SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is made as of the 3rd day of
August, 1998, by EL CONQUISTADOR PARTNERSHIP L.P., a Delaware limited
partnership, having its principal place of business and principal offices at
1000 El Conquistador Avenue, Las Croabas, Fajardo, Puerto Rico 00738 ("Debtor")
in favor of CITICORP REAL ESTATE, INC., a Delaware corporation, having an
address at 599 Lexington Avenue, New York, New York 10043 ("Secured Party").
RECITALS:
A. Secured Party 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 Debtor (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 Debtor and pursuant to the terms of that certain
Assignment and Modification Agreement, dated as of even date herewith, by and
among the Secured Party, the Debtor, Mitsubishi and certain other parties (the
"Modification Agreement"), the term 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 Debtor (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. Secured Party requires as a condition to its entering into the
Modification Agreement and modifying the Reimbursement Obligations that Debtor
grant a security interest to the Secured Party of all of its right, title and
interest in and to the Collateral (as hereinafter defined) as additional
security for the Obligations (as hereinafter defined).
NOW, THEREFORE, in consideration of the covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor hereby agrees as follows:
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ARTICLE 1 - GRANTS OF SECURITY
Section 1.1 Collateral. Debtor does hereby irrevocably pledge and assign
to Secured Party, and grant a security interest to Secured Party in, the
following property, rights, interests and estates now owned or leased, or
hereafter acquired by Debtor (collectively, the "Collateral"):
(a) Fixtures and Personal Property. All machinery, equipment, fixtures
(including, without limitation, all of Debtor's right, title and interest
in and to (i) all office equipment, furniture and furnishings, including,
without limitation, all carpeting, movable partitions, desks, chairs,
sofas, filing cabinets and systems, tables, lamps and lighting fixtures,
artwork and objects, computers, printers, typewriters, telexes, facsimile
equipment, two-way radio and paging-music systems, stationery and office
supplies, brochures, business records, (ii) all operating machinery,
fixtures and equipment, including, without limitation, all electrical
vaults, and conduits, heating, ventilating and air conditioning facilities
and equipment (including heat pumps, oil burners, incinerators, furnaces,
water heaters, heating controls, motors, boiler pressure systems and
equipment and other fuel burning devices), air intake and exhaust systems,
electrical generators, lighting, fire protection, security, life safety and
alarm systems, electrical elevators and compressor systems, laundry and
dry-cleaning facilities, all plumbing and sanitary disposal systems
(including septic or leaching systems, if any), swimming pool and spa
supplies, equipment and materials, if any, all water, sewer, refrigeration
fixtures, equipment and systems, and landscaping equipment, all inventories
of replacement and/or spare parts, all cleaning, janitorial and maintenance
equipments, tools and machinery, and all manuals and instructional
materials associated therewith, (iii) all telephone and telecommunication
and wired cable systems and equipment including, without limitation, all
telephones, television and radio receivers, loud speaker and paging
systems, satellite and microwave communication equipment, movie videotape,
film, slide and rear-screen projection equipment, (iv) all case goods for
the rooms, suites, function and common areas of the hotel or lodging
facility, all beds, bedding, tables, chairs, sofas, lamps, lighting
equipment, mirrors, armoires, linens, artwork and objects, blankets,
plants, all other operational and guest supplies and all inventories of
replacement items, (v) all restaurant and kitchen furniture, furnishings
and equipment affixed to or part of the Hotel Improvements (as defined in
the Reimbursement Agreement), including without limitation, all tables,
chairs, banquettes, stools, bars, lighting fixtures, bar equipment, china,
glassware, linens, silverware, artwork and objects, kitchen appliances,
refrigerators, freezers, stoves, grills, microwave ovens, dishwashing
equipment and all kitchen and food preparation equipment and utensils, (vi)
all merchandise located in the Hotel (as defined in the Reimbursement
Agreement), in each case in the ordinary course of business, intended for
resale to the public, including,
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without limitation, merchandise sold through gift shops and any other
retail stores located in the Hotel, and (vii) all inventories and supplies
of food and alcoholic beverages (to the extent same may be encumbered under
applicable law) in opened or unopened cases and bottles and all supplies
and replacement items arising out or in connection with the ordinary course
existence, use, ownership, occupancy, operation and/or maintenance of the
Hotel, including cleaning and maintenance equipment of any kind and
nature), money, room revenues, revenues generated by the renting of hotel
rooms, room rental revenues, accounts, accounts receivable, contract
rights, goodwill, chattel paper, documents, trademarks, trade names,
service marks, logos, designs, brand names, phrases, identifications,
registrations, applications, common law marks, licenses and/or franchise
agreements, including, without limitation, all reservations, deposits,
advance payments, security deposits and prepaid items and other amounts or
credit paid to Debtor, and other property of every kind and nature
whatsoever owned by Debtor (including, without limitation, all such
property which under the laws of the Commonwealth of Puerto Rico may
properly be classified as real or immovable property either by nature or by
destination ("inmuebles por destino"), and that under the laws of the
Commonwealth of Puerto Rico may be classified as fixtures under the Uniform
Commercial Code (as hereinafter defined)), or in which Debtor has or shall
have an interest, now or hereafter located upon the Land (as defined in the
