SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Super 8 Motels, Ltd., a California limited partnership
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
$2,420
2) Form, Schedule or Registration Statement No.:
Schedule 14A
3) Filing Party:
Registrant
4) Dated Filed:
May 15, 1998
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REVISED PRELIMINARY COPY
INFORMATION STATEMENT
PROPOSED ACTIONS BY WRITTEN CONSENT
OF LIMITED PARTNERS
OF
SUPER 8 MOTELS, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
June ____, 1998
SOLICITATION OF CONSENTS
The limited partners (the "Limited Partners") of SUPER 8 MOTELS, LTD.,
a California limited partnership (the "Partnership"), are being asked to
consider and approve by written consent the proposed sale of all of the
Partnership's interests in real property and related personal property (the
"Properties") for an aggregate purchase price of $12,100,000, and the
dissolution of the Partnership, which proposals are described hereinafter. It is
estimated that the sale of the Properties on the proposed terms would result in
total additional distributions to the Limited Partners in the approximate amount
of $2,070 per each original $1,000 Unit of limited partnership interest. If the
proposals are approved and the proposed sale is consummated, among other things,
all of the Partnership's assets will be liquidated and the Partnership will be
dissolved. (See "Effects of Approval of the Proposals" below.)
THE ENCLOSED FORM OF ACTIONS BY WRITTEN CONSENT OF LIMITED PARTNERS
(THE "CONSENT") IS SOLICITED ON BEHALF OF THE PARTNERSHIP AND GROTEWOHL
MANAGEMENT SERVICES, INC., THE GENERAL PARTNER OF THE PARTNERSHIP (THE "GENERAL
PARTNER"). This Information Statement and the enclosed Consent were first sent
to the Limited Partners on or about June __, 1998.
Units of limited partnership interest in the Partnership (the "Units")
represented by Consents duly executed and returned to the Partnership on or
before July __, 1998 (unless extended by the General Partner pursuant to notice
mailed to the Limited Partners) will be voted or not voted in accordance with
the instructions contained therein. If no instructions for the proposals are
given on an executed and returned Consent, Units so represented will be voted in
favor of the proposals. The General Partner will take no action with respect to
the proposals addressed herein except as specified in the duly executed and
returned Consents.
The cost of this solicitation of Consents is being borne by the
Partnership. Such solicitation is being made by mail and, in addition, may be
made by officers and employees of the Partnership and the General Partner,
either in person or by telephone or telegram.
REASONS FOR THE PROPOSAL
The Partnership was formed in 1978 and its three motel properties
located in South San Francisco, Sacramento County and Modesto opened for
business during the years 1979, 1980 and 1980, respectively.
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During recent years, increasing levels of earnings have resulted in
increased fair market values for the Properties. This Information Statement has
been prepared to ask the Limited Partners to approve the sale of the Properties
for cash in the amount of the aggregate appraised fair market values of
$12,100,000.
It has always been the intention of the Partnership to liquidate the
Properties when it became apparent that the best interests of the Limited
Partners would be served by doing so. The General Partner has received inquiries
over the years as to when the Properties were to be sold and the Partnership
liquidated. Its response, until recently, has been that because of overbuilt and
depressed motel market conditions, the time was not right for a sale of the
Properties. Conditions have changed, and the General Partner believes that they
should be sold now and the Partnership liquidated.
During September and October 1997, Everest Properties II, LLC, a member
of an affiliated group of entities which is the second largest investor group in
the Partnership (the "Everest Group"), made an offer to purchase the Properties
and the motel properties of four other California limited partnerships as to
which the General Partner serves as general partner (the "GMS Partnerships").
The purchase price set forth in the October offer was $8,351,230, a price far
below $12,100,000, the recent appraised value and the price offered in the
current proposal. The General Partner rejected the prior offer. Conflicts
between the Everest Group and the Partnership resulted in lawsuits. Inasmuch as
the General Partner agreed with the Everest Group in principle that the
Properties should be sold, a settlement was reached whereby, among other things,
the General Partner agreed to take steps to sell the Properties, and the
lawsuits were dismissed.
As discussed more fully below under "Appraisal of the
Properties/Fairness Opinion," the Properties have been appraised by PKF
Consulting, a highly-respected national hospitality industry specialist. Its
conclusion is that the aggregate fair market value of the Properties is
$12,100,000, which is the proposed purchase price of the Properties. The
purchase price is to be paid in cash, and the net proceeds thereof will be
distributed in accordance with the Partnership Agreement upon the close of the
sales transactions and the concomitant dissolution of the Partnership.
Termination of the Partnership will occur as soon as the winding up process can
be completed.
The General Partner is recommending the approval of the transaction by
the Limited Partners for the following reasons:
The General Partner believes that the sale value of the Properties is now
at the crest of a seller's market which may not last much longer. Although
there can be no assurance that the Properties' values will not increase
over time, the General Partner believes that within the next five years
only modest increases in the Properties' values can be expected to occur.
This belief is substantiated by the appraisals. The General Partner
believes that now is the time to sell the Properties.
Although the motels are in good condition, they are almost 20 years old
and have never been refurbished. If the Properties are to be retained, it
would be necessary for the Partnership to spend large sums for their
refurbishment and modernization. The General Partner believes that the
funds for such expenditures would not be available from cash flow without
reducing future distributions.
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The Partnership's intention has always been to sell the Properties when
the market conditions warranted sale. It was never an investment objective
of the Partnership to hold the Properties permanently.
The General Partner understands that the circumstances of many of the
Limited Partners have changed over the life of the Partnership and believes
that the Limited Partners should be presented with an opportunity to
liquidate their investments. In this regard, the General Partner believes
that it is important to understand that no true market exists for the sale
of Units. Heretofore, to dispose of their Units, Limited Partners have had
to arrange private sales, or accept tender offers, at prices well below the
correlative value of the underlying assets.
The Properties are proposed to be sold to the Buyer for $12,100,000,
approximately $3,750,000 more than was offered for the Properties in
October 1997 by the Everest Group. The sales price is equal to the
appraised value of the Properties as determined by PKF Consulting, an
independent real estate advisory firm specializing in the valuation of
lodging properties. The proposed sale will be for all cash. PKF Consulting
has rendered to the Partnership a fairness opinion, stating its opinion
that the sales price is fair to the Partnership. The contract of sale
between the Partnership and the Buyer provides for a closing of the sale on
July 15, 1998 or within 30 days after approval of the sale by the Limited
Partners, whichever occurs later. For these reasons, and because of the
length of time that widespread marketing of the Properties might take, the
General Partner has not actively marketed the Properties for sale. There
can, therefore, be no assurance that the proposed sale of the Properties to
the Buyer is at the highest price attainable for the Properties.
As of May 31, 1998, the Limited Partners had already received, over the
life of the Partnership, the sum of $2,143.64 per Unit (more than twice
their $1,000 per Unit original investment) in the form of quarterly
distributions. Upon the sale of the Properties pursuant to the proposed
transaction, the Limited Partners would receive an additional pre-tax
distribution in the estimated amount of approximately $2,070 per Unit.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The only outstanding class of voting securities of the Partnership is
the Units. Each Unit entitles its holder to one vote on each proposal.
All Limited Partners as of the date action is taken on the proposals
(the "Record Date") are entitled to notice of and to vote on the proposals. As
of April 13, 1998 there were 5,000 Units outstanding and a total of 745 Limited
Partners entitled to vote such Units. With respect to the proposals to be voted
upon, the favorable vote of Limited Partners holding in excess of 50% of the
Units outstanding as of the Record Date will be required for approval. There are
no rights of appraisal or similar rights of dissenters with regard to the
proposals to be voted upon.
As of April 13, 1998 no person or group of related persons was known by
the Partnership to be the beneficial owner of more than 5% of the Units, except
the following group of related Unit holders:
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Liquidity Fund 73 143 Units 2.86%
Liquidity Fund 74 127 Units 2.54%
Liquidity Fund 75 66 Units 1.32%
Liquidity Fund Tax Exempt Partners 116 Units 2.32%
Liquidity Fund Tax Exempt Partners II 153 Units 3.06%
Liquidity Fund XI 13 Units 0.26%
Liquidity Fund XIII 2 Units 0.04%
Liquidity Fund XIV 5 Units 0.10%
Liquidity Income/Growth Fund 1985 29 Units 0.58%
Liquidity Fund 65 17 Units 0.34%
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Total 671 Units 13.42%
Neither the General Partner nor any of its affiliates are the beneficial owners
of any Units.
No meeting will be held with regard to this solicitation of the Limited
Partners. Voting may be accomplished by completing and returning to the offices
of the Partnership, at 2030 J Street, Sacramento, California 95814, telephone:
(916) 442-9183, the form of Consent included herewith. Only Consents received
prior to the close of business on the date (the "Action Date") which is the
earlier of (i) the date on which the Partnership receives approval of both
proposals by a majority-in-interest of the Limited Partners, or (ii) July __,
1998 (unless extended by the General Partner pursuant to notice mailed to the
Limited Partners), will be counted toward the vote on the proposals. However,
Limited Partners are urged to return their Consents at the earliest practicable
date.
If a Limited Partner has delivered an executed Consent to the
Partnership, the Limited Partner may revoke such Consent not later than the
close of business on the date immediately prior to the Action Date. As of the
Action Date, the actions which are the subject of this solicitation will either
be effective (if the requisite number of executed Consents have been received by
the Partnership) or the solicitation period will have expired without approval
of the proposals. The only method for revoking a Consent once it has been
delivered to the Partnership is by the delivery to the Partnership prior to the
Action Date of a written instrument executed by the Limited Partner who executed
the Consent which states that the Consent previously executed and delivered is
thereby revoked. Other than the substance of the revocation described above, no
specific form is required for such revocation. An instrument of revocation will
be effective only upon its actual receipt prior to the Action Date by the
Partnership or its authorized agent at the Partnership's place of business as
set forth in the foregoing paragraph.
CONSENT UNDER PARTNERSHIP AGREEMENT
Pursuant to Section 6.3F of the Partnership's Certificate and Agreement
of Limited Partnership (the "Partnership Agreement"), a majority-in-interest of
the Limited Partners must approve or disapprove the sale at one time of all or
substantially all of the Partnership's assets. Because the Properties constitute
substantially all of the Partnership's assets (as discussed below under "The
Properties and the Partnership's Business"), the General Partner and the
Partnership are seeking the approval of the proposed sale of the Properties by a
majority-in-interest of the Limited Partners. If the proposals are approved by
the Limited Partners but the proposed sale of the Properties described herein is
not consummated because one or more of the conditions precedent to the sale (see
"Purchase Agreement") is not satisfied (excluding the condition precedent that
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the Limited Partners approve the proposed sale), the General Partner will
consider the Limited Partners' approval of the proposals set forth herein to
constitute approval of any purchase offer for the Properties (or for an
individual motel, including the related leasehold and personal property) if such
purchase offer is reflected in an executed purchase agreement no later than
January 31, 1999, is consummated no later than June 30, 1999, is for "all cash,"
and is for an amount equal to or greater than $2,700,000 for the Sacramento
County motel, $7,600,000 for the South San Francisco motel, and/or $1,800,000
for the Modesto motel. If the General Partner should receive more than one such
purchase offer, it would accept the best offer, unless the General Partner had
already entered into a binding contract for a less favorable offer. However,
notwithstanding the preceding, if prior to entering into a binding contract the
General Partner should receive one or more "all cash" purchase offers and also
should receive one or more purchase offers in an amount greater than that set
forth in the highest "all cash" offer but entailing the receipt by the
Partnership of a promissory note for part of the purchase price, the Partnership
would present all such offers to the Limited Partners for approval.
Under Section 13.1 of the Partnership Agreement, the sale of all or
substantially all of the Partnership's assets will not result in the dissolution
of the Partnership. Accordingly, the General Partner is also seeking the
approval by a majority-in-interest of the Limited Partners of the dissolution of
the Partnership if the proposed sale of the Properties are actually consummated.
Limited Partners must approve each proposal in order for either of them
to be effective. In the event the Limited Partners do not approve both
proposals, the Partnership will not proceed to implement the proposed sale of
the Properties.
THE PROPERTIES AND THE PARTNERSHIP'S BUSINESS
The Properties consists of three leasehold interests, the motel
properties constructed thereon, and the related personal property. The three
motels are managed and operated by the Partnership under the name "Super 8
Motel."
Narrative Description of Business
(a) Franchise Agreements
The Partnership operates each of its motel properties as a franchisee
of Super 8 Motels, Inc. through sub-franchises obtained from Super 8 Management
Corporation. In March 1988, Brown & Grotewohl, a California general partnership
that is an Affiliate of the General Partner, became sub-franchisor in the stead
of Super 8 Management Corporation, another Affiliate of the General Partner. As
of November 10, 1997, Super 8 Motels, Inc. had franchised a total of 1,619
motels having an aggregate of 98,000 guestrooms in operation. Super 8 Motels,
Inc. is a wholly-owned subsidiary of Hospitality Franchise Systems, Inc. Neither
the Partnership nor the General Partner has any interest in Hospitality
Franchise Systems, Inc.
The objective of the Super 8 Motel chain is to maintain a competitive
position in the motel industry by offering to the public comfortable, no-frills
accommodations at a budget price. Each Super 8 Motel provides its guests with
attractively decorated rooms, free color television, direct dial telephone and
other basic amenities, but eliminates or modifies other items to provide
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substantial cost reduction without seriously affecting comfort or convenience.
Some of these savings are accomplished by reductions in room size, elimination
of expensive lobbies, and by substantial economies in building construction.
By the terms of each franchise agreement with Super 8 Motels, Inc., the
Partnership pays monthly franchise fees equal to 4% of its gross room revenues
(half of which is paid to the sub-franchisor) and contributes an additional 1%
of its gross room revenues to a fund administered by Super 8 Motels, Inc. to
finance the national reservation and promotions program.
(b) Operation of the Motels
The General Partner manages and operates the Partnership's motels. The
General Partner's management responsibilities include, but are not limited to,
supervision and direction of the Partnership's employees having direct
responsibility for the operation of each motel, establishment of room rates and
direction of the promotional activities of the Partnership's employees. In
addition, the General Partner directs the purchase of replacement equipment and
supplies, maintenance activity and the engagement or selection of all vendors,
suppliers and independent contractors. The Partnership's financial accounting
activities are performed by the individual motel staffs and a centralized
accounting staff, all of which work under the direction of the General Partner.
Together, these staffs perform all bookkeeping duties in connection with each
motel, including all collections and all disbursements to be paid out of funds
generated by motel operations or otherwise supplied by the Partnership.
As of December 31, 1997, the Partnership employed a total of 59
persons, either full or part-time, at its three motel properties, including 20
desk clerks, 31 housekeeping and laundry personnel, three maintenance personnel,
two van drivers, and three motel managers. In addition, and as of the same date,
the Partnership employed 11 persons in administrative positions at its central
office in Sacramento, California, all of whom worked for the Partnership on a
part-time basis. They included accounting, investor service, sales and marketing
and motel supervisory personnel, secretarial personnel, and purchasing
personnel.
(c) Competition
As discussed in greater detail below, in the areas in which its motel
properties are located the Partnership faces intense competition from motels of
varying quality and size, including other budget motels which are part of
nationwide chains and which have access to nationwide reservation systems.
Super 8 Motels offer accommodations at the upper end, in terms of
facilities and prices, of the budget segment of the lodging industry.
Properties
The net proceeds of the Partnership's offering of Units were expended
for the acquisition (by lease) and development of three properties located in
Sacramento County, South San Francisco and Modesto, California. The aggregate
acquisition and development cost of the properties was funded with such proceeds
and financing in the amount of $850,000 secured by deeds of trust to each of the
motels. This original loan was repaid in April 1988 with the proceeds of the San
Francisco Federal Savings & Loan Association (SFFSLA) loan described in Note 6
of the audited financial statements. The SFFSLA loan bears interest at the rate
of 3% over the Federal Home Loan Bank Board 11th District Cost of Funds (with a
minimum interest rate of 8.5%) and requires monthly payments of principal and
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interest in the amount of $9,061. The SFFSLA loan, which is secured by a deed of
trust encumbering the South San Francisco motel, matures on May 1, 2003, at
which time a "balloon" payment of approximately $740,000 will be due and
payable. SFFSLA is now known as California Federal Bank.
(a) Sacramento County
Description of Motel. The Partnership is the lessee of approximately
241,000 square feet of land located at the northeast corner of Madison Avenue
and Hillsdale Boulevard, and adjacent to Interstate Highway 80, in Sacramento
County, California. The site is located to the east of the City of Sacramento.
The Partnership has constructed a 128-room motel on the site. Construction of
the motel was completed and the motel commenced operations in April 1980.
The property site consists of two leased parcels. The leases provide
for payment by the Partnership of all taxes, utilities and costs of maintenance
in addition to the monthly rent, and will expire on June 30, 2013. Pursuant to
the lease agreements, the Partnership has five consecutive 10-year renewal
options. The leases provide for adjustments to the monthly rent every two years
according to changes in the Consumer Price Index for all Urban Consumers for the
San Francisco-Oakland Area (the "CPI"). The total monthly rent was adjusted to
$9,719 ($116,630 annually) as of July 1, 1996.
The leases provide that the improvements constructed by the Partnership
on the leased premises will remain the property of the Partnership during the
lease term but that upon expiration of the leases, title to any such
improvements will pass to the lessor. The Partnership has subleased several
unused portions of the motel site as described below. As a result of the
development discussed below, the General Partner regards the Sacramento site as
completely developed.
Madison Avenue Properties Sublease.During February 1983 the Partnership
entered into a sublease with Madison Avenue Properties (an unaffiliated
developer which is a general partnership of which Jim White, Norbert J. Havlick,
William J. Hughes, Jr. and Merle D. Gilliland are the partners) of an
undeveloped portion of the motel site comprising approximately 38,000 square
feet. Construction of a restaurant and cocktail lounge facility on the property
was completed and the facility opened for business in April 1984.
The sublease to Madison Avenue Properties extends through March 31,
2003, and has five consecutive 10-year renewal options (but does not require the
Partnership to extend the term of its master leases for the property.) The cost
of improvements and all maintenance, taxes and utilities are the responsibility
of the sublessee. The Partnership and the fee owner of the property have agreed
to subordinate their interests therein to encumbrances securing permanent
financing for the restaurant and cocktail lounge facility.
The annual rent payable to the Partnership is equal to the greater of
1.5% of gross receipts generated by the restaurant and cocktail lounge facility,
or a fixed annual rent. The fixed annual rent is adjusted every two years
according to changes in the CPI. On April 1, 1998 the fixed annual rent was
increased to $38,073.
The total rent earned by the Partnership during the last three years is
as follows:
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Year Rent
1995 $34,385
1996 $35,398
1997 $35,736
KMH Trinity Properties Sublease. During December 1986, the Partnership
entered into a sublease with KMH Trinity Properties ("KMH") of another
undeveloped portion of the motel site consisting of approximately 33,000 square
feet. KMH is an unaffiliated limited partnership of which Kenneth L. Mackey and
William J. Hughes, Jr. are the general partners.
The sublease to KMH is for a term expiring on June 30, 2013, with five
consecutive 10-year renewal options exercisable by KMH. Because the initial
terms of the Partnership's leases of the overall motel property end on June 30,
2013, the Partnership has agreed in this sublease to exercise up to two of its
10-year renewal options in the event that KMH elects to extend the basic term of
its sublease with the Partnership.
The sublease provides for a minimum annual rent that is adjusted every
two years for changes in the CPI. On December 1, 1996 the minimum annual rent
was adjusted to $31,092.
Pursuant to the sublease, KMH has developed and is operating a retail
shopping center on the subleased land. KMH is required to pay, in addition to
the minimum rent described above, 25% of all rent received each year from
tenants of the shopping center in excess of a sum which is equal to $1.05
multiplied by the rentable square footage of the shopping center (9,930 square
feet). The shopping center opened in September 1987. The total annual rent
(including the minimum rent) earned by the Partnership during the last three
years is as follows:
Year Rent
1995 $29,672
1996 $29,885
1997 $31,092
Sterling Equity Investments Sublease. During November 1987, the Partnership
entered into a sublease with Sterling Equity Investments ("Sterling") of an
undeveloped portion of the motel site consisting of approximately 27,000 square
feet. Sterling is an unaffiliated general partnership of which Kenneth L. Mackey
and William J. Hughes, Jr. are the partners.
