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 II, 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:
$440
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 ACTION BY WRITTEN CONSENT
OF LIMITED PARTNERS
OF
SUPER 8 MOTELS II, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
June ____, 1998
SOLICITATION OF CONSENTS
The limited partners (the "Limited Partners") of SUPER 8 MOTELS II,
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
"Property"), for a purchase price of $2,200,000, and the dissolution of the
Partnership, which proposal is described hereinafter. If the proposal is
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 Proposal" below.)
THE ENCLOSED FORM OF ACTION BY WRITTEN CONSENT OF LIMITED PARTNERS (THE
"CONSENT") IS SOLICITED ON BEHALF OF THE PARTNERSHIP AND GROTEWOHL MANAGEMENT
SERVICES, INC., THE MANAGING GENERAL PARTNER OF THE PARTNERSHIP (THE "MANAGING
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 Managing 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
proposal are given on an executed and returned Consent, Units so represented
will be voted in favor of the proposal. The Managing General Partner will take
no action with respect to the proposal 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 Managing General
Partner, either in person or by telephone or telegram.
REASONS FOR THE PROPOSAL
The Partnership was formed in 1979 and its motel property located in
Santa Rosa, California opened for business during 1980.
This Information Statement has been prepared to ask the Limited
Partners to approve the sale of the Property for cash in the amount of the
appraised fair market value of $2,200,000.
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It has always been the intention of the Partnership to liquidate the
Property when it became apparent that the best interests of the Limited Partners
would be served by doing so. The Managing General Partner has received inquiries
over the years as to when the Property was 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
Property. Conditions have changed, and the Managing General Partner believes
that the Property 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 largest investor in the
Partnership (the "Everest Group"), made an offer to purchase the Property and
the motel properties of four other California limited partnerships as to which
the Managing General Partner serves as general partner (the "GMS Partnerships").
The purchase price set forth in the October offer was $1,173,990, a price far
below $2,200,000, the recent appraised value and the price offered in the
current proposal. The Managing General Partner rejected the prior offer.
Conflicts between the Everest Group and the Partnership resulted in lawsuits.
Inasmuch as the Managing General Partner agreed with the Everest Group in
principle that the Property should be sold, a settlement was reached whereby,
among other things, the Managing General Partner agreed to take steps to sell
the Property, and the lawsuits were dismissed.
As discussed more fully below under "Appraisal of the Property/Fairness
Opinion," the Property has been appraised by PKF Consulting, a highly-respected
national hospitality industry specialist. Its conclusion is that the aggregate
fair market value of the Property is $2,200,000, which is the proposed purchase
price of the Property. 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 transaction and the concomitant
dissolution of the Partnership. Termination of the Partnership will occur as
soon as the winding up process can be completed.
The Managing General Partner is recommending the approval of the
transaction by the Limited Partners for the following reasons:
The Managing General Partner believes that the sale value of the Property
is now at the crest of a seller's market which may not last much longer.
Although there can be no assurance that the Property's value will not
increase over time, the Managing General Partner believes that within the
next five years only modest increases in the Property's value can be
expected to occur. This belief is substantiated by the appraisal. The
Managing General Partner believes that now is the time to sell the
Property.
Although the motel is in good condition, it is almost 20 years old and has
never been refurbished. If the Property is to be retained, it would be
necessary for the Partnership to spend large sums for its refurbishment and
modernization. The Managing General Partner believes that the funds for
such expenditures would not be available from cash flow, if at all, without
reducing future distributions.
The Partnership's intention has always been to sell the Property when the
market conditions warranted sale. It was never an investment objective of
the Partnership to hold the Property permanently.
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The Managing 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 Managing General
Partner believes 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 Property is proposed to be sold to the Buyer for $2,200,000,
approximately $1,026,000 more than was offered for the Property in October
1997 by the Everest Group. The sales price is equal to the appraised value
of the Property 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 Property might take, the Managing General Partner has not
actively marketed the Property for sale. There can, therefore, be no
assurance that the proposed sale of the Property to the Buyer is at the
highest price attainable for the Property.
As of May 31, 1998, the Limited Partners had already received, over the
life of the Partnership, the sum of $924.69 per Unit in the form of
quarterly distributions. Upon the sale of the Property pursuant to the
proposed transaction, the Limited Partners would receive total additional
pretax distributions in the estimated amount of approximately $322 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 the proposal.
All Limited Partners as of the date action is taken on the proposal
(the "Record Date") are entitled to notice of and to vote on the proposal. As of
April 13, 1998 there were 7,000 Units outstanding and a total of 1,009 Limited
Partners entitled to vote such Units. With respect to the proposal 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
proposal 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:
Everest Lodging Investors, LLC 261 Units 3.73%
Everest Madison Investors, LLC 343 Units 4.90%
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Total 604 Units 8.63%
Neither the Managing General Partner nor any of its affiliates are the
beneficial owners of any Units.
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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 the
proposal by a majority-in-interest of the Limited Partners, or (ii) July __,
1998 (unless extended by the Managing General Partner pursuant to notice mailed
to the Limited Partners), will be counted toward the vote on the proposal.
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 action which is 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 proposal. 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 14.1(e) of the Partnership's Agreement of Limited
Partnership (the "Partnership Agreement"), a majority-in-interest of the Limited
Partners must approve or disapprove the sale in a single transaction of all or
substantially all of the Partnership's properties. Because the Property
constitutes all of the Partnership's properties (as discussed below under "The
Property and the Partnership's Business"), the Managing General Partner and the
Partnership are seeking the approval of the proposed sale of the Property by a
majority-in-interest of the Limited Partners. If the proposal is approved by the
Limited Partners but the proposed sale of the Property 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
the Limited Partners approve the proposed sale), the Managing General Partner
will consider the Limited Partners' approval of the proposal set forth herein to
constitute approval of any purchase offer for the 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 $2,200,000. If the Managing General Partner
should receive more than one such purchase offer, it would accept the best
offer, unless the Managing 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 Managing 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.
In the event the Limited Partners do not approve the proposal, the
Partnership will not proceed to implement the proposed sale of the Property.
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THE PROPERTY AND THE PARTNERSHIP'S BUSINESS
The Property consists of a leasehold interest in land located in Santa
Rosa, California, the motel property constructed thereon by the Partnership, and
the related personal property.
Narrative Description of Business
(a) Franchise Agreements
The Partnership operates its motel property as a franchisee of Super 8
Motels, Inc. through a sub-franchise obtained from Super 8 Management
Corporation. In March 1988, Brown & Grotewohl, a California general partnership
that is an Affiliate of the General Partner (the "Manager"), 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 Managing 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
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 Motel
Brown & Grotewohl, a California general partnership which is an
affiliate of the Managing General Partner (the "Manager"), manages and operates
the Partnership's motel. The Manager's management responsibilities include, but
are not limited to, supervision and direction of the Partnership's employees
having direct responsibility for the operation of the motel, establishment of
room rates and direction of the promotional activities of the Partnership's
employees. In addition, the Manager 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 motel staff and a centralized
accounting staff, all of which work under the direction of the Managing General
Partner or the Manager. Together, these staffs perform all bookkeeping duties in
connection with the 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 18
persons, either full or part-time, at its motel, including five desk clerks, ten
housekeeping and laundry personnel, two maintenance personnel, and one general
manager. In addition, and as of the same date, the Partnership employed 11
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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, 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.
