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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to _____________________
Commission file number 0-9032
SONESTA INTERNATIONAL HOTELS CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-5648107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Clarendon Street, Boston, Massachusetts 02116
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 421-5400
Securities registered pursuant to Section 12 (b) of the Act:
NONE
(Title of Class)
Securities registered pursuant to Section 12 (g) of the Act:
Title of each class Name of each exchange on which registered
Class A Common Stock
$ .80 par value NASDAQ
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [ ] No [X]
See Form 12b-25 filed June 30, 1997.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229,405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the common stock held by non-affiliates of
the registrant as of the close of business on March 23, 1999 was $8,187,302.
The number of shares outstanding of the registrant's common stock as of the
close of business on March 23, 1999 was 2,068,215.
Documents incorporated by reference
1. Portions of the annual report to shareholders for the year ended
December 31, 1998 are incorporated by reference into Parts I, II and IV.
2. Portions of the proxy statement for the 1999 annual meeting of
stockholders are incorporated by reference into Part III.
An Index to Exhibits appears on pages 14 through 21 of this Form 10-K.
----------------------------------------------------------------------------
PART I
Item 1. Business
(a) General Development of Business: The Company is engaged in the operation of
hotels that it owns or leases in Boston (Cambridge), Massachusetts; Key
Biscayne, Florida; New Orleans, Louisiana; and Anguilla, B.W.I. It also
operates, under management agreements, hotels in Southampton, Bermuda;
Curacao, Netherlands Antilles; New Orleans, Louisiana; and Cairo, Luxor, El
Gouna, Port Said and Sharm el Sheikh, Egypt; and two Nile River cruise
vessels. The Company has paid $2 million for a 22% ownership interest in
the hotel and casino it operates under a management contract in Curacao,
Netherlands Antilles. The Company has entered into management agreements to
operate new hotels being created in Miami Beach; Taba and Nuweiba, Egypt;
and Manama, Bahrain; these projects are scheduled to open in 1999 or 2000.
The Company also licenses the use of the Sonesta name to two hotels in
Aruba, and a hotel in Lima, Peru. The Company terminated contracts under
which it operated two properties in Hurghada, Egypt, effective in early
January 1998; and a license agreement for a hotel in Santiago, Chile was
terminated effective at the end of February 1998. In May 1998, the Company
elected not to fund a performance threshold deficit and the owner of
Sonesta Beach Resort & Casino, in Curacao, exercised its right to terminate
the Company's management contract. While the Company is cooperating in the
transition to new management at that property, it continues to operate it
under the Sonesta flag. In July 1998, the Company acquired ownership of
Sonesta Beach Resort, in Key Biscayne, Florida, a property it has operated
for many years. In February 1999, the owner of the hotel in El Gouna, Egypt
that the Company has both operated and licensed notified the Company that
it was terminating its relationship with the Company for that property,
effective in May 1999. In November 1995, the Company acquired the 100-room
Casablanca resort in Anguilla, B.W.I., which at that time was closed due to
damage from Hurricane Luis, in September 1995 (for details of this
transaction, reference is made to Note 2-Operations, on pages 14 through 16
of the 1998 Annual Report to Shareholders.) In December 1994, the Company
entered into two partnerships: one involving an 82-room hotel in SoHo, New
York; the other to create a 320-room resort in Costa Rica. In July, 1996,
the Company liquidated its investment in the SoHo project, and in March
1997 the Company notified its partner in the Costa Rica project that it was
terminating its participation in that project. Through a foreclosure
procedure the Company now owns the resort site in Costa Rica.
(b) Not applicable.
(c) Narrative Description of Business: The Company's business is to a great
extent dependent upon a high level of economic activity. The hotel business
is highly competitive. The facilities of competitors are often affiliated
with national or regional
2
Item 1. Business
(c) (Cont'd)
chains having more room accommodations and greater financial resources than
the Company. The Company follows the practice of refurnishing and
redecorating the hotels which it operates in order to keep the properties
attractive and competitive with new hotel properties, and this requires the
Company to make substantial capital expenditures. During the two years
ended December 31, 1998, the Company made capital expenditures for its
hotels totaling approximately $14,200,000.
The Company endeavors to create individual and distinctive features for
each hotel property while utilizing common corporate identification in
order to obtain the benefits of chain operation. The Company is using the
name "Sonesta" for all of its hotels.
The Company has approximately 1,900 employees. Approximately 300 of these
employees are covered by a collective bargaining agreement. The Company
considers its relations with its employees to be satisfactory.
While the business of the Company's individual hotels is seasonal, the
diverse locations of the four owned or leased properties tend to mitigate
the impact of this factor. Traditionally, the second and fourth quarters
have produced greater revenues and operating income than the first and
third quarters, although these seasonal fluctuations do not materially
affect the Company's business activities.
The following table reflects total revenues, annual occupancy percentages,
average room rates and revenues per available room ("REVPAR") for the
Company's owned and leased properties for the years 1998, 1997, and 1996.
REVPAR is calculated by dividing annual room revenue by the total number of
rooms available during the year. Sonesta Beach Resort Anguilla was acquired
by the Company in November 1995 and opened on January 18, 1996. Sonesta
Beach Resort Key Biscayne was acquired by the Company on July 1, 1998.
Revenue and room statistics for Sonesta Beach Resort Key Biscayne are for
the period July 1 to December 31, 1998.
