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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994 Commission file number 0-9032
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________________________ to __________________
SONESTA INTERNATIONAL HOTELS CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-5648107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Clarendon Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 421-5400
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock NONE
$ .80 par value
Securities registered pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229,405 of this chapter) is not contained herein
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by referenced in Part III of this
Form 10-K or any amendment to this Form 10-K [X]
The aggregate market value of the common stock held by non-affiliates of
the registrant as of the close of business on March 21, 1995 was $6,321,869.
The number of shares outstanding of the registrant's common stock as of the
close of business on March 21, 1995 was: 2,075,281.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the annual report to shareholders for the year ended
December 31, 1994 are incorporated by reference into Parts I, II and IV.
2. Portions of the proxy statement for the 1995 annual meeting of
stockholders are incorporated by reference into Part III.
An Index to Exhibits appears on pages 11 and 12 of this Form 10-K.
--------------------------------------------------------------------------------
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PART I
ITEM 1. BUSINESS
(a) General Development of Business: The Company is engaged in the
operation of hotels in Boston (Cambridge), Massachusetts and New
Orleans, Louisiana. It also operates, under management agreements,
hotels in Southampton, Bermuda; Curacao, Netherlands Antilles; Key
Biscayne, Florida; and Cairo, Hurghada, El Gouna, Port Said and Sharm
el Sheikh, Egypt; and two Nile River cruise vessels. The Company has
paid $2 million for a 22% ownership interest in the hotel and casino
it operates in Curacao, Netherlands Antilles under a management
contract. The Company has entered into a management agreement to
operate a new hotel being created in New Orleans, Louisiana, which is
scheduled to open in April 1995. The Company also licenses the use of
the Sonesta name to four operating hotels. The Company had a fifty
percent ownership and operating interest in a casino on the island of
Aruba and operated a hotel adjacent to the casino under a management
contract; in early 1992, the Company sold its casino interests to its
joint venture partner and converted its management contract to a
license arrangement.
(b) Financial Information about Industry Segments: The Company is engaged
principally in one business segment -- hotel operations -- which
represents over 90% of consolidated revenue. The Company's fifty
percent ownership interest in a casino in Aruba, described in Item
1.(a), did not constitute involvement in another industry segment for
purposes of this Form 10-K. The Financial Data and Consolidated
Statements of Operations and Retained Earnings, pages 4 and 5 of the
1994 Annual Report to Shareholders, respectively, which is
incorporated herein.
(c) Narrative Description of Business: The Company's business is to a
great extent dependent upon a high level of economic activity.
The hotel business is highly competitive. The facilities of
competitors are often affiliated with national or regional chains
having more room accommodations and greater financial resources than
the Company. The Company follows the practice of refurnishing and
redecorating the hotels which it operates in order to
keep the properties attractive and competitive with new
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ITEM 1. BUSINESS
(c) (cont'd)
hotel properties, and this requires the Company to make substantial
capital expenditures. During the two years ended December 31, 1994,
the Company made capital expenditures for its hotels totalling
approximately $3,700,000.
The Company endeavors to create individual and distinctive features
for each hotel property while utilizing common corporate
identification in order to obtain the benefits of chain operation.
The Company is using the name "Sonesta" for all of its hotels, except
Paradisio Hotel in El Gouna, Egypt, which is identified by the words:
"Managed by Sonesta Hotels".
The Company has approximately 1,348 employees. Approximately 290 of
these employees are covered by a collective bargaining agreement. The
Company considers its relations with its employees to be satisfactory.
For revenues by class of service for the three years ended December
31, 1994, reference is made to the Consolidated Statements of
Operations and Retained Earnings which appears on page 5 of the 1994
Annual Report to Shareholders.
(d) Financial Information about Foreign and Domestic Operations: This
information is incorporated by reference to Note 2 on pages 9, 10 and
11 of the 1994 Annual Report to Shareholders.
ITEM 2. PROPERTIES
The Company's hotels are primarily metropolitan and resort hotels in popular
vacation areas which emphasize luxury accommodations and personal service.
The Company has fee ownership in one hotel: Royal Sonesta Hotel, Boston
(Cambridge), Massachusetts. Reference is made to Note 6 of the Notes to the
Consolidated Financial Statements of the Registrant which appears on page 12 of
the Company's 1994 Annual Report to Shareholders for details of the mortgage
lien on the Boston (Cambridge), Massachusetts property.
The Company operates the Royal Sonesta Hotel, New Orleans, Louisiana, under a
long-term lease which expires, subject to options to extend for up to twenty
years, on September 30, 2004. The initial term of this lease expired in
October, 1994, but the Company exercised the first of three ten-year options.
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ITEM 2. PROPERTIES (cont'd)
Until January, 1992, the Company owned fifty percent of the shares of an Aruban
company which was formed under a joint venture agreement to own and operate a
casino on the island of Aruba.
The Company also operates under management agreements hotels in Southampton,
Bermuda; Curacao, Netherlands Antilles; Key Biscayne, Florida; and Cairo,
Hurghada, El Gouna, Port Said and Sharm el Sheikh, Egypt; and two Nile River
cruise vessels. The Company's hotel and casino on the island of Curacao is
operated under a management contract, and the Company has invested $2 million
for a 22% ownership interest in that property. The Company's management
contract to operate a hotel in Aruba was converted to a license agreement in
January, 1992 in connection with the sale of its casino interests. The Company
has granted licenses for the use of its name to hotels in Aruba (2); Jerusalem,
Israel; and Santiago, Chile.
In December 1994, the Company entered into two partnerships: one of the
partnerships was formed to acquire, and now owns, a building in the SoHo
district of New York and intends to develop the building as a 78-room deluxe
hotel, including retail space; the other partnership was formed to acquire, and
now owns, a beach-front hotel site in Guanacaste, Costa Rica on which the
partnership intends to develop a 320-room resort and casino. Company
subsidiaries are 50% partners in both partnerships, but the partnerships are
otherwise unrelated. Both projects are contingent on obtaining satisfactory
financing.
In addition to the properties listed above, the Company leases space for its
executive offices at 200 Clarendon Street, Boston, Massachusetts 02116.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor its subsidaries is engaged in any material legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders of the Company in the fourth
quarter of 1994.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Common stock market prices and dividends and the number of shareholders of
record are incorporated by reference to page 4 of the 1994 Annual Report to
Shareholders.
A dividend of $.15 per share was paid on the Company's common stock in July 1993
and a dividend of $.15 per share was declared on the Company's common stock in
December 1993, but was paid in January 1994. A dividend of $.15 per share was
paid on the Company's common stock in July 1994 and a dividend of $.15 per share
was declared on the Company's common stock in December 1994, but was paid in
January 1995. Other information required by this item is incorporated by
reference to the Consolidated Statements of Operations and Retained Earnings
which appears on page 5 of the 1994 Annual Report to Shareholders.
No dividends may be declared or paid on the Company's common stock or common
stock purchased or redeemed unless (a) preferred stock dividend and sinking fund
requirements are met; and (b) the total of dividends paid does not exceed the
maximum amount permitted by one of the Company's bank loan agreements.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 4 of the 1994 Annual Report to Shareholders is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This information is incorporated by reference to pages 2 and 3 of the 1994
Annual Report to Shareholders.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements listed in the Index to the Consolidated Financial
Statements filed as part of this Annual Report on Form 10-K, together with the
report of Ernst & Young LLP dated March 7, 1995, are incorporated herein by
reference to the 1994 Annual Report to Shareholders.
Selected Quarterly Financial Data, on page 3 of the 1994 Annual Report to
Shareholders, is incorporated by reference.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with auditors on accounting principles or practices
or financial statement disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. DIRECTORS OF THE COMPANY AND COMPLIANCE WITH SECTION 16(A)
The information required by this item is incorporated herein by reference
to the proxy statement for the 1995 Annual Meeting of Stockholders.
B. THE EXECUTIVE OFFICERS OF THE COMPANY ARE AS FOLLOWS
Employment History
Name Present Position Age 1990 to Present
---- ---------------- --- -------------------
Roger P. Sonnabend Chairman of the Board 69 Chairman and Chief
and Chief Executive Executive Officer.
Officer
Paul Sonnabend President 67 President.
Stephen Sonnabend Senior Vice President 63 Senior Vice
President.
Stephanie Sonnabend Executive Vice President 42 Vice President -
Marketing until
November, 1993, then
Executive Vice
President.
Boy van Riel Vice President and 36 Controller until
Treasurer March, 1993, then
Vice President &
Treasurer.
Peter J. Sonnabend Vice President and 41 Vice President and
Secretary Secretary.
Christopher Baum Vice President - Sales 41 Director of
& Marketing Advertising and
Communications Public Relations,
Westin Hotels &
Resorts, until 1991;
Corporate Director
of Marketing,
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Resorts, Hilton
Hotels, 1991-1992;
Vice President -
Sales & Marketing
Communications, 1992
to present.
Felix Madera Vice President - 46 Vice President &
International General Manager,
Sonesta Beach
Resort, Key
Biscayne, Florida.
Mary Jane Rosa Vice President - 46 Director of
Design Design until
January, 1993, then
Vice President -
Design.
Jacqueline Sonnabend Vice President - 40 Vice President -
Human Resources Human Resources.
Hans Wandfluh Vice President 60 President & General
Manager, Royal
Sonesta Hotel, New
Orleans, Louisiana.
Roger, Paul and Stephen Sonnabend are brothers. Stephanie Sonnabend and
Jacqueline Sonnabend are the daughters of Roger Sonnabend. Peter J. Sonnabend
is the son of Paul Sonnabend.
The Board of Directors elects Officers of the Company on an annual basis.
ITEM 11. EXECUTIVE COMPENSATION
and
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
and
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these items is incorporated by reference to the
proxy statement for the 1995 Annual Meeting of Stockholders.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements: The financial statements listed in the
accompanying Index to Consolidated Financial Statements is filed as
part of this Annual Report.
2. Financial Statement Schedules: The schedule listed in the
accompanying Index to Consolidated Financial Statements is filed as
part of this Annual Report.
3. Financial Statements of significant subsidiary, RIF Resort Hotel, N.V.
shall be provided by amendment to this Form 10-K by June 30, 1995, as
allowed under Regulation S-X, Rule 3-09.
4. Exhibits: The exhibits listed on the accompanying Index to Exhibits
are filed as part of this Annual Report.
(b) No reports on Form 8-K were filed during the last quarter of 1994.
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SONESTA INTERNATIONAL HOTELS CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
Item 14(a) (1) and (2) References (Page)
---------------------- -----------------
1994 Annual
Report to
Form 10-K Shareholders*
--------- -------------
Consolidated Balance Sheets
at December 31, 1994 and 1993 . . . 6 - 7
For the years ended December 31,
1994, 1993 and 1992:
Consolidated Statements of
Operations and Retained
Earnings. . . . . . . . . . . . . . 5
Consolidated Statements of Cash
Flows . . . . . . . . . . . . . . . 8
Notes to Consolidated Financial
Statements. . . . . . . . . . . . . 9 - 15
Consolidated Financial Statement
Schedules for the year ended
December 31, 1994:
II. Consolidated Valuation and
Qualifying Accounts. . . . . . 10
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
____________________
*Incorporated by Reference
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SONESTA INTERNATIONAL HOTELS CORPORATION
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
AMOUNTS AMOUNTS
BALANCE, CHARGED (WRITTEN OFF) BALANCE,
BEGINNING (CREDITED) NET OF END OF
Description OF YEAR TO INCOME RECOVERIES YEAR
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1992
Deducted from assets:
Valuation reserve on long-term
receivables and advances $ 5,500,000 -- -- $ 5,500,000
=============== ===============
Valuation reserve - other accounts
and notes receivables $ 166,723 (166,723) -- $ 0
=============== =============== ===============
Allowance for doubtful accounts $ 60,749 $ 26,286 $ (2,685) $ 84,350
=============== =============== =============== ===============
Year Ended December 31, 1993
Deducted from assets:
Valuation reserve on long-term
receivables and advances $ 5,500,000 -- -- $ 5,500,000
=============== ===============
Allowance for doubtful accounts $ 84,350 $ 32,100 $ (16,454) $ 99,996
=============== =============== =============== ===============
Year Ended December 31, 1994
Deducted from assets:
Valuation reserve on long-term
receivables and advances $ 5,500,000 -- -- $ 5,500,000
=============== ===============
Allowance for doubtful accounts $ 99,996 $ (22,000) $ 6,253 $ 84,249
=============== =============== =============== ===============
</TABLE>
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Sonesta International Hotels Corporation
INDEX TO EXHIBITS
Items l4(a) (3)
---------------
NUMBER DESCRIPTION PAGE NOS.
------ ----------- ---------
3.1 The most recent amendments to the
Company's Certificate of Incorporation
were filed as part of the Registrant's
Form 10-K for 1992.
3.2 Company By-laws, including all 14-30
amendments through March 29, 1995.
10.1(a) "Third Amendment of Mortgage and 31-35
Security Agreement and Second Amendment
of Note" Between Key Biscayne Limited
Partnership, Mortgagor ("KBLP") and
Florida Sonesta Corporation, Mortgagee
(FSC"), dated February 4, 1994.
10.1(b) "Operating Deficit Loan Mortgage Note" 36-40
($2,194,005.00) from KBLP to FSC,
dated as of December 31, 1993.
10.1(c) "Operating Deficit Loan Mortgage and 41-60
Security Agreement" between KBLP and FSC,
dated February 4, 1994.
10.1(d) "Promissory Note" ($1,576,600.00) from 61-64
KBLP to FSC, dated February 4, 1994.
10.1(e) "Second Amendment to Management Agreement" 65-69
dated as of December 31, 1993 between
KBLP and FSC.
10.2 "Second Amendment to Lease" between John 70-77
Hancock Mutual Life Insurance Company
("John Hancock") and Sonesta International
Hotels Corporation ("Sonesta"), dated
March 22, 1994.
10.3 "Third Amendment to Lease" between John 78-80
Hancock and Sonesta, dated June, 1994.
10.4(a) "1995 Loan Agreement" between Hibernia 81-111
National Bank ("Hibernia") and Royal
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Sonesta, Inc. ("Royal Sonesta"), as of PAGE NOS.
January 1, 1995). ---------
10.4(b) "Promissory Note" ($5,000,000) from Royal 112-115
Sonesta to Hibernia, dated "Effective
January 1, 1995".
10.4(c) "First Amendment to 1995 Loan Agreement" 116-117
Between Hibernia and Royal Sonesta,
dated December 12, 1994.
10.5 "Commercial Promissory Note" ($2,000,000) 118-121
from Sonesta International Hotesl
Corporation to USTrust, dated November 1,
1994.
10.6 "Shareholders Agreement of C.R. Resort 122-167
Associates Limited", dated December
8, 1994.
10.7 "Amended and Restated Agreement of 168-232
Limited Partnership of The Soho Hotel
Company, L.P.", dated December 13, 1994.
13. Annual Report to Security Holders for the 233-249
calendar year ended December 31, 1994.
21. Subsidiaries of the Registrant. 250
23. Consent of Ernst & Young LLP filed herewith. 251
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SIGNATURES
Pursuant to the requirements of Section 13 or l5(d) of the Securities and
Exchange Act of l934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SONESTA INTERNATIONAL HOTELS CORPORATION
(Registrant)
By: /s/ Boy van Riel Date: March 13, 1995
-------------------------------
Boy van Riel
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of l934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ R.P. Sonnabend Date: March 13, 1995
-------------------------------
Roger P. Sonnabend
Chairman of the Board and Chief Executive Officer
By: /s/ Boy van Riel Date: March 13, 1995
-------------------------------
Boy van Riel
Vice President and Treasurer, Principal
Financial and Accounting Officer
By: /s/ Paul Sonnabend Date: March 13, 1995
-------------------------------
Paul Sonnabend
Director
By: /s/ Stephen Sonnabend Date: March 13, 1995
-------------------------------
Stephen Sonnabend
Director
By: /s/ Vernon R. Alden Date: March 13, 1995
-------------------------------
Vernon R. Alden
Director
By: /s/ Joseph L. Bower Date: March 13, 1995
-------------------------------
Joseph L. Bower
Director
By: /s/ L.M. Levinson Date: March 13, 1995
-------------------------------
Lawrence M. Levinson
Director
<PAGE>
BY-LAWS
of
SONESTA INTERNATIONAL HOTELS CORPORATION
ARTICLE I
Offices
SECTION 1. Principal Office. The location of the principal office of the
Corporation shall be at 200 Clarendon Street, Boston, Massachusetts, or at such
other place as the Board of Directors may from time to time prescribe.
SECTION 2. Other Offices. The Corporation may, in addition to its principal
office, have offices at such other places, either within or without the State of
New York, as the Board of Directors may from time to time appoint.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meeting. A meeting of all holders of stock of the
Corporation entitled to vote shall be held in the month of May each year for the
purpose of electing a Board of Directors and for the transaction of such other
business as may properly come before the meeting. The meeting shall be called
for such day, which shall not be a legal holiday, and for such hour as shall be
fixed by the Board of Directors and set forth in the notice of the meeting.
SECTION 2. Special Meeting. Special meetings of stockholders, other than those
regulated by statute, may be called at any time by the Board of Directors, and
it shall be the duty of such Board to call such meeting forthwith whenever so
requested in writing directed to the Chairman of the Board or the President by
the holders of stock entitled to cast at least five percent (5%) of the votes of
which the holders of all outstanding stock in the aggregate are entitled, which
request shall state the purpose or purposes of the proposed meeting.
SECTION 3. Place of Meeting. Annual and special meetings of the stockholders
shall be held at such place as the Board of Directors may by resolution from
time to time determine.
SECTION 4. Notice of Meetings of Stockholders. A written or printed notice of
every meeting of stockholders, signed by the President or a Vice President, or
the Secretary or an Assistant Secretary, stating the purpose or purposes for
which the meeting is called and the time when and the place within the State
whereit is to be held, shall be served either personally or by mail, upon each
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stockholder of record entitled to vote at such meeting, and upon each
stockholder of record, who by reason of any action proposed at such meeting
would be entitled to have his stock appraised if such action were taken, not
less than ten nor more than forty days before the meeting. If mailed, it shall
be directed to a stockholder at his address as it appears on the stock-book
unless he shall have filed with the Secretary of the Corporation a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed to the address designated in such request. No notice of
any adjourned meeting need be given other than by announcement of the time and
place of such adjournment at any meeting.
SECTION 5. Quorum. Except as otherwise provided by law or in the certificate
of incorporation, at all meetings of stockholders, the presence in person or by
proxy of the holders of record of stock of the Corporation entitled to cast one-
third of the votes to which the holders of all outstanding stock in the
aggregate are entitled to cast for any item of business, shall be necessary to
constitute a quorum for the transaction of such business. In the absence of a
quorum, the holders of stock, present in person or by proxy, entitled to cast a
majority of all votes which might be cast at such meeting by the stockholders
present in person or by proxy, may adjourn the meeting from time to time,
without further notice other than by announcement at the meeting, until the
holders of the amount of stock requisite to constitute a quorum shall be
present. At any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called if a quorum had been then present.
In the event that the holders of any class of stock or any series of any
class of stock are entitled to vote separately as a class with respect to the
transaction of any business, the presence, in person or by proxy, of the holders
of record of one-third of the outstanding stock of such class or series, as the
case may be, shall be necessary to constitute a quorum of such class or series.
At any meeting for the election of Directors, the absence of a quorum of
the Preferred Stock shall not prevent the election of the Directors to be
elected by the holders of the Common Stock and the absence of a quorum of the
Common Stock shall not prevent the election of the Directors to be elected by
the holders of the Preferred Stock, and in the absence of such quorum, either of
the Preferred Stock or of the Common Stock, a majority of the holders present,
in person or by proxy, of the class of stock which lacks a quorum, shall have
power to adjourn the meeting for the election of the Directors which they are
entitled to elect, from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
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So long as any Preferred Stock remains outstanding, the two directors to be
elected by the holders of Preferred Stock (and their successors) shall be
designated as Preferred Stock directors and their places on the Board shall be
designated as Preferred Stock directorships; the remaining directors (and their
successors) shall be designated as Common Stock directors and their places on
the Board shall be designated as Common Stock directorships.
SECTION 6. Order of Business. The order of business at each meeting of
stockholders, unless otherwise directed by such meeting by majority vote, shall
be determined by the presiding officer.
SECTION 7. Closing of Stock Transfer Books and Determination of Stockholders of
Record. The Board of Directors may from time to time prescribe a period, not
exceeding fifty days prior to the date of any meeting of stockholders or prior
to the last date on which the consent or dissent of stockholders may be
effectively expressed for any purpose without a meeting, or preceding the date
fixed for the payment of any dividend, the making of any distribution, or the
allotment of rights, or preceding the date when any change, conversion or
exchange of capital stock shall go into effect, during which no transfer of
stock on the books of the Corporation may be made; or in lieu of prohibiting the
transfer of stock may fix a time not more than fifty days prior to the date of
any meeting of stockholders or prior to the last date on which the consent or
dissent of stockholders may be effectively expressed for any purpose without a
meeting or preceding the date fixed for the payment of any dividend, the making
of any distribution or the allotment of rights, or preceding the date when any
change, conversion or exchange of capital stock shall go into effect, as the
time as of which stockholders entitled to notice of and to vote at such a
meeting or whose consent or dissent is required or may be expressed for any
purpose as the case may be, shall be determined, or as the time for the
determination of the stockholders entitled to receive any such dividend,
distribution or rights or participate in such change, conversion or exchange of
capital stock; and only such persons who are holders of record of voting stock
at such time shall be entitled to notice of and to vote at such meeting or to
express their consent or dissent as the case may be, and only stockholders of
record at the time so fixed shall be entitled to receive such dividend,
distribution or rights or participate in such change, conversion or exchange of
capital stock.
SECTION 8. Voting. (a) Except as otherwise provided by law or in the
certificate of incorporation and subject to the provisions of the By-laws with
respect to the closing of the transfer books and the fixing of a record date for
the determination of stockholders entitled to vote, at each meeting of
stockholders of the Corporation, the holders of record of stock entitled to vote
shall be entitled to one vote for each share of such stock held by them
respectively.
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(b) Every stockholder entitled to vote may vote in person or by proxy.
All proxies shall be in writing, signed by the stockholder or his duly
authorized attorney, but no proxy shall be valid after the expiration of eleven
months from the date of its execution unless the person executing it shall have
specified therein its duration.
(c) No stock owned by the Corporation shall be voted, nor shall any stock
so owned be counted in determining the number necessary to constitute a quorum
or whether a quorum is present at any meeting.
(d) The vote for directors, and upon the demand of any stockholder, the
vote upon any question before the meeting shall be by ballot; and except as
otherwise provided by law or by the certificate of incorporation, or by these
By-laws, all elections of directors shall be decided by a plurality of the votes
cast and all other matters shall be decided by a majority of the votes cast.
SECTION 9. Inspectors. At each meeting of the stockholders, the polls shall be
opened and closed, the proxies and ballots shall be received and be taken in
charge, and all questions touching the qualification of voters, the validity of
proxies, and the acceptance or rejection of votes shall be decided by two
inspectors. Such inspectors shall be appointed by the Board of Directors before
the meeting, or, if no such appointment shall have been made, then by the
stockholders present at the meeting, by a per capita vote. If, for any reason,
any of the inspectors appointed shall fail to attend, or refuse or be unable to
serve, inspectors in place of any so failing to attend, or refusing or unable to
serve, shall be appointed in like manner. Such inspectors, before entering upon
the discharge of their duties, shall be sworn faithfully to execute the duties
of inspectors at such meeting with strict impartiality, and according to the
best of their ability, and the oath so taken shall be subscribed by them.
ARTICLE III
Board of Directors
SECTION 1. Powers, Number and Term of Office. The property, business and
affairs of the corporation shall be managed and controlled by a Board of
Directors, six in number, none of whom need be stockholders; provided, however,
that within the limits prescribed in the certificate of incorporation, the
number of directors may from time to time be increased, and the additional
director or directors may be elected, or the number of directors may from time
to time be decreased, in either case by resolution passed by the majority vote
of the directors then in office or such number may be increased or decreased by
amendment of these by-laws. The directors, except as otherwise provided in the
certificate of
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incorporation or the by-laws, shall be elected by ballot at the annual meeting
of the stockholders and shall continue in office until the next annual meeting
of stockholders and until their respective successors shall have been elected
and shall qualify, or until their death or until they shall resign or be removed
in the manner provided in Section 2 of this Article.
SECTION 2. Resignations and Removal. (a) Any director may resign at any time
by giving written notice of such resignation to either the Board of Directors,
the Chairman of the Board, the President, a Vice President, the Secretary or an
Assistant Secretary of the Corporation. Unless otherwise specified therein,
such resignation shall take effect upon receipt thereof by the Board of
Directors or by any such officer.
(b) The stockholders may, at any meeting called for that purpose, remove
any director for cause, by majority vote cast at said meeting, and may fill the
vacancy created by any such removal; provided, however, that any director
elected by a class vote, as provided in the certificate of incorporation, shall
be removed, and his vacancy filled, only by vote of the stockholders of the
class by which he was elected.
SECTION 3. Vacancies. Any vacancy occurring in the Board of Directors by
reason of death, resignation, or inability to serve, or the failure of the
stockholders to fill the vacancy caused by the removal of a director, or for any
other cause, may be filled by a majority vote of the remaining directors,
provided a quorum is present, at any special meeting called for that purpose or
at any regular meeting of the Board of Directors. Any such vacancy may also be
filled by the stockholders entitled to vote at any meeting held during the
existence of such vacancy, provided that the notice of such meeting shall have
mentioned such vacancy or expected vacancy. In the event that, because of a
vacancy or vacancies, the remaining directors are insufficient in number to
constitute a quorum, such vacancy or vacancies may be filled only by the
stockholders entitled to vote at a special meeting which shall be called
forthwith by the Board of Directors. If any vacancy shall occur by reason of
the death, resignation or otherwise of a director elected by a class vote and if
such vacancy is to be filled by vote of the stockholders, such vacancy shall be
filled only by vote of the stockholders of such class. If the number of
directors at any time authorized by the by-laws shall be increased by the
stockholders by amendment of the certificate of incorporation or the by-laws,
the additional directors authorized by such increase may be elected by vote of
the stockholders at the meeting authorizing such increase, or if not so elected,
such additional directors may be elected by unanimous vote of the directors then
in office.
SECTION 4. Organization Meetings of the Board of Directors. After each annual
election of Directors, the newly elected directors
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shall meet as soon as possible for the purpose of organization, the election and
appointment of officers and the transaction of other business.
SECTION 5. Regular Meetings. Regular meetings of the Board of Directors shall
be held at such time and place (within or outside the State of New York) as the
Board of Directors shall from time to time designate, and the Board, in fixing
the time and place for holding such regular meetings, may provide that no notice
thereof, except for the first meeting held at such designated time and place,
shall be necessary; provided, however, that a copy of every resolution of the
Board of Directors fixing the time and place of such regular meetings shall be
mailed to every director at least five days prior to the first meeting held in
pursuance thereof.
SECTION 6. Special Meetings. Special meetings of the Board of Directors shall
be held whenever called by the Chairman of the Board, the Chairman of the
Executive Committee, the President, or by three or more of the Directors then in
office. Special meetings of the Board of Directors shall be held at such place
(within or outside the State of New York) as shall be specified in the notice of
meeting.
SECTION 7. Notice of Meeting. The Secretary or an Assistant Secretary of the
Corporation shall give notice to each director of each regular meeting unless
notice thereof shall be dispensed with as provided in Section 5 of this Article,
and of each Special Meeting, by mailing the same, postage prepaid, or by ca-
bling, telegraphing or radioing the same at least five days before such meeting
directed to him at his last known address as it appears on the records of the
Corporation, or by personally telephoning or personal delivery of the same, not
later than two days before the day of such meeting. Such notice shall state the
time and place of the meeting.
SECTION 8. Quorum. The presence of a majority of the number of directors then
authorized by the By-laws shall be necessary and sufficient to constitute a
quorum for the transaction of business, but a majority of those present at any
regular or special meeting, if there be less than a quorum, may adjourn the same
from time to time without notice until a quorum be present. The act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise provided
by law or by the certificate of incorporation or by the By-laws. Any one or
more members of the Board or any Committee thereof may participate in a meeting
of such Board or Committee by means of a conference telephone or similar
communications equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means shall constitute
presence in person at a meeting.
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SECTION 9. Organization. At all meetings of the Board, the Chairman of the
Board, or, in his absence, the Vice Chairman of the Board, the Chairman of the
Executive Committee, the President or a Vice President if he is a member of the
Board, in that order, or, in the absence of each such officer, any director
chosen by the Board, shall preside. The Secretary or an Assistant Secretary of
the Corporation or, in the absence of the Secretary and Assistant Secretary, a
person chosen by the meeting shall act as secretary thereof and shall keep a
record of the proceedings of the meeting.
SECTION 10. Order of Business. The order of business at each meeting of the
Board of Directors, unless otherwise directed by the affirmative vote of a
majority of the members of such Board present at such meeting, shall be
determined by the presiding officer.
SECTION 11. Compensation of Directors. The Board of Directors may determine
the compensation to be paid to directors for their services, and, in addition,
may provide for reimbursement of their expenses incident thereto. Nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity as a committee member, officer, agent or
otherwise and receiving compensation therefor.
SECTION 12. Unanimous Written Consent. Any action by the Board or any
Committee thereof may be taken without a meeting if the resolution and written
consents thereto are signed by all members of the Board or Committee and are
filed with the Record of the Meeting. Such consents shall be treated as a vote
of the Board or Committee for all purposes.
ARTICLE IV
Executive and Other Committees
SECTION 1. Executive Committee. The Board of Directors, by resolution passed
by a majority of the number of directors then authorized by the By-laws, may
appoint an Executive Committee of not less than three and not more than seven
directors, including the President, to serve at the pleasure of the Board, and
may designate one of the members as Chairman of the Committee. The members of
the Executive Committee shall hold office until the first meeting of the Board
of Directors after the next annual meeting of stockholders and until their
successors are elected or until they shall cease to be directors or until their
death or until they shall resign or be removed in the manner provided in Section
4 of this Article.
SECTION 2. Powers. During the intervals between the meetings of the Board of
Directors, the Executive Committee shall possess and may exercise all the powers
of the Board of Directors in the management of the business, affairs and
property of the Corpora-
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tion, in all cases where specific directions shall not have been given by the
Board of Directors, and shall have power to authorize the seal of the
Corporation to be affixed to all papers which may require it. See Section
712(a) New York Business Corporation Law.
SECTION 3. Procedure. The Executive Committee shall, subject to any direction
by the Board of Directors, fix its own rules of procedure and shall meet where
and when provided by such rules. The presence of a majority of the members of
the Executive Committee then in office shall be necessary to constitute a quorum
and the act of a majority of the members, but not less than two, present at any
meeting at which there is a quorum shall be the act of the Executive Committee.
All action by the Executive Committee shall be recorded in a minute book and
reported to the Board of Directors at the first regular meeting of the Board
held following any such action, or at any special meeting if so requested.
SECTION 4. Resignation and Removal. Any member of the Executive Committee may
resign at any time by giving written notice of such resignation to either the
Board of Directors, the Chairman of the Board, the Vice Chairman of the Board,
the Chairman of the Executive Committee, the President, a Vice President, the
Secretary or an Assistant Secretary. Unless otherwise specified therein, such
resignation shall take effect upon receipt by the Board or by any such officer.
Any member of the Executive Committee may be removed, either with or without
cause, at any time by the affirmative vote of a majority of the number of
directors then authorized by the By-laws at any meeting of the Board of
Directors.
SECTION 5. Vacancies. If any vacancy shall occur in the Executive Committee by
reason of death, resignation, removal, disqualification or otherwise, the
remaining members, if not less than three, shall continue to act; and such
vacancy or vacancies may be filled at any meeting of the Board of Directors by
resolution passed by a majority of the number of directors then authorized by
the By-laws.
SECTION 6. Other Committees. The Board of Directors, by the affirmative vote
of the majority of the number of directors then authorized by the By-laws, may
also appoint other standing committees and special committees for any lawful
purpose or purposes. Such committees shall have such powers and duties as shall
be specified in the respective resolutions of appointment.
SECTION 7. Compensation. The Board of Directors may determine the compensation
to be paid for their services to members of any committee authorized by these
By-laws, and, in addition, may provide for reimbursement of their expenses
incident thereto. Nothing herein contained shall be construed to preclude any
committee member from serving the Corporation in any other capacity as a
director, officer, agent or otherwise and receiving compensation therefor.
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ARTICLE V
Officers
SECTION 1. Number. The officers of the Corporation shall consist of a Chairman
of the Board, a Chairman of the Executive Committee, a President, one or more
Vice Presidents (one of whom may be designated the Executive Vice President, if
the Board of Directors shall so determine), a Treasurer, a Secretary, and such
additional officers as may be elected or appointed in accordance with the
provisions of Section 3 of this Article, and may include a Vice Chairman of the
Board (if the Board of Directors shall so determine). The same person may hold
concurrently any two or more offices, except those of President and Vice
President, but no officer shall sign any documents in more than one capacity.
All such officers, in the exercise and discharge of their powers and duties,
shall be subject to the control and direction of the Board of Directors and the
Executive Committee.
SECTION 2. Election, Term of Office and Qualifications. Each officer
specifically designated in Section 1 of this Article shall be chosen by the
Board of Directors and shall hold his office until his successor shall have been
duly chosen and qualified or until his death, resignation or removal. The
Chairman of the Board, the Vice Chairman of the Board (if any), the Chairman of
the Executive Committee and the President shall be and remain directors. No
other officer need be a director.
SECTION 3. Subordinate Officers. The Board from time to time may elect or
appoint other officers, including one or more Assistant Treasurers and one or
more Assistant Secretaries, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these By-laws, or as
the Board from time to time may determine.
SECTION 4. Removal. All officers shall be subject to removal at any time, with
or without cause, by the affirmative vote of a majority of the directors then in
office.
SECTION 5. Resignations. Any officer may resign at any time by giving written
notice thereof to either the Board of Directors, the Chairman of the Board or of
the Executive Committee, the President, a Vice President, the Secretary, or an
Assistant Secretary. Unless otherwise specified therein, such resignation shall
take effect upon receipt thereof by the Board of Directors or such officer.
SECTION 6. Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled for the unexpired
portion of the term in the manner prescribed by these By-laws for the regular
election or appointment to such office.
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SECTION 7. The Chairman of the Board. The Chairman of the Board shall preside
at all meetings of the Board of Directors and at all stockholders' meetings, and
shall perform such other and further duties as the Board of Directors may from
time to time determine.
SECTION 8. The Chairman of the Executive Committee. The Chairman of the
Executive Committee shall preside at all meetings of the Executive Committee
and, in the absence of the Chairman of the Board and a Vice Chairman of the
Board, shall preside at all meetings of the Board of Directors and at all
stockholders' meetings, and shall perform such other and further duties as the
Board of Directors may from time to time determine.
SECTION 9. The President. The President, in the absence of the Chairman of the
Board, a Vice Chairman of the Board (if any) and the Chairman of the Executive
Committee, shall preside at all meetings of stockholders and of the Board of
Directors at which he is present. He shall have general charge of the property,
business and affairs of the Corporation. He shall also do and perform such
other duties as from time to time may be assigned to him by the Board of
Directors.
SECTION 10. Vice President. Any Vice President, unless limited in his powers
by the Board of Directors, may, in the absence or inability of the President to
act, perform the duties and exercise the powers of the President and shall
perform such other duties as the President or the Board of Directors shall
prescribe.
SECTION 11. The Treasurer. The Treasurer shall have the custody and control of
all of the funds and securities of the Corporation, except as otherwise provided
by the Board of Directors, and shall be responsible for all monies and other
property of the Corporation in his custody, and shall perform all duties
incident to the office of Treasurer, and such other duties as may from time to
time be assigned to him by the Board of Directors. He shall render to the
Chairman of the Board, the Chairman of the Executive Committee, the President
and directors at all regular meetings of the Board of Directors or whenever any
such officer or the Board of Directors may so require a full statement of the
financial condition of the Corporation.
SECTION 12. Assistant Treasurers. Any Assistant Treasurer shall, in the
absence or inability of the Treasurer to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties as the President
or the Board of Directors shall prescribe.
SECTION 13. The Secretary. The Secretary shall keep minutes of all proceedings
of the Board of Directors and the Executive Committee and the minutes of all
meetings of the stockholders and shall record all the votes of the stockholders,
directors and members of the Executive Committee in books provided and kept for
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that purpose; he shall extend to the giving and serving of all notices for the
Corporation; he shall have charge of the books and records of the Corporation;
he shall have custody of the seal of the Corporation and shall affix the same to
any instrument or document which requires the seal of the Corporation; and he
shall perform all the duties incident to the office of Secretary and such other
duties as may be assigned to him from time to time by the Board of Directors.
SECTION 14. Assistant Secretary. Any Assistant Secretary shall, in the absence
or inability of the Secretary to act, perform the duties and exercise the powers
of the Secretary and shall perform such other duties as the President or the
Board of Directors shall prescribe.
SECTION 15. Salaries. The salaries of the officers shall from time to time be
fixed by the Board of Directors. No officer, employee or agent shall be
prevented from receiving a salary or other compensation by reason of the fact
that he is also a director of the Corporation.
SECTION 16. Surety Bonds. The Board of Directors may require any officer,
agent or employee of the Corporation to give security for the faithful
performance of his duties.
SECTION 17. Honorary Chairman of the Board. In addition to the Officers
hereinbefore provided for, the Board of Directors may appoint an Honorary
Chairman of the Board, who shall have such duties and authority consistent with
his title, as shall be assigned to him from time to time by the Board of
Directors.
SECTION 18. Vice Chairman of the Board. The Vice Chairman of the Board shall,
in the absence or inability of the Chairman of the Board to act, perform the
duties and exercise the powers of the Chairman of the Board and shall perform
such other duties as the Board of Directors shall prescribe.
ARTICLE VI
Reimbursement and Indemnification of Directors,
Officers and Employees
SECTION 1. Reimbursement. Each director, officer and employee of the
Corporation shall be entitled to reimbursement for his reasonable expenses
incurred in connection with his attention to the affairs of the Corporation,
including attendance at meetings.
SECTION 2. (a) Indemnification. The Corporation shall indemnify any person
made, or threatened to be made, a party to an action or proceeding, whether
civil or criminal, including an action by or in the right of any corporation of
any type or kind, domestic or
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foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Corporation served in any
capacity at the request of the Corporation (such requests to serve an employee
benefit plan being further described in the Business Corporation Law of the
State of New York), by reason of the fact that he, his testator or intestate,
was a director or officer of the Corporation, or served such other corporation,
partnership, joint venture, trust employee benefit plan or other enterprise in
any capacity, against judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees actually and necessarily incurred
as a result of such action or proceeding, or any appeal thereof, if such
director or officer acted, in good faith, for a purpose which he reasonably
believed to be in, or, in the case of service for any other corporation or any
partnership, joint venture, trust, employee benefit plan or other enterprise,
not opposed to, the best interests of the Corporation and, in criminal actions
or proceedings, in addition, had not reasonable cause to believe that his
conduct was unlawful, such indemnification be made to the full extent permitted
under the Business Corporation Law of the State of New York ("Business Cor-
poration Law").
(b) Expenses incurred in defending a civil or criminal action or
proceeding may be paid by the Corporation in advance of the final disposition of
such action or proceeding, subject to the provisions of the Business Corporation
Law regarding the repayment of such advances where the person receiving such ad-
vancement or allowance is ultimately found not to be entitled to indemnification
or, where indemnification is granted, to the extent the expenses so advanced by
the Corporation or allowed by the court exceed the indemnification to which he
is entitled.
(c) If, under this article, any expenses or other amounts are paid by way
of indemnification, otherwise than by court order or action by the shareholders,
the Corporation shall, not later than the next annual meeting of shareholders
unless such meeting is held within three months from the date of such payment,
and, in any event, within fifteen months from the date of such payment, mail to
its shareholders of record at the time entitled to vote for the election of
directors a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
(d) Subject to limitations or restrictions described in the Business
Corporation Law, the Corporation shall have the power to purchase and maintain
insurance:
(1) To indemnify the Corporation for any obligation which it
incurs as a result of the indemnification of directors and officers
under the provisions of this article, and
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(2) To indemnify directors and officers in instances in which
they may be indemnified by the Corporation under the provisions of
this article, and
(3) To indemnify directors and officers in instances in which
they may not otherwise be indemnified by the Corporation under the
provisions of this article provided the contract of insurance
covering such directors and officers provides, in a manner
acceptable to the superintendent of insurance of the State of New
York, for a retention amount and for co
insurance.
(e) The Corporation shall, within the time and to the persons provided in
paragraph (c), above, mail a statement in respect of any insurance it has
purchased or renewed under section (d) specifying the insurance carrier, date of
the contract, cost of the insurance, corporate positions insured, and a state-
ment explaining all sums, not previously reported in a statement to
shareholders, paid under any indemnification insurance contract.
ARTICLE VII
Capital Stock
SECTION 1. Certificates of Stock. Every stockholder of the Corporation shall
be entitled to a certificate or certificates, signed by the President or a Vice
President and the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary and sealed with the seal of the Corporation, certifying the
number and class of shares of the stock of the Corporation owned by him;
provided, however, that where such certificates are signed by a transfer agent
or a transfer clerk and by a registrar, the signature of any President, Vice
President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may
be facsimile. In case any such officer who has signed or whose facsimile
signature has been placed upon any such certificate shall have ceased to be such
officer before such certificate is issued, such certificate may be issued by the
Corporation with the same effect as if such officer had not ceased to be such at
the date of its issue. The seal of the Corporation on the certificate may be a
printed or engraved facsimile thereof. The certificates of shares of the stock
of the Corporation, whether temporary or definitive, shall be in such form as
shall be approved by the Board of Directors. The certificates for shares of
stock shall be consecutively numbered and the names and addresses of all persons
owning shares of capital stock of the corporation, with the number of shares
owned by each and the date or dates of issue of the shares of stock held by
each, shall be entered in books kept for that purpose by the proper
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officers or agents of the Corporation.
SECTION 2. Lost or Destroyed Certificates. Any person claiming that a
certificate of stock has been lost or destroyed shall make an affidavit or
affirmation of that fact, and shall, if required by the Board of Directors,
advertise the same in such manner as the Board of Directors may require, and
shall give the corporation and its transfer agents and registrars, if any, a
bond of indemnity, in an amount and form approved by the Board of Directors and
with one or more sureties satisfactory to the Board of Directors, to indemnify
the Corporation and its transfer agents and registrars, if any, against any
liability or expense which may be incurred by reason of the original certificate
remaining outstanding; whereupon a new certificate may be issued of the same
tenor and for the same number of shares as the one alleged to have been lost or
destroyed; but always subject to the approval of the Board of Directors and, if
required by the Board, a final order or decree of a court of competent
jurisdiction adjudicating the right of any such person to receive a new certifi-
cate shall be obtained by such person. A new certificate may be issued without
requiring any bond when, in the judgment of the Board of Directors, it is proper
so to do.
SECTION 3. Transfers of Shares of Stock. Shares of stock shall be transferable
on the books of the Corporation by the holder of record thereof or by his
attorney thereunto duly authorized but only upon the surrender and cancellation
of the certificate or certificates therefor. Except in cases of lost or
destroyed certificates, and in such cases only after conforming to the re-
quirements of Section 2 of this Article, no new certificates shall be issued
until the former certificates for the shares represented thereby shall have been
surrendered and cancelled. The corporation, and its transfer agents or clerks
and registrars, if any, shall be entitled to treat the owner of record of any
share or shares of stock as the owner in fact thereof and accordingly shall not
be bound to recognize any equitable or other claim to or interest in, such share
or shares on the part of any other person, whether or not it has actual or other
notice thereof, except as expressly provided by the laws of the State of New
York.
SECTION 4. Regulations. Subject to the provisions of this Article, the Board
of Directors shall have the power and authority to make such regulations as it
may deem expedient concerning the issue, transfer and registration of a stock.
SECTION 5. Transfer Agent and Registrar. The Board of Directors may appoint
one or more transfer agents or one or more registrars, or both, and may require
all certificates to bear the signature of either or both. The Corporation may,
if so provided by the Board of Directors, act as its own transfer agent or
registrar.
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ARTICLE VIII
Dividends
SECTION 1. Dividends. Subject to the provision of the laws of the State of New
York and the certificate of incorporation, the Board of Directors in its
discretion from time to time may declare dividends upon the stock of the
Corporation out of the surplus of the Corporation.
ARTICLE IX
Contracts, Instruments, Checks, etc.
SECTION 1. Execution of checks, drafts, etc. All checks, drafts, orders for
the payment of money, notes or other evidence of indebtedness shall be signed by
such officer or officers or other persons as the Board of Directors may from
time to time designate.
SECTION 2. Loans. No loan shall be contracted on behalf of the Corporation and
no negotiable paper shall be issued in its name unless authorized by the vote of
the Board of Directors. When authorized by the Board of Directors so to do, any
officer or agent of the Corporation may effect loans and advances at any time
for the Corporation from any bank, trust company or other institution, or from
any firm, corporation or individual, and for such loans and advances may make,
execute and deliver promissory notes, bonds or other certificates or evidences
of indebtedness of the Corporation. Such authority may be general or confined
to specific instances.
SECTION 3. Proxies. Proxies to vote with respect to shares of stock of other
corporations owned by or standing in the name of this Corporation may be
executed and delivered from time to time on behalf of this Corporation by the
Chairman of the Board, the President or a Vice President and the Secretary or an
Assistant Secretary of this Corporation or by any person or persons thereunto
authorized by the Board of Directors.
ARTICLE X
Selection of Auditors and Annual Report
The Corporation's books of account shall be examined annually by an
independent form of accountants who shall be selected in the manner herein set
forth. The Board of Directors shall, prior to the annual stockholders' meeting
in each year, recommend a suitable firm of public accountants to act as the
Corporation's auditors for such year. The firm selected and any other firm or
firms of public accountants submitted to the Board by stockholders of record,
holding at least three percent (3%) of the vote to which the
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holders of all outstanding stock in the aggregate are entitled, shall be
submitted to the stockholders for their consideration; and the public
accountants to act as auditors of the Corporation for such year shall be elected
by a plurality of the vote of stockholders at the annual meeting from among the
firms so nominated. The certificate of the Corporation's auditors contained in
the Corporation's annual report to the stockholders shall be addressed to the
stockholders. The Corporation's auditors shall be required to furnish to each
member of the Board of Directors a copy of their full report. The scope of the
annual audit shall be arranged with the auditors by the Board of Directors. A
representative of the auditors shall be required to attend the annual meeting of
stockholders to answer questions and to make any explanation or statements they
desire with respect to the accounts. A copy of the annual report to
stockholders shall be mailed to stockholders at least twenty days prior to the
annual meeting of stockholders in each year.
ARTICLE XI
Notices and Waivers
SECTION 1. Notices. Unless otherwise in these By-laws provided, any notice
required to be given under these By-laws may be given by mailing the same,
postage prepaid, or by prepaid telegram, radiogram or cable, addressed to the
person entitled thereto at his last known address as it appears on the books of
the Corporation, unless such person shall have designated in writing some other
address to which such notices are to be sent, in which case such notice shall be
directed to him at the address so designated. Such notice shall be deemed to be
given at the time of such mailing, telegraphing, radiographing or cabling.
SECTION 2. Waiver of Notice. Whenever under the provisions of any law or under
the provisions of the certificate of incorporation or these By-laws, the
Corporation or the Board of Directors or any committee thereof is authorized to
take any action after notice to its stockholders or members or after the lapse
of a prescribed period of time, such action may be taken without notice and
without the lapse of any period of time, if at any time before or after such
action be completed, such requirements be waived in writing (which shall include
telegraphing, radioing and cabling) by the person or persons entitled to said
notice or entitled to participate in the action to be taken or, in the case of a
stockholder, by his attorney thereunto authorized.
ARTICLE XII
Miscellaneous
SECTION 1. The seal of the Corporation shall be circular in form,
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with the words "Sonesta International Hotels Corporation" in the circumference
thereof and in the center of said seal the words "Incorporated in New York".
Said seal shall be in the charge of the Secretary, to be used as directed by the
Board of Directors so far as may be permitted by law, and shall be subject to
change by the Board of Directors.
SECTION 2. Fiscal Year. The fiscal year of the Corporation shall begin and end
on such dates as shall be determined by the Board of Directors.
SECTION 3. Books of the Corporation. The books of the Corporation (except as
otherwise at any time may be required by law) shall be kept at such place or
places within or without the State of New York as the Board of Directors may
from time to time determine.
SECTION 4. Inspection of Books. The Board of Directors may from time to time
determine whether and to what extent and at what times and places, and under
what conditions and regulations, the accounts and books of the Corporation, or
any of them, shall be open to the inspection of the stockholders, and no
stockholder shall have any right to inspect any document, book or account of the
Corporation except as conferred by statute, unless authorized by resolution of
the stockholders or the Board of Directors.
SECTION 5. Definitions. In these By-laws, the term "certificate of
incorporation" shall mean the certificate of consolidation forming Hotel
Corporation of America, as amended by any certificates filed pursuant to law,
and the term "By-laws" shall mean these By-laws and any amendments thereof.
ARTICLE XIII
Amendments
The Board of Directors, by vote of a majority of the number of directors
then authorized by the By-laws, shall have power to make, alter, amend and
rescind any By-law or By-laws, and any By-laws made by the Board of Directors
may be altered, amended or rescinded by the stockholders at any annual meeting
or at any special meeting of stockholders, provided that notice of any proposed
By-laws or the proposed alteration, amendment, or rescission be contained in the
notice of the stockholders' meeting. The annual report to stockholders, or any
proxy statement in connection with any annual meeting, shall include a concise
statement of all changes in the By-laws made by the Board of Directors since the
preceding annual meeting.
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Exhibit 10.1(a)
THIRD AMENDMENT OF MORTGAGE AND SECURITY AGREEMENT
AND SECOND AMENDMENT OF NOTE
THIS THIRD AMENDMENT OF MORTGAGE AND SECURITY AGREEMENT AND SECOND
AMENDMENT OF NOTE (this "Amendment") is made as of the 4th day of February,
1994, between KEY BISCAYNE LIMITED PARTNERSHIP (formerly known as Biscayne Beach
Hotel Associates, Ltd.), a Florida limited partnership, having an office c/o VMS
Realty Partners, at 8700 West Bryn Mawr, Chicago, Illinois 60631 ("Mortgagor")
and FLORIDA SONESTA CORPORATION, a Florida corporation, having an office
address c/o Sonesta International Corporation, at 200 Clarendon Street, Boston,
Massachusetts, 02116 ("Mortgagee").
RECITALS:
A. Mortgagor is the owner of that certain real property commonly known as
the "Sonesta Beach Resort" situated in the City of Key Biscayne, Dade County,
Florida, and more fully described in EXHIBIT "A" attached hereto and made a part
hereof (the "Property").
B. By Mortgage and Security Agreement dated December 27, 1984 and
recorded in the Public Records of Dade County, Florida, in Official Records Book
12369, Page 6723, as amended by an Amendment of Note and Second Mortgage dated
September 12, 1991 (the "First Amendment") and recorded in the Public Records of
Dade County, Florida, in Official Records Book 15232, Page 3219, and as further
amended by Second Amendment of Mortgage and Security Agreement dated October 14,
1993 (the "Second Amendment") and to be recorded in the Public Records of Dade
County, Florida, prior to the recordation hereof (collectively, the "Mortgage"),
Mortgagor mortgaged the Property to Mortgagee as security for the payment of a
certain Purchase Money Mortgage Note dated December 27, 1984, made by Mortgagor
payable to the order of Mortgagee in the original principal amount of $5,000,000
(as amended by the First Amendment, the "Note").
C. Mortgagor and Mortgagee now desire to amend the Mortgage and the Note
as hereinafter set forth.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Mortgagor and Mortgagee agree that the Mortgage and the Note are
hereby amended as follows:
<PAGE>
1. Notwithstanding anything to the contrary set forth in the Note,
if, at any time during each of the Calendar Years occurring
during the period commencing January 1, 1996 and expiring
December 31, 1997 (the "Two Year Period"), Net Operating Income
is insufficient to make any one or more of the quarterly
installments of interest required to be paid under Paragraph 2 of
the Note, Maker shall not be in default under the Note as a
result of any deficiency provided that by the expiration of the
applicable Calendar Year, Payee has received from Net Operating
Income or other monies provided by Owner the total amount of the
deficiency, together with applicable late charges. In addition,
if at anytime or from time to time during any Calendar Year
within the Two Year Period, Net Operating Income is insufficient
to pay debt service required to be paid under the Prior Loan and
Payee has previously received interest payments from Maker
attributable to such Calendar Year, Payee shall from such
interest previously received by Payee, promptly pay over to the
holder of the Prior Loan or refund to the Property, as requested
in writing by Maker, all such interest up to the amount of such
deficiency. In no event shall Payee be required to pay over any
amount in excess of the interest previously paid to Payee for the
applicable Calendar Year. All sums so paid over by Payee to the
holder of the Prior Loan shall continue to be part of the
indebtedness evidenced by this Note. Maker and Payee shall
conduct an annual reconciliation of all payments and repayments
made pursuant to this paragraph. The terms "Net Operating
Income" and "Calendar Year" shall have the meanings ascribed to
such terms in the Management Agreement.
2. All references in the Mortgage and the Note to the Management
Agreement, shall be deemed to mean and refer to the Management
Agreement as amended from time to time.
3. All references in the Mortgage to the Note shall mean the Note as
amended by this Amendment, and otherwise from time to time.
4. A new Section 4.2 is hereby added to the Mortgage to read as
follows:
"If, at any time or from time to time, Mortgagee (in its capacity
as Operator under the Management Agreement) shall have determined
in good faith that Net Operating Income will not be sufficient to
pay the next ensuing payment of interest and/or real estate tax
escrow payments payable under the Prior Mortgage and related
documents, Mortgagee shall
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<PAGE>
have the right to pay the deficiency on behalf of Mortgagor
("Deficiency Payment"). All Deficiency Payments shall bear
interest at the Default Rate and shall be repaid from first
available Net Operating Income. If, within thirty (30) days
after Maker's receipt of annual unaudited financial statements
for any Calendar Year occurring after December 31, 1993,
Mortgagee has not received full repayment of all Deficiency
Payments made during the immediately preceding Calendar Year and
accrued interest thereon from Net Operating Income or other funds
provided by Mortgagor, the same shall constitute an Event of
Default under this Mortgage."
5. The first sentence of Paragraph (f) of Section 5.1 of the
Mortgage is hereby amended in its entirety to read as follows:
"The occurrence of an event of default (including the expiration
of any applicable grace period and/or notice period) under the
Prior Mortgage and the acceleration of the entire indebtedness
secured thereby by the holder thereof by written notice given to
the Mortgagor."
6. A new paragraph (g) is hereby added to Section 5.1 of the
Mortgage to read as follows:
"(g) FAILURE TO PAY DEFICIENCY PAYMENT(S): The occurrence of an
Event of Default under Section 4.2."
The Mortgagor acknowledges that it has had the assistance of independent
legal counsel in negotiating and reviewing this Amendment.
Except as is modified herein, the provisions of the Mortgage and the Note
and all other documents executed in connection therewith remain in full force
and effect. In the event of any conflict between the provisions of the Mortgage
and/or the Note and this Amendment, the provisions of this Amendment shall be
controlling.
If any condition of this Amendment shall be invalid or unenforceable to
any extent or in any application, then the remainder of this Amendment and such
term or condition, except to such extent or in such application, shall not be
affected thereby, and each and every other term
-3-
<PAGE>
and condition of this Amendment shall be valid and enforced to the fullest
extent and in the broadest application permitted by law.
The defined terms of the Mortgage and the Note are incorporated herein to
the extent not expressly modified hereby.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first set forth above.
MORTGAGOR:
Key Biscayne Limited Partnership,
a Florida limited partnership
By: VMS Realty Investment, Ltd.,
an Illinois limited partnership
General Partner
Witnesses: By: /S/ JAY FISHMAN
----------------------------
Authorized Signatory
/S/ MAURA HAYDEN Name: Jay Fishman
------------------------ ----------------------------
Print Name: Maura Hayden
/S/ JEFFREY H. WEITZMAN
------------------------
Print Name: Jeffrey H. Weiztman
MORTGAGEE:
Florida Sonesta Corporation,
a Florida corporation
Witnesses: By: /S/ PETER J. SONNABEND
----------------------------
Authorized Signatory
/S/ MAURA HAYDEN Name: Peter J. Sonnabend
------------------------ -----------------------------
Print Name: Maura Hayden
/S/ JEFFREY H. WEITZMAN
------------------------
Print Name: Jeffrey H. Weitzman
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<PAGE>
ACKNOWLEDGMENTS
STATE OF FLORIDA
COUNTY OF PALM BEACH
On this 4th day of February, 1994, personally appeared before me Jay
Fishman, Authorized Signatory of and on behalf of VMS Realty Investment, Ltd.,
an Illinois limited partnership, which is general partner of Key Biscayne
Limited Partnership, a Florida limited partnership, to me personally known, and
he acknowledged to me that he signed the foregoing instrument on behalf of VMS
Realty Investment, Ltd., acting as general partner of Key Biscayne Limited
Partnership.
/S/ THOMAS A. HANSON
-------------------------------
Notary Public Thomas A. Hanson
My commission expires:
NOTARY PUBLIC: STATE OF FLORIDA AT LARGE
MY COMMISSION EXPIRES APRIL 18, 1995
BONDED THRU HUCKLEBERRY & ASSOCIATES
STATE OF FLORIDA
COUNTY OF PALM BEACH
On this 4th day of February, 1994, personally appeared before me Peter J.
Sonnabend, Authorized Signatory of Florida Sonesta Corporation, a Florida
corporation, to me personally known, and he acknowledged to me that he signed
the foregoing instrument on behalf of said corporation.
/S/ THOMAS A. HANSON
-------------------------------
Notary Public Thomas A. Hanson
My commission expires:
NOTARY PUBLIC: STATE OF FLORIDA AT LARGE
MY COMMISSION EXPIRES APRIL 18, 1995
BONDED THRU HUCKLEBERRY & ASSOCIATES
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<PAGE>
Exhibit 10.1(b)
OPERATING DEFICIT LOAN
MORTGAGE NOTE
$2,194,005.00
West Palm Beach, Florida
As of December 31, 1993
FOR VALUE RECEIVED, the undersigned, KEY BISCAYNE LIMITED PARTNERSHIP, a
Florida limited partnership ("Maker"), hereby promises to pay to the order of
FLORIDA SONESTA CORPORATION, a Florida corporation ("Payee"), its successors and
assigns, c/o Sonesta International Hotels Corporation, at 200 Clarendon Street,
Boston, Massachusetts 02116, or at such other place as holder of this Operating
Deficit Loan Mortgage Note (the "Note") may from time to time designate in
writing, in lawful money of the United States of America, the principal sum of
Two Million One Hundred Ninety Four Thousand and Five Dollars ($2,194,005.00),
with interest thereon as follows:
1. Subject to the provisions of Paragraph 2 hereof, the unpaid principal
balance of this Note and all accrued and unpaid interest shall bear interest
from the date hereof at the floating rate which is at all times equal to the
announced "prime" or "base lending rate" of Chemical Bank, New York, or its
successors (as announced by said bank, the "Prime Rate"). The parties hereto
acknowledge that the Prime Rate is a rate for reference purposes and is not
necessarily the most favorable rate available from such bank. The interest rate
hereunder shall change effective on the same day as any changes in the Prime
Rate. Interest shall compound monthly on the last day of each month. The
entire unpaid principal balance of this Note together with all accrued but
unpaid interest thereon and any unpaid late charges, if not sooner paid, shall
be due and payable on December 31, 1997 (the "Maturity Date").
2. Principal and interest shall be due and payable in annual installments
(individually, an "Installment Payment") commencing on the first day of January
1995 and on the first day of January of each succeeding calendar year ("Payment
Date") as follows: The Installment Payment due on each Payment Date shall be
equal to the amount by which the Net Operating Income (as defined in that
certain Management Agreement dated December 27, 1984 between Biscayne Beach
Hotel Associates, Ltd. and Payee, as amended by First Amendment dated September
12, 1991, and Second Amendment dated as of December 31, 1993) (as so amended,
the "Management Agreement") of the Mortgaged Property (hereinafter defined)
exceeds the following deductions (the "Priority Deductions"): (A) the principal
and interest due and payable for that same year under that certain Second
Renewal Promissory Note (the "Second Renewal Note") from Maker to Aetna Life
Insurance Company in the principal amount of $24,142,088.26, plus the "Deferred
Amount" as defined therein, dated as of December 1, 1993 (the "Renewal Note");
(B) that certain fee to Strategic
<PAGE>
Realty Advisors, Inc., for that same year described in Section 7.1(g) of the
Management Agreement, pursuant to Section 3 of that certain "Second Amendment to
Management Agreement", dated as of December 31, 1993; (C) the principal and
interest due and payable for that same year under that certain "Purchase Money
Mortgage Note", from Maker to Payee, dated December 27, 1984, in the original
principal amount of $5,000,000.00, as amended; (D) all principal and interest
remaining unpaid under that certain "Promissory Note" in the original principal
amount of $1,576,600, from Maker to Payee, dated as of February 4, 1994, a copy
of which is attached hereto as "Exhibit A"; and (E) the unpaid Delinquent Amount
(as defined in the aforementioned Second Amendment to Management Agreement),
together with interest thereon at the rate of fourteen and one half percent (14
1/2%) per annum, compounded quarterly.
3. Notwithstanding the Payment Date set forth in Paragraph 1 hereof, each
Payment Date shall be extended until the date which is five (5) business days
after Maker's receipt from Payee of an unaudited financial statement (the
"Unaudited Statement) showing the profit or loss of the operations of the
Mortgaged Property (hereinafter defined) for the calendar year immediately
preceding such Payment Date together with the calculation of Net Operating
Income and the Priority Deductions. Each payment made by Maker pursuant to the
Unaudited Statement shall be subject to adjustment as follows: (i) if the Annual
Profit and Loss Statement for the Mortgaged Property (issued by Payee to Maker
pursuant to Section 4.1 of the Management Agreement) for the period covered by
the Unaudited Statement shall indicate that Maker has underpaid the Installment
Payment, Maker shall pay the deficiency to Payee within five (5) business days
after Maker's receipt of the Annual Profit and Loss Statement; and (ii) if,
however, such Annual Profit and Loss Statement shall indicate that Maker has
overpaid the Annual Installment, Payee shall pay the amount of the overpayment
to Maker within five (5) business days after Maker's receipt of the Annual
Profit and Loss Statement.
4. This Note may be prepaid in whole or in part at any time and from time
to time without penalty.
5. This Note is secured by an Operating Deficit Loan Mortgage and
Security Agreement (the "Mortgage") of even date herewith executed and delivered
by Maker to Payee encumbering certain real estate and property therein described
(the "Mortgaged Property"), located in the City of Key Biscayne, Dade County,
State of Florida.
6. The entire unpaid principal balance of this Note and all accrued but
unpaid interest thereon shall become immediately due and payable, at the option
of Payee, upon the earliest to occur of any of the following events
("Acceleration Events"):
<PAGE>
(a) the occurrence of an Event of Default (as defined in the
Mortgage);
(b) the termination of the Management Agreement by the "Owner" or
"Operator" thereunder, except for any termination pursuant to Section 10.3
thereof; or
(c) a sale or conveyance of all or substantially all of the Mortgaged
Property ("Sale"), including, without limitation, a sale of all or any portion
of the Mortgaged Property as a condominium, interval ownership or time sharing
unit or a sale or conveyance of the Mortgaged Property by foreclosure sale or
deed in lieu thereof, but excluding the granting of easements or the granting of
a lien on the Mortgaged Property as security for a mortgage loan; provided,
however, that a sale or conveyance to VMS Realty Partners ("VMS") or any entity
controlled by VMS or any of its partners shall not be deemed to be a "Sale."
Delay or failure to exercise the foregoing option with respect to any
Acceleration Event shall not constitute a waiver of the right to exercise the
same with respect to that or any subsequent Acceleration Event.
7. Should default in the payment of any Installment Payment due hereunder
continue beyond fifteen (15) days from the due date of such payment, Maker shall
pay a late charge to compensate Payee for the added expense and inconvenience
incurred by Payee and caused by such delay in payment. It is acknowledged by
Maker and Payee that the actual amount necessary to adequately compensate Payee
in such case would be impractical and extremely difficult to calculate. Maker
and Payee therefore agree that the amount of such late charge shall be two
percent (2%) of the amount of such late payment. Upon the occurrence of an
Acceleration Event, and during the continuance thereof, the interest rate
applicable to the entire unpaid principal balance of this Note shall be the
interest rate described in Section 1, above, plus six (6) percentage points.
8. Except as expressly provided for in the Mortgage, Maker hereby waives
presentment for payment, demand, protest, notice of protest or dishonor, notice
of acceleration of maturity, and all defenses on the ground of extension of time
for the payment hereof, and agrees to continue and remain bound for the payment
of principal, interest and all other sums payable hereunder notwithstanding any
change or changes by way of release, surrender, exchange, or substitution of any
security for this Note or by way of any extension or extensions of time for the
payment of principal and interest. The rights and remedies of the holder as
provided herein or in the Mortgage shall be cumulative and concurrent and may be
pursued singularly, successively or together at the sole discretion of the
holder, and may be exercised as often as occasion therefor shall occur.
