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Exhibit 10.14(a)
AGREEMENT
OF
LIMITED LIABILITY LIMITED PARTNERSHIP OF
SBR-FORTUNE ASSOCIATES, LLLP
DATED AS OF JANUARY 17, 2005
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PRELIMINARY STATEMENTS
................................................................................
76
ARTICLE 1 DEFINED TERMS
...........................................................................
77
1.1
Definitions
...............................................................................
77
1.2 Certain
Other Terms
.......................................................................
97
1.3 Accounting
Terms
..........................................................................
98
1.4 Schedules
and Exhibits
....................................................................
98
ARTICLE 2 FORMATION OF
PARTNERSHIP
................................................................
98
2.1 Formation;
Admission of Partners
.......................................................... 98
2.2 Name
......................................................................................
98
2.3
Certificates and Documents
................................................................
99
2.4 Principal
Offices
.........................................................................
99
ARTICLE 3 TERM
....................................................................................
99
ARTICLE 4 PURPOSE AND
POWERS OF THE PARTNERSHIP
................................................... 99
4.1 Purpose
...................................................................................
99
4.2 Powers
...................................................................................
103
4.3 Title to
Partnership Property
............................................................
103
4.4 Summary of
Transaction
...................................................................
103
ARTICLE 5 CAPITAL
CONTRIBUTIONS; PERCENTAGE INTERESTS; FINANCING
................................. 113
5.1 Initial
Capital Contributions
............................................................
113
5.2 Additional
Capital Contributions; Guarantees; Financing
.................................. 114
5.3 Failure to
Contribute Additional Contributions
........................................... 116
5.4 Computation of Capital
Accounts ..........................................................
119
5.5 Capital
Accounts Generally; No Interest on Capital
....................................... 120
ARTICLE 6 PROFITS AND
LOSSES; SPECIAL ALLOCATIONS
................................................ 120
6.1 Profits
and Losses
.......................................................................
120
6.2 Special
Allocations.
.....................................................................
122
ARTICLE 7 DISTRIBUTIONS
..........................................................................
126
7.1 Net Cash
Flow
............................................................................
126
7.2
Distributions Resulting from Refinancings, a Sale of All or a
Portion of the
Property not in the Ordinary Course and the Dissolution and Winding
Up of the
Partnership
..............................................................................
126
7.3
Distributions In-Kind
....................................................................
127
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7.4 Assignment
of Distributions
..............................................................
128
7.5
Withholding Taxes with Respect to Partners
............................................... 128
7.6 Profits,
Losses and Net Cash Flow from Hotel Operations
.................................. 129
ARTICLE 8 MANAGEMENT OF
THE PARTNERSHIP
.......................................................... 129
8.1
Management; General Partner
..............................................................
129
8.2 General
Rights and Duties of General Partner
............................................. 134
8.3 Execution
of Purchase and Sale Agreements
................................................ 138
8.4 Sales and
Marketing Offices
..............................................................
138
8.5 Services
of Partners
.....................................................................
138
8.6
Miscellaneous Management Provisions
...................................................... 140
8.7 Hotel
Operations
.........................................................................
142
8.8 Bank
Accounts
............................................................................
143
ARTICLE 9 POWERS, RIGHTS
AND LIABILITIES OF THE LIMITED PARTNERS
................................. 144
9.1 No Right
to Manage or Represent Partnership
.............................................. 144
9.2
Limitations on Liability
.................................................................
144
9.3 No
Priority
..............................................................................
144
ARTICLE 10 DISSOLUTION AND TERMINATION
............................................................
145
10.1 Events
Triggering Dissolution
............................................................
145
10.2 Termination
..............................................................................
146
ARTICLE 11 RESTRICTION ON
TRANSFERS OF PERCENTAGE INTERESTS
....................................... 146
11.1 Assignment
...............................................................................
146
11.2 Changes in
Control of Corporation or Entity
.............................................. 146
11.3 Permitted
Transfers
......................................................................
147
11.4 Effect of
Assignment: Documents
.......................................................... 148
11.5 Transfer in
Violation
....................................................................
148
ARTICLE 12 LIABILITY AND
INDEMNIFICATION
.......................................................... 149
12.1 Liability of
General Partner
.............................................................
149
12.2 Indemnification
of General Partner
....................................................... 149
12.3 Indemnification of
Guarantors
............................................................
150
12.4 Contractual
Provisions
...................................................................
150
12.5 Indemnification
of Limited Partners
...................................................... 151
12.6 Indemnification
by Sonesta with respect to Hotel Operations
.............................. 151
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ARTICLE 13 ACCOUNTING
.............................................................................
152
13.1 Method of
Accounting: Accountants
........................................................ 152
13.2 Books and
Records
........................................................................
152
13.3 Federal Tax
Returns
......................................................................
152
ARTICLE 14 REPORTS AND STATEMENTS
.................................................................
153
14.1 Tax Return
Information
...................................................................
153
14.2 Financial
Statements
.....................................................................
153
14.3 Reports
..................................................................................
153
14.4 Inspection
Rights
........................................................................
155
ARTICLE 15 DEALINGS IN GOOD
FAITH; BEST EFFORTS
................................................... 155
ARTICLE 16 REPRESENTATIONS AND
WARRANTIES
......................................................... 155
16.1 Sonesta
Representations
..................................................................
155
16.2 Fortune
Representations and Agreements
................................................... 158
16.3 Patriot Act and
OFAC Representations, Warranties and Covenants
........................... 159
16.4 Survival of
Representations
..............................................................
159
16.5 Brokers
..................................................................................
159
16.6 Indemnification
..........................................................................
159
ARTICLE 17 MISCELLANEOUS
..........................................................................
160
17.1 Governing Law
............................................................................
160
17.2 Partition of the
Property
................................................................
160
17.3 Notices
..................................................................................
160
17.4 No Waivers
...............................................................................
162
17.5 Joinder of
Edgardo Defortuna and Sonesta International Hotels Corp
....................... 162
17.6 Severability
.............................................................................
162
17.7 Benefits:
Binding Effect
.................................................................
162
17.8 Interpretation
...........................................................................
162
17.9 Counterparts
.............................................................................
162
17.10 Enforcement and Waiver
of Jury Trial .....................................................
163
17.11 No Third Party
Beneficiary
...............................................................
163
17.12 Integration
..............................................................................
163
17.13 Third Party Costs
........................................................................
164
17.14 Confidentiality of
Information
........................................................... 164
17.15 Dispute Resolution
.......................................................................
164
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AGREEMENT
OF
LIMITED LIABILITY LIMITED PARTNERSHIP OF
SBR-FORTUNE ASSOCIATES, LLLP
THIS
AGREEMENT OF LIMITED LIABILITY LIMITED PARTNERSHIP (the
"Agreement"), is made and entered into as
of the 17th day of January, 2005, by
and between Fortune KB GP, LLC, a Florida
limited liability company ("Fortune
GP") as the general partner (Fortune GP is
hereinafter sometimes referred to as
the "General Partner"), and Fortune KB,
LLC, a Florida limited liability company
("Fortune LP") and Sonesta Beach Resort
Limited Partnership, a Delaware limited
partnership("Sonesta"), as limited partners
(Sonesta and Fortune LP are
hereinafter sometimes referred to
collectively as the "Limited Partners" and
individually as a "Limited Partner").
PRELIMINARY STATEMENTS
A.
A
Certificate of Limited Partnership was filed by the General
Partner with the Secretary of State of the
State of Florida on January 13, 2005
to form SBR-Fortune Associates, Ltd. (the
"Partnership").
B.
The
Partnership has filed a Statement of Qualification in the
Office of the Secretary of State of the
State of Florida and has obtained the
status of a limited liability limited
partnership named SBR-Fortune Associates,
LLLP.
C.
The
General Partner and the Limited Partners (collectively, the
"Partners") desire to form the Partnership
for the purpose of acquiring the
Land, developing the Project and selling
condominium units and other parcels of
real estate comprising the Project.
D.
All
of the parties hereto desire to set forth in writing the terms
and provisions of their agreement of
limited partnership, including but not
limited to terms concerning the interim
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operation of the Hotel, commencement of
Pre-Development Activities and the
budgeting for and funding of the cost of
development, construction and sale of
the Project.
E.
All
terms appearing herein in initial capitalized letters but not
otherwise defined herein shall have the
meanings ascribed to such terms in
Section 1.1 below.
NOW,
THEREFORE, in consideration of the mutual promises, covenants
and
agreements herein contained, and other good
and valuable consideration, the
receipt and sufficiency of which are hereby
acknowledged, the Partners hereby
agree as follows:
ARTICLE 1
DEFINED TERMS
1.1
DEFINITIONS. As used in this Agreement, the following terms
shall
have the meanings set forth below.
ACT:
The Florida
Revised Uniform Limited Partnership Act (1986) as
enacted in the State of Florida and as
hereafter amended.
ADDITIONAL CAPITAL CONTRIBUTIONS: Amounts, if any, contributed to
the
capital of the Partnership by the Partners
pursuant to Subsection 5.2(a) or as
otherwise provided in this Agreement.
ADDITIONAL CAPITAL CONTRIBUTION DEFAULT: Shall have the meaning set
forth
in Subsection 5.3(a).
AFFILIATE: Means (a) any officer, director, employee,
shareholder,
manager, member or partner of a Partner;
(b) any corporation, partnership,
limited liability company, trust or other
entity controlling, controlled by or
under common control with such Partner (or
other party as applicable); and (c)
any officer, director, employee,
shareholder, manager, member or partner of any
entity described in clause (b) above. For
purposes of this definition, the term
"control" when used with respect to any
specified "Person" shall mean the power
to direct the management and policies of
such Person, directly or indirectly,
whether through the ownership of voting
securities
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or other beneficial interest, by contract
or otherwise. "CONTROL" shall be
conclusively presumed to exist with respect
to any Person that owns, directly or
indirectly, twenty-five percent (25%) or
more of the beneficial interests in a
Person.
AGREEMENT: This Agreement of
Limited Liability Limited Partnership and
any amendments thereto.
