UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
---------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ -----------------------
Commission file number
0-15771
GUARANTEED HOTEL INVESTORS 1985, L.P.
and
FFCA INVESTOR SERVICES CORPORATION 85-A
- --------------------------------------------------------------------------------
(Exact name of Co-Registrants as Specified in their
Organizational Documents)
Delaware 86-0537905
- --------------------------------------------------------------------------------
(Partnership State of Organization) (Partnership I.R.S. Employer
Identification Number)
Delaware 86-0537910
- --------------------------------------------------------------------------------
(Corporation State of Incorporation) (Corporation I.R.S. Employer
Identification Number)
The Perimeter Center
17207 North Perimeter Drive
Scottsdale, Arizona 85255
- --------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
Co-Registrants' telephone number including area code (602) 585-4500
-------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements.
GUARANTEED HOTEL INVESTORS 1985, L.P.
(A LIMITED PARTNERSHIP IN PROCESS OF LIQUIDATION)
BALANCE SHEETS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Note 1)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ - $ 6,255,398
Funds held in trust (Note 2) - -
Accounts receivable, trade - 718,454
Other receivables - 861,550
Prepaids and other - 412,582
------------- ------------
Total current assets - 8,247,984
------------- ------------
PROPERTY AND EQUIPMENT:
Land and improvements - 5,396,153
Buildings and improvements - 41,350,548
Furniture and equipment - 8,038,759
------------- ------------
54,785,460
Less - Accumulated depreciation and amortization - (9,013,099)
------------- ------------
- 45,772,361
Operating stock - 337,148
- 46,109,509
------------- ------------
Total assets $ - $ 54,357,493
============= ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
CURRENT LIABILITIES:
Distribution payable to limited partners $ - $ 1,002,104
Payable to general partner - 10,101
Accounts payable and accrued liabilities - 1,724,774
Property taxes payable - 508,630
Current portion of capital lease obligations - 111,689
------------- ------------
Total current liabilities - 3,357,298
------------- ------------
PARTNERS' CAPITAL (DEFICIT):
General partner - (324,955)
Limited partners (Note 1) - 51,325,150
------------- ------------
Total partners' capital - 51,000,195
------------- ------------
Total liabilities and partners' capital $ - $ 54,357,493
============= ============
</TABLE>
<PAGE>
GUARANTEED HOTEL INVESTORS 1985, L.P.
(A LIMITED PARTNERSHIP IN PROCESS OF LIQUIDATION)
STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
9/30/96 (Note 1) 9/30/95 9/30/96 (Note 1) 9/30/95
--------------- ------------ --------------- ------------
<S> <C> <C> <C> <C>
REVENUE:
Room $ - $ 4,171,739 $ 7,520,812 $ 13,857,553
Food and beverage - 466,419 792,450 2,149,271
Other revenue 195,295 1,186,930 1,153,161 2,147,607
------------ ------------ ------------ ------------
195,295 5,825,088 9,466,423 18,154,431
------------ ------------ ------------ ------------
EXPENSES:
Property operating costs and expenses - 1,641,869 2,309,881 5,473,020
General and administrative - 663,244 2,608,831 2,337,459
Advertising and promotion - 513,995 733,503 1,648,739
Utilities - 298,084 382,011 885,526
Repairs and maintenance - 268,573 321,719 812,917
Taxes and insurance - 409,644 1,450,423 1,261,815
Interest expense and other - 28,659 29,723 87,856
Depreciation and amortization - 608,440 623,395 1,841,023
Loss on disposition of property - 59,742 52,120 62,709
------------ ------------ ------------ ------------
- 4,492,250 8,511,606 14,411,064
------------ ------------ ------------ ------------
NON OPERATING INCOME (EXPENSE):
Gain on sale of hotels (Note 1) - - 28,003,339 -
General partner fee - - (982,620) -
Financial advisory fee - - (732,500) -
------------ ------------ ------------ ------------
- - 26,288,219 -
------------ ------------ ------------ ------------
NET INCOME $ 195,295 $ 1,332,838 $ 27,243,036 $ 3,743,367
============ ============ ============ ============
NET INCOME ALLOCATED TO:
General partner $ 1,953 $ 13,328 $ 272,430 $ 37,434
Limited partners 193,342 1,319,510 26,970,606 3,705,933
------------ ------------ ------------ ------------
$ 195,295 $ 1,332,838 $ 27,243,036 $ 3,743,367
============ ============ ============ ============
NET INCOME PER LIMITED
PARTNERSHIP UNIT (based on
200,000 units held by limited partners) $.97 $6.60 $134.85 $18.53
==== ===== ======= =======
</TABLE>
<PAGE>
GUARANTEED HOTEL INVESTORS 1985, L.P.
