HomeMy WebLinkAboutExhibit3AGREEMENT
TO ENTER INTO GROUND LEASE
BETWEEN
THE CITY OF MIAMI, FLORIDA
FLAGSTONE ISLAND GARDENS, LLC
DATED AS OF
GY&S1208223.17
TABLE OF CONTENTS
ARTICLE 1, DEFINITIONS; INCORPORATION OF RECITALS AND EFFECTIVE DATE 1
ARTICLE 2. NATURE OF THIS AGREEMENT; GROUND LEASE ATTACHED 2
2.1. Nature of this Agreement 2
22. Ground Lease 2
ARTICLE 3. INSPECTION PERIOD 2
3.1. Termination of Access and Indemnification Agreement 2
3.2. Inspections 2
3.3. Environmental Inspections 3
3.4. Indemnification 4
3.5, Insurance 4
ARTICLE 4. AGREEMENT CONDITIONS AND DELIVERIES 5
4.1. Flagstone's Acknowledgments and Deliveries 5
4..2. Other Conditions and Deliveries 7
4.3. Termination by City 9
4.4. Termination by. Flagstone 10
4.5. Outside Date 11
ARTICLE 5. SECURITY DEPOSIT 11
5.1. Initial Security 11
5.2. Additional Security 11
5.3. Deposits; Letters of Credit 12
ARTICLE 6. EXECUTION AND DELIVERY OF GROUND LEASE 12
6.1. Conditions Precedent to Execution and Delivery of Ground Lease 12
6.2. Right of Termination 17
ARTICLE 7. DEVELOPMENT OF PROJECT 18
7.1. Development Plans 18
7.2. Use and Ownership of Development Plans and Permits and Approvals in the
event of Termination 18
7.3. Platting and Other Development Matters 19
7.4. License(s) for Pre -Development Work ...19
7.5. Issuance to Flagstone of Marine Operating Permit for Existing Marina 21
7.6. Marina Approvals 21
ARTICLE 8. COORDINATION WITH CITY; APPROVAL PROCEDURES 25
8.1. Coordination with City 25
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TABLE OF CONTENTS
(continued)
Page
8.2. Chief Executive Officer Approval Procedures 26
8.3. Chief Executive Officer Approvals; Disclaimer 27
ARTICLE 9. DISCHARGE OF LIENS 28
9.1. No Liens ' 28
9.2. Discharging Liens 28
ARTICLE 10. CONDEMNATION 29
10.1. Material Taking 29
10.2. Less than a Material Taking 29
10.3. Award 29
ARTICLE 11. DEFAULT AND REMEDIES 29
11.1. Events of Flagstone's Default 29
11.2. Remedies for Flagstone's Default 30
11.3. City's Default 30
ARTICLE 12. REPRESENTATIONS BY FLAGSTONE AND CITY; DEFENSE AND
RELEASE 31
12.1, Flagstone's Representations 31
12.2. City's Representations 31
123. Disclaimer of Representations by Flagstone 31
ARTICLE 13. MISCELLANEOUS 33
13.1. Assignment 33
13.2. Notices 33
133. Applicable Law 33
13.4. Severability 33
13.5. Waiver 33
13.6. Third -Party Beneficiary 33
13.7. Enforcement Costs 33
13.8. Entire Agreement 34
13.9. Headings 34
13.10. References 34
13.11. Brokers34
13.12. No Partnership or Joint Venture 35
13.13. Counterparts 35
GY&S/208223.17
AGREEMENT TO ENTER INTO GROUND LEASE
The CITY OF MIAMI, FLORIDA, a municipal corporation of the State of Florida ("City"),
and FLAGSTONE ISLAND GARDENS, LLC, a Delaware limited liability company, f/k/a and
successor by merger to Flagstone Properties, LLC, a Florida limited liability company . (` ;Flagstone"),
hereby enter into this Agreement to Enter Into Ground Lease (this "Agreement"), as follows:
RECITALS:
WHEREAS, City owns that certain real property consisting of approximately 10.8 acres of
upland (the "Upland Parcel") and 13.4 acres of adjacent submerged land (the "Submerged Parcel") in
and about the northwest quadrant of Watson island, located in Miami -Dade County ("County"), Florida,
as more particularly described in Exhibit A attached hereto (the "Property"); and
WHEREAS, City desires that the Property be developed as a mixed use waterfront development
in accordance with that certain Mega Yacht Marina and Mixed Use Waterfront Development Opportunity
- Watson Island Miami, Florida Request for Proposals, dated February, 2001 (as amended, the "Watson
Island RFP"); and
WHEREAS, in response to the Watson Island RFP, flagstone submitted a proposal to City
entitled "Island Gardens at Watson.Island RFP" dated July 13, 2001 (the "Island Gardens Proposal");
and
WHEREAS, on November 6, 2001, the Island Gardens Proposal was approved by voter
referendum by the electorate of the City of Miami, which referendum granted Flagstone the right to
negotiate with City the terms by which flagstone would develop and ground lease the Property; and
WHEREAS, City and Flagstone now desire to enter into this Agreement for the development and
ground lease of the Property, subject to the teens and conditions contained herein.
NOW THEREFORE, in consideration of the premises and the mutual covenants herein
contained City and Flagstone agree as follows:
ARTICLE 3. DEFINITIONS; INCORPORATION OF RECITALS AND EFFECTIVE
DATE.
The foregoing Recitals are true and correct and are incorporated herein by this reference. This
Agreement shall be effective as of the date of execution hereof by the City, as set forth next to the place
GY&S/208223.17
designated for execution by the City on the last page hereof. The parties hereby agree that the "Effective
Date" as used herein shall be deemed to be January 1, 20.03. All capitalized terms used but not defined in
this Agreement shall have the meanings ascribed to such terms in Exhibit B attached hereto or in the
form of Ground Lease attached hereto as Exhibit C.
ARTICLE 2. NATURE OF THIS AGREEMENTS GROUND LEASE ATTACHED.
2.1. Nature of this Agreement. This Agreement constitutes an agreement to enter into a
ground lease upon the terms and conditions set forth herein. This Agreement shall not constitute a lease
of any portion of the Property and shall not .impose any encumbrance on the Property . nor entitle
Flagstone or any other Person to file a lis pendens in connection with this Agreement or any alleged
breach or default hereunder. The term of this Agreement shall commence upon the Effective Date and
automatically terminate upon the Lease Delivery Date, unless sooner terminated in accordance with the
terms hereof (except for any provisions hereof that expressly survive such termination).
2.Z. , Ground Lease. Attached as Exhibit C is the form of Ground Lease which (i) the parties
have fully negotiated and approved, (ii) has been approved by the City Commission at a regularly
scheduled meeting, and (iii) the parties intend to execute and deliver to each other, subject to the
satisfaction of the conditions precedent set forth in ARTICLE 4 and ARTICLE 6 of this Agreement.
ARTICLE 3. INSPECTION PERIOD.
3.1. Termination of Access and Indemnification Agreement. The parties hereby
acknowledge and agree that the certain Access and indemnification Agreement entered into between City
and Flagstone is hereby terminated and of no further force or effect (except for any indemnification and
confidentiality obligations which expressly survive such termination).
3,2. Inspections. Flagstone shall have until 5:00 P.M. (local time in the County) on the
sixtieth (60) day after the Effective Dale (the "Inspection Period") to perform, at Flagstone's sole cost
and expense, such investigations and inspections as to the Property, the physical condition thereof,
matters of zoning, title, survey and all other matters with respect to the Property, including, without
limitation, environmental matters (collectively, the "Inspections"), which are in Flagstone's judgment
relevant to Flagstone's determination whether to lease the Property (subject to the terms. and conditions
contained herein) or to terminate this Agreement Prior to performing any on -site Inspections, Flagstone
shall provide at least three (3) business days prior written notice to the Director of Real Estate and
Economic Development, City of Miami, at 444 S.W. 21'd Avenue, 3`d Floor, Miami, FL 33130, Telephone:
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305/416-1435, Facsimile: 305/416-2156 (or to such other City representative as designated by City),
which written notice shall provide reasonable detail regarding the type and scope of Inspection(s) to be
performed and the scheduled date and time of such Inspection and provide the Chief Executive Officer
with the opportunity to have a representative from the City present at any such Inspections. Any written
report, test, analysis, evaluation, appraisal, study or similar item with respect to the physical condition of
the Property which is in the possession or control of City, shall, upon written request of Flagstone, be
made available to Flagstone at reasonable times for review.
Following any such Inspections, Flagstone shall promptly restore the Property to the condition
existing immediately prior to such Inspections. Flagstone and its agents, employees, representatives and
contractors shall keep the results of any Inspections confidential (provided, however, that Flagstone may
disclose all information obtained with respect to the Inspections to its principals, officers, directors,
bankers and investors (including potential bankers and investors, attorneys, contractors and advisors as
long as such parties agree to keep the information confidential) and this obligation shall survive the
termination of this Agreement. Flagstone shall promptly deliver copies of any of the reports prepared in
connection with any of its Inspections directly to the Cbief Executive Officer. The Inspections shall be
conducted in accordance with all applicable laws utilizing licensed and insured professionals and
flagstone shall cause its inspectors to obtain, at Flagstone's sole cost and expense, any and all licenses
and permits required to conduct the Inspections, as applicable.
3.3, Environmental Inspections. Notwithstanding anything contained herein to the contrary,
with respect to any Inspections regarding environmental matters related to the Property (such Inspections
shall be referred to herein as the "Environmental Inspections"), in addition to the requirements set forth
in Section 3.2 above, the following shall apply.
3.3.1. Any Environmental Inspections shall be performed by those certain
environmental firm(s) or consultant(s) listed on Exhibit 3.3.1 attached hereto and no other environmental
firm(s) or consultant(s) shall be permitted to perforrri the Environmental Inspections without the prior
written approval of the Chief Executive Officer, which may be given or withheld in his or her sole and
absolute discretion.
3.3.2. Flagstone shall not perform any invasive environmental tests (such as drilling or
soil or groundwater testing) unless the Chief Executive Officer has provided its prior written consent
thereto, which consent may be withheld in City's sole and absolute discretion. Flagstone's request for
any invasive environmental testing must be accompanied by the inspection report (including all test
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results and analysis thereof) prepared by a reputable environmental engineering company which
recommends such additional testing and sets forth the basis thereof and the protocol for testing in
reasonable detail
3.3.3. Flagstone agrees that in the event the need arises to notify, under applicable laws,
any federal, state or local public agencies of any conditions at the Property as a result of the
Environmental Inspections performed by Flagstone, its agents, employees, contractors and/or other
representatives, Flagstone shall notify the City Attorney only and such disclosures shall be made directly
by the City (if deemed necessary thereby), and not Flagstone, to any such public agency.
