LOAN AGREEMENT Between PUERTO RICO INDUSTRIAL, TOURIST, EDUCATIONAL, MEDICAL AND ENVIRONMENTAL CONTROL FACILITIES FINANCING AUTHORITY PALMAS COUNTRY CLUB, INC. Dated October 26, 2000
Exhibit
10.28
Between
PUERTO
RICO INDUSTRIAL, TOURIST,
EDUCATIONAL,
MEDICAL AND ENVIRONMENTAL CONTROL
FACILITIES
FINANCING AUTHORITY
PALMAS
COUNTRY CLUB, INC.
Dated
October 26, 2000
This Loan Agreement has been assigned
to PaineWebber Trust Company of Puerto Rico, as Trustee under a Trust Agreement
dated October 26, 2000, as amended or supplemented from time to time, from
Puerto Rico Industrial, Tourist, Educational, Medical and Environmental Control
Facilities Financing Authority to such Trustee. A copy of such Trust Agreement
may be inspected at the corporate trust office of the Trustee at American
International Plaza, 9th Floor,
000 Xxxxx Xxxxxx Xxxxxx, Xxx Xxxx, Xxxxxx Xxxx 00000.
LOAN AGREEMENT, dated October 26, 2000, by and among
PUERTO RICO INDUSTRIAL,
TOURIST, EDUCATIONAL, MEDICAL AND ENVIRONMENTAL CONTROL FACILITIES FINANCING
AUTHORITY, a public corporation and governmental instrumentality of the
Commonwealth of Puerto Rico and PALMAS COUNTRY CLUB, INC. , a
corporation organized and existing under the laws of the State of
Delaware.
In consideration of the respective
representations and agreements herein contained, the parties hereto agree as
follows:
ARTICLE
I
"Act" means Act Xx. 000 xx xxx
Xxxxxxxxxxx xx Xxxxxx Xxxx, approved June 27, 1977, as amended, and all future
acts supplemental thereto or amendatory thereof.
"Act of Bankruptcy" means the
filing of a petition commencing a case under the United States Bankruptcy Code
by or against the Borrower or the Authority.
"Administrative Fee" means the
one time fee to the Authority in the amount of one percent (1%) of the principal
amount of the Bonds.
"Affiliate" means a
corporation, partnership, joint venture, association, business trust or similar
entity organized under the laws of the Commonwealth, the United States of
America or any state or territory thereof which: (i) is directly or indirectly
controlled by the Borrower or by any person which directly or indirectly
controls the Borrower; or (ii) controls, directly or indirectly, the Borrower.
For purposes of this definition, "control" means the power to direct the
management and policies of a person through the ownership of not less than a
majority of its voting securities or the right to designate or elect not less
than a majority of the members of its board of directors or other governing
board or body by contract or otherwise,
"Agreement" or "this Agreement" means this
Loan Agreement, including any amendments or supplements hereto as permitted by
the Trust Agreement.
"Authority" means Puerto Rico
Industrial, Tourist, Educational, Medical and Environmental Control Facilities
Financing Authority, a body corporate and politic constituting a public
corporation and governmental instrumentality of the Commonwealth and any
successor thereto.
"Authority Representative"
means each of the persons at the time designated to act on behalf of the
Authority in a written certificate furnished to the Borrower and the Trustee
containing the specimen signature of such person and signed by an authorized
officer of the Authority.
"Board" means the board of
directors of the Authority as constituted from time to time and defined by the
Act, or if said board shall be abolished, then the board, body or officer
succeeding to the principal functions thereof or to whom the powers of the
Authority shall be given by law.
"Bond Fund" means the fund
created and so designated by Section 501 of the
Trust Agreement.
"Bonds" means the bonds issued
under Section
208 of the Trust Agreement.
"Borrower" means Palmas
Country Club, Inc., a corporation organized and existing under the laws of the
State of Delaware.
"Borrower Representative"
means each of the persons at the time designated to act on behalf of the
Borrower in a written certificate furnished to the Authority and the Trustee
containing the specimen signature of such person and signed by an authorized
officer of the Borrower.
"Business Day" means any day
of the year other than a Saturday, Sunday or other day in which commercial banks
in the Commonwealth are closed for business to the general public.
"Certificate of Non-Bankruptcy"
means, with respect to any day on which any payment is due and payable on
the Bonds, a certificate required to be delivered to the Trustee, in the form of
Exhibit A hereto, to the effect that as of the date of such certificate, no Act
of Bankruptcy has occurred.
"Closing" means the date on
which this Agreement becomes legally effective, the same being the date on which
the Bonds are initially issued and delivered against payment
therefor.
"Code" means the United States
Internal Revenue Code of 1986, as amended, and the rules and regulations
thereunder.
"Commonwealth" means the
Commonwealth of Puerto Rico.
"Construction Fund" means the
fund created and so designated pursuant to Section 401 of the
Trust Agreement.
"Cost", as applied to the
Project, without intending thereby to limit or restrict any proper definition of
such word under the Act, has the meaning set forth in Section 403 of the
Trust Agreement.
"Eligible Moneys" means: (i)
all amounts drawn by the Trustee under the Letter of Credit, or otherwise
received from the Letter of Credit Issuer, and deposited to the credit of the
Bond Fund or the Debt Service Reserve Fund; (ii) all amounts in respect of
accrued interest, if any, deposited to the credit of the Bond Fund from the
proceeds of the initial sale of the Bonds; (iii) all amounts deposited to the
credit of the Bond Fund from the proceeds of the initial sale of the Bonds and
used by the Trustee to pay interest due on the Bonds for the first three
interest payment dates; (iv) all other amounts on deposit in the Construction
Fund, or the Debt Service Reserve Fund prior to the termination of the Letter of
Credit: (a) to the extent such amounts constitute: (A) proceeds received from
the initial sale of the Bonds deposited with the Trustee contemporaneously with
the issuance and sale of the Bonds (B) investment income generated by the funds
described in (i) through (iii) above or this clause (iv) deposited in the Debt
Service Reserve Fund and the Construction Fund or which have been on deposit
with the Trustee in separate and segregated accounts or sub-accounts in which no
other moneys are held for a period of ninety-four (94) consecutive days prior to
the day on which such moneys are to be used to pay interest on or principal "of
the Bonds, without the occurrence of an intervening Act of Bankruptcy; or (b) as
to which the. Trustee has received an Opinion of Counsel experienced in
bankruptcy matters to the effect that payment to the Bondholders of such moneys
would not constitute a transfer that may be voided under any provision of the
United States Bankruptcy Code in the event of an Act of Bankruptcy; and (v)
after the expiration of the Letter of Credit, the Bonds still being outstanding,
all amounts on deposit in any fund , under this Agreement from whatever
source.
