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
Famous Host Lodging V, L.P.
(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:
$820
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
FAMOUS HOST LODGING V, L.P.
June ____, 1998
SOLICITATION OF CONSENTS
The limited partners (the "Limited Partners") of FAMOUS HOST LODGING V,
L.P., a California limited partnership (the "Partnership"), are being asked to
consider and approve by written consent the proposed sale of all of the
Partnership's interests in real property and related personal property (the
"Property"), for a purchase price of $4,100,000, 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 MANAGING GENERAL PARTNER OF THE PARTNERSHIP (THE "MANAGING
GENERAL PARTNER"). This Information Statement and the enclosed Consent were
first sent to the Limited Partners on or about June __, 1998.
Units of limited partnership interest in the Partnership (the "Units")
represented by Consents duly executed and returned to the Partnership on or
before July __, 1998 (unless extended by the Managing General Partner pursuant
to notice mailed to the Limited Partners) will be voted or not voted in
accordance with the instructions contained therein. If no instructions for the
proposal are given on an executed and returned Consent, Units so represented
will be voted in favor of the proposal. The Managing General Partner will take
no action with respect to the proposal addressed herein except as specified in
the duly executed and returned Consents.
The cost of this solicitation of Consents is being borne by the
Partnership. Such solicitation is being made by mail and, in addition, may be
made by officers and employees of the Partnership and the Managing General
Partner, either in person or by telephone or telegram.
REASONS FOR THE PROPOSAL
The Partnership was formed in 1984 and its motel property located in
Barstow, California opened for business during 1985.
This Information Statement has been prepared to ask the Limited
Partners to approve the sale of the Property for cash in the amount of the
appraised fair market value of $4,100,000.
It has always been the intention of the Partnership to liquidate the
Property when it became apparent that the best interests of the Limited Partners
would be served by doing so. The Managing General Partner has received inquiries
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over the years as to when the Property was to be sold and the Partnership
liquidated. Its response, until recently, has been that because of overbuilt and
depressed motel market conditions, the time was not right for a sale of the
Property. Conditions have changed, and the Managing General Partner believes
that the Property should be sold now and the Partnership liquidated.
During September and October 1997, Everest Properties II, LLC, a member
of an affiliated group of entities which is the second largest investor group in
the Partnership (the "Everest Group"), made an offer to purchase the Property
and the motel properties of four other California limited partnerships as to
which the Managing General Partner serves as general partner (the "GMS
Partnerships"). The purchase price set forth in the October offer was
$2,614,730, a price far below $4,100,000, the recent appraised value and the
price offered in the current proposal. The Managing General Partner rejected the
prior offer. Conflicts between the Everest Group and the Partnership resulted in
lawsuits. Inasmuch as the Managing General Partner agreed with the Everest Group
in principle that the Property should be sold, a settlement was reached whereby,
among other things, the Managing General Partner agreed to take steps to sell
the Property, and the lawsuits were dismissed.
As discussed more fully below under "Appraisal of the Property/Fairness
Opinion," the Property has been appraised by PKF Consulting, a highly-respected
national hospitality industry specialist. Its conclusion is that the aggregate
fair market value of the Property is $4,100,000, which is the proposed purchase
price of the Property. The purchase price is to be paid in cash, and the net
proceeds thereof will be distributed in accordance with the Partnership
Agreement upon the close of the sales transaction and the concomitant
dissolution of the Partnership. Termination of the Partnership will occur as
soon as the winding up process can be completed.
The Managing General Partner is recommending the approval of the
transaction by the Limited Partners for the following reasons:
The Managing General Partner believes that the sale value of the Property
is now at the crest of a seller's market which may not last much longer.
Although there can be no assurance that the Property's value will not
increase over time, the Managing General Partner believes that within the
next five years only modest increases in the Property's value can be
expected to occur. This belief is substantiated by the appraisals. The
Managing General Partner believes that now is the time to sell the
Property.
The Partnership's intention has always been to sell the Property when the
market conditions warranted sale. It was never an investment objective of
the Partnership to hold the Property permanently.
The Managing General Partner understands that the circumstances of many of
the Limited Partners have changed over the life of the Partnership and
believes that the Limited Partners should be presented with an opportunity
to liquidate their investments. In this regard, the Managing General
Partner believes it is important to understand that no true market exists
for the sale of Units. Heretofore, to dispose of their Units, Limited
Partners have had to arrange private sales, or accept tender offers, at
prices well below the correlative value of the underlying assets.
The Property is proposed to be sold to the Buyer for $4,100,000,
approximately $1,485,000 more than was offered for the Property in October
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1997 by the Everest Group. The sales price is equal to the appraised value
of the Property as determined by PKF Consulting, an independent real estate
advisory firm specializing in the valuation of lodging properties. The
proposed sale will be for all cash. PKF Consulting has rendered to the
Partnership a fairness opinion, stating its opinion that the sales price is
fair to the Partnership. The contract of sale between the Partnership and
the Buyer provides for a closing of the sale on July 15, 1998 or within 30
days after approval of the sale by the Limited Partners, whichever occurs
later. For these reasons, and because of the length of time that widespread
marketing of the Property might take, the Managing General Partner has not
actively marketed the Property for sale. There can, therefore, be no
assurance that the proposed sale of the Property to the Buyer is at the
highest price attainable for the Property.
As of May 31, 1998, the Limited Partners had already received, over the
life of the Partnership, the sum of $646.90 per Unit in the form of
quarterly distributions. Upon the sale of the Property pursuant to the
proposed transaction, the Limited Partners would receive an additional
pretax distribution in the estimated amount of approximately $439 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 9,022 Units outstanding and a total of 1,764 Limited
Partners entitled to vote such Units. With respect to the proposal to be voted
upon, the favorable vote of Limited Partners holding in excess of 50% of the
Units outstanding as of the Record Date will be required for approval. There are
no rights of appraisal or similar rights of dissenters with regard to the
proposal to be voted upon.
As of April 13, 1998 no person or group of related persons was known by
the Partnership to be the beneficial owner of more than 5% of the Units, except
the following group of related Unit holders:
Everest Lodging Investors, LLC 261 Units 2.89%
Everest Madison Investors, LLC 298 Units 3.30%
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Total 559 Units 6.19%
Neither the Managing General Partner nor any of its affiliates are the
beneficial owners of any Units.
No meeting will be held with regard to this solicitation of the Limited
Partners. Voting may be accomplished by completing and returning to the offices
of the Partnership, at 2030 J Street, Sacramento, California 95814, telephone:
(916) 442-9183, the form of Consent included herewith. Only Consents received
prior to the close of business on the date (the "Action Date") which is the
earlier of (i) the date on which the Partnership receives approval of the
proposal by a majority-in-interest of the Limited Partners, or (ii) July __,
1998 (unless extended by the Managing General Partner pursuant to notice mailed
to the Limited Partners), will be counted toward the vote on the proposal.
However, Limited Partners are urged to return their Consents at the earliest
practicable date.
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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 Amended and Restated
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 lodging properties and
interests therein. Because the Property constitutes all of the Partnership's
lodging properties and interests therein (as discussed below under "The Property
and the Partnership's Business"), the Managing General Partner and the
Partnership are seeking the approval of the proposed sale of the Property by a
majority-in-interest of the Limited Partners. If the proposal is approved by the
Limited Partners but the proposed sale of the Property described herein is not
consummated because one or more of the conditions precedent to the sale (see
"Purchase Agreement") is not satisfied (excluding the condition precedent that
the Limited Partners approve the proposed sale), the Managing General Partner
will consider the Limited Partners' approval of the proposal set forth herein to
constitute approval of any purchase offer for the Property if such purchase
offer is reflected in an executed purchase agreement no later than January 1,
1999, is consummated no later than June 30, 1999, is for "all cash," and is for
an amount equal to or greater than $4,100,000. If the Managing General Partner
should receive more than one such purchase offer, it would accept the best
offer, unless the Managing General Partner had already entered into a binding
contract for a less favorable offer. However, notwithstanding the preceding, if
prior to entering into a binding contract the Managing General Partner should
receive one or more "all cash" purchase offers and also should receive one or
more purchase offers in an amount greater than that set forth in the highest
"all cash" offer but entailing the receipt by the Partnership of a promissory
note for part of the purchase price, the Partnership would present all such
offers to the Limited Partners for approval.
In the event the Limited Partners do not approve the proposal, the
Partnership will not proceed to implement the proposed sale of the Property.
THE PROPERTY AND THE PARTNERSHIP'S BUSINESS
The Property consists of a leasehold interest in land located in
Barstow, California, the hotel property constructed thereon by the Partnership,
another leasehold interest in a restaurant, and the related personal property.
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Narrative Description of Business
(a) Franchise Agreements
The Partnership operates its hotel property as a franchisee of Holiday
Inns, Inc. Holiday Inns offer accommodations in the mid-range of the lodging
industry in terms of facilities and prices.
(b) Operation of the Hotel and Restaurant
Brown & Grotewohl, a California general partnership which is an
affiliate of the Managing General Partner (the "Manager"), manages and operates
the Partnership's hotel and restaurant. The Manager's management
responsibilities include, but are not limited to, supervision and direction of
the Partnership's employees having direct responsibility for the operation of
the hotel and restaurant, 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 hotel and restaurant staff and a centralized accounting staff, all of which
work under the direction of the Managing General Partner or the Manager.
Together, these staffs perform all bookkeeping duties in connection with the
hotel and restaurant, including all collections and all disbursements to be paid
out of funds generated by hotel and restaurant operations or otherwise supplied
by the Partnership.
As of December 31, 1997, the Partnership employed a total of 49
persons, either full or part-time, at its hotel and restaurant, including eight
desk clerks, 16 housekeeping and laundry personnel, four maintenance personnel,
one general manager, four cooks and dishwashers, 11 servers and bus persons,
four bartenders and one restaurant manager. 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 hotel supervisory personnel, secretarial personnel, and purchasing
personnel.
(c) Competition
As discussed in greater detail below, the Partnership faces intense
competition from hotels and motels of varying quality and size, including other
mid-range hotels and motels which are part of nationwide chains and which have
access to nationwide reservation systems.
Properties
On May 10, 1984, the Partnership entered into a long-term lease of 3.05
acres of unimproved land located on East Main Street in Barstow, California. The
leasehold is located within a 15-acre parcel which was developed as a lodging,
restaurant, retail and theater complex known as "Barstow Station Too!". The
Partnership's hotel is the only hotel or motel to be included in the complex.
The original term of the lease was for 50 years with the lessee's option to
renew for three additional 10-year periods.
The Barstow hotel, which consists of 148 guestrooms, was placed in
service on December 31, 1985, at which date 96 guestrooms were available for
occupancy. The remaining 52 guestrooms became available for occupancy on March
15, 1986.
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On June 15, 1987 the Partnership commenced operation of a family
restaurant and cocktail lounge immediately adjacent to the Barstow hotel. The
Partnership leases the restaurant facility from Fred Rosenberg, the lessor of
the hotel site.
On May 30, 1990, the Partnership entered into a written agreement with
the lessor for the amendment of the hotel and restaurant facility leases. The
restaurant facility lease term was extended from January 1, 1991 to December 31,
2010; however, the Partnership has the option of terminating the lease after
January 1, 2001 if the Partnership should terminate its license to operate the
hotel as a franchise of Holiday Inns, Inc. Additional rent for the hotel site
and restaurant facility was changed so as to be the amount by which 9% of the
combined annual gross sales from the hotel and restaurant facility exceeds the
combined annual minimum rent ($275,556 as of December 31, 1997; $280,116 as of
December 31, 1998) under the hotel site and restaurant facility leases.
The leases provide that the improvements constructed by the Partnership
on the leased premises will remain the property of the Partnership during the
lease term but that upon expiration of the leases, title to any such
improvements will pass to the lessor.
In 1997, the Partnership incurred a total of $285,302 in rent expense
for its Barstow hotel site and restaurant facility. In addition, the Partnership
pays all property taxes and assessments for each leasehold site.
The Partnership's hotel achieved the following average occupancy rates
and average room rates during 1997, 1996 and 1995:
1997 1996 1995
-------------------------------------------
Average Occupancy 68.6% 71.1% 74.9%
Rate
Average Room Rate $66.30 $64.63 $60.95
The following lodging facilities provide direct and indirect
competition to the Partnership's Barstow hotel:
Approximate
Number Distance
Facility Of Rooms From The Hotel
- -------------------------------------------------------------------------------
Quality Inn 100 Adjacent
Days Inn 113 0.25 Mile
Comfort Inn 62 0.50 Mile
Vagabond Inn 67 0.50 Mile
Best Western 79 0.50 Mile
Holiday Inn Express 65 3.00 Miles
The Barstow hotel's major sources of patronage are generated by local
military bases, with civilian Federal employees, military personnel and Federal
government contractors generating approximately 26% of the hotel's room revenue.
The Barstow area also attracts traveling salespeople and other commercial
travelers, as well as leisure travelers.
For a discussion of the revenue received by the Partnership from the
restaurant see "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
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PURCHASE AGREEMENT
On April 30, 1998, the Partnership entered into an agreement to sell
the Property to Tiburon Capital Corporation, San Francisco, California, or a
nominee of Tiburon Capital Corporation (the "Buyer"), for the sum of $4,100,000,
payable in cash at the close of escrow. Escrow was opened at Chicago Title
Company, San Francisco, California on June 10, 1998.
The following paragraph is based on information provided by the Buyer.
The Buyer is a California corporation formed in 1992. All of its stock has been
owned since its inception equally by William R. Dixon, Jr., Herbert J. Jaffe,
John L. Wright and John F. Dixon. Management and control persons of the Buyer
consist of its stockholders. The Buyer and its related entities, including
Pacific Management Group, Inc., NCM Management Ltd. and Capital Concepts
Investment Corp., are and have been involved in many business transactions,
including the ownership and asset or property management of real estate assets.
(The owners, management and the control persons of such related entities are two
or more of the owners of the Buyer.) In many instances, the real estate assets
were or are owned by limited partnerships or limited liability companies formed
and syndicated by the Buyer or its related entities for the specific purpose of
owning such assets. The form of an entity owning real estate assets is typically
dictated by investors and/or lenders. In like fashion, it is anticipated that a
nominee of the Buyer, which would be a limited liability company, would actually
purchase the Property instead of the Buyer. It is currently anticipated that the
members of such limited liability company would be two other limited liability
companies, one of which would be formed and syndicated by the Buyer and the
other of which would be formed and wholly-owned by Mark Grotewohl. In such
event, Mark Grotewohl would be entitled to up to a 50% indirect interest in the
owner of the Property, and in some way is expected to share in the management
and control of the owner of the Property and/or the management of the Property.
Mr. Grotewohl's ultimate rights and obligations are the subject of current
negotiation between him and the Buyer.
Mark Grotewohl is the son of Philip Grotewohl, the owner of 50% of the
stock of the Managing General Partner. He was employed until recently as the
marketing and sales director for the five GMS Partnerships. It might be
contended that Mark Grotewohl is, by virtue of his past relationship with the
Partnership, an Affiliate of the Partnership as defined in its Partnership
Agreement. Under Section 11.2 of the Partnership Agreement, the Partnership is
not permitted to sell its real property to "Affiliates" of the General Partners.
