UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994.
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ................ to ...............
Commission File No. 1-9311
PRIME MOTOR INNS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) Delaware
(I.R.S. Employer Identification No.) 22-2754689
C/O WHI, 4243 Hunt Road
Cincinnati, Ohio 45242
(Registrant's Mailing Address)
Registrant's telephone number, including area code: (513) 891-2920
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on which registered
Units of Limited Partnership Interest New York Stock Exchange
Evidenced by Depository Receipts
Securities registered pursuant to Section 12(g) of the Act: None
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 __.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
On March 15, 1995 there were 4,000,000 of registrant's units of limited
partnership interest outstanding. The aggregate market value of such units
held by non-affiliates on that date based on the reported closing price on The
New York Stock Exchange, Inc. on that date, was approximately $ 2,750,000.
The Exhibit Index is located on page 22.
Page 1 of 44
PART I
Item 1. Business
Prime Motor Inns Limited Partnership (the "Partnership") and its 99% owned
subsidiary, AMI Operating Partners, L.P. ("Operating Partners") were formed
in October 1986 under the Delaware Revised Uniform Limited Partnership Act.
The Partnership and Operating Partners are referred to collectively as the
"Partnerships". Prime-American Realty Corp. (the "General Partner"), a
subsidiary of Prime Hospitality Corporation ("Prime"), formerly Prime Motor
Inns, Inc., is the general partner of and holds as its principal asset a 1%
partnership interest in each of the Partnerships.
In December 1986, the Partnership consummated an initial public offering (the
"Offering") of 4,000,000 units of limited partnership interest (the "Units")
in the Partnership, and used the funds received to acquire the 99% limited
partnership interest in Operating Partners. Operating Partners commenced
operations in December 1986 when it used the Offering proceeds and issued
mortgage notes (the "Mortgage Notes") in the principal amount of $61,470,000
to purchase 16 full service motor hotels (the "Inns") from subsidiaries of
Prime. The business of the Partnerships is to operate and maintain the Inns,
which are presently franchised as part of the "Holiday Inn" system.
Until November 30, 1990, the Inns were leased to AMI Management Corp. ("AMI
Management"), a subsidiary of Prime, pursuant to a net lease between AMI
Management and Operating Partners (the "Lease") for a term expiring December
31, 1991. Under the terms of the Lease, AMI Management was required to make
rental payments without offset or deduction; to pay all other costs associated
with the use and occupancy of the Inns, including rent under any ground lease,
maintenance, property taxes and insurance; to maintain the Inns; and to operate
the Inns as part of the "Holiday Inn" system. Pursuant to a guaranty (the
"Guaranty"), Prime guaranteed certain of AMI Management's obligations under
the Lease.
On September 18, 1990, Prime announced that it and certain of its subsidiaries,
including AMI Management, had filed for reorganization (the "Prime Bankruptcy")
under Chapter 11 of the United States Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of Florida (the "Florida Bankruptcy
Court"). Concurrently with or shortly after the Prime Bankruptcy, those
officers and directors of the General Partner who were also officers, directors
and/or employees of Prime or its affiliates resigned from their positions with
the General Partner. The two remaining directors and officers of the General
Partner, who are responsible for management and supervision of the Partnerships,
were not officers or employees of Prime. Further, the current directors of the
General Partner are not officers or employees of Prime.
On October 3, 1990, the Partnership publicly announced that it had decided to
omit a quarterly distribution for its fiscal quarter ended September 30, 1990.
It was anticipated that, since occupancies at the Inns and cash flow from the
Inns are subject to seasonal fluctuations and, during the period from
Thanksgiving through the beginning of the following April, operating expenses,
debt service, ground rent and taxes at times exceed cash flow from the Inns, if
AMI Management rejected the Lease and Prime rejected the Guaranty as part of
the Prime Bankruptcy, the Partnerships would need a cash reserve for debt
service, operating expenses, ground rent, taxes and administrative expenses.
AMI Management defaulted in the payment of Base Rent due November 1, 1990 under
the Lease in the amount of $1,311,250. On November 7, 1990, the Partnership
gave notice of default to, and demanded payment from, AMI Management and Prime.
Also on November 7, 1990, AMI Management and Prime filed a motion to reject the
Lease and Guaranty and, by order of the Bankruptcy Court dated December 7, 1990,
the Florida Bankruptcy Court approved such rejection effective as of November
30, 1990. In connection with the rejection of the Lease, Operating Partners and
the Partnership filed a joint motion and stipulation in the Florida Bankruptcy
Court with AMI Management and Prime for an order approving certain arrangements
(the "Transition Agreement"), regarding the rejection of the Lease and Operating
Partners' takeover of the Inns. The Florida Bankruptcy Court approved such
motion on January 8, 1991.
After interviewing a number of potential management companies, the Partnerships,
in consultation with their financial and legal advisors, retained Winegardner &
Hammons, Inc. ("W&H"), a prominent hotel management corporation having
operational experience with "Holiday Inn" franchises, to operate the Inns
pursuant to a management agreement among Operating Partners, W&H and Sixteen
Hotels, Inc., a corporation principally owned by a stock-holder of W&H,
commencing on December 1, 1990, and having an initial term ending on January
3, 1992 (the "Initial W&H Management Agreement"). Pursuant to the Initial W&H
Management Agreement, Operating Partners received all revenues from the
operations of the Inns and was responsible for all expenses including W&H's
Management Fee.
On December 1, 1990, Operating Partners through W&H took control of the Inns
and commenced operation of the Inns for its own account. Operating Partners
arranged the right to continue the operation of the Inns as part of the
"Holiday Inn" system on an interim basis and the interim holding of the liquor
licenses for the Inns. Pursuant to the Transition Agreement, Operating
Partners took over certain assets and liabilities of AMI Management and
arranged to use certain other assets of AMI Management on a short-term basis.
In the opinion of the Board of the General Partner, occupancies and cash flows
at the Inns during 1991 and 1990 were adversely affected by, among other things,
the increase in international tensions in the Middle East and the
intensification of the economic recession that began in 1990, and the
resulting slowdown in travel, and AMI Management's operation of the Inns,
primarily in the period immediately prior to and during its bankruptcy.
Accordingly, the Board believed that the Inns would require substantial
capital improvements and refurbishments, in addition to ongoing repairs and
maintenance, to remain competitive in their respective markets and to maintain
their affiliation with the "Holiday Inn" system.
Operating Partners was in default (technical default in 1990) under its mortgage
loan agreement as of and prior to December 1, 1990 as a result of, among other
things, the bankruptcy filing by Prime and AMI Management and, accordingly, the
outstanding balance of the Mortgage Notes was classified as a current liability
as of December 31, 1991 and 1990. To conserve cash to provide funds to maintain
and improve the Inns and pay suppliers, Operating Partners suspended the monthly
payments of the principal and interest on the Mortgage Notes beginning with the
payments due on February 28, 1991, and the holders of the Mortgage Notes (the
"Mortgage Lenders"), had the right from March 5, 1991 to declare the Mortgage
Notes to be immediately due and payable. On March 28, 1991, the Partnerships
received a notice of acceleration and demand for payment of the entire
outstanding balance of the Mortgage Notes.
In March, 1991, Operating Partners submitted to the Mortgage Lenders a proposal
for the restructuring of the Mortgage Notes and, after various questions from
the Mortgage Lenders, submitted a revised proposal in April, 1991. Those
proposals were rejected by the Mortgage Lenders.
Sixteen potential investors were invited to submit proposals for the purchase
of subordinated debt or equity of the Partnership or Operating Partners. Ten
proposals for some form of transaction with the Partnership or Operating
Partners were received, each proposal contemplated some restructuring of the
Mortgage Notes. Both the Partnership and Operating Partners, as owner of the
Inns and issuer of the securities, and the Mortgage Lenders, who were being
asked to restructure the Mortgage Notes, engaged in extended discussions and
analysis, concerning those proposals. The Partnerships determined that the
proposals were inadequate and contingent and the Mortgage Lenders determined
that the proposed restructuring terms were unacceptable.
In September, 1991, at a meeting of the Partnerships, their advisors, W&H and
the Mortgage Lenders and their advisors, the Mortgage Lenders advised the
Partnerships that the Mortgage Lenders did not believe that a direct or indirect
equity infusion in Operating Partners could be arranged on terms that were
acceptable to the Mortgage Lenders and were economically viable; that the
Mortgage Lenders were prepared, subject to the satisfaction of certain
conditions, to work with Operating Partners to try to arrange additional debt
financing for capital improvements and to fund operating needs; and that such
restructuring, if arranged, would be effected through a "prepackaged"
bankruptcy. The Partnerships agreed with the Mortgage Lenders' analysis of
the prospects for additional equity financing and undertook to work with the
Mortgage Lenders to try to negotiate additional financing and restructure the
Mortgage Notes, on acceptable terms.
Subsequent to that meeting, Operating Partners and its advisors engaged in
extended discussions with representatives of the Mortgage Lenders and their
advisors regarding the conditions to the terms of the restructuring of the
Mortgage Notes and the provision of financing for the refurbishing and upgrading
of the Inns and to fund operating shortfalls. Such discussions addressed not
only the terms of any such transaction, but the business prospects of Operating
Partners on the viability of any restructuring and financing. In the course of
those discussions, Operating Partners developed a general budget and schedule
for refurbishments and improvements to the Inns to correct deficiencies at the
Inns, satisfy "Holiday Inn" quality standards, perform all required maintenance
and repairs, improve the competitive position of the Inns and substantially
upgrade the Baltimore Inner Harbor Inn.
After detailed and extended negotiations among Operating Partners and its
advisors and representatives of the Mortgage Lenders and their advisors, the
parties agreed upon the terms of a priming loan and the restructuring of the
Mortgage Notes. Three of the Mortgage Lenders (the "Priming Lenders") agreed
to provide loans (the "Priming Loan") of up to an aggregate of $14 million to
finance the refurbishments and upgrading of the Inns and to fund operating
deficiencies, and the Mortgage Lenders agreed to restructure the Mortgage Notes,
as part of a "prepackaged reorganization of Operating Partners.
On February 24, 1992, Operating Partners issued a Pre-Petition Solicitation of
Ballots with respect to the Financial Restructuring of AMI Operating Partners,
L.P. to the Mortgage Lenders, and on February 28, 1992, was advised that the
Mortgage Lenders had consented to the plan of reorganization. On February 28,
1992, Operating Partners filed with the United States Bankruptcy Court for the
Southern District of New York (the "New York Bankruptcy Court") a Voluntary
Petition for Relief under Chapter 11 of the United States Bankruptcy Code, and
sought confirmation by the New York Bankruptcy Court of the prepackaged plan of
reorganization consented to by the Mortgage Lenders (the "Plan"). From February
28, 1992 through May 28, 1992, Operating Partners managed its properties and
its operations as a Chapter 11 debtor-in-possession pursuant to the Bankruptcy
Code.
To continue to operate the Inns as part of the "Holiday Inn" system, beginning
in July, 1991, Operating partners paid fees to acquire franchise agreements to
replace those that had been held by AMI Management. Holiday Inns Inc. and its
affiliates engaged in administering the "Holiday Inn" system (collectively,
"HII") issued a new ten-year franchise agreement for Baltimore Inner Harbor Inn,
and extended to June 30, 1997 the term of the franchise agreements that
previously expired prior to June 30, 1997. Continuation of the franchise
agreements requires continued compliance with Holiday Inn quality standards.
Operating Partners and W&H entered into a new management agreement (the "W&H
Management Agreement") pursuant to which W&H manages the Inns from January 4,
1992 through 1996, renewable for two two-year renewal terms. Under the W&H
Management Agreement, W&H was paid for 1992, 1993 and 1994, and will be paid
during the remainder of the agreement an annual base management fee of 2.25%
of the gross revenues of the Inns (plus an additional fee of $100,000 in 1992
only) and an incentive management fee based on defined income in excess of
defined amounts. W&H is also reimbursed for miscellaneous out-of-pocket
expenses allocated to the Inns, including salaries, accounting, legal, computer
services, royalties, marketing, advertising, public relations and reservation
services, subject to certain limitations.
As part of the Plan, the Priming Lenders agreed to provide Operating Partners
$14,000,000 of post-petition financing, which holds a security interest, lien
and mortgage senior to all outstanding liens. The interest rate on the Priming
Loan is 11% per annum.
On May 28, 1992, the New York Bankruptcy Court confirmed the Plan, which became
effective as of June 12, 1992 (the "Effective Date"). Upon confirmation of the
Plan the maturity date of the Priming Loan was extended to December 31, 1999.
Borrowings under the Priming Loan may be used to finance capital improvements or
to fund operating cash requirements. The portion available for capital improve-
ments (defined as the Tranche A Loan), which may be used up to the full
$14,000,000 available, provides for a prepayment premium of 2%. The portion
available for operating cash requirements (defined as the Tranche B Loan),
cannot exceed $2,500,000 and is limited to the amount remaining after borrow-
ings for capital improvements. Borrowings under the Tranche B Loan are pursuant
to a revolving facility, such that amounts repaid can be re-borrowed up to the
limits of availability. These revolving credit borrowings are subject to the
mandatory repayment provisions described below. Although there were outstanding
balances under the Tranche B Loan during 1993 and 1994, there were no
outstanding borrowings under the Tranche B Loan at December 31, 1993 and 1994.
Advances under the Priming Loan are subject to the satisfaction of various
conditions. During the term of the Priming Loan, Operating Partners must apply
to repayment of the Priming Loan all revenues in excess of operating and
administrative expenses, debt service, a reserve for capital replacements (the
"FF&E Reserve", which amounted to 1 1/2% of gross revenues in 1993 and 4% of
gross revenues in 1994, and will amount to 5% of gross revenues in 1995 and
thereafter), income taxes (if the Partnerships are taxable as corporations) and
amounts necessary to enable Operating Partners to maintain a working capital
reserve of $2 million. In the event of a default under the Priming Loan, the
agent for the Priming Lenders may, in addition to any other remedies; cure any
defaults of Operating Partners; and/or declare the entire outstanding balance
of the Priming Loan to be due and payable. Defaults under the Priming Loan
include, among others, (a) default for five days in the payment of principal
or interest, (b) default for five days after notice of any other amounts due
under the Priming Loan documents, (c) failure to corrent any non-conforming
work under the capital improvement program, (d) inability to complete the
revised capital improvement program, within the revised construction budget or
on the construction schedule, (e) cessation of construction work for more than
15 days beyond any period contemplated by the construction schedule, and (f)
acquisition by any person, without the consent of 75% in interest of the Priming
Lenders, of 50% or more of the Units, or the sale, without the consent of 75% in
interest of the Priming Lenders, of the Partnerships interest in Operating
Partners or of 50% or more of the stock of the General Partner.
