1
99.2
October 1, 1997
Via Hand Delivery
Xx. Xxxxxxx Xxxxxxxxx
Super 8 Motels, Ltd.
0000 X Xxxxxx
Xxxxxxxxxx, XX 00000
RE: PURCHASE OF CERTAIN REAL PROPERTY DESCRIBED IN EXHIBIT A
ATTACHED HERETO (THE "PROPERTIES")
BY: EVEREST PROPERTIES II, LLC OR ASSIGNEE ("BUYER")
FROM: THE LIMITED PARTNERSHIPS LISTED IN EXHIBIT A ATTACHED HERETO
("SELLERS")
Dear Xx. Xxxxxxxxx:
This binding letter of intent sets forth the terms and conditions upon
which Xxxxx is interested in pursuing the purchase of the Properties from
Sellers.
1. PURCHASE. At close of escrow, Xxxxx would pay the amounts for each
Property set forth on in accordance with Exhibit B, subject to applicable
prorations, credits and other adjustments. The purchase price shall be paid in
cash.
2. PAYMENT OF COMMISSIONS. Sellers would pay a 6.0% brokerage commission
to Everest Management, Inc. or its assignee on completion of the sales. Xxxxx
and Xxxxxx would represent to each other that no other real estate brokers are
involved in this transaction.
3. ESCROW. Upon execution of a definitive purchase agreement and escrow
instructions by Xxxxx and Seller, an escrow ("Escrow") for the transaction would
be opened at an escrow company that is acceptable to Buyer and Sellers ("Escrow
Holder"). Buyer and Sellers would deposit with Escrow Holder an executed copy of
such purchase agreement ("Escrow Instructions"). Buyer would also deposit with
Escrow Holder a deposit in the amount of $100,000 ("Deposit") to be deposited in
an interest bearing account. The Deposit would be part of the cash deposited
with Escrow Holder at close of escrow. Buyer would have up to 90 calendar days
following mutual execution of a purchase agreement to determine whether the
Properties are acceptable to Buyer in its sole and absolute discretion. If Buyer
determines the Properties are not acceptable to
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Xx. Xxxxxxx Xxxxxxxxx
October 1, 1997
Page 2
Buyer or if Xxxxx fails to provide written notice of Xxxxx's acceptance of the
Properties within the 90 day due diligence period, then Escrow Holder would
return the Deposit including accrued interest to Buyer and the agreement would
be null and void. If Buyer determines that the Properties are acceptable within
said time frame, Buyer shall provide written notice of such to Sellers and the
Deposit shall be increased to $200,000 and shall be non-refundable to Buyer
(except in the event the sale fails to close because conditions detailed in
Paragraph 5.2, 5.7 or 5.8 and in the event that the transaction fails to close
for any reason other than Buyer's default). The Deposit would be Sellers' sole
remedy as liquidated damages in case of breach of the agreement by Xxxxx.
4. CLOSING. The purchase agreement would provide that the close of
escrow would occur within 30 calendar days following written notice of Xxxxx's
acceptance of the Properties and approval of the limited partners of each
Seller of the sale of its Property pursuant to the purchase agreement.
5. CONTINGENCIES. Buyer's obligation to consummate the acquisition of
the Properties would be subject to and conditioned upon satisfaction or waiver
by Buyer in its sole and absolute discretion of all matters affecting the
Property, including the conditions described in Paragraphs 5.1, 5.3, 5.4, 5.5
and 5.6, and at the close of escrow for conditions described in Paragraphs 5.2,
5.7 and 5.8.
5.1 TITLE. Xxxxx's review and approval of the acreage and condition
of title to the Properties (including all personal property located thereon),
including without limitation all covenants, conditions, restrictions,
easements, licenses, liens, encumbrances, encroachments and other matters
affecting title to the Properties.
5.2 TITLE POLICY. Issuance to Buyer of an ALTA Owner's Policy of
Title Insurance (Form B, 1970) upon the closing of Escrow, issued by a title
company designated by Buyer, subject only to the matters approved by Xxxxx, and
with endorsements, reinsurance and coinsurance designated by Buyer.