(A LIMITED PARTNERSHIP IN PROCESS OF LIQUIDATION)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Limited Partners
General ----------------------------
Partner Number Total
Amount of Units Amount Amount
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 $ (324,955) 200,000 $ 51,325,150 $ 51,000,195
Net income 272,430 - 26,970,606 27,243,036
General partner contribution
of deficit in capital account 62,626 - - 62,626
Distribution to partners
from operations (10,101) - (1,000,000) (1,010,101)
Initial liquidating distribution
to limited partners (Note 1) - - (70,000,000) (70,000,000)
Liquidating distribution
to limited partners (Note 1) - - (4,795,656) (4,795,656)
Distribution to trust (Note 2) - - (2,500,000) (2,500,000)
Return of the assignor
limited partner's initial
capital contribution - - (100) (100)
------------ ------------ ------------ ------------
BALANCE, September 30, l996 $ - 200,000 $ - $ -
============ ============ ============ ============
</TABLE>
<PAGE>
GUARANTEED HOTEL INVESTORS 1985, L.P.
(A LIMITED PARTNERSHIP IN PROCESS OF LIQUIDATION)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 27,243,036 $ 3,743,367
Adjustments to net income:
Depreciation and amortization 623,395 1,841,023
Gain on sale of hotels (28,003,339) -
Loss on disposition of property 52,120 62,709
Change in assets and liabilities:
Decrease (increase) in accounts receivable, trade 718,454 (21,002)
Decrease (increase) in other receivables 890,701 (860,756)
Decrease in prepaids and other 412,582 360,679
Decrease in disputed liabilities - (1,112,714)
Increase (decrease) in accounts payable
and accrued liabilities (1,802,089) 60,984
Increase (decrease) in property taxes payable (508,630) 405,352
------------ ------------
Net cash provided by (used in) operating activities (373,770) 4,479,642
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions or improvements of property - (1,020,288)
Proceeds from sale of hotels 73,250,000 -
Proceeds from sale of furniture 125,398 16,593
Decrease in operating stock 30,680 16,277
------------ ------------
Net cash provided by (used in) investing activities 73,406,078 (987,418)
------------ ------------
CASH FLOWS FOR FINANCING ACTIVITIES:
Limited partner liquidating distributions (Note 1) (74,795,656) -
Distributions to partners from operations (2,020,202) (3,030,303)
Distribution to trust (2,500,000) -
General partner contribution of deficit in
capital account 62,626 -
Return of assignor limited partner's initial
capital contribution (100) -
Payments on capital lease obligations (34,374) (136,105)
------------ ------------
Net cash used in financing activities (79,287,706) (3,166,408)
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (6,255,398) 325,816
CASH AND CASH EQUIVALENTS, beginning of period 6,255,398 5,652,192
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ - $ 5,978,008
============ ============
</TABLE>
<PAGE>
GUARANTEED HOTEL INVESTORS 1985, L.P.
(A LIMITED PARTNERSHIP IN PROCESS OF LIQUIDATION)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
1) BASIS OF PRESENTATION AND DISTRIBUTION OF PARTNERSHIP ASSETS:
On April 26, 1996, the Partnership closed the sale of its three hotel
properties (its only real property assets) for a net cash sales price of
$73,250,000. In connection with the sale, the limited partners approved a formal
plan of liquidation. The General Partner has concluded the affairs of the
Partnership, including the liquidation and distribution of assets to the
investors in accordance with the Partnership agreement and, on September 30,
1996, the Partnership filed its certificate of dissolution. Investors in the
Partnership ceased to be limited partners upon dissolution of the Partnership
and instead, they became beneficiaries of the trust accounts referred to below.