ANCILLARY AGREEMENTS: The Escrow Agreement, Interim Lease, the
Listing
Agreement, the Sonesta License Agreement,
the Realty Purchase Agreement and the
Long-Term Management Agreement.
APPROVE, APPROVED or APPROVAL: As to the subject matter thereof and
as
the context may require or permit, an
express consent or approval contained in a
written statement signed by the approving
Person, and if any Person is requested
to approve any item or matter pursuant to
this Agreement within a specified time
frame and such Person fails to approve such
item in writing within such a time
frame, such failure shall constitute and be
deemed a rejection of the applicable
request. To the extent no time frame is
provided with respect to any particular
Approval requested hereunder, such Approval
must be provided (or not) within ten
(10) days of the request for same.
Notwithstanding the foregoing, in the event
that no response is received to a request
for approval within said ten (10) day
period, the party requesting the approval
may, if it desires to continue to
pursue such approval, send a notice (in
accordance with Section 17.3) to the
other party which would include the
following language: "THIS SECOND REQUEST FOR
APPROVAL IS ISSUED PURSUANT TO THAT CERTAIN
AGREEMENT OF LIMITED LIABILITY
LIMITED PARTNERSHIP OF SBR-FORTUNE
ASSOCIATES, LLLP. FAILURE TO RESPOND TO THIS
REQUEST WITHIN FIVE (5) DAYS FOLLOWING THE
DATE THIS NOTICE HAS BEEN GIVEN SHALL
BE DEEMED AN APPROVAL OF THE REQUESTED
MATTER." Failure to respond within said
five (5) day period described in the
immediately preceding sentence shall de
deemed an approval of the requested
matter.
ATTORNEYS' FEES: All reasonable fees charged by an attorney for
his
services and the services of any
paralegals, legal assistants or law clerks,
including (but not limited to) reasonable
fees charged for representation at the
trial level and in all appeals.
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BRIDGE LOAN: The financing, if any, obtained by Fortune GP on
behalf of
the Partnership and secured by a mortgage
encumbering the Property unless such
financing meets the definition of the
Construction Loan.
BUDGET: The budget for the pre-development, development,
construction,
marketing and sale of the Project which
shall be substantially in the form
attached hereto as EXHIBIT A, as such
Budget may be revised or amended. The
Partners acknowledge that in preparing the
attached Budget, they did not have
all of the information necessary for such
Budget to be final and recognize that
such Budget will be preliminary in nature
and subject to modification including
further refinement and elaboration, as
provided herein. Upon approval by the
Partners, revisions of the Budget shall be
adopted by sequentially numbered
amendments to EXHIBIT A of this
Agreement.
BUSINESS DAY: Any day other than (i) Saturday or Sunday or (ii)
those
during which banks in the State of Florida
or the Commonwealth of Massachusetts
are not open for business.
CAPITAL ACCOUNT: The account established and maintained for each
Partner
by the Partnership in accordance with the
provisions of Section 5.4 hereof.
CAPITAL CONTRIBUTIONS: The aggregate contributions made by a
Partner to
the capital of the Partnership which are
designated as "Capital Contributions"
pursuant to the provisions of Article V
hereof.
CESSATION NOTICE: The written notice described in Subsection
4.4(d)(1)
below.
CLAIMS: Shall have the meaning as set forth in Subsection 16.6.
CODE: The Internal Revenue Code of 1986, as amended, and any
successor
statute thereto.
CONSTRUCTION LENDER: The maker of the Construction Loan.
CONSTRUCTION LOAN: The construction loan to be obtained by the
Partnership to construct the Project.
Unless otherwise agreed by the Partners,
the Partnership shall solicit no less than
three (3) proposals to provide such
financing from major lenders.
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CONSTRUCTION LOAN BUDGET: The budget submitted to and approved by
the
Construction Lender (and the Partners), as
such budget may be revised from time
to time upon the agreement of the Partners
and the Construction Lender.
CONTRIBUTED LAND: An undivided two-thirds (2/3rds) interest in the
Land
which is being contributed to the capital
of the Partnership by Sonesta as its
Initial Capital Contribution pursuant to
Subsection 5.1(b) below.
CONTRACTS: All contracts, arrangements, leases, licenses,
concessions,
easements, service contracts, maintenance
agreements, listing agreements,
brokerage agreements, employment
agreements, management agreements, construction
agreements, architectural agreements and
any other agreements, either recorded
or unrecorded, written or oral, affecting
the use, ownership or operation of the
Hotel and/or all or any portion of the
Property, other than the Permitted
Exceptions. A schedule of the Contracts
existing as of the Effective Date shall
be presented by Sonesta to the Fortune
Partners within ten (10) Business Days of
the Effective Date and shall thereupon be
incorporated into this Agreement as
EXHIBIT B. Upon termination of the Interim
Lease EXHIBIT B will be updated to
reflect the Contracts existing as of such
date.
CONVEYANCE DOCUMENTS: All documents necessary to convey title to
the Land
to the Partnership, including but not
limited to those set forth in Exhibit "B"
to the Escrow Agreement entitled "Escrowed
Documents".
CURRENT OPERATING EXPENDITURES: The expenditures of the Partnership
for
each Fiscal Year, or part thereof, arising
from the ordinary course of the
Partnership's business, including, without
limitation, the following:
(1)
general operating expenses including, but not limited to,
insurance, taxes, assessments, architectural, engineering,
permitting, legal, accounting and other professional fees,
Deferred Fees, marketing, construction and any other
expenses expended on behalf of the Partnership in relation
to its business operation, but excluding the Hotel Shutdown
Payments;
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(2)
payments of principal and interest upon indebtedness of the
Partnership entered into in accordance with the terms of
this Agreement excluding Default Financings;
(3)
establishment of appropriate reserves for debt service,
capital improvements and repairs, to provide working
capital or any other contingency of the Partnership;
(4)
expenses incurred in connection with and the establishment
of reserves for the restoration of the Property resulting
from the casualty or
condemnation of the Property; and
(5)
defeasance, prepayment or comparable expenses or charges
required to be paid in connection with the retirement or
replacement of the Existing Indebtedness.
Notwithstanding the foregoing, the Partners
acknowledge that Hotel operations
prior to the Cessation Date shall be
conducted by the Hotel Manager pursuant to
the Interim Lease and that except for those
items which by the express terms of
this Agreement or the Interim Lease are to
be paid by the Partnership, the
expenses of operating the Hotel shall be
borne by the Hotel Manager.
DEFAULT FINANCINGS: The financings advanced pursuant to Subsection
5.3
below.
DEFAULT NOTICE: Shall have the meaning as set forth in Subsection
5.3.
DEFAULTING PARTNER: Shall have the meaning as set forth in
Subsection
5.3.
DEFERRED FEES: Shall have the meaning set forth in Subsection
8.5(b).
DEPRECIATION: For each Fiscal Year or other period, an amount equal
to
the depreciation, amortization, or other
cost recovery deduction allowable with
respect to an asset for such year or other
period, except that if the Gross
Asset Value of an asset differs from its
adjusted basis for
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federal income tax purposes at the
beginning of such year or other period,
Depreciation shall be an amount which bears
the same ratio to such beginning
Gross Asset Value as the federal income tax
depreciation, amortization, or other
cost recovery deduction for such year or
other period bears to such beginning
adjusted tax basis; provided, however, that
if the federal income tax
depreciation, amortization, or other cost
recovery deduction for such year is
zero, Depreciation shall be determined with
reference to such beginning Gross
Asset Value using any reasonable method
selected by the Partners.
DESIGNATED HOTEL CLOSING DATE: August 31, 2006 or such other date
agreed
to by the Partners, as described in
Subsection 4.4(d)(1), as the date on which
Hotel operations should cease.
DUE
DILIGENCE PERIOD: The period of time commencing on the Effective
Date
and ending thirty (30) days thereafter.
EFFECTIVE DATE: January 17, 2005.
ESCROW AGENT: Bilzin Sumberg Baena Price & Axelrod LLP.
ESCROW AGREEMENT: That certain Escrow Agreement to be entered into
by and
among the Partnership, the Partners and the
Escrow Agent. The form of said
agreement shall be appended as EXHIBIT C
promptly after the Effective Date. The
Partners have agreed that there will be no
substantive terms of the Escrow
Agreement which are in conflict with or
otherwise inconsistent with the terms
and intention of this Agreement.
ESCROW RELEASE ACTIONS: Shall have the meaning set forth in the
Escrow
Agreement, all of which are to be
ministerial in nature.
ESCROW RELEASE CONDITIONS: Shall have the meaning set forth in the
Escrow
Agreement, which conditions shall include
the following (and no others unless
such conditions are solely ministerial in
nature): (i) payment by Fortune of
Tranche 1, Tranche 2, Tranche 3 and Tranche
4, (ii) satisfaction of the Existing
Indebtedness either by payment or
refinancing and the release of Sonesta from
its obligations thereunder, (iii) all
documents that are contemplated to be
entered into by the parties hereto prior to
the Escrow Release Date shall have
been agreed upon, either
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voluntarily or by binding arbitration, and
(iv) all other conditions required by
this Agreement for the release of the
Escrowed Items shall have been satisfied
and all actions shall have been performed
by the applicable parties hereto.
ESCROW RELEASE DATE: The earlier of (i) the fifth (5th) Business
Day
after the date on which the Fortune
Partners provide written notice of their
election not to proceed with the
transactions described herein, which notice
must be provided in accordance with
Subsection 4.4(a)(3) and Section 17.3 below,
or (ii) the date on which the Escrow
Release Conditions have been satisfied.
ESCROWED ITEMS: Shall mean collectively, (i) the Conveyance
Documents,
(ii) the Ancillary Agreements, and (iii)
Tranche 1, Tranche 2, Tranche 3 and
Tranche 4 of the Fortune Partners' Initial
Capital Contributions, each of which
are to be deposited with the Escrow Agent
in accordance with the terms of
Section 5.1(a) of this Agreement.