"Eminent Domain" or "Taking" means the taking
pursuant to eminent domain or condemnation proceedings, or by any settlement or
compromise of such proceedings, or any voluntary conveyance of the Project or
any part thereof during the pendency of, or as a result of a threat of, such
proceedings.
"Event of Default" means, with
respect to this Agreement, each of the events set forth in Section
7.01.
"Event of Taxability" means:
(i) the failure by the Borrower to comply with the covenants provided in Section 5.10(a) or
5.10(b); or
(ii) the failure by the Borrower to comply with the representations made in
Section
2.02(g). An Event of Taxability shall be deemed to have occurred if any
of the certificates or reports required to be furnished under Section 5.10(c)
indicate that the Borrower has failed to comply with any of the covenants of
Section
5.1,0(a) or 5.10(b) or the
representations made in Section 2.02(g) and
that, as a result of such failure, interest paid or accrued on the Bonds to a
Qualifying Bondholder is includable in gross income under the Code, as in effect
on the Closing and subject to the payment of income taxes under the Code a
credit for the payment of which is not otherwise available' under the Code as in
effect on the date of such certificates or reports.
"Environmental Claim means any
claim, demand, notice of violation, suit, applicable and binding administrative,
or judicial proceeding, regulatory action, or order involving any Hazardous
Substance, Environmental Law, noise or odor pollution or any injury or threat of
injury to human health or the environment,
"Environmental Law" means any
applicable federal, state, Commonwealth, local law, regulation, applicable and
binding order, decree, opinion or agency requirement relating to: (i) the
handling, use, disposal or release of any Hazardous Substance; or (ii) the
protection of the environment or human health.
"Federal Taxes" means any
income taxes imposed under the Code.
"Hazardous Substance" means
-any
substance that is: (i) listed, classified or regulated pursuant to any
Environmental Law; or (ii) any petroleum product or by-product, asbestos
containing material, polychlorinated byphenyls, radioactive materials or
radon.
"Independent Accountants"
means Xxxxxx Xxxxxxxx, LLP, or any other firm of certified public
accountants experienced in federal tax matters that is selected by the Borrower
and approved by the Authority and the Initial Letter of Credit Issuer and that
is independent with respect to the Borrower within the meaning of the Code of
Professional Ethics of the American Institute of Certified Public
Accountants.
"Industrial Facilities" shall
have the meaning given to such term by the Act,
"Initial Letter of Credit"
means the irrevocable, transferable letter of credit, issued by the
Initial Letter of Credit Issuer in favor of the Trustee in an aggregate amount
equal to the unpaid principal of the outstanding Bonds plus one hundred
ninety-five (195) days' interest thereon.
"Initial Letter of Credit Issuer"
means Puerto Rico Tourism Development Fund, a body corporate constituting
a governmental instrumentality of the Commonwealth created pursuant to
Resolution Number 6275 of the Board of Directors. of Government Development Bank
for Puerto Rico.
"Initial Reimbursement Agreement"
means the Letter of Credit and Reimbursement Agreement, dated as of the
Date of Issuance, by and between the Borrower and the Initial Letter of Credit
Issuer providing for, among other things, the issuance of the Initial Letter of
Credit.
"Interest Payment Date" means
the 20th day of
each calendar month, commencing November 20, 2000.
"Letter of Credit" means the
Initial Letter of Credit or any Successor Letter of Credit, as the case may
be.
"Letter of Credit Issuer"
means the Initial Letter of Credit Issuer during the term of the Initial
Letter of Credit and thereafter shall mean the issuer of any Successor Letter of
Credit,
"Loan" means the loan of the
proceeds of the Bonds made by the Authority to the Borrower pursuant to Section
4.01.
"Person" means any individual,
corporation, partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or a government or any agency or political
subdivision thereof.
"Phase I Environmental Report"
means that certain Environmental Report dated October
____, 2000 prepared in connection with the Project.
"Plans and Specifications"
means, collectively, the plans and specifications prepared by the
Borrower for the Project.
"Project" means the
construction and equipping of an 18 hole championship golf course in Palmas del
Mar known as the Flamboyan Course, a 22,200 square foot golf clubhouse, a 5,600
square foot beach club house and other related facilities, and the refurbishment
of an 18 hole golf course in Palmas del Mar known as the Palm Course, more fully
described in Exhibit B hereto.
"Qualifying Bondholder" means
an owner of Bonds that is: (i) an individual who, during the entire taxable year
in which an Event of Taxability occurred, was a bona fide resident of the
Commonwealth; or (ii) a Commonwealth corporation or other foreign corporation
(for purposes of the Code) that is not engaged in any trade or business in the
United States.
"Reimbursement Agreement"
means the Initial Reimbursement Agreement or the Successor Reimbursement
Agreement at the time in effect, as the case may be.
"Successor Letter of Credit"
means an irrevocable, transferable letter of credit, in form acceptable
to the Trustee, in an amount sufficient (taking into account any adjustment
mechanism contained therein) to cover the full principal amount of the
outstanding Bonds on the effective date of such letter of credit and from time
to time at any time thereafter plus not less than one hundred ninety five (195)
days' interest thereon.
"Successor Reimbursement Agreement"
means an agreement between the Borrower and the Successor Letter of
Credit Issuer, providing for, among other things, the issuance of the Successor
Letter of Credit.
"Trust Agreement". means the Deed of Trust
Agreement, dated the Date of Issuance, by and between the Authority and the
Trustee, as the same may be amended or supplemented in accordance with the terms
thereof.
