership of the Partnership as required by the Act
is filed with the Secretary of State of the State of Delaware and shall continue
for a term ending March 31, 2030 unless sooner terminated as provided in Article
Thirteen hereof.
ARTICLE THREE
PARTNERS AND CAPITAL
SECTION 3.01. GENERAL PARTNERS. The names and addresses of each
General Partner, its Capital Contribution and its "Residual Partnership
Interest" in the Partnership are as follows:
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<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================
Residual
Capital Partnership
Contribution Interest
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kumugai Caribbean, Inc. $3,150,000 15%
Ala Moana Pacific Center
1585 Kapiolani Boulevard
Suite 1404
Honolulu, Hawaii 96814
- ---------------------------------------------------------------------------------------------------------
WKA El Con Associates $1,350,000 15%
c/o WMS Industries Inc.
767 Fifth Avenue
23rd Floor
New York, New York 10153
=========================================================================================================
</TABLE>
SECTION 3.02. LIMITED PARTNERS. The names and addresses of the Limited
Partners, their Capital Contributions and their Residual Partnership Interest in
the Partnership are as follows:
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<PAGE>
<TABLE>
<CAPTION>
=========================================================================================================
Residual
Capital Partnership
Class A Limited Partner Contribution Interest
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kumugai Caribbean, Inc. $17,850,000 35%
Ala Moana Pacific Center
1585 Kapiolani Boulevard
Suite 1404
Honolulu, Hawaii 96814
=========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
=========================================================================================================
Residual
Capital Partnership
Class B Limited Partner Contribution Interest
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
WKA El Con Associates $ 7,650,000 35%
c/o WMS Industries Inc.
767 Fifth Avenue
23rd Floor
New York, New York 10153
=========================================================================================================
</TABLE>
SECTION 3.03. CAPITAL CONTRIBUTIONS OF THE PARTNERS. The Partners
shall make up to THIRTY MILLION ($30,000,000) Dollars in aggregate Capital
Contributions to the Partnership in cash, as set forth in this Article 3.
Capital Contributions shall be made in such amounts and at such time or times as
shall be determined jointly by the General Partners. It is expected that Capital
Contributions will be made from time to time in sufficient amounts to reimburse
the General Partners or their affiliates, as the case may be, and the Resort
Manager for expenses incurred by them prior to the date hereof in connection
with the Project and the formation of the Partnership and to provide for timely
payment of expenses incurred in connection with the Project, including the
purchase of the El Conquistador land and buildings. Annexed hereto as Exhibit E
are the expenses incurred and commitments made as of the date set forth therein
in connection with the Project. Such expenses or commitments are hereby
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approved by the Partnership and the General Partners and shall be reimbursed or
paid, as applicable, by the Partnership. Whenever Capital Contributions are to
be made, each Partner shall make such Capital Contribution within seven (7)
business days after its receipt of written request therefor signed by the WKA
General Partner, in the same proportion as such Partner's total Capital
Contribution bears to $30,000,000. No partner shall be required to make a
Capital Contribution in excess of its proportionate share and the amount set
forth above as its total Capital Contribution.
SECTION 3.04. CONTRIBUTIONS OF RIGHT TO ACQUIRE EL CONQUISTADOR LAND
AND BUILDINGS. Each of the Partners hereby assigns and contributes to the
Partnership all of its respective rights to negotiate for and acquire the El
Conquistador land and buildings, including, without limitation, all of the
Partners' rights under that certain agreement dated August 18, 1989 between the
Resort Manager and the Government Development Bank for Puerto Rico referred to
in Exhibit G annexed hereto and each of the Partners shall cause their
affiliates to provide the Partnership with any and all rights they may have to
acquire the El Conquistador land and buildings.
SECTION 3.05. NO RIGHT TO RETURN OF CAPITAL. No Partner shall have the
right to withdraw any part of its Capital Contribution or to demand or receive
the return of its Capital Contribution except as expressly set forth herein.
SECTION 3.06. NO OBLIGATION TO RESTORE DEFICITS. No Partner shall be
obligated to restore any deficit balance in its Capital Account upon the
dissolution and liquidation of the Partnership.
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ARTICLE FOUR
MANAGEMENT OF THE PARTNERSHIP
SECTION 4.01. AUTHORITY OF GENERAL PARTNERS. The General Partners, as
such, and not the Limited Partners, as such, shall have full and complete
discretion in the management of the Partnership for the purposes set forth in
Section 2.03 and to do all things necessary, desirable or convenient to carry on
the business of the Partnership without notice to or obtaining the consent of
the Limited Partners. Subject to the foregoing, the General Partners shall
perform or cause to be performed, at the Partnership's expense and in its name,
the development and completion of the Project, the negotiation and coordination
of contracts for the acquisition of the Project, the arrangement for long-term
loans and the coordination of all management, leasing and operational functions
relating to the Resort upon its completion. Without limiting the generality of
the foregoing, the General Partners (subject to the provisions of this Venture
Agreement) are expressly authorized on behalf of the Partnership to:
(A) operate any business normal or customary for the owner of a
hotel/casino/resort property similar to the Project;
(B) perform any and all acts necessary or appropriate to the
acquisition, development, leasing, and operation of the Project, including, but
not limited to, making applications for rezoning or objections to rezoning of
other property, and commencing, defending and/or settling litigation regarding
the Partnership, the Project or any aspect thereof;
(C) procure and maintain with responsible companies such
insurance as may be available in such amounts and covering such risks as are
deemed appropriate by the General Partners, but in no event shall the amount of,
or risks covered by, such insurance be
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less than that which is required pursuant to the First Mortgage Loan and the
Subordinated Mortgage Loan (during the term of the First Mortgage Loan and the
Subordinated Mortgage Loan), provided that such insurance is available;
(D) take and hold all property of the Partnership, real, personal
and mixed, in the Partnership name, or in the name of a nominee of the
Partnership for the purpose of placing a mortgage on the Project or closing a
loan relating to the Project;
(E) mortgage, lease, sell or otherwise dispose of all or any
portion of the assets of the Partnership and execute and deliver on behalf of
and in the name of the Partnership, or in the name of a nominee of the
Partnership, deeds, deeds of trust, notes, leases, subleases, mortgages, bills
of sale, financing statements, security agreements, easements and any and all
other instruments necessary or incidental to the conduct of the Partnership's
business and the financing thereof;
(F) coordinate all accounting and clerical functions of the
Partnership and employ such accountants, lawyers, managers, agents and other
management, professional or service personnel, including affiliates as may from
time to time be required to carry on the business of the Partnership;
(G) collect all rents and other income accruing to the
Partnership and pay all costs, expenses, debts and other obligations of the
Partnership;
(H) negotiate and execute for and on behalf of the Partnership
leases for space or units in the Project on such terms and conditions as the
General Partners may determine in their sole discretion;
(I) pay the fees, commissions and expense reimbursements provided
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for elsewhere in this Venture Agreement;
(J) invest Partnership funds in United States Treasury
obligations, bankers acceptances, money market accounts, certificates of
deposit, investment grade commercial paper and similar money market and short
term instruments;
(K) enter into the Management Agreement and the Construction
Management Agreement;
(L) perform any and all obligations provided elsewhere in this
Venture Agreement to be performed by the General Partners;
(M) otherwise provide for the management of the Project on such
terms as the General Partners shall determine, in the exercise of their sole
discretion;
(N) elect to terminate or dissolve the Partnership;
(O) enter into any contracts, agreements or arrangements with or
make loans to or pay compensation or fees to any Partner or an affiliate of any
Partner or any officer, director, employee or agent of any Partner or any
affiliate of any Partner;
(P) amend this Venture Agreement including any amendment to
create a class or group of partnership interests not previously outstanding,
including any class or group senior in any respect to the Limited Partners;
(Q) admit any Partners to the Partnership;
(R) purchase or otherwise acquire any new or additional projects
which may expand the purposes of the Partnership whether or not located on the
Partnership's property and whether or not providing any ownership or other
economic interest therein to the Limited Partners.
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SECTION 4.02. OPERATION OF THE PARTNERSHIP. Except as otherwise set
forth in this Article FOUR and in Article FIVE, from and after the Commencement
Date with respect to the operations of the Resort and from and after the Final
Completion Date with respect to all other matters, the WKA General Partner shall
have the full and exclusive right to manage and control the business and affairs
of the Partnership and to make all decisions regarding the business of the
Partnership and shall otherwise have all of the rights, powers and obligations
of a general partner of a limited partnership under the Act. In performing its
duties under this Venture Agreement, the WKA General Partner shall have all
power and authority to act in the name and on behalf of the Partnership and the
Partners in connection with the affairs of the Partnership necessary to perform
such duties. No Limited Partner in its capacity as such, shall participate in
the management of or have any control of the Partnership's business nor shall
any Limited Partner, as such, have the power to represent, act for, sign for or
bind any General Partner or the Partnership.
SECTION 4.03. LIABILITY OF PARTNERS. No General Partner and none of
its officers, directors, partners, employees or agents, whether acting as a
General Partner, a member of the Development Committee or otherwise, shall have
any liability to the Partnership or to any other Partner for any acts performed
by such General Partner, officer, director, partner, employee or agent, by or on
behalf of the Partnership in its capacity as such except for gross negligence or
willful misconduct.
SECTION 4.04. MAJOR DECISIONS REQUIRING CONSENT. Anything else in this
Venture Agreement notwithstanding, no General Partner shall take any of the
following actions (each a "Major Decision") on behalf of the Partnership without
first obtaining the written
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consent of the other General Partner:
(A) Approve the initial plans and specifications for all or any
portion of the Project which, when so approved, shall be deemed the Plans and
Specifications or authorize any amendment, change, modification or refinement in
the Plans and Specifications as previously approved which shall have the effect
of diminishing the scope or quality of the Project or increasing the Total
Project Costs or allocations in the Development Budget.
(B) Authorize budgets to implement the Project including
amendments, changes, modifications and refinements of the Development Budget,
Pre-Opening Budgets or Annual Budgets, authorize any increase in the Total
Project Costs, the Hard Costs, the Soft Costs or any item thereof or authorize
any reallocation of amounts designated for categories of items included in the
Development Budget.
(C) Grant any consent or approval of the Partnership under the
Management Agreement.
(D) Grant any consent or approval of the Partnership under the
Construction Management Agreement or accept the Project or any portion thereof
under any agreement with a general contractor.
(E) Accept bids from contractors, award contracts relating to the
Project, or approval change orders under any construction agreement.
(F) Apply for, execute, amend or modify the First Mortgage Loan
Documents or the Subordinated Mortgage Loan Documents, approve the amounts
thereof, or apply for, execute, amend or modify in any material respect any
other material mortgage, deed of trust, pledge, encumbrance or other
hypothecation or security agreement affecting the Project
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or any interest therein, or execute any financing statement in connection
therewith except, if necessary, a third mortgage on the Project to be granted to
the KG General Partner to secure the KG Loans.
(G) Execute, enter into, amend or terminate any material
agreement of the Partnership including, without limitation, the Management
Agreement, the Construction Management Agreement and the agreement between the
Partnership and the Land Administration of Puerto Rico pursuant to which the
Partnership intends to acquire the El Conquistador land and buildings except
that the KG General Partner, acting alone on behalf of the Partnership, shall
have the right to exercise the Partnership's right under Section 8.1.2. of the
Management Agreement to terminate the Management Agreement as provided therein.
(H) Execute or enter into any contract or agreement (including
any financing or refinancing arrangement or undertaking) relating to borrowed
money on behalf of the Partnership or amend in any material respect any
contract, agreement or undertaking relating to borrowed money.
(I) Abandon the Project or terminate the Partnership.
(J) Purchase, acquire or undertake any Additional Projects beyond
the scope of the initial Resort whether or not located on the Partnership's
property.
(K) Sell, assign, transfer, exchange, grant or otherwise dispose
of the Project or any substantial portion thereof.
(L) Make, execute or deliver on behalf of the Partnership any
assignment for the benefit of creditors or any guarantee, indemnity bond or
surety bond, or file any Bankruptcy proceeding on behalf of the Partnership.
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(M) Obligate the Partnership or any Partner as a surety,
guarantor or accommodation party except as specifically provided in this Venture
Agreement.
(N) Have any property of the Partnership partitioned or file a
complaint or institute any proceeding at law or in equity to have any such
property partitioned.
(O) Amend this Venture Agreement or admit any Partners to the
Project except as specifically provided in this Venture Agreement.
(P) Terminate, change or appoint the firm of independent
certified public accountants designated for the Partnership or authorize or
approve the terms of the Partnership's business relationship with such
accountants.
(Q) Enter into or amend or terminate any agreement with any
Partner or any affiliate of any Partner except as otherwise provided in this
Venture Agreement.
(R) Authorize disbursement of Partnership funds other than in
accordance with the Development Budget or approved Budgets.
(S) Require Capital Contributions to be made.
(T) Change the Partnership's Fiscal Year.
(U) Amend, change, modify, extend or otherwise alter that certain
agreement dated August 18, 1989 between the Resort Manager and the Government
Development Bank for Puerto Rico referred to in Exhibit G annexed hereto, or the
letter of credit deposited pursuant thereto.
SECTION 4.05. CONSENT OF GENERAL PARTNERS. The written consent of a
General Partner to a Major Decision shall be evidenced by the signatures of such
General Partner as set forth in Exhibit D hereto. Any General Partner can change
the signatures necessary for a Major
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Decision by written notice to the other General Partner signed by a person
authorized to sign on behalf of such General Partner immediately prior to such
notice. Each General Partner shall use its best efforts to respond promptly to
all requests for consent and shall cooperate with the other General Partner in a
prompt and timely manner to resolve or compromise any differences between the
General Partners in respect of any Major Decision so as to avoid and prevent any
adverse affect on the Partnership's business.
SECTION 4.06. FINANCIAL INFORMATION. The WKA General Partner shall, at
the expense of the Partnership, maintain or cause to be maintained the books and
records of the Partnership (including all items of income and loss) in
accordance with generally accepted accounting principles consistently applied.
The WKA General Partner shall prepare or cause to be prepared and delivered to
each of the Partners the following financial statements:
(A) not later than 120 days after the end of each Fiscal Year of
the Partnership, a balance sheet, an income statement and a statement of cash
flows of the Partnership for such fiscal year, certified by the independent
certified public accountants then servicing the Partnership as having been
prepared in accordance with generally accepted accounting principles
consistently applied; and
(B) not later than 45 days after the end of each of the first
three quarters of the Partnership's Fiscal Year, an unaudited balance sheet,
income statement and statement of cash flows for such quarter.
In addition, the WKA General Partner shall cause to be furnished to
each General Partner the monthly financial reports provided to the Partnership
by the Resort Manager under the terms of the Management Agreement.
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SECTION 4.07. ACCOUNTANTS. Initially the firm of Ernst & Young shall
serve as the independent certified public accountants for the Partnership.
SECTION 4.08. TAX RETURNS. The WKA General Partner shall engage and
instruct the independent certified public accountants or other professionals
then servicing the Partnership to prepare income tax returns for the Partnership
as soon as practical after the end of each of the Partnership's fiscal years and
shall instruct such accountants to deliver such tax returns to each of the
General Partners for their review and reasonable approval prior to their
delivery to each Partner and the filing thereof with the appropriate
governmental agencies.
SECTION 4.09. FISCAL YEAR. The Fiscal Year of the Partnership shall
end on each March 31 or on such other date as shall be agreed to by both General
Partners as provided in Section 4.04 hereof.
SECTION 4.10. TAX MATTERS PARTNER.
(A) Designation of Tax Matters Partner. The WKA General Partner
shall be the tax matters partner as defined in Section 6231(a)(7) of the Code
(the "Tax Matters Partner").
(B) Duties of Tax Matters Partner. To the extent and in the
manner provided by applicable law and regulations, the Tax Matters Partner
shall:
(1) furnish the name, address, partnership interest and
taxpayer identification number of each Partner, including any successor to a
Partner, to the Secretary of the Treasury or his delegate (the "Secretary"); and
(2) keep each Partner informed of the administrative and
judicial proceedings for the adjustment at the Partnership level of any item
required to be taken into
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account by a Partner for income tax purposes (such administrative proceeding
referred to hereinafter as a "tax audit" and such judicial proceeding referred
to hereinafter as "judicial review").
(C) Authority of Tax Matters Partner. Without the consent of the
other General Partner, the Tax Matters Partner shall not:
(1) enter into any settlement with the Internal Revenue
Service, the Secretary or other taxing authority;
(2) seek judicial review of any administrative adjustment;
(3) file a request for an administrative adjustment or a
petition for judicial review with respect thereto;
(4) enter into any agreement with the Internal Revenue
Service or other taxing authority to extend the period for assessing any tax
which is attributable to any item required to be taken into account by a Partner
for tax purposes, or an item affected by such item; or
(5) take any other action or behalf of the Partners or the
Partnership in connection with any tax audit or judicial review regardless of
whether or not permitted by applicable law or regulations.
(D) Participation by other General Partner. The Tax Matters
Partner shall give reasonable advance notice to the other General Partner of all
meetings and discussions between the Partnership and the Internal Revenue
Service, the Secretary and all other governmental authorities and courts
asserting jurisdiction with respect to tax matters and all agents and
representatives of the foregoing and the KG General Partner shall have the
right,
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together with the Tax Matters Partner, to meet, discuss and negotiate with such
persons and entities.
SECTION 4.11. DELEGATION OF AUTHORITY. Except as otherwise set forth
in this Venture Agreement, the General Partners jointly or any one of them with
the consent of the other, may appoint, employ, contract or otherwise deal with
any person for the transaction of the business of the Partnership, which person
may, under supervision of the General Partners, perform any acts or services for
the Partnership as the General Partners may approve.
SECTION 4.12. GENERAL PARTNERS OR AFFILIATES DEALING WITH THE
PARTNERSHIP.
(A) Nothing in this Venture Agreement shall be construed to
prevent any Partner or any affiliate thereof from acting as resort manager for
the Resort and/or construction manager or general contractor for the Project.
The Partners acknowledge that it is presently contemplated that an affiliate of
WKA shall be engaged by the Partnership to render development services to the
Partnership during the Construction Phase and to act as the Resort Manager and
that an affiliate of the KG General Partner shall be engaged to render services
to the Partnership during the Construction Phase. The Partners acknowledge that
no General Partner shall be entitled to payment of any fee for its services as a
General Partner but the Partners acknowledge that various fees will be paid to
Partners for services rendered by them in their capacities other than as
Partners.
(B) In addition to services elsewhere set forth in this Venture
Agreement, the General Partners or any affiliate thereof shall have the right to
contract or otherwise deal with the Partnership for the purchase or sale of
property or services or for other purposes upon such terms as the General
Partners in their sole discretion shall determine and
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the General Partners shall have no duty to disclose such arrangements or such
relationships to the Limited Partners.
SECTION 4.13. OTHER BUSINESS ACTIVITIES. No General Partner shall be
obligated to devote its full time to the Partnership, or to devote its
financial, personnel or other services or resources exclusively for the benefit
or on behalf of the Partnership or to the activities in which the Partnership is
participating, but shall only be obligated to devote such time, attention and
resources to the conduct of the business of the Partnership as it shall deem
reasonably necessary for the conduct of such business and the performance of
such parties obligations hereunder, and the General Partners are expressly
authorized to exercise their powers and discharge their duties hereunder through
their affiliates and employees of such affiliates. Any General Partner and any
shareholder, partner or affiliate of a General Partner, direct or indirect, may
engage in or possess an interest in other business ventures of every nature and
description and in any vicinity whatsoever, including the ownership, operation,
management and development of real property or resorts, and, except as otherwise
provided in this Article, neither the Partnership, nor any other Partner, shall
have any rights in or to such independent ventures or to any profits therefrom.
Any of such activities may be undertaken with or without notice to or
participation therein by the other Partners. Each Partner and the Partnership
hereby waive any right or claim that they may have against any Partner (or any
shareholder or partner of a partner) now or hereafter conducting such activity
with respect to the income or profits therefrom. The Partners acknowledge that
affiliates of WKA are engaged and affiliates of the KG General Partner expect to
become engaged in Puerto Rico in the business of owning, operating, managing and
developing hotel and casino resorts and that nothing in the Venture
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Agreement or otherwise shall be construed to limit, prevent or otherwise impair
such activities. Except as otherwise provided in this Article, no General
Partner or any of its affiliates shall have any obligation to offer any
opportunity to the Partnership or any Partner or allow the Partnership to invest
in any property or business of any General Partner or of any of their
affiliates. Neither the Partnership nor any Partner shall by virtue of this
Venture Agreement have any right, title or interest in or to such permitted
independent activities or ventures. Notwithstanding the foregoing, if a General
Partner of an affiliate thereof undertakes or has an opportunity to undertake or
participate in any project any portion of which is located within a one mile
radius from the Resort's property line, then it shall offer the other General
Partner individually, not the Partnership, an opportunity to participate
therein. If such other General Partner desires to participate, either directly
or through an affiliate, then the General Partners shall negotiate in good faith
equitable terms upon which they both may participate in such project, and, in
the event of any failure to reach agreement, each of the General Partners shall
have the right to participate in such project on an equal basis.
SECTION 4.14. ADDITIONAL PROJECTS. The General Partners acknowledge
that this Partnership has been formed for the purpose of developing the Project
in accordance with the description of the Project set forth in Exhibit B
attached hereto and thereafter operating the Resort as first class, luxury
destination mega-resort. It is the present intention of the General Partners,
however, to consider the pursuit of further development of the real estate on
which the Project is located and the acquisition and development of related real
estate opportunities in connection with the Resort such as condominiums,
time-sharing units and an additional gift course (herein referred to as
"Additional Projects"). The undertaking of such Additional
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Projects may be undertaken by the Partnership, by the General Partners for their
own benefit or a new partnership or other entity formed for such purpose. Except
as otherwise provided in Sections 4.13 and 4.15 of this Venture Agreement, the
General Partner shall have no obligation to the Partnership or the Limited
Partners with respect to such Additional Projects. In the event a new or
different partnership or other entity is formed for any Additional Project, it
is the present intention of the General Partners that such new partnership or
other entity be jointly owned in equal shares by WKA and the KG general partner,
for their own benefit, and that all funds required to be contributed by such
General Partners to such entity and participation in the profits and losses of
such entity shall be on an equal basis. The foregoing is merely an expression of
the General Partners' present intentions and shall not be construed as a binding
agreement of the General Partners to undertake such Additional Projects or to
participate in such Additional Projects. Nothing contained herein shall obligate
any General Partner to engage in any Additional Project unless such General
Partner shall specifically agree to do so in writing. The General Partners shall
be free to form such new entities and to enter into any arrangements on behalf
of the Partnership with such new entities as they in their sole discretion shall
determine.
SECTION 4.15. INITIAL CONDOMINIUM UNITS.
(A) The parties contemplate that at least 100 condominium units
(each unit being capable of rental as three separate hotel rooms thereby
resulting in the potential availability of at least 300 hotel rooms upon
completion of all such units and each unit being referred to as a "Condominium"
and all units being collectively referred to as the "Condominiums") will be
constructed between 1992 and 1995. These Condominiums are
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anticipated to be constructed in sections consisting of at least 25 Condominiums
per section on that portion of the present El Conquistador land situated south
of the "clifftop" building, on the bluff, overlooking the golf course, having
Fajardo Bay to the East and the golf course and spa to the West. Each section is
contemplated to include a swimming pool. It is also contemplated that prior to
the commencement of construction, each Condominium shall be sold to private
investors purchasing such Condominium pursuant to contracts executed prior to
the commencement of construction of each Condominium. The Condominiums will be
offered and sold on substantially the same terms as similar units are then being
offered at Palmas del Mar and the Hyatt Dorado Beach Hotel and the Partnership
will offer to manage such units on the same terms contained in management
agreements covering similar units at Palmas del Mar and the Hyatt Dorado Beach.
In the event the KG General Partner elects, in writing delivered to WKA by not
later than one year after the Commencement Date, not to participate in the
construction and sale of the Condominiums, WKA shall thereafter, in its
discretion, be entitled to do so directly or through its affiliates. In such
event, WKA's construction of the Condominiums shall occur without participation
in the profit, loss, construction or financing of such Condominiums by the
Partnership or the KG General Partner and all profits and losses with regard to
the construction or sale of such Condominiums shall inure to the benefit of WKA.
(B) Unless the KG General Partner has elected not to participate
in the construction and development of the Condominiums, then development and
construction thereof shall be accomplished by a new entity (the "Condo Entity"),
separate and different, from the Partnership which Condo Entity shall have been
formed for that purpose by WKA and the KG General Partner. The Condo Entity
shall be jointly owned in equal shares by WKA and the KG
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General Partner, for their own benefit and not for the benefit of the
Partnership or any other Partners thereof, and all funds required to be
contributed by such General Partners to the Condo Entity and participation in
the profits and losses of the Condo Entity shall be on an equal basis, unless
agreed otherwise by the General Partners. Provided that KG General Partner has
not elected to exercise its right not to participate in the construction and
development of the Condominiums, all decisions regarding the Condominiums shall
require the approval of WKA and the KG General Partner.
(C) If requested to do so by WKA (after the KG General Partner
has elected not to participate in the construction and sale of the Condominiums)
or by the Condo Entity, the land to be used for such purpose shall be conveyed
to (i) WKA or its affiliate if the KG General Partner has elected not to
participate in the construction and sale of the Condominiums or (ii) to the
Condo Entity, by the Partnership together with all other legal rights sufficient
to permit WKA or the Condo Entity, as applicable, to construct the Condominiums
in the manner currently envisioned by the General Partners. Such conveyance
shall occur prior to the commencement of construction of any such Condominium,
or section thereof, and concurrently with or after financing for the
construction thereof has been obtained.
(D) The Partnership shall be paid a purchase price for any land
so conveyed in an amount equal to the Partnership's cost per acre of land
conveyed, as determined below. For purposes of this Paragraph D, the
Partnership's cost per acre of the land initially acquired by the Partnership
from the Land Administration of Puerto Rico shall be the result of multiplying
(a) the sum of (i) $10,000,000 and (ii) interest on the sum specified in (i)
above from the date the Partnership acquires title to the Resort to the date of
such conveyance,
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calculated at a rate equal to the average blended rate of the cost of funds
incurred by the Partnership on the First Mortgage Loan (including all fees
payable under the Mitsubishi Credit Facility) and the Subordinated Mortgage
Loan, times (b) a fraction, the numerator of which is the number of acres so
conveyed and the denominator of which shall be the total number of acres
contained in the Resort at the time of acquisition thereof by the Partnership
from the Land Administration of Puerto Rico. The Partnership's cost per acre of
other land acquired by the Partnership which may be transferred to WKA or the
Condo Entity as provided herein shall be the sum of the Partnership's actual
cost for such land and interest on such amount at the average blended rate of
the Partnership's cost of funds incurred to finance such purchase price. The
amount of the purchase price shall be paid simultaneously with such conveyance
provided that the construction financing lender has agreed to loan such amount
to WKA or the Condo Entity, as applicable (each of WKA and the Condo Entity, as
applicable, agree to use its best efforts to cause such construction financing
lender to do so) or, if such construction financing lender has not agreed to do
so, the purchase price shall be paid simultaneously with the closing of the sale
of such Condominiums to third party investors and the Partnership shall be
entitled to retain a lien against such property to receive the payment thereof.
(E) Because it is anticipated that the Condominiums will be
constructed in sections, the provisions above relating to the transfer of and
payment for the land on which the Condominiums will be built shall be applicable
to each section.
(F) In the event WKA or the Condo Entity, as applicable,
undertakes construction of the Condominiums (or any of them), WKA or the Condo
Entity, as applicable, and not the Partnership, shall indemnify, defend, and
hold harmless the Partnership, the Partners
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and their respective agents, officers, directors, shareholders, successors and
assigns from and against any and all liability, damage, cost and expense
(including legal fees and court costs) associated with the development,
financing, construction and sale of the Condominiums upon the procedures set
forth in Section 12.02(D) hereof.
(G) The Partnership shall offer to place such Condominiums into a
rental pool program operated by the Partnership under the Management Agreement
pursuant to which a percentage of gross revenues derived from the occupancy of
such Condominiums shall be paid to the Partnership in consideration for its
conducting the program. The terms of such rental pool arrangements shall be
substantially similar to the arrangements for similar units at the Hyatt Dorado
Beach Hotel and Palmas del Mar. Neither WKA nor any of its affiliates will offer
or otherwise make available to any owner of a Condominium any rental pool
arrangement or similar arrangement with respect to such Condominiums except
through the Partnership. Each guest occupying a Condominium (and owner, when
occupying such Condominium) shall be entitled to use the facilities of the
Project on the same terms as are generally made available to guests of the
Resort.
SECTION 4.16. ADDITIONAL FINANCIAL INFORMATION. The Partner
acknowledge that because the fiscal years of the Partnership, the Resort and
each of the General Partners are different, certain additional financial
information and accounting reviews may be necessary in order to provide each
General Partner with sufficient information to meet its own financial reporting
needs and obligations. The Partnership, at its sole cost and expense shall
furnish or cause to be furnished to each General partner such additional
information as each General Partner shall reasonably request. Such additional
information may be furnished or provided by
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the accountants for the Partnership or the accountants for the General Partner
requesting such information at the Partnership's expense, or a combination of
both. The General Partners shall cause the Partnership to furnish such
information so that each of the General Partner's needed are met in the manner
most economical to the Partnership.
ARTICLE FIVE
THE PRE-OPENING PERIOD
SECTION 5.01. THE DEVELOPMENT COMMITTEE. The Partnership hereby
establishes a committee (the "Development Committee") to consist of two persons;
one person designated by the WKA General Partner and one person designated by
the KG General Partner. The person initially designated by the WKA General
Partner shall be Hugh A. Andrews and the person initially designated by the KG
General Partner shall be Shunsuke Nakane. Either General Partner shall have the
right to change such designee upon written notice given to the other General
Partner and such other General Partner's designee. The designation set forth in
such notice shall not be effective until actually received by the other General
Partner and its designee. Subject to the direction and control of the General
Partners, the Development Committee shall be responsible for administering the
Partnership's activities in connection with the Project, the disbursement of
amounts relating to the Construction Phase as the same shall been approved by
the Partnership, the solicitation of bids for construction contracts relating to
the Project and the negotiation of the terms thereof, the making of
recommendations as to the Development Budget, the setting of the Commencement
Date and the administration of the overall design and development of the Project
in accordance with the Development Budget and the Plans and
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Specifications. The Development Committee shall respond to questions, initiate
correspondence, submit appropriate information to the General Partners in
connection with Major Decisions and otherwise administer the day to day affairs
of the Partnership to effect completion of the Project. The Development
Committee may only act by joint consent of its members. The Committee shall not,
however, have the authority to authorize a Major Decision, it being the
intention of the Partners that any action involving a Major Decision be made
exclusively as provided in Section 4.05. Unless otherwise determined by mutual
consent of the General Partners, the power and authority of the Development
Committee shall cease upon the Final Completion Date.
SECTION 5.02. REIMBURSEMENT OF EXPENSES. Annexed hereto as Exhibit E
are to the expenses incurred and commitments made to date by the General
Partners or their affiliates and by the Resort Manager in connection with the
Project. The General Partners shall promptly submit to the Partnership an
estimate of expenses to be incurred by the Partnership prior to its purchase of
the Project, in such detail and with such supporting data as the Partnership
shall reasonably request. The Partners shall make their respective Capital
Contributions to provide for prompt reimbursement of all such expenses and
commitment incurred to date and all such expenses and commitments reasonably
incurred or made by such General Partners, as determined by the Partnership, and
to provide for payment in a timely manner of all expenses to be incurred by or
on behalf of the Partnership or the General Partners in connection with the
Project. The Partners anticipate that initial Capital Contributions will be
required shortly after the execution of this Venture Agreement and that
additional amounts will be required prior to the acquisition of the El
Conquistador land and buildings by the Partnership.
SECTION 5.03. CONDUCT OF NEGOTIATIONS. The WKA General Partner shall
be
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primarily responsible for conducting negotiations on behalf of the Partnership
with the Land Administration of Puerto Rico and other government agencies in
connection with the acquisition of the El Conquistador land and buildings and
related parcels of real property for the Project. The other General Partner
shall have the right to participate in such negotiations but shall have no right
to independently conduct such negotiations on behalf of the Partnership. All
material decisions with respect to such negotiations shall be made by the
General Partners.
SECTION 5.04. CONDITIONS TO ACQUIRING THE PROJECT. The Partnership
shall not close the acquisition of the El Conquistador land and buildings from
the Land Administration of Puerto Rico until the following conditions shall have
been satisfied or waived by the written consent of the General Partners:
(A) The KG General Partner shall have received a copy of the
written arrangements among the partners of WKA concerning their ownership of and
investment in WKA and such arrangements shall be reasonably satisfactory to the
KG General Partner.
(B) The General Partners shall have received all environmental,
engineering, toxic waste and other professional studies which they shall require
and the results of such studies shall be reasonably satisfactory to each of the
General Partners.
(C) All governmental approvals, including zoning and building
permits necessary for the commencement of the construction and renovation of the
Project shall have been obtained, including the following:
(i) Endorsements of an Engineering and Planning Approvals of
the Puerto Rico Aqueduct and Sewer Authority and Puerto Rico Electric Power
Authority;
(ii) Approval of Puerto Rico Environmental Quality Board;
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(iii) Approval of an environmental impact statement for the
Project by the Puerto Rico Planning Board, Municipality of Fajardo, Puerto Rico
Highway Authority, Puerto Rico Tourism Company, Puerto Rico Telephone Company,
Puerto Rico Electric Power Authority, United States Fish and Wildlife Service,
Department of Natural Resources, and the Puerto Rico Environmental Quality
Board;
(iv) Siting Permit from the Puerto Rico Planning Board;
(v) Approval of preliminary development plans for the first
construction stage of the Project by the Administration of Regulations and
Permits; and
(vi) Construction Permit.
(D) The KG General Partner shall have received any necessary
approvals of the Japanese Ministry of Finance with respect to the KG General
Partner's investment in the Partnership.
(E) Each of the General Partners shall have approved the Total
Project Costs including the respective amounts of the Hard Costs and the Soft
Costs and the items thereof.
(F) Each of the General Partners shall be satisfied as to the
terms and commitments of the First Mortgage Loan and the Subordinated Mortgage
Loan.
(G) Each of the General Partners shall have received title and
survey reports with respect to the Project and such reports shall be reasonably
satisfactory to each General Partner.
(H) Each of the General Partners shall have approved the terms
and conditions of the contract to acquire the existing El Conquistador and
buildings from the Land
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Administration of Puerto Rico.
(I) Each of the General Partners shall be satisfied that the
Partnership will be acquiring all the real property or the sufficient rights
thereto, including Palominos Island, which is contemplated to constitute the
Project.
SECTION 5.05. CONTRACTORS. Without the consent of the General Partners
as provided in Section 4.05 hereof as required for a Major Decision, the
Partnership shall not enter into any agreement with a general contractor or any
subcontractor for the provision of any labor or materials in connection with the
construction, renovation or development of the Project unless such contract or
subcontract provides for a guaranteed maximum price for the furnishing of such
labor or materials in accordance with Plans and Specifications and further
provides for delivery to the Partnership of a full and complete performance (and
payment, if applicable) bond in respect of such contract, issued by a
financially responsible surety acceptable to the General Partners.
SECTION 5.06. COOPERATION. Each General Partner shall cause its
designee on the Development Committee to act reasonably and to cooperate with
the other member of the Development Committee to make decisions and take action
necessary and advisable to complete the Project in a prompt and efficient manner
within the Development Budget and within the current expectations of the General
Partners that the Resort will be a first class, luxury destination mega-resort.
Each of the General Partners will use their best efforts to ascertain and
confirm as soon as practical and with a high degree of certainty that the
Construction Phase of the Project can be completed within the budgeted Hard
Costs, such certainty to include the obtaining of guaranteed maximum
construction contracts with respect to the construction aspects
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and renovations of the Project, and to ascertain and confirm that the entire
Project can be completed within the budgeted Total Project Costs, such certainty
to include bids for and to the extent practical actual pricing of items included
in the Soft Costs.
6.01.
ARTICLE SIX
LOANS TO THE PARTNERSHIP
SECTION 6.01. DEFICIENCY LOANS. If at any time after all Capital
Contributions of the Partners have been made but prior to the expiration of five
years from the Commencement Date, the Partnership has insufficient funds
available to pay any portion of the Total Project Costs, operating costs or any
other fees or expenses related to the Project or operation of the Resort, the
Partnership's business or the liquidation or winding up of the Partnership,
including payment of liabilities or reserves for liabilities, the WKA General
Partner shall notify (the "Call Notice") each of the General Partners in writing
of the amount needed (the "Deficiency") pay such costs, fees or expenses. With
thirty (30) days after the receipt of the Call Notice each of the KG General
Partner and the WKA General Partner shall advance to the Partnership one-half of
the amount of the Deficiency. All such advances shall constitute loans
("Deficiency Loans") to the Partnership, shall be non-recourse to the
Partnership and the General Partners of the Partnership and shall be subordinate
to the First Mortgage Loan and the Subordinated Mortgage Loan. Deficiency Loans
shall be repaid on or before the expiration of nine years from the Commencement
Date (subject to prepayment as provided in Section 6.03 hereof) and shall bear
interest at the same rate of interest as the First Mortgage Loan (computed with
respect to all costs of such financing, including fees payable to credit
enhancers, trustees and others).
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Notwithstanding the foregoing, at no time shall either the KG General Partner or
the WKA General Partner be required to make Deficiency Loans to the Partnership
in excess of $10,000,000 in principal amount each outstanding at any time.
SECTION 6.02. ADDITIONAL LOANS. If at any time after all Capital
Contributions have been made and either (i) there is outstanding Deficiency
Loans in the aggregate principal amount of $20,000,000 or (ii) the obligation of
the General Partners to make Deficiency Loans has terminated, the Partnership
has insufficient funds to meet any of its obligations other than obligations to
any of its Partners, then the General Partners shall have the right, but not the
obligation, to fund such deficiencies by making additional loans ("Additional
Loans") to the Partnership in the amounts necessary to meet such obligations but
only if the reasonable needs of the Partnership's business so require. If both
General Partners desire to make such Additional Loans to the Partnership, each
shall have the right to do so up to 50% of the amount needed or in such other
proportion as they shall agree. If only one General Partner desires to make an
Additional Loan, such General Partners shall have the right to make such
Additional Loan for the full amount needed. Additional Loans shall be repaid on
or before the expiration of ten years from the date each is made (subject to
prepayment as provided in Section 6.05 hereof) and shall bear simple interest at
the rate per annum equal to the lesser of the prime rate announced in New York
City by The Chase Manhattan Bank, N.A. from time to time as its "Prime Rate" or
the maximum lawful rate under applicable law. All Additional Loans shall be
non-recourse to the Partners of the Partnership and shall be subordinate to the
First Mortgage Loan and Subordinated Mortgage Loan but senior to Deficiency
Loans and all other distributions to the Partners hereunder and shall be paid
only in accordance with Section 6.04 hereof.
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SECTION 6.03. KG LOANS.
(A) At the time of delivery of the Call Notice with respect to
any Deficiency Loan, the WKA General Partner may include in the Call Notice a
request that the KG General Partner make a loan (the "KG Loan") to the WKA
General Partner in principal amount up to one-half of the amount of the
Deficiency. In such event, within thirty (30) days after the receipt of the Call
Notice, the KG General Partner shall advance to the WKA General Partner such
amount.
(B) Upon receipt of such amount, the WKA General Partner shall
use such funds to immediately make its share of the Deficiency Loan to the
Partnership as provided in Section 6.01. Anything in Section 6.01 to the
contrary notwithstanding, and provided the WKA General Partner has requested
that the KG General Partner make a KG Loan, the WKA General Partner shall have
no obligation to make any Deficiency Loan to the Partnership unless it
concurrently receives the proceeds of a KG Loan in like amount.
(C) All KG Loans shall be for a term ending nine years after the
Commencement Date, shall bear interest at the same rate as the First Mortgage
Loan (computed with respect to all costs of such financing, including fees
payable to credit enhancers, trustees and others), and shall be secured by all
of WKA's Interests in the Partnership, both as a General and a Limited Partner,
pursuant to the terms of a security agreement (the "Security Agreement") in the
form of Exhibit F annexed hereto which shall be executed and delivered
concurrently herewith. The KG General Partner shall only be obligated to make a
KG Loan if, at the time such loan is made, the security interest granted under
the Security Agreement constitutes a valid first priority lien on such
Interests. The Partnership shall grant the KG General Partner a third
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mortgage on the Resort (and in the form and of substance reasonably satisfactory
to the KG General Partner), subordinate to the First Mortgage Loan and the
Subordinated Mortgage Loan, as security for Deficiency Loans made by the WKA
General Partner which Deficiency Loans have been assigned to the KG General
Partner as additional security for the KG Loans. This mortgage shall be released
upon payment in full of the KG Loans. The costs and expenses associates with the
preparation and recording of such mortgage and assignment thereof shall be paid
by the Partnership.
(D) The obligation to pay principal and interest to the KG
General Partner in respect of any KG Loan shall be non-recourse to WKA or any
successor thereto or transferee thereof, or any partner, employee or agent of
WKA or such successor or transferee.
(E) WKA shall be obligated to pay principal and interest on the
KG Loans solely from (i) the proceeds of loans received by WKA from the Resort
Manager out of the Basic Management Fee as provided in that certain agreement of
even date herewith among WKA, the KG General Partner and the Resort Manager, a
copy of which is annexed as Exhibit F to the Management Agreement, (ii) amounts
paid by the Partnership to WKA in respect of Deficiency Loans and (iii) the
proceeds of any collateral securing such KG Loans, except that WKA shall have
the right, but not the obligation, to pay the KG Loans from any other sources.
WKA hereby assigns to the KG General Partner its right to receive payments from
the Partnership in respect of Deficiency Loans. WKA hereby authorizes and
directs the Partnership, for so long as the KG Loans are outstanding, to pay to
the KG General Partner at the address provided herein all sums which WKA is
entitled to receive from the Partnership in repayment of Deficiency Loans.
Notwithstanding the payment of such sums to the KG General Partner,
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such sums shall be deemed to be in payment of the obligations of the Partnership
to WKA under the terms hereof with respect to Deficiency Loans owed to WKA.
(F) Upon the foreclosure of the security interest granted the KG
General Partner pursuant to the terms of the Security Agreement and the
substitution of the party acquiring the Interest of WKA under the Venture
Agreement in accordance with the Act, as both a Limited Partner and a General
Partner for WKA, the obligations of WKA under this Venture Agreement shall
terminate.
(G) The Partnership and WKA will, at all times, maintain accurate
books and records duly marked with an entry showing the assignment of the
Interest of WKA, as both a Limited Partner and a General Partner, to Secured
Party under the Security Agreement as contemplated herein.
SECTION 6.04. REPAYMENT OF LOANS. Subject to appropriate subordination
agreements which may be required by the holders of the First Mortgage Loan, the
Partnership shall be required to pay interest and principal on Deficiency Loans
and Additional Loans solely from Operating Cashflow and Extraordinary Cashflow
in the following manner and shall not be required to pay such Deficiency Loans
from any other sources:
FIRST: In payment of interest and then principal of all
outstanding Additional Loans. If Additional Loans have been made by more than
one General Partner, then such funds shall be applied to such loans in the same
proportion as each General Partner's Additional Loan bears to the total
outstanding Additional Loans, first in payment of interest and then principal;
SECOND: one-half to interest and then principal of Deficiency
Loans
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made by the KG General Partner and one-half to interest and then principal of
Deficiency Loans made by the WKA General Partner.
Operating Cashflow shall be paid in reduction of such loans at
least once per year on or before the 120th day following the end of the
Partnership's fiscal year. Extraordinary Cashflow shall be paid in reduction of
such loans as soon as practical after the receipt of such proceeds.
SECTION 6.05. ASSUMPTION OF LETTER OF CREDIT OBLIGATIONS. Concurrently
herewith, the KG General Partner is executing an assumption agreement in the
form of Exhibit G annexed hereto pursuant to which it is assuming 70% of the
liability under the irrevocable letter of credit in the principal amount of
$1,650,000 which was furnished by Williams Hospitality Management Corporation to
secure the performance of the Partnership in negotiating the acquisition from
the Land Administration for Puerto Rico of the existing El Conquistador land and
buildings and Kumuagai Properties, Inc. is executing a guaranty of such
assumption in the form of Exhibit I annexed hereto. Concurrently herewith, the
WKA General Partner is executing an assumption agreement in the form of Exhibit
K annexed hereto pursuant to which it is assuming 30% of the liability under the
aforesaid irrevocable letter of credit. The Partnership hereby assumes and
agrees to defend, indemnify and hold the Resort Manager harmless from and
against any liability it may have whatsoever arising under such irrevocable
letter of credit.
ARTICLE SEVEN
CAPITAL ACCOUNTS; ALLOCATION OF PROFITS AND LOSSES
SECTION 7.01. DEFINITIONS. As used in this Venture Agreement, the
following
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terms shall have the meanings hereinafter set forth:
(A) "Net Income" and "Net Loss" shall mean, for each fiscal year
of the Partnership, the Partnership's taxable income or loss for such fiscal
year as determined under Code Section 703(a) and Treas. Reg. 'SS' 1.703-1, but
with the following adjustments:
(1) Net Income and Net Loss shall be adjusted to treat items
of tax-exempt income described in Code Section 705(a)(1)(b) as items of gross
income, and to treat as deductible items all nondeductible, noncapital
expenditures (other than expenses in respect of which an election is made under
Code Section 709) describe in Code Section 705(a)(2)(B), including any items
treated under Treas. Reg. 'SS' 1.704-1(b)(2)(iv)(i) as items described in Code
Section 705(a)(2)(B).
(2) Items of Depreciation, and Gain from a Capital
Transaction and Net Loss from a Capital Transaction shall be excluded from the
computation of Net Income or Net Loss.
(B) "Gain from a Capital Transaction" and "Net Loss from a
Capital Transaction" shall mean, for each fiscal year of the Partnership, the
gain and loss, respectively, realized by the Partnership from a Capital
Transaction.
SECTION 7.02. DEFINITION OF CAPITAL ACCOUNTS.
(A) Capital Accounts. The Partnership shall establish and
maintain "Capital Accounts" for each Partner throughout the full term of the
Partnership in accordance with Treas. Reg. 'SS' 1.704-1(b)(2)(iv), as such
regulation may be amended from time to time. To the extent not inconsistent with
such rules, the following provisions shall apply:
The Capital Account of each Partner shall be credited with (i)
each
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Partner's Capital Contribution and (ii) such Partner's share of Net Income and
Gain from a Capital Transaction (or items thereof). The Capital Account of each
Partner shall be debited by (i) the amount of distributions made to such Partner
(other than distributions in repayment of debt, as payment of interest or as
fees (including the Incentive Management Fee) or reimbursement of expenses) and
(ii) such Partner's share of Net Loss, Net Loss from a Capital Transaction and
Depreciation (or items thereof) including expenditures which can neither be
capitalized nor deducted for tax purposes.
(B) "Target Capital Account" shall mean for any Partner the
Capital Account of such Partner as of the most recently completed fiscal year
which would equal the hypothetical distribution that any such Partner would
receive if the Partnership sold all of its assets (including cash) for cash
equal to the tax basis of such assets as of the end of such fiscal year (or book
value if an adjustment has been made pursuant to Regulation
'SS'1.704-1(b)(2)(iv)(g) and all liabilities allocable to those assets were due
and satisfied according to their terms (limited with respect to each nonrecourse
liability to the book basis of the assets securing that liability (or book value
if an adjustment has been made pursuant to Regulation 'SS'1.704-1(b)(2)(iv)(g))
and all net assets of the Partnership (including the proceeds from the
disposition) were distributed pursuant to Section 8.02 hereof as of the last day
of such fiscal year reduced by each Partner's share of Partnership Minimum Gain
and Partner Minimum Gain immediately prior to the hypothetical sale and such
Partner's share of Distributable Cash which if taken into account hereunder
shall not be taken into account when distributed.
SECTION 7.03. ALLOCATIONS OF INCOME AND LOSS. Income and losses of the
Partnership shall be allocated and charged to the Capital Accounts of the
Partners in accordance
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with the provisions of the Appendix attached hereto, all the terms of which are
incorporated herein by reference.
SECTION 7.04. SPECIAL PARTNERSHIP ELECTION. The Partnership and each
of its Partners shall prepare, execute and file appropriate documents and
returns with the taxing authorities or otherwise in a manner so as to reduce,
minimize or eliminate Puerto Rican income taxes payable including, without
limitation, the election by the Partnership to be treated for Puerto Rican
income tax purposes as a special purpose partnership.
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ARTICLE EIGHT
PARTNERSHIP DISTRIBUTION
SECTION 8.01. DISTRIBUTABLE CASH FROM OPERATIONS. Distributable Cash
shall be distributed at least once per year on or before the 120th day following
the end of the Resort's fiscal year and shall be distributed and applied in the
following order of priority:
(A) Payment of the Preferred Return to the KG General Partner and
the Class A Limited Partners for such fiscal year to the extent not previously
paid from Distributable Cash from a Capital Transaction. If the Distributable
Cash is insufficient to pay such Preferred Return in full, then the
Distributable Cash shall be paid to each such Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate Unrecovered Capital of the
KG General Partner and Class A Limited Partners and the amount of any Preferred
Return unpaid shall become Deferred Preferred Return.
(B) Payment of any Deferred Preferred Return to the KG General
Partner and the Class A Limited Partners. If such Distributable Cash is
insufficient to pay such Deferred Preferred Return in full, then such
Distributable Cash shall be paid to each Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate Unrecovered Capital of the
KG General Partner and Class A Limited Partners and shall be applied first to
the interest portion of such Deferred Preferred Return and then to the oldest
Preferred Return portions.
(C) Payment of the Preferred Return to the WKA General Partner
and Class B Limited Partners or such fiscal year to the extent not previously
paid from Distributable Cash from a Capital Transaction. If such Distributable
Cash is insufficient to pay such Preferred Return in full, then such
Distributable Cash shall be paid to each such Partner in the same ratio
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as such Partner's Unrecovered Capital bears to the aggregate Unrecovered Capital
of the WKA General Partner and Class B Limited Partners and the amount of any
Preferred Return unpaid shall become Deferred Preferred Return.
(D) Payment of any Deferred Preferred Return to the WKA General
Partner and Class B Limited Partners. If such Distributable Cash is insufficient
to pay such Deferred Preferred Return in full, then such Distributable Cash
shall be paid to each such Partner in the same ratio as such Partner's
Unrecovered Capital bears to the aggregate Unrecovered Capital of the WKA
General Partner and the Class B Limited Partners and shall be applied first to
the interest portion of such Deferred Preferred Return and then to the oldest
Preferred Return portions.
(E) Payment of the Incentive Management Fee.
(F) Any Balance remaining shall be paid to the Partners in
accordance with their Residual Partnership Interests.
SECTION 8.02. DISTRIBUTABLE CASH FROM A CAPITAL TRANSACTION. As soon
as practical after the receipt of the proceeds from a Capital Transaction, the
Partnership shall distribute and apply the distributable Cash from a Capital
Transaction in the following order of priority:
(A) Payment of the Preferred Return to the KG General Partner and
the Class A Limited Partners for the current Fiscal Year. If the Distributable
Cash from a Capital Transaction is insufficient to pay such Preferred Return in
full, then the Distributable Cash from a Capital Transaction shall be paid to
each such Partner in the same ratio as such Partner's Unrecovered Capital bears
to the aggregate Unrecovered Capital of the KG General Partner and
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Class A Limited Partners.
(B) Payment of any Deferred Preferred Return to the KG General
Partner and the Class A Limited Partners. If such Distributable Cash from a
Capital Transaction is insufficient to pay such Deferred Preferred Return in
full, then such Distributable Cash from a Capital Transaction shall be paid to
each such Partner in the same ratio as such Partner's Unrecovered Capital bears
to the aggregate Unrecovered Capital of the KG General Partner and Class A
Limited Partners and shall be applied first to the interest portion of such
Deferred Preferred Return and them to the oldest Preferred Return portions.
(C) Payment of the Preferred Return to the WKA General Partner
and Class B Limited Partners for the current Fiscal Year. If such Distributable
Cash from a Capital Transaction is insufficient to pay such Preferred Return in
full, then such Distributable Cash from a Capital Transaction shall be paid to
each such Partner in the same ratio as such partner's Unrecovered Capital bears
to the aggregate Unrecovered Capital of the WKA General Partner and Class B
Limited Partners.
(D) Payment of any Deferred Preferred Return to the WKA General
Partner and Class B Limited Partners. If such Distributable Cash from a Capital
Transaction is insufficient to pay such Deferred Preferred Return in full, then
such Distributable Cash from a Capital Transaction shall be paid to each such
Partner in the same ratio as such Partner's Unrecovered Capital bears to the
aggregate Unrecovered Capital of the WKA General Partner and the Class B Limited
Partners and shall be applied first to the interest portion of such Deferred
Preferred Return and then to the oldest Preferred Return Portions.
(E) Payment of any Incentive Management Fee in respect of the
fiscal
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year in which the funds constituting Distributable Cash from a Capital
Transaction were received by the Partnership.
(F) Payment of any Incentive Management Fee in respect of any
preceding fiscal year of the Resort which was earned and not previously paid.
(G) To the Partners as return of their respective Capital
Contributions in an amount equal to their respective Unrecovered Capital. If the
remaining Distributable Cash from a Capital Transaction is less than the
Partners' Unrecovered Capital, then the remaining Distributable Cash from a
Capital Transaction shall be paid to each Partner in the same proportion as each
Partner's Unrecovered Capital bears to the aggregate Unrecovered Capital of all
Partners.
(H) Any balance remaining shall be paid to the Partners in
accordance with their respective Residual Partnership Interests.
ARTICLE NINE
TRANSFERABILITY OF PARTNERS' INTERESTS
SECTION 9.01 NO TRANSFER.
(A) Except as otherwise set forth in this Article Nine, no
Partner may assign, transfer, sell, pledge, hypothecate, exchange or otherwise
transfer or dispose of all or any part of its Interest, without the written
consent of the General Partners. Any such attempted sale, assignment, transfer,
pledge, encumbrance, hypothecation, mortgage or other disposition by a Partner
without such consent shall be null and void. No sale, assignment, transfer or
other alienation permitted by this Venture Agreement shall constitute or result
in a termination of the
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Partnership unless otherwise expressly provided for herein. For purposes of this
Section 9.01, a sale or transfer of all or any portion of the beneficial
ownership of any General Partner shall be deemed a transfer of such General
Partner's Interest.
(B) Notwithstanding anything contained in this Article Nine, no
Partner shall sell or offer for sale or solicit offers to purchase or effect any
transfer of any Interest in the Partnership whether or not otherwise permitted
under this Article Nine to any person
(i) in such a manner as to require the registration or
qualification of such interest under the Securities Act of 1933, as amended, or
under any applicable state, local or foreign securities laws;
(ii) if such sale or transfer would result in or create a
prohibited transaction under, or cause the Partnership to become a "party in
interest" as defined in Section 3(14) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or otherwise result in the holder of an
Interest in the Partnership or the assets of the Partnership being subject to
the provisions of ERISA;
(iii) if any part of the funds to be used in such purchase
or transfer to acquire an interest in the Partnership constitutes assets of an
employee benefit plan within the meaning of Section 3(3) of ERISA or any trust
created under any such plan, or assets of a plan as defined in Section
4975(e)(i) of the Code, or any trust created under any such plan;
(iv) if such sale or transfer would constitute or result in
a termination of the Partnership under Section 708 (or any successor provision)
of the Code;
(v) if such sale or transfer would cause the Partnership to
cease to be classified as a partnership for federal income tax purposes or the
Interest of each Partner
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to cease to be treated as a partnership interest for federal income tax
purposes;
(vi) if such sale or transfer would constitute a default
under or cause the acceleration of the First Mortgage Loan or Subordinated
Mortgage Loan;
(vii) if the Puerto Rico Gaming Authorities require such
person to be qualified or approved and such person has not been so qualified or
approved prior to becoming a Partner; or
(viii) if such sale or transfer would adversely affect any
tax exemptions granted to the Partnership by the Commonwealth of Puerto Rico.
In connection with any sale or transfer, the General Partners or
either of them may request counsel to the partnership to render its opinion to
the Partnership as to whether such sale or transfer would cause a termination of
the Partnership for federal income tax purposes. No offer, sale, transfer,
hypothecation or pledge of any Interest may be made unless the Partnership shall
have received an opinion of counsel satisfactory to the General Partners that
such proposed sale or transfer is exempt from registration under the federal
securities laws and any applicable state or local securities laws.
SECTION 9.02. NO WITHDRAWAL. Prior to the Commencement Date, no
Partner shall withdraw, retire or resign from the Partnership or sell, assign,
transfer, pledge or hypothecate its Interest. After the Commencement Date,
except as provided in Section 9.06 or 9.07 hereof, no General Partner shall
withdraw, retire or resign from the Partnership without the prior written
consent of the other General Partner.
SECTION 9.03. PERMITTED SALES OF LIMITED PARTNERS' INTERESTS.
(A) After the Commencement Date, any Limited Partner may sell,
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assign or transfer all or any portion of its limited partnership Interest to any
of its affiliates, provided that such affiliate is admitted to the Partnership
as a Class A or B Limited Partner, as the case may be, as hereinafter provided.
(B) Any Limited Partner (the "Selling Partner") desiring to sell
or otherwise dispose of all or any part of its Interest as a Limited Partner to
an unaffiliated third party after the Commencement Date shall first offer (the
"Offer") in writing to sell such Interest or part thereof to the General
Partners in equal shares. If the Selling Partner is also a General Partner, such
Offer shall only be made to the other General Partner. Such Offer shall set
forth the price (the "Offering Price") and the terms at which the Selling
Partner desires to sell such Interest including copies of any third party offer
received by such Selling Partner. The General Partner(s) receiving such Offer
shall have the right, but not the obligation, to accept such Offer by written
notice of acceptance within 30 days from their receipt of the Offer. If the
Offer is not accepted in full by such General Partners, the Selling Partner
shall offer the Interest not so accepted to the General Partner who shall have
accepted the Offer and such General Partner shall have the right, but not the
obligation, to accept such additional Offer by written notice of acceptance
within 30 days from its receipt of such additional Offer. If the Selling Partner
is also a General Partner, such additional offer need not be made to such
General Partner. The General Partners shall have the right to accept the Offer
in such other proportion as they shall agree. If the Offers are not accepted by
the General Partners with respect to the entire Interest being offered by such
Selling Partner, then the Selling Partner shall be free for a period of 180 days
thereafter to enter into a binding contract with an unaffiliated third party for
the sale of such Interest for a price not less than 95% of the Offering Price
and otherwise on such material terms
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and conditions as are not more favorable to the purchaser than those contained
in the Offer; provided, however, that if the sale of such Interest is not
consummated within 60 days after the entry into such contract, the Selling
Partner's Interest in the Partnership shall again be subject to the restrictions
of this Section 9.03.
(C) Upon the consummation of sale or transfer permitted under
this Section 9.03, the purchaser or transferee of such Interest shall be
admitted as a Class A or Class B Limited Partner, as the case may be.
SECTION 9.04. PERMITTED SECURITY INTEREST. WKA shall have the right to
grant a security interest in all or any part of its Interests in the
Partnership, both as a General Partner and a Limited Partner, to secure payment
of the KG Loans as provided in Section 6.03 hereof.
SECTION 9.05. WITHDRAWAL OR TRANSFER BY GENERAL PARTNER.
(A) A General Partner shall be entitled to withdraw from the
Partnership only in connection with a transfer of its General Partner Interest
otherwise permitted under this Venture Agreement.
(B) Any General Partner (the "Selling General Partner") desiring
to sell or otherwise dispose of all of its Interest as a General Partner to an
unaffiliated third party at any time after the expiration of nine years after
the Commencement Date, shall first Offer in writing to sell such Interest to the
other General Partner. Such Offer shall set forth the Offering Price and the
terms at which the Selling General Partner desires to sell such Interest
including copies of any third party offer received by such Selling General
Partner. The other General Partner shall have the right, but not the obligation,
to accept such offer, in whole but not in part, by written notice of acceptance
within 30 days from their receipt of the Offer. If the Offer is
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not accepted in full by such General Partner or the Selling General Partner is
the sole remaining General Partner, then the Selling General Partner shall offer
the Interest to the Limited Partners, other than Limited Partners who are also
General Partners, and such Limited Partners shall have the right to accept such
additional Offer in proportion to their respective Residual Partnership
Interests, by written notice of acceptance within 30 days from their receipt of
such additional Offer. If the Offer is not accepted in full by such Limited
Partners, the Selling General Partner shall Offer the Interest not so accepted
to the Limited Partners who shall have accepted the Offer and such Limited
Partners shall have the right, but not the obligation, to accept such additional
Offer in proportion to their respective Residual Partnership Interests, by
written notice of acceptance given within 15 days of their receipt of such
additional offer. The Limited Partners entitled to receive an Offer from the
General Partner shall have the right to accept the Offers in such other
proportion as they shall agree. If the Offers are not accepted by the General
and/or Limited Partners with respect to the entire General Partner Interest of
such Selling General Partner, then the Selling General Partner shall be free for
a period of 180 days thereafter to enter into a binding contract with an
unaffiliated third party for the sale of such Interest for a price not less than
95% of the Offering Price for such Interest and otherwise on such material terms
and conditions as are not more favorable to the purchaser than those contained
in the Offer; provided, however, that if the sale of such Interest is not
consummated within 60 days after entry into such contract, the Selling General
Partner's Interest in the Partnership shall again be subject to the restrictions
of this Section 9.05;
(C) Upon the consummation of any sale or transfer permitted under
this Section 9.05, the purchasers or transferees of such Interest shall be
admitted as a General
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Partner except that if the Selling Partner is not the sole remaining General
Partner, the remaining General Partner(s) may require that such purchaser or
transferee be admitted only as a Limited Partner: a Class A Limited Partner if
the Selling General Partner was the KG General Partner and a Class B Limited
Partner if the Selling General Partner was the WKA General Partner.
SECTION 9.06. EFFECT OF BANKRUPTCY, DEATH OR INCOMPETENCE OF A LIMITED
PARTNER. The Bankruptcy, death or dissolution of a Limited Partner or an
adjudication that a Limited Partner is incompetent (which term shall include,
but not be limited to, insanity), shall not cause the termination or dissolution
of the Partnership, and the business of the Partnership shall continue. In the
event of the Bankruptcy, death or dissolution of a Limited Partner, the trustee,
receiver, executor, administrator or trustee of its estate, or if he is
adjudicated incompetent, his committee, guardian or conservator, shall have the
rights of such Limited Partner for the purpose of settling or managing his
estate or property and such power as the Bankrupt, deceased, dissolved or
incompetent Limited Partner possessed to assign all or any part of its Interest
and to join with the assignee in satisfying conditions precedent to the
admission of the assignee as a Limited Partner. The estate of a deceased,
dissolved or incompetent Limited Partner shall not be relieved of any
liabilities and obligations of the deceased, dissolved or incompetent Limited
Partner to the Partnership under this Agreement.
SECTION 9.07. BANKRUPTCY OF A GENERAL PARTNER. In the event of the
Bankruptcy or dissolution of a General Partner, the Partnership shall not be
dissolved unless such General Partner is the sole remaining General Partner.
Upon the Bankruptcy or dissolution of a General Partner, provided the
Partnership is not thereby dissolved, such Genal Partner shall immediately cease
to be a General Partner and its Interest as a General Partner shall become the
Interest of
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a Limited Partner (Class A Limited Partner if such Bankrupt General Partner is
the KG General Partner and a Class B General Partner if such Bankrupt General
Partner is the WKA General Partner). Such event shall not affect any rights,
including rights to fees hereunder, or liabilities of the former General Partner
which matured or were earned prior to the Bankruptcy or dissolution or the value
at the time of such Bankruptcy or dissolution of its Interest. If at the time of
the Bankruptcy or dissolution of a General Partner such General Partner was not
the sole General Partner of the Partnership, the remaining General Partner shall
immediately make such amendments of this Venture Agreement and execute and file
such amendments, certificates or other instruments as are necessary to reflect
the withdrawal.
SECTION 9.08. EFFECT OF TRANSFER. A Partner selling, transferring or
assigning all or any portion of its Interest hereunder shall pay all taxes and
fees incurred by the Partnership or any other Partner as a result of any
transfer of all or any portion of such Partner's Interest in the Partnership.
Any purchaser, transferee or assignee of a Partner's Interest shall be bound by
all of the terms and conditions of this Venture Agreement, including this
Article Nine, with the same force and effect as if such transferee had been a
signatory and an original party to this Venture Agreement in the place and stead
of its transferor. No sale, transfer or assignment shall be effective and no
purchaser, transferee or assignee of any Interest shall be admitted to the
Partnership unless and until such purchaser, transferee or assignee shall have
accepted and agreed to be bound by the terms and conditions of this Venture
Agreement and expressly assumed all obligations of the transferor with respect
to such Interest, except those obligations which are enforceable against the
transferor only by foreclosure of a lien or encumbrance on the Project or the
other property or assets of the Partnership by executing a
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counterpart hereof and other appropriate instruments and shall have delivered
such executed counterparts and instruments to each of the General Partners.
ARTICLE TEN
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
SECTION 10.01. MANAGEMENT OF THE PARTNERSHIP. No Limited Partner as
such shall take part in the management or control of the business of the
Partnership or transact any business in the name of the Partnership. No Limited
Partner as such shall have the power or authority to bind the Partnership or
to sign any agreement or document in the name of the Partnership. No Limited
Partner shall have any power or authority with respect to the Partnership.
SECTION 10.02. LIMITATION ON LIABILITY OF LIMITED PARTNERS. The
liability of each Limited Partner shall be limited to its Capital Contribution
as and when it is payable under the provisions of this Venture Agreement. No
Limited Partner as such shall have any other liability to contribute money to,
or in respect of the liabilities or obligations of, the Partnership, nor shall
any Limited Partner as such be personally liable for any obligations of the
Partnership except as otherwise provided by law. No Limited Partner as such
shall be obligated to make loans to the Partnership.
SECTION 10.03. LIABILITY TO LIMITED PARTNERS. The General Partners
shall have no fiduciary obligations to the Limited Partners as provided by the
Act or the law of the State of Delaware or any other jurisdiction absent gross
negligence or willful misconduct on the part of the General Partner sought to be
held liable. The Limited Partners shall look solely to the
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assets of the Partnership for any liability owed to them including any return of
their Capital Contributions and shall not look to the General Partners to
satisfy any such liabilities.
SECTION 10.04. POWER OF ATTORNEY. Each Class A Limited Partner hereby
makes, constitutes and appoints the KG General Partner and each Class B Limited
Partner hereby makes, constitutes and appoints WKA, its true and lawful attorney
for itself and in its name, place and stead to make, execute, sign, acknowledge,
file for recording at the appropriate public offices, and public such documents
as may be necessary to carry out the provisions of this Venture Agreement,
including (i) this Venture Agreement and amendments to this Venture Agreement,
(ii) any certificate and such other certificates or instruments as may be
required by law or are necessary to the conduct of the Partnership business.
Each Class A Limited Partner shall execute and deliver to the KG General Partner
and each Class B Limited Partner shall execute and deliver to WKA, within five
(5) days after receipt of the respective General Partner's written request
therefor, such other and further powers of attorney and instruments as the KG
General Partner or WKA deems necessary to carry out the purpose of this Section.
The foregoing grant of authority is hereby declared to be irrevocable and a
power coupled with an interest and shall not be affected by the Bankruptcy,
death or disability of any Limited Partner and the assignment by any Limited
Partner of its Interest; provided that in the event of an assignment of its
entire Interest, the foregoing power of attorney of an assignor Limited Partner
shall survive such assignment only until such time as the assignee is admitted
to the Partnership as a Limited Partner and all required documents and
instruments have been duly executed, filed and recorded to effect such
substitution. In the event of any conflict or inconsistency between the
provisions of this Venture Agreement and any document executed, signed or
acknowledged
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by the KG General Partner and/or WKA or filed for recording or published
pursuant to the power of attorney granted in this Section, this Venture
Agreement shall govern.
ARTICLE ELEVEN
APPROVALS
SECTION 11.01. PUERTO RICO GAMING AUTHORITY APPROVAL. Each General
Partner shall use its best efforts to obtain and thereafter maintain all
consents, approvals and authorizations which must be obtained and maintained by
such party in order to consummate the transactions contemplated thereby and
operate the Project as a first class luxury resort as presently contemplated,
including, without limitation, all consents, approvals and authorizations from
the Treasury of the Commonwealth of Puerto Rico and any other governmental body
or agency having authority over licensing of gambling in the Commonwealth of
Puerto Rico and any tax exemption granted to the Partnership by the Commonwealth
of Puerto Rico; provided. however, that nothing contained in this Article Eleven
shall require any General Partner to consent to modify any provisions of this
Venture Agreement or any other document referred to herein in any manner
materially adverse to its best interests.
SECTION 11.02. APPROVAL OF JAPANESE MINISTRY OF FINANCE. The KG
General Partner shall use its best efforts to obtain as promptly as practical
all approvals of the Japanese Ministry of Finance or other governmental
authorities as may be necessary to permit the KG General Partner to invest in
the Partnership and perform its obligations hereunder.
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ARTICLE TWELVE
PARTNERSHIP OBLIGATIONS
SECTION 12.01. NATURE OF OBLIGATIONS. The General Partners are acting
as joint developers of the Project and are sharing responsibility for completing
the Project on time and within a budget mutually agreed to by the General
Partners, all in accordance with the terms of this Venture Agreement. Except as
provided in Article Three with respect to Capital Contributions and Article Six
with respect to Deficiency Loans and KG Loans, all obligations of and expenses
and losses incurred by the Partnership or any General Partner on behalf of the
Partnership, and all payments made by the General Partners in connection with
the Partnership and the Project, including any liability for damages arising out
of claims or actions against any of the General Partners on account of the
ownership or operation of the Project, shall be obligations of the Partnership
and shall be satisfied out of the assets of the Partnership. Any indebtedness of
this Partnership, including any loans contemplated by this Venture Agreement,
which is secured by a mortgage, security interest or other lien or encumbrance
on the Project or the interests of the Partners in the Partnership, its assets,
profits and distributions and any mortgages, security interests or other liens
or encumbrances executed or granted in connection therewith, shall expressly
provide (unless the General Partners shall otherwise agree in writing) that the
obligee shall look solely to its security interest in the Project or the
interests of the Partners in the Partnership, its assets, profits and
distributions for the payment of any and all amounts due under the term of such
instruments and that the Partners shall have absolutely no personal liability
for the payment of such indebtedness or for any deficiency judgment resulting
from the foreclosure of such mortgage, security interest or liens.
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SECTION 12.02. INDEMNITIES.
(A) The Partnership shall defend, indemnify and hold harmless
each General Partner from and against all claims, demands, actions, suits,
proceedings, losses, liabilities, damages, deficiencies, costs or expenses
(including interest, penalties and reasonably, attorneys fees and disbursements
(collectively, "Losses") arising from (i) any act taken on behalf of or
reasonably believed by such General Partner to be taken on behalf of the
Partnership other than willful misconduct or gross negligence of the indemnified
General Partner.
(B) Each General Partner shall defend, indemnify and hold the
Partnership and the other General Partner harmless against and from all Losses
which shall or may arise by reason of anything done or omitted to be done by the
indemnifying General Partner (through or by its agents, employees or other
representatives) constituting gross negligence or willful misconduct.
(C) Each General Partner shall defend, indemnify and hold the
Partnership and the other General Partner harmless against and from any Loss
asserted by a transferee of all or any portion of such General Partner's
Interest as a Limited Partner.
(D) For purposes of this Section, the party entitled to
indemnification shall be known as the "Injured Party" and the party required to
indemnify shall be known as the "Other Party." In the event that the Other Party
shall be obligated to the Injured Party pursuant to this Section or in the event
that a suit, action, investigation, claim or proceeding is begun, made or
instituted as a result of which the Other Party may become obligated to the
Injured Party hereunder, the Injured Party shall give prompt written notice to
the Other Party of the occurrence of such event. The Other Party shall have the
right to defend, contest or otherwise
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protect against any such suit, action, investigation, claim or proceeding at the
Other Party's own cost and expense by counsel of its own choice reasonably
satisfactory to the Injured Party. The Injured Party shall have the right, but
not the obligation, to participate at its own expense in the defense thereof by
counsel of its own choice. In the event that the Other Party fails timely to
defend, contest or otherwise protect against any such suit, action,
investigation, claim or proceeding, the Injured Party shall have the right to
defend, contest or otherwise protect against the same and may make any
compromise or settlement thereof and recover the entire cost thereof from the
Other Party, including, without limitation, reasonable attorneys fees,
disbursements and all amounts paid as a result of such suit, action,
investigation, claim or proceeding or compromise or settlement thereof. In the
event the Injured Party elects at any time not to seek or continue to rely upon
indemnification from the Other Party with respect to any Loss, it shall have the
right to pay, defend, contest or otherwise protect against the same at its sole
cost and expense and the Other Party shall have no liability to the Injured
Party in respect of such Loss and no right to defend or participate in the
defense of such Loss. Anything to the contrary herein notwithstanding, prior to
finally settling any such claim, suit, action or proceeding, the Other Party
shall give the Injured Party notice of its intention to settle same and the
terms of such proposed settlement. If the Injured Party shall object to such
proposed settlement within ten days after its receipt of such notice, then the
Injured Party shall thereafter, at its sole expense, assume the control and
defense of such claim, suit, action or proceeding. In such event, the Other
Party shall not be relieved from its obligations hereunder but such obligation
shall be limited with respect to the amount of such claim, suit, action or
proceeding in the sense that its liability may not be greater than the amount
for which the same could have been settled
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as proposed by the Other Party and will not be greater than the amount for which
such suit, action, claim, investigation or proceeding is ultimately resolved. If
the Injured Party does not object to the terms of the proposed settlement within
the aforesaid ten day period, then the Other Party shall have the right to
consummate such proposed settlement upon the terms set forth in the aforesaid
notice. Failure to give the Other Party timely notice of any claim, suit, action
or proceeding shall in no way relieve such party from its obligation to
indemnify the Injured Party except to the extent of losses actually caused to
the Other Party by reason of such failure.
ARTICLE THIRTEEN
TERMINATION AND LIQUIDATION
SECTION 13.01. TERMINATION. The Partnership shall terminate upon the
occurrence of any one of the following events:
(A) The end of its term as provided in Section 2.04 hereof.
(B) Mutual agreement of the General Partners.
(C) The sale or abandonment of all or substantially all of the
Resort.
(D) Bankruptcy of the sole remaining Genal Partner unless within
90 days after such Bankruptcy, all Partners agree in writing to continue the
business of the Partnership and to the appointment, effective as of the date of
withdrawal of the Bankrupt General Partner, of one or more additional General
Partners.
SECTION 13.02. WINDING UP. Upon termination of the Partnership for any
reason, the Partnership shall continue its business solely for the purpose of
winding up its affairs and shall be liquidated as rapidly as business judgment
permits. All decisions with respect to
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disposition of Partnership assets, collection or compromise of any amounts
receivable and payment or compromise of any amounts payable by the Partnership
shall be made only with the consent of all General Partners except any General
Partner who is in Bankruptcy. The assets of the Partnership or proceeds thereof
shall be applied for the following purposes in the following order:
(A) Payment or provision for payment of all just debts and
obligations of the Partnership to creditors (other than Deficiency Loans,
Additional Loans, Preferred Returns, Deferred Preferred Returns and Incentive
Management Fees) and for the expenses of winding up the affairs of the
Partnership.
(B) Payment of interest and then principal on the Deficiency
Loans and Additional Loans in the order of priority and in such proportions as
set forth in Section 6.04 hereof.
(C) Payment of Distributable Cash in accordance with Section 8.01
with respect to any Fiscal Year for which such distributions had not been made.
(D) In accordance with the order of priority of the distribution
of Distributable Cash from a Capital Transaction as provided in Section 8.02
hereof.
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ARTICLE FOURTEEN
REPRESENTATIONS, WARRANTIES AND ADDITIONAL COVENANTS
SECTION 14.01. DUE ORGANIZATION.
(A) Kumugai Caribbean, Inc. represents and warrants to each
Partner that it is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas and has all necessary power and
authority, corporate or otherwise, to enter into this Venture Agreement, own its
Interests and perform its obligations hereunder.
(B) WKA represents and warrants to each Partner that it is a
genal partnership duly organized under the laws of the State of New York and has
all necessary power and authority under its partnership agreement to enter into
this Venture Agreement, own its Interests and perform its obligations hereunder.
SECTION 14.02. DUE EXECUTION AND DELIVERY. Each Partner represents and
warrants to each other Partner that the execution, delivery and performance by
such Partner of this Venture Agreement have been duly authorized by all
necessary corporate or partnership action, as the case may be, on the part of
such Partner, and no further action or approval is required in order to
constitute this Venture Agreement as the valid and binding obligation of such
Partner, enforceable in accordance with its terms.
SECTION 14.03. BINDING OBLIGATION. Each Partner represents and
warrants to each other Partner that this Venture Agreement constitutes the
legal, valid and binding obligation of such Partner, enforceable in accordance
with its terms.
SECTION 14.04. INVESTMENT. Each Partner represents and warrants to
each other
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Partner that such Partner is acquiring its interest in the Partnership for its
own account and without a view to sale or distribution.
SECTION 14.05. OWNERSHIP OF KG GENERAL PARTNER. The KG General Partner
represents and warrants to WKA that all of its outstanding capital stock is
issued to and beneficially owned by Kumugai Properties, Inc., that Kumugai
Properties, Inc. has the sole right to own and control the KG General Partner
and that no other person, firm or entity has any rights in or right to acquire
any interest in the KG General Partner.
SECTION 14.06. OWNERSHIP OF WKA GENERAL PARTNER. WKA represents and
warrants to the KG General Partner that it is directly or indirectly controlled
by WMS Industries, Inc., Burton and Richard Koffman and Hugh A. Andrews and that
no unaffiliated person, firm or entity has any rights to acquire any interest in
WKA.
ARTICLE FIFTEEN
MISCELLANEOUS
SECTION 15.01. FURTHER ASSURANCES. Each Partner hereby agrees to
execute and deliver all such other and additional instruments and documents and
do all such other acts and things as may be necessary to more fully effectuate
this Venture Agreement and carry on the business contemplated herein.
SECTION 15.02. EXPENSES. All costs, expenses and fees incurred by any
General Partner in connection with the formation and/or operation of the
business of this Partnership, the preparation, negotiation and execution of this
Venture Agreement and the acquisition of the Project shall be paid for and borne
by the Partnership and each General Partner shall be entitled to be reimbursed
for any of such amounts paid directly by it. All of the foregoing amounts,
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other than those incurred in connection with the operation of the business of
the Partnership, shall be included in the Total Project Costs.
SECTION 15.03. NOTICES. All notices, requests, statements, offers,
acceptances or other writings required or permitted to be given or furnished
hereunder to any Partner shall be deemed sufficiently given or furnished if in
writing and delivered personally to such Partner, transmitted by confirmed fax,
deposited in the United States mail, in a sealed envelope, certified, with
postage prepaid, or sent by responsible overnight delivery service addressed to
such Partner, at its address set forth on Exhibit H hereof or at such other
address as such Partner shall have previously designated by written notice to
the other Partners and shall be effective when personally delivered or
transmitted, five business days after mailing or the next business day after
delivery to a responsible overnight delivery service.
SECTION 15.04. EQUITABLE REMEDIES. In the event of a breach or
threatened breach of this Venture Agreement by any Partner, the remedy at law in
favor of the other Partners will be inadequate and such other Partners, in
addition to all other rights which may be available, shall accordingly have the
right of specific performance in the event of any breach, or injunction in the
event of any threatened breach, of this Venture Agreement by any Partner.
SECTION 15.05. REMEDIES CUMULATIVE. Except as otherwise provided
herein, each right, power and remedy provided for herein or now or hereafter
existing at law, in equity, by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power or remedy
provided for herein, or now or hereafter existing at law, in equity, by statute
or otherwise, and the exercise or beginning of the existence or the forbearance
of exercise by any party of any one or more of such rights, powers or remedies
shall not preclude the
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simultaneous or later exercise by such party of any or all of such other rights,
power or remedies.
SECTION 15.06. CAPTIONS; PARTIAL INVALIDITY. The captions, Section
numbers and Article numbers appearing in this Venture Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of such Sections or Articles of this Venture
Agreement nor in any way affect this Venture Agreement. If any term, covenant or
condition of this Venture Agreement or the application thereof to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder of
this Venture Agreement, or the application of such term, covenant or condition
to persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby and each term, covenant or
condition of this Venture Agreement shall be valid and be enforced to the
fullest extent permitted by law.
SECTION 15.07. ENTIRE AGREEMENT. This Venture Agreement and the other
documents and instruments being delivered concurrently herewith shall constitute
the entire agreement among the Partners with respect to the Partnership, all
prior agreements among the partners, whether written or oral, begin merged
herein and of no further force and effect. This Venture Agreement cannot be
changed, modified or discharged orally but only by an agreement in writing
executed by all General Partners. The Venture Agreement shall be amended as may
be necessary to reflect the subsequent addition, substitution or deletion of any
Partner.
SECTION 15.08. APPLICABLE LAW. This Venture Agreement shall be
interpreted and construed under and governed by the Act and the laws of the
State of Delaware applicable to agreements executed and performed entirely
within that State.
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SECTION 15.09. COUNTERPARTS. This Venture Agreement may be executed in
several original counterparts, each of which shall for all purposes be deemed an
original, and all of such counterparts shall together constitute but one and the
same agreement.
SECTION 15.10. SUCCESSORS. All of the provisions of this Venture
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Partners hereto. Any Partner who makes a transfer or assignment
of all of its Interest permitted by the terms of this Venture Agreement shall
have no further liability or obligation hereunder, except with (i) respect to
claims arising prior to such transfer or assignment and the obligation to make
Capital Contributions, (ii) that no assignment shall relieve the KG General
Partner from its obligation to make Deficiency Loans or KG Loans, (iii) no
transfer by WKA shall impair or impede the obligation of the WKA General Partner
to repay the KG Loans in accordance with their terms or impair or impede the
validity or integrity of the security interest granted to the KG General Partner
in the Interests of WKA in the Partnership and any such transfer shall be
expressly subject thereto. References in this Venture Agreement to one or more
of the parties hereto, or to a "Partner" or the "Partners" shall, in the case of
a transfer or assignment of any such Partner's Interest which is permitted by
this Venture Agreement, be deemed to be, or to include, as the case may be, a
reference to such permitted assignee or transferee and shall not be deemed to
include a reference to the Partner who has transferred or assigned such
Interest.
SECTION 15.11. CONFIDENTIALITY. Each Partner agrees not to issue any
press release or make any public announcement no public statement regarding this
Venture Agreement without the consent of the other Partner, except as may be
required by law.
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IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the day and year first written.
WKA EL CON ASSOCIATES
By: WMS El Con Corp., Partner
By:/s/
............................
Norman J. Menell, President
By: International Textile Products
of Puerto Rico, Inc., Partner
By:/s/
............................
Richard E. Koffman,
Vice President
By: KMA Associates of Puerto Rico,
Inc., Partner
By:/s/
............................
Richard E. Koffman,
Vice President
By: Hospitality Investor Group, S.E.,
Partner
By:/s/
............................
Hugh A. Andrews, President
KUMAGAI CARIBBEAN, INC.
By:/s/
............................
Takayuki Furuta, Chairman
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State of Hawaii )
: ss.:
City and County of Honolulu )
On January 12, 1990 before me personally came Norman J. Menell, to me
known and known to me to be President of WMS El Con Corp., the corporation
described in and who executed the foregoing instrument, and he acknowledged to
me that he executed the same by order of the Board of Directors.
/s/
..............................
Notary Public
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State of Hawaii )
: ss.:
City and County of Honolulu )
On January 12, 1990 before me personally came Richard E. Koffman, to
me known and known to me to be Vice President of International Textile Products
of Puerto Rico, Inc., the corporation described in and who executed the
foregoing instrument, and he acknowledged to me that he executed the same by
order of the Board of Directors.
/s/
...............................
Notary Public
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State of Hawaii )
: ss.:
City and County of Honolulu )
On January 12, 1990 before me personally came Richard E. Koffman, to
me known and known to me to be Vice President of KMA Associates of Puerto Rico,
Inc., the corporation described in and who executed the foregoing instrument,
and he acknowledged to me that he executed the same by order of the Board of
Directors.
/s/
...............................
Notary Public
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State of Hawaii )
: ss.:
City and County of Honolulu )
On January 12, 1990 before me personally came Hugh A. Andrews, to me
known and known to me to be President of HASN, Inc., the corporation described
in and who executed the foregoing instrument, and he acknowledged to me that he
executed the same by order of the Board of Directors.
/s/
...............................
Notary Public
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State of Hawaii )
: ss.:
City and County of Honolulu )
On January 12, 1990 before me personally came Takayuki Furuta, to me
known and known to me to be Chairman of Kumagai Caribbean, Inc., the corporation
described in and who executed the foregoing instrument, and he acknowledged to
me that he executed the same by order of the Board of Directors.
/s/
...............................
Notary Public
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APPENDIX
The following constitutes an Appendix to the EL CONQUISTADOR PARTNERSHIP L.P.
VENTURE AGREEMENT, dated January 12, 1990 and shall be deemed a part thereof as
if fully set forth therein. All capitalized terms used herein shall have the
same meaning ascribed to such terms in the Venture Agreement except as otherwise
defined herein.
The allocations to the Capital Account of each Partner for Federal
income tax purposes of Net Income, Gain from a Capital Transaction, Net Loss,
Net Loss from a Capital Transaction and Depreciation or, where required, the
allocation of items or elements of any of the foregoing, and the allocation of
gross income, if required, shall be made in accordance with this Appendix. The
Partners wish to have the allocations made in accordance with Article I of this
Appendix but recognize that under certain circumstances such allocations may
diverge from allocations that may be required to be made for tax purposes.
Article II of this Appendix sets forth certain targets which must be met by the
Allocations in Article I. To the extent that there is divergence between the
results of allocations under Article I and Article II, Article I is subject to
Article II. Article II prescribes the order in which the allocations in Article
I are to be adjusted if such adjustments are required to bring the Article I
allocations into conformity with the results mandated by Article II. Article III
sets forth certain provisions required by the Regulations and both Article I and
Article II are subject to Article III.
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I. ALLOCATIONS OF NET INCOME, NET LOSS, GAIN OR NET LOSS FROM A CAPITAL
TRANSACTION AND DEPRECIATION
1. NET INCOME: For each fiscal year of the Partnership with respect to
which the operations of the Partnership have produced Net Income, 50% of such
Net Income shall be allocated and credited to the Capital Accounts of the Class
A Limited Partners and the KG General Partner in proportion to their respective
Residual Partnership Interests and 50% of such Net Income shall be allocated and
credited to the Capital Accounts of the WKA General Partner and the Class B
Limited Partners in proportion to their respective Residual Partnership
Interests (the foregoing allocation being referred to as the "50-50 ratio")
provided that an amount of Net Income up to the amount of the Preferred Return
for such fiscal year shall first be allocated and credited 70% to the Capital
Accounts of the Class A Limited Partners and the KG General Partner in
proportion to their Contribution Ratios and 30% to the Capital Account of the
WKA General Partner and the Class B Limited Partners in proportion to their
respective Contribution Ratios, and further provided that allocations in the
50-50 ratio shall only exceed the amount of Distributable Cash to be distributed
in such ratio to the extent the Capital Account of each of the Partners after
giving effect to distributions of such Net Income for the Fiscal Year in the 50-
50 ratio would exceed its Unrecovered Capital plus such Partner's Deferred
Preferred Return.
2. NET LOSS: For each year of the Partnership with respect to which
the operations of the Partnership have produced a Net Loss such Net Loss shall
be allocated and charged to the Capital Accounts of the Partners in the
following manner:
FIRST: 50% to the KG General Partner and the Class A Limited
Partners in proportion to their respective Residual Partnership Interests and
50% to the WKA General Partner and the Class B Limited Partners in proportion to
their respective Residual
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Partnership Interests to the extent of the respective allocations to them of the
excess of (X) prior allocations of Net Income made in the 50-50 ratio plus
current and prior allocations of Gain from a Capital Transaction made in the
50-50 ratio over the sum of (Y) distributions of Operating Cashflow and
Extraordinary Cashflow made in the 50-50 ratio and prior allocations made in the
50-50 ratio of (i) Net Loss, (ii) Net Loss from a Capital Transaction, and (iii)
Depreciation;
SECOND: 70% to the KG General Partner and the Class A Limited
Partners in proportion to their respective Contribution Ratios and 30% to the
WKA General Partner and the Class B Limited Partners in proportion to their
respective Contribution Ratios until the Capital Account of any Partner has been
reduced to zero;
THIRD: to any Partner or Partners with a positive balance in its
Capital Account until each Partner's Capital Account has been reduced to zero;
and if more than one Partner has a Positive Capital Account as near as possible
to the ratio set forth in paragraph SECOND, until no Partner has a Positive
Capital Account.
FOURTH: 100% to the KG General Partner and the Class A General
Partners in the ratio of their respective Contribution Ratios up to the lesser
of an additional $20 million or the Partner Nonrecourse Debt in respect of
Deficiency Loans in accordance with and subject to the principles of Section 2
of Article III of this Appendix.
FIFTH: to the General Partners in proportion to their Residual
Partnership Interests.
Notwithstanding the foregoing, Nonrecourse Deductions shall be
allocated 70% to the KG General Partner and the Class A Limited Partners in
proportion to their respective
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Contribution Ratios, and 30% to the WKA General Partner and the Class B Limited
Partners in proportion to their respective Contribution Ratios.
3. GAIN FROM A CAPITAL TRANSACTION. Gain from a Capital Transaction
realized by the Partnership after giving effect to Sections 3 and 4 of Article
III of this Appendix shall be allocated as follows after giving effect for
purposes of paragraph FOURTH of this Section to the distribution of the
Preferred Return and the Deferred Preferred Return but otherwise prior to giving
effect to any other distribution of Extraordinary Cash Flow in respect of such
transaction:
FIRST: up to the deficit balance in each Partner's Capital
Account (i) in the ratio of 50% to the KG General Partner and the Class A
Limited Partners in proportion to their Contribution Ratios and 50% to the WKA
General Partner and the Class B Limited Partners in proportion to their
Contribution Ratios or such other ratio as will cause the deficits in their
Capital Accounts to be in the Prescribed Ratio and (ii) thereafter in the ratio
of 70% to the KG General Partner and the Class A Limited Partners in proportion
to their Contribution Ratios and 30% to the WKA General Partner and the Class B
Limited Partner in proportion to their Contribution Ratios until the Partners'
Capital Accounts shall no longer be negative;
SECOND: to the KG General Partner and the Class A Limited
Partners in proportion to their Contribution Ratios to the extent their Capital
Accounts are less than the amounts distributable to them under paragraphs A and
B of Section 8.02 of the Venture Agreement in respect of such transaction;
THIRD: to the WKA General Partner and the Class B Limited
Partners in proportion to their Contribution Ratios to the extent their Capital
Accounts are less
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than the amounts distributable to them under paragraphs C and D of Section 8.02
of the Venture Agreement in respect of such transaction;
FOURTH: to either the KG General Partner and the Class A Limited
Partners on the one hand, or the WKA General Partner and the Class B Limited
Partners, on the other, the amount or amounts if any necessary to cause the
Capital Account of such Partners to be in the same ratio to their Unrecovered
Capital as the ratio of the other Partners' Capital Accounts is to their
Unrecovered Capital; and thereafter 70% to the KG General Partner and the Class
A Limited Partners in proportion to their Contribution Ratios and 30% to the WKA
General Partner and the Class B Limited Partners in proportion to their
Contribution Ratios until each Partner's Capital Account is equal to its
Unrecovered Capital;
FIFTH: to the Partners in accordance with their respective
Residual Partnership Interests.
4. NET LOSS FROM A CAPITAL TRANSACTION. Net Loss from a Capital
Transaction shall be charged to the Capital Accounts of the Partners and
allocated as follows:
FIRST: 50% to the KG General Partners and the Class A Limited
Partners in proportion to their Residual Partnership Interests and 50% to the
WKA General Partners and the Class B Limited Partners in proportion to their
Residual Partnership Interests to the extent in the case of each Partner of the
excess of (X) current and prior allocations of Net Income plus prior allocations
of Gain from a Capital Transaction made in the 50-50 ratio over the sum of (Y)
distributions made in the 50-50 ratio, current and prior allocations of Net Loss
made in the 50-50 ratio, prior allocations of Net Loss from a Capital
Transaction made in the 50-50 ratio and prior allocations of Depreciation made
in the 50-50 ratio.
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SECOND: 70% to the KG General Partner and the Class A Limited
Partners in proportion to their Contribution Ratios and 30% to the WKA General
Partner and the Class B Limited Partners in proportion to their Contribution
Ratios until the Capital Account of any Partner shall be reduced to zero;
THIRD: to any Partner or Partners with a positive balance in its
Capital Account until each Partner's Capital account has been reduced to zero
and if more than one Partner has a Positive Capital Account in proportion to
their respective Contribution Ratios or as near as possible to such ratios until
no Partner has a Positive Capital Account; and
FOURTH: to the General Partners in proportion to their Residual
Partnership Interests, subject to Section 2 of Article III of this Appendix.
5. ALLOCATION OF DEPRECIATION.
(A) For each fiscal year of the Partnership there shall be
charged to the Capital Account of each Partner, and allocated to each Partner
for income tax purposes, an amount of the Depreciation as follows:
FIRST: 50% to the KG General Partner and the Class A Limited
Partners in proportion to their Residual Partnership Interests and 50% to the
WKA General Partner and the Class B Limited Partners in proportion to their
Residual Partnership Interests to the extent of the excess in the case of each
Partner of (X) current and prior allocations of Net Income and Gain from a
Capital Transaction made in the 50-50 ratio over the sum of (Y) distributions of
Operating Cashflow and Extraordinary Cashflow made in the 50-50 ratio, current
and prior allocations of Net Loss and Net Loss from a Capital Transaction made
in the 50-50 ratio, and prior allocations under this paragraph FIRST;
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SECOND: depreciation shall be allocated to the Partners in the
ratio of 70% to the KG General Partner and the Class A Limited Partners in
proportion to their respective Contribution Ratios and 30% to the WKA General
Partner and the Class B Limited Partners in proportion to their respective
Contribution Ratios until the Capital Account of any Partner shall be reduced to
zero;
THIRD: to any Partner or Partners with a positive balance in its
Capital Account until each Partner's Capital Account has been reduced to zero
and if more than one Partner has a Positive Capital Account in proportion to
their Contribution Ratios or as near as possible to such ratios until no Partner
has a Positive Capital Account; and
FOURTH: subject to Section 2 of Article III of this Appendix, any
remaining Depreciation shall be allocated 70% to the KG General Partner and the
Class A Limited Partners in proportion to their Contribution Ratios and 30% to
the WKA General Partner and the Class B Limited Partners in proportion to their
Contribution Ratios.
Notwithstanding the foregoing paragraphs FIRST through FOURTH,
Depreciation which is a Nonrecourse Deduction shall be allocated 70% to the KG
General Partner and the Class A Limited Partners in proportion to their
respective Contribution Ratios and 30% to the WKA General Partner and the Class
B Limited Partners in proportion to their respective Contribution Ratios.
(B) Recapture shall be allocated to the Partners as follows
(i.e., the portion of the gain allocated to a Partner which constitutes
Recapture shall be determined as follows): to the extent possible, there shall
be allocated to each Partner that portion of such Recapture which is equal to
the fraction, the numerator of which is the Depreciation deductions
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that generated such Recapture (or other items of deduction that generated such
Recapture) allowable with respect to the Partnership property being sold
theretofore allocated to such Partner (or a predecessor in interest to such
Partner), and the denominator of which is the total Depreciation deductions that
generated such Recapture (or other items of deduction that generated such
Recapture) allowable with respect to the Partnership property being sold
theretofore allocated to all Partners provided, however, that under no
circumstances shall there be allocated to any Partner Recapture in excess of the
Gain from a Capital Transaction allocated to such Partner (and such excess shall
be allocated instead to the other Partners).
II. ALLOCATIONS TO CONFORM TO TARGET CAPITAL ACCOUNTS.
If the Capital Account of a Partner at the end of any fiscal year as
determined by the application of Articles I and III differs from that Partner's
Target Capital Account, the allocations provided for in Article I of this
Appendix shall be modified so that each Partner's Capital Account shall equal
its Target Capital Account. Modification pursuant to the preceding sentence
shall be subject to the requirements that (i) the ceiling rule as set forth in
Code Section 1.704-1(c)(2) as it may be applied by the Internal Revenue Service
will not be violated and (ii) the provisions of Article III of this Appendix may
not be violated. Subject to the foregoing, the modifications required hereunder
shall be made by first reallocating Net Income or Net Loss, as the case may be,
and then reallocating Gain or Net Loss from a Capital Transaction, as the case
may be, and then by reallocating Depreciation.
III. EXCEPTIONS.
Notwithstanding anything to the contrary contained in this Appendix,
the following shall apply:
1. GENERAL LIMITATION: No allocation shall be made to a Partner which
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would cause such Partner to have a deficit balance in its Adjusted Capital
Account which exceeds the sum of such Partner's share of Partnership Minimum
Gain and such Partner's Share of Minimum Gain Attributable to Partner
Nonrecourse Debt. If the limitation contained in the preceding sentence would
apply to cause an item of Net Loss or deduction to be unavailable for allocation
to all Partners then such item of Net Loss or deduction shall be allocated among
the Partners in accordance with the WKA General Partner's best judgment as to
the manner in which the loss or deduction will be borne.
2. PARTNER NONRECOURSE DEDUCTIONS: Any and all items of Net Loss and
deduction and any and all expenditures described in Section 705(a)(2)(B) of the
Code (or treated as expenditures so described pursuant to Section
1.704-1(b)(2)(iv)(i) of the Regulations) (collectively, "Partner Nonrecourse
Deductions") that are (in accordance with the principles set forth in Section
1.704-IT(b)(4)(iv)(h)(3) of the Regulations) attributable to Partner Nonrecourse
Debt shall be allocated to the Partner that bears the Economic Risk of Loss for
such Partner Nonrecourse Debt. If more than one Partner bears such Economic Risk
of Loss, such Partner Nonrecourse Deductions shall be allocated between or among
such Partners in accordance with the ratios in which they share such Economic
Risk of Loss.
3. PARTNERSHIP MINIMUM GAIN: If there is a net decrease in Partnership
Minimum Gain for any fiscal year of the Partnership, there shall be allocated to
each Partner for such fiscal year, before any other allocation is made of
Partnership items under Article I or Article II of this Appendix, items of
income and gain for such year (and, if necessary, for subsequent years) in
proportion to, and to the extent of, an amount equal to the greater of: (1) the
portion of such Partner's share of the net decrease in Partnership Minimum Gain
during such
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fiscal year that is allocable (in accordance with the principles set forth in
Section 1.704-IT(b)(4)(iv)(e)(2) of the Regulations) to the sale or other
disposition of Partnership property subject to one or more Nonrecourse
Liabilities of the Partnership; or (2) the deficit balance in such Partner's
Adjusted Capital Account at the end of such fiscal year. The amount of such
deficit balance which needs to be eliminated shall be reduced by the amount of
such Partner's Share of Partnership Minimum Gain and such Partner's Share of
Minimum Gain Attributable to Partner Nonrecourse Debt (computed, in each case,
by reference to the amount of Partnership Minimum Gain and Minimum Gain
Attributable to Partner Nonrecourse Debt after taking into account any changes
thereto during such fiscal year). Items of income and gain to be allocated
pursuant to the foregoing provisions of this paragraph shall consist first of
gains recognized from the disposition of items of Partnership property subject
to one or more Nonrecourse Liabilities of the Partnership to the extent of the
decrease in Partnership Minimum Gain attributable to the disposition of such
items of Partnership property (or a proportionate share of each such gain if
such gains exceed the amount of income and gain required to be allocated
pursuant to the foregoing provisions of this paragraph for such fiscal year),
and then of a pro rata portion of the other items of Partnership income and gain
for that year.
4. MINIMUM GAIN ATTRIBUTABLE TO PARTNER NONRECOURSE DEBT: If there is,
for any fiscal year of the Partnership, a net decrease in the Minimum Gain
Attributable to Partner Nonrecourse Debt, there shall be allocated to each
Partner that has a share of Minimum Gain Attributable to Partner Nonrecourse
Debt at the beginning of such fiscal year before any other allocation under
Section 704(b) of the Code is made pursuant to this Appendix (other than an
allocation required pursuant to the provisions of Section 3 of this Article III
of this Appendix)
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items of income and gain for such fiscal year (and, if necessary, for subsequent
years) in proportion to, and to the extent of, an amount equal to the greater
of: (1) the portion of such Partner's share of the net decrease in the Minimum
Gain Attributable to Partner Nonrecourse Debt that is allocable (in accordance
with the principles set forth in Section 1.704-1T(b)(4)(iv)(h)(4) of the
Regulations) to the sale or other disposition of Partnership property subject to
such Partner Nonrecourse Debt; or (2) the deficit balance in such Partner's
Adjusted Capital Account at the end of such fiscal year. The amount of such
deficit balance which needs to be eliminated shall be reduced by the amount of
such Partner's Share of Partnership Minimum Gain and such Partner's Share of
Minimum Gain Attributable to Partner Nonrecourse Debt (computed, in each case,
by reference to the amount of Partnership Minimum Gain and Minimum Gain
Attributable to Partner Nonrecourse Debt after taking into account any changes
thereto during such fiscal year). The determination of which items of income and
gain to be allocated pursuant to the foregoing provisions of this paragraph of
this Section shall be made in a manner that is consistent with the principles
contained in Section 1.704-IT(b)(4)(iv)(e)(2) of the Regulations.
5. QUALIFIED INCOME OFFSET: In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Section
1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Regulations (modified, as
appropriate, by Sections 1.704-IT(b)(4)(iv)(e)(3) and (h)(4) of the
Regulations), there shall be specially allocated to such Partner such items of
Partnership income and gain, at such times and in such amounts as will eliminate
as quickly as possible the deficit balance (if any) in its Capital Account (in
excess of the sum of such Partner's share of Partnership Minimum Gain, such
Partner's share of Minimum Gain Attributable to Partner
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Nonrecourse Debt) created by such adjustments, allocations or distributions. To
the extent permitted by the Code and the Regulations, any special allocations of
items of income or gain pursuant to this paragraph 5 shall be taken into account
in computing subsequent allocations of Net Income or Net Loss pursuant to this
Appendix, so that the net amount of any items so allocated and the subsequent
Net Income or Net Loss allocated to the Partners pursuant to Article I and
Article II of this Appendix shall, to the extent possible, be equal to the net
amounts that would have been allocated to each such Partner pursuant to the
provisions of Article I and Article II of this Appendix if such unexpected
adjustments, allocations or distributions had not occurred.
IV. SPECIAL ALLOCATION RULES AND PARTNERSHIP ELECTIONS:
1. Income, gain, loss and deduction with respect to property
contributed to the Partnership by a Partner (and with respect to other
circumstances for which Treas. Reg. 'SS'1.704-1(b) requires Code Section 704(c)
principles to be applied) shall be allocated among the Partners for tax purposes
so as to take account of the variation between the basis (within the meaning of
Section 704(c) of the Code) of the property to the Partnership and its fair
market value at the time of contribution (or the variation between the basis and
value or applicable Capital Account at the time the principles of Section 704(c)
of the Code are to be applied.
2. In the event a Partner transfers all or part of its interest in the
Partnership, or in the event an interest in the Partnership, or in the event an
interest in a Partner that itself is a partnership is transferred, the
Partnership shall, upon request of the transferee, elect, pursuant to Section
754 of the Code, to adjust the basis of the property owned by the Partnership in
accordance with Section 743 of the Code.
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3. The Partnership shall elect the straight line method of
depreciation and the shortest permissible recovery periods (within the meaning
of Section 168 of the Code) with respect to the Resort.
4. Except as otherwise provided in this Partnership Agreement, all
other elections required or permitted to be made by the Partnership under the
Code shall be made by mutual agreement of all the General Partners.
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FIRST AMENDMENT AGREEMENT
This Amendment Agreement (the "Amendment Agreement") is made the 4th
day of May, 1992, between KUMAGAI CARIBBEAN, INC., a Texas corporation, having
an office at Suite 300, Parkside Building, Metro Office Park, San Juan, Puerto
Rico 00920-1706 and WKA EL CON ASSOCIATES, a New York General Partnership,
having an office c/o WMS Industries Inc., 405 Lexington Avenue, New York, New
York 10174.
W I T N E S S E T H :
WHEREAS, the parties executed on January 12, 1990, a Venture Agreement
(the "Venture Agreement") for the purpose of acquiring certain real property and
improvements thereon located in Fajardo, Puerto Rico, formerly known as "El
Conquistador Hotel", and to undertake the renovation, improvement, construction
and development thereof and to operate the same as a first-class, luxury
destination mega-resort; and
WHEREAS, the parties desire to amend the Venture Agreement.
NOW, THEREFORE, in consideration of the premises and other respective
representations, warranties, covenants and conditions contained herein, the
parties hereto agree as follows:
1. The Preamble is made to form part hereof.
2. The capitalized terms used herein shall have the same meaning used
in the Venture agreement and the Appendix thereto, unless the context requires
otherwise.
3. It is the intent of the parties that the terms of this First
Amendment
<PAGE>
<PAGE>
Agreement (the "Amendment Agreement") shall supersede and override any
conflicting provision in the Venture Agreement or other document executed by the
parties hereto and any conflict or ambiguity between this Amendment Agreement
and any other Agreement shall be resolved in favor of this Amendment Agreement.
4. The revised Development Budget for the Project is hereby approved
as delivered by the parties hereto.
5. The Venture Agreement is hereby amended by deleting Sections 1.212
and 1.28 in their entireties and substituting in their places the following:
"Section 1.12 "Capital Contribution" means the amount
to be contributed to the Partnership by any Partner, other
than Supplemental Contributions, pursuant to Article Three
hereof."
"Section 1.28 "Distributable Cash" means Operating
Cashflow plus an amount equal to mandatory prepayments under
the Special Loans less all payments made in respect of
Deficiency Loans and Additional Loans."
6. The Venture Agreement is hereby amended by adding new Sections 1.88
through 1.95 to read as follows:
"Section 1.88 "Supplemental Contribution" means the
amounts contributed to the Partnership by any Partner
designated as a "Supplemental Contribution" in Article
Three.
Section 1.89 "Unrecovered Supplemental Contribution"
means with respect to each Partner the amount at any time of
such Partner's Supplemental Contribution actually made to
the Partnership, reduced by distributions made to such
Partner pursuant to Paragraph J of Section 8.02 hereof.
Section 1.90 "Supplemental Preferred Return" means for
any Fiscal Year or part thereof an 8.5% annual rate of
return on the amount of each Partner's Unrecovered
Supplemental Contribution calculated based upon the amount
of each Partner's Unrecovered Supplemental Contribution from
day to day.
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<PAGE>
Section 1.91 "Supplemental Deferred Preferred Return"
means the amount of any Supplemental Preferred Return unpaid
from all prior fiscal year(s) of the Partnership, together
with interest thereon at the rate of 10% per annum from the
end of the Fiscal Year to which such Supplemental Preferred
Return relates to the date of payment.
Section 1.92 "GDB" means the Government Development
Bank For Puerto Rico.
Section 1.92 "GDB Loans" shall have the meaning set
forth in Section 6.06 hereof.
Section 1.94 "GDB Loan Agreements" means the Loan
Agreement dated February 7, 1991 between the GDB and the
Partnership and the Credit Facility Agreement dated May 5,
1992 between the GDB, the KG General Partner and the WKA
General Partner, as the same may be amended from time to
time.
Section 1.95 "Special Loans" shall have the meaning set
forth in Section 6.06 hereof.
7. The Venture Agreement is hereby amended by changing the addresses
in the table in Section 3.01 to read as follows:
Kumagai Caribbean, Inc.
Suite 310, Parkside Bldg.
Metro Office Park
San Juan, Puerto Rico
00920-1706
WKA El Con Associates
c/o WMS Industries Inc.
3401 N. California Avenue
Chicago, Illinois 60618
8. The Venture Agreement is hereby further amended by changing the
addresses in the table in Section 3.02 to read as follows:
Class A Limited Partner
- -----------------------
3
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<PAGE>
Kumagai Caribbean, Inc.
Suite 310, Parkside Bldg.
Metro Office Park
San Juan, Puerto Rico
00920-1706
Class B Limited Partner
- -----------------------
WKA El Con Associates
c/o WMS Industries Inc.
3401 N. California Avenue
Chicago, Illinois 60618
9. Section 3.03 of the Venture Agreement is hereby amended by adding
the following at the end thereof:
"Additionally, the Partners may make Supplemental
Contributions to the Partnership, such Supplemental
Contributions to be made pursuant to the written consent of
the Partners as they may agree upon from time to time."
10. The parties hereby agree that a Call Notice for Deficiency Loans
cannot be made to fund costs, fees or expenses attributable to Total Project
Costs, it being the intention of the parties that the revised Development Budget
not to be exceeded. The first sentence of Section 6.01 of the Venture Agreement
is hereby amended to read as follows:
"If at any time after the Commencement Date but prior
to the expiration of five (5) years from the Commencement
Date, the Partnership has insufficient funds available to
pay any portion of operating costs or any other fees or
expenses related to the operation of the Project or the
Resort, the Partnership's business or the liquidation or
winding up of the Partnership, including payment of
liabilities or reserves for liabilities, the WKA General
Partner shall notify (the "Call Notice") each of the General
Partners in writing of the amount needed (the "Deficiency")
to pay such costs, fees or expenses; no Call Notice should
be made to cover any portion of any costs, fees or expenses
attributable to Total Project Costs, including the
renovation, improvement, construction or development of the
Project or the Resort."
4
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<PAGE>
11. Section 6.01 of the Venture Agreement is hereby further amended by
deleting the last sentence thereof and substituting in its place the following:
"Notwithstanding the foregoing, at no time shall either
the KG General Partner or the WKA General Partner be
required to make Deficiency Loans to the Partnership in
excess of $7,000,000 in principal amount each outstanding at
any time."
12. Section 6.02 of the Venture Agreement is hereby amended by
deleting the first sentence thereof and substituting in its place the following:
"If at any time after all Capital Contributions have
been made and either (i) there is outstanding Deficiency
Loans in the aggregate principal amount of $14,000,000 or
(ii) the obligation of the General Partners to make
Deficiency Loans has terminated, the Partnership has
insufficient funds to meet any of its obligations other than
obligations to any of its Partners, then the General
Partners shall have the right, but not the obligation, to
fund such deficiencies by making additional loans
("Additional Loans") to the Partnership in the amounts
necessary to meet such obligations but only if the
reasonable needs of the Partnership's business so require."
13. Contemporaneously herewith the Partners are entering into an
agreement with The Mitsubishi Bank, Limited pursuant to which the Partners,
severally and not jointly, have agreed with The Mitsubishi Bank, Limited to
provide up to $3,000,000 each to the Partnership under certain circumstances to
fund operating deficiencies. Such funds, if provided, will be deemed Additional
Loans under Section 6.02 of the Venture Agreement. Any additional Loans made by
the Partners voluntarily and not at the request of The Mitsubishi Bank, Limited
will not be deemed to satisfy such Partner's obligations to The Mitsubishi Bank,
Limited to make the Additional Loans to fund operating deficiencies as
aforesaid.
14. Section 7.02(A) of the Venture Agreement is hereby amended by
adding the following after the words "Capital Contribution":
5
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<PAGE>
"and Supplemental Capital Contribution".
15. There is hereby added a new Section 6.06 to the Venture Agreement
entitled "Special Loans", which reads as follows:
"6.06 Special Loans. The General Partners each expect
to borrow $4,000,000.00 from the GDB (the "GDB Loans") for a
total of $8,000,000.00 The General Partners agree to utilize
the proceeds from the GDB Loans to make a loan to the
Partnership of $4,000,000.00 each (the "Special Loans"). The
terms and conditions of the Special Loans shall be the same
as the terms and conditions of the GDB Loans in all material
respects and shall be in accordance with the form of
Partnership loan agreement annexed hereto as Exhibit A.
Special Loans shall not be deemed to be Deficiency Loans or
Additional Loans for purposes of this Agreement, including
Section 6.04 hereof."
16. Section 6.04 of the Venture Agreement dealing with repayment of
loans is hereby amended by the addition at the end of the section of a new
paragraph which reads as follows:
"The payment of interest and principal on the Special
Loans shall not be subject to the limitations provided above
and the Partnership shall make payments of interest and
principal on the Special Loans in accordance with the terms
and conditions thereof (which reflect the terms and
conditions of the GDB Loans)."
17. The Venture Agreement is hereby amended by deleting ARTICLE EIGHT
in its entirety and substituting in its place the following:
"ARTICLE EIGHT
PARTNERSHIP DISTRIBUTIONS
"Section 8.01 Distributable Cash from Operations.
Distributable cash shall be distributed at least once per
year on or before the 120th day following the end of the
Resort's fiscal year and shall be distributed and applied in
the following order of priority:
6
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<PAGE>
(A) Special Loan prepayments required to be deposited
in escrow in respect of such fiscal year for the benefit of
the GDB pursuant to the GDB Loans.
(B) Payment of the Preferred Return to the KG General
Partner and the Class A Limited Partners for such fiscal
year to the extent not previously paid from Distributable
Cash from a Capital Transaction. If the Distributable Cash
is insufficient to pay such Preferred Return in full, then
the Distributable Cash shall be paid to each such Partner in
the same ratio as such Partner's Unrecovered Capital bears
to the aggregate Unrecovered Capital of the KG General
Partner and Class A Limited Partners and the amount of any
Preferred Return unpaid shall become Deferred Preferred
Return.
(C) Payment of any Deferred Preferred Return to the KG
General Partner and the Class A Limited Partners. If such
Distributable Cash is insufficient to pay such Deferred
Preferred Return in full, then such Distributable Cash shall
be paid to each such Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate
Unrecovered Capital of the KG General Partner and Class A
Limited Partners and shall be applied first to the interest
portion of such Deferred Preferred Return and then to the
oldest Preferred Return portions.
(D) Payment of the Preferred Return to the WKA General
Partner and Class B Limited Partners for such fiscal year to
the extent not previously paid from Distributable Cash from
a Capital Transaction. If such Distributable Cash is
insufficient to pay such Preferred Return in full, then such
Distributable Cash shall be paid to each such Partner in the
same ratio as such Partner's Unrecovered Capital bears to
the aggregate Unrecovered Capital of the WKA General Partner
and Class B Limited Partners and the amount of any Preferred
Return unpaid shall become Deferred Preferred Return.
(E) Payment of any Deferred Preferred Return to the WKA
General Partner and Class B Limited Partners. If such
Distributable Cash is insufficient to pay such Deferred
Preferred Return in full, then such Distributable Cash shall
be paid to each such Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate
Unrecovered Capital of the WKA General Partner and the Class
B Limited Partners and shall be applied first to the
interest portion of such Deferred Preferred
7
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<PAGE>
Return and then to the oldest Preferred Return portions.
(F) Payments of Supplemental Preferred Returns to the
Partners in accordance with their Unrecovered Supplemental
Contributions. If the Distributable Cash is insufficient to
pay such Supplemental Preferred Returns in full, then the
Distributable Cash shall be paid to each such Partner in the
same ratio as such Partner's Unrecovered Supplemental
Contribution bear to the aggregate Unrecovered Supplemental
Contributions of all Partners.
(G) Payment of the Supplemental Deferred Preferred
Return to all Partners. If such Distributable Cash is
insufficient to pay such Supplemental Deferred Preferred
Return in full, then such Distributable Cash shall be paid
to each Partner in the same ratio as such Partner's
Unrecovered Supplemental Contributions bear to the aggregate
Unrecovered Supplemental Contributions of all Partners and
shall be applied first to the interest portion of such
Supplemental Deferred Preferred Return and then to the
oldest Supplemental Preferred Return portions.
(H) Payment of the Incentive Management Fee.
(I) Any balance remaining shall be paid to the Partners
in accordance with their Residual Partnership Interests.
Section 8.02 Distributable Cash from a Capital
Transaction. As soon as practical after the receipt of the
proceeds from a Capital Transaction, the Partnership shall
distribute and apply the Distributable Cash from a Capital
Transaction in the following order of priority:
(A) Special Loan prepayments required to be deposited
in escrow in respect of such fiscal year for the benefit of
the GDB pursuant to the GDB Loans.
(B) Payment of the Preferred Return to the KG General
Partner and the Class A Limited Partners for the current
Fiscal Year. If the Distributable Cash from a Capital
Transaction is insufficient to pay such Preferred Return in
full, then the Distributable Cash from a Capital Transaction
shall be paid to each such Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate
Unrecovered Capital of the KG General Partner and Class A
Limited Partners.
8
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<PAGE>
(C) Payment of any Deferred Preferred Return to the KG
General Partner and the Class A Limited Partners. If such
Distributable Cash from a Capital Transaction is
insufficient to pay such Deferred Preferred Return in full,
then such Distributable Cash from a Capital Transaction
shall be paid to each such Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate
Unrecovered Capital of the KG General Partner and Class A
Limited Partners and shall be applied first to the interest
portion of such Deferred Preferred Return and then to the
oldest Preferred Return portions.
(D) Payment of the Preferred Return to the WKA General
Partner and Class B Limited Partners for the current Fiscal
Year. If such Distributable Cash from a Capital Transaction
is insufficient to pay such Preferred Return in full, then
such Distributable Cash from a Capital Transaction shall be
paid to each such Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate
Unrecovered Capital of the WKA General Partner and Class B
Limited Partners.
(E) Payment of any Deferred Preferred Return to the WKA
General Partner and Class B Limited Partners. If such
Distributable Cash from a Capital Transaction is
insufficient to pay such Deferred Preferred Return in full,
then such Distributable Cash from a Capital Transaction
shall be paid to each such Partner in the same ratio as such
Partner's Unrecovered Capital bears to the aggregate
Unrecovered Capital of the WKA General Partner and the Class
B Limited Partners and shall be applied first to the
interest portion of such Deferred Preferred Return and then
to the oldest Preferred Return portions.
(F) Payments of Supplemental Preferred Returns to the
Partners for the current fiscal year in accordance with
their Unrecovered Supplemental Contributions. If the
Distributable Cash form a Capital Transaction is
insufficient to pay such Supplemental Preferred Returns in
full then the Distributable Cash from a Capital Transaction
shall be paid to each such Partner in the same ratio as such
Partner's Unrecovered Supplemental Contributions bear to the
aggregate Unrecovered Supplemental Contributions of all
Partners.
(G) Payment of the Supplemental Deferred Preferred
Return to all Partners. If such Distributable Cash from a
Capital Transaction is insufficient to pay such Supplemental
Deferred
9
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<PAGE>
Preferred Return in full, then such Distributable Cash from
Capital Transaction shall be paid to each Partner in the
same ratio as such Partners Unrecovered Supplemental
Contributions bear to the aggregate Unrecovered Supplemental
contributions of all Partners and shall be applied first to
the interest portion of such Supplemental Deferred Preferred
Return and then to the oldest Supplemental Preferred Return
portions.
(H) Payment of any Incentive Management Fee in respect
of the fiscal year in which the funds constituting
Distributable Cash from a Capital Transaction were received
by the Partnership.
(I) Payment of any Incentive Management Fee in respect
of any preceding fiscal year of the Resort which was earned
and not previously paid.
(J) To the Partners as return of their respective
Supplemental Contributions in an amount equal to their
respective Unrecovered Supplemental Contributions. If the
remaining Distributable Cash from a Capital Transaction is
less than the Partners' Unrecovered Supplemental
Contributions, then the remaining Distributable Cash from a
Capital Transaction shall be paid to each Partner in the
same proportion as each Partner's Unrecovered Supplemental
Contribution bears to the aggregate Unrecovered Supplemental
Contributions of all Partners.
(K) To the Partners as return of their respective
Capital Contributions in an amount equal to their respective
Unrecovered Capital. If the remaining Distributable Cash
from a Capital Transaction is less than the Partners'
Unrecovered Capital, then the remaining Distributable Cash
from a Capital Transaction shall be paid to each Partner in
the same proportion as each Partner's Unrecovered Capital
bears to the aggregate Unrecovered Capital of all Partners.
(L) Any balance remaining shall be paid to the Partners
in accordance with their respective Residual Partnership
Interests."
18. All Partners agree that they will request no further design
changes to the Project and will exercise their best efforts not to incur in any
cost overruns and to keep Total Project Costs within the revised Development
Budget.
10
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<PAGE>
19. The WKA General Partner acknowledges for itself and for the
Partnership that the Guaranty executed on the 12th day of January, 1990 by
Kumagai Properties, Inc. which formed Exhibit I to the Venture Agreement, is
hereby modified so that the reference to the KG Partner being required to loan
to the Partnership up to $10,000,000.00 as Deficiency Loans and for the KG
Partner to loan to the WKA General Partner up to $10,000,000.00 as the KG Loan
Obligation is hereby amended so that the Guaranty properly refers to the
Deficiency Loan Obligation as $7,000,000.00 and to the KG Loan Obligation as
$7,000,000.
20. The parties hereto acknowledge that certain assets of the
Partnership and the Partners (but excluding the Partners' ownership Interests in
the Partnership) may be encumbered by the GDB Loan Agreements, and each party
agrees to subordinate, assign and pledge its rights and interests under the
Venture Agreement to the extent necessary to comply with the GDB Loan
Agreements, and no such subordination, assignment or pledge shall be deemed a
breach of the Venture Agreement.
21. The parties hereto acknowledge that appropriate technical changes
must be made in the provisions of the appendix to the Venture Agreement relating
to tax matters to reflect the partners' understandings set forth above. The
parties agree to negotiate such changes in good faith and to use their best
efforts to have such changes in effect by May 31, 1992.
11
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WKA EL CON ASSOCIATES
BY: WMS EL CON CORP., PARTNER
By:
.................................
Louis J. Nicastro
Chairman
BY: AMK CONQUISTADOR, S.E, PARTNER
By:
.................................
Ruthanne Koffman
By:
.................................
Sara Koffman
BY: HOSPITALITY INVESTMENT GROUP,
S.E., PARTNER
By: HASN, INC., GENERAL PARTNER
By:
.............................
Hugh A. Andrews,
President
KUMAGAI CARIBBEAN, INC.
By:
.......................................
Shunsuke Nakane,
President
12
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<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
DEVELOPMENT SERVICES AND MANAGEMENT AGREEMENT
DATED JANUARY 12, 1990
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P
DEVELOPMENT SERVICES AND MANAGEMENT AGREEMENT
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
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<S> <C>
1. DEVELOPMENT OF THE RESORT..................................................................... 2
1.1. The Renovation....................................................................... 2
1.2. Certain Definitions.................................................................. 3
1.2.1. "Commencement Date"........................................................... 3
1.2.2. "Construction Management Agreement"........................................... 3
1.2.3. "Construction Manager"........................................................ 4
1.2.4. "Consultants"................................................................. 4
1.2.5. "Contractors"................................................................. 4
1.2.6. "Project"..................................................................... 4
1.3. Technical and Development Services................................................... 4
1.4. Pre-Opening Program.................................................................. 5
1.5. Working Capital and Supplies......................................................... 6
1.6. Reimbursable Costs and Expenses...................................................... 6
1.7. Partnership's Pre-Approval........................................................... 8
1.8. Pre-Opening Budgets.................................................................. 10
1.9. Compensation for Technical and Development Services.................................. 11
1.10. Obligations Separate................................................................. 13
2. APPOINTMENT AS MANAGER OF THE RESORT.......................................................... 14
2.1. Appointment and Term................................................................. 14
2.2. Relation of the Parties.............................................................. 15
3. BUDGETS....................................................................................... 16
3.1. General Policy....................................................................... 16
3.2. Fiscal Year.......................................................................... 16
3.3. Annual Budgets....................................................................... 16
3.4. No Guarantee......................................................................... 21
4. OPERATION..................................................................................... 21
4.1. Operational Standards, Etc........................................................... 21
4.1.1. First Class Resort............................................................ 21
4.1.2. Non-Disturbance............................................................... 22
4.2. Permits.............................................................................. 23
4.3. Personnel............................................................................ 24
4.3.1. Employees of Partnership...................................................... 24
4.3.2. Employees of Manager.......................................................... 24
4.3.3. Key Managers.................................................................. 25
ii
</TABLE>
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<TABLE>
<S> <C>
4.3.4. Reimbursement for Third Party Costs........................................... 25
4.4. Sales and Promotion.................................................................. 26
4.4.1. Sales......................................................................... 26
4.4.2. Promotion..................................................................... 26
4.5. Maintenance and Capital Replacement.................................................. 26
4.6. Operating, Supply and Maintenance Contracts.......................................... 27
4.7. Accounting Services.................................................................. 28
4.7.1. Books and Records............................................................. 28
4.7.2. Annual Financial Information.................................................. 28
4.7.3. Monthly Reports............................................................... 29
4.7.4. Quarterly Financial Information............................................... 29
4.7.5. Meetings...................................................................... 30
4.8. Bank Accounts........................................................................ 30
4.9. Concessions.......................................................................... 30
4.10. Working Capital...................................................................... 31
4.11. Legal Actions........................................................................ 32
4.12. Expenses............................................................................. 32
4.12.1. Partnership's Financial Obligations.......................................... 32
4.12.2. No Obligation to Fund........................................................ 33
4.12.3. Taxes........................................................................ 33
4.12.4. Funding Deficits............................................................. 33
4.13. Consent and Approvals................................................................ 34
5. COMPENSATION OF MANAGER....................................................................... 34
5.1. Basic Compensation for Management Services........................................... 34
5.2. Incentive Management Fees............................................................ 35
5.3. Fee Adjustment....................................................................... 35
5.4. Subordination of Incentive Management Fees........................................... 35
5.4.1. Subordination................................................................. 35
5.4.2. Payment of Loans.............................................................. 38
5.5. Losses............................................................................... 38
5.6. Manager Loans........................................................................ 38
5.7. Certain Definitions.................................................................. 39
5.7.1. Resort Gross Revenues......................................................... 39
5.7.2. Resort Operating Profits...................................................... 40
5.7.3. Venture Agreement............................................................. 41
6. INSURANCE..................................................................................... 41
6.1. Insurance............................................................................ 41
6.2. Insurance Standards and Requirements................................................. 41
6.3. Indemnification...................................................................... 42
6.3.1. Indemnification of Manager.................................................... 42
6.3.2. Indemnification of the Partnership............................................ 43
6.3.3. Procedure for Indemnification................................................. 44
</TABLE>
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<TABLE>
<S> <C>
7. DAMAGE TO RESORT AND CONDEMNATION............................................................. 46
7.1. Casualty Damage...................................................................... 46
7.1.1. The Partnership to Restore.................................................... 46
7.1.2. Limitation on Restoration..................................................... 47
7.2. Condemnation......................................................................... 47
7.2.1. Total Condemnation............................................................ 47
7.2.2. Partial Condemnation.......................................................... 48
8. TERMINATION................................................................................... 48
8.1. Right of Termination................................................................. 48
8.2. Payments............................................................................. 50
8.3. Manager's Liquidation Share.......................................................... 51
8.4. Null and Void........................................................................ 52
9. MISCELLANEOUS................................................................................. 52
9.1. Entire Agreement..................................................................... 52
9.2. Counterparts......................................................................... 53
9.3. Notices.............................................................................. 53
9.4. Waivers.............................................................................. 55
9.5. Severability......................................................................... 55
9.6. Choice of Law........................................................................ 55
9.7. Non-Assignability.................................................................... 55
9.8. Captions............................................................................. 56
9.9. Non-Recourse to Partners............................................................. 56
9.10. Limitation of Remedies............................................................... 56
</TABLE>
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DEVELOPMENT SERVICES AND MANAGEMENT AGREEMENT
THIS AGREEMENT, made as of the 12th day of January 1, 1990, by and
between EL CONQUISTADOR PARTNERSHIP L.P., a limited partnership formed pursuant
to the limited partnership law of the State of Delaware (the "Partnership"), and
WILLIAMS HOSPITALITY MANAGEMENT CORPORATION, a Delaware Corporation ("Manager").
W I T N E S S E T H:
WHEREAS, the Partnership is acquiring and renovating a hotel and casino
resort in Fajardo, Puerto Rico, formerly known as the "El Conquistador Hotel" to
develop the property as a first class, luxury destination mega-resort (the
"Resort"); and
WHEREAS, the Resort is currently closed and will undergo extensive
remodeling, renovation, refurbishing and construction (the "Renovation") as
generally outlined in Exhibit A annexed hereto, prior and subsequent to its
scheduled re-opening in December, 1991; and
WHEREAS, the parties mutually desire Manager to provide technical
assistance and development services during the Renovation and to control,
supervise and direct the operation and management of the Resort on behalf of the
Partnership after the opening of the Resort;
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NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereby agree as follows:
1. DEVELOPMENT OF THE RESORT.
1.1. THE RENOVATION. The Partnership shall proceed diligently
to acquire the land and buildings contemplated for the Resort and to use its
best efforts to effect the Renovation in accordance with plans and
specifications approved by the Partnership so that the Resort may be ready for
operation as a first class, luxury destination mega-resort as quickly as
practical. Manager shall use its best efforts to assist the Partnership by
performing the Technical and Development Services (as hereafter defined)
provided in this Section 1 as and when requested by the Partnership and will
work closely and coordinate its services with the Partnership and the
Construction Manager (as hereafter defined) so that the Resort may be ready for
operation as a first class, luxury destination mega-resort as quickly as
practical. The parties acknowledge that the Partnership has prepared an
estimated budget (the "Development Budget"), a copy of which is annexed hereto
as Exhibit B, for all "hard costs" and "soft costs" to be incurred in connection
with the Renovation and equipping of the Resort. The parties believe that the
Project (as hereafter defined) can be completed within the parameters of the
Development Budget. To the extent practical, the Partnership and Manager shall
make decisions and recommendations, perform their obligations hereunder and
otherwise use their best efforts to complete the
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Renovation and perform the Technical and Development Services within the
parameters of the Development Budget. Notwithstanding the foregoing, it shall be
the Partnership's obligation, subject to the provisions of Section 9.10 hereof,
to complete the Renovation, approve Pre-Opening Budgets (as hereafter defined)
and deliver to the Manager for management as hereafter provided, a fully
equipped, first class, luxury destination mega-resort having substantially all
the facilities described in Exhibit A annexed hereto, even if the costs and
expenses thereof exceed the Development Budget. From time to time the
Partnership may revise the Development Budget without the approval or consent of
Manager but such revision shall not affect any previously approved Pre-Opening
Budget without the consent of the Manager. The Partnership shall notify Manager
promptly of all changes, modifications and refinements to the Development
Budget. All references herein to the Development Budget shall refer to such
budgets as amended by the Partnership from time to time.
1.2. CERTAIN DEFINITIONS.
1.2.1. "COMMENCEMENT DATE" means the first day the
Resort opens to the general public and commences business.
1.2.2. "CONSTRUCTION MANAGEMENT AGREEMENT" shall
refer to the contract to be entered into between the Partnership and the
"Construction Manager" for construction management services in connection with
the Renovation.
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1.2.3. "CONSTRUCTION MANAGER" shall refer to KG
(Caribbean) Corporation.
1.2.4. "CONSULTANTS" shall refer to any an all
various architectural, landscape, design, engineering or other professional
consultants retained by or on behalf of the Partnership for the overall or
separate aspects of the Project.
1.2.5. "CONTRACTORS" shall refer to any and all
of the various general and specialty contractors, suppliers, trade contractors
or other construction related firms or entities retained by or on behalf of the
Partnership for the overall or separate aspects of the Renovation.
1.2.6. "PROJECT" means all matters relating to
the acquisition of the land and buildings for the Resort, all things associated
with completion of the Renovation and to fully equip the Resort and make it
fully operational as a first-class, luxury destination mega-resort having
substantially all the facilities described in Exhibit A annexed hereto.
1.3. TECHNICAL AND DEVELOPMENT SERVICES. In connection with
the Project, and subject to the terms of this Section 1, Manager shall make
available and provide to the Partnership the technical and development services
("Technical and Development Services") as are described on Exhibit C annexed
hereto. Manager will use its best efforts in rendering such services as and when
requested by the Partnership and will work closely with and coordinate its
activities with the Construction Manager except that Manager
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makes no representation or warranty as to its ability to perform the Technical
and Development Services. Manager will make available all of its sources of
supply to the Partnership and shall make reasonably available all of its
expertise in connection with the Project. To the extent it is able and subject
to any other provisions of this Section 1, Manager will provide personnel as
needed for the rendering of its Technical and Development Services and for the
coordination of its obligations with other parties involved in the Renovation
including the Construction Manager. Manager understands that the Partnership may
request Manager to render assistance to the Partnership in all phases and
aspects of the Renovation and that Manager will be working closely on a day to
day basis with the Construction Manager. In some cases, the responsibilities of
Manager and the Construction Manager overlap and it is the parties intention
that the Manager and the Construction Manager will coordinate their activities
in a manner so as to provide the best results to the Partnership. Any conflicts
between the Manager and the Construction Manager shall be resolved by the
Partnership. Manager shall use its best efforts, subject to the limitations and
constraints of this agreement, in rendering the Technical and Development
Services consistent with completion of the Project as contemplated and to the
extent practical, consistent with the Development Budget.
1.4. PRE-OPENING PROGRAM. Prior to the Commencement
Date, Manager shall develop and implement a pre-opening program for the
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Resort in accordance with Pre-Opening Budgets to be developed and approved
pursuant to Section 1.8 hereof and as part of such program shall on behalf of
the Partnership (a) recruit, hire and train the initial staff of the Resort
using such training techniques as Manager shall reasonably deem advisable, (b)
organize the Resort's operations and services, including licensees and
concessionaires, and (c) provide a marketing program for the Resort, which shall
include advertising, promotions, literature, travel, business entertainment and
opening celebration ceremonies (all of the foregoing begin referred to herein as
the "Pre-Opening Program").
1.5. WORKING CAPITAL AND SUPPLIES. Prior to the Commencement
Date and consistent with the Development Budget and the Pre-Opening Budgets
approved by the Partnership as provided in Section 1.8, the Partnership shall
provide all necessary working capital and all necessary inventories of
chinaware, silverware, utensils, glasses, linens, towels, uniforms, food,
beverage, paper products, soap, cleaning supplies, cards, chips, dice and other
casino supplies, golf and marina supplies and other operating supplies and
consumables as Manager deems reasonably necessary to operate the Resort as a
first class, luxury destination mega-resort.
1.6. REIMBURSABLE COSTS AND EXPENSES. Subject to pre-approval
by the Partnership as provided in Section 1.8, all costs, fees and expenses
incurred by Manager in performance of its duties under this Section 1, including
the Pre-Opening Program and Technical and Development
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Services, shall be borne by the Partnership and shall not be the responsibility
of Manager. Manager shall receive monthly reimbursement payments from the
Partnership in respect thereof, or, at Manager's request, the Partnership shall
pay such costs, fees or expenses directly upon submission of third party
invoices therefor. Such costs shall include, but not be limited to, the
following:
(A) travel, meals, lodging and other living
expenses in connection with travel outside of Puerto Rico;
(B) salaries personnel of Manager other than Hugh
Andrews, to the extent directly involved in the performance of services
hereunder;
(C) reproductions, postage and handling of
drawings, plans, specifications and other documents;
(D) Manager's computer and duplicating services at
its usual and customary hourly rate or the actual cost of use of outside data
processing, computer or duplicating services;
(E) photography and video procedures, whether by
Manager or third parties;
(F) renderings, models and work-ups;
(G) cost of establishing and maintaining an
on-site office for Manager and/or the Partnership's use including furnishings,
equipment and utilities in connection therewith;
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(H) local and long distance phone charges and
telecommunication costs;
(I) entertainment and promotional expenses,
particularly in connection with the Pre-Opening Program;
(J) advertising expenses;
(K) salaries and fees of third parties such as
accounting, law, architectural, design, engineering and decorating firms;
(L) overtime work requiring higher than regular
rates;
(M) insurance, if any, carried by Manager in
connection with its services;
(N) transportation to and from or otherwise in
connection with the Project and the performance of Manager's obligations under
this Section 1; and
(O) any other expense incurred by Manager in
connection with performance of its obligations under this Section 1.
1.7. PARTNERSHIP'S PRE-APPROVAL. Manager acknowledges that
the Partnership intends to perform the Renovation and otherwise complete the
Project within strict budgetary guidelines evidenced by the Development Budget.
Accordingly, Manager will assist the Partnership and the Partnership's agents to
set up budgets to the extent reasonably practical for all expenses for which
Manager expects to be reimbursed in connection with
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performance of its obligations under this Section 1, and to be incurred by the
Partnership in connection with the Project, including staffing, allocation of
resources and contingencies. Manager shall only incur such expenses and perform
such services under this Section 1 as shall be provided for in a Pre- Opening
Budget approved by the Partnership. All of Manager's staffing, allocation and
assignment of personnel to the performance of services under this Section 1
shall be subject to the Partnership's prior approval through the Pre-Opening
Budget process, which approval shall not be unreasonably withheld. Except as set
forth herein, Manager shall not incur or be entitled to reimbursement for any
costs or expenses or enter into any contracts, or engage the services of any
professionals, consultants or other third parties without the Partnership's
prior approval thereof through the Pre-Opening Budget approval process.
Manager's obligation to render Technical and Development Services and establish
and carry out the Pre-Opening Program is expressly limited by and conditioned
upon the Partnership's approval of the costs and expenses associated therewith
evidenced by its approval of a Pre-Opening Budget containing such costs and
expenses. The Partnership's obligation to pay or reimburse Manager therefor is
expressly subject to the Partnership's prior approval thereof as aforesaid and
to its obligations as provided in Section 1.1 but the Pre-Opening Budget
approval process and Manager's compliance therewith shall not impair, impede or
otherwise affect the payments to Manager of the Development Fee as provided in
Section 1.9 hereof.
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1.8. PRE-OPENING BUDGETS.
1.8.1. From time to time Manager shall prepare and
deliver to the Partnership cost estimates and budgets ("Pre-Opening Budgets")
detailing costs and expenses which Manager intends to incur in connection with
its rendering of Technical and Development Services and establishment of the
Pre-Opening Program and may provide for unanticipated contingencies. These
Pre-Opening Budgets may be in various forms and formats depending upon the
nature of the expenditure for which approval is sought. For example, a Pre-
Opening Budget may consist of a request to engage a specific professional such
as an architect or designer at a specific price or rate of compensation, may be
a request to hire a specific individual or unidentified individuals at specific
rates of compensation, or may be in the nature of line items of a general nature
such as travel, secretarial services, equipment, landscape, architects, etc.
Manager shall identify the expenditures for which approval is sought and provide
the Partnership with such detail and explanations to support such requests as
may reasonably be requested by the Partnership.
1.8.2. The initial Pre-Opening Budget shall be submitted
to the Partnership promptly following the execution of this agreement but prior
to Manager's performance of any additional Technical and Development Services
other than the continuation of services already in progress. The Partnership
acknowledges that Manager has heretofore performed Technical and Development
Services in connection with the Project and made
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expenditures and commitments in connection therewith. The Partnership hereby
approves such services, expenses and commitments and shall reimburse Manager for
the expenses incurred in connection therewith promptly following the execution
of this agreement and hereby assumes the commitments, all as set forth in
Exhibit D annexed hereto. All subsequent Pre-Opening Budgets shall be submitted
to the Partnership for its approval sufficiently in advance of the date by which
the expenses are expected to be incurred so as to permit the Partnership an
adequate opportunity to fully evaluate and take action with respect to such
Pre-Opening Budget. The Partnership shall respond promptly to Manager's requests
for approval of Pre-Opening Budgets by approving, disapproving or proposing
changes for or modifications to all requests for approval of Pre-Opening Budgets
so that there is no unreasonable delay in Manager's performance of its
obligations hereunder.
1.8.3. Pre-Opening Budgets shall be prepared by the
Manager so as to effect the Renovation and completion of the Project as a first
class, luxury destination mega-resort and to be ready for the Commencement Date
as quickly as practical.
1.9. Compensation for Technical and Development Services.
1.9.1. In consideration for all services rendered by
Manager under this Section 1, the Partnership shall pay to Manager a fee (the
"Development Fee") equal to Three Million Two Hundred Thirty Eight Thousand
($3,238,000) Dollars. In addition to the Development Fee, Manager
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shall receive monthly payments on account of reimbursable expenses as set forth
in Section 1.6 hereof. The Development Fee shall be deemed earned by and shall
be paid to Manager in twenty-four (24) equal monthly installments of One Hundred
Thirty Four Thousand Nine Hundred Sixteen Dollars and Sixty Seven Cents
($134,916.67) each on the first day of each calendar month commencing December,
1989 and ending November, 1991; provided, however, that the Partnership shall
not pay and is not required to pay any portion of the Development Fee unless and
until the Partnership acquires the land and buildings on which the Resort shall
be located and upon the closing with respect to such acquisition, the
Partnership shall pay to the Manager that portion of the Development Fee deemed
earned by Manager from December 1, 1989 through the date of such closing.
1.9.2. Subject to Section 1.9.1 and any provisions to
the contrary which may be required by the lender of the First Mortgage Loan, as
defined in the Venture Agreement (as hereafter defined), the Partnership shall
pay the Development Fee to Manager as and when earned. The parties acknowledge
that the Development Fee shall be paid from funds available to the Partnership
including capital contributions to the Partnership and proceeds of loans
received by the Partnership from lenders for the Project and that
notwithstanding any provision in this Section 1.9 to the contrary, payment of
the Development Fee to the Manager as provided herein shall be made only to the
extent and in the manner permitted by such lenders; provided, however,
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that the Partnership shall make every effort to include the Development Fee
within such loans and to permit payment of the Development Fee as provided
herein under the terms of such loans. The Partnership shall promptly advise
Manager of any limitation or objection by its lenders with respect thereto.
1.9.3. Subject to Section 1.9.2, payments to Manager
under this Section 1, both of the Development Fee and for reimbursement of
expenses, shall be made on the basis set forth herein in full without retainage
of other withholding.
1.10. OBLIGATIONS SEPARATE. The obligations of Manager under
this Section 1 are separate and severable from the obligations of Manager during
the Management Term (as hereafter defined). No default or claimed default by
Manager in the performance of its obligations under Section 1 hereof shall in
any way affect or operate to terminate Manager's rights and obligations with
respect to the Management Term, affect Manager's right to commence management of
the Resort on the Commencement Date, nor be asserted against Manager or entitle
the Partnership to deduct from, offset or withhold any amounts required to be
paid to Manager in respect of the Management Term. Provided this agreement has
not bee terminated prior to the Commencement Date as provided in Section 8.1.1,
8.1.4 or 8.1.5 hereof, Manager's right to commence management of the Resort on
the Commencement Date as hereafter provided is absolute and unconditional and
neither the Partnership nor any partner of the Partnership shall assert any
claim
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to the contrary. No deductions shall be made from the Development Fee or other
compensation or from any expenses due Manager on account of penalty, liquidated
damage or other sums withheld from payments to Consultants or Contractors, or on
account of the cost of changes in work comprising the Project.
1.11. If the Partnership observes or otherwise becomes aware
of any fault or defect in the Project, or nonconformance with the applicable
contract documents, the Partnership shall give prompt written notice thereof to
Manager.
1.12. Manager shall be entitled to rely upon the expertise of
all third party Contractors and Consultants in connection with the Project.
Under no circumstances shall the Partnership seek to hold Manager responsible
for any acts or omissions of any Contractor or Consultant or for the quality of
their performance or lack thereof.
2. APPOINTMENT AS MANAGER OF THE RESORT.
2.1. APPOINTMENT AND TERM. The Partnership hereby appoints and
employs Manager to act as its agent for the supervision, direction and control
of the operation and management of the Resort on the Partnership's behalf, upon
the terms and conditions hereinafter set forth, for a term of 20 years beginning
on the Commencement Date (the "Management Term"). Manager hereby accepts such
appointment and shall supervise, direct and control the operation and management
of the Resort during the Management
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Term upon the terms and conditions hereinafter set forth. As used herein, the
Resort shall include substantially all the facilities currently contemplated by
the Partnership as set forth in Exhibit A annexed hereto to the extent
constructed. The Partnership shall also include in the Resort for purposes of
Manager's services hereunder as and when built the up to 100 condominium units
(each unit to be capable of rental as three separate hotel rooms) currently
contemplated by the Partnership to be built in four sections of 25 units each
during the years 1992 through 1995, the net rental income from which is
contemplated to be included within the Resort's Gross Revenues (as hereafter
defined), and such other additional facilities as may be added to the Resort at
the election of the Partnership from time to time. Manager shall have no right
by virtue of this agreement to manage such other additional facilities unless
the Partnership shall have elected to include such facilities in the Resort.
2.2. RELATION OF THE PARTIES. In performing its duties during
the Management Term, Manager shall be deemed to act only as the appointed agent
or representative of the Partnership, and nothing in this agreement shall be
construed as creating a tenancy, partnership, joint venture or any other
relationship between the parties hereto except that of principal and agent. All
debts and liabilities incurred by Manager within the scope and in accordance
with the performance of its obligations hereunder as manager of the Resort shall
be the debts and obligations of the Partnership only and shall be borne by the
Partnership and shall not be the responsibility of Manager.
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3. BUDGETS.
3.1. GENERAL POLICY. It is the intention of the parties to
operate the Resort at all times in accordance with pre-established budgets
approved by the Partnership and Manager shall not incur on behalf of the
Partnership any debts, liabilities, costs, expenses or commitments except within
such budgetary restraints or which are otherwise specifically approved by the
Partnership except as otherwise contemplated by this agreement. All budgeting,
planning and accounting records and reports prepared by Manager will be based
upon generally accepted accounting principles consistently applied and the
Uniform System of Accounts for Hotels, copyrighted by the Hotel Association for
New York City, 8th edition of 1986, as amended from time to time (the "Uniform
System of Account for Hotels") and shall, to the extent practical, be
coordinated with the Partnership's books and records.
3.2. FISCAL YEAR. For all purposes under this agreement, the
Resort's fiscal year ("Fiscal Year") shall be the twelve-month period ending on
March 31 or such other period as the Partnership shall designate, which period
shall be reasonably acceptable to Manager.
3.3. ANNUAL BUDGETS.
3.3.1. For each Fiscal Year or part thereof during the
Management Term, Manager shall submit to the Partnership 60 days before the
beginning of each such Fiscal Year, or, with respect to the Fiscal Year in which
the Commencement Date occurs, 45 days before the Commencement
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Date, reasonably detailed operating budgets (the "Operating Budgets") and
capital expenditures budgets (the "Capital Budgets") (the Operating Budgets and
Capital Budgets are referred to herein collectively as the "Annual Budgets"),
each in comparable detail to the Operating Budgets and Capital Budgets now
prepared by Manager in respect of the El San Juan Hotel and Casino and the
Condado Plaza Hotel and Casino. Capital Budgets shall contain all items of a
capital nature as determined under generally accepted accounting principles and
Operation Budgets shall contain all other items. Within 30 days after its
receipt of any Annual Budget, the Partnership shall notify Manager in writing of
its approval of the Operating Budget and Capital Budget comprising the Annual
Budget or items therein or of any objections, changes, revisions or other
comments it may have with respect thereto. The Partnership may approve or object
to all or any portion of an Annual Budget. To the extent that any budget is
approved, in whole or in part, in writing by the Partnership, such budget or
portion thereof so approved shall constitute an approved budget ("Approved
Budget") for purposes of this agreement and Manager shall be entitled to incur
expenses and made commitments consistent with such Approved Budget. To the
extent that the Partnership has failed to approve any Annual Budget or portion
thereof, Manager and the Partnership shall meet with each other to agree upon a
mutually satisfactory Operating Budget or Capital Budget, as the case may be, or
portion thereof in accordance with the principle set forth in Section 3.3.5 and,
once so agreed, the budget
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or portion thereof so agreed to shall become an Approved Budget for purposes of
this agreement. Subject to Section 9.10, the Partnership shall not, however, be
entitled to unilaterally require the reduction of the amount of the total
Operating Budget, excluding Variable Charges, (as hereafter defined), below the
amount of the total Operating Budget, excluding Variable Charges, contained in
the most recent Approved Budget and shall not be entitled to unilaterally
require the reduction of the total amount of the Variable Charges so as to
reduce the Variable Charges as a percent of projected revenues in the proposed
Annual Budget below the amount of the Variable Charges as a percentage of
revenues in the most recent Approved Budget. The Partnership shall have absolute
discretion to approve or disapprove items in a Capital Budget except the
Partnership shall approve portions of the Capital Budgets consistent with the
principle set forth in Section 4.5 hereof. No proposed Capital Budget or
Operating Budget or portion thereof shall constitute an Approved Budget unless
and until it shall be approved by the Partnership as herein provided.
3.3.2. After approval of a Capital Budget, Manager may
not exceed the expenditures therein without the prior written approval of the
Partnership.
3.3.3. The parties acknowledge that the Operating
Budgets shall consist of certain charges which are not expected to fluctuate
based upon occupancy or use of the Resort's facilities ("Stable Charges") and
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certain charges which will fluctuate based upon occupancy or use of the Resort's
facilities ("Variable Charges"). Variable Charges include, but are not limited
to, utilities, water, laundry, personnel and food and beverage. Stable Charges
include, but are not limited to, marketing and advertising expenses, property
taxes and insurance. Within each Operating Budget, Manager shall be entitled to
establish a reserve amount which it deems sufficient to cover any cost overruns
in connection with the Stable Charges. Accordingly, Manager shall not exceed the
total amount of Stable Charges, including such reserve, reflected in an Approved
Budget without the prior written consent of the Partnership. Variable Charges
shall be reflected in Operating Budgets both as a dollar amount and as a
percentage of projected revenues. Manager shall be entitled to incur Variable
Charges in an aggregate amount above or below the aggregate dollar amounts
reflected in an Approved Budget provided, however, that the aggregate amount of
actual Variable Charges as a percentage of projected revenues reflected in the
Approved Budget by more than five (5) percentage points.
3.3.4. If the Partnership fails to approve Annual
Budgets or any portion thereof for any Fiscal Year, Manager may continue to
operate the Resort and made expenditures for such Fiscal Year within the
parameters of (i) the Operating Budget, including Variable Charges as a
percentage of revenues, and (ii) the amount set forth for replacement of
furniture, fixtures and equipment in the Capital Budget, each contained in the
Approved Budgets
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for the most recently completed Fiscal Year until full Approved Budgets shall
have been established except that Manager shall be entitled to incur increased
expenses in the ordinary course of business for matters set forth in the
operating Budget if such increases are due to factors beyond the control of
Manager such as utility rate increases, increased insurance premiums, tax
increases, interest rate increases, supplier price increases and the like.
3.3.5. Manager shall prepare Annual Budgets and the
Partnership shall act to approve budgets for the purpose of establishing
Approved Budgets so as to enable the Resort to operate as a first class, luxury
destination mega-resort.
3.3.6. In some cases Annual Budgets and therefore
Approved Budgets may be broken down by month or quarter. All tests for whether
Manager has complied with the Approved Budgets shall be made on an annual basis
and not a monthly or quarterly basis. Such more detailed breakdown shall be
solely for information purposes.
3.3.7. During the course of any Fiscal Year during the
Management Term it may be appropriate to modify portions of an Approved Budget
based upon actual operations and experience, unforeseen events or otherwise. In
such event, Manager shall be entitled to request changes or modifications to
Approved Budgets using the same procedures for requests for approval of Annual
Budgets as provided above.
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3.4. NO GUARANTEE. Manager makes no guarantee, warranty or
representation whatsoever with respect to any Annual or Approved Budgets,
including whether there will be profits or losses from the operation of the
Resort or the amount of revenues to be derived. Manager shall use due care in
preparing Annual Budgets so that such budgets shall reflect Manager's best
estimate of costs and expenses to be incurred and revenues to be generated. The
amounts, however, shall be only estimates and Manager shall have no liability to
the Partnership with respect to such amounts absent gross negligence, wilful
misconduct or fraud in connection with the preparation of such Annual Budgets or
in connection with the performance of Manager's obligations during the
Management Term.
4. OPERATION.
4.1. OPERATIONAL STANDARDS, ETC.
4.1.1. FIRST CLASS RESORT. Manager shall, at the expense
of the Partnership and subject to Approved Budgets and the provisions of Section
9.10 hereof, use its best efforts to operate the Resort as a first class, luxury
destination mega-resort in accordance with the provisions of this agreement and
consistent with such standards, other comparable properties in the area and
customary practices in the resort industry. Subject to the provisions of Section
9.10 hereof, the Partnership shall conduct its affairs, provide funds and all
other matters necessary for the operation of the Resort as a first class, luxury
destination mega-resort.
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4.1.2. NON-DISTURBANCE. Subject to Section 9.10, the
Partnership hereby warrants to Manager uninterrupted control and operation of
the Resort during the Management Term except as otherwise set forth herein,
unless this agreement is earlier terminated as herein provided. The Partnership
shall comply with all obligations to lenders to the Partnership so as to
preserve ownership of the Resort and to permit the Partnership to fund its
obligations hereunder. Except as otherwise set forth herein, Manager shall have
complete control and discretion in the management of the Resort and the
Partnership shall not interfere or involve itself with the day-to-day operation
and affairs of the Resort. Manager shall operate the Resort free of molestation,
eviction, disturbance by the Partnership or any third party claiming by, through
or under the Partnership. Manager shall have absolute discretion in the
determination of room rates, food and beverage menu prices, and charges to
guests for other services performed by the Resort for guests and may alter room
rates or other charges without prior consultation with the Partnership. Manager
shall have control and discretion with regard to the use of the Resort for all
customary purposes, including, the terms of admittance to the Resort for rooms,
for commercial purposes, for privileges of entertainment, employee rules and
practices and all phases of publicity and promotion. No influence shall be
brought on Manager by the Partnership relating to the granting or extension of
credit. Credit facilities shall be given by Manager in its discretion and in
accordance with Manager's standard
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practice. All of the foregoing shall be consistent with Manager's obligation to
operate a first class, luxury destination mega-resort for the benefit of the
Partnership as provided hereunder and within Approved Budgets.
4.2. PERMITS. Manager shall, on behalf of and with the
cooperation of the Partnership and at the Partnership's sole expense, obtain all
necessary licenses, findings of suitability, approvals and permits from the
applicable governmental authorities (the "Government Authorities"), including
the Secretary of the Treasury of the Commonwealth of Puerto Rico and any other
governmental body or agency having authority over gaming, as may be required for
the operation of the Resort throughout the Management Term, including without
limitation, such liquor, bar, restaurant, gaming, marina, sign and hotel
licenses as may be required for the operation of the Resort as a first class,
luxury destination mega-resort. All such licenses, approvals and permits shall,
to the extent possible, be obtained in the name of the Partnership. Manager
shall notify the Partnership prior to obtaining any license, approval or permit
in the name of anyone other than the Partnership. Manager undertakes to comply
in all material respects with the rules, regulations and orders of the
Government Authorities and with any conditions set out in any such licenses and
permits and at all times to operate and manage the Resort in accordance with
such conditions and any other requirements of law. Upon receipt by Manager of
notice from the Partnership or any Government Authority that either the Manager
or the Resort is not in compliance with the
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rules, regulations and orders of any Government Authority or any condition in
any license or permit, Manager, subject to the Approved Budgets, shall take such
action as may be necessary to fully comply therewith.
4.3. PERSONNEL.
4.3.1. EMPLOYEES OF PARTNERSHIP. Subject to the Approved
Budgets, Manager, as agent for the Partnership, shall hire, supervise, direct
the work of, discharge, and determine the compensation and other benefits of all
personnel working in the Resort during the term hereof, all of whom shall be in
the sole employ of the Partnership and not in the employ of Manager. Manager
shall be the sole judge of the fitness and qualifications of such personnel and
shall have absolute discretion in the hiring, supervision, direction,
discharging and determination of the compensation and other benefits of such
personnel during the course of their employment. Manager shall in no way be
liable to such personnel for their wages, compensation or other benefits
(including, without limitation, severance, vacation and termination pay), nor to
the Partnership, and the Partnership shall not interfere with or give orders or
instructions to personnel employed at the Resort. Manager shall not, however,
without the written consent of the Partnership, enter into any negotiations with
any collective bargaining units or enter into any collective bargaining
agreements.
4.3.2. EMPLOYEES OF MANAGER. Manager shall employ such
of its personnel as deemed necessary by Manager for the performance of
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its duties hereunder. During the term hereof, Manager shall be reimbursed by the
Partnership for the salary, expenses and other compensation or benefits of such
personnel, consistent with Approved Budgets. If such personnel perform services
for other hotels or resorts managed by Manager, such personnel's salary,
expenses and other compensation and benefits shall be fairly allocated by
Manager, consistent with allocation methods used with other facilities managed
by Manager. Manager shall keep the Partnership advised as to the personnel and
services which it performs and shall fully advise the Partnership of allocation
procedures used. Manager shall have the right to grant complimentary rooms and
food and beverages to key personnel and their families, or to others wherein
such is customary in the hotel industry or in Manager's standard practice or
policy.
4.3.3. KEY MANAGERS. Notwithstanding the foregoing, the
Partnership shall have the right to disapprove of Manager's choice for hiring or
designation of key managers of the Resort, whether such managers shall be
employees of the Partnership or Manager. Such key managers shall include the
Resort's general manager, food and beverage manager, casino manager, controller,
executive assistant manager and other managers whose annual compensation exceeds
$100,000 per year.
4.3.4. REIMBURSEMENT FOR THIRD PARTY COSTS. The costs,
fees, compensation or other expenses of any persons engaged by the Partnership
or Manager in connection with the operations of the Resort and the
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continuing obligations of the Manager, to perform duties of a specialist in
nature related to the operation, maintenance or protection of the Resort, such
as engineers, designers, attorneys, independent accountants and the like, shall
be borne by the Partnership in accordance with Approved Budgets and shall not be
the responsibility of Manager. Such costs, fees, compensation and other expenses
shall be included in the Approved Budgets.
4.4. SALES AND PROMOTION.
4.4.1. SALES. Manager, on behalf of the Partnership and
at the sole expense of the Partnership, shall institute and supervise a sales
and marketing program which shall be reflected in the Operating Budgets included
in the Approved Budgets.
4.4.2. PROMOTION. Manager may cause the Resort, on
behalf of the Partnership and at the sole expense of the Partnership in
accordance with Approved Budgets, to participate in sales and promotional
campaigns and activities involving complimentary rooms, food, beverages and the
use of other facilities of the Resort to travel agents, tourist officials and
airline representatives.
4.5. MAINTENANCE AND CAPITAL REPLACEMENT. The Partnership and
Manager recognize the necessity of establishing a continuing program of
replacement of furnishings and equipment and the need to cause the Resort to be
furnished, equipped and landscaped as a first class, luxury destination
mega-resort. The parties acknowledge that the Partnership has
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estimated that such program during the early years of the Management Term will
be approximately 1% of revenues per year and thereafter increase up to
approximately 3% of revenues per year. The actual amount shall be fixed each
year under the procedures for Approved Budgets. However, the foregoing is
intended to establish the Partnership's obligation to approve a budget
implementing such program and to set forth the parties' expectation of the scope
of such program as of the date hereof. The program shall be reflected in the
Capital Budgets prepared by Manager and shall be included in the Approved
Budgets consistent with the principles set forth in this Section 4.5 and Section
3.3.5 hereof.
4.6. OPERATING, SUPPLY AND MAINTENANCE CONTRACTS. Manager is
authorized to make and enter into in the name of, for the account of, and at the
expense of the Partnership all such contracts and agreements as are in Manager's
opinion necessary for the operation, supply and maintenance of the Resort,
except that prior written approval of the Partnership shall be required if such
contract or agreement is for a term greater than one year and cannot be
terminated without payment or penalty upon not more than 90 days notice. Manager
is authorized to pay amounts due under such contracts and agreements when due
from the Resort's accounts, consistent with the Approved Budgets. Manager shall
be required to obtain the consent of the Partnership before entering into any
contract, agreement or purchase involving any structural repair, alteration or
rehabilitation of the Resort or the repair or
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replacement of any furnishings, fixtures or equipment contained therein if not
provided for in the Approved Budgets.
4.7. ACCOUNTING SERVICES.
4.7.1. BOOKS AND RECORDS. As an expense of the
Partnership, Manager shall maintain an accurate accounting system in connection
with its management of the Resort which shall be reasonably coordinated with the
accounting system used by the Partnership. The books and records regarding the
operation of the Resort shall be kept in accordance with Section 3.1 of this
agreement, shall be maintained at the Resort, and shall be the property of the
Partnership. As an expense of the Partnership and as reflected in the Approved
Budgets, Manager shall comply with all requirements in respect of internal
controls and accounting and shall prepare all required reports under the rules
and regulations of the Government Authorities or any other applicable law or
regulation. In connection with the foregoing and consistent with the Approved
Budgets, Manager shall, in connection with its obligations under this Section
4.7.1, exercise due care and diligence, consistent with the level of operations
of the Resort contemplated by this agreement.
4.7.2. ANNUAL FINANCIAL INFORMATION. As an expense
of the Partnership, Manager shall direct that a certified audit of the accounts
of the Resort shall be performed annually by Ernst and Young or another
independent accounting firm mutually acceptable to the Partnership and Manager
and shall instruct such accounting firm to deliver at least one copy
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thereof, consisting of a balance sheet, income statement and statement of cash
flows, to the Manager and the Partnership, at the addresses set forth on Exhibit
E annexed hereto, as the same may be amended from time to time, no later than 90
days after the end of each Fiscal Year. Nothing herein contained shall prevent
Manager's shareholders or the Partnership's general partners or their duly
authorized designees or their independent accounting firms from examining the
books and records of the Resort at all reasonable times.
4.7.3. MONTHLY REPORTS. On or before the 25th day of
each month, Manager shall furnish the Partnership at the addresses set forth on
Exhibit E annexed hereto with a statement for the preceding calendar month of
the gross income received from rooms, food and beverages, gaming, marina, golf
course, condominiums and other sources, guest room occupancy percentage, average
room rate and total expenses paid by category during the said month, such
statement to be prepared in accordance with the Uniform System of Accounts for
Hotels. Monthly reports furnished by Manager pursuant to this Section will be in
comparable detail to those reports now prepared by Manager for the El San Juan
Hotel and Casino and the Condado Plaza Hotel and Casino.
4.7.4. QUARTERLY FINANCIAL INFORMATION. On or before
the expiration of 45 days following the end of each fiscal quarter of the
Resort, Manager shall furnish to the Partnership unaudited financial statements
of the Resort for that quarter consisting of a balance sheet, income statement
and
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statement of cash flows, prepared in accordance with Section 3.1 of this
agreement.
4.7.5. MEETINGS. During the Management Term and at
the request of the Partnership or either of the General Partners thereof, the
Manager shall cause its representatives to meet in Puerto Rico with
representatives of the Partnership or such General Partners, as the case may be,
no more frequently than once per month, for the purpose of reviewing the
financial results of the operations of the Resort and to otherwise respond to
all reasonable inquiries of the Partnership or such General Partners concerning
the operations of the Resort.
4.8. BANK ACCOUNTS. Manager shall establish such bank accounts
as Manager deems appropriate for the operation of the Resort. Such bank accounts
shall relate solely to the Resort, all Resort Gross Revenues or other
Partnership funds shall be deposited, maintained and segregated by the Manager
in such accounts and Manager shall not commingle such funds with any of the
Manager's funds or any funds of any other person or entity. Such bank accounts
shall be established only at financial institutions approved by the Partnership.
4.9. CONCESSIONS. Manager is authorized to consummate, in the
name of and for the benefit of the Partnership, arrangements and leases with
concessionaires, licensees, tenants and other intended users of any facilities
related to the Resort. Copies of all such arrangements and leases
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shall be furnished to the Partnership. The terms of such arrangements or leases
shall be subject to the prior approval of the Partnership although Manager shall
have absolute discretion in choosing or selecting the type of facility that
shall be given to and conducted by such third party. Manager customarily uses a
standard form for such arrangements, however, the terms and provisions thereof
as well as in each case the specific economic and additional terms thereof,
shall be subject to the Partnership's prior approval which approval shall not be
unreasonably withheld. For instance, if Manager deems it appropriate that the
Resort have an Italian restaurant run by a third party, the Partnership shall
have the right to approve the economic and additional terms of the agreement to
be entered into by Manager on behalf of the Partnership as aforesaid but the
Partnership shall not be entitled to disapprove of the Manager's decision that
the restaurant be run by a third party and be an Italian style restaurant, that
decision being recognized as being within the scope of Manager's expertise as a
manager of first class, luxury resorts.
4.10. WORKING CAPITAL. The Partnership shall, at its sole
expense, provide Manager will sufficient working capital during the Management
Term for the uninterrupted and efficient operation of the Resort as a first
class, luxury destination mega-resort and in accordance with the Approved
Budgets.
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4.11. LEGAL ACTIONS. Manager may institute, at its sole
option, in its name or the Partnership's name, but at the sole expense of the
Partnership, legal actions or other proceedings to collect charges or rents, to
oust guests or tenants, or to terminate leases or agreements. Manager shall give
the Partnership written notice prior to instituting any action or proceeding
involving in excess of $25,000 and which relates to the ordinary course of
operations of the Resort, other than routine collection matters. Without the
prior written consent of the Partnership, Manager shall not institute any legal
actions or other proceedings which involve matters outside the ordinary course
of operations of the Resort or which are otherwise of an extraordinary or non-
routine nature.
4.12. EXPENSES.
4.12.1. PARTNERSHIP'S FINANCIAL OBLIGATIONS. All
costs, expenses, funding of operating deficits and working capital, debts,
obligations and liabilities of the Partnership or the Resort under this
agreement (the "Partnership's Financial Obligations") shall be the sole and
exclusive responsibility and obligation of the Partnership. It is understood
that statements in this agreement indicating that Manager shall furnish, provide
or otherwise supply, present or contribute items or services hereunder shall not
be interpreted or construed to mean that Manager is liable or responsible to
fund or pay for such items or services.
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4.12.2. NO OBLIGATION TO FUND. The Partnership shall
reimburse Manager upon demand for any money or other property which Manager may
in its discretion pay out for any reason whatsoever in performing its duties as
manager of the Resort hereunder as provided for in the Approved Budgets whether
the payment is for operating expenses or any other charges or debts and whether
or not designated herein as an obligation of the Manager, the Partnership or the
Resort; provided, however, that it is understood and agreed that Manager shall
have no obligation or duty to fund or pay for any of the Partnership's Financial
Obligations or advance any of its own funds for the operation of the Resort.
4.12.3. TAXES. As agent for the Partnership and at
the Partnership's sole expense, Manager shall cause to be paid all taxes, fees
and other charges due by the Partnership to the Government Authorities and other
federal, commonwealth, state and local authorities in respect of the operation
of the Resort. The Partnership shall retain the right to contest or cause the
Manager to contest such taxes, fees and other charges.
4.12.4. FUNDING DEFICITS. With respect to any
deficits which may arise as a result of operations of the Resort, the
Partnership shall be obligated to fund and pay such deficits which are not
covered by the Resort income, within 30 days after written request therefor by
Manager. If the Partnership fails or delays in furnishing funds to cover such
deficits, Manager shall have no responsibility or liability, and the Partnership
shall indemnify and
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hold harmless Manager with respect to any liability, however arising, which may
arise out of or relate to, directly or indirectly, such failure or delay in
funding such deficits. The foregoing obligation is subject to the provisions of
Section 9.10 hereof.
4.13. CONSENT AND APPROVALS. In acting under this agreement in
all matters relative to this agreement and in approving or consenting to any
matter under this agreement, the Partnership and Manager shall act in a
reasonable manner and consistent with the operation of a Resort as a first
class, luxury destination mega-resort. The Partnership shall take into account
Manager's advice stemming from its experience as a manager of first class,
luxury resorts, and conditions prevailing generally in the hotel and casino
resort industry.
5. COMPENSATION OF MANAGER.
5.1. BASIC COMPENSATION FOR MANAGEMENT SERVICES. In
consideration for all services rendered by Manager as manager of the Resort
pursuant to this agreement on and after the Commencement Date, the Partnership
shall pay to Manager, subject to the provisions of Section 5.3 of this
agreement, a basic management fee (the "Basic Management Fee") of three and one
half (3.5%) percent of Resort Gross Revenues (as hereinafter defined in Section
5.7). The Basic Management Fee shall be payable monthly on the 25th day
following the end of each month based upon the monthly operating statements
prepared and delivered in accordance with Section 4.7 of
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this agreement, subject, however, to adjustment as provided in Section 5.3 of
this agreement.
5.2. INCENTIVE MANAGEMENT FEES. Subject to the provisions of
Section 5.3 and 5.4 of this agreement, for each Fiscal Year during the term of
this agreement, the Partnership shall pay Manager an incentive management fee
(the "Incentive Management Fee") of ten (10%) percent of Resort Operating
Profits (as hereinafter defined), which Incentive Management Fee shall be
payable annually on the earlier to occur of (a) five days after the
Partnership's receipt of audited financial statements for such Fiscal Year or
(b) 120 days after the end of such Fiscal Year.
5.3. FEE ADJUSTMENT. Basic Management Fees paid or payable to
Manager prior to the end of any Fiscal Year will be subject to verification and
adjustment after receipt of the audited financial statements for the applicable
Fiscal Year. If the Management Term is in effect for less than any full Fiscal
Year then the Basic Management Fee and the Incentive Management Fee with respect
to such partial Fiscal Year shall be based upon actual operations for the
portion of the Fiscal Year included in the Management Term.
5.4. SUBORDINATION OF INCENTIVE MANAGEMENT FEES.
5.4.1. SUBORDINATION.
(A) Notwithstanding anything herein to the
contrary, no Incentive Management Fee with respect to any Fiscal Year shall
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be paid by the Partnership or accepted by Manager until (i) all of the interest
and principal due and payable during such month or Fiscal Year, as the case may
be, with respect to the First Mortgage Loan and the Subordinated Mortgage Loan
(as those terms are defined in the Venture Agreement) (the "Loans") shall have
been paid or provided for by the Partnership, and (ii) all interest and
principal on any Additional Loan or Deficiency Loan and payments of any
Preferred Return and Deferred Preferred Return, as those terms are defined in
the Venture Agreement, due for such Fiscal Year and any prior Fiscal Year shall
have been paid or provided for by the Partnership (all of the foregoing being
herein referred to as "Senior Obligations"). All payments of the Incentive
Management Fee with respect to any Fiscal Year shall be subordinate to the
Senior Obligations in accordance with this Section 5.4 and any payments received
by Manager in violation of the foregoing shall be held in trust by Manager for
the benefit of the holders of the Senior Obligations and shall be paid over or
delivered to the holders of the Senior Obligations in accordance with their
respective payment priorities. In addition, in the event of (a) a default under
the Loans causing acceleration of the Loans or (b) a sale by the Partnership of
all or substantially all of the Resort or (c) the condemnation or insured
casualty loss of all or substantially all of the Resort or (d) the liquidation,
dissolution or winding up of the Partnership, no Incentive Management Fee shall
be paid to Manager until all Senior Obligations have been paid in full.
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(B) In the event that notwithstanding the
provisions of this Section 5 subordinating the payment of the Incentive
Management Fee to the Senior Obligations in the circumstances set forth herein,
Manager shall receive any payment in respect of the Incentive Management Fee at
a time when such payment is prohibited by this Section 5 because the
subordination provisions of Section 5.4.1 are deemed invalid or unenforceable by
a court of competent jurisdiction, then and in such event such payment shall be
received and held in trust by Manager for the benefit of the holders of the
Senior Obligations and shall be paid over or delivered to the holders of the
Senior Obligations in accordance with their respective payment priorities. In
such event, Manager shall become subrogated to the rights of such holders to the
extent it has turned over payments so received.
(C) Any Incentive Management Fee
due Manager but which is not paid by the Partnership by reason of the foregoing
subordination shall be accrued and carried over, with simple interest at the
rate of 10% per annum, until the Partnership shall have paid or provided for
payment of the Senior Obligations to the extent provided in this Section 5.4.1
and shall thereafter be paid to Manager. If requested, Manager shall enter into
an appropriate subordination agreement evidencing the foregoing if requested by
the lenders of the First Mortgage Loan and/or Subordinated Mortgage Loan. Except
for the Loans, the Deficiency Loans, the Additional Loans, the Preferred Return
and Deferred Preferred Return, the Partnership shall not,
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without the prior written consent of Manager, enter into any agreement which
requires the Partnership to subordinate the Basic Management Fee or the
Incentive Management Fee.
5.4.2. PAYMENT OF LOANS. Subject to Section 9.10
hereof, the Partnership shall pay or provide for the payment, when due, of all
principal and interest and other amounts under the Senior Obligations so that
the Partnership shall be entitled to pay the Incentive Management Fees provided
for by this agreement.
5.5. LOSSES. Losses in any Fiscal Year shall be borne
exclusively by the Partnership and shall not reduce the amount of any
compensation which Manager may be entitled to receive pursuant to this agreement
for any prior or subsequent Fiscal Year. No part of such loss shall be charged
against, recaptured out of or otherwise serve to diminish or affect the Resort
Gross Operating Profit for any prior or subsequent Fiscal Year.
5.6. MANAGER LOANS. In the event the General Partners of the
Partnership make Deficiency Loans prior to the expiration of five years from the
Commencement Date and the KG General Partner makes KG Loans, as those terms are
defined in the Venture Agreement, then, so long as such KG Loans remain
outstanding, Manager shall make non-recourse loans ("Manager Loans") to the WKA
General Partner, as that term is defined in the Venture Agreement, out of
payments received by it in respect of the Basic Management Fee to the extent and
in an amount equal to 1% of Resort Gross Revenues as
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provided in the agreement (the "Manager Loan Agreement") to be executed
concurrently herewith among Manager, the WKA General Partner and Kumagai
Caribbean, Inc. in the form annexed hereto as Exhibit F. Manager hereby
authorizes and directs the Partnership, for so long as the KG Loans remain
outstanding, to pay that portion of the Basic Management Fee required to be
loaned to the WKA General Partner as Manager Loans directly to the KG General
Partner at the address provided in the Venture Agreement. Notwithstanding the
payment of such sums to the KG General Partner, such sums shall be deemed to
satisfy, to the extent thereof, the obligation of the Partnership to Manager
under the terms hereof with respect to the Basic Management Fee. It is
understood and agreed that the KG General Partner is an express third party
beneficiary of the foregoing agreement.
5.7. CERTAIN DEFINITIONS. For purposes of this agreement:
5.7.1. RESORT GROSS REVENUES. "Resort Gross Revenues"
shall mean all gross revenues from all operations of the Resort, including,
without limitation, all revenues from rooms, golf course (including dues and the
first $5,000 of each initiation or membership fee but not amounts in excess
thereof), marina, food and beverage, telephone, telex, interest, casino net
wins, condominium net rentals, rentals or other payments from lessees,
licensees, or concessionaires (but not including the licensees' or
concessionaires' receipts), proceeds of business interruption insurance, and all
other receipts (exclusive of tips, service charges added to a customer's bill or
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statement in lieu of gratuities, which are payable to Resort employees, taxes
collected and remitted to others, and the value of complimentary rooms, food and
beverages, except those purchased by the casino), minus actual credits and
refunds made to customers, guests or patrons. Subject to the foregoing
adjustments, Resort Gross Revenues shall be determined in accordance with
generally accepted accounting principles and the Uniform System of Accounts for
Hotels as set forth in Section 3.1 of this agreement, except that in the event
of conflict the definition of "Resort Gross Revenues" herein shall be
controlling.
5.7.2. RESORT OPERATING PROFITS. "Resort Operating
Profits" shall mean Resort Gross Revenues less all operating expenses of the
Resort whether designated herein as an obligation of Manager, the Partnership or
the Resort,, including, without limitation, (a) the Basic Management Fee; (b)
marketing expenses; (c) repair and maintenance; (d) utility charges; (e) reserve
for replacement of furniture, fixtures and equipment; (f) administrative and
general expenses (including bad debt reserve) and (g) premiums for accident,
health, workers compensation and other insurance furnished to or for the benefit
of employees of the Resort and premiums for insurance of a similar nature; but
prior to deducting (i) premiums for liability, property and casualty insurance;
(ii) depreciation of building, plant, furniture, fixtures and equipment; (iii)
amortization of pre-opening expenses; (iv) financing costs including interest
charges, principal payment and debt service; (v) capital
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expenditures and payments on leases other than amounts included in the reserve
for replacement of furniture, fixtures and equipment; (vi) property taxes and
taxes on income; (vii) the Incentive Management Fee; (viii) real property
rentals.
5.7.3. VENTURE AGREEMENT. The "Venture Agreement"
shall mean that certain joint venture agreement dated January 12, 1990 between
Kumagai Caribbean, Inc. and WKA El Con Associates pursuant to which the
Partnership was formed.
6. INSURANCE.
6.1. INSURANCE. Manager shall procure and maintain, on behalf
of and at the expense of the Partnership, consistent with the Approved Budgets,
at all times during the Management Term, all such insurance as Manager and the
Partnership shall deem advisable including, without limitation, fidelity
liability insurance covering all of the Resort's employees authorized to deal
with Resort funds, and the premiums for such insurance shall be included in the
Annual Budgets and Approved Budgets. The Partnership shall maintain all
necessary insurance for the Resort and the premiums therefor shall be included
in the Approved Budgets. Manager shall not be required to maintain separate
insurance.
6.2. INSURANCE STANDARDS AND REQUIREMENTS. The Partnership and
Manager shall keep each other advised of applicable laws, rules or regulations
and third parties having the right to determine insurance
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requirements for the Resort, including without limitation, the agreements under
which the Loans are made and all insurance procured pursuant to Section 6.1 of
this agreement shall meet or exceed any requirements of such applicable laws,
rules or regulations and third parties having the right to determine insurance
requirements for the Resort. Insurance procured hereunder shall be placed with
insurance companies believed by Manager to be reputable and financially sound.
All insurance hereunder shall name both Manager and the Partnership, as their
interests shall appear and to the extent permitted by the insurance carrier
shall name Manager as an additional insured at least to the extent of the
Partnership's obligations under Section 6.3.1 hereof.
6.3. INDEMNIFICATION.
6.3.1. INDEMNIFICATION OF MANAGER. The Partnership
shall defend and promptly indemnify Manager and save and hold it harmless from,
against, for and in respect of and pay any and all damages, losses, obligations,
liabilities, claims, encumbrances, deficiencies, costs and expenses, including
without limitation, actual attorneys' fees and other costs and expenses incident
to any suit, action, investigation, claim or proceeding, suffered, sustained,
incurred or required to be paid by Manager by reason of (a) any breach or
failure of any observance or performance of any representation, warranty,
covenant, agreement or commitment made by the Partnership hereunder or relating
to or as a result of any such representation, warranty, covenant, agreement or
commitment being untrue or incorrect in any respect,
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(b) injury or death to persons or damage or destruction of property due to any
cause whatsoever, either in or about the Resort or elsewhere, as a result of the
performance of this agreement by Manager, its agents, officers, directors or
employees, or otherwise, irrespective of whether alleged to be caused, wholly or
partially, by Manager, its agents, officers, directors or employees or (c) for
any money or other property which Manager is required to pay out for any reasons
whatsoever in performing its duties under this agreement, whether the payment is
for operating expenses or any other charges or debts incurred or assumed by
Manager or any other party, or judgments, settlements, or expenses in defense of
any claim, civil or criminal action, proceedings, charge, or prosecution made,
instituted or maintained against Manager or the Partnership, jointly or
severally, because of the condition or use of the Resort, or acts or failures to
act of Manager, its agents, officers, directors or employees, or arising out of
or based upon any law, regulation, requirement, contract or award.
Notwithstanding the foregoing, the Partnership shall not be liable to Manager
pursuant to this Section 6.3.1 if any liability described above results from the
willful misconduct, fraud or gross negligence by Manager, its officers,
directors or employees who are not employed substantially full time in the
management or operation of the Resort.
6.3.2. INDEMNIFICATION OF THE PARTNERSHIP. Manager
shall defend and promptly indemnify the Partnership and save and hold it
harmless from, against, for an in respect of and pay any and all damages,
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losses, obligations, liabilities, claims, encumbrances, deficiencies, costs and
expenses, including without limitation, actual attorneys' fees and other costs
and expenses incident to any suit, action, investigation, claim or proceeding,
suffered, sustained, incurred or required to be paid by the Partnership by
reason of any injury or death of any person or damage or destruction of property
due to the willful misconduct, gross negligence or fraud of Manager, its
officers, directors or employees who are not employed substantially full time in
the management or operation of the Resort.
6.3.3. PROCEDURE FOR INDEMNIFICATION. For purposes of
this Section 6.3, the party entitled to indemnification shall be known as the
"Injured Party" and the party required to indemnify shall be known as the "Other
Party." If the Other Party shall be obligated to the Injured Party pursuant to
this Section 6.3 or if a suit, action, investigation, claim or proceeding is
begun, made or instituted as a result of which the Other Party may become
obligated to the Injured Party hereunder, the Injured Party shall give prompt
written notice to the Other Party of the occurrence of such event. The Other
Party shall defend, contest or otherwise protect against any suit, action,
investigation, claim or proceeding at the Other Party's own cost and expense.
The Injured Party shall have the right, but not the obligation, to participate
at its own expense in the defense thereof by the counsel of its own choice. If
the Other Party fails timely to defend, contest or otherwise protect against any
suit, action, investigation, claim or proceeding, the Injured Party
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shall have the right to defend, contest or otherwise protect against the same
and upon ten days' written notice to the Other Party may make any compromise or
settlement thereof and recover the entire cost thereof from the Other Party
including without limitation, actual attorneys' fees, disbursements and all
amounts paid as a result of such suit, action, investigation, claim or
proceeding or compromise or settlement thereof. In the event the Injured Party
elects at any time not to seek or continue to rely on indemnification from the
Other Party with respect to any claim, suit, action or proceeding, it shall have
the right to defend, contest or otherwise protect against the same at its sole
cost and expense and the Other Party shall have no liability to the Injured
Party in respect of such claim, suit, action or proceeding and no right to
defend or participate in the defense of such claim, suit, action or proceeding.
Anything to the contrary herein notwithstanding, prior to finally settling any
such claim, suit, action or proceeding, the Other Party shall give the Injured
Party notice of its intention to settle same and the terms of such proposed
settlement. If the Injured Party shall object to such proposed settlement within
ten days after its receipt of such notice, then the Injured Party shall
thereafter, at its sole expense, assume the control and defense of such claim,
suit, investigation action or proceeding. In such event, the Other Party shall
not be relieved from its obligations hereunder but such obligation shall be
limited with respect to the amount of such claim, suit, investigation action or
proceeding in the sense that it may not be greater than the amount for which the
same
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<PAGE>
could have been settled as proposed by the Other Party and will not be greater
than the amount for which it is ultimately resolved. If the Injured Party does
not object to the terms of the proposed settlement within the aforesaid ten day
period, then the Other Party shall have the right to consummate such proposed
settlement upon the terms set forth in the aforesaid notice. Failure to give the
Other Party timely notice of any claim, suit, action or proceeding shall in no
way relieve such party from its obligation to indemnify the Injured Party except
to the extent of losses actually caused to the Other Party by reason of such
failure.
7. DAMAGE TO RESORT AND CONDEMNATION.
7.1. CASUALTY DAMAGE.
7.1.1. THE PARTNERSHIP TO RESTORE. The Partnership
shall, subject to the provisions of this Section 7.1, repair, restore, rebuild
or replace any damage to, or impairment or destruction of the Resort from fire
or other casualty provided, however, that such obligation shall be limited to
the amount of insurance proceeds actually received by the Partnership in respect
of such casualty plus $3,000,000. If the Partnership fails to undertake such
work within 90 days after the casualty, or shall fail to complete the same
diligently, Manager may, but shall not be obligated to, undertake or complete
such work for the account of the Partnership and shall be entitled to be repaid
by the Partnership therefor, and the proceeds of insurance shall be made
available to Manager for such purpose. If the Partnership fails to undertake
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<PAGE>
such work within 90 days after fire or other casualty, or shall fail to complete
the same diligently, Manager, without prejudice to its rights against the
Partnership arising from any breach by the Partnership of its obligations under
this Section 7, may, at its election, terminate this agreement upon five days'
written notice to the Partnership.
7.1.2. LIMITATION ON RESTORATION. If the Resort shall
be wholly destroyed or Substantially Destroyed (as hereafter defined) during the
term of this agreement by fire or other casualty, the Partnership shall have the
right and option, upon notice served upon Manager within 90 days after such fire
or other casualty, to decide not to make any repair, restoration, rebuilding or
replacement and to terminate this agreement upon 30 days' written notice. For
purposes of this Section, "Substantially Destroyed" shall mean damage to the
Resort in excess of $40,000,000.
7.2. CONDEMNATION.
7.2.1. TOTAL CONDEMNATION. If the whole of the Resort
shall be taken or condemned in any eminent domain, condemnation, compulsory
acquisition or like proceeding by any competent authority for any public or
quasi-public use or purpose, or if such of the Resort's facilities shall be so
taken or condemned resulting in the Resort being Substantially Destroyed or if
such a portion of the Resort shall be taken or condemned so as to make it
imprudent or unfeasible, in Manager's reasonable opinion, to use the remaining
portion as a resort of the type and class immediately preceding such
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taking or condemnation, then in any of such cases, at the Partnership's election
given in writing to Manager, the term of this agreement shall cease and
terminate as of the later of the date of such taking or condemnation or
Manager's receipt of notice of the Partnership's election to terminate this
agreement.
7.2.2. PARTIAL CONDEMNATION. If such taking or
condemnation results in the Resort not being deemed Substantially Destroyed and
such taking or condemnation does not make if unfeasible or imprudent, in
Manager's reasonable opinion, to operate the remainder as a resort of the type
and class immediately preceding such taking or condemnation, this agreement
shall not terminate, but the Partnership, to the extent of the condemnation
award plus $3,000,000, shall repair any damage to the Resort, or any part
thereof, or alter or modify the Resort, or any part thereof, or reconstruct any
facility so taken or condemned so as to render the Resort a complete and
satisfactory architectural unit as a resort of the same type and class as it was
immediately preceding the taking or condemnation.
8. TERMINATION.
8.1. RIGHT OF TERMINATION.
8.1.1. Notwithstanding anything herein to the
contrary, Manager may terminate this agreement if the Partnership shall fail to
keep, observe or perform any covenant, agreement or provision of this agreement
required to be kept, observed or performed by the Partnership, such
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<PAGE>
termination to become effective thirty days after Manager shall have given to
the Partnership written notice of such failure, and such failure remains uncured
by the Partnership during such thirty-day period or, if such failure cannot be
cured within such thirty-day period, the Partnership has failed during such
thirty-day period to proceed promptly and diligently to cure such failure.
8.1.2. The Partnership shall have the right to
terminate this agreement upon thirty (30) days prior written notice to Manager
in the event that (a) WKA El Con Associates fails to pay at maturity (nine years
after the Commencement Date) the full amount of all outstanding KG Loans, as
that term is defined in the Venture Agreement; (b) WKA El Con Associates fails
to immediately apply amounts received by it from the Partnership in respect of
Deficiency Loans in repayment of outstanding KG Loans; (c) WKA El Con Associates
fails to immediately apply the proceeds of Manager Loans in repayment of
outstanding KG Loans or (d) Manager fails to make any required Manager Loan
immediately upon its receipt of the Basic Management Fee as provided in Section
5.6 hereof and the Manager Loan Agreement. Such right shall be exercisable only
during the 180 day period immediately following such default.
8.1.3. The Partnership shall have the right to
terminate this agreement upon thirty (30) days prior written notice to Manager
in the event that Manager shall have failed to meet the Performance Standards,
as hereafter defined, for any two consecutive Fiscal Years commencing with the
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<PAGE>
sixth full Fiscal Year during the Management Term. Manager shall be deemed to
have failed to meet the Performance Standards in any Fiscal Year if the average
revenues per room and average occupancy levels of the Resort are both less than
80% of the average revenues per room and average occupancy levels of Hyatt
Dorado Beach Hotel and Candelero Hotel at Palmas del Mar, collectively, during
the comparable period.
8.1.4. The Partnership shall have the right to
terminate this agreement effective upon a consummation of a sale by the
Partnership of all or substantially all of the Resort, provided the Partnership
shall have given Manager at least 30 days prior written notice and provided
further that if such sale occurs during the Management Term, the Partnership
shall pay Manager the Liquidation Share (as hereafter defined).
8.1.5. This agreement may be terminated upon 30 days
prior written notice to Manager in connection with a sale or other disposition
of the Resort in connection with proceedings to foreclose the First Mortgage
Loan or any other mortgage constituting a first lien of the Resort.
8.2. PAYMENTS. Upon termination of this agreement for any
cause or reason including those set forth in Section 7 and Section 8.1 hereof,
all amounts owing from the Partnership to Manager pursuant to this agreement for
all periods prior to the date of termination, including the Basic Management
Fee, the Incentive Management Fee and all expenses for which Manager is entitled
to reimbursement, shall become immediately due and
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payable provided, however, that the Incentive Management Fee shall be payable
only in accordance with Section 5.4.1(A) hereof. The Partnership shall promptly
determine and pay such amounts and if this agreement shall have been terminated
as provided in Section 8.1.4, the Partnership shall immediately pay Manager an
amount equal to Manager's Liquidation Share at the date of termination.
Effective upon such termination, the Management Term shall cease and Manager and
the Partnership shall cease to have any continuing obligations to each other
except with respect to such payments, causes of action by reason of any breach
prior to such termination and the indemnification obligations set forth in
Section 6.3 hereof. The payment by the Partnership of amounts due upon
termination shall not operate as a waiver of any claims the Partnership may have
against Manager for any breach by Manager of the terms of this agreement.
8.3. MANAGER'S LIQUIDATION SHARE. For purposes of this Section
8, "Manager's Liquidation Share" shall be an amount equal to 75% of the sum of
the Individual Year Amounts for each Fiscal Year or portion thereof remaining
between the date of determination ("Determination Date") and the date occurring
20 years after the Commencement Date. The "Individual Year Amount" for any
Fiscal Year shall be an amount equal to the average of the Basic Management Fees
and the Incentive Management Fees payable (whether actually paid or accrued) to
Manager hereunder for the three full Fiscal Years which shall have passed
immediately prior to the
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Determination Date (or the average of all Fiscal Years if at least three full
Fiscal Years have not passed prior to the Determination Date or $3,000,000 if at
least one full Fiscal Year has not passed prior to the Determination Date)
discounted to the Determination Date assuming an 8% simple interest factor and
assuming further that each year's payment would have been made on the first day
of such year.
8.4. NULL AND VOID. If (a) the Partnership shall not acquire
the land and buildings for the Resort before September 30, 1990, or (b) the
Partnership elects to abandon the Project or sell the Resort after such
acquisition but prior to the Commencement Date, then in either of such events
this agreement shall be deemed cancelled and of no force and effect and no party
hereto shall have any obligation to the other hereunder except that the
Partnership shall reimburse Manager for expenses incurred prior thereto which
are otherwise expenses of the Partnership pursuant to the terms hereof and if
the Project is abandoned or the Resort sold prior to the Commencement Date, the
Partnership shall pay to the Manager any portion of the Development Fee earned
through the date of termination.
9. MISCELLANEOUS.
9.1. ENTIRE AGREEMENT. This agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof. No change,
modification, amendment, addition or termination of this agreement or any part
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thereof shall be valid unless in writing and signed by or on behalf of the party
to be charged therewith.
9.2. COUNTERPARTS. This agreement may be executed in one or
more counterparts, and shall become effective when one or more counterparts has
been signed by each of the parties.
9.3. NOTICES. Except as otherwise provided herein, any and all
notices or other communications or deliveries required or permitted to be given
pursuant to any of the provisions of this agreement shall be deemed to have been
duly given for all purposes if sent by certified or registered mail, return
receipt requested and postage prepaid, sent by express mail or other responsible
overnight delivery service, hand delivered or sent by telegraph, telex or
telephone facsimile as follows:
If to the Partnership, at:
c/o WMS Industries Inc.
767 Fifth Avenue - 23rd Floor
New York, New York 10153
Attention: President
Telecopy: (212) 319-9789
and
Kumagai Caribbean, Inc.
c/o Williams Hospitality
Management Corp.
P.O. Box 50053
San Juan, Puerto Rico 00902
Attention: President
Telecopy: (809) 791-7500
with copies to:
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Whitman and Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telecopy: (212) 351-3131
Jones, Day, Reavis & Pogue
4100 Lincoln Plaza
500 North Akard
Dallas, Texas 75201
Attention: Brian D. Lafving, Esq.
Telecopy: (214) 871-0729
If to Manager, at:
c/o Mr. Hugh A. Andrews
Williams Hospitality
Management Corp.
P.O. Box 50053
San Juan, Puerto Rico 00902
Telecopy: (809) 791-7500
with a copy to:
Whitman and Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telecopy: (212) 351-3131
or at such other address as any party may specify by notice given to other party
in accordance with this Section 9.3. The date of giving of any such notice shall
be three business days following the date sent by certified or registered mail,
the next business day following delivery to a responsible overnight delivery
service, the date hand delivered, the date sent by telegraph, telex or telephone
facsimile.
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9.4. WAIVERS. No waiver of the provisions hereof shall be
effective unless in writing and signed by the party to be charged with such
waiver. No waiver shall be deemed a continuing waiver or waiver in respect of
any subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
9.5. SEVERABILITY. Should any clause, section or part of this
agreement be held or declared to be void or illegal for any reason, all other
clauses, sections or parts of this agreement which can be effected without such
illegal clause, section or part shall nevertheless continue in full force and
effect.
9.6. CHOICE OF LAW. This agreement shall be governed,
interpreted and construed in accordance with the laws of the State of Delaware.
9.7. NON-ASSIGNABILITY. This agreement and the various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns except that
no assignee or successor of the Partnership shall be entitled to enforce any of
the Partnership's rights under Section 9.10 hereof. This agreement shall not be
assignable by any of the parties hereto without the prior written consent of all
other parties hereto and any attempt to assign this agreement shall be void and
of no effect, except that (i) Manager shall have the right, without consent of
the Partnership, to assign all or any part of this agreement to a wholly owned
subsidiary of Manager which shall assume the
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obligations of Manager hereunder but such assignment shall not relieve Manager
of any liability hereunder and (ii) the Partnership shall have the right to
assign this agreement after the Commencement date without the consent of Manager
in connection with a sale of the entire Resort provided that the purchaser of
the Resort shall assume and be responsible only for the obligations hereunder
with respect to periods following the date of such sale and the Partnership
shall be responsible under this agreement only for obligations hereunder with
respect to periods prior to the date of such sale. The Partnership shall not be
responsible for obligations hereunder for periods following the date of such
sale.
9.8. CAPTIONS. The headings or captions under sections of
this agreement are for convenience and reference only and do not in any way
modify, interpret or construe the intent of the parties or effect any of the
provisions of this agreement.
9.9. NON-RECOURSE TO PARTNERS. The obligations of the
Partnership hereunder shall be non-recourse to the General Partners of the
Partnership and Manager shall look solely to the assets of the Partnership to
satisfy such obligations.
9.10. LIMITATION OF REMEDIES. The general partners of the
Partnership have agreed to make capital contributions to the Partnership of not
less than $30,000,000 and to make Deficiency Loans to the Partnership of up to
$20,000,000 in principal amount outstanding, all as provided in the Venture
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Agreement and each of the general partners of the Partnership hereby covenants
with Manager to make such capital contributions and Deficiency Loans as and to
the extent provided in the Venture Agreement. Neither the Partnership nor the
General Partners of the Partnership shall have any obligations to make, or any
liability to Manager for damages incurred by Manager as a result of any failure
to refusal by the General Partners to make, any additional loans or capital
contributions or otherwise provide financing to the Resort except that
Partnership shall remain responsible to Manager for amounts payable under
Section 5.1, 5.2, 4.12.2 and 6.3 hereof. The parties acknowledge that
notwithstanding such contributions and Deficiency Loans and the proceeds of
Loans, the possibility exists that the Partnership may have insufficient funds
available to complete the Project as contemplated or that such funds, together
with revenues generated from the operations of the Resort may be insufficient to
enable the Partnership to fully perform certain of its obligations during the
Management Term including those obligations set forth in Sections 3.3.1, 3.3.5,
4.1.1, 4.1.2, 4.5, 4.10, 4.12.1, 4.12.2, 4.12.4 and 4.13 hereof. If, despite the
fact that the capital contributions and proceeds of Deficiency Loans and the
Loans have all been used in connection with the Project and the operations of
the Resort, the Partnership has insufficient funds available to meet its
obligations under the Loans and/or this agreement, other than the obligation to
pay the Basic Management Fee as provided in Section 5 hereof and to reimburse
Manager for expenses under Section 4.12.2 hereof,
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at the Partnership's request, Manager shall refrain from enforcing its rights
under such sections, other than the right to be paid the Basic Management Fee
under Section 5.1 hereof and to be reimbursed for expenses under Section 4.12.2
hereof, to the extent necessary to afford the Partnership the opportunity to
continue to operate the Resort, to meet its obligations to its lenders, or to
obtain refinancing or additional financing, as the Partnership shall determine.
Manager understands that in such event certain measures may be required to be
taken by the Partnership to cut back on the expenses associated with the
operation of the Resort which may adversely affect the operation of the Resort
as a first class, luxury destination mega-resort and notwithstanding anything to
the contrary in this agreement, Manager shall cooperate with the Partnership to
reduce expenses revise budgets including Approved Budgets and otherwise comply
with all reasonable requests of the Partnership designed to continue the Resort
as a going concern. All revised budgets, when approved by the Partnership, shall
thereafter constitute Approved Budgets for purposes of this agreement, including
Section 4.12.2 hereof. In such event, Manager shall nevertheless continue
management of the Resort subject to the terms of this agreement, unless and
until this agreement has been terminated as provided herein; however, Manager's
obligations to operate the Resort as a first class, luxury destination
mega-resort and to otherwise perform certain obligations hereunder shall be
correspondingly suspended to the extent funds are not available for such level
of operation.
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The parties acknowledge that Manager's undertaking not to enforce its remedies
under such circumstances is extraordinary and shall not be broadly construed.
Nothing in this Section shall be deemed to constitute a waiver of any of
Manager's rights to receive the Basic Management Fee and to be reimbursed for
its expenses as provided in Section 4.12.2 hereof. This Section is only an
agreement by Manager to temporarily refrain from asserting certain of its rights
under this agreement and to claim damages as a result thereof. All such rights
shall be reinstated in full on a going forward basis and Manager shall be
entitled to require full compliance by the Partnership with its obligations
under this agreement when the Partnership's financial circumstances permit. In
the event expenses or operations of the Resort are curtailed under this Section
9.10 so that the Resort cannot be operated at a first class, luxury level, the
Partnership's right to terminate this agreement under Section 8.1.3 hereof shall
have no force and effect during the period that such expenses or operations were
curtailed and once such expenses and operations have returned to normal, shall
be applicable only to Fiscal Years commencing one full Fiscal Year after they
shall have returned to normal. Nothing in this Section 9.10 shall be deemed to
limit or curtail Manager's right to terminate this agreement under the
provisions of Section 8.1.1 in the event the Partnership is unable to perform
its obligations for any reason whatsoever, including those referred to in this
Section 9.10.
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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be
signed on the date and year first above written.
EL CONQUISTADOR PARTNERSHIP L.P.
By: WKA EL CON ASSOCIATES,
a general partner
By: WMS EL CON CORP., Partner
By: /s/____________________________
Norman J. Menell,
President
and
By: KUMAGI CARIBBEAN, INC.,
a general partner
By: /s/____________________________
Takayuki Furuta, Chairman
WILLIAMS HOSPITALITY MANAGEMENT
CORPORATION
By: /s/____________________________
Hugh A. Andrews, President
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FIRST AMENDMENT TO THE DEVELOPMENT SERVICES
AND MANAGEMENT AGREEMENT BETWEEN
EL CONQUISTADOR PARTNERSHIP L.P. AND
WILLIAMS HOSPITALITY MANAGEMENT CORPORATION
This amendment ("Amendment") is made and entered into as of
the 30th day of September 1990, by and between El Conquistador Partnership L.P.,
a Delaware limited partnership ("Partnership"), and Williams Hospitality
Management Corporation, a Delaware corporation ("Manager").
W I T N E S S E T H :
WHEREAS, the Partnership and the Manager are parties to a
development services and management agreement dated January 12, 1990 with
respect to the El Conquistador Hotel to be acquired and developed by the
Partnership in Fajardo, Puerto Rico; and
WHEREAS, the Partnership and the Manager desire to amend the
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto hereby agree as follows:
Section 8.4, paragraph (a), clause (i) of the Agreement is
hereby amended to change the date of September 30, 1990 set forth therein to
January 31, 1991.
All other provisions of the Agreement shall remain in full
force and effect except as amended hereby.
EL CONQUISTADOR PARTNERSHIP, L.P., a
Delaware limited partnership
By: WKA El Con Corp., General Partner
By: /s/___________________________
Norman J. Menell, President
By: Kumagai Caribbean, Inc.,
General Partner
By: /s/___________________________
Shunsuke Nakane
WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION
By: /s/__________________________
Hugh Andrews, President
<PAGE>
<PAGE>
SECOND AMENDMENT TO THE DEVELOPMENT SERVICES
AND MANAGEMENT AGREEMENT BY AND BETWEEN
EL CONQUISTADOR PARTNERSHIP L.P.
AND WILLIAMS HOSPITALITY MANAGEMENT CORPORATION
THIS AGREEMENT is made and entered into as of the 31st day of January
1991, by and between El Conquistador Partnership L.P., a Delaware limited
partnership (the "Partnership"), and Williams Hospitality Management
Corporation, a Delaware corporation (the "Manager").
W I T N E S S E T H :
WHEREAS, the Partnership and the Manager are parties to a
development services and management agreement dated January 12, 1990, as amended
by agreement dated September 30, 1990 (the "Agreement"), with respect to, among
other things, the construction, renovation and development by the Partnership of
the El Conquistador Resort and Country Club in Fajardo, Puerto Rico (capitalized
terms used herein and not otherwise defined shall have the same meaning ascribed
to such terms in the Agreement); and
WHEREAS, the Partnership's acquisition of the land and
buildings on which the Resort will be located has been delayed beyond January
31, 1991; and
WHEREAS, the Manager has requested that the Partnership not
permit the Agreement to automatically terminate as a result of the Partnership's
failure to acquire the land and buildings for the Resort by January 31, 1991 as
currently provided in Section 8.4 of the Agreement; and
WHEREAS, the Partnership has requested that as a condition to
continuing the Agreement beyond January 31, 1991, that the Manager defer payment
of portions of the Development Fee; and
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WHEREAS, the Partnership and the Manager believe it is
mutually beneficial to amend the Agreement to accommodate their respective
requests.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and in consideration of
the premises and mutual covenants set forth herein, the parties hereto agree as
follows:
1. Section 8.4 of the Agreement is hereby amended to change
the date on which the Agreement shall be deemed to automatically terminate by
reason of the failure by the Partnership to acquire to land and buildings on
which the resort will be located from January 31, 1991 to February 15, 1991.
3. Except as specifically set forth above all other provisions
of the Agreement are hereby ratified and confirmed and shall remain in full
force and effect.
IN WITNESS WHEREOF the parties hereto have set their hand and
seal as of the date and year first above written.
EL CONQUISTADOR PARTNERSHIP L.P.
Delaware limited partnership
By: WKA El Con Associates,
General Partner
By: /s/ Norman J. Menell
----------------------------------------
Norman J. Menell,
Authorized Signatory
By: Kumagai Caribbean, Inc.,
General Partner
By: /s/ Shunsuke Nakane
----------------------------------------
Shunsuke Nakane, President
2
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WILLIAMS HOSPITALITY MANAGEMENT
CORPORATION
By: /s/ Hugh A. Andrews
-----------------------------------------
Hugh A. Andrews, President
3
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<PAGE>
- --------------------------------------------------------------------------------
LOAN AGREEMENT
BETWEEN
PUERTO RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND
ENVIRONMENTAL POLLUTION CONTROL FACILITIES FINANCING AUTHORITY
AND
EL CONQUISTADOR PARTNERSHIP L.P.
DATED FEBRUARY 7, 1991
----------------------
$120,000,000
INDUSTRIAL REVENUE BONDS, 1991 SERIES A
CONVERTIBLE INDUSTRIAL REVENUE BONDS, 1991 SERIES B
INDUSTRIAL REVENUE BONDS, 1991 SERIES C
(EL CONQUISTADOR RESORT PROJECT)
- --------------------------------------------------------------------------------
THIS LOAN AGREEMENT HAS BEEN ASSIGNED BY PUERTO RICO INDUSTRIAL,
MEDICAL, EDUCATIONAL AND ENVIRONMENTAL POLLUTION CONTROL FACILITIES FINANCING
AUTHORITY TO THE TRUSTEE UNDER THE TRUST AGREEMENT AS THE SAME MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME. A COPY OF THE TRUST AGREEMENT MAY BE INSPECTED
AT THE CORPORATE TRUST OFFICE.
<PAGE>
<PAGE>
TABLE OF CONTENTS
(This Table of Contents is not a part of the Loan Agreement but is for
convenience of reference only.)
<TABLE>
<CAPTION>
ARTICLE I Page
DEFINITIONS AND RULES OF CONSTRUCTION
<S> <C>
Section 1.01. Definitions.....................................................I-1
Section 1.02. Rules of Construction...........................................I-8
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01. Representations and Warranties by the Authority................II-1
Section 2.02. Representations, Warranties and Covenants by the
Borrower.......................................................II-1
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS;
LETTER OF CREDIT
Section 3.01 Construction of Project.......................................III-1
Section 3.02 Revision of Description of Project............................III-1
Section 3.03 Agreement to Issue the Bonds..................................III-1
Section 3.04 Disbursements from Project Fund...............................III-1
Section 3.05 Borrower Required to Pay Cost of Project......................III-2
Section 3.06 Establishment of Completion Date; Verification of Cost
of the Project................................................III-2
Section 3.07 The Letter of Credit; Successor Letter of Credit..............III-2
Section 3.08 Conditions Precedent to Issuance of the Bonds.................III-4
ARTICLE IV
LOAN BY THE AUTHORITY TO THE BORROWER; REPAYMENT;
MAINTENANCE; INDEMNITY
Section 4.01 Loan by the Authority; Repayment...............................IV-1
</TABLE>
(i)
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Section 4.02 No Set-Off.....................................................IV-2
Section 4.03 Prepayments....................................................IV-2
Section 4.04 Covenant to Operate and Maintain Project.......................IV-2
Section 4.05 Expenses.......................................................IV-3
Section 4.06 Indemnification................................................IV-3
Section 4.07 Past Due Payments..............................................IV-5
Section 4.08 Insurance......................................................IV-5
ARTICLE V
FURTHER AGREEMENTS
Section 5.01 Covenant to Maintain Existence..................................V-1
Section 5.02 Authority's Covenant to Cooperate...............................V-1
Section 5.03 No Warranty by Authority........................................V-1
Section 5.04 Right of Inspection.............................................V-1
Section 5.05 Consent to Jurisdiction. ......................................V-2
Section 5.06 Officers of Authority Not Liable................................V-2
Section 5.07 Indemnification with Respect to Government
Obligations.....................................................V-2
Section 5.08 Annual Reports..................................................V-2
Section 5.09 Consent to Assignment. ........................................V-3
Section 5.10 Maintenance of Source of Income; Indemnity; Change in
Law.............................................................V-3
Section 5.11 Sale of Project. ...............................................V-7
Section 5.12 Compliance with Applicable Law. ...............................V-7
Section 5.13 Authority's Performance of the Borrower's
Obligations.....................................................V-7
Section 5.14 No Purchase of Bonds by Borrower; Exceptions....................V-8
Section 5.15 Covenant to Notify..............................................V-8
Section 5.16 No Interest of Authority in Project.............................V-8
Section 5.17 Limitation of Liability.........................................V-8
Section 5.18 Covenant as to Status under Bankruptcy Code.....................V-9
ARTICLE VI
ASSIGNMENT
Section 6.01 Assignment by Borrower.........................................VI-1
Section 6.02 Assignment by Authority........................................VI-1
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.01 Events of Default.............................................VII-1
Section 7.02 Acceleration; Remedies........................................VII-4
Section 7.03 Remedies Not Exclusive........................................VII-5
Section 7.04 Attorney's Fees and Expenses. ................................VII-5
Section 7.05 Waivers.......................................................VII-5
ARTICLE VIII
PREPAYMENT OF THE LOAN
Section 8.01 Option to Prepay Loan........................................VIII-1
Section 8.02 Mandatory Prepayment of Loan.................................VIII-1
Section 8.03 Relative Position of Loan Agreement and Trust
Agreement. ..................................................VIII-4
ARTICLE IX
MISCELLANEOUS
Section 9.01 Termination....................................................IX-1
Section 9.02 Reference to Bonds Ineffective After Bonds Paid................IX-1
Section 9.03 No Additional Waiver Implied by One Waiver.....................IX-1
Section 9.04 Authority Representative.......................................IX-1
Section 9.05 Authorized Borrower Representative.............................IX-1
Section 9.06 Confidential Information. ....................................IX-2
Section 9.07 Notices........................................................IX-2
Section 9.08 Binding Effect.................................................IX-5
Section 9.09 If Payment or Performance Date Not a Business Day..............IX-5
Section 9.10 Severability...................................................IX-5
Section 9.11 Amendments, Changes and Modifications..........................IX-5
Section 9.12 Execution in Counterparts......................................IX-5
Section 9.13 Applicable Law.................................................IX-5
Section 9.14 No Charge Against Authority Credit.............................IX-5
Section 9.15 Authority Not Liable...........................................IX-5
Section 9.16 Loan Agreement Supersedes Prior Agreements.....................IX-6
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LOAN AGREEMENT
This LOAN AGREEMENT, dated February 7, 1991, by and between the parties
appearing in the cover page hereof,
W I T N E S S E T H:
in consideration of the respective representations and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01. DEFINITIONS. In addition to the words and terms elsewhere
defined in this Loan Agreement, the following words and terms hereinbefore and
hereinafter used shall have the following meanings:
ACT: Act No. 121 of the Legislature of the Commonwealth, approved June
27, 1977, as amended, and all future acts supplemental thereto or amendatory
thereof.
ADMINISTRATIVE FEE: the single fee to the Authority in the amount of
1/2 of 1% of the aggregate principal amount of the Bonds.
AUTHORITY: Puerto Rico Industrial, Medical, Educational and
Environmental Pollution Control Facilities Financing Authority, a body corporate
and politic constituting a public corporation and governmental instrumentality
of the Commonwealth, or any successor thereto.
AUTHORITY REPRESENTATIVE: each of the Persons designated at the time to
act on behalf of the Authority by a certificate furnished to the Trustee, the
Borrower and the Letter of Credit Bank containing the specimen signatures of
such Persons and signed on behalf of the Authority by the Executive Director (as
defined in the Trust Agreement).
AUTHORIZED BORROWER REPRESENTATIVE: each of the Persons designated at
the time to act on behalf of the Borrower by a certificate furnished to the
Trustee, the Authority and the Letter of Credit Bank containing the specimen
signatures of such Persons and signed on behalf of the Borrower by an authorized
officer thereof.
BOND FUND: the fund created by Section 501 of the Trust Agreement.
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BONDHOLDER: the Person registered as owner of any Bonds in the Bond
Register.
BOND PURCHASE AGREEMENT: the Purchase Contract relating to the Bonds by
and among the Authority, the Borrower, and the Underwriter, together with all
permitted agreements amendatory thereof or supplemental thereto.
BOND PURCHASE FUND: the fund created by Section 505 of the Trust
Agreement.
BOND REGISTER: the register to be maintained by the Trustee, as
provided under Section 206 of the Trust Agreement.
BONDS: the bonds authorized to be issued under Section 208 of the Trust
Agreement.
BORROWER: El Conquistador Partnership L.P., a limited partnership
organized and existing under the laws of the State of Delaware, and its
successors and permitted assigns, and any surviving, resulting or transferee
entity.
CHANGE IN LAW: the receipt by the Trustee from an attorney selected by
the Trustee who is recognized as knowledgeable in tax matters under the Code as
in effect on the date of such selection of an opinion to the effect that: (i)
solely as a result of any repeal of or changes enacted to Section 936 of the
Code (and not due to the particular circumstances of any Holder), the benefits
of the 936 Credit applicable to interest on the Bonds are reduced or eliminated
without the enactment of an equivalent substitute credit, exemption or deduction
from income taxes under the Code as in effect on the effective date of such
changes or (ii) solely as a result of a change enacted to the Code, interest on
the Bonds is treated as an item of tax preference (or similar item) for federal
corporate income tax purposes.
CODE: the Federal Internal Revenue Code of 1986, and the regulations
issued thereunder, as in effect on the Date of Issuance.
COLLATERAL AGREEMENT: the Collateral Pledge Agreement, by and among the
Borrower, the Authority and the Letter of Credit Bank, together with all
permitted agreements amendatory thereof or supplemental thereto.
COMMONWEALTH: the Commonwealth of Puerto Rico.
COMPLETION DATE: the date of completion of the Project as certified in
the manner provided in Section 3.06.
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CORPORATE TRUST OFFICE: the principal office of the Trustee at Banco
Popular Center, Suite 503 Fifth Floor, Hato Rey, Puerto Rico 00918, or any other
address at which its corporate trust business shall be administered at any
particular time.
COST: as applied to the Project, shall have the meaning set forth in
the Act, and shall include but is not limited to the items of cost set forth in
Section 403 of the Trust Agreement.
DATE OF ISSUANCE: the date appearing on page I-1 of this Loan
Agreement.
ELIGIBLE FUNDS: funds defined as such under Regulation 3582.
ELIGIBLE INSTITUTION: an institution defined as such under Regulation
3582.
ELIGIBLE MONEYS: shall have the meaning assigned to such term under the
Trust Agreement.
ELIGIBLE INVESTMENT OBLIGATIONS: Investment Obligations that qualify as
"Eligible Activities" under Regulation 3582.
EVENTS OF DEFAULT: any one or more of the occurrences specified in
Section 7.01.
EVENT OF TAXABILITY: the receipt by the Authority and the Trustee of
(a) a certificate of an Independent Accountant pursuant to Section 5.10(d)(1);
or (b) an opinion of legal counsel knowledgeable in tax matters pursuant to
Section 5.10(d)(2) (unless the same is contested pursuant to said Section); or
(c) a final arbitration award pursuant to Section 5.10(d)(3), in each case to
the effect that (i) the Borrower has failed to meet the requirements of Section
5.10(a), (b), and (c) or that the representations made in (xv) and (xvi) of
Section 2.02 are not true and correct, and (ii) that as a consequence thereof,
under the Code as in effect on the date of such certificate or opinion the
interest paid or accrued on Bonds held by any 936 Corporation is includable in
gross income and subject to the payment of income taxes a credit for the payment
of which is not otherwise available to such 936 Corporation.
GOVERNMENT OBLIGATIONS: (i) direct obligations of, or obligations the
principal of and the interest on which are unconditionally guaranteed by, the
United States of America; and (ii) any certificates or other evidences of
ownership in obligations or in specified portions thereof (which may consist of
specified portions of the principal thereof or the interest thereon) of the
character described in clause (i).
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HIGHEST LAWFUL RATE: the least of (i) 12% per annum, (ii) the maximum
rate of interest permitted to be paid on the Bonds by applicable Commonwealth
law, and (iii) the maximum rate of interest that may be collected under the
provisions of Article 3 C of Regulation No. 24-A, as amended by Regulations No.
I, No. II, No. III and No. IV of the Board Regulating Rates of Interest and
Financing Charges of the Commonwealth, approved on December 27, 1982 which is
currently 2 percentage points over the annual interest rate equivalent to the
gross yield resulting from the auction held by the Federal Home Loan Mortgage
Corporation during the week immediately prior to the Date of Issuance, rounded
to the nearest 1/8 of a percentage point.
HOLDER: the Person registered as owner of any Bonds in the Bond
Register.
INDEPENDENT ACCOUNTANT: a firm of certified public accountants, which
may also be the firm which audits the financial statements of the Borrower,
which is independent with respect to the Borrower within the meaning of the Code
of Professional Ethics of the American Institute of Certified Public
Accountants.
INDUSTRIAL FACILITIES: shall have the meaning given to such term by
Section 3 of the Act as in effect on the Date of Issuance.
INITIAL LETTER OF CREDIT: the irrevocable, transferable, stand-by
letter of credit, substantially in the form of Exhibit A to the Initial
Reimbursement Agreement, issued by the Initial Letter of Credit Bank in favor of
the Trustee in an aggregate amount equal to the principal amount of the Bonds
plus 120 days' interest thereon at the rate of 12% per annum, together with all
permitted agreements amendatory thereof or supplemental thereto.
INITIAL LETTER OF CREDIT BANK: The Mitsubishi Bank, Limited, acting
through its New York Branch.
INITIAL REIMBURSEMENT AGREEMENT: the Letter of Credit and Reimbursement
Agreement, between the Borrower and the Initial Letter of Credit Bank, providing
for, among other things, the issuance of the Initial Letter of Credit, together
with all permitted agreements amendatory thereof or supplemental thereto.
INVESTMENT AGREEMENT: an agreement providing for the investment of
funds held under the Trust Agreement, whether in the form of an interest bearing
time account, or any similar
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arrangement other than a repurchase agreement, entered into between the Trustee
and a Qualified Financial Institution, in which, among other things, the
Qualified Financial Institution represents that the funds invested thereunder
will be invested in conformity with Section 6.2.6(b) of Regulation 3582.
INVESTMENT OBLIGATIONS: (i) Government Obligations, (ii)
bonds, debentures or notes issued by any of the following Federal agencies:
Banks for Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan
Banks, Export-Import Bank of the United States, Governmental National Mortgage
Association, Federal Land Banks, or the Federal National Mortgage Association
(including participation certificates issued by such Association), (iii)
obligations of the Commonwealth or any of its instrumentalities or political
subdivisions which are rated in one of the four highest rating categories
(without regard to any gradations within such categories by numerical qualifier
or otherwise) by any nationally recognized securities rating service; (iv) all
obligations issued or unconditionally guaranteed as to principal and interest by
an agency or Person controlled or supervised by and acting as an instrumentality
of the United States of America pursuant to authority granted by the Congress,
(v) time deposits, certificates of deposit or similar arrangements with the
Trustee or any bank or banking association or trust company organized under the
laws of the United States of America or any state thereof or of the Commonwealth
having reported capital and surplus of not less than Fifty Million Dollars
($50,000,000) and reported deposits of not less than Two Hundred Fifty Million
Dollars ($250,000,000) and which has been designated by the Secretary of the
Treasury of the Commonwealth as a depository for public funds, fully secured in
the manner provided in Section 601 of the Trust Agreement, (vi) bankers'
acceptances (other than by the Borrower) drawn on and accepted by any commercial
bank organized under the laws of the United States of America or any state
thereof or of the Commonwealth which is a member of the Federal Deposit
Insurance Corporation having reported capital and surplus of not less than Fifty
Million Dollars ($50,000,000) and reported deposits of not less than Two Hundred
Fifty Million Dollars ($250,000,000), (vii) repurchase agreements with respect
to any of the investments or securities referred to in subsections (i), (ii),
(iii), (iv) or (v) above, (viii) commercial paper of any corporation whose
commercial paper has been rated in the highest rating category (without
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regard to any gradations within such category by numerical qualifier or
otherwise) credit rating issued by any nationally recognized securities rating
service, (ix) bonds, debentures, notes and other obligations of any corporation
which are rated in the two highest categories (without regard to any gradations
within such categories by numerical qualifier or otherwise) by any nationally
recognized securities rating service, and (x) an Investment Agreement.
LETTER OF CREDIT: the Initial Letter of Credit or any Successor Letter
of Credit, as the case may be.
LETTER OF CREDIT BANK: the Initial Letter of Credit Bank during the
term of the Initial Letter of Credit, and thereafter the issuer of any Successor
Letter of Credit.
LIEN or LIENS: any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof or any
similar interest under the laws of the Commonwealth.
LOAN AGREEMENT: this Loan Agreement, together with all permitted
agreements amendatory hereof and supplemental hereto permitted by the Trust
Agreement and the Reimbursement Agreement.
MORTGAGE: collectively, the first mortgage on the Project and the
leasehold mortgage on Palominos Island, constituted by deeds numbers one (1) and
two (2), respectively dated the Date of Issuance, executed before Notary Public
Leonor M. Aguilar Guerrero, to secure the Mortgage Note.
MORTGAGE NOTE: collectively, the notes of the Borrower dated the Date
of Issuance in the principal amounts of $120,000,000, $20,000,000, $612,000 and
$2,000,000 secured by the Mortgage.
936 CORPORATION: a corporation that has elected and qualifies for the
936 credit.
936 CREDIT: the income tax credit provided in Section 936.
OFFICIAL STATEMENT: the Official Statement issued in respect of the
Bonds.
PARTNERSHIP AGREEMENT: the Partnership Agreement of the Borrower
governed by the laws of the State of Delaware and executed on January 12, 1990,
between Kumagai Caribbean, Inc. and WKA El Con Associates, together with all
permitted agreements amendatory thereof or supplemental thereto.
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PAYMENT OF THE BONDS: full payment of the principal of, and premium, if
any, and interest on all the Bonds in accordance with their terms, whether
through payment at maturity, upon acceleration or redemption or provision for
such payment in such a manner that the Bonds shall be deemed to have been paid
under Article XIII of the Trust Agreement.
PERSON: any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
PLANS AND SPECIFICATIONS: the final plans and specifications for the
Project, as approved by the Regulations and Permits Administration of the
Commonwealth or as certified by an architect or engineer duly licensed in the
Commonwealth, together with all amendments or supplements thereto so approved or
certified.
PRELIMINARY OFFICIAL STATEMENT: the Preliminary Official Statement
issued in respect of the Bonds.
PROJECT: the Industrial Facilities described in Exhibit A attached
hereto and made a part hereof, including any modifications thereof,
substitutions therefor or additions thereto, and excluding deletions therefrom.
PROJECT FUND: the fund created by Section 401 of the Trust Agreement.
QPSII: qualified possession source investment income as defined in
Section 936.
QUALIFIED FINANCIAL INSTITUTION: a bank, trust company, national
banking association or a corporation subject to registration with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956 which is satisfactory to the Borrower and the Letter of Credit Bank and
having combined capital and surplus of Fifty Million Dollars ($50,000,000),
Government Development Bank for Puerto Rico or such other institution (including
a government securities dealer) as may be acceptable to the Borrower and the
Letter of Credit Bank.
REGULATION 3582: Regulation Number 3582 issued by the Commissioner of
Financial Institutions of the Commonwealth on January 29, 1988, as amended from
time to time, and any successor regulation.
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REIMBURSEMENT AGREEMENT: the Initial Reimbursement Agreement or the
Successor Reimbursement Agreement at any time in effect, as the case may be,
together with all permitted agreements amendatory thereof or supplemental
thereto.
RELATED DOCUMENTS: the Trust Agreement, the Mortgage, the Mortgage
Note, the Collateral Agreement and the Reimbursement Agreement individually or
collectively, as the case may be.
SECTION 936: Section 936 of the Code or any successor provision
thereto.
SUCCESSOR LETTER OF CREDIT: the irrevocable transferable letter of
credit, reasonably acceptable in form to the Trustee, substantially similar to
the Initial Letter of Credit, in an aggregate amount equal to the principal
amount of the Bonds outstanding on the issue date of such letter of credit plus
not less than 120 days' interest thereon at the rate of 12% per-annum, which
meets the requirements of Section 3.07(b) of this Loan Agreement, together with
all permitted agreements amendatory thereof or supplemental thereto.
SUCCESSOR LETTER OF CREDIT BANK: the issuer of the Successor Letter of
Credit.
SUCCESSOR REIMBURSEMENT AGREEMENT: an agreement between the Borrower
and the Successor Letter of Credit Bank, providing for, among other things, the
issuance of the Successor Letter of Credit, together with all permitted
agreements amendatory thereof or supplemental thereto.
TAXABLE YEAR: the taxable year of the Borrower under the Code as in
effect on any date of its determination; the term will include the annual
accounting period for which the Borrower makes its income tax return, and will
include an accounting period of less than 12 months if the Borrower makes a
return for a period of less than 12 months.
TRUST AGREEMENT: the Trust Agreement, dated the Date of Issuance,
between the Authority and the Trustee, together will all permitted agreements
amendatory thereof or supplemental thereto.
TRUSTEE: the bank, banking association or trust company at the time
serving as Trustee under the Trust Agreement.
UNDERWRITER: Chase Securities (P.R.), Inc.
SECTION 1.02. RULES OF CONSTRUCTION.
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(a) Words of the masculine gender shall be deemed and construed to
include correlative words of the feminine and neuter genders.
(b) Unless the context shall otherwise indicate, the words "Bonds",
"Bondholder", "owner", "Holder", and "Person" shall include the plural as well
as the singular number.
(c) Words importing the redemption or calling for redemption of the
Bonds shall not be deemed to refer to or connote the payment of Bonds at their
stated maturity.
(d) The captions or headings in this Loan Agreement are for convenience
only and in no way define, limit or describe the scope or intent of any
provisions or sections of this Loan Agreement.
(e) All references herein to particular articles, sections or exhibits
are references to articles, sections or exhibits of this Loan Agreement unless
some other reference is established.
(f) Except as provided in Section 8.03, any inconsistency between the
provisions of this Loan Agreement and the provisions of the Trust Agreement
shall be resolved in favor of the provisions of the Trust Agreement.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.01. REPRESENTATIONS AND WARRANTIES BY THE AUTHORITY. The
Authority represents and warrants that:
(i) It is a duly constituted and existing body corporate and politic
constituting a public corporation and governmental instrumentality of the
Commonwealth, established under the Act.
(ii) Under the provisions of the Act, the Authority has full power and
authority to enter into, execute, and deliver this Loan Agreement and the
Related Documents to which it is a party, to undertake the transactions
contemplated hereby and thereby and to carry out its obligations hereunder and
thereunder.
(iii) By duly adopted resolution, the Authority has duly authorized the
execution, delivery, and performance of this Loan Agreement and the Related
Documents to which it is a party, and the issuance and sale of the Bonds.
(iv) Under existing law all payments received by the Authority pursuant
to this Loan Agreement are exempt from Commonwealth taxation.
(v) It shall not submit the statement provided in Section 149 (e) (2)
of the Code with respect to the Bonds.
SECTION 2.02. REPRESENTATIONS, WARRANTIES AND COVENANTS BY THE
BORROWER. The Borrower represents and warrants that:
(i) It is a limited partnership duly organized and validly existing
under the laws of the State of Delaware, has all necessary partnership power and
authority to own its properties and to conduct its business as presently
conducted or proposed to be conducted and to enter into and perform this Loan
Agreement and the Related Documents to which it is a party.
(ii) The execution, delivery, and performance by the Borrower of this
Loan Agreement, and the Related Documents to which it is a party, the
consummation of the transactions contemplated thereby and the fulfillment of or
compliance with the terms and conditions thereof, have been duly authorized by
all necessary action, and do not and will not
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violate any law or any regulation, order, writ, injunction, or decree of any
court or governmental body, agency or other instrumentality applicable to the
Borrower, or result in a breach of any of the terms, conditions, or provisions
of, or constitute a default under, or result in the creation or imposition of
any Lien upon any of the assets of the Borrower (except as contemplated hereby
and by the Related Documents to which it is a party) pursuant to the terms of
the Partnership Agreement as now in effect, or any mortgage, indenture, license,
approval, agreement, instrument or document to which the Borrower is a party or
by which it or any of its properties is bound.
(iii) All authorizations, consents, and approvals of, notices to,
registrations or filings (other than registration and filing of the Mortgage)
with, or other actions in respect of or by, any governmental body, agency or
other instrumentality or court required in connection with the execution,
delivery and performance by the Borrower of this Loan Agreement and the Related
Documents to which it is a party have been duly obtained, given or taken and are
in full force and effect.
(iv) This Loan Agreement, and each Related Document to which the
Borrower is a party is a legal, valid, and binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except as may be
limited by bankruptcy, insolvency or other similar laws affecting the
enforcement of creditors' rights generally, from time to time in effect, and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(v) There is no action, suit, proceeding, inquiry or investigation
before or by any court, public board or body pending or, to the knowledge of the
Borrower, threatened against or affecting the Borrower wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business, condition (financial or other) or results of operations of
the Borrower or the transactions contemplated by this Loan Agreement, or the
Related Documents to which it is a party, or which would adversely affect the
validity or enforceability of, or the authority or ability of the Borrower to
perform its obligations under, this Loan Agreement, and the Related Documents to
which it is a party.
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(vi) The Borrower is not in default under any law or any regulation,
order, writ, injunction or decree of any court or governmental body, agency or
other instrumentality applicable to the Borrower, and no default has occurred
and is continuing under any material debt or any indenture or other agreement or
instrument governing outstanding material debt of the Borrower, or any other
material contract, agreement, or instrument to which the Borrower is a party or
by which it or its property is bound, and no event has occurred which with the
giving of notice or the passage of time or both would constitute such a default
where such default would have a material adverse effect on the properties,
condition (financial or other) or results of operations of the Borrower or the
transactions contemplated by this Loan Agreement, or the Related Documents to
which it is party or which would adversely affect the validity or enforceability
of, or the authority or materially adversely affect the ability of the Borrower
to perform its obligations under, this Loan Agreement and the Related Documents
to which it is a party.
(vii) The Preliminary Official Statement as of its date and the
Official Statement, as of the Date of Issuance, did not and do not contain any
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that no representation is made
with respect to information contained under the headings "The Authority and
Government Development Bank for Puerto Rico", "Taxation" (other than matters
relating to, and representations, warranties and covenants made by, the
Borrower) "Legal Investment", "Underwriting", "Legal Matters" and in Appendix B
in the Preliminary Official Statement and in the Official Statement.
(viii) The proceeds of the Bonds will be used exclusively to pay the
Cost of the Project.
(ix) The Borrower is the owner in fee simple ("pleno dominio") of the
real estate comprising the Project, excluding the Palominos Island, subject to
no Liens, except the Mortgage and liens permitted by the Related Documents.
(x) The Borrower has filed all tax returns required by law to be filed,
and has paid all taxes, assessments, and other governmental charges levied upon
the Borrower and its properties, assets, income and franchises, including,
without limitation, the Project, which are
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due and payable, other than those presently payable without penalty or interest
or being contested in good faith. The charges, accruals and reserves on the
books of the Borrower in respect of taxes for all fiscal periods are adequate in
the opinion of the Borrower.
(xi) The chief executive office of the Borrower is located at the El
San Juan Hotel & Casino in Isla Verde, Puerto Rico.
(xii) All information previously furnished in writing by the Borrower
to the Authority is true and correct.
(xiii) The Borrower hereby makes to the Authority each of the
representations and warranties made by the Borrower and contained in the Related
Documents to which it is a party as if such representations and warranties were
set forth in full herein.
(xiv) The Borrower will at all times cause the Project to be operated
as Industrial Facilities.
(xv) For purposes of the Code, at all times during each Taxable Year of
its existence, and up to and including the Date of Issuance; (i), the Borrower
(A) has been a partnership; (B) has been engaged in trade or business only in
the Commonwealth; (C) has not been engaged, directly or imputedly, in any trade
or business outside the Commonwealth; (D) has not derived, directly or
imputedly, any gross income which is, or is treated as, effectively connected
with, or attributable to, the conduct of a trade or business outside the
Commonwealth; and (ii) at least 80% of the Borrower's gross income from all
sources (A) has been derived from sources outside the United States, or has been
attributable to income so derived by a subsidiary of the Borrower, and (B) has
been attributable to the conduct of a trade or business outside the United
States by the Borrower, or by a subsidiary (assuming,for clauses (ii) (A) and
(B) above in this paragraph (xv), that the Borrower is an association taxable as
a corporation).
(xvi) (A) all interest paid to, or accrued by, a Bondholder on the
Bonds will constitute income from sources within the Commonwealth for purposes
of the Code; (B) the total proceeds from the issuance and sale of the Bonds will
be used by the Borrower exclusively as required by Regulation 3582 (assuming,
for these purposes, that said proceeds are Eligible Funds borrowed from an
Eligible Institution) and by Section 936(d)(2)(B) of the Code, and (C) all
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interest paid to, or accrued by, a Bondholder on the Bonds will qualify as QPSII
for purposes of Section 936(d)(2) of the Code.
(xvii) The Borrower has duly and lawfully obtained or will obtain all
authorizations, licenses, consents, and orders of any governmental or public
agency or authority required to construct or renovate the buildings and
structures constituting a part of the Project.
(xviii) The estimated useful life of the Project is equal to or exceeds
the final maturity of the Bonds.
(xix) The Borrower and the Initial Letter of Credit Bank, as to each
other, are not "insiders" or "affiliates" as those terms are defined in the
applicable statutory provision of the Bankruptcy Code of the United States.
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ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS;
LETTER OF CREDIT
SECTION 3.01 CONSTRUCTION OF PROJECT. The Borrower will construct the
Project substantially in accordance with the Plans and Specifications with all
reasonable dispatch; but if for any reason such construction shall be delayed or
shall not be completed, there shall be no resulting diminution in or
postponement of the payments required under this Loan Agreement to be paid by
the Borrower.
SECTION 3.02 REVISION OF DESCRIPTION OF PROJECT. The Borrower may cause
the description of the Project to be revised from time to time; provided,
however, no change in the description of the Project shall be inconsistent with
the representations made in (xiv) of Section 2.02. In the case of any change
effected prior to the Completion Date that would render materially inaccurate
the description of the Project in Exhibit A, the Borrower shall deliver to the
Trustee, the Letter of Credit Bank and the Authority (i) a new Exhibit A, the
accuracy of which shall have been certified by an Authorized Borrower
Representative and (ii) the approvals and consents, if any, required by the Act,
the Trust Agreement or the Reimbursement Agreement.
SECTION 3.03 AGREEMENT TO ISSUE THE BONDS. The Authority agrees that it
will use its best efforts to issue, sell, and deliver to the purchasers thereof
the Bonds for the purpose of paying, in part, the Cost of the Project. The
proceeds of the Bonds shall be delivered to the Trustee for application in
accordance with the Trust Agreement.
SECTION 3.04 DISBURSEMENTS FROM PROJECT FUND. The Authority and the
Borrower hereby agree that the moneys in the Project Fund shall be applied to
the payment of the Cost of the Project and otherwise as provided in accordance
with ARTICLE IV of the Trust Agreement and substantially to the extent of the
estimates of the Cost of the Project set forth in the application filed with the
Authority, as such application may be amended from time to time, and such moneys
shall be invested and reinvested in accordance with the Trust Agreement.
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SECTION 3.05 BORROWER REQUIRED TO PAY COST OF PROJECT. If the moneys in
the Project Fund available for the payment of the Cost of the Project should not
be sufficient to pay or cause to be paid the Cost of the Project, the Borrower
agrees to cause the Project to be completed and to pay all that portion of the
Cost of the Project as may be in excess of the moneys available therefor in the
Project Funds. The Authority does not make any warranty, either express or
implied, that the moneys which will be paid into the Project Fund will be
sufficient to pay the Cost of the Project. The Borrower agrees that if, after
exhaustion of the moneys in the Project Fund, the Borrower should pay or cause
to be paid any portion of the Cost of the Project, it shall not be entitled to
any reimbursement therefor from the Authority or from the Trustee, and it shall
not be entitled to any abatement, diminution or postponement of the payments to
be made pursuant to Article IV and Section 5.10 of this Loan Agreement.
SECTION 3.06 ESTABLISHMENT OF COMPLETION DATE; VERIFICATION OF COST OF
THE PROJECT. (a) The Completion Date means the date on which the Borrower
certifies to the Trustee by a certificate delivered to the Trustee, signed by an
Authorized Borrower Representative, substantially in the form of Exhibit B
attached hereto, and setting forth the Cost of the Project, that, except for
amounts not then due and payable or the liability for the payment of which is
being contested or disputed by the Borrower, the Project has been completed and
the Cost of the Project has been paid. Notwithstanding the foregoing, such
certificate shall state that it is given without prejudice to any rights against
third parties which exist at the date of such certificate or which may
subsequently come into being.
(b) The Borrower shall furnish to the Authority, within ninety (90)
days after the end of the Borrower's Taxable Year during which the Project is
completed, a written statement prepared by an Independent Accountant,
substantially in the form of Exhibit C attached hereto, verifying the aggregate
Cost of the completed Project to the end of such Taxable Year.
SECTION 3.07 THE LETTER OF CREDIT; SUCCESSOR LETTER OF CREDIT. (a) From
the Date of Issuance the Borrower shall provide security for payment of the
principal of and interest on the Bonds, and for payment of the redemption price
of the Bonds (corresponding to the principal amount thereof and interest
thereon) redeemed pursuant to the Trust Agreement and for payment of the
purchase price of Bonds tendered or deemed tendered for purchase under the Trust
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Agreement by causing the Letter of Credit to be delivered to the Trustee. The
Borrower hereby authorizes and directs the Trustee to claim moneys under the
Letter of Credit in accordance with its terms and the terms of the Trust
Agreement.
(b) The Borrower, at any time prior to, and the Initial Letter of
Credit Bank, at any time after the Completion Date and prior to the expiration
of the Letter of Credit then in force, but subject to the provisions of Section
8.02(b), may substitute a Successor Letter of Credit therefor by delivering to
the Trustee the following documents:
(1) the Successor Letter of Credit;
(2) an executed copy of the Successor Reimbursement Agreement;
(3) an opinion of counsel to the Borrower, which counsel may
be the general counsel of the Borrower, to the effect that either (at the option
of the Borrower) (i) the acceptance by the Trustee of the Successor Letter of
Credit does not require the Bonds, the obligations of the Borrower under the
Loan Agreement or the Successor Letter of Credit to be registered under the
Securities Act of 1933, as amended, or the qualifications of the Trust Agreement
under the Trust Indenture Act of 1939, as amended, or (ii) any registration
statement required to be filed under the Securities Act of 1933, as amended,
with respect to the Bonds, the Borrower's obligations under the Loan Agreement
or the Successor Letter of Credit is effective under such Act, and the Trust
Agreement has been duly qualified under the Trust Indenture Act of 1939, as
amended;
(4) an opinion of counsel of the Successor Letter of Credit
Bank to the effect that the Successor Letter of Credit is a legal, valid and
binding obligation of the Successor Letter of Credit Bank (subject to customary
bankruptcy, creditor's rights and general principles of equity exceptions);
(5) evidence, reasonably satisfactory to the Trustee that the
proposed Successor Letter of Credit Bank is a banking association, bank or trust
company or branch or agency thereof whose long term debt obligations are rated
by a nationally recognized securities rating service, at the time of delivery of
such Successor Letter of Credit, no lower than the rating at such time of
delivery of the long term debt obligations of the Letter of Credit Bank whose
letter of credit is being substituted;
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(6) a representation by the Successor Letter of Credit Bank or
an opinion from its legal counsel to the effect that the Successor Letter of
Credit Bank and the Borrower, as to each other, are not "insiders" or
"affiliates" as those terms are defined in the applicable statutory provisions
of the Bankruptcy Code of the United States, as amended; and
(7) such other documents and opinions as the Trustee may
reasonably request.
SECTION 3.08 CONDITIONS PRECEDENT TO ISSUANCE OF THE BONDS. The
obligation of the Authority to issue the Bonds is subject to the following
conditions precedent:
(1) The Authority shall have received on or before the Date of
Issuance the following, each in form and substance satisfactory to the
Authority:
(i) the Partnership Agreement certified by the general
partner(s);
(ii) the opinions of counsel required under the Bond Purchase
Agreement;
(iii) an executed or simple copy of this Loan Agreement and
each of the Related Documents; and
(iv) such other documents, instruments, opinions and
approvals as the Authority shall have reasonably
requested.
(2) There shall have been made and there shall be in full
force and effect, all applicable filings, recordings, and/or registrations
(except the filing, recording or registration of the Mortgage), there shall have
been paid, or provision shall have been made for the payment of, all applicable
mortgage recording fees or filing fees, if any, and there shall have been given,
or taken, any notice or any other similar action, as may be necessary or, to the
extent requested by the Authority, advisable, in order to establish, perfect,
protect and preserve the right, title and interest, remedies, powers,
privileges, liens and security interests of the Trustee created by this Loan
Agreement and the Related Documents and the Authority shall have secured
evidence satisfactory to it of all of the foregoing.
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ARTICLE IV
LOAN BY THE AUTHORITY TO THE BORROWER; REPAYMENT;
MAINTENANCE; INDEMNITY
SECTION 4.01 LOAN BY THE AUTHORITY; REPAYMENT.
(a) Upon the terms and conditions of this Loan Agreement the Authority
shall loan the Borrower the gross proceeds (including the Underwriter's
discount) of the sale of the Bonds. The principal amount of the loan shall be
equal to the aggregate principal amount of the Bonds.
(b) The Borrower agrees to repay the loan in accordance with the
provisions of this Loan Agreement, and will agree in the Reimbursement Agreement
to pay when due all Reimbursement Obligations (as such term is defined in the
Reimbursement Agreement) to the Letter of Credit Bank. With respect to each date
on which the premium, if any, principal of or the interest on the Bonds is
payable (whether at maturity, tender for purchase, upon acceleration, by
redemption or otherwise), the Borrower will pay such amounts which, together
with all other moneys available therefor in the Bond Fund, will be sufficient to
pay:
(i) all interest which will become due and payable on the
Bonds on such date; and
(ii) the principal and premium, if any, which will become due
and payable on the Bonds on such date; and
(iii) amounts, if any, required to effect redemption or
mandatory tender for purchase of Bonds on the date
specified pursuant to Section 301 and 305 of the Trust
Agreement.
(c) The Borrower will pay or cause to be paid the amounts it is
required to pay under this Section directly to the Trustee in immediately
available funds for deposit in the Bond Fund or the Bond Purchase Fund, as the
case may be. The Borrower shall deposit or cause to be deposited such amounts
with the Trustee no later than 10:00 a.m., Atlantic standard time, on the 124th
day immediately preceding the date on which the corresponding amounts are due on
the Bonds, or if such 124th day is not a Business Day, the next preceding
Business Day except in the case of a mandatory tender for purchase of the Bonds
pursuant to Section 305 of the Trust Agreement.
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(d) To secure its obligation to make the payments required by this
Section 4.01, the Borrower agrees to cause the Initial Letter of Credit to be
issued and delivered to the Trustee on or prior to the Date of Issuance. The
Initial Letter of Credit shall be in the amount provided in the definition
thereof in Section 1.01 and shall in no event cover any premium on the Bonds.
Payments by the Letter of Credit Bank under the Letter of Credit will be deemed
to satisfy the obligations of the Borrower under this Section 4.01 to the extent
such payments are made and applied to the payment of the principal or the
purchase price of and interest on the Bonds.
(e) Except as provided in Section 906 of the Trust Agreement, the
Trustee shall not use any of the amounts deposited in the Bond Fund pursuant to
this Section 4.01 for any purpose other than the payment of principal of,
premium, if any, and interest on the Bonds payable on the date with respect to
which such amounts were deposited, or to reimburse the Letter of Credit Bank for
any drawing under the Letter of Credit.
SECTION 4.02 NO SET-OFF. The obligation of the Borrower to make the
payments required by Section 4.01 shall be absolute and unconditional. The
Borrower will pay without abatement, diminution or deduction (whether for taxes
or otherwise) all such amounts regardless of any cause or circumstance
whatsoever including, without limitation, any defense, set-off, recoupment or
counterclaim which the Borrower may have or assert against the Authority, the
Trustee, any Bondholder, the Letter of Credit Bank or any other Person.
SECTION 4.03 PREPAYMENTS. The Borrower may at any time prepay all or
any part of the amounts it is required to pay under Section 4.01 to the extent
provided in Section 8.01., and the Borrower shall be obligated to prepay all of
the amounts payable under Section 4.01 as provided in Section 8.02.
SECTION 4.04 COVENANT TO OPERATE AND MAINTAIN PROJECT. The Borrower
will cause the Project: (i) to be operated at all times as Industrial
Facilities; and (ii) together with the appurtenances and every part and parcel
thereof, to be maintained, preserved and kept in good repair, working order and
condition (reasonable wear and tear excepted) and will from time to time cause
to be made all reasonably necessary and proper repairs, replacements and
renewals; provided, however, that the Borrower will have no obligation to cause
to be maintained, preserved, repaired, replaced or renewed any element or unit
of the Project the maintenance,
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repair, replacement or renewal of which, in the opinion of the Borrower, becomes
uneconomic to the Borrower because of damage or destruction or obsolescence, or
change in economic or business conditions, or change in government standards and
regulations, or the termination by the Borrower of the operation of the
Industrial Facilities to which such element or unit of the Project is an
adjunct. For purposes of this Section 4.04, the "opinion of the Borrower", upon
the Authority's request, shall be expressed to the Authority and the Trustee by
delivery of a certificate of an Authorized Borrower Representative specifying
the circumstances, situations or conditions described in this Section 4.04 the
existence of which permits the Borrower not to cause to be maintained any
element or unit of the Project. The Borrower covenants that it will promptly
notify the Trustee, the Letter of Credit Bank and the Authority if the Project
ceases to operate as Industrial Facilities or to be maintained as required
hereunder.
SECTION 4.05 EXPENSES. The Borrower will pay: (i) all reasonable fees
and expenses of the Trustee and the costs and expenses of indemnifying the
Trustee for, and holding the Trustee harmless against, any loss, liability or
expense (including the costs and expenses of defending against any claim of
liability) incurred without negligence or willful misconduct by the Trustee and
arising out of or in connection with its acting as Trustee under the Trust
Agreement; and (ii) the Administrative Fee and all reasonable expenses of the
Authority incurred at the request or with the consent of the Borrower in
connection with the financing of the Project.
SECTION 4.06 INDEMNIFICATION. The Borrower will at all times indemnify
and hold harmless the Authority and the Trustee against any and all losses,
costs, damages, expenses, and liabilities (collectively referred to hereinafter
as "Losses") of whatever nature (including but not limited to reasonable
attorneys' fees, litigation and court costs, amounts paid in settlement, and
amounts paid to discharge judgments) directly or indirectly resulting from,
arising out of, or related to one or more Claims, as hereinafter defined. The
word "Claims" as used herein shall mean all claims, lawsuits, causes of action
and other legal actions and proceedings, involving bodily or personal injury to
or death of any Person or damage to any property (including, but not limited to
Persons employed by the Authority, the Borrower or any other Person) brought
against the Authority or the Trustee or to which the Authority or the Trustee is
a party, that
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directly or indirectly result from, arise out of, or relate to (i) the design,
construction, transfer, sale, operation, use, occupancy, maintenance or
ownership of the Project or any part thereof or (ii) the execution, delivery or
performance of this Loan Agreement, the Related Documents to which the Authority
and the Trustee are a party or any related instruments or documents or (iii) any
untrue statement or alleged untrue statement of a material fact contained in the
Preliminary Official Statement or the Official Statement, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made; provided, however, that the Borrower will not be liable in any such case
to the extent that any such Loss or Clam arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission
made in any of such documents in reliance upon and in conformity with written
information furnished to the Borrower by the Underwriter or the Authority
specifically for use therein (it being understood that the information in the
Preliminary Official Statement and the Official Statement under the captions
"The Authority and Government Development Bank for Puerto Rico," "Taxation"
(except matters relating to, and representations, warranties and covenants made
by, the Borrower) and "Legal Investment," has been so furnished to the Borrower
by the Authority specifically for use therein). The obligations of the Borrower
under this Section 4.06 shall apply to all Losses or Claims, or both, that
result from, arise out of, or are related to any event, occurrence, condition or
relationship prior to termination of this Loan Agreement, whether such Losses or
Claims, or both are asserted prior to termination of this Loan Agreement or
thereafter. The Authority shall reimburse the Borrower for payments made by the
Borrower pursuant to this Section 4.06 to the extent of any proceeds, net of all
expenses of collection, actually received by the Authority from any insurance
covering such Claims with respect to the Losses sustained. The Authority shall
have the duty to claim any such insurance proceeds and the Authority shall
assign its rights to such proceeds, to the extent of such required
reimbursement, to the Borrower. In case any action shall be brought against the
Authority in respect of which indemnity may be sought against the Borrower, the
Authority shall promptly notify the Borrower in writing and the Borrower shall
have the right to assume the investigation and defense thereof including the
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employment of counsel and the payment of all expenses. The Authority shall have
the right to employ separate counsel in any such action and participate in the
investigation and defense thereof, but the fees and expenses of such counsel
shall be paid by the Authority unless the employment of such counsel has been
authorized by the Borrower. The Borrower shall not be liable for any settlement
of any such action without its consent but, if any such action is settled with
the consent of the Borrower or if there be a final judgment for the plaintiff in
any such action, the Borrower agrees to indemnify and hold harmless the
Authority from and against any such Losses or Claims. Nothing herein shall be
construed as requiring the Authority to acquire or maintain insurance of any
form or nature with respect to the Project or any portion thereof or with
respect to any phrase, term, provision, condition or obligation of this Loan
Agreement or any other matter in connection herewith. The provisions of this
Section 4.06 shall survive the expiation or termination of this Loan Agreement.
SECTION 4.07 PAST DUE PAYMENTS. In the event the Borrower shall fail to
pay amounts required to be paid under Section 4.01, any such amounts pertaining
to principal of or interest on the Bonds to which such defaulted amounts relate
shall continue to bear interest until their payment from the date they were
payable, at the rate of interest on such Bonds.
SECTION 4.08 INSURANCE. The Borrower covenants that, so long as any
Bond is outstanding, it shall keep the Project adequately insured at all times
and shall carry such insurance with respect to the operation and maintenance of
the Project of such type and in such amounts as may be required under the
provisions of the Related Documents, which as to the obligations under this
Section shall be and remain prior and superior.
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ARTICLE V
FURTHER AGREEMENTS
SECTION 5.01 COVENANT TO MAINTAIN EXISTENCE. The Borrower covenants
that so long as any Bonds are outstanding it will maintain its existence, will
not dissolve, or otherwise dispose of all or substantially all of its assets and
will not consolidate with or merge into another entity. Anything herein to the
contrary notwithstanding, the Borrower may consolidate with or merge into
another entity, or transfer to another entity all or substantially all of its
assets and thereafter dissolve, if (i) the successor or transferee entity (A) is
organized under the laws of any state of the United States, or the Commonwealth,
(B) shall comply with the covenants contained in Section 5.10(a), (b) and (c),
and (C) irrevocably and unconditionally assumes in writing all the obligations
of the Borrower herein; and (ii) the Letter of Credit Bank shall reaffirm its
obligations under the Letter of Credit.
SECTION 5.02 AUTHORITY'S COVENANT TO COOPERATE. In the event it may be
necessary, for the proper performance of this Loan Agreement, on the part of the
Authority or the Borrower, that any application or applications for any permit
or license to do or to perform certain things be made to any governmental or
other agency by the Borrower or the Authority, the Borrower and the Authority
each agree to cooperate in such matters; provided, however, that the Authority
and the Borrower are bound to the agreement of this Section 5.02 only in the
case of reasonable requests for assistance.
SECTION 5.03 NO WARRANTY BY AUTHORITY. The Authority makes no warranty,
either express or implied, as to the condition of the Project or its suitability
for the Borrower's purpose or needs or that the proceeds of the Bonds will be
sufficient to pay the Cost of the Project or to reimburse the Borrower for Costs
incurred in connection therewith.
SECTION 5.04 RIGHT OF INSPECTION. The Borrower agrees that the
Authority, the Trustee, and their duly authorized agents shall have the right at
all reasonable times during business hours at their own expense to enter upon
and examine and inspect the Project, subject to the provisions of Section 4.04,
to determine whether the Project continues to constitute Industrial Facilities.
The Authority and the Trustee shall also be permitted, at all reasonable times
during business
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hours, at their own expense to examine the Plans and Specifications and the
other books and records of the Borrower with respect to the Project in
connection with the transactions contemplated by this Loan Agreement and the
Related Documents to which the Authority and the Trustee are a party. The
aforesaid rights of examination and inspection shall be exercised only upon such
reasonable and necessary terms and conditions as the Borrower shall prescribe,
which conditions shall be deemed to include, but not be limited to, reasonable
notice and those conditions necessary to protect the Borrower's trade secrets
and proprietary rights.
SECTION 5.05 CONSENT TO JURISDICTION. The Borrower consents to the
jurisdiction of the courts of the Commonwealth for causes of action arising
under or relating to the terms of this Loan Agreement.
SECTION 5.06 OFFICERS OF AUTHORITY NOT LIABLE. All covenants,
stipulations, promises, agreements, and obligations of the Authority contained
herein shall be deemed to be covenants, stipulations, promises, agreements, and
obligations of the Authority and not of any member of the governing body of the
Authority or any officer, agent, servant or employee of the Authority in his
individual capacity. No recourse shall be had for the payment of the principal
amount or interest on the Bonds or for any claim based thereon or hereunder
against any member of the governing body of the Authority or any officer, agent,
servant or employee of the Authority or any natural person executing the Bonds.
Neither any member of the governing body of the Authority nor any person
executing the Bonds shall be liable personally on the Bonds or be subject to any
personal liability or accountability by reason of the issuance of the Bonds.
SECTION 5.07 INDEMNIFICATION WITH RESPECT TO GOVERNMENT OBLIGATIONS. If
the Borrower shall elect to cause Government Obligations to be deposited with
the Trustee pursuant to Section 1301 of the Trust Agreement, the Borrower shall
pay and shall indemnify and hold harmless the Trustee, the Authority, the Letter
of Credit Bank and each Bondholder against any tax, fee or other charge imposed
upon or assessed against such Government Obligations or the principal thereof,
or premium, if any, and interest received thereon.
SECTION 5.08 ANNUAL REPORTS. The Borrower shall furnish a copy of its
year end audited financial statements to the Trustee and to the Authority within
120 days following the completion of each Taxable Year.
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SECTION 5.09 CONSENT TO ASSIGNMENT. The Borrower approves all the terms
of the Trust Agreement and consents to the assignment made by the Authority to
the Trustee herein.
SECTION 5.10 MAINTENANCE OF SOURCE OF INCOME; INDEMNITY; CHANGE IN LAW.
(a) The Borrower covenants that, for purposes of the Code, at all time during
each Taxable Year of its existence, up to and including the Taxable Year when
all interest on and principal of the Bonds are paid in full, and so long as the
Borrower is a partnership under the Code on any determination date, the Borrower
will: (i) be a partnership; (ii) be engaged in trade or business only in the
Commonwealth; (iii) not be engaged, directly or imputedly, in any trade or
business outside the Commonwealth; and (iv) not derive, directly or imputedly,
any gross income which is, or is treated as, effectively connected with, or
attributable to, the conduct of a trade or business outside the Commonwealth.
(b) The Borrower covenants that, for purposes of the Code, at all times
for each Taxable Year of its existence, up to and including the Taxable Year
when all interest on and principal of the Bonds are paid in full, if the
Borrower is deemed an association taxable as a corporation for purposes of the
Code on any determination date: (i) at least 80% of the gross income from all
sources of the Borrower will be (1) derived from sources outside the United
States, or attributable to income so derived by a subsidiary of the Borrower,
and (2) attributable to the active conduct of a trade or business outside the
United States by the Borrower or by a subsidiary of the Borrower; and (ii) all
interest on the Bonds will be paid by a trade or business of the Borrower in the
Commonwealth.
(c) The Borrower covenants that: (i) all interest paid to, or accrued
by, a bondholder on the Bonds will constitute income from sources within the
Commonwealth for purposes of the Code; (ii) the total proceeds from the issuance
and sale of the Bonds will be used by the Borrower exclusively as required by
Regulation 3582 (assuming, for these purposes, that said proceeds are Eligible
Funds borrowed from an Eligible Institution) and by Section 936(d)(2)(B) of the
Code; and (iii) all interest paid to, or accrued by, a Bondholder on the Bonds
will qualify as QPSII for purposes of Section 936(d)(2) of the Code.
(d) (1) The Borrower covenants that for each Taxable Year, up to and
including the Taxable Year when all interest on and principal of the Bonds are
paid in full, it will cause an
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Independent Accountant to deliver to the Trustee, the Authority and the Letter
of Credit Bank, not later than the last day of the third month following the
close of each such Taxable Year, beginning with the first Taxable Year ending
after the Date of Issuance, a certificate addressed to the Trustee and the
Authority stating, for each such Taxable Year: (i) the percentage of the
Borrower's gross income that was derived from sources within the Commonwealth
for purposes of the Code; (ii) the percentage of the Borrower's gross income
that was, or was treated as, effectively connected with, or attributable to, the
active conduct of a trade or business in the Commonwealth for purposes of the
Code; (iii) whether the Borrower has failed to meet the requirements of Section
5.10(a), (b) and (c) or the representations made in (xv) and (xvi) of Section
2.02 are not true and correct, and if as a consequence thereof, the interest
paid to, or accrued by, a Bondholder on the Bonds constituted income from
sources outside the Commonwealth for purposes of the Code; and (iv) whether any
portion of the interest paid to, or accrued by, a Bondholder on the Bonds did
not qualify as QPSII for purposes of Section 936(d)(2) of the Code. Such
certificate will also contain a statement from said Independent Accountant
setting forth whether, in his opinion, as a consequence of the Borrower's
failure to comply with the provisions of Sections 2.02 (xv), and (xvi) or
5.10(a), (b) and (c), under the Code as in effect on the date of such
certificate interest paid or accrued on Bonds held by a 936 Corporation is
includable in the gross income and subject to the payment of income taxes a
credit for the payment of which is not otherwise available to the 936
Corporation. Upon receipt of such certificate, the Trustee shall promptly cause
a copy thereof to be mailed to each Bondholder.
(2) Any Bondholder who is a 936 Corporation may deliver to the
Authority, the Trustee and the Letter of Credit Bank an opinion of legal counsel
(the "Legal Opinion") knowledgeable in tax matters to the effect that the
Borrower has failed to meet the requirements of Section 5.10(a), (b) and (c) or
that the representations made in (xv) and (xvi) of Section 2.02 are not true and
correct, and that as a consequence thereof, under the Code as in effect on the
date of such opinion, the interest paid or accrued on Bonds held by said
Bondholder is includable in gross income or subject to the payment of income
taxes a credit for the payment of which is not otherwise available to said
Bondholder. The Trustee upon receipt of such Legal Opinion shall
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promptly give notice thereof to the Borrower. The Borrower shall have thirty
(30) days from the receipt of said notice to contest such Legal Opinion by
delivering to the Authority, the Trustee, the Letter of Credit Bank and the
Bondholder a certificate of an Independent Accountant to the effect: (i) that
the Borrower has met the requirements of Section 5.10(a), (b) and (c) and that
the representation made in (xv) and (xvi) of Section 2.02 are true and correct,
and that, consequently, under the Code the interest paid or accrued on the Bonds
held by 936 Corporations qualifies as QPSII for purposes of Section 936(d) (2)
of the Code; or (ii) that the Borrower failed to meet the requirements of
Section 5.10(a), (b), and (c) or that the representations made in (xv) and (xvi)
of Section 2.02 are not true and correct, but that, nevertheless, under the Code
as in effect on the date of the Legal Opinion, the interest paid or accrued on
Bonds held by 936 Corporations qualifies as QPSII for purposes of Section 936 of
the Code or is not includable in gross income nor subject to the payment of
income taxes, or if so includable and subject, a credit for the payment of said
taxes is available to the Bondholder filing the Legal Opinion. If the Borrower
fails to deliver to the Authority, the Trustee, the Letter of Credit Bank and
the Bondholder the Independent Accountant's certificate within the time
specified above, the Legal Opinion shall become final and binding upon the
Borrower.
(3) Upon receipt of the Independent Accountant's certificate described
in Section 5.10(d) (2) above, each Bondholder may within the following twenty
days notify the Borrower, the Authority, the Trustee and the Letter of Credit
Bank of its intention to contest the Independent Accountant's certificate. If
the Bondholder fails to notify the Authority, the Trustee and the Letter of
Credit Bank of its intention to contest the Independent Accountant's certificate
within the time specified above, the determination made by the Independent
Accountant shall become final and binding upon the Bondholder. In the event that
a Bondholder notifies the Borrower, the Authority, the Trustee and the Letter of
Credit Bank of its intention to contest the Independent Accountant's
certificate, the matter shall be settled by arbitration. Such arbitration shall
be before one disinterested arbitrator. If the Borrower and the contesting
Bondholder shall fail to select a mutually agreeable disinterested arbitrator
within 15 days after the aforesaid notice to contest is given, said arbitrator
shall be appointed by the American Arbitration Association pursuant to the usual
procedures of said Association. Arbitration shall take place
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in San Juan, Puerto Rico, pursuant to the rules of said Association and in
accordance with any available expedited determination procedure. The award of
the arbitrator shall be final, conclusive and binding upon the parties. The
losing party shall pay all costs and expenses of such arbitration including all
attorney's fees.
(e) Upon the occurrence of an Event of Taxability, the Authority and
the Trustee shall promptly give notice of same to the Borrower, all Bondholders
and the Letter of Credit Bank, and the Borrower will pay an indemnity to each
Bondholder who demonstrates to the Borrower that solely as a consequence of the
occurrence of the Event of Taxability it has paid or is required to pay United
States income taxes ("federal taxes") in respect of the interest paid or accrued
on the Bonds, provided that such Bondholder, in the year with respect to which
such taxes were paid or are required to be paid, was or is a 936 Corporation.
Such indemnity will consist of a sum equal to the federal taxes such taxpayer
was required or may be required to pay on interest paid or accrued to the date
set for redemption of the Bonds pursuant to the Trust Agreement, as a result of
the occurrence of the Event of Taxability plus any penalties, interest and other
additions which have been or may be assessed against such Bondholder with
respect to such federal taxes, including any federal taxes payable with respect
to such indemnity. The obligation of the Borrower to make these payments shall
be separate and apart from any other obligations of the Borrower under this Loan
Agreement, shall survive the Payment of the Bonds and the termination of this
Loan Agreement and the Trust Agreement, is undertaken herein by the Borrower as
an inducement to prospective purchasers of the Bonds to induce them to purchase
the Bonds and is intended to benefit the Bondholders and is enforceable by each
qualifying Bondholder as an independent and direct claim against the Borrower.
(f) Any claim against the Borrower by a Bondholder under subsection (e)
above for an indemnity must be filed with the Borrower setting forth in detail
the basis for such claim no later than 90 days after receipt by said Bondholder
of notice of the occurrence of the Event of Taxability giving rise to the claim.
(g) Upon an amendment to the Code, the Trustee may and upon receiving a
request from a Bondholder who is a 936 Corporation, shall, designate counsel
recognized as knowledgeable in tax matters under the Code as in effect on the
date of such designation, for purposes of
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rendering an opinion stating (A) whether (i) solely as a result of any repeal of
or changes enacted to Section 936 of the Code (and not due to the particular
circumstances of any Holder), the benefits of the 936 Credit applicable to
interest on the Bonds are reduced or eliminated without the enactment of an
equivalent substitute credit, exemption or deduction from income taxes under the
Code as in effect on the effective date of such changes or (ii) solely as a
result of a change enacted to the Code interest on the Bonds is treated as an
item of tax preference (or similar item) for federal corporate income tax
purposes and (B) the effective date of such changes. The tax counsel so
designated shall be directed to deliver, within 30 days after its designation,
such written opinion to the Trustee. Upon the receipt of such opinion in the
affirmative, the Trustee shall promptly give notice that a Change in Law has
occurred together with a copy of said opinion to the Authority, the Borrower,
all Bondholders and the Letter of Credit Bank.
SECTION 5.11 SALE OF PROJECT. (a) The Borrower may not sell or
otherwise dispose of the Project without the consent of the Authority and the
Trustee.
(b) The consent of the Authority and the Trustee under (a) above shall
not be required if prior to the proposed sale or disposition: (1) the Borrower
notifies the same, and provides to the Authority and the Trustee proof
satisfactory to them (which may include an opinion from counsel approved by the
Trustee and the Authority) that the consummation of the proposed sale, or
disposition will not result in the interest payable on the Bonds not continuing
to constitute, under the applicable provisions of the Code as in effect on the
date such transaction is to be consummated: (i) Commonwealth source income and
(ii) QPSII; and (2) the Letter of Credit Bank reaffirms its obligations under
the Letter of Credit. No such sale or disposition shall relieve the Borrower of
the obligation to make the payments required by Section 4.01.
SECTION 5.12. COMPLIANCE WITH APPLICABLE LAW. The Borrower covenants
that it shall comply with all applicable laws, ordinances, orders, rules,
regulations and requirements of all federal, Commonwealth and municipal
governments, and appropriate departments, commissions, boards and officers
thereof, whether now or hereafter in force.
SECTION 5.13 AUTHORITY'S PERFORMANCE OF THE BORROWER'S OBLIGATIONS. In
the event the Borrower at any time neglects, refuses or fails to perform any of
its obligations under this
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Loan Agreement, the Authority or the Trustee, at their respective options and
following at least 30 days' notice to the Borrower (except where a shorter
period of notice is necessary to avoid a default on the Bonds or to avoid
endangering the interest of the Authority or the Trustee in the Project, or any
part thereof, or to prevent any loss or forfeiture thereof) may perform or cause
to be performed such obligations, and all reasonable expenditures incurred by
the Authority or the Trustee thereby shall be promptly paid or reimbursed by the
Borrower to the Authority or the Trustee, as the case may be.
SECTION 5.14. NO PURCHASE OF BONDS BY BORROWER; EXCEPTIONS. Borrower
covenants that none of the Bonds will be purchased by the Borrower or its
subsidiaries or affiliates, if any, or its partners except for any Bonds
purchased by or on behalf of the Borrower pursuant to Section 305 of the Trust
Agreement and except that the Borrower may at any time, and from time to time,
direct the Trustee by written notice to apply any Eligible Moneys remaining in
the Bond Fund after payment of the principal of and interest on all the Bonds
then due, together with any additional Eligible Moneys furnished to the Trustee
for this purpose, to the payment of the purchase price of Bonds.
SECTION 5.15. COVENANT TO NOTIFY. (a) The Borrower covenants that from
the date hereof and for 180 days after the Payment of the Bonds it shall
immediately notify the Authority and the Trustee of the filing of a petition
commencing a case under the United States Bankruptcy Code by or against the
Borrower.
(b) In the event any officer of the Borrower knows of any Event of
Default which shall have occurred or knows of the occurrence of any event which,
upon notice or lapse of time or both would constitute an Event of Default, the
Borrower shall promptly notify the Authority, the Trustee and the Letter of
Credit Bank as to such occurrence, specifying the nature and extent thereof and
the action (if any) which is proposed to be taken with respect thereto.
SECTION 5.16. NO INTEREST OF AUTHORITY IN PROJECT. The Authority shall
not have any rights to or interest in the Project, which shall be the sole and
exclusive property of the Borrower.
