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 III, 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:
$580
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 III, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
June ____, 1998
SOLICITATION OF CONSENTS
The limited partners (the "Limited Partners") of SUPER 8 MOTELS III,
LTD., a California limited partnership (the "Partnership"), are being asked to
consider and approve by written consent the proposed sale of all of the
Partnership's interests in real property and related personal property (the
"Properties"), for an aggregate purchase price of $2,900,000, 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 GENERAL PARTNER OF THE PARTNERSHIP (THE "GENERAL PARTNER").
This Information Statement and the enclosed Consent were first sent to the
Limited Partners on or about June __, 1998.
Units of limited partnership interest in the Partnership (the "Units")
represented by Consents duly executed and returned to the Partnership on or
before July __, 1998 (unless extended by the General Partner pursuant to notice
mailed to the Limited Partners) will be voted or not voted in accordance with
the instructions contained therein. If no instructions for the proposal are
given on an executed and returned Consent, Units so represented will be voted in
favor of the proposal. The 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 General Partner,
either in person or by telephone or telegram.
REASONS FOR THE PROPOSAL
The Partnership was formed in 1980 and its two motel properties located
in San Bernardino and Bakersfield, California opened for business in 1982.
This Information Statement has been prepared to ask the Limited
Partners to approve the sale of the Properties for cash in the amount of the
aggregate appraised fair market values of $2,900,000.
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It has always been the intention of the Partnership to liquidate the
Properties when it became apparent that the best interests of the Limited
Partners would be served by doing so. The General Partner has received inquiries
over the years as to when the Properties were to be sold and the Partnership
liquidated. Its response, until recently, has been that because of overbuilt and
depressed motel market conditions, the time was not right for a sale of the
Properties. Conditions have changed, and the General Partner believes that the
Properties should be sold now and the Partnership liquidated.
During September and October 1997, Everest Property 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 Properties and
the motel properties of four other California limited partnerships as to which
the General Partner serves as general partner (the "GMS Partnerships"). The
purchase price for the Properties set forth in the October offer was $1,418,595,
a price far below $2,900,000, the recent appraised value and the price offered
in the current proposal. The General Partner rejected the prior offer. Conflicts
between the Everest Group and the Partnership resulted in lawsuits. Inasmuch as
the General Partner agreed with the Everest Group in principle that the
Properties should be sold, a settlement was reached whereby, among other things,
the General Partner agreed to take steps to sell the Properties, and the
lawsuits were dismissed.
As discussed more fully below under "Appraisal of the
Properties/Fairness Opinion," the Properties have been appraised by PKF
Consulting, a highly-respected national hospitality industry specialist. Its
conclusion is that the aggregate fair market value of the Properties is
$2,900,000, which is the proposed purchase price of the Properties. The purchase
price is to be paid in cash, and the net proceeds thereof will be distributed in
accordance with the Partnership Agreement upon the close of the sales
transactions and the concomitant dissolution of the Partnership. Termination of
the Partnership will occur as soon as the winding up process can be completed.
The General Partner is recommending the approval of the transaction by
the Limited Partners for the following reasons:
The General Partner believes that the sale value of the Properties is now
at the crest of a seller's market which may not last much longer. Although
there can be no assurance that the Properties' value will not increase over
time, the General Partner believes that within the next five years only
modest increases in the Properties' value can be expected to occur. This
belief is substantiated by the appraisals. The General Partner believes
that now is the time to sell the Properties.
Although the motels are in good condition, they are 16 years old and have
never been refurbished. If the Properties are to be retained, it would be
necessary for the Partnership to spend large sums for their refurbishment
and modernization. The General Partner believes that the funds for such
expenditures would not be available from cash flow, if at all, without
reducing future distributions.
The Partnership's intention has always been to sell the Properties when
the market conditions warranted sale. It was never an investment objective
of the Partnership to hold the Properties permanently.
The General Partner understands that the circumstances of many of the
Limited Partners have changed over the life of the Partnership and believes
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that the Limited Partners should be presented with an opportunity to
liquidate their investments. In this regard, the 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 Properties are proposed to be sold to the Buyer for $2,900,000,
approximately $1,481,000 more than was offered for the Properties in
October 1997 by the Everest Group. The sales price is equal to the
appraised value of the Properties as determined by PKF Consulting, an
independent real estate advisory firm specializing in the valuation of
lodging properties. The proposed sale will be for all cash. PKF Consulting
has rendered to the Partnership a fairness opinion, stating its opinion
that the sales price is fair to the Partnership. The contract of sale
between the Partnership and the Buyer provides for a closing of the sale on
July 15, 1998 or within 30 days after approval of the sale by the Limited
Partners, whichever occurs later. For these reasons, and because of the
length of time that widespread marketing of the Properties might take, the
General Partner has not actively marketed the Properties for sale. There
can, therefore, be no assurance that the proposed sale of the Properties to
the Buyer is at the highest price attainable for the Properties.
As of May 31, 1998, the Limited Partners had already received, over the
life of the Partnership, the sum of $663.98 per Unit in the form of
quarterly distributions. Upon the sale of the Properties pursuant to the
proposed transaction, the Limited Partners would receive total additional
pretax distributions in the estimated amount of approximately $497 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 5,941 Units outstanding and a total of 929 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 216 Units 3.64%
Everest Madison Investors, LLC 280 Units 4.71%
KM Investments 50 Units 0.84%
-----------------------
Total 546 Units 9.19%
Neither the 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 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 Certificate and
Agreement of Limited Partnership (the "Partnership Agreement"), a
majority-in-interest of the Limited Partners must approve or disapprove the sale
of all or substantially all of the Partnership's motel properties and interests
therein. Because the Properties constitute all of the Partnership's motel
properties and interests therein (as discussed below under "The Properties and
the Partnership's Business"), the General Partner and the Partnership are
seeking the approval of the proposed sale of the Properties by a
majority-in-interest of the Limited Partners. If the proposals are approved by
the Limited Partners but the proposed sale of the Properties described herein is
not consummated because one or more of the conditions precedent to the sale (see
"Purchase Agreement") is not satisfied (excluding the condition precedent that
the Limited Partners approve the proposed sale), the General Partner will
consider the Limited Partners' approval of the proposal set forth herein to
constitute approval of any purchase offer for the Properties (or for an
individual motel, including the related personal property) if such purchase
offer is reflected in an executed purchase agreement no later than January 31,
1999, is consummated no later than June 30, 1999, is for "all cash," and is for
an amount equal to or greater than $1,600,000 for the San Bernardino motel and
$1,300,000 for the Bakersfield motel. If the General Partner should receive more
than one such purchase offer, it would accept the best offer, unless the General
Partner had already entered into a binding contract for a less favorable offer.
However, notwithstanding the preceding, if prior to entering into a binding
contract the General Partner should receive one or more "all cash" purchase
offers and also should receive one or more purchase offers in an amount greater
than that set forth in the highest "all cash" offer but entailing the receipt by
the Partnership of a promissory note for part of the purchase price, the
Partnership would present all such offers to the Limited Partners for approval.
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In the event the Limited Partners do not approve the proposal, the
Partnership will not proceed to implement the proposed sale of the Properties.
THE PROPERTIES AND THE PARTNERSHIP'S BUSINESS
The Properties consist of fee interests in land located in San
Bernardino and Bakersfield, California, the motel properties constructed
thereon, and the related personal property. The two motels are managed and
operated by the Partnership under the name "Super 8 Motel."
Narrative Description of Business
(a) Franchise Agreements
The Partnership operates each of its motel properties as a franchisee
of Super 8 Motels, Inc. through sub-franchises obtained from Super 8 Management
Corporation. In March 1988, Brown & Grotewohl, a California general partnership
that is an Affiliate of the General Partner (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 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 Motels
The Manager manages and operates the Partnership's motels. 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 each 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 individual motel staffs and a centralized
accounting staff, all of which work under the direction of the General Partner
or the Manager. Together, these staffs perform all bookkeeping duties in
connection with each motel, including all collections and all disbursements to
be paid out of funds generated by motel operations or otherwise supplied by the
Partnership.
As of December 31, 1997, the Partnership employed a total of 39
persons, either full or part-time, at its two motel properties, including ten
desk clerks, 24 housekeeping and laundry personnel, three maintenance personnel,
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and two motel managers. In addition, and as of the same date, the Partnership
employed 11 persons in administrative positions at its central office in
Sacramento, California, all of whom worked for the Partnership on a part-time
basis. They included accounting, investor service, sales and marketing and motel
supervisory personnel, secretarial personnel, and purchasing personnel.
(c) Competition
As discussed in greater detail below, in the areas in which its motel
properties are located the Partnership faces intense competition from motels of
varying quality and size, including other budget motels which are part of
nationwide chains and which have access to nationwide reservation systems.
Super 8 Motels offer accommodations at the upper end, in terms of
facilities and prices, of the budget segment of the lodging industry.
Properties
The net proceeds of the Partnership's offering of Units (and financing
in the amount of $870,000 which has since been repaid) were expended for the
acquisition in fee and development of two properties located in San Bernardino
and Bakersfield, California.
(a) San Bernardino, California
The San Bernardino motel, which consists of 81 guest rooms on
approximately 1.87 acres of land, commenced operations on March 6, 1982. The
average monthly occupancy rates and average monthly room rates during the three
most recent years are as follows:
1997 1996 1995
-------------------------------------------
Average Occupancy 53.8% 49.9% 55.3%
Rate
Average Room Rate $43.57 $40.23 $40.29
The Partnership's San Bernardino motel provides accommodations to no
one customer, the loss of which could materially affect the Partnership's
operations.
The following lodging facilities provide direct and indirect
competition to the Partnership's San Bernardino motel:
Approximate
Number Distance
Facility Of Rooms From Motel
- -------------------------------------------------------------------------------
Comfort Inn 50 Adjacent
Hilton Inn 200 Across street
La Quinta Motel 154 200 Yards
TraveLodge 90 200 Yards
EZ-8 Motel 117 0.13 Mile
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(b) Bakersfield, California
The Bakersfield motel, which consists of 90 guestrooms on approximately
2.32 acres of land, commenced operations on September 20, 1982. The average
monthly occupancy rate and average monthly room rate for the three most recent
years are as follows:
1997 1996 1995
-------------------------------------------
Average Occupancy 84.6% 87.2% 85.6%
Rate
Average Room Rate $32.35 $30.28 $30.87
From October 1, 1982 to January 31, 1993, an agreement was in effect
granting the Partnership the first opportunity to provide rooms to employees of
Santa Fe Railroad at a room rate of $20.00 per night. Though expired according
to its terms, the contract continues to be observed by both parties, except that
the agreed rate is now $23.00 per room night. Revenue attributable to this
agreement constituted approximately 32%, 31%, and 32% of the motel's guest room
revenues during 1997, 1996 and 1995, respectively.