"Trustee" means the Trustee at
the time serving as such under the Trust Agreement, whether the original or
successor trustee.
(b) Unless the context shall
otherwise indicate, the words "Bond," "Bondholder," "owner," "Holder" and
"Person" shall include the plural as well as the singular number, and "Holder"
and "Bondholder" when used herein with respect to the Bonds shall mean the
holder or registered owner, as the case may be, of the Bonds at the time issued
and outstanding.
(c) Words
importing the redemption or calling for redemption of the Bonds shall not be
deemed to refer to or connote the payment of the Bonds at their stated
maturity.
(d) The captions or headings in
this Agreement are for convenience of reference only and in no way define, limit
or describe the scope or intent of any provisions or sections of this
Agreement.
(e) All references herein to
particular articles, sections or exhibits are references to articles, sections
or exhibits of this Agreement unless some other reference is
established.
(f) Except as provided in Section 8.03, any
inconsistency between the provisions of this Agreement and the provisions of the
Trust Agreement shall be resolved in favor of the provisions of the Trust
Agreement.
ARTICLE
II
(a) The Authority was duly created
and is validly existing under the laws of the Commonwealth as a body corporate
and politic constituting a public corporation and governmental instrumentality
of the Commonwealth.
(b) Under the provisions of the Act,
the Authority is duly authorized to enter into and to execute and deliver this
Agreement, the Security Agreements to which it is a party and the Trust
Agreement, to undertake the transactions contemplated by this Agreement, the
Security Agreements to which it is a party and the Trust Agreement, and to carry
out its obligations hereunder and thereunder.
(c) By duly adopted resolution, the
Authority has duly authorized the execution and delivery of this Agreement, the
Trust Agreement and the Security Agreements to which it is a party and the
issuance, sale, execution and delivery of the Bonds.
(d) Under existing law all
payments received by the Authority pursuant to this Agreement are exempt from
Commonwealth income taxation, duties, assessments and governmental
charges.
(a) It
is a constituted and validly existing corporation under the laws of the State of
Delaware and duly authorized to do business in the Commonwealth,
(b) It
has the power and authority to enter into and perform its obligations under this
Agreement and the Security Agreements to which it is a party.
(c) It
has the necessary power and authority to develop, construct and operate the
Project, and to conduct its operations as presently conducted or proposed to be
conducted.
(d) It
has duly authorized the execution, delivery and performance of this Agreement
and the Security Agreements to which it is a party.
(e) The execution and delivery by it
of this Agreement and the Security Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby and the
fulfillment of or compliance with the terms and conditions hereof and thereof do
not and will not conflict with the provisions of its organizational documents,
and do not and will not conflict with, or constitute on its part a breach of or
default under any indenture, deed of trust, mortgage, agreement or other
instrument to which it is a party or by which it or any of its property is bound
or conflict with, violate or result in a breach of any existing law, public
administrative rule or regulation, judgment, court order or consent decree to
which it or any of its property is now a party or is bound, or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of its property or assets under the terms of any instrument
or agreement other than this Agreement, the Trust Agreement or the Security
Agreements to
(f) It
will cause the Project to be operated as Industrial Facilities within the
meaning of the Act.
(g) (i)
During each of its taxable years while interest on the Bonds is paid or payable,
it will be engaged in trade or business only in Puerto Rico; (ii) for the
three-year period ending with the close of its taxable year immediately
preceding the payment of interest on the Bonds (or for such part of such period
as may be applicable), at least 80% of its gross income will be derived from
sources outside the United States and attributable to the active conduct of a
trade or business in Puerto Rico, such determination to be made under Section
861(c)(1)(B) of the Code, as in effect on the Closing; and (iii) interest on the
Bonds will not be treated as paid by' a trade or business conducted by it
outside the Commonwealth, such determination to be made under Section
884(f)(l)(A) of the Code, as in effect on the Closing.
(h) All
consents, approvals, licenses and permits of any governmental authority having
jurisdiction, or of any other person, required for the development, construction
and operation of the Project are, and shall remain, in full force and effect,
except for such licenses and permits which are not required to be in effect
prior to the commencement of the operations at the Project, all of which the
Borrower shall promptly and diligently pursue at the time required.
(i) Except
as may be set forth in the Phase I Environmental Report, to the best of its
knowledge, the Project, or the real estate subject to the Mortgage, is not in
violation of any applicable Environmental Law. It has not received any
Environmental Claims or is aware of any threatened Environmental Claims in
connection with the Project or such real estate.
ARTICLE
III
Section
3.03. Establishment
of Completion Date. The Completion Date for
the construction of the Project shall be evidenced to the Trustee by a
certificate delivered to the Trustee and signed by the Borrower Representative
setting forth the Cost of the Project and stating that, except for amounts not
then due and payable or the liability for the payment of which is being
contested or disputed by the Borrower, the construction of the Project has been
completed in accordance with the description thereof and the Plans and
Specifications therefor and the Cost of the Project has been paid. Such
certificate shall state that it is given without prejudice to any rights against
third parties which exist at the date .of such certificate or which may
subsequently come into being.
ARTICLE
IV
Repayment;
Maintenance of Project; Indemnity
The Borrower agrees to repay the Loan
in accordance with the provisions of this Agreement. The Borrower acknowledges
that the proceeds of the Loan will be delivered to the Trustee and applied on
behalf of the Borrower in accordance with this Agreement and the Trust
Agreement.
With respect to each date on which
the principal amount of, redemption premium, if any, or the interest on the
Bonds is payable (whether at maturity, upon acceleration, redemption or
otherwise), the Borrower will pay such additional amounts which, together with
all other moneys available therefor in the Bond Fund will be sufficient to
pay:
(a) all
interest which will become due and payable on the Bonds on such
date;
(b) the
principal amount of the Bonds and redemption premium, if any, which will become
due and payable on such date; and
(c) amounts,
if any, required to effect redemption or purchase of the Bonds on the dates
specified pursuant to Section 301 of the Trust Agreement.
