As filed with the Securities and Exchange Commission on March 5, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
LELY GOLF VILLAS I LIMITED PARTNERSHIP
(Exact Name of Registrant as Specified in Governing
Instruments)
3185 Horseshoe Drive South
Naples, Florida 34104
Telephone: (941) 649-6310
(Address of Principal Executive Offices)
A. Jack Solomon
Chief Executive Officer
Ronto Golf Developments, Inc.
3185 Horseshoe Drive South
Naples, Florida 34104
Telephone: (941) 649-6310
(Name, Address and Telephone Number of Agent for Service)
Copy to:
Robert C. Brighton, Jr., Esquire
Ruden, McClosky, Smith, Schuster, & Russell, P.A.
200 East Broward Boulevard
Fort Lauderdale, Florida 33301
(954) 764-6660
Approximate date of commencement of proposed sale to the public: As
soon as practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933, check the following box. /X/
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CALCULATION OF REGISTRATION FEE
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Title Proposed maximum range of Proposed maximum
of securities to Amount to be offering price per aggregate offering Amount of
be registered registered Unit price registration fee
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Condominium Units
and Mandatory Rental
<S> <C> <C> <C> <C> <C>
Program 200 Units $125,000 to $240,000 $38,000,000 $10,564
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The registrant hereby amends this registration statement on such dates
or date as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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CROSS REFERENCE TABLE
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY PART I
OF FORM S-11
Item No. Caption Location in Prospectus
- -------- ------- ----------------------
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Item 1 Forepart of Registration Statement Front Cover
and Outside Front Cover Page of
Prospectus
Item 2 Inside Front and Outside Back Cover Front and Outside Back Cover
Pages of Prospectus
Item 3 Summary Information, Risk Factors Questions and Answers; Summary;
and Ratio of Earnings to Fixed Risk Factors
Charges
Item 4 Determination of Offering Price Determination of Offering Price
Item 5 Dilution N/A
Item 6 Selling Security Holders N/A
Item 7 Plan of Distribution Plan of Distribution
Item 8 Use of Proceeds Use of Proceeds
Item 9 Selected Financial Data N/A
Item 10 Management's Discussion and N/A
Analysis of Financial Condition and
Results of Operation
Item 11 General Information as to Registrant Questions and Answers; Summary;
The Company
Item 12 Policy with Respect to Certain N/A
Activities
Item 13 Investment Policies of Registrant N/A
Item 14 Description of Real Estate Questions and Answers; Summary;
The Resort
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Item No. Caption Location in Prospectus
- -------- ------- ----------------------
Item 15 Operating Data N/A
Item 16 Tax Treatment of Registrant and Its Certain Federal Tax Aspects
Security Holders
Item 17 Market Price of and Dividends on N/A
Registrant's Common Equity and
Related Stockholder Matters
Item 18 Description of Registrant's Securities Questions and Answers; Summary
Item 19 Legal Proceedings N/A
Item 20 Security Ownership of Certain The Company
Beneficial Owners and Management
Item 21 Directors and Executive Officers The Company
Item 22 Executive Compensation The Company
Item 23 Certain Relationships and Related Questions and Answers; Summary;
Transactions The Company
Item 24 Selection, Management and Custody N/A
of Registrant's Investments
Item 25 Policies with Respect to Certain N/A
Transactions
Item 26 Limitations of Liability N/A
Item 27 Financial Statements and Information Financial Statements; Projections
Item 28 Interests of Named Experts and Experts
Counsel
Item 29 Disclosure of Commission Position N/A
on Indemnification for Securities Act
Liabilities
Item 30 Quantitative and Qualitative N/A
Disclosures About Market Risk
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LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY PART II
OF FORM S-11
Item No. Caption Location in Prospectus
- -------- ------- ----------------------
Item 31 Other Expenses of Issuance and Distribution N/A
Item 32 Sales to Special Parties N/A
Item 33 Recent Sales of Unregistered Securities N/A
Item 34 Indemnification of Executive Committee
Members and Administrative Partner N/A
Item 35 Treatment of Proceeds from Stock Being
Registered N/A
Item 36 Financial Statements and Exhibits N/A
Item 37 Undertakings N/A
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</TABLE>
[GRAPHIC OMITTED]
PRELIMINARY PROSPECTUS DATED MARCH 5, 1999 -- SUBJECT TO COMPLETION
[TO BE DETERMINED] RESORT AND GOLF CLUB OF NAPLES
200 Resort Condominium Units
Coupled with a Mandatory Rental Agreement
Lely Golf Villas I Limited Partnership (the "Company") is offering up to 200
fully-furnished residential condominium units (the "Units") that are part of a
golf resort condominium (the "Condominium") and related resort properties called
[To be determined] (the "Resort") and Golf Club of Naples to be built in 17
residential phases in the Naples, Florida area. The Units consist of (1)
condominiums of various sizes and dimensions, (2) an undivided interest in the
common elements of the Condominium and (3) certain rights to use the Flamingo
Island and Mustang golf courses located next to the Resort (the "Golf Courses").
In connection with the purchase of a Unit, each purchaser must enter into a
rental program agreement with an affiliate of the Company providing for the
rental of the purchaser's Unit.
The Company is offering the Units at prices ranging from approximately $125,000
to $240,000, depending upon the size of the specific Unit and its location
within the Condominium. The aggregate offering price for the sale of Units may
be up to $38,000,000.
This investment involves a high degree of risk. Consider carefully the risk
factors beginning on page __ before investing. These risk factors include:
o Income from the rental of a Unit (1) is not guaranteed, (2)
will vary in amount depending upon the time of year, a Unit's
size, location within the Condominium and occupancy rate, (3)
will likely be insufficient to pay a typical mortgage
obligation and (4) may be insufficient to pay expenses
associated with ownership of the Unit.
o No market currently exists for the resale of the Units and no
public market is expected to develop in the future. The Units
will not be listed on any securities exchange or quoted by
Nasdaq.
o The income tax treatment of an investment in the Units by an
individual investor depends on various factors including
personal use of the Unit by the investor.
o The Company has no prior experience as a developer of resort
properties and the success of the Condominium is dependent on
the efforts of the Resort Operator in managing the maintenance
and rental of the Units, as well as general economic and
market factors.
o The value of the Units depends in part on a Unit Owners' right
to use the Golf Courses. This right may be cut-off by defaults
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under leases, subleases or action by mortgagees or lienholders
with respect to the Golf Courses and may be adversely affected
by the failure of the operator of the Golf Courses to maintain
the Golf Courses.
The Company has the right to reject any offer to purchase, and to withdraw or
cancel further sales, without notice. The Company is not required to sell any
Units until it has entered into 40 binding purchase contracts. However, once the
Company has sold 40 Units or waived this condition, it is obligated to complete
construction of 40 Units and all of the Resort's amenities. The Company cannot
assure that any or all of the Units will be sold.
The Company will directly offer and sell the Units through employees who will
not be specially compensated for the sale of Units. The Company may also use
third party sales agents who hold appropriate securities and real estate
licenses under applicable federal and state law.
Neither the Company nor any affiliate of the Company does business with the
Government of Cuba nor with any person or affiliate located in Cuba. This
information is current as of the later of the date of filing of this Prospectus
with (x) the Securities and Exchange Commission and (y) the Florida Department
of Banking and Finance. Current information concerning the Company's business
dealings with Cuba may be obtained from the Florida Department of Banking and
Finance, Division of Securities and Investor Protection, at 101 East Gaines
Street, Tallahassee, Florida 32399-0350; telephone: (805) 410-9805.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved nor disapproved the securities, nor determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
_________________, 1999
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QUESTIONS AND ANSWERS
1. Q: What is a resort condominium unit?
A: A resort condominium unit is a residential
condominium unit, together with an undivided interest
in the common elements of the Condominium, that is
part of the Resort. Your Unit will be rented with
other Units for short-term recreational purposes
pursuant to a mandatory Rental Program Agreement
between you and the Company's affiliate, Lely Golf
Villas II Limited Partnership ("LGV II"), as Rental
Manager. Each Unit is a fully furnished suite that
includes a kitchen, living area and either two
bedrooms and two bathrooms or three-bedrooms (or
two-bedrooms and den) and three-bathrooms. The
three-bedroom Unit may be used as a two-bedroom,
two-bathroom suite with a one-bedroom and
one-bathroom hotel room that can be rented
separately. The mandatory Rental Program Agreement
provides for the payment to you of the rental income
derived from your Unit, less related expenses. These
expenses include a commission paid to the Rental
Manager for rental services provided under the Rental
Program Agreement, certain annual licensing fees for
use by the Unit Owners of the Golf Courses ("Annual
Licensing Fees") and a reserve for repair and
replacement of furnishings, housewares and certain
other items (the "Interior Maintenance Fund").
2. Q: What kind of resort facility is the Resort?
A: The Resort is an upscale resort facility located in the
Lely Resort designed primarily for golf enthusiasts. In
addition to the Units, the Resort includes a separate
building containing a lobby and reception area. This
building will be owned and managed by the Company or one of
its affiliates. The Resort includes a sundries shop, arcade
and activity room that will be contained in a building
owned by the Company or one of its affiliates. The Resort's
facilities also include a fully-equipped gym, men and
women's saunas, a massage facility and a sports bar and
grill contained in commercial Units that will be owned by
the Company or one of its affiliates. The bar and grill
initially will be owned and operated by the Company or one
of its affiliates. The Resort will also contain a 5,000
square foot putting green, adult and kiddie pools, a
cabana, a tanning beach, a volleyball court and two tennis
courts. The first phase should be completed by the end of
the second quarter of 1999. Units are expected to be
available for rental beginning in November 1999.
3. Q: What is the Lely Resort?
A: The Lely Resort is a 2,900 acre country club community
under development by Lely Development Corporation, a
leading land developer in Collier County for over 25 years.
Upon completion, the Lely Resort will be a mixed use
residential
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community that includes custom homes, mid-rise condominium
units, retail sites and office and commercial properties.
The Lely Resort currently features two public and one
private 18-hole golf courses served by a 27,000 square foot
(under air conditioning) club house.
4. Q: What are my rights to use the Golf Courses in season?
A: As a Unit Owner you will have the right to play an 18-hole
round of golf 42 times each year in season (November 1
through April 30) on the Golf Courses up to a maximum of 85
rounds for all persons who qualify as a Unit Owner of your
Unit without the payment of green fees. You and each other
person who qualifies as a Unit Owner of your Unit may make
reservations for tee times up to one year in advance for
dates during which your Unit is not rented or you rent
another Unit at the Resort. If your Unit is rented, you may
still play on a space available basis without payment of a
green fee up to the number of free rounds per Unit Owner
discussed above. If you own a three-bedroom Unit and are
occupying the one-bedroom and bath hotel room or the
two-bedroom suite while renting the remainder of your Unit,
your Unit is considered "rented" and you will not have
reservation privileges. You will be required to pay
standard fees and costs charged by the Golf Courses for
golf cart and equipment rental and for goods or services,
other than green fees both in and out of season. You will
also be required to pay green fees to play in season in
excess of the 42 individual or 85 total free play times.
5. Q: What are my rights to use the Golf Courses out of season?
A: Out of season (during the months of May through October)
from 1999 to 2004, if you exceed your 42 free play times
(or 85 rounds for all Unit Owners of your Unit) you may use
the Golf Courses and will not be charged green fees for
your excess plays. However, commencing in May 2005, you
will be charged one-half of the published resort green fee
for excess uses over your free play times out of season.
6. Q: Are there any other limitations on my rights to use the
Golf Courses?
A: From December 16 through April 15, you may only play a
maximum of seven days during any one 30-day period. Once
all seven days have been used, you must wait ten days
before being eligible to schedule additional tee times,
except that there may be one period of up to 14 days of use
per season within a particular 30-day period. However, you
may not use the Golf Courses for ten days before and after
the first and last day of this 14-day period. From April 16
through December 15, you may use the Golf Courses as often
as you wish, subject to availability of tee times. All use
of the Golf Courses, including use by reservation, is
subject to availability. To reduce the chance that no tee
times will be available when you wish to play, you should
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reserve a tee time by providing the Resort Operator with
written notice up to one year in advance of the date(s)
when you wish to play. Failure to play at a reserved time
without timely cancellation will be charged as a use
against your 42 individual and 85 total free play times. A
"cancellation" or "no show" fee will be assessed if all
free play times have been used.
7. Q: Who is considered a "Unit Owner" for purposes of use of the
Golf Courses?
A: A "Unit Owner" includes (1) one person and that person's
immediate family, comprised of a husband, wife and their
dependent children under 25, (2) two adults who live
together and hold themselves out to the public as the
equivalent of a married couple and their dependent children
under 25, or (3) two joint tenants. In addition, a
corporation operating an ongoing commercial business that
owns a Unit may designate one person and that person's
immediate family or two individuals to have the privileges
of a Unit Owner.
8. Q: Who is going to operate the Resort?
A: The Rental Manager is in negotiations to engage MeriStar
Management Company, L.L.C., an affiliate of MeriStar Hotels
& Resorts, Inc., as Resort Operator. The Resort Operator
and certain of its affiliates manage and operate various
hotel assets, including most of the hotels owned by
American General Hospitality Corporation, making it one of
the largest independent hotel management companies in the
United States based on number of rooms under management.
The Resort Operator is included in the MeriStar Group's
Resorts division which focuses on sun, golf and ski
oriented properties. These resorts are located in
California, Florida, Georgia, Massachusetts, Vermont and
the U.S. Virgin Islands and are operated under nationally
recognized brand names such as Hilton(R), Sheraton(R),
Westin(R), Marriott(R), Doubletree(R)and Radisson(R).
9. Q: What happens if the proposed agreement with the Resort
Operator is not consummated or is terminated without another
experienced resort operator being available to take over?
A: In the event that the proposed agreement with the Resort
Operator is not consummated or is terminated without an
experienced operator being available to take over, the
Company or one of its affiliates will operate the Resort
until an experienced resort operator can be retained.
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10. Q: What will be the involvement of the Company and LGV II
after the offering?
A: The Company will collect a royalty fee from LGV II under
the terms of the Assignment and Assumption Agreement, an
agreement providing for the assignment of golf and rental
rights to LGV II. LGV II will collect user fees for use of
the Golf Courses from non-Unit Owners ("Designated Users")
as provided under the Use and Access Agreement with Golf
Enterprises, Inc., the agreement which provides rights to
use the Golf Courses. If all of the Units constructed are
not sold, the Company will be a Unit Owner that will
generally be treated the same as every other Unit Owner.
The Company expects in most cases to include these Units in
the rental program. In addition, the Company or one of its
affiliates will initially own and operate four commercial
condominium Units. These commercial condominium Units will
be used for the Resort's bar and grill, gym, the saunas and
the massage room, as well for vending and storage purposes.
The Company will be required to pay assessments to the
Association after the expiration of the Guarantee Period
(as defined in the Answer to Question 15) with respect to
these commercial condominium units but will not be required
to pay Annual Licensing Fees. The Company or one of its
affiliates will also initially own a building on property
next to the Resort that will be used as a lobby and
reception area for the Resort but which will not be part of
the Condominium. LGV II, as Rental Manager, will collect a
rental commission from each Unit Owner for operating the
Resort and supervising the rental and maintenance of the
Units under the Rental Program Agreement and collect fees
and receive payments for providing certain services and
goods to Unit Owners and their guests.
11. Q: How often can I use my Unit?
A: From December 16 through April 15, syou may occupy your
Unit up to a total of four weeks. You are also restricted
to a maximum of seven days during any one 30-day period.
Once all seven days have been used, you must wait ten days
before being eligible to occupy your Unit again, except
that there may be one period of up to 14 days of occupancy
per year within a particular 30-day period. However, you
may not occupy your Unit for ten days before and after the
first and last day of such occupancy. From April 16 through
December 15, you may occupy your Unit as much as you wish,
subject to availability. To reduce the chance that your
Unit will be unavailable, you should provide the Resort
Operator with written notice at least six months in advance
of the dates during which you wish to use your Unit.
You should be aware that the amount of your personal usage
of your Unit may limit your tax deductions relating to your
Unit. Frequent use of your Unit, particularly in season,
will also significantly reduce your income from the rental
of your Unit.
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12. Q: How does the Rental Program Agreement work?
A: You are required to enter into a Rental Program Agreement
with LGV II as Rental Manager when you purchase your Unit.
Under the Rental Program Agreement you will agree to make
your Unit available for rental and to limit your use of
your Unit as described in the answer to Question 11. LGV
II, acting through the Resort Operator, will serve as
exclusive rental agent for your Unit and manage the rental
and maintenance of your Unit. The Resort Operator will rent
your Unit on terms and conditions determined by the Rental
Manager, including the rental rate. Neither the Rental
Manager nor the Resort Operator guarantees a specific
rental occupancy rate or a specific level of rental income.
13. Q: What are my costs and expenses relating to the rental of my
Unit?
A: Gross rental revenue does not include sales taxes, resort
taxes or similar taxes or charges. The Rental Manager will
deduct from gross rental revenue related travel agent fees,
airline booking fees, and credit card and check collection
fees and any other applicable collection or booking fees
("Adjusted Gross Rental Revenue"). From this Adjusted Gross
Rental Revenue, the Rental Manager will subtract an amount
initially equal to 3% of the Adjusted Gross Rental Revenue
derived from the rental of your Unit during the prior month
to create and maintain an Interior Maintenance Fund. The
Interior Maintenance Fund will be used to pay for the
repair or replacement of furnishings, linens, decorative
items, accessories, floor and wall coverings, equipment and
appliances. The Rental Manager will subtract from the
balance remaining after these deductions a rental
commission of 50% of Adjusted Gross Rental Revenue to be
paid to the Rental Manager for managing the rental and
maintenance of your Unit. The Rental Manager may in its
discretion deduct from your portion of the Adjusted Gross
Rental Revenue any costs incurred by the Company, the
Rental Manager or the Resort Operator with respect to your
Unit. Such costs may include unpaid taxes, assessments,
liens, judgments, and deficiencies in amounts required to
replace, repair and maintain the interior of the Units in
excess of amounts contained in the Interior Maintenance
Fund and Annual Licensing Fees.
14. Q: When will I receive my rental revenue check?
A: After making the deductions described in Question 13, the
Rental Manager will pay you the balance of rental revenue
received from the rental of your Unit during the preceding
month, if any, by check on or about the 20th day of each
month. If rental revenues are insufficient to pay the costs
described in the answer to Question 13 above, you will be
billed by the Rental Manager for the deficiency.
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15. Q: What happens if the Resort loses money?
A: The Company and the Rental Manager bear any risk of loss
for expenses related to the general operation of the
Resort. You and other Unit Owners are only responsible for
making up any shortfalls related to your Unit or the common
elements, either directly or through the Association. The
Company has agreed to guarantee that Association
assessments will not exceed $_____ per month and will pay
all Association expenses not paid from dues, other than
special assessments, until the end of the Guarantee Period,
defined as the earlier of ____________, 2000 or the
Majority Election Date (as defined in the Association
Articles of Incorporation).
16. Q: Will there be any debt or lien on my Unit or the common
elements following completion of construction?
A: At the time you purchase your Unit, the only debt that
relates to your Unit will be debt that you incur in
connection with the purchase of your Unit, debt related to
the Lely Community Development District ("CDD") obligations
and real estate taxes as described in Question 17 below.
The construction of the Resort will be financed by the
Company and unsold Units will be subject to the lien of the
Company's lender. At the closing of the sale of your Unit,
the portion of the debt relating to your Unit will be
discharged from the sale proceeds and the related lien
removed as to your Unit and your use of the common
elements. In the event that you default on your association
assessments, CDD obligations or real estate taxes a lien
may be placed on your Unit. In addition, if there is a
default on your Annual Licensing Fees, a lien may be placed
on your Unit.
17. Q: What payments will I make as a Unit Owner?
A: You must pay any loan you obtain to buy your Unit, the real
property taxes on your Unit and your share of other
expenses not paid by the Association or the Company. In
addition, each Unit Owner is required to pay an Annual
Licensing Fee of $3,500 (increasing by 4% per year
beginning November 1, 2001) payable in ten equal monthly
installments from November to August relating to use of the
Golf Courses. Based on current estimates, annual real
estate taxes will range from approximately $1,800 to $3,000
and monthly Association assessments will initially be $250
per month, including the $40 monthly assessment payable to
the Lely Resort Association. Debt service on mortgages on
your Unit, if any, will depend on the particular terms of
any individual loan. Net rental revenue from the rental of
a Unit will likely be insufficient to service a typical
mortgage. Unit Owners must also pay the CDD obligations of
the Resort of approximately $400,000 in aggregate or $2,000
per Unit. A Unit Owner's CDD obligation may be paid in full
at closing or at any time thereafter but must be paid over
a twelve-year period with unpaid amounts bearing interest
at __% per annum. The CDD can also assess or tax the Unit
Owners for the cost for basic infrastructure annually.
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18. Q: Are there any other charges that I may be responsible for
in connection with using my Unit?
A: If you use your Unit's local or long-distance phone
service, or charge golf-related expenses or the cost of
various sundries to your Unit account while occupying your
Unit, you must pay these amounts to the Rental Manager
prior to check-out.
19. Q: Is the Company obligated to complete the construction of my
Unit and the Resort amenities?
A: Until the Company has 40 binding contracts to sell Units it
is not obligated to complete the sale of any Unit. However,
once the Company has sold 40 Units or waived this condition
(the "Presale Period"), it is obligated to complete the
construction of at least 40 Units and all of the Resort's
amenities described in this Prospectus. The Company may
decide to stop construction at any time following
completion of 40 Units.
20. Q: How do I purchase a Unit?
A: You will sign a purchase agreement that will be considered
by the Company and accepted or rejected following the
effective date of the Company's registration statement
relating to the offering of Units. At the time that your
contract for the purchase of your Unit is accepted by the
Company (or after registration is effective, at the time
you execute a purchase contract) you will be required to
pay a deposit equal to 10% of the purchase price of your
Unit. An additional 10% deposit is required within ten days
after issuance of a building permit provided that
construction of your Unit has commenced and you are past
the Presale Period. This money will be held in escrow in an
interest bearing account until the completion of your Unit.
In the event your Unit is not completed, the funds
deposited by you will be returned with interest and you
will have no further obligations. In addition, under
Florida condominium law, you are entitled to rescind your
purchase contract during a 15-day period commencing on the
last of the date of execution of your purchase contract,
the date you receive all documents required by law and the
date you receive any material amendment to a document
previously received. Your funds cannot be held for more
than two years from the date you sign a purchase contract.
21. Q: What payments will I be required to make at the closing of
the purchase of my Unit?
A: In addition to paying the purchase price for your Unit, you
will be required to pay an administrative fee of $500 to
the Rental Manager, $500 to the Association as
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working capital (an amount equal to two months of
Association assessments), closing costs of 1.25% of
your purchase price, the cost of recording your deed
and all prorated amounts (for example, taxes). You
will also be required to pay the costs of any
financing should you decided to finance the purchase
of your Unit.
22. Q: Is there any risk that my rights to use the Golf Courses
could be cut- off?
A: Your rights to use the Golf Courses are derived from the
rights granted to the Company by Golf Enterprises, the
operator of the Golf Courses, under the Use and Access
Agreement. These rights terminate on June 30, 2034, the
date on which the subleases under which Golf Enterprises
operates the Golf Courses expires, unless earlier
terminated or revoked in the event of breach of the Use and
Access Agreement. Your rights to use the Golf Courses will
be automatically extended for so long as the subleases
under which Golf Enterprises uses the Golf Courses are
extended. However, if these subleases are not extended,
Golf Enterprises will not be able to extend the Use and
Access Agreement past June 30, 2034. In addition, there is
the risk that there could be defaults, either under the
subleases or the underlying ground leases, or foreclosure
by mortgagees or other lienholders on the Golf Courses that
could cause an earlier termination of Golf Enterprises'
subleases. The Company has the right under certain
circumstances to cure these defaults, but these rights do
not apply in all cases and may be impractical to exercise
in some circumstances. If there is a termination of Golf
Enterprises' rights under the subleases your rights to use
the Golf Courses will be cut-off. In addition, if any
payments owed to Golf Enterprises by any party to the Use
and Access Agreement are not paid after expiration of grace
periods, your rights to use the Golf Courses may be
suspended or terminated.
23. Q: What is the Association and who runs it?
A: The Association is the organization that represents the
Unit Owners in managing and maintaining the common elements
owned collectively by the Unit Owners. Each Unit Owner
automatically becomes a member of the Association when the
Unit Owner purchases a Unit. The Association is run by its
Board of Directors. The Company will appoint the initial
Board of Directors. The Board will be elected by the Unit
Owners from among the Unit Owners after control of the
Resort is passed to the Unit Owners from the Company. As
Units are sold, the Company will gradually cede control
over the Association to the Unit Owners in accordance with
the Florida Condominium Act. The Company will have the
right to elect at least one director as long as it holds
for general sale at least 5% of the Units. The Board
approves the annual operating plan and budget for the
Association.
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24. Q: How does the Association work?
A: The Association is responsible for paying all common
expenses, such as electricity, water, sewer and cable
television, and for maintaining common areas and certain
amenities. The Association is also responsible for paying
the Annual Licensing Fees, although this amount will be
directly passed through to Unit Owners by deduction from
rental payments or will be billed to the Unit Owners to the
extent that rental payments are insufficient. Association
assessments will be paid directly by the Unit Owners to the
Association.
The Company will initially guarantee payment of certain
Association expenses to the extent not covered by
Association assessments. See the Answer to Question 15.
25. Q: Do I own the contents in my Unit?
A: Yes. The initial purchase price for your Unit includes the
initial items of the standard "Furnishings Package" and
"Housewares Package" listed in the Appendices to the Rental
Program Agreement. However, you may not remove, alter or
add to any of these items.
26. Q: Who is responsible for maintaining my Unit?
A: Other than certain minor repairs made without charge by the
Rental Manager, you are responsible for the cost of
maintaining your Unit and replacing its contents.
Maintenance of your Unit and repair and replacement of its
contents will be determined by the Rental Manager in its
sole discretion, although, to the extent practicable, the
Rental Manager will attempt to consult with you prior to
repairing or replacing any of your Unit's contents. The
cost of maintenance and any repairs or replacements will
generally be paid from the Interior Maintenance Fund, but
if money in the Replacement Reserve Refund is insufficient,
the Rental Manager will bill you directly. Bills not paid
by the Unit Owner within 30 days may, at the sole
discretion of the Rental Manager, be paid by the Rental
Manager. In such cases, the Rental Manager will deduct the
amount paid, together with a 10% surcharge, from future
rental revenues payable to you. In all cases you will
remain liable for any amounts unpaid, as well as accrued
interest on unpaid amounts at the highest interest rate
permitted by law (currently 18% per annum).
27. Q: Who is responsible for insuring my Unit?
A: As the Owner you are responsible for insuring the contents
of your Unit and maintaining a property damage and bodily
injury liability policy in the minimum amount of $300,000
per occurrence naming LGV
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II and the Resort Operator as additional insureds. The
Association will maintain insurance covering each building
containing commercial and residential Units, the amenities
owned by the Unit Owners collectively and the common
elements.
28. Q: May I sell my Unit?
A: You may sell your Unit at any time. However, you must
provide prior notice to the Rental Manager and give prior
notice and receive the approval of the Association. If the
Association does not approve your purchaser, it must
provide you with a substitute purchaser. In addition, your
purchaser will be subject to the Rental Program Agreement
and must sign such documents as the Rental Manager may
request as a condition to the transfer. In connection with
the sale of your Unit, you will also be required to pay a
fee of $5,000 to the Rental Manager who is obligated to pay
this amount to Golf Enterprises. This fee will be increased
by 4% each year beginning on November 1, 2000.
29. Q: Is there a market for the resale of Units?
A: Presently there is no market for resales of the Units and
no organized public market is anticipated to develop. The
Units will not be listed on any securities exchange or
quoted on Nasdaq. Resales must comply with applicable
securities and real estate law and are likely to occur only
in privately negotiated transactions.
30. Q: How well is the U.S. and Florida resort industry doing?
A: According to a survey published by PKF Consulting in its
1998 edition of Trends in the Hotel Industry, average daily
room rates at all resort properties nationally grew 5.4% in
1997 with increases in the South Atlantic region advancing
3.7% over 1996. These modest growth rates trailed growth
for rates at all hotels. However, the average daily room
rate for resort properties exceeded the average daily room
rate for all hotels by 34.3%. PKF believes that resort
properties will increase in value by 28.8% with a projected
30% increase in profits during the period from 1997 to
2000. According to a report prepared for the Company by
Landauer Hospitality Group in late 1997, the market for
golf-oriented resort properties in the Naples, Florida area
is very strong.
31. Q: What are the tax implications of owning a Unit?
A: You are responsible for consulting with your own tax
adviser to determine your individual tax consequences
relating to your purchase of a Unit.
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However, as a matter of general information, you will be
required to report on your federal income tax return the
income from the rental of your Unit. The Rental Manager
will provide you with an annual statement describing
revenues and expenses that can be used in preparing your
federal income tax return.
You may be able to deduct property taxes, interest expense
and depreciation for your Unit. However, your tax
deductions may be limited or eliminated by certain
provisions of the Internal Revenue Code, including
provisions governing vacation home rentals, passive
activity losses, interest expense limitations, and at-risk
limitations.
You will be required to pay any income and/or capital gains
taxes and property taxes that may result from the ownership
of your Unit. Unit Owners other than individuals, i.e.,
corporations, partnerships, limited liability companies,
trusts, and foreign individuals and entities, may have
additional considerations associated with ownership of a
Unit, and must consult their tax advisors to determine the
proper treatment of income or expense associated with
ownership of a Unit.
Additional information about the tax implications of the
purchase of a Unit is provided in "Certain Federal Tax
Aspects" beginning on page ___ of this Prospectus.
32. Q: Are there risks involved in purchasing a Unit?
A: There are inherent risks in any investment. While we have
tried to present as realistic a picture as possible, the
Resort may not perform as well as anticipated. Conditions
that today are favorable to the resort industry both
nationally and locally may change substantially before or
after the Resort opens. There are many factors, including
but not limited to local competition, taxes and
governmental regulations, and the state of the local,
national and international economies that are not within
the control of the Company, the Rental Manager or the
Resort Operator. Even though we believe our analysis points
to the Resort being successful, we cannot assure you that
this will be the case. Several of the specific risks
related to a purchase of a Unit are described in "Risk
Factors" beginning on page ___ of this Prospectus.
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SUMMARY
This Summary highlights selected information from this
Prospectus and may not contain all of the information that is important to you.
To understand what ownership of a Unit means and for a more complete description
of the legal terms involved, you should read carefully this entire Prospectus,
including the documents in the Annexes.
The Company The Units are being offered by Lely Golf Villas I
Limited Partnership, a Delaware limited partnership.
The general partners of the Company are Ronto Golf
Developments, Inc., a Florida corporation ("Ronto"),
and Westbrook Lely Golf Villas I, L.L.C., a Delaware
limited liability company ("Westbrook"). Ronto is one
of the companies of The Ronto Group, which is a group
of affiliated private companies engaged in land
development and residential, retail and commercial
construction consulting and advisory services. The
Ronto Group typically allies itself with funding
partners with real estate experience. Its projects
are located primarily in Southwest Florida. Westbrook
is a special purpose company formed by Westbrook
Partners, L.L.C., a Delaware limited liability
company ("Westbrook Partners"), to act as a general
partner of the Company. Westbrook Partners is a fully
integrated real estate investment management company
that invests in a broad range of real estate related
properties and securities, including office, retail
and industrial properties, apartments, hotels,
residential lot developments, and resort properties,
as well as commercial mortgage-backed and other real
estate investments and securities consistent with its
investment objectives. You will not acquire any
ownership interest in the Company, Ronto or
Westbrook, or any of their affiliated entities, by
purchasing a Unit.
The Company will be managed and operated by the
officers and employees of Ronto and Westbrook, and
their affiliated entities. See "Management of the
Resort."
The Company maintains its principal executive offices
at 3185 Horseshoe Drive South, Naples, Florida 34104
and its telephone number is (941) 649- 6310. The
Company also has sales offices at 7985 Mahogany Run
Lane, Naples, Florida 34113 and its telephone number
is (941) 732-9920.
The Units Each Unit is a fully-furnished suite with kitchen
facilities and living and sleeping areas. If all 200
Units are constructed, the Unit mix will consist of
136 two-bedroom, two-bathroom Units having [____]
square feet of air conditioned space and 64
three-bedroom (or two-bedroom and den), three-
bathroom Units having [____] square feet of air
conditioned space. The three-bedroom Unit may be used
as a three-bedroom suite or as a two- bedroom,
two-bathroom suite, plus a private hotel room with
bath. Each Unit also includes an undivided interest
in the common elements of the Condominium and certain
rights with respect to use of the Golf Courses.
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A Unit's use by a Unit Owner is subject to the terms
and conditions of the Declaration of Condominium of
the Condominium (the "Condominium Declaration"), the
Articles of Incorporation (the "Association
Articles") and By-laws (the "Association By-Laws") of
the Association and the Rental Program Agreement.
Among other things, these documents limit the in
season use of a Unit by Unit Owners. See "Summary of
Condominium Declaration and Related Documents."