EXCESS DEVELOPMENT AND CONSTRUCTION OVERRUNS: All costs incurred
in
achieving Project Completion (including
without limitation any fines or
penalties) in excess of one hundred fifteen
percent (115%) of the aggregate
expenditures (including contingencies) set
forth in the Construction Loan
Budget, provided however, costs incurred in
connection with the Project which
arise from any of the following shall not
be deemed to give rise to Excess
Development and Construction Overruns (i)
changes in the scope of the Project
which are acceptable to both the Fortune
Partners and Sonesta, (ii) delays to
the extent caused by or increased costs
attributable to any acts of Sonesta, or
any of Sonesta's Affiliates, Related
Parties, agents, directors, employees, and
representative, (iii) Force Majeure, or
(iv) excess costs incurred with respect
to the payment of sales commissions as a
result of increased sales prices
provided that such commissions are not in
excess of the amounts described in the
Listing Agreement.
EXCESS FINANCING COSTS: Shall mean the sum of (a) that portion of
the
interest expense of the Partnership for
each period in which the drawn down
portion of the Non-Construction Loan
Indebtedness exceeds Thirty-Nine Million
Dollars ($39,000,000.00) and which is
attributable to such excess, plus (b) the
portion of the costs incurred in connection
with obtaining, negotiating and
closing all Non-Construction Loan
Indebtedness which are either (I) agreed by
the Partners, or (II) in the absence of
such an agreement, equal to the product
of (i) all such costs described in
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clause (b) incurred by the Partnership as a
result of such Non-Construction Loan
Indebtedness (but only to the extent such
costs would not otherwise have been
incurred had the Non-Construction Loan
Indebtedness not been in excess of the
Indebtedness Threshold), and (ii) a
fraction, the numerator of which is the
excess of (x) the total Non-Construction
Loan Indebtedness, over (y) Thirty-Nine
Million Dollars ($39,000,000.00) and the
denominator of which is the total
Non-Construction Loan Indebtedness.
EXCESS INDEBTEDNESS: Shall have the meaning set forth in
Subsection
5.2(a)(ii).
EXISTING INDEBTEDNESS: Shall have the meaning as set forth in
Subsection
4.4(c)(2).
EXISTING INDEBTEDNESS BALANCE: Shall have the meaning as set forth
in
Subsection 4.4(c)(2).
FISCAL YEAR: The fiscal year of the Partnership, which shall be
the
calendar year.
FORCE MAJEURE shall mean an act of God (including but not limited
to
hurricanes), war, enemy action, civil
insurrection, or substantial labor dispute
(including strike or lockout) which is
beyond the reasonable control of the
Fortune GP and has a demonstrable material
adverse economic and/or timing effect
on the ability of the Fortune GP to procure
necessary goods or services,
Governmental Requirements not foreseeable
on the date of execution of this
Agreement, fire, casualty, act of terrorism
or any other act or circumstance
beyond the reasonable control of the
Fortune GP for which no blame or fraud can
be imputed and which has a demonstrable
material adverse economic and/or timing
effect on the ability of the Fortune GP to
procure necessary goods or services.
FORTUNE
EXCESS BALANCE: Shall have the meaning as set forth in
Subsection
6.1(b)(2).
FORTUNE PARTNERS: The Fortune GP and the Fortune LP. Any amount
payable
or otherwise allocable to or from the
Fortune Partners hereunder shall, unless
specifically indicated herein to the
contrary, be paid to or from the Fortune GP
and the Fortune LP pro rata in accordance
with their respective Percentage
Interests.
GENERAL PARTNER: Fortune GP or any successor General Partner
appointed in
accordance with the terms of this
Agreement.
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GOVERNMENTAL AUTHORITY: Any federal, state, county, municipal or
other
governmental department or quasi
governmental/citizens group, entity, authority,
commission, board, bureau, court, agency or
any instrumentality of any of them.
GOVERNMENTAL REQUIREMENT: Any law, enactment, statute, code,
ordinance,
rule, regulation, judgment, decree, writ,
injunction, permit, certificate,
license, authorization, agreement, or other
direction or requirement of any
Governmental Authority existing on the date
on which the applicable Governmental
Requirement must be satisfied.
GROSS ASSET VALUE: With respect to any asset, the asset's adjusted
basis
for federal income tax purposes, except as
follows:
(1) The
initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market
value of such asset, as determined by the contributing
Partner and the General Partner;
(2) The
Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market
values, as determined by the General Partner, as of the
following times: (a) the acquisition of an additional
interest in the Partnership by any new or existing Partner
in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a
Partner of more than a de minimis amount of Property as
consideration for an interest in the Partnership; and (c)
the liquidation of the Partnership within the meaning of
Regulations Section 1.704-l(b)(2)(ii)(g); provided,
however, that adjustments pursuant to clauses (a) and (b)
above shall not be made if the General Partner reasonably
determines that such adjustments are not necessary or
appropriate to reflect the relative economic interests of
the Partners in the Partnership;
(3) The
Gross Asset Value of any Partnership asset distributed
to any Partner shall be the gross fair market value of such
asset on the date of distribution; and
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(4) The
Gross Asset Values of Partnership assets shall be
increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that
such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section
1.704-l(b)(2)(iv)(m) and Section 6.2 hereof; provided,
however, that Gross Asset Values shall not be adjusted
pursuant to this subsection (4) to the extent that the
General Partner determines that an adjustment pursuant to
subsection (3) above is necessary or appropriate in
connection with a transaction that would otherwise result
in an adjustment pursuant to this subsection (4).
If the Gross Asset Value of an asset has
been determined or adjusted pursuant to
subsections (1), (2) or (4) hereof, such
Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into
account with respect to such asset for
purposes of computing Profits and
Losses.
GROSS REVENUE: The gross revenue of the Partnership arising from
the
ordinary course of the Partnership's
business, including, prior to the date on
which the Hotel is demolished, only the
gross revenue derived by the Partnership
(as opposed to by the Hotel Manager) under
the Interim Lease, if any, will be
gross revenue of the Partnership (the
Partners acknowledge that Gross Revenue
attributable to the Hotel operations prior
to the Cessation Date shall be the
property of the Hotel Manager as provided
in the Interim Lease, as more fully
described in Subsection 8.7 below, and
shall not constitute Gross Revenues of
the Partnership). Gross Revenue shall
include Capital Contributions and the
proceeds of loans, and shall also include
any property insurance or condemnation
proceeds unless such proceeds are being
used to rebuild or restore the Project
or repay indebtedness encumbering the
Project.
HOTEL: That certain two hundred ninety four (294) room hotel
currently
operated by Sonesta on the Land under the
name Sonesta Beach Resort Key Biscayne
on the Land.
HOTEL MANAGER: Sonesta or its Affiliate which is retained as the
manager
of the Hotel during the Interim Hotel
Operating Period.
HOTEL OPENING DATE: The date upon which Project Completion has
occurred.
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HOTEL SHUTDOWN PAYMENTS: The sum of One Hundred Twenty-Five
Thousand
Dollars ($125,000.00) per month, or a
prorated amount for partial months, which
will be paid to Sonesta, in arrears, on the
thirtieth (30th) day of each month
commencing with the month in which the
Hotel is closed to guests pursuant to the
Cessation Notice and continuing until the
Hotel Opening Date; provided however
that notwithstanding anything to the
contrary contained herein, in no event
shall the Hotel Shutdown Payments commence
earlier than June 30, 2006.
INDEBTEDNESS THRESHOLD: Forty-Five Million Dollars
($45,000,000.00).
INDEMNITEES: Shall have the meaning as set forth in Section
16.5.
INDEMNITOR: Shall have the meaning as set forth in Section
16.5.
INITIAL CAPITAL CONTRIBUTIONS: The amount initially required to
be
contributed to the capital of the
Partnership by a Partner pursuant to Sections
5.1(a) and 5.1(b) below.
INSPECTIONS: Shall have the meaning set forth in Subsection
4.4(a)(1).
INTERIM LEASE: That certain Interim Lease pursuant to which lease
Sonesta
or an Affiliate of Sonesta shall lease the
Hotel from the Partnership during the
Interim Hotel Operating Period. The form of
the Interim Lease will be in
accordance with the terms attached hereto
as EXHIBIT D, will be agreed to by the
parties thereto during the Due Diligence
Period, and which form of agreement,
once finalized, will be appended hereto as
EXHIBIT D. The Interim Lease will be
executed by the parties thereto at the end
of the Due Diligence Period and will
be deposited with the Escrow Agent as an
Escrowed Item.
INTERIM HOTEL OPERATING PERIOD: The period of time prior to the
Cessation
Date, during which the Hotel shall be
leased by the Partnership to an Affiliate
of Sonesta pursuant to the Interim
Lease.
LAND: The approximately 10.6 acre parcel of land (the "REALTY")
described
in EXHIBIT E attached hereto, located on
Key Biscayne, in Miami-Dade County,
Florida on which the Hotel is operated,
together with Sonesta's interest in and
to the following property and rights:
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(1)
All strips
and gores of land lying adjacent to the Realty,
together with all easements, privileges, rights-of-way,
riparian
and other water rights, lands underlying any adjacent streets
or
roads, and appurtenances pertaining to or accruing to the
benefit
of the Realty.
(2)
All
deposits, licenses, permits, authorizations, approvals and
contract rights pertaining to ownership and/or operation of the
Hotel and/or the Project including the Contracts.
(3)
The
existing telephone number(s) for the Hotel (which the Partners
agree shall be the phone number for the hotel to be contained
within the New Development), general intangible rights
pertaining
to the ownership and/or operation of the Hotel and/or the
Project
and brochures and other sales materials (expressly excluding,
however, any rights to the name "Sonesta" and any related
Sonesta
intellectual property).
(4)
All
general intangible rights pertaining to the ownership and/or
operation of the Hotel and/or the Project (expressly excluding
the
name Sonesta and any related Sonesta intellectual property).
(5)
All
architectural and engineering plans and specifications,
surveys and drawings in connection with the Hotel and/or the
Project and the improvements to be constructed thereon.