The Borrower will pay the amounts it
is required to pay under clauses (a), (b) and (c) above directly to the Trustee
in immediately available funds for deposit in the Bond Fund. The Borrower shall
deposit or cause to be deposited such amounts with the Trustee no later than
10:00 a.m. (Atlantic Standard time) on the 94th day
immediately preceding the date on which the corresponding amounts are due on the
Bonds, except as provided in Sections 8.01 and
8.02.
All payments required to be made by
the Borrower under the terms of this Loan Agreement shall be made in lawful
money of the United States of America.
In addition, the Borrower agrees to
deposit with the Trustee for the credit of the Debt Service Reserve Fund amounts
sufficient to cover the required Debt Service Reserve Fund Requirement or to
eliminate any. Debt Service Reserve Deposit Deficiency within one (1) Business
Day from the date that such deficiency arises, except that if such deficiency
arises solely as a result of a decline in the market value of the investments
held to the credit of the accounts in the Debt Service Reserve Fund, such
deposit by the Borrower shall be made within three (3) Business Days after
receipt of notice of such deficiency from the Trustee.
To secure its obligation to make the
payments required under this Section 4.01, the
Borrower agrees to cause the Initial Letter of Credit to be issued and delivered
by the Initial Letter of Credit Issuer to the Trustee on or prior to the Date of
Issuance. The Initial Letter of Credit shall be in the amount provided in the
definition thereof in Section 1.01 and
shall in no event cover any premium on the Bonds. For purposes of this Section 4.01 all
drawings by the Trustee under the Letter of Credit to the extent made and
applied to the payment of the principal amount of and interest on the Bonds,
will be deemed to satisfy the corresponding obligation of the Borrower under
this Section
4.01.
To additionally secure the obligation
of the Borrower to make payments required under this Section 4.01, the
Borrower shall execute and deliver the Security Agreements on or prior to the
date of delivery and payment for the Bonds.
Except as provided in Section 906 of
the Trust Agreement, the Trustee shall not use any of the amounts deposited in
the Bond Fund or the Debt Service Reserve Fund pursuant to this Section for any
purpose other than the payment of the principal amount of and redemption
premium, if any, and interest on the Bonds payable on the date with respect to
which such amounts were deposited, or to reimburse the Initial Letter of Credit
Issuer for any drawings under the Letter of Credit.
The Borrower covenants that it will
promptly notify the Trustee and the Authority if the Project ceases to be
operated as an Industrial Facility within the meaning of the Act as in effect on
the date hereof.
(a) the
fees and other costs payable to the Trustee, including the reasonable
compensation and the reasonable expenses and disbursements of Trustee's counsel
and the reasonable costs and expenses of indemnifying the Trustee for, and
holding the Trustee harmless against, any loss, liability or expense (including
the reasonable costs and Trustee expenses of defending against any claim of
liability) incurred without negligence or willful misconduct by the Trustee and.
arising out of or in connection with its acting as Trustee under the Trust
Agreement;
(b) all
costs incurred by the Authority or the Trustee in connection with the purchase
or redemption of Bonds to the extent money is not otherwise available
therefor;
(c)
the fees and other costs incurred for services of such attorneys, management
consultants and accountants as are employed by the Authority or the Trustee to
make examinations, provide services, render opinions or prepare reports required
under this Agreement or the Trust Agreement;
(d) easonable
fees and other costs that the Borrower is obligated to pay, not otherwise paid
under this Agreement or the Trust Agreement, incurred by the Authority in
connection with its administration and enforcement of., and
compliance with, this Agreement or the Trust Agreement, including, but not
limited to, the Administrative Fee; and
(e) reasonable
fees and other costs incurred at the request or with the consent of the Borrower
in connection with the issuance of the Bonds to the extent such. fees, and other
costs are not paid from the proceeds of the Bonds; provided, however, that in no
event shall the total amount of such fees and other costs paid from the proceeds
of the Bonds exceed two percent (2%) of the proceeds of the Bonds, less amounts
paid to the Underwriters and underwriters' discount, but excluding the
Administrative Fee, fees and. expenses payable to the Initial Letter of Credit
Issuer on the Date of Issuance and the internal revenue stamps and recordation
fees payable in connection with the Security Agreements and the title insurance
premium.
(a) The
Borrower shall at all times indemnify and hold harmless the Authority and the
Trustee against any and all losses, costs, damages, expenses and liabilities
(individually, a "Loss" and collectively, the "Losses") of whatsoever nature
(including but, not limited to reasonable attorneys' fees, litigation and court
costs, amounts paid in settlement, and amounts paid to discharge judgments)
directly or indirectly resulting from, arising out of, or related to one or more
Claims, as hereinafter defined. The word "Claims" as used herein shall mean all
claims, lawsuits, causes of action and otherr legal actions and proceedings of
whatsoever nature, including those related to bodily or personal injury or death
of any person or damage to any property (including but not limited to persons
employed by the Authority, the Borrower or any other person) brought against the
Authority or to which the Authority is a party, that directly or indirectly
result from, arise out of, or relate to: (i) the design, construction, transfer,
sale, operation, use, occupancy, maintenance or ownership of the Project or any
part thereof; (ii) the execution, delivery or performance of this Agreement, the
Trust Agreement, the Security Agreements, or any related instruments or
documents; or (iii) any untrue statement or alleged untrue statement of a
material fact contained in the Official Statement relating to the Bonds, or any
amendment or supplement thereto, or any Preliminary Official Statement relating
to the Bonds, or arising out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Borrower will
not be liable in any such case to the extent that any such Loss or Claim arises
out of or is based upon. an untrue
statement or alleged untrue statement or omission or alleged omission made in
any of such documents in reliance upon and in conformity with written
information furnished to the Borrower by the Authority specifically for use
therein (it being understood that the information in said Official Statement
under the captions "The Authority and Governing Board" and "Government
Development Bank for Puerto Rico" is the only information that has been so
furnished to the Borrower by the Authority specifically for use
therein).