The Resort The Resort is called [To be determined] Resort and
Golf Club of Naples. It is part of the Lely Resort in
the greater Naples metropolitan area of Collier
County, Florida. The Resort consists of the
Condominium, which includes both the residential
Units offered for sale by this Prospectus and the
commercial Units which will be owned by the Company
or one of its affiliates. The Resort also consists of
a building that will be used as a lobby and reception
area that will be owned by the Company or one of its
affiliates. The Units will be constructed in 17
residential phases, each phase consisting of a single
two-story building. The initial 2 buildings will
contain 10 Units and 15 buildings will contain 12
units. Offers to purchase at least 40 Units must be
accepted before the Company is obligated to close the
sale of any Unit. The Company may waive this
condition but once this condition is satisfied or
waived the Company is obligated to construct at least
40 Units and to complete the Resort amenities
described in this Prospectus. After the initial 40
Units are constructed, the Company may decide not to
construct and offer for sale any additional Units. If
all of the Units in any phase are not sold, the
Company will hold these Units for sale or rent the
Units pursuant to the Rental Program Agreement
generally on the same terms and conditions applicable
to other Unit Owners, including the payment of
Association assessments, and other certain expenses
related to ownership of a Unit, including payment of
rental commissions.
Although the Resort's amenities do not include beach
access, the Rental Manager currently intends to
obtain beach access in Collier County for Unit Owners
and guests. The proposed Resort Management Agreement
provides that the Resort Operator will allow Unit
Owners and guests use of the beach (located
approximately ____ miles from the Resort) at its
Radisson-Marco Island resort without charge.
Construction of the first phase consisting of ten
residential Units began in November 1998 and is
anticipated to be completed by the end of the second
quarter of 1999. The Resort will include a recreation
area consisting of a 5,000 square foot putting green,
adult and kiddie pools ( including a cabana, and
outdoor spa), two tennis courts, a volleyball court,
tanning beach and parking facilities. Each of these
facilities will be owned as common areas by the Unit
Owners and maintained by the Association.
Construction of the recreation area is anticipated to
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be completed by December 31, 1999. A lobby and
reception building, which will also contain a shop
where sundries may be purchased, an arcade and
activity room will be contained in a separate
building that will be owned by the Company or one of
its affiliates. If the reception building is not
completed when rental of Units commences, the Company
intends to use a portion of the recreation area as a
temporary reception and registration area for guests
of the Resort. In addition, LGV II will initially own
four commercial Units. The sports bar & grill will be
one of the commercial Units and the other three
commercial Units will include two saunas, a massage
facility and a fully-equipped gym, as well as vending
and storage areas. The Resort Operator will manage
the rental program on behalf of the Rental Manager.
See "The Resort."
The Lely Resort The Lely Resort is a 2900 acre country club community
under development by Lely Development Corporation, a
leading land developer in Collier County for over 25
years. Upon completion, the Lely Resort will be a
mixed use residential community that includes custom
homes, mid-rise condominium units, retail sites and
office and commercial property. The community is
being developed in three phases: Flamingo Plantation,
Mustang Plantation and Classics Plantation. The
Resort is part of [name of phase]. In addition to the
Condominium Declaration and the Association Articles
and Association By-laws, Unit Owners are also subject
to the Declaration of Covenants and Restrictions for
the Lely Resort and the Articles of Incorporation and
By-laws of the Lely Resort (the "Community
Declaration") and the Neighborhood Declaration (as
defined in the Condominium Declaration). See "The
Lely Resort."
The Golf Courses The Company is a party to the Use and Access
Agreement for Lely Golf Villas with Golf Enterprises,
Inc. (the "Use and Access Agreement") providing for
use of the Golf Courses.
Golf Enterprises is a privately-held golf course
management company that subleases and manages some of
the golf properties of its affiliate, American Golf
Corporation, a privately-held golf course management
company having a portfolio of golf facilities that
includes private country clubs, resorts, daily fee
public facilities and practice centers located in 29
states and 10 facilities in the United Kingdom.
Robert Trent Jones, Sr. designed and built the
Flamingo Island Club course, which opened to the
public in April 1990. Lee Trevino and W.M. Graves,
Inc. designed the Mustang Golf Club course which
opened to the public in December 1997. The Flamingo
Island course is a 18 hole, par 72 course measuring
6,292 yards in length and the Mustang course is a 18
hole, par 72 course measuring 7,217 yards in length.
Both Golf Courses are managed by Golf Enterprises.
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The Company has agreed to permit Golf Enterprises to
use a portion of the property owned by the Company
adjacent to the Resort as a temporary clubhouse.
Under the terms of the Use and Access Agreement, Golf
Enterprises is obligated to close the temporary
clubhouse by February 28, 2000 and to construct a
permanent clubhouse, which will include a proshop and
restaurant, by February 2000. See "The Golf Courses."
Unit Owners will be entitled to 42 rounds of golf per
individual Unit Owner and 85 rounds for all Unit
Owners occupying a Unit without payment of green fees
at either Golf Course each year during the period
from November 1 through October 31, as well as the
right to make reservations for tee times up to one
year in advance when their Unit is not rented. Rental
guests will be entitled to use the Golf Courses but
will receive no rounds of free golf or special
privileges not generally available to the public
using the Golf Courses, other than the right to
reserve tee times up to one year in advance.
During the period from December 16 through April 15,
Unit Owners may only play a maximum of seven days
during any one 30-day period. Once all seven days
have been used, Unit Owners must wait ten days before
being eligible to schedule additional tees times,
except that there may be one period of up to 14 days
of use per season within a particular 30-day period.
However, Unit Owners may not use the Golf Courses for
ten days before and after the first and last day of
this period.
The Rental
Program
Agreement Each Unit Owner must enter into the Rental Program
Agreement with the Rental Manager when purchasing a
Unit. Under the Rental Program Agreement, each Unit
must be made available for rent whenever it is not
occupied by the Unit Owner. The Rental Program
Agreement recommends that a Unit Owner give six
months notice prior to use of a Unit to reduce the
risk that the Unit will be unavailable. In addition,
the Rental Program Agreement limits a Unit Owner's
right to occupy a Unit from December 16 through April
15. During this period, a Unit Owner can occupy the
Unit Owner's Unit to a maximum of seven days during
any one 30-day period, a maximum of four total weeks.
Once all seven days have been used, the Unit Owner
must wait ten more days before being allowed to use
the Unit. However, once each year, a Unit Owner may
use the Unit for one 14-day period during the
December 16 to April 15 period. The number of days a
Unit Owner or certain related parties of the Unit
Owner uses the Unit may affect the tax consequences
associated with ownership of a Unit. See "Certain
Federal Tax Aspects--Section 280A."
Under the Rental Program Agreement, the Rental
Manager will be paid a management fee equal to 50% of
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annual Adjusted Gross Rental Revenue (as defined in
the Rental Program Agreement). Each Unit Owner will
also pay a Golf Fee, a monthly Association fee, an
amount to be used as a Replace Reserve Fund and
certain other expenses. Regardless of whether a Unit
Owner's Unit is rented, the Unit Owner is responsible
for these expenses. Unit Owners will be billed
directly for any shortfall to the extent that rental
revenues are not sufficient to pay allocated
expenses. See "Management of the Resort -- Rental
Program Agreement."
The Resort
Operator The Rental Manager is negotiating with MeriStar
Management Company, L.L.C., an affiliate of MeriStar
Hotels & Resorts, Inc., to serve as the operator of
the Resort Operator. The Resort Operator and certain
of its affiliates manage and operate various hotel
assets, including most of the hotels owned by
American General Hospitality Corporation, making it
one of the largest independent hotel management
companies in the United States based on number of
rooms under management. The Resort Operator is
included in the MeriStar Group's Resorts division
which focuses on sun, golf and ski oriented
properties. These resorts are located in California,
Florida, Georgia, Massachusetts, Vermont and the U.S.
Virgin Islands and are operated under nationally
recognized brand names such as Hilton(R),
Sheraton(R), Westin(R), Marriott(R), Doubletree(R)and
Radisson(R). The MeriStar group is the successor to
the leasing and management company interests of
CapStar Management Company and American General
Hospitality Corporation. About half of the hotels
leased or managed by the MeriStar group are owned by
MeriStar Hospitality Corporation, a real estate
investment trust and an affiliate of the MeriStar
group.
Under the proposed Resort Management Agreement, the
Resort Operator has agreed to manage the Resort and
perform the Rental Manager's obligations under the
Rental Program Agreement until March __, 2004, unless
sooner terminated in accordance with the terms of the
Resort Management Agreement. Under the terms of the
Resort Management Agreement, the Resort Operator may
terminate the agreement if at least ____ Units are
not completed by _______. LGV II will be responsible
for paying the fees and expenses of the Resort
Operator. See "Management of the Resort -- Resort
Management Agreement."
In the event that the agreement with the Resort
Operator is terminated without an experienced
operator available to take over, the Company or one
of its affiliates will operate the Resort. The
Company has no experience managing a resort.
Development of
the Resort The proceeds of the offering are not being used to
finance construction of the Resort, or any of the
Units or any properties related to the Resort, such
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<PAGE>
as the Golf Courses or the reception area. All net
proceeds of the offering representing the purchase
price of the Units will be paid to the Company upon
the closing of each sale of a Unit and will not be
available to fund operation of the Resort. See "Use
of Proceeds." The total estimated acquisition,
construction, development, marketing costs, financing
costs, including a return on internally generated
funds, and overhead costs in connection with the
project are currently estimated to be approximately
$35,500,000. Actual costs may vary depending on final
design, control of construction costs, the length of
time to construct and market the project and
unforeseen factors such as labor and material
shortages.
Assuming all of the Units are sold at the highest
prices of the price ranges set forth in Annex A
(which prices may be adjusted within the range upward
or downward from time to time based on marketing and
other factors), the Company will receive gross
revenue of approximately $38,000,000. The gross
revenue less the above total costs represent the
Company's pre-tax profit. Pre-tax profits will be
available to pay fees and distributions to Ronto,
Westbrook or their affiliated entities and taxes. The
Company and its affiliates will also receive income
from (1) development fees, (2) management fees, (3)
the use of the Golf Courses by Unit Owners or their
tenants and (4) other miscellaneous sources related
to the operation of the Resort.
Ronto will act as administrative partner with respect
to the development of the Resort. Ronto will
administer the design, construction, marketing, sales
and financing of the Resort in such capacity and as
provided under the Development Agreement between the
Company and Ronto. Under the Development Agreement,
for its services, Ronto will receive a fee of 3% of
substantially all revenues paid to the Company until
all Units are sold and occupied. Certain employees of
an affiliate of Ronto will be loaned to the Company
for certain purposes, including marketing and sales.
The Company also intends to engage unaffiliated
parties to assist in the administration of marketing
and sales.
The Company has assigned its rights under the Use and
Access Agreement to LGV II, an affiliate of the
Company, pursuant to the Assignment and Assumption
Agreement, other than the rights associated with a
Unit Owner's use of the Golf Courses. The Company has
granted the rights associated with a Unit Owner's use
of the Golf Courses under the Use and Access
Agreement to the Unit Owners pursuant to the
Condominium Declaration.
Certain
Transactions and
Related Parties The Company, LGV II, Ronto and certain of
their respective affiliates are parties to various
agreements and will receive various fees for services
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provided and be reimbursed for various expenses
relating to the development and operation of the
Resort, including the Development Agreement and the
Rental Program Agreement as described above. Pursuant
to the Assignment and Assumption Agreement, the
Company assigned its rights under the Use and Access
Agreement, other than certain rights associated with
a Unit Owner's rights to use the Golf Courses,
including rights relating to the rental of the Units
and the use of the Golf Courses by certain Designated
Users. In consideration of this assignment, LGV II
will pay to the Company quarterly royalties equal to
__% of the gross rental fees and __% of the gross
fees generated from use of the Golf Courses.
Personal Use The Rental Program Agreement limits a Unit Owner's
right to occupy a Unit from December 16 to April 15
to a total of four weeks. A Unit Owner's occupancy is
also limited to a maximum of seven days during any
one 30-day period. Once all seven days have been
used, you must wait ten more days before being
allowed to use your Unit. However, once each year a
Unit Owner may use the Unit for one 14-day period,
provided that the Unit Owner does not use the Unit
for ten days both before and after this period. A
Unit Owner is permitted to use the Unit an unlimited
number of times from May 1 through October 31,
subject to prior reservation in order to avoid
conflict with the rental of the Unit by the Resort
Operator. Depending on the amount of personal usage,
a Unit Owner may be subject to different limitations
on tax deductions and income from the rental of the
Unit will be affected.
Reserves The Rental Manager will deduct from the rent payment
distribution made to the Unit Owner each month an
amount equal to 3% of the Adjusted Gross Rental
Revenues credited to the rental of the Unit Owner's
Unit during the preceding month for the Interior
Maintenance Fund. The Interior Maintenance Fund will
fund the replacement and repair of furniture, linens
and other household items, including appliances. If
the amount withheld for the Interior Maintenance Fund
is insufficient, then the Unit Owner will be directly
billed for the shortfall. The Rental Manager will
provide the Unit Owner with an accounting of the
Interior Maintenance Fund from time to time and
adjust the amount withheld to correspond to
anticipated use. Interest earned on the Interior
Maintenance Fund will be added to the Fund.
Expenses The amount of the Association assessment and the
annual payments into the Interior Maintenance Fund
will be adjusted periodically. Annual Licensing Fees
are initially $3,500 per annum (pro rated for partial
years) payable in ten equal installments from
November through August. A Unit Owner must pay at the
time of a transfer of a Unit of fee of $5,000. Annual
Licensing Fees and fees payable upon the transfer of
a Unit will increase by 4% per annum beginning
November 1, 2002 and November 1, 2000, respectively.
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Shortfalls A Unit Owner is obligated to pay the allocated
expenses, including Annual Licensing Fees and
Association assessments, and to maintain furnishings,
and replace wall coverings, equipment and appliances,
linens, decorative items, accessories, floor and the
condominium reserve, regardless of the amount of
rental income paid to the Unit Owner for the rental
of the Unit. Under the Rental Program Agreement, the
Rental Manager may, but is not obligated to, advance
funds to pay these expenses and be repaid, plus
interest, out of future rent revenues. Interest on
advances by the Rental Manager will accrue at the
highest rate permitted by law (currently 18% per
annum). Under the Rental Program Agreement, the
Rental Manager may also assess a charge of 10% of any
shortfall. Failure by a Unit Owner to pay obligations
related to the Unit Owner's Unit may result in the
imposition of a lien on a Unit Owner's Unit.
Distributions The Rental Manager will distribute to Unit Owners the
net rental revenue obtained from the rental of the
Unit Owner's Unit by the 20th day following the end
of each month. Net rental revenue is the amount
determined by deducting from Adjusted Gross Rental
Revenue, the Management Fee, Annual Licensing Fees,
payments to the Interior Maintenance Fund and certain
other costs and expenses incurred and/or payable by
the Unit Owner. The Rental Manager will provide an
itemized statement of income and expenses relating to
rental of a Unit to the Unit Owners and will also
provide an annual accounting for the Interior
Maintenance Fund, as well as appropriate information
for income tax preparation purposes.
Risks of
Projections The Resort has no operating history on which to rely.
For this reason, this Prospectus includes certain
projections of operating results. While the Company
believes that its projections are based on a
reasonable range of assumptions and consider those
factors that are likely to impact on the expected
income to be derived from rental of a Unit,
projections are not predictions of anticipated
results. Actual results are likely to be different,
perhaps materially. The selection and evaluation of
the factors to be included in the projections is
highly subjective and the projections do not consider
all of the factors that may affect the income you may
receive from your particular Unit. Factors such as
anticipated occupancy levels are based on numerous
variables, many of which are outside of the ability
of the Company, the Rental Manager or the Resort
Operator to control, including the impact of
competitive resorts, and local, national and
international economic conditions.
Prices of Units The initial range of purchase prices of
Units have been established by the Company. The
Company is not required to maintain the initial price
schedule and may adjust the price of individual Units
up or down from time to time in response to market
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conditions and demand. Adjustments may not be
uniformly applied to all Units of the same type. The
price of a Unit cannot be changed once a purchase
contract has been executed for such Unit. The initial
schedule of purchase prices for each Unit designated
by type and location, together with a schedule
specifying all other payments required to be paid by
a purchaser at closing are set forth in Annex B.
Purchase
Procedure To purchase a Unit, you must execute a purchase
contract in the form attached to this Prospectus as
Annex C. Following acceptance by the Company your
contract is irrevocable, subject to the 15-day
period, commencing on the last to occur of the date
of execution of the purchase contract, the date the
purchaser receives all documents required by law and
the date the purchaser receives any amendment to a
document previously received, permitted for
rescission of the purchase contract under Florida
law. The Company will not accept any contract until
after the effectiveness of the registration statement
of which this Prospectus is a part. You may revoke
your purchase contract at any time prior to
acceptance.
Following execution of a purchase contract, if the
registration statement relating to the offering of
the Units is effective under the Securities Act, you
are required to make a down payment in the amount of
10% of the purchase price of your Unit. An additional
10% must be paid within ten days after issuance of a
building permit provided that construction of your
Unit has commenced and you are past the Presale
Period. The down payment will be held in an interest
bearing escrow account for your benefit until the
closing of the purchase of your Unit. The down
payment is nonrefundable if the purchaser breaches
the contract but is refundable if the Unit is not
completed, the offer to purchase the Unit is revoked
or the purchase is rescinded in accordance with
Florida law. At closing, the balance of the purchase
price, together with a one-time administrative fee of
$500, a $500 payment as an Association working fund
contribution (an amount equal to two months
Association assessments) and closing costs in the
amount of 1.25% of the purchase price of the Unit,
the cost of recording the deed and all pro rated
amounts (e.g., taxes and Association assessments)
will be due. The purchaser also will be responsible
for any costs relating to any financing by the
purchaser for the purchase of a Unit. There will be a
separate closing for each Unit.
The Company is not obligated to close the sale of any
Unit until 40 Units are sold. However, once this
condition is satisfied or waived, the Company is
obligated to construct at least 40 Units. The Company
may discontinue the offer and sale of Units at any
time after satisfying or waiving this condition
without notice in its sole discretion.
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Financing Each prospective Unit Owner will be required to pay
the purchase price and all other amounts due at
closing in cash. However, prospective owners may
obtain financing from any available source. The
Company may, but is not obligated to, make referrals
for financing in connection with a purchase of an
Unit. Failure to receive financing will not relieve a
prospective owner from the obligation to purchase a
Unit.
Tax
Considerations You are urged to consult with your own tax advisors
concerning the tax effect of ownership by you of a
Unit under federal and applicable state law.
Unit Owners must report income from the rental of a
Unit as income for federal and applicable state
income tax purposes. You will be entitled to any
available deductions associated with ownership of the
Unit for federal income tax purposes, including
deductions for property taxes, investment interest
expense and depreciation. However, you should be
aware that your use of your Unit will impact on the
income tax treatment of your ownership of your Unit
and the availability of such deductions.
For a more complete discussion of certain income tax
consequences of Unit ownership see "Certain Federal
Tax Aspects" beginning on page ____.
The Association When you purchase your Unit, you will automatically
become a member of the Association. The Association
will supervise the maintenance of the common areas
and will pay certain common charges. In addition, the
Association will be liable for the payment of the
Annual Licensing Fees to the extent not paid by a
Unit Owner. In addition, at the closing of each Unit,
the Unit Owner will make a payment of $500 as a
working fund contribution. The Association
assessments are currently budgeted at $250 per month.
The Board of Directors is responsible for managing
the Association, including preparation of the
Association's annual operating plan and budget. The
number of directors on the Board will initially be
three. The Company will initially appoint all three
directors of the Association. Unit Owners will elect
1/3 of the directors after the Company conveys 15% of
the Total Condominium Units (as defined in the
Articles of Incorporation of the Association). Unit
Owners will elect a majority of the directors after
the earliest to occur of the following:
(1) Three years after 50% of all Units which are
to be conveyed have been conveyed;
(2) Three months after 90% of all Units which
are to be conveyed have been conveyed;
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(3) When all Units that are to be conveyed are
completed, some are conveyed and no other
Units are being offered for general sale;
(4) When some Units have been conveyed and no
other Units are being constructed or offered
for general sale; or
(5) Seven years after recordation of the
Condominium Declaration.
The Company may elect at least one director as long
as it is offering for general sale at least 5% of the
Units.
Directors will have a two-year staggered term of
office once control of the Board is transferred to
the Unit Owners. There will be a minimum of three
directors.
RISK FACTORS
Prospective investors are urged to consider carefully the following, together
with the other information contained in this Prospectus and in the Annexes,
before purchasing Units.
Revenue Insufficient to Cover Expenses
Net rental revenue payable will not likely be sufficient to pay a
typical mortgage. There is also the risk that operating costs will exceed the
rental revenue. Unit Owners are responsible for expenses relating to their
Units, including expenses paid by the Association, regardless of the amount of
rental income received.
If there is a default on the Annual Licensing Fees, Golf Enterprises
may impose a lien on the Units that may be foreclosed in the same way as a
mortgage. If there is a failure to pay any of the obligations to Golf
Enterprises by the Unit Owners or any of the other parties to the Use and Access
Agreement, the Unit Owners may lose use of the Golf Courses. In addition, if
there is a significant default by Unit Owners on other fees and expenses, there
may be insufficient funds to operate the Resort generally. This could make it
impossible to operate the Resort on a rental basis and could result in a general
decline in the value of the Resort and the individual Units. In such event,
while the defaulting Unit Owners will not be relieved from their obligations to
pay delinquencies, the remaining Unit Owners may be subject to increased or
special assessments in order to defray the operating shortfall.
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Limited Resale Market
There will not be an organized resale market for the sale of your Unit.
The Units will not be listed on a national securities exchange or quoted by
Nasdaq. Resales will occur only in privately negotiated transactions and may
only be made directly by the Unit Owner or through a sales representative
appropriately licensed under applicable federal and state securities and real
estate law. Your resale ability could be further diminished if the Resort's
performance does not reach expectations. You, therefore, may not be able to sell
your Unit quickly or at a price you feel equal to its value in an emergency.
Consequently, the purchase of a Unit should be considered only as a long-term
investment.
Significant Income Tax Considerations to Owners
The following is a brief summary of the most significant tax
considerations discussed under "Certain Federal and State Income Tax Aspects"
involved in an investment in a Unit and the rental arrangement contemplated by
the Rental.
You are strongly urged to review this material with your financial
advisor and to discuss the tax consequences of an investment in a Unit with your
own tax advisors.
Section 183 Hobby Loss Rules
The Internal Revenue Code of 1986, as amended (the "Code"),
distinguishes between activities engaged in for profit and activities not
engaged in for profit. Your ability to deduct your share of any losses from
renting your Unit may be limited by Section 183 of the Code, which is commonly
called the "hobby loss rule". If the rental program contemplated by the Rental
Program Agreement is subject to the hobby loss rules, the amount you will able
to deduct for your share of expenses and losses from renting your Unit will be
limited to the rental income you receive. See "Certain Federal and State Income
Tax Aspects -- Tax Consequences of Renting to Unit Owners -- Section 183."
Vacation Home Rental Rules
Your share of any losses from the rental of your Unit may be further
limited by the vacation home rental rules in the Code. Section 280A of the Code
establishes a gross income limitation and an expense allocation formula for
apportioning deductions between personal (that is, your use of your own Unit by
you and your family members) and business use of a dwelling unit. Your Unit is
considered a dwelling unit for federal income tax purposes. You will be
permitted to deduct expenses related to the ownership and rental of your Unit
only to the extent such expenses are allocable to business use of your Unit. In
addition, if personal use of your Unit by you and your family members exceeds
the greater of 14 days or 10% of the number of days during the year that your
Unit is rented for fair value, your deductible expenses will be limited to your
income from renting your Unit. See "Certain Federal and State Income Tax Aspects
- -- Tax Consequences of Renting For Unit Owners -- Section 280A."
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Passive Activity Rules
The rental of your Unit under the Rental Program Agreement is
considered a passive activity under the Code. Losses from passive activities
generally may only be deducted against income from the same or other passive
activities. See "Certain Federal and State Income Tax Aspects -- Tax
Consequences of Renting For Unit Owners -- Income and Losses from Passive
Activities."
Possible Cut-Off of Right to Use Golf Courses
Golf Enterprises operates the Golf Courses as subleasee under subleases
that expire on June 30, 2034. If these subleases are not extended, Golf
Enterprises will not be able to extend the Use and Access Agreement past June
30, 2034. In addition, there is the risk that there could be defaults, either
under the subleases or the underlying ground leases, or foreclosure by
mortgagees or other lienholders on the Golf Courses that could cause an earlier
termination of Golf Enterprise's subleases. The Company has the right under
certain circumstances to cure these defaults, but these rights do not apply in
all cases and may be impractical to exercise in some circumstances. If there is
a termination of Golf Enterprises' rights under the subleases your rights to use
the Golf Courses will be cut-off.
Your rights to use the Golf Courses may also be adversely affected by a
breach of the Use and Access Agreement by the Company, the Rental Manager or
otherwise, after expiration of applicable grace periods.
Risks in Relying on Projections
The Resort has no operating history. Therefore, this Prospectus
contains Projections using assumptions about rental income payable to Unit
Owners. These Projections do not relate to all Units or any specific Unit.
Projections are not predictions of actual results. Actual results are likely to
be different, perhaps materially. Factors that will affect actual performance
include, but are not limited to, occupancy rate achieved, actual rental rate,
effects of competition, strength of tourism and assumptions about the regional,
national and international economies. If actual results are materially worse
than those set forth in the Projections, Unit Owners may experience material
adverse consequences, including the need to pay additional funds to meet
operating costs (such as Annual Licensing Fees and Association assessments), and
to make payments on any loan obtained by a Unit Owner to purchase a Unit.
Forward Looking Statements
Since the Resort has not yet been completed or commenced operations,
all statements in this Prospectus regarding the Resort and its operation are
forward-looking statements within the meaning of Federal securities law. Such
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<PAGE>
statements can be identified by the use of forward-looking terminology such as
"may," "will," "expect" "anticipate," "estimate," "continue" or other similar
words. These statements discuss future expectations, contain projections of
results of operations or of financial condition or state other "forward-looking"
information. When considering such forward-looking statements, you should keep
in mind the other risk factors contained in this Prospectus. Although management
of the Company believes that the expectations reflected in these forward-looking
statements are based on reasonable assumptions, there are certain factors such
as general economic conditions, local real estate conditions, or weather
conditions that might cause a difference between actual results and those
forward-looking statements. This discussion should be read in conjunction with a
review of the Company's financial statements, including the related notes to the
financial statements, and the Projections included in this Prospectus beginning
at pages F-1 and P-1, respectively.
Year 2000
The year 2000 issue is the result of computer programs that were
written using two digits rather than four to define the year. Management of the
Company and the Rental Manager are aware of the potential problems, including
the inability to collect and maintain the information necessary to operate the
rental program, and is currently assessing the potential impact on the Company
and the Rental Manager. One factor in evaluating candidates to serve as Resort
Operator is the preparations that the Resort Operator candidate has taken with
respect to the potential problems attendant to a failure to be Year 2000
compliant. Since the Company and the Rental Manager have not completed their
evaluation, the Company and the Rental Manager are currently unable to estimate
the cost of compliance.
The goal of the Company and the Rental Manager is to ensure that all of
their critical systems and those of the Resort Operator are under their
respective direct control and remain operational. However, certain systems and
processes may be interrelated with systems outside their control, such as the
systems and operations of travel agents, tour group operators and other booking
agencies, and their can be no assurance that all implementations will be
successful. Under the Company's and the Rental Manager's present analysis of the
most reasonable likely worst case scenario for Year 2000 disruptions, there is
the concern that telecommunications and electric industries serving the Resort
may fail, causing temporary disruptions in the construction of the Resort and
the ability of the Rental Manager to rent Units. The Company and the Rental
Manager are considering alternatives for these possibilities which include
electricity provided by personal generators and batteries and various
alternative communications systems.
The Company and the Rental Manager are currently unable to estimate the
cost of becoming Year 2000 compliant, but do not anticipate that it will have a
material adverse effect on the construction and operation of the Resort.
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Dependence on the Resort Operator
Success of the Resort will depend to a great extent on the efforts and
abilities of the Resort Operator. The Resort Operator was engaged for a
five-year term, subject to earlier termination under certain circumstances. In
particular, the Resort Operator may terminate the Resort Management Agreement if
at least _____ units are not sold by _____________.
If the Resort Operator were to terminate its arrangement to manage the
Resort, and another experienced resort operator was not immediately available,
the Company or one of its affiliates would operate the Resort. The Company has
no experience managing a resort.
If the Company is required to operate the Resort for an interim period,
the Resort may be without the benefits of an advanced reservation booking system
and national advertising that is generally provided by an experienced operator
and otherwise at a disadvantage with respect to some of its competition.
Inexperience of the Company and the Renal Manager
[To be determined] Resort and Golf Club of Naples is the first resort
condominium project and rental program developed or managed by the management of
the Company or the Rental Manager, and their experience in resort development
and management is therefore limited.
Dependence on Golf Operator
The Resort's ability to attain satisfactory occupancy and room rates is
dependent on access to the Golf Courses, which has been arranged with Golf
Enterprises under the Use and Access Agreement. Neither the Company nor the Unit
Owners will have any ability to control or direct the operations of Golf
Enterprises or the use or condition of the Golf Courses, except to the limited
extent set forth in the Use and Access Agreement. If Golf Enterprises fails to
properly operate or maintain the Golf Courses, occupancy and room rates of the
Resort could be materially adversely affected.
Competition
The success of the Resort will be determined by, among other things,
its location, quality of accommodations, room rate structure and the quality and
availability of play on the Golf Courses. The Resort will compete with existing
hotels and resorts, as well as with future hotels and resorts that may be
developed in proximity to the Resort. According to a study prepared by Landauer
Hospitality Group, in 1996, there were [2,309] rooms in the Naples hotel supply.
These rooms compete with the Resort in varying degrees on the basis of location,
potentially common customer base, quality level of facilities and room rate
structure. However, the majority of these hotels are located on beachfront, a
factor that mitigates seasonality and attracts a different market. According
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to the Landauer study, outside of the Naples area, there are golf resort
properties with rooms totaling [3,609] in 1996. The majority of these resorts
are much larger than the Resort and generally are located in the interior of
Florida. In addition, most of these properties provide significant amounts of
meeting space in order to capitalize on the meeting group market to supplement
golf demand. As a result, the majority of demand is meeting group oriented. In
the Naples area the Company believes that there are currently only three resorts
that are directly competitive with the Resort. However, additional projects for
resort facilities have been announced that may compete with the Company, if
completed. Competition in the future may be affected by changes in the hotel and
resort market in the Naples area, changes in local or regional population
patterns, changes in disposable income characteristics, changes in travel
patterns and preferences, and periodic over-building that can adversely affect
patronage levels.
Potential Liability of Ownership
Included in your Association assessments will be a share of insurance
premiums for property damage, public liability and fire and other hazard
insurance carried by the Association against certain risks of operating the
Resort. In addition, under the Rental Program Agreement, each Unit Owner is
required to carry property, casualty and liability insurance of at least
$300,000. However, the amount of insurance carried by the Association or the
Unit Owner may prove inadequate. There are certain risks which may be
uninsurable or not insurable at reasonable terms. In the event insurance is
unavailable for any reason, the Association will have to self-insure for all or
part of any potential loss or to seek coverage at higher rates from alternative
carriers.
You may personally have joint and several liability for tort and
contract claims as a result of ownership of your Unit or as a party to the
Rental Program Agreement. You are urged to consult an insurance advisor or
attorney with respect to the nature and extent of such personal liability and to
determine what additional liability insurance coverage, if any, may be necessary
or appropriate for your particular circumstances.
Seasonal Fluctuations
The Naples resort market is seasonal, with demand fluctuating at
different levels throughout the year. This seasonality will cause fluctuations
in the gross revenue generated from the rental of your Unit. The peak season in
the Naples market extends from November through April. The low season is from
June through September with a shoulder season of the months of May and October.
Operating Uncertainties
The value of the Resort and an investment in the Units will depend in
part on the ability of the Resort Operator to achieve, maintain or increase
gross revenue sufficient to cover operating expenses and generate a reasonable
return for the Unit Owners. Income from an investment in the Units may be
adversely affected by a range of factors in addition to increased competition as
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discussed above. These factors include but are not limited to increases in
operating costs as a result of inflation and other factors, which the Rental
Manager may determine cannot be offset by increased revenue, strikes and other
labor disturbances by the Resort's employees, increases in energy costs and
other expenses of travel, weather conditions (including the impact of damages
caused by hurricanes, tornadoes and floods) and adverse effects on general and
local economic conditions. Due to the orientation of the Resort to use of the
Golf Courses, the Resort is particularly dependent upon the quality and
availability of play on the Golf Courses. Occupancy by tourists who do not play
golf is expected to be minimal. All of these and other factors could reduce the
Resort's ability to generate revenue.
Potential Liability for Violation of Environmental Laws
Under various federal, state, and local environmental laws, a current
or previous owner or operator of real property may be liable for the costs of
removal or remediation of hazardous or toxic substances. Such laws, ordinances
and regulations often impose liability, whether or not the owner or operator
knew of, or was responsible for, the presence of such hazardous or toxic
substances. The Company is not aware of any material violations of currently
applicable environmental laws. However, violations may occur in the future or
more stringent laws may be enacted. If this occurs, the Company, the Rental
Manager or the Unit Owners could suffer material adverse consequences as a
result.
