Interhotel Company, Ltd. - Page 8




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               Cash                          $7,955,796                               
               Unamortized Organization costs         39,388                          
               Investment in Pacific Gateway     2,328,218                            
               Investment in Pacific Landmark     (1,358,431)                         
               Liabilities                            (6,193)                         
               Subtotal                 8,958,778                                     
              On June 20, 1991, Dondi transferred its 15-percent limited             
          partnership interest in IHCL to the FDIC, as receiver for Vernon.           
          The FDIC transferred this interest in IHCL to Mr. Manchester in             
          exchange for his $5 million payment.  As a result, THEI held a 1-           
          percent interest as general partner and an 84-percent interest as           
          a limited partner.  Mr. Manchester, as Dondi’s successor, held the          
          remaining 15-percent limited partnership interest and succeeded to          
          Dondi’s capital account.                                                    
               On June 21, 1991, the parties executed a second amendment to           
          the IHCL Restated Agreement.  The second amendment provided that            
          IHCL’s net income would be allocated first to the partners who had          
          negative capital account balances and, thereafter, to the partners          
          pro rata.                                                                   
               At the end of 1991, the balance sheet of IHCL set forth its            
          book value as follows:                                                      
               Cash                               $9,098,388                          
               Unamortized organization costs     39,388                              
               Note receivable from THEI          2,619,833                           
               Investment in Pacific Gateway      2,660,677                           
               Investment in Pacific Landmark     (3,967,304)                         
               Liabilities                        (1,847)                             
               Subtotal                 10,449,135                                    
               IHCL filed a 1991 information return (Partnership Return of            
          Income) reporting the allocation of 99 percent of its net income to         





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