(b) The
Borrower hereby agrees to indemnify and hold harmless the Authority and the
Trustee from and against all reasonable losses, costs, damages, Environmental
Claims, expenses (including reasonable attorneys' and consultants' fees),
liabilities, fines, enforcement actions, remedial costs, and third party cost
recovery actions that the Authority and the Trustee may sustain by reason of the
Trustee or the Authority becoming liable as an operator (and/or as an owner if,
in its function as a lender, the Trustee or the Authority is deemed to be an
owner) under any applicable Environmental Law or related to the presence in,
under or at the Project of any Hazardous Substance or related to the Borrower's
failure to comply with any applicable Environmental Law.
(c) The
obligations of the Borrower under this Section 4.05 shall
apply to all Losses or Claims, or both, that result from, arise out of, or are
related to any event, occurrence, condition or relationship existing prior to
termination of this Agreement, whether such Losses or Claims, or both, are
asserted prior to termination of this Agreement or thereafter. The Authority or
the Trustee, as applicable, shall reimburse the Borrower for payments made by
the Borrower pursuant to this Section 4.05 to the
extent of any proceeds, net of all expenses of collection, actually received by
the Authority or the Trustee from any insurance covering such Claims with
respect to the Losses sustained. The Authority and the Trustee shall assign
their rights to such proceeds, to the extent of such required reimbursement, to
the Borrower. In case any action shall be brought against the Authority or the
Trustee in respect of which indemnity may be sought against the Borrower, the
Authority or the Trustee, as applicable, shall promptly notify the Borrower in
writing and the Borrower shall have the right to assume the investigation and
defense thereof including the employment of counsel and the payment of all
expenses. The Authority and the Trustee shall have the right to employ separate
counsel in any such action and participate in the investigation and defense
thereof, but the fees and expenses of such counsel shall be paid by the
Authority and the Trustee unless the employment of such counsel has been
authorized by the Borrower. The Borrower shall not be liable for any settlement
of any such action without its written consent but, if any such action is
settled with the written consent of the Borrower or if there be a final
unappealable judgment for the plaintiff in any such action, the Borrower agrees
to indemnify and hold harmless the Authority and the Trustee from and against
any such Losses or Claims by reason of such settlement or judgment. Nothing
herein shall be construed as requiring the Authority or the Trustee to acquire
or maintain insurance of any form or nature with respect to the Project or any
portion thereof or with respect to any phrase, term, provision, condition or
obligation of this Agreement or any other matter in connection herewith so long
as this Agreement is in effect.
(d) The
provisions of this Section 4.05 shall survive
the expiration or termination of this Agreement.
ARTICLE
V
(a) The
Borrower covenants that: (i) during each taxable year of the Borrower while
interest on the Bonds is paid or payable it will be engaged in trade or business
only in the Commonwealth; (ii) for the three-year period ending with the close
of its taxable year immediately preceding the payment of interest on the Bonds
(or for such part of such period as may be applicable), at least 80% of its
gross income will be derived from sources outside the United States as
determined by Subchapter N of the Code, and attributable to the active conduct
of a trade or business within the Commonwealth, such determination to be made
under Section 861(c)(1)(B) of the Code as in effect on the Closing; and (iii)
interest on the Bonds will be treated as paid by a trade or business conducted
by said Borrower within the Commonwealth, such determination to be made under
Section 884(f)(1)(A) of the Code and the regulations thereunder as in effect on
the Closing,
(b) The
Borrower covenants that it will conduct its business so that at all times all
interest paid or payable on the Bonds will constitute income from sources within
the Commonwealth under the general sourcing rules of the Code as in effect on
the Closing.
(c) The
Borrower covenants that for each taxable year, up to and including the taxable
year when all interest on and principal of the Bonds are paid in full, not later
than the one hundred twentieth (120th) day
following the close of each such taxable year, beginning with the first taxable
year ending after the Closing, it will: (1) deliver to the Trustee, the Letter
of Credit Issuer, the Independent Accountants and the Authority, a certificate
(the "Borrower's Certificate") addressed to the Trustee, the Letter of Credit
Issuer, the Independent Accountants and the Authority: (i) stating for -such
taxable year, the percentage of the Borrower's gross income that was derived
from sources outside the Commonwealth under the general sourcing rules of the
Code as in effect on the Closing; (ii) stating the percentage of its gross
income that was, or was treated as, effectively connected with, or attributable
to, the active conduct of: (A) its trade or business in the Commonwealth; and
(B) any trade or business outside the Commonwealth, in each case under the
general sourcing rules of the Code as in effect on the Closing; and (iii) making
an assertion as to whether or not the Borrower has complied with each of the
covenants of Section
5.10(a) and 5.10(b) and the
representations of Section 2.02(g) and,
accordingly, whether or not an Event of Taxability has occurred; and (2) cause
the Independent Accountants to deliver to the Trustee, the Letter of Credit
Issuer and the Authority, an Independent Accountants' Report stating: (i) that
they have examined (such examination being made in accordance with standards
established by the American Institute of Certified Public Accountants)
management's assertion included in the Borrower's Certificate as to said
Borrower's compliance with the covenants of Section 5.10(a) and
5.10(b) and the
representations of Section 2,02(g); and
(ii) whether in their opinion said Borrower's assertion as to compliance with
each of such covenants and representation is correct, If the Borrower's
Certificate or the Independent Accountants' Report indicate that a Borrower has
failed to comply with any of the covenants of Sections 5.10(a) and
5.10(b) or the
representations made in Section 2.02(g), and
that, as a result of such failure interest paid or accrued on the Bonds to a
Qualifying Bondholder is includable in gross income under the Code as in effect
on the Closing and subject to the payment of income taxes under the Code, a
credit for the payment of which is not otherwise available under the Code as in
effect on the date of the Borrower's Certificate or Independent Accountants'
Report, an Event of Taxability shall be deemed to have occurred, The Trustee
shall send a copy of such certificate or report together with a written notice
to each Bondholder (and to any person who was a Bondholder during the preceding
taxable year of the Borrower) stating that an Event of Taxability has occurred
within five (5) Business Days of the receipt of such certificate or
report.
