AGREEMENT OF MERGER

AGREEMENT OF MERGER (this “Agreement”) dated as of April 2005 (the “ Effective Date ”), by and among SBR-FORTUNE ASSOCIATES, LLLP , a Florida limited liability limited partnership (“ SBR ”), SONESTA BEACH RESORT LLC , a Delaware limited liability company (the “ Company ”) and SONESTA BEACH RESORT LIMITED PARTNERSHIP , a Delaware limited partnership (the “ Sonesta ”).  SBR, the Company and Sonesta are individually referred to as a “ Party ” and collectively as the “ Parties ”.

RECITATIONS

WHEREAS, Sonesta is the owner of certain real property more particularly described on Exhibit  “ A ” attached hereto and made a part hereof, and the improvements situated thereon operated by Sonesta as the Sonesta Beach Resort Key Biscayne (the “ Hotel ”), located at 350 Ocean Drive, in the City of Key Biscayne situate, lying and being in Miami-Dade, County, Florida;

WHEREAS, Fortune KB GP, LLC, as general partner, and Fortune KB, LLC and Sonesta, as limited partners have previously entered into that certain Agreement of Limited Liability Limited Partnership of SBR dated January 17, 2005, as amended from time to time (the “ Partnership Agreement ”) (unless otherwise defined in this Agreement, all capitalized terms used in this Agreement shall have the meanings assigned to the same in the Partnership Agreement);

WHEREAS, on or about March 2, 2005, Sonesta and SBR entered into that certain Realty Purchase Agreement pursuant to which SBR contracted to purchase a portion of the property and Sonesta agreed to contribute the remaining portion of the Property to SBR as a contribution to capital such that SBR would acquire title to all of the Property;

WHEREAS, Sonesta and SBR desire to terminate the Realty Purchase Agreement and in lieu thereof, Sonesta intends to contribute all of the Property to the Sonesta Beach Resort Trust, a Delaware trust (the “Trust”), and to thereafter cause the Trust to be merged with and into the Company pursuant to Delaware law;

WHEREAS , SBR and the Company desire SBR to consummate a business combination with the Company in a transaction whereby, upon the terms and subject to the conditions set forth in this Agreement, the Company will merge with and into SBR (the “ Merger ”), the membership interests in the Company (“ Company Membership Interests ”) will be converted into the right to receive the Merger Consideration (as defined below), and SBR will be the surviving entity in the Merger;

WHEREAS , Sonesta as a sole member of the Company has determined and resolved that the Merger and all of the transactions contemplated by this Agreement are in its best interest and the interests of the Company, and that the Merger is fair and advisable, and has approved this

Agreement in accordance with the Delaware Limited Liability Company Law, as amended (the “ DLLCL ”);

WHEREAS , the General and Limited Partners of SBR have unanimously determined and resolved that the Merger and all of the transactions contemplated by this Agreement are in the best interest of SBR and the General and Limited Partners have adopted this Agreement in accordance with the Florida Revised Uniform Limited Partnership Act, as amended (the “ FRULPA ”).

NOW, THEREFORE , in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto intending to be legally bound do hereby agree as follows:

1.                                       Definitions .  For purposes of this Agreement, the terms set forth below are defined as follows:

(a)                                   “ Authorizations ” means all licenses, permits and approvals required by any governmental or quasi-governmental agency, body, department, commission, board, bureau, instrumentality or office, or otherwise appropriate with respect to the construction, ownership, operation, leasing, maintenance, or use of the Property or any part thereof.

(b)                                  “ SBR ” means the Party described as SBR, its successors and permitted assigns subject to the terms of Section 17 of this Agreement.

(c)                                   “ Closing ” or “ Closing Date ” means the date provided in Section 2.2 or such other date as the Parties may mutually agree to in writing.

(d)                                  “ County ” means Miami-Dade County.

(e)                                   “ Deposit ” collectively, means Tranche 1, Tranche 2, Tranche 3 and Tranche 4 paid or, in the case of Tranche 4, to be paid, to the Escrow Agent pursuant to the Partnership Agreement.

(f)                                     “ Improvements ” means the Hotel and all other buildings, improvements, and other items of real estate located on the Land.

(g)                                  “ Intangible Personal Property ” means to the extent assignable, Sonesta’s right, title and interest in and to all intangible personal property owned or possessed by Sonesta and used in connection with the ownership or operation of the Property, including, without limitation, (1) Authorizations, (2) utility and development rights and privileges, impact fee credits, development density, utility capacity or similar rights, general intangibles, business records, plans and specifications pertaining to the Real Property and the Personal Property, (3) any unpaid award for taking by condemnation or any damage to the Land by reason of a change of grade or location of or access to any street or highway excluding, however, the Intellectual Property.