The Partnership made an initial liquidating distribution aggregating
$70 million to the limited partners in May 1996. On September 30, 1996, the
Partnership made an additional liquidating distribution to the limited partners
aggregating approximately $4.8 million. The remaining unrestricted cash totaling
$1 million has been transferred to a trust (separate, and in addition to, the
Funds Held in Trust discussed in Note 2 below) to be used to pay the remaining
accounts payable and accrued liabilities outstanding upon dissolution of the
Partnership. These liabilities relate primarily to estimates of potential tax
assessments which may result from the final Florida and Texas sales tax audits
of the hotels. Management believes its estimates are reasonable; however the
actual liabilities may be less than the amounts reported; therefore, any amounts
remaining in the trust after all liabilities have been settled (including
interest thereon) will be distributed to the investors upon liquidation of the
trust.
2) FUNDS HELD IN TRUST:
On April 26, 1996, a trust fund of $2.5 million was established by the
Partnership which will be available only to satisfy claims made by the buyer,
arising from the Partnership's obligations under the sales agreement during the
eighteen-month period ending October 26, 1997. If, as of October 26, 1997, no
claims have been made by the buyer or if final decisions have been rendered for
all disputed claims, the remaining balance of the trust fund (including interest
thereon) will be disbursed to the investors. If, however, there exist disputed
claims as of October 26, 1997, no disbursements will be made from the trust fund
until a final decision has been reached as to all disputed claims; provided,
however, that no later than April 26, 1999 the remaining balance of the trust
fund will be disbursed to the investors, and the buyer will have no further
recourse as to such disputed claims. As of September 30, 1996, there have been
no claims made by the buyer.
<PAGE>
PART I - FINANCIAL INFORMATION
- --------------------------------
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Liquidity and Capital Resources
On April 26, 1996, the Partnership closed a transaction with Starwood
Lodging Trust operating through its affiliate, SLT Realty Limited
Partnership (collectively, the "Buyer"), whereby the Buyer acquired fee
simple title to the Partnership's three hotels located in Irving, Texas;
Fort Lauderdale, Florida; and Tampa, Florida (the "Properties") from the
Partnership for a cash payment to the Partnership of $73,250,000. The
Buyer is not affiliated with the Partnership or its general partner, FFCA
Management Company Limited Partnership, a Delaware limited partnership
(the "General Partner"). The sale of the Properties represents the
disposition of substantially all of the Partnership's assets and the
Partnership has no further liability in connection with any of the
Properties. In connection with the sale, the limited partners approved a
plan of liquidation and the General Partner has concluded the affairs of
the Partnership, which includes the liquidation and distribution of assets
to the investors in accordance with the Partnership agreement and filed a
certificate of dissolution of the Partnership on September 30, 1996. The
Partnership made an initial liquidating distribution aggregating $70
million to the limited partners in May 1996. On September 30, 1996, the
Partnership made an additional liquidating distribution to the limited
partners aggregating $4.8 million. The remaining unrestricted cash
totaling $1 million has been transferred to a trust (separate, and in
addition to, the Trust Fund discussed below) to be used to pay the
remaining accounts payable and accrued liabilities outstanding upon
dissolution of the Partnership. These liabilities relate primarily to
estimates of potential tax assessments which may result from the final
Florida and Texas sales tax audits of the hotels. Management believes its
estimates are reasonable; however the actual liabilities may be less than
the amounts reported; therefore, any amounts remaining in the trust after
all liabilities have been settled (including interest thereon) will be
distributed to the investors upon liquidation of the trust. In conjunction
with the sales transaction, the investors of the Partnership also approved
the payment of a fee in the amount of $982,620 to the General Partner for
substantial and unanticipated services rendered to the Partnership from
January 1, 1991 to the date of liquidation of the Partnership. This fee
was paid to the General Partner in May 1996.