3.4, Indemnification. Flagstone shall assume all risks associated with the Inspections and
agrees to indemnify and hold harmless City, of, from and against any and all costs, tosses, 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 flagstone and its agents, employees,
contractors and' other representatives in or upon the Property for the purposes of the Inspections. The
foregoing shall not apply to any diminution in the value of the land or cost or expenses which might arise
due to the uncovering of the existence of adverse conditions (e.g., environmental conditions), provided,
however, that the foregoing is not intended to relive Flagstone from liability if Flagstone, its agents,
employees, contractors or other representatives cause such a condition to exist. The foregoing
indemnification obligations of Flagstone shall survive any expiration or termination of this Agreement.
3.5. Insurance. Flagstone shall, prior to entering the Property and performing any
Inspections, provide to City evidence of insurance by Flagstone and its contractors, as applicable, as
specified on Exhibit 3.5 attached hereto, insuring against any liability by any one or more of Flagstone
and its agents, employees, contractors or other representatives arising from, out of or in connection with
or otherwise relating to the entry by any one or more of Flagstone and its agents, employees, contractors
or other representatives in or upon the Property for the purposes of the Inspections. Flagstone shall
provide City with a certificate from Flagstone and its contractors, as applicable evidencing such insurance
coverage, naming City as an additional insured thereon and which insurance coverage shall be kept in
force until the expiration or earlier termination of this Agreement.
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ARTICLE 4. AGREEMENT CONDITIONS AND DELIVERIES.
Flagstone's Acknowledgments and Deliveries.
4.1.1. Acceptance of Property. If for any reason whatsoever, in Flagstone's sole
discretion, Flagstone determines during the Inspection Period that it does not wish to proceed forward
with this Agreement, Flagstone shall have the absolute right to terminate this Agreement' by giving
written notice of such termination to City in the manner hereinafter provided for the giving of' notices
prior to the expiration of the Inspection Period (the "Termination Notice"). Upon City's receipt of the
Termination Notice, the Initial Security shall be returned to Flagstone and thereafter this Agreement shall
be deemed terminated and of no further force and effect and both parties shall be released and relieved of
any liability or obligations hereunder (except for those indemnification and confidentiality obligations of
Flagstone which specifically survive such termination). If Flagstone does not provide the Termination
Notice prior to the expiration of the Inspection Period, then it shall be presumed conclusively that
Flagstone has had adequate opportunity to review and has inspected and reviewed all portions of the
Property, including, without limitation, the status of title, survey and the environmental condition of the
Property, and, on the basis of its Inspections, Flagstone has determined that the condition of all portions
of the Property is satisfactory to Flagstone, and, except for the City's obligations under Section 4.2.5 and
Section 4.2.6 hereof, upon delivery of possession of the Property by City to Flagstone, Flagstone shall
accept every portion of the Property in its "AS -IS, WHERE -IS, WITH ALL FAULTS" condition, without
requiring any action, expense or other thing or matter on the part of City to be paid or performed, other
than those obligations of City set forth on Exhibit 4.1.1.
4.1.2. Environmental Condition Acceptance Notice. On or before the expiration of
the Inspection Period, FIagstone shall execute and deliver to the City the "Environmental Condition
Acceptance Notice" in form and substance attached hereto as Exhibit 4.1.2.
4.1.3. Investors. As of the Effective Date, Exhibit 4.1.3 attached hereto is a true,
correct and complete listing (the "Investor List") of the name, address and Social Security Number or
U.S. Federal Taxpayer Identification Number (or in the case of foreign investors who do not have such
Social Security Number or U.S. Federal Taxpayer Identification Number, any similar identification
number, if one exists, provided for in the country of their primary residence or domicile) of all of the
currently existing Investors in the Project other than those. Investors: (A) whose investments in the Project
are made through an Existing Investment Fund; or (B) who are or will become Investors on account of a
Going Public Transaction. (collectively, the "Non -Disclosed Investors") (it being understood and agreed
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that all Investors other than Non Disclosed Investors shall be referred to herein as the "Disclosed
Investors").
4.1.3.1. Flagstone acknowledges and agrees that, during the tern of this
Agreement, Mehmet Bayraktar shall at all times retain voting and beneficial control of Flagstone. During
the term of this Agreement, Flagstone shall cause its Financial Advisor to require each Disclosed Investor
(other than Flagstone or Mehmet Bayraktar) to complete the Investment Questionnaire. Based on the
responses to the questions in the Investor Questionnaire and such other due diligence the Financial
Advisor may perform in the normal course of its fiduciary duties, the Financial Advisor shall determine,
in its good faith, commercially reasonable judgment, whether or not such Disclosed Investor is a
Disqualified Person. Financial Advisor shall not propose to the City any Disclosed Investor which it has
concluded is a Disqualified Person. Furthermore, the City itself shall have the right to object to any
Disclosed Investor if it determines in its good faith commercially reasonable judgment that such
Disclosed Investor is a Disqualified Person. The parties acknowledge and agree that no Disqualified
Person shall hold a legal or beneficial interest in the Project.
4.1.4. Organizational Documents, As of the Effective Date, the documents listed in
Exhibit 4.1.4 attached hereto constitute all of the existing organizational documents of Flagstone,
including, without limitation, any operating and/or voting agreements among the members thereof
(collectively, the "Organizational Documents"), and Flagstone has provided to the Chief Executive
Officer true, correct and complete copies of all such Organizational Documents. Flagstone shall promptly
provide City written notice of any amendments, modifications, additions or terminations of the
Organizational Documents, together with written copies thereof. The members) or other Investor(s) of
Flagstone shall not enter into any voting agreements the effect of which would cause Mehrnet Bayraktar
to relinquish voting and beneficial control of Flagstone; provided, however, major or material decisions
requiring investor or shareholder consent, agreements among minority shareholders and/or other
customary commercial arrangements are not intended to be prohibited by the foregoing.
4.15. Expressions of Interest. Exhibit 4.1.5 attached hereto contains a letter to the
City from Flagstone's Financial Advisor and Holiday Fegnolio, which sets forth in favor of the City that,
based upon the Island Gardens Proposal, this Agreement and the form of Ground Lease attached hereto as
Exhibit C, such parties are highly confident that Flagstone will ,be able to raise its Initial Equity
Requirement, Which together with the projected financing should• be sufficient to fully fund the
development and construction of the Project Components as currently contemplated as well as the
operation thereof through Project Stabilization.
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4.2. Other Conditions and Deliveries.
4.2.1. MUSP Approval. From and after the Effective Date, Flagstone shall use good
faith reasonable efforts to obtain the approval of the Major 'Use Special Permit by the applicable
governmental authority(ies) for the Major Project Components (such approval shall be referred to herein
as the "MUSP Approval'). City shall reasonably and in good faith cooperate with such efforts,
including, without limitation, executing all applications jointly as owner, if necessary. Flagstone shall
obtain written approval of the Chief Executive Officer to the application for the MUSP, which shall
include any applications for zoning changes or variances and/or amendments to the Comprehensive Plan
currently in effect for the City of Miami (collectively, the "MUSP Application") prior to submission of
the MUSP Application to any governmental and/or quasi -governmental agency (it being understood that,
notwithstanding anything contained herein to the contrary the Chief Executive Officer may withhold his
or her consent to any zoning changes, variances or Comprehensive Plan amendments included in the
MUSP Application in his or her reasonable discretion). The parties agree to use reasonable, good -faith
efforts to agree upon necessary modifications to the MUSP Application which result from any
governmental or quasi -governmental process, provided that in no event shall the Chief Executive Officer
be required to consent to any changes which would violate any material tenns of the Watson Island RFP
or deviate materially from the Island Gardens Proposal. Flagstone hereby agrees that it shall have
submitted the MUSP Application to the appropriate Governmental Authority for approval thereof by no
later than six (6) months from the Effective Date.
4.2.2. NOPC Approval. From and after the Effective Date, Flagstone shall use good
faith reasonable efforts to obtain the approval of the State of Florida Department of Community Affairs
("DCA") to a "Notice of Proposed Change" ("NOPC") to the Downtown Development of Regional
Impact Increment 11 ("Downtown DRr'), which amends the Downtown DRI to: (i) add the Marina as a
new use thereunder, including the applicable simultaneous increase and decrease from an existing land
use category to account for any impacts of the Marina slips on traffic, if necessary; and (ii) expand the
boundaries of the Downtown DRI to include the Project (such approval shall be referred to herein as the
"NOPC Apnroval"). Flagstone shall obtain written approval of the Chief Executive Officer to the
application for the NOPC ("NOPC Application") prior to submission thereof to the City of Miami
Downtown Development Authority ("DDA"). No other development orders or amendments thereto shall
be applied for without the express prior written approval of the Chief ExecutiveOfficer. Any changes to
the NOPC Application during the NOPC approval process, including. without limitation, any conditions
that may be imposed by DDA or DCA in connection therewith must be approved by the Chief Executive
Officer in advance of the approval of the NOPC. The parties agree to use reasonable, good -faith efforts to
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agree upon necessary modifications to the NOPC Application which result from any governmental or
quasi -governmental process, provided that in no event shall the Chief Executive Officer be required to
consent to any changes which would violate any material terms of the Watson Island RFP or deviate
materially from the Island Gardens Proposal. Attached hereto as Exhibit 4.2.2 is a letter from DCA with.
respect to the vested rights for the existing marina slips at the Property. Flagstone hereby agrees that it
shall have submitted the NOPC Application to DCA.for approval thereof by no later than six (6) months
from the Effective Date.
4.2.3. MUSP/NOPC Application Date and Approval Date, The date of the later to
occur of the filing of the MUSP Application and tbe NOPC Application shall be referred to herein as the
"MUSp/NOPC Application Date". The date of the later to occur of the MUSP Approval and the NOPC
Approval shall be referred to herein as the "MUSP/NOPC Approval Date".
4.2.4. First Source Hiring Agreement. Within six (6) months from the Effective
Date, Flagstone and the City shall execute four (4) counterpart originals of a "First Source Hiring
Agreement" (to be prepared by Flagstone) for the Project (which is referred to in Section 34.1 of the
Ground Lease), which First Source Hiring Agreement shall be in form and substance reasonably
acceptable to the parties.