Risks in Relying on Industry Data
The Company has obtained various industry data set forth in this
Prospectus regarding the golf and resort industry from PCK Consulting's report
on Trends in the Hotel Industry, a report prepared for use by the Company by the
Landauer Hospitality Group, information provided by the Resort Operator and
information obtained from certain public sources. Industry information as a
whole or on specific markets may not be indicative of results that can be
achieved in the Naples market or by the Resort and may not be applicable to a
resort focused on golf or which includes a rental program. The Company has not
independently verified the resort industry data contained in the national
studies cited or obtained from other sources. The sources of this information
are not affiliated with the Company or associated in any way with this offering.
Inexperience of Association Directors
Following relinquishment of control of the Association by the Company,
the Association will be governed by a Board of Directors, all of whom will be
Unit Owners. These directors will not be full-time residents of the Resort and
may have little or no experience in operating a resort or a rental program
between Unit Owners and tenants. The operating inexperience of the directors may
result in the directors not being able to recognize or take corrective action if
and when required.
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THE RESORT
General
The Resort is a golf-orient condominium-hotel consisting of 200 fully
furnished suites located in 2 buildings of 10 units and 15 buildings containing
12 units each, complemented by resort and recreational facilities, on a 20 acre
site in the Naples, Florida area. The Resort is part of the Lely Resort and is
located approximately five miles from the Naples airport and 37 miles from the
Fort Myers/Southwest Florida International Airport. Each building will be two
stories. There will be a lobby and reception building, as well as a separate
building housing certain recreational amenities, including a bar and grill, his
and her saunas, message facilities and a fully-equipped gym. There will also be
a golf practice area, a cabana, adult and kiddie swimming pools, tanning beach,
two spas, volleyball court, two tennis courts and parking facilities owned and
operated by the Company or one of its affiliates.
In response to the Company's market studies, the Company has determined
that a mix of two- and three-bedroom Units with certain amenities and
recreational activities will be most attractive to potential users of the
Resort.
The Company believes that the Resort will fill a void in the Naples
market for resort facilities that cater to the golf enthusiast. The Company
believes that the mix of the facilities provided at the Resort and located
nearby, including the Golf Courses, comprises an ideal setting that is not
duplicated at other area resorts or at golf resorts located inland.
The floor plans for the Units and the building layouts indicating the
location of the Units and other Resort facilities are set forth in Annex D to
this Prospectus.
THE GOLF COURSES
Golf Enterprises is the operator of the Golf Courses. It is a privately
held golf course management company that subleases and manages some of the golf
properties of its affiliate, American Golf Corporation, a privately held golf
course management company having a portfolio of golf facilities that include 260
private country clubs, resorts, daily fee public facilities and practice centers
located in 29 states and 10 facilities in the United Kingdom.
American Golf established American Golf Country Clubs ("AGCC") as a
separate and distinct operating division within the company dedicated to private
club acquisition, management and member service in the United States and abroad.
AGCC's portfolios comprised of over 60 private country clubs, that are
considered by the industry to be among the most desirable golf properties in the
country and which include the Golf Courses.
Robert Trent Jones, Sr. designed and built the Flamingo Island Club
course, which opened to the public in April, 1990 and Lee Trevino and W.M.
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Graves, Inc. designed the Mustang Golf Club course which opened to the public in
December, 1997. The Flamingo Island course is a 18 hole, par 72 course measuring
6,292 yards in length and the Mustang course is a 18-hole, par 72 course
measuring 7,217 yards in length. Both Golf Courses are managed by Golf
Enterprises.
Golf Enterprises will erect a temporary club house, that will include a
restaurant and pro shop, on property owned by the Company that is adjacent to
the Resort. Under the Use and Access Agreement, Golf Enterprises has agreed to
complete a permanent club house by February 2000. This clubhouse will be
available to the Resort and the general public.
THE LELY RESORT
The Lely Resort is a 2900 acre country club community under development
by Lely Development Corporation, a leading land developer in Collier County for
over 25 years. Upon completion, the Lely Resort will be a mixed use residential
community that includes custom homes, mid-rise condominium units, retail sites
and office and commercial property. The community is being developed in three
phases: Flamingo Plantation, Mustang Plantation and Classics Plantation.
The Resort is part of [name of phase].
THE RESORT INDUSTRY
General
The resort industry is very cyclical and profitability is determined in
part by the relative availability of supply to demand. Demand is closely linked
to the strength of the economy. The growth of supply, however, is closely linked
to the availability of capital, which may be less or more than existing demand.
According to the report (the "Landauer Report") prepared for the
Company by Landauer Hospitality Group, Inc. ("Landauer"), the Resort is
comparable and may be considered to compete with three distinct groups of
properties. The first group consists of resort-oriented hotels in the local
Naples-Marco Island area that attract leisure and group demand. The second group
consists of inland Florida resorts which are golf-oriented, some of which
feature organized rental pool programs. The third group includes other Florida
resorts, many of which are located beachfront and cater to upscale meeting
groups, as well as discretionary leisure travelers.
The performance of the U.S. or Florida resort industry as a whole may
not be indicative of results that can be achieved in the Naples area. Factors
that would not necessarily have a material effect on the national industry
because it is geographically diverse may have a significant impact on a smaller
market. Individual resort markets may underperform or outperform the industry as
a whole. In addition, the results of resort hotels in the Naples area or golf
oriented resorts located inland are not directly comparable to the market for a
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Naples-based golf oriented property such as the Resort. Finally, properties
included in a rental pool or program are affected by factors that may not be
applicable to these other properties.
Resort Market
Resorts that are focused on a particular area of interest, such as
golf, sometimes experience results that contrast with the performance of the
resort market generally. Resort properties in the Naples area generally feature
waterfront locations, some with direct golf access, and offer luxury
accommodations and services. In addition, many of these hotels are considered
"flagship" properties or destination resorts. As such they cater to upscale
meeting groups and discriminating leisure travelers and command higher room
rates compared to other properties, including the Resort. This would be true of
two of the golf-oriented resorts currently planned for the Naples area.
Florida
Tourism is Florida's second largest industry and plays a significant
economic role throughout the state. The growth of the tourism industry in
Florida is based on the following:
o Favorable climate
o Natural beauty
o More leisure time
o Number and quality of resort
hotels and championship golf courses
o Development of new tourist attractions
o Low airfare structure
o Expansion of sporting events
o Shopping
o Healthy economy
o Aggressive tourism development
Comparable Resort Properties Operating Performance
The performance of a representative set of Naples/Marco Island hotel
resort properties, according to the Landauer Report, is as set forth in the
following table:
Naples/Marco Island Resort Hotels
- --------------------------------------------------------------------------------
YEAR OCCUPANCY ADR
- --------------------------------------------------------------------------------
1995 70% $141
1996 73% $144
1997 (estimate) 76% $151
- --------------------------------------------------------------------------------
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Note: The hotel resort properties represented include Registry
Resort Naples, Naples Beach Hotel and Golf Club, Marriott's
Marco Island Resort & Golf Club and Inn at Pelican Bay.
The performance of a representative set of Florida golf resort
properties, according to the Landauer Report, is as set forth in the following
table:
Florida Golf Resorts
- --------------------------------------------------------------------------------
YEAR OCCUPANCY ADR
- --------------------------------------------------------------------------------
1995 60% $117
1996 61% $122
1997 (estimate) 63% $128
- --------------------------------------------------------------------------------
Note: The golf resort properties represented include Westin
Innisbrook Resort, Marriott at Sawgrass Resort and PGA
National West Palm Beach.
The Naples Market
Naples
The Resort is located in Collier County within the Naples metropolitan
area, a residential and resort community located on the southwest coast of
Florida.
According to the Landauer Report, Naples has experienced growth in
nearly all sectors of its economy that is above the growth rate for Florida and
the United States. The majority of this growth has been concentrated in the
central and western portions of Naples near the commercial business district and
along the gulf coast. The highest rate of growth has been experienced in retail
sales and in sales by eating and drinking establishments located in the area.
Golf is a major attraction in Naples and contributes to the health of
the tourism sector. Naples is second in the nation for the highest number of
golf holes per capita and hosts an annual PGA Tour event each winter.
Competition
The Company believes that three properties in the Naples market are
directly competitive with the Resort. These are Pointe Estero Resort, Gullwing
Beach Resort and Marco Beach Ocean Resort. The following chart sets forth some
of the characteristics of these properties:
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<TABLE>
<CAPTION>
Property Year Opened No. of Rooms Facilities/Amenities
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pointe Estero Resort 1988 60 - TV's in every bedroom and
living room
- Swimming pool
- Jacuzzi
- Recreational activities
- Cookouts
Gullwing Beach Resort 1998 66 - Beach access
- Swimming pool
- Decorator designed rooms
- Guest services
- Turnkey ownership
Marco Beach Ocean Resort 1998 103 - Six floor plan choices
- Two swimming pools
- Restaurant building
- Concierge service
- Health spa
- Fitness training
- Two jacuzzi spas
- Reciprocal membership with
Royal Tarpon Yacht Club
</TABLE>
The factors considered in determining this competitive supply
included: (1) the number of rooms and amount and quality of meeting space, (2)
quality and value of overall facilities and amenities, (3) character and style
of the resort, (4) rate structure and market position, and (5) location factors
such as surrounding land uses.
These properties are competitive largely based upon their size, price
points and location. Each offers certain amenities comparable to the amenities
offered by the Resort. Each property offers access to golf at sites, some of
which are owned by the resort and others of which are located at adjacent
properties or nearby. The cost of tee times at these golf facilities is
approximately equal to prices that will be paid by Resort guests, though less
than amounts that will be paid by a Unit Owner when such prices are calculated
as part of the price of ownership of a Unit. The quality of the golf facilities
themselves are generally of lower caliber than the Golf Courses.
In addition, there are a number of condominiums and hotels in the
Naples area that offer golf as one of their featured recreational activities
such as Lover's Key Beach Club and Resort, the Naples Beach & Golf Hotel,
Fiddler's Creek and Naples Heritage. The Lely Resort also includes condominium
units that offer access to the Lely golf courses.
Resort Market Seasonality
The Naples resort market is affected by seasonality with demand
fluctuating at different levels throughout the year. The severity of demand
fluctuation has lessened in recent years as a result of the increasing
popularity of the area. Peak season in demand occurs from November through
April. During peak periods, occupancy in Naples ranges from 79.11% to 85.51%
during this period and there is less disparity between weekend and weekday
demand. As a result, the resort market experiences numerous fill nights (periods
in which the market is at capacity) during the peak season. The "shoulder"
season includes the months of October and May. Occupancy percentages generally
range from 67% to 70% during this period. The resort market experiences numerous
fill nights on the weekends during the shoulder season. The low season is from
June through September. Market occupancy ranges from 48% to 61% during this
period.
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Unsatisfied Demand
As a result of significant tourist activity and a strong demand for
proximity to the area's high quality golf facilities, Naples experiences high
levels of unsatisfied demand during certain times of the year. Unsatisfied
demand is that demand which is not able to be accommodated in the direct market
area due to facility size or capacity constraints and exists whenever a market
experiences periods of 100% occupancy. As a result of seasonality, unsatisfied
demand can exist even though the average annual occupancy for the market is less
than 100%. The level of unsatisfied demand is extremely important when
considering the potential support for new resort development in a particular
area.
Market Demand
The overall demand for resort lodging accommodations in the Naples
area is generated primarily by leisure destination travelers and the meeting
group market. However, because of the number and quality of the golf facilities
in the Naples area, lodging for golf enthusiasts who come to the area primarily
to play golf is high.
Future Demand Growth
The Company currently estimates that demand will increase at
approximately __% annually starting in ______, the point at which new supply is
expected to enter the competitive marketplace. This growth is consistent with
the demand growth experienced by the competitive supply between 1995 and 1996 as
set forth in the Landauer Report.
The Company also presently anticipates that the new additions to the
competitive supply will induce demand into the market. Induced demand is new
demand that enters a market as a direct result of the introduction of a new
hotel product. This demand is over and above the normal demand growth
experienced by the marketplace. As a result of their more unique physical
attributes, variety of amenities, and ability to cater to all demand segments,
resort oriented hotels, more than any other lodging type, possess the ability to
induce new demand into a marketplace.
Prospective New Resort Supply
The Company estimates that ____ new rooms (including the Resort Units)
will be constructed within the next three years, including both resort hotels
and golf-oriented resorts.
Plans for the construction of three significant golf resort properties
have been announced. Florida Panthers Holdings, a publicly-held sports and
leisure company, announced a project for the construction of a world-class golf
resort and country club in Naples. The project will include a semi-private,
18-hole golf course and a luxury 250-room hotel. Plans to construct a 295-room
golf lodge that will be operated by the Ritz-Carlton luxury hotel chain have
also been announced. In addition, WCI Communities and Hyatt Equities announced
an agreement for the development of a 450-room Hyatt Regency resort hotel in
southern Lee County (between Naples and Fort Meyers) that will include an
18-hole championship golf course that will primarily serve guests of the hotel,
but which will also be open to the public for daily-fee play.
PROJECTED PERFORMANCE OF THE RESORT
The following represents a summary of a range of selected projected
financial performance of a typical Unit for the first five years of operations
and is derived from the Projections appearing on page P-1. This summary of
selected financial performance should be read in conjunction with the
Projections, which includes the assumptions underlying the Projections and
related notes.
34
<PAGE>
Investors should recognize that the Projections are not intended to be
predictions about the performance of the Resort. The Company believes that the
assumptions on which the Projections are based are reasonable. However, actual
results will differ from the results contained in the Projections, perhaps
materially. Investors are encouraged to consult with their own advisors with
respect to the assumptions upon which the Projections are based and are
encouraged to review the discussion of risk factors regarding the Resort and its
operations set forth under "Risk Factors" beginning on page __.
[Add Selected Projections of Financial Performance of the Units]
Market Penetration
The operating results set forth in the Projections are predicated on a
number of assumptions relating to the physical and locational characteristics of
the Resort. These assumptions include the Resort's overall facility, as well as
the fact that the Resort has a preferential use and access agreement with Golf
Enterprises. The Company believes that the resort-oriented facilities and
dedicated golf agreement will provide a significant competitive advantage for
the Resort in the Naples marketplace. Additionally, the Company considered the
following factors in preparing the Projections:
o the estimated future performance of the overall competitive
lodging market
o the advantages and disadvantages of the Resort relative to
the existing and future competitive market (assuming its
location, overall facilities, and access to the Golf Courses
with the rights provided to Unit Owners under the Use and
Access Agreement)
o the estimated mix of different types of demand for the Resort
o the estimated rate structure for the Resort
o the impact of potential new resort supply in the competitive
market
Different assumptions about market penetration serve as a basis for
the Projections of future occupancy performance for the Resort. Market
penetration is a measurement of the level of demand captured by a given resort
in relation to its fair market share based on the number of resort rooms it has
relative to the number of rooms in the market. Market penetration is expressed
as a percentage, with a resort capturing its fair market share having a market
penetration rate of 100%.
Occupancy
[To be added]
Conclusion
[To be added]
THE RESORT OPERATOR
The Rental Manager is negotiating to engage MeriStar Management
Company, L.L.C., an affiliate of MeriStar Hotels & Resorts, Inc., as Resort
Operator. The Resort Operator and certain of its affiliates manage and operate
various hotel assets, including most of the hotels owned by American General
Hospitality Corporation, making it one of the largest independent hotel
management companies in the United States based on number of rooms under
management. The Resort Operator is included in the MeriStar Group's Resorts
division which focuses on sun, golf and ski oriented properties. These resorts
are located in California, Florida, Georgia, Massachusetts, Vermont and the U.S.
Virgin Islands and are operated under nationally recognized brand names such as
Hilton(R), Sheraton(R), Westin(R), Marriott(R), Doubletree (R) and Radisson(R).
The MeriStar group is the successor to the leasing and management company
interests
35
<PAGE>
of CapStar Management Company and American General Hospitality Corporation.
About half of the hotels leased or managed by the MeriStar group are owned by
MeriStar Hospitality Corporation, a real estate investment trust and an
affiliate of the MeriStar group.
MANAGEMENT OF THE RESORT
The Resort Operator will manage the rental of the Units, and maintain
the Units on behalf of the Rental Manager and the Unit Owners pursuant to the
Resort Management Agreement and the Rental Program Agreement. The Resort
Management Agreement does not provide for the management of the Condominium and
the Association. The following discussion is a summary of these agreements.
Please refer to Annex E to this Prospectus for the full text of these
agreements.
Rental Program Agreement
Each Unit Owner is required to enter into the Rental Program Agreement
with LGV II as Rental Manager, and may not rent a Unit to anyone except pursuant
to the Rental Program Agreement. Under the Rental Program Agreement, a Unit
Owner agrees to make the Unit Owner's Unit available for rental by the Rental
Manager whenever the Unit Owner is not occupying the Unit Owner's Unit. The
Rental Manager will seek suitable renters to rent the Unit who will pay a rental
rate set by the Rental Manager.
Rental Revenue
Rental revenue does not include funds collected for taxes or other
governmental requirements, including sales tax and tourist taxes. Rental revenue
will be adjusted by deduction of all applicable travel agent fees, airline
booking fees, credit card and check collection fees, and any other applicable
collection or booking costs, from the monthly gross rental revenue received with
respect to the rental of the Unit. This does not include other deductions
described below.
Interior Maintenance Fund
The Rental Manager will deduct 3% of Adjusted Gross Rental Revenue
from the prior month's Adjusted Gross Rental Revenue to the Interior Maintenance
Fund. Interest earned on the Interior Maintenance Fund will be added to the
Fund. The Interior Maintenance Fund will be used by the Rental Manager to repair
or replace furnishings, linens, decorative items, accessories, floor and wall
coverings, equipment and appliances as the Rental Manager may deem necessary. In
making these repairs, the Rental Manager will consult with the Unit Owner to the
extent practicable. If amounts in the Interior Maintenance Fund are
insufficient, the Unit Owner is responsible for paying any shortfall. The Rental
Manager may, but is not obligated to, advance funds that may be repaid from
future rental revenues or billed to the Unit Owner. The Rental Manager will
provide the Unit Owners with an annual accounting of all monies held or
disbursed from the Interior Maintenance Fund.
Management Fee
For its services under the Rental Program Agreement, the Unit Owners
will pay the Rental Manager a management fee equal to 50% of the Adjusted Gross
Rental Revenue derived by the Unit Owner from the rental of the Unit Owner's
Unit (the "Management Fee"). The Rental Manager will deduct the Management Fee
from the Adjusted Gross Rental Revenue received in the previous month.
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<PAGE>
Distributions
The Rental Manager will distribute to the Unit Owners by check the
balance of Adjusted Gross Rental Revenue for the preceding month remaining after
payment of the Interior Maintenance Fund amount and the Management Fee on or
about the 20th day of each month. The Rental Manager reserves the right to
deduct for other costs or expenses incurred by the Rental Manager with respect
to the Unit, including without limitation, unpaid taxes, assessments, judgments,
deficiencies in the amount available from the Interior Maintenance Fund for the
repair, replacement and maintenance of the Units, Annual Licensing Fees, and
other charges payable by the Unit Owner or guests for use of services or the
purchase of goods while in residence in the Unit.
Reports to Unit Owners
Under the Rental Program Agreement, the Rental Manager will provide to
Unit Owners each month a statement of revenues derived from the rental of their
Units and the amount deducted from the gross revenues in arriving at the
Adjusted Gross Rental Revenues. In addition, the Rental Manager will provide
each Unit Owner with information by January 31 of each year for purposes of
preparing their tax returns. The Rental Manager will also provide Unit Owners
with an annual statement of income and expenses charged to the Interior
Maintenance Fund and any other expenditures made for the maintenance, repair or
replacement of the Unit Owners's Unit and its contents.
Indemnification
The Rental Program Agreement provides that the Unit Owner will
indemnify the Rental Manager and the Resort Operator against losses or damages
resulting from its performance under the Rental Program Agreement, including
claims arising out of neglect or misconduct by the Unit Owner or the Unit
Owner's guests and for damage to any person or property.
Administrative Fee
The Rental Program Agreement provides for the payment of a one-time
administrative fee at the closing of the purchase of a Unit of $500 to defray
the cost of the computerized rental and income tax reporting systems,
administrative expenses related to initial set-up and management of the computer
system, and set-up of the telephone systems.
Other Provisions
The Rental Program Agreement contains provisions regarding insurance,
assignment of a Unit, electronic services, pest control and certain other
matters.
Sale of a Unit by Unit Owner
There are certain conditions that must be satisfied in connection with
the sale of a Unit by a Unit Owner. Prior to entering into an agreement for the
sale of a Unit, the Unit Owner must provide the proposed purchaser with a copy
of the Rental Program Agreement and must notify the Rental Manager within five
days after putting the Unit up for sale and must also notify the Rental Manager
of the proposed conveyance ten days in advance of closing. In addition, the
selling Unit Owner must pay a fee of $5,000 which will increase annually by 4%
beginning on November 1, 2000.
Under the Condominium Declaration, a Unit Owner who enters into an
agreement to sell the Unit Owner's Unit must within ten days after the execution
of the sale agreement furnish to the Association written notice of the name of
the proposed purchaser, together with a copy of the purchase agreement. The
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<PAGE>
Association must approve or disapprove the proposed purchaser within 20 business
days after receipt of notice. If the Association disapproves the purchase, it
must within 30 days after the Association received notice of the proposed sale,
furnish the Unit Owner with an approved purchaser who will purchase the Unit
Owner's Unit on terms as favorable to the Unit Owner as the terms set forth in
the notice to the Association. If the Association fails to furnish a substitute
purchaser, the Unit Owner may sell the Unit to the originally proposed
purchaser.
Resort Management Agreement
The Company has entered into the Resort Management Agreement with the
Resort Operator pursuant to which the Resort Operator has agreed to manage the
Resort and perform the Company's obligations under the Rental Program Agreement
for a five-year terming ending March __, 2004, subject to earlier termination
under certain circumstances, including termination by the Resort Operator if at
least __ Units are not completed on or before _____.
Compensation
The Rental Manager will pay to the Resort Operator each month in
arrears a management fee equal to the sum of (1) 2.5% of Total Non-Golf Revenues
(as defined in the Resort Management Agreement) plus (2) 0.5% of Total Net Golf
Revenues (as defined in the Resort Management Agreement), subject to a
guaranteed minimum monthly payment of $7,500 commencing on the later of (x) the
first anniversary of the commencement of the Resort Management Agreement and (y)
the date on which all the Units have been completed. In addition, the Rental
Manager will pay the Resort Operator an incentive fee. The Rental Manager will
also be paid a monthly fee of $____ for provision of its centralized accounting
services.
Beach Access
The Resort Management Agreement provides that so long as the Rental
Manager is not in default under the Agreement, the Resort Operator will permit
Unit Owners and their guests to use the beach at the Resort Operator's Radisson
- - Marco Island resort without charge. The costs of such access, including
transportation to the beach, will be absorbed by the Rental Manager as an
Operating Expense under the Resort Management Agreement.
SUMMARY OF CONDOMINIUM DECLARATION AND RELATED DOCUMENTS
As described elsewhere in this Prospectus, the Resort is a part of the
Lely Resort. Each Unit is also subject to the Declaration of General Covenants,
Conditions and Restrictions for Lely Resort (the "Community Declaration") and
the Neighborhood Declaration (as defined in the Condominium Declaration), as
well as the Condominium Declaration, the Association Articles and the
Association By-laws (collectively, the "Documents"). The Documents impose
certain covenants, conditions and restrictions on the Units and Unit Owners. The
following discussion of these Documents is a summary of the material terms of
these Documents but does not purport to be complete and is qualified in its
entirety by reference to such Documents, which are included as Annex F to this
Prospectus.
The Community Declaration
The Community Declaration sets out the initial protective covenants
running with the land that created the project known as Lely Resort, and creates
general easements over the Lely Resort property allowing it to function as a
community. It describes the plan of development for Lely Resort, including the
maintenance responsibility of the Community Association for community Common
Areas, and sets forth provisions for establishing Neighborhoods within Lely
Resort with individual homeowner or condominium associations operating the
Neighborhoods under the auspices of the Community Association. The Community
Declaration also set forth the rights of Members of the Community Association,
whether or not such Members live within an area designated as a Neighborhood,
38
<PAGE>
and provides for the representation of Members in the Community Association. The
Community Declaration further creates assessment and lien rights for the
Community Association against units within Lely Resort. It also generally
provides for use restrictions, some functional, such as requirements for
Community Association approval for any modification to the water management
system, and some aesthetic, such as the requirement for Community Association
approval for any change in the exterior colors of residences.
The Community Articles
[To be completed]
The Community By-Laws
[To be completed]
The Neighborhood Declaration
The Neighborhood Declaration designates the Resort as a Neighborhood
under the provisions of the Community Declaration.
Condominium Declaration
The Condominium Declaration describes the phases of the condominium
development, including the Resort Units and the commercial Units. The
Condominium Declaration also describes and sets forth the rights of Unit Owners
with respect to common elements, provides for voting rights with respect to the
Units and sets forth the plan for development of the condominium Units and
common elements and amenities to be owned by the Unit Owners. Generally, the
Condominium Declaration sets forth provisions regarding insurance requirements,
condemnation and casualty occurrences and certain other events affecting the
condominium Units generally. Among other things, the Condominium Declaration
provides for occupancy and use restrictions, sets forth the rights of Unit
Owners to use the Golf Courses, provides for assignment of Units and sets forth
restrictions on signs, pets, clotheslines, litter and other external and
aesthetic aspects of the Resort. We provide additional information about the
Condominium Declaration under the captions "Voting Rights", "Meetings", "Board
of Directors" and "Insurance".
The Association
The Association will be formed as a Florida non-profit corporation to
perform various management and supervision functions at the Condominium on
behalf of the Unit Owners pursuant to the Condominium Declaration. The
Condominium Declaration, established by the Company as Developer, is recorded
against title to the Unit and the common elements of the Condominium. A Unit
Owner automatically becomes a member of the Association. Membership in the
Association may not be transferred or retained separately from any Unit.
The Association will supervise and assure the performance of all
appropriate maintenance, management, repair, and administration of the common
elements of the Condominium. Operation of the rental aspects of the Resort will
be the responsibility of the Resort Operator and Rental Manager, pursuant to the
terms of the Resort Management Agreement and the Rental Program Agreement.
Voting Rights
All voting rights are vested exclusively in the members of the
Association. The Association Articles and the Condominium Declaration provide
that there will be a period of control of the Board of Directors of the
Association by the Company until the earliest to occur of the following:
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<PAGE>
Unit Owners will elect 1/3 of the directors after the Company sells
15% of the Total Condominium Units (as defined in the Association Articles).
Unit Owners will elect a majority of the directors after the earliest to occur
of the following:
(1) Three years after 50% of all Units which are to be conveyed
have been conveyed;
(2) Three months after 90% of all Units which are to be conveyed
have been conveyed;
(3) When all Units that are to be conveyed are completed, some are
sold and no Units are being offered for general sale;
(4) When some of the Units have been conveyed and no other Units
are being constructed or offered for general sale; or
(5) Seven years after recordation of the Condominium Declaration.
The Company may elect at least one director as long as it is offering
for general sale at least 5% of the Units.
Directors will have a two-year staggered term of office once control
of the Board is transferred to the Unit Owners. There will be a minimum of three
directors.
Board members and officers appointed by the Company while in control
are not required to be Unit Owners. Each Unit Owner will be entitled to cast one
vote for each Unit owned by such Owner in all meetings of the members of the
Association. However, the voting rights of a Unit Owner may be suspended if a
Unit Owner fails to pay any assessments or other amounts due the Association
within 15 days after such payment is due or if any Unit Owner violates any other
provision of the Condominium Declaration or other documents pertaining to the
Condominium and such violation is not cured within 15 days after notice to the
owner. Only a single vote may be cast for each Unit, regardless of how title is
held. If a Unit is owned by more than one person and the Unit Owners are unable
to agree among themselves as to how their vote or votes shall be cast, they will
lose their right to vote on the matter in question.
Under the Condominium Declaration, a special assessment exceeding
$50,000 may be levied only upon an affirmative vote of two-thirds of the Unit
Owners entitled to vote on such matters. In addition, the Condominium
Declaration provides the Unit Owners with the right to vote to approve by a
majority-in-interest of owners whether to finance capital improvements in the
condominium by pledging future assessments. The Condominium Declaration may only
be amended or modified by an affirmative vote of 67% of the owners entitled to
vote thereon, except where applicable law otherwise requires or in cases
involving the exercise of development rights by the Developer, eminent domain,
relocation of limited common elements or boundaries between Units, subdivision
of Units, or termination of the Condominium.
Meetings
Under the Association By-laws, meetings of the members of the
Association will be held annually commencing in 2000. The purpose of the annual
meeting is to hear reports of the officers, elect members of the Board of
Directors and transact other appropriate business. Special meetings of the
members may be called by the President or Vice President of the Association or
by a majority of the Board of Directors.
Meetings of the Board of Directors of the Association will be held
annually to elect officers of the Association. Regular meetings of the Board of
Directors shall be held at such time and place as determined by a majority of
the Board of Directors and special meetings of the Board of Directors may be
called by the Secretary at the request of one-third of the directors.
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<PAGE>
Board of Directors; Officers
The initial members of the Board of Directors of the Association are:
A. Jack Solomon, Mark S. Taylor and Karen Welks. The initial officers of the
Association are: President - A. Jack Solomon; Vice President - Mark S. Taylor;
and Secretary and Treasurer - Karen Welks. Each of these individuals are
employees of Ronto or one of its affiliates.
Insurance
The Association will maintain property and casualty insurance on the
exterior of the buildings, common elements of the Resort and the amenities that
are owned by the Unit Owners. The amount of the insurance coverage, as well as
other terms of coverage will be determined by the Board of Directors in
accordance with the requirements of the Condominium Declaration.
THE COMPANY
Management
The Company is a limited partnership and management of the Company is
determined in accordance with the provisions of the Agreement of Limited
Partnership (the "Partnership Agreement") by and among Westbrook and Ronto, as
General Partners, and Westbrook Real Estate Fund II, L.P. and Westbrook Real
Estate Co-Investment Partnership II, L.P. as Limited Partners. Under the terms
of the Partnership Agreement, management of the Company is vested in an
Executive Committee. The Executive Committee has three members, two of which are
appointed by Westbrook and one of which is appointed by Ronto.
Executive Committee
The initial members of the Executive Committee are Jonathan H. Paul and Richard
P. Hoch, as Westbrook appointees, and A. Jack Solomon, as Ronto appointee.
<TABLE>
<CAPTION>
Occupation and
Name Date Appointed Business Experience Age
<S> <C> <C> <C>
Richard P. Hoch 1998 Director-Acquisitions of Westbrook 38
Partners, L.L.C., a real estate
investment management company, since
February 1995. From January 1990 to
February 1995, Mr. Hoch was employed by
Price Waterhouse L.L.P. as a Senior
Manager performing real estate advisory
services for pension funds, investment
companies, real estate
developers/operators and other
institutions.
Jonathan H. Paul 1998 Managing Principal of Westbrook Partners, 34
L.L.C. since May 1994. From September
1990 to May 1994 Mr. Paul was employed
by Morgan Stanley & Co., Inc. as a Senior
Associate engaged in real estate and
corporate investment banking and principal
activities.
41
<PAGE>
Occupation and
Name Date Appointed Business Experience Age
A. Jack Solomon 1998 President of Ronto Management, Inc., a [ ]
real estate management and development
consulting company, as well as other
companies in The Ronto Group of companies
since June 1995. From ____ to June 1995,
Mr. Solomon served in various senior
executive capacities for The Ronto Group
of companies, performing administrative
and analytical services in connection
with the identification, development,
construction and marketing of commercial
and residential real estate.
</TABLE>
As provided under the Partnership Agreement, the Executive Committee
has designated Ronto as the initial Administrative Partner. The Administrative
Partner conducts the day-to-day business of the Company and performs asset
management services for the Company. The Administrative Partner has the power
and authority to enter into contracts and take other actions on behalf of the
Company that have been authorized by the Executive Committee specifically or in
the context of approval of the Company's budget. The Administrative Partner also
has authority regarding matters requiring expenditures up to $5,000 or for
budget items in an amount up to 5% above the amounts authorized in the budget
approved by the Executive Committee, whichever is greater.
Executive Officers
In its capacity as Administrative Partner, Ronto has appointed the
following individuals, each of whom is employed by Ronto or one of its
affiliates, to act in executive capacities on behalf of the Company:
<TABLE>
<CAPTION>
Name Office Business Experience Age
<S> <C> <C> <C>
A. Jack Solomon Chief Executive Officer See above under Executive Committee [ ]
Karen E. Welks Secretary and Treasurer Treasurer of Ronto Management, Inc. 40
and other companies in The Ronto
Group since December 1993
Kenneth C. Torrens Vice President - Vice President - Marketing/Sales of 52
Marketing /Sales Ronto Management, Inc. and other
companies in The Ronto Group since
June 1998; from January 1997 to June
1998, Director of Sales for F.D.C.;
and from June 1996 to June 1998,
Director of Sale/Marketing for
Black Diamond Ranch.