Properties
On January 8, 1980, the Partnership acquired by long-term lease a
parcel of approximately three acres of unimproved land located at 2632 N.
Cleveland Avenue, Santa Rosa, California, adjacent to U.S. Highway 101.
Effective May 1, 1981, the lease was amended to delete an area comprising
approximately 32,600 square feet from the lease. A restaurant facility was
subsequently built on this deleted portion.
The term of the lease extends until August 31, 2015, with a possible
extension of the term for up to an additional 15 years through exercise by the
Partnership of three five-year renewal options. Base rental payments are subject
to adjustment at three-year intervals to reflect changes in the Consumer Price
Index. The base rent is $8,398 per month from September 1, 1997 through August
31, 2000. Such rent is net to the lessor of property taxes and assessments,
utilities and other expenses relating to the land.
In April 1980, construction of the Partnership's 100-room motel was
commenced on the site. The motel opened for operations immediately after
construction was completed on November 12, 1980.
The lease provides 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 lease, title to any such improvements
will pass to the lessor.
The Partnership's motel achieved the following average occupancy rates
and average room rates during the fiscal years ended September 30, 1997, 1996
and 1995:
1994 - 1995 1995 - 1996 1996 - 1997
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Average Occupancy Rate 54% 53% 60%
Average Room Rate $42.33 $44.49 $45.65
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The following existing lodging facilities provide direct or indirect
competition to the Partnership's Santa Rosa motel:
Approximate
Distance From
Number Of Partnership's
Facility Rooms Motel
- -------------------------------------------------------------------------------
Motel 6 100 Adjacent
Motel 6 119 0.5 Mile
Los Robles Inn 90 0.5 Mile
Sandman Motel 112 0.5 Mile
Ramada Inn 50 0.5 Mile
Holiday Inn Express 95 1.0 Mile
Days Inn 160 1.5 Miles
TraveLodge 60 2.0 Miles
Best Western Garden Inn 100 3.0 Miles
The Santa Rosa motel draws its business from a variety of sources,
including corporate travelers, vacationers and tourists, convention attendees
and sports teams. The Santa Rosa motel has no single customer the loss of which
would have a materially adverse effect on the motel's operations.
PURCHASE AGREEMENT
On April 30, 1998, the Partnership entered into an agreement to sell
the Property to Tiburon Capital Corporation, San Francisco, California, or a
nominee of Tiburon Capital Corporation (the "Buyer"), for the sum of $2,200,000,
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 Property 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 the
owner of the Property, and in some way is expected to share in the management
and control of the owner of the Property and/or the management of the Property.
Mr. Grotewohl's ultimate rights and obligations are the subject of current
negotiation between him and the Buyer.
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Mark Grotewohl is the son of Philip Grotewohl, the owner of 50% of the
stock of the Managing General Partner. He was employed until recently 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 Partners.
(The Partnership Agreement defines "Affiliate" as (i) any person directly or
indirectly controlling, controlled by, or under common control with another
person, (ii) any person owning or controlling 10% or more of the outstanding
voting securities or another person, (iii) any officer, director or partner of
any person, and (iv) if the person is an officer, director or partner, any
company for which such person acts in any such capacity.) The Managing General
Partner believes that, based on the facts and circumstances, Mark Grotewohl is
not an Affiliate of the Partnership or the General Partners, 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 Partners, and
therefore does not control the Partnership or the General Partners, (ii) owns
any voting securities in the Partnership or the General Partners, nor (iii)
serves as an officer, director or partner of the General Partners 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, the Buyer has the right and option not to proceed with the proposed
purchase of the Property from the Partnership, even if the Limited Partners
approve this sale. In this regard, the Partnership has not solicited any offers
to purchase the Property or the motel properties of the other GMS Partnerships,
has not listed the Property or the motel properties of the other GMS
Partnerships for sale with independent brokers, and has not otherwise actively
sought competing offers for the Property 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 Property; 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 Property; the absence of any damage or loss
to the Property 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 price
of the Property, 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 Managing 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.
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The Buyer will deposit the sum of $11,000 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 Property. 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 Managing
General Partner anticipates that the Partnership's share of aggregate closing
costs, including real estate brokerage commissions, will be approximately
$82,500. 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 PROPOSAL
General
The consummation of the proposed sale of the Property and the
concomitant dissolution of the Partnership should result in the following
consequences for the Partnership, the Limited Partners and the General Partners:
(i) The Limited Partners are expected to receive the distributions of net cash
proceeds from the sale of the Property as described below.
(ii) The Limited Partners and the General Partners 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.
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, assuming the Property is sold for a gross sales price
of $2,200,000. This summary has been prepared by the Managing General Partner.
If the proposed transaction is consummated on September 30, 1998, it is
estimated that the Partnership would receive the following net proceeds:
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Gross sales price $2,200,000
Less: Real estate commission (60,500)
Estimated escrow and closing costs (22,000)
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Net proceeds of sale $2,117,500
The Partnership's real property taxes are payable twice yearly on April
10 and December 10, partially in arrears, in the current amount of $7,935.43
each. The Partnership's minimum lease payment for its leasehold interest is
$8,398 per month. 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. Similarly, the amount indicated below as the
estimate of reserves available for distribution on dissolution of the
Partnership will vary depending on the actual date of consummation of the
proposed transaction.
The net proceeds of $2,117,500 estimated to be received by the
Partnership from the proposed transaction, in the estimated amount of $302.50
per Unit based on a closing date of September 30, 1998, would be distributed
entirely to the Limited Partners. The Partnership's 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 Property through the date of sale and the operation and
winding-up of the Partnership through its termination, and the balance,
estimated to be $139,000 or $19.81 per Unit, also would be distributed entirely
to the Limited Partners. Alternatively, if the proposed sale is not approved,
the Partnership would continue to operate the Property for an indeterminate
period pending receipt of another purchase offer which is acceptable to the
Limited Partners. The Managing General Partner estimates that if the Property is
not sold the Partnership will make average annual distributions to the Limited
Partners of from zero to $210,000 ($30.00 per Unit) for the foreseeable future.
However, there can be no assurance that the Managing 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
10
<PAGE>
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 Property 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 Property 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 Property 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%.
Set forth below are the Managing 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 Property 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 Property
or relating to dissolution of the Partnership. These estimates are not the
subject of an opinion of counsel.
11
<PAGE>
Portion
Total Taxed As Portion Portion
Estimated Ordinary Taxed At Taxed At
Gain Income 25% Rate 20% Rate
------------------------------------------------------
Limited Partners $1,628,000 $27,000 $1,294,000 $307,000
General Partner 16,000 0 13,000 3,000
------ ---- ------ -----
Total $1,644,000 $27,000 $1,307,000 $310,000
========= ====== ========= =======
Per Unit $232.57 $3.86 $184.86 $43.86
====== ==== ====== =====
Because of different methods of depreciation used for California income
tax purposes than for Federal income tax purposes, the Managing General Partner
anticipates that consummation of the proposed transaction would produce a gain
for California income tax purposes in the amount of approximately $1,641,000, of
which approximately $16,000 and $1,625,000 would be allocated to the General
Partners and to the Limited Partners, respectively.
