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As filed with the Securities and Exchange Commission April 30, 1999
Registration No. 333-74447
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
Under the Securities Act of 1933
-------------------
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
(Exact Name of Registrant as specified in its Governing Instruments)
113 BAYBRIDGE DRIVE
GULF BREEZE, FLORIDA 32561
(850) 934-3609
(Address of Principal Executive Offices)
JULIAN B. MACQUEEN
PRESIDENT
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
113 BAYBRIDGE DRIVE
GULF BREEZE, FLORIDA 32561
(Name and Address of Agent for Service)
COPIES TO:
B. G. MINISMAN, JR., ESQ.
LANA K. HAWKINS, ESQ.
BERKOWITZ, LEFKOVITS, ISOM & KUSHNER
420 NORTH 20TH STREET
1600 SOUTHTRUST TOWER
BIRMINGHAM, ALABAMA 35203
(205) 328-0480
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE
OF THE SECURITIES TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registrations statement number of the earlier effective registration statement
for the same offering.[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
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CALCULATION OF REGISTRATION FEE (1)
- --------------------------------------------------------------------------------------------------------------------------
TITLE OF SECURITIES PROPOSED MAXIMUM AMOUNT OF
BEING REGISTERED AGGREGATE OFFERING PRICE REGISTRATION FEE
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Condominium Units coupled with mandatory rental pool.... $12,673,700 $3,524 (2)
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(1) Calculated pursuant to Rule 457(o) of the Rules and Regulations under
the Securities Act of 1933.
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
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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BEACHSIDE ALL-SUITES HOTEL
83 Extended-Stay Condominium Hotel Investment Unites
(Condominium Hotel Suites Coupled with a Mandatory Rental Pool)
Southwind Development Company, L.L.C. ("Southwind") is offering for
sale 83 beachside hotel condominium suites (the "Suites") as extended-stay
condominium hotel investment units in Beachside All-Suites Hotel, a beachside
condominium hotel (the "Hotel") in Gulf Shores, Alabama. The investment units
(the "Units") will be subject to a mandatory Hotel Operating and Rental Pool
Agreement (the "Hotel Operating Agreement"), which provides for the pooling of
revenue (adjusted for personal usage) and expenses. Each Unit will be priced
between $149,900 and $169,900, depending on the location of the Suite within the
Hotel.
SEE "RISK FACTORS": ON PAGE 12 FOR A DISCUSSION OF MATERIAL FACTORS
RELEVANT TO THE PURCHASE OF UNITS INCLUDING:
- - You are subject to assessments for operating and capital shortfalls in
the operation of the Hotel.
- - If you do not pay assessments you are subject to an adverse arbitration
award which may result in a lien against your personal assets.
- - You may have unlimited personal liability for tort and contract claims.
- - Your funds will be held in escrow until the Hotel is complete.
- - You may not be able to resell your Unit quickly because you will not
be able to sell directly through a real estate broker.
- - You may suffer a complete loss of your investment if all Owners do not
pay shortfalls.
We are offering the Units on a best effort basis. We must sell 65
Units, the minimum number of securities offered (at the prices specified in
Appendix A hereto) if any are sold, within twelve months from the date of this
Prospectus. We are required to use only our best efforts to sell 83 Units, the
maximum number of securities offered. We must receive funds in the aggregate of
approximately $1,995,100 within fourteen months from the date of this
Prospectus, or your deposits will be promptly refunded to you, together with
interest. The offering will terminate on the earlier to occur of the following
events:
- - Twenty four months from the date of this Prospectus
- - Twelve months from the date of this Prospectus if 65 Units have not
been sold
- - The date the last of the 83 Units is sold
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS
HAVE NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1999.
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[INSIDE FRONT COVER OF PROSPECTUS]
[ARCHITECT'S DRAWING OF A TYPICAL CONDOMINIUM SUITE FLOOR PLAN]
The seller reserves the right to make modifications and
changes. Size and dimensions are approximate and may vary with
actual condo plat, survey and model.
[ARCHITECT'S DRAWING OF THE HOTEL SITE PLAN]
The seller reserves the right to make modifications and
changes. Size and dimensions are approximate and may vary with
actual condo plat, survey and model.
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[FACING PAGE OF PROSPECTUS]
[ACTUAL AERIAL PHOTOGRAPH OF HOTEL SITE]
The building currently occupying the hotel site will be demolished prior to
commencement of construction.
[BEACHSIDE ALL-SUITES HOTEL LOGO]
[ARCHITECTURAL DRAWING OF HOTEL SUPERIMPOSED ON HOTEL SITE]
This is an architectural drawing of the Hotel superimposed
on the Hotel site. The seller reserves the right to
make modifications and changes.
Size and dimensions are approximate and may vary with actual condo
plat, survey and model.
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS.................................................................................. 2
SUMMARY................................................................................................ 7
RISK FACTORS........................................................................................... 12
Revenue may not cover expenses................................................................ 12
Defaults on shortfalls may render the Hotel inoperable........................................ 12
The anticipated performance of the hotel is based on forecasts................................ 12
The success of the hotel will depend primarily on the Hotel Operator.......................... 13
The success of the Hotel will be influenced by competition in the Gulf
Shores Market............................................................................... 13
The success of the Hotel will be influenced by a range of factors............................. 14
Seasonal fluctuations will cause fluctuations in gross revenue................................ 14
The Hotel's insurance coverage may not be adequate............................................ 14
You may be personally liable for tort and contract claims..................................... 14
Zoning restrictions restrict the use of the hotel property.................................... 15
The resale market for your units may be limited............................................... 15
The Hotel will not be built if we do not sell a minimum number of units....................... 15
There are limits on the Units available ...................................................... 15
There are hurricane risks in the Gulf Shores Market........................................... 16
There may be conflicts of interest among Southwind, Innisfree and their
affiliates.................................................................................. 16
Violation of environmental laws may occur in the future....................................... 17
There are significant income tax considerations to owners..................................... 17
The rental pool may be classified as a partnership ........................................... 17
Cash distribution may be insufficient to pay taxes............................................ 17
Section 183 rules regarding activities not engaged in for profit.............................. 18
Vacation home rental rules.................................................................... 18
Passive activity rules........................................................................ 18
Partnership audit risk........................................................................ 18
Risks in relying on market data............................................................... 18
FORWARD-LOOKING STATEMENTS............................................................................. 19
THE HOTEL AND THE HOTEL SITE........................................................................... 19
THE HOTEL..................................................................................... 19
THE HOTEL SITE................................................................................ 19
THE SUITES.................................................................................... 20
TERRACE RESORT SUITES................................................................ 21
SUPERIOR RESORT SUITES............................................................... 21
THIRD FLOOR SIDE VIEW RESORT SUITES.................................................. 21
SECOND FLOOR SIDE VIEW RESORT SUITES................................................. 21
FIRST FLOOR SIDE VIEW RESORT SUITES.................................................. 21
STANDARD RESORT SUITES............................................................... 22
ACQUISITION OF THE HOTEL SITE................................................................. 22
ALABAMA................................................................................................ 23
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THE GULF SHORES MARKET................................................................................. 23
GULF SHORES................................................................................... 23
MARKET OVERVIEW............................................................................... 24
DEVELOPMENT ACTIVITY.......................................................................... 24
COMPETITION................................................................................... 25
THE COMPETITIVE SET........................................................................... 25
RESORT MARKET SEASONALITY..................................................................... 26
UNSATISFIED DEMAND............................................................................ 27
MARKET DEMAND................................................................................. 27
INDIVIDUAL LEISURE............................................................................ 27
GROUP MARKET.................................................................................. 28
PREMIER LOCATION.............................................................................. 28
ESTIMATED PERFORMANCE FOR THE HOTEL........................................................... 28
MARKET PENETRATION................................................................... 28
DEMAND............................................................................... 29
OCCUPANCY............................................................................ 29
Average daily rate (ADR)............................................................. 30
CONCLUSION.................................................................................... 30
BASIS FOR FORECASTS AND SUMMARY OF SELECTED
FINANCIAL PERFORMANCE............................................ 30
THE HOTEL OPERATOR AND THE HOTEL OPERATING AGREEMENT................................................... 35
MANAGEMENT OF THE HOTEL AND THE RENTAL POOL................................................... 35
MANAGEMENT OF THE RENTAL POOL................................................................. 35
OWNERS' USE OF SUITES......................................................................... 36
ALLOCATION OF REVENUE AND EXPENSES............................................................ 36
DIRECT EXPENSES OF OWNERS..................................................................... 37
RENTAL POOL REPORTS........................................................................... 37
DISTRIBUTIONS FROM RENTAL POOL................................................................ 38
RESERVES...................................................................................... 38
SHORTFALLS.................................................................................... 39
HOTEL OPERATOR MAY RELY UPON ACTS OF BOARD OF DIRECTORS....................................... 39
MANAGEMENT OF THE HOTEL....................................................................... 39
FEES PAID TO HOTEL OPERATOR................................................................... 40
TERMINATION OF HOTEL OPERATOR................................................................. 41
SALE OF A UNIT BY AN OWNER.................................................................... 41
SUMMARY OF DECLARATION AND RELATED DOCUMENTS........................................................... 42
THE CONDOMINIUM ASSOCIATION................................................................... 42
VOTING RIGHTS........................................................................ 43
MEETINGS............................................................................. 43
BOARD OF DIRECTORS; OFFICERS......................................................... 44
USE RESTRICTIONS.............................................................................. 45
INSURANCE..................................................................................... 45
ENFORCEMENT OF THE DECLARATION................................................................ 46
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SOUTHWIND DEVELOPMENT COMPANY, L.L.C................................................................... 47
MANAGEMENT............................................................................................. 47
CERTAIN RELATIONSHIPS AND TRANSACTIONS................................................................. 48
DETERMINATION OF PURCHASE PRICE........................................................................ 50
USE OF PROCEEDS........................................................................................ 50
PLAN OF DISTRIBUTION................................................................................... 51
HOW TO PURCHASE........................................................................................ 51
CERTAIN FEDERAL AND STATE INCOME TAX ASPECTS........................................................... 53
CLASSIFICATION OF RENTAL POOL AS A PARTNERSHIP................................................ 54
STATUS OF THE PARTNERSHIP AS A PUBLICLY TRADED PARTNERSHIP.................................... 56
PARTNERSHIP ANTI-ABUSE RULE................................................................... 56
BASIS OF EACH OWNER IN THE Unit AND IN THE RENTAL POOL PARTNERSHIP............................ 56
SECTION 183 - ACTIVITIES NOT ENGAGED IN FOR PROFIT............................................ 57
SECTION 280A - RESIDENCE AND VACATION HOME RULES.............................................. 58
LIMITATIONS ON LOSSES FROM PASSIVE ACTIVITIES................................................. 58
APPLICATION OF AT-RISK LIMITATIONS............................................................ 59
LIMITATION ON INTEREST DEDUCTIONS............................................................. 60
DEPRECIATION/AMORTIZATION..................................................................... 60
SALE OR OTHER DISPOSITION OF A Unit........................................................... 61
ADMINISTRATIVE AND COMPLIANCE MATTERS......................................................... 61
AUDIT RISK........................................................................... 61
RESOLUTION OF DISPUTES INVOLVING RENTAL POOL ITEMS................................... 61
POSSIBLE CHANGES IN FEDERAL TAX LAWS.......................................................... 62
INVESTMENT BY FOREIGN PERSONS................................................................. 62
CORPORATE INVESTORS........................................................................... 62
STATE AND LOCAL TAXES......................................................................... 63
LEGAL MATTERS.......................................................................................... 63
EXPERTS................................................................................................ 63
ADDITIONAL INFORMATION................................................................................. 64
Forecasted Summarized Statement of Estimated Annual Operating Results..................................F-4
BEACHSIDE ALL-UNITS HOTEL............................................................F-8
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
Balance Sheet.........................................................................................FS-4
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QUESTIONS AND ANSWERS
Q: What is a hotel investment unit?
A: A hotel investment unit is a Suite, together with an undivided
interest in the common areas of the Hotel, which will be
operated under a mandatory rental pool. The mandatory rental
pool provides for the pooling of revenue, adjusted for
personal usage, and expenses.
Q: What is a Suite?
A: A Suite is a hotel condominium unit. Each Suite is
fully-furnished, with a living room (which includes a
sleeper-sofa), one bedroom, one and one-half bathrooms and a
fully-equipped kitchen. In addition, each Suite contains a
built-in bunk-bed area. Each Suite has the capacity to sleep
six persons.
Q: How does the Hotel Operating Agreement work?
A: The hotel operator will rent the Units to hotel guests and
will pool the revenue for the owners of the Suites (the
"Owners"). After paying the expenses associated with running
the Hotel, the hotel operator will distribute the balance, if
any, to the owners. You will not share in the revenue of the
Hotel for any day you use your Unit but will still be
obligated for your share of the expenses.
Q: Who is the hotel operator?
A: Innisfree Hotels, Inc. (the "Hotel Operator"), an affiliate of
Southwind, will manage the hotel under the Hotel Operating
Agreement.
Q: What happens if the hotel loses money?
A: If the Hotel loses money, you and the other Owners will be
responsible for making up any shortfalls.
Q: Will there be any debt on the Hotel property?
A: The only debt will be that of individual Owners.
Q: What payments will I make as an Owner of a Unit?
A: You will have to make payments on any loan you obtain to buy
your Unit, the real property taxes on your Unit and your share
of any Condominium Association expenses. Based on current
estimates, real estate taxes are expected to range from
approximately $975 to $1,170 per annum per Unit. In addition,
the Condominium Association may make assessments.
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Debt service will depend on the particular terms of any
individual loan.
Q: What is the commercial unit?
A: The commercial unit will be used as a lobby and registration
area. The commercial unit is not included in the 83 Units
being offered for sale. It will not generate revenue but will
bear expenses in proportion to its percentage ownership
interest, which has been fixed at .001%.
Q: What type of hotel is it?
A: Beachside All-Suites Hotel will be an extended-stay beachside
hotel located in Gulf Shores, Alabama. An extended-stay hotel
is a hotel with "in-room" kitchen facilities. We expect that
hotel will be used primarily by tourists and seasonal
residents as vacation accommodations.
Q: How many Suites will the Hotel have?
A: The Hotel will consist of 84 Suites.
Q: What types of facilities and amenities will the Hotel have?
A: The Hotel will have parking facilities, a central laundry and
housekeeping area and a heated swimming pool. The Hotel will
not provide food and beverage service.
Q: What is beachside property?
A: When we say beachside property, we mean the property located
on the gulf side of the public road closest to and parallel
with the shoreline of the Gulf of Mexico.
Q: Is there any obstruction of view from any of the Suites in the Hotel?
A: There is a one-story restaurant and lounge on pilings that is
located near the southwest border of the Hotel site. The
restaurant is visible from the Hotel site and may partially
obstruct the beach view from one or more of the first-floor
Suites on the west side of the Hotel.
Q: What are the possible future obstructions to the beach view from the
Hotel site?
A: The City of Gulf Shores owns the undeveloped property south of
the Hotel site. We believe the City may in the future
construct a boardwalk on a strip of this property that is
approximately 20 feet in width, but we cannot assure you that
a boardwalk will be constructed. We do not believe the City
has any other plans to develop this undeveloped
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property, but we cannot assure you that it will remain
undeveloped in the future.
The property south of the twenty foot strip extends to the
Gulf of Mexico and lies south of the coastal construction
line. The Alabama Department of Environmental Management
prohibits the development of that property since it is located
south of the coastal construction line.
Q: Where is the Hotel site located?
A: The Hotel will be located on a 1.137 acre beachside site one
block east of the intersection of Highway 59 and East Beach
Boulevard in Gulf Shores, Alabama.
Q: How will hotel guests get to the public beach from the Hotel?
A: Access to the public beach will be limited to a secured gate
located on the west side of the southwest corner of the
property. The gate will open onto a public right of way that
provides direct access to the public beach.
Q: What is Southwind Development Company, L.L.C.?
A: Southwind is an Alabama limited liability company formed in
April 1998 to acquire the property for the Hotel and to
design, develop, finance, construct and market the Hotel. We
are located at 113 Baybridge Drive, Gulf Breeze, Florida
32561. Our telephone number at that address is (850) 934-3609.
Q: How will Innisfree be paid for managing the hotel?
A: Innisfree will receive a base fee of 5% of annual revenues,
plus incentive fees if the hotel performs well.
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Q: What happens if Innisfree quits or is terminated?
A: The board of directors of the Condominium Association will be
responsible for selecting another hotel operator. If a
replacement operator cannot be found immediately, the
Condominium Association will be responsible for running the
Hotel.
Q: Who owns the Suite that is not being offered for sale?
A: In connection with the purchase of the property for the Hotel
site, we agreed with one of the sellers of that property to
place $100,000, of the purchase price for that property in
escrow until the Hotel is completed. Upon completion of the
Hotel, one of the sellers who sold us the real property will
use the $100,000 to purchase a first floor Suite of his
choice. The Suite will participate in the rental pool in
proportion to its percentage ownership interest.
Q: If I decide to purchase, will I be able to purchase the Suite of my
choice from the 83 units available?
A: We granted one of the sellers who sold us the real property an
option to purchase four Suites of his choice at the same price
that the Suites will be offered for sale to you. The seller
must exercise this right within 3 days from the date of this
prospectus. Otherwise, the Suites will be offered and sold on
an "as available" basis.
Q: Is Southwind required to sell a minimum number of Units?
A: If we do not sell 65 units within twelve months from the date
of the prospectus, we will refund all deposits paid by
purchasers with interest.
Q: Once construction begins, how long will it take to build the Hotel?
A: Our current construction financing requires us to complete
construction of the Hotel within ten months from the date of
the notice of commencement. The current financing also
requires us to sell a minimum of 75 Units before we may begin
construction. If we have not sold the 75 Units by the time we
are ready to begin construction, we will seek either a
modification of the construction financing or alternative
financing.
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Q: How does the Condominium Association work?
A: All of the Owners and the owner of the commercial unit will be
members of the Condominium Association. The members elect a
board of directors whose duties will include approving the
annual operating plan and budget for the Hotel and reviewing
the performance of the hotel operator.
Q: Do I own the contents in my Suite?
A: Yes; however, you may not alter or remove any of the
furnishings or fixtures.
Q: May I sell my Unit?
A: You may sell your Unit at any time as long as the purchaser
signs the Hotel Operating Agreement. You may sell the Unit
yourself or through a securities broker-dealer. You may not
sell your Unit exclusively through a real estate broker, but a
real estate broker may assist in the sale if supervised by a
securities broker-dealer.
Q: How often will I be able to use my unit?
A: You are guaranteed the use of your Unit for a maximum 14 days
per year with four months notice, or based on availability.
Q: What are the tax implications of owning a Unit?
A: The rental pool will be taxed as a partnership for federal
income tax purposes. You will be required to report on your
federal income tax return your share of income or loss from
the Hotel. You may be able to deduct property taxes, interest
expense and depreciation for your Unit and losses, if any,
from the rental pool. Your tax deductions may be limited by
certain provisions of the Internal Revenue Code, including
provisions governing vacation home rentals, passive activity
losses, and interest expense.
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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.
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Seller Southwind, the seller of the Units, was established in April 1998 to
design, develop, finance and construct the Hotel and to market the Units.
Southwind's core management team consists of a President and four Vice-
Presidents who devote a portion of their time to the development of the
Hotel, while maintaining separate full-time employment in other
capacities. You will not acquire any ownership interest in Southwind.
Southwind will not have any management role in the Hotel after the
offering.
The Hotel The Hotel will be called Beachside All-Suites Hotel. Construction of the
Hotel is expected to begin in the summer of 1999 and to be completed by
the summer of 2000. The Hotel will consist of one nine-story building and
will contain 84 fully-furnished, one-bedroom suites (hotel rooms), a
commercial unit that will be used as a lobby and registration area,
parking facilities, a central laundry and housekeeping area and a heated
swimming pool. We anticipate that the Suites will be used primarily by
tourists and seasonal residents as vacation accommodations.
The Hotel Site The Hotel will be located in Gulf Shores, Alabama on a 1.137 acre
beachside site on East Beach Boulevard. East Beach Boulevard, the
primary highway through the Gulf Shores beach area, intersects with
Highway 59 one block east of the Hotel site. Highway 59 is currently the
most direct access into Gulf Shores from the interstate highway system.
A building which was formerly operated as a fast-food restaurant
currently occupies the site. This building will be demolished prior to
the commencement of construction of the Hotel. The Hotel site is
bordered on the south by undeveloped land owned by the City of Gulf Shores
that extends to the Gulf of Mexico.
The Hotel The Hotel will be managed and operated by Innisfree Hotels, Inc., an
Operator Alabama corporation and an affiliate of Southwind. Innisfree has been in
the business of operating and developing hotels for more than 14 years. It
currently operates twelve hotel properties throughout the southeastern
United States and Arizona, with more than 1,100 guest rooms under
management. Innisfree's corporate headquarters are located in Gulf Breeze,
Florida. It has approximately 500 employees.
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The Hotel The Hotel Operating Agreement requires the pooling of all revenue and expenses
Operating of the Units in the rental pool. We believe that a mandatory rental pool will
Agreement provide the Hotel Operator with a sufficient number of hotel rooms to operate
the Hotel effectively. Your Suite will be in the rental pool except for the
period you reserve the Suite for your own use. You will not share in the revenue
for any day that you use your Suite but you will be obligated to bear your full
share of expenses.
Development Southwind was formed in April 1998 to design, develop, finance and construct the
of the Hotel Hotel and to market the Suites. Southwind financed the acquisition of the real
property for the Hotel site through third-party financing and will finance the
construction of the Hotel through third-party construction financing.
Units Available In connection with the purchase of the property for the Hotel site, we agreed
For Purchase with one of the sellers of that property to place $100,000 of the purchase price
for the real property in escrow to be held for the seller of the real property
until the Hotel is completed. Upon completion of the Hotel, the seller of the
real property will use the $100,000 to purchase a first floor Suite of his choice.
The total purchase price for this Suite will be $100,000, which is substantially
below the offering prices of the other Suites. In addition, we also granted the
seller of the real property an option to purchase four additional Suites of his
choice at the same price that the Units will be offered for sale to you. The seller
must exercise this right within three days from the date of this prospectus. The
remainder of the Units will be sold on an "as available" basis.
Personal Use Use You are guaranteed the use of your Suite for a maximum of 14 days per year
with four months notice, or based on availability. The Hotel Operator, the
Condominium Association and Southwind will not have any liability for any tax
consequences of your personal usage.
Reserves At the closing of the purchase of your Unit, you will be required to contribute
your share of an operating cash reserve of $50,000. This reserve will be available
to the Hotel Operator for working capital purposes. The Hotel Operator will also
establish a reserve for capital expenditures for the repair and replacement of
the hotel property and for the repair and replacement of furniture, fixtures and
equipment. This reserve will range from 1% of gross revenue beginning in year one
of operations to a maximum of 5% of gross revenue for year five and thereafter.
These reserves are in addition to the retention of a portion of distributable
cash flow in order to maintain the operating cash reserve of $50,000.
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Shortfalls If at any time the funds from hotel operations are not sufficient to pay
the expenses of operating the Hotel, to maintain reserves, or to make
capital expenditures in excess of the established reserves, each Owner
will be obligated to pay his share of the shortfall. The Hotel Operator
may elect, but is not obligated, to advance such amount and to be repaid,
plus interest, out of future cash flow from Hotel operations. Interest
on advances by the Hotel Operator will be computed at the prime rate (as
defined in the Hotel Operating Agreement) plus 2% per annum. Each Owner
will also be obligated to make the payment on any loan obtained by him to
purchase a Suite and real estate taxes, regardless of whether the Hotel
Operator distributes sufficient cash to cover these expenses.
Risks of The Hotel has no operating history on which to rely. Therefore, the
Forecasts anticipated performance of the Hotel is based on forecasts. While we
believe that we have considered all factors that might affect the Hotel's
overall economic performance, there are inherent risks in relying on forecasts. The
evaluation of the factors that are considered in the preparation of a forecast
is highly subjective. Factors such as occupancy are based on numerous variables
including the Hotel facilities, the impact of new supply, the level and type of
demand and overall market conditions. The same data can lead to different
interpretations and conclusions. Actual results can differ materially from results
forecasted if the assumptions underlying the forecasts prove to be
incorrect. Adverse consequences can occur if forecasted results are not achieved.
Timing of The Hotel Operator will prepare monthly reports on the operation of the
Distributions Hotel and distribute any rental pool income to Owners by the 25th day
following the end of each month. The Hotel Operator may choose to make
distributions of income based on an estimate of the annual amount
distributable to Owners, less an amount not to exceed 20%, and make
distributions in 12 equal monthly installments with the balance, if
any, paid no later than 75 days following the end of the operating year.
Prior to making distributions of rental pool income, the Hotel Operator
will adjust your share of such income to take into account your use of your
Suite.
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Prices of Units The initial purchase prices of Units have been established by us, and we
are not required to maintain the initial purchase price schedule. We may
increase or lower the purchase price of any Unit in response to market
conditions and demand. If we make adjustments we may not uniformly apply
those adjustments 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 schedule of purchase prices, the percentage interest and the
amount to be contributed to the operating cash reserve by the purchaser
for each Unit are all set forth in the Schedule of Purchase Prices, which
is attached as Appendix A to this Prospectus. The percentage interest
for a Unit determines the share of revenue and expenses for that Unit.
The percentage interest will not change even if prices of Units change in
the future.
Purchase To purchase a Unit you must execute a Purchase Agreement. Upon execution
Procedure of the Purchase Agreement, you are required to make a down payment in the
amount of 20% of the purchase price of your Unit. The down payment will be
held in escrow for your benefit and will not be available for distribution
to us until the completion of construction (estimated to be the summer
of 2000) and the Hotel is ready to commence operations. The down payment is
non-refundable if you breach the contract. If we do not sell 65 Units within
twelve months from the date of this Prospectus, we will refund your deposit
with accrued interest.
Further, all purchasers are entitled to receive a copy of this Prospectus
in connection with the purchase of a Unit, and any purchaser may terminate
the purchase agreement within seven days of receiving the Prospectus.
In case of a termination, we will promptly refund all funds paid by the
purchaser. Upon the expiration of the seven days, the Purchase Agreement will
become irrevocable on the part of a purchaser. Upon completion of the Hotel,
the purchase of all Units under contract will be completed and the balance of
the purchase price together with any closing costs and the operating cash
reserves contribution will be due. Additional closings will occur as Units
are sold.
Financing Prospective purchasers may obtain financing from any available source.
We may make referrals for financing for purchasers on terms that will
vary based on market conditions. Each prospective purchaser will be
required to qualify for financing based on the requirements of the
particular lender. If a prospective purchaser is rejected for a loan, we
may elect to cancel the purchase contract.
</TABLE>
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<TABLE>
<S> <C>
Tax While the issue is not certain, it is the opinion of Counsel that the
Considerations rental pool likely will be treated as a partnership for federal income
tax purposes. You must therefore report your share of the rental pool's
taxable income and loss on your own federal income tax return. You will
be entitled to any available deductions associated with ownership of the
Suite for federal income tax purposes, including deductions for property
taxes, investment interest expense and depreciation. For a more complete
discussion of the tax consequences of ownership, see "Certain
Federal and State Income Tax Aspects" on page 53.
The tax laws provide for the limitation of deductions to the amount of
gross income derived from rental of a Unit if personal use of a Suite
exceeds the greater of 14 days or 10% of the total number of days during
the year that a Suite is rented for fair market value. The limitation on
personal use of a Suite under the Hotel Operating Agreement to 14 days
should prevent this limitation from applying to an Owner.
The When you purchase your Unit, you will automatically become a member of
Condominium the Beachside All-Suites Hotel Condominium Owners Association, Inc. (the
Association "Condominium Association"). The Condominium Association will monitor
the Hotel Operating Agreement and will levy, collect and enforce the
assessments of the Condominium Association. The Owners will elect a Board
of Directors which will be responsible for managing the Condominium Association
and acting on behalf of the Owners in certain matters. Southwind may control
the Condominium Association for up to 60 days after the sale of at least
75% percent of the Units.
</TABLE>
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RISK FACTORS
All material risks that are known to us as of the date of this
Prospectus are disclosed below. Prospective investors should carefully consider
these risks in conjunction with the other information contained in this
Prospectus before purchasing Units.
REVENUE MAY NOT COVER EXPENSES
If the Hotel fails to experience the level of occupancy anticipated
or room rates are not as high as expected, the Hotel may not generate enough
income to cover its operating expenses. In addition, if operating costs exceed
those forecasted, we cannot assure you that revenue will increase sufficiently
to cover such increases. We also cannot assure you that the rental pool income
payable to an Owner in any year will exceed the Owner's share of Hotel operating
costs, reserves and potential capital expenditures in excess of such reserves
for that year and the payments on any loan obtained by an Owner to purchase a
Unit.
Assuming the forecasted average daily rate of $126.12 in year 2003, the
anticipated first year of stabilized operations, occupancy required to
break-even before and after debt service is 32.5% and 54.8% respectively. This
does not include real estate taxes on your individual unit, which are expected
to range between $975 and $1,170 per unit based on effective mill rates. This
level of occupancy required to cover debt service on an Owner's loan assumes
that the loan is for 80% of the purchase price at an interest rate of 7.5% with
a 30 year amortization. The actual level of occupancy necessary for any
individual Owner to break-even before and after debt service and real estate
taxes will vary depending on the terms of the specific financing obtained by
such Owner and the amount of real estate taxes each Owner is required to pay. If
average daily rate is less than forecasted, occupancy would have to increase to
maintain a break-even level.
DEFAULTS ON SHORTFALLS MAY RENDER THE HOTEL INOPERABLE
If a significant number of Owners default on payments required to cover
shortfalls under the Hotel Operating Agreement, the Hotel Operator may have
insufficient funds to pay maintenance and operating costs, which could result in
the loss of the ability to operate the property as a Hotel.
THE ANTICIPATED PERFORMANCE OF THE HOTEL IS BASED ON FORECASTS
The hotel has no operating history. Therefore, the anticipated
performance of the Hotel is based on forecasts. There are inherent risks in
relying on forecasts. The evaluation of the factors that are considered in the
preparation of a forecast is highly subjective. Actual results can differ
materially from results forecasted if the assumptions underlying the forecasts
prove to be incorrect. Factors that can cause actual performance to vary with
that of a forecast include, among others, delays in completion of the hotel
beyond the summer of 2000, occupancy rate achieved, actual average daily rate,
the effects of competition, including the impact of new
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supply, strength of the tourist sector of the economy and assumptions regarding
the effects of inflation. No assurance can be given that the assumptions will
prove correct or that actual results will not differ from the results
forecasted. Adverse consequences can occur if forecasted results are not
achieved, including a Unit Owner's need to pay additional funds to meet
operating costs, to fund reserves and capital expenditures, to make payments on
any loan obtained by an Owner and to pay Condominium Association expenses and
real estate taxes.
THE SUCCESS OF THE HOTEL WILL DEPEND PRIMARILY ON THE HOTEL OPERATOR
The Hotel Operating Agreement appoints the Hotel Operator as the
manager of the rental pool and the bookings of the Suites for an initial term of
15 years with two automatic renewal periods of five years, unless earlier
terminated. Success of the Hotel will depend to a great extent on the efforts
and abilities of the Hotel Operator. The loss of its services could have a
material adverse effect on the Hotel's business and results of operation. The
Hotel Operator may terminate its appointment upon 60 days' prior notice if the
Owners fail to make or authorize the Hotel Operator to make capital expenditures
that are necessary, in the opinion of the Hotel Operator, for the Hotel to be
operated.
If the Hotel Operator is terminated or resigns, it may be difficult to
contract with another party to provide replacement services immediately at
comparable costs. Termination could result in cancellations of reservations,
reduced maintenance, loss of operating licenses, loss of staff and delays in
transferring operations to a new Hotel Operator. The Hotel could experience
lower occupancy and reduced revenue during a transition. If the Condominium
Association is required to operate the Hotel for an interim period, the
Condominium Association may be at a disadvantage without the experience of
operating a Hotel or the benefits of an advanced reservation booking system and
advertising provided by a Hotel Operator.
THE SUCCESS OF THE HOTEL WILL BE INFLUENCED BY COMPETITION IN THE GULF
SHORES MARKET
The success of the Hotel will be determined by, among other things, its
location, quality of accommodations and room rate structure. The Hotel will
directly compete with existing and future Hotels and indirectly with short-term
(less than a 30-day stay) home and condominium rentals in the Gulf Shores Market
and the surrounding area. There are approximately 1,124 hotel and motel rooms
(excluding the hotel) in the Gulf Shores Market. Approximately 199 hotel rooms
have been added to the market since 1998. Competition in the future may be
affected by changes in the hotel and short-term home and condominium rental
markets in Gulf Shores, 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.
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THE SUCCESS OF THE HOTEL WILL BE INFLUENCED BY A RANGE OF FACTORS
The value of the Hotel will depend on the ability of the Hotel Operator
to maintain or increase gross revenue sufficient to cover operating expenses and
generate a reasonable return for its Owners. Income from the Hotel may be
adversely affected by a range of factors in addition to increased competition as
discussed above. These factors include: increases in operating costs as a result
of inflation and other factors which the Hotel Operator may determine cannot be
offset by increased revenue; strikes and other labor disturbances of Hotel
employees; increases in energy costs and other expenses of travel; weather
conditions; and adverse effects on general and local economic conditions. Due to
minimal commercial activity in Gulf Shores, the Hotel is particularly dependent
upon individual leisure travelers and tourism; occupancy by commercial travelers
is expected to be minimal. All of these factors could reduce the Hotel's ability
to generate revenue.
SEASONAL FLUCTUATIONS WILL CAUSE FLUCTUATIONS IN GROSS REVENUE
The Gulf Shores Market is seasonal, with demand fluctuating at
different levels throughout the year. This seasonality is expected to cause
fluctuations in the gross revenue generated from the operation of the Hotel. The
peak season extends from June through August. The shoulder seasons extend from
September through October and from March through May. The low season extends
from November through February.
THE HOTEL'S INSURANCE COVERAGE MAY NOT BE ADEQUATE
Included in Hotel operating costs will be insurance premiums for
property damage, business interruptions, public liability and fire and other
hazard insurance carried by the Condominium Association against certain risks of
operating the Hotel. We cannot assure you that the type or amount of insurance
carried by the Condominium Association will be adequate. Further, we cannot
assure you that payment for insurance claims will be received in a timely
fashion. If payments are not received timely, you will still be responsible for
the debt service on your Suite. In the event insurance is unavailable for any
reason, the Condominium 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 BE PERSONALLY LIABLE FOR TORT AND CONTRACT CLAIMS
You may personally have joint and several liability for tort and
contract claims as a result of ownership of your Unit or participation in the
rental pool. Insurance coverage maintained by the Condominium Association will
include coverage for such claims; however, 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.
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<PAGE> 21
ZONING RESTRICTIONS RESTRICT THE USE OF THE HOTEL PROPERTY
The hotel site has been zoned "BCR - Central Resort Business District,"
which generally restricts the use of the property to retail or certain
commercial activities. The zoning restrictions would prohibit the use of the
property for residential condominium usage or rental, other than condominium
units that are dedicated to the control of, or managed by, a single management
entity and operated as a hotel. If the Hotel ceases to operate as a Hotel for
any reason, the Owners will have limited options available for the use of the
property.
THE RESALE MARKET FOR YOUR UNITS MAY BE LIMITED
We cannot assure you that there will be a resale market for the sale of
your Unit since the Units will not be listed on a publicly traded exchange. Your
resale ability could be further limited if the Hotel's performance does not
reach expectations. In addition, you may sell your Unit either directly yourself
or through a securities broker. You may not sell your Unit exclusively through a
real estate broker. However, a real estate broker may assist in the sale of your
Unit if properly supervised by a securities broker. You may be obligated in such
event to pay commissions to both the real estate broker and the securities
broker. The fact that you may not sell your Unit exclusively through a real
estate broker may further limit your ability to sell your Unit. Therefore, you
may not be able to sell your Unit quickly in an emergency or for a purchase
price which exceeds your indebtedness. Consequently, the purchase of a Unit
should be considered only as a long-term investment.
THE HOTEL WILL NOT BE BUILT IF WE DO NOT SELL A MINIMUM NUMBER OF UNITS
If we do not sell 65 units within twelve months from the date of this
Prospectus, this offering will terminate. If this occurs, we will refund your
deposit with accrued interest.
THERE ARE LIMITS ON THE UNITS AVAILABLE
In connection with the purchase of the property for the Hotel site, we
agreed with one of the sellers of that property to place $100,000 of the
purchase price for the real property in escrow until the Hotel is completed.
Upon completion of the Hotel, the seller who sold us the real property will use
the $100,000 to purchase a first floor Unit of his choice. The total purchase
price for this Unit will be $100,000, which is substantially below the offering
prices of the other Units. This Unit will participate in the rental pool based
on the percentage ownership interest (which will be determined according to the
value of the Unit) just like all the other Units. In addition, we also granted
one of the sellers who sold us the real property an option to purchase four
additional Units of his choice at the same price that the Units will be offered
for sale to you. The seller must exercise this right within 3 days from the date
of this prospectus.
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THERE ARE HURRICANE RISKS AND OTHER NATURAL DISASTER RISKS
IN THE GULF SHORES MARKET
Gulf Shores receives a substantial number of hurricane warnings and
threats that may require residents and tourists to evacuate the beach area. If
evacuations occur, the Hotel may lose substantial revenues. In addition, if a
hurricane actually strikes in or near the area, the Hotel may incur substantial
property loss or be completely destroyed. If there is substantial property loss
or destruction from hurricanes or other disasters such as fire and floods, the
Hotel Operator may, in its sole discretion, elect to terminate the Hotel
Operating Agreement. If there is damage or destruction, we cannot assure you
that the Hotel will continue to operate as a Hotel or that it would be rebuilt
after substantial loss or destruction. If the Hotel ceases to operate as a
Hotel, the Owners will have limited options available for the use of the
property.
THERE MAY BE CONFLICTS OF INTEREST AMONG SOUTHWIND, INNISFREE AND THEIR
AFFILIATES
Southwind, Innisfree and their affiliates may experience certain
conflicts of interest in connection with the sale of the Units and the
management of the Hotel. For example, it is possible that continuation of hotel
activities would be advantageous to Innisfree, which will continue to receive
fees for services rendered, while termination of the Hotel activities might be
advantageous to you. Innisfree will receive a base fee of 5% annual revenues,
plus incentive fees if the Hotel performs well.
Innisfree currently operates the Days Inn Hotel in Orange Beach,
Alabama and Young's By The Sea in Gulf Shores, Alabama. Both of these hotels are
beachside hotels in the Gulf Shores Market that directly compete with the Units
for rental accommodation. Innisfree and its affiliates intend to develop, market
and manage in the future other hotels, condominiums or condominium hotel
projects, to designate their employees as temporary directors for such
associations and to act as rental agent and managers for the Owners of units in
such projects. Any future projects of Innisfree or its affiliates may also
directly or indirectly compete with the Units for rental accommodations.
Although Innisfree is required to spend sufficient time for the proper
performance of its duties as Hotel Operator, it is entitled to engage in other
business activities. The principals of Innisfree and its staff will not be
spending full time or a major portion of their time in connection with the Hotel
and they may be actively engaged in owning or exploiting other properties which
may be in competition with the Hotel. Because the staff of Innisfree will be
managing competing hotels, it is possible that they may recommend accommodations
in such hotels, which would deprive Unit Owners of revenues from the rental of
Units in the Hotel.
Mr. MacQueen and Mr. Lagman have equity interests in certain entities
that own or operate condominium rental properties that are not operated as
hotels in the Gulf Shores Market. These properties may also directly or
indirectly compete with the Hotel. Mr. Lagman and Steve Shannon, both Southwind
officers, will also, as real estate agents who will assist the Company's
licensed agents with Unit sales, receive commissions equal to 6% of the purchase
price of all Units sold.
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VIOLATION OF ENVIRONMENTAL LAWS MAY OCCUR IN THE FUTURE
Under various federal, state, and local environmental laws, ordinances,
regulations, and common law, 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 on, under, or in such property. 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. We
are not aware of any material violations of currently applicable environmental
laws or regulations. However, it is possible that violations will occur in the
future or that more stringent laws will be enacted in the future, and that
Southwind, the Hotel Operator or the Owners could suffer material adverse
consequences as a result.
THERE ARE 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 participation in the rental pool. Unless
otherwise noted, this summary is based upon the opinion of Berkowitz, Lefkovits,
Isom & Kushner, A Professional Corporation, Birmingham, Alabama, which is
special counsel to Southwind ("Counsel"). If the IRS disagrees with any of the
positions described below, you may be subject to additional taxes. Certain
additional tax considerations are discussed under "Certain Federal and State
Income Tax Aspects."
THE RENTAL POOL MAY BE CLASSIFIED AS A PARTNERSHIP
Counsel has opined that, under current law and regulations and
interpretations thereof, the rental pool should more likely than not be
classified as a partnership for federal income tax purposes. Counsel's opinion
is based on its interpretation of existing law statutes, regulations, case law,
and administrative rulings but it is not binding on the Internal Revenue Service
(the "Service") or the courts, either of which may interpret such authorities
differently. No definitive ruling from the service has been, or is anticipated
to be requested on the issue of the tax classification of the rental pool. If it
were determined that the partnership is taxable as a corporation rather than as
a partnership, the tax consequences to you and the rental pool would be
significant and adverse. See "Certain Federal and State Income Tax Aspects --
Classification of the rental pool as a Partnership." The tax consequences of
being classified as a corporation includes, without limitation, that the taxable
income of the rental pool would be subject to the federal and state income taxes
imposed on corporations, items of income, gain, loss and deduction would not
flow through to the owners, and distributions, if any, may be taxable as
dividends to owners. The remainder of this discussion of tax considerations
assumes that the rental pool will be taxed as a partnership.
CASH DISTRIBUTION MAY BE INSUFFICIENT TO PAY TAXES
We cannot assure you that cash distributions from the rental pool
during any applicable time period will be sufficient for an Owner to pay the
federal and state
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income taxes due on income that an Owner will have to recognize on his or her
individual tax return.
SECTION 183 RULES REGARDING ACTIVITIES NOT ENGAGED IN FOR PROFIT
The tax 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 the rental pool may be limited by Section 183 of the Code, which is
commonly called the "hobby loss rule." If the rental pool is subject to the
hobby loss rule, the amount you will able to deduct for your share of expenses
and losses from the rental pool will be limited to the income you receive from
the rental pool. See "Certain Federal and State Income Tax Aspects -- Section
183 Activities Not Engaged in for Profit."
VACATION HOME RENTAL RULES
Section 280A of the tax code establishes a gross income limitation and
an expense allocation formula for apportioning deductions between personal (that
is, your use of your own Unit) 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 your share of the rental pool operating expenses only to the
extent such expenses are allocable to business use of your Unit. Based upon the
proposed operation of the rental pool, which would limit the personal use by any
Owner to a total of 14 days in any year, the Section 280A gross income
limitation should not apply. See "Certain Federal and State Income Tax Aspects
- -- Section 280A Residence and Vacation Home Rules."
PASSIVE ACTIVITY RULES
Your participation in the rental pool is considered a passive activity
under the tax 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 -- Limitations on Losses From Passive
Activities."
PARTNERSHIP AUDIT RISK
If the rental pool's information tax return is audited and adjusted,
such audit may cause corresponding adjustments to, and may increase the
probability of an audit of, your federal income tax return. See "Certain Federal
and State Income Tax Aspects -- Administrative and Compliance Matters."
RISKS IN RELYING ON MARKET DATA
Southwind has obtained various market information and data set forth in
this prospectus regarding the hotel, condominium and tourist industries from the
Alabama Gulf Coast Convention and Visitors Bureau. The market information and
data cited may not be indicative of results that can be achieved by Beachside
All-Suites Hotel. We have not independently verified the information and data
cited.
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FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus represent our expectations for
the Hotel as of the date of this Prospectus. We will not report to the public
any changes to any forward-looking statements to reflect events, developments or
circumstances that occur after the date of this Prospectus.
We believe the expectations expressed in all forward-looking statements
are reasonable and accurate based on information we currently have. However, our
expectations may not prove to be correct. Important factors that could cause
actual results to differ from our expectations include, among, other things,
delay in completion of the Hotel beyond the summer of 2000, occupancy rate
achieved, actual average daily rate, the effects of competition (including the
impact of new supply), strength of the tourist sector of the economy and the
effects of inflation. Other factors that could cause actual results to differ
from our expectations are disclosed under "Risk Factors" and in other parts of
this Prospectus.
THE HOTEL AND THE HOTEL SITE
THE HOTEL
The Hotel will be called Beachside All-Suites Hotel. Construction of
the hotel is expected to begin in the summer of 1999 and to be completed by the
summer of 2000. The Hotel will consist of one nine-story building (excluding the
ground level) and will contain 84 fully-furnished, one-bedroom suites (with
fully-equipped kitchens, one and one-half baths and a built-in bunk bed area), a
commercial unit that will be used as a lobby and registration area; parking
facilities, a central laundry and housekeeping area and a swimming pool. We
anticipate that the Suites will be used primarily by tourists and seasonal
residents as vacation accommodations.
The Hotel building will be constructed with poured in place
post-tensioned concrete. It will have a stucco or similar exterior finish and a
built-up roof. The Hotel will be built on precast concrete pilings, with a
portion of its 106 parking spaces at ground level underneath the first elevated
floor of the building. The first story of the Hotel includes six Suites, the
commercial unit and the central laundry and housekeeping area. Each of levels
two through eight of the Hotel contains ten Suites, and the ninth level of the
Hotel contains eight Suites.
THE HOTEL SITE
The Hotel will be located in Gulf Shores, Alabama on a 1.137 acre
beachside site on East Beach Boulevard. East Beach Boulevard, the primary
highway through the Gulf Shores beach area, intersects with Highway 59 one block
east of the Hotel site. Highway 59 is currently the most direct access into Gulf
Shores from the interstate highway system. A building which was formerly
operated as a fast-food restaurant currently occupies the site. This building
will be demolished prior to the commencement of construction of the Hotel.
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The City of Gulf Shores has designated the undeveloped parcel of land
directly to the east of the hotel site as a dune preserve, and has restricted
access to the parcel. We are not aware of any plans that the City has to develop
this parcel, which is currently covered with sand dunes and sea oats, but we
cannot assure you that it will remain undeveloped in the future. The City also
owns a parcel of property running along the southern border of the Hotel site.
The western 50 feet of that parcel is a strip approximately 20 feet in width;
the remaining 170 feet of the City parcel that is on the south border of the
Hotel site extends to the Gulf of Mexico. The City may construct a boardwalk for
public access on that parcel, immediately south of the Hotel site. We cannot
assure you that the City will ever construct the boardwalk or otherwise develop
this parcel.
There is a one-story restaurant and lounge on pilings immediately south
of the 20 foot strip of city property. The restaurant is visible from the Hotel
site and may partially obstruct the beach view from one or more of the
first-floor Suites on the west side of the Hotel. Access to the public beach
from the south side of the property will be limited to a secured gate located on
the west side of the southwest corner of the property, which will open onto
property of the City of Gulf Shores with direct access to the public beach.
There is a public recreation area featuring a boardwalk along the beach
immediately to the west of the Hotel site. There are several restaurants, oyster
bars and sandwich shops within easy walking distance. There are also family
recreation facilities in the immediate proximity of the Hotel site, along with a
seasonal amusement park and souvenir and gift stores.
THE SUITES
Each Suite is fully-furnished, having a living room (which includes a
sleeper-sofa), one bedroom, one and one-half bathrooms, a fully-equipped
kitchen, a built-in bunk-bed area and a private balcony. The kitchen will
include a refrigerator with ice-maker, a dishwasher, garbage disposal, an
electric stove top and range and a microwave. Each Suite will have approximately
613 square feet, with the capacity to sleep up to six people. The following is a
floor-plan for one of the Suites.
[Picture of floor plan for Unit.]
Although all Suites will share the same basic floor plan, the Hotel will have
six types of Suites, all of which are described below. The purchase prices for
the different types of Suites vary depending upon the location of the Suites
within the Hotel. The Schedule of Purchase Prices, Percentage Ownership and
Contribution to Operating Cash Reserve for each of the Units is attached to the
Prospectus as Appendix A.
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TERRACE RESORT SUITES
There will be two Terrace Resort Suites. These Suites will be located
on the east and west sides of the ninth floor of the Hotel. Both Suites will
directly overlook the Gulf of Mexico. In addition, each Terrace Resort Suite
will have windows in the bedroom and living room that provide a view to either
the east or the west. Each Suite will have a private balcony extending from the
Gulf side of the Hotel to either the east or west side of the Hotel.
SUPERIOR RESORT SUITES
There will be sixteen Superior Resort Suites. Six Superior Resort
Suites will be located on the ninth floor of the Hotel. Each of these six Suites
will directly overlook the Gulf of Mexico, but none of these Suites will have
windows providing a view to the east or west. Five Superior Resort Suites will
be located on the fourth through eighth floors of the east side of the Hotel.
Each of these five Suites will directly overlook the Gulf of Mexico and will
have a view to the east provided by windows in the bedroom and living room. The
final five Superior Resort Suites will be located on the fourth through eighth
floors of the west side of the Hotel. Each of these five Suites will directly
overlook the Gulf of Mexico and will have a view to the west provided by windows
in the bedroom and living room. All Superior Resort Suites will have private
balconies facing the Gulf of Mexico.
THIRD FLOOR SIDE VIEW RESORT SUITES
There will be two Third Floor Side View Resort Suites, one on each side
of the Hotel. Each Suite will directly overlook the Gulf of Mexico and will have
a view to the east or west provided by windows in the bedroom and living room.
Each Suite will also have a private balcony facing the Gulf of Mexico.
SECOND FLOOR SIDE VIEW RESORT SUITES
There will be two Second Floor Side View Resort Suites, one on each
side of the Hotel. Each Suite will directly overlook the Gulf of Mexico and will
have a view to the east or west provided by windows in the bedroom and living
room. Each Suite will also have a private balcony facing the Gulf of Mexico.
FIRST FLOOR SIDE VIEW RESORT SUITES
There will be two First Floor Side View Resort Suites, one on each side
of the Hotel. Each Suite will directly overlook the Gulf of Mexico and will have
a view to the east or west provided by windows in the bedroom and living room.
Each Suite will also have a private balcony facing the Gulf of Mexico. The Suite
on the west side of the Hotel may have a partially-obstructed view of the beach
due to the presence of a one-story restaurant and lounge on pilings located
immediately to the south of this Suite.
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STANDARD RESORT SUITES
There will be sixty Standard Resort Suites. These Suites will be
located in the interior of the Hotel on the first through eighth floors. None of
these Suites will have windows providing a view to the east or west, but all
Suites will directly overlook the Gulf of Mexico and will have private balconies
facing the Gulf of Mexico. One or more of the first floor Standard Resort Suites
on the west side of the Hotel may have a partially-obstructed view of the beach
due to the presence of a one-story restaurant and lounge on pilings located on
the west side of the Hotel.
ACQUISITION OF THE HOTEL SITE
Southwind purchased the Hotel site from Michael A. and M. Katherine
DeJusto in 1998 for $2,341,500. Southwind financed its acquisition of the hotel
site in part by borrowing $1,800,000 from First American Bank of Pensacola, N.A.
The loan is evidenced by a promissory note dated April 16, 1998 and bears
interest at the rate of 8% per annum. The loan is secured by a mortgage dated
April 16, 1998. Payments of accrued interest only are payable quarterly. The
principal amount together with accrued interest are payable on the maturity
date, which is currently April 12, 1999. We expect to obtain an extension of the
maturity date or to obtain financing sufficient to satisfy the land acquisition
loan. Pursuant to our construction financing, the $1,800,000 land acquisition
loan from First American will be combined with a construction loan from First
American to Southwind when construction is ready to begin.
In addition, Southwind financed a portion of the purchase price for the
hotel site by issuing a promissory note in the amount of $541,500 in favor of
Michael A. and M. Katherine DeJusto, together with a second mortgage on the
hotel site. Payments of interest only at the rate of 10% per annum are due
monthly. Additional interest at the rate of 10% per annum (which is not
compounded) accrues on the principal balance remaining from time to time.
Principal and any unpaid interest are due at the earlier of (i) the closing of
90% of the units, or (ii) August 17, 1999. In connection with the purchase of
the hotel site, Southwind agreed to sell one first floor condominium unit to
Michael A. DeJusto for $100,000. The $100,000 was withheld from the $1,800,000
cash portion of the purchase price and placed in escrow pending completion of
the hotel. Furthermore, Southwind agreed to grant Michael A. DeJusto a right to
purchase up to four Units of his choice at the prices the Units are sold in this
offering.
22
<PAGE> 29
ALABAMA
Tourism is Alabama's second largest industry and plays a significant
economic role throughout the state. The growth of the tourism industry in
Alabama is based on the following:
- Favorable climate
- Natural beauty
- Number and quality of hotels and championship golf courses
- Development of new tourist attractions
- Shopping
- Healthy economy
- Aggressive tourism development
We believe that the above factors all contribute to the strong growth
the tourism industry has experienced throughout Alabama. This growth makes
Alabama an ideal location for a new hotel development. We have selected the City
of Gulf Shores and the City of Orange Beach, which is adjacent to Gulf Shores
and located seven miles east of the Hotel Site (the "Gulf Shores Market"), as a
particularly attractive location for such development.
THE GULF SHORES MARKET
GULF SHORES
Alabama's Gulf Coast includes a 32-mile span of beautiful sandy, white
beaches on the Gulf of Mexico, and is a popular vacation site. Gulf Shores is
located in the southern tip of the state on the Gulf of Mexico approximately 60
miles southeast of Mobile, Alabama, a major port. Gulf Shores is best known for
its beaches, beautiful golf courses, and mild climate. It is an incorporated
town in Baldwin County, one of the state's fastest-growing areas. Tourist
spending in Baldwin County totaled more than $1 billion in 1997, a fifth of the
state's total. Approximately 22% of Alabama's tourism-related jobs are in
Baldwin County.
Gulf Shores is conveniently accessed by a major highways, and is
serviced by a small local airport and regional airports in both Mobile, Alabama
and Pensacola, Florida. Although Gulf Shores has four distinct seasons, it has a
mild climate year round that is attractive to tourists as well as to permanent
and seasonal residents. The annual mean temperature of the region is
76.1(degree)F, with temperatures averaging 82(degree)F in July and 53(degree)F
in January. The average annual precipitation for the region is 58 inches.
The Gulf Shores Market and surrounding area also features eight fine
golf courses and a regional outlet mall a few miles north in Foley, Alabama.
Charter excursions for fishing and site seeing are available at several
conveniently located marinas in the Gulf Shores area. The area has a large
number of restaurants, retail stores and recreational facilities.
23
<PAGE> 30
Gulf State Park comprises 6,000 acres and lies just east of the city of
Gulf Shores. The park has a camping area, a championship golf course and 700
acres of fresh water lake for water sports or fishing. Gulf State Park's main
inland body of water, Lake Shelby, is the closest natural occurrence of fresh
water to salt water in the world.
MARKET OVERVIEW
The following chart shows the monthly, seasonal and total revenues
derived from taxable lodging rentals for hotels, motels and condominiums and
rental homes that are rented on a short-term basis (less than 30 days), and
therefore are competitive with the Hotel, in Gulf Shores and adjacent Orange
Beach, Alabama for the years 1995-1998. The variances for each category from the
previous year, which are expressed as percentages, are also shown on an annual
and monthly basis. These percentages illustrate the growth in the market and
seasonal fluctuations in the market.
<TABLE>
<CAPTION>
TAXABLE LODGING RENTALS
======================================================================================================================
MONTH/SEASON 1995-96 VARIANCE 1996-97 VARIANCE 1997-98 VARIANCE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SEPTEMBER $ 6,375,427 13.1% $ 6,557,658 2.9% $ 6,412,808 -2.2%
OCTOBER $ 3,658,304 1.3% $ 4,568,045 24.9% $ 4,986,730 9.2%
NOVEMBER $ 2,089,423 12.2% $ 2,128,268 1.9% $ 2,562,267 20.4%
FALL $12,123,154 8.2% $13,253,971 9.3% $ 13,961,805 5.3%
- ----------------------------------------------------------------------------------------------------------------------
DECEMBER $ 1,180,999 -3.0% $ 1,328,402 12.5% $ 1,268,602 -4.5%
JANUARY $ 1,092,123 1.6% $ 1,281,461 17.3% $ 1,489,259 16.2%
FEBRUARY $ 1,941,941 -0.9% $ 2,393,948 23.3% $ 2,397,748 20.0%
WINTER $ 4,215,062 -0.9% $ 5,003,811 18.7% $ 5,155,609 3.0%
- ----------------------------------------------------------------------------------------------------------------------
MARCH $ 5,363,916 5.0% $ 6,832,714 27.4% $ 5,775,341 -15.5%
APRIL $ 7,805,694 5.8% $ 7,666,209 -1.8% $ 9,713,109 26.7%
MAY $ 9,203,773 8.8% $10,597,617 15.1% $ 11,855,903 11.9%
SPRING $22,373,383 6.9% $25,096,540 12.2% $ 27,344,353 9.0%
- ----------------------------------------------------------------------------------------------------------------------
JUNE $18,040,618 19.5% $19,298,048 7.0% $ 22,059,914 14.3%
JULY $22,094,438 17.8% $19,577,682 -11.4% $ 27,192,566 38.9%
AUGUST $14,776,622 33.3% $15,779,301 6.8% $ 15,664,886 -0.7%
SUMMER $54,911,678 22.2% $54,655,031 -0.5% $ 64,917,366 18.8%
- ----------------------------------------------------------------------------------------------------------------------
ANNUAL $93,623,277 15.1% $98,009,353 4.7% $111,379,132 13.6%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
This information was provided by the Alabama Gulf Coast Convention &
Visitors Bureau. The source for the information is the City of Gulf Shores
Revenue Department.