In conjunction with the sale of the Properties, $2.5 million of the sales
price was deposited in trust with a bank (the "Trust Fund"). The Trust
Fund (including interest income) will be available only to satisfy claims
made by the Buyer, arising from the Partnership's obligations under the
sales agreement during an eighteen-month period commencing upon the sale
date. If, at the end of such eighteen-month period, no claims have been
made by the Buyer or if final decisions have been rendered for all
disputed claims, the remaining balance of the Trust Fund will be disbursed
to the investors. If, however, there exist disputed claims at the end of
such eighteen-month period, no disbursements will be made from the Trust
Fund until a final decision has been reached as to all disputed claims;
provided, however, that no later than three years after the acquisition of
the hotels by the Buyer the remaining balance of the Trust Fund will be
disbursed to the investors, and the Buyer will have no further recourse as
to such disputed claims.
Results of Operations
The Partnership had no hotel operations during the quarter ended September
30, 1996 (the quarter) due to the sale of the hotel assets on April 26,
1996 as discussed above, as compared to a full quarter of hotel operations
for the same period of the prior year. During the quarter, the
Partnership's only source of revenue was investment interest income from
temporary investments pending the dissolution of the Partnership and final
distribution of cash to the limited partners on September 30, 1996.
General and administrative costs for the nine months ended September 30,
1996 include costs related to the wind-down and liquidation of the
Partnership.
<PAGE>
PART II - OTHER INFORMATION
- -----------------------------
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) For electronic filing purposes only, this report contains the following
exhibits filed as part of this Form 10-Q with the Securities and Exchange
Commission. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
10.13 Second Liquidating Trust and Escrow
Agreement
(b) During the quarter covered by this report, the Partnership did not file any
reports on Form 8-K.
<PAGE>
FFCA INVESTOR SERVICES CORPORATION 85-A
BALANCE SHEET - SEPTEMBER 30, 1996
ASSETS
Cash $ -
Investment in Guaranteed Hotel Investors 1985, L.P., at cost -
----
Total Assets -
====
LIABILITY
Payable to Parent $ -
STOCKHOLDER'S EQUITY
Common Stock; $l par value; 100 shares authorized,
issued and outstanding -
----
Liability and Stockholder's Equity $ -
====
Note: FFCA Investor Services Corporation 85-A (85-A) was organized on June
28, 1985 to act as the assignor limited partner in Guaranteed Hotel
Investors 1985, L.P. (GHI-85). Other than to serve as assignor limited
partner, 85-A had no other business purpose and did not engage in any
other activity or incur any debt. Simultaneous with the filing of GHI's
certificate of dissolution on September 30, 1996; 85-A filed its
certificate of dissolution.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
GUARANTEED HOTEL INVESTORS 1985, L.P.
By FFCA MANAGEMENT COMPANY LIMITED PARTNERSHIP
General Partner
By PERIMETER CENTER MANAGEMENT COMPANY
Corporate General Partner
Date: September 30, 1996 By /s/ John R. Barravecchia
---------------------------------------------
John R. Barravecchia, Chief Financial Officer
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
co-registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FFCA INVESTOR SERVICES CORPORATION 85-A
Date: September 30, 1996 By /s/ John R. Barravecchia
--------------------------------------------
John R. Barravecchia, President
<PAGE>
EXHIBIT INDEX
The following is a complete list of exhibits filed as part of this Form 10-Q.
For electronic filing purposes only, this report contains Exhibit 27, Financial
Data Schedule. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
10.13 Second Liquidating Trust and Escrow
Agreement
SECOND LIQUIDATING TRUST AND ESCROW AGREEMENT
THIS SECOND LIQUIDATING TRUST AND ESCROW AGREEMENT (this
"Agreement") is entered into and effective as of September 30, 1996 (the
"Effective Date") by and between GUARANTEED HOTEL INVESTORS 1985, L.P., a
Delaware limited partnership ("GHI"), and NORWEST BANK ARIZONA, NATIONAL
ASSOCIATION, a national banking association principally located in the State of
Arizona ("Escrow Agent").
PRELIMINARY STATEMENTS
Unless otherwise expressly provided herein, all defined terms used in
this Agreement shall have the meanings set forth in Section 1 of this Agreement.