42
<PAGE>
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
<TABLE>
<CAPTION>
Name Beneficial Ownership Interest
<S> <C>
A. Jack Solomon general partnership interest 1, 2
Ronto general partnership interest 2
Westbrook general partnership interest 3
Richard P. Hoch general partnership interest 3, 4
Jonathan Paul general partnership interest 3, 5
Westbrook Partners. general partnership interest 3, 6
</TABLE>
Development of the Resort
The Company, organized in February 1998, was formed solely to design,
develop, finance, construct and market the Resort. The Company will finance the
construction of the Resort through third-party construction financing,
internally generated equity funds and loans from its partners. The total
estimated acquisition, construction, development (including funding of the
obligation for a break-even cash flow for the first year), marketing costs,
financing costs (including a return on internally generated funds), and overhead
costs in connection with the project are estimated to be approximately
$35,500,000. Actual costs may vary depending on final design, control of
construction costs, the length of time to construct and market the project and
unforeseen factors such as labor and material shortages. At no time will
proceeds from the sale of Units be used to provide financing for the
construction of the Resort. Management of the Company includes certain members
of management of Ronto and Westbrook and, together with certain other officers
of Ronto and its affiliates, will provide expertise in project development,
finance, marketing and administration. The Company will fund any amount required
to keep Association assessments under $______ during the Guarantee Period from
net proceeds of the offering.
Prior Developments by The Ronto Group
The Ronto Group of companies has developed and constructed a variety
of projects, primarily in Southwest Florida, including: Royal Marco Point, a
beach-front development in Hideaway Beach, Marco Island, Florida consisting of
villas, cottages and mid-rise apartments; The Habitat, also in Hideaway Beach, a
golf course condominium; Key Marco in Marco Island, Florida, a development of
single-family lots; Independence Bay in Deerfield Beach, Florida, a land
development and construction program consisting of single family villas and
garden apartments; Silver Lake in Boynton Beach, Florida, a single-family home
subdivision; The Gates of Hillsboro in Deerfield Beach, Florida, a single family
home subdivision involving both land development and home building; The
Crestview at Heritage Greens in Naples, Florida, a community development
consisting of coach homes and luxury villas; and The Shores at Gulf Harbour in
Naples, Florida, mid-rise luxury condominiums and coach homes.
- --------
1 Mr. Solomon owns a class of stock of Ronto that provides him with 75.5%
of the total voting power of Ronto and may be deemed an indirect
beneficial owner of the general partnership interest of Ronto in the
Company.
[Footnotes describing direct and indirect
beneficial ownership interest to be added]
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<PAGE>
DETERMINATION OF PURCHASE PRICE
The initial purchase price of the Units has been determined by the
Company solely on the basis of its subjective evaluation of marketing
considerations. No independent valuations have been obtained for purposes of
determining the value of the Units. The Company may increase or lower the
purchase price in response to market conditions and demand based on
configuration, view or location within the Condominium. Adjustments could be
applied in different amounts to the same type of Units based on location and may
not be uniformally applied to all Units of the same type. The price of a Unit
cannot be changed once a purchase contract has been executed for such Unit.
There can be no assurance that Units can be resold at or in excess of the
purchase price. No organized market for the trading of Units is expected to
develop as a result of this Offering. Units may only be offered for resale
personally or through securities broker-dealers that satisfy applicable Florida
real estate sale requirements.
USE OF PROCEEDS
Assuming that the maximum number of Units offered hereby are sold at
the highest price in the proposed range of prices for each Unit category, the
gross proceeds from the sale of Units will be approximately $38,000,000 million
exclusive of offering expenses estimated at $_________. All of the net proceeds
of this offering will be paid to the Company except for amounts paid in addition
to the purchase price for closing costs that are payable to third parties and
for the amount paid to fund the Association reserve. None of the net proceeds
representing the purchase price of the Units will be available to fund
operations of the Resort. The total revenue less the total estimated costs of
$35,500,000 represent the Company's pre-tax profit and are available to pay
management fees to Ronto, distributions to the Company's general partners and
affiliated entities, and income taxes.
PLAN OF DISTRIBUTION
The Units are being offered directly by the Company through its
employees. Neither the Company nor these employees are licensed as
broker-dealers under the Securities Exchange Act of 1934, as amended. The
Company has filed an application for registration as an issuer-dealer under the
laws of the State of Florida and its employees participating in the sale of
Units have filed applications for registration as sales associates under Florida
law. These employees will not be specially compensated for serving as sales
agents in connection with the offer and sale of the Units. The Company will pay
finders fees to real estate brokers in connection with the offering of the
Units.
HOW TO PURCHASE
To purchase a Unit, you must execute a purchase contract in the form
appearing in Annex F and agree to be bound by its terms. All purchase contracts
are subject to the review, approval and acceptance by the Company, whose
decision shall be final. Upon acceptance, you must pay a down payment of 10% of
the purchase price for your Unit following acceptance by the Company (or after
effectiveness of the registration statement, at signing of the purchase
contract. An additional deposit of 10% of the purchase price must be paid within
10 days after the issuance of a certificate of occupancy. Checks must be made
payable to "Ruden, McClosky, Smith, Schuster & Russell, P.A., Escrow Account."
Under Florida condominium law a purchaser of Units will have the right
to rescind the purchase for a 15-day period commencing on the last to occur of
the date of execution of the purchase contract, the date the purchaser receives
all documents required by law and the date the purchaser receives any amendment
to a document previously received.
Funds deposited as down payments will be held by Ruden, McClosky,
Smith, Schuster & Russell, P.A., as escrow agent (the "Escrow Agent"), in an
interest-bearing escrow account for your benefit until closing of your Unit when
these funds will be released to the Company. In the event your Unit is not
completed or the Company rejects your purchase contract, all funds held in
escrow, together with accrued interest thereon, will be refunded. Amounts held
in escrow are non-refundable if you breach the purchase contract.
44
<PAGE>
Upon completion of your Unit, you will be required to pay to the
closing agent the balance of the purchase price and closing costs of 1.25% of
the purchase price, the cost of recording the deed, prorated amounts and other
costs. See Annex G for estimated amounts. Upon payment of the balance of the
purchase price, the closing agent will record a deed to you from the Company and
the Escrow Agent will disburse the purchase proceeds to the Company, net of all
closing costs. The closing agent will also record the lien securing any loan
that you may obtain to finance the Unit. The Rental Program Agreement will be
recorded prior to any mortgage or other lien on the Unit.
You may procure financing from any available source and will be
required to qualify for financing based on the requirements of the particular
lender. The Company may, but is not obligated to, refer you to a source of
financing. All financing costs will be your obligation if you elect to finance
the purchase of your Unit.
CERTAIN FEDERAL TAX ASPECTS
Set forth below is a summary of the material federal income tax
considerations related to the offering, but does not address all tax
considerations that may apply to a particular owner. This summary of the tax
aspects is based on the Internal Revenue Code of 1986, as amended (the "Code"),
on existing Treasury Department regulations ("Regulations"), and on
administrative rulings and judicial decisions interpreting the Code. Legislative
amendments, administrative changes and judicial decisions could modify or change
completely statements and opinions expressed below about the federal income tax
consequences of the purchase and rental of a Unit. Additionally, the
interpretation of existing law and regulations described here may be challenged
by the Internal Revenue Service during an audit of a Unit Owner's individual
return.
The following summary of tax aspects generally assumes that the
investor is an individual and is a United States citizen or resident. The
following discussion is only a summary and is limited to those areas of federal
income tax law that are considered to be most important to individual investors
owning interests in the Units. Although the Rental Manager will furnish the Unit
Owners with such information regarding the Units as is required for income tax
purposes, each Unit Owner will be responsible for preparing and filing his own
tax returns.
Accordingly, prospective investors are urged to consult, and must
depend upon, their tax advisors regarding their individual circumstances
(especially if the prospective investor is not an individual) and the federal,
state, local and other tax consequences arising out of their participation as
Unit Owners.
Tax Consequences to Unit Owners of Rental of Units
General
Each Unit Owner will be required to report his rental income with
respect to his Unit on his individual return. The extent to which a Unit Owner
may deduct his or her Unit's expenses will depend upon: (1) whether the rental
activity engaged in is with the intent of making a profit (Code Section 183);
(2) whether the Unit constitutes a "dwelling unit" (Code Section 280A); (3)
whether the rental activity is a "passive activity" (Code Section 469); (4)
whether the taxpayer is "at risk" with respect to the activity (Code Section
465); and (5) the limitations on interest deductions. Additional provisions of
the Code may also limit a specific taxpayer's deductions. Moreover, to the
extent that a Unit Owner's share of losses exceeds the basis of his Unit, such
excess losses cannot be utilized in that year by that Unit Owner for any
purpose, but are suspended and allowed as a deduction (subject to the
limitations described above) when the Unit Owner's adjusted basis for his Unit
at the end of any year exceeds zero (before reduction by the suspended loss).
Section 183
Section 183 of the Code provides that, in the case of an activity
engaged in by an individual or an S corporation, certain deductions attributable
to such activity will be limited to the gross income generated by such activity
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if the activity is not engaged in for profit. Losses disallowed under Section
183 are not merely suspended but are permanently denied. The Regulations under
Section 183 provide a three-tier system of permitted deductions up to a maximum
of the gross income from the activity. The Regulations also provide rules for
allocation of expenses to the specific tiers.
Section 1.183-2 of the Regulations provides that all facts and
circumstances are to be taken into account and no one factor or combination of
factors is determinative. The Regulations list nine factors that will generally
be considered, but caution that other factors may also be relevant. Because the
presence or absence of a profit objective is in part a factual issue which
depends upon the individual circumstances of each Unit Owner, it is impossible
to presently predict with accuracy whether a particular Unit Owner will be able
to establish that he or she has a profit objective.
Section 183 creates a presumption in favor of the determination that
the activity is engaged in for profit if a profit (without regard to operating
loss carryforwards) is realized in three out of five consecutive years. To allow
the presumption to work, a Unit Owner is given an election to postpone the
determination of whether the presumption applies until the end of the fourth
taxable year following the taxable year in which he first purchased his Unit and
engaged in rental activity. A Unit Owner should consider making an election as
prescribed in the Regulations to preserve the ability to take advantage of this
presumption and the delay in determining its application. A Unit Owner should
note that the Company makes no assurances or representations concerning whether
a Unit Owner can expect a profit from the rental of a Unit within four years.
Section 280A
The Section 280A home business expense disallowance rule applies to
any "dwelling unit" used by the taxpayer as a residence. For these purposes,
"taxpayers" include individuals, partnerships, trusts, estates, and S
corporations. Section 280A does not apply to a C corporation, except in its
capacity as a member of a partnership or S corporation or as a beneficiary of a
trust or estate. A "dwelling unit" includes a house, apartment, condominium,
mobile home, boat or other similar property that provides basic living
accommodations. The Regulations provide an objective standard for determining
whether a taxpayer's use of a dwelling unit causes it to be considered a
residence.
The Code and Regulations impose a gross income limitation upon
deductions for any owner whose Unit is used by the Unit Owner for personal use
for a number of days during a taxable year which exceeds the greater of (i) 14
days, or (ii) 10% of the number of days during the year for which the Unit is
rented for fair value. Personal use includes use by the taxpayer, use by the
taxpayer's family, use by an individual pursuant to a reciprocal arrangement
that permits the taxpayer use of another Unit, days on which the Unit is rented
for less than fair rental, use by other Unit Owners in a time sharing
arrangement or use by the taxpayer of other Units in the rental arrangement, and
use of the Unit as a result of a charitable donation by the taxpayer. If a Unit
Owner's use exceeds the greater of (i) 14 days or (ii) 10% of the number of days
during the year for which the Unit is rented for fair value, the Section 280A
gross income limitation will apply and a Unit Owner's use of the available
deductions from the rental of a Unit will be limited to the expenses incurred by
a Unit Owner in connection with the rental of the Unit Owner's Unit. If a Unit
Owner escapes the Code Section 280A limitation, the availability of deductions
is determined by the Hobby Loss rules of Code Section 183, above.
Section 280A also establishes an expense allocation fraction to be
used in apportioning deductions between personal and business use of a property
to which Section 280A applies. The expense allocation formula permits deduction
of the fraction of expenses associated with the property (other than those
expenses that are otherwise deductible even if a property is used for personal
use such as mortgage interest and real estate taxes) of which the numerator is
the number of days the property is rented at fair market value, and the
denominator of which is the total of the days the property is actually used
(either for business or personal use).
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Income and Losses from Passive Activities
The Code characterizes certain activities as producing either passive
or portfolio income and loss. Deductions of passive activity losses incurred by
an individual, estate, trust, or personal service corporation or, with
modifications, certain closely held corporations, may not be used to offset
non-passive activity income. In general, passive activity losses can be used
only to offset passive income, not wages or portfolio income (such as dividends,
interest, annuities and royalties). The passive activity rules do not apply to
regular C corporations, other than personal service corporations or certain
closely-held corporations. For ownership of Units by a pass-through entity, such
as a partnership, S corporation, or grantor trust, the passive loss rules apply
(if at all) to owners or beneficiaries, with a separate determination being made
for each separate taxpayer.
In general, a passive activity is one which: (1) is a trade or
business activity in which the taxpayer does not materially participate; or (2)
is a rental activity.
Investments in rental activities generally produce passive income and
loss. Rental activities are treated as passive without regard to whether they
involve the conduct of trade or business or whether the taxpayer materially
participates. The Regulations provide that where the actual or prospective
customer's payments are principally for the use of tangible property, the
activity is a rental activity, even if payments are made pursuant to a service
contract or other arrangement that is not denominated as a lease. There are
several exceptions provided by the Regulations to treatment as a rental
activity; however, the Company does not believe that any of the exceptions apply
to the rental of a Unit. Therefore, it is the Company's belief that income from
the rental of a Unit will most likely be treated as passive income.
To the extent that a Unit Owner has passive losses from other
activities, he should be able to offset those passive losses against income and
profits from the rental of a Unit. Losses and credits disallowed by the passive
activity rules are suspended and may be carried forward and treated as losses
and credits from passive activities in each successive taxable year until offset
by income from passive activities or allowed against other income as a result of
the complete disposition of the taxpayer's interest in that activity. When a
taxpayer's entire interest in an activity is disposed of in a fully taxable
transaction (other than to a related party), any remaining suspended loss
incurred in connection with that specific activity is allowed in full, first
against income or gain from such activity during the year of disposition, second
against net income or gain from all other passive activities, and thereafter
against income from all sources, including active income.
Application of At-Risk Limitations
Generally, Code Section 465 limits losses that a taxpayer can claim in
real estate and other enumerated activities to the amount that the taxpayer has
at risk with respect to such activities. Losses that are disallowed in any year
because of the "at-risk" limitations are carried over to succeeding years and
can be used in those years to the extent that the partner's at-risk amount has
increased. A taxpayer is considered at risk in any activity with respect to (i)
the net amount of money and the adjusted basis of property contributed by the
taxpayer to the activity, (ii) any amount with respect to the activity if the
taxpayer is considered personally liable for the repayment of that amount, and
(iii) the taxpayer's proportionate share of any amount borrowed with respect to
the activity of holding real property if the lender is an institutional lender
or government or guaranteed by the government and the loan is secured by real
property used in the activity ("qualified nonrecourse financing"). A taxpayer is
not considered to be "at risk" to the extent he or she is protected against loss
through nonrecourse financing, guarantees, stop loss agreements or similar
agreements. A taxpayer's at-risk amount is increased by profits earned in the
activity and decreased by losses occurring in the activity. In determining the
amount of loss, if any, disallowed under Section 465, Sections 183 (hobby loss
provisions) and 280A (limitations on personal use of Units) are applied prior to
the application of Section 465, and Section 469 (passive loss rules) is applied
after any limitation under Section 465 is determined.
Limitation on Interest Deductions
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The deductibility of any interest expense incurred by a Unit Owner in
purchasing a Unit may be limited by the Code. Generally, investment interest may
be deducted to the extent of a taxpayer's net investment income. Investment
interest expense does not include any interest expense which is taken into
account in determining the income or loss from a passive activity, but does
include (i) interest on indebtedness incurred or continued to purchase or carry
property held for investment, (ii) a partnership's interest expense attributable
to portfolio income under the passive loss rules, and (iii) the portion of
interest expense incurred or continued to purchase or carry an interest in a
passive activity to the extent attributable to portfolio income (within the
meaning of the passive loss rules). Net investment income includes gross income
from property held for investment, gain attributable to the disposition of
property held for investment, and amounts treated as gross portfolio income
pursuant to the passive loss rules less deductible expenses (other than
interest) directly connected with the production of investment income.
Investment interest deductions which are disallowed may be carried forward and
deducted in subsequent years to the extent of net investment income in such
years.
In addition, interest expense associated with the purchase and finance
of a Unit may constitute as "qualified residence interest" if (i) a Unit Owner's
personal use of a Unit exceeds the greater of 14 days or 10% of the number of
days it is rented out for a fair rental in any year, (ii) the Owner elects to
treat the Unit as the Unit Owner's second residence, and (iii) the loan is
secured by the Unit. Note that "qualified residence interest" may only be
claimed by a taxpayer with respect to his principal residence and one other
residence used by the taxpayer for personal use.
Owners who intend to finance the purchase of their Units with borrowed
funds should consult their own tax advisors before borrowing such funds and
should maintain careful records of any debt they incur to carry or acquire their
Units, because the interest on such debt may be interest which is taken into
account under Code Section 469 (passive activity rules) in computing income or
loss from a passive activity, or under certain circumstances, may qualify as
qualified residence interest.
Depreciation / Amortization
Each Unit Owner will separately determine the applicable allowance for
depreciation with respect to such Unit and any tangible personal property
associated with such Unit for any year, subject to the limitations described
above. Applicable conventions for depreciation generally require that
residential rental property be depreciated on the straight-line basis over 27
1/2 years, while tangible personal property is generally depreciated over a
5-year period on an accelerated basis. Section 179 of the Code allows a taxpayer
(other than trusts, estates and certain noncorporate lessors) to expense certain
depreciable business assets in the year of acquisition by electing to treat the
cost of new property as an expense rather than as a capital expenditure subject
to depreciation. The deductions for which the election are made are allowed for
the tax year in which the Section 179 property is placed in service and are in
lieu of a depreciation deduction. Generally, a taxpayer may elect to expense
only tangible personal property under Section 179. The deduction which may be
taken under Section 179 is subject to yearly dollar limitations; the limits for
1999 and 2000 are $19,000 and $20,000, respectively.
Depreciation deductions available to a Unit Owner may not exceed the
taxable income to a Unit Owner from the rental of his Unit. Each Unit Owner
should consult with his tax advisor to determine the availability of
depreciation deductions based upon Unit ownership.
Sale of a Unit
If a Unit is held solely for business purposes for more than one year
by an owner who is not a dealer with respect to such Unit, gain or loss realized
on the sale of such Unit generally will be considered gain or loss from the sale
of a Section 1231 asset and will be so taken into account in computing the
taxpayer's net Section 1231 gain or loss for the taxable year. A net Section
1231 gain generally is treated as a long-term capital gain, while a net Section
1231 loss is treated as an ordinary loss. Any gain on the sale of a Unit that is
treated as "unrecaptured Section 1250 gain" (essentially, the depreciation
claimed with respect to a Unit which is not required to be recaptured) will be
taxed at rates that are greater than the tax rate applicable to long term
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capital gains. For example, the maximum rate on long term capital gains realized
by an individual is 20%, while the maximum tax rate on unrecaptured Section 1250
gain is 25%. If any gain on the sale of a Unit represents recapture of
depreciation of personal property, that portion of the gain will be taxable as
ordinary income.
No loss will be allowed in connection with the sale of a Unit held for
personal use. Any gain realized on the sale of a Unit held for personal use will
be a long-term or a short-term capital gain, depending upon whether the Unit was
held for more than one year. If a Unit is held partly for personal use and
partly for business use, an apportionment of the gain or loss will be required
and each portion will be reported in accordance with the principles stated
above.
In the event of a Unit Owner's sale or other transfer of a Unit, the
Unit Owner will report all income, gain, loss, deduction or credit only for the
time period that he owned the Unit.
Possible Changes in Federal Tax Laws
The Code is subject to change by Congress, and interpretations of the
Code may be modified or affected by judicial decisions, by the Treasury
Department through changes in Regulations and by the Service through its audit
policy, announcements, and published and private rulings. Such changes may be
retroactive. Accordingly, the ultimate effect on an owner's tax situation may be
governed by laws, regulations or interpretations of laws or regulations which
have not yet been proposed, passed or made, as the case may be. Although
significant changes historically have been given prospective application, no
assurance can be given that any changes made in the tax law affecting an
investment in a Unit would be limited to prospective effect.
Investment by Foreign Persons
The rules governing the federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
investors ("foreign persons") are complex, and no attempt has been made herein
to discuss such rules. Potential investors that are foreign persons should
consult with their tax advisors to fully determine the impact on them of United
States federal, state and local income tax laws.
It should be noted, however, that there is imposed a withholding
requirement on distributions of rental income and dispositions of a United
States real property interest, which includes United States real estate and
interests in entities, such as partnerships, holding United States real estate.
Therefore, distributions of rental income and disposition of the property or
disposition of a Unit will give rise to a withholding requirement.
Corporate Investors
The tax consequences of ownership of a Unit by a corporation may
differ significantly from the tax rates applicable to individuals. Code Section
183 (the hobby loss rules) does not apply to corporate owners. Code Section 280A
(limitations on personal use of Units) does not apply to corporations that are
not electing S corporations. Code Section 469 (the passive loss rules) applies
only to certain closely held C corporations and personal service corporations.
However, deduction of expenses associated with the acquisition and ownership of
a Unit by a corporation may be disallowed or restricted under other Code
sections. Corporations that purchase Units should consult their own tax advisor
regarding the application of Section 274 of the Code, which prohibits the
deduction of certain expenses incurred with respect to facilities used for
entertainment, amusement or recreation. There are numerous issues involved in
corporate ownership, and corporations should obtain tax advice from their own
counsel before purchasing a Unit.
State and Local Taxes
Presently, Florida imposes no state income taxes on individuals,
partnerships, or limited liability companies treated as partnerships under
Federal law, but it does impose an income tax on all corporations (regardless of
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where incorporated) at the rate of 5.5% on the net income deemed to be earned in
Florida. For this purpose, corporate Unit Owners would be liable for Florida
income tax on their taxable income from the rental of their Units.
A Unit Owners' taxable income (or loss) from the rental of their Units
may have to be included in determining their reportable income for state or
local tax purposes in the jurisdiction in which they are residents or are
domiciled. However, such state and local income taxes will normally be
deductible for federal income tax purposes. Depending upon the applicable state
and local laws, tax benefits which are available to Unit Owners for federal
income tax purposes may not be available for state or local income tax purposes.
Because the state and local income tax liabilities will vary with the
facts of each Unit Owner's particular circumstances, prospective Unit Owners are
urged to consult with their own tax advisers regarding the states and local
income tax consequences of ownership and rental of their Unit.
LEGAL MATTERS
Ruden McClosky Smith Schuster & Russell, P.A. will pass upon the
validity of the offering of Units for the Company. Prospective owners should not
consider Ruden McClosky Smith Schuster & Russell, P.A. to be their legal counsel
with respect to this Offering or any other related matter and are strongly
encouraged to seek the advice of qualified and independent legal counsel with
respect to entering any of the agreements or contracts contemplated by this
Offering and any other related matters, including the tax implications of the
purchase of a Unit. No opinion shall be rendered as to the tax consequences of
the purchase or ownership of a Unit.
EXPERTS
The balance sheet of the Company dated as of December 31, 1998
appearing in this Prospectus and Registration Statement has been audited by
Arthur Anderson LLP, independent auditors, as set forth in their report
appearing elsewhere herein, and is included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
OTHER
The table on page ___ setting forth the historical performance of the
competitive resort supply has been obtained for the Company by Landauer.
Landauer has expressed no opinion on the information presented and has neither
provided any analysis with respect thereto nor conducted any audit or other
procedure to independently verify the information. The conclusions contained in
this Prospectus regarding the information presented are those of the Company.
Landauer are not affiliated with the Company or associated in any way with this
offering.
USE OF SALES MATERIAL
Sales materials may be used in connection with this Offering only when
accompanied or preceded by the delivery of this Prospectus. Such sales materials
may include a booklet, slides, films, video, disk "fact" sheets, articles,
publications, and brochures describing the offering, and the Resort. Units may
be offered only by means of the Prospectus.
ADDITIONAL INFORMATION
This Prospectus may be supplemented or amended. For further
information with respect to the Units offered by this Prospectus, reference is
made to the Registration Statement, including the exhibits thereto. Statements
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contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete. Please obtain and review the
actual agreement for further information. The Registration Statement, together
with exhibits thereto, may be inspected at the public reference facilities of
the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549,
without charge and copies of the material contained therein may be obtained at
prescribed rates from the Commission's public reference facilities in
Washington, D.C. The Commission also maintains a Web site that contains reports,
proxy and information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis, and Retrieval system. This Web
site can be accessed at http://www.sec.gov. The Company has filed a registration
statement which includes this Prospectus with the Securities and Exchange
Commission. This registration statement contains information not included in the
Prospectus, including copies of most of the agreements described in the
Prospectus.
We cannot accept your offer to buy a Unit until the SEC declares the
registration statement effective or at any time when the SEC has suspended the
effectiveness of the registration statement. Moreover, we cannot offer or sell
the Units in any state until the offer is registered or qualified under the laws
of that state. Units may only be offered by Prospectus.
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PROJECTIONS
Index to Projections
Document Page
- -------- ----
P-1
<PAGE>
FINANCIAL STATEMENTS
Index to Financial Statements
Document Page
Report of Independent Certified Public Accountants
F-2
Balance Sheet as at December 31, 1998 F-3
Statement of Expenses for the period from inception F-4
through December 31, 1998
Statement of Changes in Partners' Capital for the F-5
period from inception through December 31, 1998
Statement of Cash Flows for the period from inception F-6
through December 31, 1998
Notes to Financial Statements F-7
F-1
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================================================================================
TABLE OF CONTENTS
Page
----
Questions and Answers....................................
Summary..................................................
Risk Factors.............................................
The Resort...............................................
The Golf Courses.........................................
The Lely Resort..........................................
The Resort Industry......................................
Projected Performance
of the Resort.........................................
The Resort Operator......................................
Management of the Resort.................................
Summary of Condominium
Declaration and Related
Documents.............................................
Prior Developments of Ronto..............................
Determination of Purchase Price..........................
Use of Proceeds..........................................
Plan of Distribution.....................................
How to Purchase..........................................
Certain Federal and State
Income Tax Aspects....................................
Legal Matters............................................
Experts..................................................
Other....................................................
Sales Materials..........................................
Financial Statements..................................F-1
Projections...........................................P-1
Annexes...............................................A-1
Until __________, 1999, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
================================================================================
<PAGE>
200 Resort Condominium Units
Coupled with a Mandatory
Rental Program Agreement
----------
PROSPECTUS
----------
[To Be Determined] Resort
and Golf Club of Naples
______________, 1999
================================================================================
<PAGE>
F-3
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of the anticipated cost to the Trust
in connection with the issuance and distribution of the securities to be
registered. All amounts, other than the registration fee, are estimates.
Legal: $ *
Advertising, Printing & Promotion Expenses: $ *
Accounting: $ *
Registration Fees: $10,564
------
$ *
* To be added by amendment
ITEM 32. SALES TO SPECIAL PARTIES
There is no person or class of persons to whom any securities have
been sold within the past six months, or are to be sold, by the registrant or
security holder for whose account any of the securities being registered are to
be offered, at a price varying from that at which securities of the same class
are to be offered to the general public pursuant to this registration, except as
follows:
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES
No sales of unregistered securities have been made, other than the
issuance of limited partnership interests to certain affiliates of one of the
general partners of the Company at the time of organization of the Company,
which issuances are exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended.
ITEM 34. INDEMNIFICATION OF EXECUTIVE COMMITTEE MEMBERS AND
ADMINISTRATIVE PARTNER
The governing provisions of the Partnership provide nonliability of
and indemnification to the Executive Committee members and Administrative
Partner except for (i) acts not reasonably believed by the acting Partner to be
in the best interest of the Partnership and within the scope of authority
conferred on such Partner; (ii) fraud, bad faith, willful misconduct or gross
negligence; (iii) the breach by the Partnership of any of its representations or
warranties made under any purchase, loan or other agreement entered into
connection with the acquisition of the Partnership Property, which breach was
the result of information or matters relating to such Partner; or (iv) any
liability imposed by Securities Act of 1933. The Partnership currently provides
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no insurance coverage for the errors or omissions of Executive Committee members
or the Administrative Partner or the officers or directors of the corporate
general partner of the members of the general partner that is a limited
liability company.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the company pursuant to the foregoing provisions, Lely Golf Villas I Limited
Partnership has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is therefore unenforceable.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED
Assuming that the maximum number Units offered hereby are sold at the
highest price in the proposed range of prices for each Unit category, the gross
proceeds from the sale of Units will be approximately $38,000,000 exclusive of
offering expenses estimated at $ . All of the net proceeds of this offering will
be paid to the Company except for amounts paid in addition to the purchase price
for closing costs that are payable to third parties and for the amount paid to
fund the Association reserve. None of the net proceeds representing the purchase
price of the Units will be available to fund operations of the Resort. The total
revenue less the total estimated costs of $35,500 represent the Company's
pre-tax profit and are available to pay management fees to Ronto, distributions
to the general partners and their affiliated entities and income taxes. The
Company will deliver the Units and the amenities comprising the Resort free and
clear of any and all liens.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS
a) List of all financial statements filed as part of this registration statement
1. Financial Statements of Lely Golf Villas I Limited Partnership
at and for the period ended December 31, 1998, audited by
Arthur Anderson, L.L.P., Independent Certified Public
Accountants
b) Exhibit Index
Exhibit No. Description
- ----------- -----------
3.1 Agreement of Limited Partnership
3.2 Certificate of Limited Partnership
5.1 Opinion of Ruden, McClosky, Smith, Schuster & Russell, P.A.
10.1 Rental Program Agreement
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10.2 Assignment and Assumption Agreement
10.3 Real Estate Sales Agreement
10.4 Leasehold Mortgage and Security Agreement
10.5 Mortgage and Security Agreement
10.6 License Agreement
10.7 Use and Access Agreement for Lely Golf Villas
10.8 Declaration of Condominium of Fala Bella Resort and Golf
Club Naples
10.9 Articles of Incorporation of the Fala Bella Resort and Golf
Club Naples Condominium Association, Inc.
10.10 Bylaws of the Fala Bella Resort and Golf Club Naples
Condominium Association, Inc.
10.11 Development Agreement
10.12 Resort Management Agreement
23.1 Consent of Arthur Anderson, L.L.P.
23.2 Consent of Ruden, McClosky, Smith, Schuster & Russell, P.A.
23.3 Consent of Landauer Hospitality Group, Inc.
24.1 Power of Attorney
ITEM 37 UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
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post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) of (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
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shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-5
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-11 and has duly caused this
registration to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Naples, State of Florida on March 5, 1999.
LELY GOLF VILLAS I LIMITED PARTNERSHIP
(Registrant)
RONTO GOLF DEVELOPMENTS,
INC., a general partner
By: /s/ A. Jack Solomon
-------------------
A. JACK SOLOMON
Chief Executive Officer and
Director of Ronto Golf Developments, Inc., a
General Partner, and member of registrant's
Executive Committee
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
Chief Executive Officer and Director March 5, 1999
of Ronto Golf Developments, Inc., a
General Partner, and member of
/s/A. Jack Solomon registrant's Executive Committee
- ------------------
A. JACK SOLOMON
II-6
<PAGE>
Managing Member of Westbrook Lely March 5, 1999
Golf Villas I, L.L.C., a General Partner,
and member of registrant's
/s/ Richard P. Hoch Executive Committee
- -------------------
RICHARD P. HOCH
Managing Member of Westbrook Lely March 5, 1999
Golf Villas I, L.L.C., a General Partner,
and member of registrant's
Executive Committee
- -----------------
JONATHAN PAUL
II-7
<PAGE>
<TABLE>
<CAPTION>
Exhibit Index
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
3.1 Agreement of Limited Partnership 68
3.2 Certificate of Limited Partnership *
5.1 Opinion of Ruden, McClosky, Smith, Schuster & Russell, P.A. *
10.1 Rental Program Agreement *
10.2 Assignment and Assumption Agreement *
10.3 Real Estate Sales Agreement *
10.4 Leasehold Mortgage and Security Agreement *
10.5 Mortgage and Security Agreement *
10.6 License Agreement *
10.7 Use and Access Agreement for Lely Golf Villas *
10.8 Declaration of Condominium of Fala Bella Resort and Golf Club *
Naples
10.9 Articles of Incorporation of Fala Bella Resort and Golf Club *
Naples Condominium Association, Inc.
10.10 Bylaws of Fala Bella Resort and Golf Club Naples *
Condominium Association, Inc.
