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, 1996
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------------------
Commission file number 0-9032
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
---- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.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 19, 1997 was $6,805,751.00.
The number of shares outstanding of the registrant's common stock as of the
close of business on March 19, 1997 was: 2,068,215.
Documents incorporated by reference
1. Portions of the annual report to shareholders for the year ended
December 31, 1996 are incorporated by reference into Parts I, II and IV.
2. Portions of the proxy statement for the 1997 annual meeting of
stockholders are incorporated by reference into Part III.
An Index to Exhibits appears on pages 11-17 of this Form 10-K.
================================================================================
<PAGE>
PART I
Item 1. Business
(a) General Development of Business: The Company is engaged in the
operation of hotels that it owns or leases in Boston (Cambridge),
Massachusetts; New Orleans, Louisiana; and Anguilla, B.W.I. It
also operates, under management agreements, hotels in
Southampton, Bermuda; Curacao, Netherlands Antilles; Key
Biscayne, Florida; and New Orleans, Louisiana; 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 management agreements to operate new
hotels being created in Luxor, Egypt and Manama, Bahrain, both of
which are scheduled to open later this year. The Company also
licenses the use of the Sonesta name to three operating hotels.
In November 1995, the Company acquired the 100-room resort in
Anguilla, B.W.I., known as Casablanca Resort, which at that time
was closed due to damage from Hurricane Luis, in September. (For
details of this transaction, reference is made to Note
2-Operations, on page 11 of the 1996 Annual Report to
Shareholders.) In December 1994 the Company entered into two
partnerships: one involving an 82-room hotel in Soho, New York;
the other to create a 320-room resort in Costa Rica. In July,
1996, the Company liquidated its investment in the Soho project,
and recently the Company notified its partner in the Costa Rica
project that it was terminating its participation in that
project.
(b) Not applicable.
(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
hotel properties, and this requires the Company to make
substantial capital expenditures. During the two years ended
December 31, 1996, the Company made capital expenditures for its
hotels totalling approximately $10,900,000.00.
2
<PAGE>
Item 1. Business
(c) (Cont'd)
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 Ambassador Club in Hurghada, Egypt, which is
identified by the words: "Managed by Sonesta Hotels".
The Company has approximately 1,523 employees. Approximately 263
of these employees are covered by a collective bargaining
agreement. The Company considers its relations with its employees
to be satisfactory.
While the business of the Company's individual hotels is
seasonal, the diverse locations of the three owned or leased
properties tend to mitigate the impact of this factor.
Traditionally, the second and fourth quarters have produced
greater revenues and operating income than the first and third
quarters, although these seasonal fluctuations do not materially
affect the Company's business activities.
The Company's hotels: Royal Sonesta Hotel, Boston (Cambridge), a
400-room hotel; Royal Sonesta Hotel, New Orleans, a 500-room
hotel; and Sonesta Beach Resort Anguilla, B.W.I., a 90-room beach
resort hotel, reported a combined average daily room rate and
average occupancy rate of $136.24 and 75.7%, respectively, for
the year ended December 31, 1996. (Sonesta Beach Resort Anguilla
reopened January 18, 1996 after having been closed from Hurricane
Luis on September 5, 1995.)
The Company has established and maintains trademark protection
for certain service marks it uses in conducting its business,
including the service marks "Sonesta", "Sonesta Beach", "Just Us
Kids", and the Company's stylized "S" logo. Trademarks are
maintained in numerous countries, besides the United States. Each
mark is generally protected for several years, subject to
periodic renewal.
For revenues by class of service for the three years ended
December 31, 1996, reference is made to the Consolidated
Statements of Operations and Retained Earnings which appears on
page 6 of the 1996 Annual Report to Shareholders.
(d) Financial Information about Foreign and Domestic Operations: This
information is incorporated by reference to Note 2 on pages 11
and 12 of the 1996 Annual Report to Shareholders.
3
<PAGE>
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 two hotels: Royal Sonesta Hotel, Boston
(Cambridge), Massachusetts and Sonesta Beach Resort Anguilla, B.W.I. Reference
is made to Note 6 of the Notes to the Consolidated Financial Statements of the
Registrant which appears on page 14 of the Company's 1996 Annual Report to
Shareholders for details of the mortgage liens on the Boston (Cambridge),
Massachusetts property and the Anguilla 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 Company also operates under management agreements hotels in Southampton,
Bermuda; Curacao, Netherlands Antilles; Key Biscayne, Florida; New Orleans,
Louisiana; and Cairo, Hurghada (2), 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
has granted licenses for the use of its name to hotels in Aruba (2); and
Santiago, Chile.
In December, 1994, the Company entered into two partnerships: one of the
partnerships was formed to acquire and develop as a hotel, including retail
space, a building in the SoHo district of New York; the other partnership was
formed to acquire a beachfront hotel site in Guanacaste, Costa Rica on which the
partnership intended to develop a 320-room resort and casino. The Company
liquidated its investment in the SoHo project in July 1996. The Company has
notified its development partner that it does not intend to proceed with the
Costa Rica project, in which a Company subsidiary is a 50% partner.
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 subsidiaries 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 1996.
4
<PAGE>
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 2 of the 1996 Annual Report to
Shareholders.
A dividend of $ .15 per share was paid on the Company's common stock in July
1995 and a dividend of $ .15 per share was declared on the Company's common
stock in December 1995, but was paid in January 1996. A dividend of $ .15 per
share was paid on the Company's common stock in July 1996 and a dividend of $.15
per share was declared on the Company's common stock in December 1996, but was
paid in January 1997. Other information required by this item is incorporated by
reference to the Consolidated Statements of Operations and Retained Earnings
which appears on page 6 of the 1996 Annual Report to Shareholders.
No dividends may be declared or paid on the Company's common stock nor may
common stock be 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 2 of the 1996 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 3 and 4 of the 1996
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 14, 1997, are incorporated herein by
reference to the 1996 Annual Report to Shareholders.
Selected Quarterly Financial Data, on page 17 of the 1996 Annual Report to
Shareholders, is incorporated by reference.
5
<PAGE>
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 1997 Annual Meeting of
Stockholders.
B. The Executive Officers of the Company are as follows
<TABLE>
<CAPTION>
Employment History
Name Present Position Age 1992 to Present
- ---- ---------------- --- ---------------------
<S> <C> <C> <C>
Roger P. Sonnabend Chairman of the Board and 71 Chairman and Chief Executive Officer.
Chief Executive Officer
Stephanie Sonnabend President 44 Vice President-Marketing until November, 1993,
then Executive Vice President until January 1,
1996.
Paul Sonnabend Chairman of the Executive Committee 69 President until December 31, 1995.
and Chief Financial Officer
Stephen Sonnabend Senior Vice President 65 Senior Vice President.
Boy van Riel Vice President and Treasurer 38 Controller until March, 1993, then Vice
President & Treasurer
Peter J. Sonnabend Vice Chairman, Vice President and 43 Vice President and Secretary, until May 1995.
Secretary
</TABLE>
6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Christopher Baum Vice President - Sales & Marketing 43 Corporate Director of Marketing, Resorts,
Hilton Hotels, 1991-1992; Vice President -
Sales & Marketing Communications, 1992 to
present.
Michael Levie Vice President - Egypt 36 Vice President & General Manager, Royal Sonesta
Hotel, Boston (Cambridge), until January 1996.
Felix Madera Vice President - International 48 Vice President & General Manager, Sonesta Beach
Resort, Key Biscayne, Florida.
Mary Jane Rosa Vice President - Design 48 Director of Design until January, 1993, then
Vice President - Design.
Jacqueline Sonnabend Executive Vice President 42 Vice President - Human Resources.
Hans Wandfluh Vice President 62 President & General Manager, Royal Sonesta
Hotel, New Orleans, Louisiana.
</TABLE>
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 1997 Annual Meeting of Stockholders.
7
<PAGE>
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,
1997, 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) Reports on Form 8-K filed during the last quarter of 1996: None
8
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
Index to Consolidated Financial Statements
and Financial Statement Schedules
---------------------------------
Item 14 (a) (1) and (2) References (Page)
1996 Annual Report to
Form 10-K Shareholders*
--------- ---------------------
Consolidated Balance Sheets
at December 31, 1996 and 1995............... 7-8
For the years ended December 31,
1996, 1995 and 1994:
Consolidated Statements of
Operations and Retained Earnings............ 6
Consolidated Statements of Cash
Flows....................................... 9
Notes to Consolidated Financial
Statements.................................. 10-17
Consolidated Financial Statement
Schedule for the year ended
December 31, 1996:
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
9
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
AMOUNTS AMOUNTS
BALANCE, CHARGED (WRITTEN OFF) BALANCE,
BEGINNING (CREDITED) NET OF END OF
OF YEAR TO INCOME RECOVERIES YEAR
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
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
========== ========== ========== ==========
Year Ended December 31, 1995
Deducted from assets:
Valuation reserve on long-term
receivables and advances $5,500,000 $ -- $ -- $5,500,000
========== ========== ========== ==========
Allowance for doubtful accounts $ 84,249 $ 26,400 $ (12,748) $ 97,901
========== ========== ========== ==========
Year Ended December 31, 1996
Deducted from assets:
Valuation reserve on long-term
receivables and advances $5,500,000 $ -- $ -- $5,500,000
========== ========== ========== ==========
Allowance for doubtful accounts $ 97,901 $ 37,650 $ (27,577) $ 107,974
========== ========== ========== ==========
</TABLE>
10
<PAGE>
Sonesta International Hotels Corporation
Index to Exhibits
NUMBER DESCRIPTION
- ------ -----------
3.1 Certificate of Incorporation as amended to date. (8)
3.2 Company By-laws, including all amendments through March
29, 1997.(12)
9.1 (a) Sonnabend Voting Trust Agreement dated August 1, 1984,
providing for the combination of the voting power of
stock held by members of the Sonnabend Family.(6)
9.1 (b) First Amendment dated December 1984 to Sonnabend Voting
Trust Agreement.(6)
10.1 (a) "Third Amendment of Mortgage and 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)
10.1 (b) "Operating Deficit Loan Mortgage Note" ($2,194,005.00)
from KBLP to FSC, dated as of December 31, 1993.(10)
10.1 (c) "Operating Deficit Loan Mortgage and Security Agreement"
between KBLP and FSC, dated February 4, 1994.(10)
10.1 (d) "Promissory Note" ($1,576,600.00) from KBLP to FSC, dated
February 4, 1994.(10)
10.1 (e) "Second Amendment to Management Agreement" dated as of
December 31, 1993 between KBLP and FSC.(10)
10.2 (a) Renovation Enhancement Agreement, dated February 19, 1993,
between Florida Sonesta Corporation ("FSC") and Ke
Biscayne Limited Partnership ("KBLP").(9)
11
<PAGE>
NUMBER DESCRIPTION
- ------ -----------
10.2 (b) First Amendment to Renovation Enhancement Agreement, dated
May 18, 1993, between FSC and KBLP.(9)
10.3 Second Renovation Enhancement Agreement, dated April 30,
1993, between FSC and KBLP.(9)
10.4 (a) "Sonesta Loan" agreement, dated April 13, 1993 between FSC
and KBLP.(9)
10.4 (b) First amendment to "Sonesta Loan" agreement, dated September
29, 1993, between FSC and KBLP.(9)
10.5 (a) "Renovation Agreement", dated September 12, 1991, between
Florida Sonesta Corporation ("FSC") and Key Biscayne Limited
partnership ("KBLP").(7)
10.5 (b) "First Amendment to Management Agreement", dated September
12, 1991, between FSC and KBLP.(7)
10.5 (c) "Amendment of Note and Second Mortgage", dated September 12,
1991, between FSC and KBLP.(7)
10.5 (d) "Amendment of Note and Third Mortgage", dated September 12,
1991, between FSC and KBLP.(7)
10.6 (a) "1995 Loan Agreement" between Hibernia National Bank
("Hibernia") and Royal Sonesta, Inc. ("Royal Sonesta"), as
of January 1, 1995.(10)
10.6 (b) "Promissory Note" ($5,000,000) from Royal Sonesta to Hibernia,
dated "Effective January 1, 1995".(10)
10.6 (c) "First Amendment to 1995 Loan Agreement" Between Hibernia and
Royal Sonesta, dated December 12, 1994.(10)
10.7 (a) 1992 Loan Agreement, dated December 30, 1992, between Royal
Sonesta, Inc. and Hibernia National Bank in New Orleans.(8)
12
<PAGE>
NUMBER DESCRIPTION
- ------ -----------
10.7 (b) Promissory Note, dated December 30, 1992 between Royal
Sonesta, Inc. and Hibernia National Bank in New Orleans.(8)
10.7 (c) Restatement and Continuation of Continuing Guaranty, dated
December 30, 1992, between the Registrant and Hibernia
National Bank in New Orleans.(8)
10.8 (a) "Amendment and Restatement of the Amended and Restated Loan
Agreement", dated December 23, 1991, between Hibernia
National Bank, Royal Sonesta, Inc. and Sonesta International
Hotels Corporation.(7)
10.8 (b) $2,875,000 Promissory Note, dated December 23, 1991, from
Royal Sonesta, Inc. to Hibernia National Bank.(7)
10.9 (a) Promissory Note ($22,880,000), dated December 18, 1996,
from the Trustees of Charterhouse of Cambridge Trust
("Trust") and Sonesta of Massachusetts, Inc. ("Sonesta
Mass") to SunAmerica Life Insurance Company ("SunAmerica").
10.9 (b) Mortgage, Security Agreement, Fixture Filing, Financing
Statement and Assignment of Leases and Rents, dated as of
December 18, 1996, between Trust and Sonesta Mass, and
SunAmerica.
10.9 (c) Environmental Indemnity Agreement, dated as of December 18,
1996, between Trust, Sonesta Mass, and Sonesta International
Hotels Corporation ("Sonesta"), and SunAmerica.
10.9 (d) Escrow Agreement, dated as of December 18, 1996, between
Trust and Sonesta Mass, SunAmerica, and "Escrow Agent".
10.9 (e) Replacement Reserve and Security Agreement, dated as of
December 18, 1996, between Trust and Sonesta Mass, and
SunAmerica.
10.9 (f) Limited Guaranty Agreement, dated as of December 18, 1996,
between Sonesta and SunAmerica.
13
<PAGE>
NUMBER DESCRIPTION
- ------ -----------
10.10 (a) "Contract of Sale", dated July 11, 1996, between The Soho
Hotel Company, L.P. ("Soho") and The Mercer I L.L.C.
("Mercer I").
10.10 (b) "Lease Assignment and Assumption", dated July 11, 1996,
between Soho and Mercer I.
10.10 (c) "Assignment and Assumption of Assumed Contracts", dated
July 11, 1996, between SoHo and Mercer I.
10.10 (d) "Indemnity Agreement", dated July 11, 1996, between Soho
and Andre Balazs.
10.11 "Shareholders Agreement of C. R. Resort Associates Limited",
dated December 8, 1994.(10)
10.12 (a) First Amendment to Shareholders Agreement of C.R. Resort
Associates Limited, dated September 18, 1996.
10.12 (b) Agreement, dated September 18, 1996, between El Cacique de
Calzon de Pobre, S.A.; Extency Internacional S.A.; Investex,
S.A.; Sonesta International Hotels Limited; Sonesta
International Hotels Corporation; Costa Rica Resort
Associates, S.A.
10.13 (a) Revolving Term Note ($2,000,000) from Sonesta International
Hotels Corporation to USTrust, dated September 30, 1995.(12)
10.13 (b) Commitment Letter agreement, dated September 28, 1995, between
Sonesta International Hotels Corporation and USTrust. (12)
10.14 Letter agreement extending the maturity date of the
Revolving Term Note ($2,000,000) from Sonesta International
Hotels Corporation to USTrust, dated September 30, 1996.
10.15 (a) Loan Agreement ($1,000,000), dated December 18, 1996,
between Masters of Tourism and Sonesta International Hotels
Limited.
14
<PAGE>
NUMBER DESCRIPTION
- ------ -----------
10.15 (b) (Personal) Guaranty of Hisham Aly, dated as of December
18, 1996.
10.16 Loan Agreement ($277,935), dated as of January 1,
1997, between Masters of Tourism and Sonesta
International Hotels Limited (consolidating two (2)
outstanding loan balances).
10.17 "Third Amendment to Lease" between John Hancock and
Sonesta, dated June, 1994.(10)
10.18 "Second Amendment to Lease" between John Hancock Mutual
Life Insurance Company ("John Hancock") and Sonesta
International Hotels Corporation ("Sonesta"), dated
March 22, 1994.(10)
10.19 Indenture of Lease, dated June 26, 1979, between John
Hancock Mutual Life Insurance Company and Sonesta
International Hotels Corporation.(4)
10.20 (a) Intercreditor, Payment Priority and Lien Priority
Agreement, dated as of September 15, 1993, between
Sonesta International Hotels Corporation ("Sonesta"),
Sonesta Louisiana Hotels Corporation ("SLHC"), 800 Canal
Street Limited Partnership (the "Partnership"), and
numerous other parties.(9)
10.20 (b) Commercial Guaranty, dated September 15, 1993, by SLHC
and Sonesta.(9)
10.20 (c) CSDC/Manager Reserve Agreement, dated September 15, 1993,
between SLHC, the Partnership and Canal Street
Development Corporation.(9)
10.21 Extension of Lease by Royal Sonesta, Inc., dated August 6,
1993.(9)
10.22 Agreement, dated September 9, 1993, between Royal Sonesta,
Inc. and Aetna Life Insurance Company.(9)
10.23 Hotel Lease-Amendment No. 3, dated September 17, 1981,
between Aetna Life Insurance Company and Royal Sonesta,
Inc.(5)
15
<PAGE>
NUMBER DESCRIPTION
- ------ -----------
10.24 Hotel Lease-Amendment No. 2, dated September 1, 1977,
between Chateau Louisiane, Inc. and Royal Sonesta, Inc.(3)
10.25 Hotel Lease-Amendment No. 1, dated November 26, 1973,
between Chateau Louisiane, Inc. and Louisiana Sonesta
Corporation.(2)
10.26 Hotel Lease, dated December 12, 1967, between Chateau
Louisiane, Inc., as "Landlord", and The Royal Orleans,
Inc., as "Tenant".(1)
10.27 (a) Restated Employment Agreement, dated January 1, 1992,
between the Registrant and Paul Sonnabend, together with
letter agreement regarding permanent and total disability.
(8)(Management contract under Item 601(10)(iii)(A))
10.27 (b) Restated Employment Agreement, dated January 1, 1992,
between the Registrant and Roger P. Sonnabend, together
with letter agreement regarding permanent and total
disability. (8) (Management contract under Item 601(10)
(iii)(A)).
10.27 (c) Restated Employment Agreement, dated January 1, 1992,
between the Registrant and Stephen Sonnabend, together
with letter agreement regarding permanent and total
disability. (8)(Management contract under Item 601 (10)
(iii)(A))
10.28 (Letter) Loan Agreement ($2,000,000), dated July 18, 1996,
between Maduro & Curiel's Bank N.V. and Sonesta Curacao
Hotel Corporation N.V.
10.29 Lease, dated September 21, 1991, between "the Crown" and
Casablanca Resorts Development of Anguilla Limited
("CRDAL")(assumed by Sonesta Hotels of Anguilla Limited
("Sonesta Anguilla") in November 1995).(11)
10.30 Debenture, dated November 28, 1995, between Scotiabank
Anguilla Limited and Sonesta Anguilla.(11)
16
<PAGE>
NUMBER DESCRIPTION
- ------ -----------
10.31 Debenture ($6,390,000) from Sonesta Hotels of Anguilla
Limited to Scotiabank Anguilla Limited, dated December
1996 (evidencing additional $1,700,000 loan).
10.32 Agreement, dated as of March 1, 1996, between CRDAL and
Sonesta Anguilla
10.33 (Letter) Loan Agreement ($1,000,000), dated February 9,
1997, between Sakkara Hotels and Sonesta International
Hotels Corporation.
10.34 (Letter) Lease Agreement, dated June 3, 1996, between
Sonesta Hotels of Anguilla, Ltd. and Amsterdam Sonesta
Corporation (subsequently renamed Anguilla Hotel
Management, Inc.)
13 Annual Report to Security Holders for the calendar year
ended December 31, 1996
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP filed herewith.
(1) Incorporated by reference to the Company's 1967 Report on Form 10-K.
(2) Incorporated by reference to the Company's 1973 Report on Form 10-K.
(3) Incorporated by reference to the Company's 1977 Report on Form 10-K.
(4) Incorporated by reference to the Company's 1979 Report on Form 10-K.
(5) Incorporated by reference to the Company's 1981 Report on Form 10-K.
(6) Incorporated by reference to the Company's 1984 Report on Form 10-K.
(7) Incorporated by reference to the Company's 1991 Report on Form 10-K.
(8) Incorporated by reference to the Company's 1992 Report on Form 10-K.
(9) Incorporated by reference to the Company's 1993 Report on Form 10-K.
(10) Incorporated by reference to the Company's 1994 Report on Form 10-K.
(11) Incorporated by reference to the Company's 1995 Report on Form 8-K
(12) Incorporated by reference to the Company's 1995 Report on Form 10-K.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
and Exchange Act of 1934, 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/ Date: March 14, 1997
-------------------------------------------------
Boy van Riel
Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934,
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/ Date: March 14, 1997
-------------------------------------------------
Roger P. Sonnabend
Chairman of the Board and Chief Executive
Officer
By: /S/ Date: March 14, 1997
--------------------------------------------------
Boy van Riel
Vice President and Treasurer, Principal
Financial and Accounting Officer
By: /S/ Date: March 14, 1997
-------------------------------------------------
Paul Sonnabend
Director
By: /S/ Date: March 14, 1997
-------------------------------------------------
Peter J. Sonnabend
Director
By: /S/ Date: March 14, 1997
--------------------------------------------------
Stephanie Sonnabend
Director
By: /S/ Date: March 14, 1997
--------------------------------------------------
Stephen Sonnabend
Director
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By: /S/ Date: March 14, 1997
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George S. Abrams
Director
By: /S/ Date: March 14, 1997
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Vernon R. Alden
Director
By: /S/ Date: March 14, 1997
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Joseph L. Bower
Director
By: /S/ Date: March 14, 1997
-------------------------------------------------
Lawrence M. Levinson
Director
By: /S/ Date: March 14, 1997
--------------------------------------------------
Jean C. Tempel
Director
19
PROMISSORY NOTE
U.S. $22,880,000.00 v December 18, 1996
FOR VALUE RECEIVED, and at the times hereinafter specified, ROGER P.
SONNABEND, PETER J. SONNABEND, and BOY A.J. VAN RIEL, trustees of the
Charterhouse of Cambridge Trust, and not individually, under a Declaration of
Trust dated December 27, 1963 and recorded at Middlesex South Deeds Book 11160,
Page 340, as amended by Amendment of Declaration of Trust dated July 8, 1966 and
recorded at Middlesex South Deeds Book 11160, Page 359 ("Charterhouse"), and
SONESTA OF MASSACHUSETTS, INC., a Massachusetts corporation ("Sonesta," and,
together with Charterhouse, collectively, "Maker"), whose address is c/o Sonesta
International Hotels Corp., 200 Clarendon Street, 41st Floor, Boston,
Massachusetts 02116, hereby promises to pay to the order of SUNAMERICA LIFE
INSURANCE COMPANY, an Arizona corporation (hereinafter referred to, together
with each subsequent holder hereof, as "Holder"), at 1 SunAmerica Center,
Century City, Los Angeles, California 90067-6022, or at such other address as
may be designated from time to time hereafter by any Holder, the principal sum
of TWENTY-TWO MILLION EIGHT HUNDRED EIGHTY THOUSAND AND NO/100THS DOLLARS
($22,880,000.00), together with interest on the principal balance outstanding
from time to time, as hereinafter provided, in lawful money of the United States
of America.
By its execution and delivery of this promissory note (this "Note"), Maker
covenants and agrees as follows:
1. Interest Rate and Payments.
(a) The balance of principal outstanding from time to time under this
Note shall bear interest at the rate of eight and eighty-six one-hundredths
percent (8.86%) per annum (the "Original Interest Rate"), based on a three
hundred sixty (360) day year composed of twelve (12) months of thirty (30)
days each.
(b) Interest only shall be payable on the date hereof, in advance, for
the period from and including the date hereof through and including
December 31, 1996.
<PAGE>
(c) Commencing on February 1, 1997, and on the first day of each month
thereafter through and including December 1, 2003, combined payments of
principal and interest shall be payable, in arrears, in the amount of
$203,801.72 each (such amount representing an amount sufficient to fully
amortize the original principal amount of this Note over a twenty (20) year
period (the "Amortization Period")).
(d) The entire outstanding principal balance, together with all
accrued and unpaid interest and all other sums due hereunder, shall be due
and payable in full on January 1, 2004 (the "Original Maturity Date").
2. Holder's Extension Option; Net Operating Income.
(a) If Maker shall fail to pay the outstanding principal balance of
this Note and all accrued interest and other charges due hereon at the
Original Maturity Date, Holder shall have the right, at Holder's sole
option and discretion, to extend the term of the loan evidenced by this
Note (the "Loan") for an additional period of five (5) years (the
"Extension Term"). If Holder elects to extend the term of the Loan, Maker
shall pay all fees of Holder incurred in connection with such extension,
including, but not limited to, reasonable attorneys' fees and title
insurance premiums. Maker shall execute all documents reasonably requested
by Holder to evidence and secure the Loan, as extended, and shall obtain
and provide to Holder any title insurance policy or endorsement requested
by Holder.
(b) Should Holder elect to extend the term of the Loan as provided
above, Holder shall (i) reset the interest rate borne by the then-existing
principal balance of the Loan to a rate per annum (the "New Rate") equal to
the greater of (A) the Original Interest Rate, or (B) Holder's (or
comparable lenders', if Holder is no longer making such loans)
then-prevailing interest rate for five (5) year loans secured by properties
similar to the Property (hereinafter defined), as determined by Holder in
its sole discretion; (ii) re-amortize the then-existing principal balance
of the Loan over the remaining portion of the Amortization Period (the "New
Amortization Period"); (iii) have the right to require Maker to enter into
modifications of the non-economic terms of the Loan Documents (hereinafter
defined) as Holder may request (the "Non-Economic Modifications"); and (iv)
notwithstanding any provision set forth in the Loan Documents
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to the contrary, have the right to require Maker to make monthly payments
into escrow for insurance premiums and real property taxes, assessments and
similar governmental charges. Hence, monthly principal and interest
payments during the Extension Term shall be based upon the New Rate, and
calculated to amortize fully the outstanding principal balance of the Loan
over the New Amortization Period.
(c) If Holder elects to extend the term of the Loan, Holder shall
advise Maker in writing of the New Rate on or prior to the Original
Maturity Date.
(d) In addition to the required monthly payments of principal and
interest set forth above, commencing on the first day of the second month
following the Original Maturity Date and continuing on the first day of
each month thereafter during the Extension Term (each an "Additional
Payment Date"), Maker shall make monthly payments to Holder in an amount
equal to all Net Operating Income (hereinafter defined) attributable to the
Property for the calendar month ending on the last day of the month that is
two months preceding each such Additional Payment Date. For example,
assuming the Original Maturity Date is January 1, then Net Operating Income
for the period from January 1 through January 31 shall be payable to Holder
on March 1; Net Operating Income for the period from February 1 through
February 28 shall be payable to Holder on April 1, and so on.
(e) Holder shall deposit all such Net Operating Income received from
Maker into an account or accounts maintained at a financial institution
chosen by Holder or its servicer in its sole discretion (the "Deposit
Account") and all such funds shall be invested in interest-bearing
investments in a manner acceptable to Holder in its sole and reasonable
discretion. All interest, dividends and earnings credited to the Deposit
Account shall be held and applied in accordance with the terms hereof.
(f) On the third Additional Payment Date and on each third Additional
Payment Date thereafter, Holder shall apply all Excess Funds (hereinafter
defined), if any, to prepayment of amounts due under this Note, without
premium or penalty.
(g) As security for the repayment of the Loan and the performance of
all other obligations of Maker under the Loan Documents, Maker hereby
assigns, pledges, conveys, delivers,
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transfers and grants to Holder a first priority security interest in and
to: all Maker's right, title and interest in and to the Deposit Account;
all rights to payment from the Deposit Account and the money deposited
therein or credited thereto (whether then due or in the future due and
whether then or in the future on deposit); all interest thereon; any
certificates, instruments and securities, if any, representing the Deposit
Account; all claims, demands, general intangibles, choses in action and
other rights or interests of Maker in respect of the Deposit Account; any
monies then or at any time thereafter deposited therein; any increases,
renewals, extensions, substitutions and replacements thereof; and all
proceeds of the foregoing.
(h) From time to time, but not more frequently than monthly, Maker may
request a disbursement (a "Disbursement") from the Deposit Account for
shortfalls in Operating Expenses (as defined in Section 2(k) below),
capital expenses, tenant improvement expenses, leasing commissions and
special contingency expenses. Holder may consent to or deny any such
Disbursement in its sole discretion, provided, however, that Holder shall
consent to Disbursements to cover Operating Expenses in months when Gross
Revenue (as defined in Section 2(k) below) is insufficient to pay such
Operating Expenses, if (i) the budget approved by Holder as provided in
Section 3 below for the applicable period contemplates such deficit between
Gross Revenue and Operating Expenses for such months, (ii) no Default or
Event of Default shall exist, and (iii) funds in the Deposit Account are
sufficient to pay the requested Disbursement.
(i) Upon the occurrence of any Event of Default (hereinafter defined)
(i) Maker shall not be entitled to any further Disbursement from the
Deposit Account; and (ii) Holder shall be entitled to take immediate
possession and control of the Deposit Account (and all funds contained
therein) and to pursue all of its rights and remedies available to Holder
under the Loan Documents, at law and in equity.
(j) All of the terms and conditions of the Loan shall apply during the
Extension Term, except as expressly set forth above, and except that no
further extensions of the Loan shall be permitted.
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(k) For the purposes of the foregoing:
(i) "Excess Funds" shall mean, on any Additional Payment Date,
the amount of funds then existing in the Deposit Account (including
any Net Operating Income due on the applicable Additional Payment
Date), less an amount equal to the sum of three regularly scheduled
payments of principal and interest due on this Note;
(ii) "Net Operating Income" shall mean, for any particular period
of time, Gross Revenue for the relevant period, less Operating
Expenses for the relevant period; provided, however, that if such
amount is equal to or less than zero (0), Net Operating Income shall
equal zero (0);
(iii) "Gross Revenue" shall mean all payments and other revenues
(exclusive, however, of any payments attributable to sales taxes)
received by or on behalf of Maker from all sources related to the
ownership or operation of the Property, including, but not limited to,
rents, room charges, parking fees, interest, business interruption
insurance proceeds, operating expense pass-through revenues and common
area maintenance charges, for the relevant period for which the
calculation of Gross Revenue is being made; and
(iv) "Operating Expenses" shall mean the sum of all ordinary and
necessary operating expenses actually paid or incurred by Maker in
connection with the operation of the Property during the relevant
period for which the calculation of Operating Expenses is being made,
including, but not limited to, (a) payments made by Maker for taxes
and insurance required under the Loan Documents, (b) monthly debt
service payments as required under this Note, (c) federal and state
income taxes, and (d) amounts contributed by Maker to the Replacement
Reserve Account (as defined in the Replacement Reserve and Security
Agreement of even date herewith executed by Maker for the benefit of
Holder).
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<PAGE>
3. Budgets.
(a) Within fifteen (15) days following the Original Maturity Date and
on or before December 1 of each subsequent calendar year, Maker shall
deliver to Holder a proposed revenue and expense budget for the Property
for the remainder of the calendar year in which the Original Maturity Date
occurs or the immediately succeeding calendar year (as applicable). Such
budget shall set forth Maker's projection of Gross Revenue and Operating
Expenses for the applicable calendar year, which shall be subject to
Holder's reasonable approval. Once a proposed budget has been reviewed and
approved by Holder, and Maker has made all revisions reasonably requested
by Holder, if any, the revised budget shall be delivered to Holder and
shall thereafter become the budget for the Property hereunder (the
"Budget") for the applicable calendar year. If Maker and Holder are unable
to agree upon a Budget for any calendar year, the budgeted Operating
Expenses (excluding extraordinary items) provided in the Budget for the
Property for the preceding calendar year shall be considered the Budget for
the Property for the subject calendar year until Maker and Holder agree
upon a new Budget for such calendar year.
(b) During the Extension Term, Maker shall operate the Property in
accordance with the Budget for the applicable calendar year, and the total
of expenditures relating to the Property exceeding one hundred and five
percent (105%) of the aggregate of such expenses set forth in the Budget
for the applicable time period shall not be treated as Operating Expenses
for the purposes of calculating "Net Operating Income," without the prior
written consent of Holder except for emergency expenditures which, in the
Maker's good faith judgment, are reasonably necessary to protect, or avoid
immediate danger to, life or property.
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<PAGE>
4. Reports.
(a) During the Extension Term, Maker shall deliver to Holder all
financial statements reasonably required by Holder to calculate Net
Operating Income, including, without limitation, a monthly statement to be
delivered to Holder concurrently with Maker's payment of Net Operating
Income that sets forth the amount of Net Operating Income accompanying such
statement and Maker's calculation of Net Operating Income for the relevant
calendar month. Such statements shall be certified by an executive officer
of Maker or Maker's manager, managing member or general partner (as
applicable) as having been prepared in accordance with the terms hereof and
to be true, accurate and complete in all material respects.
(b) In addition, on or before February 15 of each calendar year during
the Extension Term, Maker shall submit to Holder an annual income and
expense statement for the Property which shall include the calculation of
Gross Revenue, Operating Expenses and Net Operating Income for the
preceding calendar year and shall be accompanied by Maker's reconciliation
of any difference between the actual aggregate amount of the Net Operating
Income for such calendar year and the aggregate amount of Net Operating
Income for such calendar year actually remitted to Holder. All such
statements shall be certified by an executive officer of Maker or Maker's
manager, managing member or general partner (as applicable) as having been
prepared in accordance with the terms hereof and to be true, accurate and
complete in all material respects. If any such annual financial statement
discloses any inconsistency between the calculation of Net Operating Income
and the amount of Net Operating Income actually remitted to Holder, Maker
shall immediately remit to Holder the amount of any underpayment of Net
Operating Income for such calendar year or, in the event of an overpayment
by Maker, such amount may be withheld from any subsequent payment of Net
Operating Income required hereunder.
(c) Holder may notify Maker within ninety (90) days after receipt of
any statement or report required hereunder that Holder disputes any
computation or item contained in any portion of such statement or report.
If Holder so notifies Maker, Holder and Maker shall meet in good faith
within twenty (20) days after Holder's notice to Maker to resolve such
disputed items.
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<PAGE>
If, despite such good faith efforts, the parties are unable to resolve the
dispute at such meeting or within ten (10) days thereafter, the items shall
be resolved by an independent certified public accountant with at least
fifteen (15) years of hotel accounting experience designated by Holder
within fifteen (15) days after such ten (10) day period. The determination
of such accountant shall be final. All fees of such accountant shall be
paid by Maker. Maker shall remit to Holder any additional amount of Net
Operating Income found to be due for such periods within ten (10) days
after the resolution of such dispute by the parties or the accountant's
determination, as applicable. The amount of any overpayment found to have
been made for such periods may be withheld from any required future
remittance of Net Operating Income.
(d) Maker shall at all times keep and maintain full and accurate books
of account and records adequate to reflect correctly all items required in
order to calculate Net Operating Income.
5. Prepayment.
(a) During the first three (3) years after the date of this Note (the
"Lockout Period"), Maker shall have no right to prepay all or any part of
this Note.
(b) At any time following the Lockout Period, Maker shall have the
right to prepay the full principal amount of this Note and all accrued but
unpaid interest hereon as of the date of prepayment, provided that (i)
Maker gives not less than thirty (30) days' prior written notice to Holder
of Maker's election to prepay this Note, and (ii) Maker pays a prepayment
premium to Holder equal to (A) during the period of time after the Lockout
Period and up to and including January 1, 2003, the greater of (1) one
percent (1%) of the outstanding principal amount of this Note or (2) the
Present Value of this Note (hereinafter defined), less the amount of
principal being prepaid, calculated as of the prepayment date, or (B) at
any time after January 1, 2003, one percent (1%) of the outstanding
principal amount of this Note.
(c) Within ten (10) days following notice from Maker of its intention
to prepay this Note, Holder shall notify Maker in writing of the amount and
basis of determination of the
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<PAGE>
prepayment premium. Holder shall not be obligated to accept any prepayment
of the principal balance of this Note unless such prepayment is accompanied
by the applicable prepayment premium and all accrued interest and other
sums due under this Note.
(d) Except for making payments of Net Operating Income as required
above, in no event shall Maker be permitted to make any partial prepayments
of this Note.
(e) If Holder accelerates this Note for any reason, then in addition
to Maker's obligation to pay the then outstanding principal balance of this
Note and all accrued but unpaid interest thereon, Maker shall pay an
additional amount equal to the prepayment premium that would be due to
Holder if Maker were voluntarily prepaying this Note at the time that such
acceleration occurred, or if under the terms hereof no voluntary prepayment
would be permissible on the date of such acceleration, Maker shall pay a
prepayment premium calculated as set forth in the Mortgage (hereinafter
defined).
(f) For the purposes of the foregoing:
(i) The "Present Value of this Note" with respect to any
prepayment of this Note, as of any date, shall be determined by
discounting all scheduled payments of principal and interest remaining
to maturity of this Note, attributed to the amount being prepaid, at
the Discount Rate. If prepayment occurs on a date other than a
regularly scheduled payment date, the actual number of days remaining
from the prepayment date to the next regularly scheduled payment date
will be used to discount within such period;
(ii) The "Discount Rate" is the rate which, when compounded
monthly, is equivalent to the Treasury Rate, when compounded
semi-annually;
(iii) The "Treasury Rate" is the semi-annual yield on the
Treasury Constant Maturity Series with maturity equal to the remaining
weighted average life of this Note (excluding the Extension Term), for
the week prior to the prepayment date, as reported in Federal Reserve
Statistical Release H.15 - Selected Interest Rates, conclusively
determined by Holder on
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the prepayment date. The rate will be determined by linear
interpolation between the yields reported in Release H.15, if
necessary. In the event Release H.15 is no longer published, Holder
shall select a comparable publication to determine the Treasury Rate.
(g) Holder shall not be obligated actually to reinvest the amount
prepaid in any treasury obligations as a condition precedent to receiving
any prepayment premium.
(h) Notwithstanding the foregoing, (i) at any time during the three
month period preceding the Original Maturity Date and during the entire
Extension Term, Maker shall have the right to prepay the full principal
amount of this Note and all accrued but unpaid interest thereon as of the
date of prepayment, without prepayment premium thereon, (ii) no prepayment
premium shall be due in connection with the application of insurance
proceeds or condemnation awards to the principal balance of this Note as
provided in the Mortgage, and (iii) if Holder applies any insurance
proceeds to the principal balance of this Note as provided in the Mortgage,
then Maker shall have the right to prepay the remaining principal amount of
this Note and all accrued but unpaid interest thereon as of the date of
prepayment, without prepayment premium thereon.
6. Payments. Whenever any payment to be made under this Note shall be
stated to be due on a Saturday, Sunday or public holiday or the equivalent for
banks generally under the laws of the Commonwealth of Massachusetts (any other
day being a "Business Day"), such payment may be made on the next succeeding
Business Day.
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7. Default Rate.
(a) The entire balance of principal, interest, and other sums due upon
the maturity hereof, by acceleration or otherwise, shall bear interest from
the date due until paid at the greater of (i) eighteen percent (18%) per
annum and (ii) a per annum rate equal to five percent (5%) over the prime
rate (for corporate loans at large United States money center commercial
banks) published in The Wall Street Journal on the first business day of
each month (the "Default Rate"); provided, however, that such rate shall
not exceed the maximum permitted by applicable state or federal law. In the
event The Wall Street Journal is no longer published or no longer publishes
such prime rate, Holder shall select a comparable reference.
(b) If any payment under this Note is not made within five (5) days
after its due date, interest shall accrue at the Default Rate from the date
such payment was due until payment is actually made.
8. Late Charges. In addition to interest as set forth herein, Maker shall
pay to Holder a late charge equal to four percent (4%) of any amounts due under
this Note in the event any such amount is not paid within five (5) days after
its due date.
9. Application of Payments. All payments hereunder shall be applied first
to the payment of late charges, if any, then to the payment of prepayment
premiums, if any, then to the repayment of any sums advanced by Holder for the
payment of any insurance premiums, taxes, assessments, or other charges against
the property securing this Note (together with interest thereon at the Default
Rate from the date of advance until repaid), then to the payment of accrued and
unpaid interest, and then to the reduction of principal.
10. Immediately Available Funds. Payments under this Note shall be payable
in immediately available funds without setoff, counterclaim or deduction of any
kind.
11. Security. This Note is secured by a Mortgage, Security Agreement,
Fixture Filing, Financing Statement and Assignment of Leases and Rents of even
date herewith granted by
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Maker for the benefit of the named Holder hereof (the "Mortgage") encumbering
certain real property and improvements thereon commonly known as the Royal
Sonesta Hotel, City of Cambridge, Middlesex County, Massachusetts, as more
particularly described in such Mortgage (the "Property").
12. Certain Definitions. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Mortgage.
13. Event of Default. Each of the following events will constitute an event
of default (an "Event of Default") under this Note and under the Mortgage and
each other document securing or executed in connection with this Note
(collectively, the "Loan Documents"), and any Event of Default under any Loan
Document shall constitute an Event of Default hereunder and under each of the
other Loan Documents:
(a) any failure to pay when due any sum hereunder within five (5) days
after its due date or failure to perform any covenant or agreement herein
contained within thirty (30) days following written notice of default
thereof; or
(b) if, at any time during the Extension Term, Gross Revenue for any
twelve (12) month period shall be less than ninety-three percent (93%) of
the amount of projected Gross Revenue for such month set forth in the
applicable Budget.
14. Acceleration. Upon the occurrence of any Event of Default, the entire
balance of principal, accrued interest, and other sums owing hereunder shall, at
the option of Holder, become at once due and payable without notice or demand.
Upon the occurrence of an Event of Default described in Section 13(b), hereof,
Holder shall have the option, in its sole discretion, to either (a) exercise any
remedies available to it under the Loan Documents, at law or in equity, or (b)
require Maker to submit a new proposed budget for Holder's approval. If Holder
agrees to accept such new proposed budget, then such budget shall become the
Budget for all purposes hereunder.
15. Conditions Precedent. Maker hereby certifies and declares that all
acts, conditions and things required to be done and performed and to have
happened precedent to the creation and issuance of this Note by Maker, and to
constitute this Note the
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legal, valid and binding obligation of Maker, enforceable in accordance with the
terms hereof, have been done and performed and happened in due and strict
compliance with all applicable laws.
16. Certain Waivers and Consents. Maker and all parties now or hereafter
liable for the payment hereof, primarily or secondarily, directly or indirectly,
and whether as endorser, guarantor, surety, or otherwise, hereby severally (a)
waive presentment, demand, protest, notice of protest and/or dishonor, and all
other demands or notices of any sort whatever with respect to this Note, (b)
consent to impairment or release of collateral, extensions of time for payment,
and acceptance of partial payments before, at, or after maturity, (c) waive any
right to require Holder to proceed against any security for this Note before
proceeding hereunder, (d) waive diligence in the collection of this Note or in
filing suit on this Note, and (e) agree to pay all reasonable costs and
expenses, including reasonable attorneys' fees, which may be incurred in the
collection of this Note or any part thereof or in preserving, securing
possession of, and realizing upon any security for this Note.
17. Usury Savings Clause. The provisions of this Note and of all agreements
between Maker and Holder are, whether now existing or hereinafter made, hereby
expressly limited so that in no contingency or event whatever, whether by reason
of acceleration of the maturity hereof, prepayment, demand for payment or
otherwise, shall the amount paid, or agreed to be paid, to Holder for the use,
forbearance, or detention of the principal hereof or interest hereon, which
remains unpaid from time to time, exceed the maximum amount permissible under
applicable law, it particularly being the intention of the parties hereto to
conform strictly to Massachusetts and Federal law, whichever is applicable. If
from any circumstance whatever, the performance or fulfillment of any provision
hereof or of any other agreement between Maker and Holder shall, at the time
performance or fulfillment of such provision is due, involve or purport to
require any payment in excess of the limits prescribed by law, then the
obligation to be performed or fulfilled is hereby reduced to the limit of such
validity, and if from any circumstance whatever Holder should ever receive as
interest an amount which would exceed the highest lawful rate, the amount which
would be excessive interest shall be applied to the reduction of the principal
balance owing hereunder (or, at Holder's option, be paid over to Maker) and
shall not be counted as interest. To the
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extent permitted by applicable law, determination of the legal maximum amount of
interest shall at all times be made by amortizing, prorating, allocating and
spreading in equal parts during the period of the full stated term of this Note,
all interest at any time contracted for, charged, or received from Maker in
connection with this Note and all other agreements between Maker and Holder, so
that the actual rate of interest on account of the indebtedness represented by
this Note is uniform throughout the term hereof.
18. Non-Recourse; Exceptions to Non-Recourse. Except as expressly
hereinafter set forth, the recourse of Holder with respect to the obligations
evidenced by this Note shall be solely to the Property, Chattels, Intangible
Personalty (as such terms are defined in the Mortgage) and all other collateral
pledged by Maker to secure this Note. Notwithstanding anything to the contrary
contained in this Note or in any Loan Document, nothing shall be deemed in any
way to impair, limit or prejudice the rights of Holder (a) in foreclosure
proceedings or in any ancillary proceedings brought to facilitate Holder's
foreclosure on the Property or any portion thereof; (b) to recover from Maker
damages or costs (including without limitation reasonable attorneys' fees)
incurred by Holder as a result of waste by Maker; (c) to recover from Maker any
condemnation or insurance proceeds attributable to the Property which were not
paid to Holder or used to restore the Property in accordance with the terms of
the Mortgage; (d) to recover from Maker any rents, profits, security deposits,
advances, rebates, prepaid rents or other similar sums attributable to the
Property collected by or for Maker following an Event of Default under any Loan
Document and not properly applied to the reasonable fixed and operating expenses
of the Property, including payments of this Note, or held pursuant to Leases or
other applicable agreements; (e) to pursue the personal liability of Maker under
the provisions of Section 5.10 of the Mortgage, including any indemnification
provisions under such Sections; (f) to exercise any specific rights or remedies
afforded Holder under any other provisions of the Loan Documents or by law or in
equity (or to recover under any guarantee agreement given in connection with
this Note); (g) to recover from Maker and to properly apply and disburse the
amount of any accrued taxes, assessments, and/or utility charges affecting the
Property (whether or not the same have been billed to Maker) that are either
unpaid by Maker or paid by Holder under the Mortgage and to collect from Maker
any sums expended by Holder in fulfilling the
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obligations of Maker, as lessor, under any Secondary Leases; (h) to pursue any
personal liability of Maker and Guarantor under the Environmental Indemnity
Agreement; and (i) to recover from Maker the amount of any loss suffered by
Holder (that would otherwise be covered by insurance) as a result of Maker's
failure to maintain any insurance required under the terms of any Loan Document.
The agreement contained in this paragraph to limit the personal liability of
Maker shall become null and void and be of no further force and effect in the
event (i) that the Property or any part thereof or any interest therein, or any
interest in Maker, shall be further encumbered by a voluntary lien securing any
obligation upon which Maker or any general partner, principal or affiliate of
Maker shall be personally liable for repayment, whether as obligor or guarantor
which has not been approved in advance by Holder; (ii) of any breach or
violation of Section 5.4, 5.5 or 5.7 of the Mortgage; (iii) of any fraud or
material misrepresentation by Maker in connection with the Property, the Loan
Documents or the application made by Maker for the loan evidenced by this Note;
or (iv) of any execution, amendment, modification or termination of any Primary
Lease or Secondary Lease without the prior written consent of Holder if such
consent is required under the terms of the Loan Documents. For purposes of the
foregoing, "affiliate" shall mean any individual, corporation, trust,
partnership or any other person or entity controlled by, controlling or under
common control with Maker. A person or entity of any nature shall be presumed to
have control when it possesses the power, directly or indirectly, to direct, or
cause the direction of, the management or policies of another person or entity,
whether through ownership of voting securities, by contract, or otherwise.
19. Severability. If any provision hereof or of any other document securing
or related to the indebtedness evidenced hereby is, for any reason and to any
extent, invalid or unenforceable, then neither the remainder of the document in
which such provision is contained, nor the application of the provision to other
persons, entities, or circumstances, nor any other document referred to herein,
shall be affected thereby, but instead shall be enforceable to the maximum
extent permitted by law.
20. Transfer of Note. Each provision of this Note shall be and remain in
full force and effect notwithstanding any
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negotiation or transfer hereof and any interest herein to any other Holder or
participant.
21. Governing Law. Regardless of the place of its execution, this Note
shall be construed and enforced in accordance with the laws of the Commonwealth
of Massachusetts.
22. Time of Essence. Time is of the essence of this Note.
23. Remedies Cumulative. The remedies provided to Holder in this Note, the
Mortgage and the other Loan Documents are cumulative and concurrent and may be
exercised singly, successively or together against Maker, the Property, and
other security, or any guarantor of this Note, at the sole and absolute
discretion of the Holder.
24. No Waiver. Holder shall not by any act or omission be deemed to waive
any of its rights or remedies hereunder unless such waiver is in writing and
signed by the Holder and then only to the extent specifically set forth therein.
A waiver of one event shall not be construed as continuing or as a bar to or
waiver of any right or remedy granted to Holder hereunder in connection with a
subsequent event.
25. Joint and Several Obligation. If Maker is more than one person or
entity, then (a) all persons or entities comprising Maker are jointly and
severally liable for all of the Maker's obligations hereunder; (b) all
representations, warranties, and covenants made by Maker shall be deemed
representations, warranties, and covenants of each of the persons or entities
comprising Maker; (c) any breach, Default or Event of Default by any of the
persons or entities comprising Maker hereunder shall be deemed to be a breach,
Default, or Event of Default of Maker; and (d) any reference herein contained to
the knowledge or awareness of Maker shall mean the knowledge or awareness of any
of the persons or entities comprising Maker.
26. WAIVER OF JURY TRIAL. MAKER AND HOLDER KNOWINGLY, IRREVOCABLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS NOTE, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE, THE MORTGAGE, OR ANY
OTHER LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT
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<PAGE>
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO ANY LOAN
DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR MAKER AND HOLDER TO ENTER
INTO THE LOAN TRANSACTION EVIDENCED BY THIS NOTE.
27. WAIVER OF PREPAYMENT RIGHT WITHOUT PENALTY. MAKER HEREBY EXPRESSLY
WAIVES ANY RIGHT IT MAY HAVE UNDER APPLICABLE LAW TO PREPAY THIS NOTE, IN WHOLE
OR IN PART, WITHOUT PREPAYMENT PREMIUM (EXCEPT AS OTHERWISE PROVIDED HEREIN),
UPON ACCELERATION OF THE MATURITY DATE OF THIS NOTE, AND AGREES THAT, IF FOR ANY
REASON A PREPAYMENT OF ALL OR ANY PART OF THIS NOTE IS MADE, WHETHER VOLUNTARILY
OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON
ACCOUNT OF THE OCCURRENCE OF ANY EVENT OF DEFAULT ARISING FOR ANY REASON,
INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY PROHIBITED OR RESTRICTED
TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF THE PROPERTY OR ANY PART THEREOF
SECURING THIS NOTE, THEN MAKER SHALL BE OBLIGATED TO PAY, CONCURRENTLY WITH SUCH
PREPAYMENT, THE PREPAYMENT PREMIUM PROVIDED FOR IN THIS NOTE OR, IN THE EVENT OF
PREPAYMENT FOLLOWING ACCELERATION OF THE MATURITY DATE HEREOF WHEN THIS NOTE IS
CLOSED TO PREPAYMENT, AS PROVIDED IN THE MORTGAGE. MAKER HEREBY DECLARES THAT
HOLDER'S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THIS NOTE AT THE INTEREST RATE
AND FOR THE TERM SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION,
GIVEN INDIVIDUAL WEIGHT BY MAKER, FOR THIS WAIVER AND AGREEMENT.
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<PAGE>
IN WITNESS WHEREOF and intending to be legally bound, Maker has duly
executed this Note as of the date first above written.
/S/
---------------------------------------
Peter J. Sonnabend, Trustee
of the Charterhouse of Cambridge
Trust, and not individually
/S/
---------------------------------------
Peter J. Sonnabend, Trustee under
a Grant of Trustee Power,
Authority and Discretion dated
December 5, 1996 from Boy A.J.
van Riel, Trustee of
the Charterhouse of Cambridge Trust,
and not individually
SONESTA OF MASSACHUSETTS, INC., a
Massachusetts corporation
By:/S/
------------------------------------
Peter J. Sonnabend
Vice President
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COMMONWEALTH OF MASSACHUSETTS
COUNTY OF MIDDLESEX
Recording requested by:
And when recorded mail to:
Otten, Johnson, Robinson,
Neff & Ragonetti, P.C.
950 Seventeenth Street
Suite 1600
Denver, Colorado 80202
Attention: Mark F. Copertino, Esq.
MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING,
FINANCING STATEMENT
AND ASSIGNMENT OF LEASES AND RENTS
THIS MORTGAGE, SECURITY AGREEMENT, FIXTURE FILING, FINANCING STATEMENT AND
ASSIGNMENT OF LEASES AND RENTS (this "Mortgage") is executed as of December 18,
1996, by ROGER P. SONNABEND, PETER J. SONNABEND, and BOY A.J. VAN RIEL, trustees
of the Charterhouse of Cambridge Trust, and not individually, under a
Declaration of Trust dated December 27, 1963 and recorded at Middlesex South
Deeds Book 11160, Page 340, as amended by Amendment of Declaration of Trust
dated July 8, 1966 and recorded at Middlesex South Deeds Book 11160, Page 359
("Charterhouse"), and SONESTA OF MASSACHUSETTS, INC., a Massachusetts
corporation ("Sonesta," and, together with Charterhouse, collectively,
"Mortgagor"), in favor of, and for the use and benefit of, SUNAMERICA LIFE
INSURANCE COMPANY, an Arizona corporation ("Mortgagee").
I
PARTIES, PROPERTY, AND DEFINITIONS
The following terms and references shall have the meanings indicated:
I.1 Bankruptcy Rights: All rights and remedies at any time arising
under or pursuant to Section 365(h) of Title 11 of the United States Code
(the "Bankruptcy Code"), or under or pursuant to any other provision of the
Bankruptcy Code, including,
<PAGE>
without limitation, all of Mortgagor's rights to remain in possession of
any property that is subject to a Primary Lease.