<PAGE>
9. Nothing herein contained, nor any transaction related thereto, shall
be construed or so operate as to require Maker to pay interest at a greater rate
than the maximum allowed by applicable law. Should any interest or other
charges paid or payable by Maker in connection with this Note or any other
document delivered in connection herewith, result in the computation or earning
of interest in excess of the maximum allowed by applicable law, then any and all
such excess shall be and the same is hereby waived by Payee or the then holder
hereof, and any and all such excess paid shall be automatically credited against
and in reduction of the balance due under this Note, and the portion of such
excess which exceeds the balance due under this Note shall be paid by Payee or
the then holder hereof to Maker.
10. All notices and other communications between the parties under this
Note shall be deemed to have been properly given and shall be effective if
delivered in accordance with the provisions of the Mortgage.
11. As used herein, the terms "Maker" and "Payee" shall be deemed to
include their respective successors and assigns, whether by voluntary action of
the parties or by operation of law.
12. Payee's source of satisfaction of the indebtedness evidenced by this
Note is limited solely and exclusively to the Mortgaged Property and any other
collateral pledged by Maker to Payee, and Payee shall not seek to procure
payment out of any other assets of Maker, or its successors and assigns, or any
partner or Maker, or any officer, director, shareholder or partner of a partner
of Maker, or any disclosed or undisclosed principal of Maker, or to procure any
judgment for any sum of money which is or may be payable hereunder or under the
Mortgage or under any other document evidencing or securing this Note (the "Loan
Documents") or for any deficiency remaining after foreclosure of the Mortgage or
sale under any such document; provided, however, that nothing herein contained
shall be deemed to be a release or impairment of the indebtedness evidenced by
any other document or be deemed to preclude Payee from foreclosing the Mortgage
or any other agreement or from enforcing any of Payee's rights thereunder. The
obligations of Maker under this Note, under the Mortgage and under any and all
of the other Loan Documents shall be and are totally nonrecourse as to Maker,
its partners and any partners of its partners, and none of such parties shall
have any personal liability with respect to this Note, the Mortgage and the
other Loan Documents.
13. If this Note is placed in the hands of an attorney for collection,
Maker hereby agrees to pay the holder hereof in addition to the sums above
stated, all costs of collection, including reasonable attorneys' fees and other
legal costs.
<PAGE>
14. Neither this Note nor the method set forth herein for the computation
and payment of interest is intended to create, nor shall be construed as
creating, a partnership, joint venture or any other relationship between Maker
and Payee other than that of the debtor and creditor.
15. This Note shall be governed by and construed in accordance with the
laws of the State of Florida.
IN WITNESS WHEREOF, Maker has executed this Note as of the day and year
first above written.
KEY BISCAYNE LIMITED PARTNERSHIP,
A Florida Limited Partnership
By: VMS Realty Investment, Ltd.
By: /S/ JAY FISHMAN
-----------------------
Authorized Signatory
<PAGE>
Exhibit 10.1(c)
OPERATING DEFICIT LOAN
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (this "Mortgage"), made as of the 4th
day of February, 1994 by and between KEY BISCAYNE LIMITED PARTNERSHIP, a Florida
limited partnership, having an office address c/o VMS Realty Partners, at 8700
West Bryn Mawr, Chicago, Illinois 60631 (the "Mortgagor"), and FLORIDA SONESTA
CORPORATION, a Florida corporation, having an office address c/o Sonesta
International Hotels Corporation, at 200 Clarendon Street, Boston, Massachusetts
02116 (the "Mortgagee"), provides:
W I T N E S S E T H :
ARTICLE 1
RECITALS
Section 1.1 LOAN. Pursuant to a Management Agreement dated December 27,
1984 between Biscayne Beach Hotel Associates, Ltd. and Payee, as amended by
First Amendment dated September 12, 1991 and Second Amendment dated as of
December 31, 1993, the Mortgagee has agreed to make an Operating Deficit Loan
(the "Loan") of TWO MILLION ONE HUNDRED NINETY FOUR THOUSAND FIVE AND NO/100
DOLLARS ($2,194,005.00) to the Mortgagor, as evidenced by an Operating Deficit
Loan Mortgage Note of even date herewith (the "Note"), made by the Mortgagor to
the order of the Mortgagee in the original principal amount of $2,194,005.00,
payable in accordance with its terms, with interest at the rate specified
therein, a copy of which is attached hereto as EXHIBIT "B" and made a part
hereof.
Section 1.2 REAL ESTATE. The Mortgagor is the owner of that certain parcel
of land situated in the City of Key Biscayne, County of Dade, State of Florida,
and more fully described in EXHIBIT "A" attached hereto and made a part hereof
(the "Land").
ARTICLE 2
GRANT
Section 2.1 GRANT. NOW, THEREFORE, the Mortgagor does hereby execute this
Mortgage to further secure the performance and observance of (i) all the
covenants, agreements, conditions and obligations contained in the Note, this
Mortgage, and any other security agreement now or hereafter delivered in
connection with the Loan (the Note, this Mortgage and any such other security
agreement being sometimes hereinafter collectively referred to herein as the
"Loan Documents"); (ii) payment of the Note in accordance with its terms and any
and all other sums and liabilities of the Mortgagor to the Mortgagee due under
any of the other Loan Documents, whether in the form of refinancings or
otherwise, including, without limitation, repayment to the Mortgagee of all sums
advanced by the Mortgagee for or on account of the Mortgagor pursuant to the
terms of this Mortgage, and all other expenses, costs and fees, including
reasonable attorneys' fees paid or incurred by the Mortgagee in connection with
the
<PAGE>
collection of all indebtedness and interest thereon secured hereby, the taking
possession of the Mortgaged Property (hereinafter defined), the protection,
preservation and maintenance of the Mortgaged Property, or the creation,
perfection, realization upon, disposition or enforcement of any of the Loan
Documents; (iii) payment of any renewals, extensions or modifications of, or
substitutions for, all such indebtedness, and all interest that shall accrue
thereon, whether before or after maturity; and (iv) payment of all Basic Fees
and Advertising and Promotional Fees deferred by the Mortgagee pursuant to that
certain Second Amendment to Management Agreement dated as of December 31, 1993,
between the Mortgagor and the Mortgagee, together with interest thereon as
provided therein. The terms "Basic Fee" and "Advertising and Promotional Fee"
shall have the meanings given them in the Management Agreement (hereinafter
defined). All of the indebtedness, interest thereon and liabilities described
in the above clauses (i), (ii), (iii) and (iv) and secured hereby are
hereinafter referred to as the "Secured Indebtedness."
IN CONSIDERATION of the premises and of the indebtedness herein recited and
for the sum of Ten Dollars ($10.00) in hand paid by the Mortgagee to the
Mortgagor, the receipt and sufficiency of which are hereby acknowledged, the
Mortgagor, subject to the matters set forth herein, does hereby grant, bargain,
sell, alien, remise, release, convey, transfer, assign, set over and confirm
unto the Mortgagee, its successors and assigns, the following described
property:
(a) The Land described in EXHIBIT "A" attached hereto;
(b) All buildings, structures and other improvements now or hereafter
located upon, or to be constructed upon the Land (the "Improvements");
(c) All furniture, furnishings, machinery, apparatus, equipment,
fittings, fixtures, and articles of personal property of every kind and nature
(the "Fixtures and Personality"), including all stored building material (except
consumable supplies), any interest in which, whether the same be real or
personal property, is now owned or hereafter acquired by the Mortgagor, and any
of which is now or hereafter placed in, affixed to or used in connection with
the operation of the Land or the Improvements, or any part thereof, and all
additions thereto and all replacements thereof (excluding (i) all fixtures and
personalty now or hereafter leased by Mortgagor, and (ii) all consumable stores
and all furniture, furnishings, appliances, trade fixtures and other personal
property owned by tenants or subtenants of the Mortgagor if such tenants or
subtenants have the right to remove the same under the terms of their applicable
leases or subleases); and
(d) All of the following described property and interests (the
"Additional Property Interests"):
(i) all and singular the tenements, hereditaments, easements,
appurtenances, riparian rights, permits, rights of way, licenses,
agreements and privileges belonging or in any way appertaining to the Land,
and the reversion or reversions, remainder and remainders, rents, issues
and profits thereof; and also the estate, right,
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<PAGE>
title, interest, claim and demand whatsoever of the Mortgagor in and to the
same, including all of the right, title and interest of the Mortgagor in
and to the rights of way, streets, avenues, alleys, gores or strips of
land adjoining the Land, including any after-acquired title or reversion;
(ii) all of the interest of the Mortgagor as landlord under all
present and future leases (the "Leases") applicable to the Land or any part
thereof, and any and all rents, issues, profits, revenues, royalties and
benefits (the "Rents") which, whether before or after foreclosure by the
Mortgagee, or by any senior or junior mortgagee or during the full period
of redemption, shall accrue and be owing for the use or occupation of the
Mortgaged Property or any part thereof provided that this assignment shall
not impose on the Mortgagee any of the lessor's obligations under the
Lease, and provided further that, notwithstanding such assignment, the
Mortgagor may exercise and enforce all its right, title and interest in
and under the Leases and in and to the Rents until the occurrence of an
Event of Default hereunder (hereinafter defined), whereupon the same may
thereafter be exercised and enforced by the Mortgagee at its option, and
without notice and whether or not it shall have accelerated the Secured
Indebtedness, for so long as such Event of Default continues and remains
uncured;
(iii) all of the right, title and interest of the Mortgagor in
any and all awards or payments, including interest thereon, and the right
to receive the same, as a result of (A) the exercise or the threat of
exercise of the right of eminent domain, (B) the alteration of the grade of
any street, or (C) any other injury to, taking of, or decrease in the value
of the Land, or any part thereof to the extent of the Secured Indebtedness
existing at the date of receipt of any such award or payment by the
Mortgagee and of the reasonable attorneys' fees, costs and disbursements
incurred by the Mortgagee in connection with the collection of any such
award or payment; and
(iv) all of the right, title and interest of the Mortgagor in any
and all of the following items (the "Revenues"): (i) accounts, (ii)
accounts receivable, (iii) deposits (including tenant security deposits, if
any), (iv) income derived from the occupation of hotel/motel rooms, rents,
tenant leases, licenses, motel guest receipts, (v) income generated by
services, (vi) profits, (vii) payments from any consumer
credit/debit/charge card organization or entity, which receipts in (i)
through (vii) of this subparagraph are received in connection with the
operation of the Mortgaged Property (defined below), (viii) any general
intangibles arising from or by virtue of any transaction related to the
Mortgage Property, (ix) any notes or chattel paper payable to the Mortgagor
arising from or by virtue of any transaction related to the Mortgaged
Property and (x) all of the Mortgagor's reserve funds for payment of real
property taxes and assessments, insurance, rents and other charges with
respect to the Mortgaged Property; and
(v) all monies and proceeds (the "Proceeds") received by the
Mortgagor from the use, occupancy, management, operation or control of the
Land, including but not limited to rents, refunds, rebates, condemnation
awards and payments, and proceeds
-3-
<PAGE>
of insurance in connection therewith.
The Land, Improvements, Fixtures and Personalty and Additional
Property Interests are hereinafter sometimes collectively referred to as the
"Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property and all estate therein, together
with all the rights, privileges and appurtenances thereunto belonging, unto the
Mortgagee, its successors and assigns, forever, subject and subordinate to the
following:
(A) the lien, terms, covenants and conditions of that certain
mortgage dated December 28, 1984 (the "Prior Mortgage"), between the Mortgagor
and Southeast Bank, N.A., securing the principal sum of Twenty-Two Million and
NO/100 DOLLARS ($22,000,000) (the "Prior Loan"), together with interest thereon
and any replacements, refinancings, extensions, renewals or modifications
thereof, or substitutions therefor, which Prior Mortgage is recorded in the
Public Records of Dade County, Florida, Official Records Book 12369, Page 6689
and that certain Assignment of Lessor's Interest in Leases appurtenant thereto
recorded in Official Records Book 12369, Page 6716, of the Public Records of
Dade County, Florida (the "Original Assignment"). The Original Mortgage was
amended and restated by that certain Mortgage Modification and Extension
Agreement recorded in Official Records Book 12514, Page 2847 of the Public
Records of Dade County, Florida; subject further to that certain Assignment of
Rents and Leases recorded in Official Records Book 12514, Page 2847 of the
Public Records of Dade County, Florida (the "Second Assignment"), that certain
Note and Mortgage Modification Agreement recorded in Official Records Book
13804, Page 1027, of the Public Records of Dade County, Florida; that certain
Second Note and Mortgage Modification Agreement recorded in Official Records
Book 14290, Page 861 of the Public Records of Dade County, Florida; that certain
Third Note and Mortgage Modification Agreement recorded in Official Records Book
14461, Page 697 of the Public Records of Dade County, Florida; that certain
Mortgage Modification Agreement between Mortgagor and Aetna Life Insurance
Company dated as of October 1, 1991, recorded prior hereto as Instrument
#94R064212, and that certain Mortgage Modification Agreement between Mortgagor
and Aetna Life Insurance Company dated December 1, 1993, recorded prior hereto
as Instrument #94R064214.
(B) the lien, terms, covenants and conditions of that certain
mortgage dated December 27, 1984 (the "$5,000,000 Mortgage"), between the
Mortgagor and the Mortgagee, securing the principal sum of Five Million and
No/100 Dollars ($5,000,000.00) (the "$5,000,000 Loan"), together with interest
thereon and any replacements, extensions, renewals or modifications thereof
which $5,000,000 Mortgage is recorded in the Public Records of Dade County,
Florida, Official Records Book 12369, Page 6723, as amended by Amendment of Note
and Second Mortgage recorded in Official Records Book 15232, Page 3219, and by
that certain Second Amendment of Mortgage and Security Agreement dated October
14, 1993 and recorded prior hereto as Instrument #94R064220.
(D) all liens hereafter created to secure the payment of all Capital
Loans, as defined in Section 7.2 hereof.
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(E) all easements, covenants, conditions, restrictions and other
agreements more fully described in EXHIBIT "C" attached hereto and made a part
hereof (the "Permitted Exceptions").
Section 2.2 UNIFORM COMMERCIAL CODE. This Mortgage is intended to be a
security agreement pursuant to the Uniform Commercial Code as enacted and in
effect in the State of Florida (the "Code") covering the Fixtures, Personalty
and Additional Property Interests and the Mortgagor hereby grants the Mortgagee
a security interest in such items. With respect to the Fixtures, this Mortgage
shall also constitute a fixture filing in accordance with the provisions of the
Code. For purposes of the Code, the Mortgagee is a "secured party" and the
Mortgagor is a "debtor" with their addresses being as hereinbefore set forth.
The Mortgagor agrees to execute and deliver to the Mortgagee, upon the
Mortgagee's request, financing statements in such form as the Mortgagee may
require to perfect or continue a security interest hereunder. Upon the
occurrence of an Event of Default under this Mortgage, the Mortgagee shall be
entitled to exercise all rights and remedies of a secured party under the Code
and may proceed as to the Fixtures, Personalty and Revenues.
ARTICLE 3
COVENANTS
Section 3.1 PARTICULAR COVENANTS. The Mortgagor covenants and agrees as
follows:
(a) PAYMENT OF SECURED INDEBTEDNESS. The Mortgagor covenants that it
shall duly and punctually pay the principal of and interest on the Note in
accordance with the terms thereof and shall duly and punctually pay any and all
other portions of the Secured Indebtedness in accordance with the applicable
terms of the other Loan Documents.
(b) PERFORMANCE BY THE MORTGAGOR. The Mortgagor covenants that it shall
perform and observe each and every of the terms, covenants and conditions
required to be performed or observed by it under the Loan Documents.
(c) TAXES. The Mortgagor covenants to pay and discharge, or cause to be
paid and discharged, when and as the same shall become due (with the right to
pay the same in installments to the extent permitted by law), all real estate
and personal property taxes and other taxes and assessments, including but not
limited to, water and sewer rents and charges and all other governmental or non-
governmental charges, general and special, ordinary and extraordinary, foreseen
and unforeseen, of any kind and nature whatsoever, which at any time prior to or
after the execution of this Mortgage may be assessed, levied or imposed upon the
Mortgaged Property, or any use or occupancy thereof, and other taxes,
assessments, fees and governmental or non-governmental charges levied, imposed
or assessed upon or against the Mortgagor with respect to the Mortgaged
Property, together with any penalties or interest on any of the foregoing;
provided, however, that after prior written notice to the Mortgagee, the
Mortgagor, at its sole expense, may contest by appropriate legal proceedings,
conducted in good
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faith and with due diligence, the amount or validity or application, in whole or
in part, of any such taxes, assessments or other charges if (i) such proceedings
shall suspend the collection thereof from the Mortgagor and from the Mortgaged
Property and (ii) the Mortgagor shall have set aside adequate reserves with
respect thereto. The Mortgagor will submit to the Mortgagee, promptly after
payment thereof, appropriate evidence of the due and punctual payment of all
such taxes, assessments and charges.
(d) INSURANCE. The Mortgagor shall continuously maintain insurance with
respect to the Mortgaged Property against such risks as are customarily insured
against by businesses of like size and character as the business conducted on
the Mortgaged Property, paying as the same become due all premiums in respect
thereto, including without limitation:
(i) Insurance to the extent of the full insurable value of the
Improvements and Fixtures and Personalty located on the Land against loss
or damage by fire and lightning, with broad form extended coverage
including damage by windstorm, explosion, aircraft, smoke, sprinkler
leakage, vandalism, malicious mischief and such other risks as are normally
included within such coverage, provided that during any period of
construction of Improvements on the Land, the Mortgagor may provide, or
cause to be provided in connection with such construction and in lieu of
such insurance, builders' risk or similar type of insurance in the amount
of the full insurable value thereof.
(ii) Rental value and/or business interruption insurance for loss
occasioned by the perils commonly insured in a broad form fire and extended
coverage policy in an aggregate amount equal to not less than the annual
debt service payable on the Note.
(iii) Such other insurance as may be reasonably required by the
Mortgagee, including, without limitation, public liability insurance,
comprehensive general liability coverage including blanket contractual
liability, completed operations and personal injury coverage with a
combined single limit for any one occurrence of at least $1,000,000;
workmen's compensation and other insurance required by law.
All such insurance shall be in forms and amounts and issued by
companies reasonably satisfactory to the Mortgagee, and losses thereunder shall
be payable to the Mortgagee (subject to the rights of the mortgagees under the
Senior Mortgages (hereinafter defined)) pursuant to the standard form of
mortgagee endorsement, without contribution. The Mortgagor may maintain any of
the insurance required hereunder under a blanket policy covering the Mortgaged
Property and other real estate owned by affiliates of the Mortgagor. At the
request of the Mortgagee, copies of all such insurance policies shall be
delivered to the Mortgagee, provided that in lieu of such policies there may be
delivered to the Mortgagee a certificate or certificates of the respective
insurers attesting the fact that the insurance required hereunder is in force
and effect. All such policies shall provide that they will not be terminated
without at least thirty (30) days prior written notice having been delivered to
the Mortgagee. At the request of Mortgagee, no less than thirty (30) days
prior to the expiration date of any such policy required under this
subsection (d), the Mortgagor shall furnish certificates of renewal
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of such policies or replacement policies to the Mortgagee, together with
evidence of payment of the premiums therefor. In the event of a foreclosure of
this Mortgage, or a deed in lieu of foreclosure, the Mortgagee (subject to the
rights of the mortgagees under the Senior Mortgages) shall succeed to all rights
of the Mortgagor including any rights to unearned premiums in and to all
policies of insurance maintained by the Mortgagor with respect to the Mortgaged
Property.
The Mortgagor covenants to give prompt notice to the Mortgagee of any
damage to or destruction of the Mortgaged Property or any part thereof.
Notwithstanding anything to the contrary contained herein, so long as no Event
of Default has occurred and is continuing hereunder, any and all insurance
proceeds shall be paid to the Mortgagor for the repair or restoration of the
Mortgaged Property or any part thereof. The Mortgagee shall not be obligated to
see to the proper application of any amount paid to the Mortgagor.
Notwithstanding anything set forth in this subsection (d) to the
contrary, so long as the Management Agreement (as defined in Section 5.2 below)
remains in effect, the Mortgagor's obligation to obtain insurance hereunder
shall be limited to the insurance coverage required to be maintained by the
"Operator" under the Management Agreement.
(e) CONDEMNATION. The Mortgagor shall give the Mortgagee prompt
notice of the actual or threatened commencement of any proceedings under eminent
domain affecting the Land and the Improvements, any part thereof, any easement
therein or appurtenance thereof, including severance and consequential damage
and change in grade of streets, and shall deliver to the Mortgagee (within
fifteen (15) days after receipt) copies of any and all papers served on the
Mortgagor in connection with any such proceedings. Subject to the rights of the
mortgagees under the Senior Mortgages, the Mortgagor hereby assigns, transfers
and sets over to the Mortgagee, all right, title and interest of the Mortgagor
in and to any award or payment in respect to (i) any taking of all or any part
of the Land and the Improvements, or any interest therein, as a result of the
exercise of the right of condemnation or eminent domain or the threat thereof,
by any entity, governmental or otherwise, (ii) any such taking of any
appurtenances to the Land or the Improvements or part thereof or of vaults,
areas or projections outside the boundaries of the Land or the Improvements, or
part thereof, or rights in, under or above the alleys, streets or avenues, or
for the taking of space or rights therein, below the level of or above the Land
and the Improvements or part thereof, and (iii) any damage to the Land and
Improvements or part thereof due to governmental or other action, but not
resulting in a taking of any portion thereof, such as, without limitation, the
changing of the grade of any street adjacent to the Land and Improvements or
part thereof. The Mortgagor hereby agrees to file and prosecute its claim or
claims for any such award or payment in good faith and with due diligence and,
in the event that the Mortgagor fails to act, or in the event that an Event of
Default has occurred hereunder and is continuing, the Mortgagor hereby
irrevocably authorizes and appoints the Mortgagee as its attorney-in-fact to
file and prosecute such claim or claims.
Notwithstanding anything to the contrary contained herein, so long as
no Event of Default has occurred and is continuing hereunder, any and all such
awards shall be paid to the Mortgagor for the purpose of altering, restoring or
rebuilding any part of the Mortgaged
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Property which may have been so altered, damaged or destroyed. Any balance of
such awards or payment shall be applied without premium to the payment of the
unpaid principal balance of the Secured Indebtedness. The Mortgagee shall not
be obligated to see to the application of any payment made to the Mortgagor
pursuant to this subsection.
(f) COMPLIANCE WITH LAWS. The Mortgagor shall promptly and faithfully
comply in all material respect with, conform to and obey all present and future
laws, ordinances, rules, regulations and requirements of every duly constituted
governmental authority or agency and of every Board of Fire Underwriters having
jurisdiction, or similar body exercising similar functions, which may be
applicable to the Land or the Improvements, or any part thereof, or the use or
manner of use, occupancy, possession, operation, maintenance, alteration,
repair or reconstruction of the Improvements, or any part thereof; provided,
however, that after prior written notice to the Mortgagee, the Mortgagor, at its
sole expense, may contest by appropriate legal proceedings, conducted in good
faith and with due diligence, the validity or application of any law, ordinance,
rule, regulation or requirement referred to herein if (i) such proceeding shall
suspend the enforcement thereof against the Mortgagor and the Mortgaged Property
and (ii) the Mortgagor shall have furnished such security, as may be reasonably
necessary, against any loss or injury by reason of such proceeding.
(g) REPAIR. The Mortgagor shall not permit or suffer any waste,
impairment or deterioration of the Mortgaged Property or any part thereof,
ordinary wear and tear and damage by fire or casualty excepted. The Mortgagor
shall keep the Mortgaged Property in good order and condition and expeditiously
make all necessary or appropriate repairs, replacements and renewals thereof,
and additions and betterments and improvements thereto, interior and exterior,
structural and non-structural, ordinary and extraordinary, foreseen and
unforeseen, and use its best efforts to prevent any act or thing which might
materially impair the value or usefulness of the Mortgaged Property or any part
thereof; provided, however, that in the case of any damage or destruction to the
Mortgaged Property by a casualty against which insurance has been obtained
hereunder, the Mortgagor shall be relieved from the foregoing obligation unless
the mortgagees under the Senior Mortgages (if applicable) elect to apply the
insurance proceeds to the cost of repairs and replacements. The Mortgagor shall
not do or suffer anything which will materially increase the risk of fire or
other hazard to the Mortgaged Property or any part thereof or which would or
could result in the cancellation of any insurance policy maintained by the
Mortgagor with respect to the Mortgaged Property.
(h) INSPECTION. The Mortgagor shall permit the Mortgagee by its
representatives upon reasonable notice and at reasonable times to inspect the
Mortgaged Property.
(i) CONTINUANCE OF LIEN. The Mortgagor at its expense shall at all
times cause this Mortgage, and any modification, supplement or amendment hereto,
to be recorded and filed and to be kept recorded and filed in such manner and in
such places, and shall pay all such recording, filing or other taxes, fees and
other charges, and shall comply with all such statutes and regulations as may be
required by law, in order to establish, preserve and protect the status of this
Mortgage as a valid lien, with such priority as is provided herein, on all of
the
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Mortgaged Property, including, without limitation, any such property acquired
after the execution hereof, and the rights of the Mortgagee hereunder. The
Mortgagor shall execute and deliver, and pay the costs of preparation and
recordating thereof, any further instrument or instruments, including, but not
limited to, mortgages, security agreements, financing statements, assignments
and renewal and substitution notes, so as to perfect the evidence of the Secured
Indebtedness and the lien of this Mortgage upon all or any part of the Mortgaged
Property intended to be hereby conveyed hereunder, whether now conveyed, later
substituted for, or acquired subsequent to the date hereof.
(j) MECHANICS LIENS. The Mortgagor shall pay, from time to time when
the same shall become due, all lawful claims and demands of mechanics,
materialmen, laborers and others which, if unpaid, might result in, or permit
the creation of, a lien on the Mortgaged Property, or any part thereof, or on
the revenues, rents, issues, income and profits arising therefrom, and in
general will do or cause to be done everything reasonably necessary so that the
lien of this Mortgage shall be fully preserved as provided herein, at the cost
of the Mortgagor, without expense to the Mortgagee.
(k) ESTOPPEL CERTIFICATES. Within ten (10) business days after
written request of the Mortgagee, the Mortgagor shall at any time and from time
to time, execute, acknowledge and deliver to the Mortgagee a written statement
certifying the amount then owing on the Secured Indebtedness and whether or not
any offsets or defenses are claimed to exist against the Secured Indebtedness.
Within ten (10) business days after written request of the Mortgagor, the
Mortgagee shall at any time and from time to time, execute, acknowledge and
deliver to the Mortgagor a written statement certifying the amount then owing
on the Secured Indebtedness, the date of the last Installment Payment and
Supplemental Installment Payment made and if any default exists under the Loan
Documents and, if any such default does exist, stating the nature and period of
the existence thereof.
(l) SENIOR MORTGAGES. The Mortgagor shall (i) promptly make all
payments and perform and observe all of the terms, covenants and conditions
required to be performed and observed by the Mortgagor under the Senior
Mortgages, within the grace and notice periods provided for therein, and (ii)
promptly notify the Mortgagee in writing of the receipt by the Mortgagor of any
notice (other than notices customarily sent on a regular periodic basis) from
the mortgagee under any Senior Mortgage claiming any default by Mortgagor in the
performance or observance of any of the terms, covenants, or conditions on the
part of Mortgagor to be performed or observed under such Senior Mortgage, and
(iii) request that the mortgagees under the Senior Mortgages simultaneously send
copies of any such notices to the Mortgagee.
Section 3.2. BANKRUPTCY. The Mortgagor knowingly, voluntarily and
intentionally stipulates and agrees, to the fullest extent allowed by law and
with the full intention that such stipulation and agreement shall survive the
filing of any bankruptcy, that, in the event that the Mortgagor files for
protection under the United States Bankruptcy Code (11 U.S.C. Section 101 et
seq.) (the "Bankruptcy Code"), it being understood that this Mortgage is not
intended to preclude such filing, or if any involuntary petition in bankruptcy
is filed against the Mortgagor, and not
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dismissed within sixty (60) days, at any time from and after the date of this
Mortgage:
1. The Mortgagor shall use all reasonable efforts to obtain written
consent of lienors with subordinate interests (to this Mortgage)
in the Mortgaged Property to execute and deliver consents to the
entry of a foreclosure judgment in favor of the Mortgagee in the
event a foreclosure action is commenced or resumed. If permitted
by applicable law, the Mortgagee and the consenting subordinate
lienors shall be entitled to the immediate termination of the
automatic stay provisions of 11 U.S.C. Section 362, granting the
Mortgagee complete relief and allowing the Mortgagee to exercise
all of its legal rights and remedies, including, without
limitation, the right to foreclosure judgment and sale in a
foreclosure action and to pursue any and all remedies available
to the Mortgagee under this Mortgage, and the documents executed
in connection with the Loan pursuant to any provision of Florida
or United States law. The Mortgagor shall use diligent effort to
cause lifting of the automatic stay and with respect thereto
shall take such actions deemed necessary by the Mortgagee
including, without limitation, execution and filing of documents
reasonably required by the Mortgagee. The Mortgagor shall not
directly or indirectly oppose or otherwise defend against the
Mortgagee's effort to gain relief from the automatic stay. In
the event that the bankruptcy petition is an involuntary
petition, the Mortgagor shall undertake all practicable efforts
to cause such petition to be dismissed at the earliest possible
time. The Mortgagor agrees that the Mortgagee is entitled to
receive all Rents, Revenues and Proceeds, either because they are
not deemed to be property of the bankruptcy estate or because
they are the Mortgagee's cash collateral which the Mortgagee must
receive in order to have adequate protection of its interests
pursuant to Sections 361 and 363 of the Bankruptcy Code, but
without prejudice to the Mortgagee's right to assert a claim for
additional adequate protection payments. It is specifically
agreed and acknowledged by the Mortgagor that the lifting of the
automatic stay hereunder by the appropriate Bankruptcy Court
shall be deemed to be "for cause" pursuant to Section 362(d)(1)
of the Bankruptcy Code (11 U.S.C. Section 362[d][1]);
2. Any and all amounts incurred or deferred under the Mortgage or
the Note shall be, as of the day preceding such bankruptcy
petition, due and owing in full, and that all amounts owing under
the Mortgage or the Note shall be deemed an allowed claim as used
in 11 U.S.C. Section 502(b) and that any and all amounts due and
owing under the Mortgage or the Note shall be deemed a secured
claim as used in 11 U.S.C. Section 506(a), and the Mortgagee
shall be entitled to the extent permitted by applicable law
(including applicable bankruptcy law) to all fees, costs,
expenses and interest at the rate of twelve (12%) percent per
annum (the "Default Rate") from the date of the filing of the
bankruptcy petition until judgment;
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3. The assignment of the Rents, the Revenues and the Proceeds
provided in the Mortgage is an absolute and unconditional
assignment (subject to a license in favor of Mortgagor to receive
and apply the same until the occurrence of an Event of Default
[including the expiration of an applicable grace period and/or
notice period, if any] under this Mortgage) and not a collateral
assignment intended for security purposes, and the Mortgagor
stipulates and agrees that any receipts or income generated from
the Mortgaged Property shall not be deemed property of the estate
as used in 11 U.S.C. Section 541, but to the extent that such
assignment is construed, for any reason, not to constitute a
present, unconditional and absolute assignment of rents and other
income, said assignment shall constitute a valid and perfected
security agreement under Section 552(b) of the Bankruptcy Code;
and
4. Upon relief from the automatic stay of 11 U.S.C. Section 362, the
Mortgagee shall be entitled to pursue any and all rights, claims
and remedies available to it hereunder or under law or under the
Note and under the documents executed in connection with the
Loan, including, but not limited to, the commencement and
prosecution of a mortgage foreclosure proceeding and sale of the
Mortgaged Property.
ARTICLE 4
RIGHTS OF PERFORMANCE
Section 4.1 MORTGAGEE'S RIGHTS TO PERFORM. If the Mortgagor shall fail to
make any payment or perform or observe any act required to be made, performed or
observed under any of the Loan Documents, within the applicable grace or notice
periods, if any, unless the Mortgagor shall be engaged in good faith by
appropriate action diligently pursued in curing or causing to be cured or
contesting or causing to be contested the existence of such default, then, after
thirty (30) days prior written notice to the Mortgagor, or earlier if necessary
to avoid an event of default under any of the Senior Mortgages, the Mortgagee
may, but shall not be obligated to, make such payment or perform such act for
the account of and at the expense of the Mortgagor, and shall have the right to
enter upon the Mortgaged Property for such purpose to take all reasonable action
thereon as the Mortgagee may deem necessary or appropriate for such purpose.
All reasonable sums so paid by the Mortgagee and all reasonable costs and
expenses, including, without limitation, attorneys' fees, so incurred, together
with interest thereon at the Default Rate, from the date of such payment of
incurring of such cost or expense, shall constitute additional indebtedness
secured by this Mortgage, and shall be paid by the Mortgagor to the Mortgagee
within fifteen (15) days after written demand.
ARTICLE 5
EVENTS OF DEFAULT
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Section 5.1 EVENTS OF DEFAULT. Events of Default shall mean and include
the occurrence or happening from time to time of any one or more of the
following:
(a) PAYMENT OF NOTE. The Mortgagor shall fail to make any payment of
principal of or interest on the Note, when due and as the same shall become due
and payable under the terms of the Note, whether at maturity or otherwise, and
such failure shall continue for a period of ten (10) days after written notice
thereof shall have been given to the Mortgagor by the Mortgagee.
(b) PAYMENT OF OTHER SECURED INDEBTEDNESS. The Mortgagor shall fail
to pay when due any other portion of the Secured Indebtedness, including,
without limitation, any sums payable hereunder, and such failure shall continue
for a period of ten (10) days after written notice thereof shall have been given
to the Mortgagor by the Mortgagee.
(c) COVENANTS, ETC. The Mortgagor shall default in the performance
or observance, or there shall occur any material breach of, any other material
covenant, agreement, term or condition contained in this Mortgage, and such
default shall continue for a period of forty-five (45) days after written notice
thereof shall have been given to the Mortgagor by the Mortgagee, or in the case
of any such default which cannot with due diligence be cured within such forty-
five (45) day period, the failure of the Mortgagor to proceed to cure the same
within such forty-five (45) day period and thereafter to prosecute the curing of
such default with due diligence.
(d) OTHER LIENS. Any mechanic's or materialmen's lien shall be filed
or any judgment lien shall be docketed against the Mortgaged Property or any
part thereof and shall remain unsatisfied or not bonded so as to remove the same
from record for a period of forty-five (45) days after such filing or docketing.
(e) BANKRUPTCY; ASSIGNMENT FOR CREDITORS. If the Mortgagor shall
make any assignment for the benefit of creditors or shall be adjudged bankrupt,
or if a receiver is appointed for the Mortgagor and the appointment of such
receiver, if involuntary, is not vacated within sixty (60) days or if the
Mortgagor shall file or have filed against it a petition under or pursuant to
any provisions of the United States Bankruptcy Code or any amendment thereof or
substitute therefor, and such petition, if involuntary, is not vacated or stayed
within sixty (60) days after filing, or if any other proceeding for the relief
of creditors is commenced against the Mortgagor and not vacated or stayed within
sixty (60) days after the date commenced.
(f) SENIOR MORTGAGES. The occurrence of an event of default
(including the expiration of any applicable grace and/or notice period) under
any of the Senior Mortgages and the acceleration of the entire indebtedness
secured thereby by the holder thereof by written notice given to the Mortgagor.
The cure by the Mortgagor of any event of default under the Senior Mortgages
accepted by the mortgagee thereunder or any waiver of any event of default by
such mortgagee shall be deemed a complete and absolute cure hereunder of any
default thereunder and any Event of Default hereunder as a result of such
default, provided that the Mortgagor shall
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furnish the Mortgagee with evidence, reasonably satisfactory to the Mortgagee,
of such cure or waiver.
Section 5.2 DEFAULT BY MANAGER. Notwithstanding the provisions of Section
5.1 hereof, the Mortgagor shall not be deemed to be in default under this
Mortgage if the occurrence of such default resulted from, or was caused by, a
default by the Mortgagee as the "Operator" under that certain Management
Agreement dated December 27, 1984, between the Mortgagor and the Mortgagee, as
amended by First Amendment to Management Agreement dated September 12, 1991 and
that certain Second Amendment to Management Agreement dated as of December 31,
1993 (collectively, the "Management Agreement").
ARTICLE 6
REMEDIES ON DEFAULT
Section 6.1 REMEDIES. If any one or more of the Events of Default shall
occur, the Mortgagee may, subject to the rights of the mortgagees under the
Senior Mortgages, exercise any or all of the following remedies:
(a) ACCELERATION. The Mortgagee may declare the entire unpaid
portion of the Secured Indebtedness to be immediately due and payable, upon
giving such notice as may be required by law, whereupon the same shall become
immediately due and payable.
(b) ENTRY ON MORTGAGED PROPERTY. The Mortgagee may enter the Land
and the Improvements and take possession thereof including Fixtures and
Personalty located thereon and of all books, records and accounts relating
thereto.
(c) OPERATION OF MORTGAGED PROPERTY. The Mortgagee may enter the
Land and the Improvements and take possession of all or any part of the
Mortgaged Property and exclude the Mortgagor, its agents and servants wholly
therefrom, and use, lease, operate, manage and control the Mortgaged Property,
either personally or by its managers, employees, agents, servants, attorneys or
receivers. Upon each such entry the Mortgagee, at the expense of the Mortgagor,
from time to time, may complete the construction of any partially constructed
Improvements and make all necessary or proper repairs, renewals and replacements
to and upon the Mortgaged Property as it deems advisable and pay all proper
costs and expenses thereof and of its taking, holding and managing the same, and
any taxes, assessments and other charges prior to the lien of this Mortgage
which the Mortgagee may deem it appropriate to pay. In each such case the
Mortgagee shall have the right to manage the Land and the Improvements and to
carry on the business and exercise all rights and powers of the Mortgagor,
either in the name of the Mortgagor, or otherwise, as the Mortgagor shall deem
advisable; and the 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 Land and the
Improvements and conducting the business thereof, and of all other repairs,
maintenance, renewals, replacements, alterations, additions, betterments,
improvements and all payments
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which the Mortgagee may be required or may elect to make for taxes, assessments
or other proper charges, or any part thereof, as well as just and reasonable
compensation for all managers, employees, agents, servants, attorneys, and
receivers engaged and employed, the monies arising as aforesaid shall be applied
to the unpaid principal portion of the Secured Indebtedness.
(d) FORECLOSURE AND SALE. Upon the occurrence of any one or more of
the above-mentioned Events of Default, all of the Secured Indebtedness shall
immediately become due and payable, upon giving such notice to the Mortgagor as
may be required by law, at the option of the Mortgagee, and the Mortgagee may
commence foreclosure proceedings against the Mortgaged Property through judicial
proceedings pursuant to the statutes in such case made and provided, and sell
the Mortgaged Property or cause the same to be sold at public sale, and convey
the same to the purchaser, in accordance with such statutes in a single parcel
or in several parcels at the option of the Mortgagee.
In the event of any sale of the Mortgaged Property by foreclosure
through judicial proceedings or otherwise, subject to the rights of the
mortgagees under the Senior Mortgages, the Mortgagee shall apply the proceeds of
any such sale in the following order: (i) to the payment of all reasonable
expenses incurred for the collection of the Secured Indebtedness and the
foreclosure of this Mortgage, including advertising costs and reasonable
attorneys' fees; (ii) to the payment of any taxes or assessments which may be a
lien against the Mortgaged Property unless the Mortgagee advertised and sold
same subject to such taxes or assessments; (iii) to the payment of interest due
under the Note; (iv) to the principal of the Note; (v) to the payment of any
other sums secured by the Loan Documents; and (vi) the remainder, if any, to the
account of the Mortgagor.
In the event foreclosure is commenced but not completed, the Mortgagor
shall pay all expenses of the proceeding, including reasonable attorneys' fees.
All expenses of such proceeding which are incurred by the Mortgagee, together
with interest thereon at the Default Rate from the date such expenses are
incurred, shall constitute additional indebtedness secured by this Mortgage, and
shall be paid by the Mortgagor to the Mortgagee on demand.
At such sale the Mortgagee may bid for and acquire any part of the
Mortgaged Property and in lieu of paying cash therefor may take settlement for
the purchase price by crediting upon the sums due and payable under and secured
by this Mortgage the net sales price which shall be the proceeds of sale after
deducting therefrom the expenses referred to above.
(e) REMEDIES CUMULATIVE AND CONCURRENT. All rights and remedies of
the Mortgagee shall be cumulative and concurrent and may be pursued separately,
successively or together against the Mortgagor, or the Mortgaged Property, or
any part thereof, at the sole discretion of the Mortgagee and may be exercised
as often as occasion therefor shall arise. The failure to exercise any such
right or remedy shall in no event be construed as a waiver or release thereof.
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<PAGE>
(f) PERFORMANCE. Any failure by the Mortgagee to insist upon
performance by the Mortgagor of any of the terms and provisions of the Loan
Documents shall not be deemed to be a waiver of any of the terms or provisions
thereof, and the Mortgagee shall have the right thereafter to insist upon the
performance by the Mortgagor of any and all of them. Failure of the Mortgagee
to exercise the option for acceleration of maturity or foreclosure following any
Event of Default or to exercise any other option granted to the Mortgagee under
the Loan Documents in any one or more instances, or the acceptance by the
Mortgagee of partial payments, shall not constitute a waiver of any such
default, but such option of the Mortgagee shall remain continuously in force.
ARTICLE 7
SUBORDINATION
Section 7.1 SENIOR MORTGAGES. The Mortgagee, by its acceptance of this
Mortgage, does hereby agree that the Loan Documents and (i) all rights,
remedies, powers, privileges and benefits, and all titles, interests, liens and
security interests created by the Loan Documents or arising by virtue thereof,
and (ii) the indebtedness, liabilities, obligations and payments secured by the
Loan Documents, are and shall at all times continue to be subject and
subordinate in lien to the lien created by the Prior Mortgage, the $5,000,000
Mortgage, all Capital Loan Mortgages and those Operating Deficit Loan Mortgages
which are expressly by their terms senior hereto and the indebtedness and
obligations secured by any of the foregoing, together with interest thereon, and
to all advances thereon or replacements, refinancings, extensions, renewals or
modifications thereof, or substitutions therefor, hereafter made.
Section 7.2 DEFINITIONS. For purposes of this Mortgage; (i) the term
"Prior Mortgage" shall mean the mortgage instrument dated December 28, 1984 as
amended and assigned as set forth in granting clause (A) of this Mortgage and
any extension, renewal or modification thereof and any replacement or substitute
mortgage and security instruments given by the Mortgagor in connection with a
refinancing of the Prior Loan; (ii) the term "$5,000,000 Mortgage" shall mean
the mortgage instrument specified in granting clause (B) of this Mortgage and
any extension, renewal or modification thereof; (iii) the term "Capital Loan
Mortgage" shall mean such mortgage and security instruments hereafter given by
the Mortgagor to secure any loan or loans made by an institutional lender to the
Mortgagor ("Capital Loan"), the proceeds of which are used for any repairs,
maintenance, alterations, renovations, installations, replacement or
improvements of or to the Mortgaged Property or any part thereof, and the costs
incurred by the Mortgagor in obtaining such loans, including, without
limitation, brokerage commissions and fees, mortgage and/or documentary stamp
taxes, recording charges, title insurance premiums, surveyor's and/or
appraiser's fees, escrow and settlement charges and attorney's fees; (iv) the
term "Operating Deficits Loan Mortgage" shall mean the mortgage and security
instruments hereinafter given by the Mortgagor to secure any Operating Deficits
Loan (as defined in Section 2.20 of the Management Agreement) and if the
mortgage securing such future Operating Deficits Loan expressly provides that it
is senior in priority to the lien of this Mortgage; (v) the Prior Mortgage, the
$5,000,000 Mortgage, all Capital Loan Mortgages and those Operating Deficits
-15-
<PAGE>
Loan Mortgages which are made senior hereto are herein sometimes collectively
referred to as the "Senior Mortgages"; and (vi) the term "institutional lender"
shall mean any of the following entities, whether acting for their own account
or in a fiduciary capacity: any bank, savings institution, credit union, trust
company, national banking association, insurance company, pension, retirement or
profit-sharing trust or fund, investment company, real estate investment trust
not affiliated with the Mortgagor, governmental or quasi-government agency,
public employees' pension or retirement system or any other governmental agency
supervising the investment of public funds, securities broker/dealers, or any
entity engaged in the business of making commercial loans such as General
Electric Credit Corporation.
Section 7.3 ADDITIONAL INSTRUMENTS. The subordination of the lien created
by this Mortgage to (i) the Prior Mortgage, the $5,000,000 Mortgage, and any
extensions, renewals or modifications thereof, (ii) the lien hereafter created
to secure a refinancing of the Prior Loan, and (iii) the liens hereafter created
by all Capital Loan Mortgages and those Operating Deficits Loan Mortgages made
senior hereto, shall be self-operative without further act or agreement by the
Mortgagee. Upon written request of the Mortgagor, the Mortgagee shall promptly
execute, acknowledge and deliver to the Mortgagor any further instrument or
instruments, in form satisfactory to the Mortgagor, requested at any time and
from time to time, to reaffirm, evidence and assure the subordination of this
Mortgage in accordance with the provisions hereof.
ARTICLE 8
MISCELLANEOUS
Section 8.1 NOTICES. Except as otherwise contemplated herein or required
by statute, all notices, demands, consents and other communications which any
party is required or may desire to give to or made upon the other party or
parties pursuant to this Mortgage shall be in writing and signed by the party
giving same, and shall be delivered personally (upon an officer, general partner
or officer of a general partner of the other party if such party is not an
individual or to such individual as may be noted in the addresses stated below)
to the other party or parties or sent by certified or registered mail of the
United States Postal Service return receipt requested, postage prepaid,
addressed to the other party or parties as follows (or to such other address or
person as either party or person entitled to notice may by notice to the other
specify):
To the MORTGAGOR:
Key Biscayne Limited Partnership
c/o VMS Realty Partners
8700 West Bryn Mawr Avenue
Chicago, Illinois 60631
Attn: Jay Fishman,
Senior Vice President - Hotels
With a copy concurrently delivered to:
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<PAGE>
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attn: Jeffrey H. Weitzman, Esq.
To the MORTGAGEE:
Florida Sonesta Corporation
c/o Sonesta International Hotels Corporation
200 Clarendon Street
Boston, Massachusetts 02116
Attn: Office of the Treasurer
With a copy concurrently delivered to:
Burns & Levinson
125 Summer Street
Boston, MA 02110
Attn: Lawrence M. Levinson, Esq.
Unless otherwise specified, notices shall be deemed given when received, but if
delivery is not accepted, on the earlier of the date delivery is refused or the
third day after the same is deposited with the United States Postal Service.
Section 8.2 GOVERNING LAW. This Mortgage shall be governed by and
construed according to the laws of the State of Florida.
Section 8.3 COVENANTS RUNNING WITH THE LAND. All covenants contained in
this Mortgage shall run with the Mortgaged Property.
Section 8.4 SUCCESSORS AND ASSIGNS. This Mortgage shall be binding upon
and shall insure to the benefit of the Mortgagor, and the Mortgagee and their
respective Successors and assigns, as such successors and assigns are permitted
under the provisions of this Mortgage.
Section 8.5 SEVERABILITY. In case any one or more of the terms,
provisions, covenants or conditions of this Mortgage shall be invalid, illegal
or unenforceable in any respect, the validity of the remaining terms,
provisions, covenants and conditions hereof shall be in no way affected,
prejudiced or disturbed thereby.
Section 8.6 MODIFICATION. This Mortgage may not be changed, waived,
discharged or terminated orally, but only by an instrument or instruments in
writing, signed by all parties hereto.
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<PAGE>
Section 8.7 NO PERSONAL LIABILITY OF THE MORTGAGOR. By accepting this
Mortgage, the Mortgagee acknowledges that the promise of the Mortgagor to pay
the Secured Indebtedness is for the sole purpose of establishing the existence
of an indebtedness, and the Mortgagee's source of satisfaction of the Secured
Indebtedness is limited solely and exclusively to the Mortgaged Property and any
other collateral pledged by the Mortgagor to the Mortgagee, and the Mortgagee
shall not seek to procure payment out of any other assets of the Mortgagor, or
its successors and assigns, or any partner of the Mortgagor, or any officer,
director, shareholder or partner of a partner of the Mortgagor, or any
disclosed or undisclosed principal of the Mortgagor, or to procure any judgment
for any sum of money which is or may be payable under the Note and under this
Mortgage or under any other of the Loan Documents or for any deficiency
remaining after foreclosure of this Mortgage or sale under any such document;
provided, however, that nothing herein contained shall be deemed to be a release
or impairment of the Secured Indebtedness or the security therefor intended by
this Mortgage or any other document or be deemed to preclude the Mortgagee from
foreclosing this Mortgage or any other document or be deemed to preclude the
Mortgagee from foreclosing this Mortgage or other document or from enforcing
any of the Mortgagee's rights thereunder. The Mortgagee, by accepting this
Mortgage, acknowledges and agrees that the obligations of the Mortgagor under
the Note, under this Mortgage and under any and all of the other Loan Documents
shall be and are totally nonrecourse as to the Mortgagor, its partners and any
partners of its partners, any officer, director, shareholder or partner of a
partner of the Mortgagor, and any disclosed or undisclosed principal of the
Mortgagor, and none of such parties shall have any personal liability with
respect to the Note, this Mortgage and the other Loan Documents.
Section 8.8 HEADINGS. The Article headings and the Section and Subsection
entitlements hereof are inserted for convenience of reference only, and are in
no way to be construed as part hereof or as a limitation on the scope of the
particular provisions to which they refer.
Section 8.9 RELEASE. If the Mortgagor shall pay the Note in accordance
with its terms, together with interest thereon, and any renewals and extensions
thereof, and all indebtedness otherwise due under the Loan Documents, and shall
comply with all of the covenants, terms and conditions of the Loan Documents,
then this Mortgage shall become null and void and shall be cancelled of record
at the request and expense of the Mortgagor.
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<PAGE>
IN WITNESS WHEREOF, the Mortgagor has duly executed, sealed and delivered
this Mortgage as of the day and year first above written.
KEY BISCAYNE LIMITED PARTNERSHIP
a Florida limited partnership
By: VMS Realty Investment, Ltd.,
an Illinois limited partnership,
General Partner
By: /S/ JAY FISHMAN
---------------------------------
Authorized Signatory
Type/Print Name: Jay Fishman
Address:____________________________
Witness:
/S/ MICHAEL D. BARNELLO
------------------------------
Type/Print Name: Michael D. Barnello
Witness:
/S/ PETER J. SONNABEND
-------------------------------
Type/Print Name: Peter J. Sonnabend
ACKNOWLEDGMENTS
STATE OF FLORIDA
COUNTY OF PALM BEACH
On this 4th day of February, 1994, personally appeared before me Jay
Fishman, Authorized Signatory of and on behalf of VMS Realty Investment, Ltd.,
an Illinois limited partnership, which is general partner of Key Biscayne
Limited Partnership, a Florida limited partnership, to me personally known
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<PAGE>
[strike inapplicable clause] and he acknowledged to me that he signed the
foregoing instrument on behalf of VMS Realty Investment, Ltd., acting as
general partner of Key Biscayne Limited Partnership.
/S/ THOMAS A. HANSON
----------------------------------------
Notary Public Thomas A. Hanson
My Commission Expires:
NOTARY PUBLIC, STATE OF FLORIDA AT LARGE
MY COMMISSION EXPIRES APRIL 18, 1995
BONDED THRU HUCKLEBERRY & ASSOCIATES
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<PAGE>
Exhibit 10.1(d)
PROMISSORY NOTE
$1,576,600.00
West Palm Beach, Florida
February 4, 1994
FOR VALUE RECEIVED, the undersigned, KEY BISCAYNE LIMITED PARTNERSHIP, a
Florida limited partnership ("Maker") hereby promises to pay to the order of
FLORIDA SONESTA CORPORATION, a Florida Corporation ("Payee"), its successors
and assigns, c/o Sonesta International Hotels Corporation, at 200
Clarendon Street, Boston, Massachusetts 02116, or at such other place as the
holder of this Promissory Note (the "Note") may from time to time designate in
writing, in lawful money of the United States of America, the principal sum of
One Million Five Hundred Seventy Six Thousand Six Hundred and No/100 Dollars
($1,576,600.00), or such lesser amount as may have been advanced by Payee to
Maker pursuant to a letter agreement dated April 13, 1993, as amended September
29, 1993, and further amended by a letter agreement dated February 1, 1994, with
interest thereon, as follows:
1. Subject to the provisions of Paragraph 2 hereof, the unpaid principal
balance of this Note shall bear interest from the date hereof at the rate of ten
percent (10%) per annum. Accrued but unpaid interest shall be added monthly to
the unpaid principal balance of this Note on the last day of each calendar month
and thereafter such principal balance will earn interest at the rate of ten
percent (10%) per annum. The entire unpaid principal balance of this Note
together with all accrued but unpaid interest thereon and any unpaid late
charges, if not sooner paid, shall be due and payable on December 31, 1997, (the
"Maturity Date").
2. Principal and interest shall be due and payable in annual installments
(individually, an "Installment Payment") commencing on the first day of January
1994 and on the first day of January of each succeeding calendar year ("Payment
Date") as follows: The Installment Payment due on each Payment Date shall be
equal to the amount by which the Net Operating Income (as defined in that
certain Management Agreement dated December 27, 1984 between Biscayne Beach
Hotel Associates, Ltd. and Payee, as amended by First Amendment dated September
12, 1991 and Second Amendment dated as of December 31, 1993) (as so amended, the
"Management Agreement") of the Mortgaged Property (hereinafter defined) exceeds
the following deductions (the "Priority Deductions"): (A) principal and
interest due and payable for that same year under that certain Second Renewal
Promissory Note (the "Second Renewal Note") from Maker to Aetna Life Insurance
Company in the principal amount of $24,142,088.26 plus the "Deferred Amount" as
defined therein, dated as of December 1, 1993 (the "Renewal Note"); (B) that
certain fee to Strategic Realty Advisors, Inc., for that same year described in
Section 7.1(g) of the Management Agreement, pursuant to Section 3 of that
certain "Second Amendment to Management Agreement" dated as of
<PAGE>
December 31, 1993; and (C) the principal and interest due and payable for that
same year under that certain "Purchase Money Mortgage Note" dated December 27,
1984 in the original principal amount of $5,000,000 (as amended).
3. Notwithstanding the Payment Date set forth in Paragraph 1 hereof, each
Payment Date shall be extended until the date which is five (5) business days
after Maker's receipt from Payee of an unaudited financial statement (the
"Unaudited Statement") showing the profit or loss of the operations of the
Mortgaged Property (hereinafter defined) for the calendar year immediately
preceding such Payment Date together with the calculation of Net Operating
Income. Each payment made by Maker pursuant to the Unaudited Statement shall be
subject to adjustment as follows: (i) if the Annual Profit and Loss Statement
for the Mortgaged Property (issued by Payee to Maker pursuant to Section 4.1 of
the Management Agreement) for the period covered by the Unaudited Statement
shall indicate that Maker has underpaid the Installment Payment, Maker shall pay
the deficiency to Payee within five (5) business days after Maker's receipt of
the Annual Profit and Loss Statement; and (ii) if, however, such Annual Profit
and Loss Statement shall indicate that Maker has overpaid the Installment
Payment, Payee shall pay the amount of the overpayment to Maker within five (5)
business days after Maker's receipt of Annual Profit and Loss Statement.
4. This Note may be prepaid in whole or in part at any time and from time
to time without penalty.
5. The entire unpaid principal balance of this Note and all accrued but
unpaid interest thereon shall become immediately due and payable, at the option
of Payee, upon the earliest to occur of any of the following events
("Acceleration Events"):
(a) the termination of the Management Agreement by the "Owner" or
"Operator" thereunder, except for any termination pursuant to Section 10.3
thereof; or
(b) a sale or conveyance of all or substantially all of the Mortgaged
Property ("Sale"), including, without limitation, a sale of all or any portion
of the Mortgaged Property as a condominium, interval ownership or time sharing
unit or a sale or conveyance of the Mortgaged Property by foreclosure sale or
deed in lieu thereof, but excluding the granting of easements or the granting of
a lien on the Mortgaged Property as security for a mortgage loan; provided,
however, that a sale or conveyance to VMS Realty Partners ("VMS") or any entity
controlled by VMS or any of its partners shall not be deemed to be a "Sale."
<PAGE>
Delay or failure to exercise the foregoing option with respect to any
Acceleration Event shall not constitute a waiver of the right to exercise the
same with respect to that or any subsequent Acceleration Event.
6. Should default in the payment of any installment Payment due hereunder
continue beyond fifteen (15) days from the due date of such payment, Maker shall
pay a late charge to compensate Payee for the added expense and inconvenience
incurred by Payee and caused by such delay in payment. It is acknowledged by
Maker and Payee that the actual amount necessary to adequately compensate Payee
in such case would be impractical and extremely difficult to calculate. Maker
and Payee therefore agree that the amount of such late charge shall be two
percent (2%) of the amount of such late payment. Upon the occurrence of an
Acceleration Event and during the continuation thereof, the interest rate
applicable to the entire unpaid principal balance of this Note shall be the
interest rate described in Section 1 above, from time to time in effect, plus
six (6) percentage points.
7. Except as expressly provided for in the Mortgage, Maker hereby waives
presentment for payment, demand, protest, notice of protest or dishonor, notice
of acceleration of maturity, and all defenses on the ground of extension
of time for the payment hereof, and agrees to continue and remain bound
for the payment of principal, interest and all other sums payable hereunder
not withstanding any change or changes by way of release, surrender,
exchange, or substitution of any security for this Note or by way of any
extension or extensions of time for the payment of principal and interest. The
rights and remedies of the holder as provided herein shall be cumulative and
concurrent and may be pursued singularly, successively or together at the sole
discretion of the holder, and may be exercised as often as occasion therefor
shall occur.
8. Nothing herein contained, nor any transaction related thereto, shall be
construed or so operate as to require Maker to pay interest at a greater rate
than the maximum allowed by applicable law. Should any interest or other
charges paid or payable by Maker in connection with this Note or any other
document delivered in connection herewith, result in the computation or earning
of interest in excess of the maximum allowed by applicable law, then any and all
such excess shall be and the same is hereby waived by Payee or the then holder
hereof, and any and all such excess paid shall be automatically credited against
and in reduction of the balance due under this Note, and the portion of such
excess which exceeds the balance due under this Note shall be paid by Payee or
the then holder hereof to Maker.
9. All notices and other communications between the parties under this
Note shall be deemed to have been properly given and
<PAGE>
shall be effective if delivered in accordance with the provisions of the
Management Agreement.
10. As used herein, the terms "Maker" and "Payee" shall be deemed to
include their respective successors and assigns, whether by voluntary action of
the parties or by operation of law.
11. Payee's source of satisfaction of the indebtedness evidenced by this
Note is limited solely and exclusively to the Net Operating Income of the
Property, and Payee shall not seek to procure payment out of any other assets of
Maker, or its successors and assigns, or any partner of Maker, or any officer,
director, shareholder or partner of a partner of Maker, or any disclosed or
undisclosed principal of Maker, or to procure any judgment for any deficiency;
provided, however, that nothing herein contained shall be deemed to be a release
or impairment of the indebtedness evidenced by this Note or any security
therefor intended by this Note or any other document. The obligations of Maker
under this Note, and under any and all of the other documents evidencing or
securing this Note (the "Loan Documents"), if any, shall be and are totally
nonrecourse as to Maker, its partners and any partners of its partners, and none
of such parties shall have any personal liability with respect to this Note and
the other Loan Documents.
12. If this Note is placed in the hands of an attorney for collection,
Maker hereby agrees to pay the holder hereof in addition to the sums above
stated, all costs of collection, including reasonable attorneys' fees and other
legal costs.
13. Neither this Note nor the method set forth herein for the compensation and
payment of interest is intended to create, nor shall be construed as creating, a
partnership, joint venture or any other relationship between Maker and Payee
other than that of the debtor and creditor.
14. This Note shall be governed by and construed in accordance with the
laws of the State of Florida.
KEY BISCAYNE LIMITED PARTNERSHIP,
A Florida Limited Partnership
By: VMS Realty Investment, Ltd.
By: /S/ JAY FISHMAN
----------------------------
Authorized Signatory
<PAGE>
Exhibit 10.1(e)
SECOND AMENDMENT TO MANAGEMENT AGREEMENT
SECOND AMENDMENT TO MANAGEMENT AGREEMENT made as of the 31st day of
December, 1993 ("Second Amendment"), between KEY BISCAYNE LIMITED PARTNERSHIP
(formerly known as Biscayne Beach Hotel Associates, Ltd.), a Florida limited
partnership, having an office address c/o VMS Realty Partners, at 8700 West Bryn
Mawr, Chicago, Illinois 60631 ("Owner"), and FLORIDA SONESTA CORPORATION, a
Florida corporation, having an office address c/o Sonesta International Hotels
Corporation, at 200 Clarendon Street, Boston, Massachusetts 02116 ("Operator").
RECITALS:
A. Owner is the owner of that certain real property commonly known as
the "Sonesta Beach Resort" and situated in the City of Key Biscayne, Dade
County, Florida (the "Property").
B. Operator is the operator of the Property pursuant to a Management
Agreement dated as of October 27, 1984, as amended by a First Amendment to the
Management Agreement, dated September 12, 1991 (the "Management Agreement"),
between Owner and Operator.
C. Owner and Operator now desire to further amend the Management
Agreement on the terms and conditions hereinafter set forth.
AMENDMENT:
NOW, THEREFORE, in consideration of the sum of Ten Dollars ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Section 2.11 is hereby amended to provide as follows:
"Term" shall mean the period beginning on the Commencement Date and
ending at midnight on December 31 of the twenty-fifth (25th) full
Calendar Year following the Commencement Date.
The foregoing amendment is exclusive of any extension of the Term arising under
Section 8.6 or otherwise.
2. The provisions of Section 3.4 of the Management Agreement shall be
deemed to be Subsection 3.4(A). A new Subparagraph (B) shall be added to
Section 3.4 of the Management Agreement to read as follows:
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<PAGE>
(B) Commencing in Calendar Year 1994 and continuing thereafter all
Net Operating Income remaining after the application of such Net Operating
Income to Items (1) through (7), inclusive, as set forth on Exhibit II to
the Management Agreement entitled "Disbursement Priority" shall be paid to
Operator to pay off the following indebtedness of Owner to Operator, in the
following order of priority:
(1) principal and interest payable under that certain "Promissory
Note" in the original principal amount of $1,576,600.00, dated as
of February 4, 1994, a copy of which is attached hereto as
Exhibit "A";
(2) accrued and unpaid interest, including without limitation
applicable late charges (collectively, the "Delinquent Amount"),
payable by Owner to Operator under that certain "Purchase Money
Mortgage Note" dated December 27, 1984, in the original principal
amount of $5,000,000.00 (as amended), together with interest on
the Delinquent Amount at the rate of fourteen and one-half
percent (14 1/2%) per annum, from the date hereof, compounded
quarterly to the extent unpaid; (upon the execution of this
"Second Amendment" by both parties all defaults existing under
the aforementioned "Purchase Money Mortgage Note" and the
mortgage that secures such Purchase Money Mortgage Note as of
this date shall be deemed waived by the Operator); as of the
date of this Second Amendment the Delinquent Amount is
$561,000.00; and
(3) principal and interest payable under that certain "Operating
Deficit Loan Mortgage Note" in the original principal amount of
$2,194,005.00, dated as of December 31, 1993, a copy of which is
attached hereto as "Exhibit B";
No "Renovation Fee", as referenced in that certain "First Amendment to
Management Agreement", dated as of September 12, 1991, shall be payable to
Owner or Operator until all amounts referenced in sections (1)-(3), above, have
been paid in full.
3. Item (2) of Exhibit II to the Management Agreement entitled
"Disbursement Priority", referencing debt service payable by Owner under the
"Expansion Loan", is hereby deleted in its entirety and replaced with the words,
"Intentionally omitted". All
- 2 -
<PAGE>
other Items enumerated in said Exhibit II shall retain their existing numbers.
4. A new Subparagraph (g) shall be added to Section 7.1 of the Management
Agreement to read as follows:
(g) For each of the four (4) Calendar Years, 1994-1997, inclusive, a fee
to Strategic Realty Advisors, Inc. (the "SRA Fee") equal to .0075 (3/4 of 1%) of
Gross Revenue per year, payable monthly (or at such other interval(s) as
Strategic Realty Advisors, Inc. instructs Operator) out of Net Operating Income
remaining after the application of such Net Operating Income to Item (1), as set
forth on Exhibit II to the Management Agreement entitled "Disbursement Priority"
(which Item (1) is understood to include the modification to the Prior Loan
being effected as of December 1, 1993); provided, however, that said fee (not
including any previously accrued and unpaid SRA Fee(s)) shall not be paid, and
shall cease being payable, from and after the earlier to occur of (i) a filing
by Owner for protection under the United States Bankruptcy Code (11 U.S.C.,
Sec. 101 et seq.) not caused by a breach by Operator of its obligations under
the Management Agreement, or an involuntary bankruptcy filing against Owner to
which neither Operator nor any Affiliate of Operator is a party and that is not
dismissed within sixty (60) days after the date of filing, or (ii) Owner's
receipt of a written notice of default from the holder of the loan secured by
the "Prior Mortgage" as that term is referenced in Section 2.18 of the
Management Agreement which default has not been caused by a breach by Operator
of its obligations under the Management Agreement; provided, however, that in
the case of (ii), above, (A) the SRA Fee shall not be payable only so long as
such default continues, without waiver or the rescission of such notice by the
holder of such loan; if any such default is cured, waived or rescinded within
sixty (60) days after it occurs, the SRA Fee not paid during the period of
default shall be paid upon such cure, waiver or rescission; however, if any
such default continues for more than sixty (60) days, the SRA Fee not paid
during the period of default shall not be paid at any time; and (B) the
existence of a default that does not arise from Owner's failure to pay money
due under such loan shall not result in the nonpayment of the SRA Fee if
Operator has received written notice of such default and has an opportunity to
cure same. Notwithstanding the calculation of the SRA Fee based on Gross
Revenue, the SRA Fee is not an Expense (as defined in the Management Agreement).