4.2.5. Partial Modification of Restrictions. From and after the Effective Date, City
shall use good faith reasonable efforts (which shall in no event be deemed to include any financial
obligation on the part of the City) to obtain from the Board of Trustees of the Internal Improvement Trust
Fund of the State of Florida (the "Board of Trustees") a "Partial Modification of Restrictions" (tbe
"Partial Modification of Restrictions") which modifies the restrictions set forth within Deed No. 19447
from the Board of Trustees in favor attic City filed for record April 11, 1949 in Deed Book 3130, Page
257 of the Public Records of Dade County, Florida ("Board of Trustees Deed") in order to permit the
Project. City's efforts to obtain the Partial Modification of Restrictions for the Project shall not be
inconsistent with other actions and efforts by the City in connection with the City's obtaining of other
partial modifications of restrictions from the Board of Trustees. City shall attempt to have this completed
within six (6) months from the Effective Date, subject to Events of Closure. Flagstone's counsel may, at
FIagstone's sole discretion, join in or assist such efforts by City to obtain the Partial Modification of
Restrictions provided that Flagstone shall not take any actions or engage in any correspondence with
respect thereto without the prior consent of the Chief Executive Officer.
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4.2.6. Removal of Existing Occupants. From and after the Effective Date, City shall
use good faith reasonable efforts (which shall in no event be deemed to include any financial obligation
on the part of the City) to remove or otherwise enter into agreements which provide for the removal of
those certain existing occupants of the Property more particularly described on Exhibit 4.2.6 attached
hereto (the "Existine Occupants") on or before the Lease Delivery Date (it being understood that City
shall provide to Flagstone any proposed agreement negotiated by the City with those certain tenants
designated on Exhibit 4.2.6 as "fish markets" for such tenants to remain in place until immediately prior
to the Lease Delivery Date prior to the execution by City thereof for Flagstone's review and comments; it
being understood, however, that Flagstone shall have no rights of approval thereover). City shall attempt
to enter into agreements for such removal or otherwise remove such Existing Occupants within six (6)
months from the Effective Date, subject to Events of Closure. Flagstone may, at Flagstone's sole
discretion, negotiate agreements with any Existing Occupants for the continued occupancy at the Marina
(solely as a subtenant of Flagstone under the Ground Lease and only during the term thereof), and if such
an agreement is reached by the applicable parties, then, notwithstanding anything contained herein to the
contrary, City shall have no further responsibility under any such agreements negotiated by Flagstone
with such Existing Occupant(s) (it being understood that (i) in no event shall Flagstone be permitted to
bind the City to any such agreement in the event that Flagstone and the City do not enter into a Ground
Lease hereunder or in the event of any termination of such Ground Lease; and (ii) and any such
agreement between Flagstone and an Existing Occupant(s) shall contain an acknowledgment by such
Existing Occupant(s) that its rights under such agreement relate only to Flagstone's leasehold estate and
such Existing Occupant(s) releases City from any and all claims of rights to occupy the Property or
entitlements to compensation in lieu thereof in the event of a termination of the Ground Lease for any
reason whatsoever).
42.7. Each party hereby agrees to keep the other party regularly apprised in writing as
to what actions have been taken by such party in order to satisfy their respective conditions precedent set
forth above and the status thereof.
4,3, Termination by City. In the event that: (i) Flagstone fails to file its MUSP Application
and NOPC Application with the applicable Governmental Authorities or fails to execute and deliver to
City a "First Source Hiring Agreement" which is reasonably acceptable to City within six (6) months
from the Effective Date (which date shall not be extended for an Event of Closure) (the "MUSP/NOPC
Application Deadline"); or (ii) Flagstone fails to obtain the MUSP Approval and NOPC Approval within
twelve (12) months from the IvfUSP/NOPC Application Date (which date may be extended by Flagstone
for an Event of Closure) (the "MUSP/NOPC Approval Deadline"), then City shall have the right (but
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not the obligation) to terminate this Agreement by written notice to Flagstone delivered on or before the
fifth (511i) day after the expiration of the MUSP/NOPC Application Deadline or the MUSP/NOPC
Approval Deadline, as applicable, whereupon the Initial Security shall be returned to Flagstone and
thereafter this Agreement shall be deemed terminated and of no further force or effect and both parties
shall be relieved of. any liability or obligations hereunder, except with respect to any provisions hereof
that are intended by the parties to survive such termination. Notwithstanding the foregoing, Flagstone
shall have the right (but not the obligation) in its sole discretion to prevent a termination by the City and
extend either the MUSP/NOPC Application Deadline or the MUSP/NOPC Approval Deadline for up to
an additional twelve (12) months in the aggregate (for example, if Flagstone extends the MUSP/NOPC
Application Deadline for an additional four (4) months, Flagstone shall thereafter only be permitted to
extend the MUSP/NOPC Approval Deadline for up to an additional eight (8) months), provided, however,
that: (a) Flagstone must provide written notice to the City of any such extension on or before the
expiration of the applicable deadline; and (b) Flagstone shall continue to exercise reasonable diligence to
apply for or obtain the MUSP Approval and NOPC Approval during any such extension period. To the
extent that Flagstone applies for both MUSP Approval and NOPC Approval in a shorter time than six (6)
months, then Flagstone shall have the ability to extend the MUSP/NOPC Approval Deadline by the
difference between six (6) months and the time period actually used to apply for such approvals (e.g., if
the MUSP/NOPC Application Date is four (4) months from the Effective Date, then Flagstone shall have
fourteen (14) months to obtain the MUSP Approval and NOPC Approval (plus its aggregate 12 month
extension, if necessary) before the City's right to terminate in Section 4.3 would be effective).
4.4. Termination by Flagstone. In the event that within six (6) months after the Effective
Date (which date may be extended for an Event of Closure), City is unable to: (i) obtain the Partial
Modification of Restrictions; and/or (ii) remove the Existing Occupants from the Property, then Flagstone
shall have the right (but not the obligation) to terminate this Agreement by written notice to the City on or
before the fifth (5t4) day after the expiration of such six (6) month period, whereupon the Initial Security
shall be returned to Flagstone and thereafter this Agreement shall be deemed terminated and of no further
force or effect and both parties shall be relieved of any liability or obligations hereunder, except with
respect to any provisions hereof that are intended by the parties to survive such termination.
Notwithstanding the foregoing, the City shall have the right (but not the obligation) in its sole discretion
to prevent a termination by Flagstone and extend the initial six (6) month period for up to an additional
three (3) month period in order for the City to obtain the Partial Modification of Restrictions and/or
remove the Existing Occupants from the Property, provided, however, that (a) the City shall provide
written notice to Flagstone of such extension on or before the expiration of the initial six (6) month
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period; and (b) the City shall continue to exercise reasonable diligence to obtain the Partial Modification
of Restrictions and/or remove the Existing Occupants from the Property during such extension period.
Flagstone shall have the right (but not the obligation) to extend the foregoing time periods for the City's
satisfaction of the conditions precedents set forth in Section 4.2.5 and Section 4.2.6 for an additional six
4.2.5(6) month period; provided, however, that: (a) Flagstone shall provide written notice to City of such
extension on or before the expiration of such nine (9) month period; and (b) the City shall continue to
exercise reasonable diligence to obtain the Partial Modification of Restrictions and/or remove the Existing
Occupants from the Property during such extension period.
45. Outside Date. The parties agree that adding up all of the time periods for satisfaction of
the conditions precedent set forth in this ARTICLE 4 plus all the applicable extensions therefor
(including, without limitation, any extensions for Events of Closure) shall equal thirty-six months;
therefore, the parties acknowledge and agree that notwithstanding anything contained herein to the
contrary, either party shall have the absolute right to terminate this Agreement by providing written notice
to the other party if the conditions precedent set forth in Section 4.2 above are not satisfied on or before
thirty (36) months froth the Effective Date.
ARTICLE 5. SECURITY DEPOSIT,
5.1. Initial Security. Upon the execution and delivery by City to Flagstone of any License(s)
referred to in Section 7.4 hereof, Flagstone shall either (a) deliver the amount of Three Hundred
Thousand and No/] 00 Dollars (S300,000.00) (the "Initial Deposit") to Escrow Agent or (b) provide to
City, at Flagstone's sole cost and expense, a Letter of Credit in the amount of Three Hundred Thousand
and No/100 ($300,000.00) (the "Initial LOC"). Notwithstanding the foregoing, Flagstone shall be
permitted to utilize any combination of cash or Letter of Credit so long as the Initial Security equals
$300,000.00 in the aggregate. The Initial Deposit or the Initial LOC, as applicable, shall hereinafter be
referred to as the "Initial Security" and shall provide security for the faithful performance by Flagstone
of all of the provisions of this Agreement and/or the License(s) to be performed or observed by Flagstone.
5.2. Additional Security. Within three (3) business days after the last to occur of: (i) MUSP
Approval; (ii) NOPC Approval; (iii) the removal of all of the Existing Occupants, as evidenced by written
agreements with such Existing Occupants agreeing to such removal or final court orders authorizing the
removal thereof; and (iv) the Partial Modification of Restrictions has been approved by the Board of
Trustees, Flagstone shall either (a) deliver the additional amount of Two Hundred Thousand and No/100
Dollars ($200,000.00) (the "Additional Deposit") to Escrow Agent or (b) provide to City, at Flagstone's
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sole cost and expense, an additional Letter of Credit in the amount of Two Hundred Thousand and
No/100 Dollars ($200,000.00) (the "Additional LOC") (the Additional Deposit or the Additional LOC,
as applicable, hereinafter the "Additional Security"). Notwithstanding the foregoing, Flagstone shall be
permitted to utilize any combination of cash or Letter. of Credit so long as the Additional Security equals
$200,000.00 in the aggregate. The Initial Security and the Additional Security (collectively, the
"Agreement Security") shall provide security for the faithful performance by Flagstone of all of the
provisions of this Agreement to be performed or observed by Flagstone.
5.3. Deposits; Letters of Credit, Any Security Deposit held by Escrow Agent shall be held
in accordance with the Escrow Agreement, in form and substance attached hereto as Exhibit 5.3 (the
"Escrow Agreement"), which Escrow. Agreement shall be executed by City, Flagstone and Escrow
Agent simultaneously with the execution of this Agreement. Any Letter of Credit elected by Flagstone
pursuant to the provisions of this ARTICLE 5 (or a replacement thereof satisfactory to City) shall remain
in effect until Lease Delivery, unless this Agreement is otherwise terminated in accordance with the
provisions of ARTICLE 4 or ARTICLE 6 hereof.
ARTICLE 6. EXECUTION AND DELIVERY OF GROUND LEASE.