I.2 Chattels: All goods, fixtures, inventory, equipment, building and
other materials, supplies, and other tangible personal property of every
nature now owned or hereafter acquired by Mortgagor and used, intended for
use, or reasonably required in the construction, development, or operation
of the Property, together with all accessions thereto, replacements and
substitutions therefor, and proceeds thereof.
I.3 Default: Any manner which, with the giving of notice, passage of
time, or both, would constitute an Event of Default.
I.4 Environmental Indemnity Agreement: The Environmental Indemnity
Agreement of even date herewith executed by Mortgagor and Guarantor for the
benefit of Mortgagee.
I.5 ERISA: The Employee Retirement Income Security Act of 1974, as
amended, together with all rules and regulations issued thereunder.
I.6 Escrow Agreement: The Escrow Agreement of even date herewith
executed by Mortgagor, Mortgagee and Fowler, Goedecke, Ellis & O'Connor,
Inc.
I.7 Event of Default: As defined in Article VI.
I.8 Financial Certificate: The certificate of even date herewith
executed by Mortgagor to Mortgagee concerning financial statements
previously delivered by Mortgagor to Mortgagee.
I.9 Guarantor: Sonesta International Hotels Corporation, a New York
corporation.
I.10 Guaranty Agreement: The Limited Guaranty Agreement of even date
herewith made by Guarantor for the benefit of Mortgagee.
I.11 Intangible Personalty: All accounts, accounts receivable arising
from guest occupancy of the Property, monies in the possession of Mortgagee
(including without limitation proceeds
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from insurance, retainages and deposits for taxes and insurance), permits,
contract rights (including, without limitation, rights to receive insurance
proceeds) and general intangibles (whether now owned or hereafter acquired,
and including proceeds thereof) relating to or arising from Mortgagor's
ownership, use, operation, leasing, or sale of all or any part of the
Property, specifically including but in no way limited to any right which
Mortgagor may have or acquire to transfer any development rights from the
Property to other real property, and any development rights which may be so
transferred.
I.12 Lease Certificate: The certificate of even date herewith executed
by Mortgagor to Mortgagee concerning Secondary Leases.
I.13 Leasehold Estate: As defined in Section 2.1.
I.14 Liquor License Assignment: The Collateral Assignment of Liquor
Licenses of even date herewith executed by Sonesta for the benefit of
Mortgagee.
I.15 Loan Documents: The Note, all of the deeds of trusts, mortgages
and other instruments and documents securing the Note, including this
Mortgage, the Environmental Indemnity Agreement, the Guaranty Agreement,
the Lease Certificate, the Financial Certificate, the Liquor License
Assignment, the Escrow Agreement, the Replacement Reserve and Security
Agreement, and each other document executed or delivered in connection with
the transaction pursuant to which the Note has been executed and delivered.
The term "Loan Documents" also includes all modifications, extensions,
renewals, and replacements of each document referred to above.
I.16 Mortgagee: The Mortgagee named in the introductory paragraph of
this Mortgage (Taxpayer Identification No. 52-0502540), whose legal address
is 1 SunAmerica Center, Century City, Los Angeles, California 90067-6022,
together with any future holder of the Note.
I.17 Mortgagor: The Mortgagor named in the introductory paragraph of
this Mortgage (Taxpayer Identification No. (Charterhouse: 04-6148511;
Sonesta: 04-2233480), whose legal address is c/o Sonesta International
Hotels Corp., 200 Clarendon Street, 41st Floor, Boston, Massachusetts
02116, Attention:
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<PAGE>
Office of the Treasurer, together with any future owner of the Property or
any part thereof or interest therein.
I.18 Note: Mortgagor's promissory note of even date herewith, payable
to the order of Mortgagee in the principal face amount of $22,880,000.00,
the last payment under which is due on December 1, 2003, or, if extended by
Mortgagee by its terms, December 1, 2008, unless such due date is
accelerated, together with all renewals, extensions and modifications of
such promissory note. All terms and provisions of the Note are incorporated
by this reference in this Mortgage.
I.19 Permits: All permits, licenses, certificates and authorizations
necessary for the beneficial development, ownership, use, occupancy,
operation and maintenance of the Property, including, without limitation,
all liquor, innholder's and similar such licenses.
I.20 Permitted Exceptions: The matters set forth in Exhibit B attached
hereto.
I.21 Primary Lease: As defined in Section 2.1.
I.22 Property: The tract or tracts of land described in Exhibit A
attached, together with the following:
(a) All buildings, structures, and improvements now or hereafter
located on such tract or tracts, as well as all rights-of-way,
easements, and other appurtenances thereto;
(b) All of Mortgagor's right, title and interest in any land
lying between the boundaries of such tract or tracts and the center
line of any adjacent street, road, avenue, or alley, whether opened or
proposed;
(c) All of the rents, income, receipts, revenues, issues and
profits of and from such tract or tracts and improvements;
(d) All (i) water and water rights (whether decreed or undecreed,
tributary, nontributary or not nontributary, surface or underground,
or appropriated or unappropriated); (ii) ditches and ditch rights;
(iii) spring and spring rights; (iv) reservoir and reservoir rights;
and (v) shares of stock in
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<PAGE>
water, ditch and canal companies and all other evidence of such
rights, which are now owned or hereafter acquired by Mortgagor and
which are appurtenant to or which have been used in connection with
such tract or tracts or improvements;
(e) All minerals, crops, timber, trees, shrubs, flowers, and
landscaping features now or hereafter located on, under or above such
tract or tracts;
(f) All machinery, apparatus, equipment, fittings, fixtures owned
by Mortgagor (whether actually or constructively attached, and
including all trade, domestic, and ornamental fixtures) now or
hereafter located in, upon, or under such tract or tracts or
improvements and used or usable in connection with any present or
future operation thereof, including but not limited to all heating,
air-conditioning, freezing, lighting, laundry, incinerating and power
equipment; engines; pipes; pumps; tanks; motors; conduits;
switchboards; plumbing, lifting, cleaning, fire prevention, fire
extinguishing, refrigerating, ventilating, cooking, and communications
apparatus; boilers, water heaters, ranges, furnaces, and burners;
appliances; vacuum cleaning systems; elevators; escalators; shades;
awnings; screens; storm doors and windows; stoves; refrigerators;
attached cabinets; partitions; ducts and compressors; rugs and
carpets; draperies; and all additions thereto and replacements
therefor;
(g) All development rights associated with such tract or tracts,
whether previously or subsequently transferred to such tract or tracts
from other real property or now or hereafter susceptible of transfer
from such tract or tracts to other real property;
(h) All awards and payments, including interest thereon,
resulting from the exercise of any right of eminent domain or any
other public or private taking of, injury to, or decrease in the value
of, any of such property;
(i) All Bankruptcy Rights; and
(j) All other and greater rights and interests of every nature in
such tract or tracts and in the possession or use thereof and income
therefrom, whether now owned or subsequently acquired by Mortgagor.
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<PAGE>
I.23 Replacement Reserve and Security Agreement: The Replacement
Reserve and Security Agreement of even date herewith executed by Mortgagor
for the benefit of Mortgagee.
I.24 Secondary Leases: Any and all leases, subleases and other
agreements under the terms of which any person other than Mortgagor has or
acquires any right to occupy or use the Property, or any part thereof.
I.25 Secured Obligations: All present and future obligations of
Mortgagor to Mortgagee evidenced by or contained in the Note, the
Environmental Indemnity Agreement, this Mortgage and all other Loan
Documents, whether stated in the form of promises, covenants,
representations, warranties, conditions, or prohibitions or in any other
form. If the maturity of the Note secured by this Mortgage is accelerated,
the Secured Obligations shall include an amount equal to any prepayment
premium which would be payable under the terms of the Note as if the Note
were prepaid in full on the date of the acceleration. Except as provided in
Section 5.4 hereof in connection with a Guarantor Transfer (as defined in
Section 5.4), if under the terms of the Note no voluntary prepayment would
be permissible on the date of the such acceleration, then the prepayment
fee or premium to be included in the Secured Obligations shall be equal to
one hundred fifty percent (150%) of the highest prepayment fee or premium
set forth in the Note, calculated as of the date of such acceleration.
II
GRANTING CLAUSE
II.1 Grant to Mortgagee.
(a) As security for the Secured Obligations, Mortgagor hereby
grants, bargains, sells, conveys, mortgages and warrants with MORTGAGE
COVENANTS unto Mortgagee the entire right, title, interest and estate
of Mortgagor in and to the Property, whether now owned or hereafter
acquired; TO HAVE AND TO HOLD the same, together with all and singular
the rights, hereditaments, and appurtenances in anywise appertaining
or belonging thereto, unto Mortgagee and Mortgagee's successors,
substitutes and assigns forever.
-6-
<PAGE>
(b) If Exhibit A attached to this Mortgage shall indicate that
Mortgagor's interest in any portion or portions of the Property is in
the nature of one or more leasehold estates (a "Leasehold Estate"),
then the granting language set forth in this Section shall extend to
and include the entire right, title and interest of Mortgagor in, to
and under each lease creating a Leasehold Estate (hereinafter a
"Primary Lease," or, collectively, the "Primary Leases"), together
with any other or greater interest in the Property hereafter acquired
by Mortgagor, including, but not limited to, any fee estate hereafter
acquired by Mortgagor in the land or improvements demised under the
provisions of any Primary Lease. This Mortgage shall be deemed to
encumber, and to grant, bargain, sell, convey and mortgage unto
Mortgagee, the fee simple title to the entire Property and the Primary
Leases.
II.2 Security Interest to Mortgagee. As additional security for the
Secured Obligations, Mortgagor hereby grants to Mortgagee a security
interest in the Chattels and in the Intangible Personalty. To the extent
any of the Chattels or the Intangible Personalty may be or have been
acquired with funds advanced by Mortgagee under the Loan Documents, this
security interest is a purchase money security interest. This Mortgage
constitutes a Security Agreement under the Uniform Commercial Code of the
state in which the Property is located (the "Code") with respect to any
part of the Property, Chattels and Intangible Personalty that may or might
now or hereafter be or be deemed to be personal property, fixtures or
property other than real estate (all collectively hereinafter called
"Collateral"); all of the terms, provisions, conditions and agreements
contained in this Mortgage pertain and apply to the Collateral as fully and
to the same extent as to any other property comprising the Property, and
the following provisions of this Section shall not limit the generality or
applicability of any other provisions of this Mortgage but shall be in
addition thereto:
(a) The Collateral shall be used by Mortgagor solely for business
purposes, and all Collateral (other than the Intangible Personalty)
shall be installed upon the real estate comprising part of the
Property for Mortgagor's own use or as the equipment and furnishings
furnished by Mortgagor, as landlord, to tenants of the Property;
(b) Subject to the provisions of Section 5.7, the Collateral
(other than the Intangible Personalty) shall be
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<PAGE>
kept at the real estate comprising a part of the Property, and shall
not be removed therefrom without the consent of Mortgagee (being the
Secured Party as that term is used in the Code); and the Collateral
(other than the Intangible Personalty) may be affixed to such real
estate but shall not be affixed to any other real estate;
(c) No financing statement covering any of the Collateral or any
proceeds thereof is on file in any public office; and Mortgagor will,
at its cost and expense, upon demand, furnish to Mortgagee such
further information and will execute and deliver to Mortgagee such
financing statements and other documents in form satisfactory to
Mortgagee and will do all such acts and things as Mortgagee may at any
time or from time to time reasonably request or as may be necessary or
appropriate to establish and maintain a perfected first-priority
security interest in the Collateral as security for the Secured
Obligations, subject to no adverse liens or encumbrances; and
Mortgagor will pay the cost of filing the same or filing or recording
such financing statements or other documents and this instrument in
all public offices wherever filing or recording is deemed by Mortgagee
to be necessary or desirable;
(d) The terms and provisions contained in this Section and in
Section 7.6 of this Mortgage shall, unless the context otherwise
requires, have the meanings and be construed as provided in the Code;
and
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<PAGE>
(e) This Mortgage constitutes a financing statement under the
Code with respect to the Collateral. As such, this Mortgage covers all
items of the Collateral that are or are to become fixtures. The filing
of this Mortgage in the real estate records of the county where the
Property is located shall constitute a fixture filing in accordance
with the Code. Information concerning the security interests created
hereby may be obtained at the addresses set forth in Article I of this
Mortgage. Mortgagor is the "Debtor" and Mortgagee is the "Secured
Party" (as those terms are defined and used in the Code) insofar as
this Mortgage constitutes a financing statement.
III
MORTGAGOR'S REPRESENTATIONS AND WARRANTIES
III.1 Warranty of Title. Mortgagor represents and warrants to
Mortgagee that:
(a) As to each portion (if any) of the Property in which
Mortgagor's interest is in the nature of a Leasehold Estate (as
indicated in Exhibit A attached hereto), Mortgagor is the sole owner
and holder of such Leasehold Estate and the entire right, title and
interest of the lessee or tenant under the Primary Lease creating such
Leasehold Estate, such Leasehold Estate and Primary Lease are in full
force and effect in accordance with their terms, there are no defaults
under such Primary Lease by any of the parties thereto and there are
no events or circumstances existing which, after notice or the passage
of time, or both, would constitute a Default or an Event of Default
under such Primary Lease, and the Leasehold Estate and Mortgagor's
interest under such Primary Lease are free and clear of all liens,
encumbrances, security interests and other claims whatsoever;
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<PAGE>
(b) Except as specifically described in Section 3.1(a) above,
Mortgagor has a good and marketable fee simple title to the Property,
and such fee simple title is free and clear of all liens,
encumbrances, security interests and other claims whatsoever, subject
only to the Permitted Exceptions;
(c) Mortgagor is the sole and absolute owner of the Chattels and
the Intangible Personalty, free and clear of all liens, encumbrances,
security interests and other claims whatsoever, subject only to the
Permitted Exceptions;
(d) This Mortgage is a valid and enforceable first lien and
security interest on the Property, Chattels and Intangible Personalty,
subject only to the Permitted Exceptions; and
(e) Mortgagor, for itself and its successors and assigns, hereby
agrees to warrant and forever defend, all and singular of the property
and property interests granted and conveyed pursuant to this Mortgage,
against every person whomsoever lawfully claiming, or to claim, the
same or any part thereof.
The warranties contained in this Section shall survive foreclosure of this
Mortgage, and shall inure to the benefit of and be enforceable by any person who
may acquire title to the Property, the Chattels, or the Intangible Personalty
pursuant to any such foreclosure.
III.2 Due Authorization. If Mortgagor is other than a natural person,
then each individual who executes this document on behalf of Mortgagor
represents and warrants to Mortgagee that such execution has been duly
authorized by all necessary corporate, partnership, or other action on the
part of Mortgagor. Mortgagor represents that, with respect to any portion
of the Property in which Mortgagor's interest is in the nature of a
Leasehold Estate, Mortgagor has obtained all consents and approvals
required in connection with the execution, delivery and performance of this
Mortgage. Without limitation, Mortgagor represents that it has obtained all
such consents and approvals which are required from the landlord or lessor
under any Primary Lease creating such Leasehold Estate, and that Mortgagee
is, and at all times will be, free to exercise its rights and powers
pursuant to this Mortgage, including each of the rights set forth in
Article VII hereof,
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<PAGE>
without any further consent or approval of the landlord or lessor under any
such Primary Lease.
III.3 Other Representations and Warranties. Mortgagor represents and
warrants to Mortgagee as follows:
(a) Charterhouse is a business trust, duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts. Sonesta is a corporation, duly organized, validly
existing and in good standing under the laws of the Commonwealth of
Massachusetts. Guarantor is a corporation, duly organized, validly
existing and in good standing under the laws of the State of New York.
(b) This Mortgage is, and each other Loan Document to which
Mortgagor is a party will, when delivered hereunder, be valid and
binding obligations of Mortgagor enforceable against Mortgagor in
accordance with their respective terms, except as limited by equitable
principles and bankruptcy, insolvency and similar laws affecting
creditors' rights;
(c) The execution, delivery and performance by Mortgagor of the
Loan Documents will not contravene any contractual or other
restriction binding on or affecting Mortgagor or any Guarantor, and
will not result in or require the creation of any lien, security
interest, other charge or encumbrance (other than pursuant hereto)
upon or with respect to any of its properties;
(d) The execution, delivery and performance by Mortgagor of the
Loan Documents does not contravene any applicable law;
(e) No authorization, approval, consent or other action by, and
no notice to or filing with, any court, governmental authority or
regulatory body is required for the due execution, delivery and
performance by Mortgagor of any of the Loan Documents or the
effectiveness of any assignment of any of Mortgagor's rights and
interests of any kind to Mortgagee;
(f) No part of the Property, Chattels, or Intangible Personalty
is in the hands of a receiver, no application for a receiver is
pending with respect to any portion of the Property, Chattels, or
Intangible Personalty and no part of
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<PAGE>
the Property, Chattels, or Intangible Personalty is subject to any
foreclosure or similar proceeding;
(g) Neither Mortgagor nor any Guarantor has made an assignment
for the benefit of creditors, nor has Mortgagor or any Guarantor
filed, or had filed against it, any petition in bankruptcy;
(h) There is no pending or, to the best of Mortgagor's knowledge,
threatened, litigation, action, proceeding or investigation,
including, without limitation, any condemnation proceeding, against
Mortgagor, any Guarantor or the Property before any court,
governmental or quasi-governmental, arbitrator or other authority;
(i) Mortgagor is a "non-foreign person" within the meaning of
Sections 1445 and 7701 of the United States Internal Revenue Code of
1986, as amended, and the regulations issued thereunder;
(j) Access to and egress from the Property are available and
provided by public streets, and Mortgagor has no knowledge of any
federal, state, county, municipal or other governmental plans to
change the highway or road system in the vicinity of the Property or
to restrict or change access from any such highway or road to the
Property;
(k) All public utility services necessary for the operation of
all improvements constituting part of the Property for their intended
purposes are available at the boundaries of the land constituting part
of the Property, including water supply, storm and sanitary sewer
facilities, and natural gas, electric, telephone and cable television
facilities;
(l) The Property is located in a zoning district designated
C-3A, with a PUD-2 overlay by Cambridge, Massachusetts. Such
designation permits the development use and operation of the
Property as it is currently operated as a permitted, and not as a
non-conforming use. To the best of Mortgagor's knowledge, the
Property complies in all material respects with all requirements,
conditions and restrictions, including but not limited to deed
restrictions and restrictive covenants applicable to the
Property;
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<PAGE>
(m) There are no special or other assessments for public
improvements or otherwise now affecting the Property, nor does
Mortgagor know of any pending or threatened special assessments
affecting the Property or any contemplated improvements affecting the
Property that may result in special assessments. There are no tax
abatements or exceptions affecting the Property;
(n) Mortgagor and each Guarantor have filed all tax returns which
are required to be filed by them, and have paid all taxes as shown on
such returns or on any assessment received pertaining to the Property;
(o) Mortgagor has not received any notice from any governmental
body having jurisdiction over the Property as to any violation of any
applicable law, or any notice from any insurance company or inspection
or rating bureau setting forth any requirements as a condition to the
continuation of any insurance coverage on or with respect to the
Property or the continuation thereof at premium rates existing at
present which have not been remedied or satisfied;
(p) To the best of Mortgagor's knowledge, neither Mortgagor nor
any Guarantor is in default, in any manner which would adversely
affect its properties, assets, operations or condition (financial or
otherwise), in the performance, observance or fulfillment of any of
the obligations, covenants or conditions set forth in any agreement or
instrument to which it is a party or by which it or any of its
properties, assets or revenues are bound;
(q) Except as set forth in the Lease Certificate, there are no
occupancy rights (written or oral), leases or tenancies presently
affecting any part of the Property. The Lease Certificate contains a
true and correct description of all Secondary Leases presently
affecting the Property. No written or oral agreements or
understandings exist between Mortgagor and the tenants under the
Secondary Leases described in the Lease Certificate that grant such
tenants any rights greater than those described in the Lease
Certificate or that are in any way inconsistent with the rights
described in the Lease Certificate;
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<PAGE>
(r) There are no options, purchase contracts or other similar
agreements of any type (written or oral) presently affecting any part
of the Property;
(s) There exists no brokerage agreement with respect to any part
of the Property;
(t) Except as otherwise disclosed to Mortgagee in writing prior
to the date hereof, (i) there are no contracts presently affecting the
Property ("Contracts") having a term in excess of one hundred eighty
(180) days or not terminable by Mortgagor (without penalty) on thirty
(30) days' notice; (ii) Mortgagor has heretofore delivered to
Mortgagee true and correct copies of each of the Contracts together
with all amendments thereto; (iii) to the best of Mortgagor's
knowledge, Mortgagor is not in default of any obligations under any of
the Contracts; and (iv) the Contracts represent the complete agreement
between Mortgagor and such other parties as to the services to be
performed or materials to be provided thereunder and the compensation
to be paid for such services or materials, as applicable, and except
as otherwise disclosed herein, such other parties possess no
unsatisfied claims against Mortgagor. To the best of Mortgagor's
knowledge, Mortgagor is not in default under any of the Contracts and
no event has occurred which, with the passing of time or the giving of
notice, or both, would constitute a Default under any of the
Contracts;
(u) Mortgagor has obtained all Permits necessary or desirable for
the operation, use, ownership, development, occupancy and maintenance
of the Property as a hotel. None of the Permits has been suspended or
revoked, and all of the Permits are in full force and effect, are
fully paid for, and Mortgagor has made or will make application for
renewals of any of the Permits prior to the expiration thereof;
(v) All insurance policies held by Mortgagor relating to or
affecting the Property are in full force and effect and shall remain
in full force and effect until all Secured Obligations are paid in
full. Mortgagor has not received any notice of default or notice
terminating or threatening to terminate any such insurance policies.
Mortgagor has made or will make application for renewals of such
insurance policies prior to the expiration thereof; and
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(w) Mortgagor currently complies with ERISA. To the best of
Mortgagor's knowledge, neither the making of the loan evidenced by the
Note and secured by this Mortgage nor the exercise by Mortgagee of any
of its rights under the Loan Documents constitutes or will constitute
a non-exempt prohibited transaction under ERISA.
III.4 Continuing Effect. Mortgagor shall be liable to Mortgagee for
any damage suffered by Mortgagee if any of the foregoing representations
are materially inaccurate as of the date hereof, regardless when such
inaccuracy may be discovered by, or result in harm to, Mortgagee. Mortgagor
further represents and warrants that the foregoing representations and
warranties, as well as all other representations and warranties of
Mortgagor to Mortgagee relative to the Loan Documents, shall remain
materially true and correct during the term of the Note and shall survive
termination of this Mortgage.
IV
MORTGAGOR'S AFFIRMATIVE COVENANTS
IV.1 Payment of Note. Mortgagor will pay all principal, interest, and
other sums payable under the Note, on the date when such payments are due,
without notice or demand.
IV.2 Performance of Other Obligations. Mortgagor will promptly and
strictly perform and comply with all other covenants, conditions, and
prohibitions required of Mortgagor by the terms of the Loan Documents.
IV.3 Other Encumbrances. Mortgagor will promptly and strictly perform
and comply with all covenants, conditions, and prohibitions required of
Mortgagor in connection with any other encumbrance affecting the Property,
the Chattels, or the Intangible Personalty, or any part thereof, or any
interest therein, regardless of whether such other encumbrance is superior
or subordinate to the lien hereof.
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IV.4 Payment of Taxes.
(a) Property Taxes. Except to the extent that Mortgagor has made
escrow payments to Mortgagee pursuant to Section 4.4(b) below, (i)
Mortgagor will pay, before delinquency, all taxes and assessments,
general or special, which may be levied or imposed at any time against
Mortgagor's interest and estate in the Property, the Chattels, or the
Intangible Personalty, (ii) within ten (10) days after each payment of
any such tax or assessment, Mortgagor will deliver to Mortgagee,
without notice or demand, an official receipt for such payment, and
(iii) at Mortgagee's option, Mortgagee may retain the services of a
firm to monitor the payment of all taxes and assessments relating to
the Property, the cost of which shall be borne by Mortgagor.
(b) Deposit for Taxes. On or before the date hereof, Mortgagor
shall deposit with Mortgagee an amount equal to 1/12th of the amount
which Mortgagee estimates will be required to make the next annual
payment of taxes, assessments, and similar governmental charges
referred to in this Section, multiplied by the number of whole or
partial months that have elapsed since the date one month prior to the
most recent due date for such taxes, assessments and similar
governmental charges. Thereafter, with each monthly payment under the
Note, Mortgagor shall deposit with Mortgagee an amount equal to 1/12th
of the amount which Mortgagee estimates will be required to pay the
next annual payment of taxes, assessments, and similar governmental
charges referred to in this Section. The purpose of these provisions
is to provide Mortgagee with sufficient funds on hand to pay all such
taxes, assessments, and other governmental charges thirty (30) days
before the date on which they become past due. If the Mortgagee, in
its sole discretion, determines that the funds escrowed hereunder are,
or will be, insufficient, Mortgagor shall upon demand pay such
additional sums as Mortgagee shall determine necessary and shall pay
any increased monthly charges requested by Mortgagee. Provided no
Default or Event of Default exists hereunder, Mortgagee will apply the
amounts so deposited to the payment of such taxes, assessments, and
other charges when due. Any amount deposited pursuant to this Section
4.4(b) may be held and commingled with Mortgagee's own funds. All
amounts held in escrow pursuant to this Section 4.4(b) shall accrue
interest for the benefit of Mortgagor; provided, however, Mortgagor
shall pay to Mortgagee (or its loan servicer) the administrative costs
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associated with investing, administering or otherwise providing for
interest on the amounts so deposited.
(c) Intangible Taxes. If by reason of any statutory or
constitutional amendment or judicial decision adopted or rendered
after the date hereof, any tax, assessment, or similar charge is
imposed against the Note, Mortgagee, or any interest of Mortgagee in
any real or personal property encumbered hereby, Mortgagor will pay
such tax, assessment, or other charge before delinquency and will
indemnify Mortgagee against all loss, expense, or diminution of income
in connection therewith. In the event Mortgagor is unable to do so,
either for economic reasons or because the legal provisions or
decisions creating such tax, assessment or charge forbid Mortgagor
from doing so, then the Note will, at Mortgagee's option, become due
and payable in full upon ninety (90) days' notice to Mortgagor.
(d) Right to Contest. Notwithstanding any other provision of this
Section, Mortgagor will not be deemed to be in default solely by
reason of Mortgagor's failure to pay any tax, assessment or similar
governmental charge so long as, in Mortgagee's judgment, each of the
following conditions is satisfied:
(i) Mortgagor is engaged in and diligently pursuing in good
faith administrative or judicial proceedings appropriate to
contest the validity or amount of such tax, assessment, or
charge; and
(ii) Mortgagor's payment of such tax, assessment, or charge
would necessarily and materially prejudice Mortgagor's prospects
for success in such proceedings; and
(iii) Nonpayment of such tax, assessment, or charge will not
result in the loss or forfeiture of any property encumbered
hereby or any interest of Mortgagee therein; and
(iv) Mortgagor deposits with Mortgagee, as security for such
payment which may ultimately be required, a sum equal to the
amount of the disputed tax, assessment or charge plus the
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interest, penalties, advertising charges, and other costs which
Mortgagee estimates are likely to become payable if Mortgagor's
contest is unsuccessful.
If Mortgagee determines that any one or more of such conditions is not
satisfied or is no longer satisfied, Mortgagor will pay the tax, assessment, or
charge in question, together with any interest and penalties thereon, within ten
(10) days after Mortgagee gives notice of such determination.
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IV.5 Maintenance of Insurance.
(a) Coverages Required. Mortgagor shall maintain or cause to be
maintained, with financially sound and reputable insurance companies
or associations, insurance which insures the Property against (i) all
risk of loss, damage, destruction, theft, or any other casualty or
risk, covering the Property including all of Mortgagor's personal
property located therein, without deduction for depreciation, in an
amount reasonably approved by Mortgagee, but in no event less than the
full replacement cost thereof, and builder's risk insurance throughout
the period of any construction of any improvements on the Property,
(ii) use and occupancy insurance covering either rental income or
business interruption with coverage in an amount not less than twelve
months' anticipated gross rental income, (iii) comprehensive general
liability insurance covering the Property and Mortgagor, in an amount
not less than $2,000,000.00 for bodily injury and/or property damage
liability per occurrence and $5,000,000.00 in the aggregate or such
higher amounts as Mortgagee may reasonably require, and (iv) worker's
compensation insurance in accordance with the requirements of
applicable law, which policies of insurance maintained pursuant to
this Section shall provide standard mortgagee endorsements or clauses
naming Mortgagee as mortgagee and as loss payee (with respect to
property insurance) or additional insured (with respect to liability
insurance). Each policy of insurance required hereunder shall provide
that it shall not be modified or cancelled without at least thirty
(30) days prior written notice to Mortgagee. The original or a
certified copy of each insurance policy shall be delivered to
Mortgagee by the applicable insurance company, and such delivery will
constitute an assignment to Mortgagee, as further security for the
Secured Obligations, of all unearned premiums returnable upon
cancellation of any such policy. Mortgagor shall also maintain, at the
request of Mortgagee, such hazard insurance, in addition to the
insurance required above, as Mortgagee may reasonably request and as
shall be available, including but not limited to flood, including
surface waters, and earthquake, including subsidence, all of such
insurance to comply in all respects with the requirements of this
Section. Within five (5) days following written request therefor,
Mortgagor shall provide to Mortgagee proof of payment of all premiums
for all policies of insurance required hereunder.
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(b) Renewal Policies. Not less than thirty (30) days prior to the
expiration date of each insurance policy required pursuant to Section
4.5(a) above, Mortgagor will deliver to Mortgagee an appropriate
renewal policy (or a certified copy thereof) or evidence satisfactory
to Mortgagee that the existing policy has been extended, together with
evidence satisfactory to Mortgagee that the applicable premium has
been prepaid.
(c) Deposit for Premiums. Upon demand made by Mortgagee following
the occurrence of any Default or Event of Default, Mortgagor shall
deposit with Mortgagee an amount equal to 1/12th of the amount which
Mortgagee estimates will be required to make the next annual payments
of the premiums for the policies of insurance referred to in this
Section, multiplied by the number of whole and partial months which
have elapsed since the date one month prior to the most recent policy
anniversary date for each such policy. Thereafter, with each monthly
payment under the Note, Mortgagor will deposit an amount equal to
1/12th of the amount which Mortgagee estimates will be required to pay
the next required annual premium for each insurance policy referred to
in this Section. The purpose of these provisions is to provide
Mortgagee with sufficient funds on hand to pay all such premiums
thirty (30) days before the date on which they become past due. If the
Mortgagee, in its sole discretion, determines that the funds escrowed
hereunder are, or will be, insufficient, Mortgagor shall upon demand
pay such additional sums as Mortgagee shall determine necessary and
shall pay any increased monthly charges requested by Mortgagee.
Provided no Default or Event of Default exists hereunder, Mortgagee
will apply the amounts so deposited to the payment of such insurance
premiums when due. Any amount deposited pursuant to this Section
4.5(c) may be held and commingled with Mortgagee's own funds. All
amounts held in escrow pursuant to this Section 4.5(c) shall accrue
interest for the benefit of Mortgagor; provided, however, Mortgagor
shall pay to Mortgagee (or its loan servicer) the administrative costs
associated with investing, administering or otherwise providing for
interest on the amounts so deposited.
(d) Application of Hazard Insurance Proceeds. Mortgagor shall
promptly notify Mortgagee of any damage or casualty to all or any
portion of the Property or Chattels. Mortgagee may participate in all
negotiations and appear and participate in all judicial arbitration
proceedings concerning any insurance proceeds which may be payable as
a result of such
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casualty or damage. Any such insurance proceeds shall be paid to
Mortgagee and shall be applied first to reimburse Mortgagee for all
costs and expenses, including attorneys' fees, reasonably incurred by
Mortgagee in connection with the collection of such insurance
proceeds. The balance of any insurance proceeds received by Mortgagee
with respect to an insured casualty may, in Mortgagee's sole
discretion, either (i) be retained and applied by Mortgagee toward
payment of the Secured Obligations, or (ii) be paid over, in whole or
in part and subject to such conditions as Mortgagee may reasonably
impose and as are consistent with customary construction loan
disbursements, to Mortgagor to pay for repairs or replacements
necessitated by the casualty; provided, however, that if all of the
Secured Obligations have been performed or are discharged by the
application of less than all of such insurance proceeds, then any
remaining proceeds will be paid over to Mortgagor. Notwithstanding the
preceding sentence, if (A) no Default or Event of Default shall exist
hereunder, and (B) the proceeds received by Mortgagee (together with
any other funds delivered by Mortgagor to Mortgagee for such purpose)
shall be sufficient, in Mortgagee's reasonable judgment, to pay for
any restoration necessitated by the casualty, and (C) the cost of such
restoration shall not exceed $2,300,000.00, and (D) such restoration
can be completed, in Mortgagee's judgment, at least ninety (90) days
prior to the maturity date of the Note, then Mortgagee shall apply
such proceeds as provided in clause (ii) of the preceding sentence.
Mortgagee will have no obligation to see to the proper application of
any insurance proceeds paid over to Mortgagor, nor will any such
proceeds received by Mortgagee bear interest or be subject to any
other charge for the benefit of Mortgagor. Mortgagee may, prior to the
application of insurance proceeds, commingle them with Mortgagee's own
funds and otherwise act with regard to such proceeds as Mortgagee may
determine in Mortgagee's sole discretion.
(e) Successor's Rights. Any person who acquires title to the
Property or the Chattels upon foreclosure hereunder will succeed to
all of Mortgagor's rights under all policies of insurance maintained
pursuant to this Section.
IV.6 Maintenance and Repair of Property and Chattels. Mortgagor will
at all times maintain the Property and the Chattels in good condition and
repair, will diligently prosecute the completion of any building or other
improvement which is at any time in the process of construction on the
Property, and will
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promptly repair, restore, replace, or rebuild any part of the Property or
the Chattels which may be affected by any casualty or any public or private
taking or injury to the Property or the Chattels, provided that applicable
insurance proceeds or condemnation awards are made available for such
purpose pursuant to Section 4.5 or 4.9 hereof. All costs and expenses
arising out of the foregoing shall be paid by Mortgagor whether or not the
proceeds of any insurance or eminent domain shall be sufficient therefor.
Mortgagor will comply with all statutes, ordinances, and other governmental
or quasi-governmental requirements and private covenants relating to the
ownership, construction, use, or operation of the Property, including but
not limited to any environmental or ecological requirements; provided, that
so long as Mortgagor is not otherwise in default hereunder, Mortgagor may,
upon providing Mortgagee with security reasonably satisfactory to
Mortgagee, proceed diligently and in good faith to contest the validity or
applicability of any such statute, ordinance, or requirement. Mortgagee and
any person authorized by Mortgagee may enter and inspect the Property at
all reasonable times, and may inspect the Chattels, wherever located, at
all reasonable times.
IV.7 Primary Leases. Mortgagor shall timely pay and perform each of
its obligations under or in connection with any Primary Lease, and shall
otherwise pay such sums and take such action as shall be necessary or
required in order to maintain any Primary Lease in full force and effect in
accordance with its terms. Mortgagor shall immediately furnish to Mortgagee
copies of any notices given to Mortgagor by the lessor under any Primary
Lease, alleging the Default by Mortgagor in the timely payment or
performance of its obligations under any such Primary Lease and any
subsequent communication related thereto. Mortgagor agrees that Mortgagee,
in its sole discretion, may advance any sum or take any action which
Mortgagee believes is necessary or required to maintain any Primary Lease
in full force and effect, and all such sums advanced by Mortgagee, together
with all costs and expenses incurred by Mortgagee in connection with action
taken by Mortgagee pursuant to this Section, shall be due and payable by
Mortgagor to Mortgagee upon demand, shall bear interest from the date ten
(10) days following demand therefor until paid at the "Default Rate" (as
that term is defined in the Note), and shall be secured by this Mortgage.
IV.8 Secondary Leases. Mortgagor shall timely pay and perform each of
its obligations under or in connection with
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the Secondary Leases, and shall otherwise pay such sums and take such
action as shall be necessary or required in order to maintain each of the
Secondary Leases in full force and effect in accordance with its terms.
Mortgagor shall immediately furnish to Mortgagee copies of any notices
given to Mortgagor by the lessee under any Secondary Lease, alleging the
Default by Mortgagor in the timely payment or performance of its
obligations under such Secondary Lease and any subsequent communication
related thereto. Mortgagor shall also promptly furnish to Mortgagee copies
of any notices given to Mortgagor by the lessee under any Secondary Lease,
extending the term of any Secondary Lease, requiring or demanding the
expenditure of any sum by Mortgagor (or demanding the taking of any action
by Mortgagor), or relating to any other material obligation of Mortgagor
under such Secondary Lease and any subsequent communication related
thereto. Mortgagor agrees that Mortgagee, in its sole discretion, may
advance any reasonable sum or take any action which Mortgagee believes is
necessary or required to maintain the Secondary Leases in full force and
effect, and all such sums advanced by Mortgagee, together with all
reasonable costs and expenses incurred by Mortgagee in connection with
action taken by Mortgagee pursuant to this Section, shall be due and
payable by Mortgagor to Mortgagee upon demand, shall bear interest until
paid at the Default Rate, and shall be secured by this Mortgage.
IV.9 Eminent Domain; Private Damage. If all or any part of the
Property is taken or damaged by eminent domain or any other public or
private action, Mortgagor will notify Mortgagee promptly of the time and
place of all meetings, hearings, trials, and other proceedings relating to
such action. Mortgagee may participate in all negotiations and appear and
participate in all judicial or arbitration proceedings concerning any award
or payment which may be due as a result of such taking or damage. Any such
award or payment is to be paid to Mortgagee and will be applied first to
reimburse Mortgagee for all costs and expenses, including attorneys' fees,
reasonably incurred by Mortgagee in connection with the ascertainment and
collection of such award or payment. The balance, if any, of such award or
payment may, in Mortgagee's sole discretion, either (a) be retained by
Mortgagee and applied toward the Secured Obligations, or (b) be paid over,
in whole or in part and subject to such conditions as Mortgagee may
reasonably impose and as are consistent with customary construction loan
disbursements, to Mortgagor for the purpose of restoring, repairing, or
rebuilding any part of the Property
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affected by the taking or damage. Notwithstanding the preceding sentence,
if (i) no Default or Event of Default shall have occurred and be continuing
hereunder, and (ii) the proceeds received by Mortgagee (together with any
other funds delivered by Mortgagor to Mortgagee for such purpose) shall be
sufficient, in Mortgagee's reasonable judgment, to pay for any restoration
necessitated by the taking or damage, and (iii) the cost of such
restoration shall not exceed $2,300,000.00, and (iv) such restoration can
be completed, in Mortgagee's judgment, at least ninety (90) days prior to
the maturity date of the Note, and (v) the remaining Property shall
constitute, in Mortgagee's sole judgment, adequate security for the Secured
Obligations, then Mortgagee shall apply such proceeds as provided in clause
(b) of the preceding sentence. Mortgagee will have no duty to see to the
application of any part of any award or payment released to Mortgagor.
Mortgagor's duty to pay the Note in accordance with its terms and to
perform the other Secured Obligations will not be suspended by the pendency
or discharged by the conclusion of any proceedings for the collection of
any such award or payment, and any reduction in the Secured Obligations
resulting from Mortgagee's application of any such award or payment will
take effect only when Mortgagee receives such award or payment. If this
Mortgage has been foreclosed prior to Mortgagee's receipt of such award or
payment, Mortgagee may nonetheless retain such award or payment to the
extent required to reimburse Mortgagee for all costs and expenses,
including attorneys' fees, incurred in connection therewith, and to
discharge any deficiency remaining with respect to the Secured Obligations.
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IV.10 Mechanics' Liens. Mortgagor will keep the Property free and
clear of all liens and claims of liens by contractors, subcontractors,
mechanics, laborers, materialmen, and other such persons, and will cause
any recorded statement of any such lien to be released of record within
thirty (30) days after the recording thereof. Notwithstanding the preceding
sentence, however, Mortgagor will not be deemed to be in default under this
Section if and so long as Mortgagor (a) contests in good faith the validity
or amount of any asserted lien and diligently prosecutes or defends an
action appropriate to obtain a binding determination of the disputed
matter, and (b) provides Mortgagee with such security as Mortgagee may
require to protect Mortgagee against all loss, damage, and expense,
including attorneys' fees, which Mortgagee might incur if the asserted lien
is determined to be valid.
IV.11 Defense of Actions. Mortgagor will defend, at Mortgagor's
expense, any action, proceeding or claim which affects any property
encumbered hereby or any interest of Mortgagee in such property or in the
Secured Obligations, and will indemnify and hold Mortgagee harmless from
all loss, damage, cost, or expense, including attorneys' fees, which
Mortgagee may incur in connection therewith. Mortgagor's obligations under
this Section are subject to the following: (a) the right to settle or
resolve such claim, subject to Mortgagee's approval, which approval shall
not be unreasonably withheld, (b) the right to select legal counsel of
Mortgagor's choice, subject to Mortgagee's approval, which approval shall
not be unreasonably withheld, and (c) Mortgagor shall not indemnify
Mortgagee for Mortgagee's gross negligence or willful misconduct.
IV.12 Expenses of Enforcement. Mortgagor will pay all costs and
expenses, including attorneys' fees, which Mortgagee may incur in
connection with any effort or action (whether or not litigation or
foreclosure is involved) to enforce or defend Mortgagee's rights and
remedies under any of the Loan Documents, including but not limited to all
attorneys' fees, appraisal fees, consultants' fees, and other expenses
incurred by Mortgagee in securing title to or possession of, and realizing
upon, any security for the Secured Obligations. All such costs and expenses
(together with interest thereon at the Default Rate from the date ten (10)
days following demand therefor until paid) shall constitute part of the
Secured Obligations, and may be included in
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the computation of the amount owed to Mortgagee for purposes of foreclosing
or otherwise enforcing this Mortgage.
IV.13 Financial Reports. Within ninety (90) days after the end of each
fiscal year of Mortgagor, Mortgagor will furnish to Mortgagee (a)
Mortgagor's operating statements for the Property as of the end of and for
the preceding fiscal year, prepared against the budget for such year; and
(b) an annual balance sheet and profit and loss statement of Mortgagor and
of each Guarantor. The financial statements and reports described in (a)
and (b) above shall be in such detail as Mortgagee may require, shall be
prepared in accordance with generally accepted accounting principles
consistently applied, and shall be certified as true and correct by
Mortgagor or the applicable Guarantor (or, if required by Mortgagee, such
operating statements, balance sheets and profit and loss statements shall
be certified by an independent certified public accountant acceptable to
Mortgagee). Mortgagor will also furnish or cause to be furnished to
Mortgagee within thirty (30) days of Mortgagee's request, any other
financial reports or statements of Mortgagor, including, without
limitation, balance sheets, profit and loss statements, other financial
statements and certified rent rolls, required under any of the Loan
Documents, requested by any regulatory or governmental authority exercising
jurisdiction over Mortgagee, or reasonably requested by Mortgagee from time
to time.
IV.14 Priority of Leases. To the extent Mortgagor has the right, under
the terms of any Secondary Lease, to make such lease subordinate to the
lien hereof, Mortgagor will, at Mortgagee's request and Mortgagor's
expense, take such action as may be required to effect such subordination.
Conversely, Mortgagor will, at Mortgagee's request and Mortgagor's expense,
take such action as may be necessary to subordinate the lien hereof to any
future Secondary Lease designated by Mortgagee.
IV.15 Inventories; Assembly of Chattels. Mortgagor will, from time to
time at the request of Mortgagee, supply Mortgagee with a current inventory
of the Chattels and the Intangible Personalty, in such detail as Mortgagee
may require. Upon the occurrence of any Event of Default hereunder,
Mortgagor will at Mortgagee's request assemble the Chattels and make them
available to Mortgagee at any place designated by Mortgagee which is
reasonably convenient to both parties.
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IV.16 Compliance with Laws, Etc. Mortgagor shall comply in all
material respects with all applicable laws, rules, regulations and orders,
such compliance to include, without limitation, maintaining all Permits and
paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon Mortgagor or the Property.
IV.17 Records and Books of Account. Mortgagor shall keep accurate and
complete records and books of account, in which complete entries will be
made in accordance with generally accepted accounting principles
consistently applied, reflecting all financial transactions relating to the
Property.
IV.18 Inspection Rights. At any reasonable time, and from time to
time, Mortgagor shall permit Mortgagee, or any agents or representatives
thereof, to examine and make copies of and abstracts from the records and
books of account of, and visit the Property and to discuss with Mortgagor
the affairs, finances and accounts of Mortgagor.
IV.19 Change of Executive Offices. Mortgagor shall promptly notify
Mortgagee if changes are made in the location of Mortgagor's primary
executive offices.
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IV.20 Further Assurances; Estoppel Certificates. Mortgagor will
execute and deliver to Mortgagee upon demand, and pay the costs of
preparation and recording thereof, any further documents which Mortgagee
may request to confirm or perfect the liens and security interests created
or intended to be created hereby, or to confirm or perfect any evidence of
the Secured Obligations. Mortgagor will also, within ten (10) days after
any request by Mortgagee, deliver to Mortgagee a signed and acknowledged
statement certifying to Mortgagee, or to any proposed transferee of the
Secured Obligations, (a) the balance of principal, interest, and other sums
then outstanding under the Note, and (b) whether Mortgagor claims to have
any offsets or defenses with respect to the Secured Obligations and, if so,
the nature of such offsets or defenses.
IV.21 Costs of Closing. Mortgagor shall on demand pay directly or
reimburse Mortgagee for any costs or expenses pertaining to the closing of
the loan evidenced by the Note and secured by this Mortgage, including, but
not limited to, fees of counsel for Mortgagee, costs and expenses for which
invoices were not available at the closing of such loan, or costs and
expenses which are incurred by Mortgagee after such closing. All such costs
and expenses (together with interest thereon at the Default Rate from the
date ten (10) days following demand therefor until paid) shall constitute a
part of the Secured Obligations, and may be included in the computation of
the amount owed to Mortgagee for purposes of foreclosing or otherwise
enforcing this Mortgage.
IV.22 Fund for Electronic Transfer. All monthly payments of principal
and interest on the Note, and escrow deposits under this Mortgage, shall be
made by Mortgagor by electronic funds transfer from a bank account or
accounts established and maintained by Mortgagor.
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IV.23 Use. Mortgagor shall use the Property solely for the operation
of a hotel and ancillary purposes and for no other use or purpose.
V
MORTGAGOR'S NEGATIVE COVENANTS
V.1 Waste and Alterations. Mortgagor will not commit or permit any
waste with respect to the Property or the Chattels. Mortgagor shall not
cause or permit any part of the Property, including but not limited to any
building, structure, parking lot, driveway, landscape scheme, timber, or
other ground improvement, to be removed, demolished, or materially altered
without the prior written consent of Mortgagee.
V.2 Zoning and Private Covenants. Mortgagor will not initiate, join
in, or consent to any change in any zoning ordinance or classification, any
change in the "zone lot" or "zone lots" (or similar zoning unit or units)
presently comprising the Property, any transfer of development rights, any
private restrictive covenant, or any other public or private restriction
limiting or defining the uses which may be made of the Property or any part
thereof, without the express written consent of Mortgagee. If under
applicable zoning provisions the use of all or any part of the Property is
or becomes a nonconforming use, Mortgagor will not cause such use to be
discontinued or abandoned without the express written consent of Mortgagee,
and Mortgagor will use its best efforts to prevent the tenant under any
Secondary Lease from discontinuing or abandoning such use.
V.3 Interference with Leases. Mortgagor shall not collect rent from
all or any part of the Property for more than one month in advance, or
assign the rents from the Property or any part thereof. Without the prior
written consent of Mortgagee, which consent shall not be unreasonably
withheld, Mortgagor shall not (a) terminate or make or permit any
modification to any Primary Lease, or (b) enter into or terminate any
Secondary Lease, or modify or permit the modification to any economic term
of any Secondary Lease.
V.4 Transfer or Further Encumbrance of Property. Without the prior
written consent of Mortgagee, which may be
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withheld for any reason, Mortgagor will not sell, lease, convey,
assign, or otherwise transfer, dispose of, or be divested of its title
to, or mortgage, convey security title to, or otherwise encumber or
cause to be encumbered, the Property or any part thereof or interest
therein in any manner or way, whether voluntary or involuntary, or
cause or permit to occur any of the following: (a) any merger,
consolidation or dissolution involving, or the sale or transfer of all
or substantially all of the assets of, Mortgagor or any general
partner of Mortgagor; (b) the transfer (at one time or over any period
of time) of 10% or more of the voting stock of (i) a corporate
Mortgagor, (ii) any corporate general partner of Mortgagor, or (iii)
any corporation which is the direct or indirect owner of 10% or more
of the voting stock of any Mortgagor or any general partner of
Mortgagor; (c) the transfer of any general partnership interest in any
Mortgagor or in any partnership which is a direct or indirect general
partner of Mortgagor; (d) the conversion of any such general
partnership interest to a limited partnership interest; (e) the
transfer (at one time or over any period of time) of 10% or more of
the membership or beneficial interest in any Mortgagor (if any
Mortgagor is a limited liability company); or (f) the transfer (at one
time or over any period of time) of 10% or more of the certificates of
participation or shares of any Mortgagor (if any Mortgagor is a
Massachusetts business trust). Upon the occurrence of any such
transfer, encumbrance, or other event, the entire balance of the Note,
plus any applicable prepayment premium, shall become immediately due
and payable at the option of Mortgagee. Consent to one such transfer
or encumbrance by Mortgagee shall not be deemed a waiver to require
such consent to further or future transfers or encumbrances. This
provision shall not apply to transfers of title or interest under any
will or testament or applicable law of descent. Notwithstanding the
foregoing to the contrary, (1) Mortgagee shall permit transfers of the
shares of Guarantor (a "Guarantor Transfer") in connection with the
sale of all of the shares of Guarantor to an individual or entity
previously approved in writing by Mortgagee in its sole discretion,
or, in all other cases, provided that the Sonnabend family, or any of
them, shall at all times during which any Secured Obligation shall
remain outstanding, (x) collectively own not less than 51% of
Guarantor, and (y) control Guarantor, and (2) in connection with any
Guarantor Transfer not permitted by this Section 5.4, and
notwithstanding any lockout provisions set forth in Section 5(a) of
the Note, Mortgagor shall have the right to prepay the entire
principal balance of the Note, together with
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all accrued interest and other charges due thereon and subject to the
prepayment premium set forth in the Note. For purposes of the
foregoing, the Sonnabend family shall be presumed to control Guarantor
if the Sonnabend family, or any of them, possesses the power, directly
or indirectly, to direct, or cause the direction of, the management or
policies of Guarantor, whether through ownership of voting securities,
by contract, or otherwise.
V.5 Further Encumbrance of Chattels. Mortgagor will neither create nor
permit any lien, security interest or encumbrance against the Chattels or
Intangible Personalty or any part thereof or interest therein, other than
the liens and security interests created by the Loan Documents, without the
prior written consent of Mortgagee, which may be withheld for any reason.
V.6 Assessments Against Property. Mortgagor will not, without the
prior written approval of Mortgagee, which may be withheld for any reason,
consent to or allow the creation of any so-called special districts,
special improvement districts, benefit assessment districts or similar
districts, or any other body or entity of any type, or allow to occur any
other event, that would or might result in the imposition of any additional
taxes, assessments or other monetary obligations or burdens on the
Property, and this provision shall serve as RECORD NOTICE to any such
district or districts or any governmental entity under whose authority such
district or districts exist or are being formed that, should Mortgagor or
any other person or entity include all or any portion of the Property in
such district or districts, whether formed or in the process of formation,
without first obtaining Mortgagee's express written consent, the rights of
Mortgagee in the Property pursuant to this Mortgage or following any
foreclosure of this Mortgage, and the rights of any person or entity to
whom Mortgagee might transfer the Property following a foreclosure of this
Mortgage, shall be senior and superior to any taxes, charges, fees,
assessments or other impositions of any kind or nature whatsoever, or liens
(whether statutory, contractual or otherwise) levied or imposed, or to be
levied or imposed, upon the Property or any portion thereof as a result of
inclusion of the Property in such district or districts.
V.7 Transfer or Removal of Chattels. Mortgagor will not sell, transfer
or remove from the Property all or any part of the Chattels, unless the
items sold, transferred, or removed are
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simultaneously replaced with similar items of equal or greater value.
Mortgagor shall not replace any Chattel owned by any Mortgagor as of the
date hereof by leasing such Chattel or Chattels unless Mortgagee consents
to such lease, which consent shall not be unreasonably withheld provided
(a) Mortgagee may, under the terms of any such lease, succeed to
Mortgagor's rights as lessee, and (b) Mortgagee is given notice and an
opportunity to cure any default by Mortgagor under any such lease.
V.8 Change of Name. Mortgagor will not change the name under which
Mortgagor does business, or adopt or begin doing business under any other
name or assumed or trade name, without first notifying Mortgagee of
Mortgagor's intention to do so and delivering to Mortgagee such executed
modifications or supplements to this Mortgage (and to any financing
statement which may be filed in connection herewith) as Mortgagee may
require.
V.9 Improper Use of Property or Chattels. Mortgagor will not use the
Property or the Chattels for any purpose or in any manner which violates
any applicable law, ordinance, or other governmental requirement, the
requirements or conditions of any insurance policy, or any private
covenant.
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V.10 ERISA. Mortgagor shall not engage in any transaction which would
cause the Note (or the exercise by Mortgagee of any of its rights under the
Loan Documents) to be a non-exempt (under a class exemption), prohibited
transaction under ERISA, (including for this purpose the parallel
provisions of Section 4975 of the Internal Revenue Code of 1986, as
amended), or otherwise result in Mortgagee being deemed in violation of any
applicable provisions of ERISA. Mortgagor shall indemnify, protect, defend,
and hold Mortgagee harmless from and against any and all losses,
liabilities, damages, claims, judgments, costs, and expenses (including,
without limitation attorneys' fees and costs reasonably incurred in the
investigation, defense, and settlement of claims and in obtaining any
individual ERISA exemption or state administrative exception that may be
required, in Mortgagee's sole and absolute discretion) that Mortgagee may
incur, directly or indirectly, as the result of the breach by Mortgagor of
any warranty or representation set forth in Section 3.3(w) hereof or the
breach by Mortgagor of any covenant contained in this Section. This
indemnity shall survive any termination, satisfaction or foreclosure of
this Mortgage and shall not be subject to the limitation on personal
liability described in Section 9.4 hereof.