Notwithstanding anything herein to the contrary, if Net Operating Income is not
sufficient to pay any portion of the SRA Fee in any year, Operator shall pay any
such insufficiency to Strategic Realty Advisors, Inc.
5. Notwithstanding anything in the Management Agreement to the contrary
during the period commencing January 1, 1994 through December 31, 1995 (the
"Deferral Period"), Operator agrees to defer
- 3 -
<PAGE>
the payment of the Basic Fee and the Advertising and Promotional Fee, or
otherwise provide funds, to the extent necessary to make up any shortfall in Net
Operating Income available to pay debt service payable under the $5,000,000.00
Loan (as referenced in "Exhibit II" ("Disbursement Priority") and secured by the
$5,000,000.00 Mortgage") for the Deferral Period. Without limiting the
generality of the foregoing, if at any time or from time to time during the
Deferral Period, Net Operating Income is insufficient to pay debt service
payable under the $5,000,000.00 Loan and Operator has previously received
payments of the Basic Fee and the Advertising and Promotional Fee attributable
to the Deferral Period, Operator shall, upon request from Owner, promptly pay
over to the holder of the $5,000,000.00 Loan, from such fees previously received
by Operator for the Deferral Period, all such fees up to the amount of such
deficiency, or otherwise provide funds to cover such insufficiency. All such
fees so deferred shall be added to the indebtedness evidenced by the "Operating
Deficit Loan Mortgage Note" described above, and repayment thereof shall be
secured by the Operating Deficit Loan Mortgage and Security Agreement which
secures the Operating Deficit Loan Mortgage Note. Notwithstanding the
foregoing, Operator's obligation to defer fees hereunder shall terminate upon
the occurrence of an event of default under the Prior Loan (as referenced in
"Exhibit II" ("Disbursement Priority") and secured by the "Prior Mortgage");
provided, however, that Operator's obligation to defer fees, as described above,
shall be reinstated, with retroactive effect, in the event that such default
under the Prior Loan is cured, waived or rescinded on or before December 31,
1995.
6. Owner shall not have the right to make any withdrawals from the
accounts for the Hotel maintained by the Operator without the prior written
consent of the Operator; provided, however, that Owner may make withdrawals from
such accounts if Owner, in good faith, determines or reasonably anticipates that
Operator is going to apply the monies in such accounts in violation of the terms
of the Management Agreement. Owner agrees to execute and deliver, upon request
of Operator, such documents as may be reasonably required by the banks where
such accounts are maintained to effectuate the provisions of this paragraph.
7. Except as specifically amended hereby, the Management Agreement is
hereby ratified and confirmed in all respects and shall remain in full force and
effect.
8. Notwithstanding the consent by AETNA Life Insurance Company ("AETNA"),
to this Second Amendment, AETNA shall not be bound by the provisions of Section
4 above from and after the occurrence of an event of default under the Prior
Loan.
- 4 -
<PAGE>
IN WITNESS WHEREOF, Owner and Operator have executed this Second Amendment
as of the day and year first above written.
OWNER:
KEY BISCAYNE LIMITED PARTNERSHIP
a Florida limited partnership
By: VMS Realty Investment, Ltd.
Managing General Partner
By: /S/ JAY FISHMAN
------------------------
OPERATOR:
FLORIDA SONESTA CORPORATION
a Florida corporation
By: /S/ PETER J. SONNABEND
--------------------------
- 5 -
<PAGE>
Exhibit 10.2
SECOND AMENDMENT TO LEASE
WHEREAS, JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY
("Landlord") and SONESTA INTERNATIONAL HOTELS CORPORATION ("Tenant") entered
into a Lease dated June 26, 1979 and amended by a Revised First Amendment to
Lease dated May 30, 1989 demising certain Premises in the John Hancock Tower,
200 Clarendon Street, Boston, MA (the "Lease"); and
WHEREAS, pursuant to the terms of the Lease, Tenant currently leases 14,772
square feet of space located on the 41st floor (the "T-41 Premises") and 11,137
square feet of space on the 51st floor (the "T-51 Premises") all as more fully
described in the Lease; and
WHEREAS, the term of the Lease for the T-41 Premises and the T-51 Premises
is scheduled to expire on October 28, 1994; and
WHEREAS, Tenant desires to amend the Lease by extending the term of the
Lease for the T-41 Premises for an additional period of ten years (and return
the T-51 Premises to Landlord on the scheduled October 28, 1994 expiration
date); and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide for the
above;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Lease is hereby amended as
follows:
1. T-51 PREMISES. Landlord and Tenant acknowledge that the term of the
Lease with respect to the T-51 Premises shall expire on the scheduled
expiration date of October 28, 1994. Without limiting any other
provision in the Lease, Tenant shall surrender possession of the T-51
Premises to Landlord on October 28, 1994 in compliance with Section 18
of the Lease, free and clear of all occupants and subtenants,
including but not limited to, Standish Care Company, Inc. and Pacific
Financial Research, Inc.
2. T-41 PREMISES EXTENSION. The term of Lease with respect to the T-41
Premises is hereby extended for an additional period of 10 years,
commencing October 29, 1994 and expiring on October 31, 2004 (herein
the "Extension Term"), unless sooner terminated pursuant to the terms
of the Lease. From and after October 29, 1994 the term "Premises"
under the Lease shall mean and refer only to the T-41 Premises.
<PAGE>
- 2 -
3. BASE RENT DURING EXTENSION TERM. Effective October 29, 1994 and
continuing through October 31, 1999, the Base Rent for the Premises
shall be at an annual rate of $413,616.00 (14,772 rentable square feet
at $28.00 per square foot), payable by Tenant to Landlord in equal
monthly installments of $34,468.00. From November 1, 1999 and
continuing through October 31, 2004, the Base Rent for the Premises
shall be at an annual rate of $457,932.00 (14,772 rentable square feet
at $31.00 per square foot), payable by Tenant to Landlord in equal
monthly installments of $38,161.00. Tenant's Proportionate Share of
Ownership Taxes, Operating Expenses and Utility Expenses shall be as
set forth in Section 5 herein.
4. RENTAL ABATEMENT.
(a) Notwithstanding the provisions of Section 3, above, Tenant shall
not be obligated to pay Base Rent with respect to the Premises
during the twelve month period from October 29, 1994 through and
including October 31, 1995.
(b) Notwithstanding Sections 3 and 4(a) above to the contrary,
provided Tenant is not otherwise in default under the Lease, both
at the time of the Rental Notice (as hereinafter defined) and
thereafter, Tenant may elect, by written notice ("Rental Notice")
received by Landlord on or before 5:00 P.M. on September 7, 1994,
to pay annual Base Rent as set forth in subsection (i) below in
lieu of the rental abatement described in Section 4(a) above.
(i) In the event Tenant delivers the Rental Notice as
described above, effective October 29, 1994 and continuing
through October 31, 1999, the Base Rent for the Premises
shall be at an annual rate of $372,264.40 (14,772 rentable
square feet at $25.20 per square foot), payable by Tenant to
Landlord in equal monthly installments of $31,021.20. From
November 1, 1999 and continuing through October 31, 2004,
the Base Rent for the Premises shall be at an annual rate of
$416,570.40 (14,772 rentable square feet at $28.20 per
square foot), payable by Tenant to Landlord in equal monthly
installments of $34,714.20). Tenant's Proportionate Share of
Ownership Taxes, Operating Expenses and Utility Expenses
shall be as set forth in Section 5 herein.
<PAGE>
- 3 -
5. OPERATING/UTILITY AND TAX EXPENSES. Effective October 29, 1994
Tenant's proportionate share of Ownership Taxes, Operating Expenses
and Utility Expenses shall be .9247% (based upon occupancy of 14,772
rentable square feet). The Base Year for Ownership Taxes under
Section 2(a) of the Lease shall be fiscal year 1994 (July 1, 1994
through June 30, 1995). Also effective October 29, 1994, Tenant's
Base Year for Operating Expenses and Utility Expenses under Section
2(b) of the Lease shall be calendar year 1994.
6. TENANT ALLOWANCE. Landlord shall make available to Tenant a tenant
allowance (the "Tenant Allowance") of up to 100% of Tenant's true and
actual specialized costs of space plans, construction drawings and
construction costs in connection with the reconfiguration of the T-41
Premises up to a maximum of $100,000.00; provided that Landlord shall
have no obligation to make any payment under this section for any
Tenant construction for which Completion, Payment and Lien Evidence
(as defined below) has not been submitted to Landlord before November
1, 1995. Subject to the foregoing provisions and time limitation, and
provided that Tenant is not in default under the Lease, payment by
Landlord of the Tenant Allowance shall be made to Tenant within 30
days of receipt by Landlord of (i) a request for advance from Tenant,
stating the amount requested and an itemization of the construction
costs forming a part of such advance, (ii) a certification of Tenant's
architect that the construction work covered by such advance has been
completed in accordance with approved plans and specifications, (iii)
evidence reasonably satisfactory to Landlord that the payment does not
exceed the out-of-pocket costs and expenses theretofore incurred by
Tenant and (iv) evidence that the requisite lien period has expired
which may give rise to a mechanic's or materialmen's lien or the
receipt of such evidence as may be required to assure Landlord that no
claim made thereafter may arise with respect to any such work
performed or labor or materials supplied (items (i) through (iv) are
collectively referred to as "Completion, Payment and Lien Evidence").
Such payments shall be conditioned upon inspection and approval by
Landlord of the work done and the material furnished and such
inspection shall be made within ten (10) business days after Landlord
has received all items provided above. Any request for an advance may
not be submitted to Landlord more frequently than once per month.
Notwithstanding anything in this Second Amendment to the contrary, any
and all alterations, improvements or additions to the Premises are
subject to the prior written consent of Landlord (which consent shall
not be unreasonably withheld), as provided in Section 10 of the
<PAGE>
- 3 -
Lease. Notwithstanding any provision in the Lease to the contrary,
Tenant, at Tenant's expense, shall comply with all laws, rules,
orders, ordinances, directions, regulations, and requirements of
federal, state, county, and municipal authorities, now in force or
which may hereafter be in force, which shall impose any duty upon
Landlord or Tenant with respect to the use, occupation, or alteration
of the Premises, including without limitation the Americans with
Disabilities Act.
7. OPTION TO EXTEND LEASE. Section 29 - Option to Extend Lease is hereby
deleted in its entirety and the following Section 29 is inserted in
its stead.
"SECTION 29 - TERM EXTENSION OPTION.
(a) OPTION. Tenant shall have the option (the "Extension Option") to
extend the Term hereof for an additional period of five (5) years for
the period commencing on November 1, 2004 and terminating on October
31, 2009 (the "Extension Term"). Tenant shall give written notice to
Landlord of the exercise thereof not later than November 1, 2003. In
exercising the Extension Option hereunder, Tenant acknowledges time is
of the essence. If Tenant fails to exercise the Extension Option on
or before the date specified above, Tenant shall be deemed to have
waived all of its rights with respect to the Extension Option.
(b) TERMS AND CONDITIONS. If the Extension Option is duly exercised
as aforesaid, the Term of this Lease shall be automatically extended
for the Extension Term upon all the same terms, provisions and
conditions set forth in this Lease except that with respect to the
Extension Term, Landlord shall not be obligated to provide any so
called "free rent" or tenant improvement allowance or other tenant
inducements and Base Rent for the Extension Term shall be determined
as provided in Section 29 (c) below. In the event that the Extension
Option is duly exercised, all references contained in this Lease to
the Term hereof, whether by number of years or number of months, shall
be construed to refer to the original Term hereof extended as
aforesaid, whether or not specific reference thereto is made in this
Lease.
(c) RENT DURING EXTENSION TERM. In the event Tenant exercises the
Extension Option as herein provided, commencing on the first day of
the Extension Term, Tenant shall pay to Landlord for the Premises then
leased by Tenant annual Base Rent equal to the "Fair Rental Value", as
hereinafter determined, and Tenant's share of Operating Expenses and
Taxes for the Property determined in accordance with Section 2 of the
Lease.
<PAGE>
- 5 -
For the purposes of this Lease, "Fair Rental Value" shall mean the
annual fair rental for the Premises to be leased by Tenant pursuant to
its exercise of the Extension Option that would be agreed upon between
a landlord and a tenant executing a lease in a comparable building of
comparable age for comparable square footage located in Boston (Back
Bay) for a comparable term in light of all of the other business terms
of the Lease, taking the following assumptions into account while
determining "Fair Rental Value":
(i) the Landlord and Tenant are well informed and well advised
and each is acting in what it considers its own best interests;
(ii) the rental shall reflect the condition of the Premises and
all residual value of any improvements to the Premises;
(iii) the method by which square footage is measured is similar
to the measure used in the Lease;
(iv) the credit worthiness of the Tenant is similar to the
credit worthiness of Tenant at the time the option to extend the Lease
is exercised; and
(v) the base year for determining Tenant's share of Operating
Expenses and Utility Expenses under Section 2(b) of the Lease shall be
calendar year 1999 and the base year for Ownership Taxes under Section
2(a) of the Lease shall be fiscal year 1999.
(d) DETERMINATION OF FAIR RENTAL VALUE. To assist Tenant in
determining whether to exercise the Extension Option, upon a written
request given by Tenant to Landlord not earlier than June 1, 2003 nor
later than October 1, 2003, Landlord shall within twenty (20) days of
such request give written notice to Tenant of Landlord's determination
of the aforesaid Fair Rental Value of the Premises for the Extension
Term. The amount so designated by Landlord shall be the annual Base
Rent for the Premises for the Extension Term unless, within thirty
(30) days after Landlord shall have given such notice, Tenant shall
give notice to Landlord exercising Tenant's right of appraisal to
determine such Fair Rental Value pursuant to the provisions of Section
30 of the Lease, in which event such Fair Rental Value shall be
determined by the appraisal process thereunder.
<PAGE>
- 6 -
Should Tenant elect to exercise its right of appraisal and should the
appraisal not have been concluded prior to the date on which Tenant's
obligation to pay Rent for the Extension Term shall have occurred,
Tenant shall continue to pay the then existing annual Base Rent. If
the Fair Rental Value as determined by appraisal is greater than or
less than the then existing Base Rent, then any adjustment required to
correct the amount previously paid shall be made by payment by the
appropriate party within ten (10) days after such determination of
Fair Rental Value.
(e) CONDITIONS PRECEDENT TO EXERCISE. Notwithstanding any contrary
provision of this Section 29 or any other provision of this Lease, the
Extension Option and any exercise by Tenant of the Extension Option
shall be void and of no effect unless on the date Tenant notifies
Landlord that it is exercising the Extension Option and on the date of
commencement of the Extension Term (i) this Lease is in full force and
effect, (ii) no Event of Default on the part of Tenant has occurred
under this Lease and is continuing, and (iii) Tenant has neither
assigned this Lease nor sublet more than 4,772 rentable square feet of
the T-41 Premises; provided, however, that Landlord reserves the right
to waive the provisions of this subsection 29(e).
(f) AMENDMENT. In the event Tenant elects to exercise the Extension
Option as set forth in this Section 29, Landlord and Tenant agree to
enter into an amendment to this Lease to confirm such exercise and to
document all changes to the Lease, as amended, resulting from the
exercise of such Option.
8. SECTION 30 - ARBITRATION is hereby deleted and the following Section
30 is inserted in its stead:
"SECTION 30 - APPRAISAL OF FAIR RENTAL VALUE. In the event that
Tenant disputes the amount claimed by Landlord as Fair Rental Value
pursuant to Section 29, and such dispute cannot be resolved by mutual
agreement, the dispute shall be submitted to the appraisal process
hereinafter set forth. The amount of Fair Rental Value determined
pursuant to such appraisal process shall be final and binding between
the parties. The appraisal process shall be conducted as follows:
(a) Tenant shall make demand for appraisal in writing within thirty
(30) days after receipt of Landlord's written determination of Fair
Rental Value given under Section 29 specifying therein the name and
address of the person to act as the appraiser on its behalf. The
<PAGE>
- 7 -
appraiser shall be a real estate appraiser with at least ten years'
experience in the field and a qualified member of the American
Institute of Real Estate Appraisers, or any successor of such
Institute (or if such organization or successor shall no longer be in
existence, a recognized national association or institute of land
appraisers) familiar with the fair market rent of first-class
commercial office space in the downtown Boston (Back Bay) area.
Failure on the part of Tenant to make a timely and proper demand for
such appraisal shall constitute a waiver of the right thereto. Within
ten (10) business days after the service of the demand for appraisal,
Landlord shall give notice to Tenant, specifying the name and address
of the person designated by Landlord to act as appraiser on it behalf
who shall be similarly qualified. If Landlord fails to notify Tenant
of the appointment of its appraiser, within or by the time above
specified, then Tenant may thereafter send a second notice to Landlord
indicating such failure and requesting Landlord to appoint such an
appraiser. If Landlord fails to notify Tenant of the appointment of
its appraiser within five (5) business days after its receipt of said
second notice by Tenant then the appraiser appointed by Tenant shall
be the sole appraiser to determine the issue.
(b) In the event that two (2) appraisers are chosen pursuant to
Section 30(a) above, the appraisers so chosen shall meet within ten
(10) business days after the second appraiser is appointed and, if
within ten (10) business days after such first meeting the two
appraisers shall be unable to agree upon a determination of Fair
Rental Value they, themselves, shall appoint a third appraiser, who
shall be a competent and impartial person with qualifications similar
to those required of the first two appraisers. In the event they are
unable to agree upon such appointment within five (5) business days
after expiration of said ten (10) day period, the third appraiser
shall be selected by the parties themselves, if they can agree
thereon, within a further period of ten (10) business days. If the
parties do not so agree, then either party, on behalf of both, may
request appointment of such a qualified person by an officer of the
American Arbitration Association in Boston. The three (3) appraisers
shall decide the dispute, if it has not previously been resolved, by
following the procedure set forth in Section 30(c) below.
(c) Where the issue cannot be resolved by agreement between the two
appraisers selected by Landlord and Tenant or by settlement between
the parties during the course of the appraisal process, the issue
shall be resolved by the three appraisers in accordance with the
<PAGE>
- 8 -
following procedure. Within thirty (30) days after the third
appraiser has been selected, each appraiser shall state in writing his
determination of the Fair Rental Value, supported by the reasons
therefor, with counterpart copies to each party. The appraisers shall
arrange for a simultaneous exchange of such proposed determinations.
If the third appraisal shall exceed the higher of the first two
appraisals, the Fair Rental Value shall be the average of the third
appraisal and said higher appraisal. If the third appraisal shall be
less than the lower of the first two appraisals, the Fair Rental
Value shall be the average of the third appraisal and said lower
appraisal. In all other cases, the Fair Rental Value shall be the
third appraisal. All such determinations of Fair Rental Value shall
be final and binding upon the parties. This provision for
determination by appraisal shall be specifically enforceable to
the extent such remedies are available under applicable law, and
any determination hereunder shall be final and binding upon the
parties hereto, and either party shall have the right to enter
judgment thereon, unless otherwise provided by applicable law. If a
determination of Fair Rental Value is to be made pursuant to this
Section 30, Landlord and Tenant shall each pay for the fees and
disbursements of any appraiser appointed by it and shall share equally
in the fees and expenses of any third appraiser.
(d) In the event of a failure, refusal or inability of any appraiser
to act, his successor shall be appointed by him, but in the case of
the third appraiser, his successor shall be appointed in the same
manner as provided for appointment of the third appraiser."
Except as hereinabove mentioned, the Lease shall remain in full force and
effect.
EXECUTED as a sealed instrument this 22nd day of March, 1994.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /S/ LAURENCE W. GABOURY
--------------------------------
Title:
SONESTA INTERNATIONAL HOTELS
CORPORATION
By: /S/ PETER J. SONNABEND
--------------------------------
Title: Vice President
<PAGE>
Exhibit 10.3
THIRD AMENDMENT TO LEASE
WHEREAS, JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY ("Landlord") and
SONESTA INTERNATIONAL HOTELS CORPORATION ("Tenant") entered into a Lease dated
June 26, 1979 and amended by a Revised First Amendment to Lease dated May 30,
1989 and by a Second Amendment to Lease dated March 22, 1994, demising certain
premises in the John Hancock Tower, 200 Clarendon Street, Boston, MA
(collectively the "Lease"); and
WHEREAS, Tenant wishes to lease an additional 1,867 square feet of space
located on the 41st floor; and
WHEREAS, Landlord and Tenant desire to amend the Lease to provide for the
above;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Lease is hereby amended as
follows:
1. Effective October 29, 1994, Tenant shall lease an additional 1,867
square feet of space on the 41st floor shown on EXHIBIT A-2 attached
hereto (the "Additional Premises"). The designated rentable area
included in the Premises shall be increased by the rentable area of
the Additional Premises.
2. The annual Base Rent for the Additional Premises shall be at the same
annual rates and on the same terms as provided for the existing T-41
Premises. Effective October 29, 1994 and continuing through October
31, 1999, the Base Rent for the Additional Premises shall be at an
annual rate of $52,276.00 (1,867 rentable square feet at $28.00 per
square foot), payable by Tenant to Landlord in equal monthly
installments of $4,356.33. From November 1, 1999 and continuing
through October 31, 2004, the Base Rent for the Additional Premises
shall be at an annual rate of $57,887.00 (1,867 rentable square feet
at $31.00 per square foot), payable by Tenant to Landlord in equal
monthly installments of $4,823.08. Tenant's total Proportionate Share
of Ownership Taxes is increased to 1.041% (based upon an occupancy of
16,639 rentable square feet). The base year for Ownership Taxes and
the base year for Operating Expenses and Utility Expenses shall be the
same as that currently provided for the T-41 Premises under the Lease.
<PAGE>
- 2 -
3. Notwithstanding the provisions of Sections 1 and 2 above, Tenant shall
have access to the Additional Premises effective July 1, 1994, subject
to all of the terms and conditions of the Lease, except that Tenant's
obligation to pay Base Rent and Additional Rent shall not commence
until October 29, 1994.
4. RENTAL ABATEMENT.
(a) Notwithstanding the provisions of Sections 2 and 3 above, Tenant
shall not be obligated to pay Base Rent with respect to the
Additional Premises during the twelve month period from October
29, 1994 through and including October 31, 1995.
(b) Notwithstanding Sections 2, 3 and 4(a) above to the contrary,
provided Tenant is not otherwise in default under the Lease, both
at the time of the Rental Notice (as hereinafter defined) and
thereafter, Tenant may elect, by written notice ("Rental Notice")
received by Landlord on or before 5:00 P.M. on September 7, 1994,
to pay annual Base Rent for the Additional Premises as set forth
in subsection (i) below in lieu of the rental abatement described
in Section 4(a) above.
(i) In the event Tenant delivers the Rental Notice as
described above, effective October 29, 1994 and
continuing through October 31, 1999, the Base Rent for
the Additional Premises shall be at an annual rate of
$47,048.40 (1,867 rentable square feet at $25.20 per
square foot), payable by Tenant to Landlord in equal
monthly installments of $3,920.70. From November 1,
1999 and continuing through October 31, 2004, the Base
Rent for the Additional Premises shall be at an annual
rate of $52,649.40 (1,867 rentable square feet at
$28.20 per square foot), payable by Tenant to Landlord
in equal monthly installments of $4,387.45. Tenant's
Proportionate Share of Ownership Taxes, Operating
Expenses and Utility Expenses shall be as set forth in
Section 2 herein.
5. Tenant shall not be entitled to any tenant allowance with respect to
the Additional Premises and shall accept the Additional Premises in
"As-Is" condition. In addition, on or before October 29, 1994, Tenant
shall install certain demising walls acceptable to Landlord separating
the Additional Premises from the premises currently leased by HHCC.
The glass partitions currently located
<PAGE>
-3-
in the Additional Premises and owned by HHCC shall be removed by
Tenant and returned to HHCC in good order and condition. All work
required hereunder shall be performed at Tenant's sole cost and
expense and in accordance with all of the terms and conditions of the
Lease, including, but not limited to, Section 10 of the Lease.
Except as hereinabove mentioned, the Lease shall remain in full force and
effect.
EXECUTED as a sealed instrument this _____ day of June, 1994.
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By: /S/ LAURENCE W. GABOURY
----------------------------
Title: Vice President
SONESTA INTERNATIONAL HOTELS
CORPORATION
By: /S/ PETER J. SONNABEND
----------------------------
Title: V.P.
<PAGE>
Exhibit 10.4(a)
1995 LOAN AGREEMENT
This 1995 Loan Agreement ("1995 Agreement") is made and entered into effective
as of the 1st day of January, 1995 by and between:
ROYAL SONESTA, INC., a Louisiana corporation having its principal place of
business in New Orleans, Louisiana, TIN #72-0803191, herein represented by its
undersigned officer, duly authorized and acting pursuant to resolutions of its
Board of Directors, a certified copy of which is annexed hereto ("Borrower");
and
HIBERNIA NATIONAL BANK, a national banking association, organized and existing
under the laws of the United States of America, and domiciled in the Parish of
Orleans, State of Louisiana, with its principal office at 313 Carondelet Street,
New Orleans, Louisiana 70130, TIN #72-0210640, represented herein by its duly
authorized undersigned officer ("Bank");
and
SONESTA INTERNATIONAL HOTELS CORPORATION, a New York corporation having its
principal place of business in Boston, Massachusetts, TIN #135648107, herein
represented by its undersigned officer, duly authorized and acting pursuant to
resolutions of its Board of Directors ("Guarantor").
W I T N E S S E T H:
WHEREAS, Borrower, Bank and Guarantor previously entered into a Loan Agreement
originally dated October 15, 1984, which Loan Agreement was amended March 16,
1987, August 7, 1989, August 31, 1990, December 31, 1990 and December 23, 1991,
and renewed and extended effective December 30, 1992 (collectively "Loan
Agreement"); and
WHEREAS, Borrower and Guarantor have requested that Bank renew and extend credit
to Borrower in accordance with the particulars as set forth hereinafter; and
WHEREAS, subject to the terms and conditions hereinafter set forth, Bank is
willing to extend credit to Borrower as hereinafter set forth.
NOW, THEREFORE, in order to carry out and set forth the desired renewal and
extension of credit and, in consideration of the mutual benefits received or to
be received by each of them, Borrower, Guarantor and Bank do hereby covenant and
agree as follows:
<PAGE>
ARTICLE I.
DEFINITIONAL PROVISIONS
1.1 TERMS DEFINED ABOVE. As used in this 1995 Agreement, the terms
"Borrower", "Bank", "Guarantor" and "1995 Agreement" shall have the meanings
indicated above.
1.2 DEFINITIONS. As used in this 1995 Agreement, the following terms
shall have the following meanings:
"AFFILIATE" shall mean any entity directly or indirectly controlled by
Guarantor.
"AMENDMENT TO COLLATERAL LEASEHOLD MORTGAGE" shall mean the amendment
to Collateral Leasehold Mortgage and Collateral Chattel Mortgage
amending the Collateral Leasehold Mortgage executed by Borrower on
October 15, 1984.
"ARTICLES OF INCORPORATION" shall mean the instrument dated January 5,
1977, filed with the Louisiana Secretary of State in Record of
Charters Book 317.
"ASSIGNMENT OF SUBLEASES AND OPERATING AGREEMENTS" shall mean the
assignment dated October 15, 1984 by which Borrower assigned to Bank
the subleases and operating agreements identified therein.
"BANK'S COUNSEL" shall mean Chaffe, McCall, Phillips, Toler & Sarpy,
L.L.P.
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or
a day on which banks are required or permitted to be closed in the
State of Louisiana.
"BYLAWS" shall mean the regulations, ordinances, rules or laws adopted
by Borrower for its government.
"CAPITAL EXPENDITURES" shall mean, collectively, on a consolidated
basis for Borrower: (a) the aggregate expenditures for fixed assets;
and (b) Capitalized Lease Obligations.
"CAPITAL LEASE" shall mean, with respect to any Person, any lease of
any property (whether real, personal or mixed) by such Person as
lessee which would, in accordance with GAAP, either be required to be
classified and accounted for as a capital lease on a balance sheet of
such Person or otherwise be disclosed as such in a note to said
balance sheet, other than, in the case of Borrower, any such lease
under which Borrower is the lessor.
-2-
<PAGE>
"CAPITAL LEASE OBLIGATION" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee which would, in
accordance with GAAP, appear on a balance sheet of such lessee in
respect of such Capital Lease or otherwise be disclosed in a note to
such balance sheet.
"CLOSING DATE" shall be a date designated by Bank's Counsel which
shall be on or before October 21, 1994. Bank's Counsel shall give 3
days prior notice of the Closing Date.
"COLLATERAL LEASEHOLD MORTGAGE" shall mean the Collateral Mortgage of
Leasehold Interest and Collateral Chattel Mortgage as amended by the
Amendment to Collateral Leasehold Mortgage and executed by Borrower to
secure the Collateral Leasehold Mortgage Note, which mortgage is dated
the 16th day of August, 1983, and was amended October 15, 1984 and
encumbers the Property and improvements thereon.
"COLLATERAL LEASEHOLD MORTGAGE NOTE" shall mean the collateral
mortgage note executed by Borrower, dated the 16th day of August,
1983, and payable to Bearer in the sum of SEVENTEEN MILLION AND NO/100
($17,000,000.00) DOLLARS, paraphed for identification with the
Collateral Leasehold Mortgage and with the Act of Purchase and
Assignment Agreement, and delivered in pledge by Borrower to Bank as
security for the Loan as well as any and all other indebtedness.
"COLLATERAL PLEDGE AGREEMENT" shall mean the pledge agreement dated
October 15, 1984 by which Borrower pledges to Bank the Collateral
Leasehold Mortgage Note, as acknowledged and reaffirmed by the
Acknowledgment of Continued Pledge of Collateral Mortgage Note dated
December 28, 1992 and as further reaffirmed by the Acknowledgment of
Continued Pledge of Collateral Mortgage Note dated as of the
Effective Date.
"COMMITMENT TERMINATION DATE" shall mean January 1, 1998.
"CONTINUING GUARANTY" shall mean the continuing guaranty of the
Guarantor in favor of Bank dated October 15, 1984 which Continuing
Guaranty was Restated and Reaffirmed effective December 30, 1992 and
which is being Restated and Reaffirmed as of the Effective Date.
"DEBT" shall have the meaning assigned to it in Section 2.1(b).
"EFFECTIVE DATE" shall mean January 1, 1995.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
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"EVENT OF DEFAULT" shall mean any of the events or occurrences as set
forth in Article VIII, Section 8.1 of this 1995 Agreement.
"FINANCIAL STATEMENTS" shall mean the financial statements referred to
in Article VI, Section 6.2.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"GOVERNMENTAL AUTHORITY" shall mean any municipal, parish, state or
federal governmental authority having jurisdiction over the Property,
the Borrower or the Guarantor.
"INDEBTEDNESS" shall mean any and all amounts owed or to be owed by
Borrower or Guarantor to Bank in connection with this 1995 Agreement,
the Guaranty, and all other liabilities of Borrower or Guarantor to
Bank from time to time existing, including without limitation the 1995
Agreement, whether in connection with this or other transactions.
"INTEREST PAYMENT DATE" shall mean the last day of March, June,
September and December.
"INTEREST RATE" shall mean interest equal to the Prime Rate of
Citibank, N.A. plus 3/4% (floating daily).
"LEASE" shall mean the lease dated December 12, 1967 registered in COB
683D, folio 40, Orleans Parish as amended, granting the leasehold
interest.
"LEASEHOLD INTEREST" shall mean Borrower's interest in the Property
under the Lease.
"LOAN AGREEMENT" shall mean the Loan Agreement dated October 15, 1984
as amended on March 16, 1987, August 7, 1989, August 31, 1990,
December 31, 1990, December 23, 1991 and December 30, 1992.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on the
business, operations, financial condition of Borrower or Guarantor
taken as a whole, Borrower's and Guarantor's collective ability to pay
the Obligations in accordance with the terms thereof, the Collateral
or the Bank's Lien or the priority of any such Lien (except as
otherwise provided in the Security Instruments).
"MAXIMUM REVOLVING CREDIT LOAN AMOUNT" shall mean the sum of Five
Million and No/100 ($5,000,000.00) Dollars.
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"NET INCOME" shall mean Borrower's net income before payment of
interest and federal and state income taxes.
"NOTE" shall mean the Revolving Credit Note.
"OBLIGATIONS" shall mean all Indebtedness, loans, advances, debts,
liabilities, and obligations, for monetary amounts (whether or not
such amounts are liquidated or determinable) owing by Borrower to
Bank, and all covenants and duties regarding such amounts, of any kind
or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising under any of the Security
Instruments. This term includes, without limitation, all interest,
charges, expenses, attorneys' fees and any other sum chargeable to
Borrower under any of the Security Instruments.
"OPERATING CASH FLOW" shall mean income before taxes plus depreciation
plus other non-cash expenses, minus Capital Expenditures and excluding
extraordinary items.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof, or any other form of entity or relationship.
"PRIME RATE" shall mean that rate or index which shall be established
by Citibank, N.A. from time to time, as its "prime rate", or
equivalent term, but is not necessarily the lowest or best rate of
interest which that institution may at any time charge any of its
customers.
"PROPERTY" shall mean Borrower's leasehold interest as lessee under
the Lease.
"REVOLVING CREDIT ADVANCE" shall have the meaning assigned to it in
section 2.1(a) hereof.
"REVOLVING CREDIT LOAN" shall mean the aggregate amount of Revolving
Credit Advances outstanding at any time up to the maximum of the
Maximum Revolving Credit Loan Amount.
"REVOLVING CREDIT NOTE" shall have the meaning assigned to it in
Section 2.1(b) hereof.
"SECURITY INSTRUMENTS" shall mean the agreements or instruments
described or referred to in Article III hereof, and any and all other
agreements or instruments now or hereafter executed and delivered by
Borrower in connection with, or as security for the payment or
performance of the Note or this 1995 Agreement.
"TANGIBLE NET WORTH" shall mean the amount by which (a) the amount
included under total stockholders' equity on the balance sheet exceeds
(b) the sum of the following amounts as included on such balance
sheet: (i) any unamortized debt discount and
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expense, (ii) any cost of investments in excess of net assets acquired
at the time of acquisition, (iii) any patents, patent applications,
copyrights, trademarks, trade names, goodwill, experimental or
organizational expenses, and (iv) any other intangible assets.
1.3 OTHER DEFINITIONAL PROVISIONS.
(a) All terms defined in this 1995 Agreement shall have the defined
meanings when used in the Revolving Credit Note or in any certificates or other
documents made or delivered pursuant hereto unless the context shall otherwise
require.
(b) Words used herein in the singular, where the context so permits, shall
be deemed to include the plural and vice versa. Likewise, the definition of
words used in the singular herein shall also apply to such words when used in
the plural and vice versa, unless the context shall otherwise require.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this 1995 Agreement shall refer to this 1995 Agreement as a
whole and not to any particular provision of this 1995 Agreement.
(d) Section, subsection, schedule and exhibit references are to this 1995
Agreement unless otherwise specified.
ARTICLE II.
AMOUNT AND TERMS OF CREDIT
2.1 REVOLVING CREDIT ADVANCES.
(a) Upon and subject to the terms and conditions herein, Bank agrees
to make available, at any time from time to time on any Business Day until
the Commitment Termination Date, upon the request of Borrower therefor,
advances (each, a "Revolving Credit Advance") in an aggregate amount outstanding
which shall not at any given time exceed the Maximum Revolving Credit Loan
Amount. In the event the Revolving Credit Loan exceeds the Maximum Revolving
Credit Loan Amount, Borrower shall pay to Bank sufficient sums to reduce the
Revolving Credit Loan to the Maximum Revolving Credit Loan Amount. Subject to
the provisions of Section 2.2 hereof and until all amounts outstanding in
respect of the Revolving Credit Loan shall become due and payable on the
Commitment Termination Date, Borrower may from time to time borrow, repay
and reborrow under this Section 2.1(a) up to the Maximum Revolving Credit
Loan Amount. Each Revolving Credit Advance shall be made on notice, given
no later than 11:00 A.M. (New Orleans time) on the Business Day of the
proposed Revolving Credit Advance, by Borrower to Bank. Each such notice
(a "Notice of Revolving Credit Advance") shall be in writing or by
telephone to Bank and such requests shall be fully authorized by Borrower if
made by any one of the persons designated hereinbelow. Bank shall, before
5:00 P.M. (New Orleans time) on the date of the proposed
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Revolving Credit Advance, upon fulfillment of the applicable conditions set
forth in Section 3, wire to a bank designated by the Borrower and reasonably
acceptable to Bank the amount of such Revolving Credit Advance. Bank shall have
the right, but not the obligation, to verify any telephone requests by calling
the person who made the request at the telephone number hereinafter set forth
opposite his name.
The persons who are authorized by Borrower to make personal, written, or
telephonic requests of Bank for reborrowing are the following persons:
NAME, TELEPHONE NUMBER
AND ADDRESS TITLE
---------------------- -----
Roger P. Sonnabend Chairman of the Board
617 421-5400
Sonesta International Hotels Corporation
200 Clarendon St.
Boston, MA 02116
Peter J. Sonnabend Vice-President & Secretary
617 421-5400
Sonesta International Hotels Corporation
200 Clarendon St.
Boston, MA 02116
Boy van Riel Vice President & Treasurer
617 421-5400
Sonesta International Hotels Corporation
200 Clarendon St.
Boston, MA 02116
(b) The Revolving Credit Loan made by Bank shall be evidenced by a
promissory note in the amount of $5,000,000.00 to be executed, dated and
delivered by Borrower at the time of this 1995 Agreement, the form of which is
attached hereto and made a part hereof as Exhibit A with the blanks
appropriately filled in conformity herewith (the "Revolving Credit Note"). The
Revolving Credit Note shall be payable to the order of Bank and shall represent
the obligation of Borrower to pay the amount of the Maximum Revolving Credit
Loan Amount or, if less, the aggregate unpaid principal amount of all Revolving
Credit Advances made by Bank to Borrower with interest thereon as prescribed in
Section 2.5 (the "Debt"). The date and amount of each Revolving Credit Advance
and each payment of principal with respect thereto shall be recorded on the
books and records of Bank, which books and records shall constitute PRIMA FACIE
evidence of the accuracy of the information therein recorded.
(c) Borrower shall be able to borrow and Bank agrees to lend an amount the
sum of which may be a maximum of the Maximum Revolving Credit Loan Amount.
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(d) Borrower shall bring the outstanding balance of the Revolving Credit
Loan to equal to or less than $1,000,000.00 for thirty (30) consecutive calendar
days in each twelve month period during the life of the Loan.
(e) All reborrowings and/or prepayments shall be in the amount of Fifty
Thousand ($50,000.00) Dollars or multiples thereof.
2.2 OPTIONAL PREPAYMENT: PREPAYMENT PREMIUM. Borrowers shall have the
right at any time to voluntarily prepay the Revolving Credit Loan in whole or in
part, without premium or penalty. At any time that Borrower has paid the
Revolving Credit Loan in full and there are no outstanding fees or sums due
under the Revolving Credit Loan, Borrower shall have the right of canceling this
1995 Agreement by giving five (5) days prior written notice to Bank.
2.3 USE OF PROCEEDS. The proceeds of the Revolving Credit Loan shall be
used for general corporate purposes of the Borrower or the Guarantor, including
without limitation such legal uses that may arise in the ordinary course of
business.
2.4 SINGLE LOAN. The Debt and all of the other Obligations of Borrower
arising under this 1995 Agreement and the other Security Instruments shall
constitute one general obligation of Borrower secured by all of the Security
Instruments. The entire unpaid balance of the Revolving Credit Loan shall be
due and payable on the Commitment Termination Date.
2.5 INTEREST. The Revolving Credit Note shall bear interest on the
outstanding principal balance at the Interest Rate.
The Interest Rate on the Revolving Credit Note shall be adjusted from time
to time on and as of the effective date of any change in the Prime Rate, and
interest shall be assessed on a simple interest basis utilizing a 360-day daily
interest factor over the number of days in a calendar year. Interest shall be
payable quarterly in arrears on the last day of March, June, September and
December of each year, and at the Commitment Termination Date (whether by
acceleration or otherwise) ("Interest Payment Date").
2.6 COMMITMENT TERMINATION DATE. The entire unpaid principal balance plus
all accrued interest and any unpaid late charges and fees shall be due and
payable in full on the Commitment Termination Date.
2.7 COMMITMENT FEE. Borrower shall pay Bank a commitment fee on the
Interest Payment Date on the undisbursed portion of the Revolving Credit Loan in
an amount equal to one-half (1/2%) percent per annum of the undisbursed portion
("Undisbursed Commitment Fee").
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2.8 RECEIPT OF PAYMENTS. Borrower shall make each payment under this 1995
Agreement not later than 2:00 P.M. (New Orleans time) on the day when due in
lawful money of the United States of America in immediately available funds to
Bank.
2.9 APPLICATION OF PAYMENTS. Payments shall be applied in the following
order: (i) to the then due and payable fees and expenses; (ii) to the then due
and payable interest payments on the Revolving Credit Loan; and (iii) to the
then due and payable principal payments on the Revolving Credit Loan. Bank is
authorized to, and at its option may, make advances on behalf of Borrower for
payment of all fees, including attorney fees and the Undisbursed Commitment Fee,
expenses, charges, costs, principal and interest incurred by Borrower hereunder.
Such advances shall be made when and as Borrower fails to promptly pay such
fees, expenses, charges, costs, principal and interest and, at Bank's option
and to the extent permitted by law, shall be deemed Revolving Credit Advances
constituting part of the Revolving Credit Loan hereunder.
2.10 INDEMNITY. Borrower shall indemnify and hold Bank harmless from and
against any and all suits, actions, proceedings, claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable attorneys'
fees and disbursements, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by Bank as the result of its having
entered into any of the Security Instruments or extended credit hereunder;
provided, HOWEVER, that Borrower shall not be liable for such indemnification to
Bank to the extent that any such suit, action, proceeding, claim, damage, loss,
liability or expense results from Bank's gross negligence or willful misconduct.
2.11 ACCESS. Bank and any of its officers, employees and/or agents shall
have the right, exercisable as frequently as Bank determines to be appropriate,
during normal business hours (or at such other times as may reasonably be
requested by Bank), to inspect the properties and facilities of Borrower and to
inspect, audit and make extracts from all of Borrower's records, files and books
of account. Borrower and Guarantor shall deliver any document or instrument
reasonably necessary for Bank to obtain records from any service bureau
maintaining records for Guarantor and Borrower and shall maintain duplicate
records or supporting documentation on media, including, without limitation,
computer tapes and discs owned by Borrower. Borrower and Guarantor shall
instruct their banking and other financial institutions to make available to
Bank such information and records as Bank may reasonably request.
ARTICLE III.
SECURITY INSTRUMENTS
3.1 As security for the Revolving Credit Loan, Borrower has heretofore
furnished to Bank the following Security Instruments each duly and validly
executed and each in form and substance satisfactory to Bank, and in sufficient
executed counterparts for recording purposes:
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(a) Collateral Leasehold Mortgage Note and Collateral Leasehold Mortgage;
(b) Collateral Pledge Agreement executed by Borrower pledging the
Collateral Leasehold Mortgage Note to Bank;
(c) Continuing Guaranty executed by Guarantor in the amount of NINE
MILLION AND NO/100 ($9,000,000.00) DOLLARS;
(d) Assignment of Subleases and Operating Agreements.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
4.1 In order to induce Bank to renew and extend the Loan Agreement,
Borrower and Guarantor hereby represent, warrant and covenant to Bank as
follows:
(a) STATUS OF B0RROWER AND GUARANTOR. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of Louisiana.
Guarantor is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of New York. Both Borrower and Guarantor
have all requisite corporate power and authority to carry on their respective
businesses as now conducted and propose to be conducted and to own and operate
their properties. Borrower and Guarantor are licensed or qualified as foreign
corporations where the conduct of their business or the ownership of their
properties requires such licensing or qualification.
(b) NO LEGAL BAR OR RESULTANT LIEN. The Loan Agreement, as renewed and
extended by this 1995 Agreement, the Revolving Credit Note, the Security
Instrument and all other documents which have been or which were executed by
Borrower and/or Guarantor in connection with the Loan Agreement or are to be
executed in connection with the 1995 Agreement do not and will not violate the
Borrower's or the Guarantor's Articles of Incorporation or their Bylaws, or any
contract, agreement, law, regulation, order, injunction, judgment, decree or
writ to which Borrower or Guarantor is subject, or any indenture, mortgage, deed
of trust, credit agreement, lease or other instrument to which Borrower or
Guarantor or any of their property is bound, and do not conflict with or result
in a breach of or constitute a default under any such instrument, or result in
the creation or imposition of any lien upon the Property other than those
contemplated by this 1995 Agreement.
(c) REPORTS/FINANCIAL STATEMENTS. All information, reports, papers,
financial statements and data given by Borrower and Guarantor to Bank pursuant
to this 1995 Agreement, or otherwise provided, were prepared in accordance with
GAAP to the extent applicable and are complete, accurate and correct in all
material respects. There are no known material contingent liabilities of
Borrower or Guarantor not reflected in the Financial Statements, nor has there
been any adverse material change in Borrower's or Guarantor's
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condition since December 31, 1993. In addition, no information, exhibit or
report furnished by Borrower or Guarantor to Bank in connection with the
negotiation of this 1995 Agreement contains any material misstatement of fact
or omits to state a material fact or any fact necessary to make the statements
contained therein not misleading.
(d) DEFAULTS. Neither Borrower nor Guarantor is in default, in any
respect which materially and adversely affects their business, properties,
operations or condition, financial or otherwise, under any indenture, mortgage,
deed of trust, contract, agreement or other instrument to which Borrower or
Guarantor is a party or by which they are bound, nor, in any respect which
materially and adversely affects their business, properties, operations or
condition, financial or otherwise any order, writ, injunction, judgment, decree
or any statute, rule or regulation, except as disclosed to Bank in writing.
(e) TAXES/GOVERNMENTAL CHARGES. With immaterial exceptions (no such
exceptions being known to Borrower or Guarantor) Borrower and Guarantor have
filed or caused to be filed all federal, state and local tax returns and reports
required to be filed, and have paid all taxes, assessments, fees and other
governmental charges levied upon Borrower or Guarantor or their properties or
income, which are due and payable, including interest and penalties, or has
provided adequate reserves for the payment thereof.
(f) BORROWER'S TITLE. Borrower has good and merchantable title to all
leases affecting the Property to which it is a party as lessee including the
leasehold interest subject to the Collateral Leasehold Mortgage, free and clear
of all liens and encumbrances, and Borrower has not conveyed or encumbered, as
of the date hereof, said leasehold interest in any way, except pursuant to the
Collateral Leasehold Mortgage which ranks as a first mortgage on the leasehold
interests mortgaged therein. None of such leases contains any provision
restricting the incurrence of indebtedness by Borrower.
(g) SUITS. There are no actions, suits or proceedings pending, at law or
in equity, or before any Governmental Authority, or, to the knowledge of
Borrower or Guarantor, threatened against Borrower or Guarantor or any of
Borrower's or Guarantor's property, or to the knowledge of Borrower or Guarantor
involving the validity or enforceability of the Collateral Leasehold Mortgage,
or the priority of the liens thereof, which, if successful, would have a
Material Adverse Effect.
(h) GOVERNMENTAL CONSENT, ETC. Neither Borrower nor Guarantor is required
to obtain any order, consent, approval or authorization of, or required to make
any declaration or filing with any Governmental Authority or Persons in
connection with the execution or delivery of the Revolving Credit Note pursuant
hereto, or in connection with the execution and delivery of the Security
Instruments or the granting of the security interests pursuant thereto other
than routine periodic filings with Governmental Authorities, which filings have
been or shall be duly made by the Borrower and Guarantor.
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(i) PATENTS, TRADEMARKS. Borrower owns, possesses or has the right to use
all the patents, trademarks, service marks, trade names, copyrights and
licenses, and rights with respect to its business which the failure to so own or
possess might have a Material Adverse Effect.
(j) OTHER AGREEMENTS. Neither Borrower nor Guarantor is a party to any
contract or agreement made other than in the ordinary course of business which,
in the opinion of Borrower or Guarantor have a Material Adverse Effect.
(k) NO OFFER. Neither the Borrower nor anyone acting on its behalf has
directly or indirectly offered the Revolving Credit Note thereof or any similar
securities for sale to or solicited any offer to buy any of the same from anyone
other than Bank.
(l) BROKERS, ETC. Borrower has not dealt with any broker, finder,
commission agent or other similar person in connection with the Revolving Credit
Loan or the transactions contemplated by this 1995 Agreement.
(m) FRANCHISES, LICENSES, ETC. Borrower and Guarantor have all necessary
franchises, permits, licenses and other rights necessary in connection with the
conduct of their business.
(n) REGULATION U, ETC. Borrower neither owns nor has any present
intention of acquiring any "margin stock" within the meaning of Regulation U (12
CFR Part 221) of the Board of Governors of the Federal Reserve System (therein
called "margin stock"). If requested by Bank the Borrower will furnish promptly
to Bank a statement in conformity with the requirements of Federal Reserve Form
U-1. For purposes of this representation, shares of stock of Borrower are not
deemed to be margin stock.
(o) EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974. Neither Borrower nor
Guarantor has incurred (i) any material accumulated funding deficiency within
the meaning of ERISA, or (ii) any material liability to the Pension Benefit
Guaranty Corporation established under the Act (or any successor thereto) in
connection with any employee benefit plan established or maintained by either of
them, nor has Borrower or Guarantor had any tax assessed against it by the
Internal Revenue Service for any alleged violation under Section 4975 of the
Internal Revenue Code. To Borrower's and Guarantor's knowledge, no prohibited
transaction within the meaning of such Section 4975 has occurred with respect to
any employee benefit plan established or maintained by the Borrower.
(p) BINDING OBLIGATIONS. The execution, delivery and performance of this
1995 Agreement, and all other documents executed or to be executed by Borrower
and Guarantor have been duly authorized by all necessary corporate action and
constitute valid and binding obligations of Borrower and Guarantor, enforceable
in accordance with their respective terms.
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(q) CONTINUING GUARANTY. The Continuing Guaranty secures all amounts
heretofore advanced by Bank to Borrower and will secure any and all amounts
advanced by Bank to Borrower pursuant to the terms of this 1995 Agreement, up to
a maximum amount of $9,000,000.00, together with all fees and charges thereon.
ARTICLE V.
CONDITIONS PRECEDENT
5.1 CONDITION TO LOAN. Notwithstanding any provision of this 1995
Agreement and without affecting in any manner the rights of Bank hereunder,
unless and until the hereinbelow set forth conditions are satisfied and there
shall have been delivered to Bank evidence in form and substance satisfactory to
Bank, Borrower shall have no rights to obtain any advances of the Revolving
Credit Loan and Bank shall not be obligated to fund the Revolving Credit Loan
hereunder, the conditions being the receipt by Bank of the following:
(a) REPRESENTATIONS, WARRANTIES AND COVENANTS. The representations,
warranties and covenants of Borrower and Guarantor set forth in this 1995
Agreement, in the Security Instruments and in any other documents furnished to
Bank heretofore or in connection herewith, to the extent they apply, shall be
true and correct as of this date and with the same effect as though such
representations, warranties and covenants had been made on and as of such date.
(b) DOCUMENTS TO BE EXECUTED AND DELIVERED.
(i) Borrower shall have duly and validly issued, executed and
delivered to Bank
(a) the Revolving Credit Note,
(b) the 1995 Agreement,
(c) Reaffirmation of Pledge of Collateral Leasehold Mortgage
Note,
(d) Corporate Resolutions,
(ii) Guarantor shall have executed the
(a) 1995 Agreement,
(b) Corporate Resolutions, and
(c) Guaranty, and
(iii) Borrower and Guarantor shall have executed the Security
Instruments which may be necessary to secure the Revolving Credit Loan
and shall have delivered all of the above referenced documents and the
Security Instruments to the Bank.
(c) LANDLORD'S ESTOPPEL CERTIFICATE. Borrower shall have delivered an
estoppel certificate from Aetna Life Insurance Company, Landlord under the
Lease, verifying that (i) the Lease is in full force and effect, (ii) Borrower
is not in default of any of the terms of the Lease, and that rent has been paid
to date, and (iii) Landlord will use its best efforts to deliver to Bank a copy
of any notice of default sent in accordance with the Lease to Borrower.
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(d) PAYMENT OF TAXES. Borrower shall deliver to Bank proof of payment of
all personal property and all franchise taxes.
(e) INSURANCE AND EXTERMINATION CONTRACT. Bank shall have been furnished
with duplicate insurance policies or certificates of insurance evidencing that
Borrower maintains the insurance coverage described in this 1995 Agreement and
with an extermination contract complying with the requirements of Section 6.15
hereof.
(f) NO DEFAULT. At the time of this 1995 Agreement or the funding of the
Revolving Credit Note, no Event of Default shall have occurred and be
continuing, and there shall not have occurred any condition, event or act which
constitutes or with notice or lapse of time (or both) would constitute an Event
of Default in this 1995 Agreement, in the Lease, or in any other agreement which
would have a Material Adverse Effect.
(g) NO MATERIAL ADVERSE CHANGES. Prior to the execution of this 1995
Agreement and of the Revolving Credit Note, there shall not have occurred, in
the sole opinion of Bank, any material adverse changes, either in any case or in
the aggregate, in the assets, liabilities, financial condition, business,
operation, affairs or circumstances of Borrower from those reflected in the
financial statements or by the facts warranted or represented in any Security
Instrument or this 1995 Agreement.
(h) COUNSEL FOR BANK. All legal matters incident to the transactions
herein contemplated shall be satisfactory to Bank's Counsel.
(i) OPINIONS. Bank shall have received the favorable opinion of Peter J.
Sonnabend, Esq., or such other counsel for Borrower and for the Guarantor as
Bank may require, dated as of the Closing Date and in form attached hereto as
Exhibit B.
(j) RESOLUTIONS. Borrower and Guarantor shall have delivered to Bank
resolutions of the boards of directors of Borrower and Guarantor, certified by
the Secretary or Assistant Secretary of Borrower and Guarantor, as of the
Closing Date, to be duly adopted and in full force and effect on such date,
authorizing (i) the consummation of each of the transactions contemplated by
this 1995 Agreement and (ii) specific officers to execute and deliver this 1995
Agreement and the Revolving Credit Note and any other required documents.
(k) OUTSIDE COUNSEL FEES. Payment by Borrower of all reasonable fees and
expenses of Bank's outside counsel, Chaffe, McCall, Phillips, Toler & Sarpy,
L.L.P.
(l) CERTIFICATE OF INCUMBENCY. Certificates of the Secretary or an
Assistant Secretary of Borrower and Guarantor, dated the Closing Date, as to the
incumbency and signatures of the officers of Borrower and Guarantor executing
this 1995 Agreement, the Revolving Credit Note, any of the required documents
and any other certificate or other document to be delivered pursuant hereto or
thereto, together with evidence of the incumbency of such Secretary or Assistant
Secretary.
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(m) APPRAISAL. Bank shall receive an updated MAI appraisal of the
Leasehold Interest of Borrower, at Borrower's expense, which appraisal is
satisfactory to Bank in its sole unconditional determination. Said appraisal
must be received by the Bank on or before the Closing Date. In the event the
appraisal is either (i) not timely received (time being of the essence) or (ii)
is unsatisfactory to Bank, this 1995 Agreement shall terminate and be of no
further force and effect and Borrower shall have no further rights hereunder.
(n) INSPECTION AND INSPECTION FEE. Bank's inspector shall perform
inspections annually, to be billed to and paid for by Borrower upon completion
of each inspection.
ARTICLE VI.
AFFIRMATIVE COVENANTS
6.1 OBLIGATION FOR COSTS. Borrower will promptly pay or will cause to be
paid all reasonable legal costs and fees incurred by Bank in connection with the
preparation of this 1995 Agreement and any and all Security Instruments
contemplated hereby (including any amendments). Borrower will, upon request,
promptly reimburse Bank for all amounts expended, advanced or incurred by Bank
(i) to satisfy any obligation of Borrower under this 1995 Agreement or any other
Security Instrument, or to protect the Property of Borrower, or (ii) after an
Event of Default to collect the Revolving Credit Note or to enforce the rights
of Bank under this 1995 Agreement or any other Security Instruments, which
amounts will include all court costs, reasonable fees of attorneys, auditors and
accountants, and investigation expenses incurred by Bank in connection with any
such matters, together with interest.
6.2 FINANCIAL STATEMENTS. Borrower and Guarantor will maintain their
financial reporting in accordance with GAAP consistently applied, and Borrower
and Guarantor will furnish or cause to be furnished to Bank the following
reports:
(a) ANNUAL REPORTS. As soon as available and in any event within ninety
(90) days in the case of consolidated statements and one hundred twenty (120)
days in the case of consolidating statements, in each case after the end of each
fiscal year, (i) audited financial statements of Borrower's operation of the
Property which shall contain statements of sources and uses of funds and (ii)
audited consolidated and consolidating financial statements of Guarantor
together with all notes thereto, prepared in reasonable detail and in accordance
with GAAP consistently applied and duly certified by a certified independent
public accountant of national standing who shall be selected by Borrower and the
Guarantor, as the case may be, and shall be acceptable to Bank, which statements
shall be accompanied by a statement of such accountants that the examination
made by them in certifying such statements did not disclose the existence of any
condition or event which constitutes an Event of Default or which, after notice
or lapse of time or both, would constitute an Event of Default, or, if an Event
of Default is disclosed, a statement specifying the nature and period of
existence of an Event of Default.
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(b) QUARTERLY REPORTS. As soon as reasonably possible, and in any event
within forty-five (45) days after the end of the first three calendar quarters
in each fiscal year, consolidated financial statements of Borrower and Guarantor
prepared in reasonable detail and in accordance with GAAP and certified by the
chief financial officer of Borrower and Guarantor, which statements shall
contain balance sheets as of the end of such accounting period, statements of
profit and loss for the period from the beginning of the fiscal year to the end
of such calendar quarter, and statements of sources and uses of funds.
(c) MONTHLY REPORT. As soon as reasonably possible, and in any event
within thirty (30) days after the end of each calendar month in each fiscal
year, financial statements of Borrower prepared in reasonable detail and in
accordance with GAAP and certified by the local comptroller of Borrower, which
statements shall contain statements of profit and loss for the period from the
beginning of such month and such fiscal year to the end of such calendar month.
(d) OFFICER'S CERTIFICATE. With each report submitted pursuant to Section
6.2(a) and (b) Borrower and Guarantor shall provide to Bank a Chief Financial
Officer's Certificate substantially in the form of Exhibit C attached hereto.
(e) ADJUSTMENT COMPUTATIONS. With each report submitted pursuant to
Section 6.2(a) and (b), a schedule in form and scope satisfactory to Bank,
certified by the principal financial officer of the Borrower and the Guarantor,
setting forth data sufficient to demonstrate compliance by the Borrower and
Guarantor with this 1995 Agreement.
(f) SCHEDULE OF INSURANCE. With each report submitted pursuant to Section
6.2(a), a schedule setting forth data sufficient to demonstrate compliance with
Section 6.6, which schedule shall include the name of the insurer, the amount
and nature of the coverage and the party named as loss payee under each
insurance policy in force as at the end of the Borrower's most recent fiscal
year.
6.3 CORPORATE MATTERS. Borrower will do or cause to be done all things
necessary to preserve, renew and keep in full force and effect Borrower's
corporate existence, will maintain and preserve in full force and effect all
rights, licenses, patents and franchises material to Borrower's business, and
will comply with all applicable laws and regulations having a material effect on
its business.
6.4 MAINTENANCE OF PROPERTIES. Borrower will maintain, preserve, protect
and keep all properties used or useful in the conduct of its business in good
repair, working order and condition, and from time to time make such repairs,
renewals, replacements and improvements thereto as may be necessary or advisable
to conduct such business.
6.5 TAXES. Borrower will pay or cause to be paid when due, all taxes,
assessments, governmental charges or levies imposed upon it or on any of its
properties provided, however, Borrower shall have the right to contest such in
good faith. Upon request, Borrower will
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furnish Bank with such documentation as Bank may require in order to establish
and verify that all such taxes, assessments, charges or levies have been paid.
6.6 INSURANCE. Borrower will keep its insurable properties insured by
financially sound and reputable insurers reasonably satisfactory to Bank against
such risks and in such amounts as is required by the Lease but at least to the
extent customary with respect to like properties of companies conducting similar
business. Borrower will maintain in full force and effect public liability and
workmen's compensation insurance to the extent customary with respect to
companies conducting similar businesses. All policies shall, subject to the
rights of Borrower's Lessor and the Mortgagee of such Lessor, be endorsed in
favor of Bank as beneficiary, mortgage loss payee, or as additional insured
whichever is appropriate, which policy shall not be modified or cancelled
without giving Bank at least thirty (30) days prior written notice thereof.
The Borrower shall procure and forward to the Bank original paid up
insurance policies or certificates of such policies from companies having the
Best's rating of A-IX or higher with a company acceptable to Bank, licensed to
do business in Louisiana, in amounts, in form and substance, and with expiration
date acceptable to the Bank and containing a noncontributory standard mortgagee
clause or its equivalent in a form satisfactory to the Bank, or the statutory
mortgagee clause if any, required in any state where the Project is located, or
a mortgagee's loss payable endorsement, in favor of the Bank, providing the
following types of insurance on the Project:
(i) PROPERTY HAZARD INSURANCE. Property hazard insurance, in each
case affording insurance against loss or damage by fire,
lightning, theft, sprinkler leakage, vandalism and malicious
mischief and such other perils as are included in so-called
"all risks" or "extended coverage" and against such other
insurable perils as, under good insurance practices, from time
to time are insured against for properties of similar character
and location; such insurance to be not less than 100% of the
full replacement cost of the Property without deduction for
depreciation; said policy to contain replacement costs and
stipulated value endorsements.
(ii) FLOOD INSURANCE. Insurance against flood, not less than
$10,000,000.00 or the full replacement cost of the Property or
the maximum amount available, whichever is lesser.
(iii) COMPREHENSIVE GENERAL AUTOMOBILE AND LIABILITY INSURANCE.
Comprehensive public liability insurance with respect to the
Property and the operations related thereto, whether conducted
on or off the Property, against liability for personal injury
(including bodily injury and death) and property damage, of not
less than $1,000,000.00 per occurrence and in the aggregate,
combined bodily injury and property damage; such comprehensive
public liability insurance to be on a per occurrence basis
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and to specifically include but not be limited to water damage
liability, products liability, motor vehicle liability for all
owned and non-owned vehicles, including rented and leased
vehicles, and contractual indemnification.
(iv) BUSINESS INTERRUPTION. Business income loss insurance with
coverage for at least six months.
(v) OTHER INSURANCE. Such other insurance on the Property or any
replacements or substitutions therefor and in such amounts as
may from time-to-time be reasonably required by Bank against
other insurable casualties which at the time are commonly
insured against in the case of premises similarly situated, due
regard being given to the height and type of the Property, its
construction, location, use and occupancy, or any replacements
or substitutions therefor.
6.7 PAYMENT OF AMOUNTS DUE, ETC. Borrower and Guarantor will make all
payments of interest on the Revolving Credit Note in accordance with the terms
hereof and thereof and will observe, perform and comply with each of the
covenants, terms and conditions contained herein, therein and in all other
documents and instruments required hereby or incident or collateral hereto.
Borrower and Guarantor will make all payments on account of principal required
to be made in order to reduce the unpaid principal balance to the Maximum
Revolving Credit Loan Amount.
6.8 INFORMATION AND INSPECTION. Borrower and Guarantor will furnish to
Bank from time to time with reasonable promptness, upon the request of Bank,
full information pertinent to any covenant, provision or condition hereof or to
any matter in connection with their business and, at all reasonable times and as
often as Bank shall reasonably request, permit any authorized representative
designated by Bank to visit and inspect any of their properties, including their
books (and to make extracts therefrom), and to discuss their affairs, finances
and accounts with their officers. Borrower and Guarantor will, in addition,
furnish to Bank with reasonable promptness such financial information as is
prepared regularly by Borrower or Guarantor on a monthly basis as Bank shall
reasonably request.
6.9 COMPLIANCE WITH AGREEMENT, ETC. Borrower and Guarantor will
immediately advise Bank of any event which constitutes or, after notice or lapse
of time or both, would constitute an Event of Default or a default in the
performance by Borrower or Guarantor of any covenant or agreement contained in
any other agreement which is material to their businesses to which Borrower or
Guarantor is a party or by which Borrower or Guarantor is bound. Borrower shall
give Bank immediate notice of any notice of any default under the Lease.
6.10 LEASE. Borrower shall maintain the Lease in full force and effect and
shall not amend, alter or modify without the prior written consent of Bank.
Borrower shall exercise its
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option to renew the Lease thirty (30) days prior to the required notice time
period set forth in the Lease and shall deliver to Bank a duplicate original of
the certified notice to exercise Borrower's option to extend the Lease within
five (5) days of the date that it is mailed.
6.11 FINANCIAL COVENANTS OF GUARANTOR.
(a) FINANCIAL RATIOS. Guarantor covenants and agrees that until
the Commitment Termination Date, Guarantor shall maintain at all times the
following financial ratios and covenants:
(i) TOTAL LIABILITIES TO TANGIBLE NET WORTH. The Guarantor's
ratio of current liabilities plus the aggregate principal
amount of consolidated long term debt of the Guarantor
(including subsidiaries) to consolidated Tangible Net
Worth shall equal 3.0 to 1.0 or less, tested quarterly.
