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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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
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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.
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"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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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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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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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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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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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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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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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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(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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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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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
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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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
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
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
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.
20
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.
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
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.
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.
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
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.
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
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
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
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
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-
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
32
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
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.
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.
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
36
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
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
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:
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
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
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,
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
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