On the Closing Date, GHI sold the Hotel Properties to Buyer pursuant to
the terms of the Purchase Agreement, and GHI, Buyer and Escrow Agent entered
into the Initial Trust Agreement which provided for the deposit and disbursement
of the Initial Escrow Funds.
GHI now desires to enter into this Agreement for the purpose of
appointing Escrow Agent to receive and hold the Escrow Funds in escrow and
disburse such Escrow Funds as contemplated by this Agreement, including, without
limitation, to satisfy (i) possible sales tax obligations of GHI resulting from
its ownership and operation of the Hotel Properties prior to the Closing Date,
and (ii) other possible obligations of GHI which were unknown to GHI as of the
Closing Date but which are disclosed to and acknowledged by GHI subsequent to
the Closing Date.
This Agreement shall govern the terms upon which Escrow Agent shall
distribute the Escrow Funds.
AGREEMENT
In consideration of the premises set forth above and other good and
valuable consideration, the receipt of which is acknowledged, the parties agree
as follows:
1. Definitions. The following terms shall have meanings set forth in
this Section 1 for all purposes of this Agreement:
"Buyer" means SLT Realty Limited Partnership, a Delaware limited
partnership.
"Closing Date" means April 26, 1996.
<PAGE>
"Escrow Funds" means the sum of $1,000,000 to be deposited by GHI into
an interest bearing trust account with Escrow Agent pursuant to this Agreement
on the Effective Date. The term "Escrow Funds" shall include all interest
accruing thereon.
"General Partner" means FFCA Management Company Limited Partnership, a
Delaware limited partnership, whose general partner is Perimeter Center
Management Company, a Delaware corporation.
"Hotel Properties" has the meaning set forth in the Purchase Agreement.
"Initial Escrow Funds" means the sum of $2,500,000 deposited by GHI
with Escrow Agent from the Purchase Price (as defined in the Purchase
Agreement), which Initial Escrow Funds will be distributed by Escrow Agent to
Investors and/or Buyer pursuant to the Initial Trust Agreement.
"Initial Trust Agreement" means that certain Liquidating Trust and
Escrow Agreement entered into among GHI, Buyer and Escrow Agent as of the
Closing Date.
"Investors" means each person who holds one or more Units in GHI and
was reflected as an Investor on the books and records of GHI on the Closing
Date.
"Purchase Agreement" means that certain Purchase Agreement dated as of
October 27, 1995 between GHI and Buyer, as amended.
"Unit" means one or more units of assigned limited partnership
interests in GHI.
2. Appointment of Escrow Agent. (a) Effective as of the Effective Date,
Escrow Agent is appointed escrow agent to hold and disburse the Escrow Funds in
accordance with the instructions set forth herein. Escrow Agent agrees, upon
such appointment, to act as escrow agent under this Agreement.
(b) Escrow Agent shall have no powers or rights with respect to
holding, investing and disbursing the Escrow Funds other than as expressly set
forth in this Agreement.
(c) Escrow Agent shall be responsible for providing to each Investor
periodic reports containing unaudited financial statements and certain other
information and will file such reports on Forms 10-K and 8-K with the Securities
and Exchange Commission in accordance with applicable securities laws. Such
reports shall include, without limitation, an annual written report, certified
by Escrow Agent, setting forth:
(i) an unaudited balance sheet of the Escrow Fund account as
of the end of the calendar year and the investment status of any funds
held in the Escrow Fund account;
2
<PAGE>
(ii) the amount of all liabilities discharged during such
calendar year;
(iii) the amount of all distributions, if any, made to
Investors during such calendar year; and
(iv) any action taken by Escrow Agent in the performance of
its duties not previously reported that materially effect the Escrow
Funds.
In preparing the periodic reports, Escrow Agent will rely on
information provided by General Partner. Escrow Agent shall be indemnified in
accordance with the provisions set forth in Section 9 of this Agreement for all
losses, costs and expenses arising from and related to the preparation and
distribution of the periodic reports to Investors.