(h)                                  “ Intellectual Property ” means all trademarks, service marks, trade names, copyrights, insignia, emblems, slogans, logos, commercial symbols, signs, designs, trade dress and all other visual identification, whether in English or any other language, by which the Hotel is identified and publicized, including the good will associated with all of them.  The foregoing shall be deemed to include the name “Sonesta” and all of the trademarks, service marks, trade names, copyrights, insignia, emblems, slogans, logos, commercial symbols, signs, designs, trade dress and all other visual identification matters affiliated or associated therewith.

(i)                                      “ Inventory ” means all inventories of food and beverage in opened or unopened cases and all in-use or reserve stock of linens, towels, paper goods, soaps, china, glass and silverware, cleaning supplies and the like.

(j)                                      “ Leased Property ” means all leased items of Tangible Personal Property, including, items subject to any capital lease, operating lease, financing lease, or any similar agreement. All such Leased Property is set forth on Schedule “Leased Property” attached hereto.

(k)                                   “ Leased Property Agreements ” means the lease agreements pertaining to the Leased Property, all of which are set forth on Schedule “Leased Property Agreements” attached hereto

(l)                                      “ Occupancy Agreements ” means all leases, concession or occupancy agreements in effect with respect to the Property under which any tenants, licenses or concessionaires occupy space upon the Property,  all of which are set forth on Schedule “Occupancy Agreements” attached hereto

(m)                                “ Off-Site Facility Agreements ” means any leases, contracts and agreements, if any, pertaining to facilities not located on the Property but which are required and presently used for the operation of the Property including, without limitation, use agreements for local golf courses, and parking or garage contracts or leases,  all of which are set forth on Schedule “Off-Site Facility Agreements” attached hereto

(n)                                  “ Operating Agreements ” means all service, supply, maintenance, construction, capital improvement and other similar contracts in effect with respect to the Property related to construction, operation, or maintenance of the Property,  all of which are set forth on Schedule “Operating Agreements” attached hereto

(o)                                  “ Partnership Agreement ” shall have the meaning set forth in the Recitals above.

(p)                                  “ Personal Property ” means collectively the Tangible Personal Property and the Intangible Personal Property.

(q)                                  “ Real Property ” means the Land and the Improvements.

(r)                                     “ Tangible Personal Property ” shall mean the items of tangible personal property consisting of all furniture, fixtures, equipment, machinery, artwork, Inventory and other tangible personal property of every kind and nature (which does not include cash-on-hand and petty cash funds) located at the Hotel or stored on behalf of Sonesta off site and owned or leased

by Sonesta including, without limitation, Sonesta’s interest as lessee with respect to any such leased Tangible Personal Property.

2.                                       The Merger

2.1                                  The Merger .  Upon the terms and subject to the conditions set forth in this Agreement and in accordance with the FRULPA and the DLLCL, at the Effective Time (as defined below), the Company shall be merged with and into SBR and SBR shall be the surviving entity in the Merger (the “ Surviving Entity ”) and, as such, SBR shall continue its limited liability limited partnership existence under the laws of the State of Florida, and the separate limited liability company existence of the Company thereupon shall cease.

2.2                                  Closing .  Subject to the satisfaction or, to the extent permitted by applicable law, waiver of the conditions to consummation of the Merger contained in Section  7 hereof, the closing of the Merger (the “ Closin g ”) shall take place at 10:00 a.m., Miami, FL time, on April [18], 2005 (the “ Closing Date ”), unless another time or date is agreed to by the parties hereto. The Closing will be held at the offices of SBR’s counsel, or at such other location as is agreed to by the Parties.

2.3                                  Effective Time .  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing the parties shall cause the Merger to be consummated by filing with the Secretary of State of the State of Florida and the Secretary of State of the State of Delaware (the “ Secretaries ”) a certificate of merger in form and substance acceptable to the parties hereto (the “ Certificate of Merger ”) duly executed and so filed in accordance with the FRULPA and the DLLCL and shall make all other filings and recordings required under the FRULPA and the DLLCL to effectuate the Merger and the transactions contemplated by this Agreement. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretaries, or at such subsequent date or time as SBR and the Company mutually shall agree and specify in the Certificate of Merger (the time the Merger becomes so effective being hereinafter referred to as the “ Effective Time ”).  To the extent required under provisions of either the FRULPA or DLLCL, the parties shall also execute and deliver a plan of merger (“the “ Plan of Merger ”) in form and substance acceptable to the parties hereto.  The parties shall cooperate with each other and take all commercially reasonable action to pre-position and/or pre-clear the Certificate of Merger with the Secretary of State of Florida and the Secretary of State of Delaware so that the Certificate of Merger is accepted and becomes effective on the Closing Date.