10.11 Development Agreement *
10.12 Resort Management Agreement *
23.1 Consent of Arthur Anderson, Certified Public Accountants *
23.2 Consent of Ruden, McClosky, Smith, Schuster & Russell, P.A. *
23.3 Consent of Landauer Hospitality Group, Inc. *
24.1 Power of Attorney *
* To be filed by amendment
</TABLE>
II-8
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
LELY GOLF VILLAS I LIMITED PARTNERSHIP
Dated as of March __, 1998
II-9
<PAGE>
I. DEFINED TERMS.................................................1
1.01 Defined Terms.................................................1
1.02 Other Defined Terms..........................................11
II. ORGANIZATION................................................11
2.01 Formation....................................................11
2.02 Name and Principal Place of Business.........................13
2.03 Term.........................................................13
2.04 Registered Agent and Registered Office.......................13
2.05 Purpose......................................................13
2.06 Modifications to Structure...................................14
III. CAPITAL....................................................17
3.01 Contribution of Certain Property.............................17
3.02 Capital Contributions........................................18
3.03 Capital Accounts.............................................23
3.04 No Further Capital Contributions.............................24
IV. INTERESTS IN THE PARTNERSHIP................................24
4.01 Percentage Interests.........................................24
4.02 Return of Capital............................................24
4.03 Ownership....................................................24
4.04 Waiver of Partition; Nature of Interests
in the Partnership..............................................24
V. ALLOCATIONS AND DISTRIBUTIONS................................25
5.01 Allocations..................................................25
5.02 Compliance with Section 704(b)...............................26
5.03 Payment of Certain Obligations...............................27
5.04 Distributions................................................28
5.05 Distributions in Liquidation.................................30
5.06 Tax Matters..................................................30
5.07 Tax Matters Partner..........................................31
5.08 Section 704(c)...............................................31
VI. MANAGEMENT..................................................31
6.01 Management...................................................31
6.02 Members of the Executive Committee...........................37
6.03 Administrative Partner.......................................38
6.04 Services and Fees............................................42
6.05 Duties and Conflicts.........................................43
6.06 Partnership Expenses.........................................44
VII. SALE AND DEFAULT BUY-SELL PROVISIONS.......................44
(i)
<PAGE>
7.01 First Offer..................................................44
7.02 Sale of Property.............................................46
7.03 Default Buy-Sell.............................................47
7.04 Termination of Other Agreements..............................49
7.05 Power of Attorney............................................49
VIII. BOOKS AND RECORDS...............................................50
8.01 Books and Records............................................50
8.02 Accounting and Fiscal Year...................................50
8.03 Reports......................................................51
8.04 The Partnership Accountant...................................53
8.05 Reserves.....................................................53
8.06 The Budget and Operating Plan................................54
IX. TRANSFER OF PARTNERSHIP INTERESTS.................................55
9.01 No Transfer..................................................55
9.02 Permitted Transfers..........................................55
9.03 Transferees..................................................57
9.04 Section 754 Election.........................................58
X. EXCULPATION AND INDEMNIFICATION....................................58
10.01 Exculpation..................................................58
10.02 Indemnification..............................................58
XI. TERMINATION.......................................................60
11.01 Dissolution.............................................60
11.02 Termination.............................................61
11.03 Liquidating Partner.....................................62
XII. DEFAULT BY PARTNER...............................................63
12.01 Events of Default.......................................63
12.02 Effect of Event of Default..............................63
XIII. MISCELLANEOUS...................................................64
13.01 Representations and Warranties of
the Partners.......................................64
13.02 Further Assurances......................................65
13.03 Notices.................................................65
13.04 Governing Law...........................................66
13.05 Attorney Fees...........................................66
13.06 Captions................................................67
13.07 Pronouns................................................67
13.08 Successors and Assigns..................................67
13.09 Extension Not a Waiver..................................67
13.10 Creditors Not Benefited.................................67
(ii)
<PAGE>
13.11 Recalculation of Interest...............................67
13.12 Severability............................................68
13.13 Entire Agreement........................................68
13.14 Publicity...............................................68
13.15 Counterparts............................................68
13.16 Confidentiality.........................................69
13.17 Venue...................................................70
13.18 Waiver of Jury Trial....................................70
(iii)
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (this "Agreement") is made and
entered into as of March __, 1998 by and among Westbrook Lely Golf Villas I,
L.L.C. (the "Westbrook General Partner"), a Delaware limited liability company
and an Affiliate of Westbrook Real Estate Fund II, L.P. ("Westbrook"), a
Delaware limited partnership, and Ronto Golf Developments, Inc. ("Ronto"), a
Florida corporation, as the general partners (the Westbrook General Partner and
Ronto are sometimes referred to herein individually as a "General Partner" and
collectively as the "General Partners"); and Westbrook and Westbrook Real Estate
Co-Investment Partnership II, L.P. ("WRECIP"), a Delaware limited partnership,
as the limited partners (Westbrook and WRECIP are sometimes referred to herein
individually as a "Limited Partner" and collectively as the "Limited
Partners")(the General Partners and the Limited Partners are sometimes
collectively referred to herein as the "Partners").
WHEREAS, the Partnership (as hereinafter defined) was formed by the
General Partners pursuant to a Certificate of Limited Partnership of Lely Golf
Villas I Limited Partnership, dated as of February 12, 1998, and filed with the
Secretary of State of the State of Delaware on February 12, 1998;
NOW, THEREFORE, the Partners hereby agree as follows:
33. DEFINED TERMS
a. Defined Terms. As used in this Agreement, the
following terms have the meanings set forth below:
"AAA" has the meaning set forth in Section 2.06(b).
"Additional Capital Contribution" has the meaning set forth in
Section 3.02(g).
"Adjusted Capital Account Balance" means, with respect to any
Partner for any period, the balance, if any, in such Partner's Capital Account
as of the end of such period, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts that
such Partner is obligated to restore or is deemed obligated to
restore as described in the penultimate sentence of Treasury
1
<PAGE>
Regulation Section 1.704-2(g)(1) and in Treasury Regulation
Section 1.704-2(i); and
(b) Debit to such Capital Account the items described
in Treasury Regulation Sections 1.704-l(b)(2)(ii)(d)(4), (5)
and (6).
"Adjusted Capital Account Deficit" means, with respect to any Partner
for any fiscal year, the deficit balance, if any, in such Partner's Capital
Account as of the end of such fiscal year, after giving effect to the following
adjustments:
(a) Credit to such Capital Account any amounts that
such Partner is obligated to restore or is deemed obligated to
restore as described in the penultimate sentence of Treasury
Regulation Section 1.704-2(g)(1) and in Treasury Regulation
Section 1.704-2(i); and
(b) Debit to such Capital Account the items described
in Treasury Regulation Sections 1.704-l(b)(2)(ii)(d)(4), (5)
and (6).
"Administrative Partner" has the meaning set forth in Section
6.03(a).
"Adverse Change" has the meaning set forth in Section 2.06(a).
"Affiliate" means, with respect to any Person, (a) any other Person
directly or indirectly controlling, controlled by, or under common control with
such Person, or (b) any other Person owning or controlling 10% or more of the
outstanding voting interests of such Person, or (c) any officer, director,
general partner or managing member of such Person, or (d) any other Person which
is an officer, director, general partner, managing member or holder of 10% or
more of the voting interests of any other Person described in clauses (a)
through (c) of this definition.
"Agreement" has the meaning set forth in the introductory paragraph
hereof.
"Asset Management Services" means (a) the services performed by the
Administrative Partner pursuant to and as provided in this Agreement and all
actions contemplated in the day-to-day management of the Partnership
2
<PAGE>
contemplated under the Budget and Operating Plan and (b) all other services
requested from time to time by the Executive Committee.
"Book Basis" means, with respect to any asset of the Partnership, the
adjusted basis of such asset for federal income tax purposes; provided, however,
(a) if any asset is contributed to the Partnership, the initial Book Basis of
such asset shall equal its fair market value on the date of contribution, and
(b) if the Capital Accounts of the Partners are adjusted pursuant to Treasury
Regulation Section 1.704-1(b) to reflect the fair market value of any asset of
the Partnership, the Book Basis of such asset shall be adjusted to equal its
respective fair market value as of the time of such adjustment in accordance
with such Treasury Regulation. The Book Basis of all assets of the Partnership
shall be adjusted thereafter by depreciation as provided in Treasury Regulation
Section 1.704-l(b)(2)(iv)(g) and any other adjustment to the basis of such
assets other than depreciation or amortization.
"Budget" means the budget covering the Partnership's anticipated
operations approved by the Executive Committee and in effect from time to time
pursuant to Section 8.06.
"Capital Account" means the separate account maintained for each
Partner under Section 3.03.
"Capital Call" has the meaning set forth in Section 3.02(d).
"Capital Contribution" means, with respect to any Partner, any
Initial Capital Contribution or Additional Capital Contribution made by such
Partner to the Partnership pursuant to this Agreement.
"Certificate of Limited Partnership" has the meaning set
forth in Section 2.01.
"Closing Date" has the meaning set forth in Section 7.01(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning set forth in
Section 13.16(a).
"Construction Loan" means the loan or loans obtained by the
Partnership for the Partnership to finance the construction of the Project.
3
<PAGE>
"Contributing Partners" has the meaning set forth in Section 3.02(i).
"Default Buy-Sell Offer" has the meaning set forth in Section 7.03.
"Default Election" has the meaning set forth in Section 7.03(b).
"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act, as amended from time to time.
"Deposit" has the meaning set forth in Section 7.01(a).
"Development Agreement" means that certain Development Agreement of
even date by and between the Partnership and Ronto.
"Dilution Percentage" has the meaning set forth in Section 3.02(i).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Event of Default" has the meaning set forth in Section 12.01.
"Executive Committee" means the committee formed and operated
pursuant to Section 6.01.
"Expenses" means, for any period, the sum of the total gross
expenditures of the Partnership during such period, including (a) all cash
operating expenses (including all fees, commissions, expenses and allowances
paid or reimbursed to any Partner or any of its Affiliates pursuant to any
property management agreement or otherwise as permitted hereunder), (b) all debt
service payments of the Partnership including debt service on loans made to the
Partnership by the Partners or any of their Affiliates, (c) all expenditures by
the Partnership which are treated as capital expenditures (as distinguished from
expense deductions) under generally accepted accounting principles, (d) all real
estate taxes, personal property taxes and sales taxes, (e) all increases to the
Partnership's Reserve accounts and (f) all expenditures related to any
acquisition, sale, disposition, financing, refinancing or securitization of any
Partnership Property; provided, however, that Expenses shall not include (i) any
4
<PAGE>
payment or expenditure to the extent (A) the sources or funds used for such
payment or expenditure are not included in Revenues or (B) such payment or
expenditure is paid out of any Partnership reserve account, or (ii) any
expenditure properly attributable to the liquidation of the Partnership.
"Expiration Offer" has the meaning set forth in Section 9.02(b).
"First Offer Notice" has the meaning set forth in Section 7.01.
"General Partner" means the Westbrook General Partner or Ronto, so
long as each remains a general partner of the Partnership, or any other Person
who is admitted as a general partner of the Partnership in accordance with this
Agreement and applicable law.
"Golf Rights" means those rights granted to the Partnership by Golf
Enterprises, Inc. in that certain Use and Access Agreement for Lely Golf Villas.
"Initial Budget and Operating Plan" has the meaning set forth in
Section 8.06.
"Initial Capital Contribution" means, with respect to any Partner,
any capital contribution made by such Partner pursuant to Sections 3.02(a) and
(b).
"Interest" means, with respect to any Partner at any time, the
interest of such Partner in the Partnership at such time, including the right of
such Partner to any and all of the benefits to which such Partner may be
entitled as provided in this Agreement, together with the obligations of such
Partner to comply with all of the terms and provisions of this Agreement.
"Letter of Credit Reimbursement" means an annual amount equal to 10%
of the undrawn amount of any Letter of Credit provided by Westbrook in
connection with any Construction Loan, compounded quarterly.
"Limited Partner" means Westbrook or WRECIP, so long as each remains
a limited partner of the Partnership, or any other Person who is admitted as a
limited partner of the Partnership in accordance with this Agreement and
applicable law.
5
<PAGE>
"Liquidating Partner" means the General Partner designated as such by
the Executive Committee; provided, however, a General Partner that causes the
dissolution of the Partnership under Section 11.01(g) or 11.01(h) shall not
serve as the Liquidating Partner.
"Loss" means, for each taxable year or other period, an amount equal
to the Partnership's items of taxable deduction and loss for such year or other
period, determined in accordance with Section 703(a) of the Code (including all
items of loss or deduction required to be stated separately under Section
703(a)(1) of the Code), with the following adjustments:
(a) Any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B)
expenditures under Treasury Regulation Section 1.704-l(b)(2)(iv)(i),
and not otherwise taken into account in computing Loss, will be
considered an item of Loss;
(b) Loss resulting from any disposition of Partnership
Property with respect to which gain or lose is recognized for federal
income tax purposes will be computed by reference to the Book Basis
of such property, notwithstanding that the adjusted tax basis of such
property may differ from its Book Basis;
(c) In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or
loss, there will be taken into account depreciation for the taxable
year or other period as determined in accordance with Treasury
Regulation Section 1.704- 1(b)(2)(iv)(g);
(d) Any items of deduction and loss specially allocated
pursuant to Section 5.08 shall not be considered in
determining Loss; and
(e) Any decrease to capital accounts as a result of any
adjustment to the Book Basis of Partnership assets pursuant to
Treasury Regulation Section 1.704-l(b)(2)(iv)(f) or (g) shall
constitute an item of Loss.
"Major Decision" has the meaning set forth in Section 6.01(a).
6
<PAGE>
"Make-Up Contribution" has the meaning set forth in Section 3.02(i).
"Necessary Expenses" has the meaning set forth in Section
6.03(b)(iii).
"Net Cash Flow" means, for any period, the excess of (a) Revenues for
such period, over (b) Expenses for such period.
"Net Loss" means, for any period, the excess of Losses over Profits,
if applicable, for such period determined without regard to any Profits or
Losses allocated pursuant to Section 5.02.
"Net Profit" means, for any period, the excess of Profits over
Losses, if applicable, for such period determined without regard to any Profits
or Losses allocated pursuant to Section 5.02.
"Non-Contributing Partner" has the meaning set forth in Section
3.02(i).
"Nonrecourse Deductions" has the meaning set forth in Treasury
Regulation Section 1.704-2.
"Notices" has the meaning set forth in Section 13.03.
"Offered Price" has the meaning set forth in Section 7.01.
"Operating Plan" means the strategic and comprehensive operating plan
covering the Partnership's anticipated operations approved by the Executive
Committee and in effect from time to time pursuant to Section 8.06.
"Partially Adjusted Capital Account" means, with respect to any
Partner for any fiscal year, the Capital Account balance of such Partner at the
beginning of such year, adjusted for all contributions and distributions during
such year and all special allocations pursuant to Section 5.02 with respect to
such year but before giving effect to any allocations of Net Profit or Net Loss
pursuant to Section 5.01 for such fiscal year.
"Partner" means any General Partner, any Limited Partner or any other
Person who is admitted as a partner of the Partnership in accordance with this
Agreement and applicable law.
7
<PAGE>
"Partner Minimum Gain" means the Partnership's "partner nonrecourse
debt minimum gain" as defined in Treasury Regulation Section 1.704-2(i)(2).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Treasury Regulation Section 1.704-2(i)(2).
"Partnership" means the limited partnership governed by the terms of
this Agreement.
"Partnership Accountant" has the meaning set forth in Section 8.04.
"Partnership Minimum Gain" has the meaning set forth in Treasury
Regulation Section 1.704-2(d).
"Partnership Property" means any real estate asset or other property
(real, personal or mixed) owned by or leased to the Partnership, including,
without limitation, the Property.
"Percentage Interest" means (a) with respect to the Westbrook General
Partner, 1%, (b) with respect to Ronto, 25%, (c) with respect to Westbrook,
65.95351%, and (d) with respect to WRECIP, 8.04649%, in each case subject to
adjustment as provided in this Agreement.
"Person" means any individual, partnership, corporation, limited
liability company, trust or other entity.
"Plan Asset Rules" means the plan asset rules of ERISA at 29 C.F.R.
2510.3-101.
"Profit" means, for each taxable year or other period, an amount
equal to the Partnership's items of taxable income and gain for such year or
other period, determined in accordance with Section 703(a) of the Code
(including all items of income and gain required to be stated separately under
Section 703(a)(1) of the Code), with the following adjustments:
8
<PAGE>
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profit
or Loss will be added to taxable income or loss;
(b) Gain resulting from any disposition of Partnership
Property with respect to which gain or loss is recognized for federal
income tax purposes will be computed by reference to the Book Basis
of such property, notwithstanding that the adjusted tax basis of such
property may differ from its Book Basis;
(c) Any items specially allocated pursuant to Section 5.08
shall not be considered in determining Profit; and
(d) Any increase to capital accounts as a result of any
adjustment to the book value of Partnership assets pursuant to
Treasury Regulation Section 1.704-l(b)(2)(iv)(f) or (g) shall
constitute an item of Profit.
"Project" means: (i) the acquisition and development of the Property
by the Partnership for the purpose of constructing, developing, owning,
improving and selling residential condominiums within the Lely Golf Resort in
Naples, Florida, in accordance with the Budget, Operating Plan and plans and
specifications approved by the Executive Committee; (ii) the acquisition of the
Rental Program Rights; and (iii) the acquisition of the Golf Rights.
"Property" means the real property described in Exhibit 1.01A to be
acquired by the Partnership in connection with the Project and all buildings and
improvements to be developed and constructed thereon and all personal property
used in connection therewith and all other tangible and intangible assets and
property of every kind and description owned from time to time by the
Partnership and related to the Project.
"Purchase Agreement" has the meaning set forth in Section 3.01.
"Qualifying Purchase and Sale Agreement" has the meaning set forth in
Section 7.02.
"Reasonable Period" means, with respect to any defaulting Partner, a
period of 15 calendar days after such defaulting Partner receives written notice
of its default from a non-defaulting Partner; provided, however, that if such
breach consists of other than an obligation to make a Capital Contribution or
9
<PAGE>
otherwise pay money to the Partnership and such breach can be cured but cannot
reasonably be cured within such 15-day period, the period shall continue, if
such defaulting Partner commences to cure the breach within such 15-day period,
for so long as such defaulting Partner diligently prosecutes the cure to
completion up to a maximum of 45 calendar days.
"Regulatory Allocations" has the meaning set forth in Section
5.02(g).
"Rental Program Rights" means those certain rights to operate a
rental program granted by the purchasers of the condominium units in the Project
to the Partnership.
"Reserves" means, with respect to any fiscal period, amounts set
aside during such period as and for reserves in amounts deemed sufficient by the
Executive Committee, in their reasonable judgment, or as set forth in any Budget
approved by the Executive Committee, for acquisition costs of the Property, for
working capital and to pay taxes, insurance, debt service (including, without
limitations, any balloon payments due under any loan), replacements, capital
improvements or repairs, contingent liabilities or other costs and expenses
incident to the Partnership and the ownership or operation of the Property and
the Partnership.
"Response Period" has the meaning set forth in Section 7.01(a).
"Revenues" means, for any period, the sum of the total cash receipts
of the Partnership during such period, including all receipts of the Partnership
from the ownership, operation or sale of all or any portion of the Property,
including, without limitation, (i) all deposits for the sale of condominium
units of the Property when used in connection with the Property as permitted
under applicable law or applied in payment of the purchase price of a
condominium unit, whichever occurs first, and all other proceeds from the sale
of condominium units of the Property or the use or occupancy of the Property,
(ii) all interest earned on deposits for the sale of condominium units and not
paid or payable to the purchasers of such condominium units and any and all
operating and other bank accounts, (iii) all rent and other sums paid for the
use or occupancy of all or any portion of the Property, including, without
limitation, any license or other fees for the use or occupancy of all or any
portion of the Property, including, without limitation, any license or other
10
<PAGE>
fees for the use or occupancy of any supplemental quarters or storage space at
the Property, revenue from any food, beverage or other concessions or
facilities, revenue from any recreational or fitness facilities and revenue from
any parking facilities, (iv) amounts received for management, administrative or
other similar services, (v) amounts received in connection with any cable,
security or any other system provided to all or any portion of the Property,
(vi) insurance proceeds or condemnation awards; (vii) proceeds of business
interruption insurance, (viii) damages or other settlement proceeds from
litigation and (ix) all proceeds of any loan; provided, however, that Revenues
shall not include any revenue or receipt realized by the Partnership incident to
the liquidation of the Partnership.
"Ronto" has the meaning set forth in the introductory paragraph
hereof.
"Sales Period" has the meaning set forth in Section 7.01(a).
"Shortfall" has the meaning set forth in Section 3.02(g).
"Target Account" means, with respect to any Partner for any fiscal
year, the excess of (a) an amount (which may be either a positive balance or a
negative balance) equal to the hypothetical distribution (or contribution) such
Partner would receive (or contribute) if all assets of the Partnership,
including cash, were sold for cash equal to their Book Basis (taking into
account any adjustments to Book Basis for such year), all liabilities allocable
to such assets were then satisfied according to their terms (limited, with
respect to each nonrecourse liability, to the Book Basis of the assets securing
such liability) and all remaining proceeds from such sale were distributed
pursuant to Section 5.04 over (b) the amount of Partnership Minimum Gain and
Partner Minimum Gain that would be charged back to such Partner as determined
pursuant to Treasury Regulation Section 1.704-2 immediately prior to such sale.
"Transfer" has the meaning set forth in Section 9.01.
"Treasury Regulation means, with respect to any referenced provision,
such provision of the regulations of the United States Department of the
Treasury or any successor provision.
"UBTI" means unrelated business taxable income.
"U.S. GAAP" has the meaning set forth in Section 8.01.
11
<PAGE>
"Valuation Agent" has the meaning set forth in Section 2.06(b).
"Venture Coordinator" has the meaning set forth in Section 6.03(f).
"Westbrook" has the meaning set forth in the introductory paragraph
hereof.
"Westbrook General Partner" has the meaning set forth in the
introductory paragraph hereof.
"Westbrook Loan" has the meaning set forth in Section 3.02(e).
"Westbrook Note" means the Note in substantially the form of Exhibit
1.01B.
"Westbrook Pledge Agreement" means the Pledge Agreement in
substantially the form of Exhibit 1.01C.
"Westbrook Partner Group" means the Westbrook General Partner,
Westbrook, WRECIP and their respective permitted successors and assigns.
"WRECIP" has the meaning set forth in the introductory paragraph
hereof.
"WRECIP Loan" has the meaning set forth in Section 3.02(e).
"WRECIP Note" means the Note in substantially the form of Exhibit
1.01D.
b. Other Defined Terms. As used in this Agreement, unless
otherwise specified, (a) all references to Sections, Articles,
Exhibits or Schedules are to Sections, Articles, Exhibits or
Schedules of or to this Agreement, and (b) each accounting
term has the meaning assigned to it in accordance with United
States generally accepted accounting principles.
34. ORGANIZATION
a. Formation. The Partnership was formed as a limited partnership
under the Delaware Act by the filing of a certificate of
limited partnership of the Partnership (the "Certificate of
Limited Partnership") in the office of the Secretary of State
12
<PAGE>
of Delaware. The Partners hereby agree to continue the
Partnership pursuant to this Agreement for the purposes and
upon the terms and conditions hereinafter set forth. The
General Partners shall be authorized to file with such
authorities as may be required any and all amendments to the
Certificate of Limited Partnership as may be required under
the Delaware Act.
b. Name and Principal Place of Business.
i. The name of the Partnership is set forth on
the cover page to this Agreement. The
Executive Committee may change the name of
the Partnership or adopt such trade or
fictitious names for use by the Partnership
as the Executive Committee may from time to
time determine. All business of the
Partnership shall be conducted under such
name, and title to all Partnership Property
shall be held in such name.
ii. The principal place of business and office
of the Partnership shall be located at the
offices of Ronto at 3185 Horseshoe Drive
South, Naples, Florida 34104, or at such
other place or places as the Executive
Committee may from time to time designate.
c. Term. The term of the Partnership commenced on the
date of the filing of the Certificate of Limited
Partnership pursuant to the Delaware Act and shall
continue until December 31, 2048, unless sooner
terminated or further extended pursuant to the
provisions of this Agreement by the Executive
Committee.
d. Registered Agent and Registered Office. The name of
the Partnership's registered agent for service of
process shall be The Corporation Trust Company, and
the address of the Partnership's registered agent and
the address of the Partnership's registered office in
the State of Delaware shall be 1209 Orange Street,
Wilmington, Delaware 19801. Such agent and such
office may be changed from time to time by the
Executive Committee.
e. Purpose.
i. The purpose of the Partnership shall be:
(1) To enter into and perform its obligations
and exercise its rights under the
agreement to acquire the Property and
develop the Project, and any other
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agreements or contracts contemplated by the
foregoing, including, without limitation,
to acquire and realize upon (A) the Rental
Program Rights and (B) the Golf Rights.
(2) To acquire, own, manage, develop, operate,
improve, repair, finance, refinance, sell
and otherwise deal with and dispose of the
Property; and
(3) To conduct all activities reasonably
necessary or desirable to accomplish the
foregoing purposes.
ii. The Partnership shall not engage in any
other business or activity without the
approval of the Executive Committee.
f. Modifications to Structure.
i. In order to qualify and/or preserve the
status of Westbrook, WRECIP, the
Partnership, or any entity in which the
Partners and/or the Partnership owns an
interest and which owns any portion of the
Property, as an "operating company" under
the Plan Asset Rules, to avoid the
imposition of a corporate tax on any income
of the Westbrook General Partner, WRECIP or
Westbrook, or to minimize the effects of any
UBTI on Westbrook, WRECIP and its partners,
Ronto agrees to consent to modifications
required from time to time by the Westbrook
Partner Group, to be based upon a written
opinion of the Partnership's or the
Westbrook Partner Group's tax or ERISA
counsel, due to a change in applicable law,
to the structure of the Partnership and/or
the Partnership's investments in, and
ownership of the Property and/or to the
terms of this Agreement, including, without
limitation, the capital contribution and
allocation and distribution provisions set
forth in Articles III and V, if in any case
the modifications will not materially
adversely affect the aggregate amount or
timing of capital contributions, payment of
fees, distributions of Net Cash Flow and
liquidation proceeds or the aggregate
allocations of Profits and Losses or the
replacement of Ronto as Administrative
Partner with an Affiliate of Westbrook;
provided, however, that if the modifications
do adversely affect the aggregate amount or
timing of capital contributions, fees
payable or distributions of Net Cash Flow
and liquidation proceeds or the aggregate
allocations of Profits and Losses (an
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<PAGE>
"Adverse Change"), the provisions of Section
2.06(b) shall apply. Subject to and
specifically limited by the foregoing, any
such modification may include, without
limitation, the formation by the Partners of
other limited liability companies,
partnerships, corporations or other entities
(including, without limitation, corporations
and trusts that qualify as real estate
investment trusts under Section 856 of the
Code) to be owned by the Partners or their
Affiliates and which will own a portion of
the Property. In any such event, the
Partnership and such other entities shall be
treated as a single partnership entity for
federal income tax purposes and the amounts
distributable to, the Profits and Losses
allocable to, the capital contributions
required to be contributed by, the
maintenance of Capital Accounts, and the
buy-sell rights and obligations pursuant to
this Agreement and the organic documents
governing such other entities shall be
calculated, determined and applied on an
aggregate basis as if the entire Property
were owned by the Partnership pursuant to
this Agreement as in effect on the date
hereof unless the Westbrook Partner Group
determines in its sole discretion that such
provisions must be calculated, determined
and applied on an entity by entity basis and
not on an aggregate basis to qualify or
preserve the status of Westbrook, the
Partnership or any entity in which the
Partners and/or the Partnership owns an
interest and which owns any portion of the
Property as an operating company under the
Plan Asset Rules. If the Westbrook Partner
Group determines that such provisions must
be calculated, determined and applied on an
entity by entity basis and not an aggregate
basis, the Partners agree to negotiate in
good faith modifications to the terms of
this Agreement and to the organic documents
governing such other entities so as to
preserve as nearly as possible without any
material adverse affect to Ronto the same
overall economic benefits and burdens
relating to the entire Property as exist
under this Agreement as in effect on the
date hereof; provided, however, that if the
modifications do cause an Adverse Change,
the provisions of Section 2.06(b) shall
apply. Ronto agrees to cooperate with the
Westbrook Partner Group and to execute,
acknowledge, deliver, file, record and
publish all such documents, agreements and
instruments and to do all such other acts
and things as the Westbrook Partner Group
determines are reasonably necessary to
implement the foregoing, subject to the
limitations set forth in the first sentence
of this Section. The Westbrook Partner Group
shall bear all costs and expenses incurred
in connection with any transfers of the
Property and the formation of any additional
entities to own any portion of the Property
in connection with any of the foregoing,
including the reasonable fees and expenses
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<PAGE>
of Ronto's legal counsel and other advisors
in connection with any modifications
consummated pursuant to this Section 2.06.
ii. In the event of an Adverse Change, Ronto
shall notify the Westbrook Partner Group
thereof in writing including an estimate of
the economic value of the Adverse Change
incurred and anticipated to be incurred by
Ronto. If the Partners are unable to
mutually agree upon the amount thereof
within 30 days, the value of such Adverse
Change shall be determined by the following
valuation procedure, including the present
value of any changes in timing. The
Westbrook Partner Group and Ronto shall,
within 10 days after the expiration of the
foregoing 30-day period, mutually agree on a
independent third party (the "Valuation
Agent") to determine the economic value to
Ronto arising from the Adverse Change
resulting from a modification described in
Section 2.06(a). If the Partners are unable
to agree on a Valuation Agent within such
10-day period, the Valuation Agent shall be
appointed by a retired judge selected by the
Partners from a panel presented by the New
York office of the American Arbitration
Association ("AAA"). If the Partners are
unable to agree, AAA will provide a list of
three available retired judges, and each of
the Westbrook Partner Group and Ronto may
strike one of the available retired judges.
The remaining retired judge shall select the
Valuation Agent. If the Westbrook Partner
Group and Ronto strike no retired judge or
the same retired judge and two or three
remain, the retired judge whose last name
begins with the letter closest to the letter
"A" shall select the Valuation Agent. In
making its determination of the economic
value of the Adverse Change, the Valuation
Agent shall only consider the impact of the
modifications to the amounts and timing of
capital contributions, fees payable and
distributions of Net Cash Flow and
liquidation proceeds and the allocations of
Profits and Losses to Ronto. Any Valuation
Agent selected shall be independent and
shall not have performed any appraisal or
valuation services for the Partnership, the
Westbrook Partner Group or Ronto at any time
during the two-year period prior to its
selection. Within 60 days of the Partners'
selection of the Valuation Agent, the
Valuation Agent shall deliver to the
Partners a written report of the foregoing
valuation, and the determination of the
Valuation Agent thereon shall be conclusive
and binding upon the Partners. Within 30
days of the receipt of such report, the
Westbrook Partner Group shall pay (in such
proportions as they shall agree) to Ronto
the amount of the economic value of the
Adverse Change determined by the Valuation
Agent.
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<PAGE>
iii. In the event of any conflict or
inconsistency of the terms of this Section
2.06 and any other provision of this
Agreement, the terms of this Section 2.06
shall control.
35. CAPITAL
a. Contribution of Certain Property. Any and all
reasonable third party out-of-pocket costs and
expenses (including legal fees and costs) incurred
prior to the date hereof but subsequent to October
15, 1997 (or prior to October 15, 1997 if approved by
the Executive Committee) by any Partner or any of its
Affiliates individually and associated with its due
diligence, analyses and other evaluations of the
Property or relating to the negotiation and execution
of this Agreement and approved by the Executive
Committee as reasonable in amount shall be reimbursed
by the Partnership in accordance with Section 6.06.
All other costs or expenses incurred prior to the
date hereof by any of the Partners or their
respective Affiliates individually shall be borne by
such Partners and Affiliates individually and shall
not be reimbursed by the Partnership. On the date
hereof, the Partners shall cause to be contributed to
the Partnership the agreement to acquire the Property
(the "Purchase Agreement")and all of their reports,
work product, analyses, due diligence and other
evaluations regarding the Property, all of which will
be deemed to have a fair market value of zero. At the
Westbrook Partner Group's option, and in its sole and
absolute discretion, the Partnership may form new
partnerships with the same Partners or Affiliates
thereof as are the Partners in this Partnership and
on the same economic terms and conditions hereof to
avoid, among other things, the imposition of any
UBIT. All costs incurred by the Partners or their
respective Affiliates in connection with the
preceding sentence shall be borne by the Westbrook
Partner Group and shall not be reimbursed by the
Partnership.
b. Capital Contributions.
i. Ronto's Initial Deposit. Ronto hereby
assigns to the Partnership all of Ronto's
interest in and to a $50,000.00 earnest
money deposit previously made by Ronto with
respect to the acquisition of the Property
for which the Partnership will receive a
credit at the closing under the Property
acquisition purchase and sale contract.
Ronto shall receive a credit to its Capital
Account in this amount. The credit to
Ronto's Capital Account described in this
Section 3.02(a) shall constitute a Capital
Contribution by Ronto.