ARTICLE
VI
(a) prior
to the proposed sale, lease or other transfer of the Project, as a whole or
substantially as a whole, the Trustee, the Authority and the Letter of Credit
Issuer are provided with proof satisfactory to them by the Borrower (which may.
include an opinion from counsel knowledgeable in Federal and Commonwealth tax
matters approved by the Trustee) that, as a result of such transfer or
assignment or the terms thereof, interest payable on the Bonds will continue to
constitute Puerto Rico source income under the Code as in effect on the date of
issuance of the Bonds; and
(b) the
Borrower shall, within ten (10) days after such sale, lease, transfer or
encumbrance of the Project, or such assignment of this Agreement, notify the
Authority, the Trustee and the Letter of Credit Issuer thereof.
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Any
authorized assignment of this Agreement is subject to the following
additional conditions:
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(A) the assignee shall, in a
certificate delivered to the Authority, the Trustee and the Letter of Credit
Issuer, which certificate shall be in a form reasonably satisfactory to the
Authority, the Trustee and the Letter of Credit Issuer, expressly assume, and
agree to pay and to perform, all of the obligations of the Borrower under this
Agreement which shall have been assigned to it; and
(B) the assignee shall deliver to the
Authority, the Trustee and the Letter of Credit Issuer, a certificate executed
by its chief financial officer (or other executive officer performing similar
functions) stating that none of the obligations, covenants and performances
under this Agreement and the Reimbursement Agreement assumed by it will conflict
with or constitute on the part of such assignee a breach of, or default under,
any indenture, mortgage, agreement or other instrument to which such assignee is
a party or by which it is bound, or under any existing law, rule, regulation,
judgment, order or decree to which such assignee is subject.
The provisions of subsections (A) and
(B) of this Section
6.01 (c) shall not apply to any sale, lease, transfer or encumbrance of
any portion of the Project, or assignment of this Agreement, in which all the
parties consist of the Borrower and any Affiliate.
No sale, lease or other transfer or
encumbrance of the Project or assignment of this Agreement shall: (i) relieve
the Borrower of the obligation to make the payments required by Section 4.01 unless
the Borrower obtains the prior written consent of the Authority and the Letter
of Credit Issuer; (ii) relieve the Letter of Credit Issuer from its obligations
under the Letter of Credit; (iii) affect in any way the validity or
enforceability of the Letter of Credit; or (iv) affect in any way the validity
or enforceability of any of the Security Agreements.
ARTICLE
VII
(a) failure
by the Borrower to pay the amounts required to be paid with respect to principal
of or redemption premium, if any, or interest on the Bonds when the same shall
become due and payable, at maturity, upon acceleration, redemption or otherwise;
or
(b) failure
by the Borrower to pay when due any payment required to be made under this
Agreement (other than payments under subsections (a) and (g) of this Section 7.01), which
failure shall continue for a period of thirty (30) days after written notice,
specifying such failure and requesting that it be remedied, is given to the
Borrower by the Authority or the Trustee, unless the Authority or the Trustee
shall agree in writing to an extension of such time prior to its expiration;
or
(c) failure
by the Borrower to comply, in any material respect, with any of the covenants
set forth in Section
5.01 of this Agreement; or
(d) failure
by the Borrower to duly perform, observe or comply with any covenant, condition
or agreement on its part under this Agreement or under the Security Agreements
(except the covenant to maintain insurance contained in the Pledge Agreement),
other than a failure by the Borrower to make any payment as described in
subsections (a), (b) or (g) of this Section 7.01 or a
failure to comply, in any material respect, with any of the covenants set forth
in Section 5.01
of this Agreement, and such failure shall continue for a period of thirty (30)
days after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Borrower and the Letter
of Credit Issuer by the Authority or the Trustee, unless the Authority and the
Trustee shall agree in writing to an extension of such time prior to its
expiration; provided, however, that if such performance, observation or
compliance requires work to be done, action to be taken, or conditions to be
remedied, as the case may be, within such thirty (30) day period, no Event of
Default shall be deemed to have occurred or to exist if, and so long as, the
Borrower shall commence such performance, observation or compliance within such
period and shall diligently and continuously pursue the same to completion;
or
(e) the
Borrower or the Letter of Credit Issuer shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case under any such law, or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee or
sequestrator (or other similar official) of itself or of any substantial part of
its property, or shall make a general assignment for the benefit of creditors,
or shall fail generally to pay its debts as they become due, or the Borrower or
its partners or the Letter of Credit Issuer shall take any action in furtherance
of any of the foregoing (except in connection with a consolidation or a merger
of the Borrower with or into another entity or transfer of all or substantially
all the assets of the Borrower not prohibited by Sections 5.01 and
6.01);
or
(f) a
court having jurisdiction in the premises shall enter a decree or order for
relief in respect of the Borrower or the Letter of Credit Issuer in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or appointing a receiver, custodian, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Borrower, or
the Letter of Credit Issuer, respectively, of any substantial part of their
respective properties, or ordering the winding up or liquidation of their
affairs, and the continuance of such decree or order unstayed and in effect for
a period of sixty (60) consecutive days; or
(g) failure
by the Borrower to replenish the Debt Service Reserve Fund within the periods
set forth in the Trust Agreement or in Section 4.01 of this
Agreement; or
(h) (i) the Letter of Credit
Issuer shall fail to honor a draft under the Letter of Credit complying with the
terms thereof; (ii) the Trustee shall have received from the Letter of Credit
Issuer a notice to the effect that an "event of default has occurred and is
continuing under the Reimbursement Agreement or a notice that the interest
portion of the Letter of Credit will not be reinstated after a draw on such
Letter of Credit, in each case accompanied by instructions in writing from the
Letter of Credit Issuer instructing the Trustee to accelerate the Bonds as a
result of the occurrence and continuance of such event of default under the
Reimbursement Agreement, together with sufficient funds from the Letter of
Credit Issuer to pay the principal of and interest on the Bonds then
outstanding; or (iii) the Letter of Credit shall at any time for any reason
cease to be in full force and effect, or shall be declared to be null and void
in whole or in part, or the validity or enforceability thereof shall be
contested by the Letter of Credit Issuer, or the Letter of Credit Issuer shall
renounce the same or deny that it has any or further liability
thereunder.