The sublease is for a term expiring on June 30, 2013, with five
consecutive 10-year renewal options exercisable by Sterling. Because the initial
terms of the Partnership's leases of the overall motel property end on June 30,
2013, the Partnership has agreed in this sublease to exercise up to two of its
10-year renewal options in the event that Sterling elects to extend the basic
term of its sublease with the Partnership.
The sublease provides for a minimum annual rent that is adjusted every
two years for changes in the CPI. On November 12, 1997, the minimum annual rent
was adjusted to $20,868.
Pursuant to the sublease Sterling has developed and is operating a
retail shopping center on the subleased land. Sterling is required to pay, in
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addition to the minimum rent described above, 25% of all rent received in each
year from tenants of the shopping center in excess of a sum which is equal to
$1.10 multiplied by the rentable square footage of the shopping center (9,069
square feet). The shopping center opened in July 1988. The total annual rent
(including the minimum rent) earned by the Partnership during the last three
years is as follows:
Year Rent
1995 $19,001
1996 $19,676
1997 $19,835
Motel Operations. The Sacramento motel achieved the following average
occupancy rates and average room rates for the years 1997, 1996 and 1995:
1997 1996 1995
---- ---- ----
Average Occupancy 58.4% 55.5% 53.8%
Average Room Rate $42.09 $40.37 $41.06
The following lodging facilities provide direct and indirect
competition to the Partnership's Sacramento County motel:
Approximate
Motel Number Distance From
Facility Of Rooms The Motel
Motel 6 82 Across Street
Holiday Inn 350 0.25 mile
La Quinta Motel 130 0.50 mile
Oxford Suites 131 5.00 miles
The Sacramento County motel's patronage consists primarily of leisure,
military and corporate sources. The motel has significant weekend patronage from
sports teams and vacation travelers. In 1997 the McCllelan Air Force Base, which
is in the process of closing, provided approximately 11% of the occupied rooms
and approximately 8% of the room revenue, in 1996 approximately 15% of the
occupied rooms and approximately 11% of the room revenue, and in 1995
approximately 19% of the occupied rooms and approximately 14% of the room
revenue. McCllelan Air Force Base is scheduled for complete closure in 2001. No
other customer supplies as much as 5% of the motel's patronage.
(b) South San Francisco
Description of Motel. The Partnership is the lessee of two parcels of
approximately 81,330 square feet of land located at the corner of Mitchell and
West Harris Avenues in the City of South San Francisco, approximately two miles
north of the San Francisco International Airport. One of the two parcels leased
was pursuant to a sublease until the Partnership's landlord purchased the
subleased area in 1984 from an unrelated party. In 1984 the original lease was
modified to reflect the changed ownership, and has substantially the same terms
and conditions as the original lease. The Partnership has constructed a 117-room
motel on the site. Construction of the motel was completed and motel operations
commenced on December 5, 1979.
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The leases provide for payment by the Partnership of all taxes,
utilities and costs of maintenance and expire, according to their terms, on
December 31, 2007. Each lease provides for five consecutive five-year renewal
options exercisable by the Partnership. The monthly rent for each parcel is
adjusted at five-year intervals according to changes in the CPI. As of December
15, 1993 the rent was adjusted to $7,547 per month ($90,564 per year).
Improvements constructed by the Partnership on the leased premises will
remain the property of the Partnership during the lease terms. However, upon the
expiration of the leases, title to any such improvements will pass to the
lessor.
Motel Operations. The South San Francisco motel achieved the following
average occupancy rates and average room rates for the years 1997, 1996 and
1995:
1997 1996 1995
---- ---- ----
Average Occupancy 83.7% 78.3% 69.4%
Average Room Rate $59.68 $53.83 $49.43
The following lodging facilities provide direct and indirect
competition to the Partnership's South San Francisco motel:
Approximate
Motel Number Distance From
Facility Of Rooms The Motel
Ramada Inn 250 Across Street
Econo Lodge 51 Adjacent
La Quinta Motor Inn 174 0.25 mile
TraveLodge 200 0.50 mile
Grosvenor Inn 210 0.50 mile
Comfort Suites 165 1.00 mile
Days Inn 200 2.00 miles
The major sources of patronage at the motel are leisure travelers and
business travelers. No single account supplies as much as 5% of the motel's
patronage.
(c) Modesto
Description of Motel. The Partnership is the lessee of 2.188 acres of
land in the City of Modesto on Orangeburg Avenue near Evergreen Road, located
immediately east of U.S. Highway 99, upon which it has constructed an 80-room
motel. Construction of the motel was completed and operations commenced during
April 1980.
The lease term will expire on September 13, 2029. The lease may be
extended at the Partnership's option for three additional 10-year periods. The
monthly rent is adjusted at three-year intervals according to changes in the
CPI. The rent was adjusted effective September 15, 1996 to $5,913 per month
($70,954 per year).
During the term of the lease, the Partnership is responsible for the
payment of all taxes, utilities and costs of maintenance. The lease provides
that the improvements on the premises are the property of the Partnership until
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the termination of the lease, at which time they will become the property of the
lessor.
Motel Operations. The Modesto motel achieved the following average
occupancy rates and average room rates for the years 1997, 1996 and 1995:
1997 1996 1995
---- ---- ----
Average Occupancy 60.1% 66.8% 73.2%
Average Room Rate $44.70 $41.63 $41.06
The following lodging facilities provide direct and indirect
competition to the Partnership's Modesto motel:
Approximate
Motel Number Distance From
Facility Of Rooms The Motel
Ramada Inn 115 0.10 mile
Holiday Inn 188 0.25 mile
Mallard's Best Western 120 0.50 mile
Red Lion 285 2.00 miles
The major sources of patronage at the Modesto motel are business
travelers, leisure travelers and the many sports teams attending athletic events
in the area. No single account generates as much as 5% of the motel's total
patronage.
PURCHASE AGREEMENT
On April 30, 1998, the Partnership entered into an agreement to sell
the Properties to Tiburon Capital Corporation, San Francisco, California, or a
nominee of Tiburon Capital Corporation (the "Buyer"), for the sum of
$12,100,000, payable in cash at the close of escrow. Escrow was opened at
Chicago Title Company, San Francisco, California on June 10, 1998.
The following paragraph is based on information provided by the Buyer.
The Buyer is a California corporation formed in 1992. All of its stock has been
owned since its inception equally by William R. Dixon, Jr., Herbert J. Jaffe,
John L. Wright and John F. Dixon. Management and control persons of the Buyer
consist of its stockholders. The Buyer and its related entities, including
Pacific Management Group, Inc., NCM Management Ltd. and Capital Concepts
Investment Corp., are and have been involved in many business transactions,
including the ownership and asset or property management of real estate assets.
(The owners, management and the control persons of such related entities are two
or more of the owners of the Buyer.) In many instances, the real estate assets
were or are owned by limited partnerships or limited liability companies formed
and syndicated by the Buyer or its related entities for the specific purpose of
owning such assets. The form of an entity owning real estate assets is typically
dictated by investors and/or lenders. In like fashion, it is anticipated that a
nominee of the Buyer, which would be a limited liability company, would actually
purchase the Properties instead of the Buyer. It is currently anticipated that
the members of such limited liability company would be two other limited
liability companies, one of which would be formed and syndicated by the Buyer
and the other of which would be formed and wholly-owned by Mark Grotewohl. In
such event, Mark Grotewohl would be entitled to up to a 50% indirect interest in
11
<PAGE>
the owner of the Properties, and in some way is expected to share in the
management and control of the owner of the Properties and/or the management of
the Properties. Mr. Grotewohl's ultimate rights and obligations are the subject
of current negotiation between him and the Buyer.
Mark Grotewohl is the son of Philip Grotewohl, the owner of 50% of the
stock of the General Partner. He was employed until recently as the manager of
the Sacramento motel and as the marketing and sales director for the five GMS
Partnerships. It might be contended that Mark Grotewohl is, by virtue of his
past relationship with the Partnership, an Affiliate of the Partnership as
defined in its Partnership Agreement. Under Section 11.2 of the Partnership
Agreement, the Partnership is not permitted to sell its real property to
"Affiliates" of the General Partner. (The Partnership Agreement defines
"Affiliate" as (i) any person directly or indirectly controlling, controlled by,
or under common control with another person, (ii) a person owning or controlling
10% or more of the outstanding voting securities or another person, (iii) any
officer, director, partner or employee of any person, and (iv) if a person is
classified as an affiliate by virtue of (i), (ii) or (iii) above is an officer,
director, partner or employee, any company for which such person acts in any
such capacity.) The General Partner believes that, based on the facts and
circumstances, Mark Grotewohl is not an Affiliate of the Partnership or the
General Partner, because Mark Grotewohl neither (i) possesses the power to
direct or cause the direction of the management and policies of the Partnership
or the General Partner, and therefor does not control the Partnership or the
General Partner, (ii) owns any voting securities in the Partnership or the
General Partner, nor (iii) serves as an officer, director, partner or employee
of the General Partner or the Partnership.
The Buyer has made a contemporaneous offer to purchase the motel
properties of the four other GMS Partnerships. The offers made by the Buyer for
the properties of each of the GMS Partnerships have been evaluated independently
by the General Partner. Other than with respect to the purchase price of each
motel, the offers are on identical terms. If the limited partners of the other
partnerships do not approve the sale of their respective properties to the
Buyer, however, the Buyer has the right and option not to proceed with the
proposed purchase of the Properties from the Partnership, even if the Limited
Partners approve this sale. In this regard, the Partnership has not solicited
any offers to purchase the Properties or the motel properties of the other GMS
Partnerships, has not listed the Properties or the motel properties of the other
GMS Partnerships for sale with independent brokers, and has not otherwise
actively sought competing offers for the Properties or the motel properties of
the other GMS Partnerships. Consequently, the offer presented by the Buyer is
the only offer that the General Partner has received for the Properties or the
motel properties of the other GMS Partnerships other than those presented by the
Everest Group.
There are a number of significant conditions to the consummation of the
proposed sale of the Properties; therefore, there can be no assurance as to
whether, or when, such transaction will be consummated. Among these conditions
are the Partnership's receipt of the approval of the Limited Partners; the
Buyer's receipt (at the Partnership's expense) and approval of an ALTA Survey
and preliminary title report for the Properties; the absence of any damage or
loss to the Properties prior to the closing date in excess of $50,000; the
decision by the Buyer, in its unfettered discretion, to terminate the proposed
purchase prior to June 30, 1998; the Buyer's receipt prior to June 30, 1998 of a
loan commitment for financing in an amount of not less than 90% of the purchase
12
<PAGE>
price of the Properties, provided that the deadline may be extended upon request
of the Buyer for up to 15 days; and receipt by the Partnership of any necessary
approvals of the sale by, among others, the franchisor, the landlords, and the
subtenants. The General Partner expects that such conditions will be satisfied;
however, there can be no assurances in this regard. No federal or state
regulatory requirements must be complied with, or approvals obtained, in
connection with the transaction.
The Buyer will deposit the sum of $63,000 into escrow on the later of
the expiration of the Buyer's inspection period referred to above or the date
the Partnership notifies the Buyer that the Limited Partners have approved the
proposed sale of the Properties. Should the Buyer default in the performance of
its obligations under the purchase agreement, the Partnership will be entitled
to retain said deposit as its only damages.
The Partnership and the Buyer will share closing costs. The General
Partner anticipates that the Partnership's share of aggregate closing costs,
including real estate brokerage commissions, will be approximately $453,750.
Included therein is a real estate brokerage commission payable to Everest
Financial, Inc., a member of the Everest Group, in an amount equal to 2.75% of
the purchase price. Everest Financial, Inc. has agreed to reallow 1.25% of the
purchase price to the Buyer's broker or, at the Buyer's option, the Buyer will
be entitled to a credit against the purchase price in the amount of 1.25% of the
purchase price.
EFFECTS OF APPROVAL OF THE PROPOSALS
General
The consummation of the proposed sale of the Properties and the
dissolution of the Partnership should result in the following consequences for
the Partnership, the Limited Partners and the General Partner:
(i) The Limited Partners and General Partner are expected to receive the
distributions of net cash proceeds from the sale of the Properties as described
below.
(ii) The Limited Partners and General Partner are expected to realize the
Federal income tax consequences as described below.
(iii) All of the Partnership's assets will be liquidated and the Partnership
will be dissolved and terminated.
The consequences stated above are discussed in more detail in the
subsections which follow. Those subsections, in part, include computations as to
the cash proceeds to be received and distributed by the Partnership, and the
taxable gain and allocations thereof to be made by the Partnership, in the event
the proposed sale is consummated. HOWEVER, THIS INFORMATION IS PRESENTED SOLELY
FOR THE PURPOSES OF EVALUATING THE PROPOSAL. ALL AMOUNTS ARE ESTIMATES ONLY. ALL
COMPUTATIONS ARE BASED ON ASSUMPTIONS (SUCH AS THE DATE OF SALE, THE EXPENSES OF
THE SALE, AND THE RESULTS OF PARTNERSHIP OPERATIONS THROUGH THE DATE OF SALE)
WHICH MAY OR MAY NOT PROVE TO BE ACCURATE AND SHOULD NOT BE RELIED UPON TO
INDICATE THE ACTUAL RESULTS WHICH MAY BE ATTAINED.
13
<PAGE>
Determination and Use of Net Proceeds
The following is a summary of the projected amount of cash to be
received by the Partnership and the projected amount of cash to be distributed
to the Limited Partners and the General Partner, assuming the Properties is sold
for a gross sales price of $12,100,000. This summary has been prepared by the
General Partner.
If the proposed transaction is consummated on September 30, 1998, it is
estimated that the Partnership would receive the following net proceeds:
Gross sales price $12,100,000
Less: Real estate commission (332,750)
Retirement of debt (920,000)
Estimated escrow and closing costs (121,000)
Net proceeds of sale $10,726,250
The Partnership's real property taxes are payable twice yearly on April
10 and December 10, partially in arrears, in the current amount of $48,334 each.
The Partnership's aggregate lease payment for its three leasehold interests are
$23,179 monthly, and its aggregate sublease receipts for the Sacramento County
motel are $7,448 monthly. Accordingly, if the proposed transaction is
consummated, the actual date of consummation will determine whether there is a
credit to the Partnership for prorated lease payments and/or a credit to the
Buyer for prorated real property taxes and sublease payments. Similarly, the
amount indicated below as the estimate of reserves available for distribution
immediately prior to the sale of the Properties and on dissolution of the
Partnership will vary depending on the actual date of consummation of the
proposed transaction.
Prior to the sale, the Partnership is expected to make its regular
quarterly distribution on August 15, 1998, in the anticipated amount of $250,000
($50.00 per Unit) to the Limited Partners and $27,778 to the General Partner,
and, if the proposed sale is approved, is also expected to make a distribution
from reserves in the amount of $450,000 ($90.00 per Unit) to the Limited
Partners and $50,000 to the General Partner. The net proceeds of $10,726,250
estimated to be received by the Partnership from the proposed transaction, based
on a closing date of September 30, 1998, would be distributed 99% to the Limited
Partners and 1% to the General Partner until the Limited Partners had received
$2,815,022, or $563.00 per Unit (i.e., the Limited Partners' original
investments plus a 10% return on their adjusted investments, less all prior
distributions from the Partnership) and the General Partner had received
$28,435, and the balance ($7,882,793) would be distributed 85% to the Limited
Partners ($6,700,374, or $1,340.07 per Unit) and 15% to the General Partner
($1,182,419). The Partnership's remaining cash reserves would be retained for
the payment of accounts payable and other liabilities and expenses incurred to
that date or expected to be incurred in connection with the operation of the
Properties through the date of sale and the operation and winding-up of the
Partnership through its termination, and the balance, estimated to be $200,000,
would be distributed 85% to the Limited Partners ($170,000, or $34 per Unit) and
15% to the General Partner ($30,000). Alternatively, if the proposed sale is not
approved, the Partnership would continue to operate the Properties for an
indeterminate period pending receipt of another purchase offer which is
acceptable to the Limited Partners. The General Partner estimates that if the
Properties are not sold the Partnership will make average annual distributions
14
<PAGE>
to the Limited Partners of from $500,000 ($100 per Unit) to $800,000 ($160 per
Unit), and to the General Partner of from $55,000 to $89,000 for the foreseeable
future. However, there can be no assurance that the General Partner's estimate
in this regard will be borne out.
Federal Income Tax Consequences
(a) General. The following is a summary of the Federal income tax
consequences expected to result from consummation of the proposed transaction
based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
laws, judicial decisions and administrative regulations, rulings and practices.
This summary is general in content and does not include considerations which
might affect certain Limited Partners, such as Limited Partners which are
trusts, corporations or tax-exempt entities, or Limited Partners who must pay an
alternative minimum tax. Except as otherwise specifically indicated, this
summary does not address any state or local tax consequences.
Tax counsel to the Partnership, Derenthal & Dannhauser, has delivered
an opinion to the Partnership which states that the following summary has been
reviewed by it and, to the extent the summary involves matters of law,
represents its opinion, subject to the assumptions, qualifications, limitations
and uncertainties set forth therein.
(b) Characterization of Gain. Upon the sale of property, the owner
thereof measures his gain or loss by the difference between the amount of
consideration received in connection with the sale and the owner's adjusted
basis in the property. A gain will be recognized for Federal income tax
purposes. This is so because the depreciation used for Federal income tax
purposes, which decreases adjusted basis, was greater than that used for book
purposes.
The Properties should constitute "Section 1231 property" (i.e., real
property and depreciable assets used in a trade or business which are held for
more than one year) rather than "dealer" property (i.e., property which is held
primarily for sale to customers in the ordinary course of business). While it is
possible that the Internal Revenue Service will argue that the Properties is
"dealer" property, gain upon the sale of which would be taxed entirely as
ordinary income, tax counsel to the Partnership is of the opinion that it is
more likely than not that such an assertion would not be sustained by a court.
A Limited Partner's allocable share of Section 1231 gain from the sale
of the Properties would be combined with any other Section 1231 gains or losses
incurred by him in the year of sale, and his net Section 1231 gains or losses
would be taxed as long-term capital gains or constitute ordinary losses, as the
case may be, except that a Limited Partner's net Section 1231 gains will be
treated as ordinary income to the extent of net Section 1231 losses for the five
most recent years which have not previously been offset against net Section 1231
gains.
Long-term gain on sale of Section 1231 property is taxed as follows:
(i) the excess of accelerated depreciation over straight-line depreciation is
taxed at ordinary income rates, (ii) to the extent that any other gain would be
treated as ordinary income if the property were depreciable personal property
rather than depreciable real property, at a maximum rate of 25%, and (iii) the
balance at a maximum rate of 20%.
15
<PAGE>
Set forth below are the General Partner's estimates of the total
taxable gain for Federal income tax purposes, and the allocations thereof, which
will result if the proposed sale of the Properties is consummated, based on an
assumed closing date of September 30, 1998. These estimates do not include any
amounts relating to Partnership operations prior to the sale of the Properties
or relating to dissolution of the Partnership. These estimates are not the
subject of an opinion of counsel.
Portion
Total Taxed As Portion Portion
Estimated Ordinary Taxed At Taxed At
Gain Income 25% Rate 20% Rate
-----------------------------------------------------------
Limited Partners $10,150,000 $54,000 $3,961,000 $6,135,000
General Partner 103,000 1,000 40,000 62,000
------- ----- ------ ------
Total $10,253,000 $55,000 $4,001,000 $6,197,000
========== ====== ========= =========
Per Unit $2,030.00 $10.80 $792.20 $1,227.00
======== ===== ====== ========
The General Partner anticipates that consummation of the proposed
transaction would produce a gain for California income tax purposes in the
amount of approximately $10,251,000, of which approximately $103,000 and
$10,148,000 would be allocated to the General Partner and to the Limited
Partners, respectively.
Dissolution of the Partnership
Section 13.1B of Partnership Agreement provides that the Partnership
shall be dissolved upon the vote of a majority of the Limited Partners.
As set forth above, if both proposals are approved by a
majority-in-interest of the Limited Partners, and if the proposed sale of the
Properties is consummated, the net cash proceeds received by the Partnership
upon close of escrow for the proposed transaction will be distributed in
accordance with the provisions of the Partnership Agreement. Thereupon the
Partnership will be dissolved, the General Partner will commence to wind up the
business of the Partnership, and after payment of all expenses of the
Partnership (including the expense of a final accounting for the Partnership)
the remaining cash reserves of the Partnership will be distributed in accordance
with the provisions of the Partnership Agreement. The General Partner will then
take all necessary steps toward termination of the Partnership's Certificate of
Limited Partnership.
