COLLATERAL PLEDGE AGREEMENT
This COLLATERAL PLEDGE AGREEMENT ("this Agreement") dated as of February
7, 1991, by and among EL CONQUISTADOR PARTNERSHIP L.P., a Delaware limited
partnership (the "Borrower"), PUERTO RICO INDUSTRIAL, MEDICAL, EDUCATIONAL AND
ENVIRONMENTAL POLLUTION CONTROL FACILITIES FINANCING AUTHORITY, a public
corporation and governmental instrumentality of the Commonwealth of Puerto Rico
(hereinafter referred to as the "Authority"), and THE MITSUBISHI BANK, LIMITED,
a Japanese banking corporation, acting through its New York Branch (hereinafter
referred to as the "Bank") hereby agree as follows:
WHEREAS, pursuant to the Loan Agreement (such term and all other
capitalized terms used herein have the respective meanings set forth or referred
to in Section 1 hereof unless otherwise stated), the Authority has undertaken,
on behalf of the Borrower, to issue the Bonds, the proceeds of which will be
loaned to the Borrower to finance the cost of the Project and to pay expenses
incurred in connection with the issuance of the Bonds;
WHEREAS, the Bonds are secured by, among other things, the obligations of
the Borrower under the Loan Agreement and by the Trust Agreement;
WHEREAS, the Borrower, in order to support its obligations under the Loan
Agreement and to provide for the payment of the principal of and interest
accrued on the Bonds in accordance with their terms, has requested the Bank to
issue the Letter of Credit in favor of the Trustee pursuant to the Reimbursement
Agreement;
WHEREAS, under the terms of the Reimbursement Agreement the Borrower has
agreed to reimburse the Bank for any payments made by the Bank under the Letter
of Credit, with interest thereon from the
-2-
date of payment as provided therein, as well as to pay certain other fees and
amounts in connection therewith; and
WHEREAS, the Borrower has agreed to grant the Authority and the Bank a
pledge of the Mortgage Notes, and to grant the Bank a pledge of the Termination
Payments Note on a pari-passu basis with the pledge of the Mortgage Notes, and
to establish certain other Collateral Security, in order to secure the
obligations of the Borrower under the Loan Agreement and the Reimbursement
Agreement;
NOW THEREFORE, in consideration of the premises and in order to induce the
Authority to issue the Bonds and the Bank to issue the letter of Credit and to
enter into the Bond Swap Agreement, the parties hereto agree as follows:
SECTION 1. Defined Terms. The following terms shall have the meanings
specified below for all purposes of this Agreement:
Affiliated Person means any Person controlling, controlled by or under
common control with the Borrower.
Architect shall mean Ray, Melendez & Associates or any successors engaged
by the Borrower with the prior written consent of the Bank.
Bank means THE MITSUBISHI BANK, LIMITED, a Japanese banking corporation,
acting through its New York Branch, and its successors and assigns, or any bank
issuing a Successor Letter of Credit.
Bank's Consultant shall mean Merritt & Harris, Inc. or such other person
or architectural or engineering consultant as may be designated and engaged by
the Bank, at the Borrower's expense, to examine the Budget (as defined in the
Reimbursement Agreement) and
-3-
the Plans, any changes thereto, and cost breakdowns and estimates with respect
to the project (including, without limitation, all cost breakdowns and estimates
set forth in any Request for Disbursement, as such term is defined in the
Reimbursement Agreement, and all accompanying certifications), to make periodic
inspections of the progress of the Construction of the Improvements on behalf of
the Bank, to advise and render reports to the Bank concerning the foregoing and
to otherwise consult with the Bank with respect to the Project.
Bond Fixed Rate means __% per annum.
Bonds means (a) the Industrial Revenue bonds, 1991 Series A (El
Conquistador Resort Project) and (b) the convertible Industrial Revenue bonds,
1991 Series B (El Conquistador Resort Project), as the same may hereafter be
converted to Industrial Revenue Bonds, 1991 Series C (El Conquistador Resort
Project), of the Authority in the initial aggregate principal amount of
$120,000,000, issued under the Trust Agreement.
Bond Swap Agreement means an Interest Rate and Currency Exchange Agreement
entered into by the Borrower and the Bank in accordance with Section 4(w) of the
Reimbursement Agreement and pursuant to which the Borrower and the Bank enter
into an interest rate swap under which the borrower agrees to pay to the Bank
amounts calculated on a notional amount of $120,000,000 at the Bond Fixed Rate
in exchange for the Bank's obligation to pay to the Borrower amounts calculated
on a notional amount of $120,000,000 at rates equal to 88% of the Applicable
LIBID Rate.
Casualty means any damage to or destruction of the Mortgaged Property, or
any portion thereof.
-4-
Company Partnership Agreement shall mean that certain Venture Agreement
dated January 12, 1990 between Kumagai Caribbean, Inc. and WKA El Con
Associates.
Construction or Construct, when used with reference to the Project, shall
mean construction, installation, renovation or development of the Improvements
or any portion thereof.
Default means any event which, with the giving of notice or lapse of time
or both, would constitute an Event of Default or a Termination Payments Event of
Default.
Design Architects shall mean Edward D. Stone, Jr. and Associates, Inc.,
Jorge Rossello Associates, Edward Durrell Stone Associates, P.C., Cosentini
Associates, Arthur Hill and Associates, and Peter George Associates, Inc., or
any successors engaged by the Borrower with the prior written consent of the
Bank.
Disbursement shall mean each disbursement of all or any of the proceeds of
the Loan.
Emergency means a condition presenting, in the judgment of the Bank or the
Authority, imminent danger to the health or safety of persons or imminent danger
to property.
Event of Default shall mean and include any of the following:
(a) Any one or more of the Events of Default specified in the
Reimbursement Agreement, or
(b) Any one or more of the Events of Default specified in the Loan
Agreement, either of the Mortgages, or the Trust Agreement, or
-5-
(c) Failure by the Mortgagor to perform or comply with any covenant,
agreement or term binding upon it contained in this Agreement (except as
elsewhere specifically set forth in this definition of Event of Default), which
failure shall continue for a period of ninety (90) days after notice is given to
the Mortgagor by the Bank or the Authority, unless the bank or the Authority
shall agree to an extension of such time prior to its expiration; provided,
however that if such failure cannot be corrected within such ninety (90) day
period, it shall not constitute an Event of Default if corrective action is
instituted by the Mortgagor within such period and diligently pursued until such
failure is corrected; or
(d) Any representation or warranty made by the Mortgagor in this
Agreement or any certificate furnished in connection therewith shall prove to
have been incorrect or misleading in any material respect as of the date made.
To the extent that any circumstance constitutes an Event of Default
under the Reimbursement Agreement but would not otherwise constitute an Event of
Default hereunder or under the Loan Agreement, the Mortgages or the Trust
Agreement (for example, if the grace period for curing a particular default
under the Reimbursement Agreement is shorter than the grace period for the same
default under the Loan Agreement), then, notwithstanding the foregoing, such
circumstance shall constitute an Event of Default hereunder.
Fajardo Property shall mean approximately 220 acres of land located in
Fajardo, Puerto Rico, as more particularly described in the Fee Mortgage.
-6-
Fee Mortgage shall mean the Mortgage of the Borrower constituted on the
date of this Agreement by Deed Number One before Notary Public Leonor M.
Aguilar-Guerrero, as said document may be amended, modified or supplemented from
time to time.
GDB shall mean the Government Development Bank for Puerto Rico.
GDB Loan shall mean a loan by GDB to the Borrower in the amount of up to
$25,000,000 to be used to finance a portion of the Total Project Costs (as
defined in the Reimbursement Agreement), substantially on the terms and
conditions set forth in the GDB Loan Agreement (as defined in the Reimbursement
Agreement).
GDB Mortgage shall mean those certain mortgages, dated as of the date
hereof, made by the Borrower in favor of GDB and securing the GDB Loan, which
mortgages were constituted on the date of this Agreement (i) by Deed Number Two
before Notary Public Ramon Moran Loubriel, and (ii) by Deed Number Three before
Notary Public Ramon Moran Loubriel, respectively.
Improvements shall mean the improvements to be renovated or constructed on
the Premises pursuant to the Plans, consisting of approximately 750 guest rooms,
approximately 50,000 square feet of meeting space (including prefunctionary
space), six restaurants, approximately 13,000 square feet of retail space, an
approximately 10,000 square foot casino, a marina, approximately 100,000 square
feet of swimming pools and water features, an 18-hole golf course, an
approximately 40,000 square foot clubhouse and spa facility, eight tennis
courts, water sports facilities on the Palominos Island Property and related
amenities and facilities.
-7-
Insurance Policies means the policies of insurance required to be
maintained pursuant to Section 16 hereof and pursuant to the Reimbursement
Agreement.
Insurance Requirements means and includes all provisions of any Insurance
Policy, all requirements of the issuer of any such Insurance Policy, and all
orders, rules, regulations and other requirements of the Puerto Rico Fire
Department, Factory Mutual System or Commercial Risk Insurors (or any other body
exercising similar functions) applicable to or affecting the Project, or any
part thereof or any use or condition of the Project, or any part thereof.
KGC Mortgage shall mean a third priority mortgage on the Premises in favor
of Kumagai Caribbean, Inc., as provided in Section 6.03 of the Company
Partnership Agreement, subject to the terms set forth in Section 7(e) of the
Reimbursement Agreement.
Leasehold Mortgage shall mean the Leasehold Mortgage of the Borrower
constituted on the date of this Agreement by Deed Number Two before Notary
Public Leonor M. Auilar-Guerrero, as said document may be amended, modified or
supplemented from time to time.
Legal Requirements shall have the meaning ascribed to such term in the
Mortgages.
Letter of Credit means the irrevocable letter of credit issued by the Bank
to the Trustee pursuant to the Reimbursement Agreement.
Lien shall mean any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind, including, without
-8-
limitation, any conditional sale or other title retention agreement, any lease
in the nature thereof, or the filing of, or any agreement to give, any financing
statement under the Uniform Commercial Code of any jurisdiction (other than
informational filings in respect of equipment leased under any lease not
intended as security, within the meaning of the Uniform Commercial Code) and any
comparable financing statement under the laws of the Commonwealth of Puerto
Rico.