DEVELOPMENT ACTIVITY
The Hotel is the only hotel currently being developed in Gulf Shores of
which Southwind is aware. The limited development activity results from lack of
available
24
<PAGE> 31
beachside property and the high cost of land that is available. Due to these
barriers to entry, there have been only three hotels that have opened in the
Gulf Shores Market in the past two years, adding a total of 199 hotel rooms to
the market.
COMPETITION
The success of the Hotel will be determined by, among other things, its
location, quality of accommodation and room rate structure. The Hotel will
compete with existing and future hotels and short-term (less than a 30 day stay)
home and condominium rentals in the Gulf Shores Market and surrounding areas.
There are approximately 1,124 hotel rooms (excluding the Hotel) in the Gulf
Shores Market. Of these rooms, 199 hotel rooms have been added to the market
since 1998. Competition in the future may be affected by changes in the hotel
and short-term home and condominium rental market in the Gulf Shores Market,
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.
THE COMPETITIVE SET
For the purpose of the Hotel Operating Agreement, Southwind has
designated the following five hotels in the Gulf Shores Market as the
Competitive Set: the Holiday Inn of Gulf Shores, the Quality Inn of Gulf Shores,
the Light House Resort, the Oleander Hotel and Young's By The Sea. See "The
Hotel Operator -- Management of the Hotel and the Rental Pool." These hotels
are expected to directly compete with the Hotel. The factors considered in
determining the Competitive Set included the number of rooms; quality and value
of overall facilities and amenities; character and style of the hotel; rate
structure and market position; and location factors such as direct beach
frontage. The following chart sets forth the characteristics of the hotels in
the Competitive Set, together with those of the Hotel:
25
<PAGE> 32
<TABLE>
<CAPTION>
Year No. of
Property Opened Rooms Facilities
-------- ------ ------ ----------
<S> <C> <C> <C>
Holiday Inn Gulf Shores Before 118 Full-service beachside hotel,
1989 meeting rooms, suites, jacuzzi
(29 kitchenettes units)
Lighthouse Before 200 Extended-stay beachside hotel,
1989 indoor and outdoor heated pool
(10 full kitchens, 140
kitchenettes units)
Oleander Hotel Before 90 Limited-service beachside
1989 hotel, pool
(33 full kitchens)
Quality Inn Before 155 Full-service beachside hotel,
1989 indoor heated pool, suites (48
kitchen units)
Young's By The Sea Before 112 Extended-stay beachside hotel,
1989 suites, full kitchens, outdoor
pool (77 full kitchen units)
Beachside All-Suites Hotel Not opened 84 Extended-stay beachside hotel,
suites, (84 full kitchens),
outdoor heated pool
</TABLE>
RESORT MARKET SEASONALITY
The Gulf Shores resort market is affected by seasonality with demand
fluctuating at different levels throughout the year. The severity of demand
fluctuation has decreased in recent years as a result of the increasing
popularity of the area year-round. Much of the area's outdoor recreational
activities, including golf, beach activities, bird watching and deep-sea
fishing, are available on a year-
26
<PAGE> 33
round basis. Specifically, the peak season extends from June through August.
During peak periods, occupancy in the Gulf Shores Market ranges from 80% - 95%.
As a result, the resort market experiences numerous fill nights (periods in
which the market is at capacity) during the peak seasons.
The "shoulder" seasons are September through October and March through
May. Occupancy percentages generally range from approximately 50% to
approximately 70% during these periods. Group meetings and winter "snowbird"
demand bolster midweek occupancies, with individual tourist demand occurring
primarily on the weekends. The resort market experiences numerous fill nights on
the weekends during the shoulder seasons. The low season is November through
February. Market occupancy ranges from 30% - 50% during this period.
UNSATISFIED DEMAND
As a result of significant tourist activity, the Gulf Shores Market
experiences high levels of unsatisfied demand during certain times of the year.
Unsatisfied demand means that demand cannot be accommodated in the direct market
area due to facility size or capacity constraints. Unsatisfied demand 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
important when considering the potential support for new hotel development in a
particular area. We believe that unsatisfied demand will continue because of
limited beachside hotel developments in the Gulf Shores Market.
MARKET DEMAND
The overall demand for lodging accommodations in the Gulf Shores Market
is generated primarily by two market segments: individual leisure and group
meetings. Based on information obtained through interviews with Gulf Shores
hotel operators, it is estimated that the commercial demand segment comprised
only approximately 3% of the total number of hotel rooms rented in the Gulf
Shores Market in 1998 due to the minimal commercial activity in Gulf Shores.
Southwind does not expect a substantial amount of business from commercial
travelers.
INDIVIDUAL LEISURE
The "individual leisure" market segment consists of tourists requiring
accommodations in the area for general sightseeing, weekend "get-aways", local
festivals and a variety of recreational and special events throughout the year.
This demand segment is strongest in the spring and summer. Individual leisure
demand is characterized by multiple occupancy and therefore higher rates are
applicable. Based on information obtained through interviews with Gulf Shores
hotel operators we estimate that this market segment accounted for approximately
80% of the total hotel rooms rented in the Competitive Set in Gulf Shores in
1998. We believe that individual leisure travelers generally select
accommodations based on the following factors:
27
<PAGE> 34
- Proximity to the beach
- Relationship to the central business district
- Aesthetic appeal of surrounding area
- Proximity to area attractions
- Overall quality of the facilities
- Quality and variety of recreational facilities
- Value offered
- Name identity or affiliation and reputation
GROUP MARKET
Group meeting demand is typically composed of smaller regional or state
associations, small businesses and state government. Corporate meeting business
consists primarily of executive or incentive retreats and conferences. Group
demand in the Gulf Shores Market typically peaks during March-April and
September-October. Based on information obtained through interviews with Gulf
Shores hotel operators, we estimate that group meeting demand accounted for
approximately 17% of the total hotel rooms rented in the Gulf Shores Market in
1998 by the hotels in the Competitive Set.
We believe there has been support from the group market in the past in
the Gulf Shores Market, and that there is a significant opportunity for new
group-oriented hotel business in the Gulf Shores Market. Currently, only a few
of the properties competitive with the Hotel specifically cater to the group
demand segment. The Hotel does not provide meeting rooms or conference
facilities.
PREMIER LOCATION
Located one block from Highway 59, the Hotel will be the closest
beachside hotel to the main artery into the Gulf Shores Market. Highway 59
provides direct access to the interstate highway system. In addition, with its
nine-story structure, the Hotel will be the most visible building in the Gulf
Shores central business district. As a result of its location and visibility,
the Hotel will occupy a premiere location in relation to other hotels in Gulf
Shores. There could be future highway construction that may provide more
desirable access to the Gulf Shores Market, thereby diverting traffic from
Highway 59. We cannot assure you that the Hotel will be the closest hotel to the
main artery into the Gulf Shores Market in the future.
ESTIMATED PERFORMANCE FOR THE HOTEL
MARKET PENETRATION
Our estimates of operating results for Beachside All-Suites Hotel are
predicated on a number of assumptions relating to conditions in the Gulf Shores
Market, the physical characteristics of the Hotel and its location. We
considered the following factors in estimating the hotel's future performance:
28
<PAGE> 35
- The premier location of the Hotel in relation to the other hotels
- The Hotel's beachside site
- All Suites will have private balconies
- The Hotel will be a newly-constructed property
- The estimated mix of demand for the Hotel
- The estimated rate structure for the Hotel
- The impact of potential new hotel and condominium developments
- The relative experience of the management companies operating
hotels and condominiums in the Gulf Shores Market
DEMAND
Based on information obtained through interviews with Gulf Shores hotel
operators, Southwind estimates that the leisure market will account for
approximately 80% of the occupied rooms in the Hotel during a stabilized year of
operations and that the group market will account for the remaining demand.
Southwind expects the following factors to contribute to the Hotel's
ability to attract leisure travelers and groups:
- Unsatisfied demand during the peak season
- The all-suites format of the Hotel
- A competitive rate structure
- The yield management techniques used by the Hotel Operator
- Each Suite's capacity to sleep six persons
- The Hotel's premiere, beachside location
OCCUPANCY
As indicated in the below table, we estimate that the Hotel's occupancy
will increase from 59.3% in year one to 63.8% in year three of operations.
Beyond year three, the Hotel is estimated to operate at a more stabilized level
of 66% to 70%.
The relatively low occupancy rate in the first year of operation is not
unusual for a new Hotel entering a market. The period between when a Hotel opens
and when it reaches stabilization can vary substantially depending on the type
of Hotel, its physical characteristics, its location, its market mix, and
prevailing market conditions.
The determinations of the occupancy rate upon opening and the period
necessary to reach stabilization are subjective and are based on all of the
factors discussed regarding the Hotel facilities, the impact of new supply
(including the impact of the Hotel), and market conditions. No one factor is
determinative and no particular weight is assigned to any one factor.
The following table sets forth the resulting occupancy estimates for
the Hotel during its first full three calendar years of operation:
29
<PAGE> 36
<TABLE>
<CAPTION>
ESTIMATED ESTIMATED TOTAL ESTIMATED
OCCUPIED ROOM OCCUPIED ROOM ESTIMATED OCCUPANCY
NIGHTS: LEISURE NIGHTS: GROUP OCCUPIED ROOM RATE FOR THE
YEAR SECTOR SECTOR NIGHTS HOTEL
- ---- --------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Year 1 (2001) 14,545 3,091 18,181 59.3%
Year 2 (2002) 15,207 3,232 19,009 62.0%
Year 3 (2003)* 15,649 3,325 19,561 63.8%
</TABLE>
* Forecasted first year of stabilized operating performance
Average daily rate (ADR)
The ADR is the total room revenue divided by the total number of rooms
rented. The ADR is driven by the yield management concept used by Innisfree to
obtain the maximum rate and the maximum occupancy for each room on a daily
basis, based on demand. We used the ADR of Young's By The Sea to determine the
methodology for deriving an ADR for Beachside All-Suites Hotel.
CONCLUSION
We believe that the Gulf Shores lodging market will experience
continued growth into the foreseeable future. Factors contributing to the
strength of the market and its overall potential growth are:
- Projected growth of tourism throughout the Alabama region
- Increased desirability of Gulf Shores for group meeting planners
- Local municipal commitment to aggressive marketing
- Positive economic trends within Alabama
- Enhanced interest in the Alabama Gulf Coast as a resort and golf
destination
- Steady trend of growth in lodging revenues for the past three years
- Continued growth in the low season demand
We believe that the Hotel, with its larger one-bedroom, one-and-a-half
bath suites and fully-equipped kitchens, built-in bunk-beds and private
balconies that overlook the Gulf of Mexico will provide an attractive
alternative to standard hotel guest rooms. We also believe that the Hotel's
quality and premiere location will position the Hotel to attract individual
leisure and group travelers in the Gulf Shores Market. In addition, the Hotel
will be newer than most of the other Hotels and condominiums in the Gulf Shores
Market. Based on all of these factors, we believe the Hotel is well positioned
to perform as indicated.
BASIS FOR FORECASTS AND SUMMARY OF SELECTED
FINANCIAL PERFORMANCE
The following represents a summary of selected financial performance of
a typical one-bedroom standard resort Unit, first floor side view resort unit,
second floor side view resort unit, third floor side view resort unit and the
terrace resort
30
<PAGE> 37
unit for the first full three years of operations and is derived from the
Forecasts appearing on page F-l. This summary of selected financial performance
is forecasted and should be read in conjunction with the Forecasts, which
includes the assumptions, appearing at page F-17, underlying the Forecast and
related notes.
The Forecasts include a three-year forecast of the financial
performance of the hotel and, by applying the allocable percentage to the
correct unit type, a three-year forecast of financial performance for the Owners
of each of the typical Units illustrated. Southwind has prepared the Forecasts
based upon the stated assumptions, which it believes are reasonable. While
Southwind believes it has taken into consideration all factors that can affect
the overall economic performance of the hotel, there are a number of critical
factors that can cause actual performance, especially when related to the hotel
industry, to vary with that of a forecast. These factors include, but are not
limited to:
- Projected occupancy rate
- Projected average daily room rate
- The effect of competition
- General economic environment
- Strength of the tourist sector of the economy
- Assumptions regarding the effects of inflation on both revenue and
expenses
- Weather conditions
Investors should recognize that there can be no assurance that the
assumptions will prove correct or that actual results will not differ from the
results forecasted. Actual results may vary materially because events and
circumstances frequently do not occur as expected. Investors are encouraged to
consult with their own advisors with respect to the assumptions upon which the
forecasts are based and are encouraged to review the discussion of risk factors
regarding the Hotel and its operations set forth under the heading "Risk
Factors."
31
<PAGE> 38
TYPICAL ONE-BEDROOM STANDARD RESORT UNIT ($149,900)
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
(Year ending Dec 31, 2001) (Year ending Dec 31, 2002) (Year ending Dec. 31, 2003)
<S> <C> <C> <C>
Average Occupancy 59.3% 62% 63.8%
Average Occupancy required to achieve 29.6% 31% 32.53%
break-even before Debt Service (1)
ADR $ 117.21 $ 120.94 $ 126.12
Revenue Per Room $ 25,284 $ 27,277 $ 29,271
Net distributable cash flow assuming no $ 13,203 $ 13,971 $ 14,700
personal usage
Net distributable cash flow assuming 14 $ 11,313 $ 12,081 $ 12,810
days personal usage (2)
Net after debt service cash flow $ 3,141 $ 3,909 $ 4,638
assuming no personal usage (3)(4)
Net after debt service cash flow $ 1,251 $ 2,019 $ 2,748
assuming 14 days personal usage
(2)(3)(4)
</TABLE>
TYPICAL ONE-BEDROOM 1st FLOOR SIDE VIEW RESORT UNIT ($152,900)
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
(Year ending Dec 31, 2001) (Year ending Dec 31, 2002) (Year ending Dec. 31, 2003)
<S> <C> <C> <C>
Average Occupancy 59.3% 62% 63.8%
Average Occupancy required to achieve 29.6% 31% 32.53%
break-even before Debt Service (1)
ADR $ 117.21 $ 120.94 $ 126.12
Revenue Per Room $ 25,790 $ 27,823 $ 29,857
Net distributable cash flow assuming no $ 13,467 $ 14,251 $ 14,994
personal usage
Net distributable cash flow assuming 14 $ 11,577 $ 12,361 $ 13,104
days personal usage (2)
Net after debt service cash flow $ 3,204 $ 3,988 $ 4,731
assuming no personal usage (3)(4)
Net after debt service cash flow $ 1,314 $ 2,098 $ 2,841
assuming 14 days personal usage
(2)(3)(4)
</TABLE>
(1) Assumes the forecasted ADR is achieved, the ratio of each type of
revenue to total revenue remains constant, the ratio of departmental
expenses to departmental revenue remains constant, and undistributed
and fixed expenses remain constant as to dollar amounts. To illustrate
the effect of lower ADR, if ADR is 15% less than forecasted, the
occupancy to break-even would have to increase between 8% to 10%.
(2) Assumes that Owner usage has been calculated by multiplying 14 days
times $135 ADR per day for all three years. The cleaning charges to the
Owner have been ignored for purposes of this calculation.
(3) Assumes debt service of 80% of the purchase price at interest rate of
7.5% with a 30 year amortization.
(4) Before real estate taxes.
32
<PAGE> 39
TYPICAL ONE-BEDROOM 2nd FLOOR SIDE VIEW RESORT UNIT ($154,900)
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
(Year ending Dec 31, 2001) (Year ending Dec 31, 2002) (Year ending Dec. 31, 2003)
<S> <C> <C> <C>
Average Occupancy 62% 63.8% 65.6%
Average Occupancy required to achieve 29.6% 31% 32.53%
break-even before Debt Service (1)
ADR $ 117.21 $ 120.94 $ 126.12
Revenue Per Room $ 26,128 $ 28,187 $ 30,247
Net distributable cash flow assuming no $ 13,664 $ 14,437 $ 15,190
personal usage
Net distributable cash flow assuming 14 $ 11,754 $ 12,547 $ 13,300
days personal usage (2)
Net after debt service cash flow $ 3,246 $ 4,039 $ 4,792
assuming no personal usage (3)(4)
Net after debt service cash flow $ 1,356 $ 2,149 $ 2,902
assuming 14 days personal usage
(2)(3)(4)
</TABLE>
TYPICAL ONE-BEDROOM 3rd FLOOR SIDE VIEW RESORT UNIT ($157,900)
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
(Year ending Dec 31, 2001) (Year ending Dec 31, 2002) (Year ending Dec. 31, 2003)
<S> <C> <C> <C>
Average Occupancy 59.3% 62% 63.8%
Average Occupancy required to achieve 29.6% 31% 32.53%
break-even before Debt Service (1)
ADR $ 117.21 $ 120.94 $ 126.12
Revenue Per Room $ 26,634 $ 28,732 $ 30,833
Net distributable cash flow assuming no $ 13,908 $ 14,717 $ 15,484
personal usage
Net distributable cash flow assuming 14 $ 12,018 $ 12,827 $ 13,594
days personal usage (2)
Net after debt service cash flow $ 3,309 $ 4,118 $ 4,885
assuming no personal usage (3)(4)
Net after debt service cash flow $ 1,419 $ 2,228 $ 2,995
assuming 14 days personal usage
(2)(3)(4)
</TABLE>
(1) Assumes the forecasted ADR is achieved, the ratio of each type of
revenue to total revenue remains constant, the ratio of departmental
expenses to departmental revenue remains constant, and undistributed
and fixed expenses remain constant as to dollar amounts. To illustrate
the effect of lower ADR, if ADR is 15% less than forecasted, the
occupancy to break-even would have to increase between 8% to 10%.
(2) Assumes that Owner usage has been calculated by multiplying 14 days
times $135 ADR per day for all three years. The cleaning charges to the
Owner have been ignored for purposes of this calculation.
(3) Assumes debt service of 80% of the purchase price at interest rate of
7.5% with a 30 year amortization.
(4) Before real estate taxes.
33
<PAGE> 40
TYPICAL ONE-BEDROOM SUPERIOR RESORT UNIT ($159,900)
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
(Year ending Dec 31, 2001) (Year ending Dec 31, 2002) (Year ending Dec. 31, 2003)
<S> <C> <C> <C>
Average Occupancy 59.3% 62% 63.8%
Average Occupancy required to achieve 29.6% 31% 32.53%
break-even before Debt Service (1)
ADR $ 117.21 $ 120.94 $ 126.12
Revenue Per Room $ 26,971 $ 29,096 $ 31,223
Net distributable cash flow assuming no $ 14,084 $ 14,903 $ 15,680
personal usage
Net distributable cash flow assuming 14 $ 12,194 $ 13,013 $ 13,790
days personal usage (2)
Net after debt service cash flow $ 3,351 $ 4,170 $ 4,947
assuming no personal usage (3)(4)
Net after debt service cash flow $ 1,461 $ 2,280 $ 3,057
assuming 14 days personal usage
(2)(3)(4)
</TABLE>
TYPICAL ONE-BEDROOM TERRACE RESORT UNIT ($169,900)
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
(Year ending Dec 31, 2001) (Year ending Dec 31, 2002) (Year ending Dec. 31, 2003)
<S> <C> <C> <C>
Average Occupancy 59.3% 62% 63.8%
Average Occupancy required to achieve 29.6% 31% 32.53%
break-even before Debt Service (1)
ADR $ 117.21 $ 120.94 $ 126.12
Revenue Per Room $ 28,658 $ 30,916 $ 33,176
Net distributable cash flow assuming no $ 14,965 $ 15,835 $ 16,661
personal usage
Net distributable cash flow assuming 14 $ 13,075 $ 13,945 $ 14,771
days personal usage (2)
Net after debt service cash flow $ 3,561 $ 4,431 $ 5,257
assuming no personal usage (3)(4)
Net after debt service cash flow $ 1,671 $ 2,541 $ 3,367
assuming 14 days personal usage
(2)(3)(4)
</TABLE>
(1) Assumes the forecasted ADR is achieved, the ratio of each type of
revenue to total revenue remains constant, the ratio of departmental
expenses to departmental revenue remains constant, and undistributed
and fixed expenses remain constant as to dollar amounts. To illustrate
the effect of lower ADR, if ADR is 15% less than forecasted, the
occupancy to break-even would have to increase between 8% to 10%.
(2) Assumes that Owner usage has been calculated by multiplying 14 days
times $135 ADR per day for all three years. The cleaning charges to the
Owner have been ignored for purposes of this calculation.
(3) Assumes debt service of 80% of the purchase price at interest rate of
7.5% with a 30 year amortization.
(4) Before real estate taxes.
34
<PAGE> 41
DESCRIPTION OF SECURITIES BEING OFFERED
The securities being offered consist of 83 extended-stay condominium
hotel investment units (the "Units") in Beachside All-Suites Hotel. Each Unit
consists of a Suite, coupled with a mandatory rental pool. The Hotel will be a
beachside condominium hotel in Gulf Shores, Alabama. Each Owner will own his
Unit, which includes an undivided interest in the common areas of the Hotel.
Each Unit will be subject to the Hotel Operating and Rental Pool Agreement that
appoints Innisfree Hotels, Inc. as the manager of the Hotel. The mandatory
rental pool provides for the pooling of both revenue, adjusted for personal
usage, and expenses. Distributions, if any, will be based on the assigned
percentage interest of a Unit.
Each Unit will be priced between $149,900 and $169,900, depending on
the location within the Hotel. The Hotel will consist of 84 fully-furnished
Suites. Each Suite consists of a living room (including a sleeper-sofa), a
bedroom, one and one-half baths, a built-in bunk-bed area and a fully equipped
kitchen. The Hotel includes a commercial unit that will be used as a lobby and
registration area, parking facilities, a central laundry and housekeeping area
and a heated pool.
THE HOTEL OPERATOR AND
THE HOTEL OPERATING AGREEMENT
The Hotel will be managed and operated by Innisfree Hotels, Inc., which
is based in Gulf Breeze, Florida. Innisfree has been in business for more than
14 years and owns and operates 11 hotel properties throughout the southeastern
United States and Arizona. Innisfree currently has more than 1,100 guest rooms
under management. Two of the Innisfree properties, the Days Inn Hotel in Orange
Beach, Alabama and Young's By The Sea in Gulf Shores, Alabama, are beachside
hotels located in the Gulf Shores Market. Julian B. MacQueen founded Innisfree
in 1985 and has served as its Chairman and Chief Executive Officer since that
time. Mr. MacQueen also owns 64% of the equity interest of Southwind.
MANAGEMENT OF THE HOTEL AND THE RENTAL POOL
The Hotel Operator will manage the hotel and the rental pool and
maintain the Hotel on behalf of the Owners pursuant to the Hotel Operating
Agreement. The following discussion of the Hotel Operating Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Hotel Operating Agreement together with all attachments and exhibits to the
Hotel Operating Agreement, which is filed as an Exhibit to the Registration
Statement.
MANAGEMENT OF THE RENTAL POOL
Participation for all Owners in the rental pool in accordance with the
Hotel Operating Agreement is mandatory. In addition, any Suites that have not
been sold by Southwind will be placed in the rental pool. A Suite will
automatically be placed in the rental pool except when the Suite is reserved for
use by the Owner. Each Owner appoints the Hotel Operator as his exclusive agent
for management of the rental pool and the bookings of the Owner's Suite and
agrees to honor and be bound by the rental booking of his Suite made by the
Hotel Operator in accordance with the Hotel Operating Agreement. Suites may not
be used for any purpose other than as
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condominium hotel suites in accordance with the Hotel Operating Agreement, the
Declaration and other condominium documents governing the Hotel. The Hotel
Operator has complete discretion to establish rental rates including offering
the use of Suites at low promotional rental rates and offering Suites on a
complimentary basis from time to time to guests of the Hotel.
The initial operating period of the rental pool will commence on the
date that the Hotel is opened by the Hotel Operator for business as a hotel in
the Hotel Operator's hotel system and will conclude on December 31 in that year.
Thereafter, operating periods for the rental pool will run 12 months based on
the calendar year.
OWNERS' USE OF SUITES
The Hotel Operating Agreement provides that AN OWNER MAY ONLY USE HIS
SUITE FOR A TOTAL OF 14 DAYS PER CALENDAR YEAR. See "Certain Federal and State
Income Tax Aspects - Tax Consequences of Rental Pool to Owners - Section 280A."
If an Owner reserves the use of his Suite for a stay which commences at or after
2:00 p.m. on a Friday or a Saturday, the Owner must reserve the Suite for a
minimum two night stay. An Owner may use his Suite no more than four times a
year with respect to two or three night stays that commence at or after 2:00
p.m. on a Friday or a Saturday. Under the Hotel Operating Agreement, an Owner
may assure the use of his Suite by sending a written reservation to the Hotel
Operator no less than four months prior to the date the Owner desires to use his
Suite. An Owner may request the use of his Suite on less than four months notice
on an "as available" basis. If an Owner does not use all of his allotted days in
a calendar year, he will not be entitled to accumulate the unused days for use
in any subsequent year. If an Owner reserves his Suite for use, but does not use
his Suite at the reserved time, he will, nevertheless, be deemed to have used
his Suite, and his Suite will not be included in the rental pool, unless he has
cancelled his reservation with the approval of the Hotel Operator at least 30
days prior to the date of his reservation and his Suite is made available for
rental to the public. An Owner will be required to pay a mandatory room cleaning
charge in connection with his use of his Suite. In addition, an Owner will pay
the standard charges established by the Hotel Operator for, among other
amenities, long distance telephone calls, movie rentals, vending machine
charges, charges for use of any recreational facilities located off the Hotel
premises pursuant to Agreement with third parties, and the purchase of other
goods and services at the Hotel. Owners cannot remove or change any furniture,
fixtures and equipment located within a Suite except as set forth in the Hotel
Operating Agreement.
ALLOCATION OF REVENUE AND EXPENSES
The Hotel Operating Agreement describes the manner in which income from
Suite rentals is divided among the Owners. For each day that a Suite is in the
rental pool, the Owner of that Suite will be entitled to share in the gross
revenue from the operation of the hotel, regardless of whether the Owner's Suite
generated rental income on that particular date. An Owner's share of the gross
revenue will be determined based on the percentage interest of the Suite as set
forth in Annex A and in the Declaration.
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An Owner's share of gross revenue for a day in which the Owner's Unit
is in the rental pool (not reserved for use by the Owner) will be determined
according to the following formula:
<TABLE>
<S> <C> <C>
(% Interest of the Unit)
-----------------------------------------------
(Gross Revenue for the Day) X (the sum of the % Interests of Units in rental
pool that day)
</TABLE>
Each Owner will be responsible for his share of all hotel expenses and
other costs attributable to the Owners under the Hotel Operating Agreement. An
Owner will be responsible for his share of the costs attributable to the Owners
for each day that the Hotel is operating, regardless of whether the Owner's
Suite is in the rental pool on any particular day. The Owners bear all of the
costs and expenses of operating, maintaining and repairing the hotel, the hotel
grounds and the contents of the hotel. These costs include, but are not limited
to:
- Repair and maintenance of hotel buildings, grounds, furniture,
fixtures and equipment located at the hotel
- Purchasing all supplies including linens, and cleaning
products necessary for the operation of the hotel
- Costs associated with hiring, firing and compensating
employees necessary to staff the hotel
- Fees paid to the hotel operator
- Utilities and insurance
- Marketing and promotion expenses, reservation fees and travel
agent commissions.
DIRECT EXPENSES OF OWNERS
Each Owner will be personally responsible for the payment of all
property taxes applicable to his Unit and contents, amounts owed under any
financing of the Unit, and all assessments made by the Condominium Association.
The amount of property taxes to be paid by each Owner will be determined
annually by the Baldwin County Assessor's Office. Property taxes will be
assessed against each Owner as of the date the Unit is purchased by the Owner.
Southwind's estimate of taxes is based on application of 1995 tax rates to such
property. The actual tax may differ from the projected amount when actually
assessed. Subsequent transfers of one or more Units may cause further
reassessments of one or more Units and tax increases. Property taxes may
increase for all Owners even in years in which no reassessment from any sale or
transfer occurs.
RENTAL POOL REPORTS
For each calendar month, the Hotel Operator will prepare detailed
statements of operations that describe, among other things, the gross revenue
from the Hotel, hotel operating expenses, capital expenditures, reserves, and
the amount, if any, distributable to an Owner for that month. A summary of these
statements of operations will be mailed to each Owner no later than the 25th day
following the end of each calendar month. The Hotel Operator will also prepare
and mail to each Owner within 75 days after the end of an operating year
statements of operations for the
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entire operating year and individual statements relative to each Owner's Unit.
The individual statements will serve as the basis for reporting to the Internal
Revenue Service and other appropriate taxing authorities.
DISTRIBUTIONS FROM RENTAL POOL
The amount distributable to an Owner will be computed each month by
subtracting the following amounts from the Owner's share of gross revenue from
the Hotel's operations:
- The Owner's share of the Hotel's operating expenses
- The Owner's share of amounts necessary to:
- Fund or replenish operating and capital expenditure reserves
- Make capital lease payments
- Pay the hotel operator's Incentive Fee, if any
- The Owner's share of capital expenditures exceeding amounts
paid out of reserves
- The Owner's share of shortfalls, if any
- Any assessment payable by the Owner pursuant to the
Declaration
- Expenses associated with an Owner's personal use of the Hotel
- Bed taxes and other similar taxes
- Withholding taxes, if applicable
- Any other amounts payable by the Owner under the Hotel
Operating Agreement
The amount distributable to an Owner, if any, will be sent to the
Owners with the monthly financial summary (see, "Rental Pool Reports" above).
Alternatively, the Hotel Operator, in consultation with the Board of Directors,
may prepare a reasonable estimate of the amount distributable to the Owners on
an annual basis and distribute to the Owners the estimated amount, less an
amount (not to exceed 20%) established by the Hotel Operator for seasonal
working capital requirements, in 12 equal monthly installments. If the Hotel
Operator elects to distribute an estimated amount, at the end of the operating
year the Hotel Operator will calculate the actual amount distributable to each
Owner and pay to each Owner the balance of the amount, if any, distributable for
that operating year. This last payment will be sent after the end of the
operating year with the annual financial statements.
RESERVES
An operating cash reserve in the amount of $50,000 will be established
when the Hotel commences operations. Upon the closing of the purchase of a Unit,
the Owner will be required to contribute to the operating cash reserve an amount
indicated in Annex A. This reserve will be available to the Hotel Operator for
working capital in connection with the operation of the Hotel. Additionally, a
reserve will be established for capital expenditures for repair and replacement
of the Hotel premises and repair and replacement of furniture, fixtures and
equipment at the rate of 1% of gross revenue beginning in year one of operations
and increasing by 1% of gross revenue per year in each of the next four years
until reaching 5% of gross revenues for the fifth operating year and subsequent
years. This reserve will increase each year through year five. The amount of the
reserve for years two
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through five are as follows: 2% in year 2; 3% in year 3; 4% in year 4 and 5% in
year 5 and beyond.
SHORTFALLS
If at any time the funds derived from the operations of the Hotel
(including established reserves) are not sufficient to pay when due all expenses
incurred in connection with the operation of the Hotel, capital expenditures or
other amounts for which the Owners are liable (such as may occur from time to
time as a result of, among other causes, seasonal fluctuations in the use of the
Hotel by Owners and other patrons), the Hotel Operator may require each Owner to
remit to the Hotel Operator his share of the shortfall. The Hotel Operator may
elect, but is not obligated, to advance the shortfall and obtain repayment of
the shortfall, plus interest accruing at the designated prime rate plus 2%, out
of the cash flow from the operations of the Hotel. Any dispute regarding the
payment or nonpayment of shortfalls may be referred to an arbitrator pursuant to
the Hotel Operating Agreement. An adverse arbitration award could result in a
judgment being entered against an Owner and a lien against an Owner's personal
assets.
HOTEL OPERATOR MAY RELY UPON ACTS OF BOARD OF DIRECTORS
The Board of Directors of the Condominium Association elected in
accordance with the provisions of the Declaration will represent the Owners in
certain respects concerning the Hotel Operator. See "Summary of Declaration and
Related Documents - The Condominium Association - Board of Directors". All of
the Owners will be bound by the acts of the Board of Directors on behalf of the
Owners and the Hotel Operator will be entitled to rely upon the acts of the
Board of Directors as the authorized acts of the Owners. The Hotel Operator has
agreed to meet with the Board of Directors on behalf of the Owners.
MANAGEMENT OF THE HOTEL
The Hotel Operator will perform, on an exclusive basis, all duties and
obligations within the scope of the management, maintenance, and marketing of
the Hotel. The Hotel Operator will, among other things, use all reasonable
efforts to maintain and operate the Hotel substantially in accordance with the
standards of the Competitive Set, market and sell the rental use of the Units,
furnish bookkeeping, inventory control, reservations, marketing and advertising
services, direct, in consultation with the Board of Directors, litigation in
respect of the Hotel, supervise the use of the Hotel by guests and Owners, hire,
train, terminate and perform other managerial functions with respect to the
staff necessary to the operation of the Hotel, and obtain for itself and on
behalf of the Owners all insurance, licenses and permits necessary to the
operation of the Hotel. The Hotel Operator may make, at the Owners' expense, but
subject to the then current approved operating plan and budget and other
limitations, reasonable changes to the Hotel.
The Hotel Operator will prepare, on or before December 1 of each year,
an annual budget for the operation of the hotel during the following operating
year. The annual budget will be subject to the reasonable approval of the Board
of Directors of the Condominium Association and a summary of the budget will be
sent to all of the Owners after it has been approved by the Board of Directors.
Disputes regarding the budget will be resolved by arbitration.
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The Hotel Operator will obtain and maintain, as an operating expense of
the Hotel, public liability, fire and casualty, business interruption, workmen's
compensation and other insurance reasonably necessary to the operation of the
Hotel, naming the Owners, the Hotel Operator and the Condominium Association as
insureds. With regard to the possible liability of the Owners, see "Risk
Factors-Insurance."
Under the Hotel Operating Agreement, the Hotel Operator may, in its
discretion, assign all or a portion of its rights and obligations under the
Hotel Operating Agreement to an affiliate of the Hotel Operator or any successor
in interest to the Hotel Operator.
FEES PAID TO HOTEL OPERATOR
As a compensation for its services provided under the Hotel Operating
Agreement, the Hotel Operator will be paid various fees. The Hotel Operator's
fees will be paid out of the gross revenues of the Hotel. The Hotel Operator
will receive annually a base fee of 5% of gross revenues (the "Base Fee")
payable in monthly installments.
In addition to the Base Fee, the Hotel Operator will receive an
Incentive Fee in varying percentages of the Hotel's net distributable income
(the "Incentive Fee"). In 2001, the Incentive Fee will be 15% of the net
distributable income in excess of $1,252,978 and less than $1,384,522 plus 30%
of net distributable income in excess of $1,384,522. In 2002 the Incentive Fee
will be 15% of the net distributable income in excess of $1,252,978 and less
than $1,384,522 plus 25% of net distributable income in excess of $1,384,522. In
2003 through 2005 it will be 12% of the net distributable income in excess of
$1,252,978 and less than $1,384,522 plus 22.5% of the net distributable income
in excess of $1,384,522. In 2006 and thereafter it will be 10% of the net
distributable income in excess of $1,252,987 and less than $1,384,522 plus 20%
of the net distributable income in excess of $1,384,522.
The Hotel Operator will also receive reimbursement for marketing and
reservations system costs incurred in connection with the operation of the
Hotel. The Hotel Operator will also be paid a monthly Accounting Fee in the
amount of $30.00 per month per Unit. In addition, the Hotel Operator will be
entitled to be reimbursed for costs incurred by the Hotel Operator in connection
with special promotional programs, training materials, travel by head office
personnel and others on matters directly involving the Hotel, and other similar
expenses. The Hotel Operator may retain an affiliate or division as a consultant
to perform technical services in connection with any substantial remodeling,
repairs, construction or other capital improvements to the Hotel and the Hotel
Operator will be entitled to be compensated by the Owners for such services.
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TERMINATION OF HOTEL OPERATOR
The appointment of the Hotel Operator under the Hotel Operating
Agreement will run continuously from the date that the Hotel is opened for
business as a Hotel in the Hotel Operator's hotel system until December 31,
2014, unless earlier terminated. The appointment of the Hotel Operator may be
renewed for two additional terms of 5 years each if certain conditions are
satisfied or by agreement of the Owners and the Hotel Operator. If the Owners
fail to make or authorize the hotel operator to make capital expenditures
without which the hotel cannot be operated substantially in accordance with the
standards of the Competitive Set, the hotel operator may terminate its
appointment under the Hotel Operating Agreement upon 60 days' prior notice to
the Board of Directors of the Condominium Association. The appointment of the
hotel operator under the Hotel Operating Agreement may be terminated by a vote
of 75% of the Units entitled to vote on the matter if the hotel operator is in
default under the Hotel Operating Agreement and the hotel operator fails to cure
the breach within the required time. In addition, because the Hotel Operating
Agreement will be entered into before the Board of Directors elected by the Unit
Owners takes office, the Condominium Association may have the right to terminate
the Hotel Operating Agreement under Alabama Law.
SALE OF A UNIT BY AN OWNER
The Hotel Operating Agreement contains certain conditions that must be
satisfied in connection with the sale of a Unit by an Owner. Prior to entering
into an agreement for the sale of a Unit, the selling Owner must provide the
proposed purchaser with a copy of the Hotel Operating Agreement and must notify
the proposed purchaser of any proposed bookings of the Unit by the selling
Owner. In addition, the purchaser must, as a condition of the purchase, ratify
the Hotel Operating Agreement, appoint the hotel operator as its exclusive agent
for the management and rental of the hotel and the Unit, and expressly assume
the obligations of an Owner pursuant to a form acceptable to the hotel operator.
The Hotel Operating Agreement does not terminate upon the death or the attempted
withdrawal of an Owner or upon the sale or transfer of a Unit by an Owner.
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SUMMARY OF DECLARATION AND RELATED DOCUMENTS
The Declaration, Articles of Incorporation and Bylaws of the
Condominium Association impose certain covenants, conditions and restrictions on
the Units and Owners. The following discussion of these documents is a summary
of all of the material terms of these documents but does not purport to be
complete and is qualified in its entirely by reference to such documents and
instruments which are attached as Exhibits to the Registration Statement filed
by Southwind with the Securities and Exchange Commission.
THE CONDOMINIUM ASSOCIATION
The Condominium Association will be formed as an Alabama non-profit
corporation to perform various management and supervision functions at the hotel
on behalf of the Owners pursuant to the Declaration. The Declaration will be
recorded in the Probate Court of Baldwin County. When the document is recorded,
the property will become a condominium under the laws of the State. An Owner of
a Suite automatically becomes a member of the Condominium Association.
Membership in the Condominium Association may not be transferred or retained
separately from any Suite.
The Condominium Association will supervise the Hotel Operator and
assure the performance of all appropriate maintenance, management, repair, and
administration of the Hotel, including the Common Elements, the Suites, and all
of the furnishings, fixtures, equipment and other items located in and around
the Hotel. Actual operation of the Hotel will be the responsibility of the Hotel
Operator, pursuant to the terms of the Hotel Operating Agreement. The
Condominium Association will be responsible for representing the Owners with
respect to matters related to the Hotel Operating Agreement, including reviewing
and approving proposed annual budgets prepared by the Hotel Operator and
coordinating with and reviewing the performances of the Hotel Operator. If the
Hotel Operator defaults in its obligations under the Hotel Operating Agreement
or if the Hotel Operating Agreement terminates and is not concurrently replaced
with a new hotel operator and Hotel Operating Agreement, the Condominium
Association will be responsible for managing and operating the Hotel.
The Condominium Association may levy assessments against the Units in
order to cover the budgeted costs of operating the Condominium Association and
performing the obligations of the Condominium Association under the Declaration
("Common Expenses"). Such assessments, if any, will be levied against a Unit in
proportion to its percentage interest in the common elements, as set forth in
the Declaration. If the Board of Directors determines during any fiscal year
that available Condominium Association funds are or will become inadequate to
meet Common Expenses of the Condominium Association for any reason, the Board of
Directors may increase the assessment for Common Expenses.
In addition to assessments for Common Expenses, the Condominium
Association may levy special assessments for the purposes of defraying the cost
of any construction, reconstruction, repair or replacement of capital
improvements to any one or more Suites or the Common Elements.
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The Condominium Association is responsible for enforcement and monthly
collection of the assessments. Delinquent assessments may accrue interest and
may be subject to other late fees. The Condominium Association may request the
Hotel Operator to offset assessments from amounts otherwise due to the Owners
pursuant to the Hotel Operating Agreement. The Condominium Association also has
the right to enforce all other rights and remedies to collect assessments,
including but not limited to either initiating a lawsuit against a defaulting
Owner to collect delinquent assessments or foreclosing any assessment lien
against a defaulting Owner's Unit, or both. Once a delinquent Owner has paid any
past due assessment, and all collection costs and any late fees and accrued
interest, whether by offset from amounts due from the rental pool or otherwise,
he will have all rights available to non-defaulting Owners under the
Declaration.
VOTING RIGHTS
All voting rights are vested exclusively in the members of the
Condominium Association. The Declaration provides that there will be a period of
control by Southwind until up to 60 days after the conveyance of 75% of the
Units to Owners other than Southwind. During the period that Southwind controls,
only Southwind will have the right to appoint and remove the members of the
Board of Directors and the officers of the Condominium Association; provided,
however, that within 90 days after the conveyance of 25% of the Units have been
sold to Owners other than Southwind, at least one board member and 25% of the
members of the Board of Directors must be elected by Owners other than
Southwind, and that within 90 days after the conveyance of 50% of the Units have
been sold to Owners other than Southwind, not less than 331/3% of the members of
the Board of Directors must be elected by Owners other than Southwind. Such
board members and officers are not required to be Owners during the period of
Southwind control.
After termination of the period of Southwind control, each Owner will
be entitled to cast a vote equal to his percentage interest in all meetings of
the members of the Condominium Association. 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 such 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.
The Declaration may only be amended or modified by an affirmative vote
of the holders of at least 67% of the Hotel's interest, except where applicable
law otherwise requires or in cases involving the exercise of development rights
by Southwind, eminent domain, relocation of limited common elements or
boundaries between Units, subdivision of Units, or termination of the
condominium. In addition, the approval of the holders of mortgage or vendor's
liens who represent at least 51% of the Units subject to mortgage or vendor's
liens is required in connection with certain acts of the Condominium
Association. Further, any amendment must be approved by the City of Gulf Shores.
MEETINGS
The Condominium Association is required to hold annual meetings.
Special meetings of the Condominium Association may be called at any time by the
president of the Condominium Association, by a majority of the Board of
Directors, or by written
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request of the Owners holding at least 20% of the votes entitled to be cast at
such meeting. Owners will receive written notice of Condominium Association
meetings not less than 10 nor more than 60 days prior to the date of the
meeting. Owners entitled to cast 51% of the total authorized votes will
constitute a quorum. If a quorum is not present at any meeting, the Owners
entitled to vote who are present at such meeting will have the power to adjourn
the meeting without notice other than announcement at the meeting and the Owners
present at the time and place announced in the prior adjourned meeting will
constitute a quorum.
BOARD OF DIRECTORS; OFFICERS
The Board of Directors is responsible for the control and management of
the Condominium Association and the disposition of its funds and properties.
Unless the Declaration, other condominium documents or applicable law provide
otherwise, an act or approval of the Board of Directors will be deemed to be an
act or approval of the Condominium Association. The responsibilities of the
Board of Directors include, but are not limited to:
- Opening bank accounts on behalf of the Condominium Association
- Approving or disapproving additions to, improvements to, or
alterations to the hotel
- Enforcing the provisions of the condominium documents
- Following receipt of a proposed annual budget from the hotel
operator
- Adopting an annual budget and operating plan for the hotel and
Condominium Association prior to the commencement of each
operating year
- Exercising for the Condominium Association all powers, duties
and authority vested in or delegated to the Condominium
Association and not reserved to the membership by other
provisions of the Declaration or other condominium documents
- Supervising all officers, agents and employees of the
Condominium Association and seeing that their duties are
properly performed
- Levying, collecting and enforcing the payment of assessments
in accordance with the provisions of the Declaration
- Causing to be procured and maintained adequate property
liability and other insurance as required by the Declaration
- Negotiating with the hotel operator, and
- Engaging providers of professional services including
attorneys, accountants and property managers, to render
services to the Condominium Association
The initial Board of Directors will consist of three directors, who,
except during the period of Southwind control, must be members of the
Condominium Association. Directors are non-salaried and will not be required to
render full time service. Except with respect to directors appointed by
Southwind, any director may be removed with or without cause by Owners having at
least 67% of the votes entitled to be cast on such matter.
Officers of the Condominium Association will include a president,
vice-president, secretary and treasurer, to be appointed by the Board of
Directors
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for one year terms. The Board of Directors may appoint other officers for such
terms and with such authority as is determined by the Board of Directors.
USE RESTRICTIONS
Restrictions on the use of Units appear in the Declaration, the Hotel
Operating Agreement and other documents. The use restrictions include, without
limitation, the following:
1. The Suites must be used only for commercial rental by the
hotel operator to the public for tourist, visitor and transient traveller
accommodation.
2. An Owner may not individually lease his Suite or directly or
indirectly charge rent or any form of consideration for the use of his Suite
except in accordance with the terms of the Hotel Operating Agreement.
3. The rights of an Owner to make use of the common elements at
the Hotel are limited to those times when the Owner has the right to occupy his
Unit in accordance with the terms of the Hotel Operating Agreement.
4. The Hotel Operator is authorized to designate certain areas of
the Hotel for its exclusive use and an Owner may not interfere with that
exclusive use.
5. No animals are allowed in the Suites or in other areas of the
Hotel except for physical impairment assistive animals to the extent that they
are required by persons at the Hotel.
6. Except for signs incidental to the operation of the Hotel, and
any other advertising signs that Southwind elects to post in connection with the
development of the Hotel, no signs are permitted on the exterior of any Suite or
any other portion of the Hotel without the prior written approval of the Board
of Directors.
7. No Owner may remove, replace, substitute, alter, repair or add
to any part of the Hotel (including the Owner's Suite) or any of the furniture,
fixtures or equipment located in and around the hotel (including in any Suite).
For a discussion of additional use restrictions see "The Hotel
Operating Agreement."
INSURANCE
If for any reason the Hotel Operator fails to provide insurance
coverage pursuant to Article XII of the Hotel Operating Agreement, the
Condominium Association will be required to assure that property damage, public
liability, fire and other hazard insurance and business interruption coverage
with respect to the Hotel is maintained pursuant to the Declaration. The
Condominium Association may maintain other insurance affording such coverages
and with such limits as the Board of Directors may determine. All insurance
policies will name the Owners, the Hotel Operator and the Condominium
Association as insureds.
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The Condominium Association will also obtain fidelity blanket bonds for
all officers, directors, trustees, and employees of the Condominium Association.
The amount of the bonds maintained by the Condominium Association will be
determined in the discretion of the Board of Directors.
Each Owner may personally have joint (with other Owners) and several
(individual) liability for tort and contract claims as a result of ownership of
Suites or participation in the rental pool. Although we believe that the
insurance coverage provided to Owners will be adequate, we cannot assure you of
that fact, and you should consider whether you should obtain additional
insurance coverage.
ENFORCEMENT OF THE DECLARATION
The Condominium Association will do all things necessary to enforce
each Owner's obligations under the Declaration, including, without limitation,
with respect to non-payment of assessments, the filing and foreclosure of liens,
the suspension of an Owner's right to vote on Condominium Association matters,
and the bringing of an action at law against the Owner personally. Furthermore,
the Condominium Association may direct the hotel operator to deduct the amount
of unpaid Assessments from any sum distributable to the Owner under the Hotel
Operating Agreement. All unpaid assessments will constitute a lien on a Unit
superior to all other liens except for tax and special assessment liens and
unpaid sums under a first mortgage or deed of trust.
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SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
Southwind Development Company, L.L.C. is an Alabama limited liability
company ("Southwind"). However, each member of Southwind's management team will
continue his involvement with Southwind until all Units are sold and thereafter
as necessary for the operating of Southwind. If all the Units are not sold, the
unsold Units will remain in the rental pool and Southwind will be an Owner on
the same basis as other Owners. Southwind will own the commercial unit and lease
it to the Hotel Operator when the Hotel begins operations.
MANAGEMENT
Julian B. MacQueen, age 48, has served as the President of Southwind
since March 11, 1999. Like all Southwind's officers, he will serve in that
capacity until he resigns or is removed by Southwind's manager. He also owns,
64% of the equity interest in Southwind. Mr. MacQueen is also the Chairman and
Chief Executive Officer of Innisfree. From 1979 until forming Innisfree in 1985,
Mr. MacQueen was Executive Vice President of Family Inns of America, a regional
chain of 27 motels. In that capacity, he was responsible for sales, marketing,
franchise and development. During his tenure with Family Inns of America, Mr.
MacQueen was responsible for the construction of six motel properties and the
development of a national sales and reservation system. Mr. MacQueen is a
Certified Hotel Administrator and a member of the Board of Directors of First
American Bank, Pensacola, Florida.
William P. Lagman, age 59, has served as Vice President of Marketing
for Southwind since March 11, 1999. Like all Southwind's officers, he will serve
in that capacity until he resigns or is removed by Southwind's manager. Mr.
Lagman is also the President of Gulf Coast Accommodations, Inc. Mr. Lagman has
been associated with
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Gulf Coast Accommodations, Inc. since 1993. Mr. Lagman is a licensed real estate
broker in the states of Alabama and Florida.
Harlan R. Butler, age 50, has served as the Vice President of Business
Development for Southwind since March 11, 1999. Like all Southwind's officers,
he will serve in that capacity until he resigns or is removed by Southwind's
manager. Mr. Butler is also an Executive Vice President for Innisfree hotels. He
joined the Innisfree management team in 1989. He directs the operation of 11
multiple franchise properties, office parks, and condominium management
companies. Mr. Butler has more than 26 years in the hotel management industry.
Roger W. Wiegner, age 45, has served as a Vice President of Operations
for Southwind since March 11, 1999. Like all Southwind's officers, he will serve
in that capacity until he resigns or is removed by Southwind's manager. He is
also the Regional Director of Operations for Innisfree, a position he has held
since 1991. Mr. Wiegner has more than 20 years of experience in the hotel
industry.
Stephen A. Shannon, age 51, has served as Vice President of Sales for
Southwind since March 11, 1999. Like all Southwind's officers, he will serve in
that capacity until he resigns or is removed by Southwind's manager. Mr. Shannon
is a licensed real estate broker with more than 20 years of experience in real
estate development and real estate sales.
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CERTAIN RELATIONSHIPS AND TRANSACTIONS
Julian MacQueen owns 64% of the equity interest in Southwind and 100%
of the equity interest of Southwind Development Management Company, Inc.,
Southwind's manager. Mr. MacQueen has at least a 50% equity interest in the
following companies which own or operate hotels or condominiums in the Gulf
Shores Market and surrounding areas: Romar Motels, Inc., which owns a 94-room
hotel that is operated as a Days Inn in Orange Beach, Alabama; Young's Motels,
Ltd., which owns "Young's By The Sea," an 112- room hotel in Gulf Shores,
Alabama; Perdido Hospitality, Ltd., which owns a 100- room hotel operated as a
Best Western Hotel in Perdido Key Beach, Florida; and Sunrise Hospitality,
L.L.C., which owns and operates the 100 room Beachside Resort and Conference
Center located in Pensacola, Florida.
Mr. MacQueen is also the majority stockholder and Chairman and Chief
Executive Officer of Innisfree Hotels, Inc., which will manage and operate the
Hotel. Innisfree is the Hotel Operator for each of the hotels listed above.
Innisfree is also the hotel operator for certain hotels in other markets.
Mr. MacQueen owns a 50% equity interest in Gulf Coast Accommodations,
Inc., which, in turn, owns a 50% equity interest in Island Vacations, L.L.C.
Island Vacations operates Perdido Skye Condominiums in Perdido Key Beach,
Florida, which has 46 units. In addition, it manages approximately 200
additional rental homes and condominiums in the Gulf Shores Market.
Mr. MacQueen is also the sole shareholder of Gulf Coast Accommodations
of Florida, Inc., which is located in Pensacola Beach, Florida. Gulf Coast
Accommodations of Florida, Inc. was formed in 1994 and operates three
condominium properties and 150 additional condominium rentals in Pensacola
Beach, Florida
Mr. MacQueen owns approximately 5% of First American Bank of Pensacola,
N.A., the construction lender for the development of the hotel. Mr. MacQueen is
also on the Board of Directors of First American Bank of Pensacola.
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The following diagram shows the relationship of Southwind and its
affiliates:
[DIAGRAM]
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In 1998 Mr. MacQueen advanced $198,901 to Southwind. He advanced
Southwind an additional $49,900 between January 1 and March 5, 1999. These
advances are non-interest bearing and are not secured. There are no written
terms for the repayment of these advances. We expect that these advances, as
well as any other such advances which may be made by Mr. MacQueen prior to
completion of the Hotel, will be repaid from the proceeds received by Southwind
from its sale of Units.
Bill Lagman and Steve Shannon, both Southwind officers, will also act
as real estate agents who will assist the Company's licensed agents with Unit
Sales and will receive commissions equal to 6% of the purchase price of all
Units sold.
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DETERMINATION OF PURCHASE PRICE
The initial purchase prices of the Units have been determined by
Southwind 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. We cannot assure you 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.
USE OF PROCEEDS
Assuming that the maximum number of Units offered hereby is sold, the
gross proceeds from the sale of Units will be approximately $12.67 million
exclusive of offering expenses (estimated at $237,024) and real estate
commissions of approximately $760,000. All of the net proceeds of the offering
will be paid to Southwind. Southwind will use the net proceeds from the offering
as follows:
<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE
APPLICATION OF NET APPROXIMATE AMOUNT OF NET PROCEEDS
------------------ ------------------ ---------------
PROCEEDS
--------
<S> <C> <C>
Repayment of construction $ 8,500,000(3) 72.82%
loan to First Bank of
Pensacola, N.A
Repayment of DeJusto Note 541,200(2) 4.64%
Repayment of loan to Mr. MacQueen 248,801(1) 2.13%
Retained by Southwind 2,382,975(4) 20.41%
----------- ------
TOTAL $11,672,976 100.00%
</TABLE>
(1) This amount reflects the outstanding principal amount of the loan from
Mr. MacQueen as of the date of this Prospectus. Additional amounts may be
advanced to Southwind prior to the time all of the Units are sold. In that
event, all additional amounts advanced will be repaid from the net proceeds of
the offering.
(2) This amount is principal only and does not include interest payable at 10%
per annum.
(3) The land acquisition loan will be combined with the construction loan. This
amount is estimated and includes the land acquisition loan, but does not include
cost overruns. In addition, this amount does not include interest payable at 10%
per annum. Any additional amounts incurred by Southwind under the construction
loan will be repaid from the net proceeds of the offering.
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(4) This amount may be substantially reduced if additional advances are repaid
to Mr. MacQueen by Southwind, if cost overruns are incurred, or if offering
expenses exceed the estimated amount. Any amounts retained by Southwind will be
distributed to its members pursuant to its operating agreement.
PLAN OF DISTRIBUTION
Southwind is offering the Units on a best efforts basis directly
through its members, officers and employees who are "associated persons" within
the meaning of Rule 3a4-1(c) under the Securities Exchange Act of 1934 and who
will not receive any sales commissions. The associated persons will be duly
licensed by state securities commissions in the states that require them to be
licensed as agents. Southwind will also engage duly licensed real estate
brokers, who will be supervised by its licensed agents, to assist in the sale of
the Units. The real estate brokers will receive sales commissions of 6% of the
total selling price of the Units sold by them in conjunction with such licensed
agents. The minimum subscription is one Unit.
Southwind must sell 65 Units, the minimum number of securities offered
(at the prices specified in Appendix A hereto) if any are sold, within twelve
months from the date of this Prospectus. Southwind is required to use only its
best efforts to sell 83 Units, the maximum number of securities offered.
Southwind must receive funds in the aggregate of approximately $1,995,100 within
fourteen months from the date of this Prospectus, or your deposits will be
promptly refunded to you, together with interest. The offering will terminate on
the earlier to occur of the following events:
- Twenty four months from the date of this Prospectus
- Twelve months from the date of this Prospectus if 65 Units
have not been sold
- The date the last of the 83 Units is sold
Retirement plans and individual retirement accounts may not purchase
Units. No sales will be made to discretionary accounts without prior approval of
the prospective investor.