VI
EVENTS OF DEFAULT
Each of the following events will constitute a default (an "Event of
Default") under this Mortgage and under each of the other Loan Documents:
VI.1 Failure to Pay Note. Mortgagor's failure to make any payment when
due under the terms of the Note or any other Loan Document;
VI.2 Due on Sale or Encumbrance. The occurrence of any violation of
any covenant contained in Section 5.4, 5.5 or 5.7 hereof;
VI.3 Other Obligations. The failure of Mortgagor to properly perform
any obligation contained herein or in any of the other Loan Documents
(other than the obligation to make payments under the Note or the other
Loan Documents) and the continuance of
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such failure for a period of thirty (30) days following written notice
thereof from Mortgagee to Mortgagor; provided, however, that if such
failure is not curable within such thirty (30) day period, then, so long as
Mortgagor commences to cure such failure within such thirty (30) day period
and is continually and diligently attempting to cure to completion, such
failure shall not be an Event of Default unless such failure remains
uncured for ninety (90) days after such written notice to Mortgagor;
VI.4 Levy Against Property. The levy against any of the Property,
Chattels, or Intangible Personalty of any execution, attachment,
sequestration or other writ, unless discharged within thirty (30) days;
VI.5 Liquidation. The liquidation, termination or dissolution of
Mortgagor any Guarantor, or any other party directly or indirectly liable
for the payment of the Note, whether as maker, endorser, guarantor, surety,
general partner or otherwise;
VI.6 Appointment of Receiver. The appointment of a trustee, liquidator
or receiver for Mortgagor or any Guarantor, or the assets, or any part
thereof, of Mortgagor, any Guarantor or any other party directly or
indirectly liable for the payment of the Note, whether as maker, endorser,
guarantor, surety, general partner or otherwise, or the appointment of a
trustee or receiver for any real or personal property, or the like, or any
part thereof, representing the security for the Note, unless discharged
within thirty (30) days;
VI.7 Assignments. The making by Mortgagor, or any other party directly
or indirectly liable for the payment of the Note, whether as maker,
endorser, guarantor, surety, general partner or otherwise, of a transfer in
fraud of creditors or an assignment for the benefit of creditors;
VI.8 Order for Relief. The entry in bankruptcy of an order for relief
for or against Mortgagor, any Guarantor or any other party directly or
indirectly liable for the payment of the Note, whether as maker, endorser,
guarantor, surety, general partner or otherwise;
VI.9 Bankruptcy. The filing of any petition (or answer admitting the
material allegations of any petition), or
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other pleading, seeking entry of an order for relief for or against
Mortgagor, any Guarantor or any other party directly or indirectly liable
for the payment of the Note, whether as maker, endorser, guarantor, surety,
general partner or otherwise as a debtor or bankrupt or seeking an
adjustment of any of such parties' debts, or any other relief under any
state or federal bankruptcy, reorganization, debtor's relief or insolvency
laws now or hereafter existing, including, without limitation, a petition
or answer seeking reorganization or admitting the material allegations of a
petition filed against any of such parties in any bankruptcy or
reorganization proceeding, or the act of any of such parties in instituting
or voluntarily being or becoming a party to any other judicial proceedings
intended to effect a discharge of the debts of any such parties, in whole
or in part, or a postponement of the maturity or the collection thereof, or
a suspension of any of the rights or powers of a trustee or of any of the
rights or powers granted to Mortgagee herein, or in any other document
executed in connection herewith; provided, however, that no Event of
Default shall occur under this Section if an involuntary bankruptcy or
insolvency petition is filed against Mortgagor, any General Partner, any
Guarantor or any other party directly or indirectly liable for the payment
of the Note unless such petition is not dismissed within sixty (60) days
following its filing;
VI.10 Misrepresentation. If any representation or warranty made by
Mortgagor, any Guarantor or any other party directly or indirectly liable
for the payment of the Note, whether as maker, endorser, guarantor, surety,
general partner or otherwise, herein, or in any of the other Loan Documents
or any other instrument or document modifying, renewing, extending,
evidencing, securing or pertaining to the Note is false, misleading or
erroneous in any material respect;
VI.11 Judgments. The failure of Mortgagor, any Guarantor or any party
directly or indirectly liable for the payment of the Note, whether as
maker, endorser, guarantor, surety, general partner or otherwise, to pay
any money judgment in excess of $50,000.00 against any such party before
the expiration of thirty (30) days after such judgment becomes final and no
longer appealable;
VI.12 Admissions Regarding Debts. The admission of Mortgagor, any
Guarantor or any other party directly or indirectly
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liable for the payment of the Note, whether as maker, endorser, guarantor,
surety, general partner or otherwise, in writing of any such party's
inability to pay such party's debts as they become due;
VI.13 Assertion of Priority. The assertion of any claim of priority
over this Mortgage, by title, lien, or otherwise, unless Mortgagor within
thirty (30) days after such assertion either causes the assertion to be
withdrawn or provides Mortgagee with such security as Mortgagee may require
to protect Mortgagee against all loss, damage, or expense, including
attorneys' fees, which Mortgagee may incur in the event such assertion is
upheld;
VI.14 Other Loan Documents. The occurrence of any Default by
Mortgagor, after the lapse of any applicable grace or cure period, or the
occurrence of any event or circumstance defined as a Default or an Event of
Default, under any of the Loan Documents other than this Mortgage;
VI.15 Other Liens. The occurrence of any Default by Mortgagor, after
the lapse of any applicable grace or cure period, or the occurrence of any
event or circumstance defined as an Event of Default, under any other
consensual lien encumbering the Property, or any part thereof or interest
therein, or any document or instrument evidencing obligations secured
thereby; or
VI.16 Default Under or Termination of Primary Lease. The occurrence of
any Default under any Primary Lease (subject to any applicable cure
period), or the termination of any Primary Lease before the expiration of
the term thereof for any reason, without the prior written consent of
Mortgagee.
VII
MORTGAGEE'S REMEDIES
Immediately upon or any time after the occurrence of any Event of Default
hereunder, Mortgagee may exercise any remedy available at law or in equity,
including but not limited to those listed below and those listed in the other
Loan Documents, in such sequence or combination as Mortgagee may determine in
Mortgagee's sole discretion:
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VII.1 Performance of Defaulted Obligations. Mortgagee may make any
payment or perform any other obligation under the Loan Documents which
Mortgagor has failed to make or perform, and Mortgagor hereby irrevocably
appoints Mortgagee as the true and lawful attorney-in-fact for Mortgagor to
make any such payment and perform any such obligation in the name of
Mortgagor. All payments made and expenses (including attorneys' fees)
incurred by Mortgagee in this connection, together with interest thereon at
the Default Rate from the date paid or incurred until repaid, will be part
of the Secured Obligations and will be immediately due and payable by
Mortgagor to Mortgagee. In lieu of advancing Mortgagee's own funds for such
purposes, Mortgagee may use any funds of Mortgagor which may be in
Mortgagee's possession, including but not limited to insurance or
condemnation proceeds and amounts deposited for taxes, insurance premiums,
or other purposes.
VII.2 Specific Performance and Injunctive Relief. Notwithstanding the
availability of legal remedies, Mortgagee will be entitled to obtain
specific performance, mandatory or prohibitory injunctive relief, or other
equitable relief requiring Mortgagor to cure or refrain from repeating any
Default.
VII.3 Acceleration of Secured Obligations. Mortgagee may, without
notice or demand, declare all of the Secured Obligations immediately due
and payable in full.
VII.4 Suit for Monetary Relief. Subject to the provisions of Section
9.4 of this Mortgage, with or without accelerating the maturity of the
Secured Obligations, Mortgagee may sue from time to time for any payment
due under any of the Loan Documents, or for money damages resulting from
Mortgagor's Default under any of the Loan Documents.
VII.5 Possession of Property. To the extent permitted by law,
Mortgagee may enter and take possession of the Property without seeking or
obtaining the appointment of a receiver, may employ a managing agent for
the Property, and may lease or rent all or any part of the Property, either
in Mortgagee's name or in the name of Mortgagor, and may collect the rents,
issues, and profits of the Property. Any revenues collected by Mortgagee
under this Section will be applied first toward payment of all expenses
(including attorneys' fees) incurred by Mortgagee,
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together with interest thereon at the Default Rate from the date incurred
until repaid, and the balance, if any, will be applied against the Secured
Obligations in such order and manner as Mortgagee may elect in its sole
discretion.
VII.6 Enforcement of Security Interests. Mortgagee may exercise all
rights of a secured party under the Code with respect to the Chattels and
the Intangible Personalty, including but not limited to taking possession
of, holding, and selling the Chattels and enforcing or otherwise realizing
upon any accounts and general intangibles. Any requirement for reasonable
notice of the time and place of any public sale, or of the time after which
any private sale or other disposition is to be made, will be satisfied by
Mortgagee's giving of such notice to Mortgagor at least five (5) days prior
to the time of any public sale or the time after which any private sale or
other intended disposition is to be made.
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VII.7 Foreclosure Against Property.
(a) Mortgagee may bring an action in any court of competent
jurisdiction to foreclose this Mortgage. Mortgagor agrees that, in
case Mortgagee in the exercise of the Power of Sale herein given
elects to sell in parcels, such sales may be held from time to time
and the Power of Sale shall not be exhausted until all of the Property
shall have been sold; and that Mortgagee shall have the additional
right and power to sell the whole of the Property notwithstanding that
the proceeds of such sales exceed or may exceed the sum of money then
secured hereby. In the event of any separate sale of the Collateral,
Mortgagor shall be entitled to reasonable notice of the time and place
of any public sale or of the time after which any private sale or
other intended disposition thereof is to be made, and such requirement
of reasonable notice shall be met if such notice is mailed postage
prepaid, to the address of Mortgagor as set forth in this Mortgage at
least five (5) days before the time of such sale or other disposition.
At any foreclosure sale, the Property or any combination or all of any
other security for the Secured Obligations or any part thereof may be
offered for sale for one total price, and the proceeds of such sale
may be accounted for in one account without distinction between the
items of security and without assigning to them any proportion of such
proceeds, Mortgagor hereby waiving the application of any doctrine of
marshalling of assets.
(b) All fees, costs and expenses of any kind incurred by
Mortgagee in connection with foreclosure of this Mortgage, including,
without limitation, the costs of any appraisals of the Property
obtained by Mortgagee, the cost of any title reports or abstracts, all
costs of any receivership for the Property advanced by Mortgagee, and
all attorneys' and consultants' fees and expenses incurred by
Mortgagee, shall constitute a part of the Secured Obligations and may
be included as part of the amount owing from Mortgagor to Mortgagee at
any foreclosure sale.
(c) The proceeds of any sale under this Section shall be applied
first to the fees and expenses of the officer conducting the sale, and
then to the reduction or discharge of the Secured Obligations in such
order and manner as Mortgagee may elect in its sole discretion; any
surplus remaining shall be paid
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over to Mortgagor or to such other person or persons as may be
lawfully entitled to such surplus.
(d) Nothing in this Section dealing with foreclosure procedures
or specifying particular actions to be taken by Mortgagee shall be
deemed to contradict or add to the requirements and procedures now or
hereafter specified by Massachusetts law, and any such inconsistency
shall be resolved in favor of Massachusetts law applicable at the time
of foreclosure.
VII.8 Appointment of Receiver. To the extent permitted by law,
Mortgagee shall be entitled, as a matter of absolute right and without
regard to the value of any security for the Secured Obligations or the
solvency of any person liable therefor, to the appointment of a receiver
for the Property upon ex-parte application to any court of competent
jurisdiction. Mortgagor waives any right to any hearing or notice of
hearing prior to the appointment of a receiver. Such receiver and its
agents shall be empowered to (a) take possession of the Property and any
businesses conducted by Mortgagor or any other person thereon and any
business assets used in connection therewith, (b) exclude Mortgagor and
Mortgagor's agents, servants, and employees from the Property, (c) collect
the rents, issues, profits, and income therefrom, (d) complete any
construction which may be in progress, (e) do such maintenance and make
such repairs and alterations as the receiver deems necessary, (f) use all
stores of materials, supplies, and maintenance equipment on the Property
and replace such items at the expense of the receivership estate, (g) pay
all taxes and assessments against the Property and the Chattels, all
premiums for insurance thereon, all utility and other operating expenses,
and all sums due under any prior or subsequent encumbrance, and (h)
generally do anything which Mortgagor could legally do if Mortgagor were in
possession of the Property. All expenses incurred by the receiver or its
agents shall constitute a part of the Secured Obligations. Any revenues
collected by the receiver shall be applied first to the expenses of the
receivership, including attorneys' fees incurred by the receiver and by
Mortgagee, together with interest thereon at the Default Rate from the date
ten (10) days following demand therefor until paid, and the balance shall
be applied toward the Secured Obligations in such order or manner as
Mortgagee may in its sole discretion elect or in such other manner as the
court may direct. Unless sooner terminated with the express consent of
Mortgagee, any such receivership will continue until the Secured
Obligations
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have been discharged in full, or until title to the Property has passed
after foreclosure sale and all applicable periods of redemption have
expired.
VII.9 Right to Make Repairs, Improvements. Should any part of the
Property come into the possession of Mortgagee after an Event of Default,
Mortgagee may use, operate, and/or make repairs, alterations, additions and
improvements to the Property for the purpose of preserving it or its value.
Mortgagor covenants to promptly reimburse and pay to Mortgagee, at the
place where the Note is payable, or at such other place as may be
designated by Mortgagee in writing, the amount of all reasonable expenses
(including the cost of any insurance, taxes, or other charges) incurred by
Mortgagee in connection with its custody, preservation, use or operation of
the Property, together with interest thereon from the date incurred by
Mortgagee at the Default Rate, and all such expenses, costs, taxes,
interest, and other charges shall be a part of the Secured Obligations. It
is agreed, however, that the risk of accidental loss or damage to the
Property is undertaken by Mortgagor and Mortgagee shall have no liability
whatsoever for decline in value of the Property, for failure to obtain or
maintain insurance, or for failure to determine whether any insurance ever
in force is adequate as to amount or as to the risks insured.
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VII.10 Prima Facie Evidence. Mortgagor agrees that, in any
assignments, deeds, bills of sale, notices of sale, or postings, given by
Mortgagee, any and all statements of fact or other recitals therein made as
to the identity of Mortgagee, or as to the occurrence or existence of any
Event of Default, or as to the acceleration of the maturity of the Secured
Obligations, or as to the request to sell, posting of notice of sale,
notice of sale, time, place, terms and manner of sale and receipt,
distribution and application of the money realized therefrom, and without
being limited by the foregoing, as to any other act or thing having been
duly done by Mortgagee, shall be taken by all courts of law and equity as
prima facie evidence that such statements or recitals state facts and are
without further question to be so accepted, and Mortgagor does hereby
ratify and confirm any and all acts that Mortgagee may lawfully do by
virtue hereof.
VIII
ASSIGNMENT OF LEASES AND RENTS
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VIII.1 Assignment of Leases and Rents. Mortgagor hereby
unconditionally and absolutely grants, transfers and assigns unto Mortgagee
all rents, royalties, issues, profits and income ("Rents") now or hereafter
due or payable for the occupancy or use of the Property, and all Secondary
Leases, whether written or oral, with all security therefor, including all
guaranties thereof, now or hereafter affecting the Property; reserving unto
Mortgagor, however, a license to collect and retain such Rents prior to the
occurrence of any Event of Default (and Mortgagee shall not revoke such
license prior to the occurrence of any Event of Default). Such license
shall be revocable by Mortgagee without notice to Mortgagor at any time
after the occurrence of an Event of Default. Mortgagor represents that the
Rents and the Secondary Leases have not been heretofore sold, assigned,
transferred or set over by any instrument now in force and will not at any
time during the life of this assignment be sold, assigned, transferred or
set over by Mortgagor or by any person or persons whomsoever; and Mortgagor
has good right to sell, assign, transfer and set over the same and to grant
to and confer upon Mortgagee the rights, interest, powers and authorities
herein granted and conferred. Failure of Mortgagee at any time or from time
to time to enforce the assignment of Rents and Leases under this Section
shall not in any manner prevent its subsequent enforcement, and Mortgagee
is not obligated to collect anything hereunder, but is accountable only for
sums actually collected.
VIII.2 Further Assignments. Mortgagor shall give Mortgagee at any time
upon demand any further or additional forms of assignment or transfer of
such Rents, Secondary Leases and security as may be reasonably requested by
Mortgagee, and shall deliver to Mortgagee executed copies of all such
Secondary Leases and security.
VIII.3 Application of Rents. Mortgagee shall be entitled to deduct and
retain a just and reasonable compensation from monies received hereunder
for its services or that of its agents in collecting such monies. Any
monies received by Mortgagee hereunder may be applied when received from
time to time in payment of any taxes, assessments or other liens affecting
the Property regardless of the delinquency, such application to be in such
order as Mortgagee may determine. The acceptance of this Mortgage by
Mortgagee or the exercise of any rights by it hereunder shall not be, or be
construed to be, an affirmation by
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it of any Secondary Lease nor an assumption of any liability under any
Secondary Lease.
VIII.4 Collection of Rents. Upon or at any time after an Event of
Default shall have occurred and be continuing, Mortgagee may declare all
sums secured hereby immediately due and payable, and may, at its option,
without notice, and whether or not the Secured Obligations shall have been
declared due and payable, either in person or by agent, with or without
bringing any action or proceeding, or by a receiver to be appointed by a
court, (a) enter upon, take possession of, manage and operate the Property,
or any part thereof (including without limitation making necessary repairs,
alterations and improvements to the Property); (b) make, cancel, enforce or
modify Secondary Leases; (c) obtain and evict tenants; (d) fix or modify
Rents; (e) do any acts which Mortgagee deems reasonably proper to protect
the security thereof; and (f) either with or without taking possession of
the Property, in its own name sue for or otherwise collect and receive such
Rents, including those past due and unpaid. In connection with the
foregoing, Mortgagee shall be entitled and empowered to employ attorneys,
and management, rental and other agents in and about the Property and to
effect the matters which Mortgagee is empowered to do, and in the event
Mortgagee shall itself effect such matters, Mortgagee shall be entitled to
charge and receive reasonable management, rental and other fees therefor as
may be customary in the area in which the Property is located; and the
reasonable fees, charges, costs and expenses of Mortgagee or such persons
shall be additional Secured Obligations. Mortgagee may apply all funds
collected as aforesaid, less costs and expenses of operation and
collection, including reasonable attorneys' and agents' fees, charges,
costs and expenses, as aforesaid, upon any Secured Obligations, and in such
order as Mortgagee may determine. The entering upon and taking possession
of the Property, the collection of such Rents and the application thereof
as aforesaid shall not cure or waive any Default or waive, modify or affect
notice of Default under the Note or this Mortgage or invalidate any act
done pursuant to such notice.
VIII.5 Authority of Mortgagee. Any tenants or occupants of any part of
the Property are hereby authorized to recognize the claims of Mortgagee
hereunder without investigating the reason for any action taken by
Mortgagee, or the validity or the amount of secured obligations owing to
Mortgagee, or the existence of any Default in the Note or this Mortgage, or
under or by reason of
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this assignment of Rents and Leases, or the application to be made by
Mortgagee of any amounts to be paid to Mortgagee. The sole signature of
Mortgagee shall be sufficient for the exercise of any rights under this
assignment and the sole receipt of Mortgagee for any sums received shall be
a full discharge and release therefor to any such tenant or occupant of the
Property. Checks for all or any part of the rentals collected under this
assignment of Rents and Leases shall be drawn to the exclusive order of
Mortgagee.
VIII.6 Indemnification of Mortgagee. Nothing herein contained shall be
deemed to obligate Mortgagee to perform or discharge any obligation, duty
or liability of any lessor under any Secondary Lease of the Property unless
and until Mortgagee forecloses this Mortgage or takes title to the
Property, and Mortgagor shall and does hereby indemnify and hold Mortgagee
harmless from any and all liability, loss or damage which Mortgagee may or
might incur under any Secondary Lease or by reason of the assignment; and
any and all such liability, loss or damage incurred by Mortgagee, together
with the costs and expenses, including reasonable attorneys' fees, incurred
by Mortgagee in defense of any claims or demands therefor (whether
successful or not), shall be additional Secured Obligations, and Mortgagor
shall reimburse Mortgagee therefor on demand. Mortgagor's obligations under
this Section are subject to the following: (a) the right to settle or
resolve such claim, subject to Mortgagee's approval, which approval shall
not be unreasonably withheld, (b) the right to select legal counsel of
Mortgagor's choice, subject to Mortgagee's approval, which approval shall
not be unreasonably withheld, and (c) Mortgagor shall not indemnify
Mortgagee for Mortgagee's gross negligence or willful misconduct.
IX
MISCELLANEOUS PROVISIONS
IX.1 Time of the Essence. Time is of the essence with respect to all
provisions of the Loan Documents.
IX.2 Joint and Several Obligations. If Mortgagor is more than one
person or entity, then (a) all persons or entities comprising Mortgagor are
jointly and severally liable for all of the Secured Obligations; (b) all
representations, warranties, and covenants made by Mortgagor shall be
deemed representations,
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<PAGE>
warranties, and covenants of each of the persons or entities comprising
Mortgagor; (c) any breach, Default or Event of Default by any of the
persons or entities comprising Mortgagor hereunder shall be deemed to be a
breach, Default, or Event of Default of Mortgagor; (d) any reference herein
contained to the knowledge or awareness of Mortgagor shall mean the
knowledge or awareness of any of the persons or entities comprising
Mortgagor; and (e) any event creating personal liability of any of the
persons or entities comprising Mortgagor shall create personal liability
for all such persons or entities.
IX.3 Waiver of Homestead and Other Exemptions. To the extent permitted
by law, Mortgagor hereby waives all rights to any homestead or other
exemption to which Mortgagor would otherwise be entitled under any present
or future constitutional, statutory, or other provision of applicable state
or federal law. Mortgagor hereby waives any right it may have to require
Mortgagee to marshall all or any portion of the security for the Secured
Obligations.
IX.4 Non Recourse. Except as expressly hereinafter set forth, the
recourse of Mortgagee with respect to the obligations evidenced by the Note
shall be solely to the Property, Chattels, Intangible Personalty and all
other collateral pledged by Mortgagor to secure the Note. Notwithstanding
anything to the contrary contained in the Note or in any Loan Document,
nothing shall be deemed in any way to impair, limit or prejudice the rights
of Mortgagee (a) in foreclosure proceedings or in any ancillary proceedings
brought to facilitate Mortgagee's foreclosure on the Property or any
portion thereof; (b) to recover from Mortgagor damages or costs (including
without limitation reasonable attorneys' fees) incurred by Mortgagee as a
result of waste by Mortgagor, (c) to recover from Mortgagor any
condemnation or insurance proceeds attributable to the Property which were
not paid to Mortgagee or used to restore the Property in accordance with
the terms of this Mortgage; (d) to recover from Mortgagor any rents,
profits, security deposits, advances, rebates, prepaid rents or other
similar sums attributable to the Property collected by or for Mortgagor
following an Event of Default under any Loan Document and not properly
applied to the reasonable fixed and operating expenses of the Property,
including payments of the Note and other sums due under the Loan Documents,
or held pursuant to Leases or applicable agreements; (e) to pursue the
personal liability of Mortgagor under the provisions of Section 5.10 of
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<PAGE>
this Mortgage; (f) to exercise any specific rights or remedies afforded
Mortgagee under any other provisions of the Loan Documents or by law or in
equity (or to recover under any guarantee given in connection with the
Note); (g) to recover from Mortgagor and to properly apply and disburse the
amount of any accrued taxes, assessments, and/or utility charges affecting
the Property (whether or not the same have been billed to Mortgagor) that
are either unpaid by Mortgagor or paid by Mortgagee under this Mortgage and
to collect from Mortgagor any sums expended by Mortgagee in fulfilling the
obligations of Mortgagor, as lessor, under any Secondary Leases; (h) to
pursue any personal liability of Mortgagor or any Guarantor under the
Environmental Indemnity Agreement; and (i) to recover from Mortgagor the
amount of any loss suffered by Mortgagee (that would otherwise be covered
by insurance) as a result of Mortgagor's failure to maintain any insurance
required under the terms of any Loan Document. The agreement contained in
this Section to limit the personal liability of Mortgagor shall become null
and void and be of no further force and effect in the event (i) that the
Property or any part thereof or any interest therein, or any interest in
Mortgagor, shall be further encumbered by a voluntary lien securing any
obligation upon which Mortgagor or any general partner, principal or
affiliate of Mortgagor shall be personally liable for repayment, whether as
obligor or guarantor which has not been approved in advance by Mortgagee;
(ii) of any breach or violation of Sections 5.4, 5.5 or 5.7 of this
Mortgage; (iii) of any fraud or material misrepresentation by Mortgagor in
connection with the Property, the Loan Documents or the application for the
loan which is evidenced by the Note; or (iv) of any execution, amendment,
modification or termination of any Primary Lease or Secondary Lease without
the prior written consent of Mortgagee if such consent is required under
the terms of the Loan Documents. For purposes of the foregoing, "affiliate"
shall mean any individual, corporation, trust, partnership or any other
person or entity controlled by, controlling or under common control with
Mortgagor. A person or entity of any nature shall be presumed to have
control when it possesses the power, directly or indirectly to direct, or
cause the direction of, the management or policies of another person or
entity, whether through ownership of voting securities, by contract, or
otherwise.
IX.5 Rights and Remedies Cumulative. Mortgagee's rights and remedies
under each of the Loan Documents are cumulative of the rights and remedies
available to Mortgagee under
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<PAGE>
each of the other Loan Documents and those otherwise available to Mortgagee
at law or in equity. No act of Mortgagee shall be construed as an election
to proceed under any particular provision of any Loan Document to the
exclusion of any other provision in the same or any other Loan Document, or
as an election of remedies to the exclusion of any other remedy which may
then or thereafter be available to Mortgagee.
IX.6 No Implied Waivers. Mortgagee shall not be deemed to have waived
any provision of any Loan Document unless such waiver is in writing and is
signed by Mortgagee. Without limiting the generality of the preceding
sentence, neither Mortgagee's acceptance of any payment with knowledge of a
Default by Mortgagor, nor any failure by Mortgagee to exercise any remedy
following a Default by Mortgagor shall be deemed a waiver of such Default,
and no waiver by Mortgagee of any particular Default on the part of
Mortgagor shall be deemed a waiver of any other Default or of any similar
Default in the future.
IX.7 No Third Party Rights. No person shall be a third party
beneficiary of any provision of any of the Loan Documents. All provisions
of the Loan Documents favoring Mortgagee are intended solely for the
benefit of Mortgagee, and no third party shall be entitled to assume or
expect that Mortgagee will not waive or consent to modification of any such
provision in Mortgagee's sole discretion.
IX.8 Preservation of Liability and Priority. Without affecting the
liability of Mortgagor or of any other person (except a person expressly
released in writing) for payment and performance of all of the Secured
Obligations, and without affecting the rights of Mortgagee with respect to
any security not expressly released in writing, and without impairing in
any way the priority of this Mortgage over the interests of any person
acquired or first evidenced by recording subsequent to the recording
hereof, Mortgagee may, either before or after the maturity of the Note, and
without notice or consent: (a) release any person liable for payment or
performance of all or any part of the Secured Obligations; (b) make any
agreement altering the terms of payment or performance of all or any of the
Secured Obligations; (c) exercise or refrain from exercising, or waive, any
right or remedy which Mortgagee may have under any of the Loan Documents;
(d) accept additional security of any kind for any of the Secured
Obligations; or (e) release or otherwise deal with any
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<PAGE>
real or personal property securing the Secured Obligations. Any person
acquiring or recording evidence of any interest of any nature in the
Property, the Chattels, or the Intangible Personalty shall be deemed, by
acquiring such interest or recording any evidence thereof, to have agreed
and consented to any or all such actions by Mortgagee.
IX.9 Subrogation of Mortgagee. Mortgagee shall be subrogated to the
lien of any previous encumbrance discharged with funds advanced by
Mortgagee under the Loan Documents, regardless of whether such previous
encumbrance has been released of record.
IX.10 Notices. Any notice required or permitted to be given by
Mortgagor or Mortgagee under this Mortgage shall be in writing and will be
deemed given (a) upon personal delivery, (b) on the first business day
after receipted delivery to a courier service which guarantees
next-business-day delivery, or (c) on the fifth business day after mailing,
by registered or certified United States mail, postage prepaid, in any case
to the appropriate party at its address set forth below:
If to Mortgagor:
c/o Sonesta International Hotels Corporation
200 Clarendon Street, 41st Floor
Boston, Massachusetts 02116
Attn: Office of the Treasurer
with a copy to:
Burns & Levinson
125 Summer Street
Boston, Massachusetts 02110
Attn: Steven L. Charlip, Esq.
If to Mortgagee:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attn: Director-Mortgage Lending and Real Estate
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<PAGE>
Either party may change such party's address for notices or copies of
notices by giving notice to the other party in accordance with this
Section.
IX.11 Defeasance. Upon payment and performance in full of all of the
Secured Obligations, Mortgagee will execute and deliver to Mortgagor such
documents as may be required to release this Mortgage of record.
IX.12 Illegality. If any provision of this Mortgage is held to be
illegal, invalid, or unenforceable under present or future laws effective
during the term of this Mortgage, the legality, validity, and
enforceability of the remaining provisions of this Mortgage shall not be
affected thereby, and in lieu of each such illegal, invalid or
unenforceable provision there shall be added automatically as a part of
this Mortgage a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid, and
enforceable. If the rights and liens created by this Mortgage shall be
invalid or unenforceable as to any part of the Secured Obligations, then
the unsecured portion of the Secured Obligations shall be completely paid
prior to the payment of the remaining and secured portion of the Secured
Obligations, and all payments made on the Secured Obligations shall be
considered to have been paid on and applied first to the complete payment
of the unsecured portion of the Secured Obligations.
IX.13 Usury Savings Clause. It is expressly stipulated and agreed to
be the intent of Mortgagee and Mortgagor at all times to comply with the
applicable law governing the highest lawful interest rate. If the
applicable law is ever judicially interpreted so as to render usurious any
amount called for under the Note or under any of the other Loan Documents,
or contracted for, charged, taken, reserved or received with respect to the
loan evidenced thereby, or if acceleration of the maturity of the Note, any
prepayment by Mortgagor, or any other circumstance whatsoever, results in
Mortgagor having paid any interest in excess of that permitted by
applicable law, then it is the express intent of Mortgagor and Mortgagee
that all excess amounts theretofore collected by Mortgagee be credited on
the principal balance of the Note (or, at Mortgagee's option, paid over to
Mortgagor), and the provisions of the Note and other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of
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<PAGE>
any new document, so as to comply with the applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder
and thereunder. The right to accelerate maturity of the Note does not
include the right to accelerate any interest which has not otherwise
accrued on the date of such acceleration, and Mortgagee does not intend to
collect any unearned interest in the event of acceleration. All sums paid
or agreed to be paid to Mortgagee for the use, forbearance or detention of
the Secured Obligations evidenced hereby or by the Note shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full term of such Secured Obligations until payment
in full so that the rate or amount of interest on account of such Secured
Obligations does not exceed the maximum rate or amount of interest
permitted under applicable law. The term "applicable law" as used herein
shall mean any federal or state law applicable to the loan made by
Mortgagee to Mortgagor evidenced by the Note.
IX.14 Obligations Binding Upon Mortgagor's Successors. This Mortgage
is binding upon Mortgagor and Mortgagor's successors and assigns, and shall
inure to the benefit of Mortgagee, and its successors and assigns, and the
provisions hereof shall likewise be covenants running with the land. The
duties, covenants, conditions, obligations, and warranties of Mortgagor in
this Mortgage shall be joint and several obligations of Mortgagor and
Mortgagor's successors and assigns.
IX.15 Construction. All pronouns and any variations of pronouns herein
shall be deemed to refer to the masculine, feminine, or neuter, singular or
plural, as the identity of the parties may require. Whenever the terms
herein are singular, the same shall be deemed to mean the plural, as the
identity of the parties or the context requires.
IX.16 Attorneys' Fees. Any reference in this Mortgage to attorneys' or
counsel fees paid or incurred by Mortgagee shall be deemed to mean
reasonable fees and shall be further deemed to include reasonable
paralegals' fees and reasonable legal assistants' fees. Moreover, wherever
provision is made herein for payment of attorneys' or counsels fees or
expenses incurred by Mortgagee, such provision shall include but not be
limited to, such fees or expenses incurred in any and all judicial,
bankruptcy, reorganization, administrative, or other proceedings, including
appellate proceedings, whether such fees or expenses
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<PAGE>
arise before proceedings are commenced, during such proceedings or after
entry of a final judgment.
IX.17 Waiver and Agreement. MORTGAGOR HEREBY EXPRESSLY WAIVES ANY
RIGHT IT MAY HAVE UNDER APPLICABLE LAW TO PREPAY THE NOTE, IN WHOLE OR IN
PART, WITHOUT PREPAYMENT CHARGE (EXCEPT AS OTHERWISE PROVIDED IN THE NOTE),
UPON ACCELERATION OF THE MATURITY DATE OF THE NOTE, AND AGREES THAT, IF FOR
ANY REASON A PREPAYMENT OF ALL OR ANY PART OF THE NOTE IS MADE, WHETHER
VOLUNTARILY OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE OF THE NOTE
BY MORTGAGEE ON ACCOUNT OF THE OCCURRENCE OF ANY EVENT OF DEFAULT ARISING
FOR ANY REASON, INCLUDING, WITHOUT LIMITATION, AS A RESULT OF ANY
PROHIBITED OR RESTRICTED TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION OF
THE PROPERTY OR ANY PART THEREOF SECURING THE NOTE, THEN MORTGAGOR SHALL BE
OBLIGATED TO PAY, CONCURRENTLY WITH SUCH PREPAYMENT, THE PREPAYMENT PREMIUM
PROVIDED FOR IN THE NOTE (OR, IN THE EVENT OF ACCELERATION WHEN THE NOTE IS
CLOSED TO PREPAYMENT, AS PROVIDED IN SECTION 1.25 HEREOF). MORTGAGOR HEREBY
DECLARES THAT MORTGAGEE'S AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE NOTE
AT THE INTEREST RATE AND FOR THE TERM SET FORTH IN THE NOTE CONSTITUTES
ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY MORTGAGOR, FOR THIS
WAIVER AND AGREEMENT.
IX.18 Waiver of Jury Trial. MORTGAGEE AND MORTGAGOR KNOWINGLY,
IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING OR COUNTERCLAIM
BASED ON THIS MORTGAGE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
MORTGAGE OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY HERETO OR TO
ANY LOAN DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR MORTGAGEE
AND MORTGAGOR TO ENTER INTO THE LOAN TRANSACTION EVIDENCED BY THE NOTE.
IX.19 Governing Laws. The substantive laws of the Commonwealth of
Massachusetts shall govern the validity, construction, enforcement and
interpretation of this Mortgage.
IX.20 Inconsistency. In the event of any inconsistency between the
terms of the Loan Documents and the terms of that certain First Mortgage
Loan Application between Mortgagor and Mortgagee dated September 19, 1996,
as amended by Addendum to First Mortgage Loan Application, the terms of the
Loan Documents shall govern and control in all respects.
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<PAGE>
IX.21 Statutory Condition. This Mortgage is upon the STATUTORY
CONDITION, and upon the further condition that each of the aforementioned
covenants, agreements, representations and warranties shall be kept and
duly performed. If there shall occur a breach of any of such conditions
which constitutes an Event of Default hereunder, or if the entire mortgage
debt becomes due at the option of Mortgagee, the holder hereof shall have
the STATUTORY POWER OF SALE, and, as to the Collateral, all rights and
remedies conferred by the Uniform Commercial Code.
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<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed and delivered this Mortgage as
of the date first mentioned above.
/s/
-------------------------------------
Peter J. Sonnabend, Trustee of the Charterhouse of
Cambridge Trust, and not individually
/s/
-------------------------------------
Peter J. Sonnabend, Trustee under a Grant of Trustee
Power, Authority and Discretion dated December 5, 1996
from Boy A.J. van Riel, Trustee of the Charterhouse of
Cambridge Trust, and not individually
SONESTA OF MASSACHUSETTS, INC., a Massachusetts
corporation
By:/s/
-------------------------------------
Peter J. Sonnabend
Vice President
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
COMMONWEALTH OF MASSACHUSETTS )
) ss. December ___, 1996
COUNTY OF ___________________ )
Then personally appeared the above-named Peter J. Sonnabend as Trustee of
the Charterhouse of Cambridge Trust, and not individually, and acknowledged the
foregoing instrument to be the free act and deed of Peter J. Sonnabend and such
trust before me.
______________________________
Notary Public
My commission expires ____________.
COMMONWEALTH OF MASSACHUSETTS
COMMONWEALTH OF MASSACHUSETTS )
) ss. December ___, 1996
COUNTY OF ___________________ )
Then personally appeared the above-named Peter J. Sonnabend, Trustee of
Charterhouse of Cambridge Trust, and not individually, under a Grant of Trustee
Power, Authority and Discretion dated December 5, 1996 from Boy A.J. van Riel,
Trustee, and acknowledged the foregoing instrument to be the free act and deed
of Peter J. Sonnabend and such trust before me.
______________________________
Notary Public
My commission expires ____________.
COMMONWEALTH OF MASSACHUSETTS
COMMONWEALTH OF MASSACHUSETTS )
) ss. December ___, 1996
<PAGE>
COUNTY OF ___________________ )
Then personally appeared the above-named Peter J. Sonnabend as Vice
President of Sonesta of Massachusetts, Inc., a Massachusetts corporation, and
acknowledged the foregoing instrument to be the free act and deed of Peter J.
Sonnabend and such corporation before me.
______________________________
Notary Public
My commission expires ____________.
<PAGE>
EXHIBIT A
to
MORTGAGE
(Legal Description)
A-1
<PAGE>
EXHIBIT B
to
MORTGAGE
(Permitted Exceptions)
1. Real estate taxes for the second half of fiscal year ending June 30, 1997,
and subsequent years, not yet due and payable
B-1
ENVIRONMENTAL INDEMNITY AGREEMENT
THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this "Agreement"), dated as of
December 18, 1996, is made by ROGER P. SONNABEND, PETER J. SONNABEND, and BOY
A.J. VAN RIEL, trustees of the Charterhouse of Cambridge Trust, and not
individually, under a Declaration of Trust dated December 27, 1963 and recorded
at Middlesex South Deeds Book 11160, Page 340, as amended by Amendment of
Declaration of Trust dated July 8, 1966 and recorded at Middlesex South Deeds
Book 11160, Page 359 ("Charterhouse"), and SONESTA OF MASSACHUSETTS, INC., a
Massachusetts corporation ("Sonesta," and, together with Charterhouse,
collectively, the "Borrower") and SONESTA INTERNATIONAL HOTELS CORPORATION., a
New York corporation ("Guarantor," and, together with Borrower, the
"Indemnitor") for the benefit of SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation ("Lender"), and the other "Indemnitees," as hereinafter defined.
RECITALS
A. Lender has agreed to make a loan to Borrower in the amount of
$22,880,000.00 (the "Loan") to be evidenced by a Promissory Note of even date
herewith made by Borrower to the order of Lender (the "Note") and secured by a
Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment
of Leases and Rents of even date herewith granted by Borrower for the benefit of
Lender (the "Mortgage") covering certain real property more specifically
described in the Mortgage (the "Property") and guaranteed by a Limited Guaranty
Agreement of even date herewith by Guarantor for the benefit of Lender (the
"Guaranty"). All capitalized terms used herein without definition shall have the
meanings given to such terms in the Mortgage.
B. Charterhouse is the owner of a fee simple estate in the Property;
Sonesta is the owner of a leasehold estate in the Property.
C. As a condition precedent to making the Loan, Lender requires that
Indemnitor enter into this Agreement, whose covenants and obligations are
independent of and in addition to Borrower's obligations under the Note,
Mortgage and the other documents governing, evidencing and securing the Loan and
Guarantor's obligations under the Guaranty.
<PAGE>
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Indemnitor hereby represents, warrants and covenants to Lender and
Lender's officers, directors, employees, agents, affiliates, successors and
assigns (collectively, the "Indemnitees") as follows:
1. Representations and Warranties. Indemnitor represents and warrants to
the Indemnitees that:
(a) to the best of Indemnitor's knowledge, Hazardous Substances have
not at any time been generated, used, treated or stored on, or transported
to or from the Property in any quantity or manner which violates any
Environmental Law;
(b) to the best of Indemnitor's knowledge, Hazardous Substances have
not at any time been Released or disposed of on the Property in any
quantity or manner which violates any Environmental Law;
(c) to the best of Indemnitor's knowledge, Borrower is in compliance
with all applicable Environmental Laws with respect to the Property and the
requirements of any permits issued under such Environmental Laws with
respect to the Property;
(d) there are no past, pending or, to the best of Indemnitor's
knowledge, threatened Environmental Claims against Indemnitor or the
Property;
(e) to the best of Indemnitor's knowledge, there is no condition or
occurrence at the Property that could reasonably be anticipated (i) to form
the basis of any Environmental Claim against Indemnitor or the Property, or
(ii) to cause the Property to be subject to any restrictions on the
ownership, occupancy, use or transferability thereof under any
Environmental Law;
(f) except as otherwise disclosed in the Environmental Report
(hereinafter defined), to the best of Indemnitor's knowledge there are not
now and never have been any underground storage tanks located on the
Property;
(g) Charterhouse (i) is a business trust, duly organized, validly
existing and in good standing under the laws of
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<PAGE>
the Commonwealth of Massachusetts, (ii) has the power and authority to own
its property and assets and to transact the business in which it is engaged
and (iii) is duly qualified as a foreign business trust and is in good
standing in each jurisdiction in which it owns or leases property or in
which failure to be duly qualified and in good standing would have an
adverse effect on its business, operations, property or financial
condition;
(h) Sonesta (i) is a corporation, duly organized, validly existing and
in good standing under the laws of the Commonwealth of Massachusetts, (ii)
has the power and authority to own its property and assets and to transact
the business in which it is engaged and (iii) is duly qualified as a
foreign corporation and is in good standing in each jurisdiction in which
it owns or leases property or in which failure to be duly qualified and in
good standing would have an adverse effect on its business, operations,
property or financial condition;
(i) Guarantor (i) is a corporation, duly organized, validly existing
and in good standing under the laws of the State of New York, (ii) has the
power and authority to own its property and assets and to transact the
business in which it is engaged and (iii) is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which it owns
or leases property or in which failure to be duly qualified and in good
standing would have an adverse effect on its business, operations, property
or financial condition;
(j) Indemnitor has the power to execute, deliver and perform the terms
and provisions of this Agreement and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement;
(k) Indemnitor has duly executed and delivered this Agreement, and
this Agreement constitutes its legal, valid and binding obligation
enforceable against Indemnitor in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights generally and by principles of
equity;
(l) neither the execution, delivery or performance by Indemnitor of
this Agreement, nor compliance by it with the terms and provisions hereof,
will (i) contravene any provision of any
-3-
<PAGE>
law, statute, rule or regulation or any order, writ, injunction or decree
of any court or governmental instrumentality, (ii) result in any breach of
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or result in the creation or imposition of (or the
obligation to create or impose) any lien upon any of its property or assets
pursuant to the terms of any indenture, mortgage, deed of trust, credit
agreement, loan agreement or any other agreement, contract or instrument to
which it is a party or by which it or any of its property or assets is
bound or to which it may be subject, or (iii) violate any provision of any
organizational document under which any Indemnitor has been formed or
operates under applicable law;
(m) no order, consent, approval, license, authorization or validation
of, or filing, recording or registration with, or exemption by, any
governmental or public body or authority, or any subdivision thereof, is
required to authorize, or is required in connection with, the execution,
delivery and performance by Indemnitor of this Agreement or the legality,
validity, binding effect or enforceability of this Agreement; and
(n) to the best of Indemnitor's knowledge, Borrower is in compliance
with all applicable statutes, regulations and orders of, and all applicable
restrictions imposed by all governmental bodies in respect of the conduct
of its business and the ownership of its property.
2. Covenants. Indemnitor covenants and agrees as follows:
(a) Indemnitor will (i) comply with all Environmental Laws applicable
to the ownership or use of the Property, (ii) use its best efforts to cause
all tenants and other persons occupying the Property to comply with all
Environmental Laws, (iii) immediately pay or cause to be paid all costs and
expenses incurred in such compliance, and (iv) keep or cause the Property
to be kept free and clear of any liens imposed thereon pursuant to any
Environmental Laws. Notwithstanding clause (i) of the preceding sentence,
Indemnitor will not be deemed to be in default solely by reason of
Indemnitor's failure to comply with an Environmental Law applicable to the
ownership or use of the Property so long as, in Lender's judgment, each of
the following conditions is satisfied:
-4-
<PAGE>
(A) Indemnitor is engaged in and diligently pursuing in good
faith administrative or judicial proceedings appropriate to contest
the validity or applicability to the ownership or use of the Property
of such Environmental Law; and
(B) Indemnitor's noncompliance with such Environmental Law will
not result in either (1) the loss or forfeiture of any property
encumbered by the Mortgage or any interest of Lender therein, or (2)
any diminution in the value of the Property, as determined by Lender;
and
(C) Indemnitor deposits with Lender such security as Lender
requires to protect the Indemnitees against all loss, damage and
expense, including reasonable attorneys' fees, which Indemnitees might
incur if the subject Environmental Law is determined to be valid or
applicable.
If Lender determines that any one or more of such conditions is not satisfied or
is no longer satisfied, Indemnitor shall comply with the subject Environmental
Law (or commence and then diligently pursue compliance with such Environmental
Law if such compliance cannot be accomplished within ten (10) days) within ten
(10) days after Lender gives notice of such determination.
(b) Indemnitor will not generate, use, treat, store, Release or
dispose of, or permit the generation, use, treatment, storage, Release or
disposal of, any Hazardous Substances on the Property, or transport or
permit the transportation of any Hazardous Substances to or from the
Property, in each case in any quantity or manner which violates any
Environmental Law.
(c) If Lender (i) has knowledge of any pending or threatened
Environmental Claim against Indemnitor or the Property or (ii) has reason
to believe that the Indemnitor or the Property is in violation of any
Environmental Law or (iii) receives a request for an environmental site
assessment report from a regulatory or other governmental entity with
jurisdiction over Lender, then at Lender's written request, at any time and
from time to time, Indemnitor will provide to Lender an environmental site
assessment report concerning the Property, prepared by Haley and Aldrich,
Inc. or an environmental consulting firm approved by
-4-
<PAGE>
Lender, indicating the presence or absence of Hazardous Substances and the
potential cost of any removal or remedial action in connection with any
Hazardous Substances on the Property. Any such environmental site
assessment report shall be conducted at Indemnitor's sole cost and expense.
If Indemnitor fails to deliver to Lender any such environmental site
assessment report within sixty (60) days after being requested to do so by
Lender pursuant to this Section, Lender may obtain the same, and Indemnitor
hereby grants to Lender and its agents access to the Property and
specifically grants to Lender an irrevocable nonexclusive license to
undertake such an assessment, and the cost of such assessment will be
payable by Indemnitor on demand (together with interest thereon at the
Default Rate as defined in the Note if such cost is not paid within ten
(10) days after demand).
(d) Lender may, at its option, at any time and from time to time,
perform at its sole cost and expense an environmental site assessment
report for the Property, and Indemnitor hereby grants to Lender and its
agents access to the Property and specifically grants to Lender an
irrevocable non-exclusive license to undertake such an assessment;
provided, however, Lender shall give three (3) business days' prior written
notice to Borrower and Lender shall conduct all such assessments in a
manner reasonably intended to minimize the impact on Borrower's normal
business operations.
(e) Indemnitor will advise Lender in writing promptly upon learning of
any of the following: (i) any pending or threatened Environmental Claim
against Indemnitor or the Property; (ii) any condition or occurrence on the
Property that (A) results in noncompliance by Indemnitor with any
applicable Environmental Law, or (B) could reasonably be anticipated to
form the basis of an Environmental Claim against Indemnitor or the
Property; (iii) any condition or occurrence on the Property that could
reasonably be anticipated to cause the Property to be subject to any
restrictions on the ownership, occupancy, use or transferability of the
Property under any Environmental Law; and (iv) the taking of any removal or
remedial action in response to the actual or alleged presence, in any
quantity or manner which violates any Environmental Law, of any Hazardous
Substances on the Property. Each such notice shall describe in reasonable
detail the nature of the claim, investigation, condition, occurrence or
removal or remedial action and Indemnitor's response thereto. In
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<PAGE>
addition, Indemnitor will provide Lender with copies of all communications
to or from Indemnitor and any governmental agency relating to Environmental
Laws, all communications to or from Indemnitor and any person relating to
Environmental Claims, and such detailed reports of any Environmental Claim
as may be requested by Lender.
(f) Lender shall have the right but not the obligation to participate
in or defend, as a party if it so elects, any Environmental Claim. Without
Lender's prior written consent, which consent shall not be unreasonably
withheld, Indemnitor shall not enter into any settlement, consent or
compromise with respect to any Environmental Claim that might impair the
value of the Property.
(g) At its sole expense, Indemnitor will conduct any investigation,
study, sampling and testing, and undertake any cleanup, removal, remedial
or other action necessary to remove and clean up all Hazardous Substances
from the Property which must be so removed or cleaned up in accordance with
the requirements of any applicable Environmental Laws, and in accordance
with orders and directives of all governmental authorities. If all or any
portion of the Loan shall be outstanding, Indemnitor may prepay the Loan in
full, together with all applicable prepayment penalties, in lieu of
complying with the preceding sentence.
(h) In the event Hazardous Substances are caused to be removed from
the Property by Indemnitor or Lender, in no event shall the Environmental
Protection Agency number, manifest number or similar identification
assigned to the Hazardous Substances so removed be in the name of Lender,
and, if required by applicable law, Indemnitor shall assume all liability
for such removed Hazardous Substances.
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<PAGE>
3. Indemnity.
(a) Indemnitor agrees to defend (with attorneys reasonably
satisfactory to the Indemnitees), protect, indemnify and hold harmless each
of the Indemnitees and its respective officers, directors, employees,
attorneys and agents from and against any and all liabilities, obligations
(including removal and remedial actions), losses, damages (including
foreseeable and unforeseeable consequential damages and punitive damages),
penalties, actions, judgments, suits, claims, costs, expenses and
disbursements (including reasonable attorneys' and consultants' fees and
disbursements) of any kind or nature whatsoever that may at any time be
incurred by, imposed on or asserted against any of them directly or
indirectly based on, or arising or resulting from (i) the actual presence
(or presence alleged by third parties) of Hazardous Substances on the
Property in any quantity or manner which violates Environmental Law, or the
removal, handling, transportation, disposal or storage of such Hazardous
Substances, (ii) any Environmental Claim with respect to Indemnitor or the
Property, or (iii) the exercise of any Indemnitee's rights under this
Agreement (collectively, the "Indemnified Matters"), regardless of when
such Indemnified Matters arise, but excluding any Indemnified Matter with
respect to Hazardous Substances first placed or Released on the Property
after the later of (1) the date neither Indemnitor nor any of its
affiliates holds title to or any other interest in or lien on the Property,
or (2) the payment in full of the Secured Obligations (as defined in the
Mortgage). To the extent that this indemnity is unenforceable because it
violates any law or public policy, Indemnitor agrees to contribute the
maximum portion that it is permitted to contribute under applicable law to
the payment and satisfaction of all Indemnified Matters. Indemnitor's
obligations under this Section are subject to the following: (a) the right
to settle or resolve such claim, subject to Mortgagee's approval, which
approval shall not be unreasonably withheld, (b) the right to select legal
counsel of Indemnitor's choice, subject to Mortgagee's approval, which
approval shall not be unreasonably withheld, and (c) Indemnitor shall not
indemnify Mortgagee for Mortgagee's gross negligence or willful misconduct.
(b) Indemnitor agrees to reimburse each Indemnitee for all sums paid
and costs incurred by such Indemnitee with respect to any Indemnified
Matter within ten (10) days following written
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<PAGE>
demand therefor, with interest thereon at the Default Rate (as defined in
the Note) if not paid within such ten (10) day period.
(c) Should any Indemnitee institute any action or proceeding at law or
in equity, or in arbitration, to enforce any provision of this Agreement
(including an action for declaratory relief or for damages by reason of any
alleged breach of any provision of this Agreement) or otherwise in
connection with this Agreement or any provision hereof, it shall be
entitled to recover from Indemnitor its reasonable attorneys' fees and
disbursements incurred in connection therewith if it is the prevailing
party in such action or proceeding.
(d) Notwithstanding any non-recourse provisions of the Note or any
other provision in any Loan Document, Lender shall be entitled to bring an
in personam action against Indemnitor, including an action for specific
performance or damages, to enforce the provisions of this Agreement.
4. Events of Default. Upon the occurrence of any of the following specified
events (each an "Event of Default"):
(a) if any of the representations and warranties contained in Section
1 shall prove to be untrue in any material respect as of the date made; or
(b) if Indemnitor fails to perform any of its obligations under this
Agreement within fifteen (15) days following notice thereof from Lender;
provided that if such nonperformance is incapable of cure within such
15-day period, no Event of Default shall occur hereunder if Indemnitor has
commenced a program to perform such obligations, which program is
satisfactory to Lender in its reasonable discretion and is in accordance
with applicable law, and is diligently pursuing such program to completion;
and provided further that if a shorter cure period or notice requirement
for any particular failure to perform is provided by applicable law or this
Agreement, such specific provision shall control;
then and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, Lender may do or cause to be done
whatever is reasonably necessary in its sole judgment to cause the Property
to comply with applicable Environmental Laws, and the cost thereof
(together with interest thereon at the
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<PAGE>
Default Rate, as defined in the Note, from the date ten (10) days following
demand therefor) shall become immediately due and payable by Indemnitor
without notice. Indemnitor shall and does hereby grant to Lender and its
agents access to the Property and hereby specifically grants to Lender an
irrevocable, non-exclusive license to do whatever is reasonably necessary
in Lender's judgment to cause the Property to so comply, including, without
limitation, to enter the Property and remove therefrom any Hazardous
Substances.
5. Recourse Obligations.
(a) Indemnitor agrees that notwithstanding any term or provision
contained in this Agreement or the other Loan Documents to the contrary,
the obligations of Indemnitor as set forth in this Agreement shall be
exceptions to any non-recourse or exculpatory provision relating to the
Loan, and Indemnitor shall be fully liable for the performance of its
obligations under this Agreement, and such liability shall not be limited
to the original principal amount of the Loan.
(b) The liability of Indemnitor under this Agreement shall in no way
be limited to or impaired by any amendment or modification of the
provisions of the Loan Documents unless such amendment or modification
expressly refers to this Agreement. In addition, the liability of
Indemnitor under this Agreement shall in no way be limited or impaired by
(i) any extensions of time for performance required by any of the Loan
Documents, (ii) any sale, assignment or foreclosure of the Note or any sale
or transfer of all or any part of the Property, (iii) any exculpatory
provision in any of the Loan Documents limiting any Indemnitee's recourse
to property encumbered by the Mortgage or to any other security, or
limiting the Indemnitees' rights to a deficiency judgment against
Indemnitor, (iv) the accuracy or inaccuracy of the representations and
warranties made by Indemnitor under any of the Loan Documents, (v) the
release of Indemnitor or any other person from performance or observance of
any of the agreements, covenants, terms or conditions contained in any of
the Loan Documents (other than this Agreement) by operation of law, any
Indemnitee's voluntary act, or otherwise, (vi) the release or substitution
in whole or in part of any security for the Note or (vii) Lender's failure
to record the Mortgage or file any Financing Statements (or Lender's
improper recording or filing of any thereof) or to otherwise perfect,
protect, secure or insure any security interest or lien given as
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<PAGE>
security for the Note; and, in any such case, whether with or without
notice to Indemnitor and with or without consideration.