(d) Escrow Agent may resign upon 30-days advance written notice to
General Partner. If a successor escrow agent is not appointed by General Partner
within the 30-day period following such notice, Escrow Agent may petition any
court of competent jurisdiction to name a successor escrow agent.
3. Purpose of Agreement. This Agreement is being executed, and the
Escrow Funds are being deposited with Escrow Agent, for the purpose of
liquidating and distributing the Escrow Funds.
4. Deposit of Escrow Funds. On the Effective Date GHI agrees to deposit
with Escrow Agent the Escrow Funds. The Escrow Funds shall be credited by Escrow
Agent and recorded in a separate, segregated account. Escrow Agent is directed
and is hereby authorized to deposit, transfer, hold and invest all funds
received in the Escrow Funds account, including principal and interest, in the
account described on the attached Exhibit A (the "Fund"), during the period of
escrow. The Escrow Agent may sell all or any interest in the Fund only to the
extent necessary to make any disbursement under the terms of Section 5 of this
Agreement or to the extent necessary to make any distribution to Investors under
the terms of Section 7 of this Agreement. Escrow Agent shall not otherwise sell,
transfer or convey all or any interest in the Fund.
5. Disbursement of Escrow Funds. (a) Escrow Agent shall only disburse
the Escrow Funds pursuant to directions to be provided by General Partner as
described in this Section or to the Investors upon termination of this Agreement
as contemplated by Section 7; provided, however, Escrow Agent shall not disburse
Escrow Funds to GHI or to General Partner. Escrow Agent shall be authorized and
is directed by General Partner to withdraw from the Escrow Funds its fee for
acting as Escrow Agent as contemplated by Section 10.
(b) General Partner may, from time to time, prior to the termination of
this Agreement, deliver to Escrow Agent a written direction (each, a
"Direction") signed by a duly authorized officer of General Partner stating:
3
<PAGE>
(i) that GHI is obligated to the persons and/or entities named
in such Direction in the amount or amounts set forth in such Direction
(each, an "Obligation", and collectively, the "Obligations"), which
Obligations may include, without limitation, possible sales tax
obligations of GHI resulting from its ownership and operation of the
Hotel Properties prior to the Closing Date and other possible
obligations of GHI which were unknown to GHI as of the Closing Date but
which are disclosed to and acknowledged by GHI subsequent to the
Closing Date;
(ii) the basis for the Obligations, set forth in reasonable
detail; and
(iii) directing Escrow Agent to distribute from the Escrow
Funds to each such person and/or entity a sum of money equal to the
corresponding Obligation, which distribution shall otherwise be made in
accordance with the directions set forth in such Direction.
Each Direction delivered to Escrow Agent shall be accompanied by copies of all
relevant third-party documentation supporting such Obligation. Escrow Agent
shall, within seven days after its receipt of each Direction, promptly pay to
the applicable persons and/or entities from the Escrow Funds an amount equal to
the corresponding Obligations due such persons and/or entities. If the Escrow
Funds are not sufficient to pay in full the Obligations set forth in such
Directions, Escrow Agent shall pay to such persons and/or entities such Escrow
Funds as are available in accordance with the directions of General Partner, but
in no event shall General Partner or the Investors have any obligation or
liability for that portion of the Obligations which exceed the amount of Escrow
Funds.
(c) General Partner shall also have the right to notify Escrow Agent at
any time prior to the termination of this Agreement to distribute all or a
portion of the Escrow Funds then held by Escrow Agent to the Investors, and
Escrow Agent shall promptly make such distributions in accordance with the
applicable procedures set forth in Section 7.
6. Appointment of General Partner with Power of Attorney. Effective as
of dissolution of GHI, GHI appoints General Partner as its true and lawful
attorney-in-fact to exercise GHI's rights under this Agreement. General Partner
shall notify Escrow Agent of the effective date of GHI's dissolution, and all
actions to be taken by GHI, or deliveries to be made to GHI, pursuant to this
Agreement subsequent to such dissolution shall be exercised by, or directed to,
General Partner pursuant to the power of attorney set forth in this Section. The
power of attorney set forth in this Section is coupled with an interest and is
irrevocable. Notwithstanding the appointment by GHI of General Partner as its
attorney-in-fact, General Partner and its officers, directors, shareholders,
employees and agents shall have no personal liability to Escrow Agent, or, to
the extent permitted by applicable law, the Investors as a result of such
appointment and/or General Partner exercising GHI's rights under this Agreement.
