DEBT SERVICE RESERVE AGREEMENT
THIS DEBT SERVICE RESERVE AGREEMENT ("Agreement") is made as
of the 3rd day of August, 1998, by and between EL CONQUISTADOR PARTNERSHIP L.P.,
a Delaware limited partnership, having an address at 1000 El Conquistador
Avenue, Las Croabas, Fajardo, Puerto Rico 00738 ("Borrower") and CITICORP REAL
ESTATE, INC., a Delaware corporation, having an address at 599 Lexington Avenue,
New York, New York 10043 ("Lender").
RECITALS:
A. Lender is the owner and holder of certain reimbursement
obligations in the principal amount of $90,000,000 (collectively, the
"Reimbursement Obligations") which are outstanding pursuant to a Letter of
Credit and Reimbursement Agreement dated as of February 7, 1991, by and between
The Bank of Tokyo-Mitsubishi, Ltd. (f/k/a The Mitsubishi Bank, Limited)
("Mitsubishi") and the Borrower (as heretofore amended and as amended on the
date hereof by the Modification Agreement (as hereinafter defined), the
"Reimbursement Agreement").
B. The Reimbursement Obligations are secured, in part, by
certain Collateral Pledge Agreements more particularly described in the
Reimbursement Agreement (collectively, the "Security Instruments") and by
certain other notes, deeds of mortgage, assignments, guaranties and other
documents and instruments executed in connection with the Reimbursement
Agreement (including the Modification Agreement) or otherwise with respect to
the Reimbursement Obligations (collectively, the "Other Security Documents").
C. At the request of Borrower and pursuant to the terms of
that certain Assignment and Modification Agreement, dated as of even date
herewith, by and among the Lender, the Borrower, Mitsubishi and certain other
parties (the "Modification Agreement"), the terms for payment of the
Reimbursement Obligations is being extended and certain terms and provisions of
the Reimbursement Agreement, the Security Instruments and the Other Security
Documents, among other things, are being amended and modified at the request of
the Borrower (the Reimbursement Agreement, the Security Instruments, the Other
Security Documents and each of the other documents evidencing, securing or
otherwise relating to the Reimbursement Obligations or any of the foregoing
documents are hereinafter sometimes collectively referred to as the "Loan
Documents").
D. Lender requires as a condition to its entering into the
Modification Agreement and modifying the Reimbursement Obligations that Borrower
enter into this Agreement and make certain deposits with Lender as provided in
this Agreement as additional security for all of Borrower's obligations under
the Reimbursement Agreement, the Security Instruments and the other Loan
Documents.
AGREEMENT:
For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Deposits to the Debt Service Reserve.
(a) Concurrently with the execution of this Agreement,
Borrower shall deposit with Lender the sum of $568,664 (the "Initial Deposit";
the Initial Deposit and the Additional Deposit (as hereinafter defined) are
hereinafter sometimes collectively referred to as the "Debt Service Reserve
Fund").
(b) Upon receipt of the Initial Deposit and the Additional
Deposit, Lender shall deposit the same, as received, in an interest-bearing
escrow account (the "Debt Service Reserve"). Borrower hereby acknowledges and
confirms that (i) the Debt Service Reserve Fund shall not constitute a trust
fund and may be commingled with other monies held by Lender; (ii) Lender or its
designee shall have the sole right to make withdrawals from the Debt Service
Reserve; and (iii) Lender shall have no responsibility or liability for the
amount of interest earned on the Debt Service Reserve. All interest earned from
investment of the funds deposited in the Debt Service Reserve shall be credited
to the Debt Service Reserve. Borrower shall include and report such interest in
its income for Federal, state, commonwealth and local income and franchise tax
purposes.
(c) In the event Borrower requests an extension of the term
for payment of the Reimbursement Obligations pursuant to the provisions of the
Reimbursement Agreement, as modified by the Modification Agreement, then on or
prior to the date on which Borrower delivers notice of such extension to Lender,
Borrower shall cause to be deposited with Lender, for further deposit by Lender
into the Debt Service Reserve, an amount to be held in the Debt Service Reserve
pursuant to the terms of this Agreement equal to $568,664 (the "Additional
Deposit").
2. Pledge of Debt Service Reserve.
As additional security for the payment of all sums due under
the Reimbursement Agreement and the other Loan Documents and the performance by
Borrower of its obligations thereunder, Borrower hereby pledges, assigns and
grants to Lender a continuing perfected security interest (to the extent Lender
maintains possession of same) in and to and a first lien upon, the Debt Service
Reserve Fund and the Debt Service Reserve; provided that, Lender shall make
disbursements from the Debt Service Reserve in accordance with the terms of this
Agreement.