6. Independent Obligations. This Agreement is intended to create
obligations that are separate and independent of Indemnitor's obligations under
the Note, Mortgage and other Loan Documents. Indemnitor's obligations hereunder
are, however, secured by the Mortgage and the other Loan Documents.
7. Survival.
(a) The representations, warranties, covenants and indemnities set
forth in this Agreement shall survive the repayment of the Loan, the
release of the lien of the Mortgage, any foreclosure of the Mortgage or the
delivery of a deed or assignment in lieu of foreclosure or otherwise, and
the transfer of any interest in and to the Property.
(b) This Agreement shall be binding on and inure to the benefit of
Indemnitor, the Indemnitees, and their respective successors and assigns.
Without limiting the generality of the foregoing, this Agreement shall
inure to the benefit of each assignee or holder of the Note and each of
such assignee's or holder's officers, directors, employees, agents and
affiliates. Notwithstanding the foregoing, (i) this Agreement shall not
inure to the benefit of parties unaffiliated with Lender that acquire title
to the Property from Lender or an affiliate of Lender, and (ii) Indemnitor,
without the prior written consent of Lender in each instance, may not
assign, transfer or set over in whole or in part, all or any part of its
benefits, rights, duties and obligations hereunder.
8. Definitions. As used in this Agreement, the following terms shall have
the following meanings:
"Hazardous Substances" means (a) any chemicals, materials or
substances defined as or included in the definition of "hazardous
substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or words of similar
import, under any applicable Environmental Law; and (b) any other chemical,
material or substance, exposure to which is prohibited, limited or
regulated by any governmental authority, including, without limitation,
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asbestos and asbestos-containing materials in any form, lead-based paint,
any radioactive materials and polychlorinated biphenyls ("PCB's"), or
substances or compounds containing PCB's.
"Environmental Law" means any federal, state or local law, whether
common law, court or administrative decision, statute, rule, regulation,
ordinance, court order or decree, or administrative order or any
administrative policy or guidelines concerning action levels of a
governmental authority (federal, state or local) now or hereafter in effect
relating to the environment, public health, occupational safety, industrial
hygiene, any Hazardous Substance (including, without limitation, the
disposal, generation, manufacture, presence, processing, production,
Release, storage, transportation, treatment or use thereof), or the
environmental conditions on, under or about the Property, as amended and as
in effect from time to time (including, without limitation, the following
statutes and all regulations thereunder as amended and in effect from time
to time: the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, 42 U.S.C. ss.ss. 9601, et seq.; the
Superfund Amendments and Reauthorization Act of 1986, Title III, 42 U.S.C.
ss.ss. 11001, et seq.; the Clean Air Act, 42 U.S.C. ss.ss. 7401 et seq.;
the Safe Drinking Water Act, 42 U.S.C. ss.ss. 300(f), et seq.; the Solid
Waste Disposal Act, 42 U.S.C. ss.ss. 6901 et seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. ss.ss. 5101, et seq.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. ss.ss. 6901,
et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss.ss. 1251, et seq.; the Toxic Substances Control Act of 1976, 15 U.S.C.
ss.ss. 2601, et seq.; the Occupational Safety and Health Act, 29 U.S.C.
ss.ss. 651, et seq.; the Massachusetts Oil and Hazardous Material Release
Prevention and Response Act, Chapter 21E of the Massachusetts General Laws,
the Massachusetts Hazardous Waste Management Act, Chapter 21C of the
Massachusetts General Laws; and any successor statutes and regulations to
the foregoing).
"Environmental Claims" means any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any
way to any Environmental Law (hereafter "Claims") or any permit issued
under any such Environmental Law, including without limitation (a) any and
all Claims by governmental or regulatory authorities for enforcement,
cleanup, removal, response, remedial or other
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<PAGE>
actions or damages pursuant to any applicable Environmental Law, and (b)
any and all Claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief resulting
from Hazardous Substances or arising from alleged injury or threat of
injury to health, safety or the environment.
"Environmental Report" means the "Report on Phase 1 Environmental Site
Assessment, Royal Sonesta Hotel" relating to the Property, prepared by
Haley and Aldrich, Inc. dated October 22, 1996 and addressed to Lender.
"Release" means disposing, discharging, injecting, spilling, leaking,
leaching, dumping, emitting, escaping, emptying, seeping, placing and the
like, into or upon any land or water or air, or otherwise entering into the
environment.
9. Miscellaneous.
(a) If Indemnitor is more than one person or entity, then (i) all
persons or entities comprising Indemnitor are jointly and severally liable
for all of the Indemnitor's obligations hereunder; (ii) all
representations, warranties, and covenants made by Indemnitor shall be
deemed representations, warranties, and covenants of each of the persons or
entities comprising Indemnitor; (iii) any breach, Default or Event of
Default by any of the persons or entities comprising Indemnitor hereunder
shall be deemed to be a breach, Default, or Event of Default of Indemnitor;
and (iv) any reference herein contained to the knowledge or awareness of
Indemnitor shall mean the knowledge or awareness of any of the persons or
entities comprising Indemnitor.
(b) Indemnitor waives any right or claim of right to cause a
marshalling of its assets or to cause any Indemnitee to proceed against any
of the security for the Loan before proceeding under this Agreement.
Indemnitor expressly waives and relinquishes all present or future rights,
remedies, or circumstances which might constitute a legal or equitable
discharge of Indemnitor or which might otherwise impair the validity or
enforceability of this Agreement. Indemnitor hereby agrees to postpone the
exercise of any and all rights of subrogation to the rights of any
Indemnitee against Indemnitor hereunder and any rights of subrogation to
any collateral securing the Loan, until all obligations of Indemnitor to
the Indemnitees
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<PAGE>
hereunder have been performed in full and all principal, interest and other
sums evidenced or secured by the Loan Documents shall have been paid in
full.
(c) Any party liable upon or in respect of this Agreement or the Loan
may be released without affecting the liability of any party not so
released.
(d) No failure or delay on the part of any of the Indemnitees in
exercising any right, power or privilege hereunder or under any other Loan
Document and no course of dealing between Indemnitor and the Indemnitees
(or any of them) shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any
other Loan Document preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder or thereunder.
The rights, powers and remedies herein or in any other Loan Document
expressly provided are cumulative with and not exclusive of any rights,
powers or remedies which the Indemnitees or any of them would otherwise
have. No notice to or demand on Indemnitor in any case shall, ipso facto,
entitle Indemnitor to any other or further notice or demand in similar or
other circumstances or constitute a waiver of the rights of the Indemnitees
to any other or further action in any circumstances without notice or
demand where notice or demand is not otherwise required.
(e) Any notice required or permitted to be given under this Agreement
shall be in writing and will be deemed given (a) upon personal delivery,
(b) on the first business day after receipted delivery to a courier service
which guarantees next-business-day delivery, or (c) on the fifth business
day after mailing, by registered or certified United States mail, postage
prepaid, in any case to the appropriate party at its address set forth
below:
If to Indemnitor:
c/o Sonesta International Hotels Corporation
200 Clarendon Street, 41st Floor
Boston, Massachusetts 02116
Attn: Office of the Treasurer
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<PAGE>
with a copy to:
Burns & Levinson
125 Summer Street
Boston, Massachusetts 02110
Attn: Steven L. Charlip, Esq.
If to Lender:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attn: Director-Mortgage Lending and Real Estate
Either party may change such party's address for notices or copies of
notices by giving notice to the other party in accordance with this
Section.
(f) Indemnitor hereby submits itself to the jurisdiction and venue of
any state court located in Middlesex County, Massachusetts, or any federal
court located in the Commonwealth of Massachusetts in connection with any
action or proceeding brought for enforcement of Indemnitor's obligations
hereunder, and hereby waives any and all personal or other rights under the
law of any other country or state to object to jurisdiction within such
location for purposes of litigation to enforce such obligations. Indemnitor
agrees that service of process upon Indemnitor shall be complete upon
delivery thereof in any manner permitted by law.
(g) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or
termination is in writing and signed by each of the parties hereto.
(h) LENDER AND INDEMNITOR KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY ACTION, PROCEEDING OR COUNTERCLAIM BASED ON THIS AGREEMENT, OR
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR
ACTIONS OF ANY PARTY HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER AND
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INDEMNITOR TO ENTER INTO THE LOAN TRANSACTION EVIDENCED BY THE NOTE.
(i) This Agreement and the rights and obligations of the parties
hereunder shall be construed in accordance with and be governed by the law
of the Commonwealth of Massachusetts.
(j) All pronouns and any variations of pronouns herein shall be deemed
to refer to the masculine, feminine, or neuter, singular or plural, as the
identity of the parties may require. Whenever the terms herein are
singular, the same shall be deemed to mean the plural, as the identity of
the parties or the context requires and vice versa.
(k) This Agreement may be executed in multiple counterparts, each of
which shall constitute a duplicate original, but all of which together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, Indemnitor has executed and delivered this
Agreement as of the date first above written.
INDEMNITOR:
/s/ Peter J. Sonnabend
--------------------------------------------------
Peter J. Sonnabend, Trustee of the Charterhouse of
Cambridge Trust, and not individually
/s/ Peter J. Sonnabend
--------------------------------------------------
Peter J. Sonnabend, Trustee under a Grant of Trustee
Power, Authority and Discretion dated December 5, 1996
from Boy A.J. van Riel, Trustee of the Charterhouse of
Cambridge Trust, and not individually
SONESTA OF MASSACHUSETTS, INC., a Massachusetts
corporation
By:/s/ Peter J. Sonnabend
-----------------------------------------------
Peter J. Sonnabend
Vice President
SONESTA INTERNATIONAL HOTELS
CORPORATION, a New York
corporation
By:/s/ Peter J. Sonnabend
-----------------------------------------------
Peter J. Sonnabend
Vice President
-17-
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") dated as of December 18, 1996, is
made by and among ROGER P. SONNABEND, PETER J. SONNABEND, and BOY A.J. VAN RIEL,
trustees of the Charterhouse of Cambridge Trust, and not individually, under a
Declaration of Trust dated December 27, 1963 and recorded at Middlesex South
Deeds Book 11160, Page 340, as amended by Amendment of Declaration of Trust
dated July 8, 1966 and recorded at Middlesex South Deeds Book 11160, Page 359
("Charterhouse"), and SONESTA OF MASSACHUSETTS, INC., a Massachusetts
corporation ("Sonesta," and, together with Charterhouse, collectively,
"Borrower"), SUNAMERICA LIFE INSURANCE COMPANY, an Arizona corporation
("Lender"), and FOWLER, GOEDECKE, ELLIS & O'CONNOR, INC., a Massachusetts
corporation ("Escrow Agent").
RECITALS
A. Lender has agreed to make a loan to Borrower in the principal amount of
$22,880,000.00 (the "Loan"). The Loan is evidenced by a Promissory Note made by
Borrower to Lender of even date herewith (the "Note") and is secured by a
Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment
of Leases and Rents granted by Borrower to Lender of even date herewith (the
"Mortgage"). Capitalized terms not otherwise defined herein shall bear the
definitions set forth in the Mortgage.
<PAGE>
B. As a condition precedent to making the Loan, Lender has required that
Borrower deliver the sum of $1,880,000.00 to Escrow Agent to be held by Escrow
Agent on the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Borrower, Lender and Escrow Agent
agree as follows:
1. Deposit of Funds. Contemporaneously with the execution and delivery
of this Agreement, Borrower has deposited with Escrow Agent the amount of
$1,880,000.00 by wire transfer to Escrow Agent (the "Funds"). By executing
and delivering this Agreement, Escrow Agent acknowledges receipt of the
Funds.
2. Investment of Funds. Escrow Agent shall hold and invest the Funds
in either an interest-bearing, money-market account or accounts at United
States Trust Company in Boston, Massachusetts (or at another financial
institution reasonably acceptable to Borrower and Lender) or United States
government obligations (or both), with Borrower assuming all risk of
investment loss.
3. Borrower to Pay Interest on Funds. The Funds shall constitute
proceeds of the Loan, and Borrower shall pay interest on the Funds from the
date of this Agreement at the rate and in the manner provided in the Note.
4. Instructions for Disbursement.
(a) The Funds, or any portion thereof, shall be delivered to
Borrower upon Escrow Agent's receipt of written instructions from
Lender instructing Escrow Agent to deliver such Funds to Borrower.
(b) The Funds, or any portion thereof, shall be delivered to
Lender upon Escrow Agent's receipt of written instructions from Lender
instructing Escrow Agent to deliver such Funds to Lender.
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<PAGE>
(c) If Escrow Agent shall continue to have the Funds, or any
portion thereof, other than the Capital Reserve (as hereinafter
defined), on deposit on or after December 18, 1998 (the "Termination
Date"), Escrow Agent shall deliver such Funds to Lender, promptly upon
notice or demand given or made by Lender.
5. Acquisition of Personal Property and Completion of Work Items. For
each of the two hundred (200) rooms comprising what is commonly referred to
as the East Wing of the Property (each, a "Room"), Borrower shall acquire
all of the personal property (the "Personal Property"), and shall complete
all of the capital improvement work (the "Work Items"), described in
Exhibit A attached hereto on or before the Termination Date. If Borrower's
completion of the Work Items is delayed by inclement weather conditions,
strikes, lock-outs, acts of God, or fire or other casualty, the Termination
Date shall be extended for the period of the delay.
6. Lender's Notices. Lender shall give to Escrow Agent the notice
referred to in Section 4(a) and 4(b) hereof to cause Escrow Agent to
deliver the Funds in accordance with the following terms and conditions:
(a) Upon acquiring all of the Personal Property and performing
all of the Work Items for any Room or Rooms, Borrower may request a
disbursement of Funds (a "Disbursement") in the amount of $8,400.00
for each completed Room; provided, however, that Lender shall not be
obligated to authorize (i) any Disbursement to Borrower more
frequently than monthly (each such date being referred to herein as a
"Disbursement Date"), or (ii) Disbursements of more than a total of
$1,680,000.00 of the Funds, it being the intent of the parties hereto
that Escrow Agent retain $200,000.00 of the Funds (the "Capital
Reserve") under this Agreement for the entire term of the Loan as a
reserve for capital improvements to the Property, and from which
Capital Reserve Lender may, from time to time, in its sole discretion,
authorize Disbursements of all or any portion thereof to Borrower;
(b) Lender shall have no obligation to authorize any Disbursement
to Borrower unless and until Borrower has delivered to Lender a
capital expenditure budget and projected construction schedule
concerning the Personal Property and the Work Items acceptable to
Lender in its reasonable discretion,
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<PAGE>
Lender hereby acknowledging that such budget attached hereto as
Exhibit A is acceptable to Lender;
(c) Lender shall have no obligation to authorize any Disbursement
to Borrower if a Default or an Event of Default has occurred and is
continuing under the terms of the Note, Mortgage or any other Loan
Document;
(d) Lender shall have no obligation to authorize any Disbursement
to Borrower unless, for each Room for which Borrower seeks a
Disbursement, Borrower has acquired all of the applicable Personal
Property and all applicable Work Items have been completed in a good
and workmanlike manner on or before the applicable Disbursement Date,
and Lender shall have received all of the following in form
satisfactory to Lender, at Borrower's sole cost and expense, to
evidence such acquisition and completion:
(i) Invoices from all vendors, contractors, subcontractors,
and materialmen relating to or prepared in connection with the
acquisition of the applicable Personal Property and completion of
the applicable Work Items;
(ii) A certificate, signed by Borrower, stating that
Borrower has acquired all applicable Personal Property and all
applicable Work Items have been fully completed;
(iii) Evidence reasonably satisfactory to Lender that all
amounts owed to third parties in connection with the acquisition
of the applicable Personal Property and completion of the
applicable Work Items have been paid (including, without
limitation, a certification signed by Borrower and final lien
waivers from any general contractor and other potential lienor
under Massachusetts law); and
(iv) A favorable report based on an inspection of the
Property by an employee or representative of Escrow Agent, acting
on behalf of Lender, that Borrower has acquired and installed all
applicable Personal Property and all applicable Work Items have
been satisfactorily completed. Escrow Agent
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<PAGE>
shall cause its employee or representative to so inspect the
Property reasonably promptly after Escrow Agent's receipt of any
written request for a Disbursement under Section 4(f) below.
(e) Each Disbursement (other than any Disbursement of the Capital
Reserve) shall be in an amount equal to the product derived by
multiplying the number of Rooms completed to the satisfaction of
Lender (as evidenced by the items and inspections required by this
Section 6) by $8,400.00.
(f) Borrower shall make any request for Disbursement of Funds in
writing delivered to both Lender and Escrow Agent, which request shall
include Borrower's certification that it has delivered to Lender, or
Lender has otherwise received, all of the documents and information
required in Sections 6(d)(i)-(iv).
(g) Lender shall have no obligation to make any Disbursement
after the Termination Date.
(h) Lender may authorize Disbursement of all or any portion of
the Capital Reserve in its sole discretion. In connection with any
Disbursement of the Capital Reserve, Lender may require Borrower to
deliver to Lender such information, lien waivers and reports as Lender
may reasonably require, including, without limitation, those items
required by Section 6(d)(i)-(iv) in connection with Disbursements for
Personal Property and Work Items.
(i) Lender shall not deliver the notice referred to in
Section 4(b) hereof to cause Escrow Agent to disburse any Funds
to Lender until the earlier to occur of the following, but upon
the occurrence of any of the following, Lender may, at its
election, deliver to Escrow Agent such notice:
(i) the occurrence of an Event of Default under any Loan
Document; or
(ii) Borrower's failure to satisfy all conditions for any
Disbursement of the Funds (excluding the Capital Reserve) as set
forth in this Section 6 on or before the Termination Date.
-5-
<PAGE>
7. Application by Lender. If Escrow Agent delivers the Funds, or any
portion thereof, to Lender, Lender shall (a) apply the Funds to payment of
Borrower's obligations under, and in the manner set forth in, the Note and
the Mortgage, and (b) re-amortize the principal balance of the Note
(following the application of the Funds), at the interest rate set forth in
the Note, over a period equal to the number of months comprising the
original amortization period set forth in the Note minus the number of
regular monthly payments that have been made on the Note prior to the date
of such application of Funds. Borrower shall not be liable for the payment
of any prepayment premium or penalty in connection with the application of
the Funds to the balance of the Note.
8. Interest on Funds. All interest earned on the Funds shall be paid
to Borrower on a quarterly basis on or before fifteen days following the
end of each calendar quarter of each year; provided, however, if Escrow
Agent has received from Lender the notice referred to in Section 4(b) or
4(c) hereof, then all interest theretofore earned that has not been paid to
Borrower shall be paid to Lender. Borrower shall supply to Escrow Agent all
documents and information requested by Escrow Agent, including, without
limitation, W-9 forms and Borrower's taxpayer identification numbers.
9. Grant of Security Interest. As security for the repayment of the
Loan and the performance of all other Secured Obligations (as defined in
the Mortgage), Borrower hereby assigns, pledges, conveys, delivers,
transfers and grants to Lender a first priority security interest in and to
all Borrower's right, title and interest in and to the Funds and any and
all bank or other accounts holding such Funds (the "Accounts"); all rights
to payment from the Accounts and the money deposited therein or credited
thereto (whether now due or in the future due and whether now or in the
future on deposit); all interest thereon; any certificates, instruments and
securities, if any, representing the Funds or the Accounts; all claims,
demands, general intangibles, choses in action and other rights or
interests of Borrower in respect of the Funds and the Accounts; any monies
now or at any time hereafter deposited therein; any increases, renewals,
extensions, substitutions and replacements thereof; and all proceeds of the
foregoing (collectively, the "Collateral").
-6-
<PAGE>
10. Default and Remedies. Upon the occurrence of any Event of Default
(as defined in the Mortgage), (a) Borrower shall not be entitled to any
further Disbursement, (b) Lender may declare all Secured Obligations to be
immediately due and payable, and (c) Lender shall be entitled to take
immediate possession and control of the Funds, the Accounts and all other
Collateral, and to pursue all of its rights and remedies under the Loan
Documents, and the remedies to which it is entitled at law and in equity.
11. Interpleader. If any dispute shall develop with respect to the
duties of Escrow Agent under this Agreement, Escrow Agent may deposit the
Funds into a court of competent jurisdiction in Middlesex County,
Massachusetts, and may interplead Lender and Borrower.
12. Indemnification. Borrower shall indemnify Escrow Agent for, and
hold Escrow Agent harmless from, liability incurred by Escrow Agent as a
result of Escrow Agent's having undertaken the obligations contained in
this Agreement (excluding, however, Escrow Agent's gross negligence or
willful misconduct), and shall reimburse Escrow Agent for all of its
reasonable expenses incurred in connection with this Agreement, including,
among other things, reasonable attorneys' fees and court costs.
13. Notice. All notices or instructions required or permitted to be
given under this Agreement shall be in writing, and sent certified or
registered mail, return receipt requested, to the parties at their
addresses set forth below:
If to Borrower:
Charterhouse of Cambridge Trust
Sonesta of Massachusetts, Inc.
c/o Sonesta International Hotels Corporation
200 Clarendon Street, 41st Floor
Boston, Massachusetts 02116
Attn: Office of the Treasurer
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<PAGE>
If to Lender:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attn: Director-Mortgage Lending and
Real Estate
If to Escrow Agent:
Fowler, Goedecke, Ellis & O'Connor, Inc.
225 Franklin Street
Boston, Massachusetts 02110
Attn: Mr. Peter L. Goedecke
14. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Massachusetts.
15. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which taken together
shall constitute the same agreement.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
set forth above.
BORROWER:
/s/
-----------------------------------
Peter J. Sonnabend, Trustee of
the Charterhouse of Cambridge
Trust, and not individually
/s/
-----------------------------------
Peter J. Sonnabend, Trustee under
a Grant of Trustee Power,
Authority and Discretion dated
December 5, 1996 from Boy A.J.
van Riel, Trustee of the
Charterhouse of Cambridge Trust,
and not individually
SONESTA OF MASSACHUSETTS, INC.,
a Massachusetts corporation
By:/s/
------------------------------
Peter J. Sonnabend
Vice President
LENDER:
SUNAMERICA LIFE INSURANCE
COMPANY, an Arizona corporation
By:/s/
------------------------------
Name:
---------------------------
Title:
---------------------------
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<PAGE>
ESCROW AGENT:
FOWLER, GOEDECKE, ELLIS
& O'CONNOR, INC., a Massachusetts
corporation
By:/s/
------------------------------
Name:
---------------------------
Title:
---------------------------
-10-
<PAGE>
EXHIBIT A
[DESCRIBE PERSONAL PROPERTY / WORK ITEMS]
A-1
REPLACEMENT RESERVE
AND SECURITY AGREEMENT
THIS REPLACEMENT RESERVE AND SECURITY AGREEMENT (this "Agreement") is made
as of December 18, 1996, by ROGER P. SONNABEND, PETER J. SONNABEND, and BOY A.J.
VAN RIEL, trustees of the Charterhouse of Cambridge Trust, and not individually,
under a Declaration of Trust dated December 27, 1963 and recorded at Middlesex
South Deeds Book 11160, Page 340, as amended by Amendment of Declaration of
Trust dated July 8, 1966 and recorded at Middlesex South Deeds Book 11160, Page
359 ("Charterhouse"), and SONESTA OF MASSACHUSETTS, INC., a Massachusetts
corporation ("Sonesta," and, together with Charterhouse, collectively,
("Debtor"), for the benefit of SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation ("Secured Party").
RECITALS
A. Secured Party has agreed to extend to Debtor a loan (the "Loan") in the
principal amount of $22,880,000.00, to be evidenced by a Promissory Note, of
even date herewith, payable to the order of Secured Party and in the original
principal amount of the Loan (the "Note") and secured by, among other things, a
Mortgage, Security Agreement, Fixture Filing, Financing Statement and Assignment
of Leases and Rents of even date herewith (the "Mortgage"), encumbering certain
real property located in Cambridge, Massachusetts, more particularly described
therein (the "Property").
B. The Note, Mortgage and all other documents and instruments now or
hereafter evidencing or securing the Loan shall hereinafter be referred to as
the "Loan Documents." Capitalized terms not otherwise defined herein shall bear
the meanings set forth in the Mortgage.
C. To provide for a reserve for capital improvements, Debtor has agreed to
execute this Agreement.
D. To further secure the Note, Secured Party has requested and Debtor has
agreed to assign to Secured Party and to grant to Secured Party a security
interest in certain property of Debtor.
<PAGE>
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and for other good
and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Debtor hereby agrees as follows:
1. Assignment and Grant of Security Interest. Debtor hereby assigns to
Secured Party, and grants to Secured Party a security interest in, the
Collateral (as hereinafter defined) to secure the timely payment and
performance by Debtor of the Obligations (as hereinafter defined).
2. Collateral. The term "Collateral" shall mean: all funds from time
to time on deposit in the "Replacement Reserve Account" (as hereinafter
defined), all Debtor's right, title and interest in and to the Replacement
Reserve Account; all rights to payment from the Replacement Reserve Account
and the money deposited therein or credited thereto (whether now due or in
the future due and whether now or in the future on deposit); all interest
thereon; any certificates, instruments and securities, if any, representing
the Replacement Reserve Account; all claims, demands, general intangibles,
choses in action and other rights or interests of Debtor in respect of the
Replacement Reserve Account; any increases, renewals, extensions,
substitutions and replacements thereof; and all proceeds of the foregoing.
3. Obligations. The obligations secured by this Agreement shall
consist of any and all debts, obligations, and liabilities of Debtor to
Secured Party arising out of, connected with, or related to the Note, the
Loan Documents, this Agreement, and all amendments, extensions, or renewals
of all such documents, whether now existing or hereafter arising (all of
the obligations described in this Paragraph 3 are collectively referred to
herein as the "Obligations").
-2-
<PAGE>
4. Replacement Reserve.
(a) On or before March 1, 1997 (the "Commencement Date"), and
continuing on or before the first day of each month thereafter during
the term of the Loan, Debtor shall deposit into an account at an
FDIC-insured financial institution chosen by Debtor and acceptable to
Secured Party in its reasonable discretion (the "Replacement Reserve
Account"), four percent (4%) of Gross Revenue (hereinafter defined)
for the calendar month ending on the last day of the month that is two
months preceding such date. For example, assuming the Commencement
Date is November 1, then Debtor shall deposit 4% of Gross Revenue for
the period from September 1 through September 30 into the Replacement
Reserve Account on or before November 1; Debtor shall deposit 4% of
Gross Revenue for the period from October 1 through October 31 into
the Replacement Reserve Account on or before December 1, and so on.
The sum of all monies on deposit from time to time in the Replacement
Reserve Account, including any interest earned thereon, is referred to
hereinafter as the "Replacement Reserve."
(b) For purposes of this Agreement, "Gross Revenue" shall mean
all revenue received by or on behalf of Debtor from or with respect to
the Property for the relevant period for which the calculation of
Gross Revenue is being made, including, but not limited to, payments
to Debtor from tenants and other occupants in connection with Leases
of any portion of the Property or from the operation of the Property,
room rentals or occupancy fees or charges, telephone and television
charges, usage fees for spa or pool facilities, advertising revenues,
garage and parking fees, vending machine and concession revenues,
payments received from insurance on account of business or rental
interruption and condemnation proceeds from any temporary use or
occupancy. Gross Revenue shall not include: (i) proceeds from the sale
or other disposition of any part or all of the Property, or from any
financing or refinancing of the Property; (ii) proceeds from any
condemnation of any part or all of the Property (except for temporary
use or occupancy); (iii) proceeds on account of a casualty to the
Property (other than payments from insurance on account of business or
rental interruption); (iv) other insurance proceeds (other than in
compensation of lost revenues or its equivalent); (v) security
deposits paid under Leases of all or a part of the Property, unless
and until retained and applied by Debtor in accordance with the terms
of such Leases; (vi) similar
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<PAGE>
items or transactions, the proceeds of which under generally accepted
accounting principles are deemed attributable to capital and are not
in the nature of rent or compensation therefor; and (vii)
contributions or loans to Debtor by any affiliate of Debtor.
(c) Notwithstanding the foregoing, Debtor shall be permitted to
implement the approved Budget (as hereinafter defined) program for the
current calendar year notwithstanding that the amount of funds in the
Replacement Reserve Account is not then adequate to cover the cost of
items purchased or work undertaken pursuant to the Budget, and Debtor
shall be solely responsible for funding out of its separate funds the
difference between the amount of funds in the Replacement Reserve
Account and the cost of such items and work. Any such amounts funded
by Debtor out of its separate funds shall, if consistent with the
Budget, be reimbursed to Debtor out of first funds subsequently
deposited in the Replacement Reserve Account in the remaining months
of the same calendar year. Debtor shall, further, provide Secured
Party with regular updates regarding the status of items purchased and
work performed pursuant to the current year's Budget.
5. Purpose of Replacement Reserve. The Replacement Reserve shall be
maintained by Debtor solely for payment for capital improvements and
replacements to the furniture, fixtures and equipment located at the
Property (collectively, "Capital Expenses"). Subject to the terms and
conditions of this Agreement, Debtor may withdraw funds from the
Replacement Reserve Account for Capital Expenses, and for no other purpose.
-4-
<PAGE>
6. Capital Budgets.
(a) On or before the Commencement Date and on or before each
succeeding November 1 during the term of the Loan, Debtor shall
deliver to Secured Party a proposed capital budget for the Property
for the immediately succeeding calendar year, which budget shall set
forth Debtor's projection of necessary Capital Expenses for such
calendar year, and which budget shall be subject to Secured Party's
reasonable approval.
(b) Secured Party may request reasonable modifications to any
budget delivered to Secured Party by Debtor. Once Debtor has made all
revisions requested by Secured Party, if any, the revised budget for
the Property shall be delivered to Secured Party and shall thereafter
become the Capital Expense budget for the Property hereunder (each
such budget a "Budget") for the applicable calendar year. If Debtor
and Secured Party are unable to agree upon a Budget for any calendar
year, the budgeted Capital Expenses provided in the Budget for the
preceding calendar year (absent extraordinary items) shall be
considered the Budget for the subject calendar year until Secured
Party and Debtor agree upon a new Budget for such calendar year.
(c) From time to time Debtor may submit proposed changes to the
current year's Budget to Secured Party, which changes shall be subject
to Secured Party's reasonable approval; provided, however, that
Secured Party may withhold its approval to any such proposed change in
its sole discretion if the implementation of such change (i) would
cause the total cost of the Budget for the current year to exceed four
percent (4%) of forecasted Gross Revenues for the current year, and
(ii) are not either mandated by applicable law or necessary to
preserve the safety of Property employees and guests or to maintain
the structural integrity of the Property.
7. Withdrawals from Replacement Reserve Account. Debtor may make
withdrawals from the Replacement Reserve Account (each, a "Withdrawal") for
Capital Expenses upon the following terms and conditions:
(a) Debtor shall not be entitled to any Withdrawal if a Default
(as defined in the Mortgage) or Event of
-5-
<PAGE>
Default (hereinafter defined) has occurred and is continuing under the
terms of the Note, Mortgage or any other Security Document.
(b) Debtor may make a Withdrawal for Capital Expenses, and for no
other purpose, and only to the extent that Secured Party has given its
prior written approval of such Withdrawal or such Capital Expense is
set forth in the applicable Budget.
8. Reports.
(a) On or before the fifteenth (15th) day of each calendar month,
Debtor shall deliver to Secured Party a statement concerning the
preceding calendar month period, which statement shall detail all of
Debtor's Withdrawals from the Replacement Reserve Account, the Capital
Expenses for which such Withdrawals were made, and shall contain a
reconciliation of Debtor's Withdrawals versus the Budget for the
applicable calendar month and for the applicable calendar year to
date. Debtor shall also provide to Secured Party such supporting
information, including, without limitation, invoices and paid
receipts, as reasonably required by Secured Party to verify such
Capital Expenses. If any such statement discloses any inconsistency
between the Budget (or any other Capital Expense approved by Secured
Party pursuant to Section 7(b) hereof) and the purposes for which
Debtor made such Withdrawals, then Debtor shall, within five (5) days
of demand therefor, deposit into the Replacement Reserve Account the
amount of any such discrepancy.
(b) Debtor shall deliver to Secured Party all financial
statements reasonably required by Secured Party to calculate Gross
Revenue, including, without limitation, a statement to be delivered to
Secured Party with each deposit of Gross Revenue, that sets forth the
amount of Gross Revenue accompanying such statement, if any, and
Debtor's calculation of Gross Revenue for the relevant calendar month.
Such statements shall be certified by an executive officer of Debtor
as having been prepared in accordance with the terms hereof and to be
true, accurate and complete in all material respects. If any such
statement discloses any inconsistency between the calculation of Gross
Revenue and the amount of Gross Revenue actually remitted to Secured
Party, Debtor shall immediately remit to Secured Party the amount of
any underpayment of Gross Revenue. Secured Party may notify Debtor
within thirty (30) days after receipt of any
-6-
<PAGE>
statement or report required hereunder that Secured Party disputes any
computation or item contained in any portion of such statement or
report. If Secured Party so notifies Debtor, Secured Party and Debtor
shall meet in good faith within ten (10) days after Secured Party's
notice to Debtor to resolve such disputed items. If, despite such good
faith efforts, the parties are unable to resolve the dispute at such
meeting or within ten (10) days thereafter, the items shall be
resolved by an independent certified public accountant designated by
Secured Party within fifteen (15) days after such ten (10) day period.
The determination of such accountant shall be final. All fees of such
accountant shall be paid by Debtor, provided, however, that if such
accountant determines that no additional Gross Revenue is due to be
remitted to Secured Party, then Secured Party shall pay the fees of
such accountant. Debtor shall remit to Secured Party any additional
Gross Revenue found to be due for such periods within ten (10) days
after the resolution of such dispute by the parties or the
accountant's determination, as applicable. Debtor shall at all times
keep and maintain full and accurate books of account and records
adequate to reflect correctly all items required in order to calculate
Gross Revenue.
9. Event of Default and Remedies.
(a) An "Event of Default" shall occur under this Agreement if (i)
Debtor fails to perform any monetary obligation under this Agreement
within five (5) days after its due date, (ii) if Debtor fails to
comply with any of the non-monetary terms of this Agreement within
thirty (30) days following notice of default thereof, (iii) an Event
of Default occurs under any of the Loan Documents, or (iv) any
representation or warranty contained hereunder proves to be untrue or
misleading in any material respect.
(b) An Event of Default hereunder shall constitute an Event of
Default under all of the Loan Documents.
(c) Upon the occurrence of an Event of Default, (i) Debtor shall
not be entitled to any Withdrawal from the Replacement Reserve
Account; (ii) Secured Party may, at its option, declare all
Obligations to be immediately due and payable; and (iii) Secured Party
shall be entitled to take immediate possession and control of the
Replacement Reserve Account and to
-7-
<PAGE>
pursue all of its rights and remedies hereunder, under the Loan
Documents, and to which it is entitled at law and in equity.
10. Representations and Warranties. In addition to all representations
and warranties of Debtor set forth in the Loan Documents, which are
incorporated herein by this reference, Debtor hereby represents and
warrants that:
(a) Debtor is the sole and absolute owner of the Collateral and
no other person or entity has any right, title, claim, or interest
(whether a security interest, lien, charge or otherwise) in, against,
or to the Collateral;
(b) All information heretofore, herein, or (to the best of
Debtor's knowledge) hereafter supplied to Secured Party by or on
behalf of Debtor with respect to the Collateral and its rights thereto
is and will be true and correct in all material respects;
(c) To the best of Debtor's knowledge, no person or entity has
any defense, set off, claim or counterclaim against Debtor which can
be asserted against Secured Party, whether in any proceeding to
enforce Secured Party's rights in the Collateral or otherwise;
(d) No financing statements covering any of the Collateral are on
file in any public office other than any financing statements which
reflect the security interest granted by this Agreement; and
(e) Debtor has full right to grant to Secured Party the security
interest contemplated herein in accordance with the terms of this
Agreement.
-8-
<PAGE>
11. Covenants of Debtor. Debtor hereby covenants and agrees:
(a) That Debtor will not, without the prior written consent of
Secured Party: (i) grant any security interest or any other interest
in any of the Collateral, other than the security interest granted by
this Agreement; or (ii) subordinate or permit the subordination of the
security interest granted to Secured Party herein to the interest of
any other person or entity in or to any of the Collateral. Any attempt
to do any of the foregoing without the prior written consent of
Secured Party shall be void and ineffective as against Secured Party
and shall constitute an Event of Default under the terms of this
Agreement;
(b) At Debtor's sole cost and expense, to appear in and defend
any action or proceeding arising under, growing out of, or in any
manner connected with the Collateral or the Obligations, and to pay
all reasonable costs and expenses of Secured Party, including
attorneys' fees in a reasonable sum, in any such action or proceeding
in which Secured Party may appear;
(c) To do all acts that may be necessary to maintain, preserve
and protect the Collateral;
(d) Not to use or permit any Collateral to be used unlawfully or
in violation of any provision of this Agreement, any Security
Document, or any applicable statute, regulation or ordinance or any
policy of insurance covering the Collateral, or to withdraw any funds
from the Replacement Reserve Account for any purpose inconsistent with
this Agreement;
(e) To pay promptly when due all taxes, assessments, charges,
encumbrances, and liens now or hereafter imposed upon or affecting any
Collateral;
(f) To give prompt notice to Secured Party of any change in
either the name or the place of business of Debtor;
(g) To procure, execute, and deliver from time to time any
endorsements, assignments, financing statements, and other writings
deemed necessary or appropriate by Secured Party to perfect, maintain,
and protect its security interest hereunder and the priority thereof,
and to deliver promptly to Secured Party all Collateral consisting of
chattel paper or instruments;
-9-
<PAGE>
(h) To keep separate, accurate, and complete records of the
Collateral and to provide Secured Party with such records and such
other reports and information relating to the Collateral as Secured
Party may request from time to time;
(i) Not to surrender or lose possession of (other than to Secured
Party), sell, encumber, lease, rent, or otherwise dispose of or
transfer any Collateral or right or interest therein, and to keep the
Collateral free of all levies and security interests or other liens or
charges except those approved in writing by Secured Party;
(j) To deliver promptly to Secured Party copies of all material
notices or communications received by Debtor concerning the
Collateral; and
(k) That this Agreement shall in no way operate to prevent
Secured Party from pursuing any remedy which it now or hereafter may
have because of any present or future breach of the terms or
conditions of the Obligations or any amendment, modification, or
extension thereof.
12. No Assumption by Secured Party; Indemnification. Secured Party
shall not be obligated to perform or discharge, nor does it hereby
undertake to perform or discharge, any obligation, duty or liability under
any Collateral or by reason of this Agreement. This Agreement and the
rights granted Secured Party hereunder shall in no way be construed to make
Secured Party a partner of Debtor. Debtor shall perform and discharge all
of its obligations, duties and liabilities with respect to any Collateral.
Debtor hereby agrees to indemnify Secured Party against and hold it
harmless from any and all liability, loss or damage which it may or might
incur by reason of this Agreement, and against and from any and all claims
and demands whatsoever which may be asserted against it by reason of any
alleged obligation or undertaking on its part to perform or discharge any
of the terms, covenants or agreements with respect to any Collateral
(except any liability arising as the result of Secured Party's willful
misconduct). Should Secured Party incur any such liability, loss or damage
under any Collateral or by reason of this Agreement, or in the defense
against any such claims or demands, the amount thereof, including costs,
expenses and reasonable attorneys' fees (together with interest at the
Default
-10-
<PAGE>
Rate set forth in the Note from the date ten (10) days following demand
therefor until paid) shall be included in the Obligations secured hereby,
and Debtor shall reimburse Secured Party therefor promptly upon demand, and
upon the failure of Debtor to do so, Secured Party may deem Debtor in
default of this Agreement and exercise all remedies granted hereby.
13. Notice of Security Interest; Perfection; Financing Statements. At
its option, Secured Party may notify the financial institution that holds
the Replacement Reserve Account of Secured Party's security interest in
such account. Debtor shall execute such financing statements as Secured
Party may request to perfect the rights assigned and the security interest
granted by this Agreement, and shall pay the cost of filing such financing
statements in such offices in such jurisdictions as Secured Party may
require.
14. Other Information. Secured Party or its agents shall have the
right to review and Debtor shall deliver to Secured Party, upon reasonable
notice, copies of any documents or instruments affecting or relating to any
of the Collateral.
15. Waiver of Hearing. To the fullest extent permitted by law, Debtor
hereby expressly waives any constitutional or other right to a judicial
hearing prior to the time Secured Party takes possession, disposes of,
assigns, or succeeds to the Collateral upon an Event of Default as provided
in Paragraph 9 hereof. Debtor hereby expressly waives any right to require
Secured Party to proceed against any person or to exhaust any security or
to pursue any remedy in Secured Party's power.
16. Cumulative Rights. The rights, powers and remedies of Secured
Party under this Agreement shall be in addition to all rights, powers and
remedies given to Secured Party by virtue of any statute or rule of law or
the terms and conditions of the Obligations, all of which rights, powers
and remedies shall be cumulative and may be exercised successively or
concurrently without impairing Secured Party's security interest in the
Collateral.
17. Waiver. Any forbearance, failure or delay by Secured Party in
exercising any right, power or remedy shall not preclude the further
exercise thereof, and every right, power or remedy of Secured Party shall
continue in full force and effect
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<PAGE>
until such right, power or remedy is specifically waived in a writing
executed by Secured Party.
18. Setoff. Debtor agrees that Secured Party may exercise its rights
of setoff with respect to the Obligations in the same manner as if the
Obligations were unsecured.
19. No Assignment; Successors and Assigns. Except as otherwise
provided herein, Debtor may not assign, encumber, or transfer in any manner
whatsoever all or any part of its interest in the Collateral without the
prior written consent of Secured Party. Secured Party's consent to one
assignment or other transfer shall not be deemed to be a consent to any
subsequent assignment or transfer. Any transferee or assignee of all or any
part of Debtor's interest in any Collateral shall hold such interest
subject to all the terms, conditions and provisions of this Agreement. All
rights of Secured Party under this Agreement shall inure to the benefit of
its successors and assigns, and all obligations of Debtor shall bind its
successors and assigns.
20. Severability. If any of the provisions of this Agreement shall be
held invalid or unenforceable, this Agreement shall be construed as if not
containing those provisions and the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired.
21. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of Massachusetts, and,
where applicable and except as otherwise defined herein, terms used herein
shall have the meanings given them in the Massachusetts Uniform Commercial
Code. Any dispute concerning Section 6(b), 8(a) or 8(b) shall be resolved
pursuant to the expedited Commercial Rules of the American Arbitration
Association. Any arbitration shall be held in Boston, Massachusetts, and
the prevailing party shall be entitled to receive all costs and expenses
incurred in connection with such arbitration.
22. Address; Trade Name; Records. Debtor represents that its residence
or chief place of business is located in either Cambridge, Massachusetts,
or Boston, Massachusetts, and that Debtor's records concerning the
Collateral are kept at either or both of such locations.
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<PAGE>
23. Notices. Any written notice, consent or other communication
provided for this Agreement shall be deemed to have been properly given (a)
upon personal delivery, (b) on the first business day after receipt of
delivery to a courier service which guarantees next-day business delivery,
or (c) on the third business day after mailing, by registered or certified
United States mail, postage prepaid, in any case to the appropriate party
at its address set forth below:
Secured Party: SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attention: Director--Mortgage Lending and
Real Estate
Debtor: c/o Sonesta International Hotels Corporation
200 Clarendon Street, 41st Floor
Boston, Massachusetts 02116
Attention: Office of the Treasurer
Such addresses may be changed by written notice given as provided herein.
24. Joint and Several Obligation. If Debtor is more than one person or
entity, then (a) all persons or entities comprising Debtor are jointly and
severally liable for all of the Debtor's obligations hereunder; (b) all
representations, warranties, and covenants made by Debtor shall be deemed
representations, warranties, and covenants of each of the persons or
entities comprising Debtor; (c) any breach, Default or Event of Default by
any of the persons or entities comprising Debtor hereunder shall be deemed
to be a breach, Default, or Event of Default of Debtor; and (d) any
reference herein contained to the knowledge or awareness of Debtor shall
mean the knowledge or awareness of any of the persons or entities
comprising Debtor.
25. Headings. Headings of the paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
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<PAGE>
IN WITNESS WHEREOF, Debtor has executed this Replacement Reserve and
Security Agreement as of the day and year first above written.
DEBTOR:
/s/
-----------------------------------
Peter J. Sonnabend, Trustee of
the Charterhouse of Cambridge
Trust, and not individually
/s/
-----------------------------------
Peter J. Sonnabend, Trustee under
a Grant of Trustee Power,
Authority and Discretion dated
December 5, 1996 from Boy A.J.
van Riel, Trustee of the
Charterhouse of Cambridge Trust,
and not individually
SONESTA OF MASSACHUSETTS, INC.,
a Massachusetts corporation
By:/s/
---------------------------------
Peter J. Sonnabend
Vice President
-14-
LIMITED GUARANTY AGREEMENT
This LIMITED GUARANTY AGREEMENT (this "Guaranty") is made as of December
18, 1996, by SONESTA INTERNATIONAL HOTELS CORPORATION., a New York corporation
("Guarantor"), in favor of SUNAMERICA LIFE INSURANCE COMPANY, an Arizona
corporation ("Lender").
1. Loan and Note. This Guaranty is executed in connection with a
$22,880,000.00 loan ("Loan") made by Lender to Roger P. Sonnabend, Peter J.
Sonnabend, and Boy A.J. van Riel, trustees of the Charterhouse of Cambridge
Trust, and not individually, under a Declaration of Trust dated December 27,
1963 and recorded at Middlesex South Deeds Book 11160, Page 340, as amended by
Amendment of Declaration of Trust dated July 8, 1966 and recorded at Middlesex
South Deeds Book 11160, Page 359 ("Charterhouse"), and Sonesta of Massachusetts,
Inc., a Massachusetts corporation ("Sonesta," and, together with Charterhouse,
collectively, "Borrower"). The Loan is (a) evidenced by a Promissory Note of
even date herewith in the original principal amount of the Loan ("Note"), and
(b) secured by, among other things, a Mortgage, Security Agreement, Fixture
Filing, Financing Statement and Assignment of Leases and Rents of even date
herewith granted by Borrower for the benefit of Lender ("Mortgage," and,
together with the Note and all other documents evidencing and/or securing the
Loan, "Loan Documents") covering certain real property commonly known as the
Royal Sonesta Hotel, Cambridge, Massachusetts and more particularly described in
the Mortgage. All capitalized terms used herein without definition shall have
the meanings given to such terms in the Mortgage.
2. Purpose and Consideration. The execution and delivery of this Guaranty
by Guarantor is a condition to Lender's willingness to make the Loan to
Borrower, is made in order to induce Lender to make the Loan, and is made in
recognition that Lender will be relying upon this Guaranty in making the Loan
and performing any other obligations it may have under the Loan Documents.
Guarantor is the sole beneficiary of Charterhouse and the sole shareholder of
Sonesta, and, accordingly, acknowledges that Guarantor will receive material
direct and indirect benefit from Lender making the Loan to Borrower.
3. Guaranty. Guarantor hereby guarantees absolutely, primarily, and
irrevocably, payment and performance of all
<PAGE>
obligations of Borrower under the Loan Documents for which Borrower incurs
personal liability to Lender under the exceptions to the non-recourse provisions
described in Section 9.4 of the Mortgage and Section 18 of the Note
(collectively, the "Obligations").
4. Guaranty is Independent and Absolute. The obligations of Guarantor
hereunder are independent of the obligations of Borrower and of any other person
who may become liable with respect to the Obligations. Guarantor is jointly and
severally liable with Borrower and with any other guarantor for the full and
timely payment and performance of all of the Obligations. Guarantor expressly
agrees that a separate action or actions may be brought and prosecuted against
Guarantor (or any other guarantor), whether or not any action is brought against
Borrower, any other guarantor or any other person for any Obligations guaranteed
hereby and whether or not Borrower, any other guarantor or any other persons are
joined in any action against Guarantor. Guarantor further agrees that Lender
shall have no obligation to proceed against any security for the Obligations
prior to enforcing this Guaranty against Guarantor, and that Lender may pursue
or omit to pursue any and all rights and remedies Lender has against any person
or with respect to any security in any order or simultaneously or in any other
manner. All rights of Lender and all obligations of Guarantor hereunder shall be
absolute and unconditional irrespective of (a) any lack of validity or
enforceability of the Note or any other Loan Document, and (b) any other
circumstances which might otherwise constitute a defense available to, or a
discharge of Borrower in respect of, the Obligations.
5. Authorizations to Lender. Guarantor authorizes Lender, without notice or
demand and without affecting Guarantor's liability hereunder, from time to time
(a) to renew, extend, accelerate or otherwise change the time for payment of,
change, amend, alter, cancel, compromise or otherwise modify the terms of the
Note, including increasing the rate or rates of interest thereunder agreed to by
Borrower, and to grant any indulgences, forbearances, or extensions of time; (b)
to renew, extend, change, amend, alter, cancel, compromise or otherwise modify
any of the terms, covenants, conditions or provisions of any of the Loan
Documents or any of the Obligations; (c) to apply any security and direct the
order or manner of sale thereof as Lender, in Lender's discretion, may
determine; (d) to proceed against Borrower,
-2-
<PAGE>
Guarantor or any other guarantor with respect to any or all of the Obligations
without first foreclosing against any security therefor; (e) to exchange,
release, surrender, impair or otherwise deal in any manner with, or waive,
release or subordinate any security interest in, any security for the
Obligations; (f) to release or substitute Borrower, any other guarantors,
endorsers, or other parties who may be or become liable with respect to the
Obligations, without any release being deemed made of Guarantor or any other
such person; and (g) to accept a conveyance or transfer to Lender of all or any
part of any security in partial satisfaction of the Obligations, or any of them,
without releasing Borrower, Guarantor, or any other guarantor, endorser or other
party who may be or become liable with respect to the Obligations, from any
liability for the balance of the Obligations.
6. Application of Payments Received by Lender. Any sums of money Lender
receives from or for the account of Borrower may be applied by Lender to reduce
any of the Obligations or any other liability of Borrower to Lender, as Lender
in Lender's discretion deems appropriate.
7. Waivers by Guarantor. In addition to all waivers expressed in any of the
Loan Documents, all of which are incorporated herein by Guarantor, Guarantor
hereby waives (a) presentment, demand, protest and notice of protest, notice of
dishonor and of non-payment, notice of acceptance of this Guaranty, and
diligence in collection; (b) notice of the existence, creation, or incurring of
any new or additional Obligations under or pursuant to any of the Loan
Documents; (c) any right to require Lender to proceed against, give notice to,
or make demand upon Borrower; (d) any right to require Lender to proceed against
or exhaust any security or to proceed against or exhaust any security in any
particular order; (e) any right to require Lender to pursue any remedy of
Lender; (f) any right to direct the application of any security held by Lender;
(g) any right of subrogation or to enforce any remedy which Lender may have
against Borrower and any right to participate in any security now or hereafter
held by Lender and any right to reimbursement from the Borrower for amounts paid
to Lender by Guarantor; (h) benefits, if any, of Guarantor under any
anti-deficiency statutes or single-action legislation; (i) any defense arising
out of any disability or other defense of Borrower, including bankruptcy,
dissolution, liquidation, cessation, impairment, modification, or limitation,
from any cause, of any liability of
-3-
<PAGE>
Borrower, or of any remedy for the enforcement of such liability; (j) any
statute of limitations affecting the liability of Guarantor hereunder; (k) any
right to plead or assert any election of remedies by Lender; and (l) any other
defenses available to a surety under applicable law.
8. Subordination by Guarantor. Guarantor hereby agrees that any
indebtedness of Borrower to Guarantor, whether now existing or hereafter
created, shall be and is hereby subordinated to the indebtedness of Borrower to
Lender under the Loan Documents. At any time during which a Default or Event of
Default exists, Guarantor shall not accept or seek to receive any amounts from
Borrower on account of any indebtedness of Borrower to Guarantor.
9. Bankruptcy Reimbursements. Guarantor hereby agrees that if any amounts
paid to Lender by Borrower or any other party liable for payment and
satisfaction of the Obligations (other than Guarantor) are recovered from Lender
in any bankruptcy proceeding, Guarantor shall reimburse Lender immediately on
demand for all amounts so recovered from Lender (together with interest thereon
at the default rate set forth in the Note from the date ten (10) days following
demand therefor until paid), and, for this purpose, this Guaranty shall survive
repayment of the Loan. Without limiting the foregoing, Guarantor shall pay all
costs and expenses incurred by Lender in connection with any bankruptcy
proceeding of Borrower, Guarantor or any other party liable for payment and
satisfaction of the Obligations, including attorneys' fees and expenses.
10. Jurisdiction and Venue. Guarantor hereby submits itself to the
jurisdiction and venue of any state court located in Middlesex County,
Massachusetts, or federal court located in the Commonwealth of Massachusetts in
connection with any action or proceeding brought for enforcement of Guarantor's
obligations hereunder, and hereby waives any and all personal or other rights
under the law of any other country or state to object to jurisdiction within
such locations, for purposes of litigation to enforce such obligations.
Guarantor agrees that service of process upon Guarantor shall be complete upon
delivery thereof in any manner permitted by law.
11. Financial Statements. In addition to those obligations set forth in any
of the Loan Documents, for so long as
-4-
<PAGE>
any of the Obligations remain unsatisfied, within one hundred twenty (120) days
after the end of each calendar year, Guarantor shall furnish to Lender such
financial statements of Guarantor for such calendar year as Lender may request,
in such detail as Lender may request, certified by Guarantor as being true and
correct in all respects. Guarantor shall also furnish to Lender copies of his
federal and state income tax returns for the preceding year within ten (10) days
of the filing thereof with the appropriate governmental agencies.
12. Assignability. This Guaranty shall be binding upon Guarantor and
Guarantor's heirs, representatives, successors, and assigns and shall inure to
the benefit of Lender and Lender's successors and assigns. This Guaranty shall
follow the Note and other Loan Documents which are for the benefit of Lender,
and, in the event the Note and other Loan Documents are negotiated, sold,
transferred, assigned, or conveyed by Lender in whole or in part, this Guaranty
shall be deemed to have been sold, transferred, assigned, or conveyed by Lender
to the holder or holders of the Note and other Loan Documents, with respect to
the Obligations contained therein, and such holder or holders may enforce this
Guaranty as if such holder or holders had been originally named as Lender
hereunder.