HOW TO PURCHASE
Units are being offered for sale prior to the construction of the
hotel. Prospective Owners must execute a Preconstruction Purchase and Escrow
Agreement (the "Purchase Agreement"). The Purchase Agreement requires a deposit
of at least 20% of a Unit's purchase price into escrow. Although a purchaser's
obligations under the Purchase Agreement are not contingent upon his obtaining
financing, Southwind may terminate any Purchase Agreement in the event the
prospective purchaser is denied financing. Purchasers may procure financing from
any available source. Lender requirements for financing may vary. All financing
costs will be the obligation of individual purchasers who elect to finance the
purchase of a Unit. Additionally, Southwind may review a prospective purchaser's
credit report and terminate the Purchase Agreement if, in Southwind's
discretion, such credit report is unsatisfactory. Southwind may also, in its
sole discretion, terminate the Purchase Agreement if it does not sell at least
65 Units within 12 months from the date of this
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Prospectus. If this occurs, your deposit is refundable with accrued interest and
you will have no further remedies.
Concurrently with the execution of the Purchase Agreement, prospective
purchasers will be required to execute an Assignment and Assumption of the Hotel
Operating Agreement. By executing the Assignment and Assumption, each
prospective purchaser agrees to be bound by and comply with the Hotel Operating
Agreement.
Purchasers will be notified of the date and place for closing at least
10 days in advance. At closing, each purchaser will be required to pay the
balance of the Unit purchase price and to contribute to the Operating Cash
Reserve the amount indicated on the Schedule of Purchase Prices attached hereto
as Appendix A. Purchasers will also be required to pay the following expenses:
- Any applicable taxes
- Any costs associated with purchasers financing of the purchase
of the Unit
- Any utility deposit apportioned to the Unit
- Any insurance premium apportioned to the Unit
- Any fees for attorneys or other parties engaged by purchaser
- Any other expenses incidental to closing
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CERTAIN FEDERAL AND STATE INCOME TAX ASPECTS
The following discussion summarizes some of the federal income tax
aspects of the purchase, ownership and disposition of the Units and
participation in the rental pool and the opinions of Berkowitz, Lefkovits, Isom
& Kushner, A Professional Corporation, Birmingham, Alabama, counsel to Southwind
("Counsel"), with regard to certain material aspects. This discussion and
Counsel's opinions are based on the Internal Revenue Code of 1986, as amended
(the "Code"), existing and proposed Treasury Regulations, IRS rulings and
procedures and judicial decisions in effect on the date of this Memorandum. The
Tax Reform Act of 1986 (the "1986 Tax Act") and the Revenue Act of 1987 (the
"1987 Tax Act") substantially altered the federal income tax system,
particularly as it relates to the tax consequences of investments by individuals
in real estate, and the Technical and Miscellaneous Revenue Act of 1988 (the
"1988 Tax Act"), the Omnibus Revenue Reconciliation Act of 1989 (the "1989 Tax
Act"), the Revenue Reconciliation Act of 1990 (the "1990 Tax Act"), the Revenue
Reconciliation Act of 1993 (the "1993 Tax Act"), the Taxpayer Relief Act of 1997
(the "1997 Tax Act") and other acts have made numerous other changes in the
Code. Consequently, significant uncertainty exists regarding various aspects of
the taxation of Owners of Units. Furthermore, applicable Treasury Regulations
and interpretations have not yet been written or are under continuing review by
the IRS in many relevant areas. No assurance is given that future legislative or
administrative changes or court decisions will not modify the legal bases for
the statements, conclusions and opinions expressed in this discussion. Any such
changes may or may not be retroactive with respect to transactions completed
prior to the dates of such changes. Additionally, the interpretation of existing
law and regulations described here may be challenged by the Service during an
audit of the rental pool's information return or an Owner's individual return.
Moreover, a successful challenge of the rental pool's information return would
likely result in an adjustment to an Owner's individual return.
The following discussion of tax aspects generally assumes that the
investor is an individual and is a United States citizen or resident and is
limited to those areas of federal income tax law that are considered to be most
important to individual investors. Although the hotel operator will furnish the
Owners with such information regarding the rental pool as is required for income
tax purposes, each Owner will be responsible for preparing and filing his own
tax returns. Prospective investors should also be aware that it is impractical
to discuss in this section all aspects of federal and state income tax law which
might affect an investment in the Units, including determinations the
correctness of which depend in significant part on future factual circumstances
and matters peculiar to certain investors. Accordingly, while this discussion
applies generally to all individual prospective investors, prospective investors
are urged to consult, and must depend upon, their tax advisors regarding their
particular 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 Owners.
Unless otherwise noted, the discussion in this section represents the
opinion of Counsel. Counsel's opinions expressed in the following discussion are
only opinions that the tax law results described are more likely than not to be
the tax law results that should occur, subject to any conditions stated in the
particular
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section of this discussion which states such tax law conclusions. Although
Counsel's opinions represent its best judgment as of the date of this
Registration Statement and are based on legal authorities published as of that
date, those opinions do not bind the Service or in any way constitute an
assurance that the Service will agree with the federal income tax consequences
described. Further, no rulings have been requested from the IRS with respect to
the matters discussed in this section. Southwind does not intend to obtain any
such rulings.
CLASSIFICATION OF RENTAL POOL AS A PARTNERSHIP
Pursuant to the provisions of the Rental Pool Agreement, the hotel
operator will rent the Unit of each Owner on behalf of such Owner. Profits from
the rental of Units will be shared proportionately by the Owners of the Units.
Under Section 301.7701-2 of the Regulations, a business entity with two or more
members is classified for federal tax purposes as either a corporation or a
partnership. Counsel believes that the sum of the contractual relationships
created by the Rental Pool Agreement cause the rental pool to be a business
entity. Therefore, in counsel's opinion although each Owner will be the legal
Owner of a separate Unit, because of provisions in the Rental Pool Agreement
relating to the sharing of income and expenses of the hotel and its operations,
the Owners will be treated as participants in an business entity taxable as
either a partnership or a corporation for federal income tax purposes. There is
no assurance that the IRS or a court will agree that the rental pool should be
classified as a business entity.
If, consistent with tax counsel's opinion, a business entity is created
by the sum of the contractual relationships among the Owners of the Units, the
federal income tax consequences to the Owner of a Unit will depend upon the
business entity's classification for federal income tax purposes. If the
business entity is classified as a partnership for federal income tax purposes
and is not a "publicly traded partnership," it will not be subject to any
federal income tax. Instead, an Owner will be subject to tax on his or her
allocable share of the partnership's income and gain, and may be entitled to
claim his or her allocable share of the partnership's losses. However, deduction
of an Owner's allocable share of loss from a partnership is subject to many
important limitations, some of which are discussed below. Prospective Owners
should consult, and must depend on, their own tax advisor's advice concerning
detailed application of partnership tax rules to their specific tax situations.
If the business entity is classified as a corporation or as a "publicly
traded partnership," Owners will be treated as shareholders of a corporation,
and (1) the taxable income of the organization will need to be reported on a
corporate income tax return and will be subject to the federal income tax
imposed on corporations, (2) items of income, gain, loss, deduction or credit
will not flow through to the Owners to be accounted for on their individual
federal income tax returns, and (3) distributions, if any, will be treated as
corporate distributions to Owners, some or all of which may be taxable as
dividends. As a result, an owner's share of income from the rental pool would be
subject to two levels of taxation, at the corporate level when earned and at the
owner level when distributed.
Treasury Regulations which became effective January 1, 1997 address the
issue of whether a business entity must be classified for federal tax purposes
as a
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partnership or as a corporation. These Treasury Regulations, known as the
"check- the-box" regulations, state that a business entity that is not
specifically classified as a corporation under the Regulations (an "eligible
entity") can elect its classification for federal income tax purposes. An
eligible entity with two or more members that does not elect its classification
is classified under the default provisions of the Regulations is a partnership
for federal tax purposes. Counsel is of the opinion that the business entity
created by the contractual relationships among the Owners of the Units is an
eligible entity of two or more members under the Regulations. Therefore,
provided that the rental pool either affirmatively elects to be classified as a
partnership or makes no election and is classified under the default provisions
of the Regulations, and subject to the discussion of publicly-traded
partnerships below, Counsel is of the opinion that the rental pool will be
classified as a partnership for federal tax purposes. There is no assurance that
the IRS or a court will agree with counsel's opinion.
The discussion that follows is based upon the assumption that the
Owners will be treated as the Owners for tax purposes of their Unit and their
undivided share of the hotel common areas and that the rental pool will be
classified as a partnership and not as a corporation for federal income tax
purposes. Owners will be considered partners who have contributed the use of a
Unit, not its ownership, to the rental pool, so that each participating Owner
will report separately items of expense or deduction relating to the ownership
of a Unit, including interest and depreciation subject to the limitations
described below.
No federal income tax is paid by a partnership as an entity.
Partnerships file an annual partnership information return, and each Owner will
be provided with the information required for the preparation of such Owner's
respective federal income tax return. Each partner is required to report on his
income tax return his distributive share of a partnership's income, gain, loss,
deduction or credit (and items of tax preference), regardless of whether any
actual distribution is made to that partner during his taxable year.
Consequently, a partner's share of the partnership's taxable income may exceed
the cash, if any, actually distributed to that partner. Conversely, actual (or
constructive) distributions of money from a partnership will be taxable only to
the extent that such distributions exceed the adjusted basis of the partner's
interest in the partnership, regardless of whether the partnership has current
income. The characterization of an item of income or loss generally will be the
same for the partners as it is for the partnership.
The rental pool's items of income, gain, loss, deduction or credit will
be allocated proportionately among the Owners. The extent to which a specific
Owner may deduct his or her distributive share of the rental pool's expenses
will depend upon: (1) whether the rental activity engaged in is with the intent
of making a profit (Section 183); (2) whether the Unit constitutes a "dwelling
unit" (Section 280A); (3) whether the rental activity is a "passive activity"
(Section 469); (4) whether the taxpayer is "at risk" with respect to the
activity (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 an Owner's share of rental pool losses
exceeds the basis of his interest in the rental pool, such excess losses cannot
be utilized in that year by that Owner for any purpose, but are allowed as a
deduction (subject to the limitations described above) only when and
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to the extent that Owner's adjusted basis for his interest in the rental pool at
the end of any year exceeds zero.
STATUS OF THE PARTNERSHIP AS A PUBLICLY TRADED PARTNERSHIP
Under Section 7704 of the Code, a publicly traded partnership will be
treated as a corporation for federal income tax purposes. For this purpose, a
publicly traded partnership is one the interests in which are (i) traded on an
established securities market or (ii) readily tradable on a secondary market (or
the substantial equivalent thereof). Under the Regulations, for partnerships
starting business after December 31, 1995, an "established securities market"
means generally any national, regional, or local exchange, certain foreign
exchanges, and any interdealer quotation system that regularly disseminates firm
buy or sell quotations by identified brokers or dealers. Also pursuant to the
Regulations, interests are "readily tradable on a secondary market (or the
substantial equivalent thereof)" if (i) such interests are regularly quoted by
any person making a market in the securities; (ii) any person regularly makes
available to the public bid or offer quotes with respect to the interests and
stands ready to effect buy or sell transactions at the quoted prices for itself
or on behalf of others; (iii) the holder has a readily available, regular and
ongoing opportunity to sell or exchange the interest through a public means of
obtaining or providing information of offers to buy, sell or exchange such
interests; or (iv) prospective buyers and sellers have the opportunity to buy,
sell or exchange interests in the partnership in a time frame and with the
regularity and continuity comparable to that described in (i) through (iii)
above. Based on these Regulations, Counsel is of the opinion that the rental
pool will not be treated as publicly-traded partnership.
PARTNERSHIP ANTI-ABUSE RULE
Regulation ss. 1.701-2 gives the IRS broad authority to disregard a
partnership in whole or in part, to refuse to treat a partner as a partner, to
adjust a partnership's methods of accounting, or to alter or disregard
partnership allocations in the case of a partnership which the IRS determines to
have been formed or availed of with a principal purpose of substantially
reducing the present value of the partners' aggregate federal tax liability in a
manner which, even though in compliance with the literal language of the Code or
Regulations, the IRS determines to be "inconsistent with the intent of
subchapter K" of the Code. While the Counsel does not believe that the
anti-abuse rule has any application to the rental pool and its operations as
presently contemplated, the IRS is given very broad power under the Regulation.
Tax advisors can only speculate as to how such power might be used and how it
may be applied to future facts. Accordingly, Counsel has not given an opinion on
this matter.
BASIS OF EACH OWNER IN THE Unit AND IN THE RENTAL POOL PARTNERSHIP
For federal and state income tax purposes, an Owner will acquire an
ownership interest in the Unit and its furnishings and will be required to
contribute his or her pro-rata share to the initial operating cash reserve.
The Owner will acquire a tax basis in the Unit and the furnishings
equal to the Owner's cost for those items. These costs are not deductible but
will be recoverable
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either through depreciation deductions (see "Depreciation/Amortization" below)
or as an offset to the sales amount realized in the computation of gain or loss
on the sale or other disposition of such property.
The amount contributed by an Owner to the operating cash reserve will
be treated as a cash contribution to the rental pool partnership and the Owners
will acquire an initial tax basis in their rental pool partnership interest
equal to such contribution. From time to time, such tax basis will be increased
by the amount of an Owner's allocable share of rental pool income on gain and
decreased (but not below zero) by the amount of an Owner's allocable share of
losses and deductions and by the amount of cash or other property distributions
received by the Owner. The basis of an Owner in his or her partnership interest
is important for determining, among other things, the amount of losses and
deductions an Owner may deduct on his or her own tax return, the taxability of
distributions of cash or other property from the rental pool to the Owner, and
the amount of gain or loss on the sale of an Owner's interest in the rental
pool.
SECTION 183 - ACTIVITIES NOT ENGAGED IN FOR PROFIT
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
if the activity is not engaged in for profit. Losses disallowed under Section
183 are permanently denied, not suspended. 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 of whether an activity is engaged in for profit. 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 Owner, it is impossible to presently predict with accuracy
whether a particular Owner will be able to establish that he or she has a profit
objective with respect to his or her ownership of a Unit and participation in
the rental pool.
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 carry forwards) is realized in three out of five consecutive years. To
allow the presumption to work, a taxpayer 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. An Owner should make an election as prescribed in
the Regulations to preserve the ability to take advantage of this presumption
and the delay in determining its application. An Owner should note that
Southwind makes no assurances or representations concerning whether an Owner can
expect a profit from the ownership of a Unit and participation in the rental
pool within four years, however, it believes that the rental pool will more
likely than not be considered an activity engaged in for profit.
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SECTION 280A - RESIDENCE AND VACATION HOME RULES
The Section 280A home business expense disallowance rule applies to any
"dwelling unit" used by the taxpayer as a residence. Affected 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 and all structures and other property appurtenant to such
dwelling unit. A dwelling unit does not, however, include that portion of a unit
which is used exclusively as a hotel, motel, inn or similar establishment. For
this purpose, any personal use of a Unit will likely result in the Unit being
deemed a dwelling unit and not used exclusively as a hotel, motel, inn or
similar establishment.
The Regulations provide an objective standard for determining whether a
taxpayer's use of a dwelling unit causes it to be considered a residence subject
to a gross income limitation on deductions. Any Unit used by the 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 will be deemed a residence. 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
Owners in a time sharing arrangement or use by the taxpayer of other units in a
rental pool, and use of the unit as a result of a charitable donation by the
taxpayer. Based upon the proposed operation of the rental pool, which would
limit the use by any Owner of any of the Units to a combined total of 14 days,
the Section 280A gross income limitation should not should not apply to the
Owners.
Section 280A also establishes an expense allocation fraction to be used
in apportioning deductions between personal and business use of a dwelling unit.
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) of which the numerator
is the days the property is actually used for business and the denominator of
which is the total of the days the property is actually used (either for
business or personal use). This allocation formula applies if a property is used
for personal use for even one day. If an Unit is a dwelling unit, it is possible
that, pursuant to an election of all Owners, Units held by other Owners could be
aggregated with the Unit held by a particular Owner, with the result that even
an Owner that never used an Unit for personal purposes could, nevertheless, have
otherwise deductible expenses reduced pursuant to Section 280A. Based upon the
expense allocation requirement, an Owner will be able to deduct expenses
attributable to the rental pool only to the extent allocable to business use.
LIMITATIONS ON 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
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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).
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. Counsel believes that it is very unlikely that an Owner
will be treated as materially participating in the rental pool because, under
the terms of the Pooling Agreement, sole authority for the management and
operation of the hotel resides in the Hotel Manager.
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, Counsel does not believe that any of the exceptions apply to
the rental pool. Therefore, income and losses from the rental pool will be
treated as derived from a passive activity.
To the extent that an Owner has passive losses from other activities,
he should be able to offset those passive losses against his allocable share of
the rental pool's income and profits. Losses and credits disallowed by the
passive activity rules are suspended and may be carried forward (but not back)
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 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. A disposition can occur through a partner's disposition of his entire
partnership interest.
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 other amount borrowed with
respect to the activity if the lender is an institutional lender 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
61
<PAGE> 68
he or she is protected against loss through nonrecourse financing not so
secured, 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 and 280A are applied prior to the
application of Section 465, and Section 469 is applied after any limitation
under Section 465 is determined.
LIMITATION ON INTEREST DEDUCTIONS
Interest incurred to finance the purchase of a Unit will be deductible
subject to the application of the Residence and Vacation Home Rules and the
Passive Activity rules discussed above. Generally interest used to purchase an
interest in an entity which produces passive income or loss is treated as
passive. However to the extent that the rental pool partnership has investment
income, a portion of such interest may be characterized as investment (or
portfolio) interest. The deductibility of a taxpayer's investment interest
expense generally is limited to the amount of such 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). 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 investment interest to the extent the rental pool does not engage in
a passive activity or to the extent of any portfolio income received from the
rental pool.
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.
DEPRECIATION/AMORTIZATION
In Counsel's opinion, it is more likely than not that an Owner will be
treated as the Owner of a Unit and the tangible personal property associated
with the Unit and be entitled to depreciation deductions with respect to the
Unit and the tangible personal property. Each Owner of a Unit used for rental
purposes 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. 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
62
<PAGE> 69
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.
SALE OR OTHER DISPOSITION 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. If any such 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 an Owner's sale or other transfer of a Unit, the
distributive share of rental pool income, gain, loss, deduction or credit for
the entire year allocable to such Unit generally will be allocated between the
transferor and the transferee, based upon the period of time during the taxable
year that each owned such Unit, notwithstanding the timing or amounts of any
rental pool distributions.
ADMINISTRATIVE AND COMPLIANCE MATTERS
AUDIT RISK
The Service has the right to audit partnership information returns. If
the Service audits and adjusts the rental pool's information return, it is
likely that the Service will make corresponding adjustments to the Owners'
income tax returns. It also will be more likely that the Owners' individual tax
returns also will be audited. It is not expected that the rental pool will make
cash distributions to Owners to assist them in paying a tax liability resulting
from either an audit of the rental pool or the Owner.
RESOLUTION OF DISPUTES INVOLVING RENTAL POOL ITEMS
The rental pool will be treated as a separate entity for purposes of
federal tax audits, judicial review of administrative adjustments by the Service
and tax settlement proceedings. The tax treatment of partnership items of
income, gain, loss, deduction and credit are determined at the partnership level
in a unified partnership proceeding rather than in separate proceedings with the
partners. The Code provides for one partner to be designated as the "Tax Matters
Partner" for these purposes. The Board of Directors shall be responsible for
selecting the Tax Matters Partner for the rental pool.
63
<PAGE> 70
The Tax Matters Partner is entitled to make certain elections on behalf
of the rental pool and Owners and can extend the statute of limitations for
assessment of tax deficiencies against Owners with respect to rental pool items.
The Tax Matters Partner may seek judicial review (to which all the Owners are
bound) of a final rental pool administrative adjustment and, if the Tax Matters
Partner fails to seek judicial review, such review may be sought by any Owners
having in the aggregate at least a 5% profits interest. Only one action for
judicial review will go forward, however, and any Owners with an interest in the
outcome may participate.
The Owners generally will be required to treat rental pool items on
their personal federal income tax returns consistent with the treatment of the
items on the rental pool's information return. In general, this consistency
requirement is waived if an Owner files a statement with the Service identifying
the inconsistency. Failure to satisfy the consistency requirement, if not
waived, will result in an adjustment to conform the Owner's treatment of the
item with his treatment on the rental pool's information return. Even if the
consistency requirement is waived, adjustments to an Owner's tax liability with
respect to rental pool items may result from an audit of the rental pool's or
the Owner's tax return. Intentional or negligent disregard of the consistency
requirement may subject an Owner to substantial penalties.
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. Judicial
decisions generally are given retroactive effect, and other significant changes
historically have been given prospective application. However no assurance can
be given that any changes made in the tax law affecting an investment in the
rental pool 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.
CORPORATE INVESTORS
Section 183 does not apply to corporate Owners. Section 280A does not
apply to corporations that are not electing S corporations. Section 469 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. In particular, corporations that purchase Units should consult their
own tax advisor
64
<PAGE> 71
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
The rental pool's activities will be carried on within the state of
Alabama and the rental pool will be considered to be domiciled in the state of
Alabama. Alabama imposes an income tax with respect to all income, regardless of
source, of Alabama residents and the income derived from Alabama sources earned
by a nonresident. Alabama income tax law generally conforms to federal income
tax law in matters material to an investment in the rental pool.
Owners who are not Alabama residents may be subject to taxation by
their state of residence as well as Alabama with respect to income derived from
the rental pool. Depending upon applicable state and local laws, both Alabama
residents and nonresidents may find that some deductions that are available to
the Owners for federal income tax purposes may not be available for state or
local income tax purposes.
Furthermore, the tax treatment of particular items under other state or
local income tax laws may vary materially from federal income tax treatment. In
addition, Owners may be subject to income, gift, estate or inheritance taxes in
the state or locality of their residence or domicile, as well as in the state of
Alabama. Prospective Owners are urged to consult their tax advisors concerning
those matters.
LEGAL MATTERS
Berkowitz, Lefkovits, Isom & Kushner, A Professional Corporation,
Birmingham, Alabama, has passed on certain tax matters as described under
"Certain Federal and State Income Tax Aspects." Prospective Owners should not
consider Berkowitz, Lefkovits, Isom & Kushner, A Professional Corporation, 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.
EXPERTS
The balance sheet of Southwind dated as of December 31, 1998 appearing
in this Prospectus and Registration Statement has been audited by Randall
Sansom, CPAs, 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.
65
<PAGE> 72
ADDITIONAL INFORMATION
Southwind Development Company, L.L.C. has filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement under the
Securities Act with respect to the Units offered by this Prospectus. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect to the
Units offered by this Prospectus, reference is made to the Registration
Statement, including the exhibits thereto. Statements contained in this
Prospectus as to the contents of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. 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.
66
<PAGE> 73
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL
IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENTS
OF ESTIMATED ANNUAL OPERATING RESULTS
FOR THE OPERATING YEARS ENDING
DECEMBER 31, 2001-2003
F-1
<PAGE> 74
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL
IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENTS
OF ESTIMATED ANNUAL OPERATING RESULTS
FOR THE OPERATING YEARS ENDING
DECEMBER 31, 2001-2003
Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Accountant's Compilation Report.................................................................................F-3
Forecasted summarized statement of estimated
annual operating results........................................................................................F-4
Forecasted summarized statement of allocation
of net distributable cash flow to Owner of Units.........................................................F-5 - F-16
Summary of significant forecast assumptions.............................................................F-17 - F-19
</TABLE>
F-2
<PAGE> 75
March 5, 1999
To the Member
Southwind Development Company, L.L.C.
Gulf Breeze, Florida
I have compiled the accompanying forecasted summarized statement of estimated
annual operating results and the related forecasted summarized statements of
allocation of net distributable cash flow to an Owner of the following: a
typical one bedroom superior resort unit, a typical one bedroom terrace resort
unit, a typical one bedroom 3rd floor side view resort unit, a typical one
bedroom 2nd floor side view resort unit, a typical one bedroom 1st floor side
view resort unit, a typical one bedroom standard resort unit both with and
without individual Owners' usage and the forecasted summarized statement of
allocation of net distributable cash flow to an Owner of a unit both with and
without individual Owners' usage, of Beachside All-Units Hotel, a proposed 84
room hotel in Gulf Shores, Alabama for the operating years ending December 31,
2001 through 2003, in accordance with standards established by the American
Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of a forecast, information
that is the representation of management and does not include evaluation of the
support for the assumptions underlying the forecast information that is the
representation of management and does not include evaluation of the support for
the assumptions underlying the forecast. I have not examined the forecasts and,
accordingly, do not express an opinion or any other form of assurance on the
actual results, because events and circumstances frequently do not occur as
expected, and those differences may be material. I have no responsibility to
update this report for events and circumstances occurring after the date of
this report.
Randall L. Sansom
Certified Public Accountant
Gulf Breeze, Florida
F-3
<PAGE> 76
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
Forecasted Summarized Statement of Estimated Annual Operating Results
For the Operating Years ending December 31, 2001-2003
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
December 31, 2001 December 31, 2002 December 31, 2003
<S> <C> <C> <C>
Revenue (A)
Rooms 2,131,040 98.5% 2,298,973 98.5% 2,467,043 98.5%
Telephone (1% of Room Rev) 21,310 1.0% 22,990 1.0% 24,670 1.0%
Other Income (.5% of Room Rev) 10,655 0.5% 11,494 0.5% 12,336 0.5%
------------------- ------------------- --------------------
Total Revenue 2,163,005 100.0% 2,333,457 100.0% 2,504,049 100.0%
Departmental Expenses (B)
Rooms 348,243 16.1% 375,686 16.1% 403,151 16.1%
Telephone 27,704 1.3% 29,887 1.3% 32,072 1.3%
Other Income -- 0.0% -- 0.0% -- 0.0%
------------------- ------------------- --------------------
Total Departmental Expenses 375,947 17.4% 405,573 17.4% 435,223 17.4%
------------------- ------------------- --------------------
Income Before Undistributed Expenses 1,787,058 82.6% 1,927,884 82.6% 2,068,826 82.6%
Undistributed Expenses
Administrative & General 173,041 8.0% 186,677 8.0% 200,324 8.0%
Sales & Marketing 62,727 2.9% 67,670 2.9% 72,617 2.9%
Property Operations 108,150 5.0% 116,673 5.0% 125,202 5.0%
Energy 114,639 5.3% 123,673 5.3% 132,715 5.3%
------------------- ------------------- --------------------
Total Undistributed Expenses 458,557 21.2% 494,693 21.2% 530,858 21.2%
------------------- ------------------- --------------------
Gross Operating Profit 1,328,501 61.4% 1,433,191 61.4% 1,537,968 61.4%
Fixed Costs
Management Fees 108,150 5.0% 116,673 5.0% 125,202 5.0%
Incentive Management Fees 0 0.0% -- 0.0% 0 0.0%
Property Insurance 64,890 3.0% 70,004 3.0% 75,121 3.0%
Equipment Leases 4,326 0.2% 4,666 0.2% 5,009 0.2%
Property Taxes 0 0.0% -- 0.0% 0 0.0%
------------------- ------------------- --------------------
Total Fixed Costs 177,366 8.2% 191,343 8.2% 205,332 8.2%
------------------- ------------------- --------------------
Total Operating Income before 1,151,135 53.2% 1,241,848 53.2% 1,332,636 53.2%
Reserves
Reserve Replacement 21,630 1.0% 46,669 2.0% 75,121 3.0%
------------------- ------------------- --------------------
Net Distributable Cashflow (C) 1,129,505 52.2% 1,195,179 51.2% 1,257,515 50.2%
=================== =================== ====================
# Units 84 84 84
# days 365 365 365
Available Room nights 30,660 30,660 30,660
Projected Room Nights 18,181 19,009 19,561
Projected Room Revenue $2,131,040 $2,298,973 $2,467,043
Projected Average Room Rate $ 117.21 $ 120.94 $ 126.12
Projected Occupancy % 59.3% 62.0% 63.8%
</TABLE>
(A) An Owner's personal usage is fourteen days per year and has
not been deducted from room revenue. Cleaning charges have
been included in room revenue.
(B) The percentages for departmental expenses are stated as a
percentage of the related revenue, based on the experience of
Young's By The Sea, which is a Gulf Shores hotel, operated by
Innisfree. Young's By The Sea is a beachfront extended stay
property approximately 0.5 miles east of the Beachside
All-Units Hotel site.
(C) Net distributable cash flow excludes certain fixed costs such
as interest, property taxes, depreciation, association dues
or assessments and various other costs that will be paid at
the investor level.
See accompanying summary of significant assumptions and accounting policies and
accountant's report
F-4
<PAGE> 77
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
Forecasted Summarized Statement of Allocation of Net Distributable Cash Flow
To an Owner of a Typical One-Bedroom Standard Resort Unit
Without Usage
Sales Price $149,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $25,284 $27,277 $29,271
Operating Expenses from forecast (2) $11,828 $12,760 $13,693
------- ------- -------
Net Operating Income Before certain charges $13,456 $14,517 $15,578
Reserves for Replacement (3) $ 253 $ 546 $ 878
------- ------- -------
Net Distributive Cash Flow $13,203 $13,971 $14,700
Debt Service (4) $10,062 $10,062 $10,062
------- ------- -------
Annual Cash Flow (Deficiency) received Prior
to Deduction for Depreciation & Income Tax Effect (5) $ 3,141 $ 3,909 $ 4,638
======= ======= =======
Owners Initial Cash Investment $30,564 $30,564 $30,564
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned
percentage interests of the units. See the Schedule of
Purchase Prices in the Prospectus for assigned percentage
interests. This forecast assumes no individual Owner usage.
Revenues exclude lodging and sales tax.
(2) Operating expenses include the estimated Departmental
Expenses, Undistributed Expenses and Fixed Costs to manage
the hotel.
(3) Reserve for replacement is 1% of Total Revenue in the first
year, 2% of Total Revenue in year two, 3% of Total Revenue in
year 3, 4% of Total Revenue in year 4 and stabilizing at 5%
thereafter. This Reserve Replacement is established for the
replacement of capital items.
(4) Debt service assumes a mortgage of 80% of the purchase price
($149,900) bearing a 7.5% interest rate with a 30-year
amortization. The terms of this financing are based on
mortgage availability from a variety of Alabama lenders for
qualified individuals purchasing an investment property.
(5) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $149,900
Less estimated financing of 80% of Purchase Price ($119,920)
------------------------------------------------- --------
Down Payment $ 29,980
Additional funding of Operating Reserve (1.169%) $ 584
------------------------------------------------ --------
Owner's Initial Cash Investment $ 30,564
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 29.6% 53.6%
2002 $120.94 62.0% 31.0% 54.3%
2003 $126.12 63.8% 32.5% 54.8%
</TABLE>
See accompanying summary of significant assumptions and accounting policies and
accountant's report
F-5
<PAGE> 78
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
Forecasted Summarized Statement of Allocation of Net Distributable Cash Flow
To an Owner of a Typical One-Bedroom Standard Resort Unit
With 14 Days of Personal Usage
Sales Price $149,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $25,284 $27,277 $29,271
Operating Expenses from forecast (3) $11,828 $12,760 $13,693
Owner Usage (2) $ 1,890 $ 1,890 $ 1,890
------- ------- -------
Net Operating Income Before certain charges $11,566 $12,627 $13,688
Reserves for Replacement (4) $ 253 $ 546 $ 878
------- ------- -------
Net Distributive Cash Flow $11,313 $12,081 $12,810
Debt Service (5) $10,062 $10,062 $10,062
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax
Effect (6) $ 1,251 $ 2,019 $ 2,748
======= ======= =======
Owners Initial Cash Investment $30,564 $30,564 $30,564
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage
interests of the units. See the Schedule of Purchase Prices in the
Prospectus. Revenues exclude lodging and sales tax.
(2) This forecast assumes fourteen days of personal usage of each unit.
Based on this assumption, the reduction of gross revenue due to an
Owner's usage has been calculated by multiplying fourteen days times
$135 ADR per day for all three years. The $135 ADR is calculated by
taking an average of peak season ADR and low season ADR.
(3) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(4) Reserve for replacement is 1% of Total Revenue in the first year, 2%
of Total Revenue in year two, 3% of Total Revenue in year 3, 4% of
Total Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(5) Debt service assumes a mortgage of 80% of the purchase price ($149,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of
this financing are based on mortgage availability from a variety of
Alabama lenders for qualified individuals purchasing an investment
property.
(6) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 149,900
Less estimated financing of 80% of Purchase Price $(119,920)
------------------------------------------------- ---------
Down Payment $ 29,980
Additional funding of Operating Reserve (1.169%) $ 585
------------------------------------------------ ---------
Owner's initial Cash Investment $ 30,565
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 31.2% 58.0%
2002 $120.94 62.0% 32.6% 58.5%
2003 $126.12 63.8% 34.0% 58.90%
</TABLE>
See accompanying summary of significant assumptions and accounting policies and
accountant's report
F-6
<PAGE> 79
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
Forecasted Summarized Statement of Allocation of Net Distributable Cash Flow
To an Owner of a Typical One-Bedroom First Floor Side View Resort Unit
Without Usage
Sales Price $152,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $25,790 $27,823 $29,857
Operating Expenses from forecast (2) $12,065 $13,016 $13,968
------- ------- -------
Net Operating Income Before certain charges $13,725 $14,807 $15,889
Reserves for Replacement (3) $ 258 $ 556 $ 896
------- ------- -------
Net Distributive Cash Flow $13,467 $14,251 $14,993
Debt Service (4) $10,263 $10,263 $10,263
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (5) $ 3,204 $ 3,988 $ 4,730
======= ======= =======
Owners Initial Cash Investment $31,176 $31,176 $31,176
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage
interests of the units. See Schedule of Purchase Prices in the
Prospectus for assigned percentage interests. This forecast assumes no
individual Owner usage. Revenues exclude lodging and sales tax.
(2) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(3) Reserve for replacement is 1% of Total Revenue in the first year, 2%
of Total Revenue in year two, 3% of Total Revenue in year 3, 4% of
Total Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(4) Debt service assumes a mortgage of 80% of the purchase price ($152,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of
this financing are based on mortgage availability from a variety of
Alabama lenders for qualified individuals purchasing an investment
property.
(5) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 152,900
Less estimated financing of 80% of Purchase Price $(122,320)
------------------------------------------------- ---------
Down Payment $ 30,580
Additional funding of Operating Reserve (1.192%) $ 596
------------------------------------------------ ---------
Owner's initial Cash Investment $ 31,176
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 29.6% 53.6%
2002 $120.94 62.0% 31.0% 54.3%
2003 $126.12 63.8% 32.5% 54.8%
</TABLE>
See accompanying summary of significant assumptions and accounting policies and
accountant's report
F-7
<PAGE> 80
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM FIRST FLOOR SIDE VIEW RESORT UNIT
WITH 14 DAYS OF PERSONAL USAGE
------------------------------
SALES PRICE $152,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $25,790 $27,823 $29,857
Operating Expenses from forecast (3) $12,065 $13,016 $13,968
Owner Usage (2) $ 1,890 $ 1,890 $ 1,890
------- ------- -------
Net Operating Income Before certain charges $11,835 $12,917 $13,999
Reserves for Replacement (4) $ 258 $ 556 $ 895
------- ------- -------
Net Distributive Cash Flow $11,577 $12,361 $13,104
Debt Service (5) $10,263 $10,263 $10,263
------- ------- -------
Annual Cash Flow (deficiency ) received Prior to
Deduction for Depreciation & Income Tax Effect (6) $ 1,314 $ 2,098 $ 2,841
======= ======= =======
Owners Initial Cash Investment $31,176 $31,176 $31,176
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. Revenues exclude lodging and sales tax.
(2) This forecast assumes fourteen days of personal usage of each unit. Based
on this assumption, the reduction of gross revenue due to an Owner's usage
has been calculated by multiplying fourteen days times $135 ADR per day for
all three years. The $135 ADR is calculated by taking an average of peak
season ADR and low season ADR.
(3) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(4) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(5) Debt service assumes a mortgage of 80% of the purchase price ($152,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(6) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 152,900
Less estimated financing of 80% of Purchase Price $(122,320)
---------
Down Payment $ 30,580
Additional funding of Operating Reserve (1.192%) $ 596
---------
Owner's initial Cash Investment $ 31,176
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 31.2% 58.0%
2002 $120.94 62.0% 32.6% 58.5%
2003 $126.12 63.8% 34.0% 58.9%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-8
<PAGE> 81
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM 2ND FLOOR SIDE VIEW RESORT UNIT
WITHOUT USAGE
-------------
SALES PRICE $154,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $26,128 $28,187 $30,247
Operating Expenses from forecast (2) $12,223 $13,186 $14,150
------- ------- -------
Net Operating Income Before certain charges $13,905 $15,001 $16,097
Reserves for Replacement (3) $ 261 $ 564 $ 907
------- ------- -------
Net Distributive Cash Flow $13,644 $14,437 $15,190
Debt Service (4) $10,398 $10,398 $10,398
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (5) $ 3,246 $ 4,039 $ 4,792
======= ======= =======
Owners Initial Cash Investment $31,584 $31,584 $31,584
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. This forecast assumes no individual Owner
usage. Revenues exclude lodging and sales tax.
(2) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(3) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(4) Debt service assumes a mortgage of 80% of the purchase price ($154,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(5) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 154,900
Less estimated financing of 80% of Purchase Price $(123,920)
---------
Down Payment $ 30,980
Additional funding of Operating Reserve (1.208%) $ 604
---------
Owner's initial Cash Investment $ 31,584
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 29.6% 53.6%
2002 $120.94 62.0% 31.0% 54.3%
2003 $126.12 63.8% 32.5% 54.8%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-9
<PAGE> 82
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM 2ND FLOOR SIDE VIEW RESORT UNIT
WITH 14 DAYS OF PERSONAL USAGE
------------------------------
SALES PRICE $154,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $26,128 $28,187 $30,247
Operating Expenses from forecast (3) $12,223 $13,186 $14,150
Owner Usage (2) $ 1,890 $ 1,890 $ 1,890
------- ------- -------
Net Operating Income Before certain charges $12,015 $13,111 $14,207
Reserves for Replacement (4) $ 261 $ 564 $ 907
------- ------- -------
Net Distributive Cash Flow $11,754 $12,547 $13,300
Debt Service (5) $10,398 $10,398 $10,398
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (6) $ 1,356 $ 2,149 $ 2,902
======= ======= =======
Owners Initial Cash Investment $31,584 $31,584 $31,584
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. Revenues exclude lodging and sales tax.
(2) This forecast assumes fourteen days of personal usage of each unit. Based
on this assumption, the reduction of gross revenue due to an Owner's usage
has been calculated by multiplying fourteen days times $135 ADR per day for
all three years. The $135 ADR is calculated by taking an average of peak
season ADR and low season ADR.
(3) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(4) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(5) Debt service assumes a mortgage of 80% of the purchase price ($154,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(6) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 154,900
Less estimated financing of 80% of Purchase Price $(123,920)
---------
Down Payment $ 30,980
Additional funding of Operating Reserve (1.208%) $ 604
---------
Owner's initial Cash Investment $ 31,584
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 31.2% 58.0%
2002 $120.94 62.0% 32.6% 58.5%
2003 $126.12 63.8% 34.0% 58.9%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-10
<PAGE> 83
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM 3RD FLOOR SIDE VIEW RESORT UNIT
WITHOUT USAGE
-------------
SALES PRICE $157,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $26,634 $28,732 $30,833
Operating Expenses from forecast (2) $12,459 $13,441 $14,424
------- ------- -------
Net Operating Income Before certain charges $14,175 $15,291 $16,409
Reserves for Replacement (3) $ 266 $ 575 $ 925
------- ------- -------
Net Distributive Cash Flow $13,909 $14,716 $15,484
Debt Service (4) $10,599 $10,599 $10,599
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (5) $ 3,310 $ 4,117 $ 4,885
======= ======= =======
Owners Initial Cash Investment $32,196 $32,196 $32,196
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. This forecast assumes no individual Owner
usage. Revenues exclude lodging and sales tax.
(2) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(3) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(4) Debt service assumes a mortgage of 80% of the purchase price ($157,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(5) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 157,900
Less estimated financing of 80% of Purchase Price $(126,320)
---------
Down Payment $ 31,580
Additional funding of Operating Reserve (1.231%) $ 616
---------
Owner's initial Cash Investment $ 32,196
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 29.6% 53.6%
2002 $120.94 62.0% 31.0% 54.3%
2003 $126.12 63.8% 32.5% 54.8%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-11
<PAGE> 84
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM 3RD FLOOR SIDE VIEW RESORT UNIT
WITH 14 DAYS OF PERSONAL USAGE
------------------------------
SALES PRICE $157,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $26,634 $28,732 $30,833
Operating Expenses from forecast (3) $12,459 $13,441 $14,424
Owner Usage (2) $ 1,890 $ 1,890 $ 1,890
------- ------- -------
Net Operating Income Before certain charges $12,285 $13,401 $14,519
Reserves for Replacement (4) $ 266 $ 575 $ 925
------- ------- -------
Net Distributive Cash Flow $12,019 $12,826 $13,594
Debt Service (5) $10,599 $10,599 $10,599
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (6) $ 1,420 $ 2,227 $ 2,995
======= ======= =======
Owners Initial Cash Investment $32,196 $32,196 $32,196
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. Revenues exclude lodging and sales tax.
(2) This forecast assumes fourteen days of personal usage of each unit. Based
on this assumption, the reduction of gross revenue due to an Owner's usage
has been calculated by multiplying fourteen days times $135 ADR per day for
all three years. The $135 ADR is calculated by taking an average of peak
season ADR and low season ADR.
(3) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(4) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(5) Debt service assumes a mortgage of 80% of the purchase price ($157,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(6) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 157,900
Less estimated financing of 80% of Purchase Price $(126,320)
---------
Down Payment $ 31,580
Additional funding of Operating Reserve (1.231%) $ 616
---------
Owner's initial Cash Investment $ 32,196
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 31.2% 58.0%
2002 $120.94 62.0% 32.6% 58.5%
2003 $126.12 63.8% 34.0% 58.9%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-12
<PAGE> 85
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM SUPERIOR RESORT UNIT
WITHOUT USAGE
-------------
SALES PRICE $159,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $26,971 $29,096 $31,223
Operating Expenses from forecast (2) $12,617 $13,611 $14,606
------- ------- -------
Net Operating Income Before certain charges $14,354 $15,485 $16,617
Reserves for Replacement (3) $ 270 $ 582 $ 937
------- ------- -------
Net Distributive Cash Flow $14,084 $14,903 $15,680
Debt Service (4) $10,733 $10,733 $10,733
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (5) $ 3,351 $ 4,170 $ 4,947
======= ======= =======
Owners Initial Cash Investment $32,603 $32,603 $32,603
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. This forecast assumes no individual Owner
usage. Revenues exclude lodging and sales tax.
(2) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(3) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(4) Debt service assumes a mortgage of 80% of the purchase price ($159,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(5) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 159,900
Less estimated financing of 80% of Purchase Price $(127,920)
---------
Down Payment $ 31,920
Additional funding of Operating Reserve (1.247%) $ 623
---------
Owner's initial Cash Investment $ 32,603
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 29.6% 53.6%
2002 $120.94 62.0% 31.0% 54.3%
2003 $126.12 63.8% 32.5% 54.8%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-13
<PAGE> 86
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM SUPERIOR RESORT UNIT
WITH 14 DAYS OF PERSONAL USAGE
------------------------------
SALES PRICE $159,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $26,971 $29,096 $31,223
Operating Expenses from forecast (3) $12,617 $13,611 $14,607
Owner Usage (2) $ 1,890 $ 1,890 $ 1,890
------- ------- -------
Net Operating Income Before certain charges $12,464 $13,595 $14,727
Reserves for Replacement (4) $ 270 $ 582 $ 937
------- ------- -------
Net Distributive Cash Flow $12,194 $13,013 $13,790
Debt Service (5) $10,733 $10,733 $10,733
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (6) $ 1,461 $ 2,280 $ 3,057
======= ======= =======
Owners Initial Cash Investment $32,603 $32,603 $32,603
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. Revenues exclude lodging and sales tax.
(2) This forecast assumes fourteen days of personal usage of each unit. Based
on this assumption, the reduction of gross revenue due to an Owner's usage
has been calculated by multiplying fourteen days times $135 ADR per day for
all three years. The $135 ADR is calculated by taking an average of peak
season ADR and low season ADR.
(3) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(4) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(5) Debt service assumes a mortgage of 80% of the purchase price ($159,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(6) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 159,900
Less estimated financing of 80% of Purchase Price $(127,920)
---------
Down Payment $ 31,980
Additional funding of Operating Reserve (1.247%) $ 623
---------
Owner's initial Cash Investment $ 32,603
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 31.2% 58/0%
2002 $120.94 62.0% 32.6% 58.5%
2003 $126.12 63.8% 34.0% 58.9%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-14
<PAGE> 87
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM TERRACE RESORT UNIT
WITHOUT USAGE
-------------
SALES PRICE $169,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $28,658 $30,916 $33,176
Operating Expenses from forecast (2) $13,407 $14,463 $15,520
------- ------- -------
Net Operating Income Before certain charges $15,251 $16,453 $17,656
Reserves for Replacement (3) $ 287 $ 618 $ 995
------- ------- -------
Net Distributive Cash Flow $14,964 $15,835 $16,661
Debt Service (4) $11,404 $11,404 $11,404
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (5) $ 3,560 $ 4,431 $ 5,257
======= ======= =======
Owners Initial Cash Investment $34,642 $34,642 $34,642
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. This forecast assumes no individual Owner
usage. Revenues exclude lodging and sales tax.
(2) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(3) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(4) Debt service assumes a mortgage of 80% of the purchase price ($169,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(5) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 169,900
Less estimated financing of 80% of Purchase Price $(135,920)
---------
Down Payment $ 33,980
Additional funding of Operating Reserve (1.325%) $ 662
---------
Owner's initial Cash Investment $ 34,642
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 29.6% 53.6%
2002 $120.94 62.0% 31.0% 54.3%
2003 $126.12 63.8% 32.5% 54.8%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-15
<PAGE> 88
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL IN GULF SHORES, ALABAMA
FORECASTED SUMMARIZED STATEMENT OF ALLOCATION OF NET DISTRIBUTABLE CASH FLOW
TO AN OWNER OF A TYPICAL ONE-BEDROOM TERRACE RESORT UNIT
WITH 14 DAYS OF PERSONAL USAGE
------------------------------
SALES PRICE $169,900
<TABLE>
<CAPTION>
Year Ending Year Ending Year Ending
Dec 31, 2001 Dec 31, 2002 Dec 31, 2003
------------ ------------ ------------
<S> <C> <C> <C>
Revenue from Forecast (1) $28,658 $30,916 $33,176
Operating Expenses from forecast (3) $13,407 $14,463 $15,520
Owner Usage (2) $ 1,890 $ 1,890 $ 1,890
------- ------- -------
Net Operating Income Before certain charges $13,361 $14,563 $15,766
Reserves for Replacement (4) $ 287 $ 618 $ 995
------- ------- -------
Net Distributive Cash Flow $13,074 $13,945 $14,771
Debt Service (5) $11,404 $11,404 $11,404
------- ------- -------
Annual Cash Flow (Deficiency) received Prior to
Deduction for Depreciation & Income Tax Effect (6) $ 1,670 $ 2,541 $ 3,367
======= ======= =======
Owners Initial Cash Investment $34,642 $34,642 $34,642
======= ======= =======
</TABLE>
(1) Revenues are allocated to Owners based on the assigned percentage interests
of the units. See Schedule of Purchase Prices in the Prospectus for
assigned percentage interests. Revenues exclude lodging and sales tax.
(2) This forecast assumes fourteen days of personal usage of each unit. Based
on this assumption, the reduction of gross revenue due to an Owner's usage
has been calculated by multiplying fourteen days times $135 ADR per day for
all three years. The $135 ADR is calculated by taking an average of peak
season ADR and low season ADR.
(3) Operating expenses include the estimated Departmental Expenses,
Undistributed Expenses and Fixed Costs to manage the hotel.
(4) Reserve for replacement is 1% of Total Revenue in the first year, 2% of
Total Revenue in year two, 3% of Total Revenue in year 3, 4% of Total
Revenue in year 4 and stabilizing at 5% thereafter. This Reserve
Replacement is established for the replacement of capital items.
(5) Debt service assumes a mortgage of 80% of the purchase price ($169,900)
bearing a 7.5% interest rate with a 30-year amortization. The terms of this
financing are based on mortgage availability from a variety of Alabama
lenders for qualified individuals purchasing an investment property.
(6) Before real estate taxes.
<TABLE>
<S> <C>
Unit Price $ 169,900
Less estimated financing of 80% of Purchase Price $(135,920)
---------
Down Payment $ 33,980
Additional funding of Operating Reserve (1.325%) $ 662
---------
Owner's initial Cash Investment $ 34,642
</TABLE>
Occupancy Level Required to
Break Even
<TABLE>
<CAPTION>
Years Ending Average Daily Projected Before Debt After Debt
December 31, Room Rates Occupancy Service Service
------------ ------------- --------- ----------- ----------
<S> <C> <C> <C> <C>
2001 $117.21 59.3% 31.2% 58.0%
2002 $120.94 62.0% 32.6% 58.5%
2003 $126.12 63.8% 34.0% 58.9%
</TABLE>
SEE ACCOMPANYING SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES AND
ACCOUNTANT'S REPORT
F-16
<PAGE> 89
BEACHSIDE ALL-UNITS HOTEL
PROPOSED 84 ROOM HOTEL
IN GULF SHORES SHORES, ALABAMA
SUMMARY OF SIGNIFICANT ASSUMPTIONS AND ACCOUNTING POLICIES
These financial forecasts present, to the best of management's knowledge and
belief, the hotel's expected annual operating years ending December 31, 2001
through 2003. Accordingly, the forecasts reflect its judgment as of March 5,
1999, the date of these forecasts, of the expected conditions and these expected
courses of action. The assumptions disclosed herein are those that management
believes are significant to the forecasts. There will usually be differences
between the forecasted and actual results, because events and circumstances
frequently do not occur as expected, and those differences may be material.
Investors should recognize that there can be no assurance that the assumptions
will prove correct or that actual results will not differ from the results
forecasted. Actual results may vary materially because events and circumstances
frequently do not occur as expected. Investors are encouraged to consult with
their own advisors with respect to the assumptions upon which the forecasts are
based and are encouraged to review the discussion of risk factors regarding the
hotel and its operations set forth under the heading "Risk Factors."
The securities prospectus should be reviewed for a more detailed explanation of
the investment and its related risk factors.
1. DESCRIPTION OF THE PROJECT AND ANALYSIS OF SOURCES OF FORECASTED
INFORMATION:
Southwind Development Company, L.L.C. owns a parcel of land in Gulf
Shores, Alabama for the purpose of developing a hotel. Southwind
Development Company, L.L.C. plans to market the hotel as 83 individual
units to individual investors. Concurrent with the purchase of the
units, the unit Owners will enter into a hotel and operating rental
pool agreement. Unit Owners will be subject to income taxes at an
individual level on their allocated share of income or loss, as
forecasted on pages F-5 through F-16, less other deductions, such as
interest, depreciation, association dues and/or assessments, cleaning
fees and various other costs that will be paid at the investor level.
Management of Southwind Development Company, L.L.C. has evaluated
numerous sources of information and believes they have identified the
most relevant material sources of information available pertaining to
this forecast to support assumptions for revenues and expenses in this
forecast. These sources include, but are not limited to, market data,
operating data for the geographic location and certain mandatory
facility requirements based on architectural renderings, cost analysis,
site surveys, zoning studies and real estate consultation. Management
has analyzed this information for consistency and completeness in
developing this forecast.
F-17
<PAGE> 90
2. SUMMARY OF SIGNIFICANT FORECAST ASSUMPTIONS:
- The property will be developed as an 84-unit hotel, all units
directly on the Gulf of Mexico with full kitchens and a bath
and a half.
- The anticipated opening date for the hotel is the summer of
2000.
- The number of rooms available in the rental pool is 84
individual hotel units.
- The anticipated occupancy and average daily room rates as
shown on page F-5 through F-16 are more fully discussed on
pages 29 through 33 of this Summary.
- Innisfree Hotels, Inc. will operate the facility as discussed
on pages 29 through 33 of this Summary.
- The forecasted summarized statements of allocation of Net
Distributable Cash Flow to an Owner are presented on pages F-5
through F-16.
- Management fees are as set forth in the hotel operating
agreement.
- The percentage expenses is based on the percentage expenses of
Youngs by the Sea.
- Reserves for furniture, fixtures and expenses are based on
industry standards.
- A minimum of 84 rooms must be completed prior to the hotel
opening
- At the time of closing, Southwind Development Company, L.L.C.
will retain ownership of any unsold units and the commercial
unit and will share in the rental pool operations
proportionately. Southwind Development Company, L.L.C. will
continue to market any unsold units.
- Each Unit will include a built-in bunk bed area that will
allow each unit to sleep 6 people.
3. BASIS OF PRESENTATION:
The forecasted presentation of Net Distributable Cash Flow has been
presented using the accrual basis of accounting. Net Distributable Cash
Flow, as presented on page F-4, excludes expense for property taxes.
The operating reserve established concurrently with the purchase of the
units will be used to stabilize cash flow for operations and investor
distribution purposes. Due to the establishment of this reserve, no
adjustments have been made for any differences between the accrual
basis Net Distributable Cash Flow and the net distributable cash flow,
except for the reserve for replacements.
4. HOTEL AND OPERATING RENTAL POOL AGREEMENT:
Upon purchasing a unit, each Owner will be required to sign a
fifteen-year agreement with Innisfree Hotels, Inc. Innisfree Hotels,
Inc. will be engaged to act as the Owners' exclusive manager for the
operation of the hotel. Innisfree Hotels, Inc. will prepare, on a
monthly basis, calculations of unit revenue based upon the days each
unit qualifies to be included in the rental pool, in addition to
various other financial reports. Revenues, adjusted for personal usage,
and operating expenses will be shared by all of the Owners based upon
the assigned percentage interests of each unit. The percentage interest
of a unit equals the initial value of a Unit as established by
Southwind Development Company, L.L.C.
F-18
<PAGE> 91
divided by $12,673,700. Innisfree Hotels, Inc. will maintain certain
minimum insurance requirements at the expense of the Owners.
Innisfree Hotels, Inc. will establish on behalf of the Owners, a
reserve for capital expenditures and for the replacement of furniture,
fixtures and equipment. The reserve for replacement will be 1% of gross
revenues in the first year, 2% the second year, 3% the third year, 4%
the fourth year and 5% in year five and 5% every year thereafter.
The forecasts as outlined in pages F-5 through F-16 do not assume any
requirement for any assessments by the Condominium Association,
although one may be required. The cash return to the investor will be
lower if assessments are required.
The Owners will fund an operating cash reserve for working capital
purposes in connection with the operation of the hotel at the time of
closing of the Owner's purchase of the unit. Innisfree Hotels, Inc will
manage the operating fund.
Innisfree Hotels, Inc., at its option, will distribute to the investors
monthly, based upon 80% of anticipated net distributable cash flow for
the year, multiplied by the individual investor's allocable share. The
balance of the net distributable cash flow will be distributed no later
than seventy-five days after the operating year-end. Innisfree Hotels,
Inc. will also prepare final year-end reports for purposes of filing
individual income tax returns.
Base management fees paid to Innisfree Hotels, Inc. will be 5% of total
revenue, payable monthly with the submission of the Owner's statements.
In addition, an incentive management fee will be paid to Innisfree
Hotels, Inc. when net distributable cash flow, excluding the management
incentive, reaches $1,252,987. The incentive fees will be calculated
for the next three years, based on the appropriate percentage applied
to the net distributable cash flow.
<TABLE>
<CAPTION>
Net distributable cash flow, Years ending December 31,
excluding association expenses 2001 2002 2003
- ------------------------------ ---- ---- ----
<S> <C> <C> <C>
Less than $1,252,987 0.0% 0.0% 0.0%
Over $1,252,987 and up to 15.0% 15.0% 12.0%
Over $1,384,522 30.0% 25.0% 22.5%
</TABLE>
Innisfree Hotels, Inc. will receive additional fees for accounting
services and sales and marketing services. These fees are included in
hotel operating expenses in the accompanying forecasted statements on
pages F-5 through F-16.
F-19
<PAGE> 92
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
BALANCE SHEET
DECEMBER 31, 1998
FS-1
<PAGE> 93
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
BALANCE SHEET
DECEMBER 31, 1998
Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report...................................................................................FS-3
Balance Sheet..................................................................................................FS-4
Notes to Balance Sheet..................................................................................FS-5 - FS-7
</TABLE>
FS-2
<PAGE> 94
March 5, 1999
INDEPENDENT AUDITOR'S REPORT
To the Member
Southwind Development Company, L.L.C.
Gulf Breeze, Florida
I have audited the accompanying balance sheet of Southwind Development Company,
L.L.C. (the "Company") as of December 31, 1998. This financial statement is the
responsibility of the Company's management. My responsibility is to express an
opinion on this financial statement based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. I believe that my audit
provides a reasonable basis for my opinion.