APPRAISAL OF THE PROPERTIES/FAIRNESS OPINION
The appraisals of the three motel properties, dated February 20, 1998,
were prepared by PKF Consulting, San Francisco, California, and indicate that
the aggregate current fair market value as of January 1, 1998 was $12,100,000.
PKF Consulting was selected by the General Partner based on its expertise in
appraising motel properties in the State of California. PKF Consulting also
prepared appraisals of the motel properties of the other GMS Partnerships.
The appraised value of the Properties was determined through the use of two
methodologies: the sales comparison approach and the income capitalization
approach.
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<PAGE>
No limitations were imposed by the General Partner on the appraiser's
investigation.
Upon request the Partnership will furnish to a Limited Partner, without
charge, a copy of each appraisal. In this regard Limited Partners are cautioned
to refer to the entire appraisal reports, inasmuch as the opinions of value
stated therein are subject to the assumptions and limiting conditions stated
therein. Furthermore, Limited Partners should be aware that appraised values are
opinions and, as such, may not represent the realizable value of the Properties.
Neither the appraiser, nor any of its affiliates, has had any prior
relationship with the Partnership, the General Partner or any of their
affiliates other than as an appraiser of the Properties and the properties of
the other GMS Partnerships and no future relationship other than as an appraiser
is contemplated.
The Partnership has also received an opinion from PKF Consulting to the
effect that the terms of the proposed sale are fair and equitable from a
financial standpoint to the Limited Partners.
17
<PAGE>
FINANCIAL INFORMATION
Selected Partnership Financial Data
Following are selected financial data of the Partnership for the period
from January 1, 1993 to December 31, 1997.
<TABLE>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Guest room income $4,067,156 $3,668,873 $3,373,790 $3,236,373 $3,252,522
Net income $889,604 $807,895 $530,783 $471,069 $227,464
Per Partnership Unit:
Cash distributions $260.00 $107.50 $100.00 $100.00 $100.00
Net income $176.14 $159.96 $105.10 $93.27 $45.04
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
----------- ------------ ------------ ------------ ------------
Total assets $2,490,307 $2,878,579 $2,618,110 $2,628,782 $2,671,473
Long-term debt $901,925 $932,561 $960,709 $986,557 $1,010,318
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
I. Fiscal Year Financial Statements
(a) Liquidity and Capital Resources
The General Partner believes that the Partnership's liquidity, defined
as its ability to generate sufficient cash to meet its cash needs, is adequate.
The Partnership's primary source of internal liquidity is revenues from motel
operations, which, since commencement of motel operations, have been sufficient
to satisfy the Partnership's cash needs, including repayment of debt interest
and principal, capital improvements and distributions to the Limited Partners
and General Partner. The Partnership's current assets of $960,505 exceed its
current liabilities of $248,379 by $712,126. These net current assets provide a
reserve in excess of the General Partner's target, which is 5% of adjusted
capital contributions or $250,000.
The Partnership's properties are currently unencumbered except for the
loan described above (see "The Properties and the Partnership's Business"), the
principal balance of which was $932,561 at December 31, 1997. Although no
assurance can be had in this regard, the General Partner believes that the
Partnership's equity in its properties provides a potential source of external
liquidity (through financing) in the event the Partnership's internal liquidity
is impaired. Unless the properties are sold prior to that date, the General
Partner may use excess reserves to liquidate the loan when its becomes due in
2003.
The Partnership expended $177,451 on renovations and replacements
during 1997. Included in the total (of which $111,960 was capitalized) were
$51,522 in replacement guest room and corridor carpets, $33,228 in replacement
washing machines, $12,890 in tub repairs, $11,831 in replacement bedspreads,
$9,246 in replacement guest room chairs, $8,523 for replacement
air-conditioners, $8,494 in furniture repairs and $8,008 for replacement drapes.
18
<PAGE>
The Partnership expended $112,233 on renovation and replacements during
1996. Included in the total (of which $63,372 was capitalized) were $43,534 for
guest room carpet, $17,743 for painting and exterior building repairs at the
South San Francisco property, $17,448 for computer system replacements, $6,394
for replacement air-conditioning units, $4,544 for replacement televisions and
$4,215 for bathtub repairs.
The Partnership currently has no material commitments for capital
expenditures. Its three motel properties are in full operation and no further
property acquisitions or extraordinary capital expenditures are planned. If the
properties are not sold the General Partner is aware of no material trends or
changes with respect to the mix or relative cost of the Partnership's capital
resources. If the properties are retained adequate working capital is expected
to be generated by motel operations.
(b) Results of Operations
(i) Combined Financial Results
The following tables summarize the Partnership's operating results for
1995, 1996 and 1997 on a combined basis. The results of the individual
properties follow in separate subsections. The income and expense numbers in the
following table are shown on an accrual basis and other payments on a cash
basis. Total expenditures include the operating expenses of the motels, together
with the cost of capital improvements and those Partnership expenses properly
allocable to such motels.
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
- ---------------------------------------------------------------
December 31, 1995 64.2% $44.32
December 31, 1996 66.5% $46.39
December 31, 1997 67.9% $50.46
Total
Expenditures Partnership
Total and Cash Flow
Fiscal Year Ended: Revenues Debt Service (1)
- -------------------------------------------------------------------------
December 31, 1995 $3,476,890 $2,836,242 $640,648
December 31, 1996 $3,818,298 $2,832,177 $986,121
December 31, 1997 $4,218,479 $3,214,059 $1,004,420
(1) While Partnership Cash Flow as it is used here is not an amount
found in the financial statements, it is the best indicator of the annual change
in the amount, if any, available for distribution to the Limited Partners and
the General Partner. This calculation is reconciled to the financial statement
in the following table.
19
<PAGE>
A reconciliation of Partnership Cash Flow (included in the chart above)
to Net Income as shown on the Statements of Operations (in the audited financial
statements) is as follows:
1997 1996 1995
-------------------------------------------------
Partnership Cash Flow $1,004,420 $986,121 $640,648
Principal Payments on Financial
Obligations 28,148 25,862 23,747
Additions to Fixed Assets 111,960 63,372 128,748
Depreciation and Amortization (254,260) (255,459) (261,488)
Other Items (664) (12,001) (872)
===============================================
Net Income $889,604 $807,895 $530,783
===============================================
Following is a reconciliation of Partnership Cash Flow (shown above) to
the aggregate total of Cash Flow from Properties Operations for the
Partnership's three motels which are segregated in the tables following this
subsection:
1997 1996 1995
-----------------------------------------------
South San Francisco Motel Cash Flow $814,752 $637,439 $372,917
Sacramento Motel Cash Flow 240,429 284,759 195,669
Modesto Motel Cash Flow 52,294 93,876 108,118
------------------------------------------
Aggregate Cash Flow from Properties
Operations 1,107,475 1,016,074 676,704
Partnership Management Fees (144,444) (59,722) (55,556)
Interest on Cash Reserves 36,765 28,421 17,226
Other Income (Net of Other Expenses)
Not Allocated to the Individual
Properties 4,624 1,348 2,274
============================================
Partnership Cash Flow $1,004,420 $986,121 $640,648
=============================================
The Partnership's total revenues increased $400,181 or 10.5% during
1997 as compared to 1996. As discussed below, the improved revenues were
generated primarily by improved occupancies and room rates at the South San
Francisco motel and to a lesser degree by improved performance at the Sacramento
motel.
The Partnership's total revenue increased $341,408 or 9.8% during 1996
as compared to 1995. As discussed below, the improved revenues were generated
primarily by improved occupancies and room rates at the South San Francisco
motel.
The Partnership's total expenditures and debt service increased
$381,882 or 13.5% during 1997 as compared to 1996. The increased expenses are
associated with the increased room revenue and occupancy.
The Partnership's total expenditures and debt service were essentially
unchanged from 1995 to 1996.
20
<PAGE>
(ii) South San Francisco Motel
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
- ----------------------------------------------------------------
December 31, 1995 69.4% $49.43
December 31, 1996 78.3% $53.83
December 31, 1997 83.7% $59.68
Total Cash Flow
Expenditures From
Total And Properties
Fiscal Year Ended: Revenues Debt Service Operations
- ------------------------------------------------------------------------------
December 31, 1995 $1,501,439 $1,128,522 $372,917
December 31, 1996 $1,857,629 $1,220,190 $637,439
December 31, 1997 $2,187,188 $1,372,436 $814,752
The Partnership's South San Francisco motel achieved a $329,559 or
17.7% increase in total revenues during 1997 as compared to 1996. Guestroom
revenues increased $328,285 or 18.2% due to the increases in occupancy and in
the average room rate. The motel achieved significant increases in the leisure
market segment while it experienced a downturn in the number of corporate, group
and discount rooms sold. The improvement in the average daily rate is related to
the increased strength of the lodging market in the San Francisco airport area.
The Partnership's South San Francisco motel achieved a $356,190 or
23.7% increase in total revenues during 1996 as compared to 1995. Guestroom
revenues increased $339,825 or 23.2% due to the increases in occupancy and in
the average room rate. The motel achieved significant increases in the leisure
market segment while it experienced a slight downturn in the number of corporate
rooms sold. The improvement in the average daily rate is related to the strength
of the San Francisco airport market.
The Partnership's South San Francisco motel experienced a $152,246 or
12.5% increase in total expenditures and debt service during 1997 as compared to
1996 due primarily to the increase in room sales. Included in the increase were
increased front desk wages of $15,231, increased housekeeping wages of $8,642,
increased credit card discounts of $7,152, increased security service of $10,745
and increased franchise and management fees of $29,602. Bad debt expense
increased $10,556 due primarily to the write-off of some bankrupt direct bill
accounts.
The Partnership's South San Francisco motel experienced a $91,668 or
8.1% increase in total expenditures and debt service during 1996 as compared to
1995 due primarily to the increase in room sales. Increased housekeeping wages
of $17,200, increased guest transportation cost of $9,802, increased costs of
guest services of $6,045, increased appraisal fees of $7,250, increased workers'
compensation costs of $6,934 and increased franchise and management fees of
$34,798 were partially offset by reductions of $6,478 in maintenance wages and
$19,207 in renovations.
21
<PAGE>
(iii) Sacramento Motel
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
- ------------------------------------------------------------------------------
December 31, 1995 53.8% $41.06
December 31, 1996 55.5% $40.37
December 31, 1997 58.4% $42.09
Total Cash Flow
Expenditures From
Total and Properties
Fiscal Year Ended: Revenues Debt Service Operations
- ------------------------------------------------------------------------------
December 31, 1995 $1,061,119 $865,450 $195,669
December 31, 1996 $1,092,057 $807,298 $284,759
December 31, 1997 $1,187,852 $947,423 $240,429
The Partnership's Sacramento motel achieved a $95,795 or 8.8% increase
in total revenues during 1997 as compared to 1996. This increase was due
primarily to the $99,778 increase in guestroom revenue, which was achieved by
increases in both the average room rate and the average occupancy rate. Revenue
from McCllelan Air Force Base decreased from 11% of total room revenue to
approximately 8% of total room revenue. Future business from the McCllelan Air
Force Base is uncertain as the base will take some time to completely close. The
termination functions should provide additional room nights for transient
personnel and the final alternate use of the facility is not yet determined.
The Partnership's Sacramento motel achieved a $30,938 or 2.9% increase
in total revenues during 1996 as compared to 1995. The property's 3.2% increase
in occupancy was partially offset by the 1.7% decrease in average room rate. The
motel experienced growth in the corporate and discount rooms market segments.
Revenue from McCllelan Air Force Base decreased from 14% of total room revenue
to approximately 11% of total room revenue.
The Partnership's Sacramento motel experienced a $140,125 or 17.4%
increase in expenditures during 1997 as compared to 1996. Decreased expenditures
for maintenance employees of $11,495 were offset by increased front desk wages
of $8,908 and increased housekeeping expenses of $16,202. The uncertain
collection of receivables aged more than three years led to the write-off of
$21,227 in bad debts. The age of the property and the location required
increased expenditures of $49,575 for renovations and replacements and for
increased security of $19,180.
22
<PAGE>
The Partnership's Sacramento motel achieved a $58,152 or 6.7% decrease
in expenditures during 1996 as compared to 1995. Total expenditure increases of
$5,830 for workers' compensation insurance and $7,250 for appraisal fees were
offset by reduced expenditures of $54,978 for renovations and replacements,
$6,606 in security services, $6,035 in housekeeping wages and $5,271 in
air-conditioning repairs and replacements.
(iv) Modesto Motel
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
- ---------------------------------------------------------------------
December 31, 1995 73.2% $41.06
December 31, 1996 66.8% $41.63
December 31, 1997 60.1% $44.70
Total Cash Flow
Expenditures from
Total And Properties
Fiscal Year Ended: Revenues Debt Service Operations
- ----------------------------------------------------------------------------
December 31, 1995 $896,780 $788,662 $108,118
December 31, 1996 $838,579 $744,703 $93,876
December 31, 1997 $806,674 $754,380 $52,294
The Partnership's Modesto motel experienced a $31,905 or 3.8% decrease
in total revenue during 1997 as compared to 1996. The decrease in revenue was
due to a 10.0% reduction in guestroom occupancy, which was slightly offset by a
7.4% increase in average room rate. The occupancy reduction was experienced in
all market segments, except the corporate market segment, which was essentially
unchanged.
The Partnership's Modesto motel experienced a $58,201 or 6.5% decrease
in total revenue during 1996 as compared to 1995. The decrease in revenue was
due to an 8.7% reduction in guestroom occupancy, which was slightly offset by a
1.4% increase in average room rate. The occupancy reduction was experienced in
all market segments.
The Partnership's Modesto motel experienced a $9,677 or 1.3% increase
in total expenditures during 1997 as compared 1996. The condition of the
property required increased expenditures of $11,710 for renovation and
replacements and of $6,938 for landscaping.
23
<PAGE>
The Partnership's Modesto motel achieved a $43,959 or 5.6% decrease in
total expenditures during 1996 as compared to 1995. The reduced expenditures of
$42,788 for renovations and replacements and of $8,391 for landscaping were
partially offset by increased expenditures of $5,148 for workers' compensation
and of $7,250 for appraisal fees.
II. Interim Financial Statements
(a) Liquidity and Capital Resources
As of March 31, 1998, the Partnership's current assets of $1,004,484
exceeded its current liabilities of $330,630, providing an operating reserve of
$673,854. The General Partner's reserves target is 5% of adjusted capital
contributions, or $250,000.
The Partnership expended $58,402 on renovations and replacements during
the three months ended March 31, 1998, of which $40,758 was capitalized. The
expenditures included $43,224 for guest room and hallway carpets.
(b) Results of Operations
Total Partnership income decreased $6,427 or 0.7% for the first quarter
of 1998 as compared to the first quarter of 1997. Guest room revenue increased
$3,979 or 0.4% due to an increase in the average room rate from $45.72 in 1997
to $52.87 in 1998. Such increase was partially offset by a decrease in the
average occupancy rate from 68.2% to 59.2%. All three motels had higher room
rates and lower occupancies. Overall, the South San Francisco motel had an
increase in guest room revenues and the other motels had a decrease in guest
room revenues.
Total Partnership expenses increased $48,750 or 6.5%, primarily due to
increases in the minimum wage, management fees and legal, appraisal and other
costs associated with the proposed sale of the properties and the liquidation of
the Partnership.
Other Financial Information
Items 304 and 305 of Regulation S-K promulgated by the Securities and
Exchange Commission are not applicable to the Partnership. Moreover, the General
Partner is unaware of any "Year 2000" problems which could impact the
Partnership's operations.
24
<PAGE>
FINANCIAL STATEMENTS
for
INFORMATION STATEMENT
of
SUPER 8 MOTELS, LTD.
June __, 1998
F-i
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SUPER 8 MOTELS, LTD. Page
INDEPENDENT AUDITORS' REPORT ........................................... F-1
FINANCIAL STATEMENTS:
Balance Sheets, December 31, 1997 and 1996.............................. F-2
Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995................................... F-3
Statements of Partners' Equity for the Years
Ended December 31, 1997, 1996 and 1995............................. F-4
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995................................... F-5
Notes to Financial Statements........................................... F-7
Balance Sheets, March 31, 1998 and December 31, 1997 (Unaudited)........ F-12
Statements of Operations for the Three Months
Ended March 31, 1998 and 1997 (Unaudited).......................... F-13
Statements of Partners' Equity for the Three Months
Ended March 31, 1998 and 1997 (Unaudited).......................... F-14
Statement of Cash Flows for the Three Months
Ended March 31, 1998 (Unaudited)................................... F-15
Notes to Financial Statements........................................... F-16
F-ii
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Super 8 Motels, Ltd.
We have audited the accompanying balance sheets of Super 8 Motels, Ltd., a
California limited partnership, as of December 31, 1997 and 1996, and the
related statements of operations, partners' equity and cash flows for each of
the years in the three year period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Super 8 Motels, Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the years in the three year period ended December 31, 1997 in
conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
February 26, 1998
San Mateo, California
e-super8\s8197fs.wp8.wpd F-1
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
----------- ---------
Current Assets:
<S> <C> <C>
Cash and temporary investments (Notes 3, 8 and 9) $ 812,763 $1,058,309
Accounts receivable 126,154 122,841
Prepaid expenses 21,588 24,463
----------- -----------
Total Current Assets 960,505 1,205,613
---------- ----------
Property and Equipment (Note 2):
Buildings 5,223,252 5,223,252
Furniture and equipment 1,147,274 1,049,769
--------- ----------
6,370,526 6,273,021
Accumulated depreciation (4,858,036) (4,620,543)
---------- ----------
Property and Equipment, Net 1,512,490 1,652,478
--------- ----------
Other Assets 17,312 20,488
------------- -----------
Total Assets $2,490,307 $2,878,579
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable (Notes 6 and 9) $ 30,636 $ 28,148
Accounts payable and accrued liabilities 193,805 157,712
Due to related parties 23,938 9,759
----------- ------------
Total Current Liabilities 248,379 195,619
---------- -----------
Long-term Liabilities, Net of Current Portion:
Note payable (Notes 6 and 9) 901,925 932,561
---------- -----------
Total Liabilities 1,150,304 1,128,180
--------- ----------
Lease Commitments (Note 5)
Partners' Equity:
General Partner 75,455 66,559
Limited Partners 1,264,548 1,683,840
--------- ----------
Total Partners' Equity 1,340,003 1,750,399
--------- ----------
Total Liabilities and Partners' Equity $2,490,307 $2,878,579
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended December 31:
1997 1996 1995
---------- ---------- ----------
Income:
<S> <C> <C> <C>
Guest room $4,067,156 $3,668,873 $3,373,790
Telephone and vending 82,035 90,377 75,815
Interest 36,765 28,421 17,226
Other 32,524 30,627 10,059
---------- ----------- -----------
Total Income 4,218,480 3,818,298 3,476,890
---------- ---------- ----------
Expenses:
Motel operations (Notes 4, 5 and 7) 2,497,568 2,318,534 2,293,289
General and administrative (Note 4) 143,137 104,592 77,993
Depreciation and amortization (Note 2) 254,260 255,459 261,488
Interest 80,381 82,683 84,812
Property management fees (Note 4) 209,086 189,413 172,969
Partnership management fees (Note 4) 144,444 59,722 55,556
---------- ----------- -----------
Total Expenses 3,328,876 3,010,403 2,946,107
--------- ---------- ----------
Net Income $889,604 $807,895 $530,783
======== ======== ========
Net Income Allocable to General Partner $8,896 $8,079 $5,308
====== ====== ======
Net Income Allocable to Limited Partners $880,708 $799,816 $525,475
======== ======== ========
Net Income Per Partnership Unit (Note 1) $176.14 $159.96 $105.10
======= ======= =======
Distributions to Limited Partners Per
Partnership Unit (Note 1) $260.00 $107.50 $100.00
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31:
1997 1996 1995
---------- ---------- -----------
General Partner:
Balance, beginning of year $ 66,559 $ 58,480 $ 53,172
Net income 8,896 8,079 5,308
---------- ------------ ------------
Balance, End of Year 75,455 66,559 58,480
---------- ----------- -----------
Limited Partners:
Balance, beginning of year 1,683,840 1,421,524 1,396,049
Net income 880,708 799,816 525,475
Less: Cash distributions to
limited partners (1,300,000) (537,500) (500,000)
---------- ----------- -----------
Balance, End of Year 1,264,548 1,683,840 1,421,524
---------- ---------- ----------
Total Partners' Equity $1,340,003 $1,750,399 $1,480,004
========== ========== ==========
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31:
1997 1996 1995
---------- ---------- -------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Received from motel operations $4,178,483 $3,776,765 $3,455,302
Expended for motel operations and
general and administrative expenses (2,940,025) (2,671,907) (2,617,626)
Interest received 36,684 28,351 16,576
Interest paid (80,580) (82,866) (84,980)
----------- ----------- -----------
Net Cash Provided by Operating Activities 1,194,562 1,050,343 769,272
---------- ---------- -----------
Cash Flows From Investing Activities:
Purchases of property and equipment (111,960) (63,372) (128,748)
Proceeds from sales of property and equipment - 3,500 12,285
-------------- ------------ -----------
Net Cash Used by Investing Activities (111,960) (59,872) (116,463)
---------- ----------- -----------
Cash Flows From Financing Activities:
Payments on notes payable (28,148) (25,862) (23,747)
Distributions paid to limited partners (1,300,000) (537,500) (500,000)
---------- ----------- -----------
Net Cash Used by Financing Activities (1,328,148) (563,362) (523,747)
---------- ----------- -----------
Net Increase (Decrease) in Cash and
Temporary Investments (245,546) 427,109 129,062
Cash and Temporary Investments:
Beginning of year 1,058,309 631,200 502,138
--------- ----------- -----------
End of Year $812,763 $1,058,309 $ 631,200
======== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31:
1997 1996 1995
---------- ---------- ---------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
<S> <C> <C> <C>
Net income $889,604 $ 807,895 $530,783
-------- ---------- --------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 254,260 255,459 261,488
Loss on disposition of property
and equipment 863 1,036 1,040
Increase in accounts receivable (3,313) (28,182) (5,012)
(Increase) decrease in prepaid expenses 2,875 (1,801) (1,319)
Increase (decrease) in accounts payable and
accrued liabilities 36,093 6,177 (1,784)
Increase (decrease) in due to related parties 14,180 9,759 (15,924)
------------ ------------ ---------
Total Adjustments 304,958 242,448 238,489
----------- ----------- --------
Net Cash Provided By Operating Activities $1,194,562 $1,050,343 $769,272
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Motels, Ltd. is a limited partnership organized under California law on
August 25, 1978, to acquire and operate motel properties in South San Francisco,
Sacramento and Modesto, California. The term of the Partnership expires December
31, 2027, and may be dissolved earlier under certain circumstances. The
Partnership grants credit to customers, substantially all of which are local
businesses in South San Francisco, Sacramento or Modesto.