13. Payment of Costs of Enforcement. In the event any action or proceeding
is brought to enforce this Guaranty, Guarantor shall pay all costs and expenses
of Lender in connection with such action or proceeding, including, without
limitation, all reasonable attorneys' fees incurred by Lender.
14. Notices. Any notice required or permitted to be given by Guarantor or
Lender under this Guaranty shall be in writing and will be deemed given (a) upon
personal delivery, (b) on the first business day after receipted delivery to a
courier service which guarantees next-business day delivery, or (c) on the fifth
(5th) business day after mailing, by registered or certified United States mail,
postage prepaid, in any case to the appropriate party at its address set forth
below:
-5-
<PAGE>
If to Guarantor:
Sonesta International Hotels Corporation
200 Clarendon Street, 41st Floor
Boston, Massachusetts 02116
Attn: Office of the Treasurer
with a copy to:
Burns & Levinson
125 Summer Street
Boston, Massachusetts 02110
Attn: Steven L. Charlip, Esq.
If to Lender:
SunAmerica Life Insurance Company
1 SunAmerica Center
Century City
Los Angeles, California 90067-6022
Attn: Director-Mortgage Lending and Real Estate
Either party may change such party's address for notices or copies of notices by
giving notice to the other party in accordance with this Section 14.
15. Reinstatement of Obligations. If at any time all or any part of any
payment made by Guarantor or received by Lender from Guarantor under or with
respect to this Guaranty is or must be rescinded or returned for any reason
whatsoever (including, but not limited to, the insolvency, bankruptcy or
reorganization of any Guarantor), then the obligations of Guarantor hereunder
shall, to the extent of the payment rescinded or returned, and to the extent
permitted by law, be deemed to have continued in existence, notwithstanding such
previous payment made by Guarantor, or receipt of payment by Lender, and the
obligations of Guarantor hereunder shall continue to be effective or be
reinstated, as the case may be, as to such payment, all as though such previous
payment by Guarantor had never been made.
16. Severability of Provisions. If any provision hereof or of any other
Loan Document shall, for any reason and to any extent, be invalid or
unenforceable, then the remainder of the
-6-
<PAGE>
document in which such provision is set forth, the application of the provision
to other persons, entities or circumstances, and any other document referred to
herein shall not be affected thereby but instead shall be enforceable to the
maximum extent permitted by law.
17. Waiver. Neither the failure of Lender to exercise any right or power
given hereunder or to insist upon strict compliance by Borrower, Guarantor, any
other guarantor, or any other person with any of its obligations set forth
herein or in any of the Loan Documents, nor any practice of Borrower or
Guarantor at variance with the terms hereof or of any Loan Documents, shall
constitute a waiver of Lender's right to demand strict compliance with the terms
and provisions of this Guaranty.
18. Certain Waivers. GUARANTOR, BY SIGNING THIS GUARANTY, AND LENDER, BY
ACCEPTING IT, EACH KNOWINGLY, IRREVOCABLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION,
PROCEEDING OR COUNTERCLAIM BASED ON THIS GUARANTY, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS GUARANTY OR ANY LOAN DOCUMENT, OR ANY COURSE OF CONDUCT,
COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY
HERETO. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER AND GUARANTOR
ENTERING INTO THE SUBJECT LOAN TRANSACTION.
19. Applicable Law. This Guaranty and the rights and obligations of the
parties hereunder shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the day and
year first above written.
GUARANTOR:
SONESTA INTERNATIONAL HOTELS
CORPORATION, a New York
corporation
By:/s/
--------------------------------
Peter J. Sonnabend
Vice President
-7-
<PAGE>
COMMONWEALTH OF MASSACHUSETTS
STATE OF MASSACHUSETTS )
) ss. December ____, 1996
COUNTY OF SUFFOLK )
Then personally appeared the above-named Peter J. Sonnabend, Vice President
of Sonesta International Hotels Corporation, a New York corporation, and
acknowledged the foregoing instrument to be the free act and deed of Peter J.
Sonnabend and the corporation before me.
-----------------------------------
Notary Public
My commission expires _____________
-8-
CONTRACT OF SALE
AGREEMENT (the "Agreement") made this ____ day of July, 1996 between The
Soho Hotel Company, L.P., a Delaware limited partnership, having an office at
142 Greene Street, New York, New York 10012 (hereinafter "Seller") and The
Mercer I L.L.C., a Delaware limited liability company, having an address c/o BD
Hotels, LLC, 60 East 54th Street, New York, New York 10022 (hereinafter
"Purchaser").
W I T N E S S E T H
WHEREAS, Seller is the owner of the Property (as defined below).
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Property.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Seller and Purchaser agree as follows:
0. Sale-Purchase. Seller agrees to sell, assign and convey to
Purchaser, and Purchaser agrees to purchase from Seller, subject to the
terms and conditions of this Agreement, all of Seller's right, title and
interest as fee owner of the premises more particularly described in
Exhibit A attached hereto (the "Land"), together with the building and
improvements thereon (collectively, the "Building"), commonly known by the
street address of 147 Mercer Street, and all of Seller's right, title and
interest in, to and under (i) all easements, rights of way, privileges,
appurtenances, development rights, strips, gores and other rights
pertaining to the Land and the Building, if any (collectively, the
"Appurtenances"); and (ii) the fixtures, and equipment, if any, owned by
Seller and attached to or built into the Building (collectively, the
"Fixtures"). The Land, the Building, the Appurtenances, and the Fixtures
are hereinafter collectively referred to as the "Property".
1. Purchase Price. Purchaser shall pay to Seller for the Property the
sum of Seven Million Eight Hundred Twenty-Six Thousand Five Hundred Five
and 14/100 DOLLARS ($7,826,505.14) (hereinafter, the "Purchase Price").
Purchaser shall pay the Purchase Price, on the Closing Date (as herein
defined), by wire transfer of immediately available federal funds for
credit to Seller's account or to such other bank account or accounts, and
divided into such amounts, as Seller shall designate.
<PAGE>
2. Title: Permitted Encumbrances. Subject to the terms and provisions
of this Agreement, title to the Property shall be sold, assigned and
conveyed by Seller to Purchaser, and Purchaser shall accept the same
subject to the following (collectively, the "Permitted Encumbrances"):
( ) The encumbrances, conditions, stipulations and exceptions
raised in Exhibit B attached hereto and hereby made a part hereof and
such other matters as any reputable title insurance company shall be
willing, without special premium, to omit as exceptions to coverage;
(a) Real estate taxes, water and sewer charges, vault taxes and
assessments affecting the Property;
(b) All utility company rights, easements and franchises to
maintain and operate lines, poles, wires, cables, pipes, distribution
boxes and other fixtures and facilities in over, under and upon the
Property;
(c) Possible projections and/or encroachments of retaining walls,
stoops, areas, steps, sills, trim, cornices, standpipes, casings,
ledges, water table, lintels, porticos, keystones, bay windows,
copings, cellar doors, sidewalk elevators, fences, fire escapes and
the like, or similar projections of objects on, under or above any
adjoining streets of the Property or any property adjoining the
Property, or within any set-back areas, and encroachments of similar
elements projecting from adjoining property over the Property and
variations between the lines of record title and fences, retaining
walls and the like;
(d) Zoning ordinances and restrictions and amendments thereto now
or hereafter in force or effect provided they are not violated by the
Building or the use thereof as a hotel with restaurant and retail
uses;
(e) Existing rights and obligations in respect of any party walls
which are not the subject of written agreement provided such
obligations do not interfere with or prevent the use of the building
as a hotel with restaurant and retail uses;
(f) The rights, if any, of any governmental authority having or
asserting jurisdiction thereof, with respect to any vaults under the
sidewalks beyond the building line;
(g) All notes or notices of any violation of law or municipal
ordinances, orders or requirements noted in any federal,
2
<PAGE>
state or municipal department having or asserting jurisdiction against
the Property (hereinafter "Violations") after the date hereof;
(h) The rights of J. Crew Company under the terms and provisions
of that certain retail lease with respect to a portion of the
Building, dated as of January 29, 1996, by and between Seller, as
lessor, and Grace Holmes, Inc., as lessee (the "J. Crew Lease");
(i) The mechanics liens identified on Exhibit C annexed hereto
(the "Mechanics' Liens").
(j) Any other matter or thing affecting the Property which
Purchaser agrees to take subject to or waives in writing pursuant to
the terms of this Agreement.
3. Title Insurance.
( ) Purchaser has received and reviewed a specimen owner's title
insurance policy from Chicago Title Insurance Company (the "Title
Company") numbered TA #9601-105-000307 (the "Specimen Policy") a copy
of which is attached hereto as Exhibit D and incorporated herein by
this reference. Purchaser has no objections to the exceptions set
forth in the Specimen Policy and agrees that such exceptions shall be
deemed Permitted Encumbrances. It shall be a condition to Purchaser's
obligation to close that the Title Company commit to issue to
Purchaser a title insurance policy in the amount of $18,000,000 in the
form of the Specimen Policy.
(a) In lieu of satisfying any monetary liens or encumbrances
which Seller may elect, or be required pursuant to the express terms
hereof, to satisfy under this Agreement, Seller may deposit with the
Title Company such amount of money as may be determined by the Title
Company as being sufficient to induce the Title Company to
affirmatively insure Purchaser (at the then current rate(s) of the
Title Company which shall be Seller's obligation) against collection
of such liens and/or encumbrances out of or against the Property.
(b) If, at the Closing, the Property is subject to any existing
mortgage or mortgages given by Seller, unpaid taxes, water charges and
assessment or any other lien or liens which, pursuant to the terms of
this Agreement Seller is required to satisfy or discharge, Seller
shall not be obligated to satisfy or discharge same of record provided
(i) recordable instruments of satisfaction, discharge or pay-off
letters are delivered to the Title Company on
3
<PAGE>
the Closing Date (as hereinafter defined) and proper allowances made
to Purchaser for recording charges thereon and (ii) the Title Company
shall omit same as an exception to title on Purchaser's title
insurance policy.
(c) If the title report of the Title Company discloses judgments,
bankruptcies or other returns against other persons having names the
same as, or similar to, that of Seller, Seller shall, if requested,
deliver to the Title Company affidavits showing that such judgments,
bankruptcies or other returns are not against Seller in order to
induce the Title Company to omit exceptions with respect to such
judgments, bankruptcies or other returns or to insure over same.
(d) Franchise or other similar taxes against any owner or others
in the chain of title shall not constitute a title objection if the
Title Company shall agree to insure without additional premium that
such taxes will not be collectible against the Property. As a
condition to Closing, Seller shall deliver to the Title Company a good
standing certificate from the State of Delaware and a current
certificate of authority to transact business in the State of New York
with respect to Seller. In the event Seller is unable to deliver such
certificates by the Closing Date, Seller shall be entitled to a
reasonable adjournment of the Closing Date for the purpose of
obtaining such certificates.
(e) Seller shall deliver to the Title Company, if required, in
reasonable and customary form (i) a certificate with respect to
mechanics' liens certifying that there are no unpaid bills for
services rendered or material furnished to the Property, other than
the Mechanics' Liens set forth on Exhibit C, and (ii) an agreement
indemnifying the Title Company against claims for any such services or
materials other than the claims of the Mechanics' Liens. In the event
Seller shall elect a New York style Closing, Seller shall agree to
deliver to the Title Company a gap indemnity agreement in the
customary reasonable form of the Title Company limited to a time
period of not greater than forty-eight (48) hours.
4. Closing Date. The closing of title (the "Closing") shall take place
on July 11, 1996 at the office of Seller's attorneys, Skadden, Arps, Slate,
Meagher & Flom, 919 Third Avenue, New York, New York 10022. Upon delivery
of the Purchase Price to Seller by Purchaser, as aforesaid, Seller and
Purchaser shall deliver the documents referred to in Section 11 hereof. The
date on which the Closing shall take place is hereinafter referred to as
the "Closing Date."
4
<PAGE>
5. Intentionally omitted.
6. Assessments. If, on the Closing Date, the Property or any part
thereof shall be or shall have been affected by an assessment or
assessments which are payable in annual installments, then for the purposes
of this Agreement (a) all installments due and payable at the time of the
Closing shall be the responsibility of Seller and (b) all the unpaid
installments which are not due and payable as of the Closing shall be paid
and discharged by Purchaser as and when same shall become due and payable;
provided that any annual installment for the fiscal year in which the
Closing Date occurs shall be apportioned.
7. Condition of the Property.
( ) Subject to the provisions of Section 16 hereof, Purchaser
agrees to accept the Property "as is", "where is" and with all faults
on the date hereof
(a) Except as expressly set forth in this Agreement (i) neither
Seller, nor the employees, agents, representatives, accountants or
attorneys of Seller have made any verbal or written representations or
warranties whatsoever with respect to the physical condition or
operation of the Property, the zoning and other laws, regulations,
rules and ordinances applicable thereto (including the Landmarks
Preservation Commission) or the compliance by the Property therewith,
(ii) neither Seller nor Purchaser has relied or will rely on any such
representations made or to be made by the other except as herein
specifically set forth, and (iii) Purchaser and Seller acknowledge
that no such representations or warranties have been made by the other
except as herein specifically set forth.
8. Brokers and Advisors.
( ) Purchaser represents to Seller that Purchaser did not
negotiate with any real estate agents, brokers or finders in
connection with this transaction. Purchaser hereby agrees to
indemnify, defend and hold Seller harmless from and against any and
all claims, losses, liability, costs and expenses (including
reasonable attorneys' fees and disbursements) resulting from any claim
that may be made against Seller by any broker, or any other person
claiming a commission fee or other compensation by reason of this
transaction, if the same shall arise by, through or on account of any
alleged act of Purchaser or Purchaser's representatives.
5
<PAGE>
(a) Seller represents to Purchaser that Seller did not negotiate
with any real estate agents, brokers or finders in connection with
this transaction. Seller hereby agrees to indemnify, defend and hold
Purchaser harmless from and against any and all claims, losses,
liability, costs and expenses (including reasonable attorneys' fees
and disbursements) resulting from any claim that may be made against
Purchaser by any broker, or any other person claiming a commission fee
or other compensation by reason of this transaction, if the same shall
arise by, through or on account of any alleged act of Seller or
Seller's representatives.
(b) The provisions of this Section 9 shall survive the Closing.
9. Recording Charges.
( ) Purchaser shall pay, without credit against the Purchase
Price, any and all recording charges and fees and all transfer,
conveyance, sales, intangible and mortgage taxes paid or payable in
connection with any assignment or transfer by Seller, or any person or
entity comprising Seller, of all or any portion of its interest in the
Property.
(a) The obligations arising pursuant to this Section 10 shall
survive the Closing.
10. Deliveries to be made on the Closing Date.
Seller, pursuant to the provisions of this Agreement, shall execute,
acknowledge and/or deliver, as applicable, to Purchaser on the Closing Date
the following items:
(i) A bargain and sale deed without covenants against grantor's
acts, conveying good and valid record title to the Property, subject
to no encumbrances other than the Permitted Encumbrances;
(ii) An instrument of assignment of (x) permits and licenses, (y)
warranties and guarantees from contractors with respect to any work
performed at the Property and (z) intangible personal property, duly
executed by Seller;
(iii) Plans and specifications for the Building, and surveys and
site plans for the Property, to the extent in Seller's
6
<PAGE>
possession; provided, however, Seller makes no representation or
warranty as to the accuracy or completeness of same;
(iv) A resolution of the Board of Directors of the Managing
General Partner of Seller authorizing the transactions contemplated
hereby, together with a certificate of the Secretary of the Managing
General Partner of Seller certifying that the Board of Directors of
the Managing General Partner of Seller has duly adopted such
resolutions;
(v) A duly executed certification as to Seller's non-foreign
status as prescribed in Section 13 hereof;
(vi) An instrument of assignment of the J. Crew Lease, duly
executed by Seller;
(vii) An instrument of assignment of the Contracts (as
hereinafter defined), duly executed by Seller;
(viii) An estoppel certificate duly executed and acknowledged by
the tenant under the J. Crew Lease which shall be acceptable to
Purchaser in form and substance;
(ix) A lien waiver and estoppel certificate duly executed by the
party with whom Seller contracted under each of the Contracts which
shall be acceptable to Purchaser in form and substance; and
(x) A bill of sale conveying Seller's right, title and interest
in and to any personal property located at the Property.
The Closing and consummation of the transaction contemplated herein shall
be deemed to be a waiver by Purchaser of any of the Seller's deliveries in this
Section 11, unless Seller and Purchaser agree otherwise in writing.
Purchaser shall execute and deliver to Seller on the Closing Date the
following items:
(i) An instrument of assumption of the Contracts, duly executed by
Purchaser; and
(ii) An instrument of assumption of the J. Crew Lease, duly executed
by Purchaser; and
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<PAGE>
(iii) A release by Purchaser in favor of Seller with respect to claims
relating to the Mechanics's Liens.
11. REPRESENTATIONS, WARRANTIES AND COVENANTS.
( ) Seller represents, warrants and covenants to Purchaser as of the
date hereof that:
(i) Seller is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware;
(ii) Seller has not received written notice of any pending
condemnation or eminent domain proceedings which would affect the Property;
(iii) This Agreement constitutes the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its
terms;
(iv) Except for the Mechanics' Liens, to Seller's actual knowledge, no
action, suit, claim, investigation or proceeding, whether legal or
administrative or in mediation or arbitration, is pending or threatened, at
law or in equity (collectively, "Pending Proceedings"), against Seller or
the Property before or by any court or federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality including, without limitation, any Pending Proceedings,
which would prevent Seller from performing its obligations pursuant to this
Agreement, and to Seller's actual knowledge, there are no judgments,
decrees or orders entered on a suit or proceeding against Seller or the
Property, an adverse decision in which might, or which judgment, decree or
order does, adversely affect Seller's ability to perform its obligations
pursuant to, or Purchaser's rights under, this Agreement, or which seeks to
restrain, prohibit, invalidate, set aside, rescind, prevent or make
unlawful this Agreement or the carrying out of this Agreement or the
transactions contemplated hereby;
(v) The execution and delivery of this Agreement and the performance
by Seller of its obligations hereunder do not and will not conflict with or
violate any law, rule, judgment, regulation, order, writ, injunction or
decree of any court or governmental or quasi-governmental entity with
jurisdiction over Seller, including, without limitation, the United States
of America, the State of New York or any political subdivision of either of
the
8
<PAGE>
foregoing, or any decision or ruling of any arbitrator to which Seller is a
party or by which Seller is bound or affected;
(vi) To the best of Seller's knowledge, Seller has not received any
written notice from any governmental authority having jurisdiction over the
Property claiming that the Property is in violation of any laws, rules,
orders, codes or ordinances of all applicable federal, state, city or other
governmental authority (collectively, "Laws") applicable to the Property
including, without limitation, any Laws relating to the presence, release
or discharge at the Property of any flammable explosives, radioactive
materials, hazardous wastes, hazardous and toxic substances, or related
materials, asbestos or any material containing asbestos or any other
substance or material, as defined by any federal, state or local
environmental law, ordinance, rule or regulation.
(vii) Seller has taken all necessary action to authorize and approve
the execution and delivery of this Agreement and the consummation of the
transactions contemplated by this Agreement; and
(viii) Exhibit E annexed hereto and made a part hereof is a true and
complete list of all contracts and agreements (other than the J. Crew
Lease) (collectively, the "Contracts") which bind Seller and/or the
Property. To the best of Seller's knowledge, there are no material defaults
by Seller beyond any applicable grace period under the Contracts.
If any written materials which have been exhibited or delivered to or reviewed
by Purchaser or its representative contain provisions that are inconsistent with
the foregoing representations and warranties, such representations and
warranties shall be deemed modified to the extent necessary to eliminate such
inconsistency and to conform such representations and warranties to the
provisions of such materials. All representations and warranties made to the
best of Seller's knowledge or to Seller's actual knowledge or any variation
thereof shall be conclusively construed to mean and be limited to the statement
that there is no fact or circumstance contrary to such representation or
warranty included in a written notice received or sent by the general partner in
Seller on behalf of Seller.
(a) Purchaser represents, warrants and covenants to Seller as of the
date hereof that:
9
<PAGE>
(i) This Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance
with its terms. Purchaser has taken all necessary action to authorize
and approve the execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement.
(ii) The execution and delivery of this Agreement and the
performance by Purchaser of its obligations hereunder do not and will
not conflict with or violate any law, rule, judgment, regulation,
order, writ, injunction or decree of any court or governmental or
quasi-governmental entity with jurisdiction over Purchaser, including,
without limitation, the United States of America, the State of new
York, or any political, subdivision of either of the foregoing; and
(b) The representations and warranties set forth hereinabove and all
other representations and warranties contained in this Agreement shall not,
except as expressly set forth herein, survive the Closing Date.
12. FIRPTA Compliance. Seller shall comply with the provisions of the
Foreign Investment in Real Property Tax Act, Internal Revenue Code of 1986, as
amended, Section 1445, as the same may from time to time be amended, or any
successor or similar law (collectively, the "FIRPTA Code"). On the Closing Date,
Seller shall deliver to Purchaser a certification as to Seller's non-foreign
status which complies with the provisions of Section 1445(b)(2) of the FIRPTA
Code, and shall comply with any temporary or final regulations promulgated with
respect thereto and any relevant revenue procedures or other officially
published announcements of the Internal Revenue Service of the U.S. Department
of the Treasury in connection therewith.
13. Merger. Except as otherwise expressly provided to the contrary in this
Agreement or in a separate written agreement, no representations, warranties,
covenants or other obligations of Seller set forth in this Agreement shall
survive the Closing, and no action based thereon shall be commenced after the
Closing. The delivery and acceptance of the Deed at the Closing, absent the
simultaneous execution and delivery of a specific agreement which by its terms
shall survive the Closing, shall be deemed to constitute full compliance by the
parties with all of the terms, conditions and covenants of this Agreement on
their part to be performed, except to the extent of any representations or
covenants, if any, expressly
10
<PAGE>
set forth herein which are specifically stated to survive the Closing.
14. Notices. All demands, requests or other communications (collectively,
"notices") required to be given or which may be given hereunder shall be in
writing and shall be sent by (a) certified or registered mail, return receipt
requested, postage prepaid, or (b) national prepaid overnight delivery service,
acknowledged in writing, directed to:
Seller: The Soho Hotel Company, L.P.
c/o Andre Balazs
142 Greene Street, 4th Floor
New York, New York 10012
and
c/o Hotel Corporation of America
c/o Sonesta International Hotels
Corporation
200 Clarendon Street
Boston, Massachusetts 02116
Attn: Peter J. Sonnabend, Esq.
with a copy to: Skadden, Arps, Slate, Meagher
& Flom
919 Third Avenue
New York, New York 10022
Attn: Benjamin F. Needell, Esq.
and
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attn: Jeffrey H. Weitzman, Esq.
Purchaser: The Mercer I L.L.C.
c/o BD Hotels, LLC
60 East 54th Street
New York, New York 10022
Attn: Richard Born
with a copy to: Spitzer & Feldman P.C.
405 Park Avenue
New York, New York 10022
11
<PAGE>
Attn: M. James Spitzer, Jr., Esq.
Any notice shall be deemed given on the date of receipt or when delivered or
refused. A notice may be given either by a party or by such party's attorney.
Both Seller and Purchaser may designate by not less five (5) business days'
notice given to the other in accordance with the terms of this Section 15,
substituted parties to whom notices should be sent hereunder.
15. Inspection of the Property. Purchaser acknowledges and agrees that
Purchaser and/or its consultants and contractors have, prior to the date hereof,
entered upon the Property for the purposes of making "walk-through" visual
inspections of the Property and for otherwise making such tests, inspections,
surveys, Phase 1 environmental assessments and such other architectural,
engineering or environmental studies of the same as Purchaser has deemed
necessary or desirable in making its determination to purchase the Property.
Purchaser has determined the condition of the Property to be satisfactory to
Purchaser based solely upon Purchaser's own and/or its consultants' and
contractors' inspection, analysis and evaluation of the Property and not in
reliance upon any records or other information obtained from or on behalf of
Seller, and Purchaser agrees to accept the Property subject to all latent and
patent defects existing as of the Closing Date. All actions taken by or on
behalf of Purchaser with respect to the inspection of the Property have been in
accordance with all applicable laws, rules and regulations of the appropriate
governmental authorities having jurisdiction over the Property. Purchaser
acknowledges that Seller has made available to Purchaser, for its review, copies
of any existing surveys of the Property in the possession of Seller, copies of
certain environmental, engineering or architectural tests, studies and reports;
provided, however, the Purchaser and Seller agree that any such surveys, and
environmental or engineering tests, studies, reports or similar items were
provided by Seller as an accommodation to Purchaser and without representation
or warranty by Seller as to the accuracy or completeness thereof.
( ) Purchaser agrees to provide to Seller, without representation or
warranty as to accuracy, a copy of all results from structural or
environmental tests and written reports with respect to structural or
environmental matters related to the Property. Purchaser agrees that all
reports, data, information, studies and materials (collectively, "Reports")
resulting from the tests shall be confidential and Purchaser shall not
disclose any such reports prior to the Closing to any third party.
Notwithstanding
12
<PAGE>
the foregoing, Purchaser shall not have any liability for disclosure of
confidential Reports required by law or by court order or by order of any
governmental or administrative agency or tribunal having jurisdiction over
the Property or Purchaser.
(a) Purchaser shall promptly repair any damage to the Property caused
by the tests and inspections and agrees to restore the Property to the same
condition as existed immediately before the commencement of the tests and
inspections.
(b) The provisions of this Section 16 shall survive the Closing.
16. Intentionally omitted.
17. Amendments. This Agreement may not be modified or terminated orally or
in any manner other than by an agreement in writing signed by all the parties
hereto or their respective successors in interest.
18. Governing Law; Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, Seller and
Purchaser hereby irrevocably: (a) submit in any legal proceeding relating to
this Agreement to the non-exclusive in personam jurisdiction of any state or
United States court of competent jurisdiction sitting in the City and State of
New York and agree to suit being brought in such courts; and (b) waive any
objection either party may now or hereafter have to the venue of such proceeding
in any such court or that such proceeding was brought in an inconvenient court.
19. No Offer. This document is not an offer by Seller, and under no
circumstances shall this Agreement have any binding effect upon Purchaser or
Seller unless and until Purchaser and Seller shall each have executed this
Agreement and delivered to each other executed counterparts of this Agreement.
20. Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable as against any person or under certain circumstances,
the remainder of this Agreement and the applicability of such provision to other
persons or circumstances shall not be affected thereby. Each provision of this
Agreement shall be valid and enforceable to the fullest extent permitted by law.
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<PAGE>
21. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall constitute an original, but all of which,
taken together, shall constitute but one and the same instrument.
22. No Third Party Beneficiaries. The warranties, representations,
agreements and undertakings contained herein shall not be deemed to have been
made for the benefit of any person or entity other than the parties hereto.
23. Waiver. No failure to delay of either party in the exercise of any
right given to such party hereunder or the waiver by any party of any condition
hereunder for its benefit (unless the time specified herein for exercise of such
right, or satisfaction of such condition, has expired) shall constitute a waiver
or any other or further right nor shall any single or partial exercise of any
right preclude other of further exercise thereof or any other right. The waiver
of any breach hereunder shall not be deemed to be waiver of any other or any
subsequent breach hereof.
24. Assignment. Purchaser may not assign its rights and obligations
hereunder without the express prior written consent of Seller, which consent may
be granted or withheld by Seller in its sole and absolute discretion.
25. Binding Effect. This Agreement is binding upon and shall inure to the
benefit of, the parties and each of their respective successors and permitted
assigns, if any.
26. Waiver of Jury Trial. Each of Purchaser and Seller hereby irrevocably
waive all right to trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement.
27. Litigation. In connection with any litigation arising out of this
Agreement, the prevailing party shall be entitled to recover all reasonable
costs, including reasonable attorneys' fees for services rendered in connection
with such litigation, including appellate proceeding and post judgment
proceedings. The provisions of this Section shall survive the Closing.
28. Paragraph Headings. The headings of the various sections of this
Agreement have been inserted only for the purpose of convenience and are not
part of this Agreement and shall not be
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<PAGE>
deemed in any manner to modify, expand, explain or restrict any of the
provisions of this Agreement.
29. No Personal Liability. Except as otherwise provided in separate written
agreements executed and delivered in connection with the Closing, no general or
limited partner of Seller, no officer, director, stockholder or partner of a
partner of Seller, no disclosed or undisclosed principal of Seller, and no
person or entity in any way affiliated with Seller shall have any personal
liability with respect to this Agreement, any instrument delivered by Seller at
the closing, or the transaction contemplated hereby, nor shall the property of
any such person or entity be subject to attachment, levy, execution or other
judicial process.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the day and year first above written.
SELLER:
THE SOHO HOTEL COMPANY, L.P.
By: Hotel Corporation of America
By:/s/
-------------------------------
Name:
Title:
PURCHASER:
THE MERCER I L.L.C.
By: BDL Prince LLC, Manager
By:/s/
Ira Drukier, Manager
-------------------------------
By:/s/
-------------------------------
Richard Born, Manager
By: Mercer Management L.L.C.,
Manager
By:/s/
---------------------------
Name: Andre Balazs
Title: Manager-Member
16
<PAGE>
LIST OF EXHIBITS
EXHIBIT A LEGAL DESCRIPTION
EXHIBIT B PERMITTED ENCUMBRANCES
EXHIBIT C MECHANICS' LIENS
EXHIBIT D SPECIMEN TITLE POLICY
EXHIBIT E CONTRACTS
17
LEASE ASSIGNMENT AND ASSUMPTION
KNOW that THE SOHO HOTEL COMPANY, L.P., a Delaware limited partnership
("Assignor"), in consideration of the sum of Ten ($10.00) Dollars and other good
and valuable consideration paid by THE MERCER I L.L.C., a Delaware limited
liability company ("Assignee"), hereby assigns, transfers and sets over to the
Assignee all of Assignor's right, title and interest, as landlord, in and to
that certain lease (the "Lease") dated as of January 29, 1996, between Assignor,
as landlord, and Grace Holmes, Inc., as tenant.
Assignee hereby accepts the within assignment, assumes and agrees to
perform each and every burden, obligation and liability of Assignor hereafter
arising under or by virtue of the Lease and agrees to accept and take the same
subject to all of the terms, covenants and conditions hereof.
This Assignment and Assumption shall inure to the benefit of, and be
binding upon, Assignor and Assignee and their respective legal representatives,
successors, and assigns.
IN WITNESS WHEREOF, the Assignor and Assignee have hereunto set their
hands as of the 11th day of July 1996.
THE SOHO HOTEL COMPANY, L.P.
By: Hotel Corporation of
America, its general partner
By: /s/
-----------------------------
Name: Peter J. Sonnabend
Title: Vice President
THE MERCER I L.L.C.
By: Mercer Management L.L.C.,
Manager
By: /s/
-----------------------------
By: Andre Balazs,
Manager - Member
By: BDL Prince, LLC, Manager
By: /s/
-----------------------------
Ira Drukier, Manager
By: /s/
-----------------------------
Richard Born, Manager
ASSIGNMENT AND ASSUMPTION
OF ASSUMED CONTRACTS
For and in consideration of the sum of TEN DOLLARS ($10.00), and for other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, THE SOHO HOTEL
COMPANY, L.P., a Delaware limited partnership ("Assignor") does hereby transfer
and assign to THE MERCER I L.L.C., a Delaware limited liability company, its
successors and assigns, without any representation, warranty and/or recourse,
express or implied, all of Assignor's right, title and interest in, to and under
the contracts set forth on Schedule A attached hereto and made a part hereof
(the "Contracts").
Assignee hereby accepts the within assignment, assumes and agrees to
perform each and every burden, obligation and liability of Assignor hereafter
arising under or by virtue of the Contracts and agrees to accept and take the
same subject to all of the terms, covenants and conditions hereof.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment as
of the 11th day of July, 1996.
THE SOHO HOTEL COMPANY, L.P.
By: Hotel Corporation of
America, its general partner
By: /s/
-----------------------------
Name: Peter J. Sonnabend
Title: Vice President
THE MERCER I L.L.C.
By: Mercer Management L.L.C.,
Manager
By: /s/
-----------------------------
By: Andre Balazs,
Manager - Member
By: BDL Prince, LLC, Manager
By: /s/
-----------------------------
Ira Drukier, Manager
By: /s/
-----------------------------
Richard Born, Manager
<PAGE>
SCHEDULE A
CONTRACTS
1. Agreement, dated July 15, 1995, between The SOHO Hotel Company, L.P. and
Gilula Associates, Inc.
2. Agreement, dated June 8, 1995, between The SOHO Hotel Company, L.P. and
Bremman Beer Gorman Monk/Interiors, as amended on June 19, 1995, July 21,
1995, July 21, 1995 and November 28, 1995.
3. Agreement, dated December 6, 1995, between FLACK & KURTZ Consulting
Engineers, LLP and The SOHO Hotel Company, L. P.
4. Agreement, dated March 20, 1995, between Superstructures Engineers &
Architects and The SOHO Hotel Company, L.P.
5. Agreement, dated July 26, 1995, between Construction Consulting Associates
and The SOHO Hotel Company, L.P.
INDEMNITY AGREEMENT
THIS INDEMNITY AGREEMENT (this "Agreement") is entered into as of July 11,
1996 between ANDRE BALAZS ("Indemnitor") and THE SOHO HOTEL COMPANY, L.P.
("Soho").
Recitals
A. Soho is this day conveying all of its right, title and interest in and
to that certain property having a street address of 147 Mercer Street (a/k/a
93-99 Prince Street), New York, New York (the "Property") to The Mercer I L.L.C.
("Buyer") pursuant to a certain Contract of Sale dated as of the date hereof
between Soho, as seller, and Buyer, as purchaser (the "Purchase Agreement").
B. Soho is comprised of Hotel Corporation of America, as general partner,
and Sonesta Soho Investment Corp., Marmont Hotel Group, Inc., and Balazs, as
limited partners. Hotel Corporation of America and Sonesta Soho Investment Corp.
are entities affiliated with Sonesta International Hotels Corporation (such
entities, collectively, the "Sonesta Partners").
C. Indemnitor has agreed to indemnify Soho and the Sonesta Partners in
respect of certain matters relating to the Purchase Agreement and conveyance of
the Property.
Agreement
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereby agree
as follows:
1. Indemnification. Indemnitor shall protect, defend, indemnify and hold
harmless Soho, the Sonesta Partners and their respective officers, directors,
partners, shareholders, employees, affiliates, agents, attorneys, successors and
assigns (collectively, the "Indemnitees") from and against all liabilities
(including sums paid in settlement of claims), losses, costs, obligations,
demands, suits, liens, damages (including consequential and punitive damages),
fines, penalties, forfeitures, actions, defenses, administrative proceedings,
judgments, orders, equitable relief, expenses, reasonable attorneys' fees and
expenses, and claims of any kind or nature whatsoever sought from or asserted
against Indemnitees in connection with, in whole or in part, directly or
indirectly, (i) any leases, contracts or other agreements entered into or
administered by Indemnitor on behalf of Soho, including without limitation, the
lease for space at the Hotel with J. Crew and all obligations of Soho arising
thereunder, (ii) any actions taken by Indemnitor outside the scope of
Indemnitor's authority under the Amended and Restated Agreement of Limited
Partnership of the Soho Hotel Company, L.P., as amended (the "Partnership
Agreement"), (iii) the title affidavit referenced in Section 4(f) of the
Purchase Agreement, (iv) all closing costs payable by Soho in connection with
the transaction contemplated under the Purchase Agreement, and (v) the costs of
winding up the business of Soho and of dissolving Soho. This indemnification
provision is in addition to and not in lieu of any indemnification
<PAGE>
obligations of Indemnitor in favor of Indemnitees (or any of them) set forth in
the Partnership Agreement.
2. Assignment. This Agreeement shall bind and inure to the benefit of the
parties and their respective heirs, executors, successors and assigns.
3. Construction. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to principles of
conflict of law. Nothing contained in this Agreement shall constitute a waiver
of any of Indemnitees' rights or remedies at law or in equity. If any provision
of this Agreement or the application thereof to any party or circumstances shall
to any extent be invalid or unenforceable, the remainder of this Agreement, or
the application of such provision to parties or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby, and
each provision shall be valid and be enforced to the fullest extent permitted by
law.
4. Counterparts. This Agreement may be executed in any number of duplicate
originals and each duplicate original shall be deemed to be an original.
IN WITNESS WHEREOF, Soho and Indemnitor have executed this Agreement as of
the date first written above.
SOHO:
THE SOHO HOTEL COMPANY, L.P.
By: Hotel Corporation of
America, general partner
By: /s/
-------------------------
Name: Peter J. Sonnabend
Title: Vice President
INDEMNITOR:
/s/
-------------------------
ANDRE BALAZS
2
FIRST AMENDMENT
TO
SHAREHOLDERS AGREEMENT OF
C.R. RESORT ASSOCIATES LIMITED
Reference is made to that certain "Shareholders Agreement of C.R. Resort
Associates Limited", dated December 8, 1994, by and between El Cacique de Calzon
de Pobre S.A. and Sonesta International Hotels Limited ("Shareholders
Agreement"). This Agreement shall constitute the "First Amendment" to the
Shareholders Agreement.
For consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. Defined Terms. Terms defined in the Shareholders Agreement which are used in
this Agreement shall have the same meaning as under the Shareholders Agreement
unless specifically indicated otherwise.
2. Cash Advances. The following paragraphs are hereby added to Section 4.01:
Notwithstanding the foregoing, the parties acknowledge and agree that
neither of them anticipates advancing more than $2,000,000 (U.S.) (in cash,
as opposed to value of services rendered), in the aggregate (a total of
$4,000,000), in connection with (A) subsections (i) and (ii) of the
preceding paragraph in this Section 4.01, (B) establishing and
administering the Venture, (C) performing and completing the action steps
described in subsections (a) - (o) of Section 3.01, and (D) otherwise
developing, constructing, and opening the Hotel Facilities. From and after
January 1, 1996, the balance of any and all such advances shall be pursuant
to a budget, in form, detail and amount satisfactory to each of the parties
in its sole and absolute discretion (i.e. not subject to Article XVI),
which budget shall be prepared by El Cacique and submitted to Sonesta for
approval on or before _____________, 199_.
Provided, further, and notwithstanding any other provision of this
Shareholders Agreement or any other agreement to the contrary, Sonesta
shall not be required to advance $1,000,000 (U.S.) of its (anticipated)
$2,000,000 cash funding (as referenced above) until Sonesta is satisfied in
its sole and absolute discretion (not subject to Article XVI) that the
Hotel will be completed and available for full business operation with at
least 39 Villa units in the Rental Pool (156 keys).
On or before the first funding of construction financing, but in no event
prior to El Cacique's sale of 39 Villas, Sonesta shall provide to El
Cacique a commercial letter of credit from United States Trust Company,
Boston, Massachusetts, or
<PAGE>
another bank reasonably acceptable to El Cacique, which letter of credit
("Letter of Credit") shall
(i) be in the face amount of $1,000,000.00;
(ii) be maintained in effect for successive terms of one year each, but
shall by its terms expire and terminate no later than the earlier to
occur of (A) completion of the Hotel Facilities (completion of the
Hotel Facilities for these purposes being defined as the completion of
construction and availability for full business operation of the core
facility and 39 Villas (156 keys)), and (B) April 1, 1999;
(iii)be reduced, dollar for dollar, to the extent of funding provided by
Sonesta for Pre-Opening Expenses (as defined in Section 1.18 of the
Management Agreement), and/or Working Capital (as defined in Section
1.23 of the Management Agreement); provided, however, that Sonesta
shall not be required to advance any such funding until the later of
(A) six (6) months prior to the Commencement Date (as defined in the
Management Agreement), and (B) when Sonesta is reasonably assured that
the Hotel Facilities will be completed according to (1) the Plans and
the Supplemental Plans, and (2) the agreed upon Budget (referenced in
Section 4 below); and
(iv) subject to subsections (i), (ii), and (iii), above, the Letter of
Credit will be in such form as the Bank (as defined in Section 6
below) may reasonably require as a condition to providing construction
and/or permanent financing to the Venture.
Any and all costs and expenses incurred in obtaining and maintaining the
Letter of Credit shall be borne by the Venture.
Should the parties agree to develop Hotel Facilities not contemplated in
the agreed upon Budget (referenced in Section 4 below), and as a
consequence additional cash is required of the Venturers--in excess of the
$4,000,000.00 referenced above--in order to complete the Hotel Facilities,
the parties shall discuss how such additional Hotel Facilities shall be
paid for, it being understood that in no event shall Sonesta be required to
advance more than $2,000,000 of cash to the Venture in developing the Hotel
Facilities, or otherwise.
3. FF&E Budget. Sonesta and Sonesta International Hotels Corporation shall
jointly and severally, guaranty that the budget agreed upon by El Cacique and
Sonesta for furnishings, fixtures and equipment ("FF&E") to be purchased for and
installed in the core facility of the Hotel Facilities will be substantially
complete and will not be exceeded. Any costs and expenses of purchasing said
FF&E, transporting it to the Site, and installing it in the Hotel Facilities,
that exceed the agreed upon budget shall be the responsibility of Sonesta and/or
Sonesta International Hotels Corporation. The parties agree that the FF&E budget
shall include an appropriate contingency. The guaranty obligations of Sonesta
and Sonesta International
2
<PAGE>
Hotels Corporation under this Section are subject to the force majeure
provisions of Section 18.13 of the Shareholders Agreement, which provisions
shall be deemed to include a party's failure to perform its obligations that
results directly from the other party's (or its Affiliates') acts or omissions.
4. Construction Budget. The Venturers hereby reaffirm that construction of the
Hotel Facilities shall not commence unless and until they have together agreed
upon a "Budget" (as said term is used in that certain "Development and
Construction Management Agreement", dated December 8, 1994, by and between Costa
Rica Resort Associates S.A., as "Owner", and El Cacique. El Cacique, John Ryan
and Michael Ryan shall jointly and severally, guaranty that the Budget agreed
upon by Sonesta (acting on behalf of Costa Rica Resort Associates S.A.) and El
Cacique will not be exceeded. Any costs and expenses of developing the Hotel
Facilities that exceed the Budget shall be the responsibility of El Cacique,
John Ryan and Michael Ryan. The guaranty obligations of El Cacique, John Ryan
and Michael Ryan under this Section are subject to the force majeure provisions
of Section 18.13 of the Shareholders Agreement, which provisions shall be deemed
to include a party's failure to perform its obligations that results directly
from the other party's (or its Affiliates') acts or omissions.
5. Number of Villas. Notwithstanding the references to "eighty (80)" or "80"
Villas in the Recitals and in Section 13.03, the parties intend to create no
more than seventy-two (72) Villas; provided, however, that if El Cacique
establishes to Sonesta's reasonable satisfaction that the Site has been enlarged
by an additional three (3) acres, references in the Shareholders Agreement to
eighty (80) Villas shall remain unchanged.
6. Condominium Association. The condominium association referenced in subsection
3.01 (e) of the Shareholders Agreement shall be administed by Sonesta or one of
its Affiliates after the Rental Pool has been established and the Hotel is in
operation. Consistent with its administrative responsibilities, Sonesta shall
(i) seek to collect mortgage payments from Villa owners who financed the
purchase of their Villas directly or indirectly through El Cacique (or one of
its Affiliates) as a result of Villa end loan financing provided by Bank of Nova
Scotia (or its Costa Rican affiliate) (the "Bank"); (ii) transmit the mortgage
payments it collects to the Bank, as appropriate; and (iii) manage the Rental
Pool.
7. Rental Pool Revenue. Reference is made to "Annex 1" to the form of "Villa
Rental Pool Agreement" attached to the Shareholders Agreement as Exhibit 3.01
(g), and to Section 1.19 ("Rental Pool") of the Management Agreement. The
percentages of "Rental Pool Revenues" distributable to Villa owners is five (5)
percentage points higher under the Management Agreement than under "Annex 1", it
being the intention of the parties that a corporation owned and controlled
jointly by Sonesta International Hotels Corporation, or one of its Affiliates,
on the one hand, and the individual guarantors referenced in the definition of
"Guarantors" in the Shareholder Agreement, on the other hand, (the "Jointly
Owned Corporation") would receive said five percent (5%) of Rental Pool Revenues
as an administrative fee. If, however, El Cacique determines that all or any
portion of said five percent (5%) of Rental Pool Revenues should be
distributable to the Rental Pool in order to facilitate Villa sales, then only
the portion of said five percent (5%) remaining, if any, shall be payable to the
Jointly Owned Corporation.
3
<PAGE>
8. Confirmation of Sonesta Expenses. Neither Sonesta nor its Affliates shall be
required to advance any additional funds in connection with the Venture until El
Cacique has verified that the expenses incurred by Sonesta to date in connection
with the Venture, which are set forth on the attached "Schedule A", are
appropriate Venture expenses; if El Cacique disputes that any of such expenses
are appropriate Venture expenses, the parties shall discuss and resolve the
issue and Sonesta shall have no further obligation until such resolution is
received.
9. Option to Terminate/Additional Sonesta Right.
A. Section 12.01 is hereby deleted and replaced with the following:
Section 12.01. Option to Terminate. If for any reason the Hotel has
not commenced full business operation by October 1, 1999, 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 termination,
neither party shall have further obligations 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, or owing to either of the parties as of the date of
termination).
B. Section 12.02 is hereby amended as follows:
(w) the date in subsection (i) is changed to March 1 1997, from April
1, 1995;
(x) the date in subsection (ii) is changed to December 1 , 1997, from
September 1, 1995;
(y) the date in subsection (iii) is changed to October 1 1999, from
December 31, 1996; and
(z) the following shall be added to the sixth line of subsection
12.02, after the words "Purchase and Sale (Exhibit F),": the
"First Amendment to Shareholders Agreement of C. R. Associates
Limited (including without limitation for the Letter of Credit
and Bank fees,".
The exercise of Sonesta's termination rights under Section 12.02 is
subject to its not being the cause that the actions described in
subsections (i) - (iii) of Section 12.02 were not achieved by the
stipulated dates; said dates shall be deemed to be extended to the
extent of any delay caused by Sonesta.
10. EDSA. The following is hereby added to the Shareholders Agreement as Section
3.06:
The parties agree that Edward D. Stone, Jr. and Associates, Planners
and Landscape Architects ("EDSA"), or another landscape architect
approved by
4
<PAGE>
Sonesta, shall be retained by the Venture to prepare concept drawings
for Hotel landscaping and for the swimming pool. Further, the parties
shall together discuss whether EDSA, or such other landscape
architect, shall also be retained to prepare concept drawings for
Villa landscaping.
11. Sonesta Mortgage/Security. It is the intention of the parties that the first
mortgage in favor of Sonesta, referenced in Section 4.01 of the Shareholder
Agreement, shall remain in place until the first mortgage in favor of the Bank
is ready for filing; and that the Bank shall not file its first mortgage until
just prior to the time it will make its first advance of construction loan
proceeds. The parties shall from time to time, at Sonesta's request, increase
the face amount of Sonesta's mortgage, or file additional mortgages, to secure
cash advances made by Sonesta in excess of the initial $450,000.00. In the event
that Sonesta is compelled to discharge its mortgage(s) for any reason, prior to
the Bank's initial funding of construction loans proceeds, the further
performance of Sonesta's obligations under the Shareholders Agreement, any
agreement referenced as an Exhibit to the Shareholders Agreement, or any
amendment (including this "First Amendment") to the Shareholders Agreement shall
be deemed suspended until Sonesta has received and perfected such other security
for its aggregate cash advances as it deems satisfactory.
12. Controlling Document. To the extent of any conflict between this "First
Amendment", the Shareholders Agreement, or any other agreement between the
parties, this First Amendment shall be deemed to control.
In all other respects the Shareholders Agreement shall remain unchanged and
in full force and effect.
IN WITNESS WHEREOF, the undersigned set their hands and seals as of this
___ day of September, 1996.
El Cacique de Calzon de Pobre, S.A. Sonesta International Hotels Limited
By: /S/ By: /S/
----------------------------------- ----------------------------------
its duly authorized: its duly authorized:
--------------- --------------
The undersigned Guarantors hereby enter into this Agreement in order to
acknowledge their continuing guaranties under the Shareholders Agreement and
this "First Amendment".
Extency Internacional S.A. Sonesta International Hotels Corporation
By: /S/ By: /S/
------------------------------ ----------------------------------
its duly authorized: its duly authorized:
---------- --------------
/S/
- ------------------
John Ryan
/S/
- ------------------
Michael Ryan
5
AGREEMENT
This Agreement is made this _____ day of September, 1996 by and between the
following parties:
El Cacique de Calzon de Pobre, S.A., a Costa Rican Sociedad Anonima ("El
Cacique")
Extency Internacional S.A., a Costa Rican Sociedad Anonima ("Extency")
Investex, S. A.., a Costa Rican Sociedad Anonima, (formerly known as Mary
S.A.) ("Investex")
Sonesta International Hotels Limited, a Bahamian corporation ("Sonesta
Limited")
Sonesta International Hotels Corporation, a New York corporation ("Sonesta
Corporation")
Costa Rica Resort Associates, S. A. (also known as "Hoteleros Asociados de
Costa Rica HACR S. A."), a Costa Rican Sociedad Anonima ("Associates")
RECITALS
WHEREAS, El Cacique and Sonesta Limited entered into a Shareholders
Agreement, dated December 8, 1994, which sets forth their agreements regarding
the development and operation of a deluxe beach hotel in Guanacaste, Costa Rica
(the "Shareholders Agreement"); and
WHEREAS, Extency and Sonesta Corporation are also parties to the
Shareholders Agreement, as guarantors and/or as otherwise; and
WHEREAS, El Cacique and Sonesta Limited have received a commitment (the
"Commitment") from Scotiabank (the "Bank") for the financing referenced in
Section 3.01 (i) of the Shareholders Agreement ("Core Loan"), and have also
received a commitment from the Bank regarding financing for the Villas ("Villa
Loan"); and whereas, pursuant to the Commitment, Associates will be entering
into a Loan Agreement with the Bank ("Loan Agreement"); and whereas, Sonesta
Corporation has made (or will be making) certain guarantees to the Bank in
connection with the Core Loan and the Villa Loan ("Sonesta Guarantees"); and
WHEREAS, Investex is the legal entity through which El Cacique and/or
Extency will be selling, developing and constructing the Villas; and
WHEREAS, by entering into this Agreement the parties hereto intend to
modify their existing agreements and understandings in order to acknowledge new
agreements and understandings;
<PAGE>
NOW THEREFORE, for consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree as follows:
1. Defined Terms. Unless a contrary meaning is specifically set forth, terms
used in this Agreement shall be deemed to have the same meanings ascribed to
them in the Shareholders Agreement and/or the Loan Agreement.
2. Villa Loan/Investex Advances. Associates agrees to loan to Investex such
"Advances" of the Villa Loan it receives under the Loan Agreement. Such loan(s)
from Associates to Investex ("Investex Advances") shall be made at the same rate
of interest and on the same repayment terms as apply under the Loan Agreement
with respect to Advances of the Villa Loan; provided, however, that in order to
permit the timely payment of amounts owed by Associates to Bank regarding the
Villa Loan, including without limitation payments of interest and principal,
Investex agrees that all such payments shall be due from Investex to Associates
ten (10) business days prior to the date that such amounts are due form
Associates to Bank. (Investex warrants and represents that it has received a
copy of the Loan Agreement, including copies of all agreements, documents and
instruments referenced therein and is familiar with their respective terms.)
Investex and Associates shall enter into such agreements regarding the foregoing
as Investex and/or Sonesta Limited my reasonably require form time to time; by
way of example only, such agreements may take the form of promissory notes,
security agreements and/or pledge agreements.
3. Right to Foreclose Investex. In consideration of its guaranty to the Bank
regarding the Villa Loan ("Sonesta Villa Loan Guaranty"), including without
limitation the Bank funding that Investex will loan to Villa purchasers, Sonesta
Corporation and/or Sonesta Limited shall have the right (but not the obligation)
to act on behalf of Investex in foreclosing on any Villa in the event the owner
of such Villa defaults on its mortgage loan and as a consequence Sonesta
Corporation advances funds under the Sonesta Villa Loan Guaranty. Any such
foreclosure shall accrue to the benefit of the Venture; provided that Sonesta
shall be entitled to recover on a priority basis from the operation and/or sale
of any such foreclosed Villa El Cacique's share of any advances made by Sonesta
under the Sonesta Villa Loan Guaranty, and any costs and expenses incurred by
Sonesta and related to such foreclosure Investex shall provide Sonesta
Corporation and Sonesta Limited with such documentation, including without
limitation powers of attorney, as they may reasonably require from time to time
in order to exercise their rights hereunder. [Costa Rican counsel have advised
that Powers of Attorney may not work in this context. They suggest that Investex
make mortgage loans through a trust; in the event of a villa loan default
Sonesta, as a "secondary Trustee", would have certain rights regarding
foreclosure and disposition of the villa. The parties agree to implement this
advice unless there are compelling reasons not to do so.]
4. Joint and Several Guarantees. Notwithstanding that the Bank has not required
guarantees regarding the Core Loan or the Villa Loan from El Cacique, Extency,
and Investex, said entities hereby acknowledge and agree that they are jointly
and severally liable for any and all amounts that Sonesta Corporation is
required to pay under the Sonesta Guarantees.
2
<PAGE>
IN WITNESS WHEREOF the parties have set their hands and seals as of this
____ day of September, 1996
El Cacique de Calzon de Pobre, S.A. Sonesta International Hotels Limited
By: /S/ By: /S/
---------------------------------- ----------------------------------
its duly authorized: its duly authorized:
-------------- --------------
Extency Internacional S.A. Sonesta International Hotels
Corporation
By: /S/ By: /S/
---------------------------------- ----------------------------------
its duly authorized: its duly authorized:
-------------- --------------
Investex, S. A. Costa Rican Resort Associates, S.A.
By: /S/ By: /S/
---------------------------------- ----------------------------------
its duly authorized: its duly authorized:
-------------- --------------
3
September 30, 1996
Mr. Boy Van Riel
Vice President & Treasurer
Sonesta International Hotels Corporation
John Hancock Tower
200 Clarendon Street
Boston, Massachusetts 02116
Dear Boy:
We are pleased to advise that USTrust has approved the renewal of your
$2,000,000 unsecured line of credit at our Base Lending Rate. Unless renewed the
line will expire on September 30, 1997. The line continues to be guaranteed by
the company's principal domestic subsidiaries (as described in Exhibit A). This
line will be governed by the terms and conditions of the commitment letter dated
September 28, 1995 and the Commercial Promissory Note dated September 30, 1995,
except as amended as follows:
1. The maturity date of the Commercial Promissory Note dated September 30,
1995 is hereby extended from September 30, 1996 to September 30, 1997.
2. The permitted indebtedness and guaranties as described in Exhibit B shall
be replaced with Exhibit B - 1996.