On December 31, 1992, the Partnership entered into a written agreement
with the National Railroad Passenger Corporation (Amtrak) for the provision of
lodging services to its employees at a room rate of $25.75 per night, which
included a transportation credit of $1.75 per room night payable to the
Partnership for providing transportation from the train terminal. Due to
competitive bids, the rate was lowered to $24.00 per room night effective
October 1, 1994. Amtrak provided approximately 24%, 22% and 26% of the motel's
guest room revenue in 1997, 1996 and 1995, respectively.
Except as set forth above, the Bakersfield motel provides
accommodations to no one customer, the loss of which could materially affect the
Partnership's operations.
The following lodging facilities provide direct or indirect competition
to the Partnership's Bakersfield motel:
Approximate
Number Distance
Facility Of Rooms From Motel
- -------------------------------------------------------------------------------
California Inn 74 Adjacent
Motel 6 160 0.50 Mile
EZ-8 Motel 100 0.50 Mile
TraveLodge Plaza 61 0.75 Mile
Comfort Inn South 80 0.75 Mile
Four Points Inn 199 1.00 Mile
Best Western Kern River Motor Inn 200 1.00 Mile
La Quinta Inn 150 1.00 Mile
Days Inn 120 1.00 Mile
Roderunner 49 1.50 Miles
Economy Motels of America 140 1.50 Miles
Rio Mirada 209 2.00 Miles
Comfort Inn 60 2.00 Miles
Econo Lodge 100 2.00 Miles
Holiday Inn Express 100 6.00 Miles
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PURCHASE AGREEMENT
On April 30, 1998, the Partnership entered into an agreement to sell
the Properties to Tiburon Capital Corporation, San Francisco, California, or a
nominee of Tiburon Capital Corporation (the "Buyer"), for the sum of $2,900,000,
payable in cash at the close of escrow. Escrow was opened at Chicago Title
Company, San Francisco, California on June 10, 1998.
The following paragraph is based on information provided by the Buyer.
The Buyer is a California corporation formed in 1992. All of its stock has been
owned since its inception equally by William R. Dixon, Jr., Herbert J. Jaffe,
John L. Wright and John F. Dixon. Management and control persons of the Buyer
consist of its stockholders. The Buyer and its related entities, including
Pacific Management Group, Inc., NCM Management Ltd. and Capital Concepts
Investment Corp., are and have been involved in many business transactions,
including the ownership and asset or property management of real estate assets.
(The owners, management and the control persons of such related entities are two
or more of the owners of the Buyer.) In many instances, the real estate assets
were or are owned by limited partnerships or limited liability companies formed
and syndicated by the Buyer or its related entities for the specific purpose of
owning such assets. The form of an entity owning real estate assets is typically
dictated by investors and/or lenders. In like fashion, it is anticipated that a
nominee of the Buyer, which would be a limited liability company, would actually
purchase the Properties instead of the Buyer. It is currently anticipated that
the members of such limited liability company would be two other limited
liability companies, one of which would be formed and syndicated by the Buyer
and the other of which would be formed and wholly-owned by Mark Grotewohl. In
such event, Mark Grotewohl would be entitled to up to a 50% indirect interest in
the owner of the Properties, and in some way is expected to share in the
management and control of the owner of the Properties and/or the management of
the Properties. Mr. Grotewohl's ultimate rights and obligations are the subject
of current negotiation between him and the Buyer.
Mark Grotewohl is the son of Philip Grotewohl, the owner of 50% of the
stock of the General Partner. He was employed until recently as the marketing
and sales director for the five GMS Partnerships. It might be contended that
Mark Grotewohl is, by virtue of his past relationship with the Partnership, an
Affiliate of the Partnership as defined in its Partnership Agreement. Under
Section 11.2 of the Partnership Agreement, the Partnership is not permitted to
sell its real property to "Affiliates" of the General Partner. (The Partnership
Agreement defines "Affiliate" as (i) any person directly or indirectly
controlling, controlled by, or under common control with another person, (ii)
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 General Partner believes
that, based on the facts and circumstances, Mark Grotewohl is not an Affiliate
of the Partnership or the General Partner, because Mark Grotewohl neither (i)
possesses the power to direct or cause the direction of the management and
policies of the Partnership or the General Partner, and therefore does not
control the Partnership or the General Partner, (ii) owns any voting securities
in the Partnership or the General Partner, nor (iii) serves as an officer,
director or partner of the General Partner or the Partnership.
The Buyer has made a contemporaneous offer to purchase the motel
properties of the four other GMS Partnerships. The offers made by the Buyer for
the properties of each of the GMS Partnerships have been evaluated independently
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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 Properties from the Partnership, even if the Limited Partners
approve this sale. In this regard, the Partnership has not solicited any offers
to purchase the Properties or the motel properties of the other GMS
Partnerships, has not listed the Properties or the motel properties of the other
GMS Partnerships for sale with independent brokers, and has not otherwise
actively sought competing offers for the Properties or the motel properties of
the other GMS Partnerships. Consequently, the offer presented by the Buyer is
the only offer that the General Partner has received for the Properties or the
motel properties of the other GMS Partnerships other than those presented by the
Everest Group.
There are a number of significant conditions to the consummation of the
proposed sale of the Properties; therefore, there can be no assurance as to
whether, or when, such transaction will be consummated. Among these conditions
are the Partnership's receipt of the approval of the Limited Partners; the
Buyer's receipt (at the Partnership's expense) and approval of an ALTA Survey
and preliminary title report for the Properties; the absence of any damage or
loss to the Properties prior to the closing date in excess of $50,000; the
decision by the Buyer, in its unfettered discretion, to terminate the proposed
purchase prior to June 30, 1998; the Buyer's receipt prior to June 30, 1998 of a
loan commitment for financing in an amount of not less than 90% of the purchase
price of the Properties, provided that the deadline may be extended upon request
of the Buyer for up to 15 days; and receipt by the Partnership of any necessary
approvals of the sale by, among others, the franchisor. The General Partner
expects that such conditions will be satisfied; however, there can be no
assurances in this regard. No federal or state regulatory requirements must be
complied with, or approvals obtained, in connection with the transaction.
The Buyer will deposit the sum of $15,000 into escrow on the later of
the expiration of the Buyer's inspection period referred to above or the date
the Partnership notifies the Buyer that the Limited Partners have approved the
proposed sale of the Properties. Should the Buyer default in the performance of
its obligations under the purchase agreement, the Partnership will be entitled
to retain said deposit as its only damages.
The Partnership and the Buyer will share closing costs. The General
Partner anticipates that the Partnership's share of aggregate closing costs,
including real estate brokerage commissions, will be approximately $108,750.
Included therein is a real estate brokerage commission payable to Everest
Financial, Inc., a member of the Everest Group, in an amount equal to 2.75% of
the purchase price. Everest Financial, Inc. has agreed to reallow 1.25% of the
purchase price to the Buyer's broker or, at the Buyer's option, the Buyer will
be entitled to a credit against the purchase price in the amount of 1.25% of the
purchase price.
EFFECTS OF APPROVAL OF THE PROPOSAL
General
The consummation of the proposed sale of the Properties and the
concomitant dissolution of the Partnership should result in the following
consequences for the Partnership, the Limited Partners and the General Partner:
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(i) The Limited Partners are expected to receive the distributions of net cash
proceeds from the sale of the Properties as described below.
(ii) The Limited Partners and General Partner are expected to realize the
Federal income tax consequences as described below.
(iii) All of the Partnership's assets will be liquidated and the Partnership
will be dissolved and terminated.
The consequences stated above are discussed in more detail in the
subsections which follow. Those subsections, in part, include computations as to
the cash proceeds to be received and distributed by the Partnership, and the
taxable gain and allocations thereof to be made by the Partnership, in the event
the proposed sale is consummated. HOWEVER, THIS INFORMATION IS PRESENTED SOLELY
FOR THE PURPOSES OF EVALUATING THE PROPOSAL. ALL AMOUNTS ARE ESTIMATES ONLY. ALL
COMPUTATIONS ARE BASED ON ASSUMPTIONS (SUCH AS THE DATE OF SALE, THE EXPENSES OF
THE SALE, AND THE RESULTS OF PARTNERSHIP OPERATIONS THROUGH THE DATE OF SALE)
WHICH MAY OR MAY NOT PROVE TO BE ACCURATE AND SHOULD NOT BE RELIED UPON TO
INDICATE THE ACTUAL RESULTS WHICH MAY BE ATTAINED.
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 Properties are sold for a gross sales
price of $2,900,000. This summary has been prepared by the General Partner.
If the proposed transaction is consummated on September 30, 1998, it is
estimated that the Partnership would receive the following net proceeds:
Gross sales price $2,900,000
Less: Real estate commission (79,750)
Estimated escrow and closing costs (29,000)
-----------
Net proceeds of sale $2,791,250
The Partnership's real property taxes are payable twice yearly on April
10 and December 10, partially in arrears, in the current amount of $27,746.54
each. Accordingly, if the proposed transaction is consummated, the actual date
of consummation will determine whether there is 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 $2,791,250 estimated to be received by the
Partnership from the proposed transaction, in the estimated amount of $469.83
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 Properties through the date of sale and the operation and
winding-up of the Partnership through its termination, and the balance,
estimated to be $159,000 or $26.75 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 Properties for an indeterminate
period pending receipt of another purchase offer which is acceptable to the
Limited Partners. The General Partner estimates that if the Properties are not
10
<PAGE>
sold the Partnership will make average annual distributions to the Limited
Partners of from zero to $297,000 ($50.00 per Unit) for the foreseeable future.
However, there can be no assurance that the General Partner's estimate in this
regard will be borne out.
Federal Income Tax Consequences
(a) General. The following is a summary of the Federal income tax
consequences expected to result from consummation of the proposed transaction
based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
laws, judicial decisions and administrative regulations, rulings and practices.
This summary is general in content and does not include considerations which
might affect certain Limited Partners, such as Limited Partners which are
trusts, corporations or tax-exempt entities, or Limited Partners who must pay an
alternative minimum tax. Except as otherwise specifically indicated, this
summary does not address any state or local tax consequences.
Tax counsel to the Partnership, Derenthal & Dannhauser, has delivered
an opinion to the Partnership which states that the following summary has been
reviewed by it and, to the extent the summary involves matters of law,
represents its opinion, subject to the assumptions, qualifications, limitations
and uncertainties set forth therein.
(b) Characterization of Gain. Upon the sale of property, the owner
thereof measures his gain or loss by the difference between the amount of
consideration received in connection with the sale and the owner's adjusted
basis in the property. A gain will be recognized for Federal income tax
purposes. This is so because the depreciation used for Federal income tax
purposes, which decreases adjusted basis, was greater than that used for book
purposes.