Dissolution of the Partnership
Section 18.1(e) of the Partnership Agreement provides that the
Partnership shall be dissolved upon the sale of all of the Partnership property
and the conversion into cash of any proceeds of sale originally received in a
form other than cash.
If the proposal is approved by a majority-in-interest of the Limited
Partners, and if the proposed sale of the Property is consummated, the
Partnership will be dissolved, the Managing 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 Managing
General Partner will then take all necessary steps toward termination of the
Partnership's Certificate of Limited Partnership.
APPRAISAL OF THE PROPERTY/FAIRNESS OPINION
The appraisal of the Property, dated February 20, 1998, was prepared by
PKF Consulting, San Francisco, California, and indicates that the current fair
market value as of January 1, 1998 was $2,200,000. PKF Consulting was selected
by the Managing General Partner based on its expertise in appraising hotel and
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 Property was determined through the use of two
methodologies: the sales comparison approach and the income capitalization
approach.
No limitations were imposed by the Managing General Partner on the
appraiser's investigation.
12
<PAGE>
Upon request the Partnership will furnish to a Limited Partner, without
charge, a copy of the appraisal. In this regard Limited Partners are cautioned
to refer to the entire appraisal report, inasmuch as the opinion of value stated
therein is 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 Property.
Neither the appraiser, nor any of its affiliates, has had any prior
relationship with the Partnership, the Managing General Partner or any of their
affiliates other than as an appraiser of the Property 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.
13
<PAGE>
FINANCIAL INFORMATION
Selected Partnership Financial Data
Following are selected financial data of the Partnership for the period
from October 1, 1992 to September 31, 1997.
<TABLE>
Year Ended Year Ended Year Ended Year Ended Year Ended
September 30, September 30, September 30, September 30, September 30,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Guest room income $995,707 $856,246 $829,326 $808,505 $828,804
Net income (loss) $213,399 $101,430 $31,089 $(31,564) $(88,213)
Per Partnership Unit:
Cash distributions $60.50 $3.00 ---- ---- ----
Net income (loss) $30.18 $14.35 $4.40 $(4.46) $(12.48)
September 30, September 30, September 30, September 30, September 30,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------- -------------
Total assets $1,067,776 $1,268,224 $1,172,917 $31,122,106 $1,158,408
Long-term debt ---- ---- ---- ---- ----
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
I. Fiscal Year Financial Statements
(a) Liquidity and Capital Resources
The Managing General Partner believes that the Partnership's liquidity,
defined as its ability to generate sufficient cash to satisfy its cash needs, is
adequate. The Partnership's primary source of liquidity is its cash flow from
operations. The Partnership had, as of September 30, 1997, current assets of
$486,052, current liabilities of $108,806 and, therefore, an operating reserve
of $377,246. The Managing General Partner's reserves target is 5% of the
adjusted capital contributions, which are approximately $3,494,317. Current
reserves are above this $174,716 required reserve.
The Partnership's motel property is unencumbered. Although no assurance
can be had in this regard, the Managing General Partner believes that the
Partnership's equity in its property provides a potential source of external
liquidity (through financing) in the event the Partnership's internal liquidity
is impaired.
During fiscal year 1997, the Partnership expended $61,087 on
renovations and replacements, $43,159 of which was capitalized. Included in
these amounts was $28,669 for guest room and corridor carpeting, $8,024 for a
replacement washing machine, $4,459 for six replacement room air-conditioning
units and $3,660 for furniture refurbishment.
During fiscal year 1996, the Partnership expended $57,971 on
renovations and replacements, $36,984 of which was capitalized. Included in the
capitalized items were $11,148 for a replacement central office computer, $8,149
for a replacement washing machine, $6,817 for new backflow devices required by
the City of Santa Rosa under the EPA's administration of the Clean Water Act,
$6,088 for replacement room carpets, $2,577 for a replacement clothes dryer and
$2,205 for replacement television sets. The non-capitalized renovations of
$20,988 included expenditures for lamps and light fixtures, drapes,
14
<PAGE>
air-conditioning units, mattresses, chairs, outside building trim repairs and
landscaping.
The Partnership currently has no material commitments for capital
expenditures, other than parking lot repairs. The Property is in full operation
and no further property acquisitions or extraordinary capital expenditures are
planned. If the Property is not sold the Managing 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 Property is retained adequate working
capital is expected to be generated by motel operations.
(b) Results of Operations
(i) Overall Financial Results
During fiscal year 1997 as compared to fiscal year 1996, the Partnership
achieved a $143,084 or 16.1% increase in total income. This increase was due
primarily to a $139,461 or 16.3% increase in guest room revenue. The increased
room revenue is discussed under the Santa Rosa Motel caption below.
During fiscal year 1996 as compared to fiscal year 1995, the Partnership
achieved a $38,502 or 4.5% increase in total income, due primarily to a $26,920
or 3.2% increase in guest room revenue. The increased room revenue is discussed
under the Santa Rosa Motel caption below.
During fiscal year 1997 as compared to fiscal year 1996, the Partnership
experienced a $31,115 or 3.9% increase in total expenses. This increase is
related to increased property occupancy and is discussed below.
During fiscal year 1996 as compared to fiscal year 1995, the Partnership
achieved a $31,839 or 3.9% reduction in total expenses, due primarily to the
$25,548 or 3.7% reduction in motel operating expenses. This decrease in motel
operating expenses is discussed below.
(ii) Santa Rosa Motel
The following is a comparison of operating results of the Partnership's
Santa Rosa motel for the fiscal years ended 1995, 1996 and 1997:
Average Average
Occupancy Room
Twelve months ended: Rate Rate
- -----------------------------------------------------------------------
September 30, 1995 53.7% $42.33
September 30, 1996 52.6% $44.49
September 30, 1997 59.8% $45.65
Total
Expenditures Partnership
Total And Debt Cash
Twelve months ended: Revenues Service Flow (1)
- ------------------------------------------------------------------------------
September 30, 1995 $850,781 $752,705 $98,076
September 30, 1996 $889,283 $733,042 $156,241
September 30, 1997 $1,032,367 $771,215 $261,152
(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. This
calculation is reconciled to the financial statements in the following table.
15
<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:
1995 1996 1997
----------------------------------------------
Partnership Cash Flow $98,076 $156,241 $261,152
Additions to Fixed Assets 28,974 36,964 43,159
Depreciation and Amortization (97,047) (91,815) (90,581)
Other Items 1,086 40 (331)
==============================================
Net Income $31,089 $101,430 $213,399
==============================================
During fiscal year 1997 as compared to fiscal year 1996, the
Partnership's motel achieved an increase in its guest room revenue through
increases in both its average room rate and its occupancy rate. The occupancy
rate increased from 52.6% to 59.8%. The average room rate increased from $44.49
to $45.65. These two increases resulted in the $143,084 or 16% increase in total
revenue. The Santa Rosa motel achieved its largest increased revenue from the
leisure-market segment with the next largest increase from the corporate
segment.