(The Partnership Agreement defines an "Affiliate" of a person as (i) any person
directly or indirectly controlling, controlled by, or under common control with
such person, (ii) any person owning or controlling 10% or more of the
outstanding voting securities or such person, (iii) any officer, director or
partner of such person, and (iv) any person who is an officer, director or
general partner of any of the foregoing. The Managing General Partner believes
that, based on the facts and circumstances, Mark Grotewohl is not an Affiliate
of the Partnership or the General Partners, because Mark Grotewohl neither (i)
possesses the power to direct or cause the direction of the management and
policies of the Partnership or the General Partners, and therefore does not
control the Partnership or the General Partners, (ii) owns any voting securities
in the Partnership or the General Partners, nor (iii) serves as an officer,
director or partner of the General Partners or the Partnership.
The Buyer has made a contemporaneous offer to purchase the motel
properties of the four other GMS Partnerships. The offers made by the Buyer for
the properties of each of the GMS Partnerships have been evaluated independently
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by the Managing General Partner. Other than with respect to the purchase price
of each motel, the offers are on identical terms. If the limited partners of the
other partnerships do not approve the sale of their respective properties to the
Buyer, the Buyer has the right and option not to proceed with the proposed
purchase of the Property from the Partnership, even if the Limited Partners
approve this sale. In this regard, the Partnership has not solicited any offers
to purchase the Property or the motel properties of the other GMS Partnerships,
has not listed the Property or the motel properties of the other GMS
Partnerships for sale with independent brokers, and has not otherwise actively
sought competing offers for the Property or the motel properties of the other
GMS Partnerships. Consequently, the offer presented by the Buyer is the only
offer that the Managing General Partner has received for the Property or the
motel properties of the other GMS Partnerships other than those presented by the
Everest Group.
There are a number of significant conditions to the consummation of the
proposed sale of the Property; therefore, there can be no assurance as to
whether, or when, such transaction will be consummated. Among these conditions
are the Partnership's receipt of the approval of the Limited Partners; the
Buyer's receipt (at the Partnership's expense) and approval of an ALTA Survey
and preliminary title report for the Property; the absence of any damage or loss
to the Property prior to the closing date in excess of $50,000; the decision by
the Buyer, in its unfettered discretion, to terminate the proposed purchase
prior to June 30, 1998; the Buyer's receipt prior to June 30, 1998 of a loan
commitment for financing in an amount of not less than 90% of the purchase price
of the Property, provided that the deadline may be extended upon request of the
Buyer for up to 15 days; and receipt by the Partnership of any necessary
approvals of the sale by, among others, the franchisor, and the landlords. The
Managing General Partner expects that such conditions will be satisfied;
however, there can be no assurances in this regard. No federal or state
regulatory requirements must be complied with, or approvals obtained, in
connection with the transaction.
The Buyer will deposit the sum of $21,000 into escrow on the later of
the expiration of the Buyer's inspection period referred to above or the date
the Partnership notifies the Buyer that the Limited Partners have approved the
proposed sale of the Property. Should the Buyer default in the performance of
its obligations under the purchase agreement, the Partnership will be entitled
to retain said deposit as its only damages.
The Partnership and the Buyer will share closing costs. The Managing
General Partner anticipates that the Partnership's share of aggregate closing
costs, including real estate brokerage commissions, will be approximately
$153,750. 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 Property and the
concomitant dissolution of the Partnership should result in the following
consequences for the Partnership, the Limited Partners and the General Partners:
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(i) The Limited Partners are expected to receive the distributions of net cash
proceeds from the sale of the Property as described below.
(ii) The Limited Partners and the General Partners are expected to realize the
Federal income tax consequences as described below.
(iii) All of the Partnership's assets will be liquidated and the Partnership
will be dissolved and terminated.
The consequences stated above are discussed in more detail in the
subsections which follow. Those subsections, in part, include computations as to
the cash proceeds to be received and distributed by the Partnership, and the
taxable gain and allocations thereof to be made by the Partnership, in the event
the proposed sale is consummated. HOWEVER, THIS INFORMATION IS PRESENTED SOLELY
FOR THE PURPOSES OF EVALUATING THE PROPOSAL. ALL AMOUNTS ARE ESTIMATES ONLY. ALL
COMPUTATIONS ARE BASED ON ASSUMPTIONS (SUCH AS THE DATE OF SALE, THE EXPENSES OF
THE SALE, AND THE RESULTS OF PARTNERSHIP OPERATIONS THROUGH THE DATE OF SALE)
WHICH MAY OR MAY NOT PROVE TO BE ACCURATE AND SHOULD NOT BE RELIED UPON TO
INDICATE THE ACTUAL RESULTS WHICH MAY BE ATTAINED.
Determination and Use of Net Proceeds
The following is a summary of the projected amount of cash to be
received by the Partnership and the projected amount of cash to be distributed
to the Limited Partners, assuming the Property is sold for a gross sales price
of $4,100,000. This summary has been prepared by the Managing General Partner.
If the proposed transaction is consummated on September 30, 1998, it is
estimated that the Partnership would receive the following net proceeds:
Gross sales price $4,100,000
Less: Real estate commission (112,750)
Estimated escrow and closing costs (41,000)
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Net proceeds of sale $3,946,250
The Partnership's real property taxes are payable twice yearly on April
10 and December 10, partially in arrears, in the current amount of $31,560 each.
The Partnership's minimum lease payment for its leasehold interests is $23,343
monthly. Accordingly, if the proposed transaction is consummated, the actual
date of consummation will determine whether there is a credit to the Partnership
for prorated lease payments and/or a credit to the Buyer for prorated real
property taxes. 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 $3,946,250 estimated to be received by the
Partnership from the proposed transaction, in the estimated amount of $437.40
per Unit based on a closing date of September 30, 1998, would be distributed
entirely to the Limited Partners. The Partnership's cash reserves would be
retained for the payment of accounts payable and other liabilities and expenses
incurred to that date or expected to be incurred in connection with the
operation of the Property through the date of sale and the operation and
winding-up of the Partnership through its termination, and the balance,
estimated to be $16,336 or $1.81 per Unit, also would be distributed entirely to
the Limited Partners. Alternatively, if the proposed sale is not approved, the
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Partnership would continue to operate the Property for an indeterminate period
pending receipt of another purchase offer which is acceptable to the Limited
Partners. The Managing General Partner estimates that if the Property is not
sold the Partnership will make average annual distributions to the Limited
Partners of from zero to $324,792 ($36.00 per Unit) for the foreseeable future.
However, there can be no assurance that the Managing General Partner's estimate
in this regard will be borne out.
Federal Income Tax Consequences
(a) General. The following is a summary of the Federal income tax
consequences expected to result from consummation of the proposed transaction
based on the Internal Revenue Code of 1986, as amended (the "Code"), existing
laws, judicial decisions and administrative regulations, rulings and practices.
This summary is general in content and does not include considerations which
might affect certain Limited Partners, such as Limited Partners which are
trusts, corporations or tax-exempt entities, or Limited Partners who must pay an
alternative minimum tax. Except as otherwise specifically indicated, this
summary does not address any state or local tax consequences.
Tax counsel to the Partnership, Derenthal & Dannhauser, has delivered
an opinion to the Partnership which states that the following summary has been
reviewed by it and, to the extent the summary involves matters of law,
represents its opinion, subject to the assumptions, qualifications, limitations
and uncertainties set forth therein.
(b) Characterization of Gain. Upon the sale of property, the owner
thereof measures his gain or loss by the difference between the amount of
consideration received in connection with the sale and the owner's adjusted
basis in the property. A gain will be recognized for Federal income tax
purposes. This is so because the depreciation used for Federal income tax
purposes, which decreases adjusted basis, was greater than that used for book
purposes.
The Property should constitute "Section 1231 property" (i.e., real
property and depreciable assets used in a trade or business which are held for
more than one year) rather than "dealer" property (i.e., property which is held
primarily for sale to customers in the ordinary course of business). While it is
possible that the Internal Revenue Service will argue that the Property is
"dealer" property, gain upon the sale of which would be taxed entirely as
ordinary income, tax counsel to the Partnership is of the opinion that it is
more likely than not that such an assertion would not be sustained by a court.
A Limited Partner's allocable share of Section 1231 gain from the sale
of the Property would be combined with any other Section 1231 gains or losses
incurred by him in the year of sale, and his net Section 1231 gains or losses
would be taxed as long-term capital gains or constitute ordinary losses, as the
case may be, except that a Limited Partner's net Section 1231 gains will be
treated as ordinary income to the extent of net Section 1231 losses for the five
most recent years which have not previously been offset against net Section 1231
gains.
Long-term gain on sale of Section 1231 property is taxed as follows:
(i) the excess of accelerated depreciation over straight-line depreciation is
taxed at ordinary income rates, (ii) to the extent that any other gain would be
treated as ordinary income if the property were depreciable personal property
10
<PAGE>
rather than depreciable real property, at a maximum rate of 25%, and (iii) the
balance at a maximum rate of 20%.
Set forth below are the Managing General Partner's estimates of the
total taxable gain for Federal income tax purposes, and the allocations thereof,
which will result if the proposed sale of the Property is consummated, based on
an assumed closing date of September 30, 1998. These estimates do not include
any amounts relating to Partnership operations prior to the sale of the Property
or relating to dissolution of the Partnership. These estimates are not the
subject of an opinion of counsel.
Portion
Total Taxed As Portion Portion
Estimated Ordinary Taxed At Taxed At
Gain Income 25% Rate 20% Rate
------------------------------------------------------------
Limited Partners $2,676,000 $ 0 $2,676,000 $ 0
General Partner 27,000 0 27,000 0
------ ----- ------ -----
Total $2,703,000 $ 0 $2,703,000 $ 0
========= ===== ========= =====
Per Unit $296.61 $ 0 $296.61 $ 0
====== ===== ====== =====
Because of different methods of depreciation used for California income
tax purposes than for Federal income tax purposes, the Managing General Partner
anticipates that consummation of the proposed transaction would produce a gain
for California income tax purposes in the amount of approximately $1,978,000, of
which approximately $155,000 and $1,823,000 would be allocated to the General
Partners and to the Limited Partners, respectively.
Dissolution of the Partnership
Section 18.1(e) of the Partnership Agreement provides that the
Partnership shall be dissolved upon the sale of all lodging properties or
interests 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 Property is consummated, the
Partnership will be dissolved, the Managing General Partner will commence to
wind up the business of the Partnership, and after payment of all expenses of
the Partnership (including the expense of a final accounting for the
Partnership) the remaining cash reserves of the Partnership will be distributed
in accordance with the provisions of the Partnership Agreement. The Managing
General Partner will then take all necessary steps toward termination of the
Partnership's Certificate of Limited Partnership.
APPRAISAL OF THE PROPERTIES/FAIRNESS OPINION
The appraisal of the Property, dated February 20, 1998, was prepared by
PKF Consulting, San Francisco, California, and indicates that the current fair
market value as of January 1, 1998 was $4,100,000. PKF Consulting was selected
by the Managing General Partner based on its expertise in appraising hotel and
motel properties in the State of California. PKF Consulting also prepared
appraisals of the motel properties of the other GMS Partnerships.
11
<PAGE>
The appraised value of the Property was determined through the use of two
methodologies: the sales comparison approach and the income capitalization
approach.
No limitations were imposed by the Managing General Partner on the
appraiser's investigation.
Upon request the Partnership will furnish to a Limited Partner, without
charge, a copy of the appraisal. In this regard Limited Partners are cautioned
to refer to the entire appraisal report, inasmuch as the opinion of value stated
therein is subject to the assumptions and limiting conditions stated therein.
Furthermore, Limited Partners should be aware that appraised values are opinions
and, as such, may not represent the realizable value of the Property.
Neither the appraiser, nor any of its affiliates, has had any prior
relationship with the Partnership, the Managing General Partner or any of their
affiliates other than as an appraiser of the Property and the properties of the
other GMS Partnerships and no future relationship other than as an appraiser is
contemplated.
The Partnership has also received an opinion from PKF Consulting to the
effect that the terms of the proposed sale are fair and equitable from a
financial standpoint to the Limited Partners.
12
<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 $2,458,115 $2,489,982 $2,466,338 $2,526,730 $2,458,535
Restaurant income $690,622 $655,746 $636,141 $701,900 $775,129
Net income (loss) $(45,074) $14,787 $78,676 $188,470 $82,208
Per Partnership Unit:
Cash distributions $36.80 $36.80 $36.80 $34.40 $16.00
Net income (loss) $(4.95) $1.62 $8.63 $20.68 $9.02
December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
Total assets $2,430,463 $2,815,123 $3,127,918 $3,411,671 $3,523,707
Long-term debt ---- ---- ---- ---- ----
</TABLE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
I. Fiscal Year Financial Statements
(a) Liquidity and Capital Resources
The Managing General Partner believes that the Partnership's liquidity,
defined as its ability to generate sufficient cash to satisfy its cash needs, is
adequate. The Partnership's primary source of liquidity is its cash flow from
operations. The Partnership had, as of December 31, 1997, current assets of
$216,599, current liabilities of $176,765 and, therefore, an operating reserve
of $39,834. The Managing General Partner's reserves target is 5% of the adjusted
capital contributions, which are approximately $5,536,000. Current reserves are
below the $276,800 reserves target partially because the Managing General
Partner decided to pay for renovations and replacements from cash on hand rather
than by incurring debt. The reserve will be replenished during the coming fiscal
year to the extent made possible by operations.
The Partnership's Property is currently unencumbered. Although no
assurance can be had in this regard, the Managing General Partner believes that
the Partnership's equity in its Property provides a potential source of external
liquidity (through financing) in the event the Partnership's internal liquidity
is impaired.
During 1997, the Partnership expended $103,300 for renovations and
replacements, of which $50,387 was capitalized. The expenditures included
$25,714 for desk chairs, chairs and sleep sofas, $19,721 for parking lot
repairs, $12,341 for guestroom carpet, $6,200 for security equipment, $7,478 for
lamp and ballast upgrades, $5,700 for roof repairs and $7,132 for restaurant
signage.
During 1996, the Partnership expended $70,569 for renovations and
replacements, of which $29,643 was capitalized. The expenditures included
$11,148 for computer systems, $9,103 for replacement chairs, $5,797 for carpet,
$5,195 for tub refinishing, $4,745 for roof repairs and $4,000 for pool
replastering.
13
<PAGE>
The Partnership currently has no material commitments for capital
expenditures. The Property is in full operation and no further property
acquisitions or extraordinary capital expenditures are planned. If the Property
is not sold the Managing General Partner is aware of no material trends or
changes with respect to the mix or relative cost of the Partnership's capital
resources. If the Property is retained adequate working capital is expected to
be generated by motel operations.
(b) Results of Operations
(i) Combined Financial Results
The following tables summarize the Partnership's operating results for
1995, 1996 and 1997 on a combined basis. Individual hotel and restaurant results
follow in separate subsections. The income and expense numbers in the following
tables are shown on an accrual basis and other payments on a cash basis.
Average Average
Hotel Hotel
Occupancy Room
Fiscal Year Ended: Rate Rate
- ------------------------------------------------------------------
December 31, 1995 74.9% $60.95
December 31, 1996 71.1% $64.63
December 31, 1997 68.6% $66.30
Total Partnership
Total Expenditures Cash Flow
Fiscal Year Ended: Revenues and Debt Service (1)
- -------------------------------------------------------------------------------
December 31, 1995 $3,213,820 $3,158,485 $55,335
December 31, 1996 $3,257,416 $2,961,860 $295,556
December 31, 1997 $3,250,726 $3,063,793 $186,933
(1) While Partnership Cash Flow as it is used here is not an amount
found in the financial statements, it is the best indicator of the annual change
in the amount, if any, available for distribution to the Limited Partners. These
calculations are reconciled to the financial statements in the following table.