6.1. Conditions Precedent to Execution and Delivery of Ground Lease. Within fifteen
(I5) days after the satisfaction of all of the following conditions precedent (or the written waiver by the
Chief Executive Officer in his or her sole and absolute discretion of any such conditions precedent that
are not satisfied), the City and Flagstone hereby agree to execute four (4) duplicate original counterparts
of the Ground Lease, in form and substance attached hereto as Exhibit C for delivery to each party
hereunder (the "Lease Delivery") (it being understood and agreed that (i) the date of execution and
delivery of the Ground Lease by the latter of the parties hereto to so execute shall be referred to herein as
the "Lease Delivery Date"; and (ii) the Ground Lease shall become effective and commence on the Lease
Delivery Date):
6.1.1. . Construction Plans and Specifications. The Chief Executive Officer shall have
received and approved in his or her good faith, reasonable discretion plans and specifications for the
development and construction of the Project (the "Construction Pans and Specifications") which shall
be in sufficient detail in order for in order for Flagstone to obtain foundation permits for at least two (2)
Major Project Cotnponents (other than the Marina), which Construction Plans and Specifications shall be
in accordance with the Project Approvals. Such Construction Plans and Specifications shall contain
sufficient detail in order for the Chief Executive Officer to determine, using the Schedule of Values, the
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proposed Construction Budget and the GMP Contract(s) described in Section 6.1.6 hereof, that the
Project can be completed in accordance with the MUSP Approval and the Hotels can be constructed as
four or five star hotels or better, as defined in the American Automobile Association ("AAA") hotel
rating standards, within the Construction Budget.
6.1.2. Closing of Construction Loan(s); Other. Flagstone shall have closed its Initial
Construction Loan with an Approved Initial Construction Lender (as defined in the -Ground Lease), which
financing thereunder, together with the amount of Initial Equity Requirement, shall be sufficient to
complete the development and construction of the Project and to fund any shortfalls in operations that
may exist prior to Project Stabilization. At such closing, all of the conditions precedent to funding the
first draw thereunder shall have been satisfied other than Lease Delivery. Flagstone shall also be
satisfied, in its sole discretion, with negotiations concerning financial incentives and entitlements
available under federal, state, county or local law.
6.1.3. Initial Equity Requirement. flagstone shall have provided to the Chief
Executive Officer written evidence satisfactory to the Chief Executive Officer in his or her reasonable
judgment of the availability of the Initial Equity Requirement (which funds shall be available to Flagstone
subject to typical conditions for the funding of equity in similar projects) which, when added to the equity
expenditures heretofore made by Flagstone and the loan proceeds to be funded in connection with the
Initial Construction Loan(s), is sufficient to complete the development and construction of the Project and
to fund any shortfalls in operations that may exist prior to Project Stabilization. In connection with the
foregoing, Flagstone and the Financial Advisor shall provide to the City an updated Investor List,
certified to the City by the president or vice-president of Flagstone and an officer of Financial Advisor,
under penalty of perjury, that such Investor List accurately sets forth each and all of the Disclosed
Investors as of the Lease Delivery Date, together with a listing, to the best of flagstone's and the
Financial Advisor's knowledge, of the current address and Social Security Number or U.S. Federal
Taxpayer Identification Number (or in the case of foreign investors who do not have such Social Security
Number or U.S. Federal Taxpayer Identification Number, any similar identification number, if one exists,
provided for in the country of their primary residence or domicile) of such Disclosed Investors; it being
understood and agreed that the provisions of Section 4.1.3 hereof shall apply to all Investors.
6.1.4. Development Team. Flagstone shall have (a) obtained the prior written
approval of the Chief Executive Officer to the identities of all of the following individuals and/or entities:
(i) the lead architect which is coordinating preparation of the conceptual and architectural plans for each
of the Major Project Components; (ii) the Lead landscape architect which is coordinating preparation of
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the landscape plans for each of the Major Project Components; and (iii) the construction manager(s) for
the Project and/or for each of the Major Project Components, to the extent different (collectively, the
"Development Team") and (b) provided written evidence that binding agreements with each of the
members of the Development Team have been executed. Each member of the Development Team shall
be subject to the prior written approval of the City, which approval shall not be unreasonably withheld
and shall include, but not be limited to, the City's ability to withhold its approval of any Disqualified
Person. Flagstone shall be permitted to supplement the Development Team with additional members
without the prior consent of the. City; provided, however, any replacements of an approved member of the
Development Team shall be subject to the City's approval in accordance with the foregoing sentence.
The City hereby approves the Persons listed on Exhibit 6.1.4 attached hereto.
6.1.5. Operations Team. Flagstone shall have (a) obtained the prior written approval
of the Chief Executive Officer to the identities of the operator and, if applicable, the franchisor, for each
of the Hotels and the Marina within the Project (the foregoing, together with Fairchild Tropical Garden
and The Historical Museum of South Florida, shall be collectively referred to herein as the "Operating
Team"), and (b) provided written evidence that binding agreements with each of the members of the
Operating Team have been executed. Each member of the Operating Team shall be subject to the prior
written approval of the City, which approval shall not be unreasonably withheld and shall include, but not
be limited to, the City's ability to withhold its approval of any Disqualified Person. City hereby approves
those certain hotel operators and/or franchisors set forth on Exhibit 6.1.5 attached hereto. City hereby
agrees that, if Flagstone so .elects, Flagstone shall be permitted to operate or manage the Hotel(s), Marina.
and/or Parking Garage either directly or through an Affiliate thereof.
6.1.6. Construction Contracts. The Chief Executive Officer shall have received and
approved in his or her good faith, reasonable discretion one (1) or more binding guaranteed maximum
price construction contract(s) (individually or collectively, the "GMP Contracts)") which individually
or in the aggregate provide for the development and construction of the Project Components in
accordance with the MUST' Approval (at a cost which shall not exceed the aggregate costs for
development and construction of the Project as set forth in the Construction Budget), together with a
"Schedule of Values" for the Project to be approved by the Chief Executive Officer in his or her good
faith, reasonable discretion.
6.1.7. Construction Budget. The Chief Executive Officer shall have received and
approved in his or her good faith, reasonable discretion the budget setting forth in reasonable detail the
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anticipated costs of development and construction of the Project Components (the "Construction
BudQct").
6.1.8. Construction Schedule. The Chief Executive Officer shall have received and
approved in his or her good faith, reasonable discretion the detailed schedule for development and
construction of the Project Components and related infrastructure, including, without limitation, the
anticipated commencement and completion of major components of the work. Flagstone may accelerate
all or any portions(s) of such schedule without the Chief Executive Officer's approval; provided that
Flagstone provide notice to the Chief Executive Officer of such acceleration.
6.1.9. I3onds/Letters of Credit. The Chief Executive Officer shall have received and
approved in his or her good faith, reasonable discretion a copy of the Payment and Performance Bond
and/or Letters of Credit (which shall have been issued at Flagstone's sole cost and expense) in an amount
equal to 100% of the hard construction costs of the Project Components, which shall name City as the
owner or dual obligee, as appropriate. The forms of such Payment and Performance Bond and/or Letters
of Credit and the surety or institution issuing the same shall be subject to the prior written approval of the
Chief Executive Officer, which shall not be unreasonably withheld (provided that such surety or
institution has a credit rating of A or higher with a financial strength to be mutually acceptable to the
parties). Any Payment and Performance Bond may be enforced by City in accordance with its terms.
6.1.10. Hotel Management Agreements. The Chief Executive Officer shall have
received and approved in his or her good faith, reasonable discretion (with appropriate consideration'
given to the manner in which similar issues are resolved by sophisticated lenders in similar transactions)
binding hotel management agreements between Flagstone and the approved operators of each of the
Hotels within the Project (unless the Hotel(s) is to be operated directly by Flagstone or an Affiliate, in
which case any management agreement between Flagstone and such Affiliate shall not require the prior
approval of City but Flagstone shall provide to the City binding franchise or license agreements between
Flagstone or its Affiliate and a nationally or an internationally recognized hotel franchisor for such
Hotel(s), which franchise or license agreement shall be subject to the City's reasonable approval). Bach
management agreement (or franchise or license agreement, if applicable) shall provide for, among other
things: (i) the operation or management of a four or five star botel or better, as defined in the AAA hotel
rating standards; (ii) that the hotel operator or franchisor shall provide written notice to the Chief
Executive Officer of any default by Flagstone under such hotel management agreement or franchise
agreement, together with the reasonable opportunity to cure such default by the City; and (iii) an
attornment provision whereby the hotel operator or franchisor agrees to attorn to the City pursuant to a
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subordination, non -disturbance and attornment agreement acceptable to the Chief Executive Officer. in
his or her reasonable discretion. In no event shall the City be required to provide non -disturbance to any
operator or franchisor that is an Affiliate of Flagstone (or the applicable Major Subtenant of the Major
Project Component which is subject to such operating or franchise agreement), unless a non -Affiliated
minority interest in such Affiliate has the right, and so exercises such right, to take over control over such
Affiliated -operator or franchisor, in which event City shall provide a subordination, non -disturbance and
attomment agreement thereto acceptable to the Chief Executive Officer in his or her reasonable
discretion. Any such affiliated operator or franchisor shall execute a subordination agreement reasonably
acceptable to the Chief Executive Officer.
6.1.11. Insurance. All insurance policies required to be maintained by Flagstone under
the Ground Lease (and applicable to the work that is then ongoing) shall have been obtained, as evidenced
by the originals of such policies of insurance or certified duplicates thereof issued by the applicable
insurance companies, which policies shall name the City as an additional insured thereunder.
. 6.1.12. No Default. There shall be no Event of Flagstone's Default (as defined in
Section I1.1 of this Agreement).
6.1.13. Project Approvals. The Partial Modification of Restrictions, MUSP Approval,
NOPC Approval and foundation permits for at least two (2) Major Project Components (other than the
Marina) (the "Foundation Permits") shall have been issued by the applicable Government Authorities
for the Project (collectively, the "Project Approvals"). The Project Approvals shall riot be deemed to
have been issued unless and until any and all appeals periods as provided by law shall have expired
without an appeal, objection or challenge having been filed, or, if filed, when such objection, challenge or
appeal has been dismissed or resolved finally and conclusively to the satisfaction of the Chief Executive
Officer in his or her reasonable judgment
6.1.14. Establishment of Skills Trainine and Employment Center Program. Chief
Executive Officer shall have approved in its reasonable good -faith judgment sufficient evidence of the
establishment of a "Skills Training and Employment Center Program" at a site near the Project in Miami,
Florida which shall provide for training of the construction and operations personnel associated with the
Project in accordance with the Proposal.
6.1.15. Trust Agreement. flagstone and City shall have executed four (4) counterpart
originals of the "Trust Agreement" for the "Civic Arts Endowment Trust" to be created for the Project
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(which is referred to in Section 26.2 of the Ground Lease), which shall be in form and substance
reasonably acceptable to the parties.