2.4                                  Effects of the Merger .  The Merger shall have the effects set forth in the FRULPA and DLLCL.

2.5                                  Certificate of Limited Partnership and Agreement of Partnership of the Surviving Limited Partnership .  The certificate of limited partnership of the Surviving Entity shall be the certificate of limited partnership of the Surviving Entity until thereafter amended or restated as provided therein or by applicable law.  The Agreement of Limited Liability Limited Partnership of SBR in effect immediately prior to the Effective Time shall be the Agreement of Limited Liability Limited Partnership of the Surviving Entity until thereafter amended or restated as provided therein or by applicable law.

3.                                       Merger Consideration

3.1                                  Merger Consideration .  At the Effective Time, by virtue of the Merger and without any action on the part of SBR, the Company or Sonesta:

(a)                                   The Company Membership Interest held by Sonesta shall be converted into the right to receive cash in the amount of FORTY MILLION AND NO/100 DOLLARS ($40,000,000.00), reduced by one-third (1/3 ^rd ) of the Existing Indebtedness Balance (as described in and as determined pursuant to Section 4.4(c)(2) of the Partnership Agreement), together with a fifty percent (50%) interest as limited partner of SBR.  Sonesta acknowledges and agrees that as an original party to the Agreement of Limited Liability Limited Partnership of SBR, it has already been recognized as a partner of SBR and shall not by reason of the merger increase or change its partnership interest.

(b)                                  For purposes of this Agreement, the cash component of the Merger Consideration shall, at the Closing, be payable in cash by wire transfer of immediately available federal funds to the account of Sonesta, less the amount of the Deposit that is held by Escrow Agent.

(c)                                   The Deposit shall be paid pursuant to the terms of the Partnership Agreement.

(d)                                  There shall be no adjustments, credits or prorations to the Merger Consideration as the Interim Lease (as defined in the Partnership Agreement) will be entered into on the Closing.

3.2                                  Cancellation of Company Membership Interests . At the Closing, Sonesta shall surrender to SBR all certificates evidencing Membership Interests, if any, in proper form for cancellation, and upon such surrender shall be entitled to receive in exchange therefor the Merger Consideration.  At the Closing, the Company Membership Interests shall forthwith be cancelled.  Without limiting the generality of the foregoing (and notwithstanding any other provisions of this Agreement), no interest shall be paid or accrued in respect of any of the Merger Consideration.  Until cancelled in accordance with this Section 3.2, the Company Membership Interests shall be deemed at all times from and after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration.

3.3                                  Intended Tax Consequences of Merger .  For federal income tax purposes, the parties intend that the Merger be treated in part as a sale by Sonesta to SBR in an amount equal to the cash portion of the Merger Consideration and in part as a contribution to the capital of SBR in an amount equal to excess of the value of the property over the cash portion of the Merger Consideration, which contribution is intended to be tax-free as described in Section 721 of the Internal Revenue Code of 1986, as amended (the “Code”).   The parties hereto agree not to take any action which could result in the Merger failing to so qualify.  For Florida documentary stamp tax purposes, the parties intend that the Merger be treated as a merger of the Company with and into SBR, with SBR owning all of the real and personal property of the Company by operation of law and without need for further documents or instruments of conveyance.

4.                                       Representations .

4.1                                  To induce SBR to enter into this Agreement and to pay the Merger Consideration therefor, Sonesta and the Company hereby make the following representations and warranties (to the extent that there are any conflicts between the representations and warranties made by Sonesta under the Partnership Agreement and the representations and warranties set forth in this Agreement, then the representations and warranties set forth in the Partnership Agreement shall control).

(a)                                   There are no actual or, to Sonesta’s or the Company’s knowledge, threatened suits, actions (including, without limitation, regulatory or governmental enforcement actions), claims, demands, proceedings or violations (and Sonesta has received no notice of contemplated suits, actions, proceedings or violations) with respect to Sonesta, the Company, the Hotel or the Property, by any Governmental Authority or otherwise that is not covered by insurance and, to Sonesta’s knowledge, neither the Property, nor any on site activities, have been subject to any governmental enforcement actions, proceedings or violations except as set forth in Exhibit “C” attached hereto.