SECTION 5.17. LIMITATION OF LIABILITY. Notwithstanding anything to the
contrary contained in this Loan Agreement, no recourse shall be had, whether by
levy or execution or
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otherwise, for the payment of the principal of or interest on, or other amounts
owed under this Loan Agreement, or for any claim based on this Loan Agreement or
in respect thereof, against any partner of the Borrower or any predecessor,
successor of affiliate of any such partner or any of their assets (other than
from the interest of such partner in the Borrower), or against any principal,
partner, shareholder, officer, director, agent or employee of any such partner
(other than from interest of any such person in such partner), nor shall any
such persons be personally liable for any such amount or claims, or liable for
any deficiency judgment based thereon or with respect thereto. The sole remedies
of the Authority with respect to the hereinbefore mentioned amounts and claims
shall be against the Borrower and the drawings available under the Letter of
Credit in accordance with its terms and all such liability of the aforesaid
persons, except as expressly provided in this Section 5.17 is expressly waived
and released as a condition of and as consideration for the execution of this
Loan Agreement. Anything in this Section to the contrary notwithstanding (A)
nothing contained in this Loan Agreement (including, without limitation, the
provisions of this Section 5.17) shall constitute a waiver of any indebtedness
of the Borrower evidenced hereby or any of the Borrower's other obligations or
shall be taken to prevent recourse to and the enforcement against the Borrower
of all the liabilities, obligations and undertakings contained in this Loan
Agreement; (B) this Section 5.17 shall not be applicable to a breach by any
Person of any independent obligation to the Authority; and (C) this Section 5.17
shall not be applicable to the active party in the event of (i) fraud by such
party, (ii) misappropriation of funds or other property by such party, or (iii)
damage to the Project or any part thereof intentionally inflicted in bad faith
by such party. For the purposes of the foregoing, the term "shareholder" shall
be deemed to include the shareholders of any corporation which is a shareholder
of a corporation and the term "partner" shall be deemed to include the partners
of any partnership which is a partner of a partnership.
SECTION 5.18. COVENANT AS TO STATUS UNDER BANKRUPTCY CODE. The Borrower
covenants that at no time while the Bonds are outstanding will the Borrower and
the Letter of Credit Bank as to each other be an "insider" or an "affiliate" as
those terms are defined in the applicable statutory provisions of the Bankruptcy
Code of the United States, as amended.
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ARTICLE VI
ASSIGNMENT
SECTION 6.01 ASSIGNMENT BY BORROWER. This Loan Agreement may not be
assigned by the Borrower without the consent of the Authority and the Trustee.
No such consent shall be required if prior to the proposed assignment (1) the
Borrower notifies the same, and provides to the Authority and the Trustee
satisfactory proof (which may include an opinion from counsel approved by the
Trustee and the Authority) that the consummation of the proposed assignment will
not result (i) in the interest payable on the Bonds not continuing to
constitute, under applicable provisions of the Code as in effect on the date
such assignment is to be consummated, (A) Commonwealth source income and (B)
QPSII; (2) the Letter of Credit Bank shall reaffirm its obligations under the
Letter of Credit; (3) the assignee, in a certificate delivered to the Authority
and the Trustee, which certificate shall be in a form reasonably satisfactory to
the Authority and the Trustee, expressly assumes, and agrees to pay and to
perform, all of the obligations of the Borrower under this Loan Agreement that
shall have been assigned to it; and (4) the assignee delivers to the Authority
and the Trustee a certificate executed by its chief financial officer or
treasurer stating that none of the obligations and covenants under this Loan
Agreement the Related Documents assumed by it or the performance thereof will
conflict with, or constitute on the part of such assignee a breach of, or
default under, any indenture, mortgage, agreement or other instrument to which
such assignee is a party or by which it is bound, or any existing law, rule,
regulation, judgment, order or decree to which such assignee is subject.
SECTION 6.02 ASSIGNMENT BY AUTHORITY. By the provisions of the Trust
Agreement, the Authority will assign its rights under and interest in this Loan
Agreement and the Related Documents to which it is a party (except its rights to
receive notices, reports and other statements given both to the Authority and
the Trustee, its rights under Section 4.05, 4.06, 5.07 and 7.04 and
corresponding sections or paragraphs of the Related Documents to which it is a
party, to payment of certain costs and expenses and indemnification, and to
individual and corporate rights to exemption from liability under Sections 5.06,
9.14, and 9.15 and
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corresponding sections or paragraphs of the Related Documents to which it is a
party), including its rights to any payments, receipts, and revenues receivable
by it (except as aforesaid) under or pursuant to this Loan Agreement and the
Related Documents to which it is a party, and any income earned by the
investment of funds under the Trust Agreement, to the Trustee for the benefit of
the Bondholders and the Letter of Credit Bank. Except as provided herein, the
Authority will not sell, assign, transfer, convey, or otherwise dispose of its
interest in this Loan Agreement and the Related Documents to which it is a party
or the payments, receipts, and revenues of the Authority derived hereunder or
under the Related Documents to which it is a party.
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ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
SECTION 7.01 EVENTS OF DEFAULT. The following shall be "Events of
Default" under this Loan Agreement, and the term "Events of Default" shall mean,
whenever used with reference to this Loan Agreement, any one or more of the
following occurrences:
(a) failure by the Borrower to pay the amounts required to be paid with
respect to principal of and premium, if any, and interest on, the Bonds on or
prior to the date on which the same shall become due and payable in accordance
with the terms of the Bonds; or
(b) the Letter of Credit Bank shall fail to honor a draft made and
presented pursuant to and in strict compliance with the Letter of Credit; or
(c) failure by the Borrower to pay when due any payment required to be
made under this Loan Agreement other than payments under Section 4.01, which
failure shall continue for a period of 30 days after notice, specifying such
failure and requesting that it be remedied, is given to the Borrower by the
Authority or the Trustee, unless the Authority or the Trustee shall agree to an
extension of such time prior to its expiration; or
(d) failure by the Borrower to observe or perform any covenant,
condition or agreement on its part to be observed or performed hereunder, other
than as referred to in (a) and (c) above, which failure shall continue for a
period of ninety (90) days after notice, specifying such failure and requesting
that it be remedied, is given to the Borrower and the Letter of Credit Bank by
the Authority or the Trustee, unless the Authority or the Trustee shall agree to
an extension of such time prior to its expiration; provided, however, that if
such failure cannot be corrected within such ninety (90) day period, it shall
not constitute an Event of Default if corrective action is instituted by the
Borrower within such period and diligently pursued until such failure is
corrected; or
(e) the Borrower shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment
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of or taking possession by a receiver, custodian, liquidator, assignee, trustee
or sequestrator (or other similar official) of itself or of any substantial part
of its property, or shall make a general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become due, or the
Borrower or its general partner, or partners owning a majority in interest in
the Borrower shall take any action in furtherance of any of the foregoing
(except in connection with a consolidation or a merger of the Borrower with or
into another entity or transfer of all or substantially all the assets of the
Borrower not prohibited by Section 5.01); or
(f) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Borrower in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, custodian, liquidator, assignee, trustee or
sequestrator (or other similar official) of the Borrower or of any substantial
part of its property, or ordering the winding up or liquidation of its affairs,
and the continuance of such decree or order unstayed and in effect for a period
of 120 consecutive days;
(g) the Letter of Credit shall at any time for any reason cease to be
in full force and effect, or shall be declared by a court of competent
jurisdiction to be null and void in whole or in part, which cessation or
declaration shall continue for a period of 30 days after receipt by the Letter
of Credit Bank from the Trustee of notice specifying such occurrence and
requesting that it be remedied, unless the Trustee and the Authority shall agree
to an extension of such time prior to its expiration; or
(h) the validity or enforceability of the Letter of Credit shall be
contested by the Letter of Credit Bank, or the Letter of Credit Bank shall
renounce the same or deny that it has any further liability thereunder.
(i) the Letter of Credit Bank shall have notified the Trustee (i) that
an event of default under the Reimbursement Agreement has occurred and is then
continuing and has instructed the Trustee to declare the principal of the Bonds
to be immediately due and payable pursuant to Section 803 of the Trust
Agreement, or (ii) that the interest portion of the Letter of Credit shall not
be reinstated as provided in the Letter of Credit after an interest drawing
shall have been made thereunder; or
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(j) the Letter of Credit Bank shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case under any such law, or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee or
sequestrator (or other similar official) of itself or of any substantial part of
its property, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or the Letter of
Credit Bank or Persons owning a majority in interest in the Letter of Credit
Bank shall take any action in furtherance of any of the foregoing; or
(k) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Letter of Credit Bank in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, custodian, liquidator, assignee,
trustee or sequestrator (or other similar official) of the Letter of Credit Bank
or of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of such decree or order unstayed
and in effect for a period of 120 consecutive days.
The provisions of (c) and (d) above are subject to the following
limitation: if by reason of Force Majeure, the Borrower is unable in whole or in
part to carry out any of its agreements herein contained, failure of the
Borrower to carry out any such agreements other than the obligations on the part
of the Borrower contained in Sections 4.01 and 5.01 shall not be deemed an Event
of Default during the continuance of such inability, including a reasonable time
for the removal of the effect thereof.
The term "Force Majeure" shall mean, without limitation, the following:
(i) acts of God; strikes, lockouts or other industrial
disturbances; acts of public enemies; orders or restraints of any kind
of the government of the United States or of the Commonwealth or any of
their respective departments, agencies, political subdivisions or
officials, or any civil or military authority; war; insurrections;
civil disturbances; riots; epidemics; landslides; lightning;
earthquakes; fires; hurricanes; storms; droughts; floods; washouts;
arrests; restraint of government and people; explosions; breakage,
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malfunction or accident to facilities, machinery, transmission pipes or
canals; partial or entire failure of utilities; shortages of labor,
materials, supplies or transportation; or
(ii) any cause, circumstance or event not reasonably within
the control of the Borrower.
The Borrower agrees, however, to use its best efforts to remedy with
all reasonable dispatch any Force Majeure preventing it from carrying out its
agreements; provided that the settlement of any disputes of any nature,
including without limitation strikes, lockouts and other industrial
disturbances, shall be entirely within the discretion of the Borrower, and the
Borrower shall not be required to make settlement of any such disputes by
acceding to the demands of the opposing party or parties when such course is in
the judgment of the Borrower unfavorable to the Borrower. Anything herein to the
contrary notwithstanding, the Borrower's failure to effect the deposit required
in 4.01(c) shall not constitute an Event of Default under this Section 7.01.
SECTION 7.02 ACCELERATION; REMEDIES. (a) Subject to Section 7.02(b),
whenever any Event of Default hereunder shall have happened and be continuing,
any one or more of the following remedial steps may be taken, provided that
notice of the default has been given to the Borrower and the Letter of Credit
Bank by the Authority of the Trustee, except that notice need not be given to
the Borrower in the case of an Event of Default specified in clauses (a), (e)
and (f) of Section 7.01, or to the Letter of Credit Bank in the case of an Event
of Default in clauses (b), (g), (h), (i), (j) and (k) of Section 7.01, and the
default has not theretofore been cured, and provided further that no remedial
steps shall be taken by the Authority the effect of which would be to entitle
the Authority to funds necessary for the payment of principal of and interest on
Bonds which have not yet matured or otherwise become due unless such principal
and interest shall have been declared due and payable in accordance with the
Trust Agreement and such declaration shall not have been rescinded:
(i) declare all unpaid amounts payable under Section 4.01 hereof to be
immediately due and payable, whereupon the same shall become immediately due and
payable, and
(ii) take any action at law or in equity to collect the payments then
due and thereafter to become due, or to enforce performance and observance of
any obligation, agreement or covenant of the Borrower under this Loan Agreement.
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Any amounts collected pursuant to action taken under this Section shall
be applied in accordance with the Trust Agreement.
(b) Anything in this Loan Agreement notwithstanding, no remedial steps
shall be taken by the Authority under this Section without the prior consent or
direction of the Letter of Credit Bank (as long as the Letter of Credit Bank
shall not have failed to honor any drawing made and presented pursuant to and in
strict compliance with the Letter of Credit), except in the case of an Event of
Default specified in clauses (b), (g), (h), (i), (j) and (k) of Section 7.01.
SECTION 7.03 REMEDIES NOT EXCLUSIVE. No remedy conferred upon or
reserved to the Authority in connection with the loan to the Borrower pursuant
to this Loan Agreement is intended to be exclusive of any other available remedy
or remedies, but each and every remedy shall be cumulative and shall be in
addition to every other remedy either given under this Loan Agreement or now or
hereafter existing at law or in equity. No delay or omission to exercise any
right or power accruing upon any default shall impair any such right or power or
shall be construed to be a waiver thereof, but any such right and power may be
exercised from time to time and as often as it may be deemed expedient. In order
to entitle the Authority to exercise any remedy reserved to it in this Article,
it shall not be necessary to give any notice, other than such notice as may be
herein expressly required.
SECTION 7.04 ATTORNEY'S FEES AND EXPENSES. If an Event of Default shall
occur and the Authority or the Trustee shall employ attorneys or incur other
expenses for the collection of payments due hereunder or for the enforcement of
performance or observance of any obligation or agreement on the part of the
Borrower contained herein, the Borrower will on demand therefor reimburse the
reasonable fees of such attorneys and such other reasonable expenses so
incurred.
SECTION 7.05 WAIVERS. In view of the assignment of the Authority's
rights under and interest in this Loan Agreement to the Trustee by the
provisions of the Trust Agreement, the Authority shall have no power to waive
any default hereunder or extend the time for the correction of any default which
could become an Event of Default by the Borrower without the consent of the
Trustee to such waiver.
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ARTICLE VIII
PREPAYMENT OF THE LOAN
SECTION 8.01 OPTION TO PREPAY LOAN. (a) The Borrower shall have, and is
hereby granted, an option (i) to prepay in whole or in part the amounts payable
in respect of the Bonds under Section 4.01 by taking, or causing the Authority
to take, the actions required for Payment of the Bonds or (ii) to effect an
optional redemption of the Bonds, pursuant to the Trust Agreement; provided,
however that any such prepayment or redemption shall require the prior consent
of the Letter of Credit Bank. To exercise the option granted in this subsection,
the Borrower shall give to the Authority and the Trustee the consent of the
Letter of Credit Bank and notice setting forth (i) the date to be fixed for
redemption, (ii) the amount to be prepaid and (iii) the principal amount of
Bonds to be redeemed.
(b) The Borrower shall have, and is hereby granted, an option to prepay
in whole or in part the amounts payable in respect of the Series A and Series C
Bonds under Section 4.01 upon the occurrence of a Change in Law by taking, or
causing the Authority to take, the actions required to effect an optional
redemption of the Bonds pursuant to the Trust Agreement; provided, however, that
any such redemption shall require to prior consent of the Letter of Credit Bank.
Upon the receipt by the Borrower of the notice from the Trustee that a Change in
Law has occurred, the Borrower may, at any time thereafter, exercise the option
granted in this Section 8.01(b) by giving to the Trustee and the Authority the
consent of the Letter of Credit Bank and notice setting forth (i) the date to be
fixed for redemption and (ii) the principal amount of such Bonds that it elects
to have redeemed.
(c) The Borrower agrees to make the payments under paragraphs (a) or
(b) of this Section to the Trustee for deposit to the credit of the Bond Fund in
the amount due in respect of principal, interest, and premium, if any, on a
Business Day that is not less than one hundred twenty four (124) days prior to
the date to be fixed for such prepayment or redemption.
SECTION 8.02 MANDATORY PREPAYMENT OF LOAN. (a) The Borrower shall be
obligated, and agrees, to prepay the entire amount payable under Section 4.01
upon cessation of operation
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of the Project. A cessation of operation of the Project shall not be deemed to
have occurred (i) until 30 days shall have elapsed after notice has been given
to the Borrower and the Letter of Credit Bank by the Authority that operations
at the Project have ceased and the Borrower shall not have demonstrated to the
satisfaction of the Authority that the Project is being operated as Industrial
Facilities or that the Borrower is, in good faith, seeking to cause the
resumption of an economically reasonable operation of the Project as Industrial
Facilities, or (ii) until receipt by the Authority, the Letter of Credit Bank
and the Trustee of notice from the Borrower stating that operations at the
Project have ceased and that the Borrower has no intention of causing the
resumption of operation of the Project as Industrial Facilities or of seeking,
in good faith, to cause the redemption of an economically reasonable operation
of the Project as Industrial Facilities. A cessation of operations of the
Project shall not be deemed to exist on account of the occurrence of any of the
events set forth in Paragraph (d) of this Section.
In any case described in this Section 8.02(a), the Borrower shall be
obligated to pay a sum sufficient, together with any other funds held by the
Trustee and available for such purpose, (i) to redeem, on the redemption date
specified pursuant to the Trust Agreement, all outstanding Bonds, at a
redemption price equal to the principal amount of the Bonds, (ii) to pay the
interest which will accrue on said Bonds to the date so fixed for their
redemption, and (iii) to make all other payments, if any, required hereunder
accrued and to accrue through the date fixed for such redemption. The Borrower
agrees to make the payments required by this Section 8.02(a) not later than
10:00 a.m., Atlantic standard time, on a Business Day that is not less than one
hundred twenty-four (124) days prior to the redemption date set forth for the
Bonds pursuant to Section 301(B)(i) of the Trust Agreement.
(b) The Borrower shall be obligated, and agrees, to prepay the entire
amount payable under Section 4.01 hereof if the Trustee shall not have received
on or before the 120th day preceding the expiration date of the then outstanding
Letter of Credit except a Letter of Credit expiring on or after November 1,
1999, the final maturity of the Bonds, the following documents:
(1) a notice of extension of the then outstanding Letter of Credit; or
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(2) a Successor Letter of Credit together with the documents itemized
and numbered (2) through (6) in Section 3.07(b).
In any case described in this Section 8.02(b), the Borrower shall be
obligated to pay a sum sufficient, together with any other funds held by the
Trustee and available for such purpose, to redeem, on the date specified
pursuant to the Trust Agreement, all outstanding Bonds at a redemption price
equal to the principal amount thereof, (ii) to pay the interest which will
accrue on the Bonds to the date so fixed for their redemption, and (iii) to make
all other payments required hereunder accrued and to accrue through the date
fixed for such redemption. The Borrower agrees to make the payments required by
this Section 8.02(b) not later than 10:00 a.m., Atlantic standard time, on the
Business Day immediately prior to the redemption date set for the Bonds pursuant
to Section 3.01(B)(ii) of the Trust Agreement.
(c) The Borrower shall be obligated, and agrees, to prepay the entire
amount payable under Section 4.01 upon the occurrence of an Event of Taxability.
In any such case described in this Section 8.02(c), the Borrower shall be
obligated to pay a sum sufficient, together with any other funds held by the
Trustee and available for such purpose, (i) to redeem, on the date specified
pursuant to the Trust Agreement, all outstanding Bonds at a redemption price
equal to the principal amount thereof, (ii) to pay the interest which will
accrue on the Bonds to the date so fixed for their redemption and (iii) to make
all other payments, if any, required hereunder accrued and to accrue through the
date fixed for such redemption. The Borrower agrees to make the payments
required by this Section 8.02(c) not later than 10:00 a.m., Atlantic standard
time, on the Business Day immediately prior to the redemption date set for the
Bonds pursuant to Section 3.01(B)(iii) of the Trust Agreement.
(d) The Borrower shall be obligated, and agrees, to prepay and shall be
deemed to have prepaid a portion of the amount payable under Section 4.01 upon
the occurrence of an event of condemnation, damage to or destruction of the
Project to the extent such prepayment is required in and determined pursuant to
the Collateral Agreement. The Borrower, with the consent of the Letter of Credit
Bank, shall deliver to the Trustee a notice stating that the Borrower has become
obligated to prepay a portion of the amount payable under Section 4.01, setting
forth the amount required to be paid pursuant to Section 3.01(C) of the Trust
Agreement; and the Borrower shall
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be obligated to deposit or cause to be deposited with the Trustee a sum
sufficient together with any other funds held by the Trustee and available for
such purpose to redeem the principal amount of the Bonds set forth in such
notice. The Borrower agrees to make the payments required by this paragraph (d)
not later than 10:00 a.m., Atlantic standard time, on a Business Day which is
not less than 124 days prior to the redemption date set for the Bonds pursuant
to Section 3.01(C) of the Trust Agreement.
(e) To the extent that amounts are transferred from the Project Fund to
the Bond Fund and used to redeem Bonds pursuant to the Trust Agreement, the
Borrower shall be deemed to have prepaid the portion payable under Section 4.01
hereof in an amount equal to the amount of such transfer.
SECTION 8.03 RELATIVE POSITION OF LOAN AGREEMENT AND TRUST AGREEMENT.
(a) The rights and the obligations of the Borrower in this Article VIII shall be
and remain prior and superior to the Trust Agreement and may be exercised or
shall be fulfilled, as the case may be, whether or not the Borrower is in
default hereunder, provided that such default will not result in nonfulfillment
of any condition to the exercise of any such right or option.
(b) The obligations of the Borrower in Section 8.02 shall supersede the
rights and options of the Borrower in Section 8.01.
VIII-4
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ARTICLE IX
MISCELLANEOUS
SECTION 9.01 TERMINATION. This Loan Agreement and all obligations of
the parties hereunder, other than the obligations of the Borrower under Sections
4.06, 5.07, and 5.10, shall terminate upon (i) Payment of the Bonds and (ii)
payment or satisfaction of all other obligations incurred by the Authority or
the Borrower under this Loan Agreement, including (without limitation) interest
and other charges, if any, thereon. Upon such termination any amounts remaining
in the Bond Fund and any other fund established under the Trust Agreement not
needed for payment of the aforesaid items shall belong to and be paid to the
Borrower by the Trustee in accordance with the provisions of the Trust
Agreement.
SECTION 9.02 REFERENCE TO BONDS INEFFECTIVE AFTER BONDS PAID. Upon
Payment of the Bonds, and payment of all fees and charges of the Trustee, all
references in this Loan Agreement to the Bonds and the Trustee shall be
ineffective and the Trustee, the Authority, the Letter of Credit Bank and the
Holders shall not thereafter have any right hereunder, excepting those that
shall have theretofore vested.
SECTION 9.03 NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event
any agreement contained in this Loan Agreement should be breached by either
party and thereafter waived by the other party, such waiver shall be limited to
the particular breach so waived and shall not be deemed to waive any other
breach hereunder.
SECTION 9.04 AUTHORITY REPRESENTATIVE. Whenever under the provisions of
this Loan Agreement the approval of the Authority is required or the Authority
is required to take some action at the request of the Borrower, such approval
shall be made or such action shall be taken by the Authority Representative; and
the Borrower and the Trustee shall be authorized to act on any such approval or
action.
SECTION 9.05 AUTHORIZED BORROWER REPRESENTATIVE. Whenever under the
provisions of this Loan Agreement the approval of the Borrower is required or
the Borrower is required to take some action at the request of the Authority,
such approval shall be made or such action
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shall be taken by the Authorized Borrower Representative; and the Authority and
the Trustee shall be authorized to act on any such approval or action.
SECTION 9.06 CONFIDENTIAL INFORMATION. The Borrower shall not be
required to disclose, or to permit the Authority, the Trustee, the Letter of
Credit Bank or others to acquire access to, any trade secrets of the Borrower or
any of its subsidiaries or any other processes, techniques or information deemed
by the Borrower to be proprietary or confidential.
SECTION 9.07 NOTICES. All notices, certificates, requests, consents,
demands, directions, agreements or other instruments or communications between
the Authority, the Borrower, the Trustee and the Letter of Credit Bank required
to be given hereunder or under the Trust Agreement shall be in writing and shall
be (i) sent by private courier service, next day delivery, or by telefax, or
other similar form of rapid transmission, confirmed by sending (by or private
courier service, next day delivery) written confirmation at substantially the
same time as such rapid transmission, or (ii) personally delivered to the
receiving party or, if not an individual, to an officer of the receiving party.
All such communications shall be, sent or delivered addressed as follows:
If to the Authority: Puerto Rico Industrial, Medical,
Educational and Environmental
Pollution Control Facilities
Financing Authority
c/o Government Development Bank for
Puerto Rico
Minillas Government Center
De Diego Avenue and Baldorioty de
Castro - Stop 22
Santurce, Puerto Rico 00911
Attention: Executive Director
Telephone: (809) 722-1425
Telefax: (809) 726-1440
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If to the Borrower: El Conquistador Partnership L.P.
c/o Williams Hospitality
Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Hugh A. Andrews
Telephone: (809) 791-2000
Telefax: (809) 791-7500
With a copy to: Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telephone: (212) 351-3139
Telefax: (212) 351-3131
Kumagai Caribbean, Inc.
c/o William Hospitality
Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Shunsuke Nakane
Telephone: (809) 791-2195
Telefax: (809) 791-1610
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Chief Operating Officer
Telephone: (312) 728-2300
Telefax: (312) 539-2099
Messrs. Burton and Richard Koffman
c/o Richford American
950 Third Avenue
New York, NY 10022
Telephone: (212) 838-2785
Telefax: (212) 888-1185
IX-3
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If to the Trustee: Banco Popular de Puerto Rico
Banco Popular Center
Suite 503
Hato Rey, Puerto Rico 00918
Attention: Trust Division
Telephone: (809) 754-8472
Telefax: (809) 763-5972
If to the Initial
Letter of Credit
Bank: The Mitsubishi Bank, Limited
225 Liberty Street
Two World Financial Center
New York, N.Y. 10281
Attention: Real Estate Finance
Group
Akira Fujii
Russ J. Lopinto
Telephone: (212) 667-3524
Telephone: (212) 667-3259
Telefax: (212) 667-3661
with a copy to: Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Attention: Warren J. Bernstein, Esq.
Telephone: (212) 836-8000
Telefax: (212) 836-7156
A duplicate copy of each notice, certificate, request, consent, demand,
direction agreement or other instruments or communication given hereunder to the
Authority, the Borrower, the Trustee or the Letter of Credit Bank shall also be
given to each of the others. The Borrower, the Authority, the Trustee and the
Letter of Credit Bank may, by notice given hereunder, designate any further or
different addresses to which subsequent notices, certificates, requests or other
communications shall be sent. All such notices and other communications shall be
effective when received.
IX-4
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SECTION 9.08 BINDING EFFECT. This Loan Agreement shall inure to the
benefit of and shall be binding upon the Authority, the Borrower and their
respective successors and assigns, subject, however, to the provisions contained
in Sections 5.01 and 6.01.
SECTION 9.09 IF PAYMENT OR PERFORMANCE DATE NOT A BUSINESS DAY. If the
date for making payment, or the last date of performance of any act or the
exercising of any right, as provided in this Loan Agreement, shall not be a
Business Day (as such term is defined in the Trust Agreement) such payment may
be made or performed or right exercised on the next succeeding Business Day with
the same force and effect as if done on the nominal date.
SECTION 9.10 SEVERABILITY. In the event any provision of this Loan
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
SECTION 9.11 AMENDMENTS, CHANGES AND MODIFICATIONS. Subsequent to the
issuance of the Bonds and prior to Payment of the Bonds, this Loan Agreement may
not be effectively amended, changed, modified, altered or terminated except in
accordance with the Trust Agreement.
SECTION 9.12 EXECUTION IN COUNTERPARTS. This Loan Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
SECTION 9.13 APPLICABLE LAW. This Loan Agreement shall be governed by
and construed in accordance with the laws of the Commonwealth.
SECTION 9.14 NO CHARGE AGAINST AUTHORITY CREDIT. No provisions hereof
shall be construed to impose a charge against the general credit of the
Authority or shall impose any personal or pecuniary liability upon any director,
official or employee of the Authority.
SECTION 9.15 AUTHORITY NOT LIABLE. Notwithstanding any other provision
of this Loan Agreement (a) the Authority shall not be liable to the Borrower,
the Trustee, any Holder, or any other Person for any failure of the Authority to
take action under this Loan Agreement unless the Authority (i) is requested in
writing by an appropriate Person to take such action and (ii) is assured of
payment of or reimbursement for any expenses in such action, and (b) except with
respect to any action for specific performance or any action in the nature of a
prohibitory or
IX-5
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mandatory injunction, neither the Authority nor any director of the Authority or
any other official or employee of the Authority shall be liable to the Borrower,
the Trustee, any Holder or any other Person for any action taken by it or by its
officers, servants, agents or employees, or for any failure to take action under
this Loan Agreement or the Trust Agreement. In acting under this Loan Agreement,
or in refraining from acting under this Loan Agreement, the Authority may
conclusively rely on the advice of its legal counsel.
SECTION 9.16 LOAN AGREEMENT SUPERSEDES PRIOR AGREEMENTS. This Loan
Agreement supersedes any other prior agreements or understandings, written or
oral, between the parties with respect to the subject matter hereof.
IN WITNESS WHEREOF, the Authority and the Borrower have caused this
Loan Agreement to be executed in their respective legal names and the Authority
seal to be hereunto affixed, and the signatures of its authorized persons
attested all as of the date first above written.
PUERTO RICO INDUSTRIAL, MEDICAL,
EDUCATIONAL AND ENVIRONMENTAL
[SEAL] POLLUTION CONTROL FACILITIES
FINANCING AUTHORITY
Attest
By: /s/ BY: /s/
______________________________ _____________________________________
Assistant Secretary George B. Wilson
Executive Director
EL CONQUISTADOR PARTNERSHIP L.P.
BY: KUMAGAI CARIBBEAN, INC.
GENERAL PARTNER
By: /s/
_____________________________________
Shunsuke Nakane
President
WKA EL CON ASSOCIATES,
GENERAL PARTNER
By: /s/
_____________________________________
Norman J. Menell
Authorized Signatory
IX-6
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TRUST AGREEMENT
Between
PUERTO RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND
ENVIRONMENTAL POLLUTION CONTROL FACILITIES
FINANCING AUTHORITY
And
BANCO POPULAR DE PUERTO RICO,
Trustee
Dated February 7, 1991
Securing
$120,000,000
Industrial Revenue Bonds, 1991 Series A
Convertible Industrial Revenue Bonds, 1991 Series B
Industrial Revenue Bonds, 1991 Series C
(El Conquistador Resort Project)
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TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS............................................. -5-
Section 101. Definitions............................................. -5-
ARTICLE II FORM, EXECUTION, AUTHENTICATION,
DELIVERY AND EXCHANGE OF BONDS.......................... -27-
Section 201. Limitation on Issuance of Bonds......................... -27-
Section 202. Form of Bonds........................................... -27-
Section 203. Details of Bonds........................................ -28-
Section 204. Authentication of Bonds................................. -32-
Section 205. Exchange of Bonds....................................... -32-
Section 206. Registration of Transfer of Bonds....................... -33-
Section 207. Ownership of Bonds; Transfer of Title. ................ -34-
Section 208. Authorization of Bonds. ............................... -35-
Section 209. Temporary Bonds. ...................................... -45-
Section 210. Mutiliated, Destroyed or Lost Bonds. .................. -46-
ARTICLE III REDEMPTION OF BONDS;
MANDATORY TENDER FOR PURCHASE........................... -47-
Section 301. Redemption of Bonds. .................................. -47-
Section 302. Redemption Notice. .................................... -50-
Section 303. Effect of Calling for Redemption. ..................... -51-
Section 304. Redemption of Portions of the Bonds. .................. -52-
Section 305. Mandatory Tender for Purchase. ........................ -53-
Section 306. Effect of Tender for Purchase. ........................ -55-
Section 307. Delivery of Bonds and Cancellation of Put Bonds. ...... -55-
Section 308. Payment of Put Bonds Not Presented on Tender Date. .... -56-
Section 309. Remarketing of Pledged Bonds. ......................... -57-
Section 310. No Reissuance Upon Purchase. .......................... -58-
Section 311. No Sales after Default. ............................... -59-
ARTICLE IV PROJECT FUND............................................ -59-
Section 401. Project Fund. ......................................... -59-
Section 402. Payments from Project Fund. ........................... -60-
Section 403. Items of Cost. ........................................ -60-
Section 404. Requisites for Payments from Project Fund. ............ -61-
Section 405. Reliance on Requisition. .............................. -63-
Section 405. Balance in Project Fund. .............................. -63-
ARTICLE V BOND FUND AND BOND PURCHASE FUND........................ -64-
Section 501. Creation of Bond Fund................................... -64-
Section 502. Payments into Bond Fund................................. -65-
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Section 503. Use of Moneys in Bond Fund............................... -66-
Section 504. Application and Pledge of Moneys in the Bond Fund........ -67-
Section 505. Creation of Bond Purchase Fund........................... -68-
Section 506. Disbursement from the Bond Purchase Fund................. -69-
Section 507. Moneys Withdrawn from Bond Fund or Bond Purchase Fund.... -69-
Section 508. Cancellation of Bonds Upon Payment....................... -70-
ARTICLE VI DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS
AND INVESTMENT OF FUNDS.................................. -71-
Section 601. Security for Deposits.................................... -71-
Section 602. Investment of Moneys..................................... -72-
ARTICLE VII PARTICULAR COVENANTS AND PROVISIONS...................... -73-
Section 701. Covenants to Pay Bonds; Bonds Limited Obligations of
Authority................................................ -73-
Section 702. Covenant to Perform Obligations under this Trust Agreement
and Loan Agreement and Related Documents................. -75-
Section 703. Covenant to Perform Further Acts......................... -76-
Section 704. Trustee May Enforce Authority's Rights Under Loan
Agreement and the Related Documents...................... -76-
ARTICLE VIII DEFAULT AND REMEDIES.......................................... -76-
Section 801. Extension of Interest Payment Dates...................... -76-
Section 802. Defaults................................................. -77-
Section 803. Acceleration............................................. -77-
Section 804. Enforcement of Remedies.................................. -79-
Section 805. Trustee May File Claim in Bankruptcy..................... -80-
Section 806. Pro Rata Application of Funds............................ -82-
Section 807. Effect of Discontinuance of Proceedings.................. -85-
Section 808. Majority Interest May Control Proceedings................ -85-
Section 809. Restrictions Upon Actions by Individual Bondholder....... -85-
Section 810. Receiver................................................. -87-
Section 8.11 Actions by Trustee....................................... -87-
Section 812. No Remedy Exclusive...................................... -88-
Section 813. No Delay or Omission Construed to Be a Waiver............ -88-
Section 814. Waiver of Past Defaults. Subj............................ -88-
Section 815. Notice of Default........................................ -89-
Section 8.16 Notice of Acceleration................................... -89-
Section 8.17.Notice of Failure of Letter of Credit Bank to Pay........ -89-
Section 818. Letter of Credit Bank Consent............................ -90-
ARTICLE IX CONCERNING THE TRUSTEE................................... -90-
Section 901. Acceptance of Trusts..................................... -90-
Section 902. Trustee Entitled to Indemnify............................ -90-
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Section 903. Trustee Not Responsible for Insurance, Taxes or
Execution of this Trust Agreement....................... -91-
Section 904. Trustee Not Responsible for Acts of the Authority or
Application of Moneys Applied in Accordance with this
Trust Agreement......................................... -92-
Section 906. Compensation............................................ -97-
Section 907. Quarterly Statement of Funds on Deposit................. -97-
Section 908. Notice of Default....................................... -98-
Section 909. Trustee May Be Bondholder............................... -98-
Section 910. Trustee Not Responsible for Recitals.................... -99-
Section 911. Trustee Not Responsible for Recording................... -99-
Section 912. Qualification of the Trustee............................ -99-
Section 913. Resignation and Removal of Trustee......................-100-
Section 914. Successor Trustee.......................................-102-
Section 915. Money Held in Trust.....................................-103-
ARTICLE X EXECUTION OF INSTRUMENTS BY BONDHOLDERS
AND PROOF OF OWNERSHIP OF BONDS.........................-105-
Section 1001. Execution of Instruments................................-105-
Section 1002. Proof of Execution of Instrument and of Ownership.......-105-
Section 1003. Record Date.............................................-106-
ARTICLE XI SUPPLEMENTS AND AMENDMENTS TO TRUST
AGREEMENT...............................................-107-
Section 1102. Supplements and Amendments Requiring consent of the
Majority Interest.......................................-108-
Section 1103. Supplements and Amendments Deemed Part of Trust
Agreement...............................................-110-
Section 1104. Discretion of Trustee in Entering into Supplements and
Amendments..............................................-111-
Section 1105. Consent of Borrower and Letter of Credit Bank Required..-112-
ARTICLE XII SUPPLEMENTS AND AMENDMENTS TO LOAN
AGREEMENT AND RELATED DOCUMENTS.........................-112-
Section 1201. Supplements and Amendments to Loan Agreement and Related
Documents Not Requiring Consent.........................-112-
Section 1202. Supplements and Amendments to Loan Agreement and Related
Documents Requiring Consent of the Majority Interest....-113-
Section 1203. Consent of Trustee and Letter of Credit Bank Required...-113-
ARTICLE XIII PAYMENT OF BONDS AND TERMINATION;
DEFEASANCE..............................................-114-
Section 1301. Payment of Bonds and Termination. .....................-114-
Section 1302. Defeasance..............................................-115-
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ARTICLE XIV LETTER OF CREDIT; SUCCESSOR LETTER OF CREDIT............-117-
Section 1401. Compliance with Procedure...............................-117-
Section 1402. Surrender Upon Payment of the Bonds.....................-117-
Section 1403. Draws Under Letter of Credit............................-117-
Section 1404. Successor Letter of Credit..............................-119-
Section 1405. Supplements and Amendments to the Letter of Credit Not
Requiring Consent.......................................-120-
Section 1406. Supplements and Amendments to the Letter of Credit
Requiring Consent of the Majority Interest..............-121-
ARTICLE XV MISCELLANEOUS PROVISIONS................................-122-
Section 1501. Covenants of Authority Bind Its Successors..............-122-
Section 1502. Notices.................................................-123-
Section 1503. Substitute Mailing......................................-128-
Section 1504. Rights Under Trust Agreement............................-128-
Section 1505. Severability............................................-129-
Section 1506. Covenants of Authority Not Covenants of Officials
Individually............................................-129-
Section 1507. Commonwealth Law Governs................................-130-
Section 1508. Payments Due on a Non-Business Day......................-130-
Section 1509. Headings Not Part of Trust Agreement....................-130-
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Comienza mi protocolo de Instrumentos Publicos para el ano mil novecientos
noventa y uno, hoy dia siete (7) de febrero de mil novecientos noventa y uno
(1991).
----------------------------------------
Notario Publico
NUMBER ONE (1)
TRUST AGREEMENT
In the City of San Juan, Commonwealth of Puerto Rico, on this seventh
(7th) day of February, nineteen hundred ninety-one (1991).
BEFORE ME
JULIO L. AGUIRRE RODRIGUEZ, Attorney-at-Law and Notary Public in and
for the Commonwealth of Puerto Rico with residence in Guaynabo, Puerto Rico and
offices on the Seventh (7th) Floor, The Chase Manhattan Bank Building, Hato Rey,
San Juan, Puerto Rico.
APPEAR
AS THE PARTY OF THE FIRST PART: PUERTO RICO INDUSTRIAL, MEDICAL,
EDUCATIONAL AND ENVIRONMENTAL POLLUTION CONTROL FACILITIES FINANCING AUTHORITY
(the "Authority"), a public corporation and governmental instrumentality of the
Commonwealth of Puerto Rico (the "Commonwealth"), Employer Identification Number
66-0426994, and represented herein by its Assistant Executive Director,
Francisco Sierra Mendez, of legal age, married and a resident of Juncos, Puerto
Rico, who has been duly authorized to appear herein on behalf of the Authority.
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AS PARTY OF THE SECOND PART: The Person identified as the Trustee in
Section 101, represented herein by the Authorized Trustee Representative, who
has been duly authorized to appear herein on behalf of the Trustee.
I, the Notary, DO HEREBY CERTIFY that I have assured myself as to the
identity of the appearing parties herein by the means set forth in Article 17(c)
of Act Number 75 of July two (2), nineteen hundred eighty-seven (1987) and by
their statements as to their respective ages, civil status, professions and
residences. They assure me that they have, and in my judgment they do have, the
necessary legal capacity and knowledge of the English language to execute this
public instrument. Wherefore, they freely and voluntarily
STATE
FIRST: The Authority was created a body corporate and politic
constituting a public corporation and governmental instrumentality of the
Commonwealth by the Act.
SECOND: The Authority is authorized under the Act to borrow money and
issue bonds therefor for the purpose of providing funds to pay all or any part
of the cost of any industrial, commercial, medical, educational or pollution
control facility, the principal of and the premium, if any, and the interest on
which bonds shall be payable solely from the
-2-
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funds provided by the obligor under the financing agreement in respect of
such project.
THIRD: The Authority has entered into the Loan Agreement with the
Borrower which provides that (i) the Borrower shall acquire, develop, construct
and equip the Project, (ii) the Authority shall issue the Bonds to pay all or
part of the Cost of the Project, and (iii) the Borrower shall pay or caused to
be paid to the Authority sufficient amounts to pay the principal of, the
premium, if any, and the interest on the Bonds.
FOURTH: The Authority is entering into this Trust Agreement for the
purpose of authorizing the Bonds and securing the payment thereof by Granting
the Trust Estate to the Trustee.
FIFTH: The Borrower has entered into the Reimbursement Agreement
providing for the issuance of the Initial Letter of Credit by the Initial Letter
of Credit Bank to the Trustee in order to assure the full and timely payment of
the Bonds.
SIXTH: The Borrower will pledge the Mortgage Note under the terms of
the Collateral Agreement, in order to further secure its obligations under the
Loan Agreement. The rights of the Authority to the pledged collateral under the
terms of the Collateral Agreement are subordinate to the rights of the Letter of
Credit Bank so long as the Letter of Credit Bank shall not have failed to honor
any drawing made and presented pursuant to and in strict compliance with the
Letter of Credit.
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SEVENTH: The Authority has determined that the Bonds and the
certificate of authentication to be endorsed thereon by the Trustee shall be
substantially in the forms set forth in Exhibit A, Exhibit B and Exhibit C with
such substitutions, omissions, and insertions as are required or permitted by
this Trust Agreement.
EIGHTH: The execution and delivery of this Trust Agreement, the Loan
Agreement, and the Related Documents to which the Authority is a party, have
been duly authorized by a resolution of the Authority.
NINTH: All acts, conditions and things required by the Constitution
and laws of the Commonwealth and the rules and regulations of the Authority to
happen, exist and be performed precedent to and in the execution and delivery of
this Trust Agreement, the Loan Agreement and the Related Documents to which the
Authority is a party have happened, exist and have been performed as so required
in order to make this Trust Agreement, the Loan Agreement and the Related
Documents to which the Authority is a party legal, valid and binding agreements
in accordance with their terms.
TENTH: The Trustee has accepted the trusts created by this Trust
Agreement and in evidence thereof has joined in the execution hereof.
ELEVENTH: (A) The Authority Grants the Trust Estate to the Trustee IN
TRUST, subject to the rights of the Borrower under the Loan Agreement and to the
exceptions, reservations and matters therein and
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herein contained, for the equal and proportionate benefit of all and singular
present and future Bondholders without preference, priority or distinction,
except as otherwise hereinafter provided, of any one Bond over any other Bond,
for reason of priority in the issue, sale, negotiation or incurrence thereof or
otherwise.
(B) This Trust Agreement and all covenants, agreements and other
obligations of the Authority hereunder (except with respect to such funds,
delivered to the Borrower pursuant to Section 507) shall cease and terminate
after the rights, title and interest of the Trustee in and to the Trust Estate
shall have ceased and terminated in accordance with Article XIII and the
principal of and interest on the Bonds shall have been paid to the Bondholders,
or to the Borrower pursuant to Section 507(B). Thereupon, the Trustee shall
cancel and discharge this Trust Agreement and execute and deliver to the
Authority and the Borrower such instruments as shall be required to evidence the
discharge hereof.
TWELFTH: The Bonds are to be issued, authenticated and delivered and
the payments under the Loan Agreement and other revenues and funds hereby
Granted are to be dealt with and disposed of under, upon and subject to the
provisions of this Trust Agreement. The Authority agrees and covenants with the
Trustee and with the Holders from time to time as follows:
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ARTICLE I
DEFINITIONS
SECTION 101. DEFINITIONS. In addition to words and terms elsewhere
defined in this Trust Agreement, the following words and terms hereinbefore and
hereinafter used shall have the following meanings, unless some other meaning is
intended:
ACT: Act No. 121 of the Legislature of the Commonwealth, approved June
twenty-seven (27), nineteen hundred seventy-seven (1977), as amended, and all
future acts supplemental thereto or amendatory thereof.
ACT OF BANKRUPTCY: the filing of a petition commencing a case under
the United States Bankruptcy Code by or against the Borrower.
ADMINISTRATIVE FEE: the single fee to the Authority in the amount of
one-half of one percent (1/2 of 1%) of the aggregate principal amount of the
Bonds.
AFFILIATE: A Person that directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common control with the
Borrower.
APPLICABLE CONVERSION DATE: The Conversion Date selected by the Holder
of a Series B Bond to effect a Conversion.
APPLICABLE LIBID RATE: has the meaning specified in Section 208(B).
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AUTHORITY: Puerto Rico Industrial, Medical, Educational and
Environmental Pollution Control Facilities Financing Authority a body corporate
and politic constituting a public corporation and governmental instrumentality
of the Commonwealth and any successor thereto.
AUTHORITY REPRESENTATIVE: each of the Persons designated at the time
to act on behalf of the Authority by a certificate furnished to the Trustee, the
Borrower and the Letter of Credit Bank, containing specimen signatures of such
Persons and signed on behalf of the Authority by the Executive Director.
AUTHORIZED BORROWER REPRESENTATIVE: each of the Persons designated at
the time to act on behalf of the Borrower by a certificate furnished to the
Trustee, the Authority and the Letter of Credit Bank, containing the specimen
signatures of such Persons and signed on behalf of the Borrower by the general
partners thereof.
AUTHORIZED TRUSTEE REPRESENTATIVE: Manuel Eugenio Sarmiento, Vice
President and Trust Officer of the Trustee, of legal age, single, and resident
of San Juan, Puerto Rico.
BOARD: the board of directors of the Authority as constituted from
time to time and defined by the Act, or if said Board shall be abolished, then
the board, body or officer succeeding to the principal functions thereof or to
whom the powers of the Authority shall be given by law.
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BOND FUND: the Industrial Revenue Bonds, 1991 Series A, Series B, and
Series C (El Conquistador Resort Project) Bond Fund, a special fund created and
designated by the provisions of Section 501.
BONDHOLDER: the Person registered as owner of any Bond in the Bond
Register.
BOND PURCHASE FUND: the Industrial Revenue Bonds, 1991 Series A,
Series B, and Series C (El Conquistador Resort Project) Bond Purchase Fund, a
special fund created and designated by the provisions of Section 505.
BOND REGISTER: the register to be maintained by the Trustee, and which
shall provide for the registration, transfer and exchange of Bonds, as provided
under Section 206.
BONDS: the Series A Bonds, Series B Bonds and Series C Bonds,
collectively.
BORROWER: El Conquistador Partnership L.P., a limited partnership
organized and existing under the laws of the State of Delaware, and its
successors and permitted assigns and any surviving, resulting or transferee
partnership or other entity.
BUSINESS DAY: any day, other than a Saturday or Sunday, or a day on
which commercial banks in the Commonwealth or New York, New York are authorized
or required by law or executive order to close.
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<PAGE>
CHANGE IN LAW: shall have the meaning assigned to such term under the
Loan Agreement.
CODE: the Federal Internal Revenue Code of 1986, and the regulations
issued thereunder, as in effect on the Date of Issuance.
COLLATERAL AGREEMENT: the Collateral Pledge Agreement, dated the Date
of Issuance, by and among the Borrower, the Authority, and the Initial Letter of
Credit Bank, together with all permitted agreements amendatory thereof or
supplemental thereto.
COMMISSIONER: the Commissioner of Financial Institutions of the
Commonwealth.
COMMONWEALTH: the Commonwealth of Puerto Rico.
COMPLETION DATE: the date of completion of the Project, as that date
shall be certified under Section 3.06 of the Loan Agreement.
CONVERSION: the conversion of the Series B Bonds to Series C Bonds
authorized pursuant to Section 208.
CONVERSION DATE: means (i) the first day of every month (or if any
such day is not a Business Day, the immediately succeeding Business Day) after
the Issue Date and before the Conversion Expiration Date, and (ii) the
Conversion Expiration Date.
CONVERSION EXPIRATION DATE: means October thirty-one (31) nineteen
hundred ninety-one (1991).
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<PAGE>
CONVERSION NOTICE: means the notice to the Trustee required for a
Conversion under Section 208(a).
CORPORATE TRUST OFFICE: the principal office of the Trustee at Suite
503, Banco Popular Center, 209 Munoz Rivera Avenue, Hato Rey, Puerto Rico,
00919, or any other address at which its corporate trust business shall be
administered at any particular time.
COST: as applied to the Project, shall have the meaning set forth in
the Act, and shall include, but shall not be limited to, the items of cost set
forth in Section 403.
COST OF PROJECT REIMBURSEMENT DATE: the ninth (9th) day of April,
nineteen hundred ninety (1990).
COSTS OF ISSUANCE: all items of expense, not to exceed in the
aggregate TWO MILLION FOUR HUNDRED THOUSAND DOLLARS ($2,400,000), relating to
the authorization, sale and issuance of the Bonds, including the initial or
acceptance fee of the Trustee, the initial or acceptance fee of the Initial
Letter of Credit Bank relating to the Initial Letter of Credit, legal,
accounting and financial advisory fees and expenses, underwriting fees and
expenses, filing and rating agencies' fees and printing and engraving costs
incurred in connection with the authorization, sale and issuance of the Bonds,
the execution of this Trust Agreement, the Loan Agreement, and all other
documents in connection therewith, and payment of all fees, costs and expenses
for the preparation
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of the Loan Agreement, this Trust Agreement, the Bonds, the Initial Letter of
Credit, the Initial Reimbursement Agreement, the Related Documents and any other
collateral or security taken by the Initial Letter of Credit Bank for its
obligations under the Initial Letter of Credit, and any other fees and expenses
necessary or incident to the issuance and sale of the Bonds, the issuance of the
Initial Letter of Credit, the delivery of the Reimbursement Agreement and the
documents contemplated by any of the foregoing.
DATE OF ISSUANCE: the date appearing in the first page of this Trust
Agreement.
DEFAULTED INTEREST: has the meaning specified in Section 203.
ELIGIBLE INVESTMENT OBLIGATIONS: Investment Obligations that qualify
as "Eligible Activities" under Regulation 3582.
ELIGIBLE MONEYS: (i) all amounts drawn by the Trustee under the Letter
of Credit and deposited to the credit of the Bond Fund or the Tender Account,
and (ii) all amounts deposited to the credit of the Bond Fund: (a) in respect of
accrued interest from the proceeds of the initial sale of the Bonds, (b) to the
extent such amounts have been on deposit in the Bond Fund for a period of 124
consecutive days without the occurrence of an intervening Act of Bankruptcy or
(c) as to which the Trustee has received an opinion of counsel experienced in
bankruptcy matters to the effect that payment to the Bondholders of such moneys
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would not constitute a transfer which may be avoided under any provision of the
Federal Bankruptcy Code in the event of an Act of Bankruptcy.
EVENT OF TAXABILITY: shall have the meaning assigned to such term
under the Loan Agreement.
EXECUTIVE DIRECTOR: the Executive Director, the Assistant Executive
Director or the Acting Executive Director of the Authority, or if there is no
Executive Director, Assistant Executive Director or Acting Executive Director,
then any Person designated by the Board or authorized by the by-laws of the
Authority to perform the functions of the Executive Director.
EXHIBIT A: the "FORM OF BOND" attached to this Trust Agreement and
marked Exhibit A.
EXHIBIT B: the "FORM OF BOND" attached to this Trust Agreement and
marked Exhibit B.
EXHIBIT C: The "FORM OF BOND" attached to this Trust Agreement and
marked Exhibit C.
EXHIBIT D: the Pledge Agreement attached to this Trust Agreement and
marked Exhibit D.
EXHIBIT E: the rulings of the Treasury Department required to be
delivered to the Trustee pursuant to Section 305(A) attached to this Trust
Agreement and marked Exhibit E.
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FEDERAL: the United States of America and the government thereof.
FLOATING RATE: a fluctuating rate of interest that throughout each
Interest Period shall be fixed at a per annum rate determined as provided in
Section 208.
GOVERNMENT OBLIGATIONS: (i) direct obligations of, or obligations the
principal of and the interest on which are unconditionally guaranteed by, the
United States of America, and (ii) any certificates or other evidences of an
ownership in obligations or in specified portions thereof (which may consist of
specified portions of the principal thereof or the interest thereon) of the
character described in clause (i).
GRANT: to convey, assign and transfer legal title.
HIGHEST LAWFUL RATE: the least of (i) 12% per annum, (ii) the maximum
rate of interest permitted to be paid on the Bonds by applicable Commonwealth
law and (iii) the maximum rate of interest that may be collected under the
provisions of Article 3 C. of Regulation No. 24-A, as amended by Regulations No.
I, No. II, No. III and No. IV, of the Board Regulating Rates of Interest and
Financing Charges of the Commonwealth, approved on December twenty-seven (27),
nineteen hundred eighty-two (1982) which is currently 2 percentage points over
the annual interest rate equivalent to the gross yield resulting from the
auction held by the Federal
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Home Loan Mortgage Corporation during the week immediately prior to the Date of
Issuance, rounded to the nearest 1/8 of a percentage point.
HOLDER: the Person registered as owner of any Bond in the Bond
Register.
INDUSTRIAL FACILITIES: shall have the meaning given to such term by
Section 3 of the Act as in effect on the Date of Issuance.
INITIAL APPLICABLE CONVERSION DATE: the Applicable Conversion Date of
the Series C Bonds or Bonds issued and authenticated pursuant to the first
Conversion Notice filed with the Trustee as provided in Section 208(A).
INITIAL LETTER OF CREDIT: the irrevocable, transferable, stand-by
letter of credit, substantially in the form of Exhibit A to the Initial
Reimbursement Agreement, issued by the Initial Letter of Credit Bank in favor of
the Trustee in an aggregate amount equal to the principal amount of the Bonds
plus 120 days' interest thereon at the rate of 12% per annum, together with all
permitted agreements amendatory thereof or supplemental thereto.
INITIAL LETTER OF CREDIT BANK: The Mitsubishi Bank, Limited, acting
through its New York Branch.
INITIAL REIMBURSEMENT AGREEMENT: the Letter of Credit and
Reimbursement Agreement, dated the Date of Issuance between the Borrower and the
Initial Letter of Credit Bank, providing for, among
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other things, the issuance of the Initial Letter of Credit, together with all
permitted agreements amendatory thereof or supplemental thereto.
INTEREST PAYMENT DATE: the first day of each February, May, August and
November, commencing May first (1), nineteen hundred ninety-one (1991), and in
the case of each Series B Bond surrendered pursuant to a Conversion, the
Applicable Conversion Date of the Series C Bond issued in exchange thereof.
INTEREST PERIOD: each period of three months commencing on each
Interest Payment Date and ending on the day preceding the next Interest Payment
Date, except that the first Interest Period shall commence on the Issue Date and
the last Interest Period shall end on the Maturity Date.
INTEREST RATE: as of any date, the prevailing rate of interest on each
of the Series A Bonds, Series B Bonds, and the Series C Bonds, established in or
pursuant to Section 208(B).
INTEREST RATE DETERMINATION DATE: the second Mutual Business Day
immediately preceding the first day of each Interest Period, and, solely in the
case of the Series C Bonds, the Initial Applicable Conversion Date.
INVESTMENT AGREEMENT: an agreement providing for the investment of
funds held under this Trust Agreement, whether in the form of an interest
bearing time account, or any similar arrangement (not including a repurchase
agreement), entered into between the Trustee and
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a Qualified Financial Institution, in which, among other things, the Qualified
Financial Institution represents that the funds invested thereunder will be
invested in conformity with Section 6.2.6(b) of Regulation 3582.
INVESTMENT OBLIGATIONS: (i) Government Obligations, (ii) bonds,
debentures or notes issued by any of the following Federal agencies: Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Home Loan Banks, Export
- - Import Bank of the United States, Government National Mortgage Association,
Federal Land Banks, or the Federal National Mortgage Association (including
participation certificates issued by such Association), (iii) obligations of the
Commonwealth or any of its instrumentalities or political subdivisions that are
rated in one of the four highest rating categories (without any gradations
within any category by numerical qualifier or otherwise) by any nationally
recognized securities rating service, (iv) all other obligations issued or
unconditionally guaranteed as to principal and interest by an agency or Person
controlled or supervised by and acting as a Federal instrumentality pursuant to
authority granted by the Congress, (v) time deposits, certificates of deposit or
similar arrangements with the Trustee or any bank or banking association or
trust company organized under the laws of the United States of America or any
state thereof or the Commonwealth having reported capital and surplus of not
less than FIFTY MILLION DOLLARS ($50,000,000) and reported deposits of not less
than TWO HUNDRED
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FIFTY MILLION DOLLARS ($250,000,000) and which has been designated by the
Secretary of the Treasury of the Commonwealth as a depository for public funds,
fully secured in the manner provided in Section 601, (vi) bankers' acceptances
(other than by the Borrower) drawn on and accepted by the Trustee or any
commercial bank organized under the laws of the United States of America or any
state thereof or the Commonwealth, that is a member of the Federal Deposit
Insurance Corporation having reported capital and surplus of not less than FIFTY
MILLION DOLLARS ($50,000,000) and reported deposits not less than TWO HUNDRED
FIFTY MILLION DOLLARS ($250,000,000), (vii) repurchase agreements with respect
to any of the investments or securities referred to in subsection (i), (ii),
(iii), (iv) or (v) above, (viii) commercial paper of any corporation whose
commercial paper has been rated in the highest category (without regard to any
gradations within any category by numerical qualifier or otherwise) by any
nationally recognized securities rating service, (ix) bonds, debentures, notes
and other obligations of any corporation, which are rated in the two highest
categories (without regard to any gradations within any category by numerical
qualifier or otherwise) by any nationally recognized securities rating service
and (x) an Investment Agreement.
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ISSUE DATE: the date appearing in the face of each Bond as the
original issue date, which in the case of any Series C Bonds shall be the
corresponding Applicable Conversion Date.
LIBOR: the offered quotation for the rate of interest on three- month
deposits of United States dollars in the London interbank market, as published
by Telerate Systems, Inc. (currently on page 3750 of the financial information
reporting services furnished electronically by Telerate Systems, Inc.) at
approximately 11:00 a.m. (London time) on any Interest Rate Determination Date.
LETTER OF CREDIT: the Initial Letter of Credit or any Successor Letter
of Credit, as the Case may be.
LETTER OF CREDIT BANK: The Initial Letter of Credit Bank during the
term of the Initial Letter of Credit and thereafter the issuer of any Successor
Letter of Credit.
LOAN AGREEMENT: The Loan Agreement, dated the Date of Issuance, by and
between the Authority and the Borrower, together with all permitted agreements
amendatory thereof or supplemental thereto.
MAJORITY INTEREST: as of any date of calculation, the Bondholders (not
including the Borrower, any Affiliate or any Person holding Bonds on behalf of
the Borrower or an Affiliate) of more than 50% of the aggregate principal amount
of Bonds then Outstanding.
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MANDATORY PROJECT TERMINATION DATE: January thirty-one (31), nineteen
hundred ninety-four (1994), or such later date as may be approved by the
Commissioner and the Authority.
MATURITY DATE: November one (1), nineteen hundred ninety-nine (1999).
MORTGAGE: collectively, the first mortgage and the leasehold mortgage
constituted by deeds numbers one (1) and two (2), dated the Date of Issuance,
executed before Notary Public Leonor M. Aguilar Guerrero, to secure the Mortgage
Note.
MORTGAGE NOTE: collectively, the notes of the Borrower dated the Date
of Issuance in the principal amounts of ONE HUNDRED TWENTY MILLION DOLLARS
($120,000,000), TWENTY MILLION DOLLARS ($20,000,000), SIX MILLION SIX HUNDRED
TWELVE THOUSAND DOLLARS ($6,612,000) and TWO MILLION DOLLARS ($2,000,000),
secured by the Mortgage.
MUTUAL BUSINESS DAY: any day that is not a Saturday, Sunday or any
other day on which banking institutions in any of San Juan, Puerto Rico, New
York, New York or London, England are authorized or required by law or executive
order to close.
OUTSTANDING: when used with reference to the Bonds, means, as of a
particular date, all Bonds theretofore issued and authenticated under this Trust
Agreement except:
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(i) Bonds paid or delivered to the Trustee for cancellation;
(ii) Bonds deemed to have been paid in accordance with Article XIII;
and
(iii) Bonds in exchange for or in lieu of which other Bonds have been
authenticated and delivered pursuant to this Trust Agreement.
PERSON: any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
PLEDGE AGREEMENT: the Pledge Agreement between the Letter of Credit
Bank and the Borrower substantially in the form and substance of Exhibit C.
PLEDGED BONDS: all Bonds authenticated and registered by the Trustee
pursuant to Section 307.
PREDECESSOR BOND: of any particular Bond means every previous Bond
evidencing all or a portion of the same debt as that evidenced by such
particular Bond; and, for purposes of this definition, any Bond authenticated
and delivered under Section 210 in lieu of a lost, destroyed, mutilated, or
stolen Bond shall be deemed to evidence the same debt as the lost, destroyed,
mutilated or stolen Bond.
PRINCIPAL PAYMENT DATE: the Maturity Date and any date on
which the principal of the Bonds, in whole or in part, is due and payable
by reason of redemption, purchase, acceleration or otherwise.
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PROJECT: the Industrial Facilities described in Exhibit A to the Loan
Agreement, including any modifications thereof, substitution therefor or
additions thereto and excluding deletions therefrom, as may be permitted by the
Loan Agreement.
PROJECT FUND: the Industrial Revenue Bonds, 1991 Series A, Series B
and Series C (El Conquistador Resort Project) Project Fund, a special fund
created and designated by the provisions of Section 401.
PURCHASE PRICE: with respect to any Put Bond, 100% of the principal
amount thereof together with interest accrued and unpaid to the Tender Date.
PUT BONDS: the Bonds outstanding at the end of business on the Tender
Record Date.
QUALIFIED FINANCIAL INSTITUTION: a bank, trust company, national
banking association or a corporation subject to registration with the Board of
Governors of the Federal Reserve System under the Bank Holding Company Act of
1956 which is satisfactory to the Borrower and the Letter of Credit Bank and
having a combined capital and surplus of at least FIFTY MILLION DOLLARS
($50,000,000), Government Development Bank for Puerto Rico or such other
institution (including a government securities dealer) as may be acceptable to
the Borrower and the Letter of Credit Bank.
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REDEMPTION PRICE: with respect to any Bond to be redeemed in whole or
in part pursuant to this Trust Agreement, an amount equal to 100% of the
principal amount of the Bond to be so redeemed (or, in the case of a Bond to be
redeemed in part, 100% of the portion of the principal amount thereof to be
redeemed), together with interest on such amount at the Interest Rate from the
preceding Interest Payment Date to the date of redemption.
REFERENCE BANKS: the three banks selected by the Trustee whose long
term obligations are at the time rated in one of the two highest rating
categories (without regard to any gradations within any category by numerical
qualifier or otherwise) by any nationally recognized securities rating service.
REGULAR RECORD DATE: the fifteenth day of the month immediately
preceding an Interest Payment Date.
REGULATION 3583: Regulation 3582 issued by the Commissioner on January
twenty-nine (29), nineteen hundred eighty-eight (1988), as amended from time to
time, and any successor regulation.
REIMBURSEMENT AGREEMENT: the Initial Reimbursement Agreement or the
Successor Reimbursement Agreement at the time in effect, as the case may be.
RELATED DOCUMENTS: the Mortgage, the Mortgage Note, the
Collateral Agreement, and the Remarketing Agreement.
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REMARKETING ACCOUNT: The account of such name in the Bond Purchase
Fund created and established by the provisions of Section 505.
REMARKETING AGENT: Chase Securities (P.R.), Inc. and Meduna & Co.,
Inc., collectively, or any other Person appointed by the Borrower as Remarketing
Agent in accordance with the terms of the Remarketing Agreement.
REMARKETING AGREEMENT: the Remarketing Agreement, dated the Date of
Issuance, by and between the Remarketing Agent and the Borrower.
REMARKETING DATE: the date established by the Trustee pursuant to
Section 309 (A) for the remarketing of the Pledged Bonds.
SECRETARY: The Secretary or any Assistant Secretary of the Authority,
or if there is no secretary or assistant secretary, then any Person designated
by the Board or authorized by the by-laws of the Authority to perform the
functions of the Secretary.
SERIES A BONDS: the Authority's Industrial Revenue Bonds, 1991 Series
A (El Conquistador Resort Project) authorized under the provisions of Section
208.
SERIES B BONDS: the Authority's Convertible Industrial Revenue Bonds,
1991 Series B (El Conquistador Resort Project) authorized under the provision of
Section 208.
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SERIES C BONDS: the Authority's Industrial Revenue Bonds, 1991 Series
C (El Conquistador Resort Project) authorized under the provision of Section
208.
SPECIAL RECORD DATE: the date fixed by the Trustee for determining the
Holders entitled to the payment of Defaulted Interest, pursuant to Section 203.
SUCCESSOR LETTER OF CREDIT: the irrevocable transferable letter of
credit, reasonably acceptable in form to the Trustee, substantially similar to
the Initial Letter of Credit, in an aggregate amount equal to the principal
amount of the Bonds Outstanding on the date of issue of such letter of credit
plus not less than 120 days' interest thereon at the rate of 12% per annum,
together with all permitted agreements amendatory thereof or supplemental
thereto.
SUCCESSOR LETTER OF CREDIT BANK: the issuer of the Successor Letter of
Credit.
SUCCESSOR REIMBURSEMENT AGREEMENT: an agreement between the Borrower
and the Successor Letter of Credit Bank providing for, among other things, the
issuance of the Successor Letter of Credit, together with all permitted
agreements amendatory thereof or supplemental thereto.
TENDER ACCOUNT: the account of such name in the Bond Purchase Fund
created and established by the provisions of Section 505.
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TENDER DATE: each date specified by the Letter of Credit Bank pursuant
to Section 305(A) on which the Put Bonds are subject to mandatory tender for
purchase.
TENDER EVENT: the occurrence and continuation of an event of default
under Section 12 of the Reimbursement Agreement.
TENDER RECORD DATE: any date the Trustee receives the notice pursuant
to Section 305(A).
TRUST AGREEMENT: this Trust Agreement together with all permitted
agreements amendatory hereof or supplemental hereto.
TRUSTEE: Banco Popular de Puerto Rico (Employer Identification Number
66-017-5278), a bank incorporated and existing under the laws of the
Commonwealth and having its principal corporate trust office in Hato Rey, Puerto
Rico, which is authorized under such laws to exercise corporate trust powers and
any other bank or trust company becoming successor trustee under this Trust
Agreement, and any other bank, banking association or trust company becoming
successor trustee under this Trust Agreement.
TRUST ESTATE: (i) all right, title and interest of the Authority in
and to (a) the Loan Agreement and all amounts receivable thereunder (except its
rights under Sections 4.05, 4.06, 5.06, 5.07, 7.04, 9.14 and 9.15 of the Loan
Agreement, and its rights to receive notices), and (b) the Related Documents
(except its rights under the sections of the Related
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Documents corresponding to Sections 4.05, 4.06, 5.06, 5.07 and 7.04 of the Loan
Agreement, and its rights to receive notices); (ii) all funds and accounts
established under this Trust Agreement and all moneys and securities from time
to time held by the Trustee hereunder until disbursement therefrom as provided
herein; and (iii) any and all real or personal property of every name and nature
from time to time, by delivery or by writing of any kind, Granted pursuant to
the provisions of this Trust Agreement.
TWENTY-FIVE PERCENT INTEREST: as of any date of calculation, the
Holders (not including the Borrower, any Affiliate or any Person holding Bonds
on behalf of the Borrower or an Affiliate) of not less than 25% of the aggregate
principal amount of Bonds then Outstanding.
UNDERWRITER: Chase Securities (P.R.), Inc.
SECTION 102. MISCELLANEOUS. (A) Words of the masculine gender shall be
deemed and construed to include correlative words of the feminine and neuter
genders.
(B) Unless the context shall otherwise indicate, "Bond", "Bondholder",
"owner", "Person" shall include the plural as well as the singular number.
(C) All references herein to particular articles, sections or
exhibits, of this Trust Agreement unless some other reference is established.
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(D) Words importing the redemption or calling for redemption of the
Bonds shall not be deemed to refer to or connote the payment of the Bonds at
their Maturity Date.
(E) The captions or headings in this Trust Agreement are for
convenience only and in no way define, limit or describe the scope or intent of
any provisions of articles and sections of this Trust Agreement.
ARTICLE II
FORM, EXECUTION, AUTHENTICATION,
DELIVERY AND EXCHANGE OF BONDS
SECTION 201. LIMITATION ON ISSUANCE OF BONDS. No Bonds may be issued
under the provisions of this Trust Agreement except in accordance with the
provisions of this Article.
SECTION 202. FORM OF BONDS. The definitive Bonds are issuable as fully
registered bonds without coupons in denominations of ONE HUNDRED THOUSAND
DOLLARS ($100,000) or any integral multiple thereof, and substantially in the
forms of Exhibit A, Exhibit B, and Exhibit C. All Bonds may contain or have
endorsed thereon such legends or text as may be necessary or appropriate to
conform to any applicable rules and regulations of any governmental authority or
of any securities exchange on which the Bonds may be listed or traded or any
usage or requirement of law with respect thereto or as may be authorized by the
Authority and approved by the Trustee.
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SECTION 203. DETAILS OF BONDS. (A) The Bonds shall be dated, shall
bear interest until their payment and shall be stated to mature (subject to
prior redemption) all as hereinafter provided.
(B) Each Bond shall bear interest from the Interest Payment Date next
preceding the date on which it is authenticated, unless authenticated on an
Interest Payment Date, in which case it shall bear interest from such Interest
Payment Date, or, unless authenticated prior to the first Interest Payment Date
in which case it shall bear interest from the Issue Date; provided, however,
that if at the time of authentication of any Bond interest thereon is in
default, such Bond shall bear interest from the date to which interest shall
have been paid.
(C) Interest on the Bonds shall be computed on the basis of a 360- day
year of twelve 30-day months.
(D) The Bonds shall be signed by, or bear the facsimile signatures of,
the Executive Director and the Secretary. A facsimile of the corporate seal of
the Authority shall be imprinted on the Bonds. In case any officer whose
signature or a facsimile of whose signature shall appear on any Bonds shall
cease to be such officer before the delivery of such Bonds, such signature or
such facsimile shall nevertheless be valid and sufficient for all purposes as if
he had remained in office until such delivery, and also any Bond may bear the
facsimile signatures of or may be signed by such Persons as at the actual time
of the execution of such Bond shall be
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the proper officers to sign such Bond although at the Issue Date of such Bond
such Persons may not have been such officers.
(E) The principal of and premium, if any, and the interest on the
Bonds shall be payable in any Federal coin or currency which on the respective
dates of payment thereof is legal tender for the payment of public and private
debts.
(F) Payment of the interest on each Bond which is payable and is
punctually paid shall be made by the Trustee on each Interest Payment Date to
the Holders at the close of business on the Regular Record Date by check mailed
to such Holder or at the request of a Holder who initially purchases or
subsequently acquires at least ONE MILLION DOLLARS ($1,000,000) aggregate
principal amount of Bonds, by wire transfer to the bank account of such Holder,
provided he files his bank account number with the Trustee for such purpose at
least 15 Business Days prior to the first Interest Payment Date for which such
wire transfer is to be made.
(G) Except as provided in Section 209 and 210, payment of the
principal of all Bonds and any premium thereon shall be made at the Corporate
Trust Office upon the presentation and surrender of such Bonds as the same shall
become due and payable, and only to the Holder or his legal representative.
(H) Any interest on any Bond which is payable but is not punctually
paid or duly provided for within 5 days after the same shall
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become due and payable on any Interest Payment Date for such Bond (herein called
"Defaulted Interest"), shall forthwith cease to be payable to the Holder on the
relevant Regular Record Date by virtue of his having been such Holder; and such
Defaulted Interest may be paid by the Authority, in its election in each case,
as provided in clause First or Second below:
First: The Authority may elect to make payment of any Defaulted
Interest to the Holders at the close of business on a Special Record Date, which
shall be fixed in the following manner. The Authority shall notify the Trustee
of the amount of Defaulted Interest proposed to be paid on each such Bond and
the date of the proposed payment, and at the same time the Authority shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this clause
provided. Thereupon the Trustee shall fix a Special Record Date which shall be
not more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the Trustee of
the notice of the proposed payment. The Trustee shall promptly notify the
Authority of such Special Record Date and, in the name and at the expense of the
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Authority, shall cause notice of the proposed payment of such Defaulted Interest
and the date therefor to be given to each Holder of such Bonds on the Special
Record Date not less than 5 days prior to the date specified for payment of such
Defaulted Interest. Notice of the proposed payment therefor having been given as
aforesaid, such Defaulted Interest shall be paid on the date fixed for payment
to the Holder at the close of business on such Special Record Date and shall no
longer be payable pursuant to the following clause Second:
Second: The Authority may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Bonds affected may be listed, and upon such notice as may
be required by such exchange, if, after notice given by the Authority to the
Trustee of the proposed payment pursuant to this clause, such payment shall be
deemed practicable by the Trustee.
(I) Subject to the foregoing provisions of this Section, each Bond
delivered under this Trust Agreement upon registration of transfer of or in
exchange for or in lieu of any other Bond shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Bond.
SECTION 204. AUTHENTICATION OF BONDS. Only such of the Bonds as shall
have endorsed thereon a certificate of authentication substantially in the form
set forth in Exhibit A, Exhibit B and Exhibit C, duly executed
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by the Trustee, shall be entitled to any benefit or security under this Trust
Agreement. No Bond shall be valid or become obligatory for any purpose unless
and until such certificate of authentication shall have been duly executed by
the Trustee, and such certificate of the Trustee upon any such Bond shall be
conclusive evidence that such Bond has been duly authenticated and delivered
under this Trust Agreement. The Trustee's certificate of authentication on any
Bond shall be deemed to have been duly executed if signed by an authorized
officer of the Trustee, but it shall not be necessary that the same officer sign
the certificate of authentication on all of the Bonds that may be issued
hereunder at any one time.
SECTION 205. EXCHANGE OF BONDS. Bonds, upon surrender thereof at the
Corporate Trust Office, together with an assignment duly executed by the Holder
or legal representative in such form as shall be satisfactory to the Trustee,
may, at the option of the Holder thereof, be exchanged for an equal aggregate
principal amount of Bonds, of any denomination or denominations authorized by
this Trust Agreement and, except in the case of a Conversion of the same Series.
SECTION 206. REGISTRATION OF TRANSFER OF BONDS. (A) The Trustee shall
keep the Bond Register. The transfer of any Bond may be registered only in the
Bond Register upon surrender of such Bond to the Trustee together with an
assignment, duly executed by the Holder or legal representative in such form as
shall be satisfactory to the Trustee. Upon
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any such registration of transfer the Authority shall execute and the Trustee
shall authenticate and deliver in exchange for such Bond a new Bond or Bonds
registered in the name of the transferee, for an equal aggregate principal
amount, of any denomination or denominations authorized by this Trust Agreement
and, except in the case of a Conversion, of the same Series.
(B) In all cases in which Bonds shall be exchanged or the transfer of
Bonds shall be registered hereunder, the Authority shall execute and the Trustee
shall authenticate and deliver at the earliest practicable time Bonds in
accordance with the provisions of this Trust Agreement. All Bonds surrendered in
any such exchange or registration of transfer shall forthwith be canceled by the
Trustee. The Authority or the Trustee may impose a reasonable fee or service
charge for every such exchange or registration of transfer of Bonds sufficient
to reimburse it for any tax or other governmental charge required to be paid
with respect to such exchange or registration of transfer. Neither the Authority
nor the Trustee shall be required to make any such exchange or registration of
transfer of Bonds during the 15 days immediately preceding the date of giving of
notice of any redemption of Bonds, or after such Bond or any portion thereof has
been selected for redemption, or at any time after a Tender Record Date and
prior to a Tender Date.
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(C) The Series B Bonds are being issued and sold subject to the
restriction that they can only be sold, transferred or otherwise disposed of to
Eligible Institutions (as defined in Regulation 3582). The Trustee shall not
register any Series B Bond in the name of any Person with respect to whom there
is not on file with the Trustee evidence satisfactory to the Trustee that such
Person is an Eligible institution. In addition, the Holder of any Series B Bond
shall be deemed to have accepted such Bond subject to the undertaking of the
Underwriter for a period of nine months after the Issue Date to sell Series C
Bonds to 936 Corporations into which the Series B Bonds are convertible as
described below and to convert such Series B Bonds (including such Holder's
Series B Bond) as described below.
(D) The Trustee shall not register the transfer of any Pledged Bonds
until the Remarketing Date.
SECTION 207. OWNERSHIP OF BONDS; TRANSFER OF TITLE. (A) As to any
Bond, the Holder shall be deemed and regarded as the absolute owner thereof for
all purposes. Payment of or on account of the principal of and the interest on
any Bond shall be made only to or upon the order of the Holder or his legal
representative, and shall be valid and effectual to satisfy and discharge the
liability upon such Bond to the extent of the sum or sums so paid.
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(B) Subject to the provision of Section 207(C), the Holders are
granted the power to transfer absolute title to their Bonds, including by
assignment thereof to a bona fide purchaser for value (present or antecedent)
without notice of prior defenses or equities or claims of ownership enforceable
against his assignor or any Person in the chain of title and before the maturity
of such Bond. Every prior Holder or any Bond shall be deemed to have waived and
renounced all of his equities or rights therein in favor of every such bona fide
purchaser, and every such bona fide purchaser shall acquire absolute title
thereto and to all rights represented thereby.
(C) The Series B Bonds can only be sold, transferred or otherwise
disposed of to Eligible Institutions.
SECTION 208. AUTHORIZATION OF BONDS. (A) There shall be issued under
this Trust Agreement Bonds in the aggregate principal amount of ONE HUNDRED
TWENTY MILLION DOLLARS ($120,000,000) for the purpose of providing funds for
paying, with other available funds, all or a portion of the Cost of the Project.
The Bonds shall consist of three series: (i) Series A, designated "Industrial
Revenue Bonds, 1991 Series A (El Conquistador Resort Project)", in an aggregate
principal amount of Ninety Million Dollars ($90,000,000), dated the Issue Date
and numbered from RA-0001 upward, (ii) Series B, designated "Convertible
Industrial Revenue Bonds, 1991 Series B (El Conquistador Resort Project)",
initially
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in an aggregate principal amount of Thirty Million Dollars ($30,000,000), dated
the Issue Date and numbered RB-0001 and upward, and (iii) Series C, designated
"Industrial Revenue Bonds, 1991 Series C (El Conquistador Resort Project), dated
the Issue Date and numbered RC-0001 and upward. At no time may the aggregate
principal amount of the Outstanding Series B Bonds and Series C Bonds exceed
THIRTY MILLION DOLLARS ($30,000,000).
Each Holder of a Series B Bond may, on any Conversion Date, elect to
convert all or any portion of its Series B Bond in any authorized denominations
to a Series C Bond or Bonds of equal aggregate principal amount and authorized
denominations as shall be selected by such Holder and specified in the
Conversion Notice. To exercise the option to convert, such Holder must deliver
to the Trustee, at the Corporate Trust Office (i) by 3:00 P.M. (Atlantic
standard time) on a Business Day that is at least seven (7) days prior to the
Applicable Conversion Date an irrevocable notice thereof designating the number,
the Series B Bond (or portion thereof in authorized denominations) to be
converted, the name of such Holder and its assignee, if any, and the Applicable
Conversion Date (the "Conversion Notice"); and (ii) by 10:00 A.M. (Atlantic
standard time) on the Applicable Conversion Date, the Series B Bond to be
converted together with an assignment in the manner provided in
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Section 206 if the registered owner of the Series C Bond or Bonds then being
authenticated is not such Holder.
On the Applicable Conversion Date, upon compliance with the conditions
for conversion set forth in the preceding paragraph, the Trustee shall (i)
authenticate and deliver to the converting Series B Bond Holder, or its
assignee, without charge therefor, a Series C Bond or Bonds of authorized
denomination or denominations and in an aggregate principal amount equal to the
aggregate principal amount of the converted Series B Bond, (ii) register such
Series C Bond or Bonds in the name of such Holder, or its assignee, in the
manner provided in Section 206, such registration to be effective on the
Applicable Conversion date, (iii) pay to such Holder presenting the Series B
Bond for conversion, by check, the interest that has accrued on such Bond and is
unpaid, (iv) cancel the converted Series B Bond and (v) if such Series B Bond is
converted in part only, authenticate and deliver to such Holder or his legal
representative, without charge therefor, for the unconverted portion of such
Bond, a new Series B Bond or Bonds, of any denomination or denominations
authorized by this Trust Agreement and in amount equal to the unconverted
portion of such Series B Bond.
(B) (a) The Series A Bonds and the Series B Bonds, subject to the
provisions of Section 208 (B)(c), shall bear interest through April thirty (30),
nineteen hundred ninety-one (1991) at the following per annum
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rates: the Series A Bonds 5.966250%, and the Series B Bonds 6.521250%; and at
the Floating Rate for each Interest Period thereafter, which shall equal 86% in
the case of the Series A Bonds, and 94% in the case of the Series B Bonds, or
the Applicable LIBID Rate (such rate being expressed out to the sixth decimal
place and truncated thereafter) in effect on the Interest Rate Determination
Date for each such Interest Period.
(b) The Series C Bonds, during each Interest Period, shall bear
interest at the Floating Rate which shall equal a percentage, determined as
provided below, of the Applicable LIBID Rate (such rate being expressed out to
the sixth decimal point and truncated thereafter) in effect on the Interest Rate
Determination Date for each such Interest Period. Such percentage shall be
established on the Initial Applicable Conversion Date by the Underwriter and
shall equal such percentage (not to exceed 86%) which in the judgment of the
Underwriter would have resulted in the sale at par of the Series C Bonds, on the
Initial Applicable Conversion Date, to a purchaser or purchasers acquiring for
its or their own account or accounts. Prior to noon, Atlantic standard time, on
the Initial Applicable Conversion Date the Underwriter shall notify the Trustee
of such percentage.
(c) For each Interest Period, commencing with the Interest Period
beginning on the Interest Payment Date immediately succeeding the effective date
of a Change in Law, the Interest Rate
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applicable to the Series A Bonds and the Series C Bonds shall equal the
Applicable LIBID Rate (such rate being expressed out to the sixth decimal point
and truncated thereafter) in effect on the Interest Rate Determination Date for
each such Interest Period.
(d) In determining the percentage of the Applicable LIBID Rate
pursuant to Section 208(B)(b), the Underwriter shall taken into account, to the
extent applicable, such factors as (i) market interest rates for comparable
securities which are held by institutional and private investors with
substantial portfolios with a term equal to the Maturity Date, subject to
similar treatment under the Code and Commonwealth law, subject to similar
treatment under Regulation 3582, with a similar rating, if the Series C Bonds
are rated by a nationally recognized securities rating service and with
redemption and tender for purchase provisions similar to such Bonds; (ii) other
financial market rates and indices which have a bearing on such percentage;
(iii) general financial market conditions; and (iv) factors particular to the
Project, such Bonds and the credit standing of the Borrower and the Letter of
Credit Bank.
(e) The Trustee shall be responsible for determining the Interest Rate
as of each Interest Rate Determination Date. The Trustee shall notify all
Holders, the Borrower, the Letter of Credit Bank and the Authority, of the
applicable Interest Rate within 5 Business Days after each Interest Rate
Determination Date.
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(D) The Applicable LIBID Rate as of a particular Interest Rate
Determination Date shall be determined by the Trustee and shall be equal to
LIBOR less 1/8th of 1%.
If, as of any Interest Rate Determination Date, the Applicable LIBID
Rate cannot be ascertained by the Trustee on the foregoing basis, the Trustee
shall request the principal London office of each of the Reference Banks to
provide the Trustee with its offered quotation to leading banks in the London
interbank market for three month United States dollar deposits at approximately
11:00 a.m. (London time) on the Interest Rate Determination Date in question. If
quotations are received from at least two Reference Banks, the Applicable LIBID
Rate to be used in calculating the Interest Rate for the forthcoming Interest
Period will be the arithmetic mean of the quotations received less 1/8th of 1%.
If fewer than two of the Reference Banks provide the Trustee with such
offered quotations, in order to determine the Applicable LIBID Rate to be used
in calculating the Interest Rate for the forthcoming Interest Period the Trustee
shall request several major banks in New York City, such banks to be selected by
the Trustee in its sole discretion, to provide the Trustee with their interest
rate quotations to leading banks in the London interbank market for three month
loans in United States dollars at approximately 11:00 a.m. (New York time) on
the Interest Rate
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Determination Date in question. If quotations are received from at least two
major banks, the Applicable LIBID Rate to be used in calculating the Interest
Rate for the Forthcoming Interest Period will be the arithmetic means of the
quotations received, less 1/8th of 1%.
If for any reason the Applicable LIBID Rate cannot be determined by
the Trustee in any of these manners, the Interest Rate in effect during the
Interest Period about to end will be continued in effect during the forthcoming
Interest Period.
(E) In no event shall the Interest Rate exceed the Highest Lawful
Rate. If the amount of interest that would be paid at the Interest Rate in
respect of any Interest Period would exceed the amount of interest that would
have accrued on the Bonds during such Period at the Highest Lawful Rate (such
excess being herein called the "Deferred Interest"), then the Interest Rate
shall remain at the Highest Rate thereafter until the amount of interest
actually paid at the Highest Lawful Rate is in excess of the amount that would
have been paid at the Interest Rate which would otherwise have been applicable,
by an amount equal to the Deferred Interest. After the Maturity Date or other
payment in full of the Bonds, upon redemption, mandatory tender for purchase or
otherwise, the Holders shall not be entitled to receive any Deferred Interest
not theretofore paid.
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(F) The principal of the Bonds shall be payable on the Principal
Payment Date.
(G) The Bonds shall be executed substantially in the form and manner
set forth in Exhibit A in the case of the Series A Bonds, Exhibit B in the case
of the Series B Bonds and Exhibit C in the case of the Series C Bonds and shall
be deposited with the Trustee for authentication, but before the Trustee shall
authenticate and deliver said Bonds there shall be filed with the Trustee the
following:
(i) a copy, certified by the Secretary, of the resolution of the
Board awarding the Bonds, specifying the initial interest rates for the Bonds,
and directing their authentication and delivery to or upon the order of the
purchasers mentioned therein upon payment of the purchase price therein set
forth;
(ii) an executed counterpart of the Loan Agreement;
(iii) executed counterparts or simple copies of the Related
Documents;
(iv) the Letter of Credit, duly executed;
(v) an opinion of counsel to the Letter of Credit Bank, addressed
to the Trustee, to the effect that the Letter of Credit is a legal, valid and
binding agreement of the Letter of Credit Bank, enforceable in accordance with
its terms except to the extent that the enforceability of the
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Letter of Credit may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally and subject to general principles of
equity (regardless of whether said enforceability is considered in a proceeding
in equity or at law);
(vi) an opinion of counsel to the Borrower that the execution and
delivery of each of the Loan Agreement and the Related Documents has been duly
authorized by the Borrower, each in the form so authorized, and has been duly
executed by the Borrower and that, assuming proper authorization and execution
thereof by the other parties thereto, each is valid, binding and enforceable
against the Borrower in accordance with its terms, except to the extent that the
enforceability thereof may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights generally and subject to general principles of
equity (regardless of whether said enforceability is considered in a proceeding
in equity or at law);
(vii) an opinion of counsel, who may be counsel for the
Authority, addressed to the Trustee, to the effect that (a) the Authority has
the legal right and power to enter into and has duly authorized, validly
executed and delivered, this Trust Agreement, the Loan Agreement, and the
Related Documents to which it is a party, and each of such agreements and
documents is legally valid and binding upon the Authority and enforceable
against the Authority in accordance with its terms, except to
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the extent that the enforceability thereof may be limited by bankruptcy,
insolvency or other laws affecting creditors' rights generally and subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law), (b) this Trust Agreement
creates a legally valid and effective Grant of the Trust Estate, subject to the
application thereof to the purposes and on the conditions permitted by this
Trust Agreement, and that no filing or recording of any document is necessary in
order to make such Grant effective or to continue it in effect (or specifying
the place or places, if any, where such filing or recording is necessary and
furnishing any officially authenticated certificates, or other documents, by
which such filing or recording is evidenced), (c) the issuance of the Bonds will
not violate any provision of law or of the by-laws of the Authority or result in
the breach of, or constitute a default under, any agreement, indenture or other
instrument to which the Authority is a party or by which it may be bound, (d) no
authorization, consent or approval or withholding of objection of any
governmental body or regulatory authority is requisite to the legal issue of
said Bonds (unless such opinion shall show that no authorization, consent or
approval or withholding of objection is requisite to the legal issue of said
bonds, it shall specify and furnish any officially authenticated certificates,
or other documents, by which such authorization, consent or approval or
withholding of objection is evidenced), (e) the Bonds are
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legally valid and binding direct obligations of the Authority in accordance with
their terms and the terms of this Trust Agreement and have been duly and validly
authorized and issued in accordance with applicable law and this trust
Agreement, and (f) the conditions precedent to the delivery of the Bonds have
been fulfilled, and covering such other matters as the Trustee may reasonably
request; and
(viii) such other opinions and certificates as the Trustee may
reasonably request.
When the documents mentioned above in this Section shall have been
filed with the Trustee and when the Bonds shall have been executed an
authenticated as required by this Trust Agreement, the Trustee shall deliver the
Bonds at one time or from time to time to or upon the order of the purchasers
named in the resolution mentioned in clause (i) of Section 208 (G), but only
upon payment to the Trustee of the purchase price of said Bonds.
(H) The proceeds of the Bonds shall be applied by the Trustee as
follows:
(i) such portion representing accrued interest, if any, shall be
deposited to the credit of the Bond Fund; and
(ii) the remainder of said proceeds shall be deposited to the
credit of the Project Fund.
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SECTION 209. TEMPORARY BONDS. (A) Until definitive Bonds are ready for
delivery, they may be executed, and upon request of the Authority the Trustee
shall authenticate and deliver, in lieu of definite Bonds and subject to the
same limitations and conditions, one or more temporary printed, typewritten,
engraved or lithographed Bonds, in fully registered form without coupons in such
denomination(s), equal to the aggregate principal amount of such definitive
Bonds, with payment record attached for the notation of payments of interest,
without presentation and surrender of such Bond, as the Authority by resolution
may provide, substantially of the tenor hereinabove set forth and with such
appropriate omissions, insertions and variations as may be required.
(B) If temporary Bonds shall be issued, the Authority shall cause the
definitive Bonds to be prepared and to be executed and delivered to the Trustee,
and the Trustee, upon presentation to it at the Corporate Trust Office, of any
temporary Bond, shall cancel the same and authenticate and deliver in exchange
therefor at the place designated by the Holder, without charge to the Holder
thereof, a definitive Bond or Bonds of an equal aggregate principal amount as
the temporary Bond surrendered. Until so exchanged the temporary Bonds shall in
all respects be entitled to the same benefit of this Trust Agreement as the
corresponding definitive Bonds to be issued and authenticated hereunder.
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No charge of any kind shall be made against the Holder upon an exchange of a
temporary Bond for a definitive Bond.
SECTION 210. MUTILIATED, DESTROYED OR LOST BONDS. (A) A mutilated Bond
may be surrendered and thereupon the Authority shall execute and the Trustee
shall authenticate and deliver in exchanged therefor a new Bond of like tenor
and principal amount to the surrendered Bond.
(B) If there be delivered to the Authority, the Borrower and to the
Trustee:
(i) evidence to their satisfaction of the destruction or loss of
any Bond, and
(ii) such security or indemnity as may be required by them to
save each of them harmless, then, in the absence of notice to the Authority or
the Trustee that such Bond has been acquired by a bona fide purchaser, the
Authority shall execute and upon its requests the Trustee shall authenticate and
deliver in lieu of any such destroyed or lost Bond, a new Bond of like tenor and
principal amount. In case any such mutilated, destroyed or lost bond has become
or is about to become due and payable, the Authority in its discretion, instead
of issuing a new Bond, may pay such Bond.
(C) Upon the issuance of any new Bond under this Section, the
Authority may require the payment of a sum sufficient to cover any tax
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or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the trustee) connected
herewith.
ARTICLE III
REDEMPTION OF BONDS;
MANDATORY TENDER FOR PURCHASE
SECTION 301. REDEMPTION OF BONDS. (A) The Bonds shall not
be subject to prior redemption except as provided in this Article III.
(B) The Bonds shall be called for redemption in whole at the
Redemption Price, without premium, in the event the Borrower shall have become
obligated to prepay the entire amount payable under Section 4.01 of the Loan
Agreement in accordance with:
(i) Section 8.02(a) of the Loan Agreement due to the cessation of
operation of the Project, on the next Interest Payment Date occurring not less
than 130 days after the Borrower become so obligated; or
(ii) Section 8.02(b) of the Loan Agreement, on the Interest
Payment Date immediately prior to the expiration date of the Letter of Credit
which has not been extended or replaced; or
(iii) Section 8.02(c) of the Loan Agreement, not later than 45
days after the occurrence of an event of Taxability.
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(C) The Bonds shall be called for redemption in whole or in part, at
the Redemption Price, without premium, in the event the Borrower shall have
become obligated to prepay any amount payable under Section 4.01 of the Loan
Agreement in accordance with Section 8.02(d) of the Loan Agreement due to the
occurrence of an event of condemnation, damage or destruction of the Project, on
the next Interest Payment date occurring not less than 130 days after receipt by
the Trustee of the notice delivered pursuant to said Section 8.02(d).
(D) The Bonds in the case of (i) below, and the Series A Bonds and the
Series C Bonds in the case of (ii) below, shall be called for redemption in
whole or in part, as directed by the Borrower at the Redemption Price, without
premium, in the event that the Authority and the Trustee shall have received
notice pursuant to Section:
(i) 8.01(a) of the Loan Agreement that the Borrower has elected
to prepay all or a portion of the amounts payable under Section 4.01 of the Loan
Agreement pursuant to Section 8.01(a) of the Loan Agreement, on any Interest
Payment Date on or after May first (1st), nineteen hundred ninety-six (1996)
(which shall not be less than 130 days from the date such notice is received by
the Trustee) selected by the Borrower; and
(ii) 8.01(b) of the Loan Agreement that the Borrower has elected
as a result of the occurrence of a Change in Law to prepay all
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or a portion of the amounts payable under Section 4.01 of the Loan Agreement
pursuant to Section 8.01(b) of the Loan Agreement, on any Interest Payment Date
(which shall not be less than 130 days from the date the notice of the Borrowers
election so to prepay is received by the Trustee) selected by the Borrower.
(E) The Bonds shall be called for redemption in part, to the extent of
any balance remaining in the Project Fund on the earlier of the Completion Date,
the Mandatory Project Termination Date and the receipt by the Trustee of a
certificate signed by an Authorized Borrower Representative, approved by an
Authority Representative and the Letter of Credit Bank to the effect that the
Project will not be completed, at the Redemption Price, without premium, on the
next Interest Payment Date occurring not less than 130 days after the earlier of
such dates or the date of such certificate.
(F) The portion of the Bonds of each Series to be redeemed, in the
case of a partial redemption, shall be determined by the Borrower. If fewer than
all of the Bonds of any series shall be called for redemption, the Bonds or
portions thereof of such Series to be redeemed shall be selected by the Trustee
by such method as the Trustee shall deem fair and appropriate; provided,
however, that the portion of any Bond to be redeemed shall be in the principal
amount equal to ONE HUNDRED THOUSAND DOLLARS ($100,000) or some integral
multiple thereof,
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and that, in selecting Bonds for redemption, the Trustee shall treat each Bond
as representing that number of Bonds that is obtained by dividing the principal
amount of such Bond by ONE HUNDRED THOUSAND DOLLARS ($100,000).
SECTION 302. REDEMPTION NOTICE. At least 30 days before the redemption
date of any Bonds the Trustee shall cause a notice, signed by it, of any such
redemption, either in whole or in part, to be given to all Bondholders whose
Bonds are to be redeemed. Each such notice shall set forth (i) the date fixed
for redemption, (ii) the Redemption Price to be paid, (iii) if less than all of
the Bonds then Outstanding shall be called for redemption, the distinctive
numbers and letters, if any, of such Bonds to be redeemed and, in the case of
Bonds to be redeemed in part only, the portion of the principal amount thereof
to be redeemed, (iv) that on the date fixed for redemption such Redemption Price
will become due and payable upon each Bond or portion thereof called for
redemption, and that interest thereon shall cease to accrue on and after said
redemption date, (v) the place where such Bonds are to be surrendered for
payment of such Redemption Price; and (vi) whether the redemption is effected by
reason of the occurrence of an Event of Taxability; and shall otherwise comply
with Securities Exchange Act of 1934 Release No. 34-23856, dated December 3,
1986 (the "Redemption Release"). In case any Bond is to be redeemed in part
only, the notice of redemption which relates to such
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Bond shall state also that on or after the redemption date, upon surrender of
such Bond, a new Bond or Bonds in principal amount equal to the unredeemed
portion of such Bond will be issued. Failure to comply with the requirements of
the Redemption Release or any defect thereon shall not affect the validity of
the proceedings for the redemption of the Bonds. Failure to give redemption
notice to any Holder or any defect in any notice so given shall not affect the
validity of the proceedings for the redemption of the Bonds of any other
Holders.
SECTION 303. EFFECT OF CALLING FOR REDEMPTION. On the date so
designated for redemption, notice having been given in the manner and under the
conditions hereinabove provided, the Bonds or portions of Bonds so called for
redemption: (i) shall become and be due and payable at the Redemption Price
(plus premium, if any) provided for redemption thereof on such date, and, (ii)
if sufficient Eligible Moneys for payment of the Redemption Price (plus premium,
if any,) are held in separate accounts by the Trustee in trust for the Holders
thereof, as provided in this Trust Agreement, interest thereon shall cease to
accrue, and said Bonds shall cease to be entitled to any benefits or security
under this Trust Agreement or to be deemed outstanding, and their Holders shall
have no rights in respect thereof except to receive payment of the Redemption
Price thereof (including premium, if any) and, to the extent provided in Section
304, to receive Bonds for any unredeemed portions of the Bonds.
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Bonds and portions of Bonds for which irrevocable instructions to pay or to call
for redemption on one or more specified dates have been given to the Trustee in
form satisfactory to it shall not thereafter be deemed to be Outstanding under
this Agreement and shall cease to be entitled to the security of or any rights
under this Agreement, other than rights to receive payment of the Redemption
Price thereof and any premium and accrued interest thereon, to be given notice
of redemption in the manner provided in Section 302, and, to the extent
hereinafter provided, to receive Bonds for any unredeemed portions of Bonds if
Eligible Moneys or Government Obligations purchased with Eligible Moneys, or a
combination of both, sufficient to pay the Redemption Price of such Bonds or
portions thereof, together with accrued interest thereon to the date upon which
such Bonds are to be paid or redeemed, are held in separate accounts by the
Trustee in trust for the Holders of such Bonds.
SECTION 304. REDEMPTION OF PORTIONS OF THE BONDS. In case part but not
all of an Outstanding Bond shall be selected for redemption, the Holder or his
legal representative shall present and surrender such Bond to the Trustee for
payment of the Redemption Price thereof, and the Authority shall execute and the
Trustee shall authenticate and deliver to or upon the order of such Holder or
his legal representative, without charge therefor, for the unredeemed portion of
the principal amount of the Bond so surrendered, a new Bond or Bonds of the same
series, of any
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denomination or denominations authorized by this Trust Agreement and in an
amount equal to the unredeemed principal amount of such Bond so surrendered.
SECTION 305. MANDATORY TENDER FOR PURCHASE.
(A) The Put Bonds are subject to mandatory tender for purchase on each
Tender Date at the Purchase Price upon receipt by the Trustee from the Letter of
Credit Bank of,
(i) notice of a Tender Event, directing the Trustee to purchase
all Put Bonds in accordance with this Section 305(A) and establishing the Tender
Date, which shall not be earlier than four (4) Business Days and not later than
thirteen (13) days after the Trustee receives such notice and the items
mentioned in clauses (ii), (iii) and (iv) below;
(ii) a certified copy of a ruling issued by the Treasury
Department of the commonwealth containing rulings substantially to the effect
set forth in Exhibit E'
(iii) an opinion of Bond Counsel as to the validity of the
aforesaid rulings as of the date of the Letter of Credit Bank notice mentioned
in clause (i) above and
(iv) an executed copy of the Pledge Agreement.
(B) The Trustee, no later than the Business Day after receiving the
proceeds of the claim filed pursuant to Section 1403(C), shall give, by
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had delivery or overnight mail courier service, to each Holder on the close of
business on the Tender Record Date notice that:
(i) a Tender Event has occurred,
(ii) all such Holders are required to tender their Bonds for
purchase at the Purchase Price on the Tender Date,
(iii) all Bonds not so tendered will be deemed to have been
tendered and purchased on the Tender Date, and
(iv) on and after the Tender Date interest on such Bonds shall
cease to accrue and said Bonds shall cease to be entitled to any benefits or
security under this Trust Agreement or to be deemed Outstanding and their
Holders shall have no rights in respect thereof except to receive payment of the
Purchase Price.
Any notice given as provided in this Section shall be
conclusively presumed to have been given whether or not the Holder receives the
notice.
(C) All Put Bonds whether or not tendered to the Trustee as provided
in subsection (B) below shall be deemed to have been tendered for purchase and
purchased on each Tender Date in accordance with the terms of this Trust
Agreement.
(D) The Purchase Price of the Put Bonds will be paid by the Trustee to
the Bondholders on the Tender Date and on any Business Day
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thereafter, upon delivery to the Trustee of Put Bonds at the corporate Trust
Office, using funds deposited in the Tender Account.
(E) Put Bonds delivered to the Trustee shall be cancelled.
SECTION 306. EFFECT OF TENDER FOR PURCHASE.
On the Tender Date, if sufficient Eligible Moneys for the payment
of the Purchase Price of all the Put Bonds are held in separate accounts by the
Trustee in trust for the Holders thereof, interest thereon shall cease to accrue
and the Put Bonds shall cease to be Outstanding and entitled to any benefits or
security under this Agreement, and the Holders shall have no rights in respect
thereto except to receive payment of the Purchase Price thereof in accordance
with Section 305. The Trustee is required by Section 507 to hold all such moneys
in trust for the benefit of the Holders of Put Bonds which Bonds are not
presented to the Trustee in accordance with the provisions of Section 305.
SECTION 307. DELIVERY OF BONDS AND CANCELLATION OF PUT BONDS. On or
prior to 2:00 p.m. Atlantic standard time on the Tender Date regardless of
whether any Put Bonds have been tendered in accordance with Section 305(B), the
Trustee shall: authenticate and register in the name of the Borrower without
charge therefor, a Bond of each Series in the aggregate principal amount
purchased of each Series and shall hold such Bonds in trust for the benefit of
the Letter of Credit Bank pursuant
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to a custodial agreement between the Letter of Credit Bank and the Trustee and
such Bonds shall constitute Pledged Bonds.
SECTION 308. PAYMENT OF PUT BONDS NOT PRESENTED ON TENDER DATE. (A) In
the event that any Put Bonds shall not be presented to the Trustee on or prior
to 10:00 a.m. Atlantic standard time on the related Tender Date, the Trustee
shall segregate in the Tender Account and, subject to Section 507, hold the
moneys for the Purchase price of such Put Bonds in trust, uninvested and without
liability for interest thereon, for the benefit of the former Holders of such
Put Bonds, who shall thereafter be restricted exclusively to such moneys for the
satisfaction of any claim for the Purchase Price of such Put Bonds.
(B) In the case of Put Bonds delivered to the Trustee on any Business
Day subsequent to 10:00 a.m. Atlantic standard time on the related Tender Date,
duly assigned in blank, the Trustee shall, subject to the provisions of Section
507, pay the Purchase Price of such Put Bond to the holder no later than 3:00
p.m Atlantic standard time, on the next succeeding Business Day.
(C) The Trustee agrees to accept delivery of all Put Bonds surrendered
to it in accordance with Section 305, and to hold such Bonds in trust for the
benefit of the respective Holders that shall have so surrendered such Bonds,
until the Purchase Price of such Bonds shall have
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been delivered to or for the account of or to the order of such Holders or
otherwise held by the Trustee pursuant to Section 506(B).
(D) In purchasing Put Bonds hereunder, the Trustee shall be acting as
a conduit and shall not be purchasing Put Bonds for its own account and in the
absence of notice from the Authority or the Borrower shall be entitled to assume
that any Put Bond tendered to it, or deemed tendered to it for purchase, is
entitled under this Trust Agreement to be so purchased.
SECTION 309. REMARKETING OF PLEDGED BONDS.
(A) The Trustee, upon receipt from the Letter of Credit Bank of notice
pursuant to Section 5 of the Pledge Agreement, shall establish the Remarketing
Date, which date shall be at least ten (10) Business Days after the Trustee's
receipt of such notice, and notify promptly the Remarketing Agent thereof.
(B) On the Remarketing Date, upon the receipt of an opinion of Bond
Counsel reconfirming the opinion
(i) authenticate and deliver to or upon the order of the
purchasers of Pledged Bonds that are sold by the Remarketing Agent, without
charge therefor, a Bond or Bonds at the option of such purchasers, of authorized
denominations, in the principal amount and of the same Series of the pledged
Bonds so sold and register their transfer in the Bond Register;
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(ii) deliver to the Remarketing Agent the Bonds so authenticated
for redelivery to the purchasers thereof pursuant to the Remarketing Agreement;
(iii) cancel all Pledged Bonds; and
(iv) deliver to the Letter of Credit Bank the amounts held to the
credit of the Remarketing Account.
(C) In the event that on or before 12:00 noon Atlantic standard time
on the Remarketing Date, the Trustee shall have not received the opinion
provided for in Section 309(B), the Trustee shall:
(i) deliver to the Remarketing Agent, by check, the amounts held
to the credit of the Remarketing Account; and
(ii) cancel all Pledged Bonds.
SECTION 310. NO REISSUANCE UPON PURCHASE. It is the express intention
of the parties hereto that any purchase, sale or transfer of Bonds, as provided
in Sections 305 and 309, shall not constitute or be construed to be the
extinguishment of any Bonds or the indebtedness represented thereby or the
reissuance of any Bonds.
SECTION 311. NO SALES AFTER DEFAULT. Notwithstanding anything in this
Trust Agreement to the contrary, if the Bonds shall be declared to be
immediately due and payable pursuant to Section 803(A), and such declaration
shall not have been rescinded or annulled pursuant to Section
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803(B) there shall be no remarketing of Bonds pursuant to this Trust Agreement
and the Remarketing Agreement.
ARTICLE IV
PROJECT FUND
SECTION 401. PROJECT FUND. (A) A special fund is hereby created and
designated the "Industrial Revenue Bonds, 1991 Series A, Series B and Series C
(El Conquistador Resort Project; Project Fund", to the credit of which such
deposits shall be made as are required by the provisions of Section 208. Any
moneys received by the Trustee from any other source for the Project shall also
be deposited to the credit of the Project Fund.
(B) Subject to the provisions of Sections 404, 406 and 602, the moneys
in the Project Fund shall be held by the Trustee in trust and shall be subject
to a lien and charge in favor of the Holders of the Outstanding Bonds and the
Letter of Credit Bank as long as the Letter of Credit Bank shall not have failed
to honor any drawing made and presented pursuant to and in strict compliance
with the Letter of Credit, and for the further security of such Holders and the
Letter of Credit Bank, until paid out or transferred as herein provided.
SECTION 402. PAYMENTS FROM PROJECT FUND. Payment of the Cost of the
Project shall be made from the Project Fund. All payments from the Project Fund
shall be subject to the provisions and restrictions set forth in this Article.
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SECTION 403. ITEMS OF COST. For the purposes of this Trust Agreement
the Cost of the Project shall embrace all Costs permitted by the Act in
connection with the Project, including without limitation:
(i) payment to the Borrower and the Authority, as the case may
be, of such amounts, if any, as shall be necessary to reimburse the Borrower and
the Authority in full for all advances and payments made by them or either of
them or for their accounts, with respect to the Project at any time after the
Cost of the Project Reimbursement Date for expenditures in connection with the
Cost of the Project, including, but not limited to, the acquisition of any
property required for or deemed necessary in connection with the Project, the
preparation of the Plans and Specifications as defined in the Loan Agreement)
(including any preliminary study or planning of the Project, or any aspect of
either thereof and any reports or analyses concerning the Project), the
acquisition and construction of the Project, and all real and personal property
deemed necessary in connection with the Project, or any one or more of said
expenditures;
(ii) payment of interest on the Bonds during the period beginning
on the Issue Date an ending on the Completion Date and for 180 days thereafter,
including any payments by the Borrower under any interest rate swap arrangement
relating to interest on obligations incurred by the Borrower in respect of the
Project;
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(iii) payment of the Costs of Issuance;
(iv) payment for labor, services (including architectural,
engineering and supervisor services), materials and supplies used or furnished
in site improvement and in the acquisition and construction of the Project,
payment for the cost of the acquisition, construction and installation of
utility services or other facilities, and payment for the miscellaneous expenses
incidental to any of the foregoing items;
(v) payment, as they become due, of the fees, commissions and
expenses of the Trustee and the Letter of Credit Bank properly incurred under
this Trust Agreement or the Reimbursement Agreement prior to the Completion
Date;
(vi) payment of any other costs and expenses relating to the
Project (including testing), or the authorization, issuance and sale of the
Bonds; and
(vii) payment of the Administrative Fee.
SECTION 404. REQUISITES FOR PAYMENTS FROM PROJECT FUND. (A) Payments
from the Project Fund shall be made by the Trustee upon the order of the
Borrower in accordance with the provisions of this Section, but no such payment
shall be made unless and until the Trustee shall receive a requisition, prepared
and signed by the Authorized Borrower Representative, approved by the Letter of
Credit Bank and, if the Authority so determined by notice to the Trustee, the
Borrower, and
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the Letter of Credit Bank which the Trustee has received not less than 15 days
prior to its making such payment, approved by an Authority Representative;
provided, however, that such approval by the Authority shall not be withheld if
the requisition is consistent with the Act, the Loan Agreement and this Trust
Agreement, stating:
(i) the item number of each such payment,
(ii) the name of the Person (including the Borrower) to whom each
payment is due,
(iii) the respective amounts to be paid, and
(iv) that obligations in the stated amounts have been incurred
and are presently due and payable, or reimbursable to the Borrower, and that
each item thereof is a proper charge against the Project Fund, is substantially
in accord with the estimates of the Cost of the Project set forth in the
application (as amended from time to time) filed with the Authority, and has not
been paid from the Project Fund.
(B) Upon receipt of any such order and accompanying requisition, the
Trustee shall pay such obligation from the Project Fund. If prior to payment of
any item in a requisition the Borrower should for any reason desire not to pay
such item, the Borrower shall give notice of such decision to the Trustee.
(C) In making any disbursement, the Trustee shall pay each such
obligation directly to the Borrower or to any payee designated by the
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Authorized Borrower Representative, as set forth in the order of the Borrower
directing such disbursement.
SECTION 405. RELIANCE ON REQUISITIONS. All requisitions and orders
received by the Trustee, as required in this Article as conditions of payment
from the Project Fund, may be relied upon by the Trustee, and shall be retained
by the Trustee, subject at all reasonable times to examination by the Borrower,
the Authority, any Bondholder and the agents and representative thereof.
SECTION 405. BALANCE IN PROJECT FUND.
(A) Upon the earlier of the Mandatory Project Termination Date and the
receipt by the Trustee of the certificate required by Section 3.06 of the Loan
Agreement or a certificate signed by an Authorized Borrower Representative,
approved by an Authority Representative and the Letter of Credit Bank, to the
effect that the Project will not be completed, any moneys remaining in the
Project Fund shall be transferred to the Bond Fund and used to pay the
Redemption Price of Bonds called for redemption pursuant to Section 301(E), and
any balance remaining after such use shall first: be applied to reimburse the
Letter of Credit Bank for any drawings in respect of such redemption, and
second: shall be transferred to the Bond Fund on the Interest Payment Date next
succeeding such redemption, together with any interest or income earned thereon.
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(B) In the event that the Borrower exercises the option under Section
8.01 of the Loan Agreement to prepay in full the amounts payable under Section
4.01 of the Loan Agreement, the Trustee shall, upon the direction of the
Borrower, deposit into the Bond Fund, on the date the prepayment is made, any
moneys remaining in the Project Fund.
(C) If the principal amount of all Outstanding Bonds shall have become
due and payable pursuant to a declaration in accordance with Section 803 or the
giving of a redemption notice pursuant to Section 301, the Trustee shall deposit
in the Bond Fund any balance remaining in the Project Fund.
ARTICLE V
BOND FUND AND BOND PURCHASE FUND
SECTION 501. CREATION OF BOND FUND. A special fund is hereby created
and designated "Industrial Revenue Bonds, 1991 Series A, Series B, and Series C
(El Conquistador Resort Project) Bond Fund". The moneys in the Bond Fund shall
be held by the Trustee in trust and applied as hereinafter provided and, pending
such application, shall be subject to a lien and charge in favor, and for the
further security, of the Holders and the Letter of Credit Bank so long as the
Letter of Credit shall be outstanding, until paid out or transferred as herein
provided.
SECTION 502. PAYMENTS INTO BOND FUND.
(A) There shall be deposited to the credit of the Bond Fund:
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(i) accrued interest, if any, on the Bonds paid by the purchasers
thereof;
(ii) all amounts drawn under the Letter of Credit;
(iii) all amounts paid pursuant to Sections 4.01, 8.01 and 8.02
of the Loan Agreement;
(iv) any amount in the Project Fund to be transferred to the Bond
Fund in accordance with the provisions of Section 406;
(v) all amounts derived from the Mortgage Note, which are due and
payable to the Trustee under the Collateral Agreement; and
(vi) all other moneys received by the Trustee under and pursuant
to any of the provisions of the Loan Agreement or otherwise which are permitted
or required, or are accompanied by directions from the Borrower, the Letter of
Credit Bank or the Authority that such moneys are to be paid into the Bond Fund.
(B) The Trustee shall establish a separate account or subaccount
within the Bond Fund corresponding to the source of moneys specified in Section
502 for each deposit made into the Bond Fund so that the Trustee may at all
times ascertain the source and date of deposit of the funds in each such account
or subaccount. The Bond Fund and its accounts and sub-accounts shall be held
separate and apart from each other and from all funds, accounts and subaccounts
created by or pursuant to this Trust Agreement. Amounts on deposit on said
accounts or subaccounts shall not
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be commingled with each other or with any other fund, account or subaccount
created by or pursuant to the provisions of this Trust Agreement.
(C) All moneys other than Eligible Moneys held to the credit of the
Bond Fund shall be held in a separate account therein until such time as such
moneys become Eligible Moneys.
(D) The Trustee is authorized to receive at any time payments from the
Borrower pursuant to the Loan Agreement or otherwise for deposit in the Bond
Fund.
SECTION 503. USE OF MONEYS IN BOND FUND.
(A) Except as otherwise provided in this Trust Agreement, Eligible
Moneys in the Bond Fund shall be used solely for the payment of the principal
(whether at maturity or upon acceleration or redemption or otherwise) of and
premium, if any, and interest on the Bonds. On each Interest Payment Date and on
each Principal Payment Date, the Trustee shall withdraw from the Bond Fund
sufficient Eligible Moneys and pay the amounts due and payable to the
Bondholders pursuant to this Trust Agreement.
(B) Moneys deposited to the credit of the Bond Fund pursuant to clause
(ii) of Section 502(A), and any interest accruing on and any profit realized
from the investment thereof, shall not be withdrawn pursuant to
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this Section until all other Eligible Moneys to the credit of the Bond Fund
shall have been withdrawn from the Bond Fund.
(C) Any provision herein to the contrary notwithstanding, no payment
of the principal of and premium, if any, and interest on Bonds held by or on
behalf of the Borrower or any Affiliate (other than Pledged Bonds) shall be made
by the Trustee.
SECTION 504. APPLICATION AND PLEDGE OF MONEYS IN THE BOND FUND.
Subject to the terms and conditions set forth in this Trust Agreement, and
except as otherwise provided in Section 503(B), moneys held for the credit of
the Bond Fund shall be held in trust and disbursed by the Trustee for (i) the
payment of the interest on the Bonds as such interest becomes due and payable,
or (ii) the payment of the principal of the Bonds, or (iii) the payment of the
Redemption Price and premium, if any, of the Bonds, or (iv) subject to the prior
payment or provision for payment of the amounts described in the preceding
clauses (i), (ii) and (iii), the payment of amounts payable to the Letter of
Credit Bank pursuant to the Reimbursement Agreement and the documents relating
thereto as such amounts become due and payable. Moneys held for the credit of
the Bond Fund are hereby pledged to secure, and are charged with, the payments
mentioned in this Section.
SECTION 505. CREATION OF BOND PURCHASE FUND.
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(A) A special fund is hereby created and designated "Industrial
Revenue Bonds, 1991 Series A, Series B, and Series C (El Conquistador Resort
Project) Bond Purchase Fund". Within the Bond Purchase Fund there are hereby
created and established two separate accounts designated the "Remarketing
Account" and the "Tender Account". Moneys held to the credit of the Bond
Purchase Fund shall be held by the Trustee subject to the provisions of Section
507(B) and shall not be invested by the Trustee. The Bond Purchase Fund accounts
shall be held separate and apart from each other and from all funds and accounts
created by or pursuant to this Trust Agreement. Amounts on deposit in the Bond
Purchase Fund accounts shall not be commingled with each other or with other
amounts held by the Trustee under this Trust Agreement. No funds shall be
accepted for deposit to the credit of the Bond Purchase Fund by or on behalf of
the Authority or any subsidiary or affiliate thereof, nor shall any such funds
if deposited by mistake or otherwise, be used for the purchase of Bonds pursuant
to the terms of this Trust Agreement and the Remarketing Agreement and no funds
of the Letter of Credit Bank shall be deposited to the credit of any account
established hereunder or pursuant to the provisions hereof other than the Tender
Account.
(B) Any moneys received by the Trustee from the Remarketing Agent
representing the Purchase Price of Pledged Bonds remarketed pursuant to the
Remarketing Agreement shall be (i) deposited to the credit
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of the Remarketing Account and (ii) disbursed in accordance with Section
506.
(C) Any moneys received by the Trustee from the Letter of Credit Bank
for the purchase of Put Bonds pursuant to Section 1403(C) shall be (i) deposited
to the credit of the Tender Account, and (ii) disbursed in accordance with
Section 506.
SECTION 506. DISBURSEMENT FROM THE BOND PURCHASE FUND. Moneys in the
Bond Purchase Fund shall be applied on the Tender Date or the Remarketing Date,
as applicable, as follows:
(i) moneys constituting immediately available funds deposited to
the credit of the Tender Account shall be applied on the Tender Date, at or
before 2:00 p.m., Atlantic standard time, by the Trustee to purchase the Put
Bonds, and
(ii) moneys in the Remarketing Account shall be applied by the
Trustee as provided in Sections 309(B) and (C).
SECTION 507. MONEYS WITHDRAWN FROM BOND FUND OR BOND PURCHASE FUND.
(A) All moneys which the Trustee shall have withdrawn from the Bond
Fund, the Bond Purchase Fund or shall have received from any other source and
set aside for the purpose of paying any of the Bonds, either at the maturity
thereof or upon call for redemption, tender for
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purchase or otherwise shall be held in trust for the respective Holders of such
Bonds.
(B) Any moneys which shall be withdrawn or set aside under this
Section and which shall remain unclaimed by such Holders for a period of two
years after the date on which such Bonds shall have become due and payable or
deemed tendered for purchase may, after payment to the Letter of Credit Bank of
all amounts then due and owing to the Letter of Credit Bank pursuant to the
Reimbursement Agreement and the documents relating thereto, upon the request of
the Borrower, be paid to the Borrower or to such officer, board or body as may
then be entitled by law to receive the same, thereafter the Holders of such
Bonds shall look only to the Borrower or to such officer, board or body, as the
case may be, for payment and then only to the extent of the amount so received
without any interest thereon, and the Authority and the Trustee shall have no
responsibility with respect to such moneys. Until paid as aforesaid, any moneys
so withdrawn or set aside shall be invested as the Trustee and the Borrower may
agree.
SECTION 508. CANCELLATION OF BONDS UPON PAYMENT. All bonds paid or
redeemed, either at or before maturity and all Bonds delivered by the Borrower
to the Trustee for cancellation shall be canceled upon the payment, redemption
or delivery of such Bonds. All Bonds canceled under any of the provisions of
this Trust Agreement shall be held by the
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Trustee until such time as they are destroyed by the Trustee. The Trustee shall
execute a certificate in triplicate describing the Bonds so destroyed, and an
executed certificate shall be filed with each of the Authority and the Borrower
and the other executed certificate shall be retained by the Trustee. Upon the
delivery to the Trustee by the Borrower of any Bonds to be canceled, the Trustee
shall promptly file with the Letter of Credit Bank a certificate of reduction in
the form specified in the Reimbursement Agreement, if any.
ARTICLE VI
DEPOSITARIES OF MONEYS, SECURITY FOR DEPOSITS
AND INVESTMENT OF FUNDS
SECTION 601. SECURITY FOR DEPOSITS.
(A) All moneys deposited with the Trustee under the provisions of this
Trust Agreement or the Loan Agreement shall be held in trust and applied only in
accordance with the provisions of this Trust Agreement and the Loan Agreement
and shall not be subject to lien or attachment by any creditor of the Authority
or the Borrower.
(B) All moneys deposited with the Trustee under this Trust Agreement
and the Loan Agreement in excess of the amount guaranteed by the Federal Deposit
Insurance Corporation or other Federal agency shall be continuously secured for
the benefit of the Authority and the Bondholders either (i) by lodging with a
bank or trust company approved by the Authority and the Trustee as custodian,
or, if then permitted by
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law, by setting aside under control of the trust department of the bank holding
such deposit, as collateral security, Government Obligations or, with the
approval of the Trustee, other marketable securities eligible as security for
the deposit of trust funds under regulations of the Comptroller of the Currency
of the United States of America, or applicable Commonwealth or state law or
regulations, having a market value (exclusive of accrued interest) not less than
the amount of such deposit, or (ii) if the furnishing of security as provided in
clause (i) of this Section is not permitted by applicable law, in such other
manner as may then be required or permitted by applicable Commonwealth, state or
Federal laws and regulations regarding the security for, or granting a
preference in the case of, the deposit of trust funds. Provided, however, that
it shall not be necessary for the Trustee to give security for any moneys which
shall be represented by the investments purchased under the provision of this
Article as an investment of such moneys.
SECTION 602. INVESTMENT OF MONEYS. (A) Moneys held for the credit of
the project Fund and the Bond Fund, except proceeds of any draws under the
Letter of Credit and except as provided in Article XIII hereof, at the direction
of any Authorized Borrower Representative with the prior approval of the Letter
of Credit Bank shall be invested and reinvested by the Trustee in Eligible
Investment Obligations in the case of the Project Fund, or, in the case of the
Bond Fund, in Investment
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Obligations the income on which constitutes income from sources within Puerto
Rico under the Code as in effect on the date of each such investment or
reinvestment, selected by the Borrower. Moneys held to the credit of the Bond
Purchase Fund shall not be invested by the Trustee.
(B) Obligations purchased as an investment of moneys in any fund,
account or sub-account shall be deemed at all times to be part thereof and any
interest accruing and any profit realized therefrom shall be credited, and any
loss resulting from such investment shall be charged to such fund, account or
sub-account. Neither the Trustee nor the Authority shall be liable or
responsible for any loss resulting from any such investment.
ARTICLE VII
PARTICULAR COVENANTS AND PROVISIONS
SECTION 701. COVENANTS TO PAY BONDS; BONDS LIMITED OBLIGATIONS OF
AUTHORITY. (A) The Authority covenants that it will cause to be paid promptly
principal of interest and all other amounts payable on every Bond on the dates
and in the manner provided herein and in said Bond, according to the true intent
and meaning thereof; provided, however, that any amount in the Bond Fund
available for any payment of principal of or interest and all other amounts
payable on the Bonds shall be credited against any amount required to be caused
by the Authority so to be paid. Except as in this Trust Agreement otherwise
provided, such principal amount, interest and other amounts are payable
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solely from the payments required to be made by the Borrower under Section 4.01
of the Loan Agreement and any other revenues and funds derived under the Loan
Agreement, this Trust Agreement and the Related Documents to the extent provided
in this Trust Agreement, which payments under the Loan Agreement, revenues and
funds together extent provided in this Trust Agreement are hereby charged with
the payment thereof in the manner and to the extent hereinabove particularly
specified.
(B) The Bonds, and the interest and other amounts payable thereon
shall not constitute an indebtedness of either the commonwealth or any of its
political subdivisions, other than the Authority. The Bonds shall be payable
solely from the revenues and proceeds provided therefor, and the Authority is
not obligated to pay the Bonds or the interest thereon except from such revenues
and proceeds or other amounts and neither the Commonwealth nor any of such
political subdivisions, other than the Authority, shall be liable thereon.
(C) Anything herein to the contrary notwithstanding, so long as the
Letter of Credit Bank shall not have failed to honor any drawing made and
presented pursuant to and in strict compliance with the Letter of Credit, the
prior approval, consent or direction of the Letter of Credit Bank shall be
required as to any direction of or selection by the Borrower under Section
602(A) and as to any action taken by the Trustee (including any waivers of the
Trustee's rights) thereunder or under the provisions of
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the documents evidencing (i) investments made thereunder and (ii) any security
interest guaranteeing payments under said investments.
SECTION 702. COVENANT TO PERFORM OBLIGATIONS UNDER THIS TRUST
AGREEMENT AND LOAN AGREEMENT AND RELATED DOCUMENTS. The Authority covenants
that: (i) it will faithfully perform at all times any and all covenants,
undertakings, stipulations, and provisions on its part to be observed or
performed contained in this Trust Agreement, in the Bonds, in all proceedings of
the Authority pertaining thereto and filed with the Trustee and contained in the
Loan Agreement and in the Related Documents to which it is a party; (ii) it is
duly authorized under the laws of the Commonwealth, including particularly and
without limitation the Act, to issue the Bonds and to enter into this Trust
Agreement, the Loan Agreement and the Related Documents to which it is a party,
to assign the payments and other funds derived from the Loan Agreement and the
Related Documents and otherwise in the manner and to the extent herein set
forth; (iii) all action on its part for the issuance of the Bonds, the execution
and delivery of this Trust Agreement, the Loan Agreement and the Related
Documents to which it is a party and the Grant of the payments and other funds
as provided herein has been duly and effectively taken; and (iv) each Bond in
the hands of the owners thereof is and will be a valid and enforceable
obligation of the Authority according to the tenor and import thereof.
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SECTION 703. COVENANT TO PERFORM FURTHER ACTS. The Authority covenants
that it will do, execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered, such agreements supplemental hereto and such further
acts, instruments and transfers as the Trustee may reasonably require to Grant
the Trust Estate in trust to the Trustee.
SECTION 704. TRUSTEE MAY ENFORCE AUTHORITY'S RIGHTS UNDER LOAN
AGREEMENT AND THE RELATED DOCUMENTS. The Trustee, subject to the provisions of
the Loan Agreement and this Trust Agreement reserving certain rights to the
Authority and respecting actions by the Trustee in its name or in the name of
the Authority, may enforce all rights of the Authority and all obligations of
the Borrower under and pursuant to the Loan Agreement and the Related Documents
to which the Authority is a party and on behalf of the Bondholders whether or
not the Authority is in default hereunder.
ARTICLE VIII
DEFAULT AND REMEDIES
SECTION 801. EXTENSION OF INTEREST PAYMENT DATES. In case the time for
the payment of the interest on any Bond shall be extended, whether or not such
extension be by or with the consent of the Authority, such interest shall not be
entitled in case of default hereunder to the benefit of this Trust Agreement
except subject to the prior payment in full
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of the aggregate principal amount and interest on all Outstanding Bonds, the
time for the payment of which shall not have been extended.
SECTION 802. DEFAULTS. Each of the following events is hereby declared
an "event of default":
(a) payment of the principal amount or premium, if any, of any of
the Bonds shall not be made when the same shall become due and payable; or
(b) payment of any installment of interest on any of the Bonds
shall not be made when the same shall become due and payable; or
(c) an event of default under the Loan Agreement other than under
clauses (a) or (i) of Section 7.01 thereof, or
(d) an event of default under clause (i) of Section 7.01 of the
Loan Agreement.
SECTION 803. ACCELERATION. (A) Upon (i) the happening and continuance
of any event of default specified in clause (c) of Section 802 then the Trustee,
subject in all cases to the provisions of Section 818, may, and (ii) the
direction of the Twenty-Five Percent Interest, or upon the happening of any
other event of default specified in Section 802, then the trustee shall, by
notice to the Authority and the Letter of Credit Bank, declare the aggregate
principal amount of the Bonds (if not then due and payable) to be due and
payable immediately after the date of receipt of such notice, and upon such
declaration the same shall become and be due
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and payable immediately after the date of such notice anything contained in the
Bonds or in this Trust Agreement to the contrary notwithstanding.
(B) Anything contained in Section 803(A) notwithstanding, other than
in the case of a default specified in clause (a) of Section 802, if at any time
after the principal of the Bonds shall have been so declared to be due and
payable, and before the entry of final judgment or decree in any suit, action or
proceeding instituted on account of such default, or before the completion of
the enforcement of any other remedy under this Trust Agreement, sufficient
Eligible Moneys shall have accumulated in the Bond Fund to pay the principal of
all matured Bonds and all arrears of interest, if any, upon all Bonds then
Outstanding (except the principal of any Bonds not then due and payable by their
terms and the interest accrued on such Bonds since the last Interest Payment
Date) and thee charges, compensation, expenses, disbursements, advances and
liabilities of the Trustee and all other amounts then payable by the Authority
hereunder shall have been paid or a sum sufficient to pay the same shall have
been deposited with the Trustee, and every other default known to the Trustee in
the observance or performance of any covenant, condition, agreement or provision
contained in the Bonds or in this Trust Agreement (other than a default in the
payment of the principal of such Bonds then due and payable only because of a
declaration under this Section 803) shall have been cured or waived as provided
in Section 814, then and in
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every such case the Trustee, subject to the provisions of Section 818, may, and
upon the written direction of the Majority Interest, shall, by notice to the
Authority, rescind and annul such declaration and its consequences, but no such
rescission or annulment shall extend to or affect any subsequent default or
impair any right consequent thereon.
SECTION 804. ENFORCEMENT OF REMEDIES. (A) Upon the happening and
continuance of any event of default specified in Section 802, then and in every
such case the Trustee, subject to the provisions of Section 818, may, and upon
the direction of the Twenty-Five Percent Interest shall proceed, subject to the
provisions of Section 902, to protect and enforce its rights and the rights of
the Bondholders under applicable laws, the Loan Agreement, this Trust Agreement
and the Related Documents by such suits, actions or special proceedings in
equity or at law, or by proceedings in the office of any board or officer having
jurisdiction, either for the specific performance of any covenant or agreement
contained herein or in aid or execution of any power herein granted or for the
enforcement of any proper legal or equitable remedy, as the Trustee, being
advised by counsel, shall deem most effectual to protect and enforce such
rights.
(B) In the enforcement of any remedy under this Trust Agreement, the
Trustee in its own name and as Trustee of an express trust, shall be entitled to
sue for, enforce payment of and recover
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judgment for, any and all amounts then or after any default becoming, and at any
time remaining, due from the Authority and unpaid for principal, premium, if
any, and interest or otherwise under any of the provisions of this Trust
Agreement or of the Bonds, with interest on overdue payments of principal and
interest at the Interest Rate together with any and all costs and expenses of
collection and of all proceedings hereunder and under the Bonds, without
prejudice to any other right or remedy of the Trustee, or the Bondholders, and
to recover and enforce any judgment or decree against the Authority, but solely
as provided herein and in the Bonds, for any portion of such amounts remaining
unpaid, and interest, costs and expenses as above provided, and to collect (but
solely from moneys in the Bond Fund and any other moneys available for such
purpose), in any manner provided by law, the moneys adjudged or decreed to be
payable.
SECTION 805. TRUSTEE MAY FILE CLAIM IN BANKRUPTCY. (A) In case of the
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other similar judicial
proceeding relative to the Authority or the Borrower or to the property of the
Authority or the Borrower or the creditors of either of them, the Trustee
(irrespective of whether the principal of the Bonds shall then be due and
payable or the Trustee shall have made any demand on the Borrower for the
payments equal to overdue principal), shall be entitled and empowered, by
intervention in such proceeding or otherwise:
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(i) to file and prove a claim for the whole amount of principal
amount and any premium or interest owing and unpaid in respect of the Bonds and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and of the Bondholders allowed in such judicial proceeding; and
(ii) to collect and receive any moneys or other property payable
or deliverable on any such claims and to distribute the same.
(B) Any receiver, custodian, assignee, trustee, liquidator,
sequestrator (or other similar official) in any such judicial proceeding is
hereby authorized by each Bondholder to make such payments to the Trustee, and
in the event that the Trustee shall consent to the making of such payments
directly to the Bondholders, to pay to the Trustee any amount due to it for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel, and any other amounts due the Trustee under Section 902.
(C) Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Bondholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Bonds or the rights of any Holder, or to
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authorize the Trustee to vote in respect of the claim of any Bondholder in any
such proceeding.
SECTION 806. PRO RATA APPLICATION OF FUNDS. (A) Anything in this Trust
Agreement to the contrary notwithstanding, (but subject in all cases to Section
1403(E)) if at any time the moneys in the Bond Fund shall not be sufficient to
pay the principal of or interest on the Bonds as the same shall become due and
payable, such moneys, together with any moneys then available or thereafter
becoming available for such purpose, whether through the exercise of the
remedies provided for in this Article or otherwise, shall be applied, following
the satisfaction of any payments due to the Trustee under the provisions of
Sections 902 and 906, as follows:
(i) if the principal of all the Bonds shall not have become due
and payable or shall not have been declared due and payable, all such moneys
shall be applied first to the payment of all installments of interest then due
and payable in the order in which such installments become due and payable, and,
if the amount available should not be sufficient to pay in full any particular
installment, then to the payment of such installments, ratably, according to the
amounts due on such installment, without any discrimination or preference; and
second to satisfy all obligations to the Letter of Credit Bank under the
Reimbursement Agreement;
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(ii) if the principal of all the Bonds shall have come due and
payable or shall have been declared due and payable, all such moneys shall be
applied first to the payment of the principal, interest and premium, if any,
then due upon the Bonds, without preference or priority of principal over
interest or premium or of interest or premium over principal, or of any
installment of interest over any other installment of interest, or of any bond
over any other Bond, ratably, according to the amounts due respectively for
principal, interest and premium, if any, to the Persons entitled thereto without
any discrimination or privilege, and second, to satisfy all obligations to the
Letter of Credit Bank under the Reimbursement Agreement, and
(iii) if the principal of all the Bonds shall have been declared
due and payable and if such declaration shall thereafter have been rescinded and
annulled under the provisions of Section 803, then, subject to the provisions of
(ii) above in the event that the principal of all the Bonds shall later become
due and payable or be declared due and payable, the moneys remaining in and
thereafter accruing to the Bond Fund shall be applied in accordance with the
provisions of (i) above.
(B) Whenever moneys are to be applied by the Trustee pursuant to the
provisions of this Section, such money shall be applied by the Trustee at such
times, and from time to time, as the Trustee in its sole discretion shall
determine, having due regard to the amount of such
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moneys available for application and the likelihood of additional moneys
becoming available for such application in the future. The setting aside of such
moneys in trust for the proper purpose shall constitute proper application by
the Trustee. The Trustee shall incur no liability whatsoever to the Authority,
to any Bondholder or to any other Person for any delay in applying any such
moneys, so long as the Trustee acts with reasonable diligence, having due regard
to the circumstances, and ultimately applies the same in accordance with the
then applicable provisions of this Trust Agreement. Whenever the Trustee shall
exercise such discretion in applying such moneys, it shall fix the date (which
shall be an Interest Payment date unless the Trustee shall deem and another date
more suitable) upon which such application is to be made and upon such date
interest on the principal amount to be paid on such date shall cease to accrue.
The Trustee shall give such notice as it may deem appropriate of the fixing of
any such date, and shall not be required to make payment to the Holder of any
Bond until such Bond shall be surrendered to the Trustee for appropriate
endorsement, or for cancellation if fully paid.
(C) The provisions of sub-section (A) and (B) of this Section are in
all respects subject to the provisions of Section 801.
SECTION 807. EFFECT OF DISCONTINUANCE OF PROCEEDINGS. In case any
proceeding taken by the Trustee on account of any default shall have been
discontinued or abandoned for any reason, then, and in every such
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case, the Authority, the Trustee, the Borrower, the Bondholders and the Letter
of Credit Bank shall be restored to their former positions and rights hereunder,
respectively, and all rights, remedies, powers and duties of the Trustee and the
Letter of Credit Bank shall continue as though no proceeding had been taken.
SECTION 808. MAJORITY INTEREST MAY CONTROL PROCEEDINGS. Anything in
this Trust Agreement to the contrary notwithstanding, but subject to Section
818, the Majority Interest shall have the right subject to the provisions of
Sections 902 and 906, by an instrument or concurrent instruments executed and
delivered to the Trustee, to direct the time, method and place of conducting all
remedial proceedings to be taken by the Trustee hereunder or exercising any
trust or power conferred upon the Trustee, provided that (i) such direction
shall not be otherwise than in accordance with law and the provisions of this
Trust Agreement, and (ii) subject to the provisions of Sections 902 and 906,
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.
SECTION 809. RESTRICTIONS UPON ACTIONS BY INDIVIDUAL BONDHOLDER.
Except as to indemnity provided in Section 5.10 of the Loan Agreement, no
Bondholder shall have any right to institute any suit, action or proceeding in
equity or at law on any Bond or for the execution of any trust hereunder or for
any other remedy hereunder unless: (i) he
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previously shall have given to the Trustee notice of the event of default on
account of which such suit, action or proceeding is to be instituted, (ii) the
Twenty-Five Percent Interest shall have requested the Trustee, after the right
to exercise such powers or right of action, as the case may be, shall have
accrued, and shall have afforded the Trustee a reasonable opportunity, either to
proceed to exercise the powers hereinabove granted or to institute such action,
suit or proceeding in its or their name, (iii) there shall have been offered to
the Trustee reasonable security and indemnity against the costs, expenses and
liabilities to be incurred therein or thereby, and (iv) the Trustee shall have
refused or neglected to comply with such request within a reasonable time. Such
notification, request and offer of indemnity are declared in every such case, at
the option of the Trustee, to be conditions precedent to the execution of the
powers and trusts of this Trust Agreement or to any other remedy hereunder.
Except as otherwise above provided, it is understood and intended that: (i) no
one or more Holders shall have any right in any manner whatever by his or their
action to affect, disturb or prejudice any rights under this Trust Agreement, or
to enforce any right hereunder except in the manner provided herein, (ii) all
suits, actions and proceedings shall be instituted, had and maintained in the
manner herein provided and for the benefit of all Bondholders, and (iii) any
individual right of action or other right
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given to one or more Bondholders by law is restricted by this Trust Agreement to
the rights and remedies herein provided.
SECTION 810. RECEIVER. Upon the occurrence of an event of default and
upon the filing of a suit or other commencement of judicial proceedings to
enforce the rights of the Trustee and of the Bondholders under this Trust
Agreement, the Trustee shall be entitled, as a matter of right, to the
appointment of a receiver or receivers of the payments under the Loan Agreement
and the Related Documents pending such proceedings, with such powers as the
court making such appointment shall confer, whether or not any such amount
payable shall be deemed sufficient ultimately to satisfy the amounts due and
payable on the Outstanding Bonds.
SECTION 8.11 ACTIONS BY TRUSTEE. All rights of action and claims under
this Trust Agreement or under any of the Bonds, enforceable by the Trustee or
the Letter of Credit Bank, may be prosecuted and enforced by the Trustee or the
Letter of Credit Bank without the possession of any of the Bonds or the
production thereof in the trial or other proceeding relative thereto, and any
such suit, action or proceeding instituted by the Trustee shall be brought in
its name for the benefit of all of the Bondholders subject to the provisions of
this Trust Agreement.
SECTION 812. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Trustee, the Letter of Credit Bank or the
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Bondholders is intended to be exclusive of any other remedy or remedies herein
provided, and each and every such remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or by law.
SECTION 813. NO DELAY OR OMISSION CONSTRUED TO BE A WAIVER. No delay
or omission of the Trustee, any Bondholder or the Letter of Credit Bank to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver of any such default or any
acquiescence therein. Every power and remedy given by this Trust Agreement to
the Trustee, the Bondholders and the Letter of Credit Bank, respectively, may be
exercised from time to time and as often as may be deemed expedient.
SECTION 814. WAIVER OF PAST DEFAULTS. Subject to the provisions of
Section 818 the Majority Interest may on behalf of all the Holders waive any
past default hereunder and its consequences except a default: (i) in the payment
of principal of, premium, if any, and interest on any Bonds; or (ii) in respect
of a covenant or provision hereof which under Article XI hereof cannot be
amended or modified without the consent of each Bondholder affected. Upon such
waiver, such default shall cease to exist, and any event of default arising
therefrom shall be deemed to have been cured, for every purpose of this Trust
Agreement. No such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
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SECTION 815. NOTICE OF DEFAULT. The Trustee shall give notice to the
Bondholders of the occurrence of any Event of Default set forth in Section 802
within 30 days after the Trustee shall have notice, pursuant to the provisions
of Section 908, that any such event of default shall have occurred, unless such
default shall have been cured or waived. Anything herein to the contrary
notwithstanding, in the case of an event of default specified in Section 802
arising out of a default specified in clause (c) of Section 7.01 of the Loan
Agreement, the Trustee shall be protected in withholding such notice if and so
long as the board of directors or a designated committee of the Trustee in good
faith determines that the withholding of such notice is in the best interests of
the Bondholders. The Trustee shall not, however, be subject to any liability to
any Bondholder by reason of its failure to give any such notice.
Section 8.16. Notice of Acceleration. The Trustee, promptly after any
declaration under Section 803(A), shall give notice thereof to all Bondholders.
Failure to give such notice, or any defect in any notice as given, shall not
affect the proceedings for such declaration.
SECTION 8.17. NOTICE OF FAILURE OF LETTER OF CREDIT BANK TO PAY. The
Trustee shall, within 5 days after the Letter of Credit Bank shall have failed
to make any payment as required by the Letter of Credit, notify the Bondholders
of such failure.
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SECTION 818. LETTER OF CREDIT BANK CONSENT. Except in the cases for
which the consent of the Letter of Credit Bank is not required under Section
7.02(b) of the Loan Agreement, anything contained in this Trust Agreement
notwithstanding, any action by the Trustee under the provisions of Section 803
and 804 taken upon the happening of an Event of Default specified in clause (c)
of Section 802 shall be taken and any waiver under Section 814 shall be given
only with the prior consent of the Letter of Credit Bank so long as the Letter
of Credit Bank shall not have failed to honor any drawing made and presented
pursuant to and in strict compliance with the Letter of Credit.
ARTICLE IX
CONCERNING THE TRUSTEE
SECTION 901. ACCEPTANCE OF TRUSTS. The Trustee accepts and agrees to
execute the trusts imposed upon it by this Trust Agreement for the benefit of
the Bondholders, but only upon the terms and conditions set forth in this
Article and subject to the provisions of this Trust Agreement. The Trustee also
accepts, and agrees to do and perform, the duties and obligations imposed upon
it by and under the Loan Agreement and the Related Documents, but only upon the
terms and conditions set forth therein and herein.
SECTION 902. TRUSTEE ENTITLED TO INDEMNITY. With the exception of its
obligations under Sections 803(A)(ii) and 143, the Trustee shall be
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under no obligation to institute any suit, or to take any remedial proceedings
under this Trust Agreement, the Loan Agreement or the Related Documents, or to
enter any appearance in or in any way defend against any suit, in which it may
be made a defendant, or to take any steps in the execution of the trusts hereby
created or in the enforcement of any rights and powers hereunder or under the
Loan Agreement until it shall be indemnified to its satisfaction against any and
all costs and expenses, outlays and counsel fees and other reasonable
disbursements, and against all liability. The Trustee may, nevertheless, begin
suit, or appear in and defend suit, or do anything else in its judgment proper
to be done by it as such Trustee, without prior indemnity, and in such case the
Trustee shall be entitled to be reimbursed and indemnified under Section 4.06 of
the Loan Agreement. If the Borrower shall fail to make such reimbursement or
indemnification, the Trustee may reimburse or indemnify itself from any moneys
in its possession under the provisions of this Trust Agreement, except as
provided in Section 1403(E) and except from moneys held in trust for the benefit
of the Bondholders, and shall be entitled to a preference over any of the Bonds.
SECTION 903. TRUSTEE NOT RESPONSIBLE FOR INSURANCE, TAXES OR EXECUTION
OF THIS TRUST AGREEMENT. The Trustee shall not be under any obligation to effect
or maintain insurance or to renew any policies of insurance or to inquire as to
the sufficiency of any policies of insurance
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carried by the Borrower, or to report, or make or file claims or proof of loss
for, any loss or damage insured against or which may occur, or to keep itself
informed or advised as to the payment of any taxes or assessments, or to require
any such payments to be made. The Trustee makes no representation and shall have
no responsibility in respect of the validity, sufficiency, due execution or
acknowledgment of this Trust Agreement or the Loan Agreement by the Authority
or, except as to the authentication thereof, in respect of the validity of the
Bonds or the due execution or issuance thereof. The Trustee shall not be under
any obligation to see that any duties herein imposed upon any party other than
itself, or any covenants herein contained on the part of any party other than
itself shall be done or performed, and the Trustee shall be under no obligation
for failure to see that any such duties or covenants are so done or performed.
SECTION 904. TRUSTEE NOT RESPONSIBLE FOR ACTS OF THE AUTHORITY OR
APPLICATION OF MONEYS APPLIED IN ACCORDANCE WITH THIS TRUST AGREEMENT. The
Trustee shall not be liable or responsible because of the failure of the
Authority or of any of its employees or agents or make any collections or
deposits or to perform any act herein required of the Authority or because of
the loss of any moneys arising through the insolvency or the act or default or
omission of any other depositary in which such moneys shall have been deposited
under the provisions of the
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Trust Agreement. The Trustee shall not be responsible for the application of any
of the proceeds of the Bonds or any other moneys deposited with it and paid out,
withdrawn or transferred hereunder, if such applications, payment withdrawal or
transfer shall be made in accordance with the provisions of this Trust
Agreement. The immunities and exemptions from liability of the Trustee hereunder
shall extend to its directors, officers, employees and agents.
SECTION 905. CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEE. (A)
Except during the continuance of an event of default specified in Section 802:
(i) the Trustee undertakes to perform such duties and only such duties as are
specifically set forth in this Trust Agreement, the Loan Agreement and the
Related Documents, and no implied covenants or obligations shall be read into
this Trust Agreement or the Loan Agreement against the Trustee; and (ii) in the
absence of bad faith on its part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Trustee and conforming to the
requirements of this Trust Agreement, the Loan Agreement and the Related
Documents.
(B) In case an event of default specified in Section 802 of this Trust
Agreement has occurred and is continuing, the Trustee shall exercise such of the
rights and powers vested in it by this Trust Agreement, and use the same degree
of care and skill in their exercise, as a prudent man
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would exercise or use under the circumstances in the conduct of his own
affairs.
(C) None of the provisions of this Trust Agreement shall be construed
to relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that: (i) the
subsection shall not be construed to limit the effect of Section 905(A), (ii)
the Trustee shall not be liable for any error of judgment made in good faith by
an officer or officers of the corporate trust department of the Trustee, unless
it shall be proved that the Trustee was negligent in ascertaining the pertinent
facts, (iii) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
Majority Interest relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred upon the Trustee, under the provisions of this Trust Agreement;
and (iv) no provision of this Trust Agreement, the Loan Agreement or the Related
Documents shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
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(D) Except as otherwise above provided in this Section: (i) the
Trustee may rely and shall be protected in acting or refraining from acting upon
any resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, waiver, affidavit, requisition or
other paper or document believed by it to be genuine and to have been adopted,
signed or presented by the proper board or Person or to have been prepared and
furnished pursuant to this Trust Agreement, the Loan Agreement or the Related
Documents; (ii) whether in the administration of this Trust Agreement, prior to
the occurrence of an event of default specified in Section 802, the Trustee
shall deem it desirable that a matter be proved or established prior to taking
or suffering any action hereunder, such matters (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate of an Authorized Borrower
Representative and such certificate, in the absence of bad faith on the part of
the Trustee, shall be full warrant to the Trustee for any action taken or
suffered by it under the provisions of this Trust Agreement, the Loan Agreement
or the Related Documents upon the faith thereof; (iii) the Trustee may consult
with counsel, accountant, engineer and other expert and the written advice of
such expert believed by the Trustee to be qualified in relation to the subject
matter, shall be full and complete authorization and protection in respect of
any action taken,
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suffered or omitted by it hereunder in good faith and in reliance thereon; (iv)
the Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, or other paper or
document, but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the Trustee
shall determine to make such further inquiry or investigation, it shall be
entitled to examine the books, records and premises of the Borrower, personally
or by agent or attorney; provided, however, that the aforesaid right of
examination shall be exercised only upon such reasonable and necessary terms and
conditions as the Borrower shall prescribe, which conditions shall be deemed to
include, but not be limited to, reasonable notice and those conditions necessary
to protect the Borrower's trade secrets and proprietary rights; and (v) the
Trustee may execute any of the trusts or powers hereunder or perform any duties
hereunder either directly or by or through attorneys and the Trustee shall not
be responsible for any misconduct or negligence on the part of any attorney
appointed with due care by it hereunder.
(E) Whether or not therein expressly so provided, every provision of
this Trust Agreement, the Loan Agreement and the Related Documents relating to
the conduct or affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
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SECTION 906. COMPENSATION. The Authority shall cause the Borrower to
pay to the trustee its reasonable fees and expenses in accordance with Section
4.05 of the Loan Agreement. Upon the occurrence of an event of default under
Section 802, if the Borrower shall fail to make any payment required by this
Section, the Trustee may, but shall be under no obligation to, make such payment
from any moneys in its possession under the provisions of this Trust Agreement
except as provided in Section 1403(E) and from moneys held in trust for the
benefit of the Bondholders, and shall be entitled to a preference therefor over
any Outstanding Bonds.
SECTION 907. QUARTERLY STATEMENT OF FUNDS ON DEPOSIT. (A) It shall be
the duty of the Trustee, on or before the fifteenth day after each Interest
Payment Date, to file with the Authority, the Borrower and the Letter of Credit
Bank a statement setting forth in respect of the preceding Interest Period.
(i) the amount withdrawn or transferred by it and the amount
deposited with it on account of each fund and account held by it under the
provisions of this Trust Agreement;
(ii) a brief description of all the Investment Obligations held
by it as an investment of moneys in each such fund and account;
(iii) the amount applied to the payment of principal amount of
Bonds;
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(iv) the amount applied to the payment of interest on the Bonds
and the applicable Interest Rate; and
(v) any other information which the Authority, the Borrower or
the Letter of Credit Bank may reasonably request.
(B) All records and files pertaining to the Project and the trusts
hereunder in the custody of the Trustee shall be open at all reasonable times to
the inspection of the Authority, the Borrower and the Letter of Credit Bank and
their agents and representatives.
SECTION 908. NOTICE OF DEFAULT. The Trustee shall not be obligated to
take notice or be deemed to have notice of any event of default under clause (c)
of Section 802, unless specifically notified of such event of default by the
Twenty-Five Percent Interest.
SECTION 909. TRUSTEE MAY BE BONDHOLDER. The Trustee and its directors,
officers, employees or agents, may in good faith buy, sell, own, hold and deal
in the Bonds, and may join in the capacity of Bondholder in any action which any
Bondholder may be entitled to take with like effect as if it were not the
Trustee, may engage, as principal or agent, or be interested in any financial or
other transaction with the Authority or the Borrower, or may maintain any and
all other general banking and business relations with the Authority or the
Borrower, with like effect and in the same manner as if the Trustee were not a
party to this Trust Agreement, and may act as depository, trustee or agent for
any committee or body of
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Bondholders or other obligations of the Authority with like effect and in the
same manner as if the Trustee were not a party to this Trust Agreement; and no
implied covenant shall be read into this Trust Agreement against the Trustee in
respect of such matters.
SECTION 910. TRUSTEE NOT RESPONSIBLE FOR RECITALS. The recitals,
statements and representations contained herein and in the Bonds (excluding the
Trustee's certificates of authentication on the Bonds) shall be taken and
construed as made by and on the part of the Authority and not by the Trustee,
and the Trustee shall not be under any responsibility for the correctness of the
same.
SECTION 911. TRUSTEE NOT RESPONSIBLE FOR RECORDING. The Trustee shall
not be under any obligation to see to the recording or filing of this Trust
Agreement, the Loan Agreement, the Related Documents or any other instrument or
otherwise to the giving to any Person of notice of the provisions hereof or
thereof.
SECTION 912. QUALIFICATION OF THE TRUSTEE. There shall at all times be
a Trustee hereunder which shall be a corporation organized and doing business
under the Federal laws, or the laws of any state thereof, or of the
Commonwealth, authorized under such laws to exercise corporate trust powers,
having a combined capital and surplus of at least FIFTY MILLION DOLLARS
($50,000,000), subject to supervision or examination by Federal, Commonwealth or
state authority, and having its
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principal trust office in the Commonwealth or in one of the states of the United
States of America. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus and the reported deposits of such corporation shall be deemed to be
its combined capital and surplus and reported deposits, respectively, as set
forth in its most recent report of condition so published. If at any time the
Trustee shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect specified
in Section 913 hereof.
SECTION 913. RESIGNATION AND REMOVAL OF TRUSTEE. (A) No resignation or
removal of the Trustee and no appointment of a successor Trustee pursuant to
this Article shall become effective until the acceptance of appointment by the
successor Trustee under Section 914.
(B) The Trustee may resign at any time by giving notice thereof to the
Authority and the Borrower. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the retiring Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
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(C) The Trustee may be removed at any time by demand given to the
Trustee, the Authority and the Borrower by the Majority Interest.
(D) If at any time: (i) the Trustee shall cease to be eligible under
Section 912 hereof and shall fail to resign after request therefor by the
Borrower or by any Bondholder who shall have been a bona fide Bondholder for at
least six months, or (ii) the Trustee shall become incapable of acting or shall
be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, the Authority or the
Borrower may remove the Trustee, or subject to Section 902, any Bondholder who
has been a bona fide Bondholder for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
(E) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Authority, with the approval of the Borrower and the Letter of Credit Bank,
shall promptly appoint a successor Trustee. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee shall be appointed by an instrument or concurrent instruments
executed by the Majority Interest delivered to the
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Authority, the Borrower, and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Authority
and approved by the Borrower. If no successor Trustee shall have been so
appointed by the Authority and approved by the Borrower, and accepted its
appointment in the manner hereinafter provided, any Bondholder who shall have
been a bona fide Bondholder for at least six months may, on behalf of himself
and all others similarly situated, petition any court of competent jurisdiction
for the appointment of a successor Trustee.
(F) The Authority shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Bondholders. Each notice shall include the name and address of the corporate
trust office of the successor Trustee.
SECTION 914. SUCCESSOR TRUSTEE. (A) Every successor Trustee appointed
hereunder shall execute, acknowledge and deliver to its predecessor, to the
Authority and the Borrower, an instrument accepting such appointment hereunder,
and thereupon such successor Trustee without any further act, shall become fully
vested with all the rights, immunities, powers and trusts, and subject to all
the duties and obligations, of its predecessors. The predecessor Trustee shall,
nevertheless, on the request of its successor or of the Authority and upon
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payment of the expenses, charges and other disbursements of such predecessor
which are payable pursuant to the provisions of Section 906, execute and deliver
an instrument transferring to such successor Trustee all the rights, immunities,
powers and trusts of such predecessor hereunder. Every predecessor Trustee shall
deliver all property and moneys held by it hereunder to its successor, subject,
nevertheless, to its preference, if any, provided for in Sections 902 and 906.
Should any instrument from the Authority be required by any successor Trustee
for more fully and certainly vesting such Trustee the rights, immunities, powers
and trusts hereby vested or intended to be vested the predecessor Trustee, any
such instrument shall and will, on request, be executed, acknowledged and
delivered by the Authority.
(B) Notwithstanding any of the foregoing provisions of this Article,
any bank, national association or trust company acting as Trustee may be
converted, merged or consolidated, or to which the corporate trust business
assets as a whole or substantially as a whole of such bank, national association
or trust company may be sold, shall be deemed the successor of the Trustee.
SECTION 915. MONEY HELD IN TRUST. Money held by the Trustee in trust
under this Trust Agreement need not be segregated from other funds except to the
extent required by law or by the express provisions hereof. Subject to the
provisions of Section 602, the Trustee shall be
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under no liability for interest on any money received by it under this Trust
Agreement except as otherwise agreed with the Authority or the Borrower.
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ARTICLE X
EXECUTION OF INSTRUMENTS BY BONDHOLDERS
AND PROOF OF OWNERSHIP OF BONDS
SECTION 1001. EXECUTION OF INSTRUMENTS. Any request, direction,
consent or other instrument required or permitted by this Trust agreement to be
signed or executed by Bondholders may be in any number of concurrent instruments
of similar tenor and may be signed or executed by such Bondholders or their
legal representatives.
SECTION 1002. PROOF OF EXECUTION OF INSTRUMENT AND OF OWNERSHIP. Proof
of the execution of any instrument mentioned in Section 1001 and of the
ownership of Bonds shall be sufficient for any purpose of this Trust Agreement
and shall be conclusive in favor of the Trustee with regard to any action taken
by it under such instrument if made in the following manner: (i) the fact and
date of the execution by and the authority of the Person executing any such
instrument may be proved by the verification of any officer in any jurisdiction
who, by the laws thereof, has power to take affidavits within such jurisdiction,
to the effect that such instrument was subscribed to before him, or by an
affidavit of a witness to such execution; and (ii) the ownership of Bonds shall
be proved by the Bond Register. Nothing contained in this Section shall be
construed as limiting the Trustee to such proof, it being intended that the
Trustee may accept any other evidence of the matters herein stated which may be
sufficient. Any request or consent of any Bondholder shall
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bind every future Holder of the same Bond or any Bond issued in place thereof in
respect of anything done by the Trustee in pursuance of such request or consent.
SECTION 1003. RECORD DATE. If the Authority shall solicit from the
Holders any request, direction, consent or other instrument required or
permitted by this Trust Agreement to be signed or executed by Bondholders, the
Authority may, at its option, fix in advance a record date for the determination
of Holders entitled to give such request, direction, consent or other
instrument, but the Authority shall have no obligation to do so. If such record
date is fixed, such request, direction, consent or other instrument may be given
before or after such record date, but only the Holders at the close of business
on such record date shall be deemed to be Holders for the purposes of
determining whether Holders of the requisite proportion have authorized or
agreed or consented to such request, direction, consent or other instrument, and
for that purpose the Outstanding Bonds shall be computed as of such record date.
No such consent by the Holders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of this Trust
Agreement not later than six months after the record date.
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ARTICLE XI
SUPPLEMENTS AND AMENDMENTS TO TRUST AGREEMENT
SECTION 1101. SUPPLEMENTS AND AMENDMENTS NOT REQUIRING BONDHOLDERS'
CONSENT. The Authority and the Trustee may, without the consent or approval of,
or notice to, any of the Bondholders, at any time and from time to time, enter
into such supplements and amendments to this Trust Agreement, in form
satisfactory to the Trustee the Trustee, as shall not, in the opinion of the
Trustee, be detrimental to the interest of the Bondholders (which supplements
and amendments shall thereafter form a part hereof): (i) to cure any ambiguity
or formal defect or omission, to correct or supplement any provision herein that
may be inconsistent with any other provision herein, or to make any other
provisions with respect to matters or questions arising under this Trust
Agreement that shall not be inconsistent with the provisions of this Trust
Agreement; or (ii) to grant to or confer upon the Trustee for the benefit of the
Bondholders any additional rights, remedies, powers, authority or security that
may lawfully be granted to or conferred upon the Bondholders or the Trustee; or
(iii) to correct any description of, or to reflect changes in, any properties
comprising the Project; or (iv) to add to the covenants of the Authority for the
benefit of the Bondholders or to surrender any right or power herein conferred
upon the Authority.
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SECTION 1102. SUPPLEMENTS AND AMENDMENTS REQUIRING CONSENT OF THE
MAJORITY INTEREST. (A) With the consent of the Majority Interest, the Authority
and the Trustee may, from time to time and at any time, enter into supplements
and amendments to this Trust Agreement for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this Trust
Agreement or of any supplement or amendment to this Trust Agreement or of
modifying in any manner the rights of the Bondholders. Nothing herein contained
shall permit, or be construed as permitting, (i) an extension of the time for
the payment of principal of or interest on any Bond; or (ii) a reduction in the
principal amount of any Bond or the redemption premium, if any, or the Interest
Rate; or (iii) the creation of any lien or security interest with respect to the
Loan Agreement or the payments thereunder; or (iv) a preference or priority of
any Bond or Bonds over any other Bond or Bonds; (v) a reduction in the aggregate
principal amount of the Bonds required for consent to such supplement or
amendment or any waiver hereunder; of (vi) any modification relating to the
security provided by the Letter of Credit.
(B) Nothing herein contained, however, shall be construed as making
necessary the approval by Bondholders of the execution of any supplemental
agreement as authorized in Section 1101.
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(C) It shall not be necessary for the consent of the Bondholders under
this Section to approve the particular form of any proposed supplement or
amendment but it shall be sufficient if such consent shall approve the substance
thereof.
(D) If at any time the Authority shall request the Trustee to enter
into any supplement or amendment to this Trust Agreement for any of the purposes
of this Section, the Trustee shall, at the expense of the Authority, cause
notice of the proposed execution of such supplement or amendment to be given to
the Bondholders. Such notice shall briefly set forth the nature of the proposed
supplement or amendment and shall state that copies thereof are on file at the
Corporate Trust Office for inspection by the Bondholders. The Trustee shall not,
however, be subject to any liability to any Bondholder by reason of its failure
to give the notice required by this Section, and any such failure or any defect
in such notice shall not affect the validity of such supplement or amendment
when consented to as provided in this Section.
(E) Whenever, at any time within one year after the date of the giving
of such notice, the Authority shall deliver to the Trustee an instrument or
instruments in writing purporting to be executed by the Majority Interest, which
instrument or instruments shall refer to the proposed supplement or amendment
described in such notice and shall specifically consent to and approve the
execution thereof in substantially
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the form of the copy thereof referred to in such notice, thereupon, but not
otherwise, the Trustee may execute such supplement or amendment in substantially
such form, without liability or responsibility to any Bondholder whether or not
such Bondholder shall have consented thereto.
(F) If the Majority Interest at the time of the execution of such
supplement or amendments or any record date established in connection therewith
pursuant to Article X shall have consented to and approved the execution thereof
as herein provided, no Holder shall have any right to object to the execution of
such supplement or amendment, or to object to any of the terms and provisions
contained therein or the operation thereof or in any manner to question the
propriety of the execution thereof, or to enjoin or restrain the Trustee or the
Authority from executing the same or from taking any action pursuant to the
provisions thereof.
SECTION 1103. SUPPLEMENTS AND AMENDMENTS DEEMED PART OF TRUST
AGREEMENT. The Trustee is authorized to join with the Authority in the execution
of any supplement or amendment herein provided. Any supplement or amendment to
this Trust Agreement executed in accordance with the provisions of this Article
shall thereafter form a part of this Trust Agreement, and all of the terms and
conditions contained in any such supplement or amendment as to any provision
authorized to be contained therein shall be and shall be and be deemed to be
part of the terms and conditions of this Trust Agreement for any and all
purposes. Upon the
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execution of any supplement or amendment to this Trust Agreement pursuant to the
provisions of this Article, this Trust Agreement shall be and be deemed to be
modified and amended in accordance therewith, and the respective rights, duties
and obligations under this Trust Agreement of the Authority, the Trustee and the
Bondholders shall thereafter be determined, exercised and enforced hereunder,
subject in all respects to such modifications and amendments. In case of the
execution and delivery of any supplement or amendment, express reference may be
made thereto in the text of any Bonds issued thereafter, if deemed necessary or
desirable by the Trustee.
SECTION 1104. DISCRETION OF TRUSTEE IN ENTERING INTO SUPPLEMENTS AND
AMENDMENTS. (A) In each and every case provided for in this Article, the Trustee
shall not be obligated to execute any proposed supplement or amendment, if the
rights, obligations and interests of the Trustee would be thereby affected, and
the Trustee shall not be under any responsibility or liability to the Authority,
the Borrower or to any Bondholder or to anyone whomsoever for its refusal in
good faith to enter into any such supplement or amendment if such supplement or
amendment is deemed by it to be contrary to the provisions of this Article.
(B) The Trustee shall be entitled to receive, and shall be fully
protected in relying upon, an opinion of any counsel, as conclusive evidence
that any such proposed supplement or amendment does or does
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not comply with the provisions of this Trust Agreement, and that it is or is not
proper for it, under the provisions of this Article, to join in the execution of
such supplement or amendment.
SECTION 1105. CONSENT OF BORROWER AND LETTER OF CREDIT BANK REQUIRED.
Anything in this Trust Agreement to the contrary notwithstanding, any amendment
or supplement to this Trust Agreement shall not become effective unless and
until the Borrower and the Letter of Credit Bank shall have consented thereto.
ARTICLE XII
SUPPLEMENTS AND AMENDMENTS TO LOAN
AGREEMENT AND RELATED DOCUMENTS
SECTION 1201. SUPPLEMENTS AND AMENDMENTS TO LOAN AGREEMENT AND RELATED
DOCUMENTS NOT REQUIRING CONSENT. The Authority and the Borrower may enter into,
and the Trustee may consent to, from time to time and at any time, such
amendments and supplements to the Loan Agreement or the Related Documents, in
form satisfactory to the Trustee, as shall not be inconsistent with the terms
and provisions thereof and, in the opinion of the Trustee, shall not be
detrimental to the interests of the Bondholders (which supplements and
amendments shall thereafter form a part thereof): (i) to make changes in the
description of or identify more precisely the Project; or (ii) to cure any
ambiguity or formal defect or omission in the Loan Agreement or the Related
Documents or in any supplement thereto; or (iii) to grant to or confer
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upon the Authority or the Trustee for the benefit of the Bondholders any
additional rights, remedies, powers, authority or security that may lawfully be
granted to or conferred upon any of them; or (iv) to add to the covenants of the
Borrower for the benefit of the Bondholders or to surrender any right or power
therein conferred upon the Borrower.
SECTION 1202. SUPPLEMENTS AND AMENDMENTS TO LOAN AGREEMENT AND RELATED
DOCUMENTS REQUIRING CONSENT OF THE MAJORITY INTEREST. Except for supplements or
amendments provided for in Section 1201, the Authority shall not enter into and
the Trustee shall not consent to any supplement or amendment to the Loan
Agreement or the Related Documents unless notice of the proposed execution of
such supplement or amendment shall have been given to, and the Majority Interest
shall have shall have consented to and approved the execution thereof, all as
provided for in Section 1102 in the case of supplements and amendments to this
Trust Agreement and with the same effect as provided in Section 1103. The
Trustee shall be entitled to exercise its discretion in consenting or not
consenting to any such supplement or amendment in the same manner as provided
for in Section 1104 in the case of supplements and amendments to this Trust
Agreement.
SECTION 1203. CONSENT OF TRUSTEE AND LETTER OF CREDIT BANK REQUIRED.
Anything in this Trust Agreement to the contrary notwithstanding, any supplement
or amendment to the Loan Agreement or
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the Related Documents shall not become effective unless and until the Trustee
and the Letter of Credit Bank shall have consented thereto.
ARTICLE XIII
PAYMENT OF BONDS AND TERMINATION; DEFEASANCE
SECTION 1301. PAYMENT OF BONDS AND TERMINATION. If there is paid or
caused to be paid from the Bond Fund in accordance with the provisions of
Sections 502 and 503 to the Holders of all of the Outstanding Bonds the
principal amount of, and interest which is and shall thereafter become due and
payable thereon, together with all other sums payable hereunder by the
Authority, then and in that case the rights, title and interest of the Trustee
hereunder shall cease and terminate, and such Bonds shall cease to be entitled
to any benefit under this Trust Agreement. In such event, the Trustee shall
transfer and assign to the Borrower all property then held by the Trustee, shall
execute such documents as may be reasonably required by the Authority or the
Borrower to evidence such transfer and assignment and shall turn over to the
Borrower any surplus in the Bond Fund and any balance remaining in the Project
Fund. If the Authority shall pay or cause to be paid to the Holders of less than
all of the Outstanding Bonds the principal amount of, premium, if any, and
interest which is and shall thereafter become due and payable upon such Bonds,
such Bonds or portions thereof, shall cease to be entitled to any benefit or
security under this Trust Agreement.
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SECTION 1302. DEFEASANCE. (A) Any Outstanding Bond, or any portion
thereof, shall be deemed to have been paid within the meaning and with the
effect expressed in Section 1301 when the whole amount of the principal of, and
interest on such Bond shall have been paid and the condition set forth in clause
(vi) below shall have been satisfied or when (i) if such Bond or portion thereof
shall have been selected for redemption in accordance with Section 301, the
Borrower shall have given to the Trustee irrevocable instructions to give in
accordance with the provisions of Section 302 notice of redemption thereof; (ii)
there shall be on deposit with the Trustee, Eligible Moneys, or Government
Obligations purchased with Eligible Moneys, which shall not contain provisions
permitting the redemption thereof other than at the option of the holder, the
principal of and the interest on which when due and without any reinvestment
thereof, will provide moneys which shall be sufficient to pay when due the
principal of, and interest due and to become due on said Bond; (iii) in the
event the Maturity Date of said Bond will not occur or said Bond is not to be
redeemed within the next succeeding 60 days, the Borrower shall have given the
Trustee irrevocable instructions to give notice, as soon as practicable in the
same manner as a notice of redemption is given pursuant to Section 302, to the
Holder of said Bond or portion thereof, stating that the deposit of such Moneys
or Government Obligations required by clause (ii) of this paragraph has been
made with the Trustee and that said Bond
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is deemed to have been paid in accordance with this Section and stating such
payment or redemption date or dates upon which moneys are to be available for
the payment of the principal of and interest on said Bond; (iv) the Trustee
shall have received an opinion of counsel, which counsel is experienced in
bankruptcy matters, satisfactory to the Trustee and the Authority, to the effect
that the payment to the Bondholder of the moneys described in clause (ii) of
this paragraph would not constitute a transfer which may be avoided under any
provision of the Federal Bankruptcy Code in the event of an Act of Bankruptcy;
and (v) the Trustee shall have received an opinion of counsel experienced in tax
matters under the Code and matters relating to Regulation 3582, satisfactory to
the Trustee and the Authority, to the effect that the deposit described in
clause (ii) of this paragraph would not adversely affect the treatment of the
interest received by the Bondholders as income from sources within the
Commonwealth or as Eligible Activities as defined in Regulation 3582.
(B) Neither the moneys nor the Government Obligations deposited with
the Trustee pursuant to this Section nor principal or interest payments on any
such obligations shall be withdrawn or used for any purpose other than, and
shall be held in trust for, the payment of the principal of and interest on said
Bond.
(C) If payment of less than all of the Bonds is to be provided for in
the manner and with the effect described in this Article, the Trustee
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shall select such Bonds, or portions thereof, by such method as the Trustee
shall deem fair and appropriate.
(D) If Bonds (or portions thereof) are deemed to have been paid in
accordance with the provisions of this Article by reason of the deposit with the
Trustee or moneys or Government Obligations, no amendment to the provisions of
this Section which would adversely affect the Holders of such Bonds (or portions
hereof) shall be made without the Consent of each Holder affected thereby.
ARTICLE XIV
LETTER OF CREDIT;
SUCCESSOR LETTER OF CREDIT
SECTION 1401. COMPLIANCE WITH PROCEDURE. The Trustee shall comply with
the procedure set forth in the Letter of Credit.
SECTION 1402. SURRENDER UPON PAYMENT OF THE BONDS. Upon payment of the
Bonds, the Trustee shall surrender the Letter of Credit then outstanding to the
Letter of Credit Bank for cancellation in accordance with its terms.
SECTION 1403. DRAWS UNDER LETTER OF CREDIT. (A) Except as provided in
subsection (B) and (C) of this Section, if by 10:00 a.m., Atlantic standard
time, on the Business Day immediately preceding any Interest Payment Date or
Principal Payment Date there shall not otherwise be available to the Trustees
sufficient Eligible Moneys to purchase, pay or provide for the payment of the
principal of, and interest on the Bonds
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then due and payable, the Trustee, before 2:00 p.m., New York time on that same
Business Day, shall file a notice of claim under the Letter of Credit to the
extent necessary (together with any Eligible Moneys available to the Trustee
therefor) to pay or provide for such payment.
(B) The Trustee, immediately after declaring the principal amount of
the Bonds to be due and payable under Section 803(a), shall file a notice of
claim under the Letter of Credit in an amount sufficient (together with any
Eligible Moneys available to the Trustee therefor) to pay or provide for the
payment of such principal amount, and interest thereon then due and payable.
(C) On the Business Day on which the Trustee receives the notice and
documents mentioned in Section 305(A), if received on or prior 10:00 a.m. (New
York time), or in the next Business Day if received after such hour, the
Trustee, before 2:00 p.m., New York time, shall file a notice of claim under the
Letter of Credit in an amount sufficient (together with any Eligible Money
available to the Trustee therefor) to pay the Purchase Price of the Put Bonds.
(D) The proceeds of any drawings under the Letter of Credit pursuant
to (i) Section 1403(A) and (B) shall be deposited to the credit of the
corresponding account of the Bond Fund and (ii) Section 1403(C) shall be
deposited in the Tender Account of the Bond Purchase Fund.
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(E) Notwithstanding any other provision of this Agreement, including
Section 902 and 906 hereof, the Trustee shall not file a notice of claim under
the Letter of Credit to provide for the payment of: (i) Bonds the Holder of
which is the Borrower of any Affiliate (including the Pledge Bonds), (ii) fees,
expenses and costs of indemnification of the Trustee or (iii) premium, if any,
on any Bonds.
SECTION 1404. SUCCESSOR LETTER OF CREDIT.
(A) The Borrower, at any time prior to the one hundred twentieth
(120th) day preceding the expiration of the Letter of Credit then outstanding,
and the Initial Letter of Credit Bank, at any time after the Completion Date and
prior to such day, may at their option in accordance with the provisions of
Section 3.07(b) of the Loan Agreement provide for the delivery to the Trustee of
a Successor Letter of Credit. Any Successor Letter of Credit may be for a term
of years more or less than the Letter of Credit which is being replaced but in
no event less than one year and shall contain administrative provisions
reasonably acceptable to the Trustee.
(B) If pursuant to sub-section (A) of this Section at any time prior
to 120 days prior to the expiration of the Letter of Credit then outstanding
there shall have been delivered to the Trustee a Successor Letter of Credit and
the documents mentioned in Section 3.07(b) of the Loan Agreement, then the
Trustee shall accept such Successor Letter of
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Credit and surrender any previously held Letter of Credit to the Letter of
Credit Bank for cancellation in accordance with its terms.
(C) The Trustee will give notice of its acceptance of any Successor
Letter of Credit to all Bondholders promptly after such acceptance.
SECTION 1405. SUPPLEMENTS AND AMENDMENTS TO THE LETTER OF CREDIT NOT
REQUIRING CONSENT. The Trustee and the Letter of Credit Bank may enter into,
from time to time and at any time, such amendments and supplements to the Letter
of Credit as shall not be inconsistent with the terms and provisions thereof,
which amendments or supplements in the opinion of the Trustee shall not be
detrimental to the interests of the Bondholders (which supplements and
amendments shall thereafter form a part thereof),
(i) to cure any ambiguity or formal defect or omission in the Letter
of Credit or in any supplement thereto,
(ii) to grant to or confer upon the Trustee for the benefit of the
Bondholders any additional rights, remedies, powers, authority or security that
may lawfully be granted to or conferred upon the Bondholders or the Trustee, or
(iii) in connection with any other change which, in the judgement of
the Trustee, will not restrict, limit or reduce the obligation of the Letter of
Credit Bank to make the payments under the Letter of
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Credit to pay the principal of or interest on the Bonds or otherwise impair the
security of the Bondholders under this Trust Agreement.
SECTION 1406. SUPPLEMENTS AND AMENDMENTS TO THE LETTER OF CREDIT
REQUIRING CONSENT OF THE MAJORITY INTEREST. Except for supplements or amendments
provided for in Section 1405, the Trustee shall not enter into any supplement or
amendment to the Letter of Credit, unless notice of the proposed execution of
such supplement or amendment shall have been given to the Bondholders and the
Majority Interest shall have consented to and approved the execution thereof,
all as provided for in Section 1102 hereof in the case of supplements and
amendments to this Trust Agreement and with the same effect as provided in
Section 1103; provided that the Trustee shall be entitled to exercise its
discretion in consenting or not consenting to any such supplement or amendment
in the same manner as provided for in Section 1104. Nothing herein contained
shall permit, or be construed as permitting any amendment or modification of any
provision of the Letter of Credit which would reduce the amount of any payment
required to be made thereunder to the Trustee, or would postpone the time of any
such payment, or would alter the conditions under which any such payment is
made, or any other amendment or modification which would adversely affect the
security of the Holders.
SECTION 1407. ENFORCEMENT OF REMEDIES BY TRUSTEE. In the event of a
default by the Letter of Credit Bank under the Letter of Credit,
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the Trustee is hereby authorized and required to enforce all of its rights in
and under the Letter of Credit, by such actions, at law or in equity, as it
deems necessary in order to protect the interest of the Holders. No default by
the Letter of Credit Bank under the terms of the Letter of Credit shall relieve
or reduce any obligations of the Borrower under this Trust Agreement.
SECTION 1408. ENFORCEMENT OF REMEDIES BY LETTER OF CREDIT BANK. So
long as the Letter of Credit Bank shall not have failed to honor any drawing
made and presented pursuant to and in strict compliance with the Letter of
Credit, the Letter of Credit Bank may proceed to protect and enforce its rights
under this Trust Agreement by such suits, actions or special proceedings in
equity or at law or in any manner available to the Trustee, as the Letter of
Credit Bank may deem most effectual to protect and enforce its rights.
ARTICLE XV
MISCELLANEOUS PROVISIONS
SECTION 1501. COVENANTS OF AUTHORITY BIND ITS SUCCESSORS. In the event
of the dissolution of the Authority, all of the covenants, stipulations,
obligations and agreements contained in this Trust Agreement by or on behalf of
or for the benefit of the Authority shall bind or inure to the benefit of the
successor or successors of the authority from time to time and any officer,
board, commission, authority, agency or
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instrumentality to whom or to which any power or duty affecting such covenants,
stipulations, obligations and agreements shall be transferred by or in
accordance with law.
SECTION 1502. NOTICES. (A) All notices, demands, directions, requests,
consents or other instruments and communications authorized or required by this
Trust Agreement to be given by or to, or filed with the Bondholders, the
Authority, the Trustee, the Letter of Credit Bank or the Borrower shall be in
writing and shall be (i) mailed by first-class mail, registered or certified,
return receipt requested, or express mail, postage prepaid, or private courier
service, next day delivery, or sent by telex, telecopy or other similar form of
rapid transmission confirmed by mailing (by first-class mail, registered or
certified, or express mail, postage prepaid, or by private courier, next day
delivery) confirmation at substantially the same time as such rapid
transmission; or (ii) personally delivered to the receiving party or, if not an
individual, to an officer of the receiving party. All such communications shall
be mailed, sent or delivered addressed as follows:
If to the Bondholder: To the address appearing in the registration
books kept by the Trustee,
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If to the Authority: Puerto Rico Industrial, Medical, Educational
and Environmental Pollution Control Facilities
Financing Authority
c/o Governmental Development Bank for Puerto Rico Minillas
Government Center De Diego Avenue and
Baldorioty de Castro
Stop 22
Santurce, Puerto Rico
Attention: Executive Director
Telephone: (809) 722-1425
Telefax: (809) 726-1440 :
If to the Trustee: Banco Popular de Puerto Rico
Banco Popular Center
Suite 503
Hato Rey, Puerto Rico 00918
Attention: Trust Division
Telephone: (809) 754-8472
Telefax: (809) 763-5972
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If to the Borrower: El Conquistador Partnership L.P.
c/o Williams Hospitality Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Hugh A. Andrews
Telephone: (809) 791-2000
Telefax: (809) 791-7500
With copy to: Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telephone: (212) 351-3139
Telefax: (212) 351-3131
Kumagai Caribbean, Inc.
c/o Williams Hospitality
Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Shunsuke Nakane
</TABLE>
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Telephone: (809) 791-2195
Telefax: (809) 791-1610
WMS Industries, Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Corporate Secretary
Telephone: (312) 728-2300
Telefax: (312) 539-2099
Messrs. Burton and Richard
Koffman c/o Richford American
950 Third Avenue
New York, New York 10022
Telephone: (212) 838-2785
Telefax (212) 888-1185
If to the Letter of Credit Bank: To the address appearing in the
Reimbursement Agreement then in
force.
If to the Remarking Agent: Chase Securities (P.R.), Inc.
</TABLE>
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Chase Manhattan Bank Building
254 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Attention: General Manager
Telephone: (809) 753-3773
Telefax: (809) 753-3669
Meduna & Co., Inc.
206 Tetuan Street
San Juan, Puerto Rico 00902
Attention: President
Telephone: (809) 725-5285
Telefax: (809) 721-1735
</TABLE>
(B) All documents received by the Trustee under the provisions of this
Trust Agreement, or photographic copies thereof, shall be retained in its
possession until this Trust Agreement shall be released in accordance with the
provisions of the Trust Agreement, subject at all reasonable times to the
inspection of the Authority, and the Bondholders and the agents and
representatives thereof.
(C) A duplicate copy of each notice, certificate, request or other
communication given hereunder to the Authority, the Borrower, the
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Trustee, or the Letter of Credit Bank shall also be concurrently given to each
of the others. The Authority, the Trustee, the Borrower and the Letter of Credit
Bank may, by notice given hereunder, designate any further or different
addresses to which subsequent notices, certificates or other communications
shall be sent.
(D) All such notices and other communications shall be effective when
received.
SECTION 1503. SUBSTITUTE MAILING. In case, by reason of the suspension
of regular mail service and private courier service as a result of a strike,
work stoppage or similar activity, it shall be impractical to mail notice of any
event to the Bondholders when such notice is required to be given pursuant to
any provision of this Trust Agreement, any manner of giving notice as shall be
satisfactory to the Trustee and the Authority shall be deemed to be a sufficient
giving of such notice.
SECTION 1504. RIGHTS UNDER TRUST AGREEMENT. Except as herein otherwise
expressly provided, nothing in this Trust Agreement expressed or implied is
intended or shall be construed to confer upon any Person, other than the parties
hereto, the Borrower, the Bondholders and the Letter of Credit Bank any right,
remedy or claim, legal or equitable, under or by reason of this Trust Agreement
or any provision hereof. This Trust Agreement and all of its provisions is
intended to be and is for the
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sole and exclusive benefit of the parties hereto, the Borrower, the Bondholders
and the Letter of Credit Bank.
SECTION 1505. SEVERABILITY. In case any one or more of the provisions
of this Trust Agreement or of the Bonds shall for any reason be held to be
illegal or invalid, such illegality or invalidity shall not affect any other
provision of this Trust Agreement or of the Bonds, but this Trust Agreement and
the Bonds shall be construed and enforced as if such illegal or invalid
provision had not been contained therein. In case any covenant, stipulation,
obligation or agreement contained in the Bonds or in this Trust Agreement shall
for any reason be held to be in violation of law, then such covenant,
stipulation, obligation or agreement shall be deemed to be the covenant,
stipulation, obligation or agreement of the Authority to the full extent
permitted by law.
SECTION 1506. COVENANTS OF AUTHORITY NOT COVENANTS OF OFFICIALS
INDIVIDUALLY. No covenant, stipulation, obligation or agreement contained herein
shall be deemed to be a covenant, stipulation, obligation or agreement of any
present or future member, agent or employee of the Authority in his individual
capacity, and neither the members of the Board nor any other officer of the
Board or the Authority executing the Bonds shall be liable personally on the
Bonds or be subject to any personal liability or accountability by reason of the
issuance thereof. No member, officer, agent or employee of the authority shall
incur any personal
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liability in acting or proceeding or in not acting or not proceeding, in good
faith, reasonably and in accordance with the terms of this Trust Agreement.
SECTION 1507. COMMONWEALTH LAW GOVERNS. This Trust Agreement shall be
governed by and construed in accordance with the laws of the Commonwealth.
SECTION 1508. PAYMENTS DUE ON A NON-BUSINESS DAY. In any case where a
Principal Payment Date or an Interest Payment Date shall not be a Business Day,
then payment of interest or principal need not be made on such date but may be
made on the next succeeding Business Day with the same force and effect, and no
interest on such payment shall accrue for the period after such date.
SECTION 1509. HEADINGS NOT PART OF TRUST AGREEMENT. Any heading
preceding the text of the Articles and Sections, and any table of contents or
marginal notes appended to copies hereof, shall be solely for convenience or
reference and shall not affect its meaning, construction or effect.
SECTION 1510. TRUST AGREEMENT SUPERSEDES PRIOR AGREEMENT. This Trust
Agreement supersedes any other prior agreement written or oral, between the
parties hereto with respect to the Bonds.
ACCEPTANCE
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The appearing parties accept this Deed as drafted and confirm that the
same has been drawn in accordance with their instructions.
I, the Notary, hereby certify that the appearing parties read this
Deed, and I advised the appearing parties of their right to have witnesses
present at its execution, which right they waived, and that I advised them of
the legal effect of this Deed; and they acknowledged that they understood the
contents of this Deed and such legal effect, and thereupon they signed this Deed
before me, affixing their initials to each and every page thereof.
I further certify as to everything stated or contained herein.
I, the Notary, DO HEREBY ATTEST.
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LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
Dated as of February 7, 1991
between
EL CONQUISTADOR PARTNERSHIP L.P.,
a Delaware limited partnership
and
THE MITSUBISHI BANK, LIMITED,
acting through its New York Branch
-----------------------------------
$120,000,000
PUERTO RICO INDUSTRIAL, MEDICAL, EDUCATIONAL
AND ENVIRONMENTAL POLLUTION CONTROL
FACILITIES FINANCING AUTHORITY
INDUSTRIAL REVENUE BONDS,
1991 SERIES A
(EL CONQUISTADOR RESORT PROJECT)
CONVERTIBLE INDUSTRIAL REVENUE BONDS
1991 SERIES B (EL CONQUISTADOR
RESORT PROJECT) AND
INDUSTRIAL REVENUE BONDS
1991 SERIES C (EL CONQUISTADOR
RESORT PROJECT)
-----------------------------------
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1. DEFINITIONS................................................................................... 2
2. ISSUANCE OF LETTER OF CREDIT; FEES............................................................ 20
(a) Amount and Terms of Letter of Credit................................................. 20
(b) Annual Letter of Credit Fee.......................................................... 20
(c) Annual Agent's Fee................................................................... 21
(d) Substitution and Amendment Fees...................................................... 21
(e) Drawing Fees......................................................................... 21
(f) Additional Payment................................................................... 21
3. AGREEMENT TO REPAY DRAWINGS; PURCHASE OF BONDS................................................ 22
(a) Reimbursement........................................................................ 22
(b) Payments and Computations. ......................................................... 23
(c) Payment on Non-Business Days......................................................... 23
(d) Book Entries......................................................................... 23
(e) Obligations Absolute................................................................. 23
(f) No Withholdings...................................................................... 24
(g) Pledge of Bonds...................................................................... 25
(h) Credits for Amount Paid on Bonds; Other Credits...................................... 25
(i) Collateral Account................................................................... 25
4. CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF
CREDIT........................................................................................ 27
(a) Delivery of the Bonds and Operative Documents........................................ 27
(b) No Default........................................................................... 27
(c) Representations and Warranties....................................................... 27
(d) Certificate of Compliance............................................................ 27
(e) Opinion of Counsel................................................................... 27
(f) Opinion of Bond Counsel.............................................................. 27
(g) Guarantors' Representations and Warranties........................................... 27
(h) Documentation and Proceedings........................................................ 28
(i) Construction Management Agreement.................................................... 28
(j) Fees................................................................................. 28
(k) Management Agreement................................................................. 28
(l) Ground Lease......................................................................... 28
(m) Acquisition Documents................................................................ 28
(n) Title Policy......................................................................... 29
(o) Appraisal............................................................................ 29
(p) Survey............................................................................... 29
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(q) Environmental Report................................................................. 30
(r) Preliminary Report................................................................... 30
(s) Insurance............................................................................ 30
(t) Real Estate Taxes.................................................................... 30
(u) Formation of Company................................................................. 30
(v) Other Approvals...................................................................... 30
(w) Swap Arrangement..................................................................... 30
(x) Maximum Effective Interest Rate...................................................... 31
(y) GDB Loan Documents................................................................... 31
(z) Budget............................................................................... 31
(aa) Authorization........................................................................ 31
(bb) Accounting........................................................................... 31
(cc) No Flood Plain....................................................................... 31
(dd) Labor Contributions.................................................................. 31
5. INDEMNIFICATION; BROKERAGE.................................................................... 32
6. CONDOMINIUM UNITS............................................................................. 33
7. COVENANTS..................................................................................... 33
(a) Notice of Default.................................................................... 34
(b) ERISA................................................................................ 34
(c) Preservation of Existence............................................................ 34
(d) Successor Letter of Credit........................................................... 34
(e) Additional Indebtedness.............................................................. 35
(f) Payment of Swap Obligations.......................................................... 35
(g) Financial Statements................................................................. 35
(h) Transfers............................................................................ 36
(i) Decision Making...................................................................... 36
(j) Further Assurances................................................................... 37
(k) Compliance with Laws................................................................. 37
(l) Performance of This and Other Agreements. .......................................... 37
(m) Amendments........................................................................... 37
(n) Construction. ...................................................................... 37
(o) Inspection of Project and Books and Records.......................................... 38
(p) Expenses............................................................................. 38
(q) Plans................................................................................ 39
(r) Delivery of Agreement................................................................ 39
(s) Correction of Work................................................................... 39
(t) Revised Budget....................................................................... 39
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(u) Notices.............................................................................. 40
(v) Plan Changes......................................................................... 40
(w) No Encroachments..................................................................... 40
(x) Insurance............................................................................ 40
(y) Application of Insurance and Condemnation Proceeds................................... 41
(z) Compliance with Documents............................................................ 41
(aa) Bonds................................................................................ 41
(bb) Work Changes......................................................................... 41
(cc) No Contracts......................................................................... 41
(dd) Asbestos............................................................................. 42
(ee) Final Survey......................................................................... 42
(ff) Construction Trust Account........................................................... 42
(gg) Leasing.............................................................................. 42
(hh) Distribution Cash Under Company Partnership Agreements. ............................ 42
(ii) Deficiency Loans..................................................................... 43
(jj) Ground Lease and GDB Documents....................................................... 44
(kk) Compliance with Environmental Laws................................................... 44
(ll) Expropriation........................................................................ 44
(mm) Palominos Island Property............................................................ 45
(nn) Registration and Mortgages of Boats.................................................. 45
(oo) Recordation of True Description...................................................... 45
(pp) Additional Assignments and Chattel Mortgages......................................... 45
(qq) Amounts Secured by Mortgage.......................................................... 46
(rr) Sole Business........................................................................ 46
(ss) Loan Agreement Covenants............................................................. 46
(tt) Termination of Swap Agreements....................................................... 46
8. REPRESENTATIONS AND WARRANTIES................................................................ 46
(a) Due Organization..................................................................... 46
(b) No Violation......................................................................... 47
(c) Consents............................................................................. 47
(d) Enforceability....................................................................... 48
(e) No Litigation........................................................................ 48
(f) No Defaults.......................................................................... 48
(g) Tax Returns.......................................................................... 48
(h) Compliance with ERISA................................................................ 49
(i) Other Facts.......................................................................... 49
(j) Other Representations and Warranties................................................. 49
(k) Financial Statements................................................................. 49
(l) Martin Regulations................................................................... 50
</TABLE>
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(m) Investment Company Act............................................................... 50
(n) Disclosure........................................................................... 50
(o) Management Agreement; Ground Lease and Other Agreements.............................. 50
(p) Location of Company.................................................................. 51
(q) Plans; Construction.................................................................. 51
(r) Availability of Utilities. ......................................................... 51
(s) No Liens............................................................................. 51
(t) Compliance with Building Codes, Zoning Laws, Etc..................................... 51
(u) Budget............................................................................... 52
(v) Security Documents................................................................... 52
(w) Hazardous Materials.................................................................. 52
9. DISBURSEMENTS FOR CONSTRUCTION................................................................ 52
(a) Disbursements for Construction....................................................... 52
(b) Retainages........................................................................... 53
(c) Bank's Consultant.................................................................... 54
(d) Disbursements for Operating Deficits................................................. 54
(e) Documentation to the Bank............................................................ 54
(f) Use of Disbursements................................................................. 54
(g) Determination of Amounts of Disbursements............................................ 55
(h) Final Disbursement................................................................... 55
(i) Disbursements for Deposits or Stored Materials....................................... 55
(j) Reallocation......................................................................... 56
(k) Loan Balance......................................................................... 57
(l) Disbursements after Default.......................................................... 57
(m) Method of Disbursement............................................................... 58
(n) Disbursements for Amounts Due........................................................ 58
(o) Partial Disbursements................................................................ 58
(p) Investment of Bond Proceeds.......................................................... 59
(q) Disbursements for Vehicles........................................................... 59
10. CONDITIONS PRECEDENT TO MAKE THE INITIAL DISBURSEMENT......................................... 59
(a) Equity Contribution.................................................................. 59
(b) Trade Contracts...................................................................... 59
(c) Architect's and Engineer's Agreements and Subcontracts............................... 59
(d) [Intentionally Omitted].............................................................. 60
(e) GDB Loan............................................................................. 60
(f) Representations and Warranties....................................................... 60
(g) Receipt of Documents by Bank......................................................... 60
(h) No Condemnation...................................................................... 63
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(i) No Default........................................................................... 63
(j) Accounting........................................................................... 63
11. CONDITIONS PRECEDENT TO DISBURSEMENTS AFTER THE INITIAL
DISBURSEMENT.................................................................................. 63
(a) Conditions Satisfied................................................................. 63
(b) Representations and Warranties....................................................... 63
(c) Receipt of Documents by Bank......................................................... 64
(d) No Default........................................................................... 65
12. EVENTS OF DEFAULT............................................................................. 65
(a) Events of Default.................................................................... 65
(b) Bank Remedies........................................................................ 69
(c) Bank's Right to Stop Disbursing Funds................................................ 70
(d) Bank's Right to Complete............................................................. 70
(e) No Liability of the Bank............................................................. 71
(f) Termination of Agreement............................................................. 71
(g) Remedies Not Exclusive............................................................... 72
13. NATURE OF THE BANK'S DUTIES................................................................... 72
14. MISCELLANEOUS................................................................................. 73
(a) Amendments and Consents.............................................................. 73
(b) Survival of Representations and Warranties........................................... 73
(c) Expenses............................................................................. 73
(d) Set-off.............................................................................. 74
(e) No Approval of Work.................................................................. 74
(f) Bank's Review........................................................................ 74
(g) Submission of Evidence............................................................... 75
(h) Bank Sole Beneficiary................................................................ 75
(i) Contractors.......................................................................... 75
(j) Entire Agreement..................................................................... 75
(k) Further Assurances................................................................... 75
(l) No Waiver; Cumulative Remedies....................................................... 76
(m) Singular/Plural...................................................................... 76
(n) No Joint Venture..................................................................... 76
(o) Incorporation by Reference........................................................... 76
(p) Binding Effect; Assignment........................................................... 76
(q) Notices.............................................................................. 77
(r) Satisfaction......................................................................... 77
</TABLE>
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(s) Governing Law and Consent to Jurisdiction............................................ 77
(t) Limitation of Liability.............................................................. 78
(u) Counterparts......................................................................... 79
(v) Defined Instruments.................................................................. 79
(w) Accounting Terms and Determinations.................................................. 79
(x) Lawful Interest...................................................................... 79
(y) Consents; Approvals.................................................................. 79
(z) Severability......................................................................... 80
(aa) Headings............................................................................. 80
(bb) Reliance by Bank..................................................................... 80
</TABLE>
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Exhibit A -- Form of Irrevocable Letter of Credit
Exhibit B -- Form of Assignment of Accounts Receivable
Exhibit C -- Form of Assignment of Contracts
Exhibit D -- Form of Assignment of Rents
Exhibit E -- Borrower's Affidavit
Exhibit F -- Budget
Exhibit G -- Form of Chattel Mortgage
Exhibit H -- Condominium Parcels
Exhibit I -- Request for Disbursement
Exhibit J -- Insurance Requirements for all Labor and Material
Exhibit K -- Trade Contractor Consent and Agreement
<PAGE>
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LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
This LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this AGREEMENT)
dated as of February 7, 1991 between EL CONQUISTADOR PARTNERSHIP L.P., a
Delaware limited partnership (the COMPANY), AND THE MITSUBISHI BANK, LIMITED, a
Japanese banking corporation acting through its New York Branch (the BANK).
WITNESSETH:
WHEREAS, pursuant to the Loan Agreement dated as of the date hereof
(the LOAN AGREEMENT) between the Company and Puerto Rico Industrial, Medical,
Educational and Environmental Pollution Control Facilities Financing Authority,
a body corporate and politic constituting a public corporation and a
governmental instrumentality established and existing under and by virtue of the
laws of the Commonwealth of Puerto Rico (the ISSUER), the Issuer has resolved to
issue and sell its Industrial Revenue Bonds, 1991 Series A (El Conquistador
Resort Project) and Convertible Industrial Revenue Bonds 1991 Series B (El
Conquistador Resort Project), as the same may hereafter be converted to
Industrial Revenue Bonds, 1991 Series C (El Conquistador Resort Project) in the
aggregate principal amount of $120,000,000 (collectively, the BONDS) and to
apply the proceeds thereof to finance a portion of the cost of acquiring,
developing, constructing and equipping a first-class destination resort hotel
and related facilities to be located in Fajardo, Puerto Rico and to be known as
the El Conquistador Resort and Country Club; and
WHEREAS, Banco Popular de Puerto Rico has been designated to serve as
trustee under the Trust Agreement, dated as of the date hereof, between the
Issuer and the Trustee (the TRUST AGREEMENT) (together with any successor
trustee designated pursuant to the Trust Agreement, the TRUSTEE); and
WHEREAS, the Issuer and the Company have requested the Bank to issue
its irrevocable letter of credit (together with any substitute therefor or
replacement thereof issued in accordance with the terms of such letter of credit
or this Agreement, the LETTER OF CREDIT) to provide security for the payment of
the principal of, and interest accrued on, the Bonds; and
WHEREAS, the obligations of the Company under this Agreement, the Loan
Agreement and the four Mortgage Notes, dated as of the date hereof, from the
Company to the Issuer in the respective principal amounts of $120,000,000,
$6,612,000, $20,000,000 and $2,000,000 (collectively, the NOTE), shall be
secured, inter alia, by the Mortgage, dated as of the date hereof, from the
Company in favor of the Issuer (the FEE MORTGAGE), the Leasehold Mortgage dated
as of the date hereof, from the Company in favor of the Issuer (the LEASEHOLD
MORTGAGE), the Collateral Pledge Agreement, dated as of the date hereof, from
the Company in favor of the Issuer and the Bank (the PLEDGE AGREEMENT), the
Assignment of Contracts dated as of the date hereof, from the Company to the
Bank (the ASSIGNMENT OF CONTRACTS), and the Assignment of Management Agreement,
dated as of the date hereof, from the Company to the Bank (the
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ASSIGNMENT OF MANAGEMENT AGREEMENT) (the Note, the Fee Mortgage, the Leasehold
Mortgage, the Pledge Agreement, the Assignment and the Assignment of Management
Agreement together with any hereafter created Assignments of Accounts
Receivable, Assignments of Contracts, Assignments of Rents and Chattel
Mortgages, are herein collectively referred to as the SECURITY DOCUMENTS); and
WHEREAS, as further inducement to the Bank to issue the Letter of
Credit, (i) KG (Caribbean) Corporation, a Texas corporation (KGCC) and Kumagai
International USA Corporation, a Texas corporation (KIUSA) shall execute and
deliver to the Bank a Completion Guaranty dated as of the date hereof (the
COMPLETION GUARANTY), (ii) Kumagai Caribbean Inc., a Texas corporation (KGC)
shall execute and deliver to the Bank a Completion Guaranty dated as of the date
hereof (the SECONDARY COMPLETION GUARANTY) and (iii) KIUSA and KGC, together
with Williams Hospitality Management Corporation, a Delaware corporation
(WILLIAMS), shall execute and deliver to the Bank an Environmental Indemnity,
dated as of the date hereof (THE ENVIRONMENTAL INDEMNITY; the Environmental
Indemnity, the Completion Guaranty and the Secondary Completion Guaranty are
herein individually referred to as a GUARANTY and collectively referred to as
the GUARANTIES, and KIUSA, KGCC, KGC and William are herein individually
referred to as a GUARANTOR and collectively referred to as the GUARANTORS).
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement and unless otherwise
expressly indicated, or unless the context clearly requires otherwise:
ACCOUNTANT shall mean Ernst & Young, or such other independent
certified public accountant reasonably satisfactory to the Bank.
ACT shall mean The Puerto Rico Industrial, Medical, Higher
Education and Environmental Pollution Control Facilities Financing Authority
Act, Act No. 121 of the Legislature of the Commonwealth of Puerto Rico, approved
June 27, 1977, as amended, and all future acts supplemental thereto or
amendatory thereof.
AGGREGATE BUDGET CHANGE AMOUNT shall mean $1,500,000.
AGREEMENT shall have the meaning set forth in the first
paragraph of this Agreement.
AMK shall mean AMK Conquistador, S.E., a Puerto Rico special
partnership.
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ANDREWS FAMILY shall mean Hugh A. Andrews, his spouse and
children.
ANNUAL AGENT'S FEE shall have the meaning set forth in
Paragraph 2(c) hereof.
ANNUAL DEBT SERVICE shall mean, for any period for which
Annual Debt Service is being determined, the sum of (i) interest paid or payable
under the Loan at the Bond Fixed Rate with respect to such period (or, to the
extent the Bond Fixed Rate is inapplicable to any portion of the Loan, at the
rate provided for with respect to such portion of the Loan), (ii) interest paid
or payable under the GDB Loan at the rate provided for thereunder with respect
to such period or, to the extent interest swap arrangements are in place with
respect to the GDB Loan, at the GDB Fixed Rate with respect to such period,
(iii) the Annual Agent's Fee and the Annual Letter of Credit fee payable with
respect to such period, and (iv) any fees arising out of any swap arrangements
entered into by the Company in connection with the Loan and/or the GDB Loan
which are payable with respect to such period.
ANNUAL LETTER OF CREDIT FEE shall have the meaning set forth
in Paragraph 2(b) hereof.
APPLICABLE LIBID RATE shall have the meaning set forth in the
Trust Agreement.
APPRAISAL shall mean an appraisal in narrative form, prepared
by an appraiser retained by the Bank at the Company's sole cost and expense
setting forth a fair market value of the Premises, assuming that the
Improvements have been completed in accordance with the Plans and that the
Mortgage and the GDB Mortgage do not encumber the Premises.
ARCHITECT shall mean Ray, Melendez & Associates or any
successors engaged by the Company with the prior written consent of the Bank.
ARCHITECTS' AGREEMENTS shall mean those certain agreements
between the Company and the Architect and the Design Architects, respectively,
relating to the design of the Improvements and providing for architectural
services in connection with the construction of the Improvements.
ARCHITECTS' INITIAL CERTIFICATION shall mean the certification
from the Architect to the Bank dated February 7, 1991 annexed hereto.
ARPE shall mean the Administration of Regulations and Permits
of the Commonwealth of Puerto Rico.
ASSIGNMENT OF ACCOUNTS RECEIVABLE shall mean an assignment
from the Company to the Bank, which shall be in form and substance substantially
similar to that set forth in Exhibit B hereof, pursuant to which the Company
collaterally assigns to the Bank its rights in
<PAGE>
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and to all accounts receivable obtained in connection with the Project,
including, without limitation, its rights in and to all Condominium Revenues.
ASSIGNMENT OF CONTRACTS shall mean an assignment from the
Company to the Bank, which shall be in form and substance substantially similar
to that set forth in Exhibit C hereof, pursuant to which the Company
collaterally assigns to the Bank its rights in and to all contracts, licenses,
permits and certain other documents entered into or obtained by the Company in
connection with the Project.
ASSIGNMENT OF MANAGEMENT AGREEMENT shall have the meaning set
forth in the WHEREAS clauses hereof.
ASSIGNMENT OF RENTS shall mean an assignment from the Company
to the Bank, which shall be in form and substance substantially similar to that
set forth in Exhibit D hereof, pursuant to which the Company collaterally
assigns to the Bank its rights in and to all rents, issues and profits derived
from any leases entered into for space at the Project.
BANK shall have the meaning set forth in the first paragraph
of this Agreement.
BANK COVERAGE REQUIREMENT shall mean that either (i) the Net
Earnings for the 24 full calendar-month period next preceding the date of
determination has been an amount not less than the Annual Debt Service for such
24 full calendar-month period multiplied by 1.30 or (ii) the Net Earnings for
the 12 full calendar-month period next preceding the date of determination has
been an amount not less than the Annual Debt Service for such 12 full
calendar-month period multiplied by 1.50.
BANK'S CONSULTANT shall mean Merritt & Harris, Inc. or such
other Person or architectural or engineering consultant as may be designated and
engaged by the Bank, at the Company's expense to examine the Budget and the
Plans, any changes thereto, and cost breakdowns and estimates with respect to
the Project (including, without limitation, all cost breakdowns and estimates
set forth in any Request for Disbursement and all accompanying certifications),
to make periodic inspections of the progress of the Construction of the
Improvements on behalf of the Bank, to advise and render reports to the Bank
concerning the foregoing and to otherwise consult with the Bank with respect to
the Project.
BANK'S CONSULTANT'S REPORT shall mean a report by the Bank's
Consultant (i) to the effect that all of the work theretofore completed on the
Project has been completed in a good an workmanlike manner, substantially in
accordance with the Plans and the Construction Schedule and in compliance with
the Legal Requirements, (ii) stating whether the work which is the basis of the
applicable Request for Disbursement has been completed within the applicable
Line Item therefor, (iii) stating whether the undisbursed amount of the Loan
allocable to the Construction of the Improvements is sufficient to complete the
Construction of the Improvements
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in accordance with the Plans, (iv) to the extent that the Bank's Consultant
determines that the remaining cost to complete the work which is the subject of
a Line Item is less than the undisbursed portion of such line item such that
such excess can be reallocated in accordance with Paragraph 9(j) hereof, or the
remaining cost to complete the work which is the subject of a Line Item is
greater than the undisbursed portion of such Line Item, setting forth such
amount and (v) addressing such other matters requested by the Bank to be
addressed therein.
BOND FIXED RATE shall mean 7.55% per annum.
BOND PROCEEDS shall mean the aggregate proceeds obtained from
the issuance of the Bonds.
BOND PURCHASE AGREEMENT shall mean the Purchase Contract,
dated January 25, 1991, among the Underwriter, the Company and the Issuer.
BOND SWAP AGREEMENT means an Interest Rate and Currency
Exchange Agreement entered into by the Company and the Bank in accordance with
Section 4(w) hereof and pursuant to which the Company and the Bank enter into an
interest rate swap under which the Company agrees to pay to the Bank amounts
calculated on a national amount of $120,000,000 at the Bond Fixed Rate in
exchange for the Bank's obligation to pay to the Company amounts calculated on a
notional amount of $120,000,000 at rates equal to 88% of the Applicable LIBID
Rate. The Bond Swap Agreement shall provide inter alia, that all sums payable by
the Bank to the Company pursuant to Section 2(a) thereof, shall be payable by
the Bank to the Trustee to be deposited in the Bond Fund.
BONDS shall have the meaning set forth in the WHEREAS clauses
hereof.
BORROWER'S AFFIDAVIT shall mean an affidavit substantially in
the form of Exhibit E annexed hereto.
BUDGET shall mean a budget prepared by the Company setting
forth Total Project Costs in detail satisfactory to the Bank, and the Bank's
Consultant, which most current Budget is annexed hereto as Exhibit F, as such
Budget may be amended, modified or supplemented from time to time pursuant to
the terms of this Agreement and as the Line Items set forth in such Budget may
be reallocated pursuant to Paragraph 9(j) hereof.
BUSINESS DAY shall mean any day other than a Saturday, Sunday
or other day on which banks in New York, New York or San Juan, Puerto Rico are
authorized or required by law or executive order to close.
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CASH COLLATERAL means all funds now or hereafter on deposit in
the Cash Collateral Account, together with any and all interest earned thereon,
to the extent such interest is on deposit in the Cash Collateral Account.
CASH COLLATERAL ACCOUNT has the meaning assigned to that term
in Section in 3(i) hereof.
CHATTEL MORTGAGE shall mean a mortgage made by the Company in
favor of the Issuer in substantially the form attached hereto as Exhibit G,
pursuant to which title to particular buses, vessels, limousines and other
moving vehicles are mortgaged as required hereunder.
CODE shall mean the Internal Revenue Code of 1986, as amended
from time to time.
COLLATERAL shall mean all of the property, real or personal,
tangible or intangible, and all rights thereto, pledged, mortgaged or
hypothecated pursuant to the Security Documents.
COMPANY shall have the meaning set forth in the first
paragraph of this Agreement.
COMPANY PARTNERSHIP AGREEMENT shall mean that certain Venture
Agreement dated January 12, 1990 between KGC and WKA.
COMPLETION DATE shall mean the date that is 24 months after
the date of the Initial Disbursement, subject to extension for Unavoidable Delay
as provided in Paragraph 7(n) hereof.
COMPLETION GUARANTY shall have the meaning set forth in the
WHEREAS clauses hereof.
CONDOMINIUM PARCELS shall mean the approximately 20-acre
portion of land shown on Exhibit H annexed hereto.
CONDOMINIUM REVENUES shall mean revenues derived by the
Company from the Condominium Units through (i) the rental of the Condominium
Units, (ii) the use of the Premises by the occupants of the Condominium Units
and (iii) the right of such occupants to use the premises.
CONDOMINIUM UNITS shall mean up to 150 residential condominium
units that may be developed and constructed on the Condominium Parcels.
CONSENTS shall have the meaning set forth in Paragraph 8(c)
hereof.
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CONSTRUCTION or CONSTRUCT, when used with reference to the
Project, shall mean construction, installation, renovation or development of the
Improvements or any portion thereof.
CONSTRUCTION DOCUMENTS shall mean, collectively, the
Construction Management Agreement, the Architect's Agreements, all Trade
Contracts and all other agreements to which the Company is party or beneficiary
pertaining to the Construction of the Improvements.
CONSTRUCTION MANAGEMENT AGREEMENT shall mean that certain
agreement between the Company and the Construction Manager dated as of January
12, 1990 and amended by First Amendment thereto dated as of September 30, 1990
and Second Amendment thereto dated as of January 31, 1991, providing for the
construction of the Improvements upon the terms and conditions set forth
therein.
CONSTRUCTION MANAGER shall mean KGCC or any successor engaged
by the Company with the prior written consent of the Bank.
CONSTRUCTION MANAGER CONSENT AND AGREEMENT shall mean that
certain agreement dated as of the date hereof between the Construction Manager
and the Bank.
CONSTRUCTION SCHEDULE shall have the meaning provided in
paragraph 10(g)(xii) hereof.
CONSTRUCTION TRUST ACCOUNT shall have the meaning set forth in
Paragraph 9(a) hereof.
COVERAGE DATE shall have the meaning set forth in Paragraph
2(b) hereof.
DATE OF ISSUANCE shall mean the date of issuance and delivery
of the Letter of Credit.
DATE OF SUBSTANTIAL COMPLETION shall mean the date which is 30
days following the date upon which the Company first delivers to the Bank
evidence satisfactory to the Bank that Substantial Completion has been achieved.
DEBT or DEBTS shall mean, with respect to any Person, (a)
indebtedness of such Person for money borrowed (including, without limitation,
indebtedness evidenced by notes, bonds, debentures or other similar instruments
of such Person), (b) indebtedness represented by the deferred purchase price of
property or services acquired by such Person, (c) rentals payable by such Person
under any lease of real or personal property which shall have been, or should,
under generally accepted accounting principles, be classified as capital lease,
(d) obligations of such Person under direct or indirect guarantees in respect
of, and obligations (contingent or otherwise) of such Person to purchase or
otherwise acquire, or otherwise assure a creditor
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against loss in respect of, indebtedness or obligations of another Person of the
type described in clause (a), (b) or (c) above, and (e) liabilities of such
Person in respect of unfunded vested benefits under, or withdrawal liability in
respect of, plans covered by Title IV of ERISA.
DEFAULT shall mean any event which with notice or lapse of
time, or both, would become an Event of Default.
DEFICIENCY LOANS shall have the meaning set forth in Paragraph
7(ii) hereof.
DESIGN ARCHITECTS shall mean Edward D. Stone, Jr. and
Associates, Inc., Jorge Rossello Associates, Edward Durrell Stone Associates,
P.C., Cosentini Associates, Arthur Hill and Associates, and Peter George
Associates, Inc., or any successors engaged by the Company with the prior
written consent of the Bank.
DISBURSEMENT shall mean each disbursement of all or any
portion of the Project Fund.
DOLLARS or the sign "$" shall mean dollars in the lawful
currency of the United States of America.
DRAWING or DRAWINGS shall mean a Principal Drawing and/or an
Interest Drawing.
ENVIRONMENTAL INDEMNITY shall have the meaning set forth in
the WHEREAS clauses hereof.
ENVIRONMENTAL LAWS shall mean, collectively, all current and
future federal, state, commonwealth and local environmental laws, statutes and
regulations, now or at any time hereafter in effect, including, without
limitation, the Resource, Conservation and Recovery Act, as amended from time to
time, the Comprehensive Environmental Response, Compensation and Liability Act,
as amended from time to time, and any so-called Superfund or Superlien law,
including, without limitation, the Superfund Amendments an Reauthorization Act
of 1986, and the counterparts of such statutes as enacted by state, commonwealth
and local governments with jurisdiction over the Project, and any and all
regulations promulgated under or judicial or administrative interpretation of
any of the foregoing.
ENVIRONMENTAL REPORT shall mean an environmental report
relating to the Premises and the Improvements, addressed to the Bank, which
report shall include, without limitation, geological, soil and hazardous waste
evaluations, prepared at the Company's sole cost and expense by Certified
Engineering and Testing Company or by another firm of environmental consultants
acceptable to the Bank.
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EQUITY CONTRIBUTION shall have the meaning set forth in
Paragraph 10(a) hereof.
ERISA shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time. Section references to ERISA are to ERISA
as in effect at the date of this Agreement and any subsequent provisions of
ERISA, amendatory thereof, supplemental thereto or substituted therefor.
ERISA AFFILIATE shall mean each trade or business (whether or
not incorporated) which, together with the Company or a Subsidiary, would be
deemed to be a SINGLE EMPLOYER within the meaning of Section 4001 of ERISA.
EVENT OF DEFAULT shall have the meaning set forth in Paragraph
12(a) hereof.
EXPIRATION DATE shall mean the Stated Expiration Date or such
later expiration date of the Letter of Credit, if the same is extended by the
Bank pursuant to Paragraph 2(a) hereof.
FAJARDO PROPERTY shall mean approximately 220 acres of land
located in Fajardo, Puerto Rico, as more particularly described in the Fee
Mortgage.
FEDERAL FUNDS EFFECTIVE RATE means, for any day, the weighted
average of the rates on overnight Federal funds transactions, with members of
the Federal Reserve System only, arranged by Federal funds brokers, as published
as of such day (or, if such day is not a New York Business Day, for the next
preceding New York Business Day) by the Federal Reserve Bank of New York (or, if
such rate is not so published for any day which is a New York Business Day, the
average of the quotations for such day on such transactions received by the Bank
from three Federal funds brokers of recognized standing selected by the Bank.
FEE DATES shall have the meaning set forth in Paragraph 2(b)
hereof.
FEE MORTGAGE shall have the meaning set forth in the WHEREAS
clauses hereof.
FINANCIAL STATEMENTS shall mean, as applicable, (i) all
statements of financial condition with respect to the Company and the Guarantors
previously submitted to the Bank and/or (ii) all updates of such statements
and/or other statements of financial condition submitted by the Company and the
Guarantors to the Bank as required pursuant to Paragraph 7(g) hereof.
FOUR PARTY AGREEMENT shall mean the Four Party Agreement,
dated as of the date hereof, among the Bank, the Company, WKA and KGC.
GDB shall mean Government Development Bank for Puerto Rico.
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GDB FIXED RATE shall mean the sum of (x) the effective per
annum fixed rate of interest that the Company will be obligated to pay with
respect to the GDB Loan upon the Company's entering into an interest rate swap
arrangement in connection with the GDB Loan and (y) the GDB Margin.
GDB INVESTMENT AGREEMENT shall mean, collectively, (i) the
Investment Agreement, dated the date hereof, between GDB and the Trustee, and
(ii) the Collateral and Security Agreement, dated the date hereof, among GDB,
the Trustee, the Company and Mitsubishi Bank Trust Company of New York.
GDB LOAN shall mean a loan by GDB to the Company in the amount
of up to $25,000,000 to be used to finance a portion of the Total Project Costs
pursuant to the GDB Loan Agreement.
GDB LOAN AGREEMENT shall mean the Loan Agreement dated the
date hereof between GDB and the Company.
GDB MORTGAGE shall mean that certain Mortgage, dated as of the
date hereof, made by the Company in favor of GDB, securing the GDB Loan.
GDB STANDSTILL AGREEMENT shall mean the Subordination and
Standstill Agreement, dated the date hereof, between GDB and the Bank.
GENERAL PARTNER shall mean either KGC or WKA, the sole general
partners of the Company (KGC and WKA together being the GENERAL PARTNERS).
GOVERNMENT ACTS shall have the meaning set forth in Paragraph
5(a) hereof.
GOVERNMENT AUTHORITY shall mean any court, agency, authority,
board (including, without limitation, any environmental protection, planning or
zoning board), bureau, commission, department, office or instrumentality of any
nature whatsoever of any governmental or quasi-governmental unit of the United
States, the Commonwealth of Puerto Rico, any State of the United States, or the
Municipality of Fajardo, whether now or hereafter in existence, having
jurisdiction over the Company or the Project.
GROSS REVENUES shall mean, for any period with respect to
which Gross Revenues are being determined, all revenues of any kind received or
derived by the Company from the ownership an operation of the Premises for such
period, including, without limitation, room, food and beverage, and other
facility revenues, Condominium Revenues, casino net wins, rentals or other
payments from leases and concession agreements, annual dues for golf
memberships, revenues derived from the resale of golf memberships, the proceeds
of any business interruption insurance, and, except as provided below, all
revenues received by the Company from all other
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activities of the Premises, less in each case actual refunds made to customers,
guests or patrons. Gross Revenues shall not include the proceeds of the sale of
the Condominium Units, revenues derived from the initial sale of golf
memberships, tips, service charges added to a customer's bill or statement in
lieu of gratuities which are payable to employees of the Project, value of
complimentary rooms, food and beverages (except those purchased by the casino
forming a part of the Project), and any sales or other use or excise taxes
required by law to be collected with respect to the operations of the Premises
and remitted to taxing authorities. Notwithstanding the foregoing, Condominium
Revenues derived from any Condominium Units for any year shall only be included
in Gross Revenues to the extent that the Company has demonstrated to the Bank's
satisfaction (including, without limitation, by providing copies of written
contracts) that a corresponding number of Condominium Units of equivalent types
and sizes will be included in the rental arrangement pursuant to which such
units will be rented by Williams on behalf of the owners thereof, for the
succeeding year (so that, if the Condominium Units of each type and size
included in the rental arrangement for the succeeding year are fewer than the
Condominium Units from which such Condominium Revenues were derived, the amount
of the Condominium Revenues which may be included in Gross Revenues shall be
proportionately reduced). For example, if, in year one, 100 Type A Condominium
Units were included in the rental arrangements and produced aggregate revenues
of $100,000, but only 50 type A Condominium Units have been included in the
rental arrangement for year two, then only $50,000 may be included in Gross
Revenues for year one.
GROUND LEASE shall have the meaning set forth in Paragraph
4(1) hereof.
GUARANTOR and GUARANTORS shall have the meaning set forth in
the WHEREAS clauses hereof.
GUARANTY and GUARANTIES shall have the meaning set forth in
the WHEREAS clauses hereof.
HARD COSTS shall mean costs and expenses in connection with
the Line Items indicated as being Hard Costs on the Budget annexed hereto as
Exhibit F.
HAZARDOUS MATERIAL shall mean asbestos, polychlorinated
biphenyls, petroleum products and any other substance or material that, whether
by its nature or use, is now or hereafter defined as hazardous waste, hazardous
substance, pollutant or contaminant under any Environmental Law, or which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is now or hereafter regulated under
any Environmental Law.
HOSPITALITY shall mean Hospitality Investor Group, S.E., a
Puerto Rico special partnership.
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IMPROVEMENTS shall mean the improvements to be renovated or
constructed on the Premises pursuant to the Plans, consisting of approximately
750 guest rooms, approximately 50,000 square feet of meeting space (including
prefunctionary space), six restaurants, approximately 13,000 square feet of
retail space, an approximately 10,000 square foot casino, a marina,
approximately 100,000 square feet of swimming pools and water features, an
18-hole golf course, an approximately 40,000 square foot clubhouse and spa
facility, eight tennis courts, water sports facilities on the Palominos Island
Property and related amenities and facilities and all related fixtures,
furniture and equipment.
INCREASED COSTS shall have the meaning set forth in Paragraph
2(f) hereof.
INDEMNIFIED PARTY shall have the meaning set forth in
Paragraph 5(a) hereof.
INDIVIDUAL BUDGET CHANGE AMOUNT shall mean $100,000.
INITIAL DISBURSEMENT shall mean the initial disbursement of
any of the Project Fund, other than disbursements to pay costs comprising Annual
Debt Service to the extent such disbursements are made from amounts, in the
Project Fund in excess of $120,000,000.
INITIAL DISBURSEMENT DATE shall mean the date on which the
Initial Disbursement is made.
INITIAL STATED AMOUNT shall have the meaning set forth in
Paragraph 2(a) hereof.
INTEREST DRAWING shall have the meaning set forth in the
Letter of Credit.
INTERNATIONAL TEXTILE shall mean International Textile
Products of Puerto Rico, Inc., a Puerto Rico corporation.
ISSUER shall have the meaning set forth in the WHEREAS clauses
hereof.
KGC shall mean Kumagai Caribbean, Inc., a Texas corporation.
KGC MORTGAGE shall have the meaning set forth in Paragraph
7(e) hereof.
KGCC shall mean KG (Caribbean) Corporation, a Texas
corporation.
KIUSA shall mean Kumagai International USA Corporation, a
Texas corporation.
KMA shall mean KMA Associates of Puerto Rico, Inc., a Puerto
Rico corporation.
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KOFFMAN FAMILY shall mean Burton I. Koffman, Richard E.
Koffman, their parents, issue (including adopted persons), wives, siblings and
direct descendants, and trusts organized for the benefit of any of the
foregoing.
KUMAGAI shall mean Kumagai Gumi Co., Ltd., a Japanese
corporation.
LEASEHOLD MORTGAGE shall have the meaning set forth in the
WHEREAS clauses hereof.
LEGAL REQUIREMENTS shall mean, collectively, (i) all statutes,
laws, rules, rulings, orders, regulations, ordinances, judgments, decrees and
injunctions of any Governmental Authority (including, without limitation, fire,
health, handicapped access, sanitation, ecological, historic, zoning,
environmental protection, wetlands and building laws) in any way applicable to
the Company or the Premises and the Improvements, or any portion thereof, or to
the ownership, use, occupancy, possession, operation or maintenance of the
Premises and the Improvements; (ii) all requirements of the local Board of Fire
Underwriters or other similar body acting in and for the locality in which the
premises are situated and all requirements of each insurance policy covering or
applicable to all or any portion of the Premises and the Improvements, or the
use thereof, and all requirements of the issuer of each such policy, including
any which may require repairs, modifications or alterations (structural or
otherwise) in or to the Improvements, or any portion thereof; and (iii) all
requirements of each permit, license, authorization and regulation relating to
the premises and the Improvements, or any portion thereof, or to the ownership,
use, occupancy, possession, operation or maintenance thereof.
LETTER OF CREDIT shall have the meaning set forth in the
WHEREAS clauses hereof.
LIEN shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof, or the filing of, or any agreement to give, any financing statement
under the Uniform Commercial Code of any jurisdiction (other than informational
filings in respect of equipment leased under any lease not intended as security,
within the meaning of the Uniform Commercial Code) and any comparable financing
statement under the laws of the Commonwealth of Puerto Rico.
LINE ITEM shall mean a line item of cost set forth in the
Budget.
LOAN shall mean the loan made by the Issuer to the Company
pursuant to the Loan Agreement.
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LOAN AGREEMENT shall have the meaning set forth in the WHEREAS
clauses hereof.
MANAGEMENT AGREEMENT shall mean the Development Services and
Management Agreement dated January 12, 1990 between Williams and the Company, as
amended by the First Amendment thereto dated as of September 30, 1990, and
Second Amendment thereto dated as of January 31, 1991.
MANAGEMENT SUBORDINATION AGREEMENT shall mean the Management
Agreement Subordination and Attornment Agreement, dated as of the date hereof,
between the Bank and Williams.
MORTGAGE shall mean, collectively, the Fee Mortgage and the
Leasehold Mortgage.
NET EARNINGS shall mean Gross Revenues minus Operating
Expenses.
NEW YORK BUSINESS DAY means any day other than a Saturday,
Sunday or other day on which commercial banks in New York City are authorized or
required by law or executive order to close.
NOTE shall have the meaning set forth in the WHEREAS clauses
hereof.
OFFICER'S CERTIFICATE shall mean a certificate signed by the
General partners.
OFFICIAL STATEMENT shall mean the official statement of the
Issuer pursuant to which the Bonds are offered for sale.
OPERATING DEFICITS shall mean, for any period after the Date
of Substantial Completion, an amount equal to the lesser of (1) the Annual Debt
Service with respect to such period, and (2) the excess, if any, of (a) the sum
of (i) the Operating Expenses with respect to such period, and (ii) the Annual
Debt Service with respect to such period over (b) the Gross Revenues with
respect to such period.
OPERATING EXPENSES shall mean, with respect to any period for
which Operating Expenses are being determined, all expenses paid by or on behalf
of the Company in connection with the ownership and operation of the Premises
and the Condominium Units of such period, including, without limitation,
insurance; utilities; funding of reserves for maintenance, capital and
non-capital repairs and the repair and replacement of furniture, fixtures and
equipment in amounts reasonably approved by the Bank (but in any event
commensurate with the guidelines set forth in Section 4.5 of the Management
Agreement); general and special real property taxes on and assessments of the
Premises; equipment rentals; maintenance and non-capital repairs to
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the extent not paid for from reserves established therefor; non-capital repair
and replacement of furniture, fixtures and equipment to the extent not paid for
from reserves established therefor; governmental and license fees; advertising
and marketing; payments under the Ground Lease; fees and expenses arising under
the Management Agreement; all other operating expenses reasonably necessary for
the proper and efficient operation of the Premises as a first class destination
resort hotel. Operating Expenses shall not include Annual Debt Service.
OPERATIVE DOCUMENTS shall have the meaning set forth in
Paragraph 4(a) hereof.
OUTSIDE DISBURSEMENT DATE shall mean the date which is one
year from the date hereof.
PALOMINOS ISLAND PROPERTY shall mean approximately 90 acres of
land located on an island approximately three miles to the east of the Fajardo
Property, as more particularly described in the Leasehold Mortgage.
PBGC shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
PERMITS shall mean, collectively, all applicable
authorizations, consents, licenses, approvals and permits of Government
Authorities for Construction of the Improvements in accordance with the Plans
and all Legal Requirements, and for the performance and observance of all
agreements, provisions and conditions herein contained.
PERMITTED ENCUMBRANCES shall mean, collectively, the Mortgage,
the GDB Mortgage, the KGC Mortgage, if any (subject to the conditions set forth
in Paragraph 7(e) hereof), and any other Lien permitted under Paragraph 7(e)
hereof, real estate taxes not yet due and payable, those items listed as
exceptions to title on the Title Policy issued on the Date of Issuance, and any
other Liens consented to in writing by the Bank.
PERMITTED TRANSFERS shall mean (a) any transfer, direct or
indirect, of the interests of or in KGC, KGCC or KIUSA to Kumagai or to any
entity wholly owned and controlled by Kumagai; (b) any transfer, direct or
indirect, of the interests of or in WMS El Con to WMS Industries or any entity
wholly owned and controlled by WMS Industries; (c) any transfer, direct or
indirect, of the interests of or in International Textile or KMA to a member of
the Koffman Family or to any entity which is wholly owned by one or more members
of the Koffman Family; (d) any transfer, direct or indirect, of the interests of
or in AMK to a member of the Koffman Family or to any entity which is owned by
one or more members of the Koffman Family; (e) any transfer of the interests of
Marcel Arroyo, Marcel Arroyo, Jr. or David Mellon in KMA which is not prohibited
by any shareholder's or similar agreement applicable to the transfer of such
interests; (f) any transfer, direct or indirect, of interests in Hospitality to
members of the Andrews Family or any entity wholly owned and controlled by one
or more
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members of the Andrews Family, provided that Hospitality shall at all times be
controlled by Hugh A. Andrews for so long as he shall be alive and competent;
(g) any transfer of a limited partner interest in the Company prior to the
Stabilization Date which is made with the Bank's prior written consent, which
consent may be withheld in the Bank's sole discretion; (h) any transfer of a
limited partner interest in the Company after the Stabilization Date which is
made with the Bank's prior written consent, which consent shall not be
unreasonably withheld, and (i) any transfer of publicly-traded ownership
interests in WMS Industries or Kumagai.
PERSON shall mean an individual, corporation, partnership,
joint venture, trust, association or any other entity or organization, including
a government or political subdivision, agency or instrumentality thereof.
PLAN shall mean any multiemployer plan or single employer
plan, as defined in Section 4001 and subject to Title IV of ERISA, which is
maintained, or at any time during the five calendar years preceding the date of
this Agreement was maintained, for employees of the Company or a Subsidiary or
an ERISA Affiliate.
PLANS shall mean the plans, drawings and specifications for
the construction of the Improvements, including, without limitation, the
architectural, structural, mechanical and electrical plans and specifications
therefor prepared or to be prepared by the Company, the Architects, the Design
Architects and the Company's engineers and contractors, as approved by the Bank
and the Bank's Consultant, together with all revisions and addenda to such
plans, drawings and specifications, provided that such revisions and addenda
have been approved by the Bank to the extent such approval is required pursuant
to Paragraph 7(bb) hereof, which Plans shall include, without limitation, a
description of the materials, equipment, fixtures and furnishings necessary for
the Construction of the Improvements.
PLEDGE AGREEMENT shall have the meaning set forth in the
WHEREAS clauses hereof.
PRELIMINARY OFFICIAL STATEMENT shall mean the preliminary
official statement of the Issuer prior to the sale of the Bonds.
PREMISES shall mean the fee simple title to the Fajardo
Property (other than those Condominium Parcels which have been released from the
lien of the Mortgage pursuant to Paragraph 6 hereof) and the leasehold estate in
the Palominos Island Property.
PRIME RATE shall mean at any time the lower of (i) the
fluctuating rate of interest announced publicly from time to time by The Chase
Manhattan Bank, N.A. in New York, New York as its "prime," "base," or
"reference" rate and (ii) the fluctuating rate of interest announced publicly
from time to time by Citibank, N.A. in New York, New York as its "prime,"
"base," or "reference" rate, it being understood that such rates shall not
necessarily
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be the best or lowest rates of interest available to such bank's best or more
preferred large commercial customers.
PRINCIPAL DRAWING shall have the meaning set forth in the
Letter of Credit.
PROJECT shall mean, collectively, the acquisition of the
Fajardo Property, the leasing of the Palominos Island Property and the
renovation, development, construction, furnishing and equipping of the Premises
and the Improvements.
PROJECT DOCUMENTS shall mean (A) the Management Agreement and
(B) all licenses, easements or other agreements or instruments pertaining to the
Project and to be entered into by the Company with the approval of the Bank
(including, without limitation, all architects' agreements, engineers'
agreements and subcontracts for the Project).
PROJECT FUND shall have the meaning set forth in the Trust
Agreement.
PURCHASE DRAWING shall have the meaning set forth in the
Letter of Credit.
REPORTABLE EVENT shall mean an event described in Section
4043(b) of ERISA (with respect to which the 30-day notice requirement has not
been waived by the PBGC).
REQUEST FOR DISBURSEMENT shall mean a written certified
statement of the Company as more particularly set forth in Exhibit I hereto
setting forth the amount of the Disbursement sought, which shall constitute an
affirmation that the representations and warranties of the Company with respect
to the Improvements set forth in Paragraph 8 hereof and in the other Operative
Documents remain true and correct as of the date thereof, except to the extent
the Bank has been notified in writing to the contrary, and, unless the Bank is
notified in writing to the contrary prior to the Disbursement, will be true and
correct on the date of such Disbursement.
RETAINAGE shall have the meaning set forth in Paragraph 9(b)
hereof.
SECURITY DOCUMENTS shall have the meaning set forth in the
WHEREAS clauses hereof.
SOFT COSTS shall mean costs and expenses in connection with
the Line Items set forth on the Budget which are not designated as Hard Costs.
STABILIZATION DATE shall mean a date which is 30 days
following the date upon which the Company first delivers to the Bank audited
Financial Statements of the Company, prepared by the Accountant, demonstrating
that the Net Earnings for the 12 full calendar month
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period to which such Financial Statements relate was an amount not less than the
Annual Debt Service for such 12 full calendar-month period.
STATED AMOUNT shall have the meaning set forth in the Letter
of Credit.
STATED EXPIRATION DATE shall mean the date which is seven
years and 30 days after the Date of Issuance.
SUBSIDIARY shall mean any corporation of which at least a
majority of the outstanding stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Company and/or one or more of its Subsidiaries.
SUBSTANTIAL COMPLETION shall mean the occurrence of all of the
following events: (i) the completion of the Construction of the Improvements
(excluding punchlist items) in accordance with all Legal Requirements and
substantially in accordance with the Plans as to any aspect of Construction and
the issuance of applicable use or occupancy permits therefor satisfactory to the
Bank and (ii) the delivery to the Bank of certificates, in form and content
satisfactory to the Bank, from the Company, the Architects and the Bank's
Consultant to the effect that all of the work required to be performed
substantially to complete the Improvements in accordance with all Legal
Requirements and in accordance with the Plans has been performed.
SUCCESSOR LETTER OF CREDIT shall have the meaning set forth in
the Trust Agreement.
SURVEY shall have the meaning set forth in Paragraph 4(p)
hereof.
TERMINATION DATE shall have the meaning set forth in the
Letter of Credit.
TERMINATION PAYMENTS shall mean any and all sums which may
become payable by the Company to the Bank pursuant to Section 6 of the Bond Swap
Agreement.
TERMINATION PAYMENTS GUARANTY shall mean that certain
Guaranty, dated the date hereof, pursuant to which KGC and Williams guaranty to
the Bank the payment of Termination Payments in excess of $20,000,000.
TITLE POLICY shall have the meaning provided in Paragraph 4(n)
hereof, and shall include all endorsements thereto.
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TOTAL PROJECT COSTS shall mean those costs and expenses that
are included within the Line Items in the Budget as of the date hereof.
TRADE CONTRACT shall mean any contract entered into by the
Company, including, without limitation, general construction contracts, with
respect to the Construction of the Improvements that satisfies the conditions
set forth in the following sentence. Each Trade Contract (A) shall be entered
into with a Trade Contractor satisfactory to the Bank in its sole and absolute
discretion, (B) shall provide for the Trade Contractor's obligations thereunder
to be performed for a fixed price or guaranteed maximum price which, when
aggregated with other existing and contemplated Trade Contracts and other costs
of Construction of the Improvements, as the same are estimated by the Bank, will
not exceed the Budget, (C) shall require the Trade Contractor to provide the
Bank with a payment and performance bond satisfactory to the Bank as to form,
content and issuer with respect to such Trade Contractor's obligations under its
respective Trade Contract, (D) shall require the Trade Contractor to maintain
the insurance coverage more particularly described in Exhibit J annexed hereto,
(E) shall provide the Trade Contractor's consent to the assignment thereof by
the Company to the Bank, and (F) shall be otherwise satisfactory to the Bank in
form and content. Trade Contracts shall not include Architect's Agreements.
TRADE CONTRACTOR shall mean any contractor engaged in the
Construction of the Improvements under a Trade Contract.
TRADE CONTRACTOR CONSENT AND AGREEMENT shall mean that certain
agreement in the form of Exhibit K annexed hereto.
TRANSFER shall mean (i) any sale or transfer by the Company of
the Premises or the Improvements, or any portion thereof (other than any
transfer, pledge or hypothecation of all or any portion of the Condominium
Parcels in accordance with the terms and conditions of Section 6 hereof), or
(ii) any transfer, pledge or hypothecation of any direct or indirect equity
interest in the Company, including, without limitation, any sale or transfer of
a direct or indirect equity interest in the constituent partners of the Company,
of WKA, of KIUSA or of Kumagai.
TRUST AGREEMENT shall have the meaning set forth in the
WHEREAS clauses hereof.
TRUSTEE shall have the meaning set forth in the WHEREAS
clauses hereof.
UNAVOIDABLE DELAY shall mean any delay due to conditions
beyond the control of the Company, including, without limitation, strikes, labor
disputes, acts of God, the elements, governmental restrictions, regulations or
controls, enemy action, civil commotion, fire, unavoidable casualty, mechanical
breakdowns or shortages of, or inability to obtain, labor,
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utilities or material; PROVIDED, HOWEVER, that any lack of funds shall not be
deemed to be a condition beyond the control of the Company.
UNDERWRITER shall mean Chase Securities (P.R.), Inc.
WILLIAMS shall mean Williams Hospitality Management
Corporation, a Delaware Corporation.
WKA shall mean WKA El Con Associates, a New York general
partnership.
WMS EL CON shall mean WMS El Con Corp., a Delaware
corporation.
WMS HOTEL shall mean WMS Hotel Corporation, a Delaware
corporation.
WMS INDUSTRIES shall mean WMS Industries Inc., a Delaware
corporation.
WORK CHANGE shall mean any change order, any other amendment
or modification to any contract or subcontract and any revision, addendum,
modification to or amendment of the Plans for the Improvements (including minor
departures from the Plans for the Improvements pursuant to field orders).
2. ISSUANCE OF LETTER OF CREDIT; FEES.
(a) Amount and Terms of Letter of Credit. The Bank agrees, on
the terms and subject to the conditions herein set forth, to issue the Letter of
Credit to the Trustee. The Letter of Credit (i) shall be in substantially the
form of Exhibit A attached hereto, (ii) shall have a term ending on the Stated
Expiration Date (subject to earlier termination as set forth therein) and shall
have an initial Stated Amount of $124,800,000 (as the same may be reduced from
time to time by a Principal Drawing or as a result of cancellation of Bonds, the
INITIAL STATED AMOUNT). The Bank shall have the option, exercisable in its sole
discretion at least one year prior to the Stated Expiration Date, to extend the
Expiration Date by up to one year.
(b) Annual Letter of Credit Fee. In consideration of the
issuance of the Letter of Credit, the Company hereby agrees to pay to the Bank
an annual letter of credit fee (the ANNUAL LETTER OF CREDIT FEE) equal to (i)
from the date hereof through the Date of Substantial Completion 1.25% per annum
of the amount at any time by which $120,000,000 exceeds the balance of the
Project Fund, and (iii) thereafter and through the Date which is 30 days after
the date upon which the Company delivers to the Bank audited financial
statements prepared by the Accountant demonstrating that the Bank Coverage
Requirement has been achieved (the COVERAGE DATE), 1.05% per annum of the amount
at any time by which $120,000,000 exceeds the balance of the Project Fund, and
(iii) thereafter and through the Termination Date, .90% per annum at any time by
which $120,000,000 exceeds the balance of the Project Fund. The Annual Letter
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of Credit Fee shall be payable by the Company in advance installments, in
immediately available funds, on the Initial Disbursement Date and on each
February 1, May 1, August 1 and November thereafter (collectively, the FEE
DATES). The amount of the installment of the Annual Letter of Credit Fee payable
on any Fee Date shall be determined based on the Bank's projection of the
average amount at any time by which $120,000,000 exceeds the balance of the
Project Fund during the period to which such installment relates, and shall be
adjusted at the end of such period based on the actual average amount of Bond
Proceeds that were outstanding during such period. Any resulting overpayment or
underpayment of the Annual Letter of Credit Fee shall be credited against or
paid by the Company together with, as the case may be, the next succeeding
installment of the Annual Letter of Credit Fee. On the Termination Date, the
Annual Letter of Credit Fee shall be prorated for the period from the last Fee
Date to the Termination Date, and any underpayment shall made by the Company to
the Bank, or any overpayment shall be made by the Bank to the Company.
(c) Annual Agent's Fee. In consideration of the issuance of
the Letter of Credit, the Company hereby agrees to pay to the Bank an annual
agent's fee (the ANNUAL AGENT'S FEE) equal to .25% per annum of the Initial
Stated Amount from the date hereof through the Termination Date. The Annual
Agent's Fee shall be determined based on the Initial Stated Amount on the date
hereof, and on each February 1 after the date hereof, and shall be payable
quarterly by the Company in immediately available funds, in advance, on each of
the Fee Dates; provided that a prorated portion of the Annual Agent's Fee shall
be paid on the date hereof and on the last Fee Date prior to the Termination
Date.
(d) Substitution and Amendment Fees. In consideration of the
issuance of any substitute or amended letter of credit pursuant to the terms of
the Letter of Credit, the Company hereby agrees to pay to the Bank, upon each
such substitution or amendment, a fee equal to $5,000, or such other amount as
shall be, at the time of substitution or amendment, the charge which the Bank is
imposing for substitutions or amendments of similar letters of credit. A
reinstatement of the Stated Amount pursuant to the terms of the Letter of Credit
shall not, in and of itself, be deemed to be a substitution or amendment of the
Letter of Credit for the purposes of this subparagraph (d).
(e) Drawing Fees. In consideration of the use of the Letter of
Credit, the Company hereby agrees to pay to the Bank, upon each disbursement
made by the Bank under the Letter of Credit, a fee equal to $500, or such other
amount as shall at the time of such disbursement be the charge which the Bank is
making for disbursements on similar letters of credit.
(f) Additional Payment. In addition to the Annual Letter of
Credit Fee, the Annual Agent's Fee, interest payable with respect to Drawings
and all other sums due pursuant to this Agreement, the Company hereby agrees
promptly to pay to the Bank upon demand by the Bank and from time to time as
specified by the Bank, an amount equal to any increase in the
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Bank's cost or any reduction in the rate of return on the Bank's capital (and
any participant's increase in cost or reduction in rate of return)
(collectively, INCREASED COSTS) actually incurred or determined by the Bank to
have been incurred in issuing or maintaining the Letter of Credit or funding or
maintaining Drawings (which increase in cost or reduction in rate of return
shall be determined by the Bank's allocation of the aggregate of such cost
increases or reduction in rates of return, as the case may be, resulting from
such event), including, without limitation, any such costs attributable to
present or future reserve, special deposit or similar requirements, present or
future capital adequacy requirements, or other regulatory conditions applicable
to the Bank. Notwithstanding the foregoing, (i) if the Bank shall issue and/or
maintain the Letter of Credit through a lending office of the Bank located
outside of the United States, the Company shall not pay any Increased Costs in
excess of Increased Costs that would have been incurred if the Letter of Credit
had been issued and/or maintained by a lending office of the Bank located in the
United States, and (ii) if the Bank shall issue participations in the Letter of
Credit, the Borrower shall not pay any Increased Costs with respect to such
participant's costs of the nature referred to above to the extent such Increased
Costs of such participant exceed what the Increased Costs would have been if the
Bank had not issued such participation in the Letter of Credit. A certificate
setting forth in reasonable detail such increased cost or reduced rate of return
and the calculation of the amount demanded, submitted by the Bank to the
Company, shall be conclusive, absent manifest error, as to the amount thereof.
3. AGREEMENT TO REPAY DRAWINGS; PURCHASE OF BONDS.
(a) Reimbursement. The Company hereby agrees to pay to the
Bank (i) immediately after payment is made under the Letter of Credit pursuant
to a Principal Drawing or an Interest Drawing, an amount equal to such amount so
paid under the Letter of Credit, (ii) interest on any and all amounts required
to be paid as provided in this Paragraph 3(a) from and after the due date
thereof until payment in full, payable on demand at the Prime Rate plus 2% (but
in no event greater than the maximum rate permitted by applicable law) and (iii)
(A) on the Termination Date, an amount equal to all Purchase Drawings and (B)
interest on each such Purchase Drawing from the date of each such Purchase
Drawing until payment (including prepayment pursuant to paragraph (g) below) in
full thereof together with all accrued interest thereon, at the Prime Rate plus
2% per annum (but in no event at a rate greater than the maximum rate permitted
by applicable law), payable in arrears on each of the Fee Dates and on the date
of payment (including prepayment pursuant to paragraph 3(g) below) of any such
amount. Unless waived by the Bank or as otherwise specifically set forth in this
Agreement, the Company shall be obligated, without notice of a Drawing or demand
for reimbursement from the Bank (which notice is hereby waived by the Company),
to reimburse the Bank for all Drawings (other than Purchase Drawings) on the
same day as made. The Company and the Bank agree that the reimbursement in full
for each Drawing on the date such Drawing is made is intended to be a
contemporaneous exchange for new value given to the Company by the Bank. If a
Drawing is repaid at or prior to 2:00 P.M. (New York City time) on the same day
on which it is made, no interest shall be payable on such Drawing.
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(b) Payments and Computations. The Company shall make or cause
to be made each payment hereunder not later than 2:00 P.M. (New York City time)
on the day when due, in Dollars and in immediately available funds, to the Bank
at Morgan Guaranty Trust Company of New York ABA #021000238 for credit to the
account of Mitsubishi Bank. Limited, New York Branch, Account #631-21-920,
Advise: Frank Conigliaro, Assistant Vice President-Planning & Administration
(phone #212-667-2670), or at such other place as the Bank may from time to time
designate in a notice to the Company. If any sum due hereunder is not paid
within 10 days after the date on which the same is due, a late charge in the
amount of one percent (1%) of such amount shall immediately become due and
payable; if such sum has not been paid within 20 days after the date on which
the same is due, an additional late charge in the amount of one percent (1%) of
such amount shall immediately become due and payable; and if such sum has not
been paid within 30 days after the date on which the same is due an additional
late charge in the amount of one percent (1%) of such amount shall immediately
become due and payable. All computations of interest and fees hereunder shall be
made on the basis of a year of 360 days for the actual number of days elapsed
(including the first day but excluding the last day). Any sums paid by the
Company to the Bank pursuant to this Agreement shall be applied by the Bank in
any order whatsoever, in the absolute and sole discretion of the Bank.
(c) Payment on Non-Business Days. Whenever any payment to be
made hereunder shall be stated to be due on a day which is not a Business Day,
such payment shall be due on the immediately succeeding Business Day.
(d) Book Entries. The Bank shall maintain in accordance with
its usual practice an account or accounts evidencing the indebtedness of the
Company resulting from Drawings made from time to time and the amounts of
principal and interest payable and paid from time to time hereunder. In any
legal action or proceeding in respect of this Agreement, the entries made in
such account or accounts shall, in the absence of manifest error, be conclusive
evidence of the existence and amounts of the obligations of the Company therein
recorded.
(e) Obligations Absolute. The obligations of the Company under
this Agreement shall be unconditional and irrevocable, and shall be paid or
performed strictly in accordance with the terms of this Agreement under all
circumstances, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of the Letter of
Credit, this Agreement or any other Operative Documents;
(ii) any amendment or waiver of, or any consent to departure
from, any of the provisions of any of the Operative Documents;
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(iii) the existence of any claim, set-off, defense or other
right which the Company may have at any time against the Trustee, any
beneficiary or any transferee of the Letter of Credit (or any Persons for whom
the Trustee, any such beneficiary or any such transferee may be acting), the
Bank or any other Person, whether in connection with this Agreement, any other
Operative Documents, the transactions contemplated herein or therein or any
unrelated transaction;
(iv) any certificate, statement or any other document
presented under the Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect, provided that payment by the Bank under the Letter of
Credit against presentation of any such certificate, statement or documents
shall not have constituted gross negligence or willful misconduct of the Bank;
(v) any non-application or misapplication by the Trustee of
the proceeds of any Drawing under the Letter of Credit;
(vi) payment by the Bank under the Letter of Credit against
presentation of a draft or a certificate which does not comply with the terms of
the Letter of Credit, provided that such payment by the Bank shall not have
constituted gross negligence or willful misconduct of the Bank; and
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
(f) No Withholdings. All payments required to be made by the
Company hereunder shall be made free and clear of, and without set-off or
counterclaim and without deduction or withholdings for, any and all present and
future taxes, levies, imposts, duties, filing and other fees or other charges of
any nature whatsoever imposed by any taxing authority, except as provided in
this Paragraph 3(f). The Company agrees to pay or cause to be paid directly to
the appropriate governmental authority, or to reimburse the Bank for the cost
of, any and all present and future taxes, duties, fees and other governmental
charges of any nature, including any interest, penalties and expenses arising
therefrom or with respect thereto levied or imposed by any Government Authority
on or with regard to any aspect of the transactions contemplated by this
Agreement whether or not such taxes or other charges were correctly or legally
asserted, except such taxes as are imposed on or measured by the Bank's net
income by applicable federal, state, commonwealth and local taxing authorities
and taxing authorities of the jurisdiction in which the head office of the Bank
is located and except such taxes and other charges as are imposed on any
participant in the Letter of Credit to the extent that such taxes and other
charges exceed the amount that they would have equalled if the Bank had not
issued such participation in the Letter of Credit. In the event that the Company
is prohibited by operation of law from (i) making payments without set-off or
counterclaim or without deduction or withholding as provided above or (ii)
paying, causing to be paid, or reimbursing the Bank for
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the cost of any and all such taxes, duties, levies, imposts, filing and other
fees and other charges of any nature, including any interest, penalties and
expenses arising therefrom or with respect thereto, as provided above, then the
payments due to the Bank hereunder shall be increased to such amount as may be
necessary in order that the actual amount received after provision for such
taxes, duties, levies, imposts, filing and other fees or other charges shall
equal the amount that would have been received if such set-off, counter-claim,
deduction or withholding were not required. The Company shall provide evidence
that all applicable taxes imposed on the transactions contemplated by this
Agreement have been paid to the appropriate taxing authority by delivery to the
Bank of the official tax receipts or notarized copies of such receipts within
the later of (i) 30 days after the due date for payment of any such tax or (ii)
10 days after the date on which the Company receives the official receipts for
the payment of such tax.
(g) Pledge of Bonds. As security for the payment of the
obligations of the Company pursuant to Paragraph 3(a)(iii) hereof, the Company
shall pledge to the Bank, and grant to the Bank a security interest in, all of
the Company's right, title and interest in and to the Bonds delivered to the
Trustee in connection with Purchase Drawings (the Pledged Bonds), pursuant to a
Pledge and Security Agreement dated the date hereof between the Bank and the
Company (the Bond Pledge Agreement). At such time as the Bank determines that
the Pledged Bonds should be remarketed, it shall deliver to the Trustee the
notice required by Section 309 of the Trust Agreement. Upon the sale of the
Pledged Bonds or the cancellation of Pledged Bonds that cannot be remarketed and
the payment to the Bank of an amount equal to the Purchase Drawing corresponding
to the principal amount of Pledged Bonds sold or cancelled, together with (x)
accrued interest thereon, as set forth in clause (B) of Paragraph 3(a)(iii)
hereof, to the date of such payment or cancellation and (y) all amounts owing in
respect of the Interest Drawing, if any, made in conjunction with such Purchase
Drawing, then (1) the outstanding obligations of the Company under Paragraph
3(a)(iii) hereof shall be reduced by the amount of such payment, (2) interests
shall cease to accrue on the amount paid and (3) the Bank shall release from the
pledge and security interest created by the Bond Pledge Agreement a principal
amount of Pledged Bonds equal to the principal amount of Pledged Bonds to be
sold or cancelled.
(h) Credits for Amount Paid on Bonds; Other Credits. The
Company shall (A) receive a credit against its obligation to pay interest
pursuant to clause (B) of Paragraph 3(a)(iii) to the extent of any amounts
actually paid by or on behalf of the Issuer to the Bank in respect of the
interest due on any Pledged Bonds under the terms of the Trust Agreement. The
Company shall receive a credit against its reimbursement obligation pursuant to
Paragraph 3(a)(ii) hereof with respect to any Principal Drawing or Interest
Drawing to the extent of any payment with respect to such reimbursement
obligation made by the Trustee to the Bank, pursuant to the Trust Agreement from
the funds held by the Trustee under the Trust Agreement.
(i) Collateral Account. (i) Any sums payable to the Company
pursuant to Section 6 of the Bond Swap Agreement and which the Bank elects
pursuant to the terms thereof
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to have deposited as collateral for the Company's performance of its obligations
hereunder, shall be deposited with the Bank in an account maintained for the
benefit of the Company (the Cash Collateral Account). The Cash Collateral shall
be held by the Bank as collateral security for the obligations of the Company
hereunder. Unless and until the Cash Collateral is withdrawn or disbursed from
the Cash Collateral Account, any funds in the Cash Collateral Account (i) may be
commingled with the general funds of the Bank, (ii) shall bear interest at a
fluctuating rate per annum, which rate shall be equal to the Federal Funds
Effective Rate, and (iii) together with such interest, shall constitute
additional security for the Company's performance of its obligations pursuant to
this Agreement (a security interest therein being granted hereby to the Bank).
The Cash Collateral and any interest accrued thereon may be applied by the Bank
to the payment of the obligations of the Company hereunder when and as the same
shall be due, in such order as the Bank may elect. Upon termination of the
Letter of Credit and this Agreement, and provided the Company shall have paid to
the Bank all amounts due and to become due to the Bank hereunder, the Bank shall
release and pay to the Company the amount remaining, if any, of the Cash
Collateral, together with any interest earned thereon and not theretofore
disbursed.
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4. CONDITIONS PRECEDENT TO ISSUANCE OF THE LETTER OF CREDIT. The
obligation of the Bank to issue the Letter of Credit is subject to the
conditions precedent that the Bonds are issued and sold to the purchaser(s)
thereof and all of the following conditions are met:
(a) Delivery of the Bonds and Operative Documents. This
Agreement, the Letter of Credit, the Trust Agreement, the Loan Agreement, the
Note, the Security Documents, the Guaranties, the Bond Purchase Agreement, the
GDB Standstill Agreement, the Four Party Agreement, the Management Subordination
Agreement, the Construction Manager Consent and Agreement, the Architect's
Letter, the Official Statement, the GDB Investment Agreement, the Bond Swap
Agreement, the Termination Payment Guaranty and the Bond Pledge Agreement
(collectively, the Operative Documents) and the Bonds shall have been executed
and delivered by authorized Persons of the parties thereto and the Trust
Agreement shall have been duly adopted by the Issuer, each in form and substance
satisfactory to the Bank. The Bank shall have received an executed copy of each
of the Operative Documents.
(b) No Default. On the Date of Issuance and after giving effect to the
issuance of the Letter of Credit, there shall exist no Default or Event of
Default.
(c) Representations and Warranties. On the Date of Issuance
and after giving effect to the issuance of the Letter of Credit, all
representations and warranties of the Company contained herein or in the other
Operative Documents, or otherwise made in writing in connection herewith, shall
be true and correct in all material respects, with the same force and effect as
though such representations and warranties had been made on and as of such date.
(d) Certificate of Compliance. There shall have been delivered
to the Bank a certificate of the General Partners of the Company, dated as of
the Date of Issuance, to the effect that all of the conditions specified in
Paragraph 4(b) and 4(c) hereof have been satisfied as of such date.
(e) Opinion of Counsel. There shall have been delivered to the
Bank an opinion of counsel to the Company, dated as of the Date of Issuance and
in form and substance satisfactory to the Bank covering such matters as the Bank
may reasonably request.
(f) Opinion of Bond Counsel. There shall have been delivered
to the Bank an opinion of bond counsel to the Issuer, dated as of the Date of
Issuance and in form and substance satisfactory to the Bank, to the effect that
the Bonds are legal, valid and binding obligations of the Issuer and covering
such other matters as the Bank may reasonably request.
(g) Guarantors' Representations and Warranties. On the Date of Issuance
and after giving effect to the issuance of the Letter of Credit, all
representations and warranties of the Guarantors contained in the Guaranties or
otherwise made in writing in connection herewith
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or with the Guaranties shall be true and correct with the same force and effect
as though such representations and warranties had been made on and as of such
date.
(h) Documentation and Proceedings. All corporate and legal
proceedings and all instruments in connection with the transactions contemplated
by this Agreement, the other Operative Documents, the Project Documents and the
Construction Documents, to the extent that the same have previously been entered
into by the Company, shall be satisfactory in form and substance to the Bank and
its counsel and the Bank shall have received all information and copies of all
documents, instruments, approvals (and, if requested by the Bank, certified
duplicates of executed copies thereof) and opinions as the Bank may reasonably
request, including, without limitation, records of corporate proceedings,
partnership documents and certificates, governmental approvals and incumbency
certificates, which it may have requested in connection with the transactions
contemplated by this Agreement, the other Operative Documents, the Project
Documents, and the Construction Documents, such documents, where appropriate, to
be certified by proper officers.
(i) Construction Management Agreement. There shall have been
delivered to the Bank a copy of the Construction Management Agreement, certified
by the General Partners to be true, correct and complete, in form and substance
satisfactory to the Bank.
(j) Fees. The Bank shall have received (1) the Annual Agent's
Fee, pursuant to Paragraph 2(c) hereof, (2) payment of the Bank's counsel fees
and the fees of the Bank's Consultant relating to the Project, (3) payment of
all other out-of-pocket expenses of the Bank relating to the Project, including,
without limitation, any Appraisal, investigation or insurance fees or costs and
the cost of the Environmental Report, and (4) payment of any portion of the
Facility Fee that has not yet been paid, as such fee is more particularly
described in that certain Facility Fee Letter dated October 4, 1990 between the
Company and the Bank.
(k) Management Agreement. The Management Agreement is in full
force and effect.
(l) Ground Lease. The Company shall have entered into a ground
lease (as amended or supplemented from time to time as permitted by the
Operative Documents, the GROUND LEASE) which shall be satisfactory in form and
substance to the Bank, pursuant to which the Company shall lease the Palominos
Island Property, and which shall be in full force and effect.
(m) Acquisition Documents. The Company shall have delivered to
the Bank and the Bank shall have approved a copy of the purchase agreement(s)
(and all modifications and supplements thereto) and deed(s) pursuant to which
the Fajardo Property has been or will be acquired by the Company, together with
any redevelopment agreement or similar agreement
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affecting the Premises or the Improvements and any documents affecting title to
the Premises or to the Improvements.
(n) Title Policy. The Bank shall have received and approved a
title policy (the TITLE POLICY) issued by a title company satisfactory to the
Bank in its sole and absolute discretion, marked paid in full, in the amount of
the Loan, insuring the Issuer, the Bank and the Trustee, as their respective
interests may appear, that the Fee Mortgage, in connection with the Fajardo
Property, and the Leasehold Mortgage, in connection with the Palominos Island
Property, together with the other Security Documents to be recorded constitute
valid first liens on the Premises, and on the other property secured, free and
clear of all defects, restrictions, Liens and violations, except the Permitted
Encumbrances, and which Title Policy shall contain:
(A) no exception for mechanics' or materialmen's
liens;
(B) no survey exceptions other than those approved by
the Bank;
(C) a statement that the Title Company agrees to
affirmatively insure the priority of each Disbursement against
the existence of any other Liens, including mechanic's and
materialman's liens, whether choate or inchoate;
(D) reinsurance with provisions for direct access
against the reinsurers, in amounts and with companies
acceptable to the Bank; and
(E) such other endorsements or affirmative insurance
as the Bank and the Bank's counsel shall require.
(o) Appraisal. The Bank shall have received the Appraisal, in
form and content satisfactory to the Bank in its sole discretion, which
Appraisal states that the fair market value of the Premises equals or exceeds
$172,700,000.
(p) Survey. The Bank shall have received a survey of the
Premises (the SURVEY), in form and content satisfactory to the Bank, certified
by Manuel Ray or such other licensed surveyor acceptable to the Bank, certified
to the Bank and the title insurance company issuing the Title Policy, and dated
as of a date within 30 days prior to the Date of Issuance, showing (i) the
outlines of the Premises and the courses and measured distances of the exterior
property lines, the exact location of all buildings including the Improvements
(as of the date of such survey), (ii) the area of the Premises in square meters,
(iii) the exact location of all adjoining streets, (iv) the exact location of
any encroachments on the Premises by any improvements on adjoining property (as
of the date of such survey) and (v) the exact location of all easements and
rights-of-way and other matters of interest to the Bank and recordation
information with respect to the Premises.
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(q) Environmental Report. The Bank shall have received the
Environmental Report, satisfactory to the Bank in form and content, and all
recommendations set forth in the Environmental Report shall have been
implemented to the Bank's satisfaction.
(r) Preliminary Report. The Bank shall have received a
preliminary report from the Bank's Consultant satisfactory to the Bank in form
and content with respect other acceptability of (i) the then-current Plans and
associated design materials; (ii) the design of various systems, including,
without limitation, architectural, structural, electrical, plumbing, heating,
air conditioning and sprinkler systems; (iii) the general conformity of
materials specified to overall Project quality objectives; (iv) the contents of
soil reports and coordination of foundation design of the Improvements; (v) the
conformity of the scope and design set forth in the then-current Plans to the
description of the Project otherwise presented to the Bank; (vi) the Company's
projected Date of Substantial Completion and Construction Schedule; (vii) the
Company's proposed Budget; (viii) the Company's distribution of overall Budget
to individual trade cost items; (ix) the adequacy of contingency reserves within
the Budget; (x) the value, scope, and limiting conditions of the Trade Contracts
and/or subcontracts received for review; and (xi) such other matters as the Bank
shall reasonably require.
(s) Insurance. The Bank shall have received such policies of
casualty, insurance, liability insurance, business interruption insurance,
worker's compensation insurance and such other insurance as the Bank may
require, issued by companies and in amounts satisfactory to the Bank, all as
more particularly set forth in the Pledge Agreement; the conditions set forth in
Paragraph 7(x) hereof shall have been satisfied; and the Bank shall have
received evidence that the applicable premiums with respect to such insurance
policies have been paid and that the insurance thereunder is in full force and
effect.
(t) Real Estate Taxes. The Bank shall have received evidence
of payment of all real estate taxes currently due and payable or delinquent with
respect to the Premises and the Improvements situated thereon.
(u) Formation of Company. All legal matters in connection with
the transaction and the formation and organization of the Company, its partners
and the Guarantors shall be satisfactory to the Bank and counsel for the Bank.
(v) Other Approvals. The bank shall have received and approved
evidence that the Premises cannot be subject to a lien for unpaid real property
taxes from any other property.
(w) Swap Arrangement. The Company shall have entered into and
satisfied all conditions precedent to the effectiveness of the Bond Swap
Agreement such that for the period commencing on the third "Business Day" (as
such term is employed in the Trust Agreement) following the date hereof up to
and including the Stated Expiration Date, the
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Company's exposure with respect to interest payable on the Loan is fixed or
limited to the Bond Fixed Rate.
(x) Maximum Effective Interest Rate. The aggregate of the
interest payable with respect to the Loan at the Bond Fixed Rate, the Annual
Agent's Fee and the Annual Letter of Credit Fee (as projected by the Bank)
payable for any year during the term of the Letter of Credit shall not yield an
effective rate of interest on the Loan in excess of 11% per annum.
(y) GDB Loan Documents. The GDB Loan shall have been entered
into in accordance with documentation satisfactory to the Bank in its sole and
absolute discretion, which documentation shall include, without limitation, the
GDB Standstill Agreement. Copies of each of the documents executed in connection
with the GDB Loan shall have been delivered to the Bank, and shall have been
certified to be true, correct and complete by the General Partners.
(z) Budget. The Budget shall have been delivered to the Bank's
Consultant and shall be identical to the Budget annexed hereto as Exhibit F, or
shall otherwise be satisfactory to the Bank and the Bank's Consultant.
(aa) Authorization. The Bank shall have received copies of (i)
a transaction authorization executed by the General Partners authorizing the
Company's execution of this Agreement and the other Operative Documents to which
the Company is party, (ii) the Company Partnership Agreement and filed
certificate of limited partnership of the Company and all amendments thereto,
(iii) a certificate of good standing from the State of Delaware for the Company,
(iv) evidence that the Company has filed a properly certified copy of the
Company Partnership Agreement with the Mercantile Registry of Puerto Rico and
that such filing has been accepted, (v) organizational documents of the Company,
all of which shall be certified as true, correct and complete by the General
Partners and (vi) copies of all other organizational documents of the Company
and its partners which the Bank may reasonably request, all of which shall be in
form and substance satisfactory to the Bank.
(bb) Accounting. The Bank shall have received and approved an
accounting of all expenditures for costs shown on the Budget as having been
incurred prior to the Date of Issuance.
(cc) No Flood Plain. The Bank shall have received and approved
a certificate from the Architect or an insurance broker that the Improvements to
be Constructed in accordance with the Plans will not be located in a flood
hazard plain.
(dd) Labor Contributions. The Bank shall have received a
certificate from the Secretary of Labor of Puerto Rico evidencing that there is
no liability for contributions owing by the Company under the provisions of the
Employment Security Act of 1956, as amended.
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5. INDEMNIFICATION; BROKERAGE.
(a) It is the intention of the parties hereto that this
Agreement shall be construed and applied to protect and indemnify the Bank
against any and all risks involved in the issuance of the Letter of Credit, all
of which risks are hereby assumed by the Company, including, without limitation,
any and all risks of the acts or omissions, whether rightful or wrongful, of any
present or future de jure or de facto government or Government Authority (all
such acts and omissions herein collectively referred to as GOVERNMENT ACTS).
Accordingly, in addition to amounts payable under Paragraphs 2 and 3 hereof, the
Company hereby agrees to defend, indemnify and hold the Bank, its affiliates,
members, employees, agents and representatives (each an INDEMNIFIED PARTY)
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including, without limitation, attorneys'
fees and disbursements) which such Indemnified Party may sustain or incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of the
Letter of Credit or with respect to any other Operative Documents, other than as
a result solely of the gross negligence or willful misconduct of such
Indemnified Party, (ii) any breach by the Company of any representation,
warranty, covenant, term or condition in, or the occurrence of any default
under, this Agreement, any other Operative Documents or the Bonds, together with
all reasonable expenses resulting from the compromise or defense of any claims
or liabilities arising as a result of any such breach or default, (iii) defense
against any legal action commenced to challenge the validity of this Agreement,
the bonds or any other Operative Documents, (iv) any misrepresentation of a
material fact or any failure to state a material fact (other than any facts
relating to and supplied by the Bank) in the Preliminary Official Statement or
the Official Statement, (v) the consummation of the transactions contemplated
herein or in any of the Operative Documents, and (vi) the Construction, use or
occupancy of the Project. In addition, the Bank shall not, in any way, be liable
for any failure by the Bank or anyone else to pay any drawing under the Letter
of Credit as a result of any Government Acts or any other cause beyond the
control of the Bank.