6.2. Right of Termination.
6.2.1. Termination. Flagstone agrees to use diligent good -faith efforts to cause the
satisfaction of the conditions precedent set forth in Section 6.1 above and Flagstone shall promptly
probidc to the Chief Executive Officer, from time to time, such written documentation as may be
reasonably requested by the Chief Executive Officer to evidence the same. In the event the conditions
precedent set forth in Section 6.1 above are not. satisfied (and the Chief Executive Officer has not waived
the same in writing in his or her sole and absolute discretion) on or before twelve (12) months from the
MUSP/NOPC Approval Date (the "Lease Deadline"), City or Flagstone, so long as the terminating party
is not in default hereunder (which default has not been cured in accordance with any applicable notice and
cure periods provided for in ARTICLE 11 hereof), shall have the right to terminate this Agreement,
without cost or liability of either party to the other party, by written notice from the terminating party to
the non -terminating party delivered within five (5) business days after the Lease Deadline, whereupon
this Agreement shall be deemed terminated and of no further force or effect as of the date of such notice
and both parties shall be relieved of any and all further liability or obligations hereunder except with
respect to any provisions hereof that are intended by the parties to survive such termination.
6.2.2. Extension. Flagstone shall have the option to extend the Lease Deadline for up
to an additional twelve (12) month period (subject to subsection (iii) below) upon prior written notice to
the City; provided, however that, (i) Flagstone has been diligently pursuing satisfaction of these
conditions, in good faith and in a commercially reasonable manner with the City hereby agreeing to give
written notice to Flagstone and an opportunity to cure in accordance with Section 11.1.1 hereof if at any
time it believes otherwise; (ii) no Event of Flagstone's Default has occurred and is continuing hereunder,
and (iii) to the extent that Flagstone has previously exercised all or any portion of its initial extension
option in accordance with Section 4.3 hereof, then the twelve (12) month period referred to above shall
be automatically reduced by the total amount of such initial extension. To the extent that Flagstone has
satisfied all of the conditions precedent set forth in this ARTICLE 6 by the Lease Deadline (as extended,
if applicable in accordance with this Section 6.2.1) other than the issuance of the Foundation Permits for
at least two (2) Major Project Components and the reason for the delay in the issuance of such Foundation
Permits is directly attributable to an Event of Closure, then Flagstone shall be permitted to extend the
Lease Deadline (as extended, if applicable in accordance with this Section 6.2.1) for a reasonable period
of time in order to diligently pursue the issuance of such Foundation permits (which extension period
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shall in no event exceed six (6) months in the aggregate, which aggregation shall include any period of
extension previously exercised by Flagstone in connection with a previous Event of Closure). •
6.2.3. Outside Date. The parties agree that adding up all of the time periods for
satisfaction of the conditions precedent set forth in this ARTICLE 6 plus all the applicable extensions
therefor (including, without limitation, any extensions for Events of Closure) shall equal forty-eight (48)
months; therefore, the parties acknowledge and agree that notwithstanding anything contained herein to
the contrary, City shall have the absolute right to terminate this Agreement by providing written notice to
Flagstone if the conditions precedent set forth in ARTICLE 6 above are not satisfied on or before forty-
eight (48) months from the Effective Date. ,
ARTICLE 7. DEVELOPMENT OF PROJECT,
7.1. Development Plans. Flagstone shall, at its sole cost and expense, design and prepare all
plans required or desirable in connection with the design and construction of the Project, including,
without limitation, (i) the Construction Plans and Specifications, (ii) all application materials required to
complete the MUSP Application, (iii) all application materials necessary to complete the NOPC
Application; (iv) all materials necessary or required in connection with obtaining the Project Approvals,
the Mega -Yacht Marina Permits (as hereinafter defined) and all other permits and approvals necessary for
the development and construction of the Project, and (v) any and aU other necessary or desirable plans,
drawings or renderings, including conceptual layouts and artistic or architectural renderings, elevations or
plans(all of the foregoing collectively, the "Development Plans"). The Development Plans shall be
consistent with the terns and provisions of this Agreement, the requirements of the Watson Island RFP,
and the conditions and commitments set forth in the Island Gardens Proposal.
7.2. Use and Ownership of Development Plans and Permits and Approvals in the event
of Termination. In the event of a termination of this Agreement due to an Event of Flagstone's Default,
City shall be entitled to full, complete and unconditional use and ownership of the Development Plans
(subject to the rights of the architect(s) and engineer(s) who prepare the same and any Approved Lenders'
rights therein; it being understood that City shall have no obligation to bring current any existing
delinquencies but shall be obligated to make payments thereafter as they become due), the Project
Approvals, the Mega -Yacht Marina Permits and all other permits and/or approvals obtained by Flagstone
in connection with the Project without payment of any consideration therefor by City to flagstone.
Flagstone agrees that any agreement between the architect(s) and engineer(s) with respect to the Project
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shall provide that the City shall have the right to use such plans with respect to the Project without
payment of any additional charge therefor.
7.3. Plattine and Other Development Matters. Flagstone and City shall cooperate with one
another in connection with City's platting of the south side of Watson Island (which plat shall include the,
Property), and, if necessary, shall join in and consent to any reasonable easements, dedications or other
conveyances or encumbrances which may be required by any Government Authority in connection with
the approval of such plat provided that such agreements do not materially and adversely affect in
Flagstone's reasonable opinion the use, value or utility of the Project as contemplated by the
Development Plans. In addition, City shall have the right from time to time to enter into development
related agreements which may impact or otherwise encumber Property, including, without limitation,
easements, water and sewer agreements (including, without limitation, the amendment or modification of
such existing agreements), road vacations, etc., and Flagstone shall have no right to object to the same at
Lease Delivery provided that such agreements do not materially and adversely affect in Flagstone's
reasonable opinion the use of the Project as contemplated by the Development Plans.
7.4. License(s) for Pre -Development Work.
7.4.1. License(s),. Subject to (i) obtaining the City Commission's prior written
approval (which shall include, without limitation, approval as to the type and extent of work to be
performed), and (ii) compliance with the Board of Trustees Deed (as the same may be modified in
connection with Section 4.2.5 hereof) and Applicable Laws (including, without limitation, obtaining the
appropriate permits necessary from the applicable Governmental Authority(ies)), City shall grant to
Flagstone, for use by its agents, employees and contractors, a license to perform certain pre -approved
dredging work on the Submerged Parcel and/or a license to perform certain pre -approved utility
relocation and/or other pre -development work on the Uplands Parcel (individually and/or collectively
referred to herein as the "License"), all of which pre -approved work (the "Pre -Development Work")
shall be performed at Flagstone's sole cost and expense, and in a good and workmanlike manner in
accordance with all applicable Govenunental Requirements. Bach License shall be for a term not to
exceed twelve (12) months (in total for each License) and shall be revocable for any reason by City upon
thirty (30) days prior written notice. During the term of any License, City, or any of its agents, successors
or assigns, shall have the right to enter the Property during all reasonable hours to examine and inspect
the same. Except in the event of an issuance of such Licenses, flagstone agrees that, Flagstone has no
right, title, interest or claim in, or to the use of, the Property, all of which are waived hereby, unless and
until the occurrence of the Lease Delivery Date. Notwithstanding anything contained herein to the
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contrary, in no event shall any License granted in accordance with this Section 7.4 hereof be deemed to
permit any party other than Flagstone, for use by Flagstone and its agents, contractors and employees,
from using the Property as provided for herein. In connection with the Pre -Development. Work, City
agrees that it shall use good faith reasonable efforts (which shall in no event be deemed to include any
financial obligation on the part of the City) to cooperate with Flagstone in coordinating any utility
relocation within the Property with the Water and Sewer Department of Miami -Dade County.
7.4.2. No Consideration. The parties hereby acknowledge and agree that, during the
term trite License, no consideration (i.e., construction rent or otherwise) will be due from Flagstone to
City. In the event that this Agreement is terminated. for any reason whatsoever, (i) Flagstone shall not be
entitled to reimbursement for any of its costs and expenses incurred in connection with the Pre -
Development Work or for the value of any such improvements made by Flagstone to the Property in
connection therewith; and (ii) except as specifically set forth in a surviving indemnification section of this
Agreement or to the extent necessary to correct any defective work performed by Flagstone or to
complete any incomplete work which is necessary in order to provide uninterrupted services to any other
property owners (such costs shall be deemed to be "Reimbursable Expenses"), City shall not be entitled
to reimbursement for any costs or expenses that may be incurred by City in connection with the Pre -
Development Work (it being understood that in no event shall the foregoing be deemed to impose any
obligation of the part of the City to incur any such cost or expense, but to the extent that City does incur
Reimbursable Expenses, Flagstone shall promptly reimburse the same to City within thirty (30) days after
receipt of a written invoice, together with reasonable supporting documentation, therefor. Flagstone shall
maintain and cause its contractors to maintain the insurance referred to in Article XI of the Ground Lease
(which is applicable to the work that is then .ongoing) with respect to any Pre -Development Work
performed by Flagstone in connection with such License.
7.43. Indemnification and Waiver. Flagstone agrees to defend, indemnify and hold
City harmless from any and all claims, demands, actions; whether legal, equitable or otherwise, costs,
damages (including reasonable attorneys' fees and experts' fees) and any other liability incurred now or
in the future as a result of any claim, injury, death or property damage, resulting directly or indirectly
from Flagstone's entry upon the Property and performance of the Pre -Development Work thereon.
Flagstone agrees that its access to and use ofthe Property for the Pre -Development Work shall be solely
at its own risk and expense. As a material inducement for City to grant the License(s), Flagstone does
hereby release, waive, discharge, covenant not to sue, acquit, satisfy and forever discharge City and its
officers, directors, employees, agents and attorneys and the affiliates and assigns of all of the foregoing of
and from any and all liability, claims, counterclaims, defenses, actions, causes of actions, suits,
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controversies, agreements, promises and demands whatsoever, at law or in equity, which Flagstone or any
of its members, officers, directors, employees, attorneys and agents and the affiliates and assigns of all of
the foregoing had, now has, or hereafter can, shall or may have against City or its officers, directors,
employees, attorneys and agents and the affiliates and assigns of all of the foregoing, for, upon, or by
reason of any matter cause or thing whatsoever arising out of the License(s), the Pre -Development Work
and/ or Flagstone's use of the Property. The foregoing indemnification obligations of Flagstone shall
survive any expiration or termination of this Agreement.