(ii) TANGIBLE NET WORTH. A total Tangible Net Worth equal to
or greater than $19,000,000.00 from the Effective Date
until June 30, 1996. Thereafter a total Tangible Net
Worth equal to or greater than $20,000,000.00 from July 1,
1996 until the Commitment Termination Date, tested
quarterly.
(b) DIVIDENDS. Guarantor shall have the right of distributing
dividends and/or purchasing stock from operations in an aggregate amount not to
exceed $1,500,000.00 in any fiscal year ("Dividend and Stock Purchase
Allowance").
(c) OPERATING CASH FLOW. Guarantor shall maintain at the end of
each quarter, Operating Cash Flow equal to or greater than $2,000,000.00 for
each preceding 12 month period.
6.12 FINANCIAL COVENANTS OF BORROWER.
(a) FINANCIAL RATIOS. Borrower covenants and agrees that until the
Commitment Termination Date, Borrower shall maintain at all times the following
financial ratios and covenants.
(i) TOTAL LIABILITIES TO TANGIBLE NET WORTH. Borrower's ratio
of current liabilities plus the aggregate principal amount
of long term debt (including capitalized lease payables)
plus the aggregate amount of indebtedness to Affiliates to
Tangible Net Worth shall equal 2.1 to 1.0 or less, tested
quarterly.
(ii) TANGIBLE NET WORTH. A total Tangible Net Worth equal to
or greater than $5,000,000.00 until the Commitment
Termination
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Date, tested quarterly.
(b) NET INCOME REQUIREMENT. For each year Borrower's Net Income
before the 1 1/2% marketing fee shall equal or exceed $1,000,000.00.
(c) Borrower shall be permitted to make intercompany transfers,
said transfers to be limited to a maximum of Net Income plus Depreciation and
advances under the Revolving Credit Loan minus Capital Expenditures and
repayments under the Revolving Credit Loan. Upon the occurrence of an Event of
Default and during its continuance, Borrower shall be prohibited from making any
intercompany transfers without Bank's written approval which approval may be
withheld in its sole determination.
(d) Borrower shall be permitted to incur a maximum of $1,000,000.00
of additional debt arising from the capitalization of equipment leases for
capital improvements which debt must be subordinate to Bank's lien.
(e) Borrower may guarantee a maximum of $1,000,000.00 of
Guarantor's debt.
(f) Borrower shall be permitted to pay dividends to Guarantor
unless an Event of Default occurs at which time Borrower shall thereafter be
prohibited from paying dividends to Guarantor during the existence of an Event
of Default.
6.13 ADDITIONAL DOCUMENTATION. Borrower agrees to promptly cure any
defects in the creation and issuance of the Revolving Credit Note and the
execution and delivery of the Security Instruments and this 1995 Agreement.
Borrower and Guarantor shall, at their expense, promptly execute and deliver to
Bank upon Bank's reasonable request all such other and further documents,
agreements and instruments in compliance with or accomplishment of the covenants
and agreements of Borrower in the Security Instruments and the 1995 Agreement,
or to further evidence and more fully describe the collateral intended as
security for the Revolving Credit Note, or to correct any omissions in the
Security Instruments or any amendments thereto or in the 1995 Agreement, or more
fully to state the security obligations set out herein or in any of the Security
Instruments, or to perfect, protect or preserve any liens created pursuant to
any of the Security Instruments, or to make any recordings, to file any notices,
or obtain any consents, all as may be necessary or appropriate in connection
therewith.
6.14 CHANGES. The Borrower will not make any material changes in the
improvements on the Property which alter the character of its business as
carried on as of the date hereof, without the prior written approval of Bank.
6.15 EXTERMINATING CONTRACT. Borrower shall obtain and maintain in force
during the term of this 1995 Agreement a contract with a licensed exterminating
company acceptable to Bank certifying that the Property is under the contract
and that there is no active infestation from termites or other wood destroying
organisms. In the event that any termite certificate
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shall disclose active termite or other infestation, such infestation shall not
constitute a default under this covenant provided that any damages as a result
thereof is being repaired diligently.
ARTICLE VII.
NEGATIVE COVENANTS
7.1 LIMITATION OF INDEBTEDNESS. Borrower covenants and agrees that during
the term of this Revolving Credit Loan it will not incur, create, assume or in
any manner become or be liable in respect of any indebtedness and Borrower will
not guarantee or otherwise in any way become or be responsible for the
obligations of any other Person, whether by agreement to purchase the
indebtedness of any other Person or agreement for the furnishing of funds to any
other Person through the purchase or lease of goods, supplies or services (or by
way of stock purchase, capital contribution, advance or loan), for the purpose
of paying or discharging the indebtedness of any other Person, or otherwise,
except that the foregoing restrictions shall not apply to:
(a) the Revolving Credit Note or other indebtedness to Bank;
(b) indebtedness consented to by Bank and subordinated to Bank and which
shall not jeopardize payment of this Revolving Credit Loan;
(c) liabilities, direct or contingent, of Borrower existing on the date of
this 1995 Agreement which are reflected in the financial statements or have been
disclosed to Bank in writing, and any renewals and extensions thereof;
(d) endorsements of negotiable or similar instruments for collection or
deposit in the ordinary course of business;
(e) taxes, assessments or other governmental charges which are not yet due
or are being contested in good faith by appropriate action promptly initiated
and diligently conducted, if such reserve as shall be required by generally
accepted accounting principles shall have been made therefor;
(f) trade account payables and other similar indebtedness incurred in the
ordinary course of business;
(g) intercompany transfers to Guarantor or Affiliate as set forth in
Section 6.12(c);
(h) equipment lease obligations described in Section 6.12(d);
(i) guaranty of Guarantor's debt described in Section 6.12(e).
7.2 LIENS AND ENCUMBRANCES. Borrower will not create, incur, assume or
permit to exist any mortgage or other lien upon any assets now owned or
hereafter acquired by it, except:
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(a) liens for taxes, assessments, or other governmental charges not yet
due or which are being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be required by
generally accepted accounting principles shall have been made therefor.
(b) liens of landlords, vendors, carriers, warehousemen, mechanics,
laborers and materialmen arising by law in the ordinary course of business for
sums not yet due or being contested in good faith by appropriate action promptly
initiated and diligently conducted, if such reserve as shall be required by
generally accepted accounting principles shall have been made therefor;
(c) liens existing on property owned by Borrower on the date of this 1995
Agreement which have been disclosed to Bank in writing and any renewals and
extensions thereof;
(d) pledges or deposits made in the ordinary course of business in
connection with workmen's compensation, unemployment insurance, social security
and other like laws;
(e) any liens created pursuant to this 1995 Agreement;
(f) purchase money mortgages or encumbrances in the aggregate amount of
$150,000.00;
(g) liens immaterial in amount;
(h) liens expressly junior to the liens of Bank provided such junior liens
do not exceed $1,000,000.00 and are for capital improvements.
7.3 LOANS AND ADVANCES. Borrower will not make any loans, advances or
investments to or with any third parties; provided, however, that Borrower may
make loans or advances to employees or officers of Borrower, not exceeding
$50,000.00 in the aggregate outstanding, and to Guarantor as provided in Section
6.12. Borrower also will not pay any salaries to any offsite officers but
Borrower may pay annual management and marketing fees to Guarantor equal to 4
1/2% of revenues in accordance with present practices.
7.4 DIVIDENDS, DISTRIBUTION, REDEMPTIONS. Guarantor shall not declare or
pay any dividend of any kind whatsoever (other than stock dividends), purchase,
redeem or otherwise acquire for value any of its stock now or hereafter
outstanding, return any capital to its stockholders, or make any distribution of
its assets to its stockholders as such, provided, however, that Guarantor may
declare dividends and purchase its own shares as provided in Section 6.11.
Guarantor shall report the number of shares so purchased and the price it paid
for such shares.
7.5 NATURE OF BUSINESS. Neither Borrower nor Guarantor will permit any
material
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change to be made in the character of their business as carried on as of the
date hereof.
7.6 MERGERS, ETC. Neither Borrower nor Guarantor will merge or
consolidate with or into any other corporation, nor will either of them sell,
assign, lease, transfer, convey or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of their
capital assets (whether now owned or hereafter acquired) including the Property
to any Person, without Bank's prior written consent, which consent may
arbitrarily be withheld, nor shall Borrower or Guarantor adopt any plan of
liquidation, except where Borrower merges with or conveys its assets to
Guarantor and the surviving company assumes payment of the Revolving Credit
Loan.
7.7 OTHER AGREEMENTS. Borrower will not amend, change, alter or enter
into any agreement that has a reasonable likelihood of materially adversely
affecting Borrower's ability to comply with the terms and conditions of this
1995 Agreement and the repayment of the Revolving Credit Loan.
7.8 SALE OF ACCOUNTS RECEIVABLE. The Borrower will not sell or transfer
any of its accounts receivable, whether with or without recourse, except for
third party consumer credit card transactions.
7.9 TRANSACTIONS WITH AFFILIATES. Borrower will not enter into any
transactions with any Affiliate, except on terms no less favorable to the
Borrower than would be available in a bona fide arm's length transaction with a
non-affiliated person or entity.
7.10 ENVIRONMENTAL COMPLIANCE. (a) Borrower represents and warrants that
(i) Borrower shall not cause nor to the best of its knowledge has the Property
ever been used in a manner to violate any applicable federal, state and local
environmental, health and safety statutes and regulations of every nature
whatsoever, including without limitation, those regarding the presence and
removal of asbestos-containing materials (said statutes and regulations are
hereinafter collectively referred to as "Environmental Laws"), (ii) Borrower
shall not permit the Property to be used, and represents to the best of its
knowledge that the Property has never been used, for the generation,
manufacture, refinement, production, storage, handling, transfer, processing or
transportation of any hazardous or toxic substances or waste, any oil or
pesticide or any asbestos-containing materials (except for customary materials
incident to the normal operation of the Property, i.e., solvents, pesticides,
cleaners, heating oil, etc. which shall be used in accordance with applicable
law) and (iii) to the best of Borrower's knowledge the Property does not contain
any underground storage tanks nor will Borrower install any underground storage
tanks unless they are in full compliance with all environmental laws and
regulations.
(b) Borrower has never generated, stored, disposed of or otherwise handled
any hazardous substance on the Property in any fashion contrary to applicable
law and is, to the best of its knowledge, not aware of the generation, storage,
disposal or other handling of any hazardous substance on the Property by anyone
else in any fashion contrary to applicable law.
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Borrower also is, to the best of its knowledge, not aware of the presence of any
hazardous substance on the Property which may require remedial action under
applicable law. Borrower, to the best of its knowledge, is not aware of any
transformers or other equipment on the Property which contain PCBs.
(c) Borrower shall give Bank immediate notice of the occurrence of any of
the following events: (i) Borrower's knowledge of the failure of the Property to
comply with any Environmental Law in any manner whatsoever; (ii) the receipt by
Borrower or any tenant of any notice, complaint or order of violation or non-
compliance of any nature whatsoever with regard to compliance of the Property
with any Environmental Law; or (iii) any notice of a pending or, to Borrower's
best knowledge, information and belief, threatened investigation regarding the
compliance of any of the operations on the Property with the requirements of any
Environmental Law.
(d) Borrower agrees to defend, indemnify and hold harmless Bank and each
and all of Bank's officers, directors, employees, attorneys and agents
(collectively referred to as "Indemnities") from and against any and all losses
(including, without limitation, diminution in value of the Property),
liabilities (including, without limitation, strict liability), suits,
obligations, fines, damages, judgments, penalties, claims, charges, costs and
expenses (including, without limitation, fees and disbursements of counsel and
consultants for such Indemnities), which may be paid, incurred or suffered by,
or asserted against, an Indemnitee by any person or entity or governmental
agency and arising directly or indirectly out of or in connection with (i) any
matter, condition or act involving Environmental Law which arise from and after
the date hereof, whether or not Borrower has knowledge of same or (ii) the
breach by Borrower of any representation, warranty or covenant by Borrower
contained in this Section 7.10.
(e) The warranties and indemnities of Borrower, and the rights and
remedies of Bank, under this Section 7.10 are in addition to and not in the
limitation of any other warranties, indemnities, rights and remedies provided in
this 1995 Agreement or otherwise at law or in equity and shall survive any
foreclosure and sale of the Property and any conveyance thereof by deed in lieu
of foreclosure, or the satisfaction or release, or assignment by Bank, of this
1995 Agreement.
ARTICLE VIII.
DEFAULT
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default" hereunder and failure to cure such Event of Default within five (5)
business days (or such other time periods as indicated hereinbelow) following
written notice of such Event of Default shall, at Bank's option, relieve Bank of
its obligations hereunder and shall immediately mature and make due and exigible
the entire balance of funds under the Revolving Credit Loan up to the date of
said
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Event of Default;
(a) The failure of Borrower or Guarantor to pay interest or principal on
any Indebtedness after the same becomes due and payable, including without
limitation on the Revolving Credit Loan under the terms of the Revolving Credit
Note and this 1995 Agreement as and when same is due and payable whether at
maturity or at a date fixed for the payment of any reduction in principal to
comply with the Maximum Revolving Credit Loan Amount thereof or by acceleration
or otherwise and such failure shall have remained unremedied for a period of
five (5) days after Borrower or Guarantor shall have received notice of such
Event of Default from Bank;
(b) The failure of Borrower or Guarantor to observe or perform any of the
obligations to be observed or performed by Borrower or Guarantor under the terms
of this 1995 Agreement, the Revolving Credit Note or any one or more of them,
including, but not limited to, the obligation set forth in Section 2.1(d). If
the default is a nonmonetary default, Borrower or Guarantor shall have thirty
(30) days to cure the Event of Default;
(c) The failure of Guarantor or Borrower to be in compliance with the
financial covenants set forth in Section 6.11 and Section 6.12;
(d) The failure of Borrower to maintain the insurance required under this
1995 Agreement, or any failure to pay any reasonable attorney's fee, recordation
fee, appraisal fee, inspection fee, or other fee to be paid by Borrower
hereunder;
(e) Any representation or warranty by Borrower or Guarantor contained
herein or in the Collateral Leasehold Mortgage, or any of the other Security
Instruments shall at any time be or become incorrect, false, or misleading, or
shall be breached, in any material respect and such representation or warranty
is not remedied within 30 days of written notice from Bank;
(f) Borrower or Guarantor shall (1) become insolvent; (2) admit in writing
its inability to pay its debts as they mature; (3) fail generally to pay its
debts as they become due; (4) make a general assignment for the benefit of
creditors; (5) be adjudicated as bankrupt, or insolvent; or (6) file a voluntary
petition in bankruptcy or a petition or an answer seeking an arrangement with
creditors or to take advantage of any insolvency law, or file an answer
admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization, or insolvency proceeding;
(g) If a court having jurisdiction shall enter a decree (i) appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator or other such
official for Borrower or
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Guarantor or for any substantial part of its property; or (ii) ordering the
winding up or liquidation of the affairs of Borrower or Guarantor, and such
decree or order shall remain unstayed and in effect for a period of 30
consecutive days;
(h) If any proceedings shall be instituted against Borrower or Guarantor
under any applicable bankruptcy, reorganization, insolvency or other similar law
now or hereafter in effect; and such decree or order shall remain unstayed and
in effect for a period of thirty (30) consecutive days;
(i) A final judgment for the payment of money not covered by insurance in
excess of $50,000 shall be rendered against Borrower or Guarantor, and shall
remain undischarged for a period of thirty (30) consecutive days and not be
effectively stayed;
(j) Borrower or Guarantor or any subsidiary of Guarantor shall fail to
make when due, or within any applicable grace period, any payment of principal
or interest required by any evidence of indebtedness for borrowed money,
finance lease agreement, security agreement, or real estate mortgage held by any
person other than Bank, or shall fail to comply with any other material
provision of any such evidence of indebtedness, agreement or mortgage, document
or instrument to which Borrower's or Guarantor's property is bound, which such
failure shall be continuing without waiver or cure and which failure to make
payment or to comply shall have a Material Adverse Effect on Borrower of
Guarantor or any subsidiary of Guarantor;
(k) Borrower knowingly violates any covenant or condition in any other
agreement which creates or may create a Material Adverse Effect;
(l) The revocation, withdrawal, material modification, withholding or
expiration of any license, consent, or approval of any governmental agency or
regulatory body required for the completion of Borrower's obligations under this
1995 Agreement;
(m) The failure of Borrower or Guarantor to pay the Undisbursed Commitment
Fee within 5 days of receipt of the Bank's invoice for said commitment; or
(n) A default not cured or waived under the Lease shall be deemed to be an
Event of Default.
8.2 REMEDIES. Upon the occurrence of an Event of Default hereunder, Bank,
at its option:
(a) shall be relieved of any further obligation to Borrower under this
1995 Agreement, including without limitation its obligation to allow Borrower to
reborrow from Bank pursuant to Article II hereof;
(b) shall have the right to declare the Revolving Credit Note and any
Security
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Instruments to be immediately due and payable, whereupon the same shall become
immediately due and payable without presentment, demand, protest or notice of
any kind (all of which are hereby expressly waived), and Bank may thereupon
institute proceedings to collect same, including, but without limiting the
generality of the foregoing, the right to institute foreclosure proceedings on
the Collateral Leasehold Mortgage;
(c) shall have the right and is hereby authorized to apply and/or set off
any or all funds or balances on deposit in any accounts maintained by Borrower
or Guarantor with Bank and any other funds now or hereafter belonging to
Borrower or Guarantor and in the care, custody or control of Bank, to the
payment of the Indebtedness;
(d) shall have the right to take possession of any additional collateral
which Bank may hold belonging to Borrower or Guarantor, if any, and convert same
without the consent of Borrower or Guarantor, and use the proceeds of such
collateral to pay any debt or expenses required to be paid by Borrower hereunder
or apply such proceeds to the payment of or reduction of the Revolving Credit
Loan; and
(e) shall have the right to take nay action which in Bank's own judgment
may be necessary or advisable in order to fulfill the obligations of Borrower or
Guarantor under this 1995 Agreement. Any and all amounts expended by Bank in so
doing shall constitute an additional indebtedness on the Revolving Credit Loan
made hereunder to Borrower under this 1995 Agreement.
ARTICLE IX.
MISCELLANEOUS
9.1 NOTICES. All notices required hereunder shall be in writing and shall
be deemed to have been sufficiently given or served for all purposes when
received after being deposited in the United States mail by certified mail,
return receipt requested, addressed to any party hereto at its address below
stated, or at such other address of which it shall have notified the party
giving such notice in writing. The respective addresses of the parties are as
follows:
To Bank: Hibernia National Bank
313 Carondelet Street
New Orleans, Louisiana 70130
Attention: Hal Hopson
National Accounts Officer
With copy to: Chaffe, McCall, Phillips, Toler & Sarpy, L.L.P.
2300 Energy Centre, 1100 Poydras Street
New Orleans, Louisiana 70163-2300
Attention: Kathleen S. Plemer
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<PAGE>
To Borrower
or Guarantor: Royal Sonesta, Inc.
Royal Sonesta Hotel
300 Bourbon Street
New Orleans, Louisiana 70130
Attention: General Manager
and
Sonesta International Hotels Corporation
200 Clarendon Street
Boston, Massachusetts 02116
Attention: Office of the Treasurer
and
Burns & Levinson
125 Summer Street
Boston, Massachusetts 02110
Attention: Lawrence M. Levinson
9.2 ENTIRE AGREEMENT - AMENDMENT. This 1995 Agreement sets forth the
entire agreement of the parties with respect to the subject matter hereof and
restates all prior written or oral agreements or understandings with respect
thereto. Neither this 1995 Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but same may only be accomplished by an
instrument in writing signed by the parties against whom enforcement of the
change, waiver, discharge or termination is sought.
9.3 CUMULATIVE EFFECT. Each and every right, remedy and power granted
Bank hereunder shall be cumulative and in addition to any other right, remedy or
power held by Bank or now or hereafter existing in equity, at law, by statute or
otherwise, and may be exercised by Bank, from time to time, concurrently or
independently and as often and in such order as Bank may deem expedient.
9.4 THIRD PARTY BENEFICIARIES. Nothing in this 1995 Agreement shall be
deemed to create any rights in favor of any person, firm or corporation not a
party hereto, and this 1995 Agreement shall not be construed in any respect to
be a contract in whole or in part for the benefit of any third party, except in
the case of the permitted successors and/or assigns of the parties hereto.
9.5 SUCCESSORS AND ASSIGNS. The provisions of this 1995 Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that, subject only to the provisions
of any applicable bankruptcy law, neither Borrower or Guarantor may assign or
transfer any of its rights or obligations under this 1995 Agreement;
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<PAGE>
9.6 SECTION HEADINGS. Section headings are inserted for convenience only
and shall not affect any construction or interpretation of this 1995 Agreement.
9.7 GOVERNING LAW. This 1995 Agreement, the Revolving Credit Note, the
Security Instruments and all other documents required hereunder shall be
governed by and construed in accordance with the laws of the State of Louisiana.
9.8 WAIVER. In the event that Borrower shall at any time during the term
of this 1992 Agreement not perform any of its obligations hereunder or fail to
satisfy any of the conditions set forth herein, the fact that Bank shall not
avail itself at that time of any remedy to which it may be entitled hereunder
shall not constitute a waiver of any of the subsequent obligations of Borrower
hereunder, and shall not prohibit Bank from demanding payment of the Revolving
Credit Note at any time.
9.9 INVALIDITY. In the event that any one or more of the provisions
contained in this 1995 Agreement, the Revolving Credit Note, the Security
Instruments or any of the other collateral documents executed in connection
herewith shall, for any reason, be held invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this 1995 Agreement, the Revolving Credit Note, the Security
Instruments or any of the other collateral documents.
9.10 SURVIVAL OF AGREEMENTS. All representations, warranties, covenants
and agreements of Borrower and Guarantor herein not fully performed before the
date of this 1995 Agreement shall survive such date. In addition, this 1995
Agreement shall continue in existence until the Indebtedness has been paid or
discharged in full.
9.11 SEVERABILITY. If any provision or provisions of this 1995 Agreement
are found to be void or unenforceable, the remaining provisions of this 1995
Agreement and any agreements or instruments delivered pursuant hereto shall,
nevertheless, be binding, and this 1995 Agreement and such agreements and
instruments as shall be enforceable as if the void or unenforceable provision or
provisions had not been included.
9.12 ORIGINALS. This 1995 Agreement may be executed in multiple originals,
each of which shall be deemed an original. In making proof of this 1995
Agreement for any reason, it shall not be necessary to produce more than one
original.
9.13 NO REPRESENTATIONS BY THE BANK. The Bank has no obligation in
connection with the Property, except to advance proceeds as herein provided, and
the Bank shall not be liable for the performance or non-performance or delay in
performance of any contractor, subcontractor or supplier of materials, or for
the quality of workmanship or materials, or for the failure to construct,
complete, protect or insure the Property, or for the payment of any costs or
expenses incurred in connection therewith, or for the performance or non-
performance or delay in performance of any obligation of Borrower to the Bank.
Any inspection by the
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<PAGE>
Bank of the Property, approval of any activities shall only be for the sole and
separate benefit of the Bank for the purpose of protecting the security of the
Bank, and the same shall in no way be construed as a representation that there
is compliance on the part of the Borrower with its obligators or that any
construction on the Property is free from faulty material or workmanship. The
fact that the Bank makes such inspection shall not relieve Borrower from its
duty to independently ascertain that any construction is being completed in
accordance with the plans and specifications, and Borrower has no right to rely
on any procedures required by the Bank.
9.14 ESTOPPEL LETTER. Upon reasonable request of Borrower or Guarantor
from time to time, Bank will provide a statement to Borrower or Guarantor of the
amounts due under the Revolving Credit Loan and stating whether Bank is claiming
that any default thereunder or Event of Default hereunder exists at that time.
Nothing in this section shall relieve Borrower or Guarantor of their obligations
under this 1995 Agreement.
9.15 WAIVER OF JURY TRIAL; SUBMISSION TO JURISDICTION.
(a) The Borrower and the Bank hereby waive trial by jury in any action or
proceeding to which the Borrower and the Bank may be parties, arising out of or
in any way pertaining to (i) the Note, (ii) this 1995 Agreement and (iii) any
and all previous loan agreements and Security Instruments. It is agreed and
understood that this waiver constitutes a waiver of trial by jury of all claims
against all parties to such actions or proceedings, including claims against
parties who are not parties to this 1995 Agreement. This waiver is knowingly,
willingly and voluntarily made by the Borrower and the Bank, and the Borrower
and the Bank hereby represent that no representations of fact or opinion have
been made by any individual to induce this waiver of trial by jury or to in any
way modify or nullify its effect. The Borrower and the Guarantor further
represents that it has been represented in the signing of this 1995 Agreement
and in the making of this waiver by counsel, selected of its own free will, and
that it has had the opportunity to discuss this waiver with counsel.
(b) The Borrower hereby irrevocably consents to the jurisdiction of the
State Courts of Louisiana and the Federal Courts in Louisiana, and agrees that
any action or proceeding arising out of or brought to enforce the provisions of
the note and/or any loan documents may be brought in any court having subject
matter jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this 1995 Agreement, in
multiple original counterparts on the dates set forth below.
WITNESSES: ROYAL SONESTA, INC.
/S/ CLAUDIA A. BRENNAN BY: /S/ PETER J. SONNABEND, V.P.
----------------------------- -------------------------------
DATE:
/S/ BOY A.J. VAN RIEL 10/18/94
----------------------------- -----------------------------
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<PAGE>
SONESTA INTERNATIONAL HOTELS
/S/ CLAUDIA A. BRENNAN CORPORATION
-----------------------------
/S/ BOY A.J. VAN RIEL BY: /S/ PETER J. SONNABEND
--------------------------
DATE: 10/18/94
----------------------------
/S/ SHARON GUNN HIBERNIA NATIONAL BANK
-----------------------------
/S/ LYNDA GAZER
----------------------------- BY: /S/ HAL HOPSON
-----------------------------
DATE: 10/26/94
----------------------------
<PAGE>
Exhibit 10.4(b)
PROMISSORY NOTE
$5,000,000.00 Effective January 1, 1995
Boston, Massachusetts
FOR VALUE RECEIVED, the undersigned, ROYAL SONESTA, INC., a Louisiana
corporations (the "Borrower") promises to pay to the order of HIBERNIA NATIONAL
BANK, 313 Carondeler Street, New Orleans, Louisiana 70130 (the "Bank"), at its
offices in New Orleans, Louisiana, or at such other place as may be designated
in writing by the holder of this Note, the principal sum of FIVE MILLION AND
NO/100 ($5,000,000.00) DOLLARS, together with interest thereon at the prime or
base rate of interest charged by Citibank N.A., plus 3/4% adjustable daily
("Index Rate") per annum and on any past due interest hereunder at the rate
hereinafter specified, said interest and principal payable as follows, namely,
(a) Interest on the unpaid and outstanding principal amount of this Note
shall be payable quarterly in arrears on the last day of September,
December, March, and June commencing on March 1, 1995 (each, an
"Interest Payment Date") in an amount equal to the quotient of (i) an
amount equal to (A) the sum of the daily unpaid principal amounts of
the Revolving Credit Loan outstanding on each day during the previous
month multiplied by (B) the Index Rate divided by (ii) 360.
The Index Rate shall be determined for use in calculating the interest
which is payable if any payment on the Revolving Credit Loan becomes
due and payable on a day other than a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day.
(b) The entire unpaid and outstanding amount of principal and interest
shall be due and payable on the 31st day of December, 1997.
"Prime" or "base" rate of interest is defined as the rate of interest
established by the Board of Directors or management of Citibank N.A., from time
to time as such bank's "prime" or "base" rate, whether or not that rate is
published, and which is not necessarily the lowest rate charged by such
institution.
Notwithstanding anything to the contrary set forth in this Note, if at any
time until payment in full of all of the Obligations in respect of the debt, the
Index Rate exceeds the highest rate of interest permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then
<PAGE>
in such event and so long as the Maximum Lawful Rate would be so exceeded, the
rate of interest payable hereunder shall be equal to the Maximum Lawful Rate;
PROVIDED, however, that if at any time thereafter the Index Rate is less than
the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at
the Maximum Lawful Rate until such time as the total interest received by Bank
from the making of advances hereunder is equal to the total interest which Bank
would have received had the Index Rate been (but for the operation of this
paragraph) the interest rate payable from the date hereof. Thereafter, the
interest rate payable hereunder shall be the Index Rate unless and until the
Index Rate again exceeds the Maximum Lawful Rate; in which event this paragraph
shall again apply. In no event shall the total interest exceed the amount which
Bank could lawfully have received had the interest due hereunder been calculated
for the full term hereof at the Maximum Lawful Rate. In the event the Maximum
Lawful Rate is calculated pursuant to this paragraph, such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. In the event that
a court of competent jurisdiction shall make a final determination that Bank has
received interest hereunder or under any of the Security Instruments in excess
of the Maximum Lawful Rate, Bank shall, to the extent permitted by applicable
law, promptly apply such excess to any interest due and not yet paid under the
Revolving Credit Loan and then to the principal amount of the Revolving Credit
Loan, then to other unpaid Obligations and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.
Borrower may prepay this Note in full or in part at any time by paying the
then unpaid principal balance of this Note, plus accrued simple interest and any
unpaid late charges and fees through date of prepayment. If Borrower prepays
this Note in full, or if Bank accelerates payment, Borrower understands that,
unless otherwise required by law, any prepaid fees or charges will not be
subject to rebate and will be earned by Bank at the time this Note is signed.
All payments under this Note shall be made in legal tender of the United
States of America in immediately available funds at Bank's office described
above, and no credit shall be given for any payment received by check, draft or
other instrument or item until such time Bank or the holder hereof shall have
received credit therefor from Bank's or the holder's collecting agent or, in the
event no collecting agent is used, from the bank or other financial institution
upon which said check, draft or other instrument or item is drawn.
If Borrower fails to pay any payment under this Note in full within 5 days
of when due, Borrower agrees to pay Bank a late payment fee in an amount equal
to 5.000% of the delinquent interest due.
Payment of this Note is secured by a Collateral Mortgage of Leasehold
Interest and Collateral Chattel Mortgage dated the 16th of August, 1983, as
amended October 15, 1984, and an Assignment of Subleases and Operating
Agreements.
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<PAGE>
In the event Borrower fails to make any payment of principal or interest or
there is another Event of Default, not cured within the required time period,
under the 1995 Agreement dated of even date hereof, at the option of the holder
hereof, the entire indebtedness hereby evidenced shall become due, payable and
collectible in accordance with the terms of the 1995 Agreement.
For the purpose of computing interest under this Note, payments of all or
any portion of the principal sum under this Note will not be deemed to have been
made until such payments are received by the holder of this Note in collected
funds.
Borrower and each guarantor of this Note hereby waive presentment for
payment, protest, notice of protest and notice of nonpayment, and all pleas of
division and discussion, and severally agree that their obligations and
liabilities to Bank hereunder shall be on a "solidary" basis. Borrower and each
guarantor further severally agree that discharge or release of any party who is
or may be liable to Bank for the indebtedness represented hereby, or the release
of any collateral directly or indirectly securing repayment hereof, shall not
have the effect of releasing any other party or parties, who shall remain liable
to Bank, or of releasing any other collateral that is not expressly released by
Bank. Borrower and each guarantor additionally agree that Bank's acceptance of
payment other than in accordance with the terms of this Note, or Bank's
subsequent agreement to extend or modify such repayment terms, or Bank's failure
or delay in exercising any rights or remedies granted to Bank, shall likewise
not have the effect of releasing Borrower or any other party or parties from
their respective obligations to Banks or of releasing any collateral that
directly or indirectly secures repayment hereof. In addition, any failure or
delay on the part of Bank to exercise any of the rights and remedies granted to
Bank shall furthermore not be construed as a waiver of any other rights and
remedies; it being Borrower's intent and agreement that Bank's rights and
remedies shall be cumulative in nature. Borrower and each guarantor further
agree that, should any event of default occur or exist under this Note, any
waiver or forbearance on the part of Bank to pursue the rights and remedies
available to Bank, shall be binding upon Bank only to the extent that Bank
specifically agrees to any such waiver or forbearance in writing. A waiver or
forbearance on the part of Bank as to one event of default shall not be
construed as a waiver or forbearance as to any other default.
The Bank is hereby authorized by the Borrower to record on the schedule
annexed to this Note (or on a supplemental schedule thereto) the amount of each
Revolving Credit Advance made by the Bank under the Revolving Credit Loan and
the amount of each payment of principal of each such Revolving Credit Advance
received by the Bank, it being understood however that failure to make any such
notation shall not affect the rights of the Bank or the obligations of the
Borrower hereunder or under the 1995 Agreement dated of even date in respect of
such Revolving Credit Advances.
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<PAGE>
In the event that Borrower makes any payment under this Note by check and
Borrower's check is returned to Bank unpaid due to nonsufficient funds in my
deposit account, Borrower agrees to pay Bank an additional NSF check charge
equal to $20.00.
If Bank refers this Note to an attorney for collection, or files suit
against Borrower or Guarantor to collect this Note, or if Borrower files for
bankruptcy or other relief from creditors, Borrower agrees to pay Bank's
reasonable attorneys' fees.
Capitalized terms not defined in this Note shall have the meanings given
them in the 1995 Agreement.
The records of the holder of this Note shall be prima facie evidence of the
amount owing on this Note.
ROYAL SONESTA, INC.
By: /S/ PETER J. SONNABEND
------------------------
Its: Vice President
RECEIVED BY HIBERNIA NATIONAL BANK
THIS 26TH DAY OF OCTOBER, 1994.
/S/ HAL HOPSON
----------------------------
HAL HOPSON
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<PAGE>
Exhibit 10.4(c)
FIRST AMENDMENT TO 1995 LOAN AGREEMENT
This First Amendment to 1995 Loan Agreement is executed on this 12th day of
December, 1994, by and between HIBERNIA NATIONAL BANK, a national banking
association (hereinafter "Bank"), ROYAL SONESTA, INC., a Louisiana corporation
(hereinafter "Borrower") and SONESTA INTERNATIONAL HOTELS CORPORATION, a New
York corporation (hereinafter "Guarantor").
WITNESSETH
WHEREAS, Borrower, Bank and Guarantor have entered into a 1995 Loan
Agreement effective January 1, 1995, whereunder Bank renewed and extended a
revolving line of credit facility in the amount of $5,000,000.00 (the "1995
Agreement"), and
WHEREAS, in connection with the 1995 Agreement, Borrower executed a
Promissory Note in favor of Bank dated Effective January 1, 1995 in the amount
of $5,000,000.00 with interest thereon at the prime or base rate of interest
charged by Citibank N.A. plus 3/4% adjustable daily ("Index Rate") per annum.
WHEREAS, in the 1995 Agreement, the term "Interest Rate" is defined as
"interest equal to the Prime Rate of Citibank, N.A. plus 3/4% (floating daily).
WHEREAS, Borrower and Bank desire to amend the Index Rate and the Interest
Rate as defined respectively in the Promissory Note and the 1995 Agreement, and
also to amend a certain other covenant in the 1995 Agreement, specifically
Article II, Section 2.7 entitled "Commitment Fee."
NOW THEREFORE, in consideration of the foregoing, the parties agree as
follows:
1. The 1995 Agreement is hereby amended so that Article I., Section 1.2,
DEFINITIONS shall be amended with respect to the term "Interest Rate"
to read as follows:
"INTEREST RATE" shall mean interest equal to the Prime Rate of
Citibank, N.A. minus 1/8% (floating daily).
2. The 1995 Agreement is further amended so that Article II, Section 2.7
COMMITMENT FEE, shall read as follows:
2.7 COMMITMENT FEE Borrower shall pay Bank a commitment fee on the
Interest Payment Date on the undisbursed portion of the Revolving
Credit Loan in an amount equal to .65 percent per annum of the
undisbursed portion ("Undisbursed Commitment Fee").
1
<PAGE>
3. All other terms and conditions of the 1995 Loan Agreement and the
Promissory Note remain in full force and effect.
IN WITNESS WHEREOF, Bank, Borrower and Guarantor have each caused this
amendment to be executed by their respective officers, hereunto duly authorized,
on the day, month and year first written above.
WITNESSES: ROYAL SONESTA, INC.
/S/ CLAUDIA A. BRENNAN BY: /S/ BOY A.J. VAN RIEL
---------------------- --------------------------
V.P. & Treasurer
/S/ KRISTI ROBBINS DATE: December 12, 1994
---------------------
SONESTA INTERNATIONAL HOTELS
CORPORATION
/S/ CLAUDIA A. BRENNAN BY: /S/ BOY A.J. VAN RIEL
---------------------- --------------------------
V.P. & Treasurer
/S/ KRISTI ROBBINS DATE: December 12, 1994
---------------------
HIBERNIA NATIONAL BANK
/S/ SUSAN CANO BY: /S/ HAL HOPSON
--------------------- --------------------------
Banking Officer
/S/ SHARON DERVER DATE: December 21, 1994
---------------------
2
<PAGE>
EXHIBIT 10.5
/ / UNITED STATES TRUST COMPANY /XX/ USTrust
40 Court Street 30 Court Street
Boston, MA 02108 Boston, MA 02108
$2,000,000.00 Boston, Massachusetts November 1, 1994
FOR VALUE RECEIVED, the undersigned (hereinafter, the "Borrower")
promise(s) to pay to the order of the banking institution named above
next to the box marked above with an "X" or the like (hereinafter, with
any subsequent holder, the "Bank") at an office of the Bank, the
principal sum of *** Two Million and 00/100 ** Dollars, with interest
thereon. In accordance with the provisions which are marked with an "X"
or the like, below, or on demand if none are so marked.
INTEREST RATE (CHECK ONE)
Interest shall be determined in all instances based upon a 360 day year and
actual day months. Interest on the unpaid principal balance of the Note shall
accrue as follows:
/X/ FLOATING RATE. At the floating rate equal to 0% per annum above the
Base Lending Rate (hereinafter defined), however in no event shall
said rate of interest be less than, if filled in, ______% per annum at
any time. The term "Base Lending Rate" means the rate of interest
established from time to time by the Bank as its base lending rate and
may or may not be the lowest rate of interest charged by the Bank to
any of its customers. Changes in the Base Lending Rate shall take
effect on the date announced by the Bank unless otherwise specified in
the announcement.
/ / FIXED RATE. At the rate of __________ percent per annum.
/ / DISCOUNT. Interest to maturity has been deducted from the proceeds of
the Note. Interest at the rate of __________ percent per annum shall
be paid on any amount not paid when due hereunder until that amount
and any such interest are so paid.
/ / OTHER.
INTEREST PAYMENTS (CHECK ONE)
Interest, at the rate set forth above, shall be paid by the Borrower to the
Bank as follows, or monthly in arrears if none are so marked:
/X/ PERIODICALLY. Monthly, but if filled in then NA in arrears, with the
first such payment due on November 30, 1994 and each subsequent
payment due on the like day of each consecutive calendar month, but if
filled in then calendar NA thereafter.
/ / AT MATURITY. At the maturity of the Note.
/ / INTEREST INCLUDED IN REPAYMENTS. Interest is included in the
payment(s) to be made pursuant to the Repayment Provisions set forth
below.
/ / OTHER
REPAYMENT PROVISIONS (CHECK ONE)
In addition to any Interest Payments to be made as indicated above, the
Borrower shall pay the Bank the principal sum set forth above as follows, or on
demand if none are so marked:
/ / TIME __________ days, but if filled in then __________ year(s), after
the date hereof.
/ / INSTALLMENTS. In __________ consecutive monthly, but if filled in
then __________ installments, of which each but the last shall be
$__________ and the last of which shall be equal to the then unpaid
principal balance of the Note plus all accrued and unpaid interest
thereon. The first such monthly, but if filled in then __________
installment shall be due on __________ 19__ and each subsequent
installment shall be due on the like day of each consecutive month,
but if filled in then __________ thereafter.
/ / ON DEMAND. On Demand.
/ / PAYMENTS TO BE MADE UNTIL DEMAND. On demand with payments of
$__________ each to be made monthly, but if filled in then __________
unless and until such demand is made. The first such payment shall be
due on __________ 19__ (no sooner demand having been made hereunder)
and unless and until demand is so made, each subsequent payment shall
be due on the like day of each consecutive month, but if filled in
then __________ thereafter.
/X/ OTHER. Revolving note with a maturity date of September 30, 1995
CERTAIN DEFINITIONS
(a). BORROWER. As used herein, "Borrower" means the persons and/or
entities named herein as borrower, and/or otherwise signing the Note
as maker, and each of them, jointly and severally if more than one.
(b). GUARANTOR. As used herein, "Guarantor" means the endorser(s) and/or
guarantor(s) of the Note, and/or any guarantor(s) of any obligations
now existing and/or hereafter arising of the Borrower to the Bank,
any Affiliate (hereinafter defined) and/or any Participant
(hereinafter defined), and each of them, if at all.
(c). BORROWER AND ANY GUARANTOR. As used herein, "Borrower and any
Guarantor" means all persons and/or entities which constitute the
Borrower, and if any, the Guarantor, and each of them.
(d). AFFILIATE. As used herein, "Affiliate" means any parent company of
the Bank, and all subsidiaries and/or affiliates of the Bank and/or
said parent company, now existing and/or hereafter arising, and each
of them.
(e). PARTICIPANT. As used herein, "Participant" means any bank or other
lender acting as a participant under any loan arrangement with the
Borrower and any Guarantor, now existing and/or hereafter arising, in
which the Bank or any Affiliate is a participant, including without
limitation the Note if applicable.
(f). LOAN DOCUMENTS. As used herein, "Loan Documents" means documents.
If any, which secure, evidence and/or relate to the loan evidenced
by the Note, including without limitation any mortgages, security
agreements , financing statements, loan applications, pledges,
collateral assignments, commitment letters, loan agreements, and
set-off rights contained in any other instrument whatsoever, all the
foregoing now existing and/or hereafter arising.
(g). NOTE. As used herein, "Note" means this promissory note.
XX This note is governed by the terms and conditions of the Commitment
Letter dated September 20, 1994.
<PAGE>
The Borrower and any Guarantor hereby certify, represent and covenant
to the Bank that the proceeds and basis of the loan evidenced by the Note are
for business and commercial purposes only, and that the proceeds of the Note
have not been and/or will not be used for personal (non-business), family,
household or agricultural purposes, and this has been relied on by the Bank.
The Borrower and any Guarantor shall pay to the Bank an administrative
late fee of the greater of twenty-five ($25.00) dollars or five (5%) percent of
any periodic payment under the Note not received by the Bank within fifteen
(15) days after the periodic payment is due. Neither the inclusion of this
provision nor the Borrower's or any Guarantor's payment of such an
administrative late fee shall excuse the Borrower and any Guarantor from
timely making those payments otherwise required to be made under the Note, or
waive or limit any rights which the Bank has under the Note. The obligation of
the Borrower and any Guarantor to pay such administrative late fees is in
addition to all other payment obligations of the Borrower and any Guarantor
under the Note.
Upon any default under the Note, interest shall accrue thereafter on the
entire unpaid principal balance until the Note is paid in full at a rate per
annum ("Default Rate") equal to the aggregate of two percent (2%), plus the rate
provided in the Note. The Default Rate is separate and in addition to the
administrative late fee set forth herein for any principal and/or interest
installment under the Note not received by the Bank within fifteen (15) days
after the installment is due.
Any payments received by the Bank on account of the Note prior to demand or
acceleration shall be applied first, to any costs, expenses, or charges then
owed the Bank by the Borrower; second, to accrued and unpaid interest; and
third, to the unpaid principal balance hereof. Any payments so received after
demand or acceleration shall be applied in such manner as the Bank may determine
in the Bank's sole discretion.
If the Note is not payable on demand, then on that date on which by the
terms hereof, the then entire principal balance of the Note is due, at all times
thereafter, the aggregate of the then unpaid principal balance of the Note, and
all accrued and unpaid interest not so paid shall be payable on demand. If the
Note is payable on demand, then the inclusion of the following default provision
shall not alter, affect, or otherwise limit the Bank's right to make demand at
any time. The Bank, at its option, may declare the entire unpaid principal
balance of the Note and accrued unpaid interest thereon to be immediately due
and payable without demand, notice or protest (which are hereby waived) upon
the occurrence of any one or more of the following events (herein, "Events of
Default"): (a) The failure by the Borrower to pay upon demand (or when due, if
not payable on demand) any of the Borrower's liabilities, obligations, and
indebtedness to the Bank, any Affiliate and/or any Participant under the Note
and/or the Loan Documents; (b) The failure by the Borrower to promptly,
punctually, and faithfully perform, discharge, or comply with any of the
Borrower's liabilities, obligations, indebtedness, or covenants to the Bank, any
Affiliate and/or any Participant under the Note and/or the Loan Documents; (c)
The occurrence of any event of default under any agreement between the Bank and
the Borrower, or instrument or paper given the Bank by the Borrower, whether
such agreement, instrument, or paper now exists or hereafter arises
(notwithstanding that the Bank may not have exercised its rights upon default
under any such other agreement, instrument, or paper) (the liabilities,
obligations, indebtedness, and covenants described in (a), (b) and (c) are
referred to herein as the "Liabilities"); (d) Any representation or warranty
heretofore, now, or hereafter made by the Borrower and any Guarantor to the
Bank, in any document, instrument, agreement, or paper was not true or accurate
when given; (e) The occurrence of any event such that any indebtedness of the
Borrower and any Guarantor to any creditor other than the Bank could be
accelerated, notwithstanding that such acceleration has not taken place; (f) Any
act by, against, or relating to the Borrower and any Guarantor, or the property
or assets of the Borrower and any Guarantor, which act constitutes the
application for, consent to, or sufferance of the appointment of a receiver,
trustee, or other person, pursuant to court action or otherwise, over all, or
any part of the property of the Borrower and any Guarantor; the granting of any
trust mortgage or execution of an assignment for the benefit of the creditors of
the Borrower and any Guarantor, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for the Borrower and any
Guarantor; the failure by the Borrower and any Guarantor to generally pay the
debts of the Borrower and any Guarantor as they mature; adjudication of
bankruptcy or insolvency relative to the Borrower and any Guarantor; the entry
of an order for relief or similar order with respect to the Borrower and any
Guarantor in any proceeding pursuant to Title 11 of the United States Code, as
amended (commonly referred to as the Bankruptcy Code) or any other federal
bankruptcy law; the filing of any complaint, application, or petition by or
against (however, if against, only if not dismissed within 30 days of the
filing) the Borrower and any Guarantor initiating any matter in which the
Borrower and any Guarantor is or may be granted any relief from the debts of
the Borrower and any Guarantor pursuant to the Bankruptcy code or any other
insolvency statute or procedure; the calling or sufferance of a meeting of
creditors of the Borrower and any Guarantor; the meeting by the Borrower and any
Guarantor with a formal or informal creditor's committee; the offering by, or
entering into by, the Borrower and any Guarantor of any composition, extension
or any other arrangement seeking relief or extension for the debts of the
Borrower and any Guarantor, or the initiation of any other judicial or
non-judicial proceeding or agreement by, against (however, if against, only if
not dismissed within 30 days of the filing), or including the Borrower and any
Guarantor which seeks or intends to accomplish a reorganization or arrangement
with creditors; (g) The imposition of any lien upon any material portion of the
assets of the Borrower and any Guarantor or the entry of any judgment against
the Borrower and any Guarantor, which lien is not discharged or judgment is
not satisfied or appealed from (with execution or similar process stayed)
within fifteen (15) days of its imposition or entry; (h) The occurrence of any
materially adverse event or circumstance with respect to the Borrower and any
Guarantor such that the Bank deems itself insecure; (i) The entry of any court
order which enjoins, restrains or in any way prevents the Borrower from
conducting all or any part of Borrower's business affairs in the ordinary
course; (j) The service of any process upon the Bank seeking to attach by
mesne or trustee process any funds of the Borrower on deposit with the Bank or
with an Affiliate of the Bank; (k) The occurrence of any loss, theft, damage,
or destruction to or of any material portion of the assets of the Borrower and
any Guarantor, or the sale (other than sales in the ordinary course of business)
or encumbrance to or of any of the assets of the Borrower and any Guarantor;
(l) The death, termination of existence, dissolution, winding up, or
liquidation of the Borrower and any Guarantor; (m) The merger or consolidation
of the Borrower and any Guarantor with or into any other corporation or other
entity; (n) The occurrence of any of the foregoing Events of Default with
respect to any guarantor, endorser, or surety to the Bank of the Liabilities,
or the occurrence of any of the foregoing Events of Default with respect to
any parent (if the Borrower is a corporation), subsidiary, or affiliate of the
Borrower, as if such guarantor, endorser, surety, parent, subsidiary, or
affiliate were the Borrower described therein; and/or (o) The termination of
any guaranty by any guarantor of the Liabilities.
The Borrower and any Guarantor respectively waive presentment, demand,
notice, and protest, and also waive any delay on the part of the holder hereof.
Each assents to any extension or other indulgence (including, without
limitation, the release or substitution of collateral) permitted the Borrower
and any Guarantor by the Bank with respect to the Note and/or any collateral
given to secure the Note or any extension or other indulgence, as described
above, with respect to any other liability or any collateral given to secure any
other liability of the Borrower and any Guarantor to the Bank. All monies due
under the Note and/or Loan Documents shall be without setoff or counterclaim on
the part of the Borrower and any Guarantor.
Any and all now existing and/or hereafter arising deposits, or other sums
at any time credited by, or due to, the Borrower and/or any Guarantor from the
Bank, any Affiliate and/or any Participant, including without limitation, being
a participant under the Note, if at all, and any now existing and/or hereafter
arising monies, securities, instruments, certificates, repurchase agreements,
and/or other property of the Borrower and any Guarantor in the possession of the
Bank, and Affiliate and/or any Participant, regardless of the reason the Bank or
such Affiliate or Participant had received same (all the foregoing collectively
called "Deposits") shall at all times constitute security for the Liabilities
including the Note, and/or for any endorsement of the Note and/or guaranty by
any Guarantor (said endorsement of the Note and/or guaranty by any Guarantor
hereinafter called "Guaranty Obligations"), and may be held, applied and/or set
off by the Bank, any Affiliate and/or any Participant against the Liabilities
and/or Guaranty Obligations at any time when due, whether or not other
collateral is held by or otherwise available to the Bank, any Affiliate and/or
any Participant, whether such collateral be security in full or in part. Without
limitation, and in addition to the foregoing, in the event the Bank, any
Affiliate or any Participant at any time or times hereafter is served with
trustee process of any kind which attach or order any payment from any goods,
effects and/or credits of the Borrower and any Guarantor in the hands or
possession of the Bank, any Affiliate or any Participant, then the Bank, any
Affiliate and/or any Participant without notice or demand to the Borrower and
any Guarantor may deem the dollar amount set forth in the trustee process as
becoming immediately due and payable under the Note, any endorsement and/or
guaranty by any Guarantor, and/or any other loan arrangement with the Borrower,
and setoff said amount against any Deposits being held by the Bank, any
Affiliate and/or any Participant, and any such payment made by said setoff
shall be applied as the Bank, any Affiliate or any Participant shall in its
sole discretion determine, and when applied to any outstanding principal, may
be applied in inverse order of maturity. The Borrower and any Guarantor hereby
grant to the Bank, any Affiliate and/or any Participant a security interest in
the Deposits to secure all obligations of the Borrower and any Guarantor, or
any one or more persons or entities comprising the Borrower and any Guarantor,
to the Bank, any Affiliate and/or any Participant under the Liabilities and/or
the Guaranty Obligations. The Borrower and any Guarantor hereby authorize the
Bank, any Affiliate and/or any Participant to charge the Deposits which the
Borrower and any Guarantor may at any time maintain with the Bank, and
Affiliate and/or any Participant for any payment due on account of the
Liabilities and/or the Guaranty Obligations. The Borrower and any Guarantor
agree that the rights to setoff against Deposits and to charge Deposits granted
herein by the Borrower and any Guarantor to the Bank, any Affiliate or any
Participant (a) are irrespective of the source or contributor(s) of funds or
other property which comprise the Deposits, whether or not the Deposits,
Liabilities and/or Guaranty Obligations are (i) individual and/or joint of the
Borrower
Page 2
<PAGE>
and any Guarantor, or any one or more persons or entities comprising the
Borrower and any Guarantor, with another or others; and (b) are at the option
of the Bank, any Affiliate or any Participant, and in no event is the Bank,
any Affiliate or any Participant under a duty to exercise setoff against
Deposits or to charge Deposits.
The Borrower and any Guarantor agree that the Bank and any Affiliate shall
have the right at any time, and from time to time, with or without notice to the
Borrower and any Guarantor to enter into any participation agreement(s) with
other(s) which grants participation interests to the Bank and other(s) (a) in
the Note and any loan evidenced by the Note and the Loan Documents, (b) in any
other loan or loans, including promissory notes and all loan documents
applicable thereto, now existing and/or hereafter arising, by the Borrower
and/or any Guarantor with the Bank and/or any Affiliate, and/or (c) in any
other loan or loans, including promissory notes and all loan documents
applicable thereto, now existing and/or hereafter arising, by the Borrower
and/or any Guarantor with any other bank(s) or other lender(s). In addition,
the Borrower and any Guarantor agree that the Bank, any affiliate and/or any
Participant and/or any other holder of the Note shall have the right to sell
or otherwise transfer the Note and/or any Loan Documents at any time.
The Borrower agrees not to seek or accept contribution, reimbursement,
indemnity, subrogation or enforcement of any rights from anyone also obligated
under the Note, as maker, guarantor, endorser or otherwise, if at all; and any
Guarantor agrees not to seek or accept contribution, reimbursement, indemnity,
subrogation or enforcement of any rights from the Borrower, and any other
guarantor or endorser hereof, or anyone otherwise obligated under the Note; all
the foregoing in this paragraph until all obligations under the Note are paid
in full and no claim whatsoever exists and/or may exist against the Bank, any
Affiliate, and/or Participant for repayment, a preference payment in bankruptcy,
or otherwise in connection with the Borrower and any Guarantor.
The Borrower and any Guarantor agree to indemnify, defend and hold harmless
the Bank, any Affiliate, and/or any officer, director and/or employee of the
Bank and/or any Affiliate of and from any claim or claims now existing,
hereafter arising and/or hereafter brought and/or threatened by the Borrower and
any Guarantor or by any other person or entity, in connection therewith, on
account of or relating to any relationship and/or dealings with the Borrower and
any Guarantor, including without limitation any person or entity contesting the
validity or priority of any mortgage(s) and/or other collateral granted to the
Bank.
The Borrower and any Guarantor agree to promptly pay to the Bank and any
Affiliate for all legal services hereafter rendered to the Bank and/or any
Affiliate including all time, legal fees and expenses, in connection with the
review, drafting, preparation for enforcement, negotiation, enforcement,
amendment, extension, substitution and/or modification of the Note, any
endorsement and/or guaranty thereof, any endorsement and/or guaranty of the
obligations of the Borrower to the Bank, any Loan Documents, any other
instruments securing or otherwise relating to the Note, any other matters
relating to the collection of the loan proceeds and/or realization on any
collateral given to the Bank, any bankruptcy and/or foreclosure proceedings,
procedures and expenses which relate to the Borrower and any Guarantor and/or
any mortgage(s) and/or other collateral given by the Borrower and any Guarantor,
and all rights and remedies of the Bank, whether new existing and/or hereafter
arising against the Borrower and any Guarantor and/or any collateral given by
the Borrower and any Guarantor to the Bank, whether or not court proceedings
are brought. The responsibility set forth anywhere in the Note of Borrower and
any Guarantor to pay for the attorneys time, legal fees and expenses of the
Bank and/or any Affiliate shall include both outside counsel engaged by the
Bank, and any in-house counsel employed by the Bank and/or any Affiliate at the
same rate as comparable outside counsel.
IN ANY CASE, CONTROVERSY OR MATTER WHICH ARISES OUT OF, OR IS IN RESPECT
OF, THE NOTE AND/OR LOAN EVIDENCED THEREBY, ANY LOAN DOCUMENTS, ANY COLLATERAL
SECURING THE NOTE, ANY OTHER INSTRUMENT IN CONNECTION WITH THE NOTE, AND/OR ANY
OTHER BUSINESS RELATIONSHIP OR TRANSACTION BETWEEN THE BANK AND/OR ANY AFFILIATE
WITH THE BORROWER AND ANY GUARANTOR, WHETHER NOW EXISTING OR HEREAFTER ARISING,
THE BORROWER AND ANY GUARANTOR KNOWINGLY, VOLUNTARILY AND INTENTIONALLY: (A)
WAIVE ANY RIGHT TO AND AGREE NOT TO BRING, COMMENCE, OR OTHERWISE TAKE ANY
ACTION TO TRANSFER, ANY PROCEEDING INCLUDING WITHOUT LIMITATION COURT ACTION,
ARBITRATION, MEDIATION, ADMINISTRATIVE PROCEEDING OR OTHERWISE AGAINST THE BANK
AND/OR ANY AFFILIATE, OTHER THAN IN THE COMMONWEALTH OF MASSACHUSETTS; (B) WAIVE
ANY NOW EXISTING AND/OR HEREAFTER ARISING RIGHT TO A TRIAL BY JURY; AND (C)
WAIVE ANY NOW EXISTING AND/OR HEREAFTER ARISING RIGHT TO ANY CONSEQUENTIAL,
PUNITIVE, SPECIAL, EXEMPLARY AND/OR INCIDENTAL DAMAGES.
The Borrower and any Guarantor shall maintain full and accurate books and
records showing in detail the income and expenses, and assets and liabilities,
of the Borrower and any Guarantor and any mortgaged premises which may secure
the Note and/or any endorsement and/or guaranty by any Guarantor; and, upon
request from the Bank, shall permit the Bank and/or its representatives to
examine and make copies of the books and records of the Borrower and any
Guarantor and any mortgaged premises which may secure the Note and/or any
endorsement and/or guaranty by any Guarantor. The Borrower and any Guarantor
shall deliver to the Bank annual financial statements including without
limitation a statement of assets, liabilities and net worth.
At all times when the security for the Note and/or any endorsement and/or
guaranty by any Guarantor includes real estate, the Borrower and any Guarantor
agree that the Bank and any Affiliate and representatives shall have the right
at any time hereafter to enter the mortgaged premises (a) for purposes of
inspecting and testing for hazardous materials and oils to determine whether or
not the premises violate any provisions of M.G.L. ch. 21E and regulations
relating thereto, and/or (b) for purposes of appraising the mortgaged premises.
Any default under the Note shall be a default by the Borrower and any
Guarantor under any other promissory note and/or other instrument by the
Borrower and any Guarantor to the Bank, any Affiliate and/or any Participant,
now existing or hereafter arising. Any default by the Borrower under any other
promissory note and/or other instrument by the Borrower and any Guarantor to the
Bank, any Affiliate and/or any Participant now existing or hereafter arising,
shall be a default under the Note and Loan Documents. All mortageges and/or
other collateral from the Borrower to the Bank and/or any Affiliate, if any,
now existing or hereafter arising, shall also secure the obligations of the
Borrower under the Note. All mortgages and/or other collateral, if any, which
secure the Note shall also secure all promissory notes and other obligations of
the Borrower to the Bank, now existing or hereafter arising, whereof individual
and/or joint of the Borrower, or any one or more persons or entities comprising
the Borrower.
AT THE DUE DATE OF THE NOTE (AT MATURITY, UPON EARLIER ACCELERATION, OR IN
THE EVENT THE NOTE IS A DEMAND NOTE), THE BANK MAY DEMAND PAYMENT OF THE NOTE,
MAY REWRITE THE NOTE BY AGREEMENT AT A GREATER OR LESSER RATE OF INTEREST, OR
MAY, BY AGREEMENT, ALLOW PAYMENTS TO BE MADE ON SAID NOTE AT THE SAME, OR A
LESSER OR A GREATER RATE OF INTEREST, IF AT ALL, THE NOTE IS A CONTRACT FOR A
SHORT-TERM LOAN. THE LOAN IS PAYABLE IN FULL AT MATURITY, UPON EARLIER
ACCELERATION, OR IN THE EVENT THE NOTE IS A DEMAND NOTE. THE BORROWER MUST REPAY
THE ENTIRE PRINCIPAL BALANCE OF THE LOAN AND UNPAID INTEREST WHEN DUE. THE BANK
IS UNDER NO OBLIGATION TO REFINANCE THE LOAN AT THAT TIME. THE BORROWER WILL,
THEREFORE, BE REQUIRED TO MAKE PAYMENT OUT OF OTHER ASSETS THE BORROWER MAY OWN,
OR WILL HAVE TO FIND ANOTHER BANK OR LENDER WILLING TO LEND THE BORROWER THE
MONEY AT PREVAILING MARKET RATES, WHICH MAY BE CONSIDERABLY HIGHER THAN THE
INTEREST RATE ON THE LOAN.
Within ten (10) days after requested by the Bank by notice to the Borrower,
Borrower and any Guarantor agree to execute and deliver to the Bank a written
statement addressed to the Bank, any Affiliate, any Participant and/or any
proposed Participant, and signed by the Borrower and any Guarantor under the
penalties of perjury, and duly notarized, acknowledging the principal and
interest balances then due under the Note, and further acknowledging that the
Note is in full force and effect and unmodified, that the Borrower and any
Guarantor have no defenses, offsets or counterclaims to the payment and/or
performance of the obligations of the Borrower and any Guarantor under the Note,
and have no claims or causes of action of any kind whatsoever then existing
against the Bank, any Affiliate and/or Participant, and a statement that the
Bank is not in default under the Note or any loan or other agreement relating to
the Note or any obligations evidenced thereby, all the foregoing in this
sentence except as may otherwise exist in which event the Borrower shall specify
what otherwise exists, and a statement regarding such other matters which the
Bank may require.
In the event that prior to the recording of any mortgage, financing
statement or other collateral instrument, if any, given herewith by the Borrower
and any Guarantor to the Bank, there shall exist or otherwise be made known to
the Bank or any Affiliate, any voluntary or involuntary creation or occurrence,
of any encumbrance, mortgage, lien, attachment, or other security interest on or
in any real or personal property given herewith by the Borrower and any
Guarantor as
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<PAGE>
collateral to the Bank, or any portion thereof (except as otherwise specifically
permitted, if at all, in any of the Loan Documents), or the transfer of such
real or personal property or any portion thereof or any legal or beneficial
interest therein, or the Borrower and any Guarantor become the subject of a
bankruptcy petition, assignment for the benefit of creditors, or any arrangement
with creditors, or any restraining order or injunction exists against the
Borrower and any Guarantor, at the option of the Bank all obligations of the
Bank to make the loan and/or advance monies pursuant to any loan agreement, of
which the Note evidences the loan in whole or in part, shall be void, and the
Note shall become immediately due and payable without notice or demand to the
extent of all monies due thereunder which have previously been paid by the
Bank.
The Borrower and any Guarantor acknowledge that the Bank has notified and
does hereby notify the Borrower and any Guarantor as follows:
(a) THE RESPONSIBILITY OF THE ATTORNEY FOR THE BANK IS TO PROTECT THE
INTEREST OF THE BANK;
(b) THE BORROWER AND ANY GUARANTOR MAY, AT BORROWER'S OR GUARANTOR'S OWN
EXPENSE, ENGAGE AN ATTORNEY OF THEIR OWN SELECTION TO REPRESENT THE
BORROWER'S OR GUARANTOR'S OWN INTERESTS IN THE TRANSACTION.
No delay or omission by the Bank in exercising or enforcing any of the
Bank's powers, rights, privileges, remedies, or discretions hereunder shall
operate as a waiver thereof on that occasion nor on any other occasion. No
waiver of any default hereunder shall operate as a waiver of any other default
hereunder, nor as a continuing waiver. The Note shall be binding upon the
Borrower and each endorser and guarantor hereof and upon their respective heirs,
successors, assigns, and representatives, and shall inure to the benefit of the
Bank and its successors, endorsees, and assigns. The Borrower and any Guarantor
each authorizes the Bank to complete the Note if delivered incomplete in any
respect by the Borrower and any Guarantor. The Note is delivered to the Bank at
one of its offices in Massachusetts, shall be governed by the laws of the
Commonwealth of Massachusetts, and shall take effect as a sealed instrument. The
Borrower and any Guarantor of the Note each submits to the jurisdiction of the
courts of the Commonwealth of Massachusetts for all purposes with respect to
the Note, any collateral given to secure their respective liabilities,
obligations and indebtedness to the Bank, and their respective relationships
with the Bank. The Borrower and any Guarantor agree that all assets in which
the Borrower and any Guarantor have previously granted or hereafter grant to
the Bank or any Affiliate a security, mortgage or collateral interest shall
secure the Liabilities and Guaranty Obligations. The Note includes all future
amendments, decreases, extensions, increases, modifications, renegotiations,
renewals, replacements, revisions, rewritings and/or substitutions thereof, in
whole or in part ("Modifications/Substitutions"). The Borrower and any
Guarantor agree that any mortgages and/or other collateral, if any, which may
secure the Note, secure all Modifications/Substitutions of the Note, if any,
now existing and/or hereafter arising, and include all future
Modifications/Substitutions of such mortgages and/or other collateral, if any,
now existing, and/or hereafter arising. To the maximum extent permitted by law,
except for payments made on account of the Note which reduce the monies due
under the Note, all other provisions of the Note, shall survive (a) the
payment of all principal and interest obligations of the Borrower and any
Guarantor under the Note, (b) any termination, release or discharge of the
principal and interest obligations of the Borrower and any Guarantor to the
Bank and/or any Affiliate, and (c) the discharge or satisfaction of any
mortgage, security agreement and/or other collateral, if any, which may at any
time secure the Note. Any prepayment of the Note shall be applied to principal
in inverse order of maturity. Time of all payments and provisions hereof is of
strict essence. In the event more than one person or entity comprises the
Borrower, all provisions herein of the Borrower are joint and several
obligations. The Borrower and any Guarantor acknowledge and agree, and say
under the penalties of perjury, that (a) each is executing the Note as the
free act and deed of each, (b) each is not acting under any duress or undue
influence, and (c) the Bank and/or any Affiliate have made no agreements,
warranties, representations or promises in connection with the Note and/or any
loan agreements or other agreements relating to the Note, except as set forth
herein or in a written instrument executed and delivered by the Bank. The
provisions of the Note are hereby declared to be severable, and the invalidity
of any provision or application thereof shall not effect any other provision
or any other application thereof. Interest on principal under the Note shall
accrue only on the amount of principal from time to time actually outstanding
under the Note. The Bank records, including without limitation, computer
printout of the Bank showing an account of the Borrower, shall be admissible
as evidence in any action or proceeding in connection with the Note, and shall
constitute prima facie evidence of the items contained therein. The Note may
not be modified orally, but may only be modified by written instrument signed
by the holder hereof.