LIMITED PARTNERS: Fortune LP and Sonesta and any permitted
successors and
assigns thereto and any additional limited
partners admitted to the Partnership
in accordance with the terms of this
Agreement.
LISTING AGREEMENT: That certain Listing Agreement to be entered
into by
and between the Partnership and Fortune
Development Sales Corp., pursuant to
which Fortune Development Sales Corp. shall
be retained as the exclusive sales
agent for the Partnership, as described
therein, and shall be paid a listing fee
in connection with bona fide third party
sales of 2.75%, which agreement shall
be agreed upon by the parties thereto by no
later than the end of the Due
Diligence Period and, once finalized, will
be appended hereto as EXHIBIT F. The
Listing
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Agreement will be executed by the parties
thereto at the end of the Due
Diligence Period and will be deposited with
the Escrow Agent as an Escrowed
Item. The Listing Agreement will provide,
without limitation, that the
Partnership shall have the option to
terminate it in the event that the Fortune
Partners cease to Control at least forty
(40%) percent of the Percentage
Interests in the Partnership.
LONG
TERM MANAGEMENT AGREEMENT: That certain long term hotel
management
agreement between Hotel Manager and the
Partnership pursuant to which the Hotel
Manager, or an affiliate, shall operate the
New Hotel following the
redevelopment contemplated as part of the
Project, which agreement shall include
the terms set forth in the term sheet
attached hereto as EXHIBIT G and which
agreement shall be agreed upon by the
parties thereto by no later than the
Escrow Release Date, the initial draft of
which shall be provided by Sonesta
during the Due Diligence Period, and, once
finalized, will be appended hereto as
EXHIBIT G.
MAJOR DECISIONS: Shall have the meaning set forth in Section
8.1(b).
MILESTONES: Those specific benchmarks set forth in EXHIBIT H.
NET
CASH FLOW: Commencing on the date of execution of this Agreement,
Net
Cash Flow shall mean the Gross Revenue for
an applicable period less the Current
Operating Expenditures for the same
period.
NET
DEFICIT: A Net Deficit shall arise when the funds of the
Partnership
are insufficient to pay (i) all expenses
relating to the development and
construction of the Project, (ii) all
expenses relating to the sale, operation,
marketing and management of the Project
actually incurred and currently due by
the Partnership, including, without
limitation, insurance, real estate taxes,
utilities, salaries, costs of maintenance,
cleaning, and costs of repairs, (iii)
current debt service payments and similar
obligations of the Partnership in
respect of the Project or the Partnership
and (iv) satisfying any current
indebtedness of the Partnership (whether
secured or unsecured).
NEW
DEVELOPMENT: Shall have the meaning attributed to it in Section
4.4(e) of this Agreement.
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NEW
HOTEL: Shall mean the hotel component of the New Development to
be
operated by a Sonesta Affiliate pursuant to
the Long Term Management Agreement.
NON-ARBITRABLE MATTERS: The Major Decisions set forth in
Subsections
8.1(b)(5), 8.1(b)(6), 8.1(b)(7), 8.1(b)(8),
8.1(b)(10), 8.1(b)(11), 8.1(b)(13),
8.1(b)(22), and 8.1(b)(29). It is the
intention of the Partners that either
Partner may prevent Non-Arbitrable Matters
from being arbitrated.
NON-CONSTRUCTION LOAN INDEBTEDNESS: The aggregate of the Bridge
Loan and
any other indebtedness secured by a
mortgage or mortgages encumbering the
Property and incurred by the Partnership
prior to the closing of the
Construction Loan. In no event may the
principal amount of the Non-Construction
Loan Indebtedness outstanding at any time
and from time to time exceed Sixty
Million Dollars ($60,000,000.00) without
the consent of Sonesta.
PARTNERS: The General Partner and the Limited Partners.
PARTNERSHIP: The limited liability partnership described by
this
Agreement.
PARTNERSHIP INTEREST: All the right, title and interest of a
Partner in
the Property, the Project and the
Partnership, as the same may vary from time to
time pursuant to the terms of this
Agreement, including the rights of a Partner
to a return of its Capital Contributions, a
distribution of the Partnership's
Property and all other rights under or
interest in this Agreement and the
Property.
PERCENTAGE INTEREST: The ultimate percentage interest of the
Partners in
the profits and losses of the Partnership.
The Percentage Interest of Fortune GP
shall be one percent (1%) as a General
Partner, the Percentage Interest of
Fortune LP shall be forty nine percent
(49%) as a Limited Partner, and the
Percentage Interest of Sonesta shall be
fifty percent (50%) as a Limited
Partner, none of which shall be subject to
change.
PERMITTED EXCEPTIONS: The title exceptions to be set forth in
EXHIBIT I
attached hereto. The Permitted Exceptions
shall be mutually agreed to by the
Partners promptly following the Effective
Date.
PERMITTED OPPORTUNITY: Shall have the meaning set forth in
Section
4.1(e).
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PERMITTED TRANSFEREES: Shall have the meaning as set forth in
Section
11.3.
PERMITTED VARIANCE: With respect to the matters contained in the
Budget
(including any revised or amended Budget
adopted in accordance with the terms of
this Agreement) when (a) the aggregate
expenditures in any line item does not
exceed one hundred ten percent (110%) of
the amounts previously approved for
such line item and (b) the aggregate
expenditures by the Partnership do not
exceed one hundred five percent (105%) of
the total aggregate amount contained
in such Budget.
PERSON: Any individual, partnership, firm, corporation, trust,
limited
liability company or other entity,
association or organization.
PRE-DEVELOPMENT ACTIVITIES: Those activities necessary to develop,
sell
and construct the Project and related
infrastructure on the Property, including
without limitation, licensing, permitting,
arranging for appropriate financing,
coordinating selling efforts, obtaining
zoning, entitlements, mapping, and
approvals, contracting engineers,
architects, contractors and consultants to
begin all working construction drawings and
shop drawings, and performing other
construction, management and consulting
activities relating thereto.
PRE-DEVELOPMENT PERIOD: The period during which the Hotel shall
continue
to be operated on the Land pursuant to the
Interim Lease.
PRESENTING PARTNER: Shall have the meaning set forth in
Subsection
4.1(e).
PROFITS AND LOSSES: For each Fiscal Year or other period, an amount
equal
to the Partnership's taxable income or loss
for such year or period, determined
in accordance with Code Section 703(a) (for
this purpose, all items of income,
gain, loss, or deduction required to be
stated separately pursuant to Code
Section 703(a)(1) shall be included in
taxable income or loss), with the
following adjustments:
(1) Any
income of the Partnership that is exempt from federal
income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this subsection
shall be added to such taxable income or loss;
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(2) Any
expenditures of the Partnership described in Code
Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-l(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this subsection
shall be subtracted from such taxable income or loss;
(3) In the
event the Gross Asset Value of any Partnership asset
is adjusted pursuant to Subsections (2) or (3) of the
definition of Gross Asset Value above, the amount of such
adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing
Profits or Losses;
(4) Gain
or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference
to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(5) In
lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss, there shall be taken into account
Depreciation for such fiscal year or other period; and
(6)
Notwithstanding any other provision of this subsection, any
items which are separately allocated pursuant to Section
6.2 hereof shall not be taken into account in computing
Profits or Losses.
PROJECT: (i) The development and construction on the Land of a
luxury
resort facility to be composed of such
components as the Partners mutually
agree, provided that unless otherwise
expressly agreed to by the Partners such
components shall include at a minimum: (a)
three hundred fifty (350) hotel keys
(including lockouts)(each hotel room being
not less than approximately 500
square feet), 25,000 square feet of meeting
space, two full service restaurants
and one upscale cafe and two swimming pools
and related lounge areas; together
with hotel
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shops, spa, support space, parking and
related amenities and commercial/retail
space, and (b) the maximum permissible
number of residential condominium units,
as well as such other facilities as are
agreed to by the Partners and are
reflected in the approved plans and
specifications; and (ii) the marketing and
sale of the condominium and any
non-condominium parcels or real property on the
Land. Notwithstanding the Partners'
inability to definitively agree, upon
execution of this Agreement, on all
components of the Project, the Partners have
agreed that, subject to applicable
Governmental Requirements, in all events, the
Project shall include those components
included in clause (a) above.
PROJECT COMPLETION: Shall be deemed to occur on the date (i) the
Project
has been completed (including the
installation of hotel furniture, fixtures and
equipment) in accordance with the plans and
specifications therefor approved by
the Partners, subject to only punch-list
items, (ii) a final certificate of
occupancy or equivalent approval has been
issued by a Governmental Authority
permitting occupancy of substantially all
of the Project and the operation
thereof for its intended purpose, and (iii)
all material permits and licenses
necessary to operate the New Hotel have
been received from applicable
Governmental Authorities.
PROJECT COSTS: All direct and indirect costs shown on the Budget
and
actually incurred by the Partnership
(including the value of the Land, which for
this purpose shall be as reflected in the
Budget).
PROJECT STANDARD: Project Standard refers to that quality of design
and
construction established pursuant to the
plans and specifications for the
Project approved by the Partners, which
shall be at or above the standard of
design and construction used at the
Ritz-Carlton (Key Biscayne) and Four Seasons
(Miami).
PROPERTY: The Land, the Hotel and the Project, as applicable.
PURCHASED LAND: An undivided one-third (1/3rd) interest in the Land
which
is being purchased by the Partnership
pursuant to the Realty Purchase Agreement.
QUALIFIED ARBITRATOR: Means an independent consulting firm or
individual
who is well respected in South Florida or
nationally and who or which is
qualified by experience and ability with
respect to the subject matter being
arbitrated, appointed in each instance by
agreement of the
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parties or, failing agreement, each party
shall select one (1) such consulting
firm or individual and the two (2)
respective firms and/or individuals so
selected shall select another such
consulting firm or individual to be the
Qualified Arbitrator, and in the event that
such firms and/or individuals do not
select another such consulting firm or
individual within fifteen (15) days of
the date they first confer on the subject,
either party shall be authorized to
request that the American Arbitration
Association designate the individual to
serve as the Qualified Arbitrator.