The Properties should constitute "Section 1231 property" (i.e., real
property and depreciable assets used in a trade or business which are held for
more than one year) rather than "dealer" property (i.e., property which is held
primarily for sale to customers in the ordinary course of business). While it is
possible that the Internal Revenue Service will argue that the Properties is
"dealer" property, gain upon the sale of which would be taxed entirely as
ordinary income, tax counsel to the Partnership is of the opinion that it is
more likely than not that such an assertion would not be sustained by a court.
A Limited Partner's allocable share of Section 1231 gain from the sale
of the Properties would be combined with any other Section 1231 gains or losses
incurred by him in the year of sale, and his net Section 1231 gains or losses
would be taxed as long-term capital gains or constitute ordinary losses, as the
case may be, except that a Limited Partner's net Section 1231 gains will be
treated as ordinary income to the extent of net Section 1231 losses for the five
most recent years which have not previously been offset against net Section 1231
gains.
Long-term gain on sale of Section 1231 property is taxed as follows:
(i) the excess of accelerated depreciation over straight-line depreciation is
taxed as 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%.
11
<PAGE>
Set forth below are the General Partner's estimates of the total
taxable gain for Federal income tax purposes, and the allocations thereof, which
will result if the proposed sale of the Properties is consummated, based on an
assumed closing date of September 30, 1998. These estimates do not include any
amounts relating to Partnership operations prior to the sale of the Properties
or relating to dissolution of the Partnership. These estimates are not the
subject of an opinion of counsel.
Portion
Total Taxed As Portion Portion
Estimated Ordinary Taxed At Taxed At
Gain Income 25% Rate 20% Rate
-----------------------------------------------------------
Limited Partners $2,667,000 $ 0 $2,667,000 $ 0
General Partner 27,000 0 27,000 0
------ ----- ------ -----
Total $2,694,000 $ 0 $2,694,000 $ 0
========= ===== ========= =====
Per Unit $448.91 $ 0 $448.91 $ 0
====== ===== ====== =====
Because of different methods of depreciation used for California income
tax purposes than for Federal income tax purposes, the General Partner
anticipates that consummation of the proposed transaction would produce a gain
for California income tax purposes in the amount of approximately $1,814,000, of
which approximately $18,000 and $1,796,000 would be allocated to the General
Partner 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 motel properties or any
interest therein 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 Properties is consummated, the net
cash proceeds received by the Partnership upon close of escrow for the proposed
transaction will be distributed in accordance with the provisions of the
Partnership Agreement. Thereupon the Partnership will be dissolved, the General
Partner will commence to wind up the business of the Partnership, and after
payment of all expenses of the Partnership (including the expense of a final
accounting for the Partnership) the remaining cash reserves of the Partnership
will be distributed in accordance with the provisions of the Partnership
Agreement. The General Partner will then take all necessary steps toward
termination of the Partnership's Certificate of Limited Partnership.
APPRAISAL OF THE PROPERTIES/FAIRNESS OPINION
The appraisals of the two motel properties, dated February 20, 1998,
were prepared by PKF Consulting, San Francisco, California, and indicate that
the aggregate current fair market value as of January 1, 1998 was $2,900,000.
PKF Consulting was selected by the General Partner based on its expertise in
appraising motel properties in the State of California. PKF Consulting also
prepared appraisals of the motel properties of the other GMS Partnerships.
The appraised value of the Properties was determined through the use of two
methodologies: the sales comparison approach and the income capitalization
approach.
12
<PAGE>
No limitations were imposed by the General Partner on the appraiser's
investigation.
Upon request the Partnership will furnish to a Limited Partner, without
charge, a copy of each appraisal. In this regard Limited Partners are cautioned
to refer to the entire appraisal reports, inasmuch as the opinions of value
stated therein are subject to the assumptions and limiting conditions stated
therein. Furthermore, Limited Partners should be aware that appraised values are
opinions and, as such, may not represent the realizable value of the Properties.
Neither the appraiser, nor any of its affiliates, has had any prior
relationship with the Partnership, the General Partner or any of their
affiliates other than as an appraiser of the Properties and the properties of
the other GMS Partnerships and no future relationship other than as an appraiser
is contemplated.
The Partnership has also received an opinion from PKF Consulting to the
effect that the terms of the proposed sale are fair and equitable from a
financial standpoint to the Limited Partners.
13
<PAGE>
FINANCIAL INFORMATION
Selected Partnership Financial Data
Following are selected financial data of the Partnership for the period
from January 1, 1993 to December 31, 1997.
<TABLE>
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ---------
<S> <C> <C> <C> <C> <C>
Guest room income $1,592,209 $1,464,850 $1,526,742 $1,625,581 $1,734,535
Net income $117,093 $1,116 $68,750 $33,851 $49,083
Per Partnership Unit:
Cash distributions $25.00 ---- ---- ---- ----
Net income $19.52 $0.19 $11.46 $5.64 $8.18
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
Total assets $3,259,069 $3,237,869 $3,411,456 $3,632,719 $3,793,456
Long-term debt ---- ---- $75,493 $390,484 $595,214
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
I. Fiscal Year Financial Statements
(a) Liquidity and Capital Resources
The General Partner believes that the Partnership's liquidity, defined
as its ability to generate sufficient cash to meet its cash needs, is adequate.
The Partnership's primary source of internal liquidity is its revenues from
motel operations. The Partnership had, as of December 31, 1997, current assets
of $471,628, current liabilities of $116,417 and, therefore, an operating
reserve of $355,211. The General Partner's reserves target is 5% of adjusted
capital contributions, or $297,050.
The Partnership's properties are currently unencumbered. Although no
assurance can be had in this regard, the General Partner believes that the
Partnership's equity in its properties provides a potential source of external
liquidity (through financing) in the event the Partnership's internal liquidity
is impaired.
During 1997, the Partnership expended $66,721 for renovations and
replacements, of which $36,441 was capitalized. This amount included $18,629 for
guestroom carpets, $8,021 for two ice machines, $4,255 for tub refurbishing,
$5,099 for replacement bedspreads, $6,323 for replacement air conditioners and
$4,524 for replacement televisions.
During 1996, the Partnership expended $70,718 for renovations and
replacements, of which $24,711 was capitalized. This amount included $21,900 for
parking lot resurfacing at the Bakersfield motel, $15,348 for computer systems,
$7,345 for guest room carpets, $6,218 for re-keying, $5,365 for tub
refurbishing, $5,006 for replacement bedspreads and $3,702 for replacement
televisions.
The Partnership currently has no material commitments for capital
expenditures, except that the Bakersfield motel requires painting and roof
repairs. Its two motel properties are in full operation and no further property
14
<PAGE>
acquisitions or extraordinary capital expenditures are planned. If the
properties are not sold the General Partner is aware of no material trends or
changes with respect to the mix or relative cost of the Partnership's capital
resources. If the properties are retained adequate working capital is expected
to be generated by motel operations.
(b) Results of Operations
(i) Combined Financial Results
The following tables summarize the operating results of the Partnership
for 1997, 1996 and 1995 on a combined basis. The results of the individual motel
properties follow in separate subsections. The income and expense numbers in the
following table are shown on an accrual basis and other payments on a cash
basis.
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
- ------------------------------------------------------------------
December 31, 1995 71.3% $34.33
December 31, 1996 69.5% $33.66
December 31, 1997 70.0% $36.43
Total
Expenditures Partnership
Total and Cash Flow
Fiscal Year Ended: Revenues Debt Service (1)
- ----------------------------------------------------------------------------
December 31, 1995 $1,571,111 $1,671,151 $(100,040)
December 31, 1996 $1,510,262 $1,515,375 $(5,113)
December 31, 1997 $1,641,860 $1,408,696 $233,164
(1) While Partnership Cash Flow as it is used here is not an amount
found in the financial statements, this amount is the best indicator of the
annual change in the amount, if any, available for distribution to the Limited
Partners. These calculations are reconciled to the financial statements in the
following table.
A reconciliation of Partnership Cash Flow (included in the chart above)
to Net Income as shown on the Statements of Operations (in the audited financial
statements) is as follows:
1997 1996 1995
------------------------------------------------
Partnership Cash Flow $233,164 $(5,113) $(100,040)
Principal Payments on Financial
Obligations 0 153,456 285,133
Additions to Fixed Assets 36,441 24,711 45,880
Depreciation and Amortization (151,769) (162,569) (164,599)
Other Items (743) (9,369) 2,376
================================================
Net Income $117,093 $1,116 $68,750
================================================
15
<PAGE>
Following is a reconciliation of Partnership Cash Flow (shown above) to
the aggregate total of Cash Flow from Properties Operations for the
Partnership's two motels which are segregated in the tables below:
1997 1996 1995
-----------------------------------------------
San Bernardino Motel $82,590 $20,090 $41,110
Bakersfield Motel 134,412 (34,512) (159,959)
-----------------------------------------------
Aggregate Cash Flow from Properties
Operations $217,002 ($14,422) (118,849)
Interest on Cash Reserves 13,116 8,288 10,071
Other Partnership Income (Net of Other
Expenses) Not Allocated to the
Properties 3,046 1,019 8,738
------------------------------------------------
Partnership Cash Flow $233,164 $(5,113) $(100,040)
- ---------------------------------------------
The Partnership achieved a $131,598 or 8.7% increase in total revenues
during 1997 as compared to 1996. The increase in revenue primarily is due to
increased room rates at both motels. The San Bernardino market improved in 1997
as compared to 1996.
The Partnership experienced a $60,849 or 3.9% decrease in total revenues
during 1996 as compared to 1995. The decrease in revenue is due to slightly
reduced room rates at both motels and to significantly reduced occupancy at the
San Bernardino motel. These conditions are related to the high level of
competition in the Bakersfield market and to poor economic conditions in the San
Bernardino market.
The Partnership achieved a $106,679 or 7.0% decrease in total
expenditures and debt service during 1997 as compared to 1996. This decrease is
due primarily to the liquidation of the Bakersfield motel's loan during 1996.
The Partnership achieved a $155,776 or 9.3% reduction in total
expenditures and debt service during 1996 as compared to 1995. This reduction is
due primarily to the comparatively smaller payments necessary to liquidate the
Bakersfield motel's loan and to lower payments for renovations and replacements.
(ii) San Bernardino Motel
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
- -------------------------------------------------------------------
December 31, 1995 55.3% $40.29
December 31, 1996 49.9% $40.23
December 31, 1997 53.8% $43.57
Total Cash Flow
Expenditures From
Total and Properties
Fiscal Year Ended: Revenues Debt Service Operations
- ------------------------------------------------------------------------------
December 31, 1995 $678,561 $637,451 $41,110
December 31, 1996 $615,471 $595,381 $20,090
December 31, 1997 $717,895 $635,305 $82,590
16
<PAGE>
The Partnership's San Bernardino motel achieved a $102,424 or 16.6%
increase in total revenues during 1997 as compared to 1996. The increased
revenue was primarily in guestroom revenue and was realized by increased
business in the corporate market segment.
