SUBORDINATION AGREEMENT
This Subordination Agreement, dated January 20, 1993, among XXXXXXXX
HOSPITALITY MANAGEMENT CORP., a corporation organized and existing under the
laws of Delaware ("XXXXXXXX"); XXXXXXX DE SAN XXXX ASSOCIATES, a New York
partnership engaged in business in the Commonwealth of Puerto Rico (the
"BORROWER"), and in favor of THE BANK OF NOVA SCOTIA (the "BANK").
PRELIMINARY STATEMENTS
1. The Bank has entered into a Credit Agreement dated as 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 to the Borrower the
aggregate sum of US$34,000,000 (the "LOAN").
2. The Borrower is now obligated to Xxxxxxxx pursuant to an Operating
and Management Agreement dated July 31, 1984, as amended as of October 25, 1984
and October 1, 1986 (collectively, the "MANAGEMENT AGREEMENT"), copies of which
are attached hereto marked SCHEDULE I hereof), to pay to Xxxxxxxx a Basic
Management Fees, an Incentive Management Fee (as said terms are defined in the
Management Agreement (hereinafter individually, the "BASIC FEES" and the
"INCENTIVE FEES", and collectively referred to as the "FEES").
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 right (i) to receive payment of the Basic and Incentive Fees
under the Management Agreement in the event of
arrears in the payments on the Term Loan Note or to the Furniture, Fixture and
Equipment Reserve Account under the Credit Agreement and (ii) to receive payment
of the Incentive Fees under the Management Agreement in the event any other
Event of Default under the Credit Agreement occurs and remains unremedied in
excess of 30 days from the date of the occurrence. The payment obligations of
the Borrower in respect of the Term Loan and the F. F. & R. Reserve Account as
set forth this paragraph 3 are hereinafter collectively referred to as the
"SECURED OBLIGATIONS".
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 the Bank declares a default under the Term Loan or
Operating Credit facilities of the Credit Agreement and the Bank institutes
foreclosure or receivership proceedings as a result of such default.
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 Basic Fees and the Incentive Fees under 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 future payment of Incentive Fees are
and shall be subject to (to the extent and in the manner hereinafter set forth)
the absence of the occurrence of an Event of Default other than non-payment of
the Secured Obligations which Event of Default shall remain uncured for 30 days.
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For purposes of this Agreement, the obligations requiring payment of the
Secured Obligations shall not be deemed to have been complied 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 Fees payable to it under the Management Agreement, while any of the Secured
Obligations shall remain unpaid or unsatisfied when due; provided, however that
(i) Xxxxxxxx may receive and the Borrower may pay such Fees, on the stated dates
of payment thereof if, at the time of making any such payment no default as to
the Secured Obligations exist which default has not been cured by Borrower or
Xxxxxxxx, and (ii) that Xxxxxxxx may receive payments of Basic Fees if the event
of default that occurs under the Credit Agreement is not a failure to pay the
Secured Obligations when due.
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 Fees which are
received by Xxxxxxxx after the date of such Notice of Default
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
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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 and
cure any such breach 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 when
due, it will not commence, or join with any creditor other than the Bank in a
proceeding to collect the 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 or 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 it's right to receive the 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 Notes issued thereunder, or of 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 Secured
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 payment of any of the Secured Obligations is
rescinded or must otherwise be returned
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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 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 corporate 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.
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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 telegraphed, faxed or delivered to it, addressed to it at:
Xxxxxxxx Hospitality Management Corporation
El San Xxxx Hotel & Casino
000 X. Xxxx Xxxxx Xxxx
Xxxx Xxxxx, Xxxxxx Xxxx 00000
Attention: Xx. Xxxx X. Xxxxxxx
Fax Number (000) 000-0000
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WMS Industries, Inc.
Xxxxx Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx
Attention: President
Fax Number (000) 000-0000
Copy to: Xxxxxxx X. Xxxxxx, Esq.
Xxxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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.
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Section 14. Continuing and Superseding 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. This Agreement supersedes any other agreements regarding the
subordination of the Basic and Incentive Fees and the termination of the
Management Agreement among the parties hereto or the AFICA Documents.
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 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.
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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 above written.
XXXXXXX DE SAN XXXX ASSOCIATES XXXXXXXX HOSPITALITY
MANAGEMENT CORP.
By: ______________________________ By: ______________________________
Xxxx X. Xxxxxxx Xxxx X. Xxxxxxx
Authorized Party President
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Affidavit Number: 2954 (copy)
Subscribed to before me by Xxxx X. Xxxxxxx, of legal age, married and
resident of San Xxxx, Puerto Rico, as authorized signatory of Xxxxxxx de San
Xxxx Associates and as President of Xxxxxxxx Hospitality Management Corp., who
is personally known to me, in San Xxxx, Puerto Rico on this 20th day of January,
1993.
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Notary Public
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