7. Termination of Escrow. (a) This Agreement shall terminate upon the
earlier of the termination of the Initial Trust Agreement and the distribution
by Escrow Agent of all of the
4
<PAGE>
Escrow Funds. If, at the time of the termination of the Initial Trust Agreement,
Escrow Agent is still holding Escrow Funds Escrow Agent shall promptly
distribute such remaining Escrow Funds to the Investors in proportion to the
respective Units of the Investors. The distribution by Escrow Agent of the
remaining Escrow Funds to the Investors shall, if applicable, be made
simultaneously with the final distribution to the Investors under the Initial
Trust Agreement. All disbursements by Escrow Agent to Investors shall be
delivered to the addresses for such Investors provided to Escrow Agent by
General Partner.
(b) The beneficial interest of the Investors in the Escrow Funds are
non-transferable, except by will, intestate succession or operation of law.
Accordingly, in the absence of the foregoing circumstances, all disbursements of
Escrow Funds other than to the persons and/or entities contemplated by Section
5, if any, shall be made and delivered to the Investors.
8. Notices. All notices (including Directions), certificates and
distributions required or permitted to be given or delivered hereunder (other
than distributions to Investors, which distributions shall be delivered as
described in Section 7) shall be in writing, as applicable, and given by (i)
hand delivery, (ii) facsimile, as applicable, (iii) express overnight delivery
service or (iv) certified or registered mail, return receipt requested, and
shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b)
transmission, if delivered by facsimile or (c) the next business day, if
delivered by express overnight delivery service. Attorneys may send or receive
notices and certificates on behalf of their respective clients. Notices and
certificates shall be provided to the parties and addresses (or facsimile
numbers, as applicable) specified below:
If to GHI or Dennis L. Ruben, Esq.
General Partner: Senior Vice President and General Counsel
Franchise Finance Corporation of America
17207 North Perimeter Drive
Scottsdale, AZ 85255
Telephone: (602) 585-4500
Telecopy: (602) 585-2226
If to Escrow Agent: Norwest Bank Arizona, National Association
Fourth Floor, MS 9030
3300 N. Central Avenue
Phoenix, Arizona 85012
Attention: Administrator
Telephone: (602) 248-2344
Telecopy: (602) 248-1200
or to such other address as a party shall designate by written notice to all
other parties to this Agreement.
5
<PAGE>
9. Reliance. Escrow Agent may act upon any instrument or other writing
believed by it in good faith to be genuine and to be signed or presented by the
proper person or persons and shall not be liable in connection with the
performance by it of its duties pursuant to the provisions hereof, except for
its own willful default or gross negligence. Escrow Agent shall be indemnified
and held harmless solely from the Escrow Funds for all losses, costs, and
expenses which may be incurred by it without negligence or bad faith on the part
of Escrow Agent, arising out of or in connection with its entering into this
Agreement and carrying out its duties hereunder.
10. Fee. Escrow Agent shall be entitled to compensation for its
services as agreed to by GHI and Escrow Agent. The fee agreed upon for the
services rendered hereunder shall only be paid from the Escrow Funds and is
intended as full compensation for Escrow Agent's services as contemplated by
this Agreement. Escrow Agent shall not render any material services not
contemplated in this Agreement without the prior consent of General Partner.
11. Waiver and Amendment. No provisions of this Agreement shall be
deemed waived or amended except by a written instrument unambiguously setting
forth the matter waived or amended and signed by the party against which
enforcement of such waiver or amendment is sought. Waiver of any matter shall
not be deemed a waiver of the same or any other matter on any future occasion.
12. Captions. Captions are used throughout this Agreement for
convenience of reference only and shall not be considered in any manner in the
construction or interpretation hereof.
13. Severability. The provisions of this Agreement shall be deemed
severable. If any part of this Agreement shall be held unenforceable, the
remainder shall remain in full force and effect, and such unenforceable
provision shall be reformed by such court so as to give maximum legal effect to
the intention of the parties as expressed therein.