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<PAGE>
ii. Prior to the date hereof, the Westbrook
Partner Group made payments in the total
amount of $500,000.00 as an additional
earnest money deposit with respect to the
Property acquisition purchase and sale
agreement for which the Partnership will
receive a credit at the closing under the
Property acquisition purchase and sale
contract and which is hereby assigned to the
Partnership. The Westbrook Partner Group
shall receive a credit to its Capital
Account in this amount. The credit to
Westbrook Partner Group's Capital Account
described in this Section 3.02(b) shall
constitute a Capital Contribution by
Westbrook Partner Group.
iii. Maximum Contributions. Subject to the
condition precedent set forth in Section
3.02(f), each Partner agrees to contribute
capital to the Partnership from time to time
to acquire the Property (including the Golf
Rights) and for due diligence and start-up
costs, working capital purposes and any
other purpose described in the Initial
Budget and Operating Plan up to a maximum
contribution equal to (i) $3,700,000.00 with
respect to the Westbrook Partner Group
(which shall include the $500,000.00 deposit
more fully described in Section 3.02(b)) and
(ii) $185,000.00 with respect to Ronto
(which shall include the $50,000.00 deposit
more fully described in Section 3.02(a)).
The Westbrook Partner Group's obligation
under this Section 3.02(c) shall be reduced
by the amount of loans the Westbrook Partner
Group make to the Partnership under Section
3.02(e).
iv. Capital Calls. The Executive Committee will
determine the aggregate amount of capital
required to be contributed from time to time
for the foregoing purposes and will notify
the Partners of their obligation to
contribute the amount so requested
proportionately based upon the amounts of
the Initial Capital Contributions which may
be required pursuant to this Section
3.02(d)(a "Capital Call"). Subject to
Section 3.02(c) and the condition precedent
set forth in 3.02(f), each Partner will
contribute its share of a Capital Call
within 5 business days of such Partner's
receipt of a notice from the Executive
Committee specifying the amount of such
Partner's contribution.
v. Subject to the condition precedent set forth
in Section 3.02(f), on March __, 1998
Westbrook shall make a loan (the "Westbrook
Loan") to the Partnership upon the terms and
conditions set forth in the Westbrook Note
in an original principal amount equal to
$2,228,159.25 and WRECIP shall make a loan
(the "WRECIP Loan") to the Partnership upon
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<PAGE>
the terms and conditions set forth in the
WRECIP Note in an original principal amount
equal to $271,840.75. The terms of the
Westbrook Loan are set forth in this
Agreement and in the Westbrook Note. The
terms of the WRECIP Note are set forth in
this Agreement and in the WRECIP Note.
vi. Condition Precedent. Notwithstanding the
execution of this Agreement by the Westbrook
Partner Group, all of the obligations of
each member of the Westbrook Partner Group,
including but not limited to the Capital
Contributions contemplated in this Section
3.02, the Westbrook Loan and the WRECIP Loan
are conditioned upon, and the Westbrook
Partner Group shall have no obligations
under this Partnership Agreement unless as
of March __, 1998 Shores at Gulf Harbor
Limited Partnership ("Shores") has entered
into binding (i.e., all major contingencies
and conditions have been met) written
contracts to sell at least seven condominium
units in the Shores at Gulf Harbour ("Gulf
Harbour") located in Fort Myers, Florida to
be constructed at Gulf Harbour for purchase
prices not less than those previously
projected and approved pricing levels by the
executive committee of Shores.
In the event that the preceding condition has not been timely
satisfied, Westbrook and WRECIP shall not be obligated to make the
Westbrook Loan and the WRECIP Loan to the Partnership and the Westbrook
Partner Group shall have no obligation to make any additional capital
contributions hereunder. Provided that the preceding condition have
been timely satisfied, the Partnership shall, no later than March __,
1998, (i) execute and deliver to Westbrook the Westbrook Note, the
Westbrook Pledge Agreement and any and all financing statements
relating thereto requested by Westbrook, and, upon the delivery of such
documents, Westbrook shall disburse the amount of such Westbrook Loan
to the Partnership, and (ii) execute and deliver to WRECIP the WRECIP
Note, the Westbrook Pledge Agreement and any and all financing
statements relating thereto requested by WRECIP, and, upon the delivery
of such documents, WRECIP shall disburse the amount of such WRECIP Loan
to the Partnership. The Partnership shall pay any and all documentary
stamp taxes and intangible taxes payable in respect of the Westbrook
Note and the WRECIP Note.
vii. If at any time or from time to time
additional funds (a "Shortfall") are
required to meet any liabilities,
obligations, expenditures or needs of the
Partnership which Shortfall has been
previously approved by the Executive
Committee or provided for in any Budget or
19
<PAGE>
Operating Plan, then, at the election, and
in the sole discretion, of the Westbrook
Partner Group, (i) either or both of
Westbrook and WRECIP may advance 95% of the
amount of such total Shortfall to the
Partnership within 25 business days after a
request therefor by the Westbrook Partner
Group and any such advance shall be deemed
to be a loan (a "Shortfall Loan") (which
shall be non-recourse to the Partners)
bearing interest at a rate equal to a 24.9%
cumulative annual rate compounded quarterly
with the outstanding principal thereof
maturing at such time as determined by the
Executive Committee, and (ii)
notwithstanding anything to the contrary
contained in Article VI, the Partners shall,
make a further capital contribution, with
the Westbrook Partner Group contributing 95%
of the amount of such total Shortfall
(unless either or both of Westbrook and
WRECIP have made a Shortfall Loan for the
Westbrook Partner Group's 95% portion of
such Shortfall in which event the Westbrook
Partner Group will not make a further
capital contribution hereunder) and Ronto
contributing 5% of the amount of such total
Shortfall (each an "Additional Capital
Contribution"). In lieu of either or both of
Westbrook and WRECIP making Shortfall Loans
to the Partnership or the Executive
Committee requesting the Partners to make
Additional Capital Contributions, the
Executive Committee may cause the
Partnership to obtain funds to cover any
Shortfall through loans on terms approved by
the Executive Committee. In the event that
from time to time additional funds are
required to meet any expenditures under any
construction agreement entered into by the
Partnership in excess of or over the
guaranteed price under same or not initially
contemplated by same except with respect to
changes requested or required and approved
by the Executive Committee, such funds shall
not be considered a Shortfall or Capital
Contributions and shall be the sole
responsibility and liability of Ronto
individually. Any such funds expended by
Ronto pursuant to the preceding sentence
shall not be reimbursed by the Partnership
and Ronto shall expressly waive any rights
to contribution or subrogation.
viii. The Capital Contributions shall be made by
wire transfer of funds to a Partnership
account designated by the Executive
Committee.
ix. If any Partner (the "Non-Contributing
Partner") fails to timely make any Capital
Contributions (or any portion thereof)
required by Section 3.02(a), (b), (d), (e)
or (g) (for purposes of this Section
3.02(i), any such failure by any Partner in
the Westbrook Partner Group shall be deemed
to be such a failure by each of the Partners
in the Westbrook Partner Group) and Ronto
(if the Non-Contributing Partner is in the
20
<PAGE>
Westbrook Partner Group) or the Westbrook
Partner Group, collectively (if the
Non-Contributing Partner is Ronto), (as the
case may be, the "Contributing Partner") has
made such Capital Contribution, then the
Contributing Partner, if the
Non-Contributing Partner fails to cure such
failure by making the necessary Capital
Contribution as required herein within 5
days after the Contributing Partner has
demanded in writing that it make such
contribution, may elect as its sole remedy
and in its sole discretion (but without any
obligation to do so) to contribute the
Non-Contributing Partner's share of such
Capital Contribution to the Partnership (a
"Make-Up Contribution"). In the event that
such Contributing Partner elects to make a
Make-Up Contribution: (A) such Contributing
Partner's Percentage Interest shall
thereafter be increased by a percentage (the
"Dilution Percentage") equal to a fraction,
the numerator of which is one hundred fifty
percent (150%) of such Make-Up Contribution
made by such Contributing Partner and the
denominator of which is the total Capital
Contributions made as of that date by the
Non-Contributing Partner and (B) the
Non-Contributing Partner's Percentage
Interest shall thereafter for all purposes
hereof be decreased by the amount of the
Dilution Percentage; provided, however, that
in the event that at any time the Dilution
Percentage reduces a Non-Contributing
Partner's Percentage Interest to less than
one percent (1%), then such Non-Contributing
Partner's Percentage Interest shall become
zero (0%) percent and such NonContributing
Partner shall be eliminated as and shall
thereafter no longer be considered a Partner
hereunder. The elimination of a
Non-Contributing Partner's Interest
hereunder shall not eliminate the
Non-Contributing Partner's right to the
return of its Capital Contributions and a
return thereon, as contemplated by Section
5.04 of this Agreement.
x. Ronto hereby grants to each of Westbrook and
WRECIP, as secured parties, a security
interest in Ronto's Interest to secure the
performance of the obligations of the
Partnership, if any, under the Letter of
Credit Reimbursement, Westbrook Note, WRECIP
Note and Westbrook Pledge Agreement and in
respect of any Shortfall Loans made by
either or both of Westbrook and WRECIP or
any respective Affiliate thereof to the
Partnership, and each of Westbrook and
WRECIP individually shall have all rights
available to secured parties under the
Delaware Uniform Commercial Code and the
laws of the state of organization of Ronto.
In the circumstances set forth in the
Westbrook Pledge Agreement, Westbrook and/or
WRECIP may exercise any remedies permitted
by applicable law to enforce its security
interest. Ronto hereby irrevocably appoints
each of Westbrook and WRECIP, and the
21
<PAGE>
agents, officers or employees of such
parties, its attorneys-in-fact, coupled with
an interest, with full power jointly and
severally to prepare and execute any
documents, instruments and agreements, and
such financing, continuation statements, and
other instruments and documents as may be
appropriate to perfect, continue and enforce
such security interests in favor of
Westbrook and WRECIP.
xi. Construction Loan Letter of Credit. In order
to assist the Partnership in obtaining a
Construction Loan, either Westbrook or
WRECIP or both shall agree to provide a
letter of credit or letters of credit or a
surety bond or surety bonds (the "Letter of
Credit") of up to a maximum of $1,000,000.00
in the aggregate to the construction lender
to secure a Construction Loan without
guaranties from any parties, including,
without limitation, the Limited Partners.
Any fees paid by Westbrook or WRECIP for any
Letter of Credit shall be reimbursed by the
Partnership in accordance with Section 6.06.
The Partnership shall pay Westbrook or
WRECIP or both, as appropriate, the Letter
of Credit Reimbursement on any Letter of
Credit. In the event that there are any
drawings against any Letter of Credit, such
drawings shall, at the option of Westbrook
or WRECIP, as appropriate, either be
reimbursed to Westbrook and/or WRECIP, as
appropriate, immediately or be deemed to
constitute Shortfall Loans by Westbrook
and/or WRECIP, as appropriate. Further, in
connection with any Construction Loan, Ronto
shall provide and comply with the terms of
any completion guaranties required by the
construction lender to obtain such
Construction Loan and shall expressly waive
any rights to contribution or subrogation
c. Capital Accounts. A separate capital account (a
"Capital Account") will be maintained for each
Partner in accordance with Treasury Regulation
Section 1.704-l(b)(2)(iv). Consistent therewith, the
Capital Account of each Partner will be determined
and adjusted as follows:
i. Each Partner's Capital Account will be
credited with:
(1) Any contributions of cash made by such
Partner to the capital of the Partnership
plus the Book Basis of any property
contributed by such Partner to the capital
of the Partnership (net of any liabilities
to which such property is subject or which
are assumed by the Partnership);
22
<PAGE>
(2) The Partner's distributive share of Net
Profit and Profit and items thereof
allocated to such Partner; and
(3) Any other increases required by Treasury
Regulation Section 1.704-l(b)(2)(iv).
ii. Each Partner's Capital Account will be
debited with:
(1) Any distributions of cash made from the
Partnership to such Partner plus the fair
market value of any property distributed
in kind to such Partner (net of any
liabilities to which such property is
subject or which are assumed by such
Partner);
(2) The Partner's distributive share of Net
Losses and Loss and items thereof
allocated to such Partner; and
(3) Any other decreases required by Treasury
Regulation Section 1.704-l(b)(2)(iv).
The provisions of this Section 3.03 relating to the maintenance of Capital
Accounts have been included in this Agreement to comply with Section 704(b) of
the Code and the Treasury Regulations promulgated thereunder and will be
interpreted and applied in a manner consistent with those provisions.
d. No Further Capital Contributions. Except as expressly
provided in this Agreement or with the prior written
consent of the Partners, no Partner shall be required
or entitled to contribute any other or further
capital to the Partnership, nor shall any Partner be
required or entitled to loan any funds to the
Partnership. No Partner will have any obligation to
restore any negative balance in its Capital Account
upon liquidation or dissolution of the Partnership.
36. INTERESTS IN THE PARTNERSHIP
a. Percentage Interests. The Percentage Interests of the
Partners may be adjusted only as set forth in this
Agreement.
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<PAGE>
b. Return of Capital. No Partner shall be liable for the
return of the capital contributions (or any portion
thereof) of any other Partner, it being expressly
understood that any such return shall be made solely
from the assets of the Partnership. No Partner shall
be entitled to withdraw or receive a return of any
part of its capital contributions or Capital Account,
to receive interest on its capital contributions or
Capital Account or to receive any distributions from
the Partnership, except as expressly provided for in
this Agreement or under applicable law.
c. Ownership. All Partnership Property shall be owned by
the Partnership, subject to the terms and provisions
of this Agreement.
d. Waiver of Partition; Nature of Interests in the
Partnership. Except as otherwise expressly provided
for in this Agreement, each of the Partners hereby
irrevocably waives any right or power that such
Partner might have:
i. To cause the Partnership or any of its
assets to be partitioned;
ii. To cause the appointment of a receiver for
all or any portion of the assets of the
Partnership;
iii. To compel any sale of all or any portion of
the assets of the Partnership pursuant to
any applicable law; or
iv. To file a complaint, or to institute any
proceeding at law or in equity, to cause the
termination, dissolution or liquidation of
the Partnership.
Each of the Partners has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 4.04 and without those waivers no
Partner would have entered into this Agreement. No Partner shall have any
interest in specific Partnership Property. The Interests of all Partners are
personal property.
37. ALLOCATIONS AND DISTRIBUTIONS
a. Allocations. For each taxable year or portion
thereof, Net Profit and Net Loss shall be allocated
(after all allocations pursuant to Section 5.02 have
been made) as follows:
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<PAGE>
i. Except as provided in Sections 5.01(b) and
5.01(c), Net Profit or Net Loss shall be
allocated to make the Partially Adjusted
Capital Accounts of the Partners equal, as
nearly as possible, their respective Target
Accounts.
ii. Net Profit in connection with the
liquidation and termination of the
Partnership shall be allocated to make the
Partially Adjusted Capital Accounts of the
Partners equal, as nearly as possible, their
respective Target Accounts; provided,
however, that if there is insufficient Net
Profit to make the Partially Adjusted
Capital Accounts of the Partners equal their
Target Accounts, (i) items of Profit
comprising Net Profit for such year and, to
the extent permitted pursuant to Section 761
of the Code, for the immediately preceding
year shall be allocated to the Westbrook
Partner Group; and (ii) items of Loss
comprising Net Profit for such year and, to
the extent permitted pursuant to Section 761
of the Code, for the immediately preceding
year shall be allocated to Ronto so as to
make the Adjusted Capital Accounts of such
Partners equal, as nearly as possible, their
respective Target Accounts.
iii. Items of Profit and Loss comprising Net Loss
in connection with the liquidation and
termination of the Partnership shall be
allocated to make the Partially Adjusted
Capital Accounts of the Partners equal, as
nearly as possible, their respective Target
Accounts; provided, however, that in no
event shall an allocation under this Section
5.01(c) be made to the extent it would cause
any Partner (other than Westbrook and
WRECIP) to be allocated a percentage of
overall Net Loss for the taxable year in
excess of its Percentage Interest unless
Westbrook and WRECIP shall elect to have the
terms of this proviso not apply. In the
event that there are insufficient item of
Profit and Loss comprising Net Loss to make
the Partially Adjusted Capital Accounts of
the Partners equal their respective Target
Accounts, items of Profit and Loss for the
immediately preceding year shall (to the
extent permitted pursuant to Section 761 of
the Code) be allocated to make the Adjusted
Capital Accounts of the Partners equal, as
nearly as possible, their respective Target
Accounts; provided, however, that the
proviso of the immediately preceding
sentence shall apply to any such allocation.
b. Compliance with Section 704(b). The following special
allocation. shall, except as otherwise provided, be
made in the following order:
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<PAGE>
i. Notwithstanding any other provision of this
Article V, if there is a net decrease in
Partnership Minimum Gain or in any Partner
Minimum Gain during any fiscal year or other
period, prior to any other allocation
pursuant hereto, such Partner shall be
specially allocated items of Partnership
income and gain for such year (and, if
necessary, subsequent years) in an amount
and manner required by Treasury Regulation
Sections 1.704-2(f) or 1.704-2(i)(4). The
items to be so allocated shall be determined
in accordance with Treasury Regulation
Section 1.704-2.
ii. Items of Profit shall be allocated to each
Partner receiving distributions of a return
on its Capital Contributions pursuant to
Section 5.04(a) and Section 5.04(b) until
the aggregate items of Profit allocated to
such Partner under this Section 5.02(b) is
equal to the aggregate amount theretofore
distributed (and immediately available for
distribution) pursuant to such clauses.
iii. Any Partner who unexpectedly receives an
adjustment, allocation or distribution
described in Treasury Regulation Section
1.704-l(b)(2)(ii)(d)(4), (5) or (6) which
causes or increases a negative balance in
his or its Capital Account shall be
allocated items of income and gain
sufficient to eliminate such increase or
negative balance caused thereby, as quickly
as possible, to the extent required by such
Treasury Regulation.
iv. Nonrecourse Deductions for any fiscal year
or other period shall be allocated (as
nearly as possible) under Treasury
Regulation Section 1.704-2 to the Partners,
pro rata in proportion to their respective
Percentage Interests.
v. Any Partner Nonrecourse Deductions for any
fiscal year or other period shall be
allocated to the Partner that made, or
guaranteed or is otherwise liable with
respect to the loan to which such Partner
Nonrecourse Deductions are attributable in
accordance with principles under Treasury
Regulation Section 1.704- 2(i).
vi. No allocation or loss or deduction shall be
made to any Partner if, as a result of such
allocation, such Partner would have an
Adjusted Capital Account Deficit. Any such
disallowed allocation shall be made to the
Partners entitled to receive such allocation
under Treasury Regulation Section 1.704 in
proportion to their respective Percentage
Interests.
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vii. The allocations contained in Sections
5.02(a), 5.02(c), 5.02(d) and 5.02(e) (the
"Regulatory Allocations") are intended to
comply with certain requirements of Treasury
Regulation Section 1.704. The Regulatory
Allocations shall be taken into account in
allocating Profits, Losses, Net Profit and
Net Loss and other items of income, gain,
loss and deduction among the Partners so
that to the extent possible, the allocations
contained in this Agreement other than the
Regulatory Allocations and the Regulatory
Allocations made to each Partner shall equal
the net amount that would have been
allocated to each Partner had the Regulatory
Allocations not occurred. The Executive
Committee shall take account of the fact
that certain of the Regulatory Allocations
will occur at a period in the future in
applying this Section 5.02(g).
c. Payment of Certain Obligations. Prior to making
distributions of Net Cash Flow pursuant to this
Agreement, the Partnership shall have made the
following payments, in the following manner and order
of priority:
i. First, from and after any Letter of Credit
has been provided by either Westbrook or
WRECIP or both as set forth in the Westbrook
Note or the WRECIP Note, any accrued and
unpaid Letter of Credit Reimbursement with
respect to any such outstanding Letter of
Credit;
ii. Second, from and after any Shortfall Loan
has been made, accrued and unpaid interest
thereon and all other amounts then due and
payable and, after the payment in full of
such interest and other amounts, the
prepayment or repayment of the outstanding
principal balance thereof; and
iii. Third, from and after the Westbrook Loan and
the WRECIP Loan have been made, all accrued
and unpaid interest thereon and all other
amounts then due and payable and, after the
payment in full of such interest and other
amounts, the scheduled repayment of the
outstanding principal balance thereof unless
the payment on the principal is deferred at
the option of either or both Westbrook and
WRECIP.
Any Letter of Credit Reimbursement and any interest paid in
accordance with this Section 5.03 shall be treated as payments under Code
Section 7.07(a).
d. Distributions. Except as provided in Section 5.05,
the Partnership shall, as soon as reasonably
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practical (but no less often than quarterly), make
distributions of Net Cash Flow to the Partners in the
following manner and order of priority:
i. First, Net Cash Flow shall be distributed to
the Partners (and pro rata among the
Westbrook Partner Group based upon
Percentage Interests) equal to the product
of such Net Cash Flow multiplied by a
fraction, the numerator of which is the
Capital Contributions made by such Partner
and not previously distributed to such
Partner and the denominator of which is the
aggregate Capital Contributions made by all
Partners and not previously distributed,
until such Partners have received aggregate
distributions of Net Cash Flow pursuant to
this Section 5.04(a) in an amount equal to
the sum of (i) a 20% cumulative annual
return compounded quarterly on the
undistributed portion of its Capital
Contributions, and (ii) its Capital
Contributions; provided, however, in the
event Capital Contributions of the Westbrook
Partner Group or any part thereof are
distributed to the Westbrook Partner Group
prior to a period of two years after their
contribution by the Westbrook Partner Group,
such Capital Contributions or the part
thereof distributed prior to such two year
period for purposes of computing the return
thereon shall be treated as if they had been
undistributed for the entire two year
period. ii. Second, Net Cash Flow shall be
distributed to Westbrook and WRECIP, in
accordance with their relative interests in
the Partnership, until the Westbrook Loan
and the WRECIP Loan are paid and satisfied
in full in accordance with the terms of each
of the Notes, with all such payments being
applied to the outstanding principal in the
inverse order of maturity.
iii. Third, Net Cash Flow shall be distributed
85% to the Westbrook Partner Group (based
upon Percentage Interests) and 15% to Ronto,
until the Westbrook Partner Group has
received aggregate distributions of Net Cash
Flow and principal and interest payments
under the Westbrook Loan and the WRECIP Loan
in an aggregate amount equal to (i) a 25%
cumulative annual return compounded
quarterly on the sum of (A) its
undistributed portion of its Capital
Contributions, (B) the unrepaid Westbrook
Loan (including all capitalized interest
thereon), and (C) the unrepaid WRECIP Loan
(including all capitalized interest
thereon), (ii) its aggregate Capital
Contributions, (iii) the Westbrook Loan
(including all capitalized interest), and
(iv) the WRECIP Loan (including all
capitalized interest); provided, however;
(x) in the event Capital Contributions of
the Westbrook Partner Group or any part
thereof are distributed to the Westbrook
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Partner Group prior to a period of two years
after their contribution by the Westbrook
Partner Group, such Capital Contributions or
the part thereof distributed prior to such
two year period for purposes of computing
the return thereon shall be treated as if
they had been undistributed for the entire
two year period, and (y) in the event
principal payments on the Westbrook Loan
including any capitalized interest thereon
and the WRECIP Loan including any
capitalized interest thereon have been paid
under Section 5.04(b), such payments for
purpose of computing the return thereon
shall be treated as if they had been paid in
accordance with Section 3.4 of the Notes
rather than having been paid in accordance
with Section 3.5 of the Notes.
Notwithstanding the foregoing and for
purposes of this Section 5.04(c) only, the
85%/15% ratio paid to the Westbrook Partner
Group and Ronto under this Section 5.04(c)
shall be adjusted in accordance with the
provisions of Section 3.02(i) as if the 85%
and the 15% were the Percentage Interests of
the Westbrook Partner Group and Ronto
respectively.
iv. Thereafter, any remaining Net Cash Flow
shall be distributed pro rata (based upon
Percentage Interests) to the Partners.
Distributions made pursuant to Section 5.04(a), and (c) shall be deemed to be
made (i) first, with respect to the return described in such provision and (ii)
then, with respect to the Capital Contributions described in such provision.
e. Distributions in Liquidation. Upon the dissolution
and winding-up of the Partnership, the proceeds of
sale and other assets of the Partnership
distributable to the Partners under Section
11.02(c)(iii) shall be distributed, not later than
the latest time specified for such distributions
pursuant to Treasury Regulation Section
1.704-l(b)(2)(ii)(b)(2) to the Partners in proportion
to and in accordance with their respective positive
Capital Account balances(after adjustment to reflect
the allocations pursuant to this Article V), after
payment of the Westbrook Loan and the WRECIP Loan,
including all capitalized and accrued interest
thereon. With the approval of the Executive
Committee, a pro rata portion of the distributions
that would otherwise be made to the Partners under
the preceding sentence may be distributed to a trust
established for the benefit of the Partners for the
purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and
paying any contingent or unforeseen liabilities or
obligations of the Partnership arising out of or in
connection with the Partnership.
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The assets of any trust established under this
Section 5.05 will be distributed to the Partners from
time to time by the trustee of the trust upon
approval of the Executive Committee in the same
proportions as the amount distributed to the trust by
the Partnership would otherwise have been distributed
to the Partners under this Agreement.
f. Tax Matters. The Executive Committee shall make all
applicable election, determination and other
decisions under the Code, including, without being
limited to, the deductibility of a particular item of
expense and the positions to be taken on the
Partnership's tax return, and shall approve the
settlement or compromise of all audit matters raised
by the Internal Revenue Service affecting the
Partners generally. The Partners shall each take
reporting positions on their respective federal,
state and local income tax returns consistent with
the positions determined for the Partnership. The
Westbrook Partner Group shall cause all federal,
state and local income and other tax returns to be
timely filed by the Partnership.
g. Tax Matters Partner. The Westbrook General Partner
shall be the tax matters partner within the meaning
of Section 6231(a)(7) of the Code, provided that the
Westbrook General Partner shall not have any right to
settle or compromise any matter raised by the
Internal Revenue Service without the approval of the
Executive Committee.
h. Section 704(c). In accordance with Section 704(c) of
the Code and the applicable Treasury Regulations
promulgated thereunder, income, gain, loss, deduction
and tax depreciation with respect to any property
contributed to the capital of the Partnership, or
with respect to any property which has a Book Basis
different than its adjusted tax basis, shall, solely
for federal income tax purposes, be allocated among
the Partners so as to take into account any variation
between the adjusted tax basis of such property to
the Partnership and the Book Basis of such property.
38. MANAGEMENT
a. Management.
i. Except as otherwise expressly provided in
this Agreement, the business and affairs of
the Partnership shall be vested in and
controlled by the General Partners. The
General Partners shall act by means of and
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through a committee of persons appointed in
writing pursuant to Section 6.02 (the
"Executive Committee"). The Executive
Committee shall have responsibility for
establishing the policies and operating
procedures with respect to the business and
affairs of the Partnership and for making
all decisions as to all matters which the
Partnership has authority to perform, as
fully as if the General Partners were
themselves making such decisions and in lieu
thereof. All decisions with respect to the
management and control of the Partnership
approved by the Executive Committee (except
for such decisions which by the express
terms of this Agreement require the approval
of all General Partners or all Partners)
shall be binding on the Partnership and all
Partners. The Executive Committee shall
delegate, unless otherwise determined by the
Executive Committee, certain management
functions to the Administrative Partner. The
Administrative Partner shall be responsible
for performing, or for causing to be
performed, the duties described in Section
6.03. Except as otherwise expressly provided
in this Agreement or otherwise previously
approved, or provided for in any Budget or
Operating Plan, by the Executive Committee,
the Executive Committee shall have the sole
authority to authorize and approve any
material matter pertaining to the
Partnership's business (a "Major Decision"),
including, without limitation, the following
matters:
(1) The execution and delivery of any
agreement to acquire the Property
(including, without limitation, the
Golf Rights) (which agreement is
hereby approved by each of the
Partners) and the taking of any
action required or permitted to be
taken thereunder (including,
without limitation, all actions
necessary to close the acquisition
of the Property) or any assignment
(in whole or in part) of any such
agreement and the taking of any
action required or permitted to be
taken thereunder;
(2) Any financing, refinancing or
securitization of any Partnership
Property and the use of any
proceeds thereof, including,
without limitation, the financing
of the acquisition of the Property,
Construction Loan financing,
interim and permanent financing and
any other financing or refinancing
of the operations of the
Partnership and the execution and
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delivery of any documents,
agreements or instruments
evidencing, securing or relating to
any such financing;
(3) The approval of the Budget and
Operating Plan and any amendments
or modifications thereto;
(4) Any sale of condominium units,
restructuring, lease, transfer or
other disposition, improvement,
rehabilitation, alteration, repair,
or completion of construction of
any Partnership Property on terms
that vary materially from the
ranges and guidelines in the Budget
or Operating Plan (for purposes of
this Section 6.01(a)(iv), such a
material variance shall be (A) an
amount that is not within the
ranges established in the Operating
Plan or is in excess of the amount
set forth in the Budget by more
than $5,000.00 or 5% of such Budget
amount, whichever is greater, or
(B) terms that materially conflict
with the other guidelines in the
Operating Plan regarding such
transactions) and any other sale,
transfer or other disposition of
all or any Partnership Property;
(5) The making of any expenditure or
incurring of any obligation by or
on behalf of the Partnership that
vary materially from the Budget or
entering into (or amending or
modifying) any agreement which was
not specifically included in the
Budget or contemplated under the
Operating Plan (for purposes of
this Section 6.01(a)(v)), such a
material variance shall be
expenditures or obligations (A)
involving an amount that is in
excess of the amount set forth in
the Budget for such expenditure or
line item by more than $5,000.00 or
5% of such Budget amount, whichever
is greater, (B) involving the
incurrence of an expenditure or
obligation for any transaction or
any series of related transactions
when taken with all prior
expenditures or obligations during
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<PAGE>
the particular fiscal year related
thereto exceeds the maximum
expenditure amount provided in the
Budget or the Operating Plan for
such particular transaction or
series of transactions for such
fiscal year by the greater of
$5,000.00 or 5% of such maximum
expenditure amount for such fiscal
year, or (C) in the case of any
agreement proposed to be entered
into, such agreement is not
terminable by the Partnership on 30
calendar days or less written
notice to the other parties;
provided, however, this Section
6.01(a)(v) shall not apply to
expenditures made or obligations
incurred or agreements entered into
pursuant to, specifically included
in or contemplated under the Budget
or Operating Plan or in connection
with the acquisition of the Initial
Partnership Property);
(6) The establishment of the offering
plan or prospectus for the sale of
condominium units in the Project,
together with all forms of
agreement to be executed by each
unit purchaser, including, without
limitation, the contract of sale
and purchase and escrow agreement
and all documentation or
applications to be filed with any
state, city or county regulatory
authority in connection with
obtaining approval of the offering
plan or prospectus for the sale of
such condominium units;
(7) The commencement of construction of
each of the buildings within the
Project and approval of the final
plans and specifications for each
such building;
(8) Any revisions to the general layout
of the Project as to the location
of the various improvements and
facilities to be located upon the
Property;
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<PAGE>
(9) The establishment of Reserves,
determination of the amount of Net
Cash Flow and making of
distributions to Partners;
(10) The institution of any legal
proceedings in the name of the
Partnership, settlement of any
legal proceedings against the
Partnership and confession of any
judgment against the Partnership or
any property of the Partnership
other than the institution of any
foreclosure, eviction or similar
proceedings contemplated or
provided in the Operating Plan;
(11) The possession of any Partnership
Property for other than Partnership
purposes;
(12) (A) The filing of any voluntary
petition in bankruptcy on behalf of
the Partnership, (B) the consenting
to the filing of any involuntary
petition in bankruptcy against the
Partnership, (C) the filing of any
petition seeking, or the consenting
to, reorganization or relief under
any applicable federal or state law
relating to bankruptcy or
insolvency, (D) the consenting to
the appointment of a receiver,
liquidator, assignee, trustee,
sequestrator (or other similar
official) of the Partnership or a
substantial part of its property,
(E) the making of any assignment
for the benefit of creditors, (F)
the admission in writing of the
Partnership's inability to pay its
debts generally as they become due
or (G) the taking of any action by
the Partnership in furtherance of
any such action;
(13) The engagement of any sales or
placement agent or broker not
expressly permitted hereunder for
the disposition, financing or
refinancing of any Partnership
Property;
(14) The entering into or consummation
of any transaction or arrangement
34
<PAGE>
with any Partner or any Affiliate
of any Partner, or any other
transaction involving an actual or
potential conflict of interest; and
(15) The approval, determination or any
other action expressly reserved to
the Executive Committee under this
Agreement, including, without
limitation, any modification,
amendment, or renewal of any matter
previously requiring Executive
Committee action.