Further, upon confirmation of the Plan, the Mortgage Lenders entered into a
Restated Loan Agreement (the "Restated Loan Agreement") under which $3,467,000
of accrued and unpaid interest at December 31, 1991 (the "Deferred Amount") was
added to the principal amount of the Mortgage Notes, but bears interest only
from and after January 1, 1995; the Mortgage Notes (not including the Deferred
Amount) bore interest at the rate of 7% per annum in 1992 and 1993 and 8% in
1994; the principal amount of the Mortgage Notes (including the Deferred Amount)
bears interest at a rate of 10% per annum after 1994; and the maturity of the
Mortgage Notes (including the Deferred Amount) was extended to December 31,
1999. In addition, upon any sale of any of the Inns and/or upon the maturity
(by acceleration, at the stated maturity date or otherwise), a portion of any
appreciation in the Inns held by the Partnerships is payable as additional
interest on the restructured Mortgage Notes. During the term of the restructured
Mortgage Notes operating revenues in excess of the $2 million of working capital
that Operating Partners in permitted to retain and the required payments (as
described in the Priming Loan) must be applied to the repayment of the Mortgage
Notes after the Priming Loan has been repaid. The Mortgage Notes can be repaid
at any time without penalty.
In addition, in consideration of the agreement of the Mortgage Lenders to the
restructuring of the Mortgage Notes, Operating Partners and the Partnership
deposited the deeds to the Inns and assignments of other assets of Operating
Partners in escrow. Under the terms of the escrow agreement those deeds and
assignments will be released from escrow to a designee of the Mortgage Lenders
if certain defaults occur and continue not cured for 90 days. Such defaults
include, among others,(a) non-payment when due, of any principal, interest or
other charges under the Priming Loan or the Mortgage Notes, (b) failure to pay
rent on any ground leases, (c) failure to pay taxes on the Inns, (d) failure to
pay or provide for premiums for insurance required under the Priming Loan or the
Mortgage Notes or the mortgages securing them, (e) failure to pay operating
expenses for the Inns (subject to certain rights to contest amounts claimed to
be due), (f) failure to substantially complete the capital improvement program
by December 31, 1993, and (g) the willful failure to commence, pursue or
complete the capital improvement program in accordance with the revised
construction budget and construction schedules therefore. In the escrow
agreement, Operating Partners has agreed not to interpose any defense or
objection to, or bring any lawsuit opposing the Mortgage Lenders' exercise of
their rights under the escrow agreement, or, if Operating Partners files
another bankruptcy case, contest the lifting of any stay to permit the Mortgage
Lenders to exercise such rights.
During 1992, Operating Partners violated certain covenants included in both the
Priming Loan and Restated Loan Agreements. During the first quarter of 1993,
the Mortgage Lenders and Priming Lenders (collectively the "Lenders") consented
to amendments to the Priming Loan and Restated Lan Agreement, to provide for,
among other things, (1) revised capital and operating budgets, (2) revised
administrative expense budgets, and (3) elimination of operating cash flow
requirements.
During 1993, Operating Partners violated, with prior knowledge of the Lenders,
certain covenants included in both the Priming Loan and Restated Loan
Agreements. During the first quarter of 1994, the Lenders consented to amend-
ments to the Priming Loan and Restated Loan Agreement, to provide for, among
other things, a revised capital improvement program (the "Revised Capital
Improvement Program") and operating budgets, including an extension of time to
July 1, 1994, to complete the Revised Capital Improvement Program.
The capital improvment program provided for in the Priming Loan, encompassed
improvements and refurbishments with an aggregate cost of approximately
$16,000,000, which were expected to be completed by December 31, 1993. However,
during 1992, it became clear that cash provided by operations was not sufficient
to fund the full portion of the cost not funded from the Tranche A Loan. In
addition, Operating Partners determined that in light of market conditions,
certain of the capital improvements should not be made. Under the Revised
Capital Improvement Program, the Lenders approved capital improvements and
refurbishments totaling $13,000,872, of which approximately $12,095,000 was
completed as of December 31, 1993. The entire $13,000,872 Revised Capital
Improvement Program was completed by July 1, 1994. The Revised Capital
Improvement Program was funded by $11,500,000 of the Tranche A Loan and
$1,500,000 from the FF&E Reserve.
During the first quarter of 1995, the Lenders agreed to the 1995 operating,
capital and administrative expense budgets for the Partnerships, confirmed
satisfactory and timely completion of the Revised Capital Improvement Program
and acknowledged that the requirements of the Priming Loan with respect to the
capital improvement program had been completed. Operating Partners is in
compliance with all covenants and requirements of the Priming Loan and the
Restated Loan Agreements at December 31, 1994.
The Partnerships' investment in the Inns continues to be subject to the risks
generally incident to the ownership of real estate, including those relating
to the uncertainty of cash flow to meet fixed obligations, adverse changes in
national economic conditions, adverse changes in local market conditions,
construction of new hotels and/or the franchising by Holiday Inn of competitor
hotels, changes in interest rates, the availability of financing for operating
or capital needs, changes in real estate tax rates and other operating expenses,
adverse changes in governmental rules and fiscal policies, acts of God (which
may result in uninsured losses), condemnation and other factors that are beyond
the control of the General Partner, the Partnership, Operating Partners or W&H.
Certain of the Inns could also be negatively impacted by the continuation in
1995 of the major league baseball strike
In September 1994, HII announced a new Core Modernization Program (the "Core
Modernization Program"). HII has informed the Partnership that it is
temporarily exempt from the current category of hotels included in the program
due to the completion by Operating Partners of the Revised Capital Improvement
Program. HII has further informed Operating Partners that the Inns may be
reviewed for the Core Modernization Program at the beginning of 1996 or
thereafter. The Core Modernization Program may require certain of the Inns to
incur capital expenditures, currently indeterminable, to retain their respect-
ive Holiday Inn franchises.
The Partnerships believe that their ability to pay operating expenses, debt
service (both the Mortgage Loan and Priming Loan), and to create required
reserves depends on the ability of the Partnerships to increase future cash
flows from operations. The Partnership has not declared or paid any
distributions to Unitholders of the Partnership since the third quarter of 1990
and no distributions are expected to be declared until cash flows are sufficient
to pay operating and capital requirements, including debt service. In addition,
the Partnership cannot make any distributions to Unitholders until the Priming
Loan is repaid, Mortgage Note payments are maintained and proper reserves are
funded as required.
The Transfer Agent for the Partnership is First Chicago Trust Company of New
York. Their address is P.O. Box 2500, Jersey City, New Jersey 07303-2500.
Certain administrative functions are performed for the Partnership by W&H.
Therefore, the mailing address of the Partnership is c/o WHI, 4243 Hunt Road,
Cincinnati, Ohio 45242 (Telephone: (513) 891-2920). The operation of the Inns
is supervised from W&H's regional office at 301 West Lombard Street, Baltimore,
Maryland 21201.
Competition
The hotel industry is highly competitive and competition at each Inn location is
intense. The number of available hotel rooms in certain markets has increased
in recent years and in many areas has reached levels in excess of peak demand.
Each of the Inns experiences significant competition from other hotels, some of
which are affiliated with national or regional chains (including the "Holiday
Inn" system). The Inns' success is in large part dependent upon their ability
to compete on the basis of factors such as physical condition of the hotels,
accesss, location, service, employees, marketing quality, reservation services,
the quality and scope of food and beverage facilities, and other amenities.
The demand for lodging accomodations varies seasonally and from one part of the
week to another, and is dependent upon general and local economic conditions.
In addition, the demand for accomodations at a particular Inn may be adversely
affected by government cutbacks, changes in travel patterns caused by the
relocation of highways or airports, the construction of additional highways,
strikes, weather conditions, and the availability and price of gasoline and
energy or other factors.
Employees
Approximately 950 persons are employed in the operation of the Inns (not
including W&H employees engaged in managment and supervision). Operating
Partners believes its relationships with its employees are satisfactory.
ITEM 2. PROPERTIES
The Inns, each of which is franchised as a "Holiday Inn", are located in
Maryland, Pennsylvania and Connecticut. The franchises with HII expire on
various dates as summarized below. The HII Core Modernization Program may
require certain of the Inns to incur capital expenditures, currently
indeterminable, to retain their respective Holiday Inn franchise.
Each of the Inns is located near an interstate highway or major traffic artery,
or in a city's business district, providing both visibility and accessibility
to travelers. All of the Inns contain meeting rooms with sound equipment and
banquet facilities. Each of the Inns has on-site parking and a swimming pool.
Also, each of the Inns contains a full service restaurant and lounge which offer
food and beverages throughout the day.
The following table presents certain information concerning the Inns:
<TABLE>
<CAPTION>
Year Number Franchise Status of Ownership
Location Opened of Rooms Expiration Date by Operating Partners
<S> <C> <C> <C> <C>
Maryland
Baltimore-Inner Harbor 1964 374 Dec. 31, 2005 Land and building lease
Baltimore-Washington
International Airport 1973 (1) 259 Jun. 30, 1997 Land and building lease
Frederick 1963 (2) 157 Jun. 30, 1997 Fee
Baltimore-Cromwell Bridge Rd. 1972 139 Dec. 31, 1997 Fee
Baltimore-Moravia Road 1974 139 Dec. 31, 1997 Fee
Baltimore-Belmont Blvd. 1973 135 Dec. 31, 2001 Fee
Baltimore-Glen Burnie No. 1973 128 Dec. 31, 1999 Land Lease
Baltimore-Pikesville 1963 108 Jun. 30, 1997 Fee
Baltimore-Glen Burnie So. 1965 100 Jun. 30, 1997 Fee
Pennsylvania
Lancaster-Route 30
Lancaster-Route 501
York-Market Street 1964 120 Jun. 30, 1997 Land Lease
York-Arsenal Road 1970 100 Dec. 31, 1998 Fee
Hazleton 1969 107 Jun. 30, 1997 Fee
Connecticut
New Haven 1965 160 Jun. 30, 1997 Fee
East Hartford 1974 130 Jun. 30, 1997 Land and building lease
Total 2,505
</TABLE>
(1) 96 room addition completed in 1985
(2) 63 room addition completed in 1985
The terms of the leases (including options exercised) expire at various dates
ranging from 2000 through 2024. Some of the leases contain purchase options
to acquire title, with options to extend the leases for terms varying from
fifteen to forty years. The leases generally require Operating Partners to pay
the cost of repairs, insurance, and real estate taxes.
Each of the properties is subject to mortgage liens securing the Priming Loan
and the Mortgage Notes. Each Mortgage Note is cross-collateralized and secured
by all of the Inns. In addition, the land and building under lease in the
Baltimore Washington International Airport Inn is subject to an additional
mortgage held by the Ground Lessor.
The Priming Loan funded the needed capital improvements and capital expenditures
in order to render the condition of the Inns suitable and adequate for Operating
Partners' business, correct deficiencies at the Inns, satisfy HII quality
standards, perform required maintenance and repairs, restore and retain the
competitive position of the Inns and substantially upgrade the Baltimore Inner
Harbor Inn, which was primarily funded from the Tranche A portion of the Priming
Loan.
The following table summarizes the Revised Capital Improvement Program which
was completed in 1994.
<TABLE>
<CAPTION>
Revised Capital
Location Improvement Program
Maryland
<S> <C>
Baltimore-Inner Harbor $6,799,975
Baltimore-Washington
International Airport 1,393,397
Frederick 311,499
Baltimore-Cromwell Bridge Rd. 253,121
Baltimore-Moravia Road 168,844
Baltimore-Belmont Blvd. 221,588
Baltimore-Glen Burnie North 349,625
Baltimore-Pikesville 244,073
Baltimore-Glen-Burnie South 368,258
Pennsylvania
Lancaster-Route 30 607,824
Lancaster-Route 501 203,537
York-Market Street 123,345
York-Arsenal Road 250,384
Hazleton 204,989
Connecticut
New Haven 747,588
East Hartford 547,014
12,795,061
Other capital improvements
and refurbishment costs 205,811
Total $13,000,872
</TABLE>
In addition to the completion of the Revised Capital Improvement Program, the
Inns made other capital improvements during 1994, which were funded from the
FF&E Reserve.
Item 3. Legal Proceedings
The Partnership and Operating Partners asserted claims against Prime and AMI
Management in the Prime Bankruptcy with respect to defaults under the Lease and
the Guaranty, the operation and maintenance of the Inns prior to and following
the commencement of the Prime Bankruptcy, and the rejection of the Lease and the
Guaranty. However, disputes existed between the parties as to, among other
things, the values of certain assets and liabilities. Operating Partners
entered into an agreement (the "Omnibus Agreement") under which, among other
things, Operating Partners assigned to the holders of the Mortgage Notes its
claims (including claims in connection with such disputes) against Prime and
AMI Management and agreed that amounts recovered on such claims would be
allocated among financial claims (the proceeds of which would be applied to the
repayment of the Mortgage Notes) and operating claims (the proceeds of which
would be available to finance capital improvements to the Inns). In July, 1992
the Prime Settlement was agreed to, whereby the servicing agent for the Mortgage
Lenders, Prime and AMI Management reached a settlement of claims, which was
approved by the Florida Bankruptcy Court. Under the Prime Settlement various
claims of the holders of the Mortgage Notes against Prime and AMI Management
were allowed; Operating Partners did not make any payments to or for the
benefit of any other party; and Prime, AMI Management and Operating Partners
exchanged mutual releases.
In 1992, as a result of the Prime Settlement, the following proceeds were
received by the Partnerships: cash of $124,000; 1,646,208 shares of new Common
Stock in Prime ("Prime Stock") which was valued in accordance with the Omnibus
Agreement at $1.85 per share, for a total value of $3,045,000; Senior Secured
Notes of Prime ("Senior Notes"), with an original par value of $291,000 and
bearing interest at 8.2% per annum, representing principal. Accordingly, total
proceeds of $3,375,000 (net of $85,000 previously accrued) was recognized as
lease settlement proceeds in 1992. Pursuant to the Omnibus Agreement,
$3,419,000 of the total proceeds including the Prime Stock had been distributed
to the Mortgage Lenders, who applied the proceeds to reduce the outstanding
principal balance of the Mortgage Notes. The remaining $41,000 was used to fund
capital improvements. The Settlement also included Junior Secured Notes of
Prime ("Junior Notes"), with an original par value of $639,000 bearing interest
at 9.2% per annum, and additional Senior Notes (Junior Notes and Senior Notes
known collectively as the "Notes") with an original par value of $196,000.