14
<PAGE>
A reconciliation of Partnership Cash Flow (from the chart above) to Net
Income (Loss) as shown on the Statements of Operations (in the audited financial
statements) is as follows:
1997 1996 1995
----------------------------------------------
Partnership Cash Flow $186,933 $295,556 $55,335
Net Additions to Fixed Assets 50,387 29,643 306,084
Depreciation and Amortization (281,791) (299,764) (278,574)
Other Items (603) (10,648) (4,169)
==============================================
Net Income ($45,074) $14,787 $78,676
==============================================
Following is a reconciliation of Partnership Cash Flow (shown above) to
the aggregate total of Cash Flow from Hotel Operations (shown in the succeeding
subsection) and the Total Restaurant Net Loss (shown in the second succeeding
subsection):
1997 1996 1995
---------------------------------------------
Cash Flow from Hotel Operations $408,473 $467,476 $251,271
Total Restaurant Net Loss (231,552) (182,081) (207,886)
----------------------------------------------
Aggregate Cash Flow from Property
Operations $176,921 285,395 43,385
Interest on Cash Reserves 6,938 9,131 11,825
Other Income (Net of Other Expenses)
Not Allocated to the Property 3,074 1,030 125
=============================================
Partnership Cash Flow $186,933 $295,556 $55,335
=============================================
(ii) Hotel Operations
The following table summarizes the operating results of the hotel for
1997, 1996, and 1995. Total expenditures include the operating expenses of the
hotel, together with the cost of capital improvements and those Partnership
expenses properly allocable to such hotel.
Cash Flow
from
Total Total Hotel
Fiscal Year Ended: Revenues Expenditures Operations
- ------------------------------------------------------------------------------
December 31, 1995 $2,565,636 $2,314,365 $251,271
December 31, 1996 $2,591,465 $2,123,989 $467,476
December 31, 1997 $2,553,167 $2,144,694 $408,473
The Partnership's hotel experienced a $38,298 or 1.5% decrease in total
revenues during 1997 as compared to 1996. The decrease in average occupancy rate
from 71.1% in 1996 to 68.6% in 1997 was partially offset by an increase in the
average daily rate from $64.63 in 1996 to $66.30 in 1997. The occupancy
generated by the group market segments declined while occupancy by the other
market segments stayed about the same. The average room rate for all market
segments increased due to rate increases.
The Partnership's hotel achieved a $25,829 or 1.0% increase in total
revenues during 1996 as compared to 1995. The 5% decline in the average
occupancy rate was offset by the $3.68 increase in the average room rate. The
occupancy generated by the government and corporate market segments declined
while occupancy by the other market segments increased. The average room rate
for all market segments increased due to rate increases.
15
<PAGE>
The Barstow hotel's total expenditures increased $20,705 or 1.0% during
1997 as compared to 1996. This included increases of $7,855 for additional
billboards, $9,139 for central overhead allocation, $8,776 for travel agent
commissions, $8,145 for legal fees and $43,879 for renovations and replacements.
These increases were partially offset by reductions of $34,243 in security
services.
The Barstow hotel's total expenditures decreased $190,376 or 8.2%
during 1996 as compared to 1995. This decrease is primarily attributable to the
reduction in renovations and replacements. This decrease was partially offset by
increased expenditures of $69,170 for security services, of $9,858 for front
desk wages and salaries, of $8,589 in workers' compensation insurance, of $7,311
for print advertising, of $16,780 for commissions and of $7,250 for appraisal
fees.
(iii) Restaurant Operations
The following table summarizes the operating results of the restaurant
for 1997, 1996, and 1995:
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Food Sales $533,750 100.0% $506,255 100.0% $496,097 100.0%
Cost of Food Sales (229,820) -43.1% (203,022) -40.1% (183,583) -37.0%
---------------- -------------------- -----------------
Gross Profit from Food Sales $303,930 56.9% 303,233 59.9% 312,514 63.0%
Beverage Sales 156,871 100.0% 149,490 100.0% 140,044 100.0%
Cost of Beverages Sold (50,488) -32.2% (50,866) -34.0% (47,772) -34.1%
----------------
-------------------- -----------------
Gross Profit from Beverage Sales $106,383 67.8% 98,624 66.0% 92,272 65.9%
---------------- -------------------- -----------------
Combined Gross Profit $410,313 59.4% 401,857 61.3% 404,786 63.6%
Restaurant Operating Expenses (641,865) -92.9% (583,938) -89.0% (612,672) -96.3%
---------------- -------------------- -----------------
Total Restaurant Net Loss ($231,552) -33.5% $(182,081) -27.8% $(207,886) -32.7%
================ ==================== =================
</TABLE>
The Partnership's restaurant experienced a $49,471 or 27.2% increase in
its net loss during 1997 as compared to 1996. There was an effort to increase
restaurant sales, but the costs rose faster than revenue. Holiday Inn has
modified its standards so that the restaurant operations can be reduced from 16
hours per day to six hours per day. Effective February 23, 1998, the restaurant
hours were reduced to seven hours per day. Financial projections of the modified
operation indicate that future restaurant operating losses will be much lower
than those experienced during the last three fiscal years.
The Partnership's restaurant achieved a $25,805 or 12.4% decrease in
its net loss during 1996 as compared to 1995. The improved performance is
attributable to the elimination of $20,000 in professional fees and some
renovations paid in the previous year.
II. Interim Financial Statements
(a) Liquidity and Capital Resources
As of March 31, 1998, the Partnership's current assets of $225,680 were
less than its current liabilities of $316,540. The deficit is due primarily to
the use of cash reserves for capital expenditures in prior years and to cash
distributions to the Limited Partners. The Statement of Cash Flows for the three
months ended March 31, 1998 shows that the Partnership continues to generate
cash sufficient to meet its cash needs.
16
<PAGE>
The Partnership expended $14,018 on renovations and replacements during
the three months ended March 31, 1998, of which $10,221 was capitalized. The
expenditures included $5,221 for guestroom carpet and $5,000 for the restaurant
signs.
(b) Results of Operations
Total Partnership income decreased $69,539 or 7.9% for the first
quarter of 1998 as compared to the first quarter of 1997. Hotel room revenue
decreased $51,363 or 7.3% due to a decrease in occupancy from 80.1% to 72.9%
(which was partially offset by an increase in the average room rate from $66.03
to $67.23). The decrease in occupancy was due primarily to reduced military
activity at Fort Irwin which has not yet held its annual training event.
Restaurant revenue decreased $19,211 or 12.5% due to a reduction in daily
operating hours from 16 to seven.
Total Partnership expenses increased $97,786 or 12.4% primarily due to
increases in the minimum wage and to increases in legal, appraisal and other
costs associated with the proposed sale of the Property and liquidation of the
Partnership.
Other Financial Information
Items 304 and 305 of Regulation S-K promulgated by the Securities and
Exchange Commission are not applicable to the Partnership. Moreover, the
Managing General Partner is unaware of any "Year 2000" problems which could
impact the Partnership's operations.
17
<PAGE>
FINANCIAL STATEMENTS
for
INFORMATION STATEMENT
of
FAMOUS HOST LODGING V, L.P.
June __, 1998
F-i
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FAMOUS HOST LODGING V, L.P. Page
INDEPENDENT AUDITORS' REPORT ............................................ F-1
FINANCIAL STATEMENTS:
Balance Sheets, December 31, 1997 and 1996............................... F-2
Statements of Operations for the Years Ended
December 31, 1997, 1996 and 1995.................................... F-3
Statements of Partners' Equity for the Years
Ended December 31, 1997, 1996 and 1995.............................. F-4
Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.................................... F-5
Notes to Financial Statements............................................ F-7
Balance Sheets, March 31, 1998 and December 31, 1997 (Unaudited)......... F-12
Statements of Operations for the Three Months
Ended March 31, 1998 and 1997 (Unaudited)........................... F-13
Statements of Partners' Equity for the Three Months
Ended March 31, 1998 and 1998 (Unaudited)........................... F-14
Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 (Unaudited)........................... F-15
Notes to Financial Statements............................................ F-16
F-ii
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Famous Host Lodging V, L.P.
We have audited the accompanying balance sheets of Famous Host Lodging V, L.P.,
a California limited partnership, as of December 31, 1997 and 1996, and the
related statements of operations, partners' equity, and cash flows for each of
the years in the three year period ended December 31, 1997. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Famous Host Lodging V, L.P. as
of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the years in the three year period ended December 31, 1997, in
conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
February 26, 1998
San Mateo, California
F-1
e-super8/s8597fs.wp8.wpd
<PAGE>
<TABLE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
------------ --------
Current Assets:
<S> <C> <C> <C> <C> <C>
Cash and temporary investments (Notes 1, 3, 8 and 9) $ 146,113 $ 246,283
Accounts receivable 32,624 24,531
Prepaid expenses 37,862 39,762
---------- -----------
Total Current Assets 216,599 310,576
--------- ----------
Property and Equipment (Note 2):
Building 4,077,604 4,077,604
Furniture and equipment 1,294,151 1,253,417
Projects in progress - 58,444
------------- -----------
5,371,755 5,389,465
Accumulated depreciation and amortization (3,190,183) (2,917,212)
---------- ----------
Property and Equipment, Net 2,181,572 2,472,253
---------- ----------
Other Assets 32,294 32,294
----------- -----------
Total Assets $2,430,465 $2,815,123
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 165,909 $ 184,017
Due to related parties 10,856 322
---------- ------------
Total Liabilities 176,765 184,339
--------- -----------
Contingent Liabilities and Lease Commitments (Notes 4 and 5)
Partners' Equity:
General Partners 3,385 3,836
Limited Partners 2,250,315 2,626,948
--------- ----------
Total Partners' Equity 2,253,700 2,630,784
--------- ----------
Total Liabilities and Partners' Equity $2,430,465 $2,815,123
========== ==========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
<TABLE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended December 31:
1997 1996 1995
------------ ------------ ---------
Income:
<S> <C> <C> <C>
Guest room $2,458,115 $2,489,982 $2,466,338
Restaurant 690,622 655,746 636,141
Telephone and vending 55,707 65,512 54,893
Interest 6,938 9,131 11,825
Other 39,344 37,045 44,624
------------ ----------- ----------
Total Income 3,250,726 3,257,416 3,213,821
----------- ---------- ----------
Expenses:
Hotel and restaurant operations (Notes 4, 5 and 6) 2,774,813 2,701,717 2,634,845
General and administrative (Note 4) 77,356 78,787 61,637
Depreciation and amortization (Note 2) 281,791 299,764 278,574
Property management fees (Note 4) 161,840 162,361 160,089
----------- ----------- ----------
Total Expenses 3,295,800 3,242,629 3,135,145
---------- ---------- ----------
Net Income (Loss) $ (45,074) $ 14,787 $ 78,676
=========== =========== ===========
Net Income (Loss) Allocable to General Partners $(451) $148 $787
===== ==== ====
Net Income (Loss) Allocable to Limited Partners $(44,623) $14,639 $77,889
======== ======= =======
Net Income (Loss) Per Partnership Unit (Note 1) $4.95 $1.62 $8.63
===== ===== =====
Distributions to Limited Partners Per
Partnership Unit (Note 1) $36.80 $36.80 $36.80
====== ====== ======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
<TABLE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended December 31:
1997 1996 1995
---------- ---------- --------
General Partners:
<S> <C> <C> <C>
Balance, beginning of year $ 3,836 $ 3,688 $ 2,901
Net income (Loss) (451) 148 787
----------- ------------ ----------
Balance, End of Year 3,385 3,836 3,688
---------- ------------ ----------
Limited Partners:
Balance, beginning of year 2,626,948 2,944,319 3,198,440
Net income (Loss) (44,623) 14,639 77,889
Less: Cash distribution to limited partners (332,010) (332,010) (332,010)
----------- ----------- ----------
Balance, End of Year 2,250,315 2,626,948 2,944,319
---------- ---------- ----------
Total Partners' Equity $2,253,700 $2,630,784 $2,948,007
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
<TABLE>
FAMOUS HOST LODGING V, L.P.
(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 hotel and restaurant operations $3,237,065 $3,255,807 $3,224,408
Expended for hotel and restaurant operations
and general and administrative expenses (2,963,719) (2,942,661) (2,878,610)
Interest received 8,651 8,216 11,223
------------ ------------ -----------
Net Cash Provided by Operating Activities 281,997 321,362 357,021
----------- ----------- -----------
Cash Flows From Investing Activities:
Proceeds from sale of property and equipment 230 500 3,060
Purchases of property and equipment (50,387) (29,643) (306,084)
----------- ----------- ----------
Net Cash Used by Investing Activities (50,157) (29,143) (303,024)
----------- ----------- ----------
Cash Flows From Financing Activities:
Distributions paid to limited partners (332,010) (332,010) (332,010)
---------- ----------- ----------
Net Cash Used by Financing Activities (332,010) (332,010) (332,010)
---------- ----------- ----------
Net Increase (Decrease) in Cash
and Temporary Investments (100,170) (39,791) (278,013)
Cash and Temporary Investments:
Beginning of year 246,283 286,074 564,087
---------- ----------- ----------
End of Year $ 146,113 $ 246,283 $ 286,074
========= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
<TABLE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended December 31:
1997 1996 1995
----------- ---------- -------
Reconciliation of Net Income (Loss) to Net Cash
Provided by Operating Activities:
<S> <C> <C> <C>
Net income (loss) $ (45,074) $ 14,787 $ 78,676
---------- -------- --------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 281,791 299,764 278,574
(Gain) loss on disposition of property and equipment 59,047 (500) 4,170
(Increase) decrease in accounts receivable (8,093) 6,607 21,810
(Increase) decrease in prepaid expenses 1,900 (3,724) 5,210
(Increase) decrease in other assets - - (1,000)
Increase (decrease) in accounts payable and
accrued liabilities (18,108) 4,106 (18,863)
Increase (decrease) in due to related parties 10,534 322 (11,556)
---------- ---------- ---------
Total Adjustments 327,071 306,575 278,345
--------- -------- ---------
Net Cash Provided By Operating Activities $281,997 $321,362 $357,021
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Famous Host Lodging V, L.P. is a limited partnership organized under California
law on January 17, 1984, to acquire and/or develop and operate hotel properties
in the State of California. The term of the Partnership expires December 31,
2023, and may be dissolved earlier under certain circumstances. On February 13,
1991 the Partnership Agreement was amended to change the name of the Partnership
from "Super 8 Lodging V, Ltd." to "Famous Host Lodging V, L.P." The hotel in
Barstow, California was opened in December 1985. In 1987 the Partnership
commenced operation of a family restaurant and cocktail lounge immediately
adjacent to the hotel. The Partnership grants credit to customers, substantially
all of which are local businesses.
The managing general partner is Grotewohl Management Services, Inc., the fifty
percent stockholder and officer of which is Philip B. Grotewohl. In addition,
there is one individual associate general partner.
The net income or net loss of the Partnership is allocated 1% to the General
Partners and 99% to the Limited Partners. Net income (loss) and distributions
per partnership unit are based upon 9,022 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 gross proceeds of the public offering of units as
adjusted for distributions of sales proceeds ($276,799 at December 31, 1997). As
of December 31, 1997, the Partnership had working capital of only $39,834 due to
capital renovations made during 1996 and distributions to limited partners in
1996 and 1997.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Items of Partnership income or loss 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 $750,000 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
----------- ------- ------------
Building and components 150% declining balance 10-25 years
and straight-line
Furniture and equipment 200% declining balance 4-7 years
and straight-line
Costs incurred in connection with maintenance and repair are charged to expense.