5.3 AGREEMENTS AND LEASES. Xxxxx's review and approval in writing of
each and every agreement and contract, and of all records and other pertinent
information which relate to, concern or affect the Properties, including
without limitation any and all ground leases, franchise agreements, property
tax statements, management agreements, maintenance contracts, governmental
agreements, government documents and instruments pertaining to the management,
operation or ownership of the Properties, including any correspondence with
governmental entities.
5.4 BUYER'S INVESTIGATIONS. Buyer's preparation or receipt and
approval of such physical, engineering, seismic, environmental, geological,
toxic and hazardous substance and other audits, studies, reports, inspections
and investigations of the Properties which Buyer desires, or which Seller has
in its possession.
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Xx. Xxxxxxx Xxxxxxxxx
October 1, 1997
Page 3
5.5 BUYER'S AUDIT. Xxxxx's obtaining the last three years financial
statements on the Properties (or Sellers) audited (at Buyer's cost) by
certified public accountants of Xxxxx's choice and Xxxxx's approving same (if
available).
5.6 GOVERNMENTAL APPROVALS. Buyer's receipt of evidence reasonably
satisfactory to Buyer that (i) the general plan land use designation and zoning
of the Properties permit the use of the Properties for Buyer's intended use,
and (ii) all permits, approvals, consents, authorizations, conditions or
approvals, and entitlements required to be obtained from or issued or given by
any governmental agency or authority having jurisdiction of the Properties to
permit the use of the Properties for Buyer's intended use, have been so
obtained, issued or given.
5.7 SELLER PERFORMANCE. Sellers' performance of all of their duties
and obligations and agreements under the binding agreement for the sale of the
Properties.
5.8 REPRESENTATIONS AND WARRANTIES. The truthfulness at closing of
Sellers' representations and warranties contained in the binding agreement.
6. REPRESENTATIONS AND WARRANTIES. In the purchase agreement, among
other things, each Seller would represent and warrant that it has no knowledge
of any condition of its Property which could materially and adversely affect
Buyer's intended use of such property as motels; the foregoing conditions
include but are not limited to physical conditions of the Property, toxic or
hazardous substances, geological conditions, governmental restrictions and
pending or threatened governmental action.
7. COSTS AND ADJUSTMENTS. The purchase price will be adjusted as follows:
7.1 CLOSING COSTS. The purchase agreement would provide that the
Sellers pay all costs of title insurance and transfer taxes. Buyer and each
Seller shall share equally in payment of recording fees, Escrow Holder's fee,
and all other closing items pursuant to country custom. Sellers shall pay all
costs of the ALTA surveys. Buyer and Sellers shall each pay all costs of their
respective legal counsel and other advisors.
7.2 PRORATIONS. Real estate taxes and assessments, personal property
taxes, revenue and operating expenses and all other income and expenses of the
Properties would be prorated as of the closing date.
8. DURATION OF OFFER. This proposal would remain open unless withdrawn
or extended, until 5:00 p.m., California time, October 7, 1997. If this
proposal is not accepted by that time, it would become null and void.
9. PREPARATION OF PURCHASE AGREEMENT. Each party acknowledges that this
letter sets forth only the basic terms and conditions upon which the purchase
and sale of
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Xx. Xxxxxxx Xxxxxxxxx
October 1, 1997
Page 4
the Properties would be consummated, and is not a binding agreement for such
purchase and sale. Xxxxx and Xxxxxxx agree to negotiate the definitive purchase
agreement in good faith and to use their best efforts to enter into the purchase
agreement as soon as reasonably possible. The purchase agreement will
incorporate all of the terms set forth in this letter and such additional terms,
conditions, representations and warranties as Buyer or Seller may reasonably
require. This letter will terminate if a definitive purchase agreement has not
been signed by October 31, 1997.