The Partnership's San Bernardino motel experienced a $63,090 or 9.3%
decrease in total revenues during 1996 as compared to 1995. Guestroom revenue
from the leisure market segment decreased approximately $68,000 while the
revenue from the other market segments remained substantially unchanged.
The San Bernardino motel experienced a $39,924 or 6.7% increase in total
expenditures during 1997 as compared to 1996. These expenditure increases
included $14,184 in increased resident manager costs reflecting a management
change, $9,987 in increased franchise and management fees costs associated with
the increased guestroom revenue and $6,808 in increased renovation expenses.
The San Bernardino motel achieved a $42,070 or 6.6% reduction in total
expenditures during 1996 as compared to 1995. These expenditure reductions
included $13,573 in reduced property taxes from a property tax appeal, $14,602
in reduced resident manager costs, $6,054 in lower housekeeping wages and $9,861
in reduced renovation expenses. These reductions were partially offset by $7,250
in increased appraisal costs and by $7,609 of increased workers' compensation
insurance.
(iii) Bakersfield Motel
Average Average
Occupancy Room
Fiscal Year Ended: Rate Rate
- -------------------------------------------------------------------------
December 31, 1995 85.6% $30.87
December 31, 1996 87.2% $30.28
December 31, 1997 84.6% $32.35
Total Cash Flow
Expenditures From
Total and Properties
Fiscal Year Ended: Revenues Debt Service Operations
- -------------------------------------------------------------------------------
December 31, 1995 $882,261 $1,042,220 $(159,959)
December 31, 1996 $885,403 $919,915 $(34,512)
December 31, 1997 $910,849 $776,437 $134,412
The Bakersfield motel achieved a $25,446 or 2.9% increase in total
revenues during 1997 as compared to 1996. Guestroom revenue increased $30,045
due to increased average room rates. The railroad contracts were essentially
unchanged, while rate increases were achieved in other market segments with a
slight decline in rooms sold.
The Bakersfield motel achieved a $3,142 or 0.4% increase in total
revenues during 1996 as compared to 1995. Guestroom revenue was substantially
unchanged as the increase in occupancy was mostly offset by the decrease in
average room rate. Decreased corporate and leisure business segments were offset
by increased contract rooms to the Santa Fe Railroad and to Amtrak.
17
<PAGE>
The Partnership's Bakersfield motel experienced a $143,478 or 15.6%
decrease in total expenditures and debt service during 1997 as compared to 1996.
The loan that was secured by the Bakersfield property was liquidated in 1996.
The Partnership's Bakersfield motel experienced a $122,305 or 11.7%
decrease in total expenditures and debt service during 1996 as compared to 1995.
The $152,300 reduction in mortgage payments was partially offset by increased
expenditures of $7,250 for appraisal fees, $5,460 for workers' compensation
insurance and $5,329 for increased supplies.
II. Interim Financial Statements
(a) Liquidity and Capital Resources
As of March 31, 1998, the Partnership's current assets of $498,813
exceeded current liabilities of $153,934, providing an operating reserve of
$344,879. The General Partner's reserves target is 5% of adjusted capital
contributions, or $297,050.
The Partnership expended $13,090 on renovations and replacements during
the three months ended March 31, 1998, of which $7,140 was capitalized. The
expenditures included $7,140 for guestroom carpets.
(b) Results of Operations
Total Partnership income increased $5,886 or 1.4% for the first quarter
of 1998 as compared to the first quarter of 1997. The decrease in the average
occupancy rate from 74.3% in 1997 to 72.4% in 1998 was more than offset by an
increase in the average room rate from $35.25 in 1997 to $36.73 in 1998. The
decreased occupancy was due to a reduction in corporate business at the San
Bernardino motel.
Total Partnership expenses increased $23,412 or 6.5% primarily due to
increases in the minimum wage and to increases in legal, appraisal and other
costs associated with the proposed sale of the Properties and the liquidation of
the Partnership.
Other Financial Information
Items 304 and 305 of Regulation S-K promulgated by the Securities and
Exchange Commission are not applicable to the Partnership. Moreover, the General
Partner is unaware of any "Year 2000" problems which could impact the
Partnership's operations.
18
<PAGE>
- -
FINANCIAL STATEMENTS
for
INFORMATION STATEMENT
of
SUPER 8 MOTELS III, LTD.
June __, 1998
F-i
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SUPER 8 MOTELS III, LTD. Page
INDEPENDENT AUDITORS' REPORT .......................................... F-1
FINANCIAL STATEMENTS:
Balance Sheets, December 31, 1997 and 1996............................. F-2
Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995.................................. F-3
Statements of Partners' Equity for the Years
Ended December 31, 1997, 1996 and 1995............................ F-4
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.................................. F-5
Notes to Financial Statements.......................................... F-7
Balance Sheets, March 31, 1998 and December 31, 1997 (Unaudited)....... F- 11
Statements of Operations for the Three Months
Ended March 31, 1998 and 1997 (Unaudited)........................ F-12
Statements of Partners' Equity for the Three Months
Ended March 31, 1998 and 1997 (Unaudited)........................ F-13
Statement of Cash Flows for the Three Months
Ended March 31, 1998 (Unaudited)................................. F-14
Notes to Financial Statements.......................................... F-15
F-ii
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Super 8 Motels III, Ltd.
We have audited the accompanying balance sheets of Super 8 Motels III, Ltd., a
California limited partnership, as of December 31, 1997 and 1996, and the
related statements of operations, partners' equity, and cash flows for each of
the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Super 8 Motels III, Ltd. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
February 26, 1998
San Mateo, California
e-super8/s8397fs.wp8.wpd
F-1
<PAGE>
<TABLE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
------------ --------
Current Assets:
<S> <C> <C>
Cash and temporary investments (Notes 1, 3 and 6) $ 362,215 $ 254,782
Accounts receivable 100,184 68,114
Prepaid expenses 9,229 11,341
----------- -----------
Total Current Assets 471,628 334,237
---------- -----------
Property and Equipment (Note 2):
Land 1,670,129 1,670,129
Capital improvements 26,175 26,175
Buildings 3,276,870 3,276,870
Furniture and equipment 782,439 756,837
---------- -----------
5,755,613 5,730,011
Accumulated depreciation and amortization (2,968,172) (2,826,379)
--------- ----------
Property and Equipment, Net 2,787,441 2,903,632
--------- ----------
Total Assets $3,259,069 $3,237,869
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 105,668 $ 62,020
Due to related parties 10,749 1,765
---------- --------
Total Current Liabilities 116,417 63,785
---------- -------
Total Liabilities 116,417 63,785
---------- --------
Partners' Equity:
General Partner 20,376 19,205
Limited Partners 3,122,276 3,154,879
--------- ----------
Total Partners' Equity 3,142,652 3,174,084
--------- ----------
Total Liabilities and Partners' Equity $3,259,069 $3,237,869
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
<TABLE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended December 31:
1997 1996 1995
---------- ---------- ---------
Income:
<S> <C> <C> <C>
Guest room $1,592,209 $1,464,850 $1,526,742
Telephone and vending 33,356 34,128 32,654
Interest 13,116 8,288 10,071
Other 3,178 2,996 1,644
------------ ------------ -----------
Total Income 1,641,859 1,510,262 1,571,111
---------- ---------- ----------
Expenses:
Motel operations (Notes 4 and 5) 1,164,112 1,189,294 1,174,475
General and administrative (Note 4) 127,448 74,474 57,956
Depreciation and amortization (Note 2) 151,769 162,569 164,599
Interest - 7,765 27,290
Property management fees (Note 4) 81,437 75,044 78,041
---------- ----------- -----------
Total Expenses 1,524,766 1,509,146 1,502,361
---------- ---------- ----------
Net Income $ 117,093 $ 1,116 $ 68,750
========== =========== ===========
Net Income Allocable to General Partner $1,171 $11 $688
====== === ====
Net Income Allocable to Limited Partners $115,922 $1,105 $68,062
======== ====== =======
Net Income Per Partnership Unit (Note 1) $19.52 $.19 $11.46
====== ==== ======
Distributions to Limited Partners Per
Partnership Unit (Note 1) $25.00 $ - $ -
====== ======== =====
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31:
1997 1996 1995
---------- ---------- -------
General Partner:
Balance, beginning of year $ 19,205 $ 19,194 $ 18,506
Net income 1,171 11 688
------------ ------------- -----------
Balance, End of Year 20,376 19,205 19,194
----------- ----------- ----------
Limited Partners:
Balance, beginning of year 3,154,879 3,153,774 3,085,712
Net Income 115,922 1,105 68,062
Cash Distributions (148,525) - -
----------- -------------- ---------
Balance, End of Year 3,122,276 3,154,879 3,153,774
---------- ---------- ----------
Total Partners' Equity $3,142,652 $3,174,084 $3,172,968
========== ========== ==========
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended December 31:
1997 1996 1995
---------- ---------- -------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Received from motel operations $1,596,674 $1,505,571 $1,575,015
Expended for motel operations and
general and administrative expenses (1,317,510) (1,359,033) (1,313,408)
Interest received 13,115 9,401 9,154
Interest paid - (9,044) (29,666)
-------------- ------------ ----------
Net Cash Provided by Operating Activities 292,279 146,895 241,095
----------- ----------- ----------
Cash Flows From Investing Activities:
Proceeds from sale of equipment 120 500 5,366
Purchases of property and equipment (36,441) (24,711) (45,880)
---------- ----------- ----------
Net Cash Used by Investing Activities (36,321) (24,211) (40,514)
---------- ----------- ----------
Cash Flows From Financing Activities:
Distributions paid to limited partners (148,525) - -
Payments on notes payable - (153,456) (285,134)
-------------- ----------- ---------
Net Cash Used by Financing Activities (148,525) (153,456) (285,134)
----------- ----------- ---------
Net Increase (Decrease) in Cash and
Temporary Investments 107,433 (30,772) (84,553)
Cash and Temporary Investments:
Beginning of year 254,782 285,554 370,107
----------- ----------- ---------
End of Year $ 362,215 $ 254,782 $285,554
========== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
<TABLE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31:
1997 1996 1995
---------- ---------- -------
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
<S> <C> <C> <C>
Net income $117,093 $ 1,116 $ 68,750
-------- --------- --------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 151,769 162,569 164,599
(Gain) loss on disposition of property and equipment 743 (500) 433
Decrease in accounts receivable (32,070) 4,710 13,058
(Increase) decrease in prepaid expenses 2,112 247 (866)
Increase (decrease) in accounts payable and
accrued liabilities 43,648 (23,012) 3,033
Increase (decrease) in due to related parties 8,984 1,765 (7,912)
--------- --------- ----------
Total Adjustments 175,186 145,779 172,345
-------- -------- --------
Net Cash Provided by Operating Activities $292,279 $146,895 $241,095
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Motels III, Ltd. is a limited partnership organized under California law
on June 2, 1980 to acquire and operate motel properties in San Bernardino and
Bakersfield, California. The term of the Partnership expires December 31, 2030,
and may be dissolved earlier under certain circumstances. The San Bernardino
motel was opened in March, 1982, and the Bakersfield motel was opened in
September, 1982. The Partnership grants credit to customers, substantially all
of which are local businesses in San Bernardino or Bakersfield.