In the first quarter of 1993, semi-annual interest on the Notes, plus a
prepayment of principal on the Senior Notes were received, and the remaining
Notes were sold by the Mortgage Lenders. As a result of these transactions,
in the first quarter of 1993, $709,000 was recognized as lease settlement
proceeds. The Mortgage Lenders, in accordance with the Omnibus Agreement,
determined that $703,000 of such proceeds be utilized to reduce the outstanding
principal balance of the Mortgage Notes and the remaining $6,000 utilized to
fund the capital improvements. In May 1993, the Mortgage Lenders received
237,987 additional shares of Prime Stock which were sold and or valued in
accordance with the Omnibus Agreement in July, 1993. The total proceeds of
$763,000 were utilized to reduce the Mortgage Notes and was recognized as lease
settlement proceeds. Additionally, in November 1993, the Mortgage Lenders
received 603,143 shares of Prime Stock. These shares were sold and or valued
in accordance with the Omnibus Agreement in November and December of 1993,
with total proceeds of $2,917,000 reducing the Mortgage Notes and recognized as
lease settlement proceeds by the Partnerships.
In November, 1994, the Mortgage Lenders received 127,924 shares of Prime Stock
as further recovery from the Prime Settlement. These shares were subsequently
sold and/or valued by the Mortgage Lenders in February, 1995, in accordance with
the Omnibus Agreement. At the time the principal reduction of the Mortgage
Notes occurs, the Partnerships will recognize lease settlement proceeds.
No further recovery from the Prime Settlement is expected by the Mortgage
Lenders or the Partnerships. Should any further recovery be received by the
Mortgage Lenders, the proceeds would be utilized to reduce the principal
balance of the Mortgage Notes, upon valuation in accordance with the Omnibus
Agreement. At the time the principal reduction of the Mortgage Notes occurs,
the Partnerships will recognize lease settlement proceeds.
In the ordinary course of business, the Partnership and Operating Partners are
named as defendants in lawsuits relating to the operation of the Inns,
principally involving claims for injury alleged to have been sustained in or
near the Inns or for damages alleged to have been incurred in business dealings
with Operating Partners or others in connection with the Inns. Such claims are
generally covered by insurance and have not, individually or in the aggregate
been material.
Item 4. Submission of Matters to a Vote of Unitholders
No matters were submitted during 1994 to a vote of the Unitholders of the
Partership.
PART II
Item 5. Market for Registrant's Units and Related Unitholder Matters
(a) The Units have been traded on the New York Stock Exchange since December 17,
1986. The following table sets forth the high and low sale price for the
Partnership's Units for the calendar quarters indicated, as reported by the
New York Stock Exchange:
<TABLE>
<CAPTION>
Year Fiscal Period High Low
<S> <S> <C> <C>
1994 First Quarter 1 3/4 1/2
Second Quarter 1 1/2 5/8
Third Quarter 1 3/8 3/4
Fourth Quarter 3/4 3/8
1993 First Quarter 5/8 1/4
Second Quarter 1 -- 5/8
Third Quarter 5/8 3/4
Fourth Quarter 5/8 3/8
1992 First Quarter 5/8 1/4
Second Quarter 5/8 1/4
Third Quarter 7/8 1/4
Fourth Quarter 1/2 1/4
</TABLE>
(b) On February 28, 1994, there were 711 holders of record of the Partnership's
Units.
(c) No dividends have been declared or distributed since 1990. Subsequent to
the termination of the Lease, which was effective on December 1, 1990, the
Partnership's cash flow is entirely dependent on revenues from operations of
the Inns and the net cash flow has been insufficient to maintain quarterly
distributions. In addition, the Partnership cannot make any distributions to
Unitholders until the Priming Loan is repaid, Mortgage Note payments are
maintained and proper reserves are funded as required.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1994 (a) 1993 (a) 1992 (a) 1991(a) 1990(a)
(in thousands, except per Unit amounts)
<S> <C> <C> <C> <C> <C>
Operating Data:
Total Revenues $43,471(b) $45,590(b) $43,422(b) $41,417(b) $17,539
Net income (loss) ( 4,673) ( 1,215) ( 2,911) (61,806)(c) 855
Net income (loss) allocable
to limited partners ( 4,626) ( 1,203) ( 2,882) (61,188)(c) 843
Per unit income (loss)
allocable to limited partners $( 1.16) $( 0.30) $( .72) $(15.30) $ .21
Balance Sheet Data:
Total Assets $ 60,673 $ 64,009 $ 66,645 $61,723 $119,174
Long-term debt, net of
current maturities 66,627 65,912 67,108 59,354(d) 59,420(d)
Partners' capital (deficit) (13,453) ( 8,780) ( 7,565) ( 4,654) 57,152
Distribution per unit $ ---(e) $ ---(e) $ ---(e) $ ---(e) $ 1.04
</TABLE>
(a) As a result of the fact that W&H's system of accounting for all properties
under its management operates on the basis of a calendar year deemed closed by
bookkeeping purposes on that Friday which is most proximate to December 31 of
any given year, the fiscal year of Operating Partners for 1994 ended December
30, 1994, for 1993 ended on December 31, 1993, for 1992 ended on January 1,
1993, for 1991 ended on January 3, 1992, and for 1990 ended on December 28,
1990.
(b) Includes $341,000, $304,000, $360,000 and $300,000 for the years ended
December 31, 1994, 1993, 1992 and 1991, respectively, of other income
(principally interest income). In addition, it includes $4,389,000 and
$3,375,000 for the years ended December 31, 1993 and 1992, respectively, of
non-recurring revenue from the Prime Settlement.
(c) The carrying value of the Inns and related intangible assets were written
down through a charge to expense in 1991 in the amount of $51,292,000,
consisting of $46,354,000 of property and equipment and $4,938,000 of
favorable contracts.
(d) As a result of the payment default on the Mortgage Notes, the outstanding
indebtedness of Operating Partners thereunder, $59,354,000 at December 31, 1991,
and $59,420,000 at December 31, 1990, were classified as a current liability.
(e) No distributions were made in 1994, 1993, 1992 or 1991 (See Item 1).
The Inns' room statistics are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
Average Average Average
Room Occupancy Room Occupancy Room Occupancy
Rate Percentage Rate Percentage Rate Percentage
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $56.33 48.0% $51.77 50.5% $52.20 52.8%
2nd Quarter $61.79 69.4% $57.69 66.3% $57.43 64.0%
3rd Quarter $61.10 72.7% $59.93 71.7% $56.59 70.9%
4th Quarter $58.72 57.5% $56.76 55.6% $54.16 54.7%
Full Year $59.82 61.9% $56.91 61.0% $55.31 60.6%
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
The Partnership derives its income from its 99% interest in Operating Partners,
whose income is generated from the operations of the Inns. Operating Partners
receives all lodging and other revenues from, and is responsible for the payment
of all expenses directly attributable to, the operation of the Inns. Set forth
below is information as to lodging and food and beverage revenues and expenses
generated from the operations of the Inns:
<TABLE>
<CAPTION>
1994 1993 1992
(in thousands)
<S> <C> <C> <C>
Operating revenues:
Lodging $34,866 $32,563 $31,368
Food & beverage 8,264 8,334 8,319
Totals 43,130 40,897 39,687
Direct operating expenses:
Lodging 7,972 7,294 7,204
Food & beverage 7,509 7,514 7,380
Utilities 2,875 2,978 2,942
Repairs & maintenance 3,379 3,016 2,998
Rent 1,301 1,315 1,220
Insurance 670 595 535
Property taxes 1,300 1,385 1,665
Marketing 3,244 3,228 3,055
Other 7,593 7,013 6,906
Totals 35,843 34,338 33,905
Operating revenues in
excess of direct
operating expenses $ 7,287 $ 6,559 $ 5,782
</TABLE>
In 1992, as part of its Plan, Operating Partners restructured its Mortgage Notes
under the Restated Loan Agreement and arranged a Priming Loan to fund necessary
capital improvements and finance operating deficiencies. The Partnerships
believed that the Inns were not able in their condition and the state of the
economy, to generate the revenues necessary to pay all operating expenses and
also pay debt service and make the improvements and repairs necessary to
satisfy the requirements for inclusion in the "Holiday Inn" system or in any
of the first class national franchise systems.
Operating Partners believes that the improved condition of the Inns coupled with
proper management has enabled the Partnerships to maintain and improve
occupancies at the Inns, while continuing to significantly increase average
daily room rates (ADR). Operating revenues have, therefore, increased to
improve the cash flows to cover operating expenses, pay debt service (including
the Tranche A Loan), make necessary and required repairs and maintenance and
repay the Tranche B Loan. The Inns have also been assisted by the growing
economy and the resumption of travel by certain industries that reduced or
suspended travel into the markets where the Inns are located, such as the
insurance, healthcare and government industries. The ability of the
Partnerships to pay operating expenses, increased debt service (the interest
rate on the Mortgage Notes increases from 8% in 1994 to 10% in 1995 and
thereafter) and create required reserves depends upon the ability of the
Partnerships to increase future cash flows from operations. Unless cash flows
from operations are sufficient, the Partnerships may not be able to continue as
going concerns. It is the intention of the Partnerships to continue to operate
the Inns as going concerns.
The Partnership's investment in the Inns continues to be subject to the risks
generally incident to the ownership of real estate, including those relating to
the uncertainty of cash flow to meet fixed obligations, adverse changes in
national economic conditions, adverse changes in local market conditions,
changes in interest rates and other operating expenses, adverse changes in
governmental rules and fiscal policies, acts of God (which may result in
uninsured losses), condemnation and other factors that are beyond the control
of the General Partner, the Partnership, Operating Partners or W&H.
Results of Operations
For the year ended December 31, 1994, total revenues (excluding non-recurring
income from the Prime Settlement) increased to $43,471,000 in 1994 from
$41,201,000 in 1993 and $40,047,000 in 1992. Total non-recurring income from
the Prime Settlement was $4,389,000 in 1993 and $3,375,000 in 1992. The
Partnerships' loss from operations increased to $4,673,000 for the year ended
December 31, 1994, as compared to $1,215,000 and $2,911,000 of losses reported
in 1993 and 1992, respectively, including the Prime Settlement proceeds.
Excluding the Prime Settlement proceeds received in 1993 and 1992, the loss from
operations in 1994 declined to $4,673,000 from $5,604,000 in 1993 and $6,286,000
in 1992. Included in the Partnership's loss from operations in 1992 are legal
and professional fees of $956,000 incurred in connection with the Plan. These
costs were related to the New York Bankruptcy Court filing and subequent
proceedings and the restructuring of the debt, which were intended to enable
Operating Partners to borrow the capital required for the refurbishments
needed, and funding for operating deficiencies. The Following table compares
the room revenues, occupancy percentage levels and ADR for the periods
indicated:
<TABLE>
<CAPTION>
Twelve Months Ended December 31st 1994 1993 1992
<S> <C> <C> <C>
Room Revenue (in thousands) $34,866 $32,563 $31,368
Occupancy Percentage 61.9% 61.0% 60.6%
ADR $ 59.82 $ 56.91 $ 55.31
</TABLE>
The Inns' ability to increase their respective ADR's has been accomplished by
changing the mix of market segments (hotel guests categorized as individual
business, leisure and government guests, etc. and groups such as corporate,
association, tours, crews, etc.) from lower ADR to higher ADR segments.
Attracting the higher ADR segments has been accomplished by increased
marketing and sales promotions and the improved condition of the Inns resulting
from the capital improvements. In addition, the Inns have become less
dependent upon the defense industry and have recovered business from the
insurance, healthcare, and government industry travel. Attracting the higher
rated market segments has also been accomplished through effective marketing
and sales promotions. In attracting the market segments with higher ADR the
Inns have had to remove some of their lower ADR market segments (such as
airline crews and tour groups). This repositioning of market segment business
contributed to the decline in occupancies in the first quarter of 1994, relative
to the first quarter of 1993 and 1992, which rebounded in the second, third and
fourth quarters of 1994 (absolutely and relative to the comparable periods of
1993 and 1992). Due to the intense competition and saturation of available
rooms where the Inns are located, the Partnerships and W&H believe it will
continue to be difficult to increase their respective occupancy levels. Another
contributing factor to the projected stagnant occupancy is that approximately
one-third of the Inns are "highway oriented" location properties, which in
general have lagged behind in demand, as compared to midscale and urban,
suburban and airport location properties. Also, the "highway oriented" Inns
have an external dated appearance due to their age, which contributes to their
median occupancies. Contributing to future competition are certain pending
competitor hotels changing franchise affiliation to a Holiday Inn franchise.
It is anticipated that the Inns can continue to improve their mix of market
segments and thereby increase their ADR's and improve profit margins. This is
expected to be accomplished by seeking the higher rated segments through
continued participation in HII national advertising and marketing, Priority Club
promotions, W&H Marketing and Sales, and attracting and targeting segments
previously unattainable due to the conditions of the Inns prior to the capital
improvements.
Food and beverage revenues for the year ended December 31, 1994 declined to
$8,264,000 from $8,334,000 and $8,319,000 in 1993 and 1992, respectively. The
food and beverage revenues have historically fluctuated with occupancies at the
Inns. The occupancies in the first quarter of 1994 were adversely affected by
the harsh winter weather and the repositioning of market segment business,
significantly affecting the food and beverage revenues. The decrease in the
first quarter was partially offset by the strong second and third quarter
revenues in the food and beverage departments. In the fourth quarter of 1994,
food and beverage revenues declined as compared to the previous fourth quarter
of 1993. This decline resulted from "New Years Eve" revenue not being included
in 1994, due to Operating Partners' accounting calendar. Operating Partners
utilizes a 52/53 week accounting calendar with the year ending on the Friday
nearest December 31 (the 1993 accounting calendar ended on December 31, 1993,
while the 1994 accounting year ended on December 30, 1994). This fourth quarter
decline coupled with the first quarter decline caused the year over year
shortfall in food and beverage revenues.
Direct operating expenses in 1994 were $35,843,000, as compared to $34,338,000
in 1993 and $33,905,000 in 1992. The increase in direct operating expenses
from 1993 to 1994, resulted from increased lodging expenses, reflecting higher
labor costs, travel agent commissions, ongoing repairs and maintenance, and
increases in other operating expenses. The increases in other expenses,
included in direct operating expenses, reflect higher administrative and
general expenses directly incurred in the operations of the Inns and in costs
that vary with revenues, such as franchise fees paid to HII, management fees
paid to W&H, and credit card commissions. Utility expenses decreased due to
the adoption of energy management techniques at the Inns coupled with favorable
weather conditions after the first quarter of 1994. Property tax reductions
are a result of the successful appeals of the property tax assessments for
certain of the Inns.
Other non-direct operating expenses, such as other general and administrative
expenses, declined in 1994 over 1993 due to the reduced need for professional
and legal services from outside sources, required during the restructuring of
the Mortgage Notes and bankruptcy reorganization of the Operating Partners.
Depreciation and amortization expenses increased in 1994, due to the property
and equipment additions from the Revised Capital Improvement Program and ongoing
capital improvements. The reduction of the Mortgage Notes in the last quarter
of 1993 resulted in a reduction of interest expense in 1994 as compared to the
total interest expense in 1993.