Reimbursement Agreement) or the Hotel Improvements, or appurtenant thereto,
and used in connection with the present or future operation and occupancy
of the Land and the Hotel Improvements and all building equipment,
materials and supplies of any nature whatsoever owned by Debtor, or in
which Debtor has or shall have an interest, now or hereafter located upon
the Land and the Hotel Improvements, or appurtenant thereto, or used in
connection with the present or future operation and occupancy of the Land
and the Hotel Improvements (collectively, the "Personal Property"), and the
right, title and interest of Debtor in and to any of the Personal Property
which may be subject to any security interests, as defined in the Uniform
Commercial Code, as adopted and enacted by the Commonwealth of Puerto Rico
and known as the Commercial Transactions Act of the Commonwealth of Puerto
Rico, as amended (the "Uniform Commercial Code"), superior in lien to the
lien of this Agreement, the Security Instruments, the Mortgage or any of
the Other Security Documents and all proceeds and products of the above;
(b) Leases and Rents. All leases, concession agreements and other
agreements affecting the use, enjoyment or occupancy of all or any part of
the Land or the Hotel Improvements heretofore or hereafter entered into
whether before or after the filing by or against Debtor of any petition for
relief under 11 U.S.C. 'SS' 101 et seq. (the "Bankruptcy Code"), as the
same may be amended from time to time (the "Leases") and all right, title
and interest of Debtor, its successors and assigns therein and thereunder,
including, without limitation, cash or
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securities deposited thereunder to secure the performance by the lessees of
their obligations thereunder and all rents, additional rents, revenues,
issues and profits (including all oil and gas or other mineral royalties
and bonuses), all receivables, rentals, receipts and payments received from
the rental of guest/hotel rooms, suites, meeting rooms, beverage or food
sales and facilities, the provision or sale of other goods and services,
vending machines, telephone and television systems, guest laundry and all
other payments received from guests or visitors of the Mortgaged Property
and other items of revenue, receipts or income as identified in the Uniform
System of Accounts for Hotels 9th Edition, International Association of
Hospitality Accounts (1996)), from the Land and the Hotel Improvements
whether paid or accruing before or after the filing by or against Debtor of
any petition for relief under the Bankruptcy Code (the "Rents") and all
proceeds from the sale or other disposition of the Leases and the right to
receive and apply the Rents to the payment of the Debt;
(c) Condemnation Awards. All awards or payments, including interest
thereon, which may heretofore and hereafter be made with respect to the
Collateral, whether from the exercise of the right of eminent domain
(including, but not limited to, any transfer made in lieu of or in
anticipation of the exercise of the right), or for a change of grade, or
for any other injury to or decrease in the value of the Collateral;
(d) Insurance Proceeds. All proceeds of and any unearned premiums on
any insurance policies covering the Collateral, including, without
limitation, the right to receive and apply the proceeds of any insurance
judgments, or settlements made in lieu thereof, for damage to the
Collateral;
(e) Tax Certiorari. All refunds, rebates or credits in connection with
a reduction in real estate taxes and assessments charged against the
Collateral as a result of tax reduction proceedings or any applications or
proceedings for reduction;
(f) Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation,
proceeds of insurance and condemnation awards, into cash, liquidation or
other claims;
(g) Rights. The right, in the name and on behalf of Debtor, to
commence any action or proceeding to protect the interest of Secured Party
in the Collateral and while an Event of Default (as defined in the
Reimbursement Agreement) remains uncured, to appear in and defend any
action or proceeding brought with respect to the Collateral;
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(h) Agreements. To the extent permitted by law, all agreements,
contracts, certificates, instruments, franchises, permits, licenses, plans,
specifications and other documents, now or hereafter entered into, and all
rights therein and thereto, respecting or pertaining to the use,
occupation, construction, management or operation of the Land and any part
thereof and any Hotel Improvements or respecting any business or activity
conducted on the Land and any part thereof and all right, title and
interest of Debtor therein and thereunder, including, without limitation,
the right to receive and collect any sums payable to Debtor thereunder;
(i) Intangibles. All accounts, trade names, trademarks, servicemarks,
logos, copyrights, goodwill, books and records and all other general
intangibles specific to or used in connection with the operation of any
portion of the Collateral;
(j) Other Rights. Any and all other rights of Debtor in and to the
items set forth in Subsections (a) through (i) above, including, without
limitation, all proceeds and products of any of the items set forth in
Subsections (a) through (i) above.
Section 1.2 Security Agreement. This Agreement constitutes a "security
agreement" within the meaning of the Uniform Commercial Code. The Collateral
includes personal property and all other rights and interests, whether tangible
or intangible in nature, of Debtor in the Collateral. By executing and
delivering this Agreement, Debtor hereby grants to Secured Party, as security
for the Obligations, a security interest in the Collateral to the full extent
that the Collateral may be subject to the Uniform Commercial Code.
Section 1.3 Pledge of Monies Held. Debtor hereby pledges to Secured Party
any and all monies now or hereafter held by Secured Party, including, without
limitation, any sums deposited in escrow with Secured Party and any insurance or
condemnation proceeds, as additional security for the Obligations until expended
or applied as provided in the Reimbursement Agreement.