In my opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Southwind Development Company,
L.L.C. as of December 31, 1998 in conformity with generally accepted accounting
principles.
Randall L. Sansom
Certified Public Accountant
Gulf Breeze, Florida
FS-3
<PAGE> 95
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 2,168
Due from affiliate 8,210
Refundable application fees 2,500
Real estate under development 2,684,614
----------
TOTAL CURRENT ASSETS $2,697,492
OTHER ASSETS
Organization costs 1,566
----------
TOTAL ASSETS $2,699,058
==========
</TABLE>
LIABILITIES AND MEMBER'S EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 35,982
Accrued interest payable 72,174
Accrued liabilities 50,000
Due to member 198,901
Note payable - first mortgage 1,800,000
Note payable - second mortgage 541,500
----------
TOTAL CURRENT LIABILITIES $2,698,557
MEMBER'S EQUITY 501
----------
TOTAL LIABILITIES AND MEMBER'S EQUITY $2,699,058
==========
</TABLE>
The accompanying notes are an integral part of this financial statement.
FS-4
<PAGE> 96
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
NOTES TO BALANCE SHEET
DECEMBER 31, 1998
NOTE A - NATURE OF ORGANIZATION
The Company was formally organized in Alabama in April, 1998 to acquire and
develop real estate for future sale. The Company acquired a parcel of land in
Gulf Shores, Alabama in April, 1998 and intends to develop 84 condominium units
and a commercial unit to be known as Beachside All-Units Hotel, a Condominium.
As part of the sales transaction, each condominium purchaser will enter into a
hotel operating and rental pool agreement with the hotel operator. The Company
has incurred certain project development costs, but has not yet commenced
construction or its marketing campaign.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
As the Company receives purchase contracts for condominium units, deposits of
20% of the purchase price will be placed into an escrow account. Upon
construction completion, the funds will be transferred to the company through a
closing and the condominium unit Owners will receive title to their unit. At
that time, revenue will be recognized for the sale of the condominium units and
the costs associated with revenue will be expensed with a corresponding
reduction to real estate under development.
Organization Costs
Organization costs consist of legal fees stated at cost and amortized on a
straight-line basis over a period of five years.
Income Taxes
The Company is treated as a partnership for federal income tax purposes and does
not incur income taxes. Instead, its earnings and losses are included in the
personal return of the member and taxed depending on his personal tax situation.
The financial statement does not reflect a provision for income taxes.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
FS-5
<PAGE> 97
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
NOTES TO BALANCE SHEET
DECEMBER 31, 1998
NOTE C - REAL ESTATE UNDER DEVELOPMENT
Real estate under development consists of the following:
<TABLE>
<S> <C>
Land $2,391,500
Capitalized interest 179,874
Capitalized closing costs 24,003
Architect and engineering fees 53,552
Legal fees 28,196
Taxes and permits 4,447
Other costs 3,042
----------
Total $2,684,614
==========
</TABLE>
NOTE D - NOTE PAYABLE - FIRST MORTGAGE
The note payable is due to a financial institution and originally matured on
October 12, 1998. On that date, Southwind Development Company, L.L.C. (the
"Company") was granted an extension to January 11, 1999. Subsequent to year-end,
the Company was granted another extension of the maturity date to April 12,
1999. The terms of the note call for quarterly interest payments calculated at
8% simple interest annually. The mortgage is collateralized by the land and its
improvements and an unconditional standby letter of credit in the amount of
$360,000 which has been personally guaranteed by the member. It is anticipated
that the mortgage on the land will be converted to a construction loan at final
maturity. Under current financing arrangements, the Company must have a purchase
contract on 43 units 45 days before requesting a construction loan and on 70
units with a minimum contract price of $147,500 before closing on such loan. 90%
of the units must be under contract before the first draw is allowed on the
construction loan. At that time, additional collateral would also include a 10%
contractors holdback and the third party escrows described in Note B. It is
anticipated that the construction loan would carry an interest rate of 8%, with
principal and interest due at maturity. The construction loan is subject to
participation by another lender. The member of the Company is on the Board of
Directors and owns 5% of the equity interest of the financial institution
holding the first mortgage on the land.
NOTE E - NOTE PAYABLE - SECOND MORTGAGE
The second mortgage payable is due to the seller of the property and matures no
earlier than January 1, 1999 and, then, at the earlier of final closing on 90%
of the units or August 17, 1999. Simple interest is payable in monthly
installments of 10% annual interest. An additional 10% simple interest is
payable upon maturity of the loan. This loan is personally guaranteed by the
member of the Company.
NOTE F - ACCRUED LIABILITY
As an additional condition of the second mortgage, the second mortgage holder
has escrowed $100,000 toward the purchase of a condominium unit. It is
anticipated that the sales price of the unit would be approximately $150,000.
The $50,000 variance is due to the second mortgage holder as the difference in
the sales price of the unit or, in the event the condominium units are not
constructed, is due to the second mortgage holder in cash. Furthermore, the
second mortgage holder has first right of refusal on four additional units.
FS-6
<PAGE> 98
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
NOTES TO BALANCE SHEET
DECEMBER 31, 1998
NOTE G - DUE TO MEMBER
Amounts due to member are for real estate development advances. The advances are
non-interest bearing, unsecured, and have no fixed repayment terms. The advances
will be repaid from future cash flows as they become available. Between December
31, 1998 and the date of these financial statements, the member advanced an
additional $49,900.
NOTE H - DUE FROM AFFILIATE
The Company has made an advance to a related party. After deducting repayments
from the related party and amounts paid by the related party for Company
expenses, there is still a balance due from the affiliate. This advance is
non-interest bearing, unsecured, and has no specific terms of repayment. Between
December 31, 1998 and the date of these financial statements, the related party
repaid an additional $4,600 to the Company. The related party will enter into an
agreement with Beachside All-Units Hotel, A Condominium, as hotel operator. The
majority of stock in this related party is owned by a member of the Company.
NOTE I - OTHER RELATED PARTIES
The member of the Company has a 50% equity interest in the real estate company
which handled the purchase of the land for the Company. This real estate company
is expected to handle some of the listings for the sale of the condominium
units. The Company plans to retain ownership of the commercial unit and lease it
to the hotel operator.
NOTE J - OTHER SUBSEQUENT EVENTS
This audit has been prepared in anticipation of the Company registering with the
Securities and Exchange Commission for the sale of the condominium unit
interests.
NOTE K - OTHER COMMITMENTS AND CONTINGENCIES
The Company must have purchase contracts for 75 units within 180 days from the
time the first unit is sold unless the construction lender agrees to allow a
lesser number of units to be sold or unless alternative financing is obtained.
Furthermore, per the proposed purchase contracts, the Company has committed to
construction of the condominium units within two years of contract signing.
NOTE L - CONSTRUCTION AND RELATED CONSTRUCTION CONTRACTS
As of December 31, 1998, the Company had entered into construction-related
contracts totaling $55,600.00. On December 31, 1998, earnings on these contracts
totaled $42,352.00, of which $21,927.00 remained in accounts payable. Between
December 31, 1998 and the date of these financial statements, an additional
$5,000.00 of the accounts payable was paid.
FS-7
<PAGE> 99
APPENDIX A
PURCHASE PRICE, PERCENTAGE OWNERSHIP AND CONTRIBUTION TO OPERATING CASH RESERVE
<TABLE>
<CAPTION>
NUMBER OF UNIT UNIT PRICE PERCENTAGE OPERATING
UNITS DESCRIPTION OWNERSHIP CASH RESERVE
CONTRIBUTION
<S> <C> <C> <C> <C>
2 One Bedroom $ 169,900 1.325 $ 662.50
Terrace Resort
Unit
16 One Bedroom $ 159,900 1.247 $ 623.50
Superior Resort
Unit
2 One Bedroom 3rd $ 157,900 1.231 $ 615.50
Floor Side View
Resort Unit
2 One Bedroom $ 154,900 1.208 $ 604.00
2nd Floor Side
Resort Unit
2 One Bedroom 1st $ 152,900 1.192 $ 596.00
Floor Side View
Unit
60 One Bedroom $ 149,900 1.169 $ 584.50
Standard Resort
Unit
</TABLE>
<PAGE> 100
[OUTSIDE BACK COVER OF PROSPECTUS]
BEACHSIDE ALL-SUITES HOTEL
83 Extended-Stay Condominium Hotel Investment Units
(Condominium Hotel Suites Coupled with a Mandatory Rental Pool)
[BEACHSIDE ALL-SUITES HOTEL LOGO]
-------------
PROSPECTUS
-------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary...........................................................................................................7
Risk Factors.....................................................................................................12
Forward-Looking Statements.......................................................................................19
The Hotel and the Hotel Site.....................................................................................19
Alabama..........................................................................................................23
The Gulf Shores Market...........................................................................................23
Basis for Forecasts and Summary of Selected Financial Performance................................................30
The Hotel Operator and the Hotel Operating Agreement.............................................................35
Summary of Declaration and Related Documents.....................................................................42
Southwind Development Company, L.L.C.............................................................................47
Management.......................................................................................................47
Certain Relationships and Transactions...........................................................................48
Determination of Purchase Price..................................................................................50
Use of Proceeds..................................................................................................50
Plan of Distribution.............................................................................................51
How to Purchase..................................................................................................51
Certain Federal and State Income Tax Aspects.....................................................................53
Legal Matters....................................................................................................63
Experts..........................................................................................................63
Additional Information...........................................................................................64
Forecasted Summary Statements of Estimated Annual Operating Results.............................................F-4
Balance Sheet of Southwind Development Company, L.L.C..........................................................FS-4
</TABLE>
, 1999
----------------
<PAGE> 101
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses incurred in connection with the issuance and
distribution of the securities being registered hereby are as follows:
<TABLE>
<S> <C>
SEC registration fee....................................................................... $ 3,524
Accountants' fees and expenses............................................................. 8,500
Legal fees and expenses.................................................................... 150,000
Printing expenses.......................................................................... 15,000
Total...................................................................................... $ 237,164
</TABLE>
ITEM 32. SALES TO SPECIAL PARTIES
None.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES
Southwind has engaged in one prior sale of unregistered securities as
follows: on April 9, 1998, Julian MacQueen purchased 100% of the interests in
Southwind in exchange for one thousand dollars ($1,000.00). This sale of
securities was exempt from registration under Section 4(2) of the Securities Act
of 1933.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Southwind is a limited liability company organized under the laws of
the State of Alabama. Section 10-12-4 of the Alabama Limited Liability Company
Act (the "Act") provides that, subject to such standards and restrictions, if
any, as are set forth in its operating agreement, a limited liability company
may, and shall have the power to, indemnify and hold harmless any member or
manager or other persons from and against any and all claims and demands
whatsoever.
Section 8 of Southwind's Operating Agreement (the "Agreement")
provides, among other things, that Southwind shall indemnify any Person and the
heirs, devisees, executors and administrators of such Person (individually, an
"Indemnified Party," collectively, the "Indemnified Parties") who, by reason of
the fact that such Indemnified Party is or was a Member, Manager, agent,
affiliate or employee of Southwind or an officer, director, shareholder, member
or manager of a Member or Manager, and was or is a party or is threatened to be
made a party, to any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative, including
appeals (other than an action by or in the right of the Company), against
expenses, including, without limitation, attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any such threatened, pending or completed claim, action, suit or
proceeding; and any threatened, pending or completed claim, action or suit by or
in the
II-1
<PAGE> 102
right of the Company to procure a judgment in its favor, against expenses
including, without limitation, attorneys' fees, actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit.
The Operating Agreement further provides that expenses, including
attorneys' fees, incurred by any such Indemnified Party in defending a
proceeding may be paid by Southwind in advance of the final disposition of such
proceeding, including any appeal therefrom, upon receipt of an undertaking by or
on behalf of such Indemnified Party to repay such amount if it shall ultimately
be determined that such Indemnified Party is not entitled to be indemnified by
Southwind.
The Operating Agreement defines "Person" as any individual,
partnership, limited liability company, corporation, trust, estate, or other
association, whether created by the laws of the State of Alabama or another
state or foreign country. The Operating Agreement defines "Member" as each
Person who is an initial signatory to the Operating Agreement, or has been
admitted to Southwind as a Member in accordance with the provisions of the
Operating Agreement. According to the Operating Agreement, Southwind shall have
power to purchase and maintain insurance on behalf of any Indemnified Party
against any liability asserted against such Person and incurred by such Person
in any such capacity.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
registrants pursuant to the foregoing provisions, the registrants have been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED
Not Applicable.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements *
Independent Auditor's Report
Balance Sheet as of December 31, 1998
Notes to Balance Sheet - December 31, 1998
* Included in the Prospectus.
(b) Exhibits
II-2
<PAGE> 103
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
<S> <C>
**3.1 Articles of Organization of the Registrant
**3.2 Operating Agreement of the Registrant
5.1 Form of Opinion of Berkowitz, Lefkovits, Isom & Kushner, A
Professional Corporation, as to the Legality of the Securities
being Registered
8.1 Form of Opinion of Berkowitz, Lefkovits, Isom & Kushner, A Professional
Corporation, as to the Tax Matters
10.1 Purchase Agreement between MacQueen Enterprises, Inc. and Michael A.
DeJusto
10.2 Assignment of Purchase Agreement between MacQueen Enterprises, Inc. and
Michael A. DeJusto from MacQueen Enterprises, Inc. to Southwind
10.3 Form of Preconstruction Purchase and Escrow Agreement
**10.4 Form of Hotel Operating and Rental Pool Agreement
10.5 Promissory Note from Southwind in favor of First American Bank, N.A.,
dated April 16, 1998
10.6 First Mortgage from Southwind in favor of First American Bank, N.A., dated
April 16, 1998
10.7 Promissory Note from Southwind in favor of Michael A. and M. Katherine
DeJusto, dated April 16, 1998
10.8 Second Mortgage from Southwind in favor of Michael A. and M. Katherine
DeJusto, dated April 15, 1998
10.9 Letter from First American Bank, N.A. extending maturity date of April 16,
1998 Promissory Note from Southwind in favor of First American Bank, N.A.
to January 11, 1999
10.10 Letter from First American Bank, N.A. extending maturity date of April 16,
1998 Promissory Note from Southwind in favor of First American Bank, N.A.
to April 12, 1999
23.1 Consent of Berkowitz, Lefkovits, Isom & Kushner, A
Professional Corporation (included as Exhibits 5.1 and 8.1
hereto)
23.2 Consent of Randall L. Sansom, CPAs,
**27.1 Financial Data Schedule
99.1 Articles of Incorporation of Beachside All-Units Hotel Condominium Owners
Association, Inc.
99.2 Bylaws of Beachside All-Units Hotel Condominium Owners Association, Inc.
99.3 Declaration of Condominium of Beachside All-Units Hotel, a Condominium
</TABLE>
** Previously filed
ITEM 37. UNDERTAKINGS
(a) 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:
II-3
<PAGE> 104
(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
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 and 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% change in the minimum
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 of
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 new registration statement relating to the securities offer 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.
(h) 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.
II-4
<PAGE> 105
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Gulf Breeze, State of Florida, as of the 29 day of April, 1999.
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
By: /s/ Southwind Development Management Company, Inc.
---------------------------------------------------
Its: Manager
By: /s/ Julian B. MacQueen
-----------------------
Its: President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- -----
<S> <C> <C>
SOUTHWIND DEVELOPMENT Manager of Southwind April 29, 1999
MANAGEMENT COMPANY, INC. Development Company,
L.L.C.
By: /s/ Julian B. MacQueen
-------------------------
Julian B. MacQueen
Its: President
/s/ Julian B. MacQueen President of Southwind April 29, 1999
- ----------------------------- Development Company,
Julian B. MacQueen L.L.C., President and Sole
Director of Southwind
Development Management
Company, Inc.
/s/ Roger W. Wiegner Controller and Principal April 29, 1999
- ------------------------------ Accounting Officer of
Roger W. Wiegner Southwind Development
Company, L.L.C.
</TABLE>
II-5
<PAGE> 1
EXHIBIT 5.1
[Form of Opinion re Legality]
April 28, 1999
Southwind Development Company, L.L.C.
113 Baybridge Drive
Gulf Breeze, Florida 32561
RE: Registration Statement on Form S-11
Registration Number 333-74447
Ladies and Gentlemen:
As legal counsel to Southwind Development Company, L.L.C., an Alabama
limited liability company (the "Company"), we have assisted in the preparation
of the Company's Registration Statement on Form S-11, Registration Number
333-74447, as amended (the "Registration Statement"), filed with the Securities
and Exchange Commission in connection with the registration under the
Securities Act of 1933, as amended, of 83 Extended-Stay Hotel Investment Units
(condominiums coupled with a mandatory rental pool) (the "Units") to be sold by
you as described in the Registration Statement. The facts, as we understand
them, are set forth in the Registration Statement.
With respect to the opinion set forth below, we have examined
originals, certified copies, or copies otherwise identified to our satisfaction
as being true copies, only of the following:
A. The Articles of Organization of the Company, as filed with
the Mobile County Probate Court on April 9, 1998;
B. The Operating Agreement of the Company, as amended through
the date hereof;
C. The Registration Statement, including the exhibits thereto;
and
D. The Resolutions of the Manager of the Company relating to
the approval of the filing of the Registration Statement and
the transactions in connection therewith;
We have assumed (i) the genuineness and authenticity of all documents
examined by us and all signatures thereon and the conformity to originals of
all copies of all documents examined by us; (ii) the Purchase Contracts and
Hotel Operating and Rental Pool Agreement will constitute a legal, valid and
binding obligation of the parties to such agreements other than the Company
(such other parties referred to as the "Other Parties") under the laws of all
applicable jurisdictions; (iii) the Other Parties have obtained all necessary
consents, authorizations, approvals, permits or certificates (governmental and
otherwise) that are required as a condition to the execution and delivery of
the Purchase Contracts and Hotel Operating and Rental Pool Agreement by the
Other Parties and to the performance of, and carrying out by, the other parties
and transactions contemplated thereby; (iv) the Other Parties will act in a
commercially
<PAGE> 2
reasonable manner in enforcing their rights under the Purchase Contracts and
the Hotel Operating and Rental Pool Agreement; and (v) the Purchase Contracts
and the Hotel Operating and Rental Pool Agreement accurately describe and
contain the mutual understanding of the parties thereto and there are no oral
or written statements or agreements that modify, amend or vary, or purport to
modify, amend or vary, the terms of the Purchase Contracts or the Hotel
Operating and Rental Pool Agreement.
In rendering this opinion, we have relied upon (a) the representations
and warranties of the Company as set forth in the Purchase Contract and Hotel
Operating and Rental Pool Agreement as to certain factual matters, all of which
representations and warranties we have assumed to be true and correct in all
respects as of the date hereof; and (b) the various representations and
warranties by Other Parties as to factual matters contained in the Purchase
Contract and the Hotel Operating and Rental Pool Agreement.
Based upon and subject to the foregoing, and to the further
limitations and qualifications set forth below, and assuming; (i) the due
authorization, execution and delivery by the Other Parties thereto of the
Purchase Contracts and the Hotel Operating and Rental Pool Agreement, (ii) the
due acceptance of the Company of a Purchase Contract from each of the
purchasers, and (iii) the payment by each purchaser to the Company of the full
consideration due from it for the Unit(s) acquired by it, it is our opinion
that:
1. The Purchase Contracts will constitute legal, valid and
binding obligations of the Company, enforceable in accordance
with their terms.
2. The Hotel Operating and Rental Pool Agreement will constitute
a legal, valid, and binding obligation of the Company.
3. The Units to be sold in accordance with the transactions
contemplated by the Purchase Contract and Hotel Operating and
Rental Pool Agreement will be validly issued, duly authorized
and fully paid.
4. The Company has taken all actions required to be taken by it
to authorize the issuance and sale of the Units.
The enforceability of the Purchase Contracts may be subject to (i)
bankruptcy, insolvency, reorganization, moratorium, or other similar laws now
or hereafter in effect relating to creditors' rights, and (ii) general
principles of equity, including the principle of the remedy of specific
performance and injunctive and other forms of equitable relief that may be
subject to equitable defenses and to the discretion of the court before which
any proceeding therefore may be brought.
Please be advised that we are members of the State Bar of
Alabama, and our opinion is limited to the legality of matters under the laws
of the State of Alabama. Further, our opinion is based solely upon existing
laws, rules and regulations, and we undertake no obligation to advise you of
any changes that may be brought to our attention after the date hereof.
<PAGE> 3
We hereby expressly consent to any reference to our firm in the
Registration Statement and the inclusion of this Opinion as an exhibit to the
Registration Statement.
BERKOWITZ, LEFKOVITS, ISOM & KUSHNER
A Professional Corporation
By:
---------------------------------
<PAGE> 1
[Form of Opinion as to tax matters] EXHIBIT 8.1
April 28, 1999
Southwind Development Company, L.L.C.
113 Baybridge Drive
Gulf Breeze, Florida 32561
Gentlemen:
You have requested our opinion as to certain federal and state income
tax consequences in connection with the issuance of extended-stay Hotel
Investment Units (the "Units") by Southwind Development Company, L.L.C.
The facts, as we understand them, are set forth in amended Registration
Statement No. 333-74447, and exhibits thereto, filed with the Securities and
Exchange Commission (the "Registration Statement"). All terms capitalized
herein, and not specifically defined herein, shall have the same meaning as set
forth in the Registration Statement and Prospectus. We have reviewed the summary
of federal income tax consequences to the Unit Owners set forth in the
Registration Statement and the Prospectus under the heading "Certain Federal and
State Income Tax Considerations." Based upon the facts set forth in the
Registration Statement, (i) Counsel's opinions with respect to classification of
the Rental Pool for federal income tax purposes are set forth in "Entity
Classification of Rental Pool and Taxation of Ownership of Units" and
"Classification of Rental Pool as a Partnership" under the heading "Certain
Federal and State Income Tax Aspects" in the Registration Statement, and (ii)
Counsel is of the opinion that the remaining statements of law contained under
the heading "Certain Federal and State Income Tax Considerations" in the
Registration Statement address all other material federal income tax
consequences expected to result from the issuance of the Units and that such
statements of law are more likely than not correct under the Internal Revenue
Code of 1986 (the "Code"), as amended, the Treasury Regulations promulgated
thereunder and existing interpretations thereof.
As noted in the Registration Statement, Counsel has specifically not
opined on certain federal income tax issues because the relevant facts are
presently unascertainable and, in certain cases, there is a lack of clear legal
authority. Specifically, Counsel expresses no opinion with respect to (a) the
application of the partnership anti-abuse regulations, (b) whether a particular
owner will be able to establish a profit motive under Code Section 183; or (c)
whether a particular owner will be able to deduct interest payments on any debt
used to acquire a unit.
<PAGE> 2
Southwind Development Company, L.L.C.
April 28, 1999
Page 2
- ------------------------------------
The opinions and statements of law in "Certain Federal and State Income
Tax Considerations" are expressly made subject to the several conditions stated
therein and, should any condition not be met, those opinions or statements of
law may not be relied upon. Counsel's opinions are not binding on the Internal
Revenue Service nor on the courts and represent only our best judgement based on
our evaluation of the legal authorities reasonably available to us on the date
of the Registration Statement. We assume no responsibility for changes in
applicable law occurring after that date. You should be aware that, as stated in
the Prospectus, judicial opinions generally have a retroactive effect and
legislative enactments and administrative determination sometimes have such an
effect. Accordingly, you should be aware that future legislation, administrative
or judicial authority could change the weight of authority on issues discussed
in the Registration Statement and Prospectus. Also, any variation or difference
in the facts as set forth in the Registration Statement and Prospectus might
affect the opinions and conclusions stated therein.
We render this opinion and the opinions in the Prospectus in our
capacity as attorneys admitted to the practice of law in the State of Alabama.
We do not opine or purport to opine on any matter to the extent that it involves
laws of any jurisdiction other than the State of Alabama and the United States
of America.
We consent to the use of this letter as an exhibit to the Registration
Statement and to the references to the name of our firm contained therein.
Very truly yours,
BERKOWITZ, LEFKOVITS, ISOM & KUSHNER
A Professional Corporation
By:
------------------------------------
<PAGE> 1
EXHIBIT 10.1
AGREEMENT
THIS AGREEMENT is between MICHAEL A. DEJUSTO and/or assigns ("Seller")
and MACQUEEN ENTERPRISES, INC. ("Buyer").
1. Property. On the terms and conditions herein, Buyer shall buy
and Seller shall sell certain land ("the Subject Property") located in Gulf
Shores, Alabama, having an approximate total of 223 feet of frontage along the
south side of Highway 182, and being bordered on the south by property owned by
the City of Gulf Shores fronting the Gulf of Mexico. The Subject Property is
more particularly described on Exhibits "A" and "B" attached hereto and
includes any appurtenances thereto and any rights incidental or related
thereto, including governmental permits, clearances, etc. Buyer is aware that
Seller is in the process of acquiring the easternmost parcel comprising
approximately 56 feet, with an estimated acquisition date of March 20,1998.
2. Purchase Price.
(a) The purchase price is $2,341,500.00 to be paid as follows:
$1,800,000.00 shall be paid in cash at closing, with $100,000.00 of the
$1,800,000.00 to be held in escrow according to the terms of item 2-b of this
contract; the balance shall be evidenced by a promissory note (the "Note") in
the amount of $541,500.00, which shall be secured by a mortgage on the Subject
Property. The said mortgage shall be expressly subordinated by Seller, as and
when requested by Buyer, to a first mortgage in favor of the holder of any
mortgage created by Buyer to secure a 1st Mortgage to finance some or all of
the purchase price and some or all of the improvements Buyer intends to erect
on the Subject Property. The second mortgage shall provide that until the first
mortgage is paid in full and canceled of record, individual units shall be
released from the lien of said mortgage as and when they are sold without the
necessity of Buyer's making any principal payment; these releases shall be
automatic but Seller shall execute partial releases when requested by Buyer.
Monthly interest payments on the Note shall begin 30 days after closing at an
annual rate of 10% and be paid monthly thereafter until the principal balance
is paid in full. Additionally, interest at the annual rate of 10% (which shall
not be compounded) shall accrue on the principal balance remaining from time to
time and be paid as and when the principal balance matures. The principal
balance matures upon final closing of at least 90% of the multiple units
proposed to be constructed upon the Subject Property, but in no event prior to
January 1, 1999 or later than August 17, 1999. The Note shall be personally
guaranteed by Julian B. MacQueen. Buyer agrees to notify Seller a minimum of
120 days in advance of the date anticipated for repayment of the Note and to
cooperate with Seller in the timing of such payment in order to minimize the
impact of tax consequences to Seller, provided, such cooperation is at zero
cost to Buyer.
(b) One hundred thousand dollars ($100,000.00) of the cash to be
paid in closing shall be placed in escrow with the company issuing the title
insurance. If, as and when Buyer has developed a final building design for the
multi-unit structure to be built upon the Subject Property, Buyer shall select
a unit either on the ground floor or the first living floor, that meets with
Sellers approval, to be conveyed to Seller. This one (1) unit shall be of a
size and with appointments substantially equal to other units proposed to be
built. Such conveyance shall be subject to such matters as to which other
purchasers purchase their units. Seller shall, upon demand, execute a standard
pre construction purchase agreement, and upon conveyance, the $100,000.00 shall
be released from escrow to Buyer as payment of the purchase price. If Buyer, or
an affiliate of Buyer, does not build the proposed multi-unit structure on the
Subject
<PAGE> 2
Property, the $100,000.00 plus an additional $50,000.00 shall be paid to the
Seller, either within twenty (20) days after Buyer's interest in the Subject
Property is conveyed to any other party unrelated to Buyer, or within twenty
(20) days after a certificate of occupancy is issued for any structure built on
the property. Notwithstanding the above, Buyer reserves the right to draw (by
written notice to the title company), from time to time, upon the $100,000.00
in escrow for use in connection with the construction of a multi-unit structure
on the Subject Property,] with any amount drawn by Buyer to be credited to
Seller when the $100,000.00 would have otherwise have been released to Buyer at
the time of conveyance of the unit to Seller. If the circumstances are such
that Buyer draws from such escrowed funds yet Seller is, in lieu of being
conveyed a unit, entitled to receive $150,000.00, then any amount drawn by
Buyer shall be repaid by Buyer to the escrow fund. In no event shall Seller be
entitled to the possession, use or benefit of the $100,000.00 or any portion
thereof, prior to the earliest to occur of the following: (a) the conveyance of
the said unit to Seller by Buyer, which upon conveyance shall release the
$100,000.00 to Buyer, (b) twenty (20) days after Buyer's interest in the
Subject Property is conveyed to any other party unrelated to Buyer (c) within
twenty (20) days after a certificate of occupancy is issued for any other
structure built on the property.
(c) In addition to the items enumerated in subparagraphs (a) and
(b) above, if, as and when the proposed multi-unit structure is developed,
then, prior to the offering of any units for reservation of sale, Seller shall
have first right of refusal on unit locations. Seller shall have ten (10) days
after notice from Buyer of such offering in which to elect, by written notice
to Buyer, to reserve up to four (4) units of his first choice from the total
inventory of all units, at the first advertised price on the terms and
conditions that are available for other purchasers. Seller's notice within such
ten (10) day period must be accompanied by a fully executed and completed form
purchase agreement prepared by Buyer and signed by Seller, identifying the
unit(s) to be purchased, with required earnest money deposits to be in hand
within two (2) weeks of said election. If Buyer, or an affiliate of Buyer, does
not build the proposed multi-unit structure on the Subject Property, this
subparagraph (c) shall be deemed void.
3. Earnest Money and Conditions to Buyer's Obligations.
Upon Seller's execution and delivery to Buyer of an original or counterpart of
this Agreement, Buyer shall deliver the sum of $125,000.00 to GCA Reality to be
held in escrow, which shall be applied to the purchase price at closing.
(a) If Buyer defaults under this Agreement, the earnest money
shall be forthwith delivered to, and retained by, Seller as liquidated damages
and not as a penalty, constituting a reasonable pre-default estimate of
Seller's probable damage which would otherwise be difficult to determine. If
Buyer elects not to close this transaction, Buyer shall deliver to Seller any
surveys, topographic surveys, environmental reports, architectural plans,
engineering studies, and appraisals obtained by Buyer with respect to the
Subject Property, without any recourse to Buyer.
4. Survey, Title Policy and Deed.
(a) Seller shall, at Seller's expense, deliver, within 14 days of
the effective date of the Agreement, a title insurance commitment by a licensed
reputable Alabama title insurer to Buyer (such commitment to obligate the
insurer to issue an ALTA owner's title insurance policy, Form B, insuring Buyer
in the amount of the purchase price), subject to the acquisition of the
property by Seller as described in Exhibits "C" and "D". Buyer shall, within 7
days from receipt of such commitment, deliver written notice to Seller of any
matter appearing in such commitment that Buyer considers a defect. Title
2
<PAGE> 3
shall be deemed acceptable to Buyer if (i) Buyer fails to deliver timely notice
of defects or (ii) Buyer delivers proper notice and Seller cures the defects
within 10 days from receipt of the notice (the "Curative Period). If such
matters are deemed a title defect that can be cured within the Curative Period,
Seller shall use Seller's best efforts to cure said title defect. If, despite
shall Seller's best efforts, all of the defects are not cured within the
Curative Period, Buyer shall have 10 days from receipt of notice of Seller's
inability to cure the defects to elect whether to terminate this Agreement or
accept title subject to existing defects and close the transaction without
reduction in purchase price.
(b) At closing, Seller shall deliver to Buyer (i) a fully executed
general warranty deed conveying to Buyer marketable fee simple title, free and
clear of any and all liens, encumbrances, easements, restrictions, claims
subject only to those matters and conditions that presently exist on said
property in that contract dated April 7, 1997 between McDonald's Corporation
and Mike DeJusto or assigns as described in Exhibit "C" and (ii) an ALTA
owner's title insurance policy issued pursuant to the aforesaid commitment.
5. Condition of Subject Property: Access and Delivery of Studies.
(a) Buyer agrees to purchase the Subject Property in its "as is"
condition; however, this provision does not abrogate Buyer's right to terminate
this Agreement if the title to the Subject Property is not satisfactory as
provided in paragraph 4-(a).
(b) Buyer, its agents, representatives and assigns, may enter onto
the Subject Property at all times to perform such inspections and examinations
of the Subject Property and to make such surveys, evaluations, delineations,
soil borings and other tests and studies as Buyer reasonably deems necessary to
determine the condition of the Subject Property. Buyer shall repair any damage
caused by entry onto the Subject Property within 48 hours of creating such
damage or hazard.
(c) Within ten (10) days after the effective date of this
Agreement, Seller shall deliver to Buyer true, correct, and complete copies of
all reports, studies, surveys, evaluations, delineations, soil borings,
permits, governmental correspondence, governmental notices, and other documents
in possession of, or accessible to, Seller that affect the Subject Property or
the title or the use thereof.
6. Ad Valorem Taxes. Real estate ad valorem taxes shall be prorated
as of the date of closing based on the then best available information.
7. Hazardous Materials. Seller represents that, to the best of
Seller's knowledge, no hazardous materials have been dumped, released, stored
or used on the Subject Property.
8. Closing Costs. Buyer shall be responsible for the preparation
of the deed, the second mortgage and the Note and costs of recording said
mortgage and deed.
9. Closing. Seller to provide Buyer with five (5) working days
notice of closing date. Closing shall take place at any mutually agreeable
location in any event on or before April 6,1998. Time shall be of the essence.
Seller may, at Seller's election, extend said closing date.
10. Risk of Loss and Possession. Risk of loss and possession shall
shift from Seller to Buyer at closing.
3
<PAGE> 4
11. Real Estate Commission. A real estate commission of $150,000
shall be paid by the Seller to RE/MAX of Gulf Shores and GCA Realty. RE/MAX of
Gulf Shores and GCA Realty agree to accept $40,000.00 to be paid (50/50 split,
$20,000.00 each) upon closing, with the balance of $110,000 to be due in full
upon the repayment of the Note addressed in paragraph 2. Each party shall
indemnify and hold the other harmless from and against any and all other claims
for a real estate commission, finder's fee or similar charge made by any person
whose claim is based on dealings with the indemnifying party. Seller
acknowledges that principals of Buyer and assignees of Buyer, or principals of
such assignees, may include licensed real estate brokers, and said brokers may
buy, sell, lease and/or develop the Subject Property for profit or loss without
recourse to Seller for any profit.
12. CONTINGENCY: In the event Seller is unable to acquire and
convey the additional approximately 56 feet appurtenant to and east of the
original 166 foot parcel on or before March 20, 1998, then Buyer agrees to
proceed with the purchase of the 166 foot parcel at a price of $1,750,350 based
on 166.7 feet, to include a paid for unit with the same terms and conditions as
outlined in paragraph 2-b with closing on the 166 foot to be on or before April
6th, 1998. The terms of that purchase shall be as follows: The purchase price
is $1,750,350.00 to be paid as follows: $1,320,000.00 shall be paid in cash at
closing, with $100,000.00 to be held in escrow according to the terms of 2-b of
this contract; the balance shall be evidenced by a promissory not (the "Note")
in the amount of $430,350.00, which shall be secured by a mortgage on the
subject property, with all other terms as specified in paragraph 2-a, "Purchase
Price". In any event, payment of said promissory note and a resolution of the
$100,000.00 in escrow shall be done no later than August 17, 1999.
4
<PAGE> 5
13. AGENCY DISCLOSURE:
The selling company, RE/MAX OF GULF SHORES is exclusively an agent of:
X SELLER
-----
PURCHASER
-----
BOTH PARTIES AS A LIMITED CONSENSUAL
----- DUAL AGENT
NEITHER PARTY AND IS ACTING AS A
----- CONTRACT BROKER
Seller's Initials /s/JM Buyer's Initials
------ ------
The selling company, GCA Realty is exclusively an agent of:
SELLER
-----
X PURCHASER
-----
BOTH PARTIES AS A LIMITED CONSENSUAL
-----
DUAL AGENT
-----
NEITHER PARTY AND IS ACTING AS A
----- CONTRACT BROKER
Seller's Initials /s/JM Buyer's Initials
----- ------
14. Entire Agreement. This agreement contains the entire
understanding between the parties, and supersedes any prior or contemporaneous
oral or written agreements, representation, etc. No amendment to this Agreement
shall be binding unless same is in writing and signed by both parties.
15. Captions. The captions in this Agreement are inserted solely as a
matter of convenience and for reference, and are not a substantive part of this
Agreement.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5
<PAGE> 6
17. Binding. This Agreement shall inure to the benefit of, and shall
be binding upon, each of the parties hereto, and their respective heirs,
personal representatives, successors, and assigns.
18. Notice. Any notices or other communications required or arising
hereunder shall be in writing and shall be deemed given when delivered
personally or delivered by Federal Express or other reputable overnight
delivery service or two (2) days after deposited in registered or certified
mail, postage prepaid, return receipt requested, addressed as follows:
<TABLE>
<S> <C>
TO BUYER: MacQueen Enterprises, Inc.
113 Bay Bridge Drive
Gulf Breeze, Florida 32561
with a copy to: Richard E. Davis, Esquire
Helmsing Lyons Sims & Leach
Post Office Box 2767
Mobile, Alabama 36652
TO SELLER: Michael A DeJusto
8295 North 6th Street
Fresno, California 93720
</TABLE>
Either party may change such party's address for purpose of notices hereunder
by giving the other party written notice of such change, which shall be
effective five (5) business days after notice of the change is given.
19. Offer and Date. This Agreement shall be deemed an offer to
purchase, until the same is accepted by Seller. Acceptance may be made by Seller
at anytime prior to noon, CT, March 20, 1998. The date of this Agreement shall
be deemed to be the date on which Seller accepts the offer.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have hereunto set their respective
hands and seals.
SELLER: MICHAEL A. DeJUSTO
BY: /s/ Michael A. DeJusto 3/20/98 11:30
----------------------
MICHAEL A. DEJUSTO
BUYER: MACQUEEN ENTERPRISES, INC.
BY: /s/ Julian B. MacQueen
-----------------------
JULIAN B. MACQUEEN, PRESIDENT
The above offer is hereby accept subject to:
1) Review and approval, by both buyer and seller, of the specific
terms of the promissory note referenced in item 2a.
2) Review and approval by seller of the financial statement to be
provided by buyer.
------------------------- [DJ]
7
<PAGE> 8
EXHIBIT A
[Copy of Plat of Field and Topographical survey performed July 24, 1985]
<PAGE> 9
A-2
LEGAL DESCRIPTION
C E R T I F I C A T I O N
I, Noel Ed Hand, a Registered Professional Land Surveyor in the State of
Alabama, for Perry Hand & Associates, Inc., certify to McDonald's Corporation
and Lawyers Title Company, that this is a correct plat of an actual field &
topographical survey performed by me or under my direction on July 24, 1985, on
the following described property:
The North 222.17 feet of Lot 1 and the North 222.17 feet of the West
56.97 feet of Lot 2, Block 9 of a re-survey of Blocks 8, 9, 10, 11,
12, 28, 29, and 30, Unit 1 of Gulf Shores as recorded in Map Book 3,
page 85 of the Baldwin County Probate Records. Said land being in
Section 20, Township 9 South, Range 6 East, Gulf Shores, Baldwin
County, Alabama.
More Particularly described as follows:
Commence at the Northwest corner of Lot 1, Block 9 of a re-survey of
Blocks 8, 9, 10, 11, 12, 28, 29, and 30, Unit 1 of Gulf Shores as
recorded in Map Book 3, page 85 of the Baldwin County Probate Records,
for the Point of Beginning; run thence North 83(degree)-34"-00" East
along the South right-of-way of East Gulf Shores Boulevard for 166.91
feet; run thence South 06(degree)-26"-00" East for 222.17 feet; run
thence South 83(degree)-34"-00" West for 166.91 feet to the East
right-of-way of East First Street; run thence North 06(degree)-26"-00"
West along the East right-of-way of said East First Street for 222.17
feet to the Northwest corner of Lot 1, Block 9 of a re-survey of
Blocks 8-12 & 28-30, of said Unit 1 of Gulf Shores, and the Point of
Beginning. Said land being in Section 20, Township 9 South, Range 4
East, Gulf Shores, Baldwin County, Alabama.
I further certify that the encroachment(s), if any, are as shown and that this
plat does not reflect if there are any recorded and unrecorded easements or
underground encroachments (other than shown) and that this survey & plat
conforms to or exceeds the requirements of the Minimum Technical Standards for
the Practice of Land Surveying in the State of Alabama as approved on January
27, 1984.
This is the 12th day of August, 1985.
/s/ Noel Ed Hand
- ----------------
Noel Ed Hand
Ala. Reg. No. 14978 [ S E A L ]
FLOOD STATEMENT
This property is in Zone V-9, (Elevation 10") which is areas of 100-year
coastal flood with velocity (wave action), as per the map by the Federal
Emergency Management Agency, Federal Insurance Administration Community-Panel
Number 015005 0005E for the Town of Gulf Shores, Alabama, Baldwin County,
Alabama as per revised Map Dated January 03, 1985.
The above described property is all or part of the property conveyed
to Seller by ________ deed, dated _______, 19__, recorded at page _____, book
_____, volume _____, document no. ______ on _________, 19__, in the ________
County records.
EXHIBIT A
<PAGE> 10
EXHIBIT B
[Sketch of Parcels forming Hotel site]
<PAGE> 11
B-2
[CITY OF GULF SHORES LETTERHEAD]
DAVID L. BODENHAMER,Mayor
TONY RIVERA,City Administrator
November 26, 1997
Mike DeJusto
3790 W. Buena Vista
Fresno, CA 93711
Dear Mr. DeJusto:
Please accept this letter as the official confirmation from the City of Gulf
shores of our intent to proceed with an exchange of property currently owned by
the City for property that you currently have under contract for purchase. Per
our previous discussion, the exchange would be structured as follows:
1. The City will swap to you a portion of our existing beach property
adjacent to the current McDonald's property. The size of this parcel
will be 12,500 square feet or 56.27" x 222.17".
2. In return for the City parcel, you will swap to the City the parcel
described as Unit 1, Block 7, Lots 3 & 5 which contains 12,500 square
feet and measures 50" x 250".
3. The exchange will involve only the two parcels of land described above
which have been determined to be equal value.
4. Any outstanding ad valorem taxes due at the time of exchange on your
parcel will be paid by you.
5. The City will initiate and bear any costs involved in subdividing the
parcel to be exchanged from the existing City property and see the
process through to completion. This process will be completed prior to
the exchange.
After consulting with our City Attorney, I will communicate to you any other
details we may need to discuss prior to the exchange.
If you have any questions, please feel free to contact me at your convenience.
Very truly yours,
/s/ David L. Bodenhamer
-----------------------------
David L. Bodenhamer, Mayor
- -----------------------------------COUNCILMEN-----------------------------------
J.R. HANZLIK - GEORGE H. HARRIS - G.W. DUKE - JUDITH KAISER - M.E. (MIKE) MICELI
P.O. BOX 229 - GULF SHORES, ALABAMA 36547 - 334-968-2425
<PAGE> 12
EXHIBIT C
REAL ESTATE SALE CONTRACT
THIS CONTRACT, dated April 7, 1997, is between McDONALD'S CORPORATION,
a(n) Delaware corporation, hereinafter called "Seller" and MICHAEL A DeJUSTO
and M. KATHERINE DeJUSTO, their heirs or assigns, hereinafter called
"Purchaser."
1. CONVEYANCE: Seller agrees to sell and convey to Purchaser by
special warranty deed, and Purchaser agrees to purchase from Seller, the real
estate located in Gulf Shores County of Baldwin, State of Alabama more
particularly described on Exhibit A attached (hereinafter described as
"Premises").
2. PRICE: Purchase price is ONE MILLION ONE HUNDRED THOUSAND AND
NO/100 Dollars ($1,100,000.00).
3. CONDITIONS: Conveyance shall be subject to matters generally
excepted by title insurance companies in their title policies issued in the
state in which the Premises are located; special taxes or special assessments,
if any, for improvements not yet completed; installments not due at the date
hereof of any special tax or special assessment for improvements heretofore
completed, if any; general real estate taxes, if any, for the year in which
closing occurs; covenants, conditions and restrictions of record; zoning and
building laws or ordinances; private, public and utility easements and roads
and highways, whether or not of record; the terms, reservations and conditions
of this sale; and a reservation to Seller of the right and privilege of Seller,
its lessees, franchisees, successors and assigns to continue, protect,
maintain, operate and use all existing private utility easements and roads of
any kind whatsoever on the Premises, whether or not of record, including their
repair, reconstruction, replacement and removal. Further, Purchaser agrees to
accept in Seller's deed to Purchaser a restriction prohibiting the Premises
from being used a quick service restaurant with drive-thru or any of the
following listed name brand competitors, their successors or assigns for a
period of twenty (20) years form the date of the deed: Wendy's, Hardee's,
Carl's Jr., Arby's, Pizza Hut, Burger King, Taco Bell, Popeyes, Subway.
Purchaser agrees that the restriction shall be a covenant running with the land
and be binding upon Purchaser, its heirs, administrators, successors and
assigns.
4. EARNEST MONEY: Upon acceptance of this contract by Purchaser,
Purchaser shall tender to Seller the non-refundable sum (except as stated in
Paragraph 6) of ONE HUNDRED FOUR THOUSAND AND NO/100 Dollars ($104,000.00)
hereinafter known as the "earnest money." The earnest money shall be applied to
the purchase price at closing. Purchaser shall consummate this transaction and
pay to Seller the balance of the purchase price no later than February 17,
1998, unless Seller cannot convey marketable title subject to the conditions
set forth in Article 3.
5. ESCROW: Purchaser shall deposit the balance of the purchase price
with Gulf Shores Title, as escrowee, prior to closing. The sale shall be closed
in accordance with the general provisions of the usual form of Deed and Money
Escrow Agreement then furnished and in use by the escrowee, with such special
provisions inserted in the Escrow Agreement as may be required to conform with
this contract. Closing and settlement shall take place at the office of the
escrowee. The cost of recording the documents called for herein shall be paid
for by the Purchaser. All current real estate taxes and assessments are to be
prorated to the date of closing and if the amount of such taxes is not the
ascertainable, the prorating shall be on the basis of the amount of the most
recent ascertainable taxes. If the real estate tax bill includes additional
property owned by Seller at closing Purchaser shall give Seller a credit for
taxes from
<PAGE> 13
C-2
the date of closing through the remainder of the tax year. Seller covenants to
pay the taxes prior to the date they are due. All state and country transfer
and conveyance and or documentary stamps shall be paid by the Seller, all local
or city transfer stamps shall be paid for by Purchaser. The costs of the escrow
shall be divided equally between Seller and Purchaser.
6. TITLE: Purchaser agrees to pay all costs in connection with the
examination, opinion and insurance of title. Upon Purchaser's request, Seller
shall furnish Purchaser with any survey, abstract, title insurance policy or
other title information in Seller's possession. Seller makes no representation
as to the correctness of such material. Purchaser agrees to return all such
materials to Seller at or prior to the date of closing. If Purchaser's
examination of title reveals exceptions or conditions which render title
unmarketable or which do not comply with the permitted exceptions set forth
above, Purchaser must give Seller written notice of such objections within 14
days from the date of the last execution of this contract. Seller shall then
have thirty days to remove such title defects or have them waived by the title
insurer, and the closing date shall be extended accordingly. If Seller is
unable to have such defects cured or waived within thirty days, Purchaser may,
as its sole remedy, terminate this contract, and the earnest money deposit
shall be returned to Purchaser.
7. SURVEY: Purchaser shall have the right to have the Premises
surveyed by registered surveyor at Purchaser's sole cost and expense by serving
written notice on Seller of Purchaser's intention to obtain a survey, said
notice to be served within ten (10) days after the acceptance of this offer by
Seller. A copy of such survey shall be then served upon the Seller within
twenty (20) days after the date of the service of written notice on Seller of
Purchaser's intention to obtain a survey.
8. NOTICES: All notices and demands herein required shall be in
writing and shall be sent by United State Certified mail to Seller at
McDonald's Plaza, Oak Brook, Illinois 60523, Attention: Director, Real
Estate/Legal Department, or Purchaser at 8295 N. 6th Street, Fresno, CA 93720.
9. TIME OF THE ESSENCE: Time is of the essence of this agreement. If
the Purchaser shall default or fail to perform this agreement within the time
limits specified, Seller may, at its election, retain the earnest money as
agreed liquidated damages and just compensation, and not as a penalty or
forfeiture, and declare this agreement terminated, or proceed to have this
agreement specifically enforced and/or avail itself of any other remedy at law
or in equity.
10. REAL ESTATE COMMISSION: Purchaser hereby warrants that Purchaser
did not engage or use the services of any Real Estate Broker or Agent in any
manner whatsoever in connection with the Premises. Purchaser agrees to
indemnify Seller and hold Seller harmless against any and all claims for
brokers fees made on behalf of brokers Seller has not hired.
11. ACCEPTANCE OF OFFER: This offer when accepted shall constitute
the entire agreement between the parties for the sale and purchase of the
Premises. This Agreement may be modified only in writing. It is understood that
there are no oral agreements or representations between Purchaser and Seller
affecting this Contract and this Contract supersedes and cancels any and all
previous negotiations, arrangements, representations and understandings, if
any, between the parties.
<PAGE> 14
C-3
12. AUTHORITY TO SIGN: No employee or agent of Seller or Seller's
Broker, if any, has authority to make a contract, alter, change or modify any
provisions, or make any warranty, representation, agreement or undertaking.
The submission of this contract for examination and negotiation does not
constitute an offer to sell or a reservation of or any option for the
Premises, and this Contract will become effective and binding only upon
execution and delivery by Purchaser and an authorized officer of Seller.
13. COVENANTS AND WARRANTIES: All of the covenants, warranties and
agreements contained in this Contract shall extend to and be binding on the
heirs, executors, administrators, successors and assigns of the respective
parties. Purchaser has inspected the Premises and agrees to take title to the
Premises as is without warranty or representation of any kind, either express
or implied, as to its condition or fitness for use, by Seller, or any agent of
Seller, which is not expressly state herein.
14. EXISTING IMPROVEMENTS: Seller shall have the right, but not the
obligation, to remove any or all of Seller's existing improvements, including
but not limited to, Seller's trade fixtures, kitchen equipment, seating and
decor package and signage, from the Premises prior to closing or within a
thirty (30) day period after closing. Any improvements not removed by Seller
within the time period provided above shall become a part of the real estate
being transferred by this contract and shall become the property of the
Purchaser.
15. REWRITE COMMITTEE APPROVAL: Both parties acknowledge and agree
that notwithstanding, the acceptance of this Real Estate Sale Contract and the
closing of the restaurant presently operated on the Premises and the sale of
the Premises by McDonald's Corporation is subject to final approval by
McDonald's Rewrite Committee.
SELLER AND PURCHASER, by their execution below, indicate their consent
to the terms of this Contract.
SELLER: Mc Donald's Corporation, a PURCHASER:
Delaware corporation
/s/ Martin W. Chamura /s/ Michael A. DeJusto
- ----------------------------- -----------------------------
Martin W. Chamura, Home Office Director Michael A. DeJusto
[ S E A L ]
/s/ M. Katherine DeJusto
- ----------------------------- -----------------------------
M. Katherine DeJusto
Date: 12-1-97 Date: 4/10/97
----------------------- -----------------------
WITNESS: WITNESS:
/s/ Angela K. Williamson
- ----------------------------- -----------------------------
Angela K. Williamson
/s/ Shirley A. Collins
- ----------------------------- -----------------------------
Shirley A. Collins
<PAGE> 15
C-4
LEGAL DESCRIPTION
C E R T I F I C A T I O N
I, Noel Ed Hand, a Registered Professional Land Surveyor in the State of
Alabama, for Perry Hand & Associates, Inc., certify to McDonald's Corporation
and Lawyers Title Company, that this is a correct plat of an actual field &
topographical survey performed by me or under my direction on July 24, 1985, on
the following described property:
The North 222.17 feet of Lot 1 and the North 222.17 feet of the West
56.97 feet of Lot 2, Block 9 of a re-survey of Blocks 8, 9, 10, 11,
12, 28, 29, and 30, Unit 1 of Gulf Shores as recorded in Map Book 3,
page 85 of the Baldwin County Probate Records. Said land being in
Section 20, Township 9 South, Range 6 East, Gulf Shores, Baldwin
County, Alabama.
More Particularly described as follows:
Commence at the Northwest corner of Lot 1, Block 9 of a re-survey of
Blocks 8, 9, 10, 11, 12, 28, 29, and 30, Unit 1 of Gulf Shores as
recorded in Map Book 3, page 85 of the Baldwin County Probate Records,
for the Point of Beginning; run thence North 83(degree)-34"-00" East
along the South right-of-way of East Gulf Shores Boulevard for 166.91
feet; run thence South 06(degree)-26"-00" East for 222.17 feet; run
thence South 83(degree)-34"-00" West for 166.91 feet to the East
right-of-way of East First Street; run thence North 06(degree)-26"-00"
West along the East right-of-way of said East First Street for 222.17
feet to the Northwest corner of Lot 1, Block 9 of a re-survey of
Blocks 8-12 & 28-30, of said Unit 1 of Gulf Shores, and the Point of
Beginning. Said land being in Section 20, Township 9 South, Range 4
East, Gulf Shores, Baldwin County, Alabama.
I further certify that the encroachment(s), if any, are as shown and that this
plat does not reflect if there are any recorded and unrecorded easements or
underground encroachments (other than shown) and that this survey & plat
conforms to or exceeds the requirements of the Minimum Technical Standards for
the Practice of Land Surveying in the State of Alabama as approved on January
27, 1984.
This is the 12th day of August, 1985.
/s/ Noel Ed Hand
- ----------------
Noel Ed Hand
Ala. Reg. No. 14978 [ S E A L ]
FLOOD STATEMENT
This property is in Zone V-9, (Elevation 10") which is areas of 100-year
coastal flood with velocity (wave action), as per the map by the Federal
Emergency Management Agency, Federal Insurance Administration Community-Panel
Number 015005 0005E for the Town of Gulf Shores, Alabama, Baldwin County,
Alabama as per revised Map Dated January 03, 1985.
The above described property is all or part of the property conveyed
to Seller by ________ deed, dated _______, 19__, recorded at page _____, book
_____, volume _____, document no. ______ on _________, 19__, in the ________
County records.
EXHIBIT A
<PAGE> 16
C-5
MCDONALD'S
(ACKNOWLEDGMENT)
STATE OF ILLINOIS )
) SS;
COUNTY OF DUPAGE )
I, Ellen L. Loess, a Notary Public in and for the county and state
aforesaid, DO HEREBY CERTIFY that Martin W. Chamura, Home Office Director, of
McDonald's Corporation, a Delaware corporation, who are personally known to
me to be the same persons whose names are subscribed to the foregoing
instrument to as such Vice-President and Assistant Secretary appeared before me
this day in person and acknowledged that they signed, sealed and delivered the
said instrument as their free and voluntary act as such Vice-President and
Assistant Secretary respectively and as the free and voluntary act of said
corporation for the uses and purposes therein set forth.
Given under my hand and notarial seal, this 1st day of December,
1997.
/s/ Ellen L. Loess My commission expires: 5-30-2001
- ------------------ [ S E A L ]
Notary Public
ACKNOWLEDGMENT - INDIVIDUAL
STATE OF ALABAMA )
) SS;
COUNTY OF BALDWIN )
I, Sunnie Laine South, a Notary Public in and for the county and state
aforesaid, DO HEREBY CERTIFY that Michael A. DeJusto and M. Katherine DeJusto
of 3790 W. Buena Vista, Fresno, CA who (is)(are) personally known to me to be
the same person(s) whose name(s) (is)(are) subscribed to the foregoing
instrument appeared before me this day in person and acknowledge that (he)(she)
(they) signed, sealed and delivered the said instrument as (his)(her)(their)
free and voluntary act for the uses and purposes therein set forth.
Give under my hand and notarial seal, this 10th day of April, 1997.
Sunnie Laine South My commission expires: [ S E A L ]
- ------------------ December 31, 2000
Notary Public
<PAGE> 17
ACKNOWLEDGMENT - CORPORATE
STATE OF )
) SS;
COUNTY OF )
I,__________________, a Notary Public in and for the county and state
aforesaid, DO HEREBY CERTIFY that ______________, President and _____________,
Secretary of ____________________, a(n) _____________________ corporation, who
is personally known to me to be the person whose name is subscribed to the
foregoing instrument as such President, appeared before me this day in person
and acknowledged that they signed, sealed and delivered the said instrument as
their free and voluntary act as such President and Secretary respectively and
as the free and voluntary set of said corporation for the uses and purposes
therein set forth.
Given under my hand and notarial seal, this___ day of___________, 19__.
- ---------------------------- My commission expires:
Notary Public
<PAGE> 18
ADDENDUM
This addendum shall amend the purchase agreement dated March 14, 1998 and dated
March 20, 1998 between Mike DeJusto and MacQueen Enterprises, Inc. on that
property formerly known as McDonald's and the approximately 56 feet appurtenant
and to the east.
Whereas,
DeJusto and MacQueen desire to amend the above referenced agreement as follows:
The closing date of the sale shall be extended to April 15, 5 PM, 1998. All
other terms and conditions shall remain the same.
This addendum, when signed by both parties, shall become a part of the
aforementioned agreement to purchase as evidenced by their signatures affirmed
below.