The general partner is Grotewohl Management Services, Inc., the fifty
percent stockholder and officer of which is Philip B. Grotewohl.
The net income or net loss of the Partnership is allocated 1% to the General
Partner and 99% to the Limited Partners. Net income and distributions per
Partnership unit are based on 5,941 units outstanding. All Partnership units are
owned by the Limited Partners.
The Partnership agreement requires that the Partnership maintain working capital
reserves for normal repairs, replacements, working capital and contingencies in
an amount of at least 5% of adjusted capital contributions ($297,050 at December
31, 1997). As of December 31, 1997 the Partnership had working capital of
$355,211.
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. At December 31, 1997, assets and liabilities on a tax basis were
approximately $1,000,000 lower than on a book basis due to accelerated
depreciation methods used for tax purposes.
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 150-200% declining balance 10-20 years
Buildings Straight-line and 10-25 years
150% declining balance
Furniture and equipment 200% declining balance 4-7 years
Costs incurred in connection with maintenance and repair are charged to expense.
Major renewals and betterments that materially prolong the lives of assets are
capitalized.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
F-7
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
Cash and temporary investments as of December 31, 1997 and 1996 consists of the
following:
1997 1996
-------- ------
Cash in bank $ 44,675 $ 43,305
Money market accounts 317,540 211,477
--------- ---------
Total Cash and Temporary Investments $362,215 $254,782
======== ========
Temporary investments are recorded at cost, which approximates market value. The
Partnership considers temporary investments and all highly liquid marketable
securities with original maturities of three months or less to be cash
equivalents for purposes of the statement of cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS
Franchise Fees
Super 8 Motels, Inc., now a wholly-owned subsidiary of Hospitality Franchise
Systems, Inc., is franchisor of all Super 8 Motels. The Partnership pays to the
franchisor monthly fees equal to 4% of the gross room revenues of each motel and
contributes an additional 1% of its gross room revenues to an advertising fund
administered by the franchisor. In return, the franchisor provides the right to
use the name "Super 8," a national institutional advertising program, an advance
room reservation system, and inspection services. These costs ($79,610, $73,242
and $76,337 for the years ended December 31, 1997, 1996 and 1995, respectively)
are included in motel operations expense in the accompanying statements of
operations. The Partnership operates its motel properties as a franchisee of
Super 8 Motels, Inc., through a sub-franchise agreement with Brown & Grotewohl,
a California general partnership, of which Grotewohl Management Services, Inc.
(see Note 1) is a 50% owner. Under the sub-franchise agreement, Brown &
Grotewohl earned 40% of the above franchise fees, which amounted to $31,844,
$29,297 and $30,535 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Property Management Fees
The General Partner, or its affiliates, handles the management of the motel
properties of the Partnership. The fee for this service is 5% of the gross
revenues from Partnership operations, as defined in the Partnership agreement,
and amounted to $81,437, $75,044 and $78,041 for the years ended December 31,
1997, 1996 and 1995, respectively.
Subordinated Partnership Management Fees
During the Partnership's operational stage, the General Partner is to receive 9%
of cash available for distributions for Partnership management services, along
with an additional 1% of cash available for distributions on account of its
interest in the profit and losses subordinated in each case, however, to receipt
by the Limited Partners of a 10% per annum cumulative pre-tax return on their
adjusted capital contributions. At December 31, 1997, the Limited Partners had
not received the 10% cumulative return, and accordingly, no Partnership
management fees are presently payable and therefore are not reflected in these
financial statements. Management believes it is not likely that these fees will
become payable in the future. 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 a refinancing. As of December 31, 1997, the cumulative amount of these
fees was $438,290.
F-8
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Subordinated Incentive Distributions
Under the terms of the Partnership agreement, the General Partner is to receive
15% of distributions of net proceeds from the sale or refinancing of Partnership
properties remaining after distribution to the Limited Partners of any portion
thereof required to cause distributions to the Limited Partners from all sources
to be equal to their capital contributions plus a cumulative 10% per annum
pre-tax return on their adjusted capital contributions. Through December 31,
1997, there had been no such sales or refinancings.
Administrative Expenses Shared by the Partnership and Its Affiliates
There are certain administrative expenses allocated between the Partnership and
other partnerships managed by the General Partner and its affiliates. These
expenses, which are allocated based on usage are telephone, data processing,
rent of the administrative office, and administrative salaries. The
administrative expenses allocated to the Partnership were approximately
$230,000, $225,000 and $223,000 during the years ended December 31, 1997, 1996
and 1995, respectively, and are included in general and administrative and motel
operating expenses in the accompanying statements of operations. Included in
administrative salaries are allocated amounts paid to two employees who are
related to Philip B. Grotewohl, the fifty percent stockholder of Grotewohl
Management Services, Inc., the General Partner.
NOTE 5 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating costs for
the following years:
1997 1996 1995
---------- ---------- -------
Salaries and related costs $ 454,635 $ 447,181 $ 441,334
Franchise and advertising fees 79,610 73,242 76,337
Utilities 111,274 111,366 121,969
Allocated costs, mainly
indirect salaries 186,004 184,064 181,607
Renovations and replacements 30,280 46,007 35,740
Other operating expenses 302,309 327,434 317,488
----------- ----------- -----------
Total motel operating expenses $1,164,112 $1,189,294 $1,174,475
========== ========== ==========
F-9
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - CONCENTRATION OF CREDIT RISK
The Partnership maintains its cash accounts in four commercial banks located in
California. Accounts at each bank are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000 per bank. A summary of the total
insured and uninsured cash balances (not reduced by outstanding checks) as of
December 31, 1997 follows:
Total cash in all California banks $406,606
Portion insured by the FDIC (359,665)
-------
Uninsured cash balances $ 46,941
========
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and temporary investments approximates fair value
because of the short-term maturity of those investments.
NOTE 8 - LEGAL PROCEEDINGS AND SUBSEQUENT EVENT
On October 27, 1997, a complaint was filed in the United States District Court
by the General Partner naming as defendants Everest/Madison Investors, LLC,
Everest Lodging Investors, LLC, Everest Properties II, LLC, Everest Properties,
Inc., W. Robert Kohorst, David I. Lesser, The Blackacre Capital Group, L.P.,
Blackacre Capital Management Corp., Jeffrey B. Citron, Ronald J. Kravit, and
Stephen P. Enquist. The complaint alleged that the defendants violated certain
provisions of the Security and Exchange Act of 1934 and sought injunctive and
declarative relief.
On October 28, 1997, a complaint was filed in the Superior Court of the State of
California, Sacramento County by Everest Lodging Investors, LLC and
Everest/Madison Investors, LLC as plaintiffs against the General Partners of the
Partnership and four other partnerships which have common general partners as
nominal defendants. The complaint pertained to the receipt by the defendants of
franchise fees and reimbursement of expenses, the indications of interest made
by the plaintiffs in purchasing the properties of the nominal defendants, and
the alleged refusal of the defendants to provide information required by the
terms of the Partnership's partnership agreement and California law.
On February 20, 1998, the parties entered into a settlement agreement and both
of the above complaints were dismissed. Pursuant to the terms of the settlement
agreement, the General Partner has agreed to proceed with the marketing for sale
of the properties of the Partnerships, among other things, if by June 30, 1998,
it receives an offer to purchase one or more properties for a cash price equal
to 75% or more of the appraised value. In addition, the General Partner has
agreed to submit the offer for approval to the limited partners as required by
the partnership agreements and applicable law. The General Partner has also
agreed that upon the sale of one or more properties, to distribute promptly the
proceeds of the sale after payment of payables and retention of reserves to pay
anticipated expenses. The Everest Defendants agreed not to generally solicit the
acquisition of any additional units of the Partnerships without first filing
necessary documents with the SEC. Under the terms of the settlement agreement,
the Partnerships have agreed to reimburse the Everest Defendants for certain
costs not to exceed $60,000, to be allocated among the Partnerships. Of this
amount, the Partnership will pay approximately $12,000 during the year ended
December 31, 1998.