3. Disbursements from Debt Service Reserve.
Within ten (10) days prior to each date on which interest is
due and payable to GDB pursuant to the terms of the GDB Loan Agreement, Lender
shall, at Borrower's written request, disburse
sums then present in the Debt Service Reserve to Borrower for the payment of
interest due on the GDB Loan in the amount specified by Borrower in Borrower's
request, provided however that Lender has no obligation to apply, and Borrower
has no right to receive, any amount in excess of the balance of Debt Service
Reserve on the date of such request, and provided further that Borrower may
request the application of funds in the Debt Service Reserve no more than one
(1) time during any calendar month. Notwithstanding the foregoing, in the event
that the funds in the Debt Service Reserve are insufficient to make such
payment, Borrower shall not be relieved of its obligations under the
Reimbursement Agreement to make such payments.
4. Default.
4.1 Default Under this Agreement. Borrower shall be in default
under this Agreement if (i) it fails to make any Additional Deposit or other
payment required hereunder when due or (ii) it fails to comply with any
provision of this Agreement and such failure is not cured within ten (10)
calendar days after notice from Lender. Borrower understands that a default
under this Agreement shall be deemed to be a default under the terms of the
Reimbursement Agreement, the Modification Agreement and the other Loan
Documents, and that in addition to the remedies specified in this Agreement,
Lender shall be able to exercise all of its rights and remedies under the
Reimbursement Agreement, the Modification Agreement, and the other Loan
Documents upon a default. If a default occurs under the Reimbursement Agreement,
the Modification Agreement, or any of the other Loan Documents, such event shall
be deemed a default hereunder and Lender may at its option hold and apply the
funds in the Debt Service Reserve as provided in Section 4.2 of this Agreement.
4.2 Application of Debt Service Reserve Upon Default. The
funds held in the Debt Service Reserve are pledged as additional security for
the Reimbursement Obligations and all other indebtedness and other obligations
of the Borrower under the Reimbursement Agreement and each of the other Loan
Documents (the "Obligations"). If Borrower defaults on any payment due under the
Reimbursement Agreement or any of the other Loan Documents, or if Borrower
defaults under any other provision in the Reimbursement Agreement, the
Modification Agreement or under any provision in the Security Instruments, any
of the other Loan Documents or this Agreement, then, upon any such default,
Borrower shall not be entitled to receive any funds from the Debt Service
Reserve and Lender may, in its sole and absolute discretion, use the Debt
Service Reserve (or any portion thereof) for any purpose permitted under the
Loan Documents, including, but not limited to (i) toward payment of the
Obligations; provided, however, that such application of funds shall not cure or
be deemed to cure any default; (ii) reimbursement of Lender for all losses and
expenses (including, without limitation, reasonable legal fees) suffered or
incurred by Lender as a result of such default; and/or (iii) payment of any
amount expended in exercising all rights and remedies available to Lender at law
or in equity or under this Agreement or under the Reimbursement Agreement, the
Security Instruments or any of the other Loan Documents, all in such order,
proportion and priority as Lender may determine in its sole discretion. Lender's
right to withdraw and apply the Debt Service Reserve Fund shall be in addition
to all other rights and remedies provided to Lender under this Agreement, the
Reimbursement Agreement, the Modification Agreement, the other Loan Documents,
and at law or in equity.
4.3 Borrower's Other Obligations. Nothing contained in this
Agreement shall in any manner whatsoever alter, impair or affect the obligations
of Borrower, or relieve Borrower of any of its obligations to make payments and
perform all of its other obligations required under the Reimbursement Agreement
or any of the other Loan Documents, except to the extent that payments required
under the Reimbursement Agreement or the other Loan Documents are actually made
pursuant to this Agreement.
5. Insufficient Funds in the Debt Service Reserve. The
insufficiency of any balance in the Debt Service Reserve shall not relieve
Borrower from its obligations under the Reimbursement Agreement, the other Loan
Documents and this Agreement.
6. Remedies Cumulative. None of the rights and remedies herein
conferred upon or reserved to Lender under this Agreement is intended to be
exclusive of any other rights or remedies conferred upon or reserved to Lender
under this Agreement or under the Reimbursement Agreement or any of the other
Loan Documents or available to Lender at law or in equity, and each and every
right or remedy shall be cumulative and concurrent, and may be enforced
separately, successively or together, and may be exercised from time to time as
often as may be deemed necessary by Lender.
7. Enforcement of Agreement. This Agreement is executed by
Borrower and Lender for the benefit of Lender and its successors and assigns.
8. Indemnification. Borrower agrees to indemnify Lender and to
hold Lender harmless from and against any and all actions, suits, claims,
demands, liabilities, losses, damages, obligations and costs and expenses
(including litigation costs and reasonable attorneys' fees and expenses) arising
from or in any way connected with the holding, investing or disbursing of the
Debt Service Reserve or the Debt Service Reserve Fund except for actions, suits,
claims, demands, liabilities, losses, damages, obligations and costs and
expenses caused by the gross negligence of Lender.
9. No Third Party Beneficiary. This Agreement is intended
solely for the benefit of Borrower and Lender and their respective successors
and assigns, and no third party shall have any rights or interest in the Debt
Service Reserve, the Debt Service Reserve Fund, this Agreement, the
Reimbursement Agreement or any of the other Loan Documents. Nothing contained in
this Agreement shall be deemed or construed to create an obligation on the part
of Lender to any third party, nor shall any third party have a right to enforce
against Lender any right that Borrower may have under this Agreement.