10. RATIFICATION OF PURCHASE AGREEMENT BY SELLER LIMITED PARTNERS. Buyer
acknowledges that each Seller is a California limited partnership in which
pursuant to its partnership agreement a vote of the limited partners is required
to ratify the within contemplated purchase and sale transaction. Each Seller's
general partner(s) and agent(s) agree to use reasonable good faith efforts to
solicit and complete and recommend in favor of a vote of the limited partners
regarding the transaction within 30 calendar days following mutual execution of
the definitive purchase agreement. Each Seller shall promptly inform Xxxxx in
writing in a form reasonably satisfactory to Buyer of the results of the limited
partner ratification vote and of such Xxxxxx's authority to enter into the
proposed transaction. In the event that the limited partners fail to ratify the
proposed sale, Buyer shall be entitled to a fixed cost reimbursement of $25,000
for each such Property. In the event that any Property is otherwise sold to any
third party within 12 months after the date hereof, Buyer shall be entitled to a
breakup fee of $50,000 for each such Property in addition to the cost
reimbursement in the previous sentence.
11. NO OTHER OFFERS. Anything herein to the contrary notwithstanding, from
and after your acceptance of this letter, and until such time as the parties
cannot, in good faith, agree upon the terms and conditions of such purchase
agreement, but in any event for not less than 60 days after the date hereof, no
Seller will offer any Property for sale, or accept any offers to purchase any
Property, and additionally, no Seller will lease, transfer, hypothecate,
mortgage or otherwise convey any interest in any Property without the prior
written consent of Buyer.
12. MANAGEMENT OF PROPERTIES. Xxxxx will enter into a contract with
Grotewohl Management, Inc., the existing property manager ("Grotewohl"), to
manage the Properties for a term of 10 years, on terms mutually acceptable to
Grotewohl and Buyer. Buyer will have the right to terminate this management
contract at any time upon making a payment to Grotewohl equal to $2,000,000 less
$200,000 for each year (or partial year) the management contract remains in
effect.
This letter of intent is subject to a mutually agreed upon and signed
purchase and sale agreement.
If the contents of this letter meet with your approval and you are willing
to proceed with the negotiation of a definitive purchase agreement, please
indicate your acceptance of the foregoing by executing a copy of this letter and
returning it to Buyer
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Xx. Xxxxxxx Xxxxxxxxx
October 1, 1997
Page 5
within the time provided in Paragraph 9 above. Following Xxxxx's receipt of a
fully executed counterpart of this letter, the purchase agreement will be
drafted by Xxxxx's counsel, and the purchase agreement will then be submitted to
you for your review.
Very truly yours,
EVEREST PROPERTIES II, LLC
By:
----------------------------
XXXXXX X. XXXXXXXX
The undersigned hereby approves and accepts on this _______ day of October,
1997 the foregoing provisions and conditions, and represents and warrants that
the person executing this document on behalf of Sellers and their general
partner is fully authorized and approved to do so.
GROTEWOHL MANAGEMENT SERVICES, INC.
GENERAL PARTNER OF XXXXXXX
By:
----------------------------
XXXXXXX XXXXXXXXX
PRESIDENT
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EXHIBIT A
PRICE
-----
Super 8 Motels $4,104,683
000 Xxxxxxxx Xxxxxx
Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx
Partnership: Super 8 Motels, Ltd.
Super 8 Motels 678,616
000 X. Xxxxxxxxxxx Xxxx
Xxx Xxxxxxxxxx, Xxxxxxxxxx
Partnership: Super 8 Motels III, Ltd.
Super 8 Motels 2,496,034
0000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx
Partnership: Super 8 Motels, Ltd.
Super 8 Motels 1,750,522
0000 X. Xxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx
Partnership: Super 8 Motels, Ltd.
Super 8 Motels 1,173,990
0000 Xxxxxxxxx Xxxxxx
Xxxxx Xxxx, Xxxxxxxxxx
Partnership: Super 8 Motels II Ltd.
Holiday Inn 2,614,736
0000 X. Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx
Partnership: Famous Host Lodging V, Ltd.
Super 8 Motels 6,193,494
0000 Xxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxxx
Partnership: Super 8 Economy Lodge IV, Ltd.
Super 8 Motels 739,979
901 Real Road ----------
Bakersfield, California
Partnership: Super 8 Motels III, Ltd.
$19,752,054
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