/s/ Mike DeJusto date 4/1/98
- ---------------------------------------------- -----------
Mike DeJusto
/s/ Julian B. MacQueen date 4/4/98
- ---------------------------------------------- ----------
MacQueen Enterprises, Inc., By Julian MacQueen
<PAGE> 1
EXHIBIT 10.2
ASSIGNMENT OF PURCHASE AGREEMENT
MACQUEEN ENTERPRISES, INC. hereby assigns to SOUTHWIND DEVELOPMENT COMPANY,
L.L.C. its rights under that certain agreement with Michael A. DeJusto dated
March 20, 1998, and SOUTHWIND DEVELOPMENT COMPANY, L.L.C. hereby assumes all of
MACQUEEN ENTERPRISES, INC.'S obligations under said agreement. This assignment
is effective as of April 9, 1998.
MACQUEEN ENTERPRISES, INC. SOUTHWIND DEVELOPMENT
COMPANY, INC.
BY: /s/ Julian B. MacQueen BY: /s/ Julian B. MacQueen
----------------------- ----------------------
AS PRESIDENT AS MANAGER
<PAGE> 1
EXHIBIT 10.3
PRECONSTRUCTION
PURCHASE AND ESCROW AGREEMENT FOR
BEACHSIDE ALL-SUITES HOTEL, A CONDOMINIUM
THIS AGREEMENT is made and entered into by and between Purchaser
identified on the signature page hereof (hereafter referred to as "Purchaser")
and SOUTHWIND DEVELOPMENT COMPANY, L.L.C., an Alabama limited liability company
(hereafter referred to as "Developer").
R E C I T A L S
Developer proposes to construct a Condominium known as Beachside
All-Suites Hotel, a Condominium, located in Baldwin County, Alabama, more
particularly described in the Declaration of Condominium of said Condominium
(the "Condominium"). If the Condominium is built, Purchaser desires to purchase
a Unit on the terms and conditions stated in this Agreement. IF FEWER THAN 65
HOTEL GUEST UNITS HAVE BEEN SOLD BY _________, ____ THE CONDOMINIUM IMPROVEMENTS
WILL NOT BE BUILT, AND YOUR ERNEST MONEY DEPOSIT WILL BE REFUNDED TO YOU, WITH
INTEREST, IN ACCORDANCE WITH SECTIONS 5 & 8 HEREOF. The Declaration of
Condominium, which, if the Condominium is developed, will be filed for record in
the Probate Court of Baldwin County, Alabama (the "Declaration"), more
particularly describes the Condominium. The Declaration provides, among other
things, that the Condominium will be known and operated as a hotel and that
personal use of any Hotel Guest Unit by the owner thereof is limited.
IT IS, THEREFORE, AGREED AS FOLLOWS:
1. UNIT.
A. Subject to the terms and conditions hereinafter set forth, Developer
agrees to sell and Purchaser agrees to purchase the Hotel Guest Unit known as
Unit Number ___ in Beachside All-Suites Hotel, a Condominium, located near the
City of Gulf Shores, Baldwin County, Alabama. The Unit described above is herein
referred to as the "Unit".
B.
------------------------------- -----------------------------
Purchaser Developer
2. PRICE AND TERMS OF PAYMENT. Purchaser agrees to pay the Purchase Price
in the following manner:
<PAGE> 2
<TABLE>
<S> <C> <C>
A. Condominium Unit $
----------------
B. Earnest Money Deposit paid as
earnest money upon the execution of this Agreement, which
shall be held by an "Escrow Agent" in an interest bearing
account in accordance with the terms and conditions of this
Agreement. $
----------------
C. Balance Due Upon Closing: $
----------------
</TABLE>
3. FURNISHINGS. The Unit will be sold finished with colors and materials
determined by Developer and furnished as Developer deems appropriate for the
operation of the hotel.
4. MORTGAGE FINANCING; FINANCIAL STATEMENT; AND CREDIT REPORT. This sale
is not contingent upon Purchaser's obtaining financing. Notwithstanding the
foregoing, if Purchaser is denied financing by a lender, Developer may, in its
discretion, terminate this contract by written notice to Purchaser. If Purchaser
obtains financing to close this sale, all charges of the lender and other costs
of such loan and closing costs shall be borne by Purchaser. Purchaser shall
provide to Developer for review by Developer and Developer's lender a financial
statement signed by Purchaser in a form approved by Developer. Purchaser hereby
authorizes the Developer and Developer's lender to order and review credit
report(s) concerning Purchaser. If, in Developer's discretion, Purchaser's
credit report(s) is unsatisfactory, then Developer may terminate this contract
by written notice to Purchaser.
5. ESCROW AGENT. The deposits required to be made to the Escrow Agent by
Purchaser shall be deposited in escrow and held within the State of Alabama in
an account designated solely for that purpose by either a licensed title
insurance company, an attorney, a licensed real estate broker, or an institution
whose accounts are insured by a governmental agency or instrumentality until:
(i) delivered to the Developer at closing; (ii) delivered to the Developer
because of Purchaser's default under this Preconstruction Purchase and Escrow
Agreement to purchase the Unit; or (iii) refunded to Purchaser in accordance
with this Preconstruction Purchase and Escrow Agreement. The funds representing
such deposit shall be held in an interest bearing account, and the interest
accrued thereon shall belong to the party entitled to the principal deposit. The
Escrow Agent shall hold said deposit in the escrow account subject to the terms
and conditions of this Agreement. Developer shall give to Purchaser notice of
the person or company which shall act as Escrow Agent and the name and account
number of the escrow account. Developer may, from time to time, designate a
different Escrow Agent, and in any such case, Developer will promptly notify, in
writing, Purchaser of the name and address of the new Escrow Agent. In all
events, the Escrow Agent shall be a licensed title insurance company, an
attorney, a licensed real estate broker or an institution whose accounts are
insured by a governmental agency or instrumentality.
6. PURCHASER'S ACKNOWLEDGMENT OF RECEIPT AND REVIEW OF DOCUMENTS. The
Purchaser acknowledges receipt from the Developer and review of a copy of the
following:
(A) Prospectus;
(B) Proposed Declaration with proposed Plans attached;
(C) Proposed Articles of Incorporation of the Condominium
Association;
(D) Proposed Bylaws of the Condominium Association;
2
<PAGE> 3
(E) Proposed Hotel Operating and Rental Pool Agreement; and
(F) This Preconstruction Purchase and Escrow Agreement. (all
herein collectively referred to as the "Condominium
Documents").
This Preconstruction Purchase and Escrow Agreement is subject to all of the
terms, conditions and stipulations of the Condominium Documents. The Purchaser
further acknowledges that he has had adequate opportunity to fully review of all
of the Condominium Documents. The Purchaser understands that the Condominium
Documents may be amended from time to time by the Developer prior to the
closing. Purchaser hereby adopts and ratifies all of the terms and provisions of
the Condominium Documents. Purchaser agrees to execute at closing the Assignment
and Assumption Agreement attached to the Hotel Operating and Rental Pool
Agreement, thereby making Purchaser a party thereto.
7. PURCHASER'S RIGHT OF TERMINATION. Purchaser shall have the right to
terminate this Agreement within seven (7) days after first receiving the
Prospectus. The Purchaser acknowledges receiving the Prospectus simultaneously
with, or prior to, Purchaser's execution of this Agreement. If the Purchaser
elects to cancel this Agreement pursuant to the terms hereof, Purchaser may do
so by hand delivering notice thereof to the Developer or by mailing notice
thereof by prepaid United States mail to the Developer. However, if Purchaser
does not deliver to Developer notice terminating this Agreement as provided for
herein, Purchaser shall have no further rights to terminate. Upon such proper
cancellation and termination by Purchaser, all sums paid to Escrow Agent by
Purchaser, together with interest accrued thereon, will be repaid to Purchaser
forthwith upon demand. Upon return to Purchaser of all sums, the parties hereto
shall be released from all obligations under this Agreement and, thereupon,
neither party hereto shall have any further liability to the other.
8. MINIMUM SALES CONTINGENCY. If the Developer does not sell at least 65
Hotel Guest Units prior to _____________ ____, ____, the Developer shall
promptly refund all monies paid hereunder by the Purchaser, together with the
interest accrued thereon, to Purchaser through the escrow account and this
Agreement shall be null and void.
9. CONSTRUCTION OF THE CONDOMINIUM. The Developer proposes to construct
the Condominium substantially in accordance with the Plans, subject, however, to
modifications and amendments approved solely by the Developer. In the event that
there is a conflict or ambiguity between the Plans and the brochures,
advertisement, or other drawings, it is agreed that the Plans shall govern. Risk
of loss and right to possession shall transfer to Purchaser at closing.
11. THE UNIT. The Unit dimensions are approximate. Purchaser acknowledges
that in the course of construction of the improvements on the Property and of
the Unit, certain changes, deviations or omissions may be required by the
Developer, an engineer or architect, or required by governmental authorities.
Therefore, any changes, deviations or omissions that may be required are hereby
authorized, provided it does not materially affect the rights of the Purchaser,
size or location of the Purchaser's Unit, decrease the Purchaser's share in the
Common Elements, change the Purchaser's voting rights or increase his share in
the Common Expense.
Living area ceilings at the top floor will be insulated with permalite tappered
roof insulation or equivalent to an average thickness of 5 inches, which
thickness, according to the manufacturer, will result in an approximate R-Value
of 14. Living area exterior walls will be insulated with fiberglass butt type
insulation to a thickness of 3.5 inches, which thickness, according to the
manufacturer, will result in an approximate R-Value of 13. (Purchaser agrees and
understands that in accordance with FTC Regulations,
3
<PAGE> 4
this information has been supplied by the installer and has not been determined
by Developer.)
12. INSPECTION PRIOR TO CLOSING/WARRANTY. The Purchaser has the right to
inspect, and/or have the Purchaser's designee inspect, the premises prior to
closing; such inspection shall occur within three (3) business days after notice
to Purchaser that the Unit may be inspected. The Purchaser shall satisfy himself
at his expense that all appliances, heating and air conditioning, wiring, and
plumbing are in working order before closing. Neither Developer nor Developer's
agent makes any warranty regarding the condition of the Unit or of the Common
Elements, except as follows: At closing, the Developer will give to Purchaser a
one (1) year limited warranty on the following terms and conditions:
(A) Not later than thirty (30) days after closing or occupancy,
whichever event shall first occur, the Purchaser shall deliver a written list of
any minor omissions or malfunctions not previously made known, in writing, to
the Developer. To the extent that such items are the responsibility of Developer
or not otherwise excluded hereunder, corrections or adjustments will be made by
the Developer;
(B) Developer warrants the Unit to be free from latent defects for
a period of one (1) year following closing or occupancy, whichever event shall
first occur;
(C) A latent defect in construction is herein defined as a defect
not apparent at time of occupancy or closing, but which becomes apparent within
one (1) year from date of closing or occupancy, whichever event shall first
occur, and such defect has been directly caused by Developer's failure to
construct in accordance with the standards of construction prevailing in the
geographical area of the Unit. It is understood, however, by Purchaser that
normal characteristic behavior of building materials, wear and tear, general
maintenance, and like items, will not constitute a latent defect;
(D) All latent defects must be described, in writing, and
delivered to Developer within the one (1) year period described herein;
(E) Developer does not assume responsibility for any of the
following, all of which are expressly excluded from this Limited Warranty:
(i) defects in appliances and pieces of equipment which
are covered by manufacturer's warranties;
(ii) incidental, consequential, or secondary damages
caused by a breach of this warranty;
(iii) defects which are the result of characteristics
common to the materials used, such as, but not limited to: warping and
deflection of wood; mildew and fading; chalking and checking of paint
due to sunlight; cracks due to drying and curing of concrete, stucco,
plaster, bricks, and masonry; drying, shrinking and cracking of
caulking and weatherstripping;
(iv) conditions resulting from condensation on, or
expansion or contraction of materials;
(v) defective design or materials supplied by the
Purchaser or installed under the Purchaser's direction, or defects in,
or caused by anything not built into or installed in the Unit pursuant
to Preconstruction Purchaser and Escrow Agreement between the Developer
and the
4
<PAGE> 5
Purchaser;
(vi) damages due to ordinary wear and tear, abusive use,
or lack of proper maintenance of the Unit; and
(vii) chips, scratches, or mars in tile, woodwork, walls,
porcelain, brick, plumbing fixtures, formica and glass not expressly
identified to the Developer prior to closing.
(F) NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THE LIMITED
WARRANTY PROVIDED BY THE DEVELOPER TO THE PURCHASER OF A UNIT DOES NOT COVER ANY
APPLIANCE, PIECE OF EQUIPMENT, OR ITEM WHICH IS A CONSUMER PRODUCT FOR PURPOSES
OF THE MAGNUSON-MOSS WARRANTY ACT (15 U.S.C., ss.ss.2301 THROUGH 2312). THE
LIMITED WARRANTY PROVIDED BY THE DEVELOPER TO THE PURCHASER IS GIVEN IN LIEU OF
ANY AND ALL OTHER WARRANTIES, EITHER EXPRESSED OR IMPLIED, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY WHICH ARE SEPARATELY DISCLAIMED.
(G) This warranty is extended only to the Purchaser named herein.
It is not transferable to subsequent purchasers of the Unit.
(H) Should any term of this Agreement be determined by a court of
competent jurisdiction to be unenforceable, such determination shall not affect
the enforceability of the remaining provisions.
(I) This Agreement shall be governed by and construed in
accordance with the laws of the State of Alabama.
If the premises are destroyed or substantially damaged by fire or any other
cause before the closing date, this Agreement shall become null and void at the
option of either party, and the earnest money, together with the interest
accruing thereon, shall be refunded to Purchaser.
12. CLOSING.
A. Date and Place. The closing date and the place of closing
shall be specified in a written notice given by the Developer to Purchaser in
the manner hereinafter provided for the giving of notice, provided such written
notice shall be given not fewer than ten (10) days prior to the date specified
in the notice as the date of closing. The closing shall not take place until the
Declaration of Condominium is recorded and the Unit is substantially completed,
as evidenced by a recorded certificate of substantial completion executed by an
independent registered architect or independent registered engineer or by
issuance of a certificate of occupancy authorized by law.
B. Title to be Conveyed. Upon closing, Developer shall convey the
Unit to Purchaser subject to the following exceptions:
(1) The terms, conditions, covenants, and provisions of
the Declaration of Condominium, as amended, the Articles of
Incorporation of the Condominium Association, the Bylaws, and Rules and
Regulations of the Condominium Association;
(2) Zoning, planning and other restrictions, regulations
and other limitations imposed
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<PAGE> 6
on the Real Property, or the use thereof, by or under the Federal
Coastal Zone Management Act, or other federal law or regulation, or the
City of Gulf Shores or any other governmental authorities having
jurisdiction over the Real Property;
(3) Current ad valorem taxes not yet due and payable;
(4) Any easements which may be, or have been, granted to
public authorities or utility companies to provide for utility lines,
equipment, etc., for utilities serving the Condominium or other
property;
(5) Encroachments, overlaps, boundary line disputes, and
any other matter which would be disclosed by an accurate survey or
inspection of the Real Property;
(6) Applicable building setback lines;
(7) Outstanding oil, gas, and other mineral interests and
rights in connection thereunder;
(8) Existing utility easements; and
(9) Covenants prohibiting use of a portion of the Real
Property for certain quick service restaurants or for certain named
restaurants for a period of twenty (20) years.
C. Expenses.
(1) The following expenses will be paid by the Developer:
(a) Preparation of the deed;
(b) Developer's attorney's fees; and
(c) Cost of owner's title insurance policy.
(2) The Purchaser shall pay all other costs of the
closing, including but not limited to:
(a) Recording of the deed, including all deed
taxes;
(b) All costs required to be paid by the
Mortgagee, if the Unit is to be mortgaged by
the Purchaser;
(c) Utility deposits apportioned or assigned to
said Unit;
(d) Purchaser's attorney's fees and the fees for
services of any other parties engaged by
Purchaser;
(e) Purchaser's proportionate share of the
premium(s) for the insurance procured by the
Developer for the Condominium Association
for the first year of operation; the total
premium is expected to be approximately
$___.00. The Purchaser's proportionate
share will be the same percentage as the
Purchaser's percentage ownership in the
Common
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<PAGE> 7
Elements; and
(f) Purchaser's proportionate share of the ad
valorem taxes of the Real Property allocable
to the Unit for the period of time from the
date of closing to the end of the then
pending tax year. The estimate will be based
on the assumption that the Tax Assessor's
Office will assess the Real Property for the
pertinent year based on the sales price
provided for in the Preconstruction Purchase
and Escrow Agreement at full millage rates
and further on the assumption that no
exemptions will be applied by the Tax
Assessor's Office. The foregoing sum shall
be paid to the Developer, and such funds
shall not be, nor be deemed to be, trust
funds, but may be co-mingled with the
general funds of Developer. The Developer
will cause the ad valorem tax bill on the
Real Property to be paid for such year.
Purchaser shall be entitled to a refund from
the Developer if the ad valorem tax bill
pertaining to the Real Property is less than
the amount collected at closing. In
determining the portion of the ad valorem
tax bill pertaining to the Unit, the amount
of such tax bill shall be multiplied by a
percentage equal to Purchaser's percentage
ownership of Common Elements.
D. Obligations at Closing. At the closing, the following will
take place:
(1) Purchaser shall execute and deliver to Developer such
documents which may be necessary to give effect to
this Agreement;
(2) Purchaser will pay the balance of the Purchase Price
to the Developer;
(3) Purchaser will pay to the Condominium Association for
deposit into an Operating Cash Reserve Fund;
(4) The Developer will execute and deliver to the
Purchaser a Warranty Deed conveying the Unit, subject
to the matters and things hereinabove set forth. The
acceptance of said deed by Purchaser shall be deemed
to be a full performance and discharge of every
agreement and obligation on the part of the Developer
to be performed pursuant to the provisions of this
Agreement, except those which survive by operation of
law or are herein specifically stated to survive the
delivery of the deed;
(5) The Escrow Agent will transfer to the Developer, for
credit to Purchaser, all money deposited by Purchaser
with Escrow Agent, together with the interest accrued
thereon; and
(6) The Developer will obtain, at Developer's expense,
from Gulf Shores Title Company or other title
insurance company chosen by the Developer, a standard
American Land Title Condominium Association owner's
title insurance commitment, in the usual form,
listing the Purchaser as proposed insured in the
amount of the Purchase Price. The commitment will
contain the standard exceptions and shall further
contain the same exceptions as the Warranty Deed.
E. Title Taken. Purchaser requests that title be taken in the
name(s) of _____________ and ____________, and that if more than one name is
shown, the form of ownership be _____ tenants in common; _______ joint tenants
with rights of survivorship; or _____ other [explain:________________________ ].
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<PAGE> 8
13. DEFAULT. Should Purchaser fail to make any of the payments coming due
hereunder or fail or refuse to execute the instruments required to close this
transaction, or refuse to pay the Purchase Price, costs or other sums required
by this Agreement, or otherwise default hereunder, the Developer shall be
forthwith paid all monies held in the escrow account, including interest accrued
thereon, on behalf of the Purchaser, and such monies shall be retained by the
Developer either, at the Developer's option, (i) as partial payment of the
Purchase Price, in which case, Developer shall be entitled to specific
performance of this Agreement by Purchaser and shall be entitled to recover its
costs of enforcing this Agreement against Purchaser, including reasonable
attorney fees; or (ii) as liquidated and agreed upon damages which the Developer
has sustained and suffered as a result of Purchaser's default, and thereupon the
parties hereto will be released and relieved from all obligations hereunder. The
provisions herein contained for liquidated and agreed upon damages are bona fide
provisions for such and are not a penalty, the parties understanding that by
reason of the Developer binding itself to the sale of the Unit, and by reason of
the withdrawal of it from sale at a time when other parties would be interested
in purchasing the Unit, that the Developer will have sustained damages, if
Purchaser defaults, which damages will be substantial but will not be capable of
determination with mathematical precision, and therefore, as aforesaid, the
provision for liquidated and agreed upon damages has been incorporated in this
Agreement as a provision beneficial to both parties and as a reasonable estimate
of damages that would be suffered by the Developer in the event of such default.
Purchaser agrees that if Purchaser defaults in this Agreement, Purchaser will
not file any action against the Developer seeking the return of any portion of
any payment made pursuant this Agreement, or seeking any reduction in the amount
of the liquidated and agreed upon damages.
14. NON-ASSIGNABILITY. The Purchaser shall not assign this Agreement or the
Purchaser's rights hereunder without the prior written consent of the Developer.
If Developer consents to any proposed assignment, such consent shall not release
the original purchaser from liability under this Agreement. Any proposed
assignment is subject to restrictions arising from the registration of the sale
of the Unit as a security. Subject to the provisions hereof, this Agreement
shall be binding upon the parties hereto and their personal representatives,
heirs, successors and assigns.
15. ESCROW AGREEMENT. This Agreement will also serve as the Escrow
Agreement between the parties.
16. AGREEMENT NOT AN ENCUMBRANCE. No encumbrance shall arise against the
Property as a result of this Agreement or any monies deposited hereunder. In
furtherance and not in limitation of the provisions of the preceding sentence,
Purchaser agrees that the provisions of this Agreement are and shall be subject
and subordinate to any lien of any mortgage, including, but not limited to, any
building loan mortgage, heretofore or hereafter made and any advances heretofore
made thereon and any payments or expenses already made or incurred or which
hereafter may be made or incurred, pursuant to the terms hereof, or incidental
thereto, or to protect the security thereof, to the full extent thereof without
the execution of any further legal documents by Purchaser. This subordination
shall apply whether such advances are voluntary or involuntary and whether made
in accordance with any schedule of payments or accelerated by virtue of the
right of the lender to make advances before they become due in accordance with
the schedule of payments. Developer shall, at its option, either satisfy such
mortgage or obtain a release of the Unit from the lien of such mortgage on or
prior to the closing date. The existence of any mortgage or mortgages
encumbering the Property, or portions thereof, other than the Unit, shall not
constitute an objection to title or excuse Purchaser from completing payment of
the Purchase Price or performing all his other obligations hereunder or be the
basis of any claim against, or liability of, Developer, provided that any such
mortgage is subordinated to the Declaration of Condominium or that the Unit is
released from the lien of such mortgage.
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<PAGE> 9
17. SPECIAL DECLARANT RIGHTS. The Declaration of Condominium reserves
certain Special Declarant Rights to the Developer. Reference is made to the
Declaration of Condominium for those Special Declarant Rights. In general and
not by way of limitation, the Developer has the right to: (i) maintain sales
offices, management offices, and models in Units in the Condominium; (ii)
maintain signs on the Common Elements; (iii) use easements throughout Common
Elements for purposes of making improvements within the Condominium or within
real estate that may be added to the Condominium; and (iv) appoint or remove the
officers and members of the Board of Directors of the Condominium Association.
18. MERGER. All understandings and agreements heretofore made between the
parties are merged in this Agreement which expresses the parties entire
agreement, and no representations, oral or written, not contained herein shall
be considered a part hereof. This Agreement may not be altered, enlarged,
modified, or changed except by an instrument in writing executed by the parties
hereto, and Purchaser understands that the authority of Developer's sales
representatives is limited and confined to securing purchasers for the Property
upon the terms and conditions set out in this Agreement, and that sales
representatives have no power or authority to make any change, alteration,
modification, stipulation, inducement, promise, or representation whatsoever
other than those stated herein and that said sales representatives are acting as
special representatives, and all representations of Developer not herein set
forth are deemed waived by the Purchaser.
19. WHEN AGREEMENT EFFECTIVE. This Agreement shall not be binding upon
Developer until signed by either the Developer's Manager or a person duly
authorized by Developer's Manager to act on behalf of Developer for the purpose
of binding Developer to this Agreement. However, once executed by Developer this
Agreement shall be effective as of the date executed by the Developer as set out
below.
20. VIEWING OF SITE. Purchaser acknowledges that Purchaser has personally
viewed and inspected the site of the proposed Condominium.
21. NOTICE. All notices, statements, demands or other communications
(herein referred to as "notices"), to be given under or pursuant to this
Agreement, shall be in writing, and addressed to the parties at their respective
addresses, as provided herein, and shall be delivered in person, or by certified
or registered mail, post prepaid, or by telegram or cable, charges prepaid. If
mailed or telegraphed, such Notice shall be deemed to have been given
twenty-four (24) hours after the date of mailing or twenty-four (24) hours after
the date of delivery to the telegraph or cable company.
The Developer's address is (for purposes of this paragraph):
The Purchaser's address is as set out below.
22. MISCELLANEOUS. When the context permits within this Agreement, use of
the plural shall include the singular, use of the singular shall include the
plural, and the use of any gender shall be deemed to include all genders. All
terms used herein shall have the meaning given to them in the Declaration of
Condominium and hereby are incorporated by reference and made a part hereof.
23. DISCLOSURE. THE LISTING COMPANY, _____________________________ IS
EXCLUSIVELY AN AGENT OF:
________ DEVELOPER
________ PURCHASER
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<PAGE> 10
________ BOTH PARTIES AS A LIMITED CONSENSUAL DUAL AGENT
________ NEITHER PARTY AND IS ACTING AS A TRANSACTION BROKER
THE SELLING COMPANY, ______________________________ IS EXCLUSIVELY AN AGENT OF:
________ DEVELOPER
________ PURCHASER
________ BOTH PARTIES AS A LIMITED CONSENSUAL DUAL AGENT
________ NEITHER PARTY AND IS ACTING AS A TRANSACTION BROKER
DEVELOPER INITIALS:_________
PURCHASER'S INITIALS:_______
24. ARBITRATION OF DISPUTES. Any controversy or claim between the parties
hereto arising out of or related to Beachside All-Suites Hotel, a Condominium or
this Agreement must be settled by binding arbitration in _______________ by the
American Arbitration Association in accord with its then-prevailing rules, in
lieu of judicial proceedings. The arbitrators shall have no power to change the
provisions of this Agreement, and the determination of the arbitrators shall be
conclusive and binding upon the parties thereto, and judgment upon the award
rendered may be entered in accordance with applicable law in any court having
jurisdiction thereof. The prevailing party in any arbitration proceeding shall
be entitled, in addition to such other relief as it may obtain, to the payment
of all costs and expenses incurred in connection therewith, including reasonable
attorneys' fees.
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<PAGE> 11
IN WITNESS WHEREOF, the Purchaser has executed this Agreement this
_____ day of _________, _______.
--------------------------------------------
PURCHASER
Social Security No.:
------------------------
--------------------------------------------
PURCHASER
Social Security No.:
------------------------
ADDRESS OF PURCHASER
--------------------------------------------
--------------------------------------------
bus. phone
---------------------------------
home phone
---------------------------------
IN WITNESS WHEREOF, the Developer has caused this Agreement to be
executed and accepted this offer to purchase on the day of ______, _______.
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.,
An Alabama limited liability company
By:
-----------------------------------------
As Its:
-------------------------------------
11
<PAGE> 1
EXHIBIT 10.5
PROMISSORY NOTE
$1,800,000.00 April 16, 1998
FOR VALUE RECEIVED, SOUTHWIND DEVELOPMENT COMPANY, L.b.C., an Alabama
corporation and JULIAN B. MACQUEEN, (hereinafter referred to as "Borrower")
promises to pay to the order of FIRST AMERICAN BANK OF PENSACOLA, N.A., its
successors and assigns (referred to herein, together with any other holder
hereof, as the "Lender"), at 33 West Garden Street, Pensacola, Florida 32501,
or at such other place as the Lender may from time to time designate, the
principal sum of ONE MILLION EIGHT HUNDRED THOUSAND DOLLARS AND 00/100 DOLLARS
($1,800,000.00) in lawful money of the United States of America, or so much of
that sum as may be advanced under this Note or pursuant to the Loan Agreement
(hereinafter defined), together with interest thereon from the date of this
Note until this Note is paid in full, said principal and interest being
calculated and payable in the amounts, at the times and upon the terms and
conditions provided in this Note.
1. Definitions. As used in this Note, the following terms shall
have the indicated meanings:
(A) "Loan" shall mean that certain loan made by Lender to Borrower
pursuant to the Loan Agreement, as evidenced by this Note and Addendum A and
Addendum B attached.
(B) "Loan Agreement" shall mean that certain Loan Agreement of even
date herewith between Borrower and Lender concerning a loan from Lender to
Borrower in the original principal amount of $1,800,000.00.
(C) "Loan Commitment" shall mean that certain loan commitment letter
concerning the Loan dated April 1, 1998.
(D) "Loan Documents" shall mean collectively, this Note, the
Mortgage, the Loan Agreement, the Loan Commitment and all other assignments,
guaranties and instruments evidencing, securing or relating to the Loan.
(E) "Maturity Date" shall mean October 12, 1998.
(F) "Mortgage" shall mean that certain Mortgage and Security
Agreement of even date herewith from Borrower to Lender securing this Note.
Additional collateral shall be an unconditional Letter of Credit in favor of
First American Bank of Pensacola in the amount of $360,000.00 with a maturity
date of 18 months from date, or automatically renewable for said period without
conditions as referenced in Addendum C.
(G) "Premises" shall mean the real property in Baldwin County,
Alabama, described in and subject to the Mortgage.
2. Interest Rate. Interest shall accrue and be payable on the
outstanding principal balance of this Note at the rate of eight percent (8%)
per annum. Interest shall be computed o the basis of a 360-day year for the
actual number of days the principal is outstanding during each month.
<PAGE> 2
3. Payment. Payments of accrued interest only shall be payable
quarterly on the outstanding principal balance commencing on July 15, 1998 and
matures in full on October 12, 1998. On the Maturity Date, all principal,
unpaid accrued interest and other charges hereunder shall be due and payable in
full. Each payment on the indebtedness evidenced hereby will first reduce
charges owed by Borrower that are neither principal nor interest. The remainder
of each such payment will be applied first to accrued but unpaid interest and
then to unpaid principal.
4. After-Default Interest. Notwithstanding the foregoing, from and
after any Event of Default under this Note, interest on the outstanding
principal balance shall accrue and be payable at the rate of thirteen percent
(13%).
5. Interest Limitation. Nothing contained in this Note, the
Mortgage, the Loan Agreement or in any of the Loan Documents shall be construed
or shall operate, either presently or prospectively, to require the Borrower to
pay interest in excess of the maximum interest rate allowable under any statute
or law applicable to this transaction or to make any payments or do any act
contrary to law, nor shall the Borrower by obligated or required to pay
interest on the outstanding principal balance at a rate which could subject
Lender to either civil or criminal liability as a result of being in excess of
the maximum rate which the Borrower is permitted by law to contract, agree to
pay or pay. Any interest paid in excess of the maximum rate allowed by law
shall, at Lender's option, be (i) refunded to the Borrower, (ii) applied to
reduction of the principal balance under this Note, or (iii) credited to
amounts then due and owing by the Borrower under this Note, the Mortgage, the
Loan Agreement or any of the Loan Documents; provided, however, that if the
excessive amount of interest paid by Borrower exceeds the sums outstanding
hereunder, the portion exceeding the sums outstanding hereunder shall be
refunded in cash to the Borrower. Any such crediting or refund shall not cure
or waive any Event of Default by Borrower hereunder or under any of the Loan
Documents. Further, if the terms of this Note would otherwise require or
obligate Borrower to pay interest on the principal balance hereunder at a rate
in excess of the maximum rate allowed by law, then the rate of interest under
this Note shall ipso facto be deemed to be reduced to such maximum lawful rate,
and interest payable hereunder shall be computed at such maximum lawful rate
and all payments theretofore or thereafter accruing hereunder shall be likewise
computed on the basis of such maximum lawful rate. Borrower agrees, however,
that in determining whether or not any interest payable hereunder exceeds the
maximum rate allowed by law, any non-principal payment (except payments
specifically stated herein to be "interest"), including without limitation late
charges, shall be deemed, to the extent permitted by law, to be an expense,
fee, premium or penalty rather than interest.
6. Prepayment.
(A) Voluntary Prepayment. Principal outstanding under this Note may
be prepaid in full or in part at any time and from time to time without penalty
or premium. No such partial prepayment of principal will have the effect of
postponing, satisfying, reducing or otherwise affecting any scheduled
installment of interest before the principal of and interest on this Note,
together with all other charges due under the Loan Documents, are paid in full.
7. Late Charge. If any installment of interest or of any escrow or
other payment required to be made under this Note or any of the Loan Documents
(except for the principal payment due on the Maturity Date) is not received by
Lender within ten (10) days after the date on which the installment or payment
became due, then Borrower shall pay to Lender a late charge equal to five
percent (5%) of such installment or payment amount. Nothing contained herein
shall be construed as creating any grace period or additional grace period for
the making of any such installment or payment.
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<PAGE> 3
8. Default. The occurrence of any of the following shall constitute
an Event of Default under this Note:
(A) If Borrower fails to make any monetary payment required by this
Note, as and when due. and such failure continues for a period of five (5) days
after receipt by Borrower of written notice by Lender to Borrower; or
(B) If there occurs any other Event of Default under or specified in
any of the Loan Documents.
9. Acceleration. Upon the occurrence of any Event of Default as
hereinabove defined, the entire principal balance of this Note, together with
all accrued interest and other sums due hereunder or under the Loan Documents,
shall become immediately due and payable without notice, demand or legal
process, at the option of Lender.
10. Loan Documents. This Note is referred to in and arises out of the
Loan Agreement, and this Note is secured by, among other instruments, the Loan
Documents. Said Loan Documents contain additional provisions for the
acceleration of the maturity of this Note.
11. Additional Waivers and Agreements. With respect to any and all
obligations under this Note or under any of the Loan Documents, Borrower and
all co-signers, sureties, endorsers and guarantors of this Note, hereby:
(A) Waive demand, presentment, protest, notice of protest, notice of
dishonor, notice of acceleration of maturity, suit against any party and all
other notices and requirements necessary to charge or hold the Borrower or any
such co-signer, surety, endorser or guarantor on any such obligation;
(B) Agree to continue and remain bound for the payment of principal,
interest and all other sums payable hereunder or under any of the Loan
Documents, notwithstanding any change or changes by way of addition, release,
surrender, exchange or substitution of any security for this Note or of any
party or parties liable hereunder or by way of any extension or extensions of
time for the payment of any sums due hereunder or under any of the Loan
Documents or any other changes or modifications to any of the Loan Documents
agreed to by Borrower, and waive all and every kind of notice of such change or
changes and all defenses on the ground of such change or changes and agree that
the same may be made without notice to or consent of any of them;
(C) Waive the right to interpose any setoff or counterclaim of any
nature or description (except a setoff or counterclaim directly related to or
arising from the Loan or the Loan Documents) in any litigation in which the
Lender and the Borrower and/or such co-signers, sureties, endorsers and
guarantors, or any of them, shall be parties;
(D) Agree that any obligations of Borrower or such co-signers,
sureties, endorsers or guarantors hereunder may, from time to time, in whole or
in part, be renewed, extended, modified, accelerated, compromised, discharged
or released by Lender, and any collateral, lien and right of setoff securing
any such obligations may, from time to time, in whole or in part, be exchanged,
sold or released, all without notice to or further reservations of rights
against any of said parties and all without in any way affecting or releasing
the liability of any of said parties;
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<PAGE> 4
(E) Agree to pay all filing fees, taxes and all costs of collecting
or securing or attempting to collect or secure any obligations under the Note
or any of the Loan Documents (except for current interest billing), including
without limitation reasonable attorney's fees, whether or not any lawsuit is
filed; and
(F) BORROWER AND ALL CO-SIGNERS, SURETIES, ENDORSERS AND GUARANTORS
OF THIS NOTE HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY AGREE THAT:
(1) THEY AND EACH OF THEM HEREBY WAIVE THE RIGHT TO TRIAL
BY JURY IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM, CROSS-CLAIM OR OTHER ACTION
OR PROCEEDING ARISING FROM OR BASED UPON THIS NOTE OR ANY OF THE LOAN
DOCUMENTS, AND NEITHER THE BORROWER, NOR BORROWER'S HEIRS, LEGAL
REPRESENTATIVES, SUCCESSORS OR ASSIGNS, NOR ANY CO-SIGNER, SURETY, GUARANTOR,
ENDORSER OR OTHER OBLIGOR OBLIGATED FOR THE INDEBTEDNESS EVIDENCED BY THIS
NOTE, OR SUCH PERSON'S OR ENTITY'S HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS OR
ASSIGNS, SHALL SEEK A JURY TRIAL IN ANY LAWSUIT, PROCEEDING, COUNTERCLAIM,
CROSS-CLAIM OR OTHER ACTION OR PROCEEDING ARISING FROM OR BASED UPON THIS NOTE
OR ANY OF THE LOAN DOCUMENTS.
(2) NEITHER THE BORROWER, NOR BORROWER'S HEIRS, LEGAL
REPRESENTATIVES, SUCCESSORS OR ASSIGNS, NOR ANY CO-SIGNER, SURETY, GUARANTOR,
ENDORSER OR OTHER OBLIGOR OBLIGATED FOR THE INDEBTEDNESS EVIDENCED BY THIS
NOTE, NOR SUCH PERSON'S OR ENTITY'S HEIRS, LEGAL REPRESENTATIVES, SUCCESSORS OR
ASSIGNS, SHALL SEEK TO CONSOLIDATE ANY CLAIM AS TO WHICH A JURY TRIAL HAS BEEN
WAIVED WITH ANY CLAIM IN WHICH A JURY TRIAL HAS NOT BEEN OR CANNOT BE WAIVED.
(3) THE PROVISIONS OF THIS SUBSECTION (F) HAVE BEEN FULLY
NEGOTIATED BY LENDER, BORROWER AND ANY AND ALL CO-SIGNERS, SURETIES,
GUARANTORS, ENDORSERS AND OTHER OBLIGORS OBLIGATED FOR THE INDEBTEDNESS
EVIDENCED BY THIS NOTE, AND THESE PROVISIONS SHALL BE SUBJECT TO NO EXCEPTIONS.
(4) NEITHER LENDER NOR ANY OFFICER, EMPLOYEE, ATTORNEY,
AGENT OR OTHER REPRESENTATIVE OF LENDER HAS IN ANY WAY AGREED WITH OR
REPRESENTED TO BORROWER, OR ANY CO-SIGNER, SURETY, GUARANTOR, ENDORSER OR ANY
OTHER PARTY OBLIGATED FOR THE INDEBTEDNESS EVIDENCED BY THIS NOTE THAT THE
PROVISIONS OF THIS SUBSECTION (F) WILL NOT BE FULLY ENFORCED IN ALL INSTANCES.
(5) THIS SUBSECTION (F) IS A MATERIAL INDUCEMENT FOR
LENDER TO ENTER INTO THE LOAN AND OTHER TRANSACTIONS EVIDENCED BY THIS NOTE AND
THE LOAN DOCUMENTS.
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<PAGE> 5
12. Miscellaneous.
(A) All amounts payable under this Note are payable in lawful money
of the United States at the main office of the Lender in Pensacola, Florida. A
check shall constitute payment when actually received by Lender, provided it is
subsequently honored and collected in the ordinary course of business without
having been returned to Lender for insufficient funds or other reasons. Any
payment received by Lender after 2:00 p.m., Pensacola, Florida, time on any day
shall be deemed to have been received by Lender on the next succeeding day
which is not a Saturday, Sunday or legal holiday under the laws of the State of
Florida or the United States of America.
(B) Lender may, but shall not be required to, apply, on or after
maturity, to the payment of this debt, any funds or credit held by Lender on
deposit, in trust or otherwise, for the account of the Borrower or of any
co-signer, surety, endorser or guarantor hereof
(C) As used herein, the singular shall be deemed to include the
plural and vice versa, and each gender shall be deemed to include all other
genders, unless a contrary intention clearly appears. If the Borrower consists
of more than one person or entity, the obligations and liabilities of each such
person or entity hereunder shall be joint and several.
(D) Lender shall not by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies, and no waiver of any kind
nor any modification of this Note shall be valid unless in writing and signed
by Lender. All rights and remedies of Lender under the terms of this Note, the
Loan Documents and any statutes or rules of law shall be cumulative and may be
exercised successively or concurrently. Borrower agrees that Lender shall be
entitled to all the rights of a holder in due course of a negotiable
instrument.
(E) This Note has been executed and delivered in the State of
Alabama, is to be performed in the State of Florida, and shall be governed by
and construed in accordance with the laws of the State of Florida.
(F) If any provision of this Note shall be unenforceable or invalid
under applicable law, then the remaining provisions of this Note shall not be
affected thereby but shall remain in full force and effect.
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<PAGE> 6
(G) The Borrower shall be liable for an indebtedness represented
by this Note and has subscribed its name hereto without condition that anyone
else should sign or become bound hereon and without any other condition
whatever being made. The provisions of this Note are binding on, and shall
inure to the benefit of, the Borrower and the heirs, executors, administrators,
assigns and successors of the Borrower.
(H) All notices and other communications required hereunder shall be
in writing and shall be delivered personally, or by registered or certified
mail, return receipt requested, postage prepaid, or by Federal Express, Express
Mail or Air Courier, fees prepaid. Such notices shall be deemed to have been
received (I) upon delivery, if personally delivered; (ii) upon the earlier of
actual receipt or the fourth day after mailing, if mailed by registered or
certified mail, return receipt requested, postage prepaid; and (iii) on the
next business day if sent by Federal Express, Express Mail or Air Courier, fees
prepaid. The address for delivery of such notices shall be as follows:
(a) To Lender at: FIRST AMERICAN BANK OF PENSACOLA, N.A
33 West Garden Street
Pensacola, Florida 32501
Attn: William E. Bassett
Senior Vice President/CLBB
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
/s/ Julian B. MacQueen /s/ Julian B. MacQueen
- ------------------------- ---------------------------
JULIAN B. MACQUEEN JULIAN B. MACQUEEN
MEMBER/MANAGER PERSONALLY AND INDIVIDUALLY
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ADDENDUM A
Notwithstanding anything in this Note to the contrary, the maturity
date shall be six months from the date hereof; provided however if Maker closes
a construction loan from First American Bank of Pensacola, N.A., within such
six (6) month period to fund construction of improvements on land located in
Gulf Shores, Alabama, (which such land was purchased with proceeds from the
loan evidenced by this Note) than the maturity date of this Note shall be
maturity date of said construction loan.
/s/ Julian B. MacQueen
- --------------------------------
Julian MacQueen, Personally
/s/ Julian B. MacQueen Pres.
- --------------------------------
MacQueen Enterprises, Inc.
SOUTHWIND DEVELOPMENT COMPANY L.L.C.
/s/ Julian B. MacQueen
- --------------------------------
Julian B. MacQueen
Member/Manager
<PAGE> 8
ADDENDUM B
Additional collateral shall be an unconditional Letter of Credit in
favor of First American Bank of Pensacola in the amount of $360,000.00 with a
maturity date of 18 months from date, or automatically renewable for said
period without conditions.
/s/ Julian B. MacQueen
- --------------------------------
Julian MacQueen, Personally
/s/ Julian B. MacQueen Pres.
- --------------------------------
MacQueen Enterprises, Inc.
SOUTHWIND DEVELOPMENT COMPANY L.L.C.
/s/ Julian B. MacQueen
- --------------------------------
Julian B. MacQueen
Member/Manager
<PAGE> 9
ADDENDUM C
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SECURITY AGREEMENT
KNOW ALL MEN BY THESE PRESENTS: That
WHEREAS, pursuant to a certain promissory note of even date herewith,
(the "Note") Southwind Development Company, LLC, an Alabama limited liability
company (the "Debtor") is, contemporaneously with the execution hereof,
becoming indebted to First American Bank of Pensacola, N.A. (the "Secured
Party"), on a loan in the sum of One Million Eight Hundred Thousand and No/100
DOLLARS ($1,800,000.00) principal, or so much thereof as may be advanced under
the Note (the "Loan") payable to Bank with interest thereon and as provided
therein and also secured by a Mortgage of even date herewith (the "Mortgage");
and
WHEREAS, Debtor may hereafter become indebted to Bank or a subsequent
holder of this Security Agreement on loans or otherwise (said Bank and any
subsequent holder of this Security Agreement being referred to herein as
"Secured Party"); and
WHEREAS, Debtor agrees to make this Security Agreement (this
"Agreement") to further secure said Note and any and all other future or
additional liabilities of Debtor to Secured Party (said liabilities, as defined
in paragraph 5, being referred to herein as "Liabilities").
NOW, THEREFORE, the undersigned Debtor, in consideration of making the
Loan, and to secure the prompt payment of same, with the interest thereon, and
any extensions, modifications, or renewals of same, and any and all Liabilities
of Debtor to Secured Party, and further to secure the performance of the
covenants, conditions, and agreements hereinafter set forth and set forth in
the Note, and as may be set forth in the Mortgage and other instruments
evidencing or securing other Liabilities of Debtor to Secured Party, and
further to secure any and all charges incurred by Secured Party on account of
Debtor, including but not limited to attorney's fees, does hereby agree as
follows:
1. Definitions. All terms used herein which are defined in the
Alabama Uniform Commercial Code (the "Code") shall have the same meaning herein
as in the Code unless otherwise indicated herein.
2. Incorporation by Reference. All of the terms and provisions
of the Note are hereby
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incorporated by reference as though set forth in full herein.
3. Security Interests. Debtor hereby grants to Secured Party
title to and a security interest in the Collateral described in paragraph 4
hereof to secure the performance and payment of the Liabilities described in
paragraph 5 hereof.
4. Collateral. As security for the payment and performance
of all Liabilities of the Debtor, Debtor grants Secured Party title to and a
security interest in the following described property of the Debtor (herein
collectively referred to as the "Collateral"): SEE ATTACHED EXHIBIT 1,
INCORPORATED HEREIN BY REFERENCE.
5. Liabilities. "Liabilities" of Debtor, as used herein, shall
mean:
5.01 Note. The Note, with interest as therein provided, and all
extensions, modifications, or renewals thereof.
5.02 Other Indebtedness. Any and all other obligations,
indebtedness, and liabilities of the Debtor to the Secured Party, whether joint
or several, due or to become due, liquidated or unliquidated, now existing or
hereafter arising, absolute or contingent, direct or indirect, and all
extensions, modifications, and renewals thereof, and whether incurred or given
as maker, endorser, guarantor, surety, or otherwise.
6. Representations, Warranties, and Covenants. The Debtor hereby
represents, warrants, and covenants as follows;
6.01 No Adverse Liens. Except for any security interest
specifically set forth on an addendum attached hereto, and except for the
security interest granted hereby, the Debtor is or (with respect to Collateral
not presently owned by Debtor will be) the lawful owner of all Collateral free
from any adverse lien, security interest, or encumbrance, and shall have full
right to pledge, sell, assign, or transfer the same to Secured Party. Debtor
will defend the Collateral against all claims and demands of all persons at any
time claiming the same or any interest therein.
6.02 Financing Statements. No financing statement covering any
Collateral or any proceeds thereof
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is on file in any public office, except for financing statements executed by
Debtor and Secured Party. At the Secured Party's request, the Debtor will join
with Secured Party in executing one or more financing statements pursuant to
the Code in form satisfactory to the Secured Party, and will pay the cost of
filing the same in all public offices whereafter filing is deemed by the
Secured Party to be necessary or desirable. The Debtor authorizes the Secured
Party to prepare and to file financing statements covering the Collateral
signed only by the Secured Party and to sign the Debtor's signature to such
financing statements in jurisdictions where Debtor's signature is required. The
Debtor promises to pay the Secured Party the fees incurred in filing the
financing statements, including but not limited to mortgage recording taxes
payable in connection with the filings on fixtures, which fees shall become
part of the Liabilities secured by this Agreement.
6.03 Inspection of Collateral and Records. The Secured Party may
examine and inspect the Collateral and records and documents related to the
Collateral at any time, wherever located.
6.04 Assignment or Sale. Debtor, its agents, servants, or employees
will not sell, assign, or offer to sell or assign or otherwise transfer the
Collateral, either in whole or in part, or any interest therein without the
written consent of the Secured Party.
6.05 Payment of Taxes and Insurance. Debtor will pay promptly all
taxes and assessments upon or with respect to the Collateral. Debtor hereby
authorizes Secured Party to discharge taxes, assessments, liens, security
interests, or other encumbrances at any time levied or placed on the
Collateral, to pay for any insurance on the Collateral required to be
maintained by Debtor hereunder, and to pay for, make, or provide for any
maintenance, repair, or preservation of the Collateral as the Secured Party
shall deem reasonably necessary to preserve its interests; provided, however,
that Secured Party shall be under no obligation to do so. Debtor agrees to
reimburse Secured Party on demand with interest at the rate set forth in the
Note for any payment made or any expense incurred by Secured Party pursuant to
the foregoing authorization. Payments made or expenses incurred by Secured
Party pursuant to the foregoing
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authorization shall be included in the Liabilities secured hereunder.
6.06 Additional Representations of Debtor (Collateral). With
respect to all of the Collateral:
6.06(a) Such Collateral is used or bought primarily for business
purposes.
6.06(b) Lender shall have a first priority lien on the Collateral.
6.06(c) All such Collateral will be kept at the address of Debtor
shown below Debtor's signature or, if not, at the real property described in
the Mortgage. Debtor will promptly notify Secured Party of any change in the
location of the Collateral. Except for transactions in the ordinary course of
Debtor's business, Debtor, its agents or employees will not remove such
Collateral from said location without the prior written consent of the Secured
Party.
6.06(d) If certificates of title are issued or outstanding with
respect to such Collateral, the Debtor will cause the Secured Party's interest
to be properly noted thereon.
6.06(e) Debtor has and will maintain insurance on such Collateral
to the extent and against such hazards and liabilities as is commonly done by
companies of like nature, similarly situated, including but not limited to
public liability, theft, fire (with extended coverage) insurance, and in the
case of motor vehicles, collision insurance, all containing such terms and for
such periods as may be reasonably satisfactory to the Secured Party. All such
insurance will be maintained with insurance companies reasonably acceptable tot
he Secured Party and will be payable to the Secured Party and to the Debtor as
their interest may appear. All insurance policies shall provide for a minimum
of ten (10) days, written cancellation notice to the Secured Party and, at the
Secured Party's request, all policies shall be delivered to and held by the
Secured Party. If at any time the Secured Party is of the opinion that the
Debtor's insurance coverage is inadequate, the Debtor will, within ten (10)
days after written request by the Secured Party, obtain such insurance as the
Secured Party shall reasonably request. Secured Party is hereby made
attorney-in-fact for Debtor to obtain, adjust, and settle, in its sole
discretion, such insurance and to endorse any drafts or checks issued in
connection with such insurance.
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6.06(f) Debtor agrees to prevent and protect against any waste,
damage, or destruction of such Collateral, and Debtor will maintain the same in
as good condition as it now is in, ordinary and reasonable wear and tear
excepted.
6.07 Name of Debtor. Debtor's name has always been as set forth on
the first page of this Agreement, except as otherwise disclosed in writing to
the Secured Party. Debtor will promptly advise the Secured Party in writing of
any change in Debtor's name.
7. Set Off. The Secured Party is hereby given a continuing lien
as additional security for the Liabilities hereunder upon any and all monies,
securities, and other property of Debtor, and the proceeds thereof, now or
hereafter held or received by or in transit to the Secured Party from or for
Debtor, whether for safekeeping, custody, pledge, transmission, collection, or
otherwise, and also upon any and all deposit balances (general or special) and
credits of Debtor with, and any and all claims of Debtor against, the Secured
Party at any time existing, and upon an event of default hereunder, the Secured
Party may apply or set off the same against the Liabilities hereby secured.
8. Events of Default. Debtor shall be in default under this
Agreement upon the happening of any of the following events or conditions which
is not completely cured within any specific time period provided in any Loan
Document:
8.01 Any Event of Default or failure to perform any obligation,
covenant, or liability contained or referred to herein, in the Note, the
Mortgage, or any other Loan Document.
8.02 Loss, theft, damage, destruction, sale, assignment, transfer,
or encumbrance to or of any part of the Collateral (except for sales or
encumbrances of Collateral expressly authorized by the terms of this
Agreement), or any levy, seizure, injunction, or attachment thereon.
9. Rights and Remedies Upon Default. Upon occurrence of any of
the above events of default, the Secured Party shall have the following rights
which shall be cumulative with all other rights and remedies of Secured Party:
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9.01 Acceleration and Other Rights. The right to declare all
Liabilities secured hereby to be immediately due and payable without notice to
or demand upon the Debtor or any other person. The Secured Party, in addition
to any remedies it may exercise under this Security Agreement, the Note, under
other documents executed in connection with the Liabilities secured hereby, or
under applicable law, may immediately and without demand, exercise any and all
of the rights of a secured party upon default under the Alabama Uniform
Commercial Code, all of which shall be cumulative. Such rights shall include,
without limitation:
9.01(a) The right to take possession of the Collateral without
judicial process and to enter upon any premises where the Collateral may be
located for the purposes of taking possession of, securing, removing, and/or
disposing of the Collateral without interference from the Debtor and without any
liability for rent, storage, utilities or other sums.
9.01(b) The right to sell, lease, or otherwise dispose of any or all
of the Collateral, whether in its then condition or after further processing or
preparation, at public or private sale. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Secured Party shall give the Debtor at least five (5)
days, prior notice of the time and place of any public sale of the Collateral
or of the time after which any private sale or other intended disposition of
the Collateral is to be made, all of which the Debtor agrees shall be
reasonable notice of any sale or disposition of the Collateral.
9.01 (c) Upon request of Secured Party, Debtor shall assemble
and make the Collateral available to Secured Party at a place reasonably
convenient to Debtor and Secured Party.
9.02 Attorney-in-Fact. To effectuate the rights and remedies of the
Secured Party upon default, Debtor does hereby irrevocably appoint Secured
Party attorney-in-fact for the Debtor, with full power of substitution to,
after default of Debtor, sign, execute, and deliver any and all instruments and
documents and do all acts and things to the same extent as Debtor could do, and
to sell, assign, and transfer any
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Collateral to Secured Party or any other party.
9.03 Receiver. Secured party shall have the right to apply for and
have a receiver appointed by a court of competent jurisdiction, in connection
with any action taken by the Secured Party to enforce its rights and remedies
hereunder, to manage, protect, and preserve the Collateral and continue the
business of the Debtor, to collect all revenues and profits thereof, and to
apply the same to the payment of all expenses and other charges of such
receivership, including but not limited to the compensation of the receiver,
and to the payment of Liabilities secured hereby, until a sale or other
disposition of such Collateral shall be finally made and consummated, or until
all Liabilities secured hereby shall have been paid.
9.04 Proceeds of Sale; Deficiency. The proceeds of any sale or
other disposition of Collateral by the Secured Party shall be applied first to
the expenses (including, but not limited to legal expenses and reasonable
attorneys' fees) of retaking, holding, storing, and processing the Collateral
and preparing the Agreement; then to the satisfaction of the Liabilities
secured hereby with the application of such proceeds to particular Liabilities
or to interest or principal as the Secured Party, in its sole discretion, shall
determine; and the balance, if any, to be paid to Debtor or to be paid as
otherwise provided by Law., The enumeration of the foregoing rights is not
intended to be exhaustive, and the exercise of any right shall not preclude the
exercise of any other rights, all of which shall be cumulative. Debtor agrees
that any delay by the Secured Party in exercising any right or remedy hereby
granted shall not be construed as a waiver by the Secured Party of any of its
rights or remedies hereunder. Secured Party may permit the Debtor to remedy any
default, but such shall not be a waiver of the default so remedied, and Secured
Party's waiver of any default shall not be a waiver of any subsequent or prior
defaults.
10. Waivers. In addition to any other waivers, as set forth herein
or in the Note, against the Liabilities secured hereby, Debtor expressly
waives, to the extent allowed by law, all claims and rights to claim any
exemptions allowed or allowable under the Constitution or laws of the United
States, the
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State of Florida, or any other jurisdiction. All rights and remedies of Secured
Party hereunder or with respect to Liabilities or Collateral shall be
cumulative, and in addition to any other right available to Secured Party by
statute or at law or in equity, and may be exercised singularly or
concurrently. In the event that any one or more of the terms or provisions of
this Agreement or of the Note shall be invalid, illegal, or unenforceable in
any respect, the validity of the remaining terms or provisions shall in no way
be affected prejudiced or disturbed thereby.
11. Assignment of Liabilities. If at any time or times by sale,
assignment, negotiation, pledge, or otherwise, Secured Party transfers any or
all of the Liabilities, such transfer shall, unless otherwise specified in
writing, carry with it Secured Party's rights and remedies under this Agreement
with respect to such Liabilities transferred, and the transferee shall become
vested with such rights and remedies whether or not they are specifically
referred to in the transfer. If and to the extent Secured Party retains any of
the Liabilities, Secured Party shall continue to have the rights and remedies
herein set forth with respect thereto.
12. Notices. Any demand upon or notice to Debtor that the Secured
Party may elect to give shall be effective if any delivered to Debtor,
deposited in the United States mail, postage prepaid, return receipt requested,
or delivered to a telegraph company addressed to Debtor at the address shown
below Debtor's signature, or if Debtor has notified the Secured Party in
writing of a change of address, to Debtor's last address so notified. Demands
or notices addressed to Debtor's address at which the Secured Party customarily
communicates with Debtor shall also be effective.