(b) Except as otherwise expressly provided herein, the
obligations of the Company under this Agreement are primary, absolute,
independent, irrevocable and unconditional. The Company understands and agrees
that no payment by it under any other agreement (whether voluntary or
involuntary or pursuant to court order or otherwise) shall constitute a defense
to the several obligations hereunder except to the extent that the Bank has been
indefeasibly paid in full.
(c) The Company and the Bank hereby each represents and
warrants to the other that neither it nor any of its agents has dealt with any
brokers, finders or advisors in connection with the transactions contemplated
hereby other than (i) Morgan, Hughes and Company and (ii) San Juan Capital
Corporation. The Company hereby agrees to pay any fees owed to Morgan, Hughes
and Company and San Juan Capital Corporation, respectively, in connection with
the transactions contemplated hereby pursuant to separate agreements between
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the Company and such parties and agrees to defend, indemnify and hold the
Indemnified Parties harmless from and against any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including, without
limitation, attorneys' fees an disbursements) arising as a result of any claim
by any broker, finder or advisors including, without limitation, Morgan, Hughes
and Company and/or San Juan Capital Corporation, except to the extent any such
claim, demand, liability, damage, loss, cost, charge or expense arises out of an
agreement between such broker, finder or advisor and the Bank in connection with
the transactions contemplated by this Agreement or any other Operative
Documents. The Bank agrees to defend and indemnify the Company and hold it
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including, without limitation, attorneys'
fees and disbursements) arising by reason of the foregoing representation by the
Bank being untrue or incorrect in any respect.
(d) The obligations of the Company under this Paragraph 5
shall survive the payment of the Bonds and the Note and the termination of this
Agreement and/or the Letter of Credit.
6. CONDOMINIUM UNITS. The Condominium Units, or a portion thereof,
shall be constructed at the option of the Company, subject to the Bank's
reasonable approval of the design concept, schematics, plans and specifications
for the Condominium Units. If constructed, all or a portion of the Condominium
Units may be operated by Williams as part of a rental arrangement providing for
up to 450 hotel rooms. If the Bank has approved the design concept, schematics,
plans and specifications for the Condominium Units and subject to the Bank's
receipt of evidence satisfactory to the Bank that adequate financing is
available for the completion of the Condominium Units and that the legal
relationship between the Condominium Units and the Project is appropriate and
enforceable, and provided no Default or Event of Default exists or is continuing
hereunder or under any of the other Operative Documents, portions of the
Condominium Parcels will be released from the lien of the Fee Mortgage upon the
transfer of such property to the entity which will develop the Condominium
Units, with no consideration payable to the Bank therefor, other than amounts
payable pursuant to Paragraphs 7(p) or 14(c) hereof. The Bank shall subordinate
the Fee Mortgage to necessary easements reasonably approved by the Bank for
access roads to and utilities serving the Condominium Parcels so released.
Notwithstanding the release of all or any of the Condominium Parcels from the
lien of the Fee Mortgage, the Condominium Revenues shall continue to be included
in the Collateral given by the Company in connection with the Letter of Credit,
this Agreement and the Bonds, and any such release by the Bank shall be subject
to the Bank's prior receipt of a fully executed Assignment of Rents in
connection therewith.
7. COVENANTS. The Company covenants and agrees that, so long as a
Drawing is available under the Letter of Credit or any amount is payable to the
Bank under this Agreement:
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(a) Notice of Default. The Company will furnish to the Bank as
soon as possible and in any event within three Business Days after the discovery
by the Company or any of its General Partners of any Default or Event of
Default, an Officer's Certificate, setting forth the details of such Default or
Event of Default and the action which the Company proposes to take with respect
thereto.
(b) ERISA. As soon as possible and in any event within 10 days
after the Company or a Subsidiary knows or has reason to know that a Reportable
Event has occurred, that any payment required to be made under Section 412 of
the Code is not made before the due date, that an accumulated funding deficiency
has been incurred or an application may be or has been made to the Secretary of
the Treasury for a waiver of the minimum funding standard under Section 412 of
the Code with respect to a Plan, that a Plan has been or may be terminated, that
proceedings may be or have been instituted to terminate a Plan, or that the
Company, a Subsidiary or an ERISA Affiliate will or may incur any liability to
or on account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA,
the Company will deliver to the Bank an Officer's Certificate setting forth
details as to such occurrence and action, if any, which the Company, the
Subsidiary or the ERISA Affiliate is required or proposes to take, together with
any notices required or proposed to be filed with or by the Company, the
Subsidiary, the ERISA Affiliate, the PBGC or the plan administrator with respect
thereto. Copies of any notices required to be delivered to the Bank under the
preceding sentence shall be delivered no later than 10 days after the later of
(i) the date such report or notice has been filed with the Internal Revenue
Service or the PBGC and (ii) notice has been received by the Company or the
Subsidiary. The Company will, as soon as possible and in any event within 60
days of filing, furnish to the Bank a copy of the annual report of each Plan
(Form 5500) required to be filed with the Internal Revenue Service, including a
copy of any actuarial valuation prepared in connection therewith.
(c) Preservation of Existence. The Company will preserve and
maintain its legal existence, franchises, rights and privileges in the
jurisdiction of its formation and will preserve and maintain its rights and
privileges in the Commonwealth of Puerto Rico, and shall comply with all Legal
Requirements.
(d) Successor Letter of Credit. (i) At any time following the
Date of Substantial Completion, the Bank may designate another bank which is
willing to issue a Successor Letter of Credit (as defined in the Trust
Agreement), on terms not less favorable to the Company that those contained in
this Agreement, in which case, provided that such bank and the letter of credit
to be issued by such bank meet the requirements of the Trust Agreement with
respect to a Successor Letter of Credit, and provided, further, that any
up-front fees imposed upon the Company in connection with the issuance of the
Successor Letter of Credit are borne by the Bank, the Company shall, at the
Bank's request, (A) take such action as shall be required pursuant to the Trust
Agreement to substitute such letter of credit for the Letter of Credit issued by
the Bank and (B) enter into a modification of this Agreement and such other
agreements and
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take such other action, including, without limitation, such action as may be
necessary to supplement the Trust Agreement, as shall be required to consummate
the issuance of the Successor Letter of Credit referred to in clause (A) above
and to provide for the reimbursement of the issuer of such Successor Letter of
Credit for any draws thereunder and such other terms and conditions as such
issuer may require, provided that such modification or any such other agreements
or actions shall be on such terms and conditions as the Company shall reasonably
approve.
(ii) Subject to the requirements of the Operative Documents,
the Company shall have the right to replace the Letter of Credit at any time on
30 days' prior written notice to the Bank, provided that, prior to such
replacement, payment to the Bank is made of all sums due and owing to the Bank
at the time of such replacement with respect to the Letter of Credit (including,
without limitation, sums due and owing under this Agreement).
(e) Additional Indebtedness. The Company will not, directly or
indirectly, create or permit or suffer to exist any Debt (i) secured by a
mortgage or other Lien on the Premises or Improvements, or any portion thereof,
other than (A) the Permitted Encumbrances, (B) capitalized leases for furniture,
fixtures or equipment, (C) Liens in favor of GDB created pursuant to the GDB
Loan and consented to by the Bank in writing, or (D) a third priority mortgage
on the Premises in favor of KGC (the KGC MORTGAGE), as provided in Section 6.03
of the Company Partnership Agreement, provided that KGC executes and delivers to
the Bank a standstill agreement on terms substantially similar to those
contained in the GDB Standstill Agreement and in any event on terms and
conditions satisfactory to the Bank in its sole and absolute discretion, or (ii)
secured by a Lien on any direct or indirect equity interest in the Company,
except a Lien on the interest of WKA in the Company securing WKA's repayment of
a KG Loan (as defined in the Company Partnership Agreement) as provided in
Section 6.03 of the Company Partnership Agreement.
(f) Payment of Swap Obligations. The Company shall pay all
amounts which it may be obligated to pay under the Bond Swap Agreement and the
GDB Swap Agreement, and all such amounts which become payable by the Company to
the Bank under such agreements shall be deemed amounts payable under this
Agreement.
(g) Financial Statements. The Company, each of the Guarantors,
WKA, Williams, Posadas de Puerto Rico Associates Incorporated, a Delaware
corporation, and Posadas de San Juan Associates, a New York partnership (as well
as Kumagai and/or WMS Industries, to the extent either is no longer a publicly
traded company required to make Annual Reports publicly available), shall
deliver to the Bank within 125 days after the close of their respective fiscal
years, for the twelve-month period then ended, (i) an audited balance sheet,
(ii) an audit statement of operations, (iii) an audited statement of cash flow,
(iv) an audited statement of changes in shareholder's equity, and (v) with
respect to the Company only, an audited statement of profits and loss on a cash
flow basis. The Company, KGC and WKA shall deliver to the
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Bank within 50 days after the close of each quarter, for the three-month period
then ended, (i) a balance sheet, (ii) an unaudited statement of operations,
(iii) an unaudited statement of cash flow, (iv) an unaudited statement of
changes in shareholder's equity, and (v) with respect to the Company only, an
unaudited statement of profits and loss on a cash flow basis, each of which
shall be certified to be true and correct by the general partners, if a
partnership, or the chief financial officer, if a corporation of the respective
entities. Within 10 days after the close of each calendar month occurring after
the opening for business of all or any portion of the Project, the Company shall
deliver to the Bank the monthly financial reports which the Company prepares for
its partners, certified by the General Partners to be true and correct. Within
10 days after the close of each calendar month during which any Deficiency Loans
have been made, the Company shall deliver to the Bank a report with respect to
such loans in detail reasonably satisfactory to the Bank. Within 125 days after
the close of their respective fiscal years, for the twelve-month period then
ended, Kumagai and WMS Industries shall deliver to the Bank copies of their
respective Annual Reports and WMS Industries shall deliver to the Bank a copy of
its Form 10K, all of which shall be certified to be true and correct by its
chief financial officer. Within 125 days after the close of each calendar year,
each of Hugh A. Andrews, Richard Koffman and Burton Koffman shall deliver their
respective personal financial statements to the Company (which statements for
Messrs. Koffman may be prepared jointly), certified to be true and correct by
such individual. Each of the foregoing statements (other than statements for
individual) shall be prepared in accordance with generally accepted accounting
principles as in effect from time to time, applied on a basis consistent with
the most recent audited financial statements of the respective entities
delivered to the Bank, and each such statement shall present a fair and accurate
portrayal of the financial condition of the respective party. In addition to
such requirements, all Financial Statements of the Company and of Posadas de
Puerto Rico Associates Incorporated and Posadas de San Juan Associates shall be
prepared based upon the Uniform System of Accounts for Hotels, copyrighted by
the Hotel Association for New York City, 8th edition of 1986, as amended from
time to time. All Financial Statements required to be audited hereunder shall be
audited by the Accountant in the case of the Company, and in all other cases by
an independent certified public accountant reasonably satisfactory to the Bank.
Throughout the term of this Agreement, the Company, each Guarantor, Kumagai and
WMS Industries (or its successor) shall deliver to the Bank, within 10 days
after request therefor, such other financial information and/or Financial
Statements with respect to the Company, the Guarantors, Kumagai, WMS Industries
(or its successor), as the case may be, as the Bank may reasonably request from
time to time.
(h) Transfers. The Company shall not make or permit or suffer to be
made any Transfer except for any Permitted Transfer.
(i) Decision Making. The Company shall recognize and honor the
right of the Bank, pursuant and to the extent set forth in the Pledge Agreement,
to exercise all rights and remedies and to make all decisions of the Mortgagee
under the Mortgage and of the holder of the Note.
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(j) Further Assurances. The Company will execute, acknowledge
where appropriate, and deliver, and use best efforts to cause others to execute,
acknowledge where appropriate, and deliver, from time to time promptly at the
request of the Bank, all such instruments and documents as in the opinion of the
Bank are necessary or advisable to carry out the intent and purpose of this
Agreement and the other Operative Documents and will execute and file or record,
or use best efforts to cause others to execute and file or record, any financing
statements, continuation statements or other documents, and take such other
actions as may necessary or advisable to create, perfect, protect and preserve
the first mortgage liens and first security interests acquired, or intended to
be acquired, by or for the benefit of the Bank under the Operative Documents.
(k) Compliance with Laws. The Company will comply with all
Legal Requirements, non-compliance with which would have a materially adverse
effect on its business, financial condition or results of operations or would
materially adversely affect the Company's ability to perform its obligations
under this Agreement or any of the Operative Documents. The Company will comply
with all conditions, covenants, restrictions, leases, easements, reservations,
rights and rights-of-way and all applicable requirements of any insurers related
to the Project.
(l) Performance of This and Other Agreements. The Company will
take all action and do all things which it is authorized by law to take and to
do in order to perform and observe all covenants and agreements on its part to
be performed and observed under this Agreement and each Operative Document. The
Company agrees that the Bon Swap Agreement shall not alter, impair, restrict,
limit or modify, in any respect the obligation of the Company to pay interest on
the Loan as and when the same becomes due and payable in accordance with the
provisions of the Loan Agreement and the Mortgage Note.
(m) Amendments. The Company will not surrender, terminate,
modify, amend or supplement in any material respect, or give any consent to any
surrender, termination, modification, amendment or supplement or make any waiver
with respect to any provision of the Company Partnership Agreement (including,
without limitation, any provision that would result in a transfer of an interest
in the Company or any partner of the Company which is prohibited by any of the
Operative Documents or would result in a diminution in the scope and powers of
any of the General Partners) and/or any organizational documents of any partner
of the Company, any Operative Document, any of the other Construction Documents
or the other Project Documents or any other documents relating to the Project,
including, without limitation, relating to the use or operation of the Project,
without the prior written consent of the Bank in each instance.
(n) Construction. The Company will cause the Construction of
the Improvements to be prosecuted with diligence and continuity, in a good and
workmanlike manner and in accordance with the Plans and the Construction
Schedule so as to cause
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Substantial Completion to occur, free and clear of all claims, liens and
encumbrances, within the Budget and on or prior to the Completion Date, as the
same may be extended in accordance with the next succeeding sentence, subject to
and in accordance with this Agreement, the Construction Documents and Project
Documents, to the extent the same specify construction requirements applicable
to the Construction of the Improvements. The Plans shall provide for the
purchase and installation of fixtures, furnishings and equipment of a sufficient
quantity and quality as is appropriate for a first-class destination resort. The
Completion Date may be extended for a period of time equal to the number of day
during which the Company is prevented from or delayed in proceeding with the
Construction of the Improvements by reason of any Unavoidable Delay upon
satisfaction of all of the following conditions at the time of any such
extension: (i) the Bank shall have received notice from the Company of any
requested extension and the anticipated duration thereof, (ii) no Event of
Default shall have occurred and be continuing, (iii) the Company shall have
delivered to the Bank a revised Budget to the extent such extension shall affect
the Budget, and (iv) the Company shall have satisfied the requirements of
Paragraph 9(k) hereof, if applicable; provided, however, that in no event shall
any such extension extend the Completion Date for Unavoidable Delay for an
aggregate period in excess of 180 days. The Company shall promptly notify the
Bank of any cessation of Construction of the Improvements for a period in excess
of ten days, regardless of whether or not such cessation is due to an
Unavoidable Delay.
(o) Inspection of Project and Books and Records. The Company
will permit the Bank and the Bank's Consultant, or designated representatives of
any of them, to enter upon the Project, at any reasonable times, with free
access to inspect or examine (i) the Project, (ii) all materials and shop
drawings which are or may be kept at the construction site, (iii) any contracts,
bills of sale, statements, receipts or vouchers, (iv) all work done, labor
performed or materials furnished in and about the Project, (v) all books,
contracts and records of the Company relating to the Project and (vi) any other
documents which are reasonably related to the Project. The Company will make its
representatives available for the Bank or the Bank's Consultant upon reasonable
notice to discuss the Company's affairs, finances and accounts relating to the
Project and the Company will cooperate, and take all reasonable steps to cause
the Construction Manager and the Trade Contractors to cooperate, with the Bank
or the Bank's consultant, as the case may be, or any designated representative
of either, to enable such Person to perform its functions hereunder. In
connection therewith, the Company will keep adequate records and books of
account, in which complete entries will be made in accordance with generally
accepted accounting principles, consistently applied, reflecting all financial
records of the Company.
(p) Expenses. The Company will pay promptly on demand to or
for the account of the Bank, as the case may be: (i) the Bank's counsel fees,
(ii) the fees and disbursements of the Bank's Consultant and (iii) all other
costs and expenses incurred by or on behalf of the Bank in connection with the
closing of the Loan or the issuance of the Letter of Credit or with respect to
any and all of the transactions contemplated herein or in any other Operative
Document. Without limiting the generality of the foregoing, the Company will
pay:
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(A) all taxes and recording expenses, including all
filing and notarial fees and mortgage recording fees and
taxes, with respect to the Security Documents, and any other
documents modifying, extending or consolidating the Security
Documents;
(B) all finder's fees, placement fees and commissions
lawfully due to brokers in connection with the Loan or the
issuance of the Letter of Credit, if any, except to the extent
provided otherwise in Section 5(c) hereof;
(C) all title insurance charges and premiums; and
(D) all appraisal, survey, investigation and
insurance fees and expenses and all costs of preparing
environmental and insurance reports concerning the Project.
(q) Plans. The Company shall proceed with diligence and
continuity to cause Substantial Completion and completion of the construction to
occur in accordance with the Plans and all Legal Requirements. Any material
variation of the Construction of the Improvements from the Plans shall be
subject to the prior written approval of the Bank. Without limiting the
generality of the foregoing, Substantial Completion and completion of the
Construction shall be achieved free and clear of Liens or claims for materials
supplied or for labor or services performed in connection with the Construction
of the Improvements or otherwise, except with respect to the Liens for the
performance of work or supply of materials to the extent permitted to remain
uncured and unbonded pursuant to the Mortgage.
(r) Delivery of Agreement. The Company will deliver to the
Bank, promptly after demand, copies of any contracts, bills of sale, statements,
receipted vouchers or agreements, under which the Company claims title to any
materials, fixtures or articles incorporated in the Project and subject to the
Lien of the Mortgage. The Company shall deliver to the Bank copies of all
Construction Documents and Project Documents hereafter entered into immediately
after the same are entered into.
(s) Correction of Work. The Company will, upon demand of the
Bank or the Bank's Consultant, promptly correct any structural defect in the
Improvements or any departure from the Plans not approved by the Bank and the
Bank's Consultant, to the extent any such approval is required pursuant to
Paragraph 7(bb) hereof, it being agreed that the making of any Disbursement
shall not constitute a waiver of the Bank's right to require compliance with
this covenant with respect to any such defects or departures from the Plans.
(t) Revised Budget. The Company will, at its sole cost and
expense, furnish to the Bank within 180 days after the date hereof and at least
once in every calendar quarter thereafter until the Date of Substantial
Completion, a revised construction budget which shall
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be in the form of the Budget an which shall indicate revisions made to date to
the Budget, which revised budget shall be satisfactory to the Bank in the Bank's
sole and absolute discretion.
(u) Notices. The Company shall give notice to the Bank
promptly upon the occurrence of:
(a) any (i) default or event of default under any
material contractual obligation of the Company, (ii)
litigation, investigation or proceeding of which the Company
has knowledge which may exist between the Company and any
Government Authority and (ii) any pending or threatened
litigation or action of a Government Authority of which the
Company has knowledge concerning the presence, release, threat
of release, placement on or in, or the generation,
transportation, storage, treatment or disposal at, the Project
of any Hazardous Material;
(b) any notice given pursuant to any of the Project
Documents or the Construction Document alleging that a default
or other failure by the Company has occurred thereunder; and
(c) any condition which results, or is likely to
result, in an Unavoidable Delay in Substantial Completion.
Each notice pursuant to this Paragraph 7(u) shall be accompanied by a statement
of the Company setting forth details of the occurrence referred to therein and
stating what action the Company proposes to take with respect thereto.
(v) Plan Changes. The Company shall provide to the Bank's
Consultant and, upon the Bank's request, the Bank, copies of all change orders,
change bulletins and other revisions of the Plans to the extent the Company has
received same, regardless of whether the prior approval by the Bank or the
Bank's Consultant of any such order, document or revision is required.
(w) No Encroachments. The Improvements shall be Constructed
entirely within the perimeter of the Premises and shall not encroach upon or
overhang (unless consented to in writing by the affected property owner) any
easement or right-of-way or overhang the land of owners, and when erected shall
be wholly within any building restriction lines, however established.
(x) Insurance. The Company shall provide and maintain at all
times insurance in such forms and covering such risks and hazards and in such
amounts and with such companies as may be required by the Pledge Agreement, and
shall deliver such policies, or signed insurance binders relating thereto, to
the Bank.
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(y) Application of Insurance and Condemnation Proceeds. The
application of all insurance or condemnation proceeds realized from the damage,
destruction or condemnation of the Project, or any portion thereof, shall be
governed by the Pledge Agreement.
(z) Compliance with Documents. The Company shall abide by,
perform and comply with all material terms and conditions of the Management
Agreement, the Construction Management Agreement, the Architect's Agreement, the
Trade Contracts, the other Construction Documents and the other Project
Documents and the Company, at its sole cost and expense, shall use best efforts
to secure or enforce the performance of each and every material obligation,
covenant, condition and agreement to be performed by the other parties under any
such documents.
(aa) Bonds. The Company will cause the Bank to be named as
co-obligee on all performance, payment or bid bonds obtained by the Company from
each Trade Contractor. All Trade Contracts shall be bonded pursuant to a
performance, payment or bid bond satisfactory to the Bank in form, content and
issuer.
(bb) Work Changes. Notwithstanding anything to the contrary
contained herein, the Company will not direct or permit the performance of any
work (i) pursuant to any single Work Change which would result, by itself, in an
increase in the cost of any Line Item in excess of the Individual Budget Change
Amount, (ii) pursuant to any single Work Change which, together with the
aggregate of all Work Changes theretofore executed or carried out by the
Company, would result in an increase or decrease in aggregate cost of
Construction of the Improvements in excess of the Aggregate Budget Change
Amount, nor (iii) pursuant to any single Work Change which would have the effect
of (x) materially increasing or reducing the gross square footage of the
Improvements as a whole or (y) modifying any of the design elements or
construction techniques of the Improvements in any way which would adversely
affect the quality of the Improvements as a whole; unless in each case it shall
have received the prior written approval of the Bank. Approval by the Bank of
any such Work Change shall not obligate the Bank to make any Disbursement on
account of such Work Changes unless the costs therefor are reflected in the
Budget. No Work Change shall be made unless the Company shall have obtained such
approvals as shall be necessary under the requirements of ARPE and/or the
Planning Board of Puerto Rico.
(cc) No Contracts. The Company will not, without the Bank's
prior written consent, execute any Trade Contract or become a party to any
arrangement for the performance of work or the furnishing of materials at the
Project except (a) with the Construction Manager or with those Trade Contractors
approved by the Bank and (b) a Trade Contract in substantially the form of, or
an arrangement with terms substantially equivalent to the terms provided in, the
standard form of contract or trade contract previously delivered to and approved
by the Bank. In connection with the foregoing approval, the Company may from
time to time deliver to the bank and the Bank's Consultant a list of the names
of prospective Trade Contractor's with whom
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the Construction Manager or the Company may contract for the construction of the
Improvements or for the furnishing of labor or materials therefor. Each Trade
Contract shall permit the Retainage until the work to be performed thereunder
has been completed.
(dd) Asbestos. The Company will not install, permit to be
installed or suffer to exist in the Improvements friable asbestos or any
substance containing asbestos and existing in a manner or for a use deemed
hazardous by federal, state or commonwealth regulations respecting such
material.
(ee) Final Survey. The Company will deliver to the Bank within
60 days after the Date of Substantial Completion an Update of the Survey, dated
no earlier than the Date of Substantial Completion, with a certification that no
encroachments exist by the Improvements or on the Premises other than those
shown on the Survey and consented to, in writing, by the Bank, and indicating
the completed Improvements, the dimensions thereof at ground surface level, the
distance therefrom to the facing exterior property lines and other buildings and
any set-back lines, the location of access to the Project and all utility, water
and other easements directly affecting the Project.
(ff) Construction Trust Account. The Company will (a) receive
and deposit in the Construction Trust Account all Disbursements made pursuant
hereto , (b) hold the same and the right to receive future Disbursements to be
made hereunder as a trust fund for the purpose of paying only Hard Costs and
Soft Costs and (c) apply the Disbursements to the payment of the costs for which
the applicable Request for Disbursement was made.
(gg) Leasing. To the extent that the Company leases space in
the Premises (other than renting guest rooms to transient guests), the Company
shall lease and cause the lessee to operate the space to be leased in a manner
compatible with the operation of the Premises as a first class destination
resort hotel. From time to time upon the request of the Bank, the Company shall
provide to the Bank such information as the Bank shall request with respect to
the Company's leasing activities and policies. All leases for all or any portion
of the Premises shall be subordinate in all respects to this Agreement and to
the Security Documents. The Company shall not enter into a lease for any space
in the Premises without first delivering to the Bank an Assignment of Rents in
connection therewith.
(hh) Distribution Cash Under Company Partnership Agreements.
The Company shall not make more than one distribution of Distributable Cash (as
defined in the Company Partnership Agreement ) with respect to any fiscal year
of the Company, and such distribution shall not be made earlier than the date
which is 30 days after audited Financial Statements of the Company demonstrating
the existence and the amount of such Distributable Cash have been delivered to
the Bank.
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(ii) Deficiency Loans. Any funds advanced to the Company as
Deficiency Loans (as defined in the Company Partnership Agreement), whether or
not at the direction of the Bank, shall be applied only to the operating costs
or other fees and expenses related to the operation of the Project; provided,
however, that (A) up to $6,000,000 of such funds available for Deficiency Loans
under the Company Partnership Agreement may be used by the Company to pay any
portion of the Total Project Costs for which the Company has insufficient funds
and (B) the foregoing restriction shall be of no effect from and after the
Coverage Date. After the Date of Substantial Completion and until the Coverage
Date, the Bank will have the right to cause the Company, acting through WKA, (A)
at such times as the Bank shall determine in the reasonable exercise of its
judgment that an Operating Deficit exists with respect to any month, to require
the General Partners to make Deficiency Loans in amounts of up to $20,000,000 in
the aggregate (less (x) any such Deficiency Loans for such purpose which may
have previously been voluntarily advanced and (y) any additional Deficiency
Loans of up to $6,000,000 in the aggregate which may have previously been
voluntarily advanced to pay Total Project Costs to the extent hereinabove
permitted), and (B) to apply such funds on account of such Operating Deficits.
The Bank shall have no right to cause Deficiency Loans to be made to pay
principal under the Bonds, the Loan Agreement or hereunder. In the event that
WKA elects not to make the Deficiency Loan pursuant to Section 6.03 of the
Company Partnership Agreement, the Bank may exercise the right of WKA pursuant
to Section 6.03 of the Company Partnership Agreement to require KGC to make the
Deficiency Loan on behalf of WKA through the making of a KG Loan (as defined in
the Company Partnership Agreement). In the event of a default by KGC in its
obligations to make a KG Loan, the Bank shall have the right, under the Four
Party Agreement, to cause the Company or WKA, respectively, to exercise such
available rights and remedies with respect thereto as the Bank shall determine.
The Bank's right to require Deficiency Loans to be made shall cease during the
pendency of any bankruptcy proceeding with respect to the Company or in the
event of the commencement of any foreclosure or similar proceeding with respect
to the Company's interest in the Project. If any Deficiency Loan is made to
enable the Company to make the deposit of interest on the Bonds required under
Section 401(c) of the Loan Agreement, then any Net Earnings, up to the amount of
such Deficiency Loan, for the period from the date of such deposit on the
Interest Payment Date to which such deposit relates, shall be paid to the Bank
to be held by the Bank for the benefit of the Company as collateral security for
the obligations of the Company hereunder and, subject to the conditions to
disbursement contained herein, disbursed by the Bank on account of the next
succeeding Disbursements with respect to Operating Deficits. Unless and until
such funds are withdrawn or disbursed from such account, any funds in such
account (i) maybe commingled with the general funds of the Bank, (ii) shall bear
interest at a fluctuating rate per annum, which rate shall be equal to the
Federal Funds Effective Rate, and (iii) together with such interest, shall
constitute additional security for the Company's performance of their
obligations pursuant to this Agreement (a security interest therein being
granted hereby to the Bank). Upon the occurrence and during the continuation of
any Event of Default, any sums in such account and any interest accrued thereon
may be applied by the Bank to the payment of the obligations of the Company
hereunder when and as the same shall be due, in such order, as the Bank may
elect. Upon
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termination of the Letter of Credit and this Agreement, provided the Company
shall have paid to the Bank all amounts due and to become due to the Bank
hereunder, the Bank shall release and pay to the Company the amount remaining,
if any, of such funds, together with any interest earned thereon and not
theretofore disbursed.
(jj) Ground Lease and GDB Documents. The Company shall comply
with all of the terms and conditions of the Ground Lease and of the documents
executed in connection with (i) the GDB Loan (for so long as the GDB Loan is
outstanding), respectively, and such documents shall remain in full force and
effect at all times in accordance with their terms. The Company shall not cause
or suffer any event of default on its part to occur under such documents. It is
expressly agreed that so long as the GDB is prevented by reason of the GDB
Standstill Agreement from exercising any rights or remedies against the Company
or any of the Collateral, then any failure by the Company to comply with any
non-monetary term or condition of the documents executed in connection with the
GDB Loan shall not, by itself, be deemed a breach by the Company of this Section
7(jj) or a Default or Event of Default under this Agreement or any Operative
Document.
(kk) Compliance with Environmental Laws. The Company will
comply with any and all Legal Requirements and Environmental Laws with respect
to the discharge, removal and disposal of Hazardous Material, and the Company
shall pay immediately when due the costs of removal and disposal of any such
Hazardous Material, and shall keep the Project free of any Lien imposed pursuant
to such Legal Requirements or Environmental Laws. In addition to all other
rights available to the Bank in connection therewith, if the Company fails to
comply with any requirement of this paragraph, the Bank may, but shall not be
obligated to, cause the Project to be freed from the Hazardous Material, with
the cost of the removal and disposal thereof being payable by the Company upon
the Bank's demand therefor. The Company further agrees not to release or dispose
of any Hazardous Material at the Project without the express written approval of
the Bank , and any such release or disposal will be in compliance with all Legal
Requirements and conditions established by the Bank, if any. The Bank shall have
the right upon reasonable notice to conduct an environmental audit of the
Project at any time and at the Company's sole cost and expense; provided,
however, that if the Bank requests such audit more often than once in any
calendar year, such additional audit shall be conducted at the Bank's cost and
expense. The Company shall cooperate in the conduct of any such environmental
audit. The Company shall give the Bank and its agents and employees access to
the Project to remove Hazardous Material, and the Company agrees to indemnify
and hold the Bank harmless from and against all loss, costs, damages and
expenses (including, without limitation, attorneys' fees and disbursements) that
the Bank may sustain by reason of the assertion against the Bank by any party of
any claim in connection with such Hazardous Material.
(ll) Expropriation. The Company agrees to take all actions,
execute and deliver all documents and pay all costs and expenses (including,
without limitation, payment of the purchase prices therefor) in connection with
(i) the acquisition, including, if necessary, the
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expropriation by the Lands Administration of Puerto Rico and the subsequent sale
to the Company of those parcels of land adjacent to the Project and presently
owned by Justino Diaz Santini, and identified on the Boundary Survey Map dated
February 19, 1990 prepared by David Lebron Lopez, P.L.S. as Tract and G-1c/1d,
(ii) the spreading of the lien of the Fee Mortgage to cover such property or the
granting of a separate mortgage to cover such property, and (iii) the
endorsement of the Title Policy to include the lien of the Fee Mortgage or such
new mortgage with respect to such property.
(mm) Palominos Island Property. The Company agrees to take all
actions, execute and deliver all documents and pay all costs and expenses
necessary to effect the segregation of the premises demised to the Company under
the Ground Lease into two separate parcels, consisting of (a) the demised
premises less that portion of the demised premises defined in the Ground Lease
as the "Reserved Area" and (b) the Reserved Area.
(nn) Registration and Mortgages of Boats. The Company agrees
to enter into Chattel Mortgages for all boats and ships purchased by the Company
for use at the Project, provided, however, that if any such vessel otherwise
meets the requirements necessary to qualify as a preferred vessel under federal
laws, the Company will take all acts necessary to qualify such vessel as a
preferred vessel an will enter into a mortgage therefor, in form and substance
satisfactory to the Bank, and otherwise in compliance with federal law and the
Company shall, at its own cost and expense, cause such mortgage to be properly
filed of record.
(oo) Recordation of True Description. The Company agrees to
take all actions, execute and deliver all documents and pay all costs and
expenses necessary to obtain a resolution from the Planning Board of Puerto Rico
restating the surface area of the Premises, as described of record in the
Registry of Property to be the same as the surface area of the Premises as
described on the Survey.
(pp) Additional Assignments and Chattel Mortgages. The Company
agrees to enter into Assignments of Accounts Receivable and Assignments of
Contracts at all such times as the same may be required in order to ensure that
the Bank has a valid security interest in all accounts receivable and all
contracts and agreements of the Company, respectively, to the extent permitted
by law. The Company further agrees to enter into an Assignment of Rents each
time that a new lease is entered into for any portion of the Project and each
time that a Condominium Parcel is released pursuant to Section 6 hereof. In
addition, the Company shall execute and deliver a Chattel Mortgage to the Bank
in connection with any buses, limousines or other moving vehicles purchased by
the Company for use at or in connection with the Project, except to the extent
otherwise provided in Section 7(oo) above, and shall cause same to be properly
filed for record in the corresponding Section of the Property Registry of Puerto
Rico and/or the Department of Transportation and Public Works of Puerto Rico, as
applicable, at the sole cost and expense of the Company.
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(qq) Amounts Secured by Mortgage. Any costs and expenses
incurred by or amounts advanced by the Bank pursuant to the terms hereof
(including, without limitation, any amounts advanced pursuant to Section 7(kk)
hereof) and all other Reimbursement Obligations (as defined in the Pledge
Agreement) including, without limitation, the obligation of the Company to make
Termination Payments under the Bond Swap Agreement to the extent such
Termination Payments do not exceed $20,000,000 shall be secured by the Fee
Mortgage and by the Leasehold Mortgage and, to the extent permitted by
applicable law, are included in the "credit for additional advances" recited
respectively therein.
(rr) Sole Business. Puerto Rico is and shall be the only
jurisdiction in which the Company owns real property or conducts business and
the sole business conducted by the Company at any time is and shall be the
development and operation of the Project as a first class destination resort.
(ss) Loan Agreement Covenants. The Company shall comply with
all of the covenants of the Company set forth in the Loan Agreement.
(tt) Termination of Swap Agreements. Unless there shall have
occurred an Event of Default (as defined in the Bond Swap Agreement) by the Bank
or the other counterparty under the agreement in question, the Company shall not
terminate, modify, cancel or surrender, or permit the termination, modification,
cancellation or surrender of the Bond Swap Agreement without the prior written
consent of the Bank.
8. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants
to the Bank as follows (which representations and warranties shall survive the
execution and delivery of this Agreement and the other Operative Documents,
regardless of any investigation made by the Bank or on its behalf);
(a) Due Organization. (1) The Company is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware and duly qualified to do business in the Commonwealth of
Puerto Rico and in every other jurisdiction where it is currently doing
business, has all necessary power and authority to own its properties, to
conduct its business as presently conducted or proposed to be conducted, and to
enter into and perform its obligations under this Agreement, the other Operative
Documents and the Construction Documents to which the Company is a party, and
possesses all licenses and approvals necessary for the conduct of its business
as it exists at such time. True and complete copies of the Company Partnership
Agreement, the general partnership agreement of WKA and the organizational
documents of KGC have been delivered to the Bank.
(2) The sole general partners of the Company are KGC
and WKA, each of which has a 15% general partnership interest and a 35% limited
partnership interest in the Company. KGC is a wholly-owned subsidiary of KIUSA;
and KIUSA is a wholly-owned
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subsidiary of Kumagai. The sole partners of WKA are (i) WMS El Con, with a
46.54% interest, (ii) AMK, with a 37.23% interest and (iii) Hospitality, with a
16.23% interest. WMS El Con is a wholly-owned subsidiary of WMS Hotel, which in
turn is a wholly-owned subsidiary of WMS Industries. The sole partners of AMK
are International Textile and KMA, each of which has a 50% partnership interest.
International Textile is 100% owned, directly or indirectly through one or more
corporations, by the Koffman Family. KMA is 82% owned by International Textile
and 18% owned by Marcel Arroya, Marcel Arroya, Jr. and David Mellon, employees
of International Textile. Hospitality is wholly owned by Hugh A. Andrews and his
wife, and is controlled by Hugh A. Andrews.
(3) The Company and, to the best of the Company's
knowledge, each of the entities listed in Paragraph 8(a)(2) above are duly
organized, validly existing and in good standing under the laws of their
respective States or Commonwealth of incorporation or formation, as the case may
be, and the Company and, to the best of the Company's knowledge, KGC, KGCC, WKA,
AMK, International Textile, Hospitality and KMA are duly qualified to do
business in the Commonwealth of Puerto Rico and in every other jurisdiction in
which they are currently doing business, have all necessary power and authority
to own their respective properties, to conduct their respective businesses as
presently conducted or proposed to be conducted, and to enter into and perform
their respective obligations, if any, under this Agreement, the other Operative
Documents and the Construction Documents to which the Company is a party, and
possesses all licenses and approvals necessary for the conduct of their
respective businesses as conducted at such time.
(b) No Violation. The consummation of the transactions herein
contemplated and the execution, delivery and performance by the Company of its
obligations under this Agreement, the other Operative Documents, the Project
Documents and the Construction Documents to which it is a party and all other
agreements to be executed by the Company in connection herewith or therewith
have been duly authorized by all necessary partnership and corporate action, and
do not and will not violate any Legal Requirement or any law or any regulation,
order, writ, judgment, injunction or decree of any Government Authority, or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
upon any of the assets of the Company (except as contemplated hereby and by the
other Operative Documents) pursuant to the terms of the Company's Partnership
Agreement, or any mortgage, indenture, agreement or instrument to which the
Company is a party or by which it or any of its properties is bound. The Project
and the use, occupancy, operation and condition thereof, in its present stage,
are in compliance with all applicable governmental laws, rules and regulations.
(c) Consents. All authorizations, consents and approvals of,
notices to, registrations or filings with, or other actions in respect of or by,
any governmental body, agency or other instrumentality or court (collectively,
the CONSENTS) required in connection with the execution, delivery and
performance by the Company of this Agreement, the other Operative
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Documents, the Project Documents and the existing Construction Documents and all
other agreements to be executed by the Company in connection herewith or
therewith to which it is a party have been duly obtained, given or taken and are
in full force and effect or will be duly obtained, given or taken and will be in
full force and effect when required, and the Company agrees that all Consents
required for the Construction and operation of the Improvements and otherwise in
connection with the carrying out or performance of any of the transactions
required or contemplated hereby or thereby will be obtained when required.
(d) Enforceability. This Agreement, the other Operative
Documents, the existing Project Documents and the existing Construction
Documents to which the Company is a party have been duly executed and delivered
on behalf of the Company and are legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.
(e) No Litigation. There is no action, suit, proceeding,
inquiry or investigation, at law or in equity, before or by any court, public
board or body pending or, to the best knowledge of the Company after due
inquiry, threatened against or affecting the Company or the Project, or any
portion thereof (including, without limitation, any condemnation or eminent
domain proceeding against the Project, or any portion thereof), or any of the
Guarantors, WMS Industries, Hugh A. Andrews, Burton Koffman or Richard Koffman,
wherein an unfavorable decision, ruling or finding would have an adverse effect
on the properties, business, condition (financial or other) or results of
operations of the Company, the transactions contemplated by this Agreement, the
Project, the other Operative Documents, the Project Documents and the existing
Construction Documents or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, this Agreement, the other Operative Documents, the Project
Documents and the existing Construction Documents to which it is a party.
(f) No Defaults. The Company is not in default under nor are
there any violations or notices or other records of violation of any law or any
regulation, order, writ, injunction or decree of any court or governmental body,
agency or other instrumentality applicable to the Company (including, without
limitation, any zoning, health, safety, building, environmental or other
statute, ordinance or restriction affecting all or any part of the Project or
any use or condition thereof), and no default has occurred and is continuing
under any Debt or any Indenture or other agreement or instrument governing
outstanding Debt of the Company, or any other contract, agreement or instrument
to which the Company is a party or by which it or its property is bound, and no
event has occurred which with the giving of notice or the passage of a time or
both would constitute such a default.
(g) Tax Returns. The Company has filed all tax returns, or
extensions thereof, required by law to be filed, and has paid all taxes,
assessments and other governmental charges levied upon the Company and its
properties, assets, income and franchises which are due and
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payable, other than those presently payable without penalty or interest. The
charges, accruals and reserves on the books of the Company in respect of
federal, state and commonwealth income taxes for all fiscal periods are adequate
in the opinion of the Company.
(h) Compliance with ERISA. Each Plan, if any, is in
substantial compliance with ERISA, all contributions required to be made to any
Plan by its terms, the Code or ERISA (including any quarterly installments
required under Section 412(m) of the Code) have been made by the applicable due
date, no Plan is insolvent or in reorganization, no Plan has an accumulated or
waived funding deficiency within the meaning of Section 412 of the Code, neither
the Company nor a Subsidiary nor an ERISA Affiliate has incurred any material
liability (including any material contingent liability) to or on account of a
Plan pursuant to Section 4062, 4063, 4064, 4201 or 4204 of ERISA, no proceedings
have been instituted to terminate any Plan, and no condition exists which
presents a material risk to the Company or a Subsidiary of incurring a liability
to or on account of a Plan pursuant to any of the foregoing Sections of ERISA.
(i) Other Facts. There is no fact particular to the Company or
the Project known to the Company after due inquiry which directly adversely
affects or in the future may (so far as the Company can now foresee after due
inquiry) directly adversely affect the business, property, assets or financial
condition of the Company which has not been set forth in this Agreement or in
any other Operative Documents. This representation shall not be deemed to extend
to general economic, political, military or other conditions or situations in
the Commonwealth of Puerto Rico or elsewhere in the world.
(j) Other Representations and Warranties. The Company hereby
makes to the Bank each of the representations and warranties made by the Company
contained in the Operative Documents to which the Company is a party as if such
representations and warranties were set forth in full herein.
(k) Financial Statements. The Financial Statements of the
Company, the Guarantors and WMS Industries, previously delivered to the Bank
fairly present the financial position of the Company, the respective Guarantors
and WMS Industries, as of such dates and the results of their operations and
changes in their financial positions for the period then ended, all in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent with the most recent financial statements
of the respective entities delivered to the Bank. Neither the Company, any of
the Guarantors nor WMS Industries has any contingent obligations, liabilities
for taxes or other outstanding liabilities or obligations, fixed or contingent,
which are material, individually or in the aggregate, except that, with respect
to clauses (i), (ii) and (iii) hereafter the Company has the following
outstanding obligations, and with respect to clauses (ii) and (iii) hereafter,
the Guarantors have the following outstanding obligation: (i) the Loan, (ii)
those liabilities and obligations in connection with the Project that have been
disclosed to the Bank and (iii) those liabilities and obligations disclosed
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in the financial statements described in this clause (k). Since the respective
dates set forth in the first sentence of this clause (k) there has been no
adverse change in the condition (financial or other), business, operations or
prospects of the Company or of any of the Guarantors or WMS Industries. Neither
the aforesaid financial statements of the Company and the Guarantors nor any
certificate or statement furnished to the Bank by or on behalf of the Company in
connection with the transactions contemplated hereby (including, without
limitation, any financial statements of other resorts owned or controlled by the
Company), nor any representation nor warranty in this Agreement, when taken
collectively as a whole and in the context made and to whom made, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein or herein not misleading in
light of the circumstances in which they were made.
(l) Martin Regulations. The Company is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System. No part of the proceeds of the Bonds will be used to purchase or carry
any margin stock,or to extend credit to others for that purpose, or for any
purpose that violates the provisions of Regulation U or X of the Board of
Governors of the Federal Reserve System.
(m) Investment Company Act. The Company is not an "investment
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
(n) Disclosure. The Preliminary Official Statement, as of its
date, and the Official Statement, as of its date and as of the date hereof, did
not and do not contain any untrue statement of material fact or omit to state
any material fact (other than any fact relating to and supplied by the Bank)
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(o) Management Agreement; Ground Lease and Other Agreements.
The Management Agreement is in full force and effect; no event has occurred and
is continuing which constitutes a default on the part of the Company under the
Management Agreement, or would constitute any such default but for the giving of
notice of lapse of time or both; and no event has occurred or is continuing
which would excuse Williams from its obligation under the Management Agreement
to use best efforts to operate the Project as a first class luxury destination
mega-report in accordance with the provisions of the Management Agreement and
consistent with the standards of other comparable properties in the area and
customary practices in the resort industry. The Ground Lease is in full force
and effect, and no event has occurred or is continuing which constitutes a
default on the part of the Company under the Ground Lease, or would constitute
any such default but for the giving of notice or lapse of time or both. The
Construction Management Agreement, the Architect's Agreement, the Trade
Contracts, the other
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Construction Documents and the other Project Documents heretofore executed by
the Company are in full force and effect, not having been amended, modified,
terminated or otherwise changed, or the provisions thereof waived, except as
permitted hereunder.
(p) Location of Company. The place of business or chief
executive office of the Company is located c/o Williams Hospitality Management
Corporation, 187 East Isla Verde Road, Carolina, Puerto Rico 00913, Attention:
Hugh A. Andrews. The Company will give the Bank prior written notice of any
relocation of such office.
(q) Plans; Construction. The Plans are satisfactory to the
Company and have been approved, to the extent required by applicable law,
ordinance or regulation or any effective restrictive covenant, by all Government
Authorities and the beneficiaries of any such covenant, respectively. All
Construction, if any, heretofore performed in connection with the Improvement
has been performed within the perimeter of the Premises or within the area of an
easement benefitting the Premises and with respect to which such Construction is
permitted and in accordance with the Plans and all Legal Requirements, and such
Construction has been fully paid for or else payment is not yet due or payment
is being disputed in good faith, provided that any such disputes have been fully
disclosed to the Bank and such failure to pay would not adversely affect the
Company's ownership rights in the Project. There are no structural defects in
the Improvements (to the extent currently constructed), no violation of any
Legal Requirement exists with respect thereto and the anticipated use thereof
complies with all restrictive covenants affecting the Project and all Legal
Requirements, including all applicable zoning and environmental protection
ordinances and regulations.
(r) Availability of Utilities. All utility services and
facilities necessary for the Improvements and, upon completion of Construction,
the operation and occupancy of the Improvements for their intended purposes and
which must be obtained from sources located outside the boundaries of the
Premises are available at the boundaries of the Premises, including water
supply, storm and sanitary sewer facilities, and electric and telephone
facilities.
(s) No Liens. Except for the Operative Documents, the
Construction Documents, the Project Documents, the Permitted Encumbrances and
any lien in favor of GDB created pursuant to the GDB Loan and consented to by
the Bank, the Company has made no contract or arrangement of any kind, the
performance of which by the other party thereto would give rise to a Lien
against all or any portion of the Collateral.
(t) Compliance with Building Codes, Zoning Laws, Etc. The
current zoning law and declarations covering the Project permit the Construction
of the Improvements to be completed and, upon completion of Construction, the
Improvements to be used as contemplated by this Agreement. The Project and, upon
completion of Construction, Improvements and the proposed use thereof will be in
all respects in compliance with all Permits and all Legal Requirements.
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(u) Budget. The Budget contains all costs and expenses
reasonably anticipated to be incurred in connection with the Construction,
equipping and leasing of the Improvements.
(v) Security Documents. The provisions of each Security
Document are effective to create a legal, valid and enforceable Lien on or
security interest in all of the Collateral described therein, subject to the
proper filing thereof, and when the appropriate recordings and filings have been
effected in public offices, each of the Security Documents will constitute a
perfected Lien on and security interest in all right, title, estate and interest
in the Collateral described therein, prior and superior to all other Liens,
except as permitted under the Operative Documents.
(w) Hazardous Materials. Except as specifically disclosed in
the Environmental Report, the Premises and the Improvements are not currently
and, to be best of the Company's knowledge, have never been subject to Hazardous
Materials or their effects. Other than as disclosed in the Environmental Report,
the Premises and the improvements thereon are in full compliance with the
Environmental Laws. There are no claims, litigation, administrative or other
proceedings, whether actual or threatened, or judgments or orders, regarding any
Hazardous Materials relating in any way to the Premises or the Improvements.
9. DISBURSEMENTS FOR CONSTRUCTION
(a) Disbursements for Construction. Each Disbursement shall be
made by the Trustee pursuant to Requests for Disbursements from time to time,
from the principal office of the Trustee or from such other place as the Trustee
may designate, and must be accompanied by a certificate of an Authorized Officer
of the Bank authorizing and directing such Disbursement. Each Disbursement
authorized by the Bank in accordance with the terms hereof shall be made in
accordance with the terms hereof and shall be made to or deposited in the
separate bank account of the Company at ScotiaBank de Puerto Rico (the
CONSTRUCTION TRUST ACCOUNT) which shall not be drawn upon except to pay for Hard
Costs and Soft Costs approved by the Bank, and shall be established so that the
Bank and the Trustee receive or are entitled to receive, on request, from the
depositary bank duplicate copies of regular monthly statements of all deposits
and withdrawals (including checks). Each Request for Disbursement under the Loan
shall be made in writing, shall be submitted to the Bank with a copy to the
Bank's Consultant not less than 10 Business Days prior to the proposed date for
such Disbursement and shall specify the Hard Costs and Soft Costs to be paid
with the proceeds of the requested Disbursement, including, without limitation,
the amount of any Retainage previously withheld and which has then become
payable by the Company. Each Request for Disbursement which requests payment for
Hard Costs (other than for payment of the Construction Manager's fixed monthly
fee payable under the terms of the Construction Management Agreement) shall be
accompanied by (i) the Trade Contractor's requisitions for payment, dated on or
about the date of such Request for Disbursement, accompanied by true copies of
unpaid invoices and receipted bills and noting that the only amounts due and
owing (other than any retainage pursuant to the
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terms of the applicable Trade Contract or subcontract) are the amounts to be
paid to trade contractors out of the Disbursement being requested or amounts due
and payable but which are being disputed by the Company and which are not
included in such Request for Disbursement, each of which shall be certified as
true and complete by the Company, (ii) a list of all Trade Contracts executed
since the date of the then last preceding Disbursement, together with a
certification that copies of the same and all contracts with any contractor or
subcontractor involved with the Construction of the Improvements executed by or
on behalf of the Company since the date of the then last preceding Disbursement
have been submitted to the Bank's Consultant prior to the date of such Request
for Disbursement, (iii) a list of all Work Changes, together with a statement by
the Company that copies of the same have been submitted to the Bank's Consultant
prior to the date of such Request for Disbursement, and (iv) evidence
satisfactory to the Bank that the full amount of the proceeds of the last
preceding Disbursement has been paid out by the Company in accordance with the
terms and conditions of this Agreement. In the case of any Disbursement to pay
any Soft Cost (other than interest due with respect to the Loan or payment of
the fixed monthly fees payable under the terms of the Management Agreement),
such Request for Disbursement shall be accompanied by true copies of the unpaid
invoices and a description of the costs for which the Disbursement being made,
as well as such additional supporting information as the Bank shall reasonably
request to the effect that such costs have been properly incurred and are due
and payable and are within budgeted amounts. The Bank shall not be required to
make any Disbursement for payment of amounts owed under any Trade Contract for
which the Bank has not previously received an Assignment of Contracts. All
Disbursements shall be made on a monthly basis and, with respect to
Disbursements for interest under the Loan, shall be made on the date on which
the Partnership is obligated to pay such interest pursuant to Section 401(c) of
the Loan Agreement. In the case of Disbursements to pay interest due with
respect to the Loan, any Request for Disbursement shall be reduced by the amount
of the Net Earnings reasonably estimated by the Borrower with respect to the
period commencing on the date of the previous Request for Disbursement and
ending on the date of the current Request for Disbursement. The next succeeding
Request for Disbursement shall be accompanied by a statement by the Borrower
certifying the actual amount of the Net Earnings for the prior period and such
Request for Disbursement shall be adjusted to take into account any variation
between the estimated Net Earnings and the actual Net Earnings for such prior
period as certified. To the extent that the Borrower's obligations under Section
2 of the Bond Swap Agreement for any period exceeds the interest on the Bonds
for such period, such excess shall be disbursed from the Project Fund to the
Bank as counterparty under the Bond Swap Agreement.
(b) Retainages. All Disbursements for Hard Costs (other than
for payment of the Construction Manager's fixed monthly fee payable under the
terms of the Construction Management Agreement) shall be subject to a retention
(each a RETAINAGE) equal to the greater of (i) 10% of the requested amount or
(ii) the amounts actually withheld or to be withheld pursuant to the contract
relating to such Hard Costs, which Retainage shall be disbursed after the later
to occur of (A) the date on which the Bank has received evidence satisfactory to
the
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Bank of the completion of the work of the trade in question in accordance with
the requirements of the contract therefor and (B) the date on which the Bank has
received releases or other evidence satisfactory to the Bank in its sole
discretion that the contractor in question has no other claim of payment against
the Company other than the amount of the applicable Retainage.
(c) Bank's Consultant. The Company acknowledges that the Bank,
pursuant to a separate agreement and at the Company's expense, has retained the
Bank's Consultant to review the Budget, the Plans and such other matters
relating to the Construction of the Improvements as the Bank shall request, and
to furnish reports to the Bank from time to time on the progress of Construction
with each Request for Disbursement for Hard Costs and as otherwise requested by
the Bank. In order to enable the Bank's Consultant to complete its reports to
the Bank, the Company shall permit the Bank's Consultant, at any reasonable time
and as frequently as the Bank shall require, (i) to inspect the Project and (ii)
to inspect and review all documentation with respect thereto, including, without
limitation, (x) all change orders and field orders which modify the Plans or any
contract or subcontract or which change the price, schedule or any other aspect
of the Construction of the Improvements, (y) all contracts or, to the extent the
same are in the Company's possession, subcontracts relating to the Construction
of the Improvements and (z) such other information as the Bank's Consultant
shall request relating to (1) the Construction of the Improvements (including
copies of receipts, invoices and other supporting documentation to substantiate
the costs to be paid from the proceeds of any requested Disbursement) and/or (2)
the state of the Company's claimed title to any materials, fixtures or articles
incorporated or to be incorporated in the Project.
(d) Disbursements for Operating Deficits. Notwithstanding
anything herein to the contrary, Disbursements for Operating Deficits, to the
extent provided in the Budget under the Line Item for "Interest Reserves"
(OPERATING DEFICIT ADVANCES) shall be made not more frequently than once per
calendar month and on the same date as the Disbursement for other costs is made
for such month. At least ten days prior to the proposed date for an Operating
Deficit Advance, the Borrower shall deliver to the Bank a request for an
Operating Deficit Advance, together with such financial statements and other
information as the Bank shall require in order to confirm that the amount of the
Operating Deficit Advance requested is less than or equal to the then
outstanding amount of Operating Deficits.
(e) Documentation to the Bank. All documents required to be
submitted to the Bank as a condition of each Disbursement shall be furnished to
the Bank at its office referred to in Paragraph 14(g) hereof, or to such other
address or to the attention of such other Person as shall be designated in
writing by the Bank in a notice to the Company.
(f) Use of Disbursements. All Disbursements shall be used by
the Company to pay for Hard Costs and Soft Costs with respect to which such
Disbursement was made.
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(g) Determination of Amounts of Disbursements. Disbursements,
or portions thereof, allocable to Hard Costs (other than to payment of the
Construction Manager's fixed monthly fee payable under the terms of the
Construction Management Agreement) shall be made on the basis of the documented
cost of (i) the work in place or completed or (ii) subject to the provisions of
Paragraph 9(i) below the construction materials stored on or off of the Premises
or in fabrication, in each case as certified by the Company and the Construction
Manager and verified by the Bank's Consultant.
(h) Final Disbursement. The final Disbursement of the proceeds
of the Loan shall be conditioned on, in addition to those items listed in this
Agreement, the Bank's receipt, prior to authorizing or directing the Trustee to
make such Disbursement, of (A) written assurance satisfactory to the Bank from
the Bank's Consultant to the effect that Construction of the Improvements has
been completed, and any necessary utilities have been finished and made
available for use, in accordance with the Plans and (B) the final Survey of the
Project described in Paragraph 7(ee).
(i) Disbursements for Deposits or Stored Materials.
Disbursements for deposits placed with suppliers, or for materials stored at any
location, whether on the Project or otherwise, or in fabrication, shall be made,
in the amount of such deposits or the documented cost to the Company of such
materials, as the case may be, each such Disbursement to be made strictly in
accordance with the following terms and conditions:
(A) the Company shall deliver to the Bank (i) with
respect to such deposits, assignments of the Company's
interest in the contracts pursuant to which the deposits were
made, and acknowledgements of and consents to such assignments
by the other contracting party, and (ii) in the case of stored
materials bills of sale or other evidence satisfactory to the
Bank of the cost of, and the Company's title in and to, such
materials;
(B) the Company shall deliver to the Bank (i)
evidence satisfactory to the Bank that (x) security measures
have been taken to protect such stored materials from theft,
casualty or deterioration including, if requested by the Bank,
storage in a bonded warehouse and (y) such stored materials
are identified to the Project and are segregated so as
adequately to give notice to all third parties of the
Company's title in and to such materials and (ii) written
evidence from the supplier of the stored materials identifying
such materials and indicating that ownership thereof is
vested, or upon payment therefore will vest, in the Company,
free and clear of all Liens;
(C) the Company shall provide proof satisfactory to
the Bank that such stored materials are insured against all
risk of loss for their full replacement cost
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or such lesser amount as may be approved by the Bank and that
such insurance contains a standard mortgagee loss payable
endorsement;
(D) if such materials are stored off-site, the Bank
shall have received evidence satisfactory to the Bank (which
may include a Chattel Mortgage) of the Bank's perfected first
priority lien on and security interest in such materials;
(E) any such deposits shall be with suppliers in the
United States or Puerto Rico and shall be either (i) for
materials the cost of purchase and installation of which is
guarantied pursuant to the Completion Guaranty, or (ii) with a
supplier whose obligations under the relevant contract are
secured by a bond or other third-party guaranty satisfactory
to the Bank in its sole discretion.
(F) (x) the aggregate amount disbursed under this
Agreement in respect of such deposits with suppliers or for
materials stored off the Premises or materials in fabrication
of any time outstanding shall not exceed $4,000,000; and
(G) in the event any such stored materials are
stolen, lost or in any other manner misplaced, destroyed or
rendered unusable, the Bank shall not be obligated to
authorize or direct the Trustee to make a Disbursement with
respect thereto if such materials are stolen, lost or in any
other manner misplaced, destroyed or rendered unusable prior
to the making of any Disbursement with respect thereto or
otherwise to make any Disbursement on account of the cost of
replacement thereof (unless such Disbursement is within the
Budget or unless such Disbursement involves the release of
insurance proceeds required to be released to the Company
pursuant to the terms of the Pledge Agreement).
(j) Reallocation. If at any time the Bank determines that the
cost to complete a Line Item as set forth in the Budget exceeds the undisbursed
portion of the Bond Proceeds to be advanced from the Project Fund allocable to
such Line Item, the Bank shall only be required to make an additional
Disbursements on account of such Line Item (i) to the extent of the undisbursed
portion of the Bond Proceeds to be advanced from the Project Fund allocable to
such Line Item, (ii) from other Line Items to the extent of any savings in such
other Line Item as demonstrated by the Company to the satisfaction of the Bank
in its sole and absolute discretion, and (iii) from the undisbursed portion of
the Line Item for contingency for Hard Costs or Soft Costs, as the case may be,
provided that in any event the percentage of such Line Item for contingency
which remains undisbursed at any time shall not be less than the percentage of
the Hard Costs or Soft Costs portion of the Budget for the Project, as the case
may be, which has not yet been disbursed at such time. The Company shall be
responsible to advance from its own funds all additional amounts required to
complete the Line Item in question in accordance with the Plans; provided,
however, that any cash or equivalent security deposited with the Bank
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by the Company pursuant to Paragraph 9(k) below with respect to the Line item in
question shall reduce the total of the additional amounts so required by an
equivalent amount.
(k) Loan Balance. Anything in this Agreement contained to the
contrary notwithstanding, it is expressly understood and agreed that the Loan
shall at all times be in balance. The Loan shall be deemed to be in balance only
at such time and from time to time as the Bank may determine that the aggregate
of the undisbursed Bond Proceeds (and after provision for any reallocation then
permissible pursuant to Paragraph 9(j)) above and applicable Retainage, if any)
is sufficient to pay the aggregate of the cost of completing the Construction of
the Improvements and the other costs contemplated in the Budget, as estimated by
the Bank and the Bank's Consultant, including, without limitation, the
undisbursed contingency amount provided for in the Budget and the payment of
interest due with respect to the Loan through the then-anticipated Date of
Substantial Completion. The Company agrees that, if the Bank determines than the
amount of such undisbursed Bond Proceeds shall at any time be or become
insufficient for such purpose regardless of how such condition may be caused,
then as a condition precedent to the Bank's direction or authorization of the
Trustee to make any further Disbursements, the Company shall deposit with the
Bank cash or equivalent security or such other security as is acceptable to the
Bank in its sole and absolute discretion in an amount reasonably determined by
the Bank to eliminate such deficiency. In determining the cost of completing any
portion of the Construction of the Improvements which is the subject of a fixed
price contract or a guaranteed maximum price contract, (a) a reasonable
contingency, as determined by the Bank, shall be added to the face amount of
such fixed price contract or guaranteed maximum price contract, as the case may
be, and (b) the Bank shall consider the value of work relating to the
Construction of the Improvements for which a contract has been entered into and
the value of such work for which a contract has not been entered into. Any funds
deposited with the Bank pursuant to this Paragraph 9(k) on account of any
deficiency may be applied by the Bank to pay costs of the Line Items as to which
such projected or anticipated deficiencies exist before the Bank shall direct or
authorize the Trustee to disburse proceeds of the Loan to pay such costs. In the
event that the Company shall deposit cash or deliver other security as
aforesaid, and if, after completion of the portion of the Improvements with
respect to which such deficiency was claimed, any funds remain undisbursed with
respect to the costs in connection with which such deposit was made, the Bank
will pay the surplus portion of such deficiency to the Company out of the
undisbursed proceeds of the surplus cash deposited by the Company as aforesaid
for such claimed deficiency and/or release to the Company any remaining cash,
cash equivalent security or other security, as the case may be.
(l) Disbursements after Default. At its option, the Bank may,
after the occurrence and during the continuance of a Default or an Event of
Default, authorize or direct the Trustee to make all Disbursements for work
performed or materials furnished directly to Trade Contractors or to the
Construction Manager, as the case may be, by deposit in an appropriately
designated special bank account and/or by check payable to the Person to whom a
Disbursement is to be made, and the execution of this Agreement by the Company
shall, and
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hereby does, constitute an irrevocable direction and authorization to so
disburse the funds. No further direction or authorization from the Company shall
be necessary or required for such direct Disbursements and all such
Disbursements shall satisfy pro tanto the obligations of the Bank hereunder and
shall be secured by the applicable Security Documents as fully as if made to the
Company, regardless of the disposition thereof by any Trade Contractor or the
Construction Manager.
(m) Method of Disbursement. Subject to the provisions of this
Agreement and the Loan Agreement, the Bank will direct the Trustee to disburse
from the Project Fund into the Construction Trust Account and the Company will
accept the amount of the Loan in installments as follows:
The Initial Disbursement will be made upon the
satisfaction of the applicable conditions set forth in Paragraph 10 hereof and
all subsequent Disbursements shall be made not more frequently than monthly
thereafter, upon the satisfaction of the applicable conditions set forth in
Paragraph 11 hereof, in amounts which shall be equal to the aggregate of the
Hard Costs and Soft Costs incurred by the Company through the end of the period
covered by the relevant Request for Disbursement, less:
(i) the Retainage; and
(ii) the total of the Disbursements
theretofore authorized or directed by the Bank to be made by the Trustee; and,
at the election of the Bank, less:
(iii) any costs covered by the relevant
Request for Disbursement not approved, certified or verified as provided herein
and/or any Hard Costs and/or Soft Costs covered by a previous Request for
Disbursement for which the items required pursuant to Paragraph 9(a) hereof have
not been received by the Bank and the Bank's Consultant.
(n) Disbursements for Amounts Due. Notwithstanding anything in
this Agreement which may be to the contrary, the Bank shall at all times have
the right, without regard to the Budget and the amount or classification of Line
Items and by its own action, to authorize or direct the Trustee to advance funds
into the Construction Trust Account for the purpose of paying (i) interest and
any other sums then due and payable to the Bank with respect to the Letter of
credit or pursuant to the Operative Documents or this Agreement and/or (ii)
interest and any other sums then due and payable to GDB with respect to the GDB
Loan and/or (iii) any amounts payable to the Bank under the Bond Swap Agreement.
(o) Partial Disbursements. If any or all conditions precedent
to making a Disbursement have not been satisfied on the applicable funding date
for such Disbursement, the
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Bank may, but shall not be obligated to, authorize or direct the Trustee to
disburse only that portion of the requested Disbursement for which all of the
conditions have been satisfied.
(p) Investment of Bond Proceeds. The Bond Proceeds will be
held by the Trustee in the Project Fund and will be invested in accordance with
the Investment Agreement dated the date hereof between the Trustee and the GDB.
(q) Disbursements for Vehicles. Notwithstanding anything
herein to the contrary and in addition to the other requirements hereunder, the
Bank shall not be required to make any Disbursement hereunder for the
acquisition by the Company of any boats, buses, limousines or other moving
vehicles unless the Company has executed and delivered a Chattel Mortgage (or,
in the case of boats, such other mortgage as is required pursuant to Section
7(oo) hereof) in connection therewith prior to the date of any Disbursement
therefor, and has, at its sole cost and expense, caused such Chattel Mortgage to
be properly filed for record in the corresponding Section of the Property
Registry of Puerto Rico and/or the Department of Transportation and Public Works
of Puerto Rico, as applicable.
10. CONDITIONS PRECEDENT TO MAKE THE INITIAL DISBURSEMENT. The Bank
shall not be obligated to authorize or direct the Trustee to make the Initial
Disbursement under the Trust Agreement unless, in addition to the conditions set
forth in the Loan Agreement and in Paragraph 9 hereof, the following conditions
have been satisfied.
(a) Equity Contribution. The Bank shall have received evidence
satisfactory to the Bank in its sole and absolute discretion that the Company
shall have invested at least $30,000,000 (the aggregate amount so advanced being
the EQUITY CONTRIBUTION) on account of Total Project Costs in the Project prior
to the date of the Initial Disbursement);
(b) Trade Contracts. (1) Trade Contracts shall have been
entered into for all contracts which are, in the Bank's sole and absolute
judgment, major contracts and in any event for Trade Contracts representing not
less than 75% of the Hard Costs of the Project as set forth in the Budget, (2)
if the Company determines to engage in local construction manager, the agreement
with such construction manager shall have been entered into and approved by the
Bank, (3) all payment and performance bonds required in connection with any then
existing Trade Contract shall have been delivered to the Bank, and (4) copies of
all existing Trade Contracts, and copies of all amendments thereto, together
with Trade Contractor Consents and Agreements with respect to each such Trade
Contract and Assignments of Contracts with respect to each such Trade Contract
shall have been delivered to the Bank and are satisfactory to the Bank in its
sole and absolute discretion;
(c) Architect's and Engineer's Agreements and Subcontracts.
All architect's and engineer's agreements contributing to the Plans and all
subcontracts determined to be material by the Bank, in its reasonable
discretion, which have been entered into prior to the
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Initial Disbursement Date, shall be satisfactory to the Bank in form and content
and as to the party performing the services which are the subject of such
agreements;
(d) [Intentionally Omitted];
(e) GDB Loan. The Bank shall have received evidence
satisfactory to the Bank that the GDB Loan shall have been fully disbursed and
the proceeds thereof shall have been applied on account of Total Project Costs
in accordance with documentation satisfactory to the Bank;
(f) Representations and Warranties. The representations and
warranties made by the Company in Paragraph 8 hereof and the representations and
warranties made by the Company and/or the Guarantors in any other Operative
Documents shall be true and correct in all material respects on and as of the
date of such Disbursement with the same effect as if made on such date;
(g) Receipt of Documents by Bank. The Bank shall have received
and approved the following items and documents, duly executed and in recordable
form where applicable, on or before the Initial Disbursement Date, in each case
in form and substance satisfactory to the Bank:
(i) payment of the Annual Letter of Credit Fee, the
Annual Agent's Fee, the Bank's counsel fees and the fees of the Bank's
Consultant relating to the Project, as well as all other out-of-pocket expenses
of the Bank relating to the Project, including, without limitation, any
Appraisal, investigation or insurance fees or costs and the cost of the
Environmental Report, to the extent any of the foregoing are then due and
payable;
(ii) the Financial Statements then in existence and
required to be or to have been delivered pursuant to the terms of this
Agreement;
(iii) advice from the Bank's Consultant in form and
content satisfactory to the Bank, to the effect that (i) the Plans and
associated design materials relating to the Project have been reviewed and
approved by the Bank's Consultant and, to the extent required, by the
Governmental Authorities (including, without limitation, ARPE and/or The
Planning Board of Puerto Rico), (ii) the Improvements, when completed as shown
on the Plans, will comply with applicable zoning and environmental protection
ordinances and regulations, (iii) all public utilities necessary for the full
utilization of the Improvements for their intended purposes are available at or
within the perimeter of the Premises, (iv) the necessary approval of the
Environmental Impact Statement for the Project has been obtained from the
Environmental Quality Control Board, as well as the necessary approval of the
site and master development plan for the Project from the Planning Board, and
(v) the following are acceptable to the Bank's Consultant: (A) the then current
design of various systems, including, without limitation,
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architectural, structural, electrical, plumbing, heating, air conditioning and
sprinkler systems, (B) the general conformity of specified materials to overall
Project quality objectives, (C) the contents of soil reports and coordination of
foundation design of the Improvements, (D) the conformity of the scope and
design set forth in the Plans to the description of the Improvements set forth
in this Agreement and as otherwise presented to the Bank; (E) the projected Date
of Substantial Completion and the Construction Schedule, (F) the Budget, (G) the
Company's allocation of the Budget to Individual Line Items, (H) the adequacy of
the Line Items for contingencies in the Budget, (I) the value, scope and
limiting conditions of the Construction Documents then in effect and/or trade
contracts and subcontracts received for review and (J) all other matters as the
bank shall reasonably require;
(iv) the Bank's Consultant's Report;
(v) any additional opinion(s) of counsel for the
Company requested by the Bank, in form and substance satisfactory to the Bank
and the Bank's counsel;
(vi) copies of all Permits issued by all Governmental
Authorities, evidencing the authorization of the Company to commence and
complete Construction of the Improvements, all of which shall be satisfactory to
the Bank, and evidence satisfactory to the Bank that other governmental
approvals necessary for the Construction and operation of the Improvements are
obtainable by nondiscretionary administrative procedures without the need for
any variance or waiver, whether through public hearing or otherwise, of
applicable zoning ordinances, land use regulations, building codes or similar
governmental laws and regulations;
(vii) an update to the Environmental Report, if
requested by the Bank, together with evidence satisfactory to the Bank that the
Company has fully complied with all recommendations set forth in the
Environmental Report and with the update thereto, if an update has been so
requested;
(viii) evidence that the insurance required pursuant
to Paragraph 7(x) hereof and the Pledge Agreement is in full force and effect
and evidence of the payment of the premiums therefor;
(ix) evidence of errors and omissions insurance
carried by the Architect and by each Design Architect and evidence of the
maintenance of the insurance required to be maintained by each Trade Contractor
under its Trade Contract;
(x) if requested by the Bank, an updated Survey,
satisfactory in form and content to the Bank and the Bank's counsel in their
sole and absolute discretion;
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(xi) evidence satisfactory to the Bank that the
Company has paid all real estate taxes on, and assessments of, the Project which
are due and payable and, if delinquent, all penalties and interest thereon;
(xii) a copy of the construction schedule prepared by
the Construction Manager showing a trade-by-trade breakdown (to the extent that
the information necessary to prepare such breakdown can then be ascertained) of
the estimated periods of time for Construction of the Improvements beginning
with the commencement of footings and foundations and ending with completion of
Construction of the Improvements in accordance with the Plans (the CONSTRUCTION
SCHEDULE);
(xiii) to the extent not previously delivered, copies
of the Project Documents and the other Operative Documents, each of which shall
be certified by the General Partners as true, correct and complete.
(xiv) a Request for Disbursement with respect to the
Initial Disbursement;
(xv) a Borrower's Affidavit dated the date of the
Initial Disbursement, with appropriate insertions and attachments, in form and
substance satisfactory to the Bank and the Bank's counsel, executed by the
General Partners;
(xvi) to the extent not previously delivered, copies
of the Architect's Agreements, certified by the General Partners to be true,
correct and complete;
(xvii) the standard form of contract or trade
contract to be used by the Company in connection with the Construction of the
Improvements, which shall be satisfactory in form and content to the Bank;
(xviii) a consent to the Assignment from each
architect relating to the Project, in form and content satisfactory to the Bank;
(xix) an executed counterpart of all space leases (if
any), certified by the General Partners to be true, correct and complete,
together with an executed notice to each tenant of the assignment thereof to the
Bank pursuant to the applicable Assignment of Rents;
(xx) copies of the Plans (including all approved Work
Changes) initialled to show the Company's approval, which are satisfactory to
the Bank;
(xxi) an updated Appraisal of the Project, if any
change or circumstance occurs from the date of the issuance of the Letter of
Credit that causes the Bank to determine that such an update is reasonably
appropriate;
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(xxii) an opinion of the Architect and any engineers
preparing or contributing to the Plans stating that the Construction of the
Improvements is permitted under, and such Improvements, when Constructed in
accordance with the Plans and occupied, shall be in compliance with all
applicable zoning ordinances, land use regulations and similar laws and
governmental rules and regulations relating to the Premises;
(xxiii) such other documents, instruments, opinions,
certificates and approvals (including, without limitation, estoppel certificates
and non-disturbance and attornment agreements) and such modifications and
supplements to any of the Operative Documents as the Bank shall have reasonably
requested;
(h) No Condemnation. No part of the Project shall have been
condemned, or threatened with condemnation, or in the event of such
condemnation, the Bank shall have received insurance or condemnation proceeds
sufficient, in the judgment of the Bank, to effect the satisfactory restoration
of the affected part of the Project and to permit Substantial Completion in
accordance with the Plans and the Budget prior to the Completion Date;
(i) No Default. On the Initial Disbursement Date, no Default
or Event of Default hereunder shall have occurred and be continuing and no
default of any of the Company's obligations under any of the other Operative
Documents shall have occurred and be continuing; and
(j) Accounting. The Bank shall have received an accounting to
its satisfaction of all expenditures for costs shown on the budget as having
been incurred from the Date of Issuance to the Initial Disbursement Date.
11. CONDITIONS PRECEDENT TO DISBURSEMENTS AFTER THE INITIAL
DISBURSEMENT. The Bank shall not be obligated to authorize or direct the Trustee
to make any Disbursement subsequent to the Initial Disbursement, unless in
addition to the conditions set forth in Paragraph 9 hereof, the following
conditions are satisfied:
(a) Conditions Satisfied. All conditions set forth in
Paragraph 10 hereof shall have been satisfied;
(b) Representations and Warranties. On the date of each such
subsequent Disbursement, the representations and warranties made by the Company
in Paragraph 8 and the representations and warranties made by the Company and/or
the Guarantors in any other Operative Document shall be true and correct in all
material respects on and as of the date of such Disbursement with the same
effect as if made on such date;
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(c) Receipt of Documents by Bank. The Bank shall have received
the following items and documents, duly executed and in each case in form and
substance satisfactory to the Bank;
(i) a Bank's Consultant's Report, dated the date of
the requested Disbursement, together with a revised and updated Budget;
(ii) copies of all Trade Contracts and all
architect's and engineer's agreements executed since the date of the last
preceding Request for Disbursement and copies of all amendments to any Trade
Contract, or architect's or engineer's agreement executed since the date of the
last preceding Request for Disbursement, together with copies of all performance
and payment bonds with respect to the Trade Contractors under such Trade
Contracts and together with a Trade Contractor Consent and Agreement with resect
to each such Trade Contract, and together with assignments to the Bank of all
such agreements and contracts;
(iii) such further builders' risk or other insurance
relating to the Construction of the Improvements as shall be required hereunder
or by the other Operative Documents or, to the extent the same relate to the
Project, as shall otherwise be reasonably requested by the Bank;
(iv) in the case of Disbursements to pay costs which
are shown as non- construction related Soft Costs in the Budget, such evidence
as the Bank may require to the effect that such costs have been properly
incurred and are due and payable;
(v) all documents, reports, certificates, affidavits
and other information as the Bank may require to evidence compliance by the
Company with all of the provisions of this Agreement;
(vi) a Borrower's Affidavit with appropriate
insertions and attachments, in form and substance satisfactory to the Bank and
to the Bank's counsel, executed by the General Partners, and a Request for
Disbursement, each dated the date for such Disbursement;
(vii) satisfactory evidence (including, without
limitation, contracts, bills of sale or other agreements) that title to all
materials and fixtures incorporated in the Construction of the Improvements and
all materials stored on-site or off-site or in fabrication shall vest in the
Company immediately upon delivery thereof to the Project;
(viii) payment of the Bank's counsel fees and the
fees of the Bank's Consultant relating to the Project, as well as all other
out-of-pocket expenses of the Bank relating to the Project and incurred since
the date of the preceding Request for Disbursement to the extent the foregoing
are then due and payable, including, without limitation, all Appraisal,
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investigation and insurance fees and expenses and all costs and expenses of the
Environmental Report;
(ix) evidence satisfactory to the Bank that the full
amount of all prior Disbursements has been paid out by the Company or its
contractors in accordance with this Agreement and that no Liens exist against
the Project or the Improvements;
(x) evidence satisfactory to the Bank of payment in
full by the Company to all Persons entitled to assert a mechanics' or
materialmen's lien for work done prior to the Disbursement;
(xi) if requested by the Bank, a survey inspection
and update of the Survey satisfactory in form and content to the Bank and the
Bank's counsel in their sole and absolute discretion;
(xii) if requested by the Bank, updates of the
opinions of the Architect and engineers described in clause (xxii) of Section
10(g) hereof.
(xiii) such other instruments, documents and
information pertaining to the Disbursement as the Bank may reasonably request;
and
(d) No Default. On the date of each such subsequent
Disbursement, no Default or Event of Default hereunder shall have occurred and
be continuing and no default of any of the Company's obligations under any of
the other Operative Documents shall have occurred and be continuing, other than
the failure of the Company to comply with its obligations pursuant to Section
4.01(c) of the Loan Agreement to deposit amounts required to be paid 124 days in
advance of the due date therefor.
12. EVENTS OF DEFAULT.
(a) Events of Default. It shall be deemed an Event of Default
if any of the following events shall occur and be continuing, unless such event
has been previously consented to by the Bank:
(i) any amount payable hereunder (including,
without limitation, under Paragraph 2 or Paragraph 3(a)) shall not be paid when
due; or
(ii) any representation, warranty or other
statement made or deemed to have been made by the Company or any Guarantor
under or in connection with this Agreement, any Operative Document or any
document, instrument or certificate executed or delivered in connection
herewith or therewith shall prove to have been incorrect or misleading in any
material respect when made or deemed to have been made; or
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(iii) the Company shall fail to perform or observe
any term, covenant or agreement on its part to perform or observe contained in
this Agreement or in any other Operative Document (other than the failure of the
Company to comply with the terms of Section 4.01(c) of the Loan Agreement) or
any Guarantor shall fail to perform or observe any term, covenant or agreement
on its part to perform or observe contained in any Guaranty (in any such cases,
other than as elsewhere specifically addressed in this Paragraph 12) and (A)
with respect to any such term, covenant or agreement contained herein, any such
failure shall remain unremedied for 30 days after notice and (B) with respect to
any such term, covenant or agreement contained in any of the other Operative
Documents, (other than the failure of the Company to comply with the terms of
Section 4.01(c) of the Loan Agreement)or any Guaranty any such failure remains
unremedied after any applicable grace period specified in such Operative
Document or Guaranty; provided, however, that if such failure described in this
subparagraph (iii) is of a nature such that it cannot be cured by the payment of
money and if such failure requires work to be performed, acts to be done or
conditions to be removed which cannot by their nature, with due diligence be
performed, done or removed, as the case may be, within such 30-day period or
such other applicable grace period, as the case may be, and the Company or the
Guarantor, as the case may be, shall have commenced to cure such failure, within
such 30-day period or such other applicable grace period, as the case may be,
such period shall be deemed extended for so long as shall be required by the
Company or the Guarantor, as the case may be, in the exercise of due diligence
to cure such failure, but in no event shall such 30-day grace period or such
other applicable grace period, as the case may be, be so extended to be a period
in excess of [60] days; or
(iv) the Company shall fail to perform or observe its
covenant in Paragraph 7(e), Paragraph 7(h) or Paragraph 7(ii) hereof; or
(v) there shall have been asserted in writing by or
on behalf of the Company or any Guarantor or Williams that any provision of this
Agreement or any Guaranty or the Management Agreement, as the case may be, is
not valid and binding on the Company or any Guarantor or Williams, as the case
may be, or declaration shall have been sought by or on behalf of the Company or
any Guarantor or Williams, as the case may be, that any such provision is null
and void, or there shall have been commenced by or on behalf of the Company or
any Guarantor or Williams, as the case may be, a proceeding to contest the
validity or enforceability thereof, or there shall have been a denial by or on
behalf of the Company or any Guarantor or Williams, as the case may be, that it
has any further liability or obligation under this Agreement or any Guaranty or
the Management Agreement, as the case may be; or
(vi) The Company or any Guarantor shall fail to pay
any material Debt or Debts of the Company or any Guarantor, as the case may be
(but excluding Debt under this Agreement or any Guaranty), or any interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
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relating to such Debt or Debts; or any other default under any agreement or
instrument relating to any such Debt or Debts, or any other event, shall occur
and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to accelerate
the maturity of such Debt or Debts or to accelerate or cause the holder of such
Debt or Debts (or any trustee or agent for the holders thereof) to threaten,
expressly or by implication, the acceleration of the maturity of such Debt or
Debts; or any Debt or Debts shall be declared to be due and payable, or required
to be prepaid (other than by a regularly scheduled required prepayment), prior
to the stated maturity thereof; or
(vii) the Company or any Guarantor (A) shall suffer
or permit to be entered a decree or order of a court or agency or supervisory
authority having jurisdiction determining it to be insolvent or providing for
the appointment of a conservator, receiver, liquidator, trustee or any similar
Person appointed in connection with any insolvency, readjustment of debt,
marshalling of assets and liabilities, bankruptcy, reorganization or similar
proceedings of or relating to it or of or relating to all, or substantially all,
of its property, or for the winding-up or liquidation of its affairs or (B)
shall suffer or permit to be instituted proceedings under any law relating to
bankruptcy, insolvency or the reorganization or relief of debtors to be
instituted against it, and such proceedings remain undismissed or pending and
unstayed for a period of 60 days; or
(viii) the Company or any Guarantor shall (A) consent
to the appointment of a conservator, receiver, trustee, liquidator or custodian
in any insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to it or of or relating to all, or
substantially all, of its property or for the winding-up or liquidation of its
affairs, (B) admit in writing its inability to pay its debts generally as they
become due, (C) file a petition, or otherwise institute, or consent to the
institution against it of, proceedings to take advantage of any law relating to
bankruptcy, insolvency or reorganization or the relief of debtors, (D) make an
assignment for the benefit of its creditors or (E) suspend payment of its
obligation; or
(ix) the rendering of judgment(s) for the payment of
money against the Company in excess of $250,000 in the aggregate, or against any
Guarantor in excess of $1,000,000 in the aggregate, and the continuance of any
such judgment(s) unsatisfied and without stay of execution thereon for a period
of 30 days after the entry of such judgment(s), or the continuance of such
judgment(s) unsatisfied for a period of 30 days after the termination of any
stay of execution thereon entered within such first mentioned 30 days; or
(x) any Event of Default under and as defined in any
Operative Document shall have occurred and be continuing, or in the case of an
Operative Document in which the term EVENT OF DEFAULT is not defined, any
default by the Company or a Guarantor, as the case may be, beyond applicable
grace and cure periods and after the giving of any
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required notice to the Company or the Guarantor, as the case may be, shall have
occurred and be continuing; or
(xi) the Management Agreement or the Ground Lease
shall at any time cease to be in full force and effect for any reason other than
by termination thereof by the Company in accordance with its terms and the terms
of this Agreement and/or any applicable Operative Document; or
(xii) a Plan shall fail to maintain a minimum funding
standard required by Section 412 of the Code for any plan year or a waiver of
such standard is sought or granted under Section 412(d) of the Code, or a Plan
is, shall have been or is likely to be terminated or the subject of termination
proceedings under ERISA, or the Company or a Subsidiary or an ERISA Affiliate
has failed to pay the full amount of any installment required under Section
412(m) of the Code or has incurred or is likely to incur a liability to or on
account of a Plan under Section 4062, 4063, 4064, 4201 or 4204 of ERISA, and
there shall result from any such event or events either a liability or a
material risk of incurring a liability to the PBGC or a Plan, which could have a
material or adverse effect upon the business, operations or financial condition
of the Company or a Subsidiary; or
(xiii) Construction of the Improvements shall not be
carried on with dispatch or there is any cessation of Construction of the
Improvements for a period in excess of 10 consecutive Business Days, unless the
cessation of Construction shall have been caused by an Unavoidable Delay of
which notice has been given to the Bank pursuant to Paragraph 7(n) hereof; or
(xiv) the Bank or the Bank's Consultant, or the
respective representatives of either, shall not be permitted at all reasonable
times after reasonable notice, to enter upon the Project for the purposes set
forth in Paragraph 7(o) hereof or the Company shall fail to furnish to the Bank
or the Bank's Consultant, or the respective representatives of either, within a
reasonable time after request therefor, copies of such plans, shop drawings,
specifications or other materials as the Bank or the Bank's Consultant, or the
respective representatives of either may reasonably request; or
(xv) The Company assigns this Agreement or any
Disbursement to be made under the Trust Agreement or the Loan Agreement, or any
interest in either, except as may be permitted hereunder; or
(xvi) as of the close of business on the Completion
Date, Substantial Completion has not occurred, or if the Bank or the Bank's
Consultant determines during the course of Construction of the Improvements that
the Improvements cannot be completed by the Completion Date (including if the
Improvements are partially or totally damaged or destroyed by fire, or any other
cause, or condemned and the restoration thereof cannot, in the Bank's
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judgment, reasonably be expected to be completed so that the Improvements will
be completed on or before the Completion Date); or
(xvii) any material default by the Company shall
occur and shall continue, beyond any applicable grace period provided for
therein, under the Management Agreement, the Construction Management Agreement,
the Architect's Agreement, the Trade Contracts or any other Construction
Document; or
(xviii) the Company shall fail to advance additional
funds as provided in Paragraph 9(j) hereof or deposit with the Bank cash or
cash-equivalent or other acceptable security for the benefit of the Bank as
provided in Paragraph 9(k) hereof, in either case within the time period
specified in the applicable provision; or
(xix) any Operative Documents, Construction Document
or Project Document is amended, modified or terminated without the prior written
consent or approval of the Bank to the extent such written consent or approval
is required pursuant to this Agreement; or
(xx) the Initial Disbursement shall not have occurred
by the Outside Disbursement Date; or
(xxi) the occurrence of an Event of Taxability (as
such term is defined in the Loan Agreement); or
(xxii) the occurrence of a default by the Company in
the performance of the Company's obligations under the Bond Swap Agreement or
the GDB Swap Agreement.
(b) Bank Remedies. If an Event of Default shall have occurred
then, and in any such event at any time thereafter if such Event of Default is
continuing, the Bank may, in its discretion:
(i) by notice to the Company declare all amounts
payable hereunder or under any Operative Document to be immediately due and
payable, whereupon the same shall become immediately due and payable without
demand, presentment, protest or further notice of any kind, all of which are
hereby expressly waived by the Company; and/or
(ii) exercise all or any of its rights and remedies
under or in respect of the Operative Documents (including, without limitation,
its rights and remedies under the Security Documents and any Guaranty); and/or
(iii) by notice to the Trustee and the Issuer,
require the Trustee to accelerate payment of all Bonds and interest accrued
thereon and/or purchase the Bonds as
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provided in Section 7.01(i) of the Loan Agreement or Section 305 of the Trust
Agreement, respectively; and/or
(iv) in the event that the Guarantors under the
Completion Guaranty are obligated to complete the Project and/or the Bank or the
Bank's designees or assignees undertake to complete the Project, the Bank or its
designees or assignees shall have the right to cause the Bond proceeds to be
disbursed on the same terms and conditions as if the Guarantors under the
Completion Guaranty, the Bank or such designees or assignees of the Bank were
the Company; and/or
(v) terminate the Letter of Credit by written notice
to the Trustee, the effect of which shall be to cause the Letter of Credit to
expire on the sixteenth calendar day after the date on which a notice of
termination is received by the Trustee; and/or
(vi) exercise any or all other rights and remedies
existing at law or in equity or by statute including, without limitation, the
rights and remedies of a secured creditor under the Uniform Commercial Code (or
any substitute therefor) of any applicable jurisdiction.
(c) Bank's Right to Stop Disbursing Funds. In addition to any
other rights and remedies the Bank may have pursuant to the other Operative
Documents, or as provided by law, and without limitation thereof, if any Default
or Event of Default shall occur, then the Bank shall not be obligated to
instruct the Trustee to make any further Disbursements until such Default or
Event of Default is remedied; PROVIDED, HOWEVER, the Bank may instruct the
Trustee to make any Disbursement so long as any such Default or Event of Default
shall exist without thereby waiving the right to demand payment of the
indebtedness and to exercise its rights and remedies pursuant to any one or more
of the Security Documents and/or exercise any other remedies available to the
Bank pursuant to the other Operative Documents or as provided by law, and
without becoming liable to instruct the Trustee to make any other or further
advance or Disbursement.
(d) Bank's Right to Complete. Upon the happening of any Event
of Default, the Bank may, in addition to any other remedies which the Bank may
have under this Agreement, the other Operative Documents or pursuant to law,
enter upon the Project and into possession of the Project and Construct and
complete the Construction of the Improvements substantially in accordance with
the Plans, with such changes therein as the Bank may from time to time deem
appropriate, all at the sole risk, cost and expense of the Company. The Bank
shall have the right, at any and all times, to discontinue any work commenced by
the Bank with respect to the Project or to change any course of action
undertaken by it and shall not be bound by any limitations or requirements of
time whether set forth herein or otherwise. The bank shall have the right and
power (but shall not be obligated) to assume any construction contract made by
or on behalf of the Company in any way relating to the Project and to take over
and use all or any part or parts of the labor, materials, supplies and equipment
contracted for, by or on
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behalf of the Company, whether or not previously incorporated into the Project,
all in the sole and absolute discretion of the Bank. In connection with any
portion of the Project undertaken by the Bank pursuant to the provisions of this
Paragraph 12(d), the Bank may (i) engage builders, contractors, architects,
engineers, inspectors and others for the purpose of furnishing labor, materials,
equipment and fixtures in connection with the Project, (ii) pay, settle or
compromise all bills or claims which may become Liens against the Project, or
which have been or may be incurred in any manner in connection with the
Construction and Substantial Completion or for the discharge of Liens,
encumbrances or defects in the title of the Project and (iii) take such other
action (including, without limitation, the employment of watchmen to project the
Project) or refrain from acting under this Agreement as the Bank may in its sole
and absolute discretion from time to time determine without any limitation
whatsoever. The Company shall be liable to the Bank for all sums paid or
incurred for the Project whether the same shall be paid or incurred pursuant to
the provisions of this Paragraph 12(d) or otherwise, and all payments made or
liabilities incurred by the Bank under this Paragraph 12(d) of any kind
whatsoever shall be paid by the Company to the Bank upon demand with interest at
the Prime Rate plus 2% per annum to the date of payment to the Bank, and all of
the foregoing sums, including such interest at the Prime Rate plus 2% per annum,
shall be deemed and shall constitute advances under the Loan Agreement and be
evidenced by the Note and secured by the Security Documents. Upon the occurrence
of any Event of Default, the rights, powers and privileges provided in this
Paragraph 12(d) and all other remedies available to the Bank under this
Agreement and the other Operative Documents or by statute or by rule of law may
be exercised by the Bank at any time and from time to time whether or not the
indebtedness evidenced and secured by the Note and the Security Documents shall
be due and payable, and whether or not the Bank shall have instituted any
foreclosure or other action for the enforcement of any of the Mortgage, the
Pledge Agreement or the Note. The Company hereby assigns and quitclaims to the
Bank all sums advanced pursuant to this Paragraph 12(d), and all sums held by
the Bank for the account of the Company, whether in escrow accounts or
otherwise, and all other forms of security delivered by the Company as
additional security (a security interest therein being granted hereby to the
Bank) for the repayment of the Loan, all of which security may be utilized by
the Bank for the purposes set forth in this Paragraph 12(d) or applied against
the indebtedness evidenced by the Note as the Bank, in its sole and absolute
discretion, shall determine
(e) No Liability of the Bank. Whether or not the Bank elects
to employ any or all of the remedies available to it upon the occurrence of an
Event of Default, the Bank shall not be liable for the Construction of or
failure to Construct, complete or protect the Project or for payment of any
expense incurred in connection with the exercise of any remedy available to the
Bank or for the performance or non-performance of any other obligation of the
Company.
(f) Termination of Agreement. If for any reason whatsoever the
outstanding principal amount of the Loan, together with all interest and other
indebtedness due and payable in connection therewith and all amounts due or
payable hereunder have been paid in full, and the Letter of Credit shall have
been terminated, the parties hereto shall be released and
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discharged from all of their obligations hereunder except for those obligations
that expressly survive the termination hereof.
(g) Remedies Not Exclusive. No remedy herein conferred or
reserved is intended to be exclusive of any other available remedy or remedies,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given under this Agreement or any other Operative Document or
now or hereafter existing at law or in equity or by statute. No delay or
omission to exercise any right or power accruing upon any default, omission or
failure of performance hereunder shall impair any such right or power or shall
be construed to be a waiver thereof, but any such right or power may be
exercised from time to time and as often as may be deemed expedient. In order to
exercise any remedy reserved to the Bank in this Agreement, it shall not be
necessary to give any notice, other than such notice as may be herein expressly
required. In the event any provision contained in this Agreement should be
breached by any party or thereafter duly waived by the other party so empowered
to act, such waiver shall be limited to the particular breach so waived and
shall not be deemed to waive any other breach hereunder. No waiver, amendment,
release or modification of this Agreement shall be established by conduct,
custom or course of dealing, but solely by an instrument in writing duly
executed by the parties thereunto duly authorized by this Agreement.
13. NATURE OF THE BANK'S DUTIES.
(a) The Company hereby assumes all risks of the acts,
omissions or misuse of the Letter of Credit by the Trustee or any beneficiary or
transferee of the Letter of Credit. Neither the Bank nor any of its officers or
directors shall be responsible for (i) the form, validity, sufficiency,
accuracy, genuineness or legal effect of any document, or any endorsements
thereon, even if it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged, (ii) the validity or sufficiency
of any instrument transferring or assigning or purporting to transfer or
assigning the Letter of Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, which may prove to be invalid or ineffective for
any reason, (iii) the failure of the Trustee or any beneficiary or transferee of
the Letter of Credit to comply fully with conditions required in order to draw
upon the Letter of Credit, (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher, (v) errors in interpretation of
technical terms, (vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under the Letter of Credit or of
the proceeds thereof, (vii) any consequences arising from causes beyond the
control of the Bank, (viii) payment by the Bank against presentation of
documents which do not comply with the terms of the Letter of Credit, including
failure of any documents to bear any reference or adequate reference to the
Letter of Credit or (ix) any other circumstances whatsoever in making or failing
to make payment under the Letter of Credit; provided, however, that the Bank
shall be responsible for any of the above occurrences to the extent that they
arise solely as a result of the gross negligence or willful malfeasance of the
Bank. In furtherance and extension and
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not in limitation of the foregoing, the Bank may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary. None of the above shall
affect, impair, or prevent the vesting of any of the Bank's rights or powers
hereunder.
(b) In furtherance and extension, and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Bank, under or in connection with the Letter of Credit or the related drafts or
documents(s), if taken or omitted in good faith, shall not create any liability
on the part of the Bank to the Company.
14. MISCELLANEOUS.
(a) Amendments and Consents. This Agreement may only be
amended by an instrument in writing signed by all of the parties hereto,
provided that the Company may take any action herein prohibited, or omit to
perform any act herein required to be performed by it, if the Company shall
obtain the prior written consent of the Bank. No course of dealing between the
company and the Bank, nor any delay in exercising any rights hereunder shall
operate as a waiver of any rights of the Bank hereunder.
(b) Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by the
Company in connection herewith shall survive the execution and delivery of this
Agreement, regardless of any investigation made by the Bank or on its behalf.
(c) Expenses. The Company agrees to pay promptly all costs and
expenses in connection with the preparation, negotiation, issuance, execution,
delivery, filing, recording and administration of the Letter of Credit, this
Agreement, the other Operative Documents, the Bonds and any other documents
which may be delivered in connection with this Agreement, including, without
limitation, all engineers', architects' and investigators' fees, the fees and
expenses of the Bank's counsel, construction consultant, insurance consultant
and any services selected by the Bank, each with respect to the transactions
contemplated by this Agreement, and all costs and expenses (including counsel
fees and expenses) in connection with (i) the transfer, drawing upon, change in
terms, maintenance, renewal or cancellation of the Letter of Credit, (ii) any
and all amounts which the Bank has paid relative to the Bank's curing of any
Event of Default resulting from the acts or omissions of the Company under this
Agreement, any other of the Operative Documents or the Bonds, (iii) the
enforcement of this Agreement or any other of the Operative Documents, (iv) any
action or proceeding relating to a court order, injunction, or other process or
decree restraining or seeking to restrain the Bank from paying any amount under
the Letter of Credit, (v) obtaining and reviewing appraisals and the engineering
and environmental reports relating to the Project and (vi) survey costs and
title insurance costs. In addition, the Company shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of the
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Letter of Credit, this Agreement, any other of the Operative Documents or the
Bonds, or any other document which may be delivered in connection with this
Agreement, and agrees to save the Bank harmless from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees. Notwithstanding the foregoing, no payment shall be
required under this Paragraph 14(c) in respect of any cost or expense which the
Bank has incurred solely as a result of its own gross negligence or willful
misconduct. All costs and expenses described in this Paragraph 14(c) shall be in
addition to the facility fee paid by the Company to the Bank in connection with
the transaction contemplated hereby and shall be in addition to the Annual
Letter of Credit Fee and the Annual Agent's Fee.
(d) Set-off. In addition to any rights and remedies the Bank
may have, including, without limitation, any rights now or hereafter granted
under applicable law, and not by way of limitation of any such rights, upon the
occurrence and during the continuance of any Event of Default, the Bank is
hereby authorized at any time and from time to time, without notice to the
Company (any such notice being expressly waived by the Company) and to the
fullest extent permitted by law, to set forth and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank, including, without limitation,
pursuant to the Bond Swap Agreement, to or for the credit or the account of the
Company against any and all of the obligations of the Company now or hereafter
existing under this Agreement, irrespective of whether or not the Bank shall
have made any demand hereunder.
(e) No Approval of Work. No Disbursement authorized hereunder
shall constitute an approval or acceptance by the Bank of the work theretofore
done in connection with the Project or a waiver of any of the conditions of the
Bank's obligation to make or authorize further Disbursements, nor, in the event
the Company is unable to satisfy any such condition, shall any such failure to
insist upon compliance have the effect of precluding the Bank from thereafter
declaring such inability to be an Event of Default as herein provided, it being
agreed that any Disbursement made or authorized by the Bank in the absence of
strict compliance with any or all of the conditions of the Bank's obligation to
make or authorize such Disbursement shall be deemed to have been made pursuant
to this Agreement and not in modification of the terms hereof, unless the Bank
has specifically waived any such condition or approved a deviation therefrom.
(f) Bank's Review. Inspection and approvals of the Plans, the
Project and the workmanship and materials used therein shall impose no
responsibility or liability of any nature whatsoever on the Bank and no Person
shall, under any circumstances, be entitled to rely upon such inspections and
approvals by the Bank for any reason. Approvals granted by the Bank for any
matters covered under this Agreement shall be narrowly construed to cover only
the parties and facts identified in any such approval.
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(g) Submission of Evidence. Any condition of this Agreement
which requires the submission of evidence of the existence or non-existence of a
specified fact or facts implies as a condition the existence or non-existence,
as the case may be, off such fact or facts and the Bank shall, at all times, be
free independently to establish to its satisfaction such existence or
non-existence.
(h) Bank Sole Beneficiary. All terms, provisions, covenants
and other conditions of the obligations of the Bank to authorize Disbursements
hereunder are imposed and all trust funds hereunder are held solely and
exclusively for the benefit of the Bank and its successors and assigns, and no
other Person shall have standing to require satisfaction of such terms,
covenants and other conditions in accordance with their terms or be entitled to
assume that the Bank will refuse to authorize Disbursements in the absence of
strict compliance with any or all of such terms, covenants and other conditions
or be entitled to require any particular application of such trust funds. No
Person, other than the Bank, its successors and assigns and any Person to whom
the Bank shall have granted a participation pursuant to Paragraph 14 (p) herein
shall, under any circumstances, be deemed to be a beneficiary of the terms,
covenants and other conditions of this Agreement, any or all of which may be
freely waived, in whole or in part, by the Bank at any time if, in the Bank's
sole discretion, the Bank deems it advisable or desirable to do so, and no
Person, other than said parties, shall have any right, remedy or claim under or
by reason of this Agreement.
(i) Contractors. Except as provided by law, no contractors or
subcontractors dealing with the Company shall be, nor shall any of them be
deemed to be, third party beneficiaries of this Agreement, but each shall be
deemed to have agreed (i) that they shall look to the Company as their sole
source of recovery if not paid and (ii) except as otherwise agreed to in writing
between the Bank and the contractor(s) or subcontractor(s) in question, that
they may not claim against the Bank under any circumstances. Except as provided
by law, or as otherwise agreed in writing between the Bank and the contractor(s)
or subcontractor(s) in question, each such contractor or subcontractor shall be
deemed to have waived in writing all right to seek redress from the Bank under
any circumstances whatsoever. Counterpart originals of each of such contractor's
or subcontractor's agreement and waiver shall be delivered to the Bank on or
before the date hereof.
(j) Entire Agreement. This Agreement and the other Operative
Documents embody the entire agreement and understanding between the parties with
respect to the matters set forth herein and supersede and cancel all prior loan
applications, expressions of interest, commitments, agreements and
understandings, whether oral or written, relating to the subject matter hereof,
except as specifically agreed to the contrary.
(k) Further Assurances. The Company hereby agrees promptly to
execute and deliver such additional agreements and instruments and promptly to
take such additional action
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as the Bank may at any time and from time to time reasonably request in order
for the Bank to obtain the full benefits and rights granted or purported to be
granted by this Agreement.
(l) No Waiver; Cumulative Remedies. No failure or delay on the
part of the Bank in exercising any right, power or remedy hereunder or under or
in connection with this Agreement or the other Operative Documents or to insist
upon the strict performance of any term of this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right, or
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy under or in connection with this Agreement
or the other Operative Documents. The remedies in this Agreement or the other
Operative Documents herein are cumulative and not exclusive of any remedies
provided by law.
(m) Singular/Plural. Whenever appropriate herein or required
by the context or circumstances, the masculine shall be construed as the
feminine and/or the neuter, the singular as the plural, and vice versa.
(n) No Joint Venture. The Company is not and shall not be
deemed to be a joint venturer with, or an agent of, the Bank for any purpose.
Prior to any Default or Event of Default by the Company under this Agreement and
the Bank's exercise of the remedies granted herein the Bank shall not be deemed
to be in privity of contract with any contractor or provider of services with
respect to the Construction of the Improvements.
(o) Incorporation by Reference. The Company agrees that until
this Agreement is terminated by the repayment to the Issuer of all principal and
interest due and owing on the Note and other sums due and owing pursuant to the
Operative Documents, the Note and the other Operative Documents shall be made
subject to all the terms, covenants, conditions, obligations, stipulations and
agreements contained in this Agreement to the same extent and effect as if fully
set forth in and made a part of the Note and the other Operative Documents. In
the event of a conflict between any of the Operative Documents and the
provisions of this agreement, this Agreement shall be controlling.
(p) Binding Effect; Assignment. This Agreement is a continuing
obligation and shall (i) be binding upon the Company and its permitted
successors and assigns and (ii) inure to the benefit of and be enforceable by
the Bank and its successors, transferees and assigns; provided that the Company
may not assign all or any part of this Agreement without the prior written
consent of the Bank. The Bank may assign, negotiate, pledge or otherwise
hypothecate all or any portion of this Agreement, or grant participations
herein, in the Letter of Credit, in the Loan, in the Bond Swap Agreement and in
the Bank's other rights or security hereunder, including, without limitation,
the instruments securing the Company's obligations hereunder or under any
Operative Document. No such assignment or participations by the Bank, however,
will relieve the Bank of its obligations under the Letter of Credit. All
documentation, financial statements, appraisals and other data, or copies
thereof, relevant to the Company, any Guarantor
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or the Letter of Credit may be exhibited to and retained by any such assignee,
prospective assignee, participant or prospective participant.
(q) Notices. All notices, certificates, demands and other
communications provided for herein shall be in writing and mailed (registered or
certified mail, return receipt requested, and postage prepaid), hand-delivered,
with signed receipt, or sent by nationally-recognized overnight courier, if to
the Bank, to its address at 225 Liberty Street, Two World Financial Center, New
York, New York 10281, Attention: Real Estate Finance Group (Mr. Akira Fujii or
Mr. Russ LoPinto), with a copy similarly delivered to Kaye, Scholer, Fierman,
Hays & Handler, 425 Park Avenue, New York, New York 10022, Attention: Warren J.
Bernstein, Esq., if to the Company, to its address c/o Williams Hospitality
Management Corporation, 187 East Isla Verde Road, Carolina, Puerto Rico 00913,
Attention: Hugh A. Andrews, with copies similarly delivered to Whitman & Ransom,
200 Park Avenue, New York, New York 10166, Attention: Jeffrey N. Siegel, Esq.;
Kumagai Caribbean, Inc., c/o Williams Hospitality Management Corporation, 187
East Isla Verde Road, Carolina, Puerto Rico 00913, Attention: Mr. Shunsuke
Nakane; WMS Industries Inc., 3401 North California Avenue, Chicago, Illinois
60618, Attention: Chief Operating Officer; Messrs. Burton and Richard Koffman,
c/o Richford American, 950 Third Avenue, New York, New York 10022, or to such
other address with respect to any party as such party shall notify the other
parties in writing. All such notices, certificates, demands and other
communications shall be effective when received at the address specified as
aforesaid.
(r) Satisfaction. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Agreement
required to be satisfactory Bank, the determination of such satisfaction shall
be made by the Bank in its sole and exclusive judgment.
(s) Governing Law and Consent to Jurisdiction. This Agreement
shall be governed by, and construed in accordance with, the laws of the State of
New York. The Company irrevocably (i) agrees that any suit, action or other
legal proceeding arising out of or relating to this Agreement, the other
Operative Documents or such other documents which may be delivered in connection
with this Agreement or the other Operative Documents may be brought in the City
and State of New York or in the Courts of the Untied States of America located
in the Southern District of New York [, provided, however, that any suit, action
or other legal proceeding arising out of or directly concerning the Mortgage or
the Pledge Agreement shall be brought in the Commonwealth of Puerto Rico;] (ii)
consents to the jurisdiction of each such court in any such suit, action or
proceeding and (iii) waives any objection which it may have to the laying of
venue of any such suit, action or proceeding in any of such courts and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Company irrevocably consents to the service of any and all process in
any such suit, action or proceeding by service of copies of such process to the
Company at its address provided in Paragraph 14(q) hereof or by personal service
on any partner of Whitman & Ransom. In addition to any method of service of
process provided for under applicable laws, all service of
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process under this Paragraph 14(s) may be made by certified or registered mail,
return receipt requested, directed to the Company at the address set forth in
Paragraph 14(q) hereof, and the service so made shall be complete five days
after the same shall have been so mailed. Nothing in this Paragraph 14(s) shall
affect the right of the Bank to serve legal process in any other manner
permitted by law or affect the right of the Bank to bring any suit, action or
proceeding against the Company or its property in the courts of any other
jurisdictions.
(t) Limitation of Liability. Notwithstanding anything to the
contrary contained in the Loan Agreement, any of the Security Documents or this
Agreement (except for Paragraph 5(c) hereof), no recourse shall be had, whether
by levy or execution or otherwise, for the payment of the principal of or
interest on, or other amounts owned hereunder or under the Loan Agreement or any
of the Security Documents, or for any claim based on this Agreement, the Loan
Agreement or any Security Documents or in respect thereof, against the Company,
any partner of the Company or any predecessor, successor or affiliate of any
such partner or any of their assets (other than from the interest of such person
in such partner in the Company), or against any principal, partner, shareholder,
officer, director, agent or employee of any such partner (other than from the
interest of any such partner), nor shall any such persons be personally liable
for any such amount or claims, or liable for any deficiency judgment based
thereon or with respect thereto, it being expressly understood that the sole
remedies of the Bank with respect to such amounts and claims shall be against
the assets of the Company, including the Mortgaged Property (as such term is
defined in both the Fee Mortgage and in the Leasehold Mortgage) and that all
such liability of the aforesaid persons, except as expressly provided in this
Paragraph 14(t) and Paragraph 5(c) hereof is expressly waived and released as a
condition of and as consideration for the execution of the Security Documents;
provided, however, that (A) nothing contained in this Agreement (including,
without limitation, the provisions of this Paragraph 14(t)), the Loan Agreement
or the Security Documents shall constitute a waiver of any indebtedness
evidenced hereby or any of the Company's other obligations under such
instruments or shall be taken to prevent recourse to and the enforcement against
the Company, including the Mortgaged Property, of all the liabilities,
obligations and undertakings contained in this Agreement, the Loan Agreement or
any of the Security Documents, (B) this Paragraph 14(t) shall not be applicable
to a breach by any person of any independent obligation to the Bank, including,
but not limited to, (x) the obligations of the Guarantors under the Guaranties,
(y) the obligation of WKA to enforce any or all of its remedies against KGC in
the event that KGC fails timely to provide the Deficiency Loans (as defined in
the Company Partnership Agreement) as set forth herein and in the other
Operative Documents, and (z) any other obligations of any Person under any other
guaranty or indemnity agreement executed or delivered in connection with any of
the Operative Documents (including, without limitation, the indemnities set
forth in Paragraph 5(c) hereof) and (C) this Paragraph 14(t) shall not be
applicable to the responsible party to the extent and in respect of any claim
the Bank would otherwise have against such party for (1) fraud, (2)
misappropriation of funds or other property, or (3) damage to any of the
Mortgaged Property or any part thereof intentionally inflicted in bad faith by
the Company or any partner, principal, shareholder, officer, director, agent or
employee
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of the Company or any of its partners, or principals of any of the foregoing.
For the purposes of the foregoing, the term SHAREHOLDER shall be deemed to
include the shareholders of any corporation which is a shareholder of a
corporation and the term PARTNER shall be deemed to include the partners of any
partnership which is a partner of a partnership.
(u) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
(v) Defined Instruments. All of the agreements or instruments
defined in this Agreement shall mean such agreements or instruments as the same
may, from time to time, be supplemented or amended or the terms thereof waived
or modified to the extent permitted by, and in accordance with, the terms
thereof and of this Agreement.
(w) Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent with the most recent audited financial statements of the
Company and the respective Guarantors delivered to the Bank.
(x) Lawful Interest. Nothing contained in this Agreement or in
any other Operative Document shall be construed to permit the Bank to receive,
at any time, interest, fees or other charges in excess of the amounts which the
Bank is legally entitled to charge and receive under any law to which such
interest, fees, or charges are subject. In no contingency or event whatsoever
shall the compensation payable to the Bank by the Company, howsoever
characterized or computed, hereunder, or under any other Operative Document,
exceed the highest rate permissible under any law to which such compensation is
subject. There is no intention that the Bank shall contract for, charge or
receive compensation in excess of the highest lawful rate, and, in the event it
should be determined that the Bank has contracted from any rate of interest in
excess of the highest lawful rate, then ipso facto such rate shall be reduced to
the highest lawful rate so that no amounts shall be charged which are in excess
over such highest lawful rate has been charged or received, the Bank shall
promptly refund such excess to the Company; provided, however, that, if lawful,
any such excess shall be paid by the Company to the Bank as additional interest
(accruing at a rate equal to the maximum legal rate minus the rate provided for
hereunder) during any subsequent period when regular interest is accruing
hereunder at less than the maximum legal rate.
(y) Consents; Approvals. Wherever in this Agreement the
consent or approval of the Bank shall be required, unless specifically provided
to the contrary, the Bank shall have the right to withhold, or grant, such
consent or approval in its sole discretion.
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(z) Severability. Any provision of this Agreement which is
unenforceable, prohibited or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforcability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
(aa) Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
(bb) Reliance by Bank. The Bank may but shall be under no
obligation to rely upon the advice of its legal counsel and of the Bank's
Consultant, as well as of all other parties whose advice it obtains in
connection with all decisions made by the Bank in connection with any matters
discussed herein.
IN WITNESS WHEREOF, the parties hereto have caused this Letter
of Credit and Reimbursement Agreement to be duly executed and delivered by their
respective duly authorized officers as of the day and year first above written.
EL CONQUISTADOR PARTNERSHIP L.P.,
a Delaware limited
partnership
By: Kumagai Caribbean, Inc.
By:_____________________________
Shunsuke Nakane, President
By: WKA El Con Associates, a
New York general partnership
By: ____________________________
Name: Norman J. Menell
Title: Authorized Signatory
THE MITSUBISHI BANK, LIMITED,
ACTING THROUGH ITS NEW YORK BRANCH
By:______________________________________
Tadaaki Hamada
Senior Vice President
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IRREVOCABLE TRANSFERABLE STANDBY LETTER OF CREDIT
NO. C-182
February 7, 1991
Banco Popular de Puerto Rico
Banco Popular Center, 5th Floor
Hato Rey, Puerto Rico 00819
Dear Sirs:
At the request and for the account of El Conquistador Partnership L.P.,
a Delaware limited partnership (the ACCOUNT PARTY), we hereby establish in your
favor, as designated trustee under the Trust Agreement, dated the date hereof
between Puerto Rico Industrial, Medical, Educational and Environmental Pollution
Control Facilities Financing Authority (the ISSUER) and you (such Trust
Agreement, as it may be amended or supplemented from time to time in accordance
with its provisions, being the TRUST AGREEMENT), pursuant to which $120,000,000
aggregate principal amount of the Issuer's Industrial Revenue Bonds, 1991 Series
A (El Conquistador Resort Project), Convertible Industrial Revenue Bonds, 1991
Series B (El Conquistador Resort Project) and Industrial Revenue Bonds, 1991
Series C (El Conquistador Resort Project) (collectively, the BONDS) are being or
will be issued, our Irrevocable Transferable Letter of Credit No. C-182 (this
LETTER OF CREDIT), in the amount of $124,800,000 (such amount, as reduced and
reinstated from time to time in accordance with the provisions hereof, the
STATED AMOUNT). An amount not exceeding $120,000,000 (such amount, as reduced
and reinstated from time to time in accordance with the terms and conditions
hereof, being the PRINCIPAL COMPONENT) may be drawn upon this Letter of Credit,
in accordance with the terms and conditions hereof, to pay the unpaid principal,
or the portion of the Purchase Price (as defined in the Trust Agreement)
corresponding to principal, of the Bonds. An amount not exceeding $4,800,000
(such amount, as reduced and reinstated from time to time in accordance with the
terms and conditions hereof, being the INTEREST COMPONENT) may be drawn upon
this Letter of Credit, in accordance with the terms and conditions hereof, to
pay interest, or the portion of the Purchase Price corresponding to interest,
accrued on the Bonds. Draws upon this Letter of Credit may be made, in
accordance with the terms and conditions hereof, prior to the Termination Date
(as hereinafter defined). This Letter of Credit is issued pursuant to that
certain Letter of Credit and Reimbursement Agreement dated that date hereof
between the Account Party and us (such agreement, as it may be amended or
supplemented from time to time in accordance with its provisions, the LETTER OF
CREDIT AGREEMENT).
We hereby irrevocably authorize you to draw, in accordance with the
terms and conditions hereof, in one or more drawings by one or more of your
drafts (a) an amount not exceeding, in the aggregate, the Principal Component,
to pay the principal of the Bonds in the event and to the extent that the
Trustee (as defined in the Trust Agreement) does not have
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available sufficient other Eligible Moneys (as defined in the Trust Agreement)
for such payment as the same becomes due and payable (each such drawing, a
PRINCIPAL DRAWING), provided that each draft on us requesting a Principal
Drawing is accompanied by your written and completed certificate in
substantially the form of Annex I attached hereto; (b) an amount not exceeding,
in the aggregate, the Interest Component, to pay interest, or the portion of the
Purchase Price corresponding to interest, accrued on the Bonds in the event and
to the extent that the Trustee does not have available sufficient other Eligible
Moneys for such payment as the same becomes due and payable (each such drawing,
an INTEREST DRAWING), provided that each draft on us requesting an Interest
Drawing is accompanied by your written and completed certificate in
substantially the form of Annex II attached hereto; (c) an amount not exceeding,
in the aggregate, the Principal Component, to pay when due the portion of the
Purchase Price corresponding to the principal of Bonds subject to mandatory
tender for purchase pursuant to the Trust Agreement (each such drawing, a
PURCHASE DRAWING), provided that each draft on us requesting a Purchase Drawing
is accompanied by your written and completed certificate in the form of Annex
III attached hereto. In no event will you have a right to make any drawings
under this Letter of Credit to pay (a) the principal or the Purchase Price of or
interest accrued on Bonds the Holder (as defined in the Trust Agreement) of
which is (i) the Account Party or (ii) any of Kumagai International USA,
Corporation, Kumagai Caribbean, Inc., KG (Caribbean) Corporation or Williams
Hospitality Management Corporation (collectively, the Guarantors), (b) any
premium payable upon any optional or mandatory redemption of Bonds, or (c) any
indemnity payable by the Account Party upon the occurrence of an Event of
Taxability (as defined in the Trust Agreement). Funds under this Letter of
Credit are available to you against your draft drawn on us, stating on its face
"Drawn under The Mitsubishi Bank, Limited, New York Branch, Irrevocable
Transferable Standby Letter of Credit No. C-182" and accompanied by your written
and completed certificate substantially in the form of Annex I, Annex II or
Annex III attached hereto, as appropriate. All drawings under this Letter of
Credit will be paid in accordance with the terms and conditions of this Letter
of Credit, with our own funds.
Each Purchase Drawing honored by us hereunder shall automatically
reduce the Principal Component and the amount available to be drawn hereunder by
subsequent Purchase Drawings or Principal Drawings by an amount equal to the
amount of such Purchase Drawing. Each Principal Drawing honored by us hereunder
shall automatically reduce (i) the Principal Component and the amount available
to be drawn hereunder by subsequent Purchase Drawings or Principal Drawings by
an amount equal to the amount of such Principal Drawing and (ii) the Interest
Component and the amount available to be drawn hereunder by subsequent Interest
Drawings to an amount equal to 120 days' accrued interest (computed as described
below) on the Principal Component as so reduced. Each such reduction shall be
effective on the day of the honoring by us of such Purchase Drawing or Principal
Drawing, as the case may be, and shall automatically result in a corresponding
aggregate reduction in the Stated Amount. Upon the release by the Trustee, at
our direction, pursuant to Section 5 of the Pledge Agreement (as defined in the
Trust Agreement), of any Pledged Bonds the Principal Component, and the amount
available to be drawn hereunder by subsequent Purchase Drawings or Principal
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Drawings (unless the Principal Component has been previously reinstated with
respect to such Purchase Drawing) shall be automatically reinstated by an amount
equal to the principal of such Pledged Bonds and the Interest Component shall be
automatically reinstated to an amount equal to 120 days' accrued interest on the
reinstated Principal Component, computed as described below, each such
reinstatement effective on the date of the release of such Pledged Bonds;
provided, however, that in no event shall the Principal Component be reinstated
to an amount in excess of an amount equal to the aggregate principal amount of
the Bonds then Outstanding (as defined in the Trust Agreement).
Each Interest Drawing honored by us hereunder shall automatically
reduce the Interest Component and the amount available to be drawn hereunder by
subsequent Interest Drawings by an amount equal to the amount of such Interest
Drawing effective on the day of the honoring by us of such Interest Drawing.
Such reduction shall automatically and irrevocably result in a corresponding
reduction in the Stated Amount. If you shall not have received from us, within
15 calendar days after the honoring by us of any Interest Drawing, notice to the
effect that we have not been reimbursed for such Interest Drawing or that any
other "Event of Default" has occurred and is continuing under the Letter of
Credit Agreement and instructing you as the Trustee to declare the principal of
the Bonds to be immediately due and payable pursuant to Section 803 of the Trust
Agreement, then the Interest Component and the amount available to be drawn
hereunder by subsequent Interest Drawings shall be automatically reinstated by
us, effecting on the sixteenth calendar day after an honoring by us of such
Interest Drawing, by an amount equal to the amount of such Interest Drawing. In
no event shall the Interest Component be reinstated to an amount in excess of
the lesser of (i) $4,800,000 and (ii) an amount equal to 120 days' accrued
interest on the then effective Principal Component, computed at a rate of 12%
per annum for 120 days on the basis of 360-day year, including the first day but
excluding the last day, notwithstanding the actual rate borne from time to time
by the Bonds. Each such reinstatement of the Interest Component and the amount
available to be drawn hereunder by subsequent Interest Drawings shall
automatically result in a corresponding reinstatement of the Stated Amount.
Upon receipt by us of your written and completed certificate in
substantially the form of Annex IV attached hereto, with respect to the
cancellation of Bonds in accordance with Section 508 of the Trust Agreement, the
Stated Amount shall be reduced to an amount equal to the amount stated in
paragraph 6 of said certificate, and the amounts available to be drawn hereunder
by you by any subsequent Principal Drawings, Purchase Drawings or Interest
Drawings shall be reduced, effective upon our receipt of such certificate, to
the amounts stated in paragraph 4 (for Principal Drawings or Purchase Drawings)
and paragraph 5 (for Interest Drawings), respectively, of such certificate. If
the Stated Amount shall be partially reduced pursuant to this paragraph, we
shall have the right to require you to surrender this Letter of Credit to us on
or before the tenth Business Day (as hereinafter defined) following our receipt
of such certificate. Upon such surrender, we may, at our option, either (a)
amend this Letter of Credit to reflect thereon the amount of such reduction and
the corresponding reductions in
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the amounts available for the various drawings hereunder or (b) cancel this
Letter of Credit and issue to you, in substitution therefor, a substitute
irrevocable letter of credit in substantially the form hereof, reflecting such
reductions. As used in this Letter of Credit, the term "Business Day" shall mean
a day other than a Saturday, Sunday or other day on which banks in New York, New
York or San Juan, Puerto Rico are authorized or required by law or executive
order to close.
Demand for payment may be made by you under this Letter of Credit at
any time during our business hours on a Business Day at our address set forth
below; provided, however, that no demand for payment may be made by you under
this Letter of Credit earlier than 10:00 A.M., New York time, on the Business
Day before the due date of the principal of, or interest accrued on the Bonds to
which such demand for payment relates, or, in the case of a Purchase Drawing,
10:00 a.m., New York time, on the Business Day on which the Trustee receives the
notice and documents described in Section 305(A) of the Trust Agreement which
relates to such Purchase Drawing. If a demand for payment is made by you under
this Letter of Credit at or prior to 2:00 P.M., New York time, on a Business Day
and such demand for payment and the documents presented in connection therewith
conform to the terms and conditions hereof, payment shall be made to you, in
accordance with your payment instructions, of the amount demanded, in
immediately available funds, not later than 12:00 P.M., New York time, on the
next Business Day, provided, however, that in the case of a Principal Drawing or
an Interest Drawing which is not made to pay the portion of the Purchase Price
corresponding to interest, such payment shall in no event be made prior to the
Payment Date (as defined in the applicable certificate in substantially the form
of Annex I, Annex II or Annex III attached hereto). If a demand for payment is
made by you under this Letter of Credit after 2:00 P.M., New York time, on a
Business Day and such demand for payment and the documents presented in
connection therewith conform to the terms and conditions hereof, payment shall
be made to you, in accordance with your payment instructions, of the amount
demanded, in immediately available funds, not later than 12:00 P.M., New York
time, on the second succeeding Business Day, provided, however, that in the case
of a Principal Drawing or an Interest Drawing which is not made to pay the
portion of the Purchase Price corresponding to interest, such payment shall in
no event be made prior to the Payment Date (as defined in the applicable
certificate in substantially the form of Annex I, Annex II or Annex III attached
hereto). If requested by you, payment under this Letter of Credit may be made by
wire transfer of Federal Reserve Bank of New York funds to your account in a
bank on the Federal Reserve wire system.
If a demand for payment made by you under this Letter of Credit does
not, in any instance, conform to the terms and conditions of this Letter of
Credit, we shall give you prompt notice that such demand for payment was not
effected in accordance with the terms and conditions of this Letter of Credit,
stating the reasons therefor and that we are holding any documents at your
disposal and will return the same to you, if you so request. Upon being notified
that a demand for payment made by you under this Letter of Credit was not
effected in conformity with this Letter of Credit, you may attempt to correct
such nonconforming demand
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for payment if, and to the extent that, you are entitled (without regard to the
provisions of this sentence) and able to do so.
This Letter of Credit applies only to the payment of principal (or the
portion of the Purchase Price corresponding to principal) of Outstanding Bonds,
and up to 120 days' interest (computed as aforesaid) accrued (or the portion of
the Purchase Price corresponding to such interest) on Outstanding Bonds on or
prior to the Termination Date, and does not apply to any interest (or the
portion of the Purchase Price corresponding to such interest) that may accrue on
the Bonds, or any principal (or the portion of the Purchase Price corresponding
to principal) of the Bonds that may be payable with respect thereto, after the
Termination Date (as hereinafter defined).
This Letter of Credit shall expire at 5:00 P.M., New York time, on the
earliest to occur of the following dates (the TERMINATION DATE): (a) March 9,
1998 (the EXPIRATION DATE); (b) the date on which you surrender this Letter of
Credit to us, accompanied by your written statement certifying that all of the
Bonds have been paid in full (or provision has been made for such payment in
accordance with the Trust Agreement) or you are otherwise no longer entitled to
the benefits of this Letter of Credit; (c) the date on which you surrender this
Letter of Credit to us, accompanied by your written statement certifying that
(i) the conditions precedent to the acceptance of a Successor Letter of Credit
(as such term is defined in the Trust Agreement) have been satisfied and (ii)
you have accepted the Successor Letter of Credit; (d) the date that is the
sixteenth day after the date on which you receive notice from us to the effect
that this Letter of Credit is terminated by reason of the occurrence and
continuance of an "Event of Default" under the Letter of Credit Agreement and
instructing you to accelerate the Bonds; and (e) the date on which we honor a
Principal Drawing based upon the acceleration, mandatory redemption or maturity
of the Bonds as a whole; provided, however, that the Bank shall have the option,
exercisable in its sole discretion not later than March 9, 1997, to extend the
Expiration Date by up to one year. This Letter of Credit shall promptly be
surrendered to us by you upon any expiration pursuant to clause (a), (d) or (e)
of the preceding sentence.
You may transfer your rights under this Letter of Credit in their
entirety (but not in part) only to a successor trustee properly appointed and
qualified pursuant to Section 914 of the Trust Agreement and such transferred
rights may be successively transferred to any subsequent successor trustee
properly appointed and qualified pursuant to Section 914 of the Trust Agreement.
Transfer of your rights under this Letter of Credit to any such transferee shall
be effected upon the presentation to us of this Letter of Credit accompanied by
an Instruction to Transfer in substantially the form attached hereto as Annex V.
Only you (or a successor as permitted by the terms of this Letter of
Credit) may make a drawing under this Letter of Credit. Upon the payment to you,
in accordance with your payment instructions, of the amount specified in any
draft drawn under this Letter of Credit, we shall be fully discharged of our
obligation under this Letter of Credit with respect to such draft,
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and we shall not thereafter be obligated to make any further payments under this
Letter of Credit in respect of such draft, to you or to any other person
(including the holder of any Bond) who may have made to you or to the Account
Party, or makes to you or to the Account Party, a demand for payment with
respect to any Bond. By paying to you an amount demanded in accordance herewith,
we make no representation as to the correctness of such amount.
This Letter of Credit sets forth, in full, our undertaking, and such
undertaking shall not in any way be modified, amended, amplified or limited by
reference to any document, instrument or agreement referred to herein
(including, without limitation, the Trust Agreement, the Letter of Credit
Agreement or the Bonds), except the drafts and the certificates referred to
herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement except such drafts and
certificates. References to this Letter of Credit shall include the certificates
attached hereto.
This Letter of Credit is subject to the Uniform Customs and Practice
for Documentary Credits (1983 Revision), International Chamber of Commerce,
Publication No. 400 (the UNIFORM CUSTOMS). This Letter of Credit shall be deemed
to be a contract made under the laws of the State of New York and shall, as to
matters not governed by the Uniform Customs, be governed by and construed in
accordance with the laws of the State of New York.
All demands for payment under this Letter of Credit, as well as all
notices and other communications to us with respect to this Letter of Credit,
shall be in writing and shall be addressed to us at 225 Liberty Street, Two
World Financial Center, 38th Floor, New York, New York 10281, Attention:
Planning and Administration Department, with a copy to the attention of Real
Estate Finance Group - Akira Fujii and Russ J. Lopinto (or such other office as
we shall designate to you in writing), specifically referring thereon to "The
Mitsubishi Bank, Limited, New York Branch, Irrevocable Transferable Standby
Letter of Credit No. C 182." Such demands for payment, notices and other
communications shall be personally delivered or sent by tested telex to the
following number: Telex No. 42-0367 (Answerback: BISHIBANKA NYK).
All notices and other communications to you with respect to this Letter
of Credit shall be in writing and shall be addressed to you at your address set
forth above (or such other office
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as you shall designate to us in writing. Such notices and other communications
shall be sent by registered or certified mail, postage pre-paid, or by tested
telex to the following number: 62- 0439 (Answerback: UST).
Very truly yours,
THE MITSUBISHI BANK, LIMITED,
acting through its New York
Branch
By:______________________________________
Tadaaki Hamada
Senior Vice President
<PAGE>
<PAGE>
Annex I to
Irrevocable Transferable
Standby Letter of Credit
PRINCIPAL DRAWING
CERTIFICATE
The undersigned, a duly authorized officer of Banco Popular de Puerto
Rico (the TRUSTEE), hereby certifies to The Mitsubishi Bank, Limited, acting
through its New York Branch (the BANK), with reference to Irrevocable
Transferable Standby Letter of Credit No. _____ issued by the Bank in favor of
the Trustee (the LETTER OF CREDIT), that:
(1) The Trustee is the designated trustee under the Trust
Agreement (such term and all other capitalized terms used herein that
are not otherwise defined herein shall have the respective meanings set
forth in the Letter of Credit) for the holders of the Bonds.
(2) The Trustee is making a demand for payment under the
Letter of Credit to pay the principal of the Bonds that is due and
payable on _____________, 19____ (the PAYMENT DATE).
(3) The Trustee does not have available sufficient other
Eligible Moneys to pay the principal of the Bonds that is due and
payable on the Payment Date.
(4) The amount of the draft accompanying this Certificate (i)
represents $____________, being drawn by the Trustee under the Letter
of Credit to pay the amount of the principal of the Bonds (other than
Pledged Bonds) that is due and payable on the Payment Date, (ii) does
not include any amount to pay the principal of the Bonds held by or for
the account of the Account Party or the Guarantors, (iii) was computed
in accordance with the provisions of the Bonds and the Trust Agreement,
(iv) does not exceed the amount of the Principal Component or the
amount available to be drawn under the Letter of Credit by a Principal
Drawing as in effect on the Payment Date and (v) has not been and is
not the subject of a prior or contemporaneous demand for payment under
the Letter of Credit.
(5) Upon receipt by the Trustee of the amount demanded hereby,
(i) the Trustee will apply the same directly to the payment when due of
the principal of the Bonds then due pursuant to the Trust Agreement,
(ii) no portion of said amount shall be applied by the Trustee for any
other purpose and (iii) no portion of said amount shall be commingled
with other funds held by the Trustee.
The Trustee hereby acknowledges that, pursuant to the terms of the
Letter of Credit, (A) the honoring by the Bank of the Principal Drawing made by
this Certificate shall automatically
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reduce (1) the Principal Component and the amount available to be drawn under
the Letter of Credit by subsequent Principal Drawings or Purchase Drawings by an
amount equal to the amount of such Principal Drawing, as set forth in clause (i)
of paragraph (4) of this Certificate and (2) the Interest Component and the
amount available to be drawn under the Letter of Credit by subsequent Interest
Drawings to an amount equal to 120 days' accrued interest (computed as provided
in the Letter of Credit) on the then effective Principal Component; and (B) such
reduction shall automatically result in a corresponding reduction in the Stated
Amount.
Please [deposit] [wire transfer] the amount demanded hereby [in] [to]
____________.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of ____________, 19____.
BANCO POPULAR DE PUERTO RICO,
as Trustee
By:_________________________________
Name:
Title:
<PAGE>
<PAGE>
Annex II to
Irrevocable Transferable
Standby Letter of Credit
INTEREST DRAWING
CERTIFICATE
The undersigned, a duly authorized officer of Banco Popular de Puerto
Rico (the TRUSTEE), hereby certifies to The Mitsubishi Bank, Limited, acting
through its New York Branch (the BANK), with reference to Irrevocable
Transferable Standby Letter of Credit No. _____ issued by the Bank in favor of
the Trustee (the LETTER OF CREDIT), that:
(1) The Trustee is the designated trustee under the Trust
Agreement (such term and all other capitalized terms used herein that
are not otherwise defined herein shall have the respective meanings set
forth in the Letter of Credit) for the holders of the Bonds.
(2) The Trustee is making a demand for payment under the
Letter of Credit to pay [interest accrued on the Bonds] [the portion of
the Purchase Price corresponding to interest accrued on the Put Bonds
pursuant to Section 305 of the Trust Agreement that is due and payable
on _____________, 199_ (the PAYMENT DATE).
(3) The Trustee does not have available sufficient other
Eligible Moneys to pay [the interest accrued on the Bonds] [the portion
of the Purchase Price corresponding to interest accrued on the Put
Bonds pursuant to Section 305 of the Trust Agreement] that is due and
payable on the Payment Date.
(4) The amount of the draft accompanying this Certificate (i)
represents $____________, being drawn by the Trustee under the Letter
of Credit to pay the amount of [interest accrued on the Bonds] [the
portion of the Purchase Price corresponding to interest accrued on the
Put Bonds pursuant to Section 305 of the Trust Agreement] that is due
on the Payment Date, (ii) does not include any amount to pay the
interest on Pledged Bonds or Bonds held by or for the account of the
Account Party or the Guarantors, (iii) was computed in accordance with
the provisions of the Bonds and the Trust Agreement, (iv) does not
exceed the amount of the Interest Component or the amount available to
be drawn under the Letter of Credit by Interest Drawings as in effect
on the Payment Date and (v) has not been and is not the subject of a
prior or contemporaneous demand for payment under the Letter of Credit.
(5) Upon receipt by the Trustee of the amount demanded hereby,
(i) the Trustee will apply the same directly to the payment when due of
[the interest accrued on the Bonds] [the portion of the Purchase Price
corresponding to interest accrued on the Put Bonds pursuant to Section
305 of the Trust Agreement], (ii) no portion of said
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amount shall be applied by the Trustee for any other purpose and (iii)
no portion of said amount shall be commingled with other funds held by
the Trustee.
The Trustee hereby acknowledges that, pursuant to the terms of the
Letter of Credit, (A) the honoring by the Bank of the Interest Drawing made by
this Certificate shall automatically reduce the Interest Component and the
amount available to be drawn under the Letter of Credit by subsequent Principal
Drawings or Interest Drawings by an amount equal to the amount of the draft
accompanying this Certificate, as set forth in clause (i) of paragraph (4) of
this Certificate; and (B) such reduction shall automatically result in a
corresponding reduction in the Stated Amount, subject to reinstatement pursuant
to the terms and conditions of the Letter of Credit.
Please [deposit] [wire transfer] the amount demanded hereby [in] [to]
____________.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of ____________, 199_.
BANCO POPULAR DE PUERTO RICO,
as Trustee
By:
Name:
Title:
<PAGE>
<PAGE>
Annex III to
Irrevocable Transferable
Letter of Credit
PURCHASE DRAWING
CERTIFICATE
The undersigned, a duly authorized officer of Banco Popular de Puerto
Rico (the TRUSTEE), hereby certifies to The Mitsubishi Bank, Limited, acting
through its New York Branch (the BANK), with reference to Irrevocable
Transferable Letter of Credit No. _____ issued by the Bank in favor of the
Trustee (the LETTER OF CREDIT), that:
(1) The Trustee is the designated trustee under the Trust
Agreement (such term and all other capitalized terms used herein which
are not otherwise defined herein shall have the respective meanings set
forth in the Letter of Credit) for the holders of the Bonds.
(2) The Trustee is making a demand for payment under the
Letter of Credit to pay the portion of the Purchase Price corresponding
to principal of the Put Bonds pursuant to Section 305 of the Trust
Agreement that is due and payable on _____________, 19____ (the PAYMENT
DATE).
(3) The amount of the draft accompanying this Certificate (i)
represents $____________, being drawn by the Trustee under the Letter
of Credit to pay the amount of the portion of the Purchase Price
corresponding to principal of the Put Bonds pursuant to Section 305 of
the Trust Agreement that is due on the Payment Date, (ii) was computed
in accordance with the provisions of the Bonds and the Trust Agreement,
(iii) does not exceed the amount of the Principal Component or the
amount available to be drawn under the Letter of Credit by a Purchase
Drawing as in effect on the Payment Date and (iv) has not been and is
not the subject of a prior or contemporaneous demand for payment under
the Letter of Credit.
(4) Upon receipt by the Trustee of the amount demanded hereby,
(i) the Trustee will apply the same directly to the payment when due of
the amount of the portion of the Purchase Price corresponding to
principal on the Put Bonds pursuant to the Trust Agreement, (ii) no
portion of said amount shall be applied by the Trustee for any other
purpose and (iii) no portion of said amount shall be commingled with
other funds held by the Trustee.
The Trustee hereby acknowledges that, pursuant to the terms of the
Letter of Credit, (A) the honoring by the Bank of the Purchase Drawing made by
this Certificate shall automatically reduce the Principal Component and the
amount available to be drawn under the Letter of Credit by subsequent Purchase
Drawings or Principal Drawings by an amount equal to the amount of such Purchase
Drawing, as set forth in clause (i) of paragraph (3) of this Certificate; and
(B)
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such reduction shall automatically result in a corresponding reduction in the
Stated Amount, subject to reinstatement pursuant to the terms and conditions of
the Letter of Credit.
Please [deposit] [wire transfer] the amount demanded hereby to
____________.
IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of ____________, 19____.
BANCO POPULAR DE PUERTO RICO,
as Trustee
By:________________________________________
Name:
Title:
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<PAGE>
Annex IV to
Irrevocable Transferable
Standby Letter of Credit
CERTIFICATE FOR THE REDUCTION OF AMOUNTS
AVAILABLE UNDER LETTER OF CREDIT
The undersigned, a duly authorized officer of Banco Popular de Puerto
Rico (the TRUSTEE), hereby certifies to The Mitsubishi Bank, Limited, acting
through its New York Branch (the BANK), with reference to Irrevocable
Transferable Standby Letter of Credit No. _____ issued by the Bank in favor of
the Trustee (the LETTER OF CREDIT), that:
(1) The Trustee is the designated trustee under the Trust
Agreement (such term and all other capitalized terms used herein which
are not otherwise defined herein shall have the respective meanings set
forth in the Letter of Credit) for the holders of the Bonds.
(2) The Trustee hereby notifies the Bank that on or prior to
the date hereof $____________ principal amount of Bonds have been
delivered to the Trustee and cancelled in accordance with Section 508
of the Trust Agreement.
(3) Following the cancellation referred to in paragraph (2)
above, the aggregate principal amount of all of the Bonds which are
OUTSTANDING within the meaning of the Trust Agreement is
$________________.
(4) The Principal Component and amount available to be drawn
by the Trustee under the Letter of Credit by Principal Drawings or
Purchase Drawings is reduced to $____________ (such amount being equal
to the amount specified in paragraph (3) above), upon receipt by the
Bank of this Certificate.
(5) The Interest Component and amount available to be drawn by
the Trustee under the Letter of Credit by Interest Drawings is reduced
to $__________ upon receipt by the Bank of this Certificate, which
amount equals interest on the Bonds referred to in paragraph (3) above
computed at a rate of 12% per annum for a period of 120 days on the
basis of a 360-day year, including the first day but excluding the last
day.
(6) The Stated Amount of the Letter of Credit is reduced to
$______________ (such amount being equal to the sum of the amounts
specified in paragraphs (4) and (5) above), upon receipt by the Bank of
this Certificate.
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IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the _____ day of ____________, 19____.
BANCO POPULAR DE PUERTO RICO,
as Trustee
By:
Name:
Title:
<PAGE>
<PAGE>
Annex V to
Irrevocable Transferable
Standby Letter of Credit
INSTRUCTION TO TRANSFER
[Date]
The Mitsubishi Bank, Limited,
New York Branch
225 Liberty Street
Two World Financial Center
New York, NY 10281
Attention: Real Estate Finance Group
The Mitsubishi Bank, Limited, New York Branch
Irrevocable Transferable Standby Letter of Credit No. ______
(the LETTER OF CREDIT)
Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
_______________________________________
[Name of Transferee]
_______________________________________
[Address of Transferee]
all rights of the undersigned beneficiary under the Letter of Credit. The
transferee has succeeded the undersigned as designated trustee under the Trust
Agreement referred to in the first paragraph of the Letter of Credit.
By this transfer, all rights of the undersigned beneficiary in the
Letter of Credit are transferred to the transferee and the transferee shall
hereafter have the sole rights as beneficiary thereof.
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The Letter of Credit is returned herewith, and we ask that this
transfer be effective and that you issue a new irrevocable transferable letter
of credit in favor of the transferee with provisions consistent with the Letter
of Credit.
Very truly yours,
BANCO POPULAR DE PUERTO RICO,
as predecessor Trustee
By:
Name:
Title:
<PAGE>
<PAGE>
FIRST AMENDMENT TO
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
This FIRST AMENDMENT TO LETTER OF CREDIT AND REIMBURSEMENT
AGREEMENT (this AMENDMENT) dated as of May 5, 1992 between EL CONQUISTADOR
PARTNERSHIP, L.P., a Delaware limited partnership (the COMPANY), WKA EL CON
ASSOCIATES, a New York general partnership (WKA), KUMAGAI CARIBBEAN, INC., a
Texas corporation (KGC), and THE MITSUBISHI BANK, LIMITED, a Japanese banking
corporation acting through its New York Branch (the BANK).
W I T N E S S E T H :
WHEREAS, the Company and the Bank entered into that certain
Letter of Credit and Reimbursement Agreement dated as of February 7, 1991 (the
LC AGREEMENT; all capitalized terms used but not defined herein shall have the
respective meanings assigned to them in the LC Agreement); and
WHEREAS, the LC Agreement required the Initial Disbursement to
occur on or prior to February 7, 1992; and
WHEREAS, the conditions to the Initial Disbursement enumerated
in the LC Agreement were not fulfilled in all respects by February 7, 1992; and
WHEREAS, the Bank has determined, with the concurrence of the
Company, that the aggregate amount of undisbursed Bond Proceeds is insufficient
to pay the aggregate of the cost of completing the Construction of the
Improvements and the other costs contemplated in the Budget, and that the amount
required to eliminate such insufficiency is $24,000,000; and
WHEREAS, pursuant to Paragraph 9(k) of the LC Agreement, the
Bank has
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required, as a condition to the Initial Disbursement, that the Company and/or
its partners deposit with the Bank the amount of $24,000,000 (the Loan Balance
Amount); and
WHEREAS, a portion of the Loan Balance Amount represents
amounts previously expended by the Borrower and with respect to which the
Borrower is entitled to reimbursement; and
WHEREAS, WKA and KGC have determined to each provide one-half
of the Loan Balance Amount as equity and/or a loan to the Company; and
WHEREAS, in order to finance a portion of such contributions,
WKA and KGC shall together borrow the amount of $8,000,000 from GDB on the date
hereof, pursuant to a Credit Facility Agreement dated the date hereof among GDB,
WKA and KGC (the GDB Additional Loan Agreement); and
WHEREAS, in consideration of the Bank's agreement to allow the
Initial Disbursement to occur after February 7, 1992, the Company has agreed to
certain changes in the terms and conditions to the LC Agreement.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. The following terms defined in the LC Agreement shall be
changed to mean the following:
COMPANY PARTNERSHIP AGREEMENT shall mean that certain Venture
Agreement dated January 12, 1990 between KGC and WKA, as amended by that certain
Amendment Agreement dated April 30, 1992 (the Amendment to Venture Agreement).
2
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COMPLETION DATE shall mean October 12, 1993.
GUARANTIES shall mean the (i) Environmental Indemnity, the
Completion Guaranty, the Secondary Completion Guaranty, and (ii) the Completion
Guaranty of even date herewith by WKA to the Company.
GUARANTORS shall mean KIUSA, KGCC, KGC, Williams and WKA.
INITIAL DISBURSEMENT shall mean the initial disbursement by
the Bank of the funds held by the Bank pursuant to Section 9(k) of the LC
Agreement.
SUBSTANTIAL COMPLETION shall mean the occurrence of all of the
following events: (i) the completion of the Construction of the Improvements
(excluding punchlist items) in accordance with all Legal Requirements and
substantially in accordance with the Plans as to any aspect of Construction and
the issuance of applicable use or occupancy permits therefor satisfactory to the
Bank; (ii) the delivery to the Bank of certificates, in form and content
satisfactory to the Bank, from the Company, the Architects and the Bank's
Consultant to the effect that all of the work required to be performed
substantially to complete the Improvements in accordance with all Legal
Requirements and in accordance with the Plans has been performed; and (iii) the
Commencement Date under the Management Agreement.
2. The Annual Letter of Credit Fee shall be increased by .20%
per annum through the Date of Substantial Completion and by .30% per annum
thereafter, so that the percentages 1.25%, 1.05% and .90% which appear in
Section 2(b) of the LC Agreement shall be changed to 1.45%, 1.35% and 1.20%,
respectively.
3. The Bank consents to the execution and delivery of the
Amendment to Venture Agreement. Accordingly, the first three sentences of
Section 7(ii) of the LC Agreement
3
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are amended in their entirety as follows:
(ii) Deficiency Loans. Any funds advanced to the
Company as Deficiency Loans (as defined in the Company Partnership
Agreement), whether or not at the direction of the Bank, shall be
applied only to the operating costs or other fees and expenses related
to the operation of the Project; provided, however, that the foregoing
restriction shall be of no effect from and after the Coverage Date.
After the Date of Substantial Completion and until the Coverage Date,
the Bank will have the right to cause the Company, acting through WKA,
(A) at such times as the Bank shall determine in the reasonable
exercise of its judgment that an Operating Deficit exists with respect
to any month, to require the General Partners to make Deficiency Loans
in amounts of up to $14,000,000 in the aggregate (less any such
Deficiency Loans for such purpose which may have previously been
voluntarily advanced), and (B) to apply such funds on account of such
Operating Deficits. The Bank shall have no right to cause Deficiency
Loans to be made to pay principal under the Bonds, the Loan Agreement
or hereunder. Notwithstanding anything in the Company Partnership
Agreement to the contrary, neither the Deficiency Loans nor the
operating reserve line item of the Budget may be used for the purpose
of paying principal or interest under the GDB Additional Loan.
4. From and after the date on which Deficiency Loans in the
aggregate amount of $14,000,000 have been made and applied to the payment of
Operating Deficits and until the Coverage Date, if the Bank shall determine in
the reasonable exercise of its judgment that further Operating Deficits (which,
for the purposes of this Paragraph 4, shall not include debt service on the GDB
Loan or any Special Loans (as defined in the Company Partnership
4
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Agreement)) exist with respect to any month, the Bank may require (i) each of
WKA and KGC to make additional loans to the Company in the amount of one-half of
such Operating Deficits, and (ii) the Company to apply such funds on account of
such Operating Deficits; provided, however, that the obligation of each of WKA
and KGC to make such additional loans shall be limited to $3,000,000 in the
aggregate (so that the total amount of such additional loans required to be made
by the Bank shall not exceed $6,000,000 in the aggregate). If the Bank requires
any such loans to be made, the Company hereby irrevocably directs WKA and KGC to
pay the proceeds of such loans at the direction of the Bank for application to
such Operating Deficits. The failure by WKA and/or KGC to make any such
additional loans shall constitute a default under the LC Agreement. The
obligations of WKA under this Paragraph 4 shall be severally guarantied by WMS
Industries, Hugh Andrews and Burton I. Koffman and Richard E. Koffman (the
ADDITIONAL LOAN GUARANTORS) pursuant to guaranties to be executed
contemporaneously herewith. It shall be deemed an Event of Default if (i) any of
the events described in clauses (v), (vi), (vii) and (viii) of Section 12(a) of
the LC Agreement shall occur with respect to any of the Additional Loan
Guarantors, and (ii) the Company fails to provide the Bank, within 60 days after
the event in question, with reasonably acceptable collateral or guaranties to
replace the guaranties of the Additional Loan Guarantors with respect to whom
such event occurred.
5. Simultaneously herewith, GDB shall fully advance the GDB
Additional Loan, and WKA and KGC shall deposit the Loan Balance Amount with the
Bank in the following manner: $3,538,705.36, representing amounts previously
expended by the Borrower on account of Total Project Costs, shall be paid to or
at the Borrower's direction; $3,560,966.34, representing the remaining portion
of the Initial Disbursement, shall be disbursed
5
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<PAGE>
in accordance with the Request for Disbursement approved by the Bank; and the
balance of the Loan Balance Amount $16,900,298.30) shall be paid to the Bank by
wire transfer. The Bank shall hold the Loan Balance Amount in an account at the
Bank, which account shall bear interest at a fluctuating rate per annum equal to
the Eurodollar Time Deposit Rate. The Line Item for Contingency shall be
increased by the amount of any interest earned on the Loan Balance Amount. All
such interest shall be added to and become part of the Loan Balance Amount, and,
to the extent not disbursed to pay Project Costs, shall be released to WKA and
KGC upon Substantial Completion of the Project. The Loan Balance Amount may be
commingled with the Bank's general funds. Notwithstanding anything in Section
9(k) of the LC Agreement to the contrary, the Bank is hereby irrevocably
authorized and directed by the Company, WKA and KGC to apply the Loan Balance
Amount to the costs of the first Disbursements for Hard Costs and Soft Costs
approved by the Bank, without regard to the particular Line Item(s) to which
such costs relate, before the Bank shall direct and authorize the Trustee to
disburse proceeds of the Loan to pay such costs. Upon each such application of a
portion of the Loan Balance Amount, a corresponding amount shall be deemed to
have been loaned by WKA and KGC to the Company. Unless and until the Loan
Balance Amount is so applied, the Loan Balance Amount shall constitute
additional security for WKA's and KGC's obligations under their respective
Completion Guaranties and for the Company's performance of its obligations
pursuant to this Agreement (a security interest therein being hereby created).
The parties agree that the first $8,000,000 of the Loan Balance Amount disbursed
by the Bank shall be deemed to be the proceeds of the loan from WKA and KGC to
the Company.
6
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<PAGE>
6. The Bank confirms that the Initial Disbursement is taking
place on the date hereof, notwithstanding that the Initial Disbursement is being
funded with a portion of the Loan Balance Amount rather than with Bond Proceeds.
7. The Company shall agree to promptly recommence construction
of the Project, so that the following construction activities will commence on
or before the dates listed below:
- Begin wall footings for the Cliftop remodeling -- May
30, 1992.
- Begin Elect/Mech. underground for Cliftop new
building -- May 30, 1992.
- Begin mobilization for Convention Center -- May 15,
1992.
- Begin footing excavation for Convention Center -- May
30, 1992.
- Begin mobilization for Hotel core/casino -- May 15,
1992.
- Begin footing for Panoramic Elevator at the Hotel
core/casino -- May 30, 1992.
- Begin footing excavation for Harborside -- June 30,
1992.
Failure to comply with the foregoing requirements shall constitute an Event
of Default under the LC Agreement.
8. The Bank confirms that it has approved the execution by the
Company of the Trade Contracts described on Schedule A annexed hereto in the
form presented by the Company to the Bank's Consultant.
9. The following is added to Paragraph 12(a) of the LC
Agreement:
(xxiii) if any Event of Default relating to the Project
shall occur under the
7
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<PAGE>
GDB Loan Agreement or the Additional GDB Loan
Agreement.
10. WKA and KGC agree to use their respective best efforts to
assist the Bank in obtaining participants for the Bank's interest in the LC
Agreement and the Letter of Credit.
Except as amended hereby, the LC Agreement remains in full
force and effect.
This Agreement may be executed in one or more counterparts.
8
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the day and year first above written.
EL CONQUISTADOR PARTNERSHIP L.P.
By: KUMAGAI CARIBBEAN, INC.
By: /s/
____________________________
Shunsuke Nakane, President
By: WKA EL CON ASSOCIATES
By: /s/
____________________________
Hugh A. Andrews,
Authorized Signatory
WKA EL CON ASSOCIATES
By: /s/
____________________________
Hugh A. Andrews,
Authorized Signatory
KUMAGAI CARIBBEAN, INC.
By: /s/
____________________________
Shunsuke Nakane, President
9
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<PAGE>
THE MITSUBISHI BANK, LIMITED,
acting through its New York Branch
By: _____________________________
10
<PAGE>
<PAGE>
SCHEDULE A
EL CONQUISTADOR PARTNERSHIP L.P. TRADE CONTRACTS
1. Purchase Order #1103 dated February 3, 1992 to Stelko Electrical
Products, Co. for purchase of Switchgear Units and 38KV Substation for
$161,000.
2. Purchase Order #1109 dated February 4, 1992 to Westinghouse Electric
Supply, Co. for purchase of Units Substations for $468,000.
3. Purchase Order #1108 dated February 2, 1992 to Zenruss International
for purchase of Cooling Towers for $148,000.
4. Purchase Order #1111 dated February 3, 1992 to Trane Export Inc. for
purchase of AHU,VAV Boxes for $1,543,000.
5. Purchase Order #1106 dated February 3, 1992 to Techinical Distributors,
Inc. for purchase of Pumps for $68,435.
6. Purchase Order #1125 dated February 3, 1992 to United Equipment Corp.
for purchase of Pressure Reducing Valves for $12,200.
7. Purchase Order #1122 dated February 3, 1992 to SyncroFlow c/o United
Equipment Corp. for purchase of Water Booster Systems and Well Water
Pumps for $87,300.
8. Purchase Order #1123 dated February 3, 1992 to Aurora Pump c/o United
Equipment Corp. for purchase of Fire Pump for $40,500.
9. Trade Contract of Desarrollos Metropolitanos, S.E. for Convention
Center, Hotel Core and Casino, and Seaview Building, dated February 9,
1992, for $37,944,600.
10. Trade Contract of Bird Construction Co. Inc. for Clifftop Buildings and
Main Pool, dated February 9, 1992, for $18,050,000.
11
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<PAGE>
11. Trade Contract of Redondo Construction Corp. for WWTF, dated February
10, 1992, for $1,925,000.
12. Trade Contract of Von Roll Transport Systems Inc. for Funicular, dated
February 1, 1992, for $1,708,500.
13. Trade contract of Central Florida Turf Inc. for Golf Course, dated
_________________, 199__, for $2,310,660.
14. Trade Contract of Dover Elevator Company for Elevator/Escalator, dated
February 7, 1992 for $2,109,213.
15. Trade Contract of Redondo Construction Corp. for General Sitework and
Infrastructure, dated August 22, 1991, for $2,163,800, and the
following change orders:
a) Pump House 1 & 3, for $35,000.
b) Water lines to Core Hotel and Casino, for $13,000.
c) CO-01/05/08 Lagoon Surcharge, for $93,052.
d) CO-02 Golf Course - grading, for $15,860.
e) CO-03 Core Hotel and Casino - access to Panoramic, for $1,000.
f) C04 Core Hotel and Casino - Demolition, for $3,500.
g) CO-06 Sitework, for $11,245.
h) CO-10 Earthwork - Adj., for $4,842.
16. Trade Contract of Bermudez & Longo, S.E. for Infra (Elec), dated
September 3, 1991, for $885,000.
17. Trade Contract of Hoover Pumping Systems for Fire Pumps, dated February
4, 1992, for $228,000.
12
<PAGE>
<PAGE>
LOAN AGREEMENT
BY AND BETWEEN
THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO
AND
EL CONQUISTADOR PARTNERSHIP, L.P.
I N D E X
<TABLE>
<CAPTION>
Article Page
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<S> <C> <C>
I. INCORPORATION OF RECITALS............................................................ x
II. DEFINITIONS.......................................................................II - 1
III. REPRESENTATIONS AND WARRANTIES...................................................III - 1
3.1 Partnership Existence; Compliance with Law.................... 1
3.2 Executive Offices............................................. 1
3.3 Subsidiaries.................................................. 2
3.4 Partnership Power; Authorization; Enforceable Obligations..... 2
3.5 Omitted....................................................... 2
3.6 Financial Information to Lender............................... 2
3.7 No Litigation................................................. 3
3.8 No Default.................................................... 3
3.9 Investment Company Act........................................ 4
3.10 Margin Regulations............................................ 4
3.11 Taxes......................................................... 5
3.12 Use of Loan Proceeds.......................................... 5
3.13 Omitted....................................................... 5
3.14 Reportable Event.............................................. 5
3.15 Environmental Matters......................................... 6
3.16 Condemnation.................................................. 6
3.17 Labor Matters................................................. 7
3.18 Other Ventures................................................ 7
3.19 No Contract Cancellations..................................... 7
3.20 Liens......................................................... 7
3.21 Omitted....................................................... 7
3.22 Sufficiency of Funds.......................................... 8
3.23 Title to Property............................................. 8
3.24 Possession of Premises........................................ 8
3.25 Utilities and Streets......................................... 8
3.26 General....................................................... 8
3.27 Survival of Warranties; Representations....................... 9
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<PAGE>
<PAGE>
IV. AMOUNT AND TERMS OF LOANS................................................IV - 1
4.1 Of the Interim Loans.......................................... 1
4.2 Of the Term Loan.............................................. 3
4.3 GDB Escrow.................................................... 5
4.4 Maximum Interest Rate......................................... 7
4.5 Release Provisions............................................ 8
4.6 Subordination and Standstill Agreement........................ 8
V. SECURITY..................................................................V - 1
5.1 The Security.................................................. 1
5.2 Preservation of Security...................................... 3
5.3 Non Recourse Obligations...................................... 3
VI. CONDITIONS PRECEDENT FOR INITIAL DISBURSEMENT........................... VI - 1
6.1 Conditions.................................................... 1
(a) Title to Premises.............................. 1
(b) Payment of Fee................................. 1
(c) Collateral..................................... 1
(d) Equity Contribution............................ 1
(e) Financial Information.......................... 1
(f) Appraisal...................................... 1
(g) Survey......................................... 1
(h) Environmental Report........................... 2
(i) Budget......................................... 2
(j) Special Report................................. 2
(k) Insurance...................................... 2
(l) Title Insurance................................ 3
(m) Contractor's Insurance......................... 3
(n) Utility Facilities............................. 3
(o) Construction Documents......................... 3
(p) Bonds.......................................... 4
(q) Construction Schedule.......................... 4
(r) Construction Permit............................ 4
(s) Plans and Specifications....................... 4
(t) Taxes.......................................... 4
(u) Federal Taxes.................................. 5
(v) Labor Contributions............................ 5
(w) Partnership Agreement.......................... 5
(x) Counsel Opinion................................ 5
VII. CONDITIONS PRECEDENT FOR ALL LOANS AND DISBURSEMENT REQUIREMENTS
AND PROCEDURES..........................................................VII - 1
7.1 .............................................................. 1
- ii -
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<PAGE>
VIII. AFFIRMATIVE COVENANTS .................................................VIII - 1
8.1 Application of Loan Proceeds.................................. 1
8.2 Books and Records............................................. 1
8.3 Financial Information......................................... 1
8.4 Construction Development of the Project....................... 2
8.5 Effectiveness of Permits; Approvals........................... 2
8.6 Access by Lender.............................................. 2
8.7 Maintain Rights; Franchises................................... 3
8.8 Filing of Tax Returns......................................... 3
8.9 Estoppel Certificates......................................... 3
8.10 Correctness of Representations; Warranties.................... 3
8.11 Maintenance of Existence and Conduct of Business.............. 4
8.12 Payment of Obligations........................................ 4
8.13 Agreements.................................................... 5
8.14 Litigation.................................................... 5
8.15 Insurance..................................................... 5
8.16 Compliance with Law........................................... 12
8.17 Supplemental Disclosure....................................... 12
8.18 Recording; Transfer Taxes and Fees............................ 13
8.19 Preservation of the Properties................................ 13
8.20 Environmental Matters......................................... 14
8.21 Notice........................................................ 15
8.22 Deficiency Loans.............................................. 16
8.23 Certification of Substantial Completion....................... 18
8.24 Permits and Licenses.......................................... 18
8.25 Of the Project................................................ 18
8.26 Deposit of Escrow Requirement................................. 20
8.27 Interest Rate Swap............................................ 20
8.28 Expropriation................................................. 20
IX. NEGATIVE COVENANTS........................................................IX- 1
9.1 Consent of Lender............................................. 1
X. EVENTS OF DEFAULT; RIGHTS AND REMEDIES....................................X - 1
10.1 Events of Default............................................. 1
10.2 Remedies...................................................... 4
10.3 Waiver of Defaults............................................ 6
10.4 Waivers by Borrower........................................... 6
10.5 Right of Set-Off.............................................. 6
10.6 Control....................................................... 7
XI. MISCELLANEOUS............................................................XI - 1
11.1 No Agency Relationship........................................ 1
11.2 Liability..................................................... 1
- iii -
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<PAGE>
11.3 Indemnity of Lender........................................... 2
11.4 Damage or Destruction......................................... 4
11.5 Taking of the Mortgaged Property.............................. 8
11.6 Application of Proceeds Upon Casualty or Substantial Taking .. 10
11.7 Complete Agreement; Modification of Agreement................. 11
11.8 Fees and Expenses............................................. 12
11.9 No Waiver by Lender........................................... 13
11.10 Remedies...................................................... 13
11.11 Parties....................................................... 13
11.12 Conflict of Terms............................................. 14
11.13 Authorized Signatories........................................ 14
11.14 Notices....................................................... 14
11.15 Captions...................................................... 16
11.16 Exhibits and Schedules........................................ 16
11.17 Omitted....................................................... 16
11.18 Governing Law and Venue....................................... 16
11.19 Severability.................................................. 16
11.20 Entire Agreement.............................................. 17
11.21 Survival of Representations................................... 17
11.22 GDB's Consent................................................. 18
11.23 Reliance by Lender............................................ 18
EXHIBITS
A. Description of Premises
B. Description of Condominium Parcels
C. Secured Promissory Note
D. Request for Disbursement
E. Disbursement Schedule
F. Escrow Agreement
</TABLE>
- iv -
<PAGE>
<PAGE>
LOAN AGREEMENT
This AGREEMENT, entered into in the city of San Juan, Commonwealth of
Puerto Rico, this 7th day of February, 1991 by and between:
THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO, (hereinafter
indistinctively "GDB" or "LENDER," a banking institution of the Government of
the Commonwealth of Puerto Rico, created by Act 17 enacted on September 23,
1948, with principal offices in San Juan, Puerto Rico, represented herein by its
Executive Vice President, MR. GEORGE B. WILSON, of legal age, married, an
executive and resident of San Juan, Puerto Rico; and
EL CONQUISTADOR PARTNERSHIP, L.P., (hereinafter "THE BORROWER"), a
limited partnership organized and existing under the laws of the State of
Delaware, duly qualified and authorized to do business in and within the
Commonwealth of Puerto Rico, herein represented by its Partners, KUMAGAI
CARIBBEAN, INC., a corporation organized and existing under the laws of the
State of Texas, duly qualified and authorized to do business in and within the
Commonwealth of Puerto Rico, and by WKA EL CON ASSOCIATES, a general partnership
organized and existing under the laws of the State of New York, such Partners in
turn herein respectively represented by MR. SHUNSUKE NAKANE, who is of legal
age, married, an executive and resident of San Juan, Puerto Rico, and by MR.
NORMAN JULES MENELL, who is of legal age, married, and executive and resident of
Sarasota, Florida.
<PAGE>
<PAGE>
W I T N E S S E T H:
WHEREAS, the Borrower is the owner and holder of the fee simple title
("PLENO DOMINIO") to that certain real estate (hereinafter referred to as "THE
PREMISES", more fully described in EXHIBIT "A", which is attached hereto and
made a part hereof by reference; and
WHEREAS, the Borrower proposes to construct the Project (as hereafter
defined) on the Premises and has requested and applied to GDB for loans
("LOANS") aggregating TWENTY FIVE MILLION DOLLARS ($25,000,000.00) to be used
for financing part of the Improvements (as hereafter defined); and the parties
desire to execute this Agreement to set forth the terms and conditions of their
agreements in the premises;
NOW, THEREFORE, in consideration of the premises and of the mutual and
separate agreements, pledges, covenants and warranties of the parties hereto,
and for other good and valuable considerations, it is agreed, covenanted, and
warranted by the parties as follows:
ARTICLE 1
INCORPORATION OF RECITALS
1.1 Incorporation of Recitals. The foregoing preambles and all other
recitals set forth are made a part of this Agreement.
<PAGE>
<PAGE>
ARTICLE 2
DEFINITIONS
2.1 The following terms as used herein shall have the following
meanings:
"AGREEMENT" shall mean the this Loan Agreement, including all
amendments, modifications and supplements hereto and any appendices, exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as the same
may be in effect at the time such reference becomes operative.
"AFICA" shall mean the Puerto Rico Industrial, Medical, Educational and
Environmental Pollution Control Facilities Financing Authority.
"AMK" shall mean AMK Conquistador, S.E., a Puerto Rico special
partnership.
"ANNUAL AGENTS FEE" shall have the meaning assigned in the Letter of
Credit and Reimbursement Agreement.
"ANNUAL LETTER OF CREDIT FEE" shall have the meaning assigned in the
Letter of Credit and Reimbursement Agreement.
"ANDREWS FAMILY" shall mean Hugh A. Andrews, his spouse and children.
"ARPE" shall mean the Administration of Regulations and Permits of the
Commonwealth of Puerto Rico.
"APPRAISAL" shall mean an appraisal in narrative form, assuming the
Improvements are completed in accordance with the Plans, prepared by Pannell,
Kerr & Forster for the Bank at Borrower's sole cost and expense setting forth a
fair market value of the Premises as so completed.
<PAGE>
<PAGE>
II - 2
"ARCHITECTS" shall mean Ray, Melendez and Associates, or any
successors engaged by Borrower with the prior written consent of Lender.
"ARCHITECTS' AGREEMENTS" shall mean those certain agreements
between Borrower and Architects, and Borrower and Consultant and Designers,
relating to the design of the Improvements and providing for architectural
services in connection with the construction of the Improvements, as more
specifically identified in Exhibit "A" to the Assignment Agreement.
"ASSIGNMENT" or "ASSIGNMENT AGREEMENTS" shall mean the
assignments to be made by Borrower in favor of Lender pursuant to Article Five
hereof.
"BANK" shall mean The Mitsubishi Bank, Limited, acting through
its New York Branch, its successors and assigns, a successor letter of credit
Bank or a lender providing refinancing for the loan evidenced by the Bank Loan
Documents.
"BANK COVERAGE REQUIREMENT" shall mean that either (i) the Net
Earnings for the 24 full calendar-month period next preceding the date of
determination has been an amount not less than the Annual Debt Service for such
24 full calendar-month period multiplied by 1.30 or (ii) the Net Earnings for
the 12 full calendar-month period next preceding the date of determination has
been an amount not less than the Annual Debt Service for such 12 full
calendar-month period multiplied by 1.50.
"BANK'S CONSULTANT" shall mean Merritt & Harris, Inc. or such
other Person or architectural or engineering consultant as may be designated and
engaged by the Bank, at Borrower's expense, to examine the Budget and the Plans,
any changes thereto, and cost breakdowns and estimates with respect to the
Project (including, without limitation, all cost breakdowns and estimates set
forth in any Request for Disbursement and all accompanying
<PAGE>
<PAGE>
II - 3
certifications), to make periodic inspections of the progress of the
Construction of the Improvements on behalf of the Bank and the Lender, to advise
and render reports to the Bank and the Lender concerning the foregoing and to
otherwise consult with the Bank and the Lender with respect to the Project.
"BANK'S CONSULTANT'S REPORT" shall mean a report by the Bank's
Consultant (i) to the effect that all of the work related to Construction of the
Project has been completed in a good and workmanlike manner, substantially in
accordance with the Plans and the Construction Schedule and in compliance with
the Legal Requirements, (ii) stating whether the work which is the basis of the
applicable Request for Disbursement has been completed within the applicable
Line Item therefor, (iii) stating whether the undisbursed amount of the Loan and
amounts available under the Bank Loan Documents allocable to the Construction of
the Improvements in accordance with the Plans, (iv) stating that ownership to
all material and fixtures incorporated in the Construction of the Improvements
and all materials stored on-site or off-site or in fabrication which are
included in any Request for Disbursement shall vest in the Borrower immediately
upon delivery thereof to the Project, and (v) addressing such other matters
reasonably requested by Lender to be addressed therein.
"BANK LOAN DOCUMENTS" shall have the meaning assigned in the
Subordination and Standstill Agreement.
"BUDGET" shall mean a budget prepared by Borrower setting forth
Total Project Costs in detail satisfactory to Lender (including a detailed trade
breakdown of such costs and
<PAGE>
<PAGE>
II - 4
specifying Hard Costs and Soft Costs), as such Budget may be amended, modified
or supplemented from time to time pursuant to the terms of the Bank Loan
Documents.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or other day on which banks in San Juan, Puerto Rico, New York City, or London
are authorized or required by law or executive order to close.
"CASUALTY" shall mean any damage to or destruction of the
Mortgaged Property, or any portion thereof.
"CHARGES" shall mean all federal, state, county, city, municipal,
local, or other governmental charges, taxes, assessments, user fees and
expenses, levies and similar charges applicable to Puerto Rico and the United
States and all levies, assessments or charges including assessments, user fees
and charges, utilities and those imposed by any other Person upon or relating to
(i) the Security, (ii) Borrower's withholding obligations in relation to
payroll, income or gross receipts, (iii) Borrower's ownership or use of the
Premises, or (iv) any other aspect of Borrower's businesses.
"CLOSING" shall mean the execution and delivery of this Agreement
and all other Loan Documents, which Closing shall take place at the office of
Lender at the address set forth in the beginning of this Agreement, or at such
other places as the parties may choose.
"CLOSING DATE" shall mean February 7th, 1991, by which date the
Closing shall have occurred.
<PAGE>
<PAGE>
II - 5
"COLLATERAL" shall mean all of the property, real or personal,
tangible or intangible, and all rights thereto, pledged, mortgaged or
hypothecated pursuant to the Security Documents.
"COMMITMENT" shall have the meaning assigned to it in Article
Four hereof.
"COMMONWEALTH" shall mean the Commonwealth of Puerto Rico and its
political subdivisions, municipalities, agencies and instrumentalities.
"COMPENSATION" shall mean, with respect to any Person, all
payments and accruals commonly considered to be compensation, including, without
limitation, all wages, salary, deferred payment arrangements, bonus payments and
accruals, profit sharing arrangements, payments in respect of stock options or
phantom stock options or similar arrangements, stock appreciation rights or
similar rights, incentive payments, pension or employment benefit contributions
or similar payments, made to or accrued for the account of such Person or
otherwise for the direct or indirect benefit of such Person.
"COMPLETION DATE" shall mean the date of Substantial Completion
of the Project which shall not be later than October 15, 1992, provided,
however, that the Completion Date may be extended by the Borrower to April 15,
1993, for any reason whatsoever, and, in the event of Unavoidable Delay, the
Completion Date may be extended by the Borrower to October 15, 1993.
"CONDOMINIUM PARCELS" shall mean the approximately 20-acre
portion of land shown on Exhibit "B" annexed hereto, which Condominium Parcels
have or are to be released from the GDB Mortgage in one or more segments.
<PAGE>
<PAGE>
II - 6
"CONDOMINIUM REVENUES" shall mean revenues derived by Borrower
from the Condominium Units through (i) the rental of the Condominium Units, (ii)
the use of the Premises by the occupants of the Condominium Units, and (iii) the
right of such occupants to use the Premises.
"CONDOMINIUM UNITS" shall mean up to 150 residential condominium
units that may be developed and construed on the Condominium Parcels.
"CONSTRUCTION or CONSTRUCT", when used with reference to the
Project, shall mean construction, renovation or development of the Improvements
or any portion thereof, the cost of which are included in the Budget as Hard
Costs.
"CONSTRUCTION DOCUMENTS" shall mean, collectively, the
Construction Management Agreement, the Architect's Agreements, all Trade
Contracts and all other agreements to which Borrower is party or beneficiary
pertaining to the Construction of the Improvements.
"CONSTRUCTION MANAGEMENT AGREEMENT" shall mean that certain
agreement between Borrower and the Construction Manager dated as of January 12,
1990 and amended by First Amendment thereto dated as of September 30, 1990 or
any permitted Amendments providing for the construction of the Improvements upon
the terms and conditions set forth therein.
"CONSTRUCTION MANAGER" shall mean KGCC or any successor engaged
by Borrower with the prior written consent of the Bank.
<PAGE>
<PAGE>
II - 7
"CONSULTANTS AND DESIGNERS" shall mean Edward D. Stone, Jr. and
Associates, Inc. and Jorge Rosello Associates, and or any successors engaged by
Borrower with the prior written consent of Lender.
"CONVERSION DATE" shall have the meaning given in paragraph
4.1(d) of this Agreement.
"COVERAGE REQUIREMENT" shall mean that the Net Earnings for the
preceding 24 month period is an amount not less than 1.30 times the preceding 24
month Debt Service.
"DEBT SERVICE" shall mean for any period for which Debt Service
is being determined, the sum of (i) any interest paid or payable under the loan
extended to Borrower by AFICA at the Bond Fixed Rate, as defined under the Bank
Loan Documents, with respect to such period (or to the extent the Bond Fixed
Rate is inapplicable to any portion of such loan, at the rate provided for with
respect to such portion of such loan), (ii) interest paid or payable under the
GDB Loan at the rate herein provided with respect to such period or, to the
extent interest swap arrangements are in place with respect to the GDB Loan, at
the GDB Fixed Rate with respect to such period, (iii) Annual Agents Fee and the
Annual Letter of Credit Fee payable with respect to such period, and (iv) any
fees arising in connection with the loan under the Bank Loan Documents and/or
the GDB Loan which are payable with respect to such period.
"DEBTOR RELIEF LAWS" shall mean the Bankruptcy code of the United
States of America, as amended from time to time, any bankruptcy or debtor relief
laws provided by the laws of Puerto Rico, and all other applicable liquidation,
conservatorship, bankruptcy,
<PAGE>
<PAGE>
II - 8
moratorium, rearrangement, receivership, insolvency, reorganization or similar
debtor relief laws from time to time in effect affecting the Rights of creditors
generally.
"DEFAULT" or "EVENT OF DEFAULT" shall have the meaning defined in
Article Ten hereof.
"DISBURSEMENT" shall mean each disbursement of all or any of the
proceeds of the Loan.
"DOLLARS" or the sign "$" shall mean dollars in the lawful
currency of the United States of America.
"ENVIRONMENTAL LAWS" shall mean all present or future, federal,
commonwealth and local laws, including statutes, regulations, ordinances, codes,
rules and other governmental restrictions and requirements, currently or
hereafter in effect, whether arising under the laws of the United States or
Puerto Rico, relating to the discharge of air pollutants, water pollutants or
process waste water or otherwise relating to the environment or Hazardous
Materials that are or may be applicable, in any way, to the Project, including
any such restrictions or requirements by the department of natural resources or
environmental protection agency now or at any time hereafter in effect.
"ENVIRONMENTAL REPORT" shall mean an environmental report
relating to the Premises and the Improvements, addressed to GDB and the Bank,
which report shall include, without limitation, geological, soil and hazardous
waste evaluations, prepared at Borrower's sole cost and expense by a certified
engineering and testing company, or by a firm of environmental consultants
acceptable to GDB and the Bank.
<PAGE>
<PAGE>
II - 9
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGREEMENT" or "GDB ESCROW" shall mean the Escrow
Agreement under which Borrower will deposit funds in escrow with a banking
institution mutually acceptable to Borrower and Lender, such funds to be pledged
solely for the benefit of Lender as provided in Article 4.3 hereof.
"FAJARDO PROPERTY" shall mean approximately 220 acres of land
located in Fajardo Puerto Rico, as more particularly described in the GDB
Mortgage.
"FINANCIAL INFORMATION" shall mean the financial information
required under the Agreement to be furnished by Borrower to Lender, all such
information prepared in accordance with generally accepted accounting principles
(GAAP), as appropriate.
"FISCAL YEAR" shall mean the twelve month period (or shorter
period with respect to the First Fiscal Year within the term hereof) that ends
on March 31st of any given year. Subsequent changes of the fiscal year of
Borrower shall not change the term "Fiscal Year", unless the Bank shall consent
in writing to such changes, which consent shall not be unreasonably denied.
"GDB" shall mean the Government Development Bank of Puerto Rico.
"GDB BASE RATE" shall mean for the first eight years of the term
of the GDB Loan an interest rate equal to the Libor Rate less 50 basis points,
and thereafter, as negotiated between Lender and Borrower to reflect changes in
Lender's cost of funds.
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II - 10
"GDB ESCROW AGENT" or "ESCROW AGENT" shall mean the financial
institution which will serve as Escrow Agent for the GDB Escrow.
"GDB LEASEHOLD MORTGAGE" shall mean a second leasehold mortgage
in the principal amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00)
encumbering the Palominos Island Property.
"GDB LOAN " shall mean a loan by GDB to Borrower in the aggregate
principal amount of $25,000,000 to be used by Borrower to finance a portion of
the Total Project Costs, pursuant to the terms and conditions set forth in this
Agreement.
"GDB MORTGAGE" shall mean the mortgage, deed of trust or similar
security agreement in form reasonably satisfactory to GDB, made or to be made by
Borrower upon the Premises, to be encumbered in favor of GDB to secure the
payment of the GDB Loan, creating a second priority Lien on the Premises, more
particularly a second mortgage in the principal amount of $25,000,000.00,
encumbering the Premises, including all buildings, improvements, fixtures and
personal property presently located thereon and all buildings and improvements
to be erected and constructed thereon and all fixtures and personal property
owned by Borrower to be placed therein.
"GDB MORTGAGE NOTE" shall mean the mortgage note in the amount of
$25,000,000 secured by the GDB Mortgage, and the leasehold mortgage note in the
amount of $500,000 secured by the GDB Leasehold Mortgage.
"GDB STANDSTILL AGREEMENT" shall mean the Subordination and
Standstill Agreement, dated as of the date hereof, between GDB and the Bank.
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II - 11
"GENERAL PARTNER" shall mean either Kumagai Caribbean, Inc.
("KGC") or WKA El Con Associates ("WKA"), the sole general partners of Borrower
(KGC and WKA together being the GENERAL PARTNERS).
"GOVERNMENT AUTHORITY" shall mean any court, agency, authority,
board (including, without limitation, any environmental protection, planning or
zoning board), bureau, commission, department, office or instrumentality of any
nature whatsoever of any governmental or quasi-governmental unit of the United
States, the Commonwealth of Puerto Rico, any State of the United States, or the
Municipality of Fajardo, whether now or hereafter in existence, having
jurisdiction over Borrower and/or Project.
"GROSS REVENUES" shall mean, for any period with respect to which
Gross Revenues are being determined, all revenues of any kind received by
Borrower from the ownership and operation of the Premises for such period,
including, without limitation, room, food and beverage, and other facility
revenues, Condominium Revenues, casino revenues, rentals or other payments for
leases and concession agreements, annual dues for golf memberships, revenues
derived from the resale of golf memberships, the proceeds of any business
interruption insurance, and, except as provided below, all revenues received by
Borrower from all other activities of the Premises less in each case actual
refunds made to customers, guests, or patrons. Gross Revenues shall not include
the proceeds of the sale of the Condominium Units, revenues derived from the
initial sale of golf memberships, tips, service charges added to a customer bill
or statement in lieu of gratuities which are payable to employees of the
Project, value of complimentary rooms, food and beverages, except those
purchased by the Casino, and any sales
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II - 12
or other use or excise tax required by law to be collected with respect to the
operations of the Premises and remitted to taxing authorities.
"HARD COSTS" shall mean, collectively, the costs and expenses and
items thereof set forth in the Budget as Hard Costs with respect to the
acquisition of the Project and with respect to supplying goods, services,
materials and labor for the Construction of the Project.
"HAZARDOUS MATERIAL" shall mean asbestos, polychlorinated
biphenyls, petroleum products and any other substance or material that, whether
by its nature or use, is now or hereafter defined as hazardous waste, hazardous
substance, pollutant or contaminant under any Environmental Law, or which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is now or hereafter regulated under
any Environmental Law.
"HOSPITALITY" shall mean Hospitality Investor Group, S.E., a
Puerto Rico special partnership.
"IMPROVEMENTS" shall mean the improvements to be renovated or
constructed on the Premises pursuant to the Plans, consisting of approximately
750 guest rooms, approximately 50,000 square feet of meeting space (including
prefunctionary space) six restaurants, approximately 13,000 square feet of
retail space, an approximately 10,000 square feet casino, a marina,
approximately 100,000 square feet of swimming pools and water features, an
18-hole golf course, an approximately 40,000 square feet clubhouse and spa
facility, eight tennis courts, water sports facilities on the Palominos Island
Property and related amenities and facilities.
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II - 13
"INCHOATE LIEN" means any lien for taxes not yet due and payable,
mechanic's Lien and materialmen's Lien, if any, for services or materials for
which payment is not yet due or which is being contested in good faith by
appropriate proceedings.
"INDEBTEDNESS" shall mean all liabilities, obligations and
indebtedness of any and every kind and nature, including without limitation, all
liabilities and all obligations to trade creditors, whether now or hereafter
owing, arising, due or payable from Borrower to any Person and howsoever
evidenced, created, incurred, acquired or owing, whether primary, secondary,
direct, contingent, fixed or otherwise. Without in any way limiting the
generality of the foregoing, Indebtedness shall specifically include (a) all
obligations and indebtedness of Borrower for borrowed money or for notes, bonds,
debentures and other debt securities; (b) indebtedness represented by the
deferred purchase price of property or services acquired by such Person; (c)
rental payable by such Person under any leases of real or personal property
which shall have been, or should, under generally accepted accounting
principles, be classified as a capital lease; (d) obligations of such Person
under direct or indirect guarantees in respect of, and obligations (contingent
or otherwise) of such Person to purchase or otherwise acquire, or otherwise
assure a creditor against loss in respect of, indebtedness or obligations of
another Person of the type described in clause (a), (b) or (c) above, and (e)
liabilities of such Person in respect of unfunded vested benefits under, or
withdrawal liability in respect of, plans covered by Title IV of ERISA; (F) all
charges; and (g) all taxes.
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II - 14
"INITIAL DISBURSEMENT" shall mean the first disbursement of the
proceeds of the GDB Loan.
"INITIAL DISBURSEMENT DATE" shall mean the date on which the
Initial Disbursement is made.
"INSURANCE POLICIES" shall mean the policies of insurance
required to be maintained pursuant to Article 8.15 hereof.
"INTEREST ADJUSTMENT DATES" shall mean the first day of January,
April, July and October.
"INTERNATIONAL TEXTILE" shall mean International Textile Products
of Puerto Rico, Inc., a Puerto Rico corporation.
"KGC" shall mean Kumagai Caribbean, Inc., a Texas corporation.
"KGCC" shall mean KG (Caribbean) Corporation, a Texas
corporation.
"KIUSA" shall mean Kumagai International USA Corporation, a Texas
corporation.
"KMA" shall mean KMA Associates of Puerto Rico, Inc., a Puerto
Rico corporation.
"KOFFMAN FAMILY" shall mean Burton I. Koffman, Richard E.
Koffman, their parents, issue (including adopted persons), wives, siblings and
direct descendants, and trusts organized for the benefit of any of the
foregoing.
"KUMAGAI" shall mean Kumagai Gumi Co., Ltd., a Japanese
Corporation.
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II - 15
"LEASEHOLD MORTGAGE" shall mean the mortgage in form satisfactory
to GDB to be made by Borrower upon the Lease Agreement for the Palominos Island
Property.
"LEGAL REQUIREMENTS" shall mean, collectively, (i) all statutes,
laws, rules, rulings, orders, regulations, ordinances, judgments, decrees and
injunctions of any Governmental Authority (including, without limitation, fire,
health, handicapped access, sanitation, ecological, historic, zoning,
environmental protection, wetlands and building laws) in any way applicable to
Borrower or the Project, or any portion thereof, or to the ownership, use,
occupancy, possession, operation or maintenance of the Project; (ii) all
requirements of the local Board of Fire Underwriters or other similar body
acting in and for the locality in which the Premises are situated and all
requirements of each insurance policy covering or applicable to all or any
portion of the Project, or the use thereof, and all requirements of the issuer
of each such policy, including any which may require repairs, modifications or
alterations (structural or otherwise) in or to the Project, or any portion
thereof; and (iii) all requirements of each permit, license, authorization and
regulation relating to the Project, or any portion thereof, or to the ownership,
use, occupancy, possession, operation or maintenance thereof.
"LENDER" shall mean the Government Development Bank for Puerto
Rico.
"LIBOR" or "LIBOR RATE" shall mean the rate per annum quoted at
approximately 11:00 a.m. London time by Telerates Systems, (currently on page
3750 of the financial information reporting services furnished electronically by
Telerate Systems, Inc.) on each Interest Adjustment Date for the offering to
leading banks in the London interbank market of dollar deposits immediately
available funds for ninety (90) day periods.
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II - 16
"LIEN" shall mean any mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, security interest, lien (statutory
or other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever including, without limitation, any
mechanic's lien, materialmen's lien, conditional sale agreement, title retention
agreement, any lease, which under applicable law is deemed to create a lien,
security interest or the equivalent.
"LOAN DOCUMENTS" shall mean this Agreement, the Notes, the
Security Documents and any and all other agreements, documents and instruments
delivered by Borrower pertaining to the Loans pursuant to the terms of this
Agreement, as hereafter renewed, amended or supplemented from time to time.
"LOAN(S)" shall mean any draws or advances made by GDB to
Borrower pursuant to the terms of this Agreement.
"MAJOR CASUALTY" shall mean a Casualty, the Restoration of which
is reasonably estimated to cost more than $1,000,000.
"MANAGEMENT AGREEMENT" shall mean the January 12, 1990 Agreement
between Williams and Borrower, as amended by the First Amendment thereto dated
September 30,1990, and the second amendment thereto dated January 31st, 1991,
pursuant to which the former shall operate the Project.
"MARGIN" or "GDB MARGIN" shall mean:
(a) 1.40% for any portion of the GDB Loan which has been
disbursed until the Completion Date.
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II - 17
(b) 1.25% after the Completion Date until the earlier of
maturity of the GDB Loan or such date as the Coverage
Requirement is achieved.
(c) 1.00% after the Coverage Requirement is achieved.
(d) Commencing with the fiscal year for the Project beginning
on April 1, 1999, and provided that the Net Earnings
from the Premises for the preceding 24 month period are
at least 1.50 times Debt Service for such period, then,
in lieu of the GDB Margin described above, the following
Margins will apply:
(i) For the fiscal year beginning April 1, 1999 -
1.50%;
(ii) For the fiscal year beginning April 1, 2000 -
2.00%;
(iii) For the fiscal year beginning April 1, 2001,
and for each fiscal year thereafter - 3.00%.
In any fiscal year in respect of which the 1.50 Coverage
Requirement for the preceding 24 month period described
above is not achieved, then for such fiscal year, the
Margins will be as described under (b) and (c).
"MATERIAL ADVERSE EFFECT" shall mean any set of circumstances or
event which (a) is or could reasonably be expected to have a material adverse
effect upon the validity or enforceability of any Loan Document; (b) is or could
reasonably be expected to become material and adverse to the financial condition
or business operations of Borrower; (c) does or could reasonably be expected to
materially impair Borrower's ability to fulfill its obligations under the
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II - 18
terms and conditions of any of the Loan Documents; or (d) causes a Default or an
Event of Default.
"MATURITY DATE" shall mean the Loan Maturity Date, or such
earlier date as GDB shall declare the entire principal sum due and payable in
the exercise of its Rights under Article Ten hereof.
"MORTGAGED PROPERTY(IES)" shall mean the Premises and all rights,
interest and improvements appurtenant thereto encumbered by the Lien of the GDB
Mortgage, or the GDB Leasehold Mortgage.
"NOTE" or "SECURED PROMISSORY NOTE" shall mean the Note of
Borrower to GDB evidencing the Loan Proceeds.
"NET EARNINGS" shall mean Gross Revenues minus Operating
Expenses.
"NET PROCEEDS" shall mean the amount of all insurance proceeds
other than business interruption insurance paid pursuant to any Insurance Policy
as the result of a Casualty, after deduction of Lender's costs and expenses
(including, without limitation, attorneys' fees and expenses), if any, in
collecting the same.
"NET RESTORATION AWARD" shall mean the amount of all awards and
payments received from a condemnor on account of a Taking, after deduction of
the Lender's costs and expenses (including, without limitation, attorneys' fees
and expenses), if any, in collecting the same.
"OBLIGATION(S)" mean all present and future indebtedness,
obligations and liabilities, and all renewals and extensions thereof, or any
part thereof, now or hereafter owed
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II - 19
to GDB by Borrower arising from, by virtue of, or pursuant to any Loan Document,
together with all interest accruing thereon and costs, expenses and attorneys'
fees incurred in the enforcement or collection thereof, whether such
Indebtedness, obligations and liabilities are direct, indirect, fixed,
contingent, determinate, undeterminate, joint, several or joint and several.
"OFFICER'S CERTIFICATE" shall mean a certificate signed by a
General Partner.
"OPERATING EXPENSES" shall mean, with respect to any period for
which Operating Expenses are being determined, all expenses paid by or on behalf
of the Borrower in connection with the ownership and operation of the Premises
and the Condominium Units for such period, including, without limitation,
insurance, utilities, funding of reserves in amounts approved by the Bank and
GDB for maintenance, capital and non-capital repairs and the repair and
replacement of furniture, fixtures and equipment, but in any event commensurate
with the guidelines set forth in Section 4.5 of the Management Agreement;
general and special real property taxes on and assessments of the Premises;
equipment rentals; maintenance and non-capital repairs to the extent not paid
for from reserves established therefor; non-capital repair and replacement of
furniture, fixtures and equipment to the extent not paid for from reserves
established therefor; governmental and license fees; advertising and marketing;
payments under the Ground Lease; Basic Management Fees and expenses arising
under the Management Agreement; all other operating expenses reasonably
necessary for the proper and efficient operation of the Premises as a first
class destination resort hotel. Operating expenses shall not include Debt
Service or any item of expense incurred in the development, construction, sale
or financing of the Condominium Units.
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II - 20
"PALOMINOS ISLAND PROPERTY" shall mean approximately 90 acres of
land located on an island approximately three (3) miles to the east of the
Fajardo Property, or more particularly described in the Leasehold Mortgage.
"PARTICIPATION" shall mean all shares, options, warrants,
interests, participations or other equivalents (regardless of how designated) of
or in a partnership or equivalent entity, whether voting or nonvoting,
including, without limitation, any other "equity security"
"PARTIES" shall mean Borrower and GDB.
"PARTY" shall mean either Borrower or GDB.
"PERMITTED LIENS OR ENCUMBRANCES" shall mean:
(a) The Liens in favor of GDB set forth in the Security Documents
(b) Liens arising out of judgments or awards with respect to
which Borrower or the Partnership shall in good faith be prosecuting an appeal
or proceedings for review and in respect to which the aforesaid shall have set
aside on its books reserves which GDB deems adequate with respect to each such
judgment or award.
(c) Liens for taxes, assessments, governmental charges or levies,
if payments of such taxes assessments, governmental charges or levies shall not
at the time be required to be made under the Loan Agreement or any other Loan
Document.
(d) Inchoate Liens.
(e) Existing easements, rights of way and servitudes on the
Mortgaged Properties as of the Closing Date and such future easements, rights of
way and servitudes as GDB shall approve as to the Mortgaged Properties.
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II - 21
(f) Liens on personal property to be acquired by Borrower
subsequently to the commencement of hotel operations by the Borrower and which
do not replace the originally contemplated furniture and fixture or equipment to
be acquired for such operations, or to secure financing from non-GDB sources in
accordance with and to the extent permitted in this Agreement.
(g) Deposits and similar payments incurred in the ordinary course
of Borrower's business.
(h) Liens constituted under the Bank Loan Documents.
(i) Third mortgage lien on the Premises in favor of KGC.
(j) The necessary easements, rights of way, and servitude to
provide adequate access and services to the Condominium Parcels, which shall be
constituted simultaneously with the release of the Condominium Parcels from the
lien of the GDB Mortgage.
"PERMITS" shall mean, collectively, all applicable
authorizations, consents, licenses, approvals and permits of Government
Authorities for Construction of the Improvements in accordance with the Plans
and all Legal Requirements, and for the performance and observance of all
agreements, provisions and conditions herein contained.
"PERMITTED TRANSFERS" shall mean (a) any transfer, direct or
indirect, of the interests of or in KGC or KIUSA to Kumagai or to any entity
wholly owned and controlled by Kumagai; (b) any transfer, direct or indirect, of
the interests of or in WMS El Con to WMS Industries or any entity wholly owned
and controlled by WMS Industries; (c) any transfer, direct or indirect, of the
interests of or in International Textile, KMA or AMK to a member of the
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II - 22
Koffman Family or to any entity which is wholly owned by one or more members of
the Koffman Family; (d) any transfer of the interests of Marcel Arroyo, Marcel
Arroyo, Jr. or David Melin in KMA which is not prohibited by any shareholder's
or similar agreement applicable to the transfer of such interests; (e) any
transfer, direct or indirect, of interests in Hospitality to members of the
Andrews Family or any entity wholly owned and controlled by one or more members
of the Andrews Family, provided that Hospitality shall at all times be
controlled by Hugh A. Andrews for so long as he shall be alive and competent;
(f) any transfer of a limited partner interest in Borrower approved by GDB in
writing, which approval shall not be unreasonably withheld, (g) any transfer of
publicly-traded ownership interests in WMS Industries or Kumagai; and (h)
collateral assignment of interests of WKA in the Borrower to secure a KG Loan,
as provided in Section 6.03 Borrower's Partnership Agreement, transfer of
Condominium Parcels.
"PERSON" shall mean an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, government (or an agency or political subdivision thereof) or other
entity of any kind.
"PLANS AND SPECIFICATIONS" OR "PLANS" shall mean the plans,
drawings and specifications for the Construction of the Improvements, including,
without limitation, the architectural, structural, mechanical and electrical
plans and specifications therefor prepared or to be prepared by Borrower, the
Architects and Borrower's engineers and contractors, as approved by GDB,
together with all revisions and addenda to such plans, drawings and
specifications, provided that such revisions and addenda have been approved by
GDB to the
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II - 23
extent such approval is required pursuant to this Agreement, which Plans shall
include, without limitation, a description of the materials, equipment and
fixtures necessary for the Construction of the Improvements.
"PLEDGE" shall mean the pledge of the GDB Mortgage Note by
Borrower to GDB pursuant to the execution and delivery by the Parties of a
pledge agreement in form and substance satisfactory to GDB.
"PREMISES" shall mean the fee simple title to the Fajardo
Property (other than the Condominium Parcel) and the leasehold estate in the
Palominos Island Property.
"PROJECT" shall mean, collectively, the acquisition of the
Fajardo Property, the leasing as tenant of the Palominos Island Property and the
renovation, development, construction, furnishing, equipping of the Premises and
the Improvements.
"PROJECT DOCUMENTS" shall mean (a) the Construction Management
Agreement; (b) all licenses, easements or other agreements or instruments
pertaining to the Project and to be entered into by Borrower with the approval
of the Bank and Lender; and (c) all other documents listed as exceptions to
title in the Title Policy.
"REIMBURSEMENT AGREEMENT or "LETTER OF CREDIT REIMBURSEMENT
AGREEMENT" shall mean the agreement dated the date of this Agreement, between
the Borrower and the Bank for the issuance of the letter of credit to secure the
issuance of the AFICA industrial revenue Bonds to provide financing for the
Project, its amendments and/or replacements.
"RELEASE CONDITIONS" shall have the meaning ascribed thereto in
Article 11.4 hereof.
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II - 24
"REPORTABLE EVENT" shall mean an event described in Section
4043(b) of ERISA (with respect to which the 30-day notice requirement has not
been waived by the PBGC).
"REQUEST FOR DISBURSEMENT" shall mean a written certified
statement of Borrower as more particularly set forth in Exhibit "D" hereto
setting forth the amount of the Disbursement sought, which shall constitute an
affirmation that the representations and warranties of Borrower with respect to
the Improvements set forth in Section 7.1 hereof and in the other Loan Documents
remain true and correct as of the date thereof and, except to the extent that
GDB is notified in writing to the contrary prior to the Disbursement, will be
true and correct on the date of such Disbursement.
"RESTORATION" shall mean, in case of a Casualty or Taking, the
restoration, replacement or rebuilding of the affected property such that when
such restoration, replacement or rebuilding is completed, the Improvements shall
have been constructed substantially in accordance with the Plans, and to the
extent any alterations or additions to the Improvements made in compliance with
the GDB Mortgage or this Agreement, with any such alterations or additions, or
in the event that the foregoing requirement cannot be satisfied as a result of
any Legal Requirements or, in the case of a Taking, as a result of the loss of
the use of the portion of the Mortgaged Property which was the subject of such
Taking, the Project when such restoration, replacement or rebuilding shall have
been completed, shall be an integral unit similar in condition, character and
scope to the Project prior to such Casualty or Taking, and the value of the
Project, when so restored, replaced or rebuilt, together with the amount of the
Net Proceeds or the Net Restoration Award, as the case may be, applied in
repayment of the
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II - 25
principal indebtedness evidenced by the Note or the Bank Loan Documents, shall
be equal to or greater than the value and usefulness of the Project immediately
prior to such Casualty or Taking.
"RIGHTS" shall mean rights, remedies, powers and privileges.
"SECURITY" shall have the meaning assigned to it in Article Five
hereof.
"SECURITY DOCUMENTS" shall mean the Pledge, the GDB Mortgage, the
GDB Mortgage Note, the Assignments, the GDB Leasehold Mortgage, the Chattel
Mortgage, and the Title Policy.
""SOFT COSTS" shall mean, collectively, all costs set forth in
the Budget excluding Hard Costs.
"SUBORDINATION AND STANDSTILL AGREEMENT" shall mean the agreement
under which Lender subordinates its rights as a creditor of Borrower to the Bank
Loan Documents.
"SUBSIDIARY(IES)" shall mean, with respect to any Person, any
corporation, partnership or other entity of which a majority interest is owned
or is effectively controlled by Borrower.
"SUBSTANTIAL COMPLETION" shall mean the occurrence of all of the
following events: (i) the completion of the renovation and Construction
(excluding punchlist items) of the Improvements in accordance with all Legal
Requirements and substantially in accordance with the Plans as to any aspect of
Construction and the issuance of occupancy permits therefor satisfactory to GDB
and the Bank; and (ii) the delivery to GDB and the Bank of certificates, in the
form and content satisfactory to GDB and the Bank, from Borrower, the Architects
and the
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II - 26
Bank's Consultant to the effect that all of the work required to be performed to
substantially complete the Improvements in accordance with all Legal
Requirements and in accordance with the Plans and Specifications has been
performed.
"SURVEY" shall mean a survey prepared for the Mortgaged
Properties substantially in accordance with the standards adopted by the
American Land Title Association and the American Congress on Surveying and
Mapping in 1986, known as the "Minimum Standard Detail Requirements of Land
Title Surveys" or showing equivalent detail and specifics, or otherwise
acceptable to Lender.
"TAKING" means any temporary or permanent taking by any public or
quasi-public authority of any Mortgaged Property or any part thereof through
eminent domain or other proceedings or by any settlement or compromise of such
proceedings, or any voluntary conveyance of such property in lieu of the
commencement of any such proceedings.
"TAXES" shall mean all taxes, assessments, fees, levies, imposts,
duties, deductions, withholdings, stamp taxes, mortgage taxes or charges,
recording charges, interest equalization taxes, real estate taxes or other
ad-valorem taxes, capital transaction taxes, foreign exchange taxes or charges
or other charges of any nature whatsoever from time to time or at any time
imposed by any Law or Court.
"TERM" shall mean that period from and including the Closing Date
through the Maturity Date.
"TERM LOAN" shall have the meaning assigned to it in Section (a)
hereof.
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II - 27
"TITLE INSURER" shall mean The American Title Insurance Company
or any other issuer, approved by GDB, of the title insurance policy insuring the
GDB Mortgage and GDB Leasehold Mortgage.
"TITLE POLICY" shall have the meaning provided in Section (l)
hereof.
"TOTAL PROJECT COSTS" shall mean all items of cost and expense
arising out of or necessary for the acquisition and development of the Project
and the Construction of the Improvements, and which are included in the Budget,
including, without limitation, such incidents thereto as organizational costs,
financing costs, insurance premiums, legal and accounting fees, construction
management fees, development fees, furnishings, equipment, supplies, advertising
and marketing expenses and initial working capital.
"TRADE CONTRACT" shall mean any general construction contract
entered into by Borrower with respect to the Construction of the Improvements
that satisfies the conditions set forth in the Reimbursement Agreement, and
shall require the Trade Contractor to name GDB as an additional named insurer
under a payment and performance bond satisfactory to GDB as to form, content and
issuer with respect to such Trade Contractor's obligations under its respective
Trade Contract, and shall be otherwise satisfactory to GDB in form and content.
"TRADE CONTRACTOR" shall mean any contractor engaged in the
Construction of the Improvements under a Trade Contract.
"TRANSFER" shall mean (i) any sale or transfer by Borrower of the
Premises, or any portion thereof, or (ii) any transfer of any direct or indirect
equity interest in Borrower,
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II - 28
including, without limitation, any sale or transfer of a direct or indirect
equity interest in the constituent Partners of the Borrower, of WKA, of KUSA or
of Kumagai.
"UNAVOIDABLE DELAY" shall mean any delay due to conditions beyond
the control of Borrower, including, without limitation, strikes, labor disputes,
acts of God, the elements, acts of sovereignty, enemy action, civil commotion,
fire, unavoidable casualty, mechanical breakdowns or shortages of, or inability
to obtain, labor, utilities or material; provided, however, that any lack of
funds shall not be deemed to be a condition beyond the control of Borrower.
"WILLIAMS" shall mean Williams Hospitality Management
Corporation, a Delaware corporation.
"WKA" shall mean WKA El Con Associates, a New York general
partnership.
"WMS EL CON" shall mean WMS El Con Corp., a Delaware corporation.
"WMS HOTEL" shall mean WMS Hotel Corporation, a Delaware
corporation.
"WMS INDUSTRIES" shall mean WMS Industries Inc., a Delaware
corporation.
"WORK CHANGE" shall mean any change order, any other amendment or
modification to any contract or subcontract and any revision, addendum,
modification to or amendment of the Plans for the Improvements, including minor
departures from the Plans for the Improvements pursuant to field orders.
<PAGE>
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
As an inducement to Lender to make Loans to Borrower, and also to make
the Permanent Loan to Borrower, Borrower represents and warrants to Lender that:
3.1 Partnership Existence; Compliance with Law. The Borrower (i) is a
limited partnership duly organized, existing and in good standing under the laws
of the State of Delaware, duly qualified to do business in and within the
Commonwealth of Puerto Rico, the latter being the only jurisdiction in which
Borrower owns real property or conducts business, (ii) has the requisite
partnership power and authority to own, pledge, mortgage or otherwise encumber
and operate its properties, and to conduct its business as now, heretofore and
proposed to be conducted; (iii) has or will have when required all licenses,
permits, consents or approvals from or by, and has or will have made when
required all filings with, and has or will have given all notice to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct (except for such licenses, and like, the
absence of which, and such filings and notices, as to which the failure to make
or give, would not reasonably be expected to have a Material Adverse Effect);
(iv) is in compliance with its Partnership Agreement; and (v) is in material
compliance with all applicable provisions of Law, and as of the date hereof,
except as disclosed in the Environmental Report, to the best knowledge of
Borrower, those relating to Environmental Laws where the failure to comply would
have a Material Adverse Effect.
3.2 Executive Offices. The location of Borrower's chief executive
offices is temporarily at Williams offices at the El San Juan Hotel & Casino,
Isla Verde Avenue, Carolina,
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III - 2
Puerto Rico, and will eventually be located at El Conquistador Hotel and Resort,
Fajardo, Puerto Rico.
3.3 Subsidiaries. There exist no Subsidiaries of Borrower.
3.4 Partnership Power; Authorization; Enforceable Obligations. The
Borrower is the sole owner of the assets encumbered by the Security free from
any adverse lien, security interest or adverse claim of any kind whatsoever,
except the Permitted Liens and Encumbrances; has the Partnership power and
authority to execute, deliver and carry out this Agreement, the Notes, the GDB
Mortgage, the GDB Mortgage Note, the Assignments, the Pledge, the Chattel
Mortgage and any other Security or Loan Document to be delivered by Borrower
hereunder; each of said documents and instruments has been duly authorized by
all necessary partnership action of the authorized Person(s) of Borrower, and
this Agreement, the Notes, the Leasehold Mortgage, the Chattel Mortgage, the GDB
Mortgage, the GDB Mortgage Note, the Pledge, the Assignments, and generally, any
other Security or Loan Documents to be delivered by Borrower, when issued, will
be valid obligations of the Borrower enforceable in accordance with their
respective terms subject to any necessary filings or registrations which may be
a necessary pre-requisite to such enforcement.
3.5 Omitted
3.6 Financial Information to Lender.
(a) All the financial information and representations submitted
by Borrower to Lender based on which Lender approved the credit facilities
herein contemplated, are true and
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III - 3
correct in all material aspects as the same have been amended and supplemented
as of the Closing Date.
3.7 No Litigation. No action, claim or proceeding is now pending or, to
the knowledge of Borrower, threatened against Borrower at Law, equity or
otherwise, before any court, board, commission, agency or instrumentality of the
Untied States or Puerto Rico or before any arbitrator or panel of arbitrators,
which, if determined adversely, would have a Material Adverse Effect. None of
the matters set forth therein questions the validity of any of the Loan
Documents or any action taken or to be taken pursuant thereto, or could
reasonably be expected to have either individually or in the aggregate a
Material Adverse Effect.
3.8 No Default. Neither the execution and delivery of this Agreement and
the Security Documents, the consummation of the transactions contemplated
hereunder, and the compliance with the terms, conditions and provisions of this
Loan Agreement, the Security Documents and of the other Loan Documents, will
conflict with or result in a breach of the terms, conditions or provisions of or
constitute a default under, the Partnership Agreement of Borrower, or of any
indenture or other agreement or instrument to which the Borrower is a party or
by which it is bound, or result in the creation or imposition of any Lien,
charge or encumbrance of any nature whatsoever, upon any of the properties or
assets of the Borrower, except as permitted by the provisions hereof; and except
for the recording of the GDB Mortgage and the Chattel Mortgage, and except as
noted in this Agreement, the Borrower is not required to obtain any action,
approval, consent or authorization by any governmental or quasi-
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III - 4
governmental agency, commission, board, bureau or instrumentality in order for
this Agreement to become a valid and binding obligation of Borrower enforceable
in accordance with its terms.
3.9 Investment Company Act. Borrower is not an "investment company" or
an "affiliated person" of, or a "promoter" or "principal underwriter" for, an
"investment company", as such terms are defined in the Investment Company Act of
1940, as amended. The funding of the Loans by Lender, the application of the
proceeds and repayment thereof by the Borrower and the consummation of the
transactions contemplated by this Agreement and the other Loan Documents will
not result in the violation by the Borrower of any provision of such act or any
rule, regulation or order applicable to Borrower issued by a court of competent
jurisdiction in the application of such act.
3.10 Margin Regulations. Borrower does not own any "margin security", as
that term is defined in Regulations G and U of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board"), and the proceeds of the
Loan will be used only for the purposes contemplated hereunder. The Loans will
not be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security, for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which would cause any of the Loans under this Agreement to be
considered a "purpose credit" within the meaning of Regulations G, T, U or X of
the Federal Reserve Board. Borrower will not take or permit any agent acting on
its behalf to take any action which might cause this Agreement or any document
or instrument delivered pursuant hereto to violate any
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III - 5
regulation of the Federal Reserve Board. The making of the loans will not
constitute a violation of such Regulations G, T, U or X.
3.11 Taxes. All federal, state, Commonwealth and foreign tax returns,
reports and statements required to be filed by Borrower and its partners, if the
said partners' failure to file would have a Material Adverse Effect on the
Borrower, (other than immaterial state, local and foreign filings), have been
filed with or extensions obtained from the appropriate governmental agencies and
all Charges and other impositions due and payable have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof, or any such fine, penalty, interest, late charge or loss
has been paid if such failure to pay would have a Material Adverse Effect on the
Borrower, except such taxes, charges and other impositions which are being
diligently contested in good faith by Borrower.
3.12 Use of Loan Proceeds. The Loans to be made by Lender to the
Borrower hereunder shall be applied only for the purposes set forth in Article
Four hereof.
3.13 Omitted.
3.14 Reportable Event. No Reportable Event, as such term is defined in
Title IV of the Federal Employee Retirement Income Security Act of 1974
("ERISA"), has occurred and is continuing with respect to any employee benefit
plan or other plan now existing or which the Borrower may institute or maintain
for the employees of the Borrower or any Subsidiary of the Borrower covered by
ERISA (an "Employee's Plan").
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III - 6
3.15 Environmental Matters.
(a) Except as set forth below, all facilities owned, leased, used
or operated by Borrower have been since the date hereof and continue to be,
owned, leased, used or operated in compliance in all material respects with all
applicable Environmental Laws. Some work relating to substances which may be
subject to Environmental Laws is presently being conducted and Borrower makes no
representations as to work performed prior to its acquisition of the Premises.
(b) The Environmental Report together with all previous reports
submitted to Lender by Borrower identified with respect to the Premises, to the
best knowledge of the Borrower, (i) all environmental audits, assessments or
occupational health studies undertaken by or at the direction of governmental
agencies within the past twelve (12) months; (ii) the results of the most recent
analyses of water (including groundwater analyses), soil, air or asbestos
samples where non-compliance or contamination is indicated; (iii) the most
recent inspection of each operating facility by any environmental protection
agency relating to issues of non-compliance or contamination; (iv) any claim or
complaint concerning environmental matters; and (v) all permits issued under any
Environmental Laws.
3.16 Condemnation. At the Closing Date, other than condemnation
proceedings related to the acquisition of the Premises by the Partnership
Borrower (i) no condemnation or other similar taking of any portion of the
Premises, (ii) no condemnation or relocation of any roadways abutting the
Premises, (iii) no denials of access to the Premises from any point of access to
the Premises, and (iv) no withdrawals, challenges, contests, denials or
revocations of
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III - 7
permits, licenses, use agreements or other operating agreements or applications,
have been commenced, or taken or threatened to be taken by any Governmental
Authority, quasi-governmental authority, or public or private person, which
affects any portion of the Premises.
3.17 Labor Matters. The Borrowers at the Closing Date (i) is not a party
to any labor dispute; (ii) there are no strikes or walkouts relating to any
aspect of Borrowers' business or operations; (iii) there are no collective
bargaining agreements with the Borrower and/or no collective bargaining
agreements with the Borrower and/or any Subsidiary.
3.18 Other Ventures. Borrower is not, as of the Closing Date, engaged in
any joint venture or partnership with any other Person.
3.19 No Contract Cancellations. To Borrower's knowledge there exists no
actual or threatened termination, cancellation or limitation of, or any
modification or change in, the business relationship of the Borrower under the
Construction Management Agreement, the Management Agreement, the Architects'
Agreements, the Trade Contracts and other Construction Documents as of Closing
Date.
3.20 Liens. The Liens granted to GDB pursuant to the Security Documents
will be, when filed, subject only to recording which will be effected in due
course, fully perfected second priority Liens in and to the Security described
therein, subject only to Permitted Liens and Encumbrances.
3.21 Omitted.
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III - 8
3.22 Sufficiency of Funds. The Loans, together with Borrowers' own funds
and those to be borrowed under the Bank Loan Documents are sufficient for all
purposes, as determined by the Borrower, to complete the Project.
3.23 Title to Property. The Borrower has, and at all times will have,
good and insurable title in fee simple to the Premises subject to no liens,
charges, or encumbrances other than as stated in the Title Policy referred to in
Paragraph 6.1(l) hereof, and other than Permitted Liens and Encumbrances.
3.24 Possession of Premises. At Closing, to the extent represented by
seller to Borrower, there are no squatters on the Premises and that Borrower is
and will be at all times in complete and exclusive possession of the same,
except for such portions of the Premises which have been acquired through
expropriation and possession has not been surrendered to the Borrower.
3.25 Utilities and Streets. The Premises has vehicle and pedestrian
access to and from publicly dedicated roads, streets and highways, and all
utility services, including water, sanitary and storm sewers, electric, and
telephone service are or will be provided to the Premises or are located in
abutting streets and roads, and are or will be adequate to serve the
Improvements constructed and those proposed to be constructed thereon.
3.26 General. Neither the Loan Documents nor any other agreement,
document, certificate or statement furnished to Lender by or on behalf of the
Borrower or any Person in connection with the transactions contemplated in any
of the Loan Documents contains any untrue statement of material fact or omits to
state a material fact necessary in order to make statements
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III - 9
contained herein or therein in light of the circumstances made not misleading.
To the knowledge of Borrower, there are no significant material facts or
conditions relating to the making of the Loans, any of the Security and/or the
financial condition and business of the Borrower which, collectively or
individually, cause a Material Adverse Effect, and which have not been fully
disclosed, in writing, to Lender. All writings heretofore or hereafter delivered
to Lender by or on behalf of the Borrower or any Person, are and will be genuine
and in all respects what they purport to be.
3.27 Survival of Warranties; Representations. All representations and
warranties made herein by Borrower or in any of the other Loan Documents, or in
any other certificate, document or instrument delivered pursuant thereto, shall
survive the making of the Loans transactions effected hereunder.
It is herein acknowledged and agreed by the Borrower that the above
warranties and representations are of the essence to the granting of the Loans
to Borrower and to this Agreement.
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<PAGE>
ARTICLE 4
AMOUNT AND TERMS OF LOANS
4.1 Of the Interim Loans:
a) Interim Loans. Subject to the terms and conditions hereof, and
relying on the representations, covenants, and warranties of the Borrower
contained herein, Lender agrees to make Interim Loans to the Borrower and to
advance to the Borrower monies so lent in a non-revolving line of credit of up
to TWENTY FIVE MILLION DOLLARS ($25,000,000.00) to finance part of the Total
Project Costs from time to time during the period commencing on the date of this
Agreement to and including the Completion Date.
b) Interest. Each Interim Loan under this Agreement shall bear
interest from the respective date of each such loan to the Conversion Date or
the date of payment in full at the annual rate resulting by adding One and Four
Tenths (1 4/10) Percentage Points to the GDB Base Rate. Any change in the
interest rate resulting from a change in the GDB Base Rate shall become
effective on the next Interest Adjustment Date following the effective date of
any such change in the GDB Base Rate. Such interest shall be payable quarterly
in arrears on the first day of each quarter and shall be computed only on
outstanding balances of each Loan on the basis of a year of three hundred sixty
(360) days and for the number of actual days elapsed. Interest accrued during
any quarter shall be payable on the first day of the following quarter.
c) Commitment Fee. In consideration of the commitment of Lender
to make to Borrower the Interim Loans, Borrower agrees to pay to the Lender a
commitment fee equal to ONE HUNDRED TWENTY FIVE THOUSAND DOLLARS ($125,000.00),
equivalent to
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IV - 2
One Half of One Percent (1/2%) of the maximum principal amount of the GDB Loan,
such fee to be paid on the date of this Agreement (any prior payment by Borrower
to Lender for the insurance of the commitment letter will be credited against
the Commitment Fee), and which fee shall not be reimbursable to Borrower, in
whole or in part, under any circumstance whatsoever.
d) Conversion Date. The date when Lender has disbursed the total
TWENTY FIVE MILLION DOLLARS ($25,000,000.00) shall be hereinafter referred to
as the "Conversion Date".
e) Evidence of Interim Loans. All Interim Loans made by Lender
under this Agreement shall be evidenced by a notation on the reverse side of the
Secured Promissory Note (the "Note") in the form attached hereto as Exhibit C,
dated the date of the respective Interim Loan, said notation shall be signed by
an authorized officer of Lender whom Borrower authorizes to make such notations,
however the failure to make such notation with respect to any Interim Loan shall
not limit or otherwise affect the obligations of Borrower under this Agreement
or the Note.
f) Proceeds of Interim Loans. The proceeds of the Interim Loans
will be used solely for the payment of Total Project Costs as such costs are
incurred in accordance with the Budget and the Construction Schedule. Attached
as Exhibit "E" is a Disbursement Schedule which consists of an estimate of when
such disbursements will be requested.
g) Notice of Borrowing and Making of Interim Loans. The Borrower
shall give Lender at least three (3) Business Days, prior written notice of each
borrowing it proposes to make hereunder, specifying the date and amount thereof.
Upon receipt of such notice and
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IV - 3
the other documents required to be delivered pursuant to the applicable
provisions of Article Six and/or Seven of this Agreement with respect to such
borrowing, Lender shall, on the date specified in such notice, make a Loan to
the Borrower by the disbursing of the loan proceeds to Borrower and any other
person or entity specified in the documents delivered pursuant to the applicable
provisions of Article Six and/or Seven of this Agreement.
4.2 Of the Term Loan:
a) Principal of the Term Loan. On Conversion Date, and provided
Borrower has fully complied in all material respects with all terms and
conditions of this Agreement applicable to such date, Lender agrees, upon the
terms and conditions of this Agreement, to convert the Interim Loans into a term
loan to Borrower in the principal amount of TWENTY FIVE MILLION DOLLARS
($25,000,000) (the "TERM LOAN").
b) Interest. The Term Loan will bear interest from the Conversion
Date at the annual rate resulting from the adding of the Margin to the GDB Base
Rate. The resulting rate shall be adjusted every quarter in the same manner as
interest is adjusted on the Interim Loan, that is, it will continue to be
computed on the basis of a year of three hundred sixty (360) days and for the
number of actual days elapsed, shall be payable on the first day of each quarter
in arrears, and shall be adjusted on each Interest Adjustment Date.
c) Due Date of Principal. The entire principal and any accrued
interest on the Term Loan shall be paid one hundred eighty (180) months after
the Closing Date.
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IV - 4
d) Note. The Term Loan shall be evidenced by and repaid in
accordance with a Secured Promissory Note of the Borrower. The notations on its
reverse side evidencing that the entire principal amount of the Loan has been
disbursed and received by Borrower.
e) Mandatory Prepayment. Upon any refinancing of the Borrower's
loan under the Bank Loan Documents, the GDB shall be repaid in whole or in part
from Excess Refinancing Proceeds, if any.
"Excess Refinancing Proceeds" shall mean the net amount of
refinancing proceeds available after full payment of the principal amount of the
Borrower's loan under the Bank Loan Documents and any other amounts required to
be paid in connection therewith.
f) Optional Prepayment. The GDB Loan may be prepaid in whole or
in part, at any time, plus accrued interest to the date of prepayment, but only
after the full payment of the loan to Borrower under the Bank Loan Documents,
except from the GDB Escrow.
g) Use of Proceeds. The proceeds of the Term Loan shall be used
by Borrower to convert all Interim Loans hereunder into the Term Loan.
h) Exit Fee: After the tenth anniversary of the Closing Date,
upon any optional prepayment of the GDB Loan or upon maturity, (excluding
prepayment as a result of Casualty or Condemnation) the Borrower shall pay GDB
as an "Exit Fee" the following percentage of the principal amounts being prepaid
or paid:
YEAR AFTER CLOSING IN PERCENTAGE OF
WHICH PAYMENT MADE AMOUNT PAID
--------------------- -------------
After Year 10 but
Before Year 11, 1.0%
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IV - 5
After Year 11 but
Before Year 12, 1.5%
After Year 12 but
Before Year 13, 2.0%
After Year 13 but
Before Year 14, 2.5%
After Year 14 but
Before Year 15, 3.0%
provided that no Exit Fee shall be payable in respect of an optional prepayment
or at maturity if the Net Earnings from the Premises for the 24 months preceding
such prepayment or maturity is an amount less than 1.5 times Debt Service for
such 24 month period.
4.3 GDB Escrow. Borrower shall execute an Escrow Agreement substantially
in the form annexed hereto as EXHIBIT "F" and deposit with the Escrow Agent the
GDB Escrow Requirement, as defined below, for each Fiscal Year of the Borrower
commencing with the Fiscal Year beginning April 1st, 1993. The GDB Escrow
Requirement ("GDB ESCROW REQUIREMENT") will be determined as follows:
a) In the event Available Cash Flow is Two times 1/15th of the
outstanding principal amount of the GDB Loan or less in a fiscal year, then 50%
of such Available Cash Flow shall be paid into the GDB Escrow.
b) In the event Available Cash Flow is greater than two times
1/15th of the outstanding principal amount of the GDB Loan in a fiscal, then
1/15th of the outstanding principal amount of the GDB Loan shall be paid into
the GDB Escrow and an equal amount shall be retained by the Borrower. In
addition, there shall be paid into the GDB Escrow for such
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IV - 6
Fiscal Year the Cumulative Deferred Escrow Requirement as defined below, if any,
plus 50% of Excess Available Cash Flow as defined below, if any.
c) "Excess Available Cash Flow" shall mean for each Fiscal Year
of the Borrower commencing with the Fiscal Year beginning April 1, 1993, the
Available Cash Flow in each such year in excess of the sum of (i) 1/15th of the
outstanding principal amount of the GDB Loan plus (ii) the Cumulative Deferred
Escrow Requirement paid for such year plus (iii) the partners preferred return
(as defined in the Partnership Agreement) for such year and cumulative deferred
partners preferred returns from prior years beginning April 1, 1993, paid in
such year, (iv) incentive management fees and cumulative deferred incentive
management fees (as defined in the Management Agreement) from prior years
beginning April 1, 1993, paid in such year.
d) If in any Fiscal Year, the amount of the Available Cash Flow
is less than two times 1/15th of the outstanding principal amount of the GDB
Loan, then the difference between (x) 1/15th of the outstanding principal amount
of the GDB Loan, and (y) the amount of the GDB Escrow Requirement for such
Fiscal Year, shall be, in each fiscal year, added to a "Cumulative Deferred
Escrow Requirement" and shall be paid into the GDB Escrow to the extent that
Available Cash Flow in any subsequent Fiscal Year is greater than two times
1/15th of the outstanding principal amount of the GDB Loan.
e) Payments into the GDB Escrow shall be made within 120 days of
the end of each Fiscal Year, or thirty (30) days after the Financial Statements
are delivered to the Bank. Amounts held in the GDB Escrow may be invested as the
Borrower may reasonably direct and
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IV - 7
earnings therefrom shall be for the account of the Borrower, and if the Borrower
is not in default to GDB, paid to the Borrower not more frequently than once a
year. The GDB Escrow Requirement for any year shall not exceed an amount
necessary to make the aggregate amount in the GDB Escrow equal the outstanding
principal amount of the GDB Loan multiplied by a fraction, the numerator of
which is the number of Fiscal Years elapsed since the closing of the GDB Loan
and the denominator of which is 15.
f) At any time after the payment or the maturity of the loan
under the Bank Loan Documents, the Borrower may use amounts in the GDB Escrow to
prepay the principal amount outstanding with respect to the GDB Loan. The amount
held in the GDB Escrow shall be applied to the payment of the GDB Loan at
maturity.
g) "Available Cash Flow" means Net Earnings less: (i) payments
due for Debt Service, (ii) interest only on any loan, including but not limited
to operating deficiency loans and/or working capital loans, made by partners or
their affiliates to the Partnership, and (iii) amounts required for capital
improvements to the Project as reasonably determined by the Partnership.
4.4 Maximum Interest Rate: Anything herein to the contrary
notwithstanding, if the rate of interest required to be paid hereunder exceeds
the rate lawfully chargeable, the rate of interest to be paid shall be
automatically reduced to the maximum rate lawfully chargeable so that no amounts
shall be charged which are in excess thereof, and, in the event it should be
determined that any excess over such highest lawful rate has been charged or
received, the Lender shall promptly refund such excess to the undersigned;
provided, however, that, if lawful,
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IV - 8
any such excess shall be paid by the undersigned to the Lender as additional
interest (accruing at a rate equal to the maximum legal rate minus the rate
provided for hereunder) during any subsequent period when regular interest is
accruing hereunder at less than the maximum legal rate.
4.5 Release Provisions: Upon request of the Borrower, and without any
payments other than to pay GDB any expenses incurred in connection therewith,
the GDB shall release the Lien of the Mortgage on the Condominium Parcels and
related access rights in connection with the Borrower's transfer of title to
such Parcels for the purpose of constructing all or a portion of the Condominium
Units. In connection with such release, Borrower shall furnish GDB with evidence
reasonably satisfactory to GDB of the existence and availability of adequate
financing for the completion of the Condominium Units to be built on the parcel
to be released. The GDB shall subordinate the GDB Mortgage to necessary
easements reasonably approved by the GDB for access roads to and utilities
serving the Condominium Parcels so released. The GDB shall execute, acknowledge
and deliver any and all documents and instruments necessary to effect such
release(s) and rights.
4.6 Subordination and Standstill Agreement: Lender shall enter into the
Subordination and Standstill Agreement and shall comply with the terms and
provisions thereof. Upon any refinancing of the indebtedness evidenced by the
Bank Loan Documents or any successor Letter of Credit Bank, Lender shall execute
and deliver directly to the party providing such refinancing or successor Letter
of Credit a Standstill and Subordination Agreement on terms substantially
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IV - 9
similar but no more onerous to GDB than the GDB Standstill Agreement so as to
evidence the subordination of its rights under the Loan Documents as
contemplated hereby.
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<PAGE>
ARTICLE 5
SECURITY
5.1 The Security. As Security for the Loans and the performance and
observance of all of the Obligations, covenants and agreements of the Borrower
hereunder, the Borrower shall deliver, or cause to be delivered to the Lender,
in form and substance acceptable to the Lender, the following collateral (the
"SECURITY"):
5.1.1 The Pledge of the GDB Mortgage Note secured by the GDB
Mortgage and by the GDB Leasehold Mortgage to secure payment of the Note;
5.1.2 The valid Assignment of all intangible assets connected or
associated with the Project, including, but without limitation, the right in and
to the name "El Conquistador";
5.1.3 The valid Assignment to the extent permitted by law of (i)
all consulting and construction contracts, payment and performance bonds, plans
and specifications, warranties, licenses, permits and approvals of, for, or
related to the Premises, together with such consents by any contractors,
architects, surveyors, appraisers and other entities and persons as are
necessary to perfect such assignment, (ii) all operating licenses, permits
accreditations, approvals and rights granted to the Premises or to the Borrower
in connection or related to the Premises; (iii) the Surveys and the Preliminary
Development Plan, and (iv) all other contracts and contract rights, options,
agreements, deposits, leases, concessions, and any and all other rights or
privileges of Borrower, tangible or intangible, in connection with, arising from
or related to the Premises and/or their operation;
5.1.4 Valid and perfected personal property mortgage(s), subject
only to a prior lien under the Bank Loan Documents, in all personal properties
including all vehicles, furniture,
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V - 2
furnishings, appliances, machinery, equipment, with all replacements,
accessories, parts and tools, now owned or hereafter acquired for or at the
Premises and which are not covered by the GDB Mortgage (the "CHATTEL
MORTGAGE[S]");
5.1.5 The valid and perfected Assignment of all space leases,
concessions, agreements and any other agreement relating to the Premises;
5.1.6 A valid Escrow Agreement;
5.1.7 The Title Policy.
5.1.8 The valid Assignment by the Borrower, as continuing
collateral security of the benefit of all the insurance policies required by the
Lender to be carried by the Borrower pursuant to the terms hereof, or the
appropriate mortgagee endorsements for such policies as may be approved by the
Lender;
5.1.9 The valid Assignment, as continuing collateral security of
Borrower's interest in the Management Agreement;
5.1.10 An assignment as collateral security, if and to the extent
permitted by law, of all rights of Borrower under the Casino License, and any
other license or permit required for the operation of the Project, further
provided that the Borrower shall commit as a binding obligation under the Loan
to make best efforts as is necessary or required to secure the written consent
to the assignment of the Casino License or such other license to the Lender or
its subsequent transfer or issuance to the Lender in the Event of Default by the
Borrower, all pursuant to, if and to the extent permitted by the Laws of Puerto
Rico, as amended, and the Regulations approved pursuant thereto;
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V - 3
5.1.11 Such other Security documents as Borrower may hereafter be
bound to execute and deliver to Lender under the terms of this Agreement.
All of the above Security, except for the Escrow Agreement will
be subordinated under the Subordination and Standstill Agreement to the Bank
Loan Documents.
5.2 Preservation of Security. The Borrower shall take all action
necessary to protect and preserve the Security given hereunder, including
without limitation, (i) the proper filing and/or recording of GDB Mortgage, the
GDB Leasehold Mortgage, the Chattel Mortgage(s), the Assignments executed and/or
to be executed by Borrower as Security for the Loan, and at the Lender's
request, (ii) the extension of the Lien of the GDB Mortgage, the GDB Leasehold
Mortgage and/or the Chattel Mortgage(s) to cover future personal property of
Borrower, including vehicles, equipment and machinery to be placed or used in
connection with or in any way forming part of the Premises and the said GDB
Mortgage, the GDB Leasehold Mortgage, and the Chattel Mortgage(s) shall be
properly filed for record in the corresponding section of the Property Registry
of Puerto Rico and/or the Department of Transportation and Public Works of
Puerto Rico, as applicable.
5.3 Non Recourse Obligations: The obligations of the Borrower under the
Loan Documents shall be non-recourse, payable solely from those assets of
Borrower that secure the GDB Loan, except (i) in the case of fraud with respect
to the application of the Loan Proceeds, (ii) with respect to the responsibility
of Borrower under Article 8.20; (iii) with respect to the obligations of the
partners of Borrower to provide the Deficiency Loans as set forth in
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V - 4
Article 8.22 herein, and (iv) Borrowers obligations guaranteed by its Partners
to deposit the Escrow Requirement with the Escrow Agent as provided for under
Article 4.3 herein.
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ARTICLE 6
CONDITIONS PRECEDENT FOR INITIAL DISBURSEMENT
6.1 The obligation of Lender to make the Initial Disbursement to
Borrower is subject to the condition precedent that Lender shall have received
on or before the date of such Initial Disbursement each of the following in form
and substance satisfactory to Lender:
(a) Title to Premises: Evidence satisfactory that Borrower shall
have acquired a fee simple, good, valid, recordable and insurable title to the
Premises.
(b) Payment of Fee: Borrower shall have paid Lender the
Commitment Fee.
(c) Collateral: Delivery to Lender of the Security Documents.
(d) Equity Contribution: Evidence that Borrower shall have
invested at least $30,000,000 in form and substance satisfactory to Lender (the
aggregate amount so advanced being hereinafter referred to as the "Equity
Contribution") on account of Total Project Costs in the Project.
(e) Financial Information: Current unaudited balance sheet of
Borrower certified by the chief financial officer of Borrower.
(f) Appraisal: An Appraisal of the Premises indicating that the
value thereof is not less than ONE HUNDRED SEVENTY TWO MILLION SEVEN HUNDRED
THOUSAND DOLLARS ($172,700,000.00)
(g) Survey: A Survey of the Premises, certified and acceptable to
Lender and the Title Insurer showing (i) the location of the perimeter of the
Premises by courses and distances; (ii) all easements, rights of way, and
utility lines referred to in the Title Policy for
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VI - 2
the GDB Mortgage or which actually service or cross the Premises; (iii) the
lines of the streets abutting the Premises and the width thereof, and any
established building lines; (iv) encroachments and the extent thereof upon the
Premises; (v) the Improvements to the extent constructed, and the relationship
of the Improvements as reflected by scale to the perimeter of the Premises,
established building lines and street lines.
(h) Environmental Report: A current Environmental Report.
(i) Budget: An up to date Budget for the Project.
(j) Special Report: A special written report by the Bank's
Consultant, satisfactory to Lender in form and context, setting forth that (i)
the Plans for the stages of the Project under construction or to be commenced
have been approved by it, by ARPE and all Government Authorities with
jurisdiction over the Premises and the Project; (ii) the necessary approval of
the Environmental Impact Statement for the Project has been obtained from the
Environmental Quality Control Board, as well as the necessary approval of the
site and master development plan for the Project from the Planning Board; (iii)
the Project as shown by the existing Plans will comply with applicable zoning
ordinances and regulations; (iv) all existing and proposed roads and utilities
necessary for the full utilization of the Project are or will be sufficient; (v)
the adequacy of the Budget for the Construction; (vi) its approval of a soil
report and (vii) such other reasonable matter that Lender may require.
(k) Insurance: Insurance policies, as required under Article 8.15
hereof, (together with evidence of the payment of the premiums therefor)
insuring Project (except for such portions that are not in existence).
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VI - 3
(l) Title Insurance: A paid title insurance policy (the "Title
Policy"), in the full amount of the GDB Mortgage, in form approved by Lender,
issued by the Title Insurer which shall insure the GDB Mortgage and the GDB
Leasehold Mortgage to be a valid lien on the Premises free and clear of all
defects and encumbrances except Permitted Liens and Encumbrances, and to junior
liens or encumbrances previously reviewed and approved by Lender, which shall
contain a reference to the Survey but no survey exceptions except those
theretofore approved by Lender.
(m) Contractor's Insurance: Certificates from the insurance
carrier for the general contractor or contractors (and, if Borrower is not
adequately insured therein, from Borrower's insurance carrier) evidencing
workmen's compensation, disability and liability insurance (including
contractual liability) carried during the course of construction, naming Lender
as an additional insured, with liability insurance limits for death of or injury
to persons, satisfactory to GDB.
(n) Utility Facilities: Appropriate certifications from the
Architects evidencing that the Premises on which the Project is to be
constructed will have adequate water supply, storm and sanitary sewerage
facilities, fire protection, means of ingress and egress to and from the
Premises and public highways, and other required public utilities.
(o) Construction Documents: Executed copies of all Construction
Documents for the Project, including contracts, subcontracts, and purchase
orders for all fixtures and equipment to be installed as required for the
operation of the Project.
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VI - 4
(p) Bonds: Performance bonds and labor and materials payments
bonds as may be required under the Construction Management Agreement or Trade
Contracts, each for penal sums equal to the amount of each such contract and a
Wage Payment Bond for 100% of the amount such contract, each naming Lender as
co-obligee and issued by insurance company(ies) acceptable to lender.
(q) Construction Schedule: A progress schedule or chart, showing
the interval of time over which each item included within the Budget is
projected to be incurred or paid.
(r) Construction Permit: Two photocopies of the construction
permit, and any special permits or licenses required, complete in all respects,
which shall authorize the construction of the Project and all Improvements in
accordance with the Plans and Specifications, issued by Governmental Authorities
with jurisdiction over the Project.
(s) Plans and Specifications: Detailed Plans and Specifications
for the Project, as approved, consistent with preliminary plans, if any,
satisfactory to Lender, including all changes to the date of submission thereof,
together with a certificate of the Architects containing a detailed listing of
said Plans and Specifications; a statement that said Plans and Specifications
fully comply with all applicable Legal Requirements; a statement that said Plans
and Specifications are complete in all respects, containing all detailed
requisite for the Improvements when built in accordance therewith, shall be
ready for occupancy.
(t) Taxes: Evidence of payment of real estate taxes on the
Premises for the last five (5) years and the current fiscal year.
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VI - 5
(u) Federal Taxes: Certificate from the Clerk of the United
States District Court for the District of Puerto Rico, evidencing that there is
no tax liability owing by Borrower, and that no federal tax lien is registered
with the Clerk of the United States District Court for the District of Puerto
Rico under the Internal Revenue Code of 1986, as amended.
(v) Labor Contributions: Certificate from the Secretary of Labor
of the Commonwealth of Puerto Rico evidencing that there is no liability for
contributions of Puerto Rico evidencing that there is no liability for
contributions owing by Borrower under the provisions of the Employment Security
Act of 1956, as amended.
(w) Partnership Agreement: One (1) certified copy of the
partnership agreement of Borrower.
(x) Counsel Opinion: Lender shall receive the favorable written
opinion of counsel to Borrower, dated the date of this Agreement or thereafter,
and in form and substance satisfactory to GDB and its counsel, with respect to
such matters and Lender may reasonably require.
Since the Project will be constructed in phases or stages,
anything to the contrary notwithstanding, the documents required to be submitted
to Lender prior to Initial Disbursement under Paragraphs (m), (o), (p), (r) and
(s) above, shall be those relating to the stage under construction as of the
Initial Disbursement and Borrower shall deliver those related to the next stage
to be constructed, within a reasonable time prior to any request for
disbursement and in no event later than the date on which such documents are to
be delivered to the Bank.
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<PAGE>
ARTICLE 7
Conditions Precedent For All Loans
and Disbursement Requirements and Procedures
7.1 The obligation of Lender to make the Initial Disbursement and all
additional Disbursements hereunder is subject to the further conditions
precedent that:
a) On the date of each Disbursement under the Loan the
representations and warranties contained in this Agreement shall be true and
correct in all material respects on and as of the date of each Disbursement
hereunder with the same effect as though such representations and warranties had
been made on and as of such date; and on each such date, no Event of Default
specified in this Agreement, and no condition, event or act that with the filing
of notice or the lapse of time, or both, would constitute such an Event of
Default, shall have occurred and be continuing, or shall exist.
b) There shall be delivered to Lender, in form and satisfactory
to Lender:
(i) a Request for Disbursement, in the form of Exhibit
"D" hereto, with blanks appropriately filled, executed by a person properly
authorized to execute the same on behalf of Borrower.
(ii) a Banks' Consultant Report with respect to each
Request for Disbursement for Construction Costs, dated the date of each Request
for Disbursement, other than the monthly fee under the Construction Management
Agreement.
(iii) a Notation on the reverse side of the Secured
Promissory Note, dated the date of each Disbursement, executed by a person
properly authorized to execute such Notation on behalf of Borrower.
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VII - 2
(iv) in the case of Requests for Disbursements to pay
costs which are shown as Soft Costs or the monthly fee payable under the
Construction Management Agreement in the Budget, such evidence as Lender may
require to the effect that such costs have been properly incurred and are due
and payable.
(v) evidence satisfactory to Lender that the full amount
of all prior Disbursements has been paid out by the Borrower in accordance with
this Agreement.
c) All Requests for Disbursements hereunder shall be submitted to
Lender not more often than once a month. Lender shall be allowed three (3)
Business Days following the date of each Request for Disbursement and all other
documents and evidence required in the preceding paragraph 7(b) in acceptable
form is delivered to Lender to make the requested Disbursement.
d) Borrower agrees that it will permit the Banks' Consultant to
inspect the periodic progress of the Construction of the Project, the cost
therefor to be borne by Borrower. In addition Lender may, at its option, from
time to time, during Construction of the Project and until its completion,
require, for its own information and protection, evidence from the Borrower of
the current and full payment of bills for all labor rendered and materials
furnished relating to the Construction of the Project, but Lender shall not be
required to ascertain that any bills are paid. The authority herein conferred
upon Lender, and any action taken by Lender in making inspections of the
Project, will be taken by Lender on its behalf for its own protection only, and
Lender shall not be deemed to have assumed any responsibility to Borrower with
respect to any such action herein authorized or taken by Lender or with respect
to the proper Construction of
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VII - 3
the Improvements, performance of any Trade Contract, or prevention of claims for
mechanic's lien.
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<PAGE>
ARTICLE 8
AFFIRMATIVE COVENANTS
So long as Borrower shall be indebted to Lender hereunder or otherwise,
Borrower agrees that it will:
8.1 Application of Loan Proceeds. Apply the proceeds of the Loans
advanced hereunder as set forth in Article Four hereof.
8.2 Books and Records. Maintain proper books of record and account in
accordance with sound accounting practice in which full, true and correct
entries shall be made of its dealings and business affairs, and cause such books
to be audited at the end of each fiscal year by independent certified public
accountants satisfactory to Lender.
8.3 Financial Information.
(a) Furnish to Lender within fifty (50) days after the close of
each of the first three quarters of Borrower's Fiscal Year, unaudited quarterly
financial statements including but not limited to balance sheets, income
statements and statements of changes in financial position, together with a
certificate signed by the Managing Partner of Borrower certifying that no
default has occurred under this Agreement, and that no fact or circumstance
exists which, with the lapse of time or the giving of notice or both, would
result in an Event of Default hereunder; or if in its opinion, such Event of
Default has occurred, or there is in existence such condition, event or act,
such statement shall specify the nature thereof.
(b) Furnish to Lender within one hundred twenty five (125) days
after the end of each Fiscal Year of Borrower financial statements including but
not limited to, balance sheets and statements of income, and statements of
changes in financial position for such Fiscal Year,
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VIII - 2
accompanied by the opinion of independent certified public accountants
satisfactory to Lender. The firm of Ernst & Young is acceptable to Lender. Each
such opinion of independent certified public accountants shall be accompanied by
a written statement from the Chief Financial Officer of Borrower certifying
that, during the Fiscal Year covered by the Financial Statements there has not
occurred or there is not in existence an Event of Default specified in Article
Ten hereof or of any condition, event or act which, with the giving of notice or
the lapse of time or both, would constitute such an Event of Default.
8.4 Construction Development of the Project. (a) Pursue the Construction
of the Improvements with diligence and continuity in order that said
Construction be completed in accordance with the Plans and Specifications of the
Project and (b) keep the Premises free and clear at all times of claims or
attachments for material supplied and for labor or services performed in
connection with the Construction of the Project, except Permitted Liens or
Encumbrances.
8.5 Effectiveness of Permits; Approvals. Keep in full force and effect
every license, permit, consent and approval necessary or appropriate for the
ownership, development and operation of the Premises and the Project, if failure
to do so will result in a Material Adverse Effect.
8.6 Access by Lender. Permit all officers, qualified employees and other
representatives of Lender designated by it to visit and inspect the Premises and
examine their books and discuss their affairs, finances and accounts with the
officers and auditors thereof, all at such reasonable times and as often as
Lender may reasonably request.
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VIII - 3
8.7 Maintain Rights; Franchises. Maintain, preserve and renew all
rights, powers, privileges and franchises possessed by Borrower required or
necessary for the conduct of its business and operation of the Premises and the
Project.
8.8 Filing of Tax Returns. Timely file any and all tax returns and the
like and pay and discharge all lawful taxes, assessments, impositions, and
governmental fees charged upon Borrower and pay and discharge all taxes,
assessments and governmental charges against Borrower and any of its properties,
real or personal. It will likewise pay and discharge all social security taxes,
unemployment insurance, State Insurance Fund and the like imposed upon itself,
its income and profits or its assets and its payrolls. Borrower shall have the
right to contest such taxes in the manner and as provided in Article 8.12
hereof.
8.9 Estoppel Certificates. At any time or times, but in no event more
after than twice in any calendar year, within fifteen (15) days after written
demand by Lender therefor, Borrower shall deliver to Lender a certificate, duly
executed and in form satisfactory to Lender, stating and acknowledging the then
unpaid principal balance of the Loans and the fact that there are no defenses,
offsets or counterclaims hereunder.
8.10 Correctness of Representations; Warranties. All representations and
warranties contained in Article 3 of this Agreement shall, except those which by
the action of third parties may otherwise be than as represented, specifically
those set forth in Articles 3.7, ,3.15, 3.16 and 3.17 as specifically stated
otherwise in the said Articles, remain true and correct in all material respects
during the entire term of the Loan.
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VIII - 4
8.11 Maintenance of Existence and Conduct of Business. Borrower shall
(a) do or cause to be done all things necessary to preserve and keep in full
force and effect its legal existence, rights and franchises; (b) continue to
conduct business substantially as now contemplated and as a going concern; and
(c) at all times maintain, preserve and protect all of its trademarks, service
marks and trade names.
8.12 Payment of Obligations.
(a) Subject to Paragraphs (b) and (c) of this Article 8.12,
Borrower shall (i) pay and discharge or cause to be paid and discharged all its
debts and obligations, including, without limitation, all the Obligations, as
and when due and payable; and (ii) pay and discharge or cause to be paid and
discharged promptly all (A) Charges and (B) lawful claims for labor, materials,
supplies and services or otherwise before any thereof shall become in default.
(b) Borrower may in good faith contest, by proper legal actions
or proceedings, the validity or amount of any debts or obligations, other than
the Obligations or any Charges, Liens or claims provided that Borrower gives
Lender advance notice of its intention to contest the validity or amount of any
such Charge, Lien or claim, and that at the time of commencement of any such
action or proceeding, and during the pendency thereof (i) no Default or Event of
Default shall have occurred; (ii) adequate reserves exist or are established
therefor; (iii) such contest operates to suspend collection of the contested
Charges, Liens or claims and is maintained and prosecuted continuously with
diligence; (iv) none of the Security would be subject to forfeiture or loss of
any Lien in favor of Lender by reason of the institution or prosecution of such
contents; (v) Borrower shall promptly pay or discharge such contested
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VIII - 5
Charges and all additional charges, interest, penalties and expenses, if any,
and shall deliver to Lender evidence acceptable to Lender of such compliance,
payment or discharge, if such contest is terminated or discontinued adversely to
Borrower.
8.13 Agreements. Borrower shall perform, within any required time period
(after giving effect to any applicable grace periods), all of its Obligations
and enforce all of its rights under each agreement to which it is a Party
including, without limitation, leases to which Borrower is a Party, where the
failure to so perform and enforce would have a Material Adverse Effect. Borrower
shall not terminate or modify in any manner any agreement to which it is Party
which termination or modification would reasonably be expected to have a
Material Adverse Effect.
8.14 Litigation. Borrower shall notify Lender in writing, promptly upon
any executive officer of either general Partner of Borrower learning thereof, of
any litigation commenced against Borrower, and of the institution against it of
any suit or administrative proceeding that would have a Material Adverse Effect.
8.15 Insurance.
(a) Prior to the Date of Substantial Completion (as defined in
the Reimbursement Agreement), the Borrower, at its sole cost and expense, shall
keep the existing structures insured for the benefit of Lender against loss and
damage by Fire, Lightning, Collapse, Earthmovement, Flood, Tsunami, Boiler and
Machinery, and such other standard Extended Coverage perils as are customarily
included under standard "All Risk" policies for other property and buildings
similar to the Mortgage Property in nature, use, location, height
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VIII - 6
and type of construction. The amount of such Insurance Policy(ies) shall be not
less than the full Replacement Cost of the then existing structures, with the
Agreed Amount and Replacement Cost Endorsements attached, waiving all
co-insurance provisions and eliminating the Vacancy and Unoccupied Clause. In
addition, prior to the Date of Substantial Completion, the Project shall be
covered under an "All Risk" Builder's Risk/Contract Works Policy for the 100%
Completed Value (replacement cost) of the contract(s) on a Non-Reporting Form,
subject to the same coverages as are required on the presently existing
structures, along with extensions of coverage for "Permission to Complete and
Occupy," Offsite Storage including Inland and Ocean Transit, "Hot and Cold"
Testing, Increased Cost of Construction and Contingent Liability from Building
Laws. On and after the Date of Substantial Completion, the Borrower shall secure
insurance to cover the Project against loss or damage by fire and such risks as
are customarily included in Extended Coverage, and from such other hazards
including, without limitation, Flood, Earthmovement, and Coastal Windstorm, as
may be covered by the "All Risk" insurance covering other property and buildings
similar to the Mortgaged Property in nature, use, location, height and type of
construction, in an amount not less than the greater of (A) full insurable
value, or (B) an amount sufficient to prevent the Borrower from becoming a
co-insurer within the terms of the applicable policies. Said Insurance Policy
shall include endorsements for Demolition, Contingent Liability and Increased
Cost of Construction. The term "full insurable value" as used in this Section
shall mean the cost of actual replacement, without deduction for depreciation,
less the costs of excavations, foundations and footings below the lowest
basement floor or, if there be no basement, below the level of the ground
determined as of the Date of
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VIII - 7
Substantial Completion and as further determined on the date of each renewal or
replacement of such Insurance Policy, as hereinafter set forth. Full insurable
value shall be determined by an appraisal made at least once every three (3)
years, by an appraiser, appraisal company or insurance company selected by the
Borrower and approved by Lender in its sole discretion, and such determination
of full insurable value shall be binding and conclusive upon the parties hereto.
If any Insurance Policy covering Flood or Earthmovement shall contain annual
aggregate limits, such aggregate limits shall be replenished upon the occurrence
of a substantial loss, as determined by Lender in its sole discretion. The
Insurance Policies described above shall provide for deductions of not more than
$10,000 per occurrence for all peril except Flood, Earthmovement, and Coastal
Windstorm, for which deductions of not more than $25,000 per occurrence may be
made.
(b) The Borrower, at its sole cost and expense, shall maintain or
cause to be maintained for the benefit of Lender (i) prior to the Date of
Substantial Completion, Soft Costs/Additional Expense Incurred, Loss of Gross
Earnings and/or Loss of Rental Income on an Actual Loss Sustained Basis for an
amount not less than $24,000,000, with an "Extended Period of Indemnity"
Endorsement attached; (ii) upon and after the Date of Substantial Completion,
coverage for Loss of Gross Earnings and/or Loss of Rental Income, Business
Interruption and Additional Expense Incurred Insurance on an Actual Loss
Sustained Basis (if available) in the amount equal to the greater of (A) an
estimate reasonably satisfactory to Lender of the succeeding year's Gross
Revenues (as defined in the Reimbursement Agreement), or (B) $24,000,000 with
the Extended Period of Indemnity Endorsement attached; (iii) upon and after
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VIII - 8
the installation of any boilers and/or machinery at the Project, Boiler and
Machinery Coverage for Rent Loss (including, without limitation, from both
retail space and nightly room rentals), with an "Extended Period of Indemnity"
and Improvements Loss in such amounts as are usually carried by Persons
operating property and buildings similar to the Mortgaged Property in nature,
use, location, height and type of construction.
(c) The Borrower, at its sole cost and expense, shall maintain or
cause to be maintained at all times (i) General Public Liability Insurance,
including, without limitation, the Broad Form Comprehensive General Liability
Endorsement, with the respective Primary Coverage as follows:
General Aggregate $ 1,000,000 Per Location
Products/Completed Operations
*(2 year Completed Operation
Extension $ 1,000,000
Personal & Advertising Injury $ 1,000,000
Each Occurrence (Bodily Injury
and Property Damage) $ 1,000,000
Fire Damage Legal $ 50,000
Medical Expense $ 10,000
Stop Gap Liability $ 1,000,000
(ii) Umbrella Liability Coverage in an amount of not less than $40,000,000 per
occurrence and in the aggregate prior to the Date of Substantial Completion and,
thereafter, in an amount of not less than $50,000,000 per occurrence and in the
aggregate or such greater amount as Lender shall reasonably require; (iii)
Worker's Compensation and Non-Occupational Disability Insurance
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VIII - 9
as respect a Monopolistic State as required by applicable laws and regulations
of the Commonwealth of Puerto Rico; (iv) Marina Operator's Legal Liability,
Protection and Indemnity and Marina General Liability; (v) insurance covering
pilings, piers, wharves and docks, and environmental impairment coverage (if
available) with respect to the marina operation; and (vi) such other types and
amounts of insurance with respect to the Mortgaged Property and the operation
thereof which are commonly maintained in the case of other property and
buildings similar to the Mortgaged Property in nature, use, location, height and
type of construction, as may from time to time be required by Lender, including,
without limitation, Automobile Liability Insurance in amounts reasonably
required by Lender from time to time.
(d) All Insurance Policies shall be issued by an insurer
admitted and licensed to do business in the Commonwealth of Puerto Rico with an
A.M. Best Rating of AX or better and shall be otherwise satisfactory to Lender
in form and content. The Property and Business Interruption Insurance Policies
shall contain the Standard Mortgagee Non-Contribution Clause Endorsement or its
equivalent endorsement satisfactory to Lender, naming Lender as First Mortgagee
and providing Lender (except in the case of General Liability and other
Liability and Worker's Compensation) as the Person to whom all payments made by
such insurance company shall be paid and with whom all claims shall be adjusted,
except as otherwise provided in Article 11.4 hereof. All Liability Insurance
Policies shall name Lender as Additional Insured according to its respective
interest. Without Lender's prior written consent, the Borrower shall not carry
separate or additional insurance coverage concurrent in form or contributing in
the event of loss with that required by this Agreement or the Reimbursement
Agreement. Without
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VIII - 10
Lender's prior written consent, the Borrower shall not name any Person as named
insured or loss payee under any Insurance Policy without Lender's prior written
consent. The Borrower shall pay the premiums for the Insurance Policies as the
same become due and payable. The Borrower shall deliver original binders and
certified copies of the Insurance Policies to Lender as further security for the
Borrower's performance of the terms and conditions contained herein, provided
that Lender shall not be deemed by reason of the custody of such Insurance
Policies to have knowledge of the contents thereof. In the event of a
foreclosure of either or both the GDB Mortgage and the GDB Leasehold Mortgage,
the purchaser of the Mortgaged Property will succeed to all of the rights of the
Borrower, including the rights to all unearned premiums paid, with respect to
the Insurance Policies, to the extent assignable. The Borrower also shall
deliver to Lender, within 10 days of such party's request, a certificate of
insurance issued by the Borrower's insurance agent/broker setting forth the
particulars as to all such Insurance Policies, that all premiums due thereon
have been paid and that the same are in full force and effect. Not later than 30
days prior to the expiration date of each of the Insurance Policies, the
Borrower shall deliver to Lender original binders and certified copies of a
renewal policy or policies marked "premium paid" or accompanied by other
evidence of payment of premium satisfactory to Lender.
(e) Each Insurance Policy to be carried hereunder shall contain
a provision whereby the insurer (i) agrees that such policy shall not be
cancelled or modified, and shall not fail to be renewed, without at least 60
days' prior written notice to Lender, (ii) waives any right to claim any
premiums and commissions against Lender and (iii) provides that Lender
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VIII - 11
is permitted to make payments to effect the confirmation of such Policy upon
notice of cancellation due to nonpayment of premiums. In the event any Insurance
Policy (except for general public and other liability, boiler and machinery
explosion liability and worker's compensation insurance) shall contain breach of
warranty provisions, such Policy shall provide that with respect to the
interests of Lender, such Insurance Policy shall not be invalidated by and shall
insure Lender regardless of (A) any act, failure to act or negligence of or
violation of warranties, declarations or conditions contained in such Policy by
any named insured, (B) the occupancy or use of the Mortgage Property for
purposes more hazardous than permitted by the terms thereof, (C) any foreclosure
or other action or proceeding taken by the Lender pursuant to any provision of
this Agreement, or either or both of the GDB Mortgage and GDB Leasehold
Mortgage, or (D) any change in title to or ownership of all or any of the
Mortgaged Property.
(f) Any insurance maintained pursuant to this Article 8.15 may
be evidenced by blanket Insurance Policies covering the Mortgaged Property and
other properties or assets of the Borrower or any Affiliated Person (as the term
is defined in the Collateral Pledge Agreement of even date between Borrower,
AFICA and the Bank), provided that any such policy shall specify the portion, if
less than all, of the total coverage of such Policy that is allocated to the
Mortgaged Property and shall in other respects comply with the requirements of
this Article 8.15. Lender, in its sole discretion, shall determine whether such
blanket Policies provide sufficient limits of insurance.
(g) Notwithstanding anything to the contrary contained herein,
if at any time Lender is not in receipt of written evidence that all insurance
required hereunder is
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VIII - 12
maintained in full force and effect, Lender shall have the right, upon notice to
the Borrower, to take such action as Lender may deem necessary to protect its
interests in the Mortgaged Property, including, without limitation, the
obtaining of such insurance coverage as Lender deems appropriate, and all
expenses incurred by Lender in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by the Borrower promptly after
demand and be secured by this Agreement and by the GDB Mortgage and the GDB
Leasehold Mortgage.
8.16 Compliance with Law. Borrower shall comply with all United States and
Puerto Rican federal, state and local laws and regulations applicable to it,
including, without limitation, those regarding environmental matters where the
failure to comply would have a Material Adverse Effect.
8.17 Supplemental Disclosure. From time to time as may be necessary (in the
event that such information is not otherwise delivered by Borrower to Lender
pursuant to this Agreement), so long as there are Obligations outstanding
hereunder, Borrower will, as promptly as is reasonable under the circumstances
after the Borrower has knowledge with respect thereto, supplement or amend and
deliver to Lender (i) any and all material contracts, permits, licenses,
declarations and covenants, operating agreements, or any other agreements,
documents or instruments pertaining to the Premises; and (ii) any matter with
respect to any Exhibit or representation hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in such Exhibit or as an exception to such
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VIII - 13
representation or which is necessary to correct any information in such Exhibit
or representation which has been rendered inaccurate thereby.
8.18 Recording; Transfer Taxes and Fees. Borrower shall pay all transfer,
excise, Mortgage recording or similar taxes and fees in connection with the
issuance, sale, delivery or transfer by Borrower to Lender of the GDB Mortgage
Note and the execution and delivery of the Security Documents and any other Loan
Documents and any other agreements and instruments contemplated hereby, and
shall save Lender harmless against any and all liabilities with respect to such
taxes. The obligations of Borrower under this Article 8.18 shall survive the
payment, prepayment or redemption of the GDB Loan and the termination of this
Agreement.
8.19 Preservation of the Properties. Borrower shall upon reaching Substantial
Completion of the Project, keep and preserve the Premises in good repair,
working order and condition as of the date thereof, normal wear and tear
excepted, and from time to time will cause to be made all necessary and proper
repair, replacements and renewals. Borrower shall not commit, nor permit any
other Person or event (whether by act of God or otherwise) to commit, waste or
damage upon the Premises, other than such damages which are covered under the
Casualty provisions of this Agreement, without promptly restoring the same to
the same or better condition than prior to such occurrence. In the event of any
material loss or damage to any portion of the Premises due to fire, floods,
wind, or other nature causes, whether alone or in combination, including
hurricanes and the effects thereof, Lender with the Bank's approval shall have
the right, at its sole discretion to call for a reappraisal of the Premises, the
cost
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VIII - 14
thereof to be borne by Borrower. Borrower will keep the Mortgaged Property free
from squatters.
8.20 Environmental Matters.
(a) Borrower shall (i) in connection with the ownership and
operation of the Premises, comply strictly and in all respects with all
applicable Environmental Laws, (ii) promptly forward to Lender a copy of any
order, notice, permit, application, or any other communication or report in
connection with any release of any hazardous substance or any other matter
relating to Environmental Laws as they may affect the Premises and the Project.
(b) Borrower shall, pursuant to the terms set forth herein,
indemnify GDB and hold GDB harmless from and against any loss, liability, damage
or expense, including attorneys' fees, suffered or incurred by GDB, whether as
mortgagee pursuant to any Mortgage, as Mortgagee in possession, or a successor
in interest to Borrower as owner or lessee of Premises by virtue of foreclosure
or acceptance of deed in lieu of foreclosure (i) under or on account of the
Environmental Laws, including the assertion of any Lien thereunder; (ii) with
respect to any release of any hazardous substance affecting the Premises,
whether or not the same originates or emanates from such Premises or any
contiguous real estate, including any loss of value of such Premises as a result
of a release of any hazardous substance; and (iii) with respect to any other
environmental matter affecting such Premises within the jurisdiction of any
official administering the Environmental Laws.
(c) The obligations of Borrower under this Article 8.20 shall
not extend or apply to (i) any condition or state of facts existing in respect
of the Premises or the
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VIII - 15
Improvements on the date the Borrower acquired title to the Fajardo Property
from the Puerto Rico Lands Administration or (ii) any condition caused by or
resulting from actions taken by or on behalf of the GDB or any failure by the
GDB to take any action it might have a duty to take in the event it takes
possession or control of the Premises. The Borrower shall make available to GDB
to the fullest extent permitted by law any and all rights available to the
Borrower against the Puerto Rico Lands Administration with respect to any
liability under any Environmental Law, any release of any hazardous substance
affecting the Premises or with respect to any other environmental matter
affecting the Premises and the Borrower hereby assigns such rights to the GDB
and authorizes the GDB to enforce such rights directly against the Puerto Rico
Lands Administration to the same extent as if the Borrower enforced such rights.
The procedure for Borrower to provide the foregoing indemnifications shall be
covered by the procedures set forth in Article 11.3 hereof.
8.21 Notice. Borrower shall promptly give written notice to Lender in the
manner provided in Article 11.14 hereof of (i) the occurrence of any Default or
Event of Default; (ii) any legal, judicial or regulatory proceedings affecting
Borrower or any of its properties or assets, in which the amount involved is
material and is not covered (subject to normal deductibles) by insurance and
that will have a Material Adverse Effect; (iii) any dispute between Borrower and
any governmental regulatory body or other Person that will have a Material
Adverse Effect; (iv) substantial damage, loss, or impairment in value, to any
part of the Security and/or the Premises, specifying the nature and extent of
damage, loss, or impairment in value, and whether such damage, loss, or
impairment in value is being repaired
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VIII - 16
in due course or the total loss or destruction of any material part of the
Security and/or the Premises; (v) any other action, event or condition of any
nature of which it has knowledge which would result in any Material Adverse
Effect; and (vi) the voluntary or involuntary bankruptcy of, or any assignment
for the benefit of creditors or the seeking of any relief under any Debtor
Relief Law by Borrower.
8.22 Deficiency Loans. Any funds advanced to the Borrower as Deficiency Loans
(as defined in the Borrower's Partnership Agreement), whether or not at the
direction of the Bank or Lender, shall be applied only to the operating costs or
other fees and expenses related to the operation of the Project; provided,
however that (a) up to $6,000,000 of such funds available for Deficiency Loans
under Borrower's Partnership Agreement may be used by the Borrower to pay any
portion of the Total Project Costs for which the Borrower has insufficient funds
and (b) the foregoing restriction shall be of no effect from and after the date
in which the Coverage Requirement, as such term is defined under the Bank Loan
Documents, is met (the "Bank Coverage Date"). After the date of Substantial
Completion and until the Bank Coverage Date, in the event (i) Borrower has
failed to pay Interest to Lender as provided in Article IV hereof, and such
failure shall continue uncured beyond the first (1st) day of the following
calendar month in which such payment was due, and (ii) Borrower has paid all
interest and other fees due under the Bank Loan Documents on a current basis
through and including the 15th day of such month, then Lender shall have the
right to cause the Borrower, acting through WKA, to require the General Partners
to make Deficiency Loans in amounts of up to $20,000,000 in the aggregate (less
the principal amount of any Deficiency Loans previously
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<PAGE>
VIII - 17
made by the General Partners) and to apply such funds on account of Interest
then due to the Lender. The Lender shall have no right to cause Deficiency Loans
to be made to pay principal under the GDB Loan or under the Bank Loan Documents.
In the event that WKA does not make the Deficiency Loan required by the Lender
as aforesaid which WKA may be required to make pursuant to Section 6.02 of the
Borrower's Partnership Agreement, the Lender may require KGC to make the
Deficiency Loan on behalf of WKA through the making of a KG Loan (as defined in
the Borrower's Partnership Agreement). In the event of a default by KGC in its
obligations to make a KG Loan to fund any Deficiency Loan required by Lender as
aforesaid, the Lender shall have the right to cause the Borrower or WKA,
respectively, to exercise such rights and remedies with respect thereto as the
Lender shall determine. The Lender's right to require Deficiency Loans to be
made shall cease (x) during the pendency of any bankruptcy proceeding with
respect to the Borrower or (y) in the event of the commencement of any
foreclosure proceeding or the exercise of any rights in lieu of foreclosure with
respect to the Borrower's interest in the Project. The Lender acknowledges that
an aggregate of only $20 million in principal amount of Deficiency Loans is
available to the Borrower and, that the Borrower has the right to call upon such
Deficiency Loans and apply the proceeds thereof to Total Project Costs, interest
and fees in respect of the Loan Documents and Bank Loan Documents and operating
deficiencies and in certain circumstances the Bank has the right to call upon
such Deficiency Loans and apply the proceeds thereof to operating costs or other
fees or expenses related to the operation of the Project. Accordingly, the
availability of Deficiency
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<PAGE>
VIII - 18
Loans to pay Interest to the Lender as provided herein is subject to the prior
requests for or application of the proceeds of such Deficiency Loans to pay such
other permitted items.
8.23 Certification of Substantial Completion. The Borrower upon reaching
Substantial Completion of the Project shall submit to Lender a certification
from the Architects to that effect, and a certification of the Total Project
Costs incurred up to the date of Substantial Completion, signed by the chief
financial officer of the Borrower, together with the Financial Statements for
the Fiscal Year during which Substantial Completion is reached.
8.24 Permits and Licenses. Borrower possess or will possess when required, all
rights, accreditations, franchises patents, permits licenses and privileges
necessary for the conduct of its business as now conducted, and as necessary for
the ownership and management of the Premises, without known conflict with the
rights of any person.
8.25 Of the Project.
(a) On or prior to the date of this Agreement, the Borrower will
have obtained the approval of ARPE and/or of the Planning Board of Puerto Rico
to the site plan and prior to commencement of any stage of the Project, approval
to the final Plans and Specifications of such stage of the Project to be
commenced shortly thereafter, the approval of all other Governmental Authorities
having jurisdiction in the premises, and all permits or licenses necessary to
allow the Borrower to proceed with the Construction of the Project.