REALTY PURCHASE AGREEMENT: The agreement between Sonesta and
the
Partnership pursuant to which the
Partnership shall purchase the Purchased Land,
in a form containing the salient terms set
forth on EXHIBIT K hereto and which
agreement, which shall be agreed upon by
the parties by no later than the end of
the Due Diligence Period and, once
finalized, will be appended hereto as EXHIBIT
K.
REASONABLE AND CUSTOMARY EFFORTS: Shall mean that the Person in
question
shall do all acts and take all steps that
would be done and taken by reputable
and experienced development, management
and/or condominium sales Persons, as
applicable, of properties similar to the
Project in South Florida.
RECIPIENT PARTNER: Shall have the meaning set forth in Subsection
4.1(e).
RELATED OPPORTUNITY: Shall have the meaning set forth in
Subsection
4.1(e).
RELATED PARTY: When used with reference to any Person, (i) an
Affiliate
of such specified Person (ii) an officer,
director, general partner or trustee
of, or a Person who serves in a similar
capacity with respect to, the specified
Person, (iii) any Person in which the
specified Person owns, directly or
indirectly, any class of equity securities
or in which the specified Person or
entity has a beneficial interest; provided
that this provision shall not apply
to the ownership of equity securities or
beneficial interests in a Person if
such securities or beneficial interests
were acquired solely as an investment of
any issuer that is registered under Section
12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and that
are listed or admitted for trading on
any United States national securities
exchange or that are quoted on the
National Association of Securities Dealers
Automated Quotations System, or any
similar system or automated dissemination
of quotations of securities prices in
common use, so long as neither such
specified Person nor any Affiliate of such
specified Person is a member of any control
group (within the
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meaning of the rules and regulations of the
Securities and Exchange Commission)
of any such issuer (iv) any relative or
spouse of the specified Person, or (v)
any trust created by the specified Person
for the benefit of such Person's
spouse or children.
REPRESENTATIVES: The persons designated from time to time by the
Partners
to represent their respective interests in
all matters requiring the consent or
approval of the Partners, as such persons
may vary from time to time. The
initial Representative of the Fortune
Partners shall be Edgardo Defortuna, and
the initial Representative of Sonesta shall
be Roger Sonnabend. Each Partner
may, upon written notice to other Partners
at any time and from time to time,
appoint, substitute and replace a
Representative. The written statements or
representations of a Representative shall
be deemed to be the authorized
statements and representations of the
Partner represented, and the other
Partners shall be entitled to rely upon
such statements and representations as
being the statements or representations of
the Partner represented. Any
representative may resign for any reason
whatsoever; provided, however, that
such resignation shall only be effective
upon the earlier to occur of: (i) ten
(10) days from the mailing of written
notice to each Partner informing each
Partner of such intention, or (ii) the
appointment of a successor representative
by the Partner who appointed the resigning
representative, which appointment
shall be in such Partner's sole discretion.
A representative may be removed at
any time, without cause; provided, however,
that such representative may only be
removed by the Partner who initially
appointed him as a representative. In such
event, the Partner who initially appointed
the removed representative may
appoint a successor representative.
RESTRICTED PERIOD: Shall have the meaning set forth in Subsection
4.1(d).
SALES AND MARKETING PLAN: Shall mean the plan for the marketing and
sale
of condominium units more particularly
described in Section 4.4(f) of this
Agreement.
SALES OFFICE: The sales center for the Project.
SONESTA EXCESS BALANCE: Shall have the meaning set forth in
Subsection
6.1(b)(iii).
SONESTA GUARANTEED AMOUNT: An amount to be paid by the Fortune
Partners
to Sonesta, if at all, immediately prior to
the liquidation of the Partnership,
if, as a result of aggregate distributions
made by the Partnership to Sonesta
pursuant to Section 7.1 and Section 7.2,
Sonesta's Unreturned Capital has not
been reduced to zero. In such event, the
Fortune Partners
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shall pay to Sonesta an amount equal to the
difference between (i) the amount
Sonesta would have received pursuant to
Sections 7.1 and 7.2 if the Existing
Indebtedness had been satisfied by a
Capital Contribution made by the Fortune
Partners, and (ii) the amount actually
received by Sonesta pursuant to Sections
7.1 and 7.2. The operation of this
definition is illustrated on SCHEDULE SGA
attached hereto.
SONESTA INTERNATIONAL: Shall mean Sonesta International Hotels
Corporation, a New York corporation.
SONESTA LICENSE AGREEMENT: Shall mean the agreement described in
Section
8.5(f) below.
SONESTA PREFERRED DISTRIBUTION: An amount payable to Sonesta
pursuant to
Article 7 in an amount equal to the Excess
Financing Costs.
SUBORDINATED CAPITAL: Means the amount contributed by the
Fortune
Partners as Additional Capital
Contributions necessary to fund any Excess
Development and Construction Overruns.
SUBORDINATED RETURN: An amount payable to Sonesta pursuant to
Article 7
in the event that there are Excess
Development and Construction Overruns which
amount is equal to twenty-five percent
(25%) of the amount of the Excess
Development and Construction Overruns.
TARGET FINAL BALANCES: Shall have the meaning as set forth in
Subsection
6.2(k).
TRANCHE 1: Shall have the meaning set forth in Subsection
5.1(a)(i).
TRANCHE 2: Shall have the meaning set forth in Subsection
5.1(a)(ii).
TRANCHE 3: Shall have the meaning set forth in Subsection
5.1(a)(iii).
TRANCHE 4: Shall have the meaning set forth in Subsection
5.1(a)(iv).
TRANSFER: The assignment, transfer, sale, hypothecation, mortgage,
pledge
or encumbrance, directly, indirectly, by
operation of law, or otherwise, of a
Partnership Interest.
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UNPAID SONESTA PREFERRED DISTRIBUTION: With respect to Sonesta, as
of any
given time, the excess of the Sonesta
Preferred Distribution over all
distributions to Sonesta in payment thereof
pursuant to Sections 7.1(c) or 7.2.
UNPAID SUBORDINATED CAPITAL: At any given time, the excess of
the
Subordinated Capital over all distributions
made to the Fortune Partners in
repayment thereof pursuant to Sections
7.1(f) or 7.2.
UNPAID SUBORDINATED RETURN: With respect to Sonesta, as of any
given
time, the excess of Sonesta's Subordinated
Return over all distributions to
Sonesta in payment thereof pursuant to
Sections 7.1(e) or 7.2.
UNRETURNED
CAPITAL: With respect to any Partner, at any given time, the
excess of its Capital Contributions over
all distributions made to such Partner
pursuant to Section 7.1(a) and Section
7.1(b) in the case of Sonesta (including
by reason of Section 7.2) and Section
7.1(d) in the case of the Fortune Partners
(including by reason of Section 7.2).
1.2
CERTAIN
OTHER TERMS. In this Agreement, unless otherwise specified
(a) singular words include the plural and
plural words include the singular; (b)
words which include a number of constituent
parts, things or elements, including
the terms "Hotel," "Property" and "Project"
shall be construed as referring
separately to each constituent part, thing
or element thereof, as well as to all
such constituent parts, things or elements
as a whole; (c) words importing any
gender include the other gender; (d)
references to any Partner include such
Partner's permitted successors and assigns;
(e) references to any statute or
other law include all applicable rules,
regulations and orders adopted or made
thereunder and all statutes or other laws
amending, consolidating or replacing
the statute or law referred to; (f)
references to any agreement or other
document, including this Agreement, include
all subsequent amendments,
modifications, or supplements to such
agreement or document; (g) the words
"include" and "including" and words of
similar import, shall be deemed to be
followed by the words "without limitation";
(h) the words "hereto", "herein",
"hereof", "hereunder" and words of similar
import, refer to this Agreement in
its entirety; (i) references to Articles,
Sections, Subsections, paragraphs,
Schedules and Exhibits are to the Articles,
Sections, Subsections, paragraphs,
Schedules and Exhibits of this Agreement;
(j) numberings and headings of
Articles, Sections,
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Subsections, paragraphs, Schedules and
Exhibits are inserted as a matter of
convenience and shall not affect the
construction of this Agreement; and (k) all
Schedules and Exhibits to this Agreement
are incorporated herein by this
reference thereto as if fully set forth
herein, and all references herein to
this Agreement shall be deemed to include
all such incorporated Schedules and
Exhibits.
1.3
ACCOUNTING
TERMS. Unless otherwise specified, (a) all accounting
terms used herein shall be interpreted, (b)
all accounting determinations
hereunder shall be made, and (c) all
financial statements required to be
delivered hereunder shall be prepared, in
accordance with United States
generally accepted accounting principles as
in effect from time to time,
consistently applied.
1.4
SCHEDULES
AND EXHIBITS. The parties acknowledge that they are
executing this Agreement at a time when all
of the required Schedules and
Exhibits have either not been prepared,
have not been finalized or have not been
finally agreed to. Notwithstanding anything
herein to the contrary, and subject
always to the provisions of Section
4.4(b)(4), the parties agree to use their
good faith best efforts to prepare all such
Schedules and Exhibits within the
time periods set forth in this agreement
or, in the absence of a specific time
period, as promptly as possible.
ARTICLE 2
FORMATION OF PARTNERSHIP
2.1
FORMATION;
ADMISSION OF PARTNERS. The Partners hereby acknowledge
the formation of the Partnership as a
limited liability limited partnership
designated SBR-Fortune Associates, LLLP.
for the purposes and scope set forth
herein. In the event of any conflict
between the provisions of the Act and the
provisions of this Agreement, the
provisions of this Agreement shall control to
the fullest extent permitted by applicable
law.
2.2
NAME. The
business and affairs of the Partnership shall be
conducted solely under the name
"SBR-Fortune Associates, LLLP" and such name
shall be used at all times in connection
with the Partnership's business and
affairs; provided that for all periods
during which
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the Hotel is continued to be operated under
the Interim Lease, it shall be
operated under the "Sonesta Beach Resort
Key Biscayne" name. The General Partner
shall, on behalf and in the name of the
Partnership, execute such assumed or
fictitious name certificates as may be
desirable or required by law to be filed
in connection with the formation of the
Partnership and shall cause such
certificates to be filed in all appropriate
public records.