Loan shall mean the loan made by the Authority to the Borrower pursuant to
the Loan Agreement.
Loan Agreement means the Loan Agreement, of even date herewith, between
the Authority and the Borrower.
Loan Agreement Obligations means the obligations of the Borrower to make
payments under the Loan Agreement, including, without limitation, interest
accrued on such obligations.
Major Casualty means a Casualty, the Restoration of which is reasonably
estimated to cost more than $1,000,000.
Mortgages shall mean, collectively, the Fee Mortgage and the Leasehold
Mortgage.
Mortgage Notes shall mean collectively (each individually, being a
"Mortgage Note"), (a) the demand promissory note of the Borrower in the
principal amount of $120,000,000, payable to the order of the Authority, dated
February 7, 1991, under affidavit No. 98 before Notary Public Leonor M.
Aguilar-Guerrero, ("Mortgage Note A"), (b) the demand promissory note of the
Borrower in the principal amount of $6,612,000, payable to the order of the
Authority, dated February 7, 1991 under Affidavit No. 99 before
-9-
Notary Public Leonor M. Aguilar-Guerrero ("Mortgage Note B") and (c) the demand
promissory note of the Borrower in the principal amount of $2,000,000, payable
to the order of the Authority, dated February 7, 1991, under affidavit No. 101
before Notary Public Leonor M. Aguilar-Guerrero ("Leasehold Note").
Mortgage Obligations means any and all obligations of the Borrower which
may arise or accrue under and pursuant to this Agreement or the Mortgages,
including, without limitation, interest accrued on such obligations.
Mortgaged Property shall mean, collectively, the "Mortgaged Property," as
defined in the Fee Mortgage and the "Mortgaged Property," as defined in the
Leasehold Mortgage.
Mortgagee shall have the meaning ascribed to such term in the Mortgages.
Mortgagor means the Borrower.
Net Proceeds means the amount of all insurance proceeds paid pursuant to
any Insurance policy as the result of a Casualty, after deduction of the
Mortgagee's and the bank's costs and expenses (including, without limitation,
attorneys' fees and expenses), if any, in collecting the same.
Net Restoration Award means the amount of all awards and payments received
from the condemnor on account of a Taking, after deduction of the Mortgagee's
and the Bank's costs and expenses (including, without limitation, attorneys'
fees and expenses), if any, in collecting the same.
-10-
Notes means, collectively, the Mortgage Notes and the Termination Payments
Note.
Palominos Island Property shall mean approximately 90 acres of land
located on an island approximately three miles to the east of the Fajardo
Property, as more particularly described in the Leasehold Mortgage.
Permitted Encumbrances shall mean, collectively, the Mortgages, the GDB
Mortgage, the KGC Mortgage, if any (subject to the conditions set forth in
Section 7(e) of the Reimbursement Agreement), real estate taxes not yet due and
payable, those items listed as exceptions to title on the Title Policy issued on
the date hereof, any other liens consented to in writing by the Bank, and any
other liens defined as "Permitted Encumbrances" in the Mortgages.
Person means an individual, corporation, partnership, joint venture,
trust, association, or any other entity or organization, including a government
or political subdivision, agency or instrumentality thereof.
Plans shall mean the plans, drawings and specifications for the
Construction of the Improvements, including, without limitation, the
architectural, structural, mechanical and electrical plans and specifications
therefor prepared or to be prepared by the Borrower, the Architects, the Design
Architects and the Borrower's engineers and contractors, as approved by the Bank
and the Bank's Consultant, together with all revisions and addenda to such
plans, drawings and specification, provided that such revisions and addenda have
been approved by the Bank to the extent such approval is required pursuant to
paragraph 7(bb) of the Reimbursement Agreement, which Plans shall include,
without
-11-
limitation, a description of the materials, equipment and fixtures necessary for
the Construction of the Improvements.
Pledgee(s) means (a) with respect to the Mortgage Notes, the Bank and, on
the subordinated basis established in Section 2(d) hereof, the Authority, and
(b) with respect to the Termination Payments Note and Mortgage Note B, the Bank.
Premises shall mean the fee simple title to the Fajardo Property (other
than those Condominium Parcels which have been released from the lien of the Fee
Mortgage pursuant to the terms hereof and of the Reimbursement Agreement) and
the leasehold estate in the Palominos Island Property.
Project shall mean, collectively, the acquisition of the Fajardo Property,
the leasing of the Palominos Island Property and the renovation, construction,
furnishing and equipping of the Premises and the Improvements.
Reimbursement Agreement shall mean that certain Letter of Credit and
Reimbursement Agreement, dated as of the date hereof, between the Bank and the
Borrower, relating to, inter alia, the issuance and continuance of the Letter of
Credit, and all extensions, modifications, renewals, amendments and replacements
thereof (including any replacement pursuant to which a Successor Letter of
Credit may be issued).
Release Conditions shall have the meaning ascribed thereto in Section
18(d) hereof.
Restoration means, in case of a Casualty or a Taking, the restoration,
replacement or rebuilding of the affected property such that when such
restoration, replacement or rebuilding is
-12-
completed, the Improvements shall have been constructed substantially in
accordance with the Plans, and to the extent any alterations or additions to the
Improvements were made in compliance with the Mortgages or the Reimbursement
Agreement, with any such alterations or additions, or in the event that the
foregoing requirement cannot be satisfied as a result of any Legal Requirement
or, in the case of a Taking, as a result of the loss of the use of the portion
of the Mortgaged Property which was the subject of such Taking, the Project when
such restoration, replacement or rebuilding shall have been completed, shall be
an integral until similar in condition, character and scope to the Project prior
to such Casualty or Taking, and the value of the Project, when so restored,
replaced or rebuilt, together with the amount of the Net Proceeds or the Net
Restoration Award, as the case may be, applied in repayment of the principal
indebtedness evidenced by the Notes, shall be equal to or greater than the value
and usefulness of the Project immediately prior to such Casualty or Taking.
Secured Obligations means any and all obligations (other than Termination
Payments, reimbursement for amounts advanced by the Bank in connection with
construction on the Mortgaged Property other than Construction of the
Improvements, any amounts owed in connection with any Annual Agent's Fees and
Annual Letter of Credit Fees (as such terms are defined in the Reimbursement
Agreement) and any amounts owed in connection with any Interest Drawing (as such
term is defined in the Letter of Credit) under the Letter of Credit) of the
Borrower which may arise or accrue under and pursuant to the Reimbursement
Agreement, including, without limitation, interest accrued on such obligations.
Secured Obligations B shall mean any and all obligations of the Borrower
that may arise or accrue in connection with any
-13-
Interest Drawing (as defined in the Letter of Credit) under the Letter of Credit
or in connection with the payment of up to one year's Annual Agent's Fees and
Annual Letter of Credit Fees (as such terms are defined in the Reimbursement
Agreement), including, without limitation, interest accrued on such obligations.
Successor Letter of Credit shall have the meaning set forth in the Trust
Agreement.
Taking means any temporary or permanent taking by any public or
quasi-public authority of the Mortgaged Property or any part thereof through
eminent domain or other proceedings or by any settlement or compromise of such
proceedings, or any voluntary conveyance of such property in lieu of the
commencement of any such proceedings.
Taxes means all real estate and other taxes, all assessments (including,
without limitation, all assessments for public improvements or benefits, whether
or not commenced or completed prior to the date hereof or while either of the
Mortgages is in force), water, sewer, electricity, utility and other rents,
rates and charges, excises, levies, license fees, permit fees, inspection fees
and other authorization fees and other charges in each case whether general or
specific, ordinary or extraordinary, or foreseen or unforeseen, of every
character (including all penalties or interest thereon), which at any time may
be assessed, levied confirmed or imposed on or in respect of or be a lien upon:
(a) The Mortgaged Property or any part thereof or any rents, issues,
income, profits or earnings therefrom or any estate, right or interest therein;
or
-14-
(b) Any occupancy, use or possession of or sales from the Mortgaged
Property or any part thereof; or
(c) Any or all of the Notes, either or both of the Mortgages or this
Agreement, any interest thereon or any other payments due from the Mortgagor
under the terms of any or all of the Notes, either or both of the Mortgages or
this Agreement;
excepting, however, any income taxes now or hereafter imposed by the United
States under the Internal Revenue Code of 1986, as amended from time to time,
and by the Commonwealth of Puerto Rico under the Income Tax Act of 1954, as
amended from time to time, or under any other Act of Congress of the United
States or Act of the Legislature of Puerto Rico of the same nature, modifying,
amending or substituting the statutes above mentioned.
Termination Payments shall mean any and all sums which may become payable
by the Borrower to the Bank pursuant to Section 6 of the Bond Swap Agreement.
Termination Payments Event of Default shall mean and include any of the
following:
(a) Any one or more of the Events of Default specified in the Bond Swap
Agreement; or
(b) Any one or more of the Events of Default specified in the
Reimbursement Agreement; or
(c) Failure by the Mortgagor to perform or comply with any covenant,
agreement or term binding upon it contained in this Agreement (except as
elsewhere specifically set forth in this definition of Termination Payments
Event of Default), which failure
-15-
shall continue for a period of thirty (30) days after notice is given to the
Mortgagor by the Bank, unless the Bank shall agree to an extension of such time
prior to its expiration; provided, however that if such failure cannot be
corrected within such thirty (30) day period, it shall not constitute a
Termination Payments Event of Default if corrective action is instituted by the
Mortgagor within such period and diligently pursued until such failure is
corrected, but in no event shall such 30-day period or such other applicable
grace period, as the case may be, be so extended to be a period in excess of 60
days.
Termination Payments Note means the demand promissory note of the Borrower
in the principal amount of $20,000,000, payable to the order of the Authority,
dated February 7, 1991, under affidavit No. 100 before Notary Public Leonor M.
Aguilar-Gerrero.
Termination Payments Obligations means any and all obligations of the
Borrower which may arise or accrue under and pursuant to the Band Swap Agreement
in respect of Termination Payments, including, without limitation, interest
accrued on such obligations.