(b) The Project will be completed substantially in accordance
with the Plans and Specifications, and in accordance with the use permits and
all approvals by
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<PAGE>
VIII - 19
Governmental Authorities having jurisdiction with respect to the use of the
whole or any part of the Project will have been obtained on or before Completion
Date.
(c) The Construction shall be done in a workmanlike manner and
Borrower shall provide or cause to be provided all labor, material, and
equipment of every kind necessary for the completion of the Construction of the
Project, when once begun, and shall proceed continuously to complete the same
with all reasonable speed and dispatch. No substantial changes will be made in
the Plans and Specifications of any such construction or installations except
with prior written notice to and reasonable consent from Lender, and such
approvals as shall be necessary under the requirements of ARPE and/or of the
Planning Board of Puerto Rico. The Borrower shall make full payments for all
costs of all such constructions and installations, promptly as due, except as
diligently contested in good faith, and shall assure that no lien arises on
account of failure to pay wages of Construction workers.
(d) All materials contracted or purchased for delivery to the
Project, or for use in its installations or constructions, and all labor
contracted or hired for or in connection with said installations or
constructions shall be used and employed solely on said Project, and only in
accordance with the Plans and Specifications.
(e) No part of the Project shall be permitted to become occupied
until the applicable use permit required by law has been granted.
(f) The Borrower will manage or cause the Project to be managed
in conformity with the requirement of Governmental Authorities, and in
compliance with any and all rules and regulations affecting the Project.
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<PAGE>
VIII - 20
8.26 Deposit of Escrow Requirement. Deposit with the Escrow
Agent The Escrow Requirement when such deposit becomes due, which obligation is
hereby guaranteed by the respective general partners of the Borrower by their
execution of this Agreement.
8.27 Interest Rate Swap. The Borrower will, upon notice from GDB, promptly
enter into an interest rate swap arrangement between counter parties
satisfactory to the GDB and the Bank, for a period commencing on the date such
arrangement is entered into and ending on the seventh anniversary of the date
hereof, if, within a period of five years from the date hereof, quotes by the
Bank for a 90 day Libor based Fixed for Floating Rate Swap for a term of seven
years equal or exceed 9.5% per annum at a time when three month Libor equals or
exceeds 8.5% per annum.
8.28 Expropriation. Borrower agrees to take all actions, execute and deliver
all documents and pay all costs and expenses (including, without limitation,
payment of the purchase prices therefor) in connection with the acquisition,
including, if necessary, (i) the expropriation by the Lands Administration of
Puerto Rico and the subsequent sale to Borrower of those parcels of land
adjacent to the Project and presently owned by Justino Diaz Santini, and
identified on the Boundary Survey Map dated February 19, 1990, prepared by David
Lebron Lopez, P.L.S. as Tract and G-1c/1d, (ii) the spreading of the lien of the
GDB Mortgage to cover such property, or the granting of a separate mortgage to
cover such property and (iii) the endorsement of the Title Policy to include the
lien of the GDB Mortgage on such new mortgage with respect to such property.
<PAGE>
<PAGE>
ARTICLE 9
NEGATIVE COVENANTS
9.1 Consent of Lender. The Borrower covenants that it will not,
without the prior written consent of Lender, until full payment of the GDB Loan
and the performance of all other Obligations of the Borrower hereunder:
9.1.1 Create, assume, or suffer to exist any mortgage, pledge,
encumbrance or other lien on the Premises, except for the Permitted Liens and
Encumbrances;
9.1.2 Except as contemplated or permitted in this Agreement,
become a party to any transaction whereby all or any substantial part of the
properties, assets or undertakings of the Borrower (whether legally or
beneficially owned) would become the property of any other Person, whether by
ways or reorganization, amalgamation, merger, transfer, sale, lease, sale and
leaseback, or otherwise;
9.1.3 Permit any change in the legal or beneficial ownership of
the Premises, or permit any change in the ownership of the Borrower, except for
a Permitted Transfer;
9.1.4 Make any substantial change to the operation of the
Project as presently contemplated without the prior written approval of Lender;
9.1.5 Other than in relation to the Project, guaranty or
otherwise in any way become or be contingently liable or responsible for
obligations of any other Person, including without limitation, by agreement to
purchase the Indebtedness of another Person, by agreement for the furnishing of
funds to any other Person through the purchase of goods,
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<PAGE>
IX- 2
supplies or services (or by way of stock purchase, capital contribution, loan or
advance) for the purpose of paying or discharging the Indebtedness of any other
Person, or by agreement that net assets of any other Person, consolidated or
otherwise will be maintained in any amount;
9.1.6 Permit any distribution in the form of dividends or
withdrawal of any of the profits, funds or assets of the Borrower during the
term of this Agreement in respect of any Fiscal Year before the Financial
Statements for such Fiscal Year that Borrower has to submit to Lender in the
fashion and manner stated in this Agreement, are actually submitted to Lender
and at any time when such Financial Statements reveal that there does not exist
Distributable Cash, as the term is defined in the Borrowers' Partnership
Agreement;
9.1.7 Enter into or permit the entering into of any agreement or
arrangement for borrowed money, if such borrowing shall create any mortgage,
pledge, lien, hypothecation, charge (fixed or floating), security interest or
other encumbrance whatsoever over the Premises except Permitted Encumbrances;
9.1.8 Omitted.
9.1.9 Permit or be a party to any arrangement regarding the
dissolution of Borrower;
9.1.10 Borrower shall not directly or indirectly, assign,
transfer or attempt to so assign, transfer any of their Rights, duties or
Obligations under this Agreement or any other Loan Document except as required
under the Bank Loan Documents or as specifically permitted under this Agreement;
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<PAGE>
IX- 3
9.1.11 Agree to a substantial Work Change without the prior
written approval of Lender;
9.1.12 Cause any of the material licenses and permits for the
Project to be revoked or modified in any manner or form;
9.1.13 Except as permitted in this Article Nine, make any loans
and advances, (which terms do not include salaries, bonuses, or other customary
compensation as a result of employment) to any of its officers beyond what would
be considered reasonable or prudent;
9.1.14 Except Management Fees, make any loans, or advances to,
or make any investments in any General or Limited Partner of Borrower;
9.1.15 Permit the aggregate compensation (including salaries,
bonuses and other compensation) paid to officers, directors, and employees of
Borrower to exceed an amount which is proper and reasonable in relation to the
work performed and comparable to that paid by other Persons engaged in similar
type of business and producing comparable results from operations;
9.1.16 Engage in any activity not related to the Project or
which could not be reasonably regarded as necessary to the development and
management of the Project, or invest in any Person, or engage in new ventures or
business enterprises;
9.1.17 Engage in any "prohibited transaction" within the meaning
of Section 4975 of the Internal Revenue Code or Section 406 of ERISA with
respect to any "employee benefit plan", as defined in Section 3 of ERISA;
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<PAGE>
IX- 4
9.1.18 Create any direct or indirect Subsidiary or enter into
any partnership, joint venture, or similar arrangements, or make any material
change in its partnership structure other than Permitted Transfer;
9.1.19 Amend or materially modify in any material respect
Borrowers' Venture Agreement, in effect on the Date of Closing of this
Agreement;
9.1.20 Compromise, settle or discharge any action, suit,
proceeding or claim which seeks to restrain, prevent, change or otherwise
affect, or questions the validity or legality of, the transactions contemplated
by this Agreement, the Security Documents or any other Loan Documents, in whole
or in part or which seeks damages in connection with any of such transactions;
which compromise settlement or discharge affects the interest of Lender under
his Agreement;
9.1.21 Enter into any contract or agreement which would
materially and adversely affect Borrower or its business, property, assets,
operations, condition (financial or otherwise) or enter into any transaction
which would materially and adversely affect Borrowers' assets or ability to
perform all of their Obligations under this Agreement, the Security Documents or
any of the other Loan Documents, which could reasonably be expected to have
Material Adverse Effect;
9.1.22 Borrower shall not take or omit to take any action, which
act or omission would constitute (i) a Default or an Event of Default pursuant
to, or noncompliance with any of, the terms of any of the Loan Documents or (ii)
except as provided elsewhere in this Agreement, a material Default or an Event
of Default pursuant to, or non-compliance with any
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<PAGE>
IX- 5
other contract, lease, mortgage, deed of trust or instrument to which it is a
party or by which it or any of its property is bound, or any document creating a
Lien, unless, in either case, such Default, Event of Default or non-compliance
would not have a Material Adverse Effect.
<PAGE>
<PAGE>
ARTICLE 10
EVENTS OF DEFAULT; RIGHTS AND REMEDIES
10.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute a "Default" or an "Event of Default"
hereunder:
(a) Borrower shall fail to make, within ten (10) calendar days of
written notice from Lender (by facsimile or otherwise), any payment of principal
of, or interest on, or within thirty (30) calendar days of written notice of any
other amount owing in respect of, the GDB Loan.
(b) Borrower shall fail or neglect to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents, and
the same shall remain unremedied for a period ending thirty (30) days after
Borrower shall receive written notice of any such failure from Lender (by
facsimile or otherwise) provided that no Default shall exist under this
paragraph (b) so long as Borrower is proceeding diligently to cure such failure
and such delay would not have a Material Adverse Effect.
(c) Any representation or warranty herein or in any Loan Document
or in any written statement pursuant thereto or hereto, report, financial
statement or certificate made or delivered to Lender by Borrower, shall be
untrue or incorrect in any material respect as to Borrower, as of the date when
made or deemed made.
(d) Omitted.
(e) An unreasonable delay in the construction of the Project so
that the same may not, in Lender's sole judgment, be completed on or before the
Completion Date, provided such delay or discontinuance is not caused by an
Unavoidable Delay.
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<PAGE>
X - 2
(f) All or a substantial part of the assets of Borrower shall be
attached, seized, levied upon or subjected to a writ or distress warrant, or
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of Borrower and shall remain unstayed or undismissed
for sixty (60) consecutive days; or any Person shall apply for the appointment
of a receiver, trustee or custodian for any of the assets of Borrower and shall
remained unstayed or undismissed for thirty (30) consecutive days; or Borrower
shall have concealed or removed, any part of its assets with intent to hinder,
delay or defraud its creditors or any of them or made or suffered an
unauthorized transfer of any of its assets or incurred an obligation which may
be fraudulent under any bankruptcy, fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against
Borrower in a court of competent jurisdiction seeking a decree or order in
respect of Borrower, (i) under Title 11 of the United States Code, as now
constituted or hereafter amended or any other applicable federal, Commonwealth,
state or foreign bankruptcy or other similar Law; (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
Borrower, or of any substantial part of its assets, or (iii) ordering the
winding-up or liquidation of the affairs of Borrower, and such case or
proceeding shall remain undismissed or unstayed for sixty (60) consecutive days
or such court shall enter a decree or order granting the relief sought in such
case or proceeding.
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<PAGE>
X - 3
(h) Borrower shall (i) file a petition seeking relief under Title
11 of the United States Code, as now constituted or hereafter amended, or any
other applicable federal, State or foreign bankruptcy or other similar Law, (ii)
consent to the institution of proceedings thereunder or to the filing of any
such petition or to the appointment of or taking possession by custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official) of
Borrower of any substantial part of its assets; (iii) fail generally to pay its
debts as such debts become due, or (iv) take any action in furtherance of any
such action.
(i) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of $500,000.00
shall be rendered against Borrower and the same shall not (i) be fully covered
by insurance in accordance with the insurance provisions of this Agreement; or
(ii) within sixty (60) days after the entry thereof, have been discharged or
execution thereof stayed pending appeal, or shall not have been discharged
within five (5) days after the expiration of any such stay.
(j) The conveyance, transfer, or other disposition of the
Premises or the assignment or purported assignment of the Agreement, the
Security Documents or any of its rights thereunder shall have been made by
Borrower, except as required under the Bank Loan Documents or pursuant to any
Permitted Transfer.
(k) Any material provision of any Security Document after
delivery thereof shall for any reason cease to be valid or enforceable in
accordance with its terms, or any material security interest created under any
Security Document shall cease to be a valid and
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<PAGE>
X - 4
perfected second priority security interest or Lien (except as otherwise
permitted herein or therein) in any of the Security purported to be covered
thereby.
(l) Omitted.
(m) Any Reportable Event which Lender determines in good faith
might constitute grounds for the termination of any Employees' Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Employees' Plan shall have occurred and be continuing sixty (60)
days after written notice to such effect shall have been given to Borrower by
Lender, or any Employees' Plan shall be involuntarily terminated, or a trustee
shall be appointed by an appropriate United States District Court to administer
any Employees' Plan, or proceedings to terminate any Employees' Plan or to
appoint a trustee to administer any Employees' Plan are commenced.
(n) Borrower shall be enjoined, restrained, or in any way
prevented by court order, or if any proceeding is filed or commenced seeking to
enjoin, restrain, or in any way prevent Borrower from conducting all or a
substantial part of its business affairs and/or proceeding with the Premises and
the Project and such action is not stayed, nullified or reversed within thirty
(30) days thereafter.
10.2 REMEDIES. Upon and during the continuation of any Event of Default
hereunder, the Lender shall have the absolute right, at its option and election,
to:
(a) Cancel this Agreement by written notice to Borrower;
(b) Institute appropriate proceedings to specifically enforce
performance hereof;
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<PAGE>
X - 5
(c) Withhold further disbursements hereunder;
(d) Apply for the appointment of a receiver, as a matter of
strict right without regard to the solvency of Borrower, for the purpose of
preserving the Premises, preventing waste, and to protect all rights accruing to
Lender by virtue of this Agreement. All expenses incurred in connection with the
appointment of said receiver, or in protecting and preserving the Premises,
shall be chargeable against Borrower and shall be enforced as a lien against the
Premises;
(e) Accelerate maturity of the Notes and demand payment of the
principal sums due thereunder, with interest and costs, and in default of said
payment or any part thereof, to foreclose and enforce collection of such payment
by foreclosure and/or other appropriate action in any Tribunal.
The said remedies and rights of Lender shall be cumulative and
not exclusive. Lender shall be privileged, and shall have the absolute right, to
resort to any or all of said remedies, none to limit or exclude any other. In
any Event of Default, Lender shall have the absolute right to refuse to disburse
the balance of the Loan Commitment, and no Person shall have any interest in the
undisbursed balance of the Loans and shall not have any right to require or
compel payment thereof toward discharge or satisfaction of any claim or lien
which they or any of them have or may have for work performance on, or materials
supplied to, the Improvements.
<PAGE>
<PAGE>
X - 6
10.3 WAIVER OF DEFAULTS. The waiver by Lender of any Event of Default
hereof shall not be deemed, nor shall the same constitute, a waiver of any
subsequent Event of Default.
10.4 WAIVERS BY BORROWER. Except as otherwise provided for in this
Agreement and applicable Law, Borrower waives to the fullest extent permitted by
law (i) presentment, demand and protest and notice of presentment, dishonor,
notice of intent to accelerate, notice of acceleration, protest, default,
nonpayment, maturity, release, comprise, settlement, extension or renewal of any
or all commercial paper, accounts, contract rights, documents, instruments,
chattel paper and guaranties at any time held by Lender on which Borrower may in
any way be liable and hereby ratifies and confirms whatever Lender may do in
this regard, (ii) all rights to notice and a hearing prior to Lender's taking
possession or control of, or to Lender's replevy, attachment or levy upon, the
Security or any bond or other collateral which might be required by any court
prior to allowing Lender to exercise any of its remedies, and (iii) the benefit
of all valuation, appraisal and exemption Laws.
10.5 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default and Lender's termination of this Agreement or Lender's
declaring all obligations to be forthwith due and payable pursuant to the
provisions of Section 10.2 hereof, Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by Law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other Indebtedness at any time owing by Lender to or for
the credit or the account of Borrower against any and all of the obligations of
Borrower now or hereafter existing under this Agreement, irrespective of whether
or not Lender shall have made any demand under this
<PAGE>
<PAGE>
X - 7
Agreement and although such Obligations may be unmatured. Lender agrees promptly
to notify Borrower after any such set-off and application may be Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off application.
10.6 CONTROL. None of the covenants or other provisions contained in
this Agreement shall, or shall be deemed to, given Lender under this Agreement
the right or power to exercise control over the affairs and/or management of
Borrower, the power of GDB under this Agreement being limited to the right to
exercise the remedies provided in this Article 10.
<PAGE>
<PAGE>
ARTICLE 11
MISCELLANEOUS
11.1 No Agency Relationship. The Borrower understands and agrees that
Lender is not the agent, representative, or partner of, or joint-venturer with
the Borrower, and this Agreement shall not be construed to make Lender liable to
materialmen, contractors, craftsmen, laborers, or others for goods or services
furnished by them in or into the Project, or for debts or claims accruing to the
said parties against the Borrower, and it is distinctly understood and agreed
that there is no contractual relation, either express or implied, between Lender
and any materialmen, subcontractors, craftsmen, laborers or other person or
persons supplying any work or materials in and to the Project, or of any part
thereof. This Agreement shall not give rise to the application of the doctrine
of third party beneficiary.
11.2 Liability. It is understood between the parties hereto that
Borrower has selected or will select all architects, engineers, contractors,
subcontractors, materialmen, as well as all others furnishing services or
materials for the Project and Lender has, and shall have, no responsibility
whatsoever for them or for the quality of their materials or workmanship, it
being understood that Lender's sole function is that of lender and the only
consideration passing from Lender to Borrower is the proceeds of the Loans in
accordance with and subject to the terms of this Agreement. It is also agreed
that Borrower shall have no right to rely on any procedures required by Lender
herein, such procedures being for the protection of Lender as Lender and no one
else. Borrower hereby agrees to hold and save Lender harmless and indemnify it
against and from claims, of any kind, of any persons, including but without
limiting the generality of the foregoing, employees of Borrower, any contractor
constructing the Improvements and the
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XI - 2
employees of any such contractor, any tenant of Borrower, any subtenant or
concessionaire of any such tenant, and the employees and business invitees of
any such tenant, subtenant or concessionaire, arising from or out of the
construction, use, occupancy, or possession of the Improvements by or on behalf
of Borrower.
11.3 Indemnity of Lender. Borrower hereby indemnifies the Lender, and
its respective directors, officers, employees, Affiliates and agents
(collectively, "Indemnified Persons") against, and agrees to hold each such
Indemnified Person harmless from, any and all losses, claims, damages and
liabilities, and related expenses, including reasonable counsel fees and
expenses, incurred by such Indemnified Person arising out of any claim,
litigation, investigation or proceeding (whether or not such Indemnified Person
is a party thereto) relating to any transaction, services or matters that are
the subject of the Loan Documents; provided, however, that such indemnity shall
not apply to any such losses, claims, damages, or liabilities or related
expenses determined by a court of competent jurisdiction to have arisen from the
gross negligence or willful misconduct of such Indemnified Person and provided
further that Borrower's obligations with respect to environmental matters is
solely under Article 8.20 hereof and not under this Article 11.3. If any
litigation or proceeding is brought against any Indemnified Person in respect of
which indemnify may be sought against Borrower pursuant to this Article 11.3,
such Indemnified Person shall promptly notify Borrower in writing of the
commencement of such litigation or proceeding, but the omission so to notify
Borrower shall not relieve Borrower from any other obligation or liability which
it may have to any Indemnified Person otherwise than under this Article 11.3 or
Article 8.20. Failure of the Indemnified Person
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XI - 3
to timely notify Borrower of the commencement of such litigation of proceeding
shall not relieve Borrower of its obligation under Article 11.3 or Article 8.20,
except where and to the extent such failure irrevocably prejudices any action to
hold such Indemnified Person harmless therefrom. In case any such litigation or
proceeding shall be bought against any Indemnified Person and such Indemnified
Person shall notify Borrower of the commencement of such litigation or
proceeding, Borrower shall be entitled to participate in such litigation or
proceeding and, after written notice from Borrower to such Indemnified Person,
to assume the defense of such litigation or proceeding with counsel of its
choice at its expense, provided that such counsel is satisfactory to the
Indemnified Person in the exercise of its reasonable judgment. Notwithstanding
the election of Borrower to assume the defense of such litigation or proceeding,
such Indemnified Person shall have the right to employ separate counsel and to
participate in the defense of such litigation or proceeding if (i) the use of
counsel chosen by Borrower to represent such Indemnified Person would present
such counsel with a material conflict of interest; (ii) the defendants in, or
targets of, any such litigation or proceeding include both and Indemnified
Person and Borrower, and such Indemnified Person shall have reasonable concluded
that there may be legal defenses available to it which are different from or
additional to those available to Borrower in which case Borrower shall not have
the right to direct the defense of such action on behalf of the Indemnified
Person); (iii) Borrower shall not have employed counsel satisfactory to such
Indemnified Person in the exercise of the Indemnified Person within a reasonable
time after notice of the institution of such litigation or proceeding; or (iv)
Borrower shall authorize in writing such Indemnified Person to employ separate
counsel at the expense of Borrower,
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XI - 4
provided that Borrower shall not be liable for the fees, costs and expenses of
more than one separate counsel at the same time for all such Indemnified Persons
in connection with the same action and any separate but substantially similar or
related action in the same jurisdiction. Borrower shall not consent to the entry
of any judgment or enter into any settlement in any such litigation or
proceeding unless such judgment or settlement includes as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Person of a
release from all liability in respect to such claim or litigation.
The agreements of Borrower in the Article 11.3 shall be in addition to
any liability that Borrower may otherwise have and shall be continuing and
survive the repayment of the GDB Loan. All amounts due under this Article 11.3
shall be payable as incurred upon written demand therefor, and shall be
guaranteed by the Security.
11.4 Damage or Destruction.
(a) In case of a Casualty, the Borrower will immediately give
notice thereof to Lender generally describing the nature and extent of such
Casualty and setting forth the Borrower's best estimate of the cost of
Restoration and the Borrower shall, at its sole cost and expense, promptly
commence and diligently complete or cause to be commenced and diligently
completed, the Restoration in a good and workmanlike manner and in compliance
with all Legal Requirements.
(b) Lender shall be entitled to receive all insurance proceeds
payable on account of a Casualty. The Borrower hereby irrevocably assigns,
transfer and sets over to Lender all rights of the Borrower to any such
proceeds, award or payment and irrevocably
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XI - 5
authorizes and empowers Lender, in the name of the Borrower or otherwise, to
file for and prosecute in its own name what would otherwise be the Borrower's
claim for any such proceeds. Notwithstanding the foregoing, so long as no
Default or Termination Payments (as the term is defined in the Collateral Pledge
Agreements of even date between Borrower, AFICA and the Bank) Event of Default
shall have occurred and shall then be continuing and provided the Borrower
promptly files all claims and diligently prosecutes same, the Borrower shall
have the right to file, adjust, settle and prosecute any claim for such
proceeds; provided that the Borrower shall not agree to any adjustment or
settlement of any such claim payable with respect to a Major Casualty without
Lender's prior written consent. The Borrower shall pay promptly after demand all
costs and expenses (including, without limitation, attorneys' fees and expenses)
incurred by Lender in connection with a Casualty and the seeking and obtaining
of any insurance proceeds, award or payment with respect thereto.
(c) In the event of a Major Casualty, the Net Proceeds shall be
held, at Lender's option, by Lender as additional collateral for the Note and
shall be applied or dealt with by Lender as follows:
(i) if the Release Conditions (as hereinafter defined)
are satisfied, all Net Proceeds shall be made available to the Borrower to be
applied towards the cost of the Restoration in accordance with paragraph (e) of
this Article 11.4; and
(ii) if the Release Conditions are not satisfied, all Net
Proceeds shall be applied in accordance with Article 11.6 hereof.
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XI - 6
(d) In case of a Major Casualty, all Net Proceeds shall be
applied as provided in clause (i) of paragraph (c) of this Article 11.4 if all
of the following conditions are satisfied or otherwise waived by the Lender
(collectively, the "Release Conditions"):
(i) no Default or Termination Payments Event of Default
shall have occurred and be continuing;
(ii) the Borrower shall have delivered to Lender within
thirty (30) days after the occurrence of the Major Casualty, a notice of the
Borrower's desire to undertake the Restoration of the Project;
(iii) the Borrower shall have demonstrated to the
satisfaction of Lender that the Restoration of the Project can be completed at
least six months prior to the then current due date of the Term Loan;
(iv) the Borrower shall have demonstrated to the
satisfaction of Lender that sufficient funds are available to the Borrower
through revenues and/or business interruption insurance maintained pursuant to
Article 8.15 hereof, and/or a cash deposit, letter or credit or similar
cash-equivalent security (which in the case of a letter of credit or similar
cash-equivalent security shall be satisfactory to Lender as to form, content,
and issuer) and which shall be for the benefit of Lender, to pay all amounts
estimated to be paid with respect to the GDB Loan, and all other estimated
operating expenses with respect to the Project during the period estimated by
the Borrower and approved by Lender as necessary for the completion of the
Restoration;
(v) in the event that the estimated cost of Restoration
is greater than 25% of the full replacement cost of the Project (as specified in
the Borrower's Casualty
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XI - 7
Insurance Policy), Borrower shall have provided Lender with a guaranty of
completion of the Restoration satisfactory to Lender as to form, content and
guarantor which, among other things, ensures that sufficient funds are and will
be available to complete the Restoration; and
(vi) to the extent, in Lender's judgment, that the Net
Proceeds are insufficient to pay the costs of the Restoration, the Borrower
shall have provided Lender with a cash deposit, letter of credit, or similar
cash-equivalent security in the amount of such deficiency (which in the case of
a letter of credit or similar cash-equivalent security shall be satisfactory to
Lender as to form, content and issuer).
(e) Provided that no Default or Termination Payments Event of
Default shall have occurred and be continuing, then, upon the occurrence of a
partial destruction of the Project that does not constitute a Major Casualty or
upon the occurrence of a Major Casualty in connection with which the Release
Conditions have been met, the Net Proceeds shall be paid over to the Borrower
for the Restoration of the Project. The Net Proceeds shall be disbursed
substantially in accordance with the requirements of Article 7 of this Agreement
such that the Net Proceeds shall be advanced in the same manner and subject to
the same conditions as the disbursements of the proceeds of the GDB Loan.
Notwithstanding the foregoing, after the Date of Substantial Completion, the Net
Proceeds from a Casualty that does not constitute a Major Casualty shall be paid
over to the Borrower for the Restoration of the Project without any requirement
that the Borrower comply with the provisions of Article 7 of this Agreement.
(f) All costs and expenses incurred by Lender in connection with
making the Net Proceeds or Net Restoration Awards available for the Restoration
(including, without
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XI - 8
limitation, attorneys' fees and expenses and fees and expenses of the Bank's
Consultant) shall be paid by the Borrower. Any Net Proceeds or Net Restoration
Awards remaining after the Restoration and the payment in full of all costs
incurred in connection with the Restoration shall be applied to the repayment of
any outstanding obligations of the Borrower under the GB Loan.
11.5 Taking of the Mortgaged Property.
(a) In case of a Taking or the commencement of any proceeds or
negotiations that might result in a Taking, the Borrower immediately will give
notice thereof to Lender generally describing the nature and extent of such
Taking or the nature of such proceedings or negotiations and the nature and
extent of the Taking which might result therefrom. Lender shall be entitled
hereunder to all awards or compensation payable on account of a Taking. The
Borrower hereby irrevocably assigns, transfers and sets over to Lender all
rights of the Borrower to any such awards or compensation and irrevocably
authorizes and empowers Lender in the name of the Borrower or otherwise, to
collect and receive any such award or compensation and to file and prosecute any
and all claims for any such awards or compensation. Notwithstanding the
foregoing, so long as no Default or Termination Payments Event of Default shall
have occurred and shall then be continuing and provided the Borrower promptly
files and diligently prosecutes such claim or claims, the Borrower shall have
the right to prosecute and file any such claim or claims and the Borrower shall
cause any such award or compensation to be collected and promptly paid over to
Lender; provided, that, the Borrower shall not agree to or accept any ward or
compensation without Lender's prior written consent. Lender may participate in
such proceeds or negotiations, and the Borrower will deliver or cause to be
delivered to Lender all
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XI - 9
instruments requested by Lender to permit such participation, provided that
Lender shall be under no obligation to question the amount of the award or
compensation. Although it is hereby expressly agreed that the same shall not be
necessary, in any event, the Borrower shall, upon demand of Lender, make,
execute and deliver any and all assignments and other instruments sufficient for
the purpose of assigning any such award or compensation to Lender, free and
clear of any encumbrances of any kind or nature whatsoever other than any junior
encumbrances arising as a result of the KGC Mortgage (as such term is defined in
the Reimbursement Agreement). The Borrower will pay promptly after demand all
costs and expenses (including, without limitation, attorneys' fees and expenses
and fees and expenses of the Bank's Consultant) incurred by Lender in connection
with any Taking and seeking and obtaining any award or payment on account
thereof.
(b) In case of a Taking such that, in Lender's judgment, the
Project can be restored substantially to its value and usefulness as it existed
prior to such Taking, then, the Borrower shall, at its sole cost and expense,
promptly commence and diligently complete the Restoration in a good and
workmanlike manner, and in compliance with all Legal Requirements.
(c) All Net Restoration Awards shall be held, at Lender's option,
by Lender as additional collateral for the Note and shall be applied or dealt
with by Lender as follows:
(i) Provided that no Default or Termination Payments
Event of Default shall have occurred and be continuing, then, in the case of a
Taking of the nature referred to in paragraph (b) of this Article 11.5 and, to
the extent necessary thereunder, if the Release Conditions are satisfied, all
Net Restoration Awards shall be applied to pay the cost of
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XI - 10
Restoration of the portion of the Project remaining after such Taking, such
application to be effected substantially in the same manner as provided in
paragraph (e) of Article 11.5 hereof with respect to Net Proceeds and the
balance, if any, of such Net Restoration Awards shall be applied in the manner
set forth in Article 11.4(g) hereof.
(ii) In the case of any Taking other than a Taking of the
nature referred to in paragraph (b) of this Article 11.5, all Net Restoration
Awards actually received by the Bank shall be applied in accordance with Article
11.6 hereof.
(d) Notwithstanding anything to the contrary contained herein, in
the case of a Taking such that, in Lender's judgment, the Project is an
economically viable architectural whole notwithstanding such Taking, the
Borrower shall have no obligation to commence or complete Restoration and all
Net Restoration Awards shall be applied in the order specified in Article 11.6
hereof.
11.6 Application of Proceeds Upon Casualty or Substantial Taking . Upon
a Casualty, if the disposition of the Net Proceeds is governed by clause (ii) of
paragraph (c) of Article 11.4 hereof or upon a taking, if the disposition of the
Net Restoration Awards is governed by clause (ii) of paragraph (c) or paragraph
(d) of Article 11.5 hereof, Lender shall have the option, in Lender's sole
discretion to (a) make available the Net Proceeds or the Net Restoration Awards,
the case may be, to the Borrower for Restoration in the manner provided in
paragraph (e) of Article 11.4 hereof or (b) apply such Net Proceeds or Net
Restoration Awards to the payment of any outstanding obligations of the Borrower
under the Note.
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XI - 11
If Lender shall receive and retain any Net Proceeds or Net
Restoration Awards, in trust or otherwise, the indebtedness evidenced by the
Note shall be reduced only by the amount thereof received and retained by Lender
and actually applied by Lender in reduction of the indebtedness evidenced by the
Note.
Notwithstanding anything contained in this Agreement to the
contrary, Lender shall release the proceeds of any business interruption
insurance maintained hereunder to the Borrower provided that the Borrower
satisfies the conditions set forth in Article 11.4(d)(i), (ii) and (iv) herein
and provided, further, that Lender shall retain that portion of such insurance
proceeds that Lender deems necessary to pay all amounts estimated to become
payable with respect to the Note during the period estimated by the Borrower and
approved by Lender as necessary for the completion of the Restoration, the
balance of such insurance proceeds to be released in accordance with the other
terms and conditions set forth herein, as applicable.
11.7 Complete Agreement; Modification of Agreement. The Loan Documents
constitute the complete agreement between the Parties with respect to the
subject matter hereof and may not be modified, altered or amended except by an
agreement in writing signed by the Borrower and the GDB.
No amendment or waiver of any provision of this Agreement, Notes
or any other Loan Document, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by GDB, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
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XI - 12
11.8 Fees and Expenses. The Borrower shall pay all reasonable
out-of-pocket expenses of Lender in connection with the preparation of the Loan
Documents (including the fees and expenses of all of its counsel and consultants
retained in connection with the Loan Documents and the transactions contemplated
thereby). If, at any time or times, regardless of the existence of any Event of
Default (except with respect to paragraphs (iii) and (iv), which shall be
subject to an Event of Default having occurred and be continuing), the Lender
shall employ counsel for advice or other representation in connection with or
shall incur reasonable legal or other costs and expenses in connection with:
(i) any amendment, modification, termination or waiver, or
consent with respect to, any of the Loan Documents;
(ii) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Lender, the Borrower, or any other Person) in any
way relating to the Security, any of the Loan Documents or any other
agreements to be executed or delivered in connection herewith;
(iii) any attempt to enforce any rights of GDB against the
Borrower, or any other Person, that may be obligated to the Lender by
virtue of any of the Loan Documents;
(iv) any attempt to verify, protect, collect, sell, liquidate or
otherwise dispose of the Security; then, and in any such event, the
reasonable attorneys' fees arising from such services, including those
of any appellate proceedings, and all reasonable expenses, costs,
charges and other fees incurred by such counsel in any way or respect
arising in
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XI - 13
connection with or relating to any of the events or actions described in
this Section shall be payable, on demand, by the Borrower to Lender and
shall be additional Obligations secured under this Agreement and the
other Loan Documents. Without limiting the generality of the foregoing,
such expenses, costs, charges and fees may include: paralegal fees,
accountants' fees, court costs and expenses; court reporter fees, and
expenses for travel, paid or incurred in connection with the performance
of such legal services.
11.9 No Waiver by Lender. Lender's failure, at any time or times, to
require strict performance by the Borrower of any provisions of this Agreement
and any of the other Loan Documents shall not waive, affect or diminish any
right of the Lender thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by the Lender of an Event of Default by the
Borrower under the Loan Documents shall not suspend, waive or affect any other
Event of Default by the Borrower under this Agreement and any of the other Loan
Documents whether the same is prior or subsequent thereto and whether the same
or of a different type. None of the undertakings, agreements, warranties,
covenants and representations of the Borrower contained in this Agreement or
any of the other Loan Documents shall be deemed to have been suspended or
waived by the Lender, unless such suspension or waiver is by an instrument in
writing signed by an officer of the Lender and directed to the Borrower
specifying such suspension or waiver.
11.10 Remedies. Lender's rights and remedies under this Agreement shall
be cumulative and non-exclusive of any other rights and remedies which Lender
may have under
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XI - 14
any other agreement, including without limitation, the Loan Documents, by
operation of law or otherwise. Recourse to the Security shall not be required.
11.11 Parties. This Agreement and the other Loan Documents shall be
binding upon, and inure to the benefit of, Lender's approved successors of the
Borrower, the Lender and the assigns, transferees and endorsees of the Lender.
Nothing in this Agreement or the other Loan Documents, express or implied, shall
give to any Person, other than the parties hereto and their successors
hereunder, any benefit or any legal or equitable right, remedy or claim under
this Agreement.
11.12 Conflict of Terms. Except as otherwise provided in this Agreement
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
11.13 Authorized Signatories. Until Lender shall be notified by the
Borrower to the contrary, the signature upon any document or instrument
delivered pursuant hereto of an authorized representative of the Borrower shall
bind the Borrower and be deemed to be the act of the Borrower affixed pursuant
to and in accordance with resolutions duly adopted by the Borrowers' authorized
representatives.
11.14 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
Parties by another, or whenever any of the Parties desires
<PAGE>
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XI - 15
to give or serve upon another any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be delivered in person with receipt
acknowledged, or telecopied and confirmed immediately in writing by a copy
mailed by registered or certified mail, return receipt requested, postage
prepaid, addressed as hereafter set forth, or mailed by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(a) If to Lender:
Governmental Development Bank for Puerto Rico
Box 42001
San Juan, Puerto Rico 00940-2001
Attention: President and Director of
Private Sector - Banking Services
With a copy to:
Melendez-Perez, Moran & Santiago
Box 19328
Santurce, Puerto Rico 00919
Attention: Ramon-Loubriel, Esq.
(b) If to Borrower:
El Conquistador Partnership L.P.
c/o Williams Hospitality Management Corp.
187 East Isla Verde Road
San Juan, Puerto Rico 00913
Attention: Mr. Hugh A. Andrews
Authorized Representative
With copy to:
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
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XI - 16
and
Kumagai Caribbean, Inc.
c/o Williams Hospitality Management Corp.
187 East Isla Verde Road
San Juan, Puerto Rico 00913
Attention: Mr. Shunsuke Nakane
and
WMS Industries, Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Neil D. Nicastro
and
Messrs. Burton and Richard Koffman
c/o Richford American
950 Third Avenue
New York, New York 10022
11.15 Captions. The headings, captions and arrangements used herein and
in any of the Loan Documents are, unless specified otherwise, for convenience
only and shall not be deemed to limit, amplify or modify the terms of the Loan
Documents, nor affect the meaning thereof.
11.16 Exhibits and Schedules. The Preamble and all exhibits and
schedules attached hereto shall be and are hereby incorporated herein, and made
a part of this Agreement for all purposes.
11.17 Omitted.
11.18 Governing Law and Venue:
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XI - 17
(a) The Loan Documents are being executed and delivered by
Borrower and Lender, and are intended to be performed, in the Commonwealth of
Puerto Rico, and (except as specifically provided otherwise in any Loan Document
or to the extent that the Laws of any other jurisdiction otherwise require) the
Laws of the Commonwealth of Puerto Rico shall govern the rights and duties of
the Parties and the validity, construction, enforcement, and interpretation of
the Loan Documents.
(b) Borrower hereby submits itself to the venue of the Superior
Court of Puerto Rico, Humacao Part, or any other court GDB may elect in any
litigation or dispute arising out of, connected with, related to or incidental
to the relationship established between Borrower and Lender in connection with
this Agreement, and whether arising in contract, tort, equity or otherwise.
11.19 Severability. If any provision of any of the Loan Documents is
held to be illegal, invalid or unenforceable under present or future Laws
effective during the term thereof, such provision shall be dully severable; the
appropriate Loan Document shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part thereof; and the
remaining provisions thereof shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance therefrom.
11.20 Entire Agreement. This Agreement embodies the entire agreement
among the Parties with respect to the subject matter hereof, supersedes all
prior agreements and understandings, if any, relating to the subject matter
hereof, and may be amended only by an instrument in writing executed jointly by
authorized Persons on behalf of each of the Borrower
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XI - 18
and GDB, and supplemented only by documents delivered or to be delivered in
accordance with the express terms hereof.
11.21 Survival of Representations. All indemnities, representations and
warranties herein contained or made in writing in connection with this Agreement
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder and shall continue in full force and effect until the
Obligations shall have been paid in full. Further, as specifically provided
herein, certain indemnities, representations and warranties shall survive the
repayment of the loan, cancellation of the Notes and release of the Lender's
Lien.
11.22 GDB's Consent. Whenever under this Agreement the consent or
approval of GDB is required or necessary, GDB will diligently respond to any
request for such action, consent or approval and shall execute and deliver such
documents, instruments and agreements or give such instruction as may be
necessary to effect the terms and spirit of this agreement and the other Loan
Documents.
11.23 Reliance by Lender. The Lender may but shall be under no
obligation to rely upon the advice of its legal counsel and of the Bank's
Consultant, as well as of all other parties whose advice it obtains in
connection with all decisions made by the Lender in connection with any matters
discussed herein.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first above written.
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XI - 19
EL CONQUISTADOR PARTNERSHIP, L.P. GOVERNMENT DEVELOPMENT BANK
FOR PUERTO RICO
By: WKA EL CON ASSOCIATES By: /s/
--------------------------
Its General Partner George Barr Wilson
Executive Vice President
Itself By: /s/
--------------------------
Norman Jules Menell
BY: KUMAGAI CARIBBEAN, INC.
Its General Partner
Itself By: /s/
--------------------------
Shunsuke Nakane
President
Affidavit Number:
-------------------
Sworn and subscribed to before me in San Juan, Puerto Rico, this 7th day
of February, 1991, by the above signed persons, of the personal circumstances
above mentioned and in their stated capacity and representation, personally
known to me.
/s/
---------------------------
Notary Public
<PAGE>
<PAGE>
FIRST AMENDMENT TO GDB LOAN AGREEMENT
This Amendment Agreement ("the Amendment Agreement"), entered into this
5th day of May, 1992, by and between:
THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO, (hereinafter the
"GDB"), a banking institution of the Government of the Commonwealth of Puerto
Rico, created by Act 17, enacted on September 23, 1948, with principal offices
in San Juan, Puerto Rico, represented herein by its Executive Vice President,
Mr. Hiram Melendez Carrucini, of legal age, married, bank executive and resident
of San Juan, Puerto Rico; and
EL CONQUISTADOR PARTNERSHIP L.P. (hereinafter the "BORROWER"), a
limited partnership organized and existing under the laws of the state of
Delaware, duly qualified and authorized to do business in and within the
Commonwealth of Puerto Rico, herein represented by its partners, WKA EL CON
ASSOCIATES, a partnership organized and existing under the laws of the State of
New York, duly qualified and authorized to do business in and within the
Commonwealth of Puerto Rico, herein represented by its General Partner, Mr. Hugh
Andrews, of legal age, business executive and resident of San Juan, Puerto Rico;
and KUMAGAI CARIBBEAN, INC., a corporation organized and existing under the laws
of the State of Texas, duly qualified and authorized to do business in and
within the Commonwealth of Puerto Rico, represented herein by its President, Mr.
Shunsuke Nakane, of legal age and resident of San Juan, Puerto Rico (hereinafter
collectively the "PARTNERS").
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<PAGE>
WITNESSETH
WHEREAS, GDB and Borrower on the 7th day of February, 1991 executed a
Loan Agreement (the "GDB Loan Agreement") in the principal amount of TWENTY FIVE
MILLION DOLLARS (U.S. $25,000,000) to be used for financing part of the
Improvements; and
WHEREAS, under Paragraph 4.3 of the GDB Loan Agreement, Borrower is
required to deposit certain funds in an escrow fund for the benefit of GDB; and
WHEREAS, GDB and Borrower have agreed to amend the GDB Loan Agreement
to provide that the amount deposited under the GDB Escrow Agreement may be
applied to satisfy accrued but unpaid interest under the GDB Loan Agreement;
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. The GDB Loan Agreement is, in accordance with Paragraph 11.7
thereof, hereby amended by revising paragraph 4.3(f) to read as follows:
"(f) Amounts in the GDB Escrow may be paid out as follows:
(i) The Borrower may, at any time after the payment
or the maturity of the loan under the Bank Loan Documents, use amounts
in the GDB Escrow to prepay the outstanding principal amount of the GDB
Loan;
(ii) On the Maturity Date, any amounts in the GDB
Escrow shall be applied to the payment of all amounts due under the GDB
Loan; and
(iii) If, in any calendar month, Borrower has paid
all interest and other fees due under the Bank Loan Documents on a
current basis through and including the
2
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15th day of such month, any amount in the GDB Escrow shall be applied,
on the last day of such calendar month, to the payment interest that
has accrued and is due but unpaid under the GDB Loan."
2. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the GDB Loan Agreement.
3. GDB acknowledges that the amount of Deficiency Loans available to
the Borrowers has been reduced to $14,000,000 pursuant to the First Amendment,
of even date herewith, to the Letter of Credit and Reimbursement Agreement dated
February 7, 1991, between the Partnership and the Bank. All references in
Paragraph 8.22 of the GDB Loan Agreement to $20,000,000 are hereby revised to
$14,000,000, and the provision containing clauses (a) and (b) in the first
sentence of Paragraph 8.22 is hereby deleted.
3
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IN WITNESS WHEREOF, the parties have caused this Amendment Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
EL CONQUISTADOR PARTNERSHIP L.P. GOVERNMENT DEVELOPMENT BANK
FOR PUERTO RICO
By: WKA EL CON ASSOCIATES By:/s/
Its General Partner --------------------------------------
Hiram Melendez Carrucini
Itself by: /s/
------------------------
Hugh A. Andrews
Authorized Signatory
By: KUMAGAI CARIBBEAN, INC.
Its General Partner
Itself by: /s/
-------------------------
Shunsuke Nakane
President
4
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SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement (this "Second Amendment") is
entered into as of the 4th day of October, 1996 between the Government
Development Bank for Puerto Rico, as lender ("GDB") and El Conquistador
Partnership, L.P., as borrower (the "Borrower").
RECITALS
1. GDB and the Borrower entered into that certain Loan Agreement dated
February 7, 1991, as amended by that certain First Amendment to Loan
Agreement dated May 5, 1992 (collectively, the "Loan Agreement"), with
respect to the construction of the El Conquistador Resort and Country
Club (unless otherwise defined herein, all capitalized terms used in
this Second Amendment shall have the meanings assigned to the same in
the Loan Agreement).
2. GDB has agreed to loan to Borrower an additional $6,000,000.00, as
revolving credit facility, subject to the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
1. The following definitions are hereby added to Article 2 of the Loan
Agreement:
(a) "Accounts Receivable" shall mean all of the Borrower's present
and future rights to payment with respect to the operation of the
Improvements,
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including, without limitation: (i) goods provided or sold and
services rendered, including, without limitation, merchandise or
inventory sold or leased; (ii) rental of rooms, ballrooms and
other areas that comprise the hotel portion of the Improvements,
or other proceeds therefrom; (iii) food and beverage operations
or other hotel services with respect to the Improvements; and
(iv) any proceeds of the foregoing, including, without
limitation, all of the Borrower's rights to receive payment from
any consumer credit or charge card organization or entity and all
substitutions therefor and proceeds thereof (whether cash or
non-cash, movable or immovable, tangible or intangible) received
upon the sale, exchange, transfer, collection or other
disposition or substitution thereof. The foregoing definition
shall not include rights to payments arising from Borrower's: (a)
casino operations; (b) sale or rental of assets outside the
ordinary course of business; or (c) rentals or concession fees
arising from the lease or concession of commercial or retail
space.
(b) "Advance" shall mean individually and collectively the proceeds
of the Revolving Loan delivered to the borrower by GDB pursuant
to Section 4.7(a) hereof.
(c) "Assignment of Accounts Receivable" shall mean that certain
Constitution of Assignment of Accounts Receivable executed
pursuant to Section 4.7 and forming part of the Security.
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(d) "Credit Facility" shall mean that certain loan in the amount of
$8,000,000 from GDB to Kumagai Caribbean, Inc. and WKA El Con
Associates as evidenced by that certain Credit Facility Loan
Agreement and the other Credit Facility Loan Documents.
(e) "Credit Facility Loan Agreement" shall mean that certain Credit
Facility Loan Agreement dated May 5, 1992 between GDB and Kumagai
Caribbean, Inc. and WKA El Con Associates, evidencing, in part,
the Credit Facility.
(f) "Credit Facility Loan Documents" shall mean the Credit Facility
Loan Agreement and all other agreements, notes, documents and
instruments delivered by Borrower pertaining to the Credit
Facility as hereafter renewed, amended or supplemented from time
to time.
(g) "Credit Facility Mortgage" shall mean that certain Mortgage in
the amount of $6,000,000, from the Borrower in favor GDB as per
Deed No. 6 executed in San Juan on May 5, 1992 before Eugenio
Otero Silva and recorded at page 207 of volume 353 of Fajardo,
property no. 15204, fourth and last inscription, which secures,
in part, the Credit Facility.
(h) "Mortgage Note" shall mean that certain Mortgage Note in the
amount of $6,000,000 from Borrower in favor of GDB given in
connection with the Revolving Loan Mortgage. For the purposes of
Article 10 and
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Article 11, the term "Note" or "Notes" shall also be deemed to
refer to the Mortgage Note.
(i) "Palominos Revolving Loan Mortgage" shall mean the leasehold
mortgage in form reasonably satisfactory to GDB, made or to be
made by Borrower upon its lease hold interest in Palominos Island
Property, to be encumbered in favor of GDB to secure the payment
of the Revolving Loan, creating a third priority Lien on the
Palominos Island Property in the principal amount of $120,000.00.
(j) "Palominos Mortgage Note" shall mean that certain Note in the
amount $120,000 from Borrower in favor of GDB, secured by with
the Palominos Revolving Loan Mortgage. For the purposes of
Article 10 and Article 11, the terms "Note" or "Notes" shall also
be deemed to refer to the Palominos Mortgage Note. For the
purposes of Article 10 and Article 11, the term "Note" or "Notes"
shall also be deemed to refer to the Palominos Mortgage Note.
(k) "Permitted Loan Limit" shall mean the amount of $6,000,000.
(l) "Revolving Loan" shall mean that certain Revolving Loan up to the
Permitted Loan Limit which shall be advanced, from time to time,
under Section 4.7 hereof. For the purposes of Article 3 and
Sections 8.9 and 8.10 only, the term "Loan" shall also be deemed
to refer to the Revolving Loan and for the purposes of Article 9
and Article 10 the term "GDB
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Loan" shall also be deemed to refer to the Revolving Loan.
(m) "Revolving Loan Closing" shall mean the execution and delivery of
the Second Amendment and all other Revolving Loan Documents,
which Revolving Loan Closing shall take place at the offices of
GDB or at such other place as the parties may choose.
(n) "Revolving Loan Closing Date" shall mean October 4, 1996 by which
date the Revolving Loan Closing Date shall have occurred. For the
purposes of Article 3 only, the term "Closing Date" shall be also
deemed to refer to the Revolving Loan Closing Date.
(o) "Revolving Loan Documents" shall mean the Revolving Note, the
Mortgage Note, the Palominos Mortgage Note, the Revolving Loan
Mortgage, the Assignment of Accounts Receivable, the Second
Amendment, and any and all other agreements, documents and
instruments delivered by or on behalf of Borrower pertaining to
the Revolving Loan pursuant to the terms of the Second Amendment,
as hereafter renewed, amended or supplemented from time to time.
The Revolving Loan Documents shall be deemed to be included
within the definition of the Loan Documents.
(p) "Revolving Loan Interest Rate" shall be equal to that certain
annual rate resulting by adding 100 basis points to the LIBOR
Rate for a (3) month period.
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(q) "Revolving Loan Maturity Date" shall mean October 31, 1997, or
such earlier date as GDB shall declare the entire principal sum
due and payable in the exercise of its Rights under Article 10
hereof.
(r) "Revolving Loan Mortgage" shall mean the mortgage, deed of trust
or similar security agreement in form reasonably satisfactory to
GDB, made or to be made by Borrower upon the Premises (excluding
the Palominos Island Property), to be encumbered in favor of GDB
to secure the payment of the Revolving Loan, creating a third
priority Lien on the premises in the principal amount of the
Permitted Loan Limit, encumbering the Premises, including all
buildings, improvements, fixtures and personal property presently
located thereon and all buildings and improvements to be erected
and constructed thereon, if any, and all fixtures and personal
property owned by Borrower to be placed therein.
(s) "Revolving Loan Obligations" shall mean Borrower's obligations
under all of the Revolving Loan Documents, including, without
limitation, all present and future indebtedness, obligations and
liabilities, and all renewals and extensions thereof, or any part
thereof, now or hereafter owed to GDB by Borrower arising from,
by virtue of, or pursuant to any Revolving Loan Document,
together with all interest accruing thereon and costs, expenses
and attorneys' fees incurred in the enforcement or collection
thereof, whether such indebtedness, obligations and liabilities
are
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direct, indirect, fixed, contingent, determinate, undeterminate,
joint, several or joint and several. The Revolving Loan
Obligations shall be deemed to be included within the
Obligations.
(t) "Revolving Loan Pledge Agreement" shall mean that certain Pledge
Agreement to be executed by Borrower in favor of GDB pursuant to
Section 4.7 and forming part of the Security.
(u) "Revolving Loan Secondary Rate" shall mean that certain rate of
interest that shall accrue ont he unpaid principal outstanding
balance of the Revolving Loan, as the same may exist from time to
time, from and after a Default or an Event of Default has
occurred hereunder which interest rate shall be 500 basis points
above the Revolving Loan Interest Rate.
(v) "Revolving Loan Security" shall have the meaning described in
Section 4.7(g) hereof. For the purposes of Article 3 and Section
8.12 hereof, the term "Security" shall be also deemed to refer to
Revolving Loan Security.
(w) "Revolving Loan Security Documents" shall mean those certain
Revolving Loan Documents listed in Section 4.7(g) attached
hereto. The Revolving Loan Security Documents shall be deemed to
be included within the definition of Security Documents.
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(x) "Revolving Loan Title Policy" shall mean that certain Title
Policy issued by the Title Insurer pursuant to Section 4.7.
(y) "Revolving Note" shall collectively mean that certain note
evidencing the Revolving Loan from Borrower in favor of GDB which
shall in no event exceed the aggregate amount of the Permitted
Loan Limit. For the purposes of Article 10 and Article 11, the
term "Note" or "Notes" shall also be deemed to refer to the
Revolving Note.
(z) "Revolving Period" shall mean that certain period commencing on
the Revolving Loan Closing Date and ending on the Revolving Loan
Maturity Date.
(aa) "Second Amendment" shall mean that certain Second Amendment to
Loan Agreement dated as of the Revolving Loan Closing Date
between GDB, as lender, and Borrower.
2. A new Section 4.7 is hereby added to the Loan Agreement as follows:
4.7 Revolving Loan.
(a) Subject to the terms and conditions hereof, and relying on the
representations, covenants and warranties of the Borrower
contained herein, GDB agrees, from time to time, during the
Revolving Period to lend to the Borrower under the Revolving Loan
upon its request up to the aggregate principal amount of the
Permitted Loan Limit for the
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Borrower's working capital needs for the operation of the
Premises. During the Revolving Period, the Borrower shall be
entitled to receive the entire proceeds of the Revolving Loan in
one or more Advances pursuant to this Section 4.7 hereof, except
as otherwise specifically set forth in this Agreement. After the
expiration of the Revolving Loan Period, the Borrower shall not
be entitled to receive any further Advance. The Revolving Loan
may revolve during the Revolving Period; accordingly, during the
Revolving Loan Period, the Borrower may borrow up to the
Permitted Loan Limit, repay all or any portion of such principal
amount, and re-borrow up to the Permitted Loan Limit, subject to
the terms and conditions set forth herein.
(b) The Revolving Loan shall be evidenced by the Revolving Note and
shall be due and payable as required by Section 4.7(k). The
Borrower shall not be liable under the Revolving Note except with
respect to funds actually advanced to the Borrower by GDB. The
Revolving Note shall bear interest from the date thereof on the
unpaid principal balance thereof, from time to time outstanding,
at a fluctuating interest rate equal to the Revolving Loan
Interest Rate.
(c) (i) From and after the Revolving Loan Maturity Date, (ii) upon
the failure of Borrower to pay any interest within (10) days
after such interest is due with respect to the Revolving Loan
prior to the occurrence of any Default or Event of Default, or
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(iii) upon the occurrence of any Default or Event of Default,
interest shall accrue on the unpaid balance of the Revolving Loan
and, to the extent permitted by law, on all accrued but unpaid
interest thereon as of such date, at the Revolving Loan Secondary
Rate. Such interest shall continue to accrue at the Revolving
Loan Secondary Rate until (x) the date of payment in full of all
principal and accrued but unpaid interest on the Revolving Loan,
if accelerated, (y) if applicable, such unpaid interest shall
have been paid, or (z) such Default or Event of Default has
otherwise been cured as may be permitted pursuant to the terms of
this Agreement.
(d) On the Revolving Loan Closing Date hereof and upon satisfaction
of the conditions precedent set forth in Sections 4.7(i) and (j)
below, GDB shall disburse, on behalf of the Borrower, a portion
of the proceeds of the Revolving Loan as may be necessary to pay
off the existing credit facility in favor of Scotia bank de
Puerto Rico in the amount of $5,200,000 and to cover all costs
and expenses incident to the closing of the transactions
contemplated hereby, including, without limitation, and any and
all recording charges/taxes or fees in connection therewith,
which shall all be set forth on a closing statement to be signed
by the parties hereto. Notwithstanding the foregoing, the
attorneys' fees and costs of GDB's legal counsel that is set
forth on the closing statement described above may be paid by
Borrower after the Revolving Loan Closing
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Date, but no later than February 15, 1997. In addition to the
foregoing, the Borrower shall also pay to GDB on or before
February 15, 1997, the amount of $54,224.32, representing a
portion of the costs and expenses incurred by GDB for various
accounting audits of the Premises. After the initial Advance and
upon continued satisfaction of the conditions precedent as set
forth in Section 4.7(j) below, the Borrower shall be entitled to
receive further Advances, provided, however, that the aggregate
amount of outstanding Advances shall never exceed the amount of
the Permitted Loan Limit.
(e) The Borrower shall give GDB written or telephonic notice of any
requested Advance hereunder, but no more than once per month. GDB
shall have no duty or obligation to verify or confirm the
authority of the person of the Borrower requesting any such
Advances if that person identifies himself as an employee of the
Borrower. GDB shall make each Advance hereunder provided that (i)
the Permitted Loan Limit would not be so exceeded, (ii) there has
not occurred a Default or Event of Default on the date proposed
by the Borrower therefor (but not later than two (2) business
days after the receipt of said request for an Advance), and (iii)
Borrower has complied with the terms of this Second Amendment and
the other provisions of the Loan Agreement (it being agreed that
in the event Borrower is not in compliance with the terms of this
Second Amendment or the other provisions of the Loan Documents, a
Default or Event of Default
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is not required to occur before GDB is not obligated to make any
Advance).
(f) In consideration of GDB making the Revolving Loan, the Borrower
agrees to pay to GDB a commitment fee equal to $45,000,
equivalent to three-quarters of one(1) percent (3/4%) of the
Revolving Loan Limit, such fee to be paid on or before February
15, 1997, otherwise, GDB shall not be obligated to make any
further Advances and, at GDB's election, which may be exercised
in GDB's sole and absolute discretion, the failure to pay the
same may be deemed to be an Event of Default.
(g) As security for the Revolving Loan and the performance and
observance of all of the obligations, covenants and agreements of
the Borrower under the Revolving Loan, the Borrower shall
deliver, or cause to be delivered, the following collateral to
GDB (the "Revolving Loan Security"), all of which shall be in
form and substance acceptable to GDB in GDB's sole and absolute
discretion:
(1) The Pledge of the Mortgage Note and Palominos Mortgage Note
secured by the Revolving Loan Mortgage and Palominos
Revolving Loan Mortgage, respectively, pursuant to the
Revolving Loan Pledge Agreement.
(2) Mortgage Note.
(3) Palominos Mortgage Note.
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(4) Revolving Loan Mortgage.
(5) Palominos Revolving Loan Mortgage.
(6) The Assignment of Accounts Receivable creating a first lien
priority interest in favor of GDB in the Accounts
Receivable.
(7) Subordination by GDB of the Credit Facility Mortgage to the
Revolving Loan Mortgage.
(8) Unconditional Guarantees of the Revolving Loan from Kumagai
Caribbean, Inc. and WKA El Con Associates in favor of GDB.
(9) The Revolving Loan Title Policy, showing the Revolving Loan
Mortgage as a third priority lien and the Palominos
Revolving Loan Mortgage as a third (3rd) priority leasehold
lien.
(10) An update of the descriptions of all of the Security pledged
to GDB under (and as defined in) the Loan Agreement and
Facility Loan Agreement.
(11) Such other Revolving Loan Security Documents as Borrower may
deem necessary with respect to the Revolving Loan, in GDB's
sole and absolute discretion.
(h) The Borrower hereby agrees that the Security Documents (excluding
the Revolving Loan Security Documents) shall be deemed to be
additional
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collateral to secure the performance of the Revolving Loan
Obligations, and none of the foregoing security shall be deemed
to be released from the applicable collateral unless and until
all obligations under the Revolving Loan have been paid in full.
In furtherance of the foregoing, (i) the failure to pay any
principal or interest due under the Credit Facility Loan
Documents within ten (10) days after the same is due or (ii) the
occurrence of any "Event of Default" under the Credit Facility
Loan Agreement and acceleration of the Credit Facility or
commencement of proceedings to foreclose upon any collateral
securing the Credit Facility by reason of such Event of Default,
shall, at GDB's option, also be deemed to be a Default or Event
of Default after the giving of notice and expiration of the
applicable grace period under Section 10.1(a) of this Agreement.
(i) The obligation of GDB to make the initial Advance under the
Revolving Loan is subject to the following conditions precedent
(it being understood that the conditions set forth in Article 7
hereof shall not be applicable to GDB's obligation to make
Advances):
(1) All Revolving Loan Documents in form and substance
acceptable to GDB, in GDB's sole and absolute discretion,
shall have been executed and delivered to GDB, including,
without limitation, the following:
(a) Revolving Loan Security;
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(b) Second Amendment;
(c) Consent to Loan Agreement and Assignment of Accounts
Receivable and Subordination of Assignment of Accounts
Receivable from The Bank of Tokyo-Mitsubishi, Ltd.;
(d) Consent of GDB to the Revolving Loan and the pledge of
the collateral under the Revolving Loan Documents as
required by the terms of the Loan and the Credit
Facility;
(e) First Amendment to Subordination and Standstill
Agreement between, among others, Bank of Tokyo -
Mitsubishi Bank, Ltd., and GDB with respect to the
Revolving Loan;
(f) GDB shall receive the favorable written opinion of
counsel to Borrower, dated as of the Revolving Loan
Closing Date, with respect to such matters as GDB may
require;
(g) Such additional supporting documents as GDB may deem to
be necessary, in GDB's sole and absolute discretion.
(2) A Current unaudited balance sheet of Borrower certified to
be true and correct by the chief financial officer of
Borrower shall have been delivered to GDB.
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(3) The conditions set forth in Sections 6.1 (t)- (w) hereof
shall be satisfied.
(4) [Intentionally Deleted].
(5) The conditions precedent set forth in Section 4.7(j) below
shall also be satisfied.
(6) GDB shall have received evidenced acceptable to GDB that the
partners of the Borrower have loaned or caused to be loaned
on behalf of the Partners of Borrower an amount of $800,000
to the Borrower as an unsecured loan toward working capital
for the operation of the Premises for the period of August
and September, 1996 (the "Borrower Loan").
(j) The obligations of GDB to lend amounts under the Revolving Loan
and to make the initial Advance and all other Advances, from time
to time, thereunder, are subject to the following additional
conditions precedent:
(1) The representations and warranties set forth in the
Revolving Loan Documents (excluding Sections 4(a) through
(f) of this Second Amendment) and in Article 3 of the Loan
Agreement (except for Sections 3.2, 3.6, 3.8, 3.15(b), 3.17,
3.20, 3.22, 3.25 and 3.26) shall be restated and shall be
true and correct as of the date of the applicable Advance,
as though such representations and
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warranties had been made on and as of such date.
(2) The Borrower shall be in compliance with all the terms and
provisions set froth under the Loan Documents on its part to
be observed or performed (except as such non-compliance
shall have been previously waived in writing or consented to
in writing by GDB), no Default or Event of Default shall
have occurred and be continuing at such time, and no event
shall have occurred which, with notice and/or passage of
time, and would cause a Default or Event of Default to
occur.
(3) [Intentionally Deleted].
(4) Resolutions of the Borrower and its constituent partners, in
form and substance acceptable to GDB in its sole and
absolute discretion, shall be delivered to GDB.
(5) GDB shall have received evidence acceptable to GDB that the
partners of the Borrower have made the Borrower Loan, even
if the same has been previously repaid in accordance with
Section 4.7(l).
(6) No more than twenty percent (20%) or $500,000, whichever is
greater, of the then current amount of the outstanding
Accounts Receivable, shall be more than 120 days past due.
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(k) The Borrower shall pay the Revolving Note together with interest,
fees and charges, as follows:
(1) Whenever the outstanding principal balance of the Revolving
Loan exceeds the Permitted Loan Limit, the Borrower shall
immediately pay to GDB the excess of the outstanding
principal balance of the Revolving Loan over the Permitted
Loan Limit.
(2) Each Advance under this Agreement shall bear interest at the
Revolving Loan Interest Rate from the date of each such
Advance until the Revolving Loan Maturity Date or the date
of prepayment thereof, whichever occurs first. Such interest
shall be payable quarterly in arrears on each Interest
Adjustment Date and shall be computed only on outstanding
balances of Advances on the basis of the 360 day year and
for the number of actual days elapsed.
(3) The entire unpaid principal balance of the Revolving Loan,
together with accrued and unpaid interest thereon, fees and
charges shall be due and payable in full on the Revolving
Loan Maturity Date, subject to the notice provisions of
Section 10.1(a) hereof.
(l) GDB agrees that at any time that the outstanding balance of the
Revolving Loan is zero, then the Borrower may repay the Borrower
Loan to its partners, regardless of any provisions to the
contrary under the Loan Documents or the Credit
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Facility Loan Documents, provided, however, that as a condition
precedent for the Borrower to obtain any subsequent Advances
under the Revolving Loan, then the Borrower Loan must be reloaned
to the Borrower and evidence thereof delivered to GDB in
accordance with Section 4.7(j)(5) hereof.
(m) Borrower agrees that the violation of Section 4.7(j)(6) hereof
may, at GDB's election, which may be exercised in GDB's sole and
absolute discretion, be deemed to be a Default or Event of
Default, subject to the notice provisions of Section 10.1(a)
hereof.
3. The term "Permitted Liens and Encumbrances" as used in the Loan
Agreement shall be deemed to include the Revolving Loan Mortgage and
the other liens and encumbrances evidenced by the Revolving Loan and
any liens and encumbrances shown on the Revolving Loan Title Policy.
4. As a material inducement to GDB to enter into the Second Amendment and
to make the Revolving Loan, the Borrower hereby represents, warrants
and covenants as follows:
(a) The outstanding principal amount of the Loan is $25,000,000.00;
and
(b) All outstanding and accrued interest under the GDB Loan has been
paid through September 30, 1996.
(c) [Intentionally Deleted].
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(d) As of the date hereof, the representation contained in Section
3.17 hereof is true and correct.
(e) To the knowledge of Borrower, GDB is not in default of any of its
obligations under the Loan Documents or the Operative Documents
(as defined in the Credit Facility Loan Agreement) and no event
has occurred which with lapse of time and/or notice would cause
such a default to occur;
(f) No payments have been made by or behalf of the Borrower into any
escrow account pursuant to the Escrow Requirement (as defined in
the Credit Facility Loan Agreement);
(g) The Liens granted to GDB by the Revolving Loan Documents will be,
when filed, subject only to recording which will be effected in
due course, fully perfected third (3rd) priority Liens in and to
the Revolving Loan Security described therein, subject only to
Permitted Liens and Encumbrances.
(h) That certain Development Services and Management Agreement dated
January 12, 1990 between Borrower and Williams Hospitality
Management Corporation as amended by amendments dated September
30, 1990 and January 31, 1991 has not been further amended,
modified or supplemented in any manner whatsoever since January
31, 1991 and remains in full force and effect.
(i) Those certain audited financial statements prepared by Ernst &
Young dated March 31, 1996 submitted by
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Borrower to GDB and those certain monthly financial statements
dated June 30, 1996 prepared by or on behalf of Borrower, based
on which GDB approved the Revolving Loan herein contemplated, are
true and correct in all material aspects as of the date thereof.
(j) Neither the execution and delivery of the Second Amendment and
the Revolving Loan Documents, the consummation of the
transactions contemplated thereunder, and the compliance with the
terms, conditions and provisions of the Second Amendment and the
other Revolving Loan Documents, will conflict with or result in a
breach of the terms, conditions or provisions or constitute a
default under the Partnership Agreement of Borrower, or of any
indenture or other agreement or instrument to which the Borrower
is a party or by which it is bound, or result in the creation or
imposition of any Lien, charge or encumbrance of any nature
whatsoever, upon any of the properties or assets of the Borrower,
except as permitted by the provisions of the Second Amendment and
the other Revolving Loan Documents; and except for the recording
of the Revolving Loan Mortgage and Palominos Revolving Loan
Mortgage, and except as noted in this Second Amendment, Borrower
is not required to obtain any action, approval, consent or
authorization by any governmental or quasi-governmental agency,
commission, board, bureau or instrumentality in order for the
Second Amendment to become a valid and binding obligation of
Borrower in accordance with its terms.
<PAGE>
<PAGE>
-22-
5. Section 5.3 of the Loan Agreement is hereby modified to provide for
the following clause:
"(v) Borrower's obligations guaranteed by its Partners under the
Guarantees executed in connection with the Revolving Loan."
6. Borrower hereby agrees that Exhibit A to that certain Assignment
Agreement dated December 7, 1991 shall also be deemed to include those
certain agreements listed on Exhibit A attached hereto, which
constitutes an updated list of all such contracts and agreements
affecting the Premises (in addition to those already listed in such
Assignment Agreement).
7. GDB and Borrower agree that as a condition precedent to GDB's delivery
to Borrower of the Mortgage Note and Revolving Loan Mortgage in the
event the Revolving Loan is paid in full and terminated, the Revolving
Loan Mortgage shall be subordinated to the Credit Facility Mortgage by
a document in form and substance reasonably acceptable to GDB.
8. The addresses set forth in Section 11.14 of the Agreement are hereby
deleted and replaced with the following:
(a) If to GDB:
Government Development Bank for Puerto Rico
Minillas Government Center
De Diego Avenue, Stop 22
Santurce, Puerto Rico 00907
ATTN: Ana Carmen Alemany, Sr. Vice President
With a copy to:
<PAGE>
<PAGE>
-23-
Gunster, Yoakley, Valdes-Fauli & Stewart, P.A.
500 East Broward Boulevard, Suite 1400
Fort Lauderdale, Florida 33394
ATTN: Andrew S. Robins, Esq.
(b) If to Borrower:
c/o Williams Hospitality Group, Inc.
187 East Isla Verde Road
San Juan, Puerto Rico 00913
ATTN: President
With a copy to:
Kumagai Caribbean, Inc.
1177 Avenue of the Americas
New York, New York 10019
and
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
ATTN: Jeffrey N. Siegel, Esq.
9. As a material inducement for GDB to accept this Second Amendment,
Borrower does hereby release, waive, discharge, covenant not to sue,
acquit, satisfy and forever discharge GDB and its officers, directors,
employees, agents and attorneys and the affiliates and assigns of all
of the foregoing of and from any and all liability, claims,
counterclaims, defenses, actions, causes of actions, suits,
controversies, agreements, promises and demands whatsoever, at law or
in equity, which Borrower had, now has, or which any personal
representative, successor, heir or assign of Borrower now or hereafter
can, shall or may have against GDB or their directors, employees,
attorneys and agents and the affiliates and assigns of all of the
foregoing, for, upon, or by reason of any matter, cause or thing
whatsoever through the date hereof relating to the Loan,
<PAGE>
<PAGE>
-24-
and the Revolving Loan and any and all documents or agreements
executed in connection therewith, except that nothing herein shall be
deemed to release GDB from its obligations under such documents,
including, without limitation, its obligation to make Advances,
subject to the terms thereof. Borrower further expressly agrees that
the foregoing waiver and release is intended to be as broad and
inclusive as permitted by the laws of the Commonwealth of Puerto Rico.
In addition to, and without limiting the generality of the foregoing,
and in consideration of the GDB's acceptance of this Second Amendment,
Borrower covenants with and warrants unto GDB and its affiliates and
assigns that there exists no claims, counterclaims, defenses,
objections, offsets of claims, or offsets against GDB or the
obligation of Borrower to pay the Loan, Credit Facility or Revolving
Loan to GDB when and as the same becomes due and payable in accordance
with the terms of this Second Amendment and the other Loan Documents,
including, without limitation, the Revolving Loan Documents, and the
Operative Document(as defined in the Credit Facility Loan Agreement).
10. Except as prohibited by law, the GDB and the Borrower hereby
knowingly, voluntarily and intentionally waive the right to trial by
jury with respect to any litigation based hereon or arising out of,
under, or in connection with this Second Amendment or the other
Revolving Loan Documents, including, without limitation, the Revolving
Loan Documents, or any course of conduct, course of dealing,
statements (whether verbal or written) or actions of the Borrower or
GDB with respect to the Revolving Loan; this waiver being a material
inducement
<PAGE>
<PAGE>
-25-
for GDB to accept this Second Amendment. If the subject matter of any
litigation is one in which the waiver of jury trial is prohibited,
neither GDB nor the Borrower shall present as a noncompulsory
counterclaim in such litigation, any claim arising out of this Second
Amendment or the Revolving Loan Documents. Furthermore, neither GDB
nor the Borrower shall seek to consolidate any action in which a jury
trial has been waived with any litigation in which a jury trial cannot
be waived.
11. This Second Amendment shall be binding upon GDB and the Borrower and
their respective successors and assigns. This Second Amendment may be
executed in counterparts, all if which counterparts shall be deemed to
be a single document. Signature pages received by facsimile
transmission shall be deemed to be an original document.
12. This Second Amendment constitutes the complete agreement between the
parties hereto with respect to the subject matter hereof and may not
be modified, altered or amended except by an agreement in writing
signed by GDB and the Borrower. No amendment or waiver of any
provision of this Second Amendment, the Revolving Note or any other
Revolving Loan Document, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in
writing and signed by GDB, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose
for which given.
13. Except as otherwise modified herein, the Loan Agreement and the other
Loan Documents remain unmodified and are in full force and effect.
<PAGE>
<PAGE>
-26-
IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the date first set forth above.
GOVERNMENT DEVELOPMENT BANK
FOR PUERTO RICO
By: /s/
--------------------------------
Name: Ana Carmen Alemana
Title: Senior Vice President
EL CONQUISTADOR PARTNERSHIP L.P.
By: /s/
--------------------------------
Name: Brian Gamache
Title: Authorized Signatory
<PAGE>
<PAGE>
Exhibit A
EL CONQUISTADOR
Resort And Country Club
MEMORANDUM
TO: Pam Flaherty
FROM: Larry M. Vitale
DATE: August 23, 1996
SUBJECT: Recap of Hotel Concessionaires
- ---------------------------------------------------------
Restaurants
================================================================================
Store Name Owner Service provided Tax I.D.
No.
- --------------------------------------------------------------------------------
Blossoms John He Zing Yee Restaurant 66-0491041
- --------------------------------------------------------------------------------
Gauchos (Latinos) Valerie Marty Restaurant 66-0495837
- --------------------------------------------------------------------------------
Othello's Carlos Pichetti Restaurant 66-0452336
- --------------------------------------------------------------------------------
Rest. Associates of
P.R. (Stingray) Dayn Smith Restaurant 66-0525863
- --------------------------------------------------------------------------------
Retail
- --------------------------------------------------------------------------------
Abaca Pedro Moll Shoe Store 66-0500012
- --------------------------------------------------------------------------------
Avante Peter Veneciano Health Spa 66-0500451
- --------------------------------------------------------------------------------
Bared & Sons Phillip Bared Jewelry 66-0345606
- --------------------------------------------------------------------------------
Club del Sol
(Paco Pepe/Chikos) Luis B. Gonzalez Clothing Store 66-0479241
- --------------------------------------------------------------------------------
Conversation Piece Ligia Wachtel Gifts 66-0421209
- --------------------------------------------------------------------------------
Exotica del Flower Shop 66-0525160
Conquistador Coffee Shop 66-0525159
Exotica Cafe Richard Roth
- --------------------------------------------------------------------------------
Galeria Arrecife Maria E. Torres Art 66-0527914
- --------------------------------------------------------------------------------
Group Services Inc. Saul Tanal Tour Desk 66-0486829
- --------------------------------------------------------------------------------
Events Tropical 66-0504748
Stage Crow Audiovisual Hamid Azize Audiovisual Equipment 66-0447320
- --------------------------------------------------------------------------------
American Parking Miguel Cabral Parking Concession 66-0421500
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
Jose Melendez Jose Melendez Horseback Riding ###-##-####
- --------------------------------------------------------------------------------
Water Sports
Aqua Sports Wilfredo Rosado Equipment Rental 66-0499299
- --------------------------------------------------------------------------------
Palomino Divers Debra K. Black Dive Ship (Scuba) 66-0515419
- --------------------------------------------------------------------------------
M.H. Reinhold Marie Reinhold Jewelry Store 66-0440469
- --------------------------------------------------------------------------------
Mona Liza Boutique Lourdes Cortes Clothing Store 66-0515557
- --------------------------------------------------------------------------------
Gift/Logo Clothing
W.H. Smith Catherine Gardner Shops/Store 66-0220116
================================================================================
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
MANAGEMENT AGREEMENT SUBORDINATION
AND
ATTORNMENT AGREEMENT
Dated as of February 7, 1991
BETWEEN
WILLIAMS HOSPITALITY MANAGEMENT CORPORATION,
AND
THE MITSUBISHI BANK, LIMITED
acting through its
New York Branch
Relating to
The El Conquistador Resort and Country Club,
located in Fajardo, Puerto Rico
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Subordination; Bank's Right to Terminate; Attornment;
Assignment of Licenses......................................... 3
SECTION 2. Default by Partnership under Management Agreement.............. 7
SECTION 3. Representations, Warranties, Covenants and Agreements.......... 10
SECTION 4. Liability of Bank.............................................. 12
SECTION 5. Termination of Agreement....................................... 12
SECTION 6. Notices........................................................ 12
SECTION 7. Miscellaneous.................................................. 13
</TABLE>
i
<PAGE>
<PAGE>
MANAGEMENT AGREEMENT SUBORDINATION
AND
ATTORNMENT AGREEMENT
THIS MANAGEMENT AGREEMENT SUBORDINATION AND ATTORNMENT AGREEMENT (this
AGREEMENT), dated as of the 7th day of February, 1991, by and between THE
MITSUBISHI BANK, LIMITED, acting through its New York Branch, a banking
corporation organized under the laws of Japan having an office at 225 Liberty
Street, Two World Financial Center, New York, New York 10281 (the BANK), and
WILLIAMS HOSPITALITY MANAGEMENT CORPORATION, a Delaware corporation having an
office at 187 East Isla Verde Road, Carolina, Puerto Rico 00913 (the MANAGER).
W I T N E S S E T H:
WHEREAS, El Conquistador Partnership L.P., a Delaware limited
partnership (the PARTNERSHIP) and the Manager have entered into that certain
Development Services and Management Agreement, dated January 12, 1990, as
amended by that certain First Amendment to the Development Services and
Management Agreement dated as of September 30, 1991 and that certain Second
Amendment dated as of January 31, 1991 (together with any additional amendment
or supplements thereto from time to time as permitted hereby, the MANAGEMENT
AGREEMENT), pursuant to which the Manager agreed to, among other things, provide
technical assistance and development services during the renovation of and to
control, supervise and direct the operation and management of the resort and
related golf course and other facilities to be known as The El Conquistador
Resort and Country Club (together with the tracts of real property on which the
foregoing
<PAGE>
<PAGE>
is located, the PROPERTY);
WHEREAS, pursuant to that certain Letter of Credit and Reimbursement
Agreement of even date herewith between the Bank and the Partnership (such
agreement, as amended and supplemented from time to time, the LETTER OF CREDIT
AGREEMENT), the Bank has agreed to issue a letter of credit (the LETTER OF
CREDIT) to secure the repayment of the principal of, and accrued interest on,
the Loan (such term and all other capitalized terms used but not defined herein
having the respective meanings ascribed to them in the Letter of Credit
Agreement) in accordance with their terms;
WHEREAS, pursuant to that certain Assignment of Management Agreement of
even date herewith between the Partnership and the Bank (the ASSIGNMENT), the
Partnership assigned its rights and interests under the Management Agreement to
the Bank as security for the obligations of the Partnership under the Letter of
Credit Agreement; and
WHEREAS, one of the conditions precedent to the obligation of the Bank
to issue the Letter of Credit is the agreement of the Manager to subordinate the
Management Agreement and all of its rights, interests and benefits thereunder to
the liens and charges of the Mortgage, the Pledge Agreement and the other
Operative Documents in the manner hereinafter provided; and
WHEREAS, the financing of the Project, as contemplated by the
Letter of Credit Agreement and the other Operative Documents, is in furtherance
of the purposes of the Management Agreement.
NOW, THEREFORE, for and in consideration of the issuance of
the
2
<PAGE>
<PAGE>
Letter of Credit and the entering into of the Letter of Credit Agreement by the
Bank, the mutual promises and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto further agree as follows:
SECTION 1. SUBORDINATION; BANK'S RIGHT TO TERMINATE; ATTORNMENT;
ASSIGNMENT OF LICENSES.
(a) The Manager hereby covenants and agrees for the benefit of
the Bank that the Management Agreement, the Manager's rights thereunder and the
lien for the payment of any and all fees to the Manager or otherwise under the
Management Agreement (the MANAGEMENT AGREEMENT FEES) are hereby made and shall
unconditionally continue to be and remain at all times subject and subordinate
in all respects to the liens, charges, terms, covenants and provisions of the
Mortgage, the Pledge Agreement, the Letter of Credit Agreement and the other
Operative Documents and any extensions, modifications, amendments and renewals
thereof and the rights and benefits of the Bank thereunder.
(b) At any time after the occurrence of a default or event of
default under the Mortgage, the Pledge Agreement, the Letter of Credit Agreement
or any of the other Operative Documents and the commencement of the exercise by
the Bank of any remedies for such default the result of which would be the
termination of the Partnership's ownership or operation of the Property, the
Bank may, upon written notice to the Manager that such events have occurred and
that it elects to exercise its option under this paragraph by reason thereof,
terminate the Management Agreement.
3
<PAGE>
<PAGE>
(c) If the Bank becomes the owner of the Partnership's
interest in the Property (whether pursuant to the Mortgage and the Pledge
Agreement, by voluntary conveyance, by agreement of the parties, or otherwise,
and whether in its own name, through its nominee, or otherwise), or if the
interest of the Partnership in the Property is acquired by any third party as a
result of any action taken by the Bank or the holder of the Mortgage relating to
a default by the Partnership in its obligations to the Bank or to the holder of
the Mortgage (such third party being referred to as a PURCHASER), then, provided
the Management Agreement shall not previously have been terminated in accordance
with its provisions or the provisions of this Agreement, the Manager shall fully
and completely recognize and attorn to the Bank or the purchaser, as applicable,
under the Management Agreement for the balance of the term thereof, including
any extensions and renewals thereof, upon all terms and conditions therein
provided (exclusive of any provisions thereof which have theretofore been fully
performed or which depend upon the identity or involvement of or performance by
any named individuals, insofar as the same relate to the obligations of the
Partnership, or other Persons controlling, controlled by or under common control
with the Partnership), so as to establish direct privity of contract between the
Bank or the purchaser, as applicable, and the Manager; and the Manager shall
thereafter make all payments required thereunder to be made to the Partnership
directly to the Bank or the purchaser, as applicable; PROVIDED, HOWEVER, that
the Bank or the purchaser, as applicable, shall not:
(i) be liable for any act or omission of the
Partnership or be liable for any sums due and payable to the Manager under the
Management Agreement
4
<PAGE>
<PAGE>
prior to the Bank's or the purchaser's taking possession of the Property or
otherwise acquiring or succeeding to the interest of the Partnership under the
Management Agreement;
(ii) be obligated to pay any deferred fees due solely
by reason of the acceleration thereof (it being understood that, in such event,
the provisions of the Management Agreement providing for the deferral of fees
shall continue in full force and effect);
(iii) be subject to any offsets or defenses which the
Manager may be entitled to assert against the Partnership; or
(iv) be bound by any amendment or modification of the
Management Agreement made without the consent of the Bank.
(d) Notwithstanding anything to the contrary in the Management
Agreement, the Bank or the purchaser, as applicable, shall be obligated under
the Management Agreement pursuant to this Section 1 only for the period of time
during which the Bank or the purchaser, as applicable, has an interest in the
Property, and shall not have any liability with respect to any obligations
accruing prior to or following such period; provided, however, that any such
purchaser shall continue to be liable for obligations accruing under the
Management Agreement after the sale of the Property by such purchaser to another
party to the extent so provided in the Management Agreement.
(e) The Manager hereby covenants and agrees for the benefit of
the Bank that upon its receipt of a notice of default on the part of the
Partnership under the Letter of Credit Agreement or any of the Operative
Documents, the Manager shall, upon
5
<PAGE>
<PAGE>
written notice from the Bank that the Bank invokes the provisions of this
paragraph by reason thereof (without the necessity for the Bank to obtain from
the Partnership any authorization or direction of the Manager to satisfy the
Manager that any such default exists), hold all amounts received by the Manager
in connection with the operation of the Project or otherwise received on behalf
of the Partnership in trust for the Bank and/or turn same over to the Bank, as
the Bank shall direct, or open new bank accounts in banks and in names
designated by the Bank into which the Manager shall transfer all funds then in
the bank accounts established pursuant to Section 4.8 of the Management
Agreement, which new accounts shall thereafter be considered to be the operating
accounts of the Project. The foregoing shall not be interpreted to prevent the
Manager from paying its management fees in accordance with the provisions of the
Management Agreement (provided it is not in default thereunder or hereunder) or
from paying bills to third parties incurred in connection with the operations of
the Property, as same become due and payable, pursuant to the terms of the
Management Agreement.
(f) This Agreement and the provisions of the Mortgage, the
Pledge Agreement and the Letter of Credit Agreement shall supersede, to the
extent inconsistent with, any provisions of the Management Agreement relating to
the priority or subordination of the Management Agreement and the interests and
estates created thereby to the liens or charges of the Mortgage, the Pledge
Agreement and any of the other Operative Documents. Without limiting the
generality of the foregoing, the Manager acknowledges that it has been furnished
with copies of the Operative Documents and is familiar with the terms thereof,
and the Manager hereby waives any provisions of the
6
<PAGE>
<PAGE>
Management Agreement relating to insurance requirements, the application of
insurance proceeds and/or condemnation awards or similar payments which are
inconsistent with the terms of the Mortgage, Pledge Agreement and/or the Letter
of Credit Agreement.
(g) At the Bank's request, the Manager shall enter into
collateral assignments, in form and substance satisfactory to the Bank, of the
Manager's rights, title and interest in and to any transportation permits
relating to the Property. In addition, if the Bank or a purchaser becomes the
owner of the Partnership's interest in the Property then, upon the written
request of the Bank or such purchaser, the Manager shall directly assign its
rights, title and interest in and to any transportation permits relating to the
Property to the Bank or the purchaser, as the case may be, to the extent
permitted by law.
SECTION 2. DEFAULT BY PARTNERSHIP UNDER MANAGEMENT AGREEMENT.
(a) The Manager hereby covenants and agrees for the benefit of the Bank
that upon the occurrence of any event which would, under the terms of the
Management Agreement, give rise to a right on the part of the Manager to
terminate the Management Agreement (herein called a MANAGEMENT AGREEMENT
DEFAULT), the Manager shall notify the Partnership thereof immediately upon the
Manager's becoming aware of such Management Agreement Default, and shall not
exercise such right to terminate until:
(i) the Manager has first given the Bank written notice (the
DEFAULT NOTICE) setting forth (A) the occurrence of such Management Agreement
Default, describing the same in reasonable detail, (B) the provision of the
Management
7
<PAGE>
<PAGE>
Agreement violated by such Management Agreement Default, (C) the applicable cure
period, if any, and (D) the Manager's intent to terminate the Management
Agreement by reason thereof; and
(ii) except as otherwise provided in the following paragraph
(b), the Bank has failed to cure such management Agreement Default within thirty
(30) days after the later of (x) the receipt of the Default Notice or (y) the
expiration of the applicable cure period specified in the Default Notice or
otherwise permitted under the Management Agreement or, if a stay, order or
decree of a court of competent jurisdiction enjoining the termination by the
Manager of the Management Agreement shall have been obtained by the Partnership
prior to the expiration of the applicable cure period specified in the Default
Notice or otherwise permitted under the Management Agreement, within thirty (30)
days after such stay, order or decree (including any preliminary or permanent
injunction in substance continuing in effect the provisions of a temporary
restraining order or stay) shall have been vacated, dissolved or terminated,
whichever shall be the later (any such thirty (30) day period being hereinafter
called the BANK CURE PERIOD); PROVIDED that if such Management Agreement Default
cannot be cured by the payment of money and cannot with due diligence be cured
prior to the expiration of the Bank Cure Period but is nevertheless reasonably
curable, then the Manager shall not exercise such right to terminate if, and the
Bank Cure Period shall be extended for so long as, the Bank and/or the
Partnership commences to cure such Management Agreement Default within the Bank
Cure Period and thereafter prosecutes to completion the curing of such
Management Agreement Default with diligence and continuity.
8
<PAGE>
<PAGE>
(b) If a Management Agreement Default is not reasonably curable by the
Bank or if the Bank requires possession of the Property or any portion thereof
to effect such cure, Manager agrees that so long as the fees and other amounts
thereafter arising under the Management Agreement and payable to the Manager are
paid by the Bank or otherwise, Manager shall not exercise its right to terminate
the Management Agreement until sixty (60) days after the Bank has secured the
appointment of a receiver with respect to the Property (and the Bank hereby
agrees to apply promptly for such appointment) or the Bank has gained possession
thereof; PROVIDED, HOWEVER, that if such Management Agreement Default cannot
with due diligence be cured prior to the expiration of such sixty (60) day
period, the Manager shall not exercise such right to terminate if, and such
sixty (60) day period shall be extended for as long as, the Bank and/or
Partnership commences to cure such Management Agreement Default within such
sixty (60) day period and thereafter prosecutes to completion the curing of such
Management Agreement Default with diligence and continuity.
(c) In the event of the occurrence of any default by the Partnership
under the Management Agreement, the Bank may, in its sole discretion, take any
and all acts and measures which may be required to cure any such default,
including, without limitation, the expenditure of money; PROVIDED, HOWEVER,
nothing in this Section shall be construed to require the Bank to remedy or
correct any default of the Partnership or any other condition relating to or
arising in respect of the Management Agreement. In addition, the Bank shall have
the right, but not the obligation, to appear in and defend any action or
proceeding purporting to affect the security hereof or the rights and powers
9
<PAGE>
<PAGE>
of the Bank hereunder.
(d) For the purposes of this Agreement, any provision of the Management
Agreement providing for automatic termination of such Management Agreement or
for termination without notice or other action by the Manager, upon the
occurrence of a particular event, shall be ineffective with respect to the
rights of the Bank hereunder for so long as the Letter of Credit or the Letter
of Credit Agreement shall remain in effect, and upon the happening of any such
event the Manager shall promptly notify the Bank as provided in paragraph (a)
above and the Bank shall have the rights provided in paragraphs (a), (b) and (c)
above, and the Manager agrees, notwithstanding any termination of the Management
Agreement as to the Partnership, to continue to perform under the Management
Agreement for the benefit of the Bank as if the Management Agreement were still
in effect.
SECTION 3. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
The Manager hereby represents and warrants to and covenants and agrees
for the benefit of the Bank that:
(i) The Management Agreement is the only agreement
between the Partnership and the Manager with respect to the management of the
Project, and the Management Agreement embodies the entire agreement between the
Partnership and the Manager with respect to the management of the Project;
(ii) the Management Agreement is valid and in full
force and effect and has not been amended, modified or supplemented in any
respect except by the First Amendment thereto dated as of September 30, 1990 and
the Second Amendment
10
<PAGE>
<PAGE>
thereto dated as of January 31, 1991;
(iii) neither the Manager nor, to the best knowledge
of the Manager, the Partnership is in default with respect to its obligations to
the other under the Management Agreement, nor is any condition now existing
which, with notice or lapse of time or both, would constitute a default
thereunder, and all terms and conditions have been performed as required under
the Management Agreement;
(iv) the Manager has the unencumbered right to enter
into this Agreement;
(v) the Manager has not received notice of any prior
assignment or transfer of the Partnership's interest under the Management
Agreement;
(vi) the Manager shall not alter, modify, amend or
otherwise change the terms, covenants or conditions of the Management Agreement
or cancel or terminate the Management Agreement (except in accordance with the
terms hereof) or accept a surrender thereof or waive, reduce or in any manner
release the Partnership from any obligation thereunder, without the prior
written approval of the Bank, which approval may be granted or withheld by the
Bank in its sole discretion;
(vii) the Manager will within ten (10) days after
request therefor from the Bank deliver to the Bank a certificate, executed on
behalf of the Manager by the chief financial officer of the Manager, stating
that as of the date of such certificate, no default or event of default under
the Management Agreement by the Partnership has occurred and is continuing, or
if any such default or event of default has occurred and is continuing,
describing in reasonable detail each such default or event of default and
11
<PAGE>
<PAGE>
the action, if any and if known, taken or being taken to cure the same; and
(viii) notwithstanding anything to the contrary
contained in the Management Agreement, the Manager shall not make or accept, as
the case may be, any prepayments of any portion of the Manager's fees under the
Management Agreement.
SECTION 4. LIABILITY OF BANK.
Except as expressly provided in Sections 1 and 2 of this Agreement,
neither this Agreement nor any action on the part of the Bank shall constitute
an assumption by the Bank of any of the obligations of the Partnership under the
Management Agreement, and the Partnership shall continue to be liable to the
Manager for all of its obligations thereunder.
SECTION 5. TERMINATION OF AGREEMENT.
This Agreement shall terminate upon the expiration or termination of
the Letter of Credit Agreement and the Letter of Credit and the satisfaction of
all obligations, both monetary and otherwise, of the Partnership under the
Letter of Credit Agreement and the Letter of Credit. The Bank, at the
Partnership's expense, shall execute and deliver such instruments as the Manager
may reasonably request to evidence such termination.
SECTION 6. NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications provided for hereunder shall be in writing and mailed (registered
or certified mail, return receipt requested, and postage prepaid),
hand-delivered, with signed receipt, or sent by nationally-recognized overnight
courier, if to the Bank, at its address
12
<PAGE>
<PAGE>
at 225 Liberty Street, Two World Financial Center, New York, New York 10281,
Attention: Real Estate Finance Group (Mr. Akira Fujii or Mr. Russ LoPinto), with
a copy similarly delivered to Kaye, Scholer, Fierman, Hays & Handler, 425 Park
Avenue, New York, New York 10022, Attention: Warren J. Bernstein, Esq. and if
to the Manager, at c/o Mr. Hugh A. Andrews, Williams Hospitality Management
Corp., 187 East Isla Verde Road, Carolina, Puerto Rico 00913, with a copy to
Whitman and Ransom, 200 Park Avenue, New York, New York 10166, Attention:
Jeffrey N. Siegel, Esq., or to such other address with respect to any party as
such party shall notify the other party in writing. All such notices and other
communications shall be effective when received at the address specified
aforesaid.
SECTION 7. MISCELLANEOUS.
(a) All covenants and agreements herein shall apply to, inure to the
benefit of, and bind the respective successors and assigns of the Bank and the
Manager. Upon any assignment or transfer by the Bank of its rights and interests
under this Agreement, the Bank shall be relieved of all obligations and
liabilities hereunder thereafter accruing.
(b) In the event any term or provision of this Agreement or the
application thereof to any person or circumstance shall, for any reason or to
any extent be invalid or unenforceable, the remaining terms and provisions of
this Agreement, or the application of any such provision to persons or
circumstances other than those as to whom or which it has been determined to be
invalid or unenforceable, shall not be affected thereby, and every provision of
this Agreement shall be valid and enforceable
13
<PAGE>
<PAGE>
to the fullest extent permitted by law.
(c) The Manager hereby covenants and agrees to execute and deliver, in
recordable form if necessary, any and all further documents and instruments
reasonably requested by the Bank to give effect to the terms and provisions of
this Agreement and to take such further acts or actions as may be necessary to
effectuate the provisions hereof or any transaction contemplated hereby.
(d) Any provision of this Agreement to the contrary notwithstanding,
this Agreement shall not create, or be construed as evidence of, any right,
interest or estate of the Manager in or with respect to the Project not
expressly set forth in or created by the Management Agreement.
(e) This Agreement may be amended or modified only by an instrument in
writing executed by the parties hereto.
(f) This Agreement shall be governed by and construed according to the
laws of the Commonwealth of Puerto Rico.
(g) The captions in this Agreement are for convenience of reference
only and in no way define, limit or describe the scope of this Agreement or the
intent of any provision hereof.
(h) By the execution hereof, the Manager hereby represents that it has
received a copy of the Assignment and hereby consents to the provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
14
<PAGE>
<PAGE>
THE MITSUBISHI BANK, LIMITED,
acting through its New York Branch
By: /s/
-------------------------------------
Name: Tadaaki Hamada
Title: Senior Vice President
WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION
By: /s/
-------------------------------------
Name: Hugh A. Andrews
Title: President
Affidavit No. 106 (Copy)
Acknowledged and subscribed before me by Hugh A. Andrews, of legal age,
married, business executive and resident of San Juan, Puerto Rico, in his
capacity as President of Williams Hospitality Management Corporation and by
Tadaaki Hamada, of legal age, married, banker and resident of Wyckoff, New
Jersey, in his capacity as Senior Vice President of The Mitsubishi Bank,
Limited, acting through its New York Branch identified by the means set forth in
Article 17(c) of the Notarial Law of Puerto Rico in San Juan, Puerto Rico, this
7th day of February, 1991.
_________________________________________
Notary Public
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ISDA(R)
International Swap Dealers Association, Inc.
INTEREST RATE
AND
CURRENCY EXCHANGE AGREEMENT
Dated as of February 7, 1991
THE MITSUBISHI BANK, LIMITED acting through its New York Branch and EL
CONQUISTADOR PARTNERSHIP L.P.
have entered and/or anticipate entering into one or more transactions (each a
"Swap Transaction"). The parties agree that each Swap Transaction will be
governed by the terms and conditions set forth in this document (which includes
the schedule (the "Schedule")) and in the documents (each a "Confirmation")
exchanged between the parties confirming such Swap Transactions. Each
Confirmation constitutes a supplement to and forms part of this document and
will be read and construed as one with this document, so that this document and
all the Confirmations constitute a single agreement between the parties
(collectively referred to as this "Agreement"). The parties acknowledge that all
Swap Transactions are entered into in reliance on the fact that this document
and all Confirmations will form a single agreement between the parties, it being
understood that the parties would not otherwise enter into any Swap
Transactions.
Accordingly, the parties agree as follows:-
1. INTERPRETATION
(a) DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Agreement.
(b) INCONSISTENCY. In the event of any inconsistency between the provisions of
any Confirmation and this document, such Confirmation will prevail for the
purpose of the relevant Swap Transaction.
2. PAYMENTS
(a) OBLIGATIONS AND CONDITIONS.
(i) Each party will make each payment specified in each Confirmation as
being payable by it.
(ii) Payments under this Agreement will be made not later than the due
date for value on that
Copyright (C) 1987 by International Swap Dealers Association, Inc.
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date in the place of the account specified in the relevant Confirmation
or otherwise pursuant to this Agreement, in freely transferable funds
and in the manner customary for payments in the required currency.
(iii) Each obligation of each party to pay any amount due under Section
2(a)(i) is subject to (1) the condition precedent that no Event of
Default or Potential Event of Default with respect to the other party
has occurred and is continuing and (2) each other applicable condition
precedent specified in this Agreement.
(b) CHANGE OF ACCOUNT. Either party may change its account by giving notice to
the other party at least five days prior to the due date for payment for which
such change applies.
(c) NETTING. If on any date amounts would otherwise be payable:-
(i) in the same currency; and
(ii) in respect of the same Swap Transaction.
by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.
If the parties specify "Net Payments -- Corresponding Payment Dates" in a
Confirmation or otherwise in this Agreement, sub-paragraph (ii) above will cease
to apply to all Swap Transactions with effect from the date so specified (so
that a net amount will be determined in respect of all amounts due on the same
date in the same currency, regardless of whether such amounts are payable in
respect of the same Swap Transaction); provided that, in such case, this Section
2(c) will apply separately to each office through which a party makes and
receives payments as set forth in Section 10.
(d) DEDUCTION OR WITHHOLDING FOR TAX.
(i) GROSS-UP. All payments under this Agreement will be made without
any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified
by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that
party ("X") will:-
(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be
deducted or withheld (including the full amount required to be deducted
or withheld from any additional amount paid by X to Y under this
Section 2(d) promptly upon the earlier of determining that such
deduction or withholding is required or receiving notice that such
amount has been assessed against Y:
(3) promptly forward to Y an official receipt (or a certified copy), or
other documentation reasonably acceptable to Y, evidencing such payment
to such authorities; and
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(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount
actually received by Y (free and clear of Indemnifiable Taxes, whether
assessed against X or Y) will equal the full amount Y would have
received had no such deduction or withholding been required. However, X
will not be required to pay any additional amount to Y to the extent
that it would not be required to be paid but for:-
(A) the failure by Y to comply with or perform any agreement
contained in Section 4(a)(i) or 4(d); or
(b) the failure of a representation made by Y pursuant to
Section 3(f) to be accurate and true unless such failure would
not have occurred but for a Change in Tax Law.
(ii) LIABILITY. If:-
(1) X is required by any applicable law, as modified by the
practice of any relevant governmental revenue authority, to
make any deduction or withholding in respect of which X would
not be required to pay an additional amount to Y under Section
2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly
against X,
then, except to the extent Y has satisfied or then satisfies the
liability resulting from such Tax, Y will promptly pay to X the amount
of such liability (including any related liability for interest, but
including any related liability for penalties only if Y has failed to
comply with or perform any agreement contained in Section 4(a)(i) or
(d)).
(e) DEFAULT INTEREST. A party that defaults in the payment of any amount due
will, to the extent permitted by law, be required to pay interest (before as
well as after judgment) on such amount to the other party on demand in the same
currency as the overdue amount, for the period from (and including) the original
due date for payment to (but excluding) the date of actual payment, at the
Default Rate. Such interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
3. REPRESENTATION
Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Swap Transaction is entered
into and, in the case of the representations in Section 3(f), at all times until
the termination of this Agreement) that:-
(a) BASIC REPRESENTATIONS.
(i) STATUS. It is duly organized and validly existing under the laws of
the jurisdiction of its organization or incorporation and, if relevant
under such laws, in good standing;
(ii) POWERS. It has the power to execute and deliver this Agreement and
any other documentation relating to this Agreement that it is required
by this Agreement to deliver and to
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perform its obligations under this Agreement and any obligations it has
under any Credit Support Document to which it is a party and has taken
all necessary action to authorize such execution, delivery and
performance;
(iii) NO VIOLATION OR CONFLICT. Such execution, delivery and
performance do not violate or conflict with any law applicable to it,
any provision of its constitutional documents, any order or judgment of
any court or other agency of government applicable to it or any of its
assets or any contractual restriction binding on or affecting it or any
of its assets;
(iv)CONSENTS. All governmental and other consents that are required to
have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in
full force and effect and all conditions of any such consents have been
complied with; and
(v) OBLIGATIONS BINDING. Its obligations under this Agreement and any
Credit Support Document to which it is a party constitute its legal,
valid and binding obligations, enforceable in accordance with their
respective terms (subject to applicable bankruptcy, reorganization,
insolvency, moratorium or similar laws affecting creditors' rights
generally and subject, as to enforceability, to equitable principles of
general application (regardless of whether enforcement is sought in a
proceeding in equity or at law)).
(b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default
or, to its knowledge, Termination Event with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement or any Credit
Support Document to which it is a party.
(c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened
against it or any of its Affiliates any action, suit or proceeding at law or in
equity or before any court, tribunal, governmental body, agency or official or
any arbitrator that purports to draw into question, or is likely to affect, the
legality, validity or enforceability against it of this Agreement or any Credit
Support Document to which it is a party or its ability to perform its
obligations under this Agreement or such Credit Support Document.
(d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in paragraph 2 of Part 3 of the Schedule
is, as of the date of the information, true, accurate and complete in every
material respect.
(e) PAYER TAX REPRESENTATION. Each representation specified in Part 2 of the
Schedule as being made by it for the purpose of this Section 3(e) is accurate
and true.
(f) PAYEE TAX REPRESENTATIONS. Each representation specified in Part 2 of the
Schedule as being made by it for the purpose of this Section 3(f) is accurate
and true.
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4. AGREEMENTS
Each party agrees with the other that, so long as it has or may have any
obligation under this Agreement or under any Credit Support Document to which it
is a party:-
(a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party:-
(i) any forms, documents or certificates relating to taxation specified
in Part 3 of the Schedule or any Confirmation; and
(ii) any other documents specified in Part 3 of the Schedule or any
Confirmation,
by the date specified in Part 3 of the Schedule or such Confirmation or, if none
is specified, as soon as practicable.
(b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.
(c) COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.
(d) TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.
(e) PAYMENT OF STAMP TAX. It will pay any Stamp Tax levied or imposed upon it or
in respect of its execution or performance of this Agreement by a jurisdiction
in which it is incorporated, organized, managed and controlled, or considered to
have its seat, or in which a branch or office through which it is acting for the
purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will
indemnify the other party against any Stamp Tax levied or imposed upon the other
party or in respect of the other party's execution or performance of this
Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax
Jurisdiction with respect to the other party.
5. EVENTS OF DEFAULT AND TERMINATION EVENTS
(a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if
applicable, any Specified Entity of such party, of any of the following events
constitutes an event of default (an "Event of Default") with respect to such
party:-
(i) FAILURE TO PAY. Failure by the party to pay, when due, any amount
required to be paid by it under this Agreement if such failure is not
remedied on or before the third Business Day after notice of such
failure to pay is given to the party;
(ii) BREACH OF AGREEMENT. Failure by the party to comply with or
perform any agreement
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or obligation (other than an obligation to pay any amount required to
be paid by it under this Agreement or to give notice of a Termination
Event or any agreement or obligation under Section 4(a)(i) or 4(d)) to
be compiled with or performed by the party in accordance with this
Agreement if such failure is not remedied on or before the thirtieth
day after notice of such failure is given to the party;
(iii) CREDIT SUPPORT DEFAULT.
(1) Failure by the party or any applicable Specified Entity to
comply with or perform any agreement or obligation to be
complied with or performed by the party or such Specified
Entity in accordance with any Credit Support Document if such
failure is continuing after any applicable grace period has
elapsed;
(2) the expiration or termination of such Credit Support
Document, or the ceasing of such Credit Support Document to be
in full force and effect, prior to the final Scheduled Payment
Date of each Swap Transaction to which such Credit Support
Document relates without the written consent of the other
party; or
(3) the party or such Specified Entity repudiates, or
challenges the validity of, such Credit Support Document;
(iv) MISREPRESENTATION. A representation (other than a representation
under Section 3(e) or (f) made or repeated or deemed to have been made
or repeated by the party or any applicable Specified Entity in this
Agreement or any Credit Support Document relating to this Agreement
proves to have been incorrect or misleading in any material respect
when made or repeated or deemed to have been made or repeated;
(v) DEFAULT UNDER SPECIFIED SWAPS. The occurrence of an event of
default in respect of the party or any applicable Specified Entity
under a Specified Swap which, following the giving of any applicable
notice or the lapse of any applicable grace period, has resulted in the
designation or occurrence of an early termination date in respect of
such Specified Swap;
(vi) CROSS DEFAULT. If "Cross Default" is specified in Part 1 of the
Schedule as applying to the party, (1) the occurrence or existence of
an event of condition in respect of such party or any applicable
Specified Entity under one or more agreements or instruments relating
to Specified Indebtedness of such party or any such Specified Entity in
an aggregate amount of not less than the Threshold Amount (as specified
in Part 1 of the Schedule) which has resulted in such Specified
Indebtedness becoming, or becoming capable at such time of being
declared, due and payable under such agreements or instruments, before
it would otherwise have been due and payable or (2) the failure by such
party or any such Specified Entity to make one or more payments at
maturity in an aggregate amount of not less than the Threshold Amount
under such agreements or instruments (after giving effect to any
applicable grace period);
(vii) BANKRUPTCY. The party or any applicable Specified Entity:-
(1) is dissolved; (2) becomes insolvent or fails or is unable
or admits in writing its inability generally to pay its debts
as they become due; (3) makes a general assignment,
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arrangement or composition with or for the benefit of its
creditors; (4) institutes or has instituted against it a
proceeding seeking a judgment of insolvency or bankruptcy or
any other relief under any bankruptcy or insolvency law or
other similar law affecting creditors' rights, or a petition
is presented for the winding-up or liquidation of the party or
any such Specified Entity, and, in the case of any such
proceeding or petition instituted or presented against it,
such proceeding or petition (A) results in a judgment of
insolvency or bankruptcy or the entry of an order for relief
or the making of an order for the winding-up or liquidation of
the party or such Specified Entity or (B) is not dismissed,
discharged, stayed or restrained in each case within 30 days
of the institution or presentation thereof; (5) has a
resolution passed for its winding-up or liquidation; (6) seeks
or becomes subject to the appointment of an administrator,
receiver, trustee, custodian or other similar official for it
or for all or substantially all its assets (regardless of how
brief such appointment may be, or whether any obligations are
promptly assumed by another entity or whether any other event
described in this clause (6) has occurred and is continuing;
(7) any event occurs with respect to the party or any such
Specified Entity which, under the applicable laws of any
jurisdiction, has an analogous effect to any of the events
specified in clauses (1) to (6) (inclusive); or (8) takes any
action in furtherance of, or indicating its consent to,
approval of, or acquiescence in, any of the foregoing acts;
other than in the case of clause (1) or (5) or, to the extent it
relates to those clauses, clause (8), for the purpose of a
consolidation, amalgamation or merger which would not constitute an
event described in (viii) below; or
(viii) MERGER WITHOUT ASSUMPTION. The party consolidates or amalgamates
with, or merges into, or transfers all or substantially all its assets
to, another entity and, at the time of such consolidation,
amalgamation, merger or transfer:-
(1) the resulting, surviving or transferee entity fails to
assume all the obligations of such party under this Agreement
by operation of law or pursuant to an agreement reasonably
satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document relating to
this Agreement fail to extend (without the consent of the
other party) to the performance by such resulting, surviving
or transferee entity of its obligations under this Agreement.
(b) TERMINATION EVENTS. The occurrence at any time with respect to a
party or, if applicable, any Specified Entity of such party of any event
specified below constitutes an illegality if the event is specified in (i)
below, a Tax Event if the event is specified in (ii) below, a Tax Event Upon
Merger if the event is specified in (iii) below or a Credit Event Upon Merger if
the event is specified in (iv) below:-
(i) ILLEGALITY. Due to the adoption of, or any change in, any
applicable law after the date on which such Swap Transaction
is entered into, or due to the promulgation of, or any change
in, the interpretation by any court, tribunal or regulatory
authority with competent jurisdiction of any applicable law
after such date, it becomes unlawful (other than as a result
of a breach by the party of Section 4(b) for such party (which
will be the
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Affected Party):-
(1) to perform any absolute or contingent obligation
to make a payment or to receive a payment in respect
of such Swap Transaction or to comply with any other
material provision of this Agreement relating to such
Swap Transaction; or
(2) to perform, or for any applicable Specified
Entity to perform, any contingent or other obligation
which the party (or such Specified Entity) has under
any Credit Support Document relating to such Swap
Transaction;
(ii) TAX EVENT.
(1) The party (which will be the Affected Party) will
be required on the next succeeding Scheduled Payment
Date to pay to the other party an additional amount
in respect of an Indemnifiable Tax under Section
2(d)(i)(4) (except in respect of interest under
Section 2 (e)) as a result of a Change in Tax Law; or
(2) there is a substantial likelihood that the party
(which will be the Affected Party) will be required
on the next succeeding Scheduled Payment Date to pay
to the other party an additional amount in respect of
an Indemnifiable Tax under Section 2(d)(i)(4) (except
in respect of interest under Section 2(e)) and such
substantial likelihood results from an action taken
by a taxing authority, or brought in a court of
competent jurisdiction, on or after the date on which
such Swap Transaction was entered into (regardless of
whether such action was taken or brought with respect
to a party to this Agreement);
(iii) TAX EVENT UPON MERGER. The party (the "Burdened Party")
on the next succeeding Scheduled Payment Date will either (1)
be required to pay an additional amount in respect of an
Indemnifiable Tax under Section 2(d)(i)(4) (except in respect
of interest under Section 2(e)) or (2) receive a payment from
which an amount has been deducted or withheld for or on
account of any Indemnifiable Tax in respect of which the other
party is not required to pay an additional amount, in either
case as a result of a party consolidating or amalgamating
with, or merging into, or transferring all or substantially
all its assets to, another entity (which will be the Affected
Party) where such action does not constitute an event
described in Section 5(a)(viii); or
(iv) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger"
is specified in Part 1 of the Schedule as applying to the
party, such party ("X") consolidates or amalgamates with, or
merges into, or transfers all or substantially all its assets
to, another entity and such action does not constitute an
event described in Section 5(a)(viii) but the creditworthiness
of the resulting, surviving or transferee entity (which will
be the Affected Party) is materially weaker than that of X
immediately prior to such action.
(c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
illegality, it will be treated as an illegality and will not constitute an Event
of Default.
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6. Early Termination
(a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party may, by not more than 20 days notice to the
Defaulting Party specifying the relevant Event of Default, designate a day not
earlier than the day such notice is effective as an Early Termination Date in
respect of all outstanding Swap Transactions. However, an Early Termination Date
will be deemed to have occurred in respect of all Swap Transactions immediately
upon the occurrence of any Event of Default specified in Section 5(a)(vii)(1),
(2), (3), (5), (6), (7) or (8) and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence of any Event of Default specified in Section
5(a)(vii)(4).
(b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.
(i) NOTICE. Upon the occurrence of a Termination Event, an Affected
Party will, promptly upon becoming aware of the same, notify the other
party thereof, specifying the nature of such Termination Event and the
Affected Transactions relating thereto. The Affected Party will also
give such other information to the other party with regard to such
Termination Event as the other party may reasonably require.
(ii) TRANSFER TO AVOID TERMINATION EVENT. If either an illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
the Affected Party, the Affected Party will as a condition to its right
to designate an Early Termination Date under Section 6(b)(iv) use all
reasonable efforts (which will not require such party to incur a loss,
excluding immaterial, incidental expenses) to transfer within 20 days
after it gives notice under Section 6(b)(i) all its rights and
obligations under this Agreement in respect of the Affected
Transactions to another of its offices, branches or Affiliates so that
such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give
notice to the other party to that effect within such 20 day period,
whereupon the other party may effect such a transfer within 30 days
after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be
subject to and conditional upon the prior written consent of the other
party, which consent will not be withheld if such other party's
policies in effect at such time would permit it to enter into swap
transactions with the transferee on the terms proposed.
(iii) TWO AFFECTED PARTIES. If an illegality under Section 5(b)(i)(1)
or a Tax Event occurs and there are two Affected Parties, each party
will use all reasonable efforts to reach agreement within 30 days after
notice thereof is given under Section 6(b)(i) on action that would
cause such Termination Event to cease to exist.
(iv) RIGHT TO TERMINATE. If:-
(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected
with respect to all Affected Transactions within 30 days
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after an Affected Party gives notice under Section 6(b)(i); or
(2) an illegality under Section 5(b)(i)(2) or a Credit Event
Upon Merger occurs, or a Tax Event Upon Merger occurs and the
Burdened Party is not the Affected Party, either party in the
case of an Illegality, the Burdened Party in the case of a Tax
Event Upon Merger, any Affected Party in the case of a Tax
Event, or the party which is not the Affected Party in the
case of a Credit Event Upon Merger, may, by not more than 20
days notice to the other party and provided that the relevant
Termination Event is then continuing, designate a day not
earlier than the day such notice is effective as an Early
Termination Date in respect of all Affected Transactions.
(c) EFFECT OF DESIGNATION.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date
so designated, whether or not the relevant Event of Default or
Termination Event is continuing on the relevant Early Termination Date.
(ii) Upon the effectiveness of notice designating an Early Termination
Date (or the deemed occurrence of an Early Termination Date), the
obligations of the parties to make any further payments under Section
2(a)(i) in respect of the Terminated Transactions will terminate, but
without prejudice to the other provisions of this Agreement.
(d) CALCULATIONS.
(i) STATEMENT. Following the occurrence of an Early Termination Date,
each party will make the calculations (including calculation of
applicable interest rates) on its part contemplated by Section 6(e) and
will provide to the other party a statement (1) showing, in reasonable
detail, such calculations (including all relevant quotations) and (2)
giving details of the relevant account to which any payment due to it
under Section 6(e) is to be made. In the absence of written
confirmation of a quotation obtained in determining a Market Quotation
from the source providing such quotation, the records of the party
obtaining such quotation will be conclusive evidence of the existence
and accuracy of such quotation.
(ii) DUE DATE. The amount calculated as being payable under Section
6(e) will be due on the day that notice of the amount payable is
effective (in the case of an Early Termination Date which is designated
or deemed to occur as a result of an Event of Default) and not later
than the day which is two Business Days after the day on which notice
of the amount payable is effective (in the case of an Early Termination
Date which is designated as a result of a Termination Event). Such
amount will be paid together with (to the extent permitted under
applicable law) interest thereon in the Termination Currency from (and
including) the relevant Early Termination Date to (but excluding) the
relevant due date, calculated as follows:-
(1) if notice is given designating an Early Termination Date
or if an Early Termination Date is deemed to occur, in either
case as a result of an Event of Default, at the Default Rate;
or
(2) if notice is given designating an Early Termination Date
as a result of a
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Termination Event, at the Default Rate minus 1% per annum.
Such interest will be calculated on the basis of a daily compounding
and the actual number of days elapsed.
(e) PAYMENTS ON EARLY TERMINATION.
(i) DEFAULTING PARTY OR ONE AFFECTED PARTY. If notice is given
designating an Early Termination Date or if an Early Termination Date
is deemed to occur and there is a Defaulting Party or only one Affected
Party, the other party will determine the Settlement Amount in respect
of the Terminated Transactions and:-
(1) if there is a Defaulting Party, the Defaulting Party will
pay to the other party the excess, if a positive number, of
(A) the sum of such Settlement Amount and the Termination
Currency Equivalent of the Unpaid Amounts owing to the other
party over (B) the Termination Currency Equivalent of the
Unpaid Amounts owing to the Defaulting Party; and
(2) if there is an Affected Party, the payment to be made will
be equal to (A) the sum of such Settlement Amount and the
Termination Currency Equivalent of the Unpaid Amounts owing to
the party determining the Settlement Amount ("X") less (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to
the party not determining the Settlement Amount ("Y").
(ii) TWO AFFECTED PARTIES. If notice is given of an Early Termination
Date and there are two Affected Parties, each party will determine a
Settlement Amount in respect of the Terminated Transactions and the
payment to be made will be equal to (1) the sum of (A) one-half of the
difference between the Settlement Amount of the party with the higher
Settlement Amount ("X") and the Settlement Amount of the party with the
lower Settlement Amount ("Y") and (B) the Termination Currency
Equivalent of the Unpaid Amounts owing to X less (2) the Termination
Currency Equivalent of the Unpaid Amounts owing to Y.
(iii) PARTY OWING. If the amount calculated under Section 6(e)(i)(2) or
(ii) is a positive number, Y will pay such amount to X; if such amount
is a negative number, X will pay the absolute value of such amount to
Y.
(iv) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
Termination Date is deemed to occur, the amount determined under
Section 6(e)(i) will be subject to such adjustments as are appropriate
and permitted by law to reflect any payments made by one party to the
other under this Agreement (and retained by such other party) during
the period from the relevant Early Termination Date to the date for
payment determined under Section 6(d)(ii).
(v) PRE-ESTIMATE OF LOSS. The parties agree that the amounts
recoverable under this Section 6(e) are a reasonable pre-estimate of
loss and not a penalty. Such amounts are payable for the loss of
bargain and the loss of protection against future risks and except as
otherwise provided in this Agreement neither party will be entitled to
recover any additional damages as a consequence of such losses.
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7. TRANSFER
Subject to Section 6(b) and to any exception provided in the Schedule, neither
this Agreement nor any interest or obligation in or under this Agreement may be
transferred by either party without the prior written consent of the other party
(other than pursuant to a consolidation or amalgamation with, or merger into, or
transfer of all or substantially all its assets to, another entity) and any
purported transfer without such consent will be void.
8. CONTRACTUAL CURRENCY
(a) PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts due in
respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency due
in respect of this Agreement, the party required to make the payment will, to
the extent permitted by applicable law, immediately pay such additional amount
in the Contractual Currency as may be necessary to compensate for the shortfall.
If for any reason the amount in the Contractual Currency so received exceeds the
amount in the Contractual Currency due in respect of this Agreement, the party
receiving the payment will refund promptly the amount of such excess.
(b) JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.
(c) SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or
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proof being made for any other sums due in respect of this Agreement.
(d) EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.
9. MISCELLANEOUS
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.
(b) AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing and executed by each of the
parties or confirmed by an exchange of telexes.
(c) SURVIVAL OF OBLIGATIONS. Except as provided in Section 6(c)(ii), the
obligations of the parties under this Agreement will survive the termination of
any Swap Transaction.
(d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.
(e) COUNTERPARTS AND CONFIRMATIONS.
(i) This Agreement may be executed in counterparts, each of which will
be deemed an original.
(ii) A Confirmation may be executed in counterparts or be created by an
exchange of telexes, which in either case will be sufficient for all
purposes to evidence a binding supplement to this Agreement. Any such
counterpart or telex will specify that it constitutes a Confirmation.
(f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise of that right,
power or privilege or the exercise of any other right, power or privilege.
(g) HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.
10. MULTIBRANCH PARTIES
If a party is specified as a Multibranch party in Part 4 of the Schedule, such
Multibranch Party may make and receive payments under any Swap Transaction
through any of its branches or offices listed in the Schedule (each an
"Office"). The Office through which it so makes and receives payments for the
purpose of any Swap Transaction will be specified in the relevant Confirmation
and any change of Office for such purpose requires the prior written consent of
the other party. Each Multibranch Party represents to the other party that,
notwithstanding the place of payment, the obligations of each Office are for all
purposes under this Agreement the obligations of such Multibranch Party. This
representation will be
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deemed to be repeated by such Multibranch Party on each date on which a Swap
Transaction is entered into.
11. EXPENSES
A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or by reason of the early
termination of any Swap Transaction, including, but not limited to, costs of
collection.
12. NOTICES
(a) EFFECTIVENESS. Any notice or communication in respect of this Agreement will
be sufficiently given to a party if in writing and delivered in person, sent by
certified or registered mail (airmail, if overseas) or the equivalent (with
return receipt requested) or by overnight courier or given by telex (with
answerback received) at the address or telex number specified in Part 4 of the
Schedule. A notice or communication will be effective:-
(i) if delivered by hand or sent by overnight courier, on the day it is
delivered (or if that day is not a day on which commercial banks are
open for business in the city specified in the address for notice
provided by the recipient (a "Local Banking Day"), or if delivered
after the close of business on a Local Banking Day, on the first
following day that is a Local Banking Day);
(ii) if sent by telex, on the day the recipient's answerback is
received (or if that day is not a Local Banking Day, or if after the
close of business on a Local Banking Day, on the first following day
that is a Local Banking Day); or
(iii) if sent by certified or registered mail (airmail, if overseas) or
the equivalent (return receipt requested), three Local Banking Days
after Despatch if the recipient's address for notice is in the same
country as the place of despatch and otherwise seven Local Banking Days
after despatch.
(b) CHANGE OF ADDRESSES. Either party may by notice to the other change
the address or telex number at which notices or communications are to be given
to it.
13. GOVERNING LAW AND JURISDICTION
(a) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in Part 4 of the Schedule.
(b) JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:-
(i) submits to the jurisdiction of the English courts, if this
Agreement is expressed to be governed by English law, or to the
non-exclusive jurisdiction of the courts of the State of New York and
the United States District Court located in the Borough of Manhattan in
New York City, if this Agreement is expressed to be governed by the
laws of the State of New York; and
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(ii) waives any objection which it may have at any time to the laying
of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and
further waives the right to object, with respect to such Proceedings,
that such court does not have jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
reenactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.
(C) SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in Part 4 of the Schedule to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason any
party's Process Agent is unable to act as such, such party will promptly notify
the other party and within 30 days appoint a substitute process agent acceptable
to the other party. The parties irrevocably consent to service of process given
in the manner provided for notices in Section 12. Nothing in this Agreement will
affect the right of either party to serve process in any other manner permitted
by law.
(D) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.
14. DEFINITIONS
As used in this Agreement:-
"AFFECTED PARTY" has the meaning specified in Section 5(b).
"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Swap
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Swap Transactions.
"AFFILIATE" means, subject to Part 4 of the Schedule, in relation to any person,
any entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity under common control
with the person. For this purpose, "control" of any entity or person means
ownership of a majority of the voting power of the entity or person.
"BURDENED PARTY" has the meaning specified in Section 5(b).
"BUSINESS DAY" means (a) in relation to any payment due under Section 2(a)(i), a
day on which commercial banks and foreign exchange markets are open for business
in the place(s) specified in the
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relevant Confirmation and (b) in relation to any other payment, a day on which
commercial banks and foreign exchange markets are open for business in the place
where the relevant account is located and, if different, in the principal
financial centre of the currency of such payment.
"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Swap Transaction is entered into.
"CONSENT" includes a consent, approval, action, authorization, exemption,
notice, filing, registration or exchange control consent.
"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).
"CREDIT SUPPORT DOCUMENT" means any agreement or instrument which is specified
as such in this Agreement.
"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) of
funding the relevant amount plus 1% per annum.
"DEFAULTING PARTY" has the meaning specified in Section 6(a).
"EARLY TERMINATION DATE" means the date specified as such in a notice given
under Section 6(a) or 6(b)(iv).
"EVENT OF DEFAULT" has the meaning specified in Section 5(a).
"ILLEGALITY" has the meaning specified in Section 5(b).
"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organized, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).
"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.
"LOSS" means, with respect to a Terminated Transaction and a party, an amount
equal to the total amount (expressed as a positive amount) required, as
determined as of the relevant Early Termination Date (or, if an Early
Termination Date is deemed to occur, as of a time as soon thereafter as
practicable) by the party in good faith, to compensate it for any losses and
costs (including loss of bargain and costs of funding but excluding legal fees
and other out-of-pocket expenses) that it may incur as a result of the
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early termination of the obligations of the parties in respect of such
Terminated Transaction. If a party determines that it would gain or benefit from
such early termination, such party's Loss will be an amount (expressed as a
negative amount) equal to the amount of the gain or benefit as determined by
such party.
"MARKET QUOTATION" means, with respect to a Terminated Transaction and a party
to such Terminated Transaction making the determination, an amount (which may be
negative) determined on the basis of quotations from Reference Market-makers for
the amount that would be or would have been payable on the relevant Early
Termination Date, either by the party to the Terminated Transaction making the
determination (to be expressed as a positive amount) or to such party (to be
expressed as a negative amount), in consideration of an agreement between such
party and the quoting Reference Market-maker and subject to such documentation
as they may in good faith agree, with the relevant Early Termination Date as the
date of commencement of such agreement (or, if later, the date specified as the
effective date of such Terminated Transaction in the relevant Confirmation),
that would have the effect of preserving for such party the economic equivalent
of the payment obligations of the parties under Section 2(a)(i) in respect of
such Terminated Transaction that would, but for the occurrence of the relevant
Early Termination Date, fall due after such Early Termination Date (excluding
any Unpaid Amounts in respect of such Terminated Transaction but including,
without limitation, any amounts that would, but for the occurrence of the
relevant Early Termination Date, have been payable (assuming each applicable
condition precedent had been satisfied) after such Early Termination Date by
reference to any period in which such Early Termination Date occurs). The party
making the determination (or its agent) will request each Reference Market-maker
to provide its quotation to the extent practicable as of the same time (without
regard to different time zones) on the relevant Early Termination Date (or, if
an Early Termination Date is deemed to occur, as of a time as soon thereafter as
practicable). The time as of which such quotations are to be obtained will, if
only one party is obliged to make a determination under Section 6(e), be
selected in good faith by that party and otherwise will be agreed by the
parties. If more than three such quotations are provided, the Market Quotation
will be the arithmetic mean of the Termination Currency Equivalent of the
quotations, without regard to the quotations having the highest and lowest
values. If exactly three such quotations are provided, the Market Quotation will
be the quotation remaining after disregarding the quotations having the highest
and lowest values. If fewer than three quotations are provided, it will be
deemed that the Market Quotation in respect of such Terminated Transaction
cannot be determined.
"OFFICE" has the meaning specified in Section 10.
"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or
the lapse of time or both, would constitute an Event of Default.
"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant swap market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria that
such party applies generally at the time in deciding whether to offer or to make
an extension of credit and (b) to the extent practicable, from among such
dealers having an office in the same city.
"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a) in
which the party is incorporated, organized, managed and controlled or considered
to have its seat, (b) where a branch or office through which the party is acting
for purposes of this Agreement is located, (c) in which the party executes this
Agreement and (d) in relation to any payment, from or through which such payment
is
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made.
"SCHEDULED PAYMENT DATE" means a date on which a payment is due under Section
2(a)(i) with respect to a Swap Transaction.
"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:-
(a) the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction for which a Market
Quotation is determined; and
(b) for each Terminated Transaction for which a Market Quotation is not, or
cannot be, determined, the Termination Currency Equivalent of such party's Loss
(whether positive or negative);
provided that if the parties agree that an amount may be payable under Section
6(e) to a Defaulting Party by the other party, no account shall be taken of a
Settlement Amount expressed as a negative number.
"SPECIFIED ENTITY" has the meaning specified in Part 1 of the Schedule.
"SPECIFIED INDEBTEDNESS" means, subject to Part 1 of the Schedule, any
obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"SPECIFIED SWAP" means, subject to Part 1 of the Schedule, any rate swap or
currency exchange transaction now existing or hereafter entered into between one
party to this Agreement (or any applicable Specified Entity) and the other party
to this Agreement (or any applicable Specified Entity).
"STAMP TAX" means any stamp, registration, documentation or similar tax.
"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.
"TAX EVENT" has the meaning specified in Section 5(b).
"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).
"TERMINATED TRANSACTIONS" means (a) with respect to any Early Termination Date
occurring as a result of a Termination Event, all Affected Transactions and (b)
with respect to any Early Termination Date occurring as a result of an Event of
Default, all Swap Transactions, which in either case are in effect as of the
time immediately preceding the effectiveness of the notice designating such
Early Termination Date (or, in the case of an Event of Default specified in
Section 5(a)(vii), in effect as of the time immediately preceding such Early
Termination Date).
"TERMINATION CURRENCY" has the meaning specified in Part 1 of the Schedule.
"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency
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other than the Termination Currency (the "Other Currency"), the amount in the
Termination Currency determined by the party making the relevant determination
as being required to purchase such amount of such Other Currency as at the
relevant Early Termination Date with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value the relevant Early Termination
Date. The foreign exchange agent will, if only one party is obliged to make a
determination under Section 6(e), be selected in good faith by that party and
otherwise will be agreed by the parties.
"TERMINATION EVENT" means an Illegality, a Tax Event, a Tax Event Upon Merger or
a Credit Event Upon Merger.
"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of the amounts that became due and payable (or that would
have become due and payable but for Section 2(a)(iii) or the designation or
occurrence of such Early Termination Date) to such party under Section 2(a)(i)
in respect of all Terminated Transactions by reference to all periods ended on
or prior to such Early Termination Date and which remain unpaid as at such Early
Termination Date, together with (to the extent permitted under applicable law
and in lieu of any interest calculated under Section 2(e)) interest thereon, in
the currency of such amounts, from (and including) the date such amounts became
due and payable or would have become due and payable to (but excluding) such
Early Termination Date, calculated as follows:-
(a) in the case of notice of an Early Termination Date given as a result of an
Event of Default:-
(i) interest on such amounts due and payable by a Defaulting Party will
be calculated at the Default Rate; and
(ii) interest on such amounts due and payable by the other party will
be calculated at a rate per annum equal to the cost to such other party
(as certified by it) if it were to fund such amounts (without proof or
evidence of any actual cost); and
(b) in the case of notice of an Early Termination Date given as a result of a
Termination Event, interest on such amounts due and payable by either party will
be calculated at a rate per annum equal to the arithmetic mean of the cost
(without proof or evidence of any actual cost) to each party (as certified by
such party and regardless of whether due and payable by such party) if it were
to fund or of funding such amounts.
Such amounts of interest will be calculated on the basis of daily compounding
and the actual number of days elapsed.
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IN WITNESS WHEREOF the parties have executed this document as of the date
specified on the first page of this document.
THE MITSUBISHI BANK, LIMITED EL CONQUISTADOR PARTNERSHIP L.P.
acting through its New York Branch
By:/s/ By:
------------------------------- -------------------------------
Name: Robert J. Schwartz Name:
Title: Senior Vice President Title:
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SCHEDULE
TO THE
INTEREST RATE AND CURRENCY EXCHANGE AGREEMENT
DATED AS OF FEBRUARY 7, 1991
BETWEEN THE MITSUBISHI BANK, LIMITED,
ACTING THROUGH ITS NEW YORK BRANCH (THE "BANK")
AND EL CONQUISTADOR PARTNERSHIP L.P. (THE "BORROWER")
PART I
TERMINATION PROVISIONS
In this Agreement:-
(1) No "Specified Entity" is identified in relation to the Bank.
No "Specified Entity" is identified in relation to the Borrower.
(2) "Specified Swap" will have the meaning specified in Section 14.
(3) "Termination Currency" means United States Dollars.
PART 2
TAX REPRESENTATIONS
(1) Payer Tax Representations. For the purpose of Section 3(e), both the Bank
and the Borrower make the following representation:-
It is not required by any applicable law, as modified by the practice
of any relevant governmental revenue authority, of any Relevant
Jurisdiction to make any deduction or withholding for or on account of
any Tax from any payment (other than interest under Section 2(e)) to be
made by it to the other party under this Agreement. In making this
representation, it may rely on:-
(i) the accuracy of any representation made by the other party pursuant
to Section 3(f);
(ii) the satisfaction of the agreement of the other party contained in
Section 4(a)(i) and the accuracy and effectiveness of any document
provided by the other party pursuant to Section 4(a)(i); and
(iii) the satisfaction of the agreement of the other party contained in
Section 4(d).
(2) Payee Tax Representations. For the purpose of Section 3(f), neither the
Bank nor the Borrower makes any representations.
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PART 3
DOCUMENTS TO BE DELIVERED
For the purpose of Section 4(a):-
(1) Tax forms, documents or certificates to be delivered are:-
The Bank and the Borrower agree to deliver any form, document or
certificate required or reasonably requested to allow the other party
to make payments under this Agreement without any deduction or
withholding for or on account of any Tax or with such deduction or
withholding at a reduced rate. Such form or certificate shall be
delivered upon reasonable demand by either party.
(2) Other documents to be delivered are:-
(i) The Bank and the Borrower agree to deliver a certificate executed
by a duly authorized officer of the party certifying the name, true
signature and authority of each person executing this Agreement or any
Confirmation on its behalf;
(ii) The Borrower agrees to deliver a copy of resolutions adopted by
its Partners authorizing the execution and delivery of this Agreement
(inclusive of all Confirmations), as well as the performance of its
obligations hereunder; and
(iii) the Borrower agrees to deliver all Credit Support Documents
specified in Part 4(6) of this Schedule.
Such documents shall be delivered as soon as practicable after the
execution of this Agreement and such documents listed in (i) and (ii)
above will be covered by the Section 3(d) Representation.
PART 4
MISCELLANEOUS
(1) Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York without reference to choice of
law doctrine.
(2) Process Agent. For the purpose of Section 13(c):-
The Bank appoints as its Process Agent: Not Applicable
The Borrower appoints as its Process Agent:
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Managing Partner or any other Partner
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(3) "Affiliate" will have the meaning specified in Section 14.
(4) Multibranch Party. For the purpose of Section 10:-
The Bank is not a Multibranch Party and may act only through its New
York branch.
The Borrower is not a Multibranch Party.
(5) Addresses for Notices. For the purpose of Section 12(a):-
Address for notices or communications to the Bank:-
The Mitsubishi Bank, Limited
New York Branch
Attn: Derivative Products Group
225 Liberty Street
Two World Financial Center
New York, New York 10281
Telephone: (212) 667-3330
Telecopy No: (212) 667-3560
with a copy to:
Kaye, Scholar, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Attention: Warren J. Bernstein, Esq.
Telephone: (212) 836-8000
Telecopy No: (212) 836-8760
Address for notices or communications to the Borrower:-
El Conquistador Partnership L.P.
c/o El San Juan Hotel & Casino
Highway Isla Verde 187
Isla Verde, Puerto Rico 00913
Attention: Hugh Andrews
Shunsuke Nakane
Telephone: (809) 791-2000
Telecopy No: (809) 791-7500
Telephone: (809) 791-2195
Telecopy No: (809) 791-1610
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with a copy to:
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telephone: (212) 351-3139
Telecopy No: (212) 351-3131
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Chief Operating Officer
Telephone: (312) 728-2300
Telecopy No: (312) 539-2099
Messrs. Burton & Richard Koffman
c/o Richford America
950 Third Avenue
New York, New York 10022
Telephone: (212) 838-2785
Telecopy No: (212) 888-1185
(6) Credit Support Document. Details of any Credit Support Document:-
The Borrower shall deliver to the Bank, upon execution of this
Agreement:
(i) Loan Agreement between Puerto Rico Industrial, Medical,
Educational and Environmental Pollution Control Facilities
Financing Authority (the "Authority") and El Conquistador
Partnership L.P., dated February 7, 1991 (the "Loan
Agreement");
(ii) Letter of Credit and Reimbursement Agreement, dated as of
February 7, 1991, between El Conquistador Partnership L.P. and
The Mitsubishi Bank, Limited, acting through its New York
Branch (the "Letter of Credit and Reimbursement Agreement");
(iii) on behalf of the Authority, the Trust Agreement, dated as of
February 7, 1991, between the Authority and Banco Popular de
Puerto Rico (the "Trust Agreement") (the Loan Agreement,
Letter of Credit and Reimbursement Agreement, and the Trust
Agreement hereinafter referred to collectively as the "Loan
Agreement and Related Documents");
(iv) Mortgage Note in the original principal amount of USD
20,000,000 made by the Borrower in favor of the Authority and
endorsed to the Bank pursuant to the Collateral Pledge
Agreement dated as of February 7, 1991 and secured by a
Mortgage securing such Mortgage Note and other mortgage notes;
and
(v) Joint and several guarantee by Kumagai Caribbean, Inc. and
Williams Hospitality
24
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<PAGE>
Management Corporation.
(7) Netting of Payments. "Net payments - Corresponding Payment Dates" will
apply for the purpose of Section 2(c) with effect from the date of this
Agreement.
PART 5
OTHER PROVISIONS
(1) Definitions. (a) Terms used but not otherwise defined in this Agreement
shall have the meanings assigned to them in the Loan Agreement and Related
Documents; and
(b) The 1987 Interest Rate and Currency Exchange Definitions (as published by
the International Swap Dealers Association, Inc.) is incorporated by reference
into this Agreement, without regarding to any revision or subsequent edition
thereof.
(2) Events of Default. (a) With respect to the Bank, the events specified in
Section 5(a)(i) - (viii) of this Agreement shall apply, with Section 5(a)(vi)
amended by inserting the following at the end thereof:-
"Notwithstanding the foregoing, however, an Event of Default shall not
occur under either (1) or (2) above if (x) the event or condition
referred to in (1), or the failure to make payments at maturity
referred to in (2), is caused by an error or omission of an
administrative or operational nature, (y) funds were available to such
party to enable it to make the relevant payment when due, and (z) such
relevant payment is made within three Business Days following receipt
of written notice from an interested party."
"Specified Indebtedness" will have the meaning specified in Section 14.
"Threshold Amount" means USD 10,000,000 (or its equivalent in any other
currency).
(b) With respect to the Borrower, (i) the events specified in Section 5(a)(i),
(ii) and (iv) of this Agreement shall apply; and (ii) the occurrence at any time
of any of the Events of Default set forth in Paragraph 12(a)(i), (iii), (vi)
through (ix), (xii), (xvi), (xviii) or (xxi) of the Letter of Credit and
Reimbursement Agreement shall, for purposes of this Agreement, constitute an
"Event of Default" under this Agreement.
(3) Termination Events. Section 5(b)(i) - (iv) of the Agreement shall not apply
to either the Bank or the Borrower.
(4) Early Termination. Section 6(e) of the Agreement is modified as follows:-
(a) Section 6(e)(i) is deleted in its entirety and replaced with the following:-
"(i) Defaulting Party. If notice is given designating an Early
Termination Date or if an Early Termination Date is deemed to occur and
there is a Defaulting Party, the other party will
25
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<PAGE>
determine the Settlement Amount in respect of the Terminated
Transactions and the payment to be made will be equal to (A) the sum of
such Settlement Amount and the Termination Currency Equivalent of the
Unpaid Amounts owing the party determining the Settlement Amount ("X")
less (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the party not determining the Settlement Amount ("Y")."
(b) Section 6(e)(ii) is deleted in its entirety.
(c) Section 6(e)(iii) is renumbered 6(e)(ii), and the reference to "Section
6(e)(i)(2) or (ii)" is changed to "Section 6(e)(i)"; and
(d) Sections 6(e)(iv) and (v) are renumbered 6(e)(iii) and (iv) respectively.
(5) Transfer. Notwithstanding Section 7 of this Agreement, neither the Bank nor
the borrower may transfer this Agreement or any Swap Transaction hereunder
unless such transfer is in accordance with Article VI of the Loan Agreement and
Paragraph 14(p) of the Letter of Credit and Reimbursement Agreement.
(6) Notices. (a) Section 12(a) of the Agreement is amended by replacing the
phrase "or given by telex (with answerback received) at the address or telex
number specified" with the phrase "or given by telex (with answerback received)
or telecopy at the address, telex or telecopy number specified";
(b) The following shall be included as Section 12(a)(iv) of the Agreement:-
"(iv) if sent by telecopy, on the day confirmation of such delivery to
the recipient is electronically produced."; and
(c) Section 12(b) is amended by adding the phrase "or telecopy" after the word
"telex" in the first line thereof.
(7) Payments to the Borrower. (a) Payments to be made by the Bank to the
Borrower pursuant to Section 2(a)(i) of the Agreement shall be made to the
Trustee, pursuant to the terms of the Letter of Credit and Reimbursement
Agreement; and
(b) Payments to be made by the Bank to the Borrower pursuant to Section 6(e)(i)
of the Agreement will, at the option of the Bank, be deposited in the Cash
Collateral Account pursuant to Paragraph 3(i) of the Letter of Credit and
Reimbursement Agreement.
(8) Set-Off. (a) The obligations of the Borrower to make payments required by
Section 2(a)(i) or Section 6(e)(i) of this Agreement shall be absolute and
unconditional. The Borrower will pay without abatement, diminution or deduction
(whether for taxes or otherwise) all such amounts regardless of any cause or
circumstance whatsoever including, without limitation, any defense, set-off,
recoupment or counterclaim which the Borrower may have or assert against the
Bank; and
(b) In addition to any rights and remedies the Bank may have, including, without
limitation, any rights now or hereafter granted under applicable law, and not by
way of limitation of any such rights, upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized
26
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<PAGE>
at any time and from time to time, without notice to the Borrower (any such
notice being expressly waived by the Borrower) and to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Bank to or for the credit of the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement, and the Loan Agreement and Related Documents, irrespective
of whether or not the Bank shall have made any demand hereunder.
(9) Swap Transaction. In connection with any payments to be made by the Bank
under any Swap Transaction, in no event shall the Floating Rate to be paid by
the Bank exceed the Highest Lawful Rate (as such term is defined in the Trust
Agreement.) If the Bank's Floating Rate for any Calculation Period would exceed
the Highest Lawful Rate (such excess being herein called the "Deferred
Interest"), then the Bank's Floating Rate shall remain at the Highest Lawful
Rate thereafter until the amount of payments actually paid at the Highest Lawful
Rate is in excess of the amount that would have been paid at the Floating Rate
which would have otherwise been applicable to the Swap Transaction during such
period, by an amount equal to the Deferred Interest. After the maturity of any
such Swap Transaction, the Borrower shall not be entitled to receive any
Deferred Interest not theretofore paid.
(10) Recording. The Borrower agrees to the electronic recording of telephone
conversations with the Bank (or any of its associated persons) with or without
the use of an automatic tone warning device. The Borrower further agrees to the
use of such recordings and transcripts as evidence by either party in any
dispute between the Bank and the Borrower. The Bank shall not be required to
maintain copies of such recordings and transcripts.
(11) Limitation of Liability. Notwithstanding anything to the contrary contained
in this Agreement, no recourse shall be had, whether by levy or execution or
otherwise, for the payment of any amounts owed hereunder, or for any claim based
on this Agreement, against the Borrower, any partner of the Borrower or any
predecessor, successor or affiliate of any such partner or any of their assets
(other than from the interest of such partner in the Borrower), or against any
principal, partner, shareholder, officer, director, agent or employee of any
such partner (other than from the interest of any such person in such partner),
nor shall any such persons be personally liable for any such amount or claims,
or liable for any deficiency judgement based thereon or with respect thereto, it
being expressly understood that the sole remedied of the Bank with respect to
such amounts and claims shall be against the assets of the Borrower, including
the Mortgaged Property (as such term is defined in the Letter of Credit and
Reimbursement Agreement) and that all such liability of the aforesaid persons is
expressly waived and released as a condition of and as consideration for the
execution of this Agreement; provided, however, that (A) nothing contained in
this Agreement shall constitute a waiver of any indebtedness evidenced hereby or
any of the Borrower's other obligations under such instruments or shall be taken
to prevent recourse to and the enforcement against the Borrower, including the
Mortgaged Property, of all the liabilities, obligations and undertakings
contained in this Agreement or any of the Security Documents (as defined in the
Letter of Credit and Reimbursement Agreement), (B) this Part 5(12) shall not be
applicable to a breach by any person of any independent obligation to the Bank,
including, but not limited to, (x) the obligations of the Guarantors (as defined
in the Letter of Credit and Reimbursement Agreement) under the Guaranties (as
defined in the Letter of Credit and Reimbursement Agreement), (y) the
obligations of WKA (as defined in the Letter of Credit and Reimbursement
Agreement) to enforce any or all of its remedies against KGC (as defined in the
Letter of Credit and Reimbursement Agreement) in the event that KGC fails timely
to provide the Deficiency Loans (as defined in the Letter of Credit and
Reimbursement Agreement) as set forth herein and in the other Operative
Documents (as defined in the
27
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<PAGE>
Letter of Credit and Reimbursement Agreement), and (z) any other obligations of
any Person under any other guaranty or indemnity agreement executed or delivered
in connection with any of the Operative Documents and (c) this Part 5(12) shall
not be applicable to the responsible party to the extent and in respect of any
claim the Bank would otherwise have against such party for (1) fraud, (2)
misappropriation of funds or other property, (3) damage to any of the Mortgaged
Property or any part thereof intentionally inflicted in bad faith by the
Borrower of any partner, principal, shareholder, officer, director, agent or
employee of the Borrower or any of its partners, or principals of any of the
foregoing. For the purposes of the foregoing, the term "shareholder" shall be
deemed to include the shareholders of any corporation which is a shareholder of
a corporation and the term "partner" shall be deemed to include the partners of
any partnership which is a partner of a partnership.
IN WITNESS WHEREOF the parties have executed this Schedule as of the
date specified on the first page of the Agreement.
THE MITSUBISHI BANK, LIMITED, EL CONQUISTADOR PARTNERSHIP L.P.
ACTING THROUGH ITS NEW YORK BRANCH
BY: /S/ BY:
--------------------------------- ---------------------------------
NAME: ROBERT J. SCHWARTZ NAME:
TITLE: SENIOR VICE PRESIDENT TITLE:
28
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<PAGE>
the Guaranties (as defined in the Letter of Credit and Reimbursement Agreement),
(y) the obligations of WKA (as defined in the Letter of Credit and Reimbursement
Agreement) to enforce any or all of its remedies against KGC (as defined in the
Letter of Credit and Reimbursement Agreement) in the event that KGC fails timely
to provide the Deficiency Loans (as defined in the Letter of Credit and
Reimbursement Agreement) as set forth herein and in the other Operative
documents (as defined in the Letter of Credit and Reimbursement Agreement), and
(z) any other obligations of any Person under any other guaranty or indemnity
agreement executed or delivered in connection with any of the Operative
Documents and (c) this Part 5(12) shall not be applicable to the responsible
party to the extent and in respect of any claim the Bank would otherwise have
against such party for (1) fraud, (2) misappropriation of funds or other
property, (3) damage to any of the Mortgaged Property or any part thereof
intentionally inflicted in bad faith by the Borrower of any partner, principal,
shareholder, officer, director, agent or employee of the Borrower or any of its
partners, or principals of any of the foregoing. For the purposes of the
foregoing, the term "shareholder" shall be deemed to include the shareholders of
any corporation which is a shareholder of a corporation and the term "partner"
shall be deemed to include the partners of any partnership which is a partner of
a partnership.
IN WITNESS WHEREOF the parties have executed this Schedule as of the
date specified on the first page of the Agreement.
THE MITSUBISHI BANK, LIMITED, EL CONQUISTADOR PARTNERSHIP L.P.
ACTING THROUGH ITS NEW YORK BRANCH
BY: BY:/S/
------------------------------- --------------------------
NAME: NAME: NORMAN J. MENELL
TITLE: TITLE: AUTHORIZED SIGNATORY
29
<PAGE>
<PAGE>
Date: February 7, 1991
To: El Conquistador Partnership L.P.
Attn: Hugh Andrews
Shunsuke Nakane
Telecopy No: (809) 791-7500
From: The Mitsubishi Bank, Limited, New York Office
(Mitsubishi Reference: SW0273)
Re: USD 105.6MM interest rate swap between The Mitsubishi Bank,
Limited, New York Office ("Party A") and El Conquistador
Partnership L.P. ("Party B")
PLEASE RESPOND TO THIS TELECOPY WITHIN ONE BUSINESS DAY
The purpose of this telecopy is to set forth the terms and
conditions of the USD 105.6MM interest rate swap entered into between Party A
and Party B on the Trade Date specified below (the "Swap Transaction"). This
telecopy constitutes a "Confirmation" as referred to in the Interest Rate and
Currency Exchange Agreement specified below.
The definitions and provisions contained in the 1987 Interest
Rate and Currency Exchange Definitions (as published by the International Swap
Dealers Association, Inc.) are incorporated into this Confirmation. In the event
of any inconsistency between those definitions and provisions and this
Confirmation, this Confirmation will govern.
1. ISDA Agreement
This Confirmation supplements, forms part of, and is subject to, the
Interest Rate and Currency Exchange Agreement dated as of February 7, 1991, (the
"Agreement) between Party A and Party B. All provisions contained in the
Agreement govern this Confirmation except as expressly modified below.
2. Swap Transaction
The terms of the particular Swap Transaction to which this Confirmation
relates are as follows:-
Notional Amount: USD 105,600,000
Trade Date: February 7, 1991
Effective Date: May 1, 1991
Termination Date: March 9, 1998
Fixed Amounts:
<PAGE>
<PAGE>
Fixed Rate Payer: Party B
Fixed Rate Payer
Payment Dates: Each February 1, May 1, August 1 and
November 1, from August 1991 to February
1998, and the Termination Date, subject to
adjustment in accordance with the Modified
Following Business Day convention
Fixed Rate: 8.58 pct.
Fixed Rate Day
Count Fraction: 30/360, with No Adjustment of Period End
Dates
Floating Amounts:
Floating Rate Payer: Party A
Floating Rate Payer
Payment Dates: Each February 1, May 1, August 1 and
November 1, from August 1991 to February
1998, and the Termination Date, subject to
adjustment in accordance with the Modified
Following Business Day convention
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3 month for all Calculation Periods (except
final Calculation Period), and interpolated
1 and 2 month for final Calculation Period
Spread: Minus 12.5 basis points
Reset Dates: First day of each Calculation Period
Business Days for both
Party A and Party B: London, New York and San Juan
Calculation Agent: Party A
3. Credit Support
In connection with this Swap Transaction and the Agreement, Borrower has
delivered to the Bank the following Credit Support Documents:-
(i) Loan Agreement between Puerto Rico Industrial, Medical, Educational and
Environmental Pollution Control Facilities Financing Authority (the
"Authority") and El Conquistador Partnership L.P., dated February 7,
1991 (the "Loan Agreement");
<PAGE>
<PAGE>
(ii) Letter of Credit and Reimbursement Agreement, dated as of February 7,
1991, between El Conquistador Partnership L.P. and The Mitsubishi Bank,
Limited, acting through its New York Branch (the "Letter of Credit and
Reimbursement Agreement");
(iii) on behalf of the Authority, the Trust Agreement, dated as of February
7, 1991, between the Authority and Banco Popular de Puerto Rico (the
"Trust Agreement");
(iv) Mortgage Note in the original principal amount of USD 20,000,000 made
by the Borrower in favor of the Authority and endorsed to the Bank
pursuant to the Collateral Pledge Agreement dated as of February 7,
1991 and secured by a Mortgage securing such Mortgage Note and other
mortgage notes; and
(v) Joint and several guarantee by Kumagai Caribbean, Inc. and Williams
Hospitality Management Corporation.
3. Account Details
Payment instructions
for Party A: The Mitsubishi Bank, Limited, New York Office
CHIPS: ABA 966 UID 173777
FEDWIRE: 0260-0966-1
Attn: Derivative Products Group
Ref: SW0273
Payment instructions
for Party B: Banco Popular de Puerto Rico For the
account of El Conquistador
Partnership L.P.
4. Offices
The Office of Party A for this Swap Transaction is New York.
The Office of Party B for this Swap Transaction is San Juan.
5. Exceptions to the Agreement None
<PAGE>
<PAGE>
6. Confirmation
Please confirm that the foregoing correctly sets forth the terms of the
Swap Transaction by a return telecopy to Party A substantially to the following
effect:-
"Date:
To: The Mitsubishi Bank, Limited, New York Office
Attn: Patrick Wygand
Telecopy No: (212) 667-3560
Re: USD 105.6MM interest rate swap between The Mitsubishi Bank,
Limited, New York Office ("Party A") and El Conquistador
Partnership L.P. ("Party B")
We acknowledge receipt of your telecopy dated February 7, 1991, with
respect to the above-referenced Swap Transaction between Party A and Party B,
with an Effective Date of May 1, 1991, and a Termination Date of March 9, 1998,
and confirm that such telecopy correctly sets forth the terms of our agreement
relating to the Swap Transaction described therein.
Very truly yours,
El Conquistador Partnership L.P.
By: ----------------------------
Name:
Title: "
If you have any questions or comments on the terms contained herein,
please contact Cynthia Rietscha at (212) 667-3721, or via telecopy at (212)
667-3560.
It has been a pleasure working with you, and we look forward to working
with you again in the near future.
Yours sincerely,
The Mitsubishi Bank, Limited,
New York Office
By:-----------------------------------
Name: Wendy H. Brewer
Title: Vice President
<PAGE>
<PAGE>
4. Offices
The Office of Party A for this Swap Transaction is New York.
The Office of Party B for this Swap Transaction is San Juan.
5. Exceptions to the Agreement None
6. Confirmation
Please confirm that the foregoing correctly sets forth the terms of the
Swap Transaction by a return telecopy to Party A substantially to the following
effect:-
"Date:
To: The Mitsubishi Bank, Limited, New York Office
Attn: Patrick Wygand
Telecopy No: (212) 667-3560
Re: USD 105.6MM interest rate swap between The Mitsubishi Bank,
Limited, New York Office ("Party A") and El Conquistador
Partnership L.P. ("Party B")
We acknowledge receipt of your telecopy dated February 7, 1991, with
respect to the above-referenced Swap Transaction between Party A and Party B,
with an Effective Date of May 1, 1991, and a Termination Date of March 9, 1998,
and confirm that such telecopy correctly sets forth the terms of our agreement
relating to the Swap Transaction described therein.
Very truly yours,
El Conquistador Partnership L.P.
By: /s/
-----------------------------
Name:
Title: Authorized Signatory "
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
GUARANTY
Dated as of February 7, 1991
made by
KUMAGAI CARIBBEAN, INC.
and
WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION
as GUARANTORS
in favor of
THE MITSUBISHI BANK, LIMITED
acting through its New York Branch
Relating to Termination
Payments as Defined in the
Letter of Credit
and Reimbursement Agreement
dated as of February 7, 1991 between
EL CONQUISTADOR PARTNERSHIP L.P.
and THE MITSUBISHI BANK, LIMITED
acting through its New York Branch
<PAGE>
<PAGE>
GUARANTY
THIS GUARANTY (this GUARANTY), dated as of February 7, 1991, made by
KUMAGAI CARIBBEAN, INC., a Texas Corporation, and WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION, a Delaware Corporation, each having an address at 187
East Isla Verde Road, Carolina, Puerto Rico 00913 (collectively, the
GUARANTORS), in favor of THE MITSUBISHI BANK LIMITED, a banking corporation
organized under the laws of Japan, acting through its New York Branch and having
an address at Two World Financial Center, 225 Liberty Street, New York, New York
10281 (the BANK).
W I T N E S S E T H:
WHEREAS, pursuant to that certain Letter of Credit and Reimbursement
Agreement (as the same may be amended, modified, supplemented or replaced from
time to time, the Letter of Credit Agreement), dated as of the date hereof,
between El Conquistador Partnership L.P., a Delaware limited partnership (the
COMPANY) and the Bank, the Bank has agreed to issue its Letter of Credit to
provide security for the payment of principal of, and interest accrued on the
Bonds (such term and all other capitalized terms used and not otherwise defined
herein having the respective meanings set forth or referred to in the Letter of
Credit Agreement); and
WHEREAS, pursuant to the terms of the Letter of Credit Agreement, the
Company and the Bank have entered in an Interest Rate and Currency Agreement
dated the date hereof (the BOND SWAP AGREEMENT); and
WHEREAS, the Letter of Credit Agreement requires the Company to provide
to the Bank certain security for Termination Payments which may become due
pursuant to the Bond Swap Agreement, including this Guaranty; and
WHEREAS, Kumagai Caribbean, Inc. is a general partner of the Company;
and
WHEREAS, Williams Hospitality Management Corporation is providing
technical advisory services and will act as the manager of the El Conquistador
Resort pursuant to a Development Services and Management Agreement dated January
12, 1990; and
WHEREAS, as a condition to the Bank issuing the Letter of Credit the
Bank is requiring that the Guarantors execute and deliver to the Bank this
Guaranty; and
WHEREAS, the Guarantors hereby acknowledge that the Guarantors will
materially benefit from the Bank issuing the Letter of Credit;
NOW, THEREFORE, in consideration of the premises set forth herein and
as an inducement for and in consideration of the agreement of the Bank to enter
into the Letter of
<PAGE>
<PAGE>
-2-
Credit Agreement, the Guarantors hereby, jointly and severally, agree, covenant,
represent and warrant to the Bank, as follows:
SECTION 1. Guaranty.
(a) The Guarantors hereby absolutely and unconditionally
guarantee the due and punctual payment of the Termination Payments due to the
Bank pursuant to the Letter of Credit Agreement, to the extent, but only to the
extent that such Termination Payments exceed $20,000,000 (THE GUARANTEED
OBLIGATIONS), when and as the same shall be due and payable in accordance with
the terms of the Bond Swap Agreement and the Letter of Credit Agreement. The
Guarantors hereby agree that if the Company fails to pay the Guaranteed
Obligations when and as the same shall be due and payable in accordance with the
terms of the Bond Swap Agreement and the Letter of Credit Agreement, on receipt
of demand from the Bank the Guarantors will forthwith pay to the Bank an amount
equal to the amount of the Guaranteed Obligations which are the subject of such
demand.
(b) The Guarantors hereby agree that, notwithstanding any
provision to the contrary in the Letter of Credit Agreement or the Operative
Documents limiting the recourse of the Bank to assets of the Company, the
Guarantors shall be fully and personally liable with respect to the covenants,
representations, warranties and agreements of the Guarantors under this
Guaranty.
(c) All sums payable to the Bank hereunder shall be payable on
demand.
(d) The obligations of the Guarantors hereunder shall
terminate upon the termination of the Bond Swap Agreement and the actual and
irrevocable receipt by the Bank of payment in full of any Termination Payments
which may have become due and payable.
SECTION 2. Unconditional Character of Obligations of Guarantors.
(a) The obligations of each Guarantor hereunder shall be joint
and several and absolute and unconditional, irrespective of the validity,
regularity or enforceability in whole or in part of the Bond Swap Agreement, the
Letter of Credit Agreement or the other Operative Documents (other than this
GUARANTY) or any provision thereof, or the absence of any action to enforce the
same, any waiver or consent with respect to any provision thereof, the recovery
of any judgment against the Company, the Guarantors or any other Person or any
action to enforce the same, any failure or delay in the enforcement of the
obligations of the Company under the Letter of Credit Agreement and Operative
Documents or of either Guarantor under this Guaranty, or any setoff,
counterclaim, recoupment, limitation or termination, and irrespective of any
other circumstances which might otherwise limit recourse against either
Guarantor by the Bank or constitute a legal or equitable discharge or defense of
a guarantor or surety. The Bank may enforce the obligations of the Guarantors
under this Guaranty by a
<PAGE>
<PAGE>
-3-
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against the Company or any other
Person at any time, either before or after an action against the Company or any
other Person. This Guaranty is a guarantee of payment and not of collection. The
Guarantors waive diligence, notice of acceptance of this Guaranty, filing of
claims with any court, any proceeding to enforce any provision of the Letter of
Credit Agreement and Operative Documents against the Company or any other
Person, any right to require a proceeding first against the Company or any other
Person, or to exhaust any security (including, without limitation, the Premises
or any part thereof) for the performance of the obligations of the Company, or
any other person, or any protest, presentment or notice whatsoever (except to
the extent expressly provided to the contrary in this GUARANTY), and the
Guarantors hereby covenant and agree that this Guaranty shall not be discharged
except as set forth in Section 1(d) hereof.
(b) The obligations of the Guarantors under this Guaranty, and
the rights of the Bank to enforce the same by proceedings, whether by action at
law, suit in equity or otherwise, shall not be in any way affected by (i) any
insolvency, bankruptcy, liquidation, reorganization, readjustment, composition,
dissolu- tion, receivership, conservatorship, winding up or other similar
proceeding involving or affecting either the Company, the Premises, either
Guarantor or any other Person, (ii) any failure of the Bank, or any other
Person, whether or not without fault on its part, to perform or comply with any
of the terms of the Bond Swap Agreement, the Letter of Credit Agreement or the
other Operative Documents (other than this Guaranty), (iii) the sale, transfer
or conveyance of the Premises and the Improvements or any interest therein to
any person, whether now or hereafter having or acquiring an interest in the
Premises and the Improvements, whether or not pursuant to any foreclosure,
trustee sale or similar proceeding against the Company or the Premises and the
Improvements or any part thereof; (iv) the conveyance to the Bank of the
Premises and the Improve-ments or any part thereof by a deed in lieu of
foreclosure; (v) the release of the Company from the performance or observance
of any of the agreements, covenants, terms or conditions contained in the Bond
Swap Agreement, the Letter of Credit Agreement or any of the other Operative
Documents by operation of law or otherwise; or (vi) the release in whole or in
part of any Collateral. Subject to Section 1(d) hereof the Guarantors agree that
they shall be and will remain liable for their obligations hereunder after
foreclosure of the mortgages on the Premises and the Improvements or other
security interest securing any indebtedness notwithstanding any provision of
applicable law that might prevent the Bank from enforcing any deficiency
judgment against the Company.
(c) Except as otherwise specifically provided in this Guaranty
and except to the extent claims of payment and performance of the Guaranteed
Obligations by the Company, either or both of the Guarantors or any other Person
are raised as a defense to a demand hereunder, the Guarantors hereby expressly
and irrevocably waive all claims of waiver, release, surrender, alteration or
compromise and all setoffs, counterclaims, recoupments, reductions, limitations,
impairments or terminations, whether arising hereunder or otherwise.
<PAGE>
<PAGE>
-4-
(d) The Bank may deal with the Company in the same manner and
as freely as if this Guaranty did not exist and shall be entitled, among other
things, to grant the Company or any other Person such extension or extensions of
time to perform any act or acts as may be deemed advisable by the Bank, at any
time and from time to time, without terminating, affecting or impairing the
validity of this Guaranty or the obligations of the Guarantors hereunder.
(e) No compromise, alteration, amendment, modification,
extension, renewal, release or other change of, or waiver, consent, delay,
omission, failure to act or other action with respect to, any liability or
obligation under or with respect to, or of any of the terms, covenants or
conditions of, the Bond Swap Agreement, the Letter of Credit Agreement or any of
the other Operative Documents shall in any way alter or affect any of the
obligations of the Guarantors hereunder.
(f) The Bank may proceed to protect and enforce any or all of
its rights under this Guaranty by suit in equity or action at law, whether for
the specific performance of any covenants or agreements contained in this
Guaranty or otherwise, or to take any action authorized or permitted under
applicable law, and shall be entitled to require and enforce the performance of
all acts and things required to be performed hereunder by the Guarantors. Each
and every remedy of the Bank shall, to the extent permitted by law, be
cumulative and shall be in addition to any other remedy given hereunder or now
or hereafter existing at law or in equity.
(g) No waiver shall be deemed to have been made by the Bank of
any rights hereunder unless the same shall be in writing and signed by the Bank
and any such waiver shall be a waiver only with respect to the specific matter
involved and shall in no way impair the rights of the Bank or the obligations of
the Guarantors to the Bank in any other respect or at any other time.
(h) At the option of the Bank, either Guarantor may be joined
in any action or proceeding commenced by the Bank against the Company in
connection with or based upon the Bond Swap Agreement, the Letter of Credit
Agreement or any of the other Operative Documents, and recovery may be had
against such Guarantor to the extent of the Guarantors' liability hereunder,
without any requirement that the Bank first assert, prosecute or exhaust any
remedy or claim against the Company, any other Guarantor or any other Person, or
any security for the obligations of the Company or any other Person.
(i) The Guarantors agree that this Guaranty shall continue to
be effective or shall be reinstated, as the case may be, if at any time payment
of any Guaranteed Obligation is made by the Company or either Guarantor to the
Bank and such payment is rescinded or must otherwise be returned by the Bank
upon insolvency, bankruptcy, liquidation, reorganization, readjustment,
composition, dissolution, receivership, conservatorship, winding up or other
similar proceeding involving or affecting the Company or either Guarantor, all
as though such payment had not been made.
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(j) In the event that the Guarantors shall become obligated to
pay any sums under this Guaranty, the Guarantors agree that: (i) the amount of
such sums and of such indebtedness and all interest thereon shall at all times
be subordinate as to lien, the time of payment and in all other respects to all
sums, including principal and interest and other amounts, at any time owed to
the Bank under the Bond Swap Agreement, the Letter of Credit Agreement or any of
the other Operative Documents; and (ii) the Guarantors shall not be entitled to
enforce or receive payment thereof until all such sums owed to the Bank have
been paid in full. Nothing herein contained is intended or shall be construed to
give the Guarantors any right of subrogation in or under the Bond Swap
Agreement, the Letter of Credit Agreement or any of the other Operative
Documents or any right to participate in any way therein, or in the right, title
or interest of the Bank in or to the Collateral, notwithstanding any payments
made by either Guarantor under this Guaranty, all such rights of subrogation and
participation being hereby expressly waived and released until the actual and
irrevocable receipt by the Bank of payment in full of all principal, interest
and other sums due with respect to the Bond Swap Agreement, the Letter of Credit
Agreement and the other Operative Documents. If any amount shall be paid to
either Guarantor on account of such subrogation rights at any time when any such
sum shall not have been fully paid, such amount shall be paid by such Guarantor
to the Bank for credit and application against such sums; provided, however, the
foregoing shall not prohibit such Guarantor from filing a lawsuit and proceeding
to judgment (but not executing on such judgment) against the Company for any
sums owed the Guarantor by the Company.
(k) Subject to Section 1(d) hereof, the Guarantors'
obligations hereunder shall continue notwithstanding a foreclosure or similar
proceeding involving the Premises and/or the Improvements.
SECTION 3. Representations, Warranties and Agreement.
Each Guarantor represents and warrants to and agrees with the
Bank as follows (which representations, warranties and agreements shall survive
the execution and delivery of this GUARANTY):
(a) This Guaranty is the legal, valid and binding obligation
of such Guarantor, enforceable against such Guarantor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally, general equitable principles, but such
limitations do not make such rights or remedies, taken as a whole, inadequate
for the practical realization of the benefits thereof.
(b) The execution, delivery and performance of this Guaranty
by such Guarantor do not and will not violate any law, regulation, order, writ,
injunction or decree of any court or governmental body, agency or other
instrumentality applicable to such Guarantor, or result in a material breach of
any of the terms, conditions or provisions of, or constitute a
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material default under, or result in the creation or imposition of, any
mortgage, lien, charge or encumbrance of any nature whatsoever upon any of the
assets of such Guarantor pursuant to the terms of any mortgage, indenture,
agreement or instrument to which such Guarantor is a party or by which he or any
of this properties is bound.
(c) There are no actions, suits, proceedings, inquiries or
investigations before or by any court, public board or body pending, or to a
Guarantor's best knowledge, threatened against or affecting such Guarantor or
which involve or might involve the validity or enforceability of this Guaranty
or wherein an unfavorable decision, ruling or finding might have a material
adverse effect on the properties, business or financial condition of such
Guarantor or the transactions contemplated by this Guaranty.
(d) All consents, approvals, orders or authorizations of,
registrations, declarations or filings with, all Governmental Authorities that
are required in connection with the execution, delivery and performance by such
Guarantor of this Guaranty have been duly obtained, given or taken and are in
full force and effect.
SECTION 4. Entire Agreement/Amendments.
This instrument represents the entire agreement between the
parties. The terms of this Guaranty shall not be waived, altered, modified,
amended, supplemented or terminated in any manner whatsoever except by written
instrument signed by the Bank and the Guarantors.
SECTION 5. Successors and Assigns.
This Guaranty shall be binding upon the Guarantors, may not be
assigned or delegated by any Guarantor except with the prior written consent of
the Bank and shall inure to the benefit of the Bank and its successors and
assigns.
SECTION 6. Applicable Law.
This Guaranty shall be governed by, and construed in
accordance with, the substantive law of the State of New York.
SECTION 7. Section Headings.
The headings of the sections of this Guaranty have been
inserted for convenience of reference only and shall in no way define, modify,
limit or amplify any of the terms or provisions hereof.
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SECTION 8. Severability.
Any provision of this Guaranty which may be determined by any
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the Guarantors hereby waive any provision of law
which renders any provision hereof prohibited or unenforceable in any respect.
SECTION 9. Waiver of Trial by Jury.
The Guarantors hereby waive the right of trial by jury in any
litigation arising hereunder.
SECTION 10. Notices. All notices, requests, demands, documents or other
communications which are required or permitted to be given or served hereunder
shall be in writing and mailed (registered or certified mail, return receipt
requested), hand-delivered, with signed receipt, or sent by
nationally-recognized overnight courier (such as Federal Express) as follows:
To the Guarantors:
Kumagai Caribbean, Inc.
c/o Williams Hospitality
Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Mr. Shunsuke Nakane
Telecopy No. (809)-791-1610
Williams Hospitality Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Mr. Hugh A. Andrews
Telecopy No. (809) 791-7500
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With a copy to:
Whitman Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telecopy No. (212) 351-3131
To the Bank:
The Mitsubishi Bank, Limited
225 Liberty Street,
Two World Financial Center,
New York, New York 10281
Attention: Real Estate (Mr. Akira Fujii or
Finance Group Mr. Russ Lopinto)
Telecopy No. (212) 667-3661
With a Copy to:
Kaye, Scholer, Fierman,
Hays & Handler
425 Park Avenue
New York, New York 10022
Attention: Warren J. Bernstein, Esq.
Telecopy No. (212) 836-8689
All such notices, requests, demands, documents or other communications shall be
effective when received at the address specified as aforesaid. Such addresses
may be changed from time to time by the addressee by serving notice as
heretofore provided. Service of notice or demand by telecopier with telephonic
confirmation of receipt shall constitute personal delivery for purposes of this
Section 10.
SECTION 11. The Guarantors' Receipt of Documents. The Guarantors, by
their execution hereof, acknowledge receipt of true copies of the Bond Swap
Agreement, the Letter of Credit Agreement and the other Operative Documents.
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SECTION 12. Interest; Expenses. (a) If any Guarantor fails to pay all
or any portion of its obligations hereby undertaken or other payments due from
it hereunder, upon demand of the Bank, the amount of such obligations and all
other sums payable by the Guarantors to the Bank hereunder shall bear interest
from the date of demand at the Prime Rate plus 2% per annum, but in no event
greater than the maximum amount permitted by applicable law.
(b) The Guarantors hereby agree to pay all costs, charges and
expenses, including, without limitation, reasonable attorneys' fees and actual
out-of-pocket expenses and costs of collection, that may be incurred by the Bank
in enforcing the covenants and agreements of the Guarantors under this Guaranty.
Notwithstanding anything to the contrary contained above, in the event of a
final adjudication of an action commenced by the Bank for the collection of any
amount due under or the performance of any obligations of the Guarantors with
respect to this Guaranty which final adjudication is in its entirety in favor of
the Guarantors, the Guarantors shall not be obligated to pay any such fees and
expenses of the Bank in connection with such action.
SECTION 13. Consent to Jurisdiction. Each of the Guarantors irrevocably
(a) agrees that any suit, action or other legal proceeding arising out of or
relating to this Guaranty may be brought in a court of record in the City and
State of New York or in the Courts of the United States of America located in
the Southern District of New York, (b) consents to the jurisdiction of each such
court in any such suit, action or proceeding, and (c) waives any objection which
it may have to the laying of venue of any such suit, action or proceeding in any
of such courts and any claim that any such suit, action or proceeding has been
brought in an inconvenient forum. Each of the Guarantors irrevocably consents to
the service of any and all process in any such suit, action or proceeding by
service of copies of such process to such Guarantor at its address provided in
Section 10 hereof or by personal service on any partner of Whitman & Ranson.
Nothing in this Section 13, however shall affect the right of the Bank to serve
legal
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process in any other manner permitted by law or affect the right of the Bank to
bring any suit, action or proceeding against any Guarantor or its property in
the courts of any other jurisdictions.
SECTION 14. Defined Instruments. All of the agreements or instruments
defined in this Guaranty shall mean such agreements or instruments as the same
may, from time to time, be supplemented or amended or the terms thereof waived
or modified in accordance with or as permitted by the letter of Credit Agreement
and any other Operative Document.
SECTION 15. Personal Liability. No exculpatory provisions contained in
the Bond Swap Agreement, the Letter of Credit Agreement, the Loan Agreement, or
in any other Operative Document shall in any event or under any circumstances be
deemed or construed to modify, qualify, or affect in any manner whatsoever the
personal recourse obligations and liabilities of the Guarantors under this
Guaranty.
SECTION 16. Other Guaranties. The obligations and liabilities of each
of the Guarantors under this Guaranty are in addition to the obligations and
liabilities of each of the Guarantors under the Other Guaranties. The discharge
of either Guarantor's obligations and liabilities under any one or more of the
Other Guaranties by such Guarantor or by reason of operation of law or otherwise
shall in no event or under any circumstance constitute or be deemed to
constitute a discharge, in whole or in part, of the Guarantors' obligations and
liabilities under this Guaranty. Conversely, the discharge of any Guarantor's or
by reason of operation of law or otherwise shall in no event or under any
circumstance constitute or be deemed to constitute a discharge, in whole or in
part, of the Guarantor's obligations and liabilities under any of the Other
Guaranties. The term Other Guaranties as used herein shall mean any other
guaranty of payment, guaranty of performance, completion guaranty,
indemnification agreement or other guaranty or instrument of personal recourse
obligation or undertaking of any nature whatsoever (other than this GUARANTY)
now or hereafter executed and
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delivered by either of the Guarantors in
connection with the Loan, the Letter of Credit Agreement or any other Operative
Document.
IN WITNESS WHEREOF, the Guarantors have duly executed this Guaranty as
KUMAGAI CARIBBEAN, INC.
By: Signed
------------ ------------------
Name: Shunsuke Nakane
Title: President
WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION
By: Signed
------------ ------------------
Name: Norman J. Menell
Title: Co-Chairman
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<PAGE>
COLLATERAL PLEDGE AGREEMENT
This COLLATERAL PLEDGE AGREEMENT ("this Agreement") dated as of February
7, 1991, by and among EL CONQUISTADOR PARTNERSHIP L.P., a Delaware limited
partnership (the "Borrower"), PUERTO RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND
ENVIRONMENTAL POLLUTION CONTROL FACILITIES FINANCING AUTHORITY, a public
corporation and governmental instrumentality of the Commonwealth of Puerto Rico
(hereinafter referred to as the "Authority"), and THE MITSUBISHI BANK, LIMITED,
a Japanese banking corporation, acting through its New York Branch (hereinafter
referred to as the "Bank") hereby agree as follows:
WHEREAS, pursuant to the Loan Agreement (such term and all other
capitalized terms used herein have the respective meanings set forth or referred
to in Section 1 hereof unless otherwise stated), the Authority has undertaken,
on behalf of the Borrower, to issue the Bonds, the proceeds of which will be
loaned to the Borrower to finance the cost of the Project and to pay expenses
incurred in connection with the issuance of the Bonds;
WHEREAS, the Bonds are secured by, among other things, the obligations of
the Borrower under the Loan Agreement and by the Trust Agreement;
WHEREAS, the Borrower, in order to support its obligations under the Loan
Agreement and to provide for the payment of the principal of and interest
accrued on the Bonds in accordance with their terms, has requested the Bank to
issue the Letter of Credit in favor of the Trustee pursuant to the Reimbursement
Agreement;
WHEREAS, under the terms of the Reimbursement Agreement the Borrower has
agreed to reimburse the Bank for any payments made by the Bank under the Letter
of Credit, with interest thereon from the
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date of payment as provided therein, as well as to pay certain other fees and
amounts in connection therewith; and
WHEREAS, the Borrower has agreed to grant the Authority and the Bank a
pledge of the Mortgage Notes, and to grant the Bank a pledge of the Termination
Payments Note on a pari-passu basis with the pledge of the Mortgage Notes, and
to establish certain other Collateral Security, in order to secure the
obligations of the Borrower under the Loan Agreement and the Reimbursement
Agreement;
NOW THEREFORE, in consideration of the premises and in order to induce the
Authority to issue the Bonds and the Bank to issue the letter of Credit and to
enter into the Bond Swap Agreement, the parties hereto agree as follows:
SECTION 1. Defined Terms. The following terms shall have the meanings
specified below for all purposes of this Agreement:
Affiliated Person means any Person controlling, controlled by or under
common control with the Borrower.
Architect shall mean Ray, Melendez & Associates or any successors engaged
by the Borrower with the prior written consent of the Bank.
Bank means THE MITSUBISHI BANK, LIMITED, a Japanese banking corporation,
acting through its New York Branch, and its successors and assigns, or any bank
issuing a Successor Letter of Credit.
Bank's Consultant shall mean Merritt & Harris, Inc. or such other person
or architectural or engineering consultant as may be designated and engaged by
the Bank, at the Borrower's expense, to examine the Budget (as defined in the
Reimbursement Agreement) and
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the Plans, any changes thereto, and cost breakdowns and estimates with respect
to the project (including, without limitation, all cost breakdowns and estimates
set forth in any Request for Disbursement, as such term is defined in the
Reimbursement Agreement, and all accompanying certifications), to make periodic
inspections of the progress of the Construction of the Improvements on behalf of
the Bank, to advise and render reports to the Bank concerning the foregoing and
to otherwise consult with the Bank with respect to the Project.
Bond Fixed Rate means __% per annum.
Bonds means (a) the Industrial Revenue bonds, 1991 Series A (El
Conquistador Resort Project) and (b) the convertible Industrial Revenue bonds,
1991 Series B (El Conquistador Resort Project), as the same may hereafter be
converted to Industrial Revenue Bonds, 1991 Series C (El Conquistador Resort
Project), of the Authority in the initial aggregate principal amount of
$120,000,000, issued under the Trust Agreement.
Bond Swap Agreement means an Interest Rate and Currency Exchange Agreement
entered into by the Borrower and the Bank in accordance with Section 4(w) of the
Reimbursement Agreement and pursuant to which the Borrower and the Bank enter
into an interest rate swap under which the borrower agrees to pay to the Bank
amounts calculated on a notional amount of $120,000,000 at the Bond Fixed Rate
in exchange for the Bank's obligation to pay to the Borrower amounts calculated
on a notional amount of $120,000,000 at rates equal to 88% of the Applicable
LIBID Rate.
Casualty means any damage to or destruction of the Mortgaged Property, or
any portion thereof.
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Company Partnership Agreement shall mean that certain Venture Agreement
dated January 12, 1990 between Kumagai Caribbean, Inc. and WKA El Con
Associates.
Construction or Construct, when used with reference to the Project, shall
mean construction, installation, renovation or development of the Improvements
or any portion thereof.
Default means any event which, with the giving of notice or lapse of time
or both, would constitute an Event of Default or a Termination Payments Event of
Default.
Design Architects shall mean Edward D. Stone, Jr. and Associates, Inc.,
Jorge Rossello Associates, Edward Durrell Stone Associates, P.C., Cosentini
Associates, Arthur Hill and Associates, and Peter George Associates, Inc., or
any successors engaged by the Borrower with the prior written consent of the
Bank.
Disbursement shall mean each disbursement of all or any of the proceeds of
the Loan.
Emergency means a condition presenting, in the judgment of the Bank or the
Authority, imminent danger to the health or safety of persons or imminent danger
to property.
Event of Default shall mean and include any of the following:
(a) Any one or more of the Events of Default specified in the
Reimbursement Agreement, or
(b) Any one or more of the Events of Default specified in the Loan
Agreement, either of the Mortgages, or the Trust Agreement, or
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(c) Failure by the Mortgagor to perform or comply with any covenant,
agreement or term binding upon it contained in this Agreement (except as
elsewhere specifically set forth in this definition of Event of Default), which
failure shall continue for a period of ninety (90) days after notice is given to
the Mortgagor by the Bank or the Authority, unless the bank or the Authority
shall agree to an extension of such time prior to its expiration; provided,
however that if such failure cannot be corrected within such ninety (90) day
period, it shall not constitute an Event of Default if corrective action is
instituted by the Mortgagor within such period and diligently pursued until such
failure is corrected; or
(d) Any representation or warranty made by the Mortgagor in this
Agreement or any certificate furnished in connection therewith shall prove to
have been incorrect or misleading in any material respect as of the date made.
To the extent that any circumstance constitutes an Event of Default
under the Reimbursement Agreement but would not otherwise constitute an Event of
Default hereunder or under the Loan Agreement, the Mortgages or the Trust
Agreement (for example, if the grace period for curing a particular default
under the Reimbursement Agreement is shorter than the grace period for the same
default under the Loan Agreement), then, notwithstanding the foregoing, such
circumstance shall constitute an Event of Default hereunder.
Fajardo Property shall mean approximately 220 acres of land located in
Fajardo, Puerto Rico, as more particularly described in the Fee Mortgage.
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Fee Mortgage shall mean the Mortgage of the Borrower constituted on the
date of this Agreement by Deed Number One before Notary Public Leonor M.
Aguilar-Guerrero, as said document may be amended, modified or supplemented from
time to time.
GDB shall mean the Government Development Bank for Puerto Rico.
GDB Loan shall mean a loan by GDB to the Borrower in the amount of up to
$25,000,000 to be used to finance a portion of the Total Project Costs (as
defined in the Reimbursement Agreement), substantially on the terms and
conditions set forth in the GDB Loan Agreement (as defined in the Reimbursement
Agreement).
GDB Mortgage shall mean those certain mortgages, dated as of the date
hereof, made by the Borrower in favor of GDB and securing the GDB Loan, which
mortgages were constituted on the date of this Agreement (i) by Deed Number Two
before Notary Public Ramon Moran Loubriel, and (ii) by Deed Number Three before
Notary Public Ramon Moran Loubriel, respectively.
Improvements shall mean the improvements to be renovated or constructed on
the Premises pursuant to the Plans, consisting of approximately 750 guest rooms,
approximately 50,000 square feet of meeting space (including prefunctionary
space), six restaurants, approximately 13,000 square feet of retail space, an
approximately 10,000 square foot casino, a marina, approximately 100,000 square
feet of swimming pools and water features, an 18-hole golf course, an
approximately 40,000 square foot clubhouse and spa facility, eight tennis
courts, water sports facilities on the Palominos Island Property and related
amenities and facilities.
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Insurance Policies means the policies of insurance required to be
maintained pursuant to Section 16 hereof and pursuant to the Reimbursement
Agreement.
Insurance Requirements means and includes all provisions of any Insurance
Policy, all requirements of the issuer of any such Insurance Policy, and all
orders, rules, regulations and other requirements of the Puerto Rico Fire
Department, Factory Mutual System or Commercial Risk Insurors (or any other body
exercising similar functions) applicable to or affecting the Project, or any
part thereof or any use or condition of the Project, or any part thereof.
KGC Mortgage shall mean a third priority mortgage on the Premises in favor
of Kumagai Caribbean, Inc., as provided in Section 6.03 of the Company
Partnership Agreement, subject to the terms set forth in Section 7(e) of the
Reimbursement Agreement.
Leasehold Mortgage shall mean the Leasehold Mortgage of the Borrower
constituted on the date of this Agreement by Deed Number Two before Notary
Public Leonor M. Auilar-Guerrero, as said document may be amended, modified or
supplemented from time to time.
Legal Requirements shall have the meaning ascribed to such term in the
Mortgages.
Letter of Credit means the irrevocable letter of credit issued by the Bank
to the Trustee pursuant to the Reimbursement Agreement.
Lien shall mean any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind, including, without
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limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, or the filing of, or any agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction (other than
informational filings in respect of equipment leased under any lease not
intended as security, within the meaning of the Uniform Commercial Code) and any
comparable financing statement under the laws of the Commonwealth of Puerto
Rico.
Loan shall mean the loan made by the Authority to the Borrower pursuant to
the Loan Agreement.
Loan Agreement means the Loan Agreement, of even date herewith, between
the Authority and the Borrower.
Loan Agreement Obligations means the obligations of the Borrower to make
payments under the Loan Agreement, including, without limitation, interest
accrued on such obligations.
Major Casualty means a Casualty, the Restoration of which is reasonably
estimated to cost more than $1,000,000.
Mortgages shall mean, collectively, the Fee Mortgage and the Leasehold
Mortgage.
Mortgage Notes shall mean collectively (each individually, being a
"Mortgage Note"), (a) the demand promissory note of the Borrower in the
principal amount of $120,000,000, payable to the order of the Authority, dated
February 7, 1991, under affidavit No. 98 before Notary Public Leonor M.
Aguilar-Guerrero, ("Mortgage Note A"), (b) the demand promissory note of the
Borrower in the principal amount of $6,612,000, payable to the order of the
Authority, dated February 7, 1991 under Affidavit No. 99 before
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Notary Public Leonor M. Aguilar-Guerrero ("Mortgage Note B") and (c) the demand
promissory note of the Borrower in the principal amount of $2,000,000, payable
to the order of the Authority, dated February 7, 1991, under affidavit No. 101
before Notary Public Leonor M. Aguilar-Guerrero ("Leasehold Note").
Mortgage Obligations means any and all obligations of the Borrower which
may arise or accrue under and pursuant to this Agreement or the Mortgages,
including, without limitation, interest accrued on such obligations.
Mortgaged Property shall mean, collectively, the "Mortgaged Property," as
defined in the Fee Mortgage and the "Mortgaged Property," as defined in the
Leasehold Mortgage.
Mortgagee shall have the meaning ascribed to such term in the Mortgages.
Mortgagor means the Borrower.
Net Proceeds means the amount of all insurance proceeds paid pursuant to
any Insurance policy as the result of a Casualty, after deduction of the
Mortgagee's and the bank's costs and expenses (including, without limitation,
attorneys' fees and expenses), if any, in collecting the same.
Net Restoration Award means the amount of all awards and payments received
from the condemnor on account of a Taking, after deduction of the Mortgagee's
and the Bank's costs and expenses (including, without limitation, attorneys'
fees and expenses), if any, in collecting the same.
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Notes means, collectively, the Mortgage Notes and the Termination Payments
Note.
Palominos Island Property shall mean approximately 90 acres of land
located on an island approximately three miles to the east of the Fajardo
Property, as more particularly described in the Leasehold Mortgage.
Permitted Encumbrances shall mean, collectively, the Mortgages, the GDB
Mortgage, the KGC Mortgage, if any (subject to the conditions set forth in
Section 7(e) of the Reimbursement Agreement), real estate taxes not yet due and
payable, those items listed as exceptions to title on the Title Policy issued on
the date hereof, any other liens consented to in writing by the Bank, and any
other liens defined as "Permitted Encumbrances" in the Mortgages.
Person means an individual, corporation, partnership, joint venture,
trust, association, or any other entity or organization, including a government
or political subdivision, agency or instrumentality thereof.
Plans shall mean the plans, drawings and specifications for the
Construction of the Improvements, including, without limitation, the
architectural, structural, mechanical and electrical plans and specifications
therefor prepared or to be prepared by the Borrower, the Architects, the Design
Architects and the Borrower's engineers and contractors, as approved by the Bank
and the Bank's Consultant, together with all revisions and addenda to such
plans, drawings and specification, provided that such revisions and addenda have
been approved by the Bank to the extent such approval is required pursuant to
paragraph 7(bb) of the Reimbursement Agreement, which Plans shall include,
without
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limitation, a description of the materials, equipment and fixtures necessary for
the Construction of the Improvements.
Pledgee(s) means (a) with respect to the Mortgage Notes, the Bank and, on
the subordinated basis established in Section 2(d) hereof, the Authority, and
(b) with respect to the Termination Payments Note and Mortgage Note B, the Bank.
Premises shall mean the fee simple title to the Fajardo Property (other
than those Condominium Parcels which have been released from the lien of the Fee
Mortgage pursuant to the terms hereof and of the Reimbursement Agreement) and
the leasehold estate in the Palominos Island Property.
Project shall mean, collectively, the acquisition of the Fajardo Property,
the leasing of the Palominos Island Property and the renovation, construction,
furnishing and equipping of the Premises and the Improvements.
Reimbursement Agreement shall mean that certain Letter of Credit and
Reimbursement Agreement, dated as of the date hereof, between the Bank and the
Borrower, relating to, inter alia, the issuance and continuance of the Letter of
Credit, and all extensions, modifications, renewals, amendments and replacements
thereof (including any replacement pursuant to which a Successor Letter of
Credit may be issued).
Release Conditions shall have the meaning ascribed thereto in Section
18(d) hereof.
Restoration means, in case of a Casualty or a Taking, the restoration,
replacement or rebuilding of the affected property such that when such
restoration, replacement or rebuilding is
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completed, the Improvements shall have been constructed substantially in
accordance with the Plans, and to the extent any alterations or additions to the
Improvements were made in compliance with the Mortgages or the Reimbursement
Agreement, with any such alterations or additions, or in the event that the
foregoing requirement cannot be satisfied as a result of any Legal Requirement
or, in the case of a Taking, as a result of the loss of the use of the portion
of the Mortgaged Property which was the subject of such Taking, the Project when
such restoration, replacement or rebuilding shall have been completed, shall be
an integral until similar in condition, character and scope to the Project prior
to such Casualty or Taking, and the value of the Project, when so restored,
replaced or rebuilt, together with the amount of the Net Proceeds or the Net
Restoration Award, as the case may be, applied in repayment of the principal
indebtedness evidenced by the Notes, shall be equal to or greater than the value
and usefulness of the Project immediately prior to such Casualty or Taking.
Secured Obligations means any and all obligations (other than Termination
Payments, reimbursement for amounts advanced by the Bank in connection with
construction on the Mortgaged Property other than Construction of the
Improvements, any amounts owed in connection with any Annual Agent's Fees and
Annual Letter of Credit Fees (as such terms are defined in the Reimbursement
Agreement) and any amounts owed in connection with any Interest Drawing (as such
term is defined in the Letter of Credit) under the Letter of Credit) of the
Borrower which may arise or accrue under and pursuant to the Reimbursement
Agreement, including, without limitation, interest accrued on such obligations.
Secured Obligations B shall mean any and all obligations of the Borrower
that may arise or accrue in connection with any
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Interest Drawing (as defined in the Letter of Credit) under the Letter of Credit
or in connection with the payment of up to one year's Annual Agent's Fees and
Annual Letter of Credit Fees (as such terms are defined in the Reimbursement
Agreement), including, without limitation, interest accrued on such obligations.
Successor Letter of Credit shall have the meaning set forth in the Trust
Agreement.
Taking means any temporary or permanent taking by any public or
quasi-public authority of the Mortgaged Property or any part thereof through
eminent domain or other proceedings or by any settlement or compromise of such
proceedings, or any voluntary conveyance of such property in lieu of the
commencement of any such proceedings.
Taxes means all real estate and other taxes, all assessments (including,
without limitation, all assessments for public improvements or benefits, whether
or not commenced or completed prior to the date hereof or while either of the
Mortgages is in force), water, sewer, electricity, utility and other rents,
rates and charges, excises, levies, license fees, permit fees, inspection fees
and other authorization fees and other charges in each case whether general or
specific, ordinary or extraordinary, or foreseen or unforeseen, of every
character (including all penalties or interest thereon), which at any time may
be assessed, levied confirmed or imposed on or in respect of or be a lien upon:
(a) The Mortgaged Property or any part thereof or any rents, issues,
income, profits or earnings therefrom or any estate, right or interest therein;
or
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(b) Any occupancy, use or possession of or sales from the Mortgaged
Property or any part thereof; or
(c) Any or all of the Notes, either or both of the Mortgages or this
Agreement, any interest thereon or any other payments due from the Mortgagor
under the terms of any or all of the Notes, either or both of the Mortgages or
this Agreement;
excepting, however, any income taxes now or hereafter imposed by the United
States under the Internal Revenue Code of 1986, as amended from time to time,
and by the Commonwealth of Puerto Rico under the Income Tax Act of 1954, as
amended from time to time, or under any other Act of Congress of the United
States or Act of the Legislature of Puerto Rico of the same nature, modifying,
amending or substituting the statutes above mentioned.
Termination Payments shall mean any and all sums which may become payable
by the Borrower to the Bank pursuant to Section 6 of the Bond Swap Agreement.
Termination Payments Event of Default shall mean and include any of the
following:
(a) Any one or more of the Events of Default specified in the Bond Swap
Agreement; or
(b) Any one or more of the Events of Default specified in the
Reimbursement Agreement; or
(c) Failure by the Mortgagor to perform or comply with any covenant,
agreement or term binding upon it contained in this Agreement (except as
elsewhere specifically set forth in this definition of Termination Payments
Event of Default), which failure
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shall continue for a period of thirty (30) days after notice is given to the
Mortgagor by the Bank, unless the Bank shall agree to an extension of such time
prior to its expiration; provided, however that if such failure cannot be
corrected within such thirty (30) day period, it shall not constitute a
Termination Payments Event of Default if corrective action is instituted by the
Mortgagor within such period and diligently pursued until such failure is
corrected, but in no event shall such 30-day period or such other applicable
grace period, as the case may be, be so extended to be a period in excess of 60
days.
Termination Payments Note means the demand promissory note of the Borrower
in the principal amount of $20,000,000, payable to the order of the Authority,
dated February 7, 1991, under affidavit No. 100 before Notary Public Leonor M.
Aguilar-Gerrero.
Termination Payments Obligations means any and all obligations of the
Borrower which may arise or accrue under and pursuant to the Band Swap Agreement
in respect of Termination Payments, including, without limitation, interest
accrued on such obligations.
Title Policy shall mean a title policy issued by a title company
satisfactory to the Bank in its sole and absolute discretion, marked paid in
full, in the amount of the Loan, insuring the Authority, the Bank and the
Trustee, as their respective interests may appear, that the Fee Mortgage, in
connection with the Fajardo Property, and the Leasehold Mortgage, in connection
with the Palominos Island Property, together with the other Security Documents
(as defined in the Reimbursement Agreement) to be recorded constitute valid
first liens on the Premises, and on the other property secured, free and clear
of all
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defects, restrictions, Liens and violations, except the Permitted Encumbrances,
and which Title Policy shall contain:
(A) no exception for mechanics' or materialmen's liens;
(B) no survey exceptions other than those approved by the Bank;
(C) a statement that the title company agrees to affirmatively insure
the priority of each Disbursement against the existence of any other
Liens, including mechanic's and materialman's liens, whether choate
or inchoate;
(D) reinsurance with provisions for direct access against the
reinsurers, in amounts and with companies acceptable to the Bank;
and
(E) such other endorsements or affirmative insurance as the Bank and the
Bank's counsel shall require.
Trust Agreement means the Trust Agreement, of even date herewith, between
the Authority and the Trustee, relating to the Bonds.
Trustee means Banco Popular de Puerto Rico, as trustee under the Trust
Agreement, or any successor trustee at the time serving as such under the Trust
Agreement.
SECTION 2. Pledge of Mortgage Notes and Subordination of Interests.
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(a) As security for the Secured Obligations, the Loan Agreement
Obligations and the Mortgage Obligations, the Mortgagor in this act delivers
Mortgage Note A and the Leasehold Note to the Bank and the Authority in pledge.
The parties have agreed that the Mortgage Notes so pledged shall be of equal
priority (pari-passu) and that the pledge thereof in favor of the Authority and
the Bank shall be subject to the subordination provisions of Section 2(d)
hereof. As security for the Termination Payments Obligations, the Mortgagor in
this act delivers the Termination Payments Note to the Bank in pledge and as
security for Secured Obligations B, the Mortgagor in this Act delivers Mortgage
Note B to the Bank in pledge. The parties have agreed that the pledge of
Mortgage Note A and the Leasehold Note is of equal priority (pari-passu) with
the pledge of the Termination Payments Note and Mortgage Note B in connection
with all rights and remedies of the pledgees hereunder with respect to the Fee
Mortgage.
(b) Simultaneously with the execution of this Agreement, the
Mortgagor has delivered (A) Mortgage Note A and the Leasehold Note to the Bank,
to hold in accordance with the provisions of this Agreement, in its capacity as:
(i) pledgee hereunder and (ii) agent of the Authority pursuant to the terms of
this Agreement and (B) the Termination Payments Note and Mortgage Note B to the
Bank, to hold in accordance with the provisions of this Agreement in its
capacity as pledgee hereunder. The parties hereto hereby consent to the delivery
of the Notes to the Bank to be held in accordance with the terms and conditions
of this Agreement.
(c) The Mortgage Notes and the Termination Payments Note shall have
been endorsed by the Authority as follows: "Pay to the order of THE MITSUBISHI
BANK, LIMITED, New York Branch under the terms and conditions of that certain
collateral Pledge Agreement among El Conquistador Partnership L.P., Puerto Rico
Industrial,
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Medical, Educational and Environmental Pollution Control Facilities Financing
Authority and The Mitsubishi Bank, Limited, New York Branch, dated February 7,
1991."
(d) The Authority recognizes that the primary security for the
payment of principal of and interest accrued on the Bonds is the availability of
drawings to be made by the Trustee for the account of the Borrower under the
Letter of Credit, and accordingly, the Authority agrees that notwithstanding any
provision of this Agreement to the contrary, the pledge and rights of the
Authority in Mortgage Note A and the Leasehold Note and in the Mortgages are
hereby subordinated to the pledge and rights therein of the Bank and the rights
of the Authority as the holder of the Mortgages are hereby assigned to the Bank,
so long as the Bank shall not have "wrongfully dishonored" (as hereinafter
defined) any drawing made by the Trustee in strict compliance with the terms of
the Letter of Credit. In the event that the Bank shall wrongfully dishonor any
drawing made by the Trustee in strict compliance with the terms of the Letter of
Credit, then in such event the pledge of Mortgage Note A and the Leasehold Note
granted to the Bank under this Agreement shall (except to the extent of any
amounts owed to the Bank under the Reimbursement Agreement), without any further
action, notice or the execution or delivery of any document by or to any party,
be and become subordinated to the pledge granted to the Authority under this
Agreement until such time as the Bank effects the cure of such wrongful dishonor
and, upon effecting such cure, the pledge and rights of the Authority in
Mortgage Note A and the Leasehold Note and in the Mortgages will once again be
subordinate to the pledge and rights thereof of the Bank. For purposes hereof
"wrongful dishonor" shall mean a failure by the Bank to honor any drawing made
and presented pursuant to and in strict compliance with the Letter of Credit.
The pledge of Mortgage Note A and the Leasehold Note and the pledge of the
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Termination Payments Note and Mortgage Note B effected hereunder shall remain of
equal priority (pari-passu) regardless of whether the Bank's interest as pledgee
of Mortgage Note A and the Leasehold Note shall have been subordinated to the
Authority's interest as pledgee therein.
(e) Obligations Secured. Mortgage Note A and the Leasehold Note
shall secure (i) on a senior or first priority basis the payment and performance
of (A) the Secured Obligations, and (B) the Mortgage Obligations, in that order,
and (ii) on a subordinated basis, as provided in Section 2(d) above, the payment
and performance of the Loan Agreement Obligations. The Termination Payments Note
shall secure the payment and performance of the Termination Payments Obligations
exclusively. Mortgage Note B shall secure the payment and performance of Secured
Obligations B exclusively.
(f) This Agreement constitutes a pledge and security agreement, and
the Pledgees shall have all the rights, powers and remedies of a pledgee and
secured party provided by the laws of the Commonwealth of Puerto Rico in
addition to the rights and remedies provided in this Agreement and under the
Mortgages and Mortgage Note A and the Leasehold Mortgage and, with respect to
the Bank, the Termination Payments Note and Mortgage Note B, except that the
Termination Payments Note and Mortgage Note B shall secure only the Termination
Payments Obligations and the Secured Obligations B, respectively.
(g) Mortgagor's Consent to Assignment. The Mortgagor hereby consents
to the assignment and subordination as provided in Section 2(d) above and agrees
that the Bank shall hold Mortgage Note A and the Leasehold Mortgage in pledge,
on behalf of the Pledgees, as security for the Secured Obligations, the Loan
<PAGE>
<PAGE>
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Agreement Obligations and the Mortgage Obligations. The Pledgees shall be
entitled to hold Mortgage Note A and the Leasehold Mortgage in pledge until the
termination of the Reimbursement Agreement and the Loan Agreement and the
payment in full of all of the Secured Obligations, the Loan Agreement
Obligations and the Mortgage Obligations. The Bank shall be entitled to hold the
Termination Payments Note in pledge until the termination of the Bond Swap
Agreement and the payment in full of all of the Termination Payments
Obligations, and shall be entitled to hold Mortgage Note B in pledge until the
termination of the Reimbursement Agreement and the payment in full of all of the
Secured Obligations B.
(h) Further Assignment of Notes. Notwithstanding anything contained
in this Agreement to the contrary, for so long as the GDB Loan shall be
outstanding, the Bank shall not assign Mortgage Note B or the Termination
Payments Note to any other party to secure any indebtedness other than the
indebtedness secured by each such Note on the date hereof; provided, however,
that the Bank may at any time assign Mortgage Note B to a Successor Letter of
Credit Bank (as defined in the Trust Agreement) and/or the Termination Payments
Note to any party replacing the bank as the swap counterparty in connection with
the Loan.
SECTION 3. Rights of the Bank and Authority.
(a) Notwithstanding anything in this Agreement to the contrary, so
long as the Bank shall not have wrongfully dishonored any drawing made by the
Trustee in strict compliance with the terms of the Letter of Credit, or in the
case of such a wrongful dishonor, if the Bank has cured same, (i) the Authority
shall not be entitled to foreclose on either or both of Mortgage Note A and the
Leasehold Note, either or both of the Mortgages, or any part of
<PAGE>
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the Mortgaged Property, or exercise any other remedy under either or both of the
Mortgages, either or both of Mortgage Note A and the Leasehold Note or this
Agreement without the prior written consent of the Bank, and (ii) the Bank shall
be entitled to take any action permitted to be taken jointly by the Pledgees
hereunder, including without limitation the foreclosure of either or both of
Mortgage Note A and the Leasehold Note or either or both of the Mortgages and
the making of any determination, demand or consent permitted or required to be
made by the Pledgees, and any such action may be taken solely by the Bank and at
the Bank's discretion as if the Bank were the sole Pledgee and holder of
Mortgage Note A and the Leasehold Note without notice to, consent of or
participation by the Authority; provided, however, that the Bank shall not
foreclose on any or all of the Mortgage Notes or on the Termination Payments
Note or either or both of the Mortgages unless it has delivered either the
notice and direction to the Trustee described in Section 305 of the Trust
Agreement or the notice to the Trustee described in clause (i) of Section
7.01(i) of the Loan Agreement.
(b) The Bank agrees that it will not enter into any amendment,
change or modification of this Agreement (except to the extent that any such
amendment, change or modification would affect only the pledge of the
Termination Payments Note or only the pledge of Mortgage Note B) or authorize
and direct any amendment, change or modification to be made to the Mortgages or
Mortgage Note A or the Leasehold Note, without the express prior written consent
of the Authority, which consent shall not under any circumstances be withheld,
conditioned or delayed if the interests of the holders of the Bonds are not
materially adversely affected thereby. The Authority agrees to execute,
acknowledge and deliver any amendment, change or modification to the Mortgages
or Mortgage Note A and the Leasehold Note, at the direction of the Bank, if the
interests of
<PAGE>
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the holders of the Bonds are not materially adversely affected thereby.
(c) The Authority and the Mortgagor agree that the Bank, without
notice to or any consent from the Authority and without affecting any of the
Bank's rights under this Agreement, the Mortgages or the Notes, may, from time
to time:
(i) exercise any and all rights and remedies under the
Reimbursement Agreement, including, without limitation, commencement of actions
against the Mortgagor to recover sums owing thereunder and to obtain injunctive
relief;
(ii) supplement, modify, amend, extend, renew, accelerate or
otherwise change the time for payment or the terms of the Secured Obligations,
the Secured Obligations B, the Termination Payments Obligations or any part
thereof;
(iii) supplement, modify, amend or waive, or enter into or
give any agreement, approval or consent with respect to, the obligations owing
to the Bank under the Reimbursement Agreement or under any additional security
agreement or guaranties or supplement, modify, amend or waive any condition,
covenant, default, remedy, right, representation or term thereof or thereunder;
(iv) accept new or additional instruments, documents or
agreements in exchange for or relative to the Reimbursement Agreement, the
Secured Obligations, the Secured Obligations B, the Termination Payments
Obligations or any part thereof;
<PAGE>
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(v) accept partial payments on the Secured Obligations, the
Secured Obligations B, or the Termination Payments Obligations;
(vi) receive and hold additional security or guaranties for
the Secured Obligations, the Secured Obligations B, the Termination Payments
Obligations or any part thereof, owing to the Bank;
(vii) release any Person from any personal liability with
respect to the Secured Obligations, the Secured Obligations B, the Termination
Payments Obligations or any part thereof;
(viii) settle, release on terms satisfactory to the Bank or by
operation of law or otherwise, compound, compromise, collect or otherwise
liquidate or enforce any Secured Obligations, Secured Obligations B and/or the
Termination Payments Obligations; and
(ix) grant all required consents, approvals and waivers
hereunder, including, without limitation, all renewals and extensions hereof and
all consents, approvals and waivers which require action by the Pledgees, except
as required by Section 3(b) hereof.
(d) Upon the termination of the Letter of Credit and the
Reimbursement Agreement and the full satisfaction of the Secured Obligations
then due and owing, the Bank agrees to deliver Mortgage Note A and the Leasehold
Note to the Authority or any assignee thereof; provided, however, that if at
that time, there remain outstanding any Loan Agreement Obligations, the
Authority or its assignee shall retain Mortgage Note A and the Leasehold Note in
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pledge until full satisfaction and payment of such Obligations, and references
herein to the "Bank" shall be deemed to be references to the Authority insofar
as such references apply to the Bank as pledgee of Mortgage Note A and the
Leasehold Note.
If the GDB Loan is then outstanding, upon the termination of the
Bond Swap Agreement and the full satisfaction of the Termination Payments
Obligations, the Bank agrees to deliver the Termination Payments Note to GDB for
cancellation purposes only. If the GDB Loan is not then outstanding, the Bank
agrees that upon termination of the Bond Swap Agreement and the full
satisfaction of the Termination Payments Obligations, the Bank shall deliver the
Termination Payments Note to the Borrower for cancellation purposes only.
If the GDB Loan is then outstanding, upon the termination of the
Reimbursement Agreement and the full satisfaction of the Secured Obligations B,
the Bank agrees to deliver Mortgage Note B to GDB for cancellation purposes
only. If the GDB Loan is not then outstanding, the Bank agrees that upon
termination of the Reimbursement Agreement and the full satisfaction of the
Secured Obligations B, the Bank shall deliver Mortgage Note B to the Borrower
for cancellation purposes only.
(e) Upon the request of the Bank, the Authority hereby agrees to
execute, acknowledge and deliver all instruments and documents required in
connection with the release of the Condominium Parcels (as defined in the
Reimbursement Agreement) from the lien of the Mortgages and the creation of any
easements and/or rights of way in favor of the Condominium Parcels and the
creation of any access easement in favor of the property owned by Justino Diaz
Santini.
<PAGE>
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SECTION 4. Application of Funds. Any proceeds collected or received by the
Pledgees from the foreclosure of the Notes, or any part thereof, the foreclosure
of either or both of the Mortgages, or any part of the Mortgaged Property, and
the proceeds from any possession, holding, operating or management of the
Mortgaged Property or any part thereof by the Pledgees in accordance with the
terms and conditions of the respective Mortgages, shall be applied in the
following order from time to time by the Pledgees:
First: To the payment of (i) all Taxes or liens with respect to the Notes
or the Mortgaged Property which are prior to the lien of this Agreement or
either of the Mortgages that the Pledgees may consider necessary or desirable to
pay, except those taxes, assessments and liens subject to which any sale of any
of the Notes or the Mortgaged Property shall have been made, if any, (ii) all
costs and expenses of collection, including the cost and expenses of handling
the Notes and/or the Mortgaged Property, including the taking of possession,
operating and managing of the Mortgaged Property, as the case may be, and (iii)
the cost and expenses of (A) any sale in foreclosure of the Notes and/or the
Mortgaged Property pursuant to the provisions of this Agreement or either or
both of the Mortgages, and (B) the enforcement of any remedies hereunder,
including court costs and expenses, and (C) fees and expenses of Pledgees'
agents, attorneys and counsel, and all expenses, liabilities and advances
incurred or made by the Pledgees with respect to such foreclosure.
Second: The payment of the Secured Obligations (in any order of priority
that the Bank may determine in its sole discretion), Mortgage Obligations (in
any order of priority that the Bank may determine in its sole discretion), and
Loan Agreement Obligations, in that order, then outstanding; provided, however,
that in connection with the foreclosure of the Termination Payments Note or
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the Mortgaged Property as a result of a Termination Payments Event of Default,
the proceeds shall be applied only to the payment of the Termination Payments
Obligations and in connection with the foreclosure of Mortgage Note B as a
result of a failure to pay any Secured Obligations B, the proceeds shall be
applied only to the payment of the Secured Obligations B.
Third: Any surplus then remaining shall be paid to or at the direction of
the Borrower, its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same (including, without limitation, GDB), or as a court
of competent jurisdiction may otherwise direct.
SECTION 5. Documentary Stamps. If at any time the Commonwealth of Puerto
Rico or any governmental subdivision thereof shall require the payment of
registration fees or Internal Revenue Stamps or other stamps to be affixed to
either or both of the Mortgages, any or all of the Notes or this Agreement, the
Mortgagor, upon demand, will pay for the same, with interest and penalties
thereon, if any, and shall hold the Authority and the Bank harmless of and from
and indemnify them against all losses, liabilities, obligations, damages,
penalties, claims, causes of action, charges and expenses (including, without
limitation, attorneys' fees and expenses) which may be imposed upon or incurred
by or asserted against them by reason thereof.
SECTION 6. Headings etc. The headings and captions of the various Sections
of this Agreement are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
SECTION 7. Usury Laws. This Agreement, the Mortgages and the Notes are
subject to the express condition that at no time shall
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the Mortgagor be obligated or required to pay interest on the obligations
secured thereby and hereby at a rate which is in excess of the maximum interest
rate which the Mortgagor is permitted by law to contract or agree to pay. If by
the terms of this Agreement, the Mortgages, or any of the Notes, the Mortgagor
is at any time required or obligated to pay interest at a rate in excess of such
maximum rate, the rate of interest shall be deemed to be immediately reduced to
such maximum rate so that no amounts shall be charged which are in excess
thereof and, in the event it should be determined that any excess over such
highest lawful rate has been charged or received, the holder of the Notes shall
promptly refund such excess to the Mortgagor; provided, however, that, if
lawful, any such excess shall be paid by the Mortgagor to the Mortgagee as
additional interest (accruing at a rate equal to the maximum legal rate minus
the rate provided for hereunder) during any subsequent period when regular
interest is accruing hereunder at less than the maximum legal rate.
SECTION 8. Further Assurances. The Mortgagor hereby agrees promptly to
execute and deliver such additional agreements and instruments and promptly to
take such additional action as the Bank or the Authority may at any time and
from time to time request in writing in order for the Bank and/or the Authority
to obtain the full benefits and rights granted or purported to be granted by
this Agreement and fully and continually to perfect the pledge and security
interests created hereby.
SECTION 9. No Waiver; Cumulative Remedies. No failure or delay on the part
of the Pledgees, or either of them, in exercising any right, power or remedy
hereunder or under or in connection with any or all of the Notes or either or
both of the Mortgages shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
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further exercise thereof or the exercise of any other right, power or remedy
hereunder or under or in connection with any or all of the Notes or either or
both of the Mortgages. The remedies herein and in the Mortgages provided are
cumulative and not exclusive of any remedies provided by law or in equity.
SECTION 10. Amendments, etc. No amendment, modification, termination, or
waiver of any provision of this Agreement, Mortgage Note A, the Leasehold Note
or the Mortgages nor consent to any departure by the Mortgagor therefrom shall
in any event be effective unless the same shall be authorized and directed by
the Bank in writing and signed by the Authority, subject to the provisions of
Section 3(b) hereof, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No notice to
or demand on the Mortgagor in any case shall entitle the Mortgagor to any other
or further notice or demand in similar or other circumstances.
SECTION 11. Addresses for Notices, etc. All notices, requests, demands,
directions and other communications hereunder or in connection with the Notes or
the Mortgages shall be in writing (including telegraphic communication) and
mailed (certified or registered, with signed receipt, or sent by nationally
recognized overnight courier to the applicable party at the following address or
to such other address with respect to any party as such party shall notify the
other parties in writing:
If to the Borrower:
El Conquistador Partnership L.P.
c/o Williams Hospitality Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Hugh A. Andrews
<PAGE>
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-29-
with copies similarly delivered to:
(i) Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.;
(ii) Kumagai Caribbean, Inc.
c/o Williams Hospitality Management
Corporation
187 East Isla Verde Road
Carolina, Puerto Rico
Attention: Mr. Sunsuke Nakane;
(iii) WMS Industries Inc.
3401 North Carolina Avenue
Chicago, Illinois 60618
Attention: Corporate Secretary; and
(iv) Messrs. Burton and Richard Koffman
c/o Richford American
950 Third Avenue
New York, New York 10022
If to the Authority:
Puerto Rico Industrial, Medical, Educational
and Environmental Pollution Control Facilities
Financing Authority
c/o Government Development Bank for Puerto Rico
P.O. Box 42001
San Juan, Puerto Rico 00940-2001
Attention: Executive Director
If to the Bank:
The Mitsubishi Bank, Limited
225 Liberty Street
Two World Financial Center
New York, New York 10281
Attention: Real Estate Finance Group
(Mr. Akira Fujii or Mr. Russ Lopinto)
with copies similarly delivered to:
(i) Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Attention: Warren J. Berstein, Esq.; and
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(ii) McConnell Valdes Kelley Sifre
Griggs & Ruiz-Suria
Royal Bank Center
255 Ponce de Leon Avenue
Hato Rey, Puerto Rico 00917
Attention: Fred Hulser, Esq.
and, if notice is given by the Bank to the Borrower, a copy thereof
shall be delivered to:
Government Development Bank for Puerto Rico
P.O. Box 42001
Minillas Station
San Juan, Puerto Rico 00940
Attention: President and Director of Private
Sector Banking Services
and
Melendez-Perez Moran & Santiago PO Box 19328 Santurce,
Puerto Rico 00919 Attention: Ramon Moran-Loubriel, Esq.
All such notices, requests, demands, directions and other communications
shall be effective when received at the address specified as aforesaid.
SECTION 12. Binding Effect. The Agreement shall be binding upon and inure
to the benefit of the Mortgagor, the Bank and the Authority and their respective
successors and assigns. GDB shall be a third party beneficiary of this Agreement
with respect to those provisions dealing specifically with the Termination
Payments Note, Mortgage Note B and for purposes of Section 2(h) only.
SECTION 13. Severability of Provision. Any provision of this Agreement,
the Notes or the Mortgages which is prohibited or unenforceable in the
Commonwealth of Puerto Rico shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
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SECTION 14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
SECTION 15. Inconsistent Terms. In the event of contradictions or
inconsistencies in the terms and provisions of this Agreement and the terms and
provisions of the Mortgages, the terms and provisions of this Agreement shall
prevail.
SECTION 16. Insurance.
(a) Prior to the Date of Substantial Completion (as defined in the
Reimbursement Agreement), the Borrower, at its sole cost and expense, shall keep
the existing structures insured for the benefit of the Authority and the Bank
against loss and damage by Fire, Lightning, Collapse, Earthmovement, Flood,
Tsunami, Boiler and Machinery, and such other standard Extended Coverage perils
as are customarily included under standard "All Risk" policies for other
property and buildings similar to the Mortgaged Property in nature, use,
location, height, and type of construction. The amount of such Insurance
Policy(ies) shall be not less than the full Replacement Cost of the then
existing structures, with the Agreed Amount and Replacement Cost Endorsements
attached, waiving all co-insurance provisions and eliminating the Vacancy and
Unoccupied Clause. In addition, prior to the Date of Substantial Completion, the
Improvements shall be covered under an "All Risk" Builder's Risk/Contract Works
Policy for the 100% Completed Value (replacement cost) of the contract(s) on a
Non-Reporting Form, subject to the same coverages as are required on the
presently existing structures, along with extensions of coverage for "permission
to complete and Occupy," Offsite Storage including Inland and Ocean Transit,
"Hot and Cold" Testing, Increased Cost of Construction and Contingent Liability
from Building Laws. On and after the Date of Substantial Completion, the
Borrower shall secure
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insurance to cover the Improvements and equipment at the Project against loss or
damage by fire and such risks as are customarily included in Extended Coverage,
and from such other hazards including, without limitation, Flood, Earthmovement,
and Coastal Windstorm, as may be covered by the "All Risk" insurance covering
other property and buildings similar to the Mortgaged Property in nature, use,
location, height and type of construction, in an amount not less than the
greater of (A) full insurable value, or (B) an amount sufficient to prevent the
Borrower from becoming a co-insurer within the terms of the applicable policies.
Said Insurance Policy shall include endorsements for Demolition, Contingent
Liability and Increased Cost of Construction. The term "full insurable value" as
used in this Section shall mean the cost of actual replacement, without
deduction for depreciation, less the cost of excavations, foundations and
footings below the lowest basement floor or, if there be no basement, below the
level of the ground determined as of the Date of Substantial Completion and as
further determined on the date of each renewal or replacement of such Insurance
Policy, as hereinafter set forth. Full insurable value shall be determined by an
appraisal made at least once every three (3) years, by an appraiser, appraisal
company or insurance company selected by the Borrower and approved by the Bank
in its sole discretion, and such determination of full insurable value shall be
binding and conclusive upon the parties hereto. If any Insurance Policy covering
Flood or Earthmovement shall contain annual aggregate limits, such aggregate
limits shall be replenished upon the occurrence of a substantial loss, as
determined by the Bank in its sole discretion. The Insurance Policies described
in subparagraphs (a)(i) and (a)(ii) above shall provide for deductions of not
more than $10,000 per occurrence for all perils except Flood, Earthmovement, and
Coastal Windstorm, for which deductions of not more than $25,000 per occurrence
may be made.
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(b) The Borrower, at its sole cost and expense, shall maintain or
cause to be maintained for the benefit of the Authority and the Bank (i) prior
to the Date of Substantial Completion, Soft Costs/Additional Expense Incurred,
Loss of Gross Earnings and/or Loss of Rental Income on an Actual Loss Sustained
Basis for an amount not less than $24,000,000, with an "Extended Period of
Indemnity" Endorsement attached; (ii) upon and after the Date of Substantial
Completion, coverage for Loss of Gross Earnings and/or Loss of Rental Income,
Business Interruption and Additional Expense Incurred Insurance on an Actual
Loss Sustained Basis (if available) in the amount equal to the greater of (A) an
estimate reasonably satisfactory to the Bank of the succeeding year's Gross
Revenues (as defined in the Reimbursement Agreement), or (B) $24,000,000 with
the Extended Period of Indemnity Enforcement attached; (iii) upon and after the
installation of any boilers and/or machinery at the Project, Boiler and
Machinery Coverage for Rent Loss (including, without limitation, from both
retail space and nightly room rentals), with an "Extended Period of Indemnity"
and Improvements Loss in such amounts as are usually carried by persons
operating property and buildings similar to the Mortgaged Property in nature,
use, location, height and type of construction.
(c) The Borrower, at its sole cost and expense, shall maintain or
cause to be maintained at all times (i) General Public Liability Insurance,
including, without limitation, the Broad Form Comprehensive General Liability
Endorsement, with the respective Primary Coverages as follows:
General Aggregate $ 1,000,000 Per Location
Products/Completed Operations $ 1,000,000*
*(2 year Completed Operation
Extension)
Personal & Advertising Injury $ 1,000,000
Each Occurrence (Bodily Injury
and Property Damage) $ 1,000,000
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Fire Damage Legal $ 50,000
Medical Expense $ 10,000
Stop Gap Liability $ 1,000,000
(ii) Umbrella Liability Coverage in an amount of not less than $40,000,000 per
occurrence and in the aggregate prior to the Date of Substantial Completion and,
thereafter, in an amount of not less than $50,000,000 per occurrence and in the
aggregate or such greater amount as the Bank shall reasonably require; (iii)
Worker's Compensation and Non-Occupational Disability Insurance as respect a
Monopolistic State as required by applicable laws and regulations of the
Commonwealth of Puerto Rico; (iv) Marina Operator's Legal Liability, Protection
and Indemnity and Marina General Liability; (v) insurance covering pilings,
piers, wharves and docks, and environmental impairment coverage (if available)
with respect to the marina operation; and (v) such other types and amounts of
insurance with respect to the Mortgaged Property and the operation thereof which
are commonly maintained in the case of other property and buildings similar to
the Mortgaged Property in nature, use, location, height and type of
construction, as may from time to time be required by the Authority and the Bank
(including, without limitation, Automobile Liability Insurance in amounts
reasonably required by the Bank from time to time).
(d) All Insurance Policies shall be issued by an insurer admitted
and licensed to do business in the Commonwealth of Puerto Rico with an A.M. Best
Rating of AX or better and shall be otherwise satisfactory to the Bank in form
and content. The Property and Business Interruption Insurance Policies shall
contain the Standard Mortgagee Non-Contribution Clause Endorsement or its
equivalent endorsement satisfactory to the Bank, naming the Bank as First
Mortgagee and providing the Bank (except in the case of General Liability and
other Liability and Worker's Compensation) as the person to whom all payments
made by such insurance company
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shall be paid and with whom all claims shall be adjusted, except as otherwise
provided in Section 18(b) hereof. All Liability Insurance Policies shall name
the Bank, the Authority and the Trustee as Additional Insureds according to the
their respective interests. Without the Bank's prior written consent, the
Borrower shall not carry separate or additional insurance coverage concurrent in
form or contributing in the event of loss with that required by this Agreement
or the Reimbursement Agreement. Without the Bank's prior written consent, the
Borrower shall not name any Person as a named insured or loss payee under any
Insurance Policy without the Bank's prior written consent. The Borrower shall
pay the premiums for the Insurance Policies as the same become due and payable.
The Borrower shall deliver original binders and certified copies of the
insurance Policies to the Bank and to the Authority as further security for the
Borrower's performance of the terms and conditions contained herein, provided
that the Bank and the Authority shall not be deemed by reason of the custody of
such Insurance Policies to have knowledge of the contents thereof. In the event
of a foreclosure of any or all of the Notes or either or both of the Mortgages,
the purchaser of the Mortgaged Property will succeed to all of the rights of the
Borrower, including the rights to all unearned premiums paid, with respect to
the Insurance Policies, to the extent assignable. The Borrower also shall
deliver to the Bank and the Authority, within 10 days of such party's request, a
certificate of insurance issued by the Borrower's insurance agent/broker setting
forth the particulars as to all such Insurance Policies, that all premiums due
thereon have been paid and that the same are in full force and effect. Not later
than 30 days prior to the expiration date of each of the Insurance Policies, the
Borrower shall deliver to the Bank and the Authority original binders and
certified copies of a renewal policy or policies marked "premium paid" or
accompanied by other evidence of payment of premium satisfactory to the Bank and
the Authority.
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(e) Each Insurance Policy to be carried hereunder shall contain a
provision whereby the insurer (i) agrees that such policy shall not be cancelled
or modified, and shall not fail to be renewed, without at least 60 days' prior
written notice to the Authority and the Bank, (ii) waives any right to claim any
premiums and commissions against the Authority and the Bank and (iii) provides
that the Authority and the Bank are permitted to make payments to effect the
confirmation of such Policy upon notice of cancellation due to nonpayment of
premiums. In the event any Insurance Policy (except for general public and other
liability, boiler and machinery explosion liability and workers' compensation
insurance) shall contain breach of warranty provisions, such Policy shall
provide that with respect to the interest of the Authority and the Bank, such
Insurance Policy shall not be invalidated by and shall insure the Authority and
the Bank regardless of (A) any act, failure to act or negligence of or violation
of warranties, declarations or conditions contained in such Policy by any named
insured, (B) the occupancy or use of the Mortgaged Property for purposes more
hazardous than permitted by the terms thereof, (C) any foreclosure or other
action or proceeding taken by the Authority or the Bank pursuant to any
provision of this Agreement, any or all of the Notes, or either or both of the
Mortgages, or (D) any change in title to or ownership of all or any of the
Mortgaged Property.
(f) Any insurance maintained pursuant to this Section 16 may be
evidenced by blanket Insurance Policies covering the Mortgaged Property and
other properties or assets of the Borrower or any Affiliated Person, provided
that any such policy shall specify the portion, if less than all, of the total
coverage of such Policy that is allocated to the Mortgaged Property and shall in
all other respects comply with the requirements of this Section
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16. The Bank, in its sole discretion, shall determine whether such blanket
Policies provide sufficient limits of insurance.
(g) Notwithstanding anything to the contrary contained herein, if at
any time the Pledgees are not in receipt of written evidence that all insurance
required hereunder is maintained in full force and effect, the Pledgees shall
have the right, upon notice to the Borrower, to take such action as the Pledgees
deem necessary to protect their interests in the Mortgaged Property, including,
without limitation, the obtaining of such insurance coverage as the Pledgees
deem appropriate, and all expenses incurred by the Pledgees in connection with
such action or in obtaining such insurance and keeping it in effect shall be
paid by the Borrower promptly after demand and be secured by this Agreement and
by the Mortgages.
SECTION 17. Compliance with Insurance Requirements. The Mortgagor, at its
sole cost and expense, will comply and cause compliance of the Mortgaged
Property and the operation, maintenance and use thereof with all Insurance
Requirements, whether or not compliance therewith shall require structural
changes in or interfere with the use and enjoyment of the Mortgaged Property or
any part thereof.
SECTION 18. Damage or Destruction.
(a) In case of a Casualty, the Borrower will immediately give notice
thereof to the Authority and the Bank generally describing the nature and extent
of such Casualty and setting forth the Borrower's best estimate of the cost of
Restoration, and the Borrower shall, at its sole cost and expense, promptly
commence and diligently complete or cause to be commenced and diligently
completed, the Restoration in a good and workmanlike manner and in compliance
with all legal Requirements.
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(b) The Bank shall be entitled to receive all insurance proceeds
payable on account of a Casualty. The Borrower hereby irrevocably assigns,
transfers and sets over to the Bank all rights of the Borrower to any such
proceeds, award or payment and irrevocably authorizes and empowers the Bank, in
the name of the Borrower or otherwise, to file for and prosecute in its own name
what would otherwise be the Borrower's claim for any such proceeds.
Notwithstanding the foregoing, so long as no Default, Event of Default or
Termination Payments Event of Default shall have occurred and shall then be
continuing and provided the Borrower promptly files all claims and diligently
prosecutes same, the Borrower shall have the right to file, adjust, settle and
prosecute any claim for such proceeds; provided that the Borrower shall not
agree to any adjustment or settlement of any such claim payable with respect to
a Major Casualty without the Bank's prior written consent. The Borrower shall
pay promptly after demand all costs and expenses (including, without limitation,
attorneys' fees and expenses) incurred by the Bank in connection with a Casualty
and the seeking and obtaining of any insurance proceeds, award or payment with
respect thereto.
(c) In the event of a Major Casualty, the Net Proceeds shall be
held, at the bank's option, by the Bank as additional collateral for the Secured
Obligations, the Loan Agreement Obligations, the Mortgage Obligations, the
Termination Payments Obligations and the Secured Obligations B and shall be
applied or dealt with by the Bank as follows:
(i) if the Release Conditions (as hereinafter defined) are
satisfied, all net Proceeds shall be made available to the Borrower to be
applied towards the cost of the Restoration in accordance with paragraph (e) of
this Section 18; and
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(ii) if the Release Conditions are not satisfied, all Net
Proceeds shall be applied in accordance with Section 20 hereof.
(d) In case of a Major Casualty, all Net Proceeds shall be applied
as provided in clause (i) of paragraph (c) of this Section 18 if all of the
following conditions are satisfied or otherwise waived by the Bank
(collectively, the "Release Conditions"):
(i) no Default, Event of Default or Termination Payments Event
of Default shall have occurred and be continuing;
(ii) the Borrower shall have delivered to the Authority and
the bank within thirty (30) days after the occurrence of the Major Casualty, a
notice of the Borrower's desire to undertake the Restoration of the
Improvements;
(iii) the Borrower shall have demonstrated to the satisfaction
of the bank that the Restoration of the Improvement can be completed at least
six months prior to the then-current Expiration Date (as defined in the
Reimbursement Agreement);
(iv) the Borrower shall have demonstrated to the satisfaction
of the Bank that sufficient funds are available to the Borrower through revenues
and/or business interruption insurance maintained pursuant to Section 16 hereof,
and/or a cash deposit, letter of credit or similar cash-equivalent security
(which in the case of a letter of credit or similar cash-equivalent security
shall be satisfactory to the Bank as to form, content and issuer) and which
shall be for the benefit of the Bank, to pay all amounts estimated to be paid
with respect to the Secured Obligations, Secured Obligations B, the Loan
Agreement Obligations, any debt service with respect to the GDB Loan, and all
other estimated operating expenses with respect to the Project during the period
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estimated by the Borrower and approved by the Bank as necessary for the
completion of the Restoration;
(v) in the event that the estimated cost of Restoration is
greater than 25% of the full replacement cost of the Improvements (as specified
in the Borrower's casualty Insurance Policy), the Borrower shall have provided
the Bank with a guaranty of completion of the Restoration satisfactory to the
Bank as to form, content and guarantor which, among other things, ensures that
sufficient funds are and will be available to complete the Restoration; and
(vi) to the extent, in the Bank's judgment, that the Net
Proceeds are insufficient to pay the costs of the Restoration, the Borrower
shall have provided the Bank with a cash deposit, letter of credit, or similar
cash-equivalent security in the amount of such deficiency (which in the case of
a letter of credit or similar cash-equivalent security shall be satisfactory to
the Bank as to form, content and issuer).
(e) Provided that no Default, Event of Default or Termination
Payments Event of Default shall have occurred and be continuing, then, upon the
occurrence of a partial destruction of the Improvements that does not constitute
a Major Casualty or upon the occurrence of a Major Casualty in connection with
which the Release Conditions have been met, the Net Proceeds shall be paid over
to the Borrower for the Restoration of the Improvements. The Net Proceeds shall
be disbursed substantially in accordance with the requirements of Article 9 of
the Reimbursement Agreement such that the Net Proceeds shall be advanced in the
same manner and subject to the same conditions as the disbursement of the
proceeds of the Loan. Notwithstanding the foregoing, after the Date of
Substantial Completion, (i) the Net Proceeds from a Casualty that
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does not constitute a Major Casualty shall be paid over to the Borrower for the
Restoration of the Improvements without any requirement that the Borrower comply
with disbursement procedures, and (ii) the Net Proceeds from a Major Casualty
shall be disbursed in accordance with procedures to be established by the Bank
appropriate to the Restoration of the Improvements.
(f) All costs and expenses incurred by the Authority and the Bank in
connection with making the Net Proceeds or Net Restoration Awards available for
the Restoration (including, without limitation, attorneys' fees and expenses and
fees and expenses of the Bank's Consultant, as defined in the Reimbursement
Agreement) shall be paid by the Borrower. Any Net Proceeds or Net Restoration
Awards remaining after the Restoration and the payment in full of all costs
incurred in connection with the Restoration shall be applied to the repayment of
any outstanding obligations of the Borrower under the Reimbursement Agreement
(including without limitation, the obligation to pay any Termination Payments
and any Secured Obligations B), the Loan Agreement, the Mortgages or this
Agreement, in such order as the bank shall determine; provided, however, that
any balance of the Net Proceeds or Net Restoration Awards remaining after such
application shall be applied to the prepayment of the principal of and interest
on the Loan as required pursuant to Section 8.02(e) of the Loan Agreement.
SECTION 19. Taking of the Mortgaged Property.
(a) In case of a Taking or the commencement of any proceedings or
negotiations that might result in a Taking, the Borrower immediately will give
notice thereof to the Authority and the Bank generally describing the nature and
extent of such Taking or the nature of such proceedings or negotiations and the
nature and extent of the Taking which might result therefrom. The Authority and
the Bank shall be entitled hereunder to all awards or
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compensation payable on account of a Taking. The Borrower hereby irrevocably
assigns, transfers and sets over to the Authority and the Bank all rights of the
Borrower to any such awards or compensation and irrevocably authorizes and
empowers the Authority and the Bank, in the name of the Borrower or otherwise,
to collect and receive any such award or compensation and to file and prosecute
any and all claims for any such awards or compensation. Notwithstanding the
foregoing, so long as no Default, Event of Default or Termination Payments Event
of Default shall have occurred and shall then be continuing and provided the
Borrower promptly files and diligently prosecutes such claim or claims, the
Borrower shall have the right to prosecute and file any such claim or claims and
the Borrower shall cause any such award or compensation to be collected and
promptly paid over to the Bank; provided, that, the Borrower shall not agree to
or accept any award or compensation without the Authority's and the Bank's prior
written consent. The Authority and the Bank may participate in such proceedings
or negotiations, and the Borrower will deliver or cause to be delivered to the
Authority and the Bank all instruments requested by the Authority and the Bank
to permit such participation, provided that the Authority and the Bank shall be
under no obligation to question the amount of the award or compensation.
Although it is hereby expressly agreed that the same shall not be necessary, in
any event, the Borrower shall, upon demand of the Authority and the Bank, make,
execute and deliver any and all assignments and other instruments sufficient for
the purpose of assigning any such award or compensation to the Authority and the
Bank, free and clear of any encumbrances of any kind or nature whatsoever other
than any junior encumbrances arising as a result of the GDB Mortgage or any KGC
Mortgage(as such terms are defined in the Reimbursement Agreement). The Borrower
will pay promptly after demand all costs and expenses (including, without
limitation, attorneys' fees and expenses and fees and
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expenses of the Bank's Consultant) incurred by the Authority and the Bank in
connection with any Taking and seeking and obtaining any award or payment on
account thereof.
(b) In the case of a Taking such that, in the Bank's judgment, the
Project can be restored substantially to its value and usefulness as it existed
prior to such Taking, then, the Borrower shall, at its sole cost and expense,
promptly commence and diligently complete the Restoration in a good and
workmanlike manner, and in compliance with all Legal Requirements.
(c) All Net Restoration Awards shall be held, at the Bank's option,
by the Bank as additional collateral for the Secured Obligations, the Secured
Obligations B, the Loan Agreement Obligations, the Mortgage Obligations and the
Termination Payments Obligations, and shall be applied or dealt with by the Bank
as follows:
(i) Provided that no Default, Event of Default or Termination
Payment Event of Default shall have occurred and be continuing, then, in the
case of a Taking of the nature referred to in paragraph (b) of this Section 19,
and, to the extent necessary thereunder, if the Release Conditions are
satisfied, all Net Restoration Awards shall be applied to pay the cost of
Restoration of the portion of the Improvements remaining after such Taking, such
application to be effected substantially in the same manner as provided in
paragraph (e) of Section 18 hereof with respect to Net Proceeds and the balance,
if any, of such Net Restoration Awards shall be applied in the manner set forth
in Section 18(g) hereof.
(ii) In the case of any Taking other than a Taking of the
nature referred to in paragraph (b) of this Section 19, all
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Net Restoration Awards actually received by the Bank shall be applied in
accordance with Section 20 hereof.
(d) Notwithstanding anything to the contrary contained herein, in
the case of a Taking such that, in the Bank's judgment, the Project is an
economically viable architectural whole notwithstanding such Taking, the
Borrower shall have no obligation to commence or complete Restoration and all
Net Restoration Awards shall be applied in the order specified in Section 20
hereof.
SECTION 20. Application of Proceeds Upon Casualty or Substantial Taking.
Upon a Casualty, if the disposition of the Net Proceeds is governed by clause
(ii) of paragraph (c) of Section 18 hereof or upon a Taking, if the disposition
of the Net Restoration Awards is governed by clause (ii) of paragraph (c) or
paragraph (d) of Section 19 hereof, the Bank shall have the option, in the
Bank's sole discretion, to (a) make available the Net Proceeds or the Net
Restoration Awards, as the case may be, to the Borrower for Restoration in the
manner provided in paragraph (e) of Section 18 hereof or (b) apply such Net
Proceeds or Net Restoration Awards to the payment of any outstanding obligations
of the Borrower under the Reimbursement Agreement (including, without
limitation, the obligation to pay any Termination Payments or any Secured
Obligations B), the Loan Agreement, the Mortgages or this Agreement; provided,
however, that any balance of the Net Proceeds or Net Restoration Awards
remaining after such application shall be applied to the prepayment of the
principal of and interest on the Loan as required in accordance with Section
8.02(e) of the Loan Agreement.
If the Bank shall receive and retain any Net Proceeds or Net Restoration
Awards, in trust or otherwise, the indebtedness secured by this Agreement shall
be reduced only by the amount thereof
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received and retained by the Bank and actually applied by the Bank in reduction
of the indebtedness secured by this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, the
bank shall release the proceeds of any business interruption insurance
maintained hereunder to the Borrower provided that the Borrower satisfies the
conditions set forth in Sections 18(d)(i), (ii) and (iv) herein and provided,
further, that the Bank shall retain that portion of such insurance proceeds that
the Bank deems necessary to pay all amounts estimated to become payable with
respect to the Secured Obligations, the Secured Obligations B, and to pay any
debt service with respect to the GDB Loan during the period estimated by the
Borrower and approved to the Bank as necessary for the completion of the
Restoration, the balance of such insurance proceeds to be released in accordance
with the other terms and conditions set forth herein, as applicable.
SECTION 21. Representations and Warranties. The Borrower hereby represents
and warrants to the Pledgees as follows:
(a) The Borrower is the holder of and has in its possession the
Notes, all of which are issued by it free and clear of all mortgages, pledges,
assignments, liens, encumbrances, charges or rights of others of any kind,
except those liens created hereby.
(b) The exercise by the Pledgees of any right and remedy in
accordance with the terms of this Agreement will not contravene law or any
contractual restrictions binding on or affecting the Borrower, or any of its
properties, and will not as a result of any agreement to which the Borrower is a
party result in or require the
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creation of any lien, security interest or other charge of encumbrance upon or
with respect to any of Borrower's properties.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or other regulatory body is
required for (i) the grant by the Borrower, or the perfection, of the security
interest purported to be created hereby in the Notes; or (ii) the exercise by
the Pledgees of any right and remedy hereunder.
SECTION 22. Preservation of Property. The Borrower will not alter, add to,
remove or demolish any building, structure or property forming part of the
Mortgaged Property without the prior written consent of the Bank, except to the
extent otherwise provided in the Reimbursement Agreement.
SECTION 23. Foreclosure of Mortgage Notes and/or Termination Payments
Note. If an Event of Default shall have occurred and be continuing or if a
Termination Payments Event of Default shall have occurred and be continuing, the
Bank shall have the right to foreclose on the lien of the pledge herein with
respect to the Mortgage Notes or the Termination Payments Note, respectively,
granted without demand or notice (except as provided below), and full power and
authority are hereby given to the Bank to alienate the Mortgage Notes or the
Termination Payments Note, respectively, at such place as the Bank may deem
best, before a Notary Public, at public auction, upon the giving of the notices
required by, and as provided under Article 1771 of the Civil Code of Puerto Rico
(31 L.P.R.A. Sec. 5030). The bank may also, at its option, bring legal action or
proceedings for the collection of the Secured Obligations, the Secured
Obligations B and/or the Termination Payments Obligations, and, at its option,
simultaneously foreclose on either or both of the Mortgages without first
alienating all or
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any portion of the pledge. In the of a foreclosure of this collateral pledge,
the proceeds thereof shall be applied in accordance with Section 4 hereof. In
the event of a foreclosure of the Mortgaged Property, or any portion thereof,
the proceeds thereof shall be applied in accordance with the applicable
provisions of the respective Mortgages.
SECTION 24. Offsets, Counterclaims and Defenses. The Bank shall take the
Mortgages, the Notes and this Agreement free and clear of all offsets,
counterclaims or defenses of any nature whatsoever, which Borrower may have
against the Authority or the Bank, and no such offset, counterclaim or defense
shall be interposed or asserted by Borrower in any action or proceeding brought
by the Bank and any such right to interpose or assert any such offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrower to the fullest extent permitted by law.
SECTION 25. Right of Entry. The Pledgees and their agents shall have the
right to enter and inspect the Mortgaged Property, or any portion thereof, to
the extent the Mortgagee is so permitted under the terms of the respective
Mortgages.
SECTION 26. Estoppel Certificate. Within 15 days after request therefor
from the Bank or the Authority, which request may not be made more often than
once every six months, the Borrower will deliver to such party a certificate
executed by the Borrower, stating the amount due on Mortgage Note A, the
Leasehold Mortgage, each of the Mortgages and, for the Bank only, the
Termination Payments Note and Mortgage Note B, and to the effect that as of the
date of such certificate no Default or Event of Default and, for the Bank only,
no Termination Payments Event of Default, has occurred and is continuing
thereunder or under this Agreement, or,
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if any such Default, Event of Default or Termination Payments Event of Default
has occurred and is continuing, describing in reasonable detail each such
Default, Event of Default or Termination Payments Event of Default and the
action, if any, taken or being taken to cure the same. Any such statement may be
relied upon by the Bank, its participants, the Authority (except with respect to
the Termination Payments Note), and any future mortgagee, pledgee or purchaser
of all or any of the Mortgaged Property.
SECTION 27. Right to Cure Defaults. If default in the performance of any
of the covenants of the Borrower herein occurs or if an Emergency exists with
respect to all or any of the Mortgaged Property, the Bank, may, in its sole and
absolute discretion, remedy the same and for such purpose shall have the right
to the extent permitted by law, and upon notice to the Borrower (except in the
case of an Emergency) immediately to enter upon the Mortgaged Property or any
portion thereof without thereby becoming liable to the Borrower or any Person in
possession thereof holding under the Borrower. If the Bank shall remedy such
default or Emergency or appear in, defend, or bring any action or proceeding to
protect its interest in the Mortgaged Property or to foreclose any or all of the
Notes or either or both of the Mortgages, the costs and expenses thereof
(including attorneys' fees and expenses), with interest as provided in the Notes
or the Termination Payments Note, as the case may be, shall be paid by the
Borrower upon demand.
SECTION 28. Right to Notices under Mortgages. The Borrower agrees to
provide the Pledgees with copies of all and any notices that the Borrower is
required, in its capacity as Mortgagor, to deliver to the Mortgagee under the
Mortgages.
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SECTION 29. Changes in Laws Regarding Taxation. In the event of the
enactment of any law by the Legislature of the Commonwealth of Puerto Rico
changing in any way the laws for the taxation of mortgages on real property or
personal property or debts secured by mortgages or the manner of the collection
of any such taxes, and imposing a tax, either directly or indirectly, on the
Mortgages, the Notes, or this Agreement, Borrower shall, if permitted by law,
pay any tax imposed as a result of any such law within the statutory period or
within fifteen (15) days after demand by the Pledgees, whichever is less;
provided the Borrower will not claim or demand or be entitled to any credit or
credits against the Pledgees on account of the obligations secured hereunder for
any part of the taxes assessed against the Mortgaged property or any part
thereof, and no deduction shall otherwise be made or claimed from the taxable
value of the Mortgaged Property, or any part thereof, by reason of the
Mortgages, this Agreement or the obligations secured hereunder.
SECTION 30. Officers of Authority and Bank Not Liable. All covenants,
stipulations, promises, agreements and obligations of the Authority and/or the
Bank contained herein shall be deemed to be covenants, stipulations, promises,
agreements and obligations of the Authority and/or the Bank and not of any
member of the governing body of the Authority or any officer, agent, servant or
employee of the Authority or of the Bank, respectively, in his individual
capacity, and no recourse shall be had for any claim based thereon or hereunder
against any member of the governing body of the Authority or any officer, agent,
servant or employee of the Authority or of the Bank, respectively, except, in
the case of the Bank only (and not any director, other official, officer, agent,
servant or employee thereof), for any claim resulting solely and directly from
the gross negligence or willful misconduct of the Bank.
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SECTION 31. No Charge Against Authority Credit. No provision hereof shall
be construed to impose a charge against the general credit of the Authority or
shall impose any personal or pecuniary liability upon any director, official or
employee of the Authority.
SECTION 32. Authority Not Liable. Notwithstanding any other provision of
this Agreement, (a) the Authority shall not be liable to the Borrower, the Bank,
any holder of any of the Bonds, or any other person for any failure of the
Authority to take action under this Agreement unless the authority (i) is
requested in writing by an appropriate person to take such action and (ii) is
assured of payment of or reimbursement for any expenses in such action, and (b)
except with respect to any action for specific performance or any action in the
nature of a prohibitory or mandatory injunction, neither the Authority nor any
director of the Authority or any other official or employee of the Authority
shall be liable to the Borrower, the Bank, any holder of any of the Bonds, or
any other person for any action taken by it or by its officers, servants, agents
or employees, or for any failure to take any action under this Agreement. In
acting under this Agreement, or in refraining from acting under this Agreement,
the Authority may conclusively rely on the advice of its legal counsel.
SECTION 33. Bank Not Liable. Notwithstanding any other provision of this
Agreement, (a) the Bank shall not be liable to the Borrower, the Authority, any
holder of any of the Bonds, or any other person for any failure of the Bank to
take action under this Agreement, unless the Bank (i) is requested in writing by
an appropriate person to take such action and (ii) is assured of payment of or
reimbursement for any expenses in such action, and (b) except with respect to
any action for specific performance or any action in the nature of a prohibitory
or mandatory injunction, neither the Bank nor any director of the Bank or any
other official
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or employee of the Bank shall be liable to the Borrower, the Authority, any
holder of any of the Bonds, or any other person for any action taken by it or by
its officers, servants, agents or employees or for any failure to take any
action under this Agreement, except that the Bank only (and not any director,
other official, employee, officer, servant or agent thereof) may be liable if
such action or failure to act results solely and directly from the gross
negligence or willful misconduct of the Bank. In acting under this Agreement or
in refraining from acting under this Agreement, the Bank may conclusively rely
on the advice of its legal counsel.
SECTION 34. Waivers. In view of the assignment of the Authority's rights
under and interest in this Agreement to the Trustee by the provisions of the
Trust Agreement, the Authority shall have no power to waive the performance by
the Borrower of any provision hereunder or extend the time for the correction of
any default of the Borrower without the consent of the Trustee to such waiver.
The consent of the Trustee, however, shall not be required for actions permitted
to be taken by the Bank without the consent or approval of the Authority in
accordance with the terms hereof.
SECTION 35. Indemnities. The Borrower shall protect, indemnify and save
harmless the Pledgees from and against all losses, liabilities, obligations,
damages, penalties, claims, causes of action, costs, charges, and expenses
(including, without limitation, attorney's fees and expenses) which may be
imposed upon or incurred by or asserted against the Pledgees by reason of (a)
any accident, injury or damage to any person or property occurring on or about
the Mortgaged Property or any part thereof, (b) any design, construction,
operation, use or non-use or condition of the Mortgaged Property or any part
thereof, including, without limitation, claims or penalties arising from
violation of any Legal
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Requirement, as well as any claim based on any patent or latent defect, whether
or not discoverable by the Pledgee, any claim the insurance as to which is
inadequate, and any claim in respect of any adverse environmental impact or
effect, (c) any failure on the part of the Mortgagor to perform or comply with
any of the provisions hereof or contained in either of the Mortgages, (d) any
necessity, in the Bank's judgment, to defend any of the rights, title or
interest conveyed or created by this Agreement, the Mortgages, or the Notes, (e)
ownership by the Mortgagor of any interest in the Mortgaged Property or receipt
of any rent or other sum therefrom, (f) any performance of or failure to perform
any labor or services or furnishing of or failure to furnish any materials or
other property in respect of the Mortgaged Property, or any part thereof, (g)
any negligence or tortious act or omission on the part of the Mortgagor or any
of its agents, contractors, servants, employees, tenants, lessees, sublessees,
licensees, guests or invitees, (h) the Bank's or the Authority's ownership of
any interest in the Mortgaged Property or any part thereof, (i) any other
relationship that has arisen or may arise between the Pledgees, the Mortgagor,
the Mortgaged Property, or any of the foregoing, as a result of the execution
and delivery of the Notes, this Agreement, the Mortgages, or any other action
contemplated hereby, thereby or by any other document executed in connection
with the loan by the Authority to the Mortgagor, and (j) any claim, action or
other proceeding brought by or on behalf of any other person against the Bank as
the holder of, or by reason of its interest in, any sum deposited or paid
hereunder or in connection herewith, including, without limitation, any fund
established to hold the proceeds of the loan made by the Authority to the
Mortgagor, any insurance proceeds or condemnation awards received in connection
herewith, or any other amounts received in connection herewith.
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SECTION 36. Limitation of Liability. Notwithstanding any thing to the
contrary contained in this Pledge Agreement, no recourse shall be had, whether
by levy or execution or otherwise, for the payment of the principal of or
interest on, or other amounts owed under this Pledge Agreement, or for any claim
based on this Pledge Agreement or in respect thereof, against any partner of the
Mortgagor or any predecessor, successor or affiliate of any such partner or any
of their assets (other than from the interest of such partner in the Mortgagor),
or against any principal, partner, shareholder, officer, director, agent or
employee of any such partner (other than from the interest of any such person in
such partner), nor shall any such persons be personally liable for any such
amount or claims, or liable for any deficiency judgment based thereon or with
respect thereto. The sole remedies of the Bank and/or the Authority with respect
to the hereinbefore mentioned amounts and claims shall be against the assets of
the Mortgagor, including the Mortgaged Property, and all such liability of the
aforesaid persons, except as expressly provided in this Section 36 is expressly
waived and released as a condition of and as consideration for the execution of
this Pledge Agreement. Anything in this Section to the contrary notwithstanding
(A) nothing contained in this Pledge Agreement (including, without limitation,
the provisions of this Section 36) shall constitute a waiver of any indebtedness
of Mortgagor evidenced hereby or any of the Mortgagor's other obligations or
shall be taken to prevent recourse to and the enforcement against the Mortgagor
of all the liabilities, obligations and undertakings contained in this Pledge
Agreement; (B) this Section 36 shall not be applicable to a breach by any person
of any independent obligation to the Bank and/or the Authority; and (C) this
Section 36 shall not be applicable to the responsible party to the extent and in
respect of any claim the Bank would otherwise have against such party for (i)
fraud by such party, (ii) misappropriation of funds or other property by such
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party, or (iii) damage to the Project or any part thereof intentionally
inflicted in bad faith by such party. For the purposes of the foregoing, the
term "shareholder" shall be deemed to include the shareholders of any
corporation which is a shareholder of a corporation and the term "partner" shall
be deemed to include the partners of any partnership which is a partner of a
partnership.
SECTION 37. Authority's Covenant to Cooperate. In the event it may be
necessary, for the proper performance of this Pledge Agreement that the Bank
take any action, execute and deliver any other document or do any other thing in
furtherance of the purposes hereof, the Authority agrees to cooperate in such
matters.
SECTION 38. Assignment by the Authority. The Authority will assign to the
Trustee its rights under and interest in this Agreement (except for its rights
to receive notices, reports and other statements), including its rights to any
payments, receipts and revenues receivable by it under or pursuant to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized on the date
first above written, in San Juan, Puerto Rico.
PUERTO RICO INDUSTRIAL, MEDICAL,
EDUCATIONAL AND ENVIRONMENTAL EL CONQUISTADOR PARTNERSHIP L.P.
POLLUTION CONTROL FACILITIES
FINANCING AUTHORITY By: Kumagai Caribbean, Inc.
By:________________________________ By: /s/________________________________
Name: Francisco Sierra Mendez Name: Toru Fujita Ueda
Title: Assistant Executive Director Title: Vice President
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By: WKA El Con Associates
By: /s/_________________________________
Name: Hugh Alanson Andrews
Title: Authorized Signatory
THE MITSUBISHI BANK, LIMITED
New York Branch
By:_____________________________
Name: Tadaaki Hamada
Title: Senior Vice President
Affidavit No. 105 (copy)
Acknowledged and subscribed before me by Francisco Sierra Mendez, of legal
age, married, attorney-at-law and resident of Juncos, Puerto Rico, in his
capacity as Assistant Executive Director of Puerto Rico Industrial, Medical,
Educational and Environmental Pollution Control Facilities Financing Authority,
Toru Fujita Ueda, of legal age, married, executive and resident of San Juan,
Puerto Rico, in his capacity as its Vice President of Kumagai Caribbean, Inc., a
general partner of El Conquistador Partnership L.P. and by Hugh Alanson Andrews,
of legal age, married, executive and resident of San Juan, Puerto Rico, in his
capacity as Authorized Signatory of WKA El Con Associates, a general partner of
El Conquistador Partnership L.P., and by Tadaaki Hamada, in his capacity as
Senior Vice President of the Mitsubishi Bank, Limited, acting through its New
York Branch, identified by the means set forth in Article 17(c) of the Notarial
Law of Puerto Rico, in San Juan, Puerto Rico, this 7th day of February, 1991.
/s/______________________________
Notary Public
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Comienza mi protocolo de instrumentos publicos para el ano mil novecientos
noventa y uno (1991) hoy dia siete (7) de febrero de mil novecientos noventa y
uno (1991).
Notario Publico
NUMBER ONE
MORTGAGE
In the City of San Juan, Commonwealth of Puerto Rico, this Seventh (7th)
day of February, nineteen hundred ninety-one (1991).
BEFORE ME
LEONOR M. AGUILAR-GUERRERO, Notary Public in and for the Commonwealth of
Puerto Rico, with residence in Guaynabo, Puerto Rico, and office on the Tenth
Floor, Royal Bank Center, Two Hundred Fifty-Five (255) Ponce de Leon Avenue,
Hato Rey, San Juan, Puerto Rico.
APPEARS
AS PARTY OF THE FIRST PART: EL CONQUISTADOR PARTNERSHIP L.P., a partnership
organized and existing under the laws of Delaware with a place of business at
One Hundred Eighty-Seven (187) East Isla Verde Road in the Municipality of
Carolina, Puerto Rico zero zero nine one three (00913), Taxpayer Identification
Number 06-12-88145 (hereinafter referred to as the "Mortgagor"), represented
herein by its General Partners WKA EL CON ASSOCIATES, Taxpayer Identification
Number 06-12-88143, a partnership organized and exiting under the laws
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of the State of New York, herein represented by its Authorized Signatory, HUGH
ALANSON ANDREWS, social security number ###-##-####, of legal age, married,
business executive and resident of San Juan, Puerto Rico; and KUMAGAI CARIBBEAN,
INC., Taxpayer Identification Number 75-2303665, a corporation organized and
existing under the laws of the State of Texas, represented by its Vice President
TORU FUJITA UEDA, social security number ###-##-####, of legal age, business
executive, married, and resident of San Juan, Puerto Rico.
AS PARTY OF THE SECOND PART: PUERTO RICO INDUSTRIAL, MEDICAL, EDUCATIONAL
AND ENVIRONMENTAL POLLUTION CONTROL FACILITIES FINANCING AUTHORITY, Taxpayer
Identification Number 66-04-26994, with a place of business at Minillas
Government Center, De Diego Avenue, Stop Twenty-Two (22), San Juan, Puerto Rico
zero zero nine four zero (00940), (hereinafter referred to either as the
"Mortgagee" or as the "Authority") a public corporation and a governmental
instrumentality of the Commonwealth of Puerto Rico, represented by its Assistant
Executive Director, Francisco Sierra Mendez, social security number ###-##-####,
of legal age, married, attorney-at-law and resident of Juncos, Puerto Rico.
The above parties have agreed and bind themselves to show their authorities
for this act whenever and wherever properly required.
I, the Notary do hereby certify that I personally know Mister
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Francisco Sierra Mendez and that I have identified the other appearing parties
by the means provided in Article Seventeen (c) of the Notarial Law of Puerto
Rico, specifically by means of the following documents of identity which contain
the signature and photograph of each of the appearing parties:
To: Hugh Alanson Andrews, United States of America Passport Number zero
four one eight seven five five eight six (041875586).
To: Toru Fujita Ueda, Commonwealth of Puerto Rico Driver's License number
two one seven seven seven nine eight (2177798).
I, the Notary, further certify and given faith through their statements as
to their age, civil status, occupation and residence. They assure me that they
have, and in my judgment they do have, the legal capacity to execute this
instrument, and therefore they freely and of their own will and accord
STATE
FIRST: The Mortgaged Property. The Mortgagor represents and warrants that:
(A) It is the sole owner and holder of record, with valid, good, insurable,
fee simple title (pleno dominio) to the real property (the "Land") described in
the Registry of Property Fajardo Section (the "Registry") as follows:
"RUSTIC: Parcel of land located at the Cabezas Ward of the Municipality of
Fajardo, Puerto Rico, with a survey area of two hundred
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fifty six cuerdas with one thousand four hundred seventy four ten thousandths of
another (256.1474) equivalent to two hundred fifty acres with seven thousand one
hundred seventy three ten thousandths of another (250.7173), as determined by a
survey prepared by Engineer Manual Ray based on various surveys prepared by
surveyors Alex Hornedo Robles and David Lebron, and an area of record of two
hundred sixty-seven cuerdas with five thousand eight hundred and ninety ten
thousandths of another (267.5890) bounded, on the North, by State road Nine
Hundred Eighty Seven (987), by a housing lot subdivision belonging to various
owners, by land property of Justino Diaz Santini and his wife Jean Robertson, by
land property of Las Croabas Development Corporation, by land comprising the
Marina Lanais Condominium and by the Marina access road; on the South, by land
formerly owned by Fajardo Development Corporation, currently owned by Kumugai
Caribbean, Inc., by land comprising the Marina Lanais Condominium, and by the
Maritime Zone of the Atlantic Ocean; on the East, by land owned by Ramon Soto,
by land property of Justino Diaz Santini and his wife Jean Robertson, by land
comprising the Marina Lanais Condominium, and by the Maritime Zone of the
Atlantic Ocean; on the West, by land owned by Justino Diaz Santini and his wife
Jean Robertson, by housing lot subdivision, property of various owners, by land
owned by Kumugai Caribbean, Inc., formerly Fajardo Development Corp. and by
State Road Nine Hundred Eighty-Seven (987).
According to the Registry, the Land contains the following structures and
improvements:
(a) Structure known as the Clifftop Building, consisting of a four (4)
story building, which contains approximately eighty-eight (88) hotel rooms and
facilities.
(b) Administration Building consisting of a three (3) level concrete
building which includes a casino area, kitchen facilities and meeting rooms.
(c) Structure known as Sea Wing Building, consisting of an irregular shaped
five (5) story concrete building with approximately two hundred thirty (230)
hotel rooms and related facilities.
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(d) Structure known as the Lanais Building consisting of spiral shaped,
four (4) level concrete building with swimming pool surrounded by two (2)
structures forming a semicircle which contain approximately one hundred (100)
hotel rooms and related facilities.
(e) Structure known as the Health SPA & GYM consisting of a three (3) level
concrete building with a solarium on the uppermost level, containing two (2)
swimming pools.
(f) Structure known as Hotel Villas, comprising two (2) single level
buildings formerly used as transient guest apartments and executive dwellings.
(g) Facilities known as Marina Sea Shore comprising a concrete structure,
piers, docking facilities, fueling facilities, navigational aids, breakwater and
other facilities for sea vessels, with an ocean opening towards the East.
(h) Sewer Treatment installations for the treatment and disposal of
sanitary sewage.
(i) Structure originally containing the kitchen facilities of El
Conquistador Hotel.
(j) Ocean Beach Pool, consisting of a salt-water artificial lagoon.
The land is subject to the following liens and encumbrances of record:
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(A) By its origin the Land is subject to:
(i) Easements in favor of the Puerto Rico Water Resources Authority
and the Puerto Rico Aqueduct and Sewer Authority and maritime terrestrial zone
easement as per certification of the Land Administration of Puerto Rico issued
on September five (5) nineteen hundred ninety (1990);
(ii) Right of Way Easement resulting from Deed Number Twenty-One (21)
dated February eight (8), nineteen hundred sixty-five (1965) executed before
Notary Public Guillermo Baralt.
(iii) Restrictive covenant of sale (the "Real Property Rights") in
favor of the property known as Finca Consuelo Inc., as provided in Deed of Sale
Number Forty-Eight (48) executed in San Juan, Puerto Rico, on November
twenty-three (23), nineteen hundred eighty- eight (1988) before Notary Public
Jose R. Jimenez del Valle; and
(iv) Mortgage securing a promissory note to the order of United
Federal Savings and Loan Association, for the principal amount of ONE HUNDRED
FORTY-FIVE THOUSAND DOLLARS ($145,000) payable with interest at the rate of
eight percent (8%) per annum, as per Deed Number Ninety-Eight (98) executed in
Guaynabo, Puerto Rico on March six (6), nineteen hundred seventy-three (1973)
before Notary Public Alfredo Olivero Irizarry, and recorded at page fifty (r)
(50r) of volume two hundred five (205) of the Registry.
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(B) By itself the Land is free of liens and encumbrances.
The Mortgagor represents and warrants to The Mortgagee that by Deed Number
Three (3) of Transfer of Real Property Rights in Liquidation of Corporation and
Cancellation of Stock, Purchase and Sale and Cancellation of Restrictive
Covenants executed before Notary Public Silvestre M. Miranda on January
twenty-eight (28), nineteen hundred ninety-one (1991) ("Deed Three"), the
Mortgagor cancelled the Real Property Rights. A certified copy of Deed Three is
pending recordation at the Registry of Property of Puerto Rico, Fajardo Section.
Pursuant to Deed of Consolidation of Properties Number Six (6) executed
before Notary Silvestre M. Miranda on February seventh (7th), nineteen hundred
ninety-one (1991), a certified copy of which is being presented for recordation
concurrently with a certified copy of this Deed, the Land was formed by the
grouping of the following parcels of land:
Parcel One:
"RUSTIC: Parcel of land located at the Cabezas Ward of the Municipality of
Fajardo, Puerto Rico, with a survey area of two hundred twenty three cuerdas
with nine hundred eight ten thousandths of another (223.0908 cds.), equivalent
to two hundred sixteen acres with six thousand six hundred ninety seven ten
thousandths of another (216.6697) as determined by a survey prepared by Engineer
Manual Ray based on various surveys prepared by surveyor Alex Hornedo Robles and
David Lebron, and an area of record of two hundred thirty one cuerdas with six
thousand four hundred and ninety eight ten thousandths of another (231.6498)
bounded, on the North, by land owned by El Conquistador Partnership L.P.,
formerly the estate of Rosa Mendez Abraham, by State Road Nine Hundred Eighty
Seven (987), by land property of Luis Enrique Cayere Biamon, by land property of
El Conquistador Partnership L.P., formerly owned by Enrique Cayere and his wife
Ana Luisa Biamon, by
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land property of Las Croabas Development Corporation, by land comprising the
Marina Lanais Condominium and by the marina access road; on the South, by land
formerly owned by Fajardo Development Corporation, currently owned by Kumagai
Caribbean, Inc., by land owned by El Conquistador Partnership L.P., by land
comprising the Marina Lanais condominium, and by the Maritime Zone of the
Atlantic Ocean; on the East, by land owned by Ramon Soto, by land property of
Justino Diaz Santini and his wife Jean Robertson, by land owned by El
Conquistador Partnership L.P., formerly Enrique Cayere and Ana Luisa Biamon, by
land comprising the Marina Lanais Condominium, and by the maritime Zone of the
Atlantic Ocean; on the West, by land owned by Justino Diaz Santini and his wife
Jean Robertson and by land owned by El Conquistador Partnership L.P., formerly
owned by Enrique Cayere and Ana Luisa Biamon, by housing lot subdivision,
property of various owners, by land formerly owned by estate of Rosa Mendez
Abraham, currently owned by El Conquistador Partnership L.P., by State Road Nine
Hundred Eighty-Seven (987) and by land owned by Kumagai Caribbean, Inc.,
formerly Fajardo Development Corp.
According to the Registry, the above described Parcel A contains the
following structures and improvements:
(a) Structure known as the Clifftop Building, consisting of a four (4)
story building, which contains approximately eighty eight (88) hotel rooms and
related facilities.
(b) Administration Building consisting of a three (3) level concrete
building which includes a casino area, kitchen facilities and meeting rooms.
(c) Structure known as Sea Wing Building, consisting of an irregular shaped
five (5) story concrete building with approximately two hundred thirty (230)
hotel rooms and related facilities.
(d) Structure known as the Lanais Building consisting of a spiral shaped,
four (4) level concrete building with swimming pool surrounded by two (2)
structures forming a semicircle which contain approximately one hundred (100)
hotel rooms and related facilities.
(e) Structure known as the Health SPA & GYM consisting of a three (3) level
concrete building with a solarium on the uppermost level, containing two (2)
swimming pools.
(f) Structure known as Hotel Villas, comprising two (2) single
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level buildings formerly used as transient guest apartments and executive
dwellings.
(g) Facilities known as Marina Sea Shore comprising a concrete structure,
piers, docking facilities, fueling facilities, navigational aids, breakwater and
other facilities for sea vessels, with an ocean opening towards the East.
(h) Sewer Treatment installations for the treatment and disposal of
sanitary sewage.
(i) Structure originally containing the kitchen facilities of El
Conquistador Hotel.
(j) Ocean Beach Pool, consisting of a salt water artificial lagoon.
(k) Parcel One was acquired by the Mortgagor from The Puerto Rico Lands
Administration pursuant to Deed of Purchase and Sale Number Five (5) executed at
San Juan, Puerto Rico, on February seventh (7th), nineteen hundred ninety-one
(1991) before Notary Public Silvestre M. Miranda, certified copy of which is
being filed at the Registry of Property of Fajardo, contemporaneously with
certified copy of this Deed.