The general partner is Grotewohl Management Services, Inc., the fifty
percent stockholder and officer of which is Philip B. Grotewohl.
The net income or net loss of the Partnership is allocated 1% to the General
Partner and 99% to the Limited Partners. Net income and distributions per
partnership unit are based upon 5,000 units outstanding. All partnership units
are owned by the Limited Partners.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Items of Partnership income are passed through to the individual partners for
income tax purposes, along with any income tax credits. Therefore, no federal or
California income taxes are provided for in the financial statements of the
Partnership.
Property and equipment are recorded at cost. Depreciation and amortization are
computed using the following estimated useful lives and methods:
Description Methods Useful Lives
----------- ------- ------------
Buildings 200% and 150% declining 7-31.5 years
balance and straight-line
Furniture and equipment Straight-line and 200% 3-7 years
declining balance
Costs incurred in connection with maintenance and repair are charged to expense.
Major renewals and betterments that materially prolong the lives of assets are
capitalized.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
Cash and temporary investments as of December 31, 1997 and 1996 consists of the
following:
1997 1996
---------- ----------
Cash in bank $ 100,529 $ 79,142
Money market accounts 612,234 879,167
Certificate of deposit 100,000 100,000
---------- -----------
Total Cash and Temporary Investments $ 812,763 $1,058,309
========= ==========
F-7
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3 - CASH AND TEMPORARY INVESTMENTS (Continued)
Temporary investments are recorded at cost, which approximates market value. The
Partnership considers temporary investments and all highly liquid marketable
securities with original maturities of three months or less to be cash
equivalents for purposes of the statement of cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS
Franchise Fees
Super 8 Motels, Inc., now a wholly-owned subsidiary of Hospitality Franchise
Systems, Inc., is franchisor of all Super 8 Motels. The Partnership pays to the
franchisor monthly fees equal to 4% of the gross room revenues of each motel and
contributes an additional 1% of its gross room revenues to an advertising fund
administered by the franchisor. In return, the franchisor provides the right to
use the name "Super 8", a national institutional advertising program, an advance
room reservation system, and inspection services. These costs, $203,358 in 1997,
$183,444 in 1996 and $168,690 in 1995 are included in motel operations expense
in the accompanying statements of operations. The Partnership operates its motel
properties as a franchisee of Super 8 Motels, Inc., through a sub-franchise
agreement with Brown & Grotewohl, a California general partnership, of which
Grotewohl Management Services, Inc. (see Note 1) is a 50% owner. Under the
sub-franchise agreement, Brown & Grotewohl earned 40% of the above franchise
fees, which amounted to $81,343, $73,377 and $67,476 in 1997, 1996 and 1995,
respectively.
Property Management Fees
The General Partner, or its affiliates, handles the management of the motel
properties of the Partnership. The fee for this service is 5% of the gross
revenues from Partnership operations, as defined in the Partnership agreement,
not including income from the sale, exchange or refinancing of such properties.
This fee is payable only out of the Operational Cash Flow of the Partnership,
defined as the total cash receipts from Partnership operations during a given
period of time less cash operating disbursements during the same period. It is
subordinated to prior receipt by the Limited Partners of a cumulative 10% per
annum pre-tax return on their adjusted capital contributions for each year of
the Partnership's existence. During the years ended December 31, 1997, 1996 and
1995 the General Partner received property management fees of $209,086, $189,413
and $172,969, respectively.
Subordinated Partnership Management Fees
During the Partnership's operational stage, the General Partner is to receive a
fee for partnership management services equal to one-ninth of the amounts which
have been distributed to the Limited Partners subordinated, however, to receipt
by the Limited Partners of a cumulative 10% per annum pre-tax return on their
adjusted capital contributions and to payment of the property management fees
referred to above. This fee is payable only from cash funds provided from
operations of the Partnership, and may not be paid from the proceeds of sale or
refinancing. During the years December 31, 1997, 1996 and 1995 the General
Partner received partnership management fees of $144,444, $59,722 and $55,556,
respectively.
Subordinated Incentive Distributions
Under the terms of the Partnership agreement, the General Partner is to receive
15% of distributions of net proceeds from the sale or refinancing of Partnership
properties remaining after distribution to the Limited Partners of any portion
thereof required to cause distributions to the Limited Partners from all sources
to be equal to their capital contributions plus a cumulative 10% per annum
pre-tax return on their adjusted capital contributions. Through December 31,
1997, no such proceeds had been distributed.
F-8
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Administrative Expenses Shared by the Partnership and Its Affiliates
There are certain administrative expenses allocated between the Partnership and
other partnerships managed by the General Partner and its affiliates. These
expenses, which are allocated based on usage, are telephone, data processing,
rent of the administrative office and administrative salaries. The
administrative expenses allocated to the Partnership were approximately $344,000
in 1997, $338,000 in 1996 and $334,000 in 1995 and are included in general and
administrative expenses and motel operations expenses in the accompanying
statements of operations. Included in administrative salaries are allocated
amounts paid to two employees who are related to Philip B. Grotewohl, the fifty
percent stockholder of Grotewohl Management Services, Inc., the General Partner.
NOTE 5 - LEASE COMMITMENTS
The Partnership has long-term lease commitments on land in Modesto, Sacramento,
and South San Francisco, California for original terms of 50, 35, and 29 years,
respectively. The Partnership has the right to extend the Modesto lease for
three consecutive periods of ten years each, the Sacramento lease for five
consecutive periods of ten years each, and the South San Francisco lease for
five consecutive periods of five years each. The base monthly rent is subject to
adjustment at three, two and five year intervals, respectively, to reflect
changes in the Consumer Price Index. The Partnership pays all property taxes,
assessments and utilities.
The Partnership has entered into three sublease agreements which cover
unimproved portions of the Sacramento property and expire on various dates from
March, 2003 through June, 2013, with the sublessees' options to renew the
subleases of all three parcels of land for five consecutive periods of ten years
each.
Rental expense under long-term lease commitments incurred by the Partnership
amounted to $278,148 in 1997, $272,438 in 1996 and $268,526 in 1995, less
$86,662 , $84,959 and $83,058 in sub-lease rentals in 1997, 1996 and 1995,
respectively. Such amounts are included in motel operations expense in the
accompanying statements of operations.
The future lease commitments at December 31, 1997 using the minimum monthly
amounts, are as follows:
Years Ending South San
December 31: Modesto Sacramento Francisco Total
------------ ----------- ------------ ----------- --------
1998 $ 70,954 $ 116,630 $ 90,564 $ 278,148
1999 70,954 116,630 90,564 278,148
2000 70,954 116,630 90,564 278,148
2001 70,954 116,630 90,564 278,148
2002 70,954 116,630 90,564 278,148
Thereafter 1,892,099 1,341,243 543,384 3,776,726
Less subleases - (992,990) - (992,990)
-------------- ----------- ----------- -----------
Total $2,246,869 $ 931,403 $996,204 $4,174,476
========== ========== ======== ==========
F-9
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - NOTE PAYABLE
The note payable is due to a federal savings bank, with monthly interest and
principal payments of $9,061. The interest rate is adjusted monthly and the
payment is adjusted annually. The interest rate was equal to 8.5% as of December
31, 1997 and is the lesser of 3% over the cost of funds index of the Federal
Home Loan Bank of San Francisco or 14.5% but not less than 8.5%. A balloon
payment of approximately $740,000 for the balance of the principal is due in May
2003. The note is collateralized by a first deed of trust on the leasehold
interests in real property in South San Francisco.
Note payable maturities are as follows:
Years Ending December 31:
1998 $ 30,636
1999 33,344
2000 36,291
2001 39,499
2002 42,990
2003 749,801
---------
Total $932,561
NOTE 7 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating expenses
for the following years:
1997 1996 1995
--------- --------- -------
Salaries and related costs $ 824,819 $ 790,722 $ 764,251
Rent 193,120 187,479 185,468
Franchise and advertising fees 203,358 183,444 168,690
Utilities 179,184 166,900 168,641
Allocated costs, mainly indirect salaries 279,007 276,096 272,411
Replacement and renovations 65,491 48,861 100,459
Other operating expenses 752,589 665,032 633,369
----------- ----------- ----------
Total motel operating expenses $2,497,568 $2,318,534 $2,293,289
========== ========== ==========
NOTE 8 - CONCENTRATION OF CREDIT RISK
The Partnership maintains its cash accounts in seven commercial banks located in
California. Accounts at each bank are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000 per bank. A summary of the total
insured and uninsured cash balances (not reduced by outstanding checks) as of
December 31, 1997 follows:
Total cash in all California banks $866,080
Portion insured by FDIC (696,729)
--------
Uninsured cash balances $169,351
F-10
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 9 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents - The carrying amount approximates fair value because
of the short-term maturity of these instruments.
Long-term debt - The carrying amount of the Partnership's notes payable
approximate fair value.
NOTE 10 - LEGAL PROCEEDINGS AND SUBSEQUENT EVENT
On October 27, 1997, a complaint was filed in the United States District
Court by the General Partner naming as defendants Everest/Madison Investors,
LLC, Everest Lodging Investors, LLC, Everest Properties II, LLC, Everest
Properties, Inc., W. Robert Kohorst, David I. Lesser, The Blackacre Capital
Group, L.P., Blackacre Capital Management Corp., Jeffrey B. Citron, Ronald J.
Kravit, and Stephen P. Enquist. The complaint alleged that the defendants
violated certain provisions of the Security and Exchange Act of 1934 and sought
injunctive and declarative relief
On October 28, 1997, a complaint was filed in the Superior Court of the State of
California, Sacramento County by Everest Lodging Investors, LLC and
Everest/Madison Investors, LLC as plaintiffs against the General Partners of the
Partnership and four other partnerships which have common general partners as
nominal defendants. The complaint pertained to the receipt by the defendants of
franchise fees and reimbursement of expenses, the indications of interest made
by the plaintiffs in purchasing the properties of the nominal defendants, and
the alleged refusal of the defendants to provide information required by the
terms of the Partnership's partnership agreement and California law.
On February 20, 1998, the parties entered into a settlement agreement and both
of the above complaints were dismissed. Pursuant to the terms of the settlement
agreement, the General Partner has agreed to proceed with the marketing for sale
of the properties of the Partnerships, among other things, if by June 30, 1998,
it receives an offer to purchase one or more properties for a cash price equal
to 75% or more of the appraised value. In addition, the General Partner has
agreed to submit the offer for approval to the limited partners and other
procedures as required by the partnership agreements and applicable law. The
General Partner has also agreed that upon the sale of one or more properties, to
distribute promptly the proceeds of the sale after payment of payables and
retention of reserves to pay anticipated expenses. The Everest Defendants agreed
not to generally solicit the acquisition of any additional units of the
Partnerships without first filing necessary documents with the SEC. Under the
terms of the settlement agreement, the Partnerships have agreed to reimburse the
Everest Defendants for certain costs not to exceed $60,000, to be allocated
among the Partnerships. Of this amount, the Partnership will pay approximately
$12,000 during the year ended December 31, 1998.
F-11
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
Balance Sheet
March 31, 1998 and December 31, 1997
3/31/98 12/31/97
--------------------- ---------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and temporary investments $ 896,546 $ 812,763
Accounts receivable 105,689 126,154
Prepaid expenses 2,249 21,588
--------------------- ---------------------
Total current assets 1,004,484 960,505
--------------------- ---------------------
Property and Equipment:
Buildings 5,223,252 5,223,252
Furniture and equipment 1,184,933 1,147,274
--------------------- ---------------------
6,408,185 6,370,526
Accumulated depreciation (4,916,985) (4,858,036)
--------------------- ---------------------
Property and equipment, net 1,491,200 1,512,490
--------------------- ---------------------
Other Assets: 16,519 17,312
--------------------- ---------------------
Total Assets $ 2,512,203 $ 2,490,307
===================== =====================
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable $ 31,292 $ 30,636
Accounts payable and accrued liabilities 299,338 217,743
--------------------- ---------------------
Total current liabilities 330,630 248,379
Long - Term Liabilities:
Note payable 893,852 901,925
--------------------- ---------------------
Total liabilities 1,224,482 1,150,304
--------------------- ---------------------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 76,932 75,455
Limited Partners 1,210,789 1,264,548
--------------------- ---------------------
Total partners' equity 1,287,721 1,340,003
--------------------- ---------------------
Total Liabilities and Partners' Equity $ 2,512,203 $ 2,490,307
===================== =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
Statement of Operations
For the Three Months Ending March 31, 1998 and 1997
Three Months Three Months
Ended Ended
3/31/98 3/31/97
--------------------- ---------------------
Income:
<S> <C> <C>
Guest room $ 915,699 $ 911,720
Telephone and vending 15,136 21,702
Interest 7,237 10,067
Other 7,834 8,844
--------------------- ---------------------
Total Income 945,906 952,333
--------------------- ---------------------
Expenses:
Motel operating expenses (Note 2) 591,225 575,173
General and administrative 55,230 28,635
Depreciation and amortization 62,842 61,492
Interest 19,712 20,319
Property management fees 46,957 47,152
Partnership management fees 22,222 16,667
--------------------- ---------------------
Total Expenses 798,188 749,438
--------------------- ---------------------
Net Income (Loss) $ 147,718 $ 202,895
===================== =====================
Net Income (Loss) Allocable
to General Partners $1,477 $2,029
===================== =====================
Net Income (Loss) Allocable
to Limited Partners $146,241 $200,866
===================== =====================
Net Income (Loss)
per Partnership Unit $29.25 $40.17
===================== =====================
Distribution to Limited Partners
per Partnership Unit $40.00 $30.00
===================== =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
Statement of Changes in Partners' Equity
For the Three Months Ending March 31, 1998 and 1997
1998 1997
--------------------- ---------------------
General Partners:
<S> <C> <C>
Balance at beginning of year $ 75,455 $ 66,559
Net income (loss) 1,477 2,029
--------------------- ---------------------
Balance at end of period 76,932 68,036
--------------------- ---------------------
Limited Partners:
Balance at beginning of year 1,264,548 1,683,840
Net income (loss) 146,241 146,241
Distributions to limited partners (200,000) (150,000)
--------------------- ---------------------
Balance at end of period 1,210,789 1,680,081
--------------------- ---------------------
Total balance at end of period $ 1,287,721 $ 1,748,117
===================== =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
<TABLE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
Statement of Cash Flows
For the Three Months Ending March 31, 1998 and 1997
1998 1997
--------------------- ---------------------
Cash flows from operating activities:
<S> <C> <C>
Received from motel revenues $ 960,454 $ 944,513
Expended for motel operations and
general and administrative expenses (614,648) (599,717)
Interest received 5,917 8,765
Interest paid (19,765) (20,367)
--------------------- ---------------------
Net cash provided by operating activities 331,958 333,194
--------------------- ---------------------
Cash flows from investing activities:
Purchases of property and equipment (40,758) (33,228)
--------------------- ---------------------
Net cash provided (used) by investing activities (40,758) (33,228)
--------------------- ---------------------
Cash flows from financing activities:
Principal payments on notes payable (7,417) (6,815)
Distributions paid to limited partners (200,000) (150,000)
--------------------- ---------------------
Net cash provided (used) by financing activities (207,417) (156,815)
--------------------- ---------------------
Net increase (decrease) in cash
and temporary investments 83,783 143,151
Cash and Temporary Investments:
Beginning of period 812,763 1,058,309
--------------------- ---------------------
End of period $ 896,546 $ 1,201,460
===================== =====================
Reconciliation of net income to net cash provided
by operating activities:
Net income (loss) $ 147,718 $ 202,895
--------------------- ---------------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 62,842 61,492
(Increase) decrease in accounts receivable 20,465 945
(Increase) decrease in prepaid expenses 19,339 19,116
Increase (decrease) in accounts payable
and accrued liabilities 81,594 48,746
--------------------- ---------------------
Total adjustments 184,240 130,299
--------------------- ---------------------
Net cash provided by
operating activities $ 331,958 $ 333,194
===================== =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
Notes to Financial Statements
For the Three Months ending March 31, 1998 and 1997
Note 1:
The attached interim financial statements include all adjustments (consisting of
only normal recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results for the period presented.
Users of these interim financial statements should refer to the audited
financial statements for the year ended December 31, 1997 for a complete
disclosure of significant accounting policies and practices and other detail
necessary for a fair presentation of the financial statements.
In accordance with the partnership agreement, the following information is
presented related to fees paid or accrued to the General Partner or affiliate
for the period.
Property Management Fees $46,957
Franchise Fees $18,326
Partnership Management Fees $22,222
Note 2:
The following table summarizes the major components of motel operating expenses
for the periods reported:
Three Months Three Months
Ended Ended
3/31/98 3/31/97
--------------------- ----------------
Salaries and related costs $ 209,931 $ 199,494
Rent 48,292 47,911
Franchise and advertising 45,816 45,643
Utilities 33,093 41,587
Allocated costs,
mainly indirect salaries 74,642 66,165
Replacements and renovations 17,644 9,904
Other operating expenses 161,807 164,469
--------------------- ----------------
Total motel operating expenses $ 591,225 $ 575,173
===================== ================
The following additional material contingencies are required to be restated
in interim reports under federal securities law: None.
F-16
<PAGE>
APPENDIX 1
REVISED PRELIMINARY COPY
SUPER 8 MOTELS, LTD.,
a California limited partnership
______________________
Notice of Proposed Actions By Written Consent
TO THE LIMITED PARTNERS OF
SUPER 8 MOTELS, LTD.:
The Limited Partners of SUPER 8 MOTELS, LTD., a California limited partnership
(the "Partnership"), are being asked by the Partnership and the General Partner
to consider and approve by written consent the proposed sale of substantially
all of the Partnership's assets and the dissolution of the Partnership.
The Limited Partners of the Partnership are entitled to vote on the proposals by
completing, executing and returning to the Partnership the enclosed form of
Actions by Written Consent of Limited Partners.