2.3
CERTIFICATES AND DOCUMENTS. The General Partner agrees to
execute
and timely file, record and, to the extent
required by law, publish, such
certificates and other documents and to
take such other acts, as may be
necessary or appropriate to comply with the
requirements of the Act for
formation, continuation and operation of
the Partnership.
2.4
PRINCIPAL
OFFICES. The Partnership's principal offices shall be
located at 1300 Brickell Avenue, Miami,
Florida 33131 or such other location in
Miami-Dade County as the General Partner
may determine from time to time.
ARTICLE 3
TERM
The
Partnership commenced on the date the Certificate of Limited
Partnership was filed with the Florida
Secretary of State and shall continue
until terminated as provided in Article
10.
ARTICLE 4
PURPOSE AND POWERS OF THE PARTNERSHIP
4.1
PURPOSE.
(a) The purpose of the Partnership shall be to:
1. acquire the Land in accordance with the terms hereof and
the Realty Purchase Agreement (assuming all
conditions precedent set forth in
such agreements have been satisfied);
2. pursue the Project (including permitting the Hotel
Manager to continue to operate the Hotel
under the Interim Lease until the
Designated Hotel Closing Date);
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3. prepare the site and construct improvements upon, market
and sell, and otherwise act with respect to
all or any part of the Property; and
4. engage in such other activities as are reasonably
incidental to the purpose and business of
the Partnership set forth in this
Section 4.l(a).
Notwithstanding anything to the contrary
contained herein, the Partners
recognize and agree that the Hotel will be
operated during the Interim Hotel
Operating Period by the Hotel Manager as
further described in Section 4.4 of
this Agreement.
Except by the decision of all of the
Partners, evidenced in writing, the
Partnership shall not engage in any other
business or activity.
(b) In no event shall this Agreement be held or construed to
imply
the existence of a partnership among the
Partners with regard to matters, trades
or businesses or enterprises outside the
scope of this Partnership, and no
Partner shall have any power or authority
under this Agreement to act as the
partner, agent or representative of any
other Partner with regard to any matter
beyond the scope of this Partnership.
(c) The General Partner shall be required to manage the
Partnership as its sole and exclusive
function and may not have other business
interests or engage in the making or
management of other investments or in any
other activities in addition to those
relating to the Partnership.
(d) Each Partner covenants and agrees, and acknowledges that it
is
a material inducement to the other Partners
in entering into this Agreement,
that such Partner shall not, directly or
indirectly, engage in the development,
ownership, operation or management of a
hotel, condominium hotel or fractional
ownership resort within the Village of Key
Biscayne until the earlier of (i) two
years from the Hotel Opening Date, or (ii)
the date on which eighty-five (85%)
percent of the hotel condominium units for
the Project are conveyed to third
parties (such period, the "RESTRICTED
PERIOD"), other than pursuant to this
Agreement, either for such Partner's own
account, as a partner, joint venturer,
employee, agent or independent contractor
of any person or entity, through any
Affiliate, as an officer, director or
shareholder of any corporation or
otherwise. Notwithstanding the foregoing,
this Section 4.1(d) shall not apply to
either (y) the
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acquisition solely as an investment, of
securities of any issuer that is
registered under Section 12(b) or 12(g) of
the Securities Exchange Act of 1934,
as amended, and that are listed or admitted
for trading on any United States
national securities exchange or that are
quoted on the National Association of
Securities Dealers Automated Quotations
System, or any similar system or
automated dissemination of quotations of
securities prices in common use, so
long as such Partner or any Related Party
of such Partner is not a member of any
control group (within the meaning of the
rules and regulations of the Securities
and Exchange Commission) of any such
issuer, or (z) a Permitted Opportunity (as
such term is defined in Subsection 4.1(e)
below). Without limiting the
generality of the foregoing and except as
limited by the provision of this
Section 4.1(d) and by Section 4.1(e), each
Partner recognizes that the Limited
Partners and their Affiliates (other than
the General Partner) each may and do
have other business interests and that each
may and will engage in the making or
management of other investments consistent
with such interests, including,
without limitation, investing in, owning,
operating, transferring, leasing and
otherwise using real property and interests
therein for profit, and engaging in
any and all activities related or
incidental thereto and neither the Partnership
nor any Partner shall have any right by
virtue of this Agreement or the
partnership relationship created hereby in
or to any other ventures or
activities in which any Limited Partner or
its Affiliates are involved or to the
income or proceeds derived therefrom.
Except as limited by the provision of this
Section 4.1(d) and by Section 4.1(e), the
pursuit of other ventures and
activities by each Limited Partner or its
Affiliates (other than the General
Partner), even if competitive with, or
adverse to, the business of the
Partnership is hereby consented to by all
other Partners and shall not be deemed
wrongful or improper under this Agreement.
Subject to this paragraph and Section
4.1(e), no Partner or its Affiliate shall
be obligated to present any particular
investment opportunity to the Partnership
or to any other Partner, even if such
opportunity is of a character which, if
presented to the Partnership, could be
taken by the Partnership, and each Partner
and each Affiliate shall have the
right to take for its own account, or to
recommend to others, any such
particular investment opportunity.
(e) Notwithstanding the foregoing provision, during the
Restricted
Period, each of the Fortune Partners and
Sonesta (and their Affiliates) shall be
obligated to present to the other Partners
any opportunity such Partner may have
with respect to the development of either
the Grand Bay Beach Club property or
the Silver Sands Hotel property (a "RELATED
OPPORTUNITY").
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The Partner presenting the Related
Opportunity (the "PRESENTING PARTNER") shall
provide to the other Partner (the
"RECIPIENT PARTNER") all materials and
information within its possession which are
relevant to the Related Opportunity
(for this purpose, the Fortune Partners
shall be treated as one partner). The
Recipient Partner shall have a period of
thirty (30) days from receipt of the
above described information to elect to
participate in the Related Opportunity.
In the event the Partners elect to pursue
the Related Opportunity, they shall do
so in a newly formed limited partnership
(or such other legal entity agreed by
the Partners), which would be owned fifty
percent (50%) by each of Sonesta and
the Fortune Partners, all capital
contributions shall be made and credit
enhancements shall be provided fifty
percent (50%) by each of Sonesta and the
Fortune Partners and all decision making
shall be made fifty percent (50%) by
Sonesta and fifty percent (50%) by the
Fortune Partners. In addition, each of
the Presenting Partner and the Recipient
Partner shall be required to deposit
fifty percent (50%) of all required
deposits, up to Two Million Dollars
($2,000,000.00) each, with their respective
counsel within ninety (90) days of
the date on which all relevant materials
are submitted to the Recipient Partner.
No further deposits or payments (in excess
of Two Million Dollars
($2,000,000.00) each) shall be due prior to
the end of the above described
ninety (90) day period. In the event that
the Recipient Partner elects not to
participate in the Related Opportunity or
in the event the Recipient Partner
fails to post the required deposit, up to
Two Million Dollar ($2,000,000.00),
within the ninety (90) day period described
above and the Presenting Partner
does deposit such amount, then, in such
event, the Presenting Partner shall be
permitted to pursue the Related Opportunity
for its own account (with or without
third parties), the Recipient Partner shall
have no rights to any of the
revenues or profits derived therefrom, and
in such event the Related Opportunity
shall be deemed to be a "PERMITTED
OPPORTUNITY." In the event the Presenting
Partner fails to make the required deposit
but the Recipient Partner makes the
required deposit, then the Recipient
Partner shall be permitted to pursue the
Related Opportunity for its own account
(with or without third parties), the
Presenting Partner shall have no right to
any of the revenues or profits derived
therefrom, and in such event the Related
Opportunity shall be deemed to be a
"Permitted Opportunity." In the event
neither the Presenting Partner nor the
Participating Partner makes the required
deposit within the ninety (90) day
period described above, the restrictions of
this Subsection 4.1(e) shall
continue to apply with respect to each
Related Opportunity.
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4.2
POWERS.
Subject to the Section 8.1(b) regarding Major Decisions,
the Partnership is authorized to sell,
hold, lease, own, mortgage, manage,
encumber, transfer, exchange or otherwise
convey and deal with the Property, or
any portion thereof, enter into contracts
and agreements, and to do all other
things necessary or appropriate to carry
out the purpose of the Partnership as
set forth in Section 4.1 hereof.
4.3
TITLE TO
PARTNERSHIP PROPERTY. Legal title to the Property and all
other assets acquired by the Partnership
shall be taken and at all times held in
the name of the Partnership, provided,
however, prior to the satisfaction of the
Escrow Release Conditions neither the
Partnership nor the Fortune Partners shall
have any legal or equitable interest in the
Property or in the right of Sonesta
or any Affiliate of Sonesta to operate,
develop or redevelop the Property.
4.4
SUMMARY OF
TRANSACTION. In order to avoid any question or
ambiguity, the Partners have agreed as
follows:
(a) DUE DILIGENCE PERIOD.
1. During the Due Diligence Period, Sonesta shall give the
Fortune Partners, and their attorneys,
engineers and other advisers, reasonable
access to the Hotel premises and the
Property and the books and records of
Sonesta as they relate or pertain to the
Property, including, but not limited
to, all existing environmental reports, all
documents relating to encumbrances
and easements on the Property, and any
documents relating to compliance with
zoning regulations, and will permit the
Fortune Partners and their advisers to
make copies of such books and records and
to conduct such examinations, surveys
or other engineering due diligence
respecting the Property that the Fortune
Partners reasonably deem necessary,
including, without limitation, a review of
the environmental condition of the
Property, the physical condition of the
Property, land use, zoning and entitlement
issues concerning the Property, title
searches, and surveys (without limitation,
the "INSPECTIONS"), provided that:
(i) All
such due diligence shall be performed in a
manner that the Partners believe in good
faith will minimize the impact on the
operation of the Hotel.