<PAGE>
Sonesta International Hotels Corporation
Page 2
Again we are pleased to make this accommodation to you, and are pleased to
continue to have Sonesta as one of our customers. If you are in agreement with
these terms and conditions, please indicate your acceptance by signing on the
line designated below and returning an executed copy to my attention. Thank you.
Sincerely,
/s/ Charles J. Clark
- -----------------------
Charles J. Clark
Senior Vice President
ACCEPTED
Sonesta International Hotels Corporation
By: /s/ Boy Van Riel
-----------------------
Boy Van Riel
Vice President & Treasurer
I hereby acknowledge and affirm guaranty of the above described credit facility,
by the principal domestic subsidiaries of Sonesta International Hotels
Corporation as described in Exhibit A, in my capacity as authorized signer for
said subsidiaries.
By: /s/ Boy Van Riel
---------------------------
Boy Van Riel, as authorized signer for Sonesta subsidiaries.
LOAN AGREEMENT
By and Between
SONESTA INTERNATIONAL HOTELS LIMITED
(LENDER)
and
MASTERS OF TOURISM
(BORROWER)
<PAGE>
Loan Agreement
This Loan Agreement is made as of the ___ day of December , 1996 in the
City of Boston, Massachusetts, U.S.A. by and between SONESTA INTERNATIONAL
HOTELS LIMITED organized and existing under the laws of The Bahamas and having
its principal place of business at 200 Clarendon Street, Boston, Massachusetts,
U.S.A. and represented in the signature of this Agreement by Peter J. Sonnabend,
Vice President (hereinafter referred to as the "Lender"), and MASTERS OF TOURISM
organized and existing under the laws of The Arab Republic of Egypt_ and having
its principal place of business at Salah Salem Avenue, El Abour Building, No.
13, Flat 84, Heliopolis, Cairo, Egypt and represented in the signature of this
Agreement by MOHAMED HISHAM AHMED ALY, CHAIRMAN (hereinafter referred to as the
"Borrower")
WHEREAS the Lender agrees to provide the Borrower with a loan facility in
the amount of One Million Dollars (U.S. $1,000,000.00) to be used as hereinafter
mentioned and upon and according to the terms and subject to the conditions
hereinafter mentioned. Now it is hereby agreed as follows:
SECTION 1. DEFINITIONS
The following terms shall have the meanings set forth below.
1.01 "Advance" shall mean an advance to the Borrower by the Lender pursuant to
Section 2 of this Agreement.
1.02 "Banking day" shall mean a day on which banks are open for business in
New York and London for interbank Dollar deposits in London.
1.03 "Commitment" shall mean the Loan.
1.04 "Dollars" and the sign "$" shall mean the lawful money of the United
States of America.
2
<PAGE>
1.05 "Drawdown" shall mean such borrowing by the Borrower of part or all of
the Commitment.
1.06 "Event of Default" shall have the meaning set forth in Section (8.01) of
this Agreement.
1.07 "Indebtedness" shall mean in regard to the Borrower all indebtedness
(including guaranties and other contingent obligations) with respect to
borrowed money.
1.08 (a) "Interest period" shall mean the period commencing on the date of the
Drawdown and having a duration of six months and each period thereafter
commencing on the last day of the then current Interest period and having
a duration of six months.
(b) If any Interest period would otherwise end on a day which is not a
Banking day, that Interest period shall be extended to the next
succeeding day which is a Banking day unless the result of such extension
would be to carry such Interest period over into another calendar month,
in which event such Interest period shall end on the first preceding
Banking day.
1.09 "Lending office" shall mean the office of the Lender located at its
address or any other office of such Lender as it may from time to time
notify the Borrower.
1.10 "Loan" shall mean the principal amount of One Million Dollars
(U.S.$1,000,000) made by the Lender to the Borrower hereunder or, where
the context may require, the amount thereof then outstanding.
1.11 "Interest Rate" shall mean the interest rate agreed by both parties which
is LIBOR ( one (1) year rate) plus 2% per annum. The Interest Rate shall
be adjusted as of January 1 and July 1 of each year.
1.12 "Improvements" shall mean and refer to the additional Hotel facilities
referenced in Section 2.02.
1.13 "Management Agreement" shall mean and refer to the management contract
between Lender and Borrower, dated December 13, 1991, as amended, under
which Lender operates the Hotel.
3
<PAGE>
SECTION 2. THE LOAN
2.01 Agreement to Lend. Subject to the terms and conditions of this Agreement,
the Lender hereby agrees to advance the Commitment to the Borrower through
Lender's Lending office.
2.02 Purpose of the Loan. The Borrower agrees that the Loan will be used to
finance the expansion and improvement of that certain hotel known as Sonesta
Beach Resort, Sharm El Sheikh (the "Hotel"). Specifically, Borrower will use the
Loan to create the following additional Hotel facilities:
-- 80 guestrooms (74 by new construction, 6 by completing
existing guestrooms)
-- 10,000 square foot conference center, plus appropriate
food and beverage service facilities
-- fitness center
-- 10,000 square foot swimming pool
-- increased water capacity
-- additional housing for twenty (20) Hotel employees
2.03 Drawdown.
(A) The Loan shall be funded as follows:
-- one-half (1/2): $500,000.00 when Lender has approved
the plans and specifications for the Improvements, and
construction has commenced
-- one-quarter (1/4): $250,000.00 when the development of
the Improvements is fifty percent (50%) compete
-- one-quarter (1/4): $250,000.00 when the Improvements
are completed (as completion is described in Section 2
of the "Third Amendment" to the Management Agreement).
4
<PAGE>
(B) Subject to (A) above, Borrower may borrow each portion of the
Commitment in one Drawdown (on any Banking day during the Commitment in one
period).
(C) The Borrower shall give the Lender notice of Drawdown, which notice
shall be received by the Lender at least five (5) Banking Days prior to the
proposed date of Drawdown, and which notice Lender shall accept provided that on
the date five (5) Banking days prior to the proposed date of Drawdown all
applicable conditions precedent specified in sections 7.01 and 7.02 have been
met. The Lender shall give the Borrower prompt confirmation or its acceptance of
the Borrower's notice of Drawdown.
2.04 Interest. The Borrower agrees to pay to the Lender interest on the Loan at
a rate determined to be LIBOR (one (1) year rate) plus 2% per annum, which shall
be adjusted as of January 1 and July 1 of each year .
2.05 Default Interest.
(A) Upon the occurrence of an Event of Default, the Borrower shall,
upon notice by the Lender, pay on demand interest on the Loan outstanding at the
rate that is three percentage (3%) points per annum above the interest rate on
the Loan calculated pursuant to Section 2.04.
(B) In addition to payment of such default interest, the Borrower shall
indemnify the Lender against any costs and losses which are not covered by the
default interest payable pursuant to Section 2.05 (A) resulting from the
Borrower failing to pay when due any amounts of principal or interest hereunder.
2.06 Repayment of Loan. The Loan shall be repaid to Lender out of the "Owner's
Return" payable to Owner (as provided in the Management Agreement) in 12 annual
installments of $83,333.33 each, together with interest thereon, each such
payment shall be made on or before January 1 of each year, commencing January 1,
1998. The Operator, under the said Management Agreement, is hereby authorized
and instructed to make any payment(s) due hereunder from "Owner's Return"
directly to itself as Lender hereunder.
2.07 Payment and Advances.
5
<PAGE>
(A) All sums payable to the Lender hereunder or under any document
contemplated hereby, including but not limited to payments of principal and
interest and any costs or expenses, shall be payable by wire to the United
States, in U.S. Dollars in same day funds (immediately available funds) not
later than 10:00 a.m. Boston USA time on the day in question to the Lender
(account number):
United States Trust Company
30 Court Street
Boston, Massachusetts 02108
ABA No. 011001331
Credit to Sonesta International Hotels Corporation
Master Account 885-1301900
Notify: David Rakouskas (Telephone: (617) 421-5453)
(B) Any payments made to the Lender hereunder shall be applied first
against costs, expenses and indemnities due hereunder; then against fees due to
the Lender; then against default interest, if any; then against interest due on
the Loan; and thereafter against the principal of the Loan due and payable.
(C) All sums to be advanced by the Lender to the Borrower hereunder shall
be payable in U.S. Dollars ($) in same day funds not later than 10:00 a.m. time
on the day in question to or for the account of the Borrower pursuant to written
instructions delivered to Lender by Borrower at least three (3) Banking days
prior to the expected funding date of such Advance.
3.01 Taxes.
(A) All sums payable by the Borrower hereunder, whether of principal,
interest, fees, expenses or otherwise, shall be paid in full, free of any
deductions or withholdings imposed, levied or withheld by or within the Arab
Republic of Egypt. In the event that the Borrower is prohibited by law from
making payments hereunder free of deductions or withholdings, then the Borrower
shall pay such additional amount to the Lender as may be necessary in order that
the actual amount received after deduction or withholding (and after payment of
any additional taxes or other charges due as a
6
<PAGE>
consequence of payment of such additional amount) shall equal the amount that
would have been received if such deduction or withholding were not required.
(B) The Borrower shall pay directly to the appropriate taxing authority any
and all present and future taxes, levies, imposts, deductions, stamp and other
duties, filing and other fees or charges and all liabilities with respect
thereto imposed by law or by any taxing authority on or with regard to any
aspect of the transactions contemplated by this Agreement or the execution and
delivery of this Agreement or other documentation hereunder.
The Borrower shall hold the Lender harmless from any liability with respect
to the delay or failure by the Borrower to pay such taxes or charges, and shall
reimburse the Lender upon demand for any such taxes paid by Lender in connection
herewith whether or not such taxes shall be correctly or legally asserted or
otherwise contested or contestable, together with any interest, penalties,
premiums, and expenses in connection therewith.
(C) If the Borrower shall pay any tax or charge as provided herein or shall
make any deductions or withholdings from amounts paid hereunder, the Borrower
shall forthwith forward to the Lender official receipts or other evidence
acceptable to the Lender establishing payment of such amounts.
(D) If the Borrower shall be required under this Section to pay, or to
reimburse Lender for, any tax or charge not currently in effect, then the
Borrower may at any time within thirty (30) days of the effectiveness of the
requirement of such payment or reimbursement prepay the Lender's Advances,
subject to giving the Lender not less than five (5) Banking days notice thereof.
3.02 Prepayment. The Borrower may, by giving to the Lender not less than thirty
(30) days prior notice, elect to prepay the whole or any part of the Advance(s).
Any such notice shall be irrevocable.
SECTION 4. FEES AND CHARGES
7
<PAGE>
4.01 Expenses. The Borrower shall reimburse the Lender on demand for all
reasonable expenses, including without limitation fees and expenses of legal
counsel and fees and expenses of other professional advisors, incurred by the
Lender. Such expenses shall be reimbursed whether or not they arise during the
term of this Agreement or whether or not the Lender gives notice(s) of any Event
of Default or demands acceleration of the Loan or takes other action(s) to
enforce the provisions of this Agreement.
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Borrower represents, warrants and covenants to the Lender as follows:
5.01 Incorporation and Qualifications. The Borrower is duly incorporated, under
the laws of the Arab Republic of Egypt and the Borrower has its registered
office at the address first set forth above.
The Borrower is qualified or registered to do business in every
jurisdiction where such qualification or registration is necessary.
5.02 Power and Authority. The Borrower has full legal right, power and authority
to carry on its present business, to own its property and assets, to incur the
indebtedness and other obligation(s) provided for in this Agreement, to execute
and deliver this Agreement and to perform and observe the terms and conditions
hereof and thereof.
5.03 Legal Action. The Borrower has taken all appropriate and necessary
corporate action to authorize the execution and delivery of this Agreement and
the performance and observance of the terms and conditions hereof and thereof. A
copy of the Board Declaration (in English) passed by Borrower's Board of
Directors is attached hereto as Exhibit A.
5.04 Registration and Approvals. All registration with and approvals of any
governmental authority necessary for the due execution and delivery of this
Agreement
8
<PAGE>
and note have been obtained, and all such registrations and approvals necessary
for the performance or enforceability hereof and thereof have been obtained.
5.05 Agreement Binding. This Agreement constitutes the legal, valid and binding
obligations of the Borrower enforceable in accordance with their terms.
5.06 Other Obligations. The Borrower is not in default under any agreement,
obligation or duty to which it is a party or by which it, or any of its assets,
is bound.
5.07 Compliance With Law. The Borrower is conducting its business and operations
in compliance with all applicable laws and directives of governmental
authorities having the force of law and is in compliance with all laws, decrees,
instructions, orders, ordinances, regulations, guidelines, and policy statements
with which the Borrower is obliged to comply.
SECTION 6. COVENANTS
In addition to the other undertakings herein contained, the Borrower hereby
covenants to the Lender that during the term of this Agreement, the Borrower
shall act as follows and shall perform the following obligations:
6.01 Performance of Obligations. The Borrower shall punctually pay all
indebtedness and all amounts due under this Agreement at the times and on the
dates specified herein. The Borrower shall punctually perform all its other
obligations, undertakings and covenants under this Agreement.
6.02 Other Obligations. The Borrower will pay all its Indebtedness and perform
all contractual obligations promptly pursuant to every agreement to which it is
a party or by which it is bound at any time during the term of this Agreement.
6.03 Merger; Acquisition; Sale of Assets. The Borrower shall not, without prior
written consent of the Lender (which consent shall not be unreasonably withheld)
merge, reorganize or consolidate with any other corporation or purchase or
otherwise acquire all or a significant portion of the assets of any corporation,
partnership or sole proprietorship, except for any such acquisition arising out
of or in connection with the enforcement by the Borrower of any mortgage,
pledge, lien or other security interest.
9
<PAGE>
SECTION 7. CONDITIONS OF DRAWDOWN
7.01 Drawdown. The obligation of the Lender to make available its Advance(s) in
respect of the Drawdown is subject to the fulfillment, as determined solely by
the Lender and its counsel, of the following conditions precedent and payment of
all fees then payable five (5) Banking days prior to the date of such Drawdown
(except as otherwise indicated below) and the continued fulfillment of such
conditions on the date of such Drawdown.
7.02 Authorizations. The Lender shall have received in form and substance
satisfactory to it and to its counsel:
(A) A certificate of a Director of the Borrower (signed, sealed and
legalized) certifying the declarations resolutions of its Board of Directors (in
English) authorizing the transactions contemplated in this Agreement and
certifying the authority of the persons executing this Agreement.
(B) Notice of Drawdown: The Lender shall have received the timely notice of
the Borrower as specified in Section 2.03.
SECTION 8. EVENTS OF DEFAULT
8.01 Events of Default. Each of the following events and occurrences shall
constitute an Event of Default under this Agreement:
(A) The Borrower fails to make payment of any amount which it is obliged to
pay under this Agreement on the date when such amount is due and payable.
(B) It becomes unlawful for the Borrower to make any payment to be made
hereunder on the due date hereof in (U.S.) Dollars.
(C) The Borrower shall fail to pay monies under any other agreement or
document (including without limitation the Management Agreement), or there
occurs any other event of default or other event which, with the giving of
notice or the passing of time, or both, would constitute a default or an event
of default under any such
10
<PAGE>
agreement or document and the effect of which is to accelerate or to permit
acceleration of the maturity of any indebtedness.
(D) Any circumstances occur which in the opinion of the Lender gives
reasonable grounds for belief that the Borrower will not (or will not be able
to) make payments when due in (U.S.) Dollars, or otherwise.
8.02 Consequence of Default. If an Event of Default shall occur and be
continuing the Lender at its option may: By written notice to the Borrower
declare the Loan, together with accrued interest and any other sum payable
hereunder, to be immediately due and payable and the Loan shall thereupon become
due and payable without presentment, demand, protest or notice of any kind,
other than the notices specifically required by this section, all of which are
expressly waived by the Borrower; and the Borrower shall also pay to the Lender
such additional amounts as may be necessary to compensate the Lender for any
costs or losses resulting from such Event of Default. The Borrower may also
explicitly enforce the security(ies) mentioned in Section 9.
SECTION 9. GUARANTEE
9.01 Conditional Assignment of Management Agreement. The Borrower agrees to
assign all of its rights and interests in the Management Agreement to the Lender
as additional security for the performance of its obligations under this Loan
Agreement. . This assignment is to be retained until the repayment of the
Advances, together with interest and all other amounts due under this Loan
Agreement. 9.02 Personal Guaranty. Mohamed Hisham Ahmed Aly enters into this
Agreement in order to acknowledge his personal guaranty of Borrower's payment
and performance obligations under this Loan Agreement.
SECTION 10. MISCELLANEOUS
10.01 Term. The term of this Agreement shall commence on the date first set
forth above and terminate on the date of termination of the Lender's commitment
hereunder
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<PAGE>
or, if later, upon payment in full of all principal, interest and other sums
payable by the Borrower hereunder. The indemnities of the Borrower shall survive
repayment of the Loan.
10.02 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire obligation of the Parties hereto with respect to the
subject matter hereof and shall supercede any prior expressions of intent or
understandings with respect to this transaction. Any amendment hereto shall be
in writing, signed by or on behalf of the Parties to be bound or burdened
thereby.
10.03 Indemnification. The Borrower agrees to indemnify and hold harmless the
Lender from and against any and all losses, claims, damages and liabilities
directly caused by any untrue or misleading statement or directly caused by any
omission of a material fact necessary to make the statements therein not
misleading.
10.04 Governing Law. This Agreement shall be governed by construed and
interpreted in accordance with the laws of the Arab Republic of Egypt.
10.05 Arbitration.
1. Any dispute, controversy or claim rising out of or relating to this
Agreement, or any breach, termination or invalidity thereof between both parties
shall be settled by arbitration through the Regional Center for Commercial
Arbitration, Cairo (the "Center") in accordance with the Arbitration Rules of
the United Nations Commission on International Trade Law (UNCITRAL).
2. The Arbitration tribunal shall be composed of three (3) arbitrators.
3. Each party shall appoint one (1) arbitrator. If, within thirty (30) days
after receipt of the claimant's notification of the appointment of an arbitrator
the respondent has not notified the claimant in writing of the name of the
arbitrator he appoints, the claimant may request "the Center" to appoint the
second arbitrator.
4. The two (2) arbitrators thus appointed shall choose the third arbitrator
who will act as President of the tribunal. If within thirty (30) days, after the
appointment of the second arbitrator, the two (2) arbitrators do not agree upon
the choice of a President, then either party may request the Secretary General
of the Permanent Court of Arbitration at the Hague to appoint the President in
the same way as a sole arbitrator
12
<PAGE>
would be appointed under Article 6.3 of the UNCITRAL Arbitration Rules. The
President shall be an individual of a nationality other than nationalities of
the parties and of a country which has diplomatic relations with the States to
which they belong and who shall have recognized knowledge and experience in the
hotel industry.
5. The arbitration proceeding, including the making of the award, shall
take place in Cairo.
6. The English Law shall apply to all aspects of the dispute.
7. Pending the award, the operations and activities under this Agreement
shall not be discontinued.
8. Subject to subsection 7, above, the provisions of this Agreement
relating to Arbitration shall continue in force notwithstanding the termination
of this Agreement.
9. The award rendered shall be final, binding on the parties and subject to
no appeal, except for abuse of authority or discretion by the arbitrators. The
award may be entered in any court having jurisdiction and application may be
made in such court for a judicial acceptance of the award or order of
enforcement, as the case may be.
10.06 Notices. Any notice required or permitted to be given hereunder shall be
in writing and shall be (i) personally delivered, (ii) transmitted by postage
prepaid registered or certified mail (airmail if international) or (iii) by
overnight courier service (such as Federal Express or DHL), to the parties as
follows, as elected by the party giving such notice:
To the Borrower: Mohamed Hisham Ahmed Aly
Salah Salem Avenue
El Abour Building
No. 13, Flat 84
Heliopolis, Cairo
Egypt
To the Lender: Sonesta International Hotels Limited
c/o Sonesta International Hotels Corporation
200 Clarendon Street, T-41
Boston, Massachusetts, USA 02116
Attention: Office of the Treasurer
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<PAGE>
Except as otherwise specified herein, all notices and other communications
shall be deemed to have been duly given on (i) the date of receipt if delivered
personally, (ii) the date of posting if transmitted by mail, or (iii) the date
of transmission with confirmed answerback if transmitted by telex, whichever
shall first occur; provided, that any notice to be given to the Lender shall be
effective only when received by the Lender.
10.07 Counterparts. This Agreement may be signed in any number of counterparts,
any single counterpart or a set of counterparts signed, in either case, by all
the parties hereby shall constitute a full and original agreement for all
purposes.
10.08 Time of Essence. Time is of the essence regarding the parties' respective
obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Boston, Massachusetts, U.S.A., by their respective duly authorized
signatories as of the day and year first written above.
Witness: SONESTA INTERNATIONAL HOTELS LIMITED
- --------------------------- By:/s/
---------------------------------
Name: Peter J. Sonnabend
Title: Vice President
Witness: MASTERS OF TOURISM
- --------------------------- By:/s/
---------------------------------
Name: Mohamed Hisham Ahmed Aly
Title: Chairman
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<PAGE>
EXHIBIT A
BOARD DECLARATION
The Board of Directors of Masters of Tourism (S.A.E.), the sole owner and
beneficiary of that certain resort hotel known as Sonesta Beach Resort, Sharm El
Sheikh, in its meeting held on ______________ in the city of _______________
declares and represents that the company did not assign any of its rights in the
said hotel to any legal entity or person and approves unanimously the Loan
Agreement granted from Sonesta International Hotels Limited to our company for
the amount of U.S. One Million Dollars ($1,000,000.00). This loan shall be
repaid over 12 years together with interest at LIBOR plus 2 points, in
accordance with the Loan Agreement.
The Board of Directors approves as a guarantee for the said loan to assign
unconditionally all of its rights and interests in the Management Agreement of
and pertaining to SONESTA BEACH RESORT, SHARM EL SHEIKH, dated December 13, 1991
to SONESTA INTERNATIONAL HOTELS LIMITED.
The Board of Directors delegates Mr. Mohamed Hisham Ahmed Aly to sign on behalf
of the company the Loan Agreement and any documents relating to the said Loan.
15
<PAGE>
STATE OF MASSACHUSETTS )
) SS.
COUNTY OF SUFFOLK )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
The Commonwealth of Massachusetts to take acknowledgments, personally appeared
MOHAMED HISHAM AHMED ALY, CHAIRMAN OF MASTERS OF TOURISM, to me known to be the
person described in and who executed the foregoing instrument and he
acknowledged before me that he executed the same.
WITNESS by hand official seal in ______________________________ aforesaid
this ___ day of December, 1996.
--------------------------------------
Notary Public
My Commission Expires: _________________
STATE OF MASSACHUSETTS )
) SS.
COUNTY OF SUFFOLK )
I HEREBY CERTIFY that on this day, before me an officer duly authorized in
the State and County aforesaid to take acknowledgments, personally appeared
PETER J. SONNAEND, VICE PRESIDENT of SONESTA INTERNATIONAL HOTELS LIMITED, that
said individual so appearing before me is known to me to be the individual
described in and who executed the foregoing instrument as Vice President of said
corporation; that said individual signed, sealed and delivered the said
instrument as the free and voluntary act of the corporation for the uses and
purposes therein set forth.
WITNESS my hand and official seal in the County of Suffolk, State of
Massachusetts, this ___ day of __________, 1996.
----------------------------------------
Notary Public
My Commission Expires: _________________
16
GUARANTY
Reference is made to (1) that certain Loan Agreement ("Loan Agreement") dated as
of December ___, 1996, by and between MASTERS OF TOURISM ("Borrower") and
SONESTA INTERNATIONAL HOTELS LIMITED ("Sonesta Limited"), and to (2) that
certain Management Agreement, dated as of December 13, 1991, by and between
Borrower, as "Owner", and Sonesta Limited, as "Operator", as amended to date
("Management Agreement"). For good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned (the "Guarantor")
agrees as follows:
1. Guaranty of Payment and Performance of Obligations. The undersigned
Guarantor, jointly and severally with each other person or entity which
guarantees the "Obligations" (as hereinafter defined), hereby
unconditionally guarantees to Sonesta International Hotels Corporation and
Sonesta Limited (jointly and severally "Sonesta") that Borrower will duly
and punctually pay and perform, at the place specified therefor, the
following amounts when and as required to be paid by Borrower pursuant to
the Loan Agreement and the Management Agreement: Any and all interest,
principal, fees, charges, and other amounts at any time payable by Borrower
to Sonesta (or their affiliates) under the Loan Agreement and/or the
Management Agreement. The obligations so guaranteed pursuant to the
preceding sentence may be collectively referred to in this Guaranty as the
"Obligations". This Guaranty is an absolute, unconditional and continuing
guaranty of the full and punctual payment and performance by Borrower of
the Obligations and not of their collectibility only and is in no way
conditioned upon any requirement that Sonesta first attempt to collect any
of the Obligations from Borrower or resort to any security or other means
of obtaining payment of any of the Obligations. Upon any default by
Borrower in the full and punctual payment and performance of the
Obligations, the liabilities and obligations of the Guarantor hereunder
shall, at the option of Sonesta, become forthwith due and payable to
Sonesta without demand or notice of any nature, all of which are expressly
waived by the Guarantor. Payments by the Guarantor hereunder may be
required by Sonesta on any number of occasions.
2. Guarantor's Further Agreements to Pay. The Guarantor further agrees, as
the principal obligor and not as a guarantor only, to pay to Sonesta
forthwith upon demand, in funds immediately available to Sonesta, all costs
and expenses (including court costs, attorneys' fees and legal expenses)
incurred or expended by Sonesta in connection with the enforcement hereof,
together with interest on amounts recoverable under this Guaranty from the
time such amounts become due until payment at the rate of 18% per annum but
not in excess of the maximum amount permitted by law.
3. Guarantor's Warranty and Representation. The Guarantor further
unconditionally guarantees to Sonesta the authenticity, validity, and
effectiveness of the "Board Declaration" delivered to Sonesta as of the
date of this Guaranty (being the same Board Declaration referenced as
"Exhibit A" to the Loan Agreement).
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4. Liability of Guarantor. The liability of the Guarantor hereunder shall
be unlimited, except as specifically set forth herein.
5. Security; Set-off. The Guarantor grants to Sonesta, as security for the
full and punctual payment and performance of the Guarantor's obligations
hereunder, a security interest in all property belonging to the Guarantor
now or hereafter held by Sonesta and in all sums credited by or due from
Sonesta to the Guarantor, regardless of the adequacy of any collateral or
other means of obtaining repayment of the Obligations. Sonesta may at any
time and without notice to the Guarantor set off the whole or any portion
or portions of any or all such sums against amounts payable under the
Guaranty.
6. Sonesta's Freedom to Deal with Borrower and Other Parties. Sonesta shall
be at liberty, without giving notice to or obtaining the assent of
Guarantor and without relieving the Guarantor of any liability hereunder,
to deal with Borrower, and with each other party who is now or after the
date hereof becomes liable in any manner for any of the Obligations, in
such manner as Sonesta in its sole discretion deems fit, and to this end
the Guarantor gives to Sonesta full authority in its sole discretion to do
any or all of the following things (but without any obligation of Sonesta
to do so): (a) extend credit, make loans and afford other financial
accommodations to Borrower at such times, in such amounts and on such terms
as Sonesta may approve, (b) vary the terms and grant extensions or renewals
of any present or future indebtedness or obligations to Sonesta of Borrower
or any such other party, (c) grant time, waivers and other indulgences in
respect thereto, (d) vary, release, exchange or discharge, wholly or
partially, or delay in or abstain from perfecting and enforcing any
security or guaranty or other means of obtaining payment of any of the
Obligations which Sonesta now has or acquires after the date hereof, (e)
accept partial payments from Borrower or any such other party, (f) release
or discharge wholly or partially, any endorser or guarantor, and (g)
compromise or make any settlement or other arrangement with Borrower or any
such other party.
7. Unenforceability of Obligations Against Borrower; Invalidity of Security
or Other Guarantees. If for any reason Borrower has no legal existence or
is under no legal obligations to discharge any of the Obligations
undertaken or purported to be undertaken by it or on its behalf, or if any
of the moneys included in the Obligations have become irrecoverable from
Borrower by operation of law or for any other reason, this Guaranty shall
nevertheless be binding on the Guarantor to the same extent as if the
Guarantor at all times had been the principal debtor on all such
Obligations. This Guaranty shall be in addition to any other guaranty or
other security for the Obligations, and it shall not be prejudiced or
rendered unenforceable by the invalidity of any such other guaranty or
security.
8. Waivers by Guarantor. The Guarantor waives notice of acceptance hereof,
notice of any action taken or admitted by Sonesta in reliance hereon, and
any requirement that Sonesta be diligent or prompt in making demands
hereunder, giving notice of any default by Borrower or asserting any other
right of Sonesta hereunder. The Guarantor also irrevocably waives, to the
fullest extent permitted by law, all
2
<PAGE>
defenses which at any time may be available in respect of the Guarantor's
obligation hereunder by virtue of any homestead exemption, valuation, stay,
moratorium law or other similar law now or hereafter in effect.
9. No contest with Sonesta. So long as any Obligations remain unpaid or
undischarged, and notwithstanding any other provision of this Guaranty, the
Guarantor agrees that such Guarantor will not, by paying any sum
recoverable hereunder (whether or not demanded by Sonesta) or by any means
or on any other ground, claim any set-off or counterclaim against Borrower
in respect of any liability of the Guarantor to Borrower, or, in
proceedings under any applicable bankruptcy laws or insolvency proceedings,
or of any nature, prove in competition with Sonesta in respect of any
payment hereunder or be entitled to have the benefit of any counterclaim or
proof of claim or dividend or payment by or on behalf of Borrower or the
benefit of any other security for any obligation which, now or hereafter,
Sonesta may hold or in which it may have a share.
10. Preferences; Revival. Sonesta shall have the continuing and exclusive
right to apply or reverse and re-apply any and all payments to any portion
of the Obligations. To the extent that the Guarantor makes a payment or
payments to Sonesta or Sonesta receives any payment or proceeds for
Borrower's or any Guarantor's direct or indirect benefit, which payment or
proceeds or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a
trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the Obligations, or part thereof intended to
be satisfied shall be revived and continue in full force and effect, as if
such payment or proceeds had not been received by Sonesta. This Section 9
shall survive the termination of this Guaranty.
11. Amendments, Waivers, etc. No provision of this Guaranty can be changed,
waived, discharged, or terminated except by an instrument in writing signed
by Sonesta and the Guarantor expressly referring to the provision of this
Guaranty to which such instrument relates; and no such waiver shall extend
to, affect or impair any right with respect to any Obligation which is not
expressly dealt with therein. No course of dealing or delay or omission on
the part of Sonesta in exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto.
12. Miscellaneous Provisions. This Guaranty is intended to take effect as a
sealed instrument to be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts and shall inure to the benefit of
Sonesta and its successors in title, assigns, and legal representatives and
shall be binding on the Guarantor and such Guarantor's successors in title,
assigns, and legal representatives. The Guarantor agrees that any action
under this Guaranty may be properly brought, for purposes of jurisdiction
and of venue, in any federal or state court located in either, (i) Cairo,
Arab Republic of Egypt, or (ii) the Guarantor's place of residence.
13. Joint and Several Liability. The liability of the Guarantor hereunder
shall be joint and several in all respects with Borrower and each and every
other person or entity which guaranties any or all of the Obligations, and
any action to enforce this guaranty
3
<PAGE>
may be brought against the Guarantor and any or all of such other
guarantors concurrently, consecutively or in any order that Sonesta may
deem appropriate in its sole and exclusive judgment.
14. Conflict. To the extent of any conflict between the terms of this
Guaranty and terms of the Loan Agreement and/or the Management Agreement,
this Guaranty shall be deemed to control.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty as of the 18th
day of December, 1996.
Witness /s/
---------------------------------
____________________ Mohamed Hisham Ahmed Aly
4
<PAGE>
The Commonwealth of Massachusetts
Suffolk, ss December __, 1996
Then personally appeared the above-named Mohamed Hisham Ahmed Aly and
acknowledged the foregoing instrument to be his free act and deed, before me.
-------------------------------------
Notary Public
My Commission Expires: ____________
5
LOAN AGREEMENT
By and Between
SONESTA INTERNATIONAL HOTELS LIMITED
(LENDER)
and
MASTERS OF TOURISM
(BORROWER)
<PAGE>
Loan Agreement
This Loan Agreement is made as of the 1st day of January, 1997 in the City
of Boston, Massachusetts, U.S.A. by and between SONESTA INTERNATIONAL HOTELS
LIMITED organized and existing under the laws of The Bahamas and having its
principal place of business at 200 Clarendon Street, Boston, Massachusetts,
U.S.A. and represented in the signature of this Agreement by Peter J. Sonnabend,
Vice President (hereinafter referred to as the "Lender"), and MASTERS OF TOURISM
organized and existing under the laws of The Arab Republic of Egypt and having
its principal place of business at Salah Salem Avenue, El Abour Building, No.
13, Flat 84, Heliopolis, Cairo, Egypt and represented in the signature of this
Agreement by MOHAMED HISHAM AHMED ALY, CHAIRMAN (hereinafter referred to as the
"Borrower")
WHEREAS Sonesta has advanced three loans to Masters of Tourism regarding
Sonesta Beach Resort, Sharm El Sheikh (the "Hotel"), which loans are
specifically described as follows:
-- "Loan 1": U.S. $800,000.00, pursuant to Loan Agreement dated as of
March 1, 1993; the outstanding balance of Loan 1 as of December 31,
1996 was U.S. $241,109.00 consisting of U.S $10,000.00 of principal
and U.S. $231,109.00 of accrued interest;
-- "Loan 2": U.S. $125,000.00, pursuant to Loan Agreement dated as of
August 28, 1995; the outstanding balance of Loan 2 as of December 31,
1996 was U.S. $36,826.00 consisting of U.S. $26,000.00 of principal
and U.S. $10,826.00 of accrued interest;
-- "Loan 3": U.S. $1,000,000.00, pursuant to Loan Agreement dated as of
December 18, 1996; U.S. $500,000.00 of Loan 3 has been advanced to
date and that amount, together with accrued interest, was outstanding
as of December 31, 1996; and
WHEREAS, the parties have agreed to consolidate the December 31, 1996
balances of Loan 1 and Loan 2 in a new loan ("New Loan"), which is further
described in this Loan Agreement;
2
<PAGE>
NOW THEREFORE, for consideration the receipt and sufficiency is
acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
The following terms shall have the meanings set forth below.
1.01 Intentionally Omitted.
1.02 "Banking day" shall mean a day on which banks are open for business in
New York and London for interbank Dollar deposits in London.
1.03 "Commitment" shall mean the New Loan.
1.04 "Dollars" and the sign "$" shall mean the lawful money of the United
States of America.
1.05 Intentionally Omitted.
1.06 Event of Default" shall have the meaning set forth in Section (8.01)
of this Agreement.
1.07 "Indebtedness" shall mean in regard to the Borrower all indebtedness
(including guaranties and other contingent obligations) with respect
to borrowed money.
1.08 Intentionally Omitted.
1.09 "Lending office" shall mean the office of the Lender located at its
address or any other office of such Lender as it may from time to time
notify the Borrower.
1.10 "Interest Rate" shall mean the interest rate agreed to by both parties
which is Ten Percent (10%) per annum. Interest shall compound monthly.
1.11 Intentionally Omitted.
1.12 "Management Agreement" shall mean and refer to the management contract
between Lender and Borrower, dated December 13, 1991, as amended,
under which Lender operates the Hotel.
1.13 "Maturity Date" shall mean December 31, 1999, which is the date any
and all then outstanding amounts owed hereunder are due from Borrower
to Lender.
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<PAGE>
1.14 "New Loan" shall mean the principal amount of Two Hundred Seventy
Seven Thousand Nine Hundred and Thirty Five Dollars (U.S. $277,935.00)
loaned by the Lender to the Borrower hereunder or, where the context
may requre, the amount thereof then outstanding.
SECTION 2. THE NEW LOAN
2.01 Agreement to Lend. The parties agree and acknowledge that the Commitment
represents the outstanding balances as of December 31, 1996 of two (2) loans
that have previously been made by Lender to Borrower.
2.02 Intentionally Omitted.
2.03 Intentionally Omitted.
2.04 Interest. The Borrower agrees to pay to the Lender interest on the New Loan
at the Interest Rate.
2.05 Default Interest.
(A) Upon the occurrence of an Event of Default, the Borrower shall,
upon notice by the Lender, pay on demand interest on the New Loan
outstanding at the rate that is three percentage (3%) points per annum
above the Interest Rate.
(B) In addition to payment of such default interest, the Borrower
shall indemnify the Lender against any costs and losses which are not
covered by the default interest payable pursuant to Section 2.05 (A)
resulting from the Borrower failing to pay when due any amounts of
principal or interest hereunder.
2.06 Repayment of New Loan. The New Loan shall be repaid to Lender in monthly
payments of principal and interest totalling $9,000.00. Each payment shall be
made on or before the thirtieth (30th) day of the month for which it is due. (A
repayment schedule is attached hereto as "Exhibit A".) The first payment is due
on or before January 30, 1997, and, the final payment of principal and interest
is due on the Maturity Date. Lender, as Operator under the Management Agreement,
is hereby authorized and instructed to make the monthly payments of principal
and interest described in this Loan Agreement to itself from Hotel funds which
would otherwise be available to pay Owner's Return under the Management
Agreement.
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<PAGE>
2.07 Payment and Advances.
(A) All sums payable to the Lender hereunder or under any document
contemplated hereby, including but not limited to payments of principal and
interest and any costs or expenses, shall be payable by wire, in U.S.
Dollars in same day funds (immediately available funds), on the day in
question to the Lender (account number):
Mohandes Bank
Ramses Street
Cairo, Egypt
Account No. 15370/7
(B) Any payments made to the Lender hereunder shall be applied first
against costs, expenses and indemnities due hereunder; then against fees
due to the Lender; then against default interest, if any; then against
interest due on the New Loan; and thereafter against the principal of the
New Loan due and payable.
3.01 Taxes.
(A) All sums payable by the Borrower hereunder, whether of principal,
interest, fees, expenses or otherwise, shall be paid in full, free of any
deductions or withholdings imposed, levied or withheld by or within the
Arab Republic of Egypt. In the event that the Borrower is prohibited by law
from making payments hereunder free of deductions or withholdings, then the
Borrower shall pay such additional amount to the Lender as may be necessary
in order that the actual amount received after deduction or withholding
(and after payment of any additional taxes or other charges due as a
consequence of payment of such additional amount) shall equal the amount
that would have been received if such deduction or withholding were not
required.
(B) The Borrower shall pay directly to the appropriate taxing
authority any and all present and future taxes, levies, imposts,
deductions, stamp and other duties, filing and other fees or charges and
all liabilities with respect thereto imposed by law or by any taxing
authority on or with regard to any aspect of the transactions contemplated
by this Agreement or the execution and delivery of this Agreement or other
documentation hereunder.
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<PAGE>
The Borrower shall hold the Lender harmless from any liability with
respect to the delay or failure by the Borrower to pay such taxes or
charges, and shall reimburse the Lender upon demand for any such taxes paid
by Lender in connection herewith whether or not such taxes shall be
correctly or legally asserted or otherwise contested or contestable,
together with any interest, penalties, premiums, and expenses in connection
therewith.
(C) If the Borrower shall pay any tax or charge as provided herein or
shall make any deductions or withholdings from amounts paid hereunder, the
Borrower shall forthwith forward to the Lender official receipts or other
evidence acceptable to the Lender establishing payment of such amounts.
(D) If the Borrower shall be required under this Section to pay, or to
reimburse Lender for, any tax or charge not currently in effect, then the
Borrower may at any time within thirty (30) days of the effectiveness of
the requirement of such payment or reimbursement prepay the Lender's
Advances, subject to giving the Lender not less than five (5) Banking days
notice thereof.
3.02 Prepayment. The Borrower may at any time elect to prepay the whole or any
part of the New Loan.
SECTION 4. FEES AND CHARGES
4.01 Expenses. The Borrower shall reimburse the Lender on demand for all
reasonable expenses, including without limitation fees and expenses of legal
counsel and fees and expenses of other professional advisors, incurred by the
Lender. Such expenses shall be reimbursed whether or not they arise during the
term of this Agreement or whether or not the Lender gives notice(s) of any Event
of Default or demands acceleration of the New Loan or takes other action(s) to
enforce the provisions of this Agreement.
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<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES
The Borrower represents, warrants and covenants to the Lender as
follows:
5.01 Incorporation and Qualifications. The Borrower is duly incorporated, under
the laws of the Arab Republic of Egypt and the Borrower has its registered
office at the address first set forth above.
The Borrower is qualified or registered to do business in every
jurisdiction where such qualification or registration is necessary.
5.02 Power and Authority. The Borrower has full legal right, power and authority
to carry on its present business, to own its property and assets, to incur the
indebtedness and other obligation(s) provided for in this Agreement, to execute
and deliver this Agreement and to perform and observe the terms and conditions
hereof and thereof.
5.03 Legal Action. The Borrower has taken all appropriate and necessary
corporate action to authorize the execution and delivery of this Agreement and
the performance and observance of the terms and conditions hereof and thereof.
5.04 Registration and Approvals. All registration with and approvals of any
governmental authority necessary for the due execution and delivery of this
Agreement and note have been obtained, and all such registrations and approvals
necessary for the performance or enforceability hereof and thereof have been
obtained.
5.05 Agreement Binding. This Agreement constitutes the legal, valid and binding
obligations of the Borrower enforceable in accordance with their terms.
5.06 Other Obligations. The Borrower is not in default under any agreement,
obligation or duty to which it is a party or by which it, or any of its assets,
is bound.
5.07 Compliance With Law. The Borrower is conducting its business and operations
in compliance with all applicable laws and directives of governmental
authorities having the force of law and is in compliance with all laws, decrees,
instructions, orders, ordinances, regulations, guidelines, and policy statements
with which the Borrower is obliged to comply.
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<PAGE>
SECTION 6. COVENANTS
In addition to the other undertakings herein contained, the Borrower hereby
covenants to the Lender that during the term of this Agreement, the Borrower
shall act as follows and shall perform the following obligations:
6.01 Performance of Obligations. The Borrower shall punctually pay all
indebtedness and all amounts due under this Agreement at the times and on the
dates specified herein. The Borrower shall punctually perform all its other
obligations, undertakings and covenants under this Agreement.
6.02 Other Obligations. The Borrower will pay all its Indebtedness and
perform all contractual obligations promptly pursuant to every agreement to
which it is a party or by which it is bound at any time during the term of this
Agreement.
6.03 Merger; Acquisition; Sale of Assets. The Borrower shall not, without
prior written consent of the Lender (which consent shall not be unreasonably
withheld) merge, reorganize or consolidate with any other corporation or
purchase or otherwise acquire all or a significant portion of the assets of any
corporation, partnership or sole proprietorship, except for any such acquisition
arising out of or in connection with the enforcement by the Borrower of any
mortgage, pledge, lien or other security interest.
SECTION 7. INTENTIONALLY OMITTED
8
<PAGE>
SECTION 8. EVENTS OF DEFAULT
8.01 Events of Default. Each of the following events and occurrences shall
constitute an Event of Default under this Agreement:
(A) The Borrower fails to make payment of any amount which it is
obliged to pay under this Agreement on the date when such amount is due and
payable.
(B) It becomes unlawful for the Borrower to make any payment to be
made hereunder on the due date hereof in (U.S.) Dollars.
(C) The Borrower shall fail to pay monies under any other agreement or
document (including without limitation the Management Agreement), or there
occurs any other event of default or other event which, with the giving of
notice or the passing of time, or both, would constitute a default or an
event of default under any such agreement or document and the effect of
which is to accelerate or to permit acceleration of the maturity of any
indebtedness.
(D) Any circumstances occur which in the opinion of the Lender gives
reasonable grounds for belief that the Borrower will not (or will not be
able to) make payments when due in (U.S.) Dollars, or otherwise.
8.02 Consequence of Default. If an Event of Default shall occur and be
continuing the Lender at its option may: By written notice to the Borrower
declare the New Loan, together with accrued interest and any other sum payable
hereunder, to be immediately due and payable and the New Loan shall thereupon
become due and payable without presentment, demand, protest or notice of any
kind, other than the notices specifically required by this section, all of which
are expressly waived by the Borrower; and the Borrower shall also pay to the
Lender such additional amounts as may be necessary to compensate the Lender for
any costs or losses resulting from such Event of Default. The Borrower may also
explicitly enforce the security(ies) mentioned in Section 9.
9
<PAGE>
SECTION 9. GUARANTEE
9.01 Personal Guaranty. Mohamed Hisham Ahmed Aly enters into this Agreement in
order to acknowledge his personal guaranty of Borrower's payment and performance
obligations under this Loan Agreement .
SECTION 10. MISCELLANEOUS
10.01 Term. The term of this Agreement shall commence on the date first set
forth above and terminate on the date of termination of the Lender's commitment
hereunder or, if later, upon payment in full of all principal, interest and
other sums payable by the Borrower hereunder. The indemnities of the Borrower
shall survive repayment of the New Loan.
10.02 Entire Agreement. This Agreement and the documents referred to herein
constitute the entire obligation of the Parties hereto with respect to the
subject matter hereof and shall supercede any prior expressions of intent or
understandings with respect to this transaction. Any amendment hereto shall be
in writing, signed by or on behalf of the Parties to be bound or burdened
thereby.
10.03 Indemnification. The Borrower agrees to indemnify and hold harmless the
Lender from and against any and all losses, claims, damages and liabilities
directly caused by any untrue or misleading statement or directly caused by any
omission of a material fact necessary to make the statements therein not
misleading.
10.04 Governing Law.This Agreement shall be governed by construed and
interpreted in accordance with the laws of the Arab Republic of Egypt.
10.05 Arbitration.
1. Any dispute, controversy or claim rising out of or relating to this
Agreement, or any breach, termination or invalidity thereof between both
parties shall be settled by arbitration through the Regional Center for
Commercial Arbitration, Cairo (the "Center") in accordance with the
Arbitration Rules of the United Nations Commission on International Trade
Law (UNCITRAL).
10
<PAGE>
2. The Arbitration tribunal shall be composed of three (3)
arbitrators.
3. Each party shall appoint one (1) arbitrator. If, within thirty (30)
days after receipt of the claimant's notification of the appointment of an
arbitrator the respondent has not notified the claimant in writing of the
name of the arbitrator he appoints, the claimant may request "the Center"
to appoint the second arbitrator.
4. The two (2) arbitrators thus appointed shall choose the third
arbitrator who will act as President of the tribunal. If within thirty (30)
days, after the appointment of the second arbitrator, the two (2)
arbitrators do not agree upon the choice of a President, then either party
may request the Secretary General of the Permanent Court of Arbitration at
the Hague to appoint the President in the same way as a sole arbitrator
would be appointed under Article 6.3 of the UNCITRAL Arbitration Rules. The
President shall be an individual of a nationality other than nationalities
of the parties and of a country which has diplomatic relations with the
States to which they belong and who shall have recognized knowledge and
experience in the hotel industry.
5. The arbitration proceeding, including the making of the award,
shall take place in Cairo.
6. The English Law shall apply to all aspects of the dispute.
7. Pending the award, the operations and activities under this
Agreement shall not be discontinued.
8. Subject to subsection 7, above, the provisions of this Agreement
relating to Arbitration shall continue in force notwithstanding the
termination of this Agreement.
9. The award rendered shall be final, binding on the parties and
subject to no appeal, except for abuse of authority or discretion by the
arbitrators. The award may be entered in any court having jurisdiction and
application may be made in such court for a judicial acceptance of the
award or order of enforcement, as the case may be.
10.06 Notices. Any notice required or permitted to be given hereunder shall be
in writing and shall be (i) personally delivered, (ii) transmitted by postage
prepaid registered or certified mail (airmail if international) or (iii) by
overnight courier service
11
<PAGE>
(such as Federal Express or DHL), to the parties as follows, as elected by the
party giving such notice:
To the Borrower: Mohamed Hisham Ahmed Aly
Salah Salem Avenue
El Abour Building
No. 13, Flat 84
Heliopolis, Cairo
Egypt
To the Lender: Sonesta International Hotels Limited
c/o Sonesta International Hotels Corporation
200 Clarendon Street, T-41
Boston, Massachusetts, USA 02116
Attention: Office of the Treasurer
Except as otherwise specified herein, all notices and other communications
shall be deemed to have been duly given on (i) the date of receipt if delivered
personally, (ii) the date of posting if transmitted by mail, or (iii) the date
of transmission with confirmed answerback if transmitted by telex, whichever
shall first occur; provided, that any notice to be given to the Lender shall be
effective only when received by the Lender.
10.07 Counterparts. This Agreement may be signed in any number of counterparts,
any single counterpart or a set of counterparts signed, in either case, by all
the parties hereby shall constitute a full and original agreement for all
purposes.
10.08 Time of Essence. Time is of the essence regarding the parties' respective
obligations under this Agreement.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in Boston, Massachusetts, U.S.A., by their respective duly authorized
signatories as of the day and year first written above.
Witness: SONESTA INTERNATIONAL HOTELS LIMITED
By: /s/
- ----------------------------- ---------------------------------
Name: Peter J. Sonnabend
Title: Vice President
Witness: MASTERS OF TOURISM
By: /s/
- ----------------------------- ---------------------------------
Name: Mohamed Hisham Ahmed Aly
Title: Chairman
13
<PAGE>
EXHIBIT A
BOARD DECLARATION
The Board of Directors of Masters of Tourism (S.A.E.), the sole owner and
beneficiary of that certain resort hotel known as Sonesta Beach Resort, Sharm El
Sheikh, in its meeting held on ______________ in the city of _______________
declares and represents that the company did not assign any of its rights in the
said hotel to any legal entity or person and approves unanimously the Loan
Agreement granted from Sonesta International Hotels Limited to our company for
the amount of U.S. One Million Dollars ($1,000,000.00). This New Loan shall be
repaid over 12 years together with interest at LIBOR plus 2 points, in
accordance with the Loan Agreement.
The Board of Directors approves as a guarantee for the said loan to assign
unconditionally all of its rights and interests in the Management Agreement of
and pertaining to SONESTA BEACH RESORT, SHARM EL SHEIKH, dated December 13, 1991
to SONESTA INTERNATIONAL HOTELS LIMITED.
The Board of Directors delegates Mr. Mohamed Hisham Ahmed Aly to sign on behalf
of the company the Loan Agreement and any documents relating to the said New
Loan.
14
<PAGE>
STATE OF MASSACHUSETTS )
) SS.
COUNTY OF SUFFOLK )
I HEREBY CERTIFY that on this day, before me, an officer duly authorized in
The Commonwealth of Massachusetts to take acknowledgments, personally appeared
MOHAMED HISHAM AHMED ALY, CHAIRMAN OF MASTERS OF TOURISM, to me known to be the
person described in and who executed the foregoing instrument and he
acknowledged before me that he executed the same.
WITNESS by hand official seal in ______________________________ aforesaid
this ___ day of ______________, 1997.
______________________________
Notary Public
My Commission Expires:________
STATE OF MASSACHUSETTS )
) SS.
COUNTY OF SUFFOLK )
I HEREBY CERTIFY that on this day, before me an officer duly authorized in
the State and County aforesaid to take acknowledgments, personally appeared
PETER J. SONNAEND, VICE PRESIDENT of SONESTA INTERNATIONAL HOTELS LIMITED, that
said individual so appearing before me is known to me to be the individual
described in and who executed the foregoing instrument as Vice President of said
corporation; that said individual signed, sealed and delivered the said
instrument as the free and voluntary act of the corporation for the uses and
purposes therein set forth.
WITNESS my hand and official seal in the County of Suffolk, State
of Massachusetts, this ___ day of __________, 1997.
______________________________
Notary Public
My Commission Expires:________
15
MADURO & CURIEL'S BANK
July 18, 1996
Our Ref.: CRED/ADCG/mj
CONFIDENTIAL
Sonesta Curacao Hotel Corporation N.V.
200 Clarendon Street, Boston
Massachusetts 02116,
U.S.A.
Attention Mr. Boy van Riel
Dear Friends,
With reference to our recent conversation and correspondence of June 14, July 2
and July 3, 1996, we herewith confirm our offer to extend the expiry date of the
present loan, administered on account number 510002120 for an amount of
US$.2,000,000.-- to June 30, 1998.
The interest rate will be 9 3/4% per annum until further notice and interest
should be kept current.
The loan will remain guaranteed for the full amount of US$.2,000,000. -- by
Sonesta International Hotels Corporation and assignment of the fee income under
your Management Agreement with Rif Resort Hotel N.V.
All other conditions as stipulated in the previous arrangement letter of May 4,
1994 remain in force.
If the above terms and conditions are acceptable to you, we would appreciate
your signing this letter and return the same to us.
As always at your service, we remain.
Yours truly,
MADURO & CURIEL'S BANK N.V.
/s/
-----------------
L. Capriles,
President
On behalf of Sonesta Curacao Hotel Corporation N. V., we, the undersigned accept
this offer:
Name: Boy van Riel
Position: V.P. & Treasurer/Director
Signature: /s/
-----------------
Date: July 31, 1996
1
SONESTA HOTELS OF ANGUILLA LIMITED
Incorporated under the Companies Act 1994
No 1 USD6,390,000.00
Date: .........
DEBENTURE
Issued under the authority of the Company's Articles of Association and the
By-Laws of the Company and pursuant to a Resolution of the Directors dated the
..... day of ............... 1996.
1. BORROWER & PRINCIPAL AMOUNT
SONESTA HOTELS OF ANGUILLA LIMITED, having its Registered Office at P.O.
Box 801, The Valley, in the island of Anguilla in the British West Indies
(hereinafter called "the Company") for value received acknowledges itself
indebted and covenants to pay to SCOTIABANK ANGUILLA LIMITED, The Valley,
in the Island of Anguilla (hereinafter called "the Debenture Holder", whose
expression shall where the context so admits include its assigns), in the
manner hereinafter set out, the sum of SIX MILLION THREE HUNDRED NINETY
THOUSAND Dollars United States Currency (USD6,390,000.00) (hereinafter
referred to as the ("principal") and or such other sums including overdraft
and or demand note as shall then be outstanding on that date. The loans
will be broken down as follows:
(a) USD4,690,000.00 Non-Revolving Loan
(b) USD1,700,000.00 Non-Revolving Loan
(c) Such sums advanced to the borrower by way of overdraft or demand note
from time to time that are due and owing within 60 days of demand.
<PAGE>
2
2. INTEREST RATE
The Borrower hereby covenants with the Bank to pay interest on the
principal amount of the non-revolving loan or on so much thereof as shall
from time to time remain outstanding hereunder at the rate which is 2.25%
percentum per annum over the 30, 60, or 90 day (Borrower's option) London
Inter-Bank Offer Rate (LIBOR). Interest is payable monthly, net of any
withholding tax.
Interest on overdue interest shall be calculated at the same rate as
interest on the loans/advances in respect of which interest is overdue, but
shall be compounded monthly and be payable on demand, both before and after
demand and judgment.