14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
15. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of GHI, Investors and Escrow Agent and their respective successors
and assigns, including, without limitation, any United States trustee, any
debtor-in-possession or any trustee appointed from a private panel. The
Investors are third-party beneficiaries of this Agreement.
16. Time of the Essence. Time is of the essence with respect to each
provision of this Agreement; provided, however, whenever any determination is to
be made or action to be taken on a date specified in this Agreement, if such
date shall fall upon a Saturday, Sunday or holiday observed by federal banks in
the State of Arizona, the date for such determination or action shall be
extended to the first business day immediately thereafter.
6
<PAGE>
17. Forum Selection; Jurisdiction; Venue; Choice of Law. Each of the
parties acknowledges that this Agreement was substantially negotiated in the
State of Arizona, the Agreement was signed by GHI and Escrow Agent in the State
of Arizona and delivered by each of the parties in the State of Arizona and
there are substantial contacts between the parties and the transaction
contemplated herein and the State of Arizona. For purposes of any action or
proceeding arising out of this Agreement, the parties hereto hereby expressly
submit to the jurisdiction of all federal and state courts located in the State
of Arizona and consents that it may be served with any process or paper by
registered mail or by personal service within or without the State of Arizona in
accordance with applicable law. Furthermore, each of the parties waives and
agrees not to assert in any such action, suit or proceeding that it is not
personally subject to the jurisdiction of such courts, that the action, suit or
proceeding is brought in an inconvenient forum or that venue of the action, suit
or proceeding is improper. It is the intent of the parties hereto that all
provisions of this Agreement shall be governed by and construed under the laws
of the State of Arizona.
18. Federal Income Tax Matters. GHI and Escrow Agent agree that the
Investors shall be treated as the owners of the corpus of the trust created
under this Agreement, excluding any funds disbursed to persons and/or entities
other than Investors under the terms of Section 5 of this Agreement, and shall
file all of their respective returns, reports and similar information in a
manner consistent with such ownership.
7
<PAGE>
In witness whereof, the parties hereto have caused this Agreement to be
signed as of the day and year first above written.
GUARANTEED HOTEL INVESTORS 1985,
L.P., a Delaware limited partnership
By FFCA Management Company Limited
Partnership, a Delaware limited
partnership,its general partner
By Perimeter Center Management Company
a Delaware corporation, its general partner
By /s/ M.H. Fleischer
----------------------------------------
Printed Name M.H. Fleischer
------------------------------
Its President and Chief Executive Officer
---------------------------------------
NORWEST BANK ARIZONA,
National Association
By /s/ R.A. Lenio
----------------------------------------
Printed Name R.A. Lenio
------------------------------
Its Assistant Vice President
--------------------------------------
8
<PAGE>
EXHIBIT A
---------
The Escrow Agent is directed and is hereby authorized to deposit, transfer, and
invest all funds received in the Escrow Funds account, including principal and
interest in Government Obligations, i.e., U.S. Treasury Bills, in accordance
with the following investment strategy:
$250,000.00 30-day T-Bills
$250,000.00 60 day T-Bills
$250,000.00 90-day T-Bills
$250,000.00 120-day T-Bills
Further, the Escrow Agent is directed and is hereby authorized to deposit,
transfer and hold any funds temporarily uninvested in the Norwest Advantage Fund
Treasury Fund (a money-market "sweep" vehicle.)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND
THE STATEMENT OF INCOME FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<CIK> 0000773933
<NAME> GUARANTEED HOTEL INVESTORS 1985, L.P.
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 9,466,423
<CGS> 0
<TOTAL-COSTS> 4,464,034
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,723
<INCOME-PRETAX> 27,243,036
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,243,036
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,243,036
<EPS-PRIMARY> 134.85
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE BALANCE SHEET AS OF SEPTEMBER 30, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
BALANCE SHEET.
</LEGEND>
<S> <C>
<CIK> 0000778969
<NAME> FFCA INVESTOR SERVICES CORPORATION 85-A
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