Major renewals and betterments that materially prolong the 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>
FAMOUS HOST LODGING V, L.P.
(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 consist of the
following:
1997 1996
-------- ------
Cash in bank $ 71,809 $ 57,133
Money market accounts 74,304 89,150
Certificates of deposit - 100,000
-------- --------
Total Cash and Temporary Investments $146,113 $246,283
======== ========
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 five months or less to be cash
equivalents for purposes of the statement of cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS
Property Management Fees
The General Partners, or their affiliates, handle the management of the hotel
property 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 $161,840 in 1997, $162,361 in 1996 and $160,089 in 1995.
Subordinated Distributions to General Partners
During the Partnership's operational stage, the General Partners are to receive
an aggregate of 10% of Partnership distributions from cash available for
distribution, of which 9% will constitute a fee for managing the Partnership and
1% will be on account of their interest in the income and losses of the
Partnership. These distributions are subordinated, however, to payment to each
Limited Partner during such year of distributions from cash available for
distribution equal to a 14% per annum non-cumulative return on his adjusted
capital contribution. Through December 31, 1997, the Limited Partners have not
received a 14% non-cumulative return in any year, therefore no distributions
have been made or have accrued to the General Partners.
Subordinated Incentive Distributions
Under the terms of the partnership agreement, the General Partners are to
receive an aggregate of 15% of Partnership distributions of net proceeds from
the sale or refinancing of Partnership properties. The aggregate distribution of
15% is composed of a 14% subordinated incentive fee as additional compensation
for services rendered by the General Partners and the 1% on account of their
interest in the income and losses of the Partnership. These distributions are
subordinated, however, to 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 10% per annum
cumulative return on their adjusted capital contributions. At December 31, 1997,
the Limited Partners had not received the 10% per annum cumulative return, and
accordingly, no such proceeds have been distributed to the General Partners.
F-8
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Administrative Expenses Shared by the Partnership and Its Affiliates
There are certain administrative expenses allocated between the Partnership and
other partnerships managed by the General Partners and their 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
in 1997, $225,000 in 1996 and $223,000 in 1995 and are included in general and
administrative expenses and hotel and restaurant operations expenses in the
accompanying statements of operations. Included in administrative salaries are
allocated amounts paid to two employees who are related to Philip B. Grotewohl,
the fifty percent stockholder of Grotewohl Management Services, Inc. (see Note
1), the General Partner.
NOTE 5 - LEASE COMMITMENTS
The Partnership leases 3.05 acres of land in Barstow, California for a term of
50 years beginning in 1984. The Partnership has the right to extend the lease
for three consecutive periods of ten years each. The base rent payments are
subject to annual upward or downward adjustments based on changes in the
Consumer Price Index. The Partnership also leases the site adjacent to its
Barstow hotel that contains a restaurant and lounge. The lease provides for a
20-year term ending December 31, 2010 with an option to terminate this lease
after termination of the Holiday Inn license agreement. The option cannot be
exercised before the tenth year of the renewal term and requires six months
written notice.
Both leases contain provisions requiring the lessee to pay all property taxes
and assessments. The leases provide for payment of the excess of percentage rent
over the base rent. The percentage rent is 9% of the combined gross hotel room
revenues and gross restaurant and lounge sales.
Rental expense under these leases incurred by the Partnership amounted to
$299,375 in 1997, $299,569 in 1996 and $297,167 in 1995. Such amounts are
included in hotel and restaurant operations expense in the accompanying
statements of operations.
Future lease commitments at December 31, 1997, using the current minimum monthly
amounts, are as follows:
Years Ended Hotel Land Restaurant
December 31: Lease Lease Total
- ----------- ---------- ---------- -----
1998 $ 163,428 $ 116,688 $ 280,116
1999 163,428 116,688 280,116
2000 163,428 116,688 280,116
2001 163,428 116,688 280,116
2002 163,428 116,688 280,116
2003-2035 5,147,982 933,504 6,081,486
---------- ----------- ----------
Total minimum future lease payments $5,965,122 $1,516,944 $7,482,066
========== ========== ==========
F-9
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 6 - HOTEL AND RESTAURANT OPERATING EXPENSES
The following table summarizes the major components of hotel and restaurant
operating expenses for the following years:
<TABLE>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Salaries and related expenses $ 866,496 $ 808,586 $ 789,516
Cost of food and beverage 280,607 253,888 231,355
Rent 301,054 301,606 297,168
Franchise, advertising and reservation fees 175,932 179,762 177,711
Utilities 201,671 204,251 214,662
Allocated costs, mainly indirect salaries 186,004 184,064 181,607
Renovations and replacements 52,913 40,926 77,384
Other operating expenses 710,136 728,634 665,442
---------- ----------- ---------
Total hotel and restaurant
operating expenses $2,774,813 $2,701,717 $2,634,845
========== ========== ==========
</TABLE>
NOTE 7 - COMMITMENTS
Franchise Fees
In February 1991, the Partnership obtained a ten-year franchise agreement with
Holiday Inns, Inc. to operate its Barstow hotel and restaurant under the name
"Holiday Inn." The Partnership pays monthly franchise fees of 4% of gross room
revenues of the hotel and makes monthly contributions of 1 1/2% and 1% of guest
room revenues to a marketing fund and reservation fund, respectively.
NOTE 8 - 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 9 - CONCENTRATION OF CREDIT RISK
The Partnership maintains its cash accounts in five 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
uninsured cash balances (not reduced by outstanding checks) as of December 31,
1997 follows:
Total cash in all California banks $177,077
Portion insured by FDIC (131,674)
-------
Uninsured cash balance $ 45,403
========
F-10
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 10 - LEGAL PROCEEDINGS AND SUBSEQUENT EVENT
On October 27, 1997, a complaint was filed in the United States District Court
by the Managing 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 the
necessary documents with the SEC. Under the terms of the settlement agreement,
the Partnerships have agreed to reimburse the Everest Defendants for certain
costs not to exceed $60,000, to be allocated among the Partnerships. Of this
amount, the Partnership will pay approximately $12,000 during the year ended
December 31, 1998.
F-11
<PAGE>
<TABLE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
Statement of Operations
For the Three Months Ending March 31, 1998 and 1997
3/31/98 12/31/97
--------------------- ---------------------
ASSETS
Current Assets:
<S> <C> <C>
Cash and temporary investments $ 209,674 $ 146,113
Accounts receivable 30,534 32,624
Prepaid expenses 15,472 37,862
--------------------- ---------------------
Total current assets 255,680 216,599
--------------------- ---------------------
Property and Equipment:
Buildings 4,077,604 4,077,604
Furniture and equipment 1,304,372 1,294,151
--------------------- ---------------------
5,381,976 5,371,755
Accumulated depreciation (3,255,299) (3,190,183)
--------------------- ---------------------
Property and equipment, net 2,126,677 2,181,572
--------------------- ---------------------
Other Assets: 32,294 32,294
--------------------- ---------------------
Total Assets $ 2,414,651 $ 2,430,465
===================== =====================
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities 316,540 176,765
--------------------- ---------------------
Total liabilities 316,540 176,765
--------------------- ---------------------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 2,659 3,385
Limited Partners 2,095,452 2,250,315
--------------------- ---------------------
Total partners' equity 2,098,111 2,253,700
--------------------- ---------------------
Total Liabilities and Partners' Equity $ 2,414,651 $ 2,430,465
===================== =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-12
e-super8/s8598fs.doc
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
Statement of Operations
For the Three Months Ending March 31, 1998 and 1997
Three Months Three Months
Ended Ended
3/31/98 3/31/97
------------------ ---------------------
Income:
Hotel room $ 652,776 $ 704,139
Restaurant 135,024 154,235
Telephone and vending 12,994 14,480
Interest 801 1,692
Other 13,292 9,880
---------------- ---------------------
Total Income 814,887 884,426
---------------- ---------------------
Expenses:
Motel operating expenses (Note 2) 629,363 652,966
General and administrative 152,477 22,756
Depreciation and amortization 65,116 69,753
Property management fees 40,518 44,213
---------------- ---------------------
Total Expenses 887,474 789,688
---------------- ---------------------
Net Income (Loss) $ (72,587) $ 94,738
================ =====================
Net Income (Loss) Allocable
to General Partners ($726) $947
================ =====================
Net Income (Loss) Allocable
to Limited Partners ($71,861) $93,791
================ =====================
Net Income (Loss)
per Partnership Unit ($7.97) $10.40
================ =====================
Distribution to Limited Partners
per Partnership Unit $9.20 $9.20
================ =====================
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-13
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
Statement of Changes in Partners' Equity
For the Three Months Ending March 31, 1998 and 1997
1998 1997
-------------------- ---------------------
General Partners:
Balance at beginning of year $ 3,385 $ 3,836
Net income (loss) (726) 947
----------------- ---------------------
Balance at end of period 2,659 4,783
----------------- ---------------------
Limited Partners:
Balance at beginning of year 2,250,315 2,626,948
Net income (loss) (71,861) 93,791
Distributions to limited partners (83,002) (83,002)
----------------- ---------------------
Balance at end of period 2,095,452 2,637,737
----------------- ---------------------
Total Partners' Equity $ 2,098,111 $ 2,642,520
================= =====================
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-14
<PAGE>
<TABLE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
Statement of Cash Flows
For the Three Months Ending March 31, 1998 and 1997
1998 1997
--------------------- ---------------------
Cash flows from operating activities:
<S> <C> <C>
Received from hotel and restaurant revenues $ 816,176 $ 873,307
Expended for hotel and restaurant operation
and general and administrative expenses (660,193) (645,610)
Interest received 801 1,187
--------------------- ---------------------
Net cash provided (used) by operating activities 156,784 228,884
--------------------- ---------------------
Cash flows from investing activities:
Purchases of property and equipment (10,221) (20,648)
Proceeds from sale of equipment 230
-
--------------------- ---------------------
Net cash provided (used) by investing activities (10,221) (20,418)
--------------------- ---------------------
Cash flows from financing activities:
Distributions paid to limited partners (83,002) (83,002)
--------------------- ---------------------
Net cash provided (used) by operating activities (83,002) (83,002)
--------------------- ---------------------
Net increase in cash and temporary investments 63,561 125,464
Cash and Temporary Investments:
Beginning of year 146,113 246,283
--------------------- ---------------------
End of Period $ 209,674 $ 371,747
===================== =====================
Reconciliation of net income (loss) to net cash provided (used) by operating
activities:
Net income (loss) $ (72,587) $ 94,738
--------------------- ---------------------
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization 65,116 69,753
(Gain) loss on disposition of property and equipment - (230)
(Increase) decrease in accounts receivable 2,090 (9,932)
(Increase) decrease in prepaid expenses 22,390 18,031
Increase (decrease) in accounts payable
and accrued liabilities 139,775 56,524
--------------------- ---------------------
Total adjustments 229,371 134,146
--------------------- ---------------------
Net cash provided (used) by
operating activities $ 156,784 $ 228,884
===================== =====================
</TABLE>
UNAUDITED
The accompanying notes are an integral part of the financial statements.
F-15
<PAGE>
FAMOUS HOST LODGING V, L.P.
(A California Limited Partnership)
Notes to Financial Statements
March 31, 1998 and 1997
Note 1:
The attached interim financial statements include all adjustments (consisting of
only normal recurring adjustments) which are, in the opinion of management,
necessary to a fair statement of the results for the period presented.
Users of these interim financial statements should refer to the audited
financial statements for the year ended December 31, 1997 for a complete
disclosure of significant accounting policies and practices and other detail
necessary for a fair presentation of the financial statements
In accordance with the partnership agreement, the following information is
presented related to fees paid to the General Partners or affiliates for the
period.
Property Management Fees $40,518
In February, 1991 the Partnership terminated its franchise and its affiliation
with Super 8 Motels, Inc. and began operating as a Holiday Inn. Accordingly, no
franchise or advertising fees have been paid to the General Partners or their
affiliates for the period
Partnership management fees and subordinated incentive distributions are
contingent in nature and none have been accrued or paid during the current
period.
Note 2:
The following table summarizes the major components of hotel operating expenses
for the periods reported:
<TABLE>
Three Months Three Months
Ended Ended
3/31/98 3/31/97
--------------------- ---------------------
<S> <C> <C>
Salaries and related expenses $ 200,632 $ 213,730
Cost of food and beverage 47,639 60,548
Rent 75,321 81,817
Franchise, advertising and reservation fees 46,533 49,846
Utilities 42,907 43,581
Allocated costs, mainly indirect salaries 49,761 44,110
Renovations and replacements 3,797 4,080
Other operating expenses 162,773 155,254
--------------------- ---------------------
Total hotel and restaurant operating expenses $ 629,363 $ 652,966
===================== =====================
</TABLE>
The following additional material contingencies are required to be restated
in interim reports under federal securities law: None.
F-16
<PAGE>
APPENDIX 1
REVISED PRELIMINARY COPY
FAMOUS HOST LODGING V, L.P.
______________________
Notice of Proposed Action By Written Consent
TO THE LIMITED PARTNERS OF
FAMOUS HOST LODGING V, L.P.:
The Limited Partners of FAMOUS HOST LODGING V, L.P. (the "Partnership"), are
being asked by the Partnership and the Managing General Partner to consider and
approve by written consent the proposed sale of substantially all of the
Partnership's assets.
The Limited Partners of the Partnership are entitled to vote on the proposal by
completing, executing and returning to the Partnership the enclosed form of
Action by Written Consent of Limited Partners.
PLEASE FILL IN, DATE AND SIGN THE ENCLOSED POSTPAID CONSENT CARD AND RETURN IT
PROMPTLY. ONLY CONSENTS RECEIVED ON OR BEFORE JULY ____, 1998 (UNLESS EXTENDED
BY THE MANAGING GENERAL PARTNER PURSUANT TO NOTICE MAILED TO THE LIMITED
PARTNERS) WILL BE COUNTED TO DETERMINE WHETHER THE PROPOSAL IS APPROVED.
June ___, 1998
Grotewohl Management Services, Inc.,
a California corporation,
Managing General Partner
<PAGE>
APPENDIX 2
REVISED PRELIMINARY COPY
ACTION BY WRITTEN CONSENT OF LIMITED PARTNERS
FAMOUS HOST LODGING V, L.P.
2030 J Street
Sacramento, California 95814
(916) 442-9183
THIS CONSENT IS SOLICITED ON BEHALF OF THE PARTNERSHIP AND THE MANAGING GENERAL
PARTNER.
The undersigned votes all the units of limited partnership interest of Famous
Host Lodging V, L.P. 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
PLEASE MARK, SIGN, DATE AND
RETURN THIS
POSTPAID CONSENT CARD.