Liquidity and Capital Resources
The changes in cash and cash equivalents are summarized as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net cash provided by operating activities $ 1,451 $ 578 $ 1,492
Net cash used by investing activities (2,482) (2,843) (7,892)
Net cash provided by financing activities 675 2,331 7,265
Net increase (decrease) in cash and
cash equivalents $( 356) $ 66 $ 865
</TABLE>
In 1992, cash provided by operating revenue exceeded cash used for operating
expenses of the Inns and of the Partnerships as a result of the implementation
of cost control measures, resulting in net cash being provided by operating
activities.
In 1992, the net cash used by investing activities of $7,892,000 primarily
includes additions to property and equipment of $8,452,000, less $385,000 funded
to the interest reserve restricted cash account, as required by the Priming Loan
Agreement, and $175,000 of unexpended funds, net of the reduction in the FF&E
Reserve which was utilized to partially fund the capital improvements.
In 1992, cash provided by financing activities was $7,265,000. This included
long term borrowings under the Priming Loan of $7,674,000; of which $7,499,000
was from the Tranche A Loan, and was utilized to fund capital improvements, and
the balance of $175,000 was retained as a mandatory advance as required under
the Priming Loan Agreement, and was reflected as a restricted cash account
balance. In addition, $2,535,000 was borrowed under the Tranche B Loan for
operating cash deficiencies, of which $1,709,000 was repaid from excess working
capital in 1992.
Non cash activities during 1992 included the conversion, in accordance with
the Restated Loan Agreement, of $3,467,000 of accrued interest payable as of
December 31, 1991, to long term debt, and the reduction of long term debt by
$3,419,000 from a portion of the lease settlement proceeds.
The Partnerships' cash flows from operating activities decreased in 1993 from
1992, although operating revenues increased for the same period. The reduction
in cash flows from operations was therefore due to increased operating expenses.
Cash used by investment activities equaled $2,843,000 in 1993, of which
$2,685,000 was utilized for capital improvements and refurbishments. In
addition, there was a net increase in the restricted cash and cash equivalents
of $158,000 in 1993, including the funding to the FF&E Reserve of 1-1/2% of
gross revenues, which totaled $385,000, offset by the reduction of $52,000 in
the funds required to be maintained in the property tax escrow account and the
application of $175,000 that remained unexpended in 1992 from the mandatory
advance balance under the Priming Loan to fund capital improvements and
refurbishments.
In 1993, borrowings from the Priming Loan provided cash for financing
activities. The Partnerships borrowed $3,157,000 under the Tranche A Loan
and an additional $815,000 under the Tranche B Loan. The $1,641,000 balance
of the Tranche B Loan was repaid from excess working capital in 1993. In
addition, the remaining balance of the mandatory advance was drawn down for
the capital improvements.
Non cash activities in 1993 included the reduction of long term debt by
$4,389,000 from the proceeds from the Prime Settlement.
In 1994, cash flows from operating activities increased, as compared to 1993,
as a result of increased revenue from operations and continued control of
operating expenses. This resulted in net cash being provided by operating
activities.
In 1994, net cash used by investing activities was $2,482,000, and included
additions to property and equipment of $2,773,000, partially offset by a
$291,000 decrease in the restricted cash accounts. The restricted cash accounts
included the net reduction in the FF&E Reserve of $305,000 (the capital
expenditures of $2,056,000 which were funded from the FF&E Reserve exceeded the
$1,751,000 funded to the FF&E Reserve at 4% of revenue plus interest earned) net
of an increase of $14,000 in the interest reserve and tax escrow accounts.
In 1994, borrowings from the Priming Loan provided cash for financing
activities. The Partnership borrowed the remaining $675,000 under the
Tranche A Loan and $1,763,000 under the Tranche B Loan. The entire Tranche B
Loan was repaid from excess working capital in the second quarter of 1994.
Until the Priming Loan is paid in full, no principal is required to be paid on
the Mortgage Notes from operating cash. In 1992 and 1993, interest on the
Mortgage Notes was payable at 7% per annum and at 8% per annum in 1994, and the
interest rate increased to 10% per annum after 1994 (including on the Deferred
Amount). The outstanding principal amount of the Mortgage Notes has been
reduced by $8,826,000 from the proceeds of the Prime Settlement: $3,419,000 of
Mortgage Notes during 1992, $4,383,000 of Mortgage Notes during 1993, and
$1,025,000 of Mortgage Notes during the first quarter of 1995.
The Partnerships' ongoing cash requirements are for working capital, debt
service and the funding of required reserves. The Partnerships' source of
liquidity is revenue from the operations of the Inns, which during the winter
months has been insufficient to cover operating expenses and fund working
capital, debt service and required reserves. The Partnerships may however,
borrow up to $2,500,000 of the Tranche B portion of the Priming Loan for
operating cash deficiencies, but must repay any amount borrowed, if for any
month cash on hand exceeds working capital requirements, as defined in the
Priming Loan Agreement. Approximately $1,368,000 of cash was on hand as of
December 31, 1994, which is required to meet day to day working capital needs.
Presently the Partnerships have a FF&E Reserve of approximately $610,000,
which is available only for capital improvements and refurbishments. Beginning
in 1993, the FF&E Reserve was required, under the Priming Loan, to be funded on
a monthly basis at 1.5% of revenues. The required monthly funding of the FF&E
Reserve increased to 4% of revenues, in 1994, and 5% thereafter. The interest
reserve account contains approximately $419,000. The interest reserve account
was established through the initial Priming Loan, and, at the option of the
Lenders, may be used to cure any default under the Priming Loan. No additional
funding to the interest reserve is required under the Priming Loan.
No distributions will be made to Unitholders until the Priming Loan is paid
in full, proper required reserves are maintained, and proper payments are made
on the Mortgage Notes which would include principal reduction. There is no
guarantee that there will ever be excess cash for such distributions to
Unitholders.
The Partnerships anticipate continued recovery in the economy, in the travel and
hospitality industries, in the real estate market and, as a result of ongoing
capital improvements, in the comparative attractiveness of the Inns (although
neither the Partnership nor any of its advisors can give any assurances as to
the strength or duration of any recovery). The Partnerships anticipate that
such a recovery coupled with the improvements made to the physical condition of
the Inns will result in improvement in occupancies, room rates and related
revenues at the Inns. The Partnerships anticipate that their future earnings,
together with the advances under the Tranche B portion of the Priming Loan,
will enable the Partnerships to pay all operating expenses, pay debt service and
satisfy the current requirements under the HII franchise agreements. However,
while the Partnerships' budgets and capital plans reflect their present best
estimates of future events, those events are beyond the control of the
Partnerships, the General Partner and W&H and no assurances can be given that
the Partnerships will have the liquidity to meet future operating and capital
commitments.
Operating Partners' operating expenses have been and are expected to be subject
to inflationary pressures. Depending on levels of economic activity and
competitive pressures, the room rates and food and beverage charges at the
Inns may also increase with inflation, but not necessarily in proportion to
the pressures affecting expenses.
Under the Internal Revenue Code, a publicly traded partnership, such as the
Partnership, is taxable as a corporation unless it satisfies certain conditions.
However, subject to various limitations, publicly traded partnerships in
existence on December 17, 1987 are generally exempt from taxation as a
corporation until after 1997. If the Partnerships' operations continue as
described herein, the Partnership should not be taxed as a corporation until
after 1997. However, a publicly traded partnership which adds a substantial
new line of business is not eligible for such exemption and it is possible
that the Internal Revenue Service could contend that the Partnership should
be taxed as a corporation after November 29, 1990, the date of the termination
of the Lease. If the Partnership were taxable as a corporation, its operating
losses should eliminate any tax liability for some time.
Item 8. Financial Statements and Supplementary Data
See Index to Financial Statements and Financial Schedules included in
Item 14(a).
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Certain information is set forth below concerning the directors and officers
of the General Partner, each of whom has been elected or appointed to serve
until his successor is duly elected and qualified. The Unitholders of the
Partnership do not have voting rights with respect to the election of directors
of the General Partner.
Present Position with the General Partner
Name Age and Business Experience for Past Five Years
S. Leonard Okin 61 Vice President and Director of the General Partner since
inception; Managing Director of the General Partner
since January 1, 1994 to date, Vice President and
Director of First American Realty Associates, Inc.,
(mortgage brokers) from prior to 1989 to December 31,
1993 (1).
Michael R. Stoler 48 Director of the General Partner beginning January 1,
1994 to November 21, 1994; President of Princeton
Commercial Corporation and Michael R. Stoler &
Associates., Ltd., (investment banking firm and
management consultant firm, respectively) since prior
to 1989 (2).
Robert A. Familant 43 Director of the General Partner beginning August 19,
1994 to date; Treasurer/CEO of Progressive Credit Union
(credit union) since prior to 1989 (3).
Seymour G. Siegel 52 Director of the General Partner beginning November 21,
1994 to date; President of Siegel Rich Resources, Inc.
(consulting firm) since January 1, 1994 to present,
formerly Senior Partner of M.R. Weiser & Co. (accounting
firm) (4).
(1) In the first quarter of 1994 the Lenders approved Mr. Okin's assumption
and performance of various supervisory functions for the Partnerships. Mr.
Okin entered into a Consulting Services Agreement (the "Consulting Services
Agreement") with the Partnerships, giving him authority to make day to day
operating decisions with respect to the Inns. First American Realty
Associates, Inc. has performed mortgage brokerage services for Prime.
(2) Mr. Stoler was elected and approved as an outside Director of the General
Partner effective January 1, 1994. Mr. Stoler resigned as of November 21,
1994, due to an independence issue.
(3) Mr. Familant was elected and approved as an additional outside Director
of the General Partner effective August 19, 1994.
(4) Mr. Siegel was elected and approved as an outside Director of the General
Partner replacing Mr. Stoler, effective November 21, 1994.
Under the Consulting Services Agreement, Mr. Okin, as an independent contractor,
performs on behalf of the Partnership, Operating Partners and the General
Partner, the services normally performed by and exercises the authority normally
assumed or undertaken by, the chief executive officer of a corporation.
The Consulting Services Agreement was effective December 1, 1994 and the
initial term expires on December 31, 1995. Unless the parties or the Lenders
exercise their rights to terminate the Consulting Services Agreement, it will
be extended automatically for successive twelve-month periods. The Consulting
Services Agreement is terminable, among other things, by 30 days prior written
notice from the Partnership, Operating Partners, and the General Partner to
Mr. Okin of their election not to renew the agreement at the expiration of the
initial or any renewal term; for cause; by 60 days prior written notice from Mr.
Okin to the General Partner of Mr. Okin's election at any time to terminate the
agreement; at any time by Mr. Okin if the Partnership, Operating Partners and
the General Partner for any reason are not able to maintain in place specified
liability insurance coverage for Mr. Okin; and upon foreclosure by the Lenders
on substantially all of the assets of the Partnerships, by notice from the
Lenders to Mr. Okin given within ten days of such foreclosure.
Item 11. Executive Compensation
Due to the resignation in 1990 of all officers and directors who were executive
officers and/or directors of Prime, the resignation of Mr. Ebner as Vice
President and Director of the General Partner on December 31, 1993, and the
resignation of Mr. Bradley under the Consultant Agreement, Mr. Okin was
required to devote substantial time and effort to manage the Partnerships,
resulting in a net reduction of administrative costs. The following table sets
forth Mr. Okin's compensation paid in respect of the fiscal year ended December
31, 1994.
<TABLE>
<CAPTION>
Summary Compensation Table:
Name and Other Annual Long Term All Other
Principal Position Year Salary ($) Bonus ($) Compensation Compensation Compensation
<S> <C> <C> <C> <C> <C> <C>
S. Leonard Okin (1) 1994 $120,000 $ --- $ --- $ --- $ ---
(1) Mr. Okin recieves compensation for services under the Consulting Services
Agreement. In addition, Mr. Okin received reimbursement for out-of-pocket
expenses in 1994 totaling approximately $27,400 (for office rent, secretarial
services, utilities, airfare, postage, office supplies, etc.) and $3,250 for
attendance at board meetings. Mr. Okin did not recieve compensation in excess
of $100,000 in 1993 or 1992.
For fiscal 1994 all Directors were paid a fee of $750 for each Board meeting
attended plus out-of-pocket expenses incurred for attending meetings.
Item 12. Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of December 31, 1994, the number of units
of limited partnership interest in the Partnership owned by the officers and
directors of the General Partner and by all persons owning of record or, to
the knowledge of the Partnership, beneficially more than 5% of the Partnership
outstanding Units. The General Partner does not own any Units.
</TABLE>
<TABLE>
<CAPTION>
Ownership of Units
Name & Address of Owner No. of Units Percentage of Units Outstanding
<S> <C> <C>
S. Leonard Okin
c/o Prime American Realty Corp.
P.O. Box 230
Hawthorne, NJ 07507-0230 1,000 0.025%
Jerome & Marcella Yunger
5039 Mesa View Drive
Las Vegas, NV 89120 174,800
Roxanne Rose Yunger
5039 Mesa View Drive
Las Vegas, NV 89120 129,400
Total Unitholder Position (1) 304,200 7.605%
Includes 174,800 Units held of record by Mr. & Mrs. Yunger as Trustees of
the Jerome J. and Marcella M. Yunger Family Trust and 129,400 Units held of
record by Roxanne Rose Yunger. The Partnership has no knowledge as to the
beneficial ownership of such Units.
Item 13. Certain Relationships and Related Transactions
During 1994, Mr. Okin as Director of the General Partner and as consultant
under the Consulting Services Agreement, received $150,650 as cash compensation
for his services and reimbursement of expenses. See Item 10 and 11 above.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
All financial statements of the Registrant begin on page 27.
2. Financial Statement Schedules
None
3. Exhibits
(2) (a) Joint motion and stipulation before the Florida Bankruptcy Court
for order authorizing Prime and AMI Management to enter into an
agreement with Operating Partners and the Partnership and
approving the terms thereof included as Exhibit (2) (a) to the
Partnership's 1990 Annual Report on Form 10-K is incorporated
herein by reference.
(2) (b) Agreed order of the Florida Bankruptcy Court approving rejection
of the Lease, the Guarantee and a related agreement included as
Exhibit (2) (b) to the Partnership's 1990 Annual Report on Form
10-K is incorporated herein by reference.
(3) (a) Amended and Restated Agreement of Limited Partnership of the
Partnership included as Exhibit 3.1 to the Partnership's Registration
Statement on Form S-1 (No. 33-9595) is incorporated herein by
reference.
(3) (b) Certificate of Limited Partnership of the Partnership included as
Exhibit 3.2 to the Registration Statement is incorporated herein by
reference.
(3) (c) Amended and Restated Agreement of Limited Partnership of
Operating Partners, included as Exhibit 3.3 to the Registration
Statement is incorporated herein by reference.
(3) (d) Certificate of Limited Partnership of Operating Partners included
as Exhibit 3.6 to the Registration Statement is incorporated herein by
reference.