(b)                                  Except as otherwise specifically provided under the Partnership Agreement or the Interim Lease, neither Sonesta nor the Company have since Sonesta’s entry into the Realty Purchase Agreement entered into any lease or other agreement affecting title to, possession of or otherwise affecting the ownership, maintenance, use or operation of the Property which shall bind SBR, the Company or the Property after the Closing without the written consent of SBR.

(c)                                   To the best of Sonesta’s and the Company’s knowledge and belief, and except as disclosed on Schedule 16.1(i)  to the Partnership Agreement, there has not been nor is there now:  (i) any Hazardous Substance (as hereinafter defined) present on the Land, (ii) any present or past generation, recycling, reuse, sale, storage, handling, transport and/or disposal of any Hazardous Substance on the Land, or (iii) any failure to comply with any applicable local, state or federal environmental laws, regulations, ordinances or administrative or judicial orders relating to the generation, recycling, reuse, sale, storage, handling, transport and/or disposal of any Hazardous Substance. In addition, there is no presence of any Hazardous Substance, any present or past generation, recycling, reuse, sale, storage, handling, transport and/or disposal of any Hazardous Substance or any failure to comply with any applicable local, state or federal environmental laws, regulations, ordinances or administrative or judicial orders relating to the generation, recycling, reuse, sale, storage, handling, transport and/or disposal of any Hazardous Substance.  As used herein, the term “Hazardous Substance” means any substance or material defined or designated as a hazardous or toxic waste material or substance, or other similar term by any federal, state or local environmental statute, regulation or ordinance presently or hereinafter in effect, as such statute, regulation or ordinance may be amended from time to time.

(d)                                  Sonesta and the Company will promptly join in and fully cooperate with SBR and provide any information and promptly execute any forms reasonably necessary and required with respect to (and Sonesta authorizes SBR as Sonesta’s agent to make) all

applications, permits or approvals deemed necessary by SBR in connection with SBR’s intended development of the Property for the Project, all of which shall be at no cost or expense to Sonesta or the Company (other than as provided for in the Partnership Agreement).  If any of the foregoing must, for any reason, be applied for or taken out in the name of Sonesta or the Company, Sonesta or the Company agree to promptly take any and all steps reasonably required in order for same to be accomplished.

(e)                                   The existing mortgages and other collateral documents relating to the Existing Indebtedness, the notes they secure and all related instruments (collectively the “ Loan Documents ”) are described on Exhibit “B” attached hereto; Sonesta is not in default under the Loan Documents, and, to Sonesta’s knowledge, other than for the consummation of the transactions contemplated by this Agreement and the transfer by Sonesta of the Property to the Trust and the merger of the Trust with and into the Company (the “Prerequisite Transactions”), there is no event that with the passage of time or the giving of notice, or both, would constitute a default under any of the Loan Documents; the Loan Documents have not been amended or supplemented (except as set forth on Exhibit “B” ) and all payments of principal and interest, taxes, insurance and other sums as are required under the Loan Documents are current in accordance with the terms thereof and shall continue to be paid when due up to and including the day of Closing.  Sonesta shall not, between the date hereof and the Closing, modify the Loan Documents or take or fail to take any action which would result in a default thereunder.

(f)                                     To Sonesta’s knowledge, Sonesta possesses or otherwise has the right to use those trademarks or registrations with respect to the Property set forth on Exhibit “D” attached hereto, all of which are included within the term “ Intellectual Property ” provided, however, none of the Intellectual Property is included within the Intangible Personal Property to be conveyed to SBR pursuant to this Agreement.

(g)                                  Sonesta and the Company are duly organized, validly existing and in good standing under the laws of the State of Delaware and have all requisite power and authority to enter into and perform its obligations hereunder and under any document or instrument required to be executed and delivered on behalf of such party hereunder.

(h)                                  Subject only to any approvals required by the holders of the Existing Indebtedness, this Agreement has been duly authorized by all necessary action on the part of Sonesta, has been duly executed and delivered by Sonesta and the Company, constitutes the valid and binding agreement of Sonesta and the Company and is enforceable in accordance with its terms.  The persons executing this Agreement on behalf of Sonesta and the Company have the authority to do so.

(i)                                      Subject only to any approvals required by the holders of the Existing Indebtedness, except as set forth on Schedule 16.1(c) of the Partnership Agreement, performance by Sonesta and the Company of its obligations under this Agreement will not contravene, or constitute a breach or default under, any provision of applicable law or regulation, Sonesta’s or the Company’s organizational documents or any agreement, obligation, judgment, injunction, order, decree or other instrument binding upon Sonesta or the Company or to which the Property is subject, or result in the creation of any lien or other encumbrance on any asset of Sonesta or the Company.