3. REPAYMENT
The Non-revolving loans will be repaid by 8 semi-annual installments with a
balloon payment as follows:
Date Loan (a) Amount Loan (b) Amount
- ---- --------------- ---------------
March 1, 1997 $200,000.00 --
September 1, 1997 $225,000.00 $25,000.00
March 1, 1998 $275,000.00 $50,000.00
September 1, 1998 $275,000.00 $50,000.00
March 1, 1999 $275,000.00 $75,000.00
September 1, 1999 $275,000.00 $100,000.00
March 1, 2000 $3,165,000.00 $150,000.00
September 1, 2000 -- $175,000.00
March 1, 2001 -- $200,000.00
September 1, 2001 -- $875,000.00
<PAGE>
3
The foregoing principal payments are to be supplemented annually by
application of 25% of Excess Cash Flow after debt service and annual
maintenance expenditures (3% of gross revenues to be set aside for annual
maintenance) as evidenced by audited year end financial statements, with
such payment to be made within 120 days of each fiscal year end and applied
to the loan in inverse order of maturity. Excess Cash Flow is defined as
net income plus depreciation and amortization, plus disbursements of any
kind to officers, affiliates or non-arms length parties, less interest paid
on all Bank loans, less principal paid on Bank term loans, less furniture,
fixtures and equipment ("FF&E") reserve to a maximum 5% of gross revenues,
and Management Fees, and all other amounts payable under the Management
Contract (to affiliates and other related companies), all calculated on an
annual basis. Permission from the Bank to increase the maximum allowable
FF&E reserve will not be unreasonably withheld.
4. SECURITY
As security for the payment of the principal and interest and for the due and
timely performance of the obligations of the Borrower hereunder and as security
for the payment by the Borrower of all legal costs and other expenses without
limitation incurred by the Bank, including without limiting the generality all
client/solicitor costs in connection with a default of the Borrower herein, this
Debenture and or Legal Mortgage, shall be security for the obligations of the
borrower owed to the Bank hereunder or under any other agreement entered into
between the Borrower and the Bank and in addition to any other security now or
hereafter held by the Bank, the Borrower:
a) hereby grants and conveys to the Bank by way of a floating and fixed
Charge against all the assets of the Borrower comprising that certain
property commonly known as Sonesta Beach Resort of Anguilla
(hereinafter called "the Property") including any buildings now or
hereafter erected by the Borrower and all fixtures, plans and
machinery now or hereafter affixed hereto in relation to the property
or the charged property as the case may be;
<PAGE>
4
b) hereby assigns unto the Bank all the plant machinery, equipment
furniture and furnishings personal property and chattels situate upon
the Property including without limitation leases of personal property
to the value of USD10,000.00 per annum approved by the Bank as shall
from time to time during the continuance of this security be brought
onto the sale and appropriated to the use thereof either in addition
to or in substitution for the existing plant machinery, equipment
furnishings and fittings and the benefit of all licenses held by the
Borrower in connection therewith TO HOLD the same unto and to the use
of the Bank absolutely SUBJECT to the Debenture and also SUBJECT to
the proviso for redemption hereinafter contained;
c) charges with the moneys secured hereby by way of fixed charge its
undertaking and all of its remaining real and or leasehold property
Inventory if any and equipment whatsoever and wheresoever both present
and future including but without limiting the generality of the
foregoing, its goodwill, trade marks excluding the trade mark
"Sonesta", materials, supplies, inventories, revenues, incomes and
sources of money, money rights, powers, privileges, franchises,
benefits, Immunities, contracts, rights to and under insurance
policies, agreements, bookdebts, accounts receivable, negotiable and
non-negotiable instruments, judgments, securities, choses in action
and possession and all other property and things of every nature and
kind, tangible or intangible, legal or equitable, which the Borrower
may be possessed of, entitled to, or which may hereafter constitute
the Property or any part thereof and by way of floating charge hereby
charges all other assets of the Borrower of whatsoever kind the same
might be and wheresoever situate.
d) A guarantee of Sonesta International Hotels Corporation("SIHC") for
US$1,900,000.00 supported by all necessary resolutions. The guarantee
will reduce to US$1,000,000.00 upon the Borrower achieving an excess
cash flow to provide a debt service ratio of not less than 1.25 to 1
in a year in which payments of principal are made.
e) A registered caution over land detailed in Schedule "A" together with
a letter from the company not to encumber this asset.
<PAGE>
5
All of the above mentioned assets whether mortgaged or charged by way of
specific or floating charge, are hereinafter sometimes referred to as the
"charged property".
5. PROVISO FOR REDEMPTION
PROVIDED ALWAYS AND IT IS HEREBY EXPRESSLY AGREED AND DECLARED that if the
Borrower shall repay to the Bank the total principal sum advanced hereunder
and all other moneys which shall become payable hereunder together with all
interest due thereon and all other costs and fees then and in such case the
Bank shall at the expense of the Borrower execute and do all such acts and
deeds as may be necessary to reconvey the Property to the Borrower and
release the fixed and floating charges hereby created.
6. BORROWER'S COVENANTS
a) The Borrower covenants to and with the Bank that the Borrower will:
i.) pay the principal and interest owed by the Borrower to the Bank
and observe the terms set out herein to be observed by the
Borrower;
ii) execute a contract to manage the hotel, in form and substance
acceptable to the Bank, with a management entity acceptable to
the Bank;
iii) provide its written acknowledgment that the Lease Agreement may
be terminated by the Bank at its sole option, without penalty
in the event of default by the Borrower under the terms of the
loan documents and the Bank having instituted proceedings to
realize on its security. The Bank would consider any default to
be cured by the Borrower or Guarantor if the same is remedied
within 30 days of notice to the Borrower and Guarantor;
iv) ensure that all approvals from the Government of Anguilla to
own land and operate the hotel are in place;
<PAGE>
6
v) insure that the buildings and other assets hereof with coverage
to include windstorm and loss of business to the amount of
their full replacement value in lawful money of the United
States of America and will make all losses payable under such
policy in favor of the Bank as more particularly set forth
herein and provide proof to the bank that the insurance premium
has been paid;
vi) at all times during the continuance of the Debenture, Legal
Mortgage charge and security interest keep up, maintain and
preserve all of the assets and property of the Borrower in
good, substantial and merchantable condition, subject to
ordinary wear and tear, and without delay and in a good and
workmanlike manner to the Bank's satisfaction complete any
buildings in the course of erection on the property hereby
charged;
vii) maintain a FF&E replacement reserve requirement equal to a
minimum 3%;
viii) not to part with or remove any property of the Borrower where
the same is generally kept except in the ordinary course of
business and as provided for herein;
ix) not to transfer, lease let or hire or part with possession or
create or suffer to be created any Debenture, Legal Mortgage,
charge, security interest or lien or make any assignment on the
Charged Property without the consent in writing of the Bank;
x) Not to allow any lease agreements (excepting the Lease
Agreement to ANGUILLA HOTEL MANAGEMENT, INC.), development
orders, condominium developments, timeshare schemes or other
forms of room pre-selling without the prior written consent of
the Bank, and such consent may not be unreasonably withheld;
xi) That the Borrower's equity of at least US$1,491,000.00 in the
Expansion Budget, capital improvements and new land lease is to
be fully expended, with evidence of such expenditure
satisfactory to the Bank, including certification by the Bank's
architect for construction items.
<PAGE>
7
xii) that a detailed final construction budget(s) and copy of the
construction contract(s), satisfactory to the Bank and its
supervising architect, must be provided to the Bank
xiii) that the general contractor is to be acceptable to the Bank
xiv) that all necessary governmental approvals, licenses and permits
must be in place for the new construction
xv) that the Bank is to receive written acknowledgment from the
general contractor for the new construction of all change
orders over US$25,000.00 per change order, and all change
orders regardless of size if the aggregate of change orders
exceeds US$250,000.00, and must receive the Bank's prior
written consent. All change orders are for the account of the
Borrower except as may be allowed by the Bank within the
contingency budget
xvi) all construction draws must be accompanied by an architect's
certificate in form and substance satisfactory to the Bank and
other such documentation as may be required by the Bank in its
normal procedures. A processing fee of US$250.00 will be levied
for each construction draw in addition to actual costs
incurred, which are for the account of the Borrower
xvii) all construction cost overruns are to be funded by the Borrower
immediately when identified
xviii) construction budget funds allocated for contingencies may not
be drawn without the specific prior approval of the Bank. Such
consent will be predicated on evidence satisfactory to the Bank
and its architect, that funds are required for unexpected
expenses and not upgrades, additions or other voluntary changes
to the project
<PAGE>
8
xix) the Bank is under no obligation to allow loan draws if any
construction liens or other encumbrances are registered against
the property - save where such are put in place by process of
Court action.
xx) provide the Bank with a copy of the Annual Government Health
Certificate on receipt of same
xxi) not to sell or otherwise dispose of the whole or any
substantial part of its undertaking without consent of the Bank
in writing, and such consent may not specifically be
unreasonably withheld;
xxii) comply with each and every one of its obligations, warranties,
representations, covenants, terms and agreements to be complied
with herein;
xxiii) to carry on and continue to conduct its business in an
efficient manner and to maintain and repair and keep in repair
and in good working order and condition its building, plant,
machinery, equipment, goods and chattels which in any way form
part of the charged property (ordinary wear and tear excepted);
xxiv) to permit the Bank by its officers or authorized agents at any
time and from time to time to enter the Borrower's premises and
to inspect its building, plant, machinery and equipment and the
operation thereof;
xxv) to keep proper books of account and records covering all its
business and affairs and to permit the Bank by its officer or
authorized agents from time to time, after giving reasonable
prior notice, during normal business hours to inspect the
Borrower's books of accounts and records and to make extracts
therefrom;
<PAGE>
9
xxvi) at all times during the existence of this Debenture conduct all
its banking accounts including those for credit card sales
(wherever possible) with Scotiabank Anguilla Limited subject to
the pricing being competitive;
xxvii) Provide the bank with audited financial statements of the
Borrower and SIHC no later than 120 days following each fiscal
year end;
xxviii)Provide the bank with Quarterly in house financial statements
of the Borrower and subsidiaries within 45 days of the period
end;
xxix) Provide the bank with Profit and Loss projections for the then
current year within 45 days after they year end of the
preceding year;
xxx) Provide the bank with evidence satisfactory to the Bank
annually, concurrently with the Borrower's financial statements
or at such other time as may be agreed with the Bank, that all
property taxes and other taxes, including gross receipts taxes
due and payable have been paid or arrangements made for their
payment, and that all employee deductions have been remitted to
the Government as required.
xxxi) if the introduction of, or any change in, or in the
interpretation of, or any change in its application to the
Borrower of, any law or regulation, or compliance with any
guideline from any central Bank or other governmental authority
(whether or not having the force of law) has the effect of
increasing the cost to the Bank of performing its obligations
hereinbefore or hereunder or otherwise reducing its effective
return or on its capital allocated in support of the credit(s),
then upon demand from time to time the Borrower shall
compensate the bank for such cost or reduction pursuant to a
certificate reasonably prepared by the Bank.
a) In the event of the Borrower becoming liable for such costs, the
Borrower shall have the right to cancel without fee all or any
unutilized portion of the affected
<PAGE>
10
credit (other than any portion in respect of which the Borrower has
requested utilization of the credit in which case cancellation may be
effected upon indemnification of the Bank for any costs incurred by
the Bank thereby), and to prepay, without fee the outstanding
principal balance thereunder other than the face amount of any
document or instrument issued or accepted by the Bank for the account
of the Borrower, such as a Letter of Credit, a Guarantee or a Banker's
Acceptance.
b) If any prepayment is made, for any reason, of an advance bearing a
fixed rate of interest, including without limitation a LIBOR advance,
the Borrower shall compensate the Bank for the cost of any early
termination of its funding arrangements in accordance with its normal
practices, such costs to be notified too the Borrower in a certificate
reasonably prepared by the Bank.
a) The Borrower covenants to and with the Bank that:
i) on default the Bank shall have quiet possession of the real
Property hereof free from all Encumbrances except those
Encumbrances which the Borrower has disclosed to the Bank in
writing and the Bank has approved of in writing:
ii) the Borrower shall not encumber the Property referred to in
Schedule "A" hereof which has not been disclosed to the Bank in
writing and shall not encumber the Property if any, without the
prior consent in writing of the Bank first being had and which
consent may not be unreasonably withheld;
iii) the Borrower does hereby release to the Bank all of its claims
upon all its Property, now or in the future subject to the said
proviso;
<PAGE>
11
iv) the provisos and covenants contained in this subparagraph shall
apply with the necessary changes to all the real property and or
leasehold Interests present or future of the Borrower included in
the charged property;
v) the Bank may at any time register this Agreement, notice of this
Agreement, or such other documents as it deems appropriate
including debentures, collateral legal mortgages or charges and
legal mortgages against the title to any Property present or
future of the Company and premises now owned or which may be
hereafter acquired by the Borrower in connection with any charged
property in the proper registry office and Public Records Office
without further written consent of the Borrower. All collateral
Legal mortgages or charges shall be deemed to contain the terms
and provisions of this Debenture, Legal Mortgage, charge and
security agreement;
vi) the Debenture, legal Mortgage, security agreement and charge
hereby created shall have the effect of and act as security
whether or not the monies hereby secured or any part thereof
shall be advanced before or after or upon the date of this
Agreement;
vii) Any waiver by either party of a breach of any part of this
Agreement caused by the other party will not operate as or be
interpreted as a waiver of any other breach. The failure of a
party to insist on strict adherence to any term of the Agreement
on one or more occasions is not to be considered to be a waiver
of any of their rights under this agreement or to deprive that
party of the right to insist upon strict adherence to that term
or any other term in the future. No waiver shall be of any effect
unless it is in writing and authenticated by the waiving party.
<PAGE>
12
7. SALE, RELEASE & PLEDGING OF SECURED PROPERTY
a) Without the written consent of the Bank, the Borrower shall not:
i) sell, transfer, convey, lease or otherwise dispose of any secured
property or any part thereof except in the normal course of
business;
ii) release, surrender or abandon possession of any secured property
or any part thereof or grant any leases, easements, rights of way
or register or permit registration of any restrictions on title
or other agreements on title except in the normal course of
business;
iii) move or transfer secured property from the Property except where
the secured property is replaced with items of comparable value
and quality;
iv) create, permit, assume, have outstanding, or suffer to exist, any
mortgage, charge, pledge, assignment, lien, encumbrance,
debenture, security agreement or other security to rank in
priority to or pari passu with this Debenture, whether fixed or
floating on its undertaking property or assets (excluding
equipment leases for the leased property) or any part thereof
used in connection with the Property now owned or hereinafter
acquired described in Schedule "A" hereof, or pledge, assign or
transfer any such assets as security for leaseback. For the
purposes of this Agreement, the term "Encumbrance" means any
mortgage, pledge, lien, charge, assignment, hypothecation,
security interest, title, retention agreement or other security
arrangement.
b) If the Borrower fails to perform any covenant, undertaking, warranty,
representation or agreement on its part herein contained, then the
Bank may in its absolute discretion but without being bound to do so
perform any such covenant capable of being performed by it and if any
such covenant requires the payment or expenditure of money or if any
charged property shall become subject to any lien, Encumbrances or
charge ranking in whole or in part in priority to this Debenture,
Legal
<PAGE>
13
Mortgage or any charge hereof, the Bank may make such payment and/or
pay or discharge the said prior lien or such charge from its own
funds, and all sums so paid or expended by the Bank shall immediately
be payable by the Borrower to the Bank, shall bear interest at the
rate set forth in this Agreement until paid and shall be secured
hereby, having the benefit of any charge hereby created in priority to
the principal and interest owing under this Debenture, Legal Mortgage,
charge and security interest. No such performance or payment shall
relieve the Borrower from any default under this Debenture, Legal
Mortgage, charge or security interest or any consequences of such
default.
8. EVENTS OF DEFAULT
The security hereby constituted shall be enforceable and be due:
a) immediately on written demand by the Bank if the Borrower fails to
make when due, whether on demand or at a fixed payment date, by
acceleration or otherwise, any payment of interest, principal, fee,
commission or any other monies payable to the Bank whether hereunder
or in any other agreement unless the failure results only from the
technical difficulties in the transfer of funds and such failure is
remedied within five (5) business days of written notice;
b) immediately on written demand by the Bank if any order in any
jurisdiction is made or a resolution passed for the winding-up,
dissolution or liquidation of the Borrower, or if a petition is filed
for the winding-up, dissolution or liquidation of the Borrower, or
there is an order for reorganization under any insolvency legislation
affecting the Borrower in any jurisdiction whatever and such order,
resolution etc. is not dismissed or stayed within 60 days of its
institution;
c) 30 days after written notice has been delivered to the Borrower to
remedy the defect, and which defect has not been remedied within the
said 30 days, in any of the following events or upon the occurrence of
a Demand Event as provided for herein;
<PAGE>
14
i) If the Borrower makes default in any covenant, representation,
warranty, undertaking or obligation of the Borrower herein;
ii) If the Borrower makes default in any condition contained herein, or in
the event of the happening or occurrence of a Demand Event (as herein
provided);
iii) If the Borrower becomes insolvent or makes an authorized assignment in
bankruptcy or bulk sale of its assets or if bankruptcy petition is
filed or presented against the Borrower in any jurisdiction;
iv) If the Borrower takes any proceedings in respect to liquidation of the
assets of the Borrower;
v) If any execution, sequestration, extent or any other process of any
court becomes enforceable against the Borrower or if a distress or
analogous process is levied against the property of the Borrower or
any part thereof;
vi) If the Borrower permits any debt which has been admitted as due by the
Borrower or is not disputed to be due by it and which forms or is
capable of being made by security or charge upon any of the property
subject to a charge or charges created by this Debenture, Legal
Mortgage, charge or security agreement in priority to a charge or
charges created by this Debenture, Legal Mortgage, charge or security
agreement to remain unpaid;
vii) If the Borrower commits or threatens to commit any act of bankruptcy
or is unable to pay its debts;
viii) If the Borrower makes a proposal under any relevant bankruptcy or
insolvency legislation or takes any action in respect of the
settlement of any claims of its creditors under the provisions of any
bankruptcy or insolvency legislation;
<PAGE>
15
ix) If the Borrower passes or purports to pass, or takes or purports to
take any proceedings to enable it to take proceedings for its
dissolution or liquidation, or amalgamation, or if the Borrower
purports to sell, or sells all of its undertaking or a substantial
part or parts thereof or sells any part thereof specifically
prohibited by this Agreement;
x) If a Receiver and/or Manager for all or any part of the assets of the
Borrower or any other person with like powers as either a Receiver of
Manager is appointed;
xi) If the Borrower makes a default under the provisions of any material
instrument creating a charge on assets of the Borrower relating to any
material secured property;
xii) If the Borrower fails to pay taxes, rates, rentals or other charges of
a like nature whether governmental or otherwise assessed or payable by
or against the Borrower in respect of any of the secured property;
xiii) If the Borrower stops making payments in its usual course of business
or suspends or ceases to carry on its operations or the construction
of the Project as herein provided, or any substantial part thereof or
threatens to cease to carry on the same;
xiv) If there is a cancellation, non-renewal, or suspension of any
franchises, licenses or trademarks or permits required by the Borrower
for the purpose of carrying on its business, or a substantial part
thereof;
xv) If the Borrower creates any Encumbrance upon any present or future
assets or revenues of the Borrower or permits any liens or other
charges, mortgages, debentures or other encumbrances to be registered
on title to the Property;
xvi) If the Borrower fails to complete the Project in accordance with the
plans and specifications approved in writing by the Government of
Anguilla and or the Bank;
<PAGE>
16
xvii) A) If any guarantor for the Borrower in respect of the loans secured
herein becomes insolvent or makes and unauthorized assignment in
bankruptcy or sale of its assets or if a bankruptcy petition is filed
or presented in any jurisdiction against any such guarantor for the
Borrower:
a) If a Receiver and/or Manager for all or any part of the assets of any
guarantor for the Borrower in respect of the loans secured herein, or
any other person with like powers as either a Receiver or Manager is
appointed.
9. ENFORCEMENT
a) In the event of a default in the payment of principal or interest owed
by the Borrower to the Bank or upon default of any of the
representation, warranties, covenants, conditions, undertakings or
terms and provisions herein made by the Borrower to the Bank, then the
balance of the principal and interest due by the Borrower to the Bank
shall immediately become due and payable on demand by the bank at the
option of the Bank.
b) Without prejudice and in addition to the statutory powers of the Bank
as Mortgagee, at any time after the happening of any event by which
the security hereby constituted becomes enforceable, the Bank shall
have the following rights and power:
i) to take possession of all or any part or parts of the property
and assets hereby charged with power to exclude the Borrower, its
agents and servants therefrom;
ii) to preserve and maintain the property charged and make such
replacements thereof and additions thereto as to the Bank shall
deem judicious;
iii) to enjoy and exercise all powers necessary to the performance of
all functions provided for in this Debenture, Legal Mortgage,
charge and security agreement, including but not limiting the
generality of the foregoing, the power to purchase on credit, the
power to
<PAGE>
17
borrow money in its own name and to advance its own
money to the Borrower at such rates of interest as it may deem
reasonable;
iv) to sell, lease or concur in selling or leasing all or any part of
the secured property whether by public auction or by private or
lease in such manners to it; may seem right, provided always that
it shall not be incumbent on the Borrower to sell, lease or
dispose of the said property but that it shall and may be lawful
for the Bank to peaceably and quietly take, hold, use, occupy,
possess and enjoy the said property without molestation,
eviction, hindrance or interruption by the Borrower or any other
person or persons whosoever, and to convey, transfer and assign
to a purchaser or purchasers the title any undertaking, property
and assets so sold;
v) to appoint by instrument any person or persons to be a receiver
or manager or receivers and managers (hereinafter called the
"Receiver") of the property and assets hereby charged and to
remove any receiver so appointed and appoint another or others in
his stead.
vi) for the purposes of enforcement of this Debenture, security,
charge and Legal Mortgage and for the purposes of calculation of
interest due hereunder, all advances made by the Bank to the
Borrower may be combined and consolidated by the Bank in
accordance with its internal practice, whether under this
instrument or any other instrument or loan.
10 POWERS OF RECEIVER
a) A Receiver and Manager so appointed shall be the agent of the Borrower
and shall have power:
i) to take possession of, collect and get in all or any part of the
property hereby charged and for that purpose to take any
proceedings in the name of the Borrower or otherwise as may seem
expedient;
<PAGE>
18
ii) to carry on or concur in carrying on the business of the Borrower
and with the consent of the Bank to raise money from the Bank or
others on the security of any property hereby charged;
iii) to sell, call in, collect and convert into money or let and to
accept surrenders of leases or tenancies of the property hereby
charged or any of it either by public auction or by tender or by
private contract with power to buy in at such sale, by auction or
to rescind or vary any contract for sale and to resell without
being answerable for any loss or diminution in price and to carry
out such sale, calling in, collection and conversion and such
letting on such terms and conditions and for such consideration
as the Bank shall thing fit and with liberty also to give
effectual receipts for the purchase money or the proceeds thereof
and to do all other acts and things for completing any sale,
calling in, collection and conversion which the receiver may
think fit and without thereby becoming liable as a mortgagee in
possession;
iv) to make any arrangements or compromise which the Bank or any
receiver shall think expedient;
v) to make and effect all repairs, improvements and insurances;
vi) to appoint Managers, Officers, Accountants, Attorneys and Agents
for the aforesaid purposes at such salaries as the receiver may
determine;
vii) to call up all or any portion of the uncalled capital of the
Borrower;
viii) to do all such other acts and things as may be considered to be
incidental or conducive to any of the matters or powers aforesaid
and which the Receiver lawfully may or can do as Agent for the
Borrower AND the Borrower will do all acts and things and will
execute all such assurances, assignments and instruments as the
Receiver and manager shall require the Borrower to do or execute
for the purpose of exercising or giving effect to the
<PAGE>
19
exercise of the powers conferred on the Receiver and Manager
hereunder or any of them and the Borrower hereby irrevocably
appoints the Bank to be the lawful Attorney of the Borrower to do
any act or thing and to execute and to exercise all the powers of
the Borrower in carrying out or effecting any of the powers
hereby conferred upon the Receiver and Manager.
b) The powers hereinbefore contained are in addition to and without
prejudice to and not in substitution for any other powers and remedies
vested in the Bank as a Debenture holder by statute or common law or
equity for recovering or enforcing payment of the moneys and
liabilities hereby secured and interest thereon.
11. APPLICATION OF MONEYS
a) The net profits of carrying on the said business and the net proceeds
of realization of the Borrower's property shall be applied by the Bank
or by the Receiver subject to the claims, if any, of all secured
creditors of the Borrower including any claim of the Receiver pursuant
to this Agreement above, ranking in priority to this Debenture, Legal
Mortgage, charge and security agreement:
i) Firstly, in payment of all reasonable costs, charges and expenses
of and incidental to the appointment of the Receiver.
ii) Secondly, in payment of all reasonable costs, charges and
expenses of and incidental to the exercise by the Receiver or the
Bank of all or any of the powers granted to them under this
Debenture, Legal Mortgage, charge and security agreement
including reasonable remuneration of the Receiver or any agent or
employee of the Receiver and including reasonable remuneration of
the Bank or any agents or employees of the Bank and all outgoings
properly paid by the Receiver or the Bank in exercising their
powers as aforesaid;
<PAGE>
20
iii) Thirdly, in or towards the payment to the Bank of all monies due
to it by the Borrower;
iv) Fourthly, any surplus shall be paid to the Borrower.
b) The Bank shall not, nor shall the Receiver appointed by it by reason
of the Bank or such Receiver entering into possession of the charged
property or any part thereof, be liable to account as mortgagee or
chargee in possession for anything except actual receipts or be liable
for any loss upon realization or for any default or omission for which
a mortgagee or chargee in possession might be liable.
c) No purchaser, charger chargee or other person or company dealing with
the Bank or with the Receiver appointed by it or with his, its, or
their attorneys or agents shall be concerned to inquire whether the
powers exercised or purported to be exercised have become exercisable
or whether any money remains due actually or contingently on the
security of this Agreement or as to the necessity or expediency of the
stipulations and conditions subject to which any sale shall have been
made or otherwise as to the propriety or regularity of such sale
calling in collection or conversion or to see to the application of
any money paid to the Bank and in the absence of mala fides on the
part of such purchaser, mortgagor, mortgagee or other person or
company such dealing shall be deemed so far as regards the safety and
protection of such purchaser, mortgagor, mortgagee, or other person or
company such dealing shall be deemed so far as regards the safety and
protection of such purchaser, mortgagor, mortgagee, person or company
to be within the powers hereby conferred and to be valid and effectual
accordingly.
12. PREPAYMENT
Prepayment is permitted in multiples of USD100,000.00 on interest funding
rollover dates. Any charges normally applied by the Bank to cover losses
incurred when prepayments are made on other than rollover dates are for the
account of the Borrower.
<PAGE>
21
13. RESPONSIBILITY FOR RECEIVER
Any Receiver appointed pursuant to the provisions of this Agreement shall
so far as it concerns responsibility for his acts be deemed to be an agent
of the Borrower and the Bank shall not in any way be responsible for any
misconduct or negligence on the part of such Receiver, and the Borrower
hereby forever Irrevocably releases the Bank from such claims whatsoever
and howsoever arising.
14. RESTRICTION ON BORROWER
Subject to the Borrowers rights under existing law, upon the Borrower
receiving notice from the Bank of the taking of possession of the charged
property, all the powers, functions, rights and privileges of the Borrower
with respect to the business of the Borrower in relation to the charged
property shall ceases unless specifically continued by the written consent
of the Bank.
15. BANK APPOINTED ATTORNEY
In the event of an uncured Default, the Borrower hereby irrevocably
appoints the Bank to be the attorney of the Borrower for and in the name
and on behalf of the Borrower to execute and do any deeds, documents,
transfers, demands, orders, assignments, conveyances, assurances, consents
and things which the Borrower ought to sign, execute and do hereunder and
generally to sue in the name of the Borrower in the exercise of all or any
of the powers hereby conferred on the Bank and any receiver appointed with
full powers of substitution and revocation.
16. WAIVER BY BANK
The Bank may waive any breach by the Borrower of any of the provisions
contained in this Agreement or any default by the Borrower in the
observance or performance of any covenant or condition required to be
observed or performed by the Borrower under the terms of this Agreement;
provided always that no act or omission by the Bank shall extend to or be
taken in any manner whatsoever to effect any subsequent breach or default
or the rights resulting therefrom.
<PAGE>
22
17. SET-OFF EXPENSES AND ARREARS
a) Except in the event of an uncured Default after written notice to the
Borrower, in connection with any matter relating to this Loan by the
Bank to the Borrower, the secured property or this Agreement, the Bank
may obtain the opinion or advice of or information and assistance from
any lawyer, accountant, surveyor, architect, engineer, or other
professional or expert personnel as it may reasonably deem necessary
both before and after any money is advanced. The Bank may pay proper
and reasonable compensation for all such legal and other advice or
assistance obtained as aforesaid. The Borrower shall repay to the Bank
all such reasonable expenses incurred.
b) The Borrower shall pay all reasonable costs, charges and expenses of
and incidental to the exercise by the Receiver and/or the Bank of all
or any of the powers granted to them under this Agreement and shall
also pay the remuneration, accounts and fees of the Receiver or the
Bank in exercising their powers.
c) All amounts referred to in the preceding sub-paragraphs shall be
payable on demand in lawful currency of the United States of America
together with interest at the rate set forth in this Agreement from
the date of demand to the date of payment in priority to the amount of
the principal and Interest owing under this Debenture, Legal Mortgage,
charge and security agreement.
d) If for the purposes of obtaining judgment in any court it becomes
necessary to convert into any currency any amount in dollars of the
United States of America due hereunder, then the conversion shall be
made at the rate of exchange prevailing on the day before the day on
which the judgment is given. For this purpose "rate of exchange" means
the rate at which the creditor is able on the relevant date to
purchase dollars in Anguilla for such currency. In the event there is
a change in the rate of exchange prevailing between the day before the
day in which the judgment is given and the date of payment of the
amount due, the Borrower shall pay such additional amounts as may be
necessary to ensure that the amount paid on such date is the amount in
such other
<PAGE>
23
currency which, when converted at the rate of exchange prevailing on
the date of payment, is the amount then due under this Debenture and
Legal Mortgage in Dollars in the said currency. Any Amount due from
the Borrower under this subclause will be due as a separate debt and
shall not be effected by judgment being obtained for other sums due
hereunder.
e) The taking of a Judgment or Judgments on any covenant or covenants
herein contained shall not operate as a merger on the said covenant or
covenants or affect the Bank's right to interest at the rate and time
set forth herein.
f) The Borrower shall pay all cost and expenses as between solicitor and
client incurred by the Bank of and incidental to the preparation,
stamping, registration and completion of this security on the
perfection of the title of the Bank or in relation to any default
hereunder or protection, foreclosure, realization and enforcement
thereof or otherwise in relation thereto and for the discharging of
these presence.
18. INSURANCE
a) The Borrower shall insure and keep insured the charged property
against loss or damage by fire and other usual perils, including the
obligations set out hereunder to the amount of not less than the full
replacement value of the charged property in lawful money of the
United States of America with companies reasonably acceptable to the
Bank, on an All Risks basis policy.
b) The Borrower shall insure itself and keep insured against public
liability for a reasonable amount considering the nature of the
business carried on by the Borrower.
The insurance is to cover business interruption and windstorm damage, in
such amounts as are acceptable to the Bank at all times. The insurers are
to be acceptable to the Bank and the policies together with all renewals
thereof are to be deposited with the Bank;
<PAGE>
24
c) Subject to the terms of this Agreement and regarding only insured
losses after the date of this agreement, the loss under all policies
of insurance other than public liability, if any, shall be payable to
the Bank; copies of all policies of insurance including renewals shall
be lodged with the Bank and the Borrower shall pay all premiums as the
same become due and payable in respect of such insurance. If less than
50% (fifty percent) of the Property and any other Property which is
mortgaged to or which secures the Bank under a Security Document is
destroyed or damaged by any cause whatsoever the Borrower shall be
entitled to use the proceeds of any insurance policy covering the said
Property for the repair or reconstruction of such damaged portion of
the Property, subject to the prior written consent of the Bank, which
consent shall not be unreasonably withheld. All such insurance
proceeds shall be delivered to and held by the Bank and shall be
disbursed to the Borrower for any such repairs or reconstruction in
accordance with disbursement procedures satisfactory to the Bank in
its reasonable discretion. If more than 50% (fifty percent) of the
Property and any other property which is mortgaged to or which secures
the Bank under a Security document is destroyed or damaged at any time
by any cause whatsoever, the Bank, at its absolute discretion, may
apply the proceeds of any insurance policy covering the said property
either to the reduction or satisfaction of the amount outstanding in
terms of the loan, or to the restoration of all or a portion of the
Property, in such manner as the Bank may elect in its complete
discretion.
The production of this Agreement shall be sufficient authority for,
and the insurer is hereby irrevocably directed thereupon to pay the
loss, if any, to the Bank, provided that if the Insurance is not
effected or kept renewed, the Bank may effect or renew such insurance
and if default be made in payment of the premiums or sums of money by
the Borrower, the Bank may pay the same and such sums of money shall
be added to the debt hereby secured and shall bear interest at the
same rate from the date of such payment and shall be repayable with
the moneys next falling due under these presents.
<PAGE>
25
19. DISCHARGE ON PAYMENT
If the Borrower shall pay or cause to be paid to the Bank the money secured
by this Agreement, then this Agreement and the estate and the rights
thereby granted shall cease and be void and thereupon the Bank shall, at
the request and at the expense of the Borrower cancel and discharge this
Debenture, Legal Mortgage, charge and security agreement and execute and
deliver the Borrower such deeds or other instruments as shall be requisite
to release the Debenture, Legal Mortgage, charge and security agreement
hereby constituted.
This Debenture, Legal Mortgage, charge and security agreement shall at the
Borrower's expense be impressed in the first instance with the stamp duty
to cover a maximum principal sum of USD6,390,000.00.
20. RIGHTS CUMULATIVE
All rights and remedies of the Bank prescribed in this Agreement shall be
cumulative and no remedy herein conferred or reserved is intended to be
exclusive but shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute.
21. SECURITY ADDITIONAL AND CONTINUING
a) The security hereby constituted is in addition to and not in
substitution for any other security agreements or obligations owed by
the Borrower to the Bank now or hereafter held by the Bank and this
security shall not merge in any other security now or hereafter held
by the Bank, and the security shall be deemed to be a continuing
security for the amount herein set out, until all indebtedness due or
obligations owed to the Bank by the Borrower from time to time is paid
in full.
b) To further secure the said lending to the Borrower, and in addition to
the security to be provided to the Borrower, the Bank will take such
collateral or additional charges or securities hereto as
<PAGE>
26
may from time to time be agreed to with the Borrower, such collateral
or security to be supplemental hereto and upon such terms as the Bank
shall require. All of the provisions of this Debenture, Legal
Mortgage, charge, security agreement shall be and form part and be
deemed to form part of any such collateral charge, or mortgage. The
Banks hall have the right to tack and/or consolidate this Debenture
and all collateral mortgages and charges at its will one behind the
other.
c) This Agreement is additional security for loans by the Bank to the
Borrower.
22. ADDITIONAL DOCUMENTS
a) The Borrower hereby covenants and agrees with the Bank that it will at
all times do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged or delivered, all and every such further act,
deeds, trust indentures, Legal Mortgages, Debentures, transfers,
collateral charges and security agreements and assurances in law as
the Bank shall reasonably require for the better assuring, mortgaging,
assigning and conferring unto the Bank all and singular the charge
property or intended so to be or which the Borrower may hereafter
become bound to mortgage and charge in favor of the Bank for the
better accomplishing and effecting the intention of this Agreement;
b) The Borrower hereby declares and agrees that it will henceforth hold
the secured property as Trustee for executing such Debenture as
aforesaid in favor of the Bank and the statutory power of appointing a
new Trustee in its place shall be exercisable by the Bank which shall
have full power to make such appointment and to remove the Borrower
from such Trusteeship at is sole and unfettered will and pleasure
notwithstanding that none of the events referred to in the said
statutory power as conditions precedent to it exercise shall have
occurred and further that on any such exercise of said statutory power
the party exercising the same may appoint itself to be such new
Trustee and that the Bank in consideration of the premises and any
Receiver appointed by the Bank shall be and are hereby irrevocably
appointed by the Attorneys of the Borrower in its name and on its
<PAGE>
27
behalf to vest the legal estate in the secured property in any
purchaser or other person in exercise of the statutory powers
conferred on mortgagees freed and discharged from all rights of
redemption hereunder and in the Borrower's name or in its own name and
on the Borrower's behalf and as the borrower's act and deed or
otherwise to sign, seal and deliver and otherwise perfect any deed,
assurance, agreement, instrument or act which may be required or may
be deemed proper for any of the purposes aforesaid.
23. NOTICE
a) All notices, requests, demands or other communications to or upon the
respective parties hereto shall be give in writing but in the manner
(including telex, telegram, cable or fax) which is the most
practicable in the circumstances having due regard to the requirement
that they be delivered as expeditiously as possible;
b) All such notices, request, demands or other communications:
i) to or upon the Bank shall be effective delivered to the Bank at
the following address:
Scotiabank Anguilla Limited
P.O. Box 250
The Valley, Anguilla
Attention: Managing Director
i) to or upon the Borrower, shall be effective when delivered to the
Borrower at the following address:
Sonesta Hotels of Anguilla Limited
c/o Sonesta International Hotels Corporation
200 Clarendon Street
Boston, Massachusetts 02116
U.S.A.
Fax: 1 617 421 5402
Attention: Office of the Treasurer
or to such other address as the relevant addressee may hereafter
specify for such purpose to the other by notice in writing.
<PAGE>
28
A notice, request, demand or other communication sent by fax,
shall only be regarded as received if confirmation of receipt is
requested and such confirmation received.
24. GOVERNING LAW
This Debenture, Legal Mortgage, charge and security agreement and any
collateral or additional charges or securities hereto shall be governed and
construed solely according to the Laws of Anguilla and the parties hereto
hereby submit themselves to the jurisdiction of the Eastern Caribbean
Supreme Court (Anguilla Circuit).
The Bank expressly reserves the right to consolidate this Debenture, Legal
Mortgage, charge and security agreement with any collateral or additional
charges or securities hereto notwithstanding any statutory provision to the
contrary.
25. BINDING EFFECT
This Agreement and all its provisions shall enure to the benefit of the
Bank, its successors and assigns and shall be binding upon the Borrower,
its successors and assigns.
26. The Borrower acknowledges having received a true copy of this Debenture.
<PAGE>
29
IN WITNESS WHEREOF the Borrower has
caused its Common Seal to be hereunto affixed.
SONESTA HOTELS OF ANGUILLA LIMITED
Per:
/s/ Seal
------------------------------------
The Common seal of Sonesta Hotels of Anguilla, Limited was affixed hereto
by the Director of the said company and the said affixed his signature
hereto on the day of 1996 in the presence:
<PAGE>
30
SONESTA HOTELS OF ANGUILLA LIMITED
Incorporated under the Companies Act, 1994
<PAGE>
31
Debenture No. 1
SCHEDULE A
Land to be registered as First Demand Mortgage Debenture:
WEST CENTRAL SECTION, BLOCK 28110 B, PARCEL 38/1
WEST CENTRAL SECTION, BLOCK 28009 B, PARCEL 11/1
Land to be Cautioned:
WEST CENTRAL SECTION, BLOCK 28009 B, PARCEL 2/2
AGREEMENT
Reference is made to that certain "Purchase and Sale Agreement", dated as
of November 10, 1995, by and between Casablanca Resorts Development of Anguilla
Ltd. ("CRDAL"), as "Seller", and Sonesta Hotels of Anguilla, Ltd. ("Sonesta"),
as "Purchaser", (together with the Exhibits attached thereto, the "P&S"), as
subsequently modified by that certain "Agreement", dated as of November 1995, by
and between CRDAL and Sonesta (the "Agreement") (the P&S and Agreement shall
hereafter together be referred to as the "CRDAL/Sonesta Agreement"). This
agreement is intended to amend certain provisions of the CRDAL/Sonesta
Agreement.
WHEREAS, under the provisions of Section 2.2 of the P&S, CRDAL agreed to
reduce the "Purchase Price" by offsetting against the Purchase Price the
amount(s) of costs and expenses described in subsections (i), (ii) and (iii) of
said Section 2.2; and
WHEREAS, pursuant to Section 1 of the Agreement, CRDAL and Sonesta agreed
to defer implementation of the offset described in Section 2.2 of the P&S, and
agreed that CRDAL would instead pay such amounts to Sonesta from the first
business interruption and/or rental value proceeds received by CRDAL; and
WHEREAS, CRDAL received U.S. $450,000 of rental value proceeds in December
1995, but has not paid any of such funds to Sonesta--CRDAL having represented to
Sonesta that such funds were used to repair and restore the Resort (as defined
below)--and CRDAL currently owes Sonesta approximately U.S. $400,000 pursuant to
Section 2.2 of the P&S ("Expense Reimbursement"); and
WHEREAS, pursuant to Section 2.2 (B) of the P&S, Sonesta is obligated to
pay U.S. $500,000 to CRDAL on or before March 1, 1996 ("March 1 Payment"),
however the parties acknowledge that it would not be fair or appropriate for
Sonesta to pay said March 1 Payment to CRDAL while CRDAL continued to owe the
Expense Reimbursement to Sonesta, unless the parties amended their existing
agreements;
NOW THEREFORE, for consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties agree to amend their existing agreements as
follows:
1. March 1 Payment. Upon the execution of this Agreement, Sonesta shall pay the
March 1 Payment to CRDAL, without offset or reduction.
2. Assignment of Business Interruption Claim. Upon the execution of this
Agreement, CRDAL shall execute such form(s) of assignment and related
documentation as Sonesta may require in order to effect an assignment of all
interests CRDAL may have to any and all business interruption claims (whether
asserted or unasserted), and business interruption proceeds, for the period of
September 5, 1995 through February 29, 1996, pertaining to the operation of
Casablanca Resort, Anguilla (now Sonesta Beach Resort Anguilla) (the "Resort").
Any such business interruption proceeds for the period stated above that are
actually paid to Sonesta shall
<PAGE>
be credited towards the Expense Reimbursement, and all such funds in excess of
the Expense Reimbursement shall, promptly following receipt by Sonesta, be paid
to CRDAL.
3. Reduction of $1 Million Loan; Interest Rate. Until such time as the full
amount of the Expense Reimbursement has been paid to Sonesta, the One Million
Dollars ($1,000,000) referenced in Section 2.2 (C) of the P&S shall be reduced
to Six Hundred Thousand Dollars ($600,000). This adjustment shall have effect
retroactive to November 28, 1995. In the event that the aggregate business
interruption proceeds that are finally determined to be payable with respect to
the period of September 5, 1995 through February 29, 1996, if any, and which are
actually paid to Sonesta (per Section 2 above), total less than the full amount
of the Expense Reimbursement (the "BI Deficiency"), the amounts payable by
Sonesta to CRDAL under Section 2.2 (C) of the P&S shall be deemed to have been
reduced dollar for dollar by the amount of the BI Deficiency and CRDAL shall not
thereafter be responsible for payment of the outstanding balance of the Expense
Reimbursement. Upon Sonesta's receipt of such business interruption proceeds
equal to the full amount of the Expense Reimbursement, the amount referenced in
said Section 2.2(C) of the P&S shall be increased to $1,000,000. The interest
rate applicable to the amounts due from Sonesta to CRDAL, referenced above,
shall remain 8% per annum.
4. Advances for Villa Construction Costs. Until such time as the full amount of
the Expense Reimbursement has been received by Sonesta, the provisions of
Section 4 of that certain "Agreement", dated November 30, 1995 and attached as
"Exhibit A" to the P&S--providing for up to $300,000 of advances by Sonesta to
Kamal and Maggie Alsultany--shall be deemed null and void. Sonesta shall have no
obligation to make such advances until it has received the full amount of the
Expense Reimbursement.
5. CRDAL and Sonesta Acknowledgments. CRDAL and Sonesta hereby acknowledge and
reaffirm the following matters which are part of their on-going agreements:
(i) CRDAL is responsible for all of the costs, expenses and charges
referenced in Section 2.2 (iii) of the P&S--including without
limitation, all payroll and benefits costs incurred by Sonesta in
connection with the Resort from November 28, 1995 through March 1,
1996, without set-off or reduction. (Sec. 2.2(y) of the P&S)
(ii) The Resort's mechanical, plumbing and electrical systems, including
without limitation the sewage plant, sewage system, water desalination
plant, water system, air-conditioning system, laundry and kitchen
systems were supposed to be fully operational and performing up to 90%
of design specifications when Sonesta acquired the Resort, and if any
such systems did not meet this standard, CRDAL is responsible for the
costs of bringing them to this standard. (Sec. 5.1.5 of the P&S)
(iii)The parties are aware that certain vendor(s) and others who did
business with the Resort prior to Sonesta's acquisition of the Resort
on November 28, 1995 have claimed that they did so in exchange for
rooms and/or services at the Resort; the
2
<PAGE>
parties agree that as between CRDAL and Sonesta, Sonesta is not
responsible for such claims. (Secs. 5.1.6 and 6.7.2 of the P&S)
The above acknowledgments and reaffirmations are not intended to limit or waive
any other outstanding obligation or the performance of any other term,
provision, covenant or commitment by either party, or in any way imply that the
above matters are any more important or have greater precedence than any other
between the parties, and are set forth solely for the purpose of clarification.
6. Estoppel. CRDAL hereby acknowledges and avers that it is not aware of any
breach, default or non-performance by Sonesta (or its affiliates) under any
agreement to which CRDAL and Sonesta are parties.
7. Other Provisions Unaffected. The provisions of this agreement are intended to
amend only those provisions of the P&S, the Agreement, and the "Agreement"
attached as "Exhibit A" to the P&S to which they specifically apply. All other
provisions of said P&S, Agreement and "Agreement" not specifically amended by
this agreement shall remain unchanged and in full force and effect.
8. Opportunity to Review/No Duress. The parties agree and acknowledge that both
of them had the opportunity to review this agreement, prior to signing, with
legal counsel of their choice and, further, agree and acknowledge that they have
signed this agreement willingly and without duress.
9. No Assignment. CRDAL warrants and represents that it has not previously
assigned any right, benefit or interest under the P&S or the
Agreement--including without limitation its interest in the business
interruption claim referenced in Section 2 above--to any party other than
Sonesta.
10. Right of Offset. Notwithstanding that Section 6.14 of the P&S has survived
(pursuant to Section 11.15 of the P&S) and continues to apply, the parties
hereby reiterate that, in addition to any other rights it may have, Sonesta may
offset against its payment obligations under Section 2.2 of the P&S any costs,
expenses or liabilities (contingent or actual) resulting from any claim, action,
demand or liability against CRDAL, including without limitation any liability,
costs and expenses Sonesta (or its affiliates) incurs in connection with CRDAL's
termination of its agreement(s) with Franklyn D. Resorts Ltd.
11. Miscellaneous. The following sections of the P&S are hereby incorporated
herein by reference: 11.1, 11.2, 11.3, 11.5 ("Purchaser" deemed to refer to
Sonesta, "Seller" deemed to refer to CRDAL), 11.8, 11.9, 11.1, and 11.12.
3
<PAGE>
IN WITNESS WHEREOF, CRDAL and Sonesta have executed this Agreement on the
date(s) set forth below, effective as of March 1, 1996.
March , 1996 SONESTA HOTELS OF ANGUILLA, LTD.
---
By: /S/
-----------------------------------------
Printed name:
--------------------------------
Its:
-----------------------------------------
March , 1996 CASABLANCA RESORTS DEVELOPMENT OF
--- ANGUILLA LIMITED
By: /S/
-----------------------------------------
Printed name:
--------------------------------
Its:
-----------------------------------------
The undersigned hereby execute this agreement in order to (i) acknowledge and
agree to their continuing joint and several personal guaranty(ies) of CRDAL's
obligations under the P&S, the Agreement, and this agreement and (ii)
acknowledge their agreement to the provisions of Section 4 of this agreement.
March , 1996 /S/
--- -------------------------
Kamal Alsultany
March , 1996 /S/
--- -------------------------
Maggie Alsultany
4
Sonesta Beach Resort Key Biscayne
- --------------------------------------------------------------------------------
[LOGO]
February 9, 1997
Mr. Mounir Ghabbour
Chairman Sakkara Hotels
SAKKARA HOTELS
21, Abdel Khalek Sarwat Street
Cairo, Egypt
Dear Mr. Ghabbour,
We confirm our agreement to give your company a loan in the amount of
$1,000,000.00 US (One Million US dollars), interest free, to be reembursed
$330,000.00 US (Three hundred thirty thousand US dollars) yearly in (3) three
installments, the first installment to be paid March 1, 1998. Adjustments for
the balance of the installments will be at the end of the third year.
Agreed: Accepted:
/s/ /s/
- -------------------------------- -----------------------------
Roger Sonnabend Mounir Ghabbour
CEO Sonesta International Hotels Chairman Sakkara Hotels
350 Ocean Drive, Key Biscayne, Florida 33149
Telephone (305) 361-2021 Telex 519303 Fax (305) 361-3096
June 3, 1996
[LOGO]
Amsterdam Sonesta Corporation
c/o Sonesta International Hotels Corporation
200 Clarendon Street, Floor 41
Boston, Massachusetts 02116
RE: Lease of Sonesta Beach Anguilla
-------------------------------
Gentlemen:
This will confirm our agreement that Amsterdam Sonesta Corporation ("Tenant")
will be leasing the resort operation known as Sonesta Beach Resort Anguilla
("Resort") from Sonesta Hotels of Anguilla, Ltd. ("Landlord"), pursuant to the
following terms:
1. Term. The Lease will commence July 1, 1996 and continue for a period of
five (5) years, terminating June 30, 2001. Tenant shall have the right to
extend the term of the Lease for consecutive periods of one (1) year each,
provided it gives written notice to Landlord no less than one hundred
eighty (180) days prior to the date the Lease would otherwise expire.
2. Rent. Tenant shall pay Landlord the following as rent:
(i) "fixed rent" in the amount of One Million Two Hundred Thousand
Dollars ($1,200,000.00) per year; such rent to be payable in
monthly installments of One Hundred Thousand Dollars
($100,000.00);
(ii) "capital reserve rent" equal to three (3) percent of Hotel
revenues, which amount will be utilized by the parties for
additions and replacements of FF&E for the Hotel, which amount
shall be paid monthly on or before the tenth (10th) day of each
month with respect to the previous month; and
(iii) "percentage rent" equal to thirty percent (30%) of cash flow; cash
flow shall mean net income before interest expense, depreciation,
amortization, and income taxes, but after deducting fixed rent and
capital reserve rent.
3. Improvements/Expansion. Landlord shall be responsible for completing
the improvements/expansion program described on "Exhibit A" attached
hereto.
<PAGE>
In the event Landlord pays for any additional improvements and/or expands the
Resort other than is set forth on "Exhibit A", Tenant agrees to pay increased
fixed rent equal to 8% of such additional costs per year.
[LOGO]
4. Assumption of Assets/Liabilities. Tenant agrees to acquire Landlord's
current assets and assume its liabilities, used in the operation of the
Resort, as of July 1, 1996. This will include all cash on hand,
inventories, receivables, prepaid expenses, accounts payable and accrued
expenses.
5. Responsibility for Expenses. Tenant shall be responsible for all
expenses related to the Resort operation, which expenses shall be
determined pursuant to the Uniform System of Accounts for Hotels (1986)
excluding: interest, depreciation and amortization, and land rent. Tenant
shall also be responsible for the payment of property insurance and
liability insurance.
6. Business Interruption Claim. As part of the consideration for Tenant's
agreement to pay the rent stipulated above, Landlord shall assign to
Tenant, effective as of July 1, 1996, all of its rights, title and
interest in and to the business interruption insurance claim which
Landlord has filed with Ennia Caribe, pertaining to damage from Hurricane
Luis in September 1995.
Kindly indicate your consent to the above terms below. Your signature
shall indicate a binding commitment to lease the Resort from Landlord in
accordance with the terms of this letter.
Sonesta Hotels of Anguilla, Ltd.
by:/s/
-------------------------------
Peter J. Sonnabend
Director
The Above Terms are Acknowledged and Agreed to
By Amsterdam Sonesta Corporation
By:/s/
-----------------------------
Boy van Riel
Vice President and Treasurer
Date: June __, 1996
Report to Shareholders
1996 was a good year for Sonesta with revenues increasing substantially.
Profits were down due to operating losses at Sonesta Beach Resort Anguilla,
which re-opened in January 1996. In November 1995, Sonesta purchased the
resort (formerly known as Casablanca Resort), which was then closed because
of hurricane damage.
The Royal Sonesta Hotels in Boston (Cambridge), which Sonesta owns, and in
New Orleans, which Sonesta leases, both had outstanding years. The Company
refinanced the Royal Sonesta Boston, and will use the net proceeds to
renovate 200 rooms and upgrade the heating, cooling, electrical and
communication systems over the next two years.
Sonesta has made a substantial investment in the Sonesta Beach Resort
Anguilla. In 1996, the Company invested $3 million to beautify and expand the
property, including enhanced landscaping, employee facilities and a luxurious
four bedroom villa, which is a prototype for future expansion. The Company
also leased additional beachfront land adjacent to our property. Operating
results were disappointing, due to lack of awareness of the resort and
residual effects of 1995's hurricanes. We are confident in the long term
success of this resort.
Among our managed properties, Chateau Sonesta Hotel in New Orleans had a
successful first full year of operation. Sonesta Beach Resort, Key Biscayne
also had a strong year exceeding 1995 results. Both Sonesta Beach Resorts in
Bermuda and Curacao have been disappointing financially. While the guest
experience at both resorts continues to be extremely positive, both islands
face major challenges in attracting tourists and groups.
In Egypt, our properties and ships are doing well. We continue to expand
in the Middle East with Sonesta St. George Hotel Luxor, Egypt and Sonesta
Beach Plaza Resort Bahrain opening later this year. Many of our Egyptian
hotel owners are adding rooms to their properties, including 30 guestrooms
and suites on two floors at the Sonesta Hotel in Cairo; a new section at
Sonesta Beach Resort Sharm El Sheikh with 80 new guestrooms; a new wing
including an expanded lobby at Sonesta Beach Resort Hurghada with 250 new
guestrooms and expanded function space; and a new executive wing with 20
guestrooms at Sonesta Hotel Port Said.
Our associates in Santiago, Chile are reviewing plans for a major
expansion there, as well.
We have terminated our involvement in the development of a beach resort in
Guanacaste, Costa Rica because of continuing delays in the project. We may
reconsider this project--and others in Costa Rica-- in the future.