(l) Parcel One was formed by the grouping of the following Parcels of land:
Tract "A", recorded at page two hundred thirty four (234) of volume two hundred
thirty-three (233) of Fajardo, Property Number four thousand eight hundred
thirty-one (4,831); Tract "B", recorded at page sixty-nine (69) overleaf of
volume one hundred forty-five (145) of Fajardo, Property Number one thousand
nine hundred thirty-five (1,935); Tract "C", recorded at page twenty-five (25),
overleaf of volume two hundred ninety-one (291) of Fajardo, Property Number six
thousand two hundred ninety-one (6,291); Tract "D", pending recordation at Entry
two hundred ninety-three (293) of volume thirty-eight (38) of the Book of Daily
Entries of the Registry of Property of Puerto Rico, Fajardo Section.
Parcel Two:
"RUSTICA: Radicada en el Barrio Las Cabezas del termino municipal de
Farjardo, Puerto Rico, compuesta de quince cuerdas con cuatro mil cuatrocientas
(cuarenta y cinco diez milesimas de una cuerda (15.4445 cds) colindando por el
Norte, con terrenos de Trade Winds Corporation; por el Sur, con terrenos de la
parcela de donde se segrega propiedad de Fajardo Development Corporation; por el
Este, con
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la zona maritima del Oceano Atlantico y por el Oeste, con terrenos de Farjado
Development Corporation.
(a) Parcel Two is recorded at page two hundred fifty-eight (258) of
volume two hundred twelve (212) of Farjardo, Registry of the Property of Puerto
Rico, Farjardo Section, property number seven thousand eighty hundred
seventy-five (7,875).
(b) The Mortgagor acquired title to the aforedescribed parcel of land
from Fajardo Ocean View Development S.E., pursuant to Deed number eleven (11),
executed at San Juan, Puerto Rico on November sixteen (16), nineteen hundred
ninety (1990) before Notary Public Silvestre M. Miranda and was filed for
recording at entry three hundred six (306) of volume thirty-eight (38) of the
Book of Daily Entries of the Registry of the Property of Puerto Rico, Fajardo
Section.
Parcel Three:
"RUSTICA: Radicada en el Barrio Las Cabezas del termino municipal de
Fajardo, Puerto Rico, con un area superficial de doce cuerdas con cuatro mil
novecientas cuarenta y siete diez milesimas de otra (12.4947 cds.), en lindes
por el Norte, con la Trade Winds Corporation; por el Sur, con la finca principal
de cual se segrega; por el Este, con la finca principal de law cual se segrega y
por el Oeste, con terrenos de la Fajardo Development Corporation.
(a) Parcel Three is recorded at page twenty-three (23), overleaf of
volume one hundred ninety (190), Registry of the Property of Puerto Rico,
Fajardo Section, Property Number six thousand five hundred twenty-eight (6,528).
(b) The Mortgagor acquired title to the aforedescribed property from
Fajardo Ocean View Development S.E. pursuant to deed number eleven (11) executed
at San Juan, Puerto Rico, in November sixteen (16), nineteen hundred ninety
(1990), before Notary Public Silvestre M. Miranda, which was filed for
recordation at entry three hundred six (306) of volume thirty-eight (38) of the
Book of Daily Entries of the Registry of the Property of Puerto Rico, Fajardo
Section.
Parcel Four:
"RUSTIC: Parcel of land located in the Las Cabezas Ward of the
Municipality of Fajardo with an area of record of six (6) cuerdas equivalent to
twenty-three thousand five hundred eighty-two and
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three hundred seventy-six thousandths (23,582.376) square meters, and an area,
in accordance with a survey carried out by surveyor Alex Hornedo Robles, license
number eleven thousand seven hundred forty-seven (11,747), of five cuerdas with
one thousand sixty-two ten thousandths of another (5.1062 cds.) equivalent to
twenty thousand sixty-nine square meters with two thousand two hundred and
eighty ten thousandths of another (20,069.2280), currently bounded, on the North
and on the West by the right of way of State road number nine hundred
eighty-seven (987), on the South and on the East by land currently property of
the Puerto Rico Lands Administration comprising the former El Conquistador
Hotel.
(a) Parcel Four was formed and title to the same was acquired by the
Mortgagor from A&M Contractors, Inc. pursuant to Deed of Partial Cancellation of
Mortgage, Consolidation of Parcels and Purchase and Sale Number seven (7)
executed in San Juan, Puerto Rico on January twenty-two (22), nineteen hundred
ninety-one (1991), before Notary Public Juan Antonio Aquino Barrera, which deed
was filed for recordation at entry five hundred eighty-one (581) of volume
thirty-nine (39) of the Book of Daily Entries of the Registry of the Property of
Puerto Rico, Fajardo Section, and is composed of the consolidation of Property
Number one thousand one hundred seventy (1,170), recorded at page two hundred
twenty-eight (228) of volume twenty-eight (28) of the Registry of the Property
of Fajardo and Property Number one thousand one hundred sixty-nine (1,169),
recorded at page two hundred twenty (220) of volume twenty-eight (28) of the
Registry of the Property of Puerto Rico.
Parcel Five:
"RUSTICA: Parcela de terreno sita en el Barrio Las Cabezas de Fajardo
marcada con los numeros tres (3) y cuatro (4) con Cabida superficial de dos (2)
cuerdas equivalentes a siete mil ochocientos sesenta metros con setenta y ocho
centesimas de metros cuadrados (7,860.78 mc) y en colindancias por el Norte con
parcela marcada numero dos (2); Sur, carretera pavimentada que conduce al Hotel
El Conquistador; Este, con terrenos de Trade Winds Development, Inc. y por el
Oeste con terrenos de Trade Winds Development Corp."
"Contiene una estructura de dos plantas y media construida en
hormigon."
(a) Parcel Five is recorded at page fifty (50) of volume two
hundred five 9205) of Farjardo, property number seven thousand four hundred
twenty (7,420).
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(b) The Mortgagor acquired title to the aforedescribed property
from Ana Luis Biamon, pursuant to Deed Number Ten (10), executed at San Juan,
Puerto Rico, on January twenty-nine (29), nineteen hundred ninety-one (1991),
before Notary Public Juan Antonio Aquino Barrera, filed for recordation at entry
five hundred seventy-nine (579) of volume thirty-nine (39) of the Book of Daily
Entries for the Registry of the Property of Fajardo.
The Land, the Improvements (as hereinafter defined) and the Lease Rights
(as hereinafter defined) are referred to herein collectively as the "Mortgaged
Property."
(a) The Improvements shall consist of all presently existing or
hereafter constructed buildings, structures and improvements on the Mortgaged
Property and any appurtenances or additional thereto, as well as any accessions
thereto in the future, including but not limited to the following:
(i) all buildings or structures constructed thereon and all other
buildings and improvements of every kind and description now or hereafter
erected or placed on the Land and all materials intended for construction,
reconstruction, maintenance, alteration and repairs of such buildings, title to
which materials reside in the Mortgagor, all of which materials shall be deemed
to be included within the Mortgaged Property immediately upon the delivery
thereof to the Mortgagor at the Land and all other property immoveable either by
nature or destination now owned or hereafter acquired by the Mortgagor and now
or hereafter located on said Land or in said buildings or any such other
buildings or
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improvements used either for its adornment or for the purpose of comfort, or for
the service of the industry operated on such building or structure, even though
the aforesaid shall have been attached to the same after the constitution of the
Mortgage; and
(ii) all fixtures and articles of movable property now or
hereafter owned by the Mortgagor and attached to, contained in, located on or
used in connection with the Land or in connection with any improvements thereto,
including, but not limited to all furniture, furnishings, motors, transformers,
fittings, radiators, gas ranges, ice boxes, refrigerators, awnings, shades,
screens, blinds, drapes, office equipment, word processors, computers,
typewriters, telephone and communications equipment and installations,
elevators, conveyors, kitchen, bar-room and restaurant equipment, plates, forks,
knives, spoons, silverware, napkins, tablecloths, tables, glasses, chinaware,
cups, cooking equipment and installations, electrical appliances, television
sets, radios, beds, vanities, chairs, mirrors, pillows, curtains, blankets,
sheets, towels, bathroom equipment, mattresses, box springs, sprinkler
equipment, carpeting, and other furnishings and all plumbing, heating, laundry,
ventilating, refrigerating, incinerating, lighting, air conditioning and
electrical equipment, compressors and related machinery, equipment and
apparatus, and all fixtures and appurtenances thereto; and all renewals or
replacements thereof or articles in substitution therefor, whether or not the
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same are or shall be attached to said buildings or structures in any manner, it
being understood and agreed that all the aforesaid property and any replacement
or addition thereto owned by the Mortgagor and placed by it on the Land or on or
in the improvements located thereon have been specially designed for use in
connection with the operation of a destination resort hotel and casino and that
the Mortgagor operates or will operate a destination resort hotel and casino
doing business as El Conquistador Resort and Country Club in connection with
which the same will be used, and, that for such purpose, the aforesaid property
and any replacement or addition thereto shall be deemed to be immovable
property, by nature or destination, affixation, incorporation, or appropriation
to use, and shall be deemed necessary for and integral to the operation of the
Mortgaged Property as a first-class destination resort hotel and casino; and
(iii) all right, title and interest of the Mortgagor, including
any after-acquired title or reversion, in and to the beds of the ways, streets,
avenues and alleys adjoining the Mortgaged Property, together with all singular
tenements, hereditaments, easements, appurtenances, passages, waters, water
rights, riparian rights and other rights, liberties and privileges thereof or in
any way now or hereafter appertaining, including any claim at law or in equity.
(b) In addition to the Land and the Improvements, the Mortgaged Property
shall also consist of all rights of the Mortgagor (the
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"Lease Rights") to receive payments of money under all concessions or leases of
space existing or at any time hereafter made and any and all amendments,
modifications, supplements, renewals and extensions thereof (all of such
concessions and leases being referred to individually as an "Occupancy Lease"
and collectively as the "Occupancy Leases"), including without limitation, all
rents, additional rents, revenues, earnings, profits and income, payments
incident to any assignment, sublease or surrender of any Occupancy Lease, claims
for forfeited deposits and claims for damages which are due and unpaid with
respect to any Occupancy Lease at the time payment of the secured loan is
required.
SECOND: The Mortgaged Notes. Simultaneously herewith Mortgagor has
subscribed before me three (3) mortgage notes, which are copied literally in
Paragraph FOURTEENTH hereof, as Series A ("Mortgage Note A"), Series B
("Mortgage Note B") and Series C ("Mortgage Note C") (collectively, the
"Mortgaged Notes"). The Mortgagor will pay, on demand, the principal of and
interest on the Mortgage Notes and all other sums due or to become due pursuant
to the Mortgage Notes, this Mortgage, or any pledge agreements pursuant to which
the Mortgage Notes may be pledged or assigned.
THIRD: Creation of Mortgage. In order to guarantee and secure:
(i) the full and complete payment of the principal of and
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the interest on the Mortgage Notes;
(ii) the performance and observance of the terms therein and herein
contained;
(iii) an additional credit in an amount equal to five (5) years of
interest as provided in the respective Mortgage Notes to cover accrued and
unpaid interest on the Mortgage Notes pursuant to the provisions of Article One
Hundred Sixty-Six (166) of the Mortgage and Registry of Property Law of Puerto
Rico (30 L.P.R.A. 2562) (hereinafter called the "interest credit");
(iv) an additional credit in an amount equal to fifteen percent (15%)
of the principal amount of Mortgage Note A to cover any amounts that may be paid
by or advanced by the Mortgagee pursuant to Article Eighth hereof (including,
without limitation, for all or any environmental matters), together with
interest thereon at the highest legal rate then prevailing (hereinafter called
the "credit for additional advances");
(v) an additional credit in an amount up to but no greater than five
percent (5%) of the principal amount of the Mortgage Notes to cover the actual
costs and actual expenses (including attorneys' fees) of the holder of the
Mortgage Notes, payable without necessity for approval by any court, in the
event that such holder shall have recourse to the courts or to any other
governmental agency in order to collect all
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or any part of the principal thereof or any interest thereon (by foreclosure or
other proceedings or action) (hereinafter called the "credit for liquidated
damages"); and
(vi) an additional credit in an amount equal to fifteen percent (15%)
of the principal amount of Mortgage Note A to cover any additional amounts that
may be paid or advanced by the Mortgagee in connection with the completion of
the improvements presently contemplated to be constructed on the Mortgaged
Property, which improvements shall consist of approximately 750 guest rooms,
approximately 50,000 square feet of meeting space (including prefunctionary
space), six restaurants, approximately 13,000 square feet of retail space, an
approximately 10,000 square foot casino, a marina, approximately 100,000 square
feet of swimming pools and water features, an 18-hole golf course, an
approximately 40,000 square foot clubhouse and spa facility, eight tennis
courts, related amenities and facilities and all related furniture, fixtures and
equipment (hereinafter called the "credit for additional amounts").
Mortgagor hereby constitutes and creates a voluntary first mortgage in
favor of the Mortgagee on the Mortgaged Property (references herein to Mortgagee
shall be deemed to include the Authority and any future holders of the Mortgage
Notes either by endorsement or assignment and in the event that any of the
Mortgage Notes is delivered
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in pledge to secure Mortgagor's obligations under any pledge agreement, the term
Mortgagee shall also refer to the Pledgees of such Mortgage Note under such
pledge agreement).
FOURTH: Additional Representations and Warranties. The Mortgagor
represents, warrants and covenants to the Mortgagee as follows:
(a) The Mortgagor, by its execution and delivery hereof, is mortgaging
to the Mortgagee all of its right, title and interest in and to the Mortgaged
Property.
(b) The Mortgagor is the sole and valid owner of the Improvements
located on the Land; the Mortgagor has full right, power and authority to
mortgage the Mortgaged Property to the Mortgagee pursuant hereto; the Mortgagor
knows of no adverse claim to the title and/or possession of the Mortgagor in or
to the Land, or the Improvements thereon; and no fire or casualty has affected
the Mortgaged Property within sixty (60) days prior to the date hereof; and the
Mortgagor knows of no actual or proposed condemnation or eminent domain
proceeding or settlement in lieu thereof.
(c) The Mortgagor, at its sole cost and expense, will warrant and
defend to the Mortgagee such title to the Mortgaged Property, and the lien of
the Mortgagee thereon and therein against all claims and demands and will
maintain and preserve such lien and will keep this
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Mortgage a valid and direct mortgage lien upon the Mortgaged Property, subject
only to the Permitted Encumbrances and prior, at all times, to all Occupancy
Leases.
(d) The Mortgagor will pay, or cause to be paid, all charges for all
public and private utility services at any time rendered to, or the payment of
which is the obligation of, the Mortgagor in connection with the Mortgaged
Property, or any part thereof, and will do all other things required for the
maintenance and continuance of all such services.
(e) It has taken all necessary and proper action, which has not been
modified or revoked, to enter into this Mortgage and the execution and delivery
of this Mortgage by the Persons who have signed this Mortgage on behalf of the
Mortgagor have been duly qualified and are sufficient action to constitute this
Mortgage as a valid, binding and enforceable obligation of the Mortgagor.
FIFTH: Maintenance of the Mortgage Property. The Mortgagor will at all
times maintain, preserve and keep, or cause to be maintained, preserved or kept,
all and each part of the Land and the Improvements in good repair, working order
and condition, such that the Mortgaged Property will be maintained and operated
as part of a first-class destination resort. The Mortgagor will supply the
Mortgaged Property, and keep the same or cause the same to be kept and supplied,
with all necessary supplies and equipment and make all needful and proper
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repairs, renewals and replacements thereto, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen.
All such repairs, renewals and replacements shall be at least equal in quality,
value and class to the original Improvements. Without limiting the generality of
the foregoing, the Mortgagor covenants that it will not cause or permit to
suffer damage, deterioration, loss or waste to the Mortgaged Property, other
than that resulting from normal wear and tear. The Mortgagor will not alter, add
to, remove or demolish any building, structure or property forming part of the
Mortgaged Property without the prior written consent of the Mortgagee, except to
the extent permitted in any pledge agreement pursuant to which any of the
Mortgage Notes is pledged or assigned.
SIXTH: Assignment of Leases and Rents. The Mortgagor hereby absolutely and
irrevocably mortgages and assigns to the Mortgagee all rents, income and other
sums due to the Mortgagor under each Occupancy Lease now existing or hereafter
entered into, together with the right to collect and receive the same provided
if and so long as no Event of Default (as hereinafter defined) shall have
occurred and be continuing, the Mortgagor shall have the right to collect and
receive such rents and other sums for its own uses and purposes. Upon the
occurrence of an Event of Default, all such rents and other sums shall be
collected and held by the Mortgagee to be applied as deemed appropriate in the
sole
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discretion of the Mortgagee to the obligations secured hereunder and in such
other manner as is permitted pursuant to the terms hereof and of any pledge
agreement pursuant to which any of the Mortgage Notes may be pledged or
assigned. The Mortgagee shall notify the Mortgagor of its exercise of its right
to collect rent and other sums at the same time that it notifies any tenants
thereof; provided, however, that failure on the part of the Mortgagee to give
such notice to the Mortgagor shall not operate as a waiver of the right of the
Mortgagee to collect and receive all rents, income and other sums due to the
Mortgagor under each Occupancy Lease. The assignment of rents, income and other
benefits contained herein shall constitute an absolute assignment, subject,
however, to the conditional permission given herein to the Mortgagor to collect
and use such rents, income and other benefits. The foregoing assignment shall be
fully operative without any further action on the part of either party and the
Mortgagee shall be entitled, at its option, upon the occurrence of an Event of
Default hereunder, to all rents, income and other benefits from the Mortgaged
Property, whether or not the Mortgagee takes possession of the Mortgaged
Property. The Mortgagor hereby further grants to the Mortgagee and its agent the
right, at the Mortgagee's option, upon the occurrence of an Event of Default, to
(i) enter upon and take possession of the Mortgaged Property for the purpose of
collecting said rents, income and other benefits, (ii) dispossess by the usual
summary proceedings any
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lessee defaulting in its obligations pursuant to its Occupancy Lease beyond any
applicable grace and/or notice period, (iii) let the Mortgaged Property, or any
part thereof, to the extent permitted by law, and (iv) apply such rents, income
and other benefits, after payment of all necessary charges and expenses, on
account of the indebtedness and other sums secured hereby or by any pledge
agreements pursuant to which any of the Mortgage Notes may be pledged or
assigned. Such assignment and grant shall continue in effect until the
indebtedness and other sums secured by this Mortgage, and by any pledge
agreements pursuant to which the Mortgage Notes may be pledged or assigned, are
paid in full, the execution of this Mortgage constituting and evidencing the
irrevocable consent of the Mortgagor to the entry upon and taking possession of
the Mortgaged Property by the Mortgagee pursuant to such grant. Neither the
exercise of any rights under this Paragraph SIXTH by the Mortgagee nor the
application of any such rents, income or other benefits to the indebtedness and
other sums secured hereby shall cure or waive any Default, Event of Default or
notice of Default hereunder or invalidate any act done pursuant hereto or to any
such notice, but shall be cumulative of all other rights and remedies.
SEVENTH: Insurance. As is provided in Article One Hundred Sixty (160) of
the Mortgage and Property Registry Act of Puerto Rico Act Number One Hundred
Ninety-Eight (198) of August ten (10), nineteen
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hundred seventy-nine (1979), Thirty Laws of Puerto Rico Annotated Two Thousand
Five Hundred Fifty-Six (30 L.P.R.A. 2556), this Mortgage shall be extensive to,
and shall cover, all indemnities to which the Mortgagor may be entitled under
any policy of insurance covering the Mortgaged Property or any part thereof, and
the Mortgagee shall be entitled to receive directly from the insurance
underwriter(s) all payments which become due under any such policy(ies) of
insurance unless otherwise provided in any pledge agreements under which any of
the Mortgage Notes are pledged or assigned. Such payments shall be applied in
the manner provided in any pledge agreements or other instrument under which the
Mortgage Notes are pledged or assigned.
EIGHTH: Additional Advances. The Mortgagee, without consent of or demand
upon the Mortgagor and without waiving or releasing any obligation or Default or
Event of Default, may (but shall be under no obligation to) at any time advance
such funds as may in the Mortgagee's judgment be needed for the purposes of (i)
paying real estate taxes assessed against the Mortgaged Property which the
Mortgagor has failed to pay, (ii) maintaining insurance coverage on the
Mortgaged Property as required hereunder or otherwise as set forth in any pledge
agreements pursuant to which any of the Mortgage Notes have been pledged or
assigned, (iii) complying with any Legal Requirements relating to environmental
matters with which the Mortgagor has failed to comply
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or (iv) paying any other expenses which the Mortgagee reasonably determines to
be necessary to preserve the value of the Mortgaged Property, and the Mortgagor
may, in such event, enter upon the Mortgaged Property for such purpose and take
all action thereon that it considers necessary or appropriate, and may take such
other and further action as it may consider necessary or appropriate for such
purposes. All sums so advanced or paid by the Mortgagee and all costs and
expenses (including, without limitation, attorneys' fees and expenses) so
incurred, together with interest thereon at the rate provided for in the
Mortgage Note from the date of payment or incurring, shall constitute additional
indebtedness secured by this Mortgage and shall be paid by the Mortgagor to the
Mortgagee on demand, regardless of the due date of the remainder of the
indebtedness secured by this Mortgage.
NINTH: Further Assurances; Additional Security. The Mortgagor, at its
expense, will execute, acknowledge, deliver and record all such instruments and
take all such action as the Mortgagee from time to time may request better to
assure the Mortgagee that the properties and rights hereby mortgaged and
assigned or intended to have been mortgaged and assigned have so been. Without
notice to or consent of the Mortgagor, and without impairment of the lien of and
rights under this Mortgage, the Mortgagee may take from (but the Mortgagor shall
not be obligated to furnish to) the Mortgagor or from any other Person or
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Persons (as hereinafter defined) additional security for all or any of the
Mortgage Notes or for the obligations of the Mortgagor secured by the assignment
or pledge of any of the Mortgage Notes; and neither the giving of this Mortgage
nor the acceptance of any such additional security shall prevent the Mortgagee
from resorting first to such additional security, or to the security created by
this Mortgage, in either case without affecting the Mortgagee's lien and rights
under this Mortgage.
TENTH: Foreclosure Valuation. In compliance with Article One Hundred
Seventy-Nine (179) of the Mortgage and Property Registry Act of Puerto Rico [Act
Number One Hundred Ninety-Eight (198) of August ten (10), nineteen hundred
seventy-nine (1979) Thirty Laws of Puerto Rico Annotated Two Thousand Five
Hundred Seventy-Five (30 L.P.R.A. 2575)], the Mortgagor hereby declares and
agrees for the purpose of foreclosure that the value of the Mortgaged Property
is the amount of ONE HUNDRED FIFTY MILLION DOLLARS ($150,000,000).
ELEVENTH: Foreclosure. In the event that any of the Mortgage Notes is
assigned or pledged or otherwise encumbered by the Mortgagor as collateral
security for the payment of any other note or debt of the Mortgagor or of any
other Person, the Mortgagor agrees that:
(a) The Mortgagee may foreclose this Mortgage and may exercise all
other rights, remedies, powers and privileges provided
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herein or now or hereafter existing at law, in equity, by statute, or otherwise,
without first foreclosing the pledge or other lien so constituted upon the
respective Mortgage Note, to the same extent and with the same force and effect
as if such Mortgage Note had been assigned or transferred directly to the
Mortgagee rather than assigned or pledged as collateral security, provided that
nothing contained in this paragraph ELEVENTH shall relieve the Mortgagee from
the obligation to comply with thee terms of any pledge agreements or other
instruments under which any Mortgage Note is assigned or pledged.
(b) The Mortgagor will not exercise any right which it might have to
cancel the record of the Mortgage by reason of lapse of time counted from the
date of the constitution of the Mortgage either under the provisions of Article
One Hundred Forty-Five (145) of the Mortgage and Property Registry Act of Puerto
Rico [Act Number One Hundred Ninety-Eight (198) of August ten (10), nineteen
hundred seventy- nine (1979), Thirty Laws of Puerto Rico Annotated Two Thousand
Four Hundred Sixty-Nine (30 L.P.R.A. 2469)] or otherwise and further agrees,
whenever requested by the Mortgagee, to execute and file in the appropriate
Registry, at the Mortgagor's sole cost and expense, any and all supplemental
instruments which may be necessary or convenient in the judgment of the
Mortgagee for the preservation of the lien of this Mortgage until full payment
of the notes or debts so secured by the liens
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of the Mortgage Notes and full payment of any obligations secured by any pledges
of the Mortgage Notes. Without limiting the generality of the foregoing, the
Mortgagor agrees that, unless the Mortgagee shall consent in writing to the
cancellation of the Mortgage at an earlier date, the Mortgage shall be
conclusively presumed to subsist for a period of twenty-five (25) years from the
date of its constitution; and the Mortgagor does hereby waive any right which it
might otherwise have under said Article One Hundred Forty-Five (145) of the
Mortgage and Property Registry Act to apply for an earlier cancellation of the
record of the Mortgage.
(c) The Mortgagee may upon the occurrence of any Event of Default
hereunder or under any pledge agreement pursuant to which any of the Mortgage
Notes has been pledged or assigned, petition the court having jurisdiction over
the Mortgaged Property to appoint a receiver for the Mortgaged Property,
including all rents, issues and profits therefrom, and said receiver shall have
the broadest powers and faculties permitted to be granted to a receiver by the
court and his appointment shall be made by the court as a matter of absolute
right granted to the Mortgagee without taking into consideration the value of
the Mortgaged Property or the solvency of the Mortgagor or of any other party to
the action, and the Mortgagor hereby consents to the appointment of such a
receiver and agrees not to oppose the same, and waives any requirement for such
a receiver to post a bond of any kind.
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TWELFTH: Definitions. As used in this Mortgage, the following terms shall
have the following respective meanings:
"Default" shall mean any event which, with the giving of notice or the
lapse of time, or both, would constitute an Event of Default.
"Event of Default" shall have the meaning ascribed thereto in
paragraph Seventeenth hereof.
"Governmental Authority" shall mean any court, agency, authority,
board (including, without limitation, any environmental protection, planning or
zoning board), bureau, commission, department, office or instrumentality of any
nature whatsoever of any governmental or quasi-governmental unit of the United
States, the Commonwealth of Puerto Rico, or the Municipality of Fajardo, whether
now or hereafter in existence, having jurisdiction over the Mortgagor or the
Mortgaged Property.
"Impositions" shall mean all real estate and other taxes, all
assessments (including, without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof or while this Mortgage is in force), water, sewer, electricity,
utility and other rents, rates and charges, excises, levies, license fees,
permit fees, inspection fees and other authorization fees and other charges, in
each case whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character (including all
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penalties or interest thereon), which at any time may be assessed, levied,
confirmed or imposed on or in respect of or be a lien upon (a) the Mortgaged
Property or any part thereof or any rents, issues, income, profits or earnings
therefrom or any estate, right or interest therein, or (b) any occupancy, use or
possession of or sales from the Mortgaged Property or any part thereof, or (c)
any of the Mortgage Notes, this Mortgage, any interest hereon or any other
payments due from the Mortgagor under the terms of this Mortgage; excepting,
however, the income taxes now or hereafter imposed by the Untied States under
the Internal Revenue Code of nineteen hundred eighty-six (1986), as amended from
time to time, and by the Commonwealth of Puerto Rico under the Income Tax Act of
nineteen hundred fifty-four (1954) [Act Number Ninety-One (91), approved on June
twenty-nine (29), nineteen hundred fifty-four (1954)], as amended, or under any
other Act of Congress or Act of the Legislature of Puerto Rico of the same
nature, modifying, amending, or substituting the statutes above mentioned.
"Legal Requirements" shall mean collectively (i) all laws, statutes,
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, permits, licenses, authorizations, directions and requirements of
any Governmental Authority having jurisdiction over the Mortgaged Property, the
Mortgagor or any tenant of all or any of its commercial spaces, foreseen or
unforeseen, ordinary or extraordinary
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(including, without limitation, fire, health, handicapped access, sanitation,
ecological, historic, zoning, environmental protection, wetlands, and building
laws or regulations), which now or at any time hereafter may be applicable to
the Mortgaged Property or any part thereof, or any of the streets, alleys,
passageways, sidewalks, curbs, gutters, vaults or vault spaces adjoining the
Mortgaged Property or any part thereof, or any use or condition of the Mortgaged
Property or any part thereof, (ii) all material requirements of each permit,
license, authorization and regulation relating to the Mortgaged Property, or any
portion thereof, or to the ownership, leasing, use, occupancy, possession,
operation or maintenance thereof and (iii) all requirements of the Puerto Rico
Fire Department, the Factual Mutual System or the Industrial Risk Insurors or
other similar body acting in and for the Commonwealth of Puerto Rico and all
requirements of each insurance policy covering or applicable to all or any
portion of the Land, or the use thereof, which are maintained or required to be
maintained by the Mortgagor or of which the Mortgagor has notice, and all
requirements of the issuer of each such policy, including any which may require
repairs, modifications or alterations (structural or otherwise) in or to the
Mortgaged Property, or any portion thereof.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the
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nature thereof, or the filing of, or any agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction (other than
informational filings in respect of equipment leased under any lease not
intended as security, within the meaning of the Uniform Commercial Code) and any
comparable financing statement under the laws of the Commonwealth of Puerto
Rico.
"Permitted Encumbrances" shall have the meaning ascribed hereto in
paragraph Eighteenth hereof.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, association or any other entity or organization, including a
government or political subdivision, agency or instrumentality thereof.
THIRTEENTH: Miscellaneous. (a) Successors; No Oral Modification; Headings.
All of the terms of this Mortgage shall apply to and be binding upon the
successors and assigns of the Mortgagor and all Persons claiming under or
through the Mortgagor or any such successor or assign, and shall inure to the
benefit of the Mortgagee and its successors and assigns. Neither this Mortgage
nor any term hereof may be changed, waived, discharged or terminated orally, but
only by an instrument in writing signed by the Mortgagee, notice of which is
endorsed on the respective Mortgage Notes. No notice to or demand on the
Mortgagor in any case shall entitle the Mortgagor to any other or
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further notice or demand in similar or other circumstances. The headings of the
clauses of this Mortgage have been inserted for convenience of reference only
and shall in no way define, modify or restrict any of the provisions hereof.
FOURTEENTH: The Mortgage Notes. The Mortgage Notes referred to in paragraph
SECOND of this Deed are literally transcribed herein as follows:
(a) Mortgage Note A is literally transcribed herein as follows:
"MORTGAGE NOTE
"VALUE: 120,000,000 Series A
"DUE DATE: ON DEMAND
"FOR VALUE RECEIVED, on demand, the undersigned promises to pay to PUERTO
RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND ENVIRONMENTAL POLLUTION CONTROL
FACILITIES FINANCING AUTHORITY (hereinafter the "Authority") or its order, the
principal sum of ONE HUNDRED TWENTY MILLION DOLLARS ($120,000,000) with interest
on the unpaid balance at a fluctuating annual rate (computed on the basis of a
360-day year and the actual number of days elapsed) equal to two percent (2% )
over and above the "reference rate," as defined below, such fluctuating rate to
change simultaneously with the changes in the reference rate, from the date of
this Mortgage Note until full payment hereof. As used herein, the term
"reference rate" shall mean at any time the lower of (i) the fluctuating rate of
interest announced publicly from time to time by The Chase Manhattan Bank, N.A.
in New York, New York as its "prime," "base," or "reference" rate and (ii) the
fluctuating rate of interest announced publicly from time to time by Citibank,
N.A. in New York, New York as its "prime," "base," or "reference" rate, it being
understood that such rates shall not necessarily be the best or lowest rates of
interest available to such bank's best or more preferred large commercial
customers. Anything herein to
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the contrary notwithstanding, if the rate of interest required to be paid
hereunder exceeds the rate lawfully chargeable, the rate of interest to be paid
shall be automatically reduced to the maximum rate lawfully chargeable so that
no amounts shall be charged which are in excess thereof, and, in the event it
should be determined that any excess over such highest lawful rate has been
charged or received, the holder hereof shall promptly refund such excess to the
undersigned; provided, however, that, if lawful, any such excess shall be paid
by the undersigned to the holder hereof as additional interest (accruing at a
rate equal to the maximum legal rate minus the rate provided for hereunder)
during any subsequent period when regular interest is accruing hereunder at less
than the maximum legal rate. The Mortgagee shall be entitled to charge the
maximum late charge permitted by law on any overdue principal under this
Mortgaged Note. Interest hereunder shall be payable on demand, and payments of
interest and principal shall be made at the office or domicile of the Authority
within the Commonwealth of Puerto Rico, or at such other place as may be
designated in writing by said Authority or any holder hereof.
"The undersigned, and all others who may become liable for all or any part
of this obligation whether as maker, principal, surety, guarantor or endorser,
agree hereby to be jointly and severally liable and jointly and severally waive
demand, presentment, protest, notice of dishonor and non-payment and any and all
lack of diligence or delays in collection or enforcement hereof, and expressly
agree to extend to the Authority or any holder hereof the right of set-off or
compensation prior to, on or after maturity or default, and consent to any
application of payment of any monies in possession of the Authority or any
holder hereof belonging to the undersigned or any obligor hereunder related to
this Mortgage Note and to any extension of time, modification of the terms of
payment, releases of any party liable for this obligation, release substitution
or exchange of any property, real or personal, tangible or intangible,
guaranteeing payment of the Mortgage securing this Mortgage Note, and agree also
to any other indulgence or forbearance whatsoever. Any such extension, release,
modification, substitution, exchange, indulgence or forbearance may be made
without notice to said party, and without in any way affecting the personal
liability of any party obliged hereunder.
"The holder of this Mortgage Note shall be entitled to the benefits and
security afforded by Deed Number One which was executed on the date hereof
before the undersigned Notary as security for this Mortgage Note and by any
agreement executed by the undersigned assigning, pledging, or encumbering this
Mortgage Note as security therefor, and may enforce the agreements of the
undersigned contained in each of said
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instruments, and may exercise the remedies provided thereby or otherwise in
respect thereof without being required first to foreclose the pledge or other
lien or encumbrance so constituted upon this Mortgage Note, all in accordance
with the terms of said instruments. No reference herein to said instruments, and
no provision of this Mortgage Note or of said instruments, shall alter or impair
the obligation of the undersigned hereon, which is joint and several,
continuing, absolute and unconditional, nor shall such reference affect the
negotiability hereof under the Negotiable Instruments Law of Puerto Rico.
Recourse on this Mortgage Note is limited as provided in Deed Number One.
The undersigned hereby submits to the venue of the Courts in the
Commonwealth of Puerto Rico selected by the holder in case of legal action
brought against the undersigned for the collection of this Mortgage Note.
"In San Juan, Puerto Rico, this 7th day of February, 1991.
"EL CONQUISTADOR PARTNERSHIP L.P.
"By: Kumagai Caribbean, Inc.
"(Signed) By: Toru Fujita Ueda
--------------------------------
"Toru Fujita Ueda
"Vice President
"By: WKA El Con Associates
"(Signed) By: Hugh Alanson Andrews
--------------------------------
"Hugh Alanson Andrews
"Authorized Signatory
"Affidavit No. 98
"Acknowledged and subscribed before me in San Juan, Puerto Rico, this 7th
day of February, 1991, by Toru Fujita Ueda, of legal age, married, business
executive and resident of San Juan, Puerto Rico, in his capacity as Vice
President of KUMAGAI CARIBBEAN, INC., General Partner of EL CONQUISTADOR
PARTNERSHIP L.P. , and by Hugh Alanson Andrew, of legal age, married, business
executive and resident of San Juan, Puerto Rico in his capacity as Authorized
Signatory of WKA EL CON ASSOCIATES, General Partner of EL CONQUISTADOR
PARTNERSHIP L.P., identified by the means set forth in Article Seventeen "c"
(17(c)) of the Notarial Law of Puerto Rico.
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(signed) "Leonor M. Aguilar-Guerrero
"Notary Public"
(Notarial Seal)
(b) Mortgage Note B is literally transcribed herein as follows:
"MORTGAGE NOTE
"VALUE: $6,612,000 Series B
"DUE DATE: ON DEMAND
"FOR VALUE RECEIVED, on demand, the undersigned promises to pay to PUERTO
RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND ENVIRONMENTAL POLLUTION CONTROL
FACILITIES FINANCING AUTHORITY (hereinafter the "Authority") or its order, the
principal sum of SIX MILLION SIX HUNDRED TWELVE THOUSAND DOLLARS ($6,612,000)
with interest on the unpaid balance at a fluctuating annual rate (computed on
the basis of a 360-day year and the actual number of days elapsed) equal to two
percent (2%) over and above the "reference rate," as defined below, such
fluctuating rate to change simultaneously with the changes in the reference
rate, from the date of this Mortgage Note until full payment hereof. As used
herein, the term "reference rate" shall mean at any time the lower of (i) the
fluctuating rate of interest announced publicly from time to time by The Chase
Manhattan Bank, N.A. in New York, New York as its "prime," "base," or
"reference" rate and (ii) the fluctuating rate of interest announced publicly
from time to time by Citibank, N.A. in New York, New York as its "prime,"
"base," or "reference" rate, it being understood that such rates shall not
necessarily be the best or lowest rates of interest available to such bank's
best or more preferred large commercial customers. Anything herein to the
contrary notwithstanding, if the rate of interest required to be paid hereunder
exceeds the rate lawfully chargeable, the rate of interest to be paid shall be
automatically reduced to the maximum rate lawfully chargeable so that no amounts
shall be charged which are in excess thereof, and, in the event it should be
determined that any excess over such highest lawful rate has been charged or
received, the holder hereof shall promptly refund such excess to the
undersigned; provided, however, that, if lawful, any such excess shall be paid
by the undersigned to the holder hereof as additional interest (accruing at a
rate equal to the maximum legal rate minus the rate provided for hereunder)
during any subsequent period when regular interest is accruing hereunder at less
than the maximum legal rate. The Mortgagee shall be entitled to charge the
maximum late charge permitted by law on any overdue principal under
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this Mortgaged Note. Interest hereunder shall be payable on demand, and payments
of interest and principal shall be made at the office or domicile of the
Authority within the Commonwealth of Puerto Rico, or at such other place as may
be designated in writing by said Authority or any holder hereof.
"The undersigned, and all others who may become liable for all or any part
of this obligation whether as maker, principal, surety, guarantor or endorser,
agree hereby to be jointly and severally liable and jointly and severally waive
demand, presentment, protest, notice of dishonor and non-payment and any and all
lack of diligence or delays in collection or enforcement hereof, and expressly
agree to extend to the Authority or any holder hereof the right of set-off or
compensation prior to, on or after maturity or default, and consent to any
application of payment of any monies in possession of the Authority or any
holder hereof belonging to the undersigned or any obligor hereunder related to
this Mortgage Note and to any extension of time, modification of the terms of
payment, releases of any party liable for this obligation, release substitution
or exchange of any property, real or personal, tangible or intangible,
guaranteeing payment of the Mortgage securing this Mortgage Note, and agree also
to any other indulgence or forbearance whatsoever. Any such extension, release,
modification, substitution, exchange, indulgence or forbearance may be made
without notice to said party, and without in any way affecting the personal
liability of any party obliged hereunder.
"The holder of this Mortgage Note shall be entitled to the benefits and
security afforded by Deed Number One which was executed on the date hereof
before the undersigned Notary as security for this Mortgage Note and by any
agreement executed by the undersigned assigning, pledging, or encumbering this
Mortgage Note as security therefor, and may enforce the agreements of the
undersigned contained in each of said instruments, and may exercise the remedies
provided thereby or otherwise in respect thereof without being required first to
foreclose the pledge or other lien or encumbrance so constituted upon this
Mortgage Note, all in accordance with the terms of said instruments. No
reference herein to said instruments, and no provision of this Mortgage Note or
of said instruments, shall alter or impair the obligation of the undersigned
hereon, which is joint and several, continuing, absolute and unconditional, nor
shall such reference affect the negotiability hereof under the Negotiable
Instruments Law of Puerto Rico. Recourse on this Mortgage Note is limited as
provided in Deed Number One.
The undersigned hereby submits to the venue of the Courts in the
Commonwealth of Puerto Rico selected by the holder in case of legal
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action brought against the undersigned for the collection of this Mortgage Note.
"In San Juan, Puerto Rico, this 7th day of February, 1991.
"EL CONQUISTADOR PARTNERSHIP L.P.
"By: Kumagai Caribbean, Inc.
"(Signed) By: Toru Fujita Ueda
--------------------------------
"Toru Fujita Ueda
"Vice President
"By: WKA El Con Associates
"(Signed) By: Hugh Alanson Andrews
--------------------------------
"Hugh Alanson Andrews
"Authorized Signatory"
"Affidavit No. 99
"Acknowledged and subscribed before me in San Juan, Puerto Rico, this 7th
day of February, 1991, by Toru Fujita Ueda, of legal age, married, business
executive and resident of San Juan, Puerto Rico, in his capacity as Vice
President of KUMAGAI CARIBBEAN, INC., General Partner of EL CONQUISTADOR
PARTNERSHIP L.P., and by Hugh Alanson Andrew, of legal age, married, business
executive and resident of San Juan, Puerto Rico in his capacity as Authorized
Signatory of WKA EL CON ASSOCIATES, General Partner of EL CONQUISTADOR
PARTNERSHIP L.P., identified by the means set forth in Article Seventeen "c"
(17(c)) of the Notarial Law of Puerto Rico.
(signed) "Leonor M. Aguilar-Guerrero
"Notary Public"
(Notarial Seal)
(c) Mortgage Note C is literally transcribed herein as follows:
"MORTGAGE NOTE
"VALUE: $20,000,000 Series C
"DUE DATE: ON DEMAND
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<PAGE>
"FOR VALUE RECEIVED, on demand, the undersigned promises to pay to PUERTO
RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND ENVIRONMENTAL POLLUTION CONTROL
FACILITIES FINANCING AUTHORITY (hereinafter the "Authority") or its order, the
principal sum of TWENTY MILLION DOLLARS ($20,000,000) with interest on the
unpaid balance at a fluctuating annual rate (computed on the basis of a 360-day
year and the actual number of days elapsed) equal to two percent (2%) over and
above the "reference rate," as defined below, such fluctuating rate to change
simultaneously with the changes in the reference rate, from the date of this
Mortgage Note until full payment hereof. As used herein, the term "reference
rate" shall mean at any time the lower of (i) the fluctuating rate of interest
announced publicly from time to time by The Chase Manhattan Bank, N.A. in New
York, New York as its "prime," "base," or "reference" rate and (ii) the
fluctuating rate of interest announced publicly from time to time by Citibank,
N.A. in New York, New York as its "prime," "base," or "reference" rate, it being
understood that such rates shall not necessarily be the best or lowest rates of
interest available to such bank's best or more preferred large commercial
customers. Anything herein to the contrary notwithstanding, if the rate of
interest required to be paid hereunder exceeds the rate lawfully chargeable, the
rate of interest to be paid shall be automatically reduced to the maximum rate
lawfully chargeable so that no amounts shall be charged which are in excess
thereof, and, in the event it should be determined that any excess over such
highest lawful rate has been charged or received, the holder hereof shall
promptly refund such excess to the undersigned; provided, however, that, if
lawful, any such excess shall be paid by the undersigned to the holder hereof as
additional interest (accruing at a rate equal to the maximum legal rate minus
the rate provided for hereunder) during any subsequent period when regular
interest is accruing hereunder at less than the maximum legal rate. The
Mortgagee shall be entitled to charge the maximum late charge permitted by law
on any overdue principal under this Mortgaged Note. Interest hereunder shall be
payable on demand, and payments of interest and principal shall be made at the
office or domicile of the Authority within the Commonwealth of Puerto Rico, or
at such other place as may be designated in writing by said Authority or any
holder hereof.
"The undersigned, and all others who may become liable for all or any part
of this obligation whether as maker, principal, surety, guarantor or endorser,
agree hereby to be jointly and severally liable and jointly and severally waive
demand, presentment, protest, notice of dishonor and non-payment and any and all
lack of diligence or delays in collection or enforcement hereof, and expressly
agree to extend to the Authority or any holder hereof the right of set-off or
compensation prior to, on or after
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maturity or default, and consent to any application of payment of any monies in
possession of the Authority or any holder hereof belonging to the undersigned or
any obligor hereunder related to this Mortgage Note and to any extension of
time, modification of the terms and payment, releases of any party liable for
this obligation, release substitution or exchange of any property, real or
personal, tangible or intangible, guaranteeing payment of the Mortgage securing
this Mortgage Note, and agree also to any other indulgence or forbearance
whatsoever. Any such extension, release, modification, substitution, exchange,
indulgence or forbearance may be made without notice to said party, and without
in any way affecting the personal liability of any party obliged hereunder.
"The holder of this Mortgage Note shall be entitled to the benefits and
security afforded by Deed Number One which was executed on the date hereof
before the undersigned Notary as security for this Mortgage Note and by any
agreement executed by the undersigned assigning, pledging, or encumbering this
Mortgage Note as security therefor, and may enforce the agreements of the
undersigned contained in each of said instruments, and may exercise the remedies
provided thereby or otherwise in respect thereof without being required first to
foreclose the pledge or other lien or encumbrance so constituted upon this
mortgage Note, all in accordance with the terms of said instruments. No
reference herein to said instruments, and no provision of this Mortgage Note or
of said instruments, shall alter or impair the obligation of the undersigned
hereon, which is joint and several, continuing, absolute and unconditional, nor
shall such reference affect the negotiability hereof under the Negotiable
Instruments Law of Puerto Rico. Recourse on this Mortgage Note is limited as
provided in Deed Number One.
The undersigned hereby submits to the venue of the Courts in the
Commonwealth of Puerto Rico selected by the holder in case of legal action
brought against the undersigned for the collection of this Mortgage Note.
"In San Juan, Puerto Rico, this 7th day of February, 1991.
"EL CONQUISTADOR PARTNERSHIP L.P.
"By: Kumagai Caribbean, Inc.
"(Signed) By: Toru Fujita Ueda
--------------------------------
"Toru Fujita Ueda
"Vice President
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"By: WKA El Con Associates
"(Signed) By: Hugh Alanson Andrews
--------------------------------
"Hugh Alanson Andrews
"Authorized Signatory
"Affidavit No. 100
"Acknowledged and subscribed before me in San Juan, Puerto Rico, this 7th
day of February, 1991, by Toru Fujita Ueda, of legal age, married, business
executive and resident of San Juan, Puerto Rico, in his capacity as Vice
President of KUMAGAI CARIBBEAN, INC., General Partner of EL CONQUISTADOR
PARTNERSHIP L.P., and by Hugh Alanson Andrew, of legal age, married, business
executive and resident of San Juan, Puerto Rico in his capacity as Authorized
Signatory of WKA EL CON ASSOCIATES, General Partner of EL CONQUISTADOR
PARTNERSHIP L.P., identified by the means set forth in Article Seventeen "c"
(17(c)) of the Notarial Law of Puerto Rico.
(signed) "Leonor M. Aguilar-Guerrero
"Notary Public"
(Notarial Seal)
FIFTEENTH: Deed in the Public Interest. (a) The Authority hereby states
that its appearance in this Deed, made for its benefit, is in furtherance of the
purpose for which the Authority was created and is a legitimate exercise of its
powers. In approving the financing being provided to the Mortgagor and secured
hereby, the Authority has determined that the Mortgage constituted by this Deed
is in the public interest and serves the public purpose of promoting the
economic development, health, welfare and safety of the people of the
Commonwealth of Puerto Rico, and that, therefore, under the provisions of
Sections One Thousand Two Hundred Fifty-One (1251) to One Thousand Two Hundred
Sixty-Nine (1269) of Title Twelve (12) of the
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Laws of Puerto Rico Annotated (L.P.R.A.) and Section One Thousand Seven Hundred
Seventy Subsection [c]) (1770[c]) of Title Thirty (30) of the Laws of Puerto
Rico Annotated, the constitution and recording of this Mortgage is exempt from
the payment and/or cancellation of all internal revenue stamps and recording
fees.
(b) If such exemption is held to be invalid, of if additional costs
and expenses are otherwise incurred, then all costs and expenses of this Deed,
of obtaining a certified copy or copies hereof, and of the registration of this
instrument in the proper public registry (including, without limitation, the
cost of all recording fees payable in connection with the initial recordation or
subsequent cancellation of this Mortgage or fees for the cancellation of any
revenue stamps affixed hereto); all expenses of such additional documentation as
may hereafter be required, including the registration thereof in the appropriate
sections of the Registry of Property, if such be required; and all expenses of
all documents of cancellation, including the cost of registration thereof, and
all other recording, filing, notarial or other fees, taxes and charges, shall be
for the account of Mortgagor.
SIXTEENTH: Disposition of Mortgaged Property. The Mortgagor covenants that
it shall not sell, convey, mortgage, or otherwise dispose of or encumber the
Mortgaged Property, any portion thereof, or any of the Mortgagor's right, title
or interest therein without first securing
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the written consent of the Mortgagee, except to the extent otherwise permitted
under any pledge agreement pursuant to which any of the Mortgage Notes has been
pledged or assigned.
SEVENTEENTH: (a) Events of Default. The following shall constitute "Events
of Default" under this Mortgage, and the term "Event of Default" shall mean,
wherever used with reference to this Mortgage, any one or more of the following
occurrences:
(i) any principal, interest or any other sums payable pursuant to any
of the Mortgage Notes shall not be paid when due;
(ii) any sums (other than those set forth in (i) above) payable
pursuant to this Mortgage or any pledge agreement pursuant to which any of the
Mortgage Notes has been pledged or assigned shall not be paid when due, and such
failure shall continue for a period of thirty (30) days after notice is given to
the Mortgagor by the Mortgagee, unless the Mortgagee shall agree to an extension
of such time prior to its expiration;
(iii) the Mortgagor shall fail in the due performance or observance of
any covenant, agreement or term binding upon the Mortgagor obtained in this
Mortgage, any of the Mortgage Notes or any pledge agreement pursuant to which
any of the Mortgage Notes was pledged or assigned, other than those covenants,
agreements or terms of which the Mortgagor's failure to perform would constitute
another Event
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of Default referred to in this paragraph SEVENTEENTH, and such failure shall
continue unremedied for more than ninety (90) days after notice thereof shall
have been given to the Mortgagor by the Mortgagee or such shorter grace period
provided for in any such document; provided, however, that if such failure
cannot be corrected within such ninety (90) day period, it shall not constitute
an Event of Default hereunder if corrective action is instituted by the
Mortgagor within such period and diligently pursued until such failure is
corrected;
(iv) any warranty, representation or other statement made by or on
behalf of the Mortgagor in or pursuant to this Mortgage, any pledge agreement
pursuant to which any of the Mortgage Notes was pledged or assigned, or any
document, instrument or certificate delivered in connection herewith or
therewith shall prove to have been materially incorrect or misleading when made;
provided, however, that if the incorrect or misleading nature of such warranty,
representation or other statement is curable, such incorrect or misleading
nature shall not be an Event of Default hereunder so long as the Mortgagor
diligently proceeds to cure and cures such incorrect or misleading nature within
ten (10) days after notice from the Mortgagee of such incorrect or misleading
nature such that the original warranty, representation or other statement made
shall then not be materially incorrect or misleading;
(v) the occurrence of an Event of Default under and
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pursuant to the terms of any pledge agreement pursuant to which any of the
Mortgage Notes has been pledged or otherwise encumbered; or
(vi) the Mortgagor shall breach its covenant contained in Article
Eighteenth hereof.
To the extent that any circumstances constitute an Event of Default
under any pledge agreement pursuant to which any of the Mortgage Notes may be
pledged or assigned but would not otherwise constitute an Event of Default
hereunder, then, notwithstanding the foregoing, such circumstances shall
constitute an Event of Default hereunder.
(b) Remedies. Upon the occurrence and continuance of an Event of
Default hereunder or under any pledge agreement or other document pursuant to
which any of the Mortgage Notes may be assigned, pledged or otherwise encumbered
as collateral security, the Mortgagee, its successors and assigns, may, at its
or their election:
(i) declare all or any portion of the principal sum of and interest on
all or any of the Mortgage Notes, along with all or any other sums payable under
all or any of the Mortgage Notes, this Mortgage or any pledge agreement pursuant
to which any of the Mortgage Notes has been pledged or assigned immediately due
and payable;
(ii) proceed to enforce the payment of all or any of the Mortgage
Notes and/or to foreclose the lien of the Mortgage as against all
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or any part of the Mortgaged Property (by summary proceedings or otherwise) and
to have the same sold under the judgment or decree of a court of competent
jurisdiction; and/or
(iii) enter upon and take possession of the Mortgaged Property or any
part thereof by summary proceedings, ejectment or other legal proceedings and
remove the Mortgagor and all other persons and any and all properties therefrom
(to the extent permitted by law, other than pursuant to a foreclosure
proceeding), and hold, operate and manage the same and receive all earnings,
income, rents, issues and proceeds accruing with respect thereto or any part
thereof. The Mortgagee shall be under no liability for or by reason of any such
taking of possession, entry, removal or holding, operation or management, except
that any amounts so received by the Mortgagee shall be applied to pay all costs
and expenses of so entering upon, taking possession of, holding, operating,
maintaining, repairing, preserving and managing the Mortgaged Property or any
part thereof, and any taxes, assessments or other charges prior to the Lien of
this Mortgage which the Mortgagee may consider it necessary or desirable to pay,
and any balance of such amounts shall be applied as determined by the Mortgagee
in its sole and absolute discretion; and/or
(iv) exercise any other remedy available at law or in equity.
EIGHTEENTH: No Other Liens. (a) Subject to paragraph
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Nineteenth below, relating to contests, the Mortgagor will not create or permit
to be created or to remain, and will discharge, any Lien upon the Mortgaged
Property or any part thereof other than the following (collectively, the
"Permitted Encumbrances"): (a) the herein constituted Mortgage, (b) leases of
commercial space at the Mortgaged Property, provided such leases are subordinate
to the lien of this mortgage, (c) a second mortgage in favor of Government
Development Bank for Puerto Rico, as per Deed Number Two (2) of Mortgage, dated
February seventh (7th), nineteen hundred ninety-one (1991) before Notary Ramon
Moran Loubriel, which will be filed for registration contemporaneously with this
Mortgage in the Fajardo Section, Registry of Property of Puerto Rico, (d)
easements or reservations with respect to the servicing of the Mortgaged
Property for rights of way for electric transmission and distribution lines,
telephone and telegraph lines, fuel, water, sewage and drainage pipelines and
channels and all other similar purposes, provided that such easements and
reservations are approved by the Mortgagee and do not, in any single case or in
the aggregate, materially interfere with the occupancy or use of the Mortgaged
Property, (e) statutory easement for access in favor of property owned by
Justino Diaz Stantiti, provided that such easement does not materially interfere
with the occupancy or use of the Mortgaged Property, and (f) any other liens or
encumbrances specifically permitted by the terms of any pledge agreement
pursuant to which any of the
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Mortgage Notes has been pledged, assigned or otherwise encumbered.
NINETEENTH: Payment of Impositions; Compliance with Legal Requirements and
Contests.
(a) Subject to subparagraph (c) below, the Mortgagor will pay or cause
to be paid all Impositions before the same would become delinquent and before
any fine, penalty, interest or cost may be added for non-payment of same. The
Mortgagor promptly will deliver to the Mortgagee after payment of such
Impositions copies of official receipts or other evidence satisfactory to the
Mortgagee evidencing the payment of any Imposition as required pursuant to this
subparagraph (a).
(b) The Mortgagor will comply promptly with any Legal Requirement and
will furnish the Mortgagee, on demand, with the results of any requested
official search made by a Governmental Authority regarding such compliance.
(c) The Mortgagor, at its expense, and after prior written notice to
Mortgagee and provided no Event of Default shall then have occurred and be
continuing may contest in good faith by appropriate proceedings promptly
initiated and conducted with due diligence, the amount or validity or
application, in whole or in part, of any Imposition or any Legal Requirement or
any Lien upon the Mortgaged Property or the application of any instrument of
record referred to in paragraph Eighteenth hereof and may defer payment thereof
or compliance
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therewith; provided that (i) in the case of any such unpaid Imposition or Lien,
such proceedings shall suspend the collection thereof from the Mortgagor, the
Mortgagee and the Mortgaged Property, (ii) in any case, the Mortgaged Property,
any rent or other income therefrom or any part thereof or interest therein would
not be in danger of being sold, forfeited, terminated, cancelled or lost, (iii)
in the case of a Legal Requirement, neither the Mortgagor nor the Mortgagee
would be subject to civil or criminal liability as a result of such deferral of
compliance therewith, (iv) in any case, the Mortgagor shall have furnished such
security if any, as may be required in the proceedings or as may be requested by
the Mortgagee, (v) in any case, the payment of any sums required to be paid
under any of the Mortgage Notes, this Mortgage, or any pledge agreement pursuant
to which any of the Mortgage Notes may be pledged or assigned (other than any
unpaid Imposition at the time being contested in accordance with this paragraph
Nineteenth) shall not be interfered with or otherwise affected, and (vi) in any
case, the Mortgagor shall hold the Mortgagee harmless of and from and indemnify
the Mortgagee against any loss by reason of any such deferment.
TWENTIETH: Additional Payments. If any action of proceeding shall be
commenced or taken (including, without limitation, an action to foreclose this
Mortgage, collect the indebtedness secured hereby or enforce the Mortgagee's
rights under any of the Mortgage Notes) by
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the Mortgagee, or any other Person, in which action or proceeding the Mortgage
is involved or is made a party by reason of the execution and/or delivery of any
of the Mortgage Notes, this Mortgage, any pledge agreement pursuant to which any
of the Mortgage Notes has been pledged or assigned or any other documents or in
which it becomes necessary to enforce, defend or uphold the lien on the
Mortgaged Property pursuant to this Mortgage or any other documents (including,
without limitation, any pledge agreement) or the Mortgagee's rights under any of
the Mortgage Notes or any other documents (including, without limitation, any
pledge agreement), all sums paid by the Mortgagee for the expense of any such
action or litigation shall be paid by the Mortgagor to the Mortgagee promptly
after demand. The Mortgagor will hold the Mortgagee harmless against any and all
liability with respect to any mortgage recording or intangible personal property
tax or fees or similar imposition now or hereafter in effect, to the extent that
the same may be payable by the Mortgagee with respect to this Mortgage, any of
the Mortgage Notes, any pledge agreement, or any other related document. Any
amounts due and payable to the Mortgagee under this paragraph that are not paid
within fifteen (15) days after written demand therefor by the Mortgagee shall
bear interest at the rate then applicable under the terms of Mortgage Note A,
from the date of such demand, and such amounts, together with such interest,
shall be deemed to be indebtedness secured by this Mortgage.
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In the event any action, suit or proceeding is brought against the Mortgagee by
reason of any such occurrence, the Mortgagor upon request by the Mortgagee will,
at the Mortgagor's expense, resist and defend such action, suit or proceeding or
cause the same to be resisted or defended, either by counsel designated by the
Mortgagor and approved by the Mortgagee, or where such occurrence is covered by
liability insurance, by counsel designated by the insurer. The obligations of
the Mortgagor under this paragraph Twentieth shall survive the termination or
satisfaction of this Mortgage.
TWENTY-FIRST: Application of Foreclosure Proceeds. The proceeds of any
foreclosure sale of the Mortgaged Property or any part thereof shall be applied
in accordance with the provisions of any pledge agreements pursuant to which the
Mortgage Notes may be pledged or assigned, or if no such agreements exist, the
proceeds of any such foreclosure shall be applied as follows:
First: All taxes, assessments or liens prior to the lien of this Mortgage
that the Mortgagee may consider necessary or desirable to pay, the costs and
expenses (including without limitation, attorney's fees and expenses) of
collection, including the costs and expenses of any foreclosure or sale of the
Mortgaged Property, the costs and expenses of entering upon, taking possession
of or holding, operating and managing the Mortgaged Property, as the case may
be, and of the enforcement of
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any remedies hereunder, including court costs and expenses, and reasonable
compensation to the Mortgagee's agents, attorneys and counsel, and all expenses,
liabilities and advances incurred or made by the Mortgagee with respect to such
foreclosure;
Second: All amounts disbursed for costs incurred by the Mortgagee, other
than on account of principal and interest thereon due on all indebtedness of the
Mortgagor secured by the Mortgage Notes, under this Mortgage, any pledge
agreements pursuant to which any of the Mortgage Notes may be pledged or
assigned or any documents secured thereby, plus accrued interest thereon;
Third: All amounts of interest and principal due and unpaid on all
indebtedness of the Mortgagor secured by any of the Mortgage Notes, any pledge
agreement pursuant to which any of the Mortgage Notes may be pledged or assigned
or any documents secured thereby; and
Fourth: The balance, if any, to the Mortgagor, or to any other person or
legal entity who may be legally entitled thereto, or as a court of competent
jurisdiction may otherwise direct.
TWENTY-SECOND: Remedies Cumulative. Each right, power and remedy of the
Mortgagee provided for in this Deed shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this Deed
or in any agreement between the Mortgagor and the Mortgagee secured by the
Mortgage Notes, or in
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any pledge agreements pursuant to which the Mortgage Notes have been pledged or
assigned, or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by the Mortgagee of any
one or more of the rights, powers or remedies provided for in this Deed or in
any agreement between the Mortgagor and the Mortgagee secured by the Mortgage
Notes, or in any pledge agreements pursuant to which the Mortgage Notes have
been pledged or assigned, or now or hereafter existing at law or in equity or by
statute or otherwise shall not preclude the simultaneous or later exercise by
the Mortgagee of any or all such other rights, powers or remedies. All rights,
remedies and powers provided herein may be exercised only to the extent that the
exercise thereof does not violate any applicable provision of law, and are
intended to be limited to the extent necessary so that they will not render this
Mortgage invalid, unenforceable or not entitled to be recorded, registered or
filed under the provision of any applicable law. If any provision of this Deed
shall be held to be invalid, illegal or unenforceable, the validity of other
provisions of this Deed shall in no way be affected thereby.
TWENTY-THIRD: No Waiver of Remedies. No failure by the Mortgagee to insist
upon the strict performance of any term hereof or to exercise any right, power
or remedy consequent upon a breach thereof, shall constitute a waiver of any
such term or of any such breach. No
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waiver of any breach shall affect or alter this Deed or the Mortgage constituted
herein, which shall continue in full force and effect with respect to any other
then exiting or subsequent breach. Any action, suit or proceeding brought by the
Mortgagee against the Mortgagor pursuant to any of the terms of this Mortgage or
otherwise, and any claim made by the Mortgagee hereunder may be compromised,
withdrawn or otherwise dealt with by the Mortgagee without any notice to or
approval of the Mortgagor. Nothing contained in this Deed shall constitute any
consent or request by Mortgagee, express or implied, for the performance of any
labor or services or the furnishing of any materials or other property in
respect of the Mortgaged Property or any part thereof, nor as giving Mortgagor
any right, power or authority to contract for or permit the performance of any
labor or services or the furnishing of any materials or other property in such
fashion as would permit the making of any claim against Mortgagee in respect
thereof or any claim that any lien based on the performance of such labor or
services or the furnishings of any such materials or other property is prior to
the lien of this Mortgage.
TWENTY-FOURTH: Notices. All notices to and demands and requests upon or
from the Mortgagor under this Deed shall be made in the manner called for in any
pledge agreements pursuant to which the Mortgage Notes have been pledged or
assigned; otherwise, such notices shall be in writing and shall be deemed to
have been properly given or
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made if sent by United States registered or certified mail, postage prepaid,
return receipt requested, addressed to the Mortgagor or the Mortgagee, as the
case may be, at such place as the Mortgagor or the Mortgagee may have furnished
to each other in writing. All such notices, demands and requests shall be
effective when received at the address specified as aforesaid.
TWENTY-FIFTH: Interim Sums. The Mortgagee will have the right from time to
time to sue for any sums whether for interest, damages for failure to pay
principal or any installment thereof, taxes, or any other sums required to be
paid under the terms of this Mortgage, any pledge agreements pursuant to which
the Mortgage Notes have been pledged or assigned or any other related documents
as the same become due, without regard to whether or not the principal sum or
any other sum evidenced by any of the Mortgage Note and secured by this Mortgage
becomes due and without prejudice to the right of the Mortgagee thereafter to
bring an action of foreclosure, or any other action, as a consequence of a
Default or event of Default existing at the time such earlier action was
commenced.
TWENTY-SIXTH: No Credits on Account of the Debt. The Mortgagor will not
claim or demand or be entitled to any credit or credits on account of the
indebtedness secured by this Mortgage for any part of the Impositions assessed
against the Mortgaged Property or any part
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thereof and no deduction shall otherwise be made or claimed from the taxable
value of the Mortgaged Property, or any part thereof, by reason of this Mortgage
or the indebtedness secured by this Mortgage.
TWENTY-SEVENTH: Inspection. The Mortgagor will permit the Mortgagee and any
representatives designated by the Mortgagee to visit and inspect the Mortgaged
Property, or any part thereof, (i) in an Emergency, at any time and (ii) at all
other times, during normal business hours and upon reasonable notice, or as
otherwise permitted pursuant to the terms of any pledge agreement pursuant to
which any of the Mortgage Notes may have been pledged or assigned. The Mortgagee
shall not have any duty to make any such inspection and shall not incur any
liability or obligation for not making any such inspection or, once having
undertaken any such inspection, for making the inspection, not making the same
carefully or properly, or for not completing the same; nor shall the fact that
such inspection may not have been made by the Mortgagee relieve the Mortgagor of
any obligations that it may otherwise have under this Mortgage.
TWENTY-EIGHTH: Actions and Proceedings. Except as otherwise provided in any
pledge agreements
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pursuant to which the Mortgage Notes may have been pledged or assigned, the
Mortgagee shall have the right to appear in and defend any action or proceeding
brought with respect to the Mortgaged Property, and to bring any action or
proceeding, in the name and on behalf of the Mortgagor, which the Mortgagee, in
its discretion, feels should be brought to protect its interest in the Mortgaged
Property, provided that unless an Event of Default shall have occurred and be
continuing at the time the Mortgagee first appears in or brings any such action
or proceeding, prior to the Mortgagee's appearance in or bringing of any such
action or proceeding, the Mortgagee shall give the Mortgagor notice of the
Mortgagee's intention with respect thereto.
TWENTY NINTH: Officers of Mortgagee Not Liable. All covenants,
stipulations, promises, agreements and obligations of the Mortgagee contained
herein shall be deemed to be covenants, stipulations, promises, agreements and
obligations of the Mortgagee and not of any member of the governing body of the
Mortgagee or any officer, agent, servant or employee of the Mortgagee in his
individual capacity, and no recourse shall be had for any
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claim based thereon or hereunder against any member of the governing body of the
Mortgagee or any officer, agent, servant or employee of the Mortgagee.
THIRTIETH: No Charge Against Mortgagee Credit. No provision hereof shall be
construed to impose a charge against the general credit of the Mortgagee or
shall impose any personal or pecuniary liability upon any director, official or
employee of the Mortgagee.
THIRTY-FIRST: Mortgagee Not Liable. Notwithstanding any other provision of
this Deed, (a) the Mortgagee shall not be liable to the Mortgagor or any other
person for any failure of the Mortgagee to take action under this Deed unless
the Mortgagee (i) is requested in writing by an appropriate Person to take such
action and (ii) is assured of payment of or reimbursement for any expenses in
such action, and (b) except with respect to any action for specific performance
or any action in the nature of a prohibitory or mandatory injunction, neither
the Mortgagee nor any director of the Mortgagee or any other official or
employee of the Mortgagee shall be liable to the Mortgagor or any other person
for any action taken by it or by its officers, servants, agents or employees, or
for any
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failure to take action under this Deed. In acting under this Deed, or in
refraining from acting under this Deed, the Mortgagee may conclusively rely on
the advice of its legal counsel.
THIRTY-SECOND. Waivers. In view of the assignment of the Mortgagee's rights
under and interest in this Deed to the Trustee by the provisions of the Trust
Agreement and in view of any pledge agreements pursuant to which the Mortgage
Notes may be pledged or assigned, the Mortgagee shall have no power to waive the
performance by the Mortgagor of any provision hereunder or extend the time for
the correction of any default of the Mortgagor without the consent of the
Trustee to such waiver by the Trustee and by any pledgees under any such pledge
agreement.
THIRTY-THIRD. Waiver of Moratorium and Redemption. The Mortgagor, to the
full extent that it may lawfully do so, agrees that it will not at any time
insist upon, plead or in any way take advantage of and hereby waives any
redemption or moratorium law now or hereafter in force and effect which would
prevent or hinder the enforcement of the provisions of this Deed or any rights
or
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remedies the Mortgagee may have hereunder or by law.
THIRTY-FOURTH: Limitation of Liability. Notwithstanding anything to the
contrary contained in this Mortgage, no recourse shall be had, whether by levy
or execution or otherwise, for the payment of the principal of or interest on,
or other amounts owed hereunder or under any of the Mortgage Notes, or for any
claim based on this Mortgage or in respect thereof, against any partner of the
Mortgagor or any predecessor, successor or affiliate of any such partner or any
of their assets (other than from the interest of such partner in the Mortgagor),
or against any principal, partner, shareholder, officer, director, agent or
employee of any such partner (other than from the interest of any such person in
such partner), nor shall any such persons be personally liable for any such
amount or claims, or liable for any deficiency judgment based thereon or with
respect thereto, it being expressly understood that the sole remedies of the
Mortgagee with respect to such amounts and claims shall be against the assets of
the Mortgagor, including the Mortgaged Property, and that all such liability of
the aforesaid persons, except as otherwise expressly provided herein, is
expressly waived and released as a
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condition of and as consideration for the execution of the Mortgage; provided,
however, that (A) nothing contained in this Mortgage (including, without
limitation, the provisions of this paragraph Thirty-Fourth) shall constitute a
waiver of any indebtedness of Mortgagor evidenced hereby or of any of the
Mortgagor's other obligations under such other instruments executed in
connection herewith or shall be taken to prevent recourse to and the enforcement
against the Mortgagor, of all the liabilities, obligations and undertakings
contained in this Mortgage; (B) this paragraph Thirty-Fourth shall not be
applicable to a breach by any person of any independent obligation to the
Mortgagee, including, but not limited to any other obligations of any Person
under any other guarantee or indemnity agreement executed or delivered in
connection herewith or with any pledge agreements pursuant to which any of the
Mortgage Notes is pledged or assigned and (C) this paragraph Thirty-Fourth shall
not be applicable to the active party in the event of (1) fraud by such party,
(2) misappropriation of funds or other property by such party or (3) damage to
the Mortgaged Property or any part thereof intentionally inflicted in bad faith
by such party.
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For the purposes of the foregoing, the term "shareholder" shall be deemed to
include the shareholders of any corporation which is a shareholder of a
corporation and the term "partner" shall be deemed to include the partners of
any partnership which is a partner of a partnership.
THIRTY-FIFTH: Satisfaction of Debt. Should the Mortgagor satisfy any of the
Mortgage Notes or the obligations hereunder, under any of the Mortgage Notes and
under any pledge agreements pursuant to which the Mortgage Notes are pledged or
assigned, in the time and manner heretofore set forth, and comply with, and
execute all agreements and stipulations required herein, then the Mortgagee
shall execute in its favor the corresponding release and shall endorse to
Mortgagor or its nominee the respective Mortgage Note so satisfied without
recourse, representations and warranties, or at Mortgagor's election shall
endorse the same for cancellation purposes only delivering said Mortgage Note so
endorsed to the Mortgagor, except to the extent otherwise provided in any pledge
agreements pursuant to which they have been assigned.
ACCEPTANCE, WARNINGS AND EXECUTION
The appearing parties accept this Deed as drafted
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and fully ratify and confirm the statements contained herein as the true and
exact embodiment of their stipulations, terms and conditions. I, the Notary,
made to the appearing parties the necessary legal reserves and warnings
concerning the execution of this Deed and they were fully advised by me thereon.
Specifically, I advised the appearing parties with respect to:
(a) The meaning and legal effects of the acts consummated pursuant to this
Deed, having asked each of the persons appearing herein whether they had any
further questions and allowing each of them ample time and opportunity to ask
questions and to understand and comprehend the meaning, legal nature and effects
of their acts;
(b) That any liens or encumbrances or any other matter affecting the title
to the Land that may be filed for recordation with the Registry of Property
prior to the filing of this Deed may be legally binding and could take
precedence over this Deed;
(c) The advisability for the Mortgagee to obtain an insurance policy
insuring its interest over the Land;
(d) The advisability of the parties to have
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someone with the appropriate expertise conduct an investigation to determine the
environmental conditions of the Land;
(f) that recordation at the Registry of Property of the Mortgage
constituted by this Deed is conditioned upon the recordation of the documents
described in Paragraph FIRST;
(g) That the full effectiveness of this Deed is subordinated to the
presentation of documentary evidence confirming the authority of the persons
appearing herein.
I, the Notary, certify that this Deed was read by the persons appearing
herein; that I advised them of their right to have witnesses present at the
execution hereof, which right they waived; that I advised them of the legal
effect of this Deed; that they acknowledged that they understood the contents of
this Deed and such legal effect; and that thereupon they signed this Deed before
me and affixed their initials to each and every page hereof.
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NUMBER TWO
DEED OF MORTGAGE
In the Municipality of San Juan, Commonwealth of Puerto Rico, on this
seventh (7th) day of February, nineteen hundred ninety one (1991).
BEFORE ME
RAMON MORAN LOUBRIEL, Attorney at Law and Notary Public, with residence
in Guaynabo, Puerto Rico, and office in the Eleventh Floor of the First Federal
Savings Bank Building, Santurce, Puerto Rico.
APPEAR
AS PARTY OF THE FIRST PART: EL CONQUISTADOR PARTNERSHIP L.P.,
(hereinafter referred to as the "MORTGAGOR"), a limited partnership organized
and existing under the laws of the State of Delaware and duly authorized to do
business in the Commonwealth of Puerto Rico, with taxpayer identification Number
Zero Six dash One Two Eight Eight One Four Five (06-1288145), represented herein
by its general partners KUMAGAI CARIBBEAN, INC., a corporation organized and
existing under the laws of Texas and duly authorized to do business in the
Commonwealth of Puerto Rico, taxpayer identification Number Seventy Five dash
Two Three Zero Three Six Six Five (75-02303665), in turn represented by its Vice
President MISTER TORU FUJITA, Social Security Number Five Hundred Seventy Five
dash Forty Nine dash One Thousand Twenty One (###-##-####), of legal age,
married, executive and resident of San Juan, Puerto Rico, and by WKA EL CON
ASSOCIATES, a general partnership organized and existing under the laws of the
State of New York and duly authorized to do business in the Commonwealth of
Puerto Rico, in turn represented hereby by its Authorized Signatory
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2.
MISTER HUGH ALANSON ANDREWS, of legal age, married, executive and resident of
San Juan, Puerto Rico, Social Security Number Zero Seventy Five dash Thirty Two
dash Eight Thousand Two Hundred Eighteen (S.S. # ###-##-####), whose authorities
to appear in such capacities they will evidence whenever and wherever requested
to do so.
AS PARTY OF THE SECOND PART: THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO
RICO, (hereinafter referred to as the "MORTGAGEE"), taxpayer identification
Number Sixty Six dash Zero Three Four Eight dash Five Seven Two (66-0348-572),
and instrumentality of the Commonwealth of Puerto Rico, created by Law Number
Seventeen (17) of September Twenty Three (23), Nineteen Hundred Forty Eight
(1948) as amended, having its principal offices at the Minillas Governmental
Center in Santurce, San Juan, Puerto Rico, represented herein by its Executive
Vice President, MISTER GEORGE BARR WILSON, Social Security Number Five Hundred
Forty Five dash Seventy Eight dash Nine Thousand Eighty Three (S.S.
###-##-####), who is of legal age, married, bank executive and resident of San
Juan, Puerto Rico, who binds himself to show evidence that he has been
authorized to appear on behalf and in representation of the instrumentality,
whenever and wherever so required.
I, the subscribing Notary, do hereby certify and give faith that I
personally know the natural person(s) who appear(s) herein and I further certify
and attest, from his(her) (their) statement(s), as to his(her) (their) age(s),
civil status, profession(s) and residence(s). He(they) assure me of having, and
in my judgment he(she) (they) do(does) has(have), the necessary legal capacity
and authority to execute this instrument and therefore, he(she) (they) do hereby
freely and voluntarily
SET FORTH
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3.
FIRST: THE MORTGAGED PREMISES.
Mortgagor represents and warrants being the owner of record, with valid, good,
fee simple title ("pleno dominio") of the real estate described in paragraph
TWENTY SECOND of this deed.
SECOND: THE MORTGAGE NOTE.
Simultaneously herewith Mortgagor has subscribed and issued before the
Authorizing Notary a mortgage note (hereinafter referred to as the "NOTE" or
"MORTGAGE NOTE"), which is copied literally in paragraph TWENTY FIRST hereof.
THIRD: CREATION OF MORTGAGE.
For the purpose of securing the payment, when and as due and payable in
accordance with the terms thereof and hereof, of the principal of the Mortgage
Note and the interest thereon, and also to secure payment of:
(a) An additional amount equal to five (5) annuities of interest as
provided in the Mortgage Note to cover accrued and unpaid interest on the
Mortgage Note;
(b) An additional amount equal to TWENTY PERCENT (20%) of the principal
sum of the Note to cover any additional sums which may be paid or advanced by
the Mortgagee and the interest that may accrue on such payments or advances, and
all other indebtedness of the Mortgagor secured by the terms thereof;
(c) An additional amount up to, but not greater than five percent (5%)
of the principal amount of the Mortgage Note to cover the Mortgagee's actual
costs and expenses (including attorneys' fees and expenses) incurred by the
Mortgagee in the event the Mortgagee shall have recourse to foreclosure or other
judicial proceedings for the collection of the Mortgage Note.
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4.
(d) All other obligations of the Mortgagor to the Mortgagee herein or
under any other agreement secured by the pledge of the Mortgage Note; the
Mortgagor, by these presents, DOES HEREBY EXECUTE, CONSTITUTE, AND CREATE in
favor of the Mortgagee, or the future owner, holder and/or bearer of the
Mortgage Note, a voluntary mortgage lien on the real estate described in
paragraph TWENTY SECOND hereof and which mortgage lien shall extend to the
following property (hereinafter referred to collectively as the "MORTGAGED
PREMISES"):
(one) All right, title, and interest of the Mortgagor (including,
without limitation, its fee simple pleno dominio estate) in and to the real
estate described in paragraph TWENTY SECOND hereof and all other buildings and
improvements of every kind and description now or hereafter erected or placed on
said real estate and all materials intended for construction, reconstruction,
alteration and repairs of such real estate, buildings or improvements now or
hereafter erected thereon, all of which materials shall be deemed to be included
within the Mortgaged Premises immediately upon the delivery thereof to the
Mortgaged Premises, and all other property immovable either by nature or
destination now owned or hereafter located on said real estate or in any of such
other buildings or improvements used either for its adornment or for purposes of
comfort, or for the service of some industries or commerce, operated, conducted
or exploited by Mortgagor on the Mortgaged Premises, even though the aforesaid
shall have been attached to the same after constitution of this Mortgage;
(two) All right, title, and interest of Mortgagor, including any
after-acquired title or reversion, in and to the beds of the ways, streets,
avenues and alleys adjoining said real estate;
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5.
(three) All of the right, title and interest of the Mortgagor, in and
to, all and singular, the tenements, hereditaments, easements, appurtenances,
passages, waters, water rights, riparian rights, all participations however
evidenced in such rights, and other rights, liberties, and privileges thereof or
in any other claim hereafter appertaining, including any other claim at law or
in equity as well as any after-acquired title, franchise or license and
reversion and reversions and remainder and remainders thereof.
(four) All rents, issues, proceeds and profits accruing and to accrue
from the Mortgaged Premises;
(five) All fixtures and articles of movable property now or hereafter
owned by the Mortgagor and attached to or contained in or used in connection
with the said real estate, including, but not limited to all partitions,
furniture, furnishings, apparatus, machinery, motors, transformers, elevators,
fittings, radiators, gas ranges, ice boxes, mechanical refrigerators, awnings,
shades, screens, blinds, drapers, office equipment, work processors, computers,
typewriters, telephone and communications equipment and installations, kitchen,
barroom and restaurant equipment, plates, forks, knives, napkins, tablecloths,
tables, glasses, chinaware, cups, cooking equipment and installations, laundry,
ventilating, refrigerating, incinerating, electrical appliances, television
sets, radios, beds, vanities, chairs, mirrors, pillows, curtains, blankets,
sheets, towels, bathroom equipment, mattresses, box springs, sprinkler
equipment, carpeting and other furnishings and all plumbing, heating, lighting,
cooking, laundry, ventilating, refrigerating, incinerating, air conditioning and
sprinkler equipment and fixtures and appurtenances thereto; and all renewals or
replacements thereof or articles in substitution therefor, whether or not the
same are or shall be attached to said buildings
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6.
or structures in any manner, it being agreed that all the aforesaid property
owned by the Mortgagor and placed by it on said real estate or on or in such
buildings or improvements located thereon have been specially designed for use
in connection with the operation of a hotel, and shall, so far as permitted by
law, be deemed to be immovable property, security for the said indebtedness and
covered by the mortgage hereby constituted, and as to the balance of the
property aforesaid, this deed shall be deemed to be as well a security interest
in said property, securing the said indebtedness, for the benefit of the
Mortgagee;
(six) All insurance proceeds allocable to the Mortgagor in the event of
any damage or destruction of the Mortgaged Premises (business interruption
insurance to be excluded); and
(seven) All awards and other payments allocable to Mortgagor in respect
of a taking of all or any part of the Mortgaged Premises, or any leasehold or
other interest therein, or right accruing thereto, as the result of or in lieu
or in anticipation of the exercise of the right of condemnation or eminent
domain, or a change of grade affecting the Mortgaged Premises or any part
thereof.
The Mortgagor hereby warrants and agrees that all of the property
comprising the Mortgaged Premises, taken together, constitutes and will
constitute an integrated business unit.
FOURTH: RECORDING.
The Mortgagor will at all times cause this deed and the mortgage lien hereby
constituted and any supplement hereto or thereto to be recorded, registered, and
filed in the property Registry or Registries of Property and otherwise filed in
such manner and in such other place as may be required in order to establish,
create, protect and preserve the lien hereof as a mortgage lien encumbering the
Mortgaged Premises, subject to no liens,
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7.
charges, encumbrances, encroachments, reservations, restrictions, defects or
claims of any kind, with the exception of any specific liens or easements
described in paragraph TWENTY SECOND, and comply with all statutes and
regulations relating thereto. The parties state that since the Mortgage Note
collaterally secures a loan to promote and develop the economy, the original of
this deed and its certified copy shall be exempt from canceling internal revenue
stamps, as otherwise required by law and also exempt from the payment of the
recording rights thereof in the Registry of the Property. The Mortgagee will
reimburse the authorizing notary any internal revenue stamps that it may be
required to cancel in the original and/or copy of this deed. The Mortgagor will
execute, protocolize, deliver and record all such other instruments and take all
such other action as the Mortgagee from time to time may reasonably request for
the purpose of further assuring to the Mortgagee the properties and rights now
or hereafter subjected to the lien of the mortgage lien hereby constituted or
intended so to be. In the event that any Registrar of Property to whom a
certified copy of this deed shall be presented for recordation shall reject the
same for any reason or shall record this deed against the Mortgage Premises,
junior to any other, lien or encumbrance other than those specifically described
in paragraph TWENTY SECOND hereof, then upon such rejection becoming final and
beyond appeal, the debt evidenced by the Mortgage Note shall become totally due
and the Mortgagee may proceed to its collection judicially.
FIFTH: AGREED VALUE.
In compliance with the pertinent and applicable provisions of the Mortgage Law
of Puerto Rico, as amended, and for the purpose of foreclosure of the Mortgage,
and for no other purpose, the Mortgagor hereby declares and agrees with the
Mortgagee that the value of the
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8.
Mortgaged Premises is appraised at the sum stated under the title "FORECLOSURE
VALUATION" of paragraph TWENTY THIRD hereof and the Mortgagor waives any new
appraisal.
SIXTH: ADDITIONAL COVENANTS.
The Mortgagor further covenants and agrees with the Mortgagee as follows:
A. The Mortgagor will pay promptly the principal of and interest on,
and all other obligations set forth in the Mortgage Note, at the place, in the
currency, at the times and in the manner herein and in the Mortgage Note
provided.
B. Mortgagor will pay as they become due all: Taxes, assessments, water
rates, sewer rentals and other governmental or municipal or public dues,
charges, fines and other impositions and premiums on fire, rental value, and
other insurance.
Upon prior notice to Mortgagor, the Mortgagee shall have the right to
make any such payment notwithstanding that at the time any such tax, assessment,
charge or imposition is then being protested or contested by Mortgagor, unless,
upon not less than thirty (30) days prior to the due date thereof, the Mortgagor
shall have notified the Mortgagee, in writing, of such protest or contest, in
which event, as the case may be, the Mortgagee shall make such payment under
protest in the manner prescribed by law or shall withhold such payment;
provided, however, that such contest shall during its pendency preclude
enforcement of collection and the sale of the Mortgaged Premises in satisfaction
of such tax, assessment, charge or imposition.
SEVENTH: TAXES.
The Mortgagor will keep the Mortgaged Premises free from statutory liens of
every kind; will pay, before delinquency and before any penalty for
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9.
nonpayment attaches thereto, all ground rents, taxes, assessments, water rates,
sewer rentals and other governmental or municipal or public dues, charges, fines
or impositions which are or may be levied against the Mortgaged Premises or any
part thereof, except when payment for all such items has theretofore been made
under paragraph Sixth B; will deliver to the Mortgagee, at least ten (10) days
before delinquency, receipted bills evidencing payment therefor; and will pay in
full, under protest, and in the manner provided by statute any tax, assessment,
rate, rental, charge, fine or imposition aforesaid which the Mortgagor may
desire to contest. In the event of the passage, after the date of this deed, of
any law effective in Puerto Rico, deducting from the value of land for the
purposes of taxation of any lien thereon, or changing in any way the laws for
the taxation of mortgages or debts secured by mortgage for Commonwealth or local
purpose, or the manner of the collection of any such taxes so as to impose a tax
upon or otherwise to affect the mortgage hereby constituted, or upon the
rendition by any court of competent jurisdiction of a decision that any
undertaking by the Mortgagor as in this paragraph provided is legally
inoperative, then in any such event, the indebtedness secured hereby, at the
option of the Mortgagee and upon thirty (30) days' prior written notice, shall
become immediately due, payable, and collectible; provided, however, said option
and right shall be unavailing and the Mortgage Note and said mortgage shall
remain in effect in any event if, notwithstanding such law, the Mortgagor
lawfully may pay all such taxes, assessments, and charges, including interest
and penalties thereon, to or for the Mortgagee and does in fact pay same when so
payable.
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10.
EIGHTH: INSURANCE.
The Mortgagor will keep the improvements existing or hereafter erected on the
Mortgaged Premises insured as may be required from time to time by the Mortgagee
against loss or damage by, or abatement of rental income resulting from fire and
such other hazards, casualties, and contingencies in such amounts and for such
periods as reasonably may be required by the Mortgagee, and will pay promptly
when due all premiums of such insurance. All such insurance shall be carried in
companies approved by the Mortgagee and the policies and renewals thereof shall
be deposited with and held by the Mortgagee and have attached thereto the
standard noncontributing mortgage clause (in favor of and entitling the
Mortgagee to collect any and all proceeds payable under all such insurance) as
well as the standard waiver of subrogation endorsement, all to be in form
acceptable to the Mortgagee. The insurance proceeds shall be applied in the
manner provided in the Loan Agreement between Mortgagor and Mortgagee dated on
the same date of this Deed of Mortgage (the "Loan Agreement"). The Mortgagor
shall not carry separate insurance, concurrent in kind or form and contributing,
in the event of loss, with any insurance required hereunder. In the event of a
change in ownership or of occupancy of the Mortgaged Premises, immediate notice
thereof by mail shall be delivered to all insurers and in the event of loss, the
Mortgagor will give immediate written notice to the Mortgagee.
In the event of foreclosure of the mortgage hereby constituted, or
other transfer of title to the Mortgaged Premises or any portion thereof in
extinguishment of the indebtedness secured hereby, all right, title, and
interest of the Mortgagor in any to any insurance policies then in force shall
pass to the purchaser or grantee.
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11.
The Mortgagor will also carry and maintain such liability and indemnity
insurance as may be required from time to time by the Mortgagee in forms,
amounts and with companies satisfactory to the Mortgagee.
NINTH: MAINTENANCE OF MORTGAGED PREMISES.
The Mortgagor will not alter, remove or demolish any building or other
improvement now existing or hereafter erected on the Mortgaged Premises or
sever, remove, sell or mortgage any fixture or appliance on, in or about said
buildings or improvements or any other property included in the Mortgaged
Premises without the consent of the Mortgagee other than in the ordinary course
of business; and in the event of the demolition or destruction in whole or in
part of any of the fixtures or articles of movable property covered by the
mortgage hereby constituted, the same shall be replaced promptly by similar
fixtures and articles of movable property at least equal in quality and
condition to those replaced, free from any security interest in or encumbrance
thereon or reservation of title thereto; will not permit, commit or suffer any
waste, impairment or deterioration of the Mortgaged Premises or any part
thereof; will keep and maintain the Mortgaged Premises and every part thereof,
including the buildings, fixtures, machinery and appurtenances and adjoining
sidewalks, parking areas, roadways and means of ingress and egress in reasonably
good repair and conditions; will effect such repairs as the Mortgagee may
reasonably require and make all needful and proper replacements so that said
buildings, fixtures, machinery, appurtenances, sidewalks, parking areas,
roadways and means of ingress and egress will at all time be in good condition,
fit and proper for the respective purposes for which they were originally
erected or installed; will comply with all statutes, orders, requirements or
decrees relating to the Mortgaged Premises by any
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12.
Commonwealth, municipal or other governmental authority; will observe and comply
with all conditions and requirements necessary to preserve and extend any and
all rights, licenses, permits (including, but not limited to, zoning variances,
special exceptions and non-conforming uses), privileges, franchises, and
concessions which are applicable to the Mortgaged Premises or which have been
granted to or contracted for by the Mortgagor in connection with any existing or
presently contemplated use of the Mortgaged Premises; and will permit the
Mortgagee or its agents, at all reasonable times to enter into and inspect the
Mortgaged Premises. The Mortgagee shall have the right at any time provided that
there is reasonable cause to suspect that the proper maintenance of the
Mortgaged Premises has not been undertaken, to engage an independent realtor to
survey the adequacy of the maintenance of the Mortgaged Premises, and to require
the Mortgagor, by notice in writing, to make such repairs and replacements
thereof as such realtor shall determine to be necessary in order to protect and
preserve the rentability and usability of the Mortgaged Premises, it being
understood that the Mortgagor shall reimburse the Mortgagee for the cost of such
survey unless the same determines such maintenance to be reasonably adequate, in
which case the cost thereof shall be at the expense of the Mortgagee.
TENTH: SUBSEQUENT LIENS.
The Mortgagor will not voluntarily create or permit to be created or filed
against the Mortgaged Premises, or any part thereof, any mortgage lien or other
lien or liens inferior or superior to the lien of the mortgage hereby
constituted, and will keep and maintain the Mortgaged Premises free from the
claim of any persons supplying labor or materials for the construction of any
buildings or other improvements on the Mortgaged Premises, notwithstanding by
whom such labor or materials may have
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13.
been contracted, except for a third mortgage lien to be constituted as security
for advances to be made by the Partners of Mortgagor, or except for purchase
money mortgages on personal property subsequently acquired by Borrower not for
the purposes of substituting or replacing previously existing personal property
and to be used in the Mortgaged Premises, if such personal property, due to its
nature does not become real property by having been used at or incorporated to
the Mortgaged Premises and as may be provided under the Loan Agreement.
ELEVENTH: PLEDGE:
In the event that the Mortgage Note is assigned or pledged or otherwise
encumbered as collateral security for the payment of any other note or debt of
the Mortgagor or of any other person, the Mortgagor agrees that the Mortgagee
shall have and may exercise all rights, remedies, powers and privileges provided
herein or now or hereafter existing at law, in equity, by statute, or otherwise,
in favor of Mortgagee, including, but not limited to that of foreclosing this
mortgage without first foreclosing the pledge or other lien so constituted upon
the Mortgage Note, to the same extent and with the same force and effect as if
the Mortgage Note had been assigned or transferred directly to Mortgagee rather
than assigned or pledged as collateral security, provided that nothing contained
in this paragraph ELEVENTH shall relieve Mortgagor from the obligation to comply
with the terms of the pledge agreement or other instrument under which the
Mortgage Note is assigned or pledged.
TWELFTH: INDEMNITY.
The Mortgagor will hold harmless and indemnify the Mortgagee from and against
all costs and expenses, including reasonable attorneys' fees and costs of a
title search, continuation of abstract and preparation of survey, incurred by
reason of any action, suit, proceeding, hearing, motion or
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14.
application before any court of administrative body (excepting an action to
foreclose or to collect the debt secured hereby), in and to which the Mortgagee
may be or become a party by reason hereof, including but not limited to
condemnation, bankruptcy, probate and administration proceedings, as well as any
other of the foregoing wherein proof of claim is by law required to be filed or
in which it may be necessary to defend or uphold the terms and the lien created
by the mortgage hereby constituted.
THIRTEENTH: CONDEMNATION.
The Mortgagor hereby assigns to the Mortgagee all rights of the Mortgagor to any
awards or other compensation heretofore or hereafter to be made to the present
and all subsequent owners of the Mortgaged Premises for any taking by eminent
domain, either permanent or temporary, of all or any part of the Mortgaged
Premises or any easement or appurtenance thereof, including severance and
consequential damage and change in grade of streets, and hereby irrevocably
authorizes and empowers the Mortgagee, in the name of the Mortgagor or
otherwise, upon notice to Mortgagor and failure of the Mortgagor to so do, to
prosecute what would be the Mortgagor's claim for any such awards or
compensation, to collect and receive the proceeds of any such claim, to give
proper receipts and acquittance therefor and, after deducting expenses of
collection, to apply the net proceeds in accordance with the terms of the Loan
Agreement. The Mortgagor will give the Mortgagee immediate notice of the actual
or threatened commencement of any such proceedings under eminent domain and will
deliver to the Mortgagee copies of any and all papers served in connection with
such proceedings. The Mortgagor further covenants and agrees to make, execute,
and deliver to the Mortgagee, at any time or times upon request, any and all
further
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15.
assignments and/or instruments deemed necessary by the Mortgagee for the purpose
of validly and sufficiently assigning all awards and other compensation
heretofore and hereafter to be made to the Mortgagor (including the assignment
of any award from the United States government at any time after the allowance
of the claim therefor, the ascertainment of the amount thereof and the issuance
of the warrant for payment thereof) for any taking, either permanent or
temporary, under any such proceeding. The proceeds of any condemnation award
shall be applied as provided for under the Loan Agreement.
FOURTEENTH: MORTGAGOR'S CERTIFICATE.
The Mortgagor will, upon ten (10) business days' prior written request by the
Mortgagee, but not more often that twice in any calendar year furnish the
Mortgagee a written statement duly acknowledged of the amount due upon the
mortgage hereby constituted and whether any offset or defenses exist against the
mortgage debt.
FIFTEENTH: BOOKS AND RECORDS.
The Mortgagor will keep and maintain full and correct books and records showing
in detail the earnings and expenses of the Mortgaged Premises and will permit
the Mortgagee or its representative to examine such books and records and all
supporting vouchers and data at any time and from time to time on request at its
offices, hereinbefore identified, or at such other location as may be mutually
agreed upon and following the expiration of each fiscal year the Mortgagor will
furnish to the Mortgagee a statement showing in detail all such earnings and
expenses since the last such statement, prepared by an independent certified
public accountant acceptable to the Mortgagee in accordance with generally
accepted accounting principles, including also, if so requested, statements from
all tenants of the Mortgaged Premises showing all sales made therein,
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16.
together also with a current rent roll of the Mortgaged Premises showing with
respect to each tenancy: the name of the tenant, the space occupied, the date
and term of such lease, the amount of annual rental and additional rental and
all renewal and termination options; and in the event that the Mortgagor shall
refuse or fail to furnish any statement as aforesaid, or in the event such
statement shall be inaccurate or false, or in the event of the failure of the
Mortgagor or any subsequent owner to permit the Mortgagee or its representative
to inspect the Mortgaged Premises or the said books and records on request, the
Mortgagee may consider such acts of the Mortgagor as a default hereunder and
proceed in accordance with the rights and remedies afforded it at law and under
the provisions of this deed.
SIXTEENTH: ADVANCES AND EXPENSES.
Upon the occurrence of an Event of Default by the Mortgagor, the Mortgagee may,
at its option upon prior written notice to Mortgagor and whether electing to
declare the whole indebtedness due and payable or not, perform the same without
waiver of any other remedy, and any amount paid or advanced by the Mortgagee in
connection therewith, and any other costs, charges, and expenses incurred by the
Mortgagee in the protection of the Mortgaged Premises or the maintenance of the
lien of the mortgage hereby constituted are hereby secured by the lien of said
mortgage up to an amount equal to TWENTY PERCENT (20%) of the principal sum of
the Mortgage Note, shall be repayable by the Mortgagor on demand, with interest
at the rate set forth in the Mortgage Note and shall constitute a lien upon the
Mortgaged Premises senior to any other lien that may arise or may be granted
subsequent to the lien constituted under this deed.
The Mortgagee, in making any payment herein and hereby authorized, in
the place and stead of the Mortgagor, relating to taxes,
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17.
assessments, water rates, sewer rentals and other governmental or municipal
charges, fines, impositions or liens asserted against the Mortgaged Premises may
do so according to any bill, statement or estimate procured from the appropriate
public office without inquiry into the accuracy of the bill, statement or
estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien
or title or claim thereof; or relating to any apparent or threatened adverse
title, lien, statement of lien, encumbrance, claim or charge and shall be the
sole judge of the legality or validity of same, or otherwise relating to any
other purpose herein and hereby authorized but not enumerated in this paragraph,
may do so whenever, in its judgment and discretion, such advance or advances
shall seem necessary or desirable to protect the full security intended to be
created by this deed. Mortgagee will within a reasonable time after making such
payment or advance, give notice to the Mortgagor, but failure to do so shall in
any manner affect the guarantee herein provided for such payments or advances.
SEVENTEENTH: DEFAULTS, RIGHTS, AND REMEDIES.
Upon default in the payment of any installment of principal and/or interest when
due under the Mortgage Note or in the payment, when due, of any other obligation
set forth in the Mortgage Note, or in any of the payments required to be made
under this deed, or upon default in the performance or observance of any of the
other terms, covenants, conditions or warranties herein contained, or under any
other written agreement with the Mortgagee, or should any proceedings under the
Bankruptcy Law of the United States or any similar law be brought by or against
the Mortgagor or should a receiver be appointed for any properties of the
Mortgagor by any court in a proceeding wherein the Mortgagor is alleged to be
insolvent or unable to pay its debts as they mature, then in any such
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18.
event, at the option of the Mortgagee, the principal of and all other sums
secured by the mortgage hereby constituted shall, without notice, become
immediately due, demandable, and payable as fully as if it had been stipulated
that all such sums would be due on that date and the Mortgagee, with or without
entry, personally or by attorney, at its option, may proceed to protect and
enforce its rights hereunder by suit or suits in equity or action or actions by
law, whether for specific performance of any covenant or agreement contained
herein or in aid of the execution of any power herein granted, or for the
foreclosure of the mortgage hereby constituted and the sale of the Mortgaged
Premises or for the enforcement of any other appropriate legal or equitable
remedy as the Mortgagee shall deem most effectual to protect and enforce any of
its rights or duties hereunder.
Upon any such default by the Mortgagor and following the acceleration
of maturity as aforesaid a tender of payment of the amount necessary to satisfy
the entire indebtedness secured hereby made at any time prior to foreclosure
sale (including sale under power of sale hereunder), by the Mortgagor, its
successors or assigns, or by anyone on behalf of the Mortgagor, its successors
or assigns, shall constitute an evasion of the payment terms hereunder and shall
be deemed to be a voluntary prepayment hereunder, and any such payment, to the
extent permitted by law, will therefore include the exit fee, if any required
under the prepayment privilege contained in the Mortgage Note, or the Loan
Agreement.
In connection with any judicial proceedings initiated by the Mortgagee
under the Mortgage Note or this deed, the Mortgagee may petition the court
having jurisdiction in the premises to appoint a receiver, and said court shall
appoint said receiver for the Mortgaged Premises and
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19.
of all the rents, issues, income, profits and yields of any nature derived from
the Mortgaged Premises, which receiver shall have the broadest powers and
faculties usually granted to a receiver by the court. Such appointment shall be
made by the court as a matter of absolute right granted to the Mortgagee,
without taking into consideration the value of the Mortgaged Premises or the
solvency or insolvency of the Mortgagor or defendants, and regardless of whether
the Mortgagee has an adequate remedy at law. All of said rents, income issues,
profits and yield shall be employed by the receiver in conformity with the terms
of the mortgage hereby constituted and the rulings of said court.
The remedies provided for herein shall be cumulative and not exclusive.
The failure of the Mortgagee to exercise the option for acceleration of
maturity and/or foreclosure following any default as aforesaid or to exercise
any other option granted to the Mortgagee in any one or more instances and the
acceptance by the Mortgagee of partial payments hereunder shall not constitute a
waiver of any such default nor extend or affect the grace period, if any, but
such option shall remain continuously in force.
Acceleration of maturity, once claimed hereunder by the Mortgagee, may,
at the option of the Mortgagee, be rescinded by written acknowledgment to that
effect by the Mortgagee, but the tender and acceptance of partial payments alone
shall not in any way affect or rescind such acceleration of maturity, nor extend
or affect the grace period, if any.
EIGHTEENTH: ASSIGNMENT.
As further security for the payment of the indebtedness hereby secured, the
Mortgagor hereby irrevocably assigns, transfers, and sets over to the
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20.
Mortgagee all of the Mortgagor's right, title, and interest in and to all leases
and/or subleases (hereinafter referred to collectively as "leases") affecting
the Mortgaged Premises to which the Mortgagor is or hereafter shall be a party,
together with any and all further leases upon all or any part of the Mortgaged
Premises and together with all of the rents, income, receipts, revenues, issues
and profits from or due or arising out of the Mortgaged Premises, it being
understood that the Mortgagor will from time to time, promptly upon request by
Mortgagee, execute and deliver to the Mortgagee a specific, present and
irrevocable assignment satisfactory in substance and form to the Mortgagee, of
all of the Mortgagor's right, title, and interest in, to, and under each lease
affecting the Mortgaged Premises, it being understood and agreed that every such
lease shall be subordinate to the lien of the mortgage hereby constituted. The
Mortgagor will promptly give the Mortgagee notice in the event that the tenant
under any such lease of the Mortgaged Premises shall institute any judicial or
administrative proceeding under the Reasonable Rents Act of Puerto Rico or any
similar statute at the time in effect for the reduction of the rent payable by
such tenant, it being understood that the Mortgagee shall have the right to
defend such proceeding in the name and on behalf of the Mortgagor. The Mortgagor
will not sell, assign, transfer, convey or encumber the Mortgaged Premises
except for Permitted Encumbrances, or upon assumption by the purchaser or
transferee, in form satisfactory to the Mortgagee (for so long as title remains
in said purchaser or transferee) of all of the obligations of the Mortgagor as
landlord under all leases at the time affecting the Mortgaged Premises. The
Mortgagor hereby further covenants and agrees that it will not, except in the
ordinary course of business without prior written consent of the Mortgagee,
which consent shall not be unreasonable withheld:
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21.
ONE: Except in the ordinary course of business, receive or collect any
rents from any present or future tenant under any lease of the Mortgaged
Premises or any part thereof for a period of more than one month in advance
(whether in cash or by promissory note), or pledge, transfer, mortgage or
otherwise encumber or assign future payments of said rents;
TWO: Waive, excuse, condone, discount, set off, compromise, or in
manner release or discharge any such tenant thereunder, of and from any
obligations, covenants, conditions and agreements by said tenant to be kept,
observed, and performed, including the obligation to apply the rents thereunder,
in the manner and at the place and time specified therein;
THREE: Cancel, terminate or consent to any surrender of any such lease,
or commence an action of ejectment or any summary proceedings for dispossession
of the tenant under any such lease, or exercise any right or recapture provided
in any such lease, or modify, or in any way alter the terms thereof;
FOUR: Other than in the ordinary course of business, lease any part of
the Mortgaged Premises, or renew or extend the term of any lease of the
Mortgaged Premises unless an option therefor was originally so reserved by the
tenant under such lease and for a fixed and definite rental;
FIVE: Consent to any modification of the express purposes for which the
Mortgaged Premises or any part thereof may be used, or to any assignment or
subletting of any such lease, without in each such instance enumerated in this
paragraph, the prior written consent of the Mortgagee.
NINETEENTH: RELEASES.
The Mortgagee may, without notice and without regard to the consideration, if
any, paid therefor, and notwithstanding the existence at that time of any
inferior liens thereon, release any part of the security
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22.
described herein or by any person liable for any indebtedness secured hereby,
without in any way affecting the priority of the lien of the mortgage hereby
constituted, to the full extent of the indebtedness remaining unpaid hereunder,
upon any part of the security not expressly released, and may agree with any
party obligated on said indebtedness or having any interest in the security
described herein to extend the time for payment of any part or all of the
indebtedness secured hereby. Such agreement shall not in any way release or
impair the lien of said mortgage, but shall extend such lien as against the
title of all parties having any interest in said security which interest is
subject to such lien.
In the event the Mortgagee (i) releases, as aforesaid, any part of the
security described herein or any person liable for any indebtedness secured
hereby; or (ii) grants an extension of time for any payments of the indebtedness
secured hereby; or (iii) takes other or additional security for the payment
thereof; or (iv) waives or fails to exercise any right granted in this deed or
in the Note, said act or omission shall not release the Mortgagor or any maker,
endorser or surety of the mortgage hereby constituted or of the Note or under
any covenant of this deed or of the Note, nor preclude the Mortgagee from
exercising any right, power or privilege herein granted or intended to be
granted in the event of any other default then made or any subsequent default.
TWENTIETH: MISCELLANEOUS.
Mortgagor will not exercise any right which he might have to cancel the
record of the Mortgage by reason of lapse of time counted from the date of the
constitution of the Mortgage either under the applicable provisions of the
Mortgage Law or otherwise and further agrees, whenever requested by the
Mortgagee, to execute and file in the appropriate Registry, at Mortgagor's cost
and expense, any and all
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23.
supplemental instruments which may be necessary or convenient for the
preservation of the lien of the mortgage until full payment of the Mortgage Note
or debt so secured by the lien upon the Mortgaged Premises. Without limiting the
generality of the foregoing, Mortgagor agrees that:
(a) Unless the Mortgagee shall consent in writing to the cancellation
of the Mortgage at an earlier date, the Mortgage shall be conclusively presumed
to subsist until full payment to the Mortgagee of all amounts lent and secured
hereunder, and the Mortgagor does hereby waive any right which he might
otherwise have under the Mortgage Law of Puerto Rico to apply for an earlier
cancellation of the record of the Mortgage.
(b) The Mortgagor will give immediate notice by mail to the Mortgagee
of any conveyance, transfer or change of ownership or of occupancy of the
Mortgaged Premises or any part thereof.
(c) Nothing herein contained nor any transaction related thereto shall
be construed or shall operate, either presently or prospectively, to require the
Mortgagor to make any payment or do any act contrary to law, but if any clause
and provision herein contained shall otherwise so operate to invalidate the
mortgage hereby constituted, in whole or in part, then such clause and provision
only shall be held for naught as though not herein contained and the remainder
of this deed shall remain operative and in full force and effect.
(d) The Mortgagor will, within ten (10) days after written request by
the Mortgagee, execute, acknowledge, and deliver to the Mortgagee a chattel
mortgage, security agreement or other similar security instrument, in form
satisfactory to the Mortgagee, covering all property of any kind whatsoever
owned by the Mortgagor, which, in the reasonable
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24.
opinion of the Mortgagee, is required for the operation of the Mortgaged
premises and may not be covered by the lien of the mortgage hereby constituted
under the laws of the Commonwealth of Puerto Rico, and will further execute,
acknowledge, and deliver any financing statement, affidavit, continuation
statement or certificate or other document requested by the Mortgagee in order
to perfect, preserve, maintain, continue and extend the security interest under
and the priority of such chattel mortgage or other security instrument, it being
understood that the Mortgagor will pay to the Mortgagee on demand all costs and
expenses incurred by the Mortgagee in connection with the preparation,
execution, recording and filing of any such document.
(e) Whenever in this deed or in the Mortgage Note or by law, notice or
demand shall be required to be given by the Mortgagee to the Mortgagor, such
notice or demand shall be sufficient if in writing and delivered to an officer
or employee of the Mortgagor, or if mailed to the Mortgagor addressed to it at
its last address actually furnished to the Mortgagee or at the Mortgaged
Premises, or as otherwise provided under the Loan Agreement.
(f) In the event of the sale or transfer by operation of law, or
otherwise, of all or any part of the Mortgaged Premises, the Mortgagee is hereby
authorized and empowered to deal with such vendee or transferee with reference
to the Mortgaged Premises, or the debt secured hereby, or with reference to any
of the terms or conditions hereof, as fully and to the same extent as it might
with the Mortgagor, without in any way releasing or discharging the Mortgagor
from its liability or undertakings hereunder. The term "Mortgagor" as used
herein shall mean and include the Mortgagor appearing herein and any subsequent
owner, in whole or in part, of the Mortgaged Premises.
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25.
(g) All of the covenants hereof shall run with the Mortgaged Premises.
TWENTY FIRST: THE MORTGAGE NOTE.
The Mortgage Note referred to in paragraph SECOND of this deed is literally
transcribed herein as follows:
"MORTGAGE NOTE
FOR VALUE RECEIVED, the undersigned, El Conquistador Partnership L.P.
hereby promises to pay to the order of THE GOVERNMENT DEVELOPMENT BANK FOR
PUERTO RICO, on demand, at such place as may be designated in writing by said
payee or holder the principal sum of TWENTY FIVE MILLION DOLLARS
($25,000,000.00) in lawful money of the United States of America together with
interest in like lawful money on the decreasing balance of the aforesaid
principal sum until paid and throughout its life or through any period of
non-payment, default, and after maturity, also payable on demand, at an annual
variable interest rate to be computed on the basis of a three hundred sixty
(360) days year equivalent to the London Interbank Offered Rate (LIBOR) as
described on page 3750 of the Telerate's System at 11:00 A.M. (London Time) for
a three (3) month period, plus ninety (90) basis points (LIBOR plus 0.9%). The
initial interest rate on this Mortgage Note shall be Seven point Five Twenty
Five Percent (7.525%) per annum.
Anything herein to the contrary notwithstanding, if the rate of
interest required to be paid hereunder exceeds the rate lawfully chargeable, the
rate of interest to be paid shall be automatically reduced to the maximum rate
lawfully chargeable so that no amounts shall be charged which are in excess
thereof, and, in the event it should be determined that any excess over such
highest lawful rate has been charged or received, the payee or holder hereof
shall promptly refund such excess to the undersigned; provided, however, that,
if lawful, any such excess shall be paid by the undersigned to the payee or
holder hereof as additional interest (accruing at a rate equal to the maximum
legal rate minus the rate provided for hereunder) during any subsequent period
when regular interest is accruing hereunder at less that the maximum legal rate.
In case of recourse to the courts by the payee or holder of this
Mortgage Note, including but not limited to collection, foreclosure and
Bankruptcy Code proceedings, in order to collect the whole or any portion
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26.
of the principal and interest due on this Mortgage Note, the undersigned
agree(s) to pay up to a maximum of five percent (5%) of the principal amount of
this Mortgage Note to cover actual court costs, disbursements and reasonable
attorney's fees.
The undersigned, and all other who may become liable for all or any
part of this obligation jointly and severally waive demand, presentment,
protest, notice of dishonor and non-payment, and any and all lack of diligence
or delays in collection or enforcement hereof.
The payment of this Mortgage Note is secured by a mortgage constituted
pursuant to the terms of Deed Number 2, executed on the 7th day of February,
1991, before Notary Ramon Moran Loubriel, and the payee or bearer hereof is
entitled to the benefit and security of all of the provisions and conditions set
forth in said Deed of Mortgage.
No reference herein to the Deed of Mortgage shall alter or impair the
obligation of the undersigned hereon, which is continuing, absolute and
unconditional, nor shall such reference affect the negotiability hereof under
the Negotiable Instruments Law of Puerto Rico. Nevertheless the obligations of
the undersigned under this Mortgage Note shall be non-recourse, payable solely
from the security constituted by the Mortgage securing payment of this Mortgage
Note.
IN WITNESS WHEREOF, the undersigned has caused this Mortgage Note to be
executed at San Juan, Puerto Rico, this 7th day of February, 1991.
(Signed): El Conquistador Partnership, L.P.
By: Kumagai Caribbean, Inc.
(Signed): Toru Fujita - Vice President
By: WKA el Con Associates
(Signed): Hugh Alanson Andrews-Authorized Signatory
Affidavit Number: 4655
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27.
Subscribed and acknowledged to before by Mr. Toru Fujita and Hugh
Alanson Andrews, both of legal age, married, business executives and residents
of San Juan, Puerto Rico, this 7th day of February, 1991.
(Signed): RAMON MORAN LOUBRIEL
NOTARY PUBLIC".
TWENTY SECOND: DESCRIPTION OF THE MORTGAGED PREMISES.
The description of the Mortgaged Premises is as follows:
"RUSTIC: Parcel of land located at the Cabezas Ward of the Municipality
of Fajardo, Puerto Rico, with a survey area of TWO HUNDRED FIFTY SIX CUERDAS
WITH ONE THOUSAND FOUR HUNDRED SEVENTY FOUR TEN THOUSANDTHS of another
(256.1474) more or less, equivalent to TWO HUNDRED FIFTY ACRES WITH SEVEN
THOUSAND ONE HUNDRED SEVENTY THREE TEN THOUSANDTHS of another (250.7173), as
determined by a survey prepared by Engineer Manuel Ray based on various surveys
prepared by surveyors Alex Hornedo Robles and David Lebron, and an area of
record of two hundred sixty seven cuerdas with five thousand eight hundred and
ninety ten thousandths of another (267.5890) more or less, bounded on the NORTH,
by State Road Nine Hundred Eighty Seven (987), by a housing lot subdivision
belonging to various owners, by land property of Justino Diaz Santini and his
wife Jean Robertson, by land property of Las Croabas Development Corporation, by
land comprising the Marina Lanais Condominium and by the Marina access road; on
the SOUTH, by land formerly owned by Fajardo Development Corporation, currently
Kumagai Caribbean, Inc., by land comprising the Marina Lanais Condominium, and
by the Maritime Zone of the Atlantic Ocean; on the EAST, by land owned by Ramon
Soto, by land property of Justino Diaz Santini and his wife Jean Robertson, by
land comprising the Marina Lanais Condominium, and by the maritime Zone of the
Atlantic Ocean; on the WEST, by land owned by Justino Diaz Santini, and his wife
Jean Robertson, by housing lot subdivision, property of various owners, by land
owed by Kumagai Caribbean, Inc., formerly Fajardo Development Corp. and by State
Road Nine Hundred Eighty Seven (987).
In accordance with the record, the aforedescribed property contains the
following structures:
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28.
a) Structure know as the Clifftop Building, consisting of a four (4)
story building, which contains approximately eight eight (88) hotel rooms and
facilities.
b) Administration Building consisting of a three (3) level concrete
building which includes a casino area, kitchen facilities and meeting rooms.
c) Structure known as Sea Wing Building, consisting of an irregular
shaped five (5) story concrete building with approximately two hundred thirty
(230) hotel rooms and facilities.
d) Structure known as the Lanais Building consisting of spiral shaped
four (4) level concrete building with swimming pool surrounded by two (2)
structures forming a semicircle which contain one hundred (100) hotel rooms with
facilities.
e) Structure known as the Health SPA & GYM consisting of a three (3)
level concrete building with a solarium on the uppermost level, and which has
two (2) swimming pools.
f) Structure known as Hotel Villas, comprising two (2) single level
buildings formerly used as transient guest apartments and executive dwellings.
g) Facilities known as Marina Sea Shore comprising a concrete
structure, piers, docking facilities, fueling facilities, navigational aids,
breakwater and other facilities for sea vessels, with an ocean opening towards
the East.
h) Sewer Treatment installations for the treatment and disposal of
sanitary sewage.
i) Structure originally containing the kitchen facilities of El
Conquistador Hotel.
j) Ocean Beach Pool, consisting of a salt-water artificial lagoon.
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29.
TITLE, LIENS, AND ENCUMBRANCES
Mortgagor acquired the Mortgaged Premises by Deed number Six (6), Deed
of Consolidation of Properties, of even date, before Notary Silvestre M.
Miranda, pending presentment for recordation.
Mortgagor represents that the above described Mortgaged Premises is
free and clear, by its origin and by itself, of any and all liens and
encumbrances, except that by its origin it is subject to easements in favor of
the Puerto Rico Water and Sewer Authority, the Puerto Rico Electric Energy
Company, Right of Way Easement and Special Maritime Zone Boundary easements in a
width of said meters, except that such width is reduced to three meters along
the inside boundary of the Marina.
Under the terms of the Loan Agreement pursuant to which the Mortgage
Note has been pledged to Mortgagee, Mortgagee has bound itself and any
subsequent holders of the Mortgage Note and in such terms and conditions as
specified in said Loan Agreement to: (i) Release from the lien represented by
this mortgage and securing payment of the Mortgage Note a portion of the
Mortgaged Premises not to exceed twenty (20) acres plus rights for required
access for the development of condominium units as contemplated in the Loan
Agreement; and (ii) Subordinate the lien constituted by this mortgage in favor
of a first and prior mortgage constituted as per deed number One (1) of even
date before Notary Public Leonor Aguilar Guerrero to guarantee mortgage notes in
the principal amount of ONE HUNDRED TWENTY MILLION DOLLARS ($120,000,000.00),
TWENTY MILLION DOLLARS ($20,000,000.00) AND SIX MILLIONS SIX HUNDRED TWELVE
THOUSAND DOLLARS ($6,612,000.00).
TWENTY THIRD: FORECLOSURE VALUATION.
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30.
The foreclosure valuation of the Mortgaged Premises is equal to the sum of the
principal of the Mortgage Note the payment thereof secured by the lien of the
Mortgage hereby constituted, which Mortgage Note is transcribed in paragraph
TWENTY FIRST of this Deed.
TWENTY FOURTH: LIMITATION OF LIABILITY.
Notwithstanding anything to the contrary contained in this Mortgage, no recourse
shall be had, whether by levy or execution or otherwise, for the payment of the
principal of or interest on, or other amounts owed hereunder or under the
Mortgage Note, or for any claim based on this Mortgage or in respect thereof,
against any partner of the Mortgagor or any predecessor, successor or affiliate
of any such partner or any of their assets (other than from the interest of such
partner in the Mortgagor), or against any principal, partner, shareholder,
officer, director, agent or employee of any such partner (other than from the
interest of any such person in such partner), nor shall any such persons be
personally liable for any such amount or claims, or liable for any deficiency
judgment based thereon or with respect thereto, it being expressly understood
that the sole remedies of the Mortgagee with respect to such amounts and claims
shall be against the assets of the Mortgagor, including the Mortgaged Property,
and that all such liability of the aforesaid persons, except as otherwise
expressly provided herein or in the Loan Agreement, is expressly waived and
released as a condition of and as consideration for the execution of the
Mortgage; provided, however, that (A) nothing contained in this Mortgage
(including, without limitation, the provisions of this paragraph TWENTY FOURTH
shall constitute a waiver of any indebtedness of Mortgagor evidenced hereby or
of any of the Mortgagor's other obligations under such other instruments
executed in connection herewith or shall be taken to prevent recourse to and the
enforcement against the Mortgagor, of all
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31.
the liabilities, obligations and undertakings contained in this Mortgage; (B)
this paragraph TWENTY FOURTH shall not be applicable to a breach by any person
of any independent obligation to the Mortgagee, including, but not limited to
any other obligations of any person under any other guarantee or indemnity
agreement executed or delivered in connection herewith or with any pledge
agreement pursuant to which the Mortgage Note is pledged or assigned (including
without imitation, the indemnities set forth in paragraph TWELFTH hereof) and
(C) this paragraph TWENTY FOURTH shall not be applicable to the active party in
the event of and to the extent of any claim against such party for (1) fraud by
such party, (2) misappropriation of funds or other property by such party, or
(3) damage to the Mortgaged Property or any part thereof intentionally inflicted
in bad faith by such party. For the purposes of the foregoing, the term
"shareholder" shall be deemed to include the shareholders of any corporation
which is a shareholder of a corporation and the term "partner" shall be deemed
to include the partners of any partnership which is a partner of a partnership.
TWENTY FIFTH: ENVIRONMENTAL MATTERS.
(a) Hazardous Substances. Except to the extent that failure to comply
would not have a material adverse effect on the Mortgagor or the Mortgaged
Premises and/or not result in or create a lien of any kind upon the Mortgaged
Premises, the Mortgagor shall:
(i) not store (except in compliance with all laws, ordinances, and
regulations pertaining thereto), dispose of, release or allow the release of any
hazardous substance, solid waste or oil, as defined in forty-two (42) United
States Code ("USC") Sections nine six zero one (9601) et seq., forty-two (42)
USC Sections six nine zero one (6901) et seq., fifteen (15) USC Sections two six
zero one (2601 et seq., and the regulations
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32.
promulgated thereunder, and all applicable federal, state and local laws,
rules and regulations, on the Mortgaged Premises;
(ii) neither directly nor indirectly transport or arrange for the
transport of any hazardous substance or oil (except in compliance with all laws,
ordinances and regulations pertaining thereto);
(iii) in the event of any change in the laws governing the assessment,
release or removal of hazardous material, which change would lead a prudent
lender to require additional testing to avail itself of any statutory insurance
or limited liability, take all such action (including, without limitation, the
conducting of engineering tests at the sole expense of the Mortgagor) to confirm
that no hazardous substance or oil is or ever was stored, released or disposed
of or on the Mortgaged Premises; and
(iv) provide the Mortgagee with written notice: (aa) upon the Mortgagor
obtaining knowledge of the release of any hazardous substance or oil at or from
the Mortgaged Premises; (bb) upon the Mortgagor's receipt of any notice to such
effect from any federal, state, or other governmental authority or making an
assessment of any expense incurred in connection with the containment, removal
or remediation of any hazardous substance or oil at or from the Mortgaged
Premises, for which the Mortgagor may be liable or for which expense a lien may
be imposed on the Mortgaged Premises.
For purposes of this section, the terms "hazardous substance" and
"release" shall have the meanings specified in the Comprehensive Environmental
Response, Compensation and Liability Act of nineteen hundred eighty (1980),
forty two (42) USC Sections nine six zero one (9601) et seq., ("CERCLA") and the
terms "solid waste" and "disposal" (or "disposed") shall have the meanings
specified in the Resource Conservation and Recovery act of nineteen hundred
seventy six (1976),
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33.
forty-two (42) USC Sections six nine zero one (6901) et seq., ("RCRA") and
regulations promulgated thereunder; provided, in the event either CERCLA or RCRA
is amended so as to broaden the meaning of any term defined thereby, such
broader meaning shall apply as of the effective date of such amendment and
provided further, to the extent that the laws of the jurisdiction where the
Mortgaged Premises is located establish a meaning for "hazardous substance",
"release", "solid waste", or "disposal" which is broader than specified in
either CERCLA or RCRA, such broader meaning shall apply.
(b) Environmental Assessments. In addition to the Mortgagee's rights
under Section (a)(iii), the Mortgagee may, at its election, if there is
reasonable cause to suspect some environmental damage has occurred without
regard to whether Mortgagor is in default hereunder or under the Mortgage Note,
obtain one or more environmental assessments of the Mortgaged Premises prepared
by a geohydrologist, and independent engineer or other qualified consultant or
expert approved by the Mortgagee evaluating or confirming (i) whether any
hazardous substances or other toxic substances are present in the soil or water
at or adjacent to the Mortgaged Premises and (ii) whether the use and operation
of the Mortgaged Premises comply with all applicable federal, state and local
laws, rules and regulations (herein called ("Environmental Laws") relating to
air quality, environmental control, release of oil, hazardous material,
hazardous wastes and hazardous substances, and any and all other applicable
environmental laws. Environmental assessments may include detailed visual
inspections of the Mortgage Premises including, without limitation, any and all
storage areas, and the taking of soil samples, surface water samples and ground
water samples, as well as such other investigations or analyses as are necessary
or appropriate for a complete
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34.
determination of the compliance of the Mortgaged Premises and the use and
operation thereof with all applicable Environmental Laws.
TWENTY SIXTH: RECORDATION IN THE ENGLISH LANGUAGE.
Mortgagor and Mortgagee now state that this Deed has been drafted in the English
language in satisfaction of their wishes and in compliance with their wishes and
in compliance with their instructions and they further add that to prevent any
translation mistake they have agreed to request that this Deed be recorded at
the Registry of Property in the English language thus waiving by these presents
any right that they may have to have the same translated to the Spanish language
for recordation purposes.
TWENTY SEVENTH:
The provisions contained in paragraphs SEVENTH, EIGHTH, NINTH, TENTH, ELEVENTH,
TWELFTH, FIFTEENTH, SEVENTEENTH AND TWENTY FIFTH, of this deed are subordinated
to the provisions of the Loan Agreement or to any other agreement under which
the Mortgage Note secured hereby is delivered in pledge or otherwise, and in the
event of conflicts or inconsistencies the Loan Agreement provisions will govern.
TWENTY EIGHTH: ACCEPTANCE BY MORTGAGEE.
The Mortgage Note has been delivered in pledge to Mortgagee to secure payment to
Mortgagee of credit facilities which have been granted by the Mortgagee to
Mortgagor under a Loan Agreement executed on this same date in furtherance of
Mortgagee's statutory duty and responsibility to aid an develop the economy of
Puerto Rico, particularly its industrialization, thus complying with the public
purpose of Mortgagee's creation of benefiting THE PEOPLE OF PUERTO RICO.
Complying with the requirements of Article One Hundred Eighty Six (186) of the
Mortgage
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35.
and Registry of Property Law of Puerto Rico of the year Nineteen Hundred Seventy
Nine (1979), the Mortgagee states its acceptance to the mortgage lien
constituted by these presents in its favor.
ACCEPTANCE
I, the Notary, made to the appearing party(ies) the necessary legal
warnings concerning the execution of this deed and he(she)(they) was(were) fully
advised by me thereon. I advised him(her)(them) as to his(her)(their) legal
right to read the deed and to have witnesses present at the execution thereof,
which he waived, and then I read this deed to him(her)(them).
After having heard the contents of this deed, as stated in all
preceding paragraphs, the appearing party(ies) fully ratified and confirmed the
statements contained herein as the true and exact embodiment of his(her)(their)
stipulations, terms, and conditions whereupon he(she)(they) signed this deed
before me, the Notary, and initialed each and every page of this deed.
I, the Notary, do hereby certify as to everything stated or contained
in this instrument.
Signed: Toru Fujita, Hugh Alanson Andrews and George Barr Wilson.
Signed, Sealed, Marked and Flourished: RAMON MORAN LOUBRIEL.
The corresponding Internal Revenue Stamps and that of Notarial Fee have
been cancelled on the original.
I, the Notary, CERTIFY that the foregoing is a true and exact copy of
the original, which forms part of my Protocol for Public Instruments for the
current year and which contains 39 pages.
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36.
IN WITNESS WHEREOF, and at the request of The Government Development
Bank for Puerto Rico I issue this FIRST copy
which I sign, seal, mark and flourish at San Juan, Puerto Rico, on the same date
of its execution. I ATTEST.
/s/ Ramon Moran Loubriel
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NUMBER TWELVE (12)
DEED OF LEASE
In the City of San Juan, Commonwealth of Puerto Rico, this fifteenth
(15th) day of December, nineteen hundred ninety (1990).
BEFORE ME, SILVESTRE M. MIRANDA, Attorney-at-Law and Notary Public in and
for the Commonwealth of Puerto Rico, with residence and offices in San Juan,
Puerto Rico.
APPEAR AS PARTY OF THE FIRST PART: ALBERTO BACHMAN UMPIERRE, Social
Security Number 582-166-174, of legal age, married to Margarita Gonzalez Rivera,
property owner and resident of San Juan, Puerto Rico and LILLIAM BACHMAN
UMPIERRE, Social Security Number ###-##-####, of legal age, married to Jose
Fuertes Garzot, property owner and resident of San Juan, Puerto Rico,
hereinafter, collectively, the "Landlord".
AS PARTY OF THE SECOND PART: EL CONQUISTADOR PARTNERSHIP, L.P., taxpayer
identification number 06-1288145, a partnership organized and existing under the
laws of the State of Delaware, United States of America, hereinafter "the
Tenant", represented herein by its General Partners WKA EL CON ASSOCIATES,
taxpayer
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identification number 06-1288143, a partnership organized and existing under the
laws of the State of New York, United States of America, herein represented by
its General Manager, HUGH ANDREWS, Social Security Number ###-##-####, of legal
age, married, business executive and resident of San Juan, Puerto Rico, whose
authority for the execution of this deed he will evidence whenever required; and
KUMAGAI CARIBBEAN, INC., taxpayer identification number 75-2303665, a
corporation organized and existing under the laws of the State of Texas, United
States of America, represented herein by its President SHUNSUKE NAKANE, Social
Security Number ###-##-####, of legal age, married and resident of San Juan,
Puerto Rico, whose authority for the execution of this deed he will evidence
whenever required.
I, the Notary, hereby certify that I personally know the persons appearing
herein and I further attest through their statements as to their age, civil
status, professions, and residence. They assure me that they have and in my
judgment they do have the necessary legal capacity to execute this instrument,
and therefore they freely and voluntarily
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STATE
FIRST: Title: Landlord is the owner in fee simple of the real property
which is described in the Spanish Language in the corresponding Registry of the
Property, as follows (hereinafter the "Demised Premises"):
"RUSTICA: Predio compuesto de 100 cuerdas, equivalentes a 39 hectareas, 30
areas y 4 centiareas, terreno quebrado y llano, destinado a pastos, situado en
el islote denominado Palomino, en el Mar Caribe y frente al Puerto de Fajardo,
al Este del mismo, colinda por sus cuatro puntos cardinales con el mencionado
Mar Caribe. Enclave una casa y un ranchon para peones y distintas cercas."
SECOND: Recording Data: The Demised Premises are recorded at page thirty
five overleaf (35vto) of volume three hundred twenty six (326) of Fajardo,
Property Number Five Hundred Fifty (550).
The Demised Premises were acquired by Landlord by inheritance from their
parents, Mister Alberto Bachman and Mistress Angelica Umpierre pursuant to Deeds
of Will numbers one hundred fifty seven (157) and one hundred fifty eight (158),
executed before Notary Public Jorge M. Morales on November five (5), nineteen
hundred and fifty two (1952), recorded at page thirty five (35) overleaf of
volume three hundred twenty six (326) of Fajardo, Property Number five hundred
fifty (550).
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THIRD: Liens and Encumbrances: The Demised Premises are free and clear of
all liens and encumbrances.
FOURTH: Landlord and Tenant have agreed on the lease of the Demised
Premises by Tenant from Landlord, and consequently now carry out their agreement
under the following terms and conditions:
One: Lease of Demised Premises and Improvements Thereon.
A. Landlord, in consideration of the terms, covenants, and agreements
hereinafter set forth, hereby grants, demises, and lets the Demised Premises to
Tenant, and Tenant hereby takes and hires the Demised Premises from Landlord, on
the terms, covenants, provisions, and agreements hereinafter provided, to have
and to hold for and during the term hereof and any renewals thereto together
with any and all improvements presently existing or hereinafter constructed on
the Demised Premises, and together with all and singular the appurtenances,
rights, interest, easements, and privileges in anywise appertaining thereto.
B. The parties hereto have agreed to exclude from the lease, a portion of
the Demised Premises which is described below, together with all improvements
existing or hereinafter
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constructed thereon, which portion Landlord shall retain for their exclusive use
(hereinafter the "Reserved Area"):
"RUSTICA: Predio de terreno de forma irregular situado en la portion
Noreste del islote denominado Palomino, en el Mar Caribe y frente al Puerto de
Fajardo, al Este del mismo, Municipio de Fajardo, con una cabida superficial de
nueve cuerdas con nueve mil novecientos ochenta y un diez milesimas de otra
(9.9981) equivalentes a treinta y nueve mil doscientos noventa y seis metros
cuadrados con veintinueve centesimas de otro (39,296.29), en lindes, por el
Norte, en varias alineaciones con el Mar Caribe y con la finca de la cual se
segrega; por el Sur, en Varias alineaciones, con el Mar Caribe y con la finca de
la cual se segrega; por el Este, on distintas alineaciones con el Mar Caribe y
la finca de donde se segrega, y por el Oeste, en varias alineaciones, con la
finca de la cual se segrega y el Mar Caribe."
Once the Reserved Area is segregated from the Demised Premises, the
description of the Demised Premises, as a remnant, shall be as follows:
"RUSTICA" Predio compuesto de noventa mil punto cero cero diecinueve
(90.0019) cuerdas equivalentes a treinta y cinco (35) hectareas, treinta y siete
(37) areas, cuarenta y dos (42) centiareas, cincuenta (56) miliareas, de forma
irregular, terreno quebrado y llano, destinado a pastos y otros usos, situado en
el islote denominado Palomino, en el Mar Caribe y frente al Puerto de Fajardo,
al este del mismo, en el Municipio de Fajardo; colinda por sus cuatro puntos
cardinales esta finca con el Mar Caribe y con parcela segregada propiedad de
Alberto Bachman Umpierre y Lilliam Bachman Umpierre. Enclava una casa de
hormigon un ranchon para peones y otras estructuras y cercas."
C. Landlord hereby authorizes and empowers Tenant to take at Tenant's cost
such action as might be necessary in order to segregate the Reserved Area from
the Demised Premises in order that such Reserved Area becomes a separate and
independent
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parcel of land for purposes of the Registry of the Property of Puerto Rico. In
relation therewith, Landlord hereby empowers the Tenant to file at Tenant's Cost
and on behalf of Landlord with the governmental agencies and departments having
jurisdiction, any and all requests or petitions proper or necessary to
accomplish such purpose. Upon the issuance of the corresponding segregation
permit, the Landlord agrees to execute a deed of segregation, at no cost to
Landlord, in order to record such subdivision in the Registry of the Property of
Puerto Rico. Once such segregation has been finalized, the Demised Premises
shall be deemed to exclude the "Reserved Area". Within ten (10) business days
from the date such segregation permit is obtained, the parties hereto agree to
execute a deed of segregation of land so that the Reserved Area and the Demised
Premises may be recorded as separate and independent properties and the Reserved
Area be excluded of record from this Lease.
D. Landlord agrees that the Reserved Area is to be used by them, their
immediate family and invitees solely for residential and recreational purposes
and that no commercial activity shall be allowed therein. Landlord shall not
carry out or permit others to carry out any activity in the Reserved Area which
might be detrimental to the use of the Demised Premises by tenant for the
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purposes stated herein, or which shall interfere with Tenant's rights to
peacefully enjoy and occupy the Demised Premises. Landlord shall take such
action as might be necessary in order that no pets, animals or livestock owned
or controlled by Landlord be allowed into the Demised Premises. Any construction
made by Landlord in the Reserved Area shall not exceed two stories in height and
shall be adequately maintained and landscaped by Landlord. Tenant, at its
option, may construct a fence around the Reserved Area.
Two: Term and Duration:
A. The initial term of this lease (hereinafter the "Initial Term") shall
be for a period of thirty two (32) years commencing (hereinafter the
"Commencement Date") on December first nineteen hundred and ninety (1990).
Notwithstanding the aforesaid, in the event that Tenant fails to acquire
from the government of the Commonwealth of Puerto Rico, title to the real
properties located at Fajardo, Puerto Rico comprising the former El Conquistador
Hotel (hereinafter the "Hotel Properties") on or before January thirty one (31),
nineteen hundred ninety one (1991), then, unless the parties hereto extend such
term, this agreement shall be left without effect and without further liability
to any of the parties hereto. Notwithstanding the
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provisions of paragraph Three (B) of this Agreement, the rent for the first two
months of this contract shall not become due and payable until February first
(1st), Nineteen Hundred Ninety One (1991) and then only if Tenant acquires title
to the Hotel Properties on/or before January thirty one (31), nineteen hundred
ninety one (1991).
B. Tenant shall have the option to extend this Lease on the same terms and
conditions as stated herein, for two additional consecutive five year periods.
The first five year extended period (hereinafter the "First Extended Term")
shall commence immediately upon the expiration of the Initial Term and the
second five year extended period (hereinafter the "Second Extended Term") shall
commence immediately upon the expiration of the First Extended Terms.
C. Tenant shall be deemed to have exercised its right and option to extend
the term of this Lease in the manner indicated above, unless Tenant (i) at least
one year prior to the expiration of the Initial Term, notifies Landlord of its
intention not to extend the same, in which case this Lease shall terminate upon
the expiration of the Initial Term, or (ii) at least one hundred and eighty days
prior to the expiration of the First Extended Term, notifies Landlord of its
intention not to further extend the Lease, in which
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case this Lease shall terminate upon the expiration of the First Extended Term.
D. Unless Tenant exercises its right and option not to extend the term of
this Lease for the First Extended Term, it shall pay to Landlord as additional
consideration, the lump sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) which
shall become due and payable not later than fifteen days from the date of
commencement of the First Extended Term. Unless Tenant exercises its option not
to extend the term of this lease for the period comprised in the Second Extended
Term, it shall pay Landlord as additional consideration the lump sum of SEVENTY
FIVE THOUSAND DOLLARS ($75,000.00), which sum shall become due and payable not
later than fifteen days from the date of commencement of the Second Extended
Term.
Three: Basic or Fixed Rent:
A. Tenant covenants and agrees to pay to Landlord at the address mentioned
on paragraph Twenty Seven, or at such other place or places as Landlord shall
from time to time designate in writing, for and throughout each Lease Year (as
defined hereinafter) of this Lease, without demand or deduction, except to cure
any default by Landlord or as in this Lease otherwise specifically provided, a
net annual basic rental (hereinafter
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sometimes referred to as the "Annual Basic Rent") in addition to and above all
the other sums and all other and additional payments to be made and paid by
Tenant to Landlord as set forth in this Lease, as follows:
(i) From the Commencement Date of this lease and thereafter during the
first consecutive seventeen months, a monthly Rent of three thousand three
hundred thirty three dollars ($3,333.00), payable in advance on the first day of
each month.
(ii) Commencing on the eighteenth month of this Lease and thereafter
during the next six months, a monthly rent of fifteen thousand dollars
($15,000.00) per month, payable in advance on the first day of each month.
(iii) Commencing on the first day of the third Lease Year and thereafter
during the next five consecutive Lease Years, an Annual Basic Rent of ONE
HUNDRED EIGHTY THOUSAND DOLLARS ($180,000.00).
(iv) Commencing on the first day of the eighth (8) Lease Year and
thereafter during the next five (5) consecutive Lease Years, an Annual Basic
Rent of TWO HUNDRED AND TEN THOUSAND DOLLARS ($210,000.00).
(v) Commencing on the first day of the thirteenth Lease Year and
thereafter during the next five consecutive Lease Years
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an Annual Basic Rent of TWO HUNDRED FORTY THOUSAND DOLLARS ($240,000.00).
(vi) Commencing on the first day of the eighteenth Lease Year and
thereafter during the next five consecutive Lease Years an Annual Basic Rent of
TWO HUNDRED SEVENTY THOUSAND DOLLARS ($270,000.00).
(vii) Commencing on the first day of the twenty third Lease Year and
thereafter during the next five consecutive Lease Years an Annual Basic Rent of
THREE HUNDRED THOUSAND DOLLARS ($300,000.00).
(viii) Commencing on the first day of the twenty eighth Lease Year and
thereafter during the next five consecutive Lease Years an Annual Basic Rent of
THREE HUNDRED THIRTY THOUSAND DOLLARS ($330,000.00).
(ix) If Tenant exercises its option to extend the term of this Lease, an
Annual Basic Rent of THREE HUNDRED SIXTY THOUSAND DOLLARS ($360,000.00) per year
during the First Extended Term and THREE HUNDRED NINETY THOUSAND DOLLARS
($390,000.00) per year during the Second Extended Term.
The term Lease Year is defined to mean each period of twelve consecutive
calendar months during the term hereof,
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commencing on the Commencement Date and on each anniversary thereafter.
B. The Annual Basic Rent shall be paid in equal consecutive monthly
installments payable in advance on or before the first day of each calendar
month. Any installment of Basic Rent not paid on/or before the fifteenth (15th)
day of each month, shall accrue interest at the rate of ten (10%) per cent per
annum from its due date until payment thereof. Such interest shall become
payable on the fifteenth day of the following month.
C. It is agreed that there shall be no abatement or apportionment at any
time of any rents or any other sums, amounts, payments or impositions to be paid
by Tenant under any of the terms, covenants, conditions, provisions of this
Lease except to cure a default by Landlord or as is otherwise specifically
provided in this Lease.
D. Tenant covenants to pay to Landlord the Annual Basic Rent and all other
sums and additional payments to be made by Tenant hereunder, at the times and in
the manner in this Lease provided, all of which rent, sums and payments are to
be paid in lawful money of the United States of America, which shall be legal
tender in payment of all debts and dues, public or private, at the time of
payment, or by good check without any deduction,
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diminution, abatement, or rebate of whatsoever kind, nature, and description,
except to cure a default by Landlord or as otherwise specifically provided in
this Lease.
Four: Use and Occupancy. Tenant may use and occupy the Demised Premises or
any portion or portions thereof for any and all lawful recreation, hotel and
tourism related purpose(s) and any use ancillary thereto or ancillary to the
operation of the Hotel Properties.
Five: Assignment and Subletting: Tenant shall have the right, at any time
and from time to time, both to assign its interest in this Lease, or to sublet
the whole or any portion or portions of the Demised Premises for the use and
purposes permitted under this Lease, but no such assignment or subletting shall
release Tenant's obligations hereunder, unless Landlord specifically consents to
such release in writing, which consent shall not be unreasonably denied provided
the assignee is an entity of equal or better financial solvency than Tenant.
Six: Taxes and Assessments:
A. Tenant covenants and agrees to pay from the Commencement Date and
throughout the duration of this Lease and before any fine, penalty, or costs
shall be added thereto for nonpayment thereof, all real estate taxes assessed
upon the
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Demised Premises let to and occupied by Tenant, and all structures erected
therein, which are assessed and become due and payable during the term hereof,
and which pertain to the term of this Lease, when they shall respectively become
due and payable. Notwithstanding the foregoing, Tenant shall not be chargeable
with nor obligated to pay any real property tax assessed prior to the
Commencement Date, any income, inheritance, devolution, gift, franchise,
corporate, gross receipts, capital levy, or estate tax, which may be at any time
levied or assessed against, or become a lien upon, the Demised Premises or the
rents payable hereunder, but Landlord at its own costs and expense, covenants
and warrants to discharge same so as to keep the Demised Premises free of all
such liens, it being the intent hereof that Tenant shall be required to pay only
such taxes, governmental impositions and assessments as are properly known as
real estate taxes or real estate assessments and are assessed against the real
estate (inclusive of the buildings and improvements thereof) as such.
Written evidence of the payment of said taxes, governmental impositions,
special assessments, levy, or general assessments (all of which may sometimes
collectively be referred to in this Lease as "impositions" or "Impositions")
shall be furnished by Tenant to Landlord within thirty (30) days after
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payment thereof. However, it is expressly understood and agreed that if any
assessments, special and/or general, are assessed or levied against the Demised
Premises during such time as this Lease is in force and effect and payment
thereof is permitted or provided to be made in installments over a period of
years, Tenant shall be obligated to pay only those installments which become due
and are required to be paid during such time as this lease is in force and
effect. If any such installment covers a time period prior to the expiration of
this Lease, such installment shall be apportioned among the parties as of the
expiration date of this Lease. Likewise, if a regular real estate tax assessment
is made for a particular fiscal year during the term of this Lease, but which
does not become payable until after the expiration of this Lease, the amount of
such tax shall be apportioned among the parties as of the date of expiration of
this Lease. If, however, Tenant, in good faith, shall desire to contest the
validity or amount of any tax, governmental imposition, levy, or special or
general assessment herein agreed to be paid by it, Tenant shall notify Landlord
in writing of its intention to contest the same, and Tenant shall not be
required to pay, discharge, or remove such tax, governmental imposition, levy,
or special or general assessment so long as it shall, in good faith, at its own
expense, contest the same or the
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validity thereof by appropriate proceedings, in the name of Landlord, if
necessary; and pending any such proceedings, Landlord shall not pay, remove, or
discharge any such tax, governmental imposition, levy, or special or general
assessment thereby contested, and such delay of Tenant in paying the same until
final determination of such disputed matter shall not be deemed a default under
the terms and conditions of this Lease, but if such delay exposes said property
to sale for such nonpayment, Tenant shall pay, under protest, reserving Tenant's
rights hereunder, any such tax, governmental imposition, levy, or special or
general assessment, and if Tenant fails to pay, Landlord shall have the right to
do so after ten day notice to Tenant, and upon such payment by Landlord, under
protest, Tenant shall, immediately after proof of such payment shall have been
submitted to it by Landlord, and on demand therefor, pay Landlord the amount of
any such payment so made by Landlord. Tenant shall have the right, if permitted
by law, to pay under protest any Impositions and reserve its right under this
Lease. Landlord shall cooperate with Tenant at no cost to Landlord in any tax
contest or proceeding.
B. Landlord further covenants and agrees that if there shall be any
refunds or rebates on account of any tax,
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governmental imposition, levy, or special or general assessments paid by Tenant
under the provisions of this Lease, such refund or rebate shall belong to
Tenant, unless such refund or rebate relates to a payment previously made by
Landlord. Any such refunds or rebates which shall be received by Landlord shall
be trust funds and shall be forthwith paid to Tenant.
C. Except as otherwise specified in this Lease, the real estate taxes,
governmental impositions, special assessments, and general assessments for the
respective tax fiscal years in which this Lease shall commence and terminate,
and whether or not the same have become liens upon the Demised Premises, shall
be apportioned at the Commencement Date and at the date of final termination
respectively, so that Tenant shall pay only those portions thereof which
correspond with the portions of said respective fiscal years as are within the
term hereby leased.
D. If a separate tax assessment is not then in effect for the Reserved
Area, including any structure erected therein, then the parties hereto shall
endeavor to establish in good faith a relative value among the Reserved Area and
the Demised Premises in order to distribute equitably among Landlord and Tenant
the resulting real property tax. If no such agreement is achieved, the parties
agree that the Reserved Area represents ten percent (10%)
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of the total land tax currently assessed upon the Demised Premises. Landlord
further agrees that Tenant may deduct the portion of the real estate tax
corresponding to the area reserved to Landlord, from the Annual Basic Rent and
pay the same over to the corresponding taxing authority.
Seven: Tax Exemption. Tenant agrees that it shall request from the
corresponding governmental authorities that the benefits granted under the
provisions of the Tourism Incentives Act [Act Fifty Two (52) of June second
(2nd), nineteen eighty three (1983)] as amended, or if such Act is no longer in
effect, then under any substitute statute providing for similar benefits; be
extended to Tenant's operations at the Demised Premises. Tenant further agrees
that, it shall also request that landlord's tax exemption benefits under the
terms of Act Fifty Two (52) or any substitute statute then in effect, be
extended to Landlord as owner of real property used in tourism development
activities.
If during the Twenty First Lease Year (i) Tenant is not enjoying the
benefits granted under the Tourism Incentives Act [Act fifty two (52) of June
second (2nd) nineteen eighty three (1983)], as amended, or if such Act is no
longer in effect, then under any substitute statute providing for similar
benefits, or if during the Twentieth Lease Year Tenant has been unable to renew
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or extend the benefits of Act fifty two (52) of June second (2nd) nineteen
eighty three (1983) and as a result Landlord is unable to enjoy the benefits of
such Act of any other substitute Act providing for similar benefits, or (ii) if
for reasons not attributable to Landlord the government refuses to grant to
Landlord tax exemption under said Act or any substitute thereof, after the
Twentieth Lease Year; then commencing on the Twenty First Lease Year, and
thereafter, for the remainder of the Initial Term and any extension thereto, as
long as Landlord is not enjoying tax exemption hereunder, the amount of Annual
Basic Rent indicated on paragraph THREE shall be increased by the sum of FIFTEEN
THOUSAND DOLLARS ($15,000.00). Provided further that in the event Tenant is
required to increase the Annual Basic Rent for the said amount of Fifteen
Thousand Dollars ($15,000.00), then Tenant may during the Twenty First Lease
Year, at its option, terminate this Lease.
Eight: Liability Insurance:
A. Tenants covenants and agrees, at its sole cost and expense, and
throughout the duration of this Lease, to obtain, keep, and maintain in full
force and effect comprehensive liability insurance against claims for damage to
persons or property arising out of the use and occupancy of the Demised
Premises, or any part
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thereof, by Tenant, including damages resulting from construction or demolition
work carried out by Tenant, in amounts which are usual and customary in the
hotel industry, but in no event less than One Million Dollars ($1,000,000) in
respect to bodily injury or death to any one person in any one accident, and in
limits of not less than Three Million ($3,000,000) Dollars in respect to bodily
injury or death to more than one person in any one accident, and in limits of
not less than FIVE HUNDRED THOUSAND DOLLARS ($500,000.00) with respect to
damages to property of third parties. Tenant shall revise such insurance
coverage from time to time at its prudent discretion to reflect cost of living
increases and customary practices in the hotel industry. A duplicate original,
certificate, or binder of such insurance shall be furnished to Landlord, at the
commencement of the term of this Lease and each renewal certificate of such
policy shall be furnished to Landlord at least fifteen (15) days prior to the
expiration of the policy it renews. Landlord shall be an "Additional Named
Insured" in any such policy.
B. All insurance provided for herein may be in the form of a general
coverage, floater policy or so-called blanket policies and may be furnished by
Tenant, or any affiliates of Tenant or any related entity, Tenant's written
designee(s) or
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sublessee(s) designated in writing by Tenant or by any holder of any mortgage
referred to in Paragraph Seventeen hereof. The liability coverage set forth in
this Paragraph shall be issued by insurers of recognized responsibility. All
insurance provided for herein shall contain a thirty (30) day previous notice of
cancellation provision in favor of Landlord.
C. In the event Tenant fails to cause the aforesaid insurance policies to
be written and pay the premiums for the same and deliver all such certificates
of insurance or duplicate originals thereof to Landlord, Landlord shall
nevertheless have the right, without being obligated to do so, to effect such
insurance and pay the premiums therefor, after 10 days notice to Tenant, and all
such premiums paid by Landlord shall be repaid to Landlord on demand.
Nine: Casualty Insurance:
A. Tenant covenants that it will, during the term of this Lease, keep or
cause to be kept the building(s) and improvements on the Demised Premises
insured with a responsible and reputable insurance company or companies against
loss or damage by fire, earthquake and windstorm, and such other hazards as are
currently embraced in the standard extended coverage endorsement in the
jurisdiction where the Demised Premises are located, and in an
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amount equal to Eighty percent (80%) of the full insurable value of said
buildings and improvements, or the full replacement value thereof, whichever
Tenant shall elect, but in any event in an amount sufficient to prevent Tenant
from becoming co-insurer. The insurance policies shall contain the standard
mortgagee endorsement, including Landlord as additional loss payee, but
subordinate to the prior rights of the mortgagees referenced in paragraph
SEVENTEEN hereof.
B. All insurance policies carried or caused to be carried by Tenant shall
be issued in the name of Tenant and any subtenant(s) of the Demised Premises it
designates), the Landlord, and the mortgagee(s) referred to in Paragraph
Seventeen, as their respective interests may appear. Tenant shall have the right
to make all adjustments of loss, and execute all proofs of loss in its name.
Subject to any loss payable endorsements in favor of any of the mortgagee(s)
referred to in Paragraph Seventeen hereof, if so required by said mortgagee(s),
and subject to the rights (if any) of such mortgagee(s) to apply the proceeds of
any insurance loss(es) towards the repayment of the indebtedness and interest
secured by such mortgage(s) and the rights of such mortgagee(s) to receive the
proceeds in the first instance in order to have the
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same applied for restoring, rebuilding, and repairing, the proceeds of such
insurance in case of loss(es) shall be payable to Tenant.
Ten: Waiver of Subrogation:
All insurance policies carried by either party covering the Demised
Premises, including but not limited to contents, fire, casualty, and other
insurance, shall expressly waive any right of the insurer against the other
party and the mortgagees described in Paragraph Seventeen hereof. The parties
hereto agree that the insurance policies referenced herein will include such
waiver clause or endorsement so long as the same shall be obtainable without
extra cost, or if extra cost shall be charged therefor, so long as the other
party pays such extra cost. If extra cost shall be chargeable therefor, each
party shall advise the other thereof and of the amount of the extra cost and the
other party, at its election, may pay the same, but shall not be obligated to do
so.
Eleven: Damage and Destruction Clause:
Should the whole or any part or parts of the improvements erected by
Tenant or its sublessee or assignee then on the Demised Premises be partially or
wholly damaged or destroyed by fire or other insured casualty after the
commencement of this Lease, such destruction or damage shall not operate to
terminate this Lease, but this Lease shall continue in full force and effect,
except as
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otherwise provided in this Lease. Tenant, at its own cost and expense, shall
have the option to restore, rebuild or repair said building(s) and improvements
provided, however, that should such damage or destruction be extensive and
occurs within fifteen (15) years before the end of this Lease, subject to the
written approval of the holder(s) of the mortgages described in Paragraph
Seventeen hereof, Tenant shall thereupon have the option of canceling and
terminating this Lease on giving Landlord sixty (60) days' written notice of
Tenant's intention to do so. If Tenant elects to terminate this Lease in
accordance with the foregoing option, the insurance proceeds payable as a result
of such damage or destruction of said buildings or improvement shall be paid to
Tenant, subject to the rights and interests of the holder(s) of the mortgage(s)
described in Paragraph Seventeen hereof.
Twelve: Indemnity:
A. Subject to the provisions of this Lease, Tenant covenants and agrees
that from and after the commencement of the Initial Term of this Lease and
during any renewal or extension thereof, Landlord shall not be liable or
responsible for damages for any personal injury or injuries, death(s), damages,
or losses to any person(s) or property that may be suffered or sustained by
Tenant or subtenant(s) or any of their respective agents, servants,
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employees, patrons, customers, invitees, visitors, licensees, and
concessionaires or by any other person or persons in, the Demised Premises, the
Reserved Area, or any part thereof, arising from Tenant's failure to keep or
cause to be kept the Demised Premises in good condition and repair, or arising
or resulting from the use or occupancy of the Demised Premises by Tenant or
subtenant(s) or any of their respective agents, servants, employees, patrons,
customers, invitees, visitors, licensees, and concessionaires.
B. Tenant covenants and agrees to indemnify and save Landlord harmless
from and against any and all liability, costs and expenses for damages, losses,
injuries, or death to persons or damages or losses to property which may be
imposed upon or incurred by or asserted against Landlord as to any of the
matters, provisions and conditions set forth in subparagraph A of this Paragraph
Twelve, except as to those matters which Landlord has obligation(s) or any
liability under this Lease, including without limitation thereof, the negligence
of Landlord by acts of commission or omission, or damages sustained by Landlord
its agents or invitees occurring within the areas occupied by Landlord.
Thirteen: Construction of Buildings and Improvements.
A. Subject to the conditions and limitations contained herein, Tenant
shall have the option and right at all times during
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the term of this Lease to build, construct and erect structures and betterments
on the Demised Premises in the manner indicated herein, and to do, install or
perform any improvement or betterment therein. Subject to the conditions and
limitations contained herein, Tenant is likewise authorized to demolish, remove
or substitute any structure now or in the future existing in the Demised
Premises, and perform such landscaping, land movement, and other land or soil
preparation work it considers appropriate. The number of structures and extent
of such construction shall be in substantial conformity with the general
description of improvements to be done by Tenant as referred to in this
paragraph Thirteen, and in substantial conformity with the location of such
improvements as appears on the plan identified as Isla Palominos Plan, prepared
by Ray, Melendez & Associates, (the "Master Plan"), (except for light structures
and shelters to enclose sanitary facilities, whether shelters, overlooks, bars,
refreshment and snack and light grill facilities, utilities, and facilities
related to such utilities, which are not necessarily shown in the Master Plan
and which Tenant may construct outside of the general construction boundaries
shown on said Master Plan), a copy of which Master Plan is attached to this
deed, and provided further that the aggregate enclosed construction area of all
enclosed
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structures to be erected by Tenant shall not exceed Thirty Five Thousand square
feet (35,000 sq. ft.). The parties recognize the improvements shown in the
Master Plan and/or described herein are general in nature and may suffer
modifications from time to time. Likewise, the exact location, shape and size of
the improvements shown in the Master Plan is illustrative only and it is
recognized by the parties hereto to be preliminary in nature and may be subject
to modifications by Tenant from time to time. Any such modification may be
carried out by Tenant without the prior consent of Landlord provided such
modification does not change the intended use of the proposed structure(s), or
consists merely of a change in location within the general construction
boundaries in the South portion of the Demised Premises as shown in the Master
Plan or a change in the shape of any such structure, or does not substantially
increase the area to be constructed. Notwithstanding the aforesaid, Tenant
agrees that it shall not construct more than twenty single, two story or split
level cottages to house honeymoon suites and rooms, that the area of each
individual cottage shall not exceed Nine Hundred square feet (900 sq. ft.), and
that the location of such single, two story or split level cottages shall be
within the general area comprising the southeast portion of the Demised Premises
as indicated in the Master Plan. If Tenant
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wishes to make any substantial or major modification to the description of
improvements or the structures shown on the aforesaid plan, which modification
would result in a major increase in density or in an increase on the number of
structures to be constructed or in the area of such structures in an amount
which would be in excess of over twenty percent of the number or area of the
structures shown in said Plan, or allowed hereinunder, or if Tenant wishes to
construct more than twenty single, two story or split level cottages to house
honeymoon suites and rooms, or if Tenant wishes to construct other facilities
not related to the purposes and uses of the Demised Premises as stated herein,
then in any such event, Tenant shall obtain Landlord's prior consent before
doing any such modification or construction. It is agreed that with regards to
the construction of additional facilities related to the purposes and uses of
the Demised Premises as stated herein, Landlord shall not withhold its consent
unreasonably, except that Landlord may refuse to grant its consent for any
reason to (i) the construction of more than twenty single, two story or split
level cottages to house honeymoon suites or rooms, and (ii) any construction
outside the boundaries of the general construction boundaries shown in the
Master Plan except for the light structure and shelters indicated above.
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B. If Tenant at any time or times during the initial term of this lease,
or any renewal or extension thereof, shall construct any building, buildings,
structures, or improvements on the Demised Premises, or any part or parts
thereof, the same shall be constructed without cost or expense to Landlord, in
accordance with the requirements of all laws, ordinances, codes, orders, rules,
and regulations of all governmental authorities having jurisdiction over the
Demised Premises. The issuance of certificates of occupancy or equivalent use
certificates shall be deemed "prima facie" evidence as to such compliance.
C. Tenant, at its own cost and expense, shall have the right to apply for
and prosecute with reasonable diligence, all necessary permits and licenses
required for the construction of any and all improvements authorized to be
constructed herein. Landlord, without cost or expenses to themselves, shall
cooperate with Tenant in securing location permits, building and other permits
and authorizations necessary from time to time for the performance of any
construction, alteration(s) or other work permitted to be done by tenant under
this Lease.
D. Prior to commencing construction of any building(s) or improvements
which are estimated by Tenant to have a construction cost of seventy five
thousand dollars or more, Tenant,
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without cost to Landlord, shall obtain from the general contractor in charge of
construction of any building(s) and improvements a performance bond, and a labor
and material payment bond, in the amount of the estimated cost of same issued by
a reputable surety company licensed to do business in the Commonwealth of Puerto
Rico guaranteeing the completion of said building(s) and improvements and
payment of all costs therefor and incident thereto, or in some instances, at
Landlord's option, to furnish to the Landlord a surety bond naming the Landlord
and the Mortgagee(s) mentioned in paragraph Seventeen as additional
beneficiaries thereunder, as their interest may appear. Tenant shall require
from any such general contractor a liability policy naming Landlord additional
insured and additional beneficiary under the contractor's hold harmless
agreement.
E. Tenant may carry out construction in the Demised Premises in different
phases which might extend throughout the duration of this Lease, together with
any extensions thereto. Tenant will endeavor to commence the first phase of
construction within the first two Lease Years.
F. Tenant agrees that the structures to house honeymoon rooms and suites
are to be erected in the southeast
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portion of the Demised Premises within the general area designated in the Master
Plan attached to the first certified copy of this deed.
G. Title to all improvements, structures, fixtures and betterments made,
constructed or installed by Tenant on the Demised Premises shall belong to and
remain with Tenant throughout the duration of this Lease, including all
extensions hereto and Tenant shall have the right to take all depreciation
expense arising therefrom. All improvements consisting of personal property may
be removed by Tenant at any time during the term of this Lease or at the
termination thereof.
H. As long as Tenant determines that a particular structure, building or
improvement is adequate or proper for its operations, it shall cause that the
same be maintained in good operating condition.
I. Upon the expiration of this Lease together with all extensions hereto,
or upon its termination for any cause, and upon Tenant surrendering the Demised
Premises to Landlord, title to all buildings, structures and other improvements
of a permanent or fixed nature constructed by Tenant during the term of this
Lease, shall automatically be transferred and conveyed to Landlord, free and
clear of liens and encumbrances, at no cost to Landlord.
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J. Tenant is currently considering constructing on the Demised Premises
certain buildings, structures and improvements of a permanent or fixed nature
consisting, in general terms of the following: (i) enclosed support facilities
such as a lounge, a restaurant, bars, meeting areas, kitchen, service and
storage areas, sanitary facilities, passenger shelter in the marina and marina
service building, (ii) open area facilities such as swimming pool, terraces,
walkways, paths, and service roads, (iii) community support facilities such as
communication center, sewer treatment plan, water storage tanks, electricity
generators, windmills, desalination plants, lighting facilities, (iv)
recreational facilities such as playground facilities including tennis and other
sport courts, floating docks for water sport vehicles and marina pier, and
others of similar nature and (v) not more than twenty single two story or split
level structures for honeymoon suites and guest rooms with an enclosed
construction area not to exceed nine hundred square feet (900 sq. ft.) each.
Tenant will consult with Landlord prior to constructing additional facilities
not included in the aforesaid general description and Tenant shall submit for
Landlord's approval subject to and in accordance with the provisions of
paragraph Thirteen (A) hereof, copies of all site plans and development plans
for all such additional facilities.
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L. All structures, buildings and improvements will be used by Tenant as
part of its hotel, tourism and recreational operations.
Fourteen. Temporary Occupation by Landlord and Relocation of Landlord:
a) Landlord agrees that not later than seventeen (17) months from the
Commencement Date of this Lease it shall remove all of its personal belongings
from the Demised Premises and transfer them to the Reserved Area, and shall turn
over to Tenant all the structures and facilities existing on the Demised
Premises and being currently occupied by Landlord, in order that Tenant may take
possession of all of the Demised Premises including all existing structures, and
be able to commence uninterrupted construction and/or demolishing work on the
Demised Premises. Tenant is authorized to demolish any and all existing
structures on the Demised Premises.
b) Until Landlord vacates and surrenders to Tenant all the areas and
structures occupied by Landlord in the Demised Premises, Landlord shall obtain
at its own cost and expense liability insurance against claims for damages to
persons or property arising out of Landlord's use or occupancy of the Demised
Premises in limits of not less than one million dollars in
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respect to bodily injury or death to one person and three million dollars in the
aggregate for any one accident. Such policy to be issued by reputable insurance
company licensed to do business in Puerto Rico and shall name Tenant as
additional insured and loss payee. Landlord shall provide Tenant with a
certificate of insurance providing for such coverage within ten (10) days from
the execution of this Lease, as well as a certificate of insurance upon renewal
of such policy. Upon Landlord's failure to obtain such coverage, Tenant may, but
shall not be required to obtain such coverage for the account and at the cost of
Landlord.
c) The indemnity provisions of this agreement in favor of Landlord shall
not become effective until Landlord vacates the Demised Premises. Tenant shall
not be liable to Landlord, its agents, employees or invitees for any damage,
loss or injury while Landlord, its agents, employees and invitees are occupying
the Demised Premises or any portion thereof. Until Landlord surrenders the
Demised Premises to Tenant, Landlord shall indemnify and make Tenant harmless
against any loss, damage or expense arising from any action related to or as a
consequence of Landlord's occupancy of the Demised Premises.
d) Landlord may visit the Demised Premises during construction, provided
Landlord gives Tenant reasonable prior
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notice, such visit is made during working hours, does not interrupt construction
work, and Landlord is accompanied by Tenant's agents. During any such visit
Landlord shall abide by all safety precautions and regulations imposed by Tenant
or its contractors. In no event shall Landlord enter into the Demised Premises
without the safety equipment required from all Tenant's contractors,
subcontractors, agents, and employees, and without being accompanied by an
authorized representative of Tenant.
e) During the initial seventeen months of this Agreement, Tenant shall
have access to the Demised Premises with the exception of the dwelling units
then being occupied by Landlord. Such access shall be for the purpose of
conducting soil tests, measurements, preparation of plans, studies and
inspections. In addition to the aforesaid, Tenant shall have the right to
commence construction work in the Demised Premises but only in areas
sufficiently separated from the dwelling units being occupied by Landlord in
order to reasonably avoid any discomfort or hazard to Landlord and Landlord's
invitees. In carrying out such work Tenant shall take all proper safety
precautions to avoid unsafe or hazardous conditions for Landlord and it's
invitees. Tenant shall in addition endeavor to carry out such work during
regular business days only. More specifically, Tenant may commence
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work on planned walkways and trails, landscaping, power generation plan and
windmills, water supply, sewers and treatment plant and electric distribution
facilities. Should Tenant need to commence work in other areas, or perform any
work during any weekend or holidays, it will coordinate with Landlord prior to
the commencement of such work. After the initial seventeen months (or sooner if
Landlord vacates the Demised Premises prior to the end of the initial seventeen
months), Tenant may carry out any other construction and demolition work
authorized hereunder.
Fifteen: Access by Landlord: During the term of this Lease, provided
construction work is not then in progress, Landlord shall have during business
hours access to those areas of the Demised Premises which are then open to
Tenant's guests and visitors in general. Such access shall be restricted in the
same terms and conditions and subject to the same rules of conduct as any other
guest or invitee of Tenant.
Sixteen: Compliance with Laws:
A. Tenant covenants and agrees that during the term of this Lease and any
renewals or extensions thereof, it shall endeavor to promptly comply with all
applicable laws, ordinances, orders, rules, regulations, and requirements of the
Federal,
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Commonwealth, and Municipal Governments having jurisdiction over the Demised
Premises.
B. Tenant shall have the right, after prior written notice to Landlord, to
contest by appropriate legal proceedings which shall be conducted diligently and
in good faith in the name of Landlord or Tenant or both the applicability of any
law, ordinance, order, rule, or regulation of the nature hereinabove referred to
in Paragraph Sixteen A(16A), and Tenant shall have the right to delay observance
thereof and compliance therewith until such contest is finally determined and is
no longer subject to appeal, provided that observance and compliance therewith
pending the prosecution of such proceeding may be legally delayed without
subjecting Landlord to any liability or fine.
Seventeen: Leasehold Financing: Tenant and Tenant's assigns (but not
Tenant's sublessees of less than the totality of the Demised Premises) shall
have the absolute right, at any time and from time to time, to mortgage the
leasehold interest (derecho de arrendamiento) herein demised on such terms,
conditions, and maturities, not to exceed the term of the Lease (together with
all extensions thereto), as Tenant or Tenant's assigns shall determine, and to
enter into any and all extensions, modifications, amendments, replacement(s),
and refinancing(s) of any such
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leasehold mortgage as Tenant may desire provided that no leasehold mortgage
shall extend beyond the term of this Lease together with any extension thereto.
It is the intention of the parties that any leasehold mortgage to be constituted
by tenant or its assigns be constituted upon the leasehold estate as a whole and
not upon subleases or concessions of a portion of the Demised Premises.
Accordingly, if Tenant enters into any sublease of a portion of the Demised
Premises or grants a concession for the use of a particular structure or
improvement erected therein, such sublease or concessionaire may not mortgage
his subcontract or concession agreement separate or independently from the
leasehold estate granted herein.
While Tenant is authorized to mortgage the leasehold interest created
herein, Tenant may not mortgage separately from such leasehold mortgage, the
individual structures to be constructed by Tenant in the Demised Premises.
If Tenant, or Tenant's successors or assigns, shall mortgage the leasehold
interest constituted herein, then, as long as any such leasehold mortgage shall
remain unsatisfied of record, the following provisions shall apply,
notwithstanding anything to the contrary contained in this Lease.
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(i) There shall be no voluntary cancellation, surrender, acceptance of
surrender, or modification of this Lease or attornment of any subtenant to
Landlord without the leasehold mortgage holder's prior written consent.
(ii) If the holder of any mortgage on the leasehold estate constituted
herein shall register with Landlord his or its name and address in writing,
Landlord, on serving on Tenant any notice of default or any other notice
pursuant to the provisions of, or with respect to, this Lease, shall at the same
time serve a duplicate counterpart of such notice on the holder of the then
existing mortgage on this leasehold interest by Registered Mail, return receipt
requested, addressed to said holder at the address registered with Landlord, and
no notice by Landlord to Tenant hereunder shall be deemed to have been duly
given to Tenant unless and until such duplicate counterpart thereof has been so
served on the holder of the leasehold mortgage.
(iii) Such holder of the leasehold mortgage, in the event Tenant shall be
in default hereunder shall have the right, within the period and otherwise as
herein provided, to remedy or cause to be remedied such default, and Landlord
shall accept such performance by or at the instigation of such leasehold
mortgage holder as if the same had been performed by Tenant. No default by
Tenant in
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performing work required to be performed, acts to be done, or conditions to be
remedied, shall be deemed to exist, if steps, in good faith, shall have been
promptly commenced by Tenant or by said leasehold mortgage holder or by any
other party, person, or entity to rectify the same and prosecuted to completion
with diligence and continuity, subject to force majeure (Such diligent exercise
of rights being referred to as the "Diligence Requirements").
(iv) Anything herein contained to the contrary notwithstanding, during
such time as the leasehold mortgage remains unsatisfied of record, if an event
or events shall occur which shall entitle Landlord to terminate this Lease, and
if before the expiration of sixty (60) days after the date of service of notice
of termination under this Lease such holder of the leasehold mortgage shall have
paid to Landlord all rent and additional rent and other payments herein provided
for then in default, and shall have complied with or shall be engaged in the
work of complying with all the Diligence Requirements in respect to the other
requirements of this Lease, if any, then in default, then landlord shall not be
entitled to terminate this Lease and any notice of termination theretofore given
shall be void and of no effect, provided, however, that nothing herein contained
shall in any way
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affect, diminish, or impair Landlord's right to terminate this Lease if such
default is not cured within said sixty (60) day period or in the process of
being cured pursuant to the Diligence Requirements.
(v) In the event Landlord wishes to terminate this Lease before the
natural expiration of the term hereof whether by summary dispossession
proceedings, service of notice to terminate, or otherwise, due to Tenant's
default, as a condition precedent to such termination, Landlord shall by
Registered Mail, Return Receipt Requested, serve on the holder(s) of the then
existing leasehold mortgage(s) written notice of such termination, together with
a statement of any and all sums which would at that time be due under this Lease
but for such termination, and of all other defaults, if any, under this Lease
then known to Landlord.
Such holder(s) of the leasehold mortgage(s) shall, after having paid to
Landlord all rent and additional rent and other payments herein provided for
then in default, and having complied, or be engaged in complying will all
Diligence Requirements, or upon foreclosure of the leasehold mortgage(s), have
the option to obtain a direct lease with Landlord in accordance with and on the
following terms and conditions:
(a) On the written request of the holder(s) of the said leasehold
mortgage(s), within sixty (60) days after service of the
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aforementioned notice of termination, or upon foreclosure of the leasehold
mortgage(s), Landlord shall enter into a new or direct Lease of the Demised
Premises with the holder of such leasehold mortgage, nor its designee, as
provided in the following Clause (b).
(b) Such new or direct Lease shall be entered into at the reasonable cost
of the holder of the leasehold mortgage, shall be effective as of the date of
termination of this Lease, and shall be for the remainder of the term of this
Lease, and at the rent and additional rent and on all the agreements, terms,
covenants, and conditions hereof, including without limitation hereof the
options to extend the term.
(vi) No holder(s) of any leasehold mortgage(s) shall be liable under this
Lease unless and until such leasehold mortgage holder shall become the owner of
the leasehold estate, and then only for as long as it remains such owner subject
to the provisions of this Lease. On any assignment of this Lease by any owner of
the leasehold estate whose interest shall have been acquired by, through, or
under any foreclosure of a leasehold mortgage or any transfer in lieu of
foreclosure, or shall have been derived immediately from any such mortgagee or
assignee of such mortgagee, the assignor shall be relieved of any further
liability
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which may accrue hereunder from and after the date of such assignment, it being
the intention of the parties that once the leasehold mortgage holder shall
succeed to Tenant's interest hereunder, any and all subsequent assignments,
whether by such holder, any purchaser at a foreclosure sale or other transferee,
or any assignee of either shall effect a release of the assignor's liability.
Landlord agrees to execute and deliver, on demand, but at the cost of the
assignor requesting the same, in recordable form, any instruments which may
reasonably be requested by such assignor to accomplish the aforesaid release,
but such release shall not extend to the original Tenant hereunder.
Eighteen: Condemnation:
A. If the entire Demised Premises or if the entire Hotel Premises be taken
by the exercise of the right of eminent domain for any public or quasi-public
improvement or use, this Lease and the term hereby granted shall, as a
consequence of such taking expire on the date when title to the Hotel Properties
or to the Demised Premises so taken shall vest in the appropriate authority or
on the date when any possession is required to be surrendered, whichever is
later.
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B. If so substantial a portion of the Demised Premises or of the Hotel
Properties or any building or improvements thereon shall be so taken as to make
same unusable in Tenant's opinion for the purposes to which the Demised Premises
or the Hotel Properties, as the case may be, shall then be devoted (or permitted
to be devoted hereunder), then Tenant shall have the right to cancel or
terminate this Lease on sixty (60) days written notice to landlord to be given
after the date when title to the portion(s) so taken shall vest in the
appropriate authority or, at Tenant's option, on the date physical possession is
required to be surrendered.
C. (i) In the event that an entire or partial taking of the Demised
Premises occurs during the first fifteen Lease Years, (provided that such taking
is not carried out for the benefit of Tenant, its affiliates, subsidiaries,
successors or assigns) Landlord and Tenant shall pursue, in their respective
individual and separate names and rights, unless otherwise required by law, such
remedies and make such claims as they may have against the authority exercising
such right of eminent domain or other lawful taking as if this Lease and the
term hereof had not expired (whether or not such expiration shall have occurred
on account of such taking) and for the purpose of determining the respective
rights and remedies of the parties, or for the purpose of an equitable
apportionment of
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the award for damages, Landlord shall be deemed to be the owner of the land
constituting the Demised Premises and Tenant shall be deemed to be the owner of
the buildings and all other improvements situated upon said Demised Premises.
The award of damages for such taking shall be apportioned between the parties on
equitable and just principles in accordance with said respective interests and
Tenant shall be entitled to that further award or portion of award for damages
to its leasehold and nonremovable fixtures or loss of value of its leasehold
(but in no event shall tenant be entitled to the diminution in value rent wise
of its leasehold). Rent shall be apportioned and adjusted and advance rent shall
be apportioned to the date title vests in the condemnor or the date possession
is required to be surrendered, whichever is later.
(ii) If such entire or partial taking occurs at any time after the initial
fifteen Lease Years, then for purposes of the apportionment of the award for
such taking, Landlord shall likewise be deemed to be the owner of the land
(including any landscaping thereon) constituting the Demised Premises, but shall
also be deemed to have (solely for these purposes) an interest in all
improvements, nonremovable fixtures and utilities equal to the amount of the
award attributable to such improvements,
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nonremovable fixtures and utilities multiplied by a fraction the denominator of
which shall be seventeen (17) and the numerator shall be the number of Lease
Years elapsed after the fifteenth Lease Year.
(iii) Notwithstanding the provisions of the preceding two paragraphs, if
the taking is carried out for the benefit of Tenant, its subsidiaries,
affiliates, successors or assigns, then Landlord shall be deemed to have (solely
for these purposes) an interest in the structures and fixed improvements
constructed by Tenant on the Demised Premises, equal to the amount of the award
for such taking attributable to such structures and fixed improvements,
multiplied by a fraction the denominator of which shall be thirty two (32) and
the numerator shall be the number of Lease Years (or portion of a Lease Year, if
more than six months have transpired of the then current Lease Year) elapsed
from the Commencement Date.
D. In the event of a partial taking of the Demised Premises, if Tenant
shall not cancel the Lease as hereinabove provided in subparagraph B, this Lease
shall not terminate, but the rental for the land constituting the Demised
Premises shall be reduced in proportion to the amount of land of the Demised
Premises taken and Tenant shall make such repairs or construction
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at its own cost and expense out of the award or portion of award to Tenant,
which in Tenant's judgment is made necessary due to such partial taking.
E. Landlord shall not be liable to Tenant for any damage suffered by
Tenant due to the cancellation of this Lease prior to its natural expiration
date by reason of any taking of the Demised Premises by any governmental
authority.
Nineteen: Fee Mortgages:
Landlord shall have the right to execute mortgages on its fee simple title
to the Demised Premises provided such mortgages are expressly made subject and
subordinate (a) to the provisions of this Lease and (b) to any easement
agreement or amendments thereof made by Landlord and Tenant as provided in this
Lease (whether made before or after the mortgage(s), and expressly provide that
such declaration of easements may be modified or terminated without the consent
of Landlord's mortgagee, (c) to any and all new or direct Leases which may be
made between a Landlord and the holder(s) of any Leasehold Mortgage(s) described
in paragraph Seventeen of this Lease, (d) the Landlord's mortgage by its terms
shall obligate the holder of such mortgage to execute promptly after request
therefor, in recordable form, subordination agreements in favor of such
leasehold mortgagees, and (e) the
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monthly installments of principal and interest under such mortgages becoming due
during the term of this Lease shall not exceed the installments of Annual Basic
Rent hereunder.
Twenty: Default Clauses:
A. If the Tenant shall default in the payment of any installment of basic
or additional rent on the date provided for in this Lease, and if such default
shall continue for a period of sixty (60) days after receipt by Tenant of
written notice of said nonpayment; or in the event that Tenant shall default or
fail in the performance of a material covenant or agreement on its part to be
performed in this Lease, and such default shall not have been cured for a period
of sixty (60) days after receipt by Tenant of written notice of said default
from Landlord, or if such default cannot, with due diligence, be cured within
sixty (60) days, and Tenant shall not have commenced the remedying thereof
within such period or shall not be proceeding with due diligence to remedy it
(it being intended in connection with a default not susceptible of being cured
by Tenant with due diligence within sixty (60) days, that the time within which
to remedy the same shall be extended for such period as may be necessary to
complete same with due diligence), then, and in such case, Landlord may
terminate this lease on ten day's written notice to Tenant and
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initiate appropriate legal action or proceedings, to enter upon said Demised
Premises or any part thereof and evict Tenant, or any person or persons
occupying said premises and so to repossess and enjoy the said premises, subject
to the rights of any subtenants having nondisturbance agreement(s) from
Landlord. Simultaneously with the sending of notice(s) to Tenant, Landlord shall
send a copy of such notice(s) to the record holders of the leasehold mortgage(s)
referred to in Paragraph Seventeen hereof that shall affect the premises or
portion(s) thereof.
B. If, after the commencement of the term of this Lease: (i) the Tenant
then in possession of the Demised Premises shall be adjudicated a bankrupt or
adjudged to be insolvent; (ii) a receiver or trustee shall be appointed for the
aforesaid Tenant's property and affairs; (iii) the aforesaid Tenant shall make a
general assignment for the benefit of creditors or shall file a petition in
bankruptcy or insolvency or for reorganization or shall make application for the
appointment of a receiver; or (iv) involuntary bankruptcy proceedings are filed
against it; or (v) any execution or attachment shall be issued against the
aforesaid Tenant or any of the aforesaid Tenant's property, whereby the Demised
Premises or any building or buildings or any improvements thereon shall be taken
or occupied or attempted to be taken or occupied by
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someone other than the aforesaid Tenant, except as may herein be permitted, and
such adjudication, appointment, assignment, petition, execution, or attachment
shall not be set aside, vacated, discharged, or bonded within one hundred and
twenty (120) days after the issuance of the same, then a default hereunder shall
be deemed to have occurred so that the provisions of this Paragraph Twenty shall
become effective and Landlord shall have the rights and remedies provided for
herein.
Twenty One: Effect of Unavoidable Delays:
The provisions of this Paragraph Twenty-One shall be applicable if there
shall occur, during the term of this Lease or any extension or renewal thereto,
any:
(i) Strike, lockout, or labor dispute affecting the Demised Premises or
any portion thereof; or
(ii) Inability to obtain labor or materials or reasonable substitutes
therefor; or
(iii) Acts of God, governmental restrictions, regulations, or controls,
enemy or hostile governmental action, civil commotion, insurrection, revolution,
sabotage, or fire or other casualty, or other conditions beyond the control of
the Tenant. If Tenant shall, as the result of any such event, fail punctually to
perform any Lease obligation other than Tenant's obligations to
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pay fixed rent or other monetary payments under this Lease, then such obligation
shall be punctually performed as soon as practicable after such event shall
abate. If Tenant, as a result of any such event, shall be unable to exercise any
right or option within any time limit provided therefor in this Lease, such time
limit shall be deemed extended for a period equal to the duration of such event.
Within fifteen (15) days after the happening of any event for which Tenant shall
be entitled to an extension hereunder, Tenant shall send to Landlord written
notice describing such event.
Twenty Two: Estoppel Certificate: Landlord shall, without charge at any
time and from time to time, within ten (10) days after request by Tenant,
execute a written statement and forward the same to Tenant, or to any mortgagee
identified by tenant, or to any assignee of any mortgagee or purchaser, or to
any proposed mortgagee or proposed purchaser, or to any other person, firm or
corporation specified by Tenant, whereby Landlord certifies that:
(i) That this Lease is unmodified and in full force and effect, (or, if
there has been a modification, that the same is in full force and effect as
modified and stating the modification);
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(ii) The dates, if any, to which the basic rent and additional rent,
impositions, and other charges hereunder have been paid in advance;
(iii) Whether Tenant is or is not in default in the performance of any
covenant, condition or agreement on Tenant's part to be performed and the nature
of Tenant's default, if any; and such other pertinent information as Tenant or
the holder of a mortgage described in Paragraph Seventeen hereof may request.
Twenty Three: Utility Easements and Charges:
A. Landlord covenants, warrants, and agrees, at Tenant's request and sole
expense, from time to time, to execute and deliver to Tenant, in recordable
form, within fifteen (15) days after notice from Tenant to do so, any utility
easement proper or necessary to provide the Demised Premises with any water,
sewer, electricity, telephone or cable TV services, in form and substance
acceptable to the utility company providing such service. Landlord covenants and
warrants that it will, within ten (10) days after request by Tenant, execute and
deliver to Tenant, in recordable form, any subordination agreement(s) as Tenant
or any holders of mortgages described in Paragraph Seventeen hereof shall
request to accomplish the aforesaid subordination. Landlord agrees that it will
not unreasonably withhold its consent to, and that it will
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execute in recordable form, any modification(s) or termination requested by
Tenant of any easement so made, and subsequent subordination(s) if so requested
to such modification(s) if any.
B. Said easement shall be superior to any mortgages obtained by Landlord.
C. If Tenant decides to construct water, sewer and/or electricity
generating facilities in the Demised Premises, it shall, as an accommodation to
Landlord, but not as an obligation hereunder, permit Landlord to hook-up to such
facilities and subject to availability and capacity, provide any such services
to Landlord. The hook up of any such service shall be made by Tenant at the sole
cost of Landlord. In such event and as long as such facilities have been made
available to Landlord, Landlord shall reimburse Tenant the cost, proportional to
Landlord's consumption, to Tenant of providing such services. Such cost shall be
determined on the basis of the actual cost to Tenant of constructing,
distributing, providing and maintaining such facilities and services and
generating or processing the same, including the amortization (on the same basis
that Tenant amortizes such improvements) of the value of any equipment and
installation necessary for the generation and distribution of such utilities
together with all direct costs associated to the operation of such
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equipment, and such overhead as is reasonably determined by Tenant. Nothing
contained herein will constitute an obligation of Tenant to construct or provide
any particular utility or facility or rendering any such services or continue to
provide such facilities, or services from time to time, or to construct any such
facility with a particular capacity, and Tenant shall not be liable for the
discontinuation, failure or refusal to provide any such service at any time or
from time to time, or for any damage that might be sustained by Landlord for
such discontinuation.
Twenty Four: Holdover:
If the Tenant shall hold over as a Tenant after the expiration of the
Lease, then such tenancy shall be deemed to be on a month-to-month basis.
Twenty Five: Partial Invalidity:
If any term, covenant, condition, or provision of this Lease or the
application thereof to any person or circumstances shall, at any time or to any
extent, be invalid or unenforceable, the remainder of this Lease, or the
application of such term or provision to persons or circumstances other than
those as to which this Lease is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant, condition, and provision of this
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Lease shall be valid and be enforced to the fullest extent permitted by law.
Twenty Six: Tenant's Right of First Refusal:
Landlord agrees that if at any time during the term of this Lease Landlord
receives a bona fide offer to purchase the fee of the Demised Premises, any
contract which may be entered into between Landlord and such bona fide purchaser
shall provide that the sale of the fee shall be subject to Tenant's right of
first refusal as hereinafter set forth. In the event of any sale to anyone other
than Tenant herein, the sale shall be subject to this Lease and shall be so
affirmed by the purchaser. In the event that Landlord receives a written offer
or executes a contract as above set forth, Tenant shall have the option, to be
exercised within sixty (60) days after receipt by Tenant of written notice of
the terms of such offer or contract, as the case may be, (together with a copy
of such offer or of such executed contract, as the case may be), to enter into a
contract with Landlord for the purchase of the Demised Premises, and Landlord
agrees to enter into such contract with Tenant, on the same terms and conditions
as contained in said offer to purchase (or as contained in such executed
contract if such contract, as the case may be.)
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If, after the receipt of such notice, together with a copy of the said
offer and of the said contract, if any, Tenant shall fail to exercise its option
in writing within the sixty (60) days period indicated above, Landlord shall
have the right to conclude the proposed sale on the same terms, and no other, as
contained in the offer or contract originally forwarded to Tenant.
Notwithstanding Tenant's failure to exercise such option, Tenant's option shall
remain in force and be binding on any subsequent owner or owners of the Demised
Premises in connection with any subsequent sale to the same extent as if said
subsequent owner or owners had been required to do all of the things required of
Landlord in this Lease prior to any such sale of the Demised Premises. If Tenant
duly exercises its option under the provisions of this Paragraph title to the
property shall be transferred to Tenant subject only to such mortgage or
mortgages as may have been placed against the fee of the Demised Premises by
Landlord or by Landlord's successor in interest.
If Landlord shall decide at any time and from time to time to sell the
Demised Premises, Landlord shall not place the same in the market or offer the
same to the general public until sixty days (60) after offering for sale the
same in writing to Tenant. Any modification of the sale terms of the Demised
Premises as offered
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to Tenant, shall become again subject to a new sixty day right of first refusal
period.
All sales by landlord to their direct descendants shall be exempt from the
aforesaid right of first refusal restrictions, but such direct descendants
shall, upon acquiring title to the Demised Premises, be subject to the aforesaid
right of first refusal restriction, with respect to any subsequent sale or
offer.
For purposes of this Paragraph Twenty Six, the term Demised Premises shall
include the Reserved Area.
Twenty Seven: Written Notice:
Whenever under the terms of this Lease notice is required, or whenever a
written notice or communication is sent, the same shall be in writing and sent
by Registered Mail Return Receipt, postage prepaid, or delivered in person,
receipt acknowledged, addressed as follows:
To Landlord: (a) Lilliam Bacham Umpierre; GPO Box thirty six dash twenty
thirty four (36-2034), San Juan, Puerto Rico, zero zero nine three six (00936);
(b) Alberto Bachman Umpierre, P.O. Box One Hundred Twenty Six (126), Hato Rey,
Puerto Rico, zero, zero, nine one nine (00919).
with copy to: Rafael Fuertes, Esq., Condominio El Centro Two (II), Suite
Two Hundred Fifty Six (256), Munoz Rivera
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Avenue Five Hundred (500), Hato Rey, Puerto Rico, zero, zero, nine one eight
(00918).
To Tenant: El Conquistador Partnership, L.P. c/o Williams Hospitality
Company, Inc., El San Juan Hotel & Casino, One Hundred Eighty Seven (187) East
Isla Verde Road, Carolina, Puerto Rico, zero, zero, nine one three (00913).
with copy to: Silvestre M. Miranda, Esq., Ledesma, Palou & Miranda, Suite
Eleven zero three (1103), Banco de Ponce Building, Hato Rey, Puerto Rico, zero,
zero, nine, one, eight (00918).
Twenty Eight: Binding on Successors and Assigns.
Except as otherwise provided in this Lease, all covenants, agreements,
provisions, and conditions of this Lease shall be binding on and inure to the
benefit of the parties hereto, their respective personal representatives,
successors, and assigns. No modification or termination of this Lease shall be
binding unless evidenced by an agreement in writing signed by Landlord and
Tenant.
Twenty Nine: Broker:
A. Landlord and Tenant each covenant and agree with the other than neither
has retained or contracted with any realtor or person in regard to this Lease.
Landlord and Tenant each
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covenant and agree to hold the other harmless from any claim of any person for
any commission or other compensation arising from the negotiation and execution
of this Lease to the extent such claim is asserted to arise out of such
claimant's contract or claim having been through the party to be charged. The
provisions of this paragraph shall survive the termination of this Lease.
Thirty: Exculpatory Provisions: Notwithstanding any provision in this
Lease to the contrary, Landlord agrees that in the event of any default or
breach by Tenant with respect to any of the terms and provisions of this Lease
on the part of the Tenant to be performed or observed, which causes Landlord to
terminate this Lease prior to its natural expiration date, the obligations and
liability of Tenant for breach of contract and damages, shall be limited to the
payment to Landlord in a lump-sum an amount equal to the Annual Rent for the
Lease Year during which such termination occurs, or to the number of months
remaining until the natural expiration of this Lease, whichever less, plus
reasonable attorney's fees and court costs and expenses incurred in any action
for termination of this Lease and eviction of Tenant.
Thirty One: Captions:
The captions of the Paragraphs of this instrument are solely for
convenience and shall not be deemed a part of this instrument
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for the purpose of construing the meaning thereof, or for any other purpose.
Thirty Two: Surrender.
Upon the termination or upon the cancellation of this Lease, for any cause
whatsoever, Tenant shall quit and surrender the Demised Premises and all
buildings and structures thereon, in good condition and repair, except for
depreciation and normal wear and tear. Any improvement which Tenant had
discontinued using at the time of said termination which has deteriorated beyond
normal wear and tear, may at Tenant's option, be either repaired or destroyed
and in the latter case, removed from the Demised Premises by and at the cost of
Tenant.
Thirty Three: Quiet Enjoyment:
Landlord agrees, covenants, and warrants that as long as Tenant faithfully
performs the agreements, terms, covenants, and conditions of this Lease within
the grace periods and extended periods for any unavoidable delays, Tenant shall
peaceably and quietly have, hold, and enjoy the Demised Premises for the term
and extensions thereof hereby granted without molestation or disturbance by or
from Landlord and free of any and all encumbrances created or suffered by
Landlord.
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Landlord warrants and represents that there is no ongoing litigation,
claim or procedure against Landlord or Demised Premises which could affect
Tenant's possessory rights hereunder.
Thirty Four: No Waiver.
No waiver of any covenant or condition contained in this Lease or of any
breach of any such covenant or condition shall constitute a waiver of any
subsequent breach of such covenant or condition by either party, or justify or
authorize the nonobservance on any other occasion of the same or any other
covenant or condition hereof of either party. All waivers hereto shall be in
writing signed by the parties hereto.
Thirty Five: Interpretation.
This Lease shall be construed in accordance with the law of the
Commonwealth of Puerto Rico. Whenever the contents of any provisions shall
require it, the singular number shall be held to include the plural number, and
vice versa. The neuter gender includes the masculine and the feminine.
Thirty Six: Joint Obligations.
All obligations of the parties comprised in the term "Landlord" shall be
deemed to be joint and several.
Thirty Seven: Entire Agreement.
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This Lease contains the entire agreement of the parties hereto with
respect to the letting and hiring of the Demised Premises described above and
this Lease may not be amended, modified, released, or discharged, in whole or in
part, except by an instrument in writing signed by the parties hereto, their
respective successors or assigns.
Thirty Eight: Transfers to Controlled Entity:
Landlord may transfer the Demised Premises to a corporation or to a
special partnership at any time, provided that Landlord retains thereafter
controlling interest in such corporation or special partnership, and provided
further that such corporation or special partnership, and Landlord's interest
therein, shall be subject to the right of first refusal provisions contained in
Section Twenty Six hereof. After the date of any such transfer, such special
partnership or corporation shall be deemed to be the Landlord hereunder for all
purposes, and, at the request of Tenant, shall execute such document as may be
necessary to reflect such substitution of record. Controlling interest for
purposes of this paragraph shall refer to an aggregate interest of not less than
fifty one percent (51%) in such special partnership or corporation.
Thirty Nine: Closing Expenses:
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The internal revenue stamps to be cancelled in the original and first
certified copy of this deed, the recording fees hereof and the corresponding
notarial fees shall be for the account of Tenant.
ACCEPTANCE
I, the Notary, do hereby certify that I advised the appearing parties of
the legal effect of the present deed, who waived their right to have attesting
witnesses in this instrument, after having duly advised them of such right.
I, the Notary, also certify and attest that this document was ready by the
parties and having found it in accordance with their wishes and instructions
they approve and ratify the contents thereof and sign before me also placing
their initials on each and every page of the original of this deed.
I, further certify and attest that the appearing parties and I know and
fully understand the English language and I attest as to my personal
acquaintance to the appearing parties and to their personal qualifications.
TO ALL OF WHICH, under my signature, scroll and seal, signing and sealing
the same according to law, I, the undersigned Notary, ATTEST.
/s/
/s/
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/s/
/s/
/s/
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NUMBER TWO
LEASEHELD MORTGAGE
In the City of San Juan, Commonwealth of Puerto Rico, this seventh (7th)
day of February, nineteen hundred ninety-one (1991).
BEFORE ME, LEONOR M. AGUILAR-GUERRERO, Notary Public in and for the
Commonwealth of Puerto Rico, with residence in Guaynabo, Puerto Rico, and office
on the Tenth Floor, Royal Bank Center, Two Hundred Fifty-Five (255) Ponce de
Leon Avenue, Hato Rey, San Juan, Puerto Rico.
APPEARS AS PARTY OF THE FIRST PART: EL CONQUISTADOR PARTNERSHIP L.P., a
partnership organized and existing under the laws of Delaware, with a place of
business at one hundred eighty-seven (187) East Isla Verde Road in the
Municipality of Carolina, Puerto Rico, zero zero nine one three (00913),
Taxpayer Identification Number 06-1288145 (hereinafter referred to as the
"Mortgagor"), represented herein by its General Partners WKA EL CON ASSOCIATES,
Taxpayer Identification Number 06-1288143, a partnership organized and existing
under the laws of the state of New York, herein represent by its Authorized
Signatory, HUGH ALANSON ANDREWS, Social Security Number ###-##-####, of legal
age, married,
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business executive and resident of San Juan, Puerto Rico; and KUMAGAI CARIBBEAN,
INC., Taxpayer Identification Number 75-2303665, a corporation organized and
existing under the laws of the state of Texas, represented by its Vice
President, TORU FUJITA UEDA; Social Security Number, of legal age, married, and
resident of San Juan, Puerto Rico.
AS PARTY OF THE SECOND PART: PUERTO RICO INDUSTRIAL, MEDICAL, EDUCATIONAL
AND ENVIRONMENTAL POLLUTION CONTROL FACILITIES FINANCING AUTHORITY, Taxpayer
Identification Number 66-04-26994, with a place of business at Minillas
Government Center, Avenida De Diego, Stop Twenty-Second (22), San Juan, Puerto
Rico zero zero nine four zero (00940), (hereinafter referred to either as the
"Mortgagee" or as the "Authority") a public corporation and a governmental
instrumentality of the Commonwealth of Puerto Rico, represented by its Assistant
Executive Director, Francisco Sierra Mendez, Social Security Number ###-##-####,
of legal age, married, attorney-at-law and resident of Juncos, Puerto Rico.
The above parties have agreed and bind themselves to show their
authorities for this act whenever and wherever properly required.
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I, the Notary do hereby certify that I personally know Mister Francisco
Sierra Mendez and I have identified the other appearing parties by the means
provided in Article Seventeen (c) of the Notarial Law of Puerto Rico,
specifically by means of the following documents of identity which contain the
signature and photograph of each of the appearing parties:
To: Mister Hugh Alanson Andrews, United States of America Passport Number
zero four one eight seven five five eight six (041875586).
To: Mister Toru Fujita Ueda, Commonwealth of Puerto Rico Driver's License
Number two one seven seven seven nine eight (2177798).
STATE FIRST: The Mortgaged Property. The Mortgagor represents and warrants
that:
(A) It is the sole and valid tenant with a valid, good, insurable
leasehold interest (the "Leasehold") in the real property (the "Leasehold
Estate") and all presently existing buildings, structures and improvements
thereon, which Leasehold Estate is described in the Spanish language as follows:
"RUSTICA: Predio compuesto de 100 cuerdas, equivalentes a 39 hectareas, 30
areas y 4 centiareas, terreno quebrado y llano, destinado a pastos, situado en
el islote denominado Palomino, en el Mar Caribe y frente al Puerto de Fajardo,
al Este del mismo; colinda por sus cuatro puntos
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cardinales con el mencionado Mar Caribe. Enclave una casa y un ranchon para
peones y distintas cercas."
(B) The Leasehold Estate is recorded at page thirty-five overleaf (35
vto.) of volume three hundred twenty-six (326) of Fajardo, Registry of Property
of Puerto Rico Number Five Hundred Fifty (550).
The Leasehold of the Mortgagor was constituted by Alberto Bachman Umpierre
and Lillian Bachman Umpierre, as lessor, in favor of the Mortgagor, as lessee,
for a term of thirty-two (32) years commencing on the first (1st) day of
November, nineteen hundred and ninety (1990), subject to an option to renew on
the same terms and conditions, for two additional consecutive five (5) year
periods, as per Deed Number Twelve (12) of December fifteen (15), nineteen
hundred and ninety (1990) before Notary Public Silvestre M. Miranda (the "Ground
Lease"), which is pending recording at the Registry of Property, Fajardo
Section.
(C) Its leasehold interest in the Ground Lease is good and insurable, and
is subject to no liens, charges, encumbrances, encroachments, reservations,
restrictions, defects or claims of any kind, including taxes and assessments,
easements or encumbrances, other than the Permitted Encumbrances.
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The Leasehold and the Improvements (as hereinafter defined) and the Lease
Rights (as hereinafter defined) are referred to herein collectively as the
"Mortgaged Property".
(a) The Improvements will consist of all buildings, structures and
improvements on the Leasehold Estate that are constructed by or on behalf of or
at the direction of Mortgagor after the date of the Ground Lease, and any
appurtenances or additions thereto, as well as any accessions thereto in the
future, including but not limited to the following:
(i) all buildings or structures constructed thereon and all other
buildings and improvements of every kind and description erected or placed on
the Leasehold Estate and all materials intended for construction,
reconstruction, alteration and repairs of such buildings, title to which
materials reside in the Mortgagor, all of which materials shall be deemed to be
included within the Mortgaged Property immediately upon the delivery thereof to
the Mortgagor at the Leasehold Estate, and all other property immovable either
by nature or destination now owned or hereafter acquired by the Mortgagor and
now or hereafter located on said Leasehold Estate or in said buildings or any
such other buildings or improvements used either for its adornment or for the
purpose of comfort, or for the service of some industry operated on such
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building or structure, even though the aforesaid shall have been attached to the
same after the constitution of this Mortgage; and
(ii) all fixtures and articles of movable property now or hereafter owned
by the Mortgagor and attached to, contained in, located on or used in connection
with the Leasehold Estate or in connection with any improvements thereto,
including, but not limited to all of the Mortgagor's rights, title and interest
in and to all furniture, furnishings, motors, transformers, fittings, radiators,
gas ranges, ice boxes, mechanical refrigerators, awnings, shades, screens,
blinds, drapes, office equipment, word processors, computers, typewriters,
telephone and communications equipment and installations, elevators, conveyors,
kitchen, bar-room and restaurant equipment, plates, forks, knives, spoons,
silverware, napkins, tablecloths, tables, glasses, chinaware, cups, cooking
equipment and installations, electrical appliances, television sets, radios,
beds, vanities, chairs, mirrors, pillows, curtains, blankets, sheets, towels,
bathroom equipment, mattresses, box springs, sprinkler equipment, carpeting, and
other furnishings and all plumbing, heating, laundry, ventilating,
refrigerating, incinerating, lighting, air conditioning and electrical
equipment, compressors and related machinery, equipment and apparatus, and all
fixtures and appurtenances thereto; and all renewals or replacements
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thereof or articles in substitution therefor, whether or not the same are or
shall be attached to said buildings or structures in any manner, it being
understood and agreed that all the aforesaid property and any replacement or
addition thereto owned by the Mortgagor and placed by it on the Leasehold Estate
or on or in the improvements to be located thereon have been specially
designated for use in connection with the operation of a destination resort
hotel and casino and that the Mortgagor operates or will operate a destination
resort hotel and casino doing business as El Conquistador Resort and Country
Club in connection with which the same will be used, and, that for such purpose,
the aforesaid property and any replacement or addition thereto shall be deemed
to be immovable property, by nature or destination, affixation, incorporation,
or appropriation to use, and shall be deemed necessary for and integral to the
operation of the Mortgaged Property as a first-class destination resort hotel
and casino.
(b) In addition to the Leasehold and the Improvements, the Mortgaged
Property shall also consist of all rights of the Mortgagor (the "Lease Rights")
to receive payments of money under all concessions or leases of space existing
or at any time hereafter made and any and all amendments, modifications,
supplements, renewals and extensions thereof (all of such
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concessions and leases being referred to individually as an "Occupancy Lease"
and collectively as the "Occupancy Leases"), including, without limitation, all
rents, additional rents, revenues, earnings, profits and income, payments
incident to any assignment, sublease or surrender of any Occupancy Lease, claims
for forfeited deposits and claims for damages which are due and unpaid with
respect to any Occupancy Lease at the time payment of the secured loan is
required.
SECOND: The Mortgaged Note. Simultaneously herewith Mortgagor has
subscribed before me a mortgage note (hereinafter the "Mortgage Note"), which is
copied literally in paragraph FIFTEENTH hereof. The Mortgagor will pay, on
demand, the principal of and interest on the Mortgage Note and all other sums
due or to become due pursuant to the Mortgage Note, this Mortgage, or any pledge
agreement pursuant to which the Mortgage Note is pledged or assigned.
THIRD: Creation of Mortgage. In order to guarantee and secure:
(i) the full and complete payment of the principal of and the interest on
the Mortgage Note;
(ii) the performance and observance of the terms therein and herein
contained;
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(iii) an additional credit in an amount equal to five (5) years of
interest as provided in the Mortgage Note to cover accrued and unpaid interest
on the Mortgage Note pursuant to the provisions of Article One Hundred Sixty-Six
(166) of the Mortgage and Registry of Property Law of Puerto Rico (30 L.P.R.A.
2562) (hereinafter called the "interest credit");
(iv) an additional credit in an amount equal to fifteen percent (15%) of
the principal amount of the Mortgage Note A to cover any amounts that may be
paid by or advanced by the Mortgagee pursuant to Article Ninth (9th) hereof,
together with interest thereon at the highest legal rate then prevailing
(hereinafter called the "credit for additional advances");
(v) an additional credit in an amount up to but no greater than five
percent (5%) of the principal amount of the Mortgage Note, to cover the actual
costs and actual expenses (including attorneys' fees and disbursements), of the
holder of the Mortgage Note, payable without necessity for approval by any
court, in the even that such holder shall have recourse to the courts or to any
other governmental agency in order to collect all or any part of the principal
thereof or any interest thereon (by foreclosure or other proceedings or action)
(hereinafter called the "credit for liquidated damages");
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(vi) an additional credit in an amount equal to fifteen percent (15%) of
the principal amount of the Mortgage Note to cover any additional amounts that
may be paid or advanced by the Mortgagee in connection with the condition of the
improvements presently contemplated to be constructed on the Mortgaged Property,
which improvements shall consist of approximately seven hundred fifty (75) guest
rooms, approximately fifty thousand (50,000) square fee of meeting space
(including prefunctionary space), six (6) restaurants, approximately thirteen
thousand (13,000) square feet of retail space, an approximately ten thousand
(10,000) square feet casino, a marina, approximately one hundred thousand
(100,000) square feet of swimming pools and water features, an 18-hole golf
course, an approximately forty thousand (40,000) square foot clubhouse and spa
facility, eight (8) tennis courts, related amenities and facilities, and all
related furniture, fixtures and equipment (hereinafter called the "credit for
additional amounts").
Mortgagor hereby constitutes and creates a voluntary first mortgage in
favor of the Mortgagee on the Mortgaged Property (references herein to Mortgagee
shall be deemed to include the Authority and any future holder of the Mortgage
Note either by endorsement or assignment and in the event the Mortgaged Note
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is delivered in pledge to secure Mortgagor's obligations under a pledge
agreement, the term Mortgagee shall also refer to the Pledgee(s) of the Mortgage
Note under such pledge agreement).
FOURTH: Additional Representation and Warranties. The Mortgagor
represents, warrants and covenants to the Mortgagee as follows:
(a) The Mortgagor, by its execution and delivery hereof, is mortgaging to
the Mortgagee all of its right, title and interest in and to the Mortgaged
Property.
(b) The Mortgagor has full right, power and authority to mortgage the
Mortgaged Property to the Mortgagee pursuant hereto; the Mortgagor knows of no
adverse claim to the interest of the Mortgagor in or to the Mortgaged Property;
no fire or casualty has affected the improvements on the Leasehold Estate within
sixty (60) days prior to the date hereof; and the Mortgagor knows of no actual
or proposed condemnation or eminent domain proceeding or settlement in lieu
thereof that would affect any of its rights, title or interest in or to the
Mortgaged Property.
(c) The Mortgagor, at its sole cost and expense, will warrant and defend
to the Mortgagee such title to the Mortgaged Property and the lien of the
Mortgagee thereon and therein against all claims and demands and will maintain
and preserve such lien
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and will keep this Mortgage a valid and direct mortgage lien upon the Mortgaged
Property, subject only to the Permitted Encumbrances and prior, at all times, to
all Occupancy Leases.
(d) The Mortgagor will pay, or cause to be paid, all charges for all
public and private utility services at any time rendered to, or the payment of
which is the obligation of, the Mortgagor in connection with the Mortgaged
Property, or any part thereof, and will do all other things required for the
maintenance and continuance of all such services.
(e) It has taken all necessary and proper action, which has not been
modified or revoked, to enter into this Mortgage and the execution and delivery
of this Mortgage by the Persons who have signed this Mortgage on behalf of the
Mortgagor have been duly qualified and are sufficient action to constitute this
Mortgage as a valid, binding and enforceable obligation of the Mortgagor.
FIFTH: The Ground Lease.
(a) The Mortgagor represents, warrants and covenants to the Mortgagee as
follows:
(i) The Mortgagor will promptly pay when due and payable the
rentals, additional rentals and other charges mentioned in and payable under the
Ground Lease.
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(ii) The Mortgagor will promptly perform and observe all of the
terms, covenants and conditions required to be performed and observed by the
Mortgagor under the Ground Lease, within the grace periods provided in the
Ground Lease or such lesser grace periods as are provided in this Mortgage, and
will do all things necessary to preserve and to keep unimpaired its rights under
the Ground Lease. The Mortgagor will use its best efforts to obtain performance
by the lessor of its obligations under the Ground Lease, to the end that the
Mortgagor may enjoy all of the rights granted to it under the Ground Lease.
(iii) The Mortgagor will promptly notify the Mortgagee of any
default by the Mortgagor in the performance or observance of any of the terms,
covenants or conditions on the part of the Mortgagor to be performed or observed
under the Ground Lease.
(iv) The Mortgagor will: (i) promptly notify the Mortgagee of the
receipt by the Mortgagor of any notice from the lessor under the Ground Lease of
default by the Mortgagor in the performance or observance of any of the terms,
covenants or conditions on the part of the Mortgagor to be performed or observed
under the Ground Lease; (ii) promptly notify the Mortgagee of the receipt by the
Mortgagor of any notice from the
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lessor under the Ground Lease to the Mortgagor of termination of the Ground
Lease pursuant to the provision thereof; and (iii) promptly cause a copy of each
such notice received by the Mortgagor from the lessor under the Ground Lease to
be delivered to the Mortgagee.
(v) The Mortgagor will promptly notify the Mortgagee of any request
made by either party to the Ground Lease for arbitration proceedings pursuant to
the Ground Lease and of the institution of any arbitration proceedings, and will
promptly deliver to the Mortgagee a copy of the determination of the arbitrators
in each such arbitration proceeding.
(vi) The Mortgagor will not subordinate or consent to the
subordination of the Ground Lease to any mortgage on the lessor's interest in
the property demised by the Ground Lease.
(vii) The Mortgagor will use best efforts within fifteen (15) days
after demand from the Mortgagee, to obtain from the lessor under the Ground
Lease and deliver to the Mortgagee a certificate that the Ground Lease is
unmodified and in full force and effect and the date to which the rentals,
additional rentals and other charges payable thereunder have been paid and
stating whether to the lessor's knowledge the Mortgagor is in default in
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the performance of any covenants, agreements or conditions contained in the
Ground Lease and if so, specifying each such default.
(viii) The Ground Lease is valid and in full force and effect in
accordance with its terms and without modification and no default under the
Ground Lease has occurred and is continuing.
(ix) The execution and delivery of this Mortgage is permitted under
the Ground Lease.
(x) If the term of the Ground Lease is scheduled to expire prior to
the payment in full of the indebtedness secured hereby and by any pledge
agreement pursuant to which the Mortgage Note has been pledged or assigned and
the Mortgagor has the option to renew such term, the Mortgagor shall effectively
exercise such option and deliver to the Mortgagee proof of such exercise, at
least thirty (30) days before the expiration of the period during which such
option may be exercised. The Mortgagor hereby irrevocably appoints the Mortgagee
its attorney-in-fact, to exercise any such options within such thirty (30) day
period if the Mortgagor has not theretofore exercised the same.
(b) Spreader of Mortgage to Fee. So long as any of the indebtedness
secured hereby or by any pledge agreement pursuant
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to which the Mortgage Note has been pledged or assigned shall remain unpaid,
(unless the Mortgagee shall otherwise consent), the Mortgagor covenants and
agrees that, in case it shall become the owner in fee simple ("pleno dominio")
of the Leasehold Estate, by purchase or otherwise, this Mortgage shall attach to
and cover and be a lien upon the Estate so acquired. Mortgagor further agrees
and consents to execute, acknowledge, deliver and record, at its sole cost and
expense, all such instruments necessary to attach to this Mortgage the Estate so
acquired.
SIXTH: Maintenance of the Mortgaged Property. The Mortgagor will at all
times maintain, preserve and keep, or cause to be maintained, preserved or kept,
all and each part of the Leasehold Estate and the Improvements in good repair,
working order and condition, such that the Mortgaged Property will be maintained
and operated as part of a first-class destination resort. The Mortgagor will
supply the Mortgaged Property, and keep the same or cause the same to be kept
and supplied, with all necessary supplies and equipment and make all needful and
proper repairs, renewals and replacements thereto, whether interior or exterior,
structural or non-structural, ordinary or extraordinary, foreseen or unforeseen.
All such repairs, renewals and replacements shall be at least equal in quality,
value and class to the original
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Improvements. Without limiting the generality of the foregoing, the Mortgagor
covenants that it will not cause or permit to suffer damage, deterioration, loss
or waste to the Mortgaged Property, other than that resulting from normal wear
and tear. The Mortgagor will not alter, add to, remove or demolish any building,
structure or property forming part of the Mortgaged Property without the prior
written consent of the Mortgagee, except to the extent permitted in any pledge
agreement pursuant to which the Mortgage Note is pledged or assigned.
SEVENTH: Assignment of Leases and Rents. The Mortgagor hereby absolutely
and irrevocably mortgages and assigns to the Mortgagee all rents, income and
other sums due to the Mortgagor under each Occupancy Lease now existing or
hereafter entered into, together with the right to collect and receive the same
provided if and so long as no Event of Default (as hereinafter defined) shall
have occurred and be continuing, the Mortgagor shall have the right to collect
and receive such rents and other sums for its own uses and purposes. Upon the
occurrence of an Event of Default, all such rents and other sums shall be
collected and held by the Mortgagee to be applied as deed appropriate in the
sole discretion of the Mortgagee to the obligations secured hereunder and in
such other manner as is
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permitted pursuant to the terms hereof and of any pledge agreement pursuant to
which the Mortgage Note may be pledged or assigned. The Mortgagee shall notify
the Mortgagor of its exercise of its right to collect rent and other sums at the
same time that it notifies any tenants thereof; provided, however, that failure
on the part of the Mortgagee to give such notice to the Mortgagor shall not
operate as a waiver of the right of the Mortgagee to collect and receive all
rents, income and other sums due to the Mortgagor under each Occupancy Lease.
The assignment of rents, income and other benefits contained herein shall
constitute an absolute assignment, subject, however, to the conditional
permission given herein to the Mortgagor to collect and use such rents, income
and other benefits. The foregoing assignment shall be fully operative without
any further action on the part of either party and the Mortgagee shall be
entitled, at its option, upon the occurrence of an Event of Default hereunder,
to all rents, income and other benefits from the Mortgaged Property, whether or
not the Mortgagee takes possession of the Mortgaged Property. The Mortgagor
hereby further grants to the Mortgagee and its agent the right, at the
Mortgagee's option, upon the occurrence of an Event of Default, to (i) enter
upon and take possession of the Mortgaged Property for the purpose of collecting
said rents, income and other
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benefits, (ii) dispossess by the usual summary proceedings any lessee defaulting
in its obligations pursuant to its Occupancy Lease beyond any applicable grace
and/or notice period, (iii) let the Mortgaged Property, or any part thereof, to
the extent permitted by law, and (iv) apply such rents, income and other
benefits, after payment of all necessary charges and expenses, on account of the
indebtedness and other sums secured hereby or by any pledge agreement pursuant
to which the Mortgage Note may be pledged or assigned. Such assignment and grant
shall continue in effect until the indebtedness and other sums secured by this
Mortgage, and by any pledge agreement pursuant to which the Mortgage Note may be
pledged or assigned, are paid in full, the execution of this Mortgage
constituting and evidencing the irrevocable consent of the Mortgagor to the
entry upon and taking possession of the Mortgaged Property by the Mortgagee
pursuant to such grant. Neither the exercise of any rights under this paragraph
SEVENTH by the Mortgagee nor the application of any such rents, income or other
benefits to the indebtedness and other sums secured hereby shall cure or waive
any Default, Event of Default or notice of Default hereunder or invalidate any
act done pursuant hereto or to any such notice, but shall be cumulative of all
other rights and remedies.
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EIGHTH: Insurance. As is provided in Article One Hundred Sixty (160) of
the Mortgage and property Registry Act of Puerto Rico Act Number One Hundred
Ninety-Eight (198) of August ten (10), nineteen hundred seventy-nine (1979),
Thirty Laws of Puerto Rico Annotated Two Thousand Five Hundred Fifty-Six (30
L.P.R.A. 2556), this Mortgage shall be extensive to, and shall cover, all
indemnities to which the Mortgagor may be entitled under any policy of insurance
covering the Mortgaged Property or any part thereof, and the Mortgagee shall be
entitled to receive directly from the insurance underwriter(s) all payments
which become due under any such policy(ies) of insurance, unless otherwise
provided in any pledge agreement under which the Mortgage Note is pledged or
assigned. Such payments shall be applied in the manner provided in any pledge
agreement or other instrument under which the Mortgage Note is pledged or
assigned.
NINTH: Additional Advances. The Mortgagee, without consent of or demand
upon the Mortgagor and without waiving or releasing any obligation or Default or
Event of Default, may (but shall be under no obligation to) at any time advance
such funds as may in the Mortgagee's judgment be needed for the purpose of (i)
paying real estate taxes assessed against the Mortgaged Property which the
Mortgagor has failed to pay, (ii) maintaining insurance
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coverage on the Mortgaged Property as required hereunder or otherwise as set
forth in any pledge agreements pursuant to which any of the Mortgage Notes have
been pledged or assigned, (iii) complying with any Legal Requirements relating
to environmental matters with which the Mortgagor has failed to comply or (iv)
paying any other expenses which the Mortgagee reasonably determines to be
necessary to preserve the value of the Mortgaged Property, and the Mortgagor
may, in such event, enter upon the Mortgaged Property for such purpose and take
all action thereon that it considers necessary or appropriate, and may take such
other and further action as it may consider necessary or appropriate for such
purposes. All sums so advanced or paid by the Mortgagee and all costs and
expenses (including, without limitation, attorneys' fees and expenses) so
incurred, together with interest thereon at the rate provided for in the
Mortgage Note from the date of payment or incurring, shall constitute additional
indebtedness secured by this Mortgage and shall be paid by the Mortgagor to the
Mortgagee on demand, regardless of the due date of the remainder of the
indebtedness secured by this Mortgage.
TENTH: Further Assurances; Additional Security. The Mortgagor, at its
expense, will execute, acknowledge, deliver and record all such instruments and
take all such action as the
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Mortgagee from time to time may request better to assure the Mortgagee that the
properties and rights hereby mortgaged and assigned or intended to have been
mortgaged and assigned have so been. Without notice to or consent of the
Mortgagor, and without impairment of the lien of and rights under this Mortgage,
the Mortgagee may take from (but the Mortgagor shall not be obligated to furnish
to) the Mortgagor or from any other Person or Persons (as hereinafter defined)
additional security for the Mortgage Note or for the obligations of the
Mortgagor secured by the assignment or pledge of the Mortgage Note; and neither
the giving of this Mortgage nor the acceptance of any such additional security
shall prevent the Mortgagee from resorting first to such additional security, or
to the security created by this Mortgage, in either case without affecting the
Mortgagee's lien and rights under this Mortgage.
ELEVENTH: Foreclosure Valuation. In compliance with Article One Hundred
Seventy-Nine (179) of the Mortgage and Property Registry Act of Puerto Rico [Act
Number One Hundred Ninety-Eight (198) of August ten (10), nineteen hundred
seventy-nine (1979) Thirty Laws of Puerto Rico Annotated Two Thousand Five
Hundred Seventy-Five (30 L.P.R.A. 2575)], the Mortgagor hereby declares and
agrees for the purpose of foreclosure that the
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value of the Mortgaged Property is the amount of TWO MILLION THREE HUNDRED
THOUSAND DOLLARS ($2,300,000).
TWELFTH: Foreclosure. In the event that the Mortgage Note is assigned or
pledged or otherwise encumbered by the Mortgagor as collateral security for the
payment of any other note or debt of the Mortgagor or of any other Person, the
Mortgagor agrees that:
(a) The Mortgagee may foreclose this Mortgage and may exercise all other
rights, remedies, powers and privileges provided herein or now or hereafter
existing at law, in equity, by statute, or otherwise, without first foreclosing
the pledge or other lien so constituted upon the Mortgage Note, to the same
extent and with the same force and effect as if the Mortgage Note had been
assigned or transferred directly to the Mortgagee rather than assigned or
pledged as collateral security, provided that nothing contained in this
paragraph TWELFTH shall relief the Mortgagee from the obligation to comply with
the terms of any pledge agreement or other instrument under which the Mortgage
Note is assigned or pledged.
(b) The Mortgagor will not exercise any right which it might have to
cancel the record of the Mortgage by reason of lapse of time counted from the
date of the constitution of the Mortgage
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either under the provisions of Article One Hundred Forty-Five (145) of the
Mortgage and Property Registry Act of Puerto Rico [Act Number One Hundred
Ninety-Eight (198) of August ten (10), nineteen hundred seventy-nine (1979),
Thirty Laws of Puerto Rico Annotated Two Thousand Four Hundred Sixty-Nine (30
L.P.R.A. 2469) or otherwise and further agrees, whenever required by the
Mortgagee, to execute and file in the appropriate Registry, at the Mortgagor's
sole cost and expense, any and all supplemental instruments which may be
necessary or convenient in the judgment of the Mortgagee for the preservation of
the lien of this Mortgage until full payment of the note or debt so secured by
the lien of the Mortgage Note and full payment of any obligations secured by any
pledge of the Mortgage Note. Without limiting the generality of the foregoing,
the Mortgagor agrees that, unless the Mortgagee shall consent in writing to the
cancellation of the Mortgage at an earlier date, the Mortgage shall be
conclusively presumed to subsist for a period of twenty-five (25) years from the
date of its constitution or such lesser date as the Leasehold is terminated in
accordance with the terms of the Ground Lease; and the Mortgagor does hereby
waive any right which he might otherwise have under said Article One Hundred
Forty-Five (145) of the Mortgage and
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Property Registry Act to apply for an earlier cancellation of the record of the
Mortgage.
(c) The Mortgagee may, upon the occurrence of any Event of Default
hereunder or under any pledge agreement pursuant to which the Mortgage Note has
been pledged or assigned, petition the court having jurisdiction over the
Mortgaged Property to appoint a receiver for the Mortgaged Property, including
all rents, issues and profits therefrom, and said receiver shall have the
broadest powers and faculties permitted to be granted to a receiver by the court
and his appointment shall be made by the court as a matter of absolute right
granted to the Mortgagee without taking into consideration the value of the
Mortgaged Property or the solvency of the Mortgagor or of any other party to the
action, and the Mortgagor hereby consents to the appointment of such a receiver
and agrees not to oppose the same, and waives any requirement for such a
receiver to post a bond of any kind.
THIRTEENTH: Definitions. As used in this Mortgage, the following terms
shall have the following respective meanings:
"Default" shall mean any event which, with the giving of notice or the
lapse of time, or both, would constitute an Event of Default.
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"Event of Default" shall have the meaning ascribed thereto in paragraph
EIGHTEENTH hereof.
"Governmental Authority" shall mean any court, agency, authority, board
(including, without limitation, any environmental protection, planning or zoning
board), bureau, commission, department, office or instrumentality of any nature
whatsoever of any governmental or quasi-governmental unit of the United States,
the Commonwealth of Puerto Rico, or the Municipality of Fajardo, whether now or
hereafter in existence, having jurisdiction over the Mortgagor or the Mortgaged
Property.
"Impositions" shall mean all real estate and other taxes, all assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof or
while this Mortgage is in force), water, sewer, electricity, utility and other
rents, rates and charges, excises, levies, license fees, permit fees, inspection
fees and other authorization fees and other charges, in each case whether
general or special, ordinary or extraordinary, or foreseen or unforeseen, of
every character (including all penalties or interest thereon), which at any time
may be assessed, levied, confirmed or imposed on or in respect of or be a lien
upon (a) the Mortgaged
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Property or any part thereof or any rents, issues, income, profits or earnings
therefrom or any estate, right or interest therein, or (b) any occupancy, use or
possession of or sales from the Mortgaged Property or any part thereof, or (c)
the Mortgage Note, this Mortgage, any interest herein or any other payments due
from the Mortgagor under the terms of this Mortgage; excepting, however, the
income taxes now or hereafter imposed by the United States under the Internal
Revenue Code of nineteen hundred eighty-six (1986), as amended from time to
time, and by the Commonwealth of Puerto Rico under the Income Tax Act of
nineteen hundred fifty-four (1954) [Act Number Ninety-One (91), approved on June
twenty-nine (29), nineteen hundred fifty-four (29), nineteen hundred fifty-four
(1954)], as amended, or under any other Act of Congress or Act of the
Legislature of Puerto Rico of the same nature, modifying, amending, or
substituting the statutes above mentioned.
"Legal Requirements" shall mean collectively (i) all laws, statutes,
codes, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, permits, licenses, authorizations, directions and requirements of
any Governmental Authority having jurisdiction over the Mortgaged Property, the
Mortgagor or any tenant of all or any of its commercial spaces, foreseen or
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unforeseen, ordinary or extraordinary (including, without limitation, fire,
health, handicapped access, sanitation, ecological, historic, zoning,
environmental protection, wetlands, and building laws or regulations), which now
or at any time hereafter may be applicable to the Mortgaged Property or any part
thereof, or any of the streets, alleys, passageways, sidewalks, curbs, gutters,
vaults or vault spaces adjoining the Mortgaged Property or any part thereof, or
any use or condition of the Mortgaged Property or any part thereof, (ii) all
material requirements of each permit, license, authorization and regulation
relating to the Mortgaged Property, or any portion thereof, or to the ownership,
leasing, use, occupancy, possession, operation or maintenance thereof and (iii)
all requirements of the Puerto Rico Fire Department, the Factual Mutual System
or the Industrial Risk Insurers or other similar body acting in and for the
Commonwealth of Puerto Rico and all requirements of each insurance policy
covering or applicable to all or any portion of the Leasehold Estate, or the use
thereof, which are maintained or required to be maintained by the Mortgagor or
of which the Mortgagor has notice, and all requirements of the issuer of each
such policy, including any which may require repairs, modifications or
alterations (structural or otherwise) in or to the Mortgaged Property, or any
portion thereof.
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"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind, including, without limitation, any conditional sale
or other title retention agreement, any lease in the nature thereof, or the
filing of, or any agreement to give, any financing statement under the Uniform
Commercial Code of any jurisdiction (other than informational filings in respect
of equipment leased under any lease not intended as security, within the meaning
of the Uniform Commercial Code) and any comparable financing statement under the
laws of the Commonwealth of Puerto Rico.
"Permitted Encumbrances" shall have the meaning ascribed hereto in
paragraph NINETEENTH hereof.
"Person" shall mean an individual, corporation, partnership, joint
venture, trust, association or any other entity or organization, including a
government or political subdivision, agency or instrumentality thereof.
FOURTEENTH: Miscellaneous. (a) Successors; No Oral Modification; Headings.
All of the terms of this Mortgage shall apply to and be binding upon the
successors and assigns of the Mortgagor and all Persons claiming under or
through the Mortgagor or any such successor or assign, and shall inure to the
benefit of the Mortgagee and its successors and assigns. Neither
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this Mortgage nor any term hereof may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the Mortgagee,
notice of which is endorsed on the Mortgage Note. No notice to or demand on the
Mortgagor in any case shall entitle the Mortgagor to any other or further notice
or demand in similar or other circumstances. The headings of the clauses of this
Mortgage have been inserted for convenience of reference only and shall in no
way define, modify or restrict any of the provisions hereof.
FIFTEENTH: The Mortgage Note. The Mortgage Note referred to in paragraph
SECOND of this Deed is literally transcribed herein as follows:
"MORTGAGE NOTE
"VALUE: $2,000,000
"DUE DATE: ON DEMAND
"FOR VALUE RECEIVED, on demand the undersigned promises to pay to PUERTO
RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND ENVIRONMENTAL POLLUTION CONTROL
FACILITIES FINANCING AUTHORITY (hereinafter the "Authority") or its order, the
principal sum of TWO MILLION DOLLARS ($2,000,000) with interest on the unpaid
balance at a fluctuating annual rate (computed on the basis of a 360-day year
and the actual number of days elapsed) equal to two percent (2%) over and above
the "reference rate," as defined below, such fluctuating rate to change
simultaneously with the changes in the reference rate, from the date of this
Mortgage Note until full payment hereof. As used herein, the term "reference
rate" shall mean at any time the lower of (i) the fluctuating rate of interest
announced publicly from time to time by The Chase Manhattan Bank, N.A. in New
York, New York as its "prime," "base," or
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"reference" rate and (ii) the fluctuating rate of interest announced publicly
from time to time by Citibank, N.A. in New York, New York as its "prime," "base"
or "reference" rate, it being understood that such rates of not necessarily be
the best or lowest rates of interest available to such bank's best or more
preferred large commercial customers. Anything herein to the contrary
notwithstanding, if the rate of interest required to be paid hereunder exceeds
the rate lawfully chargeable, the rate of interest to be paid shall be
automatically reduced to the maximum rate lawfully chargeable so that no amounts
shall be charged which are in excess thereof, and, in the event it should be
determined that any excess over such highest lawful rate has been charged or
received, the holder hereof shall promptly refund such excess to the
undersigned; provided, however, that, if lawful, any such excess shall be paid
by the undersigned to the holder hereof as additional interest (accruing at a
rate equal to the maximum legal rate minus the rate provided for hereunder)
during any subsequent period when regular interest is accruing hereunder at less
than the maximum legal rate. The Mortgagee shall be entitled to charge the
maximum late charge permitted by law on any overdue principal under this
Mortgage Note. Interest hereunder shall be payable on demand, and payments of
interest and principal shall be made at the office or domicile of the Authority
within the Commonwealth of Puerto Rico, or at such other place as may be
designed in writing by said Authority or any holder hereof.
"The undersigned, and all others who may become liable for all or any part
of this obligation whether as maker, principal, surety, guarantor or endorser,
agree hereby to be jointly and severally liable and jointly and severally waive
demand, presentment, protest, notice of dishonor and nonpayment and any and all
lack of diligence or delays in collection or enforcement hereof, and expressly
agree to extend to the Authority or any holder hereof the right of set-off or
compensation prior to, on or after maturity or default, and consent to any
application of payment of any monies in possession of the Authority or any
holder hereof belonging to the undersigned or any obligor hereunder related to
this Mortgage Note and to any extension of time, modification of the terms of
payment, releases of any party liable for this obligation, release, substitution
or exchange of any property, real or personal, tangible or intangible,
guaranteeing payment of the Mortgage securing this Mortgage Note, and agree also
to any other indulgence or forbearance whatsoever. Any such extension, release,
modification, substitution, exchange, indulgence
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or forbearance may be made without notice to said party, and without in any way
affecting the personal liability of any party obliged hereunder.
"The holder of this Mortgage Note shall be entitled to the benefits and
security afforded by Deed Number Two which was executed on the date hereof,
before the undersigned Notary as security for this Mortgage Note and by any
agreement executed by the undersigned assigning, pledging, or encumbering this
Mortgage Note as security therefor, and may enforce the agreements of the
undersigned contained in each of said instruments, and may exercise the remedies
provided thereby or otherwise in respect thereof without being required first to
foreclose the pledge or other lien or encumbrance so constituted upon this
Mortgage Note, all in accordance with the terms of said instruments. No
reference herein to said instruments, and no provision of this Mortgage Note or
of said instruments, shall alter or impair the obligation of the undersigned
hereon, which is joint and several, continuing, absolute and unconditional, nor
shall such reference affect the negotiability hereof under the Negotiable
Instruments Law of Puerto Rico. Recourse on this Mortgage Note is limited as
provided in Deed Number Two.
The undersigned hereby submits to the venue of the courts in the
Commonwealth of Puerto Rico selected by the holder in case of legal action
brought against the undersigned for the collection of this Mortgage Note.
"In San Juan, Puerto Rico, this 7th day of February, 1991.
"EL CONQUISTADOR PARTNERSHIP L.P.
"By: Kumagai Caribbean, Inc.
"(Signed) By: /s/ Toru Fujita Ueda
---------------------------
Toru Fujita Ueda,
"Vice President
"WKA El Con Associates
"(Signed) By: /s/ Hugh Alanson Andrew
---------------------------
Hugh Alanson Andrew
"Authorized Signatory
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"Affidavit No. 101
"Acknowledged and subscribed before me in San Juan, Puerto Rico, this 7th
day of February, 1991, by Hugh Alanson Andrew, of legal age, married, business
executive and resident of San Juan, Puerto Rico in his capacity as Authorized
Signatory of WKA EL CON ASSOCIATES, General Partner of EL CONQUISTADOR
PARTNERSHIP L.P. and by Toru Fujita Ueda, of legal age, married, business
executive and resident of San Juan, Puerto Rico, in his capacity as Vice
President of KUMAGAI CARIBBEAN, INC., General Partner of EL CONQUISTADOR
PARTNERSHIP L.P., identified by the means set forth in Article Seventeen "c"
(17(c)) of the Notarial Law of Puerto Rico.
(Signed) Leonor M. Aguilar-Guerrero
--------------------------
"Notary Public"
(Notarial Seal)
SIXTEENTH: Deed in the Public Interest: (a) The Authority hereby states
that its appearance in this Deed, made for its benefits, is in furtherance of
the purpose for which the Authority was created and is a legitimate exercise of
its powers. In approving the financing being provided to the Mortgagor and
secured hereby, the Authority has determined that the Mortgage constituted by
this Deed is in the public interest and serves the public interest and serves
the public purpose of promoting the economic development, health, welfare and
safety of the people of the Commonwealth of Puerto Rico, and that, therefore,
under the provisions of Sections One Thousand Two Hundred Fifty-One (1251) to
One Thousand Two Hundred Sixty-Nine (1269) of Tile
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Twelve (12) of the Laws of Puerto Rico Annotated (L.P.R.A.) and Section One
Thousand Seven Hundred Seventy Subsection (c)] (1770[c]) of Title Thirty (30) of
the Laws of Puerto Rico Annotated, the constitution and recording of this
Mortgage is exempt from the payment and/or cancellation of all internal revenue
stamps and recording fees.
(b) If such exemption is held to be invalid, or if additional costs and
expenses are otherwise incurred, then all costs and expenses of this Deed, of
obtaining a certified copy or copies hereof, and of the registration of this
instrument in the proper public registry (including, without limitation, the
cost of all recording fees payable in connection with the initial recordation or
subsequent cancellation of this Mortgage or fees for the cancellation of any
revenue stamps affixed hereto); all expenses of such additional documentation as
may hereafter be required, including the registration thereof in the appropriate
sections of the Registry of Property, if such be required; and all expenses of
all documents of cancellation, including the cost of registration thereof, and
all other recording, filing, notarial or other fees, taxes and charges, shall be
for the account of Mortgagor.
SEVENTEENTH: Disposition of Mortgaged Property. The Mortgagor covenants
that it shall not sell, convey, mortgage,
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or otherwise dispose of or encumber the Mortgaged Property, any portion thereof,
or any of the Mortgagor's right, title or interest therein without first
securing the written consent of the Mortgagee, except to the extent otherwise
permitted under any pledge agreement pursuant to which the Mortgage Note has
been pledged or assigned.
EIGHTEENTH: (a) Events of Default. The following shall constitute "Events
of Default" under this Mortgage, and the term "Event of Default" shall mean,
wherever used with reference to this Mortgage, any one or more of the following
occurrences:
(i) any principal, interest or any other sums payable pursuant to the
Mortgage Note shall not be paid when due;
(ii) any sums (other than those set forth in (i) above) payable pursuant
to this Mortgage or any pledge agreement pursuant to which the Mortgage Note has
been pledged or assigned shall not be paid when due, and such failure shall
continue for a period of thirty (30) days after notice is given to the Mortgagor
by the Mortgagee, unless the Mortgagee shall agree to an extension of such time
prior to its expiration;
(iii) the Mortgagor shall fail in the due performance or observance of any
covenant, agreement or term binding upon the Mortgagor contained in this
Mortgage, the Mortgage Note or any
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pledge agreement pursuant to which the Mortgage Note was pledged or assigned,
other than those covenants, agreements or terms of which the Mortgagor's failure
to perform would constitute another Event of Default referred to in this
paragraph EIGHTEENTH, and such failure shall continue unremedied for more than
ninety (90) days after notice thereof shall have been given to the Mortgagor by
the Mortgagee or such shorter grace period provided for in any such documents;
provided, however, that if such failure cannot be corrected within such ninety
(90) day period, it shall not constitute an Event of Default hereunder if
corrective action is instituted by the Mortgagor within such period and
diligently pursued until such failure is corrected;
(iv) any warranty, representation or other statement made by or on behalf
of the Mortgagor in or pursuant to this Mortgage, any pledge agreement pursuant
to which the Mortgage Note was pledged or assigned, or any document, instrument
or certificate delivered in connection herewith or therewith shall prove to have
been materially incorrect or misleading when made; provided, however, that if
the incorrect or misleading nature of such warranty, representation or other
statement is curable, such incorrect or misleading nature shall not be an Event
of Default hereunder so long as the Mortgagor diligently proceeds to cure and
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cures such incorrect or misleading nature within ten (10) days after notice from
the Mortgagee of such incorrect or misleading nature such that the original
warranty, representation or other statement made shall then not be materially
incorrect or misleading;
(v) the occurrence of an Event of Default under and pursuant to the terms
of any pledge agreement pursuant to which the Mortgage Note has been pledged or
otherwise encumbered;
(vi) the occurrence of an Event of Default under and pursuant to the terms
of the Ground Lease; or
(vii) the Mortgagor shall breach its covenant contained in paragraph
NINETEENTH hereof.
To the extent that any circumstances constitute an Event of Default under
any pledge agreement pursuant to which the Mortgage Note may be pledged or
assigned but would not otherwise constitute an Event of Default hereunder, then,
notwithstanding the foregoing, such circumstances shall constitute an Event of
Default hereunder.
(b) Remedies. Upon the occurrence and continuance of an Event of Default
hereunder or under any pledge agreement or other document pursuant to which the
Mortgage Note may be assigned, pledged, or otherwise encumbered as collateral
security,
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the Mortgagee, its successors and assigns, may, at its or their election:
(i) declare all or any portion of the principal sum of and interest
on the Mortgage Note, along with all or any other sums payable under the
Mortgage Note, this Mortgage or any pledge agreement pursuant to which the
Mortgage Note has been pledged or assigned immediately due and payable;
(ii) proceed to enforce the payment of the Mortgage Note and/or to
foreclose the lien of the Mortgage as against all or any part of the Mortgaged
Property (by summary proceedings or otherwise) and to have the same sold under
the judgment or decree of a court of competent jurisdiction; and/or
(iii) enter upon and take possession of the Mortgaged Property or
any part thereof by summary proceedings, ejectment or other legal proceedings
and remove the Mortgagor and all other persons and any and all properties
therefrom (to the extent permitted by law, other than pursuant to a foreclosure
proceeding), and hold, operate and manage the same and receive all earnings,
income, rents, issues and proceeds accruing with respect thereto or any part
thereof. The Mortgagee shall be under no liability for or by reason of any such
taking of possession, entry, removal or holding, operation or management, except
that
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any amounts so received by the Mortgagee shall be applied to pay all costs and
expenses of so entering upon, taking possession of, holding, operating,
maintaining, repairing, preserving and managing the Mortgaged Property or any
part thereof, and any taxes, assessments or other charges prior to the Lien of
this Mortgage which the Mortgagee may consider it necessary or desirable to pay,
and any balance of such amounts shall be applied as determined by the Mortgagee
in its sole and absolute discretion; and/or
(iv) exercise any other remedy available at law or inequity.
NINETEENTH: No Other Liens. (a) Subject to paragraph TWENTIETH below,
relating to contests, the Mortgagor will not create or permit to be created or
to remain, and will discharge, any Lien upon the Mortgaged Property or any part
thereof other than the following (collectively, the "Permitted Encumbrances"):
(a) the herein constituted Mortgage, (b) leases of commercial space at the
Mortgaged Property, provided such leases are subordinate to the lien of this
Mortgage, (c) a second mortgage in favor of Government Development Bank for
Puerto Rico, as per Deed Number Three (3) of Leasehold Mortgage, dated February
seven (7), nineteen hundred ninety-one (1991) before Notary Ramon
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Moran Lubriel, which will be filed for registration contemporaneously with this
Mortgage in the Fajardo Section, Registry of Property of Puerto Rico, (d)
easements or reservations with respect to the servicing of the Mortgaged
Property for rights of way for electric transmission and distribution lines,
telephone and telegraph lines, fuel, water, sewage and drainage pipelines and
channels and all other similar purposes, provided that such easements and
reservations are approved by the Mortgagee and do not, in any single case or in
the aggregate, materially interfere with the occupancy or use of the Mortgaged
Property, and (i) any other liens or encumbrances specifically permitted by the
terms of any pledge agreement pursuant to which the Mortgage Note has been
pledged, assigned or otherwise encumbered.
TWENTIETH: Payment of Impositions; Compliance with Legal Requirements and
Contests.
(a) Subject to subparagraph (c) below, the Mortgagor will pay or cause to
be paid all Impositions before the same would become delinquent and before any
fine, penalty, interest or cost may be added for non-payment of same. The
Mortgagor promptly will deliver to the Mortgagee after payment of such
Impositions copies of official receipts or other evidence satisfactory to the
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Mortgagee evidencing the payment of any Imposition as required pursuant to this
subparagraph (a).
(b) The Mortgagor will comply promptly with any Legal Requirement and will
furnish the Mortgagee, on demand, with the results of any requested official
search made by a Governmental Authority regarding such compliance.
(c) The Mortgagor, at its expense, and after prior written notice to
Mortgagee and provided no Event of Default shall then have occurred and be
continuing may contest in good faith by appropriate proceedings promptly
initiated and conducted with due diligence, the amount or validity or
application, in whole or in part, of any Imposition or any Legal Requirement or
any Lien upon the Mortgaged Property or the application of any instrument of
record referred to in paragraph NINETEENTH hereof and may defer payment thereof;
provided that (i) in the case of any such unpaid Imposition or Lien, such
proceedings shall suspend the collection thereof from the Mortgagor, the
Mortgagee and the Mortgaged Property, (ii) in any case, the Mortgaged Property,
any rent or other income therefrom or any part thereof or interest therein would
not be in danger of being sold, forfeited, terminated, cancelled or lost, (iii)
in the case of a Legal Requirement, neither the Mortgagor nor the Mortgagee
would be subject to civil or
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criminal liability as a result of such deferral of compliance therewith, (iv) in
any case, the Mortgagor shall have furnished such security if any, as may be
required in the proceedings or as may be requested by the Mortgagee, (v) in any
case, the payment of any sums required to be paid under the Mortgage Note, this
Mortgage, or any pledge agreement pursuant to which the Mortgage Note may be
pledged or assigned (other than any unpaid Imposition at the time being
contested in accordance with this paragraph TWENTIETH shall not be interfered
with or otherwise affected, and (vi) in any case, the Mortgagor shall hold the
Mortgagee harmless of and from and indemnify the Mortgagee against any loss by
reason of any such deferment.
TWENTY-FIRST: Additional Payments. If any action or proceeding shall be
commenced or taken (including, without limitation, an action to foreclose this
Mortgage, collect the indebtedness secured hereby or enforce the Mortgagee's
rights under the Mortgage Note) by the Mortgagee, or any other Person, in which
action or proceeding the Mortgagee is involved or is made a party by reason of
the execution and/or delivery of the Mortgage Note, this Mortgage, any pledge
agreement pursuant to which the Mortgage Note has been pledged or assigned or
any other documents or in which it becomes necessary to enforce,
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defend or uphold the lien on the Mortgaged Property pursuant to this Mortgage or
any other documents (including, without limitation, any pledge agreement) or the
Mortgagee's rights under the Mortgage Note or any other documents (including,
without limitation, any pledge agreement), all sums paid by the Mortgagee for
the expense of any such action or litigation shall be paid by the Mortgagor to
the Mortgagee promptly after demand. The Mortgagor will hold the Mortgagee
harmless against any and all liability with respect to any mortgage recording or
intangible personal property tax or fees or similar imposition now or hereafter
in effect, to the extent that the same may be payable by the Mortgagee with
respect to this Mortgage, the Mortgage Note, any pledge agreement, or any other
related document. Any amounts due and payable to the Mortgagee under this
paragraph that are not paid within fifteen (15) days after written demand
therefor by the Mortgagee shall bear interest at the rate then applicable under
the terms of the Mortgage Note, from the date of such demand, and such amounts,
together with such interest, shall be deemed to be indebtedness secured by this
Mortgage. In the event of any action, suit or proceeding is brought against the
Mortgagee by reason of any such occurrence, the Mortgagor upon request by the
Mortgagee will, at the Mortgagor's expense, resist
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and defend such action, suit or proceeding or cause the same to be resisted or
defended, either by counsel designated by the Mortgagor and approved by the
Mortgagee, or where such occurrence is covered by liability insurance, by
counsel designated by the insurer. The obligations of the Mortgagor under this
paragraph TWENTY-FIRST shall survive the termination or satisfaction of this
Mortgage.
TWENTY-SECOND: Application of Foreclosure Proceeds. The proceeds of any
foreclosure sale of the Mortgaged Property or any part thereof shall be applied
in accordance with the provisions of any pledge agreement pursuant to which the
Mortgage Note may be pledged or assigned or, if no such agreement exists, as
follows:
First: All taxes, assessments or liens prior to the lien of this Mortgage
that the Mortgagee may consider necessary or desirable to pay, the costs and
expenses (including without limitation, attorney's fees and expenses) of
collection, including the costs and expenses of any foreclosure or sale of the
Mortgaged Property, the cost and expenses of entering upon, taking possession of
or holding, operating and managing the Mortgaged Property, as the case may be,
and of the enforcement of any remedies hereunder, including court costs and
expenses, and
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reasonable compensation to the Mortgagee's agents, attorneys and counsel, and
all expenses, liabilities and advances incurred or made by the Mortgagee with
respect to such foreclosure;
Second: All amounts disbursed for costs incurred by the Mortgagee, other
than on account of principal and interest thereon due on all indebtedness of the
Mortgagor secured by the Mortgage Note, under this Mortgage, any pledge
agreement pursuant to which this Mortgage Note may be pledged or assigned or any
documents secured thereby, plus accrued interest thereon;
Third: All amounts of interest and principal due and unpaid on all
indebtedness of the Mortgagor secured by the Mortgage Note, any pledge agreement
pursuant to which this Mortgage Note may be pledged or assigned or any documents
secured thereby; and
Fourth: The balance, if any, to the Mortgagor, or to any other person or
legal entity who may be legally entitled thereto, or as a court of competent
jurisdiction may otherwise direct.
TWENTY-THIRD: Remedies Cumulative. Each right, power and remedy of the
Mortgagee provided for in this Deed shall be cumulative and concurrent and shall
be in addition to every other right, power or remedy provided for in this Deed
or in any agreement between the Mortgagor and the Mortgagee
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secured by the Mortgage Note, or in any pledge agreement pursuant to which the
Mortgage Note has been pledged or assigned, or now or hereafter existing at law
or in equity or by statute or otherwise, and the exercise or beginning of the
exercise by the Mortgagee of any one or more of the rights, powers or remedies
provided for in this Deed or in any agreement between the Mortgagor and the
Mortgagee secured by the Mortgage Note, or in any pledge agreement pursuant to
which the Mortgage Note has been pledged or assigned, or now or hereafter
existing at law or in equity or by statute or otherwise shall not preclude the
simultaneous or later exercise by the Mortgagee of any or all such other rights,
powers or remedies. All rights, remedies and powers provided herein may be
exercised only to the extent that the exercise thereof does not violate any
applicable provision of law, and are intended to be limited to the extent
necessary so that they will not render this Mortgage invalid, unenforceable or
not entitled to be recorded, registered or filed under the provision of any
applicable law. If any provision of this Deed shall be held to be invalid,
illegal or unenforceable, the validity of other provisions of this Deed shall in
no way be affected thereby.
TWENTY-FOURTH: No Waiver of Remedies. No failure by the Mortgagee to
insist upon the strict performance of any term
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hereof or to exercise any right, power or remedy consequent upon a breach
thereof, shall constitute a waiver of any such term or of any such breach. No
waiver of any breach shall affect or alter this Deed or the Mortgage constituted
herein, which shall continue in full force and effect with respect to any other
than existing or subsequent breach. Any action, suit or proceeding brought by
the Mortgagee against the Mortgagor pursuant to any of the terms of this
Mortgage or otherwise, and any claim made by the Mortgagee hereunder may be
compromised, withdrawn or otherwise dealt with by the Mortgagee without any
notice to or approval of the Mortgagor. Nothing contained in this Deed shall
constitute any consent or request by Mortgagee, express or implied, for the
performance of any labor or services or the furnishing of any materials or other
property in respect of the Mortgaged Property or any part thereof, nor as giving
Mortgagor any right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of any materials or other
property in such fashion as would permit the making of any claim against
Mortgagee in respect thereof or any claim that any lien based on the performance
of such labor or services or the furnishings of any such materials or other
property is prior to the lien of this Mortgage.
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TWENTY-FIFTH: Notices. All notices to and demands and requests upon or
from the Mortgagor under this Deed shall be made in the manner called for in any
pledge agreement pursuant to which the Mortgage Note has been pledged or
assigned; otherwise, such notices shall be in writing and shall be deemed to
have been properly given or made if sent by United States registered or
certified mail, postage prepaid, return receipt requested, addressed to the
Mortgagor or the Mortgagee, as the case may be, at such place as the Mortgagor
or the Mortgagee may have furnished to each other in writing. All such notices,
demands and requests shall be effective when received at the address specified
as aforesaid.
TWENTY-SIXTH: Interim Sums. The Mortgagee will have the right from time to
time to sue for any sums whether for interest, damages for failure to pay
principal or any installment thereof, taxes, or any other sums required to be
paid under the terms of this Mortgage, any pledge agreement pursuant to which
the Mortgage Note has been pledged or assigned or any other related document as
the same become due, without regard to whether or not the principal sum or any
other sum evidenced by the Mortgage Note and secured by this Mortgage becomes
due and without prejudice to the right of the Mortgagee thereafter to bring
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an action of foreclosure, or any other action, as a consequence of a Default or
Event of Default existing at the time such earlier action was commenced.
TWENTY-SEVENTH: No Credits on Account of the Debt. The Mortgagor will not
claim or demand or be entitled to any credit or credits on account of the
indebtedness secured by this Mortgage for any part of the Impositions assessed
against the Mortgaged Property or any part thereof and no deduction shall
otherwise be made or claimed from the taxable value of the Mortgaged Property,
or any part thereof, by reason of this Mortgage or the indebtedness secured by
this Mortgage.
TWENTY-EIGHTH: Inspection. The Mortgagor will permit the Mortgagee and any
representatives designated by the Mortgagee to visit and inspect the Mortgaged
Property, or any part thereof, (i) in an Emergency, at any time and (ii) at all
other times, during normal business hours and upon reasonable notice, or as
otherwise permitted pursuant to the terms of any pledge agreement pursuant to
which the Mortgage Note may have been pledged or assigned. The Mortgagee shall
not have any duty to make any such inspection and shall not incur any liability
or obligation for not making any such inspection or, once having undertaken any
such inspection, for making the inspection, not
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making the same carefully or properly, or for not completing the same; nor shall
the fact that such inspection may not have been made by the Mortgagee relieve
the Mortgagor of any obligations that it may otherwise have under this Mortgage.
TWENTY-NINTH: Actions and Proceedings. Except as otherwise provided in any
pledge agreement pursuant to which the Mortgage Note may have been pledged or
assigned, the Mortgagee shall have the right to appear in and defend any action
or proceeding brought with respect to the Mortgaged Property, and to bring any
action or proceeding, in the name and on behalf of the Mortgagor, which the
Mortgagee, in its discretion, feels should be brought to protect its interest in
the Mortgaged Property, provided that unless an Event of Default shall have
occurred and be continuing at the time the Mortgagee first appears in or brings
any such action or proceeding, prior to the Mortgagee's appearance in or
bringing of any such action or proceeding, the Mortgagee shall give the
Mortgagor notice of the Mortgagee's intention with respect thereto.
THIRTY: Officers of Mortgagee Not Liable. All covenants, stipulations,
promises, agreements and obligations of the Mortgagee contained herein shall be
deemed to be covenants, stipulations, promises, agreements and obligations of
the
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Mortgagee and not of any member of the governing body of the Mortgagee or any
officer, agent, servant or employee of the Mortgagee in his individual capacity,
and no recourse shall be had for any claim based thereon or hereunder against
any member of the governing body of the Mortgagee or any officer, agent, servant
or employee of the Mortgagee.
THIRTY-FIRST: No Charge Against Mortgagee Credit. No provision hereof
shall be construed to impose a charge against the general credit of the
Mortgagee or shall impose any personal or pecuniary liability upon any director,
official or employee of the Mortgagee.
THIRTY-SECOND: Mortgagee Not Liable. Notwithstanding any other provision
of this Deed, (a) the Mortgagee shall not be liable to the Mortgagor or any
other person for any failure of the Mortgagee to take action under this Deed
unless the Mortgagee (i) is requested in writing by an appropriate Person to
take such action and (ii) is assured of payment of or reimbursement for any
expenses in such action, and (b) except with respect to any action for specific
performance or any action in the nature of a prohibitory or mandatory
injunction, neither the Mortgagee nor any director of the Mortgagee or any other
official or employee of the Mortgagee shall be liable to the Mortgagor or
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any other person for any action taken by it or by its officers, servants, agents
or employees, or for any failure to take action under this Deed. In acting under
this Deed, or in refraining from acting under this Deed, the Mortgagee may
conclusively rely on the advice of its legal counsel.
THIRTY-THIRD: Waivers. In view of the assignment of the Mortgagee's rights
under and interest in this Deed to the Trustee by the provisions of the Trust
Agreement and in view of any pledge agreement pursuant to which the Mortgage
Note may be pledged or assigned, the Mortgagee shall have no power to waive the
performance by the Mortgagor of any provision hereunder or extend the time for
the correction of any default of the Mortgagor without the consent of the
Trustee to such waiver by the Trustee and by any such pledge agreement.
THIRTY-FOURTH: Waiver of Moratorium and Redemption. The Mortgagor, to the
full extent that it may lawfully do so, agrees that it will not at any time
insist upon, plead or in any way take advantage of and hereby waives any
redemption or moratorium law now or hereafter in force and effect which would
prevent or hinder the enforcement of the provisions of this Deed or any rights
or remedies the Mortgagee may have hereunder or by law.
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THIRTY-FIFTH: Limitation of Liability. Notwithstanding anything to the
contrary contained in this Mortgage, no recourse shall be had, whether by levy
or execution or otherwise, for the payment of the principal of or interest on,
or other amounts owed hereunder or under the Mortgage Note, or for any claim
based on this Mortgage or in respect thereof, against any partner of the
Mortgagor or any predecessor, successor or affiliate of any such partner or any
of their assets (other than from the interest of such partner in the Mortgagor),
or against any principal, partner, shareholder, officer, director, agent or
employee of any such partner (other than from the interest of any such person in
such partner), nor shall any such persons be personally liable for any such
amount or claims, or liable for any deficiency judgment based thereon or with
respect thereto, it being expressly understood that the sole remedies of the
Mortgagee with respect to such amounts and claims shall be against the assets of
the Mortgagor, including the Mortgaged Property, and that all such liability of
the aforesaid persons, except as otherwise expressly provided herein, is
expressly waived and released as a condition of and as consideration for the
execution of the Mortgage; provided, however, that (A) nothing contained in this
Mortgage (including, without limitation, the provisions of this paragraph
THIRTY-
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FIFTH) shall constitute a waiver of any indebtedness of Mortgagor evidenced
hereby or of any of the Mortgagor's other obligations under such other
instruments executed in connection herewith or shall be taken to prevent
recourse to and the enforcement against the Mortgagor, of all the liabilities,
obligations and undertakings contained in this Mortgage; (B) this paragraph
THIRTY-FIFTH shall not be applicable to a breach by any person of any
independent obligation to the Mortgagee, including, but not limited to any other
obligations of any Person under any other guarantee or indemnity agreement
executed or delivered in connection herewith or with any pledge agreement
pursuant to which the Mortgage Note is pledged or assigned and (C) this
paragraph THIRTY-FIFTH shall not be applicable to the active party in the event
of (1) fraud by such party, (2) misappropriation of funds or other property by
such party, or (3) damage to the Mortgaged Property or any part thereof
intentionally inflicted in bad faith by such party. For the purposes of the
foregoing, the term "shareholder" shall be deemed to include the shareholders of
any corporation which is shareholder of a corporation and the term "partner"
shall be deemed to include the partners of any partnership which is a partner of
a partnership.
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THIRTY-SIXTH: Satisfaction of Debt. Should the Mortgagor satisfy the
Mortgage Note or the obligations hereunder, under the Mortgage Note and under
any pledge agreement pursuant to which the Mortgage Note is pledged or assigned,
in the time and manner heretofore set forth, and comply with, and execute all
agreements and stipulations required herein, then the Mortgagee shall execute in
its favor the corresponding release and shall endorse to Mortgagor or its
nominee the Mortgage Note without recourse, representations and warranties, or
at Mortgagor's election shall endorse the same for cancellation purposes only,
delivering said Mortgage note so endorsed to the Mortgagor, except to the extent
otherwise provided in any pledge agreement pursuant to which it may have been
assigned.
ACCEPTANCE, WARNINGS AND EXECUTION.
The appearing parties accept this Deed as drafted and fully ratify and
confirm the statements contained herein as the true and exact embodiment of
their stipulations, terms and conditions. I, the Notary, made to the appearing
parties the necessary legal reserves and warnings concerning the execution of
this Deed and they were fully advised by me thereon. Specifically, I advised the
appearing parties with respect to:
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(a) The meaning and legal effects of the acts consummated pursuant to this
Deed, having asked each of the persons appearing herein whether they had any
further questions and allowing each of them ample time and opportunity to ask
questions and to understand and comprehend the meaning, legal nature and effects
of their acts;
(b) That in the execution hereof they are relying in a title report
prepared by an independent third party and not by the undersigned Notary;
(c) That any liens or encumbrances or any other matter affecting the title
to the Leasehold Estate that may be filed for recordation with the Registry of
Property prior to the filing of this Deed may be legally binding and could take
precedence over this Deed;
(d) The advisability for the Mortgagee to obtain an insurance policy
insuring its Leasehold interest;
(e) The advisability of the parties to have someone with the appropriate
expertise conduct an investigation to determine the environmental conditions of
the Leasehold Estate;
(f) That recordation at the Registry of Property of the Mortgage
constituted by this Deed is conditioned upon the recordation of the documents
described in Paragraph FIRST;
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(g) That the full effectiveness of this Deed is subordinated to the
presentation of documentary evidence confirming the authority of the persons
appearing herein.
I, the Notary, certify that this Deed was read by the persons appearing
herein; that I advised them of their right to have witnesses present at the
execution hereof, which right they waived; that I advised them of the legal
effect of this Deed; that they acknowledged that they understood the contents of
this Deed and such legal effect; and that thereupon they signed this Deed before
me and affixed their initials to each and every page hereof.
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NUMBER THREE
DEED OF LEASEHOLD MORTGAGE
In the Municipality of San Juan, Commonwealth of Puerto Rico, on this
seventh (7th) day of February, nineteen hundred ninety one (1991).
BEFORE ME
RAMON MORAN LOUBRIEL, Attorney at Law and Notary Public, with residence in
Guaynabo, Puerto Rico, and office in the Eleventh Floor of the First Federal
Savings Bank Building, Santurce, Puerto Rico.
APPEAR
AS PARTY OF THE FIRST PART: EL CONQUISTADOR PARTNERSHIP L.P., (hereinafter
referred to as the "MORTGAGOR"), a limited partnership organized and existing
under the laws of the State of Delaware and duly authorized to do business in
the Commonwealth of Puerto Rico, with taxpayer identification Number Zero Six
dash One Two Eight Eight One Four Five (06-1288145), represented herein by its
general partners Kumagai Caribbean, Inc., a corporation organized and existing
under the laws of Texas and duly authorized to do business in the Commonwealth
of Puerto Rico, taxpayer identification Number Seven Five dash Two Three Zero
Three Six Six Five (75-2303665), in turn represented by its Vice President
Mister TORU FUJITA, Social Security Number Five Hundred Seventy Five dash Forty
Nine dash One Thousand Twenty One (###-##-####), of legal age, married,
executive and resident of San Juan, Puerto Rico, and by WKA el Con Associates, a
general partnership organized existing under the Laws of the State of New York
and duly authorized to
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do business in the Commonwealth of Puerto Rico, in turn represented hereby its
Authorized Signatory Mister HUGH ALANSON ANDREWS, Social Security Number Zero
Seventy Five dash Thirty Two dash Eight Thousand Two Hundred Eighteen
(###-##-####), of legal age, married, executive and resident of San Juan, Puerto
Rico, whose authorities to appear in such capacities they will evidence whenever
and wherever requested to do so.
AS PARTY OF THE SECOND PART: THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO
RICO, (hereinafter referred to as the "MORTGAGEE"), taxpayer identification
Number Sixty Six dash Zero Three Four Eight dash Five Seven Two (66-0348-572),
and instrumentality of the Commonwealth of Puerto Rico, created by Law Number
Seventeen (17) of September Twenty Three (23), Nineteen Hundred Forty Eight
(1948) as amended, having its principal offices at the Minillas Governmental
Center in Santurce, San Juan, Puerto Rico, represented herein by its Executive
Vice President, MISTER GEORGE BARR WILSON, Social Security Number Five Thousand
Forty Five dash Seventy Eight dash Nine Thousand Eighty Three (###-##-####), who
is of legal age, married, bank executive and resident of San Juan, Puerto Rico,
who binds himself to show evidence that he has been authorized to appear on
behalf and in representation of the instrumentality, whenever and wherever so
required.
I, the subscribing Notary, do hereby certify and give faith that I
personally know the natural person(s) who appear(s) herein and I further certify
and attest, from his(her)(their) statement(s), as to his(her)(their) age(s),
civil status, profession(s) and residence(s). He(they) assure me of having, and
in my judgment he(she)(they) do(does) has(have), the necessary legal
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capacity and authority to execute this instrument and therefore, he(she)(they)
do hereby freely and voluntarily
SET FORTH
FIRST: THE LEASEHOLD ESTATE.
Mortgagor represents and warrants that it is the owner of record and holder of a
valid, good, insurable leasehold estate ("the Leasehold Estate") in the real
property and all presently existing buildings, structures and improvements
located on said real property described in paragraph TWENTY SECOND of this deed.
SECOND: THE MORTGAGE NOTE.
Simultaneously herewith Mortgagor as subscribed and issued before the
Authorizing Notary a mortgage note (hereinafter referred to as the "Note" or
"Mortgage Note"), which is copied literally in paragraph TWENTY FIRST hereof.
THIRD: CREATION OF MORTGAGE.
For the purpose of securing the payment, when and as due and payable in
accordance with the terms thereof and hereof, of the principal of the Mortgage
Note and the interest thereon, and also to secure payment of:
(a) An additional amount equal to five (5) annuities of interest as
provided in the Mortgager Note to cover accrued and unpaid interest on the
Mortgage Note;
(b) An additional amount equal to twenty per cent (20%) of the
principal sum of the Note to cover any additional sums which may be paid or
advanced by the Mortgagee and the interest that may accrue on such payments or
advances, and all other indebtedness of the Mortgagor secured by the terms
thereof;
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(c) An additional amount up to but not to exceed ten percent (10%)
of the principal amount of the Mortgage Note to cover Mortgagee's actual costs
and expenses (including attorneys' fees and expenses) incurred by Mortgagee in
the event the Mortgagee shall have recourse to foreclose or other judicial
proceedings for the collection of the Mortgage Note; and
(d) All other obligations of the Mortgagor to the Mortgagee herein
or under any other agreement secured by the pledge of the Mortgage Note; the
Mortgagor, by these presents, DOES HEREBY EXECUTE, CONSTITUTE, AND CREATE in
favor of the Mortgagee, or the future holder either by endorsement or assignment
of the Mortgage Note, a voluntary mortgage lien on the Leasehold Estate and
which mortgage lien shall extend, subject to the provisions of the Ground Lease
as hereinafter defined in paragraph TWENTY SECOND, to the following property
(hereinafter referred to collectively as the "Mortgaged Premises"):
(one) All right, title, and interest of the Mortgagor (including,
without limitation, its interest in Leasehold Estate) in the real estate
described in paragraph TWENTY SECOND hereof and all other buildings and
improvements of every kind and description now or hereafter erected or placed on
said real estate and all materials intended for construction, reconstruction,
alteration and repairs of such real estate, buildings or improvements now or
hereafter erected thereon, all of which materials shall be deemed to be included
within the Mortgaged Premises immediately upon the delivery thereof to the
Mortgaged Premises immediately upon the delivery thereof to the Mortgaged
Premises, and all other property immovable either by nature or destination now
owned or hereafter located on said real estate or in any of such other buildings
or improvements used either for its adornment or for purposes of comfort, or for
the service of
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some industries or commerce, operated, conducted or exploited by Mortgagor on
the Mortgaged Premises, even though the aforesaid shall have been attached to
the same after constitution of this Mortgage;
(two) All rents, issues, proceeds and profits accruing and to accrue
from the Mortgaged Premises;
(three) All fixtures and articles of movable property nor or
hereafter owned by the Mortgagor and attached to or contained in or used in
connection with the said real estate, including but not limited to all
partitions, furniture, furnishings, apparatus, machinery, motors, transformers,
elevators, fittings, radiators, gas ranges, ice boxes, mechanical refrigerators,
awnings, shades, screens, blinds, drapes, office equipment, word processors,
computers, typewriters, telephone and communications equipment and
installations, kitchen, bar-room and restaurant equipment, plates, forks,
knives, napkins, tablecloths, tables, glasses, chinaware, cups, cooking
equipment and installations, laundry, ventilating, refrigerating, incinerating,
electrical appliances, television sets, radios, beds, vanities, chairs, mirrors,
pillows, curtains, blankets, sheets, towels, bathroom equipment, mattresses, box
springs, sprinkler equipment, carpeting and other furnishings and all plumbing,
heating, lighting, cooking, laundry, ventilating, refrigerating, incinerating,
air conditioning and sprinkler equipment and fixtures and appurtenances thereof;
and all renewals or replacements thereof or articles in substitution therefor,
whether or not the same are or shall be attached to said buildings or structures
in any manner, it being agreed that all the aforesaid property owned by the
Mortgagor and placed by it on said real estate or on or in such buildings or
improvements located thereon have been specially designed for use in connection
with the operation of a hotel, and shall, so far as
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permitted by law, be deemed to be immovable property, security for the said
indebtedness and covered by the mortgage hereby constituted, and as to the
balance of the property aforesaid, this deed shall be deemed to be as well a
security interest in said property, securing the said indebtedness, for the
benefit of the Mortgagee;
(four) All insurance proceeds allowable to the Mortgagor in the
event of any damage or destruction of the Mortgaged Premises; and
(five) All awards and other payments allowable to Mortgagor in
respect of taking of all or any part of the Mortgaged Premises, or any other
interest therein, or right accruing thereto, as the result of or in lieu or in
anticipation of the exercise of the right of condemnation or eminent domain, or
a change of grade affecting the Mortgaged Premises or any part thereof.