(4) (a) Form of Deposit Agreement included as Exhibit 10.8 to the
Registration Statement is incorporated herein by reference.
(10) (a) Form of Lease included as Exhibit 10.1 to the Registration
Statement is incorporated herein by reference.
(10) (b) Form of Management Agreement included as Exhibit 10.2 to the
Registration Statement is incorporated herein by reference.
(10) (c) Form of Purchase and Sale Agreement included as Exhibit 10.3 to
the Registration Statement is incorporated herein by reference.
(10) (d) Form of Note Purchase and Loan Agreement included as Exhibit
10.4 to the Registration Statement is incorporated herein by
reference.
(10) (e) Form of Service Contract included as Exhibit 10.5 to the
Registration Statement is incorporated herein by reference.
(10) (f) Form of Undertaking included as Exhibit 10.6 to the Registration
Statement is incorporated herein by reference.
(10) (g) Form of Guaranty included as Exhibit 10.7 to the Registration
Statement is incorporated herein by reference.
(10) (h) Management Agreement among AMI Operating Partners, L.P.
("Operating Partners"), Sixteen Hotels, Inc. ("Sixteen Hotels"), and
Winegardner & Hammons, Inc. ("W&H"), as Manager, dated January 4, 1992, is
incorporated herein by reference.
(10) (i) Loan Agreement among Massachusetts Mutual Life Insurance
Company, Century Life of America and Jackson National Life
Insurance Company (collectively, the "Priming Lenders"), as
lenders, Operating Partners, as borrower and Norwest Bank
Minnesota, N.A., Agent (the "Agent") dated as of February 28,
1992 included as Exhibit (10) (i) to the Partnership's 1992
Annual Report on Form 10-K is incorporated herein by reference.
(10) (j) Amended and Restated Loan Agreement among Massachusetts
Mutual Life Insurance Company, Century Life of America and
Jackson National Life Insurance Company, (collectively, the
"Priming Lenders"), as lenders, AMI Operating Partners, as
borrower and Norwest Bank Minnesota, N.A., Agent (the
"Agent"), dated as of June 12, 1992, as amended by letters of
consent agreements dated February 1993, and March 17, 1993,
included as Exhibit (10) (j) to the Partnership's 1992 Annual
Report on Form 10-K and January 31, 1994, incorporated herein
by reference.
(10) (k) Amended and Restated Loan Agreement among Operating
Partners, the Holders named in Exhibit A thereto (collectively, the
"Existing Lenders") and IBJ Schroeder Bank and Trust Company,
Servicer, dated June 12, 1992, as amended by letters of consent
agreements dated February 1993, included as Exhibit (10) (k) to the
Partnership's 1992 Annual Report on Form 10-K, and March 17,
1993 and January 31, 1994, is incorporated herein by reference.
(10) (l) Escrow Agreement among Operating Partners, the Existing
Lenders and Chicago Title Insurance Company, as escrow agent
and as title insurer dated June 12, 1992, included as Exhibit (10) (l)
to the Partnership's 1992 Annual Report on Form 10-K, is
incorporated herein by reference.
(10) (m) Consulting Services Agreement among the Partnerships, the
General Partner and Mr. S. Leonard Okin dated December 1,
1994, a copy of which is attached hereto.
(10) (n) Fourth Consent Agreement among Operating Partners, the Priming
Loan Lenders named in Exhibit A thereto, and the Lenders named
in Exhibit B thereto, dated March 17, 1995, a copy of which is
attached hereto.
(21) Subsidiaries of Prime Motor Inns Limited Partnership are as
follows:
Name Jurisdiction of Incorporation
AMI Operating Partners, L.P. Delaware
(27) Financial Data Schedules
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, there-unto duly authorized.
PRIME MOTOR INNS LIMITED PARTNERSHIP
(Registrant)
By: Prime-American Realty Corp. General Partner
Date: March 22, 1995 By: /s/ S. Leonard Okin
S. Leonard Okin
Vice President & Director
Date: March 22, 1995 By: /s/ Robert A. Familant
Robert A. Familant
Director
Date: March 22, 1995 By: /s/ Seymour G. Siegel
Seymour G. Siegel
Director
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
BOARD OF DIRECTORS OF THE GENERAL PARTNER
Signature Title Date
By: /s/ S. Leonard Okin Director and Vice President March 22, 1995
S. Leonard Okin of the General Partner;
Consultant under the
Consulting Services
Agreement
By: /s/ Robert A. Familant Director of the March 22, 1995
Robert A. Familant General Partner
By: /s/ Seymour G. Siegel Director of the March 22, 1995
Seymour G. Siegel General Partner
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
Index to Consolidated Financial Statements
Page
Financial Statements:
Report of Independent Accountants 28
Consolidated:
Balance Sheets
December 31, 1994 and 1993 29-30
Statements of Operations
For the Years Ended December 31, 1994, 1993
and 1992 31
Statements of Partners' Deficit
For the Years Ended December 31, 1994, 1993
and 1992 32
Statements of Cash Flows
For the Years Ended December 31, 1994, 1993
and 1992 33-34
Notes to Consolidated Financial Statements 35-44
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of the
Prime Motor Inns Limited Partnership
and AMI Operating Partners, L.P.
We have audited the accompanying consolidated balance sheets of
Prime Motor Inns Limited Partnership and Subsidiary Limited
Partnership as of December 31, 1994 and 1993, and the related
consolidated statements of operations, partners' deficit and
cash flows for each of the three years in the period ended
December 31, 1994. These financial statements are the
responsibility of the Partnerships' 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 audit 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 consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Prime Motor Inns Limited Partnership and Subsidiary
Limited Partnership as of December 31, 1994 and 1993, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Partnerships will continue as a going
concern. As discussed in Note 1, the Partnerships have incurred
significant operating losses, have a capital deficit at December
31, 1994 and have increased debt service requirements beginning
in 1995. These matters raise substantial doubt about the
Partnerships' ability to continue as a going concern. The
consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Cincinnati, Ohio
February 24, 1995
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
</TABLE>
<TABLE>
Consolidated Balance Sheets
December 31, 1994 and 1993
(dollars in thousands)
<CAPTION>
ASSETS
1994 1993
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,368 $ 1,724
Accounts receivable, net of allowance
for doubtful accounts in 1994 and
1993 of $19 and $16, respectively 881 869
Prepaid expenses 986 949
Other current assets 391 274
Total current assets 3,626 3,816
Property and equipment:
Land 7,653 7,653
Buildings and leasehold improvements 54,359 53,445
Furniture and equipment 36,851 34,992
98,863 96,090
Less allowance for accumulated depreciation
and amortization (43,982) (38,856)
54,881 57,234
Cash and cash equivalents restricted for:
Acquisition of property and equipment 610 915
Interest and taxes 467 453
Other assets, net 1,089 1,591
Total assets $60,673 $64,009
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
Consolidated Balance Sheets
December 31, 1994 and 1993
(dollars in thousands)
LIABILITIES AND PARTNERS' DEFICIT
<CAPTION>
1994 1993
Current liabilities:
<S> <C> <C>
Trade accounts payable $ 402 $ 608
Accrued payroll 714 590
Accrued payroll taxes 258 219
Accrued vacation 436 377
Accrued utilities 249 314
Sales tax payable 221 212
Other current liabilities 643 561
Total current liabilities 2,923 2,881
Long-term debt 66,627 65,912
Deferred interest 4,426 3,846
Other liabilities 150 150
Total liabilities 74,126 72,789
Commitments
Partners' deficit:
General partner (706) (659)
Limited partners (12,747) (8,121)
Total partners' deficit (13,453) (8,780)
Total liabilities and partners' deficit $60,673 $64,009
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
Consolidated Statements of Operations
for the years ended December 31, 1994, 1993 and 1992
(dollars in thousands, except per unit amounts)
<CAPTION>
1994 1993 1992
Revenues:
<S> <C> <C> <C>
Direct operating revenues:
Lodging $34,866 $32,563 $31,368
Food and beverage 8,264 8,334 8,319
Other income 341 304 360
Lease settlement proceeds 4,389 3,375
Total revenues 43,471 45,590 43,422
Expenses:
Direct operating expenses:
Lodging 7,972 7,294 7,204
Food and beverage 7,509 7,514 7,380
Utilities 2,875 2,978 2,942
Repairs and maintenance 3,379 3,016 2,998
Rent 1,301 1,315 1,220
Insurance 670 595 535
Property taxes 1,300 1,385 1,665
Marketing 3,244 3,228 3,055
Other 7,593 7,013 6,906
Other general and administrative 606 802 1,089
Depreciation and amortization 5,626 5,451 4,684
Interest expense 6,069 6,214 5,699
Reorganization costs 956
Total expenses 48,144 46,805 46,333
Net loss (4,673) (1,215) (2,911)
Net loss allocable to general partner (47) (12) (29)
Net loss allocable to limited partners $(4,626) $(1,203) $(2,882)
Number of limited partner units outstanding 4,000 4,000 4,000
Net loss allocable to limited partners
per unit $(1.16) $(.30) $(.72)
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
Consolidated Statements of Partners' Deficit
for the years ended December 31, 1994, 1993 and 1992
(dollars in thousands)
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at December 31, 1991 $ (618) $(4,036) $(4,654)
Net loss for the year (29) (2,882) (2,911)
Balance at December 31, 1992 (647) (6,918) (7,565)
Net loss for the year (12) (1,203) (1,215)
Balance at December 31, 1993 (659) (8,121) (8,780)
Net loss for the year (47) (4,626) (4,673)
Balance at December 31, 1994 $(706) $(12,747) $(13,453)
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
Consolidated Statements of Cash Flows
for the years ended December 31, 1994, 1993 and 1992
(dollars in thousands)
<CAPTION>
1994 1993 1992
Cash flows from operating activities:
<S> <C> <C> <C>
Net loss $(4,673) $(1,215) $(2,911)
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Depreciation and amortization of property 5,126 4,951 4,222
Lease settlement proceeds (4,389) (3,375)
Amortization of other assets 500 500 460
Amortization of debt discount 40 36 32
Cash provided by (used for) assets
and liabilities:
Accounts receivable (12) 125 166
Prepaid expenses (37) (147) 42
Other current assets (117) 122 178
Other assets 2 (6) 2
Trade accounts payable (206) (351) 443
Accrued payroll 124 107 369
Accrued payroll taxes 39 (64) 178
Accrued vacation 59 11 260
Accrued utilities (65) 6 (35)
Sales tax payable 9 15 21
Other current liabilities 82 (404) 245
Deferred interest 580 1,131 1,195
Other liabilities 150
Net cash provided by
operating activities 1,451 578 1,492
Cash flows from investing activities:
Additions to property and equipment (2,773) (2,685) (8,452)
Decrease (increase) in restricted cash 291 (158) 515
Other 45
Net cash used for investing activities (2,482) (2,843) (7,892)
</TABLE>
Continued
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
Consolidated Statements of Cash Flows
for the years ended December 31, 1994, 1993 and 1992
(dollars in thousands)
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Cash flows from financing activities:
Long-term borrowings $ 675 $3,157 $7,674
Borrowings under revolving credit
facility 1,763 815 2,535
Repayment of revolving credit facility (1,763) (1,641) (1,709)
Costs incurred in connection with the
Priming Loan (1,235)
Net cash provided by
financing activities 675 2,331 7,265
Net increase (decrease) in cash and
cash equivalents (356) 66 865
Cash and cash equivalents, beginning of year 1,724 1,658 793
Cash and cash equivalents, end of year $1,368 $1,724 $1,658
Supplementary cash flow data:
Interest paid $5,449 $5,046 $4,504
Noncash activities:
Accrued interest converted to
long-term debt $3,467
Lease settlement proceeds received from
former affiliate in the form of
stock and notes receivable used to
reduce long-term debt $4,389 $3,419
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION, OPERATIONS AND BANKRUPTCY:
Prime Motor Inns Limited Partnership (the "Partnership") and
its 99%-owned subsidiary, AMI Operating Partners, L.P.
("Operating Partners"), were formed in October 1986 under the
Delaware Revised Uniform Limited Partnership Act. The
Partnership and Operating Partners are referred to collectively
as the "Partnerships". Prime-American Realty Corp. (the
"General Partner"), a subsidiary of Prime Hospitality
Corporation ("Prime"), formerly Prime Motor Inns, Inc., is the
general partner of and holds as its principal asset a 1%
partnership interest in the Partnership and in Operating
Partners.
In December 1986, the Partnership consummated an initial
public offering (the "Offering") of 4,000,000 units of limited
partnership interest (the "Units") in the Partnership, and used
the funds received to acquire the 99% limited partnership
interest in Operating Partners. Operating Partners commenced
operations in December 1986 when it used the Offering proceeds
and issued mortgage notes (the "Mortgage Notes") in the
principal amount of $61,470,000 to purchase 16 full service
motor hotels (the "Inns") from subsidiaries of Prime. The
business of the Partnerships is to operate and maintain the
Inns, which are presently franchised as part of the "Holiday
Inn" system.
Profits and losses from operations and cash distributions of
the Partnerships combined are generally allocated 1.99% to the
General Partner and 98.01% to the limited partners. Any profits
and losses from operations in excess of certain specified annual
and cumulative returns on investments in limited partner shares,
as defined (generally 12.5%), are allocated approximately 30% to
the General Partner and 70% to the limited partners.
Units are evidenced by depositary receipts which are listed on
the New York Stock Exchange.
Until November 30, 1990, the Inns were operated by AMI
Management Corp. ("AMI Management"), another subsidiary of
Prime, under the terms of a lease between AMI Management and
Operating Partners (the "Lease"), guaranteed by Prime (the
"Guaranty"). The Lease was a net lease that granted AMI
Management the right to use the Inns until December 31, 1991.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
1. ORGANIZATION, OPERATIONS AND BANKRUPTCY, Continued:
On September 18, 1990, Prime announced that it and certain of
its subsidiaries, including AMI Management but not the General
Partner, had filed for reorganization under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of Florida. AMI Management
defaulted on the payment of base rent due November 1, 1990 under
the Lease. On November 7, 1990, the Partnership gave notice of
default to, and demanded payment from AMI Management and Prime.
AMI Management and Prime also filed a motion to reject the Lease
and Guaranty and, by order of the bankruptcy court dated
December 7, 1990, the bankruptcy court approved such rejection
and the Lease and Guaranty were terminated effective as of
November 30, 1990 (see Note 3).
Operating Partners was in default under its mortgage loan
agreement as of and prior to December 31, 1991 as a result of,
among other things, the bankruptcy filing by Prime and AMI
Management. On March 28, 1991, the Partnerships received a
notice of acceleration and demand for payment of the entire
outstanding balance of the Mortgage Notes along with certain
conditions under which the lenders would pursue discussions with
respect to restructuring the Mortgage Notes.