TOTAL
NUMBER OF YEAR BUILT REVENUES
HOTEL ROOMS OR ACQUIRED (in thousands)
- ----- ----- ----------- --------------
1998 1997 1996
---- ---- ----
Sonesta Beach Resort Anguilla,
B.W.I Owned 100 1995 $ 4,253 $ 4,071 $ 2,717
Sonesta Beach Resort Key Biscayne Owned 300 1998 10,821 -- --
Royal Sonesta Hotel Boston
(Cambridge) Owned 400 1963/1984 27,602 25,521 22,891
Royal Sonesta Hotel New Orleans Leased 500 1969 33,131 31,491 30,802
3
(c) (Cont'd)
AVERAGE AVERAGE
OCCUPANCY DAILY
PERCENTAGE RATE
-------------------- ------------------
HOTEL 1998 1997 1996 1998 1997 1996
- ----- -------------------- ------------------
Sonesta Beach Resort Anguilla,
B.W.I. 44.6% 48.8% 39.3% $236 $192 $147
Sonesta Beach Resort Key Biscayne 68.3% -- -- 163 -- --
Royal Sonesta Hotel Boston
(Cambridge) 74.1% 76.2% 76.5% 161 144 127
Royal Sonesta Hotel New Orleans 79.7% 79.1% 80.5% 153 147 141
"REVPAR"
--------
HOTEL 1998 1997 1996
- ----- ---- ---- ----
Sonesta Beach Resort Anguilla, B.W.I. $106 $ 94 $ 58
Sonesta Beach Resort Key Biscayne 111 -- --
Royal Sonesta Hotel Boston (Cambridge) 119 109 97
Royal Sonesta Hotel New Orleans 122 117 114
The Company has established and maintains trademark protection for certain
service marks it uses in conducting its business, including the service
marks "Sonesta", "Sonesta Beach", "Just Us Kids", and the Company's
stylized "S" logo. Trademarks are maintained in numerous countries, besides
the United States. Each mark is generally protected for several years,
subject to periodic renewal.
For revenues by class of service for the three years ended December 31,
1998, reference is made to the Consolidated Statements of Operations which
appears on page 8 of the 1998 Annual Report to Shareholders.
(d) Financial Information about Foreign and Domestic Operations: This
information is incorporated by reference to Note 2 on pages 14 through 16
of the 1998 Annual Report to Shareholders.
Item 2. Properties
The Company's hotels are primarily metropolitan and resort hotels in popular
vacation areas which emphasize luxury accommodations and personal service.
The Company has fee ownership in three hotels: Royal Sonesta Hotel, Boston
(Cambridge), Massachusetts, Sonesta Beach Resort, Key Biscayne, Florida, and
Sonesta Beach Resort Anguilla, B.W.I. Reference is made to Note 5 of the Notes
to the Consolidated Financial Statements of the registrant which appears on
pages 17 and 18 of the Company's 1998 Annual Report to Shareholders for details
of the mortgage liens on the Boston (Cambridge), Massachusetts property, the Key
Biscayne, Florida property, and the Anguilla property.
4
The Company operates the Royal Sonesta Hotel, New Orleans, Louisiana under a
long-term lease which expires on September 30, 2024, provided the Company
exercises its two remaining ten-year extension options.
The Company also operates under management agreements hotels in Southampton,
Bermuda; Curacao, Netherlands Antilles; New Orleans, Louisiana; and Cairo,
Luxor, El Gouna, Port Said and Sharm el Sheikh (2), Egypt; and two Nile River
cruise vessels. The Company's hotel and casino on the island of Curacao is
operated under a management contract, and the Company has invested $2 million
for a 22% ownership interest in that property. As previously discussed,
ownership of the Curacao property has exercised its right to terminate the
Company's management contract for that property. Before the termination becomes
effective, the Company is entitled to receive a termination fee of $1,875,073,
which is based on the investment the Company made in the hotel of $2,000,000,
less incentive fees earned during 1998 of $124,927. As previously mentioned, the
Company's involvement with the El Gouna, Egypt property will terminate in May
1999. The Company has granted licenses for the use of its name to two hotels in
Aruba and a hotel in Lima, Peru.
In December 1994, the Company entered into two partnerships: one of the
partnerships was formed to acquire and develop as a hotel, including retail
space, a building in the SoHo district of New York; the other partnership was
formed to acquire a beachfront hotel site in Guanacaste, Costa Rica on which the
partnership intended to develop a 320-room resort and casino. The Company
liquidated its investment in the SoHo project in July 1996. The Company notified
its development partner that it did not intend to proceed with the Costa Rica
project, in which a Company subsidiary was a 50% partner, triggering the
repayment of certain funds advanced by the Company and secured by a mortgage.
Those funds were not repaid and the Company foreclosed on the mortgage and now
holds fee ownership of the development site in Costa Rica.
In addition to the properties listed above, the Company leases space for its
executive offices at 200 Clarendon Street, Boston, Massachusetts 02116.
Item 3. Legal Proceedings
A wholly-owned subsidiary of the Company, Sonesta Hotels of Anguilla Limited
("SHAL"), and two executive officers of the Company were named as defendants in
a lawsuit filed in October, 1997, in Anguilla, B.W.I., by the former owner of
the resort hotel in Anguilla which the subsidiary purchased in November 1995
(the "Resort"), and the principals of that
5
entity. The Statement of Claim in this lawsuit, which was substantially amended
in January 1998, alleges, inter alia, that the defendants have not complied with
certain "implied terms" of the agreements between them and with the terms of an
alleged oral agreement. The plaintiffs in this action are seeking relief from
their contractual obligations, entitlement to certain financial benefits, and
certain equitable relief. In late February 1998 defendants filed a "Defense and
Counterclaim" to plaintiffs' "Amended Statement of Claim". As part of its
Counterclaim SHAL is seeking offsets against amounts otherwise owed to the
former owner, specifically a loan of $1,000,000 that matured in November 1998.