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Section 1.4 Conditions to Grant. Secured Party shall have the right to have
and to hold the above granted and described Collateral unto and to the use and
benefit of Secured Party, and the successors and assigns of Secured Party,
forever. If Debtor shall well and truly pay to Secured Party the Debt at the
time and in the manner provided in the Reimbursement Agreement, shall well and
truly perform the Other Obligations (as hereinafter defined) as set forth in the
Reimbursement Agreement and shall well and truly abide by and comply with each
and every covenant and condition set forth in the Reimbursement Agreement and
the other L/C Documents (as defined in the Reimbursement Agreement), these
presents and the estate hereby granted shall cease, terminate and be void and
Secured Party shall release or assign the above described security interest in
accordance with local law and practice at the cost of Debtor.
ARTICLE 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 Debt. This Agreement is given to secure the following
(collectively, the "Debt"):
(a) the payment of the Reimbursement Obligations and all other
indebtedness of the Borrower under the Reimbursement Agreement in lawful
money of the United States of America;
(b) the payment of interest, and to the extent applicable, default
interest, late charges and other sums, as provided in the Reimbursement
Agreement and/or the other L/C Documents;
(c) the payment of all other monies agreed or provided to be paid by
Debtor in the Reimbursement Agreement and/or the other L/C Documents;
(d) the payment of all sums advanced pursuant to the Reimbursement
Agreement to protect and preserve the Collateral and the lien and the
security interest created hereby and by the Security Instruments and the
Other Security Documents; and
(e) the payment of all sums advanced and costs and expenses incurred
by Secured Party in connection with the Debt or any part thereof, any
renewal, extension, modification, consolidation, change, substitution,
replacement, restatement or increase of the Debt or any part thereof, or
the acquisition or perfection of the security therefor, whether made or
incurred at the request of Debtor or Secured Party.
Section 2.2 Other Obligations. This Agreement and the grants, assignments
and transfers made in Article 1 and in the Security Instruments and the Other
Security
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Documents are also given for the purpose of causing the Debtor to comply with
and the Debtor hereby agrees to comply with the following (the "Other
Obligations"):
(a) the performance of all other obligations of Debtor under the
Reimbursement Agreement and the other L/C Documents;
(b) the performance of each obligation of Debtor contained in the
Reimbursement Agreement in addition to the payment of the Debt and of
Debtor or of any Guarantor (as defined in the Reimbursement Agreement)
under any of the other L/C Documents; and
(c) the performance of each obligation of Debtor and any Guarantor
contained in any renewal, extension, modification, consolidation, change,
substitution, replacement for, restatement or increase of all or any part
of the Reimbursement Obligations, the Security Instruments, the
Reimbursement Agreement or the Other Security Documents.
Section 2.3 Debt and Other Obligations. Debtor's obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively herein as the "Obligations."
ARTICLE 3 - Debtor REPRESENTATIONS AND WARRANTIES
Debtor represents and warrants to Secured Party that:
Section 3.1 Warranty of Title. Debtor is the absolute owner of the
Collateral and has the right to pledge, sell, assign and transfer the same and
that it owns the Collateral free and clear of all liens, encumbrances, charges
and security interests whatsoever except for the Permitted Encumbrances (as
defined in the Reimbursement Agreement). Debtor shall forever warrant, defend
and preserve the title and the validity and priority of the lien of this
Agreement and shall forever warrant and defend the same to Secured Party against
the claims of all persons whomsoever. Debtor shall keep the Collateral free from
all liens, encumbrances, charges and security interests except for the security
interest hereby created and except for the Permitted Encumbrances.
Section 3.2 Financing Statements. No financing statements covering the
Collateral is or will be on file in any public office, except the financing
statements relating to the security interest created hereby relating to any of
the Permitted Encumbrances.
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Section 3.3 Claims of Debtors on Collateral. All account debtors and other
obligors whose debts or obligations are part of the Collateral have no right to
setoffs, counterclaims or adjustments, and no defenses in connection therewith.
Section 3.4 Power and Authority. Debtor has full power, authority and legal
right to execute this Agreement and to pledge, assign, sell, transfer and
warrant the Collateral pursuant to the terms hereof and to keep and observe all
of the terms hereof and has obtained all consents required to grant to Secured
Party a security interest in the Collateral.
Section 3.5 Valid Obligations. Debtor has duly executed and delivered this
Agreement and this Agreement constitutes a legal, valid and binding obligation
of Debtor, enforceable against it in accordance with the terms of this
Agreement.
Section 3.6 Place of Business. Debtor's place of business is located at
1000 El Conquistador Avenue, Las Croabas, Fajardo, Puerto Rico, 00738.
The representations and warranties set forth in this Article 3 shall survive the
execution, delivery and performance of this Agreement and shall continue until
all of the Obligations have been paid and performed in full.
ARTICLE 4 - Debtor COVENANTS
Debtor COVENANTS AND AGREES THAT:
Section 4.1 Obligations and this Security Agreement. Debtor shall perform
promptly all of its agreements herein and in any other agreements between Debtor
and Secured Party.
Section 4.2 Collection; Secured Party's Costs. Debtor shall pay all costs
necessary to obtain, preserve, perfect, defend and enforce the security
interests hereby granted, collect the Obligations, and preserve, defend, enforce
and collect the Collateral. Whether Collateral is or is not in Secured Party's
possession, and without any obligation to do so and without waiving Debtor's
default for failure to make any such payment, Secured Party at its option may
pay any such costs and expenses and/or discharge encumbrances on Collateral, and
such payment shall be a part of the Obligations. Debtor agrees to reimburse
Secured Party on demand for any costs so incurred.