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED POSTPAID CONSENT CARD AND RETURN IT
PROMPTLY. ONLY CONSENTS RECEIVED ON OR BEFORE JULY ____, 1998 (UNLESS EXTENDED
BY THE GENERAL PARTNER PURSUANT TO NOTICE MAILED TO THE LIMITED PARTNERS) WILL
BE COUNTED TO DETERMINE WHETHER THE PROPOSAL IS APPROVED.
June ___, 1998
Grotewohl Management Services, Inc.,
a California corporation,
General Partner
<PAGE>
APPENDIX 2
REVISED PRELIMINARY COPY
ACTIONS BY WRITTEN CONSENT OF LIMITED PARTNERS
SUPER 8 MOTELS, LTD.,
a California limited partnership
2030 J Street
Sacramento, California 95814
(916) 442-9183
THIS CONSENT IS SOLICITED ON BEHALF OF THE PARTNERSHIP AND THE GENERAL PARTNER.
The undersigned votes all the units of limited partnership interest of Super 8
Motels, Ltd., a California limited partnership, held of record by him, her or it
as follows:
PROPOSAL TO APPROVE THE SALE OF SUBSTANTIALLY ALL OF THE
PARTNERSHIP'S ASSETS, as described in the Information
Statement dated June ___, 1998. Please mark one of the
following:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL TO APPROVE THE DISSOLUTION OF THE PARTNERSHIP, as
described in the Information Statement dated June ___, 1998.
Please mark one of the following:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This Consent, when properly executed and returned to the Partnership, will be
voted in the manner directed herein by the undersigned limited partner.
IF NO DIRECTION IS MADE, THIS CONSENT, IF SO EXECUTED AND RETURNED, WILL BE
VOTED FOR THE PROPOSALS SET FORTH ABOVE.
Please sign exactly as name appears below: When Units are held by joint
tenants, both should sign.
When signing as attorney,
executor, administrator,
trustee or guardian, please
give full title as such. If a
corporation, please sign in
full corporate name by
president or other authorized
officer. If a partnership,
please sign in partnership
name by authorized person.
DATED: , 1998
----------------------------------
Signature
-----------------------------------
Additional signature, if held jointly
PLEASE MARK, SIGN, DATE AND
RETURN THIS
POSTPAID CONSENT CARD.
PURCHASE AND SALE AGREEMENT
Dated as of April 30, 1998
By and Between
Super 8 Motels, Ltd.
a California Limited Partnership
and
Tiburon Capital Corporation
a California Corporation
<PAGE>
TABLE OF CONTENTS
SECTION 1: DEFINITIONS ...........................................1
SECTION 2: AGREEMENT TO SELL AND PURCHASE ........................5
SECTION 3: REPRESENTATIONS AND WARRANTIES
BY SELLER .............................................7
SECTION 4: REPRESENTATIONS AND WARRANTIES
OF PURCHASER ........................................15
SECTION 5: OPERATION OF THE PROPERTIES PRIOR
TO CLOSING ...........................................16
SECTION 6: CONDITIONS TO CLOSING ................................17
SECTION 7: CLOSING ..............................................22
SECTION 8: INDEMNIFICATION .....................................33
SECTION 9: WAIVER ...............................................33
SECTION 10: BROKERS ..............................................34
SECTION 11: SURVIVAL; FURTHER ASSURANCES .........................34
SECTION 12: NO THIRD PARTY BENEFITS ..............................35
SECTION 13: REMEDIES .............................................36
SECTION 14: TERMINATION ..........................................36
SECTION 15: MISCELLANEOUS ........................................37
SECTION 16: NOTICES ..............................................38
SECTION 17: ATTORNEYS' FEES ......................................39
SECTION 18: CONFIDENTIALITY ......................................40
- i -
<PAGE>
LIST OF EXHIBITS
Exhibit Description Primary Section Reference
A Identification of Motels 1 (L)
B List of Franchise Agreements 1 (E)
C Land Leases 1 (I)
D Allocation of Purchase Price 2 (A)
E List of Service Contracts 3 (K)
F List of Equipment Leases 3 (L)
G List of Tenant Leases 3 (M)
H List of Labor Contracts 3 (N)
I Form of Grant Deeds 7 (C)(1)(a)
J Bills of Sale and Assignment,
Personal Property 7(C)(1)(b)
K Assignment of Franchise Agreements 7(C)(1)(c)
L Assignment of Land Leases 7(C)(1)(d)
M Assignment of Service Contracts 7(C)(1)(e)
N Assignment of Tenant Leases 7(C)(1)(f)
O Assignment of Equipment Leases 7(C)(1)(g)
P Estoppel Certificates 7(C)(1)(i)
- ii -
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made as of the 30th day of April, 1998, by and
between SUPER 8 MOTELS, LTD., a California limited partnership ("Seller"), and
TIBURON CAPITAL CORPORATION, a California corporation ("Purchaser").
W I T N E S S E T H
WHEREAS, Seller owns and operates three Super 8 Motels, as a franchisee
of Super 8 Motels, Inc., in the cities of Modesto, Sacramento, and South San
Francisco, California, and desires to sell such motels to Purchaser on the terms
and conditions set forth below; and
WHEREAS, the Purchaser desires to purchase such motels from Seller on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the parties hereinafter set forth, it is hereby agreed:
SECTION 1: DEFINITIONS
Wherever used in this Agreement, the words and phrases set forth below
shall have the meanings set forth below unless the context clearly requires
otherwise.
- 1 -
<PAGE>
A. "Closing" means the closing at which Seller conveys title to the
Properties to Purchaser and Purchaser pays Seller the Purchase Price described
in Section 2 herein below.
B. "Closing Date" means July 15, 1998, or if later, 30 days after
satisfaction of the conditions set forth in Section 6(11) hereof, subject to
commer cially reasonable extensions, but in no event later than December 31,
1998.
C. "Consumables" shall mean all food and beverages (including alcoholic
and non-alcoholic), engineering, maintenance, and housekeeping supplies,
stationery, printing and other supplies of all kinds (collectively, the
"Consumables") used in connection with the ownership, operation and maintenance
of the Properties.
D. "Financial Statements" means all financial statements and
information relating to the Properties which are referred to in Section 3(O)
hereof.
E. "Franchise Agreements" refers to the franchise agreements between
the Seller and Super 8 Motels, Inc., as identified on Exhibit B hereto.
F. "Furniture, Fixtures, and Equipment" shall mean all tangible
personal property, excluding the Consumables, located on the Properties, and
used in connection with the ownership, operation and maintenance of the
Properties (collectively, the "FF & E"). The FF & E shall include all fixtures,
furniture, furnishings, fittings, televisions, vehicles, equipment, computer
hardware and nonproprietary software, machinery, apparatus, books and records of
Seller pertaining to the Properties, appliances, china, glassware, linens,
silverware, keys and uniforms owned by Seller and used in connection with the
ownership, operation, and maintenance of the Properties.
- 2 -
<PAGE>
G. "GMS" refers to Grotewohl Management Services, Inc., a California
corporation and the general partner of the Seller.
H. "Improvements" means all buildings, structures, fixtures and other
improvements now or hereafter located or erected on the Leased Land.
I. "Land Leases" refers to the leases of the land identified on
Exhibit C hereto.
J. "Leased Land" refers to the land leased to Seller pursuant to the
Land Leases.
K. "Modesto Motel" refers to the Super 8 Motel located at 2025 W.
Orangeburg Avenue, Modesto, California 95350.
L. "Motels" refers to the Modesto Motel, the Sacramento Motel, and
the South San Francisco Motel, as identified on Exhibit A hereto.
M. "Personal Property" means all tangible and intangible personal
property now or hereafter owned by the Seller and used in connection with the
operation of the Properties, including, without limitation, (i) all building and
construction materials, equipment, appliances, machinery and other personal
property owned by Seller and used in connection with the operation of the
Properties, (ii) the Consumables, (iii) the FF & E, (iv) Seller's rights under
the Franchise Agreements, (v) all transferable permits, licenses, certificates
and approvals issued in connection with the Properties, (vi) the exclusive right
to use the name of the Properties and the right to all other names, logos and
designs used in connection with the Properties, including the names of
restaurants, bars, banquet rooms and meeting rooms, (vii) the right to use the
Properties' telephone numbers and post office boxes, (viii) all booking
agreements,
- 3 -
<PAGE>
(ix) all service marks and trademarks, (x) all plans and specifications,
operating manuals, guaranties and warranties and any other items used in the
operation of the Properties, (xi) all documents relating to guests at the
Properties, including booking agreements, (xii) all books, records, promotional
materials, marketing and leasing materials related to the Properties, and all of
Seller's right to receive and utilize water service, sanitary and storm sewer
service, electrical and gas service and other utility services presently
supplied to the Properties, and (xiii) all documents relating to employees at
the Properties.
N. "Properties" means the Seller's interest in the Land Leases, the
Motels, the Personal Property, and the Improvements.
O. "Property Agreement(s)" means, collectively, the Franchise Agree
ments, the Land Leases, the Tenant Leases, the Service Contracts, the Permitted
Exceptions, the Equipment Leases, and any other lease, rental agreement, loan
agreement, loan commitment, mortgage, deed of trust, easement, covenant or
agreement affecting Seller's interest in the Properties or in any Property.
P. "Sacramento Motel" refers to the Super 8 Motel located at 4317
Madison Avenue, Sacramento, California 95842.
Q. "Seller's Knowledge," including "to the best of Seller's knowledge,"
or any similar phrase, shall mean the present actual knowledge of the officers
of GMS, without any duty of inquiry or independent investigation of the relevant
matter by any of such individuals.
R. "South San Francisco Motel" refers to the Super 8 Motel located at
111 Mitchell Avenue, South San Francisco, California 94080
- 4 -
<PAGE>
S. "Title Company" means Chicago Title Company, Sacramento,
California.
SECTION 2: AGREEMENT TO SELL AND PURCHASE
A. Purchase Price. On the Closing Date Seller shall convey the
Properties to Purchaser or Purchaser's designee on the terms and conditions set
forth herein. On the Closing Date the Purchaser or Purchaser's designee shall
accept title to the Properties from Seller on the terms and conditions set forth
herein and shall pay to the Seller the Purchase Price ("Purchase Price"), in
immediately available funds, of Twelve Million One Hundred Thousand Dollars
($12,100,000) subject to prorations as set forth below. Exhibit D hereto sets
forth the allocation of the Purchase Price among the three Motels.
B. Earnest Money. Upon the later to occur of the completion of the
inspection period referred to in Section 6(4) hereof or the date Seller notifies
Purchaser that Seller's limited partners have approved this Agreement and all
matters related thereto (Section 6(11) hereof), Purchaser shall deposit $63,000
(the "Earnest Money") with the Title Company. The Earnest Money shall be held by
the Title Company in accordance with the terms hereof and invested in a money
market account with all interest earned thereon payable to Purchaser. If this
Agreement is terminated due to Purchaser's default hereunder, the Earnest Money
shall be paid to Seller as liquidated damages and as Seller's sole and exclusive
remedy. If the Closing occurs hereunder, the Earnest Money shall be paid to
Seller and credited against the Purchase Price. If the Closing does not occur
hereunder for any reason other than Purchaser's default hereunder, the Earnest
Money shall be refunded to Purchaser.
///
- 5 -
<PAGE>
C. Liquidated Damages. PURCHASER AND SELLER AGREE THAT SELLER'S
ECONOMIC DETRIMENT RESULTING FROM THE REMOVAL OF THE PROPERTIES FROM THE REAL
ESTATE MARKET FOR AN EXTENDED PERIOD OF TIME AND ANY CARRYING AND OTHER COSTS
INCURRED AFTER THE REMOVAL OF THE PROPERTIES FROM THE REAL ESTATE MARKET ARE
IMPRACTICABLE OR EXTREMELY DIFFICULT TO ASCER TAIN. PURCHASER AND SELLER AGREE
THAT, FROM AND AFTER THE DATE PURCHASER DEPOSITS THE EARNEST MONEY INTO ESCROW
WITH THE TITLE COMPANY, THE AMOUNT OF THE EARNEST MONEY IS A REASONABLE ESTIMATE
OF THE DAMAGES THAT WILL BE INCURRED BY SELLER IN THE EVENT ESCROW FAILS TO
CLOSE ON THE PROPER TIES AS A RESULT OF A BREACH OR DEFAULT OF PURCHASER'S
OBLIGATION TO PURCHASE THE PROPERTIES PURSUANT TO THE TERMS OF THIS AGREEMENT BY
PURCHASER. PURCHASER AGREES THAT IN THE EVENT OF A MATERIAL BREACH OR DEFAULT BY
PURCHASER RESULTING IN A TERMINATION OF THIS AGREEMENT, SELLER SHALL BE ENTITLED
TO RECEIVE THE EARNEST MONEY AS LIQUIDATED DAM AGES AND NOT AS A PENALTY. SELLER
HEREBY WAIVES THE REMEDY OF SPECIFIC PERFORMANCE WITH RESPECT TO ANY DEFAULT BY
PURCHASER OF ITS OBLIGATION TO PURCHASE THE PROPERTIES AND AGREES THAT THE
LIQUIDATED DAMAGES SET FORTH HEREIN SHALL BE SELLER'S SOLE REMEDY IN THE EVENT
PURCHASER BREACHES OR DEFAULTS IN ITS OBLIGATION TO PURCHASE THE PROPERTIES
HEREUN DER. BY INITIALING THIS SECTION 2.C BELOW, PURCHASER AND SELLER AGREE TO
THE TERMS OF THIS SECTION 2.C.
Seller's Initials: ________ Purchaser's Initials: ________
- 6 -
<PAGE>
SECTION 3: REPRESENTATIONS AND WARRANTIES BY SELLER
Seller hereby represents and warrants to, and covenants and agrees
with, Purchaser as of the date hereof and as of the Closing as follows (all of
which representations and warranties shall be deemed automatically remade as of
the Closing):
A. Due Organization. Seller is a limited partnership duly organized and
validly existing under the laws of the State of California. Seller has the full
power and authority, and is duly authorized, to execute, enter into, deliver and
perform this Agreement and its obligations hereunder.
B. Power. This Agreement and all other agreements, instruments and
documents required to be executed or delivered by Seller pursuant hereto have
been or (if and when executed) will be duly executed and delivered by Seller,
and are or will be legal, valid and binding obligations of Seller. No consents
and permissions are required to be obtained by Seller for the execution and
performance of this Agreement and the other documents to be executed by Seller
hereunder; provided, however, that sale of the Properties to Purchaser by Seller
requires (i) the consent of the lessors under the Land Leases; (ii) the consent
of the franchisors and sub-franchisors under the Franchise Agreements; and (iii)
the approval of the limited partners of Seller. The consummation of the
transactions contemplated herein and the fulfillment of the terms hereof will
not result in a breach of any of the terms or provisions of, or constitute a
default under, any agreement or document to which the Seller is a party or by
which it is bound, or, to the best of Seller's knowledge, any order, rule or
regulation of any court or of any federal or state regulatory body or any
administrative agency or any other governmental body having jurisdiction over
the Seller or the Properties.
- 7 -
<PAGE>
C. Title. Seller has good and marketable title to the Properties (other
than the land leased to Seller pursuant to the Land Leases), subject only to the
Tenant Leases, Permitted Exceptions, and those liens and encumbrances which will
be released at Closing.
D. Condition of Properties. To the best of Seller's knowledge, (i) the
Improvements (including, without limitation, all heating, ventilating, air
conditioning, electrical, elevator, plumbing and all other building systems (the
"Building Systems"), roofs, exterior walls, windows and all other structural
elements of the Properties (the "Structural Elements") are structurally sound
and have been constructed in a good and workmanlike manner, are free from
material defects, and there are no subsurface soil conditions adversely
affecting the Properties; (ii) any parking on the Properties is sufficient for
its current uses and satisfies all legal requirements, (iii) all streets and
driveways necessary for access and utilization of the Properties are complete
and available for use, (iv) the Properties include all easements necessary for
their current use and there are no off-site facilities or rights needed for
their operation or use; (v) all utilities servicing the Properties are adequate
for the use and operation of the Properties as currently intended; (vi) the
Properties are not located in any wetlands and no geological faults traverse the
Properties, and (vii) the Properties are free from infestation by pests. Seller
has not received any written notice of unsatisfied requests for repairs,
restorations or improvements from any person, entity or authority (including,
but not limited to, tenants, insurers, lenders or governmental agencies) with
respect to the Properties. Seller has not received any written notice of
complaints from adjoining property owners with respect to the Properties. In the
event any such requests or complaints are received by Seller between the date of
this Agreement and Closing, copies thereof shall be furnished to Purchaser, and
if the cost to correct the matters referred to therein exceeds $25,000 then
Purchaser may terminate this Agreement if Seller elects not to correct such
matters.
- 8 -
<PAGE>
E. Permits and Legal Compliance. To the best of Seller's knowledge, Seller
has all licenses, permits and certificates necessary for the use and operation
of the Properties, including, without limitation, all certificates of occupancy
necessary for the occupancy of the Properties. To the best of Seller's
knowledge, the Properties, including the use thereof, comply with all Property
Agreements and all applicable laws.
F. No Proceedings. There is not now pending or, to the best of Seller's
knowledge, threatened, any action, suit or proceeding before any court or
governmen tal agency or body against (i) the Seller which might result in any
material adverse change in the condition (financial or otherwise), business,
prospects, revenue or income of the Properties, or which might have any material
adverse result to the Properties, or (ii) the Properties. Without limiting the
generality of the foregoing, Seller has not received any written notice of
violations or alleged violations of any laws, rules, regulations or codes,
including building codes, with respect to the Properties which have not been
corrected to the satisfaction of the governmental agency issuing such notices.
G. Eminent Domain. Seller has not received written notice of any pending,
or to the best of Seller's knowledge, threatened condemnation, eminent domain or
similar proceeding relating to the Properties or any portion thereof or any
interest (whether legal, beneficial or otherwise) or estate therein.
H. Zoning; Taxes. Seller has not received any written notice regarding
threatened zoning changes or variances with respect to the Properties; nor has
Seller received written notice that anyone initiated any request or application
for a zoning change or variance with respect to the Properties. Seller has not
received any written notices regarding pending or threatened reassessments or
- 9 -
<PAGE>
special tax assessments against the Properties, and the Properties are
separately assessed for real estate tax purposes.
I. Franchise Agreements. Exhibit B lists the Franchise Agreements for each
of the Properties pursuant to which Seller operates each of the Properties as a
Super 8 Motel. Exhibit B also includes a list of all amendments and
modifications thereto. To the best of Seller's knowledge, except as may be shown
in said exhibit, all of the Franchise Agreements are in full force and effect
and free from default, Seller is current in the payment of all fees due under
the Franchise Agreements, and there is no existing event which, with the passage
of time or the giving of notice, or both, could become a default under the
Franchise Agreements, and there are no disputes, claims, or rights of set-off
under the Franchise Agreements.
J. Land Leases. Exhibit C lists for each of the Properties the Land Lease
applicable to that Property. Exhibit C also includes a list of all amendments
and modifications thereto. To the best of Seller's knowledge, except as may be
shown in said Exhibit, all of the Land Leases are in full force and effect and
free from default, Seller is current in the payment of all rentals and other
amounts due under the Land Leases, there is no existing event which, with the
passage of time and the giving of notice, or both, could become a default under
the Land Leases, there are no disputes, claims, or rights of set-off under the
Land Leases, and, subject to obtaining the consent of the lessors under the Land
Leases and the limited partners of Seller, Seller has the full right, power, and
authority to assign its interest in and to the Land Leases to Purchaser.
K. Service Contracts. Attached hereto as Exhibit E is a list of all
contracts or agreements to which Seller is a party for the providing of services
or supplies to or management of the Properties, including (without limitation) a
list of all amendments and modifications thereto and assignments thereon (which
contracts and
- 10 -
<PAGE>
agreements, together with the contracts and agreements entered into with respect
to the Properties after the date hereof with the consent of Purchaser pursuant
to Section 6 below, are herein referred to collectively as the "Service
Contracts"). To the best of Seller's knowledge, except as may be shown in said
exhibit, all of the Service Contracts are in full force and effect and free from
default and there is no existing event which, with the passage of time or giving
of notice, or both, could become a default under the Service Contracts, and
there are no disputes, claims or rights of set-off under the Service Contracts.
Except as may be shown in said exhibit, all management agreements relating to
the Properties are terminable by Seller at or prior to Closing, without cost or
expense to Purchaser.