7.5. Issuance to Flagstone of Marine Operating Permit for Existing Marina. The City
currently holds Marina Facilities Annual Operating Permit No. MOP-000306-2002/2003 (B)— GEN for
the existing marina on Watson island (the "Operating Permit"), which Operating Permit is valid from
October 1, 2002 through September 30, 2003 (a copy of such Operating Permit is attached hereto as
Exhibit 7.5). Subsequent to the Effective Date, Flagstone shall file with the Miami -Dade County
Department of Environmental Resources Management ("DERM") an application for the issuance of an
Operating Permit for the existing marina in Flagstone's name in order for Flagstone to pursue the Mega -
yacht Marina Permits. City shall reasonably cooperate with Flagstone in obtaining the Operating Permit
by, among other things, executing whatever documentation may be required by DERM (provided that in
no event shall City be obligated to incur any cost or expense in connection therewith). This
documentation shall include, but not be limited to, the issuance by the City of Miami of an Occupational
License to Flagstone for the operation of the existing marina. After issuance of the Operating Permit in
Flagstone's name, City shall continue to cooperate (which shall not include any obligation to incur any
cost or expense) with Flagstone in connection with keeping the Operating Permit in good standing. In the
event Flagstone desires to make minor repairs or improvements to the existing marina, and such repairs or
minor modifications require DERM's approval, City shall, provided said repairs and renovations are
approved by the Chief Executive Officer, execute whatever documentation may be reasonably required in
order to obtain DERM's approval. Any income derived from the operation of the existing Marina prior to
the Lease Delivery Date shall belong to the City. In the event that this Agreement is terminated for any
reason other than•the execution and delivery of the Lease, then, if so requested by City, Flagstone shall
take whatever actions are necessary in order to promptly transfer the Operating Permit back to tbe,City.
7.6. Marina Approvals. Flagstone shall use its "best efforts" (as such term is defined below).
to obtain all permits and approvals from Governmental Authorities (collectively, the "MeEa-Yacht
Marina Permits") which are required to construct and operate a marina substantially similar in size and•
capacity as the marina depicted in the Island Gardens Proposal (a "Mega -Yacht Marina"). If deemed
necessary or desirable by the Chief Executive Officer, any applications for Mega -Yacht Marina Permits
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shall be made with the City as the named applicant or co -applicant, as required by law. In the event
Flagstone is able to obtain all of the Mega -Yacht Marina Permits, then the term "Marina" as used in the
Lease shall mean and refer to such Mega -Yacht Marina, and Flagstone shall develop and operate such
Mega -Yacht Marina subject to and in accordance with the terms and conditions of the Lease.
7.6.1. Best Efforts. For purposes hereof, the term "best efforts" shall mean that
Flagstone shall take all of the following actions:
7.6.1.1. Flagstone shall act in good faith, expend commercially reasonable
amounts of funds, and use all due diligence (including retaining consultants, professionals and experts and
taking their advice) in pursuing all necessary Mega -Yacht Marina Permits (and specifically in taking all
of the actions described in subsections 7.6.1.2 through 7.6.1.5 below).
7.6.1.2. Flagstone shall diligently develop such detailed plans and
specifications, drawings, schematics, sketches and other documentation with respect to a Mega -Yacht
Marina (as defined above) as may be necessary or appropriate in connection with pursuing the Mega -
Yacht Marina Permits (collectively, the "Mega -Yacht Marina Plans").
7.6.1.3. Flagstone shall submit the Mega -Yacht Marina Plans to the Chief
Executive Officer for his or her approval in accordance with the Chief Executive Officer Approval
Procedures.
7.6.1.4. After approval of the Mega -Yacht Marina Plans by the Chief
Executive Officer, with whatever modifications as are agreed upon, all subject to and in accordance with
the Chief Executive Officer Approval Procedures, Flagstone shall submit the Mega -Yacht Marina Plans
to all Governmental Authorities necessary to obtain the Mega -Yacht Permits (it being understood that the
applicable Governmental Authorities include, but are not necessarily limited to, the State of Florida
Department of Environmental Protection, the Army Corps of Engineers (the "Corps"), the South Florida
Water Management District ("SFWMD") and the Miami -Dade County Department of Environmental
Resources Management ("DERM"), and respond to and accommodate, in a commercially reasonable
manner, any reasonable requests by such Governmental Authorities for modifications to the Mega -Yacht
Marina Plans. The Chief Executive Officer shall be informed, in writing, of such modifications by
Flagstone, which shall include a legend at the top of the first page in a type face larger than that used
elsewhere in the notice indicating that City is to provide approval or denial with comments within ten (10)
business days pursuant to this Section 7.6.1.4. The Chief Executive Officer shall have ten (10) business
days from the date of receipt of such notice to review the modifications and advise Flagstone in writing
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that the modifications are disapproved. If notice of disapproval is not delivered within the ten (10)
Business Day period, Flagstone shall give a written reminder notice to the Chief Executive Officer. If
notice of disapproval is not delivered within five (5) Business Days after such reminder notice is given,
the modifications shall be deemed approved. The notice to review and the reminder notice shall each
contain legends at the top of the first page, in a typeface larger than that used elsewhere in the request,
identifying the applicable required response time.
7.6.1.5. If Flagstone is able to obtain consensus among the staff of the
applicable Governmental Authorities for the Mega -Yacht Marina Plans, Flagstone shall (a) submit the
Mega -Yacht Marina Plans (as same may be modified as described above) and an. application for a Class I
Permit for the Mega -Yacht Marina (the "Class I Permit Application") to the Miami -Dade County Board
of County Commissioners (the "Board") for final approval for the construction and operation of the
Mega -Yacht Marina substantially in accordance with such Mega -Yacht Marina Plans, and have its
representatives attend the hearing before the Board concerning same and attempt to persuade the Board to
approve same; and (b) submit to the other applicable Governmental Authorities, including the SFWMD
and the Corps., the Mega Yacht Marina Plans and the appropriate application(s) required for the issuance
of the applicable Mega -Yacht Marina Permits and Flagstone shall thereafter follow up with such
application(s) including, but not limited to, appearing before the SFWMD Governing Board, until such
Mega -Yacht Marina.Permit(s) are issued by such Governmental Authorities.
7.6.2. Notice and Meetings with City. Flagstone shall provide City with at least seven
(7) days prior written notice of any meeting with the staff of applicable Governmental Authorities. City
shall have the right to have a representative present (by telephone or in person) at each such meeting. In
addition, Flagstone shall provide City with copies of any written correspondences between Flagstone and
such Governmental Authorities in connection with. the "best efforts" steps described in Section 7.6.1
above.
7.6.2.1. Flagstone hereby agrees to have monthly meetings with City's
designated representatives to discuss the status of Flagstone's "best efforts", and to keep City regularly
apprised through written updates as to what "best efforts" have been and are being taken by Flagstone in
order to satisfy its obligations in Section 7.6.1 above and the status thereof. If, after any such monthly
meeting or after City receives any such written update, City believes, reasonably and in good faith, that
Flagstone is not using its best efforts as described in subparagraph (c) above, City shall, within seven (7)
Business Days after receiving any such meeting or written update, give written notice to Flagstone stating
with particularity City's belief and the specific basis for such belief. If City fails to give such written
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notice within such seven (7) Business Day period, the actions by Flagstone which are described in such
meeting or written update shall be deemed to constitute best efforts as described in Section 7.6.1 above
up to the last step taken by Flagstone as described in such meeting or written update, and City shall not be
entitled to submit to arbitration the question of whether such actions by Flagstone constitute best efforts.
7.6.2.2. Notwithstanding the foregoing, Flagstone shall not be required to
accept any unreasonable conditions for approval which would compromise the feasibility of the proposed
Mega -Yacht Marina or place unreasonable financial or economic burdens on Flagstone (either in terns of
increased costs or reduced income) or unreasonable covenants, conditions and/or restrictions with respect
to the development and operation of the proposed Mega -Yacht Marina.
7.63. Notice of Failure to Obtain Mega -Yacht Marina Permits. In the event
Flagstone is unable, after using such best efforts, to obtain all of the Mega -Yacht Marina Permits then
Flagstone shall provide written notice thereof to City. If City agrees that Flagstone has used such best
efforts and the Mega -Yacht Marina Permits cannot be obtained, then, the term "Marina" as used herein
and in the Lease shall mean sucb marina as Flagstone is able to construct and operate based on the
existing marina permits or such other permits and approvals from Governmental Authorities Flagstone is
able to obtain, and Flagstone shall develop and/or operate such Marina subject to and in accordance with
the terms and conditions of the Lease. If City does not agree that Flagstone has used such best efforts to
obtain the Mega -Yacht Marina Permits, then no later than thirty (30) days after City's receipt of written
notice from Flagstone, City shall provide written notice to Flagstone that City is submitting the matter to
arbitration in accordance with Section 7.6.4 below; provided, however that City shall not be entitled to
submit the matter to arbitration to the extent Section 7.6.2.2 provides otherwise.
7.6.4. Arbitration. If at any time (including, without limitation, at the time Flagstone
provides written notice to City that Flagstone is unable to obtain the Mega -Yacht Marina Permits) City
believes in its good -faith reasonable judgment that Flagstone has not or is not using "best efforts" to
obtain the Mega -Yacht Marina Permits, then City shall refer such dispute to final and binding arbitration,
before a single arbitrator (the "Arbitrator"), under the commercial arbitration rules of the American
Arbitration Association in Miami -Dade County, Florida. In determining whether Flagstone has used its
best efforts as described in Section 7.6.1 above, the Arbitrator may consider whether Flagstone should
pursue any administrative appeals. In no event shall Flagstone be required to pursue litigation (although
it may, at its option, elect to do so). The Arbitrator shall be selected by the parties and if the parties are
unable to reach agreement on selection of the Arbitrator within ten (10) days after the notice of arbitration
is served, then the Arbitrator will be selected by the American Arbitration Association. All documents,
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materials, and information in the possession of a party to this Agreement and in any way relevant to the
claims or disputes shall be made available to the other parties for review and copying not later than 30
days after the notice of arbitration is served. To the extent that a party would be required to make
confidential information available to any other, an agreement or an order shall be entered in the
proceeding protecting the confidentiality of and limiting access to such information before a party is
required to produce such information. Information produced by a party shall be used exclusively in the
arbitration or litigation that may arise, and shall not otherwise be disclosed. The decision of the
Arbitrator shall be final, binding and conclusive upon the parties and their respective administrators,
personal representatives, legal representatives, heirs, successors and permitted assigns.
ARTICLE 8. COORDINATION WITH CITY; APPROVAL PROCEDURES.