Section 4.3 Additional Documents. Debtor shall sign any papers furnished by
Secured Party or do and perform such other acts and things which are necessary
in the sole judgment of Secured Party to obtain, maintain and perfect the
security interests created hereby and to enable Secured Party to comply with the
Federal Assignment of
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Claims Act or any other federal, state or commonwealth law necessary to obtain
or perfect Secured Party's interest in Collateral or to obtain proceeds of
Collateral.
Section 4.4 Modification of Collateral. Without the written consent of
Secured Party, Debtor shall not agree to any modification of any of the terms of
any accounts, chattel paper, general intangibles or instruments in Collateral.
Section 4.5 Right of Secured Party to Notify Persons Obligated on
Collateral. Before or after the occurrence of an Event of Default, Secured Party
shall have the right to notify any persons obligated on instruments, accounts or
chattel paper comprising the Collateral to make payments directly to Secured
Party, and Secured Party may take control of all proceeds of any Collateral.
Until Secured Party elects to exercise such rights, Debtor, as agent of Secured
Party, shall collect and enforce all such instruments, accounts or chattel
paper.
Section 4.6 Delivery of Receipts to Secured Party. Upon Secured Party's
demand, Debtor will deposit, upon receipt, all checks, drafts, cash or other
remittances in payment of any instrument comprising the Collateral, or on
account of accounts or contracts received as proceeds of any Collateral in a
special bank account in a bank of Secured Party's choice over which Secured
Party alone shall have power of withdrawal. The funds in said account shall be
held by Secured Party as security for the Obligations. Said proceeds shall be
deposited in the form received, except the endorsement of Debtor where necessary
to permit collection of items, which endorsements Debtor agrees to make, but
which Secured Party is authorized to make on Debtor's behalf. Pending such
deposits, Debtor agrees that it will not mingle any such checks, drafts, cash or
remittances with any of the Debtor's other funds or property, but will hold them
separate and apart therefrom and upon an express trust for Secured Party until
deposit thereof is made in the special account. Secured Party may from time to
time apply the whole or any part of the funds in the special account against the
Obligations. Any portion of said funds on deposit which Secured Party elects not
to apply to the Obligations may be paid by Secured Party to Debtor.
Section 4.7 Records of Collateral. Debtor at all times will maintain
accurate books and records covering the Collateral. Secured Party is hereby
given the right to audit the books and records of Debtor relating to Collateral
at any time and from time to time.
Section 4.8 Notice of Changes. Debtor will notify Secured Party immediately
of any material change in the Collateral, of a change in the location or
principal place of business or of a change in any material fact or circumstance
warranted or represented by Debtor in this Agreement or furnished to Secured
Party, and of any Event of Default.
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Section 4.9 Possession of Collateral. If the Collateral is a partnership
interest, chattel paper, documents, instruments or investment securities or
other instruments, Debtor agrees that Secured Party may deliver a copy of this
Agreement to the partnership, to a broker or seller thereof, or any person in
possession thereof, and that such delivery shall constitute notice to such
person of Secured Party's security interest therein and shall constitute
Debtor's express instruction to such person to deliver to Secured Party
certificates or other evidence of the same within ten (10) days of such request.
Debtor will deliver all investment securities, other instruments, documents and
chattel paper which are part of the Collateral and in Debtor's possession to
Secured Party immediately, or if hereafter acquired, immediately following
acquisition, appropriately endorsed to Secured Party's order, with all
warranties by Debtor, with recourse against Debtor, and with appropriate power.
Regardless of the form of the endorsement on any such Collateral, Debtor waives
presentment, demand, notice of dishonor, protest, and all other notices with
respect thereto.
Section 4.10 Consumer Credit. Whenever any Collateral, or proceeds of any
Collateral, includes obligations of third parties to Debtor such as accounts,
chattel paper or instruments, the transactions giving rise to the Collateral
shall conform in all respects to the applicable requirements of any state,
commonwealth or federal consumer credit law, and Debtor shall hold Secured Party
harmless and indemnify Secured Party against any cost, loss or expense of
Secured Party including attorney's fees, arising from Debtor's breach of this
covenant.
Section 4.11 Waivers by Debtor. Debtor waives notices of the creation,
advance, increase, existence, extension or renewal of, and of any indulgence
with respect to, the Obligations; waives presentment, demand, notice of
dishonor, and protest; waives notice of the amount of the Obligations
outstanding at any time, notice of any change in financial condition of any
person liable for the Obligations or any part thereof, notice of any Event of
Default, and all other notices respecting the Obligations; and agrees that
maturity of the Obligations and any part thereof may be accelerated, extended or
renewed one or more times by Secured Party in its discretion, without notice to
Debtor.