13. Agreement Under Seal. This Agreement is given under the seal
of all persons signing as and for the Debtor. It is intended by Debtor and all
persons signing for Debtor that this instrument is and shall constitute a
sealed instrument according to law.
14. Headings. The headings of the sections, paragraphs, and
subdivisions of this Agreement are for convenience of reference only, are not
to be considered a part hereof, and shall not limit or
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otherwise affect any of the terms hereof.
15. Successors and Assigns. The provisions of this Agreement shall
insure to and bind not only the parties hereto, but also their respective
heirs, executors, administrators, successors and assigns.
16. GOVERNING LAW. THIS SECURITY AGREEMENT SECURES A NOTE AND
OTHER INDEBTEDNESS, WHICH BY THE TERMS THEREOF ARE GOVERNED BY THE LAWS OF THE
STATE OF FLORIDA, AND ARE TO BE PERFORMED WITHIN THE STATE OF FLORIDA. WITHOUT
GIVING EFFECT TO CHOICE OF LAW RULES, THE PARTIES HERETO AGREE THAT THE NOTE
AND OTHER INDEBTEDNESS SHALL BE GOVERNED BY FLORIDA LAW. THE INTEREST, RIGHT
AND REMEDIES GRANTED BY THIS SECURITY AGREEMENT, AND THE MANNER IN WHICH THEY
ARE TO BE ENFORCED SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ALABAMA.
17. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HERETO EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, COUNTERCLAIM, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER OR RELATED TO THIS LOAN, ANY OTHER LOAN
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR ARISING
UNDER OR RELATED TO ANY OTHER INDEBTEDNESS, OR (2) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE RELATIONSHIP BETWEEN OR COURSE OF DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN, THIS MORTGAGE, ANY
OTHER LOAN DOCUMENT, AGREEMENT OR INSTRUMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, OR RELATING TO ANY
OTHER INDEBTEDNESS; IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN
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ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE
OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY. THIS PROVISION SHALL SURVIVE THE PAYMENT IN FULL OF THE LOANS OR ANY
OTHER INDEBTEDNESS.
IN WITNESS WHEREOF, the undersigned Debtor and Secured Party have
caused this Agreement to be duly executed and delivered effective on the 16th
day of April, 1998.
DEBTOR:
Southwind Development Company, LLC
/s/ Julian B. MacQueen
----------------------
By: Julian B. MacQueen
Its: Authorized Member
Debtor's address: c/o Julian MacQueen
----------------------
113 Baybridge Dr.
----------------------
Gulf Breeze, Fl 32561
----------------------
SECURED PARTY:
First American Bank of Pensacola,
N.A.
BY: /s/ W.E. Bassett
-----------------
Its Sr. Vice Pres.
-----------------
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STATE OF ALABAMA
COUNTY OF BALDWIN
I, the undersigned authority, in and for said County in said State,
hereby certify that Julian B. MacQueen, whose name as authorized member of
Southwind Development Company, LLC, an Alabama limited company, is signed to
the foregoing instrument and who is known to me, acknowledged before me on this
day that, being informed of the contents of the instrument, he, as such member
and with full authority, executed the same voluntarily-for and as the act of
said company.
Given under my hand this the 16th day of April, 1998.
NOTARY PUBLIC
MY COMMISSION EXPIRES:
( S E A L ) 2/20/2000
STATE OF ALABAMA
COUNTY OF BALDWIN
I, the undersigned, Notary Public in and for said ,County in said
State, hereby certify that W.E. Bassett whose name as Sr. Vice-President of
First American Bank of Pensacola, N.A., is signed to the foregoing instrument
and who is known to me, acknowledged before me on this day that, being informed
of the contents of the instrument, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation.
Given under my hand this 16th day of April 1998.
NOTARY PUBLIC
MY COMMISSION EXPIRES:
(S E A L) 2/20/2000
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EXHIBIT 1
(a) All that tract or parcel or parcels of land and estates particularly
described on Exhibit A attached hereto and made a part hereof by reference (the
"Land");
(b) All buildings, structures, and improvements of every nature whatsoever
now or hereafter situated on the Land, and all fixtures, fittings, building
materials, machinery, equipment, furniture and furnishings and personal
property of every nature whatsoever now or hereafter owned by the Borrower and
used or intended to be used in connection with or in the operation of said
property, buildings, structures or other improvements, including all
extensions, additions, improvements, betterments, renewals, substitutions,
replacements and accessions to any of the foregoing whether such fixtures,
fittings, building materials, machinery, equipment, furniture, furnishings and
personal property actually are located on or adjacent to the Land or not and
whether in storage or otherwise and wheresoever the same may be located (the
"Improvements");
(c) all accounts, general intangibles, contracts and contract rights
relating to the Land and improvements, whether now owned or existing or
hereafter created, acquired or arising, including without limitation, all
construction contracts, architectural services contracts, management contracts,
leasing agent contracts, purchase and sales contracts, put or other option
contracts and agreements relating to the construction of improvements on, or
the operation, management and sale of all or any part of the Land or
Improvements;
(d) Together with all easements, rights of way, gores of land, streets,
ways, alleys, passages, sewer rights, waters, water courses, water rights and
powers, and all estates, leases, subleases, license rights, titles, interests,
privileges, liberties, tenements, hereditaments, and appurtenances whatsoever
in any way belonging, relating or appertaining to any of the property
hereinabove described or which hereafter shall in any way belong, relate or be
appurtenant thereto, whether now owned or hereafter acquired by the Borrower,
and the reversion and reversions, remainder and remainders, rents, issues and
profits thereof, and all estate, right, title, interest, property, possession,
claim and demand whatsoever at law, as well as in equity, of the Borrower of,
in and to the same, including but not limited to:
(i) All rents, royalties, profits, issues and revenues of the Land
and Improvements from time to time accruing, whether under contracts, leases or
tenancies now existing or hereafter created; and
(ii) All judgment awards of damages and settlements hereafter made
resulting from condemnation proceedings or taking of the Land and Improvements
or any part thereof under the power of eminent domain, or for any damage
(whether caused by such taking or otherwise) to the Land and Improvements or
any part thereof, or to any rights appurtenant thereto, including any award for
change of grade or streets. Lender hereby is authorized on behalf of and in the
name of Borrower to execute and deliver valid acquittance for, and appeal from,
any such judgments or awards. Lender may apply all such sums or any part
thereof so received, after the payment of all its expenses, including costs and
attorneys' fees, on any of the indebtedness secured hereby in such manner as it
elects or, at its option, the entire amount or any part thereof so received may
be released.
(e) All cash and non-cash proceeds and all products of any of the foregoing
items or types or property described in (a), (b), (c) or (d) above,
including, but not limited to, all insurance, contract and tort proceeds and
claims, and including all inventory, accounts, chattel paper, instruments,
equipment, fixtures, consumer goods and general intangibles acquired with cash
proceeds of any of the foregoing items or types of property described in (a),
(b), (c) or (d) above.
<PAGE> 22
SOUTHWIND DEVELOPMENT COMPANY, LLC
By: /s/ Julian B. MacQueen
------------------------
Julian B. MacQueen
Its: Authorized Member
<PAGE> 23
EXHIBIT A
PARCEL A:
Lot 1 of a Resubdivision of Lot A of JLB Subdivision as shown on map or plat
of record in Slide #1797A, in the Office of the Probate Judge of Baldwin
County, Alabama.
PARCEL B:
Lot B, JLB Subdivision, a resubdivision of Lots 1-6, Block 9, of a resurvey of
Blocks 8-12 and 28-30, Unit 1 of Gulf Shores, as shown in Map Book 12, page
138, Baldwin County Probate Office, Baldwin County, Alabama.
SOUTHWIND DEVELOPMENT COMPANY, LLC
By: /s/ Julian B. MacQueen
---------------------------
Its: Authorized Member
<PAGE> 1
EXHIBIT 10.6
STATE OF ALABAMA)
COUNTY OF BALDWIN)
FIRST REAL ESTATE MORTGAGE AND FIXTURE FILING
This MORTGAGE is made and entered into on the date set forth below, by
and between Southwind Development Company, L.L.C, an Alabama limited liability
company (hereinafter referred to as "Mortgagor") and First American Bank of
Pensacola, N.A., Post Office Box 17129, Pensacola, Florida 32522-7129
(hereinafter referred to as "Mortgagee").
W I T N E S S E T H:
WHEREAS, Mortgagor is justly indebted to Mortgagee and hereby executes
this Mortgage to secure the payment of ONE MILLION EIGHT HUNDRED TWENTY FIVE
THOUSAND AND NO/100ths DOLLARS ($1,800,000.00) as evidenced by a promissory
note of even date herewith payable in accordance with the terms of said note,
and any renewals, extensions, or modifications thereof.
In consideration of Mortgagee's extension of the above-referenced
credit and as an inducement to Mortgagee to extend such credit and, in
consideration of Mortgagee agreeing to extend said credit on the terms and
conditions as set out in the aforementioned note, the Mortgagor has agreed that
this mortgage should be given to secure the timely payment of the
aforementioned note and Mortgagor's performance of its obligations as set forth
herein, in the promissory note and the Loan Documents, all made a part hereof
by reference as if fully set forth herein.
NOW, THEREFORE, Mortgagor and all others executing this Mortgage, in
consideration of the premises, and to secure the payment of said indebtedness
hereinabove specifically referred to, and to secure any and all other
indebtedness of Mortgagor to Mortgagee, whether now existing or hereafter
arising, due or to become due, absolute or contingent, liquidated or
unliquidated, direct or indirect; and any and all extensions or renewals of
same, whether evidenced by note, open account, endorsement, guaranty, pledge,
or otherwise, and to further secure the compliance of all the covenants and
stipulations herein contained, does hereby grant, bargain, sell, convey,
transfer, and mortgage unto Mortgagee, its successors and assigns, the
following described real estate, together with buildings, fixtures, and
improvements thereon (hereinafter sometimes referred to as the "real estate" or
the "mortgaged real estate") lying and being situated in the County of Baldwin,
State of Alabama, to-wit:
PARCEL A: Lot 1 of a Resubdivision of Lot A of JLB
Subdivision as shown on map or plat of record in Slide
#1797A, in the Office of the Probate Judge of Baldwin County,
Alabama.
PARCEL B: Lot B, JLB Subdivision, a resubdivision of Lots
1-6, Block 9, of a resurvey of Blocks 8-12 and 28-30, Unit 1
of Gulf Shores, as shown in Map Book 12, page 138, Baldwin
County Probate Office, Baldwin County, Alabama.
together with all awards received from eminent domain, and payments upon any
insurance policies covering the real estate, and all rights, privileges,
tenements, and appurtenances thereunto belonging or in anywise appertaining to
said real estate, including easements and right-of-ways appurtenant thereto,
and all fixtures, including but not limited to all gas, steam, electric and
other heating, cooling and lighting
<PAGE> 2
fixtures, elevators, refrigerators, plumbing, wiring, stoves, doors, and other
fixtures appertaining to the real estate and improvements located thereon,
whether now or hereafter existing, all of which shall be deemed realty and
conveyed by this mortgage.
TO HAVE AND TO HOLD the real estate, and every part thereof, unto
Mortgagee, its successors and assigns forever. And Mortgagor covenants with
Mortgagee that it is lawfully seized of the real estate in fee simple and has a
good title to sell and convey the same as aforesaid; that the real estate is
free of all encumbrances except as maybe herein set out, and Mortgagor will
warrant and forever defend the title to the real estate unto Mortgagee, its
successors and assigns, against the lawful claims of all persons whomsoever.
THIS MORTGAGE IS MADE however, subject to the following covenants,
conditions, agreements, and provisions:
1. That Mortgagor shall pay the indebtedness secured hereby with
interest thereon when and as it or they shall become due, together with any
other indebtedness which Mortgagor may owe to Mortgagee, as further defined in
paragraph 20 below, being further agreed that any statement, any note or
obligation secured by this mortgage shall be conclusive evidence of such fact.
2. (a) That Mortgagor shall provide, maintain and deliver to
Mortgagee policies of fire, casualty, and hazard insurance with extended
coverage, and such other insurance as Mortgagee may from time to time require,
and shall assign, with endorsements, and deliver to Mortgagee, with Mortgagee's
clauses, all insurance policies of any kind or in any amount now or hereafter
issued with respect to the real estate. Insurance companies, terms of coverage,
types and amount of coverage and all other documentation relating to such
policies shall be satisfactory to Mortgagee. Such insurance policies shall
provide that Mortgagee shall receive twenty (20) days notice before the
expiration or termination of any policy. Prior to the expiration or termination
of any policy, Mortgagor shall provide evidence of renewal or issuance of a new
policy with evidence of premium payment. All policies, certificates of
insurance, or evidence of renewal shall be delivered to Mortgagee within 15
days of issuance. If any insurance, or any part thereof, shall expire, or be
withdrawn, or become void or unsafe by Mortgagor's breach of any condition
thereof, or become void or unsafe by reason of the failure or impairment of the
capital of any company with whom the insurance may then be carried, or for any
reason whatever the insurance shall be unsatisfactory to Mortgagee, Mortgagor
shall procure and deliver to Mortgagee new insurance on the real estate
satisfactory to Mortgagee. Mortgagor shall give immediate notice in writing to
Mortgagee of any loss, injury, or damage affecting the mortgaged real estate
caused by any casualty or occurrence. Full power is hereby conferred upon the
Mortgagee to settle and compromise claims under all policies and to demand and
receive all monies becoming payable thereunder and to assign absolutely all
policies to any holder of the note or to the grantee of the real estate in the
event of foreclosure of this mortgage and security agreement or other transfer
of title to the real estate and extinguishment of the indebtedness secured
hereby. In the event of a loss covered by any of the policies of insurance
herein referred to, each individual insurance company concerned is hereby
authorized and directed to make payment for such loss directly to the Mortgagee
instead of to the Mortgagor and the Mortgagee jointly, and the insurance
proceeds, after deducting all costs of collection, including a reasonable
attorney fee, may be applied by the Mortgagee at its option, either as a
payment on the account of indebtedness secured hereby, whether or not then due
or payable, or toward the restoration, reconstruction, repair, or alteration of
the real estate, either to the portion thereof by which said loss was sustained
or any other portion thereof.
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(b) That Mortgagor shall pay and discharge as the same become due,
all taxes and assessments that may accrue or be assessed upon the real estate
or any part thereof, or that become a lien against the property, regardless of
whether such tax or assessment would have priority in payment to the
indebtedness secured hereby, or upon Mortgagee's interest therein, or upon
this mortgage or the indebtedness secured hereby. The Mortgagor shall pay such
taxes and assessments without regard to any law heretofore or hereinafter
enacted imposing payment of the whole or any parts thereof upon Mortgagee.
However, at Mortgagee's sole discretion upon the passage of any law imposing
payment upon the Mortgagee or upon the decision by an appellate court of
competent jurisdiction that the undertaking by Mortgagor or Mortgagee to pay
such taxes is legally inoperative, then the indebtedness secured hereby without
deduction shall, at the option of Mortgagee, become immediately due and
payable, notwithstanding anything contained in this mortgage or any law
heretofore enacted; and Mortgagor shall not suffer or permit any such taxes on
the said real estate to become or remain delinquent or permit any part of the
real estate or any interest therein to be sold for any taxes or assessments;
and further shall furnish annually to Mortgagee, prior to the date when they
become delinquent, certificates or receipts from the proper offices showing
full payment of all such taxes and assessments.
3. That in the event of the enactment of any law by the State of
Alabama, after the date of this mortgage, deducting from the value of the real
estate for the purpose of taxation any lien thereon, or imposing any liability
upon Mortgagee, in respect of the indebtedness secured hereby, or changing in
any way the laws now in force for the taxation of mortgages, or debts secured
by mortgages, or the manner of collecting of any such taxes, so as to affect
this mortgage, Mortgagor shall pay any such obligation imposed on Mortgagee
thereby, within 15 days of notice or demand given by the Mortgagee.
4. That no constructed building or other improvement on the real
estate shall be structurally removed or demolished, without the Mortgagee's
prior written consent, nor shall any fixture or chattel covered by this
mortgage and adapted to the proper use and enjoyment of the real estate be
removed at any time without like consent unless actually replaced by an article
which is equally suitable and owned by the Mortgagor.
5. Mortgagor shall not allow any statement of lien to be filed under
the statutes of Alabama relating to the liens of mechanics and materialmen
without regard to form and contents of such statement, and without regard to
the existence or non-existence of the debt, or any part thereof, or of the
lien on which such statement is based.
6. That Mortgagor shall comply with all statutes, ordinances,
regulations, and laws promulgated by any governmental entity asserting
jurisdiction over the real estate and any and all legal requirements shall be
fully complied with by the Mortgagor.
7. That the real estate and improvements thereon shall not be
abandoned and shall be kept in good condition and no waste permitted or
committed thereon. Notwithstanding the foregoing, the Mortgagor shall be
permitted to remove all existing improvements on the real estate, so long as it
is done so in compliance with all applicable ordinances and codes.
8. Should it be discovered after the execution and delivery of this
instrument that there is a defect in the title to or a lien or encumbrance of
any nature on the real estate superior to the lien hereof; or in case of any
error or defect in the above-described note, this instrument or any other loan
documentation executed in connection therewith, or in the execution of the
acknowledgement thereof; or
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<PAGE> 4
if a homestead claim be set up to the real estate or any other part thereof
adverse to this mortgage, the Mortgagor shall within thirty (30) days after
demand by the Mortgagee, or other holder of said indebtedness, correct such
defects in the title, remove any such lien or encumbrance or homestead claim,
or correct any error in said note or this instrument or its execution.
Mortgagor hereby authorizes the Mortgagee, at the option of Mortgagee and the
expense of Mortgagor, to file any Uniform Commercial Code documents that
Mortgagee may require, including any original filing pertaining to the
premises any and all continuation, amendments, assignments, releases, and
terminations thereof without further signature or authorization of Mortgagor.
Mortgagor agrees to subsequently execute or re-execute any documentation
deemed necessary by Mortgagee to perfect, continue perfection, or re-perfect
any security interest.
9. That except for the second mortgage of even date herewith to
Michael and Katherine DeJusto in the principal amount of $541,500.00, no right,
title, or interest in or to the mortgaged real estate, or any part thereof,
shall be sold, transferred, assigned, conveyed, mortgaged, or encumbered by a
lien at any time prior to the payment in full of the indebtedness secured
hereby without first obtaining the prior written consent and approval of
Mortgagee which consent and approval shall be within Mortgagee's sole
discretion.
10. That Mortgagor, at Mortgagee's request, shall furnish to
Mortgagee such financial records as the holder of this mortgage may require,
including, but not limited to, an annual statement of the operation of the real
estate, if applicable, which shall include annual statements itemizing the
income and expenses, an itemized rent roll, together with complete financial
statement of Mortgagor's assets and liabilities and its profit and loss
statement. Said information shall be given to Mortgagee at no expense to
Mortgagee.
11. That if the indebtedness evidenced by the note specifically
referred to hereinabove is being advanced by Mortgagee to Mortgagor under the
terms and provisions and in accordance with a loan and security agreement
and/or construction loan advance agreement ("Agreement"), the terms and
provisions of said Agreement are hereby incorporated by reference as a part of
this mortgage as if fully set forth herein and any default in the performance
of the provisions thereof, or any contract or agreement between Mortgagor and
Mortgagee, shall constitute a default hereunder entitling Mortgagee to exercise
the remedies provided herein, including the right to foreclose this mortgage in
accordance with the provisions hereof.
12. That in the event Mortgagor, prior to satisfaction of the
indebtedness secured hereby, files a bankruptcy petition under Title II of the
United States Code, and is permitted to cure any default in the indebtedness
secured hereby, the amount necessary to cure shall include all principal due
and outstanding, all late fees, accrued interest and other charges (including
any attorneys fees) properly chargeable under the terms hereof, or the other
Loan Documents, together with interest at the contract rate on all such
amounts.
13. All expenses incurred by Mortgagee, including attorney's fees,
in compromising, adjusting, or defending against liens, encumbrances, or other
claims sought to be fixed upon the real estate hereby conveyed, whether such
claims be valid or not, shall become a part of the indebtedness secured hereby.
That if Mortgagee shall be made a party to any suit involving title to the real
estate and employs an attorney to represent it therein, or if Mortgagee employs
an attorney to assist in settling or removing any cloud on the title to the
real estate hereby conveyed that purports to be superior to this mortgage in
any respect, Mortgagor will pay to Mortgagee such attorney's fee when the same
becomes due. Mortgagor further agrees to pay a reasonable attorney's fee as may
be permitted by law to Mortgagee should the Mortgagee employ an attorney to
collect any indebtedness secured by this mortgage, to enforce the
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<PAGE> 5
mortgage lien against the real estate, or to protect Mortgagee's interest in
the real estate.
14. Notwithstanding that the assignment of awards hereinabove
referred to shall be deemed to be self executing, Mortgagor, after the
allowance of a condemnation award, and the ascertainment of the amount due
thereon, and the issuing of a warrant by the condemnor for the payment thereof,
shall execute, at Mortgagee's request, and forthwith deliver to Mortgagee, a
valid assignment in recordable form, assigning all of such condemnation claims,
awards, or damages to Mortgagee, but not in excess of an amount sufficient to
pay, satisfy, and discharge the principal sum of this mortgage and any advances
made by Mortgagee as herein provided then remaining unpaid, with interest
thereon at the rate specified herein, or in the note which this mortgage
secures, to the date of payment, whether such remaining principal sum is then
due or not by the terms of said note or of this mortgage.
15. In the event of default, Mortgagee may enter and take possession
of the real estate and may exclude Mortgagor, its agents and servants, wholly
therefrom, having and holding the same, may use, operate, manage, and control
the real estate or any part thereof, and upon every such entry the Mortgagee
from time to time may make all necessary or proper repairs, renewals,
replacements and useful or required alterations, additions, betterments, and
improvements to and upon the real estate which may seem judicious to Mortgagee
and pay all proper costs and expenses of so taking, holding, and managing the
same, including reasonable compensation to its agents, servants, attorneys and
counsel; and in such case Mortgagee shall have the right to manage the real
estate and to carry on the business, if applicable, and exercise all rights and
powers of Mortgagor, either in the name of Mortgagee or otherwise, as Mortgagee
shall deem advisable; and Mortgagee shall be entitled to collect and receive
all earnings, revenues, rents, issues, profits, and other income thereof and
therefrom. After deducting the expenses of operating the real estate and of
conducting the business thereof, and all repairs, maintenance, renewals,
replacements, alterations, additions, betterments improvements, and all
payments that it may be required or may elect to make for taxes, assessments,
or other proper charges on the real estate, or any part thereof, as well as
just and reasonable compensation for all agents, clerks, and other employees
and for all attorneys and counsel engaged and employed, the moneys arising as
aforesaid shall be applied to the indebtedness secured hereby. As additional
security hereunder, Mortgagor hereby assigns to Mortgagee the rents and income
of the real estate. In the event the real estate is leased or rented by
Mortgagor, in whole or in part, upon an event of default, the Mortgagee may
itself, by agent, or by judicially appointed receiver enter upon, take
possession of, and manage the real estate and with or without taking
possession, collect the rents and/or income of the real estate, including those
past due. All rents collected by mortgagee or the receiver shall be applied
first to payment of the costs of management of the Property and collection of
rents, including, but not limited to, receiver's fees, premiums on receiver's
bonds and reasonable attorney fees, and then to the sums secured by this
mortgage. Mortgagee and the receiver shall be liable to account only for those
rents actually received.
16. That if Mortgagor fails to comply with any requirements herein,
defaults upon or breaches any obligation hereof, or fails to pay any sum or
satisfy any obligation imposed herein, the Mortgagee may, at its discretion,
comply with said requirement; cure, pay or satisfy any such obligation, and any
money which Mortgagee shall have so paid shall constitute a debt to Mortgagee
additional to the indebtedness secured hereby; which shall be secured by this
mortgage; and shall bear interest at the rate set out in the note hereinabove
referred to from the date paid or incurred; shall be immediately due and
payable, and constitute grounds for declaring the maturity of the indebtedness
secured hereby.
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<PAGE> 6
17. That no delay or failure of Mortgagee to exercise any option
herein given or reserved or to perform any act which it is empowered to do
shall constitute a waiver of such option or estop Mortgagee from afterwards
exercising same or any other option at any time, and the payment, or
contracting to pay, by Mortgagee of anything Mortgagor has herein agreed to pay
shall not constitute a waiver of default of Mortgagor in failing to make said
payments and shall not estop Mortgagee from foreclosing this mortgage on
account of such failure of Mortgagor. It is further agreed that no term or
condition contained in this mortgage can be waived, altered, or amended, except
as evidenced in writing signed by the Mortgagor and the Holder hereof. The
waiver of any default or breach of covenant or any other requirement contained
herein shall not constitute a waiver of any other or subsequent default or
breach.
18. That any promise made by Mortgagor herein to pay money may be
enforced by a suit at law, and the security of this mortgage shall not be
waived thereby. As to the debts secured hereby, the Mortgagor waives all right
of exemption under the laws and Constitution of the State of Alabama and agrees
to pay, as permitted by law, a reasonable attorney's fee for collection
thereof, which shall be limited by the terms of the instruments of indebtedness
secured hereby.
19. That it is further agreed that if Mortgagor shall fail to pay, or
cause to be paid, any indebtedness secured hereby, whether in whole or any
portion of the principal sum or any installment due thereon, as they or any of
them mature, either by lapse of time or otherwise, in accordance with the
agreements and covenants herein contained, or should default be made in the
payment of any mechanics lien, materialmen's lien, insurance premiums, taxes or
assessments now, or which may hereafter be, levied against, or may become a
lien on the real estate, or should default be made in any of the covenants,
obligations, conditions and agreements of Mortgagor herein contained or
contained in any instrument secured by this Mortgage, or any other Loan
Document, then and in that event the whole of said principal sum, with interest
thereon, and all other indebtedness hereby secured, shall, at the option of the
then holder of said indebtedness, and without notice or demand, be and become
immediately due and payable and the holder of the indebtedness hereby secured
shall have the right to enter upon and take possession of the real estate and
after, or without, taking such possession of same, sell the mortgaged real
estate at public outcry, in front of the courthouse door of the county wherein
the real estate is located, to the highest bidder for cash, either in person or
by auctioneer, after first giving notice of the time, place, and terms of such
sale by publication once a week for three (3) consecutive weeks in a newspaper
published in said county and, upon the payment of the purchase money, the
Mortgagee or any person conducting said sale for it is authorized and empowered
to execute to the purchaser at said sale a deed to the real estate. The
Mortgagee, or the then holder of the indebtedness hereby secured, may bid at
such sale and become the purchaser of the real estate if the highest bidder
therefor, which bid shall constitute a credit against the indebtedness and
costs secured hereby. The proceeds of any such sale shall be applied first to
the expenses incurred in making the sale and in all prior efforts to effect
collection of the indebtedness secured hereby or to enforce or protect the
interest of the Mortgagee, including a reasonable attorney's fee, as permitted
by law for such services as may be, or have been, necessary in any one or more
of the foreclosure of this mortgage, the collection of said indebtedness, and
the pursuit of any efforts theretofore directed to that end, including, but not
limited to, the defense of any proceedings instituted by the Mortgagor or
anyone liable for said indebtedness or interested in the mortgaged real estate
to prevent or delay, by any means, including bankruptcy, the exercise of said
power of sale and the foreclosure of this mortgage; then to the payment of
whatever advances or sums Mortgagee may have paid out or become liable to pay,
in carrying out the provisions of this mortgage, together with interest
thereon; then to the payment and satisfaction of accrued interest on the
principal indebtedness to the day of sale; then to the payment of the principal
indebtedness secured hereby and any other indebtedness secured by this
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mortgage; and the balance, if any, shall be paid over to that entity or
entities which may be lawfully entitled to receive the same, including the
Mortgagor, or the Mortgagor's successors or assigns. In the event more than one
entity maybe entitled to receive such excess proceeds, the Mortgagee, at its
discretion, may interplead such excess proceeds. In any event, the purchaser
under any foreclosure sale, as provided herein, shall be under no obligation to
see to the proper application of the purchase money.
20. That it is the intent of the Mortgagor and Mortgagee to secure
any and all indebtedness of said Mortgagor to Mortgagee, now existing or
hereafter arising, due or to become due, absolute or contingent, liquidated or
unliquidated, direct or indirect, and this mortgage is intended and does
secure, not only the indebtedness herein specifically referred to, but also any
other debts, obligations, and liabilities of said Mortgagor to said Mortgagee,
whether now existing or hereafter arising, and any and all extensions or
renewals of same, or any part thereof, at any time before actual satisfaction
and cancellation of this mortgage in the Probate office where recorded, and
whether the same be evidenced by a promissory note, open account, endorsement,
guaranty agreement, pledge agreement, or otherwise; that it is expressly agreed
that any indebtedness at any time secured hereby, may be extended, rearranged,
or renewed, and that any part of the security herein described may be waived or
released without in any way altering, varying, or diminishing the force,
effect, or lien of this mortgage; and this mortgage shall continue as a first
lien on all of the real estate and other property and rights covered hereby and
not be expressly released until all sums with interest and charges hereby
secured are fully paid; and no other security now existing or hereafter taken
to secure the payment of said indebtedness or any part thereof shall in any
manner be impaired or affected by the execution of this mortgage; and no
security subsequently taken by Mortgagee or other holder of said indebtedness
shall in any manner impair or affect the security given by this mortgage; and
all security for the payment of said indebtedness or any part thereof shall be
taken, considered and held as cumulative. If the Mortgagor consists of one or
more persons or entities, the indebtedness of Mortgagor to Mortgagee secured
hereunder shall include the indebtedness of each Mortgagor to Mortgagee whether
or not incurred with the knowledge of the other Mortgagors and whether now
existing or hereinafter incurred and whether absolute or contingent.
21. Provided always that if Mortgagor pays the indebtedness secured
by this mortgage (as defined in paragraph 20 above), and reimburses Mortgagee,
its successors and assigns, for any amount it may have expended pursuant to the
authorization of this mortgage, and shall do and perform all other acts and
things herein agreed to be done, this conveyance shall be null and void;
otherwise it shall remain in full force and effect.
22. That Mortgagor agrees for itself and any and all persons or
concerns claiming by, through, or under Mortgagor, that if it or any one or
more of them shall hold possession of the above described real estate or any
part thereof subsequent to foreclosure hereunder, it or the parties so holding
possession, shall become and be considered as tenants at will of the purchaser
or purchasers at such foreclosure sale; and any such tenant failing or refusing
to surrender possession upon demand shall be guilty of forcible detainer and
shall be liable to such purchaser or purchasers for reasonable rental of the
real estate, and shall be subject to eviction or removal, forcible or
otherwise, and all damages which may be sustained by any such tenant as a
result hereof being hereby expressly waived.
23. In the event that this mortgage secures a line of credit,
construction loan, or other form of indebtedness under the terms of which the
full principal amount of the indebtedness is not advanced at closing, the
Mortgagor agrees that the Mortgagee, at its option, may require the Mortgagor
to pay all recording fees and taxes on the full amount of the principal
indebtedness stated herein, whether or not the full amount of the principal
indebtedness is ever advanced or not.
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<PAGE> 8
24. All notices which are required or permitted under the terms of
this mortgage may be given to the Mortgagor by first class mail, postage
prepaid to the address set forth below, unless Mortgagor notifies Mortgagee, in
writing, of another address for the purpose of notice.
25. That singular or plural words used herein to designate the
Mortgagor shall be construed to refer to the maker or makers of this mortgage,
or any one of them, and all covenants and agreements herein contained shall
bind the successors and assigns of the Mortgagor, and every option, right, and
privilege herein reserved or secured to Mortgagee shall inure to the benefit of
its successors and assigns.
26. That the unenforceability or invalidity of any provision or
provisions of this mortgage shall not render any other provision or provisions
herein contained unenforceable or invalid. All rights or remedies of Mortgagee
hereunder are cumulative and not alternative, and are in addition to those
provided by law.
27. This Mortgage and the indebtedness secured hereby, or a part
thereof, may be assigned by the Mortgagee.
28. By its execution hereof, Mortgagor acknowledges that it has
received a complete copy of this mortgage.
29. Governing Law. This Mortgage secures a Note and Other
indebtedness, which by the terms thereof are governed by the laws of the State
of Florida, and are to be performed within the State of Florida. Without giving
effect to choice of law rules, the Parties hereto agree that the Note and Other
Indebtedness shall be governed by Florida law. The interest, right and remedies
granted by this Mortgage and the manner in which they are to be enforced shall
be governed by the laws of the State of Alabama.
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30. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HERETO EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, COUNTERCLAIM, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER OR RELATED TO THIS LOAN, ANY OTHER LOAN
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR ARISING
UNDER OR RELATED TO ANY OTHER INDEBTEDNESS, OR (2) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE RELATIONSHIP BETWEEN OR COURSE OF DEALINGS OF THE
PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN, THIS MORTGAGE, ANY
OTHER LOAN DOCUMENT, AGREEMENT OR INSTRUMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO, OR RELATING TO ANY
OTHER INDEBTEDNESS; IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING,
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES
AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE
DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY
FILE AN ORIGINAL COUNTERPART OR COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY. THIS PROVISION SHALL SURVIVE THE PAYMENT IN FULL OF THE LOANS OR
ANY OTHER INDEBTEDNESS.
IN WITNESS WHEREOF, the undersigned set their hands and seals to
this instrument on the 16th day of April, 1998.
Southwind Development Company, LLC
/s/ Julian B. MacQueen
----------------------------
By: Julian B. MacQueen
Its: Authorized Member
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<PAGE> 10
STATE OF ALABAMA
COUNTY OF BALDWIN
I, the undersigned authority, in and for said County in said State,
hereby certify that Julian B. MacQueen, whose name as authorized member of
Southwind Development Company, LLC, an Alabama limited company, is signed to
the foregoing conveyance and who is known to me, acknowledged before me on this
day that, being informed of the contents of the conveyance, he, as such member
and with full authority, executed the same voluntarily for and as the act of
said company.
Given under my hand this the 16th day of April, 1998.
/s/ James R. Owen, Jr.
-----------------------
(S E A L) NOTARY PUBLIC
MY COMMISSION EXPIRES:
2/20/2000
THIS INSTRUMENT PREPARED BY:
Richard A. Wright, Esquire
Miller, Hamilton, Snider & Odom, L.L.C.
Post Office Box 46
Mobile, Alabama 36601
(205) 432-1414
MORTGAGOR'S ADDRESS
Southwind Development Company, L.L.C.
Baybridge Professional Park
Building 113
Gulf Breeze, Florida 32561
MORTGAGEE'S ADDRESS
First American Bank of Pensacola, N.A.
Post Office Box 17129
Pensacola, Florida 32522-7129
U-\CLIENTS\GENERAL\FIRSTAMER MTG
10
<PAGE> 1
EXHIBIT 10.7
PROMISSORY NOTE
$541,500.00 Gulf Shores, Alabama
Date: April 16, 1998
For value received, the undersigned promises to pay to MICHAEL A.
DEJUSTO and M. KATHERINE DEJUSTO, husband and wife, or order, the principal sum
of Five Hundred Forty-one Thousand Five Hundred and no/100ths Dollars, with
interest thereon from date as set out below. The said principal and interest
shall be payable at Post Office Box 26357, Fresno, California 93729, or at such
place as the holder may from time to time designate in writing in installments
as follows, namely:
Consecutive monthly installments of interest only at the rate of ten
percent (10%) per annum beginning the 16th day of May, 1998.
Additional interest at the annual rate of ten percent (10%) (which
shall not be compounded) shall accrue on the principal balance
remaining from time to time and be paid as and when the principal
balance matures. The principal balance matures upon final closing of
at least ninety percent (90%) of the multiple units proposed to be
constructed upon the property secured by the mortgage executed on even
date herewith (hereinafter referred to as "Mortgage,") but in no event
prior to January 1, 1999, or later than August 17, 1999., Maker agrees
to notify holder a minimum of 120 days in advance of the date
anticipated for full payment of principal and interest as set forth in
this instrument. Maker agrees to cooperate with Holder in the timing
of such full payment of principal and interest as set forth in this
instrument to minimize the impact of tax consequences to Holder,
provided, such cooperation is at no cost to Maker.
With respect to any and all obligations under this Note or under any
of the Mortgages, Maker and all co-signers, sureties, endorsers and guarantors
of this Note, hereby:
(1) Waive, demand, presentment, protest, notice of protest, notice
of dishonor, notice of acceleration of maturity, suit against any party and all
other notices and requirements necessary to charge or hold the maker or any
such co-signer, surety, endorser or guarantor on any such obligation;
(2) Agree to continue and remain bound for the payment of principal,
interest and all other sums payable hereunder or under any of the terms of the
Mortgage, notwithstanding any change or changes by way of addition, release,
surrender, exchange or substitution of any security for this Note or of any
party or parties liable hereunder or by way of any extension or extensions of
time for the payment of any sums due hereunder or under any of the Mortgages or
any other changes or modifications to any of the Mortgages, and waive all and
every kind of notice of such change or changes and all defenses on the grounds
of such change or changes and agree that the same may be made without notice to
or consent of any of them:
<PAGE> 2
(3) Agree that any obligations of Maker or such co-signers,
sureties, endorsers of guarantors hereunder may, from time to time, in whole or
in part, be renewed, extended, modified, accelerated, compromised, discharged
or released by Lender, and any collateral, lien and right of setoff securing
any such obligations may, from time to time, in whole or in part, be exchanged,
sold or released, all without notice to or further reservations of rights
against any of said parties and all without in any way affecting or releasing
the liability of any of said parties;
(4) Agree to pay all filing fees, taxes and all costs of collecting
or securing or attempting to collect or secure any obligations under the Note
or any of the Mortgages (except for current interest billing), including
without limitation reasonable attorney's fees, whether or not any lawsuit is
filed; and
Each maker and endorser waives the right of exemption under the
Constitution and laws of the State of Alabama, and each maker and endorser
waives demand, protest, and notice of protest and all requirements necessary to
hold them liable as makers and endorsers.
It is further agreed that the undersigned shall pay all costs of
collection. including a reasonable attorney's fee, on failure to pay any
installment of principal and interest on this note on the date due hereof,
This note is to be construed according to the laws of the State of
Alabama. and is secured by mortgage on real estate executed to MICHAEL A.
DEJUSTO and M. KATHERINE DEJUSTO by the undersigned on even date herewith.
Upon failure to pay any installment of principal and/or interest
within ten (10) days from notice from holder that the same is due, or, upon
failure to cure within thirty (30) days after notice any violation or omission
of any of the conditions and requirements of the aforesaid mortgage, the entire
principal sum, at the option of the holder, shall become due and payable.
Failure to exercise this option shall not constitute a waiver of the right to
exercise the same in the event of any subsequent default. Notice from holder
shall be presumed to have been received if sent to maker by overnight courier
to last known address of maker or to maker's registered agent in the State of
Alabama.
Any other provisions herein to the contrary notwithstanding, in no
event shall the maker of this note be required to pay interest in excess of the
rate that maker may contract to pay under the applicable usury laws of the
State of Alabama, the intention of the parties being to conform strictly to the
usury laws now in force. The contract contained herein for the payment of
interest is expressly made subject to the condition that the interest shall be
reduced to the highest amount allowed under said usury laws as now or hereafter
construed by the Courts having jurisdiction.
2
<PAGE> 3
CAUTION IT IS IMPORTANT THAT YOU THOROUGHLY READ THIS
INSTRUMENT BEFORE SIGNING IT.
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
an Alabama limited liability company
By: /s/ Julian B. MacQueen
-----------------------
JULIAN B. MACQUEEN
Its: managing member
I, JULIAN B. MACQUEEN, personally guarantee payment of the note within,
waiving demand for payment, protest, and notice of nonpayment.
/s/ Julian B. MacQueen (SEAL)
---------------------
JULIAN B. MACQUEEN
3
<PAGE> 1
EXHIBIT 10.8
STATE OF ALABAMA )
COUNTY OF BALDWIN )
SECOND MORTGAGE
KNOW ALL MEN BY THESE PRESENTS, that whereas, SOUTHWIND DEVELOPMENT
COMPANY, L.L.C., a limited liability company (hereinafter called "Mortgagor"),
is justly indebted to MICHAEL A. DEJUSTO and M. KATHERINE DEJUSTO, husband and
wife (hereinafter collectively called "Mortgagee"), in the sum of FIVE HUNDRED
FORTY-ONE THOUSAND FIVE HUNDRED AND NO/100THS DOLLARS ($541,500.00), evidenced
by that certain negotiable note executed of even date herewith, and all
renewals and extensions thereof, and whereas, Mortgagor agreed, in incurring
said indebtedness, that this mortgage should be given to secure the prompt
payment thereof;
NOW, THEREFORE, in consideration of the premises, said Mortgagor,
SOUTHWIND DEVELOPMENT COMPANY, L.L.C., and all others executing this mortgage,
does hereby GRANT, BARGAIN, SELL and CONVEY unto the Mortgagee all that real
property in the County of Baldwin, State of Alabama, described as follows,
to-wit:
Parcel A:
Lot 1 of a Resubdivision of Lot A of JLB Subdivision as shown on map
or plat of record in Slide #1797A, in the Office of the Probate Judge
of Baldwin County, Alabama.
AND
Parcel B:
Lot B, JLB Subdivision, a resubdivision of Lots 1-6, Block 9, of a
resurvey of Blocks 8-12 and 28-30, Unit 1 of Gulf Shores, as shown in
Map Book 12, Page 138, Baldwin County Probate Office, Baldwin County,
Alabama,
This conveyance is made subject to any rights-of-way, easements,
restrictive covenants, or reservations of record in the Office of the
Judge of Probate of Baldwin County, Alabama, affecting the same.
TOGETHER WITH any and all buildings and improvements erected or
hereinafter erected thereon.
TOGETHER WITH all and singular the rights, members, privileges,
hereditaments, easements and appurtenances thereunto belonging or in anywise
appertaining.
TO HAVE AND TO HOLD the premises unto the Mortgagee, its successors
and assigns, forever.
Providing always, and these presents are upon the express conditions,
that if the Mortgagor shall well and truly pay to the Mortgagee the said sum of
FIVE HUNDRED FORTY-ONE THOUSAND FIVE
<PAGE> 2
HUNDRED AND NO/100THS DOLLARS ($541,500.00), with interest thereon according to
the tenor and effect of that certain negotiable note bearing even date herewith
executed by the said SOUTHWIND DEVELOPMENT COMPANY, L.L.C., providing for
consecutive monthly installments of interest only to begin thirty (30) days
after the date of closing, with the balance of the indebtedness, if not sooner
paid, due and payable on August 17, 1999. Additional interest at the annual
rate of ten percent (10%) (which shall not be compounded) shall accrue on the
principal balance remaining from time to time and be paid as and when the
principal balance matures. The principal balance matures upon final closing of
at least ninety percent (90%) of the multiple units proposed to be constructed
upon the property conveyed by this instrument, but in no event prior to January
1, 1999, or later than August 17, 1999, said note being payable to the
Mortgagee at such place as the Mortgagee shall from time to time designate; and
if the Mortgagor shall perform all the covenants and agreements herein
contained, then these presents shall be void; otherwise they shall remain in
full force and effect. This mortgage is given to secure the payment of the
above described promissory note and all renewals and extensions thereof.
This Mortgage is hereby subordinated by Mortgagee to that certain
mortgage by Mortgagor of even date herewith to First American Bank of
Pensacola, N.A., and to any modifications, amendments, renewals, extensions,
etc., thereof and/or thereto, including, without limitation, any modifications,
amendments, renewals, or extensions which may increase the principal
indebtedness secured thereby and/or extend the maturity date. This Mortgage is
further subordinated by Mortgagee to any future mortgage by Mortgagor securing
any existing or future indebtedness arising from the acquisition of the
mortgaged property and/or the financing of any construction of improvements
thereon by way of a substitute or replacement for the above referenced mortgage
to First American Bank of Pensacola, N.A. The aforesaid subordination is
automatic and self-effectuating and does not require the execution or
recordation of any further documents on the part of Mortgagee. However,
Mortgagee shall, within ten (10) days of any request therefor from time to
time, execute and deliver such separate subordination instruments as may by
required by Mortgagor's lender and/or title insurance company. Further, if, as
and when a condominium development is constructed on the mortgaged property,
Mortgagee agrees that there shall be released from the lien of this Mortgage
individual condominium units until ninety percent (90%) of the total number of
units established and constructed on the property have been conveyed to others.
A deed of any condominium unit from Mortgagor to any third party shall be
deemed to convey such unit free and clear of this Mortgage so long as said unit
is one of the first ninety percent (90%) of the units to be conveyed as
reflected in the Baldwin County Probate Court Records. The aforesaid released
shall be automatic and self-effectuating and shall not require the execution or
recordation of any separate releases. However, within ten (10) days of any
request therefor from time to time, Mortgagee shall execute such partial
releases as may be required by Mortgagor's lender and/or title insurance
company. Mortgagee shall not be entitled to any payment under the promissory
note or this Mortgage as a condition to the granting of said releases, the
parties having agreed that Mortgagor is entitled to such releases without the
necessity of making any payments whatsoever.
AND THE MORTGAGOR FURTHER EXPRESSLY AGREES AND COVENANTS:
1. That it is the lawful fee simple owner of the land, and has the
right to convey the same, and will warrant and defend the premises, with the
above mentioned appurtenances, to the said Mortgagee, its successors and
assigns forever, against all lawful claims and demands whatsoever, except those
set forth herein;
2. The conveyance of the above described property and all warranties
of the Mortgagor hereunder (whether express or statutory) are made subject to
the lien of taxes hereafter falling due;
2
<PAGE> 3
3. To pay said note, and all renewals and extensions thereof,
and installments of principal and interest thereon, when they respectively fall
due;
4. To pay any and all promissory note(s) secured by any
mortgage(s) encumbering the above described property when they respectively
fall due, and further, the Mortgagor shall not default in the payments of the
said note(s), or default in any of the terms of said mortgage(s), to which this
mortgage is specifically subordinated;
5. Upon default in the payment of any installment of principal
or interest on said note or upon default in the performance of any of the
covenants and agreements herein contained, and further on the failure to cure
said default as provided the promissory note, the Mortgagee may declare the
entire principal sum of said indebtedness and interest thereon immediately due
and payable, and further may initiate foreclosure proceedings without notice to
the Mortgagor, and the Mortgagor hereby vests the Mortgagee with full power and
authority, upon the happening of any such default, to sell said property at
public outcry at the front door of the Court House of said County, for cash to
the highest bidder, after first giving notice of the time, place and terms of
sale, together with a description of the property to be sold, by publication
once a week for three (3) consecutive weeks in a newspaper published in said
County; to make proper conveyance to the purchaser in the name of the
Mortgagor; and the proceeds of said sale to apply, first, to the payment of the
costs of said sale, including a reasonable attorney's fee, second, to the
payment of the amount of said principal indebtedness, whether due or not,
together with the unpaid interest thereon to the date of sale, and any amount
that may be due the Mortgagee by virtue of any of the special liens herein
declared; and third, the balance, if any, to pay over to the said Mortgagor;
6. Any transfer by sale, gift, devise, operation of law, or
otherwise, of the fee title interest in all or any portion of the mortgaged
premises, without the written consent of Mortgagee, shall have the same
consequences as an event of default respecting the indebtedness secured hereby,
and upon such transfer, Mortgagee, without prior notice or the elapse of any
period of grace or the right to cure, shall have the right to declare all sums
secured hereby immediately due and payable, and, upon failure by Mortgagor to
make such payment within thirty (30) days of written demand therefor, Mortgagee
shall have the right to exercise all remedies provided in the note, this
mortgage or otherwise at law;
7. To pay promptly all taxes, assessments, liens, or other
charges which may be, or become, effective against said property, regardless of
whether or not the same may be excepted from the warranties hereinabove,
together with all penalties, costs and other expenses incurred, or which may
accrue, in connection therewith;
8. To keep any buildings or other improvements now or which may
hereafter be erected upon said property in good repair and condition and
insured against fire and lightning and against other hazards, casualties and
contingencies and for such periods as may be required by the Mortgagee, by
policies issued by good and solvent insurance companies approved by the
Mortgagee, which policies shall be deposited with the Mortgagee and shall
provide that loss, if any, shall be payable to the Mortgagee as the Mortgagee's
interest may appear, such policies to be in such amounts, not exceeding the
insurable value of the said buildings or other improvements, as may be required
by the Mortgagee. Notwithstanding the foregoing, the Mortgagor shall be
permitted to remove all existing improvements on the real estate, so long as it
is done so in compliance with all applicable ordinances and codes;
9. The Mortgagor shall not cause or permit the presence, use,
disposal, storage or release of any hazardous substance on or in the property
which may be in violation of any environmental law
3
<PAGE> 4
enacted by any governing authority. The Mortgagor shall indemnify and hold
harmless the Mortgagee, and all of their employees, agents, successors,
attorneys and assigns from and against any loss, damage, cost, expense or
liability directly or indirectly arising out of or attributable to the use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal, or presence, subsequent to the date of this instrument, of
a hazardous substance on, under or about Mortgagor's property or property
leased by Mortgagor, including, but not limited to attorney's fees. This
indemnity shall survive repayment of Mortgagor's obligations to the Mortgagee
and the release of the mortgage, if any (whether by payment of the secured
indebtedness or foreclosure or action in lieu thereof);
10. That if the Mortgagee shall, upon the happening of any default
hereunder, resort to litigation for the recovery of the sums hereby secured, or
employ an attorney to collect said sums or to foreclose this mortgage under the
power of sale herein or by bill in equity, the Mortgagor will pay all
reasonable costs expenses, and attorney's fees thus incurred; and said costs,
expenses, and attorney's fees, and any other sum or sums due the Mortgagee by
virtue of any of the special liens herein declared, may be included in any
judgment or decree rendered in connection with said litigation;
11. That if the Mortgagor fails to perform any of the duties herein
specified, the Mortgagee may perform the same, and for any sums expended by the
Mortgagee in this behalf, the Mortgagee shall have an additional lien, secured
by these presents, on said property;
12. That in the event of litigation arising over the title to, or
possession of, said property, the Mortgagee may prosecute or defend said
litigation, and for any sum or sums expended by the Mortgagee in this behalf,
including, but not limited to reasonable attorney's fees, the Mortgagee shall
have an additional lien, secured by these presents, on said property;
13. That at any sale under the powers herein, the Mortgagee may bid
for and purchase said property like a stranger hereto, and in the event the
Mortgagee should become the purchaser at said sale, either the auctioneer
conducting the sale or the Mortgagee may execute a deed to the Mortgagee in the
name of the Mortgagor;
14. That the word "Mortgagee" wherever herein used, shall include all
Mortgagees herein named, and their respective heirs, executors, administrators,
successors and assigns, and the word "Mortgagor" wherever herein used, shall
include all Mortgagors herein named, and their respective heirs, executors,
administrators and successors; the masculine pronoun, wherever herein used,
shall mean and include the appropriate feminine or neuter pronoun; wherever
herein used, the singular number shall include the plural, and the plural
number shall include the singular.
4
<PAGE> 5
IN WITNESS WHEREOF, SOUTHWIND DEVELOPMENT COMPANY, L.L.C., a
corporation, the Mortgagor, has hereunto caused its corporate name to be signed
by JULIAN B. MACQUEEN, its Managing Member, duly authorized, and MICHAEL
A.DEJUSTO and M. KATHERINE DEJUSTO, the Mortgagees have hereunto set their
hands and seals on this the 15th day of April 1998.
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.,
A Limited Liability Company
By:/s/ Julian B. MacQueen
-------------------------
JULIAN B. MACQUEEN
Its: Managing Member
/s/ Michael A. DeJusto(SEAL)
----------------------------
MICHAEL A. DEJUSTO
/s/ M. Katherine DeJusto(SEAL)
------------------------------
M. KATHERINE DEJUSTO
5
<PAGE> 6
STATE OF Alabama
COUNTY OF Baldwin
I, James R. Owen, Jr., the undersigned authority, a Notary Public in
and for said County in said State, hereby certify that JULIAN B. MACQUEEN,
whose name as Managing Member, of SOUTHWIND DEVELOPMENT COMPANY, L.L.C., a
limited liability company, is signed to the foregoing instrument and who is
known to me, acknowledged before me on this day, that being informed of the
contents of said instrument, he, as such managing member and with full
authority, executed the same voluntarily for and as the act of said company on
the day the same bears date.
Given under my hand and seal this the 16th day of April 1998.
/s/ James R. Owen, Jr.
----------------------
Notary Public
My Commission Expires:
2/20/2000
6
<PAGE> 7
STATE OF California
COUNTY OF Fresno
I, Brenda Smith, the undersigned authority, a Notary Public in a for
said County in said State, hereby certify that MICHAEL A. DEJUSTO, whose name
signed to the foregoing instrument and who is known to me, acknowledged before
me on this day, that being informed of the contents of said instrument, he
executed the same voluntarily on the day the same bears date.
Given under my hand and seal this the 15th day of April, 1998.
/s/ Brenda Smith
----------------
Notary Public
My Commission Expires:
9/11/98 [S E A L]
- -------
STATE OF California
COUNTY OF Fresno
I, Brenda Smith, the undersigned authority, a Notary Public in and for
said County in said State, hereby certify that M. KATHERINE DEJUSTO, whose name
signed to the foregoing instrument and who is known to me, acknowledged before
me on this day, that being informed of the contents of said instrument, she
executed the same voluntarily on the day the same bears date.
Given under my hand and seal this the 15th day of April, 1998.
/s/ Brenda Smith
----------------
Notary Public
My Commission Expires:
9/11/98 [S E A L]
- -------
7
<PAGE> 1
EXHIBIT 10.9
[FIRST AMERICAN BANK OF PENSACOLA LETTERHEAD]
October 15, 1998
Southwind Development, LLC
Attn: Julian B. MacQueen
113 Bay Bridge Drive
Gulf Breeze, FL 32561
Re: Loan #70123501
Dear Mr. MacQueen:
As you are aware the above referenced loan matured on October 12, 1998. We are
extending the Loan and will forbear from enforcing the maturity date of the
Loan for a period of ninety days; therefore, the Loan will now mature on
January 11, 1999. You must continue to make payments under the Loan documents
as though the Loan had not matured. Your October 12, 1998 payment in the
amount of $35,600.00 is now due and needs to be paid. Please send your check
to my attention for correct application to your loan.
All terms and conditions of the Loan documents governing and/or securing the
Loan remain in full force and effect and are applicable to this letter except
to the extent hereby modified. This forbearance is not a waiver or novation on
behalf of First American Bank of Pensacola. No other action, except payment,
is required of you in conjunction with this extension. If you have any
questions, please contact me immediately.
Sincerely,
/s/ W.E. Bassett
W.E. Bassett
Senior Vice President
<PAGE> 1
EXHIBIT 10.10
[FIRST AMERICAN BANK OF PENSACOLA LETTERHEAD]
January 26, 1999
Southwind Development L.L.C.
Attn: Julian B. MacQueen
113 Bay Bridge Drive
Gulf Breeze, FL 32561
Re: Loan #70123501
Dear Mr. MacQueen:
As you are aware the above referenced loan matured on January 11, 1999. We are
temporarily extending the Loan and will forbear from enforcing the maturity
date of the Loan for a period of ninety days; therefore, the Loan will now
mature on April 12, 1999. You must continue to make payments under the Loan
documents as though the Loan had not matured.
All terms and conditions of the Loan documents governing and/or securing the
Loan remain in full force and effect and are applicable to this letter except
to the extent hereby modified. This forbearance is not a waiver or novation on
behalf of First American Bank of Pensacola. No other action, except payment,
is required of you in conjunction with this extension. If you have any
questions, please contact me immediately.
Sincerely,
/s/ W. E. Bassett
W.E. Bassett
Senior Vice President
WEB/bb
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITOR'S CONSENT
I consent to the inclusion in Amendment No. 1 to the Registration
Statement on Form S-11 of Southwind Development Company, L.L.C. of our March 5,
1999 compilation and our report dated March 5, 1999 on our audit of the balance
sheet of Southwind Development Company, L.L.C. as of December 31, 1998. I also
consent to the reference to my Firm under the caption "Experts".
RANDALL L. SANSOM CPAs
By: /S/ Randall L. Sansom
----------------------------
Randall L. Sansom
Gulf Breeze, Florida
April 28, 1999
<PAGE> 1
EXHIBIT 99.1
ARTICLES OF INCORPORATION
OF
BEACHSIDE ALL-SUITES HOTEL
CONDOMINIUM OWNERS ASSOCIATION, INC.
The undersigned, acting as incorporator of a not for profit
corporation under the Alabama Nonprofit Corporation Act, Code of Alabama 1975,
Section 10-3A-1, et seq., and the Alabama Uniform Condominium Act of 1991, Code
of Alabama 1975, Section 35-8A-101, et seq., (hereinafter referred to as the
"Acts") adopts the following ARTICLES OF INCORPORATION.
I.
NAME
The name of the corporation shall be BEACHSIDE ALL-SUITES HOTEL
CONDOMINIUM OWNERS ASSOCIATION, INC. The corporation is herein referred to as
the "Association".
II.
DEFINITIONS
The terms used herein shall have the meaning for each stated in the
Acts and in the DECLARATION OF CONDOMINIUM OF BEACHSIDE ALL-SUITES HOTEL, A
CONDOMINIUM (the "Declaration"), unless the context otherwise requires.