During fiscal year 1996 as compared to fiscal year 1995, the
Partnership's motel achieved an increase in total revenue of $38,502 or 4.5%
from an increase in its average daily room rate. This increase in revenue was
partially offset by a decrease in overall room demand. This result was achieved
by selling more rooms to the higher-priced leisure market segment and fewer
rooms to the corporate, government, group and discount-market segments.
During fiscal year 1997 as compared to fiscal year 1996, the
Partnership's motel experienced a $38,173 or 5.2% increase in total expenditures
which is due primarily to the increase in occupancy. The increased expenditures
included $14,411 in room attendant wages, $6,973 in increased franchise fees and
advertising costs and $7,250 in appraisal costs.
During fiscal year 1996 as compared to fiscal year 1995, the
Partnership's Santa Rosa motel achieved a reduction of $19,663 or 2.6% in total
expenditures and debt service. The Partnership's motel achieved reductions of
$20,880 in expenditures for renovations and additions to fixed assets, and
$5,241 in front desk wages and salaries, which were partially offset by a $7,264
increase in utility costs.
II. Interim Financial Statements
(a) Liquidity and Capital Resources
As of March 31, 1998 the Partnership's current assets of $308,117
exceeded its current liabilities of $145,086, providing an operating reserve of
$163,031. The Managing General Partner's reserves target is 5% of adjusted
capital contributions, or $174,716.
The Partnership expended $22,762 on renovations and replacements during
the six months ended March 31, 1998, of which $6,391 was capitalized. The
expenditures included $7,995 for exterior painting, $6,521 for guestroom carpet
and vinyl, $3,899 for replacement lamps and $1,919 for replacement televisions.
16
<PAGE>
(b) Results of Operations
Total Partnership income decreased $20,544 or 5.0% for the first two
quarters of fiscal year 1998 as compared to the first two quarters of fiscal
year 1997. Guest room revenue decreased $16,066 or 4.1% due to a decrease in the
average occupancy rate from 52.8% to 45.6%. Such decrease was partially offset
by an increase in the average room rate from $41.12 to $45.71. The motel
experienced decreased occupancy in the leisure and corporate market segments and
increased occupancy in the discount segment.
Total Partnership expenses increased $143,545 or 36.2% primarily due to
increases in the minimum wage, increases in franchise fees and management fees,
and increases in legal, appraisal and other costs associated with the proposed
sale of the Property 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
Managing General Partner is unaware of any "Year 2000" problems which could
impact the Partnership's operations.
17
<PAGE>
FINANCIAL STATEMENTS
for
INFORMATION STATEMENT
of
SUPER 8 MOTELS II, LTD.
June __, 1998
F-i
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SUPER 8 MOTELS II, LTD. Page
INDEPENDENT AUDITORS' REPORT ........................................... F-1
FINANCIAL STATEMENTS:
Balance Sheets, September 30, 1997 and 1996............................. F-2
Statements of Operations for the Years Ended
September 30, 1997, 1996 and 1995.................................. F-3
Statements of Partners' Equity for the Years
Ended September 30, 1997, 1996 and 1995............................ F-4
Statements of Cash Flows for the Years Ended
September 30, 1997, 1996 and 1995.................................. F-5
Notes to Financial Statements........................................... F-7
Balance Sheets, March 31, 1998 and September 30, 1997 (Unaudited)....... F-12
Statements of Operations for the Three Months and
Six Months Ended March 31, 1998 and 1997 (Unaudited)............... F-13
Statement of Partners' Equity for the Six Months
Ended March 31, 1998 and 1997 (Unaudited).......................... F-14
Statements of Cash Flows for the Six Months
Ended March 31, 1998 and 1997 (Unaudited).......................... F-15
Notes to Financial Statements........................................... F-16
F-ii
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Super 8 Motels II, Ltd.
We have audited the accompanying balance sheets of Super 8 Motels II, Ltd., a
California limited partnership, as of September 30, 1997 and 1996 and the
related statements of operations, partners' equity and cash flows for each of
the three years in the period ended September 30, 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 audit 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 II, Ltd. as of
September 30, 1997 and 1996 and the results of its operations and its cash flows
for each of the three years in the period ended September 30, 1997, in
conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
December 4, 1997
San Mateo, California
e-super6/s8297fs.wp8.wpd
F-1
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1997 and 1996
ASSETS
1997 1996
------------ ---------
Current Assets:
<S> <C> <C>
Cash and temporary investments (Notes 1 and 3) $459,098 $614,405
Accounts receivable 17,937 9,323
Prepaid expenses 9,017 21,662
--------- -----------
Total Current Assets 486,052 645,390
-------- -----------
Property and Equipment (Notes 2 and 7):
Capital improvements 34,947 34,947
Building 1,845,878 1,845,878
Furniture and equipment 524,159 497,661
---------- -----------
2,404,984 2,378,486
Accumulated depreciation and amortization (1,834,078) (1,759,327)
--------- ----------
Property and Equipment, Net 570,906 619,159
---------- -----------
Other Assets (Note 2):
Deposit of federal income tax 10,818 3,675
----------- ------------
Total Assets $1,067,776 $1,268,224
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 105,071 $ 97,413
Due to related parties (Note 4) 3,735 1,740
------------ ------------
Total Liabilities 108,806 99,153
----------- -----------
Contingent Liabilities and Lease Commitment (Notes 4 and 5) - -
Partners' Equity:
General Partners 49,493 47,359
Limited Partners 909,477 1,121,712
-------- ----------
Total Partners' Equity 958,970 1,169,071
-------- ----------
Total Liabilities and Partners' Equity $1,067,776 $1,268,224
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-2
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended September 30:
1997 1996 1995
------------ ------------ --------
Income:
<S> <C> <C> <C>
Motel room $995,707 $856,246 $829,326
Telephone and vending 14,913 14,721 10,260
Interest 16,818 17,236 10,068
Other 4,929 1,080 1,127
---------- --------- ---------
Total Income 1,032,367 889,283 850,781
--------- -------- --------
Expenses:
Motel operations (exclusive of depreciation
shown separately below) (Notes 4 and 6) 684,677 662,519 688,067
General and administrative (exclusive of
depreciation shown separately below) (Note 4) 43,710 33,519 34,578
Depreciation and amortization (Note 2) 90,581 91,815 97,047
-------- -------- --------
Total Expenses 818,968 787,853 819,692
-------- -------- --------
Net Income $213,399 $101,430 $31,089
======== ======== =======
Net Income Allocable to General Partners $2,134 $1,014 $311
====== ====== ====
Net Income Allocable to Limited Partners $211,265 $100,416 $30,778
======== ======== =======
Net Income Per Partnership Unit (Note 1) $30.18 $14.35 $4.40
====== ====== =====
Distributions to Limited Partners
Per Partnership Unit (Note 1) $60.50 $3.00 $ -
====== ===== ======
The accompanying notes are an integral part of these financial statements
F-3
</TABLE>
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended September 30:
1997 1996 1995
---------- ---------- -------
General Partners:
<S> <C> <C> <C>
Balance, beginning of year $ 47,359 $ 46,345 $ 46,034
Net income 2,134 1,014 311
------------ --------- ------------
Balance, End of Year 49,493 47,359 46,345
------------ -------- -----------
Limited Partners:
Balance, beginning of year 1,121,712 1,042,296 1,011,518
Net income 211,265 100,416 30,778
Distributions to limited partners (423,500) (21,000) -
------------ ----------- -----------
Balance, End of Year 909,477 1,121,712 1,042,296
------------ ---------- ----------
Total Partners' Equity $958,970 $1,169,071 $1,088,641
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended September 30:
1997 1996 1995