Title Policy shall mean a title policy issued by a title company
satisfactory to the Bank in its sole and absolute discretion, marked paid in
full, in the amount of the Loan, insuring the Authority, the Bank and the
Trustee, as their respective interests may appear, that the Fee Mortgage, in
connection with the Fajardo Property, and the Leasehold Mortgage, in connection
with the Palominos Island Property, together with the other Security Documents
(as defined in the Reimbursement Agreement) to be recorded constitute valid
first liens on the Premises, and on the other property secured, free and clear
of all
-16-
defects, restrictions, Liens and violations, except the Permitted Encumbrances,
and which Title Policy shall contain:
(A) no exception for mechanics' or materialmen's liens;
(B) no survey exceptions other than those approved by the Bank;
(C) a statement that the title company agrees to affirmatively insure
the priority of each Disbursement against the existence of any other
Liens, including mechanic's and materialman's liens, whether choate
or inchoate;
(D) reinsurance with provisions for direct access against the
reinsurers, in amounts and with companies acceptable to the Bank;
and
(E) such other endorsements or affirmative insurance as the Bank and the
Bank's counsel shall require.
Trust Agreement means the Trust Agreement, of even date herewith, between
the Authority and the Trustee, relating to the Bonds.
Trustee means Banco Popular de Puerto Rico, as trustee under the Trust
Agreement, or any successor trustee at the time serving as such under the Trust
Agreement.
SECTION 2. Pledge of Mortgage Notes and Subordination of Interests.
-17-
(a) As security for the Secured Obligations, the Loan Agreement
Obligations and the Mortgage Obligations, the Mortgagor in this act delivers
Mortgage Note A and the Leasehold Note to the Bank and the Authority in pledge.
The parties have agreed that the Mortgage Notes so pledged shall be of equal
priority (pari-passu) and that the pledge thereof in favor of the Authority and
the Bank shall be subject to the subordination provisions of Section 2(d)
hereof. As security for the Termination Payments Obligations, the Mortgagor in
this act delivers the Termination Payments Note to the Bank in pledge and as
security for Secured Obligations B, the Mortgagor in this Act delivers Mortgage
Note B to the Bank in pledge. The parties have agreed that the pledge of
Mortgage Note A and the Leasehold Note is of equal priority (pari-passu) with
the pledge of the Termination Payments Note and Mortgage Note B in connection
with all rights and remedies of the pledgees hereunder with respect to the Fee
Mortgage.
(b) Simultaneously with the execution of this Agreement, the
Mortgagor has delivered (A) Mortgage Note A and the Leasehold Note to the Bank,
to hold in accordance with the provisions of this Agreement, in its capacity as:
(i) pledgee hereunder and (ii) agent of the Authority pursuant to the terms of
this Agreement and (B) the Termination Payments Note and Mortgage Note B to the
Bank, to hold in accordance with the provisions of this Agreement in its
capacity as pledgee hereunder. The parties hereto hereby consent to the delivery
of the Notes to the Bank to be held in accordance with the terms and conditions
of this Agreement.
(c) The Mortgage Notes and the Termination Payments Note shall have
been endorsed by the Authority as follows: "Pay to the order of THE MITSUBISHI
BANK, LIMITED, New York Branch under the terms and conditions of that certain
collateral Pledge Agreement among El Conquistador Partnership L.P., Puerto Rico
Industrial,
-18-
Medical, Educational and Environmental Pollution Control Facilities Financing
Authority and The Mitsubishi Bank, Limited, New York Branch, dated February 7,
1991."
(d) The Authority recognizes that the primary security for the
payment of principal of and interest accrued on the Bonds is the availability of
drawings to be made by the Trustee for the account of the Borrower under the
Letter of Credit, and accordingly, the Authority agrees that notwithstanding any
provision of this Agreement to the contrary, the pledge and rights of the
Authority in Mortgage Note A and the Leasehold Note and in the Mortgages are
hereby subordinated to the pledge and rights therein of the Bank and the rights
of the Authority as the holder of the Mortgages are hereby assigned to the Bank,
so long as the Bank shall not have "wrongfully dishonored" (as hereinafter
defined) any drawing made by the Trustee in strict compliance with the terms of
the Letter of Credit. In the event that the Bank shall wrongfully dishonor any
drawing made by the Trustee in strict compliance with the terms of the Letter of
Credit, then in such event the pledge of Mortgage Note A and the Leasehold Note
granted to the Bank under this Agreement shall (except to the extent of any
amounts owed to the Bank under the Reimbursement Agreement), without any further
action, notice or the execution or delivery of any document by or to any party,
be and become subordinated to the pledge granted to the Authority under this
Agreement until such time as the Bank effects the cure of such wrongful dishonor
and, upon effecting such cure, the pledge and rights of the Authority in
Mortgage Note A and the Leasehold Note and in the Mortgages will once again be
subordinate to the pledge and rights thereof of the Bank. For purposes hereof
"wrongful dishonor" shall mean a failure by the Bank to honor any drawing made
and presented pursuant to and in strict compliance with the Letter of Credit.
The pledge of Mortgage Note A and the Leasehold Note and the pledge of the
-19-
Termination Payments Note and Mortgage Note B effected hereunder shall remain of
equal priority (pari-passu) regardless of whether the Bank's interest as pledgee
of Mortgage Note A and the Leasehold Note shall have been subordinated to the
Authority's interest as pledgee therein.
(e) Obligations Secured. Mortgage Note A and the Leasehold Note
shall secure (i) on a senior or first priority basis the payment and performance
of (A) the Secured Obligations, and (B) the Mortgage Obligations, in that order,
and (ii) on a subordinated basis, as provided in Section 2(d) above, the payment
and performance of the Loan Agreement Obligations. The Termination Payments Note
shall secure the payment and performance of the Termination Payments Obligations
exclusively. Mortgage Note B shall secure the payment and performance of Secured
Obligations B exclusively.
(f) This Agreement constitutes a pledge and security agreement, and
the Pledgees shall have all the rights, powers and remedies of a pledgee and
secured party provided by the laws of the Commonwealth of Puerto Rico in
addition to the rights and remedies provided in this Agreement and under the
Mortgages and Mortgage Note A and the Leasehold Mortgage and, with respect to
the Bank, the Termination Payments Note and Mortgage Note B, except that the
Termination Payments Note and Mortgage Note B shall secure only the Termination
Payments Obligations and the Secured Obligations B, respectively.
(g) Mortgagor's Consent to Assignment. The Mortgagor hereby consents
to the assignment and subordination as provided in Section 2(d) above and agrees
that the Bank shall hold Mortgage Note A and the Leasehold Mortgage in pledge,
on behalf of the Pledgees, as security for the Secured Obligations, the Loan
-20-
Agreement Obligations and the Mortgage Obligations. The Pledgees shall be
entitled to hold Mortgage Note A and the Leasehold Mortgage in pledge until the
termination of the Reimbursement Agreement and the Loan Agreement and the
payment in full of all of the Secured Obligations, the Loan Agreement
Obligations and the Mortgage Obligations. The Bank shall be entitled to hold the
Termination Payments Note in pledge until the termination of the Bond Swap
Agreement and the payment in full of all of the Termination Payments
Obligations, and shall be entitled to hold Mortgage Note B in pledge until the
termination of the Reimbursement Agreement and the payment in full of all of the
Secured Obligations B.
(h) Further Assignment of Notes. Notwithstanding anything contained
in this Agreement to the contrary, for so long as the GDB Loan shall be
outstanding, the Bank shall not assign Mortgage Note B or the Termination
Payments Note to any other party to secure any indebtedness other than the
indebtedness secured by each such Note on the date hereof; provided, however,
that the Bank may at any time assign Mortgage Note B to a Successor Letter of
Credit Bank (as defined in the Trust Agreement) and/or the Termination Payments
Note to any party replacing the bank as the swap counterparty in connection with
the Loan.
SECTION 3. Rights of the Bank and Authority.
(a) Notwithstanding anything in this Agreement to the contrary, so
long as the Bank shall not have wrongfully dishonored any drawing made by the
Trustee in strict compliance with the terms of the Letter of Credit, or in the
case of such a wrongful dishonor, if the Bank has cured same, (i) the Authority
shall not be entitled to foreclose on either or both of Mortgage Note A and the
Leasehold Note, either or both of the Mortgages, or any part of
-21-
the Mortgaged Property, or exercise any other remedy under either or both of the
Mortgages, either or both of Mortgage Note A and the Leasehold Note or this
Agreement without the prior written consent of the Bank, and (ii) the Bank shall
be entitled to take any action permitted to be taken jointly by the Pledgees
hereunder, including without limitation the foreclosure of either or both of
Mortgage Note A and the Leasehold Note or either or both of the Mortgages and
the making of any determination, demand or consent permitted or required to be
made by the Pledgees, and any such action may be taken solely by the Bank and at
the Bank's discretion as if the Bank were the sole Pledgee and holder of
Mortgage Note A and the Leasehold Note without notice to, consent of or
participation by the Authority; provided, however, that the Bank shall not
foreclose on any or all of the Mortgage Notes or on the Termination Payments
Note or either or both of the Mortgages unless it has delivered either the
notice and direction to the Trustee described in Section 305 of the Trust
Agreement or the notice to the Trustee described in clause (i) of Section
7.01(i) of the Loan Agreement.
(b) The Bank agrees that it will not enter into any amendment,
change or modification of this Agreement (except to the extent that any such
amendment, change or modification would affect only the pledge of the
Termination Payments Note or only the pledge of Mortgage Note B) or authorize
and direct any amendment, change or modification to be made to the Mortgages or
Mortgage Note A or the Leasehold Note, without the express prior written consent
of the Authority, which consent shall not under any circumstances be withheld,
conditioned or delayed if the interests of the holders of the Bonds are not
materially adversely affected thereby. The Authority agrees to execute,
acknowledge and deliver any amendment, change or modification to the Mortgages
or Mortgage Note A and the Leasehold Note, at the direction of the Bank, if the
interests of
-22-
the holders of the Bonds are not materially adversely affected thereby.