In light of its numerous claims against the former owner, SHAL has made no
payments on account of that loan since 1996. The parties have engaged in
settlement discussions which to date have not been fruitful. In the absence of a
settlement SHAL intends to vigorously defend against this action, and to
vigorously prosecute its counterclaims, and expects a favorable outcome.
In early 1997, SHAL filed a lawsuit in The Court of First Instance, in Curacao,
Netherlands Antilles, against the insurance company that was insuring the resort
in Anguilla at the time of Hurricane Luis, in September 1995. In the suit, SHAL
seeks to establish its entitlement to business interruption coverage for periods
subsequent to the date SHAL acquired ownership of the Resort. The insurer, Ennia
Caribe Schade N.V., has taken the position that (1) it has no obligation to fund
business losses realized after the date of sale, and (2) the applicable policy
does not recognize business losses incurred after the Resort was restored and
reopened. The Company expects to vigorously pursue its claims against Ennia
Caribe, but it is not able to predict with certainty how this lawsuit will be
resolved. No amounts which may be recoverable in this lawsuit have been
reflected in the Company's financial statements.
The Company is from time to time subject to routine litigation incidental to its
business, and generally covered by insurance. The Company believes that the
results of such litigation will not have a materially adverse effect on the
Company's financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of shareholders of the Company in the fourth
quarter of 1998.
6
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Common stock market prices and dividends and the number of shareholders of
record are incorporated by reference to page 2 of the 1998 Annual Report to
Shareholders.
A dividend of $ .15 per share was paid on the Company's common stock in July
1997 and a dividend of $ .15 per share was declared on the Company's common
stock in December 1997, but was paid in January 1998. A dividend of $ .15 per
share was paid on the Company's common stock in July 1998 and a dividend of
$.15 per share was declared on the Company's common stock in December 1998, but
was paid in January 1999. Other information required by this item is
incorporated by reference to the Consolidated Statements of Stockholders' Equity
which appears on page 11 of the 1998 Annual Report to Shareholders.
No dividends may be declared or paid on the Company's common stock nor may
common stock be purchased or redeemed unless (a) preferred stock dividend and
sinking fund requirements are met; and (b) the total of dividends paid does not
exceed the maximum amount permitted by one of the Company's bank loan
agreements.
Item 6. Selected Financial Data
Selected Financial Data, on page 2 of the 1998 Annual Report to Shareholders, is
incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition
This information is incorporated by reference to pages 3 through 6 of the 1998
Annual Report to Shareholders.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from changes in interest rates and foreign
exchange rates. The Company uses fixed rate debt and debt with variable interest
rates to finance the ownership of its properties.
7
The table that follows summarizes the Company's debt obligations outstanding as
of December 31, 1998. This information should be read in conjunction with note 5
to the consolidated financial statements.
Short and Long Term Debt at December 31, 1998 (in thousands):
1999 2000 2001 2002 2003 Total Fair Value
Principal Amount Due 4,048 26,967 2,224 682 19,537 53,458 54,779
Average Interest Rate 10.31% 10.41% 8.64% 8.87% 8.87%
Item 8. Consolidated Financial Statements and Supplementary Data
The financial statements listed in the Index to Consolidated Financial
Statements filed as part of this Annual Report on Form 10-K, together with the
report of Ernst & Young LLP dated March 19, 1999, are incorporated herein by
reference to the 1998 Annual Report to Shareholders.
Selected Quarterly Financial Data, on page 6 of the 1998 Annual Report to
Shareholders, is incorporated by reference.
Item 9. Changes in and Disagreements with Auditors on Accounting and Financial
Disclosure
There were no disagreements with auditors on accounting principles or practices
or financial statement disclosures.
8
PART III
Item 10. Directors and Executive Officers of the Registrant
A. Directors of the Company and Compliance with Section 16 (a)
The information required by this item is incorporated herein by reference
to the proxy statement for the 1999 Annual Meeting of Stockholders.
B. The Executive Officers of the Company are as follows
Employment History
Name Present Position Age 1994 to Present
- ---- ---------------- --- ---------------
Roger P. Sonnabend Chairman of the Board and Chief 73 Chairman and Chief
Executive Officer. Executive Officer.
Stephanie Sonnabend President 46 Executive Vice President
until January 1, 1996.
Paul Sonnabend Chairman of the Executive Committee 71 President until
and Chief Financial Officer December 31, 1995.
Stephen Sonnabend Senior Vice President 67 Senior Vice President.
Boy van Riel Vice President and Treasurer 40 Vice President & Treasurer.
Peter J. Sonnabend Vice Chairman, Vice President and 45 Vice President and
Secretary Secretary Until May
1995.
Christopher Baum Vice President - Sales & Marketing 45 Vice President - Sales
& Marketing.
Michael Levie Vice President - Egypt 38 Vice President &
General Manager, Royal
Sonesta Hotel, Boston
(Cambridge), Until
January 1996.
9
Employment History
Name Present Position Age 1994 to Present
- ---- ---------------- --- ---------------
Felix Madera Vice President - International 50 Vice President &
General Manager,
Sonesta Beach Resort,
Key Biscayne, Florida.
Mary Jane Rosa Vice President - Design 50 Vice President - Design
Jacqueline Sonnabend Executive Vice President 44 Vice President - Human
Resources Until March
1996.
Hans Wandfluh Vice President 64 President & General
Manager, Royal Sonesta
Hotel, New Orleans,
Louisiana.