(six) Spreader of Mortgage to Fee. So long as any of the
indebtedness secured hereby or by any pledge agreement pursuant to which the
Mortgage Note has been pledged or assigned shall remain unpaid, (unless the
Mortgagee shall otherwise consent), the Mortgagor covenants and agrees that, in
case it shall become the owner in fee simple ("pleno dominio") of the Leasehold
Estate, by purchase or otherwise, this Mortgage shall attach to and over and be
a lien upon the Estate so acquired. Mortgagor further agrees and consents to
execute, acknowledge, deliver and record, at its sole cost and expense, all such
instruments necessary to attach to this Mortgage the Estate so acquired.
The Mortgagor hereby warrants and agrees that all of the property
comprising the Mortgaged Premises, taken together, constitutes and will
constitute an integrated business unit.
FOURTH: RECORDING.
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The Mortgagor will at all times cause this deed and the mortgage lien hereby
constituted and any supplement hereto or thereto to be recorded, registered, and
filed in the proper Registry or Registries of Property and otherwise filed in
such manner and in such other place as may be required in order to establish,
create, protect and preserve the lien hereof as a mortgage lien encumbering the
Mortgaged Premises, subject to no liens, charges, encumbrances, encroachments,
reservations, restrictions, defects or claims of any kid, with the exception of
any specific liens or easements described in paragraph TWENTY SECOND, and comply
with all statutes and regulations relating thereto. The parties state that since
the Mortgage Note collaterally secures a loan to promote and develop the
economy, the original of this deed and its certified copy shall be exempt from
cancelling internal revenue stamps, as otherwise required by law and also exempt
from the payment of the recording rights thereof in the Registry of the
Property. The Mortgagee will reimburse the authorizing notary any internal
revenue stamps that it may be required to cancel in the original and/or copy of
this deed. The Mortgagor will execute, protocolize, deliver and record all such
other instruments and take all such other action as the Mortgagee from time to
time may reasonably request for the purpose of further assuring to the Mortgagee
the properties and rights now or hereafter subjected to the line of the mortgage
lien hereby constituted or intended so to be. In the event that any Registrar of
Property to whom a certified copy of this deed shall be presented for
recordation shall reject the same for any reason or shall record this deed
against the Mortgaged Premises, junior to any other, lien or encumbrance other
than those specifically described in paragraph TWENTY SECOND hereof, then upon
such rejection becoming final and beyond appeal, the debt evidenced by the
Mortgage Note shall become totally due and the Mortgagee may proceed to its
collection judicially.
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FIFTH: AGREED VALUE.
In compliance with the pertinent and applicable provisions of the Mortgage Law
of Puerto Rico, as amended, and for the purpose of foreclosure of the Mortgage,
and for no other purpose, the Mortgagor hereby declares and agrees with the
Mortgagee that the value of the Mortgaged Premises is appraised at the sum
stated under the title "Foreclosure Valuation" of paragraph TWENTY THIRD hereof
and the Mortgagor waives any new appraisal.
SIXTH: ADDITIONAL COVENANTS.
The Mortgagor further covenants and agrees with the Mortgagee as follows:
A. The Mortgagor will pay promptly the principal of and interest on,
and all other obligations set forth in the Mortgage Note, at the place, in the
currency, at the times and in the manner herein and in the Mortgage Note
provided.
B. To the extent of its obligations under the Ground Lease,
Mortgagor will pay as they become due all:
(i) Taxes, assessments, water rates, sewer rentals and other
governmental or municipal or public dues, charges, fines and other impositions
and premiums on fire, rental value, and other insurance;
(ii) Rental, additional rentals and other charges mentioned and
payable under the Ground Lease.
Upon prior notice to Mortgagor, the Mortgagee shall have the right
to make any such payment notwithstanding that at the time any such tax,
assessment, charge or imposition is then being protested or contested by
Mortgagor, unless, upon not less than thirty (30) days prior to the due date
thereof, the Mortgagor shall have notified the Mortgagee, in writing, of
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such protest or contest, in which event, as the case may be, the Mortgagee shall
make such payment under protest in the manner prescribed by law or shall
withhold such payment; provided, however, that such contest shall preclude
enforcement of collection and the sale of the Mortgaged Premises in satisfaction
of such tax, assessment, charge or imposition.
C. The Mortgagor will promptly perform and observe all of the terms,
covenants and conditions required to be performed and observed by the Mortgagor
under the Ground Lease, within the grace periods provided in the Ground Lease,
and will do all things necessary to preserve and to keep unimpaired its rights
under the Ground Lease. The Mortgagor will use its best efforts to obtain
performance by the lessor of its obligations under the Ground Lease, to the end
that the Mortgagor may enjoy all of the rights granted to it under the Ground
Lease.
D. The Mortgagor will promptly notify the Mortgagee of any default
by the Mortgagor in the performance or observance of any of the terms, covenants
or conditions on the part of the Mortgagor to be performed or observed under the
Ground Lease.
E. The Mortgagor will: (i) promptly notify the Mortgagee of the
receipt by the Mortgagor of any notice from the lessor under the Ground Lease of
default by the Mortgagor in the performance of observance of any of the terms,
covenants or conditions on the part of the Mortgagor to be performed or observed
under the Ground Lease; (ii) promptly notify the Mortgagee of the receipt by the
Mortgagor of any notice from the lessor under the Ground Lease to the Mortgagor
of termination of the Ground Lease pursuant to the provision thereof; and (iii)
promptly cause a copy of each such notice received by the Mortgagor from the
lessor under the Ground Lease to be delivered to the Mortgagee.
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F. The Mortgagor will promptly notify the Mortgagee of any request
made by either party to the Ground Lease for arbitration proceedings pursuant to
the Ground Lease and of the institution of any arbitration proceedings, and will
promptly deliver to the Mortgagee a copy of the determination of the arbitrators
in each such arbitration proceeding.
G. The Mortgagor will not subordinate or consent to the
subordination of the Ground Lease to any mortgage on the lessor's interest in
the property demised by the Ground Lease, other than as provided for under
Paragraph TWENTY SECOND hereof.
H. The Mortgagor will use best efforts within fifteen (15) days
after demand from the Mortgagee, to obtain from the lessor under the Ground
Lease and deliver to the Mortgagee a certificate that the Ground Lease is
unmodified and in full force and effect and the date to which the rentals,
additional rentals and other charges payable thereunder have been paid and
stating whether to the lessor's knowledge the Mortgagor is in default in the
performance of any covenants, agreements or conditions contained in the Ground
Lease and if so, specifying each such default.
I. The Ground Lease is valid and in full force and effect in
accordance with its terms and without modification and no default under the
Ground Lease has occurred and is continuing.
J. The execution and delivery of this Mortgage is permitted under
the Ground Lease.
K. If the term of the Ground Lease is scheduled to expire prior to
the payment in full of the indebtedness secured hereby and by any pledge
agreement pursuant to which the Mortgage Note has been pledged or assigned and
the Mortgagor has the option to renew such
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term, the Mortgagor shall effectively exercise such option and deliver to the
Mortgagee proof of such exercise, at least thirty (30) days before the
expiration of the period during which such option may be exercised. The
Mortgagor hereby irrevocably appoints the Mortgagee its attorney-in-fact, to
exercise any such options within such thirty (30) day period if the Mortgagor
has not theretofore exercised the same.
SEVENTH: TAXES.
The Mortgagor will pay taxes which may become preferential lines on the
Mortgaged Premises as provided elsewhere in this deed or in the loan agreement
of even date between the Mortgagor and the Mortgagee (the "Loan Agreement").
EIGHTH: INSURANCE.
The Mortgagor will keep the improvements existing or hereafter erected on the
Mortgaged Premises insured as may be required from time to time by the Mortgagee
against loss or damage by, or abatement of rental income resulting from fire and
such other hazards, casualties, and contingencies in such amounts and for such
periods as reasonably may be required by the Mortgagee, and will pay promptly
when due all premiums of such insurance. All such insurance shall be carried in
companies approved by the Mortgagee and the policies ad renewals thereof shall
be deposited with and held by the Mortgagee and have attached thereto the
standard noncontributing mortgage clause (in favor of and entitling the
Mortgagee to collect any and all proceeds payable under all such insurance) as
well as the standard waiver of subrogation endorsement, all to be in and
acceptable to the Mortgagee. The insurance proceeds shall be applied in the
manner provided in the Loan Agreement between Mortgagor and Mortgagee dated on
the same date of this Deed of Mortgage (the "Loan Agreement"). The Mortgagor
shall not
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carry separate insurance, concurrent in kind or form and contributing, in the
event of loss, with any insurance required hereunder. In the event of a change
in ownership or of occupancy of the Mortgaged Premises, immediate notice thereof
by mail shall be delivered to all insurers and in the event of loss, the
Mortgagor will give immediate written notice to the Mortgagee.
In the event of foreclosure of the mortgage hereby constituted, or
other transfer of title to the Mortgaged Premises or any portion thereof in
extinguishment of the indebtedness secured hereby, all right, titled, and
interest of the Mortgagor in any to any insurance policies then in force shall
pass to the purchaser or grantee.
The Mortgagor will also carry and maintain such liability and
indemnify insurance as may be required from time to time by the Mortgagee in
forms, amounts and with companies satisfactory to the Mortgagee.
NINTH: MAINTENANCE OF MORTGAGED PREMISES.
The Mortgagor will not alter, remove or demolish any building or other
improvement now existing or hereafter erected on the Mortgaged Premises or
sever, remove, sell or mortgage any fixture or appliance on, in or about said
buildings or improvements or any other property included in the Mortgaged
Premises without the consent of the Mortgagee other than in the ordinary course
of business; and in the event of the demolition or destruction in whole or in
party of any of the fixtures or articles of movable property covered by the
mortgage hereby constituted, the same shall be replaced promptly by similar
fixtures and articles of movable property at least equal in quality and
condition to those replaced, free from any security interest in or encumbrance
thereon or reservation of title thereto; will not permit, commit or suffer any
waste, impairment or deterioration of the Mortgaged Premises or any part
thereof; will keep and
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maintain the Mortgaged Premises and every part thereof, including the buildings,
fixtures, machinery and appurtenances and adjoining sidewalks, parking areas,
roadways and means of ingress and egress in reasonably good repair and
conditions; will effect such repairs as the Mortgagee may reasonably require and
make all needful and proper replacements so that said building, fixtures,
machinery, appurtenances, sidewalks, parking areas, roadways and means of
ingress and egress will at all time be in good condition, fit and proper for the
respective purposes for which they were originally erected or installed; will
comply with all statutes, orders, requirements or decrees relating to the
Mortgaged Premises by any Commonwealth, municipal or other governmental
authority; will observe and comply with all conditions and requirements
necessary to preserve and extend any and all rights, licenses, permits
(including, but not limited to, zoning variances, special exceptions and
non-conforming uses), privileges, franchises, and concessions which are
applicable to the Mortgaged Premises or which are applicable to the Mortgaged
Premises or which have been granted to or contracted for by the Mortgagor in
connection with any existing or presently contemplated use of the Mortgaged
Premises; and will permit the Mortgagee or its agents, at all reasonable times
to enter into and inspect the Mortgaged Premises. The Mortgagee shall have the
right at any time provided that there is reasonable cause to suspect that the
proper maintenance of the Mortgaged Premises has not been undertaken, to engage
an independent realtor to survey the adequacy of the maintenance of the
Mortgaged Premises, and to require the Mortgagor, by notice in writing, to make
such repairs and replacements thereof as such realtor shall determine to be
necessary in order to protect and preserve the rentability and usability of the
Mortgaged Premises, it being understood that the Mortgagor shall reimburse the
Mortgagee for the cost of such survey unless the same
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determines such maintenance to be reasonably adequate, in which case the cost
thereof shall be at the expense of the Mortgagee.
TENTH: SUBSEQUENT LIENS.
The Mortgagor will not voluntarily create or permit to be created or filed
against the Mortgaged Premises, or any part thereof, any mortgage lien or other
lien or liens inferior or superior to the lien of the mortgage hereby
constituted, and will keep and maintain the Mortgaged Premises free from the
claim of any persons supplying labor or materials for the construction of any
buildings or other improvements on the Mortgaged Premises, notwithstanding by
whom such labor or materials may have been contracted, except for a third
mortgage lien to be constituted as security for advances to be made by the
Partners of Mortgagor, or except for purchase money mortgages on personal
property subsequently acquired by Borrower not for the purposes of substituting
or replacing previously existing personal property and to be used in the
Mortgaged Premises, if such personal property, due to its nature does not become
real property by having been used at or incorporated to the Mortgaged Premises,
and as may be provided under the Loan Agreement.
ELEVENTH: PLEDGE:
In the event that the Mortgage Note is assigned or pledged or otherwise
encumbered as collateral security for the payment of any other note or debt of
the Mortgagor or of any other person, the Mortgagor agrees that the Mortgagee
shall have and may exercise all rights, remedies, powers and privileges provided
herein or now or hereafter existing at law, in equity, by statute, or otherwise,
in favor of Mortgagee, including, but not limited to that of foreclosing this
mortgage without first foreclosing the pledge or other lien so constituted upon
the Mortgage Note, to the same extent and with the same force and effect as if
the Mortgage Note had been assigned or
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transferred directly to Mortgagee rather than assigned or pledged as collateral
security, provided that nothing contained in this paragraph ELEVENTH shall
relieve Mortgagor from the obligation to comply wit the terms of the pledge
agreement or other instrument under which the Mortgage Note is assigned or
pledged.
TWELFTH: INDEMNITY.
The Mortgagor will hold harmless and indemnify the Mortgagee from and against
all costs and expenses, including reasonably attorneys' fees and costs of a
title search, continuation of abstract and preparation of survey, incurred by
reason of any action, suit, proceeding, hearing, motion or application before
any court or administrative body (excepting an action to foreclose or to collect
the debt secured hereby), in and to which the Mortgagee may be or become a party
by reason hereof, including but not limited to condemnation, bankruptcy, probate
and administration proceedings, as well as any other of the foregoing wherein
proof of claim is by law required to be filed or in which it may be necessary to
defend or uphold the terms and the lien created by the mortgage hereby
constituted.
THIRTEENTH: CONDEMNATION.
The Mortgagor hereby assigns to the Mortgagee all rights of the Mortgagor to any
awards or other compensation heretofore or hereafter to be made to the present
and all subsequent owners of the Mortgaged Premises for any taking by eminent
domain, either permanent or temporary, of all or any part of the Mortgaged
Premises or any easement or appurtenance thereof, including severance and
consequential damage and change in grade of streets, and hereby irrevocably
authorizes and empowers the Mortgagee, in the name of the Mortgagor or
otherwise, to prosecute what would be the Mortgagor's claim for any such awards
or compensation, to collect
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and receive the proceeds of any such claim, to give proper receipts and
acquittances therefor and, after deducting expenses of collection, to apply the
net proceeds in accordance with the terms of the Loan Agreement. The Mortgagor
will give the Mortgagee immediate notice of the actual or threatened
commencement of any such proceedings under eminent domain and will deliver to
the Mortgagee copies of any and all papers served in connection with such
proceedings. The Mortgagor further covenants and agrees to make, execute, and
deliver to the Mortgagee, at any time or times upon request, any and all further
assignments and/or instruments deemed necessary by the Mortgagee for the purpose
of validly and sufficiently assigning all awards and other compensation
heretofore and hereafter to be made to the Mortgagor (including the assignment
of any award from the United States government at any time after the allowance
of the claim therefor, the ascertainment of the amount thereof and the issuance
of the warrant for payment thereof) for any taking, either permanent or
temporary, under any such proceeding. The proceeds of any condemnation award
shall be applied as provided for under the Loan Agreement.
FOURTEENTH: MORTGAGOR'S CERTIFICATE.
The Mortgagor will, upon ten (10) business days' prior written request by the
Mortgagee, but not more than twice in any calendar year, furnish the Mortgagee a
written statement duly acknowledged of the amount due upon the mortgage hereby
constituted and whether any offset or defenses exist against the mortgage debt.
FIFTEENTH: BOOKS AND RECORDS.
The Mortgagor will keep the maintain full and correct books and records showing
in detail the earnings and expenses of the Mortgaged Premises and will permit
the Mortgagee or its
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representative to examine such books and records and all supporting vouchers and
data at any time and from time to time on request at its offices, hereinbefore
identified, or at such other location as may be mutually agreed upon and
following the expiration of each fiscal year the Mortgagor will furnish to the
Mortgagee a statement showing in detail all such earnings and expenses since the
last such statement, prepared by an independent certified public accountant
acceptable to the Mortgagee in accordance with generally accepted accounting
principles, including also, if so requested, statements from all tenants of the
Mortgaged Premises showing all sales made therein, together also with a current
rent roll of the Mortgaged Premises showing with respect to each tenancy: the
name of the tenant, the space occupied, the date and term of such lease, the
amount of annual rental and additional rental and all renewal and termination
options; and in the event that the Mortgagor shall refuse or fail to furnish any
statement as aforesaid, or in the event such statement shall be inaccurate or
false, or in the event of the failure of the Mortgagor or any subsequent owner
to permit the Mortgagee or its representative to inspect the Mortgaged Premises
or the said books and record on request, the Mortgagee may consider such acts of
the Mortgagor as a default hereunder and proceed in accordance with the rights
and remedies afforded it at law and under the provisions of this deed.
SIXTEENTH: ADVANCES AND EXPENSES.
Upon default by the Mortgagor in the performance of any material terms,
covenants or conditions in this deed or in the Note contained, the Mortgagee
may, at its option and whether electing to declare the whole indebtedness due
and payable or not, upon prior written notice to the Mortgagor, perform the same
without waiver of any other remedy, and any amount paid or advanced by the
Mortgagee in connection therewith, and any other costs, charges, and expenses
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incurred by the Mortgagee in the protection of the Mortgaged Premises or the
maintenance of the lien of the mortgage hereby constituted are hereby secured by
the lien of said mortgage up to an amount equal to twenty per cent (20%) of the
principal sum of the Mortgage Note, shall be repayable by the Mortgagor on
demand, with interest at the rate set forth in the Mortgage Note and shall
constitute and additional indebtedness secured in this Mortgaged.
Failure by Mortgagor to give notice, shall in any manner affect the
guarantee herein provided for such payments or advances.
SEVENTEENTH: DEFAULTS, RIGHTS, AND REMEDIES.
Upon default in the payment of any installment of principal and/or interest when
due under the Mortgage Note or in the payment, when due, of any other obligation
set forth in the Mortgage Note, or in any of the payments required to be made
under this deed, or upon default in the performance of observance of any of the
other terms, covenants, conditions or warranties herein contained, or under any
other written agreement with the Mortgagee, or should any proceedings under the
Bankruptcy Law of the Untied States or any similar law be brought by or against
the Mortgagor or should a receiver be appointed for any properties of the
Mortgagor by any court in a proceeding wherein the Mortgagor is alleged to be
insolvent or unable to pay its debts as they mature, then in any such event, at
the option of the Mortgagee, the principal of and all other sums evidenced by
the Mortgage Note plus accrued interest thereon to that date, and all other sums
secured by the mortgage hereby constituted shall, without notice, become
immediately due, demandable, and payable as fully as if it had been stipulated
that all such sums would be due on that date and the Mortgagee, with or without
entry, personally or by attorney, at its option, may proceed to protect and
enforce its rights hereunder by suit or suits in equity
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or action or actions by law, whether for specific performance of any covenant or
agreement contained herein or in aid of the execution of any power herein
granted, or for the foreclosure of the mortgage hereby constituted and the sale
of the Mortgaged Premises or for the enforcement of any other appropriate legal
or equitable remedy as the Mortgagee shall deem most effectual to protect and
enforce any of its rights or duties hereunder.
Upon any such default by the Mortgagor and following the acceleration of
mature as aforesaid tender of payment of the amount necessary to satisfy the
entire indebtedness secured hereby made at any time prior to foreclosure sale
(including sale under power of sale hereunder), by the Mortgagor, its successors
or assigns, or by anyone on behalf of the Mortgagor, its successors or assigns,
shall constitute an evasion of the payment terms hereunder and shall be deemed
to be a voluntary prepayment hereunder, and any such payment, to the extent
permitted by law, will therefore include the exit fee, if any, required under
the prepayment privilege, contained in the Mortgage Note, or the Loan Agreement.
In connection with any judicial proceedings initiated by the Mortgagee
under the Mortgage Note or this deed the Mortgagee may petition the court having
jurisdiction in the premises to appoint a receiver, and said court shall appoint
said receiver for the Mortgaged Premises and of all the rents, issues, income,
profits and yields of any nature derived from the Mortgaged Premises, which
receiver shall have the broadest powers and faculties usually granted to a
receiver by the court. Such appointment shall be made by the court as a matter
of absolute right granted to the Mortgagee, without taking into consideration
the value of the Mortgaged Premises or the solvency or insolvency of the
Mortgagor or defendants, and regardless of whether the Mortgagee has an adequate
remedy at law. All of said rents, income issues, profits
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and yield shall be employed by the receiver in conformity with the terms of the
mortgage hereby constituted and the rulings of said court.
The remedies provided for herein shall be cumulative and not exclusive.
The failure of the Mortgagee to exercise the option for acceleration of
maturity and/or foreclosure following any default as aforesaid or to exercise
any other option granted to the Mortgagee in any one or more instances and the
acceptance by the Mortgagee of partial payments hereunder shall not constitute a
waiver of any such default nor extend or affect the grace period, if any, but
such option shall remain continuously in force.
Acceleration of maturity, once claimed hereunder by the Mortgagee, may, at
the option of the Mortgagee, be rescinded by written acknowledgement to that
effect by the Mortgagee, but the tender and acceptance of partial payments alone
shall not in any way affect or rescind such acceleration of maturity, nor extend
or affect the grace period, if any.
EIGHTEENTH: ASSIGNMENT.
As further security for the payment of the indebtedness hereby secured, the
Mortgagor hereby irrevocably assigns, transfers, and sets over to the Mortgagee
all of the Mortgagor's right, title, and interest in and to all leases and/or
subleases (hereinafter referred to collectively as "leases") affecting the
Mortgaged Premises to which the Mortgagor is or hereafter shall be a party,
together with any and all further leases upon all or any part of the Mortgaged
Premises and together will all of the rents, income, receipts, revenues, issues
and profits from or due or arising out of the Mortgaged Premises, it being
understood that the Mortgagor will from time to time, promptly upon request by
Mortgagee, execute and deliver to the Mortgagee a specific, present, and
irrevocable assignment satisfactory in substance and form to the Mortgagee, of
all
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of the Mortgagor's right, title, and interest in, to, and under each lease
affecting the Mortgaged Premises, it being understood and agreed that every such
lease shall be subordinate to the lien of the mortgage hereby constituted. The
Mortgagor will promptly give the Mortgagee notice in the event that the tenant
under any such lease of the Mortgaged Premises shall institute any judicial or
administrative proceeding under the Reasonable Rents Act of Puerto Rico or any
similar statute at the time in effect for the reduction of the rent payable by
such tenant.
NINETEENTH: RELEASES.
The Mortgagee may, without notice and without regard to the consideration, if
any, paid therefor, and notwithstanding the existence at that time of any
inferior liens thereof, release any part of the security described herein or by
any person liable for any indebtedness secured hereby, without in any way
affecting the priority of the lien of the mortgage hereby constituted, to the
full extent of the indebtedness remaining unpaid hereunder, upon any part of the
security not expressly released, and may agree with any party obligated on said
indebtedness or having any interest in the security described herein to extend
the time for payment of any part or all of the indebtedness secured hereby. Such
agreement shall not in any way release or impair the lien of said mortgage, but
shall extend such lien as against the title of all partes having any interest in
said security which interest is subject to such lien.
In the event the Mortgagee (i) releases, as aforesaid, any party of the
security described herein or any person liable for any indebtedness secured
hereby; or (ii) grants an extension of time for any payments of the indebtedness
secured hereby; or (iii) takes other or additional security for the payment
thereof; or (iv) waives or fails to exercise any right granted in this deed or
in the Note, said act or omission shall not release the Mortgagor or any make,
endorser or
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surety of the mortgage hereby constituted or of the Note or under any covenant
of this deed or of the Note, nor preclude the Mortgagee from exercising any
right, power or privilege herein granted or intended to be granted in the event
of any other default then made or any subsequent default.
TWENTIETH: MISCELLANEOUS.
Mortgagor will not exercise any right which he might have to cancel the record
of the Mortgage by reason of lapse of time counted from the date of the
constitution of the Mortgage either under the applicable provisions of the
Mortgage Law or otherwise and further agrees, whenever requested by the
Mortgagee, to execute and file in the appropriate Registry, at Mortgagor's costs
and expense, any and all supplemental instruments which may be necessary or
convenient for the preservation of the lien of the mortgage until full payment
of the Mortgage Note or debt so secured by the lien upon the Mortgaged Premises.
Without limiting the generality of the foregoing, Mortgagor agrees that:
(a) Unless the Mortgagee shall consent in writing to the
cancellation of the Mortgage at an earlier date, the Mortgage shall be
conclusively presumed to subsist until full payment to the Mortgagee of all
amounts lent and secured hereunder, and the Mortgagor does hereby waive any
right which he might otherwise have under the Mortgage Law of Puerto Rico to
apply for an earlier cancellation of the record of the Mortgage.
(b) The Mortgagor will give immediate notice by mail to the
Mortgagee of any conveyance, transfer or change of ownership or of occupancy of
the Mortgaged Premises or any part thereof.
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(c) Nothing herein contained nor any transaction related thereto
shall be construed or shall operate, either presently or prospectively, to
require the Mortgagor to make any payment or do any act contrary to law, but if
any clause and provision herein contained shall otherwise so operate to
invalidate the mortgage hereby constituted, in whole or in part, then such
clause and provision shall be held for naught as though not herein contained and
the remainder of this deed shall remain operative and in full force and effect.
(d) The Mortgagor will, within ten (10) days after written request
by the Mortgagee, execute, acknowledge, and deliver to the Mortgagee a chattel
mortgage, security agreement or other similar security instrument in form
satisfactory to the Mortgagee, covering all property of any kind whatsoever
owned by the Mortgagor, which, in the reasonable opinion of the Mortgagee, is
required for the operation of the Mortgaged Premises and may not be covered by
the lien of the mortgage hereby constituted under the laws of the Commonwealth
of Puerto Rico, and will further execute, acknowledge and deliver any financing
statement, affidavit, continuation statement or certificate or other document
requested by the Mortgagee in order to perfect, preserve, maintain, continue and
extend the security interest under and the priority of such chattel mortgage or
other security instrument, it being understood that the Mortgagor will pay to
the Mortgagee on demand all costs and expenses incurred by the Mortgagee in
connection with the preparation, execution, recording and filing of any such
document.
(e) Whenever in this deed or in the Mortgage Note or by law, notice
or demand shall be required to be given by the Mortgagee to the Mortgagor, such
notice or demand shall be sufficient if in writing and delivered to an officer
or employee of the Mortgagor, or if
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mailed to the Mortgagor addressed to it at its last address actually furnished
to the Mortgagee or at the Mortgaged premises.
(f) In the event of the sale or transfer by operation of law, or
otherwise, of all or any part of the Mortgaged Premises, the Mortgagee is hereby
authorized and empowered to deal with such vendee or transferee with reference
to the Mortgaged Premises, or the debt secured hereby, or with reference to any
of the terms or conditions hereof, as fully and to the same extent as it might
with the Mortgagor, without in any way releasing or discharging the Mortgagor
from its liability or undertakings hereunder. The term "Mortgagor" as used
herein shall mean and include the Mortgagor appearing herein and any title
holder, in whole or in part, of the Mortgaged Premises.
(g) All of the covenants hereof shall run with the Mortgaged Premises.
TWENTY FIRST: THE MORTGAGE NOTE.
The Mortgage Note referred to in paragraph SECOND of this deed is literally
transcribed herein as follows:
"MORTGAGE NOTE
FOR VALUE RECEIVED, the undersigned, El Conquistador Partnership L.P.
hereby promises to pay to the order of THE GOVERNMENT DEVELOPMENT BANK FOR
PUERTO RICO, on demand, at such place as may be designated in writing by said
payee or holder the principal sum of FIVE HUNDRED THOUSAND DOLLARS ($500,000.00)
in lawful money of the United States of America together with interest in like
lawful money on the decreasing balance of the aforesaid principal sum until paid
and throughout its life or through any period of non-payment, default, and after
maturity, also payable on demand, at an annual variable interest rate to be
computed on the basis of a three hundred sixty (360) days year equivalent to the
London Interbank Offered Rate (LIBOR) as described on page 3750 of the
Telerate's System at 11:00 A.M. (London Time) for a three (3) month period, plus
ninety (90) basis points (LIBOR plus 0.9%). The initial interest rate on this
Mortgage Note shall be Seven point Five Twenty Five Percent (7.525%) per annum.
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Anything herein to the contrary notwithstanding, if the rate of interest
required to be paid hereunder exceeds the rate lawfully chargeable, the rate of
interest to be paid shall be automatically reduced to the maximum rate lawfully
chargeable so that no amounts shall be charged which are in excess thereof, and,
in the event it should be determined that any excess over such highest lawful
rate has been charged or received, the payee or holder hereof shall promptly
refund such excess to the undersigned; provided, however, that, if lawful, any
such excess shall be paid by the undersigned to the payee or holder hereof as
additional interest (accruing at a rate equal to the maximum legal rate minus
the rate provided for hereunder) during any subsequent period when regular
interest is accruing hereunder at less that the maximum legal rate.
In case of recourse to the courts by the payee or holder of this Mortgage
Note, including but not limited to collection, foreclosure and Bankruptcy Code
proceedings, in order to collect the whole; or any portio of the principal and
interest due on this Mortgage Note, the undersigned agree(s) to pay up to a
maximum of ten percent (10%) of the principal amount of the Mortgage Note, to
cover actual court costs, disbursements and reasonable attorneys' fees.
The undersigned, and all others who may become liable for all or any part
of this obligation jointly and severally waive demand, presentment, protest,
notice of dishonor and non-payment, and any and all lack of diligence or delays
in collection or enforcement hereof.
The payment of this Mortgage Note is secured by a mortgage constituted
pursuant to the terms of Deed Number 3, execute on the 7th day of February,
1991, before Notary Ramon Moran Loubriel, and the payee or bearer hereof is
entitled to the benefit and security of all of the provisions and conditions set
forth in said Deed of Mortgage.
No reference herein to the Deed of Mortgage shall alter or impair the
obligation of the undersigned hereon, which is continuing, absolute and
unconditional, nor shall such reference affect the negotiability hereof under
the Negotiable Instruments Law of Puerto Rico. Nevertheless, the obligations of
the undersigned under this Mortgage Note shall be non-recourse, payable solely
from the security constituted by the Mortgage securing payment of this Mortgage
Note.
IN WITNESS WHEREOF, the undersigned has caused this Mortgage Note to be
executed at San Juan, Puerto Rico, this 7th day of February, 1991.
(Signed): El Conquistador Partnership, L.P.
By: Kumagai Caribbean, Inc.
(Signed): Toru Fujita - Vice President
By: WKA el Con Associates
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(Signed): Hugh Alanson Andrews - Authorized Signatory
Affidavit Number: 4656
Subscribed and acknowledged to before by Mr. Toru Fujita and Mr. Hugh
Alanson Andrews, both of legal age, married, business executives and residents
of San Juan, Puerto Rico, this 7th day of February, 1991.
(Signed): RAMON MORAN LOUBRIEL
NOTARY PUBLIC".
TWENTY SECOND: DESCRIPTION OF THE MORTGAGED PREMISES:
The description of the Mortgaged Premises is as follows:
"RUSTICA: Predio compuesto de Cien (100) cuerdas, equivalentes a Treinta y
Nueve (39) hectareas, Treinta (30) areas y Cuatro (4) centiareas, terreno
quebrado y llano, destinado a pastos, situado en el islote denominado Palomino,
en el Mar Caribe y frente al Puerto de Fajardo, al Este del mismo, colinda por
sus cuatro puntos cardinales con el mencionado Mar Caribe.
Enclava una casa y un ranchon para peones y distintas cercas".
TITLE, LIENS, AND ENCUMBRANCES
The Leasehold Estate is recorded at page thirty six overleaf (36 vto.) of
volume three hundred twenty six (326) of Fajardo, Registry of Property of Puerto
Rico, Property Number Five Hundred Fifty (550).
The Leasehold of the Mortgagor was constituted by Alberto Bachman Umpierre
and Lillian Bachman Umpierre, as lessor, in favor of the Mortgagor, as lessee,
for a term of thirty two (32) years commending on the first (1st) day of
December, nineteen hundred and ninety (1990), subject to an option to renew on
the same terms and conditions, for two additional consecutive five (5) years
periods, as per that certain ground lease recorded as Deed Number Twelve (12) of
December fifteen (15), nineteen hundred and ninety (1990) before Notary Public
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Silvestre M. Miranda (the "Ground Lease"), which is pending recording at Entry
number Five Hundred and Eighty (580) of Volume Thirty Nine (39) at Page Two
Hundred and Ninety (290) of the Book of Daily Entries of the Registry of
Property, Fajardo Section, as modified by agreement dated January thirty first
(31st.), nineteen hundred ninety one (1991).
Mortgagor represents that the above described Mortgaged premises is free
and clear, by its origin and by itself, of any and all liens and encumbrances
other than a first and prior mortgage in the principal amount of TWO MILLION
DOLLARS ($2,000,000.00) constituted pursuant to Deed of Leasehold Mortgage
Number Two (2) executed this same date before Notary Public Leonor Aguilar
Guerrero to secure payment of a Mortgage Note for the same principal amount.
TWENTY THIRD: FORECLOSURE VALUATION.
The foreclosure valuation of the Leasehold Estate comprising the Mortgaged
Premises is equal to the sum of the principal of the Mortgage Note the payment
thereof secured by the line of the Mortgage hereby constituted, which Mortgage
Note is transcribed in paragraph TWENTY FIRST of this Deed.
TWENTY FOURTH: LIMITATION OF LIABILITY.
Notwithstanding anything to the contrary contained in this Mortgage, no recourse
shall be had, whether by levy or execution or otherwise, for the payment of the
principal of or interest on, or other amounts owed hereunder or under the
Mortgage Note, or for any claim based on this Mortgage or in respect thereof,
against any partner of the Mortgagor or any predecessor, successor or affiliate
of any such partner or any of their assets (other than from the interest of such
partner in the Mortgagor), or against any principal, partner, shareholder,
officer, director,
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agent or employee of any such partner (other than from the interest of any such
person in such partner), nor shall any such persons be personally liable for any
such amount or claims, or liable for any deficiency judgment based thereon or
with respect thereto, it being expressly understood that the sole remedies of
the Mortgagee with respect to such amounts and claims shall be against the
assets of the Mortgagor, including the Mortgaged Property, and that all such
liability of the aforesaid persons, except as otherwise expressly provided
herein, is expressly waived and released as a condition of and as consideration
for the execution of the Mortgage; provided, however, that (A) nothing contained
in this Mortgage (including, without limitation, the provisions of this
paragraph TWENTY FOURTH shall constitute a waiver of any indebtedness of
Mortgagor evidenced hereby or of any of the Mortgagor's other obligations under
such other instruments executed in connection herewith or shall be taken to
prevent recourse to and the enforcement against the Mortgagor, of all the
liabilities, obligations and undertakings contained in this Mortgage; (b) this
paragraph TWENTY FOURTH shall not be applicable to a breach by any person of any
independent obligation to the Mortgagee, including, but not limited to any other
obligations of any person under any other guarantee or indemnity agreement
executed or delivered in connection herewith or with any pledge agreement
pursuant to which the Mortgage Note is pledged or assigned (including without
limitation, the indemnities set forth in paragraph TWELFTH hereof) and (C) this
paragraph TWENTY FOURTH shall not be applicable to the active party in the event
of and to the extent of any claim against such party for (1) fraud by such
party, (2) misappropriation of funds or other property by such party, or (3)
damage to the Mortgaged Property or any part thereof intentionally inflicted in
bad faith by such party. For the purposes of the foregoing, the term
"shareholder" shall be deemed to include the
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shareholders of any corporation which is a shareholder of a corporation and the
term "partner" shall be deemed to include the partners of any partnership which
is a partner of a partnership.
TWENTY FIFTH: ENVIRONMENTAL MATTERS.
(a) Hazardous Substances. Except to the extent that failure to
comply would not have a material adverse effect on the Mortgagor or the
Mortgaged Premises and/or not result in or create a lien of any kind upon the
Mortgaged Premises, the Mortgagor shall:
(i) not store (except in compliance with all laws, ordinances,
and regulations pertaining thereto), dispose of, release or allow the release of
any hazardous substance, solid waste or oil, as defined in forty-two (42) United
States Code ("USC") Sections nine six zero one (9601) et seq., forty-two (42)
USC Sections six nine zero one (6901) et seq., fifteen (15) USC Sections two six
zero one (2601 et seq., and the regulations promulgated thereunder, and all
applicable federal, state and local laws, rules and regulations, on the
Mortgaged Premises;
(ii) neither directly nor indirectly transport or arrange for
the transport of any hazardous substance or oil (except in compliance with all
laws, ordinances and regulations pertaining thereto);
(iii) in the event of any change in the laws governing the
assessment, release or removal of hazardous material, which change would lead a
prudent lender to require additional testing to avail itself of any statutory
insurance or limited liability, take all such action (including, without
limitation, the conducting of engineering tests at the sole expense of the
Mortgagor) to confirm that no hazardous substance or oil is or ever was stored,
released or disposed of or on the Mortgaged Premises; and
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(iv) provide the Mortgagee with written notice: (aa) upon the
Mortgagor obtaining knowledge of the release of any hazardous substance or oil
at or from the Mortgaged Premises; (bb) upon the Mortgagor's receipt of any
notice to such effect from any federal, state, or other governmental authority
or making an assessment of any expense incurred in connection with the
containment, removal or remediation of any hazardous substance or oil at or from
the Mortgaged Premises, for which the Mortgagor may be liable or for which
expense a lien may be imposed on the Mortgaged Premises.
For purposes of this section, the terms "hazardous substance" and
"release" shall have the meanings specified in the Comprehensive Environmental
Response, Compensation and Liability Act of nineteen hundred eighty (1980),
forty two (42) USC Sections nine six zero one (9601) et seq., ("CERCLA") and the
terms "solid waste" and "disposal" (or "disposed") shall have the meanings
specified in the Resource Conservation and Recovery Act of nineteen hundred
seventy six (1976), forty two (42) USC Sections six nine zero one (6901) et
seq., ("RCRA") and regulations promulgated thereunder; provided, in the event
either CERCLA or RCRA is amended so as to broaden the meaning of any term
defined thereby, such broader meaning shall apply as of the effective date such
amendment and provided further, to the extent that the laws of the jurisdiction
where the Mortgaged Premises is located establish a meaning for "hazardous
substance", "release", "solid waste", or "disposal" which is broader than
specified in either CERCLA or RCRA, such broader meaning shall apply.
(b) Environmental Assessments. In addition to the Mortgagee's rights
under Section (a)(iii), the Mortgagee may, at its election, if there is
reasonable cause to suspect some environmental damage has occurred without
regard to whether Mortgagor is in default hereunder
30
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or under the Mortgage Note, obtain one or more environmental assessments of the
Mortgaged Premises prepared by a geohydrologist, and independent engineer or
other qualified consultant or expert approved by the Mortgagee evaluating or
confirming (i) whether any hazardous substances or other toxic substances are
present in the soil or water at or adjacent to the Mortgaged Premises and (ii)
whether the use and operation of the Mortgaged Premises comply with all
applicable federal, state and local laws, rules and regulations (herein called
("Environmental Laws") relating to air quality, environmental control, release
of oil, hazardous material, hazardous wastes and hazardous substances, and any
and all other applicable environmental laws. Environmental assessments may
include detailed visual inspection of the Mortgaged Premises including, without
limitation, any and all storage areas, and the taking of soil samples, surface
water samples and ground water samples, as well as such other investigations or
analyses as are necessary or appropriate for a complete determination of the
compliance of the Mortgaged Premises and the use and operation thereof with all
applicable Environmental Laws.
TWENTY SIXTH: RECORDATION IN THE ENGLISH LANGUAGE.
Mortgagor and Mortgagee now state that this Deed has been drafted in the English
language in satisfaction of their wishes and in compliance with their wishes and
in compliance with their instructions and they further add that to prevent any
translation mistake they have agreed to request that this Deed be recorded at
the Registry of Property in the English language thus waiving by these presents
any right that they may have to have the same translated to the Spanish language
for recordation purposes.
TWENTY SEVENTH:
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The provision contained in paragraphs EIGHTH, NINTH, TENTH, TWELFTH, FIFTEENTH,
SEVENTEENTH and TWENTY FIFTH of this deed are subordinated to the provisions of
the Loan Agreement or to any other agreement under which the Mortgage Note
secured hereby is delivered in pledge or otherwise, and in the event of conflict
or inconsistencies, the Loan Agreement provisions will govern.
TWENTY EIGHTH: ACCEPTANCE BY MORTGAGEE.
The Mortgage Note has been delivered in pledge to Mortgagee to secure payment to
Mortgagee of credit facilities which have been granted by the Mortgagee to
Mortgagor under a Loan Agreement executed on this same date in furtherance of
Mortgagee's statutory duty and responsibility to aid an develop the economy of
Puerto Rico, particularly its industrialization, thus complying with the public
purpose of Mortgagee's creation of benefiting THE PEOPLE OF PUERTO RICO.
Complying with the requirements of Article One Hundred Eighty Six (186) of the
Mortgage and Registry of Property Law of Puerto Rico of the year Nineteen
Hundred Seventy Nine (1979), the Mortgagee states its acceptance to the mortgage
lien constituted by these presents in its favor.
ACCEPTANCE
I, the Notary, made to the appearing party(ies) the necessary legal
warnings concerning the execution of this deed and he(she)(they) was(were) fully
advised by me thereon. I advised him(her)(them) as to his(her)(their) legal
right to read the deed and to have witnesses present at the execution thereof,
which he waived, and then I read this deed to him(her)(them).
After having heard the contents of this deed, as stated in all preceding
paragraphs, the appearing party(ies) fully ratified and confirmed the statements
contained herein as the true and
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exact embodiment of his(her)(their) stipulations, terms, and conditions
whereupon he(she)(they) signed this deed before me, the Notary, and initialed
each and every page of this deed.
I, the Notary, do hereby certify as to everything stated or contained in
this instrument.
Signed: Toru Fujita, Hugh Alanson Andrews and George Barr Wilson.
Signed, Sealed, Marked and Flourished: RAMON MORAN LOUBRIEL.
The corresponding Internal Revenue Stamps and that of Notarial Fee have
been cancelled on the original.
I, the Notary, CERTIFY that the foregoing is a true and exact copy of the
original, which forms part of my Protocol for Public Instruments for the current
year and which contains --37-- pages.
IN WITNESS WHEREOF, and at the request of The Government Development Bank
for Puerto Rico
I issue this --FIRST-- copy which I sign, seal, mark and flourish at San Juan,
Puerto Rico, on the same date of its execution. I ATTEST.
/s/
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================================================================================
CREDIT FACILITY AGREEMENT
BY AND BETWEEN
THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO
AND
KUMAGAI CARIBBEAN, INC.
AND
WKA EL CON ASSOCIATES
DATED AS OF MAY 5, 1992
================================================================================
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1 INCORPORATION OF RECITALS............................................................ 3
1.1 Incorporation of Recitals................................................... 3
ARTICLE 2 DEFINITIONS.......................................................................... 4
2.1 ............................................................................ 4
"Additional Security"................................................................ 4
"Additional Security Documents"...................................................... 4
"Affiliate".......................................................................... 4
"AFICA".............................................................................. 4
"AFICA Loan Agreement"............................................................... 4
"Aggregate Revenues"................................................................. 4
"Agreement".......................................................................... 6
"AMK"................................................................................ 6
"Annual Agent's Fee"................................................................. 6
"Annual Letter of Credit Fee"........................................................ 6
"Applicable Rate".................................................................... 6
"Appraisal".......................................................................... 6
"Architects"......................................................................... 6
"Architects' Agreement".............................................................. 6
"ARPE"............................................................................... 7
"Assignment or "Assignment Agreement"................................................ 7
"Bank"............................................................................... 7
"Bank Consultant's Report"........................................................... 7
"Bank Loan Documents"................................................................ 8
"Bank's Consultant".................................................................. 8
"Basic Management Fee"............................................................... 8
"Borrowers".......................................................................... 8
"Borrowers' Share of Excess Revenues"................................................ 8
"Budget"............................................................................. 8
"Budget Line Item"................................................................... 8
"Business Day"....................................................................... 9
"Capitalized Interest"............................................................... 9
"Casino License"..................................................................... 9
"Casualty"........................................................................... 9
"Charges"............................................................................ 9
"Closing"............................................................................ 9
"Closing Date"....................................................................... 9
"Collateral"......................................................................... 9
"Commitment"......................................................................... 9
"Commonwealth".......................................................................10
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"Compensation".......................................................................10
"Completion Date"....................................................................10
"Completion Guaranty"................................................................10
"Condominium Construction Documents".................................................10
"Condominium Developer"..............................................................10
"Condominium First Mortgage Holder"..................................................10
"Condominium Lien"...................................................................11
"Condominium Parcels"................................................................11
"Condominium Revenues"...............................................................11
"Condominium Units"..................................................................12
"Construction" or "Construct"........................................................12
"Construction Documents".............................................................12
"Construction Management Agreement"..................................................12
"Construction Management Fee"........................................................13
"Construction Manager"...............................................................13
"Construction Permit"................................................................13
"Construction Schedule"..............................................................13
"Consultants and Designers"..........................................................13
"Control"............................................................................13
"Coverage Date"......................................................................13
"Date of Substantial Completion".....................................................14
"Debt Service".......................................................................14
"Debtor Relief Laws".................................................................14
"Default"............................................................................14
"Deficiency Loan"....................................................................15
"Development Fee"....................................................................15
"Disbursement".......................................................................15
"Dollars"............................................................................15
"Employees' Plan"....................................................................15
"Environmental Laws".................................................................15
"Environmental Report"...............................................................15
"ERISA"..............................................................................16
"ERISA Affiliate"....................................................................16
"Escrow Requirement".................................................................16
"Event of Default"...................................................................16
"Excess Refinancing Proceeds"........................................................16
"Excess Revenues"....................................................................16
"Existing GDB Loan"..................................................................17
"Facility"...........................................................................17
"Facility Escrow Agent"..............................................................17
"Facility Escrow Cap"................................................................17
"Facility Escrow Expiration Date"....................................................17
"Facility Mortgage on the Premises"..................................................18
"Facility-Mortgaged Properties"......................................................18
</TABLE>
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"Facility Standstill Agreement"......................................................18
"Fair Value Contract"................................................................18
"Fajardo Property"...................................................................19
"Financial Information"..............................................................19
"Fiscal Quarter".....................................................................19
"Fiscal Year"........................................................................19
"GDB"................................................................................19
"GDB Escrow Agent"...................................................................19
"GDB Escrow".........................................................................20
"GDB Escrow Agreement"...............................................................20
"GDB Facility Documents".............................................................20
"GDB Facility Escrow"................................................................20
"GDB Facility Escrow Agreement"......................................................20
"GDB Facility Guaranties"............................................................20
"GDB Guaranty Mortgages".............................................................20
"GDB Guaranty Mortgage Notes"........................................................21
"GDB Loan Agreement".................................................................21
"GDB Mortgage".......................................................................21
"GDB Share of Excess Revenues".......................................................21
"GDB Standstill Agreement"...........................................................21
"General Partner"....................................................................21
"Government Authority"...............................................................22
"Gross Revenues".....................................................................22
"Ground Lease".......................................................................22
"Guaranties".........................................................................22
"Guarantors".........................................................................22
"HASN"...............................................................................22
"Hard Costs".........................................................................22
"Hazardous Material".................................................................22
"Hospitality"........................................................................22
"Improvements".......................................................................23
"Inchoate Lien"......................................................................23
"Indebtedness".......................................................................23
"Institutional First Mortgage Lien"..................................................24
"Insurance Policy"...................................................................24
"Interest Adjustment Dates"..........................................................24
"Interest Payment Date"..............................................................24
"KGC"................................................................................24
"KGCC"...............................................................................24
"Kumagai"............................................................................24
"LC Agreement".......................................................................25
"Legal Requirements".................................................................25
"Letter of Credit"...................................................................25
"LIBOR" or "LIBOR Rate"..............................................................25
</TABLE>
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"Lien"...............................................................................26
"Loan"...............................................................................26
"Loan Documents".....................................................................26
"Major Casualty".....................................................................26
"Management Agreement"...............................................................26
"Managing Partner"...................................................................26
"Material Adverse Effect"............................................................26
"Maturity Date"......................................................................27
"Mortgage Property"..................................................................27
"Net Proceeds".......................................................................28
"Net Restoration Award"..............................................................28
"Note"...............................................................................28
"Obligation".........................................................................28
"Officer's Certificate"..............................................................28
"Operating Expenses".................................................................28
"Operative Documents"................................................................30
"Outstanding Principal Amount".......................................................30
"Palominos Island Property"..........................................................31
"Participation"......................................................................31
"Parties"............................................................................31
"Partner"............................................................................31
"Partnership"........................................................................31
"Partnership Agreement"..............................................................31
"Partnership Mortgage Note"..........................................................31
"Partnership Pledge Agreement".......................................................31
"Partnership Proceeds"...............................................................32
"Partnership Returns"................................................................32
"Party"..............................................................................33
"Permits"............................................................................33
"Permitted Indebtedness".............................................................33
"Permitted Liens and Encumbrances"...................................................34
"Person".............................................................................36
"Planning Board".....................................................................36
"Plans"..............................................................................36
"Pledge of the GDB Guaranty Mortgage Notes"..........................................36
"Pledge of the Partnership Mortgage Note"............................................36
"Pledges"............................................................................36
"Premises"...........................................................................37
"Proceeds Pledge Agreement"..........................................................37
"Project"............................................................................37
"Project Costs"......................................................................37
"Quarter"............................................................................38
"Release Conditions".................................................................38
"Reportable Event"...................................................................38
</TABLE>
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"Request for Disbursement"...........................................................38
"Restoration"........................................................................38
"Rights".............................................................................39
"Security"...........................................................................39
"Security Documents".................................................................39
"Soft Costs".........................................................................39
"Subsidiary".........................................................................39
"Substantial Completion".............................................................39
"Survey".............................................................................40
"Taking".............................................................................40
"Taxes"..............................................................................40
"Term"...............................................................................40
"Threshold Amount"...................................................................40
"Title Insurer"......................................................................41
"Title Policy".......................................................................41
"Trade Contract".....................................................................41
"Trade Contractor"...................................................................41
"Transfer"...........................................................................41
"Williams"...........................................................................41
"WKA"................................................................................41
"WMS El Con".........................................................................42
"WMS Industries".....................................................................42
"Work Change"........................................................................42
ARTICLE 3 AMOUNT AND TERMS OF CREDIT FACILITY..................................................42
3.1 Advances........................................................................42
3.2 Interest........................................................................42
3.3 Commitment Fee..................................................................43
3.4 Intentionally Omitted...........................................................43
3.5 Proceeds of Advances under the Facility.........................................43
3.6 Repayment of Principal..........................................................43
3.7 Mandatory Prepayment............................................................44
3.8 Optional Prepayment.............................................................45
3.9 Payments from GDB Facility Escrow...............................................45
3.10 Priority of Application of Payments to GDB......................................47
3.11 Note............................................................................47
3.12 GDB Facility Escrow.............................................................47
3.13 Maximum Interest Rate...........................................................48
ARTICLE 4 SECURITY.............................................................................48
4.1 The Security....................................................................48
4.2 Additional Security.............................................................50
4.3 Preservation of Security........................................................52
4.4 Condominium Development.........................................................53
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4.5 Recourse and Non-Recourse Obligations...........................................55
ARTICLE 5 CONDITIONS PRECEDENT.................................................................57
5.1 Conditions Precedent to Making Facility Available...............................57
(a) Title to Premises..........................................................57
(b) Payment of Fees and Expenses...............................................57
(c) Collateral.................................................................57
(d) Escrow Agreements..........................................................58
(e) Equity and Other Contributions.............................................58
(f) Financial Information......................................................58
(g) Updated Appraisals, Surveys, Etc...........................................58
(h) Budget.....................................................................58
(i) Special Report.............................................................59
(j) Insurance..................................................................59
(l) Utility Facilities.........................................................60
(m) Construction Documents.....................................................60
(n) Bonds......................................................................60
(p) Permits....................................................................61
(q) Plans......................................................................61
(r) Taxes......................................................................61
(s) Federal Taxes..............................................................61
(t) Labor Contributions........................................................62
(u) Trade Contracts............................................................62
(v) Partnership Agreement......................................................62
(w) Counsel Opinion............................................................62
(x) Intentionally Omitted......................................................62
(y) Interest on Existing GDB Loan..............................................62
(z) Bank Consent...............................................................62
(aa) Initial Disbursement.......................................................63
(bb) Certification by Bank......................................................63
(cc) Facility Standstill Agreement..............................................63
(dd) No Defaults................................................................63
(ee) Notation on Note...........................................................63
5.2 Payment of Bills................................................................64
ARTICLE 6 REPRESENTATIONS AND WARRANTIES.......................................................64
6.1 Partnership Existence; Compliance with Law......................................64
6.2 Borrowers' Existence; Compliance with Law.......................................65
6.3 Executive Offices...............................................................66
6.4 Subsidiaries....................................................................66
6.5 Partnership Power; Authorization; Enforceable Obligations.......................66
6.6 Financial Statements............................................................68
6.7 No Litigation...................................................................68
6.8 No Defaults.....................................................................68
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6.9 Consents......................................................................69
6.10 Investment Company Act........................................................70
6.11 Margin Regulations............................................................70
6.12 Taxes.........................................................................71
6.13 Use of Facility Proceeds......................................................71
6.14 Compliance with ERISA.........................................................71
6.15 Environmental Matters.........................................................72
6.16 Condemnation..................................................................72
6.17 Labor Matters.................................................................73
6.18 Other Ventures................................................................73
6.19 No Contract Cancellations.....................................................73
6.20 Liens.........................................................................73
6.21 Sufficiency of Funds..........................................................74
6.22 Title to Property.............................................................74
6.23 Possession of Premises........................................................74
6.24 Utilities and Streets.........................................................75
6.25 General.......................................................................75
6.26 Plans; Construction...........................................................75
6.27 Intentionally Omitted.........................................................76
6.28 No Liens......................................................................76
6.29 Compliance with Building Codes, Zoning Laws, Etc..............................76
6.30 Budget........................................................................77
6.31 Security Documents and Additional Security Documents..........................77
6.32 Commissions...................................................................77
6.33 Survival of Representations and Warranties....................................77
ARTICLE 7 AFFIRMATIVE COVENANTS................................................................78
7.1 ..............................................................................78
7.1.1 Application of Loan Proceeds..................................................78
7.1.2 Books and Records.............................................................78
7.1.3 Financial Information.........................................................78
7.1.4 Construction and Development of the Project...................................79
7.1.5 Effectiveness of Permits: Approvals...........................................79
7.1.6 Access by GDB.................................................................79
7.1.7 Maintain Rights; Franchises...................................................80
7.1.8 Filing of Tax Returns.........................................................80
7.1.9 Estoppel Certificates.........................................................80
7.1.10 Insurance.....................................................................80
7.1.12 Environmental Matters.........................................................87
7.1.11 Preservation of the Properties................................................88
7.1.13 Notices.......................................................................89
7.1.14 Certification of Substantial Completion.......................................90
7.1.15 Approval of the Project.......................................................90
7.1.16 Deposit of Escrow Requirements................................................92
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7.1.17 Condominium Lien..............................................................92
7.2 Correctness of Representations;Warranties.....................................92
7.3 Maintenance of Existence and Conduct of Business..............................93
7.4 Payment of Obligations........................................................93
7.5 Agreements....................................................................94
7.6 Litigation....................................................................95
7.7 Compliance with Law...........................................................95
7.8 Supplemental Disclosure.......................................................95
7.9 Recording; Transfer Taxes and Fees............................................96
7.10 Permits and Licenses..........................................................96
7.11 Fair Value Contracts..........................................................96
7.12 Other Agreements..............................................................97
7.13 Japanese Counsel Opinion......................................................97
7.14 Federal Taxes.................................................................97
ARTICLE 8 NEGATIVE COVENANTS...................................................................97
8.1 Actions by the Borrowers or the Partnership...................................97
8.2 Actions by the Partnership...................................................101
ARTICLE 9 EVENTS OF DEFAULT, RIGHTS AND REMEDIES..............................................102
9.1 Events of Default............................................................102
9.2 Remedies.....................................................................106
9.3 Waiver of Defaults...........................................................108
9.4 Waivers by Borrowers.........................................................109
9.5 Right of Set-Off.............................................................109
9.6 Control......................................................................110
9.7 Exercise of Remedies.........................................................110
ARTICLE 10 MISCELLANEOUS.......................................................................111
10.1 No Agency Relationship.......................................................111
10.2 Liability....................................................................111
10.3 Indemnity of GDB.............................................................112
10.4 Damage or Destruction........................................................114
10.5 Taking of the Mortgaged Properties...........................................118
10.6 Application of Proceeds upon Casualty or Substantial Taking..................121
10.7 Complete Agreement, Modification of Agreement................................122
10.8 Fees and Expenses............................................................122
10.9 No Waiver by GDB.............................................................124
10.10 Remedies.....................................................................124
10.11 Parties......................................................................124
10.12 Conflict of Terms............................................................125
10.13 Authorized Signatories.......................................................125
10.14 Notices......................................................................125
10.15 Captions.....................................................................127
</TABLE>
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<TABLE>
<S> <C>
10.16 Exhibits and Schedules.......................................................128
10.17 Governing Law and Venue......................................................128
10.18 Severability.................................................................128
10.19 Entire Agreement.............................................................129
10.20 Survival of Representations..................................................129
10.21 GDB Consent..................................................................129
10.22 Reliance by GDB..............................................................130
</TABLE>
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Credit Facility Agreement (this "Agreement"), dated as of May 5, 1992
between THE GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO, ("GDB" or the
"Lender"), a banking institution of the Government of the Commonwealth of Puerto
Rico, created by Act 17, enacted on September 23, 1948, and KUMAGAI CARIBBEAN,
INC. (a corporation organized and existing under the laws of the State of Texas)
and WKA EL CON ASSOCIATES (a general partnership organized and existing under
the laws of the State of New York) (each, a "Borrower" and, collectively, the
"Borrowers").
W I T N E S S E T H:
WHEREAS, El Conquistador Partnership L.P. (the "Partnership") is the
owner and holder of the fee simple title ("Pleno Dominio") to the Premises, has
commenced and proposes to complete the development, construction and equipment
of a first-class destination resort hotel and related facilities to be located
in Fajardo, Puerto Rico and to be known as El Conquistador Resort and Country
Club (as more fully defined hereinafter, the "Project") and has previously
obtained financing for the Project from GDB; and
WHEREAS, each of the Borrowers is a general and limited partner of the
Partnership and collectively are the only partners of the Partnership; and
WHEREAS, the initial financing for the construction and development of
the Project consisted of $30 million of equity contributed by the Borrowers, a
$25 million loan to the Partnership from the GDB and $120,000,000 of the
proceeds from the sale of industrial revenue bonds issued by AFICA (the "Bond
Proceeds") payment of which is secured by an irrevocable
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letter of credit issued by the Mitsubishi Bank Limited (the "Bank") pursuant to
the LC Agreement; and
WHEREAS, the Partnership has identified cost overruns in the Budget
which require the Partnership to provide $24 million of additional funds to the
Project as a condition to the disbursement of the $120 million of Bond Proceeds
by the Bank in accordance with the loan balancing provisions of the LC
Agreement; and
WHEREAS, in order to provide such funds the Borrowers will each provide
$8 million to the Partnership and they have requested a loan from GDB in the
principal amount of EIGHT MILLION DOLLARS (U.S. $8,000,000) (the "Facility"),
the proceeds of which will be provided by the Borrowers to the Partnership to be
used by the Partnership to pay Project Costs including, without limitation, part
of the construction cost of the Improvements and accrued and accruing interest
on the Existing GDB Loan and to satisfy the loan balancing provisions of the LC
Agreement; and
WHEREAS, GDB has agreed to make the Facility available to the Borrowers
on the terms and conditions set forth herein provided that the proceeds of the
Facility are provided to the Partnership to be used to pay Project Costs; and
WHEREAS, concurrently herewith the Borrowers will deposit their $16
million (net of amounts previously advanced by the Borrowers for Project Costs)
plus the $8 million of the proceeds of the Facility with the Bank and will
authorize the Bank to disburse such funds to the Partnership under the terms of
the LC Agreement to pay Project Costs; and
WHEREAS, as security for the repayment of the Facility, KGC, Kumagai,
WKA and WMS are furnishing to GDB payment guaranties in respect of principal
under the Facility
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(limited, in each case, as described herein and supported, in the case of WKA,
by certain additional collateral described below); and
WHEREAS, in consideration of the Borrowers providing to the Partnership
the proceeds of the Facility, and as additional security for repayment of
interest on the Facility, the Partnership will deliver a mortgage on the
Premises; and
WHEREAS, GDB has agreed to make the Facility available to the Borrowers
on such terms with the understanding that (i) Borrowers consider the additional
financing to be provided under this Facility, together with the Bond Proceeds
and the additional $16 million in financing provided to the Partnership by the
Borrowers on the date hereof, to be sufficient to permit the completion of the
Project and (ii) neither the Borrowers nor the Partnership will make any further
request for additional funding from GDB in connection with the Project; and
WHEREAS, the parties desire to execute this Agreement to set forth the
terms and conditions of their agreement;
NOW THEREFORE, in consideration of the premises and of the mutual and
separate agreements of the Parties contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE 1
INCORPORATION OF RECITALS
1.1 Incorporation of Recitals. The foregoing preambles and all other
recitals set forth are hereby made a part of this Agreement.
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ARTICLE 2
DEFINITIONS
2.1 As used in this Agreement, and unless otherwise expressly
indicated, or unless the context clearly requires otherwise:
"Additional Security" shall have the meaning assigned to it in
Paragraph 4.2 hereof.
"Additional Security Documents" shall mean the mortgages, liens,
assignments and other documents required to be delivered pursuant to Paragraph
4.2 hereof.
"Affiliate" shall mean, with respect to any Person, (i) any other
Person directly or indirectly Controlling, Controlled by or under common Control
with the first Person or (ii) any parent, child (including an adopted Person),
spouse, sibling or direct descendant or ancestor of such Person or any Person
described in clause (i), or (iii) any trust or other entity organized for the
benefit of the foregoing.
"AFICA" shall mean the Puerto Rico Industrial, Medical, Educational and
Environmental Pollution Control Facilities Financing Authority.
"AFICA Loan Agreement" shall mean the Loan Agreement between AFICA and
the Partnership, dated as of February 7, 1991.
"Aggregate Revenues" shall mean, for any period with respect to which
Aggregate Revenues are being determined, all revenues of any kind received,
directly or indirectly, during such period by any of the Borrowers, the
Partnership, or any of their Affiliates from the ownership, operation or sale,
as the case may be, of the Premises, the Project, the Condominium Parcels or the
Condominium Units or any interest therein or rights with respect thereto,
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including, without limitation, room, food and beverage, and other facility
revenues, casino net wins, rents or other payments from leases and concession
agreements, annual dues for golf memberships, revenues derived from the initial
sale or resale of golf memberships, the proceeds of any rental loss or business
interruption insurance, Condominium Revenues (to the extent not already included
in the foregoing items), and, except as provided below, all revenues received
during such period by any of the Borrowers, the Partnership, or any of their
Affiliates from all other activities of the Premises, the Project, the
Condominium Parcels or the Condominium Units, less, in each case, actual refunds
made during such period to customers, guests, or patrons. Aggregate Revenues
shall not include tips, service charges added to a customer bill or statement in
lieu of gratuities which are payable to employees of the Project, the value of
complimentary rooms, food and beverages, except those purchased by the casino,
and any sales or other use or excise tax required by law to be collected with
respect to the operation of the Premises and which is actually remitted to
taxing authorities. To the extent that revenues received by any of Borrowers,
the Partnership or any of their Affiliates (a "Payee") have been (i) paid to the
Payee by another of the Borrowers, the Partnership or any of their Affiliates (a
"Payor") and (ii) already included herein as Aggregate Revenues received by the
Payor thereof, such revenues to the Payee shall not be included as Aggregate
Revenues (Except to the extent that, in the determination of Excess Revenues,
such revenues have been or are deducted from Aggregate Revenues, whether as
Operating Expenses or otherwise). Aggregate Revenues shall not include amounts
that have been paid to the Borrowers or their Affiliates by the Partnership
under Fair Value Contracts for Operating Expenses if such amounts are paid by
the Partnership out of revenues already included herein as Aggregate Revenues of
the Partnership. The receipt
5
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<PAGE>
by Williams of the Basic Management Fee and the Development Fee and the receipt
by KGCC of the Construction management Fee shall not be included in Aggregate
Revenues.
"Agreement" shall mean this Credit Facility Agreement, including all
amendments, modifications and supplements hereto and any appendices, exhibits or
schedules to any of the foregoing, and shall refer to this Agreement as it may
be in effect at the time such reference becomes operative.
"AMK" shall mean AMK Conquistador, S.E., a Puerto Rico special
partnership.
"Annual Agent's Fee" shall have the meaning assigned thereto in the LC
Agreement.
"Annual Letter of Credit Fee" shall have the meaning assigned thereto
in the LC Agreement.
"Applicable Rate" shall mean, for any period, an annual rate equal to
the LIBOR Rate for such period (expressed on an annualized basis) plus one and
seventy-five one-hundredths percentage points (1.75%). The Applicable Rate shall
be adjusted quarterly to reflect changes in LIBOR, as provided in Paragraph 3.2
hereof.
"Appraisal" shall mean, with respect to any property, an appraisal
prepared in a form and by an appraiser acceptable to GDB, conducted at the sole
cost and expense of the Borrowers (or the Partnership or an Affiliate of the
Borrowers designated by the Borrowers), setting forth a fair market value of
such property.
"Architects" shall mean Ray, Melendez and Associates, or any successors
engaged by the Partnership with the prior written consent of GDB.
"Architects' Agreement" shall mean those certain agreements between the
Partnership and Architects, and between the Partnership and Consultants and
Designers, relating to the
6
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<PAGE>
design of the Improvements and providing for architectural services in
connection with the Improvements.
"ARPE" shall mean the Administration of Regulations and Permits of the
Commonwealth of Puerto Rico.
"Assignment or "Assignment Agreement" shall mean any of the assignments
to be made by the Partnership in favor of GDB pursuant to Paragraphs 4.1 and 4.2
hereof.
"Bank" shall mean The Mitsubishi Bank, Limited, acting through its New
York Branch, its successors and assigns, a successor letter of credit bank or a
lender providing refinancing for the loan evidenced by the Bank Loan Documents.
"Bank Consultant's Report" shall mean a report by the Bank's Consultant
relating to one or more of the following items: (i) stating whether all or any
portion of the work relating to construction has been completed in a good and
workmanlike manner, substantially in accordance with the Plans and the
Construction Schedule and in compliance with Legal Requirements; (ii) stating
whether the work which is the basis of a Request for Disbursement has been
completed within the amount allocated for such work in the Budget Line Item
therefor; (iii) stating whether the amounts available under the Bank Loan
Documents allocable to the Construction are sufficient to complete the
construction in accordance with the Plans; (iv) stating whether ownership of all
material and fixtures incorporated in the Construction and all materials stored
on-site or off-site or in fabrication which are included in any Request for
Disbursement shall vest in the Partnership immediately upon delivery thereof to
the Project; and (v) addressing such other matters as GDB may reasonably request
to be addressed therein.
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"Bank Loan Documents" shall have the meaning assigned thereto in the
GDB Standstill Agreement.
"Bank's Consultant" shall mean Merritt & Harris, Inc. or such other
Person or architectural or engineering consultant as may be designated and
engaged by the Bank, at the expense of the Partnership (or an Affiliate of the
Partnership designated by the Borrowers), to examine the budget and the Plans,
any changes thereto and cost breakdowns and estimates with respect to the
Project (including, without limitation, all cost breakdowns and estimates set
forth in any Request for Disbursement and all accompanying certifications), to
make periodic inspections of the progress of the Construction on behalf of the
Bank and GDB, to advise and render reports to the Bank and GDB concerning the
foregoing and otherwise to consult with the Bank and GDB with respect to the
Project.
"Basic Management Fee" shall have the meaning assigned thereto in the
Management Agreement.
"Borrowers" shall have the meaning assigned thereto in the title of
this Agreement.
"Borrowers' Share of Excess Revenues" shall mean, for any fiscal
period, Excess Revenues, reduced by the GDB Share of Excess Revenues for such
fiscal period.
"Budget" shall mean a budget prepared by the Partnership setting forth
Project Costs in detail satisfactory to GDB (including a detailed trade
breakdown of such costs and specifying Hard Costs and Soft Costs), as such
Budget may be amended, modified or supplemented from time to time pursuant to
the terms of the Bank Loan Documents.
"Budget Line Item" shall mean an item of Project Cost as identified in
the Budget.
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"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in London, England, New York, New York or San Juan,
Puerto Rico are authorized or required by law or executive order to close.
"Capitalized Interest" shall have the meaning assigned thereto in
Paragraph 3.2 hereof.
"Casino License" shall have the meaning assigned thereto in Paragraph
4.2.8 hereof.
"Casualty" shall mean any damage to or destruction of any of the
Mortgaged Properties or any portion thereof.
"Charges" shall mean all Taxes and all federal, state, county, city,
municipal, local, or other governmental charges, user fees and expenses, levies
and similar charges assessed by Puerto Rico or the United States and all levies,
assessments or charges, including assessments, user fees and charges or
utilities upon or relating to (i) the Project, (ii) the Security, (iii) the
Additional Security, (iv) the Partnership's withholding obligations in relation
to payroll, income or gross receipts, (v) the Partnership's ownership or use of
the Premises or (vi) any other aspect of the Partnership's businesses.
"Closing" shall mean the execution and delivery of this Agreement and
all other GDB Facility Documents, which closing shall take place at the offices
of GDB or at such other place or places as the parties may agree.
"Closing Date" shall mean May 5, 1992, by which date the Closing shall
have occurred.
"Collateral" shall mean all of the property, real or personal, tangible
or intangible, and all rights thereto, pledged, mortgaged or hypothecated
pursuant to the Security Documents and the Additional Security Documents.
"Commitment" shall have the meaning assigned thereto in Paragraph 3.3
hereof.
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<PAGE>
"Commonwealth" shall mean the Commonwealth of Puerto Rico and its
political subdivisions, municipalities, agencies and instrumentalities.
"Compensation" shall mean, with respect to any Person, all payments and
accruals commonly considered to be compensation, including, without limitation,
all wages, salary, deferred payment arrangements, Partnership Returns, payments
in respect of loans made by a partner to a partnership or by a stockholder to a
corporation, bonus payments and accruals, profit sharing arrangements, payments
in respect of stock options or phantom stock options or similar arrangements,
stock appreciation rights or similar rights, incentive payments, pension or
employment benefit contributions or similar payments, made to or accrued for the
account of such Person or otherwise for the direct or indirect benefit or such
Person.
"Completion Date" shall mean the date of Substantial Completion of the
Project, which shall occur not later than November 15, 1993.
"Completion Guaranty" shall have the meaning assigned thereto in the LC
Agreement.
"Condominium Construction Documents" shall mean all contracts and other
agreements pertaining to the development of the Condominium Parcels or the
construction or development of the Condominium Units.
"Condominium Developer" shall mean the Person that has agreed to
develop and construct the Condominium Units in accordance with the provisions of
Paragraph 4.4 hereof and Paragraph 6 of the LC Agreement.
"Condominium First Mortgage Holder" shall mean an institutional lender
(other than the Borrowers, the Partnership or any of their Affiliates) that (i)
has made a loan to develop the
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Condominium Untis secured by a first mortgage thereon, (ii) is engaged in the
business of making such mortgage loans and (ii) is acceptable to the Bank.
"Condominium Lien" shall have the meaning assigned thereto in Paragraph
4.1.3 hereof.
"Condominium Parcels" shall mean the approximately 20-acre portion of
land shown on Exhibit "1" annexed hereto, which Condominium Parcels have been or
are to be released from the Lien of the GDB Mortgage in accordance with the
terms of the GDB Loan Agreement and from the Lien of the Facility Mortgage on
the Premises in accordance with Paragraph 4.4 hereof.
"Condominium Revenues" shall mean, with respect to any period for which
Condominium Revenues are being determined, revenues received by any of the
Borrowers, the Partnership or any of their Affiliates (except, in the case of an
Affiliate, to the extent provided in Paragraph 4.4(c) hereof) in connection with
the ownership, development, financing, construction or sale, as the case may be,
of the Condominium Parcels or the Condominium Units, including, without
limitation, revenues received from or through (i) the sale of the Condominium
Parcels or the Condominium Units or the right to develop, construct or operate
the Condominium Units or otherwise to develop or use the Condominium Parcels,
(ii) the rental of the Condominium Units, (iii) the use of any part of the
Premises by the occupants of the Condominium Units or Condominium Parcels, (iv)
the right of such occupants to use any part of the Premises or (v) any
contractual or other arrangements with respect to the Condominium Parcels or
Condominium Units, reduced (provided that the Partnership shall not be the
Condominium Developer) by reasonable expenses, to the extent incurred directly
by the Borrowers, the Partnership or any of their Affiliates, associated with
the development, financing,
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construction or sale of the Condominium Parcels and the Condominium Units;
provided, however, that reasonable expenses associated with the development,
financing, construction or sale of the Condominium Parcels and the Condominium
Units incurred directly by any of the Borrowers, the Partnership or their
Affiliates during any prior period may be used to reduce Condominium Revenues,
to the extent not previously deducted, in any subsequent period; and provided,
further that "Condominium Revenues" shall not include revenues received by the
Condominium Developer which are used to pay any Condominium First Mortgage
Holder to satisfy the obligations of the Condominium Developer under a loan by
such Condominium First Mortgage Holder to develop the Condominium Parcels.
"Condominium Units" shall mean any residential condominium units that
may be developed and constructed on the Condominium Parcels.
"Construction" or "Construct", when used with reference to the Project,
shall mean construction, renovation or development of the Improvements or any
portion thereof, the costs of which are included in the Budget as Hard Costs.
"Construction Documents" shall mean, collectively, the Construction
Management Agreement, the Architects' Agreements, all Trade Contracts and all
other agreements pertaining to the Construction to which any of the Borrowers,
the Partnership or any of their Affiliates is party or beneficiary.
"Construction Management Agreement" shall mean that certain agreement
between the Partnership and the Construction Manager dated as of January 12,
1990 and amended by the first amendment thereto dated as of September 30, 1990,
the second amendment thereto dated January
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31, 1991 and any subsequent permitted amendments providing for the construction
upon the terms and conditions set forth therein.
"Construction Management Fee" shall have the meaning assigned thereto
in the Construction Management Agreement.
"Construction Manager" shall mean KGCC or any successor engaged by the
Partnership with the prior written consent of the Bank.
"Construction Permit" shall mean any authorization, consent, license,
approval or permit required by any Governmental Authority with jurisdiction over
the Project in order to carry out the construction in accordance with the
existing Plans and all Legal Requirements.
"Construction Schedule" shall have the meaning assigned thereto in
Paragraph 5.1(o) hereof.
"Consultants and Designers" shall mean Edward D. Stone, Jr. and
Associates, Inc. and Jorge Rosello Associates, or any successors engaged by the
Partnership with the Prior written consent of GDB.
"Control" shall mean, with respect to any Person, (i) the ownership of
a majority interest (or, when used as a verb in any form, including "Controlled"
or "Controlling", to own a majority interest), whether in the form of stock,
partnership interest or otherwise, in such Person or (ii) the ability (or, when
used as a verb in any form, including "Controlled" or "Controlling", to have the
ability) otherwise to direct, determine, manage or otherwise control, directly
or indirectly, the business, operations, activities or management of such
Person.
"Coverage Date" shall have the meaning assigned thereto in the LC
Agreement.
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"Date of Substantial Completion" shall mean the date which is 30 days
following the date upon which the Partnership first delivers to GDB evidence
satisfactory to GDB that Substantial Completion has been achieved.
"Debt Service" shall mean, for any period for which Debt Service is
being determined, the sum of (i) any interest paid or payable under the AFICA
Loan at the Bond Fixed Rate, as defined under the Bank Loan Documents, with
respect to such period (or to the extent the Bond Fixed Rate is inapplicable to
any portion of such loan, at the rate provided for with respect to such portion
of such loan), (ii) interest paid or payable under the Existing GDB Loan at the
rate provided by the GDB Loan Agreement with respect to such period, (iii)
interest paid or payable under the Facility at the rate provided herein with
respect to such period, (iv) the annual Agent's Fee and the Annual Letter of
Credit Fee paid or payable with respect to such period, (v) any fees arising in
connection with the Loan under the Bank Loan Documents or the Existing GDB Loan
which are paid or payable with respect to such period and (vi) any interest paid
or payable on Permitted Indebtedness of the Partnership to Persons other than
the Borrowers or any Affiliate of the Borrowers or the Partnership.
"Debtor Relief Laws" shall mean the Bankruptcy Code of the United
States of America, as amended from time to time, any bankruptcy or debtor relief
laws provided by the laws of Puerto Rico, and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization or similar debtor relief laws from time to time in
effect affecting the Rights of creditors generally.
"Default" shall mean any event, condition or act, which, with the
giving of notice or lapse of time or both, would constitute an Event of Default.
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"Deficiency Loan" shall have the meaning assigned thereto in the
Partnership Agreement.
"Development Fee" shall have the meaning assigned thereto in the
Management Agreement.
"Disbursement" shall mean each disbursement of all or any of the
proceeds of the Facility.
"Dollars" shall mean dollars in the lawful currency of the United
States of America.
"Employees' Plan" shall mean any multiemployer plan or single employer
plan, as defined in Section 4001 and subject to Title IV of ERISA, which is
maintained, or at any time during the five calendar years preceding the date of
this Agreement was maintained, for employees of any of the Borrowers, the
Partnership or any of their Affiliates or an ERISA Affiliate.
"Environmental Laws" shall mean all present or future federal,
Commonwealth and local laws, including statutes, regulations, ordinances, codes,
rules and other governmental restrictions and requirements, currently or
hereafter in effect, relating to the discharge of solid waste, air pollutants,
water pollutants or process waste water or otherwise relating to the environment
or Hazardous Materials that are or may be applicable, in any way, to the
Project, including any such restrictions or requirements imposed by any federal,
state or Commonwealth department of nature resources or environmental protection
agency that may now or at any time hereafter be in effect.
"Environmental Report" shall mean an environmental report relating to
the Premises and the Improvements, addressed to GDB and the Bank, which report
shall include, without limitation, geological, soil and Hazardous Material
evaluations, prepare at the sole cost and
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expense of the Partnership by a certified engineering and testing company, or by
a firm of environmental consultants acceptable to GDB and the Bank.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with any of the Borrowers, the Partnership or any
of their Affiliates, would be deemed to be a "single employer" within the
meaning of Section 4001 of ERISA.
"Escrow Requirement" shall mean the funds required to be deposited in
escrow with a banking institution mutually acceptable to the Bank, the
Borrowers, the Partnership and GDB, such funds to be pledged solely for the
benefit of GDB, pursuant to the GDB Escrow Agreement and the GDB Facility Escrow
Agreement.
"Event of Default" shall have the meaning assigned thereto in Article
Nine hereof.
"Excess Refinancing Proceeds" shall mean the net amount of refinancing
proceeds available after full payment of the principal amount of the Loan and
all amounts payable to the Bank under the LC Agreement and any other amounts
required to be paid in connection therewith.
"Excess Revenues" shall mean, for any period for which Excess Revenues
are being determined, Aggregate Revenues, reduced by (a) Operating Expenses, (b)
Debt Service that is due, payable and paid; (c) amounts paid into the GDB
Escrow; and (d) amounts actually paid out for reasonably necessary capital
improvements relating to the Project not included in Operating Expenses;
provided, however, that if in any Fiscal Year the aggregate amount paid for such
capital improvements exceeds five hundred thousand Dollars ($500,000), then GDB
shall have the right to approve, for purposes of calculating Excess Revenues,
the deduction of
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any capital expenditure for such capital improvements in excess of five hundred
thousand Dollars ($500,000) from Aggregate Revenues, which approval shall not be
unreasonably withheld and shall be granted or denied by GDB within thirty (30)
days of its receiving a request therefor. If GDB shall not have denied such
request within such thirty (30) day period, such approval shall be deemed
granted. In determining Excess Revenues, there shall in no event be any
deduction for Partnership Returns.
"Existing GDB Loan" shall mean a loan by GDB to the Partnership in the
aggregate principal amount of twenty-five million dollars (U.S. $25,000,000)
pursuant to the terms and conditions set forth in the GDB Loan Agreement.
"Facility" shall have the meaning assigned thereto in the recitals set
out at the beginning of this Agreement.
"Facility Escrow Agent" shall mean the financial institution that will,
under the terms of the GDB Facility Escrow Agreement, serve as the escrow agent
for the GDB Facility Escrow.
"Facility Escrow Cap" shall mean, as of any Interest Payment Date, the
sum of (i) accrued but unpaid interest owed by the Borrowers as of such date,
(ii) the Outstanding Principal Amount as of such date, and (iii) two times the
product of (a) one-quarter of the Applicable Rate for the fiscal Quarter ending
on such date and (b) Outstanding Principal Amount on such date.
"Facility Escrow Expiration Date" shall mean the earliest to occur of
(i) the later of (A) the Termination Date (as defined in the LC Agreement), and
(B) the date when no amounts are owing to the Bank under the LC Agreement; (ii)
commencement by the Bank of a foreclosure action with respect to the Premises or
any Security Document (as defined in the LC Agreement); (iii) an unreimbursed
drawing under the Letter of Credit (as defined in the LC Agreement) for
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principal or any other failure to pay amounts due under the LC Agreement on or
prior to the Termination Date, which shall remain uncured for a period of 18
months following its occurrence; (iv) as to either Borrower, either (A) the
filing of a voluntary petition in bankruptcy or (B) the entry of an order for
relief or appointment of a receiver in an involuntary bankruptcy filed by a
party other than GDB; or (v) as to the Partnership, either (A) the filing of a
voluntary petition in bankruptcy or (B) the entry of an order for relief or
appointment of a receiver in an involuntary bankruptcy or similarly proceeding
filed by a party other than GDB.
"Facility Mortgage on the Premises" shall mean the mortgage, deed of
trust or similar security agreement, substantially in the form of Exhibit "2"
hereto, made or to be made by the Partnership upon the premises, to be
encumbered in favor of GDB, subject to the Facility Standstill Agreement, to
secure the obligations of the Partnership (under the Partnership Mortgage Note)
with respect to interest on the Facility, creating a third-priority Lien on the
Premises;
"Facility-Mortgaged Properties" shall mean the properties referred to
in Exhibits "3" and "4" hereto, each to be encumbered in favor of GDB to secure
the obligations of WKA with respect to principal as provided for herein and in
the Security Documents.
"Facility Standstill Agreement" shall mean the Facility Subordination
and Standstill Agreement, dated as of the date hereof, between GDB, AFICA, the
Trustee and the Bank.
"Fair Value Contract" shall mean a contract for services or for the
acquisition, lease or use of goods or merchandise reasonably necessary for the
ownership or operation of the Premises or the Project, entered into by the
Partnership and any Borrower or any Affiliate of a Borrower or the Partnership
whose terms and conditions are no less favorable to the
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Partnership than the terms and conditions that would have been given to the
Partnership if such contract had been with an unrelated person, if payments
under such contract would constitute Operating Expenses.
"Fajardo Property" shall mean the parcel of approximately 220 acres of
land located in Fajardo, Puerto Rico, as more particularly described in the GDB
Mortgage.
"Financial Information" shall mean the financial information required
under any of the GDB Facility Documents to be furnished by the Borrowers or the
Partnership to GDB, all such information prepared in accordance with generally
accepted accounting principles (GAAP) as appropriate.
"Fiscal Quarter" shall mean the three-month period that ends each March
31, June 30, September 30 and December 31 of any given Fiscal Year. Subsequent
changes of the Fiscal Year of the Partnership shall not change the term "Fiscal
Quarter", unless GDB shall have consented in writing to such changes, which
consent shall not be unreasonably withheld.
"Fiscal Year" shall mean the twelve-month period (or shorter period
with respect to the first Fiscal Year within the term hereof) that ends on March
31st of any given year. Subsequent changes of the fiscal year of the Partnership
shall not change the term "Fiscal Year", unless GDB shall have consented in
writing to such changes, which consent shall not be unreasonably withheld.
"GDB" shall mean the Government Development Bank for Puerto Rico.
"GDB Escrow Agent" shall mean the financial institution that will serve
as agent for the GDB Escrow.
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"GDB Escrow" shall mean the escrow established pursuant to the GDB
Escrow Agreement.
"GDB Escrow Agreement" shall mean the escrow agreement under which the
Partnership will deposit funds in escrow with a banking institution mutually
acceptable to the Partnership and GDB, such funds to be pledged solely for the
benefit of GDB as provided for pursuant to Paragraph 4.3 of the GDB Loan
Agreement.
"GDB Facility Documents" shall mean this Agreement, the Note, the
Security Documents, the Additional Security Documents and any and all other
agreements, documents and instruments (other than Trade Contracts) delivered by
the Borrowers and the Partnership pursuant to the terms of this Agreement, as
hereafter renewed, amended or supplemented from time to time.
"GDB Facility Escrow" shall mean the escrow to be established pursuant
to the GDB Facility Escrow Agreement.
"GDB Facility Escrow Agreement" shall mean an escrow agreement,
substantially in the form of Exhibit "5" hereto, under which funds will be
deposited by or on behalf of the Borrowers in the GDB Facility Escrow, such
funds to be pledged solely for the benefit of GDB.
"GDB Facility Guaranties" shall mean the guaranties to be provided
pursuant to Paragraph 4.1.1 hereof.
"GDB Guaranty Mortgages" shall mean the mortgages, deeds of trust or
similar security agreements, substantially in the form of Exhibits "6" and "7"
hereto, to be encumbered in favor of GDB to secure the payment of the
obligations of WKA with respect to principal hereunder and under the guaranty
provided for in Paragraph 4.1 hereof, each creating a second-priority
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Lien on the Facility-Mortgaged Property to which it refers, more particularly a
second mortgage in the aggregate principal amounts of $3,750 and $1,500,000
respectively, encumbering the respective Facility-Mortgaged Properties,
including all buildings, improvements and fixtures located thereon or used in
connection therewith and all buildings and improvements to be erected and
constructed thereon.
"GDB Guaranty Mortgage Notes" shall mean the mortgage notes, in the
form of Exhibits "8" and "9" hereto, secured by the GDB Guaranty Mortgages.
"GDB Loan Agreement" shall mean the Loan Agreement between GDB and the
Partnership, dated as of February 7, 1991, as amended at any time, and the Loan
Documents, as defined therein.
"GDB Mortgage" shall have the meaning assigned thereto in the GDB Loan
Agreement.
"GDB Share of Excess Revenues" shall mean, for any Fiscal Year, (i)
fifty percent (50%) of Excess Revenues for such Fiscal Year to the extent that
the sum of all Excess Revenues for such Fiscal Year is less than or equal to the
Threshold Amount and (ii) ninety percent (90%) of Excess Revenues for such
Fiscal Year to the extent that the sum of all Excess Revenues for such Fiscal
Year exceeds the Threshold Amount.
"GDB Standstill Agreement" shall mean the Subordination and Standstill
Agreement, dated as of February 7, 1991, between GDB, AFICA, the Trustee and the
Bank.
"General Partner" shall mean either Kumagai Caribbean, Inc. ("KGC") or
WKA El Con Associates ("WKA"), the sole general partners of the Partnership (KGC
and WKA together being the General Partners).
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"Government Authority" shall mean any court, agency, authority, board
(including, without limitation, any environmental protection, planning or zoning
board), bureau, commission, department, office, branch or instrumentality of any
nature whatsoever of any governmental or quasi-governmental unit of the United
States, the Commonwealth of Puerto Rico, any State of the United States, or the
Municipality of Fajardo, whether now or hereafter in existence, having
jurisdiction over Borrowers, the Partnership or the Project.
"Gross Revenues" shall have the meaning assigned thereto in the GDB
Loan Agreement.
"Ground Lease" shall have the meaning assigned thereto in the LC
Agreement.
"Guaranties" shall mean the GDB Facility Guaranties and the completion
Guaranties.
"Guarantors" shall mean, Kumagai, KGC, WKA and WMS Industries.
"HASN" shall mean HASN, Inc., a Puerto Rico corporation.
"Hard Costs" shall mean costs and expenses and items thereof set forth
in the Budget as Hard Costs with respect to the acquisition of the Project and
with respect to supplying goods, services, materials and labor for the
Construction.
"Hazardous Material" shall mean asbestos, polychlorinated biphenyls,
petroleum products and any other substance or material that, whether by its
nature or use, is now or hereafter defined as a hazardous waste, hazardous
substance, pollutant or contaminant under any Environmental Law, or which is
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and which is now or hereafter regulated under
any Environmental Law.
"Hospitality" shall mean Hospitality Investment Group, S.E., a Puerto
Rico special partnership.
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"Improvements" shall mean the destination resort hotel and related
resort facilities to be renovated or constructed on the Premises pursuant to the
Plans, consisting of approximately 750 guest rooms, approximately 50,000 square
feet of meeting space (including prefunctionary space), six restaurants,
approximately 13,000 suare feet of retail space, and an approximately 10,000
square-foot casino, a marina, approximately 100,000 square feet of swimming
pools and water features, an 18-hole golf course, an approximately 40,000
square-foot clubhouse and spa facility, eight tennis courts, water sports
facilities on the Palominos Island Property and related amenities and
facilities.
"Inchoate Lien" shall mean (i) any Lien for Charges not yet due and
payable or (ii) any mechanic's Lien or materialmen's Lien for services or
materials (A) for which payment is not yet due or (B) which is being contested
in good faith by appropriate proceedings, so long as no imminent risk of sale or
forfeiture of any interest in the Mortgaged Properties or any part thereof
arises during the pendency of such proceedings.
"Indebtedness" shall mean all liabilities, obligations and indebtedness
of any and every kind and nature, including, without limitation, all liabilities
and all obligations to trade creditors, whether now or hereafter owing, arising,
due or payable to any Person and howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent, fixed or
otherwise. Without in any way limiting the generality of the foregoing,
Indebtedness shall specifically include (a) all obligations and indebtedness for
borrowed money or for notes, bonds, debentures and other debt securities; (b)
indebtedness represented by the deferred purchase price of property or services;
(c) rentals payable under any lease of real or personal property which shall
have been, or should, under generally accepted accounting principles, be
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classified as a capital lease; (d) obligations under direct or indirect
guarantees in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise assure a creditor against loss in respect of,
indebtedness or obligations of another Person of the type described in clause
(a), (b) or (c) above; (e) liabilities in respect of unfunded vested benefits
under, or withdrawal liability in respect of, plans covered by Title IV of
ERISA; and (f) all obligating in the nature of Charges.
"Institutional First Mortgage Lien" shall mean a Lien on the
Condominium Parcels or the Condominium Units granted by the Partnership to a
Condominium first Mortgage Holder in connection with a loan, the proceeds of
which are used to finance the development, construction and operation of the
Condominium Parcels and the Condominium Units.
"Insurance Policy" shall mean any of the policies of insurance required
to be maintained pursuant to Paragraph 7.1.10 hereof.
"Interest Adjustment Dates" shall mean each January 1, April 1, July 1
and October 1 until the Facility is repaid in full.
"Interest Payment Date" shall mean any date on which interest is
payable under Paragraph 3.2 (including any such date on which interest would
become payable but for the deferral provisions thereof).
"KGC" shall mean Kumagai Caribbean, Inc., a Texas corporation.
"KGCC" shall mean KG (Caribbean) Corporation, a Texas corporation.
"Kumagai" shall mean Kumagai Gumi Co., Ltd. a Japanese corporation.
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"LC Agreement" shall mean the Letter of Credit and Reimbursement
Agreement between the Partnership and the bank, dated as of February 7, 1991 and
the amendment thereto of even date herewith.
"Legal Requirements" shall mean, collectively, (i) all statutes, laws,
rules, rulings, orders, regulations, ordinances, judgments, decrees and
injunctions of any Governmental Authority (including, without limitation, fire,
health, handicapped access, sanitation, ecological, historic, zoning,
environmental protection, wetlands and building laws) in any way applicable to
the Borrowers, the partnership or the Project, or any portion thereof, or to the
ownership, use, occupancy, possession, operation or maintenance of the Project;
(ii) all requirements of the local Board of Fire Underwriters or other similar
body acting in and for the locality in which the Premises are situated and all
requirements of each insurance policy covering or applicable to all or any
portion of the Project, or the use thereof, and all requirements of the issuer
of each such policy, including any which may require repairs, modifications or
alterations (structural or otherwise) in or to the Project, or any portion
thereof; and (iii) all requirements of each Permit and regulation relating to
the Project, or any portion thereof, or to the ownership, use, occupancy,
possession, operation or maintenance thereof.
"Letter of Credit" shall have the meaning assigned thereto in the LC
Agreement.
"LIBOR" or "LIBOR Rate" shall mean the ninety (90) day offered rate, as
quoted by Telerate Systems, Inc. (currently on page 3750 of the financial
information reporting services furnished electronically by Telerate Systems,
Inc.) at approximately 11:00 a.m., London time, on each Interest Adjustment Date
for Dollar deposits of immediately available funds to leading banks in the
London interbank market or, if such offered rate is not so quoted on any
Interest
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Adjustment Date, LIBOR shall mean the corresponding offered rate quoted at the
close of business on the Business Day next preceding such Interest Adjustment
Date by Telerate Systems, Inc. or such other source of reliable financial
information as GDB shall in its discretion select.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, security interest, lien (statutory or other),
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever including, without limitation, any mechanic's
lien, materialmen's lien, conditional sale agreement, title retention agreement
or lease, which under applicable law is deemed to create a lien, security
interest or the equivalent.
"Loan" shall mean the loan made to the Partnership pursuant to the
AFICA Loan Agreement.
"Loan Documents" shall mean the bank Loan Documents
"Major Casualty" shall mean a Casualty, the Restoration of which is
reasonably estimated to cost more than $1,000,000.
"Management Agreement" shall mean that certain agreement between
Williams and the Partnership dated as of January 12, 1990, as amended by the
first amendment thereto dated as of September 30,1990, and the second amendment
thereto dated as of January 31, 1991, pursuant to which Williams shall operate
the Project.
"Managing Partner" shall mean the Partner designated to manage and
control the business affairs of the Partnership pursuant to Section 4.02 of the
Partnership Agreement.
"Material Adverse Effect" shall mean, with respect to any set of
circumstance or events, that such set of circumstances or events, alone or in
the aggregate, (a) has or could reasonably
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be expected to have a material adverse effect upon the validity or
enforceability of, or the authority or ability of the Borrowers, the Guarantors
or the Partnership to perform, their respective obligating under this Agreement,
any material Operative Document (other than the GDB Loan Agreement, as to which
the provisions thereof shall apply), any material Project Document or any
material Construction Document to which the Borrowers, or the Partnership or any
of their Affiliates is a party; (b) has or could reasonably be expected to have
a material adverse effect on the properties (including, without limitation, the
Project), business, condition (financial or otherwise) or results of the
operations of any of the Borrowers, the Guarantors or the Partnership, each
taken as a whole; (c) has or could reasonably be expected to have a material
adverse effect on the transactions contemplated by this Agreement, any Operative
Document (other than the GDB Loan Agreement, as to which the provisions thereof
shall apply), any Project Document or any Construction Document to which any of
the Borrowers or the Partnership is a party; (d) results or could reasonably be
expected to result in losses or damages of $500,000 or more; or (e) causes or
could reasonably be expected to cause an Event of Default.
"Maturity Date" shall mean the tenth anniversary of the Closing Date or
such earlier date as GDB shall declare the entire principal sum due and payable
in the exercise of its Rights under Article Nine hereof.
"Mortgage Property" shall mean the Facility-Mortgaged Properties and
the Premises and all rights, interest and improvements appurtenant thereto
encumbered by Liens provided for hereunder, including under the Security
Documents and Additional Security Documents.
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"Net Proceeds" shall mean the amount of all insurance proceeds other
than business interruption insurance paid pursuant to any Insurance Policy as
the result of a Casualty, after deduction of GDB's costs and expenses
(including, without limitation, attorneys' fees and expenses), if any, in
collecting such proceeds.
"Net Restoration Award" shall mean the amount of all awards and
payments received from a condemnor on account of a Taking, after deduction of
GDB's costs and expenses (including, without limitation, attorneys' fees and
expenses), if any, in collecting such awards and payments.
"Note" shall mean a secured promissory note, substantially in the form
of Exhibit "10" hereto, issued by KGC and WKA to GDB evidencing the Borrowers'
Indebtedness under the Facility.
"Obligation" shall mean all present and future Indebtedness,
obligations and liabilities, and all renewals and extensions thereof, or any
part thereof, now or hereafter owed to the Bank or GDB by any of the Borrowers
arising from, by virtue of, or pursuant to the Bank Loan Documents, the GDB Loan
Agreement or any of the GDB Facility Documents, together with all interest
accruing thereon and costs, expenses and attorneys' fees incurred in the
enforcement or collection thereof, whether such Indebtedness, obligations and
liabilities are direct, indirect, fixed, contingent, determinate, undeterminate,
joint, several or joint and several.
"Officer's Certificate" shall mean a certificate signed by a General
Partner.
"Operating Expenses" shall mean, with respect to any period for which
Operating Expenses are being determined, all expenses paid by or on behalf of
the Partnership in connection with the ownership and operation of the Premises
for such period, including, without
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limitation, insurance, utilities, funding of reserves in amounts approved by the
Bank and GDB for maintenance, capital and non-capital repairs and the repair and
replacement of furniture, fixtures and equipment, but in any event commensurate
with the guidelines set forth in Section 4.5 of the Management Agreement;
general and special real property taxes on and assessments of the Premises;
equipment rentals; maintenance and non-capital repairs to the extent not paid
for from reserves established therefor; non-capital repair and replacement of
furniture, fixtures and equipment to the extent not paid for from reserves
established therefor; governmental and license fees; advertising and marketing;
payments under the Ground Lease; basic management Fees and expenses arising
under the Management Agreement; all other operating expenses reasonably
necessary for the proper and efficient operation of the Premises as a first
class destination resort hotel; and reasonable expenses paid to a person other
than a Partner, the Partnership or any of their Affiliates that are directly
related to the sale of initial golf club memberships and similar memberships,
even if such expenses are incurred prior to the Date of Substantial Completion.
To the extent not already included herein, Operating Expenses shall, for the
purposes of the definition of Excess Revenues, include reasonable expenses of
the type described in the preceding sentence incurred by any of the Borrowers or
their Affiliates (other than the Partnership) directly related to the generation
of revenues that are included in the definition of, and counted for purposes of
this Agreement as Aggregate Revenues; provided, however, that such Operating
Expenses shall not include any amounts paid for general overhead or general
operating expenses that exceed a reasonable allocation of such overhead or
expenses to the generation of such Aggregate Revenues; and provided, further,
that the amount of such Operating Expenses shall not include any expenses
associated with the development, financing,
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construction or sale of Condominium Parcels and the Condominium Units to the
extent already deducted in the calculation of Condominium Revenues; and
provided, further, that the amount of such Operating Expenses shall be limited,
in the case of any such Borrower or Affiliate, to the amount of revenues of such
Borrowers or Affiliate, as the case may be, derived from such Operating Expenses
and actually included in the definition of Aggregate Revenues for such Fiscal
Year, and that GDB shall have the right to inspect the books and records of such
Borrower or Affiliate with respect to such Revenues and Operating Expenses to
confirm the amounts of such Operating Expenses and Aggregate Revenues. Operating
Expenses shall not include Debt Service or Incentive Management Fees under the
Management Agreement.
"Operative Documents" shall mean the GDB Facility Documents, the GDB
Loan Agreement, the LC Agreement, The Letter of Credit, the Trust Agreement, the
AFICA Loan Agreement, the Note, the Security Documents, the Additional Security
Documents, the Bond Purchase Agreement, the GDB Standstill Agreement, the
Facility Standstill Agreement, the Four Party Agreement, the Management
Subordination Agreement, the Construction Manager Consent and Agreement, the
Architect's Letter, the Official Statement, the GDB Investment Agreement, the
Bond Swap Agreement, the Termination Payment Guaranty and the Bond Pledge
Agreement. Each capitalized term in this paragraph not otherwise defined herein
shall have the meaning assigned thereto in the Bank Loan Documents.
"Outstanding Principal Amount" shall mean the total amount of all
advances disbursed under the Facility, increase, from time to time, by the total
amount of unpaid interest under the Facility that is capitalized and added to
principal pursuant to Paragraph 3.2 hereof and reduced, from time to time, by
any repayments of principal or Capitalized Interest made by Borrowers
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directly to GDB pursuant to Paragraphs 3.6 or 3.8 hereof. Any reduction in the
Outstanding Principal Amount resuling from repayment directly to GDB shall be
applied in the order specified in Paragraph 3.10. Amounts deposited in the GDB
Facility Escrow shall not be deemed paid for purposes of determining the
Oustanding Principal Amount until withdrawn from the GDB Facility Escrow and
paid directly to GDB, as provided in Paragraph 3.9(b).
"Palominos Island Property" shall mean approximately 90 acres of land
located on an island approximately three (3) miles to the east of the Fajardo
Property, more particularly described in the GDB Loan Agreement.
"Participation" shall mean all shares, options, warrants, interests,
participations or other equivalents (regardless of how designated) of or in a
partnership or equivalent entity, whether voting or nonvoting, including,
without limitation, any other "equity security".
"Parties" shall mean Borrowers and GDB.
"Partner" shall mean (i) any of the General Partners of the Partnership
or (ii) any other partner of the Partnership.
"Partnership" shall mean El Conquistador Partnership L.P., a limited
partnership organized and existing under the laws of the State of Delaware.
"Partnership Agreement" shall mean that certain agreement among the
Partners, dated February 7, 1991, as amended by the first amendment thereto,
dated April 30, 1992.
"Partnership Mortgage Note" shall mean the mortgage note, in the form
of Exhibit "12" hereto, secured by the GDB Facility Mortgage on the Premises.
"Partnership Pledge Agreement" shall mean a pledge agreement,
substantially in the form of Exhibit "14" hereto, executed by the Partnership
and pledging to GDB the Partnership
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Mortgage Note and the Facility Mortgage on the Premises to secure the payment of
interest under the GDB Facility Documents.
"Partnership Proceeds" shall mean any issues, income, profits, avails
or other proceeds from the Project or the Partnership in which any Partner or
any Affiliate of any Partner or the Partnership has any interest whatsoever,
such Partnership Proceeds to include, without limitation, any Condominium
Revenues, any Partnership Returns (not including payments on loans by
third-party lenders other than the Partners or any Affiliate of the Partners or
the Partnership), any notes or receivables payable by the Partnership, or any
claims or other rights of any such Person against the Partnership or in any of
the documents, instruments, reports and agreements of any nature whatsoever
listed in Paragraph 4.2.4 hereof; provided, however, that Partnership Proceeds
shall not include (i) the Development Fee and the Basic Management Fee and
reimbursable expenses under the Management Agreement; (ii) the Construction
Management Fee and reimbursable expenses under the Construction management
Agreement; (iii) the Borrowers' Share of Excess Revenues and (iv) payments under
Fair Value Contracts in respect of Operating Expenses. The Borrowers' ownership
interests in the Partnership are not to be construed as Partnership Proceeds
hereunder.
"Partnership Returns" shall mean (i) any payment of principal or
interest on any Deficiency Loans (as defined in the Partnership Agreement) or on
any working capital or other loans to the Partnership from any Partner or any
Affiliate of any Partner or the partnership, (ii) any distributions by or on
behalf of the Partnership of profits or capital, including, without limitation,
dividends and withdrawals of profits, to or for the benefit of any Partner or
any Affiliate of any Partner or (iii) payments by or on behalf of the
Partnership of any amounts to
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any partner or to any Affiliate of a Partner or the Partnership as a lender to
the Partnership (regardless of whether the Indebtedness to such Lender is
Permitted Indebtedness) or (iv) any other payments or transfers of property
directly or indirectly to or for the benefit of any Partner or any Affiliate of
any Partner or the Partnership (other than the Basic Management Fee and the
Development Fee and reimbursable expenses under the Management Agreement and the
Construction Management Fee and reimbursable expenses under the Construction
Management Agreement and payments under Fair Value Contracts in respect of
Operating Expenses).
"Party" shall mean either of the Borrowers or GDB.
"Permits" shall mean, collectively, (i) all Construction Permits and
(ii) all applicable authorizations, consents, licenses, approvals and permits of
Government Authorities (A) for operation of the Project, including, without
limitation, all applicable authorizations and licenses relating to sales of
liquor and operation of the casino and other facilities comprising the
Improvements; and (B) for the performance and observance of all agreements,
provisions and conditions herein contained.
"Permitted Indebtedness" shall mean with respect to the Borrowers, any
Indebtedness incurred for fair consideration, and, with respect to the
Partnership or any of its Subsidiaries (i) Indebtedness contemplated by the
Budget, the LC Agreement and the GDB Loan Agreement; (ii) accounts payable and
accrued liabilities prudently incurred in the ordinary course of business in the
development and operation of the Project; provided, however, that no Event of
Default has occurred or would occur as a result of such Indebtedness; or (iii)
Indebtedness that consists of the obligation of the Partnership or any of its
Subsidiaries to repay any loan from any of the Borrowers or their Affiliates;
provided, however, that (A) such Indebtedness is junior, subject
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and subordinate in all respects to the Obligations owed by the Partnership to
GDB under the Facility, and the maker of such loan shall not and may not,
without the prior written consent of GDB in each instance, which consent may be
withheld by GDB in its sole and absolute discretion, exercise any rights or
remedies as a result of a default of the Partnership or any of its Subsidiaries;
and (B) such Indebtedness of the Partnership or any of its Subsidiaries shall be
evidenced by a promissory note of the Partnership or such Subsidiary pledged and
assigned to the benefit of GDB pursuant to the Proceeds Pledge Agreement or (iv)
for purposes of Article Eight, the Incentive Management Fee (as defined in the
Management Agreement) and Indebtedness to the Partners (other than loans)
arising under the Partnership Agreement.
"Permitted Liens and Encumbrances" shall mean:
(a) The Liens in favor of GDB set forth in the Security
Documents and the Additional Security Documents.
(b) Liens arising out of judgments or awards with respect to
which the Borrowers or the Partnership shall in good faith be prosecuting an
appeal or proceedings for review and in respect of which the aforesaid shall
have set aside on its books reserves which GDB deems adequate with respect to
each such judgment or award, so long as no imminent risk of sale or forfeiture
of any interest in the Mortgaged Properties or any part thereof arises during
the pendency of such appeal or proceeding.
(c) Liens for any charges, if payments of such Charges shall
not at the time be required to be made under the AFICA Loan Agreement or any
other Operative Document.
(d) Inchoate Liens.
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(e) Existing easements, rights of way and servitudes on the
Mortgaged Properties as of the Closing Date, including such easements, rights of
way and servitudes as are listed in the Title Policy, and such future easements,
rights of way and servitudes as GDB shall approve as to the Mortgaged
Properties.
(f) Liens on personal property to be acquired by the
Partnership, whether by sale or lease, subsequent to the commencement of hotel
operations by the Partnership and which do not replace the originally
contemplated furniture and fixtures or equipment to be acquired for such
operations, or to secure financing from sources other than GDB in accordance
with and to the extent permitted in this Agreement.
(g) Deposits and similar payments incurred in the ordinary
course of the partnership's business.
(h) Liens created pursuant to the Bank Loan Documents or the
GDB Loan Agreement.
(i) Liens created pursuant to the Partnership Agreement,
provided that any such Lien shall be junior, subject and subordinate in all
respects to the Obligations owed to GDB.
(j) The fourth-priority mortgage lien on the Premises in favor
of KGC.
(k) The necessary easements, rights of way, and servitudes to
provide adequate access and services to the Condominium Parcels, which shall be
constituted simultaneously with the release of the Condominium Parcels from the
Lien of the GDB Mortgage.
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"Person" shall mean an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Planning Board" shall mean the "Junta de Planificacion" of the
Commonwealth of Puerto Rico.
"Plans" shall mean the plans, drawings and specifications of the
construction of the Improvements, including, without limitation, the
architectural, structural, mechanical and electrical plans and specifications
therefor prepared or to be prepared by the Partnership, the Architects and the
partnership's engineers and contractors, as approved by GDB, together with all
revisions and addenda to such plans, drawings and specifications, provided that
such revisions and addenda have been approved by GDB to the extent such approval
is required pursuant to this Agreement, which Plans shall include, without
limitation, a description of the materials, equipment and fixtures necessary for
the Construction.
"Pledge of the GDB Guaranty Mortgage Notes" shall mean the pledge by
the Borrowers to GDB of the GDB Guaranty Mortgage Notes pursuant to the
execution and delivery by the Parties of a pledge agreement substantially in the
form of Exhibit "13" hereto.
"Pledge of the Partnership Mortgage Note" shall mean the pledge by the
Partnership to GDB of the Partnership Mortgage Note pursuant to the execution
and delivery by the Parties of a pledge agreement substantially in the form of
Exhibit "14" hereto.
"Pledges" shall mean the Pledge of the GDB Guaranty Mortgage Notes and
the Pledge of the Partnership Mortgage Note.
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"Premises" shall mean that certain real estate more fully described in
Exhibit "15" (attached hereto and incorporated by reference herein), comprising
Borrower's fee simple title to the Fajardo Property, including the Condominium
Parcels and the Condominium Units and excluding the leasehold estate in the
Palominos Island Property; provided, however, that such portion of the
Condominium Parcels and Condominium Units as is released from the Facility
Mortgage on the Premises in accordance with Paragraph 4.4 hereof shall, upon
such release, be excluded from the definition of Premises for purposes of
Articles Six, Seven and Eight, but not for purposes of any other provision of
this Agreement (including, without limitation, the definitions).
"Proceeds Pledge Agreement" shall mean the pledge or assignment
agreement, substantially in the form of Exhibit "16" hereto, to be executed by
each of the Partners in accordance with Paragraph hereof.
"Project" shall mean, collectively, the acquisition of the Fajardo
Property, the leasing as tenant of the Palominos Island Property and the
renovation, development, construction, furnishing and equipping of the Premises
and the Improvements.
"Project Costs" shall mean any item of cost and expense arising out of
or necessary for the acquisition and development of the Project and the
Construction, and which are included in the Budget, including, without
limitation, such incidents thereto as organizational costs, financing costs,
insurance premiums, legal and accounting fees, construction management fees,
development fees, furnishings, equipment, supplies, advertising and marketing
expenses and initial working capital.
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"Quarter" shall mean a period of time that (i) begins each January 1,
April 1, July 1 and October 1 and (ii) ends each March 31, June 30, September 30
and December 31, respectively, or, in the case of the period next preceding the
Maturity Date, ends on the Maturity Date.
"Release Conditions" shall have the meaning ascribed thereto in
Paragraph 10.4 hereof.
"Reportable Event" shall have the meaning assigned thereto in Title IV
of ERISA.
"Request for Disbursement" shall have the meaning assigned thereto in
the LC Agreement.
"Restoration" shall mean, in case of a Casualty or Taking, (i) with
respect to the Premises, the restoration, replacement or rebuilding of the
affected property such that when such restoration, replacement or rebuilding is
completed, the Improvements shall have been constructed substantially in
accordance with the Plans, and to the extent any alterations or additions to the
Improvements were made in compliance with the GDB Mortgage, the Facility
Mortgage on the Premises, the GDB Loan Agreement or this Agreement, with any
such alterations or additions; or in the event that the foregoing requirement
cannot be satisfied as a result of any Legal Requirements or, in the case of a
Taking, as a result of the loss of the use of the portion of the Premises which
was the subject of such Taking, such restoration, replacement or rebuilding as
shall, when such restoration, replacement or rebuilding is completed, render the
Project an integral unit similar in condition, character and scope to the
Project prior to such Casualty or Taking and (ii) with respect to any other
property, the restoration, replacement or rebuilding of such property to a
similar condition, character and use as that in existence prior to such Casualty
or Taking. For Restoration to have taken place pursuant to the preceding
sentence, the value of the Project or other property, when so restored,
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replaced or rebuilt, together with the amount of the Net Proceeds or the Net
Restoration Award, as the case may be, applied in repayment of the principal
indebtedness evidenced by the Note, the GDB Notes (as such term is defined in
the GDB Loan Agreement), the Bank Loan documents, or the first mortgages on such
other property, shall be equal to or greater than the value and usefulness of
the Project or such other property, as the case may be, immediately prior to
such Casualty or Taking.
"Rights" shall mean rights, remedies, powers and privileges.
"Security" shall have the meaning assigned to it in Paragraph 4.1
hereof.
"Security Documents" shall mean the Pledges, the Proceeds Pledge
Agreement, the Partnership Pledge Agreement, the GDB Facility Mortgages, the GDB
Guaranty Mortgages, the Note, the partnership Mortgage Notes, the GDB Guaranty
Mortgage Notes, the Assignments, the GDB Facility Guaranties, and the Title
Policy.
"Soft Costs" shall mean, collectively, all costs set forth in the
Budget, excluding Hard Costs.
"Subsidiary" shall mean, with respect to any Person, any corporation,
partnership or other entity of which a majority interest is owned or is
effectively controlled by such Person.
"Substantial Completion" shall mean the occurrence of all of the
following events: (i) the completion of the renovation and Construction
(excluding punchlist items) of the Improvements in accordance with all Legal
Requirements and substantially in accordance with the Plans as to any aspect of
Construction and the issuance of applicable use or occupancy permits therefor
satisfactory to GDB and the Bank; and (ii) the delivery to GDB and the Bank of
certificates, in form and content satisfactory to GDB and the Bank, from the
Partnership, the Architects and
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the Bank's Consultant to the effect that all of the work required to be
performed to complete the Improvements in accordance with all Legal Requirements
and in accordance with the Plans has been substantially performed.
"Survey" shall mean a survey of the Mortgaged Properties prepared
substantially in accordance with the standards adopted by the American Land
Title Association and the American Congress on Surveying and Mapping in 1986,
known as the "Minimum Standard Detail Requirements of Land Title Surveys," or
showing equivalent detail and specifics or otherwise acceptable to GDB.
"Taking" shall mean any temporary or permanent taking by any public or
quasi-public authority of any Mortgaged Property or any part thereof through
eminent domain or other proceedings or by any settlement or compromise of such
proceedings, or any voluntary conveyance of such property in lieu of the
commencement of any such proceedings.
"Taxes" shall mean all taxes, assessments, fees, levies, imposts,
duties, deductions, withholdings, stamp taxes, mortgage taxes or charges,
recording charges, interest equalization taxes, real estate taxes or other
ad-valorem taxes, capital transaction taxes, foreign exchange taxes or charges
or other charges of any nature whatsoever from time to time or at any time
imposed by any law, rule, regulation or court.
"Term" shall shall mean that period from and including the Closing Date
through the Maturity Date.
"Threshold Amount" shall mean, for any Fiscal Year, two million five
hundred thousand Dollars ($2,500,000).
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"Title Insurer" shall mean The American Title Insurance Company or any
other issuer, approved by GDB, of the title insurance policy insuring GDB as
holder of the Facility Mortgage on the Premises and the GDB Guaranty Mortgages.
"Title Policy" shall mean the title insurance policy issued by the
Title Insurer insuring GDB as holder of the GDB Facility Mortgages and the GDB
Guaranty Mortgages.
"Trade Contract" shall mean any general construction contract entered
into by Borrower with respect to the Construction of the Improvements that
satisfies the conditions set forth in the LC Agreement, which contract shall
require the Trade Contractor to name GDB as an additional named insured under a
payment and performance bond satisfactory to GDB as to form, content and issuer
with respect to such Trade Contractor's obligations under its respective Trade
Contract, and shall be otherwise satisfactory to GDB in form and content.
"Trade Contractor" shall mean any contractor engaged in the
Construction of the Improvements under a Trade Contract.
"Transfer" shall mean (i) any sale or transfer of the Premises or any
portion thereof except any sale or transfer of the Condominium Parcels or the
Condominium Units in accordance with Paragraph 4.4 hereof or (ii) any transfer
of any direct or indirect equity interest in any of the Borrowers, the
Partnership or the Guarantors, including, without limitation, any sale or
transfer of a direct or indirect equity interest in the constituent Partners of
the Borrowers or Kumagai.
"Williams" shall mean Williams Hospitality Management Corporation, a
Delaware corporation.
"WKA" shall mean WKA El Con Corp., a Delaware corporation.
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"WMS El Con" shall mean WMS El Con Corp., a Delaware corporation.
"WMS Industries" shall mean WMS Industries Inc., a Delaware
corporation.
"Work Change" shall mean any change order, any other amendment or
modification to any contract or subcontract and any revision, addendum,
modification to or amendment of the Plans for the Improvements, including minor
departures from the Plans for the Improvements pursuant to field orders.
ARTICLE 3
AMOUNT AND TERMS OF CREDIT FACILITY
3.1 Advances. Subject to the terms and conditions hereof, and relying
on the representations, covenants, and warranties of the Borrowers contained
herein, GDB agrees to make available to the Borrowers a credit facility and to
advance to the Borrowers on the Closing Date monies from such facility in a
non-revolving line of credit of EIGHT MILLION DOLLARS (U.S. $8,000,000) for the
purpose of providing the proceeds thereof to the Partnership in order to finance
part of the Project Costs including accrued and accruing interest on the
Existing GDB Loan from time to time during the period commencing on the date of
this Agreement to and including the Completion Date.
3.2 Interest. The loan made by GDB to Borrowers hereunder shall be
evidenced by the Note, and shall bear interest at the Applicable Rate. The
Applicable Rate shall be adjusted quarterly on each Interest Adjustment Date to
reflect any change in LIBOR as of such date, and such adjustment in the
Applicable Rate shall become effective on such date. Except as otherwise
provided herein, such interest accrued during any Quarter shall be payable on
the first day of the following Quarter and shall be computed on the Outstanding
Principal Amount on the basis
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of a year of three hundred sixty (360) days and for the number of actual days
elapsed; provided, however, that, during the first sixty (60) months following
the Closing Date, payment of accrued interest shall be deferred, and all such
amounts ("Capitalized Interest") of deferred interest (i) shall, on the date
they otherwise would have become due and payable but for such deferral, be
capitalized and added to the Outstanding Principal Amount; and (ii) shall be
repaid in accordance with the provisions of Paragraph 3.6 and 3.7 hereof.
3.3 Commitment Fee. In consideration of the commitment of GDB to make
the Facility available to Borrowers (the "Commitment"), Borrowers have agreed to
pay to the GDB a commitment fee equal to EIGHTY THOUSAND DOLLARS ($80,000,00)
(the "Commitment Fee"), in accordance with the terms of a commitment letter
dated March 20, 1992 which fee shall not be reimbursable to Borrowers, in whole
or in part, under any circumstance whatsoever.
3.4 Intentionally Omitted.
3.5 Proceeds of Advances under the Facility. The proceeds of advances
under the Facility shall, immediately on the Closing Date, be placed on deposit
with the Bank for the purpose of being provided to the Partnership pursuant to
an irrevocable direction by the Borrowers to the Bank to disburse such proceeds
to the Partnership to pay Project Costs subject to and in accordance with the LC
Agreement. Such proceeds shall be used solely for the payment of Project Costs
(as such costs are incurred in accordance with the Budget and the Construction
Schedule) including payment of accrued and accruing interest under the Existing
GDB Loan.
3.6 Repayment of Principal. Except as otherwise provided herein, the
Borrowers shall repay, on each Interest Payment Date occurring on or after March
31, 2000 an amount of
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principal equal to two hundred fifty thousand Dollars ($250,000) (each such
payment, a "Scheduled Principal Payment"), as follows:
(i) for any Interest Payment Date prior to and including the
Facility Escrow Expiration Date, such Scheduled Principal Payment shall, subject
to Paragraph 3.7(b), be deposited into the GDB Facility Escrow; and
(ii) for any Interest Payment Date after the Facility Escrow
Expiration Date, such Scheduled Principal Payment shall be paid directly to GDB
until payment in full of the amounts due to GDB under the Facility.
3.7 Mandatory Prepayment.
(a) If there are any Excess Revenues in any Fiscal Year,
Borrowers shall pay, or shall cause the Partnership to pay, the GDB Share of
Excess Revenues on the date that is thirty (30) days after the due date for
delivery to the Bank of audited financial statements of the Partnership pursuant
to Paragraph 7(g) of the LC Agreement demonstrating to the Bank the existence
and amount of Distributable Cash (as such term is defined in the Partnership
Agreement) for such Fiscal Year, as follows:
(i) the GDB Share of Excess Revenues shall, to the
extent of any (A) accrued but unpaid interest hereunder plus (B) Capitalized
Interest hereunder, be paid directly to GDB; and
(ii) any remaining GDB Share of Excess Revenues after
payment of the amount provided for in subparagraph (a)(i) of this Paragraph 3.7
shall (A) subject to the provisions of Paragraph 3.7(b) hereof, on any date
prior to and including the Facility Escrow Expiration Date, be deposited into
the GDB Facility Escrow and (B) on any date after the
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Facility Escrow Expiration Date, be paid directly to GDB until payment in full
of amounts due GDB under the Facility.
(b) On any Interest Payment Date prior to and including the
Facility Escrow Expiration Date, Borrower shall not be required to make the
deposit required under Paragraph 3.6 (i) or subparagraph (a)(ii)(A) of this
Paragraph 3.7 to the extent that, on such date, such deposit would cause the
amount in the GDB Facility Escrow to exceed the Facility Escrow Cap as of such
date.
(c) Upon any refinancing of the Partnership's Loan under the
Bank Loan Documents, if any Excess Refinancing Proceeds shall remain after
repayment of the Existing GDB Loan pursuant to Paragraph 4.2(e) of the GDB Loan
Agreement and payment to the Bank of any amounts owed to it, Borrowers shall
cause GDB to be repaid the Obligations under the GDB Facility Documents in whole
or in part from and to the extent of such remaining Excess Refinancing Proceeds.
3.8 Optional Prepayment. Upon at least ten (10) days' prior written
notice to GDB, the Borrowers or the Guarantors may, if all accrued interest,
including Capitalized Interest, has been paid, use any funds not derived from
the Project or the operation thereof to prepay or cause to be prepaid, directly
to GDB, outstanding principal under the Facility, in whole or in part, at any
time.
3.9 Payments from GDB Facility Escrow. Amounts in the GDB Facility
Escrow shall be paid as follows:
(a) if, on any Interest Payment Date, the Bank has not
notified GDB that the Partnership has failed to pay all interest and other fees
due under the Bank Loan Documents on
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a current basis through and including the 15th day prior to such Interest
Payment Date, an amount shall be paid directly to GDB from the GDB Escrow
Account, on such Interest Payment Date, which is equal to, if any, the sum of
(i) accrued but unpaid interest and (ii) Capitalized Interest hereunder;
(b) any amounts remaining in the GDB Facility Escrow Account
on the Facility Escrow Expiration Date shall be paid directly to GDB on such
date to the extent of Borrowers' then-outstanding Obligations to the GDB under
the GDB Facility Documents' provided, however, that, in the event that the
Facility Escrow Expiration Date occurs as to one Borrower and not the other as a
result of the application of clause (iv) of the definition thereof, GDB shall be
paid directly on such date any amount in the GDB Facility Escrow to the extent
of such Borrower's remaining Obligations, as limited in accordance with
Paragraph 4.5 hereof (with any remaining amounts to remain subject to this
Paragraph 3.9 in respect of any other remaining Obligations hereunder); and
(c) in the event that amounts on deposit in the GDB Facility
Escrow shall exceed the Facility Escrow Cap as a result of a payment received by
GDB in respect of principal or capitalized interest, such excess amounts shall
be released to the Borrowers, which hereby irrevocably direct that such excess
amounts shall be released to the Partnership; provided, however, that such
excess amounts shall be considered Partnership Returns and shall be subject to
the limitations thereupon hereunder. Any amounts remaining in the GDB Facility
Escrow after GDB has received payment in full of the Borrowers' obligations
hereunder shall be released to the Borrowers.
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3.10 Priority of Application of Payments to GDB. All amounts
paid directly to GDB in accordance with Paragraphs 3.6, 3.7 and 3.8 hereof shall
be applied first to accrued but unpaid interest, second to Capitalized Interest
and third to any remaining Outstanding Principal Amount. Amounts deposited in
the GDB Facility Escrow shall not be deemed paid until paid directly to GDB
pursuant to Paragraphs 3.9(a) or 3.9(b).
3.11 Note. The Facility shall be evidenced by and repaid in
accordance with the Note. The Note shall include on its reverse side notations
evidencing (i) the amount of accrued interest capitalized and added to such
principal amount pursuant to Paragraph hereof; and (ii) the amount by which the
Outstanding Principal Amount has been reduced pursuant to Paragraph 3.6 or
Paragraph 3.7 hereof.
3.12 GDB Facility Escrow. Borrowers shall execute a GDB
Facility Escrow Agreement substantially in the form of Exhibit "5" attached
hereto and shall cause the Partnership to deposit with the Facility Escrow Agent
the amounts to be paid into the GDB Facility Escrow in accordance with
Paragraphs 3.6 and 3.7 hereof. Amounts held in the GDB Facility Escrow may be
invested as directed by GDB in investments in accordance with Paragraph 2.6 of
the GDB Escrow Agreement, and earnings therefrom shall remain on deposit in the
GDB Escrow and shall be withdrawn in accordance with the terms thereof. If the
GDB Facility Escrow Agreement actually executed by the Facility Escrow Agent
does not contain all of the terms and conditions of the form of GDB Facility
Escrow Agreement attached hereto as Exhibit 5, then all of the terms and
conditions in such Exhibit 5 shall be deemed incorporated herein by reference
and made part hereof, and each of the Borrowers and GDB agrees to act, with
respect to the GDB Facility Escrow, in accordance with those terms. Each of the
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Borrowers and GDB shall instruct the Facility Escrow Agent to act, deal with the
GDB Facility Escrow and make deposits thereto and withdrawals therefrom in
accordance with the terms of said Exhibit 5 hereto.
3.13 Maximum Interest Rate. Anything herein to the contrary
notwithstanding, if the rate of interest required to be paid hereunder exceeds
the rate lawfully chargeable, the rate of interest to be paid shall be
automatically reduced to the maximum rate lawfully chargeable so that no amounts
in excess thereof shall be charged, and, in the event it should be determined
that any excess over such highest lawful rate has been charged or received, GDB
shall promptly refund such excess to the Borrowers or the Partnership; provided,
however, that, if lawful, any such excess shall be paid by the Borrowers or the
Partnership to GDB as additional interest (accruing at a rate equal to the
maximum legal rate minus the rate provided for hereunder) during any subsequent
period when regular interest is accruing hereunder at less than the maximum
legal rate.
ARTICLE 4
SECURITY
4.1 The Security. As Security for the Facility and the performance and
observance of the covenants, agreements and other obligations of the Borrowers
under the GDB Facility Documents, the Borrowers shall deliver or shall cause the
Partnership to deliver to GDB, in form and substance acceptable to GDB, the
following collateral (the "Security"):
4.1.1 (i) guaranties from Kumagai and KGC in respect of a
portion of the principal under the Facility, each in the form of Exhibit "19"
hereto; (ii) a guaranty from WKA in respect of a portion of the principal under
the Facility in the form of Exhibit "20" hereto; (iii)
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the GDB Guaranty Mortgages; and (iv) a guaranty from WMS Industries in respect
of a portion of the principal under the Facility in the form of Exhibit "21"
hereto;
4.1.2 The Pledge of the GDB Guaranty Mortgage Notes, secured
by the GDB Guaranty Mortgages, to secure payment of the Note;
4.1.3 To the extent that any of the Borrowers, the Partnership
or any of their Affiliates have any interest in any such property or asset: (i)
a valid lien and mortgage on any assets connected or associated with the Project
that are released from the lien and mortgage of the Bank under the Bank Loan
Documents; provided, however, that, without prejudice to GDB's rights under
Paragraph 4.5 of the GDB Loan Agreement, any such lien and mortgage granted to
GDB in respect of the Condominium Parcels or Condominium Units shall be limited
to the Lien described in clause (v) below in the event that the Bank has
released its lien on the Condominium Parcels pursuant to Paragraph 6 of the LC
Agreement; (ii) a valid assignment, to the extent permitted by law, of (a) all
Condominium Construction Documents, consulting contracts, payment and
performance bonds, plans and specifications, warranties and Permits for or
related to the Condominium Parcels or the Condominium Units, together with such
consents by any contractors, architects, surveyors, appraisers and other
entities and persons as are necessary to perfect such assignment, (B) all
operating licenses, permits, accreditations, approvals and rights granted to the
Condominium Parcels or the Condominium Units, or to any of the Borrowers, the
Partnership or any of their Affiliates in connection with or related to the
Condominium Parcels or the Condominium Units; (C) all surveys and development
plans relating to the Condominium Parcels or the Condominium Units, and (D) all
other contracts and contract rights, options, agreements, deposits, leases,
concessions, and any and all other rights or
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privileges of any of the Borrowers, the Partnership or any of their Affiliates,
tangible or intangible, in connection with, arising from or related to the
construction, development or operation of Condominium Parcels or the Condominium
Units; (iii) valid and perfected personal property mortgages in all personal
properties, including all vehicles, furniture, fixtures, furnishings,
appliances, machinery, equipment, with all replacements, accessories, parts and
tools, now owned or hereafter acquired for or at the Condominium Parcels or the
Condominium Units, which are not covered by the GDB Facility Mortgages; (iv) a
valid and perfected assignment of all space leases, concessions, agreements and
any other agreement relating to the Condominium Parcels or the Condominium
Units; and (v) a valid lien in the form of Exhibit "22" hereto (the "Condominium
Lien") on proceeds from the development, financing, sale or rental, or otherwise
derived from any of the assets and properties listed in clauses (i) through (iv)
of this Paragraph 4.1.3, including, without limitation, Condominium Revenues;
4.1.4 The Proceeds Pledge Agreement, executed by each of the
Partners, Williams, AMK, Hospitality, WMS El Con and HASN pledging to GDB a
valid lien on and assignment of all interests of such partner in Partnership
Proceeds as collateral for certain of the obligations of the Borrowers under the
GDB Facility Documents and subordinating claims of such Partner against the
Partnership in any obligation payable to GDB under any of the GDB Facility
Documents; and a valid assignment of the GDB Facility Escrow Agreement.
4.2 Additional Security. As additional assurance for the payment of
interest (including Capitalized Interest) on the Note and the performance of
certain of their obligations hereunder, Borrowers shall deliver, or cause the
Partnership to deliver to GDB, in form and
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substance acceptable to GDB, the following collateral (the "Additional
Security") in accordance with the terms hereof:
4.2.1 The Partnership Pledge Agreement;
4.2.2 The Pledge of the Partnership Mortgage Note, secured by
the GDB Facility Mortgage on the Premises, to secure payment of interest on the
Note;
4.2.3 The valid Assignment of all intangible assets connected
or associated with the Project, including, but without limitation, the right in
and to the name "El Conquistador";
4.2.4 The valid Assignment, to the extent permitted by law, of
(i) all Construction Documents, payment and performance bonds, Plans, warranties
and Permits for or related to the Premises, together with such consents by any
contractors, architects, surveyors, appraisers and other entities and persons as
are necessary to perfect such assignments; (ii) the Surveys and (iii) all other
contracts and contract rights, options, agreements, deposits, leases,
concessions, and any and all other rights or privileges of the Partnership,
tangible or intangible, in connection with, arising from or related to the
Premises or their operation;
4.2.5 The valid and perfected Assignment of all space leases,
concessions, agreements and any other agreement relating to the Premises;
4.2.6 The valid Assignment by the Partnership, as continuing
collateral security, of the benefit of all the Insurance Policies or the
appropriate mortgagee endorsements for such polices as may be approved by GDB;
4.2.7 The valid Assignment, as continuing collateral security,
of the Partnership's interest in the Management Agreement;
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4.2.8 An assignment as collateral security, if and to the
extent permitted by law, of all rights of the Partnership under any license
required for the operation of the casino (each, a "Casino License"), and any
other Permit required for the operation of the Project, provided that the
Partnership shall commit as a binding obligation under the Facility to use its
best efforts, as necessary or required, to secure any consent of any Government
Authority to effect the assignment of any Casino License or any other license or
Permit to GDB or its subsequent transfer or issuance to GDB upon the occurrence
of an Event of Default, all pursuant to, and if and to the extent permitted by,
the Laws of Puerto Rico;
4.2.9 Such other Security Documents or Additional Security as
Borrowers may hereafter be bound to execute and deliver or cause to be executed
and delivered to GDB under the terms of this Agreement or the Partnership Pledge
Agreement.
All of the above Additional Security shall be
subordinated under the Facility Standstill Agreement to the Bank Loan Documents
and shall be next in priority after the existing Liens in favor of GDB.
4.3 Preservation of Security. The Borrowers shall take, and shall cause
the Partnership to take, all action necessary to protect and preserve the
Security and the Additional Security, including, without limitation, (i) the
proper filing or recording of the GDB Facility Mortgages, the GDB Guaranty
Mortgages, the Assignments executed or to be executed by Borrower as Security or
Additional Security for the Facility, and the guaranties to be provided pursuant
to Paragraph 4.1.1 hereof, the Pledge of the GDB Guaranty Mortgage Notes to be
provided pursuant to Paragraph 4.1.2 hereof, the liens, mortgages and
assignments to be provided pursuant to Paragraph 4.1.3 hereof and the Proceeds
Pledge Agreement to be provided
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pursuant to Paragraph 4.1.4 hereof as Security or Additional Security for the
Facility; (ii) at GDB's request, the extension of the Lien of the GDB Facility
Mortgages to cover future personal property of any of the Borrowers or the
Partnership, including vehicles, equipment and machinery to be placed or used in
connection with or in any way forming part of the Premises; (iii) the proper
filing of the said Proceeds Pledge Agreement, GDB Facility Mortgages and GDB
Guaranty Mortgages for recording in the corresponding section of the Property
Registry of Puerto Rico or the Department of Transportation and Public Works of
Puerto Rico, as applicable; and (iv) the execution and proper filing of such
other agreements and documents that GDB may request from time to time to protect
its Liens and other interests hereunder.
4.4 Condominium Development.
(a) In the event that (i) a Condominium Developer has agreed
to develop the Condominium Units and (ii) the Bank, pursuant to Paragraph 6 of
the LC Agreement, has consented to the release of its lien on a portion of the
Premises to permit such development, GDB agrees that, at the Borrowers' request,
it will release the Condominium Units and the portion of the Condominium Parcels
to be so developed from the Facility Mortgage on the Premises if GDB shall have
approved the terms and conditions of the plan of development proposed by the
Condominium Developer in accordance with subparagraph 4.4(b) hereof.
(b) If the Borrowers seek the release of the Lien of the
Facility Mortgage on the Premises pursuant to subparagraph 4.4(a) the Borrowers
shall provide to GDB, together with such request, a detailed plan setting forth
(i) the terms and conditions upon which such development shall occur, (ii) the
basis upon which revenues and expenses relating to such development will be
shared by the Condominium Developer, the owners of any interest in such
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Condominium Developer, the Borrowers, the Partnership and any of their
Affiliates and (iii) such other information as may be reasonably necessary to
ascertain whether the development arrangements reflect an arm's-length
relationship among the Condominium Developer, the owners of any interests in the
Condominium Developer, the Borrowers, the Partnership and any of their
Affiliates and adequately protects GDB's Lien on the Condominium Proceeds under
the Condominium Lien. GDB agrees to review such requests and related information
promptly, and shall notify Borrowers, within 30 days of receipt of such request,
whether it approves of the terms and conditions of the plan of development,
which approval shall not be unreasonably withheld. Such requests shall be deemed
approved by GDB if not disapproved within such 30 day period.
(c) Notwithstanding subparagraphs 4.4(a) and 4.4(b) hereof,
(i) any consideration of any nature whatsoever, whether fixed or contingent,
received, directly or indirectly, by any of the Borrowers, the Partnership or
any of their Affiliates in connection with a transfer of the Condominium Parcels
or any portion thereof to a Condominium Developer shall be subject to the
condominium Lien and treated hereunder as Condominium Revenues and (ii) to the
extent that any of the Borrowers, the partnership or any of their Affiliates has
any remaining interest, whether direct or indirect, fixed or contingent, in the
Condominium Parcels, the Condominium Units or the Condominium Developer after
such transfer, such interest shall remain subject to the Condominium Lien;
provided, however, that Condominium Revenues shall exclude, and GDB shall have
no Lien on, that proportion of the revenues received by the Condominium
Developer in excess of the proportionate ownership interest of any of the
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Borrowers, the Partnership or any of their Affiliates in the revenues and
profits of the Condominium Developer.
4.5 Recourse and Non-Recourse Obligations.
(a) The obligations of the Borrowers under the GDB Facility
Documents for the payment of principal (other than Capitalized Interest) and
Paragraphs 7.1.12 and 7.1.16 hereof shall be with full recourse to and payable
from all properties and assets of both of the Borrowers; provided, however, that
the respective obligation of each Borrower with respect to repayment of
principal (other than Capitalized Interest) shall be limited to the lesser of
one half the Outstanding Principal Amount (other than Capitalized Interest) not
yet directly paid to GDB and four million Dollars ($4,000,000).
(b) the obligations of the Borrowers under the GDB Facility
Documents shall, with respect to interest under the Facility, including
Capitalized Interest, and obligations under Paragraphs 10.4 and 10.5 hereof, be
non-recourse to the Borrowers, payable solely from the assets (other than the
Guaranties or the GDB Guaranty Mortgages) that secure or guaranty the Facility.
Obligations of the Borrowers other than those identified in Paragraph 4.5 (a)
above and this Paragraph (b) shall be non-recourse to the Borrowers.
(c) Notwithstanding subparagraphs (a) and (b) of this
Paragraph 4.5, and subject to the provisions of the GDB Standstill Agreement
with respect to the Subordinate Loan Documents (as defined therein) and subject
to the provisions of the Facility Standstill Agreement with respect to the
Additional Subordinate Loan Documents (as defined therein), nothing in this
Agreement or any of the other GDB Facility Documents shall (i) limit, prevent,
prejudice or impair GDB's Rights to (A) recover damages, expenses or costs
(including, without limitation,
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reasonable attorneys' fees and disbursements) incurred by GDB as a result of
fraud by any of the Borrowers, the Partnership or any of their Affiliates
against the party committing such fraud, (B) recover any condemnation or
insurance proceeds paid to any of the Borrowers, the Partnership or any of their
Affiliates and not paid over to GDB to the extent required by the GDB Facility
Documents, (C) recover any revenues, including without limitation Aggregate
Revenues, from any of the Mortgaged Properties received or accrued after the
occurrence of an Event of Default, to the extent such revenues have not been
applied to pay Operating Expenses, insurance premiums or charges, or Debt
Service or other sums due and payable to GDB, (D) recover any tenant security
deposits or tenant rental or other payments or charges collected by any of the
Borrowers, the Partnership or any of their Affiliates or the agent of any of
them in advance and not transferred to GDB upon foreclosure, (E) recover against
any assets pledged under Paragraph 4.1.3 or 4.1.4 hereof, (F) name the
Borrowers, the Partnership or any of their Affiliates as a party defendant in
any action or suit for judicial foreclosures and sale under any of the GDB
Facility Documents or (G) obtain the appointment of a receiver; (ii) affect the
validity or the enforceability of any of the GDB Facility Documents; (iii) be
deemed to be a waiver of any right which GDB may have under any Debtor Relief
Laws; or (iv) be deemed to impair the validity of the Obligations.
(d) At any given time, GDB shall not be entitled to receive or
recover from or under, as the case may be, each of (i) WKA (whether as Borrower
or Guarantor), the GDB Guaranty Mortgages and the GDB Facility Guaranty executed
by WMS, collectively and (ii) KGC (whether as Borrower or Guarantor) and the GDB
Facility Guaranty executed by Kumagai, collectively, with respect to principal
(excluding Capitalized Interest) under the Agreement or
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the Note, an aggregate amount greater than the lesser of the Outstanding
Principal Amount or $4,000,000.
ARTICLE 5
CONDITIONS PRECEDENT
5.1 Conditions Precedent to Making Facility Available. The obligation
of GDB to make the Facility available to Borrowers is subject to the following
conditions precedent, which shall be satisfied on or before the Closing Date in
form and substance satisfactory to GDB:
(a) Title to Premises: GDB shall have received evidence
satisfactory to GDB that the Partnership has acquired and continues to hold a
fee simple, good, valid, recordable and insurable title to the Premises (except
for the Palominos Island Property, in which the Partnership holds a leasehold
estate) and that Posadas de Puerto Rico Association, Inc. and Williams hold fee
simple, good, valid recordable and insurable title to the Facility-Mortgaged
Properties, subject, in each case, only to Permitted Liens and Encumbrances.
(b) Payment of Fees and Expenses: Borrowers shall have paid
GDB the Commitment Fee and shall have paid GDB for all fees and expenses
reimbursable by the Borrowers up to the Closing Date.
(c) Collateral: Borrowers shall have delivered or shall have
caused the Partnership to deliver to GDB (i) the Security Documents, (ii) the
Additional Security Documents, and (iii) all other documents required under the
terms of the Security Documents and the Additional Security Documents, each
valid, binding and enforceable in accordance with its respective terms.
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(d) Escrow Agreements: GDB shall have received (i) a valid,
executed Escrow Agreement; and (ii) a valid, executed GDB Facility Escrow
Agreement in accordance with Paragraph 3.12 hereof.
(e) Equity and Other Contributions: GDB shall have received
evidence that Borrowers shall have invested or provided for the investment in
the Project (i) the Borrowers' equity contribution of thirty million Dollars
(U.S. $30,000,000) made in accordance with the requirements of the Existing GDB
Loan Agreement; (ii) an additional equity contribution of sixteen million
Dollars (U.S. $16,000,000), net of the Initial Disbursement (as defined in the
LC Agreement); and (iii) a subordinated loan in the amount of eight million
Dollars ($8,000,000), representing the proceeds of amounts advanced to the
Borrowers hereunder, in the case of items (ii) and (iii) to be deposited with
the Bank and disbursed for the payment of Project Costs subject to and in
accordance with the terms and provisions of the LC Agreement.
(f) Financial Information: GDB shall have received the most
recent audited and a current unaudited balance sheet of each of (i) the
Borrowers, the Partnership and every Subsidiary of any of them and (ii) the
Guarantors, certified in each case by the chief financial officer of the
Borrower, the Partnership or the Subsidiary to which such balance sheet relates.
(g) Updated Appraisals, Surveys, Etc.: GDB shall have received
such Appraisals, Surveys, Environmental Reports, and title insurance policies
regarding the Mortgaged Properties, each updated or made current, in a form
acceptable to GDB, as of the Closing Date, as GDB shall, in its reasonable
discretion, deem necessary.
(h) Budget: GDB shall have received a Budget for the Project
which shall be current as of the Closing Date.
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(i) Special Report: GDB shall have received a Bank
Consultant's Report, which shall be current as of the Closing Date hereof,
satisfactory to GDB in form and content, setting forth (i) that the Plans for
the stages of the Project under construction or to be commenced have been
approved by it, by ARPE and all Government Authorities with jurisdiction over
the Premises and the Project; (ii) that the necessary approval of the
Environmental Impact Statement for the Project as currently proposed to be
completed has been obtained from the Environmental Quality Control Board, as
well as any necessary approvals of the site and master development plan for the
Project from the Planning Board; (iii) that the Project as shown by the existing
Plans will comply with applicable zoning ordinances and regulations; (iv) that
all Permits necessary or appropriate for the Construction and development and
operation of the Project have been obtained; (v) that all existing and proposed
roads and utilities necessary for the full utilization of the Project are or
will be provided pursuant to the Plans; (vi) the adequacy of the amounts set
forth in the Budget for the Construction and for the activities and operations
intended to be covered by Soft Costs; (vii) its approval of a soil report;
(viii) the adequacy of the funds provided under the Facility, together with the
General Partners' additional $16 million equity contribution, to permit
completion and operation of the Project without giving rise to a default under
the payment terms of any financing agreement or other indebtedness relating to
the Project and without the need for additional funding in the future; and (ix)
such other reasonable matters that GDB may require.
(j) Insurance: GDB shall have received evidence of and
certificates naming GDB as additional insured under the Insurance Policies,
together with evidence of the payment
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of the premiums therefor insuring the Project (except for such portions as are
not yet in existence).
(k) Contractor's Insurance: GDB shall have received current
certificates from the insurance carrier for the general contractor or
contractors (and, if the Partnership is not adequately insured therein, from the
Partnership's insurance carrier) evidencing workmen's compensation, disability
and liability insurance (including contractual liability) carried during the
course of construction, naming GDB as an additional insured, with liability
insurance limits for death of or injury to persons, satisfactory to GDB.
(l) Utility Facilities: GDB shall have received appropriate
certifications from the Architects evidencing that the Premises on which the
Project is to be constructed will have adequate water supply, storm and sanitary
sewerage facilities, electric power supply, telephone services, fire protection,
means of ingress and egress to and from the Premises and public highways and
other required public utilities.
(m) Construction Documents: GDB shall have received executed
copies of all Construction Documents for the Project, as in effect as of the
Closing Date, including contracts, subcontracts, and purchase orders for all
fixtures and equipment to be installed as required for the operation of the
Project.
(n) Bonds: GDB shall have received performance bonds and labor
and materials payments bonds as may be required under the Construction
Management Agreement or Trade Contracts, each for penal sums equal to the amount
of each such contract and a Wage Payment Bond for 100% of the amount such
contract, each naming GDB as co-obligee and issued by insurance companies
acceptable to GDB.
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(o) Construction Schedule: GDB shall have received a progress
schedule or chart, showing the interval of time over which each item included
within the Budget is projected to be incurred or paid (the "Construction
Schedule"), which Construction schedule shall be current as of the Closing Date.
(p) Permits: GDB shall have received two photocopies of each
Construction Permit, and any other Permits required as of the Closing Date,
complete in all respects, subject to pending appeals or rights of appeal.
(q) Plans: GDB shall have received (i) current detailed Plans
for the Project, as approved, consistent with preliminary plans, if any,
satisfactory to GDB, including all changes to the date of delivery to GDB
thereof, together with a certificate of the Architects containing a detailed
listing of said Plans; (ii) a statement that said Plans comply fully with all
applicable Legal Requirements; and (iii) a statement that said Plans are
complete in all respects, containing all requisite detail such that the
Improvements, when built in accordance therewith, shall be ready for occupancy.
(r) Taxes: GDB shall have received evidence of payment of real
estate taxes on the Premises and each of the Facility-Mortgaged Properties for
the last five (5) years and the current fiscal year, to the extent required to
have been paid.
(s) Federal Taxes: GDB shall have received a certificate from
the Clerk of the United States District Court for the District of Puerto Rico,
evidencing that there is no tax liability owing by any of the Borrowers, the
Partnership or any of their Affiliates, and that no federal tax lien against any
of the Borrowers, or the Partnership or any of their Affiliates is
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registered with the Clerk of the United States District Court for the District
of Puerto Rico under the Internal Revenue Code of 1986, as amended.
(t) Labor Contributions: GDB shall have received a certificate
from the Secretary of Labor of the Commonwealth of Puerto Rico evidencing that
there is no liability for contributions owing by any of the Borrowers or the
Partnership under the provisions of the Employment Security Act of 1956, as
amended.
(u) Trade Contracts. GDB shall have received evidence
satisfactory to GDB that at least seventy-five percent (75%) of the Trade
Contracts shall have been executed.
(v) Partnership Agreement: the Partnership Agreement, as
amended.
(w) Counsel Opinion: GDB shall have received the favorable
written opinion of counsel to the Borrowers, of counsel to the Partnership and
of counsel to the Guarantors, each dated the date of this Agreement, and in form
and substance satisfactory to GDB and its counsel, with respect to such matters
as GDB may reasonably require.
(x) Intentionally Omitted.
(y) Interest on Existing GDB Loan. GDB shall have received
evidence satisfactory to GDB (i) that funds for the payment of interest on the
Existing GDB Loan will be allocated as part of a Budget Line Item for
construction period interest and fees to the Bank and (ii) that there will be no
reallocation out of this Budget Line Item prior to the Date of Substantial
Completion.
(z) Bank Consent: The Bank shall have consented in writing to
the terms of the GDB Facility Documents and the performance by each of the
parties thereto of its obligations thereunder and shall have provided written
assurances reasonably acceptable to GDB
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that GDB will be permitted to participate in the procedures for disbursement of
the entire Project funding, provided, however, that such participation by GDB in
the disbursement of the Project funding shall not be construed to give GDB any
right of approval or disapproval with respect to any disbursement of such funds.
(aa) Initial Disbursement: The Bank shall have certified that
the conditions to Initial Disbursement under the LC Agreement have been
satisfied or waived and shall otherwise have consented to such Initial
Disbursement and to the GDB Facility Documents.
(bb) Certification by Bank: The Bank shall have certified that
no default or event of default under the Bank Loan Documents or the AFICA Loan
Agreement (other than any default or event of default that has been waived) has
occurred and is continuing.
(cc) Facility Standstill Agreement: The Bank shall have
executed the Facility Standstill Agreement attached hereto as Exhibit "23".
(dd) No Defaults: On the Closing Date the representations and
warranties contained in Article Six of this Agreement shall be true and correct
in all material respects on and as of such date; and on such date, no Event of
Default specified in this Agreement, and no condition, event or act that with
the filing of notice or the lapse of time, or both, would constitute such an
Event of Default, shall have occurred and be continuing, or shall exist.
(ee) Notation on Note: GDB shall have received, in form and
substance satisfactory to GDB, a notation on the reverse side of the Note,
executed by a person properly authorized to execute such notation on behalf of
Borrowers, in accordance with Paragraph 3.4 hereof.
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5.2 Payment of Bills. Borrowers agree that they shall cause the
Partnership to permit the Bank's Consultant to inspect the periodic progress of
the Construction of the Project, and agree that the Partnership (or an Affiliate
of the Partnership designated by the Borrowers) shall be responsible for the
cost thereof. In addition GDB may, at its option, from time to time, during
Construction of the Project and until its completion, require, for its own
information and protection, evidence from the Borrowers of the current and full
payment of bills for all labor rendered and materials furnished relating to the
Construction, but GDB shall not be required to ascertain that any bills are
paid. The authority herein conferred upon GDB, and any action taken by GDB in
making inspections of the Project, will be taken by GDB on its behalf for its
own protection only (and shall not be deemed to grant to GDB any right to delay
the making of any disbursement by the Bank under the Bank Loan Documents), and
GDB shall not be deemed to have assumed any responsibility to the Borrowers or
the Partnership with respect to any such action herein authorized or taken by
GDB or with respect to proper Construction, performance of any Trade Contract,
or prevention of claims for mechanic's Liens.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
As an inducement to GDB to provide the Facility to Borrowers, Borrowers
represent and warrant to GDB that:
6.1 Partnership Existence; Compliance with Law. The Partnership (i) is
a limited partnership duly organized, validly existing and in good standing
under the laws of the State of Delaware and duly qualified to do business in and
within the Commonwealth of Puerto Rico, the latter being the only jurisdiction
in which the Partnership owns real property or conducts
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business, (ii) has all necessary power and authority to own, pledge, mortgage or
otherwise encumber and operate its properties, and to conduct its business as
presently or heretofore conducted or proposed to be conducted; (iii) possesses
(or will possess when required) all permits necessary or desirable for the
conduct of its business as it exists at any time and has made or will have made,
when required, all filings with, and has given or will have given, when
required, any notice to, any and all Governmental Authorities requiring such
notice or filing (except for such licenses, permits, consents or approvals, the
absence of which, and such filings and notices which, if not made or given,
would not reasonably be expected to have a Material Adverse Effect); (iv) is in
compliance with the Partnership Agreement; and (v) is in material compliance
with all applicable provisions of law, and as of the date hereof, except as
disclosed in the Environmental Report, to the best knowledge of the Partnership,
those relating to Environmental Laws where the failure to comply would have a
Material Adverse Effect.
6.2 Borrowers' Existence; Compliance with Law.
(a) KGC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and duly qualified to do
business in and within the Commonwealth of Puerto Rico, the latter being the
only jurisdiction in which KGC owns real property or conducts business, and WKA
is a general partnership duly organized, validly existing and in good standing
under the laws of the State of New York and duly qualified to do business in and
within the Commonwealth of Puerto Rico, the latter being the only jurisdiction
in which WKA owns real property or conducts business.
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(b) Each of KGC and WKA has all necessary power and authority
to pledge, mortgage or otherwise encumber and operate its properties, and to
conduct its business as presently or heretofore conducted or proposed to be
conducted.
(c) Each of KGC and WKA possesses (or will possess when
required) all licenses, permits, consents or approvals necessary or desirable
for the conduct of its business as it exists at any time and has made or will
have made, when required, all filings with, and has given or will have given,
when required, any notice to, any and all Government Authorities requiring such
notice or filing (except for such licenses, permits, consents or approvals, the
absence of which, and such filings and notices which, if not made or given,
would not reasonably be expected to have a Material Adverse Effect).
(d) Each of KGC and WKA is in compliance with the Partnership
Agreement.
(e) Each of KGC and WKA is, as of the date hereof, in material
compliance with all applicable provisions of law, including, without limitation,
Environmental Laws, except as disclosed in the Environmental Report and approval
by GDB.
6.3 Executive Offices. The location of the chief executive offices of
the Borrowers and the Partnership is at the respective address for each, as
shown in Paragraph 10.14 hereof. The Borrowers will give GDB prior written
notice of any relocation of such offices.
6.4 Subsidiaries. There exist no Subsidiaries of any of the Borrowers
(other than the Partnership) or the Partnership.
6.5 Partnership Power; Authorization; Enforceable Obligations. With
respect to the assets encumbered by the Security and the Additional Security,
(i) WKA or an Affiliate of WKS
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that has executed a GDB Guaranty Mortgage is the sole owner of each of the
Facility-Mortgaged Properties, as more fully provided in the guaranty executed
by WKA in accordance with Paragraph 4.1.1 hereof; (ii) the Borrowers have the
right to receive and, as of the date hereof, are the sole owners of the
Partnership Proceeds (iii) as of the date hereof, the Partnership is, and
hereafter, except as provided in Paragraphs 4.1.3 and 4.4 hereof, the
Partnership will be, the sole owner of all of the other assets encumbered by the
Security and the Additional Security, in each case free from any adverse lien,
security interest or adverse claim of any kind whatsoever, except the Permitted
Liens and Encumbrances, and each of the Borrowers and the Partnership has the
corporate or partnership power and authority to enter into and perform its
obligations under this Agreement, all other Operative Documents (other than the
GDB Loan Agreement, as to which the provisions thereof shall apply) and the
Construction Documents to which it is a party; each of the Operative Documents
(other than the GDB Loan Agreement, as to which the provisions thereof shall
apply) and the Construction Documents to which any of the Borrowers or the
Partnership is a party has been or will be when entered into, duly executed and
delivered on behalf of each of the Borrowers or the Partnership, as the case may
be, and authorized by all necessary corporate or partnership action, as the case
may be, of Borrowers or the Partnership; and the Operative Documents (other than
the GDB Loan Agreement, as to which the provisions thereof shall apply) and the
Construction Documents to which the Borrowers or the Partnership is a party are,
or will be when executed or issued, legal, valid, binding and enforceable
obligations of the Borrowers or the Partnership, as the case may be, enforceable
in accordance with their respective terms.
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6.6 Financial Statements. Each of the financial statements of the
Borrowers and the Partnership previously delivered to GDB fairly presents the
financial position of the Person to which such financial statement relates as of
the date thereof and the results of operations and changes in financial position
of the Person to which it relates as of the period then ended, all in accordance
with generally accepted accounting principles as in effect from time to time,
applied on a basis consistent with the most recent financial statements
delivered to GDB.
6.7 No Litigation. No action, suit, claims, proceeding, inquiry or
investigation, at law, in equity or otherwise is now pending or, to the best
knowledge of Borrowers after due inquiry, threatened, against or affecting any
of the Borrowers, the Partnership or the Project or any portion thereof, before
any court, board, commission, agency or instrumentality of the United States or
Puerto Rico or before any arbitrator or panel of arbitrators, which, if
determined adversely, would result in the payment by the Borrowers or the
Partnership of an amount equal to or greater than one hundred thousand Dollars
($100,000) or would otherwise have a Material Adverse Effect. None of the
matters set forth therein questions the validity of any of the Operative
Documents (other than the GDB Loan Agreement, as to which the provisions thereof
shall apply) or any action taken or to be taken pursuant thereto, or could
reasonably be expected to have either individually or in the aggregate a
Material Adverse Effect.
6.8 No Defaults. None of the Borrowers or the Partnership is in default
under, nor are there any violations or notices or other records of violation of,
any law or any regulation, order, writ, injunction or decree of any court or
governmental body, agency or other instrumentality applicable to the Borrowers
or the Partnership (including, without limitation, any zoning, health, safety,
building, environmental or other statute, ordinance or restriction affecting
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all or any part of the Project or any use or condition thereof), and no default
has occurred and is continuing under any Indebtedness or any indenture or other
agreement or instrument evidencing outstanding Indebtedness of the Borrowers or
the Partnership (other than Indebtedness under the GDB Loan Agreement), or any
other contract, agreement or instrument to which any of the Borrowers or the
Partnership is a party or by which any of them or their respective properties
are bound, and no event has occurred which with the giving of notice or the
passage of time or both would constitute such a default (other than the
Partnership's failure to comply with the "Loan Balance" provision of Paragraph
9(k) of the LC Agreement and certain other agreements to which the Partnership
is a party, which default will be cured by the transactions contemplated by this
Agreement), and no such default or event will occur upon the making of any
disbursement hereunder.
6.9 Consents. No consent or approval of, or notice to, any creditor of
any of the Borrowers or the Partnership, other than the consents required by
Paragraph 5.1 hereof, is required for the execution or delivery of, or the
performance of the obligations of the Borrowers under, any of the GDB Facility
Documents or the consummation of the transactions contemplated thereby; and such
execution, delivery, performance and consummation will not result in any breach
or violation of, or constitute a default under, the organic documents of any of
the Borrowers or the Partnership or any judgment, order, statute, rule or
regulation applicable to any of the Borrowers or the Partnership or to any of
their respective properties, or result in or require the imposition of any Lien
upon or with respect to any of the properties now owned or hereafter acquired by
any of the Borrowers or the Partnership (other than the Liens granted
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to GDB on the Security or the Additional Security under the Security Documents
or the Additional Security Documents and the liens granted to the Bank under the
LC Agreement).
6.10 Investment Company Act. None of the Borrowers or the Partnership
is an "investment company" or an "affiliated person" of, or a "promoter" or
"principal underwriter" for, an "investment company", as such terms are defined
in the Investment Company Act of 1940, as amended. The funding of the Facility
by GDB, the application of the proceeds and repayment thereof by the Borrowers
and the consummation of the transactions contemplated by this Agreement and the
other GDB Facility Documents will not result in the violation by any of the
Borrowers or the Partnership of any provision of such act or any rule,
regulation or order applicable to any of the Borrowers or the Partnership issued
by a court of competent jurisdiction in the application of such act.
6.11 Margin Regulations. None of the Borrowers or the Partnership owns
any "margin security", as that term is defined in Regulations G and U of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
and the proceeds of the Facility will be used only for the purposes contemplated
hereunder. The Facility will not be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security, for the purpose of
reducing or retiring any Indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which would cause any of
the advances under this Agreement to be considered a "purpose credit" within the
meaning of Regulations G, T, U or X of the Federal Reserve Board. None of the
Borrowers or the Partnership will take, or permit any agent acting on behalf of
any of them to take, any action that might cause this Agreement or any document
or instrument delivered pursuant hereto to violate any regulation of the Federal
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Reserve Board. The making of advances under this Agreement will not constitute a
violation of such Regulations G, T, U or X.
6.12 Taxes. Each of the Borrowers and the Partnership has filed or has
obtained currently valid extensions for filing all federal, state, Commonwealth
and foreign tax returns, reports and statements required by law to be filed by
any of the Borrowers or the Partnership and has paid all Charges and other
impositions due and payable, other than those presently payable without fine,
penalty, interest or late charge.
6.13 Use of Facility Proceeds. The advances to be made by GDB to the
Borrowers hereunder shall be applied only for the purposes set forth in Article
Three hereof.
6.14 Compliance with ERISA. Each Employees' Plan, if any, is in
substantial compliance with ERISA; all contributions required to be made to any
Employees' Plan by its terms, the Internal Revenue Code of 1986, as amended from
time to time (the "Code") or ERISA (including any quarterly installments
required under Section 412(m) of the Code) have been made by the applicable due
date; no Employees' Plan is insolvent or in reorganization; no Employees' Plan
has an accumulated or waived funding deficiency within the meaning of Section
412 of the Code; neither any of the Borrowers or the Partnership nor any
Subsidiary nor an ERISA Affiliate has incurred any material liability (including
any material contingent liability) to or on account of a Plan pursuant to
Section 4062, 4063, 4064, 4201 or 4204 of ERISA; no proceedings have been
instituted to terminate any Employees' Plan, and no condition exists which
represents a material risk to any of the Borrowers or the Partnership or any
Subsidiary of incurring a liability to or on account of an Employees' Plan
pursuant to any of the foregoing Sections of ERISA.
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6.15 Environmental Matters.
(a) Except as set forth below, all facilities owned, leased,
used or operated by the Partnership have been and continue to be owned, leased,
used or operated in compliance in all material respects with all applicable
Environmental Laws. None of the Borrowers or the Partnership makes any
representations as to the ownership, lease, use or operation of the Premises
prior to the Partnership's acquisition of the Premises.
(b) The Environmental Report, together with all previous
reports submitted to GDB by the Partnership identifies, with respect to the
Premises, to the best knowledge of the Borrowers or the Partnership, (i) all
environmental audits, assessments or occupational health studies undertaken by
or at the direction of, governmental agencies within the past twenty-four (24)
months; (ii) the results of the most recent analysis of water (including
groundwater analyses), soil, air or asbestos samples that indicates
contamination or non-compliance with any applicable Environmental law; (iii) the
most recent inspection by any environmental protection agency relating to issues
of contamination or non-compliance with any applicable Environmental Law; (iv)
any claim or complaint concerning environmental matters; and (v) all Permits
issued to the Partnership under any Environmental Laws.
6.16 Condemnation. At the Closing Date, other than condemnation
proceedings related to the acquisition of the Premises by the Partnership and
the proceedings to widen the road in front of the main entrance to the Premises,
to the best knowledge of any of the Borrowers or the Partnership, no
Governmental Authority, quasi-governmental authority, or public or private
Person has taken, commenced or threatened to take or commence any action, with
respect to any portion of any of the Mortgaged Properties, that would result in
(i) the condemnation or other
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similar taking of any portion of the Mortgaged Properties, (ii) the condemnation
or relocation of any roadways abutting any of the Mortgaged properties, (iii) a
denial of access to any of the Mortgaged Properties from any point of access to
any such Mortgaged Property or (iv) any withdrawal, challenge, denial or
revocation of any permit, license, use agreement or other operating agreement or
application relating to the business operations of any of the Borrowers or the
Partnership, including, without limitation, the Project.
6.17 Labor Matters. As of the Closing Date, (i) none of the Borrowers
or the Partnership is a party to any labor dispute; (ii) there are no strikes or
walkouts relating to any aspect of the business or operations of any of the
Borrowers or the Partnership; and (iii) there are no collective bargaining
agreements with any of the Borrowers, the Partnership or any Subsidiary.
6.18 Other Ventures. As of the Closing Date, the Partnership is not
engaged in any joint venture or partnership with any other Person, and neither
of the Borrowers is engaged in any joint venture or partnership, except for the
Partnership, with any other Person.
6.19 No Contract Cancellations. To Borrowers' knowledge, as of the
Closing Date, there exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the Rights of the Partnership
under the Construction Management Agreement, the Management Agreement or the
Architects' Agreements. All such Agreements, and the Trade Contracts and
Construction Documents to be delivered pursuant to Paragraph 5.1 hereof, remain
valid and in full force and effect.
6.20 Liens. The Liens granted to GDB pursuant to the Security Documents
and the Additional Security Documents will be, when filed, subject only, in the
case of documents that
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require such recording, to recording (which will be effected in due course),
fully perfected Liens in and to the Security and the Additional Security
described therein, subject only, where applicable, to Permitted Liens and
Encumbrances.
6.21 Sufficiency of Funds. As of the Closing Date, the Facility,
together with Borrowers' own funds and those to be borrowed under the Bank Loan
Documents, are sufficient for all purposes to complete the Project and,
thereafter, taking into consideration the Completion Guaranty, will remain
sufficient for all purposes to complete the Project. The Completion Guaranty is
and shall remain legal, valid, binding and enforceable in accordance with its
terms and, in the case of the Completion Guaranty of Kumagai International USA
Corporation, is currently in effect with respect to each of the Trade Contracts
delivered to GDB on or prior to the Closing Date.
6.22 Title to Property. The Partnership has, and at all times will
have, good and insurable title in fee simple to the Premises, except as
otherwise provided in Paragraph 4.1.3 and 4.4 hereof with respect to the
Condominium Parcels and the Condominium Units, subject to no liens, charges, or
encumbrances other than Permitted Liens and Encumbrances and those Liens and
encumbrances listed in the Title Policy.
6.23 Possession of Premises. As of the Closing Date, to the best of
Borrowers' knowledge, there are no squatters on the Premises; and, except as
otherwise provided In Paragraphs 4.1.3 and 4.4 hereof with respect to the
Condominium Parcels and the Condominium Units, the Partnership is and will be at
all times until the Maturity Date in complete and exclusive possession of the
Premises.
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6.24 Utilities and Streets. There is vehicular and pedestrian access to
and from the Premises via publicly dedicated roads, streets and highways, and
all utility services, including water, sanitary and storm sewers, electric power
and telephone service are or will be provided to the Premises or are located in
abutting streets and roads, and are or will be adequate to serve the
Improvements constructed and those proposed to be constructed thereon.
6.25 General. Neither the GDB Facility Documents nor any other
agreement, document, certificate or statement furnished to GDB by or on behalf
of the Borrowers or any Person in connection with the transactions contemplated
hereby, taken individually or collectively and in the context made and to whom
made, at the time when made or delivered, contains any untrue statement of
material fact or omits to state a material fact necessary in order to make
statements contained herein or therein, in light of the circumstances, not
misleading. To the knowledge of Borrowers, there are no significant material
facts or conditions relating to the making of the Facility, any of the Security
or the Additional Security or the financial condition and business of any of the
Borrowers or the Partnership which, collectively or individually, could cause a
Material Adverse Effect, and which have not been fully disclosed, in writing, to
GDB. All writings heretofore or hereafter delivered to GDB by or on behalf of
the borrowers or the Partnership by any Person, are and will be genuine and in
all respects what they purport to be.
6.26 Plans; Construction. The Plans are, as of the Closing Date,
satisfactory to the Borrowers and the Partnership and have been approved, to the
extent required by applicable law, ordinance or regulation or any effective
restrictive covenant, by all Government Authorities and the beneficiaries of any
such covenant, respectively. All Construction, if any, heretofore
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performed in connection with the Improvements has been performed within the
perimeter of the Premises or within the area of an easement benefitting the
Premises and with respect to which such Construction is permitted, and in
accordance with the Plans and all Legal Requirements, and such Construction has
been fully paid for, or payment is not yet due, or payment is being disputed in
good faith; provided, however, that any such disputes have been fully disclosed
to GDB and such failure to pay would not have a Material Adverse Effect in the
Partnership's ownership rights in the Project. There are no structural defects
in the Improvements (to the extent currently constructed), no violation of any
Legal Requirement exists with respect thereto, and the anticipated use thereof
complies with all restrictive covenants affecting the Project and all Legal
Requirements, including all applicable zoning and environmental protection
ordinances and regulations.
6.27 Intentionally Omitted.
6.28 No Liens. Except for the Operative Documents, the Construction
Documents, the Project Documents and the Permitted Liens and Encumbrances,
neither the Borrowers nor the Partnership has made or entered into any contract
or arrangement of any kind, the performance of which by the other party thereto
would give rise to a Lien against all or any portion of the Collateral.
6.29 Compliance with Building Codes, Zoning Laws, Etc. The current
zoning law and declarations covering the Project permit the Construction to be
completed and, upon completion of Construction, the Improvements to be used as
contemplated by this Agreement. The Project and, upon completion of
Construction, the Improvements and the proposed use thereof will be in all
respects in compliance with all Permits and all Legal Requirements.
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6.30 Budget. The Budget contains all costs and expenses reasonably
anticipated to be incurred in connection with the Construction, equipping and
leasing of the Improvements.
6.31 Security Documents and Additional Security Documents. (a) The
provisions of each Security Document and Additional Security Document are
effective to create a legal, valid, binding and enforceable Lien on or security
interest in all of the Collateral described therein, subject to the proper
filing thereof; and (b) when the appropriate recordings and filings have been
effected in public offices, each of the Security Documents and the Additional
Security Documents will constitute a perfected Lien on and security interest in
all right, title, estate and interest in the Collateral described therein, prior
and superior to all other Liens, except as permitted under the Operative
Documents.
6.32 Commissions. No broker's or finder's fee or commission will be
payable by the Borrowers, the Partnership or any of their Affiliates with
respect to the transactions contemplated hereby, and the Borrowers shall hold
GDB harmless from any claim, demand or other liability for any broker's or
finder's fees or commissions alleged to have been incurred by the Borrowers, the
Partnership or any of their Affiliates in connection herewith.
6.33 Survival of Representations and Warranties: All representations
and warranties made herein by Borrowers or in any of the other Loan Documents,
or in any other certificate, document or instrument delivered pursuant thereto,
shall survive the Closing and the transactions effected hereunder or thereunder.
It is herein acknowledged and agreed by the Borrowers that the above
warranties and representations are of the essence to the granting of the
Facility to Borrowers and to this Agreement.
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ARTICLE 7
AFFIRMATIVE COVENANTS
7.1 So long as Borrowers or the Partnership shall be indebted to GDB
hereunder or otherwise, each of the Borrowers agrees that it will, and will
cause the Partnership to:
7.1.1. Application of Loan Proceeds. Apply the proceeds of the
Loans advanced hereunder as set forth in Article Three hereof.
7.1.2 Books and Records. Maintain proper books of record and
account in accordance with sound accounting practice in which full, true and
correct entries shall be made of its dealings and business affairs, and cause
such books to be audited at the end of each fiscal year by independent certified
public accountants satisfactory to GDB. The firm of Ernst & Young is acceptable
to GDB.
7.1.3 Financial Information.
(a) Furnish to GDB within fifty (50) days after the close of
each of the first three quarters of its fiscal year, unaudited quarterly
financial statements,including but not limited to balance sheets, income
statements and statements of changes in financial position; a certificate,
executed on its behalf by an officer with authority to execute such certificate,
certifying that no default has occurred under this Agreement,and that no fact or
circumstances exists which, with the lapse of time or the giving of notice or
both, would result in an Event of Default hereunder; and, if in its opinion such
Event of Default has occurred, or there is in existence such condition, event or
act, as statement specifying the nature thereof.
(b) Furnish to GDB within one hundred twenty-five (125) days
after the end of each fiscal year, financial statements, including but not
limited to, balance sheets and
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statements of income, and statements of changes in financial position for such
Fiscal Year, accompanied by the report of independent certified public
accountants satisfactory to GDB. The firm of Ernst & Young is acceptable to GDB.
Each such report of independent certified public accountants shall be
accompanied by a written statement from the chief financial officer of the
Person to which such report refers, certifying that, during the Fiscal Year
covered by the financial statements, there has not occurred or there is not in
existence any Default or Event of Default.
7.1.4 Construction and Development of the Project. (a) Pursue
the Construction of the Improvements with diligence and continuity in order that
said Construction be completed in accordance with the Plans by the Completion
Date and (b) keep the Premises free and clear at all times of claims or
attachments for material supplied and for labor or services performed in
connection with the Construction, except Permitted Liens or Encumbrances.
7.1.5 Effectiveness of Permits: Approvals. Keep in full force
and effect every Permit necessary or appropriate for the ownership, development
and operation of the Premises and the Project, if failure to do so would result
in a Material Adverse Effect.
7.1.6 Access by GDB. Permit all officers, qualified employees
and other representatives of GDB designated by it to visit and inspect the
Mortgaged Properties and examine the books and discuss the affairs, finances and
accounts of the Partnership with the officers and auditors thereof, all at such
reasonable times and as often as GDB may reasonably request.
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7.1.7 Maintain Rights; Franchises. Maintain, preserve and
renew all rights, powers, privileges and franchises necessary or desirable for
the conduct of its business and operation of the Premises, the Project and the
Facility-Mortgaged Properties.
7.1.8 Filing of Tax Returns. Timely file any and all tax
returns and the like and pay and discharge all lawful Taxes, assessments,
impositions, and governmental fees charged upon or against any of the Borrowers
or the Partnership and any of their respective properties, real or personal. It
will likewise pay and discharge all social security taxes, unemployment
insurance, State Insurance Fund assessments and the like imposed upon itself,
its income and profits or its assets and its payrolls. The Borrowers and the
Partnership shall have the right to contest such Taxes in the manner and as
provided in Paragraph 7.4 hereof.
7.1.9 Estoppel Certificates. Deliver to GDB, at any time or
times, but in no event more than twice in any calendar year, within fifteen (15)
days after written demand by GDB therefor, a certificate, duly executed and in
form satisfactory to GDB, stating and acknowledging the then Outstanding
Principal Amount and that there are no defenses, offsets or counterclaims
hereunder.
7.1.10 Insurance.
(a) Prior to the Date of Substantial Completion, at
its sole costs and expense, keep the then-existing structures related to the
Premises, insured for the benefit of GDB against loss and damage by Fire,
Lightning, Collapse, Earthmovement, Flood, Tsunami, Boiler and Machinery, and
such other standard Extended Coverage perils as are customarily included under
standard "All Risk" policies for other property and buildings similar in nature,
use, location, height and type of construction to the Premises. The amount of
such Insurance Policy
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shall be not less than the full Replacement Cost of the then existing
structures, with the Agreed Amount and Replacement Cost Endorsements attached,
waiving all co-insurance provisions and eliminating the Vacancy and Unoccupied
Clause. In addition, prior to the Date of Substantial Completion, the Project
shall be covered under an "All Risk" Builder's Risk/Contract Works Policy for
the 100% Completed Value (replacement cost) of any contracts on a Non-Reporting
Form, subject to the same coverages as are required on the presently existing
structures, along with extensions of coverage for "Permission to Complete and
Occupy," Off-site Storage including Inland and Ocean Transit, "Hot and Cold"
Testing, Increased Cost of Construction and Contingent Liability from Building
Laws.
(b) On and after the Date of Substantial
Completion, at the sole cost and expense of the Partnership, secure insurance
for the benefit of GDB covering the Premises against loss or damage by fire and
such risks as are customarily included in Extended Coverage, and from such other
hazards including, without limitation, Flood, Earthmovement and Coastal
Windstorm, as may be covered by the "All Risk" insurance covering other property
and buildings similar in nature, use, location, height and type of construction
to the Premises, in an amount not less than the greater of (A) full insurable
value, or (B) an amount sufficient to prevent the Partnership from becoming a
co-insurer within the terms of the applicable policies. Said Insurance Policy
shall include endorsements for Demolition, Contingent Liability and Increased
Cost of Construction. The term "full insurable value" as used in this Paragraph
7.1.10 shall mean the cost of actual replacement, without deduction for
depreciation, less the cost of excavations, foundations and footings below the
lowest basement floor or, if there be no basement, below the level of the ground
determined as of the Date of Substantial Completion
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and as further determined on the date of each renewal or replacement of such
Insurance Policy, as hereinafter set forth. Full insurable value shall be
determined by an appraisal made at least once every three (3) years, by an
appraiser, appraisal company or insurance company selected by the Borrowers or
the Partnership, as the case may be, and approved by GDB in its sole discretion,
and such determination of full insurable value shall be binding and conclusive
upon the parties hereto. If any Insurance Policy covering Flood or Earthmovement
shall contain annual aggregate limits, such aggregate limits shall be
replenished upon the occurrence of a substantial loss, as determined by GDB in
its sole discretion. The Insurance Policies described above shall provide for
deductions of not more than $10,000 per occurrence for all perils except Flood,
Earthquake and Windstorm, for which deductions of not more than $25,000 per
occurrence may be made.
(c) Maintain or cause to be maintained, at the sole
cost and expense of the Partnership, for the benefit of GDB, (i) prior to the
Date of Substantial Completion, Soft Costs/Additional Expense Incurred, Loss of
Gross Earnings or Loss of Rental Income on an Actual Loss Sustained Basis for an
amount not less than $24,000,000, with an "Extended Period of Indemnity"
Endorsement attached; (ii) upon and after the Date of Substantial Completion,
coverage for Loss of Gross Earnings or Loss of Rental Income, Business
Interruption and Additional Expense Incurred Insurance on an Actual Loss
Sustained Basis (if available) in an amount equal to the greater of (A) an
estimate reasonably satisfactory to GDB of the succeeding year's Gross Revenues
(as defined in the LC Agreement), or (B) $24,000,0000 with the Extended Period
of Indemnity Endorsement attached; (iii) upon and after the installation of any
boilers or machinery at the Project, Boiler and Machinery Coverage for Rent Loss
(including,
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without limitation, loss from both retail space and nightly room rentals), with
an "Extended Period of Indemnity" and Improvements Loss in such amounts as are
customarily carried by persons operating property and buildings similar in
nature, use, location, height and type of construction to the Premises.
(d) Maintain or cause to be maintained, at the sole
cost and expense of the Partnership, at all times (i) General Public Liability
Insurance, including, without limitation, the Broad Form Comprehensive General
Liability Endorsement, with the respective Primary Coverages as follows:
<TABLE>
<S> <C>
General Aggregate $1,000,000 Per Location
Products/Completed Operations $1,000,000*
*(two-year Completed Operation
Extension)
Personal & Advertising Injury $1,000,000
Each Occurrence (Bodily Injury
and Property Damage) $1,000,000
Fire Damage Legal $ 50,000
Medical Expense $ 10,000
Stop Gap Liability $1,000,000
</TABLE>
(ii) Umbrella Liability Coverage in an amount of not less than $40,000,000 per
occurrence and in the aggregate prior to the Date of Substantial Completion and,
thereafter, in an amount of not less than $50,000,000 per occurrence and in the
aggregate or such greater amount as GDB shall reasonably require; (iii) Worker's
Compensation and Non-Occupational Disability Insurance as respect a Monopolistic
State as required by applicable laws and regulations of the Commonwealth of
Puerto Rico; (iv) Marina Operator's Legal Liability, Protection and Indemnity
and Marina General Liability; (v) insurance covering pilings, piers, wharves and
docks, and environmental impairment coverage (if available) with respect to the
marina operation; and (vi) such other types and amounts of insurance with
respect to the Mortgage Properties and the
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operation thereof as are customarily maintained in the case of other property
and buildings similar in nature, use, location, height and type of construction
to the Mortgaged Properties, as may from time to time be required by GDB,
including, without limitation, Automobile Liability Insurance in amounts
reasonably required by GDB from time to time.
(e) The Borrowers shall cause the Partnership to
ensure that (i) all Insurance Policies are issued by an insurer admitted and
licensed to do business in the Commonwealth of Puerto Rico with an A.M. Best
Rating of AX or better (or such equivalent rating as is acceptable to GDB) and
shall be otherwise satisfactory to GDB in form and content; (ii) the Property
and Business Interruption Insurance Policies contain the Standard Mortgagee
Non-Contribution Clause Endorsement or its equivalent endorsement satisfactory
to GDB, naming GDB as First Mortgagee and providing GDB (except in the case of
General Liability) and other Liability and Worker's Compensation) as the Person
to whom all payments made by such insurance company shall be paid and with whom
all claims shall be adjusted, except as otherwise provided in Paragraph hereof;
(iii) all Liability Insurance Policies name GDB as additional insured according
to its respective interest.
(f) Except with GDB's prior written consent, (i)
not carry separate or additional insurance coverage concurrent in form or
contributing in the event of loss with that required by this Agreement or the LC
Agreement; and (ii) except as provided herein, not name any Person as named
insured or loss payee under any Insurance Policy.
(g) The Borrowers shall cause the Partnership to
pay the premiums for the Insurance Policies as such premiums become due and
payable.
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(h) Deliver original binders and certified copies
of the Insurance Policies to GDB as further security for the Borrowers'
performance of the terms and conditions contained herein, provided that GDB
shall not be deemed by reason of the custody of such Insurance Policies to have
knowledge of the contents thereof.
(i) Deliver to GDB, within 10 days of GDB's request
to do so, a certificate of insurance issued by the Partnership's insurance
agent/broker setting forth the particulars as to all such Insurance Policies,
that all premiums due thereon have been paid and that the same are in full force
and effect.
(j) Not later than 30 days prior to the expiration
date of each of the Insurance Policies, deliver to GDB original binders and
certified copies of a renewal policy or polices marked "premium paid" or
accompanied by other evidence of payment of premium satisfactory to GDB.
(k) Ensure that each Insurance Policy required
hereunder contains a provision whereby the insurer (i) agrees that such policy
shall not be canceled or modified, and shall not fail to be renewed, without at
least 60 days' prior written notice to GDB, (ii) waives any right to claim any
premiums and commissions against GDB and (iii) provides that GDB is permitted to
make payments to effect the confirmation of such Insurance Policy upon notice of
cancellation due to nonpayment of premiums.
(l) Ensure that, in the event any Insurance Policy
(except for general public and other liability, boiler and machinery explosion
liability and worker's compensation insurance) shall contain breach of warranty
provisions, such Insurance Policy provides that, with respect to the interests
of GDB, such Insurance Policy shall not be invalidated by and shall
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insure GDB regardless of (A) any act, failure to act or negligence of or
violation of warranties, declarations or conditions contained in such Insurance
Policy by any named insured, (B) the occupancy or use of any of the Mortgage
Properties for purposes more hazardous than permitted by the terms thereof, (C)
any foreclosure or other action or proceeding taken by the GDB pursuant to any
provision of this Agreement, or any of the GDB Facility Mortgages or GDB
Guaranty Mortgages or (D) any change in title to or ownership of all or any of
the Mortgaged Properties.
(m) Any insurance maintained pursuant to this
Paragraph 7.1.10 may be evidenced by blanket Insurance Policies covering the
Premises and other properties or assets of the Partnership provided that any
such policy shall specify the portion, if less than all, of the total coverage
of such Policy that is allocated to the Premises and shall in other respects
comply with the requirements of this Paragraph 7.1.10. GDB, in its sole
discretion, shall determine whether such blanket Insurance Policies provide
sufficient insurance coverage.
(n) Notwithstanding anything to the contrary
contained herein, if at any time GDB is not in receipt of written evidence that
all insurance required hereunder is maintained in full force and effect, GDB
shall have the right, upon notice to the Borrowers, to take such action as GDB
may deem necessary to protect its interests in the Premises, including, without
limitation, the obtaining of such insurance coverage as GDB deems appropriate,
and all expenses incurred by GDB in connection with such action or in obtaining
such insurance and keeping it in effect shall be paid by the Partnership
promptly after demand.
(o) In the event of a foreclosure of any of the
Facility Mortgage on the Premises, the purchaser of the Premises will succeed to
all of the rights of any of the Borrowers
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and the Partnership, including the rights to all unearned premiums paid, with
respect to the Insurance Policies, to the extent assignable.
7.1.12 Environmental Matters.
(a) Upon reaching Substantial Completion of the
Project, keep and preserve the Premises in good repair, working order and
condition as of the date thereof, normal wear and tear excepted, and from time
to time make or cause to be made all necessary and proper repairs, replacements
and renewals.
(b) Keep the Facility-Mortgaged Properties free and
clear at all times of claims or attachments of any kind, except Permitted Liens
or Encumbrances.
(c) Not commit, nor permit any other Person or
event (whether by act of God or otherwise) to commit, waste or damage upon any
of the Mortgaged Properties, including without limitation, the Premises, other
than such damages as are covered under the Casualty provisions of this
Agreement, without promptly restoring such Mortgaged Property to an equivalent
or better condition than that prevailing prior to such occurrence. In the event
of any material loss or damage to any portion of the any Mortgaged property due
to fire, floods, wind, or other natural causes, whether alone or in combination,
including hurricanes and the effects thereof, GDB shall have the right (with the
Bank's approval, so long as the LC Agreement shall remain in effect), at its
sole discretion, to call for an Appraisal of such Mortgaged Property.
(d) Keep the Mortgaged Properties free from
squatters.
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7.1.11 Preservation of the Properties.
(a) In connection with the ownership and operation
of the Premises and the Facility-Mortgaged Properties, (i) comply strictly and
in all respects with all applicable Environmental Laws, and (ii) forward
promptly to GDB a copy of any order, notice, permit, application, or any other
communication or report in connection with any release of any Hazardous Material
or any other matter relating to Environmental Laws as they may affect the
Premises, the Project or any Facility-Mortgaged Property.
(b) Pursuant to the terms set forth herein,
indemnify GDB and hold GDB harmless from and against any loss, liability, damage
or expense, including attorneys' fees, suffered or incurred by GDB, whether as
mortgagee pursuant to any Mortgage, as Mortgagee in possession, or as successor
in interest to the Partnership as owner or lessee of any of the Mortgaged
Properties by virtue of foreclosure or acceptance of deed in lieu of foreclosure
(i) under or on account of the Environmental Laws, including the assertion of
any Lien thereunder; (ii) with respect to any release of any Hazardous Material
affecting any of the Mortgaged Properties, whether or not the same originates or
emanates from such Mortgaged Property or any contiguous real estate, including
any loss of value of such Mortgaged Property as a result of a release of any
Hazardous Material; and (iii) with respect to any other environmental matter
affecting such Mortgaged Property within the jurisdiction of any official
administering the Environmental Laws.
(c) The obligations of Borrowers or the Partnership
under this Article 7.1.12 shall not extend or apply to (i) any condition or
state of facts existing in respect of the
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Premises or the Improvements on the date the partnership acquired title to the
Fajardo Property from the Puerto Rico Lands Administration or (ii) any condition
caused by or resulting from actions taken by or on behalf of the GDB or any
failure by the GDB to take any action it might have a duty to take in the event
it takes possession or control of any Mortgaged Property. The Borrowers shall,
and shall cause the Partnership to, make available to GDB to the fullest extent
permitted by law any and all rights available to the Borrowers or the
Partnership against the Puerto Rico Lands Administration with respect to any
liability under any Environmental Law, any release of any Hazardous Material
affecting any of the Mortgaged Properties or with respect to any other
environmental matter affecting any of the Mortgaged Properties, and the
Borrowers hereby consent to assign, and to cause the Partnership to assign such
rights to GDB and to authorize GDB to enforce such rights directly against the
Puerto Rico Lands Administration to the same extent as if any of the Borrowers
or the Partnership enforced such rights.
The procedure for Borrowers and the Partnership to provide the
foregoing indemnifications shall be covered by the procedures set forth in
Article 10.3 hereof.
7.1.13 Notices. Promptly give written notice to GDB in the
manner provided in Article 10.14 hereof of (i) the occurrence of any Default or
Event of Default; (ii) any legal, judicial or regulatory proceedings affecting
any of the Borrowers or the Partnership or any of their respective properties or
assets, in which the amount involved is material and could have a Material
Adverse Effect; (iii) any dispute between any of the Borrowers or the
Partnership and any Governmental Authority or other Person that will have a
Material Adverse Effect; (iv) substantial damage, loss or impairment in value,
to any part of the Security (except the Facility- Mortgaged Properties), the
Additional Security or the Premises, specifying the nature and extent
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of damage, loss, or impairment in value, and whether such damage, loss, or
impairment in value is being repaired in due course, or the total loss or
destruction of any material part of the Security, the Additional Security or the
Premises; (v) to the extent the Borrowers or the Partnership have knowledge
thereof, substantial damage, loss or impairment in value to any part of the
Facility-Mortgaged Properties, specifying the nature and extent of damage, loss
or impairment in value, and whether such damage, loss or impairment in value is
being repaired in due course, or the total loss or destruction of any material
part of the Facility-Mortgaged Properties; (vi) any other action, event or
condition of any nature of which any of the Borrowers or the Partnership has
knowledge that would result in any Material Adverse Effect; and (vii) the
voluntary or involuntary bankruptcy of, or any assignment for the benefit of
creditors or the seeking of any relief under any Debtor Relief Law by, any of
the Borrowers or the Partnership.
7.1.14 Certification of Substantial Completion. Upon reaching
Substantial Completion of the Project, submit to GDB a certification from the
Architects to that effect, and a certification of the Project Costs incurred up
to the date of Substantial Completion, signed by the chief financial officer of
the Partnership, together with the financial statements for the fiscal year
during which Substantial Completion is reached.
7.1.15 Approval of the Project.
(a) On or prior to the date of this Agreement,
obtain (i) the approval of ARPE or of the Planning Board of the site plan and,
prior to commencement of any stage of the Project, of the final Plans of such
stage of the Project to be commenced shortly thereafter, (ii) the approval of
all other Governmental Authorities having jurisdiction in the premises, and
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(iii) all Permits necessary to allow the Partnership to proceed with the
construction of the Project.
(b) Complete the Project substantially in
accordance with the Plans and in accordance with the Permits, which will have
been obtained on or before Completion Date.
(c) Cause the Construction to be done in a
workmanlike manner and provide or cause to be provided all labor, material, and
equipment of every kind necessary for the completion of the construction of the
Project, when once begun, and proceed continuously to complete the same with all
reasonable speed and dispatch.
(d) Not make any substantial changes in the Plans
except with (i) prior written notice to and consent from GDB, which consent
shall not be unreasonably withheld, and (ii) such approvals as shall be
necessary under the requirements of ARPE or of the Planning Board.
(e) Make full payments for all costs of all such
construction and installations, promptly as and when due, except as diligently
contested in good faith, and assure that no lien arises on account of failure to
pay wages of Construction workers.
(f) Use and employ all materials contracted or
purchased for delivery to the Project, or for use in its installations or
construction, and all labor contracted or hired for or in connection with said
installations or construction solely on said Project, and only in accordance
with the Plans.
(g) Not permit any part of the Project to become
occupied until the applicable use permit required by law has been granted.
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(h) Manage the Project, or cause the Project to be
managed, in conformity with all requirements of Governmental Authorities, and in
compliance with any and all laws, rules and regulations of any Governmental
Authority.
(i) Submit a copy to GDB of each request for
disbursement submitted to the Bank pursuant to Paragraph 9(a) of the LC
Agreement, on the date each such request is submitted to the Bank, together with
copies of all other required documents in connection with such request for
disbursement pursuant to Paragraph 9(a) of the LC Agreement, including without
limitation Trade Contractors' requisitions for payment, unpaid invoices and
receipted bills, lists of Trade Contracts and Work Changes and evidence of
disbursement of the last preceding disbursement, each with such notations,
certifications and statements as are required pursuant to Paragraph 9(a) of the
LC Agreement.
7.1.16 Deposit of Escrow Requirements. Deposit with the
Facility Escrow Agent the Escrow Requirements when such deposits become due,
which obligation is hereby guaranteed by the respective General Partners of the
Partnership by their execution of this Agreement.
7.1.17 Condominium Lien. Deliver to GDB the Condominium Lien
on any assets that are released from the lien and mortgage of the Bank under the
Bank Loan Documents in accordance with Paragraph 4.1.3 hereof.
7.2 Correctness of Representations; Warranties. Each of the Borrowers
agrees that all representations and warranties contained in Article Six of this
Agreement, except those in Paragraphs 6.4, 6.8, 6.15, 6.19 and 6.26 and those
which by the action of third parties may be otherwise than as represented,
specifically those set forth in Paragraphs 6.7, 6.16, and 6.17 or
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as specifically stated otherwise in any Paragraph, shall remain true and correct
in all material respects during the entire Term of the Facility.
7.3 Maintenance of Existence and Conduct of Business. Each of the
Borrowers shall (a) do or cause to be done all things necessary to preserve and
keep in full force and effect their own legal existence, rights and franchises
and the legal existence, rights and franchises of the Partnership; (b) continue,
and cause the Partnership to continue, to conduct business substantially as now
contemplated and as a going concern; and (c) at all times maintain, preserve and
protect, and cause the Partnership to maintain, preserve and protect all of
their respective trademarks, service marks and trade names.
7.4 Payment of Obligations.
(a) Subject to Paragraphs (b) and (c) of this Article 7.4,
each of the Borrowers shall, and shall cause the Partnership to, (i) pay and
discharge or cause to be paid and discharged all of their respective
Indebtedness and obligations, including, without limitation, all the obligations
(other than Indebtedness and obligations under the GDB Loan Agreement and
related Documents, as to which GDB's rights and remedies shall be those provided
in the GDB Loan Agreement and related Documents), as and when due and payable,
unless failure to do so would not have a Material Adverse Effect; and (ii) pay
and discharge or cause to be paid and discharged promptly all (A) Charges and
(B) lawful claims for labor, materials, supplies and services or otherwise
before any thereof shall become in default, unless failure to do so would not
have a Material Adverse Effect.
(b) The Borrowers and the Partnership may in good faith
contest, by proper legal actions or proceedings, the validity or amount of any
Indebtedness, obligations, Charges,
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Liens or claims, other than the Obligations, provided that Borrowers give GDB
advance notice of their intention to contest the validity or amount of any such
charge, Lien or claim, and that at the time of commencement of any such action
or proceeding, and during the pendency thereof (i) no Default or Event of
Default shall have occurred; (ii) adequate reserves exist or are established
therefor; (iii) such contest operates to suspend collection of the contested
Charges, Liens or claims and is maintained and prosecuted continuously with
diligence; and (iv) none of the Security or the Additional Security would be
subject to forfeiture or loss of any Lien in favor of GDB by reason of the
institution or prosecution of such contest. Borrowers shall, if such contest is
terminated or discontinued adversely to Borrowers or the Partnership, promptly
pay or discharge or cause to be paid or discharged such contested Charges and
all additional charges, interest, penalties and expenses, if any, and shall
deliver to GDB evidence acceptable to GDB of such compliance, payment or
discharge.
7.5 Agreements. Borrowers shall perform, and shall cause the
Partnership to perform, within any required time period (after giving effect to
any applicable grace periods), all of their respective Obligations and shall
enforce, and shall cause the Partnership to enforce all of their respective
rights under each agreement to which any of them is a Party (other than the GDB
Loan Agreement, as to which GDB's rights and remedies shall be those provided in
the GDB Loan Agreement and related Documents), including, without limitation,
leases to which the Partnership is a party, where the failure so to perform or
enforce would have a Material Adverse Effect. Borrowers shall not terminate or
modify in any manner any agreement to which either of them is a party, and shall
cause the Partnership not to terminate or modify in any
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manner any agreement to which it is a party, if such termination or modification
could reasonably be expected to have a Material Adverse Effect.
7.6 Litigation. Borrowers shall notify GDB in writing, promptly upon
any executive officer of either General Partner learning thereof, of any
litigation commenced against any of the Borrowers or the Partnership, and of the
institution against any of the Borrowers or the Partnership of any suit or
administrative proceeding in which the total relief sought equals or exceeds
$100,000 or that would otherwise have a Material Adverse Effect.
7.7 Compliance with Law. Each of the Borrowers and the Partnership
shall comply with all legal Requirements applicable to it, including, without
limitation, those regarding environmental matters, where the failure so to
comply would have a Material Adverse Effect.
7.8 Supplemental Disclosure. From time to time as may be necessary (in
the event that such information is not otherwise delivered by either of the
Borrowers or the Partnership to GDB pursuant to this Agreement), so long as
there are Obligations outstanding hereunder, each of the Borrowers, as promptly
as is reasonable under the circumstances after either of the Borrowers has
knowledge with respect thereto, shall supplement or amend and deliver, or shall
cause the Partnership to supplement or amend and deliver, to GDB (i) any and all
material contracts, permits, licenses, declarations and covenants, operating
agreements, or any other agreements, documents or instruments pertaining to any
of the Mortgaged Properties; and (ii) any matter with respect to any Exhibit or
representation hereafter arising which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or described in such
Exhibit or as an exception to such representation or which is necessary to
correct any information in such Exhibit or representation which has been
rendered inaccurate thereby.
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7.9 Recording; Transfer Taxes and Fees. Borrowers shall pay,
or shall cause the Partnership to pay, all transfer, excise, mortgage recording
or similar taxes and fees in connection with the issuance, sale, delivery or
transfer to GDB by Borrowers or the Partnership, as the case may be, of the
Partnership Mortgage Notes and the GDB Guaranty Mortgage Notes and the execution
and delivery of the Security Documents and any other GDB Facility Documents and
any other agreements and instruments contemplated hereby, and shall save GDB
harmless against any and all liabilities with respect to such taxes and fees.
The obligations of Borrower under this Paragraph 7.9 shall survive the payment,
prepayment or redemption of the Facility and the Existing GDB Loan and the
termination of this Agreement.
7.10 Permits and Licenses. Borrowers agree and covenant that they
possess or will possess when required, and have caused the Partnership or other
owner of each Mortgaged Property to possess or will cause the Partnership or
such owner to possess when required, all rights, accreditations, franchises,
patents, Permits and privileges necessary for the conduct of their respective
businesses as now or heretofor conducted or proposed to be conducted, and as
necessary for the ownership and management of each of the Mortgaged Properties,
without known conflict with the rights of any Person.
7.11 Fair Value Contracts. Each contract between the Partnership and
any Borrower or Affiliate of the Borrower relating to the ownership, operation
or sale as the case may be, of the Premises or any interest therein or rights
thereto or any other activities of the Premises entered into after the date
hereof shall be on terms and for amounts no less favorable to the Partnership
than that would be given by an unrelated Person contracting with the Partnership
for the same or substantially similar purpose.
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7.12 Other Agreements. Each of GDB, on the one hand, and the Borrowers
on the other hand shall use its best efforts to apprise the other of any
agreements that relate to the Project. The Borrowers shall cause the Partnership
to use its best efforts to apprise GDB of any agreements that relate to the
Project.
7.13 Japanese Counsel Opinion. On or before May 31, 1992, without
prejudice to Section 5.1(w), Borrowers shall have provided GDB with the
favorable written opinion of Japanese counsel to Kumagai, dated on or before May
31, 1992, and in form and substance satisfactory to GDB and its counsel, with
respect to such matters as GDB may reasonably require.
7.14 Federal Taxes. On or before May 15, 1992, Borrowers shall have
provided GDB with a certificate from the Clerk of the United States District
Court for the District of Puerto Rico, evidencing that there is no tax liability
owing by any of the Borrowers, the Partnership, the Guarantors or their
Affiliates listed in Paragraph 4.1.4 hereof, and that no federal tax lien
against any of the Borrowers, the Partnership, the Guarantor or their Affiliates
listed in Paragraph 4.1.4 hereof is registered with the Clerk of the United
States District Court for the District of Puerto Rico under the Internal Revenue
Code of 1986, as amended.
ARTICLE 8
NEGATIVE COVENANTS
8.1 Actions by the Borrowers or the Partnership. The Borrowers covenant
that, until full payment of the GDB Facility and the performance of all other
Obligations of the Borrowers hereunder, they will not, without the prior written
consent of GDB, and will not permit the Partnership without the prior written
consent of GDB, to:
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8.1.1 Create, assume, or suffer to exist any mortgage, pledge,
encumbrance or other lien on the Mortgaged Properties or any other asset of the
Borrowers, except for the Permitted Liens and Encumbrances, except that the
foregoing shall not apply to any mortgage, pledge, encumbrance or other lien on
assets of the Borrowers, other than the Mortgaged Properties, created, assumed
or suffered to exist for fair consideration;
8.1.2 Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Indebtedness other
than Permitted Indebtedness;
8.1.3 Except as contemplated or permitted in this Agreement,
become a party to any transaction whereby all or any substantial part of the
properties, assets or undertakings of any of the Borrowers or the Partnership
(whether legally or beneficially owned) would become the property of any other
Person, whether by way of reorganization, amalgamation, merger, transfer, sale,
lease, sale and leaseback or otherwise except that the foregoing shall not
apply, in the case of the Borrowers, to any transaction for fair consideration;
8.1.4 Permit any change in the legal or beneficial ownership
of any of the Mortgaged Properties, or permit any change in the ownership of the
Partnership except as follows: (a) any transfer, direct or indirect, of the
interests of or in KGC to Kumagai or to any entity wholly owned and controlled
by Kumagai; (b) any transfer, direct or indirect, of the interests of or in WMS
El Con to WMS Industries or any entity wholly owned and controlled by WMS
Industries; (c) any transfer, direct or indirect, of the interest of or in AMK
to a member of the Koffman family or to any entity which is owned by one or more
members of the Koffman family; (d) any transfer, direct or indirect, of
interests in Hospitality to members of the Andrews family or any entity wholly
owned and controlled by one or more members of the
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Andrews family, provided that Hospitality shall at all times be controlled by
Hugh A. Andrews for so long as he shall be alive and competent; and (e) any
issuance or transfer of publicly-traded ownership interests in WMS Industries or
Kumagai.
8.1.5 Make any substantial change to the operation of the
Project as presently contemplated without the prior written approval of GDB;
8.1.6 Other than in relation to the Project, permit the
Partnership to guarantee or otherwise in any way become or be contingently
liable or responsible for obligations of any other Person, including without
limitation by agreement to purchase the Indebtedness of another Person, by
agreement for the furnishing of funds to any other Person through the purchase
of goods, supplies or services (or by way of stock purchase, capital
contribution, loan or advance) for the purpose of paying or discharging the
Indebtedness of any other Person, or by agreement that net assets of any other
Person, consolidated or otherwise will be maintained in any amount;
8.1.7 Enter into or permit the entering into of any agreement
or arrangement for borrowed money, if such borrowing shall create any mortgage,
pledge, lien, hypothecation, charge (fixed or floating), security interest or
other encumbrance whatsoever over the Mortgaged Properties or any other asset of
the Partnership, except Permitted Liens and Encumbrances;
8.1.8 Permit or be a party to any arrangement regarding the
dissolution of any of the Borrowers or the Partnership;
8.1.9 Directly or indirectly, assign, transfer or attempt to
assign or transfer any of their Rights, duties or Obligations under this
Agreement or any other Operative Document except as required under the Bank Loan
Documents or a specifically permitted under this Agreement;
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8.1.10 Agree to a substantial Work Change without prior
written notice to and consent from GDB, which consent shall not be unreasonably
withheld and shall be deemed given if not denied within 30 days;
8.1.11 Cause any of the Permits for the Project to be revoked
or modified in any manner or form;
8.1.12 Except as permitted in this Article Eight, make any
loans and advances, (which terms do not include customary Compensation as a
result of employment) to any of their officers beyond what would be considered
reasonable or prudent;
8.1.13 Permit the aggregate Compensation paid to officers,
directors, and employees of the Partnership to exceed an amount which is proper
and reasonable in relation to the work performed and comparable to that paid by
other Persons engaged in similar types of business and producing comparable
results from operations;
8.1.14 Engage in any "prohibited transaction" within the
meaning of Section 4975 of the Internal Revenue Code or Section 406 of ERISA
with respect to any "employee benefit plan", as defined in Section 3 of ERISA;
8.1.15 Allow the Partnership to create any direct or indirect
Subsidiary or enter into any partnership, joint venture, or similar arrangements
or make any Transfer;
8.1.16 Amend or materially modify in any material respect the
Partnership Agreement, as in effect on the Closing Date hereof;
8.1.17 Compromise, settle or discharge any action, suit,
proceeding or claim which seeks to restrain, prevent, change or otherwise
affect, or questions the validity or legality of, the transactions contemplated
by this Agreement, the Security Documents, the Additional
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Security Documents or any other Operative Documents (other than the GDB Loan
Agreement, as to which the provisions thereof shall apply), in whole or in part,
or which seeks damages in connection with any of such transactions, which
compromise settlement or discharge materially adversely affects the interest of
GDB under this Agreement;
8.1.18 Enter into any contract, agreement or transaction which
could reasonably be expected to have a Material Adverse Effect; or
8.1.19 take or omit to take any action, which act or omission
would constitute (i) a default or an event of default pursuant to, or
noncompliance with any of, the terms of any of the GDB Facility Documents or the
LC Agreement or (ii) except as provided elsewhere in this Agreement, a material
default or event of default pursuant to, or non-compliance with any other
contract, lease, mortgage, deed of trust or instrument to which it is a party or
by which it or any of its property is bound or any document creating a Lien
(except the GDB Loan Agreement), unless, in either case, such default, event of
default or non-compliance would not have a Material Adverse Effect.
8.2 Actions by the Partnership. The Borrowers further covenant that,
until full payment of the GDB Facility and the performance of all other
Obligations of the Borrowers hereunder, they will not, without the prior consent
of GDB, and will not permit the Partnership, without the prior consent of GDB,
to:
8.2.1 During the Term of this Agreement, make or permit to be
made any payment of Partnership Returns, except payments applied in reduction of
the Borrowers' Obligations hereunder, or any other distribution of any revenues
from the Partnership to any
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Partner (except with the Borrowers' Share of Excess Revenues) unless and until
the Facility shall have been repaid in full;
8.2.2. Make any loans or advances to, any investments in or
any other payment of any kind to any Partner except, if applicable, (i) the
Borrowers' Share of Excess Revenues, (ii) the Basic Management Fee, (iii) the
Development Fee, and (iv) the Construction Management Fee; provided, however,
that KGC may make, and WKA may repay to KGC, KG Loans (as defined in and in
accordance with the Partnership Agreement as in effect on the date hereof);
8.2.3 Permit the Partnership to engage in any activity not
related to the Project or which could not be reasonably regarded as necessary to
the development and management of the Project, or invest in any Person, or
engage in new ventures or business enterprises.
ARTICLE 9
EVENTS OF DEFAULT, RIGHTS AND REMEDIES
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute and "Event of Default" hereunder:
(a) Borrowers shall fail to make, within ten (10) calendar
days of written notice from GDB, any payment of principal or interest or within
thirty (30) calendar days of written notice from GDB of any other amount owing
in respect of, the Facility.
(b) Borrowers shall fail or neglect to perform, keep or
observe any other provision of this Agreement or of any of the GDB Facility
Documents, and such failure or neglect shall remain unremedied for a period
ending thirty (30) days after Borrowers shall receive written notice of any such
failure from GDB, provided that, except with respect to a
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Default under Paragraph 7.1.1, 7.1.6, 7.1.13, 7.1.14, 7.1.15, 7.6, 8.1.1, 8.1.2,
8.1.3, 8.1.4, 8.1.7, 8.1.8, 8.1.16, 8.2.1, 8.2.2 or 10.3 hereof, no Event of
Default shall exist under this paragraph (b) so long as (i) Borrowers are
proceeding diligently to cure such failure, (ii) such delay would not have a
Material Adverse Effect and (iii) Borrowers cure such failure within one hundred
eighty (180) days after Borrowers shall receive written notice of any such
failure from GDB.
(c) Any representation or warranty herein or in any other GDB
Facility Document or the Bank Loan Documents in any written statement delivered
pursuant thereto or hereto, or in any report, financial statement or certificate
made or delivered to GDB by any of the Borrowers or the Partnership pursuant to
this Agreement, shall be untrue or incorrect in any material respect as to any
of the Borrowers or the Partnership, as of the date when made or deemed made.
(d) The Project shall not have been completed on or before the
Completion Date, and the same shall remain unremedied for a period ending
forty-five (45) days after Borrowers shall have received written notice from
GDB;
(e) An "Event of Default" shall occur and be continuing under
any of the other GDB Facility Documents.
(f) All or a substantial part of the assets of any of the
Borrowers or the Partnership shall be attached, seized, levied upon or subjected
to a writ or distress warrant, or come within the possession of any receiver,
trustee, custodian or assignee for the benefit of creditors of any of the
Borrowers or the Partnership, which action shall remain unstated or undismissed
for sixty (60) consecutive days; or any person shall apply for the appointment
of
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a receiver, trustee or custodian for any of the assets of any of the Borrowers
or the Partnership, which action shall remained unstated or undismissed for
thirty (30) consecutive days; or any of the Borrowers or the Partnership shall
have concealed, removed or permitted to be concealed or removed, any part of any
of their respective assets with intent to hinder, delay or defraud any of their
creditors or made or suffered an unauthorized transfer of any of their
respective assets or incurred an obligation which may be fraudulent under any
bankruptcy, fraudulent conveyance or other similar Law.
(g) A case or proceeding shall have been commenced against any
of the Borrowers or the Partnership in a court of competent jurisdiction seeking
a decree or order in respect of any of the Borrowers or the Partnership, (i)
under Title 11 of the United States Code, as now constituted or hereafter
amended or any other applicable federal, Commonwealth, state or foreign
bankruptcy or other similar Law; (ii) appointing a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) of any of
the Borrowers or the Partnership, or of any substantial part of any of their
respective assets, or (iii) ordering the winding-up or liquidation of the
affairs of any of the Borrowers or the Partnership, and such case or proceeding
shall remain undismissed or unstated for sixty (60) consecutive days or such
court shall enter a decree or order granting the relief sought in such case or
proceeding.
(h) Any of the Borrowers or the Partnership shall (i) file a
petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable federal, State or
foreign bankruptcy or other similar Law, (ii) consent to the institution of
proceedings thereunder or to the filing of any such petition or to the
appointment of or taking possession by custodian, receiver, liquidator,
assignee, trustee or sequestrator (or
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similar official) of any of the Borrowers or the Partnership of any substantial
part of their respective assets; (iii) fail generally to pay its debts as such
debts become due, or (iv) take any action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all
times to appeal therefrom) for the payment of money in excess of one hundred
thousand Dollars ($100,000.00) shall be rendered against any of the Borrowers or
the Partnership and the same shall not (i) be fully covered by the Insurance
Policies required by this Agreement or the GDB Loan Agreement or, with respect
to the Borrowers, any insurance maintained by them; or (ii) within sixty (60)
days after the entry thereof, have been discharged or execution thereof stayed
pending appeal, or shall not have been discharged within five (5) days after the
expiration of any such stay.
(j) The conveyance, transfer, or other disposition of the
Premises other than as explicitly provided for hereunder or the assignment or
purported assignment of this Agreement, the Security Documents, the Additional
Security Documents or any of their rights thereunder shall have been made by any
of the Borrowers or the Partnership, except as required under the Bank Loan
Documents.
(k) Any material provision of any Security Document or any
Additional Security Document after delivery thereof shall for any reason cease
to be legal, valid, binding or enforceable in accordance with its terms, or any
material security interest created under any Security Document or any Additional
Security Document shall cease to be a valid and perfected first-, second-, or
third-priority security interest or Lien, as the case may be, (except as
otherwise permitted herein or therein) in any of the Security or the Additional
Security purported to be covered thereby.
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(l) Any Reportable Event which GDB determines in good faith
might constitute grounds for the termination of any Employees' Plan or for the
appointment by the appropriate United States District Court of a trustee to
administer any Employees' Plan shall have occurred and be continuing sixty (60)
days after written notice to such effect shall have been given to Borrowers by
GDB, or any Employees' Plan shall be involuntarily terminated, or a trustee
shall be appointed by an appropriate United States District Court to administer
any Employees' Plan, or proceedings to terminate any Employees' Plan or to
appoint a trustee to administer any Employees' Plan are commenced.
(m) Any of the Borrowers or the Partnership shall be enjoined,
restrained, or in any way prevented by court order, from conducting all or a
substantial part of their business affairs, including without limitation
ownership of the Facility Mortgaged Properties, or proceeding with the
development and operation of the Premises and the Project and such action is not
stayed, nullified or reversed within thirty (30) days thereafter.
9.2 Remedies. Subject to Paragraph 9.7, upon and during the
continuation of any Event of Default hereunder, GDB shall have the absolute
right, at its option and election, to:
(a) Cancel this Agreement by written notice to Borrowers;
(b) Declare all or any amounts owing to GDB under any of the
GDB Facility Documents to be immediately due and payable, all without diligence,
presentment, demand or payment, protest or notice of any kind, which are hereby
expressly waived by Borrowers;
(c) Institute appropriate proceedings, judicial or otherwise,
to specifically enforce performance hereof, or for the (i) complete foreclosure
of any of the Mortgaged Properties to the fullest extent permitted by applicable
Legal Requirements or (ii) partial
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foreclosure of any of the Mortgaged Properties, as permitted by applicable Legal
Requirements for the portion of the Obligations then due and payable (excluding
Obligations under the GDB Loan Agreement, as to which the remedies thereunder
shall apply), with the GDB Facility Documents then continuing unimpaired and
without loss of priority so as to secure the balance of such Obligations;
(d) Intentionally omitted;
(e) Make application to a court of competent jurisdiction for
the appointment of a receiver of the Mortgaged Properties of any portion
thereof, as a matter of strict right without notice to the Borrowers or the
Partnership (unless notice is required by applicable Legal Requirements and such
right of notice may not be waived) and without regard to the solvency of the
Borrowers or the Partnership, for the purpose of preserving the Mortgaged
Properties, preventing waste, and to protect all rights accruing to GDB by
virtue of this Agreement. Any such receiver shall have all the usual powers and
duties of receivers in similar cases, including the full power to rent, maintain
and otherwise operate the Mortgaged Properties, all upon such terms as may be
approved by the court. All expenses incurred in connection with the appointment
of said receiver, or in protecting and preserving the Mortgaged Properties,
shall be chargeable against Borrowers and shall be enforced as a lien against
the applicable Mortgaged Properties;
(f) To the extent permitted by applicable Legal Requirements
and subject to applicable provisions of the GDB Standstill Agreement and the
Facility Standstill Agreement, the Mortgaged Properties may be sold in one or
more parcels and in such manner and order as
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GDB in its sole discretion may elect, it being expressly understood and agreed
that any right of sale arising under this Agreement shall not be exhausted by
any one or more sales;
(g) Accelerate maturity of the Note and demand payment of the
principal sums due thereunder, with interest and costs, and in default of said
payment or any part thereof, to foreclose and enforce collection of such payment
by foreclosure or other appropriate action in any tribunal.
(h) Require that Borrowers comply with instructions of GDB or
any Person designated by GDB in its reasonable discretion to take or refrain
from taking any lawful action with respect to the operation of the business of
any of the Borrowers of the Partnership which, in the judgment of GDB exercised
in its reasonable discretion, is necessary or desirable to remedy any Default;
(i) Exercise any and all other Rights granted under the GDB
Facility Documents or now or hereafter existing in equity or at law, by virtue
of statute or otherwise.
The said remedies and rights of GDB shall be cumulative and
not exclusive. GDB shall be privileged, and shall have the absolute right,
subject to Paragraph 9.7, to resort to any or all of said remedies, none to
limit or exclude any other. In any Event of Default, GDB shall have the absolute
right to refuse to disburse any undisbursed amounts from the Facility, and no
Person shall have any interest in the undisbursed balance of the Facility or any
right to require or compel payment thereof toward discharge or satisfaction of
any claim or lien which any Person has or may have for work performed on, or
materials supplied to, the Improvements.
9.3 Waiver of Defaults. The waiver by GDB of any Event of Default
hereof shall not be deemed, nor shall the same constitute, a waiver of any
subsequent Event of Default.
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9.4 Waivers by Borrowers. Except as otherwise provided for in this
Agreement and applicable law, Borrowers waive to the fullest extent permitted by
law (i) presentment, demand and protest and notice of presentment, dishonor,
notice of intent to accelerate, notice of acceleration, protests, default,
nonpayment, maturity, release, compromise, settlement, extension or renewal of
any or all commercial paper, accounts, contract rights, documents, instruments,
chattel paper and guaranties at any time held by GDB on which any of the
Borrowers or the Partnership may in any way be liable and hereby ratifies and
confirms whatever GDB may do in this regard, (ii) all rights to notice and a
hearing prior to GDB's taking possession or control of, or to GDB's replevy,
attachment or levy upon, the Security, the Additional Security or may bond or
other collateral which might be required by any court prior to allowing GDB to
exercise any of its remedies, and (iii) the benefit or all valuation, appraisal
and exemption laws.
9.5 Right of Set-Off. Upon the occurrence and during the continuance of
any Event of Default and GDB's termination of this Agreement or GDB's declaring
all obligations to be forthwith due and payable pursuant to the provisions of
Paragraph 9.2 hereof, GDB is hereby authorized at any time and from time to
time, to the fullest extent permitted by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by GDB to or for the credit or the
account of the Borrowers (except that any monies held pursuant to the GDB
Investment Agreement (as such term is defined in the LC Agreement) and the GDB
Facility Escrow shall not be deemed to be such deposits or indebtedness ) or any
of their Affiliates against any and all of the obligations of Borrowers or any
of their Affiliates now or hereafter existing under this Agreement, irrespective
of whether or not GDB shall have made any demand under this
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Agreement and although such Obligations may be unmatured. GDB agrees promptly to
notify Borrowers after any such set-off and application made by GDB; provided,
however, that the failure to give such notice shall not affect the validity of
such set-off or application.
9.6 Control. None of the covenants or other provisions contained in
this Agreement shall, or shall be deemed to, give GDB under this Agreement the
right or power to exercise control over the affairs or management of any of the
Borrowers or the Partnership.
9.7 Exercise of Remedies.
(a) If an Event of Default shall occur solely as a result of a
failure by WKA or WMS to perform any obligations hereunder or under their
respective Guaranties or a failure by either of the owners of the
Facility-Mortgaged Properties to perform any obligations under any of the GDB
Facility Documents to which it is a party, GDB agrees that, without limiting its
rights as to WKA or WMS or otherwise hereunder, it will not exercise the
remedies set forth in Paragraph 9.2 with respect to the obligations of KGC or
Kumagai hereunder or under their respective Guaranties if KGC or Kumagai has
cured such Event of Default or provided cash collateral to secure payment in
full of such obligations of WKA and WMS.
(b) If an Event of Default shall occur solely as a result of a
failure by KGC or Kumagai to perform any obligations hereunder or under their
respective Guaranties, GDB agrees that, without limiting its rights as to KGC or
Kumagai or otherwise hereunder, it will not exercise the remedies set forth in
Paragraph 9.2 with respect to the obligations of WKS or WMS hereunder or under
their respective Guaranties or the obligations under the GDB Facility Mortgages
if WKA or WMS has cured such Event of Default or provided cash collateral to
secure payment in full of such obligations of KGC or Kumagai.
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(c) The limitations in Paragraphs 9.7(a) and 9.7(b) on the
exercise by GDB of its remedies set forth in Paragraph 9.2 shall not apply if
(i) an Event of Default has occurred which relates to the Partnership, the
Project, the Premises, the Security Documents (other than the Security Documents
referred to in Paragraph 4.1.1 or 4.1.2), the Additional Security Documents, the
deposit of amounts in the GDB Facility Escrow or the payment of interest or
principal when due under the Facility or (ii) if an event described in Paragraph
9.1(f), 9.1(g) or 9.1(h) has occurred with respect to WKS, WMS, KGC or Kumagai.
ARTICLE 10
MISCELLANEOUS
10.1 No Agency Relationship. The Borrowers understand and agree that
GDB is not the agent, representative, or partner of, or joint-venturer with any
of the Borrowers or the Partnership, and this Agreement shall not be construed
to make GDB liable to materialmen, contractors, craftsmen, laborers, or others
for goods or services furnished by them in or into the Project, or for debts or
claims accruing to the said parties against any of the Borrowers or the
Partnership, and it is distinctly understood and agreed that there is no
contractual relation, either express or implied, between GDB and any
materialmen, subcontractors, craftsmen, laborers or other person or persons
supplying any work or materials in and to the Project, or of any part thereof.
This Agreement shall not give rise to the application of the doctrine of
third-party beneficiary.
10.2 Liability. It is understood between the parties hereto that
Borrower or the Partnership has selected or will select all architects,
engineers, contractors, subcontractors, materialmen, as well as all others
furnishing services or materials for the Project, and GDB has,
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and shall have, no responsibility whatsoever for them or for the quality of
their materials or workmanship, it being understood that GDB's sole function is
that of lender and the only consideration passing from GDB to Borrowers is the
proceeds of the Facility in accordance with and subject to the terms of this
Agreement. It is also agreed that none of the Borrowers or the Partnership shall
have any right to rely on any procedures required by GDB herein, such procedures
being for the protection of GDB as lender and no one else. Borrowers hereby
agree to hold and save GDB harmless and indemnify it against and from claims of
any kind, by any Person, including but without limiting the generality of the
foregoing, employees of any of the Borrowers or the Partnership, any contractor
constructing the Improvements and the employees of any such contractor, any
tenant of any of the Borrowers or the Partnership, any subtenant or
concessionaire of any such tenant, and the employees and business invitees of
any such tenant, subtenant or concessionaire, arising from or out of the
construction, use, occupancy, or possession of the Improvements by or on behalf
of any of the Borrowers or the Partnership.
10.3 Indemnity of GDB. Borrowers hereby indemnify GDB and its
respective directors, officers, employees, Affiliates and agents (collectively,
"Indemnified Persons") against, and agree to hold each such Indemnified Person
harmless from any and all losses, claims, damages and liabilities, and related
expenses, including reasonable fees and expenses of legal counsel, incurred by
such Indemnified Person arising out of any claim, litigation, investigation or
proceeding (whether or not such Indemnified Person is a party thereto) relating
to any transactions, services or matters that are the subject of the GDB
Facility Documents or the Bank Loan Documents; provided, however, that such
indemnity shall not apply to any such losses, claims, damages, or liabilities or
related expenses determined by a court of competent
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jurisdiction to have arisen from the gross negligence or willful misconduct of
such Indemnified Person. If any litigation or proceeding is brought against any
Indemnified Person in respect of which indemnity may be sought against Borrowers
pursuant to this Paragraph 10.3, such Indemnified Person shall promptly notify
Borrowers in writing of the commencement of such litigation or proceeding, but
the omission so to notify Borrowers shall not relieve Borrowers from any other
obligation or liability which they may have to any Indemnified Person otherwise
than under this Paragraph 10.3 or Paragraph 7.1.12 hereof. Failure of the
Indemnified Person to timely notify Borrowers of the commencement of such
litigation of proceeding shall not relieve Borrowers of their obligations under
this Paragraph 10.3 or Paragraph 7.1.12 hereof, except where and to the extent
such failure irrevocably prejudices any action to hold such Indemnified Person
harmless therefrom. In case any such litigation or proceeding shall be brought
against any Indemnified Person and such Indemnified Persons shall notify
Borrowers of the commencement of such litigation or proceeding, Borrowers shall
be entitled to participate in such litigation or proceeding and, after written
notice from Borrowers to such Indemnified Person, to assume the defense of such
litigation or proceeding with counsel of its choice at its expense, provided
that such counsel is satisfactory to the Indemnified Person in the exercise of
its reasonable judgment. Notwithstanding the election of Borrowers to assume the
defense of such litigation or proceeding, such Indemnified Person shall have the
right to employ separate counsel and to participate in the defense of such
litigation or proceeding, each at Borrowers' sole cost and expense, if (i) the
use of counsel chosen by Borrowers to represent such Indemnified Person would
present such counsel with a material conflict of interest; (ii) the defendants
in, or targets of, any such litigation or proceeding include both any
Indemnified Person and any of the
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Borrowers, the Partnership or their Affiliates, and such Indemnified Person
shall have reasonably concluded that there may be legal defenses available to it
which are different from or additional to those available to any of the
Borrowers or the Partnership (in which case Borrowers shall not have the right
to direct the defense of such action on behalf of the Indemnified Person; (iii)
Borrower shall not have employed counsel satisfactory to such Indemnified Person
in the exercise of the reasonable judgment of the Indemnified Person within a
reasonable time after notice of the institution of such litigation or
proceeding; or (iv) Borrowers shall authorize in writing such Indemnified Person
to employ separate counsel at the expense of Borrowers, provided, however, that
Borrowers shall not be liable for the fees, costs and expenses of more than one
separate counsel at the same time for all such Indemnified Persons in connection
with the same action and any separate but substantially similar or related
action in the same jurisdiction. Borrowers shall not consent to the entry of any
judgment or enter into any settlement in any such litigation or proceeding
unless such judgment or settlement includes as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Person of a release from
all liability in respect of such claim or litigation.
The agreements of Borrowers in this Paragraph 10.3 shall be in
addition to any liability that Borrowers may otherwise have and shall be
continuing and survive the repayment of the GDB Facility. All amounts due under
this Paragraph 10.3 shall be payable as incurred upon written demand therefor,
and shall be guaranteed by the Security.
10.4 Damage or Destruction.
(a) In case of a Casualty, the Borrowers will immediately give
notice thereof to GDB, generally describing the nature and extent of such
Casualty and setting forth the
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Borrowers' best estimate of the cost of Restoration and the Borrowers shall, at
their sole cost and expense, promptly commence and diligently complete or cause
to be commenced and diligently completed, the Restoration in a good and
workmanlike manner and in compliance with all legal Requirements.
(b) Without prejudice to GDB's rights under the Facility
Mortgages or the mortgages on the Facility Mortgaged Properties, GDB shall be
entitled to receive all insurance proceeds payable on account of a Casualty in
respect of the Project. The Borrowers hereby irrevocably assign, transfer and
set over to GDB, and will cause the Partnership or other owner of any Mortgaged
Property irrevocably to assign, transfer and set over to GDB, all rights of any
of the Borrowers or the Partnership to any such proceeds, award or payment and
irrevocably authorized and empower GDB, in the name of the Borrowers or
otherwise, to file for and prosecute in its own name what would otherwise be the
claim of the Borrowers or the Partnership for any such proceeds. Notwithstanding
the foregoing, so long as no Event of Default shall have occurred and shall then
be continuing, and provided the Borrowers or the partnership promptly files and
diligently prosecutes all claims, the Borrowers or the Partnership shall have
the right to file, adjust, settle and prosecute any claim for such proceeds;
provided, however, that none of the Borrowers or the Partnership shall agree to
any adjustment or settlement of any such claim payable with respect to a Major
Casualty without GDB's prior written consent. The Borrowers shall pay promptly,
or shall cause the Partnership to pay promptly after demand all costs and
expenses (including, without limitation, attorneys' fees and expenses) incurred
by GDB in connection with a Casualty and the seeking and obtaining of any
insurance proceeds, award or payment with respect thereto.
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(c) In the event of a Major Casualty to the Premises, the Net
Proceeds shall be held, at GDB's option, by GDB as additional collateral for the
interest on the Note and shall be applied or dealt with by GDB as follows:
(i) if the Release Conditions (as hereinafter
defined) are satisfied, all Net Proceeds shall be made available to the
Borrowers or the Partnership to be applied towards the costs of the Restoration
in accordance with paragraph (e) of this Paragraph 10.4; and
(ii) if the Release Conditions are not satisfied,
all Net Proceeds shall be applied in accordance with Paragraph 10.6 hereof.
(d) In case of a Major Casualty, all Net Proceeds shall be
applied as provided in clause (i) of paragraph (c) of this Paragraph 10.4 if all
of the following conditions are satisfied or otherwise waived by GDB
(collectively, the "Release Conditions"):
(i) no Default or Event of Default shall have
occurred and be continuing;
(ii) the Borrowers or the Partnership shall have
delivered to GDB within thirty (30) days after the occurrence of the Major
Casualty, a notice of the Borrowers' desire to undertake, or to cause the
Partnership to undertake, the Restoration of the Project;
(iii) the Borrowers or the Partnership shall have
demonstrated to the satisfaction of GDB that the Restoration of the Project can
be completed at least six months prior to the then-current due date of the Term
Loan under the GDB Loan Agreement and at least six months prior to the Maturity
Date of the GDB Loan Agreement.
(iv) the Borrowers or the Partnership shall have
demonstrated to the satisfaction of GDB that sufficient funds are available to
the Borrowers or the Partnership
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through revenues or business interruption insurance maintained pursuant to
Paragraph 7.1.10 hereof, or a cash deposit, letter of credit or similar
cash-equivalent security (which in the case of a letter of credit or similar
cash-equivalent security shall be satisfactory to GDB as to form, content, and
issuer) and which shall be for the benefit of GDB, to pay all amounts estimated
to be paid with respect to the Existing GDB Loan and the Facility, and all other
estimated operating expenses with respect to the Project during the period
estimated by the Borrowers and approved by GDB as necessary for the completion
of the Restoration;
(v) in the event that the estimated cost of
Restoration is greater than 25% of the full replacement costs of the Project (as
specified in the Insurance Policies), Borrowers shall have provided GDB with a
guaranty of completion of the Restoration satisfactory to GDB as to form,
content and guarantor which, among other things, ensures that sufficient funds
are and will be available to complete the Restoration; and
(vi) to the extent, in GDB's judgment, that the Net
Proceeds are insufficient to pay the costs of the Restoration, the Borrowers
shall have caused the Partnership to provide GDB with a cash deposit, letter of
credit, or similar cash-equivalent security in the amount of such deficiency
(which in the case of a letter of credit or similar cash-equivalent security
shall be satisfactory to GDB as to form, content and issuer).
(e) Provided that no Default or Event of Default shall have
occurred and be continuing, then, upon the occurrence of a partial destruction
of the Project that does not constitute a Major Casualty or upon the occurrence
of a Major Casualty in the connection with which the Release Conditions have
been met, the Net Proceeds shall be paid over to the Borrowers for the
Restoration of the Project. The Net Proceeds shall be disbursed substantially
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in accordance with, and in the same manner and subject to the same conditions as
the disbursement of the proceeds of the Existing GDB Loan. Notwithstanding the
foregoing, after the Date of Substantial Completion, the Net Proceeds from a
Casualty that does not constitute a major Casualty shall be paid over to the
Borrowers for the Restoration of the Project without any requirement that the
Borrowers comply with such disbursement provisions of the GDB Loan Agreement.
(f) All costs and expenses incurred by GDB in connection with
making the Net Proceeds or Net Restoration Awards available for the Restoration
(including, without limitation, attorneys' fees and expenses and fees and
expenses of the Bank's Consultant) shall be paid by the Partnership or the
Borrowers. Any Net Proceeds or Net Restoration Awards remaining after the
Restoration and the payment in full of all costs incurred in connection with the
Restoration shall be deposited in the GDB Facility Escrow Account to be
established in accordance with the provisions of Paragraph 3.12 hereof.
10.5 Taking of the Mortgaged Properties.
(a) In case of a Taking or the commencement of any proceedings
or negotiations that might result in a Taking, the Borrowers immediately will
give notice thereof to GDB generally describing the nature and extent of such
Taking or the nature of such proceedings or negotiations and the nature and
extent of the Taking that might result therefrom. Without prejudice to GDB's
rights under the GDB Facility Mortgages or the Mortgages on the Facility
Mortgaged Properties, GDB shall be entitled hereunder to all awards or
compensation payable on account of a Taking. The Borrowers hereby irrevocably
assign, transfer and set over to GDB, and will cause the Partnership irrevocably
to assign, transfer and set over to GDB, all
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rights of any of the Borrowers or the Partnership to any such award or
compensation and irrevocably authorize and empower GDB, in the name of the
Borrowers or the Partnership or otherwise, to collect and receive any such award
or compensation and to file and prosecute any and all claims for any such award
or compensation. Notwithstanding the foregoing, so long as no Event of Default
shall have occurred and shall then be continuing, and provided the Borrowers or
the Partnership promptly files and diligently prosecutes such claim or claims,
the Borrowers or the Partnership shall have the right to prosecute and file any
such claim or claims, and the Borrowers shall cause any such award or
compensation to be collected and promptly paid over to GDB; provided, however,
that none of the Borrowers or the Partnership shall agree to or accept any award
or compensation without GDB's prior written consent. GDB may participate in such
proceedings or negotiations, and the Borrowers will deliver or cause to be
delivered to GDB all instruments requested by GDB to permit such participation,
provided, however, that GDB shall be under no obligation to question the amount
of the award or compensation. Although it is hereby expressly agreed that the
same shall not be necessary, in any event, the Borrowers shall, upon demand of
GDB, make, execute and deliver, and cause the Partnership to execute and
deliver, any and all assignments and other instruments sufficient for the
purpose of assigning any such award or compensation to GDB, free and clear of
any encumbrances of any kind or nature whatsoever other than the GDB Mortgage
and any junior encumbrances arising as a result of the KGC Mortgage (as such
term is defined in the LC Agreement). The Borrowers will cause the Partnership
to pay promptly after demand all costs and expenses (including, without
limitation, attorneys' fees and expenses and fees and expenses
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of the Bank's Consultant) incurred by GDB in connection with any Taking and
seeking and obtaining any award or payment on account thereof.
(b) In case of a Taking such that, in GDB's judgment, the
Project can be restored substantially to its value and usefulness as it existed
prior to such Taking, then the Borrowers shall cause the Partnership, at its
sole cost and expense, promptly to commence and diligently to complete the
Restoration in a good and workmanlike manner, and in compliance with all Legal
Requirements.
(c) All Net Restoration Awards shall be held, at GDB's option,
by GDB as additional collateral for interest on the Note and shall be applied or
dealt with by GDB as follows:
(i) Provided that no Default or Event of Default shall have
occurred and be continuing, then, in the case of a Taking of the nature referred
to in paragraph (b) of this Paragraph 10.5 and, to the extent necessary
thereunder, if the Release Conditions are satisfied, all Net Restoration Awards
shall be applied to pay the cost of Restoration of the portion of the Project
remaining after such Taking, such application to be effected substantially in
the same manner as provided in Paragraph 10.4 (e) hereof with respect to Net
Proceeds and the balance, if any, of such Net Restoration Awards shall be
applied in the manner set forth in Paragraph 10.4(f) hereof.
(ii) In the case of any Taking other than a Taking of the
nature referred to in Paragraph (b) of this Paragraph 10.5, all Net Restoration
Awards actually received by GDB shall be applied in accordance with Paragraph
10.6 hereof.
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(d) Notwithstanding anything to the contrary contained herein,
in the case of a Taking such that, in GDB's judgment, the Project is an
economically viable architectural whole notwithstanding such Taking, the
Borrowers shall have no obligation to commence or complete Restoration and all
Net Restoration Awards shall be applied in the order specified in Paragraph 10.6
hereof.
10.6 Application of Proceeds upon Casualty or Substantial
Taking. Upon a Casualty relating to the Premises, if the disposition of the Net
Proceeds is governed by clause (ii) of paragraph (c) of Paragraph 10.4 hereof or
upon a taking, if the disposition of the Net Restoration Awards is governed by
clause (ii) of paragraph (c) or paragraph (d) of Paragraph 10.5 hereof, GDB
shall have the option, in GDB's sole discretion to (a) make available the Net
Proceeds or the Net Restoration Awards, as the case may be, to the Borrowers or
the Partnership for Restoration in the manner provided in paragraph (e) of
Paragraph 10.4 hereof or (b) apply such Net Proceeds or Net Restoration Awards
to the payment of any outstanding interest obligations of the Borrowers or the
Partnership under the Note.
If GDB shall receive and retain any Net Proceeds or Net
Restoration Awards, in trust or otherwise, the interest obligations under the
Note shall be reduced only by the amount thereof received and retained by GDB
and actually applied by GDB in reduction of the such interest obligations.
Notwithstanding anything contained in this Agreement to the
contrary, GDB shall release the proceeds of any business interruption insurance
maintained hereunder to the Borrowers or the Partnership, provided that the
Borrowers satisfy the conditions set forth in Paragraph 10.4(d)(i), (ii) and
(iv) herein and provided further that GDB shall retain that portion
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of such insurance proceeds that GDB deems necessary to pay all amounts estimated
to become payable with respect to interest on the Note during the period
estimated by the Borrowers and approved by GDB as necessary for the completion
of the Restoration, the balance of such insurance proceeds to be released in
accordance with the other terms and conditions set forth herein, as applicable.
10.7 Complete Agreement, Modification of Agreement. The Operative
Documents constitute the complete agreement between the Parties with respect to
the subject matter hereof and may not be modified, altered or amended except by
an agreement in writing signed by the Borrowers and GDB.
No amendment or waiver of any provision of this Agreement, the
Note or any other Operative Document, nor consent to any departure by the
Borrowers therefrom, shall in any event be effective unless the same shall be in
writing and signed by GDB, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
10.8 Fees and Expenses. The Borrowers shall pay all reasonable
out-of-pocket expenses of GDB in connection with the preparation of the GDB
Facility Documents (including the fees and expenses of all of its counsel and
consultants retained in connection with the GDB Facility Documents and the
transactions contemplated thereby) subject to the limitation contained in the
Partnership's Letter to GDB dated April 9, 1992 relating thereto. If, at any
time or times, regardless of the existence of any Event of Default (except with
respect to Clauses (iii) and (iv) of this Paragraph 10.8, which shall be subject
to an Event of Default having occurred
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and continuing), GDB shall employ counsel for advice or other representation in
connection with or shall incur reasonable legal or other costs and expenses in
connection with:
(i) any amendment, modification, termination or
waiver, or consent with respect to, any of the Loan Documents or the GDB
Facility Documents;
(ii) any litigation, contest, dispute, suit,
proceeding or action (whether instituted by GDB, the Borrowers, or any other
Person) in any way relating to the Security, the Additional Security, any of the
Operative Documents (other than the GDB Loan Agreement, as to which the
provisions thereof shall apply) or any other agreements to be executed or
delivered in connection herewith;
(iii) any attempt to enforce any rights of GDB
against the Borrowers or the Partnership, or any other Person, that may be
obligated to GDB by virtue of any of the Loan Documents or the GDB Facility
Documents;
(iv) any attempt to verify, protect, collect, sell,
liquidate or otherwise dispose of the Security or the Additional Security; then,
and in any such event, the reasonable attorneys' fees arising from such
services, including those of any appellate proceedings, and all reasonable
expenses, costs, charges and other fees incurred by such counsel in any way or
respect arising in connection with or relating to any of the events or actions
described in this Section shall be payable, on demand, by the Borrowers to GDB
and shall be additional Obligations secured under this Agreement and the other
Operative Documents. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: paralegal fees, accountants'
fees, court costs and expenses; court reporter fees, and expenses for travel,
paid or incurred in connection with the performance of such legal services.
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10.9 No Waiver by GDB. GDB's failure, at any time or times, to require
strict performance by the Borrowers of any provisions of this Agreement and any
of the other Operative Documents shall not waive, affect or diminish any right
of GDB thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by GDB of an Event of Default by the Borrowers under the
Operative Documents shall not suspend, waive or affect any other Event of
Default by the Borrowers under this Agreement and any of the other Operative
Documents, whether the same is prior or subsequent thereto and whether of the
same or of a different type. None of the undertakings, agreements, warranties,
covenants and representations of the Borrowers contained in this Agreement or
any of the other Operative Documents and no Event of Default by the Borrowers
under this Agreement and no defaults by the Borrowers under any of the other
Operative Documents shall be deemed to have been suspended or waived by GDB,
unless such suspension or waiver is by an instrument in writing signed by an
officer of GDB and directed to the Borrowers specifying such suspension or
waiver.
10.10 Remedies. GDB's rights and remedies under this Agreement shall be
cumulative and non-exclusive of any other rights and remedies which GDB may have
under any other agreement, including without limitation, the Operative
Documents, by operation of law or otherwise. Recourse to the Security or the
Additional Security shall not be required.
10.11 Parties. This Agreement and the other GDB Facility Documents
shall be binding upon, and inure to the benefit of, GDB's approved successors of
the Borrowers, GDB and the assigns, transferees and endorsees of GDB. Nothing in
this Agreement or the other GDB Facility Documents, express or implied, shall
give to any Person, other than the Parties hereto
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and their successors hereunder, any benefit or any legal or equitable right,
remedy or claim under this Agreement.
10.12 Conflict of Terms. Except as otherwise provided in this Agreement
or any of the other GDB Facility Documents by specific reference to the
applicable provisions of this Agreement, if any provision contained in this
Agreement is in conflict with, or inconsistent with, any provision in any of the
other GDB Facility Documents, the provision contained in this Agreement shall
govern and control.
10.13 Authorized Signatories. Until GDB shall be notified by the
Borrowers to the contrary, the signature upon any document or instrument
delivered pursuant hereto of an authorized representative of each of the
Borrowers shall bind the Borrowers and be deemed to be the act of the Borrowers
pursuant to and in accordance with resolutions duly adopted by the Borrowers'
authorized representatives.
10.14 Notices. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
Parties or the Partnership by another, or whenever any of the Parties or the
Partnership desires to give or serve upon another any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be delivered in
person with receipt acknowledged, or telecopied and confirmed immediately in
writing by a copy mailed by registered or certified mail, return receipt
requested, postage prepaid, addressed as hereafter set forth, or mailed by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
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(a) If to GDB:
Government Development Bank for Puerto Rico
Box 42001
San Juan, Puerto Rico 00940-2001
Attention: President and Director of Private
Sector - Banking Services
Telephone: 809-729-6000
Telecopier: 809-726-1440
With copies to:
Trias, Acevedo y Otero
P.O. Box 366283
San Juan, Puerto Rico 00936-6283
Attention: Lic. Peter Trias
Telephone: 809-753-7777
Telecopier: 809-751-3405
and
Cleary, Gottlieb, Steen & Hamilton
1752 N Street, N.W.
Washington D.C. 20036
Attention: Giovanni P. Prezioso, Esq.
Telephone: 202-728-2700
Telecopier: 202-728-2743
(b) If to Borrowers or the Partnership:
Kumagai Caribbean, Inc.
Suite 310, Parkside Building
Metro Office Park
San Juan, Puerto Rico 00920-1706
Attention: Mr. Shunsuke Nakane
Telephone: 809-782-3000
Telecopier: 809-783-0797
and
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WKA El Con Associates/El Conquistador Partnership
c/o Williams Hospitality Management Corp.
El San Juan Hotel & Casino
187 East Isla Verde Road
San Juan, Puerto Rico 00913
Attention: Mr. Hugh A. Andrews
Authorized Representative
Telephone: 809-791-2000
Telecopier: 809-791-7500
With copies to:
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.
Telephone: 212-351-3100
Telecopier: 212-351-3131
and
WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Attention: Neil Nicastro
Telephone: 312-728-2300
Telecopier: 312-539-2099
and
Messrs. Burton and Richard Koffman
c/o Public Loan Company
300 Plaza Drive
P.O. Box 1568
Binghamton, New York 10022
Telephone: 607-729-9331
Telecopier: 607-797-7103
10.15 Captions. The headings, captions and arrangements used herein and
in any of the GDB Facility Documents are, unless specified otherwise, for
convenience only and shall not be
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deemed to limit, amplify or modify the terms of the GDB Facility Documents, nor
affect the meaning thereof.
10.16 Exhibits and Schedules. All exhibits and schedules attached
hereto shall be and are hereby incorporated herein, and made a part of this
Agreement for all purposes.
10.17 Governing Law and Venue:
(a) The GDB Facility Documents are being executed and
delivered by Borrowers and GDB, and are intended to be performed in the
Commonwealth of Puerto Rico, and the Laws of the Commonwealth of Puerto Rico
shall govern the rights and duties of the Parties and the validity,
construction, enforcement, and interpretation of the GDB Facility Documents.
(b) The Parties agree that any legal action or proceeding with
respect to, arising out of, connected with, related to or incidental to the
relationship established between Borrowers and GDB in connection with this
Agreement, whether arising in contract, tort, equity or otherwise may be brought
in, and the Parties accept, generally, irrevocably and unconditionally the
jurisdiction and venue of, any Court of the Commonwealth of Puerto Rico with
respect to their persons and properties. Nothing in this Paragraph 10.17 shall
affect the right of GDB to serve process in any other manner permitted by law or
limit the right of GDB to bring any action or proceedings against the Borrowers
or their properties in the courts of any other jurisdiction. Borrowers hereby
waive any claim that Puerto Rico is an inconvenient forum.
10.18 Severability. If any provision of any of the GDB Facility
Documents is held to be illegal, invalid or unenforceable under present or
future laws effective during the term
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thereof, such provision shall be fully severable; the appropriate GDB Facility
Document shall be construed and enforced as if such illegal, invalid or
unenforceable provisions had never comprised a part thereof; and the remaining
provisions thereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom.
10.19 Entire Agreement. This Agreement embodies the entire agreement
among the Parties with respect to the subject matter hereof, supersedes all
prior agreements and understandings, if any, relating to the subject matter
hereof, and may be amended only by an instrument in writing executed jointly by
authorized Persons on behalf of each of the Borrowers and GDB, and supplemented
only by documents delivered or to be delivered in accordance with the express
terms hereof.
10.20 Survival of Representations. All indemnities, representations and
warranties herein contained or made in writing in connection with this Agreement
shall survive the execution and delivery of this Agreement and the advance of
funds under the Facility and shall continue in full force and effect until the
Obligations (other than Obligations under the GDB Loan Agreement, as to which
the provisions thereof shall apply) shall have been paid in full. Further, as
specifically provided herein, certain indemnities, representations and
warranties shall survive the repayment of the loan, cancellation of the Notes
and release of GDB's Lien.
10.21 GDB Consent. Whenever under this Agreement the consent or
approval of GDB is required or necessary, GDB will diligently respond to any
request for such action, consent or approval and shall execute and deliver such
documents, instruments and agreements or give such
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instruction as may be necessary to effect the terms and spirit of this Agreement
and the other GDB Facility Documents.
10.22 Reliance by GDB. GDB may but shall be under no obligation to rely
upon the advice of its legal counsel and of the Bank's Consultant, as well as of
all other parties whose advice it obtains in connection with all decisions made
by GDB in connection with any matters discussed herein.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
WKA EL CON ASSOCIATES GOVERNMENT DEVELOPMENT BANK
FOR PUERTO RICO
Itself By: /s/ By: /s/
----------------------------- ------------------------
KUMAGAI CARIBBEAN, INC.
Itself By: /s/
-----------------------------
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DEED OF MORTGAGE
EL CONQUISTADOR PARTNERSHIP L.P.
GOVERNMENT DEVELOPMENT BANK FOR PUERTO RICO
<PAGE>
<PAGE>
NUMBER SIX
DEED OF MORTGAGE
In the City of San Juan, Commonwealth of Puerto Rico, this Fifth of
May, Nineteen hundred ninety two.
BEFORE ME
EUGENIO OTERO SILVA
Notary Public and Attorney-at-Law in and for the Commonwealth of Puerto
Rico, with offices in the nineteenth floor of the Popular Center Building, Hato
Rey Ward of the City of San Juan, and residence in said City.
APPEAR
AS PARTY OF THE FIRST PART: EL CONQUISTADOR PARTNERSHIP L.P., a
partnership organized and existing under the laws of the State of Delaware,
United States of America, with a place of business at One hundred eighty seven
East Isla Verde Road, in the Municipality of Carolina, Puerto Rico, whose tax
identification number is 06-1288145, hereinafter referred to as "MORTGAGOR",
herein represented by its General Partners: WKA EL CON ASSOCIATES, a partnership
organized and existing under the laws of the State of New York, United States of
America, whose tax identification number is 06-1288143, in turn, herein
represented by its Authorized Signatory, Mister Hugh Alanson Andrews Wotochek,
also known as Hugh Alanson Andrews and as Hugh A. Andrews, of legal age, married
to Madame Sandra Andrews Naples, an executive and resident of San Juan, Puerto
Rico, whose social security number is ###-##-####, who states that he is duly
authorized to represent said partnership and binds himself to show such
authority whenever and wherever properly required to do so; and KUMAGAI
CARIBBEAN, INC., a corporation organized and existing under the laws of the
State of Texas, United States of America, whose tax identification number is
75-2303665, in turn, herein represented by its Vice President Toru Fujita Ueda,
also known as Toru Fujita, of legal age, married to Madame Yasuko Tajima Koyama,
a business executive, and resident
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of San Juan, Puerto Rico, whose social security number is ###-##-####, who
states that he is duly authorized to represent said corporation and binds
himself to show such authority whenever and wherever properly requested to do
so; and
AS PARTY OF THE SECOND PART: GOVERNMENT DEVELOPMENT BANK FOR PUERTO
RICO, a corporate governmental instrumentality of the Commonwealth of Puerto
Rico created by and existing pursuant to Law Number Seventeen of the Twenty
third of September, Nineteen hundred forty eight, as amended, with its principal
office in San Juan, Puerto Rico, whose tax identification number is 66-0348572,
hereinafter referred to as the "MORTGAGEE", herein represented by its Senior
Vice President, Mister Hiram Melendez Carrucini, of legal age, married to Madame
Josefina Cordova Catala, a banker and resident of San Juan, Puerto Rico, whose
social security number is ###-##-####, who states that he is duly authorized to
represent said institution and binds himself to show such authority whenever and
wherever properly required to do so.
I, the Notary, do hereby certify and give faith that I am personally
acquainted with the persons appearing herein and from their statements and my
belief, I also attest as to their legal age, civil status, profession, residence
and social security number. The appearing persons assure me of their, and in my
judgment they do have the, legal authority, capacity and personal qualifications
necessary to execute this Deed, and, for such purpose, they freely and
voluntarily:
SET FORTH
FIRST: THE PROPERTY: MORTGAGOR states and warrants to MORTGAGEE that it
is the sole owner with valid, good and marketable fee simple title [pleno
dominio] of the real estate property described as follows:
"RUSTIC: Parcel of land located at the Cabezas Ward of the Municipality
of Fajardo, Puerto Rico, with a survey area of two hundred fifty six cuerdas
with one thousand four hundred seventy four ten-thousandths of another
(256.1474)
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more or less, equivalent to two hundred fifty acres with seven thousand one
hundred seventy three ten-thousandths of another (250.7173), as determined by a
survey prepared by Engineer Manuel Ray based on various surveys prepared by
surveyors Alex Hornedo Robles and David Lebron, and an area of record of two
hundred sixty seven cuerdas with five thousand eight hundred and ninety ten-
thousandths of another (267.5890) more or less, bounded on the North, by State
Road Nine hundred eighty seven (987), by a housing lot subdivision belonging to
various owners, by land property of Justino Diaz Santini and his wife Jean
Robertson, by land property of Las Croabas Development Corporation, by land
comprising the Marina Lanais Condominium and by the Marina access road; on the
South, by land formerly owned by Fajardo Development Corporation, currently
owned by Kumagai Caribbean, Inc., by land comprising the marina Lanais
Condominium, and by the Maritime Zone of the Atlantic Ocean; on the East, by
land owned by Ramon Soto, by land property of Justino Diaz Santini and his wife
Jean Robertson, by land comprising the Marina Lanais Condominium, and by the
Maritime Zone of the Atlantic Ocean; on the West, by land owned by Justino Diaz
Santini and his wife Jean Robertson, by housing lot subdivision, property of
various owners, by land owned by Kumagai Caribbean, Inc., formerly Fajardo
Development Corp. and by State Road Number Nine hundred eighty seven (987).
"Said parcel contains, among others, the following structures: Cliftop
Building, consisting of a four story building, which contain approximately
eighty eight hotel rooms and facilities; Administration Building, consisting of
a three level concrete building which includes a casino area, kitchen facilities
and meeting rooms; Sea Wing Building, consisting of an irregular shaped five
story concrete building with approximately two hundred thirty hotel rooms and
facilities; Lanais Building, consisting of spiral shaped, four level concrete
building with swimming pool surrounded by two structures forming a semicircle
which contains approximately one hundred hotel rooms and facilities; Health SPA
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& GYM, consisting of a three level concrete building with a solarium on the
uppermost level, which has two swimming pools; Hotel Villas, comprising two
single level buildings formerly used as transient guest apartments and executive
dwellings; Marina Sea Shore, comprising a concrete structure, piers, docking
facilities, fueling facilities, navigational aids, breakwater and other
facilities for sea vessels, with an ocean opening towards the East; Sewer
Treatment installations for the treatment and disposal of sanitary sewage;
structure originally containing the kitchen facilities of El Conquistador Hotel;
and Ocean Beach Pool, consisting of a saltwater artificial lagoon."
SECOND: TITLE:
MORTGAGOR states and warrants to MORTGAGEE that it created the real
estate property described hereinbefore, hereinafter referred to as the
"Property", pursuant to Deed Number Six, of Consolidation of Properties,
authorized by Notary Public Silvestre M. Miranda on the Seventh of February,
Nineteen hundred ninety two, presented for registration and pending
consideration by the Honorable Registrar at entry seventy five [75], volume
forty [40], of the Daily Log of the Registry of Property of Puerto Rico, Section
of Fajardo.
MORTGAGOR states that the registration of the aforesaid Deed of
Consolidation of Properties is dependent upon the registration of several other
instruments pending consideration by the Honorable Registrar and expressly
warrants to MORTGAGEE that all said instruments shall be registered forthwith,
free and clear of any faults.
THIRD: LIENS AND ENCUMBRANCES: MORTGAGOR states that according to the
Registry of Property, the Property is subject by its origin to:
A. Easements in favor of the Puerto Rico Electric Power Authority and
of the Aqueduct and Sewer Authority of Puerto Rico, maritime terrestrial zone
easement, and right of way easement.
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B. Restrictive covenants granted pursuant to Deed Number Forty eight,
of Sale, authorized by Notary Public Jose R. Jimenez del Valle on the Twenty
third of November, Nineteen hundred eighty eight.
MORTGAGOR expressly warrants to MORTGAGEE that said restrictive
covenants were cancelled pursuant to Deed Number Three, authorized by Notary
Public Silvestre M. Miranda on the Twenty eighth of January, Nineteen hundred
ninety one, presented for registration and pending consideration by the
Honorable Registrar at entry five hundred eighty two, volume thirty nine of the
daily log of the aforementioned Section.
C. Mortgage securing the payment of a Mortgage Note in the principal
amount of One Hundred Forty Five Thousand Dollars ($145,000) with interest at
the rate of eight percent per annum, payable to United Federal Savings and Loan
Association of Puerto Rico, or its order, granted pursuant to Deed Number Ninety
eight, authorized by Notary Public Alfredo Olivero Irizarry on the Sixth of
March, Nineteen hundred seventy three, recorded at page fifty, overleaf, volume
two hundred five of Fajardo, second entry of Property Number Seven thousand four
hundred twenty.
MORTGAGOR expressly warrants to MORTGAGEE that the aforesaid mortgage
was cancelled pursuant to Deed Number Sixty two, authorized by Notary Public
Juan Antonio Aquino Barrera on the Twenty eight of May, Nineteen hundred ninety
two, presented for registration and pending consideration by the Honorable
Registrar at entry two hundred seventy seven, volume forty three, of the Daily
Log of the aforementioned Section.
MORTGAGOR further states that the Property is subject by itself to:
A. Mortgage securing the payment of three Mortgage Notes in the
aggregate amount of One Hundred Forty Six Million Six Hundred Twelve Thousand
Dollars ($146,612,000) with interest at a variable rate, payable on demand to
the Puerto Rico Industrial, Medical, Educational and Environmental Pollution
Control Facilities Financing Authority, or its order, subscribed by
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MORTGAGOR on the Seventh of February, Nineteen hundred ninety one before Notary
Public Leonor M. Aguilar Guerrero, Note Series A - in the principal amount of
One Hundred Twenty Million Dollars - under Affidavit Ninety eight, Note Series B
- - in the principal amount of Six Million Six Hundred Twelve Thousand Dollars,
under Affidavit Ninety nine, and Note Series C - in the principal amount of
Twenty Million Dollars - under Affidavit One hundred, granted pursuant to Deed
Number One, of Mortgage, authorized by the aforenamed Notary on the same date of
said Notes, presented for registration and pending consideration by the
Honorable Registrar at entry seventy six, volume forty, of the Daily Log of the
aforementioned Section.
B. Mortgage securing the payment of a Mortgage Note in the principal
amount of Twenty Five Million Dollars ($25,000,000) with interest at a variable
rate, payable on demand to the Government Development Bank for Puerto Rico, or
its order, subscribed by MORTGAGOR on the Seventh of February, Nineteen hundred
ninety one before Notary Public Ramon Moran Loubriel, Affidavit Four thousand
six hundred fifty five, granted pursuant to Deed Number Two, of Mortgage,
authorized by the aforenamed Notary on the same date of said note, presented for
registration and pending consideration by the Honorable Registrar at entry
seventy eight, volume forty, of the Daily Log of the aforementioned Section.
MORTGAGOR warrants to MORTGAGEE that the Property is free and clear of
any other liens and encumbrances, including any leaseholds, and that it is its
sole possessor.
FOURTH: THE MORTGAGE NOTE: MORTGAGOR states and acknowledges that it
has subscribed, issued and delivered in pledge to MORTGAGEE on this same date a
mortgage note, the literal text of which is as follows:
"MORTGAGE NOTE
"PRINCIPAL AMOUNT: $6,000,000.00
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"DUE DATE: ON DEMAND
"FOR VALUE RECEIVED, the undersigned EL CONQUISTADOR PARTNERSHIP L.P.,
a partnership organized and existing under the laws of the State of Delaware,
United States of America, whose tax identification number is 06-1288145, duly
authorized to do business within the Commonwealth of Puerto Rico, promises to
pay to Government Development Bank for Puerto Rico, or its order, in legal
tender of the United States of America, at holder's address, the principal sum
of SIX MILLION DOLLARS ($6,000,000), with interest on the unpaid balance from
this date and until its payment in full, at the rate of twelve percent (12%) per
annum.
"In the event the interest rate hereunder exceeds the interest rate
that may be lawfully charged to the undersigned, such interest rate shall be
automatically reduced to the maximum interest rate that may be lawfully charged
to the undersigned, and, in the event it is determined that there has been an
excess charge under this Note, the holder thereof shall promptly refund such
excess, without any other penalty.
"The undersigned's liability for the principal amount and any interest
accrued under this Mortgage Note, as well as that of its partners, is limited to
the real estate property securing its payment pursuant to the Deed mentioned
hereinbefore.
"The undersigned does hereby expressly waive presentment, protest,
demand, and notice of dishonor, default or non payment.
"In the event the holder of this Mortgage Note resorts to any court or
initiates mortgage foreclosure proceedings, regardless of its nature, to collect
in full or in part its principal amount or any interest accrued thereon, the
undersigned shall pay to said holder a sum equal to five percent (5%) of its
unpaid principal balance plus any interest accrued thereon as of the date such
action is filed, for the attorneys' fees, costs and expenses which may be
incurred
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by such holder, which amount shall immediately become liquid, due and payable
upon the filing of the petition or complaint.
"The payment of this Mortgage Note has been secured with a mortgage
constituted pursuant to Deed Number Six, of Mortgage, authorized on this same
date by the attesting Notary.
"At San Juan, Puerto Rico, this 5th of May, 1992.
"EL CONQUISTADOR PARTNERSHIP L.P.
"By: WKA EL CON ASSOCIATES
(signed) "Hugh A. Andrews
"By: "Hugh A. Andrews - Authorized Signatory
"By: KUMAGAI CARIBBEAN, INC.
(Signed) "Toru Fujita Ueda
"By: Toru Fujita Ueda - Vice President
"Affidavit No. 2749
"Acknowledged and subscribed to before me by Mr. Hugh Alanson Andrews
Wotochek, also known as Hugh Alanson Andrews and as Hugh A. Andrews, of legal
age, married to Ms. Sandra Andrews Naples, an executive and resident of San
Juan, Puerto Rico, whose social security number is ###-##-####, personally known
to me, in his capacity as Authorized Signatory of WKA EL CON ASSOCIATES, and by
Mr. Toru Fujita Ueda, also known as Toru Fujita, of legal age, married to Ms.
Yasuko Tajima Koyama, a business executive, and resident of San Juan, Puerto
Rico, whose social security number is ###-##-####, in his capacity as Vice
President of Kumagai Caribbean, Inc., such entities, in turn, in their capacity
as General Partners of El Conquistador Partnership L.P.
"At San Juan, Puerto Rico, this 5th of May, 1992.
(signed) "Eugenio Otero Silva
"NOTARY PUBLIC"
I, the Notary, do hereby certify and give faith that the preceding is a
true and faithful transcription of the original mortgage note that I have had
before me.
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FIFTH: PREAMBLE: The appearing parties state that MORTGAGOR has agreed
to secure the payment of the mortgage note transcribed hereinbefore, hereinafter
referred to as the "Mortgage Note", with a mortgage encumbering the Property,
whereof they freely and voluntarily:
EXECUTE
SIXTH: THE MORTGAGE: MORTGAGOR does hereby mortgage the Property, its
fee simple title [pleno dominio] thereto and any title or interest that it may
have therein, in favor of MORTGAGEE, the present or future holders of the
Mortgage Note, in order to secure the full and complete payment of:
A. The principal amount of the Mortgage Note, that is, the sum of
SIX MILLION DOLLARS ($6,000,000);
B. A credit of THREE MILLION DOLLARS ($3,000,000), provided for any
interest accrued thereon, which credit does not exceed five annuities of
interest;
C. An additional credit of THREE HUNDRED THOUSAND DOLLARS ($300,000),
provided for the attorneys' fees, costs and expenses that MORTGAGEE, the present
or future holders of the Mortgage Note may incur in the event they resort to the
courts or initiate mortgage foreclosure proceedings, regardless of its nature,
to collect in whole or in part said principal amount or any interest accrued
thereon;
D. An additional credit of SIX HUNDRED THOUSAND DOLLARS ($600,000),
provided for any disbursements that MORTGAGEE, the present or future holders of
the Mortgage Note, may make, in the use of their sole discretion, to pay any
amounts appertaining to this Deed, any deeds of clarification, or any other
instruments related thereto, or their registration in the Registry of Property;
any real estate taxes, including any interest, charges and penalties related
thereto, assessed on the Property, or that may otherwise affect the same; any
insurance premiums related to any insurance policies required by or pursuant to
this Deed; any attorneys' fees, costs and expenses in order to
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defend themselves or their mortgage interest in any action or proceeding that
may affect the mortgage constituted pursuant to this Deed; any disbursements
MORTGAGEE may make for MORTGAGOR's account under this Deed and those it may make
by reason of MORTGAGOR's default in any of its obligations under the same; and
any interest earned thereby; and
E. In general, each of the terms and conditions of the Mortgage Note
and of this Deed.
SEVENTH: EXTENSION OF THE MORTGAGE: MORTGAGOR stipulates and agrees
that the mortgage constituted pursuant to this Deed shall extend to:
A. The Property;
B. Any buildings, structures and constructions now or hereafter built,
constructed or erected therein, to the fullest extent allowed by law;
C. Any improvements consisting of new plantings, irrigation or
drainage, repairs, safety measures, alterations, conveniences, decorations or
additions of stories, or any other similar improvements, now or hereafter made
therein, to the fullest extent allowed by law;
D. Any natural accessions thereof, including the annexation of land by
natural accession;
E. Any indemnities or compensation granted or owed to the owner thereof
either from insurance or by reason of any eminent domain proceedings in regard
thereto or to any buildings, structures, improvements, constructions or
plantations that are subject to the mortgage constituted pursuant to this Deed,
to the fullest extent allowed by law;
F. Any excess area therein, even if recorded after the execution or
registration of this Deed;
G. Any easements, regardless of their nature or origin, that serve or
benefit said property or any buildings, structures, improvements or
constructions thereon;
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H. Any crops, products, or commodities, regardless of their status or
condition, thereof or of any buildings, structures, improvements or
constructions thereon, to the fullest extent allowed by law;
I. Any rental income due and unpaid at the time payment of the
Mortgage Note is demanded in court, and those that may become due thereafter,
appertaining thereto or to any buildings, structures, improvements or
constructions thereon, to the fullest extent allowed by law; and
J. Any movable objects or things that are or may be permanently placed
therein or in any buildings, structures, improvements or constructions thereon,
either for its decoration, comfort or development, or its use, to the fullest
extent allowed by law.
All of the foregoing is herein referred to as the "Mortgaged Property".
EIGHTH: CHATTEL PROPERTIES: MORTGAGOR does hereby acknowledge, agree
and covenant that pursuant to the preceding paragraph:
A. Any and all materials intended for any constructions,
reconstructions, alterations, repairs and improvements within the Property,
shall be deemed to have become immovable property upon their delivery at the
Property, and, thus, subject to the mortgage granted hereby, to the fullest
extent allowed by law.
B. Any and all fixtures and articles of movable property now or
hereafter owned by MORTGAGOR and attached to or contained within or used in
connection with the Property, including, but not limited to, all partitions,
furniture, furnishings, apparatus, machinery, motors, transformers, elevators,
fittings, radiators, gas ranges, ice boxes, mechanical refrigerators, awnings,
shades, screens, blinds, drapes, office equipment, word processors, computers,
typewriters, telephone and communications equipment and installations, kitchen,
barroom and restaurant equipment, plates, forks, knives, napkins, tablecloths,
tables, glasses, chinaware, cups, cooking equipment and installations, laundry,
ventilating, refrigerating, incinerating, electrical appliances, televisions
sets,
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radios, beds, vanities, chairs, mirrors, pillows, curtains, blankets, sheets,
towels, bathroom equipment, mattresses, box springs, sprinkler equipment,
carpeting and other furnishings and all plumbing, heating, lighting, cooking,
laundry, ventilating, refrigerating, incinerating, air conditioning and
sprinkler equipment and fixtures and appurtenances thereto, and all renewals or
replacements thereof, or articles in substitution therefor, whether or not the
same are or shall be attached thereto in any manner, shall be deemed to be
immovable property upon their delivery at the Property, and, thus, subject to
the mortgage granted hereby, to the fullest extent allowed by law.
NINTH: RANK OF MORTGAGE:
A. MORTGAGOR stipulates and warrants to MORTGAGEE that the mortgage
constituted pursuant to this Deed shall be registered forthwith in the Registry
of Property, free and clear of any faults, and that there shall be no liens or
encumbrances with a prior or an equal rank, except those mentioned hereinbefore.
B. MORTGAGOR agrees and binds itself to comply with each and all of the
terms and conditions of each of the deeds, notes pledges, agreements and other
instruments mentioned in paragraph Third hereinbefore.
TENTH: MORTGAGOR's and PARTNER's LIABILITY:
The appearing parties do hereby agree and covenant that MORTGAGOR's
liability for the principal amount and the interest accrued under the Mortgage
Note, and, thus, MORTGAGEE's causes of action therefor, shall be limited to the
Mortgaged Properties, with the clarification that in the event MORTGAGOR's
representations and warranties are untrue or incorrect in any material respect
or MORTGAGOR fails to perform any of its other obligations - those aside from
the payment of the principal and the interest under the Mortgage Note - it has
expressly undertaken under this Deed, such event shall constitute an "event of
default". The appearing parties do hereby further agree and covenant that
MORTGAGOR's liability for the principal amount and the interest accrued under
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the Mortgage Note, and, thus, MORTGAGEE's causes of action therefor, do not
extend to MORTGAGOR's partners.
ELEVENTH: INDEMNITIES: MORTGAGOR, subject to the extent of the rights
that the owners or holders of the mortgage notes mentioned in paragraph Third
hereinbefore may have, does hereby:
A. Irrevocably assign to MORTGAGEE any and all indemnification,
compensation, remuneration, proceeds, judgment and decree for damages
appertaining to the Mortgaged Property, granted or owed to MORTGAGOR by any
insurance company, by any expropriation authority or by any third parties, and
any title, interest or right thereon, up to the balance of the Mortgage Note and
any interest accrued thereon, to be credited thereto, or, in the event the
Mortgage Note has been delivered in pledge to secure any obligations, to such
obligations.
