SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT, dated August 30, 1988, among XXXXXXXX
HOSPITALITY MANAGEMENT CORP., a corporation organized and existing under the
laws of Delaware ("Xxxxxxxx"); XXXXXXX DE PUERTO RICO ASSOCIATES, INCORPORATED,
a corporation organized and existing under the laws of Delaware and authorized
to do business in the Commonwealth of Puerto Rico (the "Borrower"), in favor of
SCOTIABANK DE PUERTO RICO (the "Bank").
PRELIMINARY STATEMENTS
(1) The Bank has entered into an Operating Credit and Term Loan
Agreement dated of even date herewith with the Borrower (said agreement, as it
may hereafter be amended or otherwise modified from time to time, being the
"Credit Agreement", the terms defined therein and not otherwise defined herein
being used herein as therein defined) pursuant to which the Bank has agreed to
lend the Borrower the sum of U.S. $35,000,000 (the "Term Loan").
(2) The Borrower is now obligated to Xxxxxxxx pursuant to an Operating
and Management Agreement (the "Management Agreement", a copy of which is
attached hereto marked Schedule I hereof), dated September 23, 1983 to pay to
Xxxxxxxx various management fees and other sums including an Incentive
Management Fee (as said term is defined in the Management Agreement).
(3) Pursuant to the terms of the Credit Agreement, it is a condition
precedent to the making of the loan by the Bank to the Borrower that Xxxxxxxx
subordinate its future right to receive payment of the "Incentive Management
Fees" (as said term is defined in the Management Agreement) under the Management
Agreement to the Borrower's payment to the Bank when due of the principal and
interest payments to be made on the Loan as set forth in the Credit Agreement
and the "Term Loan Note" as said term is defined in the Credit Agreement and to
Borrower's compliance with the provisions of the Credit Agreement as they
pertain to the establishment of the "Replacement Reserve" as said term is
defined in the Credit Agreement.
(4) Further, it is a condition to the Credit Agreement that Xxxxxxxx
xxxxx to the
Bank the right, at the Bank's election, to terminate the Management Agreement in
the event of the Bank's foreclosure of its security and/or in the event the Bank
shall be entitled to request the appointment of a receiver pursuant to the terms
of the Credit Agreement.
The payment obligations of the Borrower as set forth in paragraph (3)
above are hereinafter collectively referred to as the "Secured Obligations".
NOW, THEREFORE, the Borrower, in consideration of the premises and in
order to induce the Bank to make Advances under the Credit Agreement, and
Xxxxxxxx, for good and valuable consideration (the receipt of which is hereby
acknowledged), each hereby agree as follows:
SECTION 1. Agreement to Subordinate. Xxxxxxxx and the Borrower each
agree that the future payment of the Incentive Management Fees under the
Management Agreement and the continuance of the Management Agreement are and
shall be subject to (to the extent and in the manner hereinafter set forth) the
timely payment and performance by the Borrower or Xxxxxxxx of the Secured
Obligations and to the absence of the institution by Bank of foreclosure and/or
receivership procedures under the Credit Agreement.
For the purposes of this Agreement, the obligations requiring payment
of the Secured Obligations shall not be deemed to have been complied with with
respect to any interest and/or principal payment unless the Bank shall have
received such payments as required under the Credit Agreement and thereafter
shall not be required to return such payments pursuant to any bankruptcy or
similar proceeding involving the Borrower.
SECTION 2. No Discharge on the Subordinated Obligation. Xxxxxxxx agrees
not to ask, demand, xxx for, take or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any other manner
(including without limitation from or by way of collateral) payment of any of
the Incentive Management Fees payable to it under the Management Agreement,
while any of the Secured Obligations shall remain unpaid or unsatisfied;
provided, however that Xxxxxxxx may receive and the Borrower may pay such
Incentive Management Fees, on the stated dates of payment thereof if, at the
time of making any such payment no default as to the Secured Obligations exists
which default has not been cured by Borrower or Xxxxxxxx within the cure period
provided in the Credit Agreement.
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SECTION 3. In Furtherance of Subordination. Xxxxxxxx agrees, upon
receiving written notice from the Bank of Borrower's failure to pay or perform
the Secured Obligations (a "Notice of Default") that:
(a) Any payments or distributions of Incentive Management Fee's
which are received by Xxxxxxxx after the date of a Notice of Default
and which are not attributable to periods prior to the date of the
Notice of Default contrary to the provisions of this Agreement shall be
received in trust by Xxxxxxxx and held for the benefit of the Bank,
shall be segregated from other funds and property held by Xxxxxxxx and
shall be immediately on demand paid over to the Bank and applied by the
Bank to the payment of the Secured Obligations.
(b) The Bank is hereby authorized to demand specific performance of
this Agreement, whether or not the Borrower shall have complied with
any of the provisions hereof applicable to it, at any time when
Xxxxxxxx shall have failed to comply with any of the provisions of this
Agreement applicable to it.
SECTION 4. No Commencement of Any Proceeding. Xxxxxxxx agrees that, so
long as any of the Secured Obligations shall remain unpaid or unperformed, it
will not commence, or join with any creditor other than the Bank in a proceeding
to collect the Incentive Management Fees subordinated hereunder, but nothing
herein shall constitute a waiver by Xxxxxxxx of its claim against Borrower with
respect to such fees.
SECTION 5. Rights of Subrogation. Xxxxxxxx agrees that no payment or
distribution to the Bank pursuant to the provisions of this Agreement shall
entitle Xxxxxxxx to exercise any rights of subrogation in respect thereof until
the Secured Obligations shall have been paid in full.