Roger, Paul and Stephen Sonnabend are brothers. Stephanie Sonnabend and
Jacqueline Sonnabend are the daughters of Roger Sonnabend. Peter J. Sonnabend is
the son of Paul Sonnabend.
The Board of Directors elects officers of the Company on an annual basis.
Item 11. Executive Compensation
and
Item 12. Security Ownership of Certain Beneficial Owners and Management
and
Item 13. Certain Relationships and Related Transactions.
The information required by these items is incorporated by reference to the
proxy statement for the 1999 Annual Meeting of Stockholders to be held on May
18, 1999.
10
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements: The financial statements listed in the
accompanying Index to Consolidated Financial Statements are filed as
part of this Annual Report.
2. Financial Statement Schedules: The schedule listed in the accompanying
Index to Consolidated Financial Statements is filed as part of this
Annual Report.
3. Financial Statements of significant subsidiary, RIF Resort Hotel,
N.V., if available, shall be provided by amendment to this Form 10-K
by June 30, 1999, as allowed under Regulation S-X, Rule 3-09.
4. Exhibits: The exhibits listed on the accompanying Index to Exhibits
are filed as part of this Annual Report.
(b) Reports on Form 8-K filed during the last quarter of 1998: None
11
SONESTA INTERNATIONAL HOTELS CORPORATION
Index to Consolidated Financial Statements
and Financial Statement Schedules
Item 14 (a) (1) and (2) References (Page)
1998 Annual Report to
Form 10-K Shareholders*
--------- -------------
Consolidated Balance Sheets
at December 31, 1998 and 1997........................................ 9-10
For the years ended December 31, 1998, 1997 and 1996:
Consolidated Statements of
Operations...................................................... 8
Consolidated Statements of
Stockholders' Equity............................................ 11
Consolidated Statements of
Cash Flows...................................................... 12
Notes to Consolidated
Financial Statements............................................ 13-21
Consolidated Financial Statement
Schedule for the year ended
December 31, 1998:
II. Consolidated Valuation and
Qualifying Accounts............................................. 13
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
- --------------------------------------------------------------------------------
*Incorporated by Reference
12
SONESTA INTERNATIONAL HOTELS CORPORATION
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1998
Amounts
Year Ended December 31, 1996 Balance Charged Amounts Balance,
Beginning Acquisition (Credited) (Written Off) End Of
Of Year Of Hotel To Income Recovered Year
------- -------- --------- --------- ----
Deducted from assets:
Valuation reserve on long-term
receivable and advances $5,500,000 $ - $ - $5,500,000
========== ======== ======== ==========
Allowance for doubtful accounts $ 97,901 $ 37,650 $(27,577) $ 107,974
========== ======== ======== ==========
Year Ended December 31, 1997
Deducted from assets:
Valuation reserve on long-term
receivable and advances $5,500,000 $ - $ - $5,500,000
========== ======== ======== ==========
Allowance for doubtful accounts $ 107,974 $ 26,001 $(16,317) $ 117,658
========== ======== ======== ==========
Year Ended December 31, 1998
Deducted from assets:
Valuation reserve on
long-term
receivable and advances $5,500,000 $(5,500,000) $ - $ - $ -
========== =========== ======== ======== ==========
Allowance for doubtful accounts $ 117,658 $ 33,000 $(18,309) $ 8,473 $ 140,822
========== =========== ======== ======== ==========
- --------------------------------------------------------------------------------
Note: The Company acquired Sonesta Beach Resort Key Biscayne on July 1, 1998.
The Company released the seller from indebtedness owed to Company subsidiaries
and reversed a valuation reserve against one of the loans owed to the Company
prior to the acquisition. In connection with the acquisition the Company also
acquired a $33,000 reserve for trade receivables.
13
Sonesta International Hotels Corporation
Index to Exhibits
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
3.1 Certificate of Incorporation as amended to date. (8)
3.2 Company By-laws, including all amendments through
March 16, 1999. (12)
9.1(a) Sonnabend Voting Trust Agreement, dated August 1,
1984, providing for the combination of the voting
power of stock held by members of the Sonnabend
Family. (6)
9.1(b) First Amendment, dated December 1984, to Sonnabend
Voting Trust Agreement (6)
10.1(a) "Third Amendment of Mortgage and Security Agreement
and Second Amendment of Note" Between Key Biscayne
Limited Partnership, Mortgagor ("KBLP") and Florida
Sonesta Corporation, Mortgagee ("FSC"), dated
February 4, 1994. (10)
10.1(b) "Operating Deficit Loan Mortgage Note"
($2,194,005.00) from KBLP to FSC, dated as of
December 31, 1993. (10)
10.1(c) "Operating Deficit Loan Mortgage and Security
Agreement" between KBLP and FSC, dated February 4,
1994. (10)
10.1(d) "Promissory Note" ($1,576,600.00) from KBLP to FSC,
dated February 4, 1994 . (10)
10.1(e) "Second Amendment to Management Agreement", dated as
of December 31, 1993 between KBLP and FSC. (10)
10.2(a) Renovation Enhancement Agreement, dated February 19,
1993, between Florida Sonesta Corporation ("FSC") and
Key Biscayne Limited Partnership ("KBLP"). (9)
14
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
10.2(b) First Amendment to Renovation Enhancement Agreement,
dated May 18, 1993, between FSC and KBLP. (9)
10.3 Second Renovation Enhancement Agreement, dated April
30, 1993, between FSC and KBLP. (9)
10.4(a) "Sonesta Loan" agreement, dated April 13, 1993 between
FSC and KBLP. (9)
10.4(b) First Amendment to "Sonesta Loan" agreement, dated
September 29, 1993, between FSC and KBLP. (9)
10.5(a) "Renovation Agreement", dated September 12, 1991,
between Florida Sonesta Corporation ("FSC") and Key
Biscayne Limited Partnership ("KBLP"). (7)
10.5(b) "First Amendment to Management Agreement", dated
September 12, 1991, between FSC and KBLP. (7)
10.5(c) "Amendment of Note and Second Mortgage", dated
September 12, 1991, between FSC and KBLP. (7)
10.5(d) "Amendment of Note and Third Mortgage", dated
September 12, 1991, between FSC and KBLP. (7)
10.6(a) "1995 Loan Agreement" between Hibernia National Bank
("Hibernia") and Royal Sonesta, Inc. ("Royal
Sonesta"), as of January 1, 1995. (10)
10.6(b) "Promissory Note" ($5,000,000) from Royal Sonesta to
Hibernia, dated "Effective January 1, 1995". (10)
10.6(c) "First Amendment to 1995 Loan Agreement" between
Hibernia and Royal Sonesta, dated December 12, 1994.