The hotel industry continues to prosper. While we are seeing more hotel
construction, most is in the budget and extended stay categories which is not
in direct competition with Sonesta. We are a niche hotel operator in a
complex and ever-changing hotel landscape. We remain focused on our mission
of meeting or exceeding the expectations of our guests, owners, employees and
suppliers. We anticipate that our conservative approach to expansion will
result in continued financial stability and consistency of product for years
to come.
Please review our "Management's Discussion and Analysis of Results of
Operations and Financial Condition", as well as the notes to financial
statements which follow, for a more detailed analysis of our Company. If you
would like to know more about our 18 properties worldwide, please consult our
Web page at Sonesta.com.
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/ Stephanie Sonnabend
Stephanie Sonnabend
President
March 14, 1997
FRONT COVER:
Like each of Sonesta's nine beach resorts worldwide, Sonesta's newest
hotel--Sonesta Beach Resort Anguilla--offers a dramatic ocean setting. Our
private, white coral beach overlooking the distant mountains of St. Martin is
perfect for tranquility and romance.
1
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
5-YEAR SELECTED FINANCIAL DATA
(In thousands except for per share data)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ---------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 62,590 $ 55,840 $ 53,321 $ 48,592 $ 49,167
Operating income 1,768 2,659 2,906 1,652 5,022
Net interest income (expense) (825) (823) (1,286) (250) 722
Equity in net loss of hotels (89) (656) (637) -- --
Gain (loss) on sales of assets 213 548 (90) 3,005 5,707
Other 254 828 72 93 (251)
----------- ----------- ---------------------- -----------
Income before income taxes and cumulative effect of
accounting change . 1,321 2,556 965 4,500 11,200
Federal, foreign and state income tax provision
(benefit) 1,134 (219) 501 1,801 5,848
----------- ----------- ---------------------- -----------
Income before cumulative effect of accounting change 187 2,775 464 2,699 5,352
Cumulative gain from a change in an accounting
principle -- -- -- -- 292
----------- ----------- ---------------------- -----------
Net income $ 187 $ 2,775 $ 464 $ 2,699 $ 5,644
=========== =========== ====================== ===========
Per share of common stock:
Income before cumulative effect of accounting change $ .10 $ 1.33 $ .22 $ 1.30 $ 2.02
Cumulative gain from a change in an accounting
principle -- -- -- -- .11
----------- ----------- ---------------------- -----------
Net income $ .10 $ 1.33 $ .22 $ 1.30 $ 2.13
=========== =========== ====================== ===========
Cash dividends declared $ .30 $ .30 $ .30 $ .30 $ --
=========== =========== ====================== ===========
Working capital (deficit) $ (5,011) $ (5,834) $ (3,318) $ (1,586) $ 2,550
Net property and equipment 41,930 38,362 28,431 30,432 32,184
Total assets 68,971 69,240 60,114 59,787 57,903
Long-term debt and capitalized lease obligations
including currently payable portion 24,851 26,293 21,204 20,591 21,807
Redeemable preferred stock 294 294 294 294 294
Common stockholders' equity 23,152 23,626 21,520 21,693 19,689
Common stockholders' equity per share 11.19 11.41 10.37 10.45 9.45
Total revenues including hotels operated under
management contracts $169,791 $149,322 $137,584 $105,371 $116,387
Common shares outstanding at end of year 2,068 2,071 2,075 2,075 2,083
</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
------------------------------------
1996 1995
----------------- -----------------
High Low High Low
-------- ------- ----------------
<S> <C> <C> <C> <C>
First 8-1/2 6-1/2 9-3/8 8-1/2
Second 9 7-3/4 9-1/4 7-3/4
Third 11 8-1/2 9-1/4 7-3/4
Fourth 11 9-15/16 8-1/4 5-1/2
</TABLE>
The Company's common stock trades on The NASDAQ Stock Market under the symbol
SNSTA. As of March 10, 1997 there were 548 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.
2
<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), the Sonesta Beach Resort Anguilla, B.W.I., 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. The Sonesta
Beach Resort Anguilla was purchased by the Company in November 1995, and
opened in January 1996. The financial statements also include the revenues
and expenses from the management of properties located in the United States,
Caribbean and Middle East.
Results of Operations
Revenues
1996 versus 1995: Revenues in 1996 increased by $6,751,000 compared to
1995. The Company's Boston (Cambridge) hotel had increased revenues in 1996
of approximately $1,923,000, primarily because of an 8% increase in average
room rate and a 10% increase in food and beverage revenues. The Company's
Royal Sonesta Hotel New Orleans had an increase in revenues of $1,484,000 in
1996 compared to 1995 due to a 4% increase in average room rate and a slight
increase in occupancy. The Company's Sonesta Beach Resort Anguilla, which
opened January 18, 1996, had revenues of $2,717,000. The remaining revenue
increase of $627,000 was primarily from increases in management and service
fee income, in particular from the Company's managed hotels in New Orleans,
Bermuda, and Sharm El Sheikh, Egypt.
1995 versus 1994: Revenues in 1995 increased by $2,518,000 compared to
1994. The 1995 increase was due to an increase of $1,203,000 at the Royal
Sonesta Hotel Boston (Cambridge), an increase of $697,000 at the Royal
Sonesta New Orleans, and an increase of $618,000 in management fees and
income from other sources. The increase in revenues at the Boston (Cambridge)
hotel was due to an 8% increase in average room rate, and increased food and
other revenues. The increase at the Royal Sonesta Hotel New Orleans was
primarily due to a 3% increase in average room rate. The increase of $618,000
in management and service fee income was due to $256,000 of income from the
Chateau Sonesta Hotel in New Orleans, which opened in April 1995, an increase
of $226,000 from Sonesta Beach Resort, Sharm el Sheikh, which opened in May
1994, and a net increase of $136,000 from other sources.
Operating Income
1996 versus 1995: Operating income in 1996 was $1,768,000, compared to
operating income of $2,659,000 in 1995, a decrease of approximately $891,000.
The Company's Anguilla resort had an operating loss of $2,782,000 in 1996,
caused primarily by disappointing revenues as a result of the negative
effects that Hurricane Luis, which struck the island in September 1995, had
on the hotel business in Anguilla. In addition, because the resort's
facilities were not ready for opening until January 18, 1996, the resort was
unable to take full advantage of the 1996 winter season business. The Boston
(Cambridge) hotel had an increase in operating income of $1,084,000,
primarily because of increased revenues of $1,923,000, offset by an increase
in expenses of $839,000, primarily in costs and operating expenses. Operating
income at the Royal Sonesta Hotel New Orleans increased by $713,000 in 1996
due to an increase in revenues of $1,484,000, offsetting an increase in
expenses of $771,000, which increase was primarily in costs and operating and
administrative and general expenses. The Company's operating loss from
management activities and other sources decreased by $94,000 because of
increased revenues of $627,000, which exceeded the increase in expenses of
$533,000 related to these activities. The increase in expenses primarily
related to costs for management of the Company's Egyptian properties, and
costs related to development of potential new hotel properties.
1995 versus 1994: Operating income for 1995 was $2,659,000 compared to
$2,906,000 in 1994, a decrease of approximately $247,000. The operating
income from the Boston (Cambridge) hotel increased by $812,000, the New
Orleans hotel's operating income decreased by $1,437,000, while the operating
loss from management and other sources decreased by $378,000. The decrease in
operating income at the Royal Sonesta Hotel New Orleans was caused by an
increase in rent expense of $2,231,000, an increase in operating and overhead
expenses of $676,000, partially offset by an increase in revenues of
$697,000, and a decrease in depreciation expense of $773,000. The rent
increase was the result of an increase in the percentage rent due under the
hotel lease effective October 1994 (see also Note 9--Commitments and
Contingencies). The increase in operating income at the Company's Boston
(Cambridge) location was the result of increased revenues of $1,203,000,
partially offset by an increase in cost and operating and other expenses of
$391,000. Operating loss from all other sources decreased by $378,000 as a
result of increased management and other fee income of $618,000, and a net
increase in expenses related to these activities of $240,000.
Other Income and Deductions
A gain on sale of $175,000 in 1996 resulted from a reduction of accrued
costs related to a prior year sale of certain assets in Cambridge,
Massachusetts. A gain on sale of $535,000 in 1995 resulted from a settlement,
for amounts less than previously recorded, of liabilities related to the sale
by the Company of the Amsterdam Sonesta Hotel in 1991.
In 1996, the Company recorded a $200,000 gain from a casualty related to
the Sonesta Beach Resort
3
<PAGE>
Anguilla, which it acquired in 1995 (see Note 2--Operations). The Company
recognized an insurance gain of $817,000 in 1995 as a result of flooding at
the Royal Sonesta Hotel New Orleans.
Included in equity in net loss of hotels are losses of $706,000, $657,000
and $637,000 in 1996, 1995 and 1994, respectively, which reflect the
Company's 22% share of the losses of the Sonesta Beach Hotel & Casino in
Curacao (see Note 3--Investments in Hotels). Included in equity in net loss
of hotels in 1996 is income of $617,000 related to the Company's
participation in a joint venture to construct a hotel in New York City (see
Note 2--Operations).
Interest income in 1996 increased by $317,000 compared to 1995. This was
primarily because the Company recorded interest income in 1996 of $1,100,000
on its receivables related to Sonesta Beach Resort, Key Biscayne, compared to
$550,000 in 1995. The Company recorded the additional income on these
receivables because of improved cash flow of the resort. Included in income
for the 1995 period was interest received on a federal income tax refund.
Interest income in 1995 increased by $695,000 compared to 1994. In 1995 the
Company recorded $550,000 of income on its Key Biscayne receivables, whereas
no income was recorded on these receivables in 1994 (see Note 4--Long-Term
Receivables and Advances).
Interest expense in 1996 increased by $319,000 versus 1995, primarily due
to interest on the additional indebtedness related to the purchase of the
Sonesta Beach Resort Anguilla in November 1995. Interest expense increased
from $1,537,000 in 1994 to $1,769,000 in 1995. This increase was primarily
due to an increase in the interest rate on the Company's mortgage loan on the
Boston (Cambridge) hotel property. The interest rate on this loan was 5%
until April 1994, and increased to LIBOR plus two percentage points
thereafter (see also Note 6--Long-Term Debt).
Federal, State and Foreign Income Taxes
The 1996 provision for income taxes is higher than the statutory rate due
primarily to certain losses in 1996 from the Company's Sonesta Beach Resort
Anguilla, B.W.I., which are not deductible for federal income taxes. The 1995
tax benefit results primarily from a reversal of deferred federal income tax
previously provided on foreign earnings which, during 1995, were permanently
invested outside the United States. In 1994, the Company filed for a federal
income tax refund for foreign taxes paid in 1994 related to the sale of the
Amsterdam Sonesta Hotel in 1991. The Company recorded a foreign tax expense
and a federal tax benefit to reflect this transaction. The Company received
payment for this refund in the amount of $959,000 in March 1995.
Liquidity and Capital Resources
The Company had cash and cash equivalents of approximately $3,692,000 at
December 31, 1996. The Company has $7,500,000 available under three lines of
credit (see Note 5--Borrowing Arrangements). No amounts were outstanding
under these lines at December 31, 1996.
The Company had a working capital deficit of approximately $5,011,000 at
December 31, 1996. This was primarily caused by accrued percentage rent of
approximately $5,031,000 for the year ending December 31, 1996, related to
the Royal Sonesta Hotel New Orleans, which is operated by the Company under a
long-term lease. This rent is payable in March 1997 and will be paid from the
Company's available cash balances, the proceeds of long-term financing, and
borrowings under its lines of credit, if needed.
In July 1996 the Company received a payment of $5,792,000 which consisted
of its cash investment of $5,175,000 in a partnership that owned a building
in New York, and a distribution of income of $617,000 (see Note
2--Operations).
During the fourth quarter of 1996 the Company entered into agreements to
refinance the mortgage loan on the Royal Sonesta Hotel Boston (Cambridge)
(see also Note 6--Long-Term Debt). The Company closed on this loan in January
1997, and the net proceeds of this refinancing were approximately $5,357,000,
of which $1,880,000 will be held in escrow by the lender for certain
improvements to the hotel. The Company has committed $3,500,000 for
improvements to the property during the winter of 1996/97. Of this amount, a
total of $1,389,000 has been spent at December 31, 1996, and is included in
Projects in progress.
The Company arranged for an additional mortgage loan of $1,700,000 with
the lender of the Sonesta Beach Resort Anguilla, and will draw down the
proceeds before April 1, 1997 (see also Note 6--Long-Term Debt). The Company
has committed to improvements to the resort of approximately $2,250,000, of
which $1,948,000 has been spent at December 31, 1996, and is included in
Property and equipment.
Certain of the Company's receivables from the Sonesta Beach Resort Key
Biscayne mature December 31, 1997 (see Note 4--Long-Term Receivables and
Advances). The Company and the owner of the hotel are currently discussing
alternatives to address this situation. The outcome is uncertain at this
point. Management believes that all amounts due from the property will be
realized.
The Company has agreed to loan $1,000,000 in 1997 to the owner of the
Sonesta Hotel Cairo, Egypt, to partially finance certain improvements to the
hotel, which include additional guestrooms.
Company management believes that its present cash balances plus its
available borrowing capacity are more than adequate to meet its cash
requirements for 1997 and beyond.
4
<PAGE>
[LOGO] Ernst & Young LLP
200 Clarendon Street
Boston
Massachusetts 02116-5072
Phone: 617 266 2000
Fax: 617 266 5843
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 as of December 31, 1996 and 1995 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, 1996.
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 at December 31, 1996 and 1995 and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
March 14, 1997
5
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the three years ended December 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Rooms $36,275,739 $32,551,516 $31,179,197
Food and beverage 15,165,619 13,424,233 13,140,893
Management, license and service fees 6,026,487 5,319,995 4,731,460
Other 5,122,609 4,543,974 4,269,871
-------------- -------------- --------------
62,590,454 55,839,718 53,321,421
-------------- -------------- --------------
Costs and expenses:
Costs and operating expenses 26,359,988 23,008,941 22,344,098
Advertising and promotion 5,420,235 4,575,267 4,694,613
Administrative and general 11,893,456 9,655,961 8,755,289
Human resources 1,480,969 1,184,021 1,034,247
Maintenance 4,662,437 4,138,701 3,871,631
Rentals 5,882,124 6,108,269 4,080,280
Property taxes 951,416 1,091,705 1,206,188
Depreciation and amortization 4,171,714 3,418,006 4,428,737
-------------- -------------- --------------
60,822,339 53,180,871 50,415,083
-------------- -------------- --------------
Operating income 1,768,115 2,658,847 2,906,338
-------------- -------------- --------------
Other income (deductions):
Interest expense (2,087,458) (1,768,974) (1,536,883)
Interest income 1,262,974 946,046 251,310
Equity in net loss of hotels (89,068) (656,625) (637,285)
Foreign exchange gain (loss) 163 11,321 (46,383)
Gain (loss) on sales of assets 212,552 548,159 (89,558)
Gain from casualty 254,082 817,246 117,685
-------------- -------------- --------------
(446,755) (102,827) (1,941,114)
-------------- -------------- --------------
Income before income taxes 1,321,360 2,556,020 965,224
Federal, foreign and state income tax provision (benefit) 1,133,916 (219,025) 501,525
-------------- -------------- --------------
Net income 187,444 2,775,045 463,699
Retained earnings at beginning of year 28,235,172 26,095,476 26,267,732
Cash dividends on common stock (619,715) (621,978) (622,584)
Cash dividends on preferred stock (13,364) (13,371) (13,371)
-------------- -------------- --------------
Retained earnings at end of year $27,789,537 $28,235,172 $26,095,476
============== ============== ==============
Earnings per share of common stock $ .10 $1.33 $ .22
============== ============== ==============
Dividends paid per common share $ .30 $ .30 $ .30
Dividends paid per preferred share $1.25 $1.25 $1.25
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,691,741 $ 3,369,515
Accounts and notes receivable:
Trade, less allowance of $107,974 ($97,901 in 1995) for doubtful accounts 6,048,479 5,098,142
Interest receivable 140,263 145,341
Other 820,893 828,168
-------------- -------------
Total accounts and notes receivable 7,009,635 6,071,651
Current portion of deferred taxes 317,460 400,115
Inventories 851,460 656,046
Prepaid expenses 1,040,411 495,783
-------------- -------------
Total current assets 12,910,707 10,993,110
Long-term receivables and advances 13,566,998 13,543,482
Investments in hotels 563,120 6,341,385
Property and equipment, at cost:
Land 2,877,358 2,201,594
Buildings 37,792,040 36,978,982
Furniture and equipment 17,318,550 15,096,093
Leasehold improvements 3,139,807 3,332,108
Projects in progress 2,036,495 --
-------------- -------------
63,164,250 57,608,777
Less accumulated depreciation and amortization 21,234,324 19,247,148
-------------- -------------
Net property and equipment 41,929,926 38,361,629
-------------- -------------
$68,970,751 $69,239,606
============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ -- $ 562,060
Current portion of long-term debt and capitalized lease obligations 1,005,123 1,211,263
Accounts payable 5,483,893 4,058,540
Advance deposits 2,323,505 1,321,138
Federal, foreign and state income taxes 706,241 410,702
Accrued liabilities:
Salaries and wages 1,775,000 1,781,850
Rentals 5,030,767 5,269,925
Interest 23,389 172,706
Employee benefits 566,973 982,344
Other 1,006,608 1,056,314
-------------- --------------
8,402,737 9,263,139
-------------- --------------
Total current liabilities 17,921,499 16,826,842
Long-term debt 23,795,462 24,976,970
Deferred federal and state income taxes 2,282,002 2,380,872
Other non-current liabilities 1,525,511 1,134,555
Commitments and contingencies
Redeemable preferred stock, $25 par value, at redemption value 293,917 294,167
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 27,789,537 28,235,172
Treasury shares--982,873 (979,851 in 1995), at cost (8,125,559) (8,097,354)
-------------- --------------
Total common stockholders' equity 23,152,360 23,626,200
-------------- --------------
$68,970,751 $69,239,606
============== ==============
</TABLE>
8
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three years ended December 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Cash provided (used) by operating activities
Net income $ 187,444 $ 2,775,045 $ 463,699
Items not (providing) requiring cash
Foreign exchange (gain) loss (163) (11,321) 46,383
Pension expense 210,164 201,464 551,472
Depreciation and amortization 4,171,714 3,418,006 4,428,737
Deferred federal and state income taxes (16,215) (1,663,589) (1,989,680)
Gain from casualty (254,082) (817,246) (117,685)
(Gain) loss on sales of assets (212,552) (548,159) 89,558
Provision for doubtful accounts 37,650 26,400 (22,000)
Equity in net loss of hotels 89,068 656,625 637,285
Changes in assets and liabilities
Accounts and notes receivable (1,287,604) (296,785) (1,027,816)
Refundable income taxes -- 958,737 (958,737)
Inventories (195,414) (2,464) 43,675
Prepaid expenses (544,628) (137,965) 43,599
Accounts payable 1,426,406 (115,248) 246,915
Advance deposits 1,002,367 90,476 23,318
Federal, foreign and state income taxes 295,539 120,475 (891,203)
Accrued liabilities (450,217) 2,867,403 1,393,836
-------------- -------------- --------------
Cash provided by operating activities 4,459,477 7,521,854 2,961,356
Cash provided (used) by investing activities
Proceeds from sales of assets 64,822 26,630 352,934
Proceeds from casualty insurance 54,082 867,119 117,685
Expenditures for property and equipment (7,755,680) (6,421,400) (2,861,744)
Investments in hotels (102,434) (1,349,986) (6,285,309)
Proceeds from sale of investment in hotel 5,791,631 -- --
New loans and advances (727,220) (75,000) (595,283)
Payments received on long-term receivables and advances 1,004,073 1,132,123 2,582,236
-------------- -------------- --------------
Cash used by investing activities (1,670,726) (5,820,514) (6,689,481)
Cash provided (used) by financing activities
Changes in notes payable (562,060) (437,940) 500,000
Proceeds from issuance of long-term debt -- -- 2,000,000
Payments on long-term debt (1,168,111) (801,332) (633,558)
Payments on capitalized lease obligations (73,930) (99,443) (753,217)
Purchase of common and preferred stock (28,455) (33,797) --
Cash dividends paid (634,132) (635,955) (635,955)
-------------- -------------- --------------
Cash provided (used) by financing activities (2,466,688) (2,008,467) 477,270
Gain from effect of exchange rate changes on cash 163 7,944 525
-------------- -------------- --------------
Net increase (decrease) in cash 322,226 (299,183) (3,250,330)
Cash and cash equivalents at beginning of year 3,369,515 3,668,698 6,919,028
-------------- -------------- --------------
Cash and cash equivalents at end of year $ 3,691,741 $ 3,369,515 $ 3,668,698
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
9
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation and Significant Accounting Policies
Basis of Presentation:
Sonesta International Hotels Corporation (the Company) is engaged in the
operation of hotels in Boston (Cambridge), Massachusetts, New Orleans,
Louisiana and Anguilla, British West Indies. The Anguilla hotel was purchased
in November 1995, and opened in January 1996. The Company also operates,
under management agreements, hotels in Bermuda; Curacao, Netherlands
Antilles; Key Biscayne, Florida; New Orleans, Louisiana; and in Cairo, Sharm
el Sheikh, Hurghada, El Gouna and Port Said, Egypt. The Company also manages
two Nile river cruise ships in Egypt. Sonesta has granted licenses, for which
it receives fees, for the use of its name for two hotels on the island of
Aruba and a hotel in Santiago, Chile.
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 certain 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.
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.
Revenues:
Revenues are generally recognized as services are provided. Other revenues
relate principally to parking and telephone services.
Advertising:
The cost of advertising is generally expensed as incurred.
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:
<TABLE>
<CAPTION>
<S> <C>
Buildings:
Owned properties 20 to 40 years
Capital leases Initial lease periods
Furniture and equipment:
Located in owned properties 3 to 10 years
Located in leased properties 3 to 10 years or remaining lease
terms, including option terms
Leasehold improvements Remaining lease terms, including
option terms
</TABLE>
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.
Fair Value of Financial Instruments:
The Company's financial instruments consist of cash and cash equivalents,
accounts receivable, accounts payable and long-term debt. The Company's
financial instruments also include certain guarantees of indebtedness (see
Note 9--Commitments and Contingencies). The Company believes that the
carrying value of the financial instruments approximates their fair values.
The Company has made this determination for its long-term debt due to the
variable interest rates that fluctuate with the prime and LIBOR rates, and
their short-term maturities. With respect to long-term receivables and
advances, which consist principally of amounts relating to Sonesta Beach
Resort, Key Biscayne, management has concluded that it is not practical to
estimate the fair value of these instruments due to the uncertainty of the
amounts and timing of future cash flows. Management believes that the fair
value exceeds the carrying value of these receivables. Detailed information
concerning these receivables is included in Note 4--Long Term Receivables and
Advances.
Impact of Recently Issued Accounting Standards:
In the first quarter of 1996, the Company adopted Statement No. 121,
Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets
to Be Disposed Of. The Statement requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. Statement 121 also
addresses the accounting for long-lived assets that are expected to be
disposed of. The adoption of Statement 121 had no effect on the Company's
consolidated balance sheet at December 31, 1996, or the result of operations
for the year ended December 31, 1996.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Reclassification:
Certain amounts in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
10
<PAGE>
Per Share Amounts:
Income per share of common stock is computed using the weighted-average
number of shares outstanding (2,070,057, 2,072,933 and 2,075,281, in 1996,
1995, and 1994, respectively) and allows for preferred dividends.
Statement of Cash Flows:
Cash and cash equivalents consists of cash on hand and short-term, highly
liquid investments with maturities of less than 91 days when acquired, which
are readily convertible into cash.
Cash paid for interest in 1996, 1995 and 1994 was approximately
$2,237,000, $1,739,000 and $1,482,000, respectively. Cash paid for income
taxes in 1996, 1995 and 1994 was approximately $816,000, $365,000 and
$4,340,000, respectively.
As discussed in Note 2, the Company assumed $6,490,000 of indebtedness in
connection with the acquisition of a hotel property in Anguilla, B.W.I. in
November 1995.
2. Operations
In December 1994, Company subsidiaries entered into a partnership through
which it acquired a 50% interest in a building in New York City, with the
intent to develop a hotel. In October 1995, the Company notified its partner
of its intention not to proceed with the development. The partnership sold
its interest in the building in July 1996, and the Company received a payment
of $5,792,000, which consisted of its cash investment in the partnership of
$5,175,000, and distribution of income of $617,000. This income is included
in Equity in net loss of hotels in the consolidated statement of operations
for the year ended December 31, 1996.
On November 28, 1995, a wholly-owned subsidiary of the Company purchased
the Casablanca Resort in Anguilla, British West Indies. The 100-room resort
suffered extensive damage from Hurricane Luis in September 1995, and the
Seller remained obligated following the sale to restore all damage done to
the property. The hotel reopened as the Sonesta Beach Resort Anguilla in
January 1996. The purchase price for the assets and personal property was
approximately $10,050,000, including transfer taxes and expenses of $450,000,
and an estimate of $400,000 for credits the Company is entitled to for
certain expenses related to the hotel property and operations until March 1,
1996. The resort is situated on 49 acres of land leased from the Government
of Anguilla; there are 94 years remaining in the lease term. The purchase was
financed in part by the assumption of an existing mortgage loan of $4,990,000
(see Note 6--Long-Term Debt). The Seller provided $1,500,000 in loans, of
which $1,000,000 is payable in November 1998 (see Note 6--Long-Term Debt),
and $500,000 was paid on March 1, 1996. The remaining portion of the purchase
price was paid in cash. The actual amount for credits for expenses from the
Seller mentioned above was $468,000, and this amount is included in Long-Term
receivables and advances at December 31, 1996. In March 1996, the Company
received an assignment of certain expected insurance proceeds from the Seller
to satisfy this receivable. In the event such insurance proceeds prove
insufficient to pay this receivable, the Company has the right to deduct any
remaining amount from the loan from the Seller which is due in November 1998
(see Note 6--Long-Term Debt). As part of the purchase of the resort, the
Company also acquired the rights to the insurance claim for business
interruption proceeds as of March 1, 1996. The insurance carrier has not
recognized the claim that has been submitted by the Company. Included in Gain
from casualty at December 31, 1996 is income of $200,000 to which the Company
is entitled to under the Purchase and Sale agreement in the event there is no
recovery on its insurance claim. As permitted by the agreements with the
Seller, the Company has reduced the $1,000,000 loan from the Seller by this
amount (see Note 6--Long-Term Debt). The Company is contesting the rejection
of the claim by the insurance company. Management believes that the eventual
proceeds of the claim will exceed the $200,000 income it has recorded in
1996. In 1996 the Company entered into a 50-year lease agreement for two
acres of beachfront land adjacent to the resort. The Company paid $435,000
for the right to use this land, which amount is included in Land at December
31, 1996, and is being amortized over the lease term.
In April 1995 the Company opened the Chateau Sonesta Hotel in New Orleans,
Louisiana. The 243-room full-service hotel is located adjacent to the French
Quarter. The Company operates this hotel under a long-term management
agreement, under which it receives management and marketing fees based on
revenues, and incentive fees based on cash flow.
In May 1995, heavy rains in New Orleans caused damage to the Royal Sonesta
Hotel, which is operated by the Company under a long-term lease. The Company
received net insurance proceeds of $867,000. The assets and personal property
damaged by this casualty were substantially depreciated, and accordingly the
Company recorded a gain on casualty in 1995 of $817,000, which included
$180,000 for recovery of lost income.
A gain on sale of assets of $175,000 in 1996 resulted from a reduction of
accrued costs related to a prior year sale of certain assets in Cambridge,
Massachusetts. In the first quarter of 1995, the Company recognized a gain on
sale of assets of $535,000. This was the result of a settlement, for amounts
less than previously recorded, of liabilities related to the sale in 1991 of
the Company's Amsterdam Sonesta Hotel. In 1994, the Company settled a dispute
related to foreign taxes on the same transaction, which resulted in
refundable federal income taxes of $959,000. The Company received payment for
this in March 1995, together with interest.
11
<PAGE>
The Sonesta Beach Resort in Key Biscayne, Florida is operated by the
Company under a long-term management agreement. The hotel suffered extensive
damage from Hurricane Andrew in August 1992. After repairs were completed,
the resort reopened in October 1993. 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 addition to the above loans, the Company has outstanding notes
receivable from the owner of the resort related to the sale of the property
by the Company in 1984 (see also Note 4--Long-Term Receivables). At December
31, 1996, the Company's receivable from the Key Biscayne property aggregated
$12,313,000. A substantial part of the Company's receivables are due December
31, 1997. The Company and the owner are currently discussing alternatives to
address this situation, the outcome of which is uncertain at this point.
Management expects that all amounts due from the hotel will be realized.
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.
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).
Gross revenues for hotels operated by the Company under management
contracts, by geographic area, are summarized below:
<TABLE>
<CAPTION>
(in thousands)
(unaudited)
--------------------------------
1996 1995 1994
----------- --------- ----------
<S> <C> <C> <C>
United States $ 33,284 $27,850 $20,107
Caribbean 42,925 39,266 42,562
Egypt 30,992 26,366 21,594
----------- --------- ----------
$107,201 $93,482 $84,263
=========== ========= ==========
</TABLE>
Costs and operating expenses for owned and leased hotels are summarized
below:
<TABLE>
<CAPTION>
(in thousands)
------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Direct departmental costs:
Rooms $ 8,928 $ 8,077 $ 7,786
Food and beverage 12,332 10,651 10,209
Heat, light and power 2,315 1,692 1,773
Other 2,785 2,589 2,576
--------- --------- ---------
$26,360 $23,009 $22,344
========= ========= =========
</TABLE>
Direct departmental costs include payroll expense and related payroll
burden, the cost of food and beverage consumed and other departmental costs.
Segment data by geographic area of the Company's revenues, operating
income and identifiable assets follows:
<TABLE>
<CAPTION>
(in thousands)
Revenues
-------------------------------
1996 1995 1994
--------- --------- ----------
<S> <C> <C> <C>
United States $56,597 $53,129 $50,865
Other 5,993 2,711 2,456
--------- --------- ----------
Consolidated $62,590 $55,840 $53,321
========= ========= ==========
Operating Income
-------------------------------
1996 1995 1994
--------- --------- ----------
United States $ 3,452 $ 2,089 $ 2,226
Other (1,684) 570 680
--------- --------- ----------
Consolidated $ 1,768 $ 2,659 $ 2,906
========= ========= ==========
Identifiable Assets
-------------------------------
1996 1995 1994
--------- --------- ----------
United States $50,501 $53,109 $52,813
Caribbean 14,303 11,631 1,363
Other 619 1,130 1,311
Corporate 3,548 3,370 4,627
--------- --------- ----------
Consolidated $68,971 $69,240 $60,114
========= ========= ==========
</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, December 31,
1996 1995
-------------- --------------
<S> <C> <C> <C>
Sonesta Beach Hotel & Casino,
Curacao, N.A. $ -- $ 706
SoHo hotel project, New York City -- 5,072
Guanacaste hotel project, Costa Rica 563 563
-------------- --------------
$563 $6,341
============== ==============
</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 1996, 1995
and 1994:
<TABLE>
<CAPTION>
(in thousands)
-----------------------------------------------
Statements of Year Ended Year Ended Year Ended
Operations December 31, December 31, December 31,
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues $17,552 $18,563 $17,736
Costs and expenses 21,446 21,772 21,994
--------------- --------------- ---------------
Net loss $ 3,894 $ 3,209 $ 4,258
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
(in thousands)
-----------------------------------------------
Balance Sheets December 31, December 31, December 31,
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Current assets $ 3,402 $ 3,200 $ 3,988
Non-current assets 35,898 39,041 42,285
--------------- --------------- ---------------
$39,300 $42,241 $46,273
=============== =============== ===============
Current liabilities $13,654 $ 6,146 $ 6,466
Long-term liabilities 34,885 41,440 41,944
Shareholders capital
deficiency (9,239) (5,345) (2,137)
--------------- --------------- ---------------
$39,300 $42,241 $46,273
=============== =============== ===============
</TABLE>
12
<PAGE>
Included in the hotels' costs and expenses is depreciation expense of
approximately $3,700,000, $3,578,000, and $3,519,000 for 1996, 1995, and
1994, respectively.
Included in the Company's statements of operations for 1996, 1995 and 1994
is equity in net loss of $706,090, $656,625 and $637,285, respectively, which
represents the Company's 22% share of the net loss for the years ended
December 31, 1996 and 1995, and the period June to December, 1994,
respectively. The Company is not required to fund its share of the losses in
excess of its $2,000,000 investment.
The Company sold its interest in the SoHo hotel project in New York during
1996 (see Note 2--Operations).
In December 1994, Company subsidiaries entered into agreements to acquire
a 50% interest in a partnership to develop a 320-room beach resort and casino
in Guanacaste, Costa Rica. To date, the Company has advanced $563,000 to
acquire the hotel site and for other project-related expenses, which is in
part secured by a mortgage on the hotel site. As permitted under the
partnership agreements, in March 1997 the Company notified its partner that
it does not intend to proceed with the project under the current
circumstances. The Company expects to fully recover its investment.
4. Long-Term Receivables and Advances
<TABLE>
<CAPTION>
(in thousands)
-----------------------------
December 31, December 31,
1996 1995
-------------- --------------
<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 (a) 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
Loans to owner (b) 4,007 4,472
Sharm El Sheikh (c) 10 370
Sharm El Sheikh (d) 500 --
Other 781 407
-------------- --------------
Total long-term receivables 13,604 $13,555
Less: current portion 37 12
-------------- --------------
Net long-term receivables $13,567 $13,543
============== ==============
</TABLE>
(a) The Company's mortgage notes receivable are subordinate to a first
mortgage of $22,431,000 at December 31, 1996. The maturity date of the
first mortgage loan is October 1, 2000. The Company has not recorded as
income the deferred portion of interest on the second mortgage since July
1, 1992. A substantial part of these receivables are due December 31, 1997
(see also Note 2--Operations).
(b) Under five separate agreements, a subsidiary of the Company loaned
$5,475,000 to the hotel's owner during 1993 and 1994. These loans earn
interest at rates ranging from the prime rate (8-1/4% at December 31,
1996) to 14-1/2%. Of these loans, an amount of $2,684,000, and interest
thereon is secured by second and third mortgages on the hotel property.
Principal and interest are payable out of hotel cash flow remaining after
payment of first and second mortgage interest, and a payment to the
hotel's owner equal to 3/4 of 1% of revenues of the hotel.
(c) 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 are payable in 18 monthly installments out of hotel cash flow
following the opening of the hotel. During 1996 and 1995, the Company
received payments of $790,000, reducing the principal balance to $10,000
at December 31, 1996.
(d) The Company has agreed to loan $1,000,000 to the owner of the Sonesta
Beach Resort, Sharm El Sheikh, to finance certain improvements to the
resort, including construction of 80 additional guestrooms, conference and
other hotel facilities. An amount of $500,000 has been advanced in
December 1996, and the remaining amount will be funded as the improvements
are being completed. This loan earns interest at LIBOR plus two percentage
points (7-13/16% at December 31, 1996), and will be repaid in twelve
annual installments of $83,333, together with interest, commencing January
1, 1998.
In connection with its Key Biscayne notes receivable, the Company recorded
interest income of $1,100,000 in 1996 and $550,000 in 1995. No income was
recorded in 1994. Cash payments received were $1,565,000, $1,003,000 and
$550,000 for 1996, 1995 and 1994, respectively.
5. Borrowing Arrangements
The Company has a $2,000,000 line of credit which expires on September 30,
1997. This line of credit bears interest at the prime rate (8-1/4% at
December 31, 1996). 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, 1996.
A subsidiary of the Company has a $5,000,000 line of credit which will
expire December 31, 1997. The terms of the loan 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, and by a Company guaranty. The interest rate is prime
(8-1/4% at December 31, 1996) less one-eighth percent, and the commitment fee
on the unused portion of the line is .65% per annum. No amount was
outstanding under this line at December 31, 1996.
13
<PAGE>
A foreign subsidiary has an operating line of credit of $500,000, which is
guaranteed by the Company. The interest rate is at the prime rate plus one
percentage point. This line of credit is subject to periodic review by the
bank. No amount was outstanding under this line at December 31, 1996.
During 1996, 1995 and 1994, average short-term borrowings were
approximately $875,000, $240,000 and $271,000 at average interest rates of
8.3%, 8.8% and 7.4%, respectively. The maximum amounts of short- term
borrowings outstanding during 1996, 1995 and 1994 were $4,640,000, $2,110,000
and $2,000,000, respectively.
6. Long-Term Debt
<TABLE>
<CAPTION>
(in thousands)
---------------------
1996 1995
--------- ----------
<S> <C> <C>
Charterhouse of Cambridge Trust:
First mortgage notes (a) $17,068 $17,936
Sonesta Hotels of Anguilla, Ltd:
First mortgage notes (b) 4,690 4,990
Note from Seller (c) 800 1,000
Sonesta Curacao Hotel Corporation, N.V.:
Bank term loan (d) 2,000 2,000
Other 188 188
--------- ----------
24,746 26,114
Less current portion of long-term debt 951 1,137
--------- ----------
Total long-term debt $23,795 $24,977
========= ==========
</TABLE>
(a) The loan is secured by a first mortgage on the Royal Sonesta Hotel Boston
(Cambridge) property. This property is included in fixed assets at a book
value of approximately $19,273,000 at December 31, 1996. 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 required monthly
principal payments of $66,777. Interest on the loan was 5% until April
1994, and LIBOR plus two percentage points thereafter. The interest rate
at December 31, 1996 was 7-9/16%. In January 1997, this loan was
refinanced with a fixed rate mortgage loan in the amount of $22,880,000,
which matures December 31, 2003. The interest rate on the new loan is
8.86% and no prepayments are allowed during the first three years of the
loan. The new loan requires monthly payments of interest and principal of
$203,802. An amount of $1,880,000 will be held in escrow by the lender to
finance certain improvements to the property.
(b) The loan is secured by a first mortgage on the Sonesta Beach Resort
Anguilla property, and an assignment to the lender of the hotel's
furniture, fixtures and equipment. The property is included in fixed
assets at a book value of $12,744,000 at December 31, 1996. In addition,
an amount of $1,900,000 is secured by a Company guaranty. The lender has
agreed to increase the loan by $1,700,000, and the Company will draw down
these additional funds by April 1, 1997. Including the $1,700,000
increase, the loan requires minimum principal payments of $450,000,
$650,000, $725,000, $3,490,000 and $1,075,000 in the years 1997, 1998,
1999, 2000 and 2001, respectively. In addition, principal payments are
required equal to 25% of the hotel's annual excess cash flow, as defined.
The interest rate on the loan is LIBOR plus 2-1/4 percentage points. The
interest rate at December 31, 1996 was 7-15/16%.
(c) This loan from the Seller of the Sonesta Beach Resort Anguilla is for a
three year period ending November 28, 1998. The interest rate is 8% per
annum. Principal payments of up to $300,000 are required during the term
of the loan if certain conditions are met. The Company has reduced this
loan by $200,000 to which it is entitled under the agreements with the
Seller, and has further rights to offset certain receivables from the
Seller from this loan (see Note 2--Operations).
(d) This loan was for a three year period ending April 30, 1997, but has been
extended until June 30, 1998. No principal payments are required during
the term. The interest rate was 9-3/4% at December 31, 1996, 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.
Aggregate principal payments for the next five years subsequent to
December 31, 1996, based on the new mortgage loan described in (a) above, and
including the additional loan of $1,700,000 described in (b) above, are as
follows:
<TABLE>
<CAPTION>
Year (in thousands)
------------- ---------------
<S> <C>
1997 $ 951
1998 3,929
1999 1,248
2000 4,061
2001 1,699
Thereafter 20,370
</TABLE>
7. Common Stockholders' Equity
<TABLE>
<CAPTION>
(in thousands)
---------------------
Common Treasury
Stock Shares
-------- -----------
<S> <C> <C>
Balance, January 1, 1994 and 1995 $3,488 $(8,064)
Purchase of 4,044 shares -- (33)
-------- -----------
Balance, December 31, 1995 $3,488 $(8,097)
Purchase of 3,022 shares -- (29)
-------- -----------
Balance, December 31, 1996 $3,488 $(8,126)
======== ===========
</TABLE>
14
<PAGE>
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, 1996 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
A subsidiary of the Company purchased the Sonesta Beach Resort Anguilla in
November 1995 (see Note 2--Operations). The resort is located on 49 acres of
land leased from the Government of Anguilla. There are 94 years remaining on
the lease. 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 percentage rent based on net income as defined. 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 for a 10-year initial term,
at reduced rates. The Company provides for rent expense on a straight line
basis although payments under the lease did 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, 1996, (exclusive of real estate taxes, insurance and other
occupancy costs), are as follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------
Operating Leases Capital Leases
----------------- ---------------
<S> <C> <C>
Period
1997 $ 859 $ 64
1998 793 54
1999 742 --
2000 667 --
2001 625 --
Thereafter 11,912 --
----------------- ---------------
$15,598 $118
=================
Less interest amounts at various rates 13
---------------
Present value of minimum fixed rentals 105
Less current portion 54
---------------
Total long-term capitalized lease
obligation, included in other
non-current liabilities $ 51
===============
</TABLE>
Rentals charged to operations are as follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Real Estate:
Fixed rentals $ 813 $ 814 $ 996
Percentage rentals
based on defined
operating profits 5,031 5,269 3,038
Other rentals 38 25 46
-------- -------- --------
$5,882 $6,108 $4,080
======== ======== ========
</TABLE>
The Company manages the Chateau Sonesta Hotel in New Orleans under a
long-term management agreement. The hotel opened in April 1995. The Company
guarantees 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. No advances were required under this guaranty during 1995 and 1996.
The Company has agreed to loan $1,000,000 in 1997 to the owner of the
Sonesta Hotel Cairo, Egypt, to partially finance certain improvements to the
hotel.
The Company is committed to loan $1,000,000 to the owner of the Sonesta
Beach Resort, Sharm El Sheikh, of which $500,000 was advanced during 1996
(see Note 4--Long-Term Receivables and Advances).
The Company is from time to time subject to routine litigation incidental
to its business, and generally covered by insurance. The Company believes
that the results of such litigation will not have a materially adverse effect
on the Company's financial condition.
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 $928,700 in 1996, $998,400 in 1995 and $1,026,200 in 1994.
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.
15
<PAGE>
The Company's pension cost for the Plan was computed as follows:
<TABLE>
<CAPTION>
(in thousands)
-------------------------
1996 1995 1994
------- ---------------
<S> <C> <C> <C>
Service cost $ 606 $ 484 $ 560
Interest cost 936 903 840
Return on Plan assets (920) (856) (922)
Amortization of:
Unrecognized net transition asset (88) (88) (88)
Unrecognized prior service cost 65 65 65
Unrecognized net loss 172 55 96
------- ---------------
$ 771 $ 563 $ 551
======= ===============
</TABLE>
The following table sets forth the funded status of the Plan at December
31, 1996 and 1995:
<TABLE>
<CAPTION>
(in thousands)
--------------------
1996 1995
------------------
<S> <C> <C>
Actuarial present value of accumulated
benefit obligation:
Vested $ 9,007 $10,084
Nonvested 214 207
------------------
Accumulated benefit obligation 9,221 10,291
Effect of assumed increase in compensation
levels 3,096 3,147
------------------
Projected benefit obligation 12,317 13,438
Market value of Plan assets 11,685 11,681
------------------
Projected benefit obligation in excess of
Plan assets 632 1,757
Unrecognized net gain/(loss) 592 (767)
Unrecognized prior service cost (785) (850)
Unrecognized net transition asset 793 881
------------------
Accrued pension liability $ 1,232 $ 1,021
==================
</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>
1996 1995 1994
--------- -------- ---------
<S> <C> <C> <C>
Assumed discount rate 7.25% 7.0% 8.0%
Assumed rate of compensation increases 4.0% 4.0% 4.5%
Expected weighted average rate of return on
Plan assets 8.5% 8.5% 8.5%
</TABLE>
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 seven 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 table below allocates the Company's income tax expense (benefit) based
upon the source of income.
<TABLE>
<CAPTION>
(in thousands)
1996 1995 1994
---------------------- ---------------------- ----------------------
Domestic Foreign Domestic Foreign Domestic Foreign
----------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before income taxes $4,174 $(2,853) $2,100 $ 456 $ 938 $ 27
=========== =========== =========== =========== =========== ==========
Federal, foreign and state income tax
provision (benefit):
Current federal income tax (benefit) $1,128 $ (440) $ 970 $ (873) $ 709 $ 1,495
State and foreign taxes, principally
current 285 178 187 1,230 211 55
Deferred federal income tax (benefit) 228 (245) 121 (1,854) (433) (1,536)
----------- ----------- ----------- ----------- ----------- ----------
$1,641 $ (507) $1,278 $(1,497) $ 487 $ 14
=========== =========== =========== =========== =========== ==========
</TABLE>
A reconciliation of net tax expense (benefit) applicable to income before
provision for income taxes at the statutory rate follows:
<TABLE>
<CAPTION>
(in thousands)
---------------------------
1996 1995 1994
-------- ----------------
<S> <C> <C> <C>
Expected provision for taxes at statutory rate $ 449 $ 869 $329
State income taxes, net of federal benefit 97 123 139
Tax on foreign losses, not deductible for federal income taxes 459 -- --
Reversal of deferred taxes on foreign earnings permanently invested overseas -- (1,629) --
Other 129 418 33
-------- ----------------
$1,134 $ (219) $501
======== ================
</TABLE>
16
<PAGE>
Deferred tax benefits result from temporary differences in the recognition
of revenues and expenses for tax and financial reporting purposes. The source
of these differences and their tax effects are as follows:
<TABLE>
<CAPTION>
(in thousands)
------------------------------
1996 1995 1994
------------------ ----------
<S> <C> <C> <C>
Reversal of deferred taxes on unremitted foreign earnings, now permanently
invested overseas $ -- $(1,629) $ --
Gain from sale of property -- -- (639)
Earnings of foreign subsidiaries reported for tax purposes -- -- (680)
Losses from foreign subsidiary, not reported for tax purposes (240) (223) (217)
Tax depreciation more (less) than book depreciation 107 333 (156)
Other temporary differences 117 (145) (298)
------------------ ----------
$ (16) $(1,664) $(1,990)
================== ==========
</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, 1996 and 1995 relate to the
following:
<TABLE>
<CAPTION>
(in thousands)
------------------
1996 1995
-------- ---------
<S> <C> <C>
Current portion of deferred tax assets
Expenses accrued but deferred for tax purposes $ 317 $ 400
-------- ---------
Current deferred tax asset $ 317 $ 400
======== =========
Long-term portion of deferred tax liabilities (assets)
Depreciation book tax difference $3,498 $3,391
Expenses accrued but deferred for tax purposes (172) (183)
Losses from foreign subsidiary, not currently deductible (680) (440)
State tax benefits of $570,000 ($950,000 in 1995) from net operating loss
carry-forwards, net of valuation allowances -- --
Other (364) (387)
-------- ---------
Deferred tax liability $2,282 $2,381
======== =========
</TABLE>
At December 31, 1996 and 1995, the Company had state net operating loss
carry-forwards of approximately $6,000,000, and $10,000,000, respectively,
for income tax purposes. Of the total carry-forwards available at December
31, 1996, approximately $500,000, $1,000,000, $400,000, $1,800,000 and
$2,000,000 expire in the years 1997 through 2001, respectively. For financial
reporting purposes valuation allowances of $570,000 and $950,000 have been
recognized at December 31, 1996 and 1995, respectively, to offset the
deferred tax assets related to those carry-forwards.
A foreign income tax receivable of $38,300 was included in accounts
receivable other at December 31, 1995.
Unremitted foreign earnings on which no deferred taxes have been provided
approximated $3,600,000 at December 31, 1996 and 1995. Deferred taxes of
approximately $1,224,000 would have been provided had the earnings not been
permanently invested overseas.
Selected Quarterly Financial Data (unaudited)
Selected quarterly financial information for the years ended December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
(in thousands except for per share data)
1996
------------------------------------------
<S> <C> <C> <C> <C>
1st 2nd 3rd 4th
--------- --------- --------- ----------
Revenues $14,182 $16,754 $14,846 $16,808
Operating income (loss) (543) 1,562 294 455
Net income (loss) (630) 733 (14) 98
Net income (loss) per share of common stock $ (0.30) $ 0.36 $ (0.01) $ 0.05
1995
------------------------------------------
1st 2nd 3rd 4th
--------- --------- --------- ----------
Revenues $13,503 $14,444 $13,417 $14,476
Operating income (loss) (23) 1,475 851 356
Net income 334 867 320 1,254
Net income per share of common stock $ 0.16 $ 0.42 $ 0.15 $ 0.60
</TABLE>
17
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
Executive Offices, John Hancock Tower, 200 Clarendon Street
Boston, Massachusetts 02116 (617) 421-5400 Fax 421-5402
<TABLE>
<CAPTION>
<S> <C> <C>
SONESTA DIRECTORS
George S. Abrams(2) Paul Sonnabend(1) Roger P. Sonnabend(1)
Winer & Abrams Chairman of the Executive Chairman of the Board and
Attorneys at Law Committee and Chief Financial Chief Executive Officer,
Officer, Sonesta International Sonesta International
Vernon R. Alden(2)(3) Hotels Corporation Hotels Corporation
Director and Trustee of
Several Organizations Peter J. Sonnabend Stephen Sonnabend
Vice Chairman, General Counsel Senior Vice President,
Joseph L. Bower(1)(2)(3) & Secretary, Sonesta Sonesta International
Professor, Harvard International Hotels Corporation Hotels Corporation
Business School
Stephanie Sonnabend Jean C. Tempel(3)
Lawrence M. Levinson(1)(2)(3) President, Sonesta International Special Limited Partner, TL Ventures
Partner, Burns & Levinson Hotels Corporation
Attorneys at Law
(1)Member Executive Committee (2)Member Audit Committee (3)Member Compensation Committee
-----------------------------------------------------------------------------------------------------------------
SONESTA OFFICERS
Roger P. Sonnabend Christopher Baum Jacqueline Sonnabend
Chairman of the Board Vice President- Executive Vice President
and Chief Executive Officer Sales & Marketing
Peter J. Sonnabend
Stephanie Sonnabend Michael Levie Vice Chairman,
President Vice President-Egypt General Counsel and Secretary
Paul Sonnabend Felix Madera Hans U. Wandfluh
Chairman of the Executive Committee Vice President-International Vice President
and Chief Financial Officer
Boy A. J. van Riel David Rakouskas
Stephen Sonnabend Vice President and Treasurer Assistant Secretary
Senior Vice President and Corporate Controller
Mary Jane Rosa
Vice President-Design
-----------------------------------------------------------------------------------------------------------------
SONESTA HOTELS AND OTHER OPERATIONS
Royal Sonesta Hotel Sonesta Beach Resort Sonesta St. George Hotel,
Boston (Cambridge), Massachusetts(1) Key Biscayne, Florida(2) Luxor, Egypt(2)
(Opening 1997)
Royal Sonesta Hotel Sonesta Beach Resort
New Orleans, Louisiana(1) Sharm el Sheikh, Egypt(2) Ambassador Club
Hurghada, Egypt(2)
Sonesta Beach Resort Sonesta Hotel
Anguilla, B.W.I.(1) Cairo, Egypt(2) Sonesta Beach Plaza Hotel
Manama, Bahrain(2)
Chateau Sonesta Hotel Sonesta Hotel (Opening 1997)
New Orleans, Louisiana(2) Port Said, Egypt(2)
Aruba Sonesta Resort & Casino
Sonesta Beach Resort Sonesta Paradisio Hotel Oranjestad, Aruba(3)
Southampton, Bermuda(2) El Gouna, Egypt(2)
Aruba Sonesta Suites & Casino
Sonesta Beach Hotel & Casino Sonesta Nile Goddess Cruise Ship Oranjestad, Aruba(3)
Curacao, Netherlands Antilles(2) Cairo, Egypt(2)
Sonesta Hotel
Sonesta Beach Resort Sonesta Sun Goddess Cruise Ship Santiago, Chile(3)
Hurghada, Egypt(2) Cairo, Egypt(2)
(1)Owned or Leased (2)Operated under Management (3)Licensed
Agreement
For reservations, call toll free 800-SONESTA (800-766-3782)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
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
SONESTA INTERNATIONAL HOTELS CORPORATION SUBSIDIARIES
SUBSIDIARY CORPORATION NAME EMPLOYEE ID#
- --------------------------- ------------
Anguilla Hotel Management, Inc. 04-2399886
Brewster Wholesale Corporation 04-2070767
Charterhouse Cambridge Trust 04-6148511
Sonesta of Massachusetts, Inc. 04-2233480
Sonesta Middle East Hotel Corporation 54-0644830
Florida Sonesta Corporation 59-1286077
Hotel Corporation of America 04-6149348
Hotel Corporation of Georgia 58-0972981
Hotel Corporation of Maine 01-1242601
Key Biscayne Land Corporation 06-0974518
Royal Sonesta, Inc. 72-0803191
SIA Advertising, Inc. 04-6149346
Sonesta Hotels of Florida, Inc. 04-2808740
Sonesta Louisiana Hotels Corporation 72-1246856
Sonesta Soho Investment Corporation 59-2421633
TBD, Inc. 04-2399887
Foreign subsidiaries:
Newo Aruba, N.V. N/A - Aruba
Sonesta International Hotels Limited N/A - Bahamas
Hotel Corporation of American (Bermuda) Limited N/A - Bermuda
Port Royal Company Limited N/A - Bermuda
Sonesta Costa Rica, S. A. N/A - Costa Rica
Sonesta Curacao Hotel Corporation, N.V. N/A - Curacao
Sonesta Hotels of Anguilla, Ltd. N/A - Anguilla
Other subsidiaries not wholly owned:
The Soho Hotel Company L.P. 13-3804351
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 14, 1997,
included in the 1996 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.
ERNST & YOUNG LLP
Boston, Massachusetts
March 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,692
<SECURITIES> 0
<RECEIVABLES> 6,155
<ALLOWANCES> 107
<INVENTORY> 851
<CURRENT-ASSETS> 12,911
<PP&E> 63,164
<DEPRECIATION> 21,234
<TOTAL-ASSETS> 68,971
<CURRENT-LIABILITIES> 17,921
<BONDS> 23,795
0
294
<COMMON> 3,488
<OTHER-SE> 19,664
<TOTAL-LIABILITY-AND-EQUITY> 68,971
<SALES> 15,166
<TOTAL-REVENUES> 62,590
<CGS> 3,776
<TOTAL-COSTS> 26,360
<OTHER-EXPENSES> 34,462
<LOSS-PROVISION> (9)
<INTEREST-EXPENSE> 2,087
<INCOME-PRETAX> 1,321
<INCOME-TAX> 1,134
<INCOME-CONTINUING> 187
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