B. Authorize MORTGAGEE to receive any such amounts and to issue any
receipts, releases and acknowledgements of payment in regard thereto as may be
necessary; to credit any such amounts it may receive to any accrued interest and
thereafter to the unpaid principal of the Mortgage Note, or, in the event the
Mortgage Note has been delivered in pledge to secure any obligations, to such
obligations.
C. Authorize MORTGAGEE to file and prosecute any causes of action for
any such indemnification, compensation, remuneration, proceeds, judgment or
decree for damages appertaining to the Mortgaged Property, any attorneys' fees,
costs and expenses to be for MORTGAGOR's account, with the clarification that
MORTGAGEE shall not be bound to so proceed and that it shall notify MORTGAGOR
with a copy of the first document it presents in any such proceedings if it opts
to do so.
D. Notwithstanding the foregoing, at MORTGAGOR's request, MORTGAGEE
will make any such amounts, after deducting any costs, expenses and reasonable
attorneys' fees it may have incurred in their collection, for the
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restoration of the Mortgage Properties, as long as the restoration is
economically feasible, provided that such restoration shall be made under the
supervision of an architect or an engineer, by a contractor or sub-contractor
that has posted a performance bond, or other assurance or security, any and all
costs and expenses related thereto to be chargeable to MORTGAGOR, any
disbursements to be made pursuant to certifications issued by the supervising
architect or engineer, any deficits to be paid by the MORTGAGOR.
TWELFTH: TAXES: MORTGAGOR does hereby agree and bind itself
to pay any and all taxes and impositions, including any interest, charges and
penalties related thereto, that are assessed against the Mortgaged Property, or
MORTGAGOR's interest therein, within the latter of thirty days from the date the
pertinent invoice is issued, or the last day on which such taxes may be paid
without incurring in any penalty.
Notwithstanding this clause, MORTGAGOR shall have no obligation to pay
such taxes or impositions as long as it shall be contesting by appropriate
proceedings sufficient to avoid the foreclosure of any lien, the validity or
amount of any such taxes or impositions, after depositing in an escrow account
created for such purpose the total amount of the taxes or impositions in
controversy, unless MORTGAGEE waives the requirement of such escrow account,
which waiver shall not be unreasonably denied in consideration of the merits of
the grounds of MORTGAGOR's contest.
In the event MORTGAGOR defaults in its obligation to pay such taxes,
impositions, interest, charges, or penalties, MORTGAGEE may, in the use of its
sole discretion, pay the same. Any amounts so paid by the latter for such
purpose, shall be reimbursed by MORTGAGOR, with interest at the same rate agreed
to in the Mortgage Note, and shall not cure any defaults incurred by MORTGAGOR
because of its failure to pay the same.
THIRTEENTH: THIRD PARTY PROCEEDINGS: If any proceeding that may
adversely affect the value of the Mortgaged Property, or the mortgage
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granted pursuant to this Deed, or any tax exemptions appertaining to its
authorization or registration, except a proceeding to foreclose the mortgage
constituted pursuant thereto, is initiated in any court, and MORTGAGEE is joined
therein, or decides to intervene to defend its rights, MORTGAGOR shall pay all
reasonable attorneys' fees, costs and expenses, that the former may incur. Any
amounts disbursed by MORTGAGEE for such purpose shall be reimbursed by MORTGAGOR
with interest at the same rate agreed to in the Mortgage Note.
FOURTEENTH: REPRESENTATIONS: MORTGAGOR does hereby represent and
warrant to MORTGAGEE that each and all statements made in this Deed is true and
correct; it is a partnership duly organized and existing as stated hereinbefore;
no person other than itself has any interest, right or title to the Mortgaged
Property, except for the rights of the first mortgagees; it has the necessary
capacity and authority to subscribe, issue and deliver, in pledge or otherwise,
the Mortgage Note, to grant the mortgage which is the object of this Deed, and
to execute this Deed; the interest under the Mortgage Note is not usurious.
FIFTEENTH: NOTICES: MORTGAGOR shall give immediate notice to MORTGAGEE
of any proposed proceedings or any proceedings that may have been or may be
initiated for the condemnation of the Mortgaged Property or any part thereof; of
any fire, damage or other casualty that may have affected the same; of any
sales, conveyances, alienations, liens, mortgages or encumbrances that may
affect the same; of any proceedings where the title to the Mortgaged Properties,
or the title or the validity, extension or rank of the mortgage constituted
pursuant to this Deed is being controverted; of the payment of any taxes and
insurance premiums; of the issuance or cancellation of any insurance policies
required by or pursuant to this Deed; of any proceedings initiated by the owners
or holders of any of the mortgage notes mentioned in paragraph Third hereunder
with respect to the same or any obligations secured thereby; and of any
proceedings that may substantially affect its properties, business or
activities.
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Any notice, demand or request that is required, necessary, convenient
or proper pursuant to the terms of this Deed shall be in writing, and shall be
made personally or by mail.
SIXTEENTH: VALUATION: In compliance with the Mortgage Law, the
Mortgaged Property is valued in the sum of Six Million Dollars ($6,000,000),
which shall be the minimum bidding amount for the first public sale in the event
of foreclosure.
SEVENTEENTH: PLEDGE:
A. MORTGAGOR states and acknowledges that it has agreed and bound
itself to deliver in pledge the Mortgage Note to MORTGAGEE, to secure certain
obligations under a Credit Facility Agreement subscribed by MORTGAGEE, as
lender, and WKA EL CON ASSOCIATES and KUMAGAI CARIBBEAN, INC., in connection
with the project known as "El Conquistador Resort and Country Club".
B. MORTGAGOR agrees and covenants that in the event the Mortgage Note
is pledged or otherwise assigned as collateral security for any obligations, the
pledgee, pledge holder or assignee of the same shall have all those rights,
remedies, powers and privileges provided herein or by law to the owner or holder
of a mortgage note, or to a mortgagee, to the same extent and with the same
force and effect as if he were the owner, holder or bearer thereof, to the
fullest extent allowed by law.
C. MORTGAGOR further acknowledges, agrees and covenants that the
mortgage granted hereby shall subsist as long as MORTGAGEE or any other person
holds the Mortgage Note in pledge; it may not cancel the same pursuant to
Article 145 of the Mortgage and Registry of Property Act, as it may be amended,
unless it presents the Mortgage Note to evidence that it has been discharged
from any such pledges; and shall execute, deliver and file in the Registry of
Property, at its own cost and expense, subject to any exemptions from the
notarial tax and the registration tax that may be available, any instruments
that
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may be necessary or convenient to continue the effectiveness and enforceability
of such mortgage until such discharge.
EIGHTEENTH: ADDITIONAL SECURITIES: MORTGAGEE, without notice to or
consent of MORTGAGOR, may take from any other person or persons additional
securities for the Mortgage Note, or for the obligations secured by a pledge
thereof, without impairing by so doing, the mortgage and rights it has under the
Mortgage Note or this Deed.
Neither this Deed nor the acceptance of any additional securities shall
prevent MORTGAGEE from resorting first against the Mortgaged Property, pursuant
to this Deed, and thereafter against such additional security, or vice versa,
without affecting the rights to proceed against the other in either case.
NINETEENTH: RECEIVERSHIP: MORTGAGOR does hereby acknowledge, stipulate
and agree that in the event mortgage foreclosure proceedings, regardless of its
nature, are initiated with respect to the mortgage constituted hereby, MORTGAGEE
shall be entitled, as a matter of right, regardless of MORTGAGOR's solvency, to
the appointment of a receiver, without such holders or receiver having to post a
bond, for the purpose of preserving the Mortgaged Property and preventing any
waste, all expenses incurred in connection thereto, or in the protection or
preservation of the Mortgaged Property, to be paid by MORTGAGOR.
TWENTIETH: MORTGAGEE'S ACCEPTANCE: MORTGAGEE does hereby accept the
mortgage constituted herein by MORTGAGOR.
TWENTY FIRST: MISCELLANEOUS:
A. To the fullest extent it may lawfully do so, MORTGAGOR does hereby
waive any moratorium and/or redemption rights it has or may hereafter have, and
agrees and covenants not to plead, demand, claim, or in any manner take
advantage of any such rights.
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B. Whenever used in this Deed, the term "MORTGAGEE" includes the
Government Development Bank for Puerto Rico, the present or future holders of
the Mortgage Note.
C. The clauses and covenants included in this Deed shall bind and inure
to the benefit of MORTGAGOR, its successors and assigns, and all subsequent
owners of the Mortgaged Property, and shall bind and inure to the benefit of
MORTGAGEE, its successors and assigns and the present or future holders of the
Mortgage Note.
D. No failure or delay by MORTGAGEE, its successors and assigns, to
assert in any or more instances any of their rights, remedies, powers and
privileges under this Deed shall be or be interpreted to be as a waiver thereof
or as a bar to assert the same at a latter time.
E. The Mortgage Note and this Deed complement each other.
F. The titles of the paragraphs of this Deed have been given for
convenience only and shall not be attributed any effect in its interpretation.
G. If any or more of the clauses of this Deed is declared to be void,
such declaration shall not affect the mortgage constituted pursuant to the same,
nor the other clauses contained herein.
TWENTY SECOND: COSTS AND EXPENSES: The Government Development Bank for
Puerto Rico states that the transactions which are the object of this Deed are
transactions in the course of its operations and activities and, as such, as
well as any deeds of clarification, release or cancellation appertaining
thereto, are exempt from the notarial and the registration tax pursuant to
Article 5 of Law Number Seventeen of the Twenty third of September, Nineteen
hundred forty eight, as amended; and that, thus, the original of this Deed, its
first certified copy and its registration in the Registry of Property, are
exempt from any internal revenue stamps and vouchers appertaining to its
authorization and registration. Notwithstanding the foregoing, the appearing
parties clarify, agree and covenant that in the event the Courts of the
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Commonwealth of Puerto Rico finally decree that any such internal revenue stamps
or vouchers are payable to the Commonwealth of Puerto Rico, the same shall be
paid by MORTGAGOR.
ACCEPTANCE
The appearing parties expressly acknowledge that the attesting Notary,
at their request, has relied on a title report rendered by a company engaged in
such business and has advised them of the adverse consequences of any errors
therein; that the attesting Notary has advised them that the registration of
this Deed is dependent upon the registration of various instruments pending to
be considered by the Honorable Registrar of the Property, and of the adverse
consequences of the non-registration of any such instruments, and that he has
not had the opportunity to study and analyze such other instruments, and that
they have expressly instructed him not to do so, and released him from his
obligation to do so; that the attesting Notary has advised them that he has
observed certain irregularities in the description of the parcel of land which
is the object of the title report and of this Deed that lead him to believe that
there may be faults preventing the registration of such other instruments, and
that they have expressly instructed him to proceed notwithstanding such
observations; that the attesting Notary has advised them that he has not had the
opportunity to fully study and analyze the documents evidencing the power and
authority of the general partners and of the partnership to execute this Deed,
and of the adverse consequences if any of them is insufficient, and they have
expressly instructed him not to do so, and released him from his obligation to
do so; and in general, that they have instructed the attesting Notary to proceed
with the authorization of this Deed notwithstanding all such advices and others
related thereto.
The appearing persons do hereby accept, consent to, ratify and confirm
this Deed as drafted because it has been drawn in accordance with their
instructions and the terms and conditions agreed by them, and acknowledge that
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they duly understand the English language and the Spanish words, phrases,
sentences or paragraphs used in the same.
I, the Notary, do hereby certify and give faith that I have advised the
appearing persons of the legal effects of this Deed; that I advised them that
this Deed must be recorded in the Registry of Property in order to actually
create the mortgage, and that the preferred legal mortgage in favor of the
Commonwealth of Puerto Rico is reserved; and that I advised them of their right
to have attesting witnesses present in the execution of this Deed, which right
each of them expressly waived.
I, the Notary, do hereby further certify and give faith that each of
the appearing persons has personally read, and thereupon executes, this Deed by
initialling each, and signing the last, page of its original before me, the
Notary; of all of which, under my signature and seal, flourishing and marking
the same according to law, I, the undersigned Notary, ATTEST.
I, the attesting Notary, do hereby certify and give faith that:
The original appears:
SIGNED:
Hugh A. Andrews
Toru Fujita
Hiram Melendez Carrucini
SIGNED, FLOURISHED, SEALED AND MARKED:
Eugenio Otero Silva
The initials of each of the signatories and the Notary's seal and
flourish appear on each of the pages of its original.
The notarial stamp appears cancelled on its original.
I, the attesting Notary, do hereby further certify and give faith that
the foregoing, is a faithful, true and correct copy of its original, which forms
part of my protocol of public instruments for the current year, and has
twenty-one pages.
IN WITNESS WHEREOF, after noting its issuance on its original, I issue
this FIRST CERTIFIED COPY of the preceding Deed, at the request of Government
Development Bank for Puerto Rico.
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In the place and on the date of its execution.
Of all of which, under my signature and seal, flourishing and marking
the same according to law, I, the undersigned Notary, ATTEST.
EUGENIO OTERO SILVA
Notary Public
Suite 1900, Popular Center
San Juan, P R 00918-1052
Tel: (809) 753-7777
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PARTNERSHIP LOAN AGREEMENT
Agreement made as of this 5th day of May, 1992 by and among KUMAGAI
CARIBBEAN, INC. ("KGC"), a Delaware corporation, and WKA El Con Associates
("WKA"), a New York partnership (KGC and WKA are referred to herein as the
"Lenders"), and EL CONQUISTADOR PARTNERSHIP, L.P. (the "Partnership") a Delaware
limited partnership.
W I T N E S S E T H:
WHEREAS, the Lenders are the sole partners of the Partnership, and each is
a general and limited partner of the Partnership; and
WHEREAS, pursuant to the terms of that certain Letter of Credit and
Reimbursement Agreement dated February 7, 1991, as amended on the date hereof
(the "LC Agreement"), the Partnership is required to provide $24 million of
additional funds to cover certain cost overruns in the Budget (as defined in the
LC Agreement) and in satisfaction of the loan balancing provisions under
Paragraph 9(k) of the Reimbursement Agreement; and
WHEREAS, the Lenders intend to provide such $24 million to the Partnership
from $16 million of their own funds ($8 million from KGC and $8 million from
WKA) and from the proceeds of a loan obtained by the Lenders from the Government
Development Bank for Puerto Rico (the "GDB") pursuant to the terms of a facility
credit agreement of even date herewith (the "Facility Agreement") among the
Lenders and the GDB (capitalized terms used herein and not otherwise defined
shall have the same meaning ascribed to such terms in the Facility Agreement");
and
WHEREAS, the Lenders are making those funds available to the Partnership
through (1) additional capital contributions to the Partnership of $8 million
each under the terms of the First
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Amendment (the "First Amendment") to the Partnership Agreement and (ii) a loan
to the Partnership of $8 million, substantially on the terms and conditions of
the loan from the GDB to the Lenders under the Facility Agreement; and
WHEREAS, the parties hereto wish to set forth the terms and conditions
pursuant to which the Lenders will loan such $8 million to the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Upon the terms and subject to the conditions set forth herein, the
Lenders irrevocably commit to loan to the Partnership in equal amounts, up to an
aggregate of $8,000,000 (the "Partners Loan"). The Lenders have heretofore
advanced to the Partnership $7,099,701.70 for the payment of Project Costs which
amount represents the "Initial Disbursement" under the LC Agreement.
Concurrently herewith the Lenders are depositing $900,298.30 representing the
balance of such loan commitment amount with the Bank. As and to the extent the
Bank disburses such balance to the Partnership in accordance with the LC
Agreement, such disbursements shall be deemed advances under the Partners Loan.
2. Outstanding principal on the Partners Loan, together with accrued
interest thereon, shall be due and payable on the same terms and conditions and
same times as the Partners are required to pay principal and interest on the
Facility under the Facility Agreement, all of which terms are deemed
incorporated herein by reference. In addition, the Partnership shall be
responsible for and shall reimburse Lenders for all costs and expenses incurred
by Lenders in obtaining the Facility, including, without limitation, the
[$80,000] commitment fee (the "Commitment Fee") paid by the Lenders to GDB in
connection with the Facility and the
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expenses of counsel and other consultants incurred in connection therewith. Any
and all other costs incurred by the Lenders in connection with the Facility
shall be paid by the Partnership.
3. The Partnership shall be required to make deposits into the GDB
Facility Escrow by and on behalf of the Lenders in the amounts as and to the
extent provided in Paragraph 3 of the Facility Agreement, subject to the
availability of funds permitted to be used for such purpose under the LC
Agreement. Amounts deposited by the Partnership in the GDB Facility Escrow shall
not be deemed payments in respect of the Partners Loan unless and until such
amounts are actually applied in reduction of the Lenders' obligations under the
Facility and the Partnership hereby assigns and pledges to the Lenders all of
the Partnership's right, title and interest in such funds as collateral security
for the Partnership's obligations under the Partners Loan and this agreement.
4. The Partners Loan may be prepaid in whole or in part at any time
without premium or penalty but with interest on the amount prepaid. Anything
herein to the contrary notwithstanding the Partnership shall not pay or be
required to pay any principal with respect to the Partners Loan except deposits
into the GDB Facility Escrow and proceeds from the sale of Condominium Parcels
which are not Project revenues for purposes of the Bank Loan Documents. The
foregoing covenants and restrictions are for the benefit of the Bank.
5. The Partnership's obligations to repay the Lenders shall be evidenced
by a promissory note (the "Partnership Note") executed by the Partnership in the
form of Exhibit A annexed hereto and shall be assigned by the Lenders to the GDB
pursuant to the terms of the GDB Facility Documents and shall be subordinate to
the Facility and the other Obligations to the GDB as provided in the Facility
Agreement. The Lenders are hereby authorized to enter on
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the Schedule annexed to the Note any and all advances under the Partners Loan,
all costs and expenses required to be paid by the Partnership pursuant to
paragraph 2 above, and all payments made by the Partnership in respect thereof.
6. No change, modification, amendment, addition or termination of this
Agreement or any part thereof shall be valid unless in writing and signed by or
on behalf of the party to be charged therewith.
7. This Agreement may be executed in one or more counterparts, and shall
become effective when one or more counterparts has been signed by each of the
parties.
8. Any and all notices or other communications or deliveries required or
permitted to be given pursuant to any of the provisions of this Agreement shall
be deemed sufficiently given or furnished for all purposes if in writing and
delivered personally to such party; transmitted by confirmed fax; sent by
certified mail, in a sealed envelope with postage prepaid; or sent by
responsible overnight delivery service addressed in each case to such party at
its address set forth on Exhibit B annexed hereto or at such other address as
such party shall have designated by written notice as provided in this
paragraph; and shall be effective when personally delivered or transmitted, five
(5) business days after mailing or the next business day after delivery to a
responsible overnight delivery service.
9. No waiver of the provisions hereof shall be effective unless in writing
and signed by the party to be charged with such waiver. No waiver shall be
deemed a continuing waiver or waiver in respect of any subsequent breach of
default, either of the same or of a similar or different nature, unless
expressly so stated in writing.
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10. Should any clause, section or part of this Agreement be held or
declared to be void or illegal for any reason, all other clauses, sections or
parts of this Agreement which can be affected without such illegal clause,
section or part shall nevertheless continue in full force and effect.
11. This Agreement shall be governed, interpreted and construed in
accordance with the laws of the Commonwealth of Puerto Rico.
12. This Agreement and the various rights and obligations arising
hereunder shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.
13. The obligations of the Partnership hereunder shall be nonrecourse to
the general partners of the Partnership except to the extent of the
Partnership's assets. The Partnership's obligations to KGC and WKA under this
Agreement or the Partnership Note shall be equal and all payments made by the
Partnership in respect of the Partnership Note shall be shared equally by WKA
and KGC except that if payments are made in respect of the Facility by or on
behalf of one of the Lenders and not the other, such Lender shall be entitled to
apply amounts paid under the Partnership Note or this Agreement in the same
proportion. Neither Lender shall have any claim against the other in respect of
this Agreement or the Partnership Note except to the extent that such Lender has
received more than its proportionate share of payments from the Partnership in
respect of the Partnership Note or this Agreement or paid more than its
proportionate share under the Facility Documents.
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IN WITNESS WHEREOF, this Agreement has been made and executed as of the
date and year first above written.
WKA EL CON ASSOCIATES:
By: Signed
--------------------------------
Hugh A. Andrews
Authorized Signatory
KUMAGAI CARIBBEAN, INC.
By: Signed
--------------------------------
Shunsuke Nakane,
President
EL CONQUISTADOR PARTNERSHIP L.P.
By: Signed
--------------------------------
Shunsuke Nakane,
Authorized Signatory
By: Signed
--------------------------------
Hugh A. Andrews
Authorized Signatory
<PAGE>
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Exhibit A
PROMISSORY NOTE
San Juan, Puerto Rico
May 5, 1992
On May 5, 2002 for value received, the undersigned (the "Borrower")
promises to pay to Kumagai Caribbean, Inc. ("KGC"), a Texas Corporation, and WKA
El Con Associates ("WKA"), a New York Partnership (the "Lenders"), the aggregate
sum of EIGHT MILLION DOLLARS ($8,000,000), or such lesser amount from time to
time outstanding of the aggregate unpaid principal amount of all advances made
by Lenders to the Borrower from time to time pursuant to the terms set forth in
the Partnership Loan Agreement of even date herewith (the "Loan Agreement")
pursuant to which this Note has been issued. Capitalized terms used in this Note
and not otherwise defined shall have the same meaning ascribed to such terms in
the Loan Agreement.
Each advance under this Note shall bear interest from the respective date
of each such advance to the date of its repayment at the Applicable Rate. Any
change in the Applicable Rate resulting from a change in LIBOR shall become
effective on the next Interest Adjustment Date following the effective date of
any such change in LIBOR. Except as otherwise provided herein, such interest
accrued during any Quarter shall be payable on the first day of the following
Quarter and shall be computed on the Outstanding Principal Amount on the basis
of a year of three hundred sixty (360) days and for the number of actual days
elapsed; provided, however, that, during the first sixty (60) months following
the date hereof, payment of accrued interest shall be deferred, and all such
amounts "Capitalized Interest") of deferred interest (i) shall, on the date they
otherwise would have become due and payable but for such deferral, be
capitalized and added to the Outstanding Principal Amount; and (ii) shall be
repaid in accordance with the provisions of Paragraphs 3.6, 3.7 and 3.8 of the
Facility Agreement.
Except as otherwise provided herein, the Borrower shall repay, on each
Interest Payment Date occurring on or after March 31, 2000 an amount of
principal equal to TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) (each such
payment, a "Scheduled Principal Payment"), as follows:
(i) for any Interest Payment Date prior to and including the Facility
Escrow Expiration Date, such Scheduled Principal Payment shall be deposited into
the GDB Facility Escrow; and
(ii) for any Interest Payment Date after the Facility Escrow Expiration
Date, such Scheduled Principal Payment shall be paid directly to GDB.
(a) If there are any Excess Revenues in any Fiscal Year, Borrower shall
pay an amount equal to the GDB Share of Excess Revenues on the first Interest
Payment Date to occur
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after the date that is thirty (30) days after delivery to the Bank of audited
financial statements of the Borrower demonstrating to the Bank the existence and
amount of Distributable Cash (as such term is define in the Partnership
Agreement) for such Fiscal Year, as follows:
(i) an amount equal to the GDB Share of Excess Revenues shall, to the
extent of any Capitalized Interest, be paid on behalf of the Lenders directly to
GDB; and
(ii) the amount of any remaining GDB Share of Excess Revenues after
payment of the amount provided for in subparagraph (a)(i) shall, (A) subject to
the provisions of Paragraph (b) below, on any date prior to an including the
Facility Escrow Expiration Date, be deposited on behalf of the Lenders into the
GDB Facility Escrow and (B) on any date after the Facility Escrow Expiration
Date, be paid on behalf of the Lenders directly to GDB until payment in full of
amounts due GDB under the Facility and then to the Lenders until payment in full
of this Note.
(b) On any Interest Payment Date prior to and including the Facility
Escrow Expiration Date, Borrower shall not be required to make the deposit
required under subparagraph (a)(ii)(A) above to the extent that, on such date,
such deposit would cause the amount in the GDB Facility Escrow to exceed the
Facility Escrow Cap as of such date.
(c) Upon any refinancing of the Borrower's loan under the Bank Loan
Documents, if any Excess Refinancing Proceeds shall remain after repayment of
the Existing GDB Loan and payment to the Bank of any amounts owed to it,
Borrower shall pay the obligations under the Partnership Loan Agreement in whole
or in part from and to the extent of such remaining Excess Refinancing Proceeds
which amount shall be applied immediately to the Lenders' obligations under the
Facility.
Amounts in the GDB Facility Escrow shall not be deemed payments under this
Note unless and until the same shall have been paid as follows:
(a) if, on any Interest Payment Date, the Borrower has paid all interest
and other fees due under the Bank Loan Documents on a current basis through and
including the 15th day prior to such Interest Payment Date, an amount shall be
paid to GDB from the GDB Escrow Account on behalf of the Lenders, on the last
day of such calendar month, which is equal to, if any, the sum of (i) accrued
but unpaid interest and (ii) Capitalized Interest; and
(b) any amounts remaining in the GDB Facility Escrow Account on the
Facility Escrow Expiration Date shall be paid directly to GDB on such date to
the extent of Lenders then outstanding obligations to the GDB under the GDB
Facility Documents or in the event that the Facility Escrow Expiration Date
occurs as to one Lender and not the other, as a result of the application of
clause (iv) of the definition thereof, the amounts to be paid to GDB shall not
exceed the amount of such Lender's remaining obligations and shall be deemed to
have been applied toward the Partnership's obligations to such Lender hereunder.
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Priority of Application of Payments to GDB All amounts paid by the
Partnership to the GDB on behalf of the Lenders in accordance with the above or
directly to the Lenders after the Facility has been paid in full shall be
applied first to accrued but unpaid interest, second to Capitalized Interest and
third to any remaining Outstanding Principal Amount.
Anything herein to the contrary notwithstanding, if the rate of interest
required to be paid hereunder exceeds the rate lawfully chargeable, the rate of
interest to be paid shall be automatically reduced to the maximum rate lawfully
chargeable so that no amounts in excess thereof shall be charged, and, in the
event it should be determined that any excess over such highest lawful rate has
been charged or received, the Lenders shall promptly refund such excess to the
Partnership; provided, however, that, if lawful, any such excess shall be paid
by the Borrower on behalf of the Lender as additional interest (accruing at a
rate equal to the maximum legal rate minus the rate provided for hereunder)
during any subsequent period when regular interest is accruing hereunder at less
than the maximum legal rate.
The holder hereof is hereby authorized to enter on the Schedule annexed
hereto the amount of the proceeds from the Partners Loan advanced to the
Borrower, all costs and expenses incurred by Lenders in connection with the
Facility required to be paid by the Borrower pursuant to paragraph 2 of the
Partnership Loan Agreement, and all payments made by the Borrower in respect
thereof, without further authorization on the part of the Borrower or any
endorser or guarantor of this Note, but the holder's failure to make such entry
shall not limit or affect the obligations of the Borrower or any endorser or
guarantor of this Note.
If this Note is not paid in full when due, the undersigned Borrower hereby
agrees to pay all costs and expenses of collection including reasonable
attorneys' fees and thereafter the unpaid balance hereunder shall bear interest
at LIBOR plus 6%.
This Note shall become immediately due and payable at the option of the
Lenders, without notice or demand, in the event that the Borrower is the subject
of a voluntary or involuntary application for the appointment of a receiver or a
petition filed under the Federal or local Bankruptcy Laws of the borrower fails
to make a payment when due and such failure shall continue for a period of ten
(10) days or the GDB shall accelerate the Facility.
This Note may be prepaid in whole or in part at any time and from time to
time prior to the maturity hereof without premium or penalty, but with accrued
interest on the principal amount prepaid to the date of prepayment. Any payment
under this Note is subject to the restrictions under the Facility Agreement and
the Bank Loan Documents applicable thereto. For purposes of the Bank Loan
Documents, this Note shall be treated as if it were the Facility or the "Note"
under the Facility Agreement. Anything in this Note to the contrary
notwithstanding, no payments of principal on this Note shall be made by the
Borrower except deposits into the GDB Facility Escrow in accordance with
Paragraph 3.7 of the Facility Agreement and any proceeds from the sale or
development of the Condominium Parcels which are not part of the Project
revenues for purposes of the Bank Loan Documents. The foregoing covenants and
restrictions are for the benefit of the Bank.
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The undersigned Borrower and all endorsers hereof, jointly and severally
waive presentment, demand for payment, notice of dishonor, notice of protest,
and all other notices or demands in connection herewith and assent to any
extension or postponement of the time or payment or other indulgence or release
of any party, whether by operation of law or otherwise.
No delay by the holder of this Note in exercising any power or right
hereunder shall operate as a waiver of any power or right, nor shall any single
or partial exercise of any power or right preclude other or further exercise
thereof, or the exercise of any other power or right hereunder or otherwise; and
no waiver whatever or modification of the terms hereof shall be valid unless set
forth in writing and signed by the holder of this Note. No waiver shall be
deemed a continuing waiver or waiver of any subsequent breach or default,
whether of the same or similar or different nature, unless expressly so stated
in writing.
This Note shall be assigned and pledged to the GDB pursuant to the
Proceeds Pledge Agreement.
This Note shall be governed by and construed in accordance with the
substantive law of the Commonwealth of Puerto Rico.
The Partnership's obligation under this Note are subject to the terms of
the Loan Agreement and are subject and subordinate to the Partnership's
obligations to GDB under the Loan Agreement, the Facility Agreement and the Bank
Loan Documents.
EL CONQUISTADOR PARTNERSHIP L.P.
By: _________________________
Shunsuke Nakane,
Authorized Signatory
By: _________________________
Hugh A. Andrews
Authorized Signatory
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PARTNERS LOAN AND PAYMENTS
Schedule B
AMOUNT OF
LOANS DEPOSIT PERSON
ADVANCED TO COSTS AND IN MAKING
DATE BORROWER EXPENSES ESCROW PAYMENTS NOTATION
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WILLIAMS HOSPITALITY MANAGEMENT CORPORATION
AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
AGREEMENT made as of this 30th day of April, 1992, by and among WMS
HOTEL CORPORATION ("WMS"), a Delaware corporation having its principal offices
at 3401 North California Avenue, Chicago, Illinois 60618; BURTON I. KOFFMAN, as
nominee (the "Koffman Nominee"), having a business address at 300 Plaza Drive,
Binghamton, New York 13903; HUGH A. ANDREWS ("Andrews:) residing at c/o Condado
Plaza Hotel & Casino, 999 Ashford Avenue, San Juan, Puerto Rico 00902. (WMS, the
Koffman Nominee and Andrews are hereinafter collectively referred to as the
"Stockholders"); and WILLIAMS HOSPITALITY MANAGEMENT CORPORATION ("WHMC"), a
Delaware corporation having its principal offices at El San Juan Hotel & Casino,
187 East Isla Verde Road, Isla Verde, Puerto Rico 00913.
W I T N E S S E T H :
WHEREAS, the Stockholders and WHMC are parties to a stockholders'
agreement dated September 23, 1983, as amended August 20, 1986 (the "Original
Stockholders Agreement") among Williams Hotel Corporation, now known as WMS
Hotel Corporation, the Koffman Nominee, Andrews, Brian International
Incorporated ("Newcorp.") and Posadas de America Central, Inc., now known as
Williams Hospitality Management Corporation; and
WHEREAS, the shares of common stock, without par value, of WHMC (the
"WHMC Stock") formerly issued to Newcorp. are now owned by and issued to the
Koffman Nominee; and
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WHEREAS, immediately prior hereto WMS owns 500 shares of WHMC Stock;
the Koffman Nominee owns of record 400 shares of WHMC Stock and Andrews owns 100
shares of WHMC Stock; and
WHEREAS, Andrews owns 100 shares of Preferred Stock; and
WHEREAS, concurrently herewith WMS is purchasing 20 shares of WHMC
Stock from the Koffman Nominee and 30 shares of WHMC Stock from Andrews; and
WHEREAS, the Stockholders and WHMC desire to reflect the change in
ownership and provide for certain other changes to the Original Stockholders
Agreement; and
WHEREAS, the Stockholders and WHMC desire to amend and restated the
Original Stockholders Agreement to reflect such changes and accurately reflect
the current state of facts among the parties.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, and other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree that the Original Stockholders Agreement
shall be amended and restated to read in its entirety as follows:
1. Definitions.
1.1 The following definitions shall be used in this Agreement:
1.1.1 An "affiliate" of, or a person "affiliated"
with a specified person, is a person that directly, or indirectly, through one
or more intermediaries, controls, or is controlled by, or is under common
control with the person specified.
1.1.2 The "Condado" shall mean Posadas de Puerto Rico
Associates, Incorporated, as owner of the Condado Plaza Hotel & Casino.
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1.1.3 The "El San Juan" shall mean Posadas de San
Juan Associates as owner of the El San Juan Hotel & Casino.
1.1.4 "Original Stockholders Agreement" is defined in
the first recital paragraph of this agreement.
1.1.5 "Major Decisions" shall have the meaning set
forth in Section 2.3 hereof.
1.1.6 A "person" means an individual, corporation,
partnership or other legal entity.
1.1.7 "Preferred Stock" means the preferred stock,
without par value, of WHMC.
1.1.8 "Puerto Rico Gaming Authorities" means and
includes the Treasury of the Commonwealth of Puerto Rico and any other
governmental body or agency having authority over licensing of gambling in the
Commonwealth of Puerto Rico.
1.1.9 "WHMC Stock" means and includes the common
stock, without par value, of WHMC and all shares of stock issued in respect
thereof or in exchange therefor pursuant to any stock split or stock dividend or
distribution of capital or any recapitalization, reclassification, merger,
consolidation, combination of shares, sale of assets or split up or spin off.
2. Corporate Governance.
2.1 The full board of directors of WHMC shall consist of not
less than seven nor more than eight persons, as such number shall be determined
by WMS from time to time. Initially, as of the date hereof, the number of
directors shall be eight. So long as WMS shall
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be a holder of WHMC Stock, WMS shall have the right to designate four directors
if the total number of directors is seven and shall have the right to designate
five directors if the total number of directors is eight. So long as Andrews is
a holder of WHMC Stock and the Chief Operating Officer of WHMC and is able to
serve, he shall be a director. So long as the Koffman Nominee shall have the
right to designate the remaining two directors. If Andrews ceases to be a
director of WHMC because he resigns, ceases to be a holder of WHMC Stock, ceases
to be the Chief Operating Officer of WHMC or is unable to serve as a director of
WHMC, such vacancy shall be filled by a director designated by the Koffman
Nominee if he is then a holder of WHMC Stock and after such date, so long as the
Koffman Nominee is a holder of WHMC Stock, the Koffman Nominee shall be entitled
to designate the three members of the Board of Directors of WHMC not required to
be designated by WMS. The Koffman Nominee designees shall be either Burton I.
Koffman or Richard E. Koffman, or both of them, so long as they are able to
serve. Any other Koffman Nominee designee must be approved by WMS, such approval
not to be unreasonably withheld. The Stockholders shall vote their shares of
WHMC Stock and otherwise use their best efforts to elect the designee of the
Stockholders as provided above.
2.2 Action by the Board of Directors of WHMC shall require a
simple majority vote except that commencing April 30, 1999, or such earlier date
as Louis J. Nicastro shall cease to be Chairman of the Board of WHMC and
regularly exercise the functions of chief executive officer of WHMC (the "Super
Majority Date"), then action by the Board of Directors of WHMC with respect to
Major Decisions shall require an affirmative vote of 65% of the members of the
entire Board and, to the extent a vote of the stockholders of WHMC shall be
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required under the Delaware General Corporation Law to authorize or approve a
Major Decision, such authorization or approval shall require the affirmative
vote of 66-2/3% of the outstanding shares of WHMC Stock. Notwithstanding the
foregoing, following the date hereof, amendment, including repeal, of Article I,
Section 11, Article II, Sections 2 and 4, Article III, Section 5(a) and Article
V, Section 3 of the By-Laws of WHMC may be effected only by the affirmative vote
of the holders of 66 2/3% of the outstanding shares of WHMC Stock. The foregoing
specific Sections shall supersede and take priority over any provisions in the
By-Laws of WHMC or in the Certificate of Incorporation of WHMC which are
inconsistent with such Sections as they exist on the date hereof.
2.3 Major Decisions shall consist of any of the following
actions or transactions:
2.3.1 Amendment of the WHMC Certificate of
Incorporation or By- Laws.
2.3.2 The consolidation or merger of WHMC with any
other corporation except a wholly owned subsidiary of WHMC.
2.3.3 The sale, exchange, transfer, lease or
encumbrance of all or substantially all of the property or assets of WHMC.
2.3.4 The voluntary liquidation or dissolution of
WHMC.
2.3.5 The issuance of additional shares of WHMC
capital stock.
2.3.6 The purchase by WHMC of all or substantially
all of the assets or voting control, directly or indirectly, of another entity.
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2.3.7 The repurchase by WHMC of shares of its capital
stock including, without limitation, any decision to repurchase WHMC Stock other
than pursuant to any offer made or deemed made under Sections 4.9.1.2 and
4.9.2.1 of this Agreement.
2.3.8 The making or amendment of any employment
arrangements between WHMC and its key management employees including, without
limitation, Andrews.
2.3.9 The making or amendment of arrangements for the
compensation of WHMC directors by WHMC.
2.3.10 The incurrence by WHMC of indebtedness for
borrowed money in excess of $2,000,000 for any single item or $5,000,000 in the
aggregate (such excess being hereinafter referred to as "New Debt"). New Debt
and the foregoing $2,000,000 and $5,000,000 amounts shall not include any
indebtedness incurred by WHMC prior to the Super Majority Date, any refinancing
or such then existing indebtedness up to the principal amount outstanding on the
date of such refinancing and any indebtedness specifically approved by the Board
of Directors as New Debt.
2.3.11 The making or amendment of any financial or
other contractual arrangements with WMS Industries Inc. or any of its officers,
directors or majority owned subsidiaries.
2.3.12 The making of any loans or other financial
accommodations by WHMC to the El Conquistador Partnership L.P.
2.4 In order to effect the provisions of this Section 2,
concurrently herewith the Stockholders shall vote their shares of WHMC Stock and
otherwise use their best efforts to
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adopt the amendments to WHMC's By-Laws and Certificate of Incorporation in the
forms annexed hereto as Exhibits A and B.
2.5 WHMC shall and each of the Stockholders shall vote their
shares of WHMC Stock and otherwise use their best efforts to cause WHMC to
declare dividends on outstanding WHMC Stock in the following amounts, subject,
in each case, to the availability of sufficient cash to pay such dividends and
WHMC obtaining any necessary third party consents.
2.5.1 Concurrently herewith the Condado is paying
WHMC $2,350,000 on account of the existing intercompany account between the
Condado and WHMC. Upon the receipt of such payment, WHMC shall promptly declare
and pay a dividend on outstanding WHMC Stock for the full amount so received by
it on account of the existing intercompany indebtedness less an amount equal to
applicable tollgate taxes.
2.5.2 Commencing with the fiscal year ending June 30,
1992, at least once per year and no later than 120 days after the end of each
fiscal year of WHMC, WHMC shall declare and pay dividends on outstanding WHMC
Stock in an amount equal to (a) the amount required to be paid by WKA El Con
Associates to WHMC in respect of such fiscal year under the Loan and
Reimbursement Agreement, dated June 30, 1990, between WHMC and WKA El Con
Associates, so long as such loan remains outstanding and (b) after such loan has
been repaid, 50% of WHMC's net income in respect of such fiscal year as
reflected in its certified financial statements for such fiscal year less an
amount equal to applicable tollgate taxes.
2.5.3 In the event the existing financing for the El
San Juan is refinanced, it is anticipated that there will be sufficient amounts
available for the El San Juan
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to repay certain of the amounts it owes to WHMC. WHMC shall pay a dividend in an
amount at least equal to the lesser of $4,000,000 and the amount so repaid to
WHMC out of any refinancing proceeds from the El San Juan, either of such
amounts to be paid less an amount equal to applicable tollgate taxes.
2.5.4 WHMC shall declare and pay a dividend in the
amounts received by WHMC after the date hereof in respect of the Development Fee
paid by El Conquistador Partnership L.P. under the Development Services and
Management Agreement dated January 12, 1990 with WHMC, up to a maximum of
$1,755,000 less an amount equal to applicable tollgate taxes. Such dividends
shall be declared and paid as and when such amounts shall be received by WHMC or
as soon thereafter as practical.
2.6 The Preferred Stock has no voting rights except as
otherwise required by law. Andrews currently is the owner of 100 shares of
Preferred Stock constituting the only outstanding shares of Preferred Stock. If
for any reason required by law the Preferred Stock shall have the right to vote
in respect of any matter, Andrews shall vote his shares of Preferred Stock in
accordance with the instructions of WMS and Andrews hereby grants to WMS an
irrevocable proxy with respect to the Preferred Stock in the form annexed hereto
as Exhibit C.
3. Stockholders and Certificate Legends.
3.1 The holders of WHMC Stock and Preferred Stock and the
number of shares each has been issued, after giving effect to the sale of 50
shares of WHMC Stock to WMS are as follows:
<TABLE>
<CAPTION>
Name Number
---- -------
<S> <C>
WMS 550 Common Stock
Koffman Nominee* 380 Common Stock
</TABLE>
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<TABLE>
<S> <C>
Andrews 70 Common Stock
Andrews 100 Preferred Stock
</TABLE>
* See registered holders thereof on the signature pages of
this agreement.
3.2 So long as this Agreement shall be in effect, all
certificates representing shares of WHMC Stock and Preferred Stock now or
hereafter issued by WHMC to any of the Stockholders shall be marked with the
following legend:
"The shares of Stock evidenced by this Certificate
are and will be subject to, and cannot be transferred
except in accordance with, an agreement dated as of
April __, 1992, as amended from time to time, among
the Corporation and its stockholders (the
"Stockholders' Agreement"), a copy of which is on
file and may be obtained at the principal office of
the Corporation, which Stockholders' Agreement
provides, among other things, for restrictions on the
transfer of the shares of Stock of the Corporation."
Concurrently herewith the Stockholders are surrendering their current
certificates in order to have the foregoing legend inscribed thereon and to
delete reference to the Original Stockholders Agreement.
4. Restrictions on Transfers of Stock.
4.1 No Stockholder may sell, assign, transfer, pledge,
encumber, hypothecate, mortgage or in any manner dispose of all or any portion
of his or its WHMC Stock except as provided in this Agreement, and any such
attempted sale, assignment, transfer, pledge, encumbrance, hypothecation,
mortgage or other disposition (any or all of the foregoing being hereinafter
encompassed within the words "Dispose" or "Disposition") by a Stockholder of his
or its WHMC Stock, except as hereinafter provided, shall be null and void. For
purposes of this Section 4, Preferred Stock shall be deemed included within the
definition of WHMC Stock.
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4.2 WHMC shall issue no shares of WHMC Stock except as
otherwise provided in this Agreement.
4.3 No Disposition of WHMC Stock shall be made to any person
if (a) the Puerto Rico Gaming Authorities require such person to be qualified or
approved and such person has not been so qualified or approved prior to becoming
as stockholder or (b) such transfer would adversely affect any tax exemptions
granted to the Condado, the El San Juan or WHMC by the Commonwealth of Puerto
Rico.
4.4 In the event of any Disposition by reason of death of an
individual or merger or liquidation of a corporation, the transferee of the WHMC
Stock shall hold the WHMC Stock transferred subject to all of the obligations
and restrictions to which the transferor was subject and have all the rights of
the transferor hereunder.
4.5 WMS may Dispose of any or all of its WHMC Stock to any
affiliate of WMS (the "WMS Stockholder") notwithstanding any provision of
Article 4 of this Agreement except for Section 4.3. In addition, any WMS
Stockholder may Dispose of WHMC Stock to any other affiliate of WMS. Prior to
any Disposition pursuant to this Section 4.5, such WMS Stockholder shall become
a party to this Agreement and be bound by the terms hereof in the same manner
and to the same extent as WMS and thereafter any Disposition of all of the WHMC
Stock owned by WMS to a person other than WMS Stockholder shall include a
Disposition of all of the WMS Stock transferred to WMS Stockholders. All such
transferees shall be deemed included within the definition of Stockholder for
purposes of this Agreement, and shall have all of the rights and obligations
which WMS would have had under this Agreement as an owner of WHMC Stock.
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4.6 The beneficial owners of all of the shares of WHMC Stock
held of record by the Koffman Nominee must be either Burton I. Koffman, Richard
E. Koffman (collectively the "Koffmans") or any of their affiliates. All such
beneficial owners of WHMC Stock have agreed to be bound by the terms of this
Agreement and any such beneficial owner may Dispose of any or all of their
beneficial ownership of WHMC Stock to any affiliate of the Koffmans, any spouse
of the Koffmans, any children of the Koffmans or any trust or trusts for the
benefit of such children, notwithstanding any provision of Article 4 of this
Agreement except for Section 4.3. All of the foregoing are hereinafter referred
to as "Koffman Stockholders." Concurrently herewith the shares heretofore held
of record by the Koffman Nominee are being registered in the name of the
appropriate Koffman Stockholders as set forth on the signature pages of this
Agreement. In addition, Koffman Stockholders may Dispose of beneficial ownership
of WHMC Stock to other Koffman Stockholders. Prior to any Disposition pursuant
to this Section 4.6, such Koffman Stockholder shall agree in writing to be bound
by the terms of this Agreement in the same manner and to the same extent as the
Koffman Nominee and thereafter any Disposition of all of the WHMC Stock owned by
the Koffman Nominee to a person other than a Koffman Stockholder shall include a
Disposition of all the beneficial ownership of all of the WHMC Stock held by all
of the Koffman Stockholders. All Koffman Stockholders and their transferees
shall be deemed included within the definition of Stockholder for purposes of
this Agreement, and shall have all of the rights and obligations which the
Koffman Nominee would have had under this Agreement as owners of WHMC Stock.
4.7 Andrews may Dispose of any or all of his WHMC Stock to any
affiliate of Andrews, his spouse, any children of Andrews or any trust or trusts
for the benefit of such
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children, notwithstanding any provision of Article 4 of this Agreement except
for Section 4.3. All of the foregoing are hereinafter referred to as "Andrews
Stockholders." In addition, Andrews Stockholders may Dispose of WHMC Stock to
other Andrews Stockholders. Prior to any Disposition pursuant to this Section
4.7, such Andrews Stockholders shall become a party to this Agreement and be
bound by the terms hereof in the same manner and to the same extent as Andrews
and thereafter any Disposition of all of the WHMC Stock owned by Andrews to a
person other than an Andrews Stockholder shall include a Disposition of WHMC
Stock transferred to the Andrews Stockholders. All Andrews Stockholders and
their transferees shall be deemed included within the definition of Stockholder
for purposes of this Agreement, and shall have all of the rights and obligations
which Andrews would have had under this Agreement as an owner of WHMC Stock.
4.8 The Koffman Nominee, on behalf of the Koffman
Stockholders, and Andrew may Dispose of 20 and 30 shares respectively of WHMC
Stock to WMS concurrently herewith; the Koffman Nominee may pledge to a
financial institution up to an aggregate of 20 shares of WHMC Stock as security
for loans to them, the proceeds of which will be used to satisfy their
obligations to the El Conquistador Partnership L.P. and certain related taxes;
and (iii) WMS may agree to purchase and may purchase from such financial
institution any of the shares so pledged upon such terms as WMS shall deem
acceptable.
4.9 If any of the Stockholders including any of the Koffman
Stockholders (the "Seller") shall receive a bona fide offer from a third party
to purchase any or all of its or his WHMC Stock which such Stockholder is
willing to accept, the Seller shall give notice (the "Notice") to WHMC and the
Non-Selling Stockholders (as hereinafter defined) stating its or his
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desire to dispose of such stock (the "Offered Stock"), the number of shares to
be Disposed of, the name and address of the proposed transferee (the "Designated
Transferee"), the price to be paid for such stock and the terms of payment
thereof (the "Offered Price and Terms") and all the other terms and conditions
of such proposed Disposition and such other information as WHMC or the
Non-Selling Stockholders shall request. For purposes of this Agreement, "Non-
Selling Stockholders" shall mean the Stockholders who are then holders of WHMC
Stock and who have not given notice of its or his desire to Dispose of its or
his WHMC Stock pursuant to this Section 4.9.
4.9.1 Except as provided in Sections 4.6, 4.7 and 4.8
of this Agreement, the Disposition of WHMC Stock by the Koffman Nominee
(including the Koffman Stockholders) and Andrews, shall be restricted as
follows:
4.9.1.1 If the Seller shall be Andrews
the Koffman Nominee shall thereupon have the option, but not the obligation,
exercisable by written notice to the Seller, given within 30 days of the Notice,
to purchase all or any part of the Offered Stock at a price and on terms equal
to the Offered Price and Terms.
4.9.1.2 If the Koffman Nominee does not
elect to exercise its option to purchase all of the Offered Stock from Andrews
or if the Seller shall be either the Koffman Nominee or a Koffman Stockholder,
WHMC shall thereupon have the option, but not the obligation, exercisable by
written notice to the Seller, given within 60 days of the Notice if Andrews is
the Seller and within 30 days of the Notice if the Koffman Nominee or a Koffman
Stockholder is the Seller, to purchase all or any part of the Offered Stock at a
price and on terms equal to the Offered Price and Terms. For purposes of WHMC
determining whether to exercise
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its option, the Stockholders shall vote their shares of WHMC Stock as directed
by WMS and the directors appointed by WMS shall constitute a quorum of the board
of Directors of WHMC and a majority thereof shall be entitled to determined
whether the option shall be exercised. If WHMC elects to exercise its option,
and if WHMC shall thereupon have insufficient surplus to permit it legally to
purchase the Offered Stock at the time of purchase, the Stockholders shall cause
a special meeting of the stockholders of WHMC to be called prior to such
purchase. At any such meeting, all of the Stockholders shall vote their shares
of WHMC Stock so as to create, to the extent permitted by law, a surplus large
enough to permit WHMC to make such purchase payment without requiring any
additional capital investments by any of the Stockholders.
4.9.1.3 If WHMC does not elect to
exercise its option to purchase all of the Offered Stock, WMS shall thereupon
have the option, but not the obligation, exercisable by written notice to the
Sellers within 90 days of the Notice if Andrews is the Seller and within 60 days
of the Notice if the Koffman Nominee or a Koffman Stockholder is the Seller, to
purchase all or any part of the Offered Stock not purchased by WHMC at the
Offered Price and Terms.
4.9.1.4 If the Notice shall be duly
given, and if the Koffman Nominee, WHMC and WMS together shall fail to exercise
their options to purchase all of the Offered Stock, then the Seller shall be
free to Dispose of all or such portion of the Offered Stock not purchased by the
Koffman Nominee, WHMC or WMS to the Designated Transferee at the Offered Price
and Terms, free of any restrictions or rights under this Agreement, and only if
(a) such transferee agrees to be bound by the provisions of this Agreement, (b)
such Disposition
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and such transferee shall be approved by the Puerto Rico Gaming Authorities, (c)
such transfer does not adversely affect any tax exemptions granted to Posadas or
WHMC by the Commonwealth of Puerto Rico and (d) such disposition shall be bona
fide and shall be consummated within 150 days after the giving of the Notice if
Andrews is the Seller and within 120 days of the Notice if the Koffman Nominee
or a Koffman Stockholder is the Seller. If all of the Offered Stock shall not be
so Disposed of by the Seller during such period, the portion thereof not
Disposed of shall again become subject to the terms of this Agreement in the
same manner as if no Notice had been given.
4.9.1.5 The closing for the sale of WHMC
Stock to WHMC or any of the Stockholders pursuant to this Section 4.9.1 shall be
at a time and place selected by the purchaser and reasonably convenient to the
Seller not more than 30 days after the giving of the notice of the decision to
so purchase.
4.9.2 Except as provided in Section 4.5 of this
Agreement, the Disposition of WHMC Stock by WMS shall be restricted as follows:
4.9.2.1 If WMS is the Seller, WHMC shall
have the option, but not the obligation, exercisable by written notice to WMS,
given within 30 days of the Notice to purchase all or any part of the Offered
Stock at the Offered Price and Terms. For purposes of WHMC determining whether
to exercise its option, the Stockholders shall vote their shares of WHMC Stock
as directed by the Koffman Nominee and the directors appointed by the Koffman
Nominee shall constitute a quorum of the Board of Directors of WHMC and a
majority thereof shall be entitled to determine whether the option shall be
exercised. If WHMC elects to exercise its option, and if WHMC shall thereupon
have insufficient surplus to permit it legally
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to purchase the Offered Stock at the time of purchase, the Stockholders shall
cause a special meeting of the stockholders of WHMC to be called prior to such
purchase. At any such meeting, all of the Stockholders shall vote their shares
of WHMC Stock so as to create, to the extent permitted by law, a surplus large
enough to permit it to make such purchase without requiring any additional
capital investments by any of the Stockholders.
4.9.2.2 If WHMC does not elect to
exercise its option to purchase all of the Offered Stock, the Koffman Nominee
shall thereupon have the option, but not the obligation, exercisable by written
notice to WMS within 60 days of the giving of the Notice, to purchase all or any
part of the Offered Stock at a price and on terms equal to the Offered Price and
Terms.
4.9.2.3 If the Notice shall be duly
given, and if WHMC and the Koffman Nominee together fail to exercise their
options to purchase all of the Offered Stock, then WMS shall be free to dispose
of all or such portion of the Offered Stock not purchased by WHMC or the Koffman
Nominee to the Designated Transferee at the Offered Price and Terms but only if
(a) such transferee agrees to be bound by the provisions of this Agreement, (b)
such Disposition and such transferee shall be approved by the Puerto Rico Gaming
Authorities, (c) such transfer does not adversely affect the tax exemptions
granted to Posadas or WHMC by the Commonwealth of Puerto Rico and (d) such
Disposition shall be bona fide and shall be consummated within 120 days after
the giving of the Notice. If all of the Offered Stock shall not be Disposed of
by WMS during such period, the portion thereof not Disposed of shall again
become subject to the terms of this Agreement in the same manner as if no Notice
had been given.
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4.9.2.4 The closing for the sale of WHMC
Stock to WHMC or the Koffman Nominee pursuant to this Section 4.9.2 shall be at
a time and place selected by the purchaser and reasonably convenient to the
Seller not more than 30 days after the giving of the notice of the decision to
so purchase.
4.10 If (a) the Seller or Sellers shall beneficially own 80%
or more of the WHMC Stock, (b) the offer described in the Notice is to purchase
all of the issued and outstanding shares of WHMC Stock and (c) the Non-Selling
Stockholders of WHMC do not exercise his or its right of first refusal pursuant
to Section 4.9 of this Agreement with respect to all of the WHMC Stock owned by
the Seller or Sellers, then the Non-Selling Stockholders shall sell all of their
shares of WHMC Stock to the Designated Transferee at a price and on terms equal
to the Offered Price and Terms.
5. Representations and Warranties.
5.1 WMS represents and warrants to each of the Koffman Nominee
and Andrews that:
5.1.1 WMS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.1.2 The execution, delivery and performance by WMS
of this Agreement have been duly authorized by all necessary corporate action on
the part of WMS, and no further action or approval is required in order to
constitute this Agreement as the valid and binding obligation of WMS enforceable
in accordance with its terms.
5.1.3 This Agreement constitutes the legal, valid and
binding obligation of WMS, enforceable against WMS in accordance with its terms,
except as
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enforcement may be limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally.
5.1.4 WMS holds the WHMC Stock for its own account
and without a view to distribution other than in accordance with the provisions
of this Agreement and applicable securities laws.
5.2 The Koffman Nominee represents to WMS and Andrews
that:
5.2.1 This Agreement constitutes the legal, valid and
binding obligation of the Koffman Nominee, enforceable against the Koffman
Nominee in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors rights generally.
5.2.2 The Koffman Nominee holds the WHMC Stock for
its own account and without a view to distribution other than in accordance with
the provisions of this Agreement, its nominee agreement with the beneficial
owners of the WHMC Stock, a copy of which has previously been delivered to WHMC,
and applicable securities law.
5.3 Andrews represents to WMS and the Koffman Nominee
that:
5.3.1 This Agreement constitutes the legal, valid and
binding obligation of Andrews, enforceable against Andrews in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency and
other similar law affecting the enforcement of creditors rights generally.
5.3.2 Andrews holds the WHMC Stock for his own
account and without a view to distribution other than in accordance with the
provisions of this Agreement and applicable securities laws.
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6. Puerto Rico Gaming Authority Approvals; Tax Exemptions.
Each party hereto shall use its or his best efforts to obtain
and thereafter maintain all consents, approvals and authorizations which must be
obtained and maintained by such party in order to consummate the transactions
contemplated hereby, including all consents, approvals and authorization from
the Puerto Rico Gaming Authorities and the tax exemptions granted by the
Commonwealth of Puerto Rico to WHMC, the Condado and the El San Juan or any
other hotel owned by the Stockholders or their affiliates which is managed by
WHMC; provided that nothing contained in this Article 6 shall require any party
to consent to modify any provisions of this Agreement or any other document
referred to herein in any manner materially adverse to its or his best
interests.
7. Miscellaneous.
7.1 All of the representations, warranties, covenants and
agreements made by the parties to this Agreement shall survive for the full
period of any applicable statute of limitations.
7.2 This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes the Original
Stockholders Agreement. No change, modification, amendment, addition or
termination of this Agreement or any part thereof shall be valid unless in
writing and signed by or on behalf of the party to be charged therewith.
7.3 This Agreement may be executed in one or more
counterparts, and shall become effective when one or more counterparts has been
signed by each of the parties.
7.4 Any and all notices or other communications or deliveries
required or permitted to be given pursuant to any of the provisions of this
Agreement shall be deemed to
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have been duly given for all purposes if sent by certified or registered mail,
return receipt requested and postage prepaid, hand delivered or sent by
telegraph, telex or telephone facsimile as follows:
If to WMS Hotel Corporation, at:
c/o WMS Industries Inc.
3401 North California Avenue
Chicago, Illinois 60618
Fax: (312) 539-2099
Attention: President
with a copy to:
Whitman & Ransom
200 Park Avenue
New York, New York 10166
Fax: (212) 351-3131
Attention: Jeffrey N. Siegel, Esq.
If to the Koffman Nominee, at:
300 Plaza Drive
Binghamton, NY 13903
Fax: (607) 797-7103
Attention: Mr. Burton I. Koffman
with a copy to:
Kavinoky & Cook
120 Delaware Avenue - Suite 600
Buffalo, New York 14202
Fax: (716) 845-6474
Attention: Arnold B. Gardner, Esq.
If to Andrews, at:
Condado Plaza Hotel & Casino
999 Ashford Avenue
San Juan, Puerto Rico 00902
Fax: (809) 791-7500
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<PAGE>
with a copy to:
____________________________
____________________________
____________________________
or at such other address as any party many specify by notice given to the other
parties in accordance with this Section 7.4. The date of giving of any such
notice shall be the date of hand delivery, the date following the posting of the
mail or delivery to the telegraph company or when sent by telex or telephone
facsimile.
7.5 No waiver of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
7.6 Should any clause, section or part of this Agreement be
held or declared to be void or illegal for any reason, all other clauses,
sections or parts of this Agreement which can be effected without such illegal
clause, section or part shall nevertheless continue in full force and effect.
7.7 This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York.
7.8 Each of WMS, the Koffman Nominee and Andrews consents to
the jurisdiction of the Courts of the State of New York and the United States
Court for the Southern District of New York with respect to any matter arising
with respect to this Agreement, shall subject himself or itself to the
jurisdiction of such courts and agrees that service of process upon
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him or it may be made in any manner permitted by the laws of the State of New
York. Without limiting the generality of the foregoing, service of process will
be deemed sufficient if sent by registered or certified mail to WMS, the Koffman
Nominee and Andrews at the address for such persons, person or entity set forth
in Section 7.4 of this Agreement. In addition, the Koffman Nominee and Andrews
agree that the venue for any state court action shall be New York County.
7.9 This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon the parties
hereto and their respective successors and assigns. This Agreement shall not be
assignable by any of the parties hereto any attempt to assign this Agreement
shall be void and of no effect.
7.10 The headings or captions under sections of this Agreement
are for convenience and reference only and do not in any way modify, interpret
or construe the intent of the parties or effect any of the provisions of this
Agreement.
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IN WITNESS WHEREOF, this Agreement has been made and executed
as of the date and year first above written.
WMS HOTEL CORPORATION
By: /s/
_____________________________________
Louis J. Nicastro, Chairman
Burton I. Koffman, as Nominee
By: /s/
_____________________________________
Burton I. Koffman
By: /s/
_____________________________________
Hugh A. Andrews
EMPIRE HOTEL CORP.
By: /s/
_____________________________________
WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION
By: /s/
_____________________________________
Louis J. Nicastro, Chairman
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<PAGE>
<TABLE>
<CAPTION>
Consented to By
Koffman Stockholders: No. of Shares Certificate No.
------------- ---------------
<S> <C> <C>
PUBLIC LOAN COMPANY, INC.
By: /s/ 27.5 6
______________________________________________
Burton I. Koffman
/s/ 10.0 6
______________________________________________
Ruthanne Koffman
/s/ 10.0 6
______________________________________________
Milton A. Koffman
EMPIRE HOTEL CORP.
By: /s/ 332.5 3
______________________________________________
Burton I. Koffman, President
</TABLE>
24
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POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED
STOCKHOLDERS' AGREEMENT
AGREEMENT made this 23rd day of September, 1983, by and among
WILLIAMS HOTEL CORPORATION ("Williams"), a Delaware corporation having its
principal offices at 767 Fifth Avenue, New York, New York 10153, BURTON I.
KOFFMAN, as nominee (the "Koffman Nominee"), having a business address at 300
Plaza Drive, Binghamton, New York 13903; HUGH A. ANDREWS ("Andrews") residing at
the Condado Holiday Inn, 999 Ashford Avenue, San Juan, Puerto Rico 00909.
(Williams, the Koffman Nominee and Andrews are hereinafter collectively referred
to as the "Stockholders"); and POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED
("Posadas"), a Delaware corporation having its principal offices at 999 Ashford
Avenue, San Juan, Puerto Rico 00909.
W I T N E S S E T H:
WHEREAS, Williams owns 800 shares of Common Stock, without par
value, of Posadas (the "Common Stock"), the Koffman Nominee owns 150 shares of
Common Stock and Andrews owns 50 shares of Common Stock;
WHEREAS, Williams owns 600 shares of Class A Preferred Stock,
without par value, of Posadas (the "Class A Preferred Stock");
WHEREAS, Williams owns 200 shares of Class B Series I Preferred
Stock, without par value, of Posadas and the Koffman Nominee owns 200 shares of
Class B Series II
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<PAGE>
Preferred Stock, without par value, of Posadas (the Class B Series I and II
Preferred Stock are hereinafter collectively referred to as the "Class B
Preferred Stock");
WHEREAS, Posadas has acquired all of the assets of Posadas de Puerto
Rico Associates, a Texas general partnership ("Associates"), pursuant to a
purchase agreement (the "Purchase Agreement"), dated the date hereof among
Posadas, Associates, Burton I. Koffman and Richard E. Koffman and Cenkoff Corp.,
a Delaware corporation;
WHEREAS, the assets acquired by Posadas pursuant to the Purchase
Agreement consist primarily of the Condado Holiday Inn and Casino (the "Hotel")
located in the Condado Beach area of San Juan, Puerto Rico;
WHEREAS, on the date hereof, Williams has loaned to Posadas
$3,000,000 evidenced by a promissory note dated the date hereof;
WHEREAS, on the date hereof, Williams has loaned Posadas an
additional $350,000 evidenced by a promissory note dated the date hereof and the
Koffman Nominee has loaned Posadas $350,000 evidenced by a promissory note dated
the date hereof on the same terms as such Williams loan;
WHEREAS, Williams, the Koffman Nominee and Andrews are certain of
the stockholders of Posadas de America Central, Inc., a Delaware corporation
("PAC"), and on the date hereof PAC entered into an Operating and Management
Agreement with Posadas for the supervision, direction and control of the
management and operation of the Hotel; and
WHEREAS, the parties hereto desire to promote the continuity and
stability of Posadas and the mutual interests of the parties hereto by providing
for the rights, obligations and restrictions set forth herein;
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NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, the parties hereto agree as follows:
1. Definitions.
1.1 The following definitions shall be used in this Agreement:
1.1.1 An "affiliate" of, or a person "affiliated" with,
a specified person, is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified.
1.1.2 A "person" shall mean an individual, corporation,
partnership or other legal entity.
1.1.3 The "Hotel" means the property commonly known as
the Condado Holiday Inn and casino in the Condado Beach area of San Juan, Puerto
Rico.
1.1.4 "Posadas Stock" means and includes the Common
stock, the Class A Preferred Stock and the Class B Preferred Stock.
1.1.5 "Puerto Rico Gaming Authorities" means and
includes the Treasury of the Commonwealth of Puerto Rico and any other
governmental body or agency having authority over licensing of gaming in the
Commonwealth of Puerto Rico.
2. Corporate Governance.
The full board of directors of Posadas shall consist of five
persons, or such other number as shall be fixed pursuant to Article II, Section
2 of the By-Laws of Posadas, one of whom shall be a director designated by the
Koffman Nominee as long as the Koffman Nominee is a holder of Posadas Stock, and
one of whom shall be Andrews so long as he is a holder of Posadas Stock and the
Chief Operating Officer of the Hotel and is able to serve. If
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<PAGE>
Andrews resigns as a director, is not a holder of Posadas Stock, is not the
Chief Operating Officer of the Hotel or is unable to serve as a director of
Posadas, such vacancy shall be filled by the Koffman Nominee and after such
date, so long as the Koffman Nominee is a holder of Posadas Stock, the Koffman
Nominee shall be entitled to designate two directors to the Board of Directors
of Posadas. The Koffman Nominee designees shall be either Burton I. Koffman or
Richard E. Koffman, or both of them, so long as they are able to serve. Any
other Koffman Nominee designee must be approved by Williams, such approval not
to be unreasonably withheld.
3. Certificate Legends.
So long as this Agreement shall be in effect, all certificates
representing shares of Common Stock, Class A Preferred Stock or Class B
preferred Stock now or hereafter issued by Posadas shall be marked with the
following legend:
"The shares of Stock evidenced by this Certificate are and will be
subject to, and cannot be transferred except in accordance with, an
agreement dated September 23, 1983 among the Corporation and its
stockholders (the "Stockholders' Agreement"), a copy of which is on
file and may be obtained at the principal office of the Corporation,
which Stockholders' Agreement provides, among other things, for
restrictions on the transfer of shares of Stock of the Corporation."
4. Restrictions on Transfers of Stock.
4.1 No Stockholder may sell, assign, transfer, pledge,
encumber, hypothecate, mortgage or in any manner dispose of all of any portion
of his or its Posadas Stock except as provided in this Agreement, and any such
attempted sale, assignment, transfer, pledge, encumbrance, hypothecation,
mortgage or other disposition (any or all of the foregoing being
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<PAGE>
hereinafter encompassed within the words "Dispose" or "Disposition") by a
Stockholder of his or its Posadas Stock except as hereinafter provided shall be
null and void.
4.2 Posadas shall issue no shares of Posadas Stock except as
otherwise provided in this Agreement.
4.3 No Disposition of Posadas Stock shall be made to any
person if (a) the Puerto Rico Gaming Authorities require such person to be
qualified or approved and such person has not been so qualified or approved
prior to becoming a stockholder or (b) such transfer would adversely affect any
tax exemptions granted to Posadas or PAC by the Commonwealth of Puerto Rico.
4.4 In the event of any Disposition by reason of death of an
individual or liquidation of a corporation, the transferee of the Posadas Stock
shall hold the Posadas Stock transferred subject to all of the obligations and
restrictions to which the transferor was subject and have all of the rights of
the transferor hereunder.
4.5 Williams may Dispose of any or all of its Posadas Stock to
any affiliate of Williams (the "Williams Stockholder") notwithstanding any
provision of Article 4 of this Agreement except for Section 4.3. In addition,
any Williams Stockholder may Dispose of Posadas Stock to any other affiliate of
Williams. Prior to any Disposition pursuant to this Section 4.5, such Williams
Stockholder shall become a party to this Agreement and be bound by the terms
hereof in the same manner and to the same extent as Williams and thereafter any
Disposition of all of the Posadas Stock owned by Williams to a person other than
a Williams Stockholder shall include a Disposition of all of the Posadas Stock
owned by Williams Stockholders. All such transferees shall be deemed included
within the definition of Stockholder
5
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<PAGE>
for purposes of this Agreement, and shall have all of the rights and obligations
which Williams would have had under this Agreement as an owner of Posadas Stock.
4.6 The beneficial owners of all of the shares of Posadas
Stock held of record by the Koffman Nominee must be either Burton I. Koffman,
Richard E. Koffman (collectively "the Koffmans") or any of their affiliates. All
such beneficial owners have agreed to be bound by the terms of this Agreement
and any such beneficial owner may Dispose of any or all of their beneficial
ownership of Posadas Stock to any affiliate of the Koffmans, any spouse of the
Koffmans, any children of the Koffmans or any trust or trusts for the benefit of
such children, notwithstanding any provision of Article 4 of this Agreement
except Section 4.3. All of the foregoing are hereinafter referred to as "Koffman
Stockholders." In addition, Koffman Stockholders may Dispose of Posadas Stock to
other Koffman Stockholders. Prior to any Disposition pursuant to this Section
4.6, such Koffman Stockholder shall agree in writing to be bound by the terms
hereof in the same manner and to the same extent as the Koffman Nominee and
thereafter any Disposition of all of the Posadas Stock owned by the Koffman
Nominee to a person other than a Koffman Stockholder shall include a Disposition
of all of the beneficial ownership of all of the Posadas Stock held by all of
the Koffman Stockholders. All Koffman Stockholders and their transferees shall
be deemed included within the definition of Stockholder for purposes of this
Agreement, and shall have all of the rights and obligations which the Koffman
Nominee would have had under this Agreement as owners of Posadas Stock.
4.7 Andrews may Dispose of any or all of his Posadas Stock to
any affiliate of Andrews, his spouse, any children of Andrews or any trust or
trusts for the benefit of such children, notwithstanding any provision of
Article 4 of this Agreement except Section
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4.3. All of the foregoing are hereinafter referred to as "Andrews Stockholders."
In addition, Andrews Stockholders may Dispose of Posadas Stock to other Andrews
Stockholders. Prior to any Disposition pursuant to this Section 4.7, such
Andrews Stockholder shall become a party to this Agreement and be bound by the
terms hereof in the same manner and to the same extent as Andrews and thereafter
any Disposition of all of the Posadas Stock owned by Andrews to a person other
than an Andrews Stockholder shall include Disposition of all of the Posadas
Stock transferred to the Andrews Stockholders. All Andrews Stockholder and their
tranferees shall be deemed included within the definition of Stockholder for
purposes of this agreement, and shall have all of the rights and obligations
which Andrews would have had under this Agreement as an owner of Posadas Stock.
4.8 This Section 4.8 is intentionally left blank.
4.9 If any of the Stockholders or any of the Koffman
Stockholders, (the "Seller") shall receive a bona fide offer from an
unaffiliated third party to purchase any or all of its or his Posadas Stock
which such Stockholder is willing to accept, the Seller shall give notice (the
"Notice") to Posadas and the Non-Selling Stockholders (as hereinafter defined)
stating its or his desire to Dispose of such stock (the "Offered Stock"), the
number of shares to be Disposed of, the name and address of the proposed
transferee (the "Designated Transferee"), the price to be paid for such stock
and the terms of payment thereof (the "Offered Price and Terms") and all the
other terms and conditions of such proposed Disposition and such other
information as Posadas or the Non-Selling Stockholders shall request. For
purposes of this Agreement, "Non-Selling Stockholders" shall mean the
Stockholders who have not given notice of its or his desire to Dispose of its or
his Posadas Stock pursuant to this Section 4.9.
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4.9.1 Except as provided in sections 4.6 and 4.7 of this
Agreement, the Disposition of Posadas Stock by the Koffman Nominee and Andrews
shall be restricted as follows:
4.9.1.1 If the Seller shall be Andrews, the
Koffman Nominee shall thereupon have the option, but not the obligation,
exercisable by written notice to Andrews, given within 30 days of the Notice, to
purchase all or any part of the Offered Stock at a price and on terms equal to
the Offered Price and Terms.
4.9.1.2 If the Koffman Nominee does not elect to
exercise its option to purchase all of the Offered Stock from Andrews or if the
Seller shall be either the Koffman Nominee or a Koffman Stockholder, Posadas
shall thereupon have the option, but not the obligation, excisable by written
notice to the Seller, given within 60 days of the Notice if Andrews is the
Seller and within 30 days of the Notice if the Koffman Nominee or a Koffman
Stockholder is the Seller, to purchase all or any part of the Offered Stock at
the Offered Price. For purposes of Posadas determining whether to exercise its
option, the Stockholders shall vote their shares of Posadas Stock as directed by
Williams. If Posadas elects to exercise its option, and if Posadas shall
thereupon have insufficient surplus to permit it legally to purchase the Offered
Stock at the time of purchase, the Stockholders shall cause a special meeting of
the stockholders of Posadas to be called prior to such purchase. At any such
meeting, all of the Stockholders shall vote their shares Posadas Stock so as to
create, to the extent permitted by law, a surplus large enough to permit Posadas
to make such purchase payment without requiring any additional capital
investments by any of the Stockholders.
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4.9.1.3 If Posadas does not elect to exercise its
option to purchase all of the Offered Stock, Williams shall thereupon have the
option, but not the obligation, exercisable by written notice to the Sellers
within 90 days of the Notice if Andrews is the Seller and within 60 days of the
Notice if the Koffman Nominee or a Koffman Stockholder is the Seller, to
purchase the Offered Stock not purchased by Posadas at the Offered Price and
Terms.
4.9.1.4 If the Notice shall be duly given, and if
the Koffman Nominee, Posadas and Williams together shall fail to exercise their
options to purchase all of the Offered Stock, then the Seller shall be free to
Dispose of all or such portion of the Offered Stock purchased by the Koffman
Nominee, Posadas or Williams to the Designated Transferee at the Offered Price
and Terms free of any restrictions or rights under this Agreement, and only if
(a) such transferee agrees to be bound by the provisions of this Agreement, (b)
such Disposition and such transferee shall be approved by the Puerto Rico Gaming
Authorities, (c) such transfer does not adversely affect any tax exemptions
granted to Posadas or PAC by the Commonwealth of Puerto Rico and (d) such
disposition shall be bona fide and shall be consummated within 150 days after
the giving of the Notice if Andrews is the Seller and within 120 days of the
Notice if the Koffman Nominee or a Koffman Stockholder is the Seller. If all of
the Offered Stock shall not be so Disposed of by the Seller during such period,
the portion thereof not Disposed of shall again become subject to the terms of
this Agreement in the same manner as if no Notice had been given.
4.9.1.5 The closing for the sale of Posadas Stock
to Posadas or any of the Stockholders pursuant to this Section 4.9.1 shall be at
a time and place
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selected by the purchaser and reasonably convenient to the seller not more than
30 days after the giving of the notice of the decision to so purchase.
4.9.2 Except as provided in Section 4.5 of this
Agreement, the Disposition of Posadas Stock by Williams shall be restricted as
follows:
4.9.2.1 Posadas shall have the option, but not the
obligation, exercisable by written notice to Williams, given within 30 days of
the Notice to purchase all or any part of the Offered Stock at the Offered Price
and Terms. For purposes of Posadas determining whether to exercise its option,
the Stockholders shall vote their shares of Posadas Stock as directed by the
Koffman Nominee and the directors appointed by the Koffman Nominee shall
constitute a quorum of the Board of Directors of Posadas and a majority thereof
shall be entitled to determine whether the option shall be exercised. If Posadas
elects to exercise its option, and if Posadas shall thereupon have insufficient
surplus to permit it legally to purchase the Offered Stock at the time of
purchase, the Stockholders shall cause a special meeting of the Stockholders of
Posadas to be called prior to such purchase. At any such meeting, all of the
Stockholders shall vote their shares of Posadas Stock so as to create, to the
extent permitted by law, a surplus large enough to permit it to make such
purchase without requiring any additional capital investments by any of the
Stockholders.
4.9.2.2 If Posadas does not elect to exercise its
option to purchase all of the Offered Stock, the Koffman Nominee shall thereupon
have the option, but not the obligation, exercisable by written notice to
Williams within 60 days of the giving of the Notice, to purchase the Offered
Stock at a price and on terms equal to the Offered Price and Terms.
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4.9.2.3 If the Notice shall duly given, and if
Posadas and the Koffman Nominee together fail to exercise their options to
purchase all of the Offered Stock, then Williams shall be free to dispose of all
or such portion of the Offered Stock not purchased by Posadas or the Koffman
Nominee to the Designated Transferee at the Offered Price and Terms but only if
(a) such transferee agrees to be bound by the provisions of this Agreement, (b)
such Disposition and such transferee shall be approved by the Puerto Rico Gaming
Authorities, (c) such transfer does not adversely affect the tax exemptions
granted to Posadas or PAC by the Commonwealth of Puerto Rico and (d) such
Disposition shall be bona fide and shall be consummated within 120 days after
the giving of the Notice If all of the Offered Stock shall not be Disposed of by
Williams during such period, the portion thereof not Disposed of shall again
become subject to the terms of this Agreement in the same manner as if no Notice
had been given.
4.9.2.4 The closing for the sale of Posadas Stock
to Posadas or the Koffman Nominee pursuant to this Section 4.9.2 shall be at a
time and place selected by the purchaser and reasonably convenient to the seller
not more than 30 days after the giving of the notice of the decision to so
purchase.
4.10 If (a) the Seller or Sellers shall beneficially own 80%
or more of the Common Stock, (b) the offer described in the Notice is to
purchase all of the issued and outstanding shares of Common Stock and (c) the
Non-Selling Stockholders or Posadas do not exercise his or its right of first
refusal pursuant to section 4.9 of this Agreement, then the Non-Selling
Stockholders shall sell all of their shares of Common Stock to the Designated
Transferee at a price and on terms equal to the Offered Price and Terms and if
such offer does not provide
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for the purchase or redemption of all of the outstanding shares of Class A and
Class B Preferred Stock, Posadas shall redeem all such shares prior to the
closing of such sale.
5. Representations and Warranties.
5.1 Williams represents and warrants to each of the Koffman
Nominee and Andrews that:
5.1.1 Williams is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
5.1.2 The execution, delivery and performance by
Williams of this Agreement have been duly authorized by all necessary corporate
action of the part of Williams, and no further action or approval is required in
order to constitute this Agreement as the valid and binding obligation of
Williams enforceable in accordance with its terms.
5.1.3 This Agreement constitutes the legal, valid and
binding obligation of Williams enforceable against Williams in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors' rights generally.
5.1.4 Williams is acquiring the Common Stock, the Class
A Preferred Stock and the Class B Series I Preferred Stock for its own account
and without a view to distribution other than in accordance with the provisions
of this Agreement and applicable securities laws.
5.2 The Koffman Nominee represents to Williams and Andrews
that:
5.2.1 This Agreement constitutes the legal, valid and
binding obligation of the Koffman Nominee enforceable against the Koffman
Nominee in accordance
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with its terms, except as enforcement may be limited by bankruptcy, insolvency
and other similar laws affecting the enforcement of creditors rights generally.
5.2.2 The Koffman Nominee is acquiring the Common Stock
and the Class B Series II Preferred Stock for its own account and without a view
to distribution other than in accordance with the provisions of this Agreement,
its nominee agreement with the beneficial owners of the Posadas Stock, a true
copy of which has previously been delivered to Posadas, and applicable
securities law.
5.3 Andrews represents to Williams and the Koffman Nominee
that:
5.3.1 This Agreement constitutes the legal, valid and
binding obligation of Andrews enforceable against Andrews in accordance with its
terms, except as enforcement may limited by bankruptcy, insolvency and other
similar law affecting the enforcement of creditors rights generally.
5.3.2 Andrews is acquiring the Common Stock for his own
account and without a view to distribution other than in accordance with the
provisions of this Agreement and applicable securities laws.
6. Puerto Rico Gaming Authority Approvals; Tax Exemptions.
Each party hereto shall use its or his best efforts to obtain
and thereafter maintain all consents, approvals and authorizations which must be
obtained and maintained by such party in order to consummate the transactions
contemplated hereby, including all consents, approvals and authorization from
the Puerto Rico Gaming Authorities and the tax exemptions granted to Posadas and
PAC by the Commonwealth of Puerto Rico; provided that nothing contained in this
Article 6 shall require any party to consent to modify any provisions of this
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Agreement or any other document referred to herein in any manner materially
adverse to its or his best interests.
7. Miscellaneous.
7.1 All of the representations, warranties, covenants and
agreements made by the parties to this agreement shall survive for the full
period of any applicable statute of limitations.
7.2 This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof. No change, modification,
amendment, addition or termination of this Agreement or any part thereof shall
be valid unless in writing and signed by or on behalf of the party to be charged
therewith.
7.3 This Agreement may be executed in one or more
counterparts, and shall become effective when one or more counterparts has been
signed by each of the parties.
7.4 Any and all notices or other communications or deliveries
required or permitted to be given pursuant to any of the provisions of this
Agreement shall be deemed to have been duly given for all purposes if sent by
certified or registered mail, return receipt requested and postage prepaid, hand
delivered or sent by telegraph or telex as follows:
If to Williams Hotel, at:
c/o Williams Electronics, Inc.
767 Fifth Avenue
New York, New York 10153
Attention: Mr. Norman J. Menell
with a copy to:
Golenbock and Barell
645 Fifth Avenue
New York, New York 10022
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Attention: Justin M. Golenbock, Esq.
If to the Koffman Nominee, at:
c/o Koffman
300 Plaza Drive
Binghamton, New York 13903
Attention: Mr. Burton I. Koffman
with a copy to:
Beveridge & Diamond, P.C.
1333 New Hampshire Avenue, N.W.
Washington, D.C. 20036
Attention: Albert J. Beveridge, III, Esq.
If to Andrews, at:
Condado Holiday Inn
999 Ashford Avenue
San Juan, Puerto Rico 00902
with a copy to:
Maria Milagros Soto, Esq.
Banco Central Suite 1115
Hato Rey, Puerto Rico 00917
or at such other address as any party may specify by notice given to other party
in accordance with this Section 7.4. The date of giving of any such notice shall
be the date of hand delivery, the date following the posting of the mail or
delivery to the telegraph company or when sent by telex.
7.5 No waiver of the provisions hereof shall be effective
unless in writing and signed by the party to be charged with such waiver. No
waiver shall be deemed a continuing waiver or waiver in respect of any
subsequent breach or default, either of similar or different nature, unless
expressly so stated in writing.
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7.6 Should any clause, section or part of this Agreement be
held or declared to be void or illegal for any reason, all other clauses,
sections or parts of this Agreement which can be effected without such illegal
clause, section or part shall nevertheless continue in full force and effect.
7.7 This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York.
7.8 Each of Williams, the Koffman Nominee and Andrews consents
to the jurisdiction of the Courts of the State of New York and the United States
District Court for the Southern District of New York with respect to any matter
arising with respect to this Agreement, shall subject himself or itself to the
jurisdiction of such courts and agrees that service of process upon him or it
may be made in any manner permitted by the laws of the State of New York.
Without limiting the generality of the foregoing, service of process will be
deemed sufficient if sent by registered or certified mail to Williams, the
Koffman Nominee and Andrews at the address for such persons, person or entity
set forth in Section 7.4 of this Agreement. In addition, the Koffman Nominee and
Andrews agree that the venue for any state court action shall be New York
County.
7.9 This Agreement and the various rights and obligations
arising hereunder shall inure to the benefit of and be binding upon and the
parties hereto and their respective successors and assigns. This Agreement shall
not be assignable by any of the parties hereto without the prior written consent
of all other parties hereto and any attempt to assign this Agreement shall be
void and of no effect.
16
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<PAGE>
7.10 The headings or captions under sections of this Agreement
are for convenience and reference only and do not in any way modify, interpret
or construe the intent of the parties or effect any of the provisions of this
Agreement.
17
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been made and executed
as of the date and year first above written.
WILLIAMS HOTEL CORPORATION
By: /s/_________________________________
E. JOHN NEMEC,
Vice President
By: /s/_________________________________
BURTON I. KOFFMAN
As Nominee
By: /s/_________________________________
HUGH A. ANDREWS
POSADAS DE PUERTO RICO
ASSOCIATES, INCORPORATED
By: /s/_________________________________
NORMAN J. MENELL
Chairman of the Board and President
18
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<PAGE>
FIRST AMENDMENT TO
POSADAS DE PUERTO RICO ASSOCIATES, INCORPORATED
STOCKHOLDERS' AGREEMENT
FIRST AMENDMENT dated as of April 20, 1992 (the "First Amendment")
to POSADAS DE PUERTO RICO ASSOCIATES INCORPORATED STOCKHOLDERS' AGREEMENT dated
as of September 23, 1983 by and among WMS HOTEL CORPORATION, a Delaware
corporation ("WMS"); BURTON I. KOFFMAN, as Nominee (the "Koffman Nominee"); HUGH
A. ANDREWS ("Andrews") (WMS, the Koffman Nominee and Andrews are hereinafter
collectively referred to as the "Stockholder"); and POSADAS DE PUERTO RICO
ASSOCIATES, INCORPORATED, a Delaware corporation ("Posadas").
W I T N E S S E T H:
WHEREAS, the Stockholders and Posadas are parties to a Stockholders'
agreement dated September 23, 1983 (the "Stockholders Agreement") among Williams
Hotel Corporation, now known as WMS, the Koffman Nominee, Andrews and Posadas;
and
WHEREAS, WMS owns 800 shares of common stock, without par value (the
"Posadas Stock"), of Posadas, the Koffman Nominee owns 150 shares of Posadas
Stock and Andrews owns 50 shares of Posadas Stock; and
WHEREAS, pursuant to that certain agreement dated as of April 20,
1992 (the "Master Agreement") among the Stockholders, Posadas and certain of
their affiliates, WMS is
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<PAGE>
purchasing 100 shares of Posadas Stock from the Koffman Nominee and 25 shares of
Posadas Stock from Andrews; and
WHEREAS, pursuant to the Master Agreement both the Koffman Nominee
and Andrews have agreed to indemnify WMS Industries Inc., and its affiliates
under certain circumstances (the "Indemnification Obligations"); and
WHEREAS, as security for their respective Indemnification
Obligations, the Koffman Nominee and Andrews have agreed to pledge, transfer and
assign to WMS Industries Inc. and give a security interest in certain of the
Posadas Stock that each of them owns; and
WHEREAS, the Stockholders and Posadas desire to amend the
Stockholders Agreement to reflect such changes in ownership, provide for the
pledge of Posadas Stock and accurately reflect the current state of facts among
the parties.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
contained, and other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree that the Stockholders Agreement be
amended as follow:
1. All capitalized terms used herein and not otherwise defined shall
have the same meanings ascribed to such terms in the Stockholders Agreement.
2. The Stockholders Agreement is hereby amended by deleting Article
3 in its entirety and substituting in its place the following:
"3. Certificate Legends.
So long as this Agreement shall be in effect, all certificates
representing shares of Common Stock, Class A Preferred Stock or Class B
Preferred Stock now or hereafter issued by Posadas shall be marked with the
following legend:
`The shares of Stock evidenced by this Certificate are and will be
subject to, and cannot be transferred except in accordance with, an
agreement dated September
2
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<PAGE>
23, 1983, as amended from time to time, among the Corporation and
its stockholders (the "Stockholders' Agreement"), a copy of which is
on file and may be obtained at the principal office of the
Corporation, which Stockholders' Agreement provides, among other
things, for restrictions on the transfer of the shares of Stock of
the Corporation.'"
3. The Stockholders Agreement is hereby further amended by adding a
new Section 4.11 to read as follows:
"4.11 (a) WMS may purchase 100 shares of Posadas Stock from the
Koffman Nominee on such terms as they may agree, such shares to
remain subject to all of the provisions of the Agreement to the same
extent as all other shares of Posadas Stock owned by WMS.
(b) WMS may purchase 25 shares of Posadas Stock from Andrews
on such terms as they may agree, such shares to remain subject to
all of the provisions of this Agreement to the same extent as all
other shares of Posadas stock owned by WMS."
4. The Stockholders Agreement is hereby further amended by adding a
new Section 4.12.1 to read as follows:
"4.12.1 (a) The Koffman Nominee may dispose of fifteen (15) shares
of Posadas Stock by pledging such shares, together with any shares
or dividends issued in respect thereof (the "Koffman Collateral"),
to WMS Industries Inc. as security for its Indemnification
Obligations.
(b) Andrews may dispose of seven and one-half (7.5)
shares of Posadas Stock by pledging such shares, together with any
shares or dividends issued in respect thereof (the "Andrews
Collateral"), to WMS Industries Inc. as security for his
Indemnification Obligation."
5. The Stockholders Agreement is hereby further amended by adding a
new Section 4.12.2 to read as follows:
"4.12.2 If WMS Industries Inc. shall foreclose on any portion of the
Koffman Collateral or Andrews Collateral or otherwise taking
possession of the Collateral in satisfaction of all or any portion
of the Indemnification Obligations (collectively, the "Collateral"),
such shares may (i) be registered in the name of WMS Industries
Inc., and WMS Industries Inc. shall agree in writing to be bound by
all of the provisions of this Agreement to the same extent as all
other parties
3
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<PAGE>
hereto, or (ii) WMS Industries Inc. may Dispose of such shares to
WMS Hotel, and such shares shall remain subject to all the
provisions of this Agreement to the same extent as all other Posadas
Stock owned by WMS."
6. The Stockholders Agreement is hereby further amended by adding a
new Section 4.12.3 to read as follows:
"4.12.3 Notwithstanding anything to the contrary in this Article 4,
except for Section 4.3, as of the date hereof if the Collateral or
any portion thereof, is sold, transferred, assigned or disposed of
in any manner, to any third party, by reason of foreclosure or other
actions taken by WMS Industries Inc. to realize on the Collateral,
such sale, transfer, assignment or disposition shall be permitted
and such third party shall take the Collateral free and clear of any
restrictions or rights under this Agreement."
7. This First Amendment may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all of the counterparts shall together constitute one and the same
instrument.
8. The amendments set forth herein are limited precisely as written
and shall not be deemed to be a consent to any modification or waiver of any
other term or condition of the Stockholders Agreement or any other documents
referred to therein.
9. This First Amendment, including the validity hereof and the
rights and obligations of the parties hereunder, shall be construed in
accordance with and governed by the law of the State of New York, without giving
effect to the choice of law provisions thereof.
4
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their respective duly authorized officers or
representatives on the date first above written.
WMS HOTEL CORPORATION
By: /s/ ________________________________
Louis J. Nicastro,
Chairman
By: /s/ ________________________________
BURTON I. KOFFMAN, as Nominee
By: /s/ ________________________________
HUGH A. ANDREWS
POSADAS DE PUERTO RICO
ASSOCIATES, INCORPORATED
By: /s/ ________________________________
Louis J. Nicastro,
Chairman and Chief Executive Officer
5
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PUT OPTION AGREEMENT
This agreement dated as of April 30, 1993 by and among AMERICAN NATIONAL
BANK AND TRUST COMPANY OF CHICAGO, a __________________ banking corporation with
offices at 33 North La Salle Street, Chicago, IL 60690 (the "Bank"); WMS
INDUSTRIES INC., a Delaware corporation, with its principal executive offices at
3401 N. California Avenue, Chicago, Illinois 60618 ("WMS"), BURTON I. KOFFMAN
residing at 300 Plaza Drive, Binghamton, New York 13902 (the "Borrower"), and
EMPIRE HOTEL CORP., a Nevada corporation having its principal office at 300
Plaza Drive, Box 1568, Binghamton, New York 13902 (the "Pledgor").
W I T N E S S E T H :
WHEREAS, the Borrower desires to borrow from the Bank and the Bank is
willing to lend to the Borrower $1,000,000 (the "Loan") provided, among other
matters, the Borrower provides adequate collateral to the Bank; and
WHEREAS, the Pledgor, an affiliate of the Borrower, has offered to pledge
20 shares of common stock (the "Pledged Stock") of Williams Hospitality
Management Corporation, a Delaware corporation ("WHMC"), to the Bank as
collateral for the Loan; and
WHEREAS, the Pledgor owns 332.5 shares of common stock of WHMC,
constituting 33.25% of the outstanding shares of common stock of WHMC; and
WHEREAS, through wholly-owned subsidiaries, WMS owns 550 shares of common
stock of WHMC, constituting 55% of the outstanding shares of common stock of
WHMC; and
WHEREAS, pursuant to the terms of an agreement dated April 30, 1992 among
WMS, Burton I. and Richard E. Koffman and Hugh A. Andrews, WMS agreed to provide
a "Put" Agreement to the Bank with respect to the Pledged Stock; and
WHEREAS, the Bank has requested that WMS provide the put as hereinafter
set forth.
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties hereto agree as follows:
1. Grant of Option. WMS hereby grants to the Bank a put option to require
WMS to purchase all, but not less than all, of the Pledged Stock for a purchase
price of $53,000 per share, or an aggregate purchase price of One Million Sixty
Thousand Dollars ($1,060,000.00). The put option shall expire, if not previously
exercised, at 5:00 p.m. local time New York, New York on May 5, 1995 (the
"Expiration Date"). The put option may be exercised by the Bank at any time on
or before the Expiration Date by written notice to WMS of its election to
exercise
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<PAGE>
the put option in the manner herein provided. The Bank shall not sell or
transfer the Pledged Stock to any third party unless WMS shall have failed to
perform its obligations after the Bank shall have exercised the put option.
2. Closing. The closing with respect to the purchase by WMS of the Pledged
Stock upon exercise of the put option shall take place on the fifth business day
after the date the put option is exercised by the Bank or at such other date as
shall be mutually agreeable to the Bank and WMS. The closing shall be held at
the executive offices of the Bank, or such other place as shall be mutually
agreeable to the Bank and WMS. At the closing, the Pledged Stock shall be sold,
and WMS or its designee shall purchase, the Pledged Stock upon the following
terms and conditions.
(a) The Bank shall deliver to WMS, or its designee, certificates
representing the shares of Pledged Stock duly endorsed for transfer or
accompanied by appropriate stock powers.
(b) The shares representing the Pledged Stock and title thereto
shall be transferred to WMS, or its designee, free and clear of any liens,
claims or encumbrances, except that when acquired by WMS or its designee it is
understood that the Pledged Stock shall thereafter by subject to the Amended and
Restated Stockholders' Agreement dated May 5, 1992 among WMS Hotel Corporation,
Burton I. Koffman, as nominee, Hugh A. Andrews and WHMC (the "WHMC Stockholders'
Agreement").
(c) The purchase price for the Pledged Stock shall be paid by WMS by
wire transfer of funds to an account designated by the Bank.
(d) All transfer taxes, if any, with respect to transfers of the
Pledged Stock at the closing shall be the obligation of the Bank.
3. Representations and Warranties.
(a) The Bank represents and warrants that it has full corporate,
right, power and authority to enter into and perform this Agreement and to sell
and deliver the Pledged Stock.
(b) WMS represents and warrants as follows:
(i) WMS is a corporation validly existing and in good standing
under the laws of the state of Delaware;
(ii) The execution and delivery of this put agreement has been
duly authorized by the Board of Directors of WMS and no further corporate action
is necessary to constitute this put agreement a valid and binding obligation of
WMS; and
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<PAGE>
(iii) The execution, delivery and performance by WMS of this
Agreement does not conflict with any provision of its Certificate of
Incorporation or By-Laws.
(c) Pledgor represents and warrants that it has full right, power
and authority to enter into this Agreement; that Pledgor is the beneficial owner
of the Pledged Stock free and clear of all liens, claims and encumbrances other
than the WHMC Stockholders' Agreement; and that upon delivery of the
certificates representing the Pledged Stock to WMS upon exercise of the put
option by the Bank, WMS will acquire the Pledged Stock free and clear of any
liens, claims or encumbrances other than the WHMC Stockholders' Agreement.
Pledgor agrees that the sale of the Pledged Stock pursuant to this Agreement
shall be expressly permitted and shall have priority over any rights of WHMC or
its stockholders set forth in the WHMC Stockholders' Agreement.
4. Adjustments Upon Changes in Capitalization. The aggregate number and
class of shares which will constitute the Pledged Stock and the price per share
of the Pledged Stock but not the total price will be proportionately adjusted
for any increase or decrease in the number of issued shares of common stock of
WHMC resulting from a stock split or consolidation of the shares or any like
capital adjustment or reclassification of the shares or the payment of any stock
dividend or any other increase or decrease in the number of shares of WHMC
without receipt of consideration by WHMC.
5. General Provisions.
(a) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof. No change, modification, amendment,
addition or termination of this Agreement or any part thereof shall be valid
unless in writing and signed by or on behalf of the party to be charged
therewith.
(b) This Agreement may be executed in one or more counterparts and
shall become effective when one or more counterparts has been signed by each of
the parties.
(c) Any and all notices or communications or deliveries required or
permitted to be given pursuant to any of the provisions of this Agreement shall
be deemed to have been duly given for all purposes if sent by certified or
registered mail, return receipt requested and postage prepaid, hand delivered or
sent by telegraph, telex or telephone facsimile as follows:
If to WMS:
3401 N. California Avenue
Chicago, Illinois 60618
Fax: 312-539-2099
Attention: President
-3-
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<PAGE>
with a copy to:
Shack & Siegel, P.C.
360 Madison Avenue
New York, New York 10017
Fax: 212-818-1964
Attention: Jeffrey N. Siegel
If to the Bank:
American National Bank and Trust Company of Chicago
33 North La Salle Street
Chicago, Illinois 60690
If to the Borrower or the Pledgor:
Burton I. Koffman
300 Plaza Drive
Box 1568
Binghamton, New York 13902
or at such other address as any party may specify by notice given to the other
parties in accordance with this Paragraph 5(c). The date of giving of such
notice shall be the date of actual receipt by the addressee of such notice.
(d) This Agreement and the various rights and obligations arising
hereunder shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and assigns.
(e) This Agreement shall be governed, interpreted and construed in
accordance with the laws of the State of New York.
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<PAGE>
(f) This put agreement and the pledge and/or sale of the Pledged
Stock hereunder has not been registered under the Securities Act of 1933 or the
Securities Act of Puerto Rico.
IN WITNESS WHEREOF, this Agreement has been made and executed as of the
date first above written.
AMERICAN NATIONAL BANK &
TRUST COMPANY OF CHICAGO
By:__________________________________
WMS INDUSTRIES INC.
By:__________________________________
_____________________________________
BURTON I. KOFFMAN, Borrower
EMPIRE HOTEL CORP., Pledgor
By:__________________________________
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<PAGE>
AMENDMENT TO PUT OPTION AGREEMENT
Reference is made to the Put Option Agreement dated April 30, 1993 (the
"Put Option Agreement") by and among American National Bank and Trust Company of
Chicago, WMS Industries Inc., Burton I. Koffman and Empire Hotel Corporation.
Capitalized terms as used herein shall have the same meaning ascribed to such
terms in the Put Option Agreement.
The Put Option Agreement is hereby amended to change the Expiration Date
from May 5, 1995 to May 5, 1996.
Except as set forth in this Amendment, all terms and conditions of the Put
Option Agreement shall remain unchanged and in full force and effect.
AMERICAN NATIONAL BANK &
TRUST COMPANY OF CHICAGO
By:__________________________________
WMS INDUSTRIES INC.
By:__________________________________
_____________________________________
BURTON I. KOFFMAN, Borrower
EMPIRE HOTEL CORPORATION, Pledgor
By:__________________________________
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<PAGE>
SECOND AMENDMENT TO PUT OPTION AGREEMENT
This Second Amendment dated April 9, 1996, amends the Put Option Agreement
dated April 30, 1993 (the "Put Option Agreement") by and among American National
Bank and Trust Company of Chicago, WMS Industries Inc., Burton I. Koffman and
Empire Hotel Corporation and as amended May 5, 1995. Capitalized terms as used
herein shall have the same meaning ascribed to such terms in the Put Option
Agreement.
1. Paragraph 1 of the Put Option Agreement is hereby amended to change the
Expiration Date from May 5, 1996 to May 5, 1997.
2. Paragraph 5(c) of the Put Option Agreement is hereby amended to correct
the addresses and/or fax numbers of WMS and Shack & Siegel P.C. as follows:
WMS Industries Inc.
3401 N. California Avenue
Chicago, Illinois 60618
Attention: President
Fax: 312-961-1020
Shack & Siegel P.C.
530 Fifth Avenue, 16th Floor
New York, New York 10036
Fax: 212-730-1964
Attention: Jeffrey N. Siegel
Except as set forth in this Amendment, all terms and conditions of the Put
Option Agreement shall remain unchanged and in full force and effect.
AMERICAN NATIONAL BANK &
TRUST COMPANY OF CHICAGO
By: /s/
------------------------------------
William D. Ryan
Second Vice President
WMS INDUSTRIES, INC.
By: /s/
------------------------------------
Barbara M. Norman
Vice President & Secretary
/s/
----------------------------------------
BURTON I. KOFFMAN, Borrower
EMPIRE HOTEL CORPORATION, Pledgor
By:_____________________________________
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<PAGE>
U.S. $8,750,000.00
LOAN AGREEMENT
Dated as of October 21, 1993
between
EL CONQUISTADOR PARTNERSHIP L.P.
as Borrower
and
GENERAL ELECTRIC CAPITAL
CORPORATION OF PUERTO RICO
as Lender
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<PAGE>
TABLE OF CONTENTS
Page
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1. Definitions.................................................... 1
2. Purpose of Loans............................................... 3
3. Loans.......................................................... 4
4. Prepayment..................................................... 4
5. Security....................................................... 5
6. Representations and Warranties................................. 6
7. Conditions of Lending.......................................... 9
8. Affirmative Covenants.......................................... 11
9. Negative Covenants............................................. 12
10. Events of Default.............................................. 13
11. Miscellaneous.................................................. 15
(i)
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<PAGE>
LOAN AGREEMENT
AGREEMENT entered into as of this 21st day of October, 1993, by the
following parties:
A. GENERAL ELECTRIC CAPITAL CORPORATION OF PUERTO RICO, a Delaware
corporation (hereinafter referred to as "GECCPR"), and
B. EL CONQUISTADOR PARTNERSHIP L.P., a Delaware limited partnership
(hereinafter referred to as the "Borrower").
This Agreement covers the terms and conditions upon which GECCPR will make
a Loan or Loans to the Borrower. Such terms and conditions are the following:
1. Definitions.
1.1. "Eligible Activities" shall have the meaning given to
such term in Regulation 3582.
1.2. "Guarantors" shall mean Williams Hospitality Management
Corporation and Kumagai International USA Corporation.
1.3. "Initial Loans" shall mean the Loans and advances which
are being made by GECCPR to the Borrower concurrently with the execution of this
Agreement.
1.4. "Loan Documents" shall mean this Agreement, the Notes,
the security documents described in Section 5 hereof and all other agreements,
instruments, documents and certificates now or hereafter executed in connection
with this Agreement, as they may respectively be modified, amended, extended or
supplemented from time to time.
1.5. "Loan" or "Loans" shall mean the Prior Loans, the Initial
Loans, and all subsequent loans that will be made to the Borrower pursuant to
Section 3 hereof.
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<PAGE>
1.6. "936 Funds" shall mean Eligible Funds as that term is
defined in Regulation 3582.
1.7. "Note" or "Notes" shall mean the Prior Notes and the
promissory notes of the Borrower, substantially in the form of Exhibit A hereto,
evidencing the indebtedness resulting from the making of the Loan or Loans and
delivered to GECCPR pursuant to Section 3.2 hereof, as such promissory notes may
be modified, amended, extended or supplemented from time to time, and any
promissory note or notes issued in exchange or replacement therefor.
1.8. "Obligations" shall mean all loans, advances, debts,
liabilities, and obligations (including without limitation, all interest,
charges, expenses, attorneys' fees and other sum chargeable to the Borrower) for
monetary amounts (whether or not such amounts are liquidated or determinable)
owing by the Borrower to GECCPR pursuant to or in connection with the Loan
Documents, and all covenants and duties regarding such amounts (of any kind or
nature, present or future, whether or not evidenced by any note, agreement or
other instrument) arising under or in connection with any of the Loan Documents.
1.9. "Personal Property Mortgages" shall mean the personal
property mortgages referred to in Section 5.1.1. hereof.
1.10. "Prior Loans" shall mean all other loans and advances
made by GECCPR to the Borrower on December 9, 1992, March 11, 1993, August 20,
1993, and September 7, 1993.
1.11. "Prior Notes" shall mean the promissory notes evidencing
the Prior Loans, namely, notes made on (i) December 9, 1992 in the principal
amount of $256,024.00, (ii) March 11, 1993 in the principal amount of
$233,454.50, (iii) August 20, 1993 in the
2
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<PAGE>
principal amount of $361,442.00, and (iv) September 7, 1993 in the principal
amount of $289,360.00, as said promissory notes may be modified, amended,
extended or supplemented from time to time, and any promissory notes issued in
exchange or replacement therefor.
1.12. "Regulation 3582" shall refer to Regulation Number 3582
issued by the Commissioner of Financial Institutions of the Commonwealth of
Puerto Rico on January 29, 1988, as amended, or any substitute regulations
therefor.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine or the neuter. The words "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including any exhibits and schedules hereto, as the same may from time to
time be modified, extended, amended or supplemented, and not to any particular
section, subsection or clause contained in this Agreement.
2. Purpose of Loans.
GECCPR has made the Prior Loans, and will concurrently with
the execution hereof and, subject to the conditions precedent set forth herein
being met, in the future make loans to the Borrower up to the aggregate
principal amount of $8,750,000.00 to finance the acquisition of certain
furniture, fixtures, machinery, and equipment to be used by the Borrower in the
operation of El Conquistador Resort and Country Club located in Fajardo, Puerto
Rico. The Loans made by GECCPR to the Borrower will be made with 936 Funds.
3
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<PAGE>
3. Loans.
3.1. Subject to the terms and conditions and relying upon the
representations and warranties contained herein, GECCPR agrees on or prior to
December 15, 1993 to make a Loan or Loans to the Borrower up to an aggregate
principal amount of $8,750,000.00, $1,114,297.16 of which sum represents the
unpaid principal amount of the Prior Notes.
3.2. Each Loan from GECCPR to the Borrower shall be evidenced
by a Note. The Notes shall be payable in sixty (60) equal consecutive monthly
installments of principal and interest, with commencement and maturity dates as
more fully set forth therein. The Notes shall bear interest from and after this
date until full payment on the unpaid balance of principal thereof (calculated
on the basis of a 360-day year of twelve 30-day months) at a fixed annual rate
equal to nine percent (9%).
4. Prepayment.
At its option the Borrower may at any time voluntarily prepay
in full, but not in part, its entire indebtedness under all of the Notes, plus
all other sums due hereunder and under the other Loan Documents, upon at least
five days' written or telegraphic notice to GECCPR specifying the date of the
proposed prepayment and the amount thereof. In the event of prepayment, the
Borrower will pay to GECCPR an additional sum as a premium equal to the
4
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<PAGE>
following percentages of the outstanding principal balance of the Loans at the
time of payment for the indicated periods:
================================================================================
If Prepayment is made prior to: Prepayment Premium:
- --------------------------------------------------------------------------------
First anniversary 5%
- --------------------------------------------------------------------------------
Second anniversary 4%
- --------------------------------------------------------------------------------
Third anniversary 3%
- --------------------------------------------------------------------------------
Fourth anniversary 2%
- --------------------------------------------------------------------------------
Fifth anniversary 1%
================================================================================
5. Security.
5.1. As security for the Notes the Borrower shall deliver to
GECCPR the following:
5.1.1. personal property mortgages in form and substance
acceptable to GECCPR and executed by the Borrower and Williams Hospitality
Management Corporation, as the case may be, creating a continuing first priority
security interest in favor of GECCPR covering the furniture, fixtures, machinery
and equipment, including motor vehicles, financed pursuant to this Agreement;
5.1.2. guaranty agreements, in form and substance
acceptable to GECCPR, executed by the authorized officers of the Guarantors,
pursuant to which each Guarantor guarantees the obligation of the Borrower in
the lesser amount of either $4,106,800.00 or fifty percent (50%) of the
outstanding principal of and interest on the Loans; and
5
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<PAGE>
5.1.3. an irrevocable stand-by letter of credit for
$3,423,006.00 issued by the Bank of Nova Scotia, the Government Development Bank
for Puerto Rico or any other bank acceptable to GECCPR.
5.2. Notwithstanding anything to the contrary contained herein
or in any other Loan Document, upon the indefeasible payment in full of the
Obligations, whether by payment by the Borrower, application of a draw on the
letter of credit by GECCPR or payment by either or both of the Guarantors
pursuant to their respective guaranties, or a combination thereof, GECCPR shall
release any and all interest it may have in the personal property, the Personal
Property Mortgages, any guaranties or any other collateral securing the
Obligations hereunder.
6. Representations and Warranties.
6.1. The Borrower represents and warrants that:
6.1.1. It is a limited partnership duly organized and
existing and in good standing under the laws of the State of Delaware; that is
duly authorized to do business in Puerto Rico and is engaged in business
therein; that it will continue to be, duly licensed or qualified in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes licensing or qualification
necessary; that it has all requisite power to own its properties and to carry on
its business as now conducted and carried on, and to enter into and perform its
obligations under the Loan Documents;
6.1.2. The Borrower has the requisite power and
authority and the legal right to pledge, mortgage or otherwise encumber and
operate its properties, and is in compliance with its partnership agreement;
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6.1.3. It has power and authority to execute, deliver
and carry out this Agreement, and the other Loan Documents to be executed by the
Borrower; that each of said documents and instruments has been duly authorized
by all necessary partnership action, which action is in full force and effect;
and that this Agreement, and the other Loan Documents, when issued, will be
valid and enforceable in accordance with their respective terms;
6.1.4. There are no suits, proceedings, inquiries or
investigations, at law or in equity, pending or, so far as the Borrower knows
after due inquiry, threatened against the Borrower or any of the Guarantors
before any court, administrative body or governmental agency which will
materially or adversely affect the financial condition of the Borrower;
6.1.5. The Borrower possesses all licenses, rights,
permits, consents or approvals from all governmental authorities having
jurisdiction necessary for the conduct of its business as now conducted, without
substantial known conflict with the rights of others. The Borrower will obtain,
maintain, preserve, and renew all said licenses, rights, permits, consents, or
approvals as are necessary to own and operate a first class resort hotel and
country club in Puerto Rico;
6.1.6. The financial statements of the Borrower dated as
of March 31, 1993 heretofore furnished to GECCPR, correctly set forth the
financial condition of the Borrower, as of such date, and the result of its
operations for the period then ended; and there has been no material adverse
change in the financial condition of the Borrower since the date of such
statements;
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6.1.7. The proceeds of the Loan or Loans to be made by
GECCPR to the Borrower hereunder shall be used for business activities in Puerto
Rico and only for the purposes which are Eligible Activities, all as more fully
set forth in Section 2 hereof;
6.1.8. The current location of the offices and principal
place of business of the Borrower is Road 987, Las Croabas, Fajardo, Puerto Rico
00738;
6.1.9. No information contained in this Agreement, the
financial information of the Borrower or any written statement furnished by the
Borrower pursuant to the terms of this Agreement or the terms of the other Loan
Documents required of the Borrower for use in connection with the transactions
contemplated by this Agreement, which have previously been delivered to GECCPR,
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which such statements were made;
6.1.10. The liens granted to GECCPR pursuant to Section
5 of this Agreement will, on the date granted, be fully perfected first priority
liens in and to the collateral described therein;
6.1.11. Except for the consent of the Government
Development Bank for Puerto Rico, which consent is given pursuant to that
certain Mortgagee Estoppel, Consent and Subordination Agreement dated October
21, 1993, no other authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of the Agreement, or
the other Loan Documents required of the Borrower; and
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6.1.12. The Borrower will not use the loan proceeds for
activities or in a manner that would violate Regulation 3582.
7. Conditions of Lending.
7.1. The obligation of GECCPR to make the Initial Loans are
subject to the performance by the Borrower of the agreements to be performed
hereunder on or before the date of making such Initial Loans and to the
satisfaction of the following conditions, as well as to the Borrower's
compliance on the date hereof with said agreements and conditions with respect
to the Prior Loans:
7.1.1. GECCPR shall have received, prior to or at the
time of the making of the Initial Loans hereunder, an opinion dated the date
hereof in the form attached hereto as Exhibit B, from the law firm of Shack &
Siegel, P.C.;
7.1.2. GECCPR shall have received, prior to or at the
time of the making of the Initial Loans hereunder, the Notes and all of the Loan
Documents referred to in Section 5 hereof, and if such document shall be
executed by persons other than the Borrower, GECCPR shall have received evidence
satisfactory to it of the authority of such persons to execute such instruments;
7.1.3. GECCPR shall have received, prior to or at the
time of the making of the Initial Loans hereunder, a Mortgagee Estoppel, Consent
and Subordination Agreement signed by The Mitsubishi Bank, Limited and the
Government Development Bank for Puerto Rico, in form and substance satisfactory
to GECCPR and its legal counsel;
7.1.4. GECCPR shall have received, prior to or at the
time of the making of the Initial Loans hereunder, certified copies of all
partnership action taken by the
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Borrower to authorize the execution and delivery of the Loan Documents and any
other documents or instruments to be delivered by the Borrower hereunder, and
such other papers as GECCPR or its counsel may reasonably request;
7.1.5. GECCPR shall have received, prior to or at the
time of the making of the Initial Loans hereunder, a certificate of the
authorized signatory of the Borrower certifying the names and true signatures of
the officers of the Borrower authorized to sign this Agreement, and the other
Loan Documents; and
7.1.6. All legal details and proceedings in connection
with the transactions contemplated by this Agreement shall be in form and
substance satisfactory to GECCPR's legal counsel, Messrs. McConnell Valdes.
7.2. The obligation of GECCPR to make each Loan hereunder
(including the Initial Loans) shall be subject to the further conditions
precedent that:
7.2.1. On the date of such Loans the following
statements shall be true (and both the giving of the applicable notice
requesting such Loans and the acceptance by the Borrower of the proceeds of such
Loans shall constitute a representation and warranty by the Borrower that on the
date of such Loans such statements are true);
7.2.1.1. The representations and warranties
contained in this Agreement are correct on and as of the date of such Loans,
before and after giving effect to such Loans and to the application of the
proceeds therefrom; and
7.2.1.2. No event has occurred and is continuing,
or would result from such Loans or from the application of the proceeds
therefrom, which
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constitutes an event of default under Section 10.1 hereof or would constitute an
event of default but for the requirement that notice be given or time elapse or
both.
7.2.2. If the Loan is other than the Initial Loans,
GECCPR shall have received, prior to or at the time of the making of such Loan,
a Note and a Personal Property Mortgage; and
7.2.3. GECCPR shall have received such other approvals,
opinions or documents as GECCPR may reasonably request; and
7.2.4. GECCPR need not make any Loan hereunder which it
may not make lawfully under then existing conditions. 8. Affirmative Covenants.
8.1. The Borrower covenants that it will, until payment in
full of the Notes, and satisfaction of all other Obligations hereunder:
8.1.1. Apply the proceeds of the Loans made hereunder
for business activities in Puerto Rico and only for the purposes which are
Eligible Activities, all as more fully set forth in Section 2 hereof;
8.1.2. Maintain proper books of record and account, in
which complete entries will be made in accordance with generally accepted
accounting principles (GAAP) consistently applied, reflecting all financial
records of the Borrower, and cause such books to be audited at the end of each
fiscal year by Ernst & Young or such other independent public accountants of
recognized standing reasonably satisfactory to GECCPR;
8.1.3. Furnish to GECCPR within forty-five days after
the close of the first six (6) months of the Borrower's fiscal year, quarterly
balance sheets therefor and
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statements of profit and loss and surplus together with a certificate signed by
a responsible officer of the Borrower certifying that no event of default has
occurred under this Agreement, and that no fact or circumstance exists which,
with the lapse of time or the giving of notice or both, would result in an event
of default hereunder; furnish to GECCPR within ninety (90) days after the end of
each fiscal year of the Borrower a balance sheet and statement of profit and
loss and surplus of the Borrower for such fiscal year certified by Ernst & Young
or such other independent public accountants of recognized standing reasonably
satisfactory to GECCPR;
8.1.4. Permit any officers or qualified employees or
representatives of GECCPR designated by it to inspect any and all properties of
the Borrower secured pursuant to Section 5.1.1 hereof, and examine its books and
discuss its affairs, finances and accounts with the officers thereof, all at
such reasonable times and as often as GECCPR may reasonably request, at the sole
cost and expense of GECCPR, and GECCPR hereby recognizes that the properties so
secured are to be used in the operation of a first class resort hotel and
country club and such inspections will not interfere with such operations and/or
the guests using the facilities of the resort hotel and country club, except and
only to the extent necessary to undertake a reasonable inspection of said
property secured pursuant to Section 5.1.1 hereof; and
8.1.5. Maintain, preserve and renew all rights, powers,
privileges and franchises possessed by it insofar as in the bona fide opinion of
the Borrower's partners such rights, powers, privileges and franchises continue
to be advantageous to the Borrower.
9. Negative Covenants.
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9.1. The Borrower covenants that it will not, without the
prior written consent of GECCPR, until full payment of the Notes, and all of the
Borrower's other Obligations:
9.1.1. Liquidate, merge or consolidate with any other
corporation or partnership; nor
9.1.2. Engage in any business activity other than the
operation of a first class resort hotel and country club named El Conquistador
Resort and Country Club, or other activities which may be reasonably regarded as
necessary to the normal operation of such business activity.
10. Events of Default.
10.1. The following occurrences shall be considered events of
default hereunder:
10.1.1. Any representation or warranty herein made by
the Borrower, or any certificate or statement furnished pursuant to the
provisions of this Agreement by the Borrower or by any other person shall prove
to be false or misleading in any material respect, as of the time made; or
10.1.2. The Borrower shall default in the performance of
any covenant contained in Sections 8.1.1 or 9 hereof; or
10.1.3. The Borrower shall default in the performance of
any other covenant, condition or provision hereof, or in the performance of any
other obligation which may exist between the Borrower and GECCPR, whether now
existing or arising in the
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future, and such default shall not be remedied within a period of thirty (30)
days after written notice thereof to the Borrower from GECCPR; or
10.1.4. The Borrower shall default in the payment of
principal or interest on the Notes when due, and such default shall not have
been remedied for a period of ten (10) calendar days thereafter; or
10.1.5. A default shall have occurred under any other
Loan Document beyond any applicable grace period; or
10.1.6. The Borrower becomes insolvent or unable to pay
its debts as they mature, or shall file a voluntary petition in bankruptcy, or a
voluntary petition seeking reorganization, or to effect a plan or other
arrangement with creditors, or upon the filing of any petition by or against the
Borrower under, or purporting to be under, any bankruptcy, reorganization or
insolvency law of any jurisdiction, or the Borrower shall be adjudged bankrupt
or insolvent by any court of competent jurisdiction, or shall make an assignment
for the benefit of creditors or to an agent authorized to liquidate any
substantial amount of its assets, or shall apply for, or consent to the
appointment of any receiver or trustee for it or for a substantial part of its
property; or
10.1.7. An order shall be entered pursuant to, or
purporting to be pursuant to, any bankruptcy, re-organization or insolvency law
of any jurisdiction, approving an involuntary petition seeking reorganization,
or to affect a plan or other arrangement with creditors of the Borrower, or
appointment any receiver or trustee for the Borrower or for a substantial part
of the property of the Borrower; or
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10.1.8. The Borrower defaults in the payment of
principal or interest on any material obligation for borrowed money beyond any
period of grace provided with respect thereto, or in the performance or
observance of any other material agreement, term, or condition contained
therein, or in any material agreement or indenture under which such obligation
is created, if the effect of such default is to cause or permit the holder or
holders of such obligation (or a trustee on behalf of such holder) to cause such
obligation to become due prior to its stated maturity.
10.2. Upon the happening of any event of default described
under Sections 10.1.1, 10.1.2, 10.1.3, 10.1.4, or 10.1.5 if such default shall
not have been remedied, GECCPR shall be entitled, by written notice to the
Borrower, to declare the Notes to be forthwith due and payable, and the same
shall thereupon become due and payable without presentment, demand, protest or
any other notice of any kind, all of which hereby expressly waived.
10.3. If any event of default described in Sections 10.1.6,
10.1.7, or 10.1.8 shall occur, then the Notes and any interest accrued thereon
and all liability of the Borrower to GECCPR under the Loan Documents, shall
become forthwith due and payable without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived.
11. Miscellaneous.
11.1. No delay or failure of GECCPR, or of any holder of the
Notes in the exercise of any right, power or privilege hereunder, or under the
terms of the Notes or any of the other Loan Documents, shall affect such right,
power or privilege; nor shall any single
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or partial exercise thereof, nor any event, abandonment or discontinuance of
steps to enforce such right, power or privilege, preclude any further exercise
thereof, or of any other right, power or privilege.
11.2. The rights and remedies of GECCPR hereunder are
cumulative and not exclusive of any right or remedy which it would otherwise
have.
11.3. Any waiver, permit, consent or approval of any kind or
character on the part of GECCPR of any breach or default under this Agreement,
or of any provision or condition of this Agreement, must be in writing and
executed by a duly authorized representative of GECCPR. Said waiver, permit,
consent or approval shall be effective only to the extent specifically set forth
in such writing, and shall not operate as a waiver, permit, consent or approval
of any future breach of default under this Agreement, or any provision or
condition hereof.
11.4. In the event of any default under this Agreement or
under any other Loan Document, Borrower agrees that if an action at law or suit
then arises, to pay in addition to all other sums which the Borrower may be
required to pay, a reasonable sum for attorneys' fees incurred by GECCPR in
connection therewith.
11.5. Nothing in this Agreement shall be deemed to constitute
a waiver or prohibition of GECCPR's right of set-off.
11.6. All representations, warranties, covenants and
agreements of the Borrower contained herein or otherwise in writing shall
survive the making of the Loans hereunder and the issuance of the Notes.
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11.7. All communications, notices, consents, and waivers
provided for herein or given in connection herewith shall be in writing, shall
be transmitted by facsimile, mail, telex, or personal delivery (including
without limitation, air courier) and shall become effective when received,
addressed as follows: (i) if to the Borrower, at Road 987, Las Croabas, Fajardo,
Puerto Rico 00738 (fax no. 860-1144), Attention: Manuel Peredo, with a copy to
Shack & Siegel, P.C., 530 Fifth Avenue, New York, New York 10036 (fax no. (212)
730-1964), Attention: Pamela E. Flaherty, Esq.; and (ii) if to the Lender, at
General Electric Capital Corporation of Puerto Rico, 450 Ponce de Leon Avenue,
Torre de la Reina Building, First Floor, San Juan, Puerto Rico 00901 (fax no.
(809) 754-3135), Attention: Lucas Delgado, with a copy to McConnell Valdes, 270
Munoz Rivera Avenue, Hato Rey, Puerto Rico 00918, (fax no. (809) 759-8225),
Attention: Esteban F. Bird, Esq.; or such other addresses notified by the
parties from time to time.
11.8. The Borrower hereby agrees to pay and save GECCPR
harmless against liability for the payment of all reasonable out-of-pocket
expenses of GECCPR arising in connection with this transaction, including the
reasonable fees and expenses of counsel for GECCPR incurred in the preparation
of this Agreement and in the preparation and recording of any security document
issued in connection with this Agreement as the same are billed or covered by
statements from time to time; and the obligations of the Borrower under this
section shall survive the payment of the Notes.
11.9. To the extent that there is any conflict between the
provisions of this Agreement and the provisions of any of the other Loan
Documents, then this Agreement shall govern, except to the extent such conflict
relates to the granting or perfection of security
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interests, realization upon collateral, or the enforcement of any remedy under
or in respect of such other Loan Documents in which case the provisions of such
other Loan Documents shall govern.
11.10. This Agreement is made pursuant to, and shall be
construed under, the laws of the Commonwealth of Puerto Rico, and it shall be
binding upon and shall inure to the benefit of the Borrower and GECCPR and their
respective successors and assigns; provided, however, that this Agreement shall
not be assigned by the Borrower without the prior written consent of GECCPR;
further provided, however, that should any assignment be made by GECCPR, the
Agreement may only be assigned collectively with the other Loan Documents to
which GECCPR is a party.
EL CONQUISTADOR PARTNERSHIP L.P.
KUMAGAI CARIBBEAN, INC.
(General Partner)
By: /s/_____________________________
Toru Fujita
President
WKA EL CON ASSOCIATES
(General Partner)
By: /s/_____________________________
Manuel Peredo
Authorized Signatory
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GENERAL ELECTRIC CAPITAL
CORPORATION OF PUERTO RICO
By: /s/_____________________________
Thomas R. Nido
President
Affidavit No. 014
Acknowledged and subscribed before me in San Juan, Puerto Rico this 21st
day of October, 1993, by the following persons who are personally known to me:
Toru Fujita and Manuel Peredo, of legal age, married and residents of San Juan,
Puerto Rico, in their capacity as President and Authorized Signatory,
respectively, of Kumagai Caribbean, Inc. and WKA El Con Associates, general
partners of El Conquistador Partnership L.P., and by Thomas R. Nido, of legal
age, single, and resident of San Juan, Puerto Rico, in his capacity as President
of General Electric Capital Corporation of Puerto Rico.
By: /s/_____________________________
Notary Public
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AMENDMENT TO LOAN AGREEMENT
AGREEMENT entered into on this 30th day of June, 1994, by the following
parties:
A. GENERAL ELECTRIC CAPITAL CORPORATION OF PUERTO RICO, a Delaware
corporation (hereinafter referred to as "GECCPR"); and
B. EL CONQUISTADOR PARTNERSHIP L.P., a Delaware limited partnership
(hereinafter referred to as the "Borrower").
WHEREAS, the Borrower and GECCPR entered into a Loan Agreement dated as of
October 21, 1993, (the "Loan Agreement"; all capitalized terms used herein which
are not otherwise defined herein shall have the meanings set forth in the Loan
Agreement);
WHEREAS, GECCPR has agreed to increase the amount available to the
Borrower under the Loan Agreement to allow the Borrower to purchase additional
furniture, fixtures, machinery, and equipment necessary in the operation of El
Conquistador Resort and Country Club;
NOW, THEREFORE, the Borrower and GECCPR have agreed to amend the Loan
Agreement as hereinafter set forth.
SECTION 1. Amendments to Loan Agreement. The Loan Agreement is, effective
as of the date hereof and subject to the satisfaction of the conditions
precedent set forth in Section 2 hereof, hereby amended as follows:
(a) Section 1.2 is hereby amended and restated to read as follows:
""Guarantors" shall mean Williams Hospitality Group Inc., previously
Williams Hospitality Management Corporation, and Kumagai International USA
Corporation."
(b) Section 2 is hereby amended and restated to read as follows:
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"GECCPR has made the Prior Loans, and will concurrently with the execution
hereof and, subject to the conditions precedent set forth herein being
met, in the future make loans to the Borrower up to the aggregate
principal amount of $8,583,000.17 to finance the acquisition of certain
furniture, fixtures, machinery, and equipment, including motor vehicles,
to be used by the Borrower in the operation of El Conquistador Resort and
Country Club located in Fajardo, Puerto Rico. The Loans made by GECCPR to
the Borrower will be made with 936 Funds."
(c) Sections 3.1 and 3.2 are hereby amended and restated to read as
follows:
"3.1. Subject to the terms and conditions and relying upon the
representations and warranties contained herein, GECCPR agrees on or prior
to June 30, 1994 to make a Loan or Loans to the Borrower up to an
aggregate principal amount of $8,583,000.17, $7,811,000.17 of which sum
represents the unpaid principal amount of Loans made to the Borrower on or
prior to December 15, 1993."
3.2 Each Loan made by GECCPR to the Borrower on or prior to December 15,
1993, shall be evidenced by a Note which shall be payable in sixty (60)
equal consecutive monthly installments of principal and interest, with
commencement and maturity dates as more fully set forth therein. Each Loan
made by GECCPR to the Borrower after said date but on or prior to June 30,
1994 shall be evidenced by a Note which shall be payable in fifty-one (51)
equal consecutive monthly installments of principal and interest, with
commencement and maturity dates as more fully set forth therein. The Notes
shall bear interest from their respective dates until full payment on the
unpaid balance thereof (calculated on the basis of a 360-day year of
twelve 30-day moths) if executed prior to December 15, 1993, at a fixed
annual rate equal to nine percent (9%), and if executed after such date
but on or prior to June 30, 1994, at a fixed annual rate equal to nine
percent (9%)."
SECTION 2. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, GECCPR shall have received all of the following
documents, each document (unless otherwise indicated) being dated the date
hereof, in form and substance satisfactory to GECCPR:
(a) An option dated the date hereof in the form attached hereto as Exhibit
A, from the law firm of Shack & Siegel, P.C.;
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(b) Promissory notes, substantially in the form of Exhibit B hereto,
evidencing the additional indebtedness resulting from the increased loan amount
being made available to the Borrower pursuant to this Amendment;
(c) Personal property mortgages in form and substance acceptable to GECCPR
and executed by the Borrower, or Williams Hospitality Group, Inc., previously
Williams Hospitality Management Corporation, as the case may be, creating a
continuing first priority security interest in favor of GECCPR covering the
additional furniture, fixtures, machinery, and equipment, including motor
vehicles, financed pursuant to this Amendment;
(d) Letters of consent from each of the Guarantors acknowledging and
consenting to this Amendment and the extension of the guarantees up to 50% of
the additional loan provided hereby;
(e) A letter of amendment signed by The Mitsubishi Bank, Limited, and the
Government Development Bank for Puerto Rico, in form and substance satisfactory
to GECCPR and its legal counsel, amending the Mortgagee Estoppel, Consent and
Subordination Agreement executed by said parties pursuant to the Loan Agreement;
(f) Certified copies of all partnership action taken by the Borrower to
authorize the execution and delivery of this Amendment and any other documents
or instruments to be delivered by Borrower hereunder;
(g) Certified copies of all corporate action taken by the Guarantors and
the corporate partners of the Borrower to authorize the execution and delivery
of this Amendment and any other documents or instruments to be delivered to
GECCPR hereunder;
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(h) A certification from an authorized signatory of the Borrower, the
Guarantors, and the Borrower's corporate partners as the case may be, certifying
the names and true signatures of the officers authorized to sign this Amendment
and any other documents or instruments to be delivered to GECCPR pursuant
hereto; and
(i) A certificate signed by a duly authorized officer of the Borrower
stating that the representations and warranties made by the Borrower in the Loan
Agreement are true, accurate, and complete as of the date of this Amendment.
SECTION 3. Reference to and Effect on the Loan Documents.
Upon the effectiveness of Sections 1 and 2 hereof, on and after the date
hereof each reference in the Loan Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Loan Agreement, and each
reference in the other Loan Documents to "the Loan Agreement", "thereunder",
"thereof" or words of like import referring to the Loan Agreement, shall mean
and be a reference to the Loan Agreement as amended hereby.
SECTION 4. Waiver. The execution, delivery and effectiveness of this
Amendment shall not, except to the extent expressly provided herein, operate as
a waiver of any right, power or remedy of GECCPR under any of the Loan
Documents, nor constitute a waiver of any provision of any of the Loan
Documents.
SECTION 5. No Novation. This Amendment shall not in any way constitute a
novation of the Obligations. Except as specifically amended hereby, the Loan
Agreement shall remain in full force and effect.
SECTION 6. Costs, Expenses and Taxes. The Borrower hereby agrees to pay
and save GECCPR harmless against liability for the payment of all reasonable
out-of-pocket expenses
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of GECCPR arising in connection with this transaction, including the reasonable
fees and expenses of counsel for GECCPR incurred in the preparation of this
Amendment and in preparation and recording of any security document issued in
connection with this Amendment as the same are billed or covered by statements
from time to time; and the obligations of the Borrower under this section shall
survive the payment of the Notes.
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
EL CONQUISTADOR PARTNERSHIP L.P.
KUMAGAI CARIBBEAN, INC.
(General Partner)
By: /s/__________________________________
Toru Fujita
President
WKA EL CON ASSOCIATES
(General Partner)
By: /s/__________________________________
Manuel Peredo
Authorized Signatory
Address:
Road 987 Las Croabas
Fajardo, Puerto Rico 00738
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GENERAL ELECTRIC CAPITAL
CORPORATION OF PUERTO RICO
By: /s/__________________________________
Lucas Delgado
Vice President
Address:
450 Ponce de Leon Ave.
Torre de la Reina Bldg.
First Floor
San Juan, PR 00901
Affidavit No. 098
Acknowledged and subscribed before me in San Juan, Puerto Rico, this 30th
day of June, 1994, by the following persons who are personally known to me: Toru
Fujita and Manuel Peredo, of legal age, married and residents of San Juan,
Puerto Rico, in their capacity as President and Authorized Signatory,
respectively, of Kumagai Caribbean, Inc. and WKA El Con Associates, general
partners of El Conquistador Partnership L.P. and by Lucas Delgado, of legal age,
married, and resident of San Juan, Puerto Rico, in his capacity as Vice
President of General Electric Capital Corporation of Puerto Rico.
By: /s/__________________________________
Notary Public
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CORPORATE GUARANTY
Date: October 21, 1993.
GENERAL ELECTRIC CAPITAL CORPORATION
OF PUERTO RICO
450 Ponce de Leon Ave., First Floor
Torre De La Reina Building
San Juan, Puerto Rico 00901
To induce GENERAL ELECTRIC CAPITAL CORPORATION OF PUERTO RICO ("GECCPR") to
enter into the Loan Agreement executed by GECCPR and EL CONQUISTADOR PARTNERSHIP
L.P., a limited partnership organized and existing under the laws of the State
of Delaware ("Customer"), on October 21, 1993 (as the same may be modified,
amended, extended or supplemented from time to time, hereinafter referred to as
the "Loan Agreement") and purchase or otherwise acquire, now or at any time
hereafter, any promissory notes, security agreements, chattel mortgages, pledge
agreements, conditional sale contracts, lease agreements, and/or any other
documents or instruments evidencing, or relating to, any lease, loan, extension
of credit or other financial accommodation (collectively with the Loan Agreement
"Account Documents" and each an "Account Document"), but without in any way
binding GECCPR to do so, the undersigned, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, does hereby
guarantee to GECCPR and its successors and assigns, the due regular and punctual
payment of the lesser of $4,106,800.00 or fifty percent (50%) of the outstanding
principal of and interest on the loans granted to the Customer by GECCPR under
the Loan Agreement, however evidenced, whether it represents an original
balance, an accelerated balance, a balance reduced by partial payment, a
deficiency after sale or other disposition of any equipment, collateral or
security, or otherwise. All such obligations shall be referred to herein, along
with any other payment and performance obligation under the Loan Agreement,
whether for late charges, costs, expenses, indemnities, liquidated damages or
otherwise, as "Obligations". Undersigned does hereby further guarantee to pay
upon demand all losses, costs, reasonable attorneys' fees and expenses which may
be suffered by GECCPR by reason of the default of the undersigned.
This Guaranty is a guaranty of prompt payment and performance (and not
merely a guaranty of collection). Nothing herein shall require GECCPR to first
seek or exhaust any remedy against the Customer, its successors and assigns, or
any other person obligated with respect to the Obligations, or to first
foreclose, exhaust or otherwise proceed against any equipment, collateral or
security which may be given in connection with the Obligations. It is agreed
that GECCPR may, upon any breach or default of the Customer, or at any time
thereafter, make demand upon the undersigned and receive payment and performance
of any of the Obligations which are guaranteed hereby, with or without notice or
demand for payment or performance by the Customer, its successors or assigns, or
any other person. Nevertheless,
<PAGE>
<PAGE>
GENERAL ELECTRIC
CAPITAL CORPORATION
Page 2
October 21, 1993
GECCPR shall, prior to exercising any rights hereunder, be obligated to have
presented to the bank issuing the letter of credit referred to in that certain
Letter of Credit Agreement between the Customer and GECCPR dated October 21,
1993 (as said agreement may be modified, amended, extended or supplemented from
time to time), a draft drawn under such letter of credit, and have applied any
proceeds received in respect thereof to the payment of the Obligations. Suit may
be brought and maintained against the undersigned, at GECCPR's election, without
joinder of the Customer or any other person as parties thereto.
The undersigned agrees that its obligations under this Guaranty shall be
primary, absolute, continuing and unconditional, irrespective of and unaffected
by any of the following actions or circumstances (regardless of any notice to or
consent of the undersigned): (a) the genuineness, validity, regularity and
enforceability of the Account Documents or any other document; (b) any
extension, renewal, amendment, change, waiver or other modification of the
Account Documents or any other document; (c) the absence of, or delay in, any
action to enforce the Account Documents, this Guaranty or any other document;
(d) GECCPR's failure or delay in obtaining any other guaranty of the Obligations
(including, without limitation, GECCPR's failure to obtain the signature of any
other guarantor hereunder); (e) the release of, extension of time for payment or
performance by, or any other indulgence granted to the Customer or any other
person with respect to the Obligations by operation of law or otherwise; (f) the
existence, value, condition, loss, subordination or release (with or without
substitution) of, or failure to have title to or perfect and maintain a security
interest in, or the time, place and manner of any sale or other disposition of
any equipment, collateral or security given in connection with the Obligations,
or any other impairment (whether intentional or negligent, by operation of law
or otherwise) of the rights of the undersigned; (g) the Customer's voluntary or
involuntary bankruptcy, assignment for the benefit of creditors, reorganization,
or similar proceedings affecting the Customer or any of its assets; or (h) any
other action or circumstances which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.
This Guaranty may be terminated upon delivery to GECCPR (at its address
shown above) of a written termination notice from the undersigned. However, as
to all Obligations (whether matured, unmatured, absolute, contingent or
otherwise) incurred by the Customer prior to GECCPR's receipt of such written
termination notice (and regardless of any subsequent amendment, extension or
other modification which may be made with respect to such Obligations), this
Guaranty shall nevertheless continue and remain undischarged until all such
Obligations are indefeasibly paid and performed in full.
<PAGE>
<PAGE>
GENERAL ELECTRIC
CAPITAL CORPORATION
Page 3
October 21, 1993
The undersigned agrees that no payment or distribution to GECCPR pursuant
to the terms of this Guaranty shall entitle the undersigned to exercise any
rights of subrogation, contribution, reimbursement or indemnity in respect
thereof until all Obligations shall have been indefeasibly paid.
The undersigned agrees that this Guaranty shall remain in full force and
effect or be reinstated (as the case may be) if at any time payment or
performance of any of the Obligations which are guarantied hereby (or any part
thereof) is rescinded, reduced or must otherwise be restored or returned by
GECCPR, all as though such payment or performance had not been made. If, by
reason of any bankruptcy, insolvency or similar laws effecting the rights of
creditors, GECCPR shall be prohibited from exercising any of its rights or
remedies against the Customer or any other person or against any property, then,
as between GECCPR and the undersigned, such prohibition shall be of no force and
effect, and GECCPR shall have the right to make demand upon, and receive payment
from, the undersigned of all amounts and other sums that would be due to GECCPR
hereunder upon a default with respect to the Obligations.
Notice of acceptance of this Guaranty and of any default by the Customer or
any other person is hereby waived. Presentment, protest, demand, and notice of
protests, demand and dishonor of any of the Obligations, and the exercise of
possessory, collection or other remedies for the Obligations, are hereby waived.
The undersigned warrants that it has adequate means to obtain financial data
from the Customer on a continuing basis and other information regarding the
Customer and is not relying upon GECCPR to provide any such data or other
information. Without limiting the foregoing, notice of adverse change in the
Customer's financial condition or of any other fact which might materially
increase the risk of the undersigned is also waived. All settlements,
compromises, accounts stated and agreed balances made in good faith between the
Customer, its successors or assigns, and GECCPR shall be binding upon and shall
not affect the liability of the undersigned.
Payment of all amounts now or hereafter owed to the undersigned by the
Customer or any other obligor for any of the Obligations is hereby subordinated
in right of payment to the indefeasible payment in full to GECCPR of all
Obligations and is hereby assigned to GECCPR as a security therefor. The
undersigned hereby irrevocably and unconditionally waives and relinquishes all
statutory, contractual, common law, equitable and all other claims against the
Customer, any other obligor for any of the Obligations, any collateral therefor,
or any other assets of the Customer or any such other obligor, for subrogation,
reimbursement, exoneration, contribution, indemnification, set-off or other
recourse in respect of sums paid or payable to GECCPR by the undersigned
hereunder, and the undersigned hereby further irrevocably and
<PAGE>
<PAGE>
GENERAL ELECTRIC
CAPITAL CORPORATION
Page 4
October 21, 1993
unconditionally waives and relinquishes any and all other benefits which it
might otherwise directly or indirectly receive or be entitled to receive by
reason of any amounts paid by, or collected or due from, it, the Customer or any
other obligor for any of the Obligations, or realized from any of their
respective assets; provided, however, that such waiver and relinquishment shall
only be effective to the extent, and only to the extent, that the exercise of
any such rights by the undersigned could affect or impair any payment received
by GECCPR from Customer.
THE UNDERSIGNED HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS GUARANTY, THE OBLIGATIONS GUARANTIED HEREBY, ANY OF THE RELATED
DOCUMENTS, ANY DEALINGS BETWEEN US RELATING TO THE SUBJECT MATTER HEREOF OR
THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN US. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS).
THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO THIS GUARANTY, THE OBLIGATIONS GUARANTIED HEREBY, OR ANY
RELATED DOCUMENTS. IN THE EVENT OF LITIGATION, THIS GUARANTY MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
As used in this Guaranty, the word "person" shall include any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, or any government or any political
subdivision thereof.
This Guaranty is intended by the parties as a final expression of the
guaranty of the undersigned and is also intended as a complete and exclusive
statement of the terms thereof. No course of dealing, course of performance or
trade usage, nor any paid evidence of any kind, shall be used to supplement or
modify any of the terms hereof. Nor are there any conditions to the full
effectiveness of this Guaranty. This Guaranty and each of its provisions may
only be waived, modified, varied, released, terminated or surrendered, in whole
or in part, by a duly authorized written instrument signed by GECCPR. No failure
by GECCPR to exercise its rights hereunder shall give rise to any estoppel
against GECCPR, or excuse the undersigned from
<PAGE>
<PAGE>
GENERAL ELECTRIC
CAPITAL CORPORATION
Page 5
October 21, 1993
performing hereunder. GECCPR's waiver of any right to demand performance
hereunder shall not be a waiver of any subsequent or other right to demand
performance hereunder.
This Guaranty shall bind the undersigned's successors and assigns and the
benefits thereof shall extend to and include GECCPR's successors and assigns. In
the event of default hereunder, GECCPR may at any time inspect the undersigned's
records, or at GECCPR's option, the undersigned shall furnish GECCPR with a
current independent audit report.
If any provisions of this Guaranty are in conflict with any applicable
statute, rule or law, then such provisions shall be deemed null and void to the
extent that they may conflict therewith, but without invalidating any other
provisions hereof.
This Guaranty, its interpretation and application, will be subjected in all
respects to the laws of the Commonwealth of Puerto Rico, its interpretive case
law and jurisprudence.
Each signatory on behalf of a corporate guarantor warrants that he has
authority to sign on behalf of such corporation and by so signing, to bind said
guarantor corporation hereunder.
IN WITNESS WHEREOF, this Guaranty is executed the day and year above
written.
WILLIAMS HOSPITALITY
MANAGEMENT CORPORATION
By:/s/
---------------------------------
(Signature)
Title:
---------------------------------
(Officer's Title)
ATTEST:
- -------------------------------------------
Secretary/Assistant Secretary
<PAGE>
<PAGE>
GENERAL ELECTRIC
CAPITAL CORPORATION
Page 6
October 21, 1993
Affidavit No. 021
Subscribed and acknowledged before me in San Juan, Puerto Rico, this 21st
day of October, 1993, by the following person who is personally known to me:
Manuel Peredo, of legal age, married, businessman and resident of San Juan,
Puerto Rico, in his/her capacity as Vice President of Williams Hospitality
Management Corporation.
/s/
------------------------------------
Notary Public
<PAGE>
<PAGE>
GUARANTOR'S
CONSENT TO AMENDMENT TO LOAN AGREEMENT
Dated as of June 30, 1994
The undersigned, WILLIAMS HOSPITALITY GROUP INC., previously Williams
Hospitality Management Corporation, a Delaware corporation, as Guarantor under
the Corporate Guaranty dated October 21, 1993, (the "Guaranty") in favor of
GENERAL ELECTRIC CAPITAL CORPORATION OF PUERTO RICO ("GECCPR"), party to the
Loan Agreement referred to in the foregoing Amendment, hereby consents to the
said Amendment and hereby confirms, clarifies, and agrees that (i) the Guaranty
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects except that, upon the effectiveness of, and on and
after the date of, the said Amendment, the undersigned shall guarantee to GECCPR
and its successors and assigns, the due regular and punctual payment of the
lesser of $4,106,800.00 or fifty percent (50%) of the outstanding principal of
and interest on the Loans granted to El Conquistador Partnership L.P. by GECCPR
under the Loan Agreement, as amended pursuant to the foregoing Amendment; and
(ii) each reference in the Guaranty to the Loan Agreement or the Loan Documents
or to "thereunder," "thereof" or words of like import shall mean and be a
reference to the Loan Agreement or the Loan Documents as amended by the
Amendment, and any reference in the Guaranty to "this Guaranty" or words
referring thereto shall mean and be a reference to the Guaranty as amended by
the Amendment and by this Consent.
WILLIAMS HOSPITALITY GROUP INC.
previously Williams Hospitality
Management Corporation
By: /s/
------------------------------------
Name: Manuel Peredo
Title: Vice President
Affidavit No.: 099
Acknowledged and subscribed before me in San Juan, Puerto Rico this 30th
day of June, 1994, by the following person who is personally known to me: Manuel
Peredo, of legal age, married, and resident of San Juan, Puerto Rico, in his
capacity as Vice President of Williams Hospitality Group Inc.
/s/
----------------------------------------
Notary Public
<PAGE>
<PAGE>
Exhibit 21
================================================================================
Jurisdiction of % of
Name of Corporate Subsidiary Organization Ownership
- --------------------------------------------------------------------------------
El Conquistador Ferryboat Inc. Puerto Rico 100%
by Williams
Hospitality Group
Inc.
- --------------------------------------------------------------------------------
ESJ Hotel Corporation Delaware 100% by Posadas
de Puerto Rico
Associates,
Incorporated
- --------------------------------------------------------------------------------
Isla Verde Tourism Parking Corp. Puerto Rico 100%
by Williams
Hospitality
Group Inc.
- --------------------------------------------------------------------------------
Posadas de Puerto Rico Associates, Incorporated Delaware 95%
- --------------------------------------------------------------------------------
Posadas Finance Corporation Delaware 100%
by Posadas de
Puerto Rico
Associates,
Incorporated
- --------------------------------------------------------------------------------
WMS El Con Corp. Delaware 100%
- --------------------------------------------------------------------------------
Williams Hospitality Group Inc. Delaware 62% by Posadas
de Puerto Rico
Associates,
Incorporated
- --------------------------------------------------------------------------------
WMS Property Inc. Delaware 100%
================================================================================
<PAGE>
<PAGE>
================================================================================
Jurisdiction of % of
Name of Partnership Subsidiary Organization Ownership
- --------------------------------------------------------------------------------
El Conquistador Partnership L.P. Delaware 50%
by WKA El Con
Associates
- --------------------------------------------------------------------------------
Las Casitas Development Company I, S en C Puerto Rico 50%
(S.E.) by WKA El Con
Associates
- --------------------------------------------------------------------------------
Posadas de San Juan Associates New York 50%
by ESJ Hotel
Corporation
- --------------------------------------------------------------------------------
WKA Development, S.E. Puerto Rico 98%
by Williams
Hospitality Group
Inc. and
2%
by WKA El Con
Associates
- --------------------------------------------------------------------------------
WKA El Con Associates New York 46.54%
by WMS El Con
Corp.
================================================================================
<PAGE>
<PAGE>
EXHIBIT 23.1
[OPPENHEIMER LETTERHEAD]
We hereby consent to the reference to Oppenheimer & Co., Inc. under the
caption Distribution and elsewhere in the Information Statement filed as Exhibit
99 to the Form 10 Registration Statement of WMS Hotel Corporation.
OPPENHEIMER & CO., INC.
Dated: February 27, 1997
<PAGE>
<PAGE>
EXHIBIT 23.2
HOULIHAN LOKEY HOWARD & ZUKIN
-----------------------------------------------
A SPECIALTY INVESTMENT BANKING FIRM
February 27, 1997
To the Board of Directors of
WMS Hotel Corporation
We consent to i) the attachment of our solvency opinion letter as an Annex to
the Form 10 for WMS Hotel Corporation and ii) use of our firm's name and
description of our solvency opinion and analysis prepared in connection with WMS
Hotel Corporation's proposed spin off from WMS Industries Inc.
Very truly yours,
HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1995 JUN-30-1994
<PERIOD-START> JUL-01-1995 JUL-01-1994 JUL-01-1993
<PERIOD-END> JUN-30-1996 JUN-30-1995 JUN-30-1994
<CASH> 6,616 3,627 0
<SECURITIES> 0 0 0
<RECEIVABLES> 3,009 4,732 0
<ALLOWANCES> 475 399 0
<INVENTORY> 651 804 0
<CURRENT-ASSETS> 11,098 13,086 0
<PP&E> 83,302 82,153 0
<DEPRECIATION> 38,383 33,493 0
<TOTAL-ASSETS> 104,734 111,306 0
<CURRENT-LIABILITIES> 13,539 14,528 0
<BONDS> 23,555 26,928 0
<COMMON> 1 1 0
0 0 0
0 0 0
<OTHER-SE> 37,499 35,062 0
<TOTAL-LIABILITY-AND-EQUITY> 104,734 111,306 0
<SALES> 0 0 0
<TOTAL-REVENUES> 68,694 70,878 75,480
<CGS> 0 0 0
<TOTAL-COSTS> 40,219 44,959 45,367
<OTHER-EXPENSES> 5,430 5,994 5,344
<LOSS-PROVISION> 1,457 1,842 1,840
<INTEREST-EXPENSE> 3,689 4,300 4,722
<INCOME-PRETAX> 8,234 (1,131) 6,807
<INCOME-TAX> 1,645 (234) (7)
<INCOME-CONTINUING> 2,437 (4,364) 2,217
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 2,437 (4,364) 2,217
<EPS-PRIMARY> 0 0 0
<EPS-DILUTED> 0 0 0
<FN>
Earnings per share are not applicable as Williams Hotel Corporation was a
privately held subsidiary of WMS Industries Inc. prior to the distribution.
</FN>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-START> JUL-01-1996 JUL-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 5,663 0
<SECURITIES> 0 0
<RECEIVABLES> 5,274 0
<ALLOWANCES> 578 0
<INVENTORY> 604 0
<CURRENT-ASSETS> 14,890 0
<PP&E> 85,029 0
<DEPRECIATION> 40,903 0
<TOTAL-ASSETS> 104,850 0
<CURRENT-LIABILITIES> 14,596 0
<BONDS> 21,879 0
<COMMON> 1 0
0 0
0 0
<OTHER-SE> 37,340 0
<TOTAL-LIABILITY-AND-EQUITY> 104,850 0
<SALES> 0 0
<TOTAL-REVENUES> 30,054 30,856
<CGS> 0 0
<TOTAL-COSTS> 17,593 19,503
<OTHER-EXPENSES> 2,809 2,690
<LOSS-PROVISION> 69 625
<INTEREST-EXPENSE> 1,674 1,890
<INCOME-PRETAX> 1,491 (807)
<INCOME-TAX> 224 (295)
<INCOME-CONTINUING> (159) (2,002)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (159) (2,002)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
Earnings per share are not applicable as Williams Hotel Corporation was a
privately held subsidiary of WMS Industries Inc. prior to the distribution.
</FN>
<PAGE>
<PAGE>
[WMS LETTERHEAD]
[ , 1997]
Dear Stockholder:
The Board of Directors of WMS Industries Inc. ('WMS') has approved a
pro-rata tax free dividend (the 'Distribution') of all of the outstanding shares
of voting common stock, par value $.01 per share ('Hotel Common Stock'), of WMS
Hotel Corporation ('Hotel') to the holders of WMS common stock, par value $.50
per share (the 'WMS Common Stock'). As a result of the Distribution, Hotel will
be an independent publicly-held company. Hotel will operate the Puerto Rico
hotel and casino business presently operated by WMS through its subsidiaries.
The enclosed Information Statement contains information about the Distribution
and about Hotel. Mr. Louis J. Nicastro will serve as Chairman of the Board and
Chief Executive Officer of Hotel and will continue as Chairman of the Board of
WMS. Mr. Nicastro resigned as an executive officer of WMS as of July 1, 1996.
If you are a holder of record of WMS Common Stock at the close of business
on [ , 1997] (the 'Record Date'), upon consummation of the
Distribution, you will receive as a dividend one share of Hotel Common Stock for
every four shares of WMS Common Stock you hold on that date. We expect to mail
the Hotel Common Stock certificates starting on [ , 1997].
Fractional shares will be paid in cash.
The completion of the Distribution will, among other things, relieve each
of WMS and Hotel of certain of the state regulatory burdens and risks which
exist as a result of the combined ownership by WMS of both a gaming equipment
business and a Puerto Rico casino business and will enhance Hotel's ability to
attract and retain skilled employees. It is expected that Hotel Common Stock
will be listed on the New York Stock Exchange under the symbol [' '].
In connection with the Distribution, since WMS will continue forward, the
stockholders of WMS on the Record Date should retain their WMS share
certificates. You will receive new certificates representing your shares of
Hotel Common Stock.
We are enthusiastic about this separation and the growth opportunities it
will create for each company and its stockholders.
Sincerely,
Neil D. Nicastro
President and Chief Executive Officer
WMS Industries Inc.
<PAGE>
<PAGE>
FOR INFORMATION ONLY -- PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED FEBRUARY 28, 1997
INFORMATION STATEMENT
WMS HOTEL CORPORATION
COMMON STOCK
This Information Statement is being furnished in connection with the
distribution (the 'Distribution') to holders of common stock, par value $.50 per
share ('WMS Common Stock'), of WMS Industries Inc. ('WMS') of all of the
outstanding shares of voting common stock, par value $.01 per share ('Company
Common Stock'), of WMS Hotel Corporation ('Hotel' or the 'Company') pursuant to
the terms of a Plan of Reorganization and Distribution Agreement among WMS,
Williams Hotel Corporation (the Company's sole stockholder) and the Company to
be dated as of [ , 1997]. Upon the effectiveness of the
Distribution, WMS will cease to own any interest in the Company. See 'The
Distribution,' 'Risk Factors,' 'Relationship Between the Company and WMS After
the Distribution' and 'Business.'
Shares of Company Common Stock will be distributed to holders of record of
WMS Common Stock as of the close of business on [ , 1997] (the
'Record Date'). Each such holder will receive one share of Company Common Stock
for every four shares of WMS Common Stock held on the Record Date. The
Distribution is scheduled to occur on or about [ , 1997] (the
'Distribution Date'). No consideration will be paid by holders of WMS Common
Stock for shares of Company Common Stock. See 'The Distribution.'
There is no current trading market for Company Common Stock, although a
'when-issued' market is expected to develop prior to the Distribution Date. The
Company expects to apply for listing of the shares of Company Common Stock on
the New York Stock Exchange under the symbol [' ']. See 'The
Distribution -- Listing and Trading of Company Common Stock.'
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER THE CAPTION 'RISK FACTORS' BEGINNING ON PAGE 21.
------------------------
NO STOCKHOLDER APPROVAL OF THE DISTRIBUTION IS REQUIRED OR SOUGHT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION STATEMENT.
------------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
------------------------
Stockholders of WMS with inquiries related to the Distribution should
contact Barbara M. Norman, Vice President, Secretary and General Counsel, WMS
Industries Inc., 3401 North California Avenue, Chicago, Illinois 60618,
telephone: (773) 961-1667; or the Company's stock transfer agent: The Bank of
New York, 101 Barclay Street, 22W, New York, New York 10286, telephone: (800)
524-4458.
The date of this Information Statement is [ ].
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
SUMMARY OF CERTAIN INFORMATION......................................................................... 5
The Distribution.................................................................................. 5
The Company....................................................................................... 8
Corporate Structure............................................................................... 11
Pre-Distribution............................................................................. 11
Post-Distribution............................................................................ 11
Summary Financial Data............................................................................ 12
THE DISTRIBUTION....................................................................................... 14
Reasons for the Distribution...................................................................... 14
Opinions of Financial Advisors.................................................................... 15
Distribution Agent................................................................................ 17
Manner of Effecting the Distribution.............................................................. 17
Results of the Distribution....................................................................... 18
Federal Income Tax Aspects of the Distribution.................................................... 18
Listing and Trading of Company Common Stock....................................................... 19
Conditions; Termination........................................................................... 19
Reasons for Furnishing the Information Statement.................................................. 20
RISK FACTORS........................................................................................... 21
Lack of Operating History as a Separate Public Company............................................ 21
Financial Leverage of El Conquistador; Ownership Interest in El Conquistador...................... 21
Operating and Financing Limitations Associated with Debt Covenants................................ 22
Tourism Tax Exemptions............................................................................ 22
Capital Requirements.............................................................................. 23
Dependence on Key Personnel....................................................................... 23
Series B Preferred Stock.......................................................................... 23
Lack of Full Control.............................................................................. 24
Changes in Tax Law................................................................................ 24
Competition....................................................................................... 24
Reliance on Single Market......................................................................... 24
Seasonality....................................................................................... 25
Casino Gaming Regulation.......................................................................... 25
Absence of Public Market for Company Common Stock................................................. 25
Changes in Trading Prices of WMS Common Stock..................................................... 25
Dividend Policy and Withholding Tax............................................................... 26
Effect on Conversion Price of WMS Convertible Subordinated Debentures............................. 26
Certain Tax Considerations........................................................................ 26
Certain Anti-Takeover Features.................................................................... 27
Certain Consents.................................................................................. 28
Fraudulent Transfer Considerations; Legal Dividend Requirements................................... 28
RELATIONSHIP BETWEEN THE COMPANY AND WMS AFTER THE DISTRIBUTION........................................ 29
Distribution Agreement............................................................................ 29
Additional Actions and Relationships.............................................................. 30
Tax Sharing Agreement............................................................................. 30
PRELIMINARY TRANSACTIONS............................................................................... 30
RELATIONSHIP BETWEEN THE COMPANY AND THE COMPANY'S SUBSIDIARIES AFTER THE DISTRIBUTION................. 32
The Condado Plaza................................................................................. 33
The El San Juan................................................................................... 33
The El Conquistador............................................................................... 33
WHGI.............................................................................................. 33
ACCOUNTING TREATMENT................................................................................... 34
HOTEL FINANCINGS AND CERTAIN CONTINGENT OBLIGATIONS.................................................... 34
The Condado Plaza................................................................................. 34
The El San Juan................................................................................... 35
The El Conquistador............................................................................... 35
WHGI.............................................................................................. 36
The Company....................................................................................... 36
CAPITALIZATION......................................................................................... 37
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
DIVIDENDS.............................................................................................. 37
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS........................................ 38
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET............................................... 39
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS.................................... 40
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS............................... 41
SELECTED FINANCIAL DATA................................................................................ 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................. 44
General........................................................................................... 44
Results of Operations............................................................................. 44
Financial Condition............................................................................... 47
Inflation......................................................................................... 48
Seasonality....................................................................................... 48
INDUSTRY OVERVIEW...................................................................................... 48
BUSINESS............................................................................................... 49
The Condado Plaza................................................................................. 52
The El San Juan................................................................................... 52
The El Conquistador............................................................................... 53
WHGI.............................................................................................. 53
Casino Credit Policy.............................................................................. 54
Government Regulation and Licensing............................................................... 54
Seasonality....................................................................................... 55
Competition....................................................................................... 55
Employees......................................................................................... 56
Properties........................................................................................ 56
MANAGEMENT............................................................................................. 58
Board of Directors and Committees of the Board.................................................... 58
Executive Officers................................................................................ 59
Other Significant Employees....................................................................... 60
Executive Officer Compensation.................................................................... 60
Option Grants in Last Fiscal Year................................................................. 61
Aggregated Stock Option Exercises and Year-End Values............................................. 61
Compensation of Directors......................................................................... 62
Employment Agreements............................................................................. 62
Stock Option Plan................................................................................. 64
RELATED PARTY TRANSACTIONS............................................................................. 67
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT......................................... 68
Principal Stockholders............................................................................ 68
Security Ownership of Management.................................................................. 69
PURPOSES AND ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS............................................... 70
The Company Certificate and Bylaws................................................................ 71
Stockholder Rights Agreement...................................................................... 73
Series B Preferred Stock.......................................................................... 75
Certain Provisions of the Delaware General Corporation Law........................................ 75
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK............................................................. 76
General........................................................................................... 76
Preferred Stock................................................................................... 76
Series B Preferred Stock.......................................................................... 76
Common Stock...................................................................................... 77
Class A Common Stock.............................................................................. 78
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS OF THE COMPANY................................. 78
INDEPENDENT AUDITORS................................................................................... 80
</TABLE>
3
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ADDITIONAL INFORMATION................................................................................. 80
INDEX TO FINANCIAL STATEMENTS.......................................................................... F-1
ANNEX I -- OPINION OF OPPENHEIMER & CO., INC. ......................................................... I-1
ANNEX II -- OPINION OF HOULIHAN, LOKEY, HOWARD & ZUKIN, INC............................................ II-1
ANNEX III -- AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY.......................... III-1
ANNEX IV -- AMENDED AND RESTATED BYLAWS OF THE COMPANY................................................. IV-1
ANNEX V -- STOCK OPTION PLAN (Draft)................................................................... V-1
</TABLE>
4
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SUMMARY OF CERTAIN INFORMATION
This Summary is qualified by the more detailed information set forth
elsewhere in this Information Statement, which should be read in its entirety.
Capitalized terms used but not defined in this Summary are defined elsewhere in
this Information Statement. References herein to the Company, unless the context
otherwise requires, are to the Company as the surviving corporation of the
Merger, as hereafter defined, after completion of all other Preliminary
Transactions, as hereafter defined, including the Company's subsidiaries. See
'Preliminary Transactions.'
THE DISTRIBUTION
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Distributing Company................ WMS Industries Inc, a Delaware corporation ('WMS'). References herein to
WMS include its consolidated subsidiaries except where the context
otherwise requires.
Distributed Company................. WMS Hotel Corporation (the 'Company'), which is currently a wholly-owned
indirect subsidiary of WMS, and as of the Distribution Date will be the
owner, through its subsidiaries, of the Puerto Rico hotel and casino
business which currently comprises the hotel and casino operations of WMS
(the 'Hotel & Casino Business').
Distribution Ratio.................. One share of Company Common Stock for every four shares of WMS Common Stock
held on the Record Date.
Securities to be Distributed........ Based on 24,200,800 shares of WMS Common Stock outstanding on February 10,
1997, approximately 6,050,200 shares of Company Common Stock will be
distributed in the Distribution. The Company Common Stock to be
distributed will constitute all of the outstanding Common Stock of the
Company immediately after the Distribution. See 'Description of the
Company's Capital Stock -- Common Stock.'
Fractional Share Interests.......... Fractional shares of Company Common Stock will not be distributed.
Fractional shares of Company Common Stock will be aggregated and sold in
the public market by the Distribution Agent (as defined) and the
aggregate net cash proceeds will be distributed ratably to those
stockholders entitled to fractional interests. See 'The
Distribution -- Manner of Effecting the Distribution.'
Record Date......................... [ , 1997] (5:00 p.m., Eastern Standard Time).
Distribution Date................... [ , 1997]
Mailing Date........................ Certificates representing the shares of Company Common Stock to be
distributed pursuant to the Distribution will be delivered to the
Distribution Agent on the Distribution Date. The Distribution Agent will
mail certificates representing the shares of Company Common Stock to
holders of record of WMS Common Stock as soon as practicable thereafter.
Holders of WMS Common Stock should not send stock certificates to WMS,
the Company or the Distribution Agent. See 'The Distribution -- Manner of
Effecting the Distribution.'
Conditions to the Distribution...... The Distribution is conditioned upon, among other things, declaration of a
special dividend by the Board of Directors of WMS (the 'WMS Board'),
consummation of the Preliminary Transactions, receipt of a private letter
ruling from the Internal Revenue Service ('IRS') in form and substance
satisfactory to
</TABLE>
5
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the WMS Board and receipt of a no-action letter from the staff of the
Securities and Exchange Commission (the 'Commission Staff') in form and
substance satisfactory to the WMS Board. See 'The Distribution -- Federal
Income Tax Aspects of the Distribution,' ' -- Listing and Trading of
Company Common Stock,' ' -- Conditions; Termination' and 'Preliminary
Transactions.' The WMS Board has reserved the right to waive any
conditions to the Distribution or, even if the conditions to the
Distribution are satisfied, to abandon, defer or modify the Distribution
at any time prior to the Distribution Date. WMS has received the private
letter ruling from the IRS and the no-action letter from the Commission
Staff referred to above. See 'The Distribution -- Conditions;
Termination.'
Reasons for the Distribution........ The Distribution is designed to relieve WMS and the Company from certain of
the regulatory burdens and risks which exist as a result of the combined
ownership by WMS of a gaming equipment business and a Puerto Rico casino
business and to enhance the Company's ability to attract and maintain
skilled employees through stock related compensation of the Company. The
Company, through its subsidiaries, will continue to operate the Hotel &
Casino Business. WMS, through its subsidiaries, will continue to conduct
the business of designing, publishing and marketing interactive
entertainment software played in both the coin-operated and home video
markets and designing, manufacturing and selling coin-operated pinball
and novelty games, video lottery terminals, slot machines and multigame
casino video machines (the 'Games Business'). See 'The
Distribution -- Reasons for the Distribution.'
Tax Consequences.................... The WMS Board conditioned the Distribution on receipt of a ruling from the
IRS to the effect, among other things, that receipt of shares of Company
Common Stock by holders of WMS Common Stock will be tax free. On October
9, 1996, application was made to the IRS for a ruling as to the
foregoing, as well as to confirm the treatment, for Federal income tax
purposes, of certain other matters pertaining to the Distribution. On
January 31, 1997, the IRS issued the requested ruling. See 'The
Distribution -- Federal Income Tax Aspects of the Distribution.'
Preliminary Transactions............ Prior to the Distribution, WMS intends to cause the merger (the 'Merger')
of the Company with the Company's sole stockholder, Williams Hotel
Corporation, a Delaware corporation, with the Company as the surviving
corporation of such Merger. Prior to or concurrently with such Merger,
the Company will change its name to [ ]. At or about the
time of the Merger and prior to the Distribution Date, WMS shall (a)
contribute to the Company's capital (i) $4,100,000 of 8% Class A
Preferred Stock (the 'Condado Plaza Preferred Stock') of Posadas de
Puerto Rico Associates, Incorporated ('PPRA'), (ii) net intercompany
accounts due WMS from the Hotel & Casino Business of approximately
$4,500,000 and (iii) approximately $923,000 in cash; (b) cause Williams
Hospitality Group Inc. ('WHGI') to declare dividends on its outstanding
common stock (the 'WHGI Common Stock') and PPRA to pay dividends on and
redeem a
</TABLE>
6
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portion of the Condado Plaza Preferred Stock resulting in net cash
received by WMS Hotel Corporation of approximately $4,442,000; (c) pay
$5,077,000 to ESJ Hotel Corporation ('ESJ') in payment of outstanding
intercompany receivables; (d) merge WMS Property Inc. into ESJ; and (e)
transfer to PPRA the Company's interests in ESJ and WHGI in exchange for
additional shares of capital stock of PPRA. All of such interests are
currently held directly by the Company or Williams Hotel Corporation. As
a result of such transactions, the Company expects the existing 5%
interest in PPRA owned by an unaffiliated third party to be reduced to
approximately 1% and the Company's ownership of PPRA to be increased to
approximately 99% of PPRA. See 'Preliminary Transactions.'
Trading Market...................... There is currently no public market for Company Common Stock. The Company
intends to apply to list the shares of Company Common Stock on the New
York Stock Exchange. See 'The Distribution -- Listing and Trading of
Company Common Stock' and 'Risk Factors -- Absence of Public Market for
Company Common Stock.'
Distribution Agent and Transfer
Agent for Company Common Stock.... The distribution agent (the 'Distribution Agent') and the transfer agent
for the Company Common Stock is The Bank of New York, 101 Barclay Street,
22W, New York, New York 10286, telephone: (800) 524-4458.
Dividends........................... The Company presently expects to retain all available earnings, if any,
generated by its operations and does not expect to pay any cash dividends
in the foreseeable future. See 'Risk Factors -- Operating and Financing
Limitations Associated with Debt Covenants,' ' -- Dividend Policy and
Withholding Tax' and 'Dividends.'
Anti-Takeover Provisions............ The Certificate of Incorporation and Bylaws of the Company, and Delaware
statutory law, contain provisions (the 'Control Provisions') that may
have the effect of discouraging an acquisition of control of the Company
not approved by the Board of Directors of the Company (the 'Company
Board'). In addition, the Company has adopted a Stockholder Rights
Agreement (the 'Rights Agreement') and has provided for the issuance
under certain circumstances of a series of preferred stock having
enhanced voting rights (the 'Series B Preferred Stock'). The Control
Provisions, the Rights Agreement and the Series B Preferred Stock have
been designed to enable the Company to develop its business and foster
its long-term goals without disruptions caused by the threat of a
takeover not deemed by the Company Board to be in the best interests of
the Company and its stockholders. The Control Provisions, the Rights
Agreement and the Series B Preferred Stock may also have the effect of
discouraging third parties from making proposals involving an acquisition
or change of control of the Company, although such proposals, if made,
might be considered desirable by a majority of the Company's
stockholders. The Control Provisions, the Rights Agreement and the Series
B Preferred Stock could further have
</TABLE>
7
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<S> <C>
the effect of making it more difficult for third parties to cause the
replacement of the current management of the Company without the
concurrence of the Company Board. See 'Risk Factors -- Series B Preferred
Stock,' ' -- Certain Anti-Takeover Features,' 'Related Party
Transactions,' 'Purposes and Anti-Takeover Effects of Certain Provisions'
and 'Description of the Company's Capital Stock.'
Risk Factors........................ See 'Risk Factors' for a discussion of factors that should be considered in
connection with Company Common Stock received in the Distribution.
Relationship with WMS after the
Distribution...................... WMS will have no stock ownership in the Company upon consummation of the
Distribution. Each of WMS and its subsidiaries (excluding the Company and
its subsidiaries) on the one hand and the Company and its subsidiaries on
the other hand have their own separate and independent management. WMS
has, however, provided certain financial advice and assistance and
corporate secretary type services to the Hotel & Casino Business. For
purposes of governing certain ongoing relationships between the Company
and WMS after the Distribution and to provide for an orderly transition,
the Company and WMS have entered into or will enter into certain
agreements. Such agreements include: (i) the Plan of Reorganization and
Distribution Agreement (the 'Distribution Agreement'), providing for,
among other things, the Distribution, the Preliminary Transactions and
indemnifications with respect to the respective businesses of the Company
and WMS and (ii) the Tax Sharing Agreement pursuant to which the Company
and WMS will agree to allocate tax liabilities that relate to periods
prior to the Distribution Date. WMS may also continue to provide certain
advice and assistance to the Company on a transitional basis. In
addition, Louis J. Nicastro is a Director, Chairman of the Board and
Chief Executive Officer of the Company, as well as an officer and
director of all of the Company's subsidiaries, and he will continue to
serve as a Director and Chairman of the Board of WMS and a Director of
Midway Games Inc. (approximately 87% of which is owned by WMS) after the
Distribution. See 'Relationship Between the Company and WMS After the
Distribution.'
</TABLE>
THE COMPANY
The Company owns an interest in three of the leading hotels and casinos in
Puerto Rico -- the Condado Plaza Hotel & Casino (the 'Condado Plaza'), the El
San Juan Hotel & Casino (the 'El San Juan') and the El Conquistador Resort &
Country Club (the 'El Conquistador'). These three hotels are managed by WHGI,
which is 62% owned by the Company. In all, the Company owns interests in and
manages 1,875 suites and hotel rooms, 39,300 square feet of casino floor space
containing 120 gaming tables and 940 slot machines and approximately 146,000
square feet of convention and meeting space. These properties also include a
total of 22 restaurants, 41 shops, one showroom, three health and fitness
centers, 12 tennis courts, an 18-hole championship golf course, a marina and 25
cocktail and entertainment lounges. See the Consolidated Financial Statements of
the Company and the financial statements of nonconsolidated affiliates included
elsewhere herein.
8
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The Company's hotels are each focused on different market segments: the
Condado Plaza primarily services the business traveler, the El San Juan caters
to individual vacation travelers, as well as to small groups and conferences and
corporate executives and the El Conquistador offers extensive group and
conference facilities as well as attracting the individual leisure traveler.
In a survey of its readers conducted in 1996 by Conde Nast Traveler
magazine, the El Conquistador was rated among the top 100 resorts in the world
and both the El Conquistador and El San Juan were rated among the top 50
tropical resorts. The Company's casinos are among the largest and most
successful in Puerto Rico. In fiscal 1996, the Condado Plaza casino achieved the
highest table game play and the highest slot machine play in Puerto Rico while
the El San Juan casino achieved the second highest table game play and the third
highest slot machine play. The Company is a market share leader in Puerto Rico
maintaining average occupancy at the same or higher levels than reported by its
competitors.
The Condado Plaza was recently awarded a 'Four Diamond' rating by the
American Automobile Association for the ninth consecutive year. The Condado
Plaza maintained an average occupancy during the fiscal year ended June 30, 1996
of 87.4% and an average room rate of $138.68.
The El San Juan was recently awarded a 'Four Diamond' rating by the
American Automobile Association for the tenth year in a row. The El San Juan
maintained an average occupancy during the fiscal year ended June 30, 1996 of
82.3% and an average room rate of $185.30.
The El Conquistador has received the prestigious Gold Key Award by Meetings
and Conventions Magazine and the Paragon Award by Corporate Meetings and
Incentives Magazine for excellence in meetings and conventions. It was awarded
the American Automobile Association 'Four Diamond' rating for each of its two
full years of operation. During the fiscal year ended March 31, 1996, the
resort's second full fiscal year of operations, the El Conquistador had an
average occupancy of 70.9% and an average room rate of $198.99.
The Company's business strategy is to maximize the economic potential of
its existing properties while building on its hotel and casino expertise by
seeking other opportunities to manage and own hotels and casinos in Puerto Rico,
the Caribbean and elsewhere. The Company believes that its strengths make it an
attractive candidate to other hotel and casino owners seeking third-party
managers as well as an attractive joint venture partner for other hotel and
casino developers and owners.
The Company is constantly seeking new ways to reduce operating costs as
well as upgrade or add amenities to its hotel and casino properties to enhance
the overall experience of its guests. The lobby of the Condado Plaza was fully
renovated during the current fiscal year and restaurants, a nightclub and shops
were added. The El San Juan recently completed a major renovation and
refurbishment which included all guest rooms, guest room corridors, an
additional restaurant and public areas. The El Conquistador recently opened
three new restaurants, a nightclub and nine new retail shops. The El
Conquistador is currently negotiating to open a world class spa in the fall of
1997.
The Company's key strengths which have contributed to its success include:
Marketing -- The Company has extensive experience in marketing to three
distinct hotel guest types -- the corporate-executive traveler, the
individual leisure traveler and the group and convention traveler. Through
its 40 person U.S. mainland exclusive marketing service, numerous sales
professionals at each property, general sales agents in South America and
Europe as well as excellent strategic relationships with major airlines,
cruise ship operators and travel industry partners, the Company is able to
maintain its market share leadership in Puerto Rico. With this structure
in place, the Company is equipped to market additional properties.
Management -- The Company currently employs approximately 400 managers in
its three hotels and casinos. These managers provide a pool of experienced
talent to the Company for purposes of operating its existing properties as
well as for future training and expansion. The Company has a proven track
record of successful management of hotels and casinos due to long-term
management philosophy and commitment to excellence and service.
9
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Centralized Reservations System -- The Company maintains a centralized
reservation system staffed by trained personnel who handle over 500,000
telephone inquiries per year. This centralized system provides the Company
the opportunity to cross-sell its properties depending on supply and
demand, guest type and various other factors.
Centralized Purchasing -- Through the centralized purchasing system
established during fiscal 1996 for the three hotels and casinos it owns
and manages, the Company is able to reduce operating costs and achieve
certain economies of scale so that it can more effectively compete with
larger hotel chains as well as provide its guests first-class amenities at
lower incremental costs.
The Condado Plaza, the El San Juan and WHGI are owned in part by the
Company and in part by unaffiliated third parties (the 'Other Owners'). The
Company was formed in 1983 and in that same year, together with the Other
Owners, formed PPRA and WHGI for the purpose of acquiring and managing the hotel
and casino property now known as the Condado Plaza. A year later, the Company,
together with the Other Owners, caused the formation of Posadas de San Juan
Associates for the purpose of acquiring and managing, through WHGI, the hotel
and casino property now known as the El San Juan. Since 1993, the Company has
increased its ownership interests in PPRA and WHGI so that prior to completion
of the Preliminary Transactions the Company owns 95% of PPRA, a 50% interest in
the El San Juan and 62% of WHGI. Following completion of the Preliminary
Transactions, the Company's ownership interest in PPRA will increase to
approximately 99% and its effective ownership interests in the El San Juan and
WHGI will decrease to approximately 49.5% and 61.38%, respectively. In 1990 the
Company, together with the Other Owners, caused the formation of WKA El Con
Associates ('WKA') for the purpose of becoming a general and limited partner of
El Conquistador Partnership L.P. El Conquistador Partnership L.P. was formed by
WKA and Kumagai Caribbean, Inc. ('Kumagai'), a subsidiary of Kumagai Gumi Co.,
Ltd., a large Japanese construction company, for the purpose of acquiring and
renovating the hotel and casino property now known as the El Conquistador. The
Company's interest in WKA represents a 23.3% effective ownership interest in the
El Conquistador. The El Conquistador is also managed by WHGI. See 'Preliminary
Transactions' and 'Relationship Between the Company and the Company's
Subsidiaries After the Distribution.'
The Company's principal executive offices are located at 6063 East Isla
Verde Avenue, Carolina, Puerto Rico 00979; telephone: (787) 791-2000.
10
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CORPORATE STRUCTURE
PRE-DISTRIBUTION
The Hotel & Casino Business is currently conducted by WMS through its
wholly-owned subsidiary Williams Hotel Corporation and its subsidiaries. Except
for certain legal and financial activities provided by WMS, the Hotel & Casino
Business operations are separate from the Games Business. Prior to the
Preliminary Transactions and the Distribution, the organization structure of the
significant entities comprising the Hotel & Casino Business is as follows:
[CORPORATE STRUCTURE CHART]
POST-DISTRIBUTION
Upon consummation of the Preliminary Transactions and the Distribution, the
organization structure of the significant entities comprising the Company will
be as follows:
[CORPORATE STRUCTURE CHART]
11
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SUMMARY FINANCIAL DATA
The summary financial data set forth below for the fiscal years ended June
30, 1996, 1995, 1994, 1993 and 1992 have been derived from the audited
consolidated financial statements of Williams Hotel Corporation for such
periods. The summary financial data set forth below for the six months ended
December 31, 1996 and 1995 have been derived from the unaudited consolidated
financial statements of Williams Hotel Corporation, but, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
accruals, considered necessary for a fair presentation of the results for such
periods. The unaudited pro forma balance sheet data as of December 31, 1996 and
the unaudited pro forma statement of income data for the six months ended
December 31, 1996 and the year ended June 30, 1996 are derived from the
Unaudited Pro Forma Condensed Consolidated Financial Statements included
elsewhere herein. The data should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
Unaudited Pro Forma Condensed Consolidated Financial Statements and related
notes thereto, the Consolidated Financial Statements of Williams Hotel
Corporation and related notes thereto, separate statements of nonconsolidated
affiliates and other financial information included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
------------------------------- -----------------------------------------------------
(UNAUDITED)
1996 1996
SELECTED STATEMENT OF INCOME DATA PRO FORMA 1996 1995 PRO FORMA 1996 1995 1994 1993
--------- ------- ------- --------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................. $30,054 $30,054 $30,856 $68,694 $68,694 $70,878 $75,480 $70,680
--------- ------- ------- --------- ------- ------- ------- -------
--------- ------- ------- --------- ------- ------- ------- -------
Operating income..................... 4,702 5,102 3,843 12,258 13,558 7,624 13,892 14,162
Interest expense, net................ (583) (583) (1,053) (1,859) (1,859) (1,752) (3,551) (3,873)
Equity in income (loss) of
nonconsolidated affiliates......... (3,028) (3,028) (3,597) (3,465) (3,465) (7,003) (3,534) (135)
--------- ------- ------- --------- ------- ------- ------- -------
Income (loss) before tax provision
and minority interests............. 1,091 1,491 (807) 6,934 8,234 (1,131) 6,807 10,154
Credit (provision) for income
taxes.............................. (1,315) (224) 295 (2,621) (1,645) 234 7 (1,050)
Minority interests in (income)
loss............................... (1,276) (1,262) (1,194) (3,730) (3,636) (2,910) (4,597) (3,332)
Dividend on Condado Plaza Preferred
Stock.............................. -- (164) (296) -- (516) (557) -- --
--------- ------- ------- --------- ------- ------- ------- -------
Net income (loss).................... $(1,500) $ (159) $(2,002) $ 583 $ 2,437 $(4,364) $ 2,217 $ 5,772
--------- ------- ------- --------- ------- ------- ------- -------
--------- ------- ------- --------- ------- ------- ------- -------
Pro forma net income (loss)
reflecting income taxes on a
separate return basis (unaudited)
(2)................................ $(1,240) $(3,262) $ 1,537 $(6,500) $ 1,257 $ 5,579
------- ------- ------- ------- ------- -------
------- ------- ------- ------- ------- -------
Pro forma net income (loss) per share
of common stock (3)................ $ (0.25) $ 0.10
--------- ---------
--------- ---------
Pro forma shares outstanding (3)..... 6,050 6,050
--------- ---------
--------- ---------
SELECTED BALANCE SHEET DATA
<CAPTION>
SELECTED STATEMENT OF INCOME DATA 1992(1)
-------
<S> <C>
Revenues............................. $62,352
-------
-------
Operating income..................... 6,909
Interest expense, net................ (4,074)
Equity in income (loss) of
nonconsolidated affiliates......... 2,992
-------
Income (loss) before tax provision
and minority interests............. 5,827
Credit (provision) for income
taxes.............................. (1,881)
Minority interests in (income)
loss............................... 1,383
Dividend on Condado Plaza Preferred
Stock.............................. --
-------
Net income (loss).................... $ 5,329
-------
-------
Pro forma net income (loss)
reflecting income taxes on a
separate return basis (unaudited)
(2)................................ $ 2,407
-------
-------
Pro forma net income (loss) per share
of common stock (3)................
Pro forma shares outstanding (3).....
</TABLE>
SELECTED BALANCE SHEET DATA
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
PRO FORMA HISTORICAL
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
Investments in, receivables and
advances to nonconsolidated
affiliates..................... $ 27,890 $ 27,890
Property and equipment, net...... 44,126 44,126
Total assets..................... 109,984 104,850
Long-term debt, including current
maturities..................... 25,226 25,226
Minority interests............... 18,591 19,921
Shareholders' equity............. 47,069 37,341
</TABLE>
- ------------
(1) 1992 includes the operations of WHGI on a consolidated basis for the period
subsequent to the Company's April 30, 1992 purchase of an additional 5%
interest in WHGI which increased the Company's ownership to
(footnotes continued on next page)
12
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(footnotes continued from previous page)
55%. Prior to April 30, 1992, the operations of WHGI were included in the
consolidated financial statements by the equity method.
(2) Pro forma net income (loss) reflecting income taxes on a separate return
basis (unaudited) reflects the provision for income taxes without the tax
benefits allocated to the Company from WMS for utilization of partnership
losses in the WMS consolidated Federal income tax return.
(3) Pro forma net income (loss) per share of the Company was calculated using
anticipated distribution of one share of Company Common Stock for every four
of the 24,200,800 shares of WMS Common Stock outstanding on February 10,
1997.
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THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
In addition to ownership and operation of the Hotel & Casino Business, WMS,
through its subsidiaries, designs, publishes and markets interactive
entertainment software for both the coin-operated and home video game markets
('Video Games') and designs, manufactures and sells coin-operated pinball and
novelty games ('Pinball & Novelty Games') and video lottery terminals, slot
machines and multigame casino video machines ('Gaming Equipment'). The WMS Board
believes that the Distribution will relieve WMS and the Company from the
regulatory burdens and risks which exist as a result of the operations of the
Gaming Equipment business and Hotel & Casino Business within the same affiliated
group. These burdens and risks include risks to obtaining and retaining WMS'
Gaming Equipment and regulatory licenses, increased administrative costs,
increased time demands on personnel who have to monitor regulatory compliance,
and competitive disadvantages to both WMS and the Company.
In its Gaming Equipment business, WMS manufactures video lottery terminals
('VLTs'), slot machines and multigame casino video machines. The manufacture and
distribution of such Gaming Equipment is subject to extensive Federal, state,
local and foreign regulation. Although the laws and regulations of the various
jurisdictions in which WMS operates vary in their technical requirements,
virtually all of these jurisdictions require registrations, licenses, findings
of suitability, permits, documentation or qualification, including evidence of
financial stability and other forms of approval for companies engaged in the
manufacture and distribution of VLTs and gaming machines as well as for
officers, directors, major stockholders and key personnel of such companies.
Many jurisdictions have legalized gaming, but management of WMS believes
that success in Nevada is critical to success in the slot/video gaming machine
business inasmuch as Nevada is, by far, the largest single market for slot/video
gaming machines in the United States. Nevada's requirements, as well as the
requirements of gaming authorities in other states and countries with respect to
the Company's casino operations, impose risks and burdens on WMS and burdens on
the Company which management believes could be arduous. If the Hotel & Casino
Business is not conducted in a manner acceptable to gaming authorities located
outside of Puerto Rico, licenses may not be granted to WMS, or if granted, may
not be renewed or may be revoked, conditioned or limited. Furthermore, the
gaming authorities can take such action based on the operations of all three of
the Puerto Rico hotels and casinos in which the Company has an interest, even
though the Company is the majority owner of only the Condado Plaza.
Moreover, the hotel and casino properties in which the Company has an
interest could be constrained from a competitive standpoint by the requirement
that their operations be run in accordance with Nevada standards which are much
more demanding than the regulatory requirements of Puerto Rico. In order to
maximize the potential of Puerto Rico's operations, management of the Company
and its hotels and casinos must be permitted to run the business as aggressively
as possible within the limits of the applicable Puerto Rico regulatory
environment. Furthermore, even if it were economically desirable for the Puerto
Rico casinos to operate in accordance with Nevada regulatory requirements,
meeting those requirements is not within the full control of the Company. Two of
the three Puerto Rico hotels in which the Company has an interest have
substantial outside ownership interests, i.e., there is approximately 50%
outside ownership interest in the case of the El San Juan and approximately 77%
in the case of the El Conquistador. The Other Owners and Kumagai have been
required to submit information to Nevada and to undergo scrutiny by Nevada even
though they have no gaming business interests in Nevada, nor would they benefit
in any way from WMS' success in the Gaming Equipment business. Not only is
gathering information about such Other Owners difficult and time consuming, but
if such Other Owners should determine at any time not to provide information or
to transfer their interests, or if they should have any difficulties in their
other business affairs which Nevada finds unsatisfactory, WMS' Gaming Equipment
licenses could be put at risk.
The Company could be hampered in any attempts to expand its business or
restructure its financings by the requirement to have such transactions
scrutinized by Nevada and other gaming authorities outside Puerto Rico. The
Company may expand its business by acquiring or forming
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affiliations with other hotels and casinos in Puerto Rico, other areas in the
Caribbean and elsewhere. Such growth may entail joint ventures or other
relationships which will subject persons or operations to the scrutiny of Nevada
and other gaming authorities solely because of WMS' Gaming Equipment business.
Management of WMS is also concerned that the conduct of the Gaming Equipment and
Hotel & Casino Businesses under common ownership raises the possibility that
owners of casinos which compete with the Company's casinos may be less likely to
acquire WMS' Gaming Equipment than they would if WMS did not own any casinos.
In addition to such regulatory risks and burdens, management believes that
the separation of the Hotel & Casino Business as a separate public corporation
will enhance the Company's ability to attract and retain skilled employees.
Management believes highly-skilled employees in the hotel and casino business
are better able to be attracted and retained if their compensation arrangements
include opportunities to acquire equity, and thus, afford them the ability to
benefit directly from the success of their employer's business. At the current
time, it is only feasible for employees to be offered options or equity
interests in WMS since that is the only public company available for such
purpose. Because of the relative contributions of WMS' business segments, the
value of such equity interests is affected in large part by the fortunes of the
Video Games, Pinball & Novelty Games and Gaming Equipment businesses, and not
the Hotel & Casino Business. As such, equity interests in WMS are highly
inefficient mechanisms to compensate or incentivize employees of the Hotel &
Casino Business. If the Games Business does poorly, the equity interests of the
hotel and casino employees are likely to be of limited value regardless of how
well the hotels and casinos perform. Additionally, management also believes that
the separation will permit the Company and WMS to focus exclusively on their own
respective businesses.
Although it is intended that WMS and the Company will conduct their
respective businesses substantially independently following the Distribution and
that the Company will conduct its business almost exclusively with companies
other than WMS, it is contemplated that various agreements will be entered into
which will govern in certain respects the relationship between WMS and the
Company and certain other matters following the Distribution. For example, WMS
may provide certain administrative services to the Company on a transitional
basis. Ms. Barbara M. Norman, currently Vice President, Secretary and General
Counsel of WMS will resign those positions some time after the Distribution
Date. It is intended that Ms. Norman become Vice President, Secretary and
General Counsel and a Class III Director of the Company at such time. In
addition, the agreements governing the Distribution will contain
cross-indemnities, tax sharing arrangements and other provisions relating to the
separation of the companies.
OPINIONS OF FINANCIAL ADVISORS
In reaching a decision to undertake the Distribution, the WMS Board will
consider, among other things, the advice of its financial advisors, Oppenheimer
& Co., Inc. ('Oppenheimer') and Houlihan, Lokey, Howard & Zukin, Inc. ('Houlihan
Lokey'). Summaries of the opinions proposed to be rendered by WMS' financial
advisors with respect to the Distribution are set forth below. The opinions to
be rendered by WMS' financial advisors assume that the Distribution is
consummated substantially as described in this Information Statement.
Fairness Opinion. Oppenheimer was engaged as a financial advisor to WMS on
July 16, 1996 to, among other things, provide financial advice to WMS with
respect to the Distribution. In rendering such advice, Oppenheimer assisted WMS'
management in determining the capital structures of the two companies following
the Distribution. At the request of WMS, Oppenheimer rendered an opinion dated
[ , 1997] to the WMS Board that, based upon the matters set forth
in such opinion and on other factors such firm deemed relevant, and subject to
the assumptions set forth therein, it was of the opinion that the Distribution
is fair, from a financial point of view, to the holders of WMS Common Stock.
Oppenheimer's opinion is addressed to the WMS Board in connection with its
consideration of the Distribution and addresses only the fairness, from a
financial point of view, of the Distribution to the holders of WMS Common Stock.
Oppenheimer's opinion is not a recommendation to any current or prospective
stockholder of WMS or the Company as to any investment decision such person may
make, nor any opinion or estimate as to the trading prices of the WMS Common
Stock or the Company
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Common Stock following the Distribution. The full text of the opinion of
Oppenheimer, which sets forth certain assumptions made, matters considered and
limitations on the review undertaken, is attached as Annex I hereto and is
incorporated herein by reference and should be read in its entirety in
connection with this Information Statement. The summary of Oppenheimer's opinion
set forth herein is qualified in its entirety by reference to the full text of
such opinion. It is a condition to the consummation of the Distribution that
Oppenheimer deliver an updated opinion to the WMS Board, to be dated as of the
date of the WMS Board's declaration of the special dividend (the 'Declaration
Date'), in substantially the same form as the opinion set forth in Annex I. See
' -- Conditions; Termination.'
In preparing its opinion, Oppenheimer was not responsible for independent
verification of any information, whether publicly available or furnished to it,
concerning the Company or WMS, including, without limitation, any financial
information, forecasts or projections, considered by it in connection with the
rendering of its opinion. Accordingly, Oppenheimer assumed and relied upon the
accuracy and completeness of all such information and did not prepare or obtain
any independent evaluation or appraisal of any of the assets or liabilities of
the Company or WMS. With respect to the financial forecasts and projections made
available by WMS to Oppenheimer and used in its analysis, Oppenheimer assumed
that the financial forecasts and projections were reasonably prepared on bases
reflecting the best available estimates and judgments of the measurement of the
Company and WMS as to the matters covered thereby, and in rendering its opinion,
Oppenheimer expressed no view as to the reasonableness of such forecasts and
projections or the assumptions on which they are based. In addition, Oppenheimer
has reviewed the opinion of Houlihan Lokey referred to below. Oppenheimer's
opinion is necessarily based upon economic, market and other conditions as in
effect on, and the information made available to it as of, the date of its
opinion.
Oppenheimer's opinion is also based on, among other things, its review of
the terms of the Distribution, historical and pro forma financial information
and certain business information relating to WMS, including information
contained in this Information Statement, the historical stock prices of WMS
Common Stock, as well as certain financial forecasts and other data provided by
WMS relating to the businesses and prospects of WMS and the Company. Oppenheimer
also conducted discussions with WMS' management with respect to the businesses
and prospects of the Company and WMS, physically inspected certain of the
Company's properties and assets and conducted such financial studies, analyses
and investigations as such firm deemed appropriate in rendering its opinion.
Oppenheimer is an internationally recognized investment banking firm that,
among other things, provides financial advisory services in connection with
mergers and acquisitions and corporate restructuring. WMS selected Oppenheimer
based on its long-standing familiarity with WMS and its experience in analyses
of transactions of this type.
In connection with the Distribution, WMS will pay Oppenheimer a fee of not
less than $500,000, including $200,000 upon delivery of Oppenheimer's fairness
opinion. Oppenheimer has from time to time performed other investment banking
services for WMS and Midway Games Inc., approximately 87% of which is owned by
WMS, for which it has received customary compensation. Mr. Richard D. White, a
Managing Director of Oppenheimer, is a director of Midway Games Inc.
In addition, WMS has agreed, among other things, to reimburse Oppenheimer
for reasonable fees and disbursements of counsel and other reasonable
out-of-pocket expenses incurred in connection with the services provided by
Oppenheimer, not to exceed $25,000 in the aggregate unless otherwise agreed to
by WMS. WMS has also agreed to indemnify and hold harmless Oppenheimer and
certain of its related parties to the full extent lawful from and against
liabilities, including certain liabilities under the Federal securities laws,
incurred in connection with the firm's engagement.
Solvency Opinion. In a written opinion dated [ , 1997]
Houlihan Lokey stated that, based upon the considerations set forth therein and
on other factors it deemed relevant, it was of the opinion that, assuming the
Distribution is consummated as proposed, with respect to the Company,
immediately after giving effect to the Distribution: (a) on a pro forma basis,
the fair value and present fair saleable value of the Company's aggregate assets
would exceed the Company's stated liabilities and identified contingent
liabilities; (b) the Company should be able to pay and/or refinance its debts as
they become absolute and mature; and (c) the capital remaining in the Company
after the Distribution
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would not be unreasonably small for the business in which the Company is
engaged, as management has indicated it is now conducted and is proposed to be
conducted following consummation of the Distribution. The full text of Houlihan
Lokey's opinion is set forth in Annex II hereto and is incorporated herein by
reference and should be read in its entirety in connection with this Information
Statement. The summary of Houlihan Lokey's opinion set forth herein is qualified
in its entirety by reference to the text of such opinion. It is a condition to
the consummation of the Distribution that Houlihan Lokey deliver an updated
opinion to the WMS Board, to be dated as of the Declaration Date, in
substantially the same form as the opinion set forth in Annex II. See
' -- Conditions; Termination.'
In preparing its opinion, Houlihan Lokey relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
the Company, and did not independently verify such information or undertake any
independent appraisal of the assets or liabilities of the Company. Such opinion
was based on business, economic, market and other conditions existing on the
date such opinion was rendered.
Houlihan Lokey's opinion is also based on, among other things, its review
of: (i) certain audited and unaudited financial statements with respect to the
Company; (ii) certain forecasts and projections prepared by the Company's
management; (iii) the historical market prices and trading volume for WMS'
publicly-traded securities; (iv) certain business information relating to the
Company, including that contained in this Information Statement; (v) other
publicly-available financial data for the Company and certain companies deemed
comparable to the Company; and (vi) the agreements relating to the Distribution,
as well as drafts of certain other documents to be delivered upon the
Distribution, including, but not limited to, the reports of the Company's
independent public accountants. In rendering its opinion, Houlihan Lokey also
(i) visited certain facilities and business offices of the Company, (ii)
conducted discussions with the Company's senior management with respect to the
operations, financial condition, future prospects and projected operations and
performance of the Company, (iii) conducted discussions with representatives of
the Company's counsel with regard to certain matters and (iv) conducted such
other studies, analyses and investigations as it deemed appropriate.
In connection with the Distribution, WMS has paid Houlihan Lokey a fee of
$30,000 and will pay an additional fee of up to $45,000 upon delivery of the
solvency opinion.
DISTRIBUTION AGENT
The Distribution Agent is The Bank of New York, 101 Barclay Street, 22 W,
New York, New York 10286, telephone: (800) 524-4458.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set forth
in the Distribution Agreement that will be executed on or prior to the
Distribution Date among the Company, Williams Hotel Corporation and WMS.
WMS will effect the Distribution on the Distribution Date by delivering all
outstanding shares of Company Common Stock to the Distribution Agent for
distribution to the holders of record of WMS Common Stock as of the close of
business on the Record Date. The Distribution will be made on the basis of one
share of Company Common Stock for every four shares of WMS Common Stock held as
of the close of business on the Record Date. The actual total number of shares
of Company Common Stock to be distributed will depend on the number of shares of
WMS Common Stock outstanding on the Record Date. The shares of Company Common
Stock will be fully paid and nonassessable, and the holders thereof will not be
entitled to preemptive rights. See 'Description of the Company's Capital Stock.'
It is expected that certificates representing shares of Company Common Stock
will be mailed to holders of record of WMS Common Stock as soon as practicable
after the Distribution Date.
HOLDERS OF WMS COMMON STOCK SHOULD NOT SEND CERTIFICATES TO THE COMPANY,
WMS OR THE DISTRIBUTION AGENT. THE DISTRIBUTION AGENT WILL MAIL THE STOCK
CERTIFICATES REPRESENTING SHARES OF COMPANY COMMON STOCK AS SOON AS PRACTICABLE
AFTER THE DISTRIBUTION DATE. WMS STOCK CERTIFICATES WILL CONTINUE TO REPRESENT
SHARES OF WMS COMMON STOCK AFTER THE DISTRIBUTION IN THE SAME AMOUNT SHOWN ON
THE CERTIFICATES.
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No certificates or scrip representing fractional interests in shares of
Company Common Stock ('Fractional Shares') will be issued to holders of WMS
Common Stock as part of the Distribution. The Distribution Agent, acting as
agent for holders of WMS Common Stock otherwise entitled to receive in the
Distribution certificates representing Fractional Shares, will aggregate and
sell in the open market all Fractional Shares at then prevailing prices and
distribute the net proceeds to the stockholders entitled thereto. WMS will pay
the fees and expenses of the Distribution Agent in connection with such sales.
No holder of WMS Common Stock will be required to pay any cash or other
consideration for the shares of Company Common Stock to be received in the
Distribution or to surrender or exchange shares of WMS Common Stock or to take
any other action in order to receive Company Common Stock pursuant to the
Distribution.
RESULTS OF THE DISTRIBUTION
After the Distribution, the Company will be a separate public company which
will own and operate the Hotel & Casino Business. The number and identity of the
holders of Company Common Stock immediately after the Distribution will be
substantially the same as the number and identity of the holders of WMS Common
Stock on the Record Date. Immediately after the Distribution, the Company
expects to have approximately 2,000 holders of record of Company Common Stock
and approximately 6,050,200 shares of Company Common Stock outstanding based on
the number of record stockholders and outstanding shares of WMS Common Stock as
of the close of business on February 10, 1997 and the distribution ratio of one
share of Company Common Stock for every four shares of WMS Common Stock. The
actual number of shares of Company Common Stock to be distributed will be
determined as of the Record Date. The Distribution will not affect the number of
outstanding shares of WMS Common Stock or any rights of WMS stockholders.
FEDERAL INCOME TAX ASPECTS OF THE DISTRIBUTION
The WMS Board has conditioned the Distribution on the receipt of a ruling
from the IRS to the effect, among other things, that the Distribution will
qualify as a tax free spin-off under Section 355 of the Internal Revenue Code of
1986, as amended (the 'Code'), and that for Federal income tax purposes:
(1) No gain or loss will be recognized by (and no amount will be
included in the income of) a holder of WMS Common Stock upon the receipt of
Company Common Stock in the Distribution.
(2) The aggregate basis of the WMS Common Stock and the Company Common
Stock in the hands of the stockholders of WMS immediately after the
Distribution will be the same as the aggregate basis of the WMS Common
Stock held immediately before the Distribution, allocated in proportion to
the fair market value of each.
(3) Any stockholder of WMS receiving cash in lieu of Fractional Shares
will recognize gain or loss equal to the difference between the amount of
cash received and the basis such stockholder would have had in the
Fractional Shares.
(4) The holding period of the Company Common Stock received by the
stockholders of WMS will include the holding period of the WMS Common Stock
with respect to which the Distribution will be made, provided that such
stockholder held WMS Common Stock as a capital asset on the Distribution
Date.
(5) No gain or loss will be recognized by WMS upon the Distribution.
Application was made to the IRS for a ruling to the foregoing effect on
October 9, 1996. On January 31, 1997 the IRS issued the requested ruling.
The summary of Federal income tax consequences set forth above does not
purport to cover all Federal income tax consequences that may apply to all
categories of stockholders. All stockholders should consult their own tax
advisors regarding the particular Federal, state, local and foreign tax
consequences of the Distribution to such stockholders.
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For a description of the Tax Sharing Agreement pursuant to which the
Company and WMS have provided for various tax matters, see 'Relationship Between
the Company and WMS After the Distribution -- Tax Sharing Agreement.'
LISTING AND TRADING OF COMPANY COMMON STOCK
There is not currently a public market for Company Common Stock. Prices at
which Company Common Stock may trade prior to the Distribution on a
'when-issued' basis or after the Distribution cannot be predicted. Until Company
Common Stock is fully distributed and an orderly market develops, the prices at
which trading in such stock occurs may fluctuate significantly. The prices at
which Company Common Stock trades will be determined by the marketplace and may
be influenced by many factors, including, among others, the depth and liquidity
of the market for Company Common Stock, investor perception of the Company and
the industry in which the Company participates, the Company's dividend policy
and general economic and market conditions. Such prices may also be affected by
certain provisions of the Company's Certificate of Incorporation, Bylaws, Rights
Agreement and Series B Preferred Stock as each will be in effect following the
Distribution, which may have an anti-takeover effect. See 'Risk
Factors -- Dividend Policy and Withholding Tax,' ' -- Certain Anti-Takeover
Features' and 'Purposes and Anti-Takeover Effects of Certain Provisions.'
WMS intends to apply to list Company Common Stock on the New York Stock
Exchange. The Company initially will have approximately 2,000 stockholders of
record based upon the number of stockholders of record of WMS as of February 10,
1997.
WMS filed a request for a no-action letter with the Commission Staff on
November 22, 1996, setting forth, among other things, WMS' view that the
Distribution of Company Common Stock does not require registration under the
Securities Act of 1933, as amended (the 'Securities Act'). The WMS Board has
conditioned the Distribution on, among other things, receipt of the
aforementioned no-action letter. On February 25, 1997, the Commission Staff
issued the requested no-action letter. It is the Company's belief that Company
Common Stock distributed to WMS' stockholders in the Distribution will be freely
transferable, except for (i) securities received by persons who may be deemed to
be 'affiliates' of WMS within the meaning of Rule 144 promulgated under the
Securities Act in which case such persons may not publicly offer or sell Company
Common Stock received in connection with the Distribution except pursuant to a
registration statement under the Securities Act or pursuant to Rule 144 and (ii)
securities received by persons that were holders of restricted shares of WMS
Common Stock in which case such holders will receive Company Common Stock
containing the same such restrictions. For purposes of Rule 144(c), the Company
will not be deemed to satisfy the currently available public information
requirements under the Securities Exchange Act of 1934, as amended (the
'Exchange Act'), until 90 days after the Distribution Date.
CONDITIONS; TERMINATION
The WMS Board has conditioned the Distribution upon, among other things,
(i) the IRS having issued a ruling in response to WMS' request in form and
substance satisfactory to the WMS Board; (ii) the Commission Staff having issued
a no-action letter in response to WMS' request in form and substance
satisfactory to the WMS Board; (iii) completion of the Preliminary Transactions
contemplated by the Distribution Agreement to occur prior to the Distribution
having been consummated; (iv) the Company Board having been elected by WMS, the
sole stockholder of the Company, and the Certificate of Incorporation and the
Bylaws of the Company, as each will be in effect after the Distribution, having
been adopted and being in effect; (v) the Registration Statement on Form 10 with
respect to Company Common Stock (the 'Form 10 Registration Statement') having
become effective under the Exchange Act; (vi) Oppenheimer having delivered an
updated opinion to the WMS Board, dated as of the Declaration Date, in
substantially the same form as the opinion set forth in Annex I; and (vii)
Houlihan Lokey having delivered an updated opinion to the WMS Board, dated as of
the Declaration Date, in substantially the same form as the opinion set forth in
Annex II. WMS has received the private letter ruling from the IRS and the
no-action letter from the Commission Staff referred to above. There are certain
individual consents, which, if not obtained, might have a material adverse
effect on the Company. Obtaining these consents is not, however, a condition of
the
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Distribution. See 'Risk Factors -- Certain Consents.' WMS believes that there
are no individual consents, which, if not obtained, would have a material
adverse effect on WMS. Any of these conditions may be waived in the discretion
of the WMS Board. Even if all of the above conditions are satisfied, the WMS
Board has reserved the right to abandon, defer or modify the Distribution or
other elements of the Distribution at any time prior to the Distribution Date;
however, the WMS Board will not waive any of the conditions to the Distribution
or make any changes in the terms of the Distribution unless the WMS Board
determines that such changes would not be materially adverse to the WMS
stockholders. See 'Relationship Between the Company and WMS After the
Distribution -- Distribution Agreement.'
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by WMS solely to provide
information to WMS stockholders who will receive Company Common Stock in the
Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of the Company or WMS. The
information contained in this Information Statement is believed by the Company
and WMS to be accurate as of the date set forth on its cover. Changes may occur
after that date, and neither the Company nor WMS will update the information
except in the normal course of their respective disclosure practices.
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RISK FACTORS
Stockholders of WMS should be aware that the Distribution and ownership of
Company Common Stock involves certain risk factors, including those described
below and elsewhere in this Information Statement, which could adversely affect
the value of their holdings. Neither the Company nor WMS makes, nor is any other
person authorized to make, any representation as to the future market value of
Company Common Stock. Any forward-looking statements contained in this
Information Statement should not be relied upon as predictions of future events.
Such forward-looking statements may be found in the material set forth under
'Summary of Certain Information,' 'Risk Factors' and 'Management's Discussion
and Analysis of Financial Condition and Results of Operations,' as well as
elsewhere in this Information Statement generally. Such statements are
necessarily dependent on assumptions, data or methods that may be incorrect or
imprecise and that may be incapable of being realized. The Company's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including those set forth in the
following risk factors and elsewhere in this Information Statement.
LACK OF OPERATING HISTORY AS A SEPARATE PUBLIC COMPANY
The Hotel & Casino Business has been conducted by WMS through its
subsidiaries and affiliates and accordingly, does not have an operating history
as a separate public company. Historically, WMS on certain occasions has
provided credit enhancement, loans, advances or other capital in connection with
the Hotel & Casino Business. Following the Distribution, with the exception of
amounts paid or contributed by WMS in the Preliminary Transactions, the Company
will be dependent upon its own financial resources including internally
generated funds and its ability to raise capital or borrow funds to expand
and/or meet the capital requirements of its operations and any future growth.
Management of the Hotel & Casino Business has historically relied upon WMS
for certain legal and financial services. After the Distribution Date, the
Company will be responsible for maintaining its own administrative functions,
except for certain transitional services provided by WMS pursuant to agreements
between the Company and WMS. See 'Relationship Between the Company and WMS After
the Distribution.'
FINANCIAL LEVERAGE OF EL CONQUISTADOR; OWNERSHIP INTEREST IN EL CONQUISTADOR
The El Conquistador is a highly leveraged property having at December 31,
1996 aggregate short-term and long-term indebtedness of approximately
$202,695,947, of which $145,000,000 represents term loans secured by
substantially all of the assets of the El Conquistador; $6,000,000 represents
outstanding amounts under a secured revolving credit facility; $5,070,910
represents equipment financing arrangements; $37,353,783 represents loans plus
accrued interest due its partners; and $9,271,254 represents incentive
management fees plus interest thereon and other amounts due WHGI. The aggregate
annual interest costs and expenses in respect of such indebtedness is
approximately $16,870,000 of which approximately $13,750,000 is paid on a
current basis and the balance of $3,120,000 is deferred. $120,000,000 of such
indebtedness will be due February 1, 1998, unless extended, and is secured by
substantially all of the assets of the El Conquistador. If such financing is not
renewed or replaced and as a consequence thereof the existing lenders foreclose
on the El Conquistador, the Company would probably suffer a total loss of its
investment in the property of approximately $2,034,000 at December 31, 1996, a
write-off by WHGI of its incentive management fees and certain other amounts due
from the El Conquistador of approximately $7,621,685 at December 31, 1996 and a
loss of WHGI's agreement to manage the El Conquistador. WHGI received basic
management fees from the El Conquistador of $3,170,000 and $3,025,000 during the
fiscal years ended June 30, 1996 and 1995, respectively. In the event that the
proceeds of a sale of the property on foreclosure are insufficient to satisfy
the approximately $160,000,000 of mortgage indebtedness, then, the Company will
be contingently liable for approximately $4,000,000. In addition, as of December
31, 1996 WHGI is contingently liable for approximately $3,033,000 with respect
to certain equipment financing arrangements and certain other obligations of the
El Conquistador. The Company has retained an investment banking firm to assist
in structuring the refinancing of the El Conquistador debt. Based on
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the operating history of the El Conquistador, the Company believes such
refinancing will be achieved, but there can be no assurance thereof. See 'Hotel
Financings and Certain Contingent Obligations.'
The El Conquistador is owned by El Conquistador Partnership L.P., a
Delaware limited partnership, of which the Company owns a 23.3% indirect
interest. The balance of the ownership interests in the El Conquistador are
owned 26.7% by the Other Owners and 50% by Kumagai. The partners have had good
relations with each other. However, should significant disagreements develop
between the Company and the Other Owners, or the Company and/or the Other Owners
and Kumagai, such disagreements could adversely affect the operations of the El
Conquistador. See 'Relationship Between the Company and the Company's
Subsidiaries After the Distribution -- The El Conquistador.'
OPERATING AND FINANCING LIMITATIONS ASSOCIATED WITH DEBT COVENANTS
Each of the hotels and casinos in which the Company has an interest and
WHGI has separate financing arrangements which are non-recourse, subject to
certain limited exceptions, to any of the owners of the hotels and casinos and
WHGI, as applicable. A default by one of the hotels and casinos or WHGI under
any of their respective financing arrangements would not necessarily trigger a
default under any of the other hotels' financing arrangements or provide
creditors of the defaulting entity any rights against a non-defaulting entity,
except with respect to certain specific property and guarantees which serve as
collateral under the financing arrangements in default. See 'Hotel Financings
and Certain Contingent Obligations.'
The aggregate interest expense for the Company's three hotels and casinos
and WHGI for the 1996 fiscal year was approximately $23,788,000 of which
$19,846,000 was paid on a current basis and $3,942,000 was deferred. The ability
of the Company's individual hotels and casinos to meet their respective debt
service obligations is largely dependent upon the future performance of each
hotel and casino which will be subject to financial, business and other factors,
including factors beyond its control, such as competition and weather-related
disasters. Currently or in the future financing for the hotels and casinos and
WHGI, among other things, may restrict in certain circumstances incurrence of
additional indebtedness, the payment of dividends or other distributions to
owners, redemption of capital stock or repurchase of other equity interests,
creation of additional liens, disposition of certain assets, engagements in
mergers and the entry into additional transactions with affiliates. These
restrictions could limit the ability of the hotels in which the Company has an
interest to respond to changing market and economic conditions and provide for
capital expenditures. If the hotels and casinos in which the Company has an
interest are unable to generate sufficient cash flow from operations, they may
be required to refinance their outstanding debt or obtain additional financing.
There can be no assurance that any such refinancing would be possible or that
any additional financing, if available, could be obtained on terms that would be
favorable or acceptable to the Company. See 'Hotel Financings and Certain
Contingent Obligations.'
The existing financing arrangements for the Condado Plaza do not prohibit
the payment of dividends provided there exists no payment default. Distributions
to the partners of El Conquistador are restricted by such partnership's existing
financing arrangements and are expected to continue to be restricted by any new
arrangements. Existing financing arrangements for the El San Juan prohibit
distributions to its partners in excess of 50% of Excess Net Free Cash Flow (as
defined). There can be no assurance that dividends or other distributions to
owners can be made. There is currently no contractual restriction on the payment
of dividends by WHGI. See 'Hotel Financings and Certain Contingent Obligations.'
TOURISM TAX EXEMPTIONS
The hotels in which the Company has an interest and WHGI enjoy certain tax
exemptions under the Puerto Rico Tourism Incentive Acts designed to encourage
the island's tourism industry. The tourism grants provided under such acts
afford tax exemptions to the grantees for ten years, which may be extended for
an additional ten years. The hotels in which the Company has an interest and
WHGI have historically had tax exemptions under the Tourism Incentive Act of
1983 and have applied for new grants under the Tourism Incentive Act of 1993.
The exemptions do not apply to casino revenues. The
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grants are conditioned upon continued compliance with various terms and
conditions set forth in the grants. Failure of the applicable entity to comply
with these requirements could result in the revocation of the grant resulting in
the elimination of the exemptions provided. There can be no assurance that these
exemptions will continue to be available, and if changed, what effect a change
would have on the Company's operations. See Note 6 to the Consolidated Financial
Statements.
CAPITAL REQUIREMENTS
Each of the three hotel and casino properties in which the Company has an
ownership interest requires substantial ongoing expenditures for the purchase of
property and equipment and refurbishment of facilities in order to continue to
provide first-class facilities to the hotels' and casinos' guests. During the
fiscal years ended June 30, 1996, 1995 and 1994, the Condado Plaza and El San
Juan made aggregate capital expenditures of $4,390,000, $5,797,000 and
$10,482,000, respectively. Additionally, the Company anticipates aggregate
capital expenditures for those two hotels in fiscal 1997 to be approximately
$9,000,000 including the completion of the refurbishment of the Condado Plaza
lobby, casino, restaurants and nightclub. For fiscal years 1996 and 1995, the El
Conquistador had capital expenditures of $864,000 and $3,002,000, respectively.
Expenditures at the El Conquistador in 1996 were low due to the newness of the
facility. Capital expenditures at the El Conquistador for fiscal 1997 and 1998
have been budgeted at $1,800,000 and $2,800,000, respectively. There can be no
assurance that cash provided from operating activities or additional financing
will be available in such amounts in the future for similar capital expenditures
and refurbishment projects.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends to a significant extent upon the
performance of senior management and its ability to continue to attract,
motivate and retain highly qualified employees. The loss of services of senior
management or other key employees could have a material adverse effect on the
Company. Competition for highly skilled employees with management, marketing and
other specialized training in the hotel and casino business is intense,
especially in Puerto Rico and other parts of the Caribbean, and there can be no
assurance that the Company will be successful in attracting and retaining such
personnel. Specifically, the Company may experience increased costs in order to
attract and retain skilled employees.
The Company is a party to a stockholders agreement with respect to WHGI
which provides, among other things, that commencing April 30, 1999, or such
earlier date as Louis J. Nicastro ceases to be Chairman of the Board of WHGI and
to regularly exercise the functions of Chief Executive Officer of WHGI, then
action by the Board of Directors of WHGI with respect to certain major decisions
shall require an affirmative vote of 65% of the members of the entire Board and,
to the extent a vote of stockholders is required by law to authorize such a
major decision, then an affirmative vote of the holders of 66 2/3% of the
outstanding shares of WHGI Common Stock will be required. See 'Relationship
Between the Company and the Company's Subsidiaries After the
Distribution -- WHGI.'
SERIES B PREFERRED STOCK
Prior to the Distribution, the Company will enter into an agreement with
Mr. Louis J. Nicastro pursuant to which the Company can at any time prior to
December 31, 1999 require Mr. Nicastro to purchase 300,000 shares of Series B
Preferred Stock for an aggregate purchase price of $3,000,000. The Company has
granted Mr. Nicastro an option to purchase such 300,000 shares of Series B
Preferred Stock for $3,300,000 which option becomes exercisable in the event
that any person or entity hereafter acquires or announces his or its intention
to acquire 10% or more of the outstanding Common Stock of the Company. Such
option expires on the earlier to occur of December 31, 1999 or the death of Mr.
Nicastro. Among other features, the Series B Preferred Stock entitles the holder
thereof to five votes per share of Series B Preferred Stock and to vote together
with the Company Common Stock as if one class. If such Series B Preferred Stock
were issued as of the Distribution Date, such shares would represent
approximately 19.9% of the then outstanding voting power of the Company's
capital stock. The Series B Preferred Stock might make a change in control of
the Company more difficult and could
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discourage potential acquisition proposals without the consent of Mr. Nicastro.
See 'Related Party Transactions' and 'Purposes and Anti-Takeover Effects of
Certain Provisions -- Series B Preferred Stock' and 'Description of the
Company's Capital Stock -- Series B Preferred Stock.'
LACK OF FULL CONTROL
The Company is not a majority owner of the El San Juan and the El
Conquistador. Accordingly, the Company does not control such entities. Pursuant
to the stockholders agreement among the owners of WHGI, should Louis J. Nicastro
cease to be Chairman and Chief Executive Officer of WHGI and in any event
commencing April 30, 1999, then certain super majority voting requirements of
the WHGI Board of Directors and stockholders will apply. See 'Relationship
Between the Company and the Company's Subsidiaries After the Distribution.'
Although the Company has generally good relationships with the Other Owners of
its subsidiaries, there can be no assurance that such relationships will
continue. WHGI, as the manager of the three hotels and casinos in which the
Company has an interest, has substantial influence and control over the
day-to-day operations of each property.
CHANGES IN TAX LAW
Section 936 of the Code was recently amended. That section had historically
provided tax incentives for U.S. companies to invest funds earned in Puerto Rico
back into Puerto Rico, the result of which was to encourage business in Puerto
Rico and make available to certain Puerto Rico businesses financing at rates
below those generally offered by commercial banks. As a result of the recent
changes in the Code, such favorable financing rates are no longer available. In
addition, as a direct result of the change, debt service expenses at the El
Conquistador will be increased on an annual basis by approximately $700,000. See
'Hotel Financings and Certain Contingent Obligations -- The El Conquistador.'
Arguably, the changes in provisions of Section 936 of the Code which phase
out annually through 2005 certain tax benefits which are applicable to domestic
corporations, such as pharmaceutical companies, doing business in Puerto Rico
may result in such corporations reducing or closing their Puerto Rico operations
and reducing their re-investments in Puerto Rico. The Company does not yet know
the full extent to which its business will be affected by such tax law changes.
However, if the effect of the changes is to reduce the number of business
travelers to Puerto Rico, such reduction could adversely affect the occupancy
and room rates achievable by the Company's hotels, particularly the Condado
Plaza which caters to the traveling executive.
COMPETITION
The hotel and casino business in the Caribbean region is highly
competitive. The Company's facilities compete with each other and with numerous
hotels and resorts on the island of Puerto Rico (including 16 other hotels and
resorts with casinos) and on other Caribbean islands as well as those in the
southeastern United States and Mexico. The Company competes with such chains as
Hyatt, Marriott, Hilton, Holiday Inn and Westin as well as numerous other hotel
and resort chains and independent hotel and motel operators. The Company
competes for hotel and casino customers to a lesser extent with the Nevada and
New Jersey hotels and casinos as well as other casinos now operating in the
United States. During the past three years, five new hotels and casinos have
opened in Puerto Rico alone and four hotels and casinos are expected to open in
Puerto Rico during the next 12 months. Continuous capital improvement programs
are essential to stay current with industry trends and maintain the Company's
market share. Many hotels with which the Company competes are owned or managed
by hotel chains possessing substantially greater financial and marketing
resources than those of the Company. There can be no assurance that the Company
will effectively compete in the future.
RELIANCE ON SINGLE MARKET
All of the Company's current hotel and casino interests are located in
Puerto Rico. Any adverse events such as hurricanes, water shortages, labor
strikes and the like which may affect Puerto Rico generally will adversely
affect the Company's entire business. Additionally, Puerto Rico is served by a
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small number of airlines and the market is dominated by American Airlines. Any
adverse events in the airline industry as a whole, and especially to American
Airlines, including airline strikes, increased fuel prices or accidents could
have a material adverse effect on the Company's business and financial
condition. On February 15, 1997, the Allied Pilots Association, a 9,000 member
pilots union, called a strike against American Airlines. Immediately thereafter,
President Clinton invoked emergency powers under the 1926 Railway Labor Act
halting the pilots' strike for a period of 60 days. The President named a
three-member panel to recommend a non-binding resolution of the dispute. The
panel has 30 days to devise recommendations and the parties have another 30 days
to consider them, with no work stoppage in the meantime. There can be no
assurance that the parties will come to an agreement within the 60 day period
thereby avoiding a strike.
SEASONALITY
Tourism in Puerto Rico is at its peak during the months of December through
April, with occupancy levels and room rates lower during the balance of the
year. Successful operation of the hotels and casinos is dependent in large part
to a successful high season, the ability of the hotels and casinos to attract
guests during the off-season months and careful management of costs throughout
the year. Weather, airline strikes, water shortages and other uncontrollable
events may adversely affect occupancy levels and, therefore, cash flows as well
as profits at any time of the year the affects of which may not be recovered in
any given year. The El Conquistador, with its high debt service requirements is
particularly vulnerable to these types of events. Efforts are made at all of the
hotels and casinos to actively market during off-season months so as to minimize
the adverse effects of such events. There can be no assurance that such efforts
will be successful.
CASINO GAMING REGULATION
The ownership and operation of casinos in Puerto Rico and elsewhere is
heavily regulated. The Company has been granted a franchise as an owner of the
three casinos it currently operates and certain of its employees must be
licensed to work in the casinos. Each casino is required to renew its franchise
quarterly; and, unless a change of ownership of a franchisee has occurred or
regulators have reason to believe that reinvestigation of the franchisee is
necessary, renewal is generally automatic. Although the Company has no reason to
believe that any of its current franchises will not be renewed, there can be no
assurance of such renewal. Additionally, in the event the Company seeks to
acquire interests in other casinos, there can be no assurance that it will be
able to obtain the licenses and/or franchises necessary to operate such casinos.
See 'Business -- Government Regulation and Licensing.'
Puerto Rico casinos compete with other jurisdictions in which gaming is
permitted. Changes in gaming laws can affect both positively and negatively the
attractiveness of a casino to visitors. There can be no assurance that the
Puerto Rico gaming laws will not be changed or modified so as to make Puerto
Rico casinos less attractive to visitors.
ABSENCE OF PUBLIC MARKET FOR COMPANY COMMON STOCK
Prior to the Distribution there has been no public market for Company
Common Stock. Although it is intended that Company Common Stock be listed on the
New York Stock Exchange, there can be no assurance that an active trading market
in Company Common Stock will develop or, if it does develop, of the prices at
which trading Company Common Stock will occur after the Distribution. Prices for
the Company Common Stock will be determined in the marketplace and may be
influenced by many factors including quarterly variations in the financial
results of the Company. Until Company Common Stock is fully distributed and an
orderly market develops, the prices at which trading in such stock occurs may
fluctuate significantly and may not reflect the inherent value of Company Common
Stock. See 'The Distribution -- Listing and Trading of Company Common Stock.'
CHANGES IN TRADING PRICES OF WMS COMMON STOCK
It is expected that WMS Common Stock will continue to be listed and traded
on the New York Stock Exchange after the Distribution. As a result of the
Distribution, the trading price range of WMS
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Common Stock is expected to be lower than the trading price range of WMS Common
Stock prior to the Distribution. The combined trading prices of Company Common
Stock and WMS Common Stock held by stockholders after the Distribution may be
less than, equal to or greater than the trading prices of WMS Common Stock prior
to the Distribution. See 'The Distribution -- Listing and Trading of Company
Common Stock.'
DIVIDEND POLICY AND WITHHOLDING TAX
The Company expects that it will retain all available earnings, if any,
generated by its operations for the development and growth of its business and
does not anticipate paying cash dividends on Company Common Stock in the
foreseeable future. Additionally, the Company is a holding company whose only
material assets are its interests in its subsidiaries. As a result, the Company
conducts no business and will be dependent on distributions from its
subsidiaries to pay dividends. Each hotel has separate financing arrangements
which, in certain cases, may limit the declaration of dividends or other
distributions to their owners. Following completion of the Preliminary
Transactions, the Company's interest in the El San Juan and WHGI will all be
owned by PPRA, the owner of the Condado Plaza. Therefore, the Company's ability
to receive dividends from such entities will be dependent on the ability of PPRA
to declare and pay dividends. The existing financing arrangements for the
Condado Plaza do not prohibit the payment of dividends provided there exists no
payment default with respect to such financing. Distributions to the partners of
El Conquistador are restricted by its existing financing arrangements and are
expected to continue to be restricted by any new arrangements for quite some
time. Existing financing arrangements for the El San Juan prohibit distributions
to its owners in excess of 50% of Excess Net Free Cash Flow (as defined). There
is currently no contractual restriction on the payment of dividends by WHGI.
There can be no assurance that dividends can be declared and paid by the Company
to its public stockholders. See 'Hotel Financings and Certain Contingent
Obligations.'
If the Company is deemed for tax purposes to be doing business in Puerto
Rico, then dividends paid to the Company's stockholders who are not Puerto Rico
residents out of the Company's earnings subject to the Tourism Incentive Act of
1983 will be subject to Puerto Rico withholding tax of 10%. Dividends paid by
the Company to such stockholders out of earnings subject to the Tourism
Incentive Act of 1993 will not be subject to such 10% withholding.
EFFECT ON CONVERSION PRICE OF WMS CONVERTIBLE SUBORDINATED DEBENTURES
Under the terms of WMS' 5 3/4% Convertible Subordinated Debentures due
2002, the debentures are convertible into WMS Common Stock at a conversion price
of $29.00 per share. As a result of the Distribution, the conversion price will
be adjusted to reflect a proportional decrease in value of WMS Common Stock.
Following the adjustment of the conversion price in connection with the
Distribution, the number of shares of WMS Common Stock issuable upon the
conversion of all outstanding 5 3/4% Convertible Subordinated Debentures will
increase.
CERTAIN TAX CONSIDERATIONS
WMS has received a favorable ruling from the IRS to the effect, among other
things, that the Distribution will qualify as a tax free spin-off under Section
355 of the Code. See 'The Distribution -- Federal Income Tax Aspects of the
Distribution.' Such a ruling, while generally binding upon the IRS, is subject
to certain factual representations and assumptions. If such factual
representations and assumptions were incorrect in a material respect, such
ruling would be jeopardized. WMS is not aware of any facts or circumstances
which would cause such representations and assumptions to be untrue.
If the Distribution were not to qualify under Section 355 of the Code, then
in general, a corporate tax would be payable by the consolidated group of which
WMS is the common parent based upon the difference between (i) the fair market
value of Company Common Stock and (ii) the adjusted basis of Company Common
Stock. The corporate level tax would be payable by WMS. See 'Relationship
Between the Company and WMS After the Distribution -- Tax Sharing Agreement.' In
addition, under the consolidated return regulations, each member of the
consolidated group (including the Company) is severally liable for such tax
liability.
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Furthermore, if the Distribution were not to qualify under Section 355 of
the Code, then each holder of WMS Common Stock who receives shares of Company
Common Stock in the Distribution would be treated as if such stockholder
received a taxable distribution in an amount equal to the fair market value of
Company Common Stock received, which would result in (i) a dividend to the
extent paid out of WMS' current and accumulated earnings and profits; then (ii)
a reduction in such stockholder's basis in WMS Common Stock to the extent the
amount received exceeds the amount referenced in clause (i); and then (iii) gain
from the exchange of WMS Common Stock to the extent the amount received exceeds
the sum of the amounts referenced in clauses (i) and (ii).
CERTAIN ANTI-TAKEOVER FEATURES
Upon consummation of the Distribution, certain provisions of the Company's
Certificate of Incorporation and Bylaws and Delaware statutory law could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. The Control Provisions could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offers at a price above the then current market value of Company Common
Stock. The Control Provisions may also inhibit fluctuations in the market price
of Company Common Stock that could result from takeover attempts. See 'Purposes
and Anti-Takeover Effects of Certain Provisions.'
The Company Board has the authority to issue shares of Preferred Stock and
to determine the designations, preferences and rights and the qualifications or
restrictions of those shares without any further vote or action by the
stockholders and has designated the rights and preferences of 300,000 shares of
Series B Preferred Stock. The rights of the holders of Company Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
any Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate actions, could have the effect of making it
more difficult for a third-party to acquire a majority of the outstanding voting
stock of the Company. In addition, the Company will, upon consummation of the
Distribution, be subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law (the 'DGCL'). In general, this statute
prohibits a publicly held Delaware corporation from engaging in a 'business
combination' with an 'interested stockholder' for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
See 'Purposes and Anti-Takeover Effects of Certain Provisions -- Series B
Preferred Stock' and ' -- Certain Provisions of the Delaware General Corporation
Law.'
The Company has designated 300,000 shares of Series B Preferred Stock which
Mr. Louis J. Nicastro has the right to acquire in the event a non-exempt person
or entity acquires 10% or more of the Company Common Stock. The Series B
Preferred Stock has enhanced voting rights. Based upon the number of outstanding
shares of Company Common Stock anticipated immediately following the
Distribution, the Series B Preferred Stock would represent 19.9% of the voting
power of the Company's capital stock. The effect of the foregoing may be to
inhibit or make more difficult a change in control of the Company that may be
beneficial to the Company's stockholders. See 'Purposes and Anti-Takeover
Effects of Certain Provisions -- Series B Preferred Stock.'
In addition, the preferred stock purchase rights to be issued pursuant to
the Rights Agreement will provide discount purchase rights to stockholders of
the Company upon certain acquisitions of beneficial ownership of 15% or more of
the outstanding shares of Company Common Stock. The effect of the foregoing may
be to inhibit a change in control of the Company that may be beneficial to the
Company's stockholders. See 'Purposes and Anti-Takeover Effects of Certain
Provisions -- Stockholder Rights Agreement.'
The Company will have a classified Board consisting of three classes, each
class serving for a term of three years. The classification has the effect of
making it more difficult for stockholders to change the composition of the
Company Board in a short period of time. At least two annual meetings instead of
one will generally be required to effect a change in a majority of the Company
Board. The existence of a classified Board can therefore have the effect of
discouraging a third-party from making a tender offer or otherwise attempting to
obtain control of the Company. See 'Purposes and Anti-Takeover Effects of
Certain Provisions.'
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CERTAIN CONSENTS
Certain financing documents in connection with the El Conquistador provide
in substance that a transfer which results in WMS El Con Corp. (the owner of the
Company's interest in the El Conquistador) ceasing to be wholly-owned by WMS,
while not prohibited, will constitute a default under such financing documents
and the El Conquistador Partnership L.P. joint venture agreement absent consent
from the respective lenders and Kumagai, the other 50% partner of El
Conquistador Partnership L.P. The Distribution will cause WMS El Con Corp. to
cease to be wholly-owned by WMS and, therefore, the Distribution may result in a
default under such financing documents the effect of which will permit such
lenders to accelerate the subject indebtedness. The Distribution would also
constitute a transfer of a partnership interest not permitted under the El
Conquistador Partnership L.P. joint venture agreement. If appropriate consents
are not obtained, there may be material adverse consequences to the El
Conquistador and ultimately to the Company. Consents have been requested from
the relevant parties and the Company believes that these consents will be
obtained. There can be no assurance that such consents will be obtained and if
not obtained, that such lenders will not accelerate the applicable indebtedness.
See 'Hotel Financings and Certain Contingent Obligations -- The El
Conquistador.'
FRAUDULENT TRANSFER CONSIDERATIONS; LEGAL DIVIDEND REQUIREMENTS
It is a condition to the consummation of the Distribution that the WMS
Board shall have determined the permissibility of the Distribution under Section
170 of the DGCL and received a satisfactory opinion regarding the solvency of
the Company. See 'The Distribution -- Opinions of Financial Advisors -- Solvency
Opinion.' There is no certainty, however, that a court would find the solvency
opinion rendered by WMS' financial advisor to be binding on creditors of the
Company and WMS or that a court would reach the same conclusions as the WMS
Board in determining whether the Company or WMS was insolvent at the time of, or
after giving effect to, the Distribution.
If a court in a lawsuit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, were to find that at the time WMS
effected the Distribution, the Company or WMS, as the case may be, (i) was
insolvent; (ii) was rendered insolvent by reason of the Distribution; (iii) was
engaged in a business or transaction for which the Company's or WMS' remaining
assets, as the case may be, constituted unreasonably small capital; or (iv)
intended to incur, or believed it would incur, debts beyond its ability to pay
as such debts matured, such court may be asked to void the Distribution (in
whole or in part) as a fraudulent conveyance and require that the stockholders
return the special dividend (in whole or in part) to WMS or require the Company
to fund certain liabilities for the benefit of creditors. The measure of
insolvency for purposes of the foregoing will vary depending upon the
jurisdiction whose law is being applied. Generally, however, the Company or WMS,
as the case may be, would be considered insolvent if the fair value of their
respective assets were less than the amount of their respective liabilities or
if they incurred debt beyond their ability to repay such debt as it matures. In
addition, under Section 170 of the DGCL (which is applicable to the
Distribution) a corporation generally may make distributions to its stockholders
only out of its surplus (net assets minus capital) and not out of capital.
WMS' Board and management believe that, in accordance with the solvency
opinion rendered in connection with the Distribution and their own examination
of the financial statements of WMS, (i) the Company will be solvent at the time
of the Distribution (in accordance with the foregoing definitions), will be able
to repay or refinance its debts as they mature following the Distribution and
will have sufficient capital to carry on its business, and (ii) the Distribution
will be made entirely out of surplus, as provided under Section 170 of the DGCL.
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RELATIONSHIP BETWEEN THE COMPANY
AND WMS AFTER THE DISTRIBUTION
For the purpose of governing certain of the ongoing relationships between
the Company and WMS after the Distribution and to provide mechanisms for an
orderly transition, the Company and WMS have entered or will enter into the
various agreements, and will adopt policies, as described in this section.
DISTRIBUTION AGREEMENT
Prior to the Distribution Date, the Company, Williams Hotel Corporation and
WMS will enter into the Distribution Agreement, which provides for, among other
things, (i) the Preliminary Transactions (see 'Preliminary Transactions'); (ii)
the Distribution; (iii) cross-indemnification between the Company and WMS with
respect to the respective businesses of the Company and WMS; and (iv) certain
other arrangements for the furnishing of certain financial, legal and corporate
secretary functions for a transitional period following the Distribution.
Subject to certain exceptions, the Distribution Agreement provides for
cross-indemnities designed to allocate, effective as of the Distribution Date,
financial responsibility for the liabilities arising out of or in connection
with the Hotel & Casino Business to the Company and its subsidiaries, and
financial responsibility for the liabilities arising out of or in connection
with the Games Business to WMS and its subsidiaries. See ' -- Tax Sharing
Agreement.'
The Distribution Agreement provides for the Preliminary Transactions to be
consummated prior to the Distribution Date, for the Company to indemnify WMS in
respect of certain limited guarantees provided by WMS in respect of the El
Conquistador, and for WMS to provide, following the Distribution Date, certain
financial, legal and corporate services to the Company on a transitional basis.
With respect to any services provided by WMS to the Company, the Company will
reimburse WMS for the estimated cost of such services based upon an hourly rate
for employees furnishing the services calculated using the individual's base
salary.
The Distribution Agreement also provides that by the Distribution Date, the
Company's Certificate of Incorporation and Bylaws shall be in the forms attached
hereto as Annex III and IV, respectively, and that the Company and WMS will take
all actions which may be required to elect or otherwise appoint, as directors of
the Company, the persons indicated herein. See 'Management,' 'Purposes and Anti-
Takeover Effects of Certain Provisions' and 'Description of the Company's
Capital Stock.'
The Distribution Agreement also provides that each of the Company and WMS
will be granted access to certain records and information in the possession of
the other, and requires the retention by each of the Company and WMS for a
period of 10 years following the Distribution of all such information in its
possession, and thereafter requires that each party give the other prior notice
of its intention to dispose of such information. In addition, the Distribution
Agreement provides for the allocation of shared privileges with respect to
certain information and requires each of the Company and WMS to obtain the
consent of the other prior to waiving any shared privilege.
WMS has a registered trademark of the name 'Williams' for video output game
machines, coin-operated video games, video game cartridges and disks, computer
video game software and coin-operated pinball machines. The Distribution
Agreement provides that following the Distribution, the Company and its
subsidiaries, particularly WHGI, will continue to be able to use the 'Williams'
name in the ownership and management of hotels and casinos but will not use the
'Williams' name as a corporate name, except WHGI, and will not use the
'Williams' name outside its business of owning and managing hotels and casinos.
WMS has agreed not to use the 'Williams' name in the future in connection with
the ownership and management of hotels and casinos.
The Distribution Agreement provides that, except as otherwise set forth
therein or in any related agreement, all costs and expenses in connection with
the Distribution will be borne by WMS.
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ADDITIONAL ACTIONS AND RELATIONSHIPS
Prior to the Distribution Date, WMS, as sole stockholder of the Company,
will have approved the adoption by the Company of a Stock Option Plan (the
'Plan') for purposes of granting awards of options to purchase Company Common
Stock to directors, officers, employees and consultants and advisors of the
Company and its subsidiaries subsequent to the Distribution. WMS has also
approved the reservation by the Company of 900,000 shares under the Plan. For a
discussion of the principal terms and conditions of the Plan, see
'Management -- Stock Option Plan.'
After the Distribution the only person who will serve as an officer and/or
director of the Company and WMS and their respective subsidiaries will be Louis
J. Nicastro. Mr. Nicastro, the Chairman of the Board and Chief Executive Officer
of the Company, as well as an officer and director of all of the Company's
subsidiaries, will continue to serve as a Director and Chairman of the Board of
WMS and as a Director of Midway Games Inc., approximately 87% of which is owned
by WMS. Although the Chairman of the Board of WMS, Mr. Nicastro is not an
executive officer of WMS. There will be no other overlapping officers or
directors of WMS and its subsidiaries on the one hand and the Company and its
subsidiaries on the other hand.
Prior to the Distribution, the Company will enter into the Put and Call
Agreement (as defined) with respect to the Series B Preferred Stock. See
'Related Party Transactions.'
Some time after the Distribution, Barbara M. Norman, currently a Vice
President, Secretary and General Counsel of WMS will resign from WMS and become
a Director, Vice President, Secretary and General Counsel of the Company. She
will, however, continue to render limited advisory and consulting services to
WMS and its subsidiaries on matters on which she previously worked. She will be
paid directly by WMS for such services or be reimbursed by WMS for time devoted
to WMS matters based upon her base salary.
TAX SHARING AGREEMENT
The Company and WMS will enter into a tax sharing agreement (the 'Tax
Sharing Agreement') that defines the parties' rights and obligations with
respect to deficiencies and refunds of Federal, state, Puerto Rico and other
income or franchise taxes relating to the Company's business for tax years prior
to the Distribution and with respect to certain tax attributes of the Company
after the Distribution. In general, with respect to periods ending on or before
the last day of the year in which the Distribution occurs, WMS is responsible
for (i) filing both consolidated Federal tax returns for the WMS affiliated
group and combined or consolidated state tax returns for any group that includes
a member of the WMS affiliated group, including in each case the Company and its
subsidiaries for the relevant periods of time that such companies were members
of the applicable group; and (ii) paying the taxes relating to such returns
(including any subsequent adjustments resulting from the redetermination of such
tax liabilities by the applicable taxing authorities). The Company will
reimburse WMS for a defined portion of such taxes relating to the Hotel & Casino
Business. The Company is responsible for filing returns and paying taxes related
to the Hotel & Casino Business for subsequent periods. The Company and WMS have
agreed to cooperate with each other and to share information in preparing such
tax returns and in dealing with other tax matters.
PRELIMINARY TRANSACTIONS
Williams Hotel Corporation is a direct wholly-owned subsidiary of WMS whose
only assets are 100% of the outstanding stock of each of the Company, WMS El Con
Corp. and ESJ. The Company in turn, owns (i) 95% of the outstanding common stock
of PPRA, the owner of the Condado Plaza, (ii) 100% of the outstanding common
stock of WMS Property Inc., the owner of approximately 150 acres of vacant land
adjacent to the El Conquistador, and (iii) 62% of the outstanding WHGI Common
Stock. WMS also owns 82 shares, consisting of all the outstanding shares, of
Condado Plaza Preferred Stock with an aggregate liquidation value of $4,100,000.
Set forth below is a diagram of the organization structure of the
significant entities comprising the Hotel & Casino Business before the
Preliminary Transactions and the Distribution.
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HOTEL & CASINO BUSINESS BEFORE THE PRELIMINARY TRANSACTIONS AND THE DISTRIBUTION
[CORPORATE STRUCTURE CHART]
Prior to the Distribution, WMS will cause the following transactions to
occur: (i) the Merger of Williams Hotel Corporation with and into the Company;
(ii) WMS to contribute to the Company's capital the Condado Plaza Preferred
Stock together with accrued and unpaid dividends, net intercompany accounts due
WMS from the Hotel & Casino Business of approximately $4,500,000 and
approximately $923,000 in cash; (iii) PPRA to pay all accrued and unpaid
dividends of approximately $246,000 on the Condado Plaza Preferred Stock and
redeem a portion of such shares for an aggregate redemption price of
approximately $2,050,000; (iv) WHGI to pay dividends of approximately $3,500,000
to the holders of WHGI Common Stock, $2,170,000 of which will be paid to the
Company; (v) WMS to pay its outstanding intercompany receivables due ESJ of
approximately $5,077,000; (vi) WMS Property Inc. to merge with and into ESJ; and
(vii) the Company to transfer to PPRA all of the common stock of ESJ, which owns
a 50% general partnership interest in Posadas de San Juan, the owner of the El
San Juan, and its 62% of the outstanding WHGI common stock in consideration for
the issuance of additional shares of capital stock of PPRA.
31
<PAGE>
<PAGE>
Set forth below is a diagram of the organization structure of the
significant entities comprising the Company after the Preliminary Transactions
and the Distribution.
HOTEL & CASINO BUSINESS AFTER THE PRELIMINARY TRANSACTIONS AND THE DISTRIBUTION
[CORPORATE STRUCTURE CHART]
The Company has initiated negotiations with the 5% unaffiliated owner of
PPRA to purchase its interest in that entity. If those negotiations are
unsuccessful, then the 5% unaffiliated interest will be reduced based upon the
relative values of the Condado Plaza and the assets contributed by the Company
to PPRA as determined by the Board of Directors of PPRA. Based upon preliminary
estimates of values, the Company believes that the Other Owners' interest will
be reduced as a result of the transfer of assets in exchange for additional
shares of capital stock of PPRA to approximately 1% and the Company will
thereafter own approximately 99% of PPRA. As a result of the transfer of the
Company's ownership interests in Posadas de San Juan Associates and WHGI to a
less than wholly-owned subsidiary, the Company's effective ownership percentages
in such entities will be reduced to 49.5% and 61.38%, respectively.
The Company will be the surviving corporation of the Merger and
concurrently with such Merger, the Company will change its name to
[ ]. Promptly following the Merger, the Company will cause WMS
El Con Corp. to change its name to a name bearing no resemblance to 'WMS.'
All of the foregoing transactions are referred to herein collectively as
the 'Preliminary Transactions.'
RELATIONSHIP BETWEEN THE COMPANY AND THE
COMPANY'S SUBSIDIARIES AFTER THE DISTRIBUTION
The Company is a holding company for interests in three hotels and casinos
in Puerto Rico (the Condado Plaza, the El San Juan and the El Conquistador) and
in the management company (WHGI) for each of such hotels and casinos.
32
<PAGE>
<PAGE>
THE CONDADO PLAZA
Following the Distribution, the Company will own approximately 99% of PPRA,
the owner of the Condado Plaza. The remaining approximately 1% will be owned by
Empire Hotel Corporation, a corporation owned and controlled by Burton and
Richard Koffman (the 'Koffmans') of Binghamton, New York or members of their
families (the 'Koffman Family'). The Company has and after consummation of the
Preliminary Transactions will continue to have voting control of PPRA. The
Company is a party to a stockholders agreement pursuant to which the Koffmans
are entitled to designate two directors of PPRA and the Company has the right to
designate all other directors. There are currently seven members of the Board of
Directors of PPRA, five of which have been designated by the Company. In
addition, PPRA and each stockholder has the right of first refusal with respect
to a sale of the other stockholder's stock in PPRA. The Company has the right to
require the sale of the Koffman Family stock in PPRA in connection with a sale
of all of the stock of PPRA. The Company will also own 82 shares of Condado
Plaza Preferred Stock with a liquidation preference of $50,000 per share or
$4,100,000 in the aggregate of which approximately $2,050,000 will be redeemed
prior to the Distribution Date as part of the Preliminary Transactions. The
Series A Preferred Stock pays cumulative cash dividends at a rate of 8% per
annum on the aggregate liquidation preference of such stock and is redeemable,
in whole or in part, at the option of PPRA, at any time. The Series A Preferred
Stock does not entitle the holders thereof to vote on any matters except as
required by law.
The Condado Plaza is managed by WHGI pursuant to a management agreement
expiring in 2003.
THE EL SAN JUAN
The El San Juan is owned by Posadas de San Juan Associates, a New York
general partnership. The Company owns a 50% general partnership interest in such
partnership and as of the Distribution Date its effective ownership will be
reduced to 49.5%. Of the remaining 50%, 40% is owned by affiliates of the
Koffman Family and 10% is owned by a former employee of WHGI. The Posadas de San
Juan Associates partnership is governed by a venturers committee consisting of
six persons, three of whom are designated by the Company and the remaining three
are designated by the Other Owners.
The El San Juan is managed by WHGI pursuant to a management agreement
expiring in 2005.
THE EL CONQUISTADOR
The El Conquistador is owned by El Conquistador Partnership L.P., a
Delaware limited partnership. 50% of the general and limited partnership
interests are owned by Kumagai, a subsidiary of Kumagai Gumi Co., Ltd., a large
Japanese construction company, and the remaining 50% general and limited
partnership interests are owned by WKA, a New York general partnership of which
46.54% is owned by the Company's wholly owned subsidiary WMS El Con Corp.,
37.23% is owned by members of the Koffman Family and the remaining 16.23% is
owned by the former employee of WHGI who is also an owner of the El San Juan.
The Company's interest in WKA represents a 23.3% ownership interest in the El
Conquistador.
Pursuant to the El Conquistador partnership agreement, WKA is the managing
general partner of the partnership provided, however, that certain major
decisions require the consent of Kumagai. Such major decisions include the
transfer of a general partnership interest, the entry into certain significant
agreements including loan agreements, the sale of a significant asset, and the
approval of yearly budgets.
Pursuant to the WKA partnership agreement, WKA is governed by a venturers
committee consisting of six persons, three of whom are designated by the Company
and the remaining three are designated by the Other Owners. The WKA partnership
agreement also prohibits the transfer of any interest in the WKA partnership
except to an affiliate of the partners.
The El Conquistador is managed by WHGI pursuant to a management agreement
expiring in 2013.
WHGI
WHGI is a Delaware corporation. The Company owns 62% of the outstanding
WHGI Common Stock and as of the Distribution Date its effective ownership will
be reduced to 61.38%. The remaining
33
<PAGE>
<PAGE>
approximately 38% is owned by affiliates of the Koffman Family. The Company is a
party to a stockholders agreement pursuant to which the Company has the right to
designate a majority of the Board of Directors of WHGI. The stockholders
agreement further provides that there shall not be less than seven nor more than
eight directors. There are currently seven directors, five of whom have been
designated by the Company and two of whom have been designated by the Koffman
Family. The Koffman Family has the right to designate up to three members of the
WHGI Board of Directors, but currently has only designated two directors. Such
stockholders agreement provides that actions by the Board of Directors shall
require a simple majority vote except that commencing April 30, 1999, or such
earlier date as Louis J. Nicastro ceases to be Chairman of the Board of WHGI and
to regularly exercise the functions of Chief Executive Officer of WHGI, then
action by the Board with respect to certain major decisions shall require an
affirmative vote of 65% of the members of the entire Board and, to the extent a
vote of the stockholders is required by law to authorize such a major decision,
then an affirmative vote of the holders of 66 2/3% of the outstanding shares of
WHGI common stock will be required. The major decisions requiring such a vote
include the issuance of additional shares, a sale of substantially all of the
assets of WHGI, compensation of directors and incurrence of indebtedness in
excess of $2.0 million for any single item or $5.0 million in the aggregate.
Under the stockholders agreement, each of the stockholders has granted WHGI and
the other stockholder the right of first refusal with respect to such
stockholder's shares of WHGI.
Mr. Louis J. Nicastro is and after the Distribution Date will remain
Chairman and Chief Executive Officer of the Company and WHGI. Mr. Nicastro will
not be separately compensated by WHGI in his capacity as Chief Executive Officer
of WHGI but he will be entitled to receive directors fees. See
'Management -- Compensation of Directors' and ' -- Employment Agreements.'
Brian R. Gamache is President and Chief Operating Officer of WHGI and, as
of the Distribution Date, will also be President and Chief Operating Officer of
the Company. Richard F. Johnson is Senior Vice President Chief Financial Officer
of WHGI and, as of the Distribution Date, will be Treasurer and Chief Financial
Officer of the Company. See 'Management -- Executive Officers,' ' -- Executive
Officer Compensation' and ' -- Employment Agreements.'
ACCOUNTING TREATMENT
The historical consolidated financial statements of Williams Hotel
Corporation present its financial position, results of operations and cash flows
as if it was a separate entity for all periods presented. WMS' historical basis
in the assets and liabilities has been carried over.
HOTEL FINANCINGS AND
CERTAIN CONTINGENT OBLIGATIONS
THE CONDADO PLAZA
At December 31, 1996, PPRA, the owner of the Condado Plaza, had aggregate
long-term indebtedness (current and non-current) of $23,295,412 of which
$23,100,000 represents a term loan due to its secured mortgage lender (the
'Condado Term Loan'); and $195,412 represents equipment financing arrangements.
PPRA has available a revolving line of credit of up to $2,000,000. PPRA also has
outstanding $4,100,000 of Condado Plaza Preferred Stock (all of which will be
owned by the Company and of which approximately $2,050,000 is expected to be
redeemed as part of the Preliminary Transactions). The principal amount of the
Condado Term Loan is payable in semi-annual installments of $1,200,000 each in
1997, $1,350,000 each in 1998 and the remaining balance of $18,000,000 is due
September 1, 1998. The Condado Term Loan and the related revolving line of
credit are secured by substantially all of the assets of the Condado Plaza. The
Condado Term Loan restricts PPRA from declaring or paying any dividends or
making any advances to any parent, stockholder or affiliate of PPRA unless at
the time PPRA is in compliance with its payment obligations under the Condado
Term Loan.
In connection with additional financing for the El Conquistador in May
1992, PPRA granted a mortgage of $3,750,000 to the Government Development Bank
for Puerto Rico (the 'GDB') on certain
34
<PAGE>
<PAGE>
vacant land owned by PPRA and used by the Condado Plaza as a parking lot. The
original purchase price of that land was $2,100,000.
THE EL SAN JUAN
At December 31, 1996, Posadas de San Juan Associates, the owner of the El
San Juan, had aggregate long-term indebtedness (current and non-current) of
$49,555,079 of which $24,749,737 represents a term loan due to its secured
mortgage lender (the 'ESJ Term Loan'); $799,627 represents equipment financing
arrangements; and $24,005,715 represents unpaid basic and incentive management
fees due WHGI plus accrued interest thereon. The El San Juan also has available
a $1,000,000 revolving credit facility. The ESJ Term Loan is payable in monthly
installments with the balance of $7,500,000 due in March 2003. The ESJ Term Loan
and related revolving line of credit are secured by substantially all of the
assets of the El San Juan and are non-recourse to the general partners of
Posadas de San Juan Associates. The ESJ Term Loan requires the El San Juan to
annually reserve an amount equal to at least 4% of its Annual Gross Revenues (as
defined) for the replacement of furniture, fixtures and equipment, requires
mandatory prepayments equal to 50% of Excess Cash Flow (as defined) until the
last installment is reduced to $3,000,000 and prohibits distributions to the
owners or payment of $16.5 million of unpaid management fees existing at the
time the loan was entered into except out of 50% of Excess Net Free Cash Flow.
THE EL CONQUISTADOR
At December 31, 1996, El Conquistador had aggregate short-term and
long-term indebtedness of $202,695,947 of which $145,000,000 represents term
loans provided by various secured mortgage lenders; $6,000,000 represents
amounts outstanding under a revolving credit facility; $5,070,910 represents
equipment financing arrangements; $37,353,783 represents loans plus accrued
interest from its partners and $9,271,254 represents incentive management fees
and other amounts due WHGI. The revolving credit facility is limited to
$6,000,000 in principal amount outstanding at any time, expires in October 1997,
and is secured by a first lien on its accounts receivable and a third mortgage
on the El Conquistador's assets.
The first mortgage lien in the amount of $120,000,000 requires quarterly
payments of interest and will become due February 1, 1998, unless extended or
refinanced. The obligation is non-recourse to the partners of El Conquistador
payable solely from the assets of the partnership.
The El Conquistador is party to an interest rate swap agreement with
respect to the $120,000,000 of first mortgage indebtedness. El Conquistador's
obligations in respect of a default under the swap arrangements ('Swap
Breakage') are secured by a $20,000,000 mortgage on the El Conquistador which is
pari passu with the first mortgage lien. Swap Breakage in excess of $20,000,000
has been guaranteed, one-half by WHGI and one-half by an affiliate of Kumagai.
The second mortgage lien on the El Conquistador is in the principal amount
of $25,000,000. The loan secured by such lien is non-recourse to the partners of
the El Conquistador and is the subject of a subordination and standstill
agreement with the holder of the first mortgage. The second mortgage becomes due
in February 2006 and must be prepaid with any Excess Refinancing Proceeds (as
defined).
The third mortgage lien secures the El Conquistador's revolving credit
facility in the principal amount of $6,000,000 which expires in October 1997.
The third mortgage is also subject to the subordination and standstill agreement
with the holder of the first mortgage lien. The revolving credit facility is
also secured by a first lien on El Conquistador's accounts receivable.
In May 1992, each of the partners of El Conquistador borrowed $4,000,000
from the GDB and in turn loaned the proceeds of such loans to El Conquistador on
the same terms as the loans from GDB. Such $8,000,000 is included in the
$37,353,783 of loans from its partners referred to above. In connection with
such financing, the Company agreed to deposit in escrow any monies it may
receive from the El Conquistador, other than basic management fees and the fair
value of goods or services actually provided, as security for the repayment of
such indebtedness. Interest on such indebtedness is deferred and added to the
outstanding principal of such indebtedness during the first five years of the
loan. Principal payments commence March 31, 2000 and are required to be made
quarterly thereafter
35
<PAGE>
<PAGE>
until May 5, 2002 when the entire unpaid principal and interest becomes due. The
partners' obligations with respect to accrued interest on such loans is secured
by a fourth mortgage on the El Conquistador in the principal amount of
$6,000,000. In addition, the obligations of WKA in respect of its $4,000,000
indebtedness to GDB is secured by land owned by PPRA having an original cost of
$2,100,000; land owned by WHGI having an original cost of $1,661,200 and a
guaranty by WMS in the amount of $1,000,000. The Company will assume and agree
to indemnify WMS in respect of such guaranty. The other partners of WKA have
provided indemnities and collateral to WMS for their proportionate share of such
guaranty.
WHGI
In connection with additional financing for the El Conquistador in May
1992, WHGI granted a mortgage of $1,500,000 to the GDB on certain land located
near the El San Juan. The original purchase price of that land was $1,661,200.
WHGI has guaranteed certain equipment financing arrangements and other
obligations of the El Conquistador of approximately $3,033,000 as of December
31, 1996 of which $1,273,000 is secured by WHGI certificates of deposit.
THE COMPANY
In connection with additional financing for the El Conquistador in May
1992, WMS guaranteed up to $1,000,000 of the principal amount of the $4,000,000
loan made by GDB to WKA. The Other Owners of WKA have agreed with WMS to bear a
portion of such obligation equal to their respective ownership interests in WKA
and have pledged to WMS as collateral for their obligation cash and 15 shares of
common stock of PPRA. The Company will indemnify WMS in respect of its
obligations and associated collateral under the guaranty and receive the benefit
of the obligations of the Other Owners with respect to such guaranty.
The Company, as assignee from WMS, is a party to a put option agreement
with American National Bank and Trust Company of Chicago ('ANB') whereby ANB can
require the Company to purchase up to 20 shares of WHGI Common Stock for a
purchase price of $53,000 per share. Such WHGI Common Stock is owned by one of
the Other Owners and was pledged by such Other Owner as collateral for a loan
made to Burton I. Koffman. The put agreement was initially entered into as April
30, 1993 and, as extended, currently continues until May 5, 1997.
36
<PAGE>
<PAGE>
CAPITALIZATION
The following table sets forth the historical capitalization of Williams
Hotel Corporation as of December 31, 1996 and such capitalization as adjusted to
give effect to the Distribution and to the Preliminary Transactions and other
transactions (the 'transactions') described in the Unaudited Pro Forma Condensed
Consolidated Financial Statements as if the Distribution and such transactions
had occurred on December 31, 1996. The table should be read in conjunction with
the historical consolidated financial statements and notes thereto of Williams
Hotel Corporation, the Unaudited Pro Forma Condensed Consolidated Financial
Statements and Management's Discussion and Analysis of Financial Condition and
Results of Operations contained elsewhere in this Information Statement.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Short-term notes payable.......................................... $ 1,000 $ 2,000(1)
Long-term debt, including current maturities of $3,347............ 25,226 25,226
---------- -----------
Total debt................................................... 26,226 27,226
Minority interests in PPRA and WHGI.................................... 19,921 18,591(2)
Condado Plaza Preferred Stock held by WMS.............................. 4,100 -- (4)
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized...................... --
Common stock, Class A, $.01 par value, non-voting, 3,000,000
shares authorized............................................... --
Common stock, no par value, 1,000 shares authorized, 100 shares
outstanding, historical, and 12,000,000 shares, $.01 par value,
authorized, 6,050,200 shares outstanding, as adjusted........... 1 61(3)
Additional paid-in capital........................................ 3,849 13,621(3)(4)
Retained earnings................................................. 33,491 33,387(5)
---------- -----------
Total stockholders' equity................................... 37,341 47,069
---------- -----------
Total capitalization......................................... $ 87,588 $92,886
---------- -----------
---------- -----------
</TABLE>
- ------------
(1) Reflects the $1,000,000 draw down on the PPRA line of credit prior to the
Distribution.
(2) Reflects the payment of a $1,330,000 dividend by WHGI to its minority
stockholders prior to the Distribution.
(3) Reflects the issuance of 6,050,200 shares of Company Common Stock in the
Distribution and transfer of $60,000 of par value from additional paid-in
capital to common stock, based on a one for four distribution and the number
of shares of WMS Common Stock outstanding on February 10, 1997.
(4) Reflects the contribution to additional paid-in capital of the Company by
WMS of $9,588,000 including $4,100,000 in Condado Plaza Preferred Stock, an
intercompany receivable of $4,565,000 and $923,000 in cash prior to the
Distribution. In addition, $244,000 of Condado Plaza Preferred Stock
dividend is added to additional paid-in capital.
(5) Reflects the payment of the accumulated dividend on the Condado Plaza
Preferred Stock and certain tollgate taxes reducing retained earnings by
$104,000.
DIVIDENDS
The Company currently intends to retain all available earnings, if any,
generated by its operations. Accordingly, the Company does not anticipate paying
dividends on Company Common Stock in the foreseeable future. Any future
determination as to the payment of dividends will be at the discretion of the
Company Board and will be dependent upon the Company's results of operations,
financial condition, contractual restrictions, if any, and other factors deemed
relevant by the Company Board. Credit arrangements of certain of the Company's
subsidiaries contain limitations on the ability of such subsidiaries to pay
dividends to the Company. See 'Risk Factors -- Dividend Policy and Withholding
Tax' and 'Hotel Financings and Certain Contingent Obligations.'
37
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<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements give effect to the distribution of one share of Company Common Stock
for every four shares of WMS Common Stock expected to be outstanding on the
Distribution Date and reflect the 'Preliminary Transactions' described elsewhere
in this Information Statement.
The unaudited pro forma condensed consolidated balance sheet as of December
31, 1996 was prepared as if the Distribution was effectuated on December 31,
1996 and using the unaudited consolidated balance sheet of Williams Hotel
Corporation as of December 31, 1996 modified to include pro forma adjustments to
reflect the following Preliminary Transactions: (i) the Merger of Williams Hotel
Corporation into the Company; (ii) the contribution to capital of the Company by
WMS of $9,588,000 including $4,100,000 of Condado Plaza Preferred Stock, an
intercompany receivable from WMS El Con Corp. of $357,000, an intercompany
receivable from the Company of $4,208,000 and $923,000 in cash; (iii) the cash
payment by WMS of an intercompany payable to ESJ of $5,077,000 and subsequent
loan of this cash to the Company; (iv) the redemption by PPRA of $2,050,000 of
Condado Plaza Preferred Stock from the Company; (v) the $1,000,000 draw down by
PPRA on its line of credit; (vi) the payment of the accumulated dividend on the
Condado Plaza Preferred Stock; and (vii) the payment of a $3,500,000 dividend by
WHGI.
The unaudited pro forma condensed consolidated statement of operations for
the six months ended December 31, 1996 was prepared as if the Distribution was
effectuated as of July 1, 1996 and the change in ownership of certain
subsidiaries of the Company occurred on that date and using the unaudited
statement of operations of Williams Hotel Corporation for that period. The
unaudited pro forma condensed consolidated statement of operations for the year
ended June 30, 1996 was prepared as if the Distribution was effectuated as of
July 1, 1995 and the change in ownership of certain subsidiaries of the Company
occurred on that date and using the audited statement of operations of Williams
Hotel Corporation for the year ended June 30, 1996. The pro forma adjustments to
the unaudited pro forma condensed consolidated statements of operations for the
six months ended December 31, 1996 and the year ended June 30, 1996 includes
adjustments to reflect the operations of the Company as though the Company
operated as a publicly traded company separate from WMS and reflects adjustments
resulting from changes in ownership of certain subsidiaries of the Company and
include (i) an estimate of public company costs which are expected to be
incurred; (ii) the elimination of the dividend on Condado Plaza Preferred Stock;
(iii) the change in the minority interest of PPRA; (iv) the elimination of
income tax benefits; and (v) additional Puerto Rico income taxes on WHGI
dividends.
The unaudited pro forma financial information is presented for
informational purposes and does not purport to represent the consolidated
financial position and consolidated results of operations of the Company had the
Distribution actually occurred on the dates indicated; nor does it purport to be
indicative of results that will be attained in the future.
The unaudited pro forma financial information is based on and should be
read in conjunction with the historical consolidated financial statements and
notes thereto of Williams Hotel Corporation and separate financial statements of
nonconsolidated affiliates and 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' contained elsewhere in this
Information Statement.
38
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
WILLIAMS
HOTEL PRO FORMA
CORPORATION ADJUSTMENTS
HISTORICAL INCREASE/(DECREASE)
----------- -------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents -- the Company........................................ $ -- $ 6,000(b)
2,050(d)
244(e)
2,148(f)
Cash and cash equivalents -- subsidiaries....................................... 5,663 (1,050)(d)
(246)(e)
(3,500)(f)
----------- --------
Total cash and cash equivalents....................................... 5,663 5,646
Receivables, net................................................................ 4,696
Receivables from nonconsolidated affiliates..................................... 2,687
Intercompany with WMS:
WMS El Con Corp. and the Company payable to WMS............................ (4,565) 357(c)
4,208(c)
ESJ receivable from WMS.................................................... 5,077 (5,077)(b)
----------- --------
Net receivable from WMS............................................... 512 (512)
Other current assets............................................................ 1,332
----------- --------
Total current assets.................................................. 14,890 5,134
Investments in, receivables and advances to nonconsolidated affiliates............... 25,203
Property and equipment, net.......................................................... 44,126
Excess of purchase cost over amount assigned to net assets acquired, net............. 8,909
Other assets......................................................................... 11,722
----------- --------
$ 104,850 $ 5,134
----------- --------
----------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals................................................... $ 10,085
Dividend payable on Condado Plaza Preferred Stock............................... 164 $ (164)(e)
Notes payable................................................................... 1,000 1,000(d)
Current maturities of long-term debt............................................ 3,347
----------- --------
Total current liabilities............................................. 14,596 836
Long-term debt, less current maturities.............................................. 21,879
Deferred income taxes................................................................ 2,291
Other noncurrent liabilities......................................................... 4,722
Minority interests................................................................... 19,921 (1,330)(f)
Condado Plaza Preferred Stock held by WMS............................................ 4,100 (4,100)(a)
Shareholders' equity:
Common stock.................................................................... 1 60(g)
Additional paid-in capital...................................................... 3,849 4,100(a)
923(b)
4,565(c)
244(e)
(60)(g)
Retained earnings............................................................... 33,491 (82)(e)
(2,170)(f)
2,148(f)
----------- --------
Total shareholders' equity............................................ 37,341 9,728
----------- --------
$ 104,850 $ 5,134
----------- --------
----------- --------
<CAPTION>
PRO FORMA
---------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents -- the Company........................................ $ 10,442
Cash and cash equivalents -- subsidiaries....................................... 867
---------
Total cash and cash equivalents....................................... 11,309
Receivables, net................................................................ 4,696
Receivables from nonconsolidated affiliates..................................... 2,687
Intercompany with WMS:
WMS El Con Corp. and the Company payable to WMS............................ --
ESJ receivable from WMS.................................................... --
---------
Net receivable from WMS............................................... --
Other current assets............................................................ 1,332
---------
Total current assets.................................................. 20,024
Investments in, receivables and advances to nonconsolidated affiliates............... 25,203
Property and equipment, net.......................................................... 44,126
Excess of purchase cost over amount assigned to net assets acquired, net............. 8,909
Other assets......................................................................... 11,722
---------
$109,984
---------
---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accruals................................................... $ 10,085
Dividend payable on Condado Plaza Preferred Stock............................... --
Notes payable................................................................... 2,000
Current maturities of long-term debt............................................ 3,347
---------
Total current liabilities............................................. 15,432
Long-term debt, less current maturities.............................................. 21,879
Deferred income taxes................................................................ 2,291
Other noncurrent liabilities......................................................... 4,722
Minority interests................................................................... 18,591
Condado Plaza Preferred Stock held by WMS............................................ --
Shareholders' equity:
Common stock.................................................................... 61
Additional paid-in capital...................................................... 13,621
Retained earnings............................................................... 33,387
---------
Total shareholders' equity............................................ 47,069
---------
$109,984
---------
---------
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements.