(c) The Authority and the Mortgagor agree that the Bank, without
notice to or any consent from the Authority and without affecting any of the
Bank's rights under this Agreement, the Mortgages or the Notes, may, from time
to time:
(i) exercise any and all rights and remedies under the
Reimbursement Agreement, including, without limitation, commencement of actions
against the Mortgagor to recover sums owing thereunder and to obtain injunctive
relief;
(ii) supplement, modify, amend, extend, renew, accelerate or
otherwise change the time for payment or the terms of the Secured Obligations,
the Secured Obligations B, the Termination Payments Obligations or any part
thereof;
(iii) supplement, modify, amend or waive, or enter into or
give any agreement, approval or consent with respect to, the obligations owing
to the Bank under the Reimbursement Agreement or under any additional security
agreement or guaranties or supplement, modify, amend or waive any condition,
covenant, default, remedy, right, representation or term thereof or thereunder;
(iv) accept new or additional instruments, documents or
agreements in exchange for or relative to the Reimbursement Agreement, the
Secured Obligations, the Secured Obligations B, the Termination Payments
Obligations or any part thereof;
-23-
(v) accept partial payments on the Secured Obligations, the
Secured Obligations B, or the Termination Payments Obligations;
(vi) receive and hold additional security or guaranties for
the Secured Obligations, the Secured Obligations B, the Termination Payments
Obligations or any part thereof, owing to the Bank;
(vii) release any Person from any personal liability with
respect to the Secured Obligations, the Secured Obligations B, the Termination
Payments Obligations or any part thereof;
(viii) settle, release on terms satisfactory to the Bank or by
operation of law or otherwise, compound, compromise, collect or otherwise
liquidate or enforce any Secured Obligations, Secured Obligations B and/or the
Termination Payments Obligations; and
(ix) grant all required consents, approvals and waivers
hereunder, including, without limitation, all renewals and extensions hereof and
all consents, approvals and waivers which require action by the Pledgees, except
as required by Section 3(b) hereof.
(d) Upon the termination of the Letter of Credit and the
Reimbursement Agreement and the full satisfaction of the Secured Obligations
then due and owing, the Bank agrees to deliver Mortgage Note A and the Leasehold
Note to the Authority or any assignee thereof; provided, however, that if at
that time, there remain outstanding any Loan Agreement Obligations, the
Authority or its assignee shall retain Mortgage Note A and the Leasehold Note in
-24-
pledge until full satisfaction and payment of such Obligations, and references
herein to the "Bank" shall be deemed to be references to the Authority insofar
as such references apply to the Bank as pledgee of Mortgage Note A and the
Leasehold Note.
If the GDB Loan is then outstanding, upon the termination of the
Bond Swap Agreement and the full satisfaction of the Termination Payments
Obligations, the Bank agrees to deliver the Termination Payments Note to GDB for
cancellation purposes only. If the GDB Loan is not then outstanding, the Bank
agrees that upon termination of the Bond Swap Agreement and the full
satisfaction of the Termination Payments Obligations, the Bank shall deliver the
Termination Payments Note to the Borrower for cancellation purposes only.
If the GDB Loan is then outstanding, upon the termination of the
Reimbursement Agreement and the full satisfaction of the Secured Obligations B,
the Bank agrees to deliver Mortgage Note B to GDB for cancellation purposes
only. If the GDB Loan is not then outstanding, the Bank agrees that upon
termination of the Reimbursement Agreement and the full satisfaction of the
Secured Obligations B, the Bank shall deliver Mortgage Note B to the Borrower
for cancellation purposes only.
(e) Upon the request of the Bank, the Authority hereby agrees to
execute, acknowledge and deliver all instruments and documents required in
connection with the release of the Condominium Parcels (as defined in the
Reimbursement Agreement) from the lien of the Mortgages and the creation of any
easements and/or rights of way in favor of the Condominium Parcels and the
creation of any access easement in favor of the property owned by Justino Diaz
Santini.
-25-
SECTION 4. Application of Funds. Any proceeds collected or received by the
Pledgees from the foreclosure of the Notes, or any part thereof, the foreclosure
of either or both of the Mortgages, or any part of the Mortgaged Property, and
the proceeds from any possession, holding, operating or management of the
Mortgaged Property or any part thereof by the Pledgees in accordance with the
terms and conditions of the respective Mortgages, shall be applied in the
following order from time to time by the Pledgees:
First: To the payment of (i) all Taxes or liens with respect to the Notes
or the Mortgaged Property which are prior to the lien of this Agreement or
either of the Mortgages that the Pledgees may consider necessary or desirable to
pay, except those taxes, assessments and liens subject to which any sale of any
of the Notes or the Mortgaged Property shall have been made, if any, (ii) all
costs and expenses of collection, including the cost and expenses of handling
the Notes and/or the Mortgaged Property, including the taking of possession,
operating and managing of the Mortgaged Property, as the case may be, and (iii)
the cost and expenses of (A) any sale in foreclosure of the Notes and/or the
Mortgaged Property pursuant to the provisions of this Agreement or either or
both of the Mortgages, and (B) the enforcement of any remedies hereunder,
including court costs and expenses, and (C) fees and expenses of Pledgees'
agents, attorneys and counsel, and all expenses, liabilities and advances
incurred or made by the Pledgees with respect to such foreclosure.
Second: The payment of the Secured Obligations (in any order of priority
that the Bank may determine in its sole discretion), Mortgage Obligations (in
any order of priority that the Bank may determine in its sole discretion), and
Loan Agreement Obligations, in that order, then outstanding; provided, however,
that in connection with the foreclosure of the Termination Payments Note or
-26-
the Mortgaged Property as a result of a Termination Payments Event of Default,
the proceeds shall be applied only to the payment of the Termination Payments
Obligations and in connection with the foreclosure of Mortgage Note B as a
result of a failure to pay any Secured Obligations B, the proceeds shall be
applied only to the payment of the Secured Obligations B.
Third: Any surplus then remaining shall be paid to or at the direction of
the Borrower, its successors or assigns, or to whomsoever may be lawfully
entitled to receive the same (including, without limitation, GDB), or as a court
of competent jurisdiction may otherwise direct.
SECTION 5. Documentary Stamps. If at any time the Commonwealth of Puerto
Rico or any governmental subdivision thereof shall require the payment of
registration fees or Internal Revenue Stamps or other stamps to be affixed to
either or both of the Mortgages, any or all of the Notes or this Agreement, the
Mortgagor, upon demand, will pay for the same, with interest and penalties
thereon, if any, and shall hold the Authority and the Bank harmless of and from
and indemnify them against all losses, liabilities, obligations, damages,
penalties, claims, causes of action, charges and expenses (including, without
limitation, attorneys' fees and expenses) which may be imposed upon or incurred
by or asserted against them by reason thereof.
SECTION 6. Headings etc. The headings and captions of the various Sections
of this Agreement are for convenience of reference only and are not to be
construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.
SECTION 7. Usury Laws. This Agreement, the Mortgages and the Notes are
subject to the express condition that at no time shall
-27-
the Mortgagor be obligated or required to pay interest on the obligations
secured thereby and hereby at a rate which is in excess of the maximum interest
rate which the Mortgagor is permitted by law to contract or agree to pay. If by
the terms of this Agreement, the Mortgages, or any of the Notes, the Mortgagor
is at any time required or obligated to pay interest at a rate in excess of such
maximum rate, the rate of interest shall be deemed to be immediately reduced to
such maximum rate so that no amounts shall be charged which are in excess
thereof and, in the event it should be determined that any excess over such
highest lawful rate has been charged or received, the holder of the Notes shall
promptly refund such excess to the Mortgagor; provided, however, that, if
lawful, any such excess shall be paid by the Mortgagor to the Mortgagee as
additional interest (accruing at a rate equal to the maximum legal rate minus
the rate provided for hereunder) during any subsequent period when regular
interest is accruing hereunder at less than the maximum legal rate.
SECTION 8. Further Assurances. The Mortgagor hereby agrees promptly to
execute and deliver such additional agreements and instruments and promptly to
take such additional action as the Bank or the Authority may at any time and
from time to time request in writing in order for the Bank and/or the Authority
to obtain the full benefits and rights granted or purported to be granted by
this Agreement and fully and continually to perfect the pledge and security
interests created hereby.
SECTION 9. No Waiver; Cumulative Remedies. No failure or delay on the part
of the Pledgees, or either of them, in exercising any right, power or remedy
hereunder or under or in connection with any or all of the Notes or either or
both of the Mortgages shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
-28-
further exercise thereof or the exercise of any other right, power or remedy
hereunder or under or in connection with any or all of the Notes or either or
both of the Mortgages. The remedies herein and in the Mortgages provided are
cumulative and not exclusive of any remedies provided by law or in equity.
SECTION 10. Amendments, etc. No amendment, modification, termination, or
waiver of any provision of this Agreement, Mortgage Note A, the Leasehold Note
or the Mortgages nor consent to any departure by the Mortgagor therefrom shall
in any event be effective unless the same shall be authorized and directed by
the Bank in writing and signed by the Authority, subject to the provisions of
Section 3(b) hereof, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given. No notice to
or demand on the Mortgagor in any case shall entitle the Mortgagor to any other
or further notice or demand in similar or other circumstances.
SECTION 11. Addresses for Notices, etc. All notices, requests, demands,
directions and other communications hereunder or in connection with the Notes or
the Mortgages shall be in writing (including telegraphic communication) and
mailed (certified or registered, with signed receipt, or sent by nationally
recognized overnight courier to the applicable party at the following address or
to such other address with respect to any party as such party shall notify the
other parties in writing:
If to the Borrower:
El Conquistador Partnership L.P.
c/o Williams Hospitality Management Corporation
187 East Isla Verde Road
Carolina, Puerto Rico 00913
Attention: Hugh A. Andrews
-29-
with copies similarly delivered to:
(i) Whitman & Ransom
200 Park Avenue
New York, New York 10166
Attention: Jeffrey N. Siegel, Esq.;
(ii) Kumagai Caribbean, Inc.
c/o Williams Hospitality Management
Corporation
187 East Isla Verde Road
Carolina, Puerto Rico
Attention: Mr. Sunsuke Nakane;
(iii) WMS Industries Inc.