On February 28, 1992, Operating Partners filed with the United
States Bankruptcy Court a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code, seeking
confirmation by the bankruptcy court of a prepackaged plan of
reorganization (the "Plan"). The New York Bankruptcy Court
confirmed the Plan, on May 28, 1992, which became effective as
of June 12, 1992 (the "Effective Date"). Upon confirmation of
the Plan, the New York Bankruptcy Court approved the Restated
Loan Agreement (the "Restated Loan Agreement") which extended
the maturity date of the Mortgage Notes to December 31, 1999
(refer to Note 5 for a further discussion of this matter).
Costs incurred related to the bankruptcy filing and
confirmation totaling approximately $956,000 for the year ended
December 31, 1992 have been classified separately on the
consolidated statement of operations as reorganization costs.
Although the Plan was approved, the Partnerships may not be
able to continue as going concerns unless cash flow from
operations are sufficient. The Partnerships have incurred
significant operating losses, have a capital deficit at December
31, 1994 and, as discussed in Note 5, have increased debt
service requirements beginning in 1995. The accompanying
consolidated financial statements do not include any adjustments
relating to the recoverability of recorded asset amounts or the
amounts of liabilities that might be necessary should the
Partnerships be unable to continue as going concerns.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of certain significant accounting
policies used in the preparation of the consolidated financial
statements. Certain amounts in the 1993 and 1992 financial
statements have been reclassified to conform to the 1994
presentation.
Principles of Consolidation
The consolidated financial statements include the accounts of
the Partnership and its 99%-owned subsidiary limited
partnership, Operating Partners. During 1994, 1993 and 1992,
Operating Partners operated under a 52/53 week fiscal year
(fiscal 1994 ended on December 30, 1994, fiscal 1993 ended on
December 31, 1993, and fiscal 1992 ended on January 1, 1993).
All material intercompany accounts and transactions have been
eliminated.
Cash Equivalents
Cash equivalents are highly liquid investments with a maturity
of three months or less when acquired.
Property and Equipment
Property and equipment are stated at the lower of cost or fair
market value. The net carrying value of property and equipment
as of December 31, 1991 was reduced to estimated fair market
value, through a charge to expenses in the amount of
$46,354,000. Expenditures for improvements and major renewals
are capitalized. Expenditures for maintenance and repairs are
expensed as incurred. For financial statement purposes,
provision is made for depreciation and amortization using the
straight-line method over the lesser of the estimated useful
lives of the assets or the terms of the related leases. For
federal income tax purposes, accelerated methods are used in
calculating depreciation.
Other Assets
Franchise fees, deferred lease costs, and deferred debt
acquisition costs are amortized on a straight-line basis over
the estimated lives of the assets or the specific term of the
related agreement, lease or mortgage loan.
Net Loss per Unit
Net loss per Unit is calculated based on net loss allocable to
limited partners divided by the 4,000,000 Units outstanding.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. OPERATIONS OF THE INNS:
Lease and Guaranty
Prior to the rejection and termination of the Lease and
Guaranty effective as of November 30, 1990, the Lease granted
AMI Management the right to use the Inns for the operation of
motor hotels and related purposes.
AMI Management defaulted on the payment of $1,311,000 of base
rent due on November 1, 1990. Pursuant to the joint motion
approved by order of the bankruptcy court on January 8, 1991,
the Partnerships, AMI Management and Prime entered into an
agreement providing for the assumption by Operating Partners of
the operations of the Inns (the "Agreement"). The Partnerships
also effectively assumed control over certain accounts
receivable, supplies, equipment and other assets and
responsibility for certain accounts payable and other
liabilities arising from the operations of the Inns by AMI
Management during the term of the lease. Disputes between the
parties existed at December 31, 1991 as to, among other things,
the value of certain assets and liabilities under the Agreement.
Operating Partners entered into an agreement in 1992 (the
"Omnibus Agreement") under which, among other things, Operating
Partners assigned to the holders of the Mortgage Notes its
claims against Prime and AMI Management and agreed that amounts
recovered on such claims would be allocated among financial
claims (the proceeds of which would be applied to the repayment
of the Mortgage Notes) and operating claims (the proceeds of
which would be available to finance capital improvements to the
Inns).
In July, 1992 the servicing agent for the holders of the
Mortgage Notes, Prime and AMI Management reached a settlement
(the "Settlement") of claims which was approved by the Florida
Bankruptcy Court. Under the Settlement, various claims of the
holders of the Mortgage Notes against Prime and AMI Management
were allowed; Operating Partners will not make any payments to
or for the benefit of any other party; and Prime, AMI
Management and Operating Partners have exchanged mutual releases.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. OPERATIONS OF THE INNS, Continued:
Lease and Guaranty, continued
During 1993, the Partnership received proceeds totalling
$48,000 for semi-annual interest on junior and senior notes
received in the Settlement as well as for partial prepayment of
the senior notes of which $6,000 of this amount was used to fund
capital improvements while the remaining $42,000 was applied to
the principal balance of the Mortgage Notes. The junior and
senior notes were sold in 1993 and the proceeds of $661,000 were
recognized as income and used to reduce the principal balance on
the Mortgage Notes. The Settlement also included the
Partnership's receipt of 841,130 shares of new common stock in
Prime, which were sold throughout 1993 for total proceeds of
$3,680,000. The proceeds were used to reduce the principal
balance of the Mortgage Notes. Total settlement proceeds
received in 1993 of $4,389,000 have been recognized as lease
settlement proceeds on the consolidated statements of
operations. In 1992, total proceeds related to the Settlement
of $3,460,000 were received of which $3,375,000 was recognized
as lease settlement proceeds (net of $85,000 previously
accrued). $3,419,000 of these proceeds were used to reduce the
principal balance on the mortgage notes.
In February 1995, the Partnership received proceeds totalling
approximately $1,025,000 from the sale of 127,924 shares of
Prime common stock received in the Settlement. The proceeds
were used to reduce the principal balance on the Mortgage Notes
in 1995.
Franchise Agreements
Holiday Inns, Inc. and its affiliates engaged in administering
the "Holiday Inn" system (collectively, "HII") extended the
franchise agreement for Baltimore Inner Harbor Inn to 2005. The
franchise agreements for twelve of the remaining Inns expire in
1997, one each in 1998 and 1999, and another in 2001. In
addition, HII and Operating Partners have entered into a
stipulation, filed with the New York Bankruptcy Court, providing
for the conditions to the Inns continuing as part of the
"Holiday Inn" system. Continuation of the franchise agreements
will require the capital improvements and refurbishments
discussed in Note 5, as well as continued compliance with
Holiday Inn quality standards.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
3. OPERATIONS OF THE INNS, Continued:
W&H Management Agreement
Winegardner & Hammons, Inc. ("W&H") continues to manage the
operations of the Inns pursuant to its management agreement with
Operating Partners which provides for an annual management fee
of 2.25% of the gross revenues of the Inns and certain incentive
management fees. The management agreement, entered into in
1992, extends through 1996, renewable for two two-year terms.
W&H is also reimbursed for miscellaneous out-of-pocket expenses
allocated to the Inns, including salaries, accounting, legal and
computer services, royalties and marketing, advertising, public
relations, and reservation services, subject to certain
limitations. At December 31, 1994 and 1993, the Partnerships
had approximately $97,000 and $118,000, respectively, in
receivables from an entity controlled by W&H which manages
certain of the Inns' lounges.
4. OTHER ASSETS:
<TABLE>
The components of other assets are as follows (in thousands):
<CAPTION>
1994 1993
<S> <C> <C>
Deferred lease costs $ 21 $ 21
Debt acquisition costs 2,839 2,839
Franchise fees 820 820
Other 14 16
3,694 3,696
Less accumulated amortization 2,605 2,105
$1,089 $1,591
</TABLE>
Amortization of debt acquisition costs charged to expense was
$359,000 in 1994 and 1993 and $321,000 in 1992. Amortization of
franchise fees charged to expense was $141,000 in 1994, 1993,
and 1992.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. DEBT:
<TABLE>
<CAPTION>
Long-term debt consists of:
1994 1993
<S> <C> <C>
Mortgage notes, net of unamortized
discount of $247,000 in 1994
and $287,000 in 1993 $55,127,000 $55,087,000
Priming loan, interest at 11% 11,500,000 10,825,000
$66,627,000 $65,912,000
</TABLE>
In confirming the bankruptcy Plan of Reorganization on May 28,
1992, the New York Bankruptcy Court approved the Restated Loan
Agreement which called for $3,467,127 of accrued and unpaid
interest at December 31, 1991 (the "Deferred Amount") to be
added to the principal amount of the Mortgage Notes, but to bear
interest only from and after January 1, 1995; the Mortgage Notes
(not including the Deferred Amount) to bear interest payable at
a rate of 7% per annum in 1993 and 8% per annum in 1994; the
principal amount of the Mortgage Notes (including the Deferred
Amount) to bear interest at the rate of 10% per annum after
1994; and maturity of the Mortgage Notes (including the Deferred
Amount) to be extended to December 31, 1999. In addition, the
Restated Loan Agreement provides for the deeds to the Inns and
assignments of other assets of Operating Partners to be held in
escrow until maturity of the Mortgage Notes. Under the terms of
the Restated Loan Agreement, the Mortgage Notes are repayable at
any time without penalty.
The Restated Loan Agreement also provides for a shared
appreciation feature that calls for Operating Partners to pay
additional interest to the lenders, based on sale or appraisal
values of the Inns compared to the principal amount of the
Mortgage Notes, upon payment, prepayment, maturity or
acceleration of the Mortgage Notes, or upon sale of one or more
of the Inns. There was no additional interest accrued or paid
to the lenders under this feature in 1994 or 1993.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. DEBT, Continued:
The Restated Loan Agreement was accounted for as a modification
of terms in accordance with Statement of Financial Accounting
Standards No. 15 "Accounting by Debtors and Creditors for
Troubled Debt Restructurings". Accordingly, the carrying value
of the Mortgage Notes and Deferred Amount was not adjusted to
reflect the terms of the Restated Loan Agreement. The effect of
the changes in the terms of the Mortgage Notes will be
recognized prospectively over the life of the Mortgage Notes,
through an adjustment of the effective interest rate on the
Mortgage Notes and Deferred Amount to approximately 8.5% per
annum (the "Effective Rate"). The amount by which interest
payable at the Effective Rate exceeds the amount of interest
paid at the stated rate, has been accrued and is included in
deferred interest payable at December 31, 1994 and 1993. The
amount by which interest paid at the stated rate exceeds the
amount of interest payable at the Effective Rate will reduce the
deferred interest balance in future periods.
As part of the Plan, certain members of the lending group also
agreed to provide Operating Partners post-petition financing
(the "Priming Loan") which holds a security interest, lien and
mortgage senior to all outstanding liens. Borrowing under the
Priming Loan may be used to finance capital improvements or to
fund operating cash requirements. The portion used for capital
improvements (defined as the Tranche A Loan), which may be up to
the full amount of the $14,000,000 available, is due on December
31, 1999 and provides for a prepayment premium of 2%. The
portion used for operating cash requirements (defined as the
Tranche B Loan), which cannot exceed $2,500,000, is also limited
to the amount remaining after borrowings for capital
improvements. Borrowings under the Tranche B loan are pursuant
to a revolving facility, such that amounts repaid can be
reborrowed up to the limits of availability. These revolving
credit borrowings are subject to the mandatory repayment
provisions described below. There were no outstanding
borrowings under the revolving facility at December 31, 1994 or
December 31, 1993.
As of December 31, 1994 and 1993, respectively, the outstanding
balance under the Priming loan was $11,500,000 and $10,825,000.
The entire amount in 1994 and 1993 represents borrowings under
the Tranche A loan. The outstanding Tranche A Loan balance
includes $385,000 representing funds borrowed in 1992 to fund an
interest reserve required by the Priming Loan. The balance in
the interest reserve, which represents the original funds
borrowed and interest earned thereon, is $419,000 and $406,000
at December 31, 1994 and 1993, respectively. These amounts are
included in cash restricted for interest and taxes on the
consolidated balance sheets.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
5. DEBT, Continued:
The Priming Loan agreement places certain restrictions on the
use of Operating Partners' cash flow and sales proceeds.
Operating cash flow can be used only in accordance with the
Priming Loan agreement, which calls for, among other things,
monthly deposits beginning in 1993 into an escrow account held
by or on behalf of the lenders for the payment of a furniture,
fixtures and equipment reserve of 1-1/2% of gross revenues
during 1993, 4% of gross revenues in 1994 and 5% of gross
revenues thereafter. The cash on hand from the operation of the
Inns less the current month projected cash deficiency, if any,
less a working capital reserve not to exceed $2,000,000, shall
be utilized to first repay any outstanding borrowings under the
Tranche B Loan and then paid into an escrow account held on
behalf of the lenders for the payment of taxes and insurance.
6. COMMITMENTS:
Operating Leases
Four of the Inns are held pursuant to land leases and three of
the Inns are held pursuant to land and building leases, which
are accounted for as operating leases. The leases have terms
expiring at various dates from 2000 through 2024 and options to
renew the leases for terms varying from fifteen to forty years.
One of the leases is a land lease with a subsidiary of Prime
that expires in 2020 and requires annual rentals of $24,000.
Future minimum lease payments will be as follows:
<TABLE>
<CAPTION>
Year Amount
<S> <C>
1995 $ 1,257,856
1996 1,257,856
1997 1,279,319
1998 1,330,862
1999 1,330,862
2000 and thereafter 19,674,375
</TABLE>
Rent expense under these leases totalled $1,253,000, $1,251,000
and $1,178,000 in 1994, 1993, and 1992, respectively.
Continued
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
7. INCOME TAXES:
No federal or state income taxes are reflected in the
accompanying financial statements of the Partnerships. Based
upon an opinion of counsel of the Partnership obtained in 1986,
which is not binding upon the Internal Revenue Service, the
Partnerships were not taxable entities at their inception. The
partners must report their allocable shares of the profits and
losses of the Partnerships in their respective income tax
returns.
The Revenue Act of 1987 (the "1987 Act") added several
provisions to the Internal Revenue Code which affect publicly
traded partnerships such as the Partnership. Under these new
rules, a publicly traded partnership is taxed as a corporation
unless 90% or more of its income constitutes "qualifying income"
such as real property rents, dividends and interest. The 1987
Act also provided certain transitional rules, however, which
generally exempt publicly traded partnerships in existence on
December 17, 1987 from application of the new rules until after
1997, subject to various limitations.
If the Partnership's operations continue as described herein,
the Partnership should not be taxed as a corporation until after
1997. However, publicly traded partnerships which add a
substantial new line of business are not eligible for relief
under these transitional rules and it is possible that the
Internal Revenue Service could contend that the Partnership
should be taxed as a corporation after November 30, 1990, the
date of termination of the Lease. Also, it should be noted that
with respect to the partners, the 1987 Act also contained rules
under which the income of the Partnership will be treated,
effectively, as "portfolio income" for tax purposes and will not
be eligible to offset losses from other passive activities.