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(ii) The Fortune
Partners will obtain advance approval
from Roger Sonnabend (or such other person
identified in writing by Roger
Sonnabend or Sonesta to the Fortune
Partners), for physical inspections of
records or the Property which require entry
onto the Land, such approval not to
be unreasonably withheld, delayed or
conditioned.
(iii) Any independent
party that is to enter the Property
and perform Inspections shall provide to
Sonesta a certificate of insurance
evidencing liability insurance, and if
applicable, professional errors and
omissions insurance, coverages in an amount
equal to not less than $1,000,000
and reflecting Sonesta, the tenant pursuant
to the Interim Lease and the
Partnership as an additional insured with
respect to any damage arising out of
the Inspections.
(iv) Upon
completion of any physical inspection or test,
the Fortune Partners and their
representatives shall restore the Property to
substantially the same condition which
existed prior to such inspection or test.
(v) To the
extent permitted by applicable agreements
with applicable third party providers
(which the Fortune Partners shall in good
faith seek to permit), copies of any report
issued by a third party in
connection with an Inspection shall be
promptly provided to Sonesta, and all
such due diligence shall be at the expense
of the Fortune Partners and shall not
be an expense of the Partnership.
Notwithstanding the foregoing, in all events
reports issued with respect to market and
feasibility analysis, environmental
and engineering aspects of the Project and
the survey shall be provided to
Sonesta.
(vi) All parties assisting the
Fortune Partners with the
Inspections or the due diligence shall
agree to abide by the confidentiality
provision set forth in Section 17.14 hereto
and the Fortune Partners hereby
indemnify Sonesta for any breach of such
confidentiality
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requirement with respect to any such third
party in the event that such third
party does not sign a statement reasonably
satisfactory to Sonesta in which such
party agrees to abide by the
confidentiality requirements.
2. During the Due Diligence Period, the Partners shall
agree on various exhibits to this
Agreement, as provided herein, and cause the
same to be incorporated into this Agreement
by Amendment hereto, as if contained
on the Effective Date.
3. In the event the Fortune Partners elect, for any reason,
during the Due Diligence Period to not
proceed with the transactions
contemplated by this Agreement, they shall
provide written notice to Sonesta and
to the Escrow Agent, in which event the
Escrow Agent shall release the Escrowed
Items in accordance with the Escrow
Agreement and this Agreement, other than the
provisions which expressly survive the
termination hereof, shall thereafter be
terminated without penalty to any of the
Partners. In addition, in the event
that the Fortune Partners terminate this
Agreement pursuant to this provision,
the Fortune Partners shall reimburse
Sonesta for all of its documented
reasonable out of pocket expenses incurred
by Sonesta in connection with
negotiating the transactions contemplated
by this Agreement or in taking actions
requested by either of the Fortune
Partners, provided that the Fortune Partners
shall have no obligation to reimburse
Sonesta for such costs if the Fortune
Partners elect not to proceed due to a
material misrepresentation or material
breach of this Agreement by Sonesta.
4. The Fortune Partners and Edgardo Defortuna,
individually, by execution of this
Agreement hereby agree to indemnify and hold
harmless Sonesta, of, from and against any
and all costs, losses, claims,
damages, liabilities, expenses and other
obligations (including, without
limitation, reasonable attorney's fees and
court costs) arising from, out of or
in connection with or otherwise relating to
the Inspections, including, without
limitation, the entry by any one or more of
the Fortune Partners and their
agents, employees, contractors and other
representatives in or upon the Property
for the purposes of the Inspections. The
foregoing indemnification obligations
of the Fortune Partners and Edgardo
Defortuna shall survive any expiration or
termination of this Agreement.
(b) ESCROW RELEASE; ESCROW RELEASE CONDITIONS; BREAKUP FEE.
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1. In the event that the Fortune Partners do not elect to
terminate this Agreement on or before the
end of the Due Diligence Period, the
Partners shall work diligently and in good
faith to close the transactions
described herein on the Escrow Release
Date. In the event that the Escrow
Release Conditions have not been satisfied
within sixty (60) days of the end of
the Due Diligence Period, either party may
elect not to proceed with the
transaction described herein by providing
written notice to the other party and
to the Escrow Agent, in which event the (i)
Escrow Agent shall release the
Escrowed Items in accordance with the terms
of the Escrow Agreement, and (ii)
this Agreement, other than the provisions
which expressly survive the
termination hereof, shall thereafter be
terminated.
2. On the Escrow Release Date, the Escrow Agent shall take
the Escrow Release Actions.
3. The Partners acknowledge that each of them will be
investing substantial effort in pursuing
the Project and that there are
significant possible lost opportunities to
each Partner as a result of pursuing
the Project. In consideration of the
foregoing, each Partner agrees that in the
event that either Sonesta, on the one hand,
or the Fortune Partners, on the
other hand, fail to take those steps
necessary to satisfy the Escrow Release
Conditions and this Agreement has not been
terminated during the Due Diligence
Period, then in such event, (i) if Fortune
fails to take the necessary steps,
Fortune shall forfeit Tranche 1, Tranche 2
and Tranche 3 and (ii) if Sonesta
fails to take the necessary steps, Fortune
may bring an action for specific
performance against Sonesta (the "BREAKUP
CONSEQUENCE"), provided, however, that
the Partner who benefits from the Breakup
Consequence has complied with all of
its material obligations as to the Escrow
Release Conditions.
4.
Notwithstanding anything else herein to the contrary, by
their execution below, each of the Partners
acknowledges their desire and
intention that they be bound to consummate
the transactions described herein in
accordance with the terms of this
Agreement. They further acknowledge that there
are several agreements, including the
Ancillary Agreements, which remain to be
finalized between the date of execution of
this Agreement and the Escrow Release
Date, all of which will be based on the
terms attached hereto in various
exhibits. In the event that the terms of
any such agreements can not be agreed
to by the parties,
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in spite of their good faith efforts to do
so, they agree that the sole recourse
for their failure to agree shall be to
submit the issues at question to
arbitration as provided in Section 17.15
below; their failure to so agree shall
not be grounds for failing to close the
transactions described herein.
(c) LAND ACQUISITION AND CONTRIBUTION.
1. The Partnership's closing of the acquisition of the Land
will occur on the Escrow Release Date. The
Land is comprised of the Purchased
Land, which is being purchased by the
Partnership from Sonesta pursuant to the
Realty Purchase Agreement, and the
Contributed Land, which is being contributed
to the Partnership by Sonesta pursuant to
Subsection 5.1(b) below. The Land will
be acquired by the Partnership subject to
and encumbered by the Existing
Indebtedness described below and the other
Permitted Exceptions.
2. The Partners have agreed to value the Land (being the
aggregate of the Purchased Land and the
Contributed Land), as of both the
Effective Date and the Escrow Release Date,
for the purpose of establishing
Capital Accounts pursuant to this
Agreement, at One Hundred Twenty Million
Dollars ($120,000,000.00). As of the date
of this Agreement, the Realty and the
Hotel are encumbered by a mortgage securing
that certain Consolidated and
Renewed Promissory Note, dated May 30,
2000, by Sonesta in favor of SUNAMERICA
LIFE INSURANCE COMPANY in the original face
amount of $31,000,000 (the "EXISTING
INDEBTEDNESS"), which indebtedness has an
outstanding balance of approximately
Thirty Million Dollars ($30,000,000.00).
The Partners have agreed that the
Purchased Land has a gross fair market
value of Forty Million Dollars
($40,000,000.00), but because it is
encumbered by one-third (1/3rd) of the
Existing Indebtedness, the Purchased Land
is being acquired by the Partnership
pursuant to the Realty Purchase Agreement
for a cash purchase price of Thirty
Million Dollars ($30,000,000.00), subject
to one-third (1/3rd) of the Existing
Indebtedness. Pursuant to Subsection 5.1(b)
below, Sonesta is contributing to
the Partnership the Contributed Land, which
the Partners have agreed has a gross
fair market value of Eighty Million Dollars
($80,000,000.00), but which is
subject to two-thirds (2/3rds) of the
Existing Indebtedness, resulting in the
Initial Capital Contribution of Sonesta
being approximately Sixty Million
Dollars ($60,000,000.00). As of the Escrow
Release Date, the General Partner and
Sonesta shall mutually determine and agree
upon the aggregate amount of the
unpaid principal balance and all
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accrued but unpaid interest on the Existing
Indebtedness (such aggregate amount
referred to as the "EXISTING INDEBTEDNESS
BALANCE"). The Partners have agreed
that the Initial Capital Contribution of
Sonesta, shall be equal to Eighty
Million Dollars ($80,000,000.00) reduced by
the two-thirds (2/3rds) of the
Existing Indebtedness Balance. The Partners
acknowledge that Sonesta is not
contributing to the Partnership the
furniture, equipment and items of tangible
personal property (including all art work)
used or useful in connection with the
Hotel, and title to such assets will remain
with Sonesta.
3. On the Escrow Release Date the Fortune Partners shall
cause the Existing Indebtedness to be
repaid from the proceeds of either (i) a
Capital Contribution by the Fortune
Partners to the Partnership, or (ii) a
Bridge Loan to the Partnership (which
Bridge Loan shall permit Sonesta to be
released from all obligations in connection
with the Existing Indebtedness); the
Fortune Partners having the sole discretion
to elect either (i) or (ii) above.
Any guarantees required to secure any
Bridge Loan shall be provided by the
Fortune Partners and/or Edgardo Defortuna.
In the event that the Partnership
undertakes a Bridge Loan to refinance the
Existing Indebtedness, (i) the
Partnership shall be required to pay the
interest on such indebtedness; and (ii)
the Partnership shall be required to pay
the reasonable costs incurred in
obtaining, negotiating and closing such
financing. Any payments required to be
made pursuant to or in settlement of the
defeasance provisions contained in the
documents evidencing and governing the
Existing Indebtedness shall be satisfied
as part of the satisfaction of the Existing
Indebtedness and sums expended for
that purpose shall be an expense of the
Partnership and shall be funded through
an Additional Capital Contribution by the
Fortune Partners or from the proceeds
of a Bridge Loan, as determined by the
Fortune Partners. Any requirement of the
documents evidencing or governing the
Existing Indebtedness regarding the
repayment of principal in connection with
the hotel owned by an Affiliate of
Sonesta in Cambridge, Massachusetts shall
be satisfied by Sonesta International
Hotels Corp., a New York corporation or
other Affiliate of Sonesta and shall not
be an obligation of the Partnership or the
Fortune Partners.