F-10
<PAGE>
<TABLE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
Balance Sheet
March 31, 1998 and December 31, 1997
3/31/98 12/31/97
----------------- ---------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and temporary investments $ 374,860 $ 362,215
Accounts receivable 123,430 100,184
Prepaid expenses 523 9,229
----------------- ---------------------
Total current assets 498,813 471,628
----------------- ---------------------
Property and Equipment:
Land 1,670,129 1,670,129
Capital improvements 26,175 26,175
Buildings 3,276,870 3,276,870
Furniture and equipment 789,579 782,439
----------------- ---------------------
5,762,753 5,755,613
Accumulated depreciation (3,003,882) (2,968,172)
----------------- ---------------------
Property and equipment, net 2,758,871 2,787,441
----------------- ---------------------
Total Assets $ 3,257,684 $ 3,259,069
================= =====================
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities 153,934 116,417
----------------- ---------------------
Total current liabilities 153,934 116,417
----------------- ---------------------
Total liabilities 153,934 116,417
----------------- ---------------------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 20,730 20,376
Limited Partners 3,083,020 3,122,276
----------------- ---------------------
Total partners' equity 3,103,750 3,142,652
----------------- ---------------------
Total Liabilities and Partners' Equity $ 3,257,684 $ 3,259,069
================= =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-11
<PAGE>
<TABLE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
Statement of Operations
For the three Months Ended March 31, 1998 and 1997
Three Months Three Months
Ended Ended
3/31/98 3/31/97
----------------- ---------------------
Income:
<S> <C> <C>
Guest room $ 409,194 $ 403,295
Telephone and vending 7,241 8,408
Interest 2,615 1,362
Other 820 919
----------------- ---------------------
Total Income 419,870 413,984
----------------- ---------------------
Expenses:
Motel operating expenses (Note 2) 278,553 279,414
General and administrative 49,383 22,461
Depreciation and amortization 35,710 38,576
Property management fees 20,863 20,646
----------------- ---------------------
Total Expenses 384,509 361,097
----------------- ---------------------
Net Income (Loss) $ 35,361 $ 52,887
================= =====================
Net Income (Loss) Allocable
to General Partners $354 $529
================= =====================
Net Income (Loss) Allocable
to Limited Partners $35,007 $52,358
================= =====================
Net Income (Loss)
per Partnership Unit $5.89 $8.81
================= =====================
Distribution to Limited Partners
per Partnership Unit $12.50 $0.00
================= =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-12
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
Statement of Partners' Equity
For the three Months Ended March 31, 1998 and 1997
1997 1997
----------------- ---------------------
General Partners:
Balance at beginning of year $ 20,376 $ 19,205
Net income (loss) 354 529
----------------- ---------------------
Balance at end of period 20,730 19,734
----------------- ---------------------
Limited Partners:
Balance at beginning of year 3,122,276 3,154,879
Net income (loss) 35,007 52,358
Less: Cash distributions (74,263) -
----------------- ---------------------
Balance at end of period 3,083,020 3,207,237
----------------- ---------------------
Total balance at end of period $ 3,103,750 $ 3,226,971
================= =====================
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
<TABLE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
Statement of Cash Flows
For the three Months Ended March 31, 1998 and 1997
1998 1997
----------------- ---------------------
Cash Flows From Operating Activities:
<S> <C> <C>
Received from motel revenues $ 394,009 $ 410,194
Expended for motel operations
and general and administrative expenses (302,576) (282,831)
Interest received 2,615 1,362
----------------- ---------------------
Net cash provided (used) by operating activities 94,048 128,725
----------------- ---------------------
Cash Flows From Investing Activities:
Purchases of property and equipment (7,140) -
Proceeds from sale of equipment - 120
----------------- ---------------------
Net cash provided (used) by investing activities (7,140) 120
----------------- ---------------------
Cash Flows From Financing Activities:
Distributions paid to Limited Partners (74,263) -
----------------- ---------------------
Net cash provided (used) by financing activities (74,263) -
----------------- ---------------------
Net increase in cash and temporary investments 12,645 128,845
Cash and temporary investments:
Beginning of year 362,215 254,782
================= =====================
End of period $ 374,860 $ 383,627
================= =====================
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net income (loss) $ 35,361 $ 52,887
----------------- ---------------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 35,710 38,576
Gain on disposition of property - (120)
(Increase) decrease in accounts receivable (23,246) (2,428)
(Increase) decrease in prepaid expenses 8,706 9,239
Increase (decrease) in accounts payable
and accrued liabilities 37,517 30,571
----------------- ---------------------
Total adjustments 58,687 75,838
----------------- ---------------------
Net cash provided by operating activities $ 94,048 $ 128,725
================= =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
Notes to Financial Statements
March 31, 1998
Note 1:
The attached interim financial statements include all adjustments (consisting of
only normal recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results for the period presented.
Users of these interim financial statements should refer to the audited
financial statements for the year ended December 31, 1997 for a complete
disclosure of significant accounting policies and practices and other detail
necessary for a fair presentation of the financial statements.
In accordance with the partnership agreement, the following information is
presented related to fees paid or accrued to the General Partner or affiliates
for the period.
Property Management Fees $20,863
Franchise Fees $8,184
Note 2:
The following table summarizes the major components of motel operating expenses
for the periods reported:
Three Months Three
Months
Ended Ended
3/31/98 3/31/97
----------------- ---------------------
Salaries and related costs $ 115,284 $ 109,729
Franchise and advertising 20,460 20,171
Utilities 21,235 22,665
Allocated costs,
mainly indirect salaries 49,761 44,110
Replacements and renovations 5,950 12,040
Other operating expenses 65,863 70,699
----------------- ---------------------
Total motel operating expenses $ 278,553 $ 279,414
================= =====================
The following additional material contingencies are required to be restated
in interim reports under federal securities law: None.
F-15
<PAGE>
APPENDIX 1
REVISED PRELIMINARY COPY
SUPER 8 MOTELS III, LTD.,
a California limited partnership
___________________________
Notice of Proposed Action By Written Consent
TO THE LIMITED PARTNERS OF
SUPER 8 MOTELS III, LTD.:
The Limited Partners of SUPER 8 MOTELS III, LTD., a California limited
partnership (the "Partnership"), are being asked by the Partnership and the
General Partner to consider and approve by written consent the proposed sale of
substantially all of the Partnership's assets.
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 GENERAL PARTNER PURSUANT TO NOTICE MAILED TO THE LIMITED PARTNERS) WILL
BE COUNTED TO DETERMINE WHETHER THE PROPOSAL IS APPROVED.
June ___, 1998
Grotewohl Management Services, Inc.,
a California corporation,
General Partner
<PAGE>
APPENDIX 2
REVISED PRELIMINARY COPY
ACTION BY WRITTEN CONSENT OF LIMITED PARTNERS
SUPER 8 MOTELS III, LTD.,
a California limited partnership
2030 J Street
Sacramento, California 95814
(916) 442-9183
THIS CONSENT IS SOLICITED ON BEHALF OF THE PARTNERSHIP AND THE GENERAL PARTNER.
The undersigned votes all the units of limited partnership interest of Super 8
Motels III, Ltd., a California limited partnership, held of record by him, her
or it as follows:
PROPOSAL TO APPROVE THE SALE OF SUBSTANTIALLY ALL OF THE
PARTNERSHIP'S ASSETS, as described in the Information Statement dated June
___, 1998. Please mark one of the following:
FOR [ ] AGAINST [ ] ABSTAIN [ ]
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 officer. If a
partnership, please sign in
partnership name by authorized
person.
DATED: ________________, 1998 __________________________________
Signature
__________________________________
Additional signature, if held
jointly
PURCHASE AND SALE AGREEMENT
Dated as of April 30, 1998
By and Between
Super 8 Motels III, 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 .........................................14
SECTION 5: OPERATION OF THE PROPERTIES PRIOR
TO CLOSING ............................................15
SECTION 6: CONDITIONS TO CLOSING .................................16
SECTION 7: CLOSING ...............................................22
SECTION 8: INDEMNIFICATION ......................................32
SECTION 9: WAIVER ................................................32
SECTION 10: BROKERS ...............................................33
SECTION 11: SURVIVAL; FURTHER ASSURANCES ..........................33
SECTION 12: NO THIRD PARTY BENEFITS ...............................34
SECTION 13: REMEDIES ..............................................35
SECTION 14: TERMINATION ...........................................35
SECTION 15: MISCELLANEOUS .........................................36
SECTION 16: NOTICES ...............................................37
SECTION 17: ATTORNEYS' FEES .......................................38
SECTION 18: CONFIDENTIALITY .......................................39
- i -
<PAGE>
LIST OF EXHIBITS
Exhibit Description Primary Section Reference
A Identification of Motels 1 (J)
B List of Franchise Agreements 1 (F)
C Allocation of Purchase Price 2 (A)
D List of Service Contracts 3 (J)
E List of Equipment Leases 3 (K)
F List of Tenant Leases 3 (L)
G List of Labor Contracts 3 (M)
H Form of Grant Deeds 7 (C)(1)(a)
I Bills of Sale and Assignment,
Personal Property 7(C)(1)(b)
J Assignment of Franchise Agreements 7(C)(1)(c)
K Assignment of Service Contracts 7(C)(1)(d)
L Assignment of Tenant Leases 7(C)(1)(e)
M Assignment of Equipment Leases 7(C)(1)(f)
N Estoppel Certificates 7(C)(1)(h)
- ii -
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made as of the 30th day of April, 1998, by and
between SUPER 8 MOTELS III, 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 two Super 8 Motels, as a franchisee
of Super 8 Motels, Inc., in the cities of Bakersfield and San Bernardino,
California, and desires to sell such motels to Purchaser on the terms and
conditions set forth below; and
WHEREAS, the Purchaser desires to purchase such motels from Seller on
the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and the respective
undertakings of the parties hereinafter set forth, it is hereby agreed:
SECTION 1: DEFINITIONS
Wherever used in this Agreement, the words and phrases set forth below
shall have the meanings set forth below unless the context clearly requires
otherwise.
- 1 -
<PAGE>
A. "Bakersfield Motel" refers to the Super 8 Motel located at 901 Real
Road, Bakersfield, California 93309.
B. "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.
C. "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.
D. "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.
E. "Financial Statements" means all financial statements and information
relating to the Properties which are referred to in Section 3(N) hereof.
F. "Franchise Agreements" refers to the franchise agreements between the
Seller and Super 8 Motels, Inc., as identified on Exhibit B hereto.
G. "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
- 2 -
<PAGE>
owned by Seller and used in connection with the ownership, operation, and
maintenance of the Properties.
H. "GMS" refers to Grotewohl Management Services, Inc., a California
corporation and the general partner of the Seller.
I. "Improvements" means all buildings, structures, fixtures and other
improvements now or hereafter located or erected on the Purchased Land.
J. "Motels" refers to the Bakersfield Motel and the San Bernardino Motel,
as identified on Exhibit A hereto.
K. "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 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
- 3 -
<PAGE>
services presently supplied to the Properties, and (xiii) all documents
relating to employees at the Properties.
L. "Properties" means the Seller's interest in the Purchased Land, the
Motels, the Personal Property, and the Improvements.
M. "Property Agreement(s)" means, collectively, the Franchise Agree ments,
the Purchased Land, the Tenant Leases, the Service Contracts, the Permitted
Exceptions, the Equipment Leases, and any other lease, rental agreement, loan
agreement, loan commitment, mortgage, deed of trust, easement, covenant or
agreement affecting Seller's interest in the Properties or in any Property.
N. "Purchased Land" refers to the two parcels of land purchased by Seller
in Bakersfield and San Bernardino, California, where the Bakersfield Motel and
the San Bernardino Motel, respectively, are located.
O. "San Bernardino Motel" refers to the Super 8 Motel located at 294 East
Hospitality Lane, San Bernardino, California 92408.
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 Nine Hundred Thousand Dollars
($2,900,000) subject to prorations as set forth below. Exhibit C hereto sets
forth the allocation of the Purchase Price among the two Motels.
B. Earnest Money. Upon the later to occur of the completion of the
inspection period referred to in Section 6(4) hereof or the date Seller notifies
Purchaser that Seller's limited partners have approved this Agreement and all
matters related thereto (Section 6(11) hereof), Purchaser shall deposit $15,000
(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 franchisors and sub-franchisors under the
Franchise Agreements and (ii) 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, subject
only to the Tenant Leases, Permitted Exceptions, and those liens and
encumbrances which will be released at Closing. Subject to obtaining the consent
of the limited partners of Seller, Seller has the full right, power, and
authority to convey its interest in and to the Properties to Purchaser.
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
each of the Properties pursuant to which Seller operates each of the Properties
as a Super 8 Motel. Exhibit B also includes a list of all amendments and
modifications thereto. To the best of Seller's knowledge, except as may be shown
in said exhibit, all of the Franchise Agreements are in full force and effect
and free from default, Seller is current in the payment of all fees due under
the Franchise Agreements, and there is no existing event which, with the passage
of time or the giving of notice, or both, could become a default under the
Franchise Agreements, and there are no disputes, claims, or rights of set-off
under the Franchise Agreements.