3401 North Carolina Avenue
Chicago, Illinois 60618
Attention: Corporate Secretary; and
(iv) Messrs. Burton and Richard Koffman
c/o Richford American
950 Third Avenue
New York, New York 10022
If to the Authority:
Puerto Rico Industrial, Medical, Educational
and Environmental Pollution Control Facilities
Financing Authority
c/o Government Development Bank for Puerto Rico
P.O. Box 42001
San Juan, Puerto Rico 00940-2001
Attention: Executive Director
If to the Bank:
The Mitsubishi Bank, Limited
225 Liberty Street
Two World Financial Center
New York, New York 10281
Attention: Real Estate Finance Group
(Mr. Akira Fujii or Mr. Russ Lopinto)
with copies similarly delivered to:
(i) Kaye, Scholer, Fierman, Hays & Handler
425 Park Avenue
New York, New York 10022
Attention: Warren J. Berstein, Esq.; and
-30-
(ii) McConnell Valdes Kelley Sifre
Griggs & Ruiz-Suria
Royal Bank Center
255 Ponce de Leon Avenue
Hato Rey, Puerto Rico 00917
Attention: Fred Hulser, Esq.
and, if notice is given by the Bank to the Borrower, a copy thereof
shall be delivered to:
Government Development Bank for Puerto Rico
P.O. Box 42001
Minillas Station
San Juan, Puerto Rico 00940
Attention: President and Director of Private
Sector Banking Services
and
Melendez-Perez Moran & Santiago PO Box 19328 Santurce,
Puerto Rico 00919 Attention: Ramon Moran-Loubriel, Esq.
All such notices, requests, demands, directions and other communications
shall be effective when received at the address specified as aforesaid.
SECTION 12. Binding Effect. The Agreement shall be binding upon and inure
to the benefit of the Mortgagor, the Bank and the Authority and their respective
successors and assigns. GDB shall be a third party beneficiary of this Agreement
with respect to those provisions dealing specifically with the Termination
Payments Note, Mortgage Note B and for purposes of Section 2(h) only.
SECTION 13. Severability of Provision. Any provision of this Agreement,
the Notes or the Mortgages which is prohibited or unenforceable in the
Commonwealth of Puerto Rico shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof.
-31-
SECTION 14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
SECTION 15. Inconsistent Terms. In the event of contradictions or
inconsistencies in the terms and provisions of this Agreement and the terms and
provisions of the Mortgages, the terms and provisions of this Agreement shall
prevail.
SECTION 16. Insurance.
(a) Prior to the Date of Substantial Completion (as defined in the
Reimbursement Agreement), the Borrower, at its sole cost and expense, shall keep
the existing structures insured for the benefit of the Authority and the Bank
against loss and damage by Fire, Lightning, Collapse, Earthmovement, Flood,
Tsunami, Boiler and Machinery, and such other standard Extended Coverage perils
as are customarily included under standard "All Risk" policies for other
property and buildings similar to the Mortgaged Property in nature, use,
location, height, and type of construction. The amount of such Insurance
Policy(ies) shall be not less than the full Replacement Cost of the then
existing structures, with the Agreed Amount and Replacement Cost Endorsements
attached, waiving all co-insurance provisions and eliminating the Vacancy and
Unoccupied Clause. In addition, prior to the Date of Substantial Completion, the
Improvements shall be covered under an "All Risk" Builder's Risk/Contract Works
Policy for the 100% Completed Value (replacement cost) of the contract(s) on a
Non-Reporting Form, subject to the same coverages as are required on the
presently existing structures, along with extensions of coverage for "permission
to complete and Occupy," Offsite Storage including Inland and Ocean Transit,
"Hot and Cold" Testing, Increased Cost of Construction and Contingent Liability
from Building Laws. On and after the Date of Substantial Completion, the
Borrower shall secure
-32-
insurance to cover the Improvements and equipment at the Project against loss or
damage by fire and such risks as are customarily included in Extended Coverage,
and from such other hazards including, without limitation, Flood, Earthmovement,
and Coastal Windstorm, as may be covered by the "All Risk" insurance covering
other property and buildings similar to the Mortgaged Property in nature, use,
location, height and type of construction, in an amount not less than the
greater of (A) full insurable value, or (B) an amount sufficient to prevent the
Borrower from becoming a co-insurer within the terms of the applicable policies.
Said Insurance Policy shall include endorsements for Demolition, Contingent
Liability and Increased Cost of Construction. The term "full insurable value" as
used in this Section shall mean the cost of actual replacement, without
deduction for depreciation, less the cost of excavations, foundations and
footings below the lowest basement floor or, if there be no basement, below the
level of the ground determined as of the Date of Substantial Completion and as
further determined on the date of each renewal or replacement of such Insurance
Policy, as hereinafter set forth. Full insurable value shall be determined by an
appraisal made at least once every three (3) years, by an appraiser, appraisal
company or insurance company selected by the Borrower and approved by the Bank
in its sole discretion, and such determination of full insurable value shall be
binding and conclusive upon the parties hereto. If any Insurance Policy covering
Flood or Earthmovement shall contain annual aggregate limits, such aggregate
limits shall be replenished upon the occurrence of a substantial loss, as
determined by the Bank in its sole discretion. The Insurance Policies described
in subparagraphs (a)(i) and (a)(ii) above shall provide for deductions of not
more than $10,000 per occurrence for all perils except Flood, Earthmovement, and
Coastal Windstorm, for which deductions of not more than $25,000 per occurrence
may be made.
-33-
(b) The Borrower, at its sole cost and expense, shall maintain or
cause to be maintained for the benefit of the Authority and the Bank (i) prior
to the Date of Substantial Completion, Soft Costs/Additional Expense Incurred,
Loss of Gross Earnings and/or Loss of Rental Income on an Actual Loss Sustained
Basis for an amount not less than $24,000,000, with an "Extended Period of
Indemnity" Endorsement attached; (ii) upon and after the Date of Substantial
Completion, coverage for Loss of Gross Earnings and/or Loss of Rental Income,
Business Interruption and Additional Expense Incurred Insurance on an Actual
Loss Sustained Basis (if available) in the amount equal to the greater of (A) an
estimate reasonably satisfactory to the Bank of the succeeding year's Gross
Revenues (as defined in the Reimbursement Agreement), or (B) $24,000,000 with
the Extended Period of Indemnity Enforcement attached; (iii) upon and after the
installation of any boilers and/or machinery at the Project, Boiler and
Machinery Coverage for Rent Loss (including, without limitation, from both
retail space and nightly room rentals), with an "Extended Period of Indemnity"
and Improvements Loss in such amounts as are usually carried by persons
operating property and buildings similar to the Mortgaged Property in nature,
use, location, height and type of construction.
(c) The Borrower, at its sole cost and expense, shall maintain or
cause to be maintained at all times (i) General Public Liability Insurance,
including, without limitation, the Broad Form Comprehensive General Liability
Endorsement, with the respective Primary Coverages as follows:
General Aggregate $ 1,000,000 Per Location
Products/Completed Operations $ 1,000,000*
*(2 year Completed Operation
Extension)
Personal & Advertising Injury $ 1,000,000
Each Occurrence (Bodily Injury
and Property Damage) $ 1,000,000
-34-
Fire Damage Legal $ 50,000
Medical Expense $ 10,000
Stop Gap Liability $ 1,000,000
(ii) Umbrella Liability Coverage in an amount of not less than $40,000,000 per
occurrence and in the aggregate prior to the Date of Substantial Completion and,
thereafter, in an amount of not less than $50,000,000 per occurrence and in the
aggregate or such greater amount as the Bank shall reasonably require; (iii)
Worker's Compensation and Non-Occupational Disability Insurance as respect a
Monopolistic State as required by applicable laws and regulations of the
Commonwealth of Puerto Rico; (iv) Marina Operator's Legal Liability, Protection
and Indemnity and Marina General Liability; (v) insurance covering pilings,
piers, wharves and docks, and environmental impairment coverage (if available)
with respect to the marina operation; and (v) such other types and amounts of
insurance with respect to the Mortgaged Property and the operation thereof which
are commonly maintained in the case of other property and buildings similar to
the Mortgaged Property in nature, use, location, height and type of
construction, as may from time to time be required by the Authority and the Bank
(including, without limitation, Automobile Liability Insurance in amounts
reasonably required by the Bank from time to time).
(d) All Insurance Policies shall be issued by an insurer admitted
and licensed to do business in the Commonwealth of Puerto Rico with an A.M. Best
Rating of AX or better and shall be otherwise satisfactory to the Bank in form
and content. The Property and Business Interruption Insurance Policies shall
contain the Standard Mortgagee Non-Contribution Clause Endorsement or its
equivalent endorsement satisfactory to the Bank, naming the Bank as First
Mortgagee and providing the Bank (except in the case of General Liability and
other Liability and Worker's Compensation) as the person to whom all payments
made by such insurance company
-35-
shall be paid and with whom all claims shall be adjusted, except as otherwise
provided in Section 18(b) hereof. All Liability Insurance Policies shall name
the Bank, the Authority and the Trustee as Additional Insureds according to the
their respective interests. Without the Bank's prior written consent, the
Borrower shall not carry separate or additional insurance coverage concurrent in
form or contributing in the event of loss with that required by this Agreement
or the Reimbursement Agreement. Without the Bank's prior written consent, the
Borrower shall not name any Person as a named insured or loss payee under any
Insurance Policy without the Bank's prior written consent. The Borrower shall
pay the premiums for the Insurance Policies as the same become due and payable.
The Borrower shall deliver original binders and certified copies of the
insurance Policies to the Bank and to the Authority as further security for the
Borrower's performance of the terms and conditions contained herein, provided
that the Bank and the Authority shall not be deemed by reason of the custody of
such Insurance Policies to have knowledge of the contents thereof. In the event
of a foreclosure of any or all of the Notes or either or both of the Mortgages,
the purchaser of the Mortgaged Property will succeed to all of the rights of the
Borrower, including the rights to all unearned premiums paid, with respect to
the Insurance Policies, to the extent assignable. The Borrower also shall
deliver to the Bank and the Authority, within 10 days of such party's request, a
certificate of insurance issued by the Borrower's insurance agent/broker setting
forth the particulars as to all such Insurance Policies, that all premiums due
thereon have been paid and that the same are in full force and effect. Not later
than 30 days prior to the expiration date of each of the Insurance Policies, the
Borrower shall deliver to the Bank and the Authority original binders and
certified copies of a renewal policy or policies marked "premium paid" or
accompanied by other evidence of payment of premium satisfactory to the Bank and
the Authority.