PURCHASE AND SALE AGREEMENT
Dated as of April 30, 1998
By and Between
Famous Host Lodging V, Ltd.
a California Limited Partnership
and
Tiburon Capital Corporation
a California Corporation
<PAGE>
TABLE OF CONTENTS
SECTION 1: DEFINITIONS .............................................1
SECTION 2: AGREEMENT TO SELL AND PURCHASE ..........................5
SECTION 3: REPRESENTATIONS AND WARRANTIES
BY SELLER ...............................................7
SECTION 4: REPRESENTATIONS AND WARRANTIES
OF PURCHASER ..........................................15
SECTION 5: OPERATION OF THE PROPERTIES PRIOR
TO CLOSING .............................................16
SECTION 6: CONDITIONS TO CLOSING ..................................17
SECTION 7: CLOSING ................................................22
SECTION 8: INDEMNIFICATION .......................................33
SECTION 9: WAIVER .................................................33
SECTION 10: BROKERS ................................................34
SECTION 11: SURVIVAL; FURTHER ASSURANCES ...........................34
SECTION 12: NO THIRD PARTY BENEFITS ................................35
SECTION 13: REMEDIES ...............................................36
SECTION 14: TERMINATION ............................................36
SECTION 15: MISCELLANEOUS ..........................................37
SECTION 16: NOTICES ................................................38
SECTION 17: ATTORNEYS' FEES ........................................39
SECTION 18: CONFIDENTIALITY ........................................40
- i -
<PAGE>
LIST OF EXHIBITS
Exhibit Description Primary Section Reference
A Identification of Motel 1 (L)
B List of Franchise Agreements 1 (F)
C Land Leases 1 (J)
D List of Service Contracts 3 (K)
E List of Equipment Leases 3 (L)
F List of Tenant Leases 3 (M)
G List of Labor Contracts 3 (N)
H Form of Grant Deed 7 (C)(1)(a)
I Bill of Sale and Assignment,
Personal Property 7(C)(1)(b)
J Assignment of Franchise Agreements 7(C)(1)(c)
K Assignment of Land Leases 7(C)(1)(d)
L Assignment of Service Contracts 7(C)(1)(e)
M Assignment of Tenant Leases 7(C)(1)(f)
N Assignment of Equipment Leases 7(C)(1)(g)
O Estoppel Certificates 7(C)(1)(i)
- ii -
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made as of the 30th day of April, 1998, by and
between FAMOUS HOST LODGING V, LTD., a California limited partnership
("Seller"), and TIBURON CAPITAL CORPORATION, a California corporation
("Purchaser").
W I T N E S S E T H
WHEREAS, Seller owns and operates one Holiday Inn Motel, as a
franchisee of Holiday Inns, Inc., and an adjoining restaurant and cocktail
lounge, in the city of Barstow, California, and desires to sell such motel,
restaurant, and cocktail lounge to Purchaser on the terms and conditions set
forth below; and
WHEREAS, the Purchaser desires to purchase such motel, restaurant, and
cocktail lounge 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. "Barstow Motel" refers to the Holiday Inn Motel (including adjoining
restaurant and cocktail lounge) located at 1511 East Main Street, Barstow,
California 92311.
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(O) hereof.
F. "Franchise Agreements" refers to the franchise agreements between the
Seller and Holidays Inn, 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
- 2 -
<PAGE>
the Properties, appliances, china, glassware, linens, silverware, keys and
uniforms owned by Seller and used in connection with the ownership, operation,
and maintenance of the Properties.
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 Leased Land.
J. "Land Leases" refers to the leases of the land identified on Exhibit C
hereto.
K. "Leased Land" refers to the land leased to Seller pursuant to the Land
Leases.
L. "Motel" refers to the Barstow Motel, including adjoining restaurant and
cocktail lounge, as identified on Exhibit A hereto.
M. "Personal Property" means all tangible and intangible personal property
now or hereafter owned by the Seller and used in connection with the operation
of the Properties, including, without limitation, (i) all building and
construction materials, equipment, appliances, machinery and other personal
property owned by Seller and used in connection with the operation of the
Properties, (ii) the Consumables, (iii) the FF & E, (iv) Seller's rights under
the Franchise Agreements, (v) all transferable permits, licenses, certificates
and approvals issued in connection with the Properties, (vi) the exclusive right
to use the name of the Properties and the right to all other names, logos and
designs used in connection with the Properties, including the names of
restaurants, bars, banquet rooms and meeting rooms, (vii) the right to use the
- 3 -
<PAGE>
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
services presently supplied to the Properties, and (xiii) all documents relating
to employees at the Properties.
N. "Properties" means the Seller's interest in the Land Leases, the Motel,
the Personal Property, and the Improvements.
O. "Property Agreement(s)" means, collectively, the Franchise Agree ments,
the Land Leases, the Tenant Leases, the Service Contracts, the Permitted
Exceptions, the Equipment Leases, and any other lease, rental agreement, loan
agreement, loan commitment, mortgage, deed of trust, easement, covenant or
agreement affecting Seller's interest in the Properties.
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 Four Million One Hundred Thousand Dollars
($4,100,000) subject to prorations as set forth below.
B. Earnest Money. Upon the later to occur of the completion of the
inspection period referred to in Section 6(4) hereof or the date Seller notifies
Purchaser that Seller's limited partners have approved this Agreement and all
matters related thereto (Section 6(11) hereof), Purchaser shall deposit $21,000
(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.
///
///
///
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<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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<PAGE>
SECTION 3: REPRESENTATIONS AND WARRANTIES BY SELLER
Seller hereby represents and warrants to, and covenants and agrees
with, Purchaser as of the date hereof and as of the Closing as follows (all of
which representations and warranties shall be deemed automatically remade as of
the Closing):
A. Due Organization. Seller is a limited partnership duly organized and
validly existing under the laws of the State of California. Seller has the full
power and authority, and is duly authorized, to execute, enter into, deliver and
perform this Agreement and its obligations hereunder.
B. Power. This Agreement and all other agreements, instruments and
documents required to be executed or delivered by Seller pursuant hereto have
been or (if and when executed) will be duly executed and delivered by Seller,
and are or will be legal, valid and binding obligations of Seller. No consents
and permissions are required to be obtained by Seller for the execution and
performance of this Agreement and the other documents to be executed by Seller
hereunder; provided, however, that sale of the Properties to Purchaser by Seller
requires (i) the consent of the lessor under the Land Leases; (ii) the consent
of the franchisors and subfranchisors under the Franchise Agreements; and (iii)
the approval of the limited partners of Seller. The consummation of the
transactions contemplated herein and the fulfillment of the terms hereof will
not result in a breach of any of the terms or provisions of, or constitute a
default under, any agreement or document to which the Seller is a party or by
which it is bound, or, to the best of Seller's knowledge, any order, rule or
regulation of any court or of any federal or state regulatory body or any
administrative agency or any other governmental body having jurisdiction over
the Seller or the Properties.
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<PAGE>
C. Title. Seller has good and marketable title to the Properties (other
than the land leased to Seller pursuant to the Land Leases), subject only to the
Tenant Leases, Permitted Exceptions, and those liens and encumbrances which will
be released at Closing.
D. Condition of Properties. To the best of Seller's knowledge, (i) the
Improvements (including, without limitation, all heating, ventilating, air
conditioning, electrical, elevator, plumbing and all other building systems (the
"Building Systems"), roofs, exterior walls, windows and all other structural
elements of the Properties (the "Structural Elements") are structurally sound
and have been constructed in a good and workmanlike manner, are free from
material defects, and there are no subsurface soil conditions adversely
affecting the Properties; (ii) any parking on the Properties is sufficient for
its current uses and satisfies all legal requirements, (iii) all streets and
driveways necessary for access and utilization of the Properties are complete
and available for use, (iv) the Properties include all easements necessary for
their current use and there are no off-site facilities or rights needed for
their operation or use; (v) all utilities servicing the Properties are adequate
for the use and operation of the Properties as currently intended; (vi) the
Properties are not located in any wetlands and no geological faults traverse the
Properties, and (vii) the Properties are free from infestation by pests. Seller
has not received any written notice of unsatisfied requests for repairs,
restorations or improvements from any person, entity or authority (including,
but not limited to, tenants, insurers, lenders or governmental agencies) with
respect to the Properties. Seller has not received any written notice of
complaints from adjoining property owners with respect to the Properties. In the
event any such requests or complaints are received by Seller between the date of
this Agreement and Closing, copies thereof shall be furnished to Purchaser, and
if the cost to correct the matters referred to therein exceeds $25,000 then
Purchaser may terminate this Agreement if Seller elects not to correct such
matters.
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<PAGE>
E. Permits and Legal Compliance. To the best of Seller's knowledge, Seller
has all licenses, permits and certificates necessary for the use and operation
of the Properties, including, without limitation, all certificates of occupancy
necessary for the occupancy of the Properties. To the best of Seller's
knowledge, the Properties, including the use thereof, comply with all Property
Agreements and all applicable laws.
F. No Proceedings. There is not now pending or, to the best of Seller's
knowledge, threatened, any action, suit or proceeding before any court or
governmen tal agency or body against (i) the Seller which might result in any
material adverse change in the condition (financial or otherwise), business,
prospects, revenue or income of the Properties, or which might have any material
adverse result to the Properties, or (ii) the Properties. Without limiting the
generality of the foregoing, Seller has not received any written notice of
violations or alleged violations of any laws, rules, regulations or codes,
including building codes, with respect to the Properties which have not been
corrected to the satisfaction of the governmental agency issuing such notices.
G. Eminent Domain. Seller has not received written notice of any pending,
or to the best of Seller's knowledge, threatened condemnation, eminent domain or
similar proceeding relating to the Properties or any portion thereof or any
interest (whether legal, beneficial or otherwise) or estate therein.
H. Zoning; Taxes. Seller has not received any written notice regarding
threatened zoning changes or variances with respect to the Properties; nor has
Seller received written notice that anyone initiated any request or application
for a zoning change or variance with respect to the Properties. Seller has not
received any written notices regarding pending or threatened reassessments or
special tax assessments
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<PAGE>
against the Properties, and the Properties are separately assessed for real
estate tax purposes.
I. Franchise Agreements. Exhibit B lists the Franchise Agreements for the
Properties pursuant to which Seller operates the Properties as a Holiday Inn
Motel. Exhibit B also includes a list of all amendments and modifications
thereto. To the best of Seller's knowledge, except as may be shown in said
exhibit, all of the Franchise Agreements are in full force and effect and free
from default, Seller is current in the payment of all fees due under the
Franchise Agreements, and there is no existing event which, with the passage of
time or the giving of notice, or both, could become a default under the
Franchise Agreements, and there are no disputes, claims, or rights of set-off
under the Franchise Agreements.
J. Land Leases. Exhibit C lists for the Properties the Land Leases
applicable to the Properties. Exhibit C also includes a list of all amendments
and modifications thereto. To the best of Seller's knowledge, except as may be
shown in said Exhibit, the Land Leases is in full force and effect and free from
default, Seller is current in the payment of all rentals and other amounts due
under the Land Leases, there is no existing event which, with the passage of
time and the giving of notice, or both, could become a default under the Land
Leases, there are no disputes, claims, or rights of set-off under the Land
Leases, and, subject to obtaining the consent of the lessor under the Land
Leases and the limited partners of Seller, Seller has the full right, power, and
authority to assign its interest in and to the Land Leases to Purchaser.
K. Service Contracts. Attached hereto as Exhibit 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
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<PAGE>
agreements, together with the contracts and agreements entered into with respect
to the Properties after the date hereof with the consent of Purchaser pursuant
to Section 6 below, are herein referred to collectively as the "Service
Contracts"). To the best of Seller's knowledge, except as may be shown in said
exhibit, all of the Service Contracts are in full force and effect and free from
default and there is no existing event which, with the passage of time or giving
of notice, or both, could become a default under the Service Contracts, and
there are no disputes, claims or rights of set-off under the Service Contracts.
Except as may be shown in said exhibit, all management agreements relating to
the Properties are terminable by Seller at or prior to Closing, without cost or
expense to Purchaser.
L. Equipment Leases. Attached hereto as Exhibit E is a list of all
equipment leases to which Seller is a party for the leasing of equipment for the
Properties, including (without limitation) a list of all amendments and
modifications thereto and assignments thereof (which leases, together with the
equipment leases entered into with respect to the Properties after the date
hereof with the consent of Purchaser pursuant to Section 6 below, are herein
referred to collectively as the "Equipment Leases"). To the best of Seller's
knowledge, except as may be shown in said exhibit, all of the Equipment Leases
are in full force and effect and free from default and there is no existing
event which, with the passage of time or giving of notice, or both, could become
a default under the Equipment Leases, and there are no disputes, claims or
rights of set-off under the Equipment Leases.
M. Tenant Leases. Attached hereto as Exhibit F is a list of all outstanding
leases or agreements (other than the Land Leases) pursuant to which any person
occupies, or has the right to occupy, space in the Properties including (without
limitation) all amendments and modifications thereto and assignments and
guaranties thereof (which leases, agreements and other documents, together with
the lease documents entered into with respect to the Properties after the date
hereof with the
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<PAGE>
consent of purchaser pursuant to Section 6 below, are herein referred to
collectively as the "Tenant Leases"). Except as shown on such exhibit, (a) to
the best of Seller's knowledge, there are no defaults under any of the Tenant
Leases and the Tenant Leases are in full force and effect, there are no existing
events which with the passage of time or giving of notice or both could become a
default under the Tenant Leases, and there are no disputes, claims or rights of
set-off under the Tenant Leases, (b) there are no security deposits nor any
rights to refunds of rents previously paid under the Tenant Leases except as
shown on Exhibit F, (c) no person has acquired from Seller any options or rights
to lease space in the Properties or extend any Tenant Leases or rights of first
refusal or offer for space in the Properties except as set forth in the Tenant
Leases, (d) there are no brokerage commissions or fees due now or payable in the
future in connection with the Tenant Leases except as set forth in Exhibit F and
Seller agrees to pay all such commissions and fees, (e) all of the landlord's
obligations to construct tenant improvements or reimburse the tenants for tenant
improvements under the Tenant Leases have been paid and performed in full and
all concessions (other than any unexpired rent abatement set forth in the Tenant
Leases) from the landlord under the Tenant Leases have been paid and performed
in full, (f) to the best of Seller's knowledge there are no bankruptcy or
insolvency proceedings pending or threatened with respect to any of the tenants
under the Tenant Leases, and (g) no tenant has notified Seller in writing of any
material, uncured defect or alleged defect in its premises or the common areas
of the Properties. In the event any such notices are received by Seller between
the date of this Agreement and Closing, copies thereof shall be furnished to
Purchaser, and if the cost to correct the matters referred to therein (together
with the cost of correcting all other matters requiring correction by Seller
under this Agreement prior to Closing) exceeds $50,000 and Seller elects not to
correct such matters, then Purchaser may terminate this Agreement (and, in such
event, Purchaser shall be entitled to a return of its Earnest Money).
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<PAGE>
N. Labor Contracts. Except as disclosed on Exhibit G hereto, there are no
employment agreements or union contracts with respect to the Motel that will be
binding on Purchaser after Closing, and, other than as disclosed on Exhibit G
hereto, and except as provided by Section 7(E) hereof, Purchaser will be under
no obligation to use or hire such employees for the Properties after Closing.
O. Financial Information. Seller has delivered to Purchaser financial
statements of Seller for the calendar year 1997, prepared by Vocker
Kristofferson and Co., San Mateo, California. Such financial statements are
true, complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles; such financial
statements fairly present the financial condition of Seller as of the date
thereof, there are no liabilities with respect to the Properties which are
required to be shown in accordance with generally accepted accounting principles
as of the date thereof and which are not shown on such financial statements.
Seller has delivered to Purchaser operating statements for the Properties for
the calendar year 1997, which are true, complete and correct, and no material
adverse change has occurred in the financial condition of the Properties from
the date thereof to the date hereof.