(16) The terms and conditions of the
Rental Program Rights, and any
agreements related thereto, and all
terms and conditions thereof.
ii. Subject to the terms of this Agreement, the
prior approval by the Executive Committee
and the limitations imposed by law, the
General Partners shall have all of the
powers of general partners of a limited
partnership under the laws of the State of
Delaware, including, without limitation, the
full power to:
(1) Acquire, hold, operate, sell,
transfer, assign, convey, exchange,
lease, sublease, mortgage or
otherwise dispose of or deal with
all or any part of the Property or
any other Partnership Property;
(2) In furtherance of the Partnership's
purposes and business, borrow
money, whether on a secured or
unsecured basis, refinance, record,
extend, compromise or otherwise
deal with any such loan, and in
connection therewith, issue
evidences of indebtedness and
secure the same by mortgages, deeds
of trust, security agreements or
other similar documents affecting
the assets of the Partnership;
(3) Authorize other persons to execute
and deliver such documents on
behalf of the Partnership as the
Executive Committee may deem
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<PAGE>
necessary or desirable for the
Partnership's business, including,
without limitation, guarantees and
indemnities;
(4) Perform, or cause to be performed,
all of the Partnership's
obligations under any agreement to
which the Partnership is a party;
(5) Enter into contracts on behalf of
the Partnership and make
expenditures as are required to
operate and manage the Partnership
and the Partnership Properties; and
(6) Do any act which is necessary or
desirable to carry out any of the
purposes of the Partnership.
iii. Notwithstanding anything to the contrary
contained in Sections 6.01(a) or (b),
neither the Executive Committee nor any
General Partner shall have any authority to
authorize or approve any of the following
matters without the approval of both
Westbrook and WRECIP:
(1) Any matter set forth in Section
6.01(a)(i), (ii), (iii), (iv), (v),
(vii) or (ix); and
(2) The execution and delivery of any
agreement pursuant to Section 6.04
or any amendment or modification
thereof.
iv. The General Partners may, on behalf of the
Partnership, subject to approval by the
Executive Committee, employ, engage or
retain any Persons (including any Affiliate
of any Partner) to act as brokers,
accountants, attorneys, engineers or in such
other capacities as the Executive Committee
may determine are necessary or desirable in
connection with the Partnership's business,
and the General Partners and the members of
the Executive Committee shall be entitled to
rely in good faith upon the recommendations,
reports and advice given them by any such
persons in the course of their professional
engagement.
v. No Limited Partners shall have any right or
power to participate in or have any control
over the Partnership business, affairs or
operations or to act for or to bind the
36
<PAGE>
Partnership in any manner whatsoever, and no
Limited Partner shall be required or
permitted to consent to, acquiesce in, vote
on or approve any action or act taken or
decision made by the General Partners or the
Executive Committee, except as otherwise
specifically provided in this Agreement.
b. Members of the Executive Committee.
i. The Executive Committee shall be comprised
of three individuals, two appointed by the
Westbrook Partner Group and one by Ronto.
The initial members of the Executive
Committee shall be Jonathan H. Paul and
Richard P. Hoch, appointed by the Westbrook
Partner Group, and A. Jack Solomon,
appointed by Ronto. Each General Partner
may, by written notice to the other, remove
any person appointed by such Partner and
appoint a substitute therefor; provided,
however, that any new person appointed by
the Executive Committee by any Partner, must
either (i) be a partner, managing member,
officer, director or employee of such
Partner or of an Affiliate of such Partner,
or (ii) be approved by the Executive
Committee member(s) appointed by the
non-appointing Partner, such approval not to
be unreasonably withheld. Any member of the
Executive Committee may by written notice
delivered to the other members of the
Executive Committee delegate any or all of
such member's duties as a member of the
Executive Committee to any employee of
Westbrook or WRECIP or any of their
respective Affiliates, on the one hand, or
Ronto or any of its Affiliates, on the other
hand, as the case may be, and any decisions
or actions taken by such delegate shall be
fully binding as if taken by such member of
the Executive Committee.
ii. A quorum of the Executive Committee shall be
two members, and all decisions by the
Executive Committee shall require the
affirmative vote of a majority of all the
members of the Executive Committee at a
meeting at which a quorum is present. The
Executive Committee shall meet from time to
time no less frequently than quarterly (such
quarterly meetings to be scheduled by the
Executive Committee, or such meeting shall
have been waived, by the Executive
Committee), but as often as necessary or
desirable to carry out its management
functions. Meetings shall be held at the
offices of the Partnership in Naples,
Florida, unless otherwise agreed. The
Venture Coordinator will prepare an agenda
for each such meeting and will distribute
such agenda to each member of the Executive
Committee at least a week in advance of any
such meeting. Any member of the Executive
Committee may convene a meeting thereof upon
at least 7 business days' prior notice to
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<PAGE>
the other members specifying the date, time
and place of meeting and the agenda for the
meeting. The Executive Committee may also
hold meetings by telephone (in lieu of any
meeting in person), may vote by proxy and
may make decisions by written consent of a
quorum of the members of the Executive
Committee. The Executive Committee may
appoint such officers as it deems necessary
for its proper functioning and may have such
other rules of procedure as it shall
determine. A written record of all meetings
of the Executive Committee and all decisions
made by it shall be made by the Venture
Coordinator, as Secretary of the Executive
Committee, and kept in the records of the
Partnership and shall be initialed or signed
by each of the members of the Executive
Committee. The approval of any Budget and
Operating Plan will be evidenced by the
signing or initialing of a copy of the
approved version by each of the members of
the Executive Committee. Minutes and/or
resolutions of the Executive Committee, when
initialed or signed by each of the members
of the Executive Committee, shall be binding
and conclusive evidence of the decisions
reflected therein and any authorizations
granted thereby. Each member of the
Executive Committee shall be free to
represent the views and positions of the
Partner whom he represents.
iii. Except as otherwise determined by the
Executive Committee, no member thereof shall
be entitled to receive any salary or other
remuneration or expense reimbursement from
the Partnership for his services as a member
of the Executive Committee.
c. Administrative Partner
i. The Executive Committee shall designate one
of the General Partners to act as the
administrative partner of the Partnership
(the "Administrative Partner") and implement
the decisions of the Executive Committee. The
Administrative Partner shall (i) conduct the
business of the Partnership on a day-to-day
basis in accordance with the standard of care
required of prudent and experienced
third-party asset managers performing similar
functions in accordance with customary
industry standards, and in accordance with
the Operating Plan and such other guidelines
as shall be adopted by the Executive
Committee, (ii) perform the Asset Management
Services for the Property and all other
Partnership Property, (iii) perform the
duties assigned to it under this Agreement
and (iv) carry out all decisions and
resolutions of the Executive Committee. The
initial Administrative Partner shall be
Ronto, which shall remain the Administrative
38
<PAGE>
Partner until changed by action of the
Executive Committee or unless Ronto is
terminated as the Administrative Partner
pursuant to Section 6.03(e) or 6.03(g).
Subject to the limitations set forth in this
Agreement and the guidelines adopted by the
Executive Committee, the Administrative
Partner, on behalf of the Partnership, shall
have the power and authority to enter into
contracts on behalf of the Partnership, to
execute and deliver deeds, leases,
assignments, bills of sale, satisfactions of
mortgages, releases and other instruments and
documents and to make expenditures as are
required to implement the Budget and the
Operating Plan, but only to the extent that
any such expenditures and amounts required to
be paid by the Partnership under such
contracts, deeds, leases, assignments, bills
of sale, satisfactions of mortgages, releases
and other instruments and documents or
otherwise are not in excess of $5,000.00 or
5% (whichever is greater) above the amounts
provided therefor in the then-current Budget,
subject to the provisions of Section
6.01(a)(v), or which have otherwise been
approved by the Executive Committee. The
Administrative Partner shall not receive any
fees or compensation or any reimbursement for
compensation payable to any of its employees
or other direct or indirect overhead which
may be attributable to the performance of its
duties as the Administrative Partner. The
foregoing sentence is not intended to limit
or prohibit any fees or compensation set
forth in the Development Agreement. The
Administrative Partner is hereby authorized
to execute and deliver, on behalf of the
Partnership, any and all agreements,
instruments or documents necessary to effect
the acquisition of the Property.
ii. Notwithstanding anything to the contrary
provided in Section 6.01(a)(iii), if at the
beginning of any calendar year the Budget and
Operating Plan or any item or portion thereof
shall not have been approved by the Executive
Committee then:
(1) Any items or portions of the Budget
and Operating Plan and amounts of
expenses provided therein which
have been so approved shall become
operative immediately and the
Administrative Partner shall be
entitled to expend funds in
accordance with those operative
portions;
(2) With respect to the Budget, the
Administrative Partner shall be
entitled to expend, in respect of
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<PAGE>
noncapital, recurring expenses in
any quarter of the then current
calendar year, an amount equal to
the budgeted amount for the
corresponding quarter of the
immediately preceding calendar
year, as set forth on the
immediately preceding calendar year
Budget after giving effect to any
dispositions or other material
changes to the Partnership Property
or its operations during the prior
year; provided, however, that if
any contract approved by the
Executive Committee provides for an
automatic increase in costs
thereunder after the beginning of
the then-current calendar year,
then the Administrative Partner
shall be entitled to expend the
amount of such increase; and
(3) The Administrative Partner shall be
entitled to expend funds in respect
of debt service on the
Partnership's financing (including
the expense of curing any defaults
thereunder), real estate taxes and
assessments, emergency repairs and
other immediately necessary
expenditures to continue the
operation of the Partnership
Property, utility charges,
additions, modifications or repairs
to comply with applicable laws or
insurance requirements, insurance
premiums for insurance policies
approved by the Executive
Committee, any final orders,
judgments or other proceedings and
all costs and expenses related
thereto, and loan servicing fees
approved by the Executive Committee
including the fees and expenses
payable pursuant to this Agreement
and fees pursuant to other
agreements approved by the
Executive Committee regardless of
whether the Budget has been
approved or whether such
expenditures exceed the amounts
provided for in the applicable
Budget (collectively, "Necessary
Expenses"). ------------------
iii. In addition to and without limiting other
duties set forth in this Agreement, the
Administrative Partner shall:
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(1) Oversee the operations and
management on a day-to-day basis of
any and all of the assets which
comprise the Partnership Property;
(2) Take all proper and necessary
actions reasonably required to
cause the Partnership and all third
parties at all times to perform and
comply with the provisions
(including, without being limited
to, any provisions requiring the
expenditure of funds by the
Partnership) of any loan
commitment, agreement, mortgage,
lease, or other contract,
instrument or agreement to which
the Partnership is a party or which
affects any Partnership Property or
the operation thereof;
(3) Pay in a timely manner all
non-disputed operating expenses of
the Partnership in accordance with
the terms of the Budget and the
Operating Plan or as otherwise
provided herein;
(4) Obtain and maintain insurance
coverage on Partnership Properties
as required by the Executive
Committee and pay all non-disputed
taxes, assessments, charges and
fees payable in connection with the
ownership, use and occupancy of the
Partnership Properties;
(5) Deliver to the other General
Partner promptly upon the receipt
or sending thereof, copies of all
notices, reports and communications
between the Partnership and any
holder of a mortgage affecting all
or any portion of any Partnership
Property which relates to any
existing or pending default
thereunder or to any financial or
operational information required by
such Person;
(6) Deposit all receipts from
operations of the Partnership
Property to a separate account
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established and maintained by the
Administrative Partner, and shall
not commingle those receipts with
any other funds or accounts of the
Administrative Partner; and
(7) If the Administrative Partner
subcontracts with third parties or
any of its Affiliates for the
performance of any of the services
to be performed by the
Administrative Partner, supervise
and oversee the performance of the
services performed by such third
parties or Affiliates (in the event
of any such subcontract, references
in this Agreement to actions taken
or to be taken by the
Administrative Partner shall
include actions taken or to be
taken by such subcontractors).
iv. Except as specifically set forth to the
contrary in this Agreement, the
Administrative Partner shall not be
obligated to make any expenditures or
advance any funds on behalf of the
Partnership except from the accounts of
funds of the Partnership. In addition, the
Administrative Partner shall not, without
prior approval of the Executive Committee
unless previously approved or specifically
provided for in a Budget or Operating Plan
or in this Agreement, take any action
constituting a Major Decision.
v. The Executive Committee shall have the right
at any time in its discretion to terminate
the Administrative Partner's appointment as
Administrative Partner hereunder and to
appoint a successor Administrative Partner
acceptable to the Executive Committee in its
sole discretion.
vi. So long as Ronto is the Administrative
Partner, A. Jack Solomon, solely as an
employee of Ronto (the "Venture
Coordinator") will have primary
responsibility for fulfilling Ronto's
obligations as the Administrative Partner,
including, without limitation, to overseeing
the day-to-day operations and activities of
the Partnership. The Executive Committee,
for so long as A. Jack Solomon is the
Venture Coordinator, shall have the right to
cause the Partnership to maintain a Key-Man
Life Insurance Policy (the "Insurance
Requirement")for A. Jack Solomon in an
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amount not less than $5,000,000.00 (or the
maximum amount available if the less than
$5,000,000.00) of which the Partnership
shall be the sole beneficiary, provided,
however, that the foregoing Insurance
Requirement shall be deemed satisfied to the
extent Lely Golf Villas II Limited
Partnership obtains such insurance. Such
policy shall be effective no later than
April 1, 1998. The Venture Coordinator will
devote such amount of his annual services as
is reasonably necessary to perform those
functions for the Partnership. The Westbrook
Partner Group will have the right to approve
any replacement Venture Coordinator, which
approval may be unreasonably withheld. The
Venture Coordinator shall devote such time
and attention to the Partnership's affairs
and operations as shall be reasonably
necessary to discharge the Administrative
Partner's responsibilities and obligations
to the Partnership in accordance with this
Agreement.
vii. Ronto's appointment as the Administrative
Partner shall automatically terminate if
Ronto (or a permitted transferee thereof) no
longer owns an interest in the Partnership.
d. Services and Fees. Except as set forth in this
Section 6.04 or in the Development Agreement, any
agreements with any Affiliate of any Partner must be
approved by the Executive Committee and no other fees
or compensation will be paid by the Partnership to
any Partner or any of its Affiliates. Neither Ronto
nor any of its Affiliates will be entitled to any
brokerage, leasing or other fees associated with the
management and sale of any of the Partnership
Properties and will not be entitled to any
reimbursement for its employees or other direct or
indirect overhead, except as expressly approved by
the Executive Committee or as set forth in the
Development Agreement.
e. Duties and Conflicts.
i. The General Partners and their respective
officers, employees and Affiliates shall
devote such time to the Partnership business
as they deem to be necessary or desirable in
connection with their respective duties and
responsibilities hereunder. Except as
provided hereunder or as otherwise agreed to
in writing by the General Partners or as
approved by the Executive Committee, neither
any General Partner nor any partner,
shareholder, member, officer, director,
employee, agent or representative of any
General Partner shall receive any salary or
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other remuneration for its services rendered
pursuant to this Agreement.
ii. Each of the Partners recognizes that each of
the other Partners and its partners,
shareholders, members, officers, directors,
employees, agents, representatives and
Affiliates have or may have other business
interests, activities and investments, some
of which may be in conflict or competition
with the business of the Partnership and
that each of the other Partners and its
partners, shareholders, members, officers
and directors, employees, agents,
representatives and Affiliates are entitled
to carry on such other business interests,
activities and investments. Each of the
Partners may engage in or possess an
interest in any other business or venture of
any kind, independently or with others,
including, without limitation, owning,
financing, acquiring, leasing, promoting,
developing, improving, operating, managing
and servicing real property and mortgage
loans on its own behalf or on behalf of
other entities with which any of the
Partners is affiliated or otherwise, and
each of the Partners may engage in any such
activities, whether or not competitive with
the Partnership, without any obligation to
offer any interest in such activities to the
Partnership or to the other Partners.
Neither the Partnership nor the other
Partners shall have any right, by virtue of
this Agreement, in or to such activities, or
the income or profits derived therefrom, and
the pursuit of such activities, even if
competitive with the business of the
Partnership, shall not be deemed wrongful or
improper.
f. Partnership Expenses. Except as otherwise provided in
this Agreement and except for any costs to be borne
by any third party under any agreement with the
Partnership, the Partnership shall be responsible for
paying, and shall pay, all direct costs and expenses
related to the business of the Partnership and of
acquiring, holding, owning, developing, servicing,
collecting upon and operating the Partnership
Property, including, without limitation, all costs
and expenses relating to any governmental consents or
approvals required of the Partnership or any of the
Partners to be obtained in connection with the
closing of the acquisition of the Property and which
have been disclosed to the Partners prior to the date
hereof, costs of financing (including the Letter of
Credit), fees and disbursements of attorneys,
financial advisors, accountants, appraisers, brokers
and engineers, travel expenses, and all other fees,
costs and expenses directly attributable to the
business and operations of the Partnership. In the
event any such costs and expenses are or have been
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paid by any Partner, such Partner shall be entitled
to be reimbursed for such payment so long as such
payment is reasonably necessary for Partnership
business or operations and has been approved by the
Executive Committee or is expressly authorized in
this Agreement or the appropriate Budget or Operating
Plan. Notwithstanding the foregoing, in no event
shall the Partnership have any obligation to pay or
reimburse any Partner for any general overhead
expense of such Partner.
39. SALE AND DEFAULT BUY-SELL PROVISIONS
a. First Offer. The Westbrook Partner Group may at any
time deliver a notice (a "First Offer Notice") to
Ronto stating a gross purchase price (the "Offered
Price") at which the Westbrook Partner Group is
prepared to have the Partnership sell the entire
Property. Upon delivery of a First Offer Notice, the
following terms shall govern the Partners' actions:
i. Within sixty (60) days after receipt of a
First Offer Notice (the "Response Period"),
Ronto shall, by notice to the Westbrook
Partner Group, elect either to purchase the
Property from the Partnership on the terms
and conditions provided in this Section
7.01, or to permit the Partnership to convey
the Property to a third party during the
eighteen (18)-month period following Ronto's
election (the "Sales Period") so long as the
gross purchase price in such transaction
(which may be subject to customary
adjustments) is at least ninety percent
(90%) of the Offered Price. In order to
elect to purchase, Ronto must, at the time
of delivering its election to purchase,
deliver a deposit (the "Deposit") to the
Partnership in an amount equal to three
percent (3%) of the Offered Price. If Ronto
fails timely to respond, it shall be deemed
to have elected to permit a sale during the
Sales Period, which such election shall be
deemed to have occurred as of the last day
of the Response Period. If the Partnership
fails to sell the Property prior to the end
of the Sales Period, for any reason other
than failure on the part of Ronto to
cooperate in such sale as reasonably
requested by the Westbrook Partner Group,
the Westbrook Partner Group shall not be
entitled to require the Partnership to sell
the Property without again complying with
the provisions of this Section 7.01.
ii. Any closing of purchase and sale to Ronto
under this Section 7.01 will be held at the
Partnership's principal office and shall
take place on the date 90 calendar days
after the date on which Ronto elects to
purchase or is deemed to have elected
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to purchase the Property (the "Closing
Date"). All transfer, stamp and recording
taxes imposed on the transfer shall be
payable by the Partnership. Ronto shall pay
for all recording costs. Taxes on the
Property shall be prorated between the
Partnership and Ronto on the basis of the
taxes paid for the most recent fiscal year
that has been assessed and billed. If the
actual taxes for the year of closing are not
determinable at the Closing Date, taxes
shall be reprorated promptly after issuance
of the tax bill for the year of closing.
Special assessment liens certified as of the
closing shall be paid by the Partnership.
Ronto shall substitute a letter of credit
for any Letter of Credit, if any, or
otherwise release each of the Westbrook
Partner Group from each of its obligations
relating thereto, all subject to the
Westbrook Partner Group's approval. All
other liens shall be assumed by Ronto. The
Partnership shall be responsible for paying
management fees, insurance, debt service and
other operating costs up to the Closing
Date.
iii. At the closing on any sale of the Property
to Ronto pursuant to Section 7.01, the
Offered Price, adjusted as provided in
Section 7.01(b), shall be paid to the
Partnership by wire transfer of immediately
available federal funds, and the Property
shall be conveyed to Ronto, or its nominee,
subject to the then existing title
encumbrances, other than the Westbrook Loan
and the WRECIP Loan which the Partnership
shall satisfy at closing out of the
proceeds. In the event that Ronto fails to
proceed with the closing, the Partnership
shall retain the Deposit and Ronto shall be
in default hereunder.
iv. No brokerage fees or commissions shall be
payable by the Partnership in connection
with any purchase by Ronto pursuant to this
Section 7.01, and Ronto shall indemnify and
hold harmless the Partnership from and
against any such claims, including any fees
and expenses in defending against any such
claims.
b. Sale of Property. If the Westbrook Partner Group
gives Ronto a First Offer Notice pursuant to Section
7.01 and Ronto fails to elect to purchase the
Property as permitted by Section 7.01(b), during the
Sales Period the Westbrook Partner Group may require
the Partnership to (i) incur reasonable and customary
expenses in connection with the marketing of the
entire Property, such as the preparation of studies
and brochures and legal fees to prepare and negotiate
agreements, (ii) retain on an exclusive basis one or
more brokers designated by the Westbrook Partner
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Group and (iii) enter into a Qualifying Purchase and
Sale Agreement. A "Qualifying Purchase and Sale
Agreement" means an agreement which satisfies the
following requirements:
i. It is in a form approved by the Westbrook
Partner Group;
ii. It is with a buyer which has a reasonably
demonstrable financial capability to make
the deposits required under the agreement
and to provide the equity which, together
with generally available conventional
mortgage financing, will be sufficient to
pay the purchase price as reasonably
determined by the Westbrook Partner Group;
iii. It provides for a closing within one hundred
and twenty (120) days of the date of
execution of the agreement;
iv. Any diligence or investigation period
provided for in the agreement expires not
later than sixty (60) days after the date of
execution of the agreement;
v. It requires a deposit upon execution of the
agreement (which may be refundable to the
buyer if the agreement is terminated by the
buyer prior to the expiration of the
diligence or investigation period) of at
least 1% of the gross purchase price;
vi. It requires that, as of the end of the
diligence or investigation period, the buyer
must have made aggregate deposits of at
least 3% of the gross purchase price, and
provides that such deposits become
nonrefundable as of the end of the diligence
or investigation period unless the agreement
is terminated as a result of a default by
the seller or the seller's failure to
satisfy a customary closing condition.
The Administrative Partner shall arrange for property tours, inspections and
studies of the Property and obtain title commitments, environmental and
construction reports, market studies or other materials to facilitate the
marketing and sale of the Property as requested by the Westbrook Partner Group.
Ronto shall execute and deliver in connection with any agreement to sell or sale
of the Property such customary representations and warranties and other
certificates and instruments as the buyer may reasonably request and shall
cooperate with the Westbrook Partner Group in such manner as the Westbrook
Partner Group may request to facilitate the sale of the Property.
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c. Default Buy-Sell. Upon the occurrence of an Event of
Default by a Partner and compliance with Section
12.02, Ronto (if the defaulting Partner is in the
Westbrook Partner Group) or any Partner in the
Westbrook Partner Group (if the defaulting Partner is
Ronto) will have the right to make an offer as
described below (the "Default Buy-Sell Offer") to the
defaulting Partner as set forth below:
i. The Default Buy-Sell Offer shall be in
writing and be signed by the non-defaulting
Partner and may be given at any time while
the Event of Default is continuing.
ii. The non-defaulting Partner shall have the
right to deliver a notice in writing (the
"Default Election") to the defaulting
Partner within 30 calendar days from the
date of the Default Buy-Sell Offer requiring
the defaulting Partner to either:
(1) Sell to the non-defaulting Partner
all of the defaulting Partner's
right, title and interest in and to
its Interest and in any loans to
the Partnership for a cash purchase
price that if distributed by the
Partnership on the date paid would
provide the defaulting Partner with
(A) the return of its Capital
Contributions, and (B) repayment of
any loans made by the defaulting
Partner to the Partnership; or
(2) Purchase all of the non-defaulting
Partner's right, title and interest
in and to its Interest and in any
loans to the Partnership for a cash
purchase price that if distributed
by the Partnership on the date paid
would provide the non-defaulting
Partner with (A) the distributions
specified for such Partner in
Section 5.04 hereof (but with
returns on Capital Contributions
calculated using one and one-half
times the amount of the aggregate
Capital Contributions of the
non-defaulting Partner), and (B)
the repayment of any loans made by
the non-defaulting Partner to the
Partnership on the terms
specifically provided herein, in
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the Westbrook Note, the WRECIP Note
or any subsequent promissory note
or similar debt instrument.
The non-defaulting Partner shall have full discretion to elect either clause (i)
or (ii) in the Default Election.
iii. All closings of any purchase and sale under
this Section 7.03 shall be held at the
Partnership's principal office and shall
take place on the date 30 calendar days
after the defaulting Partner's Default
Election or deemed Default Election. All
transfer, stamp and recording taxes and
other closing costs imposed on the transfer
shall be payable by the defaulting Partner.
iv. Each Partner shall be entitled to enforce
its rights under this Section 7.03 by
specific performance. No Default Buy-Sell
Offer may be made until all periods for
making elections and performing obligations
under any previous Default Buy-Sell Offer
pursuant to this Section 7.03 shall have
terminated. Upon making any Default Buy-Sell
Offer under this Section 7.03, any
previously made election by Ronto to
purchase the Property pursuant to Section
7.01 which has not yet been consummated
shall be deemed terminated.
v. Any Partner may freely assign its rights and
obligations pursuant to this Section 7.03 to
any other third party, by delivering notice
of such assignment to the other Partners,
provided that the assigning Partners shall
remain liable for any and all obligations of
its assignee, as if such Partners had not
assigned its rights pursuant to this Section
7.03(e).
d. Termination of Other Agreements. If any Partner's
Interest is purchased under this Article VII, all
other agreements the Partnership has with such
Partner or any of its Affiliates will be terminated
on the date such Partner's Interest is purchased, and
if applicable, such Partner will no longer serve as
the Administrative Partner and such Partner will no
longer have the power to appoint any member(s) of the
Executive Committee. Upon termination of any such
other agreement, the Partnership will pay any amounts
then actually owed under such other agreement on the
date of termination.
e. Power of Attorney. In the event that either the
Westbrook Partner Group under Section 7.01 or the
non-defaulting Partner under Section 7.03, on the one
hand, or the Ronto under Section 7.01 or the
defaulting Partner under Section 7.03, on the
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<PAGE>
other hand, shall have failed or refused, within five
calendar days after receipt of a notice from any of
the other Partners requesting such party to execute,
acknowledge and deliver such documents, or cause the
same to be done, as shall be required to effectuate
the provisions of Sections 7.01 or 7.03, then the
purchasing Partner may execute, acknowledge and
deliver such documents for, on behalf of and in the
stead of the selling Partner, and such execution,
acknowledgment and delivery by the Purchasing Partner
shall be for all purposes effective against and
binding upon the selling Partner as though such
execution, acknowledgment and delivery had been by
the selling Partner. The Westbrook Partner Group, on
the one hand, and Ronto, on the other hand, do hereby
constitute and appoint the other of them as the true
and lawful attorney in fact of such Partner and the
successors and assigns thereof, in the name, place
and stead of such Partner or the successors or
assigns thereof, as the case may be, to execute,
acknowledge and deliver such documents in the event
such Partner shall be a selling Partner under the
circumstances contemplated by this Section 7.05. It
in expressly understood, intended and agreed by each
Partner, for such Partner and its successors and
assigns, that the grant of the power of attorney to
any other Partner pursuant to this Section 7.05 is
coupled with an interest, is irrevocable and shall
survive the death, termination or legal incompetency
of such granting Partner, as the case may be, or the
assignment of the Interest of such granting Partner,
or the dissolution Of the Partnership.
40. BOOKS AND RECORDS
a. Books and Records. The Administrative Partner shall
maintain, or cause to be maintained, at the expense
of the Partnership, in a manner customary and
consistent with generally accepted accounting
principles, practices and procedures in the United
States ("U.S. GAAP"), a comprehensive system of
office records, books and accounts (which records,
books and accounts shall be and remain the property
of the Partnership) in which shall be entered fully
and accurately each and every financial transaction
with respect to the ownership and operation of the
Partnership Property. Bills, receipts and vouchers
shall be maintained on file by the Administrative
Partner. The Administrative Partner shall maintain
said books and accounts in a safe manner and separate
from any records not having to do directly with the
Partnership or any Partnership Property. The
Administrative Partner shall cause audits to be
performed on an annual basis, in accordance with the
required financial reporting time table of the
Westbrook Partner Group, and audited statements
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<PAGE>
and income tax returns to be prepared as required by
Section 8.03. Such books and records of account shall
be prepared and maintained by the Administrative
Partner at the principal place of business of the
Partnership or such other place or places as may be
determined by the Executive Committee from time to
time. Each Partner or its duly authorized
representative shall have the right to inspect,
examine and copy such books and records of account at
the Partnership's office during reasonable business
hours. A reasonable charge for copying books and
records may be charged by the Partnership.
b. Accounting and Fiscal Year. The books of the
Partnership shall be kept on the accrual basis in
accordance with U.S. GAAP and on a tax basis and the
Partnership shall report its operations for tax
purposes on the accrual method. The fiscal year and
tax year of the Partnership shall end on December 31
of each year, unless a different tax year shall be
required by the Code.
c. Reports.
i. The Administrative Partner will prepare at
the expense of the Partnership and furnish
to each Partner within 21 calendar days
after the end of each fiscal quarter of the
Partnership (i) unless such fiscal quarter
is the last fiscal quarter of any fiscal
year of the Partnership, (A) an unaudited
balance sheet of the Partnership dated as of
the end of such fiscal quarter, (B) an
unaudited related income statement of the
Partnership for such fiscal quarter, (C) an
unaudited statement of each Partner's
Capital Account for such fiscal quarter, and
(D) an unaudited statement of cash flows of
the Partnership for such fiscal quarter and
(ii) a status report of the Partnership's
activities during such fiscal quarter,
including summary descriptions of additions
to, dispositions of and construction and
development of Partnership Properties during
such fiscal quarter, all of which shall be
certified by the Administrative Partner as
being, to the best of its knowledge, true
and correct.
ii. The Administrative Partner will prepare, on
an accrual basis in accordance with U.S.
GAAP and on a tax basis, at the expense of
the Partnership, and furnish to each Partner
no later than January 15 after the end of
each fiscal year of the Partnership (i) an
unaudited balance sheet of the Partnership
dated as of the end of such fiscal year,
(ii) an unaudited related income statement
of the Partnership for such fiscal year
(iii) an unaudited statement of each
Partner's Capital Account for such
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fiscal year, (iv) an unaudited statement of
cash flows of the Partnership as of the end
of such fiscal year, and (v) such other
supporting schedules, reports and backup
information as reasonably requested by any
member of the Westbrook Member Group, all of
which shall be certified by the
Administrative Partner as being, to the best
of its knowledge, true and correct. In
addition, if requested by any member of the
Westbrook Partner Group, the Administrative
Partner will prepare, at the expense of the
Partnership, and furnish to each Partner,
within 45 calendar days after the end of
each fiscal year, the final audited amount
of net income of the Partnership for such
fiscal year and, within 60 calendar days
after the end of such fiscal year, (i) an
audited balance sheet of the Partnership
dated as of the end of such fiscal year,
(ii) an audited related income statement of
the Partnership for such fiscal year, (iii)
an audited statement of cash flows for such
fiscal year and (iv) an audited statement of
each Partner's Capital Account for such
fiscal year, all of which shall be certified
by the Administrative Partner as being, to
the best of its knowledge, true and correct
and all of which shall be certified in the
customary manner by the Partnership
Accountant (which firm shall provide such
balance sheet, income statement and
statement of Capital Account in draft form
to the Partners for review prior to
finalization and certification thereof).
iii. The Administrative Partner will furnish to
each Partner, at the expense of the
Partnership, copies of all reports required
to be furnished to any lender of the
Partnership.
iv. The Administrative Partner will prepare at
the expense of the Partnership and furnish
to each Partner (i) not later than each
March 15 a schedule of estimated taxable
income of the Partnership for the year
ending on the following December 31, (ii)
not later than each April 30 a schedule of
estimated taxable income of the Partnership
for the nine months ending on the following
December 31, (iii) not later than each July
30 a schedule of estimated taxable income of
the Partnership for the six months ending on
the following December 31 and (iv) not later
than each October 30 a schedule of estimated
taxable income of the Partnership for the
three months ending on the following
December 31. In addition, the Administrative
Partner will prepare, at the expense of the
Partnership, and furnish to each Partner (i)
not later than each April 21 a schedule of
actual taxable income, based upon the
unaudited books and records of the
Partnership, and book income of the
Partnership for the three months ending on
the preceding March 31, (ii) not later than
each July 21 a schedule of
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actual taxable income, based upon the
unaudited books and records of the
Partnership, and book income of the
Partnership for the six months ending on the
preceding June 30, (iii) not later than each
October 21 a schedule of actual taxable
income, based upon the unaudited books and
records of the Partnership, and book income
of the Partnership for the nine months
ending on the preceding September 30 and
(iv) not later than each December 21 a
schedule of actual taxable income, based
upon the unaudited books and records of the
Partnership, and book income of the
Partnership for the 11 months ending on the
preceding November 30 and of estimated book
income of the Partnership for the one month
ending on the following December 31
(including all estimated accruals as of such
December 31). All schedules of book income
shall be prepared on a U.S. GAAP basis.
Promptly after the end of each fiscal year,
the Administrative Partner will cause the
Partnership Accountant to prepare and
deliver to each Partner a report setting
forth in sufficient detail all such
additional information and data with respect
to business transactions effected by or
involving the Partnership during the fiscal
year as will enable the Partnership and each
Partner to timely prepare its federal, state
and local income tax returns in accordance
with applicable laws, rules and regulations.