Similarly, any losses of the Partnership will not be eligible to
offset any income from other sources.
In 1993, the Partnerships adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 109 - Accounting
for Income Taxes, which requires the use of the liability method
of accounting for deferred income taxes. The Partnerships have
determined that they do not have to provide for deferred tax
liabilities based on temporary differences between financial and
tax reporting purposes. The tax basis of the net assets of the
Partnerships exceeds the financial reporting basis at January 1,
1993 and is expected to do so at December 31, 1997.
Consulting Services Agreement
This Consulting Services Agreement (the "Agreement") is
made and entered into to be effective this 1st day of December,
1994 by and between the Companies, as defined below, and S.
Leonard Okin (the "Consultant").
Preliminary Statements
1. The Companies desire to retain Consultant to pro-
vide the Consulting Services.
2. The parties desire to set forth herein the terms
and conditions under which the Consulting Services shall be
furnished.
3. In consideration of the foregoing and of the mutual
covenants set forth below, the parties, intending to be legally
bound, do hereby agree as follows:
1. Definitions:
(a) The term "Administrative Services Agreement"
shall mean that certain Amended and Restated Administrative
Services Agreement dated January 4, 1992 by and between the
Companies and WHI.
(b) The term "AMI" shall mean AMI Operating Part-
ners, L.P. a Delaware limited partnership formed pursuant to
the AMI Partnership Agreement.
(c) The term "AMI Partnership Agreement" shall
mean the Agreement of Limited Partnership entered into as of
October 17, 1986, and amended and restated as of December 23,
1986 by and between GP as general partner and PMILP as limited
partner.
(d) The term "Base Compensation" shall be an
amount equal to $5,000, which amount shall be payable to the
Consultant on a bimonthly basis on or before the 15th and 30th
day of each calendar month during the Initial Term and any
Renewal Term.
(e) The term "Companies" shall be a collective
term referring to AMI, GP and PMILP.
(f) The term "Construction Agreement" shall mean
the Construction Management Services Agreement entered into by
and between AMI and WHI as amended by the First Amendment to
Construction Management Services Agreement dated as of December
31, 1992.
(g) The term "Consulting Services" shall mean,
with respect to the Consultant and as to any of the Companies,
all work and services normally performed by, all accountability
and responsibility normally assumed or undertaken by, and all
authority normally granted to or incident to the office of,
chief executive officer of a corporation, including but not
limited to the following:
(i) The performance of those duties set
forth in Exhibit 1 hereto;
(ii) Generally managing and supervising all
activities for each of the Companies;
(iii) Developing and implementing a strate-
gic business plan for any of the Companies;
(iv) Negotiating with any one or more of
the Lenders with respect to the terms, provisions or conditions
of the Loan Agreement or any modification thereof;
(v) Negotiating with any one or more of
the Priming Loan Lenders with respect to the terms, provisions,
or conditions of the Priming Loan Agreement and/or entering
into such modification of the Loan Agreement or Priming Loan
Agreement on behalf of AMI as such person in his sole and
absolute discretion deems reasonable or appropriate;
(vi) Directing and otherwise engaging or
retaining any third parties to perform any obligations required
to be undertaken by AMI under any of the provisions in either
the Loan Agreement or the Priming Loan Agreement;
(vii) Delivering any and all documentation
required to be delivered to the Servicer under the provisions
of the Loan Agreement and otherwise engaging or retaining third
parties to perform for and on behalf of AMI any of the obliga-
tions required to be performed by AMI under the provisions of
the Loan Agreement and/or the Priming Loan Agreement;
(viii) Exercising for and on behalf of any
one or more of the Companies any of their rights under the
Administrative Services Agreement and/or executing for and on
behalf of the Companies any amendments or modifications thereto
as the Consultant in his sole and absolute discretion shall
deem reasonable or appropriate;
(ix) Exercising for and on behalf of AMI
any of the rights, powers or privileges granted to AMI under
the provisions of the Management Agreement or the Construction
Agreement and/or executing any such amendment, modification or
change to either of the foregoing documents as the Consultant
in his sole and absolute discretion deems reasonable or appro-
priate in connection with the management and operation of the
Hotels;
(x) Making any and all decisions as the
Consultant in his sole and absolute discretion shall deem
reasonable or necessary or appropriate in connection with the
management and operation of the Hotels;
(xi) Entering into any agreements with any
third parties for the purchase of any one or more of the Hotels
and in connection therewith retaining and engaging brokers,
consultants, attorneys and other professionals as the Consul-
tant in his sole and absolute discretion deems reasonably
necessary or appropriate to facilitate the potential sale of
any one or more of the Hotels;
(xii) Taking any and all such other actions
as the Consultant in his sole and absolute discretion shall
deem reasonably necessary or appropriate to facilitate the
efficient and effective operation of the Hotel;
(xiii) Performing for and on behalf of GP and
otherwise exercising any and all powers granted to GP under the
AMI Partnership Agreement or PMILP Partnership Agreement, and;
(xiv) Entering into any agreements with any
Franchisor to obtain any franchise or license as respects the
operation of any one or more of the Hotels and to enter into
any modifications in the terms and conditions as the Consultant
in his sole and absolute discretion shall deem reasonably
necessary or appropriate in connection with the operation of
the Hotels and to retain any third parties.
It is intended by the foregoing to grant to the Consultant
all authority and responsibility that might reasonably be
required or advisable in the conduct of the business of any of
the Companies, including specifically the right and authority,
as chief executive officer of the GP, to generally conduct the
business of the GP, including, but not limited to, its business
as the general partner of AMI and PMILP.
(h) The term "Date of Termination" shall mean the
date on which Consultant's retention and obligations under this
Agreement is to be terminated pursuant to any notice of termi-
na-tion given by the party terminating this Agreement.
(i) The term "Effective Date" shall be the effec-
tive date of this Agreement, which date shall be December 1,
1994.
(j) The term "Franchisor" shall mean Holiday Inns
Franchising, Inc. or any other company which issues a franchise
or license to and for the benefit of any one or more of the
Hotels.
(k) The term "GP" shall mean Prime-American Realty
Corp., a Delaware corporation.
(l) The term "Hotels" shall mean each of the
Hotels identified on Exhibit 2 attached hereto and incorporated
herein by this reference, each of which is currently owned by
AMI, and shall throughout the term of this Agreement refer to
any hotel, motel or lodging facilities of any type, kind or
nature whatsoever in which AMI has any ownership interest.
(m) The term "Indemnified Liabilities" shall mean
any and all actions, causes of action, suits, proceedings or
claims, whether civil, criminal, administrative or investiga-
tive, and all losses, liabilities and damages, and expenses in
connection therewith, including without limitation reasonable
attorneys' fees and disbursements incurred by Consultant as a
result of, or arising out of, or relating to the execution,
delivery or performance of the Consulting Services contemplated
by this Agreement, or any litigation or investigation institut-
ed by any governmental authority or any other person or entity
involving any one or more of the Companies, or the Consultant.
(n) The term "Initial Term" shall mean the period
of time commencing as of the Effective Date and extending
through December 31, 1995.
(o) The term "Lenders" shall mean the Lenders
listed on Exhibit 3 attached hereto and incorporated herein by
this reference.
(p) The term "Loan Agreement" shall mean that
certain Amended and Restated Loan Agreement dated June 12, 1992
entered into by and between AMI and the Lenders, as amended by
the Consent Agreement Priming Loan and Loan Agreement dated
February 26, 1993, March 17, 1993 and January 31, 1994.
(q) The term "Management Agreement" shall mean
that certain Replacement Management Agreement entered into to
be effective January 4, 1992 by and between AMI and WHI as
amended by that certain First Amendment to Replacement Manage-
ment Agreement made and entered into to be effective as of
December 31, 1992, and any subsequent amendments or modifica-
tions thereto.
(r) The term "Partnerships" shall be a collective
term to describe both AMI and PMILP.
(s) The term "PMILP" shall mean Prime Motor Inns
Limited Partnership, a Delaware limited partnership formed
pursuant to the PMILP Partnership Agreement.
(t) The term "PMILP Partnership Agreement" shall
mean the agreement of limited partnership made and entered into
as of October 17, 1986 and amended and restated as of December
23, 1986 by and between GP, as the sole general partner, and
any persons who from time to time are limited partners of
PMILP.
(u) The term "Priming Loan Agreement" shall mean
that certain Priming Loan Agreement dated February 28, 1992
entered into by and between AMI and the Priming Loan Lenders,
as amended by the Consent Agreement Priming Loan and Loan
Agreement dated February 26, 1993, March 17, 1993 and January
31, 1994
(v) The term "Priming Loan Lenders" shall mean
each of those lenders identified on Exhibit 4 attached hereto
and incorporated herein by this reference.
(w) The term "Renewal Term" shall mean the succes-
sive periods of twelve (12) calendar months commencing as of
the expiration of the Initial Term, i.e. the successive period
of 12 calendar months commencing on January 1 of each calendar
year starting in calendar year 1996 and ending as of December
31 of the same calendar year.
(x) The term "Servicer" shall mean Massachusetts
Mutual Life Insurance Company who has been appointed Successor
Servicer effective as of January 1, 1993 with the consent and
approval of each of the Lenders.
(y) The term "Termination Payment" shall mean the
sum of $30,000.
(z) The term "Third Consent Agreement" shall mean
that certain agreement made as of January 31, 1994 by and among
the Lenders, the Priming Loan Lenders, and AMI.
(aa) The term "WHI" shall Winegardner & Hammons,
Inc.
2. Retention as Consultant. The Companies hereby
retain Consultant and Consultant hereby agrees to perform the
Consulting Services to and for the benefit of the Companies
upon the terms and conditions set forth in this Agreement.
3. Independent Contractor Status.
(a) Consultant covenants and agrees that it will,
as an independent contractor, perform the Consulting Services.
(b) The parties recognize that the Consultant is
an independent contractor and not an employee, agent, co-ven-
turer or representative of any one or more of the Companies.
(c) No withholding shall be made from any funds
payable to the Consultant for tax or other governmental pur-
pose, and the Consultant agrees and acknowledges that he shall
be responsible for the payment of any such taxes due and pay-
able in connection with any compensation provided to the Con-
sultant under the provisions of this Agreement. Further,
Consultant agrees and acknowledges that he shall not be enti-
tled to re-ceive any employment benefits offered to any employ-
ees at any one or more of the Hotels.
4. Compensation. In order to induce Consultant to
enter into this Agreement and to provide the Consulting Servic-
es pursuant to this Agreement, and subject to compliance by
Consultant of the terms and conditions of this Agreement, it is
agreed that the Consultant shall be paid the following as
compensation for the performance of the Consulting Services:
(a) Consultant shall be paid on a bimonthly basis
on or before the 15th and 30th day of each calendar month the
Base Compensation. The Base Compensation shall be payable in
arrears and shall be prorated for any period of service less
than 15 calendar days.
(b) Consultant shall also be reimbursed for all
ordinary necessary expenses incurred by Consultant in connec-
tion with the performance of the Consulting Services subject to
the following conditions:
(i) Consultant shall provide invoices and
any other documentation reasonably requested by AMI to document
or otherwise evidence any expenses for reimbursement being
requested;
(ii) Consultant shall be responsible for
properly accounting for any reimbursements made to him under
the provisions of this Paragraph 4 in accordance with the then
existing requirements for federal income tax deductibility; and
(iii) Consultant agrees to defer reimburse-
ment for any such ordinary necessary expenses if payment of the
same during any one calendar year would exceed any limitation
on the payment of administrative expenses imposed upon AMI
under the provisions of the Priming Loan Agreement.
(c) To facilitate the appropriate accounting for
the payment of Compensation to the Consultant, AMI may elect to
fund on behalf of the Companies the payment of the Base Compen-
sation to the Consultant and/or any other amounts payable to
the Consultant under the provisions of this Agreement; and AMI
may further at its discretion elect to fund any amounts that
have been paid to the Consultant for services previously pro-
vided by the Consultant prior to the effective date of this
Agreement in accordance with the provisions of the Third Con-
sent Agreement.
5. Term and Termination Rights.
(a) The Agreement shall remain in full force and
effect during the Initial Term and, unless either party or the
Lenders and/or the Priming Loan Lenders exercises any of the
termination rights granted under the provisions of this para-
graph, shall automatically extend for successive Renewal Terms.
(b) Consultant's retention and obligations under
this Agreement shall terminate upon:
(i) His death;
(ii) If any physician treating Consultant
certifies in writing that in the opinion of such physician the
Consultant is physically or mentally incapable of managing his
financial affairs and/or of providing for his personal care;
(iii) The expiration of the Initial Term or
applicable Renewal Term provided that Consultant shall be
provided written notification by the Companies of their intent
not to renew this Agreement at least 30 days prior to the
expiration of either the Initial Term or applicable Renewal
Term; or
(iv) For cause. For the purpose of this
Agreement, the GP shall have "cause" to terminate Consultant's
retention hereunder upon:
(aa) Any intentional or willful action
by Consultant that is materially inconsistent with the terms of
this Agreement;
(bb) Consultant's continuing failure,
after notice and reasonable opportunity to cure, other than as
a result of disability to discharge his duties hereunder; or
(cc) Conviction of or a plea of nolo
con-tendere by Consultant to a felony involving fraud.
(c) Consultant may terminate his retention and
obligations under this Agreement at any time upon sixty (60)
days' notice to GP.
(i) Notwithstanding any provisions set
forth in subparagraph (c) above to the contrary, Consultant may
at its sole and absolute discretion elect to immediately termi-
nate this Agreement if the Companies for any reason are not
able to maintain in place liability insurance coverage for the
benefit of the Consultant in accordance with the requirements
set forth in Paragraph 8(a) below.
(d) If the Lenders or the Priming Loan Lenders
shall foreclose on substantially all of the assets of the
Partnerships, the Lenders or the Priming Loan Lenders may
terminate Consultant's retention and obligations under this
Agreement by notice to Consultant; provided, however, that such
notice shall be given, if at all, within 10 business days after
the Lenders or Priming Loan Lenders shall have taken any action
to begin such foreclosure. Such termination shall become
effective on the date which is 90 days after the date, if any,
that the Lenders or Priming Loan Lenders shall have consummated
the foreclosure on substantially all of the assets of the
Partnerships.
6. Compensation Upon Termination.
(a) Upon termination of this Agreement, Consultant
shall be paid his full Base Compensation through the Date of
Termination.
(b) Consultant shall also be paid all ordinary and
necessary expenses incurred for travel, entertainment or other-
wise pursuant to paragraph 4(b) of this Agreement through the
Date of Termination.
(c) If the Companies elect not to renew this
Agreement at the expiration of the Initial Term or any Renewal
Term, the Companies shall pay to Consultant the Termination
Payment as of the Date of Termination.