P. Hazardous Materials. To Seller's best knowledge, during the period
of Seller's ownership, no portion of the Properties has ever been used by Seller
as a landfill or as a dump to receive garbage, refuse, waste or fill material
whether or not hazardous. Seller, to the best of Seller's knowledge, during the
period of Seller's ownership, has not stored, handled, installed or disposed of
any Hazardous Substances (as hereinafter defined) in, on or about the Properties
or any other location within the vicinity of the Properties; and, to Seller's
knowledge, there are no Hazardous Substances in, under, or on the Properties. As
used in this Agreement, the terms "Hazardous Substances" means asbestos,
polychlorinated biphenyl and such materials, waste, contaminants or other
substances defined as toxic, dangerous to
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<PAGE>
health or otherwise hazardous by cumulative reference to the following sources
as amended from time to time: (i) the Resource Conservation and Recovery Act of
1976, 42 USC Section 6901 et seq. ("RCRA"); (ii) the Hazardous Materials
Transportation Act, 49 USC Section 1801, et seq.; (iii) the Comprehensive
Environmental Response Compensation and Liability Act of 1980, 42 USC Section
9601 et seq. ("CERCLA"); (iv) applicable laws of the State of California; and
(v) any federal, state or local statutes, regulations, ordinances, rules or
orders issued or promulgated under or pursuant to any of those laws or otherwise
by any department, agency or other administrative, regulatory or judicial body.
The term "Hazardous Substances" does not include usual and customary cleaning
and other supplies necessary for the normal operations, maintenance and/or
occupancy of the Properties.
Q. ERISA. The Seller is not and is not acting on behalf of an "employee
benefit plan" within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), a "plan" within the meaning
of Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code"),
or an entity deemed to hold "plan assets" within the meaning of 29 C.F.R.
Section 2510.3-101 of any such employee benefit plan or plans.
R. Work Under Land Leases or Licenses. To the best of Seller's knowledge,
except as may be set forth on Exhibit D hereto, Seller is current in the payment
of all fees and expenses incurred by Seller for work conducted by or for Seller
under the Land Leases or under any license relating to the Properties, and there
is no existing event which, with the passage of time or the giving of notice, or
both, could become a default under any contract for the performance of services
under the Land Leases or under any such license, and there are no disputes,
claims, or rights of set-off under any such contract.
///
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<PAGE>
SECTION 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to, and covenants and agrees
with, Seller as of the date hereof and as of the Closing as follows (all of
which representa tions shall be deemed automatically remade as of the Closing):
A. Due Organization. Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
Purchaser has full power and authority, and is duly authorized, to execute,
enter into, deliver and perform this Agreement and its obligations hereunder.
B. Power. This Agreement and all other agreements, instruments and
documents required to be executed or delivered by Purchaser pursuant hereto have
been or (if and when executed) will be duly executed and delivered by Purchaser,
and are or will be legal, valid and binding obligations of Purchaser. No
consents and permissions are required to be obtained by Purchaser for the
execution and performance of this Agreement and the other documents to be
executed by Purchaser hereunder. The consummation of the transactions
contemplated herein and the fulfillment of the terms hereof will not result in a
breach of any of the terms or provisions of, or constitute a default under, any
agreement or document to which Purchaser is a party or by which it is bound, or
any order, rule or regulation of any court or of any federal or state regulatory
body or any administrative agency or any other governmental body having
jurisdiction over Purchaser.
C. No Proceedings. There are not now pending or, to the best of Purchaser's
knowledge, threatened, any proceeding, legal, equitable or otherwise, against
Purchaser which would affect its ability to perform its obligations hereunder.
There is not now pending or, to the best of Purchaser's knowledge, threatened
any
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<PAGE>
action, suit or proceeding before any court or governmental agency or body which
might adversely affect Purchaser's ability to perform its obligations hereunder.
SECTION 5: OPERATION OF THE PROPERTIES PRIOR TO CLOSING
The Seller shall do all of the following, from and after the date
hereof through and including the Closing Date:
(a) operate and maintain the Properties in the same manner as currently
being operated, and shall, subject to damage, destruction or loss to the
Properties in which event Purchaser shall have the rights set forth in Section
6(3), cause the Properties to be, on the Closing Date, in the same condition as
exists as of the date of this Agreement (normal wear and tear excepted);
(b) maintain the FF & E in the same manner as currently being
maintained, and not remove any of the FF & E from the Properties unless replaced
with FF & E of at least as good a quality as that removed;
(c) maintain the Consumables in the same manner and quantity as
currently being maintained, and replace any Consumables used at the Properties
with new Consumables which are substantially equal in quality and quantity to
those that have been used at the Properties;
(d) maintain, or cause to be maintained, all existing insurance
carried by Seller on the Improvements;
(e) without the prior written consent of Purchaser, not enter into any
new Property Agreements, or any other agreements affecting the Properties which
would be binding on Purchaser after Closing, nor modify, amend, terminate,
cancel or grant
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<PAGE>
concessions regarding any such existing contracts or agreements which would be
binding on the Purchaser after Closing; and
(f) without the prior written consent of the Purchaser (except in the
case of emergencies), not make, or obligate itself to make, any material
alterations or modifications to the Properties.
SECTION 6: CONDITIONS TO CLOSING
In addition to the conditions provided in other provisions of this
Agreement, the parties' obligations to perform their undertakings provided in
this Agreement, are each conditioned on the fulfillment of each of the following
which is a condition to such party's obligation to perform hereunder (subject to
such party's waiver in strict accordance with Section 9 below).
(1) Purchaser shall have obtained each of the following at Seller's
expense: (i) an ALTA Survey prepared by a licensed surveyor of the Properties
(hereinafter, the "Survey") certified to Purchaser, Purchaser's lender, and to
the Title Company, (ii) preliminary title report for the Properties (the "Title
Report") together with legible copies of all exceptions appearing in such report
issued by the Title Company, and (iii) a UCC search (the "UCC Search") of all
currently effective financing statements naming Seller as debtor from the
California Secretary of State, together with legible copies of all of such
financing statements. Purchaser shall have until June 30, 1998 to approve the
Survey, the Title Report, and the results of the UCC Search. If Purchaser
approves the Survey, the Title Report, and the results of the UCC Search, then
all matters showing thereon shall be deemed "Permitted Exceptions." If Purchaser
disapproves any matters in the Survey, the Title Report, or the UCC Search, then
Seller may either cure such matters, in which case the remaining matters
approved by Purchaser shall be deemed Permitted Exceptions, or notify Purchaser
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<PAGE>
that it has elected not to cure such matters. Any such notice by Seller shall be
given to Purchaser not later than five (5) days following the date Purchaser
notifies Seller of any objectionable title matters. If Seller elects not to cure
any matter which has been disapproved by Purchaser, then Purchaser may elect
either to accept such matter as a Permitted Exception or terminate this
Agreement (and, in such event, Purchaser shall be entitled to the return of its
Earnest Money).
(2) As a condition to each party's obligation to perform hereunder, the
due performance by the other of all undertakings and agreements to be performed
by the other hereunder and the truth of each representation and warranty as set
forth herein made pursuant to this Agreement by the other at the Closing Date.
(3) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), that there shall not have occurred between the date hereof
and the Closing Date, inclusive, destruction of or damage or loss to the
Properties (whether or not covered by insurance proceeds) from any cause
whatsoever, the cost of which to repair plus any resulting abatement of any rent
after Closing under any Tenant Leases and any resulting business interruption
exceeds $100,000 in the aggregate; provided, however, that in the event of such
destruction or damage, Purchaser may elect to proceed with the Closing in which
case Seller shall assign to Purchaser any claims for proceeds from the insurance
policies covering such destruction or damage (including any rental loss
insurance) and shall pay to Purchaser the amount of any deductibles thereunder.
If the cost of repairing the destruction, damage or loss plus any resulting rent
abatement and business interruption after Closing is less than $100,000 in the
aggregate, the parties shall proceed with the Closing as provided herein, the
cost of repair plus the amount of any rent abatement shall be deducted from the
Purchase Price and Seller shall retain any insurance proceeds.
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<PAGE>
(4) As a condition of Purchaser's obligation to perform hereunder (and
not as a default), Purchaser shall be satisfied in its sole and absolute
discretion with all aspects of the Properties (including, but not limited to,
the physical and environmental condition of the Properties); provided, however,
if Purchaser does not notify Seller in writing prior to June 30, 1998 that it is
not so satisfied, this condition shall be deemed waived by Purchaser. Purchaser
shall not be required to give its reasons for terminating this Agreement
pursuant to this Paragraph, and Purchaser's notice shall be conclusive evidence
that it is dissatisfied with the Properties. It is understood and agreed, and
Purchaser hereby acknowledges, that the period of time afforded by this section
of the Agreement (the "Inspection Period") should be ample time to review and
inspect the condition of the Properties and that if, for any reason, it is
dissatisfied with the condition of the Properties or with the information
provided or available to Purchaser within the Inspection Period, it has the
unrestricted right to terminate this Agreement and receive a return of its
Earnest Money. Accordingly, in the event that Purchaser does not terminate this
Agreement and proceeds beyond the expiration of the Inspection Period, it is
understood and agreed that the Properties are being sold "as is," "where is" and
"with all faults," except as set forth in Section 3. Purchaser further agrees
and confirms that it is not relying on information other than the financial
statements and other information supplied during the Inspection Period and
Seller makes no representation or warranty whatsoever as to the condition or
value of the Properties or otherwise except as set forth in Section 3.
(5) As a condition of Purchaser's obligation to perform hereunder (and
not as a default), Purchaser shall have until June 30, 1998 to obtain a
commitment (the "Lender's Commitment") from a third-party lender to provide
financing in an amount of not less than 90% of the Purchase Price of the
Properties on terms deemed satisfactory by Purchaser, and such lender shall have
until July 15, 1998 (i) to perform its due diligence (including, without
limitation, reviewing the Survey, the Title Report, and the results of the UCC
Search, and to otherwise satisfy itself that all
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<PAGE>
conditions to loan funding are satisfied), (ii) to prepare and approve loan
documenta tion acceptable to the lender and Purchaser, and (iii) to satisfy
itself that all conditions to loan funding have been satisfied (conditions (i),
(ii) and (iii) referred to as the "Lender's Conditions"). If Purchaser does not
notify Seller in writing on or prior to July 15, 1998 that it has not obtained
the Lender's Commitment, or that Purchaser's lender has not satisfied the
Lender's Conditions, then the conditions of this subsection (5) shall be deemed
waived by Purchaser. If Purchaser notifies Seller in writing on or prior to July
15, 1998 that it has not obtained the Lender's Commitment or that Purchaser's
lender has not satisfied the Lender's Conditions, then this Agreement shall
become null and void and terminated, with neither Purchaser nor Seller having
any further obligation to consummate this Agreement or any liability to the
other party for the failure of this Agreement. On any such termination of this
Agreement, Purchaser shall be entitled to a return of its Earnest Money.
(6) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), that there shall not have occurred at any time or times on or
before the Closing Date any taking or threatened taking of the Properties or any
part thereof or any interest or estate therein by condemnation, eminent domain
or similar proceed ings; provided, however, Purchaser may elect to waive such
condition in which case Seller shall assign to Purchaser at Closing all of
Seller's right, title and interest in and to any proceeds resulting from any
such proceeding.
(7) As a condition to Purchaser's obligation to perform hereunder, that
as of the Closing Date, the Property Agreements shall be in full force and
effect, unmodified and unwaived, and in good standing and free from default, and
there shall be no material changes in the operation of the Properties.
(8) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), Seller shall obtain the consent or approval, at its sole cost
and expense,
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<PAGE>
of all necessary consents to assign all of Seller's right, title, and interest
in and to the Land Leases to Purchaser (or its designee), and to assign all of
Seller's right, title, and interest in and to the Franchise Agreements to
Purchaser (or its designee) provided, however, that Purchaser, not Seller, shall
be responsible for paying any application or related fee imposed by the
franchisor under the franchise agreement chargeable to new franchisees. Seller
shall further obtain assurance, reasonably satisfactory to Purchaser, from any
lender whose loan is secured by the land subject to the Land Leases, that such
lender will not disturb the possessory rights of Purchaser under the Land Leases
as long as Purchaser is not in default under the Land Leases. The consents and
approvals required under this paragraph shall be in a form reasonably
satisfactory to Purchaser.
(9) Seller covenants and agrees, and it shall be a condition to
Purchaser's obligation to perform its undertakings hereunder, that from and
after the date hereof, at all reasonable times, Purchaser (and its agents) shall
be permitted access to the Properties and to all books, records and reports
relating to the Properties for the purpose of inspecting same, and Purchaser
(and its agents) shall have the right to photocopy any and all such books,
records and information. All information relating to the Properties made
available to Purchaser and its agents shall be treated as confidential.
Purchaser (and its agents) shall also have the right to meet with GMS and its
officers and employees to discuss any matters relating to the operation of the
Properties. Any entry by Purchaser and its agents on the Properties shall be
upon reasonable prior notice to Seller, and the Purchaser will indemnify and
hold Seller harmless against any and all injuries, claims, losses, damages and
expenses arising out of its negligence in the performance of any such entry,
inspection or other activities.
(10) As a condition to Purchaser's obligation to perform hereunder (and
not as a default), no written notices of any violation of building codes or
other govern mental regulations have been issued.
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<PAGE>
(11) As a condition to Seller's obligation to perform hereunder, Seller
shall have obtained the approval by Seller's limited partners (1) to sell the
Properties to Purchaser pursuant to the terms of this Agreement, and (2) to take
all other actions necessary or appropriate to consummate the transaction
contemplated by this Agreement.
(12) As a condition to Seller's obligation to perform hereunder, Seller
shall have received, in a form satisfactory to GMS, on or before June 30, 1998,
a fairness opinion from PKF Consulting, San Francisco, or other qualified
independent real estate advisory or investment banking firm, to the effect that
the sale of the Properties to Purchaser pursuant to the terms and conditions of
this Agreement is fair, from a financial point of view, to Seller. If Seller
notifies Purchaser in writing on or prior to June 30, 1998, that is has not
obtained a fairness opinion satisfactory to GMS, then this Agreement shall
become null and void, with neither Purchaser nor Seller having any further
obligation to consummate this Agreement or any liability to the other party for
the failure of this Agreement. If the Agreement is terminated as aforesaid, then
Purchaser shall be entitled to a return of its Earnest Money.
SECTION 7: CLOSING
A. Time. The Closing hereunder shall occur on the Closing Date at the
offices of the Title Company.
B. Actions. At the Closing, each party shall satisfy itself that the other
is then in position to deliver the items specified in Section 7(C) below and
that the conditions contained herein have been satisfied. Upon being so
satisfied and concurrently with the delivery of the documents described below,
the following, subject to the terms and conditions hereof, shall occur:
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(1) Seller shall convey the Properties to Purchaser; and
(2) Purchaser shall pay to Seller the Purchase Price by wire
transfer of immediately available funds, plus or minus prorations as set forth
herein.
Purchaser shall receive full possession of the Properties at
Closing, subject only to the Land Leases, Tenant Leases, Permitted Exceptions,
Service Contracts, Franchise Agreements, and Equipment Leases.
The Closing shall be held at the same time as the closings of
the other Purchase and Sale Agreements referred to in Section 14(iii) hereof.