In the event the Borrower and any Guarantor is a trust or corporation, each
person signing below in behalf of said entity personally and individually
certifies to the Bank that the person(s) executing the Note (a) is a trustee of
any applicable trust, or an officer of any applicable corporation, and (b) has
been duly authorized, empowered and directed to execute and deliver the Note
and, if any, all other instruments securing or otherwise relating to the Note,
and any other agreements or instruments determined by such person in such
person's sole discretion to be appropriate or incidental to the loan evidenced
by the Note, all in such form and with such modifications, substitutions,
renewals, replacements, revisions, amendments and/or additions as such person
from time to time deems proper, in the name of and in behalf of said entity
(i) in the case of a trust, by a written instrument signed by all beneficiaries
and delivered to the trustee, and/or (ii) in the case of a corporation,
unanimously by all the Directors of the corporation, at a meeting duly held or
by written consent in lieu of meeting, duly filed with the records of the
minutes of the corporation.
The Borrower has read all of the terms and conditions of the Note and
acknowledges receipt of an exact copy of it.
WITNESS Signed in my Presence MAKER(S) ("Borrower")
SONESTA INTERNATIONAL HOTELS CORPORATION
/s/ Kristi Robbins BY: /s/ Peter J. Sonnabend
------------------------------- ---------------------------------------------
Witness
Print Name: Kristi Robbins Print Name: Peter J. Sonnabend
------------------- ---------------------------------
Title, if applicable: Vice President
-----------------------
Address: 200 Clarendon St, Boston, MA 02116
------------------------------------
------------------------------- ------------------------------------
Witness
Print Name:
------------------- Print Name:
---------------------------------
Title, if applicable:
-----------------------
Address:
------------------------------------
For good and valuable consideration, the receipt and sufficiency of which are
acknowledged, each of the undersigned endorses the Note, guarantees to the Bank
the payment and performance of the Borrower's obligations under the Note,
acknowledges reading the Note in its entirety, agrees to be jointly and
severally (if more than one) liable and bound to the Bank and any Affiliate
under all provisions of the Note, agrees to be jointly and severally liable with
the Borrower for all obligations under the Note, and agrees that all obligations
hereunder and such endorsement and guaranty shall take effect under seal.
WITNESS Signed in my Presence
------------------------------- ------------------------------------
Witness
Print Name:
------------------- Print Name:
---------------------------------
Title, if applicable:
-----------------------
Address:
------------------------------------
------------------------------- ------------------------------------
Witness
Print Name:
------------------- Print Name:
---------------------------------
Title, if applicable:
-----------------------
Address:
------------------------------------
Page 4
<PAGE>
EXHIBIT 10.6
PJS: 12/02/94
THIS SHAREHOLDERS AGREEMENT, dated this _____ day of November, 1994, is by and
between El Cacique de Calzon de Pobre S.A., a Costa Rican Sociedad Anonima ("El
Cacique") having offices at APDO 20, 551002 P.V.D., San Jose, Costa Rica and
Sonesta International Hotels Limited a Bahamian corporation ("Sonesta") having
offices at 200 Clarendon Street, Boston, Massachusetts 02116.
RECITALS
WHEREAS, EL CACIQUE and SONESTA desire to develop a deluxe beach hotel in
Guanacaste, Costa Rica on land presently owned by El Cacique, which hotel will
be comprised of land, hotel facilities, a rental pool of condominium units and
other facilities appropriate to a deluxe resort (the "Hotel"); and
WHEREAS, EL CACIQUE has agreed to undertake the sale and construction of a
minimum of eighty (80) 3-4-key, free-standing Villas (as "Villa" is defined in
the Management Agreement), all of which keyed units, when constructed, will be
included in a condominium rental pool and utilized in the Hotel operation; and
WHEREAS, EL CACIQUE and SONESTA are entering into this Agreement for the purpose
of establishing as equal shareholders a corporation under the laws of The
Bahamas (the "Corporation") to acquire land in Guanacaste, Costa Rica (the
"Venture Site") through a wholly-owned Costa Rican subsidiary ("Resort Company")
on which such Corporation will develop a reception area, offices, restaurants, a
full service casino (to be owned and operated by a separate Costa Rican
subsidiary ("Casino Company")), health facilities, a children's area, swimming
pool(s), a beach club and other facilities appropriate to a deluxe resort, which
land and facilities, together with the rental pool of villa condominium units,
will constitute the Hotel;
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements hereinafter set forth, the parties hereto hereby agree as
follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the indicated meanings:
"Additional Loans" shall mean, with respect to each Venturer, all Cash Flow
Loans and Capital Deficit Loans, if any, made by such Venturer to the capital of
the Venture pursuant to Article IV hereof. Any loan made to the Venture as an
Additional
<PAGE>
Loan, which subsequently becomes an Excess Loan, shall thereupon cease to be an
Additional Loan for all purposes. Additional Loans shall be repaid to the
Venturers, with interest at the Interest Rate, out of available net profits of
the Venture, at such times and in such amounts as the majority of the Board of
Directors of the Corporation shall determine, but in no event later than the
applicable Maturity Date.
"Affiliate" of a Person shall mean (i) any Person that directly or
indirectly controls or is controlled by or is under common control with such
Person, (ii) any officer, director, employee or partner of such Person, (iii)
any company or other person of which such Person is an officer, a director or a
partner or acts in such capacity, and (iv) blood relatives within the third
degree of consanguinity, and spouses of the foregoing, and trusts and estates of
which such persons are beneficiaries.
"Bankruptcy" shall be deemed to have occurred when (i) a Person has (a)
commenced a voluntary case for relief as a debtor under Costa Rican, U.S.,
Canadian, Bahamian or other applicable bankruptcy law or filed a petition to
take advantage of any other present or future insolvency act or other applicable
law relating to bankruptcy, insolvency, reorganization or relief of debtors; (b)
made an assignment for the benefit of creditors; or (c) consented to, or
acquiesced in, the appointment of a receiver, liquidator, trustee, custodian or
other similar official of himself or itself or of the whole or any substantial
part of his or its properties or assets, or (ii) if (a) a court of competent
jurisdiction shall enter an order, judgment or decree appointing a receiver,
liquidator, trustee, custodian or other similar official of a Person, or of the
whole or any substantial part of the property or asset of a Person and such
order, judgment or decree shall remain unvacated, or not set aside, or unstayed,
for 30 days, or (b) an involuntary case under said Costa Rican, U.S., Canadian,
Bahamian or other applicable bankruptcy law shall be commenced against a Person
or a petition shall be filed against a Person seeking similar relief under any
other present or future insolvency act or other applicable law relating to
bankruptcy, insolvency, reorganization or relief of debtors and such case or
petition shall remain undismissed for 30 days, or (c) under the provisions of
any other law for the relief or aid of debtors, any court of competent
jurisdiction shall assume custody or control of a Person or of the whole or any
substantial part of his or its property or assets and such custody remains
unterminated or unstayed for 30 days.
"Capital Loans" shall mean, with respect to each Venturer, all Additional
Loans, and Default Loans made by such Venturer to the capital of the Venture
pursuant to Article IV hereof.
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"Capital Deficit" shall mean all funds required from time to time after the
opening of the Hotel by the Venture in order to perform needed or desirable
capital improvements, repairs or replacements in or to the Hotel and/or Casino,
and/or to acquire furniture, fixtures and equipment required in connection with
the operation thereof, or any required loan repayments, in any case in excess of
funds available to the Venture out of required capital loans, borrowings,
reserves and other sources for payment of the same, exclusive of such funds as
may be required to complete the Hotel or Casino.
"Capital Deficit Loans" shall have the meaning ascribed to such term in
Section 4.03 hereof.
"Capital Deficit Loan Notice" shall have the meaning ascribed to such term
in Section 4.03 hereof.
"Capital Event" shall mean any of the following: (i) the sale or other
disposition of all or part of the assets of the Venture, (ii) any loans made to
or by the Venture, (iii) the refinancing of any indebtedness of the Venture,
(iv) the condemnation of all or any part of the real property or any other
assets of the Venture, (v) any insurance recovery relating to the real property
or any other assets of the Venture, or (vi) any other transaction the proceeds
of which, in accordance with generally accepted accounting principles, are
considered to be capital in nature.
"Capital Proceeds" shall mean the net cash proceeds received by the Venture
from any Capital Event remaining after payment of, or provision for, all Venture
debts, excluding Venture Loans but including, without limitation, all third
party obligations and reserves required or permitted to be paid upon, or
incurred or established in connection with, receipt by the Venture of such
proceeds and all expenses incurred by the Venture in connection with the Capital
Event giving rise to such proceeds.
"Cash Flow" for any period shall mean an amount equal to (i) the Venture's
(including without limitation the Resort Company's and/or the Casino Company's)
taxable income or loss (exclusive of income, gain or loss attributable to
Capital Events), computed on an accrual basis for the fiscal year (or any
lesser period for which a computation of Cash Flow may be required), plus the
sum of (ii) depreciation and other noncash deductions (such as organizational
expenses deducted but not paid for in a period) deducted in determining such
taxable income or loss and the cash available from reduction in the amount of
any reserves or escrows of the Venture, minus the sum of (iii) principal
payments on all secured and unsecured indebtedness of the Venture other than
Venture Loans, (iv) any net additions to the reserves of the
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Venture, (v) increases in Working Capital retained by the Operator, and (vi)
accruals and cash payments not deductible for tax purposes or otherwise in
accordance with generally accepted accounting principles, consistently applied
(except distributions to the Venturers under Sections 5.01 or 5.02), in the
fiscal year to the extent, if any, the foregoing have not been deducted in
determining the Venture's taxable income referred to herein. Cash Flow shall
not include any Capital Proceeds.
"Cash Flow Deficit" shall mean the negative Cash Flow of the Venture for
any period.
"Cash Flow Deficit Notice" shall have the meaning ascribed to such term in
Section 4.02 hereof.
"Cash Flow Loans" shall have the meaning ascribed to such term in Section
4.02 hereof.
"Casino" shall mean the full service casino, referenced as part of the
Hotel Facilities, and operated in conjunction with the Hotel.
"Casino Company" shall mean the Sociedad Anonima created under the laws of
Costa Rica for the purpose of owning, developing and operating as a full service
casino a portion of the real property and improvements to be created thereon,
located on Punte El Cacique in Guanacaste, Costa Rica and more fully described
on EXHIBITS A-1 AND A-2 annexed hereto and made a part hereof. The name of the
Casino Company shall be: "RMS Casino S.A."
"Casino Management Agreement" shall mean that certain agreement so titled
and entered into contemporaneously herewith between the Casino Company and the
Operator, a copy of which is attached hereto as EXHIBIT B.
"Closing Date" shall have the meaning ascribed to such term in Section 9.03
hereof.
"Default Loans" shall have the meaning ascribed to such term in Section
4.06 hereof.
"Defaulting Venturer" shall have the meaning ascribed to such term in
Section 4.06 hereof.
"Development and Construction Management Agreement" shall mean that certain
agreement titled "Development and Construction Management Agreement" and entered
into contemporaneously herewith between the Venture and El Cacique, a copy of
which is attached hereto as EXHIBIT C.
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"Development Services Agreement" shall mean that certain agreement titled
"Development and Pre-Opening Services Agreement" and entered into
contemporaneously herewith between the Venture and Sonesta International Hotels
Corporation, a copy of which is attached hereto as EXHIBIT D.
"El Cacique" shall mean El Cacique de Calzon de Pobre S.A. or any assignee
of all of El Cacique's interest in the Venture in El Cacique's place as a
Venturer therein in accordance with the terms and conditions of this Agreement.
"Electing Venturer" shall have the meaning ascribed to such term in
Sections 9.01 or 10.01 hereof, as applicable.
"Excess Loans" shall have the meaning ascribed to such a term in Section
4.06 hereof.
"Extency Internacional" shall mean Extency Internacional S.A., an Affiliate
of El Cacique, which owns Punte El Cacique, including without limitation the
Site, and all development rights thereto, as of the date of this Agreement.
"Furnishings and Equipment" shall have the meaning ascribed thereto in the
Management Agreement.
"Guarantors" shall mean Sonesta International Hotels Corporation, a New
York corporation, as to certain obligations of Sonesta, and both Extency
Internacional and certain individuals, as to certain obligations of El Cacique.
"Hotel" shall have the meaning ascribed to such term in this Agreement and
in the Management Agreement; in the event of any conflict between the meanings
ascribed to such term in this Agreement and in the Management Agreement, the
Management Agreement shall control.
"Hotel Facilities" shall mean and include those Hotel facilities which are
to be developed and owned by the Venture, including without limitation, the
facilities referred to in the third paragraph of the "RECITALS".
"Interest Rate" shall mean the sum of one percentage point per annum (i.e.
1%) in excess of the Prime Rate (i.e., if the Prime Rate is ten (10%) percent
per annum, the Interest Rate will be eleven (11%) percent per annum). The
Interest Rate shall change as and when there is a change in the Prime Rate.
"Management Agreement" shall mean that certain agreement so titled and
entered into contemporaneously herewith between the
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Resort Company and the Operator, a copy of which is attached hereto as EXHIBIT
E. Terms not otherwise defined herein shall have the meanings ascribed to such
terms in the Management Agreement.
"Mandatory Cash Flow Loan Amount" shall mean (a) as to El Cacique, the sum
of One Million Five Hundred Thousand U.S. Dollars ($1,500,000.00) of Additional
Loans and amounts advanced by El Cacique under Section 3.05, and (b) as to
Sonesta, the sum of One Million Five Hundred Thousand U.S. Dollars
($1,500,000.00) of Additional Loans and including without limitation any amounts
advanced by Sonesta (or its Affiliate) under Section 3.4(g) of the Management
Agreement; such amounts shall be deemed to include, without limitation, any
Excess Loans.
"Maturity Date" shall mean, as to any Additional Loan, Default Loan, or
other loan referred to in this Agreement, the tenth (10th) anniversary of the
making of the loan, by which date the outstanding principal balance and any
accrued and unpaid interest shall be due and payable in full.
"Net Proceeds" shall mean the gross proceeds of sale or refinancing less
the sum of all costs or expenses incurred in connection with the realization of
such proceeds, including by way of example and not limitation, brokerage
commissions, "points" or other financing or commitment fees, transfer, mortgage
or sales or other recording taxes or other charges, reasonable attorneys' fees
and expenses, survey and title insurance costs, and appraisal fees (in the case
of a loan transaction).
"Nondefaulting Venturer" shall have the meaning ascribed to such term in
Section 4.06 hereof.
"Notice of First Refusal (Hotel)" shall have the meaning ascribed to such
term in Section 10.01 hereof.
"Notice of First Refusal (Venture Interest)" shall have the meaning
ascribed to such a term in Section 9.01 hereof.
"Offer" shall have the meaning ascribed to such term in Section 10.01
hereof.
"Offeror" shall have the meaning ascribed to such term in Section 10.01
hereof.
"Operator" shall mean the "Operator" under the Management Agreement, which
shall be an Affiliate of Sonesta International.
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"Original Contributions" shall have the meaning ascribed to such term in
Section 4.01.
"Other Venturer" shall have the meaning ascribed to such term in Sections
9.01 or 10.01 hereof, as applicable.
"Percentage Interest" shall initially mean fifty (50%) percent as to each
of El Cacique and Sonesta, based on their share ownership in the Corporation.
"Person" shall mean a natural person, a corporation, a business trust, an
association, a company, a joint venture, a partnership or any other type of
entity.
"Plans" and "Supplemental Plans" shall have the meaning ascribed to such
terms in the Management Agreement.
"Pre-Opening Expenses" shall have the meaning ascribed to such term in the
Management Agreement.
"Prime Rate" shall mean the base or reference lending rate announced as
such by Chase Manhattan Bank N.A. or, if no rate is announced as such, the rate
imposed by said lender for 90-day commercial loans made to its most creditworthy
borrowers at said bank's principal office in New York City. In the event said
bank ceases to announce such prime rate or other similar rate to be used
pursuant to this Agreement, the Venturers shall together choose a successor rate
and/or announcing institution in the United States which shall be reasonably
comparable to the Prime Rate and/or said bank, as the case may be.
"Purchase Price" shall mean the amount which a Venturer selling its
interest in the Venture to the purchasing Venturer under Articles IX or X hereof
would have received had the Venture sold all its assets, subject to all such
third party liabilities but free and clear of Venture Loans, for cash to a third
party for the Venture's Asset Value and the net cash proceeds thereof were
distributed in liquidation of the Venture pursuant to Section 5.03 hereof.
"Rental Pool" shall mean the pool of Villa units into which all Villa
owners shall be required to submit their Villa units so that such units shall be
available for use in the Hotel operation; Villa unit owners will retain the
right to use their unit(s) for personal use on the basis described in Section
1.19 of the Management Agreement. Notwithstanding the foregoing, the parties
agree that after the tenth (10th) anniversary of the Commencement Date (as
defined in the Management Agreement) Villas may be excluded from the Rental Pool
on 180 days prior notice to
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the Operator, provided there will remain not less than 250 keyed Villa rooms in
the Rental Pool at all times thereafter.
"Reply Notice" shall have the meaning ascribed to such term in Section 9.02
hereof.
"Resort Company" shall mean the Sociedad Anonima created under the laws of
Costa Rica for the purpose of owning, developing and operating a luxury resort
consisting of the real property and improvements (other than the Casino) to be
created thereon, located on Punte El Cacique in Guanacaste, Costa Rica and more
fully described on EXHIBITS A-1 AND A-2 annexed hereto and made a part hereof.
The name of the Resort Company shall be: "Costa Rica Resort Associates S.A."
"Shortfall Loans" shall have the meaning ascribed to such term in Section
4.06 hereof.
"Site" shall mean the land presently owned by El Cacique's Affiliate in
Punte El Cacique, Guanacaste, Costa Rica, that will be divided into the Venture
Site and the Villa Site(s) (as those terms are defined below).
"Sonesta" shall mean Sonesta International Hotels Limited or any assignee
of all of Sonesta's interest in the Venture in Sonesta's place as a Venturer
herein in accordance with the terms and conditions of this Agreement.
"Sonesta Group" shall mean Sonesta International and any Affiliate of
Sonesta International.
"Sonesta International" shall mean Sonesta International Hotels
Corporation, a New York corporation.
"Venture" shall mean the joint enterprise of El Cacique and Sonesta to
develop, own and operate a first-class resort in Guanacaste, Costa Rica,
pursuant to the terms of this Agreement. The Venture shall be implemented
through and represented by the Resort Company, a Costa Rican entity which shall
own the Hotel, the Casino Company, a Costa Rican entity which shall own the
Casino, and the Corporation, a Bahamian entity which shall own the issued and
outstanding stock of the Resort Company and the Casino Company. References to
"the Venture" shall, unless the context requires otherwise, include jointly and
severally the Corporation, the Resort Company and the Casino Company.
"Venture Interest" shall mean the shares of capital stock of the
Corporation and all rights and obligations under this Agreement and any other
agreements related to the Venture.
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"Venture Loans" shall mean any loans made to the Venture by the Venturer in
accordance with the terms and conditions of this Agreement or as otherwise
agreed by the Venturers.
"Venturer Offer" shall have the meaning set forth in Section 11.01.
"Venture's Asset Value" shall mean the amount by which the fair market
value of all of the assets of the Venture, free and clear of liens, exceeds all
outstanding third party liabilities of the Venture other than Venture Loans.
"Venturers" shall mean Sonesta, El Cacique and any other Persons hereafter
admitted to the Venture as a shareholder in the Corporation. "Venturer" shall
mean any one of the Venturers.
"Venture Site" shall mean the parcel of land designated as "Parcel B" on
the plan attached hereto as EXHIBIT A-1 and further described on EXHIBIT A-2.
"Villa Site(s)" shall mean the parcels of land designated as "Parcel A" and
"Parcel C" on the plan attached hereto as EXHIBIT A-1 and further described on
EXHIBIT A-2.
"Working Capital" shall have the meaning ascribed to such term in the
Management Agreement.
ARTICLE II
FORMATION OF THE VENTURE
Section 2.01. FORMATION OF THE VENTURE. (a) The Venturers hereby
agree to form the Corporation, which shall constitute a corporation under the
laws of The Bahamas (the "Corporation"), and the Resort Company and Casino
Company, both of which shall constitute Sociedad Anonimas under the laws of
Costa Rica. Except as otherwise hereinafter expressly provided, the respective
rights and obligations of the Venturers, and the administration and dissolution
of the Venture, shall be governed by the laws of The Bahamas, as to the
Corporation, and by the laws of Costa Rica, as to the Resort Company and Casino
Company. The parties to this Agreement shall be equal shareholders in the
Corporation and shall not be joint venturers or partners for any purposes
whatsoever, and shall not have any relationship with each other in respect to
any unincorporated entity by reason of this Agreement or any other agreement.
(b) Promptly following the date of execution of this Agreement, the
Venturers shall execute and acknowledge, and El Cacique shall cause to be filed,
any assumed or fictitious name
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certificates required by law to be executed, acknowledged and/or filed in
connection with the formation and operation of the Venture, including without
limitation the Corporation, the Resort Company and the Casino Company, and El
Cacique shall otherwise take all action required to establish the Corporation,
the Resort Company and the Casino Company as validly existing legal entities,
properly authorized and empowered to undertake and pursue the purposes set forth
herein, all subject to the approval of Sonesta. The Corporation shall have two
classes of voting stock entitled Class A and Class B, with each class having all
the same rights, powers, preferences and privileges in every respect except that
such class shall have the sole right by a majority of the shares of such class
to elect and remove one half of the even number of directors of the Corporation.
Except in the matter of election and removal of directors, all action by the
shareholders of the Corporation shall be by a majority of the total shares of
both classes (or by such larger percentage as may be required by law to effect
action) of all shares voting as a single class. The transfer of all shares
shall be restricted in a manner which shall reflect the provisions contained in
this Agreement.
(c) The parties acknowledge that the use of a Bahamian corporation
may not be sufficient, by itself, to achieve and establish the enforceability of
the rights and obligations enumerated in Articles IV and V and elsewhere in this
Agreement regarding the Corporation. Therefore, the parties agree to vote to
elect and remove Directors and officers so as to cause the Venture to operate in
conformity with this Agreement and to cooperate in identifying and utilizing
other mechanisms to achieve and establish the enforceability of such rights and
obligations, which mechanisms may include -- by way of example only and not by
limitation -- voting trusts, nominees, and/or a partnership.
Section 2.02. PURPOSES OF THE CORPORATION. The purpose of the
Corporation shall be to own the Resort Company and the Casino Company and, by
doing so, be the legal vehicle through which the Venturers shall own, develop
and operate as a luxury resort the real property and improvements to be created
thereon located in Guanacaste, Costa Rica and more fully described on EXHIBITS
A-1 AND A-2. Certain of the actions contemplated by the parties to achieve
these purposes are set forth in Article III below.
Section 2.03. NAME. The Corporation shall conduct its business under
the name and style "C.R. Resort Associates Limited" or under such other name or
names as the Venturers shall unanimously determine from time to time.
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Section 2.04. PLACE OF BUSINESS. The principal office for the
transaction of the business of the Venture shall be El Cacique's San Jose, Costa
Rica offices or such other place or places, if any, as may be designated by the
decision of the Venturers owning a majority in interest of Percentage Interests
from time to time.
Section 2.05. TERM OF THE VENTURE. The Venture shall commence to
exist on the date of organization of the Corporation and shall continue to exist
indefinitely.
Section 2.06. TITLE TO VENTURE PROPERTY. Title to all property owned
by the Venture shall be held in the name of the Corporation, the Resort Company
and/or the Casino Company, or any other legal entity as the Venturers shall
together decide (or as to any such entities by such nominee as shall be
unanimously selected by the Venturers), and none of the Venturers shall (or
shall be deemed to), by virtue of being a Venturer, own in its individual
capacity any interest in any property held by the Venture.
ARTICLE III
VENTURER RESPONSIBILITIES
Section 3.01. ACTION STEPS REQUIRED. The parties contemplate and
agree that the following actions--which are set forth by way of example only,
and not by way of limitation--are required in order to achieve the Venture
purposes set forth in Section 2.02:
(a) Executing and delivering the various Agreements attached hereto
as EXHIBITS B-G.
(b) Establishing the Corporation, the Resort Company and the Casino
Company pursuant to Section 2.01(b).
(c) Surveying and subdividing the Venture Site from the Villa Site(s)
and creating the plan and legal descriptions to be attached hereto as EXHIBIT A-
1 and EXHIBIT A-2.
(d) Effecting the conveyance of the Venture Site to the Venture
pursuant to the "Agreement of Purchase and Sale" attached hereto as EXHIBIT F.
(e) Establishing a condominium association or associations pursuant
to the Master Deeds and By-Laws attached hereto as EXHIBIT 3.01(e) for the
purpose of owning the Villa Site(s) and governing the ownership and use of the
Villas, which Master Deeds and By-Laws shall include, without limitation, the
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relevant provisions of Sections 1.19, 1.19A and 6.7 of the Management Agreement.
(f) Marketing for sale and selling Villa units as part of the
condominium association referenced in subsection (e) above.
(g) Requiring all Villa purchasers to enter into the "Villa Rental
Pool Agreement" attached hereto as EXHIBIT 3.01(g), and otherwise submitting all
Villas not sold to third parties to the Rental Pool so that all Villas on the
Villa Site(s) will be included in the Rental Pool (except as is specifically
provided otherwise in the definition of "Rental Pool").
(h) Developing and constructing the Villas and Hotel Facilities in
accordance with the Plans and Supplemental Plans.
(i) Arranging financing for the construction of the Hotel Facilities,
and permanent financing therefor, the amount and terms of which shall, in each
case, be subject to El Cacique's and Sonesta's prior written approval.
(j) Obtaining all permits, approvals and authorizations required by
government and local authorities in connection with the construction of the
Hotel Facilities.
(k) Supervising and managing the development and construction of the
Hotel Facilities pursuant to the "Development and Construction Management
Agreement", attached hereto as EXHIBIT C.
(l) Coordinating the timing of the construction of the Villas and the
Hotel Facilities, pursuant to the "Development and Construction Management
Agreement", so that at least 39 Villas will be fully constructed and available
for occupancy at the time the Hotel Facilities are completed and available for
use.
(m) Arranging for the execution and delivery by Extency Internacional
of that certain "Agreement" attached hereto as EXHIBIT G.
(n) Marketing the Hotel in anticipation of the Hotel's "Commencement
Date", pursuant to the "Development Services Agreement".
(o) Hiring and training Hotel staff in anticipation of the Hotel's
"Commencement Date", pursuant to the "Development Services Agreement".
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(p) Operating the Hotel pursuant to the "Management Agreement".
Section 3.02. PRIMARY VENTURER RESPONSIBILITY. (A) El Cacique shall
be responsible for the performance of the actions enumerated in subsections (b)-
(k) of Section 3.01 above. Sonesta (or Sonesta International under the
"Development Services Agreement") shall be responsible for the performance of
the actions enumerated in subsections (n)-(p) of Section 3.01 above.
Section 3.03. VENTURER COOPERATION. Notwithstanding the provisions
of Section 3.02 above, the Venturers shall provide reasonable cooperation to
each other in the performance of their respective obligations hereunder.
Section 3.04. PERMIT COST ALLOCATION. The parties acknowledge that
the permits, approvals and authorizations referenced in subsection 3.01(j) will
benefit the Villas as well as the Venture. Therefore, the cost(s) of obtaining
all such permits, approvals and authorizations shall be allocated as follows:
50% to the Villas and 50% to the Venture, unless the Venturers agree otherwise.
Section 3.05. INDEMNIFICATION. With respect to its obligations under
Section 3.01(l), El Cacique hereby indemnifies Sonesta from and against all
carrying costs and expenses, including without limitation mortgage principal and
interest charges, incurred with respect to the Hotel Facilities and arising
during the period between the time the Hotel Facilities are completed and the
"Commencement Date" occurs under the Management Agreement.
ARTICLE IV
CONTRIBUTIONS AND LOANS
Section 4.01. ORIGINAL CONTRIBUTIONS. El Cacique and Sonesta have
today made cash contributions to the capital of the Venture in the amount of
$1,000 each. In addition, El Cacique and Sonesta shall each provide (i) the sum
of $450,000, in the manner and at such time as they shall mutually agree, in
order to complete the purchase of land contemplated in the Agreement of Purchase
and Sale (EXHIBIT F), and (ii) such other amounts, for pre-construction costs
and expenses, or otherwise, as they shall mutually agree; provided, however,
that prior to advancing the amounts described in (i) and (ii) above, Sonesta
shall have received and perfected a first mortgage on the Site, which mortgage
shall secure all "Original Contributions" made by Sonesta, and which mortgage
shall be forever discharged when construction and/or permanent financing for the
Hotel Facilities
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in amounts and on terms satisfactory to Sonesta is arranged and perfected. All
funds advanced under this Section by El Cacique and Sonesta shall be deemed
"Original Contributions". The expenses incurred in preparing, filing and
otherwise perfecting the above-referenced mortgage shall be borne by the
Venture.
Section 4.02. CASH FLOW LOANS. Subject to the provisions of Section
6.07 (b), and so long as the Venture shall be the owner of the Resort Company
and/or the Casino Company, in the event any Cash Flow Deficit shall exist and
either Venturer shall determine that it is in the best interests of the Venture
to make loans to the Venture to meet all or any part of such Cash Flow Deficit,
such Venturer may give written notice of the amount needed to fund such Cash
Flow Deficit to the other Venturer (the "Cash Flow Deficit Notice"). Within
thirty (30) days after any Cash Flow Deficit Notice is given (or such shorter
time as may be provided for the "Owner" under the Management Agreement to make
the loan required thereunder), each Venturer shall make a cash loan to the
Venture ("Cash Flow Loans") in an amount equal to their respective Percentage
Interest of the amount stated in the Cash Flow Deficit Notice. Cash Flow Loans
shall bear interest at the Interest Rate from their advancement to the Venture
until repaid as herein provided.
Notwithstanding the foregoing, neither Venturer shall be deemed to be in default
of its obligations under this Section, nor shall any arbitration or other legal
proceeding to enforce the compliance of either Venturer be commenced, unless and
until the Venturer that receives a Cash Flow Deficit Notice has had an
opportunity to discuss the Cash Flow Deficit with the other Venturer; provided,
however, that the Venturer that receives a Cash Flow Deficit Notice shall, if it
desires to discuss the Cash Flow Deficit with the other Venturer, attempt in
good faith to schedule such a discussion with said other Venturer promptly
following its receipt of the Cash Flow Deficit Notice.
Section 4.03. CAPITAL DEFICIT LOANS. In the event any Capital
Deficit shall exist and either Venturer shall determine that it is in the best
interests of the Venture to make an additional loan to the Venture to meet all
or any part of such Capital Deficit, such Venturer may give written notice of
the amount needed to fund such Capital Deficit to the other Venturer (the
"Capital Deficit Notice"). Within (30) days after any Capital Deficit Loan
Notice is given, each Venturer shall make cash loans to the Venture ("Capital
Deficit Loans") in an amount equal to their respective Percentage Interests of
the amount stated in the Capital Deficit Loan Notice. Capital Deficit Loans
shall bear interest at the Interest Rate from their advancement to the Venture
until repaid as herein provided.
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Notwithstanding the foregoing, neither Venturer shall be deemed to be in default
of its obligations under this Section, nor shall any arbitration or other legal
proceeding to enforce the compliance of either Venturer be commenced, unless and
until the Venturer that receives a Capital Deficit Notice has had an opportunity
to discuss the Capital Deficit with the other Venturer; provided, however, that
the Venturer that receives a Capital Deficit Notice shall, if it desires to
discuss the Capital Deficit with the other Venturer, attempt in good faith to
schedule such a discussion with said other Venturer promptly following its
receipt of the Capital Deficit Notice.
Section 4.04. Intentionally omitted.
Section 4.05. INTEREST AND RIGHT TO PROPERTY. Except as provided in
this Article IV, no Venturer shall be required or obligated to make any
contributions or loans to the Venture. Except as specifically set forth in this
Agreement, no interest shall accrue or be paid on any Capital Loans or Venture
Loans made by a Venturer to the Venture, and no Venturer shall have the right to
demand or receive property, other than cash, in return for its Capital Loans or
in payment of any loan made to the Venture hereunder. Except as expressly
provided in this Agreement, no time has been agreed for the return of any
Venturer's Capital Loans. No Venturer shall have the right to demand or receive
the return of its Capital Loans or the repayment of any loan made by it except
as provided herein.
Section 4.06. DEFAULT LOANS. (a) If any Venturer (the "Defaulting
Venturer") shall fail to make any Additional Loan which it is required to make
to the Venture within the time period required, then the nondefaulting Venturer
(the "Nondefaulting Venturer"), provided it has made the Additional Loan which
it is required to make within such same time period (an "Excess Loan"), shall
have the right to elect either of the following two remedies:
(i) To give notice to the Defaulting Venturer waiving the obligation
of the Venturers to make such Additional Loans to the Venture, in which event
such obligations shall be rescinded and the Excess Loan made by the
Nondefaulting Venturer to the Venture shall promptly be returned to the
Nondefaulting Venturer; or
(ii) To make a loan (a "Shortfall Loan") to the Venture on behalf of
the Defaulting Venturer in an amount equal to the Capital Loan which the
Defaulting Venturer failed to make. Shortfall Loans and Excess Loans are
sometimes hereinafter referred to collectively as "Default Loans". All Excess
Loans
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shall be deemed to be, and shall be treated for all purposes as, Default Loans
and not as Additional Loans.
(b) Shortfall Loans shall either be deemed loans to the Defaulting
Venturer by the Nondefaulting Venturer, or loans to the Venture by the
Nondefaulting Venturer, as the Nondefaulting Venturer may elect. Default Loans
shall earn interest at the lower of (x) the maximum rate permitted by law to be
charged on such a loan and (y) four (4) percentage points per annum in excess of
the Prime Rate, and the Shortfall Loan portion thereof shall be repayable by the
Defaulting Venturer on demand. Any such interest shall compound quarterly.
(c) So long as a Default Loan (and interest thereon) remains unrepaid, (i)
the Nondefaulting Venturer may, upon thirty (30) days' prior notice to the
Defaulting Venturer, solicit bona fide non-Affiliated third party purchasers of
the Hotel and/or Casino on an arms' length basis and thereafter (a) sell the
Hotel and/or Casino, or (b) the stock of the Resort Company and/or Casino
Company, to such a purchaser for any combination of cash and/or notes, and (ii)
the Defaulting Venturers rights to make a Venture Offer under Section 11.01
shall be suspended.
(d) Each Venturer hereby grants to the other a security interest in its
Venture Interest to secure the prompt repayment of any Shortfall Loan and the
performance of the Venturers' respective obligations under Sections 4.02 and
4.03 hereof. Each Venturer shall execute such financing statements and/or
pledge agreements as may be necessary to permit the other to perfect such
security interests under applicable law.
ARTICLE V
DISTRIBUTIONS
Section 5.01. DISTRIBUTIONS OF CASH FLOW. (a) Cash Flow in respect
of each fiscal year of the Venture shall be distributed annually, with respect
to the first three (3) Calendar Years and quarterly thereafter, to the Venturers
in accordance with the order of priority set forth in Section 5.01(b), subject
to such reserves as the Venturers shall deem appropriate for projected operating
requirements of the Venture as set forth in the then "Annual Plan" under the
Management Agreement. If at the end of any quarter in any fiscal year (after
the first three Calendar Years) it shall be determined that the aggregate
distributions to any Venturer in prior quarters shall exceed that Venturer's
share for the year through the end of such quarter, such Venturer shall promptly
return such excess.
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(b) The priority for Cash Flow distributions shall be as follows:
(i) First, to interest on and principal of any Default Loans.
(ii) Second, to interest on and principal of any Additional
Loans.
(iii) Third, the balance, if any, to the Venturers pro rata in
proportion to their respective Percentage Interests as dividends.
(c) To the extent a Non-Defaulting Venturer is owed a Shortfall Loan from
a Defaulting Venturer, the Defaulting Venturer's share of any Cash Flow under
Section 5.01(b) shall be paid to the Non-Defaulting Venturer on account of such
Shortfall Loan and interest thereon.
(d) Any payment under this Agreement on account of "interest and
principal" due a Venturer hereunder, or words of like import, shall be applied
first to interest and then to principal.
(e) Wherever distributions are to be made under this Agreement on account
of an item defined hereunder, and more than one Venturer is entitled thereto,
and such items are at the same level of priority, distribution shall be made pro
rata in proportion to the aggregate amount of such item held by each such
Venturer. The provisions of Section 5.01(d) shall be applied prior to the
application of this Section 5.01(e).
Section 5.02. DISTRIBUTIONS OF CAPITAL PROCEEDS. (a) Except as
provided in Sections 5.03 and 5.04 below, Capital Proceeds shall be distributed
to the Venturers as and when received in the following order of priority:
(i) First, to interest on and principal of any Default Loans.
(ii) Second, to interest on and principal of any Additional
Loans.
(iii) Third, the balance, if any, to the Venturers pro rata in
proportion to their respective Percentage Interests as dividends.
(b) To the extent a Non-Defaulting Venturer is owed a Shortfall Loan from
a Defaulting Venturer, the Defaulting Venturer's share of any Capital Proceeds
under Section 5.02(a)
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shall be paid to the Non-Defaulting Venturer on account of such Shortfall Loan
and interest thereon.
Section 5.03. DISTRIBUTIONS ON LIQUIDATION. (a) When the Venture
sells or disposes of the Venture's assets in liquidation of the Venture, the
Venture shall distribute the cash proceeds therefrom and all other assets of the
Venture in the following order of priority:
(i) To the payment of all debts and liabilities of the Venture (other
than Venture Loans);
(ii) To the setting aside of any reserves deemed necessary by the
Venturers for any contingent liabilities or obligations of the Venture;
(iii) To the payment of items in the amounts and in the order of
priority set forth in Subsections 5.02(a)(i) and (ii) for payment of the same;
and
(iv) To the Venturers in proportion to their respective Venture
Interests.
(b) Upon the Venture's complying with the foregoing distribution plan,
the Venture shall cease to be such and the Venturers shall execute, acknowledge
and cause to be filed all necessary and/or appropriate documents evidencing its
dissolution and winding up.
ARTICLE VI
AUTHORITY OF THE VENTURERS
Section 6.01. MANAGEMENT AND POWERS OF THE VENTURERS. Except as
expressly set forth in Sections 6.07 and 6.08 hereof, the Articles of
Incorporation and/or By-laws of the Corporation referenced in Section 2.01 shall
provide that the Board of Directors shall jointly exercise full control over all
activities of the Venture; shall together have full power and authority to do
all things which they may deem desirable in the conduct of the business of the
Venture, and, subject to any limitation in or contrary provisions of this
Agreement, shall jointly have full power and authority to act on behalf of the
Venture in all matters respecting the Venture, its business and its assets.
Each of the Venturers shall devote such time thereto as it may from time to time
deem necessary to conduct the Venture business and affairs in the best interest
of the Venture. For purposes of Sections 6.01 and 6.02, the exercise of any
authority by the Board of Directors shall be deemed to mean and require the
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consent of at least one Class A Director and at least one Class B Director.
Section 6.02. SPECIFIC POWERS. Without in any way limiting or
impairing the generality of Section 6.01 above, but subject to the provisions of
Sections 6.04, 6.07 and 6.08 hereof, the Articles of Incorporation and/or By-
laws shall provide that the Venturers, acting through the Board of Directors,
shall jointly exercise the following rights, all of which shall be exercisable
only as both Venturers may from time to time agree:
(i) To enter into the Management Agreement and all other
agreements pertaining to the Venture, and all amendments thereto;
(ii) To borrow money and, if security is required therefor, to
mortgage or subject to any other security device any or all of the assets of the
Venture and the income therefrom to secure or provide for repayment thereof; to
obtain replacements of any mortgage or other security device; and to prepay, in
whole or in part, refinance, increase, modify, consolidate or extend any
obligations or mortgages, in such amounts as the Venturers shall deem to be in
the best interests of the Venture;
(iii) To sell, transfer, assign, convey, lease, exchange, or
otherwise dispose of any or all of the assets of the Venture upon such terms and
conditions as the Venturers shall deem advisable, including a deferred payment
sale or an exchange for other assets of any kind;
(iv) To place record title to, or the right to use, Venture
assets in the name of the Venture, the name or names of either or both of the
Venturers or the name or names of a nominee or nominees for any purpose
convenient or beneficial to the Venture;
(v) To acquire and enter into any contract of insurance which
the Venturers shall deem necessary and proper for the protection of the Venture,
for the conservation of its assets, or for any purpose convenient or beneficial
to the Venture;
(vi) To execute and deliver on behalf of the Venture such
documents or instruments as the Venturers shall deem appropriate in the conduct
of the Venture business;
(vii) To employ brokers, consultants, attorneys, accountants and
other agents and other persons or entities deemed appropriate to the conduct of
the Venture business, including,
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without limitation, the Venturers and any affiliates of either of them;
(viii) To establish, invest and maintain reserves for the
benefit of the Venture, in such accounts as the Venturers shall determine, and
to expend such reserves in such amounts and for such purposes as the Venturers
shall determine; and
(ix) To exercise all other powers of the Corporation.
Section 6.03. VENTURE ACTIONS. Except as specifically provided to
the contrary in this Agreement, the Articles of Incorporation and/or By-laws of
the Corporation shall provide that all decisions regarding Venture matters,
including, without limitation, all the matters set forth in Section 6.02 above,
shall be made, all actions taken by the Venture shall be undertaken and all
other actions or decisions required to be taken or made by the Venture under any
other provision of this Agreement shall be taken or made, as the case may be, by
the Board of Directors. In no event, however, is this Section 6.03 intended to
limit or affect the obligations of the Venturers to undertake any action in
respect of the Venture mandated by this Agreement, whether or not either
Venturer shall then object thereto, and in the event such Venturer shall refuse
to perform such obligation, the other Venturers shall have the right to
undertake such mandated action as if it were the sole Venturer of the Venture.
Section 6.04. WHILE DEFAULTS OUTSTANDING.
(a) In the event that either Venturer is in default of any of its
obligations under this Agreement, including without limitation Sections 4.02 and
4.03, and for so long as any such default continues, such defaulting Venturer
shall be deemed to have forfeited its rights
(i) to set reserves under Section 5.01;
(ii) to participate in decisions or actions regarding the Venture, as
described in Sections 6.01 and 6.02;
(iii) to exercise any of its powers or authority under 6.07(a), (c) and
(d);
(iv) to acquire the other Venturer's Venture interests under Articles IX,
X and XI.
(b) While any default referenced in (a) remains outstanding, the other
(non-defaulting) Venturer shall be deemed
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to have an irrevocable power of attorney coupled with an interest to vote all of
the shares of the Corporation held by the defaulting Venturer in order to give
effect to the provisions of (a) above; provided, however, that such rights by
the non-defaulting Venturer shall be exercised only in a manner consistent with
this Agreement.
(c) For purposes of this Section 6.04, defaults arising from the failure
of a Venturer to meet a time deadline shall be deemed cured if the Venturer
performs its obligation with reasonable promptness after receiving written
notice from the other Venturer.
Section 6.05. RIGHT TO COMPETE. Each Venturer, its affiliates and
its successors and assigns may, at any time during the term of the Venture,
engage or be involved in, hold positions in and/or possess interests in other
business ventures, including, without limitation, real estate ventures and
hotels, and neither the Venture nor the other Venturer shall, by virtue of this
Agreement, have any rights in or to such other business ventures or the income
or profits derived therefrom; provided, however, that each Venturer hereby
acknowledges to the other Venturer its fiduciary duty to at all times act in
utmost good faith towards the Venture and such other Venturer while engaged in
all such other business ventures. Notwithstanding the foregoing, El Cacique
will obtain for the benefit of the Venture the agreement(s) of its Affiliates as
follows:
(i) that to the extent any said Affiliate of El Cacique controls
the supply of water, electricity and/or other utilities to the
Venture Site and the Villa Site(s), said water, electricity and
other utilities shall be provided to the Hotel on no less
favorable basis than to any other hotel, resort, time-share or
condominium development in Punte El Cacique; and
(ii) that the Affiliate(s) of El Cacique who owns and/or controls
(or shall own and/or control) the golf course(s) and tennis
courts and other recreational facilities to be developed in
Punte El Cacique shall make tee times and court times, and
other use times available to Hotel guests on no less favorable
basis (in terms of number of tee, court or use times and fees)
than to any other hotel, resort, time-share or condominium in
Punte El Cacique; and
(iii) that the Affiliate(s) of El Cacique which develops roads and
other infrastructure to
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service the resort and residential communities created or to be
created on Punte El Cacique, and the transportation along such
roads, shall in no way discriminate against the Hotel in the
design and maintenance of such infrastructure or in the
availability or flow of ground transportation thereon.
Copies of said agreement(s) shall be delivered to Sonesta upon the execution of
this Agreement.
Section 6.06. ACCOUNTING DECISIONS. All decisions as to accounting
and tax matters shall be made by the Board of Directors of the Corporation.
Ernst & Young shall be the Venture's accounting firm until otherwise agreed by
the Venturers.
Section 6.07. SPECIAL POWERS. (a) So long as a member of the
Sonesta Group shall be a Venturer, El Cacique shall have the exclusive power to
act on behalf of the Venture, as "Owner", under the Management Agreement and, in
connection therewith, to execute and deliver to the Operator such consents,
approvals or directions as may be the right or responsibility of "Owner"
thereunder. In any arbitration between the Venture and the Operator, El Cacique
agrees that the Operator may ask the arbitrator to consider the interest of a
member of the Sonesta Group, as and to the extent such member continues to have
an interest in this Venture.
(b) If, as and when the aggregate outstanding Additional Loans of a
Venturer are, or with the effect of complying with a Cash Flow or Capital
Deficit Notice would be, equal to or greater than their respective Mandatory
Cash Flow Loan Amount, either Venturer may notify the other that it will no
longer make Cash Flow Loans whereupon (i) neither Venturer shall have the
obligation to make Cash Flow Loans in excess of their respective Mandatory Cash
Flow Loan Amount and (ii) either Venturer may compel the Venture to sell the
Hotel and/or Casino, outright or by sale of stock in the Resort Company and/or
Casino Company, subject to a right of first refusal in the other, on the
conditions set forth in Article X hereof. If either Venturer intends to solicit
offers for the sale of the Hotel pursuant to this Section, it shall so notify
the other.
(c) Subject to the Development Services Agreement, El Cacique shall have
responsibility and authority to act on behalf of the Venture in all matters
relating to the Owner's rights and obligations under the Development Services
Agreement.
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(d) Subject to the Development and Construction Management Agreement,
Sonesta shall have responsibility and authority to act on behalf of the Venture
in all matters relating to the Owner's rights and obligations under the
Development and Construction Management Agreement.
(e) Subject to the "Agreement" attached hereto as
EXHIBIT G, Sonesta shall have responsibility and authority to act on behalf of
the Venture in all matters relating to the Venture's rights and obligations
under said "Agreement".
(f) Until such time as all of the Villas have been sold, Sonesta shall
have the right to purchase unsold Villas, up to a total of fifteen (15) Villas
(45 to 60 keys), from the El Cacique or its Affiliate that is developing and
selling the Villas. El Cacique shall sell or arrange with its said Affiliate to
sell such Villa(s) to Sonesta for a price that does not exceed the sum of such
Affiliate's actual costs of developing the Villas, including "hard" and "soft"
costs allocated on a reasonable basis, plus a reasonable developer's profit. El
Cacique shall have the right to participate equally with Sonesta in the purchase
of one or more such Villas, and, as to any Villas purchased by El Cacique and
Sonesta, El Cacique and Sonesta shall share equally all costs and expenses of
acquiring and owning any such Villas, including without limitation any debt
incurred by them in connection with any such acquisition or ownership; provided,
however, that Sonesta shall have the exclusive power to act on behalf of the
Venture, as owner of any such Villa(s), regarding any and all matters
pertaining, directly or indirectly, to (i) the condominium association of which
any such Villa(s) are a part, (ii) the Master Deed, By-laws or any other
documents establishing or governing the Villas, the use thereof, or the
condominium association(s) of which they are a part, or any amendments,
modifications or additions to any such Master Deed, By-laws or other documents,
and/or (iii) any sale or other disposition of any Villas owned by the Venture at
any time. Amounts advanced by El Cacique and Sonesta in purchasing Villas under
this Section, including without limitation debt service on any debt incurred in
purchasing such Villas, shall not be included as part of their respective
Mandatory Cash Flow Loan Amount. Notwithstanding the foregoing, the number of
Villas Sonesta shall have the right to purchase under this Section shall be
reduced by the number of Villas (if any) that are sold to purchasers who agree
to forego any personal use of their Villas for at least the first ten (10) years
and whose Villas are, consequently, available for Hotel use at all such times.
Section 6.08. FINANCING. (a) The Venturers acknowledge that the
Venture anticipates obtaining a first mortgage "permanent" loan, in an original
principal amount of 60-
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65% of the cost of the Hotel, on prevailing rates and terms. The Venturers
shall jointly review the loan documentation for such loan, which shall be
subject to their joint approval. For purposes of this Section 6.08, the "cost
of the Hotel" shall be agreed upon by the parties.
(b) The Venturers shall fund equally and pari passu the difference between
the cost of the Hotel and the amount of the mortgage loan referenced in
subsection (a) above.
(c) The Venturers shall cooperate in effecting the aforementioned
financings and all refinancings thereof, and shall prepare and furnish at all
times such information as may be required in prosecuting applications therefor.
ARTICLE VII
TRANSFER OF INTERESTS
Section 7.01. ASSIGNABILITY OF VENTURER INTERESTS. (a) Subject to the
provisions of Article IX hereof, no Venturer shall voluntarily or involuntarily
sell, assign or otherwise dispose of all or any part of its interest in the
Venture or pledge, mortgage, grant a security interest in or otherwise
hypothecate its interest in the Venture, in whole or part, without the prior
written consent of the other Venturer in each instance.
(b) No assignee of all or any part of the Venture Interests of either
Venturer, whether acquired by voluntary or involuntary assignment, shall become
a substitute Venturer in the Venture in place of such Venturer unless the other
Venturer shall first give its written consent thereto.
(c) The voluntary or involuntary sale, assignment or other disposition,
directly or indirectly, of any shares of Sonesta by any current or future
shareholder thereof or the issuance of any additional shares in Sonesta to any
Person or Persons with the result that Sonesta International and any other
Person theretofore approved by El Cacique ceases to own directly or indirectly
one hundred (100%) percent of all issued and outstanding shares thereof, shall
be deemed to be a sale, assignment or other disposition of Sonesta's interest in
the Venturer requiring the prior written consent of El Cacique. No change of
ownership in Sonesta International shall be deemed to be a change in ownership
in Sonesta.
(d) The voluntary or involuntary sale, assignment or other disposition,
directly or indirectly, of any shares of El Cacique by any current or future
shareholder thereof or the issuance of any additional shares therein to any
Person or Persons with the
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result that the individuals named in Section 14.01(f) cease to own directly or
indirectly one hundred (100%) percent of all issued and outstanding shares
thereof shall be deemed to be a sale, assignment or other disposition of El
Cacique's interest in the Venture requiring the prior written consent of
Sonesta.
(e) Notwithstanding the provisions of paragraph (c) of this Section 7.01,
(A) the Venture interest of Sonesta may be transferred to (i) Sonesta
International, (ii) any Person or Persons wholly owned, directly or indirectly,
by Sonesta International, (iii) to any entity into which Sonesta International
may be merged or consolidated, or (iv) to any entity to which Sonesta
International shall sell substantially all of its assets; and (B) the Venture
interest of El Cacique may be transferred to any Person or Persons wholly owned
by the Guarantors.
(f) For the purposes of paragraph (d) of this Section 7.01, interests in
El Cacique held directly or indirectly by the spouses, children and or other
heirs of any of such named individuals, or trusts established for the benefit of
such individuals and/or their respective spouses, children, and/or other heirs,
shall be deemed owned by the individual to whom such Person or trust is related.
Section 7.02. PROHIBITED TRANSFERS NULL AND VOID. No party may sell,
assign or otherwise dispose, pledge, mortgage, grant a security interest in or
otherwise hypothecate an interest in the Venture except as provided herein. Any
purported sale, assignment or other disposition, pledging, mortgaging, granting
of a security interest in or other hypothecating of an interest in the Venture
which is not permitted under this Section shall be null and void and not binding
on the Venture or other Venturer.
Section 7.03. NO POWER OR AUTHORITY. In the event either Venturer
shall sell, assign, or otherwise dispose of all or any part of its interest in
the Venture (or shall be deemed to have sold, assigned or otherwise disposed of
such interest) or shall pledge, mortgage, grant a security interest in, or
otherwise hypothecate all or any part of such interest, in either case without
the prior written consent of the other Venturer, such defaulting Venturer shall
thereupon cease to have any further power or authority to participate in the
management of, or transact any business for, the Venture and shall thereafter
have no power or authority to act for or bind the Venture, and the other
Venturer shall thereafter have and exercise all power and authority to manage,
transact business for and bind the Venture as if such Venturer were the sole
Venturer in the Venture, with an irrevocable power of attorney coupled with an
interest, to vote all of the shares of the defaulting Venturer to
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remove and replace the defaulting Venturer's directors and officers; provided,
however, the foregoing provisions of this Section shall not apply to divest the
defaulting Venturer of power or authority if the defaulting Venturer (i) has
timely given the notice of transfer required under Section 7.05, AND (ii) has
effected a reassignment (or other re-disposition) of its Venture interest within
thirty (30) days of written demand by said other Venturer, so that its default
is cured, and establishes to the other Venturer's satisfaction that it has done
so.
Section 7.04. ABSOLUTE DISCRETION. Any and all consents required of
either Venturer pursuant to Section 7.01 may be granted or arbitrarily withheld
by such Venturer in its sole and absolute discretion in light of the personal
relationships of the parties hereto which are believed by both Venturers to be
essential to the success of the Venture.
Section 7.05. NOTICE OF TRANSFERS. Each Venturer agrees to give
written notice to the other Venturer of the voluntary or involuntary, direct or
indirect, actual or deemed sale, assignment or other disposition of all or any
part of its Venture interest and of the actual or deemed pledging, mortgaging,
granting of a security interest in or other hypothecation of its interest in the
Venture, in whole or part, with or without the prior written consent of the
other Venturer, in each instance promptly following the occurrence thereof,
together with true and complete copies of all documents and/or instruments with
respect thereto. In addition, each Venturer further agrees to submit or cause
to be submitted to the other Venturer within thirty (30) days following notice
from such other Venturer requesting the same, a certificate executed by such
Venturer if such Venturer is an individual, by a partner of such Venturer if
such Venturer is a partnership or by an officer of such Venturer if such
Venturer is a corporation, (i) stating whether such Venturer's interest in the
Venture or any part thereof has been voluntarily or involuntarily, directly or
indirectly, sold, assigned, or otherwise disposed of or pledged, mortgaged,
given as a security interest or otherwise hypothecated at any time subsequent to
the date hereof, in any instance whether actual or deemed, and (ii) describing
with specificity the nature of such actual or deemed sale, assignment,
disposition, pledge, mortgaging, security interest or other hypothecation, the
terms and conditions thereof, the date the same occurred, and all parties
involved.
Section 7.06. ADMISSION OF REPLACEMENT VENTURER.
(a) In the event that either Venturer shall consent to the sale,
assignment or other disposition of all or any part of the
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Venture interests of the other Venturer, or such consent shall not be required
to such sale, assignment or other disposition, such assignee shall be bound by
the provisions hereof, and such sale, assignment or other disposition shall
nevertheless be of no force or effect until such time as each of the following
conditions shall have been satisfied:
(i) The assignee shall consent in writing, on a form prepared by
or reasonably satisfactory to the nonassigning Venturer, to be bound by the
terms and conditions of this Agreement in the place and stead of the assigning
Venturer;
(ii) The assignor and assignee shall execute and acknowledge all
other instruments reasonably required by the nonassigning Venturer;
(iii) The assignee shall pay any reasonable expenses of the
Venture and the non-assigning Venturer in effecting the substitution; and
(iv) An opinion of assignee's counsel in form acceptable to the
non-assigning Venturer that (x) all requirements of Bahamian, Costa Rican or
other applicable law have been completed by the assignor, the assignee and the
Venture and (y) the assignment is in all compliance with applicable securities
laws and (z) no termination of the Venture has occurred for Costa Rican,
Bahamian or U.S. Federal income tax purposes.
(b) Any such sale, assignment or other disposition shall further be
subject to the requirements of any applicable securities laws; and no transfer
of all or any part of a party's rights as Venturer hereunder shall relieve the
transferor of its responsibilities for its proportionate part of any expenses,
obligations and liabilities hereunder related to the interest so transferred
while the transferor held the interest, whether arising prior or subsequent to
such transfer, nor shall any such sale, assignment or other disposition, require
an accounting or the granting of rights hereunder as between such parties and
the remaining parties hereto, including the exercise of any elections hereunder,
to more than one party unanimously designated by the transferees and, if he
should have retained an interest hereunder, the transferor. Until a proper
designation acceptable to it is required above, the Venture shall continue to
account only to the person to whom it was furnishing notices prior to such time
pursuant to Section 18.07 hereof; and such party shall continue to exercise all
rights applicable to the entire interest previously owned by the transferor.
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(c) In the event of any sale, assignment or other disposition which shall
result in multiple ownership of any interest in the Venture currently held by a
single Venturer (whether voluntary or involuntary, permitted as of right or
consented to), the non-assigning Venturer may require one or more trustees or
nominees to be designated as representing a portion of or the entire interest
transferred for the purpose of receiving all notices which may be given and all
payments which may be made under this Agreement and for the purpose of
exercising all rights transferred to such transferee pursuant to the provisions
of this Agreement.
ARTICLE VIII
BOOKS, RECORDS AND REPORTS
Section 8.01. REPORTS AND DISCLOSURES. The Venturers shall cause to
be prepared and distributed to each other, within ninety (90) days after the end
of each tax year, all information with respect to the Venture for the preceding
year required in connection with the preparation of each Venturer's federal and
state income tax returns.
Section 8.02. BOOKS AND RECORDS.
(a) El Cacique shall keep at its office in San Jose, Costa Rica the
following Venture documents:
(i) All books and records of the Venture;
(ii) Copies of the Venture's federal, state and local income tax
or information returns and reports, if any, for the six (6)
most recent taxable years;
(iii) Copies of this Agreement and all amendments to the
Agreement; and
(iv) Financial statements of the Venture for the six (6) most
recent fiscal years.
(b) Upon the request of Sonesta, El Cacique shall promptly deliver to
Sonesta, at the expense of the Venture, a copy of any and all information
required to be maintained by El Cacique pursuant to Section 8.02 (a) hereof.
(c) Sonesta shall have the right to inspect and copy during normal
business hours any of the Venture records required to be maintained by El
Cacique pursuant to Section 8.02(a) above.
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Section 8.03. THIRD PARTY NOTICES. Each Venturer shall give the other
Venturer, promptly following receipt thereof, copies of all default notices,
offers to purchase, financing proposals and other material communications
received by such Venturer from persons transacting or proposing to transact
business with the Venture, and all summonses, complaints and other papers with
respect to any disputes with or claims against the Venture and/or its assets
which may be given to, served upon or otherwise received by such Venturer.
Section 8.04. EL CACIQUE ACKNOWLEDGMENT OF SONESTA REPORTING
REQUIREMENTS. El Cacique acknowledges that Sonesta International is a public
company under the laws of the United States and, as such, is subject to
quarterly and annual financial reporting requirements. El Cacique further
acknowledges that the income statement, balance sheet and other financial
statements of Sonesta, as a wholly-owned subsidiary of Sonesta International and
for so long as it retains a 50% (or more) Percentage Interest in the Venture,
will be consolidated in the financial statements reported by Sonesta
International. Therefore, El Cacique agrees to provide Sonesta, on request,
with accurate financial information regarding the Venture in order that Sonesta
and Sonesta International may satisfy their financial reporting requirements in
a prompt and timely manner.
ARTICLE IX
RIGHT OF FIRST REFUSAL - VENTURE INTEREST
Section 9.01. EXERCISE OF RIGHT. If either Venturer shall at any time
during the term of this Agreement receive or obtain a bona fide offer (the
"Offer") from a third party (the "Offeror") not related to and not an Affiliate
of such Venturer and on an arm's-length basis to purchase all or substantially
all of the Venture interests of such Venturer, and provided that the Offer is in
writing, signed by the Offeror, and is accompanied by a good certified or
official bank check, or institutional letter of credit, for not less than five
(5%) percent of the purchase price as a downpayment with respect thereto, and
provided further that the Offer provides for the closing of such sale on a date
not less than ninety (90), nor more than one hundred and twenty (120), days from
the date of such Offer, then the Venturer receiving the Offer (the "Electing
Venturer") shall, if it wishes to accept the Offer, shall first give written
notice (a "Notice of First Refusal (Venture Interest)") to the other Venturer
(the "Other Venturer") advising the Other Venturer of the Offer and the desire
of the Electing Venturer to accept it, and furnishing the name and address of
the Offeror together with such reasonable financial or other information
relating to the Offeror, including without limitation a statement of net worth,
as the Other
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Venturer may reasonably request. Neither Venturer may exercise the provisions
of this Article, notwithstanding the foregoing, if such Venturer is then in
default in any respect under this Agreement, during any period in which the
provisions of this Article IX are operational by reason of a Notice of First
Refusal (Venture Interest) previously executed or if a First Notice has
previously been given pursuant to Article X below (unless both Venturers shall
have previously agreed in writing that such Notice had ceased to be of any
further force or effect).
Section 9.02. REPLY NOTICE. The Other Venturer shall have a period
of thirty (30) days following the receipt of any Notice of First Refusal
(Venture Interest) by the Electing Venturer to send to the Electing Venturer a
notice (the "Reply Notice") electing either (a) to permit the Electing Venturer
to accept the Offer, or (b) to purchase the Venture interests of the Electing
Venturer (including any loans made by such Venturer to the Venture) for the
amount set forth in the Notice of First Refusal (Venture Interest) and otherwise
upon identical sale terms as contained in the Offer. If the Reply Notice
contains an election to purchase, such Reply Notice must be accompanied by a
certified check or institutional letter of credit in an amount equal to five
(5%) percent of the Purchase Price of the Electing Venturers' interests as a
downpayment on account of such Purchase Price. If the Other Venturer fails to
give a Reply Notice electing either option within such thirty (30) day period or
gives such Notice in a timely manner and elects therein to purchase the Venture
interests of the Electing Venturers but such Notice is not accompanied by the
required downpayment, the Other Venturer shall be deemed to have permitted the
Electing Venturer to accept the Offer.
Section 9.03. SALE OF INTERESTS. Following the Other Venturer's
election to purchase the Venture interests of the Electing Venturer, each
Venturer shall be obligated to sell or buy, as the case may be, which obligation
shall be enforceable by an action for specific performance, damages, or any
other remedy available at law or in equity. Any such sale or purchase shall be
closed at the principal place of business of the Venture on or before the
ninetieth (90th) day (the "Closing Date") following the date on which the Reply
Notice was given. At the closing, the selling Venturer shall tender all
documents, duly executed, necessary to convey the interests being sold, free and
clear of all encumbrances, with full warranties of title thereto, all in form
reasonably satisfactory to the purchasing Venturer. At the closing, the
purchasing Venturer shall tender to the selling Venturer one or more certified
checks equal to the unpaid balance of the Purchase Price of such selling
Venturer's interest and shall execute and deliver to the selling Venturer such
other agreements as may comply with the terms of the Electing
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Venturer's Offer, all in form and reasonably satisfactory to the selling
Venturer. The purchasing Venturer shall pay all costs and expenses of closing
the purchase other than the Other Venturer's attorneys' fees.
Section 9.04. Intentionally omitted.
Section 9.05. INSTITUTIONAL LETTER OF CREDIT. For the purposes of
Articles IX or X hereof, a letter of credit shall be deemed an "institutional
letter of credit" only if it expresses the unconditional obligation to pay to
the Venture the sum therein stated against a sight draft, does not expire for a
period extending not less than ninety (90) days beyond the expiration of the
later of the contract period and the period within which the Venturer being
offered an option hereunder may exercise such option, and is drawn upon a
banking institution with at least $2,000,000,000 in assets, having offices in
New York County, New York State; Dade County, Florida; Chicago, Illinois;
Suffolk County, Massachusetts; or Toronto, Ontario, Canada.