------------ ------------- ---------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Received from motel operations $1,007,202 $880,407 $840,465
Expended for motel operations and
general and administrative expenses (712,901) (679,215) (704,198)
Interest received 16,551 17,338 8,172
--------- --------- ---------
Net Cash Provided by
Operating Activities 310,852 218,530 144,439
-------- -------- --------
Cash Flows From Investing Activities:
Purchases of property and equipment (43,159) (36,984) (28,974)
Proceeds from sale of equipment 500 20 -
---------- ---------- --------
Net Cash Used by
Investing Activities (42,659) (36,964) (28,974)
--------- --------- ---------
Cash Flows From Financing Activities:
Distributions paid to limited partners (423,500) (21,000) -
---------- --------- --------
Net Cash Used by Financing Activities (423,500) (21,000) -
---------- --------- --------
Net Increase (Decrease) in Cash and
Temporary Investments (155,307) 160,566 115,465
Cash and Temporary Investments:
Beginning of year 614,405 453,839 338,374
-------- -------- --------
End of Year $459,098 $614,405 $453,839
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended September 30:
1997 1996 1995
---------- ----------- -------
Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities:
<S> <C> <C> <C>
Net income (loss) $213,399 $101,430 $ 31,089
-------- -------- ---------
Adjustments to reconcile net income (loss)
to net cash provided (used) by
operating activities:
Depreciation and amortization 90,581 91,815 97,047
Loss (gain) on sale of property 331 (20) -
(Increase) decrease in accounts receivable (8,614) 8,462 (2,144)
(Increase) decrease in prepaid expenses 12,645 5,641 (1,276)
Increase in other assets (7,143) (3,675) -
Increase in accounts payable and accrued
liabilities 7,658 14,936 19,599
Increase (decrease) in due to related parties 1,995 (59) 124
--------- ---------- ----------
Total Adjustments 97,453 117,100 113,350
-------- -------- --------
Net Cash Provided by
Operating Activities: $310,852 $218,530 $144,439
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Motels II, Ltd., is a limited partnership organized under California law
on May 7, 1979, to acquire and operate motel properties in Santa Rosa and
Ontario, California. The Santa Rosa Motel was opened in November, 1980, and the
Ontario Motel was opened in May, 1981. The Ontario Motel property was sold in
February, 1990. The Partnership grants credit to customers, substantially all of
which are local businesses in Santa Rosa.
The Managing General Partner of the Partnership is Grotewohl Management
Services, Inc., the sole shareholder and officer of which is Philip B.
Grotewohl. The Associate General Partner of the Partnership is Robert J. Dana.
The net income or net loss of the Partnership is allocated 1% to the General
Partners and 99% to the Limited Partners. Net income and distributions per
partnership unit are based upon 7,000 units outstanding. All partnership units
are owned by the Limited Partners.
The Partnership agreement requires that the Partnership maintain reserves for
normal repairs, replacements, working capital and contingencies in an amount of
at least 5% of adjusted capital contributions ($174,716 at September 30, 1997).
As of September 30, 1997, the Partnership had a combined balance in cash and
temporary investments of $459,098.
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. Since the Partnership has a fiscal year-end other than the majority
of the partners, the Partnership is required annually to make a payment to the
Internal Revenue Service based on the prior year's income.
Property and equipment are recorded at cost. Depreciation and amortization are
computed using the following estimated useful lives and methods:
Description Methods Useful Lives
-------------------------- -------------------------- ------------
Capital improvements 200% declining balance 7-20 years
and straight-line
Buildings 150% declining balance 10-25 years
and straight-line
Furniture and equipment 200% declining balance 5-7 years
and straight-line
Costs incurred in connection with maintenance and repair are charged to expense.
Major renewals and betterments that materially prolong the life 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.
F-7
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
Cash and temporary investments as of September 30, 1997 and 1996 consist of the
following:
1997 1996
-------- --------
Cash in bank, non-interest bearing $ 22,173 $ 35,070
Money market accounts 336,925 479,335
Certificates of deposit 100,000 100,000
--------- --------
Total Cash and Temporary Investments $459,098 $614,405
======== ========
Temporary investments are recorded at cost, which approximates market value. The
Partnership considers temporary investments with original maturities of six
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 the 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 ($49,785 in 1997,
$42,812 in 1996 and $41,466 in 1995) are included in motel operations expense in
the accompanying statements of operations. The Partnership operates its motel
property 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 $19,914, $17,125 and $16,587 in 1997, 1996 and 1995,
respectively.
Property Management Fees
The General Partners or their affiliates handle the management of the motel
property 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 cash available for distribution of the
Partnership, defined as the total cash receipts from Partnership operations
during a given period of time less cash used during the same period to pay debt
service, capital improvements and replacements, operating expenses and reserves.
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. At September 30, 1997 the Limited Partners had
not received the 10% cumulative return, and as no property management fees are
payable, they are not reflected in these financial statements. Management
believes it is not likely that these fees will become payable in the future.
F-8
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Subordinated Partnership Management Fees
During the Partnership's operational stage, the General Partners are to receive
9% of cash available for distribution for Partnership management services, along
with an additional 1% of cash available for distribution on account of their
interest in the income and losses, 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. Since the Limited Partners had not received the 10% cumulative return and
the property management fees had not been paid, no partnership management fees
are presently payable and therefore are not reflected in these financial
statements. Management expects these fees will never be paid. 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.
Subordinated Incentive Distributions
Under the terms of the Partnership agreement, the net proceeds of the sale of
any of the Partnership's motel properties and of any financing or refinancing of
any of the Partnership's motel properties, to the extent that such proceeds are
not to be reinvested in the acquisition of additional properties, shall promptly
be distributed to the General Partners and Limited Partners. Until the Limited
Partners have received distributions from all sources equal to their capital
contributions plus a cumulative 10% per annum pre-tax return on their adjusted
capital contributions, all of such proceeds shall be distributed to the Limited
Partners. Thereafter, 15% of the remainder of such proceeds shall be distributed
to the General Partners as cash incentive distributions and the balance shall be
distributed to the Limited Partners.
Administrative Expenses Shared by the Partnership and its Affiliates
There are certain administrative expenses allocated between the Partnership and
affiliated Super 8 partnerships. 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 $112,000 in 1997, $113,000 in 1996 and $110,000
in 1995 and are included in motel operations expenses and general and
administrative 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 sole shareholder of Grotewohl Management
Services, Inc., a General Partner of the Partnership.
NOTE 5 - LEASE COMMITMENT
The Partnership has a long-term operating lease commitment on approximately
three acres of land in Santa Rosa, California, the site of the Santa Rosa motel.