C. Deliveries.
(1) At the Closing, Purchaser shall receive all of the
following, in form and substance reasonably satisfactory to Purchaser (it being
agreed by Purchaser that the documents attached hereto as exhibits are
satisfactory in form to Purchaser):
(a) grant deed in the form attached hereto as Exhibit H executed by the
Seller;
(b) bill of sale and assignment for the Personal Property in the form of
Exhibit I, executed by Seller;
(c) an assignment of the Franchise Agreements, in the form of Exhibit J
attached hereto (the "Assignment of Franchise Agree ments"), executed by Seller,
assigning to Purchaser the Franchise Agreements, and the consents of the
franchisors to such assignments in form and content reasonably acceptable to
Purchaser;
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(d) an assignment of Land Leases, in the form of Exhibit K attached hereto
(the "Assignment of Land Leases"), executed by Seller, assigning to Purchaser
the Land Leases, and consents of the lessor to such assignments in form and
content reasonably acceptable to Purchaser;
(e) an assignment of the Service Contracts, in the form of Exhibit L
attached hereto (the "Assignment of Service Contracts"), executed by Seller,
assigning to Purchaser the Service Contracts;
(f) an assignment of the Tenant Leases, in the form of Exhibit M hereto
(the "Assignment of Tenant Leases"), executed by Seller, assigning the Tenant
Leases to Purchaser;
(g) an assignment of the Equipment Leases, in the form of Exhibit N hereto
(the "Assignment of Equipment Leases"), executed by Seller, assigning to
Purchaser the Equipment Leases;
(h) a certificate from Seller that each of the representations and
warranties contained in Section 3 hereof is true and correct as set forth herein
as of the Closing Date.
(i) written acknowledgments reasonably acceptable to Purchaser (the
"Estoppel Certificates") from the parties (other than the Seller) obligated on
the Tenant Leases (said estoppels from tenants to be in the form of Exhibit O
hereto), dated as of a date not more than thirty (30) days prior to Closing,
with no material omissions from the form of estoppel certificate set forth in
Exhibit O.
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(j) all assignable licenses, permits, approvals, zoning exceptions and
approvals, consents and orders of governmental, municipal or regulatory
authorities in Seller's possession or control which have been obtained in
connection with the ownership, operation and use of the Properties, including,
without limitation, certificates of occupancy for the Properties;
(k) notices to each of the tenants under the Tenant Leases, notifying them
of the sale of the Properties and directing them to pay all future rent as
Purchaser may direct, and notices to the other parties under the Service
Agreements and Equipment Leases notifying them of the sale of the Properties to
Purchaser;
(l) a closing statement setting forth all prorations and credits required
hereunder;
(m) UCC searches showing no financing statements on file with respect to
the Personal Property;
(n) an affidavit from Seller that it is not a "foreign person" or subject
to withholding requirements under the Foreign Investment in Real Property Tax
Act of 1980, as amended, and a comparable affidavit or form under California
law;
(o) any documents reasonably required of Seller by the Title Company;
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<PAGE>
(p) evidence satisfactory to Purchaser that Seller has the right to assign
to Purchaser the exclusive right to use the names of the Properties;
(q) the original of all Property Agreements to the extent they are in the
possession of Seller or its agents;
(r) all keys and combinations to locks located at the Properties;
(s) all soil reports, engineering studies, maintenance records, consultant
reports, plans and specifications and books and records relating to the
Properties which are in the possession of Seller or its General Partner;
(t) a complete set of all guest registration cards, guest transcripts,
guests' histories and all other guest information;
(u) a complete list of all advance room reservations and functions in
reasonable detail so as to enable Purchaser to honor them; and
(v) evidence that the Seller has terminated all existing management
agreements for the Motel (unless Purchaser has notified Seller, no later than
thirty (30) days prior to the Closing Date, that it has elected to continue such
management agreements in force).
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<PAGE>
(2) Seller shall have received from Purchaser all of the
following, in form and substance reasonably satisfactory to Seller (it being
agreed by Seller that the documents attached hereto as exhibits are satisfactory
in form to the Seller):
(a) payment of the Purchase Price, plus or minus prorations;
(b) a certificate from Purchaser that each of the representa tions and
warranties contained in Section 4 is true and correct as of the Closing Date;
and
(c) copies of the Assignment of Franchise Agreements, the Assignment of
Land Leases, the Assignment of Tenant Leases, the Assignment of Service
Contracts, and the Assignment of Equipment Leases executed by Purchaser,
pursuant to which Purchaser assumes the obligations of Seller accruing from and
after the Closing Date under the Franchise Agreements, the Land Leases, Tenant
Leases, Service Contracts, and Equipment Leases.
D. Prorations. The Purchase Price for the Properties shall be subject to
prorations and credits as follows to be determined as of 12:01 a.m. on the
Closing Date:
1. Rents Payable Under Tenant Leases. Any portion of any rents
collected subsequent to the Closing Date and properly allocable to periods prior
to the Closing Date, net of Purchaser's third-party costs of collection, if any,
shall be paid, promptly after receipt, to the Seller, but subject to all of the
provisions of this Section; and any portion thereof properly allocable to
periods subsequent to the Closing Date, if any, shall be paid to Purchaser. Any
amount collected from a tenant shall first be applied to such tenant's current
monthly rental and then to past due amounts in the
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reverse order in which they were due. Any advance rental payments or deposits
paid by tenants prior to the Closing Date and applicable to the periods of time
subsequent to the Closing Date and any security deposits or other amounts paid
by tenants, together with any interest on both thereof to the extent such
interest is due to tenants, shall be credited to Purchaser on the Closing Date.
No credit shall be given the Seller for accrued and unpaid rent or any other
non-current sums due from tenants until said sums are paid.
2. Motel Room, Restaurant and Bar Revenues. Purchaser shall be
entitled to all food service, bar, beverage and liquor revenues and charges and
all revenues and charges from restaurant operations, Motel banquet and
conference facility operations, and all other revenue of any kind attributable
to any of the same for the period on and after 12:01 a.m. on the Closing Date.
Purchaser shall pay over to Seller all collections of accounts receivable in
connection with the Properties which have accrued as of Closing (the "Closing
Accounts Receivable"). By no later than sixty (60) days after Closing, Purchaser
shall pay to Seller an amount equal to the remaining Closing Accounts
Receivable, minus those uncollectible Closing Accounts Receivable as agreed upon
by Purchaser and Seller. Seller shall deliver to Purchaser or provide Purchaser
a credit against the Purchase Price for the Properties in an amount equal to all
guest reservation deposits held by the Motels for Motel guests arriving or
staying after check-out time for the Motel on the Closing Date. All collections
of Motel receivables from any party after Closing shall be applied first to
receivables due from such party which have accrued prior to Closing and second
to receivables due from such party which have accrued after Closing.
3. Cash. Purchaser shall give Seller a credit at Closing for all petty cash
funds at the Properties and all cash in any operating accounts for the
Properties to the extent such petty cash and operating accounts are transferred
to Purchaser at Closing. Purchaser and Seller shall make mutually satisfactory
arrangements for
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counting such cash and determining the balances in the operating accounts as of
12:01 a.m. on the Closing Date.
4. Motel Consumables. Seller shall not be entitled to any credit for
Consumables located on the Properties as of the Closing Date.
5. Trade Payables. Trade payables shall mean (for all purposes) under this
Agreement open accounts payable to trade vendors or suppliers of the Properties.
Except for trade payables for Consumables, Seller agrees to give Purchaser a
credit at Closing for all trade payables from the Properties which have accrued
on or prior to 12:01 a.m. on the Closing Date, and Purchaser shall be obligated
to pay (i) such payables to the extent it has received a credit from Seller at
Closing and (ii) trade payables or the Consumables. Purchaser agrees to pay all
trade payables from the Properties which have accrued after 12:01 a.m. on the
Closing Date and shall and hereby does indemnify and hold Seller harmless from
payment of the same. The indemnities contained or provided for in this section
survive Closing.
6. Banquet and Event Deposits. Purchaser shall receive and be entitled to a
credit against the Purchase Price for all prepaid deposits for banquets and
other functions that are scheduled to take place at any of the Properties on or
after the Closing Date.
7. Franchise Agreements, Land Leases, Service Contracts, and Equipment
Leases. Subject to the provisions of Section 6(8) hereof, any amounts prepaid or
payable under any Franchise Agreement, Land Leases, Service Contract, or
Equipment Lease shall be prorated at the Closing as of the Closing Date with
Seller obligated for all sums accrued prior to 12:01 a.m. on the Closing Date
and Purchaser obligated for all sums accrued after 12:01 a.m. on the Closing
Date.
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<PAGE>
8. Sales Tax. Seller hereby agrees to indemnify and hold Purchaser harmless
from the payment of any and all sales, occupancy, use or other taxes due in
connection with the operation of the Properties prior to the Closing Date. The
indemnification set forth herein shall survive the Closing.
9. Taxes. Purchaser shall receive a credit for any accrued but unpaid real
estate taxes imposed in respect of the Properties for the portion of the current
year which has elapsed prior to the Closing Date (and, to the extent unpaid, for
prior years). Seller shall also give Purchaser a credit for any special
assessments which are due and payable in connection with the Properties prior to
Closing.
10. Utilities. Utilities and fuel, including, without limitation, water,
electricity, and gas shall be prorated as of Closing. The Seller shall cause the
meters, if any, for utilities to be read the day on which the Closing Date
occurs and to pay the bills rendered on the basis of such readings. If any such
meter reading for any utility is not available, then adjustment therefor shall
be made on the basis of the most recently issued bills therefor which are based
on meter readings no earlier than thirty (30) days prior to the Closing Date;
and such adjustment shall be prorated when the next utility bills are received.
11. Employee Expenses. Purchaser shall not be responsible for any wages or
benefits payable to employees of the Motel accruing prior to the Closing Date
and Purchaser shall not be required to assume any obligation with respect to any
employee benefits that were incurred prior to the Closing Date; and Seller shall
indemnify Purchaser against any claim in connection therewith. The indemnity
provided herein shall survive the Closing. In addition, Seller shall comply with
all obligations imposed on Seller by applicable federal or California laws
regarding continuation coverage rights, to the extent that it is required to do
so under applicable
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laws; provided, however, Purchaser acknowledges that Seller is not giving any
notice under the Worker Adjustment and Retraining Act and agrees to indemnify
Purchaser and hold Purchaser harmless from and against any and all costs and
expenses incurred by Purchaser as a result of Seller's failure to give such
notice.
12. Purchaser shall receive a credit for any reduction in the brokerage
commission payable pursuant to Section 10 hereof.
E. Staff. Seller shall terminate or arrange for the termination of all
Motel employees as of the Closing Date and shall pay all wages and fringe
benefits (including, but not limited to, accrued vacation pay and payroll taxes)
through the Closing Date. Purchaser shall not be obligated to employ any such
Motel employee, but may do so on such terms and for such compensation as
Purchaser (and any such employee) deems appropriate.
Prior to Closing, Seller shall deliver to Purchaser copies of
all information and records necessary to support the prorations hereunder. In
the event any prorations made pursuant hereto shall prove incorrect for any
reason whatsoever, either party shall be entitled to an adjustment to correct
the same.
F. Expenses. The Seller shall pay (1) for all documentary transfer
taxes, (2) the premium attributable to the standard coverage portion of the
"Owner's Policy" (defined below), (3) the sales taxes arising in connection with
the sale of the Personal Property, Consumables, and FF & E by Seller to
Purchaser, and (4) one-half of escrow fees and costs. Purchaser shall pay (1)
all costs associated with its due diligence investigation, (2) all recording
costs, (3) the premium attributable to the extended coverage portion of the
Owner's Policy (and any endorsements or affirmative coverages), (4) one-half of
escrow fees and costs. Purchaser shall
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reimburse Seller at Closing for the costs of any appraisal of the Properties
obtained by Seller subsequent to the appraisals of PKF Consulting of December 4,
1997 and for the costs incurred by Seller in obtaining any engineering or
environmental studies or reports of the Properties in preparation for their
sale. Each party shall pay its own attorneys' fees. Seller and Purchaser shall
execute and deliver such transfer and sales tax returns as may be required by
law.
G. Title. It shall be a condition of Closing that the Title Company issue
to Purchaser, in form and substance acceptable to Purchaser, an owner's policy
of title insurance for the Properties (the "Owner's Policy") with Purchaser
named as insured, dated as of the Closing Date, with a liability limit equal to
the Purchase Price allocable to the Properties, insuring that fee title to the
Improvements and the leasehold estate created by the Land Leases are vested in
Purchaser, subject only to the Permitted Exceptions and Tenant Leases.
Except with the prior written approval of Purchaser, Seller
shall not deliver (nor cause or permit to be delivered) to the Title Company, on
behalf of the Seller, any indemnities of the Seller relating to the issuance of
the Owner's Policy. If the Owner's Policy discloses any liens or encumbrances
which are not Permitted Exceptions, Purchaser may remove such liens at Closing
by paying so much of the Purchase Price to the holders of the liens as is
necessary to do so.
H. Guest Property. The parties shall arrange for Motel guests to sign new
deposit box or other appropriate receipts on the day before the Closing Date
with respect to baggage, personal property, laundry, valet packages and other
property of Motel guests checked or left in the care of Seller by Motel guests
or tenants; and, to the extent such receipts are not obtained, such property
shall be sealed, listed in an inventory prepared and signed jointly by the
parties as of the Closing Date, and Purchaser shall be responsible from and
after the Closing Date for all such property
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listed in said inventory. Seller shall be responsible for all items allegedly
left at the Properties by guests prior to Closing and not listed on such
inventory.
SECTION 8: INDEMNIFICATION
Seller shall hold harmless, indemnify and defend the Purchaser
from and against: (i) any and all obligations to, liabilities to or claims by
third parties, whether direct, contingent or consequential and no matter how
arising, in any way related to or arising from the Properties prior to the
Closing Date, including, but not limited to, for any injury to or death of any
person or damage to any property of third parties; (ii) any claims for
brokerage, commissions or fees in connection with leases of the Properties
executed prior to the Closing except to the extent Seller gives Purchaser a
credit for such commissions at Closing; (iii) any wages, salaries, pension
liabilities or fringe benefits accruing prior to the Closing for those employees
at the Motel; (iv) any and all obligations to, and liabilities to or claims by
third parties, whether direct, contingent, or consequential and no matter how
arising, in any way related to or arising from the sale or transfer of the
Properties by Seller to Purchaser, including, but not limited to, by any limited
partner of Seller; and (v) all costs and expenses of Purchaser, including
reasonable attorneys' fees, related to any actual or threatened actions, suits
or judgments incident to any of the foregoing.
SECTION 9: WAIVER
Each party hereto may, at any time or times, at its election, waive any
of the conditions to its obligations hereunder by a written waiver expressly
detailing the extent of such waiver (and no other waiver or alleged waiver by
such party shall be effective for any purpose). No such waiver shall reduce the
rights or remedies of such party by reason of any breach by the other party of
any of its or their obligations hereunder.
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SECTION 10: BROKERS
Seller has retained Everest Financial, Inc. as its broker in connection
with this transaction and shall be responsible for the payment of a brokerage
commission equal to 2.75% of the Purchase Price of the Properties (before
prorations) to Everest in connection with the sale of the Properties to
Purchaser. Everest has agreed to reallow 1.25% of the Purchase Price of the
Properties (before proration) to Purchaser's broker or, at Purchaser's option,
Purchaser shall be entitled to a credit, pursuant to the provisions of Section
7(D)(12) hereof, equal to 1.25 % of the Purchase Price of the Properties (before
prorations). Other than as aforesaid, each party represents to the other that it
has not retained any broker or finder in connection with the transaction
contemplated by this Agreement, and agrees to indemnify and hold the other party
harmless from and against any claim of any broker or finder claiming a brokerage
commission or finder's fee by or through the party.