(10)
10.6(d) "Second Amendment to 1995 Loan Agreement" between
Hibernia and Royal Sonesta, dated as of December 31,
1997. (14)
10.6(e) "Second Modification to Promissory Note" between
Hibernia and Royal Sonesta, dated as of December 31,
1997. (14)
15
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
10.7(a) 1992 Loan Agreement, dated December 30, 1992, between
Royal Sonesta and Hibernia. (8)
10.7(b) Promissory Note, dated December 30, 1992, between
Royal Sonesta and Hibernia. (8)
10.7(c) Restatement and Continuation of Continuing Guaranty,
dated December 30, 1992, between the Registrant and
Hibernia. (8)
10.8(a) "Amendment and Restatement of the Amended and Restated
Loan Agreement", dated December 23, 1991, between
Hibernia, Royal Sonesta and the Registrant. (7)
10.8(b) $2,875,000 Promissory Note, dated December 23, 1991,
from Royal Sonesta to Hibernia. (7)
10.9(a) Promissory Note ($22,880,000), dated December 18,
1996, from the Trustees of Charterhouse of Cambridge
Trust ("Trust") and Sonesta of Massachusetts, Inc.
("Sonesta Mass") to SunAmerica Life Insurance Company
("SunAmerica"). (13)
10.9(b) Mortgage, Security Agreement, Fixture Filing,
Financing Statement and Assignment of Leases and
Rents, dated as of December 18, 1996, between Trust
and Sonesta Mass, and SunAmerica. (13)
10.9(c) Environmental Indemnity Agreement, dated as of
December 18, 1996, between Trust, Sonesta Mass, and
Sonesta International Hotels Corporation ("Sonesta"),
and SunAmerica. (13)
10.9(d) Escrow Agreement, dated as of December 18, 1996,
between Trust, Sonesta Mass, and SunAmerica, "Escrow
Agent". (13)
10.9(e) Replacement Reserve and Security Agreement, dated as
of December 18, 1996, between Trust and Sonesta Mass,
and SunAmerica. (13)
16
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
10.9(f) Limited Guaranty Agreement, dated as of December 18,
1996, between Sonesta and SunAmerica. (13)
10.10(a) Revolving Term Note ($2,000,000) from Sonesta
International Hotels Corporation to USTrust, dated
September 30, 1995. (12)
10.10(b) Commitment Letter agreement, dated September 28, 1995,
between Sonesta International Hotels Corporation and
USTrust. (12)
10.11 Amendment and Allonge to Commercial Promissory Note, 24-26
dated as of September 30, 1998, between Sonesta
International Hotels Corporation and USTrust Bank.
10.12(a) Loan Agreement($1,000,000), dated December 18, 1996,
between Masters of Tourism and Sonesta International
Hotels Limited ("SIHL"). (13)
10.12(b) (Personal) Guaranty of Hisham Aly, dated as of
December 18, 1996. (13)
10.13 Loan Agreement ($277,935) dated as of January 1, 1997,
between Masters of Tourism and SIHL (consolidating two
(2) outstanding loan balances). (13)
10.14(a) "Amendment to Loan Agreement", dated April 29, 1997,
between Masters of Tourism and SIHL. (14)
10.14(b) (Personal) Guaranty of Hisham Aly, dated as of April
29, 1997. (14)
10.15 Second Amendment to Loan Agreement, dated September 27-29
15, 1998, between Masters of Tourism and SIHL.