J. 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 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.
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K. 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.
L. Tenant Leases. Attached hereto as Exhibit F is a list of all
outstanding leases or agreements 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 as the "Tenant Leases"). Except as shown on such exhibit, (a) to
the best of Seller's knowledge, there are no defaults under any or 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
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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).
M. Labor Contracts. Except as disclosed on Exhibit G hereto, there are no
employment agreements or union contracts with respect to the Motels that will be
binding on Purchaser after Closing, and, other than as disclosed on Exhibit 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.
N. 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
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which are required to be shown in accordance with generally accepted accounting
principles as of the date thereof and which are not shown on such financial
statements. Seller has delivered to Purchaser operating statements for each of
the Properties for the calendar year 1997, which are true, complete and correct,
and no material adverse change has occurred in the financial condition of the
Properties from the date thereof to the date hereof.
O. 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, 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.
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P. 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.
Q. Work Under 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 any
license relating to the Property, and there is no existing event which, with the
passage of time or the giving of notice, or both, could become a default under
any contract for the performance of services under any such license, and there
are no disputes, claims, or rights of set-off under any such contract.
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,
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and are or will be legal, valid and binding obligations of Purchaser. No
consents and permissions are required to be obtained by Purchaser for the
execution and performance of this Agreement and the other documents to be
executed by Purchaser hereunder. The consummation of the transactions
contemplated herein and the fulfillment of the terms hereof will not result in a
breach of any of the terms or provisions of, or constitute a default under, any
agreement or document to which Purchaser is a party or by which it is bound, or
any order, rule or regulation of any court or of any federal or state regulatory
body or any administrative agency or any other governmental body having
jurisdiction over Purchaser.
C. No Proceedings. There are not now pending or, to the best of
Purchaser's knowledge, threatened, any proceeding, legal, equitable or
otherwise, against Purchaser which would affect its ability to perform its
obligations hereunder. There is not now pending or, to the best of Purchaser's
knowledge, threatened any 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);
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(b) maintain the FF & E in the same manner as currently being main-tained,
and not remove any of the FF & E from the Properties unless replaced with FF & E
of at least as good a quality as that removed;
(c) maintain the Consumables in the same manner and quantity as currently
being maintained, and replace any Consumables used at the Properties with new
Consumables which are substantially equal in quality and quantity to those that
have been used at the Properties;
(d) maintain, or cause to be maintained, all existing insurance carried by
Seller on the Improvements;
(e) without the prior written consent of Purchaser, not enter into any new
Property Agreements, or any other agreements affecting the Properties which
would be binding on Purchaser after Closing, nor modify, amend, terminate,
cancel or grant 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).
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(1) Purchaser shall have obtained each of the following at Seller's
expense: (i) an ALTA Survey prepared by a licensed surveyor of each of the
Properties (hereinafter, the "Surveys") certified to Purchaser, Purchaser's
lender, and to the Title Company, (ii) preliminary title reports for each of the
Properties (the "Title Reports") together with legible copies of all exceptions
appearing in such reports issued by the Title Company, and (iii) a UCC search
(the "UCC Search") of all currently effective financing statements naming Seller
as debtor from the California Secretary of State, together with legible copies
of all of such financing statements. Purchaser shall have until June 30, 1998 to
approve the Surveys, the Title Reports, and the results of the UCC Search. If
Purchaser approves the Surveys, the Title Reports, and the results of the UCC
Search, then all matters showing thereon shall be deemed "Permitted Exceptions."
If Purchaser disapproves any matters in the Surveys, the Title Reports, or the
UCC Search, then Seller may either cure such matters, in which case the
remaining matters approved by Purchaser shall be deemed Permitted Exceptions, or
notify Purchaser that it has elected not to cure such matters. Any such notice
by Seller shall be given to Purchaser not later than five (5) days following the
date Purchaser notifies Seller of any objectionable title matters. If Seller
elects not to cure any matter which has been disapproved by Purchaser, then
Purchaser may elect either to accept such matter as a Permitted Exception or
terminate this Agreement (and, in such event, Purchaser shall be entitled to the
return of its Earnest Money).
(2) As a condition to each party's obligation to perform hereunder, the
due performance by the other of all undertakings and agreements to be performed
by the other hereunder and the truth of each representation and warranty as set
forth herein made pursuant to this Agreement by the other at the Closing Date.
(3) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), that there shall not have occurred between the date hereof
and the Closing Date, inclusive, destruction of or damage or loss to the
Properties (whether
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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.
(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
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"as is," "where is" and "with all faults," except as set forth in Section 3.
Purchaser further agrees and confirms that it is not relying on information
other than the financial statements and other information supplied during the
Inspection Period and Seller makes no representation or warranty whatsoever as
to the condition or value of the Properties or otherwise except as set forth in
Section 3.
(5) As a condition of Purchaser's obligation to perform hereunder (and
not as a default), Purchaser shall have until June 30, 1998 to obtain a
commitment (the "Lender's Commitment") from a third-party lender to provide
financing in an amount of not less than 90% of the Purchase Price of the
Properties on terms deemed satisfactory by Purchaser, and such lender shall have
until July 15, 1998 (i) to perform its due diligence (including, without
limitation, reviewing the Surveys, the Title Reports, and the results of the UCC
Search, and to otherwise satisfy itself that all conditions to loan funding are
satisfied), (ii) to prepare and approve loan documentation acceptable to the
lender and Purchaser, and (iii) to satisfy itself that all conditions to loan
funding have been satisfied (conditions (i), (ii) and (iii) referred to as the
"Lender's Conditions"). If Purchaser does not notify Seller in writing on or
prior to July 15, 1998 that it has not obtained the Lender's Commitment, or that
Purchaser's lender has not satisfied the Lender's Conditions, then the
conditions of this subsection (5) shall be deemed waived by Purchaser. If
Purchaser notifies Seller in writing on or prior to July 15, 1998 that it has
not obtained the Lender's Commit ment or that Purchaser's lender has not
satisfied the Lender's Conditions, then this Agreement shall become null and
void and terminated, with neither Purchaser nor Seller having any further
obligation to consummate this Agreement or any liability to the other party for
the failure of this Agreement. On any such termination of this Agreement,
Purchaser shall be entitled to a return of its Earnest Money.
(6) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), that there shall not have occurred at any time or times on or
before the
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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, of all necessary consents 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. 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
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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.
(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.
///
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SECTION 7: CLOSING
A. Time. The Closing hereunder shall occur on the Closing Date at the
offices of the Title Company.
B. Actions. At the Closing, each party shall satisfy itself that the other
is then in position to deliver the items specified in Section 7(C) below and
that the conditions contained herein have been satisfied. Upon being so
satisfied and concurrently with the delivery of the documents described below,
the following, subject to the terms and conditions hereof, shall occur:
(1) Seller shall convey each of the Properties to Purchaser; and
(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 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):
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(a) grant deeds in the form attached hereto as Exhibit H executed by the
Seller;
(b) bills 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;
(d) an assignment of the Service Contracts, in the form of Exhibit K
attached hereto (the "Assignment of Service Contracts"), executed by Seller,
assigning to Purchaser the Service Contracts;
(e) an assignment of the Tenant Leases, in the form of Exhibit L hereto
(the "Assignment of Tenant Leases"), executed by Seller, assigning the Tenant
Leases to Purchaser;
(f) an assignment of the Equipment Leases, in the form of Exhibit M hereto
(the "Assignment of Equipment Leases"), executed by Seller, assigning to
Purchaser the Equipment Leases;
(g) 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.
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<PAGE>
(h) 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 N
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 N.
(i) 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;
(j) 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;
(k) a closing statement setting forth all prorations and credits required
hereunder;
(l) UCC searches showing no financing statements on file with respect to
the Personal Property;
(m) an affidavit from Seller that it is not a "foreign person" or subject
to withholding requirements under the Foreign Investment in
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<PAGE>
Real Property Tax Act of 1980, as amended, and a comparable affidavit or
form under California law;
(n) any documents reasonably required of Seller by the Title Company;
(o) evidence satisfactory to Purchaser that Seller has the right to assign
to Purchaser the exclusive right to use the names of the Properties;
(p) the original of all Property Agreements to the extent they are in the
possession of Seller or its agents;
(q) all keys and combinations to locks located at the Properties;
(r) 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;
(s) a complete set of all guest registration cards, guest transcripts,
guests' histories and all other guest information;
(t) a complete list of all advance room reservations and functions in
reasonable detail so as to enable Purchaser to honor them; and
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<PAGE>
(u) evidence that the Seller has terminated all existing management
agreements for the Motels (unless Purchaser has notified Seller, no later than
thirty (30) days prior to the Closing Date, that it has elected to continue such
management agreements in force).
(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
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, Tenant Leases, Service Contracts, and Equipment Leases.
D. Prorations. The Purchase Price for the Property shall be subject to
prorations and credits as follows to be determined as of 12:01 a.m. on the
Closing Date:
1. Rents Payable Under Tenant Leases. Any portion of any rents collected
subsequent to the Closing Date and properly allocable to periods prior to the
Closing Date, net of Purchaser's third-party costs of collection, if any, shall
be paid,
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<PAGE>
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 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.
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<PAGE>
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 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, Service Contracts, and Equipment Leases. Subject
to the provisions of Section 6(8) hereof, any amounts prepaid or payable under
any Franchise Agreement, Service Contract, or Equipment Lease shall
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<PAGE>
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.
8. Sales Tax. Seller hereby agrees to indemnify and hold Purchaser harmless
from the payment of any and all sales, occupancy, use or other taxes due in
connection with the operation of the Properties prior to the Closing Date. The
indemnification set forth herein shall survive the Closing.
9. Taxes. Purchaser shall receive a credit for any accrued but unpaid real
estate taxes imposed in respect of the Properties for the portion of the current
year which has elapsed prior to the Closing Date (and, to the extent unpaid, for
prior years). Seller shall also give Purchaser a credit for any special
assessments which are due and payable in connection with the Properties prior to
Closing.
10. Utilities. Utilities and fuel, including, without limitation, water,
electricity, and gas shall be prorated as of Closing. The Seller shall cause the
meters, if any, for utilities to be read the day on which the Closing Date
occurs and to pay the bills rendered on the basis of such readings. If any such
meter reading for any utility is not available, then adjustment therefor shall
be made on the basis of the most recently issued bills therefor which are based
on meter readings no earlier than thirty (30) days prior to the Closing Date;
and such adjustment shall be prorated when the next utility bills are received.