Section 4.12 Other Parties and Other Collateral. No renewal or extension of
or any other indulgence with respect to the Obligations or any part thereof, no
release of any security, no release of any person (including any maker,
endorser, guarantor or surety) liable on the Obligations, no delay in
enforcement of payment, and no delay or omission or lack of diligence or care in
exercising any right or power with respect to the Obligations or any security
therefor or guaranty thereof or under this Agreement shall in any manner impair
of affect the rights of Secured Party under the law, hereunder, or under any
other agreement pertaining to the Collateral. Secured Party need not file suit
or assert a claim for personal judgment against any person for any part of the
Obligations or seek to realize upon any other security for the Obligations,
before foreclosing upon the Collateral for the purpose of paying the
Obligations. Debtor waives any right to the
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benefit of or to require or control applicable of any other security or proceeds
thereof, and agrees that Secured Party shall have no duty or obligation to
Debtor to apply to the Obligations any such other security or proceeds thereof.
Section 4.13 Performance of Other Agreements. Debtor shall observe and
perform each and every term to be observed or performed by Debtor pursuant to
the terms of this Agreement, the Reimbursement Agreement or any of the other L/C
Documents or any other material agreement or recorded instrument affecting or
pertaining to the Collateral.
Section 4.14 Change of Name, Identity or Structure. Debtor will not change
Debtor's name without first obtaining the prior written consent of the Secured
Party.
Section 4.15 Existence. Debtor will continuously maintain (a) its existence
and shall not dissolve or permit its dissolution, (b) its rights to do business
in the Commonwealth of Puerto Rico and (c) its franchises and trade names.
ARTICLE 5 - DEBTOR/CREDITOR RELATIONSHIP
Section 5.1 Relationship of Debtor and Secured Party. The relationship
between Debtor and Secured Party is solely that of debtor and creditor, and
Secured Party has no fiduciary or other special relationship with Debtor, and no
term or condition of the Reimbursement Agreement, this Agreement and the other
L/C Documents shall be construed so as to deem the relationship between Debtor
and Secured Party to be other than that of debtor and creditor.
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ARTICLE 6 - FURTHER ASSURANCES
Section 6.1 Recording of Security Instrument, Etc. Debtor forthwith upon
the execution and delivery of this Agreement and thereafter, from time to time,
will cause this Agreement and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Secured
Party in, the Collateral. Debtor will pay all taxes, filing, registration or
recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Reimbursement Agreement and the other L/C
Documents and any note or mortgage supplemental hereto, any security instrument
with respect to the Collateral and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
commonwealth, county and municipal taxes, duties, imposts, assessments and
charges arising out of or in connection with the execution and delivery of this
Agreement, the Reimbursement Agreement or any of the other L/C Documents, any
mortgage supplemental thereto, any security instrument with respect to the
Collateral or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
Section 6.2 Further Acts, Etc. Debtor will, at the cost of Debtor, and
without expense to Secured Party, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Secured Party shall, from time to time,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Secured Party the property and rights hereby granted,
confirmed, pledged, assigned, and warranted or intended now or hereafter so to
be, or which Debtor may be or may hereafter become bound to convey or assign to
Secured Party, or for carrying out the intention or facilitating the performance
of the terms of the Agreement or for complying with all applicable laws. Debtor,
on demand, will execute and deliver and hereby authorizes Secured Party to
execute in the name of Debtor or without the signature of Debtor to the extent
Secured Party may lawfully do so, one or more financing statements, chattel
mortgages or other instruments, to evidence or perfect more effectively the
security interest of Secured Party in the Collateral. Debtor grants to Secured
Party an irrevocable power of attorney coupled with an interest for the purpose
of exercising and perfecting any and all rights and remedies available to
Secured Party hereunder.
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Section 6.3 Amended Financing Statements. Debtor will execute and deliver
to the Secured Party, prior to or contemporaneously with the effective date of
any such change, any financing statement or change thereof required by the
Secured Party to establish or maintain the validity, perfection and priority of
the security interest granted herein. At the request of the Secured Party,
Debtor shall execute a certificate in form satisfactory to the Secured Party
listing the trade names under which Debtor intends to operate the Collateral,
and representing and warranting that Debtor does business under no other trade
name with respect to the Collateral.
ARTICLE 7 - DEFAULT
Section 7.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an event of default hereunder ("Event of
Default"):
(a) an Event of Default (as defined in the Reimbursement Agreement), under
the Reimbursement Agreement or any of the other L/C Documents;
(b) a default in the timely performance or observance of any covenant,
obligation or liability contained herein and the continuance of such default
beyond any applicable grace period;
(c) any warranty, representation or statement made or furnished to Secured
Party by or on behalf of Debtor, proves to have been false in any material
respect when made or furnished;
(d) sale, transfer, other disposition, pledge, hypothecation or encumbrance
by Debtor of all or any portion of the Collateral in violation hereof or in
violation of the terms of the Reimbursement Agreement, the Security Instruments,
the Mortgage or any of the other L/C Documents; and
(e) filing of any financing statement with regard to the Collateral, other
than in favor of the Secured Party or in respect of Permitted Encumbrances; or
attachment of any lien or security interest, except the security interest
created hereby or in respect of Permitted Encumbrances, to any portion of the
Collateral.