10. No Agency or Partnership. Nothing contained in this
Agreement shall constitute Lender as a joint venturer, partner or agent of
Borrower, or render Lender liable for any debts, obligations, acts, omissions,
representations, or contracts of Borrower.
11. Waivers.
(a) Borrower hereby waives the right to assert a counterclaim,
other than a mandatory or compulsory counterclaim, in any action or proceeding
brought against it by Lender arising out of or in any way connected with this
Agreement, the Reimbursement Agreement, the Modification Agreement, any of the
other Loan Documents, or the Reimbursement Obligations.
(b) To the extent permitted by applicable law, Borrower shall
not be entitled to any notices of any nature whatsoever from Lender except with
respect to matters for which this Agreement specifically and expressly provides
for the giving of notice by Lender to Borrower and except with respect to
matters for which Lender is required by applicable law to give notice, and
Borrower hereby expressly waives the right to receive any notice from Lender
with respect to any matter for which this Agreement does not specifically and
expressly provide for the giving of notice by Lender to Borrower.
(c) Borrower hereby expressly waives and releases to the
fullest extent permitted by law, the pleading of any statute of limitations as a
defense to any and all of its obligations hereunder.
(d) BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR IN RESPECT OF ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTION OF ANY PARTY OR ARISING OUT OF
ANY EXERCISE BY ANY PARTY OF ITS RESPECTIVE RIGHTS UNDER THE LOAN DOCUMENTS OR
IN ANY WAY RELATING TO THE OBLIGATIONS OR THE HOTEL (INCLUDING, WITHOUT
LIMITATION, WITH RESPECT TO ANY ACTION TO RESCIND OR CANCEL THIS AGREEMENT, AND
WITH RESPECT TO ANY CLAIM OR DEFENSE ASSERTING THAT THIS AGREEMENT WAS
FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE). THIS WAIVER OF JURY
TRIAL IS A MATERIAL INDUCEMENT FOR LENDER TO ACCEPT THIS AGREEMENT.
12. Choice of Law. This Agreement shall be governed,
construed, applied and enforced in accordance with the laws of the Commonwealth
of Puerto Rico and applicable laws of the United States of America, without
regard to the principles of conflicts of laws.
13. Termination of Debt Service Reserve. After payment in full
of the Reimbursement Obligations and release by Lender of the lien of the
Security Instruments, Lender shall disburse to Borrower all amounts remaining in
the Debt Service Reserve.
14. Notices. All notices or other written communications
hereunder shall be given and become effective as provided in the Reimbursement
Agreement.
15. No Oral Change. This Agreement, and any provisions hereof,
may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
16. Liability. If Borrower consists of more than one person,
the obligations and liabilities of each such person hereunder shall be joint and
several. This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns forever.
17. Provisions Subject to Applicable Law. All rights, powers
and remedies provided in this Agreement may be exercised only to the extent that
the exercise thereof does not violate any applicable provisions of law and are
intended to be limited to the extent necessary so that they will not render this
Agreement invalid or enforceable under the provisions of any applicable law.
18. Inapplicable Provisions. If any term, covenant or
condition of this Agreement or any application thereof is held to be invalid,
illegal or unenforceable in any respect, this Agreement shall be construed
without such provision.
19. Headings, etc. The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
20. Duplicate Originals; Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.
21. Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
22. Definitions. The word "Lender" as used herein includes
Lender and any and all of its agents. All capitalized words and phrases not
otherwise defined herein shall have the meanings ascribed to them in the
Reimbursement Agreement, as modified by the Modification Agreement.
23. Sole Discretion of Lender. Wherever pursuant to this
Agreement (a) Lender exercises any right given to it to approve or disapprove,
(b) any arrangement or term is to be satisfactory to Lender, or (c) any other
decision or determination is to be made by Lender, the decision of Lender to
approve or disapprove, all decisions that arrangements or terms are satisfactory
or not satisfactory and
all other decisions and determinations made by Lender, shall be in the sole and
absolute discretion of Lender and shall be final and conclusive, except as may
be otherwise expressly and specifically provided herein.
24. Costs. Wherever pursuant to this Agreement it is provided
that Borrower pay any costs and expenses, such costs and expenses shall include,
but not be limited to, reasonable legal fees and disbursements of Lender,
whether retained firms, the reimbursement for the expenses of in-house staff or
otherwise.
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IN WITNESS WHEREOF the undersigned have executed this
Agreement as of the date and year first written above.
BORROWER:
EL CONQUISTADOR PARTNERSHIP L.P., a Delaware
limited partnership
By: Conquistador Holding, Inc., a Delaware corporation, its
general partner
By: /s/ Larry M. Vitale
----------------------------------
Larry M. Vitale
Vice President
LENDER:
CITICORP REAL ESTATE, INC.,
a Delaware corporation
By: /s/ Michael Chlopak
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Michael Chlopak
Attorney-in-Fact