The foregoing provisions of
subsection (d) of this Section are subject to the following limitations: if by
reason of Force Majeure, the Borrower is unable in whole or in part to carry out
any of its agreements herein contained, failure of the Borrower to carry out any
such agreements other than the obligations on the part of the Borrower contained
in Section 4.01
and Section
5.01, shall not be deemed an Event of Default during the continuance of
such inability, including a reasonable time for the removal of the effect
thereof.
The term "Force Majeure" shall mean
the following:
(a) acts
of God; strikes, lockouts or other industrial disturbances; acts of public
enemies; orders or restraints of any kind of the government of the United States
of America or of the Commonwealth or any of its departments, agencies, political
subdivisions or officials, or any civil or military authority; war;
insurrections; civil disturbances; riots; epidemics; landslides; lightning;
earthquakes; fires; hurricanes; storms; droughts; floods; washouts; arrests;
restraint of government and people; explosions; breakage, malfunction or
accident to facilities, machinery, transmission pipes or canals; partial or
entire failure of utilities; shortages of labor, materials, supplies or
transportation; or
(b) any
cause, circumstance or event not reasonably within the control of the
Borrower.
The Borrower agrees, however to use
its best efforts to remedy with all reasonable dispatch the effects of any Force
Majeure which may prevent it from carrying out its agreements; provided, that
the settlement of strikes, lockouts and other labor disturbances, shall be
entirely within the discretion of the Borrower, and the Borrower shall not be
required to make settlement of strikes, lockouts and other labor disturbances by
acceding to the demands of the opposing party or parties when such course is in
the judgment of the Borrower unfavorable to the Borrower.
(1) The Authority may at its option
declare all unpaid amounts payable under Section 4.01 to be
immediately due and payable, whereupon the same shall become immediately due and
payable.
(2) The Authority may take any action
at law or in equity to collect the payments then due and' thereafter to become
due, or to enforce performance and observance of any obligation, agreement or
covenant of the Borrower under this Agreement or the Security
Agreements.
ARTICLE
VIII
(b) To
make a prepayment pursuant to subsection (a) of this Section, the Borrower shall
give or cause to be given to the Authority and the Trustee: (A)(i) the written
consent of the Initial Letter of Credit,Issuer to
such prepayment, which consent shall contain a representation from the Initial
Letter of Credit Issuer to the effect that the Borrower is not in default under
the Reimbursement Agreement, and that all conditions contained in the
Reimbursement Agreement to effect such prepayment have been complied with; and
(ii) deposit with the Trustee sufficient moneys to pay the redemption price
(including premium, if any) of the Bonds, no later than ninety-four (94) days
prior to the date selected for the prepayment of the Loan, but in any event with
sufficient time to allow the moneys to constitute Eligible Moneys on the date of
such intended prepayment; and (B) written notice setting forth: (i) the date of
redemption, which date shall be an Interest Payment Date occurring not less than
ninety-four (94) days from the date notice is received by the Trustee; (ii) the
principal amount and maturities of the Bonds to be redeemed; and (iii) the
applicable redemption provision of the Trust Agreement.
(c) The
Borrower agrees to make the payments under this Section 8.01 to the
Trustee for deposit to the Bond Fund in the amount due in respect of any
redemption premium at such time so that such payments constitute Eligible Moneys
under the Trust Agreement.
(b) The
Borrower shall be obligated, and agrees, to prepay a portion of the amount
payable under Section
4.01 on or prior to each Interest Payment Date for which there shall be
an Amortization Requirement in an amount equal to such Amortization Requirement
to the extent and in the manner set forth in Section 3.01(d) of
the Trust Agreement.
(c) The
Borrower shall be obligated, and agrees, to prepay all of the unpaid aggregate
amount of the Loan, together with accrued interest to the date of prepayment, if
the Trustee: (i) shall have received a written notice from the Initial Letter of
Credit Issuer to the effect that it has decided not to extend the Initial Letter
of Credit and the Initial Letter of Credit Issuer deposits, on or prior to the
sixtieth (60th) day preceding the expiration date of the Initial Letter of
Credit, an amount sufficient, together with other Eligible Moneys deposited with
the Trustee, to pay the outstanding principal and interest on the Bonds; or (ii)
shall not have received on or before the sixtieth (60th) day preceding the
expiration date of any then outstanding Successor Letter of Credit the following
documents:
(1) a
Successor Letter of Credit;
(2) an
executed copy of the Successor Reimbursement Agreement;
(3)
an opinion of counsel to the Borrower, acceptable to the Authority and the
Trustee, to the effect that: (i) the acceptance by the Trustee of the Successor
Letter of Credit will not require that the Bonds, the obligations of the
Borrower under this Agreement or the Successor Letter of Credit to be registered
under the Securities Act of 1933, as amended, or the Puerto Rico Uniform
Securities Act,. as amended, or the qualification of the Trust Agreement under
the Trust Indenture Act of 1939, as amended; or (ii) any registration statement
required to be filed under the Securities Act of 1933, as amended, or the Puerto
Rico Uniform Securities Act, as amended, with respect to the Bonds, the
Borrower's obligations under this Agreement or the Successor Letter of Credit is
effective under such Act, and the Trust Agreement has been duly qualified under
the Trust Indenture Act of 1939, as amended;
(4)
an opinion of counsel to the issuer of the Successor Letter of Credit, to the
effect that the Successor Letter of Credit is a legal, valid and binding
obligation of the Successor Initial Letter of Credit Issuer (subject to
customary bankruptcy, creditor's rights and general principles of equity
exceptions);
(5) written
confirmation from S&P to the Trustee that after upon delivery of such
Successor Letter of Credit the Bonds will not be rated lower than "A-" by
S&P (or any similar rating then used by S&P); unless such Successor
Letter of Credit is to be issued by an instrumentality of Puerto Rico in which
case the Bonds may not be rated lower than "BBB" by S&P;
(6) a
representation from the Successor Letter of Credit Issuer or an opinion from its
legal counsel to the effect that the Successor Letter of Credit Issuer and the
Borrower, as to each other, are not insiders or affiliates, as those terms are
defined in the applicable statutory provisions of the United States Bankruptcy
Code, as amended;
(7) an
opinion of counsel to the Authority to the effect that: (i) all documents and
opinions required to be delivered to the Trustee under this Section 8.02(c) have
been delivered and such documents and opinions on their face comply with the
requirements of this Section 8.02(c) and
of the Trust Agreement, and that the delivery of the Successor Letter of Credit
is authorized under and complies with the terms of the Loan Agreement; and (ii)
that the acceptance of the Successor Letter of Credit shall not adversely affect
the tax treatment of the Bonds; and
(8) such
other documents and opinions as the Trustee may reasonably request.