L. Equipment Leases. Attached hereto as Exhibit F is a list of all
equipment leases to which Seller is a party for the leasing of equipment for the
Properties, including (without limitation) a list of all amendments and
modifications thereto and assignments thereof (which leases, together with the
equipment leases entered into with respect to the Properties after the date
hereof with the consent of Purchaser pursuant to Section 6 below, are herein
referred to collectively as the "Equipment Leases"). To the best of Seller's
knowledge, except as may be shown in said exhibit, all of the Equipment Leases
are in full force and effect and free from default and there is no existing
event which, with the passage of time or giving of notice, or both, could become
a default under the Equipment Leases, and there are no disputes, claims or
rights of set-off under the Equipment Leases.
M. Tenant Leases. Attached hereto as Exhibit G is a list of all outstanding
leases or agreements (other than the Land Leases) pursuant to which any person
occupies, or has the right to occupy, space in the Properties including (without
limitation) all amendments and modifications thereto and assignments and
guaranties thereof (which leases, agreements and other documents, together with
the lease documents entered into with respect to the Properties after the date
hereof with the
- 11 -
<PAGE>
consent of purchaser pursuant to Section 6 below, are herein referred to
collectively as the "Tenant Leases"). Except as shown on such exhibit, (a) to
the best of Seller's knowledge, there are no defaults under any of the Tenant
Leases and the Tenant Leases are in full force and effect, there are no existing
events which with the passage of time or giving of notice or both could become a
default under the Tenant Leases, and there are no disputes, claims or rights of
set-off under the Tenant Leases, (b) there are no security deposits nor any
rights to refunds of rents previously paid under the Tenant Leases except as
shown on Exhibit G, (c) no person has acquired from Seller any options or rights
to lease space in the Properties or extend any Tenant Leases or rights of first
refusal or offer for space in the Properties except as set forth in the Tenant
Leases, (d) there are no brokerage commissions or fees due now or payable in the
future in connection with the Tenant Leases except as set forth in Exhibit G and
Seller agrees to pay all such commissions and fees, (e) all of the landlord's
obligations to construct tenant improvements or reimburse the tenants for tenant
improvements under the Tenant Leases have been paid and performed in full and
all concessions (other than any unexpired rent abatement set forth in the Tenant
Leases) from the landlord under the Tenant Leases have been paid and performed
in full, (f) to the best of Seller's knowledge there are no bankruptcy or
insolvency proceedings pending or threatened with respect to any of the tenants
under the Tenant Leases, and (g) no tenant has notified Seller in writing of any
material, uncured defect or alleged defect in its premises or the common areas
of the Properties. In the event any such notices are received by Seller between
the date of this Agreement and Closing, copies thereof shall be furnished to
Purchaser, and if the cost to correct the matters referred to therein (together
with the cost of correcting all other matters requiring correction by Seller
under this Agreement prior to Closing) exceeds $50,000 and Seller elects not to
correct such matters, then Purchaser may terminate this Agreement (and, in such
event, Purchaser shall be entitled to a return of its Earnest Money).
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N. Labor Contracts. Except as disclosed on Exhibit H hereto, there are no
employment agreements or union contracts with respect to the Motels that will be
binding on Purchaser after Closing, and, other than as disclosed on Exhibit H
hereto, and except as provided by Section 7(E) hereof, Purchaser will be under
no obligation to use or hire such employees for the Properties after Closing.
O. Financial Information. Seller has delivered to Purchaser financial
statements of Seller for the calendar year 1997, prepared by Vocker
Kristofferson and Co., San Mateo, California. Such financial statements are
true, complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles; such financial
statements fairly present the financial condition of Seller as of the date
thereof, there are no liabilities with respect to the Properties which are
required to be shown in accordance with generally accepted accounting principles
as of the date thereof and which are not shown on such financial statements.
Seller has delivered to Purchaser operating statements for each of the
Properties for the calendar year 1997, which are true, complete and correct, and
no material adverse change has occurred in the financial condition of the
Properties from the date thereof to the date hereof.
P. Hazardous Materials. To Seller's best knowledge, during the period of
Seller's ownership, no portion of the Properties has ever been used by Seller as
a landfill or as a dump to receive garbage, refuse, waste or fill material
whether or not hazardous. Seller, to the best of Seller's knowledge, during the
period of Seller's ownership, has not stored, handled, installed or disposed of
any Hazardous Substances (as hereinafter defined) in, on or about the Properties
or any other location within the vicinity of the Properties; and, to Seller's
knowledge, there are no Hazardous Substances in, under, or on the Properties. As
used in this Agreement, the terms "Hazardous Substances" means asbestos,
polychlorinated biphenyl and such materials, waste, contaminants or other
substances defined as toxic, dangerous to
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health or otherwise hazardous by cumulative reference to the following sources
as amended from time to time: (i) the Resource Conservation and Recovery Act of
1976, 42 USC Section 6901 et seq. ("RCRA"); (ii) the Hazardous Materials
Transportation Act, 49 USC Section 1801, et seq.; (iii) the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 USC Section
9601 et seq. ("CERCLA"); (iv) applicable laws of the State of California; and
(v) any federal, state or local statutes, regulations, ordinances, rules or
orders issued or promulgated under or pursuant to any of those laws or otherwise
by any department, agency or other administrative, regulatory or judicial body.
The term "Hazardous Substances" does not include usual and customary cleaning
and other supplies necessary for the normal operations, maintenance and/or
occupancy of the Properties.
Q. ERISA. The Seller is not and is not acting on behalf of an "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), a "plan" within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
or an entity deemed to hold "plan assets" within the meaning of 29 C.F.R.
Section 2510.3-101 of any such employee benefit plan or plans.
R. Work Under Land Leases or Licenses. To the best of Seller's knowledge,
except as may be set forth on Exhibit E hereto, Seller is current in the payment
of all fees and expenses incurred by Seller for work conducted by or for Seller
under the Land Leases or under any license relating to the Property, and there
is no existing event which, with the passage of time or the giving of notice, or
both, could become a default under any contract for the performance of services
under the Land Leases or under any such license, and there are no disputes,
claims, or rights of set-off under any such contract.
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SECTION 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees
with, Seller as of the date hereof and as of the Closing as follows (all of
which representa tions shall be deemed automatically remade as of the Closing):
A. Due Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
Purchaser has full power and authority, and is duly authorized, to execute,
enter into, deliver and perform this Agreement and its obligations hereunder.
B. Power. This Agreement and all other agreements, instruments and
documents required to be executed or delivered by Purchaser pursuant hereto have
been or (if and when executed) will be duly executed and delivered by Purchaser,
and are or will be legal, valid and binding obligations of Purchaser. No
consents and permissions are required to be obtained by Purchaser for the
execution and performance of this Agreement and the other documents to be
executed by Purchaser hereunder. The consummation of the transactions
contemplated herein and the fulfillment of the terms hereof will not result in a
breach of any of the terms or provisions of, or constitute a default under, any
agreement or document to which Purchaser is a party or by which it is bound, or
any order, rule or regulation of any court or of any federal or state regulatory
body or any administrative agency or any other governmental body having
jurisdiction over Purchaser.
C. No Proceedings. There are not now pending or, to the best of Purchaser's
knowledge, threatened, any proceeding, legal, equitable or otherwise, against
Purchaser which would affect its ability to perform its obligations hereunder.
There is not now pending or, to the best of Purchaser's knowledge, threatened
any
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action, suit or proceeding before any court or governmental agency or body which
might adversely affect Purchaser's ability to perform its obligations hereunder.
SECTION 5: OPERATION OF THE PROPERTIES PRIOR TO CLOSING
The Seller shall do all of the following, from and after the date
hereof through and including the Closing Date:
(a) operate and maintain the Properties in the same manner as currently
being operated, and shall, subject to damage, destruction or loss to the
Properties in which event Purchaser shall have the rights set forth in Section
6(3), cause the Properties to be, on the Closing Date, in the same condition as
exists as of the date of this Agreement (normal wear and tear excepted);
(b) maintain the FF & E in the same manner as currently being
main-tained, and not remove any of the FF & E from the Properties unless
replaced with FF & E of at least as good a quality as that removed;
(c) maintain the Consumables in the same manner and quantity as
currently being maintained, and replace any Consumables used at the Properties
with new Consumables which are substantially equal in quality and quantity to
those that have been used at the Properties;
(d) maintain, or cause to be maintained, all existing insurance
carried by Seller on the Improvements;
(e) without the prior written consent of Purchaser, not enter into any
new Property Agreements, or any other agreements affecting the Properties which
would be binding on Purchaser after Closing, nor modify, amend, terminate,
cancel or grant
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concessions regarding any such existing contracts or agreements which would be
binding on the Purchaser after Closing; and
(f) without the prior written consent of the Purchaser (except in the
case of emergencies), not make, or obligate itself to make, any material
alterations or modifications to the Properties.
SECTION 6: CONDITIONS TO CLOSING
In addition to the conditions provided in other provisions of this
Agreement, the parties' obligations to perform their undertakings provided in
this Agreement, are each conditioned on the fulfillment of each of the following
which is a condition to such party's obligation to perform hereunder (subject to
such party's waiver in strict accordance with Section 9 below).
(1) Purchaser shall have obtained each of the following at Seller's
expense: (i) an ALTA Survey prepared by a licensed surveyor of each of the
Properties (hereinafter, the "Surveys") certified to Purchaser, Purchaser's
lender, and to the Title Company, (ii) preliminary title reports for each of the
Properties (the "Title Reports") together with legible copies of all exceptions
appearing in such reports issued by the Title Company, and (iii) a UCC search
(the "UCC Search") of all currently effective financing statements naming Seller
as debtor from the California Secretary of State, together with legible copies
of all of such financing statements. Purchaser shall have until June 30, 1998 to
approve the Surveys, the Title Reports, and the results of the UCC Search. If
Purchaser approves the Surveys, the Title Reports, and the results of the UCC
Search, then all matters showing thereon shall be deemed "Permitted Exceptions."
If Purchaser disapproves any matters in the Surveys, the Title Reports, or the
UCC Search, then Seller may either cure such matters, in which case the
remaining matters approved by Purchaser shall be deemed Permitted Exceptions, or
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notify Purchaser that it has elected not to cure such matters. Any such notice
by Seller shall be given to Purchaser not later than five (5) days following the
date Purchaser notifies Seller of any objectionable title matters. If Seller
elects not to cure any matter which has been disapproved by Purchaser, then
Purchaser may elect either to accept such matter as a Permitted Exception or
terminate this Agreement (and, in such event, Purchaser shall be entitled to the
return of its Earnest Money).
(2) As a condition to each party's obligation to perform hereunder, the
due performance by the other of all undertakings and agreements to be performed
by the other hereunder and the truth of each representation and warranty as set
forth herein made pursuant to this Agreement by the other at the Closing Date.
(3) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), that there shall not have occurred between the date hereof
and the Closing Date, inclusive, destruction of or damage or loss to the
Properties (whether or not covered by insurance proceeds) from any cause
whatsoever, the cost of which to repair plus any resulting abatement of any rent
after Closing under any Tenant Leases and any resulting business interruption
exceeds $100,000 in the aggregate; provided, however, that in the event of such
destruction or damage, Purchaser may elect to proceed with the Closing in which
case Seller shall assign to Purchaser any claims for proceeds from the insurance
policies covering such destruction or damage (including any rental loss
insurance) and shall pay to Purchaser the amount of any deductibles thereunder.
If the cost of repairing the destruction, damage or loss plus any resulting rent
abatement and business interruption after Closing is less than $100,000 in the
aggregate, the parties shall proceed with the Closing as provided herein, the
cost of repair plus the amount of any rent abatement shall be deducted from the
Purchase Price and Seller shall retain any insurance proceeds.
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(4) As a condition of Purchaser's obligation to perform hereunder (and
not as a default), Purchaser shall be satisfied in its sole and absolute
discretion with all aspects of the Properties (including, but not limited to,
the physical and environmental condition of the Properties); provided, however,
if Purchaser does not notify Seller in writing prior to June 30, 1998 that it is
not so satisfied, this condition shall be deemed waived by Purchaser. Purchaser
shall not be required to give its reasons for terminating this Agreement
pursuant to this Paragraph, and Purchaser's notice shall be conclusive evidence
that it is dissatisfied with the Properties. It is understood and agreed, and
Purchaser hereby acknowledges, that the period of time afforded by this section
of the Agreement (the "Inspection Period") should be ample time to review and
inspect the condition of the Properties and that if, for any reason, it is
dissatisfied with the condition of the Properties or with the information
provided or available to Purchaser within the Inspection Period, it has the
unrestricted right to terminate this Agreement and receive a return of its
Earnest Money. Accordingly, in the event that Purchaser does not terminate this
Agreement and proceeds beyond the expiration of the Inspection Period, it is
understood and agreed that the Properties are being sold "as is," "where is" and
"with all faults," except as set forth in Section 3. Purchaser further agrees
and confirms that it is not relying on information other than the financial
statements and other information supplied during the Inspection Period and
Seller makes no representation or warranty whatsoever as to the condition or
value of the Properties or otherwise except as set forth in Section 3.
(5) As a condition of Purchaser's obligation to perform hereunder (and
not as a default), Purchaser shall have until June 30, 1998 to obtain a
commitment (the "Lender's Commitment") from a third-party lender to provide
financing in an amount of not less than 90% of the Purchase Price of the
Properties on terms deemed satisfactory by Purchaser, and such lender shall have
until July 15, 1998 (i) to perform its due diligence (including, without
limitation, reviewing the Surveys, the Title Reports, and the results of the UCC
Search, and to otherwise satisfy itself that
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all conditions to loan funding are satisfied), (ii) to prepare and approve loan
documentation acceptable to the lender and Purchaser, and (iii) to satisfy
itself that all conditions to loan funding have been satisfied (conditions (i),
(ii) and (iii) referred to as the "Lender's Conditions"). If Purchaser does not
notify Seller in writing on or prior to July 15, 1998 that it has not obtained
the Lender's Commitment, or that Purchaser's lender has not satisfied the
Lender's Conditions, then the conditions of this subsection (5) shall be deemed
waived by Purchaser. If Purchaser notifies Seller in writing on or prior to July
15, 1998 that it has not obtained the Lender's Commit ment or that Purchaser's
lender has not satisfied the Lender's Conditions, then this Agreement shall
become null and void and terminated, with neither Purchaser nor Seller having
any further obligation to consummate this Agreement or any liability to the
other party for the failure of this Agreement. On any such termination of this
Agreement, Purchaser shall be entitled to a return of its Earnest Money.
(6) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), that there shall not have occurred at any time or times on or
before the Closing Date any taking or threatened taking of the Properties or any
part thereof or any interest or estate therein by condemnation, eminent domain
or similar proceed ings; provided, however, Purchaser may elect to waive such
condition in which case Seller shall assign to Purchaser at Closing all of
Seller's right, title and interest in and to any proceeds resulting from any
such proceeding.
(7) As a condition to Purchaser's obligation to perform hereunder, that
as of the Closing Date, the Property Agreements shall be in full force and
effect, unmodified and unwaived, and in good standing and free from default, and
there shall be no material changes in the operation of the Properties.
(8) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), Seller shall obtain the consent or approval, at its sole cost
and expense,
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of all necessary consents to assign all of Seller's right, title, and interest
in and to the Land Leases to Purchaser (or its designee), and to assign all of
Seller's right, title, and interest in and to the Franchise Agreements to
Purchaser (or its designee) provided, however, that Purchaser, not Seller, shall
be responsible for paying any application or related fee imposed by the
franchisor under the franchise agreement chargeable to new franchisees. Seller
shall further obtain assurance, reasonably satisfactory to Purchaser, from any
lender whose loan is secured by the land subject to the Land Leases, that such
lender will not disturb the possessory rights of Purchaser under the Land Leases
as long as Purchaser is not in default under the Land Leases. The consents and
approvals required under this paragraph shall be in a form reasonably
satisfactory to Purchaser.
(9) Seller covenants and agrees, and it shall be a condition to
Purchaser's obligation to perform its undertakings hereunder, that from and
after the date hereof, at all reasonable times, Purchaser (and its agents) shall
be permitted access to the Properties and to all books, records and reports
relating to the Properties for the purpose of inspecting same, and Purchaser
(and its agents) shall have the right to photocopy any and all such books,
records and information. All information relating to the Properties made
available to Purchaser and its agents shall be treated as confidential.
Purchaser (and its agents) shall also have the right to meet with GMS and its
officers and employees to discuss any matters relating to the operation of the
Properties. Any entry by Purchaser and its agents on the Properties shall be
upon reasonable prior notice to Seller, and the Purchaser will indemnify and
hold Seller harmless against any and all injuries, claims, losses, damages and
expenses arising out of its negligence in the performance of any such entry,
inspection or other activities.
(10) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), no written notices of any violation of building codes or
other govern mental regulations have been issued.
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(11) As a condition to Seller's obligation to perform hereunder, Seller
shall have obtained the approval by Seller's limited partners (1) to sell the
Properties to Purchaser pursuant to the terms of this Agreement, and (2) to take
all other actions necessary or appropriate to consummate the transaction
contemplated by this Agreement.
(12) As a condition to Seller's obligation to perform hereunder, Seller
shall have received, in a form satisfactory to GMS, on or before June 30, 1998,
a fairness opinion from PKF Consulting, San Francisco, or other qualified
independent real estate advisory or investment banking firm, to the effect that
the sale of the Properties to Purchaser pursuant to the terms and conditions of
this Agreement is fair, from a financial point of view, to Seller. If Seller
notifies Purchaser in writing on or prior to June 30, 1998, that is has not
obtained a fairness opinion satisfactory to GMS, then this Agreement shall
become null and void, with neither Purchaser nor Seller having any further
obligation to consummate this Agreement or any liability to the other party for
the failure of this Agreement. If the Agreement is terminated as aforesaid, then
Purchaser shall be entitled to a return of its Earnest Money.
SECTION 7: CLOSING
A. Time. The Closing hereunder shall occur on the Closing Date at the
offices of the Title Company.
B. Actions. At the Closing, each party shall satisfy itself that the other
is then in position to deliver the items specified in Section 7(C) below and
that the conditions contained herein have been satisfied. Upon being so
satisfied and concurrently with the delivery of the documents described below,
the following, subject to the terms and conditions hereof, shall occur:
(1) Seller shall convey each of the Properties to Purchaser; and
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(2) Purchaser shall pay to Seller the Purchase Price by wire transfer of
immediately available funds, plus or minus prorations as set forth herein.
Purchaser shall receive full possession of the Properties at
Closing, subject only to the Land Leases, Tenant Leases, Permitted Exceptions,
Service Contracts, Franchise Agreements, and Equipment Leases.
The Closing shall be held at the same time as the closings of
the other Purchase and Sale Agreements referred to in Section 14(iii) hereof.
C. Deliveries.
(1) At the Closing, Purchaser shall receive all of the
following, in form and substance reasonably satisfactory to Purchaser (it being
agreed by Purchaser that the documents attached hereto as exhibits are
satisfactory in form to Purchaser):
(a) grant deeds in the form attached hereto as Exhibit I
executed by the Seller;
(b) bills of sale and assignment for the Personal Property in
the form of Exhibit J, executed by Seller;
(c) an assignment of the Franchise Agreements, in the
form of Exhibit K attached hereto (the "Assignment of
Franchise Agree ments"), executed by Seller, assigning to
Purchaser the Franchise Agreements, and the consents of the
franchisors to such assignments in form and content reasonably
acceptable to Purchaser;
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(d) an assignment of Land Leases, in the form of
Exhibit L attached hereto (the "Assignment of Land Leases"),
executed by Seller, assigning to Purchaser the Land Leases,
and consents of the lessors to such assignments in form and
content reasonably acceptable to Purchaser;
(e) an assignment of the Service Contracts, in the
form of Exhibit M attached hereto (the "Assignment of Service
Contracts"), executed by Seller, assigning to Purchaser the
Service Contracts;
(f) an assignment of the Tenant Leases, in the form
of Exhibit N hereto (the "Assignment of Tenant Leases"),
executed by Seller, assigning the Tenant Leases to Purchaser;
(g) an assignment of the Equipment Leases, in the
form of Exhibit O hereto (the "Assignment of Equipment
Leases"), executed by Seller, assigning to Purchaser the
Equipment Leases;
(h) a certificate from Seller that each of the
representations and warranties contained in Section 3 hereof
is true and correct as set forth herein as of the Closing
Date.