10.16 Indenture of Lease, dated June 26, 1979, between John
Hancock Mutual Life Insurance Company ("John Hancock")
and Sonesta International Hotels Corporation
("Sonesta"). (4)
17
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
10.17 "Second Amendment to Lease" between John Hancock and
Sonesta, dated March 22, 1994. (10)
10.18 "Third Amendment to Lease" between John Hancock and
Sonesta, dated June, 1994. (10)
10.19(a) Intercreditor, Payment Priority and Lien Priority
Agreement, dated as of September 15, 1993, between
Sonesta International Hotels Corporation ("Sonesta"),
Sonesta Louisiana Hotels Corporation ("SLHC"), 800
Canal Street Limited Partnership (the "Partnership"),
and numerous other parties. (9)
10.19(b) Commercial Guaranty, dated September 15, 1993, by SLHC
and Sonesta. (9)
10.19(c) CSDC/Manager Reserve Agreement, dated September 15,
1993, between SLHC, the Partnership and Canal Street
Development Corporation. (9)
10.20(a) Manager Advance Agreement, dated as of May 6, 1997,
between SLHC and the Partnership. (14)
10.20(b) Term Note ($500,000) from the Partnership to SLHC,
dated May 6, 1997. (14)
10.20(c) Collateral Note ($650,000) from the Partnership to
SLHC, dated May 6, 1997. (14)
10.20(d) Commercial Guaranty, dated May 6, 1997, between SLHC,
Sonesta, and First National Bank of Commerce. (14)
10.20(e) Amended and Restated Intercreditor, Payment Priority
and Lien Priority Agreement, dated as of May 6, 1997,
between Sonesta, SLHC, the Partnership, and numerous
other parties. (14)
10.21 Extension of Lease by Royal Sonesta, Inc., dated
August 6, 1993. (9)
18
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
10.22 Agreement, dated September 9, 1993, between Royal
Sonesta, Inc. and Aetna Life Insurance Company. (9)
10.23 Hotel Lease-Amendment No. 3, dated September 17, 1981,
between Aetna Life Insurance Company and Royal
Sonesta, Inc. (5)
10.24 Hotel Lease-Amendment No. 2, dated September 1, 1977,
between Chateau Louisiane, Inc. and Royal Sonesta,
Inc. (3)
10.25 Hotel lease-Amendment No. 1, dated November 26, 1973,
between Chateau Louisiane, Inc. and Louisiana Sonesta
Corporation. (2)
10.26 Hotel Lease, dated December 12, 1967, between Chateau
Louisiane, Inc., as "Landlord", and The Royal Orleans,
Inc., as "Tenant". (1)
10.27(a) Restated Employment Agreement, dated January 1, 1992,
between the Registrant and Paul Sonnabend, together
with letter agreement regarding permanent and total
disability. (8) (Management contract under Item 601
(10) (iii) (A))
10.27(b) Restated Employment Agreement, dated January 1, 1992,
between the Registrant and Roger P. Sonnabend,
together with letter agreement regarding permanent and
total disability. (8) (Management contract under Item
601 (10) (iii) (A)).
10.27(c) Restated Employment Agreement, dated January 1, 1992,
between the Registrant and Stephen Sonnabend together
with letter agreement regarding permanent and total
disability. (8) (Management contract under Item 601
(10) (iii) (A)).
10.28(a) (Letter) Loan Agreement ($2,000,000), dated July 18,
1996, between Maduro & Curiel's Bank N.V. and Sonesta
Curacao Hotel Corporation N.V. (13)
19
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
10.28(b) Letter Agreement extending term of Loan Agreement, 30
dated December 23, 1998, between Maduro & Curiel's
Bank N.V. and Sonesta Curacao Hotel Corporation N.V.
10.29 Lease, dated September 21, 1991, between "the Crown"
and Casablanca Resorts Development of Anguilla Limited
("CRDAL") (assumed by Sonesta Hotels of Anguilla
Limited ("Sonesta Anguilla") in November 1995). (11)
10.30 Debenture, dated November 28, 1995, between Scotiabank
Anguilla Limited and Sonesta Anguilla (11)
10.31 Debenture ($6,390,000) from Sonesta Hotels of Anguilla
Limited to Scotiabank Anguilla Limited, dated December
1996 (evidencing additional $1,700,000 loan). (13)
10.32 Agreement, dated as of March 1, 1996, between CRDAL
and Sonesta Anguilla. (13)
10.33 (Letter) Loan Agreement ($1,000,000), dated February
9, 1997, between Sakkara Hotels and Sonesta
International Hotels Corporation. (13)
10.34 (Letter) Lease Agreement, dated June 3, 1996, between
Sonesta Hotels of Anguilla, Ltd. and Amsterdam Sonesta
Corporation (subsequently renamed Anguilla Hotel
Management, Inc.) (13)
10.35 Loan Agreement, dated July 30, 1997, between Sonesta
Miami Beach Hotel Company, Inc. and Skip Properties
N.V. (14)
10.36(a) Contribution and Formation Agreement, dated as of
January 30,1998, by and among Key Biscayne Limited
Partnership ("KBLP"), Florida Sonesta Corporation and
Key Biscayne Land Corporation ("Sonesta II"), and
joined in by Key Biscayne Hotel Associates, LTD.
("KBHA"), Partners Liquidating Trust,("PLT"),
Strategic Realty Advisors, Inc., ("SRAI") and Sonesta
International Hotels Corporation ("Sonesta
International"). (15)
20
NUMBER DESCRIPTION PAGE NOS.
- ------ ----------- ---------
10.36(b) First Amendment to Contribution and Formation
Agreement, dated as of April 3, 1998, by and among
KBLP, FSC and Sonesta II, and joined in by KBHA, PLT,
SRAI and Sonesta International. (15)
10.36(c) Agreement of Limited Partnership of Sonesta Beach
Resort Limited Partnership, dated April 1998, by and
between FSC,Sonesta II and KBLP. (15)
10.36(d) Assumption Agreement, dated as of July 1, 1998, by and
between Sonesta Beach Resort Limited Partnership
("SBRLP") and State Street Bank and Trust Company,
trustee. (15)
10.36(e) Amendment to and Assignment of KBHA/PLT Indebtedness,
dated as of July 1, 1998, by and between KBLP,
KBHA,PLT and SBRLP,including KBHA/PLT Note, dated July
1, 1998. (15)
13 Annual Report to Security Holders for the calendar 31-53
year ended December 31, 1998.