ARTICLE X
RIGHT OF FIRST REFUSAL - THE HOTEL
Section 10.01. EXERCISE OF RIGHT. If, under the circumstances
described in Section 6.07(b) hereof, either Venturer shall receive or obtain a
bona fide offer (an "Offer") from a third party not related to and not an
Affiliate of such Venturer and on an arm's-length basis (an "Offeror") to
purchase all or substantially all of the assets of the Venture and provided that
the Offer is in writing, signed by the Offeror, and is accompanied by a good
certified or official bank check for not less than five (5%) percent of the
purchase price as a downpayment with respect thereto, and provided further that
the Offer provides for the closing of such sale on a date not less than sixty
(60), nor more than one hundred and twenty (120), days from the date of such
Offer, then that Venturer (the "Electing Venturer") shall, if it wishes to
accept the Offer, have the right to exercise the provisions of this Article by
given written notice (a "Notice of First Refusal (Hotel)") to the other (the
"Other Venturer") advising the Other Venturer of the Offer and the desire of the
Electing Venturer to accept it. Neither Venturer may exercise the provisions of
this Article, notwithstanding the foregoing, if such Venturer is then in default
in any respect under this Agreement.
Section 10.02. REPLY NOTICE. The Other Venturer shall have a period
of thirty (30) days following the receipt of any Notice of First Refusal (Hotel)
by the Electing Venturer either
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(a) to join with the Electing Venturer in accepting the Offer on behalf of the
Venturer, or (b) to purchase the Venture interests of the Electing Venturer as
if the Electing Venturer had given a Notice of First Refusal (Venture Interest)
pursuant to Article IX above setting forth as the Purchase Price thereunder the
amount which the Electing Venturer would receive if the Hotel were sold for the
purchase price set forth in the Offer, the Venture were to discharge therefrom
all obligations other than those to be assumed by the Offeror and the Net
Proceeds thereafter distributed in accordance with Section 13.02(b) hereof. If
the Reply Notice contains an election to purchase, such Reply Notice must be
accompanied by a certified check or institutional letter of credit in an amount
equal to five (5%) percent of the Purchase Price of the Electing Venturer's
interests as a downpayment on account of such Purchase Price. If the Other
Venturer fails to give a Reply Notice electing either option within such thirty
(30) day period or gives such notice in a timely manner and elects therein to
purchase the Venture interests of the Electing Venturer but such Notice is not
accompanied by the required downpayment, the Other Venturer shall be deemed to
accept the Offer.
Section 10.03. SALES OF VENTURE INTERESTS. If the Other Venturer
elects to purchase the Venture interests of the Electing Venturer, the
provisions of Article IX shall apply in all respects, and the Venturers shall
have the same rights and obligations to buy and sell pursuant thereto, as if the
Notice of First Refusal (Hotel) were a Notice of First Refusal (Venture
Interest) given pursuant to Article IX hereof (as contemplated by Section 10.02
above) and the Other Venturer had elected to purchase the Venturer's interest in
accordance with the terms of said Article IX.
Section 10.04. SALES PURSUANT TO THE OFFER. If the Other Venturer
accepts (or is deemed to accept) the Offer, the Electing Venturer shall
thereafter have the right, without the necessity of any further consent or
authorization from the Other Venturer, to sell all or substantially all of the
assets of the Venture on behalf of the Venture to the Offeror in accordance with
the terms and conditions of the Offer, provided that the closing of the sale
occurs within one hundred and eighty (180) days following the date of the Offer.
In the event such a sale shall not take place within such one hundred and eighty
(180) day period, all rights of the Electing Venturer to sell the Venture's
assets to the Offeror pursuant to the Offer shall terminate and be of no further
force or effect. Either Venturer may, however, exercise the rights contained in
this Article X at any time thereafter by giving a new Notice of First Refusal
(Hotel) to the other in respect of any Offer it wishes to accept.
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ARTICLE XI
VENTURER OFFER
Section 11.01. THE OFFER. If at any time one of the Venturers
desires to purchase all or substantially all of the Venture interest of the
other Venturer (or if there are more than two Venturers, of another Venturer),
and subject to Section 4.06(c), it shall so notify the other Venturer in writing
(the "Venturer Offer Notice"). The Venturer Offer Notice shall include the
following information:
(a) the amount the offering Venturer is offering to pay for said
Venture interest;
(b) the terms of payment; and
(c) the proposed closing date, which shall not be later than
ninety (90) days thereafter;
all of which shall constitute the "Venturer Offer".
Section 11.02. THE RESPONSE. Within thirty (30) days after receiving
a Venturer Offer Notice, the Venturer receiving such Notice shall respond to the
offering Venturer in writing ("Venturer Response Notice") that it will either:
(1) accept the Venturer Offer, or
(2) purchase the offering Venturer's interest in the Venture on the
same terms as set forth in the Venturer Offer Notice, except that
the closing date shall occur on the earlier of (i) the closing
date set forth in the Venturer Offer Notice, or (ii) thirty (30)
days following the offering Venturer's receipt of the Venturer
Response Notice.
Section 11.03. FAILURE TO PERFORM. In the event that a Venturer
which has agreed to purchase the other (or another) Venturer's interest in the
Venture fails to do so pursuant to its Venturer Offer or its response to a
Venturer Offer, the other Venturer shall have the following rights: (i) to
purchase said defaulting Venturer's interest in the Venture at a price equal to
90% of the price the defaulting Venturer agreed to pay; provided the purchasing
Venturer notifies said defaulting Venturer in writing of its intent to so
purchase the defaulting Venturer's Venture interest within thirty (30) days of
the defaulting Venturer's default and, thereafter, closes within ninety (90)
days; or (ii) to sell the Venture (either the Venture interests
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of both Venturers or the Hotel) to a non-Affiliate, in an arms-length
transaction, free of the defaulting Venturer's rights under Articles IX and X;
provided the sale is completed within eighteen (18) months of the date the
defaulting Venturer was supposed to purchase the other Venturer's interest in
the Venture.
Section 11.04. RIGHT TO PURCHASE MANAGEMENT AGREEMENT. In the event
that Sonesta delivers a Venturer Offer Notice to El Cacique, under Section
11.01, and El Cacique responds thereto with a Venture Response Notice indicating
that it will purchase Sonesta's Venture Interest, pursuant to Section 11.02(2),
El Cacique shall have the additional right to purchase Sonesta's interest(s) in
the Management Agreement (the "Management Agreement Purchase Right") for an
amount equal to the sum of (1) the "Base Fee" earned by the "Operator" under the
Management Agreement for the twelve (12) calendar months prior to Sonesta's
Venturer Office Notice, plus (2) the product of (a) the "Incentive Fees" earned
by the Operator under the Management Agreement in the previous "Calendar Year",
multiplied by (b) ten (10) (the "Management Agreement Purchase Price"). The
Management Agreement Purchase Right shall be deemed waived unless exercised by
El Cacique by written notice delivered to Sonesta simultaneously with its
Venturer Response Notice. If El Cacique exercises the Management Agreement
Purchase Right, the Management Agreement Purchase Price shall be paid to Sonesta
simultaneously with the payment made by El Cacique for Sonesta's Venture
Interest.
ARTICLE XII
TERMINATION OF VENTURE
Section 12.01. OPTION TO TERMINATE. If for any reason, (i)
construction of the Hotel Facilities is not substantially underway by July 1,
1995, with construction financing and a firm commitment for permanent financing
in place, or (ii) the Hotel has not commenced full business operation by
December 31, 1996, and subject to Sonesta's rights under Section 12.02, then (a)
Sonesta or El Cacique may terminate this Agreement, (b) if so terminated,
Sonesta or El Cacique may cause the Venture to terminate the Management
Agreement, the Development and Construction Management Agreement and the
Development Services Agreement, and (c) upon such terminations, neither party
shall have further obligation to the other under this Agreement or under any of
said Agreements (except any sums theretofore owing to Sonesta's Affiliate under
the Development Services Agreement and to El Cacique under the Development and
Construction Management Agreement).
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Section 12.02. ADDITIONAL SONESTA RIGHT. Notwithstanding the
provisions of Section 12.01, in the event that either (i) a firm commitment(s)
for construction and permanent financing for the Hotel Facilities has not been
obtained by April 1, 1995, and continues in effect, or (ii) construction of the
Hotel Facilities and thirty nine (39) Villas is not substantially underway by
September 1, 1995, or (iii) the Hotel has not commenced full business operation
by December 31, 1996, Sonesta shall have the additional right to either:
(1) assume sole control of the Hotel project (but not El
Cacique's Venture Interest) and seek to complete the Hotel
in accordance with the Plans and Supplemental Plans, and
otherwise in accordance with this Agreement, or
(2) terminate this Agreement by written notice to El Cacique in
which event El Cacique shall, within thirty (30) days
reimburse Sonesta for all funds advanced by Sonesta to such
date under this Agreement, the Agreement of Purchase and
Sale (EXHIBIT F), or otherwise; all of which funding shall
be verified to El Cacique's reasonable satisfaction.
In the event that Sonesta assumes control of the Hotel project, under subsection
(1) above, it shall be deemed to have an irrevocable power of attorney coupled
with an interest to vote all of the shares of El Cacique and otherwise take any
and all actions required to complete the Hotel, but only in a manner consistent
with this Agreement.
Section 12.03. FULL BUSINESS OPERATION. For purposes of Sections
12.01 and 12.02, the term "full business operation" shall mean that the Hotel is
accepting paying guests and all Hotel facilities and amenities then required to
be available under this Agreement and the Management Agreement are available.
ARTICLE XIII
SPECIAL CIRCUMSTANCES
Section 13.01. EL CACIQUE'S PURCHASE OF SONESTA INTERESTS.
(a) If the Management Agreement shall be terminated pursuant to
Section 13.18 thereof, then within ninety (90) days thereafter El Cacique shall
purchase the interest of Sonesta herein upon repayment to Sonesta of all amounts
referenced in Section 12.02(2). Such purchase shall be closed upon 10 days'
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notice to Sonesta from El Cacique and otherwise in accordance with the
provisions of Article IX hereof, and the Venturers shall have the same rights
and obligations to buy and sell pursuant thereto as if El Cacique's election
were Notice of First Refusal (Venture Interest) given by Sonesta pursuant to
Article IX and El Cacique had elected to purchase in accordance with the terms
of said Article IX. Notwithstanding the foregoing, if a Venturer Offer,
pursuant to Section 11.01, is outstanding at the time El Cacique would be
required to purchase Sonesta's interest in the Venture under this subsection, El
Cacique shall only be required to complete a purchase under this subsection if a
purchase and sale under said Article XI is not completed.
(b) If the Management Agreement shall be terminated pursuant to
Sections 10.1 or 10.2 thereof, then El Cacique may at any time within one year
thereafter purchase the interest of Sonesta herein upon payment to Sonesta of
the Purchase Price (as hereinafter determined) for Sonesta's interest herein.
(c) The Venture Asset Value shall be determined by agreement of the
parties. If the parties are unable to agree within thirty (30) days after the
event giving rise to the obligation to purchase (or exercise of option by El
Cacique, as appropriate), the parties shall submit their differing assertions of
Venture Asset Value to arbitration in the manner described in Article XVII
hereof.
Section 13.02. SONESTA'S VILLA INTERESTS. The parties acknowledge
that, at all times while the Management Agreement is in effect, it is important
that Sonesta either own at least one Villa in any condominium association
existing and comprised of Villas, or have the exclusive right to control the
sale or other disposition of any Villa(s) owned by the Venture, in order to
assure that the intent of the parties -- as reflected in this Agreement and the
Management Agreement -- will be achieved. Therefore, the parties agree that in
the event that
(A) Sonesta sells its Venture interests to El Cacique under Articles IX,
X, XI (excluding, however, a sale by Sonesta under Section 11.04 where its
management interests are transferred and/or terminated), or otherwise; and
(B) at the time of any such sale neither Sonesta, nor any of its
Affiliates, owns at least one Villa in each condominium association comprised of
Villas;
El Cacique shall transfer to Sonesta (or a Sonesta Affiliate) all of its right,
title and interest in and to one such Villa in each such condominium association
in which Sonesta (or its Affiliate) does not own a Villa, free and clear of
mortgage liens and
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encumbrances, for the sum of U.S. $1.00, and El Cacique shall have the right to
record a non-recourse, first mortgage lien against any such Villa equal to one
half (1/2) of such Villa's fair market value. For purposes of the preceding
sentence, a Villa's fair market value shall conclusively be determined from the
most recent sale of a comparable Villa on an arm's length basis. Any disputes
regarding fair market value shall be resolved under Article XVII.
El Cacique, on behalf of itself, its Affiliates, its successors and assigns
shall do nothing which, directly or indirectly, shall have the effect of
divesting Sonesta, or result in Sonesta's being divested, of its ownership of
any Villa, or adversely effect or impair Sonesta's rights under Section 6.07(f).
Section 13.03. VILLA SITES. The Villa Site(s) shall not be used for any
purpose other than the construction of Villas without the prior written consent
of Sonesta. In the event that the construction of all eighty (80) Villas is
delayed or does not proceed for any reason, the parties agree that the vacant
portion of the Villa Sites shall be reserved only for Hotel purposes, until all
80 Villas are completed.
ARTICLE XIV
WARRANTIES AND REPRESENTATIONS
Section 14.01. El Cacique hereby warrants and represents to Sonesta
the following:
(a) El Cacique is duly organized, validly existing and has the
legal power and authority to fulfill its obligations under this Agreement
between the parties in full.
(b) El Cacique's Affiliate Extency Internacional has full
ownership of the Site and El Cacique has made arrangements with Extency
Internacional so as to enable El Cacique and Extency Internacional to fulfill
all of their obligations under this Agreement in full, including without
limitation the obligation to arrange the conveyance of the Venture Site to the
Venture pursuant to the Agreement of Purchase and Sale (EXHIBIT F), and the
Venture Site is and will remain free and clear of all mortgages, liens, charges,
encumbrances, conditions or restrictions, except such as may be expressly
permitted by the terms of this Agreement or by the terms of the Management
Agreement. Copies of all title documents shall be delivered to Sonesta on
request.
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(c) There are no actions, suits or proceedings pending or
threatened against or affecting El Cacique or any of its Affiliates in any court
of law or equity, before any governmental agency or otherwise which might in any
way adversely affect its rights or asserted rights in and to the Site or the
planned portions of the Hotel or which might in any way adversely affect this
Agreement or the performance thereof, or which would materially affect El
Cacique's ability to perform its obligations hereunder.
(d) This Agreement has been duly executed and delivered by El
Cacique and constitutes the valid and binding obligation of El Cacique in
accordance with its terms.
(e) El Cacique shall use its best efforts to obtain financing in
order to develop and construct the Hotel. In all other respects El Cacique has,
or shall have, in due course, the skilled personnel and resources, financial and
otherwise, reasonably calculated to perform its obligations hereunder.
(f) The sole owners (i.e. the only legal or beneficial
shareholders) of El Cacique are John Ryan, Michael Ryan, Kathleen Timmons,
Manuel Bustemante, Carlos Lachner and Rudolpho Jimenez.
Section 14.02. Sonesta hereby warrants and represents to El Cacique
the following:
(a) Sonesta is duly organized, validly existing and has the
legal power and authority to fulfill its obligations under this Agreement.
(b) There are no actions, suits or proceedings pending or
threatened against Sonesta in any court of law or equity, before any
governmental agency or otherwise which might in any way adversely affect this
Agreement or the performance thereof.
(c) This Agreement has been duly executed and delivered by
Sonesta and constitutes the valid and binding obligation of Sonesta in
accordance with its terms.
(d) Sonesta has, or shall have, in due course, the skilled
personnel and resources, financial and otherwise, to perform its obligations
hereunder.
Section 14.03. Either party shall have the right to request from the
other party opinions from said other party's legal counsel as to any matter to
which said other party has warranted or represented herein. Such opinion(s) of
counsel
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shall be delivered to the requesting party within thirty (30) days of such
request. Where reasonable, such opinions may be based upon affidavits or
certificates with respect to fact and may condition enforceability of any
contractual obligation to standard commercial obligations in connection with
opinions.
ARTICLE XV
GUARANTOR; LIABILITY
Section 15.01. GUARANTEED OBLIGATIONS. The Guarantors have executed
this Agreement for the sole purposes of (A) guaranteeing to the Venturers the
full and prompt payment and performance of their respective affiliates of (i) as
to El Cacique's Guarantors, the obligations of El Cacique to make Additional
Loans when required hereunder and the obligations of El Cacique, if any, under
Sections 3.05, 12.02 and 13.01 and Article XI hereof, and (ii) as to Sonesta
International, the obligations of Sonesta to make Additional Loans when required
hereunder, and (B) to acknowledge the provisions of Article XVII. The liability
of El Cacique's Guarantors under Sections 11.01 or 12.02 shall be limited to the
return of any capital loan made or other funds advanced by Sonesta and the costs
incurred by Sonesta, including reasonable attorneys' fees, in enforcing the
obligations of Guarantor pursuant to this sentence.
Section 15.02. LIMITATION ON LIABILITY. (a) Anything to the contrary
herein contained notwithstanding, El Cacique's (and the El Cacique Guarantors')
liability hereunder to advance or loan sums under Article IV or to guarantee
completion of the Hotel's construction shall be limited (i) prior to the opening
of the Hotel, to the liability expressed in the last sentence of Section 15.01,
and (ii) after the opening of the Hotel, to the portion, if any, of El Cacique's
Mandatory Cash Flow Loan Amount not theretofore advanced for Cash Flow Loans and
Capital Deficit Loans.
(b) Anything to the contrary herein contained notwithstanding,
Sonesta's (and the Sonesta Guarantor's) liability hereunder to advance or loan
sums or furnish guarantees or other security under Article III hereof shall be
limited (i) prior to the opening of the Hotel, to the obligations expressed in
Sections 4.02 and 4.03 hereof, and (ii) after the opening of the Hotel to the
unadvanced portion, if any, of Sonesta's Mandatory Cash Flow Loan Amount not
theretofore advanced for Cash Flow Loans and Capital Deficit Loans.
(c) The foregoing subsections (a) and (b) shall not be deemed to
relieve either Venturer (or its Guarantor) from liability for repayment of
Shortfall Loans properly made by the
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other subject to the limitations expressed in such subsections or for further
sums expressly agreed to be advanced by such Venturer.
Section 15.03. CONTINUING GUARANTEES. The guarantees expressed in this
Article XV are unconditional and absolute guarantees of payment and of
performance. They shall be enforceable against each Guarantor, its successors
and assigns, without the necessity of resorting to any suit against any other
party or exhausting any other security or collateral. Each Guarantor waives the
right to have the benefitted party pursue any other remedy, enforce any other
rights, receive notice of non-payment, non-performance or non-observance, non-
acceptance, demand or any other notice or demand to which such Guarantor might
otherwise be entitled. These guarantees shall be continuing guarantees, and the
obligations and liability of each Guarantor hereunder shall in no way be
affected, impaired, released, reduced or discharged by reason of the occurrence
of any of the following, although without notice to or consent of Guarantor:
(a) The amendment, modification or supplement (whether material or
otherwise) of this Agreement;
(b) The assertion of any of the rights or remedies of the benefitted
party under the Agreement;
(c) The failure, omission or delay on the part of the benefitted party
to enforce, assert or exercise any right, power or remedy conferred on or
available to it under this Agreement;
(d) Any bankruptcy, insolvency, reorganization, arrangement,
assignment for the benefit of creditors, receivership or trusteeship affecting
the Venturer whose obligations are so guaranteed;
(e) Any assignment of all or any portion of the interest of the
Venturer whose obligations are so guaranteed; or
(f) The events described in Section 18.13 hereof.
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ARTICLE XVI
APPROVALS AND CONSENTS
Section 16.01. CONSENT DEEMED GIVEN. In each instance in this
Agreement where a party is given a right of approval or consent to be exercised
within the stated time period, if such approval or consent, or objections or
suggested changes, are not given within such time period, then such approval or
consent shall be deemed to have been given. Approvals, consents, objections and
suggested changes may be given by any of the methods described in Section 18.07
and shall be deemed given on the date of hand delivery or the date sent by any
of the means described in Section 18.07 provided that the copies required by
Section 18.07 for notices are also sent.
Section 16.02. FAILURE TO CONSENT. In those instances where a party
is given a right of approval or consent and no specific time period is provided
for the giving of such approval or consent, then the party which has the right
of approval or consent shall give its approval or consent, or objections or
suggested changes, within thirty (30) days of request therefor, and the failure
in any such instance to respond to any such request shall be deemed to be the
giving of approval or consent.
Section 16.03. WHERE CONSENT REQUIRED. Whenever the approval or
consent of a party is required it shall not (except as expressly provided
to the contrary hereunder) be unreasonably withheld or delayed and shall
be given in writing. Where a required approval or consent is denied, the
reasons therefor shall be stated.
ARTICLE XVII
ARBITRATION
Section 17.01. PROCEDURE. Any dispute (the settlement of which is not
otherwise provided for herein) arising hereunder between El Cacique and Sonesta,
including without limitation any of their respective Guarantors, shall be
referred for decision to arbitration as follows. Within twenty (20) days of the
receipt by one party of written notice from the other requesting arbitration and
describing in detail the dispute to be resolved, each party shall choose an
arbiter with at least five (5) years' experience in or in connection with the
hotel development/ construction industry, if the dispute pertains to development
or construction, or in connection with the hotel industry, if the dispute
pertains to any other matter, and both of said arbiters shall together resolve
said dispute. In the event that said arbiters have been unable to resolve said
dispute within thirty
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(30) days of the date the first of them was appointed, they shall together
select a third arbiter. Within thirty (30) days of the selection of said third
arbiter with like experience in or in connection with the hotel
development/construction industry or the hotel industry, as the case may be, the
third arbiter shall issue written notice to El Cacique and Sonesta choosing the
position advocated by either one of the parties' arbiters, without compromise.
If the parties' arbiters are unable to agree on a third arbiter within twenty
(20) days, then either party may apply to the American Arbitration Association,
Miami Office for the appointment of a third arbiter to decide the dispute. Any
arbitration hereunder involving a third arbiter shall be conducted in Miami and
shall be governed by the Commercial Rules of the American Arbitration
Association.
Section 17.02. PARTIES BOUND. The decision in writing of the third
arbiter so selected or appointed shall be final and conclusive upon both
parties. The costs and expenses of such third arbiter, shall be borne by the
parties as the third arbiter may determine, but failing such determination, as
an expense of the Venture; provided, however, that if the third arbiter finds
that a claim submitted for arbitration was frivolous or that a party's conduct
during the arbitration procedure was unreasonable, the party making said claim
or conducting itself unreasonably shall bear all such costs and expenses.
Either party may apply to any court of competent jurisdiction for any order
confirming the award; judgment of the court shall be entered upon the award
unless the award is vacated, modified or corrected as provided by law. For
purposes of the preceding sentence both parties irrevocably submit to the
jurisdiction of the courts of Dade County, Florida. Either Venturer may apply
to the Courts of Costa Rica (or any other jurisdiction) for the purpose of
enforcing any such award or judgment.
ARTICLE XVIII
MISCELLANEOUS
Section 18.01. ACCOUNTING. The fiscal year of the Venture for
financial reporting and tax purposes shall be the calendar year. If, however,
the Venturers determine that a change to some other fiscal year for either
financial reporting or tax purposes would be in the best interests of the
Venture, the Venturers shall be entitled to change the fiscal year of the
Venture to some other fiscal year.
Section 18.02. BANK ACCOUNTS. Until required in the conduct of the
business of the Venture or distributed to the Venturers, all Venture funds,
including, but not limited to, Capital Loans, Venture Loan proceeds, operating
revenues and
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Capital Proceeds shall be deposited in one or more bank accounts of the Venture,
each of which may or may not be interest bearing, as may be selected by the
Venturers. Any interest or other income generated by such deposits or
investments shall be for the Venture's account.
Section 18.03. VENTURER LIABILITY AND INDEMNIFICATION.
(a) The Venturers and their officers, agents and employees shall be held
harmless and be indemnified by the Venture, its receiver or trustee for any
liability or loss in favor of unaffiliated third parties by virtue of their acts
or omissions in their capacity as Venturers or officers, agents or employees
thereof in connection with Venture activities. Such indemnification shall
include, but not be limited to, all expenses and attorneys' fees incurred by any
Venturer or officer, agent or employee thereof in connection with the defense of
any action based on any such acts or omissions, except if such Venturer or
officer, agent or employee thereof is not successful in a derivative action
(i.e. an action brought on behalf of the Venture), it or he will be obligated to
reimburse the Venturer for any attorneys' fees expended on behalf of such
Venturer. Such indemnification or agreement to hold harmless shall only be
recoverable out of the assets of the Venture and not from the assets of the
Venturers. In no event, however, shall either Venturer or any of its officers,
agents or employees be indemnified or held harmless by the Venture from any loss
or liability resulting from the gross negligence, fraud, willful misconduct, bad
faith or misfeasance of such Venturer or of any of its officers, agents or
employees.
(b) No Venturer shall be liable to the Venture or the other Venturer for
any act or omission performed or omitted by it pursuant to the authority granted
to it hereunder or by law, or from a loss resulting from any mistake or error in
judgment on its part, provided that such act or omission, mistake or error in
judgment, as the case may be, did not result from the gross negligence, fraud,
willful misconduct, bad faith or misfeasance of such Venturer. Each Venturer
may consult at its own cost with legal counsel, and any action taken or omitted
in good faith by such Venturer in reliance upon and in accordance with the
written opinion of such counsel (with both Venturers being stated in said
opinion as entitled to rely on such opinion as third party beneficiaries) shall
not, for the purposes of this Agreement, be deemed to have resulted from the
gross negligence, fraud, willful misconduct, bad faith or misfeasance of the
Venturer acting in reliance on such advice. A copy of such opinion shall be
provided to the other Venturer at the time it is rendered to the Venturer
seeking such opinion; failure to so provide such opinion to the other Venturers
shall prohibit the Venturer to whom the
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opinion is rendered from relying on it for the purposes of this Section 18.03.
(c) Each Venturer shall have a right of contribution against the other
Venturer for such Venturer's Percentage Interest of any liability such Venture
may have to any unaffiliated third party creditors of the Venture, except that
the other Venturer shall have no obligation to contribute to the payment of any
liability to the extent that such liability results from the gross negligence,
fraud, willful misconduct, bad faith or misfeasance of the Venturer seeking to
assert such right of contribution.
(d) Notwithstanding any other provision of this Section 18.03, if any
Venturer shall take any action on behalf of the Venture which it is not duly
authorized to take hereunder, such Venturer shall indemnify the Venture and the
other Venturer against any liability or loss incurred by them as a result of
such unauthorized action, including, without limitation, court costs and
attorneys' fees; provided, however, for any such indemnification to apply (i)
the party seeking indemnification shall notify the other party of the potential
liability and/or loss promptly; and (ii) the indemnifying party shall have the
right to control the defense -- including without limitation the settlement --
of any claim or legal proceeding, with legal counsel of its choice.
(e) The indemnification provisions contained in this Section 18.03 shall
constitute a separate contract between the Venturers and shall be actionable
without the necessity of commencing an accounting proceeding against any
Venturer or the Venture. The provisions of this Section 18.03 shall survive the
termination of this Agreement.
Section 18.04. CURRENCY. All references in this Agreement to dollars,
and numerical references to money preceded by "$", shall be deemed to refer to
currency of the United States, unless a contrary intent is specifically set
forth.
Section 18.05. COMPLETE UNDERSTANDING OF THE PARTIES. This Agreement
embodies the complete understanding of the parties hereto with respect to the
subject matter hereof. This Agreement, together with the Management Agreement,
Development and Construction Management Agreement and Development Services
Agreement, are intended to supersede and replace all prior agreements between
the Venturers and their respective Affiliates with respect to the Hotel, and all
such prior agreements are to be considered null and void.
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Section 18.06. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of The Bahamas.
Section 18.07. NOTICES AND ADDRESSES. All notices, demands and
requests required to be given or which may be given hereunder shall be in
writing and shall be deemed to have been properly given if sent either by United
States registered and certified mail, postage prepaid, or by private "overnight"
or "same day" independent courier, e.g. Federal Express, for next day delivery,
addressed (a) in the case of El Cacique, to El Cacique at the address above
stated with a copy to Facio & Canas, Apartado 6173, 1000 San Jose, Costa Rica,
Attn: Fernan Pacheko, Esq.; and (b) in the case of Sonesta, to Sonesta at the
address above stated with a copy to George S. Abrams, Esq., Winer & Abrams, One
Court Street, Boston, MA 02108. Notices shall be effective upon receipt.
Notice from a party's attorney shall be deemed notice from that party.
Section 18.08. BINDING EFFECT. This Agreement may be executed in
counterparts and except as otherwise specified herein, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, their
personal representatives, successors and assigns.
Section 18.09. HEADINGS. The headings in this Agreement are inserted
for convenience and identification only and shall not be used in construing or
interpreting this Agreement.
Section 18.10. SEVERABILITY. Every provision of this Agreement is
intended to be severable. If any term or provision is illegal or invalid for
any reason whatsoever, such illegality or invalidity shall not affect the
validity of the remainder hereof.
Section 18.11. PROHIBITION AGAINST PARTITION. Each Venturer
permanently waives and relinquishes any and all rights it may have to cause any
property of the Venture to be partitioned, it being the intention of the parties
to prohibit any Venturer from bringing a suit for partition against the other
Venturer.
Section 18.12. ADDITIONAL DOCUMENTS. Each Venturer, upon the request
of the other, agrees to perform all further acts and execute, acknowledge and
deliver all further documents which may be reasonably necessary, appropriate or
desirable to carry out the provisions of this Agreement.
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Section 18.13. FORCE MAJEURE. No party shall be liable to the other
in damages, nor shall this Agreement be terminated, because of any failure to
perform hereunder caused by fire, earthquake, flood, explosion, casualty,
strike, unavoidable accident, riot, insurrection, civil disturbance, act of
public enemy, embargo, war, act of God, inability to obtain labor, material or
supplies or any other similar cause beyond its control.
Section 18.14. AMENDMENTS. Amendments or modifications to this
Agreement shall only be effective if in writing and signed by both parties.
Section 18.15. DRAFTING AND REVIEW OF AGREEMENT. El Cacique and
Sonesta acknowledge (i) that both such parties had input in preparing this
Agreement, (ii) that they have each reviewed this Agreement, and (iii) that
prior to signing this Agreement both such parties received the advice of their
respective legal counsel.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date indicated on the first page hereof.
VENTURERS
El Cacique de Calzon de Sonesta International
Pobre S.A. Hotels Limited
By: /S/ By: /S/
----------------------- ----------------------
Its duly authorized: Its duly authorized:
GUARANTORS
Sonesta International Hotels Corporation ("Sonesta Guarantor")
By: /S/
------------------------
Its duly authorized:
Extency Internacional S.A. ("El Cacique Guarantor") executes this Agreement as
an El Cacique Guarantor and in order to acknowledge that certain obligations of
and undertakings by El Cacique described herein are contingent on its
performance and cooperation and it hereby agrees to perform and/or cooperate
with El Cacique and Sonesta in order to assure that such obligations and
undertakings are performed as contemplated.
Extency Internacional S.A.
By: /S/
------------------------
Its duly authorized:
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EXHIBIT 10.7
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
THE SOHO HOTEL COMPANY, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF THE SOHO
HOTEL COMPANY, L.P., a Delaware limited partnership (the "PARTNERSHIP"), is
dated as of December 13, 1994, by and among HOTEL CORPORATION OF AMERICA, a New
York corporation having an address c/o Sonesta International Hotels Corporation,
200 Clarendon Street, Boston, Massachusetts 02116 (the "SONESTA GP", and also
sometimes referred to herein as a "GENERAL PARTNER"), MARMONT HOTEL GROUP, INC.,
a Delaware corporation having an address at 142 Greene Street, New York, New
York 10012 (the "BALAZS GP"), ANDRE BALAZS, having an address at 142 Greene
Street, New York, New York 10012 (the "BALAZS LP"), and SONESTA SOHO INVESTMENT
CORP., a Florida corporation, having an address at c/o Sonesta International
Hotels Corporation, 200 Clarendon Street, Boston, Massachusetts 02116
("SONESTA," and together with the Balazs GP and the Balazs LP, the "LIMITED
PARTNERS"). The General Partner and the Limited Partners are sometimes
individually referred to herein as a "PARTNER" and collectively as the
"PARTNERS".
W I T N E S S E T H :
WHEREAS, the Partnership was formed in accordance with the laws of the
State of Delaware pursuant to a Certificate and Agreement of Limited
Partnership, dated as of November 23, 1994, between the Balazs GP, as sole
general partner, and the Balazs LP, as sole limited partner (the "ORIGINAL
AGREEMENT"); and
WHEREAS, the Partnership is the contract vendee pursuant to a contract
(the "CONTRACT") with Prince Acquisition Associates, L.P. (the "SELLER") to
acquire (i) a parcel of land and the improvements thereon located
<PAGE>
at 99 Prince Street in Manhattan and more particularly described in EXHIBIT "A"
hereto (the "REAL PROPERTY"), and (ii) certain other real, personal and
intangible property, as set forth in the Contract (all of the property described
in this Recital, collectively, the "PROPERTY"); and
WHEREAS, the Partnership was formed for the purpose of acquiring the
Real Property pursuant to the Contract and developing the same into a hotel with
ancillary restaurant and retail facilities (the "HOTEL");
WHEREAS, the Sonesta GP desires to be admitted to the Partnership as a
General Partner and Sonesta desires to be admitted to the Partnership as a
Limited Partner and the Balazs Partners desire to so admit the Sonesta Partners
to the Partnership, and the Balazs GP desires to become a Limited Partner during
the Pre-Development Period and the Construction Period (as such terms are
hereinafter defined).
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto do hereby enter into this Agreement upon
the following terms and conditions:
ARTICLE I
FORMATION
1.1 CONTINUATION OF THE PARTNERSHIP. The parties hereto hereby
continue the Partnership as a limited partnership under the laws of the State of
Delaware. Promptly following the execution hereof, the Partners shall execute
an Amendment to Certificate of Limited Partnership and all such other
certificates and documents as may be necessary or desirable to reflect (i) the
admission to the Partnership of the Sonesta GP as a General Partner and Sonesta
as a Limited Partner, (ii) the change of status of the Balazs GP from a General
Partner to a Limited Partner during the period prior to
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the Completion of the Project (as hereinafter defined), and (iii) the amendment
of the terms of the Original Agreement in accordance with the requirements for
the operation of a limited partnership in the State of Delaware. In addition,
the General Partner shall do all such filing, recording, publishing and other
acts as may be necessary or appropriate from time to time in connection
therewith.
1.2 PURPOSES AND POWERS OF THE PARTNERSHIP.
(a) THE REAL PROPERTY. The initial purpose of the Partnership
shall be to do the following:
(i) acquire the Property pursuant to the
Contract;
(ii) sublease, on a month-to-month basis, a
portion of the premises leased to Seller at 142 Greene Street in
Manhattan (the "OFFICE PREMISES") by entering into a sublease or
license or sharing arrangement between Seller and the Partnership
(the "OFFICE SUBLEASE"); and
(iii) prepare financial and other analyses during
the period (the "PRE-DEVELOPMENT PERIOD") commencing on the date
hereof and ending on the Determination Date (as hereinafter
defined) to estimate the costs that would be incurred by the
Partnership to do the following (the "PROJECT"):
(1) develop and renovate the Hotel;
(2) equip the Hotel with Furnishings
and Equipment, Operating Equipment and Operating Supplies
(as such terms are hereinafter defined);
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(3) recruit, train and employ the staff
required for the operation of the Hotel;
(4) undertake pre-opening promotion and
advertising, including opening celebrations and related
activities; and
(5) do all other things necessary or
desirable to cause the Completion of the Project (as
hereinafter defined).
(b) OFFICE PREMISES. The Partnership shall enter into the
Office Sublease for the purpose of initially conducting the business of the
Partnership in a portion of the Office Premises, and the consideration, if any,
to be paid by the Partnership shall be determined by the Sonesta GP and the
Balazs GP.
(c) ADDITIONAL PURPOSES. In addition to and not in limitation
of the provisions of subsections 1.2(a) and 1.2(b) above, the additional
purposes of the Partnership shall be:
(i) to hold, develop, operate, improve, maintain,
repair, encumber, finance, manage, sell, lease or otherwise
dispose of or deal with the Real Property (including the Hotel,
if any, developed thereon) and other Partnership property and the
Partnership business;
(ii) to borrow money and issue evidences of
indebtedness in furtherance of any purposes of the Partnership,
and to secure the same by pledge or other lien covering all or
any portion of the Property, and/or other assets of the
Partnership in accordance with this Agreement;
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(iii) to enter into, perform and carry out
contracts of any kind which are necessary, advisable or
incidental to the accomplishment of the purposes of the
Partnership, including, without limitation, the Management
Agreement (as hereinafter defined);
(iv) to bring and defend actions at law or in
equity; and
(v) to do all things necessary or desirable in
connection with the foregoing or as otherwise contemplated by the
provisions of this Agreement.
(d) FURTHER ACTS. In carrying out the purposes of this
Agreement in accordance with the provisions hereof, the Partnership is empowered
and authorized to do any and all acts and things necessary, appropriate, proper,
advisable, incidental to or convenient for the furtherance of its purposes, and
for the protection and benefit of the Partnership as permitted by applicable
law.
1.3 PARTNERSHIP NAME. The name of the Partnership shall be The Soho
Hotel Company, L.P.; provided, however, that subject to all applicable laws, the
activities of the Partnership may be conducted under any other name or names
deemed necessary or advisable by the General Partner(s).
1.4 TERM. The Partnership shall commence on the date hereof, and,
unless sooner terminated or dissolved under the provisions of this Agreement,
shall continue until the fiftieth (50th) anniversary of the date hereof.
1.5 ADDRESS. The address of the Partnership shall be at the Office
Premises at 142 Greene Street, New York, New York until the Completion of the
Project; thereafter, the address of the Partnership shall be at the Hotel. The
Partnership may change its address,
5
<PAGE>
and/or offices and other facilities from time to time at such locations, if and
to the extent deemed necessary or advisable by the Sonesta GP and the Balazs GP.
1.6 TITLE TO PARTNERSHIP PROPERTY. All property owned or leased by
the Partnership, including without limitation the Property, shall be deemed to
be owned or leased by the Partnership as an entity, and no Partner individually
shall have any ownership interest in such property, except as a Partner in the
Partnership. The Partnership may hold any of its assets in its own name or in
the name of its nominee, which nominee may be one or more individuals,
corporations, partnerships, trusts or other entities, provided that such nominee
holds title thereto for the sole benefit of the Partnership.
6
<PAGE>
1.7 PRE-DEVELOPMENT PERIOD.
7
<PAGE>
(a) DEVELOPMENT DECISIONS. During the Pre-Development Period, the
Sonesta GP shall, in consultation with, and with the approval of, the Balazs GP
(such approval not to be unreasonably withheld or delayed), (i) prepare a budget
for the Project (the "PROJECT BUDGET"), (ii) select the Project architect, the
general contractor, the interior architect, the interior designer and the public
relations consultant ("KEY CONSULTANTS"), (iii) cause the Project architect to
prepare plans and specifications for the Hotel (or adopt or revise the existing
plans and specifications prepared by Harman/Jablin) (the "PROJECT PLANS"), and
(iv) finalize the Management Agreement, which Management Agreement shall
contain, among other provisions, the provisions set forth in Section 6.5 hereof
unless the Balazs GP and the Sonesta GP shall otherwise mutually agree. The
Project Budget shall include (i) at least $600,000 for pre-opening expenses to
be incurred by the Partnership, (ii) projected hard and soft costs of
constructing, equipping and otherwise preparing the Hotel to be delivered on a
"turn-key" basis to Manager, with a hard cost contingency amount of at least
$1,000,000 and a soft cost contingency amount of at least $500,000, and (iii) a
$1,000,000 working capital and debt service reserve to be used, to the extent
necessary, for working capital after the Completion of the Project and for the
payment of debt service on Third Party Loans after Completion of the Project
(the "OPERATING RESERVE"). It is contemplated that the amount of any
construction or permanent mortgage financing obtained for the Project will not
exceed $12,000,000. All costs to be incurred by the Partnership during the
Pre-Development Period, other than Acquisition Costs and Construction Lien Costs
(as such terms are hereinafter defined), shall be subject to the approval of the
Balazs GP (such approval not to be unreasonably withheld or delayed), and if the
Balazs GP approves such costs, the same shall be deemed to be pre-development
expenses incurred on behalf of the Partnership ("PRE-DEVELOPMENT EXPENSES") and
the amounts expended by Sonesta in connection therewith shall be deemed to be
Capital Contributions to the Partnership. The approval of Pre-Development
Expenses may be evidenced
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<PAGE>
by inclusion of a specific item of expense as a separate line item in a Project
Budget that has been approved by the Balazs GP (such approval not to be
unreasonably withheld or delayed).
(b) FEASIBILITY DETERMINATION. On or prior to the Determination Date
(as hereinafter defined) the Sonesta GP and the Balazs GP shall determine
whether or not to send to the other a notice electing not to proceed with the
Project (a "NON-FEASIBILITY NOTICE"). A Non-Feasibility Notice may be sent at
any time prior to the Determination Date by (i) the Balazs GP if, and only if,
(x) the budgeted cost of the Project through the Break-even Point (as
hereinafter defined) as set forth in the Project Budget exceeds $19,000,000, or
(y) the Sonesta GP has not provided assurances reasonably acceptable to the
Balazs GP that the Construction Capital Requirements (as hereinafter defined)
will be funded, or (ii) the Sonesta GP for any reason in its sole discretion.
The "DETERMINATION DATE" shall mean the earliest to occur of (i) the date on
which the Sonesta GP or the Balazs GP sends a Non-Feasibility Notice to the
other in accordance with this Section 1.7(b), (ii) the date on which the Sonesta
GP and the Balazs GP agree to end the Pre-Development Period and commence the
Construction Period (as hereinafter defined) of the Project, or (iii) the date
that is 180 days from the date of this Agreement. Notwithstanding the
foregoing, any Non-Feasibility Notice given by the Balazs GP pursuant to clause
(i)(y) above shall be null and void and of no force and effect if, within five
(5) business days thereafter, the Sonesta Parent guarantees to fund or arrange
for the funding of the Construction Capital Requirements (or the portion thereof
for which reasonable assurances of such funding shall not have been provided by
the Sonesta GP). In the event either the General Partner or the Balazs GP sends
a Non-Feasibility Notice to the other in accordance with this Section 1.7(b)
(but subject to the provisions of the preceding sentence), the Partners shall
have the rights and obligations set forth in Section 1.7(c) below. If neither
the Sonesta GP nor the Balazs GP sends a Non-Feasibility Notice during such 180
day period, then the
9
<PAGE>
Partnership shall proceed with the Project, unless the Sonesta GP and the Balazs
GP otherwise agree.
(c) PURCHASE/SALE FOLLOWING NON-FEASIBILITY DETERMINATION. In the
event that either the Sonesta GP or the Balazs GP shall send a Non-Feasibility
Notice to the other as provided in Section 1.7(b) above, the Balazs GP shall
have the option, but not the obligation, exercisable by written notice to the
Sonesta Partners given any time within 120 days after the Non-Feasibility Notice
has been given (the "CONTRACT PERIOD"), to purchase, or to cause a designee
(which may or may not be an Affiliate) to purchase (in either event, a "BALAZS
PURCHASE") (a) the Property for consideration (the "BALAZS PURCHASE PRICE")
equal to the amount required to pay the debts and liabilities of the Partnership
(a portion of which may be paid by acquiring the Property subject to such debts
and liabilities, and assuming the same to the extent they are recourse debts, if
and to the extent that the terms of such debts and liabilities permit the same)
and transaction and liquidation expenses of the Partnership, to the extent
incurred, and to cause a cash distribution to be made to the Sonesta Partners in
an amount equal to the aggregate unreimbursed cash Capital Contributions of the
Sonesta Partners plus interest at the Prime Rate calculated from the date or
dates such Capital Contributions were made (irrespective of whether or not any
Third Party Loans to repay cash Capital Contributions of the Sonesta Partners
remain outstanding after the Balazs Purchase) or (b) the Partnership Interests
of the Sonesta Partners for an amount equal to the distributions such Sonesta
Partners would have received had the Partnership property been sold for the
consideration set forth in clause (a) above. At the time of any Balazs Purchase
(or any Third Party Purchase, as hereinafter defined), the Balazs Partners shall
repay the Balazs Lien Loan (as hereinafter defined).
If the Balazs GP does not (or does not intend to) exercise its
Purchase Option to purchase the Property or the Partnership Interests of the
Sonesta Partners during the Contract Period it may, but shall not be
10
<PAGE>
obligated, to arrange for a third-party to purchase the Property (a "THIRD
PARTY PURCHASE") for a consideration at least equal to the Balazs Purchase
Price. If the Balazs GP or its designee desires to purchase the Partnership
property (in the event of a Balazs Purchase), or a bona fide third-party
purchaser with demonstrated financial ability (in the event of a Third Party
Purchase) enters into a bona fide, arms-length contract for the purchase of the
Property (or the Partnership interests of the Sonesta Partners in the event of a
Balazs Purchase, if the Balazs GP so elects) and delivers a copy of such
contract to Sonesta within such Contract Period, the closing for the sale of the
Partnership property shall occur on a date specified in a notice to the Sonesta
GP, which date shall be at least 15 days after such notice to the Sonesta GP but
not later than 180 days after the date the Non-Feasibility Notice was sent (the
period commencing on the date the contract is signed and ending on the date that
is 180 days after a Non-Feasibility Notice is sent being hereinafter referred to
as the "CLOSING PERIOD"). In the event that the Balazs GP, or an Affiliate or
designee of the Balazs GP, or a bona-fide purchaser does not enter into a
contract within the Contract Period, or if a closing has not occurred during the
Closing Period (as to which periods time shall be of the essence except as
otherwise provided below), the Sonesta GP shall be entitled to take over the
marketing of the Partnership property, and shall be entitled to cause the
Partnership to sell the Partnership property on what ever terms it deems
desirable, without any consultation or approval rights in the Balazs Partners.
Notwithstanding the provisions of the preceding sentence, the Closing Period may
be extended (i) for a reasonable period of time up to 30 days (as to which
period time shall be of the essence) provided that the purchaser pays to the
Partnership a reasonable extension fee or a reasonable portion of its deposit
becomes non-refundable at the time of such extension (it being agreed that in no
event shall the closing occur after the date that is 210 days from the date a
Non-Feasibility Notice has been sent, as to which period time shall be of the
essence), and (ii) from time to time for
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<PAGE>
a reasonable period or periods of time if required to permit the Partnership to
fulfill its closing obligations with respect to sale of the Partnership property
(provided that such closing conditions are typical, commercially reasonable
closing conditions and any inability of the Partnership to fulfill its closing
obligations prior to expiration of the Closing Period was not caused by the
Balazs GP or one of its Affiliates). If the Sonesta GP takes over the marketing
of the Partnership property as provided above, then as long as the purchaser of
the Partnership property is an unrelated third party, the Sonesta GP shall have
no fiduciary, contract or other obligation to any of the Partners or to the
Partnership to sell such property for fair market value or any other minimum
sales price, it being understood that the Sonesta GP will have no motivation or
obligation to obtain a purchase price for the Partnership property in excess of
the amount that would result in a distribution or payment to the Sonesta
Partners of an amount equal to their aggregate Adjusted Cash Capital
Contribution and the Cumulative Preferred Return thereon. The Balazs Partners
shall have no right to enter into a contract for the sale of the Property after
the expiration of the Contract Period or to consummate the sale of the Property
after the expiration of the Closing Period, as provided above.
Irrespective of whether the sale of the Property or the Sonesta
Partners' Partnership Interests pursuant to this Section 1.7(c) is arranged by
the Balazs GP or by the Sonesta GP, it is intended that, and the tax allocations
in Section 4.3 (j) are intended to permit distributions to be made pursuant to
this Section 1.7(c) such that, (i) the Sonesta Partners receive a cash amount
(net to the Sonesta Partners, except for the legal fees payable to counsel to
the Sonesta Partners and income and similar taxes payable by the Sonesta
Partners) equal to the aggregate unreimbursed cash Capital Contributions
theretofore made by the Sonesta Partners together with the Cumulative Preferred
Return thereon, and (ii) the Balazs Partners receive all sales proceeds, if any,
in excess of amounts required to pay expenses and debts of
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the Partnership (to the extent not assumed by the purchaser) and transaction and
liquidation costs of the Partnership (but not the individual Partners) and to
make the required payment to the Sonesta Partners in clause (i) above.
Furthermore, any sale transaction shall be structured so that the Sonesta
Partners have no continuing liability after the sale, unless reserves reasonably
acceptable to the Sonesta GP have been established therefor (which reserves
shall be funded out of proceeds other than the portion thereof payable to the
Sonesta Partners).
ARTICLE II
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth respectively after each:
2.1 "ACQUISITION COSTS" shall have the meaning assigned thereto in
Section 3.2(a) hereof.
2.2 "ADDITIONAL VOLUNTARY CAPITAL CONTRIBUTION" shall have the
meaning assigned thereto in Section 3.2 hereof.
2.3 "ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, at any time, the
balance in the Capital Account of a Partner, at such time, after giving effect
to the following adjustments:
(a) credit to such Capital Account any amounts that such Partner
is obligated to restore pursuant to any provisions of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulations (as hereafter defined) section 1.704-2(g)(1) and Treasury
Regulations section 1.704-2(i)(5), or any successor provisions; and
(b) debit to such Capital Account the items described in
Treasury Regulations sections 1.704-
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1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital
Account Deficit is intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted
consistently therewith.
2.4 "ADJUSTED CASH CAPITAL CONTRIBUTION" shall mean, as of any day,
the aggregate cash Capital Contributions made by Sonesta (or any other Partner
having made a cash Capital Contribution to the Partnership in accordance with
the terms hereof) less the aggregate amount of cash and the Book Basis of any
Partnership property (other than cash) distributed to such Partner pursuant to
Sections 5.2(b) or 9.4 hereof or any other provision of this Agreement.
2.5 "AGREEMENT" shall mean this Amended and Restated Agreement of
Limited Partnership, as it may be amended from time to time.
2.6 "AFFILIATE" shall mean when used with respect to a specified
Person, a Person who (i) directly or indirectly controls, is controlled by, or
is under common control with the specified Person or (ii) with respect to a
corporation, owns or controls fifty percent (50%) or more of the outstanding
voting securities of the specified Person, or (iii) is a Family Member of the
specified Person. A Person shall be deemed to be an Affiliate of itself.
2.7 "BALAZS GP" means Marmont Hotel Group, Inc., a Delaware
corporation.
2.8 "BALAZS LIEN LOAN" shall have the meaning set forth in Section
3.2(a).
2.9 "BALAZS LP" means Andre Balazs.
2.10 "BALAZS PARENT" means Andre Balazs.
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2.11 "BALAZS PARTNERS" means the Balazs LP and the Balazs GP.
2.12 "BALAZS PURCHASE" shall have the meaning assigned thereto in
Section 1.7(c) hereof.
2.13 "BALAZS PURCHASE PRICE" shall have the meaning assigned thereto
in Section 1.7(c) hereof.
2.14 "BANKRUPTCY" of a Partner shall mean (a) the filing by a Partner
of a voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States Code
(or corresponding provisions of future laws) or any other Federal or state
insolvency law, or a Partner's filing an answer consenting to or acquiescing in
any such petition, (b) the making by a Partner of any assignment for the benefit
of its creditors or the admission by a Partner in writing of its inability to
pay its debts as they mature, or (c) the expiration of sixty (60) days after the
filing of an involuntary petition under Title 11 of the United States Code (or
corresponding provisions of future laws), seeking an application for the
appointment of a receiver for the assets of a Partner, or an involuntary
petition seeking liquidation, reorganization, arrangement or readjustment of its
debts under any other Federal or state insolvency law, provided that the same
shall not have been vacated, set aside or stayed within such 60-day period.
2.15 "BOOK BASIS" shall mean, with respect to any asset, the asset's
adjusted basis to the Partnership for federal income tax purposes, except as
follows:
(a) the initial Book Basis of any asset contributed by a Partner
to the Partnership shall be its gross fair market value, as determined by the
General Partner(s);
(b) the Book Basis of all Partnership assets will be adjusted to
equal their respective fair market values, as determined by the General
Partner(s),
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as of the date of (i) the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a DE
MINIMIS Capital Contribution, (ii) the distribution by the Partnership of
property as consideration for a portion (but not all) of a Partner's Percentage
Interest in the Partnership, and (iii) the liquidation of a Partner's entire
Partnership Interest in the Partnership, or immediately prior to the
distribution of Partnership assets in liquidation of the Partnership within the
meaning of Treasury Regulations section 1.704-1(b)(2)(ii)(g); PROVIDED,
HOWEVER, that adjustments pursuant to clauses (i) and (ii) above shall be made
only if the General Partner(s) determine that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners in the
Partnership;
(c) the Book Basis of any Partnership asset distributed to any
Partner shall be adjusted to its gross fair market value as of the date of
distribution;
(d) the Book Basis of Partnership assets will be increased or
decreased to reflect any adjustment to the adjusted basis of the assets under
Code Sections 734(b) or 743(b), but only to the extent that the adjustment is
taken into account in determining Capital Accounts under Treasury Regulations
section 1.704-1(b)(2)(iv)(m); and
(e) if the Capital Accounts of the Partners are adjusted
pursuant to Treasury Regulations section 1.704-1(b) to reflect the fair market
value of any Partnership asset, the Book Basis of such asset shall be adjusted
to equal its respective fair market value as of the time of such adjustment in
accordance with such Treasury Regulations. The Book Basis of all assets shall
be adjusted thereafter by depreciation and any other adjustments to basis (other
than depreciation or amortization for federal income tax purposes), as provided
in Treasury Regulations section 1.704-1(b)(2) (iv)(g).
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2.16 "BREAK-EVEN POINT" shall mean the date on which the Hotel first
generates sufficient revenues to cover operating expenses and debt service on an
annualized basis.
2.17 "CAPITAL ACCOUNT" shall mean the capital account maintained by
the Partnership for each Partner as described in Section 3.4 hereof.
2.18 "CAPITAL CONTRIBUTION" shall mean, when used in respect of a
Partner, the amount of any cash and the Book Basis of any property (other than
cash) contributed by such Partner to the Partnership pursuant to the terms of
this Agreement, including, without limitation, Excess Capital Contributions.
Cash payments made by or on behalf of a Partner directly to a third party on
behalf of the Partnership (E.G., Acquisition Costs, Construction Lien Costs and
Pre-Development Expenses paid by the Sonesta GP on behalf of the Partnership)
shall be deemed to be cash Capital Contributions to the Partnership (provided
that such Partner was authorized to make such payments pursuant to this
Agreement).
2.19 "CAPITAL TRANSACTION" shall mean, with respect to the
Partnership, any sale or other disposition of property owned by the Partnership,
a financing by the Partnership, the receipt of an insurance award by the
Partnership, the receipt of proceeds from a partial or total condemnation of
property owned by the Partnership, and an easement sale or similar transaction
with respect to property owned by the Partnership.
2.20 "CHATEAU STANDARDS" shall have the meaning assigned thereto in
Section 6.5 hereof.
2.21 "CLOSING PERIOD" shall have the meaning assigned thereto in
Section 1.7(c) hereof.
2.22 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
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2.23 "COMPLETION OF THE PROJECT" shall mean (i) completion of
construction of the Hotel in accordance with the Project Plans and all
applicable laws and regulations, (ii) completion of the additional items
comprising a portion of the Project as set forth in Section 1.2(a) in accordance
with the Project Plans and all applicable laws and regulations, (iii) the
issuance of all necessary permits and licenses (all of the items in (i) through
(iii) above as certified by the Project architect), (iv) the Hotel having been
equipped with Furnishings and Equipment, Operating Equipment and Operating
Supplies, and (v) the Hotel having opened for full business operations.
2.24 "CONSTRUCTION CAPITAL REQUIREMENTS" shall have the meaning
ascribed thereto in Section 3.2(a) hereof.
2.25 "CONSTRUCTION LIEN COSTS" shall mean the aggregate costs paid by
the Partnership in connection with (i) (a) acquiring, satisfying, settling,
paying, discharging and/or bonding over the Construction Liens (including the
cost of removing the same of record), and (b) the amounts claimed by
StructureTone for work performed on behalf of Seller at the Real Property as set
forth in the invoice, dated November 30, 1994, and (ii) (a) $67,418.79 payable
to Getnick & Getnick pursuant to the invoice, dated December 14, 1994, and
$25,000 payable to Skadden, Arps, Slate, Meagher & Flom, pursuant to an invoice
dated December 14, 1994, all of which fees were incurred on or prior to the date
hereof in connection with negotiating the settlement of certain of the
Construction Liens, and (b) legal fees incurred after the date hereof in
connection with the actions described in clause (i) above and approved by the
Sonesta GP, such approval not to be unreasonably withheld or delayed.
2.26 "CONSTRUCTION LIENS" shall mean mechanics' and materialman's
claims arising with respect to construction and subject to which the Partnership
is taking the Property pursuant to the Contract.
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2.27 "CONSTRUCTION PERIOD" shall mean the period commencing on the
date on which the Balazs GP and the Sonesta GP agree to end the Pre-Development
Period and to proceed with the Project (which date shall by definition be the
date on which the Pre-Development Period ends other than on account of the
issuance by the Sonesta GP or the Balazs GP of a Non-Feasibility Notice) and
ending on the date on which Completion of the Project occurs.
2.28 "CONTRACT" shall have the meaning assigned thereto in the
recitals hereof.
2.29 "CONTRACT PERIOD" shall have the meaning assigned thereto in
Section 1.7(b) hereof.
2.30 "CUMULATIVE PREFERRED RETURN" shall mean a sum equal to the
Prime Rate per annum, determined on the basis of a year of three hundred sixty-
five (365) days (which shall cumulate and shall be prorated for any partial
year, but shall not compound), of the average daily balance of the aggregate
Adjusted Cash Capital Contributions of any Partner having made a cash Capital
Contribution to the Partnership in accordance with the terms hereof from time to
time.
2.31 "DESIGNEE", whether or not capitalized, shall have the meaning
assigned thereto in Section 8.2(c) hereof.
2.32 "DETERMINATION DATE" shall have the meaning assigned thereto in
Section 1.7(b) hereof.
2.33 "EVENT OF DISSOLUTION" shall have the meaning assigned thereto
in Section 9.1(1) hereof.
2.34 "EXCESS CAPITAL CONTRIBUTIONS" shall mean Capital Contributions
made to fund capital requirements of the Partnership after Completion of the
Project, including operating expense and debt service shortfalls,
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if and to the extent the same exceed the Operating Reserve established therefor.
2.35 "FAMILY MEMBERS" shall mean blood relatives within the third
degree of consanguinity, and spouses of same, and trusts and estates of which
such persons are beneficiaries.
2.36 "FISCAL YEAR" shall mean the fiscal year of the Partnership as
provided in Section 7.1 hereof.
2.37 "FREE TO SELL DATE" shall have the meaning assigned thereto in
Section 8.2(d) hereof.
2.38 "FURNISHINGS AND EQUIPMENT" shall mean all furniture,
furnishings and equipment reasonably required for the initial operation of the
Hotel (other than Operating Equipment, Operating Supplies and fixtures attached
to and forming part of the building).
2.39 "GENERAL PARTNER" shall initially mean the Sonesta GP. If the
Balazs GP becomes a General Partner in accordance with Section 3.1 hereof, the
term "General Partner" shall then mean, collectively, the Sonesta GP and the
Balazs GP. "General Partner" shall also mean any Person becoming an additional
or successor General Partner(s) of the Partnership as provided herein.
2.40 "HOTEL" shall have the meaning assigned thereto in the recitals
hereof.
2.41 "KEY CONSULTANTS" shall have the meaning assigned thereto in
Section 1.7(a) hereof.
2.42 "LEGAL REPRESENTATIVE" shall mean any and all duly appointed
executors, administrators, personal representatives, committees, guardians,
receivers, fiduciaries, conservators or trustees of a Partner.
2.43 "LIEN SAVINGS" shall have the meaning assigned thereto in
Section 3.2(d) hereof.
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2.44 "LIMITED PARTNER(S)" shall have the meaning assigned thereto in
the recitals hereof. "Limited Partner" shall also mean any Person becoming an
additional or successor Limited Partner of the Partnership as provided herein,
provided that in no event will an Additional Limited Partner be deemed to be a
Balazs Partner or a Sonesta Partner unless it is an Affiliate of the Balazs
Parent or the Sonesta Parent (as applicable).
2.45 "LIQUIDATION DEMAND" shall have the meaning assigned thereto in
Section 1.7(d) hereof.
2.46 "LIQUIDATING TRUSTEE" shall have the meaning assigned thereto in
Section 9.2 hereof.
2.47 "MANAGEMENT AGREEMENT" shall have the meaning assigned thereto
in Section 6.5 hereof.
2.48 "MANAGER" shall mean an entity to be formed and comprised of the
following entities as equal partners or owners: (i) the Balazs GP or an entity
formed and controlled by the Balazs Parent; and (ii) Sonesta or an entity formed
and controlled by the Sonesta Parent.
2.49 "NET CASH FROM DISPOSITIONS AND FINANCINGS" shall mean the net
cash proceeds derived by the Partnership from a Capital Transaction of the
Partnership, less any portion used to establish reserves, as determined by the
General Partner(s).
2.50 "NET CASH FROM OPERATIONS" shall mean the gross cash proceeds
derived by the Partnership (other than Net Cash From Dispositions and
Financings), less the portion thereof used to pay or establish reserves for all
Partnership expenses, debt payments and contingencies, all as determined by the
General Partner(s). Net Cash From Operations shall be increased by any
reductions of reserves previously established pursuant to the first sentence of
this definition and of the definition immediately above.
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2.51 "NON-CONTRIBUTING PARTNER" shall have the meaning assigned
thereto in Section 3.2 hereof.
2.52 "NON-FEASIBILITY NOTICE" shall have the meaning assigned thereto
in Section 1.7(b) hereof.
2.53 "NONRECOURSE DEDUCTIONS" has the meaning set forth in Treasury
Regulations section 1.704-2(c).
2.54 "OFFEREES" shall have the meaning assigned thereto in Section
8.2(a) hereof.
2.55 "OFFER NOTICE" shall have the meaning assigned thereto in
Section 8.2(b) hereof.
2.56 "OFFICE SUBLEASE" shall have the meaning assigned thereto in
Section 1.2(a)(ii) hereof.
2.57 "OFFICE PREMISES" shall have the meaning assigned thereto in the
recitals hereof.
2.58 "OPERATING EQUIPMENT" shall mean all operating equipment
required for the initial operation of the Hotel, including without limitation
chinaware, glassware, linens, silverware, utensils, uniforms and all other
similar items.
2.59 "OPERATING RESERVE" shall have the meaning assigned thereto in
Section 1.7(a) hereof.
2.60 "OPERATING SUPPLIES" shall mean liquor and other beverages and
snacks and other immediately consumable items required for the initial operation
of the Hotel, such as fuel, soap, cleaning materials, matches, stationery,
brochures, folios and similar items.
2.61 "ORIGINAL AGREEMENT" shall have the meaning assigned thereto in
the recitals hereof.
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2.62 "PARTNER NONRECOURSE DEBT" has the meaning set forth in Treasury
Regulations section 1.704-2(b)(4).
2.63 "PARTNER NONRECOURSE DEBT MINIMUM GAIN" has the meaning set
forth in Treasury Regulations section 1.704-2(i)(2).
2.64 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning set forth in
Treasury Regulations section 1.704-2(i).
2.65 "PARTNERS" shall mean, collectively, the General Partner(s) and
the Limited Partners; and "PARTNER" shall mean any one of the Partners.
2.66 "PARTNERSHIP" shall have the meaning assigned thereto in the
recitals hereof.
2.67 "PARTNERSHIP INTEREST" shall mean the ownership interest of a
Partner in the Partnership at any particular time, including the right of such
Partner to any and all benefits to which such Partner may be entitled as
provided in this Agreement, the right to a distributive share of Profits and
Losses, Net Cash from Operations, Net Cash from Dispositions and Financings, the
right, if any, to participate in the management of the business and affairs of
the Partnership, together with the obligations of such Partner to comply with
all of the terms and provisions of this Agreement.
2.68 "PARTNERSHIP MINIMUM GAIN" has the meaning set forth in Treasury
Regulations section 1.704-2(b) (2).
2.69 "PERCENTAGE INTEREST" of a Partner in the Partnership shall mean
the percentage interest of such Partner as stated in Section 3.1 of and EXHIBIT
"B" to this Agreement, as such percentage interest may be adjusted from time to
time in accordance with the provisions of this Agreement.
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2.70 "PERSON" shall mean any individual, partnership, corporation,
trust, limited liability company or other entity.
2.71 "PRE-DEVELOPMENT CAPITAL REQUIREMENTS" shall have the meaning
ascribed thereto in Section 3.2(a) hereof.
2.72 "PRE-DEVELOPMENT EXPENSES" shall have the meaning assigned
thereto in Section 1.7(a) hereof.
2.73 "PRE-DEVELOPMENT PERIOD" shall have the meaning assigned thereto
in Section 1.2(a) hereof.
2.74 "PRIME RATE" shall mean the rate of interest publicly announced
from time to time by Citibank, N.A., or its successors, as its "base rate" (or
such other term as may be used by Citibank, N.A. from time to time for the rate
presently referred to as its "base rate").
2.75 "PROFITS AND LOSSES" shall mean, for each fiscal year or other
period, an amount equal to the Partnership's taxable income or loss for such
year or period, determined in accordance with Code section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(a) Any income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition shall be added to such taxable income or loss;
(b) Any expenditures of the Partnership described in Code
section 705(a)(2)(B) or treated as Code section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or
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Losses pursuant to this definition shall be subtracted from such taxable income
or loss;
(c) In the event the Book Basis of any Partnership asset is
adjusted pursuant to subsection (b) or (c) of the definition of Book Basis, the
amount of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses; and
(d) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for U.S. Federal income tax purposes
shall be computed by reference to the Book Basis of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Book Basis.