SECTION 11: SURVIVAL; FURTHER ASSURANCES
All warranties, representations, covenants, obligations and agreements
contained in or made pursuant to this Agreement shall survive the Closing
hereunder and the transfers and conveyances and other transactions hereunder for
twelve (12) months from the Closing Date. All warranties, representations,
covenants, obligations, and agreements contained in or made pursuant to this
Agreement shall terminate and be of no further force or effect on the first
anniversary of the Closing Date, unless an action is brought with respect to
such applicable warranty, representa tion, covenant, obligation, or agreement
within such 12-month period. Purchaser understands that, promptly after the
Closing, Seller will make a distribution of the net proceeds realized by Seller
with respect to the sale of the Properties to Purchaser to Seller's partners,
and that Seller's limited partners shall have no liability or responsi bility to
return distributions made to them. Purchaser further understands and agrees
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that the liability of GMS, as General Partner of Seller, for any obligation of
Seller pursuant to Section 8 hereof, shall be limited as set forth in this
Section 11 and shall be further limited in an amount equal to GMS' share of any
distribution made by Seller to its partners of the proceeds from sale of the
Properties to Purchaser hereunder.
Each party agrees to use such party's best efforts to cause the
conditions to consummation of this Agreement to be satisfied and implemented as
soon as practicable. Each party will, whenever and as often as it shall be
requested so to do by the other, cause to be executed, acknowledged or delivered
any and all such further instruments and documents as may be necessary or
proper, in the reasonable opinion of the requesting party, in order to carry out
the intent and purpose of this Agreement and as is consistent with this
Agreement.
SECTION 12: NO THIRD PARTY BENEFITS
This Agreement is made for the sole benefit of Purchaser and Seller
(and Seller's partners) and their respective successors and assigns (subject to
the limitation on assignment set forth in Section 15 below), and no other person
or persons shall have any right or remedy or other legal interest of any kind
under or by reason of this Agreement. Whether or not either party hereto elects
to employ any or all the rights, powers, or remedies available to it hereunder,
such party shall have no obligation or liability of any kind to any third party
by reason of this Agreement or by reason of any of such party's actions or
omissions pursuant hereto or otherwise in connection with this Agreement or the
transactions contemplated hereby.
///
///
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SECTION 13: REMEDIES
If Seller shall default hereunder prior to Closing, Purchaser shall be
entitled, as its sole and exclusive remedies, to (i) sue for specific
performance of this Agreement, or (ii) terminate this Agreement, receive a
refund of the Earnest Money and recover damages in an amount not to exceed
$50,000; provided, however, in exercising its right of specific performance,
Purchaser may not require Seller to spend in excess of $50,000 to correct any
matter which Seller did not deliberately cause. After Closing, Purchaser shall
be entitled to any other rights and remedies it may have at law or equity,
subject to the restrictions thereon set forth in this Agreement. If Purchaser
shall default hereunder, Seller's sole and exclusive remedy shall be to retain
the Earnest Money as liquidated damages.
SECTION 14: TERMINATION
This Agreement may be terminated --
(i) By mutual written consent of Seller and Purchaser;
(ii) By either Seller or Purchaser by written notice to the other
party if the transaction contemplated hereby has not been consummated on or
before the Closing Date as defined in Section 1(B) hereof; provided, however,
that the right to terminate this Agreement under this Section 14 shall not be
available to any party whose failure to fulfill any of its obligations under
this Agreement has been the cause of or has resulted in the failure of the
transaction contemplated hereby being consummated on or before the Closing Date;
or
(iii) By Purchaser or by Seller if one or more of the Purchase and Sale
Agreements entered concurrently herewith by Purchaser for the purchase of the
motel
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properties from Super 8 Motels, Ltd., Super 8 Motels II, Ltd., Super 8 Motels
III, Ltd., and Super 8 Economy Lodging IV, Ltd., is terminated for any reason
other than Purchaser's or Seller's (as the case may be) breach thereof.
If this Agreement is terminated pursuant to the provisions of
this Section 14, then and in such event this Agreement shall be null and void,
neither party shall have any obligation or liability to the other, and Purchaser
shall be entitled to the return of its Earnest Money.
SECTION 15: MISCELLANEOUS
This Agreement (including all Exhibits hereto) contains the entire
agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements between the parties hereto respecting such
matters. The table of contents and section headings shall not be used in
construing this Agreement. Except as otherwise provided in Section 13 above, no
remedy conferred upon a party in this Agreement is intended to be exclusive of
any other remedy herein or by law provided or permitted, but each shall be
cumulative and shall be in addition to every other remedy given hereunder or now
or hereafter existing at law or in equity or by statute. Except as herein
expressly provided, no waiver by a party of any breach of this Agreement or of
any warranty or representation hereunder by the other party shall be deemed to
be a waiver of any other breach by such other party (whether preceding or
succeeding and whether or not of the same or similar nature) and no acceptance
of payment or performance by a party after any breach by the other party shall
be deemed to be a waiver of any breach of this Agreement or of any
representation or warranty hereunder by such other party whether or not the
first party knows of such breach at the time it accepts such payment or
performance. No failure or delay by a party to exercise any right it may have by
reason of the default of the other party shall operate as a waiver of default or
modification of this Agreement or shall prevent the
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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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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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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
FAMOUS HOST LODGING V, 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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IDENTIFICATION OF MOTEL
Barstow Motel Property Motel, including adjoining restaurant and cocktail
lounge, 1511 East Main Street, Barstow, California
92311
A-1
<PAGE>
LIST OF FRANCHISE AGREEMENTS
Date of
Franchisor Description Agreement
Holiday Inns, Inc. License agreement relating to 2/91
the Barstow Motel property
B-1
<PAGE>
LAND LEASES
BARSTOW MOTEL PROPERTY
Hotel Lease: original lease by and between Fred Rosenberg, as lessor, and
Dennis A. Brown and Philip B. Grotewohl, as lessees, dated as of 5/10/84, as
amended:
Expiration Date
5/9/34
Restaurant Lease: original lease by and between Fred Rosenberg, as lessor,
and Super 8 Lodging V, Ltd., dated as of 6/15/87, as amended:
Expiration Date
12/31/10
Combined Rent for Hotel and Restaurant Leases: Base rent of $275,556 plus
9% of combined annual gross sales from hotel and restaurant operations that
exceeds base rent
C-1
<PAGE>
LIST OF SERVICE CONTRACTS
The Barstow Motel property is subject to the following service
contract: Management Agreement by and between Famous Host Lodging V, Ltd., and
Super 8 Management, Inc., as amended.
Barstow Motel Property
Vendor Description Expiration Date
The Walker Group Billboard Service 30 days notice
Martin Outdoor Billboard Service 12/15/98
Martin Outdoor Billboard Service 10/20/00
Otis Elevator Elevator Service 9/1/98
Young Electric Sign Sign Service 4/8/03
Time Warner Cable Cable Service 30 days notice
World Cinema Cable Service 30 days notice
Hi Desert Alarm Alarm & Fire Sprinkler Services 12/5/00
Hi Desert Alarm Alarm & Fire Sprinkler Services 12/5/00
Bob Clemmer Mechanical Service 30 days notice
Ducommon Turf and Grounds Landscape Service 30 days notice
Ducommon Turf and Grounds Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
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<PAGE>
LIST OF EQUIPMENT LEASES
None
E-1
<PAGE>
LIST OF TENANT LEASES
None
F-1
<PAGE>
LIST OF LABOR CONTRACTS
None
G-1
<PAGE>
FORM OF GRANT DEEDS
Subject to completion
H-1
<PAGE>
BILL OF SALE AND ASSIGNMENT
PERSONAL PROPERTY
For valuable consideration, the receipt and sufficiency of which are
hereby acknowl edged, FAMOUS HOST LODGING V, LTD., a California limited
partnership ("Seller") hereby assigns and transfers to TIBURON CAPITAL
CORPORATION, a California corpora tion ("Purchaser"), all of Seller's right,
title and interest in and to any and all fixtures, machin ery, apparatus,
equipment and other personal property (the "Personal Property") used in the
ownership, operation, repair and maintenance of any and all of the Seller's
interest in the Land Leases, the Personal Property, and the Improvements (the
"Properties"), including without limitation, (i) all building and construction
materials, equipment, appliances, machinery and other personal property owned by
Seller and used in connection with the operation of the Properties, (ii) the
Consumables, (iii) the FF & E, (iv) Seller's rights under the Franchise
Agreements, (v) all transferable permits, licenses, certificates and approvals
issued in connec tion with the Properties, (vi) the exclusive right to use the
name of the Properties and the right to all other names, logos and designs used
in connection with the Properties, including the names of restaurants, bars,
banquet rooms and meeting rooms, (vii) the right to use the Properties's
telephone numbers and post office boxes, (viii) all booking agreements, (ix) all
service marks and trademarks, (x) all plans and specifications, operating
manuals, guaranties and warranties and any other items used in the operation of
the Properties, (xi) all documents relating to guests at the Properties,
including booking agreements, and (xii) all documents relating to employees at
the Properties. All terms used herein but not defined herein shall have the same
meaning as set forth in that certain Purchase and Sale Agreement, dated as of
April 30, 1998, between Seller and Purchaser for the Properties.
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<PAGE>
TO HAVE AND TO HOLD the Personal Property, subject as aforesaid, unto
Purchaser, its successors and assigns. Seller, for itself, its successors and
assigns, does hereby warrant and will forever defend title to the Personal
Property unto Purchaser, its successors and assigns, against the lawful claims
of all persons, claiming by, through or under Seller, but not otherwise.
IN WITNESS WHEREOF, Seller has caused this instrument to be executed as
of the ____ day of ____________, 1998.
SELLER:
FAMOUS HOST LODGING V, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And ______________________________
David P. Grotewohl
President
I-2
<PAGE>
ASSIGNMENT OF FRANCHISE AGREEMENTS
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between FAMOUS HOST LODGING V, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("As signee").
WITNESSETH:
WHEREAS, Assignor is party to those certain franchise agreements
executed with respect to that certain real property known as the Barstow 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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<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Agreements. Assignee hereby agrees to
indemnify Assignor against and hold Assignor harmless from any and all cost,
liability, loss, damage or expense, including without limitation, reasonable
attorneys' fees, accruing on or subsequent to the date hereof and arising under
the Agreements.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this
assignment the day and year first above written.
ASSIGNOR:
FAMOUS HOST LODGING V, 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
J-2
<PAGE>
EXHIBIT A
Schedule of Franchise Agreements
Date of
Franchisor Description Agreement
Holiday Inns, Inc. License agreement relating to 2/91
the Barstow Motel property
J-3
<PAGE>
ASSIGNMENT OF LAND LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between FAMOUS HOST LODGING V, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessee under certain leases executed with
respect to that certain real property known as the Barstow 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:
FAMOUS HOST LODGING V, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And______________________________
Philip B. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice-President
K-2
<PAGE>
EXHIBIT A
Schedule of Land Leases
BARSTOW MOTEL PROPERTY
Hotel Lease: original lease by and between Fred Rosenberg, as lessor, and
Dennis A. Brown and Philip B. Grotewohl, as lessees, dated as of 5/10/84, as
amended:
Expiration Date
5/9/34
Restaurant Lease: original lease by and between Fred Rosenberg, as lessor,
and Super 8 Lodging V, Ltd., dated as of 6/15/87, as amended:
Expiration Date
12/31/10
Combined Rent for Hotel and Restaurant Leases: Base rent of $275,556 plus
9% of combined annual gross sales from hotel and restaurant operations that
exceeds base rent
K-3
<PAGE>
ASSIGNMENT OF SERVICE CONTRACTS
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between FAMOUS HOST LODGING V, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is party to those certain contracts executed with
respect to that certain real property known as the Barstow 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.
L-1
<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the 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:
FAMOUS HOST LODGING V, 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
L-2
<PAGE>
EXHIBIT A
Schedule of Service Contracts
The Barstow Motel property is subject to the following service
contract: Management Agreement by and between Famous Host Lodging V, Ltd., and
Super 8 Management, Inc., as amended.
Barstow Motel Property
Vendor Description Expiration Date
The Walker Group Billboard Service 30 days notice
Martin Outdoor Billboard Service 12/15/98
Martin Outdoor Billboard Service 10/20/00
Otis Elevator Elevator Service 9/1/98
Young Electric Sign Sign Service 4/8/03
Time Warner Cable Cable Service 30 days notice
World Cinema Cable Service 30 days notice
Hi Desert Alarm Alarm & Fire Sprinkler Services 12/5/00
Hi Desert Alarm Alarm & Fire Sprinkler Services 12/5/00
Bob Clemmer Mechanical Service 30 days notice
Ducommon Turf and Grounds Landscape Service 30 days notice
Ducommon Turf and Grounds Landscape Service 30 days notice
Prinova Laundry and Cleaning Service 8/1/98
L-3
<PAGE>
ASSIGNMENT OF TENANT LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between FAMOUS HOST LODGING V, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessor under certain leases executed with
respect to that certain real property known as the Barstow Motel property,
including adjoining restaurant and cocktail lounge, located at 1511 East Main
Street, Barstow, California 92311, 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.
M-1
<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Leases. Assignee hereby agrees to indemnify
Assignor against and hold Assignor harmless from any and all cost, liability,
loss, damage or expense, including without limitation, reasonable attorneys'
fees, accruing on or subsequent to the date hereof and arising under the Leases.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this
Assignment the day and year first above written.
ASSIGNOR:
FAMOUS HOST LODGING V, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And______________________________
David P. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice President
M-2
<PAGE>
EXHIBIT A
Schedule of Tenant Leases
None
M-3
<PAGE>
ASSIGNMENT OF EQUIPMENT LEASES
THIS ASSIGNMENT dated ______________, 1998 (the "Assignment"), is
entered into by and between FAMOUS HOST LODGING V, LTD., a California limited
partnership ("Assignor"), and TIBURON CAPITAL CORPORATION, a California
corporation ("Assignee").
WITNESSETH:
WHEREAS, Assignor is the lessee under certain equipment leases executed
with respect to that certain real property known as the Barstow 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.
N-1
<PAGE>
4. Assignor hereby agrees to indemnify Assignee against and hold
Assignee harmless from any and all cost, liability, loss, damage or expense,
including without limitation, reasonable attorneys' fees, accruing prior to the
date hereof and arising under the Leases. Assignee hereby agrees to indemnify
Assignor against and hold Assignor harmless from any and all cost, liability,
loss, damage or expense, including without limitation, reasonable attorneys'
fees, accruing on or subsequent to the date hereof and arising under the Leases.
IN WITNESS WHEREOF, the Assignor and Assignee have executed this
Assignment the day and year first above written.
ASSIGNOR:
FAMOUS HOST LODGING V, LTD.,
By Grotewohl Management Services, Inc.
Its General Partner
By ______________________________
Philip B. Grotewohl
Chairman
And______________________________
David P. Grotewohl
President
ASSIGNEE:
TIBURON CAPITAL CORPORATION
By ______________________________
William R. Dixon, Jr.
Vice President
N-2
<PAGE>
EXHIBIT A
Schedule of Equipment Leases
None
N-3
<PAGE>
ESTOPPEL CERTIFICATE
To: TIBURON CAPITAL CORPORATION
160 Sansome Street, 11th Floor
San Francisco, California 94104
Re: Barstow Motel property, including adjoining restaurant and cocktail
lounge, located at 1511 East Main Street, Barstow, California 92311
(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
O-1
<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: ___________________________
O-2