8.1. Coordination with City.
8.1.1. Ombudsman, City shall appoint an internal representative who is experienced
and qualified to (i) report directly to the Chief Executive Officer, (ii) have authority to coordinate,
expedite and respond for the City on behalf of the Chief Executive Officer with respect to construction
and development issues through the final permitting process; and (iii) have authority to coordinate on
behalf of the City tenant -related issues among the various tenants of Watson Island (the "Ombudsman").
Among other things, the Ombudsman shall (i) lead and set schedules for the internal City review process
with respect to Construction Plans and Specifications, (ii) after the Lease Delivery Date, expedite and
help deliver construction inspection approvals (including building and fire department approvals), (iii)
after the Lease Delivery Date, monitor and inspect the development and construction process on City's
behalf and (iv) otherwise represent and assist the City in coordinating the City's roles and responses and
approvals.
8.1.2. City Consultant. In addition to the Ombudsman, City, at the request of
Flagstone, shall retain on its behalf but at the sole cost and expense of Flagstone (which costs shall be
mutually acceptable to the parties), an outside, qualified construction, development and fire and building
consultant(s) who shall be mutually agreeable to City and Flagstone (individually or collectively, the
"Consultant") to coordinate and assist in the development process and advise Ombudsman and Chief
Executive Officer. Responsibilities of the Consultant shall include the review of plans and development
issues, assistance with permitting and inspection issues during the construction and development process
and recommendations directly to Chief Executive Officer and Ombudsman. flagstone shall provide on -
site desk, telephone and storage space to the Consultant.
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8.1.3. Cooperation. Flagstone shall cooperate fully with the Ombudsman and
Consultant, and shall promptly forward to same complete copies of plans and specifications and other
reports and information customarily provided to an institutional mortgage lender, and such other
information and materials as may be reasonably requested by the Ombudsman, Consultant or City. No
inspection performed by the Ombudsman and Consultant with respect to the Pre -Development Work shall
impose upon City any responsibility or liability for any failure by Flagstone to observe any requirements
or safety practices in connection with such construction work, or constitute an acceptance of any work
which does not comply with the provisions of this Agreement. Ombudsman and Consultant shall provide
copies to Flagstone of all reports and records concerning construction inspections.
8.2. Chief Executive Officer Approval Procedures. Any matter requiring Chief Executive
Officer approval under this Agreement or in connection with the Project (any such matter, an "Approval-
Requirine Matter") shall be subject to the procedures set forth in this Section 8.2. The following shall
apply with respect to all approvals requested by Flagstone from the Chief Executive Officer:
8.2.1. Except for those instances in Section 3.3 where approval may be withheld by the
Chief Executive Officer his or her "sole discretion" or "sole and absolute discretion", any other approvals
• to be given by the Chief Executive Officer hereunder shall not be unreasonably withheld;
8.2.2. Approval or denial responses shall be given within fourteen (14) days {provided
that for submissions which require the review of Construction PIans and Specifications or new
modifications thereof which are not merely items that follow from or are consistent with prior approvals
already given, thirty (30) days shall be given) of submission to Chief Executive Officer of the last piece
of materially necessary written information; provided, however, that (i) submission of any Approval -
Requiring Matter shall be accompanied by a written request for approval which shall include 4 legend at
the top of the first page in .a type face larger than that used elsewhere in the request for approval
indicating that City is to provide approval or denial with comments within fourteen (14) days (or thirty
(30) days, as applicable) pursuant to this Section 8.2.2, (ii) Flagstone shall promptly submit to City any
additional information or materials requested by City (provided that such request: (a) shall be made by
City no later than seven (7) calendar days of receipt by City of Flagstone's initial submission; (b) shall be
for information which is materially necessary for the purpose of aiding the City's review of the original
submission; and (c) shall be limited to no more than two (2) times for any such request for additional
submission), and (iii) the fourteen (14) day approval period (or thirty (30) day, as applicable) shall not
commence until such additional information and materials are received by City;
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8.2.3. Notice of denial shall be accompanied by reasonably specific written comments
as to the reasons for such denial and what alternatives might be acceptable to City. Denial of approval of
any Approval -Requiring Matter may be based on any reasonable grounds; however, denial may not be
given with respect to, or materially inconsistent with, any approval previously given to Flagstone;
8.2.4. Approval or denial with comments of any resubmission of an Approval -
Requiring Matter shall be given within seven (7) business days provided that such resubmission of any
Approval -Requiring Matter shall be accompanied by a written request for approval which shall include a
legend at the top of the first page in a type face larger than that used elsewhere in the request for approval
indicating that City is to provide approval pr denial with comments within seven (7) business days
pursuant to this Section 8.2.4.
8.2.5. In the event that the City has not provided its approval or denial with comments
to Flagstone in accordance with the time -frames set forth above, then Flagstone shall provide a written
reminder notice to City which specifies that City has five (5) days to so respond to such submission,
which reminder notice shall include a legend at the top of the first page in a type face larger than that used
elsewhere in the reminder notice indicating that City is to provide approval or denial with comments.
within five (5) days pursuant to this Section 8.25. In the event that City does not then respond within
such five (5) day period, such matter shall be deemed approved by City; and
8.2.6. If materials resubmitted by Flagstone in connection with any construction' related
issue, which conform to all written comments, are not subsequently approved, disagreements may be
submitted to binding, expedited arbitration.
8.3. Chief Executive Officer Approvals; Disclaimer. Notwithstanding anything to the
contrary contained in this Agreement, Flagstone acknowledges that any approvals by the Chief Executive
Officer of any Approval -Requiring Matter shall in no event be deemed to be a guarantee of the City
Commission's or any other governmental or quasi -governmental agencies' approval of such Approval -
Requiring Matter. Any approval by the Chief Executive Officer of an Approval -Requiring Matter shall be
made solely in City's capacity as the owner of the Property and not in any governmental capacity and
Flagstone shall remain responsible for obtaining whatever permits, licenses and approvals may be
necessary to improve the Property in accordance with any such Approval -Requiring Matter, as well as all
Applicable Laws. In addition, approval by the Chief Executive Officer of any Approval -Requiring Matter
shall not constitute a warranty or representation by City that the Project Components meet all government
requirements or building codes nor that such plans will, if followed, result in properly designed or
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constructed Project Components or that any Project Component built in accordance therewith will be built
in a good or workmanlike manner. Notwithstanding anything contained to the contrary in this
Agreement, the parties recognize and agree that certain provisions of this Agreement may require the
City and/or its boards, departments or agencies, acting in their governmental capacity, to consider certain
changes in applicable City codes, ordinances, plans or regulations, as well as to consider other
governmental actions. All such considerations and actions shall be undertaken -in accordance with
established requirements of state statute and City ordinances, in the exercise of the City's jurisdiction
under the police power. Nothing in this Agreement is intended to limit or restrict the powers and
responsibilities of the City in acting on applications for Project Approvals and/or other permits and
approvals which may be required in connection with the Project by virtue of the fact that the City may
have consented to such applications as a property owner hereunder. The parties further recognize and
agree that these proceedings shall be conducted openly, fully, freely and fairly in full accordance with law
and with both procedural and substantive due process to be accorded the applicant and any member of the
public. Nothing contained in this Agreement shall entitle Flagstone to compel the City to take any such
actions, save and except the consents to the filing of such applications for MUSP Approvals, land use
approvals or other required approvals, as more fully set forth herein, and to timely process such
applications.
ARTICLE 9. DISCIHARGE OF LIENS.
9.1. No Liens. Flagstone shall use reasonable efforts to not create or permit to be created any
Liens upon the Property or any part thereof.
Discharging Liens. If any Lien shall at any time be filed against the Property, or any
part thereof, within forty-five (45) days after notice of the filing thereof; Flagstone shall cause the same to
be discharged or transferred to bond in accordance with the requirements of law. If Flagstone fails to
cause such Lien to be discharged or transferred to bond within such forty-five (45) day period, then City
may, but shall not be obligated to, discharge the same either by paying the amount claimed to be due or
by procuring the discharge of such Lien by deposit or by bonding proceedings, or by any other manner
permitted by law (provided, however, that before City pays any amounts on behalf of Flagstone in
connection herewith, City shall provide Flagstone five (5) days prior written notice of its intent to so do
so hereunder). Any amount so paid by City and all costs and expenses incurred by City in connection
with the discharge of such Lien shall be reimbursed to City by Flagstone, together with interest thereon at
the highest lawful rate permitted by law from the date of City's making of any such payment or incurring
of any such costs and expenses until paid. City shall notify Flagstone in writing of the dates and amounts
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of any such payments, and Flagstone shall reimburse City within seven (7) calendar days following
receipt of such notification.
ARTICLE 10. CONDEMNATION.
10.1. Material Taking. If at any time prior to the Lease Delivery Date the whole or any
portion of the Property which would have a material impact on the Project (as reasonably determined by
Flagstone and City) shall be taken by the exercise of the right of condemnation or by agreement between
City, Flagstone and those authorized to exercise such right, this Agreement shall, upon the written
election of either party, terminate and expire as of the date of such election.
10.2. Less than a Material Taking. If at any time prior to the Lease Delivery Deadline, a
portion of the Property which does not have.a material impact on the Project (as reasonably determined
by flagstone and City) shall be taken by any lawful power or authority by the exercise of the right of
condemnation or by agreement between City, Flagstone and those authorized to exercise such right, this
Agreement shall not terminate in connection with the exercise of such right and shall continue in full
force and effect.
10.3. Award. The award or awards received in consideration of any taking (material or non-
material) shall be allocated between the parties based upon the parties' respective interests under this
Agreement and the Ground Lease. Each party shall bear its own expenses of negotiation and litigation
" with respect to the award or awards unless the parties agree to share certain expenses, in which event the
shared expenses shall be allocated between (and paid from) the proceeds thereof, in the ratio in which the
amount of the gross award payable to each party bears to the total thereof.
ARTICLE 11. DEFAULT AND REMEDIES.