The term of the lease runs through August 31, 2015, with an option to extend the
lease for three consecutive periods of five years each. The base monthly rent is
subject to adjustment at three year intervals to reflect changes in the Consumer
Price Index. The Partnership will pay all property taxes, assessments and
utilities. Rent expenses for the fiscal years ending September 30, 1997, 1996
and 1995 were $102,033, $101,354 and $101,679, respectively.
F-9
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5 - LEASE COMMITMENT (Continued)
The future lease commitment at September 30, 1997, using the minimum monthly
amounts, is as follows:
Years Ending
September 30: Amount
------------- ------
1998 $100,778
1999 100,778
2000 100,778
2001 100,778
2002 100,778
2003-2007 503,888
2008-2012 503,888
2013-2015 293,935
-----------
Total $1,805,601
==========
NOTE 6 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating expenses
for the years ended September 30, 1997, 1996 and 1995.
<TABLE>
1997 1996 1995
---------- ---------- -------
<S> <C> <C> <C>
Salaries and related costs $211,215 $189,103 $191,794
Rent 94,025 93,395 94,016
Franchise and advertising fees 49,785 42,812 41,466
Utilities 71,893 74,632 73,824
Allocated costs, mainly indirect salaries 90,713 92,355 89,327
Repairs and minor renovations 17,928 20,987 33,863
Other operating expenses 149,118 149,235 163,777
-------- -------- --------
Total Motel Operating Expenses $684,677 $662,519 $688,067
======== ======== ========
</TABLE>
NOTE 7 - PROPERTY AND EQUIPMENT
The following is a summary of the accumulated depreciation and amortization of
property and equipment:
1997 1996
----------- -------
Capital improvements $ 34,947 $ 34,075
Building 1,353,486 1,292,582
Furniture and equipment 445,645 432,670
----------- ----------
Accumulated depreciation and amortization $1,834,078 $1,759,327
---------- ==========
F-10
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 8 - CONCENTRATION OF CREDIT RISK
The Partnership maintains its cash accounts in six 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
September 30, 1997 follows:
Total cash in all California banks $469,982
Portion insured by FDIC (329,181)
--------
Uninsured cash balances $140,801
=======
NOTE 9 - SUBSEQUENT EVENTS
On October 27, 1997 a complaint was filed in the United States District Court by
Grotewohl Management Services, Inc. (a general partner of the Partnership)
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 B. Enquist. The
complaint pertains to tender offers directed by certain of the defendants to
limited partners of the Partnerships, and to indications of interest made by
certain of the defendants in purchasing the property of the Partnership. The
complaint alleges that the defendants violated certain provisions of the
Security and Exchange Act of 1934 and seeks injunctive and declarative relief.
Defendants have yet to respond to the complaint.
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 Philip B. Grotewohl,
Grotewohl Management Services, Inc., Kenneth M. Sanders, Robert J. Dana, Borel
Associates, and BWC Incorporated, as defendants, and the Partnership, along with
four other partnerships of which have common general partners, as nominal
defendants. The complaint pertains 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. The complaint
requests the follow relief: a declaration that the action is a proper derivative
action; an order requiring the defendants to discharge their fiduciary duties to
the Partnerships and to enjoin them from breaching their fiduciary duties;
return of certain profits; appointment of a receiver; and an award for damages
in an amount to be determined. The defendants and nominal defendants have
recently been served and are formulating their response to the complaint.
F-11
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
Balance Sheet
March 31, 1998 and September 30, 1997
3/31/98 9/30/97
------------------- --------------------
ASSETS
<S> <C> <C>
Cash and temporary investments $ 292,672 $ 459,098
Accounts receivable 11,995 17,937
Prepaid expenses 3,450 9,017
------------------- --------------------
Total current assets 308,117 486,052
------------------- --------------------
Property and Equipment:
Capital improvements 34,947 34,947
Buildings 1,845,878 1,845,878
Furniture and equipment 526,802 524,159
------------------- --------------------
2,407,627 2,404,984
Accumulated depreciation (1,874,449) (1,834,078)
------------------- --------------------
Property and equipment, net 533,178 570,906
------------------- --------------------
Other Assets: 10,818 10,818
------------------- --------------------
Total Assets $ 852,113 $ 1,067,776
=================== ====================
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 145,086 $ 108,806
------------------- --------------------
Total current liabilities 145,086 108,806
------------------- --------------------
Total liabilities 145,086 108,806
------------------- --------------------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 48,024 49,493
Limited Partners 659,003 909,477
------------------- --------------------
Total partners' equity 707,027 958,970
------------------- --------------------
Total Liabilities and Partners' Equity $ 852,113 $ 1,067,776
=================== ====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
Statement of Operations
For the Three Months and Six Months Ended March 31, 1998 and 1997
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
3/31/98 3/31/98 3/31/97 3/31/97
----------------- ------------------ ------------------ ------------------
Income:
<S> <C> <C> <C> <C>
Guest room $ 178,484 $ 379,417 $ 190,620 $ 395,483
Telephone and vending 3,025 6,268 3,312 7,552
Interest 2,888 6,797 4,551 10,051
Other 698 1,190 606 1,130
----------------- ------------------ ------------------ ------------------
Total Income 185,095 393,672 199,089 414,216
----------------- ------------------ ------------------ ------------------
Expenses:
Motel operating expenses (Note 2) 176,430 368,172 159,019 317,542
General and administrative 96,277 129,149 8,685 34,874
Depreciation and amortization 21,713 43,294 22,498 44,654
----------------- ------------------ ------------------ ------------------
Total Expenses 294,420 540,615 190,202 397,070
----------------- ------------------ ------------------ ------------------
Net Income (Loss) $ (109,325) $ (146,943) $ 8,887 $ 17,146
================= ================== ================== ==================
Net Income (Loss) Allocable
to General Partners ($1,093) ($1,469) $89 $171
================= ================== ================== ==================
Net Income (Loss) Allocable
to Limited Partners ($108,232) ($145,474) $8,798 $16,975
================= ================== ================== ==================
Net Income (Loss)
per Partnership Unit ($15.46) ($20.78) $1.26 $2.43
================= ================== ================== ==================
Distribution to Limited Partners
per Partnership Unit $7.50 $15.00 $45.00 $48.00
================= ================== ================== ==================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
Statement of Partners' Equity
For the Six Months Ended March 31, 1998 and 1997
3/31/98 3/31/97
----------------- ----------------
General Partners:
Balance, beginning of year $ 49,493 $ 47,359
Net income (loss) (1,469) 171
----------------- ----------------
Balance, End of period 48,024 47,530
----------------- ----------------
Limited Partners:
Balance, beginning of year 909,477 1,121,712
Net income (loss) (145,474) 16,975
Distributions to Limited Partners (105,000) (336,000)
----------------- ----------------
Balance, End of Period 659,003 802,687
----------------- ----------------
Total Partners' Equity $ 707,027 $ 850,217
================= ================
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
<TABLE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
Statement of Cash Flows
For the Six Months Ended March 31, 1998 and 1997
3/31/98 3/31/97
----------------- ----------------
Cash Flows from Operating Activities:
<S> <C> <C>
Received from motel revenues $ 392,802 $ 396,925
Expended for motel operations and
general and administrative expenses (454,649) (364,391)
Interest received 6,812 9,894
----------------- ----------------
Net Cash Provided (Used) by Operating Activities (55,035) 42,428
----------------- ----------------
Cash Flows from Investing Activities:
Purchases of property and equipment (6,391) (14,695)
Proceeds from sale of land - 500
----------------- ----------------
Net Cash Provided (Used) by Investing Activities (6,391) (14,195)
----------------- ----------------
Cash Flows from Financing Activities:
Distributions to limited partners (105,000) (336,000)
----------------- ----------------
Net Cash Provided (Used) by Financing Activities (105,000) (336,000)
----------------- ----------------
Net Increase (Decrease) in Cash and Temporary Investments (166,426) (307,767)
Cash and Temporary Investments:
Beginning of period 459,098 614,405
----------------- ----------------
End of period $ 292,672 $ 306,638
================= ================
Reconciliation of Net Income (Loss) to Net Cash Provided (Used) by
Operating Activities:
Net Income (Loss) $ (146,943) $ 17,146
----------------- ----------------
Adjustments to reconcile net income to net cash used by operating
activities:
Depreciation and amortization 43,294 44,654
(Gain) loss on disposition of property and equipment 825 331
(Increase) decrease in accounts receivable 5,942 (7,397)
(Increase) decrease in prepaid expenses 5,567 16,606
(Increase) decrease in other assets - (7,143)
Increase (decrease) in accounts payable 36,280 (21,769)
----------------- ----------------
Total Adjustments 91,908 25,282
----------------- ----------------
Net Cash Provided (Used) by Operating Activities $ (55,035) $ 42,428
================= ================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
For the Six Months Ended 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 September 30, 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 to the General Partners or affiliates for the
period.