(i) written acknowledgments reasonably acceptable to
Purchaser (the "Estoppel Certificates") from the parties
(other than the Seller) obligated on the Tenant Leases (said
estoppels from tenants to be in the form of Exhibit P hereto),
dated as of a date not more than thirty (30) days prior to
Closing, with no material omissions from the form of estoppel
certificate set forth in Exhibit P.
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(j) all assignable licenses, permits, approvals,
zoning exceptions and approvals, consents and orders of
governmental, municipal or regulatory authorities in Seller's
possession or control which have been obtained in connection
with the ownership, operation and use of the Properties,
including, without limitation, certificates of occupancy for
the Properties;
(k) notices to each of the tenants under the Tenant
Leases, notifying them of the sale of the Properties and
directing them to pay all future rent as Purchaser may direct,
and notices to the other parties under the Service Agreements
and Equipment Leases notifying them of the sale of the
Properties to Purchaser;
(l) a closing statement setting forth all prorations and
credits required hereunder;
(m) UCC searches showing no financing statements on file
with respect to the Personal Property;
(n) an affidavit from Seller that it is not a
"foreign person" or subject to withholding requirements under
the Foreign Investment in Real Property Tax Act of 1980, as
amended, and a comparable affidavit or form under California
law;
(o) any documents reasonably required of Seller by the Title
Company;
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(p) evidence satisfactory to Purchaser that Seller has the
right to assign to Purchaser the exclusive right to use the names of the
Properties;
(q) the original of all Property Agreements to the extent they
are in the possession of Seller or its agents;
(r) all keys and combinations to locks located at the
Properties;
(s) all soil reports, engineering studies,
maintenance records, consultant reports, plans and
specifications and books and records relating to the
Properties which are in the possession of Seller or its
General Partner;
(t) a complete set of all guest registration cards, guest
transcripts, guests' histories and all other guest information;
(u) a complete list of all advance room reservations and
functions in reasonable detail so as to enable Purchaser to honor them;
and
(v) evidence that the Seller has terminated all
existing management agreements for the Motels (unless
Purchaser has notified Seller, no later than thirty (30) days
prior to the Closing Date, that it has elected to continue
such management agreements in force).
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(2) Seller shall have received from Purchaser all of the
following, in form and substance reasonably satisfactory to Seller (it being
agreed by Seller that the documents attached hereto as exhibits are satisfactory
in form to the Seller):
(a) payment of the Purchase Price, plus or minus prorations;
(b) a certificate from Purchaser that each of the representa
tions and warranties contained in Section 4 is true and correct as of the
Closing Date; and
(c) copies of the Assignment of Franchise Agreements,
the Assignment of Land Leases, the Assignment of Service
Contracts, the Assignment of Tenant Leases, and the Assignment
of Equipment Leases executed by Purchaser, pursuant to which
Purchaser assumes the obligations of Seller accruing from and
after the Closing Date under the Franchise Agreements, the
Land Leases, Tenant Leases, Service Contracts, and Equipment
Leases.
D. Prorations. The Purchase Price for the Property shall be subject to
prorations and credits as follows to be determined as of 12:01 a.m. on the
Closing Date:
1. Rents Payable Under Tenant Leases. Any portion of any rents
collected subsequent to the Closing Date and properly allocable to periods prior
to the Closing Date, net of Purchaser's third-party costs of collection, if any,
shall be paid, promptly after receipt, to the Seller, but subject to all of the
provisions of this Section; and any portion thereof properly allocable to
periods subsequent to the Closing Date, if any, shall be paid to Purchaser. Any
amount collected from a tenant shall first be applied to such tenant's current
monthly rental and then to past due amounts in the
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reverse order in which they were due. Any advance rental payments or deposits
paid by tenants prior to the Closing Date and applicable to the periods of time
subsequent to the Closing Date and any security deposits or other amounts paid
by tenants, together with any interest on both thereof to the extent such
interest is due to tenants, shall be credited to Purchaser on the Closing Date.
No credit shall be given the Seller for accrued and unpaid rent or any other
non-current sums due from tenants until said sums are paid.
2. Motel Room, Restaurant and Bar Revenues. Purchaser shall be entitled to
all food service, bar, beverage and liquor revenues and charges and all revenues
and charges from restaurant operations, Motel banquet and conference facility
operations, and all other revenue of any kind attributable to any of the same
for the period on and after 12:01 a.m. on the Closing Date. Purchaser shall pay
over to Seller all collections of accounts receivable in connection with the
Properties which have accrued as of Closing (the "Closing Accounts Receivable").
By no later than sixty (60) days after Closing, Purchaser shall pay to Seller an
amount equal to the remaining Closing Accounts Receivable, minus those
uncollectible Closing Accounts Receivable as agreed upon by Purchaser and
Seller. Seller shall deliver to Purchaser or provide Purchaser a credit against
the Purchase Price for the Properties in an amount equal to all guest
reservation deposits held by the Motels for Motel guests arriving or staying
after check-out time for the Motel on the Closing Date. All collections of Motel
receivables from any party after Closing shall be applied first to receivables
due from such party which have accrued prior to Closing and second to
receivables due from such party which have accrued after Closing.
3. Cash. Purchaser shall give Seller a credit at Closing for all petty cash
funds at the Properties and all cash in any operating accounts for the
Properties to the extent such petty cash and operating accounts are transferred
to Purchaser at Closing. Purchaser and Seller shall make mutually satisfactory
arrangements for
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counting such cash and determining the balances in the operating accounts as of
12:01 a.m. on the Closing Date.
4. Motel Consumables. Seller shall not be entitled to any credit for
Consumables located on the Properties as of the Closing Date.
5. Trade Payables. Trade payables shall mean (for all purposes) under this
Agreement open accounts payable to trade vendors or suppliers of the Properties.
Except for trade payables for Consumables, Seller agrees to give Purchaser a
credit at Closing for all trade payables from the Properties which have accrued
on or prior to 12:01 a.m. on the Closing Date, and Purchaser shall be obligated
to pay (i) such payables to the extent it has received a credit from Seller at
Closing and (ii) trade payables or the Consumables. Purchaser agrees to pay all
trade payables from the Properties which have accrued after 12:01 a.m. on the
Closing Date and shall and hereby does indemnify and hold Seller harmless from
payment of the same. The indemnities contained or provided for in this section
survive Closing.
6. Banquet and Event Deposits. Purchaser shall receive and be entitled to a
credit against the Purchase Price for all prepaid deposits for banquets and
other functions that are scheduled to take place at any of the Properties on or
after the Closing Date.
7. Franchise Agreements, Land Leases, Service Contracts, and Equipment
Leases. Subject to the provisions of Section 6(8) hereof, any amounts prepaid or
payable under any Franchise Agreement, Land Lease, Service Contract, or
Equipment Lease shall be prorated at the Closing as of the Closing Date with
Seller obligated for all sums accrued prior to 12:01 a.m. on the Closing Date
and Purchaser obligated for all sums accrued after 12:01 a.m. on the Closing
Date.
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8. Sales Tax. Seller hereby agrees to indemnify and hold Purchaser harmless
from the payment of any and all sales, occupancy, use or other taxes due in
connection with the operation of the Properties prior to the Closing Date. The
indemnification set forth herein shall survive the Closing.
9. Taxes. Purchaser shall receive a credit for any accrued but unpaid real
estate taxes imposed in respect of the Properties for the portion of the current
year which has elapsed prior to the Closing Date (and, to the extent unpaid, for
prior years). Seller shall also give Purchaser a credit for any special
assessments which are due and payable in connection with the Properties prior to
Closing.
10. Utilities. Utilities and fuel, including, without limitation, water,
electricity, and gas shall be prorated as of Closing. The Seller shall cause the
meters, if any, for utilities to be read the day on which the Closing Date
occurs and to pay the bills rendered on the basis of such readings. If any such
meter reading for any utility is not available, then adjustment therefor shall
be made on the basis of the most recently issued bills therefor which are based
on meter readings no earlier than thirty (30) days prior to the Closing Date;
and such adjustment shall be prorated when the next utility bills are received.
11. Employee Expenses. Purchaser shall not be responsible for any wages or
benefits payable to employees of the Motels accruing prior to the Closing Date
and Purchaser shall not be required to assume any obligation with respect to any
employee benefits that were incurred prior to the Closing Date; and Seller shall
indemnify Purchaser against any claim in connection therewith. The indemnity
provided herein shall survive the Closing. In addition, Seller shall comply with
all obligations imposed on Seller by applicable federal or California laws
regarding continuation coverage rights, to the extent that it is required to do
so under applicable
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<PAGE>
laws; provided, however, Purchaser acknowledges that Seller is not giving any
notice under the Worker Adjustment and Retraining Act and agrees to indemnify
Purchaser and hold Purchaser harmless from and against any and all costs and
expenses incurred by Purchaser as a result of Seller's failure to give such
notice.
12. Purchaser shall receive a credit for any reduction in the brokerage
commission payable pursuant to Section 10 hereof.
E. Staff. Seller shall terminate or arrange for the termination of all
Motel employees as of the Closing Date and shall pay all wages and fringe
benefits (including, but not limited to, accrued vacation pay and payroll taxes)
through the Closing Date. Purchaser shall not be obligated to employ any such
Motel employee, but may do so on such terms and for such compensation as
Purchaser (and any such employee) deems appropriate.
Prior to Closing, Seller shall deliver to Purchaser copies of
all information and records necessary to support the prorations hereunder. In
the event any prorations made pursuant hereto shall prove incorrect for any
reason whatsoever, either party shall be entitled to an adjustment to correct
the same.
F. Expenses. The Seller shall pay (1) for all documentary transfer
taxes, (2) the premium attributable to the standard coverage portion of the
"Owner's Policies" (defined below), (3) the sales taxes arising in connection
with the sale of the Personal Property, Consumables, and FF & E by Seller to
Purchaser, and (4) one-half of escrow fees and costs. Purchaser shall pay (1)
all costs associated with its due diligence investigation, (2) all recording
costs, (3) the premium attributable to the extended coverage portion of the
Owner's Policies (and any endorsements or affirmative coverages), (4) one-half
of escrow fees and costs. Purchaser shall
- 31 -
<PAGE>
reimburse Seller at Closing for the costs of any appraisal of the Properties
obtained by Seller subsequent to the appraisals of PKF Consulting of December 4,
1997 and for the costs incurred by Seller in obtaining any engineering or
environmental studies or reports of the Properties in preparation for their
sale. Each party shall pay its own attorneys' fees. Seller and Purchaser shall
execute and deliver such transfer and sales tax returns as may be required by
law.
G. Title. It shall be a condition of Closing that the Title Company issue
to Purchaser, in form and substance acceptable to Purchaser, an owner's policy
of title insurance for each Property (the "Owner's Policies") with Purchaser
named as insured, dated as of the Closing Date, with a liability limit equal to
the Purchase Price allocable to the Property, insuring that fee title to the
Improvements and the leasehold estate created by the Land Leases are vested in
Purchaser, subject only to the Permitted Exceptions and Tenant Leases.
Except with the prior written approval of Purchaser, Seller
shall not deliver (nor cause or permit to be delivered) to the Title Company, on
behalf of the Seller, any indemnities of the Seller relating to the issuance of
the Owner's Policies. If the Owner's Policies disclose any liens or encumbrances
which are not Permitted Exceptions, Purchaser may remove such liens at Closing
by paying so much of the Purchase Price to the holders of the liens as is
necessary to do so.
H. Guest Property. The parties shall arrange for Motel guests to sign new
deposit box or other appropriate receipts on the day before the Closing Date
with respect to baggage, personal property, laundry, valet packages and other
property of Motel guests checked or left in the care of Seller by Motel guests
or tenants; and, to the extent such receipts are not obtained, such property
shall be sealed, listed in an inventory prepared and signed jointly by the
parties as of the Closing Date, and Purchaser shall be responsible from and
after the Closing Date for all such property
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<PAGE>
listed in said inventory. Seller shall be responsible for all items
allegedly left at the Properties by guests prior to Closing and not listed on
such inventory.
SECTION 8: INDEMNIFICATION
Seller shall hold harmless, indemnify and defend the Purchaser
from and against: (i) any and all obligations to, liabilities to or claims by
third parties, whether direct, contingent or consequential and no matter how
arising, in any way related to or arising from the Properties prior to the
Closing Date, including, but not limited to, for any injury to or death of any
person or damage to any property of third parties; (ii) any claims for
brokerage, commissions or fees in connection with leases of the Properties
executed prior to the Closing except to the extent Seller gives Purchaser a
credit for such commissions at Closing; (iii) any wages, salaries, pension
liabilities or fringe benefits accruing prior to the Closing for those employees
at the Motels; (iv) any and all obligations to, and liabilities to or claims by
third parties, whether direct, contingent, or consequential and no matter how
arising, in any way related to or arising from the sale or transfer of the
Properties by Seller to Purchaser, including, but not limited to, by any limited
partner of Seller; and (v) all costs and expenses of Purchaser, including
reasonable attorneys' fees, related to any actual or threatened actions, suits
or judgments incident to any of the foregoing.
SECTION 9: WAIVER
Each party hereto may, at any time or times, at its election, waive any
of the conditions to its obligations hereunder by a written waiver expressly
detailing the extent of such waiver (and no other waiver or alleged waiver by
such party shall be effective for any purpose). No such waiver shall reduce the
rights or remedies of such party by reason of any breach by the other party of
any of its or their obligations hereunder.
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<PAGE>
SECTION 10: BROKERS
Seller has retained Everest Financial, Inc. as its broker in connection
with this transaction and shall be responsible for the payment of a brokerage
commission equal to 2.75% of the Purchase Price of the Properties (before
prorations) to Everest in connection with the sale of the Properties to
Purchaser. Everest has agreed to reallow 1.25% of the Purchase Price of the
Properties (before proration) to Purchaser's broker or, at Purchaser's option,
Purchaser shall be entitled to a credit, pursuant to the provisions of Section
7(D)(12) hereof, equal to 1.25 % of the Purchase Price of the Properties (before
prorations). Other than as aforesaid, each party represents to the other that it
has not retained any broker or finder in connection with the transaction
contemplated by this Agreement, and agrees to indemnify and hold the other party
harmless from and against any claim of any broker or finder claiming a brokerage
commission or finder's fee by or through the party.
SECTION 11: SURVIVAL; FURTHER ASSURANCES
All warranties, representations, covenants, obligations and agreements
contained in or made pursuant to this Agreement shall survive the Closing
hereunder and the transfers and conveyances and other transactions hereunder for
twelve (12) months from the Closing Date. All warranties, representations,
covenants, obligations, and agreements contained in or made pursuant to this
Agreement shall terminate and be of no further force or effect on the first
anniversary of the Closing Date, unless an action is brought with respect to
such applicable warranty, representa tion, covenant, obligation, or agreement
within such 12-month period. Purchaser understands that, promptly after the
Closing, Seller will make a distribution of the net proceeds realized by Seller
with respect to the sale of the Properties to Purchaser to Seller's partners,
and that Seller's limited partners shall have no liability or responsi bility to
return distributions made to them. Purchaser further understands and agrees
- 34 -
<PAGE>
that the liability of GMS, as General Partner of Seller, for any obligation of
Seller pursuant to Section 8 hereof, shall be limited as set forth in this
Section 11 and shall be further limited in an amount equal to GMS' share of any
distribution made by Seller to its partners of the proceeds from sale of the
Properties to Purchaser hereunder.
Each party agrees to use such party's best efforts to cause the
conditions to consummation of this Agreement to be satisfied and implemented as
soon as practicable. Each party will, whenever and as often as it shall be
requested so to do by the other, cause to be executed, acknowledged or delivered
any and all such further instruments and documents as may be necessary or
proper, in the reasonable opinion of the requesting party, in order to carry out
the intent and purpose of this Agreement and as is consistent with this
Agreement.
SECTION 12: NO THIRD PARTY BENEFITS
This Agreement is made for the sole benefit of Purchaser and Seller
(and Seller's partners) and their respective successors and assigns (subject to
the limitation on assignment set forth in Section 15 below), and no other person
or persons shall have any right or remedy or other legal interest of any kind
under or by reason of this Agreement. Whether or not either party hereto elects
to employ any or all the rights, powers, or remedies available to it hereunder,
such party shall have no obligation or liability of any kind to any third party
by reason of this Agreement or by reason of any of such party's actions or
omissions pursuant hereto or otherwise in connection with this Agreement or the
transactions contemplated hereby.
///
///
- 35 -
<PAGE>
SECTION 13: REMEDIES
If Seller shall default hereunder prior to Closing, Purchaser shall be
entitled, as its sole and exclusive remedies, to (i) sue for specific
performance of this Agreement, or (ii) terminate this Agreement, receive a
refund of the Earnest Money and recover damages in an amount not to exceed
$50,000; provided, however, in exercising its right of specific performance,
Purchaser may not require Seller to spend in excess of $50,000 to correct any
matter which Seller did not deliberately cause. After Closing, Purchaser shall
be entitled to any other rights and remedies it may have at law or equity,
subject to the restrictions thereon set forth in this Agreement. If Purchaser
shall default hereunder, Seller's sole and exclusive remedy shall be to retain
the Earnest Money as liquidated damages.
SECTION 14: TERMINATION
This Agreement may be terminated --
(i) By mutual written consent of Seller and Purchaser;
(ii) By either Seller or Purchaser by written notice to the other
party if the transaction contemplated hereby has not been consummated on or
before the Closing Date as defined in Section 1(B) hereof; provided, however,
that the right to terminate this Agreement under this Section 14 shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement has been the cause of or has resulted in the failure of the
transaction contemplated hereby being consummated on or before the Closing Date;
or
(iii) By Purchaser or by Seller if one or more of the Purchase and Sale
Agreements entered concurrently herewith by Purchaser for the purchase of the
motel
- 36 -
<PAGE>
properties from Super 8 Motels II, Ltd., Super 8 Motels III, Ltd., Super 8
Economy Lodging IV, Ltd., and Famous Host Lodging V, L.P. is terminated for any
reason other than Purchaser's or Seller's (as the case may be) breach thereof.
If this Agreement is terminated pursuant to the provisions of
this Section 14, then and in such event this Agreement shall be null and void,
neither party shall have any obligation or liability to the other, and Purchaser
shall be entitled to the return of its Earnest Money.
SECTION 15: MISCELLANEOUS
This Agreement (including all Exhibits hereto) contains the entire
agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements between the parties hereto respecting such
matters. The table of contents and section headings shall not be used in
construing this Agreement. Except as otherwise provided in Section 13 above, no
remedy conferred upon a party in this Agreement is intended to be exclusive of
any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Except as herein
expressly provided, no waiver by a party of any breach of this Agreement or of
any warranty or representation hereunder by the other party shall be deemed to
be a waiver of any other breach by such other party (whether preceding or
succeeding and whether or not of the same or similar nature) and no acceptance
of payment or performance by a party after any breach by the other party shall
be deemed to be a waiver of any breach of this Agreement or of any
representation or warranty hereunder by such other party whether or not the
first party knows of such breach at the time it accepts such payment or
performance. No failure or delay by a party to exercise any right it may have by
reason of the default of the other party shall operate as a waiver of default or
modification of this Agreement or shall prevent the
- 37 -
<PAGE>
exercise of any right by the first party while the other party continues to be
so in default. This Agreement shall be construed and enforced in accordance with
the laws of the State of California. Purchaser may assign its rights under this
Agreement to an affiliate of Purchaser without the prior written consent of
Seller (in which event the transferee shall assume in writing all of the
transferor's obligations hereunder). Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. The provisions of this
Agreement may not be amended, changed or modified orally, but only by an
agreement in writing signed by the party against whom any amend ment, change or
modification is sought.
SECTION 16: NOTICES
All notices and other communications which either party is required or
desires to send to the other shall be in writing and shall be sent by (i)
messenger, (ii) a nationally recognized overnight delivery service or (iii)
registered or certified mail, postage prepaid, return receipt requested. Notices
and other communications shall be deemed to have been given on the earlier of
actual receipt or the third business day after the date so mailed. Notices shall
be addressed as follows:
(a) To Seller:
c/o Grotewohl Management Services, Inc.
2030 "J" Street
Sacramento, California 95814
Attention: Philip B. Grotewohl
Fax: (916) 442-9253
///
///
- 38 -
<PAGE>
with a copy to:
James F. Fotenos, Esq.
Fotenos & Suttle, P.C.
50 California Street, Suite 700
San Francisco, California 94111
Fax: (415) 398-1869
(b) To Purchaser:
Tiburon Capital Corporation
160 Sansome Street, 11th Floor
San Francisco, California 94104
Attention: William R. Dixon, Jr.