-36-
(e) Each Insurance Policy to be carried hereunder shall contain a
provision whereby the insurer (i) agrees that such policy shall not be cancelled
or modified, and shall not fail to be renewed, without at least 60 days' prior
written notice to the Authority and the Bank, (ii) waives any right to claim any
premiums and commissions against the Authority and the Bank and (iii) provides
that the Authority and the Bank are permitted to make payments to effect the
confirmation of such Policy upon notice of cancellation due to nonpayment of
premiums. In the event any Insurance Policy (except for general public and other
liability, boiler and machinery explosion liability and workers' compensation
insurance) shall contain breach of warranty provisions, such Policy shall
provide that with respect to the interest of the Authority and the Bank, such
Insurance Policy shall not be invalidated by and shall insure the Authority and
the Bank regardless of (A) any act, failure to act or negligence of or violation
of warranties, declarations or conditions contained in such Policy by any named
insured, (B) the occupancy or use of the Mortgaged Property for purposes more
hazardous than permitted by the terms thereof, (C) any foreclosure or other
action or proceeding taken by the Authority or the Bank pursuant to any
provision of this Agreement, any or all of the Notes, or either or both of the
Mortgages, or (D) any change in title to or ownership of all or any of the
Mortgaged Property.
(f) Any insurance maintained pursuant to this Section 16 may be
evidenced by blanket Insurance Policies covering the Mortgaged Property and
other properties or assets of the Borrower or any Affiliated Person, provided
that any such policy shall specify the portion, if less than all, of the total
coverage of such Policy that is allocated to the Mortgaged Property and shall in
all other respects comply with the requirements of this Section
-37-
16. The Bank, in its sole discretion, shall determine whether such blanket
Policies provide sufficient limits of insurance.
(g) Notwithstanding anything to the contrary contained herein, if at
any time the Pledgees are not in receipt of written evidence that all insurance
required hereunder is maintained in full force and effect, the Pledgees shall
have the right, upon notice to the Borrower, to take such action as the Pledgees
deem necessary to protect their interests in the Mortgaged Property, including,
without limitation, the obtaining of such insurance coverage as the Pledgees
deem appropriate, and all expenses incurred by the Pledgees in connection with
such action or in obtaining such insurance and keeping it in effect shall be
paid by the Borrower promptly after demand and be secured by this Agreement and
by the Mortgages.
SECTION 17. Compliance with Insurance Requirements. The Mortgagor, at its
sole cost and expense, will comply and cause compliance of the Mortgaged
Property and the operation, maintenance and use thereof with all Insurance
Requirements, whether or not compliance therewith shall require structural
changes in or interfere with the use and enjoyment of the Mortgaged Property or
any part thereof.
SECTION 18. Damage or Destruction.
(a) In case of a Casualty, the Borrower will immediately give notice
thereof to the Authority and the Bank generally describing the nature and extent
of such Casualty and setting forth the Borrower's best estimate of the cost of
Restoration, and the Borrower shall, at its sole cost and expense, promptly
commence and diligently complete or cause to be commenced and diligently
completed, the Restoration in a good and workmanlike manner and in compliance
with all legal Requirements.
-38-
(b) The Bank shall be entitled to receive all insurance proceeds
payable on account of a Casualty. The Borrower hereby irrevocably assigns,
transfers and sets over to the Bank all rights of the Borrower to any such
proceeds, award or payment and irrevocably authorizes and empowers the Bank, in
the name of the Borrower or otherwise, to file for and prosecute in its own name
what would otherwise be the Borrower's claim for any such proceeds.
Notwithstanding the foregoing, so long as no Default, Event of Default or
Termination Payments Event of Default shall have occurred and shall then be
continuing and provided the Borrower promptly files all claims and diligently
prosecutes same, the Borrower shall have the right to file, adjust, settle and
prosecute any claim for such proceeds; provided that the Borrower shall not
agree to any adjustment or settlement of any such claim payable with respect to
a Major Casualty without the Bank's prior written consent. The Borrower shall
pay promptly after demand all costs and expenses (including, without limitation,
attorneys' fees and expenses) incurred by the Bank in connection with a Casualty
and the seeking and obtaining of any insurance proceeds, award or payment with
respect thereto.
(c) In the event of a Major Casualty, the Net Proceeds shall be
held, at the bank's option, by the Bank as additional collateral for the Secured
Obligations, the Loan Agreement Obligations, the Mortgage Obligations, the
Termination Payments Obligations and the Secured Obligations B and shall be
applied or dealt with by the Bank as follows:
(i) if the Release Conditions (as hereinafter defined) are
satisfied, all net Proceeds shall be made available to the Borrower to be
applied towards the cost of the Restoration in accordance with paragraph (e) of
this Section 18; and
-39-
(ii) if the Release Conditions are not satisfied, all Net
Proceeds shall be applied in accordance with Section 20 hereof.
(d) In case of a Major Casualty, all Net Proceeds shall be applied
as provided in clause (i) of paragraph (c) of this Section 18 if all of the
following conditions are satisfied or otherwise waived by the Bank
(collectively, the "Release Conditions"):
(i) no Default, Event of Default or Termination Payments Event
of Default shall have occurred and be continuing;
(ii) the Borrower shall have delivered to the Authority and
the bank within thirty (30) days after the occurrence of the Major Casualty, a
notice of the Borrower's desire to undertake the Restoration of the
Improvements;
(iii) the Borrower shall have demonstrated to the satisfaction
of the bank that the Restoration of the Improvement can be completed at least
six months prior to the then-current Expiration Date (as defined in the
Reimbursement Agreement);
(iv) the Borrower shall have demonstrated to the satisfaction
of the Bank that sufficient funds are available to the Borrower through revenues
and/or business interruption insurance maintained pursuant to Section 16 hereof,
and/or a cash deposit, letter of credit or similar cash-equivalent security
(which in the case of a letter of credit or similar cash-equivalent security
shall be satisfactory to the Bank as to form, content and issuer) and which
shall be for the benefit of the Bank, to pay all amounts estimated to be paid
with respect to the Secured Obligations, Secured Obligations B, the Loan
Agreement Obligations, any debt service with respect to the GDB Loan, and all
other estimated operating expenses with respect to the Project during the period
-40-
estimated by the Borrower and approved by the Bank as necessary for the
completion of the Restoration;
(v) in the event that the estimated cost of Restoration is
greater than 25% of the full replacement cost of the Improvements (as specified
in the Borrower's casualty Insurance Policy), the Borrower shall have provided
the Bank with a guaranty of completion of the Restoration satisfactory to the
Bank as to form, content and guarantor which, among other things, ensures that
sufficient funds are and will be available to complete the Restoration; and
(vi) to the extent, in the Bank's judgment, that the Net
Proceeds are insufficient to pay the costs of the Restoration, the Borrower
shall have provided the Bank with a cash deposit, letter of credit, or similar
cash-equivalent security in the amount of such deficiency (which in the case of
a letter of credit or similar cash-equivalent security shall be satisfactory to
the Bank as to form, content and issuer).
(e) Provided that no Default, Event of Default or Termination
Payments Event of Default shall have occurred and be continuing, then, upon the
occurrence of a partial destruction of the Improvements that does not constitute
a Major Casualty or upon the occurrence of a Major Casualty in connection with
which the Release Conditions have been met, the Net Proceeds shall be paid over
to the Borrower for the Restoration of the Improvements. The Net Proceeds shall
be disbursed substantially in accordance with the requirements of Article 9 of
the Reimbursement Agreement such that the Net Proceeds shall be advanced in the
same manner and subject to the same conditions as the disbursement of the
proceeds of the Loan. Notwithstanding the foregoing, after the Date of
Substantial Completion, (i) the Net Proceeds from a Casualty that
-41-
does not constitute a Major Casualty shall be paid over to the Borrower for the
Restoration of the Improvements without any requirement that the Borrower comply
with disbursement procedures, and (ii) the Net Proceeds from a Major Casualty
shall be disbursed in accordance with procedures to be established by the Bank
appropriate to the Restoration of the Improvements.
(f) All costs and expenses incurred by the Authority and the Bank in
connection with making the Net Proceeds or Net Restoration Awards available for
the Restoration (including, without limitation, attorneys' fees and expenses and
fees and expenses of the Bank's Consultant, as defined in the Reimbursement
Agreement) shall be paid by the Borrower. Any Net Proceeds or Net Restoration
Awards remaining after the Restoration and the payment in full of all costs
incurred in connection with the Restoration shall be applied to the repayment of
any outstanding obligations of the Borrower under the Reimbursement Agreement
(including without limitation, the obligation to pay any Termination Payments
and any Secured Obligations B), the Loan Agreement, the Mortgages or this
Agreement, in such order as the bank shall determine; provided, however, that
any balance of the Net Proceeds or Net Restoration Awards remaining after such
application shall be applied to the prepayment of the principal of and interest
on the Loan as required pursuant to Section 8.02(e) of the Loan Agreement.
SECTION 19. Taking of the Mortgaged Property.
(a) In case of a Taking or the commencement of any proceedings or
negotiations that might result in a Taking, the Borrower immediately will give
notice thereof to the Authority and the Bank generally describing the nature and
extent of such Taking or the nature of such proceedings or negotiations and the
nature and extent of the Taking which might result therefrom. The Authority and
the Bank shall be entitled hereunder to all awards or
-42-
compensation payable on account of a Taking. The Borrower hereby irrevocably
assigns, transfers and sets over to the Authority and the Bank all rights of the
Borrower to any such awards or compensation and irrevocably authorizes and
empowers the Authority and the Bank, in the name of the Borrower or otherwise,
to collect and receive any such award or compensation and to file and prosecute
any and all claims for any such awards or compensation. Notwithstanding the
foregoing, so long as no Default, Event of Default or Termination Payments Event
of Default shall have occurred and shall then be continuing and provided the
Borrower promptly files and diligently prosecutes such claim or claims, the
Borrower shall have the right to prosecute and file any such claim or claims and
the Borrower shall cause any such award or compensation to be collected and
promptly paid over to the Bank; provided, that, the Borrower shall not agree to
or accept any award or compensation without the Authority's and the Bank's prior
written consent. The Authority and the Bank may participate in such proceedings
or negotiations, and the Borrower will deliver or cause to be delivered to the
Authority and the Bank all instruments requested by the Authority and the Bank
to permit such participation, provided that the Authority and the Bank shall be
under no obligation to question the amount of the award or compensation.