Franchise Fees $ 7,594
Upon the sale of the Ontario Motel property in February, 1990,
management felt that the payment of the property management fees and partnership
management fees became remote. Therefore, no property management fees or
partnership management fees have been accrued.
Note 2:
The following table summarizes the major components of motel operating
expenses for the periods Reported:
<TABLE>
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
3/31/98 3/31/98 3/31/97 3/31/97
---------------- --------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Salaries and related costs $ 54,698 $ 110,413 $ 48,218 $ 96,968
Rent 25,194 50,388 23,349 46,713
Franchise and advertising fees 8,924 18,985 9,536 19,793
Utilities 17,549 35,018 16,056 32,719
Allocated costs,
Mainly indirect salaries 24,881 51,718 22,055 46,602
Replacements and renovations 5,260 16,371 1,538 5,278
Other operating expenses 39,924 85,279 38,267 69,469
---------------- --------------- ----------------- ----------------
Total motel operating expenses $ 176,430 $ 368,172 $ 159,019 $ 317,542
================ =============== ================= ================
</TABLE>
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 II, LTD.,
a California limited partnership
_____________________
Notice of Proposed Action By Written Consent
TO THE LIMITED PARTNERS OF
SUPER 8 MOTELS II, LTD.:
The Limited Partners of SUPER 8 MOTELS II, LTD., a California limited
partnership (the "Partnership"), are being asked by the Partnership and the
Managing General Partner to consider and approve by written consent the proposed
sale of substantially all of the Partnership's assets.
The Limited Partners of the Partnership are entitled to vote on the proposal by
completing, executing and returning to the Partnership the enclosed form of
Action 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 MANAGING 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,
Managing General Partner
<PAGE>
APPENDIX 2
REVISED PRELIMINARY COPY
ACTION BY WRITTEN CONSENT OF LIMITED PARTNERS
SUPER 8 MOTELS II, 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 MANAGING GENERAL
PARTNER.
The undersigned votes all the units of limited partnership interest of Super 8
Motels II, Ltd., a California limited partnership, 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 [ ]
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 PROPOSAL 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
office. 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 II, 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 Motel 1 (K)
B List of Franchise Agreements 1 (E)
C Land Lease 1 (I)
D List of Service Contracts 3 (K)
E List of Equipment Leases 3 (L)
F List of Tenant Leases 3 (M)
G List of Labor Contracts 3 (N)
H Form of Grant Deed 7 (C)(1)(a)
I Bill of Sale and Assignment,
Personal Property 7(C)(1)(b)
J Assignment of Franchise Agreements 7(C)(1)(c)
K Assignment of Land Lease 7(C)(1)(d)
L Assignment of Service Contracts 7(C)(1)(e)
M Assignment of Tenant Leases 7(C)(1)(f)
N Assignment of Equipment Leases 7(C)(1)(g)
O 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 II, 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 one Super 8 Motel, as a franchisee of
Super 8 Motels, Inc., in the city of Santa Rosa, California, and desires to sell
such motel to Purchaser on the terms and conditions set forth below; and
WHEREAS, the Purchaser desires to purchase such motel 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 Lease" refers to the lease of the land identified on Exhibit C
hereto.
J. "Leased Land" refers to the land leased to Seller pursuant to the Land
Lease.
K. "Motel" refers to the Santa Rosa Motel, as identified on Exhibit A
hereto.
L. "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, (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
- 3 -
<PAGE>
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.
M. "Properties" means the Seller's interest in the Land Lease, the Motel,
the Personal Property, and the Improvements.
N. "Property Agreement(s)" means, collectively, the Franchise Agree ments,
the Land Lease, 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.
O. "Santa Rosa Motel" refers to the Super 8 Motel located at 2632 N.
Cleveland Avenue, Santa Rosa, California 95401.
P. "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.
Q. "Title Company" means Chicago Title Company, Sacramento, California.
///
///
- 4 -
<PAGE>
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 Two Million Two Hundred Thousand Dollars
($2,200,000) subject to prorations as set forth below.
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 $12,000
(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: ________
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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 lessor under the Land Lease; (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.
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C. Title. Seller has good and marketable title to the Properties (other
than the land leased to Seller pursuant to the Land Lease), 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.
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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
special tax assessments
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against the Properties, and the Properties are separately assessed for real
estate tax purposes.
I. Franchise Agreements. Exhibit B lists the Franchise Agreements for the
Properties pursuant to which Seller operates 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 Lease. Exhibit C lists for the Properties the Land Lease applicable
to the Properties. 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, the Land Lease is 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 Lease, 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 Lease,
there are no disputes, claims, or rights of set-off under the Land Lease, and,
subject to obtaining the consent of the lessor under the Land Lease and the
limited partners of Seller, Seller has the full right, power, and authority to
assign its interest in and to the Land Lease to Purchaser.
K. Service Contracts. Attached hereto as Exhibit D 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 agreements, together with the contracts and agreements entered
into with respect to
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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 E 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 F is a list of all outstanding
leases or agreements (other than the Land Lease) 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 consent of purchaser pursuant to Section 6 below, are herein
referred to collectively
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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 F, (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 F 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).