Fax: (415) 989-1204
with a copy to:
Samuel L. Farb, Esq.
Berliner Cohen
Ten Almaden Boulevard, 11th Floor
San Jose, California 95113
Fax: (408) 998-5388
or to such other person and/or address as shall be specified by either party in
a notice given to the other pursuant to the provisions of this Section.
SECTION 17: ATTORNEYS' FEES
In the event either party institutes legal proceedings to enforce its
rights hereunder, the prevailing party in such litigation shall be paid all
reasonable expenses of the litigation by the losing party, including its
attorneys' fees.
///
///
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<PAGE>
SECTION 18: CONFIDENTIALITY
Seller and Purchaser agree to keep this Agreement confidential and not
disclose or make any public announcements with respect to the subject matter
hereof without the consent of the other party except for any disclosures
required by federal or state securities laws or as required by legal process or
other law. Notwithstanding the foregoing, each party may disclose the provisions
of this Agreement to such parties' advisors as long as such advisors agree to
maintain in confidence the provisions of this Agreement pursuant to this Section
18.
///
///
///
///
///
///
///
///
///
///
- 40 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
SUPER 8 MOTELS, LTD.
By Grotewohl Management Services, Inc.
Its General Partner
By ___________________________________
Philip B. Grotewohl
Chairman
And___________________________________
David P. Grotewohl
President
TIBURON CAPITAL CORPORATION
By _________________________________
John F. Dixon
President
And __________________________________
William R. Dixon, Jr.
Vice President
- 41 -
<PAGE>
IDENTIFICATION OF MOTELS
Modesto Motel Property 2025 W. Orangeburg Avenue, Modesto, California
95350
Sacramento Motel Property 4317 Madison Avenue, Sacramento, California
95842
South San Francisco Motel 111 Mitchell Avenue, South San Francisco,
California 94080
A-1
<PAGE>
LIST OF FRANCHISE AGREEMENTS
Date of
Franchisor Description Agreement
Super 8 Motels, Inc. Territorial Agreement relating 9/14/78
to the expansion of the Super 8
Motels, Inc. system in the State
of California
Super 8 Motels, Inc. License agreement relating to 5/1/79
the Modesto Motel property
Super 8 Motels, Inc. License agreement relating to 5/1/79
the Sacramento Motel property
Super 8 Motels, Inc. License agreement relating to 5/1/79
the South San Francisco Motel
property
B-1
<PAGE>
LAND LEASES
MODESTO MOTEL PROPERTY
Original lease by and between Alan R. Grant and Carolyn M. Grant, as
lessors, and Dennis A. Brown and Philip B. Grotewohl, as lessees, dated as of
9/15/79, as amended:
Rent Expiration Date
$70,954 9/13/29
SACRAMENTO MOTEL PROPERTY
Original lease by and between Hale Zimmerman, as lessor, and Dennis A.
Brown, as lessee, dated as of 4/1/79, as amended:
Rent Expiration Date
$116,630 6/30/13
SOUTH SAN FRANCISCO MOTEL PROPERTY (Lease 1)
Original lease by and between Louis J. Poletti and Natalia J. Poletti, as
Co-Trustees of the Richard L. Poletti Trust, Kathleen Costaglio Trust, and Paul
J. Poletti Trust; Louis J. Poletti, individually; and Natalia J. Poletti,
individually, as lessors, and Dennis A. Brown and Philip B. Grotewohl, as
lessees, dated as of 12/31/78, as amended:
Rent Expiration Date
$65,963 12/31/07
SOUTH SAN FRANCISCO MOTEL PROPERTY (Lease 2)
Original lease by and between Louis J. Poletti and Natalia J. Poletti, as
Co-Trustees of the Richard L. Poletti Trust, Kathleen Costaglio Trust, and Paul
J. Poletti Trust; Louis J. Poletti, individually; and Natalia J. Poletti,
individually, as lessors, and Dennis A. Brown and Philip B. Grotewohl, as
lessees, dated as of 2/18/86, as amended:
Rent Expiration Date
$24,601 12/31/07
C-1
<PAGE>
ALLOCATION OF PURCHASE PRICE
Modesto Motel Property $ 1,800,000
Sacramento Motel Property 2,700,000
South San Francisco Motel Property 7,600,000
TOTAL $12,100,000
D-1
<PAGE>
LIST OF SERVICE CONTRACTS
All three properties are subject to the following service contract:
Management Agreement by and between Super 8 Motels, Ltd., and Super 8
Management, Inc., as amended.
Modesto Motel Property
Vendor Description Expiration Date
Thyssen Elevator Service 90 days notice
Cable One Cable Service 30 days notice
Grinnell Fire Protection Fire Sprinkler Service 30 days notice
Jorgensen & Co. Alarm System Service 90 days notice
Top Notch Landscape Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
Sacramento Motel Property
Vendor Description Expiration Date
Comcast Cable Service 30 days notice
Sacramento Control Systems Alarm System Service 30 days notice
Decorative Plant Service Landscape System Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
Inn Room Video Video Rental Service 30 days notice
E-1
<PAGE>
South San Francisco Motel Property
Vendor Description Expiration Date
San Francisco Elevator Company Elevator Service 30 days notice
TCI Cablevision Cable Service 30 days notice
Grinnell Fire Protection Fire Sprinkler Service 30 days notice
Ideal Landscape Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
Inn Room Video Video Rental Service 30 days notice
E-2
<PAGE>
LIST OF EQUIPMENT LEASES
None
F-1
<PAGE>
LIST OF TENANT LEASES
Expiration
Tenant Description Annual Rent Lease Date Date
Madison Avenue Restaurant and Greater of 1.5% of 2/25/83 3/31/03
Properties Cocktail Lounge gross receipts of
or $35,736
KMH Trinity Retail Shopping $31,092 plus 125% 11/7/86 6/30/13
Properties Center of all rent received
Retail Shop each year from tenants
ping Center of the retail shopping
center in excess of
$10,426.50
Sterling Equity Retail Shopping $20,868 plus 25% 11/12/87 6/30/13
Investments Center of all rent received
each year from tenants
of the retail
shopping center in excess
of $9,975.90
G-1
<PAGE>
LIST OF LABOR CONTRACTS
None
H-1
<PAGE>
FORM OF GRANT DEEDS
Subject to completion
I-1
<PAGE>
BILL OF SALE AND ASSIGNMENT
PERSONAL PROPERTY
For valuable consideration, the receipt and sufficiency of which are
hereby acknowl edged, SUPER 8 MOTELS, LTD., a California limited partnership
("Seller") hereby assigns and transfers to TIBURON CAPITAL CORPORATION, a
California corporation ("Pur chaser"), all of Seller's right, title and interest
in and to any and all fixtures, machinery, apparatus, equipment and other
personal property (the "Personal Property") used in the ownership, operation,
repair and maintenance of any and all of the Seller's interest in the Land
Leases, the Personal Property, and the Improvements (the "Properties"),
including without limitation, (i) all building and construction materials,
equipment, appliances, machinery and other personal property owned by Seller and
used in connection with the operation of the Properties, (ii) the Consumables,
(iii) the FF & E, (iv) Seller's rights under the Franchise Agreements, (v) all
transferable permits, licenses, certificates and approvals issued in connection
with the Properties, (vi) the exclusive right to use the name of the Properties
and the right to all other names, logos and designs used in connection with the
Properties, including the names of restaurants, bars, banquet rooms and meeting
rooms, (vii) the right to use the Properties's telephone numbers and post office
boxes, (viii) all booking agreements, (ix) all service marks and trademarks, (x)
all plans and specifications, operating manuals, guaranties and warranties and
any other items used in the operation of the Properties, (xi) all documents
relating to guests at the Properties, including booking agreements, and (xii)
all documents relating to employees at the Properties. All terms used herein but
not defined herein shall have the same meaning as set forth in that certain
Purchase and Sale Agreement, dated as of April 30, 1998, between Seller and
Purchaser for the Properties.
J-1
<PAGE>
TO HAVE AND TO HOLD the Personal Property, subject as aforesaid, unto
Purchaser, its successors and assigns. Seller, for itself, its successors and
assigns, does hereby warrant and will forever defend title to the Personal
Property unto Purchaser, its successors and assigns, against the lawful claims
of all persons, claiming by, through or under Seller, but not otherwise.
IN WITNESS WHEREOF, Seller has caused this instrument to be executed as
of the ____ day of ____________, 1998.
SELLER:
SUPER 8 MOTELS, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And ______________________________
David P. Grotewohl
President
J-2
<PAGE>
ASSIGNMENT OF FRANCHISE AGREEMENTS
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS, LTD., a California limited
partnership ("As signor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("As signee").
WITNESSETH:
WHEREAS, Assignor is party to those certain franchise agreements
executed with respect to those certain real properties known as the Modesto
Motel property, Sacramento Motel property, and South San Francisco Motel
property, which franchise agreements are described in Exhibit A attached hereto
(the "Agreements"); and
WHEREAS, Assignor desires to assign its interest in the Agreements to
Assignee, and Assignee desires to accept the assignment thereof and assume the
obligations of Assignor thereunder;
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Effective as of the date hereof, Assignor hereby assigns to Assignee all
of its right, title and interest in and to the Agreements.
2. Assignee hereby assumes all of the Assignor's obligations under the
Agree ments accruing after the date hereof.
3. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
K-1
<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Agreements. Assignee hereby agrees to
indemnify Assignor against and hold Assignor harmless from any and all cost,
liability, loss, damage or expense, including without limitation, reasonable
attorneys' fees, accruing on or subsequent to the date hereof and arising under
the Agreements.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this assign
ment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And______________________________
David P. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice President
K-2
<PAGE>
EXHIBIT A
Schedule of Franchise Agreements
Date of
Franchisor Description Agreement
Super 8 Motels, Inc. Territorial Agreement relating 9/14/78
to the expansion of the Super 8
Motels, Inc. system in the State
of California
Super 8 Motels, Inc. License agreement relating to 5/1/79
the Modesto Motel property
Super 8 Motels, Inc. License agreement relating to 5/1/79
the Sacramento Motel property
Super 8 Motels, Inc. License agreement relating to 5/1/79
the South San Francisco Motel
property
K-3
<PAGE>
ASSIGNMENT OF LAND LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS, LTD., a California limited
partnership ("As signor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("As signee").
WITNESSETH:
WHEREAS, Assignor is the lessee under certain leases executed with
respect to those certain real properties known as the Modesto Motel property,
Sacramento Motel property, and South San Francisco Motel property, which leases
are described in Exhibit A attached hereto (the "Leases"); and
WHEREAS, Assignor desires to assign its interest as lessee in the
Leases to Assignee, and Assignee desires to accept the assignment thereof and
assume the obligations of Assignor thereunder;
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Effective as of the date hereof, Assignor hereby assigns to Assignee all
of its right, title and interest in and to the Leases.
2. Assignee hereby assumes all of the lessee's obligations under the Leases
accruing after the date hereof.
3. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
L-1
<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Leases. Assignee hereby agrees to indemnify
Assignor against and hold Assignor harmless from any and all cost, liability,
loss, damage or expense, including without limitation, reasonable attorneys'
fees, accruing on or subsequent to the date hereof and arising under the Leases.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this Assign
ment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And______________________________
Philip B. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice-President
L-2
<PAGE>
EXHIBIT A
Schedule of Land Leases
MODESTO MOTEL PROPERTY
Original lease by and between Alan R. Grant and Carolyn M. Grant, as
lessors, and Dennis A. Brown and Philip B. Grotewohl, as lessees, dated as of
9/15/79, as amended:
Rent Expiration Date
$70,954 9/13/29
SACRAMENTO MOTEL PROPERTY
Original lease by and between Hale Zimmerman, as lessor, and Dennis A.
Brown, as lessee, dated as of 4/1/79, as amended:
Rent Expiration Date
$116,630 6/30/13
SOUTH SAN FRANCISCO MOTEL PROPERTY (Lease 1)
Original lease by and between Louis J. Poletti and Natalia J. Poletti, as
Co-Trustees of the Richard L. Poletti Trust, Kathleen Costaglio Trust, and Paul
J. Poletti Trust; Louis J. Poletti, individually; and Natalia J. Poletti,
individually, as lessors, and Dennis A. Brown and Philip B. Grotewohl, as
lessees, dated as of 12/31/78, as amended:
Rent Expiration Date
$65,963 12/31/07
SOUTH SAN FRANCISCO MOTEL PROPERTY (Lease 2)
Original lease by and between Louis J. Poletti and Natalia J. Poletti, as
Co-Trustees of the Richard L. Poletti Trust, Kathleen Costaglio Trust, and Paul
J. Poletti Trust; Louis J. Poletti, individually; and Natalia J. Poletti,
individually, as lessors, and Dennis A. Brown and Philip B. Grotewohl, as
lessees, dated as of 2/18/86, as amended:
Rent Expiration Date
$24,601 12/31/07
L-3
<PAGE>
ASSIGNMENT OF SERVICE CONTRACTS
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS, LTD., a California limited
partnership ("As signor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("As signee").
WITNESSETH:
WHEREAS, Assignor is party to those certain contracts executed with
respect to those certain real properties known as the Modesto Motel property,
Sacramento Motel property, and South San Francisco Motel Property, which
contracts are described in Exhibit A attached hereto (the "Contracts"); and
WHEREAS, Assignor desires to assign its interest in the Contracts to
Assignee, and Assignee desires to accept the assignment thereof and assume the
obligations of Assignor thereunder;
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Effective as of the date hereof, Assignor hereby assigns to Assignee all
of its right, title and interest in and to the Contracts.
2. Assignee hereby assumes all of the Assignor's obligations under the Con
tracts accruing after the date hereof.
3. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
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<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Contracts. Assignee hereby agrees to indemnify
Assignor against and hold Assignor harmless from any and all cost, liability,
loss, damage or expense, including without limitation, reasonable attorneys'
fees, accruing on or subsequent to the date hereof and arising under the
Contracts.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this Assign
ment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And ______________________________
David P. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice President
M-2
<PAGE>
EXHIBIT A
Schedule of Service Contracts
All three properties are subject to the following service contract:
Management Agreement by and between Super 8 Motels, Ltd., and Super 8
Management, Inc., as amended.
Modesto Motel Property
Vendor Description Expiration Date
Thyssen Elevator Service 90 days notice
Cable One Cable Service 30 days notice
Grinnell Fire Protection Fire Sprinkler Service 30 days notice
Jorgensen & Co. Alarm System Service 90 days notice
Top Notch Landscape Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
Sacramento Motel Property
Vendor Description Expiration Date
Comcast Cable Service 30 days notice
Sacramento Control Systems Alarm System Service 30 days notice
Decorative Plant Service Landscape System Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
Inn Room Video Video Rental Service 30 days notice
M-3
<PAGE>
South San Francisco Motel Property
Vendor Description Expiration Date
San Francisco Elevator
Company Elevator Service 30 days notice
TCI Cablevision Cable Service 30 days notice
Grinnell Fire Protection Fire Sprinkler Service 30 days notice
Ideal Landscape Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
Inn Room Video Video Rental Service 30 days notice
M-4
<PAGE>
ASSIGNMENT OF TENANT LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS, LTD., a California limited
partnership ("As signor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("As signee").
WITNESSETH:
WHEREAS, Assignor is the lessor under certain leases executed with
respect to that certain real property known as the Sacramento Motel property
located at the northeast corner of Madison Avenue and Hillsdale Boulevard, and
adjacent to Interstate Highway 80, in Sacramento County, California, which
leases are described in Exhibit A attached hereto (the "Leases"); and
WHEREAS, Assignor desires to assign its interest as lessor in the
Leases to As signee, and Assignee desires to accept the assignment thereof and
assume the obligations of Assignor thereunder;
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Effective as of the date hereof, Assignor hereby assigns to Assignee all
of its right, title and interest in and to the Leases.
2. Assignee hereby assumes all of the lessor's obligations under the Leases
accruing after the date hereof.
3. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
N-1
<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Leases. Assignee hereby agrees to indemnify
Assignor against and hold Assignor harmless from any and all cost, liability,
loss, damage or expense, including without limitation, reasonable attorneys'
fees, accruing on or subsequent to the date hereof and arising under the Leases.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this Assign
ment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And______________________________
David P. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice President
N-2
<PAGE>
EXHIBIT A
Schedule of Tenant Leases
Expiration
Tenant Description Annual Rent Lease Date Date
Madison Avenue Restaurant and Greater of 1.5% of 2/25/83 3/31/03
Properties Cocktail Lounge gross receipts or
$35,736
2/25/83
3/31/03
KMH Trinity Retail Shopping $31,092 plus 25% of 11/7/86 6/30/13
Properties Center all rent received
Retail each year from
Shopping tenants of the
Center retail shopping center
in excess of $10,426.50
Sterling Equity Retail Shopping $20,868 plus 25% of 11/12/87 6/30/13
Investments Center rent received each
year from tenants
of the retail
shopping center in
excess of $9,975.90
N-3
<PAGE>
ASSIGNMENT OF EQUIPMENT LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessee under certain equipment leases executed
with respect to those certain real properties known as the Modesto Motel
property, Sacramento Motel property, and South San Francisco Motel property,
which leases are described in Exhibit A attached hereto (the "Leases"); and
WHEREAS, Assignor desires to assign its interest as lessee in the
Leases to Assignee, and Assignee desires to accept the assignment thereof and
assume the obligations of Assignor thereunder;
NOW, THEREFORE, in consideration of the promises and conditions
contained herein, the parties hereby agree as follows:
1. Effective as of the date hereof, Assignor hereby assigns to Assignee all
of its right, title and interest in and to the Leases.
2. Assignee hereby assumes all of the lessee's obligations under the Leases
accruing after the date hereof.
3. This Assignment shall be binding on and inure to the benefit of the
parties hereto, their heirs, executors, administrators, successors in interest
and assigns.
O-1
<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Leases. Assignee hereby agrees to indemnify
Assignor against and hold Assignor harmless from any and all cost, liability,
loss, damage or expense, including without limitation, reasonable attorneys'
fees, accruing on or subsequent to the date hereof and arising under the Leases.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this
Assignment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And______________________________
David P. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice President
O-2
<PAGE>
EXHIBIT A
Schedule of Equipment Leases
None
O-3
<PAGE>
ESTOPPEL CERTIFICATE
To: TIBURON CAPITAL CORPORATION
160 Sansome Street, 11th Floor
San Francisco, California 94104
Re: Sacramento Motel property located at the northeast corner of Madison
Avenue and Hillsdale Boulevard, and adjacent to Interstate Highway 80,
in Sacramento County, California (the "Property")
- --------------------------------------------------------------------------
The undersigned tenant (the "Tenant") hereby certifies to you (the
"Purchaser") as follows:
1) Tenant is a tenant under a lease, dated ______________, 19____
(the "Lease"); the Lease has not been cancelled, modified,
assigned, extended or amended; and there are no other
agreements, written or oral, affecting or relating to Tenant's
sublease of the premises described in the Lease (the
"Premises").
2) All rent under the Lease has been paid through ______________,
19____. There is no prepaid rent, except $______, and the
amount of security deposit is $______. Rent is currently
payable in the amount of $______ per month.
3) The Lease terminates on ______________, 19____, and Tenant has
the following renewal option(s): _____________________.
4) All work to be performed for Tenant under the Lease has been
performed as required and has been accepted by Tenant, and all
allowances to be paid to Tenant have been paid.
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<PAGE>
5) The Lease is: (a) in full force and effect; (b) free from
default and free from any event which with the giving of notice
or passage of time or both could become a default under the
Lease; and (c) Tenant has no claims against the sublandlord or
offsets against rent, and there are no disputes with the
sublandlord.
6) The Tenant has received no notice of prior sale, transfer or
assignment, hypothecation or pledge of the Lease or of the
rents payable thereunder, except ___________________________.
7) The Tenant has not assigned the sublease or sublet any part of
the Premises.
8) The Tenant has no right to remove any property from the
Premises except for its personal property and trade fixtures.
9) The Tenant has not placed any hazardous or dangerous materials
on the Premises, and the Tenant's use of the Premises complies
with all applicable environmental laws.
The undersigned has executed this Estoppel Certificate with the
knowledge and understanding that the Purchaser is acquiring the Property in
reliance on this Estoppel Certificate and that the undersigned will be bound by
this Estoppel Certificate. The statements contained herein may be relied upon by
Purchaser and its successors and assigns.
Dated this ____ day of __________, 19____.
-------------------------------------
By _________________________________
Title: ___________________________
P-2