21 Subsidiaries of the Registrant. 54
23 Consent of Ernst & Young LLP filed herewith. 55
27 Financial Data Schedule 56
(1) Incorporated by reference to the Company's 1967 Report on Form 10-K.
(2) Incorporated by reference to the Company's 1973 Report on Form 10-K.
(3) Incorporated by reference to the Company's 1977 Report on Form 10-K.
(4) Incorporated by reference to the Company's 1979 Report on Form 10-K.
(5) Incorporated by reference to the Company's 1981 Report on Form 10-K.
(6) Incorporated by reference to the Company's 1984 Report on Form 10-K.
(7) Incorporated by reference to the Company's 1991 Report on Form 10-K.
(8) Incorporated by reference to the Company's 1992 Report on Form 10-K.
(9) Incorporated by reference to the Company's 1993 Report on Form 10-K.
(10) Incorporated by reference to the Company's 1994 Report on Form 10-K.
(11) Incorporated by reference to the Company's 1995 Report on Form 8-K.
(12) Incorporated by reference to the Company's 1995 Report on Form 10-K.
(13) Incorporated by reference to the Company's 1996 Report on Form 10-K.
(14) Incorporated by reference to the Company's 1997 Report on Form 10-K.
(15) Incorporated by reference to the Company's 1998 Report on Form 8-K.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
SONESTA INTERNATIONAL HOTELS CORPORATION
(Registrant)
By: /s/ Boy van Riel Date: March 22, 1999
-----------------------------------
Boy van Riel
Vice President and Treasurer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Roger P. Sonnabend Date: March 22, 1999
-----------------------------------
Roger P. Sonnabend
Chairman of the Board and Chief Executive Officer
By: /s/ Boy van Riel Date: March 22, 1999
-----------------------------------
Boy van Riel
Vice President and Treasurer, Principal
Financial and Accounting Officer
By: /s/ Paul Sonnabend Date: March 22, 1999
-----------------------------------
Paul Sonnabend
Director
By: /s/ Peter J. Sonnabend Date: March 22, 1999
-----------------------------------
Peter J. Sonnabend
Director
22
By: /s/ Stephanie Sonnabend Date: March 22, 1999
-----------------------------------
Stephanie Sonnabend
Director
By: /s/ Stephen Sonnabend Date: March 22, 1999
-----------------------------------
Stephen Sonnabend
Director
By: /s/ George S. Abrams Date: March 22, 1999
-----------------------------------
George S. Abrams
Director
By: /s/ Vernon R. Alden Date: March 22, 1999
-----------------------------------
Vernon R. Alden
Director
By: /s/ Joseph L. Bower Date: March 22, 1999
-----------------------------------
Joseph L. Bower
Director
By: /s/ Jean C. Tempel Date: March 22, 1999
-----------------------------------
Jean C. Tempel
Director
23
AMENDMENT AND ALLONGE TO COMMERCIAL PROMISSORY NOTE
This Amendment and Allonge to Commercial Promissory Note (the
"Allonge") is made as of September 30, 1998 by Sonesta International Hotels
Corporation, a New York corporation ("Borrower"), and USTrust ("Bank").
WHEREAS, Borrower issued a Commercial Promissory Note dated September
30, 1995 in the face principal amount of $2,000,000 made payable to the order of
Bank (as amended September 30, 1997, the "Note"); and
WHEREAS, Borrower has requested the Bank to amend the Note in
accordance with the terms of this Allonge;
NOW, THEREFORE, in consideration of the premises and agreements set
forth herein and for other good and valuable consideration, the parties hereto
agree as follows:
1. The maturity date of the Note is hereby changed to September 30,
1999.
2. Exhibit B-1997 to the Commitment Letter dated September 30, 1997,
which set forth certain terms and conditions of the line of credit, is replaced
with Exhibit B-1998 attached hereto.
3. Capitalized terms used in this Allonge shall have the same meaning
as in the Note except as otherwise specified herein. All references in the Note
to the "Note" shall mean the Note as previously amended and as amended by this
Allonge
4 This Allonge shall be attached to the Note, incorporated therein and
made a part thereof.
5. This Allonge shall be governed by and construed in accordance with
the laws of The Commonwealth of Massachusetts.
Executed as an agreement under seal effective as of the day and year
set forth above.
USTrust
By: /s/ By: /s/ Peter J. Sonnabend
------------------------------ ----------------------------
Its Its Vice President
I hereby acknowledge and affirm guaranty of the above-described facility by the
principal domestic subsidiaries of Sonesta International Hotels Corporation as
described in Exhibit A, in my capacity as authorized signer for said
subsidiaries.