N. Labor Contracts. Except as disclosed on Exhibit G hereto, there are no
employment agreements or union contracts with respect to the Motel that will be
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binding on Purchaser after Closing, and, other than as disclosed on Exhibit G
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 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 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,
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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 Lease or Licenses. To the best of Seller's knowledge,
except as may be set forth on Exhibit D 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 Lease or under any license relating to the Properties, 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 Lease 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
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any 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 maintained,
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 the Properties
(hereinafter, the "Survey") certified to Purchaser, Purchaser's lender, and to
the Title Company, (ii) preliminary title report for the Properties (the "Title
Report") together with legible copies of all exceptions appearing in such report
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
Survey, the Title Report, and the results of the UCC Search. If Purchaser
approves the Survey, the Title Report, and the results of the UCC Search, then
all matters showing thereon shall be deemed "Permitted Exceptions." If Purchaser
disapproves any matters in the Survey, the Title Report, 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 notify Purchaser
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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 Survey, the Title Report, and the results of the UCC
Search, and to otherwise satisfy itself that all
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conditions to loan funding are satisfied), (ii) to prepare and approve loan
documenta tion 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 Commitment 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 Lease 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 Lease, that such
lender will not disturb the possessory rights of Purchaser under the Land Lease
as long as Purchaser is not in default under the Land Lease. 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:
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(1) Seller shall convey the Properties to Purchaser; and
(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 Lease, 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 deed in the form attached hereto as Exhibit H executed by the
Seller;
(b) bill of sale and assignment for the Personal Property in the form of
Exhibit I, executed by Seller;
(c) an assignment of the Franchise Agreements, in the form of Exhibit J
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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<PAGE>
(d) an assignment of Land Lease, in the form of Exhibit K attached hereto
(the "Assignment of Land Lease"), executed by Seller, assigning to Purchaser the
Land Lease, and consents of the lessor to such assignments in form and content
reasonably acceptable to Purchaser;
(e) an assignment of the Service Contracts, in the form of Exhibit L
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 M 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 N 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 O
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 O.
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<PAGE>
(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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<PAGE>
(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 Motel (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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<PAGE>
(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 Lease, 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 Lease, Tenant Leases,
Service Contracts, and Equipment Leases.
D. Prorations. The Purchase Price for the Properties 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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<PAGE>
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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<PAGE>
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 Lease, 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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<PAGE>
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 Motel 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 Policy" (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 Policy (and any endorsements or affirmative coverages), (4) one-half of
escrow fees and costs. Purchaser shall
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<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 the Properties (the "Owner's Policy") with Purchaser
named as insured, dated as of the Closing Date, with a liability limit equal to
the Purchase Price allocable to the Properties, insuring that fee title to the
Improvements and the leasehold estate created by the Land Lease 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 Policy. If the Owner's Policy discloses 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 Motel; (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
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<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.
///
///
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<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
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<PAGE>
properties from Super 8 Motels, 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
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<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
///
///
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<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.
///
///
///
///
///
///
///
///
///
///
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
SUPER 8 MOTELS II, 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
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<PAGE>
IDENTIFICATION OF MOTEL
Santa Rosa Motel Property 2632 N. Cleveland Avenue, Santa Rosa, California
95401
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 6/18/80
the Santa Rosa Motel property
B-1
<PAGE>
LAND LEASE
SANTA ROSA MOTEL PROPERTY
Original lease by and between Woodstock Properties, as lessor, and
Dennis A. Brown and Philip B. Grotewohl, as lessees, dated as of 9/1/79, as
amended:
Rent Expiration Date
$100,776 8/31/15
C-1
<PAGE>
LIST OF SERVICE CONTRACTS
The Santa Rosa Motel property is subject to the following service
contract: Management Agreement by and between Super 8 Motels II, Ltd., and Super
8 Management, Inc., as amended.
Santa Rosa Motel Property
Vendor Description Expiration Date
Thyssen Elevator Service 90 days notice
Cable One Cable Service 30 days notice
Santa Rosa Fire Service Alarm System Service 30 days notice
Design Nursery Landscape Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
D-1
<PAGE>
LIST OF EQUIPMENT LEASES
None
E-1
<PAGE>
LIST OF TENANT LEASES
None
F-1
<PAGE>
LIST OF LABOR CONTRACTS
None
G-1
<PAGE>
FORM OF GRANT DEEDS
Subject to completion
H-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 II, 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 connec tion
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.
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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 other wise.
IN WITNESS WHEREOF, Seller has caused this instrument to be executed as
of the ____ day of ____________, 1998.
SELLER:
SUPER 8 MOTELS II, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And ______________________________
David P. Grotewohl
President
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<PAGE>
ASSIGNMENT OF FRANCHISE AGREEMENTS
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS II, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is party to those certain franchise agreements
executed with respect to that certain real property known as the Santa Rosa
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
Agreements 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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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
assignment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS II, 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
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<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 6/18/80
the Santa Rosa Motel property
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<PAGE>
ASSIGNMENT OF LAND LEASE
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS II, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessee under certain leases executed with
respect to that certain real property known as the Santa Rosa Motel property,
which lease is described in Exhibit A attached hereto (the "Lease"); and
WHEREAS, Assignor desires to assign its interest as lessee in the Lease
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 Lease.
2. Assignee hereby assumes all of the lessee's obligations under the Lease
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.
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
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<PAGE>
attorneys' fees, accruing prior to the date hereof and arising under the Lease.
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 Lease.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this
Assignment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS II, 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
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<PAGE>
EXHIBIT A
Schedule of Land Leases
SANTA ROSA MOTEL PROPERTY
Original lease by and between Woodstock Properties, as lessor, and
Dennis A. Brown and Philip B. Grotewohl, as lessees, dated as of 9/1/79, as
amended:
Rent Expiration Date
$100,776 8/31/15
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<PAGE>
ASSIGNMENT OF SERVICE CONTRACTS
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS II, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is party to those certain contracts executed with
respect to that certain real property known as the Santa Rosa 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
Contracts 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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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
Assignment the day and year first above written.
ASSIGNOR:
SUPER 8 MOTELS II, 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
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<PAGE>
EXHIBIT A
Schedule of Service Contracts
The Santa Rosa Motel is subject to the following service contract:
Management Agreement by and between Super 8 Motels II, Ltd., and Super 8
Management, Inc., as amended.
Santa Rosa Motel Property
Vendor Description Expiration Date
Thyssen Elevator Service 90 days notice
Cable One Cable Service 30 days notice
Santa Rosa Fire Service Alarm System Service 30 days notice
Design Nursery Landscape Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
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<PAGE>
ASSIGNMENT OF TENANT LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS II, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessor under certain leases executed with
respect to that certain real property known as the Santa Rosa Motel Property
located at 2632 N. Cleveland Avenue, Santa Rosa, California 95401, 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 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 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.
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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 II, 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
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<PAGE>
EXHIBIT A
Schedule of Tenant Leases
None
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<PAGE>
ASSIGNMENT OF EQUIPMENT LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS II, 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 that certain real property known as the Santa Rosa 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.
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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 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 II, 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
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<PAGE>
EXHIBIT A
Schedule of Equipment Leases
None
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<PAGE>
ESTOPPEL CERTIFICATE
To: TIBURON CAPITAL CORPORATION
160 Sansome Street, 11th Floor
San Francisco, California 94104
Re: Santa Rosa Motel property located at 2632 N. Cleveland Avenue, Santa Rosa,
California 95401 (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.
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
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<PAGE>
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: ___________________________
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