Although it is hereby expressly agreed that the same shall not be necessary, in
any event, the Borrower shall, upon demand of the Authority and the Bank, make,
execute and deliver any and all assignments and other instruments sufficient for
the purpose of assigning any such award or compensation to the Authority and the
Bank, free and clear of any encumbrances of any kind or nature whatsoever other
than any junior encumbrances arising as a result of the GDB Mortgage or any KGC
Mortgage(as such terms are defined in the Reimbursement Agreement). The Borrower
will pay promptly after demand all costs and expenses (including, without
limitation, attorneys' fees and expenses and fees and
-43-
expenses of the Bank's Consultant) incurred by the Authority and the Bank in
connection with any Taking and seeking and obtaining any award or payment on
account thereof.
(b) In the case of a Taking such that, in the Bank's judgment, the
Project can be restored substantially to its value and usefulness as it existed
prior to such Taking, then, the Borrower shall, at its sole cost and expense,
promptly commence and diligently complete the Restoration in a good and
workmanlike manner, and in compliance with all Legal Requirements.
(c) All Net Restoration Awards shall be held, at the Bank's option,
by the Bank as additional collateral for the Secured Obligations, the Secured
Obligations B, the Loan Agreement Obligations, the Mortgage Obligations and the
Termination Payments Obligations, and shall be applied or dealt with by the Bank
as follows:
(i) Provided that no Default, Event of Default or Termination
Payment Event of Default shall have occurred and be continuing, then, in the
case of a Taking of the nature referred to in paragraph (b) of this Section 19,
and, to the extent necessary thereunder, if the Release Conditions are
satisfied, all Net Restoration Awards shall be applied to pay the cost of
Restoration of the portion of the Improvements remaining after such Taking, such
application to be effected substantially in the same manner as provided in
paragraph (e) of Section 18 hereof with respect to Net Proceeds and the balance,
if any, of such Net Restoration Awards shall be applied in the manner set forth
in Section 18(g) hereof.
(ii) In the case of any Taking other than a Taking of the
nature referred to in paragraph (b) of this Section 19, all
-44-
Net Restoration Awards actually received by the Bank shall be applied in
accordance with Section 20 hereof.
(d) Notwithstanding anything to the contrary contained herein, in
the case of a Taking such that, in the Bank's judgment, the Project is an
economically viable architectural whole notwithstanding such Taking, the
Borrower shall have no obligation to commence or complete Restoration and all
Net Restoration Awards shall be applied in the order specified in Section 20
hereof.
SECTION 20. Application of Proceeds Upon Casualty or Substantial Taking.
Upon a Casualty, if the disposition of the Net Proceeds is governed by clause
(ii) of paragraph (c) of Section 18 hereof or upon a Taking, if the disposition
of the Net Restoration Awards is governed by clause (ii) of paragraph (c) or
paragraph (d) of Section 19 hereof, the Bank shall have the option, in the
Bank's sole discretion, to (a) make available the Net Proceeds or the Net
Restoration Awards, as the case may be, to the Borrower for Restoration in the
manner provided in paragraph (e) of Section 18 hereof or (b) apply such Net
Proceeds or Net Restoration Awards to the payment of any outstanding obligations
of the Borrower under the Reimbursement Agreement (including, without
limitation, the obligation to pay any Termination Payments or any Secured
Obligations B), the Loan Agreement, the Mortgages or this Agreement; provided,
however, that any balance of the Net Proceeds or Net Restoration Awards
remaining after such application shall be applied to the prepayment of the
principal of and interest on the Loan as required in accordance with Section
8.02(e) of the Loan Agreement.
If the Bank shall receive and retain any Net Proceeds or Net Restoration
Awards, in trust or otherwise, the indebtedness secured by this Agreement shall
be reduced only by the amount thereof
-45-
received and retained by the Bank and actually applied by the Bank in reduction
of the indebtedness secured by this Agreement.
Notwithstanding anything contained in this Agreement to the contrary, the
bank shall release the proceeds of any business interruption insurance
maintained hereunder to the Borrower provided that the Borrower satisfies the
conditions set forth in Sections 18(d)(i), (ii) and (iv) herein and provided,
further, that the Bank shall retain that portion of such insurance proceeds that
the Bank deems necessary to pay all amounts estimated to become payable with
respect to the Secured Obligations, the Secured Obligations B, and to pay any
debt service with respect to the GDB Loan during the period estimated by the
Borrower and approved to the Bank as necessary for the completion of the
Restoration, the balance of such insurance proceeds to be released in accordance
with the other terms and conditions set forth herein, as applicable.
SECTION 21. Representations and Warranties. The Borrower hereby represents
and warrants to the Pledgees as follows:
(a) The Borrower is the holder of and has in its possession the
Notes, all of which are issued by it free and clear of all mortgages, pledges,
assignments, liens, encumbrances, charges or rights of others of any kind,
except those liens created hereby.
(b) The exercise by the Pledgees of any right and remedy in
accordance with the terms of this Agreement will not contravene law or any
contractual restrictions binding on or affecting the Borrower, or any of its
properties, and will not as a result of any agreement to which the Borrower is a
party result in or require the
-46-
creation of any lien, security interest or other charge of encumbrance upon or
with respect to any of Borrower's properties.
(c) No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or other regulatory body is
required for (i) the grant by the Borrower, or the perfection, of the security
interest purported to be created hereby in the Notes; or (ii) the exercise by
the Pledgees of any right and remedy hereunder.
SECTION 22. Preservation of Property. The Borrower will not alter, add to,
remove or demolish any building, structure or property forming part of the
Mortgaged Property without the prior written consent of the Bank, except to the
extent otherwise provided in the Reimbursement Agreement.
SECTION 23. Foreclosure of Mortgage Notes and/or Termination Payments
Note. If an Event of Default shall have occurred and be continuing or if a
Termination Payments Event of Default shall have occurred and be continuing, the
Bank shall have the right to foreclose on the lien of the pledge herein with
respect to the Mortgage Notes or the Termination Payments Note, respectively,
granted without demand or notice (except as provided below), and full power and
authority are hereby given to the Bank to alienate the Mortgage Notes or the
Termination Payments Note, respectively, at such place as the Bank may deem
best, before a Notary Public, at public auction, upon the giving of the notices
required by, and as provided under Article 1771 of the Civil Code of Puerto Rico
(31 L.P.R.A. Sec. 5030). The bank may also, at its option, bring legal action or
proceedings for the collection of the Secured Obligations, the Secured
Obligations B and/or the Termination Payments Obligations, and, at its option,
simultaneously foreclose on either or both of the Mortgages without first
alienating all or
-47-
any portion of the pledge. In the of a foreclosure of this collateral pledge,
the proceeds thereof shall be applied in accordance with Section 4 hereof. In
the event of a foreclosure of the Mortgaged Property, or any portion thereof,
the proceeds thereof shall be applied in accordance with the applicable
provisions of the respective Mortgages.
SECTION 24. Offsets, Counterclaims and Defenses. The Bank shall take the
Mortgages, the Notes and this Agreement free and clear of all offsets,
counterclaims or defenses of any nature whatsoever, which Borrower may have
against the Authority or the Bank, and no such offset, counterclaim or defense
shall be interposed or asserted by Borrower in any action or proceeding brought
by the Bank and any such right to interpose or assert any such offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrower to the fullest extent permitted by law.
SECTION 25. Right of Entry. The Pledgees and their agents shall have the
right to enter and inspect the Mortgaged Property, or any portion thereof, to
the extent the Mortgagee is so permitted under the terms of the respective
Mortgages.
SECTION 26. Estoppel Certificate. Within 15 days after request therefor
from the Bank or the Authority, which request may not be made more often than
once every six months, the Borrower will deliver to such party a certificate
executed by the Borrower, stating the amount due on Mortgage Note A, the
Leasehold Mortgage, each of the Mortgages and, for the Bank only, the
Termination Payments Note and Mortgage Note B, and to the effect that as of the
date of such certificate no Default or Event of Default and, for the Bank only,
no Termination Payments Event of Default, has occurred and is continuing
thereunder or under this Agreement, or,
-48-
if any such Default, Event of Default or Termination Payments Event of Default
has occurred and is continuing, describing in reasonable detail each such
Default, Event of Default or Termination Payments Event of Default and the
action, if any, taken or being taken to cure the same. Any such statement may be
relied upon by the Bank, its participants, the Authority (except with respect to
the Termination Payments Note), and any future mortgagee, pledgee or purchaser
of all or any of the Mortgaged Property.
SECTION 27. Right to Cure Defaults. If default in the performance of any
of the covenants of the Borrower herein occurs or if an Emergency exists with
respect to all or any of the Mortgaged Property, the Bank, may, in its sole and
absolute discretion, remedy the same and for such purpose shall have the right
to the extent permitted by law, and upon notice to the Borrower (except in the
case of an Emergency) immediately to enter upon the Mortgaged Property or any
portion thereof without thereby becoming liable to the Borrower or any Person in
possession thereof holding under the Borrower. If the Bank shall remedy such
default or Emergency or appear in, defend, or bring any action or proceeding to
protect its interest in the Mortgaged Property or to foreclose any or all of the
Notes or either or both of the Mortgages, the costs and expenses thereof
(including attorneys' fees and expenses), with interest as provided in the Notes
or the Termination Payments Note, as the case may be, shall be paid by the
Borrower upon demand.
SECTION 28. Right to Notices under Mortgages. The Borrower agrees to
provide the Pledgees with copies of all and any notices that the Borrower is
required, in its capacity as Mortgagor, to deliver to the Mortgagee under the
Mortgages.
-49-
SECTION 29. Changes in Laws Regarding Taxation. In the event of the
enactment of any law by the Legislature of the Commonwealth of Puerto Rico
changing in any way the laws for the taxation of mortgages on real property or
personal property or debts secured by mortgages or the manner of the collection
of any such taxes, and imposing a tax, either directly or indirectly, on the
Mortgages, the Notes, or this Agreement, Borrower shall, if permitted by law,
pay any tax imposed as a result of any such law within the statutory period or
within fifteen (15) days after demand by the Pledgees, whichever is less;
provided the Borrower will not claim or demand or be entitled to any credit or
credits against the Pledgees on account of the obligations secured hereunder for
any part of the taxes assessed against the Mortgaged property or any part
thereof, and no deduction shall otherwise be made or claimed from the taxable
value of the Mortgaged Property, or any part thereof, by reason of the
Mortgages, this Agreement or the obligations secured hereunder.