The Administrative Partner will cause the
Partnership Accountant to prepare all
federal, state and local tax returns
required of the Partnership, submit those
returns to the Executive Committee for its
approval not later than February 1 of the
year following such fiscal year and will
file the tax returns after they have been
approved by the Executive Committee. If the
Executive Committee shall not have approved
any such tax return prior to the date
required for the filing thereof (including
any extensions granted), the Administrative
Partner will timely obtain an extension of
such date to the extent such an extension is
available.
v. The Administrative Partner shall prepare, at
Partnership expense, such additional
financial reports and other information as
the Administrative Partner may determine are
appropriate.
vi. All decisions as to accounting principles
shall be made by the Executive Committee,
subject to the provisions of this Agreement.
d. The Partnership Accountant. The Partnership shall
retain as the auditor for the Partnership (the
"Partnership Accountant") Arthur Anderson or another
nationally-recognized
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accounting firm designated by the Executive
Committee. The fees and expenses of the Partnership
Accountant shall be a Partnership expense.
e. Reserves. The Executive Committee may, in its
discretion and subject to such conditions as it shall
determine, establish Reserves for the purposes and
requirements as it may deem appropriate, including,
without limitation, reserves to purchase the Property
not purchased in the initial closing under the
Property acquisition purchase and sale contract.
f. The Budget and Operating Plan.
i. Promptly after execution hereof (but in any
event within sixty days after such
execution), the Administrative Partner shall
prepare and submit to the Executive
Committee for its approval a budget and
strategic operating plan (the "Initial
Budget and Operating Plan") for the
Partnership through December 31, 1998 which
shall set forth all anticipated income,
operating expenses and capital and other
costs and expenses of the Partnership, all
of which will be based on the strategic and
comprehensive business plan designed to
maximize the Partnership's returns on the
Partnership Property. The Initial Budget and
Operating Plan will be reviewed by the
Executive Committee after six months of
actual operating results for the Partnership
Property and only required amendments or
modifications resulting from such review
shall be subject to Executive Committee
approval. Thereafter, the Budget and
Operating Plan shall be prepared and
submitted annually to the Executive
Committee at least 90 calendar days prior to
the end of each fiscal year with respect to
the following fiscal year. In formulating
the comprehensive Operating Plan, to the
extent reasonably feasible at the time of
preparation thereof the Administrative
Partner will develop strategies regarding
plans for development, construction,
rehabilitation or leasing of any real
property, preparation and release of all
promotional and advertising material
relating to any Partnership Property or
concerning the Partnership, terms for any
proposed sale or disposition of any
Partnership Property, and selection of legal
counsel, accountants, structural and
environmental engineers and appraisers for
the Partnership to efficiently implement the
Operating Plan. The Administrative Partner
will also consider and make recommendations
to the extent it deems same appropriate
regarding the amendment, modification,
alteration, change, cancellation, or
prepayment of any indebtedness evidenced by
any mortgage loan presently or hereafter
affecting any Partnership
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Property, and procurement of title insurance
and other insurance for the Partnership, or
decrease or vary the insurance carried by or
on behalf of the Partnership. In connection
with the approval of any proposed Budget or
Operating Plan, the Executive Committee
shall have full authority to make any
modifications or revisions it deems
necessary or appropriate.
ii. In conjunction with the formulation of the
Operating Plan, the Administrative Partner
will also develop sale and other operating
guidelines for the Property for the upcoming
fiscal year, which sale and other operating
guidelines shall include to the extent
reasonably feasible at the time of
preparation thereof (i) a standard form or
forms of contract to be offered to
prospective purchasers, (ii) a price
schedule setting forth proposed purchase
prices for each condominium unit for the
upcoming fiscal year, (iii) a description of
any inducements, concessions, improvements
or allowances to be offered prospective
purchasers, (iv) a schedule of existing
purchase and sale contracts affecting the
Property, (v) a budget for the costs to be
incurred for the balance of the projected
sale period, and (vi) a summary of the
general content and method of presentation
of the advertising program to be implemented
with respect to condominium units in the
Property.
41. TRANSFER OF PARTNERSHIP INTERESTS
a. No Transfer. Except as expressly permitted or
contemplated by this Agreement, no Partner may sell,
assign, give, hypothecate, pledge, encumber or
otherwise transfer ("Transfer") all or any portion of
its Interest, whether directly or indirectly, without
the prior written consent of the other Partners. Any
Transfer in contravention of this Article IX shall be
null and void. No General Partner, without the prior
written consent of the other Partners, shall retire
or withdraw from the Partnership except as a result
of such Partner's involuntary dissolution or final
adjudication as a bankrupt.
b. Permitted Transfers.
i. Any Partner in the Westbrook Partner Group
may, from time to time and in its sole
discretion without the consent of any other
Partner, sell or assign its Interest, in
whole or in part, to an entity of which
Westbrook or WRECIP or any Person directly
or indirectly controlling, controlled by, or
under common control with Westbrook or
WRECIP continues to control no less than
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50% of the voting interests or to a publicly
traded entity in which Westbrook or WRECIP
or their Affiliates own at least 10% of the
interests therein.
ii. Upon the expiration of the terms of
Westbrook and WRECIP, the Westbrook Partner
Group, collectively, shall have the right to
sell all, but not less than all, of their
Interests to one or more third party
entities provided that the Westbrook Partner
Group shall have first offered to sell such
Interests to Ronto, which offer (an
"Expiration Offer") shall (i) be in writing
and signed by each of the Partners in the
Westbrook Partner Group, (ii) delivered
neither less than 12 months nor more than 24
months prior to the expiration of the terms
of Westbrook and WRECIP (subject to the
later delivery of such Expiration Offer
under the circumstances described in the
penultimate sentence of this Section
9.02(b)), (iii) specify the cash purchase
price at which the Westbrook Partner Group
intends to sell their Interests, (iv)
disclose all liabilities and potential
liabilities relating to such Interests known
to the Westbrook Partner Group and the
monetary amount of such liabilities, (v)
specify the other major economic terms and
conditions upon which the Westbrook Partner
Group intends to sell such Interests,
including the anticipated closing date and
any contemplated financing, and (vi)
disclose the identity of any third parties
to whom the Westbrook Partner Group intends
to sell such Interests. Ronto shall have the
right, for a period of 90 calendar days
after its receipt of such Expiration Offer,
to elect to purchase all, but not less than
all, of the Interests of the Westbrook
Partner Group upon the terms and conditions
set forth in such Expiration Offer, which
closing shall be held at the Partnership's
principal office and shall take place not
later than six months after its receipt of
such Expiration Offer. Failure to give the
Westbrook Partner Group notice of the
Ronto's election to purchase the Interests
of the Westbrook Partner Group shall be
deemed, upon the expiration of such 90-day
period, to be an election not to purchase
such Interests under this Section 9.02(b),
and the Westbrook Partner Group shall have
the right to sell their Interests to one or
more third party entities provided that (i)
the purchase price (after deducting any
brokerage or other fees payable in
connection with such sale) is equal to or
greater than 90% of the price set forth in
the related Expiration Offer, and (ii) the
terms and conditions of such sale, when
taken as a whole, are not materially less
favorable to the Westbrook Partner Group
than those set forth in such Expiration
Offer. If the Westbrook Partner Group fails
to consummate the sale of their Interests to
any third party entity or entities in
accordance with the immediately preceding
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sentence within the earlier to occur of 90
days after the anticipated closing date or
180 days after the receipt by Ronto of the
related Expiration Offer, then the Westbrook
Partner Group shall not consummate any such
sale without again making an Expiration
Offer. No Transfer of any Interest pursuant
to this Section 9.02(b) may be made until
all periods for making elections and
performing obligations under any previous
right of first offer pursuant to Section
7.01 shall have terminated or any Default
Buy- Sell Offer pursuant to Section 7.03
shall have terminated.
iii. Any permitted Transfer shall not relieve the
transferor of any of its obligations prior
to such Transfer. Notwithstanding anything
to the contrary contained in this Agreement,
no transfer of all or any part of any
Interest shall be made if, as a result
thereof, any income of the Partnership will
be subject to corporate tax. Nothing
contained in this Article IX shall prohibit
any Transfer indirectly of any Interest if a
direct Transfer would otherwise be permitted
under this Section 9.02. Subject to Section
9.03, any transferee pursuant to this
Section 9.02 shall become a Partner of the
Partnership. Each Partner and its permitted
transferees shall be treated as one Partner
for all purposes of this Agreement. The
provisions of this Section 9.02 will not
apply to or be deemed to authorize or permit
any collateral transfer of, or grant of a
security interest in, any Partner's
Interest, or in Partnership Property (which
transfer or grant shall be subject to the
other provisions of this Agreement).
c. Transferees. Notwithstanding anything to the contrary
contained in this Agreement, no transferee of all or
any portion of any Interest shall be admitted as a
Partner unless (a) such Interest is transferred in
compliance with the applicable provisions of this
Agreement, (b) such Transfer shall have been approved
in writing by each of the remaining Partners (which
consent may be withheld in their sole and absolute
discretion) unless such Transfer is made in
connection with the expiration of the terms of
Westbrook and WRECIP pursuant to Section 9.02(b), (c)
if applicable, such transferee shall have furnished
evidence of satisfaction of the requirements of
Section 9.02 reasonably satisfactory to the remaining
Partners, and (d) such transferee shall have executed
and delivered to the Partnership such instruments as
the remaining Partners deem necessary or desirable to
effectuate the admission of such transferee as a
Partner and to confirm the agreement of such
transferee to be bound by all of the terms and
provisions of this Agreement with respect to such
Interest. At the request of the remaining Partners,
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each such transferee shall also cause to be delivered
to the Partnership, at the transferee's sole cost and
expense, a favorable opinion of legal counsel
reasonably acceptable to the Partnership, to the
effect that (i) such transferee has the legal right,
power and capacity to own the Interest proposed to be
transferred, (ii) if applicable, such Transfer does
not violate any provision of any loan commitment or
any mortgage, deed of trust or other security
instrument encumbering all or any portion of the
Partnership Property, (iii) if applicable, such
Transfer will not cause the termination of the
Partnership for purposes of Section 708 of the Code
or that such termination will not materially
adversely affect the Partnership or any Partner, and
(iv) if applicable, such Transfer does not violate
any federal or state securities laws and will not
cause the Partnership to become subject to the
Investment Company Act of 1940, as amended. As
promptly as practicable after the admission of any
Person as a Partner, the books and records of the
Partnership shall be changed to reflect such
admission. All reasonable costs and expenses incurred
by the Partnership in connection with any Transfer of
any Interest and, if applicable, the admission of any
transferee as a Partner shall be paid by such
transferee.
d. Section 754 Election. If requested by any Partner
making a permitted Transfer under this Agreement, the
Partnership shall make an election under Section 754
of the Code.
42. EXCULPATION AND INDEMNIFICATION
a. Exculpation. Except as expressly agreed pursuant to
the Guaranties executed in connection herewith, no
general or limited partner or member of any Partner,
shareholder, member or other holder of an equity
interest in such Partner or officer or director of
any of the foregoing, shall be personally liable for
the performance of any such Partner's obligations
under this Agreement but the foregoing shall not
relieve any partner or member of any Partner of its
obligations to such Partner.
b. Indemnification.
i. The Partners, members of the Executive
Committee, the Administrative Partner and
their respective shareholders, officers,
directors, partners, members and employees
shall be indemnified and held harmless by
the Partnership from and against any and all
claims, demands, liabilities, costs,
damages, expenses and causes of action of
any nature whatsoever arising out
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of or incidental to any act performed or
omitted to be performed by any one or more
of the Partners, members of the Executive
Committee or the Administrative Partner or
their respective shareholders, officers,
directors, partners, members or employees in
connection with the business of the
Partnership; provided, however, that such
act or omission was taken in good faith, was
reasonably believed by the applicable
Partner, members of the Executive Committee
or the Administrative Partner or their
respective shareholders, officers,
directors, partners, members or employees to
be in the best interests of the Partnership
and within the scope of authority granted to
such Partners, the Executive Committee or
the Administrative Partner under this
Agreement, and, in the case of a Partner or
member did not constitute fraud, bad faith,
willful misconduct, gross negligence on
behalf of such Partner or member; and,
provided, further, that an indemnity under
this Section 10.02 shall be paid solely out
of and to the extent of Partnership assets
and shall not be a personal obligation of
any Partner and in no event will either
Partner be required, or permitted without
the consent of all of the Partners, to
contribute additional capital under Section
3.02 to enable the Partnership to satisfy
any obligation under this Section 10.02. All
judgments against the Partnership and the
Partners, or any one or more thereof,
wherein such Partner (or Partners) is
entitled to indemnification, must first be
satisfied from Partnership assets before the
Partners shall be responsible therefor.
ii. The Partnership and the other Partners shall
be indemnified and held harmless by each
Partner from and against any and all claims,
demands, liabilities, costs, damages,
expenses, and causes of action of any nature
whatsoever arising out of or incidental to
(i) any act performed by such Partner
(including acts performed as Administrative
Partner or pursuant to the Development
Agreement) or its designated Executive
Committee member which is not performed in
good faith or is not reasonably believed by
such Partner or its designated Executive
Committee member to be in the best interests
of the Partnership and within the scope of
authority conferred upon such Partner or its
designated Executive Committee member under
this Agreement, (ii) the fraud, bad faith,
willful misconduct or gross negligence of
such Partner or its designated Executive
Committee member, or (iii) the breach by the
Partnership of any of its representations or
warranties made under any purchase, loan or
other agreement entered into in connection
with the acquisition of the Partnership
Property, which breach was the result of
information or matters relating to such
Partner.
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43. TERMINATION
a. Dissolution. The Partnership shall be dissolved and
its business wound up upon the happening of any of
the following events, whichever shall first occur:
i. The assignment of the agreement to acquire
the Property to a third party, or the sale,
condemnation or other disposition of all
Partnership Property and the receipt of all
consideration therefor;
ii. The failure to acquire the Property by the
Partnership on or before March __, 1998,
unless the Executive Committee elects in
writing to extend such deadline;
iii. The failure to occur the condition set forth
in Section 3.02(f);
iv. The expiration of the period related to the
election under Section 12.02(a);
v. The expiration of the period set forth in
Section 2.03;
vi. The written determination of the Executive
Committee to terminate the Partnership;
vii. The filing by the last remaining General
Partner, or consenting by answer or
otherwise to the filing against such General
Partner, of a petition for relief or
reorganization or arrangement or any other
petition in bankruptcy, for liquidation (in
connection with a bankruptcy or insolvency
proceeding) or to take advantage of any
bankruptcy or insolvency law of any
jurisdiction; the general assignment by such
General Partner for the benefit of such
General Partner's creditors, consenting to
the appointment of a custodian, receiver,
trustee or other officer with similar powers
of a general partner or of any material part
of such General Partner's property; or
viii. The appointment by a court or governmental
authority of competent jurisdiction, without
consent by the last remaining General
Partner, of a custodian, receiver, trustee
or other officer with similar powers with
respect to such General Partner, or if an
order for relief shall be entered in any
case or proceeding for liquidation or
reorganization or otherwise to take
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advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation (in
connection with a bankruptcy or insolvency
proceeding) of such General Partner, or if
any petition for any such relief shall be
filed against such General Partner, and such
petition or order shall not be dismissed
within 90 calendar days.
Without limitation on, but subject to, the other provisions hereof, the
assignment of all or any part of a Partner's Interest permitted hereunder will
not result in the dissolution of the Partnership. Except as otherwise
specifically provided in this Agreement, each Partner agrees that, without the
consent of the other Partners, no Partner may withdraw from or cause a voluntary
dissolution of the Partnership. In the event any Partner withdraws from or
causes a voluntary dissolution of the Partnership in contravention of this
Agreement, such withdrawal or the causing of a voluntary dissolution shall not
affect such Partner's liability for obligations of the Partnership.
b. Termination. In all cases of dissolution of the
Partnership the business of the Partnership shall be
wound up and the Partnership terminated as promptly
as practicable thereafter, and each of the following
shall be accomplished:
i. The Liquidating Partner shall cause to be
prepared a statement setting forth the
assets and liabilities of the Partnership as
of the date of dissolution, a copy of which
statement shall be furnished to all of the
Partners.
ii. The Partnership Property shall be liquidated
by the Liquidating Partner as promptly as
possible, but in an orderly and businesslike
and commercially reasonable manner and
subject to the provisions of the Operating
Plan then in effect or a liquidating plan
approved by the Executive Committee. The
Liquidating Partner may distribute
Partnership Property in kind, only with the
consent of all Partners.
iii. The proceeds of sale and all other assets of
the Partnership shall be applied and
distributed as follows and in the following
order of priority:
(1) To the payment of (A) the debts and
liabilities of the Partnership
(including any outstanding amounts
due on any indebtedness encumbering
the Partnership
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Property, or any part thereof and
the Letter of Credit Reimbursement)
and (B) the expenses of
liquidation.
(2) To the setting up of any reserves
which the Liquidating Partner and
Executive Committee shall determine
to be reasonably necessary for
contingent, unliquidated or
unforeseen liabilities or
obligations of the Partnership or
any Partner arising out of or in
connection with the Partnership.
Such reserves may, in the
discretion of the Liquidating
Partner, be paid over to a national
bank or national title company
selected by it and authorized to
conduct business as an escrowee to
be held by such bank or title
company as escrowee for the
purposes of disbursing such
reserves to satisfy the liabilities
and obligations described above,
and at the expiration of such
period as the Liquidating Partner
may reasonably deem advisable,
distributing any remaining balance
as provided in Section
11.02(c)(iii); provided, however,
that, to the extent that it shall
have been necessary, by reason of
applicable law or regulation, to
create any reserves prior to any
and all distributions which would
otherwise have been made under
Section 11.02(c)(i) and, by reason
thereof, a distribution under
Section 11.02(c)(i) has not been
made, then any balance remaining
shall first be distributed pursuant
to Section 11.02(c)(i).
(3) The balance, if any, to the
Partners, in accordance with
Section 5.05.
c. Liquidating Partner. The Liquidating Partner is
hereby irrevocably appointed as the true and lawful
attorney in the name, place and stead of each of the
Partners, such appointment being coupled with an
interest, to make, execute, sign, acknowledge and
file with respect to the Partnership all papers which
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<PAGE>
shall be necessary or desirable to effect the
dissolution and termination of the Partnership in
accordance with the provisions of this Article XI.
Notwithstanding the foregoing, each Partner, upon the
request of the Liquidating Partner, shall promptly
execute, acknowledge and deliver all such documents,
certificates and other instruments as the Liquidating
Partner shall reasonably request to effectuate the
proper dissolution and termination of the
Partnership, including the winding up of the business
of the Partnership.
44. DEFAULT BY PARTNER
a. Events of Default. If any Partner commits any
material violation or breach of any of the provisions
of this Agreement (excluding any failure by a Partner
to timely make any Capital Contributions required by
Section 3.02 (a), (b) or (d)) causing material damage
or loss to the Partnership which is not cured
(including, without limitation, by the breaching
Partner reimbursing the Partnership for the resulting
material damage or loss) within a Reasonable Period,
such Partner shall have committed an "Event of
Default".
b. Effect of Event of Default. Upon the occurrence of an
Event of Default by any Partner, Ronto (if such
Partner is in the Westbrook Partner Group) or any
Partner in the Westbrook Partner Group (if such
Partner is Ronto) shall have the right, at any time
within one year from the date of such Event of
Default and upon giving the defaulting Partner 10
calendar days' written notice of such election (and
provided such Event of Default is continuing through
the end such 10-day period) to take any of the
following actions (for purposes of this Section
12.02, any default by any Partner in the Westbrook
Partner Group shall be deemed to be a default by each
of the other Partners in the Westbrook Partner
Group):
i. Dissolve the Partnership; and
ii. Either (i) implement the buy-sell procedure
set forth in Section 7.03; provided,
however, if the Event of Default is the
failure to pay the cash purchase price
payable under Section 7.01(b) or 7.03(b)
when due, then the purchase price payable
under Section 7.03(b) by the non-defaulting
Partner will be discounted with respect to
each component thereof comprised of capital
contributions by the related percentage set
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forth in such Section and the defaulting
Partner will not have the option to acquire
the non-defaulting Partner's Interest, or
(ii) pursue any other remedy available at
law or in equity.
Upon receipt of the purchase price (or notice that the purchase price is
available to the defaulting Partner) incident to the implementation of the
buy-sell procedure set forth in Section 7.02, the defaulting Partner shall have
no further interest in the Partnership or its business or assets, and the
defaulting Partner shall execute and deliver such assignments and other
instruments as may be reasonable to evidence and fully and effectively transfer
the Interest of the defaulting Partner to the non-defaulting Partner. In the
event that the appropriate instruments are not delivered, after notice by the
non-defaulting Partner that the consideration is available to the defaulting
Partner, the non-defaulting Partner may deliver such consideration to the
defaulting Partner and execute, as the irrevocable agent of the defaulting
Partner, any such legal instruments to the appropriate continuing Partners. Such
agency is coupled with an interest and will survive the insolvency, bankruptcy
or dissolution of the Partner. However, all parties hereto agree that the
non-defaulting Partner shall not have any individual liability for any actions
taken in this connection. No assignment or transfer of the Interest of any
defaulting Partner as provided herein shall relieve such defaulting Partner from
any personal liability for outstanding indebtedness, liabilities, liens, and
obligations relating to the Partnership which may exist on the date of the
assignment or transfer; provided however, that, if applicable, the
non-defaulting Partner may remove the defaulting Partner as the Administrative
Partner and cause the Partnership to terminate any agreement with the defaulting
Partner or any of its Affiliates. The default of any Partner hereunder shall not
relieve any other Partner from its agreements, liabilities, and obligations
hereunder. A defaulting Partner's Interest shall not be considered in any
Partnership voting requirement if at the time of any such vote such Event of
Default is continuing.
45. MISCELLANEOUS
a. Representations and Warranties of the Partners.
i. Each Partner represents and warrants to the
other Partners as follows:
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(1) It is duly organized, validly
existing and in good standing under
the laws of its jurisdiction of
formation with all requisite power
and authority to enter into this
Agreement and to conduct the
business of the Partnership.
(2) This Agreement constitutes the
legal, valid and binding obligation
of the Partner enforceable in
accordance with its terms.
(3) No consents or approvals are
required from any governmental
authority or other person or entity
for the Partner to enter into this
Agreement and the Partnership. All
corporate or partnership action on
the part of the Partner necessary
for the authorization, execution
and delivery of this Agreement, and
the consummation of the
transactions contemplated hereby,
have been duly taken.
(4) The execution and delivery of this
Agreement by the Partner, and the
consummation of the transactions
contemplated hereby, does not
conflict with or contravene the
provisions of its organic documents
or any agreement or instrument by
which it or its properties are
bound or any law, rule, regulation,
order or decree to which it or its
properties are subject.
ii. Each Partner in the Westbrook Partner Group
represents and warrants to Ronto that the
term of Westbrook expires on February 24,
2007 and the term of WRECIP expires on
February 24, 2007, subject to the earlier
dissolution of Westbrook or WRECIP by the
affirmative action of their respective
general partner or limited partners.
b. Further Assurances. Each Partner agrees to execute,
acknowledge, deliver, file, record and publish such
further instruments and documents, and do all such
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<PAGE>
other acts and things as may be required by law, or
as may be required to carry out the intent and
purposes of this Agreement.
c. Notices. All notices, demands, consents, approvals,
requests or other communications which any of the
parties to this Agreement may desire or be required
to give hereunder (collectively, "Notices") shall be
in writing and shall be given by (a) personal
delivery, (b) facsimile transmission or (c) a
nationally recognized overnight courier service, fees
prepaid, addressed as follows:
<TABLE>
<CAPTION>
<S> <C>
If to the Westbrook Westbrook Real Estate Fund II, L.P.
Partner Group, to: 599 Lexington Avenue
Suite 3800
New York, New York 10022
Attn: Mr. Richard P. Hoch
Facsimile No.: 212/849-8801
With a copy to: Patrick K. Fox, Esq.
Westbrook Partners L.L.C.
13155 Noel Road
Dallas, Texas 75240
Facsimile No.: 972/934-8333
And with a copy to: Brian L. Bilzin, Esq.
Bilzin Sumberg Dunn & Axelrod LLP
200 South Biscayne Boulevard
First Union Financial Center
Suite 2500
Miami, Florida 33131-2336
Facsimile No.: 305/374-7593
If to Ronto, to: 3185 Horseshoe Drive South
Naples, Florida 34104
Attn: Mr. A. Jack Solomon
Facsimile No.: 941/649-6685
With a copy to: John L. Farquhar, Esq.
Ruden McClosky Smith Schuster &
Russell, P.A.
200 East Broward Boulevard
Fort Lauderdale, FL 33301
Facsimile No.: 954/764-4996
</TABLE>
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<PAGE>
Any Partner may designate another addressee (and/or change its address) for
Notices hereunder by a Notice given pursuant to this Section 13.03. Any Notice
sent in compliance with the provisions of this Section 13.03 shall be deemed
given on the date of receipt.
d. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the
State of New York applicable to agreements made and
to be performed wholly within that State.
e. Attorney Fees. If the Partnership or any Partner
obtains a judgment against any Partner by reason of
the breach of this Agreement or the failure to comply
with the terms hereof, reasonable attorneys' fees and
costs as fixed by the court shall be included in such
judgment.
f. Captions. All titles or captions contained in this
Agreement are inserted only as a matter of
convenience and for reference and in no way define,
limit, extend, or describe the scope of this
Agreement or the intent of any provision in this
Agreement.
g. Pronouns. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine,
and neuter, singular and plural, as the identity of
the party or parties may require.
h. Successors and Assigns. This Agreement shall be
binding upon the parties hereto and their respective
executors, administrators, legal representatives,
heirs, successors and assigns, and shall inure to the
benefit of the parties hereto and, except as
otherwise provided herein, their respective
executors, administrators, legal representatives,
heirs, successors and assigns.
i. Extension Not a Waiver. No delay or omission in the
exercise of any power, remedy or right herein
provided or otherwise available to a Partner or the
Partnership shall impair or affect the right of such
Partner or the Partnership thereafter to exercise the
same. Any extension of time or other indulgence
granted to a Partner hereunder shall not otherwise
alter or affect any power, remedy or right of any
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other Partner or of the Partnership, or the
obligations of the Partner to whom such extension or
indulgence is granted.
j. Creditors Not Benefited. Nothing contained in this
Agreement is intended or shall be deemed to benefit
any creditor of the Partnership or any Partner, and
no creditor of the Partnership shall be entitled to
require the Partnership or the Partners to solicit or
accept any Additional Capital Contribution for the
Partnership or to enforce any right which the
Partnership or any Partner may have against any
Partner under this Agreement or otherwise or under
any Guaranty.
k. Recalculation of Interest. If any applicable law is
ever judicially interpreted so as to deem any
distribution, contribution, payment or other amount
received by a Partner or the Partnership under this
Agreement as interest and so as to render any such
amount in excess of the maximum rate or amount of
interest permitted by applicable law, then it is the
express intent of the Partners and the Partnership
that all amounts in excess of the highest lawful rate
or amount theretofore collected be credited against
any other distributions, contributions, payment or
other amounts to be paid by the recipient of the
excess amount or refunded to the appropriate Person,
and the provisions of this Agreement immediately be
deemed reformed, without the necessity of the
execution of any new document, so as to comply with
the applicable law, but so as to permit the payment
of the fullest amount otherwise required hereunder.
All sums paid or agreed to be paid that are
judicially determined to be interest shall, to the
extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the term of
such obligation so that the rate or amount of
interest on account of such obligation does not
exceed the maximum rate or amount of interest
permitted under applicable law.
l. Severability. In case any one or more of the
provisions contained in this Agreement or any
application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions
contained herein and other application thereof shall
not in any way be affected or impaired thereby.
m. Entire Agreement. This Agreement contain the entire
agreement between the parties relating to the subject
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matter hereof and all prior agreements relative
hereto which are not contained herein are terminated.
Amendments, variations, modifications or changes
herein may be made effective and binding upon any
Partner by, and only by, the setting forth of same in
a document duly executed by such Partner to be bound,
and any alleged amendment, variation, modification or
change herein which is not so documented shall not be
effective as to any Partner.
n. Publicity. No Partner shall issue any press release
or otherwise publicize or disclose the terms of this
Agreement or the proposed terms of any acquisition of
the Initial Partnership Property, without the consent
of the other Partner, except as such disclosure may
be made in the course of normal reporting practices
by a Partner to its partners, shareholders or members
or as otherwise required by law.
o. Counterparts. This Agreement may be executed in
multiple counterparts, each of which shall be an
original but all of which together shall constitute
but one and the same agreement.
p. Confidentiality.
i. The terms of this Agreement and the
Development Agreement, the identity of any
person with whom the Partnership may be
holding discussions with respect to any
investment, acquisition, disposition or
other transaction, and all other business,
financial or other information (including,
without limitation, any analyses or any
other information from the due diligence
relating to the acquisition of the Property)
relating directly to the conduct of the
business and affairs of the Partnership or
the relative or absolute rights or interests
of any of the Partners (collectively, the
"Confidential Information") that has not
been publicly disclosed pursuant to
authorization by the Executive Committee is
confidential and proprietary information of
the Partnership, the disclosure of which
would cause irreparable harm to the
Partnership and the Partners. Accordingly,
each Partner represents that it has not and
agrees that it will not and will direct its
partners, shareholders, members, officers,
directors, agents, advisors and Affiliates
not to, disclose to any Person any
Confidential Information or confirm any
statement made by third Persons regarding
Confidential Information until the
Partnership has publicly disclosed the
Confidential Information pursuant to
authorization by the Executive Committee and
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has notified each Partner that it has done
so; provided, however, that any Partner (or
its Affiliates) may disclose such
Confidential Information if required by law
(it being specifically understood and agreed
that anything set forth in a registration
statement or any other document filed
pursuant to law will be deemed required by
law) or necessary for it to perform any of
its duties or obligations hereunder or in
any property management agreement to which
it is a party covering any Partnership
Property.
ii. Subject to the provisions of Section
13.16(a), each Partner agrees not to
disclose any Confidential Information to any
Person (other than a Person agreeing to
maintain all Confidential Information in
strict confidence or a judge, magistrate or
referee in any action, suit or proceeding
relating to or arising out of this Agreement
or otherwise), and to keep confidential all
documents (including without limitation
responses to discovery requests) containing
any Confidential Information. Each Partner
hereby consents in advance to any motion for
any protective order brought by any other
Partner represented as being intended by the
movant to implement the purposes of this
Section 13.16 provided that if a Partner
receives a request to disclose any
Confidential Information under the terms of
a valid and effective order issued by a
court or governmental agency and the order
was not sought by or on behalf of or
consented to by the Partner, the Partner may
disclose the Confidential Information to the
extent required if the Partner as promptly
as practicable (i) notifies the other
Partner of the existence, terms and
circumstances of the order, (ii) consults in
good faith with the other Partner on the
advisability of taking legally available
steps to resist or to narrow the order, and
(iii) if disclosure of the Confidential
Information is required, exercises its best
efforts to obtain a protective order or
other reliable assurance that confidential
treatment will be accorded to the portion of
the disclosed Confidential Information that
the other Partner designates. The cost
(including without limitation attorneys'
fees and expenses) of obtaining a protective
order covering Confidential Information
designated by the other Partner will be a
Partnership cost.
iii. The covenants contained in this Section
13.16 will survive the Transfer of the
Interest of any Partner and the termination
of the Partnership.
q. Venue. Each of the Partners consents to the
jurisdiction of the state courts of the State of New
York and of the United State District Courts for the
State of New York for any
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action arising out of matters related to this
Agreement. Each of the Partners waives the right to
commence an action in connection with this Agreement
in any court outside of such jurisdictions.
r. WAIVER OF JURY TRIAL. EACH OF THE PARTNERS HEREBY
WAIVES TRIAL BY JURY IN ANY ACTION ARISING OUT OF
MATTERS RELATED TO THIS AGREEMENT, WHICH WAIVER IS
INFORMED AND VOLUNTARY.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth in the introductory paragraph hereof.
RONTO GOLF DEVELOPMENTS, INC.,
a Florida corporation
By:
A. Jack Solomon, President
WESTBROOK LELY GOLF VILLAS I, L.L.C.,
a Delaware limited liability company
By: Westbrook Real Estate Fund II,
L.P., its managing member
By: Westbrook Real Estate Partners
Management II, L.L.C., its
general partner
By: Westbrook Real Estate
Partners, L.L.C., its
managing member
By:
Name:
Title:
WESTBROOK REAL ESTATE FUND II, L.P.,
a Delaware limited partnership
By: Westbrook Real Estate Partners
Management II, L.L.C., its general
partner
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By: Westbrook Real Estate
Partners, L.L.C., its
managing member
By:
Name:
Title:
WESTBROOK REAL ESTATE CO-INVESTMENT
PARTNERSHIP II, L.P., a Delaware
limited partnership
By: Westbrook Real Estate Partners
Management II, L.L.C., its general
partner
By: Westbrook Real Estate
Partners, L.L.C., its
managing member
By:
Name:
Title:
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EXHIBIT 1.01A
REAL PROPERTY
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EXHIBIT 1.01B
WESTBROOK NOTE
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<PAGE>
EXHIBIT 1.01C
WESTBROOK PLEDGE AGREEMENT
--------------------------
<PAGE>
EXHIBIT 1.01D
WRECIP NOTE
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<PAGE>
