Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The original Managing General Partners of the Partnership were Dennis
A. Brown and Grotewohl Management Services, Inc., a 50% shareholder of which is
Philip B. Grotewohl. The original Associate General Partners were BWC
Incorporated and Robert J. Dana.
Upon Mr. Brown's death on February 25, 1988, Mr. Grotewohl, as
president of Grotewohl Management Services, Inc., and Mr. Dana elected to
continue the Partnership. BWC Incorporated was dissolved in 1989.
Grotewohl Management Services, Inc. was organized in 1981 to serve as a
general partner of limited partnerships to be formed for the purpose of
investing in Super 8 Motels.
Mr. Grotewohl, age 80, was an attorney-at-law and was engaged in the
private practice of law in San Mateo County, California, between 1967 and 1978.
Since 1978, Mr. Grotewohl's principal occupation has been as a promoter and
general partner of Super 8 Motel limited partnerships.
Mr. Dana, age 70, was a registered representative of Brown, Brosche
Securities, Inc. between 1982 and 1988. Between 1976 and 1982 he served as a
registered representative of several stock and investment brokers. Mr. Dana
has also served as marketing consultant for various real estate limited
partnership and other direct participation investment programs.
Item 11. EXECUTIVE COMPENSATION
The following discussion contains certain information regarding
aggregate direct or indirect compensation paid or accrued by the Partnership
during the fiscal year ended September 30, 1998 to the General Partners and the
Estate of Dennis A. Brown, and/or their affiliates. Although Mr. Brown ceased to
be a general partner of the Partnership upon his death, his estate shares in
certain compensation otherwise payable to the General Partners and their
Property Management Fees
The Manager, a California general partnership which is owned equally by
the Estate of Dennis A. Brown and the Managing General Partner, is managing the
Partnership's motel. The fee for this service is 5% of the gross proceeds from
the operation of the motel. This compensation is in addition to the cost of
compensating the Partnership's employees and the cost of goods and services
acquired for the Partnership from independent contractors.
During the fiscal year covered by this report the Partnership accrued
such fees in the amount of $91,285, all of which were paid.
Franchise Fees and Advertising Fees
The Partnership operates its motel as a franchisee of Super 8 Motels,
Inc., through a sub-franchise obtained from Super 8 Management Corporation. In
March 1988 the shareholders of Super 8 Management Corporation transferred their
interests in the sub-franchise agreement to the Manager. The Partnership, as
franchisee, pays to the franchisor monthly franchise fees equal to 4% of its
gross room revenue and contributes 1% of its gross room revenue to an
advertising fund administered by the franchisor to finance institutional
advertising. The Manager is entitled to one-half of the 4% franchise fee.
The total of franchise fees accrued during the fiscal year covered by
this report was $71,817, of which $35,909 accrued to the Manager. All of the
above sums have been paid.
General Partners' Interest in Cash Available for Distribution
At quarterly intervals, the total amount of the Partnership's Cash
Available for Distribution is determined at the discretion of the Managing
General Partner. (See Item 5 above.) Distributions therefrom are made as
follows: (1) 90% of such distributions are paid to the Limited Partners; (2) 9%
thereof is paid to the General Partners as Partnership management fees; and (3)
1% thereof is paid to the General Partners in accordance with their interest in
the income and losses of the Partnership.
Notwithstanding the foregoing, however, distributions of Cash Available
for Distribution to the General Partners which would otherwise be paid to the
General Partners are deferred and paid only after payment to the Limited
Partners of distributions of Cash Available for Distribution in an amount equal
to 10% per annum cumulative on their Adjusted Capital Contributions. During the
fiscal year covered by this report, $1,000,000 in distributions of Cash
Available for Distribution were paid to the Limited Partners. A total of
$627,826 representing the General Partners' Interest in Cash Available for
Distribution has been deferred and remains unpaid since commencement of the
Partnership. The Limited Partners must receive $9,055,855 (calculated through
September 30, 1998) and $910,000 each year thereafter in additional
distributions before any of the accrued amounts will be paid to the General
Partners. Accordingly, the General Partners consider the payment of these
deferred amounts to be unlikely.
General Partner's Interest in Sale or Refinancing Proceeds
The proceeds from the sale or refinancing of properties not reinvested
are to be distributed first to the Limited Partners until they have received
cumulative payments from all distribution sources equal to 100% of their
original capital contribution and a cumulative 10% per annum return on their
Adjusted Capital Contributions. When the foregoing requirement has been
satisfied, any remaining funds from the sale or refinancing of properties will
be distributed 15% to the General Partners and 85% to the Limited Partners.
No such distributions were paid or accrued for the account of the
General Partners during the fiscal year covered by this report.
Allocation of General Partners' Interest
Compensation to the General Partners and their affiliates in the form
of franchise fees and property management fees is allocated 1/3 each to the
Estate of Dennis A. Brown, the Managing General Partner and the Associate
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
TITLE NATURE OF
OF BENEFICIAL PERCENT
CLASS NAME OF BENEFICIAL OWNER OWNERSHIP OF CLASS
---------- ---------------------------------- ----------------- -----------
Units Everest Lodging Investor, LLC 182 Units 1.82%
Units Everest Madison Investors, LLC 497 Units 4.97%
TOTAL 679 Units 6.79%
Security Ownership of Management
The General Partners do not beneficially own any Units.
Changes in Control
With the consent of all other General Partners and Limited Partners
holding more than 50% of the Units, a General Partner may designate a successor
or additional general partner, in each case with such participation in such
General Partner's interest as such General Partner and successor or additional
general partner may agree upon, provided that the interests of the Limited
Partners are not affected thereby.
A General Partner may withdraw from the Partnership at any time upon 60
days' prior written notice to the Limited Partners and any other General
Partners, or may transfer his interest to an entity controlled by him; provided,
however, that in either such event, if it is determined that the Partnership
business is to be continued rather than dissolved and liquidated upon the
happening thereof, the withdrawal or transfer will be effective only after
receipt by the Partnership of an opinion of counsel to the effect that such
withdrawal or transfer will not cause the Partnership to be classified as an
association taxable as a corporation rather than as a partnership for federal
income tax purposes.
The Limited Partners shall take no part in the management of the
Partnership's business; however, a majority in interest of the Limited Partners,
without the concurrence of the General Partners, shall have the right to amend
the Partnership Agreement, dissolve the Partnership, remove a General Partner or
any successor general partner, elect a new general partner or general partners
upon the removal, retirement, death, insanity, insolvency or bankruptcy of a
General Partner, and approve or disapprove the sale, exchange or pledge in a
single transaction of all or substantially all of the properties acquired by the
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative Expenses Shared by the Partnership and its Affiliates
There are certain administrative expenses allocated between the
Partnership and affiliated Super 8 partnerships. These expenses, which are
allocated based on usage, are telephone, data processing, rent of administrative
offices and administrative salaries. The administrative expenses allocated to
the Partnership were approximately $123,000 in the fiscal year ended September
30, 1998 and are included in general and administrative expenses and motel and
restaurant operations expenses in the Partnership's financial statements.
Included in administrative salaries are allocated amounts paid to two employees
who are related to Philip B. Grotewohl, a 50% shareholder of the Managing