2.76 "PROJECT" shall have the meaning assigned thereto in Section
1.2(a) hereof.
2.77 "PROJECT BUDGET" shall have the meaning assigned thereto in
Section 1.7(a) hereof.
2.78 "PROJECT PLANS" shall have the meaning assigned thereto in
Section 1.7(a) hereof.
2.79 "PROPERTY" shall have the meaning assigned thereto in the
recitals hereof.
2.80 "REAL PROPERTY" has the meaning assigned thereto in the recitals
hereof.
2.81 "REGULATORY ALLOCATIONS" shall have the meaning assigned
thereto in Section 4.4 hereof.
2.82 "REPORT EXPENSES" shall have the meaning assigned thereto in
Section 7.1 hereof.
2.83 "SELLER" means Prince Acquisition Associates, L.P., a Delaware
limited partnership.
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2.84 "SELLING PARTNER" shall have the meaning assigned thereto in
Section 8.2(a).
2.85 "SONESTA" means Sonesta SoHo Investment Corp., a Florida
corporation.
2.86 "SONESTA GP" means Hotel Corporation of America, a New York
corporation.
2.87 "SONESTA LIEN CAP" shall have the meaning assigned thereto in
Section 3.2(a) hereof.
2.88 "SONESTA PARENT" means Sonesta International Hotels Corporation,
a New York corporation.
2.89 "SONESTA PARTNERS" means Sonesta and the Sonesta GP.
2.90 "TAX MATTERS PARTNER" shall have the meaning assigned thereto in
Section 7.4 hereof.
2.91 "THIRD PARTY LOANS" shall have the meaning assigned thereto in
Section 3.2(a) hereof.
2.92 "THIRD PARTY PURCHASE" shall have the meaning assigned thereto
in Section 1.7(b) hereof.
2.93 "THIRD PARTY PURCHASER" shall have the meaning assigned thereto
in Section 8.2(a) hereof.
2.94 "TRANSFER" shall have the meaning assigned thereto in Section
8.1(a) hereof.
2.95 "TREASURY REGULATIONS" shall mean the Income Tax Regulations
promulgated under the Code, as such regulations may be amended from time to
time.
2.96 "VOLUNTARY CALL" shall have the meaning assigned thereto in
Section 3.2 hereof.
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ARTICLE III
PARTNERSHIP INTERESTS, CAPITAL CONTRIBUTIONS
AND REFINANCING
3.1 PARTNERS; INITIAL CAPITAL CONTRIBUTIONS; PERCENTAGE INTEREST.
(a) GENERAL AND LIMITED PARTNERS. The Sonesta GP is hereby admitted
to the Partnership as a General Partner. The Sonesta LP is hereby admitted to
the Partnership as a Limited Partner. The Balazs GP is hereby converted from a
General Partner to a Limited Partner until such time as the Completion of the
Project has occurred, at which time the Balazs GP shall once again become a
General Partner. The Sonesta GP and the Balazs GP shall file an Amendment to
Certificate of Limited Partnership to be filed to reflect such change upon the
Completion of the Project.
(b) INITIAL CAPITAL CONTRIBUTIONS; PERCENTAGE INTERESTS. The Sonesta
GP shall have the Percentage Interest in the Partnership set forth on EXHIBIT
"B" annexed hereto and made a part hereof in return for acting as General
Partner of the Partnership. On the date hereof, the Sonesta GP and Sonesta have
each made an initial contribution of cash to the capital of the Partnership in
the amounts set forth opposite each such Partner's name on EXHIBIT "B". The
Balazs Partners shall be Limited Partners (subject to the right of the Balazs GP
to become a General Partner upon Completion of the Project) having the
Percentage Interests set forth on said EXHIBIT "B". The Balazs Partners
represent and warrant to the Sonesta Partners that the Balazs Partners have not
contributed any capital to the Partnership, that no value is attributable to the
Partnership or the Contract as of the date hereof. The Percentage Interests of
the Balazs Partners are being provided in consideration of future consulting
services in connection with the development of the Project by the Partnership,
arranging for the Partnership to use the name "Chateau Marmont" at no cost,
advancing funds through Group 99, Inc. for the acquisition of certain of the
Construction Liens, agreeing to be responsible for the Construction
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Lien Costs above the Sonesta Lien Cap, making certain agreements not to compete
with the Hotel and offering to advise and consult with the Sonesta Parent with
respect to the future development of "Chateau Marmont" hotels, for which no
value is attributable.
3.2 FUNDING REQUIREMENTS.
(a) Except as otherwise specifically provided to the contrary
below, the Sonesta Partners shall be required to make certain Capital
Contributions (in accordance with their Percentage Interests or in such other
proportion as the Sonesta Partners may determine) to the Partnership from time
to time as hereinafter set forth and to fund certain capital requirements of the
Partnership if and to the extent that the Sonesta GP is unable to arrange for
the Partnership to obtain loans from institutional lenders or other reputable
third parties ("THIRD PARTY LOANS") for such requirements. Prior to the time
that the Balazs GP becomes a General Partner, the Sonesta GP, as General
Partner, shall have the right to cause the Partnership to enter into such Third
Party Loans to fund Partnership capital requirements or to repay cash Capital
Contributions of the Partners on terms and conditions determined by the Sonesta
GP (without obtaining the approval of the Balazs GP), provided that such terms
and conditions shall be commercially reasonable and shall not prevent the
exercise of the rights of any Partner hereunder (including without limitation
the right of the Balazs GP to purchase or cause a sale of the Partnership
property pursuant to Section 1.7(c) hereof); provided, however, that if
Completion of the Project shall occur prior to the refinancing of any Third
Party Loans obtained in connection with the construction of the Project, the
Sonesta GP shall continue to have the right, without the approval of the Balazs
GP, to cause such refinancing.
The Sonesta Partners shall be required to fund or to arrange for the
funding of the amounts (collectively, the "PRE-DEVELOPMENT CAPITAL
REQUIREMENTS") required (i) to consummate the acquisition
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of the Property pursuant to the Contract and pay the Partnership closing
expenses in connection therewith set forth on EXHIBIT "C" hereto (collectively,
"ACQUISITION COSTS"), (ii) to pay the Construction Lien Costs up to an aggregate
amount not in excess of $1,100,000 (the "SONESTA LIEN CAP"), with the balance,
if any, of such Construction Lien Costs to be paid by the Balazs Partners as
provided below, and (iii) to fund Pre-Development Expenses (whether or not the
same are included in the Project Budget). The Partners acknowledge that the
Sonesta Partners are paying certain of the Construction Lien Costs on the date
hereof in the aggregate amount of $612,418.79, as itemized in EXHIBIT D hereto
(which payments shall be deemed to be cash Capital Contributions to the
Partnership made by the Sonesta Partners). If the Partners elect to proceed
with the Project as provided in Section 1.2(a), the Sonesta Partners shall be
obligated to fund or arrange for the funding of the amounts (the "CONSTRUCTION
CAPITAL REQUIREMENTS") required to cause the Completion of the Project (whether
or not the same are included in the Project Budget) and the funding of the
Operating Reserve.
In the event the Construction Lien Costs exceed the Sonesta Lien Cap,
such excess costs shall be funded by the Balazs Partners, and the Sonesta
Partners shall loan the Balazs Partners the amounts required to fund such excess
costs, up to $350,000 (the "BALAZS LIEN LOAN"), which loan shall bear interest
at the Prime Rate and shall be repaid, interest first, directly by the
Partnership to the Sonesta Partners out of the first amounts distributable made
to the Balazs Partners pursuant to Sections 5.1, 5.2 and 9.4 hereof. If any
portion of the Balazs Lien Loan (including the interest thereon) remains unpaid
after the Partnership assets are liquidated and the proceeds thereof are
distributed, the Balazs Partners shall be personally liable for, and shall pay
to the Sonesta Partners, the amount of such deficiency.
After Completion of the Project and the funding of the Operating
Reserve, the Sonesta Partners shall have
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no further obligation to fund capital requirements of the Partnership except as
otherwise provided in Section 3.2(b) below. The Balazs GP shall be entitled to
enforce, on behalf of the Partnership and the Partners, the obligations of the
Sonesta Partners to provide or arrange for funding as provided above with
respect to the Pre-Development Capital Requirements and the Construction Capital
Requirements.
In the event the Sonesta GP desires to raise capital at any time by
admitting additional limited partners ("ADDITIONAL LIMITED PARTNERS" to the
Partnership, it shall be entitled to do so, provided that the following terms
and conditions of such admission shall require the approval of the Balazs GP
(such approval not to be unreasonably withheld or delayed): (i) the consent
rights of such Additional Limited Partners, (ii) the preferred return to be paid
to any Additional Limited Partner (if the same exceeds the greater of 10% per
annum or the Prime Rate, in either case cumulative), or if the preferred return
compounds, to the extent it accrues (unless the incentive fee under the
Management Agreement also compounds), (iii) except as currently set forth
herein, the return of any Capital Contributions from Net Cash from Operations,
and (iv) the identity of the Additional Limited Partner (but only if such
Additional Limited Partner is not a reputable Person or if the admission of such
Additional Limited Partner would jeopardize any liquor license or other license
or permit necessary or desirable for the operation of the Hotel or related
facilities or would cause a breach under any bona fide agreement to which the
Partnership is a party). It is understood and agreed that an Affiliate of the
Sonesta Parent may become an Additional Limited Partner, subject to the
reasonable approval rights of the Balazs GP as set forth in the first sentence
of this paragraph and provided that the other material terms and conditions
relating to the admission of such Affiliate of the Sonesta Parent (including the
amount of the Capital Contribution required to be made in return for the
Percentage Interest to be received by each Additional Limited Partner that is an
Affiliate of the Sonesta
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Parent) shall also be subject to the approval of the Balazs GP (which approval
shall not be unreasonably withheld or delayed).
In the event Additional Limited Partners are admitted to the
Partnership as provided above, neither the Percentage Interest of the Sonesta GP
nor the Balazs GP shall be diluted, and the Percentage Interests of Sonesta and
the Balazs LP as Limited Partners shall be diluted pro rata to the extent
necessary in connection with the admission of additional Partners to the
Partnership, however, in no event shall the aggregate Percentage Interests of
the Balazs Partners be reduced below 25%. All sums paid to the Partnership by
Additional Limited Partners admitted to the Partnership shall be Capital
Contributions and all such amounts shall be paid to the Partners entitled
thereto in accordance with the priorities set forth in Section 5.2 and shall
reduce each of their respective Adjusted Cash Capital Contribution until the
same has been reduced to zero, except that any amounts that would otherwise be
payable to either of the Balazs Partners while any portion of the Balazs Lien
Loan (including any interest thereon) is outstanding shall be paid directly and
solely to the Sonesta Partners until the Balazs Lien Loan and interest thereon
has been paid in full. The Percentage Interest purchased by any Additional
Limited Partner shall reduce PRO RATA the Percentage Interests of Sonesta and
the Balazs LP, until the aggregate Percentage Interest of the Balazs Partners
(including any transferrees of such Percentage Interests) has been reduced to
25%, and thereafter only the Percentage Interest of Sonesta shall be reduced.
In no event shall the Balazs Partners be required to make any Capital
Contributions to the Partnership (other than in connection with Construction
Lien Costs above the Sonesta Lien Cap, as provided above in this Section 3.2(a))
or have any personal liability under any Third Party Loans or any loan other
than the Balazs Lien Loan.
(b) If, following the Completion of the Project (assuming the
Partners have elected to proceed
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with the Project), the General Partners determine that funds in excess of the
Operating Reserve are required to be funded for the operation of the
Partnership, the General Partners shall give written notice (a "VOLUNTARY CALL")
to all the Partners, which Voluntary Call shall set forth (i) the respective
amount of cash requested to be contributed by each of the Partners to the
Partnership, which amounts (each, an "ADDITIONAL VOLUNTARY CAPITAL
CONTRIBUTION") shall be in accordance with the respective Percentage Interest
held by each Partner and (ii) the number of days after delivery of the Voluntary
Call within which each Partner is requested to make the Additional Voluntary
Capital Contribution. No Partner shall be required to contribute any additional
capital to the Partnership in connection with a Voluntary Call. If any Partner
(the "NON-CONTRIBUTING PARTNER") elects not to make an Additional Voluntary
Capital Contribution to the Partnership pursuant to the terms of a Voluntary
Call delivered to such Partner, then the other Partners, or any of them (the
"CONTRIBUTING PARTNERS") may, at their election (upon five (5) days' written
notice to the Non-Contributing Partner and the continued failure for such five
(5) day period of the Non-Contributing Partner to make the requested Additional
Voluntary Capital Contribution in response to the Voluntary Call), make
Additional Voluntary Capital Contributions to the Partnership which in the
aggregate are equal to the amount of Additional Voluntary Capital Contributions
which the Non-Contributing Partner elected not to make, in such proportion (in
the event there is more than one (1) Contributing Partner) between them as their
Percentage Interests bear INTER SE. Additional Voluntary Capital Contributions
shall be deemed to be "Excess Capital Contributions" for purposes of this
Agreement and Partners making Excess Capital Contributions shall be entitled to
receive a Cumulative Preferred Return with respect thereto and to receive
distributions of Net Cash from Operations and Net Cash from Dispositions and
Financings with respect thereto as provided in Article V hereof. In no event
shall the Percentage Interest of any Non-Contributing Partner be decreased by
reason of
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its failure to make an Additional Voluntary Contribution pursuant to a Voluntary
Call.
(c) No Partner will be required to contribute any additional
capital to the Partnership except as specifically provided above or otherwise
herein.
(d) In the event that the Sonesta Lien Cap exceeds the final
total Construction Lien Costs (such excess being referred to as the "LIEN
SAVINGS"), the Balazs GP shall be entitled to receive one-half of such Lien
Savings, as follows: if the aggregate Adjusted Cash Capital Contribution of the
Sonesta Partners at the time the final Construction Lien Costs are determined
(i) equals or exceeds the Lien Savings, then the Adjusted Cash Capital
Contribution of the Sonesta Partners (or either of them) shall be reduced and
the Adjusted Cash Capital Contribution of the Balazs Partners (or either of
them) shall be increased by an aggregate amount equal to one-half of such Lien
Savings, and the Balazs GP shall be entitled to receive distributions on account
thereof pursuant to Sections 5.1, 5.2 and 9.4 hereof, or (ii) is less than the
Lien Savings (or if the Sonesta Partners otherwise elect in lieu of making the
adjustment referred to in clause (i) above) the Sonesta Partners, or either of
them, shall make a cash payment to the Balazs GP in the amount of one-half of
the Lien Savings.
3.3 WITHDRAWAL OF CAPITAL. No Partner will be entitled to withdraw
any part of its Capital Contribution or Capital Account, nor will any Partner be
entitled to receive any distributions from the Partnership, except as
specifically provided for herein. Unless otherwise specifically provided for
herein, distributions to the Partners shall be made in cash.
3.4 CAPITAL ACCOUNTS. A separate capital account ("CAPITAL
ACCOUNT") will be maintained by the Partnership for each Partner in accordance
with Treasury Regulations section 1.704-1(b)(2)(iv) and this Section 3.4. The
Capital Account of each Partner will be determined and adjusted in accordance
with the following:
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(a) Each Partner's Capital Account will be credited with the
Partner's Capital Contributions, the Partner's distributive share of Partnership
Profits and any items in the nature of income or gain that are specially
allocated to the Partner pursuant to Sections 4.3 and 4.4 hereof (other than
Section 4.3(g)), and the amount of any Partnership liabilities that are assumed
by the Partner or secured by any Partnership property distributed to the
Partner;
(b) Each Partner's Capital Account will be debited by the amount
of cash and the fair market value of any Partnership property distributed to the
Partner pursuant to any provision of this Agreement, the Partner's distributive
share of Partnership Losses and any items in the nature of deductions or losses
that are specially allocated to the Partner pursuant to Sections 4.3 and 4.4
hereof (other than Section 4.3(g)), and the amount of any liabilities of the
Partner assumed by the Partnership or which are secured by any property
contributed by the Partner to the Partnership;
(c) If any Partnership Interest is transferred in accordance
with the terms of this Agreement, the transferee will succeed to the Capital
Account of the transferor to the extent it relates to the transferred
Partnership Interest;
(d) Each Partner's Capital Account shall, except to the extent
otherwise agreed, also be adjusted for any other increases or decreases required
to be made to Capital Accounts pursuant to Treasury Regulations section
1.704-1(b)(2)(iv); and
(e) It is the intention of the Partners that Capital Accounts
shall be maintained in accordance with Section 704(b) of the Code and with the
Treasury Regulations promulgated thereunder so that the allocations of
Partnership items of income,
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gain, loss, deduction, and credit provided herein have substantial economic
effect thereunder. If in the opinion of the General Partner(s) the manner in
which Capital Accounts are to be maintained pursuant to the preceding provisions
of this Section 3.4 should be modified in order to comply with the requirements
of Section 704(b) of the Code and the Treasury Regulations promulgated
thereunder, then notwithstanding anything to the contrary contained in the
preceding provisions of this Section 3.4, the General Partner(s) may, in its
sole and unrestricted discretion, alter the method in which Capital Accounts are
maintained, and the General Partner(s) shall have the right to amend this
Agreement of Limited Partnership without action by the Limited Partners to
reflect any such change in the manner in which Capital Accounts are maintained;
PROVIDED, HOWEVER, that any change in the manner of maintaining Capital Accounts
shall not materially alter the economic agreement between the Partners.
ARTICLE IV
PROFITS AND LOSSES
4.1 ALLOCATION OF LOSSES. After giving effect to any mandatory
allocations pursuant to Section 4.3 hereof, Losses shall be allocated to the
Partners pro rata in accordance with the Partners' respective Percentage
Interests. To the extent that any Limited Partner has or would have, as a
result of an allocation of Loss (or item thereof), an Adjusted Capital Account
Deficit, such amount of Loss (or item thereof) shall be allocated to the other
Partners in accordance with this Section 4.1 but in a manner which will not
produce an Adjusted Capital Account Deficit as to such Limited Partners. To the
extent such allocations would result in all Limited Partners having Adjusted
Capital Account Deficits, such Loss (or item thereof) shall be allocated to the
General Partner(s).
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4.2 ALLOCATION OF PROFITS. After giving effect to any mandatory
allocations pursuant to Sections 4.3 hereof, Profits shall be allocated in the
following order of priority:
(a) first, to each Partner in an amount equal to the excess, if
any, of (i) the cumulative Losses allocated to such Partner pursuant to Section
4.1 hereof for all prior periods, over (ii) the cumulative Profits allocated to
such Partner pursuant to this Section 4.2(a) for all prior periods; and
(b) the balance, if any, pro rata to the Partners in accordance
with the Partners' respective Percentage Interests.
4.3 SPECIAL ALLOCATIONS. The following special allocations shall be
made in the following order:
(a) MINIMUM GAIN CHARGEBACK. Notwithstanding any other
provision of this Article IV, if there is a net decrease in Partnership Minimum
Gain during any Fiscal Year, then, subject to the exceptions set forth in
Treasury Regulations section 1.704-2(b)(2),(3),(4), and (5), each such Partner
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Partner's share
of the net decrease in Partnership Minimum Gain, as determined under Treasury
Regulations section 1.704-(2)(g). The items to be so allocated shall be
determined in accordance with Treasury Regulations section 1.704-2(f). This
Section 4.3(a) is intended to comply with the minimum gain chargeback
requirement in such section of the Treasury Regulations and shall be interpreted
consistently therewith.
(b) PARTNER NONRECOURSE DEBT MINIMUM GAIN. Notwithstanding any
other provision of this Article IV except Section 4.3(a), if there is a net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to a
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Partner Nonrecourse Debt, then, subject to the exceptions set forth in Treasury
Regulations section 1.704-2(i)(4), each Partner who has a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treasury Regulations section 1.704-2(i)(5), shall
be specially allocated items Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to such Partner's share of the
net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Treasury Regulations
section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The items to be allocated shall be determined in
accordance with Treasury Regulations section 1.704-2(i)(4). This section 4.3(b)
is intended to comply with the minimum gain chargeback requirement in such
section of the Treasury Regulations and shall be interpreted consistently
therewith.
(c) QUALIFIED INCOME OFFSET. In the event any Partner
unexpectedly receives any adjustments, allocations, or distributions described
in Treasury Regulations section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), that cause
or increase an Adjusted Capital Account Deficit, items of Partnership income and
gain shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations, any
Adjusted Capital Account Deficit as quickly as possible, provided that an
allocation pursuant to this Section 4.3(c) shall be made only if and to the
extent that such Partner would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Article have been tentatively made as
if this Section 4.3(c) were not in the Agreement.
(d) NONRECOURSE DEDUCTIONS. Nonrecourse Deductions for any
Fiscal Year or portion thereof shall
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be allocated among the Partners in accordance with their respective Percentage
Interests.
(e) PARTNER NONRECOURSE DEDUCTIONS. Any Partner Nonrecourse
Deductions for any Fiscal Year or portion thereof shall be allocated to the
Partner who bears the risk of loss with respect to the loan to which such
Partner Nonrecourse Deductions are attributable, in accordance with Treasury
Regulations section 1.704-2(i).
(f) CODE SECTION 754 ADJUSTMENTS. To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Treasury
Regulations section 1.704-1(b)(2)(iv)(m), is to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis), and such a
gain or loss shall be allocated to the Partners in a manner consistent with the
manner in which their Capital Accounts are required to be adjusted pursuant to
such section of the Treasury Regulations.
(g) SECTION 704(C) COMPLIANCE. In accordance with section
704(c) of the Code and the applicable Treasury Regulations thereunder, income,
gain, loss, deduction and tax depreciation with respect to any property which
has a Book Basis different than its adjusted tax basis, shall, solely for
federal income tax purposes, be allocated among the Partners so as to take into
account any variation between the adjusted tax basis of such property to the
Partnership and the Book Basis of such property (or the original Book Basis of
such property if such property was contributed to the Partnership).
(h) CUMULATIVE PREFERRED RETURN ALLOCATION. An amount of gross
income for each applicable Fiscal Year shall be specially allocated to each
Partner in an amount equal to the amounts, if any, distributed to such Partner
pursuant to Sections 5.1(a) and 5.2(a) for such Fiscal Year.
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(i) CURATIVE ALLOCATIONS. The allocations set forth in Sections
4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f) and 4.3(g) hereof (the
"REGULATORY ALLOCATIONS") are intended to comply with certain requirements of
Treasury Regulations section 1.704-1(b). Notwithstanding any other provision of
this Article 4 (other than the Regulatory Allocations), the Regulatory
Allocations shall be taken into account in allocating other Partnership items of
income, gains, loss and deduction among the Partners so that, to the extent
possible, the net amount of such allocations of other Partnership items and the
Regulatory Allocations shall be equal to the net amount that would have been
allocated to the Partners pursuant to Sections 4.1 and 4.2 hereof if the
Regulatory Allocations had not occurred.
(j) ALLOCATION UPON SALE OR LIQUIDATION. In the event of a sale
of the Property or in a year of liquidation of the Partnership, any Profits or
Losses, or, if necessary, items of income, gain, loss or deduction for such
fiscal year and, if necessary, the preceding fiscal year shall be allocated in
proportion to and to the extent of such amounts as are required to cause the
Capital Account of each Partner to equal the amount which would be distributed
to such Partner as of the date of such sale or liquidation if distributions of
such proceeds were made in accordance with the priorities of Sections 5.2(a)
through (c) hereof. Any remaining Profits shall be allocated to the Partners in
accordance with their Percentage Interests; provided however, if the Property is
sold pursuant to Section 1.7(c) after a Notice of Non-Feasibility has been sent,
any remaining Profits shall be allocated to the Balazs Partners.
ARTICLE V
DISTRIBUTIONS
5.1 NET CASH FROM OPERATIONS. Subject to the provisions of Sections
9.4 and 3.2 (a) hereof, Net Cash From Operations shall be distributed to the
Partners from
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time to time as determined by the General Partner(s) but no less often than
quarterly in accordance with the following order of priority:
(a) first, to Sonesta (and any other Partner having made a cash
Capital Contribution to the Partnership in accordance with the provisions of
this Agreement to the extent of and in proportion to the excess, if any, of (i)
such Partner's Cumulative Preferred Return from the inception of the Partnership
to the date such distribution is made, over (ii) the aggregate sum of all prior
distributions made to such Partner pursuant to Section 5.2(a) hereof and this
Sections 5.1(a); and
(b) second, to each Partner having made an Excess Capital
Contribution to the Partnership in accordance with the Partners' respective
Excess Capital Contributions to the extent of and in proportion to the excess,
if any, of (i) such Partner's aggregate Excess Capital Contributions to the
Partnership, over (ii) the aggregate sum of all prior distributions to such
Partner in repayment of such Excess Capital Contributions pursuant to this
Section 5.1(b) or Section 5.2(b), or paid to Sonesta with respect to the
admission of Additional Limited Partners as permitted by Section 3.2(a) hereof;
and
(c) the balance, if any, to the Partners pro rata in accordance
with their respective Percentage Interests.
5.2 NET CASH FROM DISPOSITIONS AND FINANCINGS. Subject to the
provisions of Sections 3.2(a) and 9.4 hereof, and except as otherwise provided
in Section 5.3 below, Net Cash From Dispositions and Financings shall be
distributed to the Partners within thirty (30) days after the receipt thereof,
in accordance with the following order of priority:
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(a) first, to Sonesta (and any other Partner having made a cash
Capital Contribution to the Partnership in accordance with the provisions of
this Agreement) to the extent of and in proportion to the excess, if any, of (i)
such Partner's Cumulative Preferred Return from the inception of the Partnership
to the date such distribution is made, over (ii) the sum of all prior
distributions made to such Partner pursuant to Section 5.1(a) hereof and this
Section 5.2(a);
(b) second, to each Partner having made an Excess Capital
Contribution to the Partnership to the extent of and in proportion to the
excess, if any, of (i) such Partner's aggregate Excess Capital Contributions to
the Partnership, over (ii) the aggregate sum of all prior distributions to such
Partner pursuant to Section 5.1(b) or this Section 5.2(b) or distributions of
amounts to Sonesta permitted by Section 3.2(a); and
(c) third, to Sonesta (and any other Partner having made a cash
Capital Contribution to the Partnership (other than an Excess Capital
Contributions) in accordance with the provisions of this Agreement) in
accordance with the Partners' respective cash Capital Contributions (other than
Excess Capital Contributions) to the extent of and in proportion to the excess,
if any, of (i) such Partner's aggregate Capital Contributions to the Partnership
(other than Excess Capital Contributions), over (ii) the aggregate sum of all
prior distributions to such Partner pursuant this Section 5.2(c) or
distributions of amounts to Sonesta pursuant to Section 3.2(a) (to the extent
not related to repayment of Excess Capital Contributions); and
(d) the balance, if any, to the Partners pro rata in accordance
with their respective Percentage Interests.
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ARTICLE VI
MANAGEMENT
6.1 POWERS OF THE GENERAL PARTNER(S).
(a) POWERS PRIOR TO COMPLETION OF THE PROJECT. Until the Balazs
GP shall be admitted to the Partnership as a General Partner pursuant to Section
3.1, the Sonesta GP shall be the sole General Partner, and shall have the sole
power to bind the Partnership. Notwithstanding the foregoing, during the Pre-
Development Period, the General Partner shall consult with the Balazs GP in
connection with all Partnership matters, and, except as otherwise provided
herein, shall not make any decisions on behalf of the Partnership relating to
the development of the Project or bind the Partnership without the approval of
the Balazs GP, such approval not to be unreasonably withheld or delayed. In
furtherance and not in limitation of the foregoing, the Sonesta GP shall not,
without first obtaining the approval of the Balazs GP, adopt a Project Budget,
finalize Project Plans, hire any Key Consultants for the Project or enter into
any leases for the restaurant/bar/lounge or other retail space at the Hotel.
The Balazs GP shall act in good faith with respect to granting or withholding
its approval or consent to matters requiring the same.
Notwithstanding anything to the contrary set forth herein, the Balazs
GP shall have the sole right to conduct all negotiations regarding the
Construction Liens, and to direct any settlement and payments of the
Construction Liens that may be negotiated, or to refrain from settling or paying
any Construction Liens, and the Sonesta GP shall, on behalf of the Partnership,
execute all documents reasonably required in connection with any such
settlement(s) and make any such payments relating to the Construction Liens as
the Balazs GP shall reasonably direct, provided that in no event shall the
Balazs GP be entitled to take, or direct the Sonesta GP to take, any action that
would cause the aggregate Construction Lien
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Costs to exceed $1,450,000. Notwithstanding the exclusive right of the Balazs
GP to deal with the Construction Liens as provided above, the Sonesta GP shall
have the right to cause the Partnership to bond over any Construction Lien (i)
at any time if and only to the extent necessary to prevent the imminent sale of
the Real Property by reason of the foreclosure of such Construction Lien, and
(ii) after the expiration of the Pre-Development Period if the Partners have
elected to proceed with the Project, if required as a condition to obtaining a
Third Party Loan for the construction of the Project.
If the Sonesta GP and the Balazs GP elect to proceed with the Project,
then during the Construction Period, the Sonesta GP as sole General Partner
shall have the authority to carry out the development of the Project in a manner
consistent in all material respects with the Project Budget and the Project
Plans without obtaining the approval of the Balazs GP; provided, however, that
the Sonesta GP shall keep the Balazs GP informed of the progress of the Project
and shall not change the Key Consultants, Project Plans or Project Budget in any
material respect, or enter into or amend in any material respect leases relating
to the restaurant/bar/lounge or retail space, or cause the Partnership to take
any action materially inconsistent with the same without the consent of the
Balazs GP, such consent not to be unreasonably withheld.
Nothing herein is intended to abrogate from any consent or other
rights the Balazs GP or one of its Affiliates may have pursuant to the
Management Agreement (which by definition includes any pre-opening or technical
services agreement) with respect to the period prior to the Completion of the
Project or otherwise.
(b) GENERAL POWERS AFTER COMPLETION OF THE PROJECT. Except as
otherwise specifically provided in this Agreement, upon admittance of the Balazs
GP to the Partnership as a General Partner upon the Completion of the Project,
all policies and decisions of
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the Partnership, and the exercise of all powers of the Partnership, in
connection with the conduct of the property, business and affairs of the
Partnership, shall be made promptly, jointly, reasonably and in good faith by
the General Partners, except that the Sonesta GP shall have the right to manage
the day-to-day affairs of the Partnership that are ministerial in nature.
(c) Subject to the limitations set forth in Sections 6.1(a) and
6.1(b), and except as otherwise specifically provided in this Agreement to the
contrary, the General Partner(s) may execute and deliver contracts and
agreements on behalf of the Partnership in furtherance of the foregoing, without
the consent of the Limited Partners, and otherwise act for and bind the
Partnership. Third parties may conclusively rely upon the act of the General
Partner(s) as evidence of the authority of the General Partner(s) for all
purposes in respect of their dealings with the Partnership (provided that in no
event shall third parties be entitled to rely upon any act of the Balazs GP in
respect of its dealings with the Partnership unless and until the Balazs GP has
become a General Partner as provided herein). The Partner responsible for
managing the day-to-day affairs of the Partnership that are ministerial in
nature shall be the Sonesta GP.
(d) DISPUTE RESOLUTION. In the event that prior to the
Completion of the Project, the General Partner believes the Balazs GP is
unreasonably withholding or delaying its consent or approval with respect to any
matter requiring its consent or approval, or following the Completion of the
Project, the General Partners are unable to agree on such decision (but subject
to the provisions of Section 6.1(e) below), either party may submit such matter
to arbitration by giving the other party a written notice (an "ARBITRATION
NOTICE") specifying the matter or matters to be arbitrated and such party's
choice for arbitrator. If such party fails to so appoint an arbitrator during
such ten (10) day period, the arbitrator set forth in the Arbitration Notice
shall be the sole arbitrator. The
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other party shall respond within 10 days after the date of the Arbitration
Notice with its choice of arbitrator. The two arbitrators shall attempt to
resolve the dispute within 30 days after the Arbitration Notice was sent, and
any determination by the arbitrators shall be final and binding on the Partners.
In the event the two arbitrators are unable to make a determination regarding
said dispute by the end of such 30-day period, they shall select a third
arbitrator, who shall issue written notice to the General Partners choosing the
position advocated by one or the other of the General Partner's arbitrators,
without compromise, within 15 days after being selected, which determination
shall be binding on the Partners. If the two arbitrators are unable to agree on
a third arbitrator within such thirty (30) day period, then either party may
apply to the American Arbitration Association, New York Office for the
appointment of a third arbitrator. All arbitrators appointed hereunder shall be
unrelated third parties with at least 10 years of experience (which may be legal
experience) in hotel development, management or operation, as appropriate. The
fees and expenses of arbitration shall be borne by the non-prevailing party.
During the Pre-Development Period, at the request of either the Balazs GP or the
Sonesta GP, the Partners will adopt expedited arbitration procedures to use with
respect to construction and other disputes that must be resolved quickly, which
shall be consistent with the above procedures, except that the Balazs GP and the
Sonesta GP will each designate an arbitrator in advance and such arbitrators
must attempt to reach agreement within 48 hours.
6.2 ADDITIONAL POWERS, DUTIES AND LIMITATIONS WITH RESPECT TO THE
GENERAL PARTNER(S).
(a) GENERALLY. Subject to the provisions of Section 6.2(b), the
General Partner(s) shall be responsible for, and shall render to the Partnership
such services as are reasonably necessary for the daily management, conduct and
direction of the property, business and affairs of the Partnership.
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(b) LIMITATIONS AND GUIDELINES WITH RESPECT TO THE POWERS OF THE
GENERAL PARTNER(S). (i) The General Partner(s) shall not take any action which
shall cause any Limited Partner to be personally liable for any debts,
liabilities or obligations of the Partnership (other than as expressly provided
herein); (ii) the determination that certain cash proceeds shall be used as
reserves and not distributed to the Partners pursuant to Sections 5.1 and 5.2
hereof must be made by the General Partner(s) on a reasonable basis; and (iii)
the General Partner(s) shall provide the Limited Partners with notice of the
occurrence of the following events as soon as practicable after the occurrence
thereof: (1) any borrowing of money by the Partnership; and (2) the
commencement of any material lawsuits affecting the Partnership or its property.
(c) LIMITATION ON LIABILITY FOR ACTS AND OMISSIONS OF THE
GENERAL PARTNER(S). So long as the General Partner(s) shall use due care and
diligence in the management of the Partnership business, the General Partner(s)
shall not be liable to the Partnership or any Partner for any act or omission in
good faith and within the scope of the authority conferred by this Agreement.
The Partnership shall indemnify and save harmless the General Partner(s) from
and against any and all liability, loss, cost, expense or damage incurred or
sustained by reason of any act or omission in the conduct of the business of the
Partnership in good faith and within the scope of the authority conferred by
this Agreement. The General Partner(s), acting in good faith, shall be entitled
to rely on the advice of legal counsel, accountants and/or other experts or
professional advisers and any act or omission of the General Partner(s) acting
in reliance upon such advice shall in no event subject such General Partner(s)
to liability to the Partnership or any Partner. The indemnity by the
Partnership under this subsection (c) of Section 6.2 shall be paid out of and to
the extent of Partnership assets only. Furthermore, during the period of time
that the Sonesta GP is the sole General Partner of the Partnership, the Balazs
Partners shall be deemed to waive any claims for
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breach of fiduciary duty by the Sonesta GP with respect to any act or failure to
act of the Sonesta GP with respect to which the Sonesta GP consulted with, and
obtained the consent of, the Balazs GP.
(c) NET WORTH REQUIREMENT. If there is only one General
Partner, the sole General Partner shall maintain, or if there are two or more
General Partners, they shall collectively maintain on an equal basis, a net
worth of at least $200,000 exclusive of any value attributed to its (or their)
Partnership Interest(s) (or such other amount as may be reasonably determined by
the General Partner(s) from time to time to avoid taxation of the Partnership as
a corporation for Federal income tax purposes).
6.3 LIMITATION ON LIABILITIES AND POWERS OF THE LIMITED PARTNERS. No
Limited Partner shall have (a) any personal liability for any debts, liabilities
or obligations of the Partnership or (b) any obligation to the Partnership,
except, in each case, as specifically provided elsewhere in this Agreement. The
Limited Partner(s) shall not participate in the operation, management or control
of the business of the Partnership and shall have no right or authority to act
for or on behalf of the Partnership or to sign for or bind the Partnership.
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6.4 OTHER VENTURES. Each of the Partners, and the partners thereof,
may engage, directly or indirectly, in any other business venture or ventures of
any nature and description, independently or with others, including, without
limitation, the hotel or real estate business in all its aspects, which shall
include, without limitation, brokerage and the ownership, construction,
operation, management, financing, syndication and development of hotels and real
estate (whether or not competitive with, relating to, or in any manner connected
with, the business of the Partnership) and interests therein or contracts for
the purchase or sale thereof, and neither the Partnership nor any of the
Partners shall have any rights in and to any such business ventures or the
income or profits derived therefrom. Nothing herein is intended to abrogate or
void any obligations of or restrictions on Manager under the Management
Agreement.
Notwithstanding the foregoing, the Balazs Partners agree that so long
as (i) an Affiliate of the Balazs Parent is a Partner or one of the co-managers
comprising Manager, neither the Balazs Parent nor any Affiliate thereof shall be
involved in the management, operation or ownership of a hotel below Houston
Street in Manhattan that is comparable to, and competitive with, the Hotel, and
(ii) so long as the Partnership is operating the Hotel under the name "Chateau
Marmont", and is entitled to do so pursuant to this Agreement, neither the
Balazs Parent nor any Affiliate thereof will operate or permit the operation of
another hotel operating under the name "Chateau Marmont" in Manhattan.
6.5 MANAGEMENT AGREEMENT. In the event the Partners elect to proceed
with the Project, the Partnership shall enter into a Management Agreement with
the Manager (the "MANAGEMENT AGREEMENT"). "Management Agreement" as used herein
shall also be deemed to include any agreement relating to pre-opening services
and technical and other consulting work performed by the Manager, whether or not
such agreement is in a separate document. The Management Agreement shall
contain the
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following terms and provisions and shall otherwise be on terms and conditions to
be mutually agreed upon by the Balazs GP and the Sonesta GP:
(i) Base Management Fee - 4% of Gross Revenues.
(ii) Incentive Fee - 10% of Gross Operating
Profits, payable currently to the extent of net cash flow from
the Real Property after payment of a return of not more than the
greater of ten percent (10%) or the Prime Rate on each Partner's
Adjusted Cash Capital Contribution from time to time, with any
unpaid portion of the incentive fee to accumulate, and to be paid
out of next available net cash flow.
(iii) Terminable by Owner only upon sale,
foreclosure and for Manager's gross negligence or wilful
misconduct.
(iv) The Hotel will be known by the name "Chateau
Marmont", or such other name as the Sonesta GP and the Balazs GP
shall mutually agree. The Balazs Partners agree on behalf of
themselves and the Affiliate of the Balazs Parent described in
the next sentence, that the name "Chateau Marmont" may be used by
the Partnership in connection with the operation of the Hotel in
accordance with this Agreement (including in connection with the
sale of logo merchandise at the Hotel and other ancillary uses)
at no charge, cost or expense to the Partnership, and that the
use of the name may continue as long as either an Affiliate of
the Balazs Parent or an Affiliate of the Sonesta Parent has
significant ownership in, or involvement in the management of,
the Hotel. The Partners acknowledge that an Affiliate of the
Balazs Parent shall retain ownership of the
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name "Chateau Marmont" and all rights appurtenant thereto, and agree
that unless the Sonesta GP and the Balazs GP mutually agree to use a
different name for the Hotel, the Hotel shall continue to be operated
under the name "Chateau Marmont" throughout the period that an
Affiliate of the Balazs Parent has an interest in the Hotel as owner
or manager (with any use of the name after an Affiliate of the Balazs
Parent no longer has such management or ownership interest to be at
Sonesta's option). The Balazs Partners shall cause the Affiliate of
the Balazs Parent described above to promptly grant a license to the
Partnership permitting the use of the name "Chateau Marmont" as
provided in this item (iv).
It is contemplated that the Hotel will be developed as a four-star,
"boutique" hotel in keeping with the current scale and standards of
the hotel known as the Chateau Marmont in Los Angeles, California
(which the parties acknowledge is deluxe, four-star). "CHATEAU
STANDARDS" as used in this Agreement shall mean the current standards
of the Chateau Marmont in Los Angeles, California until the Hotel
opens for business, at which time "Chateau Standards" shall mean the
standards of the Hotel. The Balazs Partners agree that for so long as
the Hotel is operated under the name "Chateau Marmont" in accordance
herewith they shall not use or permit the use of the name "Chateau
Marmont" in connection with any hotel not meeting the Chateau
Standards (as the same may from time to time be modified or
supplemented by mutual agreement of the Sonesta GP and the Balazs GP,
and provided that the Chateau Standards with respect to the Chateau
Marmont in Los Angeles shall be the current standards for such hotel),
or in any other manner that would be reasonably likely to detract from
the value of the use of the name "Chateau Marmont" by the Partnership
in connection with the Hotel, and any agreement permitting use of such
name by a hotel shall be
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terminable by the Balazs Parent or an Affiliate of the Balazs Parent
if such hotel fails to meet the Chateau Standards. The Balazs
Partners shall notify the Sonesta GP of each proposed use of the name
Chateau Marmont, and the Sonesta GP, acting reasonably and in good
faith, shall be entitled to prevent, or compel the Balazs Partners to
cause (or to cause the Balazs Parent to cause) the discontinuance of,
any use of the name "Chateau Marmont" that violates the provisions of
the preceding sentence, unless the Sonesta GP shall have specifically
waived such right in writing. Notwithstanding the foregoing, the use
of the name "Chateau Marmont" by a hotel not meeting the Chateau
Standards may continue for a period of up to six (6) months after the
Sonesta GP notifies the Balazs Partners of such hotel's failure to
meet such standards provided that, promptly following such notice, the
Balazs Partners undertake in good faith to cause, or obtain the good
faith undertaking of the owner of such hotel to cause, the standards
of such hotel to be elevated to the Chateau Standards (provided that
the Balazs Partners shall have no liability if the hotel does not meet
the Chateau Standards within such six (6) month period). So long as
the Hotel is being operated under the name "Chateau Marmont", such
name and any logo associated therewith shall not be franchised by any
Affiliate of the Balazs Parent or otherwise transferred to any third
party unrelated to the Balazs Parent for use in connection with a
hotel without the consent of the Sonesta GP, which may be given or
withheld in its sole discretion. Any dispute as to whether or not a
particular use of the name "Chateau Marmont" violates the provisions
of this Paragraph 6.5 shall be resolved by arbitration pursuant to
Section 6.1(b) hereof.
The Balazs Partners agree that if the Balazs Partners or the Balazs
Parent of one of its Affiliates conceive of, or are approached by a
third party with respect to, a new hotel project using the name
"Chateau Marmont", the Balazs Partners will
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advise Sonesta of such potential project and will consult with Sonesta
to determine whether it would be feasible for Sonesta to participate
in such project in a manner comparable to its participation in the
Project or such other manner as may seem more feasible or desirable to
the parties. Notwithstanding the foregoing, the Balazs Partners shall
be under no obligation to allow Sonesta to participate in such project
or to offer terms and conditions for such participation similar to
those set forth herein.
(v) The "Manager" shall be comprised of an
Affiliate of the Balazs Parent and Affiliate of the Sonesta
Parent, each acting as co-manager and making all decisions
jointly. Disputes over joint management decisions shall be
resolved by arbitration procedures similar to those set forth in
Section 6.1(d) hereof and the liquidation rights as provided by
Section 6.1(e).
In no event shall the portion of the Base Management Fee and Incentive
Management Fee payable to each of the parties comprising Manager be less than
one-half of such fees as set forth in clauses (i) and (ii) above (or the
economic equivalent).
ARTICLE VII
RECORDS, REPORTS AND TAXES
7.1 FISCAL YEAR, ACCOUNTING, REPORTS AND TAX RETURNS. The fiscal
year of the Partnership (the "FISCAL YEAR") for both accounting and U.S. Federal
income tax purposes shall be the calendar year, or such other fiscal period as
may from time to time be reasonably designated by the Partners, and for
accounting and federal income tax purposes the Partnership shall report its
operations and profits and losses as determined by the Partnership's accountants
in accordance with generally ac-
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cepted accounting principles, consistently applied, and federal income tax
accounting procedures, respectively. At all times during the continuance of the
Partnership, the General Partner(s) shall keep or cause to be kept full and
faithful books of account in which shall be entered, fully and accurately, each
transaction of the Partnership and annual financial statements of the
Partnership. The books of the Partnership shall be reviewed at least annually
at the expense of the Partnership by a firm of certified public accountants
designated by the General Partner(s). The Sonesta GP on behalf of the
Partnership hereby designates Ernst & Young to act as the initial Partnership
accountants. To the extent the Partnership incurs any operating expenses
("REPORT EXPENSES") in connection with the production or delivery of any
financial reports or statements, such Report Expenses shall be paid by the
Partnership, and the General Partner(s) shall deduct the appropriate amounts
from Net Cash From Operations. All questions of accounting shall be determined
by the Partnership's accountants and their determination shall be final and
binding on all Partners. In addition, the General Partner(s) shall cause the
Federal, state and local income tax returns of the Partnership to be prepared by
the Partnership's certified public accountants.
7.2 INSPECTION. All books and records of the Partnership will be
open to inspection and examination at all reasonable times and upon reasonable
notice thereof by the Partners or their representatives.
7.3 BANK ACCOUNTS. The Partnership shall open and maintain a
segregated bank account or accounts in which shall be deposited all of the
capital and other funds of the Partnership. Such funds may not be co-mingled
with any other funds.
7.4 TAX MATTERS PARTNER. The Partnership's "tax matters partner"
pursuant to Section 6231(a)(7)(A) of the Code shall be the Sonesta GP for so
long as it is a General Partner, and such tax matters partner may exercise all
powers conferred upon a tax matters partner
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by Section 6221 through 6232 of the Code. As soon as practicable after the end
of each Fiscal Year, the General Partner(s) shall furnish or cause to be
furnished to the Limited Partner(s) IRS Form K-1, or any similar form as may be
required by the Internal Revenue Service. In addition, the General Partner(s)
shall forward to the Limited Partners any notices received from or given to the
Internal Revenue Service.
ARTICLE VIII
WITHDRAWAL AND TRANSFER OF
PARTNERSHIP INTERESTS; RIGHT OF FIRST REFUSAL
8.1 TRANSFER OF INTERESTS.
(a) No Partner may directly or indirectly substitute an assignee
in place of such Partner, withdraw from the Partnership, or sell, assign,
encumber, pledge, give or otherwise transfer or dispose of or cause a change of
control of (any such sale, assignment, encumbrance, pledge, gift or transfer
being hereinafter referred to as a "TRANSFER") all or any portion of its
interest in the Partnership, without the prior written consent of the General
Partner(s) and the Balazs GP, if not then a General Partner, except for
Additional Limited Partners pursuant to Section 3.2(a) and Transfers permitted
pursuant to Section 8.1(f).
(b) No Partner shall Transfer any portion of its Partnership
Interest if any such Transfer would result in Partnership liability with respect
to local transfer and/or recordation taxes, unless such Partner agrees to pay
such local transfer or recordation taxes at its own expense.
(c) No Partner may Transfer all or any part of its Partnership
Interest if any such Transfer would cause a termination of the status of the
Partnership as a partnership for Federal Income Tax purposes.
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(d) Any Transfer of an interest in the Partnership in
contravention of this Agreement shall be null and void and of no force and
effect.
(e) No transferee of the whole or any portion of a Partner's
Partnership Interest shall have the right to become a substitute or additional
limited partner of the Partnership (and the Transfer shall be null and void)
without the consent of the General Partner(s) unless such Transfer shall be by
an instrument which is in form and substance reasonably satisfactory to such
Partners, which instrument shall include (x) an expression by the prospective
transferee of its intention to become a limited partner of the Partnership and
its acceptance and adoption of all of the terms and provisions of this
Agreement, as the same may be amended from time to time, (y) an agreement by the
transferor and prospective transferee to execute any and all instruments
reasonably deemed by the General Partner(s) to be necessary or desirable to
effectuate the admission of the prospective transferee as a limited partner of
the Partnership and (z) an agreement by the prospective transferee to pay all
expenses incurred by the Partnership in connection with such Transfer or
admission to the Partnership as a substitute or additional limited partner.
Each such transferee who becomes a substitute or additional limited partner of
the Partnership shall be entitled to the same rights and powers possessed by its
transferor. No Partner may Transfer all or any part of its Partnership Interest
to a person if the admission of such Person to the Partnership would jeopardize
any liquor license or other license or permit necessary or desirable for the
operation of the Hotel or related facilities.
(f) Notwithstanding the provisions of Section 8.1(a) hereof, but
subject to the other provisions of this Section 8.1 and to the right of first
offer in Section 8.2 hereof and the right to admit Additional Limited Partners
in Section 3.2, (A) the Limited Partners may Transfer all or any portion of
their
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Partnership Interests to an Affiliate, and (B) in addition to the rights to
Transfer set forth in clause (A) above, the Balazs LP, Sonesta, the Balazs GP or
the Sonesta GP may Transfer a portion of their Partnership Interests, provided
that except as set forth in said clause (A) (i) no Partner shall be entitled to
Transfer any Partnership Interest during the Pre-Development Period, (ii) the
Balazs Partners shall not be entitled to collectively transfer an aggregate
Percentage Interest in the Partnership of more than 10% prior to the Completion
of the Project, (iii) the Sonesta Partners shall not be entitled to Transfer
Partnership Interests prior to Completion of the Project unless the Sonesta
Parent shall have guaranteed to fund or arrange for the funding of the
Construction Capital Requirements, (iv) until the second anniversary of the
Completion of the Project, the Sonesta Partners (including Affiliates of
Sonesta), collectively, and the Balazs Partners (including Affiliates of the
Balazs Parent), collectively, shall each retain a minimum aggregate legal and
beneficial Percentage Interest in the Partnership of 10%. Any Transfer
hereunder shall be made specifically subject to the rights of the Sonesta GP to
admit to the Partnership Additional Limited Partners and to cause the dilution
of such transferred Partnership Interest upon such admission. In the event a
General Partner Transfers its interest, dies, becomes incapacitated or ceases to
exist, or in the event of the Bankruptcy of a General Partner, the transferee,
heirs, legal representative, liquidating trust or Partner in Bankruptcy, as
applicable, shall become a limited partner in the Partnership, and if an
Affiliate of such General Partner is one of the co-managers comprising Manager,
the other co-manager shall have the right to purchase the interest of such
Affiliate of the transferring General Partner (or General Partner in Bankruptcy)
for a price equal to the amount obtained by multiplying the aggregate Base
Management Fee and Incentive Fee earned for the twelve (12) month period
immediately preceding the date of such transfer by ten (10) and dividing the
result by two (2). Such price, without interest thereon, shall be paid in equal
monthly installments over a sixty (60) month period. Notwithstanding the
foregoing, if the
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party purchasing such interest so elects, it may pay the purchase price therefor
at the time of purchase in a lump sum equal to the purchase price as determined
above, discounted to present value (based on the payment schedule set forth in
the preceding sentence) at a rate equal to the lesser of 10% or the Prime Rate
at the time of purchase. In the event that the purchase price is paid over the
sixty (60) month period provided above, the payment of such amounts shall be
secured by a pledge of the fees becoming payable to the purchasing Person under
the Management Agreement. Any pledge or encumbrance of a Partnership Interest
and all rights of the pledgee or lienor thereunder shall be subject and
subordinate to the provisions of this Agreement, including Section 8.2 hereof.
(g) Except as otherwise provided in Section 3.2 hereof, no
Partner may be admitted to the Partnership if the Partnership Interest of any
Partner would be diluted thereby, except with the consent of the Partners whose
interest would be diluted.
(h) Any Partner Transferring its Partnership Interest shall
remain liable for its obligations as Partner hereunder until the assumption
thereof by the assignee (provided that the Sonesta Partners shall remain liable
for their funding obligations until the Completion of the Project and the
funding of the Operating Reserve), if the Sonesta GP and the Balazs GP elect to
proceed with the Project.
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8.2 RIGHT OF FIRST OFFER
(a) Except in connection with the admission to the Partnership
of Additional Limited Partners, if at any time a Partner desires, and is
permitted pursuant to this Agreement, to Transfer all or a portion of its
Partnership Interest to a third-party which is not an Affiliate of such Partner
(a "THIRD PARTY PURCHASER"), then such Partner (the "SELLING PARTNER") must
first offer said Partnership Interest (or portion thereof) to the other Partners
(other than any Affiliate of the Selling Partner) at the price and on the terms
and conditions that the Selling Partner desires to sell such Partnership
Interest (or portion thereof). For purposes of this Section 8.2, the Partners
to whom the Partnership Interest of the Selling Partner is offered are
hereinafter referred to as the "OFFEREES").
(b) The Selling Partner shall give notice (an "OFFER NOTICE") to
each of the Offerees of its offer to sell its Partnership Interest (or portion
thereof) at the price and on the terms set forth therein.
(c) If an Offeree or any other Affiliate of the Offeree that the
Offeree may designate (a "DESIGNEE") shall desire to exercise the right to
purchase pursuant to this Section 8.2, then it shall do so in accordance with
the following provisions:
(i) Such Offeree or its designee shall give
written notice thereof to the Selling Partner and the other
Offerees, if any, within thirty days after the Offer Notice was
given and, if a designee is to effect the purchase, the
Offeree(s) shall guarantee the performance of such designee.
(ii) If more than one Offeree (or their
designees) gives notice of the exercise of the right to purchase
then, on consummation of the purchase, the Selling Partner's
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Partnership Interest (or portion thereof) shall be allocated among
them in proportion to their respective Percentage Interests in the
Partnership immediately prior to such purchase or in such other
proportion as such Offerees may mutually agree upon.
(iii) The closing of a purchase of the Selling
Partner(s)' Partnership Interest(s) pursuant to this Section 8.2
shall be held at a mutually acceptable place on a mutually
acceptable date not more than ninety (90) days after the Offer
Notice was given to the Offeree(s); PROVIDED, HOWEVER, that if
more than one Offeree has elected to purchase the Selling
Partner's Partnership Interest but one or more of such Offerees
fails to tender its proportionate share of the purchase price
therefor at the closing, then each tendering Partner(s) (other
than an Affiliate of a non-tendering Partner) shall be provided
an additional 30 days in which to tender payment for the portion
of the Selling Partner's Partnership Interest (or pro rata share
of such portion if there is more than one tendering Partner) that
was to have been transferred to such non-tendering Partner. At
any such closing, the Offeree(s) or its (their) designee(s) shall
tender payment in cash to the Selling Partner, and the Selling
Partner shall assign to the Offeree(s) or such designee(s) the
Partnership Interest(s) to be sold, free and clear of all liens,
claims and encumbrances, and shall execute such documents as may
be necessary to effectuate the sale.
(d) In the event that (i) no option to purchase granted pursuant
to this Section 8.2 has been exercised on or prior to the 31st day after receipt
of the Offer Notice, or (ii) the 90-day period shall elapse without the
Offeree(s) or its (their) designee(s) as the case may be, having tendered
payment (the first to occur
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of the events referred to in clauses (i) and (ii) being herein referred to as
the "FREE TO SELL DATE"), then the Selling Partner shall have the right to sell
its Partnership Interest (or portion thereof as specified in the Offer Notice)
to a Third Party Purchaser at the price (or a greater price) specified in the
Offer Notice and on other terms and conditions not materially more favorable to
the purchaser than those set forth in the Offer Notice. The Selling Partner's
right to sell its Partnership Interest to a Third Party Purchaser pursuant to
this Section 8.2 shall expire and the provisions of this Section 8.2 shall be
reinstated in the event that a Third Party Purchaser has not purchased such
Partnership Interest (or portion thereof) within 90 days after the Free to Sell
Date. Notwithstanding the foregoing in the event that all Offerees exercising
the option to purchase the Selling Partner's Partnership Interest shall default
in their obligations to consummate such purchase (provided that if all of the
Offerees are Affiliates of each other, a default by one of the Offerees will be
deemed a default by all of the Offerees for purposes of this sentence), the
Selling Partner shall have a free right to sell its Partnership Interest (or
portion thereof) for any price within 90 days after such default.
(e) The Selling Partner shall retain whatever claims or remedies
it may have in law or equity against the Offeree(s) in case such Offeree(s),
elect(s) to purchase (or to cause a designee to purchase) and wrongfully fails
to so purchase the Selling Partner's Partnership Interest. The Offeree(s) that
tender(s) payment under the circumstances described in the proviso clause of
subsection (c)(iii) of this Section 8.2 shall retain whatever claims or remedies
it (they) may have in law or equity against the nontendering Offeree(s).
(f) No notice may be given under this Section 8.2 while any
purchase or transfer through liquidation or pursuant to Section 8.2 is pending
under the provisions of this Agreement.
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(g) Notwithstanding the provisions of Section 8.2(c) above, in
the event the Balazs LP desires to Transfer a portion of its Partnership
interest to raise capital to fund any Construction Lien Costs in excess of
$1,450,000, the Sonesta Partners as Offerees pursuant to Section 8.2(c) shall
have a period of fifteen (15) days after the Offer Notice was given (instead of
thirty (30) days) within which to exercise its right to purchase, and if the
option is exercised, the closing of the purchase of the Selling Partner(s)'
Partnership Interests shall occur within thirty (30) days after the date of the
Offer Notice (instead of ninety (90) days).
ARTICLE IX
DISSOLUTION, LIQUIDATION AND TERMINATION
9.1 DISSOLUTION AND TERMINATION. (1) The Partnership shall be
dissolved and its affairs shall be wound up upon the first to occur of any of
the following events (an "EVENT OF DISSOLUTION):
(a) The transfer or sale by all of the General Partner(s) of
their entire interests in the Partnership; the Bankruptcy, withdrawal or
retirement of a General Partner (unless any remaining General Partner(s)
elect(s) to continue the Partnership); or upon the occurrence of any other event
which results in all of the General Partner(s) ceasing to be General Partners of
the Partnership; or
(b) The expiration of the term of the Partnership pursuant to
Section 1.3 hereof; or
(c) The election of the General Partner(s), in their sole
discretion, to specify a date of dissolution prior to the date of expiration of
the term of the Partnership specified in Section 1.3 hereof; or
(d) The sale or transfer in accordance with the terms of this
Agreement of the Real Property.
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(2) Except as otherwise set forth in this Section 9.1,
dissolution shall be effective on the date of the Event of Dissolution, but the
Partnership shall not terminate until the assets thereof have been distributed
in accordance with the provisions of Section 9.4 hereof. Notwithstanding the
dissolution of the Partnership, prior to the termination of the Partnership, the
business, assets and affairs of the Partnership shall continue to be governed by
this Agreement.
9.2 LIQUIDATING TRUSTEE. Upon the occurrence of an Event of
Dissolution, sole and plenary authority to effectuate the liquidation of the
Partnership shall be vested in such Partner or other Person as shall be
designated by the Sonesta GP, acting in good faith, and may be the Sonesta GP or
one of its Affiliates (any such liquidating trustee who assumes such
responsibility being referred to herein as the "LIQUIDATING TRUSTEE"). The
Liquidating Trustee shall proceed diligently to wind up the affairs of the
Partnership, liquidate the assets of the Partnership in an orderly and
business-like manner consistent with obtaining the fair value thereof and
distribute the assets of the Partnership in accordance with the provisions of
Section 9.4 hereof. Prior to such distribution of the Partnership's assets, the
Liquidating Trustee shall continue to exploit the rights, activities and
properties of the Partnership consistent with the sale or liquidation thereof,
exercising in connection therewith all of the power and authority of the
Partners as herein set forth.
9.3 ACCOUNTING UPON DISSOLUTION AND TERMINATION. Upon the
distribution of the assets of the Partnership in accordance with the provisions
of Section 9.4, the Liquidating Trustee shall cause the Partnership's
accountants to make a full and proper accounting of the assets, liabilities and
operations of the Partnership, as of and through the date on which such
distribution occurs.
9.4 DISTRIBUTION OF ASSETS. As expeditiously as possible
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after the occurrence of an Event of Dissolution and the liquidation of the
assets of the Partnership, the assets of the Partnership, including the proceeds
of any such liquidation, shall be applied and distributed in the following order
of priority:
(a) first, to the payment of debts and liabilities of the
Partnership and the expenses of liquidation;
(b) second, to the setting up of such reserves as the
Liquidating Trustee may reasonably deem necessary for any contingent liabilities
of the Partnership; and
(c) third, the balance, if any, to the Partners, in proportion
to their positive Capital Account balances as of the date of such distribution,
after giving effect to all contributions, distributions and allocations for all
periods including without limitation the allocations made pursuant to Section
4.3(j).
All saleable assets of the Partnership may be sold in connection with
the liquidation of the Partnership at public or private sale and at such price
and upon such terms as the Liquidating Trustee, in its sole discretion, may deem
advisable. Any Partner and any Person in which any Partner is in any way
interested may purchase assets at such sale. The Liquidating Trustee shall
determine, in its sole discretion, which assets of the Partnership shall be
liquidated through sale and which assets of the Partnership shall be distributed
in kind. In the event that the Liquidating Trustee determines to make a
distribution to Partners of any Partnership assets in kind, each such asset
shall be transferred and conveyed to the Partners so as to vest in each Partner,
as a tenant-in-common with all other Partners, an undivided interest in the
whole of said asset equal to such Partner's distributive share, calculated in
accordance with Section 9.4 hereof, and an adjustment shall be made to the
Capital Accounts of the Partners to reflect the fair market value of each asset
so distributed in kind.
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ARTICLE X
REPRESENTATIONS AND WARRANTIES; INDEMNITY
10.1 REPRESENTATIONS AND WARRANTIES OF THE GENERAL PARTNER. The
General Partner hereby represents and warrants to the other Partners that such
General Partner: (i) has full right, power and authority to execute and deliver
this Agreement and to perform each of its obligations hereunder; (ii) has duly
executed and delivered this Agreement and has taken all action necessary to
constitute this Agreement as its valid and binding obligation; (iii) is not
subject to any restriction or agreement which prohibits or would be violated by
the execution and delivery hereof or the consummation of the transactions
contemplated herein or pursuant to which the consent of any third person, firm
or corporation is required in order to give effect to the transactions
contemplated herein.
10.2 REPRESENTATIONS AND WARRANTIES OF THE LIMITED PARTNERS. Each
Limited Partner hereby represents and warrants to the other Partners that such
Limited Partner: (i) has full right, power and authority to execute and deliver
this Agreement and to perform each of its obligations hereunder; (ii) has duly
executed and delivered this Agreement and has taken all action necessary to
constitute this Agreement as its valid and binding obligation; and (iii) is not
subject to any restriction or agreement which prohibits or would be violated by
the execution and delivery hereof or the consummation of the transactions
contemplated herein or pursuant to which the consent of any third person, firm
or corporation is required in order to give effect to the transactions
contemplated herein.
10.3 INDEMNIFICATION BY THE BALAZS PARTNERS. Subject to the
provisions of Section 10.4 below, the Balazs Partners each hereby jointly and
severally indemnify the Partnership and the other Partners and
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agree to defend and hold the Partnership and the other Partners harmless from
and against any loss, liability, cost or expense (including reasonable
attorneys' fees and court costs) arising from (i) any claims made by any
partners of, or holders of beneficial interests in, Seller in connection with
the Contract and the consummation of the transactions contemplated thereby, the
Project or otherwise in connection with the operation of the Hotel and (ii) any
business or operations of the Partnership conducted prior to the execution and
delivery of this Agreement by the Sonesta Partners.
10.4 NON-RECOURSE. Notwithstanding anything to the contrary set forth
herein, except for the obligation of the Balazs Partners to repay the Balazs
Lien Loan (with respect to which obligation the Balazs Partners are personally
liable as set forth in Section 3.2(a) above), the liability of each Partner
hereunder to the Partnership or any other Partner for its covenants, agreements,
representations, warranties and undertakings shall be limited to its Partnership
Interest, and each Partner hereby pledges its Partnership Interest to the others
to secure its obligations to the Partners and the Partnership hereunder.
Neither the Balazs Partners, the Sonesta Partners, the Balazs Parent nor the
Sonesta Parent shall have any personal liability whatsoever with respect to
their covenants, agreements, representations, warranties and undertakings
hereunder, except to the extent of their respective Partnership Interests in the
Partnership.
ARTICLE XI
GENERAL
11.1 POWER OF ATTORNEY, APPOINTMENT: Each Partner irrevocably
constitutes and appoints each General Partner hereunder from time to time as its
true and lawful attorney-in-fact, in its name, place and stead, to make,
execute, acknowledge and file:
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(a) Any certificate or other instrument which may be required to
be filed by the Partnership under the laws of the State of Delaware or any other
jurisdiction in which the Partnership shall determine to do business, or by this
Agreement, or which the General Partner(s) shall deem advisable to file; and
(b) Such instruments or documents as may be required to effect
the dissolution, liquidation or termination of the Partnership in accordance
with the terms of this Agreement.
11.2 POWER COUPLED WITH INTEREST; SURVIVAL. It is expressed, intended
and understood that the foregoing power of attorney is coupled with an interest
and shall survive the delivery of an assignment by any Partner of all or any
part of its Partnership Interest.
11.3 NOTICES. Every notice, consent or other communication required
or permitted to be given by any provision of this Agreement shall be in writing.
Each such notice, consent or other communication, required or permitted to be
made hereunder, shall be deemed to have been duly and properly given, served or
made if delivered personally or mailed, registered or certified mail, return
receipt requested, postage and charges prepaid or if sent by telecopy with
written confirmation of transmission and receipt, and addressed to the addresses
of the Partners set forth on the first page of this Agreement.