(j)                                      To Sonesta’s knowledge, Sonesta has not received any written notice of any proposed special taxes or assessments relating to the Property or any part thereof or any planned public improvements that will result in a special tax or assessment against the Property.

(k)                                   Except as otherwise set forth in Exhibit “C” attached hereto, to Sonesta’s and the Company’s knowledge, Sonesta and the Company have not received from any Governmental Authority written notice within the past year (or previously if still relevant) of any violation of any provision of Applicable Laws, including, but not limited to, those of environmental agencies, with respect to the ownership, operation, use, maintenance or condition of the Property which violation has not been remedied.

(l)                                      There are no management, service, supply, or maintenance contracts in effect with respect to the Property other than the Operating Agreements, Leased Property Agreements or Off-Site Facility Agreements that will be in effect with respect to the Property upon the termination of the Interim Lease, true and complete copies of which shall be delivered to SBR pursuant to Section 6 hereof.  To Sonesta’s and the Company’s knowledge, all parties to the Operating Agreements, Leased Property Agreements, Occupancy Agreements and Off-Site Facility Agreements have performed all of their obligations thereunder in all material respects, and are not in default thereunder in any material respect.  Sonesta and the Company have received no written notice of any intention by any of the parties to any of the Operating Agreements, Leased Property Agreements or Off-Site Facility Agreements to cancel the same, nor has Sonesta or the Company canceled any of the same.   All contracts or agreements not expressly set forth on the Schedules attached hereto which list the Operating Agreements, Leased Property Agreements, Occupancy Agreements and Off-Site Facility Agreements shall be the obligation of Sonesta, at its sole cost and expense and Sonesta hereby agrees to indemnify, defend and hold the SBR and its officers, directors, agents and representatives harmless from all liabilities, damages, claims, costs, fees and expenses whatsoever (including reasonable attorney’s fees and court costs at trial and all appellate levels) with respect to any contracts or agreements relating to the Property other than those set forth on the above referenced Schedules.

(m)                                To Sonesta’s knowledge, all of Sonesta’s insurance policies pertaining to the Property, its operation and use thereof are valid and in full force and effect and Sonesta has not received any written notice that it has failed to comply with any material requirements thereof.  Sonesta shall continue to maintain and pay for all liability and hazard insurance currently in force and/or as required under the terms of the Loan Documents for the Property through to the date of Closing.

(n)                                  Sonesta and the Company have received no written notice of any condemnation or eminent domain proceeding pending or threatened against the Property or any part thereof.

(o)                                  To Sonesta’s knowledge, all financial and operating statements provided to SBR by Sonesta are correct and complete in all material respects and present fairly the results of the operations of the Property for the periods indicated.

(p)                                  There are no leases, concessions or occupancy agreements in effect with respect to the Property that will remain in effect after the termination of the Interim Lease, other

than the Occupancy Agreements set forth on Schedule “Occupancy Agreements”,  true and correct copies of which have been delivered to SBR pursuant to Section 6 hereof.  Except as provided in the Occupancy Agreements, no tenant or concessionaire is entitled to any rebates, allowances, free rent or rent abatement for any period after the termination of the Interim Lease.  To Sonesta’s knowledge, Sonesta has not received written notice of any intention by any of the parties to any Occupancy Agreement to cancel the same, nor has Sonesta canceled any of same.  To the extent that any Occupancy Agreement calls for security, to Sonesta’s knowledge, such security amounts remain on deposit with Sonesta and have not been applied towards any payment due under said Occupancy Agreements.  Except as provided in the Occupancy Agreements, Sonesta has not received any advance rent or advance compensation under any of said Occupancy Agreements in excess of one month. To Sonesta’s knowledge, no party is in default under any Occupancy Agreement.  To Sonesta’s knowledge, Sonesta has performed in all material respects all obligations required of it under all of the Occupancy Agreements and, to Sonesta’s knowledge, there remain no unfulfilled material obligations of Sonesta under any Occupancy Agreement.  To Sonesta’s knowledge, no tenant has given written notice to Sonesta of its intention to institute litigation with respect to any Occupancy Agreement.  To Sonesta’s knowledge, the rent roll attached hereto as Exhibit “E” is true and correct as of the date hereof.

(q)                                  To the best of Sonesta’s knowledge, no commitments have been made to any governmental authority, utility company, school board, church or other religious body or any merchant’s association or any other organization, group or individual which would impose an obligation upon the SBR or its successors or assigns to mak