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ARTICLE 8 - RIGHTS AND REMEDIES
Section 8.1 Remedies. (a) Upon the occurrence of any Event of Default and
at any time thereafter, Debtor agrees that Secured Party may declare the
Obligations in whole or in part immediately due and payable and may enforce
payment of the same and take such action, without notice or demand, as it deems
advisable to protect and enforce its rights against Debtor and in and to the
Collateral, including, but not limited to the following, each of which may be
pursued concurrently or otherwise, at such time and in such order as Secured
Party may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Secured Party:
(i) exercise any and all rights and remedies granted to a secured
party upon default under the Uniform Commercial Code, as amended from time to
time, or any other applicable uniform commercial code, or any other statute or
rule of law or equity or under the provisions of any third party agreement in
favor of the Secured Party, all of which may be exercised successively or
concurrently, including, without limiting the generality of the foregoing: (i)
the right to take possession of the Collateral or any part thereof, and to take
such other measures as Secured Party may deem necessary for the care, protection
and preservation of the Collateral, and (ii) request Borrower at its expense to
assemble the Collateral and make it available to Secured Party at a convenient
place in San Juan (and which may be at the Hotel) acceptable to Secured Party;
further, Secured Party may sell, assign, give option or options to purchase,
contract to sell or otherwise dispose of and deliver the Collateral, or any part
thereof, in one or more lots at public or private sale or sales, at any
exchange, broker's board or at any of the Secured Party's offices or elsewhere
upon such terms and conditions as it may deem advisable and at such prices as it
may deem best, for cash or on credit or for future delivery without assumption
of any credit risk, with the right to the Secured Party upon any such sale or
sales, public or private, to purchase the whole or any part of said Collateral
so sold, free of any right or equity of redemption in the Debtor, which right or
equity is, to the extent permitted by law, hereby expressly waived or released.
Any notice of sale, disposition or other intended action by Secured Party with
respect to the Collateral sent to Borrower in accordance with the provisions
hereof at least five (5) days prior to such action, shall constitute
commercially reasonable notice to Borrower; and
(ii) exercise all other rights and remedies of Secured Party under
this Agreement and all other rights and remedies available to the Secured Party
under applicable law.
(b) Secured Party will give Debtor reasonable notice of the time and place
of any public sale of the Collateral or of the time after which any private sale
or other
15
intended disposition thereof is to be made. Expenses of retaking, holding,
preparing for sale, selling, leasing or the like shall include Secured Party's
reasonable attorney's fees and legal expenses. Secured Party shall be entitled
to immediate possession of all books and records pertaining to any accounts or
chattel paper covered by this Agreement and shall have the authority to enter
upon any premises upon which any of the same may be situated and remove the same
therefrom without liability. If, in the opinion of Secured Party, there is any
question that a public sale or distribution of any Collateral will violate any
state, commonwealth or federal securities law, Secured Party in its discretion
(i) may offer and sell securities privately to purchasers who will agree to take
them for investment purposes and not with a view to distribution and who will
agree to the imposition of restrictive legends on the certificates representing
the security, or (b) may sell such securities in an intrusted offering under
Section 3(a)(11) of the Securities Act of 1933, and no sale so made in good
faith by Secured Party shall be deemed to be not "commercially reasonable"
because so made. The Debtor acknowledges and agrees that any private sale of the
Collateral may result in prices and other terms less favorable than if such sale
were a public sale and, notwithstanding such circumstances, agrees, to the
extent permitted by applicable law, that any such private sale shall be deemed
to have been made in a commercially reasonable manner. To the extent permitted
by the laws of the Commonwealth of Puerto Rico, in the event of a sale, by
foreclosure, power of sale, or otherwise, of less than all of the Collateral,
this Agreement shall continue as a lien and security interest on the remaining
portion of the Collateral unimpaired and without loss of priority.
Section 8.2 Application of Proceeds. After deducting all reasonable costs
and expenses of every kind incurred by Secured Party or incidental to the care,
safekeeping or otherwise of any and all of the Collateral, the purchase money,
proceeds and avails of any disposition of the Collateral, or any part thereof,
or any other sums collected by Secured Party pursuant to this Agreement or the
Security Instruments, may be applied by Secured Party to the payment of the Debt
in such priority and proportions as Secured Party in its discretion shall deem
proper. Only after credit against the Obligations and after the payment by the
Secured Party of any other amount required by any provision of law, including,
without limitation, the Uniform Commercial Code, need the Secured Party account
for the surplus, if any, to the Debtor.
Section 8.3 Waiver of Rights Under Uniform Commercial Code; Deficiency. The
Debtor hereby waives and agrees not to assert any rights or privileges that it
may acquire under the Uniform Commercial Code, and the Debtor shall be liable
for the deficiency if the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all amounts to which the Secured Party is
entitled and the reasonable costs, fees and expenses of any attorney employed by
the Secured Party to collect such deficiency.
Section 8.4 Actions and Proceedings. After the occurrence and during the
continuance of an Event of Default, Secured Party has the right to appear in and
defend
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any action or proceeding brought with respect to the Collateral and to bring any
action or proceeding, in the name and on behalf of Debtor, which Secured Party,
in its discretion, decides should be brought to protect its interest in the
Collateral.
Section 8.5 Other Rights, Etc. (a) No delay or failure of the Secured Party
in the exercise of any right or remedy hereunder shall operate as a waiver
thereof, and no single or partial exercise of any right or remedy hereunder
shall preclude other or further exercise thereof or the exercise of any other
right or remedy. No action or forbearance by the Pledgee contrary to the
provisions of this Agreement shall be construed to constitute a waiver of any of
the express provisions hereof. The Secured Party may specifically waive any of
the Secured Party's rights under this Agreement without invalidating the entire
Agreement. Nothing herein contained, nor anything done or omitted to be done by
the Secured Party pursuant hereto, shall be deemed a waiver by the Secured Party
of any of its rights or remedies hereunder or under the Reimbursement Agreement
or any of the other L/C Documents or under applicable law.