SECTION 6. Subordination Instrument; Further Assurances. Xxxxxxxx and
the Borrower each will, at its expense and at any time and from time to time,
promptly execute and deliver all further deeds, instruments and documents, and
take all further action, that may be reasonably necessary or desirable, or that
the Bank may reasonably request, in order to protect the right or interest
granted or purported to be granted hereby or to enable the Bank to exercise and
enforce its rights and remedies hereunder.
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SECTION 7. No Change in or Disposition of Subordinated Obligation.
Xxxxxxxx agrees that so long as the Loan is unpaid:
(a) Any sale, assignment, pledge, encumbrance or other disposition
of its right to receive the Incentive Management Fees shall be subject
to the terms of this Agreement; and
(b) The Management Agreement shall not be changed in such a manner
as to have an adverse effect upon the rights or interests of the Bank
hereunder.
SECTION 8. Obligations Hereunder Not Affected. All rights and interests
of the Bank hereunder, and all agreements and obligations of Xxxxxxxx and the
Borrower under this Agreement, shall remain in full force and effect
irrespective of:
(i) any lack of validity or enforceability of the Credit
Agreement, the Term Loan Note or any other agreement or instrument
relating thereto;
(ii) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other
amendments or waiver of or any consent to departure from the Notes
or the Credit Agreement;
(iii) any exchange, release or non perfection of any collateral
given under the Credit Agreement; or
(iv) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Borrower in respect of
the Secured Obligations.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by the Bank upon the insolvency, bankruptcy or
reorganization of the Borrower or otherwise, all as though such payment had not
been made.
SECTION 9. Representations and Warranties.
(a) Xxxxxxxx hereby represents and warrants as follows:
(i) It is a corporation duly incorporated, validly existing and
in
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good standing under the laws of the jurisdiction indicated at the
beginning of this Subordination Agreement.
(ii) The execution, delivery and performance by it of this
Subordination Agreement are within Xxxxxxxx' corporate powers and
have been duly authorized by all necessary action and do not
contravene (1) its charter or by-laws or (2) any law or contractual
restriction binding on or affecting Xxxxxxxx.
(iii) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by
Xxxxxxxx of this Subordination Agreement.
(iv) This Subordination Agreement is the legal, valid and binding
obligation of Xxxxxxxx enforceable against Xxxxxxxx in accordance
with its terms.
(b) The Borrower hereby repeats, restates and reiterates herein all
of the representations and warranties of Borrower set forth in the
Credit Agreement all of which are hereby incorporated by reference
herein as if set forth at length herein.
SECTION 10. Amendments, Etc.. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by Xxxxxxxx or the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 11. Expenses. The Borrower agrees to pay, upon demand, to the
Bank and Xxxxxxxx the amount of any and all reasonable expenses, including the
reasonable fees and expenses of its counsel, which the Bank may incur in
connection with the exercise or enforcement of any of the rights or interests of
the Bank hereunder. No such fees or expenses shall be payable if judgment in any
proceeding instituted for the exercise or enforcement of such rights or
interests is rendered against the Bank.
SECTION 12. Addresses for Notices. All demands, notices and other
communications provided for hereunder shall be in writing, and, if to Xxxxxxxx,
mailed or
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telegraphed or delivered to it, addressed to it at:
WMS INDUSTRIES INC.
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
FAX Number: (000) 000-0000
if to the Borrower or the Bank, mailed or delivered to it, addressed to it at
the address of the Borrower or the Bank specified in the Credit Agreement, or as
to each party at such other address as shall be designated by such party in a
written notice to each other party complying as to delivery with the terms of
this Section. All such demands, notices and other communications shall, when
mailed or telegraphed, be effective when received.
SECTION 13. No Waiver, Remedies. No failure on the part of the Bank to
exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
SECTION 14. Continuing Agreement. This Agreement is a continuing
agreement and shall (i) remain in full force and effect until the Secured
Obligations shall have been paid in full, (ii) be binding upon Xxxxxxxx, the
Borrower and their respective successors and assigns, and (iii) inure to the
benefit of and be enforceable by the Bank, its successors, transferees and
assigns.
SECTION 15. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Puerto Rico.
SECTION 16. Reinstatement of Management Agreement. Borrower and
Xxxxxxxx agree, that if after the Bank shall have terminated the Management
Agreement, the Bank's foreclosure proceedings are terminated or withdrawn by
reason of settlement, compromise or otherwise, then and in such event the
Management Agreement shall be reinstated for all purposes as of the date of the
Bank's termination thereof.
IN WITNESS WHEREOF, Xxxxxxxx and the Borrower each has caused this
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first
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above written.
XXXXXXXX HOSPITALITY
MANAGEMENT CORP.
By:
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XXXXXXX DE PUERTO RICO
ASSOCIATES, INCORPORATED
By:
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ACKNOWLEDGED
SCOTIABANK DE PUERTO RICO
By:
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Affidavit No. 11,733
Acknowledged and subscribed to before me Xxxxxx Xxxxx Xxxxxx, of legal
age, married, executive and resident of New York, New York, as President of
Xxxxxxx de Puerto Rico Associates, Incorporated, and Xxxx X. Xxxxxxx, of legal
age, married, executive and resident of San Xxxx, Puerto Rico, as of Xxxxxxxx
Hospitality Management Corporation, to me personally known. In San Xxxx, Puerto
Rico, this 30th day of August, 1988.
Notary
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