In any such case described in the
preceding paragraph, the Borrower shall be obligated to pay a sum sufficient,
together with any other funds held by the Trustee and available for such
purpose: (i) to redeem, on the date specified pursuant to the Trust Agreement,
all outstanding Bonds at a redemption price equal to the principal amount of the
Bonds; (ii) to pay the interest which will accrue on the Bonds to the date so
fixed for their redemption; and (iii) to make all other payments required
hereunder accrued and to accrue through the date fixed for such redemption;
provided, however, that if the Initial Letter of Credit Issuer elects to not
renew its Letter of Credit, as provided in Section 2 of the Initial Letter of
Credit and in the preceding paragraph, the prepayment of the full unpaid
aggregate amount of the Loan shall be made from the moneys received from the
Initial Letter of Credit Issuer in accordance with Section 2 of the Initial
Letter of Credit and the preceding paragraph. The Borrower agrees to make the
payments required by this Section 8.02(c) on or
prior to the redemption date set for the Bonds pursuant to Section 301(c) of the
Trust Agreement.
(d) The Borrower shall be obligated,
and agrees to prepay, in whole or in part, the amount payable under Section 4.01 upon the
occurrence of an event of condemnation. damage to or destruction of the Project
to the extent required under the terms of the Pledge Agreement or as otherwise
allowed by the terms of the Reimbursement Agreement. The Letter of Credit Issuer
or the Borrower, with the written consent of the Letter of Credit Issuer, shall
deliver to the Trustee a notice stating that the Borrower has become obligated
to prepay, in whole or in part, the amount payable under Section 4.01, setting
forth the amount required to pay the redemption price of the Bonds pursuant to
Section 301(d)
of the Trust Agreement, The Borrower agrees to make the payment required by this
paragraph (d) for deposit to the credit of the Bond Fund at the time such notice
is delivered to the Trustee.
Section
8.03. Relative
Position of Loan Agreement and Trust Agreement, The rights and the
obligations of the Borrower in this Article VIII shall be and remain prior and
superior to the Trust Agreement and may be exercised or shall be fulfilled, as
the case may be, whether or not the Borrower is in default hereunder, provided
that such default will not result in nonfulfillment of any condition to the
exercise of any such right or option.
The obligations of the Borrower in
Section 8.02 shall be joint
and several obligations of the Borrower and supersede the rights and options of
the Borrower contained in Section
8.01.
ARTICLE
IX
Section
9.03. No
Additional Waiver Implied by One Waiver. In the event any
agreement contained in this Agreement should be breached by any party hereof and
thereafter waived by the other parties, such waiver shall be limited to the
particular breach so waived and shall not be deemed to waive any other breach
hereunder..
If to the Authority:
Puerto Rico Industrial, Tourist,
Educational,
Medical and Environmental
Control
Facilities Financing
Authority
c/o Government Development Bank for
Puerto Rico
XX Xxx 00000
Xxx Xxxx, Xxxxxx Xxxx
00000
Attention: Executive
Director
If to the Borrower:
Palmas Country Club,
Inc.
XX Xxx 0000
Xxxxxxx, Xxxxxx Xxxx
00000-0000
Attention:
President
and:
Palmas Country Club,
Inc.
0000 Xxx Xxxxxx Xxxxx
0000
Xxxxxxx, Xxxxx 00000
Attention: General
Counsel
If to the Trustee:
PaineWebber Trust Company of Puerto
Rico
American International
Plaza
9th
Floor
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx Xxxx
00000
Attention: Trust
Officer
If to the Initial Letter of Credit
Issuer:
Puerto Rico Tourism Development
Fund
c/o Government Development Bank for
Puerto Rico
Minillas Government Center,
Small Building
Fourth Floor, De Diego Avenue
and
Xxxxxxxxxx xx Xxxxxx, Xxxx
00
Xxxxxxxx, Xxxxxx Xxxx
00000
Attention: Executive
Director
A
duplicate copy of each notice, certificate, request or other communication given
hereunder to the Authority, the Borrower, the Trustee, or the Letter of Credit
Issuer shall also be given to each of the others. The Borrower, the Authority,
the Trustee, and the Letter of Credit Issuer, may by notice given hereunder,
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
Section
9.09. If
Payment or Performance Date Not a Business
Day. If the
date for making payment, or the last date of performance of any act or the
exercising of any right, as provided in this Agreement, shall not be a Business
Day, such payment may be made or act performed or right exercised on the next
succeeding Business Day with the same force and effect as if done on the nominal
date provided in this Agreement, and no interest shall accrue for the period
after such nominal date.
Section
9.12. Execution
in Counterparts. This Agreement may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section
9.15. Authority
Not Liable. Notwithstanding any
other provision of this Agreement: (a) the Authority shall not be liable to the
Borrower, the Trustee, the Letter of Credit Issuer, 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 Trustee, the Letter of Credit Issuer, 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 action under this
Agreement or the Trust 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.
IN WITNESS WHEREOF, the
Authority and the Borrower have caused this Agreement to be executed in their
respective legal names, all as of the date first above written,
PUERTO
RICO INDUSTRIAL, TOURIST,
EDUCATIONAL,
MEDICAL AND ENVIRONMENTAL
CONTROL
FACILITIES FINANCING AUTHORITY
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By:
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/s/ Xxxxxx Xxxxx xx
Xxxxx
|
Xxxxxx Xxxxx xx Xxxxx
Executive Director
PALMAS
COUNTRY CLUB, INC.
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By:
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/s/ Xxxxx
Xxxxxx Xxxxxx
|
Xxxxx
Xxxxxx Xxxxxx
President