By: /s/ Peter J. Sonnabend
-----------------------------
24
EXHIBIT A
Principal Domestic Subsidiaries of
Sonesta International Hotels Corporation
Anguilla Hotel Management Inc. Guaranty Unlimited
Brewster Wholesale Corporation Guaranty Unlimited
Florida Sonesta Corporation Guaranty Unlimited
S.I.A. Advertising, Inc. Guaranty Unlimited
Sonesta Beach Resort Limited Partnership Guaranty Unlimited
Royal Sonesta, Inc. Guaranty Limited to $1,000,000
25
EXHIBIT B-1998
Financial Institute Maximum Commitment
------------------- ------------------
SunAmerica Insurance Co. $23.0 Million
Hibernia National $5.0 Million
Maduro & Curiels Bank $2.0 Million
First National Bank $1.5 Million Guaranty
Scotia Bank $6.5 Million, with a
$1.0 Million Guaranty
Seller Note (Anguilla) $1.0 Million
Aetna Realty Co. $22.45 Million
26
SECOND AMENDMENT TO LOAN AGREEMENT
Reference is made to the Loan Agreement made as of the 18th day of December,
1996 in the City of Boston, Massachusetts, U.S.A. by and between SONESTA
INTERNATIONAL HOTELS LIMITED (or its assignee) organized and existing under the
laws of The Bahamas and having its principal place of business at 200 Clarendon
Street, Boston, Massachusetts, U.S.A. and represented in the signature of this
Agreement by PETER J. SONNABEND, VICE PRESIDENT (hereinafter referred to as the
"Lender"), and MASTERS OR TOURISM organized and existing under the laws of The
Arab Republic of Egypt and having its principal place of business at Salah Salem
Avenue, El Abour Building, No. 13, Flat 84, Heliopolis, Cairo, Egypt and
represented in the signature of this Agreement by MOHAMED HISHAM AHMED ALY,
CHAIRMAN (hereinafter referred to as the "Borrower") ("Loan Agreement"), as
amended by an "Amendment to Loan Agreement", dated April 29, 1997 (the
"Amendment"). This agreement shall constitute the "Second Amendment" to the Loan
Agreement.
WHEREAS the purpose of the Loan Agreement was to provide U.S.
$1,000,000 to the Borrower as a loan to finance the expansion and improvement of
Sonesta Beach Resort, Sharm El Sheikh (the "Hotel"), as described in the Loan
Agreement; and
WHEREAS the purpose of the Amendment was to provide an additional U.S.
$500,000 to the Borrower as a loan in connection with the further expansion of
the Hotel; and
WHEREAS the Borrower has informed the Lender that the additional U.S.
$500,000, described in the Amendment, is no longer required by the Borrower in
order to complete the expansion and improvement of the Hotel, and the further
expansion of the Hotel -- such expansion and improvements being referred to as
"Improvements" under the Loan Agreement, as amended by the Amendment;
NOW THEREFORE, for consideration the receipt and sufficiency of which
is hereby acknowledged, the parties agree to amend the terms of the Loan
Agreement, as amended by the Amendment, as follows:
1. Amendment. The Lender shall have no further obligation to advance funds to
the Borrower under the Amendment.
2. Repayment of Loan. The parties acknowledge that, pursuant to Section 5 of
the Amendment, Borrower owed Lender U.S. $187,500, on January 1, 1998,
representing the first installment of the repayment of Loan principal, but
that said payment was not made. The parties now agree that Loan principal
shall be repaid in seven (7) annual installments of U.S. $142,857, with the
first payment due January 1, 1999. Other Loan terms, including without
limitation the interest rate, shall remain unchanged.
27
3. Advance for Increased Water Capacity. The parties acknowledge that the
"Improvements" described in Section 2.02 of the Loan Agreement included
"increased water capacity" for the expanded and improved Hotel.
Notwithstanding the provisions of Section 1, above, to the contrary,
Borrower shall provide increased water-making capacity for the
"Improvements" (as said term was amended by the Amendment), provided
Lender, at its option, advances an additional U.S. $250,000 for this
purpose, which amount Borrower has represented is the minimum cost of the
increased water-making capacity. If Lender elects to advance the additional
U.S. $250,000, it shall advance said amount in installments upon
presentation by Borrower of invoices from third party contractors,
satisfactory in form in content to Lender, in Lender's sole judgement. As
portions of said additional U.S. $250,000 are advanced, they shall accrue
interest and be repaid on the same basis as the Loan under the Loan
Agreement. Even if it elects to advance the additional U.S. $250,000,
Lender shall have no obligation to advance any portion of said until all of
the "Improvements" (including the 80 guest rooms referenced in the
Amendment) -- but excepting the "increased water-capacity" -- have been
fully completed and are operational.
4. Default. The following is added to Section 8.01 of the Loan Agreement as
subsection (E):
(E) In the event the "additional Hotel facilities" described in
Section 2.02 of the Loan Agreement, as amended by the Amendment,
has not commenced full business operations by January 1, 1999.
5. In all other, as amended, respects the Loan Agreement remains unchanged and
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized signatories as of
September __, 1998.
Witness: SONESTA INTERNATIONAL HOTELS LIMITED
_______________________ By: /s/ Peter J. Sonnabend
--------------------------
Name: Peter J. Sonnabend
Title: Vice President
Witness: MASTERS OF TOURISM
_______________________ By: /s/ Mohamed Hisham Ahmed Aly
--------------------------
Name: Mohamed Hisham Ahmed Aly
Title: Chairman
28
Mohamed Hisham Ahmed Aly hereby executes this Second Amendment to Loan Agreement
in order to acknowledge and re-affirm his continuing personal guaranty under the
Loan Agreement.
Witness:
_______________________ By: /s/ Mohamed Hisham Ahmed Aly
--------------------------
Mohamed Hisham Ahmed Aly
29
December 21, 1998
Maduro & Curiel's Bank N.V.
P.O. Box 305
Curacao, N.A.
Attn: Kenneth Isidora
RE: Sonesta Curacao Hotel Corporation Loan
Dear Kenneth,
As you recall, we extended Sonesta's loan until December 31, 1998, hoping that
by then Marriott Corporation would have taken over the management of the Resort.
As it stands now, it does not look like that will happen, and I would like to
request that you further extend Sonesta's loan until the earlier of the
termination of our agreement to manage the Resort, or March 31, 1999.
I'd appreciate if you could send me a confirmation of your approval to fax
number 617-421-5423.
I appreciate your help and wish you a happy holiday season.
Kindest regards,
/s/ Boy van Riel
----------------------
Boy van Riel
BVR/se
30