11. Employee Expenses. Purchaser shall not be responsible for any wages or
benefits payable to employees of the Motels accruing prior to the Closing Date
and Purchaser shall not be required to assume any obligation with respect to any
employee benefits that were incurred prior to the Closing Date; and Seller shall
indemnify Purchaser against any claim in connection therewith. The indemnity
- 29 -
<PAGE>
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 laws; provided, however, Purchaser acknowledges that Seller
is not giving any notice under the Worker Adjustment and Retraining Act and
agrees to indemnify Purchaser and hold Purchaser harmless from and against any
and all costs and expenses incurred by Purchaser as a result of Seller's failure
to give such notice.
12. Purchaser shall receive a credit for any reduction in the brokerage
commission payable pursuant to Section 10 hereof.
E. Staff. Seller shall terminate or arrange for the termination of all
Motel employees as of the Closing Date and shall pay all wages and fringe
benefits (including, but not limited to, accrued vacation pay and payroll taxes)
through the Closing Date. Purchaser shall not be obligated to employ any such
Motel employee, but may do so on such terms and for such compensation as
Purchaser (and any such employee) deems appropriate.
Prior to Closing, Seller shall deliver to Purchaser copies of
all information and records necessary to support the prorations hereunder. In
the event any prorations made pursuant hereto shall prove incorrect for any
reason whatsoever, either party shall be entitled to an adjustment to correct
the same.
F. Expenses. The Seller shall pay (1) for all documentary transfer taxes,
(2) the premium attributable to the standard coverage portion of the "Owner's
Policies" (defined below), (3) the sales taxes arising in connection with the
sale of the Personal Property, Consumables, and FF & E by Seller to Purchaser,
and (4) one-half
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<PAGE>
of escrow fees and costs. Purchaser shall pay (1) all costs associated with its
due diligence investigation, (2) all recording costs, (3) the premium
attributable to the extended coverage portion of the Owner's Policies (and any
endorsements or affirmative coverages), (4) one-half of escrow fees and costs.
Purchaser shall reimburse Seller at Closing for the costs of any appraisal of
the Properties obtained by Seller subsequent to the appraisals of PKF Consulting
of December 4, 1997 and for the costs incurred by Seller in obtaining any
engineering or environmental studies or reports of the Properties in preparation
for their sale. Each party shall pay its own attorneys' fees. Seller and
Purchaser shall execute and deliver such transfer and sales tax returns as may
be required by law.
G. Title. It shall be a condition of Closing that the Title Company issue
to Purchaser, in form and substance acceptable to Purchaser, an owner's policy
of title insurance for each Property (the "Owner's Policies") with Purchaser
named as insured, dated as of the Closing Date, with a liability limit equal to
the Purchase Price allocable to the Property, insuring that fee title to the
Improvements and the Purchased Land are vested in Purchaser, subject only to the
Permitted Exceptions and Tenant Leases.
Except with the prior written approval of Purchaser, Seller
shall not deliver (nor cause or permit to be delivered) to the Title Company, on
behalf of the Seller, any indemnities of the Seller relating to the issuance of
the Owner's Policies. If the Owner's Policies disclose any liens or encumbrances
which are not Permitted Exceptions, Purchaser may remove such liens at Closing
by paying so much of the Purchase Price to the holders of the liens as is
necessary to do so.
H. Guest Property. The parties shall arrange for Motel guests to sign new
deposit box or other appropriate receipts on the day before the Closing Date
with respect to baggage, personal property, laundry, valet packages and other
property of
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<PAGE>
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 listed in said inventory. Seller shall be responsible
for all items allegedly left at the Properties by guests prior to Closing and
not listed on such inventory.
SECTION 8: INDEMNIFICATION
Seller shall hold harmless, indemnify and defend the Purchaser from and
against: (i) any and all obligations to, liabilities to or claims by third
parties, whether direct, contingent or consequential and no matter how arising,
in any way related to or arising from the Properties prior to the Closing Date,
including, but not limited to, for any injury to or death of any person or
damage to any property of third parties; (ii) any claims for brokerage,
commissions or fees in connection with leases of the Properties executed prior
to the Closing except to the extent Seller gives Purchaser a credit for such
commissions at Closing; (iii) any wages, salaries, pension liabilities or fringe
benefits accruing prior to the Closing for those employees at the Motels; (iv)
any and all obligations to, and liabilities to or claims by third parties,
whether direct, contingent, or consequential and no matter how arising, in any
way related to or arising from the sale or transfer of the Properties by Seller
to Purchaser, including, but not limited to, by any limited partner of Seller;
and (v) all costs and expenses of Purchaser, including reasonable attorneys'
fees, related to any actual or threatened actions, suits or judgments incident
to any of the foregoing.
SECTION 9: WAIVER
Each party hereto may, at any time or times, at its election, waive any
of the conditions to its obligations hereunder by a written waiver expressly
detailing the
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<PAGE>
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.
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, representation,
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<PAGE>
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 responsibility to return distributions made to them. Purchaser
further understands and agrees 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
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<PAGE>
any of such party's actions or omissions pursuant hereto or otherwise in
connection with this Agreement or the transactions contemplated hereby.
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
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<PAGE>
(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 properties from Super 8 Motels, Ltd., Super 8 Motels II, 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
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<PAGE>
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 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 III, 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 MOTELS
Bakersfield Motel Property 901 Real Road, Bakersfield, California 93309
San Bernardino Motel Property 294 East Hospitality Lane, San Bernardino,
California 92408
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 11/18/82
the Bakersfield Motel property
Super 8 Motels, Inc. License agreement relating to 4/26/82
the San Bernardino Motel property
B-1
<PAGE>
ALLOCATION OF PURCHASE PRICE
Bakersfield Motel Property $ 1,300,000
San Bernardino Motel Property 1,600,000
---------
TOTAL $ 2,900,000
===========
C-1
<PAGE>
LIST OF SERVICE CONTRACTS
Both properties are subject to the following service contract:
Management Agreement by and between Super 8 Motels III, Ltd., and Super 8
Management, Inc., as amended.
Bakersfield Motel Property
Vendor Description Expiration Date
Tri-County Elevator Elevator Service 90 days notice
Time Warner Cable Cable Service 30 days notice
Control Fire Protection Alarm System Service 30 days notice
Stockdale Aire Mechanical Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
San Bernardino Motel Property
Vendor Description Expiration Date
Hue & Cry Security System Alarm System Service 9/10/99
Hi Desert Alarm Fire Sprinkler Service 12/5/00
Security Maintenance Service Alarm System Service 30 days notice
Bremer's Plumbing Mechanical Service 30 days notice
Santiago Service 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
Bakersfield Motel Property
There are no formal tenant leases with respect to the Bakersfield Motel
property. However, from October 1, 1982 to January 31, 1993, an agreement was in
effect granting Super 8 Motels, III, Ltd. the first opportunity to provide rooms
to employees of Santa Fe Railroad at a room rate of $20.00. Though expired
according to its terms, the contract continues to be observed by both parties,
except that the agreed rate is now $23.00 per room night.
In addition, on December 31, 1992, Super 8 Motels III, Ltd. entered
into a written agreement with the National Railroad Passenger Corporation
(Amtrak) for the provision of lodging services to its employees at a room rate
of $25.75, which included a transpor tation credit of $1.75 per room night
payable to Super 8 Motels III, Ltd. for providing transportation from the train
terminal. Due to competitive bids, the rate was lowered to $24.00 per room night
effective October 1, 1994.
San Bernardino Motel Property
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 acknowledged, SUPER 8 MOTELS III, LTD., a California limited partnership
("Seller") hereby assigns and transfers to TIBURON CAPITAL CORPORATION, a
California corporation ("Purchaser"), all of Seller's right, title and interest
in and to any and all fixtures, machinery, apparatus, equipment and other
personal property (the "Personal Property") used in the ownership, operation,
repair and maintenance of any and all of the Seller's interest in the Land
Leases, the Personal Property, and the Improvements (the "Properties"),
including without limitation, (i) all building and construction materials,
equipment, appliances, machinery and other personal property owned by Seller and
used in connection with the operation of the Properties, (ii) the Consumables,
(iii) the FF & E, (iv) Seller's rights under the Franchise Agreements, (v) all
transferable permits, licenses, certificates and approvals issued in connection
with the Properties, (vi) the exclusive right to use the name of the Properties
and the right to all other names, logos and designs used in connection with the
Properties, including the names of restaurants, bars, banquet rooms and meeting
rooms, (vii) the right to use the Properties's telephone numbers and post office
boxes, (viii) all booking agreements, (ix) all service marks and trademarks, (x)
all plans and specifications, operating manuals, guaranties and warranties and
any other items used in the operation of the Properties, (xi) all documents
relating to guests at the Properties, including booking agreements, and (xii)
all documents relating to employees at the Properties. All terms used herein but
not defined herein shall have the same meaning as set forth in that certain
Purchase and Sale Agreement, dated as of April 30, 1998, between Seller and
Purchaser for the Properties.
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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 otherwise.
IN WITNESS WHEREOF, Seller has caused this instrument to be executed as
of the ____ day of ____________, 1998.
SELLER:
SUPER 8 MOTELS III, 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 III, LTD., a California limited
partner ship ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is party to those certain franchise agreements
executed with respect to those certain real properties known as the Bakersfield
Motel property and San Bernardino 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 III, 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 11/18/82
the Bakersfield Motel property
Super 8 Motels, Inc. License agreement relating to 4/26/82
the San Bernardino Motel property
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<PAGE>
ASSIGNMENT OF SERVICE CONTRACTS
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS III, 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 those certain real properties known as the Bakersfield Motel property
and San Bernardino 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 III, 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
Both properties are subject to the following service contract:
Management Agreement by and between Super 8 Motels III, Ltd., and Super 8
Management, Inc., as amended.
Bakersfield Motel Property
Vendor Description Expiration Date
Tri-County Elevator Elevator Service 90 days notice
Time Warner Cable Cable Service 30 days notice
Control Fire Protection Alarm System Service 30 days notice
Stockdale Aire Mechanical Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
San Bernardino Motel Property
Vendor Description Expiration Date
Hue & Cry Security System Alarm System Service 9/10/99
Hi Desert Alarm Fire Sprinkler Service 12/5/00
Security Maintenance Service Alarm System Service 30 days notice
Bremer's Plumbing Mechanical Service 30 days notice
Santiago Service 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 III, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is a lessor under certain leases executed with
respect to that certain real property known as the Bakersfield Motel property
located at 901 Real Road, Bakersfield, California 93309, 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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<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 III, 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
Written Agreement by and between Super 8 Motels III, Ltd. and National
Railroad Passenger Corporation (Amtrak), dated as of December 31, 1992, as
amended
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<PAGE>
ASSIGNMENT OF EQUIPMENT LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between SUPER 8 MOTELS III, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessee under certain equipment leases executed
with respect to those certain real properties known as the Bakersfield Motel
property and San Bernardino 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 III, 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: Bakersfield Motel property located at 901 Real Road, Bakersfield,
California 93309 (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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