Copies of all notices to the Balazs LP and the Balazs GP shall be sent
to Skadden, Arps, Slate, Meagher & Flom, 919 Third Avenue, New York, New York
10022, Telecopy: (212) 735-2001, Attention: Benjamin F. Needell, Esq.; and
copies of all notices to Sonesta and the Sonesta GP shall be sent to Rogers &
Wells, 200 Park Avenue, New York, New York 10166, Attention: Jeffrey H.
Weitzman, Esq.
Any notice, consent or other communication shall be deemed given or
made on the date delivered, if
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delivered personally; or if mailed as aforesaid, upon receipt thereof; or if
sent by telecopy as aforesaid, the business day next following the day such
notice, consent or other communication is transmitted. Any Partner may change
its address for purposes of this Section 11.3 by notice in writing given to each
other Partner in the manner herein specified.
11.4 FURTHER ASSURANCES. Each of the Partners hereby agrees to
execute, acknowledge, deliver, file, record and publish such further
certificates, instruments, agreements and other documents, and to take all such
further action as may be required by law or deemed by any other Partner to be
necessary or useful in furtherance of the Partnership's purposes and the
objectives and intentions underlying this Agreement and not inconsistent with
the terms hereof.
11.5 ENTIRE AGREEMENT. This Agreement (including all Exhibits
hereto) incorporates the entire agreement between the parties hereto with
respect to the subject hereof.
11.6 AMENDMENTS; WAIVER. This Agreement may not be amended or
modified, except by a written instrument signed by all of the General Partner(s)
and by Limited Partners holding at least seventy-five percent (75%) of the total
Percentage Interests of all Limited Partners. No course of dealing or omission
or delay on the part of any Partner in asserting or exercising any right
hereunder shall constitute or operate as a waiver of any such right. No waiver
of any provision hereof shall be effective, unless in writing and signed by or
on behalf of the Partner to be charged therewith. No waiver of any breach or
default under this Agreement shall be deemed a continuing waiver or waiver in
respect of any other or subsequent breach or default, unless expressly so stated
in writing.
11.7 GENDER AND NUMBER. Unless the context otherwise requires, when
used herein, the singular in-
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cludes the plural and vice versa, and the masculine includes the feminine and
neuter and vice versa.
11.8 BENEFIT. This Agreement is binding upon and inures to the
benefit of the parties hereto and, subject to the provisions hereof, their
respective heirs, legal representatives, successors and permitted assigns.
11.9 CAPTIONS. Captions are inserted for convenience only and shall
not be given any legal effect.
11.10 GOVERNING LAW. This Agreement shall be governed by,
interpreted and construed in accordance with the laws of the State of New York
as and for contracts entered into and wholly performed within the State of New
York, without reference to principles of conflicts of law.
11.11 VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
11.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11.13 LIMITED PARTNER CONSENT. In all instances stated herein
whereby the consent of the Limited Partner(s) is required, such consent must be
obtained from the Limited Partner(s) acting by a majority in Partnership
Interest, unless a greater percentage is specifically set forth herein.
11.14 WAIVER OF ACTION FOR PETITION. Each of the parties hereto
irrevocably waives during the term of the Partnership any right that it may have
to maintain any action for partition with respect to any property of the
Partnership.
68
<PAGE>
11.15 CONSENTS. In all instances stated herein whereby the consent
of any Partner is required, such consent shall not be unreasonably withheld,
delayed or conditioned. Each such consent shall be requested in writing, and
shall reference the Section or provisions with respect to which the consent is
being requested, and shall be executed by an authorized officer or agent of the
Partner giving the consent. If any Partner fails to respond within thirty (30)
days (or as may otherwise be provided herein) to a request for consent, such
consent shall be deemed given. If a Partner notifies the other that it is
withholding its consent, it shall give an explanation therefor.
11.16 TIME PERIODS. Time periods and deadlines within which a
decision must be made, a right must be exercised or an obligation must be
performed shall not be of the essence as long as the party that would be
adversely affected by strict enforcement of such time period has been acting
reasonably and in good faith to try to observe such deadlines and time periods.
11.17 ENFORCEMENT OF CONTRACTS WITH AFFILIATES. In the event that
the Partnership enters into a contract with an Affiliate of the Balazs Parent,
including the Contract, then the Sonesta GP shall have the sole right to enforce
the Partnership's rights under such contract. Similarly, if the Partnership
enters into a contract with an Affiliate of the Sonesta Parent, then the Balazs
GP shall have the sole right to enforce the Partnership's rights under such
contract. The party entitled to enforce any such contract on behalf of the
Partnership will also be entitled to retain any damages or other amounts which
are paid to the Partnership with respect to such enforcement.
69
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
GENERAL PARTNER:
HOTEL CORPORATION OF AMERICA
By: /S/
-------------------------------
Peter J. Sonnabend,
Vice President
LIMITED PARTNERS:
MARMONT HOTEL GROUP, INC.
By: /S/
-------------------------------
Andre Balazs, President
/S/
----------------------------------
ANDRE BALAZS
SONESTA SOHO INVESTMENT CORP.
By: /S/
-------------------------------
Peter J. Sonnabend,
Vice President
70
<PAGE>
EXHIBIT A
ALL that certain plot, piece or parcel of land, situate, lying and being in the
borough of Manhattan, City, County and State of New York, bounded and described
as follows:
BEGINNING at a point on the northwesterly corner of Mercer and Prince streets;
and
RUNNING THENCE northwardly along the westerly side of Mercer Street, 99 feet 8
inches;
THENCE westwardly and parallel or nearly so with Prince Street, 75 feet 1-1/4
inches;
THENCE southwardly and parallel with Mercer Street, 6 inches;
THENCE westwardly and parallel or nearly so with Prince Street, 24 feet 7-3/4
inches;
THENCE southwardly and parallel or nearly so with Mercer Street, 98 feet 8-3/4
inches to the northerly side of Prince Street; and
THENCE eastwardly along said northerly side of Prince Street, 100 feet 1-1/2
inches to the point or place of BEGINNING.
71
<PAGE>
EXHIBIT B
<TABLE>
<CAPTION>
INITIAL CAPITAL CONTRIBUTION PERCENTAGE INTEREST
<S> <C> <C>
GENERAL PARTNER
---------------
Sonesta GP $ 75,006.52 1%
LIMITED PARTNERS
----------------
Balazs GP $ 0 1%
Balazs LP 0 49%
Sonesta $3,675,319.40
</TABLE>
[TO BE REVISED TO INCLUDE GRAHAM & JAMES LEGAL FEES]
72
<PAGE>
EXHIBIT C
ACQUISITION COSTS
Purchase Price $ 3,000,000.00
Closing Adjustments (due to Seller) $ 8,914.45
Transfer Taxes
New York State $ 12,708.00
New York City $ 83,388.33
Total Title Premiums and Charges:
- Premium for Owners Policy $ 19,519.00
- Premium for Non-Imputation
Endorsement $ 3,903.00
- Recording Charges $ 325.00
- Survey Update $ 300.00
- Municipal Searches $ 175.00
- Gratuity $ 500.00
Lender Transaction Costs $ 8,174.35
TOTAL ACQUISITION COSTS $ 3,137,907.13
73
<PAGE>
EXHIBIT D
<TABLE>
<S> <C>
Getnick & Getnick Legal Fees $ 67,418.79
Skadden, Arps Legal Fees 25,000.00
Payment to Group 99, Inc. for
acquisition of (i) Civale &
Trovato lien and prepaid legal
fees to Ross & Cohen ($485,000)
and (ii) Du-Rite Construction
Co. lien ($35,000) 520,000.00
----------
$ 612,418.79
</TABLE>
74
<PAGE>
REPORT TO SHAREHOLDERS
--------------------------------------------------------------------------------
The hotel industry is stronger today than it has been in many years. During
the 1980's, favorable tax laws and ready capital combined to produce a period of
hotel construction that added to the supply of hotel rooms at a far greater rate
than demand warranted. This, in turn, resulted in several years of stagnant
average room rates, but, fortunately, also limited new hotel construction. Thus,
with increasing demand in 1994, our industry saw room revenues increase 8.6%
over a year ago--a sign that our industry is on the upswing.
For Sonesta, 1994 was a very good year. Without exception, every one of the
hotels and resorts we operate performed better in 1994 than in 1993. In
particular, our Royal Sonesta Hotel, Boston (Cambridge) and Royal Sonesta Hotel,
New Orleans had record years. These two hotels have the greatest impact on our
operating results, since we own Royal Sonesta, Boston and have a long-term lease
on Royal Sonesta, New Orleans.
Among our managed hotels, Sonesta Beach Resort, Bermuda performed well,
although Bermuda's hotel industry is still not seeing the profitability it
enjoyed through most of the 1980's. Sonesta Beach Resort, Key Biscayne had a
good year considering that it was the hotel's first full year of operation since
Hurricane "Andrew" caused a 13-month closure. Miami has become a world-class
city, but, unfortunately, business, particularly from Europe, has fallen off
significantly. Sonesta Beach Hotel & Casino, Curacao, enjoyed a strong second
year of operations and will undoubtedly continue to improve.
Our seven operations in Egypt also did better in 1994, although isolated
acts of terrorism in upper Egypt crippled the river cruise business. Sonesta
operates two deluxe cruise ships. Occupancies remain at acceptable levels in
Egypt, but the tourism industry there will continue to suffer until the country
is again perceived as stable and safe. During the year we opened the 250-room
Sonesta Beach Resort, Sharm el Sheikh which is considered one of the most
beautiful resorts in the Middle East. This hotel has performed well in its first
few months of operation, and should continue to do well, Sharm el Sheikh being
somewhat removed from the troubled areas of Egypt.
Our hotels and resorts will, in 1995, be in the best condition ever.
Sonesta Beach, Sharm el Sheikh is new, having opened last spring. Sonesta Beach,
Curacao and Sonesta Hotel, Port Said are each only two years old. Sonesta Beach,
Key Biscayne continues to look "like new" following its complete renovation in
the wake of Hurricane "Andrew." Sonesta Beach, Bermuda and Sonesta Hotel, Cairo
are both undergoing complete renovations. The Royal Sonestas, in Boston and New
Orleans, have always been maintained in "as new" condition.
We eagerly anticipate the April opening of our 243-room Chateau Sonesta
Hotel in New Orleans. New Orleans has been one of the strongest hotel markets in
the United States over the past three years--due largely to New Orleans'
popularity with tourists and conventioneers--and is one of the few areas where
new hotel development is warranted. Chateau Sonesta will complement our Royal
Sonesta Hotel in the French Quarter of New Orleans, and will benefit from its
proximity to that hotel.
In December 1994 we entered into agreements to create two new hotels: one a
320-room beach resort on the Pacific Coast of Costa Rica, the other a 78-room
deluxe hotel in the SoHo area of New York City. Both projects, involving local
partners, are contingent on obtaining financing. We are excited about both
opportunities and we look forward to reporting on our progress in realizing
these projects during this year.
January 1995 saw the opening of a new licensed property: Sonesta Hotel, in
Santiago, Chile. This hotel is, at present, our only Sonesta in South America
and it is a jewel. We continue to explore other opportunities in South America.
Please review our "Management's Discussion and Analysis of Results of
Operation and Financial Condition", as well as the notes to financial statements
which follow, for a more detailed analysis of our company.
We appreciate the support of you, our shareholders, as well as of our many
customers and employees.
/s/ Roger P. Sonnabend
ROGER P. SONNABEND
Chairman of the Board
and Chief Executive Officer
/s/ Paul Sonnabend
PAUL SONNABEND
President
March 10, 1995
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
--------------------------------------------------------------------------------
The company's consolidated financial statements include the revenues,
expenses, assets and liabilities of the Royal Sonesta Hotel, Boston
(Cambridge) and the Royal Sonesta Hotel, New Orleans. The Boston (Cambridge)
property is owned by the Company, and the New Orleans hotel is operated under
a long-term lease. Also included in revenues is fee income from managed
hotels and license fees. Expenses include the costs associated with managing
these properties.
RESULTS OF OPERATIONS
REVENUES: Revenues increased in 1994 by $4,729,000 compared to
1993. The 1994 increase is primarily due to a $3,137,000 increase at the
Royal Sonesta Hotel, New Orleans, an increase of $1,535,000 at the Royal
Sonesta Hotel, Boston (Cambridge), and a net increase of $57,000 from
management, license and service fees, and income from other sources. The
increases at the New Orleans hotel resulted primarily from an increase in
occupancy from 73.5% to 79.6%, a 5.1% increase in average room rate, and
increased food and beverage revenues. The increase at the Boston (Cambridge)
hotel was primarily caused by a 5.9% increase in average room rate and
increased food and beverage revenues, and included a slight increase in
occupancy from 75.1% to 76.5%.
1993 VERSUS 1992: Revenues decreased in 1993 by $575,000 compared to
1992. The 1992 gross revenues included $1,739,000 of income received in 1992
for previously deferred management fees, and $259,000 for current year
management and service fees from Sonesta Sanibel Harbour Resort (see Note 2--
Operations). Excluding these amounts, the remaining 1993 increase of $1,423,000
was principally due to a $2,133,000 increase at the Royal Sonesta Hotel, Boston
(Cambridge), an increase of $315,000 at the Royal Sonesta Hotel, New Orleans,
offset by a decrease of $658,000 in management, license and service fee income
and a decrease of $367,000 from other sources. The increase at the Boston
(Cambridge) hotel was principally caused by an increase in occupancy from 72.9%
to 75.1% and a 6.0% increase in average room rate. The increase at the
New Orleans hotel resulted from a 2.7% increase in average room rate and
increased food and beverage revenues, partially offset by a slight decrease in
occupancy from 75.1% to 73.5%. The decrease in management, license, and service
fees was due principally to decreases of $637,000 in Egypt and $299,000 in
Orlando, partially offset by an increase of $158,000 in Curacao. The 1993 fee
revenue decrease in Egypt was the result of an overall drop-off in tourism due
to ongoing fear of violence by extremists. The 1993 revenue decrease in Orlando
was due to the November 1, 1992 conversion from a management agreement to a
license agreement. The 1993 revenue increase of $158,000 in Curacao was the
result of increased management and marketing fees of $443,000 partially offset
by a $285,00 decrease in pre-opening and purchasing fees. The Curacao property
began operations in November 1992.
OPERATING INCOME: Operating income increased in 1994 by $1,254,000
compared to 1993. Operating income improved by $581,000 at the Company's
Boston (Cambridge) hotel, and by $544,000 at its New Orleans hotel after
covering an increase in rent expense under the lease of $1,216,000 due to
increased profits, and an increase in the percentage rent as of October 1994
(see also Note 9--Commitments and Contingencies). The remaining 1994 increase
in operating income of $129,000 is primarily a result of net increases in
revenues from management fees and other sources, and decreased operating costs.
1993 VERSUS 1992: Operating income for 1993 was $1,652,000 compared to
operating income of $5,022,000 in 1992. The 1992 income included several items
from the Sonesta Sanibel Harbour Resort transaction including the above-
mentioned management and service fees of $1,998,000, a credit to cost and
operating expenses--other of $1,792,000, and a credit to administrative and
general expenses of $158,000 (see Note 2--Operations). Excluding these amounts
the Company's operating income increased by $578,000. Operating income improved
by $584,000 at the Company's Boston (Cambridge) hotel, and by $126,000 at its
New Orleans hotel after covering an increase of $230,000 in maintenance costs.
The remaining 1993 net decrease of $132,000 is primarily a result of increases
in advertising and promotion expenses, decreases in management fees described
above, partially offset by decreased operating costs, primarily administrative
and general.
OTHER INCOME AND DEDUCTIONS
The gains on sales of assets in 1993 and 1992 result almost entirely from
the sale in January 1992 of the Company's fifty percent ownership interest in
the Crystal Casino Aruba and the conversion of the management agreement for
the Sonesta Hotel, Beach Club & Casino, Aruba to a license agreement. This
transaction resulted in a $3,000,000 gain in 1993, and a $5,710,000 gain in
1992.
The $637,000 equity in the net loss of hotel and casino in 1994 represents
the company's 22% share in the net loss of the Sonesta Beach Hotel & Casino
in Curacao (see Note 3--Investments in Hotels).
The Company's interest expense increased from $1,192,000 in 1993 to
$1,537,000 in 1994. This increase is
2
<PAGE>
due to an increase in the interest rate on the mortgage loan on the Boston
(Cambridge) hotel in April 1994 from 5% to LIBOR plus two percentage points
(approximately 6.7% for the remainder of 1994), and the additional borrowing of
a $2,000,000 bank term loan in May 1994 (see Note 6--Long-Term Debt). The
reduction in interest expense from $1,509,000 in 1992, to $1,192,000 in 1993
is the result of the reduction in debt and capitalized lease obligations from
$26,380,000 at the beginning of 1992 to $20,591,000 at December 31, 1993. Also,
effective April 1992 and continuing until April 1994, the interest rate payable
on the Company's mortgage loan on the Boston (Cambridge) hotel was reduced to
5% per annum.
Interest income decreased from $942,000 in 1993 to $251,000 in 1994, a
$691,000 decrease. Included in 1993 was interest income of $550,000 on a
$5,000,000 mortgage note receivable which the Company did not record as
income in 1994 (see Note 4--Long-Term Receivables and Advances). The
remaining decrease of $141,000 is principally due to lower income on the
Crystal Casino note receivable, which was repaid in full in 1994, and lower
short-term investment interest income due to the Company's decreased cash
balances. Interest income of $942,000 in 1993 consisted of interest of
$550,000 on the $5,000,000 mortgage note receivable; interest of $169,000 on
the Aruba casino sale related receivable; and $223,000 principally from short
term investment of the Company's cash balances. In 1992, interest income of
$2,231,000 consisted of interest of $792,000 on the $5,000,000 mortgage note
receivable, including until June 30, 1992 deferred interest of $242,000;
interest of $204,000 on a DM 10,000,000 mortgage note receivable until its
repayment in April 1992; interest of $268,000 on the Aruba casino sale
related receivable; deferred interest of $364,000 received in March 1992 as
part of the Sonesta Sanibel Harbour Resort & Spa transaction; and the
remainder principally from short term investment of the Company's cash
balances.
The foreign exchange loss of $356,000 in 1992 resulted from a loss of
$544,000 on a DM 10,000,000 mortgage note receivable, which was repaid in
April 1992, less a gain of $188,000 on net Dutch guilder current liabilities.
FEDERAL, STATE AND FOREIGN INCOME TAXES
The total tax expense in 1994 is higher than the statutory tax rate due to
the provisions for state income taxes, in particular on the New Orleans
hotel's profits. The total tax expense in 1992 is significantly higher than
the expected standard tax rate due to the provision for income taxes on
previously untaxed earnings of a foreign subsidiary that, until 1992, had
been permanently invested overseas.
LIQUIDITY AND CAPITAL RESOURCES
The Company has cash and cash equivalents of approximately $3,670,000 at
December 31, 1994. The Company has a $5,000,000 line of credit available
until December 31, 1997 and a $2,000,000 line available until September 30,
1995. A total of $500,000 was outstanding under these credit lines at
December 31, 1994.
A foreign subsidiary has approximately $3,050,000 in cash and cash
equivalents. In the event these funds are remitted to the United States,
deferred income taxes of approximately $1,037,000 would become currently
payable.
Company management believes that its present cash balances plus its
available borrowing capacity are more than adequate to meet its cash
requirements for 1995 and beyond.
SELECTED QUARTERLY FINANCIAL DATA
Selected quarterly financial information for the years ended December 31,
1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(in thousands except for per share data)
1994
----------------------------------------
1st 2nd 3rd 4th
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $12,438 $14,721 $12,210 $13,952
Operating income 242 2,003 172 489
Net income (loss) (43) 905 (324) (74)
Net income (loss) per share of common stock $ (0.02) $ 0.44 $ (0.16) $ (0.04)
</TABLE>
<TABLE>
<CAPTION>
(in thousands except for per share data)
1993
----------------------------------------
1st 2nd 3rd 4th
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues $11,059 $13,378 $11,225 $12,930
Operating income (loss) (401) 1,527 (52) 578
Net income (loss) 1,648 926 (38) 163
Net income (loss) per share of common stock $ 0.79 $ 0.45 $ (0.02) $ 0.08
</TABLE>
3
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
5-YEAR SELECTED FINANCIAL DATA
------------------------------------------------------------------------------
(in thousands except for per share data)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues....................................................... $ 53,321 $ 48,592 $ 49,167 $ 49,986 $ 63,941
Operating income (loss)........................................ 2,906 1,652 5,022 (16,721) 2,367
Net interest income (expense).................................. (1,286) (250) 722 (1,895) (3,959)
Equity in net loss of hotel and casino......................... (637) -- -- -- --
Foreign exchange (gain) loss................................... (46) 14 (356) 726 --
Gain (loss) on sales of assets................................. (90) 3,005 5,707 34,779 (66)
Other.......................................................... 118 79 105 46 43
-------- -------- -------- -------- --------
Income (loss) before income taxes and cumulative effect
of accounting change......................................... 965 4,500 11,200 16,935 (1,615)
Federal, foreign and state income tax provision (benefit)...... 501 1,801 5,848 13,217 (200)
-------- -------- -------- -------- --------
Income (loss) before cumulative effect of accounting
change....................................................... 464 2,669 5,352 3,718 (1,415)
Cumulative gain from a change in an accounting
principle...................................................... -- -- 292 -- --
-------- -------- -------- -------- --------
Net income (loss)......................................... $ 464 $ 2,669 $ 5,664 $ 3,718 $ (1,415)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Per share of Common Stock:
Income (loss) before cumulative effect of accounting
change...................................................... $ .22 $ 1.30 $ 2.02 $ 1.27 $ (.49)
Cumulative gain from change in an accounting
principle................................................... -- -- .11 -- --
-------- -------- -------- -------- --------
Net income (loss)......................................... $ .22 $ 1.30 $ 2.13 $ 1.27 $ (.49)
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Cash dividends declared....................................... $ .30 $ .30 $ -- $ 1.00 $ .12
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Working capital (deficit)...................................... $ (3,318) $ (1,586) $ 2,550 $(26,005) $(10,676)
Net property and equipment..................................... $ 28,431 $ 30,432 $ 32,184 $ 35,459 $ 64,329
Total assets................................................... 60,114 59,787 57,903 71,145 100,466
Long-term debt and capitalized lease obligations
including currently payable portion.......................... 21,204 20,591 21,807 26,380 58,998
Redeemable preferred stock..................................... 294 294 294 294 294
Common stockholders' equity.................................... 21,520 21,693 19,689 20,173 25,112
Common stockholders' equity per share.......................... 10.37 10.45 9.45 6.93 8.60
Total revenues including hotels operated under
management contracts......................................... $137,584 $105,371 $116,387 $136,457 $152,746
Common shares outstanding at end of year....................... 2,075 2,075 2,083 2,911 2,921
</TABLE>
Market price data for the Company's common stock showing high and low prices
by quarter for each of the last two years is as follows:
<TABLE>
<CAPTION>
NASDAQ Quotations
------------------------------
1994 1993
------------- -----------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First.................................... 8 3/4 7 3/4 5 1/2 4 3/4
Second................................... 8 3/4 7 7/8 6 1/4 5
Third.................................... 8 1/2 8 8 1/4 6
Fourth................................... 9 3/8 8 3/8 9 7 1/2
</TABLE>
The Company's common stock trades on The NASDAQ Stock Market under the symbol
SNSTA. As of March 10, 1995 there were 597 holders of record of the Company's
common stock.
A copy of the Company's form 10-K Report, which is filed annually with the
Securities and Exchange Commission, is available to stockholders. Requests
should be sent to the Office of the Secretary at the Company's Executive
Offices.
4
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
--------------------------------------------------------------------------------
For the three years ended December 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rooms........................................... $31,179,197 $28,069,679 $27,483,871
Food and beverage............................... 13,140,893 11,703,017 10,457,066
Management, license and service fees............ 4,731,460 4,499,050 7,155,802
Other........................................... 4,269,871 4,320,734 4,070,573
----------- ----------- -----------
53,321,421 48,592,480 49,167,312
----------- ----------- -----------
Costs and expenses:
Costs and operating expenses.................... 22,344,098 20,922,759 20,191,831
Advertising and promotion....................... 4,694,613 4,265,209 3,829,901
Administrative and general...................... 8,755,289 8,143,765 8,716,861
Human resources................................. 1,034,247 910,715 846,937
Maintenance..................................... 3,871,631 3,872,546 3,573,665
Rentals......................................... 4,080,280 2,913,445 2,961,044
Property taxes.................................. 1,206,188 1,111,474 984,829
Depreciation and amortization................... 4,428,737 4,800,279 4,832,583
Other........................................... -- -- (1,792,349)
----------- ----------- -----------
50,415,083 46,940,192 44,145,302
----------- ----------- -----------
Operating income.................................. 2,906,338 1,652,288 5,022,010
----------- ----------- -----------
Other income (deductions):
Interest expense................................ (1,536,883) (1,191,967) (1,508,522)
Interest income................................. 251,310 941,751 2,230,527
Equity in net loss of hotel and casino.......... (637,285) -- --
Foreign exchange gain (loss).................... (46,383) 13,565 (355,742)
Gain (loss) on sales of assets.................. (89,558) 3,005,329 5,706,843
Gain from casualty insurance.................... 117,685 79,122 104,537
----------- ----------- -----------
(1,941,114) 2,847,800 6,177,643
----------- ----------- -----------
Income before income taxes and cumulative effect
of accounting change............................. 965,224 4,500,088 11,199,653
Federal, foreign and state income tax provision... 501,525 1,801,226 5,848,431
----------- ----------- -----------
Net income before cumulative effect of accounting
change........................................... 463,699 2,698,862 5,351,222
Cumulative gain from change in an accounting
principle........................................ -- -- 292,403
----------- ----------- -----------
Net income........................................ 463,699 2,698,862 5,643,625
Retained earnings at beginning of year............ 26,267,732 24,205,995 18,575,741
Cash dividends on common stock.................... (622,584) (623,754) --
Cash dividends on preferred stock................. (13,371) (13,371) (13,371)
----------- ----------- -----------
Retained earnings at end of year.................. $26,095,476 $26,267,732 $24,205,995
----------- ----------- -----------
----------- ----------- -----------
Earnings per share of common stock:
Income before cumulative effect of accounting
change......................................... $ .22 $1.30 $2.02
Cumulative gain from change in an accounting
principle...................................... -- -- .11
----- ----- -----
Net income........................................ $ .22 $1.30 $2.13
----- ----- -----
----- ----- -----
Dividends paid per common share................... $ .30 $ .30 --
Dividends paid per preferred share................ $1.25 $1.25 $1.25
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
------------------------------------------------------------------------------
December 31, 1994 and 1993
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................... $ 3,668,698 $ 6,919,028
Accounts and notes receivable:
Trade, less allowance of $84,249 ($99,996 in 1993)
for doubtful accounts........................... 4,996,610 4,437,474
Interest receivable............................... 3,281 8,985
Current portion of long-term receivables.......... 26,083 123,184
Other............................................. 892,906 484,079
----------- -----------
Total accounts and notes receivable........... 5,918,880 5,053,722
Refundable income taxes........................... 958,737 --
Inventories....................................... 653,582 697,257
Prepaid expenses.................................. 357,818 401,417
----------- -----------
Total current assets............................ 11,557,715 13,071,424
LONG-TERM RECEIVABLES AND ADVANCES.................. 14,477,188 16,283,549
INVESTMENTS IN HOTELS............................... 5,648,024 --
PROPERTY AND EQUIPMENT, AT COST:
Land............................................... 2,201,594 2,336,156
Buildings.......................................... 30,866,358 53,787,686
Furniture and equipment............................ 13,409,315 17,511,977
Leasehold improvements............................. 483,011 481,769
----------- -----------
46,960,278 74,117,588
Less accumulated depreciation and amortization..... 18,529,571 43,685,397
----------- -----------
Net property and equipment........................ 28,430,707 30,432,191
----------- -----------
$60,113,634 $59,787,164
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
----------- -----------
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to banks............................ $ 500,000 $ --
Current portion of long-term debt and
capitalized lease obligations................... 936,775 1,464,642
Accounts payable.................................. 5,440,160 5,123,751
Federal, foreign and state income taxes........... 290,227 1,181,430
Current portion of deferred taxes................. 623,108 1,933,998
Accrued liabilities:
Salaries and wages.............................. 1,662,219 1,738,757
Rentals......................................... 3,217,614 1,832,600
Interest........................................ 142,946 87,873
Taxes, other than income taxes.................. 37,431 33,051
Employee benefits............................... 1,134,365 292,224
Other........................................... 890,822 968,722
----------- -----------
7,085,397 4,953,227
----------- -----------
Total current liabilities............ 14,875,667 14,657,048
LONG-TERM DEBT...................................... 20,088,302 18,847,698
CAPITALIZED LEASE OBLIGATIONS....................... 179,104 278,616
DEFERRED FEDERAL AND STATE INCOME TAXES............. 3,021,238 3,700,028
OTHER NON-CURRENT LIABILITIES....................... 134,855 317,050
REDEEMABLE PREFERRED STOCK, $25 PAR VALUE,
AT REDEMPTION VALUE............................... 294,167 294,167
COMMITMENTS AND CONTINGENCIES
COMMON STOCKHOLDERS' EQUITY:
Common Stock:
Class A, $.80 par value
Authorized--10,000,000 shares
Issued--3,051,088 shares at stated value......... 3,488,382 3,488,382
Retained earnings............................... 26,095,476 26,267,732
Treasury shares--975,807 at cost................... (8,063,557) (8,063,557)
----------- -----------
21,520,301 21,692,557
----------- -----------
Total common stockholders' equity......... $60,113,634 $59,787,164
----------- -----------
----------- -----------
</TABLE>
7
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
For the three years ended December 31, 1994
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
CASH PROVIDED BY OPERATING
ACTIVITIES
Net Income............................ $ 463,699 $2,698,862 $5,643,625
Items not (providing) requiring cash
Deferred interest income........... -- -- (241,443)
Foreign exchange (gain) loss....... 46,383 (13,565) 355,742
Pension (benefit) expense.......... 551,472 226,012 (240,647)
Depreciation and amortization...... 4,428,737 4,800,279 4,832,583
Deferred federal and state income
taxes.......................... (1,989,680) (843,570) (1,070,605)
Gain from casualty insurance....... (117,685) (79,122) (104,537)
(Gain) loss on sales of assets..... 89,558 (3,005,329) (5,706,843)
Provision for doubtful accounts.... (22,000) 32,100 26,286
Equity in loss of hotel and casino. 637,285 -- --
Other.............................. -- -- 22,007
Changes in assets and liabilities
Accounts and notes receivable...... (1,027,816) (1,027,165) 1,831,829
Refundable income taxes............ (958,737) -- --
Inventories........................ 43,675 (12,307) (71,639)
Prepaid expenses................... 43,599 (64,183) (120,747)
Accounts payable................... 270,233 959,836 18,393
Federal, foreign and state income
taxes.......................... (891,203) 793,482 (7,230,541)
Accrued liabilities................ 1,393,836 (320,030) 537,484
---------- ---------- ----------
Cash provided (used) by
operating activities......... 2,961,356 4,145,300 (1,519,053)
CASH PROVIDED (USED) BY INVESTING ACTIVITIES
Proceeds from sales of assets........ 352,934 10,200 3,668,988
Proceeds from casualty insurance..... 117,685 79,122 331,910
Expenditures for property and
equipment...................... (2,861,744) (3,041,196) (1,852,102)
Investments in hotels................ (6,285,309) -- --
New loans and advances............... (595,283) (5,863,823) (112,684)
Payments received on long-term
receivables and advances....... 2,582,236 2,000,628 9,783,097
---------- ---------- ----------
Cash provided (used) by
investing activities......... (6,689,481) (6,815,069) 11,819,209
CASH PROVIDED (USED) BY FINANCING ACTIVITIES
Net borrowings under line of credit
agreements......................... 500,000 -- --
Proceeds from issuance of long-term
debt............................... 2,000,000 -- --
Payments on long-term debt........... (633,558) (298,009) (3,721,510)
Payments on capitalized lease
obligations........................ (753,217) (918,314) (850,730)
Purchase of common stock............. -- (57,700) (6,115,197)
Cash dividends paid.................. (635,955) (325,833) (13,371)
---------- ---------- ----------
Cash provided (used) by
financing activities.......... 477,270 (1,599,856) (10,700,808)
(Gain) loss from effect of exchange
rate changes on cash................... 525 (4,925) (4,216)
---------- ---------- -----------
Net decrease in cash...................... (3,250,330) (4,274,550) (404,868)
Cash and cash equivalents at beginning
of year................................. 6,919,028 11,193,578 11,598,446
---------- ---------- -----------
Cash and cash equivalents at end of year.. $3,668,698 $6,919,028 $11,193,578
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
8
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
OPERATIONS:
The consolidated financial statements include the results of operations of
wholly owned and leased properties and fee income from managed and licensed
properties. The equity method of accounting is used for the Company's
investments in hotels. Under the equity method, original investments are
recorded at cost and adjusted by the Company's share of undistributed earnings
or losses of these hotels. The Company's operations are described in more
detail in Note 2.
FOREIGN CURRENCY TRANSLATION:
Assets and liabilities denominated in foreign currency are translated at
end of year rates, and income and expense items are translated at weighted
average rates during the period. The net result of such translation is charged
or credited to the income statement.
INVENTORIES:
Merchandise and supplies are stated at the lower of cost (first-in, first-
out method) or market.
PROPERTY AND EQUIPMENT:
Depreciation and amortization of items of property and equipment are
computed generally on the straight-line method based on the following estimated
useful lives:
Buildings
Owned properties 20 to 40 years
Capital leases Initial lease periods
Furniture and equipment:
Located in owned properties 2 to 10 years
Located in leased properties 2 to 10 years or
remaining lease terms,
including option terms
Lease improvements Remaining lease terms,
including option terms
INCOME TAXES:
The Company and its United States subsidiaries file a consolidated federal
income tax return. Where appropriate, federal and foreign income taxes are
provided on earnings of foreign subsidiaries that are intended to be remitted to
the parent company. At December 31, 1994, income taxes have been provided for
all unremitted earnings of foreign subsidiaries.
CHANGE IN ACCOUNTING PRINCIPLE FOR INCOME TAXES:
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement No. 109, "Accounting for Income Taxes." The Company adopted the
provisions of the new standard in its financial statements for the year ended
December 31, 1992. As permitted by the Statement, prior year financial
statements have not been restated to reflect the change in accounting method.
The cumulative effect as of January 1, 1992 of adopting Statement 109 increased
net income by $292,403, or $.11 per share. The adoption of FASB 109 had no
effect on 1992, 1993 or 1994 earnings.
Under Statement 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Prior to the adoption of
Statement 109, income tax expense was determined using the deferred method.
Deferred tax expense was based on items of income and expense that were reported
in different years in the financial statements and tax returns and were measured
at the tax rate in effect in the year the difference originated.
PER SHARE AMOUNTS:
Income per share of common stock is computed using the weighted-average
number of shares outstanding (2,075,281, 2,080,998 and 2,654,067, in 1994, 1993,
and 1992, respectively) and allows for preferred dividends.
STATEMENT OF CASH FLOWS:
Cash and cash equivalents consist of cash on hand and short-term, highly
liquid investments with maturities of less than 91 days, which are readily
convertible into cash.
Cash paid for interest in 1994, 1993 and 1992 was approximately $1,482,000,
$1,189,000 and $1,597,000, respectively. Cash paid for income taxes in 1994,
1993 and 1992 was approximately $4,340,000, $1,851,000 and $13,857,000,
respectively.
In January 1992 the Company realized a net gain of $5,710,000 from a sale
of Aruban assets. The Company received $3,600,000 of the proceeds in cash and a
receivable of $2,110,000. In connection with the same sale transaction, in March
1993 the Company realized an additional net gain and recorded a receivable of
$3,000,000 (see Note 2--Operations).
2. OPERATIONS
The Company's operations in 1994 consisted of the Royal Sonesta Hotels in
Boston (Cambridge), Massachusetts, and New Orleans, Louisiana. The Company
manages, on a fee basis, Sonesta hotels in Bermuda; Curacao; Key Biscayne,
Florida; and in Cairo, Sharm el Sheikh, Hurghada, El Gouna and Port Said, Egypt.
Also in Egypt, the Company manages two Nile River cruise ships.
The Sonesta Beach Hotel & Casino, in Curacao, which opened in November of
1992, is operated by the Company under a long-term management agreement.
Pursuant to the terms of the management agreement, in May 1994 the Company
invested $2,000,000 in the hotel and casino for a 22% equity ownership. The
Company uses the equity method of accounting for this investment
9
<PAGE>
--------------------------------------------------------------------------------
(see Note 3--Investments in Hotels). The Company entered into a $2,000,000 loan
agreement to finance this investment (see Note 6--Long-Term Debt).
In December 1994, Company subsidiaries entered into a partnership, through
which it acquired a 50% interest in a building in the SoHo district of New York
City. Together with its partner(s), the Company intends to develop the building
as a 78-room deluxe hotel which will include retail space. This project is
contingent on obtaining financing. At December 31, 1994, the Company's
investment was $3,782,000.
In December 1994, Company subsidiaries entered into agreements to
participate in a partnership to develop a 320-room beach resort and casino in
Guanacaste, Costa Rica, which will be operated by the Company upon its
completion. The Company's equity investment in this project is not expected to
exceed $2,000,000. In addition, the Company is committed to guarantee certain
debt service payments following the opening of the hotel. This project is
contingent on obtaining financing. At December 31, 1994, the Company had
advanced $503,000 to acquire the hotel site and for other project-related
expenses.
The Sonesta Beach Resort, Sharm el Sheikh, Egypt, opened in May 1994. The
Company operates the hotel under a long-term management agreement, under which
it receives management and incentive fees. A subsidiary of the Company has
loaned $800,000 to the owner of the Resort (see Note 4--Long-Term Receivables).
The Sonesta Beach Resort in Key Biscayne, Florida is operated by the
Company under a long-term management agreement. The hotel reopened on October 1,
1993, after repairs of the extensive damage suffered from Hurricane "Andrew"
in August 1992 had been completed. During 1993 and 1994, the Company loaned
approximately $5,475,000 to the owner of the Resort (see Note 4--Long-Term
Receivables). Of these loans, a total of approximately $2,791,000 was spent on
building improvements and certain furniture, fixtures and equipment for the
hotel. The balance of $2,684,000 enabled the owner to meet all of its
obligations related to the hotel, including the cost of reconstruction and
reopening. In 1994, payments received for interest on the Company's second
mortgage were used to reduce the principal balance of one of these loans. At
December 31, 1994, the Company's receivable from the Key Biscayne property
aggregated $13,369,000. Management believes that all amounts due from the hotel
will be realized out of future hotel cash flow and/or future refinancing or sale
proceeds.
In 1994, the Company exercised the first of three ten-year options to renew
its lease of the Royal Sonesta Hotel in New Orleans (see Note 9--Commitments and
Contingencies).
During the first quarter of 1993, the Company had a pre-tax $3,000,000 gain
on sale, which resulted from the recognition of previously deferred income
following the sale in 1992 of its Aruban assets. In 1992, the Company had a pre-
tax gain on sale of $5,710,000, related to the same transaction.
On March 31, 1992, the Company completed the assignment of its rights under
its management agreement for the Sonesta Sanibel Harbour Resort & Spa to the
hotel owner. In connection with the transaction, the owner paid the Company
approximately $6,460,000. The payment included repayment of a $2,000,000 loan
previously made to the owner together with $400,000 of accrued interest. As a
result of this transaction, in 1992 the Company recognized management fee income
of $1,739,000 representing payment of deferred fees; a credit to costs and
expenses-other of $1,792,000 representing recovery of amounts paid to the owner
and expensed in 1991; interest income of $364,000; and a credit to
administrative and general expenses of $158,000 representing recovery of
advances made in previous years that had been expensed as nonrecoverable.
Included in the 1992 administrative and general expense is a corporate
office restructuring charge of $1,093,000.
Gross revenues for hotels operated by the Company under management
contracts, by geographic area, are summarized below:
<TABLE>
<CAPTION>
(in thousands)
(Unaudited)
----------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
United States $20,107 $ 4,678 $28,474
Caribbean 42,562 37,653 22,885
Egypt 21,594 14,448 15,861
------- ------- -------
$84,263 $56,779 $67,220
------- ------- -------
------- ------- -------
</TABLE>
Sonesta has granted licenses, for which it receives fees, for the use of
its name for hotels in Jerusalem, Israel; two hotels on the island of Aruba; and
a hotel in Santiago, Chile.
Costs and operating expenses for owned and leased hotels are summarized
below:
<TABLE>
<CAPTION>
(in thousands)
------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Direct departmental costs:
Rooms $ 7,786 $ 7,206 $ 7,111
Food and beverage 10,209 9,419 8,761
Other 2,576 2,476 2,587
------- ------- -------
20,571 19,101 18,459
Heat, light and power 1,773 1,822 1,733
------- ------- -------
$22,344 $20,923 $20,192
------- ------- -------
------- ------- -------
</TABLE>
Direct departmental costs include payroll expense and related payroll
burden, the cost of food and beverage consumed and other departmental costs.
10
<PAGE>
--------------------------------------------------------------------------------
Segment data by geographic area follows:
<TABLE>
<CAPTION>
(in thousands)
Revenues
------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
United States $50,865 $46,705 $47,361
Other 2,456 1,887 1,806
------- ------- -------
Consolidated $53,321 $48,592 $49,167
------- ------- -------
------- ------- -------
<CAPTION>
Operating income
------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
United States $ 2,226 $ 856 $ 4,110
Other 680 796 912
------- ------- -------
Consolidated $ 2,906 $ 1,652 $ 5,022
------- ------- -------
------- ------- -------
<CAPTION>
Identifiable Assets
------------------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
United States $52,813 $51,917 $46,403
Other 2,674 951 306
Corporate 4,627 6,919 11,194
------- ------- -------
Consolidated $60,114 $59,787 $57,903
------- ------- -------
------- ------- -------
</TABLE>
3. INVESTMENTS IN HOTELS
Included in the consolidated balance sheets of the Company are the
following investments, at equity (see Note 2--Operations):
<TABLE>
<CAPTION>
(in thousands)
-----------------
December 31, 1994
-----------------
<S> <C>
Sonesta Beach Hotel & Casino, Curacao, N.A. $1,363
SoHo hotel project, New York City 3,782
Guanacaste hotel project, Costa Rica 503
------
$5,648
------
------
</TABLE>
In May 1994 the Company acquired a 22% equity interest in the Sonesta Beach
Hotel & Casino, Curacao for a payment of $2,000,000. The following table
presents summarized financial information of the hotel for 1994:
<TABLE>
<CAPTION>
(in thousands)
----------------------------
Statement of Operations Year Ended December 31, 1994
----------------------------
<S> <C>
Revenues $17,736
Costs and expenses 21,994
-------
Net loss $ 4,258
-------
-------
(in thousands)
----------------------------
Balance Sheet December 31, 1994
----------------------------
Current assets $ 3,988
Non-current assets 42,285
-------
$46,273
-------
-------
Current liabilities $ 6,466
Long-term liabilities 41,944
Shareholders' capital deficiency (2,137)
-------
$46,273
-------
-------
</TABLE>
Included in the hotel's costs and expenses is depreciation and amortization
expense of approximately $3,519,000.
Included in the Company's statement of operations for 1994 is equity in net
loss of $637,285, which represents the Company's 22% share of the net loss for
the period June to December 1994.
4. LONG-TERM RECEIVABLES AND ADVANCES
<TABLE>
<CAPTION>
(in thousands)
-------------------------------
December 31 December 31
1994 1993
----------- -----------
<S> <C> <C>
The Sonesta Beach Resort, Key
Biscayne, Florida
Second mortgage receivable,
14-1/2% interest (of which 11% is
payable quarterly and 3-1/2%
deferred until maturity) due
12/31/97 (a) $ 5,000 $ 5,000
Deferred interest receivable 2,306 2,306
$6,500,000 fourth mortgage
receivable. 10% simple interest due
12/31/04, net of $5,500,000
reserve (a) 1,000 1,000
Loan to owner (b) 2,272 2,684
Loans to owner (c) 2,791 2,501
The Crystal Casino, Aruba (d) -- 1,926
Sharm el Sheikh (e) 800 600
Other 334 390
------- -------
Total long-term receivables $14,503 $16,407
Less current portion 26 123
------- -------
Net long-term receivables $14,477 $16,284
------- -------
------- -------
<FN>
(a) The Company's mortgage notes receivable are subordinate to a first mortgage
of $23,338,000 at December 31, 1994. The maturity date of the first
mortgage loan is October 1, 2000. Based on the Company's analysis of the
present situation in the hotel industry and generally depressed hotel real
estate values, it has stopped, effective July 1, 1992, recording as income
the deferred portion of interest on the second mortgage. Interest received
on the second mortgage in 1994 has been used to reduce the principal
balance of a loan made to the owner of the hotel (see Note 4(b) below).
(b) A subsidiary of the Company has loaned $2,684,000 to the hotel's owner (see
also Note 2--Operations). Of this loan, $550,000 accrues interest at a rate
of 14 1/2%, while the balance accrues interest at the prime rate. Principal
and interest are payable, beginning in 1994, out of hotel cash flow
remaining after payment of first and second mortgage interest and a payment
to owner equal to 3/4 of 1% of revenues of the hotel. Of this loan, an amount
of $550,000 and interest thereon is secured by the Company's second
mortgage, while the remaining amount is secured by a third mortgage on the
hotel
11
<PAGE>
--------------------------------------------------------------------------------
property. Interest received of $412,000 on the Company's second mortgage
(see Note 4(a) above) during 1994 has been used to reduce the principal
balance to $2,272,000 at December 31, 1994.
(c) Under three separate agreements, a subsidiary of the Company has loaned
$2,791,000 to the owner of the hotel (see also Note 2--Operations). These
loans earn interest at rates ranging from 10% to prime plus two percentage
points. The principal and interest is payable, beginning in 1994, out of
hotel cash flow available after payment of first and second mortgage
interest.
(d) This receivable, which resulted from the sale of the Company's assets in
Aruba, was paid in full during 1994.
(e) A subsidiary of the Company has loaned $800,000 to the owner of the Sonesta
Beach Resort, Sharm el Sheikh which opened in May 1994. This receivable
earns interest at an annual rate of ten percent. Principal and interest is
payable in 18 monthly installments out of hotel cash flow following the
opening of the hotel.
</TABLE>
5. BORROWING ARRANGEMENTS
The Company has a $2,000,000 line of credit which expires on September 30,
1995. This line of credit bears interest at the prime rate. The terms of the
line require a certain minimum net worth, a minimum amount of unrestricted cash
or available credit lines during part of each calendar year, and approval for
additional borrowings by the Company. No amount was outstanding under this line
at December 31, 1994.
A subsidiary of the Company has a line of credit which was $3,500,000 until
December 31, 1994, and increased to $5,000,000 as of January 1, 1995. This line
will expire on December 31, 1997. The terms of the line require certain minimum
levels of earnings and net worth, limit cash dividends and purchases of the
Company's stock, and specify a maximum defined debt to net worth ratio. The
loan is secured by the Company's leasehold interest in the Royal Sonesta Hotel,
New Orleans. The interest rate as of January 1, 1995 is prime less one-eighth
percent, and the commitment fee on the unused portion of the line is .65% per
annum. The balance outstanding under this line at December 31, 1994 was
$500,000.
During 1994 and 1993 average short-term borrowings were approximately
$270,839 and $43,889 at average interest rates of 7.43% and 6.00%, respectively.
The maximum amount of short-term borrowings outstanding during 1994 and 1993 was
$2,000,000, and $600,000, respectively. There were no short-term borrowings
during 1992.
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
(in thousands)
-----------------------
1994 1993
-------- --------
<S> <C> <C>
Charterhouse of Cambridge Trust:
First mortgage notes (a) $18,737 $19,371
Sonesta Curacao Hotel Corporation, N.V.
Bank term loan (b) 2,000 --
Other 188 188
------- -------
20,925 19,559
Less current portion of long-term debt 837 711
------- -------
Total long-term debt $20,088 $18,848
------- -------
<FN>
(a) The loan is secured by a first mortgage and first lien security interest on
the Royal Sonesta Hotel Boston (Cambridge) property. This property is
included in fixed assets at a net book value of approximately $19,700,000
at December 31, 1994. In addition, the stock of Sonesta of Massachusetts,
Inc. and the shares of Charterhouse of Cambridge Trust have been pledged as
security for the mortgage loan along with an unconditional assignment of
the lease. The loan was extended for an additional five years as of April,
1992. The loan requires monthly principal payments of $24,834 until April
1994 and $66,777 for the remaining three years as of May 1994. Interest on
the loan was 5% until April 1994, and is two percentage points over the
LIBOR rate for the remaining three years of the extension term. The
interest rate at December 31, 1994 was 8%.
(b) This loan is for a three year period ending April 30, 1997. No principal
payments are required during the term. The interest rate was 9.75% at
December 31, 1994, and is subject to periodic review by the bank. This loan
may be prepaid on 60 days notice. The loan is secured by a Company
guaranty, and by an assignment of the right to receive fees under the
management agreement for the Sonesta Beach Hotel & Casino, Curacao.
</TABLE>
7. COMMON STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
(in thousands)
-------------------------
Common Treasury
Stock Shares
------ --------
<S> <C> <C>
Balance, January 1, 1992 $3,488 $(1,891)
Purchase of 827,439 shares (a) -- (6,115)
------ --------
Balance, December 31, 1992 $3,488 $(8,006)
Purchase of 7,800 shares -- (58)
------ --------
Balance, December 31, 1993 and 1994 $3,488 $(8,064)
------ --------
------ --------
<FN>
(a) On August 26, 1992, the Company purchased 300,000 shares of its common
stock through a "Dutch Auction" tender offer and an additional 450,000
shares by agreement with members of the Sonnabend family. The purchase
price for all 750,000 shares was $7.50
12
<PAGE>
--------------------------------------------------------------------------------
per share, the price established by the "Dutch Auction". The total cost,
including expenses, was approximately $5,750,000.
</TABLE>
8. REDEEMABLE PREFERRED STOCK
The 5% cumulative preferred stock is subject to redemption at $27.50 per
share plus accrued dividends to the date of redemption. Preferred stock sinking
fund requirements to December 31, 1994, have been satisfied by the exchange in
prior years of common stock for preferred stock and by the purchase and
retirement of preferred stock. No dividends on common stock may be declared or
paid and no common stock may be purchased or redeemed, unless preferred stock
sinking fund requirements are met.
9. COMMITMENTS AND CONTINGENCIES
The Company operates the Royal Sonesta Hotel, New Orleans, Louisiana, under
a lease. The initial 25 year term expired in September 1994, and the Company has
exercised its first of three 10-year options to extend the lease. Until
September 1994 the lease required a minimum annual base rent of $953,574, plus a
percentage rent based on net income, as adjusted. As of October 1994, no base
rent is payable, but the percentage rent, based on net income, increased. The
Company leases space for its executive offices in Boston, Massachusetts. The
lease expired in 1994. As of October 1994 the Company renewed the lease for part
of the space at reduced rates. The Company provides for rent expense on a
straight line basis although payments under the lease do not commence until
October 1995. The Company is also committed, under various leases, for certain
other property, equipment and real estate.
Minimum fixed rentals, principally on real estate, payable subsequent to
December 31, 1994, (exclusive of real estate taxes, insurance and other
occupancy costs) are as follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------
Period Operating Leases Capital Leases
------ ---------------- --------------
<S> <C> <C>
1995 $ 371 $129
1996 748 91
1997 735 64
1998 666 54
1999 596 --
Thereafter 2,713 --
------ ----
$5,829 $338
Less interest amounts at various rates 60
----
Present value of minimum fixed rentals $278
Less current portion 99
----
Total long-term capitalized lease obligation $179
----
----
</TABLE>
Rentals charged to operations are as follows:
<TABLE>
<CAPTION>
(in thousands)
------------------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Real Estate:
Fixed rental $ 996 $1,038 $1,155
Percentage rentals
based on defined
operating profits 3,038 1,822 1,755
Other rentals 46 53 51
------ ------ ------
$4,080 $2,913 $2,961
------ ------ ------
------ ------ ------
</TABLE>
The capitalized lease assets and accumulated depreciation thereon are
included in property and equipment as follows:
<TABLE>
<CAPTION>
(in thousands)
------------------
1994 1993
---- -------
<S> <C> <C>
Buildings $ -- $ 15,301
Furniture and equipment 539 539
---- --------
539 15,840
Accumulated depreciation (270) (14,883)
---- --------
$269 $ 957
---- --------
---- --------
</TABLE>
In September 1993, the Company entered into agreements to manage a new
hotel in New Orleans. The 243 room full service hotel will be located in the
French Quarter and will be called Chateau Sonesta Hotel. The Company will
receive management and marketing fees based on revenues, and incentive fees
based on cash flow. The Company will guarantee debt service payments of
approximately $1,500,000 per year on the hotel's first mortgage of $12,600,000
for a period of 5 years following the opening of the hotel. Advances made under
this guaranty will be secured by a mortgage. The new hotel is expected to open
in April 1995.
The Company has incentive compensation plans under which hotel profit
bases, as established annually, must be achieved before any incentive
compensation may be earned. The incentive compensation charged to operations was
$1,026,200 in 1994, $1,008,800 in 1993 and $916,400 in 1992.
10. PENSION AND BENEFIT PLANS
PENSION PLAN
The Company maintains a non-contributory defined benefit pension plan (the
Plan) for certain employees of Sonesta International Hotels Corporation and its
subsidiaries. Benefits are based on the employee's years of service and the
highest average monthly salary during any 60 consecutive months of employment.
The Company's funding policy is to contribute annually at least the minimum
contribution required by ERISA.
13
<PAGE>
--------------------------------------------------------------------------------
The Company's pension cost for the Plan was computed as follows:
<TABLE>
<CAPTION>
(in thousands)
------------------
1994 1993
---- --------
<S> <C> <C>
Service cost $560 $ 433
Interest cost 840 944
Return on plan assets (922) (1,056)
Amortization of:
Unrecognized net transition asset (88) (88)
Unrecognized prior service cost 65 83
Unrecognized net (gain)/loss 96 (90)
---- ------
$551 $ 226
---- ------
---- ------
</TABLE>
The following table sets forth the funded status of the Plan at December
31, 1994 and 1993:
<TABLE>
<CAPTION>
(in thousands)
-----------------------
1994 1993
------ --------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligation:
Vested $8,499 $ 9,253
Nonvested 177 199
------ -------
Accumulated benefit obligation 8,676 9,452
Effect of assumed increase in compensation
levels 2,294 2,586
------ -------
Projected benefit obligation 10,970 12,038
Market value of plan assets 9,671 10,970
------ ------
Projected benefit obligation in excess of Plan
assets 1,299 1,068
Unrecognized net loss (533) (566)
Unrecognized prior service cost (915) (1,291)
Unrecognized net transition asset 969 1,057
------ ------
Accrued pension liability recognized in the
consolidated balance sheets $ 820 $ 268
------ ------
------ ------
</TABLE>
The Plan's assets include equity and fixed income securities, short-term
investments and cash.
Assumptions used to develop the pension costs were:
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Assumed discount rate 8.0% 7.0%
Assumed rate of compensation increases 4.5% 4.0%
Expected weighted average rate of return on plan
assets 8.5% 8.5%
</TABLE>
The change of the assumed discount rate and rate of compensation had no
effect on the 1994 pension expense.
SAVINGS PLAN
The Company has an employee savings plan (the "Savings Plan") that
qualifies as a deferred salary arrangement under Section 401(k) of the Internal
Revenue Code. Under the Savings Plan, participating U.S. employees may defer a
portion of their pre-tax earnings up to the Internal Revenue Service annual
contribution limit. All U.S. employees of the Company are eligible to
participate in the Savings Plan. Participating employees may choose to invest
their contributions in each one of five mutual funds, which include equity
funds, balanced funds and a money market fund. The Savings Plan does not provide
for contributions by the Company.
11. INCOME TAXES
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 109, (FASB 109), "Accounting for Income Taxes" in December 1992
and has elected not to restate prior years' results as the effect on those years
would not be material. The cumulative effect of the application of FASB 109 was
to increase net income as of January 1, 1992 by $292,403. The adoption of FASB
109 had no effect on the 1992, 1993 or 1994 earnings.
The table below allocates tax expense (benefit) based upon the source of
income.
<TABLE>
<CAPTION>
(in thousands)
1994 1993 1992
------------------- ------------------- -------------------
Domestic Foreign Domestic Foreign Domestic Foreign
-------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Income before income taxes $938 $ 27 $291 $4,209 $4,230 $6,970
---- ------ ---- ------ ------ ------
---- ------ ---- ------ ------ ------
Federal, foreign and state income tax provision (benefit):
Current United States income tax $709 $1,495 $169 $2,201 $1,998 $6,096
Current and deferred state and foreign income tax (benefit) 211 55 185 56 171 (1,688)
Deferred federal income tax (433) (1,536) (133) (677) (724) (5)
---- ------ ---- ------ ------ ------
$487 $ 14 $221 $1,580 $1,445 $4,403
---- ------ ---- ------ ------ ------
---- ------ ---- ------ ------ ------
</TABLE>
14
<PAGE>
--------------------------------------------------------------------------------
A reconciliation of net tax expense applicable to income before provision
for income taxes at the statutory rate follows:
<TABLE>
<CAPTION>
(in thousands)
------------------------------
1994 1993 1992
---- ------ ------
<S> <C> <C> <C>
Expected provision for taxes at statutory rate $329 $1,530 $3,808
State income taxes, net of federal benefit 139 122 113
Provision for tax on previously unremitted
foreign earnings -- -- 1,940
Other 33 149 (13)
---- ------ ------
$501 $1,801 $5,848
---- ------ ------
---- ------ ------
</TABLE>
Deferred tax benefits results from temporary differences in the recognition
of revenue and expense for tax and financial reporting purposes. The source of
these differences and their tax effects are as follows:
<TABLE>
<CAPTION>
(in thousands)
--------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Gain from sale of property $ (639) $ 356 $ 283
Earnings of foreign subsidiaries, reported
for tax purposes (680) (1,057) (2,713)
Losses from foreign subsidiary, not reported
for tax purposes (217) -- --
Tax depreciation less than book depreciation (156) (283) (675)
Provision for tax on previously untaxed
foreign earnings -- -- 1,940
Reversal of deferred foreign tax provision -- -- 485
Other temporary differences (298) 140 (99)
------- -------- --------
$(1,990) $ (844) $ (779)
------- -------- --------
------- -------- --------
</TABLE>
Temporary differences between the financial statement carrying amounts and
the tax basis of assets and liabilities that give rise to significant portions
of deferred income taxes at December 31, 1994 and 1993 relate to the following:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Current portion of deferred tax liabilities (assets)
Unremitted foreign subsidiary's earnings $1,186 $2,309
Expenses accrued but deferred for tax purposes (563) (375)
------ ------
$ 623 $1,934
------ ------
------ ------
Long term portion of deferred tax liabilities (assets)
Depreciation book tax difference $3,058 $3,214
Unremitted foreign subsidiary's earnings 443 --
Installment sale gain -- 639
Losses from foreign subsidiary, not currently deductible (217) --
State tax benefits of $1,320,000 ($1,950,000 in 1993)
from net operating loss carry-forwards, net of
valuation allowances -- --
Other (263) (153)
------ ------
$3,021 $3,700
------ ------
------ ------
</TABLE>
At December 31, 1994 and 1993, the Company had state net operating loss
carryforwards of approximately $14,000,000, and $21,000,000, respectively, for
income tax purposes that began expiring in 1994. For financial reporting
purposes valuation allowances of $1,320,000 and $1,950,000 have been recognized
at December 31, 1994 and 1993 respectively, to offset the deferred tax assets
related to those carryforwards.
Refundable federal income taxes of $959,000 are included in accounts
receivable at December 31, 1994. These taxes represent payments made in 1994 to
settle a dispute related to foreign taxes on the Company's 1991 sale of a hotel
in Amsterdam, The Netherlands.
Foreign income tax receivables of $71,000 and $267,000 at December 31, 1994
and 1993 respectively, are included in accounts receivable other.
15
<PAGE>
[ERNST & YOUNG LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sonesta International Hotels Corporation
We have audited the accompanying consolidated balance sheets of Sonesta
International Hotels Corporation and subsidiaries as of December 31, 1994 and
1993 and the related consolidated statements of operations and retained earnings
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sonesta
International Hotels Corporation and subsidiaries at December 31, 1994 and 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in 1992
the Company changed its method of accounting for income taxes.
/s/ Ernst & Young LLP
March 7, 1995
16
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
Executive Offices, John Hancock Tower, 200 Clarendon Street
Boston, Massachusetts 02116 (617) 421-5400 Fax 421-5402
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
SONESTA DIRECTORS
<S> <C> <C>
Vernon R. Alden(2) Lawrence M. Levinson(1)(2) Roger P. Sonnabend(1)
Director and Trustee of PARTNER, Burns & Levinson CHAIRMAN OF THE BOARD AND
Several Organizations Attorneys at Law CHIEF EXECUTIVE OFFICER
Sonesta International
Joseph L. Bower(1)(2) Paul Sonnabend(1) Hotels Corporation
PROFESSOR, Harvard PRESIDENT, Sonesta
Business School International Hotels Stephen Sonnabend
Corporation SENIOR VICE PRESIDENT
Sonesta International
Hotels Corporation
(1)Member Executive Committee (2)Member Audit and Compensation
Committees
----------------------------------------------------------------------------------------------------------
<CAPTION>
SONESTA OFFICERS
<S> <C> <C>
Roger P. Sonnabend Christopher Baum Jacqueline Sonnabend
CHAIRMAN OF THE BOARD VICE PRESIDENT- VICE PRESIDENT-HUMAN
AND CHIEF EXECUTIVE OFFICER SALES & MARKETING COMMUNICATIONS RESOURCES
Paul Sonnabend Felix Madera Peter J. Sonnabend
PRESIDENT VICE PRESIDENT-INTERNATIONAL VICE PRESIDENT
GENERAL COUNSEL AND SECRETARY
Stephen Sonnabend Boy A. J. van Riel
SENIOR VICE PRESIDENT VICE PRESIDENT AND TREASURER Hans U. Wandfluh
VICE PRESIDENT
Stephanie Sonnabend Mary Jane Rosa
EXECUTIVE VICE PRESIDENT VICE PRESIDENT-DESIGN David Rakouskas
ASSISTANT SECRETARY AND DIRECTOR
OF CORPORATE ACCOUNTING
----------------------------------------------------------------------------------------------------------
<CAPTION>
SONESTA HOTELS AND OTHER OPERATIONS
<S> <C> <C>
Royal Sonesta Hotel Sonesta Beach Resort Aruba Sonesta Resort
Boston (Cambridge), Sharm el Sheikh, Egypt(2) & Casino, Oranjestad,
Massachusetts(1) Aruba(2)
Sonesta Hotel, Cairo, Egypt(2)
Royal Sonesta Hotel Aruba Sonesta Suites & Casino
New Orleans, Louisiana(1) Sonesta Hotel, Port Said, Egypt(2) Oranjestad, Aruba(3)
Chateau Sonesta Hotel Paradisio Hotel, El Gouna, Egypt(2) Sonesta Hotel, Santiago, Chile(3)
New Orleans, Louisiana(2)
(Opening early 1995) Sonesta Nile Goddess Cruise Ship Sonesta Hotel, Jerusalem,
Cairo, Egypt(2) Israel(3)
Sonesta Beach Resort
Southampton, Bermuda(2) Sonesta Sun Goddess Cruise Ship
Cairo, Egypt(2)
Sonesta Beach Hotel & Casino
Curacao, Netherlands Antilles(2) Ambassador Club
Hurghada, Egypt(2)
Sonesta Beach Resort (Opening 1995)
Key Biscayne, Florida(2)
Sonesta Beach Resort
Hurghada, Egypt(2)
<FN>
(1)Owned or Leased (2)Operated under Management Agreement (3)Licensed
</TABLE>
For reservations, call toll free 800-SONESTA (800-766-3782)
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS
Ernst & Young LLP. 200 Clarendon Street, Boston, Massachusetts 02116
TRANSFER AGENT AND REGISTRAR
Mellon Securities Trust Company, 111 Founders Plaza, Suite 1100, East Hartford,
Connecticut 06108
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
SUBSIDIARY LIST
DOMESTIC SUBSIDIARIES
Amsterdam Sonesta Corporation
Brewster Wholesale Corporation
Charterhouse Cambridge Trust
Sonesta of Massachusetts, Inc.
Sonesta Middle East Hotel Corporation
Florida Sonesta Corporation
Hotel Corporation of America
Hotel Corporation of Georgia
Key Biscayne Land Corporation
Royal Sonesta, Inc.
SIA Advertising, Inc.
Sonesta Hotels of Florida, Inc.
Sonesta Louisiana Hotels Corporation
Sonesta Soho Investment Corporation
Virginia Sonesta Corporation
FOREIGN SUBSIDIARIES
Newo Aruba, N.V.
Sonesta International Hotels Limited
Hotel Corporation of America (Bermuda) Limited
Port Royal Company Limited
Sonesta Costa Rica, S.A.
Sonesta Curacao Hotel Corporation, N.V.
OTHER SUBSIDIARIES NOT WHOLLY OWNED
The Soho Hotel Company, L.P.
<PAGE>
EXHIBIT 23--CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Sonesta International Hotels Corporation of our report dated March 7, 1995,
included in the 1994 Annual Report to Shareholders of Sonesta International
Hotels Corporation.
Our audit also included the financial statement schedule of Sonesta
International Hotels Corporation listed in Item 14 (a). This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audit. In our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
/S/ ERNST & YOUNG LLP
Boston, Massachusetts
March 7, 1995