III.
PERIOD OF DURATION
The period of duration of the Association is perpetual unless and
until hereafter legally dissolved.
<PAGE> 2
IV.
PURPOSES
The Association is organized for the purpose of administering,
maintaining, operating and managing the Condominium known as Beachside
All-Suites Hotel, a Condominium (the "Condominium"), located in Baldwin County,
Alabama, according to the Declaration and to do all things incident, necessary,
convenient, expedient, ancillary, or in aid of the accomplishment of the
foregoing.
V.
POWERS AND RESPONSIBILITIES
The Association shall have the power, duties, and authority vested in
the Association by the Acts, the Declaration, or these Articles, including, but
not limited to, the responsibility to ensure that the Condominium Property is
operated as a hotel in accord with the Declaration and the Zoning Ordinance of
the City of Gulf Shores. Such power, duties, and authority shall include,
without limitation, the following:
(1) To elect and remove officers of the Association as
provided in the Bylaws.
(2) To administer the affairs of the Association and
Condominium Property.
(3) To maintain bank accounts on behalf of the
Association and to designate signatories required therefor.
(4) To sell, lease, mortgage, or otherwise deal with
Units acquired by the Association.
(5) To borrow money on behalf of the Association when
required in connection with the operation, care, upkeep, and maintenance of the
Common Elements, provided, however, that the consent of at least two-thirds
(2/3) of the votes of the Members, obtained at a meeting duly called and held
for such purpose in accordance with the provision of the Bylaws, shall be
required for the borrowing of such money.
2
<PAGE> 3
(6) To estimate the amount of the annual budget and to
make, levy, enforce, and collect Assessments against Unit Owners to defray the
costs, expenses, and losses of the Condominium, and to provide adequate
remedies for failure to pay such Assessments.
(7) To use the proceeds of Assessments in the exercise
of its powers and duties.
(8) To maintain, repair, replace, and operate the
Condominium Property, including the reasonable right of entry upon any Unit to
make emergency repairs and to do other work reasonably necessary for the proper
maintenance and operation of the Development and the right to grant permits,
licenses, and easements over the Common Elements for utilities, roads, and
other purposes reasonably necessary or useful for the proper maintenance or
operation of the Condominium.
(9) To purchase insurance on the Property, and to
purchase insurance for the protection of the Condominium Association and its
Members, and the Members of the Board of Directors and officers of the
Condominium Association.
(10) To reconstruct improvements after casualty and to
further improve the Property.
(11) To make and amend reasonable Rules and Regulations
respecting the use of the Property and the operation of the Condominium.
(12) To enforce by legal means the provisions of the Acts,
the Declaration, these Articles, the Bylaws, and the Rules and Regulations for
the use of the Property.
(13) To contract for the management of the Property and to
delegate to such managing agent all powers and duties of the Association except
such as are specifically required by the Declaration to have approval of the
Board of Directors or the membership of the Association.
(14) To retain attorneys and accountants.
(15) To employ personnel to perform the services required
for proper operation of the Condominium.
3
<PAGE> 4
(16) To purchase a Unit of the Condominium for the
purposes authorized in the Declaration.
(17) To maintain a class action and to settle a cause of
action on behalf of Unit Owners with reference to the Common Elements, the roof
and structural components of a building or other improvement, and mechanical,
electrical and plumbing elements serving an improvement or a building as
distinguished from such elements serving only one (1) Unit; and to bring an
action and to settle the same on behalf of two (2) or more of the Unit Owners,
as their respective interests may appear, with respect to any cause of action
relating to the Common Elements or more than one (1) Unit; all as the Board
deems advisable.
(18) To procure such fidelity bonds, as the Board deems
advisable, covering officers and employees of the Condominium Association
handling and responsible for the Association's funds and personal property, and
to procure directors' and officers' liability insurance, if the Board deems it
advisable, and the premiums of such bonds and insurance shall be paid by the
Association as Common Expense.
(19) To adopt and establish Bylaws for the operation of
the Association.
(20) To exercise any powers assigned to, or vested in, it
by the Members pursuant to the Hotel Operating and Rental Pool Agreement.
VI.
NOT FOR PROFIT
The Association is not organized for pecuniary profit and it shall pay
no dividend, and shall distribute no part of its income to its Members,
directors, or officers. Nevertheless, the Association may pay compensation in a
reasonable amount to its Members, directors, and officers for services
rendered, and it may confer benefits on its Members in conformity with the
Declaration of Condominium and the
4
<PAGE> 5
purposes of the Association. On termination, the Association may make
distributions to its Members as permitted by law, and no such payment, benefit,
or distribution shall be deemed to be a dividend or distribution of income. All
funds and Property acquired by the Association and all proceeds therefrom shall
be held and used for the benefit of the Members of the Association in
accordance with the provisions of the Declaration, these Articles and the
Bylaws.
VII.
MEMBERSHIP
This Condominium Association shall issue no shares of stock of any
kind or nature whatsoever. Every Person who is a record Unit Owner of a fee or
undivided fee interest in any Unit shall be a Member of the Association.
Membership shall be appurtenant to and may not be separated from the ownership
of any Unit which is subject to Assessment by the Association. The Members
shall enjoy such qualifications, rights and voting rights as may be fixed in
the Declaration and in the Bylaws of the Association.
VIII.
BOARD OF DIRECTORS
The Property, business and affairs of the Association shall be managed
by a Board of Directors; provided, however, that the Members, and not the Board
of Directors, shall have the right by the affirmative vote of Members owning
units representing 67% of the percentage interests of the Condominium to
terminate any Hotel Operating and Rental Pool Agreement entered into by the
Members or the Association. The Board of Directors shall consist of such number
not fewer than three (3) nor more than nine (9), which, from time to time,
shall be determined and fixed by a vote of a majority of the voting rights
present at any annual meeting of the Members. Except as may otherwise be
provided in the
5
<PAGE> 6
Declaration and the Bylaws, each director may be either a person designated by
the Developer or a person entitled to cast a vote in the Association. Directors
may be designated or elected and removed, and vacancies on the Board of
Directors shall be filled as provided in the Declaration and the Bylaws. All
the duties and powers of the Association existing under the Acts, the
Declaration, these Articles, and the Bylaws shall be exercised exclusively by
the Board of Directors, its agents, contractors or employees, subject only to
approval by Unit Owners when such approval is specifically required by the
Acts, the Declaration, these Articles, or the Bylaws. The initial Board of
Directors shall be composed of three (3) Members. The names and addresses of
the three (3) Members of the initial Board of Directors, who shall hold office
until election or appointment of their successors, are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
------------------------- ---------------------------
---------------------------
NAME ADDRESS
---- -------
------------------------- ---------------------------
---------------------------
NAME ADDRESS
---- -------
------------------------- ---------------------------
---------------------------
</TABLE>
IX.
OFFICERS
The affairs of the Association shall be administered by the officers
designated in accordance with the Bylaws. The names and the addresses of the
officers who shall serve until the election or appointment of their successors
in accordance with the Bylaws are as follows:
6
<PAGE> 7
<TABLE>
<CAPTION>
NAME OFFICE ADDRESS
- ---- ------ -------
<S> <C> <C>
President
- --------------------- ----------------------
----------------------
Vice President
- --------------------- ----------------------
----------------------
Secretary/Treasurer
- --------------------- ----------------------
----------------------
</TABLE>
X.
INDEMNIFICATION
Every director and every officer of the Association shall be
indemnified by the Association against all expenses and liabilities, or any
settlement thereof, including counsel fees, reasonably incurred by or imposed
upon him in connection with any proceeding to which he may be a party, or in
which he may become involved, by reason of his being or having been a director
or officer of the Association, whether or not he is a director or officer at
the time such expenses are incurred, except in such cases wherein the director
or officer is adjudged guilty of willful misfeasance or malfeasance in the
performance of his duties; provided that in the event of a settlement, the
indemnification herein shall apply only when the Board of Directors approves
such settlement and reimbursement as being in the best interest of the
Association. The foregoing rights of indemnification shall be in addition to
and not exclusive of all other rights to which such director or officer may be
entitled.
XI.
INCORPORATOR
The name and address of each incorporator of the Association is:
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<PAGE> 8
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Southwind Development Company, L.L.C.
------------------------------
------------------------------
</TABLE>
XII.
REGISTERED OFFICE AND AGENT
The location and mailing address of the initial registered office of
the Association is ________________ Gulf Shores, Alabama 36542, and the name of
its initial agent at such address is SOUTHWIND DEVELOPMENT COMPANY, L.L.C.
XIII.
DECLARANT CONTROL
The Developer shall retain control of the Association in accordance
with the terms and conditions of the Declaration.
XIV.
RATIFICATION OF HOTEL OPERATING AND RENTAL POOL AGREEMENT
The Developer-elected Board of Directors will call a meeting of the
Association membership for the membership to elect the Board of Directors. This
meeting shall be called at such time as the Developer determines appropriate
but not later than the date by which the entire Board must be elected by the
membership as required by Article Seven of the Declaration. Following the
meeting of the membership, the Developer will ask the newly-elected Board to
ratify and re-adopt on behalf of the owners the Hotel Operating and Rental
Pooling Agreement.
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XV.
DEFINITIONS AND CONFLICT
All terms used herein shall have the meaning given to them in the
Declaration and are hereby incorporated by reference and made a part hereof. In
the event of a conflict between the provisions of the Declaration, these
Articles, or Bylaws, the Declaration prevails, except to the extent the
Declaration is inconsistent with the Alabama Uniform Condominium Act of 1991,
Code of Alabama (1975).
XVI.
DISSOLUTION
The Association shall be dissolved upon the termination of the
Condominium in the manner provided in the Declaration and Acts. Upon
dissolution of the Association, the assets of the Association, if any, and all
money received by the Association from operations, after the payment in full of
all debts and obligations of the Association of whatsoever kind and nature,
shall be used and distributed solely and exclusively in the manner provided for
in the Acts.
IN WITNESS WHEREOF, the subscriber hereto has caused this
instrument to be executed this the ____ day of ____________, ______.
INCORPORATOR:
Southwind Development Company, L.L.C.,
an Alabama limited liability company
BY:
------------------------------------
------------------------------------
------------------------------------
Its:
------------------------------------
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STATE OF ALABAMA )
COUNTY OF _________________ )
Before me, the undersigned Notary Public in and for said County in
said State, personally appeared _____________, whose name as ______________ of
SOUTHWIND DEVELOPMENT COMPANY, L.L.C., an Alabama limited liability company, is
signed to the foregoing instrument, and who, being by me first duly sworn,
deposes and says that he is authorized to execute this instrument on behalf of
the company and that the facts contained in the above and foregoing ARTICLES OF
INCORPORATION are true and correct.
DATED this _____ day of ______________, ______.
---------------------------------------
NOTARY PUBLIC
My Commission Expires:
-----------------
THIS INSTRUMENT PREPARED BY:
RICHARD E. DAVIS, ESQUIRE
Davis & Fields, P.C.
Post Office Box 2925
Daphne, Alabama 36526
(334-621-1555)
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<PAGE> 1
EXHIBIT 99.2
BYLAWS
OF
BEACHSIDE ALL-SUITES HOTEL CONDOMINIUM OWNERS ASSOCIATION, INC.
GENERAL
1.01. PURPOSE. These are the Bylaws of the BEACHSIDE ALL-SUITES HOTEL
CONDOMINIUM OWNERS ASSOCIATION, INC., a non-profit Alabama Corporation
(hereinafter referred to as the "Association") organized pursuant to the
Alabama Uniform Condominium Act of 1991, Code of Alabama 1975, Section
35-8A-101, et seq. ("Act") and "Alabama Nonprofit Corporation Act" Code of
Alabama 1975, Section 10-3A-1 et seq., for the purpose of administering
BEACHSIDE ALL-SUITES HOTEL, A CONDOMINIUM, hereinafter referred to as the
"Condominium" which is located in Baldwin County, Alabama.
1.02. APPLICABILITY OF BYLAWS. The provisions of these Bylaws are
applicable to the Condominium Property and to the use and occupancy thereof.
All present and future owners, mortgagees, lessees and Occupants of Units, and
any other persons who may use the facilities of the Property in any manner are
subject to these Bylaws, the Declaration and the Rules and Regulations made in
accordance therewith. The acceptance of a deed or conveyance or the entering
into of a lease or the act of occupancy of a Unit shall constitute an agreement
that these Bylaws, the Rules and Regulations made in accordance therewith and
the provisions of the Declaration, as they may be amended from time to time,
are accepted, ratified, and will be complied with.
1.03. PRINCIPAL OFFICE. The principal office of the Association shall
be at ______ Gulf Shores Parkway, Gulf Shores, Alabama 36542, or at such other
place as may be designated subsequently by the Board of Directors or as the
business of the Association may require. All books and records of the
Association shall be kept at its principal office.
1.04. TERMS DEFINED. "Declaration" shall mean that certain
Declaration of Condominium for the Condominium, filed in the Office of the
Judge of Probate of Baldwin County, Alabama, as the same
<PAGE> 2
may be amended from time to time in accordance with the terms thereof. All
other terms used herein shall have the meaning given to them in the Declaration
and are hereby incorporated by reference and made a part hereof.
MEMBERSHIP
2.01. QUALIFICATION. The qualification for membership shall be
ownership of a Unit in the Condominium. No membership may be separated from the
Unit to which it is appurtenant.
2.02. NO ADDITIONAL QUALIFICATIONS. No initiation fees, costs, or
dues shall be assessed against any Person as a condition of the exercise of the
rights of membership except such Assessments, levies, and charges as are
specifically authorized in the Declaration.
2.03. SUCCESSION. The membership of each Unit Owner shall
automatically terminate on the conveyance, transfer or other disposition of a
Unit Owner's interest in the Unit. The Unit Owner's membership shall
automatically be transferred to the new Unit Owner succeeding to such ownership
interest. On the conveyance, transfer or other disposition of a portion of a
Unit Owner's interest in a Unit, the transferring Unit Owner and the transferee
shall each be Members of the Association in accordance with the ownership
interest of each following such conveyance or transfer.
2.04. NOT FOR PROFIT CORPORATION. The Association is a not for profit
corporation organized under the laws of the State of Alabama and pursuant to
the Act and the "Alabama Nonprofit Corporation Act", Code of Alabama 1975,
Section 10-3A-1, et seq. The Association shall issue no shares of stock of any
kind or nature whatsoever.
MEETINGS OF MEMBERS
3.01. ANNUAL MEETING. A meeting of the Association must be held at
least once each year. The annual meeting of Members shall be held at the office
of the Association at 9:00 a.m., local time, on
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<PAGE> 3
the third Saturday of October of each year for the purpose of electing
Directors and transacting any other business authorized to be transacted by the
Members; provided, however, if that day is a legal holiday, the meeting shall
be held at the same hour on the next day following that is not a legal holiday.
3.02. CHANGE OF ANNUAL MEETING. The time of holding the annual
meeting of Members may be changed at any time prior to not less than ten (10)
days nor more than sixty (60) days in advance of the regular day for holding
such meeting by a resolution duly adopted by the Board of Directors or by the
Members, provided that notice of such change be mailed to each Member of
record, at such address as appears upon the records of the Association, not
less than ten (10) days before the holding of such meeting nor more than sixty
(60) days in advance of the regular meeting; and further provided that each
annual meeting of Members shall be held within one (1) month of the date on
which it should regularly have been held but for such change.
3.03. SPECIAL MEETING. Special meetings of the Members of the
Association may be called by the president, a majority of the Board or by Unit
Owners having twenty percent (20%) of the interest in the Common Elements.
3.04. NOTICE OF MEETING. Notice of all meetings of Members must be
given not less than ten (10) days nor more than sixty (60) days in advance of
any meeting by the secretary, vice president, or president. Such notice shall
be hand delivered or sent prepaid by United States mail to the mailing address
of each Unit or to any other mailing address designated in writing by the Unit
Owner. Such notice must state the time and place of the meeting and the items
on the agenda, including the general nature of any proposed amendment to the
Declaration or Bylaws, any budget changes, and any proposal to remove an
officer or a member of the Board.
3.05. WAIVER OF NOTICE. Any Member or first Mortgagee may waive the
right to receive notice of any meeting by sending a written waiver to the Board
of Directors. Notice of any meeting may be waived before or after the meeting,
orally or in writing. Attendance by a Member at any meeting, either
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<PAGE> 4
in person or by proxy, shall constitute waiver of notice of such meeting.
3.06. QUORUM. A quorum of Members for any meeting shall be deemed
present throughout such meeting if Members, represented in person or by proxy,
holding more than fifty-one percent (51%) of the votes entitled to be cast at
such meeting are present throughout such meeting, except as otherwise provided
by the Articles, by the Declaration, or by these Bylaws.
3.07. ADJOURNMENT FOR LACK OF QUORUM. In the absence of a quorum at
any meeting of Members, a majority of those Members entitled to vote thereat,
present in person or by proxy, shall have the power to adjourn the meeting,
from time to time, without notice other than announcement at the meeting, until
the requisite number of Members, present in person or by proxy, shall be
present. At such adjourned meeting at which the requisite number of votes shall
be present, any business may be transacted which might have been transacted at
the meeting as originally noticed.
3.08. ACTION WITHOUT MEETING. Any action which may be taken at a
meeting of the Members may also be taken without a meeting, if a consent in
writing setting forth the action so taken, is signed by the number of Members
required to take such action at a meeting, and is filed with the Secretary of
the Association.
3.09. MINUTES OF MEETING. The minutes of all meetings of Members
shall be kept in a book available for inspection by Unit Owners or authorized
representatives.
3.10. PROVISO. Provided, however, the Developer shall retain control
of the Association in accordance with the terms and conditions of the
Declaration.
VOTING RIGHTS
4.01. VOTES. Voting shall be on a percentage basis and the percentage
of the vote to which a Member is entitled is the percentage assigned to the
Unit of which the Member is the Unit Owner, as stated in the Declaration. The
vote of a Unit shall not be divisible. The designation of the voting Member
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<PAGE> 5
shall be determined as set out in the Declaration.
4.02. VOTES REQUIRED TO TRANSACT BUSINESS. When a quorum is present
at any meeting, the holders of a majority of the voting rights present in
person or represented by written proxy shall decide any questions brought
before the meeting, unless the question is one upon which, by express provision
of the Act, the Condominium Documents, or the Bylaws, a different number or
manner of voting is required, in which case the express provision shall govern
and control the decision in question.
4.03. VOTING BY PROXY. Votes may be cast in person or by proxy. All
proxies must be in writing, dated, signed by the Member generating the proxy,
and filed with the Secretary of the Association before the appointed time of
the meeting to which it applies. A Member may revoke a proxy at any time by
delivering a written notice of revocation to the Association.
4.04. VOTING BY MORTGAGEE. The execution and delivery of mortgage on
a Unit by its Unit Owner shall be construed as conferring upon the Mortgagee a
conditional proxy to cast the vote or votes attributable to such Unit at any
regular or special meeting of the Association. The condition of such proxy
shall be notice by such Mortgagee to the Association, in writing, of its intent
to exercise the conditional proxy rights granted to it, as Mortgagee, by the
terms of this subparagraph. In the absence of such written notice, the
Association shall be entitled to recognize the Unit owner of the mortgaged
Units as fully entitled to cast the vote or votes attributable. However, once
such written notice is received by the Association, the Mortgagee's right to
cast the vote or votes attributable to that Unit shall be recognized by the
Association until the Mortgagee withdraws its intent to cast such votes in
writing, or until the mortgage is paid in full and satisfied of record,
whichever first occurs.
4.05. ORDER OF BUSINESS. The order of business at annual meetings of
Members and, as far as practical, at all other meetings of Members, shall be:
Call to order
Calling of the roll and certifying of proxies
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<PAGE> 6
Proof of notice of meeting or waiver of notice
Reading and disposal of any unapproved minutes
Reports of officers
Reports of committees
Election of directors
Unfinished business
New business
Adjournment
BOARD OF DIRECTORS
5.01. NUMBER. The affairs of the Association shall be conducted by a
Board of Directors which shall consist of not fewer than three (3) persons nor
more than nine (9) persons. The number of Directors shall be fixed from time to
time by the Association Members.
5.02. QUALIFICATION. Except for directors appointed by Developer,
each director shall be a Unit Owner. If a Unit owner is a trust, then the
beneficiary of the trust may be a director; and if a Unit Owner is a
corporation or partnership, then an officer, partner, or employee of such Unit
Owner may be a director. If a director shall cease to meet such qualifications
during his term, he shall cease to be a director and his place on the Board
shall be vacant.
5.03. APPOINTMENT BY DEVELOPER. The initial Board of Directors, as
well as successive directors (during the period of Declarant control provided
for in Article VII of the Declaration) shall be appointed by the Developer, and
may be removed by the Developer at any time in accordance with the Declaration.
The directors appointed by the Developer need not be Unit Owners.
5.04. NOMINATION FOR ELECTION. Nomination for election to the Board
of Directors shall be made from the floor at the annual meeting of Members or
at any other meeting of Members called for the
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<PAGE> 7
purpose of electing directors. Nominations shall also be made by a nominating
committee appointed by the Board prior to the annual meeting of the Members or
prior to any other meeting of Members called for the purpose of electing
directors.
5.05. ELECTION OF DIRECTORS. Directors shall be elected in accordance
with the provisions of the Condominium Documents. Directors shall be elected at
the annual meeting of Members or at a special meeting called for that purpose.
The election shall be by secret ballot (unless dispensed with by unanimous
consent) and each Member shall be entitled to vote for each vacancy. There
shall be no cumulative voting. Those candidates receiving the greatest number
of votes cast either in person or by proxy shall be elected.
5.06. TERM. Each director elected by the Members shall hold office
until the next annual meeting of Members, and until his successor shall be
elected and qualified or until he resigns or is removed in any manner provided
elsewhere herein. Each director appointed by the Developer shall hold office
until he resigns, is removed by the Developer, or his term expires as provided
for herein and in the Declaration.
5.07. VACANCIES. Any vacancy in the position of a director elected by
the Members of the Association shall be filled by a majority vote of the
remaining directors, and any director so elected shall hold office for a term
equal to the unexpired term of the director whom he succeeds. Any vacancy in
the position of a director appointed by the Developer shall be filled by the
Developer.
5.08. REMOVAL. Any director, other than one appointed by the
Developer, may be removed by a two-thirds (2/3) vote of all persons present in
person and entitled to vote at a meeting of the Unit Owners at which a quorum
in person is present. The vacancy in the Board of Directors so created shall be
filled by the Members at the same meeting.
5.09. COMPENSATION. A director shall not receive any compensation
for any services he may render to the Association as a director; provided,
however, that any director may be reimbursed for actual
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<PAGE> 8
out-of-pocket expenses incurred by him in his performance of his duties.
5.10. PROVISO. Provided, however, the Developer shall retain control
of the Association in accordance with the terms and conditions of the
Declaration.
MEETINGS OF DIRECTORS
6.01. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such time and place as shall be determined, from time to time,
by a majority of the directors. Notice of regular meetings shall be given to
each director, personally or by mail, telephone or telegraph, not less than ten
(10) nor more than sixty (60) days in advance of any meeting.
6.02. SPECIAL MEETINGS. Special meetings of the directors may be
called by the President and must be called by the Secretary at the written
request of one-third (1/3) of the votes of the Board. Not less than three (3)
days notice of the meeting shall be given personally or by mail, telephone or
telegraph, which notice shall state the time, place and purpose of the meeting.
6.03. OPEN MEETINGS. All meetings of the Board of Directors shall be
open to all Members of the Association, and notice of such meetings shall be
posted conspicuously on the Property at least forty-eight (48) hours prior to
the meeting, except in the event of an emergency.
6.04. WAIVER OF NOTICE. Any director may waive notice of a meeting
either before or after the meeting, or may consent to the holding of a meeting
without notice. Attendance by any director at a meeting shall constitute waiver
of notice of the meeting, except when attendance is for the express purpose of
objecting at the beginning of the meeting to the transaction of business on the
grounds that the meeting was not lawfully called.
6.05. QUORUM. A quorum shall consist of the number of directors
entitled to cast a majority of the votes of the entire Board of Directors. The
acts of the directors approved by a majority of the votes present at a meeting
at which a quorum is present shall constitute the acts of the Board of
Directors. The
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<PAGE> 9
joinder of a director in the action of a meeting by signing and concurring in
the minutes thereof shall constitute the presence of such a director for the
purpose of determining a quorum.
6.06. ACTION WITHOUT MEETING. Any action permitted or required to be
taken at a meeting of the directors may be taken without a meeting if written
consent setting forth the action so taken shall be signed by all the directors,
and filed with the minutes of the proceedings of the Board.
6.07. MINUTES OF MEETINGS. The minutes of all meetings of the Board
of Directors shall be kept in a minute book available for inspection by Unit
Owners, or their authorized representatives, or any directors at any reasonable
time.
6.08. PRESIDING OFFICER. The presiding officer of directors' meetings
shall be the President. In the absence of the President, the directors present
shall designate one of their number to preside.
POWERS AND DUTIES OF
THE BOARD OF DIRECTORS
7.01. POWERS DEFINED. The Board of Directors shall have the power to
exercise all powers, duties, and authority vested in the Association by the
Act, the Declaration, these Bylaws, or the Hotel Operating and Rental Pool
Agreement except for such powers and duties reserved thereby to the Members or
the Developer.
7.02 RESERVATION OF POWERS. The termination of any Hotel Operating
and Rental Pool Agreement entered into by the Owners or the Association may be
terminated only with the affirmative vote of Members owning units representing
at least sixty seven percent (67%) of the percentage interests of the
Condominium.
7.03. COMMITTEES. The Board of Directors may, by resolution, appoint
such committees as deemed appropriate in carrying out its purpose, and such
committees shall have the powers of the Board of Directors for the management
of the affairs and business of the Association to the extent provided in the
resolution designating such a committee. Any such committee shall keep regular
minutes of its
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proceedings and shall report the same to the Board of Directors.
7.04. MANAGING AGENT. The Board of Directors shall ensure that a
manager is retained to manage and operate the Condominium Property as a hotel.
7.05. ORDER OF BUSINESS. The order of business at directors'
meetings shall be:
Call of Roll
Proof of due notice of meeting
Reading and disposal of unapproved minutes
Reports of officers and committees
Election of Officers
Unfinished business
New business
Adjournment
OFFICERS
8.01. EXECUTIVE OFFICERS. The executive officers of the Association
shall be a President, who shall be a director; a Vice President, who shall be a
director; and a Secretary-Treasurer, who shall be a director, all of whom shall
be elected annually by the Board of Directors and who may be peremptorily
removed by vote of the directors at any meeting. Any Person may hold two (2) or
more offices, except that the President shall not also be the Secretary. The
Board of Directors shall from time to time elect such other officers and
designate their powers and duties as the Board shall find to be required to
manage the affairs of the Association.
8.02. TERM. Each officer shall hold office for the term of one (1)
year and until his successor shall have been appointed or elected and
qualified, provided that any officer may succeed himself.
8.03. RESIGNATION AND REMOVAL. Any officer may be removed from
office either with or
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<PAGE> 11
without cause by the Board of Directors. Any officer may resign at any time by
giving written notice to the Board of Directors. Such resignation shall take
effect on the date of receipt or at any later time specified therein, and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
8.04. VACANCIES. A vacancy in any office shall be filled by a
majority vote of the directors at any meeting. An officer elected to fill a
vacancy shall hold office for a term equal to the unexpired term of the officer
he succeeds.
8.05. COMPENSATION. An officer shall not receive any compensation for
any service he may render to the Association as an officer; provided, however,
that any officer may be reimbursed for actual out-of-pocket expenses incurred
by him in the performance of his duties.
8.06. PRESIDENT. The President, who shall be a director, is the chief
executive officer of the Association, and shall have all the powers and duties
that are usually vested in the office of President of a condominium
association, including, but not limited to the following powers:
(1) To preside over all meetings of the Members and of the
Board.
(2) To sign as President all deeds, contracts, and other
instruments that have been duly approved by the Board.
(3) To call meetings of the Board whenever he deems it
necessary in accordance with the rules.
(4) To have the general supervision, direction and
control of the affairs of the Association.
8.07. VICE PRESIDENT. The Vice President, who shall be a director,
shall have all the powers and duties that are usually vested in the office of
the Vice-President of a condominium association. The Vice President shall, in
the absence of or disability of the President, exercise the powers and perform
the duties of the President. He shall also generally assist the President and
exercise such other powers and perform
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such other duties as shall be prescribed by the Board.
8.08. SECRETARY. The Secretary, who shall be a director, shall have
all the powers and duties that are usually vested in the Secretary of a
condominium association. The Secretary shall keep the minutes of all
proceedings of the Board and the Members. He shall attend to the giving and
serving of all notices to the Members and directors and other notices required
by law. He shall have custody of the seal of the Association and affix the same
to the instruments requiring a seal when duly signed. To sign as Secretary all
deeds, contracts, all other instruments which have been duly approved by the
Board, if said instrument requires the signature or attestation of the
Secretary. He shall keep the records of the Association, except those of the
Treasurer, and shall perform all other duties incident to the office of the
Secretary of a condominium association as may be required by the directors or
the President.
8.09. TREASURER. The Treasurer, who shall be a director, shall be the
financial officer of the Association, and shall have all the powers and duties
that are usually vested in the Treasurer of a Association. The Treasurer shall
have custody of all property of the Association, including funds, securities,
and evidences of indebtedness. He shall keep the financial records and books of
account of the Association in accordance with good accounting practices; shall
keep detailed, accurate records in chronological order of the receipts and
expenditures affecting the Common Elements and facilities, specifying and
itemizing the maintenance and repair expenses of the Common Elements and
facilities and any other expenses incurred; and he shall perform all other,
duties incident to the office of the Treasurer. The records, books of account,
and the vouchers authorizing payments, shall be available for examination by a
Member of the Association at convenient hours of weekdays.
FISCAL MANAGEMENT
9.01. THE FISCAL YEAR. The fiscal year of the Association shall be
such as shall from time to time be established by the Association.
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9.02. BUDGET. The Board shall adopt a budget for each calendar year,
which shall include estimated Common Expenses, including a reasonable allowance
for contingencies and reserves less the unneeded fund balances on hand. The
budget shall also include reserve accounts for working capital expenditures,
deferred maintenance, reserves and contingencies. The amount reserved shall be
computed by means of a formula that is based on the estimated life and
estimated replacement cost of each reserve item. The budget shall also set
forth each Unit Owners proposed Assessments for Common Expenses. Copies of the
budget and proposed Assessments shall be transmitted to each Member. The budget
shall take into account amount projected to be paid from hotel operations.
9.03. ADOPTION OF THE ANNUAL BUDGET. The Board shall prepare or cause
to be prepared a proposed annual budget for each fiscal year of the
Association.
9.04. ASSESSMENTS. Assessments for Common Expenses shall be made in
accordance with the Act, the Declaration, and these Bylaws. Assessments shall
be collected by the Association on a monthly basis as follows: On or before the
first day of each month of the fiscal year for which the Assessments are made,
each Unit Owner shall pay one-twelfth (1/12) of his share of the Common
Expenses for such year as shown by the annual budget. The Assessments of the
Common Expenses shall be set forth in the Declaration, but the yearly
Assessment for each Unit Owner for Common Expenses shall be in proportion to
his respective ownership interest in the Common Elements. The Board may cause
to be sent to each Unit Owner, on or before the first day of each month, a
statement of the monthly Assessments. However, the failure to send or receive
such monthly statement shall not relieve the Unit Owner of his obligation to
make timely payment of the monthly Assessments. If the Board of Directors shall
not approve an annual budget or shall fail to determine new monthly Assessments
for any year, or shall be delayed in doing so, each Unit Owner shall continue
to pay the amount of his monthly Assessment as last determined. No Unit Owner
shall be relieved of his obligation to pay his Assessment by abandonment of his
Unit or lack of use of the Common Elements.
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9.05. RESERVES FOR REPLACEMENTS. Except as provided in the
Declaration, the Association shall establish and maintain an adequate reserve
fund for the periodic maintenance, repair, and replacement of improvements to
the Common Elements. The fund shall be maintained out of regular Assessments.
9.06. LIEN FOR EXPENSES. If any Unit Owner shall fail or refuse to
make any payment of the Common Expenses or other Assessments when due, the
amount due, together with costs, reasonable attorney's fees, and interest
thereon at a rate to be set by the Board but in no event greater than eighteen
percent (18%) from and after the date said Common Expenses or other Assessments
became due and payable in accordance with the Declaration, shall constitute a
lien on the interest of the Unit Owner in the property.
9.07. ACCELERATION OF ASSESSMENT INSTALLMENTS UPON DEFAULT. If a Unit
Owner shall be in default in the payment of an installment upon any Assessment
for a period of more than thirty (30) days, the Board may accelerate the
remaining installments of such Assessments upon notice thereof to the Unit
Owner, and thereupon the unpaid balance of the Assessment shall come due upon
the date stated in the notice, but not less than ten (10) days after delivery
thereof to the Unit Owner, or not less than twenty (20) days' after the mailing
of such notice to him by registered or certified mail, whichever shall first
occur. Upon default in the payment of an installment upon any Assessment, the
Board shall be entitled to charge interest and service charges at the highest
available rate allowed by law not to exceed 18% per year.
9.08. DEFAULT. In the event an Unit Owner does not pay any sums,
charges or Assessments required to be paid to the Association within thirty
(30) days from the due date, the Association may foreclose the lien encumbering
the Unit created by non-payment of the required moneys; provided that thirty
(30) days prior notice of the intention to foreclose shall be mailed, postage
prepaid, to the Unit Owner and to all Persons having a mortgage lien or other
interest of record in such Unit as shown in the Association record of
ownership. The Association shall be entitled to the appointment of a receiver,
if
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it so requests. The Association shall have the right to bid on the Unit at a
foreclosure sale and to acquire, hold, mortgage and convey the same. In any
such foreclosure action, the lien of the Association shall be as stated in the
Declaration. In lieu of foreclosing its lien, the Association may bring suit to
recover a money judgment for any sums, charges or Assessments required to be
paid to the Association without waiving its lien securing same. In any action
either to foreclose its lien or to recover a money judgment, brought by or on
behalf of the Association against a Unit Owner, the losing defendants shall pay
the cost thereof together with a reasonable attorney's fee.
If the Association becomes the Unit Owner by reason of foreclosure, it
shall offer said Unit and properties for sale and at such time as a sale is
consummated it shall deduct from such proceeds all sums of money due it for
monthly Assessments and charges, all costs incurred in the bringing of the
foreclosure suit, including reasonable attorney's fees, and any and all
expenses incurred in the resale of the Unit, which shall include but not be
limited to advertising expenses, real estate brokerage fees and expenses
necessary for the repairing and refurbishing of the Unit in question. All
moneys remaining after deducting the foregoing items of expense shall be
returned to the former Unit Owner in question.
9.09. SUPPLEMENTAL ASSESSMENTS. If during the course of any fiscal
year, it shall appear to the Board that the monthly Assessments, as determined
in the annual budget, are insufficient or inadequate to cover the estimated
Common Expenses for the remainder of such year, then the Board shall prepare
and approve a supplemental budget covering the estimated deficiency. Copies of
the supplemental budget shall be delivered to each Unit Owner, and thereupon a
supplemental Assessment shall be made to each Unit Owner for his proportionate
share of the supplemental budget.
9.10. ANNUAL STATEMENT. Within sixty (60) days after the end of each
fiscal year, the Board shall cause to be furnished to each Unit Owner, a
statement for the year so ended showing the receipts and expenditures of the
Association, and such other information as the Board may deem desirable.
9.11. ACCOUNTING RECORDS. The Board shall cause to be kept, in
accordance with generally
15
<PAGE> 16
accepted accounting principles, a record of all receipts and expenditures; and
a separate account for each Unit showing the Assessments or other charges due,
the due dates thereof, the present balance due, and any interest in Common
Surplus. Such records shall be open to inspection by Unit Owners at reasonable
times.
9.12. DEPOSITORY. The depository of the Association shall be such
bank or banks and/or savings and loan associations as shall be designated from
time to time by the directors and in which moneys of the Association shall be
deposited. Withdrawal of moneys from such account shall be only by checks
signed by such persons as are authorized by the directors.
9.13. FIDELITY BONDS. Fidelity bonds shall be required by the Board
from all officers and employees of the Association from any manager handling or
responsible for Association funds and from any employee, agent or subcontractor
of a manager handling or responsible for Association funds. The amount of such
bonds shall be determined by the Board, but shall be at least the amount of one
hundred and fifty percent (150%) of the total annual Assessments against
Members for recurring expenses. The premiums on such bonds shall be paid by the
Association.
AMENDMENTS TO THE BYLAWS
12.01. ADOPTION. These Bylaws may be amended only by the affirmative
vote or agreement of the Unit Owners of at least sixty-seven percent (67%) of
the Units. Additionally, material changes to these Bylaws shall require the
approval of Eligible Mortgagees who represent at least fifty-one percent (51%)
of the Units subject to mortgages held by Eligible Mortgagees.
12.02. PROHIBITED AMENDMENTS. No amendment may be adopted that would
eliminate, modify, prejudice, abridge, or otherwise adversely affect any
rights, benefits, privileges, or priorities granted to the Developer or
Eligible Mortgagee without the consent of the Developer or such Mortgagee, as
the case may be. No amendment that is in conflict with the Articles, the
Declaration, or the Act shall be adopted.
16
<PAGE> 17
12.03. RECORDING. Any amendment shall become effective when recorded
in the office of the Judge of Probate of Baldwin County, Alabama, with these
Bylaws.
MISCELLANEOUS
13.01. CONSTRUCTION. Wherever the context so permits, the singular
shall include the plural, the plural shall include the singular, and the use of
gender shall be deemed to include all genders.
13.02. CAPTIONS. The captions herein are inserted only as a matter of
convenience for all reference, and in no way define, limit, or describe the
scope of these Bylaws or the intent of any provision hereof.
13.03. CONFLICTS. In the event of any conflict between the provisions
of the Declaration and the Bylaws, the Declaration prevails, except to the
extent the Declaration is inconsistent with the Act.
13.04. COMPLIANCE. These Bylaws are set forth to comply with the
requirements of the Alabama Nonprofit Corporation Act and the Act and shall be
considered an appendage to the Declaration filed prior hereto in accordance
with said Act. In case any of these Bylaws conflict with the provisions of said
statutes, it is hereby agreed and accepted that the provisions of the Act will
apply.
13.05. PARLIAMENTARY RULES. Roberts Rules of Order (latest edition)
shall govern the conduct of Association meetings when not in conflict with the
Act, Declaration or these Bylaws.
REGISTERED OFFICE AND AGENT
14.01. NAME AND ADDRESS. The location and mailing address of the
initial registered office of BEACHSIDE ALL-SUITES HOTEL CONDOMINIUM OWNERS
ASSOCIATION, INC., is __________ Gulf Shores, Alabama 36542. The name of the
corporation's initial registered agent at such address is __________________.
17
<PAGE> 18
The foregoing were adopted as the Bylaws of the Association, at the
first meeting of the BOARD OF DIRECTORS on the ____ day of _________________,
_______.
------------------------------
Secretary
Approved:
- ------------------------------------
President
THIS INSTRUMENT PREPARED BY:
RICHARD E. DAVIS, ESQUIRE
DAVIS & FIELDS, P.C.
Post Office Box 2925
Daphne, Alabama 36526
(334) 621-1555
18
<PAGE> 1
EXHIBIT 99.3
STATE OF ALABAMA
COUNTY OF BALDWIN
DECLARATION OF CONDOMINIUM
OF
BEACHSIDE ALL-SUITES HOTEL, A CONDOMINIUM
THIS DECLARATION, made this day of _____________, _______ by SOUTHWIND
DEVELOPMENT COMPANY, L.L.C., an Alabama limited liability company, herein
called the "Developer", for itself, its successors, grantees and assigns.
DISCLOSURE
THIS DECLARATION RELATES TO BEACHSIDE ALL-SUITES HOTEL, A CONDOMINIUM.
THIS CONDOMINIUM HAS NOT BEEN BUILT. THE DEVELOPER WILL NOT BUILD THE
CONDOMINIUM UNLESS CERTAIN CONTINGENCIES CONTAINED IN THE PRECONSTRUCTION
PURCHASE AND ESCROW AGREEMENT ARE FIRST SATISFIED. THEREFORE, THE
CONDOMINIUM IMPROVEMENTS NEED NOT BE BUILT.
RECITALS:
1. The Developer is the fee simple owner of that certain parcel of Real
Property situated in the City of Gulf Shores, County of Baldwin, State of
Alabama, hereinafter more particularly described, and intends to improve said
Real Property in the manner set out herein.
2. The Developer proposes to establish a condominium pursuant to the
provisions of the Alabama Uniform Condominium Act of 1991.
3. The Condominium will consist of one (1) building containing a total of
eighty-five (85) Condominium Units, together with access, parking and
appurtenant facilities herein described.
4. Eighty-four (84) of the Condominium Units are considered Hotel Guest
Units and are irrevocably committed to the control of single hotel management
company. The management company shall operate the Condominium as a hotel; its
management activities shall be conducted from the 85th Condominium Unit, known
as the Hotel Management Unit.
NOW, THEREFORE, the Developer, hereby makes the following Declaration.
I. DEFINITIONS
The terms used in this Declaration and in the Bylaws shall have the meanings
stated in the Alabama Uniform Condominium Act of 1991, and as follows, unless
the context otherwise requires:
<PAGE> 2
<TABLE>
<S> <C>
1.1 "Act" means the Alabama Uniform Condominium Act of 1991, Code of
Alabama (1975), Section 35-8A-101, et seq.
1.2 "Articles" means the Articles of Incorporation of the Beachside
All-Suites Hotel Condominium Owners Association, Inc. recorded in the
Office of the Judge of Probate of Baldwin County, Alabama, identified
as EXHIBIT "C" attached hereto and made a part hereof as if set out
fully herein.
1.3 "Assessment" means a proportionate share of the funds required for the
payment of the Common Expenses which from time to time may be levied
against each Unit Owner.
1.4 "Association" means the Beachside All-Suites Hotel Condominium Owners
Association, Inc., an Alabama not for profit corporation, and its
successors, and is organized pursuant to the provisions of the Act.
1.5 "Board" means the Board of Directors of the Association.
1.6 "Building" means all structures or structural improvements located on
the Real Property and forming part of the Condominium.
1.7 "Bylaws" means the duly adopted Bylaws of the Association, identified
as EXHIBIT "D" attached hereto and made a part hereof as if set out
fully herein.
1.8 "Common Elements" means all portions of the condominium other than the
Units.
1.9 "Common Expenses" means expenditures made by or financial liabilities
of the Condominium Association, together with any allocations to
reserves.
1.10 "Common Surplus" means the excess of all receipts of the Association
arising out of the Common Elements over the amount of the Common
Expenses.
1.11 "Condominium" or "Hotel" means Beachside All-Suites Condominiums Hotel
and consists of the Condominium Property submitted to the condominium
form of ownership by this Declaration.
1.12 "Condominium Documents" means the Declaration, Bylaws, Articles, and
all Rules and Regulations adopted by the Association and all Exhibits
attached thereto as the same may be amended from time to time.
1.13 "Condominium Property" or "Property" means all property, both real,
personal or mixed, which is submitted to the condominium form of
ownership as provided for herein and includes the Real Property and
all improvements now existing or hereafter placed thereon and all
easements, rights, interests or appurtenances thereto, and all
personal property now or hereafter used in connection therewith.
1.14 "Declaration" means this Declaration of Condominium and any amendments
thereto which may be made from time to time.
1.15 "Developer" means Southwind Development Company, L.L.C., an Alabama
limited liability company, and its successors and assigns.
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
1.16 "Development" shall have the same meaning as "Condominium Property" or
"Property".
1.17 "Eligible Mortgagee" means any Mortgagee who has submitted to the
Association a written request for notice of any proposed action
concerning the Condominium.
1.18 "Hotel Operator" means the Hotel Operator under the Hotel Operating
and Rental Pool Agreement.
1.19 "Hotel Operating and Rental Pool Agreement" shall mean the agreement
entered into by and between each Unit owner and the Hotel Operator.
1.20 "Limited Common Element" shall have the same meaning as is defined in
the Act and as set out in this Declaration.
1.21 "Member" means a member of the Association, membership in which is
confined to Unit Owners.
1.22 "Mortgagee" means any lender holding a mortgage or vendor's lien on
any part or all of the Condominium Property.
1.23 "Occupant" means a person or persons in possession of a Unit,
regardless of whether that person is the Unit Owner.
1.24 "Person" means a natural person, a corporation, a partnership, a
limited partnership, the Association, a trustee, or other legal
entity.
1.25 "Plans" mean the site plan, floor plans, and elevations of the
Condominium prepared by an independent registered engineer or
registered architect, which are marked EXHIBIT "B" and attached hereto
and expressly made a part hereof as though fully set out herein. The
Plans contain a certificate of completion executed by an independent
registered engineer or registered architect in accordance with the
Act. The Plans contain a certification that the Plans contain all
information required by the Act.
1.26 "Real Property" means the Real Property which is submitted to the
condominium form of ownership as provided herein.
1.27 "Rules and Regulations" means those rules and regulations made and
amended by the Board respecting the use of the Property and the
operation of the Condominium.
1.28 "Special Declarant Rights" shall have the meaning as is defined in the
Act and as set out in the Declaration.
1.29 "Unit" or "Private Element" shall have the meaning as "Unit" is
defined in the Act. The Units are designated on the Plans. There are
two (2) types of units: Hotel Guest Units, which are dedicated
entirely to the control of a single hotel management company, and the
Hotel Management Unit, from which the Hotel is operated and managed.
1.30 "Unit Owner" means any Person (including the Developer) who owns a
Unit but does not include a Person having an interest in a Unit solely
as security for an obligation.
1.31 "Utility Services" shall include but not be limited to electrical
power, water, gas, garbage and sewage disposal.
</TABLE>
<PAGE> 4
When the context permits, use of the plural shall include the singular, use of
the singular shall include the plural, and the of any gender shall be deemed to
include all genders.
II. NAME
2.1 The name by which this Condominium is to be known is Beachside
All-Suites Hotel, a Condominium. The Condominium is located on East Beach
Boulevard, in the City of Gulf Shores, County of Baldwin, State of Alabama.
III. THE REAL PROPERTY
3.1 The Real Property owned by the Developer, which is herewith submitted
to the condominium form of ownership, is that certain parcel of Real Property
lying and being in Baldwin County, Alabama, more particularly described in
EXHIBIT "A", which is attached hereto and expressly made a part hereof as
though fully set forth herein.
The Real Property is subject to the following:
(a) Zoning, planning and other restrictions, regulations and
other limitations imposed on the REAL PROPERTY, or the use
thereof, by or under the Federal Coastal Zone Management Act,
or other federal law or regulation, or the City of Gulf
Shores or any other governmental authorities having
jurisdiction over the Real Property.
(b) Current ad valorem taxes not yet due and payable.
(c) Any easements which may have been, or may be, granted to or
required by public authorities and/or utility companies to
provide for utility lines, equipment, etc., for utilities
serving the Condominium or other property.
(d) Encroachments, overlaps, boundary line disputes, and any
other matter which would be disclosed by an accurate survey
and inspection of the Real Property.
(e) Applicable building setback lines.
(f) Outstanding oil, gas and other mineral interests and rights in
connection therewith.
(g) Covenants prohibiting use of a portion of the Real Property
for certain quick service restaurants or for certain named
restaurants for a period of twenty (20) years.
IV. PURPOSE
4.1 The Developer hereby submits the Real Property described on EXHIBIT "A"
together with all improvements, Buildings, structures, and all other permanent
fixtures thereon, and all rights and privileges belonging or in any way
pertaining thereto, to the condominium form of ownership and use in the manner
provided for by the "Alabama Uniform Condominium Act of 1991", Code of Alabama
(1975), Section 35-8A-101, et seq.
V. DEVELOPMENT PLAN
5.1 Plans. The improvements are substantially completed in accordance with
the Plans, as evidenced
<PAGE> 5
by the Certificate of Completion executed by an independent registered
architect or registered engineer.
5.2 Easements. Easements are reserved to the Developer throughout the
Common Elements as may be reasonably necessary for the purpose of discharging
the Developer's obligations or exercising any Special Declaring Rights.
Each of the following easements is reserved to the Association for the benefit
of the Unit Owners, their guests and lessees and is a covenant running with the
Real Property:
(a) Utilities and Drainage. Easements are reserved throughout the
Property as may be required for Utility Services and drainage in order to
adequately serve the Condominium; provided, however, such easements to a Unit
shall be only in accordance with the Plans or as the improvements are
constructed, unless approved in writing by the Unit owner. Each Unit shall have
an easement as may be required to drain the Property adequately. Each Unit
Owner shall have an easement in common with the Unit Owners of all other Units
to use all pipes, wires, ducts, cables, conduits, public utility lines and
other Common Elements located in any of the other Units and serving his Unit.
Each Unit shall be subject to an easement in favor of the Unit Owners of all
other Units to use all pipes, ducts, cables, wires, conduits, public utility
lines and other Common Elements serving such other Units and located in such
Unit. The Association shall have a right of access to each Unit to inspect the
same, to remove violations therefrom, and to maintain, repair or replace the
Common Elements contained therein or elsewhere on the Property; provided such
right of access, except in the event of an emergency, shall not unreasonably
interfere with the Unit Owner's permitted use of the Unit, and except in the
event of emergency, entries shall not be made without prior notice to the Unit
Owner.
(b) Encroachments. If any portion of the Common Elements
encroaches upon any Unit, or if any Unit encroaches upon any other Unit or upon
any portion of the Common Elements as a result of the construction of any
Building, or if any such encroachment shall occur hereafter as a result of
settling or shifting of any Building, a valid easement for the encroachment and
for the maintenance of the same shall exist so long as such Building stands. In
the event any Building, any Unit, any adjoining Unit, or any adjoining Common
Element shall be partially or totally destroyed as a result of fire, or other
casualty or as a result of condemnation or eminent domain proceedings, and
theft rebuilt, encroachments of parts of the Common Elements upon any Unit or
of any Unit upon any other Unit or upon any portion of the Common Elements due
to such rebuilding, shall be permitted, and valid easements for such
encroachments and the maintenance thereof shall exist so long as such Building
or Buildings shall stand.
(c) Support. Each Unit shall have an easement of support and of
necessity and shall be subject to an easement of support and of necessity in
favor of all other Units, and Common Elements.
(d) Access. Each Unit shall have an easement for pedestrian
traffic over, through, and across sidewalks, walks, lobbies, elevators,
stairways, walkways and lanes, and passage ways, as the same may from time to
time exist in the Common Elements; and for ingress and egress over, through and
across such portions of the Common Elements as may from time to time be paved
and intended for such purposes, but the same shall not give or create in any
Person the right to park on any portion of the Condominium Property not
designated as a parking area nor shall it give or create in any Person the
right to use or occupy a Limited Common Element designated for the exclusive
use of others. This easement shall be non-exclusive and shall include the right
of ingress and egress to a public street or highway upon and over Common
Elements providing such access and as shown on the Plans.
5.3 General Description of Improvements. The Condominium Property consists
essentially of one (1) Building, together with automobile parking areas, lawn
and landscaping and other facilities as more
<PAGE> 6
particularly set forth in the Plans. The Building is constructed with poured-in
place post-tensioned concrete, on pre-cast concrete pilings, with a stucco or
similar exterior finish and built-up roof. The Building contains nine (9)
levels (stories), excluding the ground level, which is for parking. The first
elevated level or story (meaning the first level above the ground) contains six
(6) Hotel Guest Units and the Hotel Management Unit. Each of levels two (2)
through (8) contains ten (10) Hotel Guest Units, and the ninth (9th) level or
floor contains eight (8) Hotel Guest Units. level nine There are two (2) types
of Units, eighty-four (84) Hotel Guest Units and one (1) Hotel Management Unit.
The only amenity will be one (1) outdoor swimming pool.
5.4 Units. (Private Elements). Each Unit is assigned a number, which is
indicated on the Plans so that no Unit bears the same designation as any other
Unit; the Hotel Management Unit is assigned the letter and number combination
of "C-1". The legal description of each Unit shall consist of the identifying
number as shown on the Plans, the name of the Condominium, the name of the
County in which the Unit is situated, the name of the office in which this
Declaration is recorded, and the recorded reference where the first page of
this Declaration is recorded. The description and location of the particular
Unit and the appurtenances are determined with the aid of the Plans. The Unit
boundaries are determined as follows:
(a) Horizontal Boundaries. (Planes). The upper and lower
boundaries extended to their planer intersections with the vertical boundaries
of each Unit shall be:
(i) Upper Boundary. The horizontal plane of the unfinished lower
interior surface of the uppermost ceiling.
(ii) Lower Boundary. The horizontal plane of the unfinished upper
interior surface of the floor.
(b) Vertical Boundaries. (Planes). The vertical boundaries of
each Unit shall be the vertical planes of the interior surfaces of exterior
windows and glass doors bounding a Unit and the unfinished interior surfaces of
the walls and entry doors bounding the Unit, excluding paint, wallpaper, if
any, and light coverings, extended to their planer intersections with each
other and with the upper and lower boundaries.
5.5 Type of Units. All eight-four (84) Hotel Guest Units contain
approximately 613 square feet and have the same floor plan. These Units contain
one (1) bedroom, and one and one-half (1 1/2) bathrooms, and a full kitchen.
The eighty-fifth (85th) Unit is known as the Hotel Management Unit. The Hotel
Management Unit includes a lobby, font desk or registration area, and
administrative offices, all for the exclusive use of the Hotel Operator.
5.6 Unit Ownership. Each Unit Owner shall own his Unit in fee simple, but
the right to use and enjoy such Unit is limited by the provisions of Article
XII of this Declaration and by the provisions of the Hotel Operating and Rental
Pool Agreement. Each Unit Owner is subject to all the rights and duties
assigned to Unit Owners under the terms of the Condominium Documents. The
Developer shall enjoy the same rights and shall have the same duties (as any
other Unit owner) with respect to Hotel Guest Units owned by the Developer. The
private elements of each Unit shall consist of the following:
(a) The air space of the area of the Building lying within the
Unit boundaries.
(b) The surfacing materials on the interior of the exterior walls
and on interior walls separating one Unit from another Unit.
<PAGE> 7
(c) The structural components and surfacing materials of all
interior walls located within the boundaries of the Unit.
(d) The structural components and surfacing materials of the
floors and ceilings of the Unit.
(e) All bathtubs, toilets and sinks, the range, stove top,
refrigerator, dishwasher, garbage disposal, air conditioning and heating units,
lighting fixtures and all hardware and interior and exterior wall fixtures
except those exterior lighting fixtures assigned to the common use of the
Condominium, and the power meter and its appurtenances.
(f) All interior trim and finishing materials.
5.7 Surfaces. A Unit Owner shall not be deemed to own the structural
components of the perimeter wall and/or load-bearing walls, nor the windows and
doors bounding the Units. A Unit Owner, however, shall be deemed to own the
surfacing materials on the interior of exterior walls and on interior walls
separating a Unit from other Units, and the surfacing materials of the floors
of his Unit; all window screens; and all appurtenant installations, including
all pipes, ducts, wires, cables, and conduits used connection therewith, for
services such as power, light, telephone, sewer, water, heat and air
conditioning, whether located in the boundaries of the Unit or in Common
Elements, which are for the exclusive use of the Unit; and all ceilings and
partition walls.
5.8 Changes. The Developer reserves the right to change the interior
design and arrangement of any or all Units owned by it.
5.9 Common Elements. Any right, title or interest in a Unit shall
automatically carry with it as an appurtenance and without the necessity of
specific reference thereto its respective undivided share of the Common
Elements and a right to use the Common Elements in conjunction with the other
Unit Owners. The Common Elements of the Condominium are all portions of the
Condominium other than the Units and will include the Common Elements located
substantially as shown on the Plans. Such Common Elements will include the
following:
(a) All of the Real Property.
(b) All improvements and parts of the Real Property which are not
a Unit or Private Element.
(c) All parking areas, driveways and other means of ingress and
egress.
(d) The mechanical systems and installations providing service to
a Building, or to any Unit, such as electrical power, gas, light, hot and cold
water, heating and air conditioning, sanitary and storm sewer facilities, and
including all lines, pipes, ducts, flues, chutes, conduits, cables, wires, and
all other apparatus and installations in connection therewith, whether located
in the Common Elements or in the Units, except when situated entirely within a
Unit for service only of that Unit.
(e) All tangible personal property required for the maintenance
and operation of the Condominium and for the common use and enjoyment of the
Unit Owners.
(f) All foundations, slabs, columns, beams and supports of the
Buildings and such component parts of exterior walls and walls separating
Units, roofs, floors and ceilings as are not described herein as private
elements.
<PAGE> 8
(g) Lawn areas, landscaping, walkways, sidewalks, curbs and steps.
(h) Exterior steps, ramps, handrails, stairs and stairwells.
(i) All tanks, pumps, pump houses, wells, motors, fans,
compressors and control equipment, fire fighting equipment, elevator equipment,
and garbage equipment which are not reserved for the use of certain Unit
Owners.