(b) The rights of Secured Party under this Agreement shall be separate,
distinct and cumulative and none shall be given effect to the exclusion of the
others. No act of Secured Party shall be construed as an election to proceed
under any one provision herein to the exclusion of any other provision. Secured
Party shall not be limited exclusively to the rights and remedies herein stated
but shall be entitled to every right and remedy now or hereafter afforded at law
or in equity.
Section 8.6 Right to Release any Portion of the Collateral. Secured Party
may release any portion of the Collateral for such consideration as Secured
Party may require without, as to the remainder of the Collateral, in any way
impairing or affecting the lien or priority of this Agreement, the Security
Instruments, the Mortgage or any of the Other Security Documents, or improving
the position of any subordinate lienholder with respect thereto, except to the
extent that the obligations hereunder shall have been reduced by the actual
monetary consideration, if any, received by Secured Party for such release, and
may accept by assignment, pledge or otherwise any other property in place
thereof as Secured Party may require without being accountable for so doing to
any other lienholder. This Agreement shall continue as a lien and security
interest in the remaining portion of the Collateral.
Section 8.7 Violation of Laws. If the Collateral is not in compliance with
applicable laws, Secured Party may impose additional reasonable requirements
upon Debtor in connection herewith including, without limitation, monetary
reserves or financial equivalents.
Section 8.8 Right of Entry. Secured Party and its agents shall have the
right upon prior written notice to enter and inspect the Collateral at all
reasonable times upon notice to Debtor.
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ARTICLE 9 - WAIVERS
Section 9.1 Waiver of Counterclaim. Debtor hereby waives the right to
assert a counterclaim, other than a mandatory or compulsory counterclaim, in any
action or proceeding brought against it by Secured Party arising out of or in
any way connected with this Agreement.
Section 9.2 Marshalling and Other Matters. Debtor hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Collateral or
any part thereof or any interest therein. Further, Debtor hereby expressly
waives any and all rights of redemption from sale under any order or decree of
foreclosure of this Agreement on behalf of Debtor, and on behalf of each and
every person acquiring any interest in or title to the Collateral subsequent to
the date of this Agreement and on behalf of all persons to the extent permitted
by applicable law.
Section 9.3 Waiver of Notice. To the extent permitted by applicable law,
Debtor shall not be entitled to any notices of any nature whatsoever from
Secured Party except with respect to matters for which this Agreement
specifically and expressly provides for the giving of notice by Secured Party to
Debtor and except with respect to matters for which Secured Party is required by
applicable law to give notice, and Debtor hereby expressly waives the right to
receive any notice from Secured Party with respect to any matter for which this
Agreement does not specifically and expressly provide for the giving of notice
by Secured Party to Debtor.
Section 9.4 Sole Discretion of Secured Party; Wherever pursuant to this
Agreement (a) Secured Party exercises any right given to it to approve or
disapprove, (b) any arrangement or term is to be satisfactory to Secured Party,
or (c) any other decision or determination is to be made by Secured Party, the
decision of Secured Party to approve or disapprove all decisions that
arrangements or terms are satisfactory or not satisfactory, and all other
decisions and determinations made by Secured Party, shall be in the sole and
absolute discretion of Secured Party and shall be final and conclusive, except
as may be otherwise expressly and specifically provided herein.
Section 9.5 Waiver of Trial By Jury. DEBTOR AND SECURED PARTY HEREBY
KNOWINGLY, VOLUNTARILY, UNCONDITIONALLY, IRREVOCABLY AND INTENTIONALLY WAIVE ANY
RESPECTIVE RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH, THIS AGREEMENT AND
ANY OF THE L/C DOCUMENTS, OR ANY
18
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PERSON OR ANY EXERCISE BY ANY PARTY OF THEIR RESPECTIVE RIGHTS
HEREUNDER OR UNDER THE L/C DOCUMENTS OR IN ANY WAY RELATING TO THE TRANSACTIONS
CONTEMPLATED THEREBY (INCLUDING, WITHOUT LIMITATION, ANY ACTION TO RESCIND OR
CANCEL THIS AGREEMENT, AND ANY CLAIMS AND DEFENSES ASSERTING THAT THIS AGREEMENT
WAS FRAUDULENTLY INDUCED OR IS OTHERWISE VOID OR VOIDABLE); THIS WAIVER BEING A
MATERIAL INDUCEMENT FOR THE SECURED PARTY TO ACCEPT THIS AGREEMENT AND TO ENTER
INTO THE TRANSACTIONS CONTEMPLATED BY THE MODIFICATION AGREEMENT.
ARTICLE 10 - NOTICES
Section 10.1 Notices. All notices or other written communications hereunder
shall be deemed to have been properly given (a) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged by the recipient
thereof, (b) one (1) Business Day (defined below) after having been deposited
for overnight delivery with any reputable overnight courier service, or (c)
three (3) Business Days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Secured Party: Citicorp Real Estate, Inc.