SECTION 30. Officers of Authority and Bank Not Liable. All covenants,
stipulations, promises, agreements and obligations of the Authority and/or the
Bank contained herein shall be deemed to be covenants, stipulations, promises,
agreements and obligations of the Authority and/or the Bank and not of any
member of the governing body of the Authority or any officer, agent, servant or
employee of the Authority or of the Bank, respectively, in his individual
capacity, and no recourse shall be had for any claim based thereon or hereunder
against any member of the governing body of the Authority or any officer, agent,
servant or employee of the Authority or of the Bank, respectively, except, in
the case of the Bank only (and not any director, other official, officer, agent,
servant or employee thereof), for any claim resulting solely and directly from
the gross negligence or willful misconduct of the Bank.
-50-
SECTION 31. No Charge Against Authority Credit. No provision hereof shall
be construed to impose a charge against the general credit of the Authority or
shall impose any personal or pecuniary liability upon any director, official or
employee of the Authority.
SECTION 32. Authority Not Liable. Notwithstanding any other provision of
this Agreement, (a) the Authority shall not be liable to the Borrower, the Bank,
any holder of any of the Bonds, or any other person for any failure of the
Authority to take action under this Agreement unless the authority (i) is
requested in writing by an appropriate person to take such action and (ii) is
assured of payment of or reimbursement for any expenses in such action, and (b)
except with respect to any action for specific performance or any action in the
nature of a prohibitory or mandatory injunction, neither the Authority nor any
director of the Authority or any other official or employee of the Authority
shall be liable to the Borrower, the Bank, any holder of any of the Bonds, or
any other person for any action taken by it or by its officers, servants, agents
or employees, or for any failure to take any action under this Agreement. In
acting under this Agreement, or in refraining from acting under this Agreement,
the Authority may conclusively rely on the advice of its legal counsel.
SECTION 33. Bank Not Liable. Notwithstanding any other provision of this
Agreement, (a) the Bank shall not be liable to the Borrower, the Authority, any
holder of any of the Bonds, or any other person for any failure of the Bank to
take action under this Agreement, unless the Bank (i) is requested in writing by
an appropriate person to take such action and (ii) is assured of payment of or
reimbursement for any expenses in such action, and (b) except with respect to
any action for specific performance or any action in the nature of a prohibitory
or mandatory injunction, neither the Bank nor any director of the Bank or any
other official
-51-
or employee of the Bank shall be liable to the Borrower, the Authority, any
holder of any of the Bonds, or any other person for any action taken by it or by
its officers, servants, agents or employees or for any failure to take any
action under this Agreement, except that the Bank only (and not any director,
other official, employee, officer, servant or agent thereof) may be liable if
such action or failure to act results solely and directly from the gross
negligence or willful misconduct of the Bank. In acting under this Agreement or
in refraining from acting under this Agreement, the Bank may conclusively rely
on the advice of its legal counsel.
SECTION 34. Waivers. In view of the assignment of the Authority's rights
under and interest in this Agreement to the Trustee by the provisions of the
Trust Agreement, the Authority shall have no power to waive the performance by
the Borrower of any provision hereunder or extend the time for the correction of
any default of the Borrower without the consent of the Trustee to such waiver.
The consent of the Trustee, however, shall not be required for actions permitted
to be taken by the Bank without the consent or approval of the Authority in
accordance with the terms hereof.
SECTION 35. Indemnities. The Borrower shall protect, indemnify and save
harmless the Pledgees from and against all losses, liabilities, obligations,
damages, penalties, claims, causes of action, costs, charges, and expenses
(including, without limitation, attorney's fees and expenses) which may be
imposed upon or incurred by or asserted against the Pledgees by reason of (a)
any accident, injury or damage to any person or property occurring on or about
the Mortgaged Property or any part thereof, (b) any design, construction,
operation, use or non-use or condition of the Mortgaged Property or any part
thereof, including, without limitation, claims or penalties arising from
violation of any Legal
-52-
Requirement, as well as any claim based on any patent or latent defect, whether
or not discoverable by the Pledgee, any claim the insurance as to which is
inadequate, and any claim in respect of any adverse environmental impact or
effect, (c) any failure on the part of the Mortgagor to perform or comply with
any of the provisions hereof or contained in either of the Mortgages, (d) any
necessity, in the Bank's judgment, to defend any of the rights, title or
interest conveyed or created by this Agreement, the Mortgages, or the Notes, (e)
ownership by the Mortgagor of any interest in the Mortgaged Property or receipt
of any rent or other sum therefrom, (f) any performance of or failure to perform
any labor or services or furnishing of or failure to furnish any materials or
other property in respect of the Mortgaged Property, or any part thereof, (g)
any negligence or tortious act or omission on the part of the Mortgagor or any
of its agents, contractors, servants, employees, tenants, lessees, sublessees,
licensees, guests or invitees, (h) the Bank's or the Authority's ownership of
any interest in the Mortgaged Property or any part thereof, (i) any other
relationship that has arisen or may arise between the Pledgees, the Mortgagor,
the Mortgaged Property, or any of the foregoing, as a result of the execution
and delivery of the Notes, this Agreement, the Mortgages, or any other action
contemplated hereby, thereby or by any other document executed in connection
with the loan by the Authority to the Mortgagor, and (j) any claim, action or
other proceeding brought by or on behalf of any other person against the Bank as
the holder of, or by reason of its interest in, any sum deposited or paid
hereunder or in connection herewith, including, without limitation, any fund
established to hold the proceeds of the loan made by the Authority to the
Mortgagor, any insurance proceeds or condemnation awards received in connection
herewith, or any other amounts received in connection herewith.
-53-
SECTION 36. Limitation of Liability. Notwithstanding any thing to the
contrary contained in this Pledge Agreement, no recourse shall be had, whether
by levy or execution or otherwise, for the payment of the principal of or
interest on, or other amounts owed under this Pledge Agreement, or for any claim
based on this Pledge Agreement or in respect thereof, against any partner of the
Mortgagor or any predecessor, successor or affiliate of any such partner or any
of their assets (other than from the interest of such partner in the Mortgagor),
or against any principal, partner, shareholder, officer, director, agent or
employee of any such partner (other than from the interest of any such person in
such partner), nor shall any such persons be personally liable for any such
amount or claims, or liable for any deficiency judgment based thereon or with
respect thereto. The sole remedies of the Bank and/or the Authority with respect
to the hereinbefore mentioned amounts and claims shall be against the assets of
the Mortgagor, including the Mortgaged Property, and all such liability of the
aforesaid persons, except as expressly provided in this Section 36 is expressly
waived and released as a condition of and as consideration for the execution of
this Pledge Agreement. Anything in this Section to the contrary notwithstanding
(A) nothing contained in this Pledge Agreement (including, without limitation,
the provisions of this Section 36) shall constitute a waiver of any indebtedness
of Mortgagor evidenced hereby or any of the Mortgagor's other obligations or
shall be taken to prevent recourse to and the enforcement against the Mortgagor
of all the liabilities, obligations and undertakings contained in this Pledge
Agreement; (B) this Section 36 shall not be applicable to a breach by any person
of any independent obligation to the Bank and/or the Authority; and (C) this
Section 36 shall not be applicable to the responsible party to the extent and in
respect of any claim the Bank would otherwise have against such party for (i)
fraud by such party, (ii) misappropriation of funds or other property by such
-54-
party, or (iii) damage to the Project or any part thereof intentionally
inflicted in bad faith by such party. For the purposes of the foregoing, the
term "shareholder" shall be deemed to include the shareholders of any
corporation which is a shareholder of a corporation and the term "partner" shall
be deemed to include the partners of any partnership which is a partner of a
partnership.
SECTION 37. Authority's Covenant to Cooperate. In the event it may be
necessary, for the proper performance of this Pledge Agreement that the Bank
take any action, execute and deliver any other document or do any other thing in
furtherance of the purposes hereof, the Authority agrees to cooperate in such
matters.
SECTION 38. Assignment by the Authority. The Authority will assign to the
Trustee its rights under and interest in this Agreement (except for its rights
to receive notices, reports and other statements), including its rights to any
payments, receipts and revenues receivable by it under or pursuant to this
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized on the date
first above written, in San Juan, Puerto Rico.
PUERTO RICO INDUSTRIAL, MEDICAL,
EDUCATIONAL AND ENVIRONMENTAL EL CONQUISTADOR PARTNERSHIP L.P.
POLLUTION CONTROL FACILITIES
FINANCING AUTHORITY By: Kumagai Caribbean, Inc.
By:________________________________ By: /s/________________________________
Name: Francisco Sierra Mendez Name: Toru Fujita Ueda
Title: Assistant Executive Director Title: Vice President
-55-
By: WKA El Con Associates
By: /s/_________________________________
Name: Hugh Alanson Andrews
Title: Authorized Signatory
THE MITSUBISHI BANK, LIMITED
New York Branch
By:_____________________________
Name: Tadaaki Hamada
Title: Senior Vice President
Affidavit No. 105 (copy)
Acknowledged and subscribed before me by Francisco Sierra Mendez, of legal
age, married, attorney-at-law and resident of Juncos, Puerto Rico, in his
capacity as Assistant Executive Director of Puerto Rico Industrial, Medical,
Educational and Environmental Pollution Control Facilities Financing Authority,
Toru Fujita Ueda, of legal age, married, executive and resident of San Juan,
Puerto Rico, in his capacity as its Vice President of Kumagai Caribbean, Inc., a
general partner of El Conquistador Partnership L.P. and by Hugh Alanson Andrews,
of legal age, married, executive and resident of San Juan, Puerto Rico, in his
capacity as Authorized Signatory of WKA El Con Associates, a general partner of
El Conquistador Partnership L.P., and by Tadaaki Hamada, in his capacity as
Senior Vice President of the Mitsubishi Bank, Limited, acting through its New
York Branch, identified by the means set forth in Article 17(c) of the Notarial
Law of Puerto Rico, in San Juan, Puerto Rico, this 7th day of February, 1991.
/s/______________________________
Notary Public