39
<PAGE>
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, 1996
---------------------------------------
WILLIAMS
HOTEL
CORPORATION PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ----------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Revenues:
WHGI management fees from
nonconsolidated affiliates............ $ 4,904 $ $ 4,904
Condado Plaza hotel and casino
revenues.............................. 25,150 25,150
----------- ----------- ---------
Total revenues..................... 30,054 30,054
Costs and expenses:
WHGI operating expenses (excl.
depreciation)......................... 1,827 1,827
Condado Plaza operating expenses (excl.
depreciation)......................... 15,766 15,766
Selling and administrative.............. 4,550 400(h) 4,950
Depreciation and amortization........... 2,809 2,809
----------- ----------- ---------
Total costs and expenses........... 24,952 400 25,352
----------- ----------- ---------
Income from operations....................... 5,102 (400) 4,702
Interest income, primarily from
nonconsolidated affiliates, and other
income..................................... 1,091 1,091
Interest expense............................. (1,674) (1,674)
Equity in loss of nonconsolidated
affiliates................................. (3,028) (3,028)
----------- ----------- ---------
Income before tax provision and minority
interests.................................. 1,491 (400) 1,091
Provision for income taxes................... (224) (1,091)(k) (1,315)
Minority interests in income................. (1,262) (14)(j) (1,276)
Dividend on Condado Plaza Preferred Stock.... (164) 164(i) --
----------- ----------- ---------
Net income (loss)............................ $ (159) $(1,341) $(1,500)
----------- ----------- ---------
----------- ----------- ---------
Pro forma net income (loss) per share of
common stock............................... $(0.25)
Shares used in calculating per share
amounts.................................... 6,050
<CAPTION>
YEAR ENDED JUNE 30, 1996
-------------------------------------
WILLIAMS
HOTEL
CORPORATION PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
WHGI management fees from
nonconsolidated affiliates............$ 13,372 $ $13,372
Condado Plaza hotel and casino
revenues.............................. 55,322 55,322
---------- ----------- ---------
Total revenues..................... 68,694 68,694
Costs and expenses:
WHGI operating expenses (excl.
depreciation)......................... 3,882 3,882
Condado Plaza operating expenses (excl.
depreciation)......................... 36,337 36,337
Selling and administrative.............. 9,487 1,300(h) 10,787
Depreciation and amortization........... 5,430 5,430
---------- ----------- ---------
Total costs and expenses........... 55,136 1,300 56,436
---------- ----------- ---------
Income from operations....................... 13,558 (1,300) 12,258
Interest income, primarily from
nonconsolidated affiliates, and other
income..................................... 1,830 1,830
Interest expense............................. (3,689 ) (3,689)
Equity in loss of nonconsolidated
affiliates................................. (3,465 ) (3,465)
---------- ----------- ---------
Income before tax provision and minority
interests.................................. 8,234 (1,300) 6,934
Provision for income taxes................... (1,645 ) (976)(k) (2,621)
Minority interests in income................. (3,636 ) (94)(j) (3,730)
Dividend on Condado Plaza Preferred Stock.... (516 ) 516(i) --
---------- ----------- ---------
Net income (loss)............................$ 2,437 $(1,854) $ 583
---------- ----------- ---------
---------- ----------- ---------
Pro forma net income (loss) per share of
common stock............................... $0.10
Shares used in calculating per share
amounts.................................... 6,050
</TABLE>
Pro forma net income (loss) per share of the Company was calculated using
anticipated distribution of one share of Company Common Stock for every four of
the 24,200,800 shares of WMS Common Stock outstanding on February 10, 1997.
See notes to unaudited pro forma condensed consolidated financial statements.
40
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following pro forma adjustments, debit (credit), are based on estimates
which are subject to change.
The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December
31, 1996 gives effect to the following pro forma adjustments:
(a) To reflect the contribution to the Company of $4,100,000 of
Condado Plaza Preferred Stock held by WMS.
<TABLE>
<S> <C>
Condado Plaza Preferred Stock.................................................. $ 4,100,000
Additional paid-in capital..................................................... (4,100,000)
</TABLE>
(b) To reflect the payment of $5,077,000 by WMS to ESJ to pay the
intercompany balance in full and the subsequent loan of the $5,077,000 cash
to the Company and payment by WMS of $923,000 to the Company as a
contribution to capital.
<TABLE>
<S> <C>
Cash and cash equivalents -- the Company....................................... $ 6,000,000
ESJ receivable from WMS........................................................ (5,077,000)
Additional paid-in capital..................................................... (923,000)
</TABLE>
(c) To reflect the contribution by WMS of the following intercompany
accounts to the Company additional paid-in capital:
<TABLE>
<S> <C>
Intercompany payable from WMS El Con Corp. to WMS.............................. $ 357,000
Intercompany payable from the Company to WMS................................... 4,208,000
Additional paid-in capital..................................................... (4,565,000)
</TABLE>
(d) To reflect the redemption by PPRA of $2,050,000 of Condado Plaza
Preferred Stock from the Company and a draw down on the PPRA line of credit
by $1,000,000 to facilitate the redemption.
<TABLE>
<S> <C>
Cash and cash equivalents -- the Company....................................... $ 2,050,000
Notes payable.................................................................. (1,000,000)
Cash and cash equivalents -- subsidiaries...................................... (1,050,000)
</TABLE>
(e) To reflect the anticipated payment of the accumulated dividend on
the Condado Plaza Preferred Stock, assuming the Distribution is March 31,
1997, of $246,000 of which $82,000 is charged to retained earnings for the
preferred dividend subsequent to December 31, 1996. Also, to reflect
payment of the tollgate tax of $2,000 on the preferred dividend.
<TABLE>
<S> <C>
Cash and cash equivalents -- subsidiaries........................................ $(246,000)
Dividend payable on Condado Plaza Preferred Stock................................ 164,000
Retained earnings................................................................ 82,000
Cash and cash equivalents -- the Company......................................... $ 244,000
Additional paid-in capital....................................................... (244,000)
</TABLE>
(f) To reflect the anticipated payment of a dividend by WHGI of
$3,500,000 of which $1,330,000 is shown as a reduction in minority
interests for the thirty-eight percent minority ownership and $2,148,000 is
received by the Company which is net of a $22,000 payment of tollgate tax.
<TABLE>
<S> <C>
Cash and cash equivalents -- subsidiaries...................................... $(3,500,000)
Minority interests............................................................. 1,330,000
Retained earnings.............................................................. 2,170,000
Cash and cash equivalents -- the Company....................................... $ 2,148,000
Retained earnings.............................................................. (2,148,000)
</TABLE>
41
<PAGE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(g) To reflect the anticipated issuance of 6,050,200 shares of Company
Common Stock in the Distribution and transfer of par value from additional
paid-in capital to common stock.
<TABLE>
<S> <C>
Additional paid-in capital........................................................ $ 60,000
Common stock...................................................................... (60,000)
</TABLE>
The Unaudited Pro Forma Condensed Consolidated Statements of Operations for
the Six Months Ended December 31, 1996 and the Year Ended June 30, 1996 gives
effect to the following pro forma adjustments:
(h) To reflect the estimated additional costs which will be incurred
as a result of operating as a public company.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Administrative expenses.................................... $ 400,000 $ 1,300,000
</TABLE>
(i) To eliminate the dividend on Condado Plaza Preferred Stock as a
result of the contribution of the Condado Plaza Preferred Stock from WMS to
the Company.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Dividend on Condado Plaza Preferred Stock.................. $(164,000) $(516,000)
</TABLE>
(j) The issuance of additional shares of PPRA to the Company in
exchange for the Company's ownership interests in ESJ and WHGI is to be
based on the relative fair market value of the respective ownership
interests determined by the Board of Directors of PPRA immediately prior to
the Distribution. The estimate used in the pro forma condensed consolidated
financial statements that the Company ownership in PPRA will increase from
95% to 99% was made by management and is subject to change.
To reflect the change in minority interests in income as a result of
the estimated change in minority ownership percentage in PPRA from five
percent to one percent.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Minority interests in PPRA................................. $14,000 $94,000
</TABLE>
(k) To eliminate Federal income tax benefits allocated to the Company
by WMS from the utilization of equity in loss of nonconsolidated affiliates
in the WMS consolidated income tax return. The Company is not presently
expected to be able to utilize these losses on a separate return basis and
receive a tax benefit. Also, to reflect the Puerto Rico income taxes on
WHGI dividends which would have been incurred under the new ownership
structure described in adjustment (j).
<TABLE>
<CAPTION>
DECEMBER 31, 1996 JUNE 30, 1996
----------------- -------------
<S> <C> <C>
Eliminate Federal income tax credit for equity in loss of
nonconsolidated affiliates............................... $ 1,081,000 $ 900,000
Add Puerto Rico income tax provision on WHGI dividend...... 10,000 76,000
----------------- -------------
$ 1,091,000 $ 976,000
----------------- -------------
----------------- -------------
</TABLE>
42
<PAGE>
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below for the fiscal years ended June
30, 1996, 1995, 1994, 1993 and 1992 have been derived from the audited
consolidated financial statements of Williams Hotel Corporation for such
periods. The selected financial data set forth below for the six months ended
December 31, 1996 and 1995 have been derived from the unaudited consolidated
financial statements of Williams Hotel Corporation, but, in the opinion of
management, reflect all adjustments, consisting only of normal recurring
accruals, considered necessary for a fair presentation of the results for such
periods. The data should be read in conjunction with 'Management's Discussion
and Analysis of Financial Condition and Results of Operations,' the Consolidated
Financial Statements of Williams Hotel Corporation and related notes thereto,
separate statements of nonconsolidated affiliates and other financial
information included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
-------------------
1996 1995
-------- --------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Selected Statement of Income Data:
Revenues........................... $ 30,054 $ 30,856
-------- --------
-------- --------
Operating income................... $ 5,102 $ 3,843
Interest expense, net.............. (583) (1,053)
Equity in income (loss) of
nonconsolidated affiliates....... (3,028) (3,597)
-------- --------
Income (loss) before tax provision
and minority interests........... 1,491 (807)
Credit (provision) for income
taxes............................ (224) 295
Minority interests in (income)
loss............................. (1,262) (1,194)
Dividend on preferred stock of
Condado Plaza.................... (164) (296)
-------- --------
Net income (loss).................. $ (159) $ (2,002)
-------- --------
-------- --------
Pro forma net income (loss)
reflecting income taxes on a
separate return basis
(unaudited)(2)................... $ (1,240) $ (3,262)
-------- --------
-------- --------
Selected Balance Sheet Data:
Investments in, receivables and
advances to nonconsolidated
affiliates....................... $ 27,890 $ 27,775
Property and equipment, net........ 44,126 46,837
Total assets....................... 104,850 107,870
Long-term debt, including current
maturities....................... 25,226 28,337
Minority interests................. 19,921 17,556
Shareholder's equity............... 37,341 33,061
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------------------------
1996 1995 1994 1993 1992(1)
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Selected Statement of Income Data:
Revenues...........................$68,694 $ 70,878 $ 75,480 $ 70,680 $ 62,352
------- -------- -------- -------- --------
------- -------- -------- -------- --------
Operating income...................$13,558 $ 7,624 $ 13,892 $ 14,162 $ 6,909
Interest expense, net.............. (1,859) (1,752) (3,551) (3,873) (4,074)
Equity in income (loss) of
nonconsolidated affiliates....... (3,465) (7,003) (3,534) (135) 2,992
------- -------- -------- -------- --------
Income (loss) before tax provision
and minority interests........... 8,234 (1,131) 6,807 10,154 5,827
Credit (provision) for income
taxes............................ (1,645) 234 7 (1,050) (1,881)
Minority interests in (income)
loss............................. (3,636) (2,910) (4,597) (3,332) 1,383
Dividend on preferred stock of
Condado Plaza.................... (516) (557) -- -- --
------- -------- -------- -------- --------
Net income (loss)..................$ 2,437 $ (4,364) $ 2,217 $ 5,772 $ 5,329
------- -------- -------- -------- --------
------- -------- -------- -------- --------
Pro forma net income (loss)
reflecting income taxes on a
separate return basis
(unaudited)(2)...................$ 1,537 $ (6,500) $ 1,257 $ 5,579 $ 2,407
------- -------- -------- -------- --------
------- -------- -------- -------- --------
Selected Balance Sheet Data:
Investments in, receivables and
advances to nonconsolidated
affiliates.......................$27,734 $ 29,696 $ 31,367 $ 28,018 $ 37,813
Property and equipment, net........ 44,919 48,660 51,627 45,454 44,204
Total assets.......................104,734 111,306 116,144 103,276 108,070
Long-term debt, including current
maturities....................... 26,854 30,741 30,309 36,069 45,191
Minority interests................. 18,810 16,363 16,387 14,229 15,032
Shareholder's equity............... 37,500 35,063 39,427 37,210 31,438
</TABLE>
- ------------
(1) 1992 includes the operations of WHGI on a consolidated basis for the period
subsequent to the Company's April 30, 1992 purchase of an additional 5%
interest in WHGI which increased the Company's ownership to 55%. Prior to
April 30, 1992, the operations of WHGI were included in the consolidated
financial statements by the equity method.
(2) Pro forma net income (loss) reflecting income taxes on a separate return
basis (unaudited) reflects the provision for income taxes without the tax
benefits allocated to the Company from WMS for utilization of partnership
losses in the WMS consolidated Federal income tax return.
43
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following analysis relates to the consolidated financial statements of
Williams Hotel Corporation -- see basis of presentation in Note 1 to the
Consolidated Financial Statements included elsewhere herein.
GENERAL
The Company through its subsidiaries owns interests in and manages three of
the leading hotels and casinos located in Puerto Rico: the Condado Plaza, the El
San Juan and the El Conquistador. The Condado Plaza and El San Juan hotels are
located in San Juan and include 957 suites and rooms, 10 restaurants, 19
cocktail and entertainment lounges and bars, 16 shops, and 56,000 square feet of
convention and meeting space with a seating capacity of 4,000. The casinos
occupy 26,300 square feet, have 87 gaming tables, 667 slot machines, and account
for over 50% of all table and slot play in Puerto Rico where there are currently
16 casinos operating. The El Conquistador opened for business in November 1993
and includes 751 guest rooms, 90,000 square feet of meeting space, 12
restaurants, six lounges and nightclubs, 25 retail shops, a 13,000 square foot
casino, a fitness center, five pool areas, a marina, seven tennis courts and an
18-hole championship golf course. The El Conquistador also has available 90
adjacent condominium units that provide another 167 luxury rooms to the resort.
The Company's results of operations are divided into two industry segments:
the Condado Plaza, 95% of which is owned by the Company, and WHGI, 62% of which
is owned by the Company. Also included in the Company's results is the Company's
equity in two nonconsolidated affiliates: the El San Juan, 50% of which is owned
by the Company and the El Conquistador, 23.3% of which is effectively owned by
the Company.
The Company's results of operations are highly seasonal with the highest
revenues occurring from December through April. Accordingly, results for any
single quarter are not necessarily indicative of the results for any other
quarter or for the full fiscal year. Results can also be affected by
circumstances beyond the Company's control such as hurricanes, airlines strikes,
droughts and the like, the impact of which will depend, in part, upon the time
of year when such events occur.
The Company began experiencing a decline in casino net revenues during 1994
as a result, among other things, of increased competition from other gaming
jurisdiction. Since the beginning of fiscal 1996, in an effort to improve casino
results, the Company has revised its casino credit and promotional allowance
policies and implemented programs to increase casino revenues. The Company has
also taken steps to improve the operating performance of the hotels and casinos
in which it has an interest by strengthening its hotel and casino managers and
reducing operating costs, primarily through implementation of better cost
controls and more efficient staffing.
RESULTS OF OPERATIONS
SIX MONTHS ENDED DECEMBER 31, 1996 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1995
The following summarizes the unaudited condensed consolidated statements of
operations of the Company included elsewhere herein for the periods shown in the
format presented as segment
44
<PAGE>
<PAGE>
information in the notes to the year-end audited consolidated financial
statements included elsewhere herein:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
--------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenues:
Condado Plaza................................................................ $25,150 $25,576
WHGI......................................................................... 6,711 6,836
Intersegment revenue elimination-WHGI fees charged to Condado Plaza.......... (1,807 ) (1,556 )
-------- --------
Total revenues.......................................................... $30,054 $30,856
-------- --------
-------- --------
Segment operating income (loss):
Condado Plaza................................................................ $ 1,609 $ 108
WHGI......................................................................... 3,752 3,765
General corporate administrative expenses.................................... (259 ) (30 )
-------- --------
Total operating income.................................................. $ 5,102 $ 3,843
-------- --------
-------- --------
</TABLE>
Consolidated revenues decreased by $802,000 or 2.6% in the six months ended
December 31, 1996 to $30,054,000 from $30,856,000 in the six months ended
December 31, 1995. The decrease was attributable to both the Condado Plaza and
WHGI industry segments.
Operating income in the Condado Plaza segment increased by $1,501,000 to
$1,609,000 in the six months ended December 31, 1996 from $108,000 in the six
months ended December 31, 1995. The increase was primarily due to reductions in
costs and expenses in all departments resulting from cost reduction efforts of
management and reduced provision for doubtful accounts receivable.
Operating income in the WHGI segment was approximately the same in each six
month period.
The equity in loss of nonconsolidated affiliates was ($3,028,000) for the
six months ended December 31, 1996 compared with ($3,597,000) for the six months
ended December 31, 1995. The decreased loss was due primarily to lower costs and
expenses at both the El San Juan and the El Conquistador resulting from cost
reduction efforts by management and reduced provision for doubtful accounts
receivable. The 50% equity in loss of the El San Juan was ($780,000) in the six
months ended December 31, 1996 compared with ($1,089,000) in the six months
ended December 31, 1995. The 23.3% equity in loss of the El Conquistador was
($2,248,000) in the six months ended December 31, 1996 compared with
($2,508,000) in the six months ended December 31, 1995.
The income tax provision of $224,000 in the six months ended December 31,
1996 results from Puerto Rico and Federal income tax provisions for WHGI
exceeding the tax benefit allocated from WMS on the equity in the loss of
nonconsolidated affiliates. The income tax credit of $295,000 in the six months
ended December 31, 1995 results from the tax benefit allocated from WMS on the
equity in the loss of nonconsolidated affiliates exceeding the Puerto Rico and
Federal income tax provision for WHGI.
Net loss in the six months ended December 31, 1996 was ($159,000) compared
with a net loss of ($2,002,000) in the six months ended December 31, 1995. The
net loss decreased by approximately 92% due primarily to cost reductions and
reduced provision for doubtful accounts receivable at all the hotels and casinos
in which the Company owns interests notwithstanding the change in income taxes.
FISCAL 1996 COMPARED TO FISCAL 1995
Segment data discussed below is taken or derived from segment disclosure in
Note 15 to the consolidated financial statements of Williams Hotel Corporation
included elsewhere herein.
Consolidated revenues were $68,694,000 in fiscal 1996 representing a 3.1%
decrease from fiscal 1995 consolidated revenues of $70,878,000. The decrease was
due primarily to a reduction in net casino revenues (casino revenues minus
casino promotional allowances) at Condado Plaza from $17,712,000 in
45
<PAGE>
<PAGE>
fiscal 1995 to $15,452,000 in fiscal 1996. The decrease in Condado Plaza net
casino revenues was due primarily to a lower win percentage resulting in reduced
revenues when casino promotional allowances remained constant.
Consolidated operating income increased by 78% in fiscal 1996 to
$13,558,000 from $7,624,000 in fiscal 1995 due primarily to cost reductions and
lower expenses at the Condado Plaza and increased management fee revenues at
WHGI primarily from the El Conquistador.
Operating income of the Condado Plaza segment was $2,830,000 in fiscal 1996
compared with an operating loss of ($1,465,000) in fiscal 1995. This improvement
in operating results was achieved by cost reductions initiated by management and
reduced provision for doubtful accounts receivable and insurance expense and the
incurrence in fiscal 1995 of approximately $450,000 of additional expenses
related to emergency water costs associated with the drought experienced in
Puerto Rico during that fiscal year.
Operating income of the WHGI segment increased to $10,837,000 or 18% in
fiscal 1996 compared with $9,174,000 in fiscal 1995. In fiscal 1996 revenues
from central services declined by $2,151,000, and management fee revenues
increased by $1,739,000 in comparison to fiscal 1995. Operating income resulting
from lower revenue from central services is negligible in comparison to
increased operating income from incremental management fees.
Consolidated selling and administrative expenses decreased to $9,487,000 in
fiscal 1996 from $12,301,000 in fiscal 1995 primarily at the Condado Plaza due
to cost reductions initiated by management and reduced provision for doubtful
accounts receivable and insurance expense.
The equity in loss of nonconsolidated affiliates was ($3,465,000) in fiscal
1996 compared with ($7,003,000) in fiscal 1995, representing a 50.5% improvement
in 1996 over 1995. The decrease in equity in loss was primarily due to lower
costs and expenses at the El Conquistador resulting from cost reduction
activities during the second full year of operation after opening in November
1993 and from increased revenues from hotel operations at the El San Juan with
only minor increases in hotel operating expenses. The 50% equity in loss of the
El San Juan was ($679,000) in fiscal 1996 compared with ($1,200,000) in fiscal
1995. The 23.3% equity in loss of the El Conquistador was ($2,786,000) in fiscal
1996 compared with ($5,803,000) in fiscal 1995.
The provision for income taxes in fiscal 1996 of $1,645,000 represents
Federal and Puerto Rico income taxes on WHGI reduced by the tax benefit
allocated from WMS on the equity in loss of nonconsolidated affiliates. A net
income tax credit of $234,000 occurred in fiscal 1995 because the allocated tax
benefit from WMS, due to the size of the equity in loss, exceeded the tax
provision for WHGI.
Consolidated net income was $2,437,000 in fiscal 1996 compared with the net
loss of ($4,364,000) in fiscal 1995. The improved results were attributable
primarily to cost reductions at the Condado Plaza increasing operating income
and decreased equity in loss of nonconsolidated affiliates partially offset by
the change in the provision for income taxes, as described above.
FISCAL 1995 COMPARED TO FISCAL 1994
Consolidated revenues were $70,878,000 in fiscal 1995, representing a 6.1%
decrease from consolidated revenues in fiscal 1995 of $75,480,000.
Condado Plaza segment revenues were $57,530,000 in fiscal 1995 compared to
$62,600,000 in fiscal 1994. Net casino revenue (casino revenues minus casino
promotional allowances) decreased by $3,469,000 or 16.4% due to a reduced casino
handle and a lower win percentage. Hotel revenues were slightly below fiscal
1994 due primarily to a $973,000 decrease in room revenues because of a lower
average room rate.
The Condado Plaza segment had an operating loss of ($1,465,000) in fiscal
1995 compared with operating income of $4,473,000 in fiscal 1994. The change
resulted primarily from lower net casino revenues and lower hotel revenues; and
increased expenses, including higher insurance expense, increased provision for
doubtful accounts receivable and emergency water costs of approximately $450,000
attributable to the drought experienced by Puerto Rico during that fiscal year.
46
<PAGE>
<PAGE>
WHGI segment operating income decreased to $9,174,000 in fiscal 1995 from
$9,472,000 in fiscal 1994. The decrease was primarily due to increased
administrative and amortization expense more than offsetting $468,000 of
increased revenues in fiscal 1995 resulting from primarily the inclusion of a
full year of management fees from El Conquistador.
Consolidated selling and administrative expense increased 13.1% to
$12,301,000 in fiscal 1995 from $10,877,000 in fiscal 1994, attributable
primarily to increased provision for doubtful accounts receivable and insurance
expense at the Condado Plaza.
Consolidated interest and other income in fiscal 1995 includes
approximately $900,000 received from an oil spill claim.
Consolidated income from operations was $7,624,000 in fiscal 1995 compared
with $13,892,000 in fiscal 1994. The decrease was primarily due to an operating
loss at the Condado Plaza in fiscal 1995 compared with operating income in
fiscal 1994 as discussed above.
The equity in loss of nonconsolidated affiliates was ($7,003,000) in fiscal
1995 as compared with ($3,534,000) in fiscal 1994. The increased loss was
primarily due to an increase in the Company's equity in net loss from the newly
opened El Conquistador that was ($5,803,000) in fiscal 1995 compared with
($2,311,000) in fiscal 1994, representing only five months of operations. Like
most newly opened resort properties, El Conquistador is expected to report
losses in its early years, but the Company's 23.3% equity in the losses are
expected to be partially offset by the Company's 62% interest in the management
fees earned during the year by WHGI from El Conquistador. The 50% equity in the
loss of the El San Juan was ($1,200,000) in fiscal 1995 compared to equity in
the loss of ($1,223,000) in fiscal 1994. The El San Juan's results were
relatively flat, notwithstanding a 21.6% decline in casino net revenues and a
small decline in hotel revenues, due to decreased operating expenses resulting
from cost reduction activities.
The credit for income taxes in fiscal 1995 and 1994 represents Puerto Rico
income taxes (fiscal 1995 includes Federal income taxes) incurred on WHGI more
than offset by the tax benefit allocated from WMS on the equity in loss of
nonconsolidated affiliates.
Minority interests decreased primarily due to lower net income of WHGI and
the increase in the Company's ownership percentage in WHGI from 57% to 62% in
July 1994.
Consolidated net loss was ($4,364,000) in fiscal 1995 compared with net
income of $2,217,000 in fiscal 1994. The change was primarily due to the
operating loss at the Condado Plaza, the preferred stock dividend of $557,000
paid by PPRA to WMS, and the increased loss of nonconsolidated affiliates, all
as described above.
FINANCIAL CONDITION
Cash flows from the consolidated operating, investing and financing
activities of the Company during fiscal 1996 resulted in net cash provided of
$2,989,000 compared with net cash used of $218,000 during fiscal 1995.
Cash provided by operating activities before changes in operating assets
and liabilities was $19,664,000 in fiscal 1996 compared with $11,759,000 in
fiscal 1995. The increase was primarily due to the change from a net loss of
$4,364,000 in fiscal 1995 to net income of $2,437,000 in fiscal 1996.
The changes in operating assets and liabilities, as shown in the
consolidated statements of cash flows, resulted in $1,760,000 of cash outflow
during fiscal 1996 and $6,910,000 during fiscal 1995, due in both cases to the
increase in net amounts due from nonconsolidated affiliates.
Cash used by investing activities was $164,000 in fiscal 1996 and
$5,341,000 in fiscal 1995. Cash used for the purchase of property and equipment
was $1,149,000 in fiscal 1996 and $2,066,000 in fiscal 1995. Cash of $3,925,000
was used in fiscal 1995 to purchase additional shares of WHGI and PPRA.
Cash used by financing activities during fiscal 1996 was $14,751,000
compared with cash provided of $274,000 during fiscal 1995. Payment of long-term
debt was $3,887,000 in fiscal 1996 and $4,568,000 in fiscal 1995. Net
intercompany transactions with WMS in fiscal 1996 resulted in cash used of
$6,275,000 to repay advances. Net intercompany transactions with WMS in fiscal
1995 resulted in cash advances
47
<PAGE>
<PAGE>
received of $3,125,000. During fiscal 1996 PPRA redeemed $3,400,000 of Condado
Plaza Preferred Stock owned by WMS. During fiscal 1995 PPRA sold $2,500,000 of
Condado Plaza Preferred Stock to WMS.
See the consolidated statements of cash flows of Williams Hotel Corporation
on page F-5 for further details on cash flow items. Also see the statements of
cash flows of the nonconsolidated affiliates on pages F-22, F-31, and F-38.
The three hotels and casinos and WHGI provide for their off-season cash
needs through their own cash and from individual short-term note arrangements.
The cash advances from WMS have been made to the Company and are primarily
related to additional investments and advances to WKA, purchase of additional
shares of subsidiaries and the 1994 purchase of the approximately 150 acres of
land held as an investment.
The Condado Plaza has a $2,000,000 bank line of credit available which was
fully utilized at June 30, 1996. The El San Juan has a $1,000,000 bank line of
credit available of which $300,000 was used at June 30, 1996. The El
Conquistador has a $6,000,000 bank revolving credit facility which was fully
utilized at December 31, 1996. El San Juan and El Conquistador long-term debt
agreements provide that advances and other payments to the owners are to be
based on defined levels of cash flow from the respective hotels and casinos
which based on historical results limits and prohibits, respectively, such
transactions. The long-term debt agreements and other agreements permit the
payment to WHGI of certain management fees and intercompany charges from the
three hotels and casinos. There are no agreements restricting WHGI from paying
dividends or otherwise making advances and the Company expects to receive
dividends from WHGI cash flow to provide for its operating expenses. Management
believes that cash flow from the operations of Condado Plaza and El San Juan
will be adequate to pay or refinance its long-term debt as it becomes due and
provide for its normal planned capital additions. See 'Hotel Financings and
Certain Contingent Obligations -- The El Conquistador' for a discussion of its
long-term debt.
INFLATION
During the past three years, the level of inflation affecting the Company
has been relatively low. The ability of the Company to pass on future cost
increases in the form of higher room rates and other price increases will
continue to be dependent on the prevailing competitive environment and the
acceptance of the Company's services in the market place.
SEASONALITY
The hotel and casino business in Puerto Rico is highly seasonal. From
December through April the occupancies of the hotels are greater than other
months and the average room rates are higher than other months resulting in
higher revenues and net income primarily in the third quarter of the June 30
fiscal year. The first quarter of the June 30 fiscal year normally has a net
loss. See 'Risk Factors -- Seasonality.'
INDUSTRY OVERVIEW
Globally, tourism and travel is the world's largest industry producing $3.6
trillion of gross output in 1996, accounting for more than 10.7% of global gross
domestic product. The tourism industry includes 15 interrelated segments,
including lodging, restaurants, airlines, cruise lines, car rental firms, travel
agents and tour operators. More than one billion people are expected to be
traveling worldwide and international tourism receipts are expected to increase
to $7.1 trillion by 2006. In the United States, the tourism industry is
currently third behind only auto sales and food retail sales. The tourism
industry in Puerto Rico directly and indirectly accounts for approximately
55,000 jobs and generates approximately 7% of the island's gross national
product. According to government statistics, approximately 3,130,000 tourists
(not including cruise ship visitors) visited the island in fiscal 1996 (July 1,
1995 to June 30, 1996) an increase of 2.9% from the previous fiscal year. Such
tourists spent an estimated $1.76 billion in fiscal 1996, up 5.6% from $1.67
billion in fiscal 1995. Total visitor expenditures in fiscal 1996 reached $1.83
billion, representing a 5.8% increase over 1995.
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Segments within the lodging industry are principally based on levels of
price, value, service, guest amenities, room size, room configuration and
accessibility. Segments include, among others, full service, limited service and
extended stay. Within each segment are large and small chains as well as
independent operators. All of the hotels and casinos in which the Company has an
interest are considered full-service hotels. Full service hotels typically
include swimming pools, meeting and banquet facilities, gift shops, restaurants,
cocktail lounges, room service, parking facilities and numerous other services.
The casino gaming industry is highly fragmented and characterized by a high
degree of competition among a large number of participants, including land-based
casinos, cruise ships, riverboats, dockside, Indian gaming, video lottery
terminals and other forms of gaming. The Company believes that the expansion of
gaming during the last several years reflects the increasing popularity and
acceptability of gaming activities in the United States. Generally, land-based
casinos compete based on the type of games available, level of stakes, location,
accessibility and guest amenities.
The Commonwealth of Puerto Rico offers some competitive advantages over
other destinations including Caribbean destinations due to its central location
within the Caribbean Basin, surrounded to the north by the Atlantic Ocean and to
the south by the Caribbean Sea. The 3,434 square mile island has 272 miles of
coastline, and is located approximately 1,000 miles southeast of the southern
tip of Florida. Frequent, scheduled passenger air services connects Puerto Rico
to the mainland U.S., Europe and South America. Flying time is 3 1/4 hours to
New York, 2 1/4 hours to Miami, 1 1/2 hours to Caracas and 8 hours to Europe.
The Luis Munoz Marin International Airport is the island's principal airport and
it is generally acknowledged to be the largest and most advanced aviation
facility in the Caribbean. The airport serves 50 commercial airlines and can
accommodate all types of aircraft. San Juan, with a metropolitan area population
of approximately 1,300,000, is the capital city as well as the political,
economic and social center of the Commonwealth. Other major cities are Ponce,
Bayamon, Mayaguez and Arecibo. Puerto Rico is an attractive destination for
incentive groups and is cited by multinational companies as an efficient meeting
location for executives arriving from several locations. It is also an
attractive warm weather vacation spot within easy flying distance of many cold
weather cities and offers legalized gambling which many other warm weather
destinations do not. Due to the size of the island and its extensive business
economy, it also draws many business travelers which many other Caribbean
islands do not.
Puerto Rico ranks as the number one cruise ship port in the Caribbean.
Currently 20 cruise ships include San Juan as a port of call while 17 ships have
made San Juan their home base, thus creating a new market, that of Land/Sea
packaging (attracting cruise passengers to stay in San Juan a few days before
and/or after their cruise).
BUSINESS
The Company owns an interest in three of the leading hotels and casinos in
Puerto Rico -- the Condado Plaza, the El San Juan and the El Conquistador. These
three hotels are managed by WHGI, which is 62% owned by the Company. In all, the
Company owns interests in and manages 1,875 suites and hotel rooms, 39,300
square feet of casino floor space containing 120 gaming tables and 940 slot
machines and approximately 146,000 square feet of convention and meeting space.
These properties also include a total of 22 restaurants, 41 shops, one showroom,
three health and fitness centers, 12 tennis courts, an 18-hole championship golf
course, a marina and 25 cocktail and entertainment lounges.
The Company's hotels are each focused on different market segments: the
Condado Plaza primarily services the business traveler, the El San Juan caters
to individual vacation travelers, as well as to small groups and conferences and
corporate executives and the El Conquistador offers extensive group and
conference facilities as well as attracting the individual leisure traveler.
In April 1993, WKA became a limited partner in Las Casitas Development
Company I, S en C (S.E.) which acquired certain land from El Conquistador for
the purpose of developing and selling approximately 90 condominiums known as Las
Casitas. The project was substantially completed in or about January 1997. Most
of the owners of the condominiums have entered into rental arrangements with the
El Conquistador which now provides the El Conquistador with 163 additional
luxury rooms.
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Each of the three hotel properties in which the Company has an ownership
interest was substantially renovated after its acquisition and, in the case of
the El Conquistador, was substantially expanded. The Company continues to
improve such properties on an on-going basis.
In a survey of its readers conducted in 1996 by Conde Nast Traveler
magazine, the El Conquistador was rated among the top 100 resorts in the world
and both the El Conquistador and El San Juan were rated among the top 50
tropical resorts. The Company's casinos are among the largest and most
successful in Puerto Rico. In fiscal 1996 the Condado Plaza casino achieved the
highest table game play and the highest slot machine play in Puerto Rico while
the El San Juan casino achieved the second highest table game play and the third
highest slot machine play. The Company is a market share leader in Puerto Rico
maintaining average occupancy rates at the same or higher levels than reported
by its competitors.
The Company's business strategy is to maximize the economic potential of
its existing properties while building on its hotel and casino expertise by
seeking other opportunities to manage and own hotels and casinos in Puerto Rico,
the Caribbean and elsewhere. The Company believes that its strengths make it an
attractive candidate to other hotel and casino owners seeking third-party
managers as well as an attractive joint venture partner for other hotel and
casino developers and owners.
The Company is constantly seeking new ways to reduce operating costs as
well as upgrade or add amenities to its hotel and casino properties to enhance
the overall experience of its guests. The lobby of the Condado Plaza was fully
renovated during the current fiscal year and restaurants, a nightclub and shops
were added. The El San Juan recently completed a major renovation and
refurbishment which included all of its guest rooms, guest room corridors, an
additional restaurant and public areas. The El Conquistador recently opened
three new restaurants, a nightclub and nine new retail shops. The El
Conquistador is currently negotiating to open a world class spa in the fall of
1997.
The Company's key strengths which have contributed to its success include:
Marketing -- The Company has extensive experience in marketing to three
distinct hotel guest types -- the corporate-executive traveler, the
individual leisure traveler and the group and convention traveler. Through
its 40 person U.S. mainland exclusive marketing service, numerous sales
professionals at each property, general sales agents in South America and
Europe as well as excellent strategic relationships with major airlines,
cruise ship operators and travel industry partners, the Company is able to
maintain its market share leadership in Puerto Rico. With this structure
in place, the Company is equipped to market additional properties.
Management -- The Company currently employs approximately 400 managers in
its three hotels and casinos. These managers provide a pool of experienced
talent to the Company for purposes of operating its existing properties as
well as for future training and expansion. The Company has a proven track
record of successful management of hotels and casinos due to its long-term
management philosophy and commitment to excellence and service.
Centralized Reservations System -- The Company maintains a centralized
reservation system staffed by trained personnel who handle over 500,000
telephone inquiries per year. This centralized system provides the Company
the opportunity to cross-sell its properties depending on supply and
demand, guest type and various other factors.
Centralized Purchasing -- Through the centralized purchasing system
established during fiscal 1996 for the three hotels and casinos it owns
and manages, the Company is able to reduce operating costs and achieve
certain economies of scale so that it can more effectively compete with
larger hotel chains as well as provide its guests first-class amenities at
lower incremental costs.
The Condado Plaza, the El San Juan and WHGI are owned in part by the
Company and in part by the Other Owners. The Company was formed in 1983 and in
that same year, together with the Other Owners, formed PPRA and WHGI for the
purpose of acquiring and managing the hotel and casino property now known as the
Condado Plaza. A year later, the Company, together with the Other Owners, caused
the formation of Posadas de San Juan Associates for the purpose of acquiring and
managing, through WHGI, the hotel and casino property now known as the El San
Juan. Since 1993, the Company has increased its ownership interests in PPRA and
WHGI so that prior to completion of
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the Preliminary Transactions the Company owns 95% of PPRA, a 50% interest in the
El San Juan and 62% of WHGI. Following completion of the Preliminary
Transactions, the Company's ownership interest in PPRA will increase to
approximately 99% and its effective ownership interests in the El San Juan and
WHGI will decrease to approximately 49.5% and 61.38%, respectively. In 1990 the
Company, together with the Other Owners, caused the formation of WKA for the
purpose of becoming a general and limited partner of El Conquistador Partnership
L.P. El Conquistador Partnership L.P. was formed by WKA and Kumagai, a
subsidiary of Kumagai Gumi Co., Ltd., a large Japanese construction company, for
the purpose of acquiring and renovating the hotel and casino property now known
as the El Conquistador. The Company's interest in WKA represents a 23.3%
effective ownership interest in the El Conquistador. The El Conquistador is also
managed by WHGI. See 'Preliminary Transactions' and 'Relationship Between the
Company and the Company's Subsidiaries After the Distribution.'
The Company directs its marketing to three distinct hotel guest
customers -- the corporate-executive traveler, the individual vacation and
leisure traveler and the group and convention traveler. The Company has also
directed its efforts toward local business people and residents of Puerto Rico
for its casino, convention, restaurant, nightclub and bar facilities.
The Company believes the Condado Plaza and the El San Juan are attractive
to the corporate-executive traveler because they are easily accessible from the
San Juan International Airport and from Hato Rey, San Juan's business and
commercial center and include an aggregate of 56,000 square feet of convention
and meeting space. The individual vacation traveler is attracted to all
facilities by the Caribbean climate and resort amenities including casinos,
swimming pools, whirlpools and spas, tennis, golf and water sports facilities,
health clubs and entertainment lounges. The group and convention traveler is
attracted by the combination of business and resort amenities at all facilities.
Because of its emphasis on business-related services and facilities, the Condado
Plaza attracts groups and conventions meeting to conduct business in Puerto
Rico. The El San Juan, a luxury resort hotel, attracts small groups and
conferences interested in a combination of business, recreational and social
activities while in Puerto Rico. 'Blue Chip' corporate and incentive groups
comprise a significant portion of the El Conquistador's clientele in addition to
appealing to the upscale leisure traveler.
The Company's marketing strategy includes attracting to its hotel and
casino facilities members of the local business community, residents of Puerto
Rico and vacation travelers who are staying at other hotel and lodging
accommodations. The Company believes a substantial percentage of the casino,
restaurant, nightclub and bar revenues at all facilities are from local
clientele. Local business people entertain in the hotels' restaurants and
lounges on a regular basis. Residents of Puerto Rico frequently utilize the
casinos, shops and recreational facilities. Many local social events and
receptions are held in the ballrooms and banquet facilities of the Company's
properties.
The Company's hotel and casino facilities are marketed primarily in the
United States, as well as in Canada, Mexico, Europe and South America. In
addition to its in-house marketing staff of 35 employees, the Company has a U.S.
mainland exclusive marketing service with 40 employees located primarily in
Miami and New York which promotes sales for the Company's hotels and casinos.
This combined marketing effort promotes the hotels and casinos to tour
operators, meeting planners, corporate incentive groups, wholesale and retail
travel agencies and airlines, as well as to individuals. In addition, the
marketing staff solicits casino business by identifying and contacting
individual players and through the efforts of commissioned sales
representatives. The activities of the sales force include direct sales
promotions, telephone and direct mail solicitations, participation in trade
shows and public relations.
The Company's operations are divided into two industry segments: the
Condado Plaza and WHGI. The Company's investments in the El San Juan and El
Conquistador are accounted for in the Consolidated Financial Statements on the
equity method. See Note 15 to the Consolidated Financial Statements included
elsewhere in this Information Statement for information concerning revenues and
operating income attributable to the Company's two industry segments which is
incorporated herein by reference.
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THE CONDADO PLAZA
The Condado Plaza is owned by PPRA, which is owned 95% by the Company. Such
ownership interest was increased from 92.5% effective July 13, 1994. Acquired by
the Company in 1983, the Condado Plaza has since become one of the leading
hotels in the Caribbean. Located on the Atlantic Ocean in the Condado area of
San Juan, the Condado Plaza is a ten-minute drive from Hato Rey, the city's
business and commercial center. The Condado Plaza has 569 rooms and consists of
two separate structures on a five-acre site -- the 13-story main building, which
is owned by PPRA, and the 11-story Laguna Wing, which is leased from the owners
of the minority interest in the hotel. The Laguna Wing lease expires March 31,
2004. See ' -- Properties.' In fiscal 1996, the American Automobile Association
awarded the Condado Plaza a 'Four Diamond' rating for the ninth consecutive
year.
During the fiscal years ended June 30, 1996, 1995 and 1994, the Condado
Plaza's capital expenditures for the purchase of property, plant and equipment
were $1,285,000, $2,487,000 and $7,745,000, respectively. The Condado Plaza
expects to spend approximately $4,700,000 in capital expenditures during fiscal
1997 primarily to refurbish the hotel lobby, casino, restaurants and nightclub.
Upon completion of this major refurbishment, the Company expects capital
expenditures to return to annual levels more consistent with those of fiscal
1995.
The Condado Plaza guest accommodations are geared to the needs of traveling
executives and include 'The Plaza Club,' a hotel-within-a-hotel with 72 deluxe
guest rooms and suites, private lounges and a specially-trained staff providing
concierge services. The Condado Plaza has an executive service center which
offers all necessary business-related services and facilities, conference
facilities which can accommodate groups of up to 1,000, five restaurants, three
retail shops, a health and fitness center, three tennis courts and dual pools
with spas.
Most restaurants and all of the shops located in the Condado Plaza are
owned and operated by unaffiliated concessionaires which pay the Company rentals
based primarily on a percentage of their revenues. In addition, the water sports
and valet parking are operated as concessions.
The Condado Plaza maintained an average occupancy during the fiscal year
ended June 30, 1996 of 87.4% compared with a rate of 84.5% for the fiscal year
ended June 30, 1995 and 85.4% for the fiscal year ended June 30, 1994. The 87.4%
occupancy was achieved notwithstanding the opening of several new hotels in the
greater San Juan area during recent years. Occupancy is based upon available
rooms excluding immaterial numbers of rooms under renovation or otherwise
unavailable for occupancy from time to time.
THE EL SAN JUAN
The El San Juan is owned by Posadas de San Juan Associates, a partnership
which as of the Distribution Date will be effectively owned 49.5% by a
subsidiary of the Company and the balance owned by, among others, the owners of
the minority interest in PPRA. The El San Juan is located in the Isla Verde area
of metropolitan San Juan on a 13-acre oceanfront site twenty-five minutes from
the shopping and historic sights of Old San Juan. The hotel consists of four
structures of from one to nine stories and contains 388 guest rooms and suites
and conference and meeting space of 36,000 square feet with a seating capacity
of 3,000. With its marble floors, elaborate chandeliers and carved mahogany
ceilings and walls, the El San Juan was awarded a 'Four Diamond' rating by the
American Automobile Association for the tenth year in a row.
During the fiscal years ended June 30, 1996, 1995 and 1994, the El San
Juan's capital expenditures for the purchase of property, plant and equipment
were $3,105,000, $3,310,000 and $2,737,000, respectively. For the year ending
June 30, 1997, the Company has budgeted $4,300,000 for capital expenditures at
the El San Juan.
The El San Juan caters to individual vacation travelers, as well as to
small groups and conferences and corporate-executive travelers. El San Juan
guest rooms and suites have luxury appointments and amenities and, in many of
the guest rooms, private balconies, whirlpools and spas. The Roof Top Health
Spa, two swimming pools, three tennis courts and beach area contribute to the
attractiveness of this property.
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The El San Juan maintained an average occupancy during the fiscal year
ended June 30, 1996 of 82.3% compared with a rate of 82.4% for the fiscal year
ended June 30, 1995 and a rate of 84.6% for the fiscal year ended June 30, 1994.
The El San Juan also features an indoor shopping arcade designed to
resemble a European village, which features 12 fashionable stores serving resort
guests and community residents. All of the stores in the El San Juan and all of
the restaurants except 'La Veranda' are owned and operated by unaffiliated
concessionaires which pay the El San Juan rentals based primarily on a
percentage of their revenues. In addition, the watersports and valet parking are
operated as concessions.
THE EL CONQUISTADOR
On January 12, 1990, WHGI entered into an agreement with the El
Conquistador Partnership L.P. for the management of the El Conquistador. The El
Conquistador is 23.3% owned by the Company, 26.7% owned by certain of the Other
Owners and 50% owned by Kumagai. The El Conquistador was developed with Kumagai
acting as construction manager and WHGI rendering technical development services
during the construction phase. The completed resort opened for business in
November 1993.
The El Conquistador, a world class destination resort complex, is located
at the old El Conquistador site in Las Croabas. The resort has 751 guest rooms,
an 18-hole championship golf course, a marina, seven tennis courts, 90,000
square feet of convention and meeting facilities, six lounges and nightclubs, 12
restaurants, a 13,000 square foot casino, 25 retail shops, a fitness center and
five pool areas, all situated on a bluff overlooking the convergence of the
Atlantic Ocean and the Caribbean Sea. The El Conquistador also features a
secluded beach located on a private island three miles offshore. In addition,
the El Conquistador has available 90 condominium units known as the Las Casitas.
The Las Casitas provide another 167 rooms to the inventory of luxury rooms
available to the El Conquistador bringing the total available rooms at the
resort to 918. In less than two years the resort has received the prestigious
Gold Key Award by Meetings and Conventions Magazine and the Paragon Award by
Corporate Meetings and Incentives Magazine for excellence in meeting and
conventions. For the second consecutive year, the American Automobile
Association awarded the resort a 'Four Diamond' rating.
During the fiscal years ended March 31, 1996 and 1995, the El
Conquistador's capital expenditures for the purchase of property and equipment
were $864,000 and $3,002,000, respectively. For the year ending March 31, 1997,
the El Conquistador has budgeted $1,800,000 for capital expenditures. Capital
expenditures for 1996 and 1997 have been relatively low due to the age of the
resort. Capital expenditures for fiscal 1998 are expected to be approximately
$2,800,000.
The El Conquistador finished its second full fiscal year ended March 31,
1996 with an average occupancy of 70.9% and gross revenues of $90,351,000. This
compares to an average occupancy of 73.3% and gross revenues of $85,948,000 for
the fiscal year ended March 31, 1995.
WHGI
At the time of the Distribution, WHGI will be effectively owned 61.38% by
the Company and approximately 38% by the Other Owners. The Company increased its
interest in WHGI from 57% to 62% effective July 13, 1994. WHGI, the Company's
subsidiary which provides hotel and casino management services, has managed the
Condado Plaza since 1983, the El San Juan since 1985 and the El Conquistador
since its opening in 1993. WHGI has management contracts with all such
facilities expiring in 2003 (Condado Plaza), 2005 (El San Juan) and 2013 (El
Conquistador). It earns basic management fees based on gross revenues and
incentive management fees based on gross operating profits. WHGI is reimbursed
for certain administrative expenses incurred in connection with its management
of such properties and receives fees with respect to certain centralized
services being rendered for all hotel and casino properties. In addition to
supervising the daily operations of each of the properties it manages, WHGI
supervises marketing, sales and promotions and recommends long-term policies for
the three hotels and casinos.
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CASINO CREDIT POLICY
All of the Company's casinos extend credit to qualified players who satisfy
its credit review procedures. The procedures include external credit
verification and internal management level approvals.
Credit play at the Condado Plaza for the fiscal years ended June 30, 1996,
1995 and 1994 represented 36%, 32% and 46%, respectively, of total play at the
casino. Casino credit receivables, net of allowance for doubtful accounts, at
the Condado Plaza at each of the fiscal years ended June 30, 1996, 1995 and 1994
were $464,000, $1,330,000 and $1,956,000, respectively, representing 1.2%, 3.9%
and 3.4% of annual credit play.
Credit play at the El San Juan for the fiscal years ended June 30, 1996,
1995 and 1994 represented 55%, 60% and 72%, respectively, of total play at the
casino. Casino credit receivables, net of allowance for doubtful accounts, at
the El San Juan at each of the fiscal years ended June 30, 1996, 1995 and 1994
were $473,000, $2,265,000 and $5,859,000, respectively, representing 0.8%, 2.9%
and 4.5% of annual credit play.
Credit play at the El Conquistador has not been significant since its
opening in November 1993.
The credit players represent a significant portion of total play at the El
San Juan and Condado Plaza casinos and the Company believes that collection
losses have not been unusual or material to the results of operations, except
for the El San Juan casino, where the losses for fiscal 1995 were $3.7 million
compared with $4.2 million in fiscal 1994 and $2.6 million in fiscal 1993.
Gaming debts are enforceable in Puerto Rico and the majority of States in the
United States. Those States that do not enforce gaming debts will nonetheless
generally allow enforcement of a judgment obtained in a jurisdiction such as
Puerto Rico. Due to the unenforceability generally of gaming debts in Latin
America, where a significant number of the Company's players reside, procedures
have been established to obtain promissory notes from most Latin American credit
casino clients.
GOVERNMENT REGULATION AND LICENSING
In 1948, Puerto Rico legalized gambling. The Office of the Commissioner of
Banks and Financial Institutions of the Commonwealth of Puerto Rico is
responsible for investigating and licensing casino owners. The Gaming Division
of the Tourism Development Company of Puerto Rico (the 'Gaming Division')
regulates and supervises casino operations. A government inspector must be
on-site whenever a casino is open. Among its responsibilities, the Gaming
Division licenses all casino employees and enforces regulations relating to
method of play and hours of operation (a maximum of 16 hours per day).
The casinos at the Condado Plaza, the El San Juan and the El Conquistador
are subject to strict internal controls imposed by the Company over all facets
of their operations, including the handling of cash and security measures. All
slot machines at these and all other casinos on the island are owned and
maintained by the Commonwealth of Puerto Rico. Of the profits from the slot
machines, 34% is received by the casino and the remaining 66% is allocated to
Puerto Rico government agencies and educational institutions. Each casino pays
the Government a franchise fee depending on total play or drop in the casino,
which ranges from $50,000 to $200,000. The Condado Plaza and the El San Juan
each pay an annual franchise fee of $200,000 and the El Conquistador pays an
annual franchise fee of $150,000 in quarterly installments. Each casino is
required to renew its franchise quarterly; and, unless a change of ownership of
the franchisee has occurred or the gaming authorities have reason to believe
that reinvestigation of the franchisee is necessary, renewal is generally
automatic.
The hotels and casinos are also subject to various local laws and
regulations affecting their business, including provisions relating to fire
safety, sanitation, health and the sale of alcoholic beverages.
The Gaming Reform Bill of 1996 was approved by the Legislature in Puerto
Rico and enacted into law on September 3, 1996. The Bill provides the following
improvements to existing casino operations in Puerto Rico:
1. New permitted table games: Caribbean Stud Poker, Let It Ride
(poker), Pai Gow Poker and Big Six (Wheel).
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2. New permitted table maximum bets: Blackjack - $10,000, previously
$2,000; Craps - $10,000, previously $2,000; Mini-Baccarat - $10,000,
previously $2,000; Roulette - $1,000, previously $100 (Straight); and
Baccarat - $25,000, previously $4,000.
3. Flexibility to acquire other new table games.
4. Flexibility to change procedures and regulations on existing table
games (i.e., 'odds' in Craps and 'hole card' in Blackjack).
5. New Slot Machines: approximately 1,600 new slot machines to replace
all slot machines that were manufactured prior to 1992 and those slot
machines that subsequently reach five years of age will be replaced on an
annual basis.
6. Slot Machine Ratio to Table Game positions changed from 1:1 up to
1.5:1, permitting more slot machines in each casino.
The Company's casinos expect to take full advantage of these changes, which
will enable it to be much more competitive with other gaming jurisdictions in
the Caribbean as well as the new casinos opening in Puerto Rico.
The Commonwealth of Puerto Rico is scheduled to add 44 new slot machines
and replace 270 of the existing slot machines in the casinos in which the
Company has an interest with new machines. The Condado Plaza and El San Juan
have increased their table maximums in order to entice higher stakes gamblers
who previously were not attracted to Puerto Rico. Caribbean Stud Poker, Let It
Ride and Big Six (Wheel) games have also been added at the casinos.
SEASONALITY
Tourism in Puerto Rico is at its peak during the months of December through
April. Most hotels, in spite of reducing their room rates during the off-season
months, experience decreased occupancy and lower revenues. By attracting
business travelers and residents of Puerto Rico on a year-round basis, the
Condado Plaza has reduced, to some extent, the seasonality of its operations.
The El San Juan and the El Conquistador expect that group business developed
during the off- and shoulder-seasons will reduce the effect of seasonality.
Seasonal fluctuations in the tourism industry do not have as much of an
effect on the Condado Plaza as they have on other Caribbean hotels since
approximately 40% of the Condado Plaza's accommodations are booked by business
travelers. As a result, the Condado Plaza's monthly occupancy for the fiscal
year ended June 30, 1996 ranged from 78.9% to 96.0%, with an average occupancy
of 87.4%. The in-season average occupancy figure for December 1995 to April 1996
was 88.6% compared to 87.6% and 87.2% for such period in the fiscal years 1995
and 1994, respectively. The Condado Plaza, like other Caribbean hotels, reduces
its rates during the off-season months but, unlike many other Caribbean hotels,
occupancy rates remain at relatively high levels.
During the fiscal year ended June 30, 1996, the El San Juan's monthly
occupancy ranged from 62.2% to 94.9%, with an average occupancy of 82.3%. The
in-season average occupancy figure for December 1995 to April 1996 was 85.8%
compared to 88.3% and 87.7% for such period in the fiscal years 1995 and 1994,
respectively.
The El Conquistador's monthly occupancy during its fiscal year ended March
31, 1996 ranged from 50.1% to 88.8%, with an average occupancy of 70.9%.
COMPETITION
The hotel and casino business in the Caribbean region is highly
competitive. The Company's facilities compete with each other and with numerous
hotels and resorts on the island of Puerto Rico (including 16 other hotels and
resorts with casinos) and on other Caribbean islands and in the southeastern
United States and Mexico. The Company competes with such chains as Hyatt,
Marriott, Hilton, Holiday Inn and Westin as well as numerous other hotel and
resort chains and local hotel and motel operators. The Company also competes for
hotel and casino customers to a lesser extent with the Nevada and New Jersey
hotels and casinos as well as other casinos now operating in the United States.
55
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The principal methods of competition for casino players include maintaining
promotional allowance packages that are comparable to other casinos and
providing outstanding service to players in the hotel and casino. The
promotional allowance package will vary depending upon the size of the play and
may include reduced or complimentary hotel and restaurant charges and air fares.
Some of these competing properties are owned or managed by hotel chains
possessing substantially greater financial and marketing resources than those of
the Company. See 'Risk Factors -- Competition.'
At December 31, 1996, there were 25 hotels in the San Juan area designated
as 'tourist hotels' by the Tourism Company of Puerto Rico offering a total of
approximately 5,205 rooms, of which only 10 hotels offered more than 200 rooms;
approximately 3,210 additional rooms were offered in 21 tourist hotels elsewhere
on the island of Puerto Rico. The island also has numerous commercial hotels and
guest houses. Approximately 31 cruise ships operate out of Puerto Rico in the
winter. Currently, 20 ships include San Juan as a port of call while 17 ships
have made San Juan their home base.
The Company believes that Puerto Rico offers many advantages over
geographical areas in which competing properties are located. Unlike most other
Caribbean islands, Puerto Rico is served by many direct air flights from the
continental United States and has a highly developed economy and a well-educated
population. Moreover, Puerto Rico is a Commonwealth of the United States,
freeing mainland visitors from concerns about foreign currencies or customs and
immigration laws. Unlike resort areas in the southeastern United States, Puerto
Rico enjoys a mild subtropical climate throughout the year and offers legalized
gambling.
EMPLOYEES
At December 31, 1996, the Condado Plaza employed approximately 850 persons,
561 of whom are represented by two labor unions (434 employees belong to the
hotel union and 127 employees belong to the casino union). The Condado Plaza's
contract with the Hotel and Restaurant Employees International Union expires
August 31, 1997. The Condado Plaza's contract with the Puerto Rico Association
of Casino Employees expires May 31, 1999.
The El San Juan employs approximately 860 persons of which 237 are casino
employees. The Teamsters Union was certified by the National Labor Relations
Board on May 12, 1995 to represent the 93 non-managerial casino employees and a
contract was signed on May 31, 1996 and expires May 31, 1999.
The El Conquistador employs approximately 1,574 persons of which 134 are
casino employees. WHGI employs approximately 62 persons, including the executive
office staff and the reservation staffs for all operations. None of the
Company's employees at the El Conquistador or WHGI are represented by a labor
union.
The number of persons employed by the Company varies from season to season
and is at its highest during the high season when occupancy is at its highest.
The Company considers its current relationships with all employees, union and
non-union, to be satisfactory.
PROPERTIES
The Company owns interests in and manages 1,875 suites and hotel rooms,
39,300 square feet of casino floor space containing 120 gaming tables and 940
slot machines and approximately 146,000 square feet of convention and meeting
space. These properties also include a total of 22 restaurants, 41 shops, one
showroom, three health and fitness centers, 12 tennis courts, 25 cocktail and
entertainment lounges, an 18-hole championship golf course and a marina.
The following table sets forth, with respect to the Company's principal
properties, the location, principal use, approximate floor space and the annual
rental and lease expiration date, where leased, or encumbrances, where owned by
the Company, at December 31, 1996.
Management believes that all of the facilities listed in the following
table are in good repair and are adequate for their respective purposes. The
Company owns substantially all of the machinery, equipment, furnishings, goods
and fixtures used in its businesses, all of which are well maintained and
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satisfactory for the purposes intended. The Company's personal property utilized
in the Condado Plaza, the El San Juan and the El Conquistador operations is
subject to security interests.
<TABLE>
<CAPTION>
APPROXIMATE LEASE
LOCATION PRINCIPAL USE SQUARE FEET ANNUAL RENT EXP. DATE ENCUMBRANCES
- ------------------ ------------------ ------------ -------------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Las Croabas, PR El Conquistador 854,000 23.3% Owned by -- (1)
Resort Company
San Juan, PR Condado Plaza 136,081 95% Owned by Company -- (2)
Hotel/Casino
San Juan, PR Condado Plaza 60,500 $684,000(3) 03/31/04 (2)
Laguna Wing
San Juan, PR Condado Plaza 28,611 95% Owned by Company -- (4)
Parking Lots
San Juan, PR Condado Plaza 8,343 95% Owned by Company -- (4)
Parking Lot
San Juan, PR El San Juan 162,500 50% Owned by Company -- (5)
Hotel/Casino
San Juan, PR El San Juan 10,663 62% Owned by Company -- (4)
Parking Lot
San Juan, PR El San Juan 210,000 $150,000 11/16/97 --
Parking Lot
San Juan, PR WHGI Admin. 10,000 62% Owned by Company -- (6)
Offices
</TABLE>
- ------------
(1) Subject to a first mortgage lien in the amount of $146,612,000 securing: (i)
a $120,000,000 loan from the Puerto Rico Industrial, Medical Educational and
Environmental Pollution Control Facilities Financing Authority; (ii) a
$120,000,000 letter of credit issued by The Mitsubishi Bank, Limited, now
known as The Bank of Tokyo-Mitsubishi, Ltd., which serves as collateral for
the loan referred to in (i) above; and (iii) termination liability up to
$20,000,000 under an Interest Rate Swap Agreement with respect to interest
due on the loan referred to in (i) above; subject to a second mortgage lien
securing a $25,000,000 loan from the GDB; subject to a third mortgage lien
securing a $6,000,000 revolving credit facility from the GDB; and subject to
a fourth mortgage lien in the amount of $6,000,000 securing interest due
under an $8,000,000 loan from the GDB to the partners of the El
Conquistador, the proceeds of which were loaned to the El Conquistador.
(2) Subject to mortgage liens to secure a loan in the original principal amount
of $35,500,000 from Scotiabank de Puerto Rico under the terms of an
Operating Credit and Term Loan Agreement dated August 30, 1988, as amended.
(3) Annual rent of $684,000 is fixed through September 30, 1998; thereafter,
$752,000 to September 30, 2003 and $827,000 to March 31, 2004. See
'Business -- The Condado Plaza.'
(4) Subject to a mortgage in favor of the GDB to secure a $4,000,000 loan to
WKA, the proceeds of which were loaned to the El Conquistador.
(5) Subject to a first mortgage lien to secure a loan in the original principal
amount of $34,000,000 from The Bank of Nova Scotia under the terms of a
Credit Agreement dated as of January 20, 1993.
(6) Subject to a first mortgage lien to secure a loan in the original principal
amount of $800,000 from Scotiabank de Puerto Rico.
------------------------
The El Conquistador is situated on approximately 220 acres in Las Croabas,
Puerto Rico. The Company owns approximately 42 additional acres of land in the
vicinity of the El Conquistador which have various uses including employee
parking facilities for the El Conquistador. The Company, through WMS Property
Inc., to be merged into ESJ, also owns approximately 150 acres of vacant land
adjacent to the El Conquistador.
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MANAGEMENT
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Upon consummation of the Distribution, the Company Board will be comprised
of five directors. The members of the Company Board have been elected by WMS as
sole stockholder of the Company and will serve for terms expiring at the
Company's 1998, 1999 and 2000 Annual Meetings. Set forth below is certain
information concerning the individuals who will serve as Directors of the
Company following the Distribution:
CLASS I DIRECTORS: Initial term expiring at the Company's 2000 Annual
Meeting.
Louis J. Nicastro, 68, is the Chairman of the Board and Chief
Executive Officer of the Company. Mr. Nicastro has been Chairman of the
Board and Chief Executive Officer of the Company since 1983. Mr. Nicastro
has also been a Director and has held various executive positions at the
Company's subsidiaries since their respective formations. Mr. Nicastro has
served as Chairman of the Board of Directors of WMS since its incorporation
in 1974 and will continue in such office after the Distribution. He served
as Co-Chief Executive Officer of WMS from 1994 until as of July 1, 1996,
having served as Chief Executive Officer (1974-1994), President (1985-1988
and 1990-1991) and Chief Operating Officer (1985-1986) of WMS. Mr. Nicastro
also serves as a Director of Midway Games Inc., approximately 87% of which
is owned by WMS.
George R. Baker, 67, is the Vice Chairman of the Board of the Company.
Mr. Baker has also been a Director of WHGI since 1983. He has served as a
private consultant and director of WMS since 1983. Mr. Baker will resign as
a Director of WMS as of the Distribution Date. He was a general partner of
Barrington Limited Partners (private investment partnership) (1985-1986),
as a special limited partner of Bear, Stearns & Co., Inc. (investment
banking) (1983-1985) and an Executive Vice President of Continental Bank
N.A. (1951-1982). Mr. Baker is also a director of the Midland Co., Reliance
Group Holdings, Inc., Reliance Insurance Co. and W.W. Grainger, Inc.
CLASS II DIRECTORS: Initial term expiring at the Company's 1999 Annual
Meeting.
Brian R. Gamache, 40, is the President and Chief Operating Officer of
the Company. Mr. Gamache has also been President and Chief Operating
Officer of WHGI since March 1996 and President of the El Conquistador since
May 1995. He has also served the Company as Vice President Sales and
Marketing of WHGI (September 1990-May 1995). Prior to joining the Company,
Mr. Gamache held various positions for Hyatt Hotels Corp. (1983-1990),
including Corporate Director of Sales and Marketing -- Resorts (1987-1990)
and he held various positions for Marriott Hotels Corporation (1980-1983),
including Director of Sales at the Marriott Camelback Resort and Country
Club in Scottsdale, Arizona.
David M. Satz, Jr., 71, has been a member of the law firm of Saiber
Schlesinger Satz & Goldstein, Newark, New Jersey, for in excess of five
years. Mr. Satz is also a director of the Atlantic City Racing Association.
CLASS III DIRECTORS: Initial term expiring at the Company's 1998
Annual Meeting.
Joseph A. Lamendella, 59, has been a member of the law firm of
Lamendella & Daniel, P.C., Chicago, Illinois, for in excess of five years.
The business of the Company will be managed under the direction of its
Board of Directors. The Company Board will have two standing committees: an
audit committee and a compensation committee.
The Audit Committee will be comprised of certain directors who are not
employees of the Company or any of its subsidiaries. The Audit Committee will
meet at least twice a year with the Company's independent auditors, management
representatives and internal auditors. The Audit Committee will recommend to the
Company Board the appointment of independent auditors, approve the scope of
audits and other services to be performed by the independent and internal
auditors, consider whether the performance of any professional services by the
independent auditors other than services provided in connection with the audit
function could impair the independence of the independent auditors and review
the results of internal and external audits and the accounting
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principles applied in financial reporting and financial and operational
controls. The independent auditors and internal auditors will have unrestricted
access to the Audit Committee and vice versa. Initially the members of the Audit
Committee will be Messrs. Satz (Chairman) and Lamendella.
The Compensation Committee will be comprised of certain directors who are
not employees of the Company or any of its subsidiaries. The Compensation
Committee's functions will include recommendations on policies and procedures
relating to senior executive officers' compensation and various employee stock
option and other benefit plans as well as approval of individual salary
adjustments and stock awards in those areas. Initially the members of the
Compensation Committee will be Messrs. Lamendella (Chairman) and Satz.
At the time of the Distribution, the Company's designees on each of the
Boards of Directors of PPRA and WHGI will be Messrs. Nicastro, Baker, Gamache,
Satz and Lamendella. At the time of the Distribution, the Company's designees on
the Venturers Committee of the El San Juan will be Messrs. Nicastro, Baker and
Satz.
It is intended that Barbara M. Norman will become an executive officer of
the Company at some time following the Distribution. See ' -- Executive
Officers.' At such time it is also intended that she become a Class III
Director.
EXECUTIVE OFFICERS
Following the Distribution, it is intended that the Company will continue
to be operated in substantially the same manner in which it is currently
operated. The following table sets forth certain information concerning the
persons who shall serve as executive officers of the Company from and after the
Distribution Date. Each such person shall have been elected to the indicated
office and shall serve at the pleasure of the Company Board.
<TABLE>
<CAPTION>
NAME POSITION WITH THE COMPANY
- ---------------------- ------------------------------------------------------------------
<S> <C>
Louis J. Nicastro..... Chairman of the Board and Chief Executive Officer
George R. Baker....... Vice Chairman of the Board
Brian R. Gamache...... President and Chief Operating Officer
Richard F. Johnson.... Chief Financial Officer and Treasurer
</TABLE>
Louis J. Nicastro, 68, See ' -- Board of Directors and Committees of the
Board' for a description of Mr. Nicastro's business experience.
George R. Baker, 66, See ' -- Board of Directors and Committees of the
Board' for a description of Mr. Baker's business experience.
Brian R. Gamache, 40, See ' -- Board of Directors and Committees of the
Board' for a description of Mr. Gamache's business experience.
Richard F. Johnson, 51, has been Senior Vice President and Chief Financial
Officer of WHGI since March 1, 1997 and will become Chief Financial Officer and
Treasurer of the Company effective upon the consummation of the Distribution.
Prior to joining the Company, Mr. Johnson was Chief Financial Officer of
Millamax, Inc. (October 1995-February 1997), Chief Financial Officer of Sun
International Bahamas Limited (March 1994-September 1995), Vice
President-Finance of Great Bay Hotel & Casino Corporation (June 1993-March
1994), Vice President-Finance of Loews Hotels, Inc. (February 1983-May 1992) and
he held various positions for Caesars World, Inc. (February 1975-February 1983),
including Vice President-Finance for Caesars Tahoe, Inc. (February 1980-February
1983). From May 1992 until June 1993 Mr. Johnson was a private hotel consultant.
He also was associated with KPMG Peat Marwick for approximately seven years and
is a certified public accountant.
Barbara M. Norman, 58, is currently Vice President, Secretary and General
Counsel of WMS and Midway Games Inc., positions she has held since June 1992. It
is intended that Ms. Norman will join the Company as a Director, Vice President,
Secretary and General Counsel some time after the Distribution and, therefore,
she is not included in the table of Executive Officers set forth above or the
Summary Compensation Table set forth below. At the time she joins the Company,
Ms. Norman will resign from her positions at WMS and Midway Games Inc. and their
various subsidiaries. Prior to June 1992, Ms.
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Norman was associated with the law firm Whitman & Ransom, New York, New York
(1990-1992) and served WMS and Midway Games Inc. as Vice President, Secretary
and General Counsel during the period 1986-1990 and 1988-1990, respectively.
During the years she has been associated with WMS and its subsidiaries, Ms.
Norman also served as Vice President and Secretary of the Company and many of
WMS' other subsidiaries, including the Company's subsidiaries.
OTHER SIGNIFICANT EMPLOYEES
Set forth below is a listing of the general managers of the Condado Plaza,
the El San Juan and the El Conquistador and a description of their business
experience for the past five years.
Ronald DiNola, 45, has been Vice President and General Manager of the
Condado Plaza since January 29, 1996. Prior to joining the Company Mr. DiNola
was employed by Carnival Hotels & Casinos as the General Manager of the Omni
International Hotel in Miami, Florida (June 1993-January 1996) and the General
Manager of the Sheraton Grand in Tampa, Florida. (September 1988-June 1993).
David Kurland, 43, has been Vice President and General Manager of the El
San Juan since April 1, 1994. From 1990 until joining the Company, Mr. Kurland
was General Manager of the Grand Bay Hotel in Miami, Florida.
Olivier Masson, 42, has been Vice President of the El Conquistador since
April 1996. From April 1993 until his promotion to Vice President, Mr. Masson
was the General Manager of the El Conquistador. Prior to joining the Company,
Mr. Masson was Food & Beverage Director of the Ritz Carlton Buckhead in Atlanta,
Georgia (August 1992-April 1993), Food & Beverage Director of the Grand Hyatt in
Waileh, Hawaii (1989-1992) and Regional Food & Beverage Director for Hyatt Hotel
Corp. (1985-1989).
EXECUTIVE OFFICER COMPENSATION
Prior to the Distribution, the Hotel & Casino Business has functioned as
separate subsidiaries of WMS and, with the exception of the advice and guidance
of the WMS Board and in particular Mr. Louis J. Nicastro, its management has
been employed by the separate entities comprising the business. The following
Summary Compensation Table sets forth a summary of the compensation paid during
the past three fiscal years by WMS and/or its subsidiaries to the individuals
who will be serving as the Company's Chief Executive Officer and two of the four
next most highly-compensated executive officers of the Company. Mr. Richard F.
Johnson, who upon consummation of the Distribution will become Chief Financial
Officer and Treasurer of the Company, commenced his employment with the Company
as of March 1, 1997 and, therefore, is not included in the Summary Compensation
Table set forth below. The compensation in the following table represents all
compensation paid to each such individual in connection with his or her position
at WMS and/or its subsidiaries. For a description of the compensation
arrangements of certain of these individuals by the Company after the
Distribution, see 'Employment Agreements.'
60
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
NAME AND PRINCIPAL ANNUAL COMPENSATION
POSITION WITH THE ----------------------------------------------
COMPANY AS OF THE OTHER ANNUAL
DISTRIBUTION DATE YEAR SALARY($) BONUS($) COMPENSATION($)
- ------------------------- ---- --------- -------- --------------
<S> <C> <C> <C> <C>
Louis J. Nicastro ....... 1996 $ 832,500 $ -- $6,127(1)
Chairman of the 1995 682,500 300,000 4,775(1)
Board and Chief 1994 682,500 600,000 4,173(1)
Executive Officer
George R. Baker, ........ 1996 67,500(3) -- --
Vice Chairman of the 1995 67,500(3) -- --
Board 1994 83,500(4) -- --
Brian R. Gamache, ....... 1996 290,000 75,000 --
President and Chief 1995 280,000 50,000 --
Operating Officer 1994 280,000 50,000 --
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
NAME AND PRINCIPAL (WMS)
POSITION WITH THE SECURITIES
COMPANY AS OF THE UNDERLYING ALL OTHER
DISTRIBUTION DATE OPTIONS(#) COMPENSATION($)
- ------------------------------------- ---------------
<S> <C> <C>
Louis J. Nicastro ....... -- $ 629,971(2)
Chairman of the -- 409,784(2)
Board and Chief 500,000 327,252(2)
Executive Officer
George R. Baker, ........ -- --
Vice Chairman of the -- --
Board 50,000 --
Brian R. Gamache, ....... -- --
President and Chief -- --
Operating Officer -- --
</TABLE>
- ------------
(1) Amounts shown for tax gross up payments.
(2) Amounts shown include accrual for contractual retirement for Mr. Nicastro.
(3) Includes Directors fees for services as a Director of WMS and WHGI.
(4) Includes Directors fees for services as a Director of WMS and WHGI and fees
for special consulting services.
------------------------
As stated above, it is anticipated that some time after the Distribution,
Ms. Barbara M. Norman will join the Company as a Director, Vice President,
Secretary and General Counsel.
OPTION GRANTS IN LAST FISCAL YEAR
Neither the Company nor WMS granted stock options to the persons listed on
the Summary Compensation Table during fiscal year 1996.
AGGREGATED STOCK OPTION EXERCISES AND YEAR-END VALUES
The table below sets forth, on an aggregated basis, information regarding
the exercise during the 1996 fiscal year of options to purchase WMS Common Stock
by each of the persons listed on the Summary Compensation Table above and the
value on June 30, 1996 of all unexercised options held by such individuals.
AGGREGATED STOCK OPTION EXERCISES IN
LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR OPTIONS AT FISCAL
SHARES YEAR-END ($) YEAR-END ($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(S) ESTIMATED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Louis J. Nicastro................. -- -- 500,000(U) --
George R. Baker................... -- -- 50,000(U) --
Brian R. Gamache.................. -- -- -- --
</TABLE>
The Company has not made any determinations with respect to the grant of
options to employees or directors.
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COMPENSATION OF DIRECTORS
Upon consummation of the Distribution, the Company will pay a fee of
$25,000 per annum to each Director who is not an employee of the Company or any
of its subsidiaries. Each such Director who serves as the Chairman of any
committee of the Company Board will receive a further fee of $5,000 per annum
for his services in such capacity. Individuals who serve as Directors of WHGI
and who are not employees of WHGI are paid an annual fee of $22,500.
EMPLOYMENT AGREEMENTS
Louis J. Nicastro. Until June 30, 1996, Mr. Louis J. Nicastro was employed
by WMS under the terms of an Amended and Restated Employment Agreement dated
October 27, 1994, which was due to expire July 31, 1999, subject to automatic
one-year extensions thereafter unless notice was given six months prior to any
termination date. The agreement provided for salaried compensation at the rate
of $832,500 per annum, or such greater amount as the WMS Board may have
determined. The agreement also provided for full participation in all benefit
plans available to senior executives and for reimbursement of all medical and
dental expenses incurred by Mr. Nicastro and his spouse. Upon Mr. Nicastro's
retirement date of July 31, 1999 ('Retirement Date'), or in the event Mr.
Nicastro became disabled, WMS was required to pay Mr. Nicastro until his death
an annual benefit equal to one-half of the aggregate annual base salary being
paid to him at the time of such occurrence, but in no event less than $416,250
per year payable in monthly installments. Such benefit (to the extent not
previously vested) vested ratably during the period October 27, 1994 through
July 31, 1999 (or such earlier date as Mr. Nicastro's employment may have
terminated by reason of any violation by WMS of the agreement or the occurrence
of a change-in-control of WMS). The vested amount of such retirement or
disability benefit was payable notwithstanding Mr. Nicastro's termination of
employment for any reason, provided, he was not in material breach of the terms
of the agreement and, upon his death, was payable to his designee or estate.
Upon Mr. Nicastro's death, whether during the term of his employment or after
his Retirement Date, WMS agreed to pay in monthly installments to his designee
or estate for a period of fifteen years thereafter, an annual benefit equal to
one-half of the amount of the annual base salary paid to him on his date of
death if such death occurred during his employment or the amount of his
retirement benefit but no less than $416,250 per annum.
In connection with the Distribution, the WMS Board requested Mr. Nicastro,
and Mr. Nicastro agreed, to become the Chairman of the Board and Chief Executive
Officer of the Company and to relinquish his position as Co-Chief Executive
Officer of WMS. Effective July 1, 1996, Mr. Nicastro also agreed to the early
termination and full settlement of his employment agreement with WMS pursuant to
which, in lieu of all future payments of base salary, bonus, retirement and
death benefits, Mr. Nicastro received a lump sum payment of $9,125,000 with
interest from July 1, 1996.
Effective as of the Distribution Date, Mr. Nicastro has entered into an
employment agreement with the Company pursuant to which he will serve as
Chairman of the Board and Chief Executive Officer of the Company for a term of
five years with an annual base salary of not less than $400,000 per annum, plus
bonus compensation in an amount equal to two percent of the pre-tax income of
the Company. Mr. Nicastro is also entitled to participate in the Company's
employee benefit plans for which he is eligible and which are made available to
other executive officers of the Company. Mr. Nicastro has agreed not to engage
in any competitive business with the Company during the term of the agreement
and for one year thereafter. The employment agreement is terminable at the
election of Mr. Nicastro upon the occurrence without his consent or acquiescence
of any one or more of the following events: (i) the placement of Mr. Nicastro in
a position of lesser stature or the assignment to Mr. Nicastro of duties,
performance requirements or working conditions significantly different from or
at a variance with those presently in effect, (ii) the treatment of Mr. Nicastro
in a manner which is in derogation of his status as a senior executive; (iii)
the cessation of service of Mr. Nicastro as a member of the Company Board; (iv)
the discontinuance or reduction of amounts payable or personal benefits
available to Mr. Nicastro pursuant to such agreement; or (v) the requirement
that Mr. Nicastro work outside his agreed-upon metropolitan area. In any such
event, and in the event the Company is deemed to have wrongfully terminated Mr.
Nicastro's employment agreement under the terms thereof, the Company is
obligated (a) to make a lump sum payment to Mr. Nicastro equal in amount to the
sum of the aggregate base
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salary during the remaining term of his employment agreement and the bonus
(assuming pre-tax income of the Company during the remainder of the term of the
employment agreement is earned at the highest level achieved in either of the
last two full fiscal years prior to such termination) and (b) to purchase at the
election of Mr. Nicastro all stock options held by him with respect to the
Company Common Stock at a price equal to the spread between the option price and
the fair market price of such stock as defined in the agreement. The employment
agreement is also terminable at the election of Mr. Nicastro if individuals
constituting the Company Board, or successors approved by such Company Board
members, cease for any reason to constitute at least a majority of the Company
Board. Upon such an event, the Company may be required to purchase the stock
options held by Mr. Nicastro and make payments similar to those described above.
Upon consummation of the Distribution, Mr. Nicastro will also receive
additional compensation of $22,500 per annum for his services as a Director of
WHGI. See ' -- Compensation of Directors.'
George R. Baker. Prior to the Distribution Date, Mr. George R. Baker served
as a Director of WMS and WHGI. As of the Distribution Date, Mr. Baker will
resign as a Director of WMS and will be a Director and Vice Chairman of the
Company. Mr. Baker will enter into a three year employment agreement with the
Company providing for an annual base salary of not less than $100,000. The
Company has agreed that Mr. Baker may engage in other activities which may
command his full-time and attention and that it is anticipated that he will not
be required to render services for more than 20 hours per month. Mr. Baker is
also entitled to participate in the Company's employee benefit plans for which
he is eligible and which are made available to other executive officers of the
Company. The employment agreement is terminable at the election of Mr. Baker
upon the occurrence without his consent or acquiescence of any one or more of
the following events: (i) the placement of Mr. Baker in a position of lesser
stature or the assignment to Mr. Baker of duties, performance requirements or
working conditions significantly different from or at a variance with those
presently in effect, (ii) the treatment of Mr. Baker in a manner which is in
derogation of his status as a senior executive; (iii) the cessation of service
of Mr. Baker as a member of the Company Board; or (iv) the discontinuance or
reduction of amounts payable or personal benefits available to Mr. Baker
pursuant to such agreement. In any such event, and in the event the Company is
deemed to have wrongfully terminated Mr. Baker's employment agreement under the
terms thereof, the Company is obligated (a) to make a lump sum payment to Mr.
Baker equal in amount to the sum of the aggregate base salary during the
remaining term of his employment agreement and (b) to purchase at the election
of Mr. Baker all stock options held by him with respect to the Company Common
Stock at a price equal to the spread between the option price and the fair
market price of such stock as defined in the agreement. The employment agreement
is also terminable at the election of Mr. Baker if individuals constituting the
Company Board, or successors approved by such Company Board members, cease for
any reason to constitute at least a majority of the Company Board. Upon such an
event, the Company may be required to purchase the stock options held by Mr.
Baker and make payments similar to those described above. Mr. Baker will also
continue to receive additional compensation of $22,500 per annum for his
services as a Director of WHGI. See ' -- Compensation of Directors.'
Brian R. Gamache. Mr. Brian R. Gamache is employed as the President and
Chief Operating Officer of WHGI pursuant to an employment agreement with a two
year term ending October 27, 1998, which term is automatically extended from
year to year. The agreement provides for a minimum annual base salary of
$300,000, as well as a minimum bonus of $50,000 for the 1997 fiscal year.
Additionally, Mr. Gamache is also entitled to bonus compensation at the
discretion of the Company Board, as well as participation, to the extent
eligible, in any health and life insurance plans generally available to
executive officers of the Company; provided that the Company is obligated, to
the extent available at normal rates, to provide Mr. Gamache with $500,000 of
term life insurance and additional whole life insurance in a face amount equal
to the lesser of $500,000 or such amount of whole life insurance as may be
obtained for annual premiums of $5,000. Mr. Gamache shall also be entitled to
any cash surrender value with respect to the aforementioned whole life insurance
policy. WHGI may terminate the agreement without cause upon at least 90 days'
prior written notice. In such event, Mr. Gamache will receive an amount equal to
two years' base salary, payable one-half on the termination date and the balance
a year later. Mr. Gamache has the right to terminate his employment agreement by
providing the Company at least 90 days' notice. Upon receipt of such notice, the
Company has the right to
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terminate Mr. Gamache's employment at an earlier date by providing Mr. Gamache
notice thereof. In such event, Mr. Gamache will receive one year's base salary,
payable 25% upon termination and the balance to be paid in equal installments
commencing on the first customary payment date of the Company occurring three
months after the termination date. Mr. Gamache has agreed not to engage in any
competitive business with the Company in Puerto Rico and the Caribbean during
the term of his agreement and for one year thereafter.
Effective as of the Distribution date, Mr. Gamache has entered into an
employment agreement with the Company pursuant to which he will serve as
President and Chief Operating Officer. The term of this agreement coincides with
the term of Mr. Gamache's employment agreement with WHGI. Mr. Gamache will be
paid an annual salary of $50,000 for his service to the Company. The agreement
provides that Mr. Gamache will devote such time to the business of the Company
that is reasonable to perform his duties thereunder.
Richard F. Johnson. Mr. Richard F. Johnson is employed as Senior Vice
President-Chief Financial Officer of WHGI pursuant to an employment agreement
commencing March 1, 1997 and terminating February 28, 1999, which term may be
extended by mutual agreement on a year to year basis. The agreement provides for
a minimum annual base salary of $185,000. Additionally, Mr. Johnson is entitled
to participate in any bonus, incentive and salary deferment plans generally
available to senior executives of WHGI. He is also entitled to participate, to
the extent he is eligible, in any health, medical, disability and life insurance
plans generally available to executives of WHGI. Upon 10 days' notice, WHGI may
terminate Mr. Johnson for cause (as defined in the agreement). In the event the
current owners of WHGI cease to own 50% of WHGI, Mr. Johnson may terminate his
employment and WHGI will be obligated to pay his base salary and to provide
health and life insurance benefits from the date of termination until the
earlier of (i) the expiration of the term of the agreement; (ii) one year after
the date of the change of ownership; or (iii) the date Mr. Johnson begins other
employment, provided that if Mr. Johnson's compensation level at such new
employment is less than his base salary at WHGI, then WHGI will pay Mr. Johnson
the difference thereof until the earlier to occur of (i) or (ii) above. If a
change in ownership occurs, WHGI may terminate Mr. Johnson's employment and pay
him severance equal to one year's base salary. Under certain other
circumstances, WHGI will be obligated to pay Mr. Johnson severance equal to six
month's base salary. WHGI also paid Mr. Johnson certain other amounts in
connection with his relocation to Puerto Rico. Upon consummation of the
Distribution, Mr. Johnson will become Chief Financial Officer and Treasurer of
the Company.
STOCK OPTION PLAN
WMS, as sole stockholder of the Company, has approved the adoption by the
Company of the Stock Option Plan (the 'Plan'). No approval of the creation of
the Plan is required to be obtained from the WMS stockholders. A copy of the
Plan is attached as Annex V to this Information Statement. The summary of the
Plan set forth below is qualified in its entirety by reference to the full text
of the Plan.
The Plan provides for the grant of options to purchase up to 900,000 shares
of Company Common Stock, subject to the terms and conditions of the Plan. The
Plan is intended to provide a method pursuant to which officers, directors,
employees and certain consultants and advisers to the Company and its
subsidiaries may be encouraged to acquire a proprietary interest in the Company
and potentially realize benefits from an increase in the value of Company Common
Stock, to encourage and provide such persons with greater incentive for their
continued service to the Company and generally to promote the interests of the
Company and its stockholders. Although the number and identity of individuals
who will be eligible to participate in the Plan have not been determined, each
of the persons identified in the Summary Compensation Table above and all
executive officers and directors of the Company will be eligible to participate
in the Plan. The principal terms and conditions of the Plan are summarized
below.
Administration of the Plan. The Plan is administered by the Compensation
Committee (the 'Committee') of the Company Board consisting of two or more
persons who are appointed by, and serve at the pleasure of, the Board and each
of whom is a 'non-employee director' as that term is defined in Rule 16b-3 of
the General Rules and Regulations under the Exchange Act. Subject to the express
provisions of the Plan, the Committee has the sole discretion to determine to
whom among
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those eligible, and the time or times at which, options will be granted, the
number of shares to be subject to each option, the manner in and price at which
options may be exercised and whether stock appreciation rights are associated
with such options. In making such determinations, the Committee may take into
account the nature and period of service of eligible employees, their level of
compensation, their past, present and potential contributions to the Company and
such other factors as the Committee in its discretion deems relevant. Options
are designated at the time of grant as either 'incentive stock options' intended
to qualify under of the Code or 'non-qualified stock options' which do not so
qualify.
The Committee may amend, suspend or terminate the Plan at any time, except
that no amendment may be adopted without the approval of stockholders which
would: (i) materially increase the maximum number of shares which may be issued
pursuant to the exercise of options granted under the Plan; (ii) materially
modify the eligibility requirements for participation in the Plan; or (iii)
materially increase the benefits provided under the Plan to the extent that
stockholder approval would then be required pursuant to Rule 16b-3 under the
Exchange Act.
Unless the Plan is terminated earlier by the Company Board, the Plan will
terminate on , 2007.
Shares Subject to the Plan. Subject to adjustments resulting from changes
in capitalization, no more than 900,000 shares of Company Common Stock may be
issued pursuant to the exercise of options granted under the Plan. If any option
expires or terminates for any reason, without having been exercised in full, the
unpurchased shares subject to such option will be available again for purposes
of the Plan. No employee may receive options in any calendar year to purchase
more than 500,000 shares.
The total number of shares of Company Common Stock that may be allocated
pursuant to options granted under the Plan or that may be allocated to any one
employee, the number of shares subject to outstanding options and stock
appreciation rights, the exercise price for such options and other terms and
conditions of options may be equitably adjusted by the Committee in the event of
changes in the Company's capital structure resulting from certain corporate
transactions, including a dividend or other distribution, recapitalization,
stock split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase or exchange of shares or other securities
of the Company or other corporate transaction, including a change of control or
similar event. In addition, if the Company is involved in a merger,
consolidation, acquisition, separation, reorganization, liquidation or other
similar corporate transaction, the options granted under the Plan will be
adjusted, assumed, or, under certain conditions, will terminate, subject to the
right of the option holder to exercise his option or a comparable option
substituted at the discretion of the Company prior to such event. An incentive
stock option may not be transferred other than by will or by laws of descent and
distribution, and during the lifetime of the option holder may be exercised only
by such holder. The Committee may permit non-qualified stock options to be
transferrable under certain circumstances.
Participation. The Committee is authorized to grant incentive stock options
from time to time to such employees of the Company or its subsidiaries, as the
Committee, in its sole discretion, may determine. Employees and directors of the
Company or its subsidiaries and consultants and advisers providing services to
the Company or its subsidiaries are eligible to receive non-qualified stock
options under the Plan.
Option Price. The exercise price of each option is determined by the
Committee, but may not, in any case, be less than 85% of the fair market value
of the shares of Company Common Stock on the date of grant or, in the case of
incentive stock options, be less than 100% of the fair market value of the
shares of Company Common Stock on the date of grant. If an incentive stock
option is to be granted to an employee who owns over 10% of the total combined
voting power of all classes of the Company's stock, then the exercise price may
not be less than 110% of the fair market value of the Company Common Stock
covered by the incentive stock option on the date the option is granted.
Acquisition of Shares. In order to assist an optionee in the acquisition of
shares of Company Common Stock pursuant to the exercise of an option granted
under the Plan, the Committee may authorize (i) the extension of a loan to the
optionee by the Company, (ii) the payment by the optionee of the purchase price
of Company Common Stock in installments, or (iii) the guarantee by the
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Company of a loan obtained by the optionee from a third party. Such loans,
installment payments or guarantees may be authorized without security and, in
the case of incentive stock options, the rate of interest may not be less than
the higher of the prime rate of a commercial bank of recognized standing or the
rate of interest imputed under Section 483 of the Code.
Terms of Options. The Committee has the discretion to fix the term of each
option granted under the Plan, except that the maximum length of the term of
each option is 10 years, subject to earlier termination as provided in the Plan
(five years in the case of incentive stock options granted to an employee who
owns over 10% of the total combined voting power of all classes of the Company's
stock).
Federal Income Tax Consequences of Non-Qualified Stock Options. An
individual who is a United States taxpayer who is granted a non-qualified stock
option under the Plan will not realize any income for Federal income tax
purposes on the grant of an option. An option holder will realize ordinary
income for Federal income tax purposes on the exercise of an option, provided
the shares are not then subject to a substantial risk of forfeiture within the
meaning of Section 83 of the Code ('Risk of Forfeiture'), in an amount equal to
the excess, if any, of the fair market value of the shares of Company Common
Stock on the date of exercise over the exercise price thereof. If the shares are
subject to a Risk of Forfeiture on the date of exercise, the option holder will
realize ordinary income for the year in which the shares cease to be subject to
a Risk of Forfeiture in an amount equal to the excess, if any, of the fair
market value of the shares at the date they cease to be subject to a Risk of
Forfeiture over the exercise price, unless the option holder shall have made a
timely election under Section 83(b) of the Code to include in his income for the
year of exercise an amount equal to the excess of the fair market value of the
shares of Company Common Stock on the date of exercise over the exercise price.
The amount realized for tax purposes by an option holder by reason of the
exercise of a non-qualified stock option granted under the Plan is subject to
withholding by the Company and the Company is entitled to a deduction in an
amount equal to the income so realized by an option holder.
Provided that an individual who is a United States taxpayer satisfies
certain holding period requirements provided by the Code, such individual will
realize long-term capital gain or loss, as the case may be, if the shares issued
upon exercise of a non-qualified stock option are disposed of more than one year
after (i) the shares are transferred to the individual or (ii) if the shares
were subject to a Risk of Forfeiture on the date of exercise and a valid
election under Section 83(b) of the Code shall not have been made, the date as
of which the shares cease to be subject to a Risk of Forfeiture. The amount
recognized upon such disposition will be the difference between the option
holder's basis in such shares and the amount realized upon such disposition.
Generally, an option holder's basis in the shares will be equal to the exercise
price plus the amount of income recognized upon exercise of the option.
Federal Income Tax Consequences of Incentive Stock Options. An incentive
stock option holder who meets the eligibility requirements of Section 422 of the
Code will not realize income for Federal income tax purposes, and the Company
will not be entitled to a deduction, on either the grant or the exercise of an
incentive stock option. If the incentive stock option holder does not dispose of
the shares acquired within two years after the date the incentive stock option
was granted to him or within one year after the transfer of the shares to him,
(i) any proceeds realized on a sale of such shares in excess of the option price
will be treated as long-term capital gain and (ii) the Company will not be
entitled to any deduction for Federal income tax purposes with respect to such
shares.
If an incentive stock option holder disposes of shares during the two-year
or one-year periods referred to above (a 'Disqualifying Disposition'), the
incentive stock option holder will not be entitled to the favorable tax
treatment afforded to incentive stock options under the Code. Instead, the
incentive stock option holder will realize ordinary income for Federal income
tax purposes in the year the Disqualifying Disposition is made, in an amount
equal to the excess, if any, of the fair market value of the shares of Company
Common Stock on the date of exercise over the exercise price.
An incentive stock option holder generally will recognize a long-term
capital gain or loss, as the case may be, if the Disqualifying Disposition is
made more than one year after the shares are transferred to the incentive stock
option holder. The amount of any such gain or loss will be equal to the
difference between the amount realized on the Disqualifying Disposition and the
sum of (x) the
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exercise price and (y) the ordinary income realized by the incentive stock
option holder as the result of the Disqualifying Disposition.
The Company will be allowed in the taxable year of a Disqualifying
Disposition a deduction in the same amount as the ordinary income recognized by
the incentive stock option holder.
Notwithstanding the foregoing, if the Disqualifying Disposition is made in
a transaction with respect to which a loss (if sustained) would be recognized to
the incentive stock option holder, then the amount of ordinary income required
to be recognized upon the Disqualifying Disposition will not exceed the amount
by which the amount realized from the disposition exceeds the exercise price.
Generally, a loss may be recognized if the transaction is not a 'wash' sale, a
gift or a sale between certain persons or entities classified under the Code as
'related persons'.
Alternative Minimum Tax. For purposes of computing the Federal alternative
minimum tax with respect to shares acquired pursuant to the exercise of
incentive stock options, the difference between the fair market value of the
shares on the date of exercise over the exercise price will be includible in
alternative minimum taxable income in the year of exercise if the shares are not
subject to a Risk of Forfeiture; if the shares are subject to a Risk of
Forfeiture, the amount includible in alternative minimum taxable income will be
taken into account in the year the Risk of Forfeiture ceases and will be the
excess of the fair market value of the shares at the date they cease to be
subject to a Risk of Forfeiture over the exercise price. The basis of the shares
for alternative minimum tax purposes, generally, will be an amount equal to the
exercise price, increased by the amount of the tax preference taken into account
in computing the alternative minimum taxable income. In general, the alternative
minimum tax is the excess of 26% of alternative minimum taxable income up to
$175,000 and 28% of such income above $175,000 over the regular income tax, in
each case subject to various adjustments and exemptions.
Deductions for Federal Income Tax Purposes. Pursuant to the Omnibus Budget
Reconciliation Act of 1993, the Company is not able to deduct compensation to
certain employees to the extent compensation exceeds $1.0 million per tax year.
Covered employees include the chief executive officer and the four other highest
paid senior executive officers of the Company for the tax year. Certain
performance-based compensation, including stock options, is exempt provided that
(i) the stock options are granted by a committee of the Board which is comprised
solely of two or more outside directors, (ii) the plan under which the options
are granted is approved by stockholders, and (iii) the plan states the maximum
number of shares with respect to which options may be granted during a specified
period to any employee. The Company believes that compensation related to
options granted under the Plan during the first 12 months following the
Distribution or after approval of the Plan by the Company's stockholders after
the Distribution Date will qualify for the exemption. The Company has made no
determination as to whether it will seek stockholder approval of the Plan.
Currently the Company does not have any employees earning in excess of $1.0
million.
RELATED PARTY TRANSACTIONS
Prior to the Distribution Date, the Company intends to enter into an
agreement (the 'Put and Call Agreement') with Mr. Louis J. Nicastro which will
provide that at any time prior to December 31, 1999, the Company shall have the
right to require (the 'Put Option') Mr. Nicastro to purchase 300,000 shares of
Series B Preferred Stock for an aggregate purchase price of $3,000,000. Mr.
Nicastro will also have the right to purchase (the 'Call Option') such 300,000
shares of Series B Preferred Stock for an aggregate purchase price of $3,300,000
which right may also be exercised prior to December 31, 1999 but only in the
event that any non-exempt person or entity or group of persons or entities
acting in concert, hereafter acquires or announces the intention to acquire
beneficial ownership of 10% or more of the Company Common Stock. The Put and
Call Agreement will also provide that so long as the Put Option and Call Option
remain outstanding the Company will not increase the number of or change, alter
or otherwise impair the relative rights, preferences or other provisions of the
Series B Preferred Stock nor will the Company authorize the issuance of any
shares of capital stock having voting rights, other than the 12,000,000
authorized shares of Company Common Stock and such limited voting rights as may
be required by law, except with the consent of two-thirds of the Company Board.
The Series B Preferred Stock entitles the holder to five votes for each share of
Series B Preferred Stock on all
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matters to be voted upon by the holders of Company Common Stock including the
election of the Company Board, prohibits the issuance of any capital stock
having voting rights other than the 12,000,000 authorized shares of Company
Common Stock and such limited voting rights as may be required by law without
the affirmative vote of holders of 70% of the outstanding Series B Preferred
Stock voting separately as a single class, provides for cumulative quarterly
dividends at the rate of prime plus one half percent on the liquidation value of
$3,000,000, is redeemable at the option of the holder at any time commencing
four years following the date of issuance or earlier at any time that there
shall exist two unpaid quarterly dividends and is convertible into shares of
Company Common Stock at a conversion price equal to the lower of the closing
price of Company Common Stock on the first day of trading of such Company Common
Stock (on a when-issued basis or otherwise) on the New York Stock Exchange or
the closing price on the date immediately prior to the conversion date. Mr.
Nicastro will also have registration rights with respect to any shares of
Company Common Stock issued upon conversion of the Series B Preferred Stock. See
'Description of the Company's Capital Stock -- Series B Preferred Stock'). The
Put Option and Call Option are not transferable and terminate on the earlier to
occur of December 31, 1999 or the death of Mr. Nicastro. The Company believes
that the Put Option will enable the Company to raise additional capital quickly
and inexpensively should such capital be needed. In addition, the Call Option is
intended to provide Mr. Nicastro a sufficient equity interest in the Company to
induce Mr. Nicastro to continue as Chairman and Chief Executive Officer of WHGI
following the Distribution so as to prevent the premature imposition of super
majority voting requirements at WHGI (See 'Relationship Between the Company and
the Company's Subsidiaries After the Distribution').
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Company Common Stock as of the Distribution Date (and following the
Distribution) as if the Distribution took place on February 10, 1997 by each
person known by WMS who would beneficially own more than 5% of the outstanding
Company Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING COMPANY
BENEFICIAL OWNER OWNERSHIP(1) COMMON STOCK(2)
- ------------------------------------------------------------------ ------------ -------------------
<S> <C> <C>
Sumner M. Redstone and ........................................... 1,729,425(3) 28.6%
National Amusements, Inc.
200 Elm Street
Dedham, MA 02026
FMR Corp. ........................................................ 698,163(4) 11.5%
82 Devonshire Street
Boston, MA 02109
</TABLE>
- ------------
(1) The number of shares beneficially owned has been calculated based on the
Distribution being made on the basis of one share of Company Common Stock
for every four shares of WMS Common Stock.
(2) Based upon 24,200,800 shares of WMS Common Stock outstanding on February 10,
1997 which, after the Distribution, would result in 6,050,200 outstanding
shares Company Common Stock.
(3) The number of shares reported is based upon information contained in
Amendment No. 20, dated January 7, 1997 to the Schedule 13D filed by Mr.
Summer M. Redstone with the Securities and Exchange Commission (the
'Commission'). Pursuant to such Schedule, Mr. Redstone and National
Amusements, Inc., a Maryland corporation, reported beneficial ownership of
and sole investment power with respect to 3,433,800 and 3,483,900 shares,
respectively, of WMS Common Stock (858,450 and 870,975 shares, respectively,
of Company Common Stock) and that Mr. Redstone is the beneficial owner of 66
2/3% of the issued and outstanding shares of the common stock of National
(footnotes continued on next page)
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(footnotes continued from previous page)
Amusements, Inc. Although the shares of WMS Common Stock are the subject of
a Proxy Agreement entered into between WMS and Messrs. Louis J. and Neil D.
Nicastro, pursuant to which Messrs. Nicastro have the power to vote such
shares, shares of Company Common Stock will not be covered by such Proxy
Agreement.
(4) The number of shares reported is based upon information with respect to WMS
Common Stock contained in a Schedule 13G/A dated February 14, 1997 filed
with the Commission by FMR Corp. Pursuant to such Schedule, FMR Corp.
reported that Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp. and an investment adviser registered under Section
203 of the Investment Advisers Act of 1940, as amended, is the beneficial
owner of 2,740,754 shares or 11.3% of WMS Common Stock (685,188 shares of
Company Common Stock) as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company
Act of 1940, as amended. Additionally, pursuant to such Schedule, FMR Corp.
reported that Fidelity Management Trust Company, a wholly-owned subsidiary
of FMR Corp. and a bank as defined in Section 3(a)(6) of the Exchange Act,
is the beneficial owner of 51,900 share or 0.2% of WMS Common Stock (12,975
shares of Company Common Stock) as a result of its serving as investment
manager of the institutional account(s). FMR Corp. reported it has sole
power to dispose of or direct the disposition of all such shares and sole
power to vote 51,900 of shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of WMS Common Stock and Company Common Stock as of the Distribution
Date (and following the Distribution) as if the Distribution took place on
February 10, 1997 by (i) each of the Company's Directors and the Executive
Officers identified on the Summary Compensation Table above and (ii) all of the
Company's Directors and Executives Officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL PERCENT OF BENEFICIAL OWNERSHIP OUTSTANDING
OWNERSHIP OF WMS OUTSTANDING WMS OF COMPANY COMMON COMPANY
NAME OF BENEFICIAL OWNER COMMON STOCK(1) COMMON STOCK(2) STOCK(3) COMMON STOCK(4)
- -------------------------------- ----------------- --------------- -------------------- ---------------
<S> <C> <C> <C> <C>
Louis J. Nicastro............... 7,422,332(5) 30.1% 1,158 *
George R. Baker................. 50,800(6) * 200 *
Brian R. Gamache................ 0 * 0 *
David M. Satz, Jr............... 0 * 0 *
Joseph A. Lamendella............ 100 * 25 *
Richard F. Johnson.............. 0 * 0 *
Directors and Executive Officers
as a group (six persons)...... 7,473,232(5)(6) 30.1% 1,383 *
</TABLE>
- ------------
* Less than one percent
(1) Pursuant to Rule 13d-3(d)(1) of the Exchange Act, shares underlying options
are deemed to be beneficially owned if the holder of the option has the
right to acquire beneficial ownership of such shares within 60 days. In
connection with the Distribution, it is contemplated that options to
purchase WMS Common Stock will be adjusted appropriately in order to
decrease the exercise price and target price, if any, and increase the
number of shares which can be purchased upon exercise of each option so that
the aggregate exercise price of the options will be the same both before and
after the adjustment. The aforementioned adjustments are not reflected in
this column.
(2) For purposes of calculating the percentage of shares of WMS Common Stock
owned by each director or officer, shares beneficially owned and issuable
upon the exercise of his options exercisable within 60 days have been deemed
to be outstanding.
(footnotes continued on next page)
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(footnotes continued from previous page)
(3) Pursuant to Rule 13d-3(d)(1) of the Exchange Act, shares underlying options
are deemed to be beneficially owned if the holder of the option has the
right to acquire beneficial ownership of such shares within 60 days.
(4) For purposes of calculating the percentage of Company Common Stock owned by
each director or officer, shares beneficially owned and issuable upon
exercise of his or her options exercisable within 60 days have been deemed
to be outstanding.
(5) The number of shares reported as beneficially owned includes 6,917,700
shares owned by Sumner M. Redstone and National Amusements, Inc. for which
the reporting person has shared voting power but no dispositive power
pursuant to the Proxy Agreement referred to in note 3 to the table set forth
under 'Principal Stockholders.' Additionally, the number of shares reported
as beneficially owned includes 500,000 shares for which the reporting person
has sole voting and sole dispositive power, which the reporting person has
the right to acquire pursuant to stock options which require that WMS Common
Stock attain a market price of $35.00 per share prior to exercise.
(6) Includes 50,000 shares which the reporting person has the right to acquire
pursuant to stock options which require that WMS Common Stock attain a
market price of $35.00 per share prior to exercise.
PURPOSES AND ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS
WMS, as sole stockholder of the Company, as part of the Preliminary
Transactions, has approved an amendment to the Company's certificate of
incorporation (the 'Certificate') and by-laws (the 'Bylaws'), effective as of
the Merger of the Company with Williams Hotel Corporation. See 'Preliminary
Transactions.' The Certificate contains several provisions that will make
difficult an acquisition of control of the Company by means of a tender offer,
open market purchase, proxy fight or otherwise, that is not approved by the
Company Board. The Bylaws also contain provisions that could have an anti-take
over effect.
The purposes of the relevant provisions of the Certificate and Bylaws are
to discourage certain types of transactions, described below, which may involve
an actual or threatened change of control of the Company and to encourage
persons seeking to acquire control of the Company to consult first with the
Company Board to negotiate the terms of any proposed business combination or
offer. The provisions are designed to reduce the vulnerability of the Company to
an unsolicited proposal for a take over that does not contemplate the
acquisition of all outstanding shares or is otherwise unfair to stockholders of
the Company or an unsolicited proposal for the restructuring or sale of all or
part of the Company. WMS and the Company believe that, as a general rule, such
proposals would not be in the best interests of the Company and its
stockholders.
Certain provisions of the Certificate and Bylaws, in the view of WMS and
the Company, will help ensure that the Company Board, if confronted by a
surprise proposal from a third-party which has acquired a block of Company
Common Stock, will have sufficient time to review the proposal and appropriate
alternatives to the proposal and to act in what it believes to be the best
interests of the stockholders. In addition, certain other provisions of the
Certificate are designed to prevent a purchaser from utilizing two-tier pricing
and similar inequitable tactics in the event of an attempt to take over the
Company.
These provisions, individually and collectively, will make difficult and
may discourage a merger, tender offer or proxy fight, even if such transaction
or occurrence may be favorable to the interests of the stockholders, and may
delay or frustrate the assumption of control by a holder of a large block of
Company Common Stock and the removal of incumbent management, even if such
removal might be beneficial to the stockholders. Furthermore, these provisions
could be utilized to frustrate a future takeover attempt which is not approved
by the incumbent Company Board, but which the holders of a majority of the
shares of Company Common Stock may deem to be in their best interests or in
which stockholders may receive a substantial premium for their Company Common
Stock over the then prevailing market prices of such stock. By discouraging
takeover attempts, these provisions might have the incidental effect of
inhibiting certain changes in management (some or all of the members of which
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might be replaced in the course of a change of control) and also the temporary
fluctuations in the market price of the stock which often result from actual or
rumored takeover attempts.
Set forth below is a description of such provisions in the Certificate and
Bylaws. Such description is intended as a summary only and is qualified in its
entirety by reference to the Certificate and Bylaws, the forms of which are
attached to this Information Statement as Annex III and IV, respectively.
THE COMPANY CERTIFICATE AND BYLAWS
In general, the provisions of the Certificate (i) provide for a classified
board of directors from which directors may only be removed by the stockholders
for cause, (ii) limit the right of stockholders to amend the Bylaws, (iii) limit
the right of stockholders to call a special meeting of stockholders and
eliminate the right of stockholders to take action without a meeting, (iv)
establish an advance notice procedure regarding the nomination of directors by
stockholders and stockholder proposals to be brought before an annual meeting
and (v) authorize a class of preferred stock for which the Company Board has the
power to fix the voting powers, designations, preferences and relative, optional
or other special rights.
Classified Board of Directors. The Certificate provides for the Company
Board to be divided into three classes serving staggered terms so that
directors' initial terms will expire either at the 1998, 1999 or 2000 annual
meeting of stockholders. Starting with the 1998 annual meeting of Company
stockholders, one class of directors will be elected each year for three-year
terms. See 'Management -- Board of Directors and Committees of the Board.' The
classification of directors makes it more difficult for a significant
stockholder to change the composition of the Company Board in a relatively short
period of time and, accordingly, provides the Company Board and stockholders
time to review any proposal that a significant stockholder may make and to
pursue alternative courses of action which are fair to all the stockholders of
the Company. At least two annual meetings of stockholders, instead of one, will
generally be required to effect a change in a majority of the Company Board.
The classified board provisions could have the effect of discouraging a
third-party from making a tender offer or otherwise attempting to obtain control
of the Company, even though such an attempt might be beneficial to the Company
and its stockholders. The classified board provisions could thus increase the
likelihood that incumbent directors will retain their positions. In addition,
since the classified board provisions are designed to discourage accumulations
of large blocks of Company Common Stock by purchasers whose objective is to have
such stock repurchased by the Company at a premium, the classified board
provisions could tend to reduce the temporary fluctuations in the market price
of Company Common Stock that could be caused by accumulations of large blocks of
such stock. Accordingly, stockholders could be deprived of certain opportunities
to sell their stock at a temporarily higher market price.
Removal; Filling Vacancies. The Certificate provides that, subject to the
rights of holders of any series of preferred stock, only a majority of the
Company Board then in office or the sole remaining director shall have the
authority to fill any vacancies on the Company Board, including vacancies
created by an increase in the number of directors. Moreover, because the
Certificate provides for a classified board, Delaware law provides that the
stockholders may remove a member of the Company Board only for cause. The
Certificate defines cause as being convicted of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal, or being
adjudged to be liable for negligence or misconduct in the performance of a
director's duty to the Company by a court and such adjudication is no longer
subject to direct appeal. In addition, the Certificate requires the affirmative
vote of 80% of the outstanding Company Common Stock to remove a director for
cause. These provisions relating to removal and filling of vacancies on the
Company Board will make it difficult for stockholders to enlarge the Company
Board or remove incumbent directors and filling the vacancies with their own
nominees.
Limitations on Stockholder Action by Written Consent; Special Meeting. The
Certificate provides that stockholder action can be taken only at an annual or
special meeting of stockholders and prohibits stockholder action by written
consent in lieu of a meeting. The Certificate and Bylaws provide that, subject
to the rights of holders of any series of preferred stock, special meetings of
stockholders can be
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called only by a majority of the entire Company Board or by the President or
Chairman of the Board. Stockholders are not permitted to call a special meeting
or to require that the Company Board call a special meeting of stockholders.
Moreover, the business permitted to be conducted at any special meeting of
stockholders is limited to the business brought before the meeting by or at the
direction of the Company Board. These provisions prohibit a significant
stockholder from proposing a stockholder vote at a special meeting on issues not
approved by the Company Board or from authorizing stockholder action without a
meeting at which all stockholders would be entitled to participate.
Nominations of Directors and Stockholder Proposals. The Bylaws and
Certificate establish an advance notice procedure with regard to the nomination
other than by or at the direction of the Company Board of candidates for
election as directors (the 'Nomination Procedure') and with regard to
stockholder proposals to be brought before an annual meeting of stockholders
(the 'Business Procedure'). The Nomination Procedure provides that only persons
who are nominated by or at the direction of the Company Board, or by a
stockholder who has given timely prior written notice to the Corporate Secretary
of the Company prior to the meeting at which directors are to be elected, will
be eligible for election as directors. The Business Procedure provides that
stockholder proposals must be submitted in writing in a timely manner in order
to be considered at any annual meeting. To be timely, notice for nominations or
stockholder proposals must be received by the Company not less than 60 days nor
more than 90 days prior to the annual meeting; provided, however, that in the
event that less than 70 days notice or prior public disclosure of the date of
the annual meeting is given or made to stockholders, notice by a stockholder, to
be timely, must be received no later than the close of business on the tenth day
following the date on which such notice of the date of the annual meeting was
made or such public disclosure was made, whichever first occurs.
Under the Nomination Procedure, notice to the Company from a stockholder
who proposes to nominate a person at a meeting for election as a director must
contain certain information about that person, including age, business and
residence addresses, principal occupation, the class and number of shares of
Company Common Stock beneficially owned, the consent of such person to be
nominated and such other information as would be required to be included in a
proxy statement soliciting proxies for the election of the proposed nominee, and
certain information about the stockholder proposing to nominate that person.
Under the Business Procedure, notice relating to a stockholder proposal must
contain certain information about such proposal and about the stockholder who
proposes to bring the proposal before the meeting.
The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by stockholders, to afford the Company Board a meaningful opportunity
to consider the qualifications of the proposed nominees and, to the extent
deemed necessary or desirable by the Company Board, to inform stockholders about
such qualifications. The purpose of the Business Procedure is, by requiring
advance notice of stockholder proposals, to provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the Company Board, to provide the Company Board with a
meaningful opportunity to inform stockholders, prior to such meetings, of any
proposal to be introduced at such meetings, together with any recommendation or
the Company Board's position or belief as to action to be taken with respect to
such proposal, so as to enable stockholders better to determine whether they
desire to attend such meeting or grant a proxy to the Company Board as to the
disposition of any such proposal. Although the Bylaws do not give the Company
Board any power to approve or disapprove stockholder nominations for the
election of directors or of any other proposal submitted by stockholders, the
Bylaws may have the effect of precluding a nomination for the election of
directors or precluding the conducting of business at a particular stockholders
meeting if the proper procedures are not followed, and may discourage a third-
party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of the Company, even if the
conduct of such solicitation or such attempt might be beneficial to the Company
and its stockholders.
The Certificate authorizes the issuance of up to 2,000,000 shares of
preferred stock, par value $.01 per share (the 'Preferred Stock'), and gives the
Company Board (without action by stockholders) the power to designate the number
of shares constituting any series, and to fix the voting powers, designations,
preferences and relative, optional or other special rights thereof, including
liquidation
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preferences and the dividend, conversion and redemption rights of each such
series. If the resolutions establishing the series so provide, holders of any
series of Preferred Stock may have the right to receive a liquidating
distribution before any distribution is made to holders of Company Common Stock
upon liquidation, and holders of Preferred Stock may be entitled to receive all
dividends to which they are entitled before any dividends may be paid to holders
of Company Common Stock. Holders of each series of Preferred Stock will have
such voting rights (which may include special rights regarding election of
directors) as may be provided in the resolutions establishing such series. The
proposed Preferred Stock will not be set aside for any specified purpose, but
will be subject to issuance at the discretion of the Company Board from time to
time for any proper corporate purposes and without any further stockholder
approval. Any Preferred Stock which is issued will rank senior to Company Common
Stock.
In addition, a new class of Preferred Stock can be used to make more
difficult a change in control of the Company. Under certain circumstances the
Company Board could create impediments to, or frustrate persons seeking to
effect, a takeover or transfer of control of the Company by causing such shares
to be issued to a holder or holders who might side with the Company Board in
opposing a takeover bid that the Company Board determines is not in the best
interests of the Company and its stockholders. Such action may have an adverse
impact on stockholders who may want to accept such takeover bid. In this
connection, the Company Board could, publicly or privately, issue shares of
Preferred Stock with full voting rights to a holder that would thereby have
sufficient voting power to ensure that certain types of proposals (including any
proposal to remove directors, to accomplish certain business combinations
opposed by the Company Board, or to alter, amend or repeal provisions in the
Certificate or Bylaws relating to any such action) would not receive the
requisite stockholder vote. Furthermore, the existence of such shares might have
the effect of discouraging any attempt by a person or entity to acquire control
of the Company since the issuance of such shares could dilute the ownership of
such person or entity. Other than the Preferred Stock issuable pursuant to the
Rights Agreement and the Series B Preferred Stock, the Company is not
contemplating the issuance of any Preferred Stock which may make more difficult
a change in control of the Company, nor is the Company aware of any proposals to
a possible change in control of the Company.
STOCKHOLDER RIGHTS AGREEMENT
The following description of the Company's rights agreement (the 'Rights
Agreement') is qualified in its entirety by reference to the Rights Agreement, a
copy of which is filed as an Exhibit to the Registration Statement on Form 10 of
which this Information Statement is a part.
The Company Board plans to adopt the Rights Agreement prior to the
Distribution. The Rights Agreement provides that one Right will be issued with
each share of Company Common Stock issued (whether originally issued or from the
Company's treasury) on or after the Distribution Date and prior to the Rights
Distribution Date (as defined). The Rights are not exercisable until the Rights
Distribution Date and will expire at the close of business on December 31, 2007
(the 'Final Expiration Date') unless previously redeemed by the Company as
described below. When exercisable, each right entitles the owner to purchase
from the Company one one-hundredth (.01) of a share of the Company's Series A
Preferred Stock at an exercise price of $100.00, subject to certain antidilution
adjustments. The Rights will not, however, be exercisable, transferable
separately or trade separately from the shares of Company Common Stock, until
(a) the tenth business day after the 'Stock Acquisition Date' (i.e., the date of
a public announcement that a person or group is an 'Acquiring Person') or (b)
the tenth business day (or such later day as the Company Board, with the
concurrence of a majority of Continuing Directors, determines) after a person or
group announces a tender or exchange offer, which, if consummated, would result
in such person or group beneficially owning 15% or more of the Company Common
Stock (the earlier of such dates being the 'Rights Distribution Date').
In general, any person or group of affiliated persons (other than the
Company, any of its subsidiaries, any person who as of the Distribution Date
beneficially owns 15% or more of the Company Common Stock, certain of the
Company's benefit plans and any person or group of affiliated persons whose
acquisition of 15% or more is approved by the Company Board in advance) who,
after
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the date of adoption of the Rights Agreement, acquires beneficial ownership of
15% or more of the Company Common Stock will be considered an 'Acquiring
Person.'
If a person or group of affiliated persons becomes an Acquiring Person,
then each Right (other than Rights owned by such Acquiring Person and its
affiliates and associates, which will be null and void) will entitle the holder
thereof to purchase, for the exercise price, a number of shares of Company
Common Stock having a then current market value of twice the exercise price.
Accordingly, at the original exercise price, each Right would entitle its
registered holder to purchase $200.00 worth of Company Common Stock for $100.00.
If at any time after the Stock Acquisition Date, (a) the Company merges
into another entity, (b) an acquiring entity merges into the Company and the
Company Common Stock is changed into or exchanged for other securities or assets
of the acquiring entity or (c) the Company sells more than 50% of its assets or
earning power, then each Right will entitle the holder thereof to purchase, for
the exercise price, the number of shares of common stock of such other entity
having a current market value of twice the exercise price. The foregoing will
not apply to (i) a transaction approved by a majority of the Company Board (or
from and after the Stock Acquisition Date, a majority of the Continuing
Directors) or (ii) a merger which follows a cash tender offer approved by the
Company Board (or after the Stock Acquisition Date, a majority of the Continuing
Directors) for all outstanding shares of Company Common Stock so long as the
consideration payable in the merger is the same in form and not less than the
amount as was paid in the tender offer. A Continuing Director is a director in
office prior to the distribution of the Rights and any director recommended or
approved for election by such directors but does not include any representative
of an Acquiring Person.
Subject to the limitations summarized below, the Rights are redeemable at
the Company's option, at any time prior to the earlier of the Stock Acquisition
Date or the Final Expiration Date, for $.01 per Right, payable in cash or shares
of Company Common Stock. Under certain circumstances, the decision to redeem
requires the concurrence of a majority of the Continuing Directors. In the event
a majority of the Company Board is changed by vote of the Company's
stockholders, the Rights shall not be redeemable for a period of ten business
days after the date that the new directors so elected take office and it shall
be a condition to such redemption that any tender or exchange offer then
outstanding be kept open within such ten business day period. At any time after
any person becomes an Acquiring Person, the Company Board may exchange the
Rights (other than Rights owned by the Acquiring Person and associates, which
will be null and void), in whole or in part, for Company Common Stock on the
basis of an exchange ratio of one share of Company Common Stock for each Right
(subject to adjustment).
As long as the Rights are attached to the Company Common Stock, each share
of Company Common Stock issued by the Company will also evidence one Right.
Until the Rights Distribution Date, the Rights will be represented by Company
Common Stock certificates and will be transferred only with Company Common Stock
certificates; separate certificates representing the Rights will be mailed,
however, to holders of Company Common Stock as of the Rights Distribution Date.
The holders of Rights will not have any voting rights or be entitled to
dividends until the Rights are exercised.
The purchase price payable, and the number of shares of Preferred Stock or
other securities or property issuable, upon exercise of the Rights are subject
to adjustment from time to time to prevent dilution in the event of certain
stock dividends on, or subdivisions, combinations or reclassifications of, the
shares of Company Common Stock prior to the Rights Distribution Date, and in
certain other events.
The Company Board may amend the Rights Agreement prior to the Rights
Distribution Date. After the Rights Distribution Date, the Company Board may
amend the Rights Agreement only to cure ambiguities, to shorten or lengthen any
time period (subject to certain limitations) or if such amendment does not
adversely affect the interests of the Rights Holders and does not relate to any
principal economic term of the Rights.
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SERIES B PREFERRED STOCK
Prior to the Distribution Date, the Company intends to enter into the Put
and Call Agreement which will provide that at any time prior to December 31,
1999, the Company shall have the right to require Mr. Nicastro to purchase
300,000 shares of Series B Preferred Stock for an aggregate purchase price of
$3,000,000. Mr. Nicastro will also have the right to purchase such 300,000
shares of Series B Preferred Stock for an aggregate purchase price of $3,300,000
which right may also be exercised prior to December 31, 1999 but only in the
event that any non-exempt person or entity or group of persons or entities
acting in concert, hereafter acquires or announces the intention to acquire
beneficial ownership of 10% or more of the Company Common Stock. The Put and
Call Agreement will also provide that the Company will not increase the number
of or change, alter or otherwise impair the relative rights, preferences or
other provisions of the Series B Preferred Stock so long as the Put Option and
Call Option remain outstanding. The Series B Preferred Stock entitles the holder
to five votes for each share of Series B Preferred Stock on all matters to be
voted upon by the holders of Company Common Stock including the election of the
Company Board, requires that the issuance of any capital stock having voting
rights, other than the 12,000,000 authorized shares of Company Common Stock and
such limited voting rights as may be required by law, be approved by two-thirds
of the members of the Company Board, provides for cumulative quarterly dividends
at the rate of prime plus one half percent on the liquidation value of
$3,000,000, is redeemable at the option of the holder at any time commencing
four years following the date of issuance or earlier at any time that there
shall be two unpaid quarterly dividends and is convertible into shares of
Company Common Stock at a conversion price equal to the lower of the closing
price of Company Common Stock on the first day of trading of such Company Common
Stock (on a when-issued basis or otherwise) on the New York Stock Exchange or
the closing price on the date immediately prior to the conversion date. The Put
Option and Call Option are not transferable and terminate on the earlier to
occur of December 31, 1999 or the death of Mr. Nicastro. The Company believes
that the Put Option will enable the Company to raise additional capital quickly
and inexpensively should such capital be needed. In addition, the Call Option is
intended to provide Mr. Nicastro a sufficient equity interest in the Company to
induce Mr. Nicastro to continue as Chairman and Chief Executive Officer of WHGI
following the Distribution so as to prevent the premature imposition of super
majority voting requirements at WHGI (See 'Relationship Between the Company and
the Company's Subsidiaries After the Distribution').
The existence of the Call Option and the features of the Series B Preferred
Stock have the effect, based upon the expected number of outstanding shares of
Company Common Stock as of the Distribution Date, of permitting Mr. Nicastro to
acquire 19.9% of the outstanding voting rights of the Company in the event of a
person or entity seeks to acquire 10% or more of the outstanding Company Common
Stock. These enhanced voting rights might render it more difficult for a person
to seek control of the Company even with the consent of the Company Board.
CERTAIN PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW
Generally, Section 203 of the DGCL prohibits a publicly-held Delaware
corporation from engaging in a broad range of 'business combinations' with an
'interested stockholder' (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) for three years following the time such
person became an interested stockholder unless: (i) before the person becomes an
interested stockholder, the transaction resulting in such person becoming an
interested stockholder or the business combination is approved by the board of
directors of the corporation; (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock of the corporation
(excluding shares owned by directors who are also officers of the corporation or
shares held by employee stock plans that do not provide employees with the right
to determine confidentially whether shares held subject to the plan will be
tendered in a tender offer or exchange offer); or (iii) at or subsequent to such
time the business combination is approved by the board of directors and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the outstanding
voting stock excluding shares owned by the interested stockholders.
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Section 203 of the DGCL may discourage persons from making a tender offer
for or acquisitions of substantial amounts of Company Common Stock. This could
have the effect of inhibiting changes in management and may also prevent
temporary fluctuations in Company Common Stock that often result from takeover
attempts.
Section 228 of the DGCL allows any action which is required to be or may be
taken at a special or annual meeting of the stockholders of a corporation to be
taken without a meeting with the written consent of holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, provided that the certificate of incorporation
of such corporation does not contain a provision to the contrary. The
Certificate contains a provision eliminating this authority.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
GENERAL
The Company's authorized capital stock consists of 1,000 shares of Company
Common Stock, of which 1,000 shares are issued and outstanding and are owned by
Williams Hotel Corporation. Based on the number of shares and holders of WMS
Common Stock outstanding at February 10, 1997, and after giving effect to the
Preliminary Transactions, the Company's authorized capital stock shall consist
of 17,000,000 shares of which (i) 12,000,000 shares will be Company Common
Stock, of which approximately 6,050,200 shares, constituting approximately 40%
of the authorized Company Common Stock, will be issued to WMS and distributed to
the stockholders of WMS in the Distribution, (ii) 3,000,000 shares will be Class
A non-voting common stock, par value $.01 per share (the 'Class A Common
Stock'), none of which will be outstanding and (iii) 2,000,000 shares will be
Preferred Stock, none of which will be outstanding, although a series of Series
A Preferred Stock will be designated for issuance in connection with the Rights
Agreement between the Company and The Bank of New York. All of the shares of
Company Common Stock issued in the Distribution will be validly issued, fully
paid and non-assessable.
There will be no material differences between the rights of holders of the
Company Common Stock and the rights of holders of WMS Common Stock following the
Distribution.
PREFERRED STOCK
The Certificate provides that the Company Board is authorized to provide
for the issuance of shares of Preferred Stock, from time to time, in one or more
series, and to fix any voting powers, full or limited or none, and the
designations, preferences and relative, participating, optional or other special
rights applicable to the shares to be included in any such series and any
qualifications, limitations or restrictions thereon. No shares of Preferred
Stock of the Company will be outstanding immediately following the Distribution,
although a series of Series A Preferred Stock will be designated for issuance in
connection with the Rights Agreement. See 'Purposes and Anti-Takeover Effects of
Certain Provisions -- The Company Certificate and Bylaws' and ' -- Stockholder
Rights Agreement.'
SERIES B PREFERRED STOCK
The Company will designate 300,000 shares of Series B Preferred Stock prior
to the Distribution Date pursuant to the Put and Call Agreement. The Series B
Preferred Stock will have the following rights, preferences and designations:
Voting Rights. Each holder of Series B Preferred Stock will be
entitled to five votes for each share registered in his name on the books
of the Company on all matters submitted to a vote of stockholders and
except as otherwise provided by law or as further set forth herein, the
holders of Series B Preferred Stock will vote collectively with the holders
of Company Common Stock as one class. In addition, no shares of any class
or series of capital stock having any voting rights, other than the
12,000,000 authorized shares of Company Common Stock and as such voting
rights may be otherwise required by law, may be authorized or issued by the
Company without the affirmative vote of the holders of 70% of the
outstanding shares of Series B Preferred Stock voting separately
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as a single class and the par value and the powers, preferences or special
rights of the Series B Preferred Stock may not be changed so as to
adversely affect the Series B Preferred Stock without the affirmative vote
of the holders of 70% of the outstanding shares of Series B Preferred
Stock. See 'Purposes and Anti-Takeover Effects of Certain
Provisions -- Series B Preferred Stock.'
Dividend Rights. The Series B Preferred Stock shall be senior as to
dividends over the Company Common Stock, Class A Common Stock and Series A
Preferred Stock. Subject to the rights of the holders of any other shares
of the Company's Preferred Stock which may at the time be outstanding and
subject to certain contractual restrictions on the payment of dividends
contained in any of the Company's future debt agreements, holders of Series
B Preferred Stock shall be entitled to cumulative quarterly dividends on
the liquidation value of the Series B Preferred Stock ($10.00 per share) at
the annual prime rate of Chase Bank plus one half percent. Unpaid dividends
shall also accrue dividends at the same rate. Dividends shall be paid on
the first day of January, April, July and October. At any time that there
shall exist two unpaid quarterly dividends, the holders of the Series B
Preferred Stock shall have the right to require the Company to redeem such
shares at the liquidation value plus all accrued and unpaid dividends. See
' -- Redemption Rights.'
Conversion Rights. Each share of Series B Preferred Stock may, at the
option of the holder, be converted into such number of shares of Company
Common Stock determined by dividing the sum of the liquidation value of
such shares and the cumulative unpaid dividends by the conversion price.
The conversion price shall be the lower of the closing price of the Company
Common Stock on its first day of official trading (on a when-issued basis
or otherwise) on the New York Stock Exchange and the closing price on the
New York Stock Exchange (or other recognized trading market for the Company
Common Stock) at the close of business on the business day immediately
prior to the conversion date.
Redemption Rights. The holders of the Series B Preferred Stock shall
have the right to require the Company to redeem the shares of Series B
Preferred Stock at any time after the expiration of four years from the
date of issuance or earlier at any time that there shall exist two unpaid
quarterly dividends. The Series B Preferred Stock is to be redeemed at the
liquidation value plus all accrued and unpaid dividends.
Liquidation Rights. Subject to the prior rights of creditors and
holders of any shares of stock having senior rights on liquidation, but
before any amounts are paid to the holders of the Series A Preferred Stock,
the Company Common Stock or the Class A Common Stock, the holders of the
Series B Preferred Stock shall be entitled in the event of a liquidation,
dissolution or winding-up of the Company to a preference of $10.00 per
share of Series B Preferred Stock plus all accrued and unpaid dividends.
COMMON STOCK
Voting Rights. Each holder of Company Common Stock will be entitled to one
vote for each share registered in his name on the books of the Company on all
matters submitted to a vote of stockholders. The holders of Company Common Stock
will vote as one class, subject to the right of the holders of Series B
Preferred Stock to vote together with the holders of Company Common Stock and
except as otherwise required by law. The shares of Company Common Stock will not
have cumulative voting rights. As a result, the holders of Company Common Stock
entitled to exercise more than 50% of the voting rights in an election of
directors will be able to elect 100% of the directors to be elected if they
choose to do so. In such event, the holders of the remaining shares of Company
Common Stock voting for the election of directors will not be able to elect any
persons to the Company Board. The Certificate and Bylaws contain certain
provisions that could have an anti-takeover effect. See 'Purposes and Anti-
Takeover Effects of Certain Provisions.'
Dividend Rights. Subject to the rights of the holders of any shares of the
Company's preferred stock which may at the time be outstanding and subject to
certain contractual restrictions on the payment of dividends contained in any of
the Company's future debt agreements, holders of Company Common Stock will be
entitled to such dividends as the Company Board may declare out of funds legally
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available therefor. Because virtually all of the operations of the Company are
conducted through subsidiaries, some of which are wholly-owned, the Company's
cash flow and consequent ability to pay dividends on Company Common Stock are
dependent to a substantial degree upon the earnings of such subsidiaries and on
dividends and other payments therefrom. See 'Hotel Financings and Certain
Contingent Obligations.'
Liquidation Rights and Other Provisions. Subject to the prior rights of
creditors and the holders of any Company preferred stock which may be
outstanding from time to time, the holders of Company Common Stock are entitled
in the event of liquidation, dissolution or winding up to share pro rata in the
distribution of all remaining assets.
Company Common Stock is not liable for any calls or assessments and is not
convertible into any other security. The Certificate provides that the private
property of the stockholders shall not be subject to the payment of corporate
debts. There are no redemption or sinking fund provisions applicable to the
Company Common Stock, and the Certificate provides that there shall be no
preemptive rights.
The transfer agent and registrar for Company Common Stock will be The Bank
of New York, with an address at 101 Barclay Street, 22W, New York, New York
10286.
CLASS A COMMON STOCK
The Certificate provides that the Company Board is authorized to provide
for the issuance of shares of Class A Common Stock, from time to time, in one or
more series, and to fix the designations, preferences, and relative,
participating, optional or other special rights applicable to the shares to be
included in any such series and any qualifications, limitations or restrictions
thereon. No shares of Class A Common Stock will be outstanding immediately
following the Distribution and the Company currently has no plans to designate
for issuance any series of Class A Common Stock. When issued, the Class A Common
Stock will not have voting rights, except as otherwise required by the DGCL.
LIABILITY AND INDEMNIFICATION OF
OFFICERS AND DIRECTORS OF THE COMPANY
Articles Eleventh and Twelfth of the Certificate and Section of the
Bylaws (the 'Director Liability and Indemnification Provisions') limit the
personal liability of the Company's directors to the Company or its stockholders
for monetary damages for breach of fiduciary duty.
The Director Liability and Indemnification Provisions define and clarify
the rights of certain individuals, including the Company's directors and
officers, to indemnification by the Company in the event of personal liability
or expenses incurred by them as a result of certain litigation against them.
Such provisions are consistent with Section 102(b)(7) of the DGCL, which is
designed, among other things, to encourage qualified individuals to serve as
directors of Delaware corporations by permitting Delaware corporations to
include in their articles or certificates of incorporation a provision limiting
or eliminating directors' liability for monetary damages and with other existing
DGCL provisions permitting indemnification of certain individuals, including
directors and officers. The limitations of liability in the Director Liability
and Indemnification Provisions may not affect claims arising under the Federal
securities laws.
In performing their duties, directors of a Delaware corporation are
obligated as fiduciaries to exercise their business judgment and act in what
they reasonably determined in good faith, after appropriate consideration, to be
the best interests of the corporation and its stockholders. Decisions made on
that basis are protected by the 'business judgment rule.' The business judgment
rule is designed to protect directors from personal liability to a corporation
or its stockholders when business decisions are subsequently challenged.
However, the expense of defending lawsuits, the frequency with which unwarranted
litigation is brought against directors and the inevitable uncertainties with
respect to the outcome of applying the business judgment rule to particular
facts and circumstances mean that, as a practical matter, directors and officers
of a corporation rely on indemnity from, and insurance procured by, the
corporation they serve as a financial backstop in the event of such expenses or
unforeseen liability. The Delaware legislature has recognized that adequate
insurance and indemnity provisions are often a condition of an individual's
willingness to serve as a director of a Delaware
78
<PAGE>
<PAGE>
corporation. The DGCL has for some time specifically permitted corporations to
provide indemnity and procure insurance for its directors and officers.
The Director Liability and Indemnification Provisions have been approved,
along with the rest of the Certificate and Bylaws, by WMS, as sole stockholder
of the Company prior to the Distribution Date.
Set forth below is a description of the Director Liability and
Indemnification Provisions. Such description is intended as a summary only and
is qualified in its entirety by reference to the Certificate and Bylaws which
are attached hereto as Annex III and IV, respectively.
Elimination of Liability in Certain Circumstances. Article Eleventh of the
Certificate protects directors against monetary damages for breaches of their
fiduciary duty of care, except as set forth below. Under the DGCL, absent
Article Eleventh directors could generally be held liable for gross negligence
for decisions made in the performance of their duty of care but not for simple
negligence. Article Eleventh eliminates director liability for negligence in the
performance of their duties. Directors remain liable for breaches of their duty
of loyalty to the Company and its stockholders, as well as acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law and transactions from which a director derives improper personal benefit.
Article Eleventh does not eliminate director liability under Section 174 of the
DGCL, which makes directors personally liable for unlawful dividends or unlawful
stock repurchases or redemptions and expressly sets forth a negligence standard
with respect to such liability.
While Article Eleventh provides directors with protection from awards of
monetary damages for breaches of the duty of care, it does not eliminate a
director's duty of care. Accordingly, Article Eleventh will have no effect on
the availability of equitable remedies such as an injunction or rescission based
upon a director's breach of the duty of care. The provisions of Article Eleventh
which eliminate liability as described above will apply to officers of the
Company only if they are directors of the Company and are acting in their
capacity as directors, and will not apply to officers of the Company who are not
directors. The elimination of liability of directors for monetary damages in the
circumstances described above may deter persons from bringing third-party or
derivative actions against directors to the extent such actions seeks monetary
damages.
Indemnification and Insurance. Under Section 145 of the DGCL, directors and
officers as well as other employees and individuals may be indemnified against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation (a 'derivative action')) if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the Company, and with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification only extends to expenses (including attorneys' fees)
incurred in connection with defense or settlement of such an action and the DGCL
requires court approval before there can be any indemnification where the person
seeking indemnification has been found liable to the Company.
Section of the Bylaws provides that the Company shall indemnify
any person to whom, and to the extent, indemnification may be granted pursuant
to Section 145 of the DGCL.
Article Twelfth of the Certificate provides that each person who was or is
made a party to, or is involved in any action, suit or proceeding by reason of
the fact that he is or was a director, officer or employee of the Company will
be indemnified by the Company against all expenses and liabilities (including
attorneys' fees) reasonably incurred by or imposed upon him, except in such case
where the director, officer or employee is adjudged guilty of willful
misfeasance or malfeasance in the performance of his duties. Article Twelfth
also provides that the right of indemnification shall be in addition to and not
exclusive of all other rights to which such director, officer or employee may be
entitled.
79
<PAGE>
<PAGE>
INDEPENDENT AUDITORS
The Company Board has selected Ernst & Young LLP to audit the Company's
financial statements for the year ending June 30, 1997. Ernst & Young LLP has
served as independent auditors of WMS and the Company throughout the periods
covered by the financial statements included in this Information Statement.
ADDITIONAL INFORMATION
The Company has filed with the Commission the Form 10 Registration
Statement under the Exchange Act with respect to the Company Common Stock being
received by stockholders of WMS in the Distribution as well as certain stock
purchase rights. This Information Statement does not contain all of the
information set forth in the Form 10 Registration Statement and the exhibits
thereto, to which reference is hereby made. Statements made in this Information
Statement as to the contents of any contract, agreement and other documents
referred to herein are not necessarily complete. With respect to each such
contract, agreement or other documents filed as an exhibit to the Form 10
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Form 10 Registration Statement and the exhibits thereto filed by the
Company with the Commission, as well as reports and other information submitted
by the Company to the Commission, may be inspected and copied at the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W. Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, Suite 1300, New York, New York
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or part of such materials can be obtained from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such material
may also be accessed electronically by means of the Commission's Web Site
(http://www.sec.gov).
Following consummation of the Distribution, the Company will be subject to
the informational reporting requirements of the Exchange Act. In accordance with
the Exchange Act, the Company will file with the Commission the reports and
other information required to be filed under the Exchange Act.
The Company intends to furnish holders of Company Common Stock with annual
reports containing consolidated financial statements audited by an independent
public accounting firm and quarterly reports for the first three quarters of
each fiscal year containing unaudited financial information.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS INFORMATION STATEMENT, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED. NEITHER THE DELIVERY OF THIS INFORMATION STATEMENT NOR
ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF THE COMPANY OR
WMS SINCE THE DATE HEREOF.
80
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Williams Hotel Corporation
<S> <C>
Report of Independent Auditors........................................................................ F-2
Consolidated Balance Sheets at December 31, 1996 and at June 30, 1996 and 1995........................ F-3
Consolidated Statements of Operations for Six Months Ended December 31, 1996 and 1995 and for Years
Ended June 30, 1996, 1995 and 1994................................................................... F-4
Consolidated Statements of Cash Flows for Six Months Ended December 31, 1996 and 1995 and for Years
Ended June 30, 1996, 1995 and 1994................................................................... F-5
Consolidated Statements of Changes in Shareholder's Equity for Years Ended June 30, 1996, 1995 and
1994................................................................................................. F-6
Notes to Consolidated Financial Statements............................................................ F-7
Posadas de San Juan Associates, a significant nonconsolidated affiliate of registrant
Report of Independent Auditors........................................................................ F-19
Balance Sheets at December 31, 1996 and at June 30, 1996 and 1995..................................... F-20
Statements of Operations and Deficit for Six Months Ended December 31, 1996 and 1995 and for Years
Ended June 30, 1996, 1995 and 1994................................................................... F-21
Statements of Cash Flows for Six Months Ended December 31, 1996 and 1995 and for Years Ended June 30,
1996, 1995 and 1994.................................................................................. F-22
Notes to Financial Statements......................................................................... F-23
WKA El Con Associates, a significant nonconsolidated affiliate of registrant
Report of Independent Auditors........................................................................ F-28
Balance Sheets at December 31, 1996 and at June 30, 1996 and 1995..................................... F-29
Statements of Operations and Deficit for Six Months Ended December 31, 1996 and 1995 and for Years
Ended June 30, 1996, 1995 and 1994................................................................... F-30
Statements of Cash Flows for Six Months Ended December 31, 1996 and 1995 and for Years Ended June 30,
1996, 1995 and 1994.................................................................................. F-31
Notes to Financial Statements......................................................................... F-32
El Conquistador Partnership L.P., a significant nonconsolidated affiliate of registrant
Report of Independent Auditors........................................................................ F-35
Balance Sheets at September 30, 1996 and at March 31, 1996 and 1995................................... F-36
Statements of Operations and (Deficiency in) Partners' Capital for Six Months Ended September 30, 1996
and 1995 and for Years Ended March 31, 1996, 1995 and 1994........................................... F-37
Statements of Cash Flows for Six Months Ended September 30, 1996 and 1995 and for Years Ended March
31, 1996, 1995 and 1994.............................................................................. F-38
Notes to Financial Statements......................................................................... F-39
</TABLE>
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholder and Board of Directors
WILLIAMS HOTEL CORPORATION
We have audited the accompanying consolidated balance sheets of Williams
Hotel Corporation and subsidiaries as of June 30, 1996 and 1995, and the related
consolidated statements of operations, cash flows and shareholder's equity for
each of the three years in the period ended June 30, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the accounting principles used and significant estimates made by management, as
well as evaluating the overall statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Williams Hotel Corporation and subsidiaries at June 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended June 30, 1996, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 21, 1997
F-2
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
------------ --------------------
1996 1996 1995
------------ -------- --------
(UNAUDITED)
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 5,663 $ 6,616 $ 3,627
Receivables, net of allowances of $578, $475 in 1996 and $399 in
1995............................................................... 4,696 2,534 4,333
Receivables from nonconsolidated affiliates.......................... 2,687 608 3,376
Inventories.......................................................... 604 651 804
Receivable from WMS Industries Inc. ................................. 512 -- --
Other current assets................................................. 728 689 946
------------ -------- --------
Total current assets............................................ 14,890 11,098 13,086
Investments in, receivables and advances to nonconsolidated affiliates.... 25,203 27,126 26,320
Property and equipment, net............................................... 44,126 44,919 48,660
Land held as investment................................................... 5,095 5,095 5,095
Excess of purchase cost over amount assigned to net assets acquired, net
of accumulated amortization of $3,540, $3,340 in 1996 and $2,939 in
1995.................................................................... 8,909 9,109 9,510
Deferred income taxes..................................................... -- -- 948
Other assets.............................................................. 6,627 7,387 7,687
------------ -------- --------
$104,850 $104,734 $111,306
------------ -------- --------
------------ -------- --------
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable..................................................... $ 4,993 $ 3,297 $ 3,581
Accrued compensation and related benefits............................ 2,097 2,128 1,833
Other accrued liabilities............................................ 2,995 2,721 2,744
Dividend payable on preferred stock of Condado Plaza................. 164 94 557
Notes payable........................................................ 1,000 2,000 2,000
Current maturities of long-term debt................................. 3,347 3,299 3,813
------------ -------- --------
Total current liabilities....................................... 14,596 13,539 14,528
Long-term debt, less current maturities................................... 21,879 23,555 26,928
Deferred income taxes..................................................... 2,291 2,291 --
Other noncurrent liabilities.............................................. 4,722 4,542 4,252
Payable to WMS Industries Inc. ........................................... -- 397 6,672
Minority interests........................................................ 19,921 18,810 16,363
Preferred stock of Condado Plaza held by WMS Industries Inc. ............. 4,100 4,100 7,500
Shareholder's equity:
Common stock......................................................... 1 1 1
Additional paid-in capital........................................... 3,849 3,849 3,849
Retained earnings.................................................... 33,491 33,650 31,213
------------ -------- --------
Total shareholder's equity................................. 37,341 37,500 35,063
------------ -------- --------
$104,850 $104,734 $111,306
------------ -------- --------
------------ -------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
-------------------- -----------------------------
1996 1995 1996 1995 1994
-------- -------- ------- ------- -------
(UNAUDITED)(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues:
Williams Hospitality management fees from
nonconsolidated affiliates......................... $ 4,904 $ 5,280 $13,372 $13,348 $12,880
Condado Plaza hotel/casino:
Casino.......................................... 10,809 11,137 22,438 24,584 29,560
Casino promotional allowances................... (3,454 ) (3,973 ) (6,986) (6,872) (8,379)
Rooms........................................... 11,161 11,507 25,477 25,210 26,183
Food and beverages.............................. 5,275 5,475 11,478 11,412 11,713
Other........................................... 1,359 1,430 2,915 3,196 3,523
-------- -------- ------- ------- -------
25,150 25,576 55,322 57,530 62,600
-------- -------- ------- ------- -------
Total revenues............................. 30,054 30,856 68,694 70,878 75,480
Costs and expenses:
Williams Hospitality operating expenses (excl.
depreciation)...................................... 1,827 1,954 3,882 5,175 5,724
Condado Plaza operating expenses (excl.
depreciation):
Casino.......................................... 5,284 5,718 12,375 13,737 14,612
Rooms........................................... 3,674 4,278 8,593 9,081 8,969
Food and beverages.............................. 4,378 4,938 10,088 10,503 10,153
Other........................................... 2,430 2,615 5,281 6,463 5,909
-------- -------- ------- ------- -------
15,766 17,549 36,337 39,784 39,643
Selling and administrative........................... 4,550 4,820 9,487 12,301 10,877
Depreciation and amortization........................ 2,809 2,690 5,430 5,994 5,344
-------- -------- ------- ------- -------
Total costs and expenses................... 24,952 27,013 55,136 63,254 61,588
-------- -------- ------- ------- -------
Operating income.......................................... 5,102 3,843 13,558 7,624 13,892
Interest income, primarily from nonconsolidated
affiliates, and other income............................ 1,091 837 1,830 2,548 1,171
Interest expense.......................................... (1,674 ) (1,890 ) (3,689) (4,300) (4,722)
Equity in loss of nonconsolidated affiliates.............. (3,028 ) (3,597 ) (3,465) (7,003) (3,534)
-------- -------- ------- ------- -------
Income (loss) before tax provision and minority
interests............................................... 1,491 (807 ) 8,234 (1,131) 6,807
Credit (provision) for income taxes....................... (224 ) 295 (1,645) 234 7
Minority interests in income.............................. (1,262 ) (1,194 ) (3,636) (2,910) (4,597)
Dividend on preferred stock of Condado Plaza.............. (164 ) (296 ) (516) (557) --
-------- -------- ------- ------- -------
Net income (loss)......................................... $ (159 ) $(2,002 ) $ 2,437 $(4,364) $ 2,217
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
Pro forma information reflecting income taxes on a
separate return basis (unaudited):
Income (loss) before tax provision and minority
interests.......................................... $ 1,491 $ (807 ) $ 8,234 $(1,131) $ 6,807
Provision for income taxes........................... (1,305 ) (965 ) (2,545) (1,902) (953)
Minority interests in income......................... (1,262 ) (1,194 ) (3,636) (2,910) (4,597)
Dividend on preferred stock of Condado Plaza......... (164 ) (296 ) (516) (557) --
-------- -------- ------- ------- -------
Net income (loss).................................... $(1,240 ) $(3,262 ) $ 1,537 $(6,500) $ 1,257
-------- -------- ------- ------- -------
-------- -------- ------- ------- -------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEARS ENDED JUNE 30,
-------------------- -------------------------------
1996 1995 1996 1995 1994
-------- -------- -------- ------- --------
(UNAUDITED) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss)...................................... $ (159 ) $(2,002 ) $ 2,437 $(4,364) $ 2,217
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................ 2,809 2,690 5,430 5,994 5,344
Provision for loss on receivables............ 69 625 1,457 1,842 1,840
Undistributed loss of nonconsolidated
affiliates................................ 3,028 3,597 3,465 7,003 3,534
Deferred income taxes........................ -- -- 3,239 (1,626) (963)
Minority interests........................... 1,262 1,194 3,636 2,910 4,597
Increase (decrease) resulting from changes in
operating assets and liabilities:
Receivables............................. (2,231 ) (1,171 ) 342 (541) (1,252)
Other current assets.................... 8 290 459 471 (283)
Accounts payable and accruals........... 1,939 2,445 (12) (1,152) 220
Net amounts due from nonconsolidated
affiliates........................... (3,008 ) (1,950 ) (1,931) (5,906) (5,526)
Other assets and liabilites not
reflected elsewhere.................. 319 (156 ) (618) 218 (2,971)
-------- -------- -------- ------- --------
Net cash provided by operating activities.............. 4,036 5,562 17,904 4,849 6,757
Investing activities:
Purchase of property and equipment..................... (1,727 ) (599 ) (1,149) (2,066) (10,971)
Purchase of additional shares of subsidiaries.......... -- -- -- (3,925) (660)
Investments in and advances to nonconsolidated
affiliates.......................................... (186 ) -- -- (1,360) (3,473)
Collections from nonconsolidated affiliates............ -- 217 985 2,010 1,973
Purchase of land held for investment................... -- -- -- -- (5,095)
Other investing........................................ 612 -- -- -- (1,712)
-------- -------- -------- ------- --------
Net cash used by investing activities.................. (1,301 ) (382 ) (164) (5,341) (19,938)
Financing activities:
Payment of long-term debt and notes payable............ (2,628 ) (2,404 ) (3,887) (4,568) (4,674)
Proceeds from long-term debt........................... -- -- -- -- 4,664
Net intercompany transactions with WMS Industries
Inc................................................. (909 ) (1,867 ) (6,275) 3,125 6,973
Purchase of preferred stock of Condado Plaza by WMS
Industries Inc...................................... -- -- -- 2,500 5,000
Redemption of preferred stock of Condado Plaza from WMS
Industries Inc...................................... -- (600 ) (3,400) -- --
Dividends paid to minority shareholders of
subsidiary.......................................... (151 ) -- (1,189) (783) (2,108)
-------- -------- -------- ------- --------
Net cash (used) provided by financing activities....... (3,688 ) (4,871 ) (14,751) 274 9,855
Increase (decrease) in cash and cash equivalents......... (953 ) 309 2,989 (218) (3,326)
Cash and cash equivalents at beginning of period......... 6,616 3,627 3,627 3,845 7,171
-------- -------- -------- ------- --------
Cash and cash equivalents at end of period............... $ 5,663 $ 3,936 $ 6,616 $ 3,627 $ 3,845
-------- -------- -------- ------- --------
-------- -------- -------- ------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
TOTAL
COMMON ADDITIONAL RETAINED SHAREHOLDER'S
STOCK PAID-IN CAPITAL EARNINGS EQUITY
------ --------------- --------- -------------
(THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Balance as of June 30, 1993................................. $ 1 $ 3,849 $33,360 $37,210
Net income.................................................. -- -- 2,217 2,217
------ ------- --------- -------------
Balance as of June 30, 1994................................. 1 3,849 35,577 39,427
Net loss.................................................... -- -- (4,364) (4,364)
------ ------- --------- -------------
Balance as of June 30, 1995................................. 1 3,849 31,213 35,063
Net income.................................................. -- -- 2,437 2,437
------ ------- --------- -------------
Balance as of June 30, 1996................................. $ 1 $ 3,849 $33,650 $37,500
------ ------- --------- -------------
------ ------- --------- -------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-6
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION AND COMPANY OPERATIONS
BASIS OF PRESENTATION
WMS Hotel Corporation is a wholly-owned subsidiary of Williams Hotel
Corporation ('WHC') which is a wholly-owned subsidiary of WMS Industries Inc.
('WMS'). WMS intends to merge WHC into WMS Hotel Corporation at which time the
predecessor financial statements of WMS Hotel Corporation will be those
appearing herein as WHC.
The consolidated financial statements of WHC reflect results of operations,
cash flows, financial position and changes in shareholder's equity and have been
prepared using the historical basis in the assets and liabilities and historical
results of operations of WHC and subsidiaries and affiliates.
The pro forma information reflecting income taxes on a separate return
basis (unaudited), included with the consolidated statements of operations,
reflects the provision for income taxes without the tax benefits allocated to
WHC from WMS for utilization of partnership losses in the WMS consolidated
Federal income tax return, see Note 6 -- Income Taxes. WHC presently does not
have income subject to Federal income tax that can be included in its
consolidated Federal income tax return along with the partnership losses to be
able to realize the tax benefits.
COMPANY OPERATIONS
WHC through its subsidiaries and affiliate owns, operates and manages two
of the leading hotels and casinos located in San Juan, Puerto Rico, and through
a second affiliate, the El Conquistador Hotel & Casino, a destination resort
complex in Las Croabas, Puerto Rico. WHC's holdings include: a 95% interest in
Posadas de Puerto Rico Associates, Incorporated, the owner of the Condado Plaza
Hotel & Casino ('Condado Plaza'); a 50% interest in Posadas de San Juan
Associates, a partnership which owns the El San Juan Hotel & Casino ('El San
Juan'); a 23.3% indirect interest in El Conquistador Partnership L.P. which owns
the El Conquistador Hotel and Casino; and a 62% interest in Williams Hospitality
Group Inc. ('Williams Hospitality'), the management company for the above hotels
and casinos.
WHC is a wholly owned subsidiary of WMS. On June 27, 1996, WMS announced
restructuring initiatives which include a planned spin-off of 100% of WMS Hotel
Corporation as the surviving corporation of the merger of WHC into WMS Hotel
Corporation that will create a new independent public corporation. WMS plans to
distribute all of its interest in WHC (the 'Distribution') to its shareholders,
subject to certain conditions.
INTERIM INFORMATION (UNAUDITED)
The consolidated interim financial statements as of and for the six months
ended December 31, 1996 and 1995 included herein are unaudited. Such information
reflects all adjustments, consisting solely of normal recurring adjustments,
which are in the opinion of management necessary for a fair presentation of the
consolidated balance sheet as of December 31, 1996 and the consolidated results
of operations and cash flows for the six months ended December 31, 1996 and
1995. Due to the seasonality of the businesses, operating results for the six
month period ended December 31, 1996 are not necessarily indicative of the
results that may be expected for the fiscal year ended June 30, 1997. Certain
information and disclosures normally included in annual financial statements in
accordance with generally accepted accounting principles have been excluded or
omitted in presentation of the consolidated interim financial statements.
F-7
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2: PRINCIPAL ACCOUNTING POLICIES
CONSOLIDATION POLICY
The consolidated financial statements include the accounts of WHC and its
majority-owned subsidiaries (the 'Company'). All significant intercompany
accounts and transactions have been eliminated. Investments in companies that
are 20% to 50% owned are accounted for by the equity method. WHC records its
equity in the results of operations of El Conquistador Partnership L.P. on that
partnership's fiscal year end of March 31.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and revenue and expenses during the period reported. Actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
INVENTORIES
Inventories, which consist mainly of food, beverages and supplies, are
valued at the lower of cost (determined by the first-in, first-out method) or
market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated by the
straight-line method over their estimated useful lives.
EXCESS OF PURCHASE COST OVER AMOUNT ASSIGNED TO NET ASSETS ACQUIRED (GOODWILL)
Goodwill arising from acquisitions is being amortized by the straight-line
method over 20 to 40 years.
CASINO REVENUES
Casino revenues are the net win from gaming activities, which is the
difference between gaming wins and losses.
CASINO PROMOTIONAL ALLOWANCES
Casino promotional allowances represent the retail value of complimentary
food, beverages and hotel services furnished to patrons, commissions and
transportation costs.
ADVERTISING EXPENSE
The cost of advertising is charged to earnings as incurred and for fiscal
1996, 1995 and 1994 was $988,000, $1,103,000 and $922,000, respectively.
F-8
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS
In 1995, the Financial Accounting Standards Board ('FASB') issued Statement
on Financial Accounting Standards ('SFAS') No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of'
which the Company must adopt in fiscal 1997. SFAS 121 standardizes the
accounting practices for recognition and measurement of impairment losses on
certain long-lived assets. The Company anticipates the adoption of this standard
will have no material impact on the consolidated financial statements.
NOTE 3: ACQUISITIONS
In January 1994, the Company acquired 1% of Williams Hospitality increasing
its interest from 56% to 57%. In July 1994 the Company acquired 5% of Williams
Hospitality increasing its interest from 57% to 62%. In July 1994 the Company
acquired 2.5% of Posadas de Puerto Rico Associates, Incorporated increasing its
interest from 92.5% to 95%.
NOTE 4: INVESTMENTS IN NONCONSOLIDATED AFFILIATES
Investments in nonconsolidated affiliates consist of a 50% interest in
Posadas de San Juan Associates, a partnership ('PSJA'); a 23.3% indirect
interest in El Conquistador Partnership L.P. ('El Conquistador') through a 46.5%
interest in WKA El Con Associates, a partnership ('WKA El Con').
Current receivables from nonconsolidated affiliates at June 30 were:
<TABLE>
<CAPTION>
1996 1995
---- ------
(IN THOUSANDS)
<S> <C> <C>
PSJA................................................................................... $ 61 $ --
WKA El Con............................................................................. 64 1,130
El Conquistador........................................................................ 483 2,029
Las Casitas............................................................................ -- 217
---- ------
$608 $3,376
---- ------
---- ------
</TABLE>
Investments in and noncurrent receivables and advances to nonconsolidated
affiliates at June 30 were:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Investments:
PSJA......................................................................... $(7,678) $(6,999)
WKA El Con................................................................... (612) 1,566
Receivables and advances:
PSJA......................................................................... 23,148 21,263
WKA El Con................................................................... 4,556 4,547
El Conquistador.............................................................. 7,712 5,943
------- -------
$27,126 $26,320
------- -------
------- -------
</TABLE>
PSJA operates as a partnership, therefore, 50% of its accumulated deficit
is recorded as an investment. Summarized financial data for PSJA financial
position at June 30, 1996 and 1995 and PSJA
F-9
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
results of operations for fiscal 1996, 1995 and 1994 and the six months ended
December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1996 1995
-------- -------- -------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets.................................... $ 6,558 $ 7,745
Noncurrent assets................................. 35,198 35,929
-------- --------
Total assets...................................... $ 41,756 $ 43,674
-------- --------
-------- --------
Payable to affiliates............................. $ 61 $ --
Other current liabilities......................... 10,101 9,935
-------- --------
Total current liabilities......................... 10,162 9,935
Noncurrent payable to affiliates.................. 23,148 21,263
Other noncurrent liabilities...................... 23,803 26,474
-------- --------
Total noncurrent liabilities...................... 46,951 47,737
Partners' capital deficiency...................... (15,357) (13,998)
-------- --------
Total liabilities and partners' capital
deficiency...................................... $ 41,756 $ 43,674
-------- --------
-------- --------
Revenues.......................................... $ 50,124 $ 51,797 $ 55,923 $ 22,161 $ 22,663
Management fees and interest payable to Williams
Hospitality..................................... 4,738 4,691 5,041 2,099 2,073
Other costs and expenses.......................... 46,746 49,507 53,330 21,621 22,768
-------- -------- -------- ------------ ------------
Net (loss)........................................ $ (1,360) $ (2,401) $ (2,448) $ (1,559) $ (2,178)
-------- -------- -------- ------------ ------------
-------- -------- -------- ------------ ------------
</TABLE>
The Company has a 46.5% interest in WKA El Con which has a 50% interest in
El Conquistador. Summarized financial data for WKA El Con financial position at
June 30, 1996 and 1995 and WKA El Con results of operations for fiscal 1996,
1995 and 1994 and the six months ended December 31, 1996 and 1995 were:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1996 1995
-------- -------- -------- ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Loans receivable from El Conquistador............ $ 16,116 $ 14,043
Investment in El Conquistador, net............... (7,763) (1,642)
Other assets, net................................ 3,566 5,024
-------- --------
Total assets..................................... $ 11,919 $ 17,425
-------- --------
-------- --------
Current payable to Williams Hospitality.......... $ 64 $ 1,130
Other payables................................... -- 683
Long-term note payable including interest........ 5,197 4,797
Long-term notes payable to partners including
interest....................................... 9,791 9,258
Partners' (capital deficiency) equity............ (3,133) 1,557
-------- --------
Total liabilities and partners' capital
deficiency..................................... $ 11,919 $ 17,425
-------- --------
-------- --------
Net operating expenses........................... $ (178) $ (356) $ (239) $ (11) $ (97)
Equity in net loss of El Conquistador to March 31
for fiscal years and to September 30 for six
months ended December 31....................... (6,120) (13,739) (5,024) (4,819) (5,584)
Equity in income of Las Casitas.................. 313 1,627 297 -- 313
-------- -------- -------- ------------ ------------
Net (loss)....................................... $ (5,985) $(12,468) $ (4,966) $ (4,830) $ (5,368)
-------- -------- -------- ------------ ------------
-------- -------- -------- ------------ ------------
</TABLE>
F-10
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The WKA El Con long-term note payable including interest is collateralized
by a pledge of a second mortgage on land owned by the Company that cost
$3,761,000 and a WMS guarantee of $1,000,000 as to which WHC will indemnify WMS
in the event of any payments made on the guarantee. The other partners of WKA El
Con have pledged cash and a subsidiaries stock, in proportion to their interests
in WKA El Con, to WHC to be used in the event the guarantee is drawn on.
El Conquistador is a destination resort and casino which began operations
in November 1993. Summarized financial data for El Conquistador financial
position at March 31, 1996 and 1995 (the partnership's fiscal year end) and El
Conquistador results of operations for fiscal years ended March 31, 1996 and
1995 and five months ended March 31, 1994 and the six months ended September 30,
1996 and 1995 were:
<TABLE>
<CAPTION>
MARCH 31, MARCH 31, MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994 1996 1995
--------- --------- --------- ------------- -------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets................................ $ 11,823 $ 15,316
Land, building and equipment, net............. 190,463 195,989
Deferred debt issuance and pre-opening costs,
net......................................... 8,587 12,696
Other assets.................................. 818 1,190
--------- ---------
Total assets.................................. $ 211,691 $ 225,191
--------- ---------
--------- ---------
Current liabilities........................... $ 23,281 $ 27,288
Long-term debt................................ 149,324 151,759
Long-term due to partners and affiliates...... 42,611 37,428
Partners' (capital deficiency) equity......... (3,525) 8,716
--------- ---------
Total liabilities and capital deficiency...... $ 211,691 $ 225,191
--------- ---------
--------- ---------
Revenues...................................... $ 89,214 $ 84,743 $ 32,973 $37,801 $ 37,410
Management fees and interest payable to
Williams Hospitality........................ 5,820 3,874 1,425 2,227 2,061
Interest payable to partners.................. 2,598 1,898 1,082 1,241 1,312
Other costs and expenses...................... 82,538 95,324 36,240 39,415 39,950
Depreciation and amortization................. 10,499 11,124 4,274 4,554 5,256
--------- --------- --------- ------------- -------------
Net (loss).................................... $ (12,241) $ (27,477) $ (10,048) $(9,636) $ (11,169)
--------- --------- --------- ------------- -------------
--------- --------- --------- ------------- -------------
</TABLE>
At March 31, 1996 Williams Hospitality has pledged cash equivalents and
investments of $1,850,000 as collateral for certain financing made by El
Conquistador. In addition, at March 31, 1996 Williams Hospitality has provided
guarantees amounting to $3,600,000 in connection with leasing and other
financing transactions of El Conquistador.
Long-term debt of the El Conquistador of $120,000,000 is collateralized by
a letter of credit which terminates on March 9, 1998. Under the terms of the
loan agreement, such debt is required to be repaid on February 1, 1998 in the
event the letter of credit is not renewed or replaced prior to November 9, 1997.
The Company has engaged an investment banking firm to investigate obtaining an
alternative letter of credit or financing arrangement. If such an alternative is
not found, the Company's investment in, receivables from, advances to and
potential payments on guarantees for El Conquistador totaling $19,271,000 at
June 30, 1996 ($16,689,000 at December 31, 1996) may not be recoverable. For the
years ended June 30, 1996, 1995 and 1994, the Company accrued approximately
$5,395,000, $3,704,000 and $1,425,000, respectively, in management fee revenue
from El Conquistador. The Company also recorded equity in losses of El
Conquistador of $2,786,000, $5,803,000 and $2,311,000 in the years ending June
30, 1996, 1995 and 1994, respectively.
F-11
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Consolidated retained earnings of the Company at June 30, 1996 is reduced
by $22,078,000 for the accumulated deficit of PSJA and WKA El Con which are
accounted for under the equity method.
Interest earned by the Company from all the nonconsolidated affiliates for
the years ended June 30, 1996, 1995 and 1994 was $1,650,000, $1,373,000 and
$800,000, respectively.
NOTE 5: PROPERTY AND EQUIPMENT
At June 30 net property and equipment were:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................................... $ 7,535 $ 7,535
Buildings and improvements.............................................. 45,294 45,033
Furniture, fixtures and equipment....................................... 30,473 29,585
------- -------
83,302 82,153
Less accumulated depreciation........................................... (38,383) (33,493)
------- -------
Net property and equipment.............................................. $44,919 $48,660
------- -------
------- -------
</TABLE>
NOTE 6: INCOME TAXES
The Company's two operating subsidiaries and two nonconsolidated affiliates
operate under the provisions of the Puerto Rico Tourism Incentives Act of 1983
which provides a ten-year incentive grant. Major benefits include 90% exemption
from income taxes on income deemed to be derived from tourism operations. The
grant also provides a 90% exemption from municipal real and personal property
taxes for the first five years, decreasing to a 75% exemption thereafter. Income
deemed to be derived from casino operations are not covered by the grant. The
companies have made applications to operate under the provisions of the Puerto
Rico Tourism Incentives Act of 1993 which provides benefits similar to the 1983
Act. The applications are pending final approval.
The two operating subsidiaries, the Condado Plaza and Williams Hospitality
elect to file income tax returns under Section 936 of the United States Internal
Revenue Code which provides for total or, after 1994, partial exemption from
Federal income taxes on income from sources within Puerto Rico, if certain
conditions are met. The portion of taxes that can be exempt under Section 936 is
determined by the calculation of certain limits prescribed by Section 936. These
limits are either based on certain costs and expenses ('economic activity
method') or a fixed percentage as prescribed in Section 936 ('percentage
limitation method'). Corporations that operate under Section 936 cannot be
members of a consolidated Federal income tax return. The tax exemption under
Section 936 generally decreases each year until the benefits terminate in 2005.
The Condado Plaza elected the economic activity method which results in a
100% exemption from Federal income taxes. Williams Hospitality elected the
percentage limitation method which resulted in a Federal tax provision of
$1,741,000 in fiscal 1996 and $1,149,000 in fiscal 1995.
Deferred income taxes reflect the net tax effects of temporary differences
between the amount of assets and liabilities for financial reporting purposes
and the amounts used for income taxes in the consolidated Federal income tax
return of WMS and allocated to the Company.
F-12
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
at June 30 were:
<TABLE>
<CAPTION>
1996 1995
------- ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax asset resulting from book over tax deductions for WKA EL
Con..................................................................... $ -- $2,553
Deferred tax liabilities resulting from:
Tax over book deductions of WKA El Con............................... 686 --
Tax over book deductions of PSJA..................................... 1,605 1,605
------- ------
Total deferred tax liabilities....................................... 2,291 1,605
------- ------
Net deferred tax (liability) asset........................................ $(2,291) $ 948
------- ------
------- ------
</TABLE>
The Company's provision for income taxes was calculated on a historical
basis. WHC and certain of its subsidiaries have been members of the WMS
consolidated Federal income tax return since their inception. Accordingly,
losses for Federal income tax purposes which were primarily generated by the
Company's equity in loss of nonconsolidated affiliates in the form of
partnership losses were utilized by WMS in its consolidated tax return and
resulted in tax benefits. The Company received the tax benefits of $4,139,000
and $510,000 for usage of such losses during the years ended June 30, 1996 and
1995, respectively.
Significant components of the credit (provision) for income taxes for the
years ended June 30, 1996, 1995 and 1994 were:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal:
Certain Puerto Rico corporate income subject to federal tax..... $(1,741) $(1,149) $--
U.S. subsidiaries -- primarily partnership losses of
nonconsolidated affiliates.................................... 4,139 510 (3)
------- ------- -----
Total federal........................................................ 2,398 (639) (3)
Puerto Rico.......................................................... (804) (753) (953)
------- ------- -----
Total current credit (provision)................................ 1,594 (1,392) (956)
Deferred -- federal, primarily from book to tax differences on partnership
losses.................................................................. (3,239) 1,626 963
------- ------- -----
Credit (provision) for income taxes....................................... $(1,645) $ 234 $ 7
------- ------- -----
------- ------- -----
</TABLE>
For financial reporting purposes, income (loss) before income tax credit
(provision) and minority interests is comprised of the following components for
the years ended June 30:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income (loss) before income tax credit (provision) and minority
interests:
Puerto Rico corporate income...................................... $11,487 $ 5,652 $10,307
U.S. subsidiaries -- primarily partnership losses of
nonconsolidated affiliates...................................... (3,253) (6,783) (3,500)
------- ------- -------
$ 8,234 $(1,131) $ 6,807
------- ------- -------
------- ------- -------
</TABLE>
F-13
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision (credit) for income taxes differs from the amount computed
using the statutory federal income tax rate as follows for the years ended June
30:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Statutory federal income tax at 35%........................................ $2,882 $ (395) $2,382
Puerto Rico corporate loss resulting in no tax benefit..................... 199 1,525 --
Puerto Rico corporate income taxed at lower rates.......................... (1,671) (1,602) (2,654)
Other, net................................................................. 235 238 265
------ ------ ------
$1,645 $ (234) $ (7)
------ ------ ------
------ ------ ------
</TABLE>
Undistributed earnings of the Puerto Rico subsidiaries that operate as
Section 936 corporations under Federal income tax regulations were approximately
$35,430,000 at June 30, 1996. Those earnings are considered indefinitely
reinvested and, accordingly, no provision for income or toll gate taxes has been
provided thereon. Upon distribution of those earnings in the form of dividends
the Company would be subject to U.S. income tax of approximately $2,094,000 and
toll gate withholding taxes of approximately $725,000.
WHC and WMS expect to enter into a tax sharing agreement, effective on the
distribution date, that provides for the rights and obligations of each company
regarding deficiencies and refunds, if any, relating to Federal and Puerto Rico
income taxes for tax years up to and including the tax year of the distribution.
During fiscal 1996, 1995 and 1994 income taxes paid to taxing authorities
were $2,289,000, $1,549,000 and $3,371,000, respectively.
NOTE 7: NOTES PAYABLE AND LONG-TERM DEBT
The Condado Plaza has a $2,000,000 bank line of credit which is payable on
demand with interest at the prime rate plus 1 percentage point, 9.25% and 9.75%
at June 30, 1996 and 1995, respectively. Borrowings under the line at both June
30, 1996 and 1995 were $2,000,000. The line of credit is collateralized by a
mortgage on the Condado Plaza property and accounts receivable.
Long-term debt at June 30 was:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Condado Plaza mortgage note, due in increasing annual amounts through 1999, 12%... $24,150 $26,150
Other............................................................................. 2,704 4,591
------- -------
26,854 30,741
Less current maturities........................................................... (3,299) (3,813)
------- -------
$23,555 $26,928
------- -------
------- -------
</TABLE>
Scheduled payments by fiscal year on long-term debt are as follows:
$3,299,000 in 1997; $3,662,000 in 1998 and $19,893,000 in 1999.
The amount of interest paid (excluding $204,000 capitalized in fiscal 1994)
during fiscal 1996, 1995 and 1994 was $3,679,000, $4,306,000 and $4,710,000,
respectively.
NOTE 8: AUTHORIZED SHARES
At June 30, 1996 the authorized common stock of WHC consists of 1,000
shares of no par value of which 100 shares were issued and outstanding. Prior to
the distribution, WHC intends to merge into WMS Hotel Corporation and in
connection with such merger to authorize the issuance of 15,000,000
F-14
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
shares of common stock, $.01 par value, and 3,000,000 shares of preferred stock.
The authorized and unissued common stock of WMS Hotel Corporation as the
surviving corporation of such merger will include 3,000,000 non-voting shares.
In connection with such merger WMS will receive in exchange for its shares in
the Company the appropriate numbers of shares of voting common stock to be
issued in the distribution. The preferred stock will be issuable in series, and
the relative rights and preferences and the number of shares in each series are
to be established by the Board of Directors. Prior to the Distribution, 300,000
shares of Series B Preferred Stock will be designated and reserved for issuance.
NOTE 9: STOCK OPTION PLAN
Under the proposed stock option plan WHC may grant both incentive stock
options and nonqualified options on shares of voting common stock through the
year 2007. Options may be granted on 900,000 shares of common stock to employees
and under certain conditions to non-employee directors. The stock option
committee has the authority to fix the terms and conditions upon which each
employee option is granted, but in no event shall the term exceed ten years or
be granted at less than 100% of the fair market value of the stock at the date
of grant in the case of incentive stock options and 85% of the fair market value
of the stock on the date of grant in the case of non-qualified stock options. No
stock options will be granted prior to the date of the distribution.
The Company intends to account for stock options for purposes of
determining net income in accordance with APB Opinion No. 25 'Accounting for
Stock Issued to Employees.' SFAS No. 123 regarding stock option plans permits
the use of APB No. 25 but requires the inclusion of certain pro forma
disclosures in the footnotes starting in fiscal 1997.
NOTE 10: CONCENTRATION OF CREDIT AND MARKET RISK AND FAIR VALUE DISCLOSURES OF
FINANCIAL INSTRUMENTS
Financial instruments which potentially subject the Company to
concentrations of credit and market risk consist primarily of cash equivalents
and accounts receivable. By policy, the Company places its cash equivalents only
in high credit quality securities and limits the amounts invested in any one
security. At June 30, 1996, accounts receivable are from hotel and casino guests
and travel agents located throughout North America and Latin America and because
of the number and geographic distribution, concentration is limited.
The estimated fair value of financial instruments at June 30, 1996 has been
determined by the Company, using available market information and valuation
methodologies considered to be appropriate. The amounts reported for cash
equivalents and current notes payable are considered to be a reasonable estimate
of their fair value.
At June 30, 1996 the $24,150,000 Condado Plaza 12% mortgage note payable is
estimated to have a fair value of $25,652,000 using discounted cash flow
analysis based on an estimated interest rate of 8.38%. The mortgage note is
subject to a substantial prepayment penalty based on interest rate differentials
plus a fixed percentage.
NOTE 11: LEASE COMMITMENTS
Operating leases relate principally to hotel facilities and equipment. A
portion of the Condado Plaza hotel facilities are leased from a partnership
owned by a minority shareholder of the Condado Plaza. The minority shareholder
lease extends through 2004 at an annual rent of $684,000 through 1998 with
periodic escalations thereafter to an annual rent of $827,000 in 2004. Rent
expense for fiscal 1996, 1995 and 1994 was $1,027,000, $1,077,000 and
$1,240,000, respectively (including $684,000, $684,000 and $668,000 paid in
fiscal 1996, 1995 and 1994, respectively, under the minority shareholder lease
at the Condado Plaza). Total net future lease commitments for minimum rentals at
June 30, 1997, 1998, 1999,
F-15
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2000, 2001 and thereafter are $713,000, $713,000, $764,000, $781,000, $781,000
and $2,261,000, respectively.
NOTE 12: TRANSACTIONS WITH WMS
The Company's two operating subsidiaries and two nonconsolidated affiliates
have each provided for its off-season cash needs through its own operating cash
and from individual short-term note arrangements. Plant and equipment additions
at each property has also generally been provided by its own cash from
operations or third party financing. Cash advances from WMS, for the periods
reported, have been used for investment purposes. A summary of advances and
repayments between WMS and the Company for the years ended June 30, 1996, 1995
and 1994 were:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Advances from (repayments to) WMS by use or source:
Land purchased for investment........................................ $ -- $ -- $5,095
Purchase of additional shares in subsidiaries........................ -- 3,738 660
Investment in and advances to (repayments from) WKA El Con........... (546) 157 1,416
Cash primarily generated from Williams Hospitality dividends......... (1,590) (260) (201)
Income tax benefits from partnership losses utilized by WMS -- see
Note 6............................................................. (4,139) (510) 3
------- ------ ------
$(6,275) $3,125 $6,973
------- ------ ------
------- ------ ------
</TABLE>
During fiscal 1995 and 1994 the Condado Plaza sold to WMS 50 shares and 100
shares, respectively, of 8% non-voting preferred stock with a liquidation
preference of $50,000 per share for $2,500,000 and $5,000,000, respectively.
During fiscal 1996 the Condado Plaza redeemed 68 of those preferred shares at
$50,000 per share for $3,400,000. At June 30, 1996, 82 of the preferred shares
are outstanding at $4,100,000.
NOTE 13: PENSION PLAN
Certain subsidiaries are required to make contributions on behalf of
unionized employees to defray part of the costs of the multi-employer pension
plans established by their respective labor unions. Such contributions are
computed using a fixed charge per employee. Contributions to the plans for
fiscal 1996, 1995 and 1994 were $340,000, $352,000 and $243,000, respectively.
F-16
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 14: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Summarized quarterly financial information for fiscal 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1996 1996
------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fiscal 1996 Quarters:
Revenues............................................... $13,404 $ 17,452 $21,450 $ 16,388
------------- ------------ --------- --------
------------- ------------ --------- --------
Operating income (loss)................................ $ (226) $ 4,069 $ 7,248 $ 2,467
Interest expense, net.................................. (560) (493) (395) (411)
Equity in loss of nonconsolidated affiliates........... (2,087) (1,510) (318) 450
Credit (provision) for income taxes.................... 448 (153) (1,005) (935)
Minority interests..................................... (298) (896) (1,585) (857)
Dividend on preferred stock of subsidiary.............. (150) (146) (126) (94)
------------- ------------ --------- --------
Net income (loss)...................................... $(2,873) $ 871 $ 3,819 $ 620
------------- ------------ --------- --------
------------- ------------ --------- --------
Pro forma net income (loss) reflecting income taxes on
a separate return basis.............................. $(3,623) $ 361 $ 3,713 $ 1,086
------------- ------------ --------- --------
------------- ------------ --------- --------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1994 1994 1995 1995
------------- ------------ --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Fiscal 1995 Quarters:
Revenues............................................... $15,501 $ 18,792 $20,741 $ 15,844
------------- ------------ --------- --------
------------- ------------ --------- --------
Operating income (loss)................................ $ (325) $ 3,154 $ 4,072 $ 723
Interest expense, net.................................. (745) (669) (709) 371
Equity in loss of nonconsolidated affiliates........... (2,074) (1,806) (2,392) (731)
Credit (provision) for income taxes.................... 524 34 (46) (278)
Minority interests..................................... (270) (790) (1,116) (734)
Dividend on preferred stock of subsidiary.............. (110) (147) (150) (150)
------------- ------------ --------- --------
Net income (loss)...................................... $(3,000) $ (224) $ (341) $ (799)
------------- ------------ --------- --------
------------- ------------ --------- --------
Pro forma net income (loss) reflecting income taxes on
a separate return basis.............................. $(3,702) $ (874) $(1,189) $ (735)
------------- ------------ --------- --------
------------- ------------ --------- --------
</TABLE>
For pro forma net income (loss), see Note 1 -- Basis of Presentation.
F-17
<PAGE>
<PAGE>
WILLIAMS HOTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 15: SEGMENT INFORMATION
The Company's operations are conducted through two industry segments: the
operation of the Condado Plaza and the management of hotel/casinos. Industry
segment information for the fiscal years ended June 30 follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues
Condado Plaza........................................................... $ 55,322 $ 57,530 $ 62,600
Williams Hospitality.................................................... 16,939 17,350 16,795
Intersegment revenues elimination -- Williams Hospitality fees charged
to Condado Plaza...................................................... (3,567) (4,002) (3,915)
-------- -------- --------
Total revenues..................................................... $ 68,694 $ 70,878 $ 75,480
-------- -------- --------
-------- -------- --------
Operating income (loss)
Condado Plaza........................................................... $ 2,830 $ (1,465) $ 4,473
Williams Hospitality.................................................... 10,837 9,174 9,472
General corporate administrative expenses............................... (109) (85) (53)
-------- -------- --------
Total operating income............................................. $ 13,558 $ 7,624 $ 13,892
-------- -------- --------
-------- -------- --------
Identifiable assets
Condado Plaza........................................................... $ 53,323 $ 57,879 $ 63,077
Williams Hospitality.................................................... 18,582 17,737 16,419
General investment and corporate........................................ 5,095 5,994 5,281
Investments in, receivables and advances to nonconsolidated
affiliates............................................................ 27,734 29,696 31,367
-------- -------- --------
Total identifiable assets.......................................... $104,734 $111,306 $116,144
-------- -------- --------
-------- -------- --------
Depreciation of property and equipment
Condado Plaza........................................................... $ 4,120 $ 4,656 $ 4,488
Williams Hospitality.................................................... 769 681 316
-------- -------- --------
Total depreciation of property and equipment....................... $ 4,889 $ 5,337 $ 4,804
-------- -------- --------
-------- -------- --------
Capital expenditures
Condado Plaza........................................................... $ 1,078 $ 2,030 $ 7,992
Williams Hospitality.................................................... 71 36 2,979
-------- -------- --------
Total capital expenditures......................................... $ 1,149 $ 2,066 $ 10,971
-------- -------- --------
-------- -------- --------
</TABLE>
F-18
<PAGE>
<PAGE>
[LETTERHEAD OF ERNST & YOUNG]
REPORT OF INDEPENDENT AUDITORS
The Partners
POSADAS DE SAN JUAN ASSOCIATES
We have audited the accompanying balance sheets of Posadas de San Juan
Associates as of June 30, 1996 and 1995, and the related statements of
operations and deficit, and cash flows for each of the three years in the period
ended June 30, 1996. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Posadas de San Juan
Associates at June 30, 1996 and 1995, and the results of its operations and its
cash flows for each of the three years in the period ended June 30, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Juan, Puerto Rico
August 2, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-19
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER --------------------------
31,
1996 1996 1995
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash........................................................... $ 1,620,603 $ 2,443,700 $ 1,524,300
Trade accounts receivable, less allowance for doubtful accounts
of $357,100 and $434,500 at June 30, 1996 and 1995,
respectively, and $815,617 at December 31, 1996.............. 3,808,890 2,370,700 4,152,800
Due from affiliated companies:
El Conquistador Partnership L.P........................... -- -- 82,000
Posadas de Puerto Rico Associates, Incorporated........... 8,083 -- 49,000
----------- ----------- -----------
8,083 -- 131,000
Inventories.................................................... 888,091 906,400 1,045,500
Prepaid expenses............................................... 571,846 837,100 891,600
----------- ----------- -----------
Total current assets...................................... 6,897,513 6,557,900 7,745,200
Land, building and equipment:
Land........................................................... 3,300,000 3,300,000 3,300,000
Building....................................................... 14,350,723 14,350,700 14,350,700
Building improvements.......................................... 12,512,302 12,439,600 11,828,100
Furniture, fixtures and equipment.............................. 36,292,422 33,814,000 32,324,100
----------- ----------- -----------
66,455,447 63,904,300 61,802,900
Less accumulated depreciation.................................. 31,655,328 30,080,700 27,459,900
----------- ----------- -----------
34,800,119 33,823,600 34,343,000
Operating equipment, net............................................ 558,048 570,700 649,500
Deferred financing costs, less accumulated amortization of $530,900
and $388,100 at June 30,1996 and 1995, respectively, and $601,648
at December 31, 1996.............................................. 462,768 533,500 676,300
Other assets........................................................ 254,627 270,500 260,000
----------- ----------- -----------
Total assets.............................................. $42,973,075 $41,756,200 $43,674,000
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND DEFICIENCY IN
PARTNERSHIP CAPITAL
Current liabilities:
Trade accounts payable......................................... $ 5,510,993 $ 4,039,900 $ 4,381,800
Accrued compensation and related benefits...................... 964,640 1,139,300 1,439,100
Other accrued liabilities...................................... 1,762,634 1,458,700 1,807,600
Due to affiliated companies.................................... 1,095,577 11,600 --
Note payable to bank........................................... 1,000,000 300,000 --
Current portion of long-term debt.............................. 3,151,996 3,152,000 2,306,400
----------- ----------- -----------
Total current liabilities................................. 13,485,840 10,101,500 9,934,900
Long-term debt, net of current portion.............................. 22,397,368 23,805,000 26,474,000
Due to Williams Hospitality Group Inc............................... 24,005,715 23,206,700 21,262,600
Deficiency in partnership capital:
Capital contribution........................................... 7,000,000 7,000,000 7,000,000
Deficit........................................................ (23,915,848) (22,357,000) (20,997,500)
----------- ----------- -----------
Total deficiency in partnership capital................... (16,915,848) (15,357,000) (13,997,500)
----------- ----------- -----------
Total liabilities and deficiency in partnership capital... $42,973,075 $41,756,200 $43,674,000
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes.
F-20
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
--------------------------- ------------------------------------------
1996 1995 1996 1995 1994
------------ ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms......................... $ 8,895,258 $ 9,276,458 $ 22,016,700 $ 21,517,300 $ 21,517,300
Food and beverage............. 6,075,706 6,218,198 13,424,400 12,688,200 12,731,100
Casino........................ 8,233,625 9,133,246 18,117,600 22,575,400 31,834,800
Rental and other income....... 1,443,262 1,591,036 3,503,000 2,852,400 2,884,500
Less casino promotional
allowances.................. (2,486,830) (3,555,710) (6,937,900) (7,836,300) (13,045,200)
------------ ------------ ------------ ------------ ------------
Net revenues....................... 22,161,021 22,663,228 50,123,800 51,797,000 55,922,500
Costs and expenses:
Rooms......................... 3,082,297 3,152,007 6,891,000 6,775,000 7,388,000
Food and beverage............. 4,421,091 4,563,102 9,506,100 9,340,600 9,940,400
Casino........................ 4,650,642 5,010,532 10,716,800 14,027,100 16,112,400
Selling, general and
administrative.............. 4,480,963 4,550,197 9,094,000 8,953,700 9,623,300
Management and incentive
management fees............. 1,605,483 1,633,831 3,850,100 3,893,000 4,332,300
Property operation,
maintenance and energy
costs....................... 2,337,870 2,505,696 4,803,200 4,416,800 4,483,000
Depreciation and
amortization................ 1,661,449 1,877,303 3,595,300 3,617,300 3,423,600
------------ ------------ ------------ ------------ ------------
22,239,795 23,292,668 48,456,500 51,023,500 55,303,000
------------ ------------ ------------ ------------ ------------
(Loss) income from operations...... (78,774) (629,440) 1,667,300 773,500 619,500
Interest income.................... -- -- -- 2,500 1,000
Interest expense................... 1,479,929 1,548,798 (3,026,800) (3,176,800) (3,069,800)
------------ ------------ ------------ ------------ ------------
Net loss........................... (1,558,703) (2,178,238) (1,359,500) (2,400,800) (2,449,300)
Deficit at beginning of period..... (22,357,145) (20,998,514) (20,997,500) (18,596,700) (16,147,400)
------------ ------------ ------------ ------------ ------------
Deficit at end of period........... $(23,915,848) $(23,176,752) $(22,357,000) $(20,997,500) $(18,596,700)
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
F-21
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
------------------------- ---------------------------------------
1996 1995 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss..................................... $(1,558,703) $(2,178,238) $(1,359,500) $(2,400,800) $(2,449,300)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization........... 1,661,449 1,877,305 3,595,300 3,617,300 3,423,600
Provision for losses on accounts
receivable........................... 157,800 857,300 1,278,200 3,880,400 4,442,000
Gain or sale of equipment............... -- -- (46,600) -- --
Changes in operating assets and
liabilities:
Amounts due to/from affiliated
companies.......................... 1,874,955 2,086,466 2,086,700 639,600 2,166,200
Trade accounts receivable............ (1,619,969) (3,129,165) 503,900 833,200 (4,161,600)
Inventories and prepaid expenses..... 299,434 216,418 193,600 21,600 439,000
Other assets......................... (16,110) (741,582) (10,500) (125,600) 591,500
Trade accounts payable, accrued
expenses and other accrued
liabilities........................ 1,624,230 5,538,684 (990,600) (2,493,100) 267,600
----------- ----------- ----------- ----------- -----------
Net cash provided by operating activities.... 2,423,086 4,527,188 5,250,500 3,972,600 4,719,000
Investing activities
Proceeds from sale of equipment.............. -- -- 119,300 -- --
Purchases of property and equipment.......... (2,387,150) (1,631,051) (2,502,800) (3,310,000) (2,737,300)
Purchases of operating equipment -- net...... 12,666 18,562 78,800 635,900 (98,800)
----------- ----------- ----------- ----------- -----------
Net cash used in investing activities........ (2,374,484) (1,612,489) (2,304,700) (2,674,100) (2,836,100)
Financing activities
Proceeds from long-term debt and other....... -- -- -- 156,200 188,700
Proceeds from short-term borrowings, net..... 700,000 800,000 300,000 -- --
Payments of long-term debt................... (1,571,650) (1,027,081) (2,326,400) (2,046,800) (2,017,700)
----------- ----------- ----------- ----------- -----------
Net cash used in financing activities........ (871,650) (227,081) (2,026,400) (1,890,600) (1,829,000)
----------- ----------- ----------- ----------- -----------
Net (decrease) increase in cash................ (823,048) 2,687,618 919,400 (592,100) 53,900
Cash at beginning of period.................... 2,443,651 1,524,263 1,524,300 2,116,400 2,062,500
----------- ----------- ----------- ----------- -----------
Cash at end of period.......................... $ 1,620,603 $ 4,211,881 $ 2,443,700 $ 1,524,300 $ 2,116,400
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Supplemental cash flow information:
Interest paid............................. $ 3,031,400 $ 3,232,500 $ 3,005,800
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes.
F-22
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
1. INTERIM INFORMATION (UNAUDITED)
The interim financial statements as of and for the six months ended
December 31, 1996 and 1995 included herein are unaudited. Such information
reflects all adjustments, consisting solely of normal recurring adjustments,
which are in the opinion of management necessary for a fair presentation of the
balance sheet as of December 31, 1996 and the results of operations and cash
flows for the six months ended December 31, 1996 and 1995. Due to the
seasonality of the business, the reported results are not necessarily indicative
of those expected for the entire year. Certain information and disclosures
normally included in annual financial statements in accordance with generally
accepted accounting principles have been excluded or omitted in presentation of
the interim financial statements.
2. ORGANIZATION AND PRINCIPAL ACCOUNTING POLICIES
ORGANIZATION
Posadas de San Juan Associates (the 'Partnership'), is a joint venture
organized under the General Partnership Laws of the State of New York, pursuant
to a Joint Venture Agreement dated July 27, 1984, as amended (the 'Agreement').
The Partnership is 50% owned by ESJ Hotel Corporation, an indirect wholly-owned
subsidiary of WMS Industries Inc. ('WMS'), with the remainder owned by entities
owned by individual investors (collectively, the 'Partners'). The Partnership
shall continue to exist until July 27, 2024, unless terminated earlier by mutual
agreement of the Partners pursuant to the Agreement. The Agreement provides that
the net profits or losses of the Partnership shall be allocated to the Partners
in the same proportion as their capital contributions.
The Partnership owns and operates the El San Juan Hotel & Casino, a luxury
resort hotel and casino property in San Juan, Puerto Rico.
BASIS OF PRESENTATION
The financial statements have been prepared in conformity with generally
accepted accounting principles which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories, which consist mainly of food, beverages and supplies, are
valued at the lower of cost (first-in, first-out method) or market.
LAND, BUILDING AND EQUIPMENT
Land, building and equipment are stated on the basis of cost. Building and
equipment are depreciated by the straight-line method over their estimated
useful lives.
DEFERRED FINANCING COSTS
Deferred financing costs are being amortized over the maturities of the
related debt.
CASINO REVENUES
Casino revenues are the net win from gaming activities, which is the
difference between gaming wins and losses.
F-23
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
PROMOTIONAL ALLOWANCES
Casino promotional allowances represent the retail value of complimentary
food, beverage and hotel services furnished to patrons, commissions and
transportation costs.
ADVERTISING COSTS
Advertising costs are charged to operations as incurred. Advertising costs
for fiscal years 1996 and 1995 amounted to approximately $1,394,000 and
$1,299,000, respectively.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The methods and assumptions used to estimate the fair value of the
different classes of financial instruments were as follows:
Notes payable and long-term debt: The carrying amount of the short- and
long-term borrowings at June 30, 1996 approximates fair value. The fair
values were estimated using discounted cash flows, based on the current
borrowing rates for similar types of borrowing arrangements.
3. FURNITURE, FIXTURES AND EQUIPMENT FUND
In accordance with the terms of the Management Agreement and the Loan
Agreement the Partnership is required to deposit cash equal to 4% of hotel gross
revenue each month into a furniture, fixtures and equipment fund.
Williams Hospitality Group Inc. ('Williams Hospitality'), a hotel/casino
management company that is an affiliated company through common ownership, (on
behalf of the Partnership) withdraws from the fund amounts required to pay the
cost of replacements of, and additions to, furniture, fixtures and equipment at
the Hotel. At June 30, 1996 and 1995, there were no unexpended funds available.
4. TRADE ACCOUNTS RECEIVABLE
At June 30, 1996 and 1995 trade accounts receivable consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Trade accounts receivable -- casino............................... $1,045,100 $2,874,100
Less allowance for doubtful accounts.............................. 266,100 307,500
---------- ----------
779,000 2,566,600
Trade accounts receivable -- hotel................................ 1,682,700 1,713,200
Less allowance for doubtful accounts.............................. 91,000 127,000
---------- ----------
1,591,700 1,586,200
---------- ----------
$2,370,700 $4,152,800
---------- ----------
---------- ----------
</TABLE>
Approximately 31% and 76% of the trade accounts receivable -- casino, as of
June 30, 1996 and 1995, respectively, are from customers in Latin America.
5. DUE TO AFFILIATED COMPANY
Current amounts due to affiliated company consist of fees earned by
Williams Hospitality and other payments made by Williams Hospitality for
services rendered on behalf of the Partnership. At June 30, 1996 and 1995
noncurrent amounts due to an affiliated company consisted of the following:
F-24
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Due to Williams Hospitality -- noncurrent:
Incentive management fees................................. $ 9,878,900 $ 8,881,300
Interest on incentive management fees..................... 4,526,800 3,580,300
Basic management fees..................................... 8,801,000 8,801,000
----------- -----------
$23,206,700 $21,262,600
----------- -----------
----------- -----------
</TABLE>
Payment of approximately $16,500,000 of the noncurrent amounts due to
Williams Hospitality are restricted under the terms of the Loan Agreement (see
Note 7).
6. LINE OF CREDIT
The Partnership has available a $1,000,000 revolving line of credit with a
bank, which is payable on demand, bearing interest at one percentage point over
the prime rate (9.25% at June 30, 1996). The line of credit is collateralized by
substantially all trade accounts receivable and leases with concessionaires as
well as the mortgage covering long-term debt. As of June 30, 1996, $300,000 was
outstanding under the line of credit.
7. LONG-TERM DEBT
Long-term debt at June 30, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Mortgage note payable to bank.................................. $26,250,000 $28,500,000
Capital lease obligation bearing interest at 11.18% payable in
monthly installments of $3,450, including interest through
1999......................................................... 109,600 140,300
Capital lease obligation bearing interest at 9.5% payable in
monthly installments of $10,413, including interest through
2001......................................................... 480,700 --
Chattel mortgage note payable bearing interest at 9%, payable
in monthly installments of $3,900, including interest through
1998, collateralized with personal property.................. 116,700 140,100
----------- -----------
26,957,000 28,780,400
Less current portion........................................... 3,152,000 2,306,400
----------- -----------
$23,805,000 $26,474,000
----------- -----------
----------- -----------
</TABLE>
The mortgage note payable to bank is collateralized by all the
Partnership's real and personal property. The note is payable in accelerating
monthly installments with a final installment of $7,500,000 due in fiscal 2003.
Interest is payable at rates from 6.7% to 7.3% on $21,250,000 of the note.
Interest rates have not been fixed on $5,000,000 of the note, which at June 30,
1996 was at an interest rate of 7.44%, which is reset every seven days. Under
the terms of the loan agreement 50% of the excess net free cash flow, as
defined, each year is required to be used to prepay the final installment of the
note until it is reduced to $3,000,000. Further, distributions to the partners
and payment of basic and incentive management fees and accrued interest thereon
outstanding at the date of the borrowing may only be paid to the extent of the
remaining 50% of the excess net free cash flow. There was no excess net free
cash flow, as defined, for the year ended June 30, 1996.
F-25
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Fiscal year ending in:
<C> <S> <C>
1997 ................................................................ $ 3,152,000
1998 ................................................................ 3,168,700
1999 ................................................................ 3,295,300
2000 ................................................................ 3,632,000
2001 ................................................................ 3,584,000
Thereafter...................................................................... 10,125,000
-----------
$26,957,000
-----------
-----------
</TABLE>
8. INCOME TAXES
The Partnership operated under the provisions of the Puerto Rico Tourism
Incentives Act of 1983 (the '1983 Act'). The 1983 Act provides for a ten-year
grant which may be extended for an additional ten-year term. Major benefits of
this grant are: a 90% exemption from income taxes on hotel income through the
entire term of the grant, and a 90% exemption from municipal real and personal
property taxes for the first five years, decreasing to a 75% exemption
thereafter. The Partnership's casino operations are not covered by the tax
exemption grant and are fully taxable.
The Partnership has filed an application to operate under the provisions of
the Puerto Rico Tourism Incentives Act of 1993 which provides benefits similar
to the 1983 Act. The application is pending final approval.
As of June 30, 1996 the Partnership had net operating loss carryforwards of
approximately $27,324,500 for Puerto Rico income tax purposes from its combined
hotel and casino operations and, accordingly, no Puerto Rico taxes have been
provided in the accompanying financial statements. Such losses may be utilized
to offset future Puerto Rico taxable income through June 30, 2003 as follows:
1997, $2,608,500; 1998, $2,064,000; 1999, $3,271,000; 2000, $3,896,600; 2001,
$6,046,000; 2002, $5,114,000 and 2003, $4,324,400.
Following the provisions of SFAS No. 109, the deferred tax asset that
results from the cumulative net operating loss carryforwards has been fully
reserved.
For Puerto Rico income tax purposes the Partnership is taxed as if it were
a corporation. Income of the Partnership for federal income tax purposes is
taxable to the Partners.
9. TRANSACTIONS WITH RELATED PARTIES
The Partnership has an Operating and Management Agreement (the 'Management
Agreement') dated October 2, 1986 with Williams Hospitality. The Management
Agreement provides that Williams Hospitality is to manage the Hotel until the
year 2005 for a basic management fee of 5% of the Hotel's gross revenues (as
defined in the Management Agreement) and an incentive management fee of 12% of
the Hotel's gross operating profits (as defined in the Management Agreement). In
addition, the Partnership is required to pay certain administrative expenses
incurred by Williams Hospitality in connection with management of the Hotel.
During fiscal years 1996, 1995 and 1994, basic management fees amounted to
$2,852,500, $2,981,600 and $3,447,400, respectively. Incentive management fees
amounted to $997,600, $911,500 and $884,800, respectively, for the same fiscal
years. Administrative costs and service fees charged by Williams Hospitality
during fiscal years 1996, 1995 and 1994 amounted to $1,446,700, $1,844,000 and
$2,342,800, respectively.
F-26
<PAGE>
<PAGE>
POSADAS DE SAN JUAN ASSOCIATES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal years 1996, 1995 and 1994, interest at 10% charged to the
Partnership by Williams Hospitality amounted to $888,100, $797,000 and $708,500,
respectively.
During fiscal years 1996, 1995 and 1994, the Partnership was charged by
Posadas de Puerto Rico Associates, Incorporated ('Posadas de Puerto Rico') (an
affiliated company through common ownership) $243,600, $92,800 and $625,100,
respectively, for certain services provided.
During fiscal years 1996, 1995 and 1994, the Partnership charged Posadas de
Puerto Rico $256,100, $191,500 and $578,400, respectively, for certain services
rendered.
F-27
<PAGE>
<PAGE>
[LETTERHEAD OF ERNST & YOUNG]
REPORT OF INDEPENDENT AUDITORS
The Partners
WKA EL CON ASSOCIATES
We have audited the accompanying balance sheets of WKA El Con Associates (a
joint venture partnership) as of June 30, 1996 and 1995, and the related
statements of operations and deficit, and cash flows for each of the three years
in the period ended June 30, 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WKA El Con Associates at
June 30, 1996 and 1995, and the results of its operations and its cash flows for
each of the three years in the period ended June 30, 1996 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
San Juan, Puerto Rico
August 6, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-28
<PAGE>
<PAGE>
WKA EL CON ASSOCIATES
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30,
DECEMBER 31, ----------------------------
1996 1996 1995
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash............................................................. $ 3,600 $ 3,200
Certificate of deposit held in escrow............................ -- -- $ 682,500
Notes receivable from El Conquistador Partnership L.P............ 17,321,000 16,116,000 14,043,200
Investment in Las Casitas Development Company.................... 692,600 1,292,600 1,929,400
Capitalized interest, less accumulated amortization of $71,000
and $41,600 at June 30, 1996 and 1995, respectively, and
$85,700 at December 31, 1996................................... 1,382,800 1,397,500 1,426,900
Deferred debt issuance costs and other assets, less accumulated
amortization of $496,200 and $383,700 at June 30, 1996 and
1995, respectively, and $547,600 at December 31, 1996.......... 820,800 872,200 984,800
------------ ------------ ------------
Total assets........................................... $ 20,220,800 $ 19,681,500 $ 19,066,800
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND (DEFICIENCY) PARTNERS' CAPITAL
Liabilities:
Long-term note payable...................................... $ 5,390,900 $ 5,197,000 $ 4,797,100
Due to affiliated company................................... 78,100 64,200 1,130,600
Due to partners............................................. 10,132,900 9,790,700 9,940,600
Losses in excess of equity investment in El Conquistador
Partnership L. P. ........................................ 12,581,900 7,762,600 1,642,100
------------ ------------ ------------
Total liabilities...................................... 28,183,800 22,814,500 17,510,400
(Deficiency) partners' capital:
Contributed................................................. 20,286,200 20,286,200 18,990,500
Deficit..................................................... (28,249,200) (23,419,200) (17,434,100)
------------ ------------ ------------
Total (deficiency) partners' capital................... (7,963,000) (3,133,000) 1,556,400
------------ ------------ ------------
Total liabilities and (deficiency) partners' capital... $ 20,220,800 $ 19,681,500 $ 19,066,800
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes.
F-29
<PAGE>
<PAGE>
WKA EL CON ASSOCIATES
STATEMENTS OF OPERATIONS AND DEFICIT
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
---------------------------- -------------------------------------------
1996 1995 1996 1995 1994
------------ ------------ ------------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Interest income.................. $ 605,500 $ 597,400 $ 1,150,100 $ 1,027,600 $ 337,400
Cost and expenses:
Interest.................... 536,200 589,700 1,145,800 1,137,600 474,800
Professional fees........... 13,900 32,800 40,100 83,400 18,300
Amortization................ 65,900 71,600 142,000 163,200 84,000
------------ ------------ ------------ ------------ -----------
616,000 694,100 1,327,900 1,384,200 577,100
------------ ------------ ------------ ------------ -----------
Loss before equity in operations
of investees................... (10,500) (96,700) (177,800) (356,600) (239,700)
Equity in operations of
investees:
El Conquistador Partnership
L.P....................... (4,819,500) (5,584,700) (6,120,500) (13,738,400) (5,023,800)
Las Casitas Development
Company................... -- 313,200 313,200 1,627,100 297,300
------------ ------------ ------------ ------------ -----------
(4,819,500) (5,271,500) (5,807,300) (12,111,300) 4,726,500
------------ ------------ ------------ ------------ -----------
Net loss......................... (4,830,000) (5,368,200) (5,985,100) (12,467,900) (4,966,200)
Accumulated deficit at beginning
of period...................... (23,419,200) (17,434,100) (17,434,100) (4,966,200) --
------------ ------------ ------------ ------------ -----------
Accumulated deficit at end of
period......................... $(28,249,200) $(22,802,300) $(23,419,200) $(17,434,100) $(4,966,200)
------------ ------------ ------------ ------------ -----------
------------ ------------ ------------ ------------ -----------
</TABLE>
See accompanying notes.
F-30
<PAGE>
<PAGE>
WKA EL CON ASSOCIATES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------------- ------------------------------------------
1996 1995 1996 1995 1994
----------- ----------- ----------- ------------ -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss................................. $(4,830,000) $(5,368,200) $(5,985,100) $(12,467,900) $(4,966,200)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Amortization.......................... 65,900 71,600 142,000 163,200 84,000
Equity in operations of affiliates
including $950,000 in cash
distributions received in fiscal
year 1996 and $600,000 and $350,000
cash received during the six months
ended December 31, 1996 and 1995.... 5,419,500 5,621,500 6,757,300 12,111,300 4,726,500
Changes in operating assets and
liabilities:
Accrued interest income added to
notes receivable................. (605,000) (579,300) (1,122,800) (1,000,600) (320,200)
Other receivables................... -- -- -- 13,200 (13,200)
Accrued interest expense added to
long-term liabilities............ 536,100 552,900 1,102,900 974,500 373,600
Accounts payable.................... -- -- -- (36,700) 18,300
Due to affiliated company........... 13,900 51,500 58,900 -- --
----------- ----------- ----------- ------------ -----------
Net cash provided by (used in) operating
activities............................ 600,400 350,000 953,200 (243,000) (97,200)
Investing activities
Sale (purchase) of certificate of deposit
held in escrow........................ -- 225,000 682,500 100,000 (782,500)
Increase in deferred debt issuance costs
and other assets...................... -- -- -- (230,400) (520,100)
Investment in capital of affiliates...... -- -- -- -- (25,400)
Capitalized interest, net................ -- -- -- -- (61,900)
Increase in notes receivable from
affiliate............................. (600,000) -- (950,000) (423,500) (5,506,300)
Disbursement of cash held for investment
in affiliate.......................... -- -- -- -- 1,844,900
----------- ----------- ----------- ------------ -----------
Net cash (used in) provided by investing
activities............................ (600,000) 225,000 (267,500) (553,900) (5,051,300)
Financing activities
Partners' contributed capital............ -- -- 1,295,700 1,870,500 2,417,200
Partners' loans -- net................... -- (225,000) (852,900) 323,500 4,451,700
Payments to affiliated company........... -- -- (1,125,300) (1,397,100) (1,720,400)
----------- ----------- ----------- ------------ -----------
Net cash (used in) provided by financing
activities............................ -- (225,000) (682,500) 796,900 5,148,500
----------- ----------- ----------- ------------ -----------
Net increase in cash....................... 400 350,000 3,200 -- --
Cash at beginning of period................ 3,200 -- -- -- --
----------- ----------- ----------- ------------ -----------
Cash at end of period...................... $ 3,600 $ 350,000 $ 3,200 $ -- $ --
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
</TABLE>
See accompanying notes.
F-31
<PAGE>
<PAGE>
WKA EL CON ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
1. INTERIM INFORMATION (UNAUDITED)
The interim financial statements as of and for the six months ended
December 31, 1996 and 1995 included herein are unaudited. Such information
reflects all adjustments, consisting solely of normal recurring adjustments,
which are in the opinion of management necessary for a fair presentation of the
balance sheet as of December 31, 1996 and the results of operations and cash
flows for the six months ended December 31, 1996 and 1995. Due to the
seasonality of the business, the reported results are not necessarily indicative
of those expected for the entire year. Certain information and disclosures
normally included in annual financial statements in accordance with generally
accepted accounting principles have been excluded or omitted in presentation of
the interim financial statements.
2. ORGANIZATION AND PRINCIPAL ACCOUNTING POLICIES
ORGANIZATION
WKA El Con Associates (the 'Partnership') is a joint venture organized
under the General Partnership Law of the State of New York, pursuant to a Joint
Venture Agreement (the 'Agreement') dated January 9, 1990, as amended, for the
purpose of becoming a general and limited partner of El Conquistador Partnership
L.P. ('El Con'). The Partnership is owned 46.54% by WMS El Con Corp., 37.23% by
AMK Conquistador, S.E. and 16.23% by Hospitality Investor Group, S.E. The
Partnership shall continue to exist until March 31, 2030, unless terminated
earlier pursuant to the Agreement. Net profits or losses of the Partnership will
be allocated to the partners in accordance with the terms of the Agreement.
The Partnership is a 50% limited partner in Las Casitas Development Company
I, S en C (S.E.) ('Las Casitas'), a joint venture constructing and selling
condominiums on property adjacent to El Con.
BASIS OF PRESENTATION
The financial statements have been prepared in conformity with generally
accepted accounting principles which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVESTMENTS IN AFFILIATED COMPANIES
The investments in affiliated companies are accounted for under the equity
method. El Con equity is recorded by the Partnership based on El Con's fiscal
year of March 31. Las Casitas equity is recorded by the Partnership based on Las
Casitas fiscal year of June 30. Capitalized interest is being amortized by the
straight-line method over the estimated useful life of the El Conquistador
property.
DEFERRED DEBT ISSUANCE COSTS AND OTHER ASSETS
Deferred debt issuance costs include legal and bank fees incurred in
connection with the issuance of the debt, and are being amortized over the
maturity of the related debt. Certain other capital and pre-opening costs
relating to El Con were incurred by the Partnership and are being amortized over
5 to 50 years.
F-32
<PAGE>
<PAGE>
WKA EL CON ASSOCIATES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FAIR VALUES OF FINANCIAL INSTRUMENTS
The methods and assumptions used to estimate the fair value of the
different classes of financial instruments were the following:
Note payable: The carrying amount of the note payable at June 30, 1996
approximate fair value. The fair value was estimated using discounted cash
flows, based on the current borrowing rates for similar types of borrowing
arrangements.
RECLASSIFICATIONS
Certain amounts of the prior year have been reclassified to conform to the
current year's presentation.
3. NOTES RECEIVABLE FROM AFFILIATED COMPANY
At June 30, 1996 and 1995 notes receivable from El Con consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Note receivable due on demand.................................. $ 136,000 $ 136,000
Note receivable due through May, 2002 (See Note 6)............. 4,000,000 4,000,000
Subordinated notes receivable due in 2003 to 2005 (See Note
5)........................................................... 8,229,700 8,229,700
Accrued interest receivable.................................... 2,800,300 1,677,500
Deficiency loan participation.................................. 950,000 --
----------- -----------
$16,116,000 $14,043,200
----------- -----------
----------- -----------
</TABLE>
Repayment of the notes and deficiency loan participation, including accrued
interest, is subordinated to other long-term debt of El Con.
4. COST OF INVESTMENT IN AFFILIATED COMPANIES
In 1991, the Partnership borrowed $9,000,000 from Williams Hospitality
Group Inc. ('Williams Hospitality'), a hotel/casino management company that is
an affiliated company through common ownership, and invested the proceeds in the
partnership capital of El Con, a joint venture organized to acquire the El
Conquistador property. The Partnership owns a 50% interest, as both a general
and limited partner, of El Con (See Note 5).
The Partnership's investment in Las Casitas amounts to $5,000.
5. DUE TO AFFILIATED COMPANY AND PARTNERS
In 1991, the Partnership borrowed $9,000,000 from Williams Hospitality of
which $1,050,000 was outstanding as of June 30, 1995 and none as of June 30,
1996.
Interest on the note was based on the interest rate charged to Williams
Hospitality by a bank. Interest charged to the Partnership by Williams
Hospitality amounted to approximately $16,400 and $122,500 and $206,200 in
fiscal years 1996, 1995, and 1994, respectively.
At various times, the partners loaned the Partnership $8,229,700 under the
terms of Loan Agreements. The notes are payable in 2003 to 2005 and bear
interest at the prime rate commencing on various dates. The Partnership has
advanced the same amount under a subordinated note to El Con under the same
terms as the borrowing from the partners. (See Note 3).
In November 1993, the partners advanced $782,500 to the Partnership that
was invested in a bank certificate of deposit. During fiscal years 1996 and
1995, $682,500 and $100,000, respectively, were withdrawn from the certificate
and distributed to the partners. The certificate of deposit was held in
F-33
<PAGE>
<PAGE>
WKA EL CON ASSOCIATES
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
escrow and was pledged as collateral to the bank for a bank loan of an equal
amount to El Con. Interest accrued on the partners' advances at the same
interest rate earned on the certificate of deposit.
During fiscal year 1995, Williams Hospitality converted $3,800,000 from
amounts it had due from El Con to a loan. The loan was made by Williams
Hospitality to El Con for the Partnership.
During fiscal year 1996, the Partnership purchased from Williams
Hospitality a $950,000 participation in a deficiency loan to El Con. The loan
and interest at 9.16% are payable from specified future cash flow of El Con. At
June 30, 1996 the Partnership guarantees a revolving credit facility with a bank
in the aggregate amount of up to $4,000,000 of El Con.
6. LONG-TERM NOTE PAYABLE
The long-term note payable to a bank includes accrued interest of
$1,197,000 and $797,100 at June 30, 1996 and 1995, respectively. The note is
payable in quarterly installments of $250,000 commencing in May 2000. Any unpaid
principal and interest is payable in May 2002. The note bears interest at a
variable rate, computed quarterly, equal to LIBOR, plus 1.75%. Under the terms
of the Credit Facility Agreement dated May 5, 1992, interest payments are
deferred during the first five years. The $4,000,000 borrowing was loaned to El
Con under similar terms. (See Note 3).
The note is collateralized by second mortgages on parcels of land owned by
Williams Hospitality and Posadas de Puerto Rico Associates, Incorporated,
affiliated companies through common ownership, with a cost of approximately
$3,761,000, and a guarantee of $1,000,000 by WMS Industries Inc., the ultimate
owner of WMS El Con Corp.
7. INCOME TAXES
The Partnership is not taxable for Puerto Rico income tax purposes pursuant
to an election submitted to the Puerto Rico Treasury Department. Instead, each
partner reports their distributive share of the Partnership's profit or losses
in their respective income tax returns and, therefore, no provision for income
taxes has been made in the accompanying financial statements. Income or loss of
the Partnership for Federal income tax purposes is reported by the partners.
F-34
<PAGE>
<PAGE>
[LETTERHEAD OF ERNST & YOUNG]
REPORT OF INDEPENDENT AUDITORS
The Partners
EL CONQUISTADOR PARTNERSHIP L.P.
We have audited the accompanying balance sheets of El Conquistador
Partnership L.P. as of March 31, 1996 and 1995, and the related statements of
operations and (deficiency in) partners' capital, and cash flows for each of the
three years in the period ended March 31, 1996. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of El Conquistador Partnership
L.P. at March 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended March 31, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Juan, Puerto Rico
May 3, 1996
Ernst & Young LLP is a member of Ernst & Young International, Ltd.
F-35
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
SEPTEMBER 30, ----------------------------
1996 1996 1995
------------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash....................................................... $ 716,600 $ 856,983 $ 877,970
Restricted cash and investments held by bank............... 2,584,000 2,879,355 3,382,708
Trade accounts receivable, less allowance for doubtful
accounts of $301,765 and $894,187 at March 31, 1996 and
1995, respectively, and $325,000 at September 30, 1996... 2,325,100 5,302,884 7,653,918
Due from affiliated companies.............................. 417,500 314,999 377,424
Inventories................................................ 1,485,700 1,522,463 2,051,966
Prepaid expenses and other current assets.................. 1,443,200 945,905 972,010
------------- ------------ ------------
Total current assets............................. 8,972,100 11,822,589 15,315,996
Due from affiliated company..................................... 523,100 817,868 1,189,574
Land, building and equipment:
Land....................................................... 14,372,700 14,372,707 14,372,707
Building................................................... 159,134,400 158,039,190 158,039,190
Furniture, fixture and equipment........................... 30,718,800 31,359,202 30,504,887
Construction in-process.................................... -- -- 42,978
------------- ------------ ------------
204,225,900 203,771,099 202,959,762
Less accumulated depreciation.............................. 17,927,200 14,777,283 8,402,779
------------- ------------ ------------
186,298,700 188,993,816 194,556,983
Operating equipment, net........................................ 1,491,100 1,469,350 1,431,896
Deferred debt issuance costs, net of accumulated amortization of
$4,731,745 and $3,753,733 at March 31, 1996 and 1995,
respectively, and $5,220,700 at September 30, 1996............ 3,469,600 3,958,624 4,936,636
Deferred pre-opening costs, net of accumulated amortization of
$8,751,425 and $5,619,919 at March 31, 1996 and 1995,
respectively, and $9,635,200 at September 30, 1996............ 3,744,400 4,628,254 7,759,760
------------- ------------ ------------
Total assets..................................... $ 204,499,000 $211,690,501 $225,190,845
------------- ------------ ------------
------------- ------------ ------------
LIABILITIES AND (DEFICIENCY IN) PARTNERS' CAPITAL
Current liabilities:
Trade accounts payable..................................... $ 5,915,200 $ 7,657,546 $ 9,662,586
Advance deposits........................................... 3,283,700 3,568,390 5,227,153
Accrued interest........................................... 1,566,600 1,510,080 1,510,200
Other accrued liabilities.................................. 4,341,100 4,673,189 5,893,127
Due to affiliated companies................................ 943,700 652,896 1,148,010
Notes payable to banks..................................... 6,273,400 2,773,359 1,638,359
Current portion of chattel mortgages and capital lease
obligations.............................................. 2,445,000 2,444,993 2,208,272
------------- ------------ ------------
Total current liabilities............................. 24,768,700 23,280,453 27,287,707
Long-term debt.................................................. 145,000,000 145,000,000 145,000,000
Chattel mortgages and capital lease obligations, net of current
portion....................................................... 3,165,100 4,324,358 6,759,225
Due to affiliated companies..................................... 9,405,500 8,531,671 5,917,725
Due to partners................................................. 35,321,000 34,079,309 31,510,445
(Deficiency in) partners' capital:
Limited partners........................................... (11,187,105) (2,996,497) 7,408,382
General partners........................................... (1,974,195) (528,793) 1,307,361
------------- ------------ ------------
Total (deficiency in) partners' capital............... (13,161,300) (3,525,290) 8,715,743
------------- ------------ ------------
Total liabilities and (deficiency in) partners'
capital............................................. $ 204,499,000 $211,690,501 $225,190,845
------------- ------------ ------------
------------- ------------ ------------
</TABLE>
See accompanying notes.
F-36
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
STATEMENTS OF OPERATIONS AND (DEFICIENCY IN) PARTNERS' CAPITAL
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
--------------------------- -----------------------------------------
1996 1995 1996 1995 1994
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rooms.......................... $ 15,622,447 $15,449,431 $38,817,160 $37,942,821 $16,873,156
Food and beverage.............. 12,291,270 13,255,954 26,188,693 27,298,340 9,420,792
Casino......................... 2,324,912 2,430,342 6,179,133 6,054,569 2,487,552
Rental and other income........ 8,033,781 6,582,938 19,165,969 14,652,328 4,343,493
------------ ----------- ----------- ----------- -----------
38,272,410 37,718,665 90,350,955 85,948,058 33,124,993
Less casino promotional
allowances................... (471,005) (308,960) (1,136,499) (1,205,380) (151,923)
------------ ----------- ----------- ----------- -----------
Net revenues........................ 37,801,405 37,409,705 89,214,456 84,742,678 32,973,070
Costs and expenses:
Rooms.......................... 5,617,137 6,074,162 12,853,157 14,755,239 5,686,692
Food and beverage.............. 8,412,428 8,653,520 17,638,186 20,797,173 8,186,633
Casino......................... 1,801,762 1,705,410 3,686,904 3,923,817 2,065,525
Selling, general and
administrative............... 5,583,024 5,894,595 12,992,841 18,115,433 6,624,081
Management and incentive
management fees.............. 1,948,657 1,874,880 5,394,675 3,703,819 1,425,347
Property operation, maintenance
and energy costs............. 6,915,675 6,556,952 12,396,063 14,408,347 5,452,018
Depreciation and
amortization................. 4,553,644 5,255,840 10,499,296 11,124,075 4,273,902
Other expenses................. 4,347,915 4,247,096 9,201,228 9,722,662 4,118,222
------------ ----------- ----------- ----------- -----------
39,180,242 40,262,455 84,662,350 96,550,565 37,832,420
------------ ----------- ----------- ----------- -----------
Income (loss) from operations....... (1,378,836) (2,852,750) 4,552,106 (11,807,887) (4,859,350)
Interest income..................... 95,631 119,290 228,625 467,922 109,437
Interest expense.................... 8,352,804 8,435,945 17,021,764 16,136,755 5,297,771
------------ ----------- ----------- ----------- -----------
Net loss............................ (9,636,010) (11,169,405) (12,241,033) (27,476,720) (10,047,684)
Partners' capital at beginning of
period............................ (3,525,290) 8,715,743 8,715,743 36,191,325 46,189,386
Partners' capital contribution...... -- -- -- 1,138 49,623
------------ ----------- ----------- ----------- -----------
(Deficiency in) partners' capital at
end of period..................... $(13,161,300) $(2,453,662) $(3,525,290) $ 8,715,743 $36,191,325
------------ ----------- ----------- ----------- -----------
------------ ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes.
F-37
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, YEAR ENDED MARCH 31,
-------------------------- ------------------------------------------
1996 1995 1996 1995 1994
----------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities
Net loss............................................ $(9,636,010) $(11,169,405) $(12,241,033) $(27,476,720) $(10,047,684)
Adjustments to reconcile net loss to net cash (used
in) provided by operating activities:
Depreciation and amortization.................. 4,553,644 5,255,840 10,499,296 11,124,075 4,273,902
Provision for losses on accounts receivable.... 23,235 692,689 363,245 1,808,641 517,623
Incentive management fees...................... 605,750 550,551 2,224,381 679,259 263,363
Deferred interest expense to partners and
affiliates................................... 1,509,806 1,460,665 2,995,431 2,063,981 686,446
Changes in operating assets and liabilities:
Restricted cash and investments held by
bank..................................... (295,355) (235,752) 503,353 2,549,446 1,600,000
Trade accounts receivable.................. 2,954,549 2,146,230 1,987,789 2,187,211 (12,167,393)
Inventories................................ 36,763 636,280 529,503 61,249 (2,113,215)
Prepaid expenses and other current
assets................................... (497,294) 36,069 26,105 491,032 (1,463,042)
Trade accounts payable and advance
deposits................................. (2,027,036) (4,834,856) (3,663,803) (1,323,693) 12,226,578
Accrued interest and other accrued
liabilities.............................. 620,949 (288,362) (1,220,058) 1,156,483 6,246,846
Affiliated companies, net.................. 192,267 582,321 (97,985) 1,967,073 2,259,373
----------- ------------ ------------ ------------ ------------
Net cash (used in) provided by operating
activities........................................ (1,958,732) (5,167,730) 1,906,224 (4,711,963) 2,282,797
Investing activities
Decrease in restricted cash and investments held for
construction and interest payments................ -- -- 82,280,346
Purchases of property and equipment................. (500,684) (139,355) (826,611) (3,525,762) (98,960,148)
(Usage) purchases of operating equipment, net....... (21,750) 287,488 (37,454) 523,641 (1,955,537)
Advances to affiliate, net.......................... -- -- -- -- (1,815,631)
Additions to deferred pre-opening expenses.......... -- -- -- -- (7,379,879)
----------- ------------ ------------ ------------ ------------
Net cash (used in) provided by investing
activities........................................ (522,434) 148,133 (864,065) (3,002,121) (27,830,849)
Financing activities
Additions to deferred debt issuance costs........... -- -- (505,210)
Proceeds from long-term debt........................ -- 772,000 10,992,552
Payments of principal on long-term debt............. (1,159,258) (1,075,925) (2,198,146) (1,976,625) (704,240)
Proceeds from notes payable to bank................. 3,500,041 5,875,000 7,684,685 -- --
Payments on principal on notes payable to bank...... -- -- (6,549,685) (200,000) 1,565,000
Proceeds from partners' and affiliates loans, and
capital contributions............................. -- -- -- 8,698,134 15,411,995
----------- ------------ ------------ ------------ ------------
Net cash provided by (used in) financing
activities........................................ 2,340,783 4,799,075 (1,063,146) 7,293,509 26,760,097
----------- ------------ ------------ ------------ ------------
Net (decrease) increase in cash......................... (140,383) (220,522) (20,987) (420,575) 1,212,045
Cash at beginning of period............................. 856,983 877,970 877,970 1,298,545 86,500
----------- ------------ ------------ ------------ ------------
Cash at the end of the period........................... $ 716,600 $ 657,448 $ 856,983 $ 877,970 $ 1,298,545
----------- ------------ ------------ ------------ ------------
----------- ------------ ------------ ------------ ------------
Supplemental disclosure of cash flow information:
Interest paid, net of interest capitalized in
1994.............................................. $ 14,026,453 $ 14,314,600 $ 3,545,742
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes.
F-38
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
NOTES TO FINANCIAL STATEMENTS
1. INTERIM INFORMATION (UNAUDITED)
The interim financial statements as of and for the six months ended
September 30, 1996 and 1995 included herein are unaudited. Such information
reflects all adjustments, consisting solely of normal recurring adjustments,
which are in the opinion of management necessary for a fair presentation of the
balance sheet as of September 30, 1996 and the results of operations and cash
flows for the six months ended September 30, 1996 and 1995. Due to the
seasonally of the business, the reported results are not necessarily indicative
of those expected for the entire year. Certain information and disclosures
normally included in annual financial statements in accordance with generally
accepted accounting principles have been excluded or omitted in presentation of
the interim financial statements.
2. ORGANIZATION AND PRINCIPAL ACCOUNTING POLICIES
ORGANIZATION
El Conquistador Partnership L.P. (the 'Partnership'), is a limited
partnership organized under the Laws of Delaware, pursuant to a Joint Venture
Agreement dated January 12, 1990 (the 'Agreement'). The Partnership is 50% owned
by WKA El Con Associates ('WKA El Con'), a partnership owned by several partners
affiliated with Williams Hospitality Group Inc. ('Williams Hospitality'), and
50% by Kumagai Caribbean, Inc. ('Kumagai'), a wholly-owned subsidiary of Kumagai
International USA, Inc. The partners ('Partners') are both General Partners and
Limited Partners in the Partnership. The Partnership shall continue to exist
until March 31, 2030, unless terminated earlier by mutual agreement of the
General Partners. The Agreement provides that net profits or losses of the
Partnership after deducting a preferred cumulative annual return of 8.5% on the
Partners unrecovered capital accounts, as defined, will be allocated to the
Partners on a 50-50 ratio subject to certain exceptions, as defined.
In February, 1991 the Partnership acquired the El Conquistador Hotel
property and other adjacent parcels of land in Las Croabas, Puerto Rico (the
'Resort'). The Resort experienced extensive renovation and was reopened as a
luxury resort hotel and casino in October, 1993.
BASIS OF PRESENTATION
The financial statements have been prepared in conformity with generally
accepted accounting principles which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INVENTORIES
Inventories, which consist mainly of food, beverages and supplies, are
valued at the lower of cost (first-in, first-out method) or market.
LAND, BUILDING AND EQUIPMENT
Land, building and equipment are stated on the basis of cost. Building and
equipment are depreciated by the straight-line method over their estimated
useful lives.
DEFERRED DEBT ISSUANCE COSTS
Debt issuance costs include legal and underwriting fees, other fees
incurred in connection with the financing and other costs. These costs are being
amortized on a straight-line basis over the terms of the debt.
F-39
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED PRE-OPENING COSTS
Pre-opening costs consist of amounts incurred in connection with the
marketing, organization, planning and development of the Resort. Such costs
include legal, engineering and marketing fees and other costs incurred prior to
the commencement of operations of the Resort. The remaining costs are being
amortized on a straight-line basis over a five year period extending through
November 1998.
CASINO REVENUES
Casino revenues are the net win from gaming activities, which is the
difference between gaming wins and losses.
CASINO PROMOTIONAL ALLOWANCES
Casino promotional allowances represent the retail value of complimentary
food, beverage and hotel services furnished to patrons, commissions and
transportation costs.
3. RESTRICTED CASH AND INVESTMENTS HELD BY BANK
Pursuant to the terms of the bond agreement (see Note 9), the Partnership
had cash and investments on deposit with the trustee for the following:
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Interest due May 1...................................... $1,584,000 $1,782,000
Interest due August 1................................... 1,295,355 1,600,708
---------- ----------
$2,879,355 $3,382,708
---------- ----------
---------- ----------
</TABLE>
4. TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable consisted of the following:
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Trade accounts receivable -- hotel...................... $5,259,478 $8,192,918
Less allowances for doubtful accounts................... 217,362 791,455
---------- ----------
5,042,116 7,401,463
Trade accounts receivable -- casino..................... 345,171 355,187
Less allowance for doubtful accounts.................... 84,403 102,732
---------- ----------
260,768 252,455
---------- ----------
Trade accounts receivable, net.......................... $5,302,884 $7,653,918
---------- ----------
---------- ----------
</TABLE>
5. TRANSACTIONS WITH RELATED PARTIES
The Partnership has an Operating and Management Agreement (the 'Management
Agreement') with Williams Hospitality. The Management Agreement provides that
Williams Hospitality will manage the Resort for a period of 20 years for a basic
management fee of 3.5% of the Resort's gross revenues, as defined, and an
incentive management fee of 10% of the Resorts' operating profit, as defined.
Incentive management fees accrued each year are not payable until significant
cash flows levels are achieved. In addition, the Partnership is required to pay
certain administrative expenses incurred by Williams Hospitality in connection
with management of the Resort.
F-40
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During fiscal years 1996, 1995 and 1994, basic management fees amounted to
$3,170,000, $3,025,000 and $1,162,000, respectively. Incentive management fees
amounted to approximately $2,224,000, $679,300 and $263,400 during fiscal years
1996, 1995 and 1994, respectively. In addition, Williams Hospitality charged the
Partnership approximately $2,728,000, $3,536,000 and $1,377,000 in fiscal years
1996, 1995 and 1994, respectively, for services provided to the Resort.
In addition, the Partnership was charged by Posadas de Puerto Rico
Associates, Incorporated ('Posadas de Puerto Rico') and Posadas de San Juan
Associates ('Posadas de San Juan'), hotel and casino operations affiliated
through common ownership, approximately $437,000 and $116,000, respectively in
fiscal year 1996, $687,000 and $179,000, respectively, in fiscal year 1995, and
$445,000 and $318,000, respectively, in fiscal year 1994, for services provided
to the Resort.
As of March 31, 1996 each partner had advanced $8,365,685 to the
Partnership under notes that are due for various periods up to ten years with
interest at the Citibank, N.A. in New York base rate. Repayment of interest and
principal is subordinated to other long-term debt. In addition, each partner had
advanced to the Partnership $4,000,000 under a May 5, 1992 loan agreement. The
loan agreement provides for the payment of interest at a variable rate, computed
quarterly, equal to LIBOR plus 1.75%. Interest payments will be deferred during
the first five years. The principal and deferred interest accrued at March 31,
1996 is payable in quarterly installments of $250,000 commencing in March 2000
and a final lump-sum payment in February 2002. The loan is collateralized by a
subordinated pledge of the Partnership's assets.
As of March 31, 1996 each partner had provided $3,800,000 to cover cash
flow deficiency in the Partnership's operations as provided by the Agreement.
The deficiency loans consisted of $3,800,000 in cash by Kumagai, and the
conversion of amounts due from the Partnership to Williams Hospitality to loans
for WKA El Con. The deficiency loans bear interest at 9.16%. Repayment of
interest and principal is subordinated to other long-term debt.
During fiscal year 1995 Las Casitas Development Company S.E., an affiliated
company 50% owned by WKA El Con, paid $2,500,000 to the Partnership for land
purchased in April, 1993.
As of March 31, 1996, the outstanding balance of advances made in fiscal
year 1994 by the Partnership to Williams Hospitality for the purchase of
transportation equipment leased to the Partnership under a five year service
agreement amounted to $1,123,400. Service agreement payments by the Partnership
are equal to the $39,819 monthly amounts receivable under the advance. Repayment
of the advances by Williams Hospitality are limited to amounts payable under the
service agreement. This transportation equipment is pledged as collateral by
Williams Hospitality to the Partnership's chattel mortgage notes.
In addition, a subsidiary of Williams Hospitality financed other
transportation equipment in fiscal year 1994 from an external borrowing of
$441,000 repayable over 5 years. The Partnership chartered the transportation
equipment under terms similar to the transaction described above. Monthly
payments amount to $9,699.
The chattel mortgage notes payable (see Note 8) are collateralized by a
bank standby letter of credit of $3,423,000. The letter of credit is
collateralized by certificates of deposit of the same amount issued by the bank
in equal amounts to Williams Hospitality and Kumagai. The chattel mortgage
notes, and capital leases are guaranteed by Williams Hospitality and Kumagai.
6. NOTES PAYABLE TO BANKS
Notes payable to banks include a $4,000,000 revolving term credit facility
entered into by the Partnership with a bank, which is payable on demand or at
the expiration of the credit facility (July 31, 1996). Advances under the credit
facility bear interest at .75% over the cost of 936 funds, if available, or
LIBOR, or 1.5% over the bank's base rate. The credit facility is collateralized
by accounts receivable,
F-41
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and guaranteed by the Partners and the Government Development Bank for Puerto
Rico ('GDB'). At March 31, 1996, the Partnership had outstanding borrowings of
$2,500,000 under the credit facility.
The other note payable outstanding consists of a short-term note of
$273,359 due on demand to a bank.
7. DUE TO AFFILIATED COMPANIES AND PARTNERS
Amounts due to affiliated companies consist of fees earned by Williams
Hospitality, funds advanced to the Partnership and other payments made by
Williams Hospitality, and for services rendered by Posadas de Puerto Rico and
Posadas de San Juan. Amounts due to affiliated companies consisted of the
following:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Current:
Due to Williams Hospitality:
Basic management fees................................ $ 414,718 $ 396,138
Other................................................ 195,523 447,226
Due to Posadas de Puerto Rico........................ 37,380 299,126
Due to Posadas de San Juan........................... 5,275 5,520
----------- -----------
$ 652,896 $ 1,148,010
----------- -----------
----------- -----------
Non current:
Affiliate:
Due to Williams Hospitality:
Incentive management fees....................... $ 3,167,002 $ 942,621
Interest at 10% on incentive management fees.... 89,350 36,953
Advances........................................ 3,800,000 3,800,000
Interest on advances............................ 503,368 129,199
Other........................................... 375,528 375,528
----------- -----------
7,935,248 5,284,301
Due to KG Caribbean.................................. 596,423 633,424
----------- -----------
$ 8,531,671 $ 5,917,725
----------- -----------
----------- -----------
Partners:
Due to WKA El Con:
Advances........................................ $12,365,685 $12,365,685
Interest on advances............................ 2,522,285 1,424,938
Due to Kumagai:
Advances........................................ 16,165,685 16,165,685
Interest on advances............................ 3,025,654 1,554,137
----------- -----------
$34,079,309 $31,510,445
----------- -----------
----------- -----------
</TABLE>
F-42
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. CHATTEL MORTGAGES AND CAPITAL LEASE OBLIGATIONS
Chattel mortgages and capital lease obligations on equipment consisted of
the following:
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Chattel mortgage notes payable bearing interest at 9%, payable in
monthly installments of $215,784, including interest, through
1998, collateralized with personal property..................... $6,023,820 $7,980,491
Capital lease obligations bearing interest at 11.5%, payable in
monthly installments of $28,335, including interest, through
1998, collateralized with personal property, net of $121,571 in
1996 and $223,683 in 1995 representing interest................. 745,531 987,006
---------- ----------
6,769,351 8,967,497
Less current portion.............................................. 2,444,993 2,208,272
---------- ----------
$4,324,358 $6,759,225
---------- ----------
---------- ----------
</TABLE>
Maturities of chattel mortgages and capital lease obligations are as
follows:
<TABLE>
<CAPTION>
1997........................................................ $2,444,993
<S> <C>
1998........................................................ 2,679,819
1999........................................................ 1,644,539
----------
$6,769,351
----------
----------
</TABLE>
See Note 5 for additional collateral and guarantees.
Assets and accumulated depreciation recorded under capital lease
obligations are included in land, building and equipment as follows:
<TABLE>
<CAPTION>
MARCH 31,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Equipment......................................................... $1,288,373 $1,288,373
Less accumulated depreciation..................................... 622,717 365,041
---------- ----------
$ 665,656 $ 923,332
---------- ----------
---------- ----------
</TABLE>
9. LONG-TERM DEBT
At March 31, 1996 and 1995, long-term debt consisted of the following:
<TABLE>
<S> <C>
Industrial Revenue Bonds Series A................................... $ 90,000,000
Industrial Revenue Bonds Series B................................... 30,000,000
Government Development Bank for Puerto Rico......................... 25,000,000
------------
$145,000,000
------------
------------
</TABLE>
On February 7, 1991 the Puerto Rico Industrial, Medical, Educational and
Environmental Pollution Control Facilities Financing Authority (the 'Authority')
sold industrial revenue bonds ('Bonds') in the principal amount of $120,000,000
and loaned the proceeds to the Partnership to be used for the payment of project
costs pursuant to a Loan Agreement. The Loan Agreement provides that the
Partnership will pay all interest and principal on the Bonds.
The Authority issued 1991 Series A, Industrial Revenue Bonds for
$90,000,000 and 1991 Series B, Industrial Revenue Bonds for $30,000,000.
F-43
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Commencing on May 1, 1996, the Bonds will be subject to redemption at the
Partnership's option at par plus accrued interest, if any. The Bonds are due on
November 1, 1999 and interest is payable quarterly. The 1991 Series A Bonds and
the 1991 Series B Bonds bear interest at a variable rate, computed quarterly,
equal to 86% and 94%, respectively, of a LIBOR rate minus 1/8th of 1%. On
February 7, 1991 the Partnership entered into an Interest Swap Agreement that
expires March 8, 1998 by which the Partnership agreed to a fixed rate of 7.55%
on the outstanding principal of $120,000,000 in exchange for the counterparty's
obligation to pay the variable interest rate described above.
The Loan Agreement provides that the Partnership will deposit with the
trustee all interest which will become due not later than the 124th day
preceding the date of payment. The Bonds are collateralized by a letter of
credit, that terminates on March 9, 1998, issued by the Mitsubishi Bank,
Limited. Under the terms of the Loan Agreement, the debt is required to be
repaid on February 1, 1998 in the event the Letter of Credit is not renewed or
replaced prior to November 9, 1997.
The Partnership pays an annual letter of credit fee of approximately 1.25%
of the Bond principal except under certain circumstances the rate may be reduced
to 1.2%. In addition, in connection with the letter of credit the Partnership
pays an annual agents fee of approximately .25% of the Initial Stated Amount, as
defined.
Under the provisions of a term loan agreement with the Government
Development Bank for Puerto Rico ('GDB'), the Partnership borrowed $25,000,000
for the payment of project costs which is due on February 7, 2006. The loan
agreement provides for a variable interest rate equivalent to a LIBOR rate minus
.5% plus an add-on margin as provided in the loan agreement. Interest is payable
quarterly in arrears.
Commencing on April 1, 1993, the Partnership is required to deposit
annually with an escrow agent 50% of the Available Cash Flow, as defined in the
Loan Agreement with GDB, up to a maximum of $1,666,700 plus any prior year
requirement in arrears. Through March 31, 1996, there had been no amounts
deposited in escrow under this provision.
The Bonds and the term loan with GDB are collateralized by a first and
second mortgage lien on the Resort, a chattel mortgage on personal property, and
an assignment of various contracts and a management agreement with a related
party. The collateral is subject to a subordination agreement in favor of the
Mitsubishi Bank, Limited.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107 'Disclosures About
Fair Value of Financial Instruments', requires the disclosure of the fair value
of the Partnership's financial instruments at March 31, 1996 and 1995. The
carrying amount of cash and investments, notes payable to bank, chattel mortgage
notes and capitalized leases approximates fair value because of the short
maturity of the instruments or recent issuance. The fair value of the
Partnership's long-term debt has not been determined because similar terms and
conditions may no longer be available.
11. INCOME TAXES
The Partnership is not taxable for Puerto Rico income tax purposes pursuant
to an election submitted to the Puerto Rico Treasury Department. Instead, each
Partner reports their distributive share of the Partnership's profit and losses
in their respective income tax returns and, therefore, no provision for income
taxes has been made in the accompanying financial statements. Income or loss of
the Partnership for Federal income tax purposes is reported by the partners.
The Partnership has requested a tax exemption grant under the provisions of
the Puerto Rico Tourism Incentives Act of 1993 (the 'Tourism Act'). The Tourism
Act provides for a ten-year grant which may be extended for an additional
ten-year term. Major benefits of this Act are: a 90% exemption from income taxes
on hotel income, and municipal real and personal property taxes, and a
F-44
<PAGE>
<PAGE>
EL CONQUISTADOR PARTNERSHIP L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
100% exemption from municipal license tax through the entire term of the grant.
The Partnership's casino operations are not covered by the tax exemption grant
and are fully taxable.
12. ADVERTISING COSTS
The Partnership recognizes the cost of advertising as expense in the year
in which they are incurred. Advertising costs amounted to approximately $847,000
and $2,107,000 for fiscal years 1996 and 1995, respectively.
13. COMMITMENTS
The Partnership leases land under an operating lease agreement for
thirty-one years with renewal options for two five year periods. Following are
the minimum annual rental payments on the operating lease subsequent to March
31, 1996:
<TABLE>
<S> <C>
1997........................................................ $ 180,000
1998........................................................ 190,000
1999........................................................ 210,000
2000........................................................ 210,000
2001........................................................ 210,000
Thereafter.................................................. 6,050,000
----------
$7,050,000
----------
----------
</TABLE>
Total rent expense for fiscal years 1996, 1995 and 1994 amounted to
approximately $985,000, $1,169,000 and $430,000, respectively.
F-45
<PAGE>
<PAGE>
ANNEX I -- OPINION OF OPPENHEIMER & CO., INC
[To be filed by amendment]
I-1
<PAGE>
<PAGE>
ANNEX II -- OPINION OF HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
[To be filed by amendment]
II-1
<PAGE>
<PAGE>
ANNEX III -- AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION OF THE COMPANY
[To be filed by amendment]
III-1
<PAGE>
<PAGE>
ANNEX IV -- AMENDED AND RESTATED BYLAWS
OF THE COMPANY
[To be filed by amendment]
IV-1
<PAGE>
<PAGE>
ANNEX V -- STOCK OPTION PLAN (DRAFT)
WMS HOTEL CORPORATION
1996 STOCK OPTION PLAN
ARTICLE I
PURPOSE OF THE PLAN
The 1996 Stock Option Plan (the 'Plan') is intended to provide a method
whereby 'Employees,' 'Directors' and 'Consultants and Advisers' of WMS Hotel
Corporation (the 'Company') and its 'Subsidiaries' (as such quoted terms are
hereinafter defined) may be encouraged to acquire a proprietary interest in the
Company and whereby such individuals may realize benefits from an increase in
the value of the shares of Voting Common Stock, $0.01 par value per share (the
'Common Stock'), of the Company; to encourage and provide such Employees,
Directors and Consultants and Advisers with greater incentive and to encourage
their continued provision of services to the Company; and, generally, to promote
the interests of the Company and all of its stockholders. Under the Plan, from
time to time on or before , 2007, options to purchase shares of
Common Stock and related Stock Appreciation Rights may be granted to such
persons as may be selected in the manner hereinafter provided on the terms and
subject to the conditions hereinafter set forth. Capitalized terms are defined
in Article XV hereof.
ARTICLE II
ADMINISTRATION OF THE PLAN
SECTION 1. Subject to the authority as described herein of the Board of
Directors (the 'Board') of the Company, the Plan shall be administered by the
Compensation Committee of the Company's Board of Directors (the 'Committee')
which is composed of at least two members of the Board who are Non-Employee
Directors. The Committee is authorized to interpret the Plan and may from time
to time adopt such rules and regulations for carrying out the Plan as it may
deem best. All determinations by the Committee shall be made by the affirmative
vote of a majority of its members but any determination reduced to writing and
signed by a majority of its members shall be fully enforceable and effective as
if it had been made by a majority vote at a meeting duly called and held.
Subject to any applicable provisions of the Plan, all determinations by the
Committee or by the Board pursuant to the provisions of the Plan, and all
related orders or resolutions of the Committee or the Board, shall be final,
conclusive and binding on all Persons, including the Company and its
stockholders, employees, directors and optionees.
SECTION 2. All authority delegated to the Committee pursuant to the Plan,
may also be exercised by the Board except with respect to matters which under
Rule 16b-3 and Section 16 of the 1934 Act or Section 162(m) of the Code are
required to be determined in the absolute discretion of the Committee. Subject
to the foregoing, in the event of any conflict or inconsistency between
determinations, orders, resolutions or other actions of the Committee and the
Board, the actions of the Board shall control.
SECTION 3. With respect to Section 16 of the 1934 Act, transactions under
the Plan are intended to comply with all applicable conditions of Rule 16b-3 or
its successors under the 1934 Act. To the extent any provision of the Plan or
action by the Committee fails to so comply, it shall be deemed null and void to
the extent permitted by law and deemed advisable by the Committee.
ARTICLE III
STOCK SUBJECT TO THE PLAN
SECTION 1. The shares to be issued or delivered upon exercise of options or
rights granted under the Plan shall be made available, at the discretion of the
Board, either from the authorized but unissued shares of Common Stock of the
Company or from shares of Common Stock reacquired by the Company, including
shares purchased by the Company in the open market or otherwise obtained.
SECTION 2. Subject to the provisions of Article X, the aggregate number of
shares of Common Stock which may be purchased pursuant to options granted at any
time under the Plan shall not exceed
V-1
<PAGE>
<PAGE>
900,000. Such number shall be reduced by the aggregate number of shares covered
by options in respect of which Stock Appreciation Rights are exercised. The
maximum number of shares with respect to which options may be granted in any
calendar year to any one employee shall be 500,000 as such number may be
adjusted by the Committee in accordance with Article X hereof. The Committee
shall calculate such limit in a manner consistent with Section 162(m) of the
Code. Shares subject to any options which are canceled, lapse or are otherwise
terminated shall be immediately available for reissuance under the Plan.
ARTICLE IV
PURCHASE PRICE OF OPTIONED SHARES
Unless the Committee shall fix a greater or lesser purchase price, the
purchase price per share of Common Stock under each option granted to Employees,
Directors, Consultants and Advisers shall not be less than one hundred percent
(100%) of the Fair Market Value (as hereinafter defined) of the Common Stock at
the time such option is granted, but in no case shall such price be less than
the par value of the Common Stock or 85% of the Fair Market Value of the Common
Stock as of the time of grant; provided, however, that in the case of an
Incentive Stock Option granted to an Employee who, at the time of the grant,
owns stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company (a 'Ten Percent Stockholder'), such
purchase price per share shall be at least one hundred and ten percent (110%) of
the Fair Market Value.
ARTICLE V
ELIGIBILITY OF RECIPIENTS
Options will be granted only to Persons who are Employees, Directors,
Consultants or Advisers of the Company or a Subsidiary.
ARTICLE VI
DURATION OF THE PLAN
Unless previously terminated by the Committee or the Board, the Plan will
terminate on , 2007. Such termination will not terminate any
option or Stock Appreciation Right then outstanding.
ARTICLE VII
GRANT OF OPTIONS TO EMPLOYEES,
DIRECTORS, CONSULTANTS AND ADVISERS
SECTION 1. Each option granted under the Plan to Employees shall constitute
either an Incentive Stock Option or a Non-Qualified Stock Option, as determined
in each case by the Committee and each option granted under the Plan to
Directors, Consultants and Advisers shall constitute a Non-Qualified Stock
Option. With respect to Incentive Stock Options granted to Employees, to the
extent that the aggregate Fair Market Value (determined at the time an option is
granted) of Common Stock of the Company with respect to which such Incentive
Stock Options are exercisable for the first time by any individual during any
calendar year (under the Plan and any other stock option plan of the Company)
exceeds $100,000, such Incentive Stock Options shall be treated as Non-Qualified
Stock Options to the extent of such excess. The foregoing rule shall be applied
by taking Incentive Stock Options into account in the order in which they were
granted. In the event outstanding Incentive Stock Options become immediately
exercisable under the terms hereof, such Incentive Stock Options will, to the
extent the aggregate Fair Market Value thereof exceeds $100,000, be treated as
Non-Qualified Stock Options.
SECTION 2. The Committee shall from time to time determine the Employees,
Directors, Consultants and Advisers to be granted options, it being understood
that options may be granted at different times to the same person, provided,
however, that no one person may receive an option or options under the Plan
covering more than fifty percent (50%) of the total number of shares subject to
V-2
<PAGE>
<PAGE>
the Plan. In addition, the Committee shall determine subject to the terms of the
Plan (a) the number of shares subject to each option, (b) the time or times when
the options will be granted, (c) whether such options shall be Incentive Stock
Options, Non-Qualified Stock Options or both, (d) whether Stock Appreciation
Rights will be granted in connection with the grant of options, (e) the purchase
price of the shares subject to each option, which price shall be not less than
that specified in Article IV, (f) the time or times when each option and any
related Stock Appreciation Rights may be exercised and (g) any other matters
which the Committee shall deem appropriate.
SECTION 3. All instruments evidencing options granted to Employees,
Directors, Consultants and Advisers under the Plan shall be in such form, which
shall be consistent with the Plan and any applicable determinations, orders,
resolutions or other actions of the Committee or the Board.
SECTION 4. The Committee, in its sole discretion, on the granting of an
option to an Employee, Director, Consultant or Adviser under the Plan may also
grant Stock Appreciation Rights relating to any number of shares but, except as
hereinafter provided, not more than fifty percent (50%) of the number of shares
covered by such option shall include Stock Appreciation Rights. Such options
shall be subject to such terms and conditions, not inconsistent with the Plan,
that the Committee shall impose, including the following:
(i) Stock Appreciation Rights may be granted only in writing and only
attached to an underlying option at the time of the grant of the option;
(ii) Stock Appreciation Rights may be exercised only at the time when
the option to which it is attached is exercisable;
(iii) Stock Appreciation Rights shall entitle the optionee (or any
person entitled to act under the provisions of the Plan) to surrender
unexercised all or part of the then exercisable portion of the option to
which the Stock Appreciation Rights are attached to the Company and to
receive from the Company in exchange therefor a payment in cash equal to
the excess, if any, of the then value of one share covered by such portion
over the option price per share specified in such option, multiplied by the
number of shares covered by the portion of the option so surrendered (which
excess is herein called the 'Appreciated Value'). For purposes of
computation of the Appreciated Value, the value of one share shall be
deemed to be the average Fair Market Value of such share during the
four-week period immediately preceding the date of notice of exercise of
the Stock Appreciation Rights;
(iv) if Stock Appreciation Rights attached to an option are exercised,
such option shall be deemed to have been canceled to the extent of the
number of shares surrendered on exercise of the Stock Appreciation Rights
and no further options may be granted covering such shares; and
(v) if an option to which Stock Appreciation Rights are attached is
exercised, such Stock Appreciation Rights shall be canceled to the extent
necessary to cause the number of shares to which such Stock Appreciation
Rights relate not to exceed the number of remaining shares subject to such
option.
ARTICLE VIII
NON-TRANSFERABILITY OF OPTIONS
No Incentive Stock Option or any related Stock Appreciation Rights granted
under the Plan shall be transferable by the optionee otherwise than by will or
by the laws of descent and distribution, and any such Incentive Stock Option or
any related Stock Appreciation Rights shall be exercised during the lifetime of
the optionee solely by him or her. Any Non-Qualified Stock Option granted under
the Plan may be transferable by the optionee to the extent specifically
permitted by the Committee as specified in the instrument evidencing the option
as the same may be amended from time to time. Except to the extent permitted by
such instrument, no Non-Qualified Stock Option shall be transferable except by
will or by the laws of descent and distribution.
V-3
<PAGE>
<PAGE>
ARTICLE IX
EXERCISE OF OPTIONS
SECTION 1. Each option (and any related Stock Appreciation Rights) granted
under the Plan shall terminate on the date specified by the Committee which date
shall be not later than the expiration of ten years from the date on which it
was granted; provided, however, that in the case of an Incentive Stock Option
granted to an Employee who, at the time of the grant is a Ten Percent
Stockholder, such period shall not exceed five (5) years from the date of grant.
SECTION 2. Except to the extent otherwise provided in any instruments
evidencing an option and, if so specified in such instrument, in the cases
provided for in Article XII hereof, each option (and any related Stock
Appreciation Rights) granted under the Plan may be exercised only while the
optionee is an Employee or Director of the Company.
SECTION 3. A person electing to exercise an option or Stock Appreciation
Rights then exercisable shall give written notice to the Company of such
election and, if electing to exercise an option, of the number of shares of
Common Stock such person has elected to purchase. A person exercising an option
shall at the time of purchase tender the full purchase price of such shares,
which tender, except as provided in Section 4 of this Article IX, shall be made
in cash or cash equivalent (which may be such person's personal check) or, to
the extent permitted by applicable law, in shares of Common Stock already owned
by such person (which shares shall be valued for such purpose on the basis of
their Fair Market Value on the date of exercise), or in any combination thereof.
In the event of payment in shares of Common Stock already owned, such shares
shall be appropriately endorsed for transfer to the Company. The Company shall
have no obligation to deliver shares of Common Stock pursuant to the exercise of
any option, in whole or in part, until such payment in full of the purchase
price therefor is received by the Company. No optionee, or legal representative,
legatee, distributee or transferee of such optionee, shall be or be deemed to be
a holder of any shares of Common Stock subject to such option or entitled to any
rights of a stockholder of the Company in respect of any shares of Common Stock
covered by such option until such shares have been paid for in full and issued
or delivered by the Company.
SECTION 4. In order to assist an optionee in the exercise of an option
granted under the Plan, the Committee or Board may, in its discretion,
authorize, either at the time of the grant of the option or thereafter (a) the
extension of a loan to the optionee by the Company, (b) the payment by the
optionee of the purchase price of the Common Stock in installments, (c) the
guarantee by the Company of a loan obtained by the optionee from a third party
or (d) make such other reasonable arrangements to facilitate the exercise of
options in accordance with applicable law. The Committee or Board shall
authorize the terms of any such loan, installment payment arrangement or
guarantee, including the interest rate (which, in the case of incentive stock
options, shall be not less than the higher of (i) the 'prime rate' as from time
to time in effect at a commercial bank of recognized standing, and (ii) the rate
of interest from time to time imputed under Section 483 of the Code and terms of
repayment thereof, and shall cause the instrument evidencing any such option to
be amended, if required, to provide for any such extension of credit. Loans,
installment payment arrangements and guarantees may be authorized without
security, and the maximum amount of any such loan or guarantee shall be the
purchase price of the Common Stock being acquired, plus related interest
payments.
SECTION 5. Each option shall be subject to the requirement that if at any
time the Board shall in its discretion determine that the listing, registration
or qualification of the shares of Common Stock subject to such option upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of or in connection with, the granting of such option or the issuance
or purchase of shares thereunder, such option may not be exercised in whole or
in part unless such listing, registration, qualification, consent or approval
shall have been effected or obtained free from any conditions not reasonably
acceptable to the Board. Unless at the time of exercise of an option and the
issuance of Common Stock so purchased, there shall be in effect as to such
Common Stock a registration statement under the Act, the holder of such option
shall deliver a certification (a) acknowledging that such shares of Common Stock
may be 'restricted securities' as defined in Rule 144 promulgated under the Act;
and (b) containing such optionee's agreement that such Common Stock may not be
sold or otherwise disposed of except in
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compliance with applicable provisions of the Act. In the event that the Common
Stock is then listed on a national securities exchange, the Company shall use
its best efforts to cause the listing of the shares of Common Stock subject to
options upon such exchange.
SECTION 6. All payments made by the Company pursuant to Section 4 of this
Article IX shall be subject to withholding in respect of such income or other
taxes as may be required by law to be paid or withheld. The Company may
establish appropriate procedures to provide for payment or withholding of such
income or other taxes as may be required by law to be paid or withheld in
connection with the exercise of options under the Plan, and to ensure that the
Company receives prompt advice concerning the occurrence of any event which may
create, or affect the timing or amount of, any obligation to pay or withhold any
such taxes or which may make available to the Company any tax deduction
resulting from the occurrence of such event.
ARTICLE X
ADJUSTMENTS
SECTION 1. New option rights may be substituted for the options granted
under the Plan, or the Company's duties as to options outstanding under the Plan
may be assumed, by a corporation other than the Company, or by a parent or
subsidiary of the Company or such corporation, in connection with any merger,
consolidation, acquisition, separation, reorganization, liquidation or other
similar corporate transaction in which the Company is involved. Notwithstanding
the foregoing or the provisions of this Article X, in the event such
corporation, or parent or subsidiary of the Company or such corporation, does
not substitute new option rights for, and substantially equivalent to, the
options granted hereunder, or assume the options granted hereunder, the options
granted hereunder shall terminate and thereupon become null and void (i) upon
dissolution or liquidation of the Company, or similar occurrence, (ii) upon any
merger, consolidation, acquisition, separation, reorganization, or similar
occurrence, where the Company will not be a surviving entity or (iii) upon a
transfer of substantially all of the assets of the Company or more than 80% of
the outstanding Common Stock in a single transaction; provided, however, that
each optionee shall have the right immediately prior to or concurrently with
such dissolution, liquidation, merger, consolidation, acquisition, separation,
reorganization or other similar corporate transaction, to exercise any unexpired
option granted hereunder whether or not then exercisable.
SECTION 2. In the event that the Committee determines that any dividend or
other distribution (whether in the form of cash, shares, other securities, or
other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of shares or other securities of the Company, issuance
of warrants or other rights to purchase shares or other securities of the
Company, or other corporate transaction or event affects the shares such that an
adjustment is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan, then, the Committee shall, in such manner as it
may deem equitable, adjust any or all of (i) the number of shares of Common
Stock or other securities of the Company (or number and kind of other securities
or property) with respect to which options may be granted and any limitations
set forth in the Plan, (ii) the number of shares of Common Stock or other
securities of the Company (or number and kind of other securities or property)
subject to outstanding options and (iii) the grant or exercise or target price
with respect to any option or, if deemed appropriate, make provision for a cash
payment to the holder of an outstanding option including, if necessary, the
termination of such an option; provided, in each case, that with respect to
Incentive Stock Options no such adjustment shall be authorized to the extent
that such authority would cause the Plan to violate Section 422 of the Code.
Without limiting the generality of the foregoing, any such adjustment shall be
deemed to have prevented any dilution and enlargement of an optionee's rights if
such optionee receives in any such adjustment rights which are substantially
similar (after taking into account the fact that the optionee has not paid the
applicable exercise price) to the rights the optionee would have received had he
exercised his outstanding options and become a stockholder of the Company
immediately prior to the event giving rise to such adjustment.
SECTION 3. Adjustments and elections under this Article X shall be made by
the Committee whose determination as to what adjustments, if any, shall be made
and the extent thereof shall be final, binding
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and conclusive. Adjustments required under this Article X shall also be deemed
to increase by a like number the aggregate number of shares authorized for
purchase pursuant to options granted under the Plan as set forth in Section 2 of
Article III hereof.
ARTICLE XI
PRIVILEGES OF STOCK OWNERSHIP
No optionee shall be entitled to the privileges of stock ownership as to
any shares of Common Stock not actually issued and delivered to him or her.
ARTICLE XII
TERMINATION OF SERVICE OR EMPLOYMENT
SECTION 1. In the event that an optionee shall cease his or her
relationship with the Company or a Subsidiary by voluntarily terminating such
relationship without the written consent of the Company or a Subsidiary, or if
the Company or a Subsidiary shall terminate for cause such relationship, unless
otherwise provided in the instrument evidencing such option, the option and any
associated Stock Appreciation Rights held by such optionee shall terminate
forthwith.
SECTION 2. If the holder of an option shall voluntarily terminate his or
her relationship with the Company or a Subsidiary with the written consent of
the Company, which written consent expressly sets forth a statement to the
effect that options which are exercisable on the date of such termination shall
remain exercisable, or if the optionee's relationship with the Company or a
Subsidiary shall have terminated by the Company or a Subsidiary for reasons
other than cause, unless otherwise provided in the instrument evidencing such
option, such optionee may exercise his or her option to the extent exercisable
at the time of such termination, at any time prior to the expiration of three
months after such termination or the date of expiration of the option as fixed
at the time of grant, whichever shall first occur. Options granted under the
Plan to Employees shall not be affected by any change in the position of
employment so long as the holder thereof continues to be an Employee or a
Director.
SECTION 3. Should an optionee die during the existence of his or her
relationship with the Company, unless otherwise provided in the instrument
evidencing such option, all of the optionee's options shall be terminated except
that any option (and any related Stock Appreciation Rights) to the extent
exercisable by the optionee at the time of such death, may be exercised within
one year after the date of such death but not later than the expiration date of
the option solely in accordance with all of the terms and conditions of the Plan
by the optionee's personal representatives or by the person or persons to whom
the optionee's rights under the option shall pass by will or by the applicable
laws of descent and distribution.
SECTION 4. Should an optionee die after cessation of the optionee's
relationship with the Company or a Subsidiary, unless otherwise provided in the
instrument evidencing such option, all of the optionee's options shall be
terminated except that any option (and any related Stock Appreciation Rights) to
the extent exercisable by the optionee at the time of such death may be
exercised within one year after the date of such death but not later than the
expiration of the option solely in accordance with all of the terms and
conditions of the Plan by the optionee's personal representatives or by the
person or persons to whom the optionee's rights under the option shall pass by
will or by the applicable laws of descent and distribution.
ARTICLE XIII
AMENDMENTS TO PLAN
The Board may at any time terminate or from time to time amend, modify or
suspend the Plan; provided, however, that no such amendment or modification
without the approval of the stockholders of the Company shall:
(i) materially increase the benefits accruing to participants under
the Plan;
(ii) materially increase the maximum number (determined as provided in
the Plan) of shares of Common Stock which may be purchased pursuant to
options granted under the Plan; or
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(iii) materially modify the requirements as to eligibility for
participation in the Plan.
The amendment or termination of the Plan shall not, without the written consent
of an optionee, adversely affect any rights or obligations under any option
theretofore granted to such optionee under the Plan.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
The Plan shall be effective on , 1997.
ARTICLE XV
DEFINITIONS
For the purposes of this Plan, the following terms shall have the meanings
indicated:
Act: Shall mean the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
Code: Shall mean the Internal Revenue Code of 1986, as amended and the
regulations promulgated thereunder.
Committee: Such term is defined in Article II, Section 1.
Common Stock: Such term is defined in Article I.
Consultants and Advisers: Such term shall include any third party retained
or engaged by the Company or any Subsidiary to provide services to the Company
or such Subsidiary, including any employee of such third party providing such
services.
Director: Such term shall include any director of the Company.
Employee: Such term shall include (i) any officer as well as any full-time
salaried key executive, managerial, professional, administrative, or key
employee of the Company or a Subsidiary. Such term shall also include an
employee on approved leave of absence provided such employee's right to continue
employment with the Company or a Subsidiary upon expiration of such employee's
leave of absence is guaranteed either by statute or by contract with or by a
policy of the Company or a Subsidiary and any consultant, independent
contractor, professional advisor or other person who is paid by the Company or a
Subsidiary for rendering services or furnishing materials or goods to the
Company or a Subsidiary.
Fair Market Value: The fair market value as of any date shall be determined
by the Committee or Board after giving consideration to the price of the Common
Stock in the public market and shall be determined otherwise in a manner
consistent with the provisions of the Code.
Incentive Stock Option: Such term means an option intended to qualify under
Section 422 of the Code.
1934 Act: Shall mean the Securities Exchange Act of 1934, as amended and
the rules and regulations promulgated thereunder.
Non-Employee Director: Such term shall mean any director of the Company who
is a Non-Employee Director as that term is defined in Rule 16b-3 promulgated
under the 1934 Act.
Non-Qualified Stock Option: Such term means an option which does not
qualify under Section 422 of the Code.
Person: Such term shall have the meaning ascribed to it under the 1934 Act.
Plan: Such term is defined in Article I and shall include all amendments
thereof.
Stock Appreciation Rights: Means the rights granted by the Committee
pursuant to Section 4 of Article VI hereof.
Subsidiary: Means and includes a 'Subsidiary Corporation' of the Company as
defined in Section 424 of the Code.
Ten Percent Stockholder: Such term is defined in Article IV.
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