(j) All area outdoor and exterior lights metered to individual
Units and supports and all entrance and related type signs.
(k) The patios, balconies, terraces, porches, storage areas, if
any, and doorsteps or stoops affixed to each Unit, though designated as a
Limited Common Element.
(l) One (1) outdoor 20 foot x 27 foot swimming pool.
(m) The laundry, storage, maintenance, telephone system, etc.
areas located on the first level on either side of the Hotel Management Unit.
(n) All other parts of the Condominium Property existing for the
common use or necessity of the existence, maintenance and safety of the
Condominium.
(o) All other items listed as such in the Act.
5.10 Limited Common Elements. The Limited Common Elements located on the
Property and the Unit to which they are assigned are as follows:
The patio, balcony, terrace, or porch abutting each Condominium Residential
Unit are Limited Common Elements appurtenant to those Units to which they
attach and whose use is restricted to Units they are appurtenant. Doorsteps or
stoops, if any, providing access to a patio, balcony, terrace, or porch are
assigned as a Limited Common Element to the Unit to which the patio, balcony,
terrace, or porch serves, but the maintenance, repair, upkeep, and replacement
of each patio, balcony, terrace, or porch, storage area and the doorsteps or
stoops, if any, providing access thereto shall be the responsibility of the
Condominium Association. The boundary lines of each patio, balcony, terrace, or
porch and storage area attached to a Unit are the interior vertical surfaces
thereof and the exterior unpainted finished surface of the perimeter baluster
or railing abutting the patio, balcony, terrace, or porch.
VI. COMMON ELEMENTS
6.1 Ownership. The percentage of undivided interest of each Unit in the
Common Elements is shown as follows:
<PAGE> 9
<TABLE>
<CAPTION>
Units Percentage/Fraction
----- -------------------
<S> <C>
101, 110 1.192%
102, 103, 108, 109 1.169%
201, 210 1.208%
202 through 209 1.169%
301, 310 1.231%
302 through 309 1.169%
401, 410 1.247%
402 through 409 1.169%
501, 510 1.247%
502 through 509 1.169%
601, 610 1.247%
602 through 609 1.169%
701, 710 1.247%
702 through 709 1.169%
801, 810 1.247%
802 through 809 1.169%
902, 909 1.325%
903 through 908 1.247%
Hotel Management Unit 0.001%
</TABLE>
The foregoing assignment of percentage interest reflects the ratios of the list
purchase prices and the anticipated rental rates for the various Units, subject
to principles of rounding to achieve near approximation of one hundred percent
(100%); provided, however, the Hotel Management Unit is assigned a nominal
percentage because it will not be available for rental to Hotel guests. For
purposes of percentage of ownership in the Common Elements, percentage of
Common Expenses, and percentage of Common Surplus, the percentage shall govern.
The ownership interest in the Common Elements shall be an undivided interest,
and except as provided in the Act and this Declaration, shall remain undivided.
No Unit Owner shall bring any action for partition or division of the Common
Elements. The ownership interest in the Common Elements shall not be conveyed,
transferred, encumbered or otherwise affected separate from the ownership of
the Unit, and any agreement to the contrary shall be void.
6.2 Share of Common Expenses. Each Unit Owner shall be assessed and is
individually liable for a proportionate share of the Common Expenses and the
proportionate share of the Common Expenses shall be the same ratio as the Unit
Owner's percentage ownership in the Common Elements as the case may be. Payment
of Common Expenses shall be in such amounts and at such times as determined in
the Bylaws. Assessments shall be collected by the Condominium Association on a
monthly basis. No Unit Owner shall be exempt from payment of his or her
proportionate share of the Common Expenses by waiver or non-use or
non-enjoyment of the Common Elements or by abandonment of his Unit. Common
Expenses shall include but shall not necessarily be limited to expenditures
made or liabilities incurred by the Condominium Association, together with
payments or obligations to reserve accounts. All Units will be subject to full
Assessments not later than sixty (60) days following the first conveyance by
the Developer of a Unit.
6.3 Late Payment of Assessments. Assessments for Common Expenses and
installments thereon, paid on or before fifteen (15) days after the date when
due shall bear no interest, but all sums not paid on or before fifteen (15)
days after the date when due shall bear such late charges, penalties, interest
and other costs and expenses, at a rate set by the Board, but not to exceed the
maximum legal rate, together with all expenses, including attorney's fees
incurred by the Association in any undertaking to collect such unpaid
Assessments and expenses. All payments upon account shall be first applied to
such charges, penalties, interests and other costs and expenses, including
attorney's fees, and then to the Assessment payment due. The Association may,
in the manner provided for in the Bylaws, after notice and an opportunity to be
heard, levy reasonable fines for violations of the Declaration, Bylaws, and
Rules and Regulations of the Association.
6.4 Liens for Assessments. The Association is hereby granted a lien upon
each Unit and its appurtenant undivided interest in Common Elements and upon
the goods, furniture and effects belonging
<PAGE> 10
to the Unit Owner and located in such Unit, which lien shall secure and does
secure the moneys due for all Assessments now or hereafter levied or subject to
being against the Unit Owner; which lien shall also secure such late charges,
penalties and interest, if any, which may be due on the amount of any
delinquent Assessment owing to the Association; which lien shall also secure
all costs and expenses, including reasonable attorney's fee, which may be
incurred by the Association in enforcing this lien upon said Unit and its
appurtenant undivided interest in the Common Elements.
6.5 Priority of Lien. The Association shall have a lien for nonpayment of
Common Expenses as is provided by the Act. Such lien will be subordinate to any
first mortgagee of any Unit if the mortgage was recorded before the delinquent
Assessment became due. The lien granted to the Association shall further secure
such advances for taxes and other payments which may be required to be advanced
or paid by the Association in order to preserve and protect its lien, and the
Association shall further be entitled to interest at a rate set by the Board of
Directors of the Association but in no case shall said interest exceed the
maximum legal rate on any such advances made for such purposes. All Persons who
shall acquire, by whatever means, any interest in the ownership of any Unit, or
who may be given or acquire a mortgage, lien or other encumbrance thereon, are
hereby placed on notice of the lien granted to the Association. A lien for
Common Expenses shall not be affected by any sale or transfer of a Unit, except
as herein provided. A sale or transfer pursuant to a foreclosure of a mortgage
or first vendor's lien shall extinguish a subordinate lien for Assessments
which became payable prior to such sale or transfer; provided, however, a sale
or transfer pursuant to a foreclosure of a first mortgage or first vendor's
lien shall not extinguish the lien of the Association to the extent of the
Common Expense Assessments based on the periodic budget adopted by the
Association, pursuant to the Act, which would have become due in the absence of
acceleration during the six months immediately preceding the institution of an
action to enforce the lien. However, any such delinquent Assessments which were
extinguished pursuant to the foregoing provision may be reallocated and
assessed to all of the Units as a Common Expense. Any such sale or transfer
pursuant to foreclosure does not relieve the purchaser or transferee of a Unit
from liability for, nor the Unit from the lien of, any Assessments made
thereafter.
6.6 Disposition of Surplus. Each Unit shall carry with it a proportionate
share of Common Surplus which shall be the same ratio as that Unit Owner's
percentage ownership of the Common Elements; or in the alternative, such
surplus or any portion thereof may be added to a reserve fund for maintenance,
repair, and replacement of the Common Elements at the sole discretion of the
Association.
VII. THE CONDOMINIUM ASSOCIATION
7.1 Powers and Duties. The operation and administration of the Condominium
shall be by the Association of the Unit Owners, pursuant to the provisions of
the Act. The Association shall be a not for profit Alabama corporation
incorporated by Articles of Incorporation recorded in the office of the Judge
of Probate of Baldwin County, Alabama. The Association shall be an entity which
shall have the capability of bringing suit and being sued with respect to the
exercise or nonexercise of its powers. The Association shall have exclusive
authority and power to maintain a class action and to settle a cause of action
on behalf of Unit Owners with reference to the Common Elements, the roof and
structural components of the Buildings or other improvements, and mechanical,
electrical and plumbing elements serving improvements or the Buildings as
distinguished from mechanical elements serving only a Unit; and with reference
to any and all other matters in which all the Unit Owners have a common
interest. The Association shall have all the powers and duties set forth in the
Act, as well as all the power and duties granted to or imposed on it under the
Bylaws and other Condominium Documents as they may be amended from time to time
and shall have such additional powers and duties as are set forth in the Hotel
Operating and Rental Pool Agreement. The Association is specifically authorized
to enter into agreements by which its powers and duties, or some of them, may
be exercised or performed by some other Person.
<PAGE> 11
The Association shall have a reasonable right of entry upon any Unit to make
emergency repairs and to do other work reasonably necessary for the proper
maintenance and operation of the Development and further, shall have the right
to grant permits, licenses, and easements over the Common Elements for
utilities, roads, and other purposes reasonably necessary or useful for the
proper maintenance or operation of the Development. The Board shall have the
authority and duty to levy and enforce the collection of general and specific
Assessments for Common Expenses and is further authorized to provide adequate
remedies for failure to pay such Assessments.
7.2 Members. Each Unit Owner shall be a Member of the Association so long
as he is a Unit Owner. A Unit Owner's membership shall immediately terminate
when he ceases to be a Unit Owner. The membership of a Unit Owner cannot be
assigned or transferred in any manner except as an appurtenance to his Unit.
7.3 Voting Rights. Each Unit shall be entitled to one (1) vote, which vote
is not divisible, the numerical value of which shall be the percentage of
undivided interest in the Common Elements assigned to the Unit of which the
Member is the Unit Owner. The vote for a Unit shall be cast by the Unit Owner
thereof in the manner provided for herein and in the Bylaws. However, should
the Association be a Unit Owner, it shall not have the voting right for that
Unit.
7.4 Designation of Voting Representative. In the event a Unit is owned by
one (1) Person, his right to vote shall be established by the record title to
his Unit. If a Unit is owned by more than one (1) Person, the Person entitled
to cast the vote for the Unit shall be designated by a certificate signed by
all of the record Unit Owners of the Unit and filed with the Secretary of the
Association. If a Unit is owned by a corporation, partnership or limited
partnership, the officer, employee or individual entitled to cast the vote for
the Unit shall be designated by a certificate of appointment signed by the
president or vice-president and attested by the secretary or assistant
secretary of the corporation (in the case of a corporation) or by the general
partner or partners if more than one (in the case of a partnership or limited
partnership), which certificate shall be filed with the Secretary of the
Association. If such a certificate is not on file with the Secretary of the
Association for a Unit owned by more than one (1) Person or by a corporation,
partnership or limited partnership, the membership or vote of the Unit
concerned may be cast in accordance with the Act. Such certificate shall be
valid until revoked or until superseded by a subsequent certificate or until a
change in the ownership of the Unit concerned is effected. A certificate
designating the Person entitled to cast the vote of a Unit may be revoked by
any Unit Owner thereof.
7.5 Restraint upon Assignment of Shares in Assets. The share of a Member
in the funds and assets of the Association cannot be assigned, hypothecated, or
transferred in any manner except as an appurtenance to his Unit.
7.6 Board of Directors. The affairs of the Association shall be conducted
by a Board of Directors which shall consist of such number not fewer than three
(3) nor more than nine (9) as shall, from time to time, be determined and fixed
by a vote of a majority of the voting rights present at any annual meeting of
the Members.
7.7 Indemnification. Every director and every officer of the Association
shall be indemnified by the Association against all expenses and liabilities,
or any settlement thereof, including counsel fees, reasonably incurred by or
imposed upon him in connection with any proceeding to which he may be a party,
or in which he may become involved, by reason of his being or having been a
director or officer of the Association, whether or not he is a director or
officer at the time such expenses are incurred, except in such cases wherein
the director or officer is adjudged guilty of willful misfeasance or
malfeasance in the performance of his duties; provided that in the event of a
settlement, the indemnification herein shall
<PAGE> 12
apply only when the Board of Directors approves such settlement and
reimbursement as being in the best interest of the Association. The foregoing
rights of indemnification shall be in addition to and not exclusive of all
other rights to which such director or officer may be entitled.
7.8 Limitation of Liability. Notwithstanding the liability of the
Association to maintain and repair parts of the Property, the Association shall
not be liable for injury or damage caused by a latent condition of the Property
to be maintained and repaired by the Association nor for injury or damage
caused by the elements, or other Unit Owners or Persons.
7.9 Bylaws. The Association and its Members shall be governed by the
Bylaws.
7.10 Special Declarant Rights. Subject to the provisions herein, until the
earlier of (i) sixty (60) days after conveyance of seventy-five percent (75%)
of the Units which may be created to Unit Owners other than the Developer; or
(ii) two (2) years after the Developer, its successors or assigns have ceased
to offer Units for sale in the ordinary course of business; the Bylaws and
rules adopted by the Developer shall govern and the Developer shall have the
exclusive right to appoint, remove, and designate the officers and members of
the Board of Directors, and neither the Unit Owners nor the Association nor the
use of the Property by Occupants of Unit shall interfere with the completion of
the contemplated improvements and the sale of the Units. The Developer may
voluntarily surrender the right to appoint and remove officers and members of
the Board; but, in that event, the Developer may require, for the duration of
the period of Developer control, that specified actions of the Association or
Board, as described in a recorded instrument executed by the Developer, be
approved by the Developer before they become effective. Provided, however, not
later than ninety (90) days after conveyance of twenty-five percent (25%) of
the Units which may be created to Unit Owners other than the Developer, at
least one (1) member and not less than twenty-five percent (25%) of the members
of the Board must be elected by Unit Owners other than the Developer. Not later
than ninety (90) days after conveyance of fifty percent (50%) of the Units
which may be created to Unit Owners other than the Developer, not less than
thirty-three and one-third percent of the members of the Board must be elected
by Unit Owners other than the Developer. Except as provided for in the Act, not
later than the termination of any period of Developer control, the Unit Owners
shall elect a Board of at least three (3) members, at least a majority of whom
must be Unit Owners other than the Developer.
The Developer may make such use of the unsold Units and of the Common Elements
as may facilitate such completion and sale, including but not limited to
showing of the Property and the display of signs. The Developer may maintain
sales offices and models in any Unit of the Condominium or on Common Elements
in the Condominium without restriction as to the number, size, or location of
said sales offices and models. The Developer shall be permitted to relocate
said sales offices and models from one Unit location to another or from one
area of the Common Elements to another area of the Common Elements in the
Condominium. The Developer may maintain signs on the Common Elements
advertising the Condominium. The rights of the Developer as provided for in
this paragraph shall cease and terminate ten (10) years from the date of the
recording of this Declaration in the office of the Judge of Probate of Baldwin
County, Alabama.
7.11 Availability of Records. The Association shall keep financial records
sufficiently detailed to enable the Condominium Association to comply with the
Act. The Association shall make reasonably available in the county where the
Condominium is located for examination by Unit Owners, prospective purchasers,
first Mortgagees and insurers and/or guarantors of first mortgages of any Unit,
or their authorized agents, current copies of the Declaration, Bylaws, Rules
and Regulations and other books, records, financial statements and the most
recent annual financial statement of the Association. Reasonably available
shall mean available for inspection upon request, during normal business hours
or
<PAGE> 13
under reasonable circumstances. Any Eligible Mortgagee shall have the right to
have prepared at its expense an audited financial statement of the Association.
7.12 Reserve Fund and Working Capital Fund.
(a) Reserve Fund. The Association shall establish and maintain an
adequate reserve fund for the replacement of improvements to the Common
Elements which the Association is obligated to maintain. The fund shall be
maintained out of regular Assessments for Common Expenses.
(b) Working Capital Fund. The Association shall also have a
working capital fund to meet unforeseen expenditures or to purchase any
additional equipment or services. The Preconstruction Purchase and Escrow
Agreement for any Unit (in connection with the original sale of any Unit by the
Developer) shall require the Purchaser thereunder to pay to the Association at
closing a sum equal to a two month installment of Assessments as a
nonrefundable contribution to the initial working capital fund, which payment
shall not be considered as advance payments of regular Assessments. The working
capital fund shall be transferred to the Association for deposit into a
segregated account when control of the Association is transferred to the Unit
Owners. The Developer is prohibited from using working capital funds to defray
any of the Developer's expenses, reserve contributions, or construction costs
or to make up any budget deficits while the Developer is in control of the
Association.
(c) Reserve Funds Under Hotel Operating Agreement. The
Association may elect not to fund the reserve funds contemplated by paragraphs
(a) and (b) above if similar funds are provided for in any management agreement
governing the Hotel (such as the FF&E and Operating Cash Reserve Funds provided
for in the Hotel Operating and Rental Pool Agreement), in which case the terms
of the management agreement shall govern the such funds.
VIII. MAINTENANCE
8.1 Maintenance by the Condominium Association. The Association is
responsible for maintenance, repair, and replacement of the Common Elements,
the Units, and the contents thereof. The Association may delegate the day to
day responsibility for the maintenance, repair and replacement of the Common
Elements, the Units and the contents thereof to a manager. No Unit owner shall
maintain, repair, replace, change, alter his Unit or the contents thereof
(though the expense incurred by the Association or the Hotel Operator will be
included as a Common Expense or an expense of Hotel operation). The
Association, its delegates, agents, or employees may at all times enter into
any Unit for the purposes of this Article.
8.2 Appearance of the Units. The Association or the Hotel Operator shall
maintain the uniform appearance of the Units and the contents and shall
determine what that appearance shall be from time to time.
IX. INSURANCE
9.1 Purchase of Insurance. Commencing not later than the time of the first
conveyance of a Unit to a Person other than the Developer, the Association
shall maintain or shall cause the Hotel Operator to maintain, insurance upon
the Property to the extent reasonably available as provided for in the Act and
as follows.
9.2 Locations of Policies. The Association shall retain the original of all
insurance policies in a place of safe keeping such as a safe or a safety
deposit box.
<PAGE> 14
9.3 Copies to Mortgagees. One copy of each insurance policy and of all
endorsements thereto shall be furnished by the Condominium Association to any
first Mortgagee requesting a copy.
9.4 Authorization to do Business and Ratings. All policies of insurance
must be issued by companies specifically authorized by the laws of the State of
Alabama to transact such business. Any company issuing any such policy must
have a "B" general policyholder rating or a financial performance index of "6"
or better in the Best's Key Rating Guide, or an "A" or better rating from
Demotech, Inc.; provided, however, that policies issued by Lloyd's of London
will be acceptable and policies issued by a carrier not meeting the above
requirements are acceptable if the particular issues are covered by 100%
reinsurance with a company that does meet said requirements.
9.5 Coverage. The Association is required to maintain the following
insurance coverage:
(a) Property and Casualty. The Association must obtain, maintain,
and pay the premiums upon, as a Common Expense, the property insurance required
by the Act and as follows. The type of policy shall be a "master" or "blanket"
type policy of property insurance covering all of the Common Elements (except
land, foundation, excavation, and other items usually excluded from coverage)
including fixtures, furniture, and equipment, whether or not part of or
included within any Unit. All references herein to a "master" or "blanket" type
of policy of property insurance are intended to denote single entity
condominium insurance coverage. The policy shall be in an amount of not less
than one hundred percent (100%) of the insurable replacement cost of the
Property, exclusive of land, excavation, foundation, and other items normally
excluded from property policies. The policy shall include (i) an "Agreed Amount
Endorsement" or its equivalent, (ii) if available, an "Inflation Guard
Endorsement", (iii) a "Building Ordinance or Law Endorsement"; and (iv) steam
boiler and machine coverage endorsement if available for the Condominium's
central water heater. The property insurance shall provide, as a minimum
coverage and protection against:
(i) Loss or damage by fire and all other hazards that are
normally covered by the standard extended coverage
endorsement;
(ii) All other perils which are customarily covered with respect
to condominiums similar in construction shall be obtained so
as to meet the requirements of the Act; and,
(iii) All perils covered by the standard "all risk" endorsement,
unless the policy includes the "broad form" covered causes of
loss.
(b) Liability Insurance. The Association must obtain, maintain,
and pay the premiums upon, as a Common Expense, a comprehensive general
liability insurance policy, including medical payments insurance, as required
by the Act and covering all the Common Elements, commercial space owned or
leased by the Association, and public ways of the Condominium. Coverage limits
shall be in amounts generally required by private institutional mortgage
investors for projects similar in construction, location, and use. However,
such coverage shall be, if reasonably available, for at least five million
dollars ($5,000,000.00) for bodily injury, including deaths of persons and
property damage arising out of a single occurrence, and in no event less than
$1,000,000.00. Coverage under this policy shall include, if reasonably
available, without limitation, legal liability of the insureds for property
damage, bodily injuries and deaths of persons in connection with the operation,
maintenance or use of the Common Elements, and legal liability arising out of
lawsuits related to employees or contractors of the Association. The policy
shall also include, if reasonably available, coverage for protection against,
water damage liability and, if applicable, elevator collision and garage
keepers liability. If required by any first mortgage holder and, if reasonably
available, the policy shall include protection against such other risks as are
customarily
<PAGE> 15
covered with respect to condominiums similar in construction, location and use,
including, but not limited to, host liquor liability, employers' liability
insurance, contractual and all written contract insurance and comprehensive
automobile liability insurance. If such policy does not include "severability
of interests" the policy must include a specific endorsement that precludes the
insurer's denial of an owner's claim because of negligent acts of the
Association or other Unit Owners.
(c) Flood Insurance. If any part of the Property shall be deemed
to be in a special flood hazard area, as defined by the Federal Emergency
Management Agency or other governmental agency, the Association shall obtain,
maintain, and pay the premiums upon, as a Common Expense, a "master" or
"blanket" type of flood insurance policy. The policy shall cover the Common
Elements falling within the designated flood hazard area. The insurance shall
be in an amount deemed appropriate by the Association, but not less than an
amount equal to the lesser of:
(i) One hundred percent (100%) of the insurable value of the
Property located within the flood hazard area, including
fixtures, equipment and other personal property within any
Unit (but excluding land, foundations, excavations, and other
items usually excluded from such coverage); or
(ii) The maximum coverage available for the Property under the
National Flood Insurance Program. The policy shall be in a
form which meets the criterion set forth in the most current
guidelines issued on the subject by the federal government.
The deductible shall not exceed the lesser of $5,000.00 or one percent (1%) of
the policy's face amount, unless the Board of Directors determines that a
higher deductible is more commercially reasonable.
(d) Personnel Coverages. Should the Association employ personnel,
all coverages required by law, including workman's compensation, shall be
obtained so as to meet the requirements of the law.
(e) Fidelity Bonds. The Association shall obtain, maintain and
pay the premiums upon, as a Common Expense, a fidelity bond to protect against
loss of money by dishonest acts on the part of all officers, directors and
employees of the Association and all other persons handling, or responsible
for, funds of the Association or funds administered by the Association. Where a
management agent has the responsibility for handling or administering funds of
the Association, the management agent shall be required to maintain fidelity
bond coverage for its officers, employees and agents handling or responsible
for funds of, or administered on behalf of, the Association. The fidelity bond
shall name the Association as the obligee and shall not be less than the
estimated maximum of funds, including reserve funds, in the custody of the
Association or the management agent, as the case may be, at any given time
during the term of each bond. However, in no event may the aggregate amount of
such bonds be less than one hundred and fifty percent (150%) of the estimated
annual Common Expenses. The bonds shall contain waivers by the issuers of the
bonds of all defenses based upon the exclusion of persons serving without
compensation from the definition of "employees," or similar terms or
expressions. The premiums on all bonds required herein to be maintained by the
management agent shall be paid by the management agent. The bond shall provide
that the Association and any first Mortgagee shall be given ten (10) days
written notice before the policy/bond may be canceled or modified for any
reason.
(f) Business Interruption Insurance. The Association shall obtain,
maintain and pay the premiums upon, as a Common Expense, a business
interruption insurance policy in reasonable amounts as determined by the Board.
(g) Other Insurance. The Association shall obtain other insurance
required by the Act and
<PAGE> 16
shall have authority to obtain such other insurance as it deems desirable, in
such amounts, from such sources and in such forms as it deems desirable. The,
premiums for such insurance shall be a Common Expense.
If the insurance described above which is required to be maintained is not
reasonably available, the Association promptly shall give notice of that fact
to be hand delivered or sent prepaid by United States Mail to all Unit Owners.
9.6 Individual Insurance. Nothing contained herein shall be construed to
prevent a Unit Owner from obtaining insurance for his own benefit.
9.7 Provisions. Insurance coverage must comply with the requirements of the
Act, this Declaration, and the applicable requirements (even if such
requirements are in addition to those required in the Act or this Declaration)
of the Federal Home Loan Mortgage Corporation ("FHLMC") and The Federal
National Mortgage Association ("FNMA") as they apply to condominium loans, and
shall in substance and effect:
(a) Provide that the policy shall be primary, even if the Unit
Owner has other insurance that covers that same loss, and further provide that
the liability of the insurer thereunder shall not be affected by, and that the
insurer shall not claim any right of set-off, counterclaim, apportionment,
proration or contribution by reason of any other insurance obtained by or for
any Unit Owner.
(b) Contain no provision relieving the insurer from liability for
a loss occurring because the hazard to such Building is increased, whether or
not within the knowledge or control of the Association, or because of any
breach of warranty or condition or any other act or neglect by the Association
or any Unit owner or any other Persons under either of them.
(c) Provide that such policy may not be canceled or substantially
modified and the insurer may not refuse to renew said policy (whether or not
requested by the Association) except by the insurer giving at least thirty (30)
days prior written notice thereof to the Association, the Unit Owner, each
holder of a first mortgage on an individual Unit, and every other Person in
interest who shall have requested such notice of the insurer.
(d) Contain a waiver by the insurer of any right of subrogation
to any right of the Association, or either against the Unit Owner or lessee of
any Unit.
(e) Contain a standard mortgagee clause which, among any other
provisions included in a standard mortgagee clause, shall:
(i) Provide that any reference to a Mortgagee in such policy
shall mean and include all holders of mortgages of any Unit,
whether or not named herein; and
(ii) Provide that such insurance as to the interest of any
Mortgagee shall not be invalidated by any act or neglect of
the Association or Unit Owners or any Persons under any of
them; and
(iii) Waive any provisions invalidating such mortgagee clause by
reason of the failure of the Mortgagee to notify the insurer
of any hazardous use or conveyance, any requirement that the
Mortgagee pay any premium thereon, and contribution clause.
(f) Provide that the insurance will not be prejudiced by any acts
or omissions of Unit Owners.
<PAGE> 17
(g) Provide that any Insurance Trust Agreement will be recognized.
9.8 Liabilities and Responsibilities of Unit Owner. A Hotel Guest Unit
Owner shall be liable for any claim, damage or judgment entered as a result of
the use or operation of his Unit caused by his conduct or the conduct of his
licensees or invitees (not including guests booked by the Hotel) and for any
damage to Common Elements caused by his conduct or the conduct of his licensees
or invitees.
9.9 Insurance Premiums. Insurance premiums maintained by the Association
shall be paid by the Association as a Common Expense. Should the Association
fail to pay such insurance premiums when due, or should the Association fail to
comply with other insurance requirements of a Mortgagee, the Mortgagee shall
have the right, at its option, to order insurance policies and to advance such
sums as are required to maintain or procure such insurance. To the extent of
any money so advanced, the Mortgagee shall be subrogated to the Assessment and
the lien rights of the Association as against the individual Unit Owners for
the payment of such item of Common Expense.
9.10 Insurance Trustee; Shares of Proceeds. All insurance policies
purchased by the Association shall be for the benefit of the Association and
the Unit Owners and their Mortgagees (when appropriate, the policies may name
the FNMA as Mortgagee or the servicer of the mortgage, and when the servicer is
named as the Mortgagee, its name should be followed by the phrase "its
successors and assigns") as their interest may appear, and shall provide that
all proceeds covering property losses shall be paid to the Association, as
Insurance Trustee for each of the Unit Owners in the percentages as established
by the Declaration, which said Association, for the purpose of these
provisions, is herein referred to as the Insurance Trustee. The duty of the
Insurance Trustee shall be to receive such proceeds as are paid and hold the
same in trust for the purposes elsewhere stated herein and for the benefit of
the Unit Owners and their Mortgagees. The Insurance Trustee shall have the
power (and each Unit Owner hereby appoints the Trustee for this purpose as
attorney-in-fact) to adjust all claims arising under insurance policies
purchased by the Association; to bring suit thereon in its name and/or in the
name of other insured; to deliver releases on payment of claims; to compromise
and settle such claims; and otherwise to exercise all the rights, powers, and
privileges of the Association and each Unit Owner and any other holder of an
insured interest in the Condominium Property under such insurance policies,
however, the actions of the Insurance Trustee shall be subject to the approval
of any first Mortgagee if the claim shall involve more than one Unit, and if
only one Unit is involved, such actions shall be subject to approval of any
first Mortgagee holding a mortgage and encumbering such Unit.
9.11 Shares of Proceeds. The Association as Insurance Trustee shall receive
such insurance proceeds as are paid to it and shall hold the same in trust for
the purposes stated herein and for the benefit of the Unit Owners and their
Mortgagees in the following shares:
(a) Common Elements. An undivided share of the proceeds on
account of damage to Common Elements shall be held for each Unit Owner, with
such share's portion of the total proceeds being the same percentage as the
share of the Common Element appurtenant to his Unit.
(b) Units and Limited Common Elements. Except as provided
elsewhere in this Declaration,
(i) When the Property is to be restored, the proceeds shall be
held for the Unit Owners of damaged Units and damaged Limited
Common Elements, with the share of each in the total proceeds
being in the proportion that the cost of repairing the damage
suffered by such Unit Owner bears to the total cost of
repair, which cost shall be determined by the Board.
<PAGE> 18
(ii) When the Property is not to be restored, the proceeds shall
he held for the Unit Owners in the undivided shares that are
the same as their respective shares in the Common Elements.
(c) Mortgagees. In the event a Mortgagee endorsement has been
issued with respect to a Unit, the share of the Unit Owner of that Unit shall
be held in trust for the Mortgagee and the Unit owner as their interest may
appear; provided, however, that no Mortgagee will have any right to determine
or participate in the determination of whether or not any damaged Property
shall be reconstructed or repaired except as may be specifically provided to
the contrary elsewhere in this Declaration.
9.12 Distribution of Proceeds. Proceeds of insurance policies received by
the Association as Insurance Trustee shall be distributed to or for the benefit
of the beneficial Unit Owners:
(a) Reconstruction or Repair. If the damage for which the
proceeds are paid is to be repaired or reconstructed, the remaining proceeds
shall be paid to defray the cost thereof. Any proceeds remaining after
defraying such costs shall be distributed to the beneficial Unit Owners, with
remittances to Unit Owners and Mortgagees being payable jointly to them. This
is a covenant for the benefit of any Mortgagee of a Unit and may be enforced by
any such Mortgagee.
(b) Failure to Reconstruct or Repair. If it is determined that the
damage for which the proceeds are paid shall not be reconstructed or repaired,
the remaining proceeds shall be distributed to the beneficial Unit Owner with
remittances to Unit Owners and their mortgage being payable jointly to them.
This is a covenant for the benefit of any Mortgagee of a Unit and may be
enforced by any such Mortgagee.
9.13 General. To the extent that any insurance program specifications
(including limits of liability, endorsements, and deductible maximums) required
under this Article 9 are not customarily met by prudent owners associations of
comparable condominiums located on the Alabama Gulf Coast, are unduly expensive
to meet, or require coverage which is not reasonably available, then less
stringent insurance program specifications shall be permitted hereunder so long
as the same comply with (a) the Act and, (b) if any mortgage then encumbering
any Unit is insured by either the FNMA or the FHLMC, with the requirements of
said FNMA or FHLMC as the same pertain to said mortgage.
X. RECONSTRUCTION OR REPAIR AFTER CASUALTY
10.1 Determination to Reconstruct or Repair. Any portion of the Condominium
for which insurance is required under this Declaration which is damaged or
destroyed must be repaired or replaced promptly by the Association unless:
(a) The Condominium is terminated in accordance with the Act;
(b) Repair or replacement would be illegal under any state or
local statute or ordinance governing health or safety; or
(c) Eighty percent (80%) of the Unit Owners, including every Unit
owner of a Unit or assigned Limited Common Element which will not be rebuilt,
vote not to rebuild. The cost of repair or replacement of a Common Element in
excess of insurance proceeds in reserves is a Common Expense as provided in
this Declaration.
10.2 Plans. Any reconstruction or repair must be substantially in
accordance with the Act and in
<PAGE> 19
accordance with the Plans for the original improvements or as the Property was
last constructed; or if not, then according to Plans approved by the Board and
by one hundred percent (100%) of the Unit Owners.
10.3 Responsibility. The work to effectuate the repairs, replacements,
reconstruction, etc. shall be the responsibility of the Association.
10.4 Estimate of Cost. Immediately after a casualty causing damage to the
Property for which the Association has the responsibility of maintenance and
repair, the Association shall obtain reliable and detailed estimates of the
cost to rebuild or repair.
10.5 Assessments. If the proceeds of insurance are not sufficient to defray
the estimated costs of reconstruction and repair of the Unit by the
Association, Assessments shall be made against the Unit Owners who own the
damaged Property and against all Unit Owners in the case of damage to Common
Elements in sufficient amounts to provide funds to pay the estimated costs. If
at any time during reconstruction and repair, or upon completion of
reconstruction and repair, the funds for the payment of the costs thereof are
insufficient, Assessments shall be made against the Unit Owners who own the
damaged Unit and against all Unit Owners in the case of damage to Common
Elements in sufficient amounts to provide funds for the payment of such costs.
Such Assessments against Unit Owners for reconstruction and/or repair of damage
to Units shall be in proportion to the cost of reconstruction and repair of
their respective Units. Such Assessments for reconstruction and/or repair of
damage to Common Elements shall be in proportion to the Unit Owner's share in
the Common Elements. Assessments for reconstruction and repair may be
collected, and the collection enforced, in the same manner as provided for
Assessments elsewhere herein.
10.6 Construction Funds. The funds for payment of costs of reconstruction
and repair after casualty for which the Association is responsible, which shall
consist of proceeds of insurance held by the Association as Insurance Trustee
and funds collected by the Association from Assessment against Unit Owners on
account of such casualty, shall constitute a construction fund which shall be
disbursed in payment of the cost of reconstruction and repair in the order and
in the manner provided by the Board.
XI. EMINENT DOMAIN
11.1 Proceeds. The taking of a portion of a Unit or of the Common Elements
by eminent domain shall be deemed to be a casualty and the determination as to
whether the Condominium will be reconstructed or repaired or continued after
condemnation will be determined in the manner provided for in the Act and under
Article 10 of this Declaration and the awards for such taking shall be deemed
proceeds from insurance on account of the casualty and shall be deposited with
the Association as Insurance Trustee. Even though the awards may be payable to
a Unit Owner, the Unit Owner shall deposit the awards with the Association as
Insurance Trustee; and in the event of failure to do so, in the discretion of
the Board of Directors of the Association an Assessment shall be made against a
defaulting Unit Owner in the amount of his award, or the amount of such award
shall be set off against the sums hereafter made payable to such Unit Owner.
11.2 Disbursement of Funds. If the Condominium is terminated after
condemnation, the proceeds of the condemnation awards will be deemed to be
insurance proceeds and shall be owned and distributed in the manner provided in
this Declaration for the distribution of insurance proceeds if the Condominium
is terminated after damage to the Common Elements. If the Condominium is not
terminated after condemnation, the size of the Property will be reduced and the
Property damaged by the taking will be made usable in the manner provided by
the Act and as provided below. The proceeds of such award shall be used for
these purposes and shall be disbursed in the manner provided for disbursement
of funds by
<PAGE> 20
the Association after damage to the Common Elements.
11.3 Taking of Common Elements. Awards for the taking of Common Elements
shall be used to make the remaining portion of the Common Elements usable in
the manner approved by the Board of Directors; provided that if the cost of the
work shall exceed the balance of the funds from the awards for the taking, the
work shall be approved in the manner required elsewhere in this Declaration for
further improvement of the Common Elements. The balance of the awards for the
taking of the Common Elements, if any, shall be distributed to the Unit Owners
in the shares in which they own the Common Elements, after adjustment of these
shares on account of the condemnation, except that if a Unit is encumbered by a
first mortgage, the distribution shall be paid jointly to the Unit Owner and
the first Mortgagee of the Unit.
11.4 Authority of Insurance Trustee. The Insurance Trustee shall have the
power (and each Unit Owner hereby appoints such trustee for this purpose as
attorney-in-fact) to adjust all claims for an eminent domain taking; to bring
suit in connection therewith; to deliver releases on payment of claims; to
compromise and settle such claims; and otherwise to exercise all the rights,
powers and privileges of the Association and each Unit Owner and any other
holder of a taken interest in the Condominium Property.
11.5 Conflict with Act. If there is any conflict with the provisions of this
article and the Act, the provisions of the Act shall control.
An owner may not individually lease his unit or directly or indirectly
charge rent or any form of consideration for the use of the owner's unit except
in accordance with the terms of the Hotel Operating Agreement. The rights of an
owner to make use of the common elements at the hotel are limited to those
times when the owner has the right to occupy his unit in accordance with the
Hotel Operating Agreement. The hotel operator is authorized to designate
certain areas of the hotel for the exclusive use of the hotel operator and the
owners may not interfere with that exclusive use of the hotel operator and the
owners may not interfere with that exclusive use. Except for signs incidental
to the operation of the hotel, and any other advertising signs that Declarant
posts in connection with the development of the hotel, no signs are permitted
on the extension of any unit or any other portion of the hotel without the
prior written approval of the Board of Directors.
XII. USE RESTRICTIONS/HOTEL OPERATION
12.1 The use of the Condominium Property shall be in accordance with the
provisions of this Declaration and with the following provisions so long as the
Condominium exists.
(a) Each Hotel Guest Unit shall be dedicated entirely to the
control of a single hotel management company operating from the Hotel
Management Unit. No owner shall have any right to use, or control use of, such
owner's Unit, except that a Hotel Guest Unit may be used by the owner thereof,
without the payment of Hotel rental, from time to time when not being rented to
a member of the general public but such usage shall not exceed fourteen (14)
days in any calendar year. Except as provided above related to limited personal
use, use of the Hotel Guest Units is limited to sleeping accommodations (and
incidental enjoyment) supplied to transient guests through the Hotel Operator.
(b) Initially, an affiliate of Developer will be the Hotel
Operator and operate from the Hotel Management Unit, which initially will be
owned by Developer, the initial management company, or another affiliate of
Developer. The initial Hotel Operating and Rental Pool Agreement ("the Hotel
Operating Agreement") is attached to this Declaration as Exhibit "E". This
Agreement is between Innisfree Hotels, Inc. (the initial Hotel Operator) and
each Hotel Guest Unit Owner. Therefore, each Hotel Guest Unit will be subject
to the Hotel Operating Agreement and, therefore, part of the rental pool. The
<PAGE> 21
circumstances under which any owner may use his Unit and certain use
restriction are set forth in Schedule B to the Hotel Operating Agreement. The
term of the Hotel Operating Agreement is fifteen (15) years, subject to certain
limited rights specified in the Agreement for termination and/or renewal. If
the Hotel Operating Agreement is ever terminated or expires and is not renewed,
the Association shall make advance arrangements to ensure that a successor
management company assumes property management and Hotel operation. If such
successor and the then owner of the Hotel Management Unit do not agree to terms
upon which the successor may purchase the Hotel Management Unit, the then owner
shall make the Hotel Management Unit available to the successor management
company on a reasonable rental basis. The Association is charged with the
responsibility to ensure that the Condominium is always operated as a hotel
from the Hotel Management Unit.
(c) The Hotel Operator shall furnish room cleaning, linen
supplies, telephone service, Building and Property maintenance, and maintenance
of all Hotel Guest Units, including maintenance and replacement of furnishings.
The Hotel Operator shall have exclusive control of the rental of the Hotel
Guest Units for sleeping accommodations for transient guests.
(d) Under the Hotel Operating Agreement, the Hotel Operator will
be paid a Base Fee of $7,000.00 per month for the twelve (12) month period
following the opening of the Hotel and 5% of gross revenues thereafter payable
in monthly installments. Additionally, the Hotel Operator shall have the
opportunity to earn incentive Fees. All of the costs incurred by the Hotel
Operator will be reimbursed to the operator by the owners, if revenues are
insufficient to cover costs; provided, however, the Hotel Operator will be
required to cover operating shortfalls during the first twelve (12) months of
operation (such shortfalls do not include payments by owners to their lenders).
Additionally, each Unit will be charged a monthly Accounting Fee in the amount
of $9.00 per month. For each day that a Unit is in the rental pool (meaning any
day other than a day, not to exceed fourteen (14) days per calendar year,
during which the owner has reserved his Unit for personal use), the owner of
that Unit will be entitled to share in the gross revenue from the operation of
the Hotel. The amount distributable to an owner each month, if any, will be
based on such Unit Owner's share of such gross revenues less the owner's share
of expenses, reserve replacements, assessments, and any other amounts payable
under the Hotel Operating Agreement.
(e) The Association shall require, by contract, that the hotel
operator ensure that all furnishings of the Hotel Guest Units be standardized.
The initial furniture package is included with the purchase of a Unit from the
Developer. Under no circumstances will any Hotel Guest Unit be allowed to have
washers or dryers therein.
(f) Maintenance expenses, including repairs and replacements of
furnishings, of any Hotel Guest Unit shall be deducted from rental income, and
if rental income is not sufficient during any month to cover such expenses,
then the Hotel management company may bill the Unit Owners and shall have a
lien for such amount, the same as if such amount were a Common Expense
Assessment owing to the Association.
(g) No Unit Owner shall alter the appearance of such owner's Hotel
Guest Unit or do any work therein or thereto or take any steps that tend to
give any personal identification to the Unit or distinguish the Unit or its
furnishings, decor, etc. from any other Unit. Without limiting the foregoing,
no owner shall store or leave any personal belongings in such Unit at any time
that the Unit is not being used or occupied by such owner, and no Unit shall
contain a cabinet, safe, closet, etc. that may be locked for the benefit of an
owner (this shall not prohibit the provision of locking cabinets, safes,
closets, etc. in connection with which the key(s) is made available to any
member of the general public who is renting the room).
<PAGE> 22
(h) The Association may, from time to time, adopt such rules and
regulations (and delegate such authority from time to time to the Hotel
management company) to promote the orderly and efficient operation of the
Hotel.
(i) The Hotel Operating Agreement further provides that prior to
any sale of any Unit by an owner, the owner must provide the prospective
purchaser with a copy of the Hotel Operating Agreement and must notify the
prospective purchaser of any proposed bookings of the Unit by the selling owner
for use by the selling owner. Additionally, the purchaser must, as a condition
of the purchase, ratify the Hotel Operating agreement, appoint the Hotel
Operator as its exclusive agent for the management and rental of the Hotel and
the Unit, and expressly assume the obligations of an owner pursuant to a form
acceptable to the Hotel Operator. Further, due to the sale of the Unit being
registered as a security with the Securities and Exchange Commission, there are
other restrictions upon resale.
12.2 No Restrictions on Mortgaging Units. Anything construed in any of the
Documents to the contrary, there shall be no restrictions on the right of a
Unit Owner to mortgage his Unit.
XIII. AMENDMENT
13.1 This Declaration, the Articles and Bylaws may be amended only by the
affirmative vote or agreement of the Unit Owners of at least sixty-seven
percent (67%) of the Units. Additionally, material changes to these Condominium
Documents shall require the approval of Eligible Mortgagees who represent at
least fifty-one percent (51%) of the Units subject to mortgages held by
Eligible Mortgages. A change to any of the provisions governing the following
would be considered as material:
voting rights;
increases in Assessments that raise the previously assessed
amount by more than 25%, assessment liens, or the priority of
assessment liens;
reductions in reserves for maintenance, repair, and
replacement of Common Elements;
responsibility for maintenance and repairs;
reallocation of interests in the Common Elements or Limited
Common Elements, or rights to their use;
redefinition of any Unit boundaries;
convertability of Units into Common Elements or vice versa;
expansion or contraction of the Development, or the addition,
annexation, or withdrawal of Property to or from the
Development;
hazard or fidelity insurance requirements;
imposition of any restrictions on the leasing of Units;
imposition of any restrictions on a Unit Owner's right to
sell or transfer his or her Unit;
<PAGE> 23
restoration or repair of the Development (after damage or
partial condemnation) in a manner other than that specified
in the Condominium Documents; or
any provisions that expressly benefit Mortgagees, insurers,
or guarantors.
Additionally, all amendments must be made in accordance with the provisions of
the Act.
NOTWITHSTANDING ANY PROVISION OF ANY OF THE CONDOMINIUM DOCUMENTS, NO AMENDMENT
SHALL BE VALID WITHOUT THE WRITTEN CONSENT OF THE CITY OF GULF SHORES, WHICH
CONSENT MAY BE REFUSED IF THE AMENDMENT PURPORTS TO RELIEVE THE CONDOMINIUM
PROPERTY OF ANY RESTRICTION IMPOSED TO ENSURE THAT THE PROPERTY IS OPERATED AS
A BONA-FIDE HOTEL.
XIV. PURCHASE OF CONDOMINIUM UNIT BY ASSOCIATION
14.1 Decision. The decision of the Association to purchase a Unit shall be
made by the Board without the approval of the Members except as provided in
this Article.
14.2 Limitation. If at any time the Association is already the Unit Owner
of or has agreed to purchase one or more Units, it may not purchase any
additional Units without the prior written approval of Members holding
seventy-five percent (75%) of the votes of those Members eligible to vote
thereon, except as provided in this Article. A Member whose Unit is the subject
matter of the proposed purchase shall be ineligible to vote thereon.
Notwithstanding the foregoing, however, the foregoing limitations shall not
apply to Units either to be purchased at public sale resulting from a
foreclosure of the Association's lien for delinquent Assessments where the bid
of the Association does not exceed the amount found due the Association, or to
be acquired by the Association in lieu of foreclosure of such lien if the
consideration therefor does not exceed the cancellation of such lien. In any
event, the Board or a designee thereof, acting on behalf of the Association,
may only purchase a Unit in accordance with this Article, or as the result of a
sale pursuant to the foreclosure of:
(i) A lien on the Unit for unpaid taxes;
(ii) a lien of a mortgage;
(iii) the lien for unpaid Assessments;
(iv) or any other judgment lien or lien attaching to such Unit by
operation of law.
XV. NOTICE OF LIEN OR SUIT
15.1 Notice of Lien. A Unit Owner shall give notice in writing to the
Secretary of the Association of every lien on his Unit, other then liens for
first mortgages, current taxes, and special Assessments, within five (5) days
after he receives notice of the attaching of the lien.
15.2 Notice of Suit. A Unit Owner shall give notice in writing to the
Secretary of the Association of every suit or other proceeding that may
directly affect the title to his Unit, with such notice to be given within five
(5) days after the Unit owner obtains knowledge thereof.
<PAGE> 24
15.3 Failure to Comply. Failure to comply with this section will have no
affect the validity of any judicial proceeding.
XVI. RULES AND REGULATIONS
16.1 Compliance. Each Unit Owner and the Association shall be governed by
and shall comply with the terms of the Condominium Documents and the Rules and
Regulations applicable to the Property. Ownership of a Unit subjects the Unit
Owner to compliance with provisions of this Declaration, the Articles, the
Bylaws, the Rules and Regulations of the Association, and any contracts to
which the Association is a party, as well as to any amendments to any of the
foregoing. Failure of the Unit Owner to comply therewith shall entitle the
Association or other Unit Owners to an action for damages or injunctive relief,
or both, in addition to other remedies provided in the Condominium Documents
and the Act.
16.2 Enforcement. The Association, through the Board, is hereby empowered to
enforce the Condominium Documents and all Rules and Regulations of the
Association by such means as are provided by the Act, including the imposition
of reasonable fines (after reasonable notice and opportunity to be heard) from
time to time as set forth in the Bylaws. Unit Owners shall have the right to
enforce the provisions of the Condominium Documents and decisions of the
Association against the Association, and, if aggrieved, against other Unit
Owners.
16.3 No Waiver of Rights. The failure of the Association or any Unit Owner
to enforce any covenant, restriction, or other provision of the Act, the
Condominium Documents, or any Rules and Regulations adopted pursuant thereto
shall not constitute a waiver of the right to do so.
XVII. GENERAL PROVISIONS PERTAINING TO MORTGAGES
17.1 Lender's Notices. Upon written request to the Association, identifying
the name and address of the Mortgagee, insurer or guarantor and the Unit number
or address, any Mortgagee, insurer, or guarantor will be entitled to timely
written notice of:
(a) Any condemnation or casualty loss that affects either a
material portion of the Development or the Unit securing its mortgage.
(b) Any 60-day delinquency in the payment of Assessments or
charges owed by the Unit Owner of any Unit on which it holds the mortgage.
(c) A lapse, cancellation, or material modification of any
insurance policy or fidelity bond maintained by the Association.
(d) Any proposed action that requires the consent of a specified
percentage of mortgage holders.
17.2 Blanket Mortgages. The entire Property, or some or all of the Units
included therein, may be subjected to a single or blanket mortgage constituting
a first lien thereon created by a recordable instrument executed by all of the
Unit Owners of the Property or Units covered thereby. Any Unit included under
the lien of such mortgage may be sold or otherwise conveyed or transferred
subject thereto. Any such mortgage shall provide a method whereby any Unit
Owner may obtain a release of his Unit from the lien of such mortgage and a
satisfaction and discharge in recordable form upon payment to the holder of the
mortgage of a sum equal to the reasonable proportionate share attributable to
his Unit of the
<PAGE> 25
then outstanding balance of unpaid principal and accrued interest, and any
other charges then due and unpaid. The proportionate share of the mortgage
required to be paid for release shall be determined by provisions pertaining
thereto stated in the mortgage, or, if the mortgage contains no such
provisions, then according to the proportionate share of the Common Elements
attributable to such Unit.
XVIII. TERMINATION
18.1 The termination of the Condominium may be effected in accordance with
the provisions of the Act and by agreement of (i) Unit Owners of Units to which
at least ninety percent (90%) of the votes in the Association are allocated and
(ii) first Mortgagees who represent at least sixty-seven percent (67%) of the
votes of the Units that are subject to mortgages held by Eligible Mortgagees.
The agreement shall be evidenced by a written instrument executed in the manner
required for a deed and recorded in the public records of Baldwin County,
Alabama. After termination of the Condominium, the Unit Owners shall own the
Property and all assets of the Association as tenants in common in undivided
shares.
UNDER THE APPLICABLE PROVISIONS OF THE ZONING ORDINANCE OF THE CITY OF GULF
SHORES, THE REAL PROPERTY ON WHICH THE CONDOMINIUM IS TO BE LOCATED IS ZONED
BCR, WHICH ALLOWS GENERALLY THE REAL PROPERTY TO BE USED AS A HOTEL BUT NOT AS
A "TRADITIONAL" CONDOMINIUM. THE CITY HAS APPROVED THE CONDOMINIUM ON THE
CONDITION THAT THE CONDOMINIUM IS OPERATED AS A HOTEL. THEREFORE, THIS
DECLARATION OF CONDOMINIUM CONTAINS PROVISIONS THAT ENSURE THAT THE CONDOMINIUM
IS OPERATED AS A HOTEL. THESE PROVISIONS INCLUDE THE REQUIREMENT THAT EVERY
HOTEL GUEST UNIT (MEANING EVERY UNIT OTHER THAN THE HOTEL MANAGEMENT UNIT), BE
DEDICATED ENTIRELY TO THE CONTROL OF A SINGLE HOTEL MANAGEMENT COMPANY
OPERATING FROM THE HOTEL MANAGEMENT UNIT.
OPERATION OF THE PROPERTY OR ANY PART THEREOF IN VIOLATION OF THE
ZONING ORDINANCE OF THE CITY OF GULF SHORES SHALL BE GROUNDS FOR PROCEEDINGS
FOR REVOCATION OF THE CERTIFICATE OF OCCUPANCY ISSUED FOR THE PROPERTY AND FOR
SUCH OTHER LEGAL ENFORCEMENT ACTIONS AS PROVIDED BY LAW.
XIX. COVENANT AGAINST PARTITION
19.1 There shall be no judicial or other partition of the Property or any
part thereof, nor shall Developer or any Person acquiring any interest in the
Property or any part thereof seek any such partition unless the Property has
been removed from the provisions of the Act.
XX. MISCELLANEOUS
20.1 Intent. It is the intent of the Developer to create a condominium
pursuant to the Act. In the event that the Condominium created by this
Declaration shall fail in any respect to comply with the Act, then the common
law as the same exists on the filing date of this Declaration shall control,
and the Condominium hereby created shall be governed in accordance with the
laws of the State of Alabama, the Bylaws, the Articles, and all other
instruments and exhibits attached to or made a part of this Declaration.
Further, this Declaration and the other Condominium Documents shall be
construed to ensure compliance
<PAGE> 26
with the Zoning Ordinance of the City of Gulf Shores.
20.2 Covenants, Conditions and Restrictions. All provisions of the
Condominium Documents shall, to the extent applicable and unless otherwise
expressly therein provided to the contrary, be perpetual and be construed to be
covenants running with the land and with every part thereof and interest
therein; and all of the provisions of the Condominium Documents shall be
binding on and inure to the benefit of any Unit Owner of all or any part
thereof, or interest therein, and his heirs, executors, administrators, legal
representative, successors, and assigns, but said provisions are not intended
to create nor shall they be construed as creating any rights in or for the
benefit of the general public. All Unit Owners and Occupants shall be subject
to and shall comply with the provisions of the Condominium Documents and any
Rules and Regulations promulgated thereunder.
20.3 Severability. The invalidity in whole or in part of any covenant or
restriction or any paragraph, subparagraph, sentence, clause, phrase, word, or
other provision of this Declaration, the Articles, the Bylaws, any Rules and
Regulations of the Association promulgated pursuant thereto, and any exhibits
attached hereto, as the same may be amended from time to time, or the Act, or
the invalidity in whole or in part of the application of any such covenant,
restriction, paragraph, subparagraph, sentence, clause, phrase, word or other
provision shall not affect the remaining portion thereof.
20.4 Notice. The following provisions shall govern the construction of the
Condominium Documents, except as may be specifically provided to the contrary
herein: All notices required or desired under the Condominium Documents to be
sent to the Association shall be sent certified mail, return receipt requested,
to the Secretary of the Association, at such address as the Association may
designate from time to time by notice in writing to all Unit Owners. Except as
provided specifically to the contrary in the Act, all notices to any Unit Owner
shall be delivered in person or sent by first-class mail to the address of such
Unit Owner at the Condominium, or to such other address as he may have
designated from time to time, in a writing to the Association. Proof of such
mailing or personal delivery to a Unit Owner by the Association may be provided
by the affidavit of the Person or post office certificate of mailing. All
notices to the Association or a Unit Owner shall be deemed to have been given
when delivered to the addressee in person or by a post office certificate of
mailing.
20.5 Governing Law. Should any dispute or litigation arising between any of
the parties whose rights or duties are affected or determined by the
Condominium Documents or any Rules and Regulations adopted pursuant to such
documents, such dispute or litigation shall be governed by the laws of the
State of Alabama.
20.6 Waiver. No provisions contained in the Condominium Documents shall be
deemed to have been waived by reason of any failure to enforce the same,
irrespective of the number of violations or breaches thereof which may occur.
20.7 Ratification. Each Unit Owner, by reason of having acquired ownership
of his Unit, whether by purchase, gift, operation of law, or otherwise, shall
be deemed to have acknowledged and agreed that all the provisions of the
Condominium Documents and any Rules and Regulations promulgated thereunder are
fair and reasonable in all material respects.
20.8 Captions. The captions used in the Condominium Documents are inserted
solely as a matter of convenience and reference and shall not be relied on
and/or used in construing the effect or meaning of any of the text of the
Condominium Documents.
20.9 Costs and Attorney's Fees. In any proceeding arising because of an
alleged default by a Unit
<PAGE> 27
Owner, the prevailing party shall be entitled to recover the costs of the
proceedings and such reasonable attorney's fees as may be awarded by the court.
IN WITNESS WHEREOF, Southwind Development Company, L.L.C., an Alabama limited
liability company, has caused this instrument to be executed on this the ____
day of _________, 1999.
SOUTHWIND DEVELOPMENT COMPANY, L.L.C.,
an Alabama limited liability company
By: SOUTHWIND DEVELOPMENT
MANAGEMENT COMPANY, INC.
Its Manager
By:
-----------------------------
Its
-----------------------------
<PAGE> 28
STATE OF ___________________ )
COUNTY OF __________________ )
I, the undersigned authority, a Notary Public in and for said County
in said State, hereby certify that _______________ as ____________ of SOUTHWIND
DEVELOPMENT MANAGEMENT COMPANY, INC., Manager of SOUTHWIND DEVELOPMENT COMPANY,
L.L.C., an Alabama limited liability company, is signed to the foregoing
instrument and who is known to me, acknowledged before me on this day that,
being informed of the contents of the instrument, he, as such officer and with
full authority, executed the same voluntarily for and as the act of said
company.
GIVEN under my hand this the _____ day of _____________, 1999.
----------------------------------------
NOTARY PUBLIC
My Commission Expires:
------------------
THIS INSTRUMENT PREPARED BY:
Richard E. Davis, Esquire
Davis & Fields, P.C.
Post Office Box 2925
Daphne, Alabama 36526
(334) 621-1555