399 Park Avenue
New York, New York 10043
Attention: Jeffrey A. Warner
Re: El Conquistador, Puerto Rico
Facsimile No. (212) 793-6314
With a copy to: Citicorp/Citibank REILD
599 Lexington Avenue
20th Floor/Zone 1
New York, NY 10043
Attention: General Counsel
Re: El Conquistador, Puerto Rico
Facsimile No. (212) 793-6766
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and with a copy to: Weil, Gotshal & Manges LLP
701 Brickell Avenue
Suite 2100
Miami, Florida 33131
Re: El Conquistador, Puerto Rico
Attention: Richard Morrison, Esq.
Facsimile No. (305) 374-7159
If to Debtor: El Conquistador Partnership L.P.
c/o Patriot American Hospitality, Inc.
590 Madison Avenue
New York, NY 10022
Attention: William W. Evans, III
Facsimile No. (212) 521-1482
With a copy to: Shack & Siegel, P.C.
530 Fifth Avenue
New York, NY 10036
Attention: Pamela E. Flaherty, Esq.
Facsimile No. (212) 730-1964
and with a copy to: El Conquistador Partnership L.P.
1000 El Conquistador Avenue
Las Croabas, Fajardo, Puerto Rico 00738
Attention: General Manager
Facsimile No. (787) 860-3200
or addressed as such party may from time to time designate by written notice to
the other parties.
Any party by notice to the other parties may designate additional or
different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on which
commercial banks are not authorized or required by law to close in the
Commonwealth of Puerto Rico.
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ARTICLE 11 - MISCELLANEOUS PROVISIONS
Section 11.1 Choice of Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED,
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PUERTO
RICO AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICTS OF LAWS.
Section 11.2 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, unenforceable or not entitled to be recorded, registered or
filed under the provisions of any applicable law.
Section 11.3 Inapplicable Provision. If any term of this Agreement or any
application thereof shall be invalid or unenforceable, the remainder of this
Agreement and any other application of the term shall not be affected thereby.
Section 11.4 Attorney's Fees for Enforcement. Debtor shall pay, on demand,
any and all expenses, including legal expenses and reasonable attorneys' fees,
incurred or paid by Secured Party in protecting its interest in the Collateral
or in collecting any amount payable hereunder or in enforcing its rights
hereunder with respect to the Collateral, whether or not any legal proceeding is
commenced hereunder or thereunder and whether or not any default or Event of
Default shall have occurred and is continuing, together with interest thereon at
the Default Rate from the date paid or incurred by Secured Party until such
expenses are paid by Debtor.
Section 11.5 General Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Agreement may be used interchangeably in singular or plural form and the
word "Debtor" shall mean "each Debtor and any subsequent owner or owners of the
Collateral or any part thereof or any interest therein," the word "Secured
Party" shall mean "Secured Party and any subsequent holder of the Obligations,"
the word "person" shall include an individual, corporation, limited liability
company, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, the word "Collateral" shall
include any portion of the Collateral and any interest therein, and the phrases
"attorneys' fees" and "counsel fees" shall include any and all reasonable
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Secured Party in protecting its interest in the Collateral
and enforcing its rights under the this Agreement and the Other Security
Documents.
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Section 11.6 Headings, Etc. The headings and captions of various Sections
of this Agreement are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
Section 11.7 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 Debtor or Secured Party,
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.
Section 11.8 Liability. If Debtor 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 the Debtor and its successors and
assigns and shall inure to the benefit of the Secured Party and its successors
and assigns.
Section 11.9 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.
Section 11.10 Preference. To the extent that Secured Party receives any
payment or proceeds of the Collateral for the Obligations, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds
received, the Obligations or part thereof intended to be satisfied shall be
revived and continue in full force and effect, as if such payment or proceeds
had not been received by the Secured Party.
Section 11.11 Cumulative Remedies. The rights and remedies herein provided
are cumulative and may be exercised singly or concurrently and are not exclusive
of any right or remedy provided by law.
Section 11.12 No Partial Release. The satisfaction or discharge of any part
of the Obligations hereby secured shall not in any way satisfy or discharge this
Agreement, but this Agreement shall remain in full force and effect so long as
any of the Obligations remain outstanding.
Section 11.13 Limitation of Liability. Neither Secured Party nor any of its
officers, directors, employees, agents or counsel shall be liable for any action
lawfully taken or omitted to be taken by it or them hereunder or in connection
herewith, except for its or their gross negligence or willful misconduct.
22
Section 11.14 Indemnity. Debtor does hereby agree to indemnify Secured
Party and to hold Secured Party harmless against and with respect to any and all
liability, deficiency, damage, cost or expense resulting from any
misrepresentation, material omission, breach of warranty or representation or
non-fulfillment of any covenant or agreement on the part of Debtor under this
Agreement, and any and all actions, suits, proceedings, demands, assessments,
judgments, costs, legal and accounting fees and other reasonable expenses
incidental to the foregoing indemnification.
Section 11.15 Taxes. Should any documentary stamp or other tax now or
hereafter become payable with respect to this Agreement or its execution or
delivery, Debtor will promptly, following demand therefor, pay the same and hold
Secured Party harmless from the cost of same.
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IN WITNESS WHEREOF, this Agreement has been executed by Debtor as of the
day and year first above written.
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
24