(d) INTERIM HOTEL OPERATIONS AND SHUTDOWN.
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1. Sonesta shall have the right to operate the Hotel
pursuant to the Interim Lease during the
Interim Hotel Operating Period. Sonesta
and the Fortune GP shall mutually agree on
the appropriate date to cease
operating the Hotel in order to develop the
site for the Project if other than
August 31, 2006 (the "DESIGNATED HOTEL
CLOSING DATE") and the General Partner
shall provide written notice (the
"CESSATION NOTICE") to the Hotel Manager no
less than ninety (90) days prior to the
Designated Hotel Closing Date. Sonesta
covenants and agrees to cause the Hotel
Manager to discontinue operation of the
Hotel on or before the Designated Hotel
Closing Date provided the Cessation
Notice is delivered at least ninety (90)
days in advance of the Designated Hotel
Closing Date. In addition, Sonesta shall
take reasonable steps as may be
necessary to assure that all Contracts
affecting the Hotel (other than those
specifically identified in writing by the
General Partner) are terminated on or
before the Designated Hotel Closing Date.
Although the Partners acknowledge that
it is their current contemplation that the
Designated Hotel Closing Date will be
August 31, 2006, they further acknowledge
that such date may change (either
earlier or later) and that the exact
Designated Hotel Closing Date shall be as
provided in the Cessation Notice or such
earlier date as is determined by
Sonesta. The Partners will work together,
in good faith, to determine the
appropriate Designated Hotel Closing Date
(if to be other than August 31, 2006).
On or before July 1 of each year
(commencing July 1, 2005), the Fortune GP shall
advise Sonesta whether it believes that
demolition of the hotel will occur on or
before June 1 of the following year. In the
event that Fortune GP indicates in
writing that it does not believe that
demolition of the Hotel will occur on or
before the next succeeding June 1, Sonesta
shall be permitted to continue to
operate the Hotel under the terms and
conditions set forth in the Interim Lease,
through the end of the applicable season
(May 31).
2. The costs and expenses incident to the closing of the
Hotel, which the Hotel Manager shall use
its best efforts to minimize, including
without limitation, the out of pocket costs
associated with terminating
contracts, as referred to above, any
additional cost under Sonesta's defined
benefit pension plan from the closing of
the Hotel, employee severance payments,
and all long and short term obligations of
the Hotel including but not limited
to notes payable and accrued vacation,
shall be borne by the Partnership.
Severance payments may include (i) four (4)
weeks of severance compensation for
each employee with more than one year of
service plus one (1) week of severance
compensation for each year of service (but
not less
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than a minimum of 2 weeks of severance
compensation for each employee), (ii) the
retention, at pre-existing compensation
levels, of up to ten (10) employees (all
of whom shall remain as employees of
Sonesta but whose compensation shall be
funded by the Partnership), and (iii) such
other severance arrangements as are
commonly made by Sonesta or its Affiliates
in other similar situations.
Notwithstanding anything to the contrary
contained herein, the aggregate costs
to be paid or incurred by the Partnership
incident to the closing of the Hotel,
which Sonesta represents are described in
this Subsection 3.3(d)(2), shall not
exceed Four Million and No/100
($4,000,000.00) Dollars.
3. In conjunction with the shutdown of the Hotel, Sonesta
shall receive payments in the amount of one
hundred twenty five thousand and
No/100 ($125,000) Dollars for each month,
and a prorated amount for partial
months, from and after the Designated Hotel
Closing Date and until the Hotel
Opening Date (the "HOTEL SHUTDOWN
PAYMENTS"). In the event that the Partnership
shall have insufficient funds to pay the
Hotel Shutdown Payments, the Fortune
Partners shall provide Additional Capital
Contributions pursuant to Section
5.2(a) to the extent necessary to provide
the Partnership with the cash with
which to make such payments.
Notwithstanding anything to the contrary contained
herein, in no event (and without regard to
the actual date on which the Hotel
ceases to operate) shall the first Hotel
Shutdown Payment be due or payable on
or before June 30, 2006.
(e) NEW DEVELOPMENT.
1. The Partners presently contemplate that the Partnership
will redevelop the Land after the
Designated Hotel Closing Date as a luxury
condominium hotel together with a possible
luxury condominium ("NEW
DEVELOPMENT"). By their execution of this
Agreement the Partners agree that the
New Development shall in all events be
built in accordance with the plans and
specifications approved by the Partners and
the Project Standard and shall
include a condominium hotel component
consisting of at least three hundred fifty
(350) keys (including lockouts)(each hotel
room being not less than
approximately 500 square feet), with
consent and approval rights vested in
Sonesta as to any and all uses of the
"Sonesta" or other names and marks. As to
the hotel component thereof, the Fortune GP
agrees that, unless otherwise agreed
by Sonesta in its sole and absolute
discretion, the Hotel Manager or another
Affiliate of Sonesta
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will manage the hotel component of the New
Development (the "New Hotel") under
the Sonesta "brand" and pursuant to the
Long Term Hotel Management Agreement
which shall take effect at a date to be
determined after the demolition and
reconstruction of the existing Hotel upon
the Property. Certain of the material
terms of the Long Term Hotel Management
Agreement shall be as set forth in
EXHIBIT G, with the final agreement
containing other customary terms and
conditions for comparable hotel management
agreements. The failure to agree on
such terms shall be subject to arbitration
as provided in Section 17.15 below.
Sonesta or an Affiliate of Sonesta shall
further be appointed by the Partnership
as the manager of any condominium
association for the condominium units within
the New Development to the extent that the
Partnership has the legal right to do
so. Sonesta shall be paid management fees
customary in the market for acting as
the manager of such an association or
associations.
(f) SALES AND MARKETING ACTIVITIES. The Fortune GP shall be
responsible for preparing a Sales and
Marketing Plan for the Project that is
satisfactory to Sonesta in its reasonable
discretion. The costs and expenses
expected to be incurred in implementing the
Sales and Marketing Plan shall be
included in the Budget, and the Sales and
Marketing Plan shall include projected
sales activity, key marketing strategies
and other information reasonably
requested by Sonesta.
(g) SALE OF HOTEL LOT. The Partners acknowledge that the
primary
purpose for which the Partnership has been
formed is to develop and sell
residential condominium units (the
"RESIDENTIAL UNITS") and to provide for the
operation of a condominium hotel within the
Project. The Project shall be a
mixed use project to be comprised of
residential condominium units which shall
include at least three hundred fifty (350)
hotel keys (including lockouts) and
one or more additional parcels of real
estate, which may or may not be
condominium units, and which shall contain,
as determined by the Fortune GP and
Sonesta, public spaces, back of the house,
restaurants, spas and athletic
facilities, other recreational amenities,
meeting space and facilities that will
be used in connection with the operation of
a hotel (whether one or more lots,
the "ANCILLARY LOT"). By their execution
below, the Partners agree to (i)
consult on the structure of the condominium
regime and other covenants and
restrictions that would comprise the
governance documents for the operation of
the Project and to develop legal
descriptions for the Ancillary Lot (which may
be multiple condominium or non-condominium
parcels) and the other
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condominium units; (ii) submit the Project
to the governance regime, including
the submission of a condominium filing with
the Secretary of State of Florida;
(iii) form a new entity (the form of which
(partnership, limited liability
company or other form of entity) will be
mutually determined by the Partners)
which will be owned seventy percent (70%)
by Sonesta (or Affiliates thereof) and
thirty percent (30%) by the Fortune
Partners (or Affiliates thereof), and (iv)
sell to the newly formed entity described
in (iii) above the Ancillary Lot for a
sales price equal to Five Million and
No/100 ($5,000,000) Dollars (it being
agreed by the Partners that the
determination of the fair market value of the
Ancillary Units being difficult to value
and highly speculative and the parties
desiring to agree upon the price for such
property at this time). At the
election of the new entity, the purchase
price shall be paid either (i) all cash
at closing or (ii) 20% in cash and the
remaining portion payable by negotiable
promissory note in favor of the
Partnership, which note provides for a term of
three (3) years, with mandatory payments of
principal and interest in amounts
equal to the amounts distributable to the
Partners pursuant to Section 7.1(g)
hereof (whether directly or by virtue of
the operation of Section 7.2) [which
amounts shall be funded seventy percent
(70%) by Sonesta (or Affiliates thereof)
and thirty percent (30%) by the Fortune
Partners (or Affiliates thereof)], and
which note shall bear interest compounded
annually at the applicable federal
rate established under Code Section 1274(d)
on the date of the closing. The sale
of the Ancillary Lot shall be closed on
such date subsequent to the date on
which the Construction Loan has been repaid
in full which is agreed to by
Fortune GP and Sonesta. The Ancillary Lot
will include all of the furniture,
fixtures and equipment necessary to operate
the New Hotel as reflected in the
plans and specifications for the New Hotel
agreed to by the Partners. Capital
will be contributed to the new entity
seventy percent (70%) by Sonesta and
thirty percent (30%) by the Fortune
Partners (or their Affiliates). Sonesta and
the Fortune Partners (or their Affiliates)
will enter into a partnership
agreement, operating agreement or other
similar such agreement containing
provisions relating to the new entity in
accordance with the terms of EXHIBIT K
hereto.
112
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ARTICLE 5
CAPITAL CONTRIBUTIONS; PERCENTAGE INTERESTS; FINANCING
5.1
INITIAL
CAPITAL CONTRIBUTIONS.
(a) The Fortune Partners (pro rata in accordance with their
respective Partnership Interests) shall
contribute th