11 1 Events of Flagstone's Default. Each of the following events shall be an "Event of
Flagstone's Default" hereunder:
11.1.1. The failure of Flagstone to perform or observe any of the covenants, conditions
and agreements on the part of Flagstone to be performed hereunder within thirty (30) days after written
notice of such failure;
11.1.2. If Flagstone (a) shall suffer or permit to he entered a decree or order of a court or
agency or supervisory authority having jurisdiction determining it to be insolvent or providing for the
appointment of a conservator, receiver, liquidator, trustee or any similar Person or entity appointed in
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connection with any insolvency, readjustment of debt, marshaling of assets and liabilities, bankruptcy,
reorganization or similar proceedings of or relating to it or of or relating to all, or substantially all, of its
property, or for the winding -up or liquidation of its affairs and such proceedings remain undismissed or
pending and unstayed for a period of ninety (90) days or (b) shall suffer or permit to be instituted
proceedings under any law relating to bankruptcy, insolvency or the reorganization or relief of debtors to
be instituted against it and such proceedings remain undismissed or pending and unstayed for a period of
ninety (90) days;
11.1.3. If flagstone shall (a) consent to the appointment of a conservator, receiver,
trustee, liquidator or custodian in any insolvency, readjustment of debt, marshaling of assets and liabilities
or similar proceedings of or relating to it or of or relating to all, or substantially all, of its property or for
the winding -up or liquidation of it affairs, (b) admit in writing its inability to pay its debts generally as
they become due, (c) file a petition, or otherwise institute, or consent to the institution against it of,
proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief
of debtors, or (d) make an assignment for the benefit of its creditors;
11.1.4. If flagstone shall be dissolved without City having permitted a successor to the
rights of Flagstone under this Agreement; or
11.1.5. Any express, material representation made hereunder shall prove to have been
incorrect in any material respect when made.
11.2. Remedies for Flagstone's Default. If an Event of Flagstone's Default shall occur, City
shall have the right to terminate this Agreement and require full distribution of the Agreement Security to
City as liquidated damages as and for its sole remedy hereunder, it being agreed that the Agreement
Security represents a reasonable endeavor by the parties to ascertain that said sums would be the minimal
damages suffered by City upon the occurrence of an Event of Flagstone's Default hereunder.
11.3. City's Default. If City fails to perform or observe any of the covenants, conditions and
agreements on the part of City to be performed hereunder within thirty (30) days after written notice of
such failure, then Flagstone may, provided that an Event of Flagstone's Default has not occurred, at its
option: (i) terminate this Agreement and require full distribution of the Agreement Security to Flagstone;
or (ii) pursue the remedy of specific performance. Flagstone waives all other remedies it may have
against City at law or in equity.
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ARTICLE 12. REPRESENTATIONS BY FLAGSTONE AND CITY; DEFENSE AND
RELEASE.
12.1. Flaestone's Representations. Flagstone hereby represents and warrants to City that:
12.1.1. Existence and Capacity. Flagstone is a duly organized and validly existing
limited liability company in good standing under the laws of State of Florida. Flagstone has full power
and capacity to carry on its business as presently conducted by Flagstone, and to enter into this
Agreement and the transactions contemplated by this Agreement.
12.1.2. Financial Resources and Evaluation of Project. To the best of Flagstone's
knowledge: (i) Flagstone has access to sufficient funds to satisfy the Initial Equity Requirement (ii) as of
the Lease Delivery Date, Flagstone will have dosed upon an Initial Construction Loan; and (iii) the total
of such sums will be sufficient to carry out the development and construction of the Project and to operate
the Project Components and comply with the terms and conditions of this Agreement and the Ground
Lease. Flagstone has done such studies and has made sucb evaluations as it deems appropriate regarding
the tourism and local markets in the area surrounding Watson Island and has deemed it desirable to invest
in the Project, recognizing the risks inherent therein. Flagstone acknowledges that the City shall not be
liable under this Agreement for any actions taken by the City, acting in its municipal capacity, including,
without limitation, any actions which may adversely impact tourism, crime, the local economy, the
success of this Project, etc., and that in no event shall any actions taken by the City in its municipal
capacity be the basis for any cause of action or defense of' any obligation by Flagstone Hereunder. This
section shall survive any termination of this Agreement.
12.13. Binding Obligations. This . Agreement constitutes the valid and binding
obligations of Flagstone, enforceable against Flagstone in accordance with its terms.
12.2. City's Representations. City hereby represents and . warrants to Flagstone that the
Property is free of any encumbrance or restriction other than those disclosed in Exhibit 12.2 attached
hereto (the "Permitted Title Exceptions"). City shall maintain the Property in its present condition,
ordinary wear and tear excepted, and except for the matters set forth in Section 7.3 and the Permitted
Title Exceptions, City shall not permit any liens or other encumbrances to be filed against the Property.
12.3. Disclaimer of Representations by Flagstone. Flagstone hereby expressly
acknowledges and agrees that, in connection with the Watson Island RFP or otherwise:
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12.3.1. City makes and has made no warranty or representation whatsoever as to the
condition or suitability of any portion of the Property for Flagstone's purposes;
12.3.2. City makes and has made no warranty, express or implied, with regard to the
accuracy of any information furnished to Flagstone, and City shall not be bound by any statement of any
broker, employee, agent or other representative of City;
123.3. City has made no representations, warranties or promises to Flagstone not
explicitly set forth herein.
123.4. City makes and has made no representation or warranty, express or implied, with
regard to the likelihood that the remainder of Watson Island will be developed or as to the precise type, or
quality of improvements that will be constructed thereon or the timing of the same; and
12.3.5. City makes and has made no representation or warranty, express or implied,
concerning any portion of the Property, their condition or any other thing or matter directly or indirectly
related thereto or hereto including, without limitation, no warranty, merchantability, or fitness for any
particular purpose or relating to the absence of latent or other defects.
12.3.6. Defense and Release. The parties believe that this Agreement and the form of
Ground Lease attached hereto are consistent in all material respects with the Watson Island RFP and
Island Gardens Proposal. Nevertheless, Flagstone acknowledges and agrees that the Watson Island RFP,
the island Gardens Proposal, this Agreement and/or the Ground Lease may be challenged by private third
parties for various reasons. Flagstone agrees to defend City, its officials, employees, agents and
representatives against any and all claims arising from, out of or in connection with or otherwise relating
to any such challenge. Furthermore, Flagstone acknowledges and agrees that City shall have no liability
whatsoever to Flagstone or any Investors in Flagstone and/or the. Project in connection with any such
challenge or otherwise and notwithstanding that the foregoing acknowledgement that City shall have no
such liability, Flagstone hereby forever waives and releases City from any such liability, now or hereafter
arising. The foregoing defense obligations of Flagstone and release shall survive any expiration or
termination of this Agreement.
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ARTICLE 13. MISCELLANEOUS.
13.1. Assignment.
13.1.1. By Flagstone. In no event shall Flagstone be permitted to assign its rights and/or
obligations under this Agreement (it being understood that in no event shall the foregoing be deemed to
prohibit Flagstone from obtaining equity investments therein, subject to the provisions of Section 6.1.3).
13.1.2. By City. In no event shall City be permitted to assign its rights and/or
obligations under this Agreement.
13.2. Notices. Any notices or communications under this Agreement between the parties shall
be in writing and delivered to the persons at the addresses specified for notices to such parties in the
Ground Lease. All notices shall be deemed received when actually delivered, if delivered by hand,
facsimile transmittal or by a nationally recognized overnight delivery service. Each party may substitute
one or more times the persons arid the addresses to whom notices and communications shall be sent to,
but such change shall not be effective until the other party receives such communication in accordance
with this Section 13.2.
13.3. Applicable Law. This Agreement shall be governed by the laws of the State of Florida.
13.4. Severabilitv. If any term, covenant or condition of this Agreement or the application
thereof to any Person or circumstances shah, to any extent, be determined by the appropriate judicial
authority to be illegal, invalid, or unenforceable, the remaining terms, covenants and conditions of this
Agreement, or application of such terms, covenants or conditions to Persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected thereby and each term, covenant,
or condition of this Agreement shall be bound and enforced to the fullest extent possible by law.
13 5 Waiver. No waiver of any term, provision, condition or covenant of this Agreement by
any party shall he deemed to imply or constitute a further waiver by such party of any other term,
provision, condition or covenant of this Agreement.
13.6. Third -Party Beneficiary. Nothing contained in this Agreement shall be construed so as
to confer upon any other party the rights of a third party beneficiary.
13.7. Enforcement Costs. If any civil action, arbitration or other legal proceeding is brought
for the enforcement of this Agreement, or because of an alleged dispute, breach, default or
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misrepresentation in connection with any provision of this Agreement, the successful or prevailing party
or parties shall be entitled to recover reasonable attorneys' fees, court costs and all expenses (including,
without limitation, all such fees, costs and expenses incident to arbitration, appellate, bankruptcy and
post -judgment proceedings), incurred in that civil action, arbitration or legal proceeding, in addition to
any other relief to which such party or parties may be entitled. Attomeys' fees shall include, without
limitation, paralegal fees,investigative fees, administrative costs and all other charges billed by the
attorney to the prevailing party.
13.8. Entire Agreement. This Agreement represents the entire agreement between the parties
hereto. It supersedes any and all previous agreements and understandings, whether written or oral,
between the parties. No representations, inducements, promises or agreements, oral or otherwise,
between the parties not embodied or described in this Agreement shall be of any force or effect. No
modification or amendment of this Agreement shall be binding upon the parties unless such modification
or amendment is in writing and is signed by the party to be bound thereby.
13.9. Headings. The titles of the several clauses and parts of this Agreement are inserted for
convenience of reference only and shall be disregarded when construing or interpreting any of its
provisions.
13.10. References. Except as otherwise specifically indicated, all references to Article, Section
and Subsection numbers refer to Articles, Sections and Subsections of this Agreement and all references
to Exhibits refer to the Exhibits attached hereto, which exhibits are incorporated herein by this reference.
The words "herein", "hereof", "hereunder", "hereinafter" and words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or Subsection of this Agreement. Unless
expressly stated to the contrary, reference to any Article includes all of the Sections contained therein, and
reference to any Section includes the Subsections contained therein. The terms "include" and "including"
shall be construed as if followed by the phrase "without being limited to."
13.11. Brokers. Each of the parties represents and warrants that such party has dealt with no
broker or finder in connection with any of the transactions contemplated by this Agreement, and, insofar
as such party knows, no broker or other Person is entitled to any commission or finder's fee in connection
with any of these transactions. The parties each agree to indemnify, defend and hold harmless one
another against any loss, liability, damage, cost, claim or expense incurred by reason of any brokerage
commission or finder's fee alleged 'to be payable because of any act, omission or statement of the
indemnifying party, which indemnification shall survive any termination of this Agreement.
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13.12. No Partnership or Joint Venture. Nothing contained in this Agreement is intended or
shall be construed in any manner or under any circumstances whatsoever as creating or establishing a
partnership or a joint venture between City and Flagstone, or as constituting Flagstone as the agent or
representative of City or City as the agent or representative of Flagstone for any purpose or in any manner
whatsoever.
13.13_ Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which taken together shall constitute one and the same
instrument Confirmation of execution by electronic transmission of a facsimile signature page shall be
binding upon any party so confirming.
!SIGNATURES FOLLOW]
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