7. Use of Consultant's Work.
(a) All proposals, reports, records, recommenda-
tions, manuals, findings, evaluations, reviews, information,
data, plans, and written materials originated or prepared by
Consultant in connection with performing the Consulting Servic-
es shall become the exclusive property of AMI as of the Date of
Termination, and Consultant shall relinquish all right, title
and interest in and to such materials.
(b) Title to any original work, manuals, and the
like produced by Consultant, in connection with performing the
Consulting Services, shall be classified as "Work-for-Hire" and
accordingly shall belong exclusively to and invest exclusively
in AMI. By signing this Agreement, Consultant hereby expressly
agrees to AMI's ownership and proprietary status to any and all
such documents.
(c) Consultant shall not, at any time during or
after the term of this Agreement, in any manner divulge, dis-
close or communicate to any person, firm, corporation or other
entity or use for his own benefit any information acquired from
the Companies without the expressed prior written consent of
all of the then duly elected directors of the GP.
8. Indemnity. AMI, GP, PMILP jointly and severally
agree to indemnify, exonerate, and hold Consultant free and
harmless from and against any and all Indemnified Liabilities
save and except to the extent that any such Indemnified Liabil-
ities result from claims where a court of competent jurisdic-
tion shall have determined either that the Consultant acted
with gross negligence or willful misconduct or that the Consul-
tant shall have breached his obligations hereunder, and if and
to the extent that the foregoing undertakings may be unenforce-
able for any reason, AMI, GP and PMILP, jointly and severally,
agree to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. Indemnified Liabilities
shall be paid by AMI on behalf of the Companies from time to
time as Consultant may request, and upon the reasonable request
of Consultant, AMI shall make advances on behalf of the Compa-
nies in respect of Indemnified Liabilities that are reasonably
expected to be incurred in the future by Consultant, provided
that Consultant shall return any such payment if it is ulti-
mately determined, in accordance with the immediately preceding
sentence, that Consultant was not entitled to such payment.
The provisions of this paragraph 8 shall survive termination of
this Agreement. The parties agree that AMI shall purchase and
maintain insurance on behalf of the Consultant under a direc-
tors' and officers' liability insurance policy or equivalent
insurance policy which shall provide liability coverage on a
claims made basis with limits of liability of at least $1
million and with deductibles or self-insured retentions in such
amounts as the parties shall mutually agree. If any such
policy of liability insurance is not renewed or is cancelled
for any reason whatsoever, the companies shall provide immedi-
ate notification of such fact to Consultant.
9. Notice.
(a) "Notice" means any notice, demand, request or
other communication or document to be provided under this
Agreement to a party to this Agreement.
(b) Any such Notice shall be in writing and shall
be given to the party at its address or telecopy number set
forth below or such other address or telecopy number as the
party may later specify for that purpose by notice to the other
party. Each Notice shall, for all purposes, be deemed given
and received:
(i) If given by telecopy, when the
telecopy is transmitted to the party's telecopy number speci-
fied below and confirmation of complete receipt is received by
that transmitting party during normal business hours or on the
next business day if not confirmed during normal business
hours;
(ii) If hand delivered to a party against
receipted copy, when the copy of the Notice is receipted;
(iii) If given by a nationally recognized
and reputable overnight delivery service, the day on which the
Notice is actually received by the parties; or
(iv) If given by any other means or if
given by certified mail, return receipt requested, postage
prepaid two (2) business days after it is posted with the
United Stated Postal Service, at the address of the party
specified below.
(b) Any Notice required to be given to any one or
more of the Companies shall be provided to the GP at the ad-
dress set forth below:
Prime American Realty Corp.
c/o Dorfman, Abrams, Music & Co.
11 Harristown Road
Glen Rock, NJ 07452-3307
Telecopy No.: (201) 447-0633
(c) Any Notice required to be given to the Consul-
tant shall be given at the address set forth below:
S. Leonard Okin
Prime American Realty Corp.
c/o Dorfman, Abrams, Music & Co.
11 Harristown Road
Glen Rock, NJ 07452-3307
Telecopy No.: (201) 447-0633
(d) A copy of any Notice sent by any party to the
other shall also be sent to WHI at the following address:
Winegardner & Hammons, Inc.
4243 Hunt Road
Cincinnati, OH 45242
Telecopy No.: (513) 891-2821
(e) If Notice is tendered under the provisions of
this Agreement and is refused by the intended recipient of the
Notice, the Notice shall nonetheless be considered to have been
given and shall be effective as of the date provided in this
Agreement.
10. Miscellaneous:
(a) No alteration, modification, amendment or
other change of this Agreement shall be binding on the parties
unless in writing, approved and executed by all of the then
directors of GP, and additionally executed by the Consultant.
(b) This Agreement and the rights thereunder may
not be assigned by Consultant to any third party; however, this
Agreement shall be binding upon the Companies and any successor
of the Companies by reorganization, merger, consolidation or
liquidation and any assignee of all or substantially all of the
business or assets of the Companies.
(c) The terms of this Agreement shall be severable
so that if any term, cause or provision hereof shall be deemed
invalid or unenforceable for any reason, such invalidity or
unenforceability shall not affect the remaining terms, causes
and provisions hereof, the parties intending that if any such
term, cause or provision were held to be invalid prior to the
execution hereof, they would have executed an agreement con-
taining all of the remaining terms, causes and provisions of
this Agreement.
(d) The waiver by any party hereto of any breach
of the terms and conditions of this Agreement shall not be
considered a modification of any of the provisions, nor shall
such a waiver act to bar the enforcement of any subsequent
breach.
(e) Should there be any dispute between the par-
ties as to the meaning of the terms, provisions or conditions
set forth in this Agreement or the enforceability thereof, the
parties agree that any such dispute shall be conclusively and
with finality decided by arbitration conducted by the American
Arbitration Association in accordance with its then applicable
rules governing the arbitration of commercial disputes. The
parties further agree that the results of any such arbitration
shall be final and binding upon the parties and that the award
rendered in such arbitration process may be enforced by a court
of competent jurisdiction.
(f) This Agreement shall be construed and governed
by the laws of the State of New Jersey and that such laws shall
be followed in connection with any arbitration proceed-ings used
to resolve any dispute between the parties. Further the par-
ties agree that the enforceability of any award rendered by the
arbitration process shall be venued solely in Fairfield, New
Jersey.
(g) This Agreement shall constitute the entire
agreement between and among the parties hereto and shall super-
sede all existing contracts or agreements, written or oral,
between the parties hereto.
IN WITNESS WHEREOF, the parties have hereunto executed
this Agreement to be effective as of the Effective Date.
WITNESS: PRIME-AMERICAN REALTY CORPORATION
/s/ Roberta Hellman By: /s/ Robert A. Familant
Its: Director
PRIME MOTOR INNS LIMITED PARTNERSHIP
By: Prime American Realty Corporation,
its general partner
/s/ Roberta Hellman By: /s/ Robert A. Familant
Its: Director
AMI OPERATING PARTNERS, L.P.
By: Prime American Realty Corporation,
its general partner
/s/ Roberta Hellman By: Robert A. Familant
Its: Director
/s/ Madelyn Alexander /s/ S. Leonard Okin
S. Leonard Okin
EXHIBIT 1
1. Develope and recommend strategy direction and goals with respect
to the Hotels.
2. Review and evaluate the condition and operation of the Hotels/Properties,
including the results of operations, physical condition, guest satisfaction,
employee relations and training, marketing strategies and results, and
competitive position.
3. Review and evaluate the property management activities of WHI and assist
WHI to formulate business strategies and strategic management goals and
practices.
4. review and evaluate the marketing activities of WHI, including assisting WHI
to formulate marketing and positioning strategies.
5. Review and evaluate the formulation of plans and specifications for capital
improvements and the performance of any construction management services.
6. Review and evaluate the desirability of holding or selling the Hotels
or any one of them.
7. Assist in coordinating with the Lenders and/or the Priming Loan Lenders
(or their designated representatives or agents) on all matters relating to
the financing of the Hotels and issues under the Loan Agreement and/or
Priming Loan Agreement.
EXHIBIT 2
HOTELS
1. Holiday Inn Baltimore - Pikesville
1721 Reistertown Road.
Pikesville, MD
107 Rooms
2. Holiday Inn Baltimore - Cromwell Bridge Rd
1100 Cromwell Bridge Road
Towson, MD 21204
142 Rooms
3. Holiday Inn Baltimore - Belmont
1800 Belmont Avenue
Baltimore, MD 21207
136 Rooms
4. Holiday Inn Baltimore - Moravia Road
6510 Frankford Av
Baltimore, MD 21206
139 Rooms
5. Holiday Inn Baltimore - Inner Harbor (Downtown)
301 W. Lombard St at Howard Street
Baltimore, MD 21201
365 Rooms
6. Holiday Inn Baltimore - Int'l Airport
890 Elkridge Landing Rd. at Airport Road
Linthicum, MD 21090
255 Rooms
7. Holdiday Inn Baltimore - South Glen Burnie #1
6600 Ritchie Hwy.
Glen Burnie, MD 21061
98 Rooms
8. Holiday Inn Baltimore - Glen Burnie #2
6323 Ritchie Hwy.
Glen Burnie, MD 21061
128 Rooms
9. Holiday Inn Frederick - Ft. Detrick
999 W. Patrick Street
Frederick, MD 21701
156 Rooms
10. Holiday Inn East Hartford
363 Roberts Street
East Hartford, CT 06108
131 Rooms
11. Holiday Inn New Haven - Yale University Area
30 Whalley Avenue
New Haven, CE 06511
156 Rooms
12. Holiday Inn Hazleton-Rt 309
Route 309
Hazleton, PA 18201
107 Rooms
13. Holiday Inn Lancaster-Rt 501
1492 Lilitz Pike
Lancaster, PA 17601
160 Rooms
14. Holiday Inn Lancaster- Rt. 30 E. Bypass
Rt. 30
Lancaster, PA 17601
189 Rooms
15. Holiday Inn York I083 & Rt. 30 (Arsenal Rd)
3334 Arsenal Road, Rt. 30
York, PA 17601
100 Rooms
16. Holiday Inn York-Market Street (Rt. 462)
2600 E. Market Street
York, PA 17402
120 Rooms
EXHIBIT 3
[The Lenders]
MASSACHUSETTES MUTUAL LIFE INSURANCE COMPANY
THE HOKKAIDO TAKUSHOKU BANK, LTD.
DAIWA BANK TRUST COMPANY
UNITED POSTAL SAVINGS
FOOTHILL CAPITAL CORPORATION
CENTURY LIFE OF AMERICA
PAN AMERICAN LIFE INSURANCE
JACKSON NATIONAL LIFE INSURANCE COMPANY
EXHIBIT 4
[The Priming Loan Lenders]
JACKSON NATIONAL LIFE INSURNACE COMPANY
MASSACHUSETTES MUTUAL LIFE INSURANCE COMPANY
CENTURY LIFE OF AMERICA
CONSENT AGREEMENT
PRIMING LOAN AGREEMENT AND LOAN AGREEMENT
THIS AGREEMENT is made as of this 17th day of March, 1995
and effective as of December 30, 1994 (the "Effective Date")
among AMI OPERATING PARTNERS, L.P. (herein the "Borrow-er") and
the lenders listed on Exhibit A attached hereto (here-in each a
"Priming Loan Lender" and collectively the "Priming Loan
Lenders") and the lenders listed on Exhibit B attached hereto
(herein each a "Lender" and collectively the "Lenders").
WHEREAS, the Borrower and the Priming Loan Lenders entered
into that certain Priming Loan Agreement dated February 28,
1992 (the "Priming Loan Agreement"); and
WHEREAS, the Borrower and the Lenders entered into that
certain Amended and Restated Loan Agreement dated June 12, 1992
(the "Loan Agreement"); and
WHEREAS, the Borrower, the Lenders and the Priming Loan
Lenders entered into that certain Consent Agreement Priming
Loan Agreement and Loan Agreement dated February 26, 1993 (the
"First Consent"); that certain Second Consent Agreement Priming
Loan Agreement and Loan Agreement dated March 17, 1993 (the
"Second Consent"); and that certain Third Consent Agreement
Priming Loan Agreement and Loan Agreement dated January 31,
1994 (the "Third Consent"); and
WHEREAS, Borrower has requested that the Priming Loan
Lenders and the Lenders grant their consent to several modifi-
cations and additions to the Priming Loan Agreement and the
Loan Agreement respectively; and
WHEREAS, the Priming Loan Lenders and the Lenders are
agreeable to the request and consent to the modifications as
set forth herein;
NOW, THEREFORE, in consideration of Ten Dollars ($10.00)
and other good and valuable consideration, the Priming Loan
Lenders hereby consent to and agree:
1. For the year 1995:
(a) The Capital Budget for each of the Hotels
under the Priming Loan Agreement is as shown on Exhibit 1
hereto.
(b) The Operating Budget, expressed on a combined
basis for all of the Hotels under the Priming Loan Agreement,
is shown on Exhibit 2 hereto.
(c) The Partnership Administrative Expense Budget
and Transaction Cost Budget shall not exceed the amounts shown
on Exhibit 3 hereto.
2. That Completion of all of the Work approved pursuant
to the 1993 Capital Budget has occurred prior to July 1, 1994
and further all Work required to be undertaken and completed
under Section 3.7 of the Priming Loan Agreement was also com-
pleted prior to July 1, 1994.
3. During calendar year 1994, Assigned Claim Amounts in
the amount of $1,025,042.68 were received and paid to the
Lenders. The Allocated Amount assigned to each Property was
accordingly revised/reduced, and the current Allocated Amount
assigned to each Property is as shown on Exhibit 4 hereto. The
Allocation Percentage assigned to each Property is also restat-
ed on Exhibit 4.
In consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the Lenders hereby consent to and
agree:
1. For the year 1995:
(a) The Capital Budget for each of the Hotels
under the Priming Loan Agreement is as shown on Exhibit 1
hereto.
(b) The Operating Budget, expressed on a combined
basis for all of the Hotels under the Priming Loan Agreement,
is as shown on Exhibit 2 hereto.
(c) The Partnership Administrative Expense Budget
and Transaction Cost Budget shall not exceed the amounts shown
on Exhibit 3 hereto.
2. That Completion of all of the Work approved pursuant
to the 1993 Capital Budget has occurred prior to July 1, 1994
and further all Work required to be undertaken and completed
under Section 3.7 of the Priming Loan Agreement was also com-
pleted prior to July 1, 1994.
3. During calendar year 1994, Assigned Claim Amounts in
the amount of $1,025,042.68 were received and paid to the
Lenders. The Allocated Amount assigned to each Property was
accordingly revised/reduced, and the current Allocated Amount
assigned to each Property is as shown on Exhibit 5 hereto. The
Allocation Percentage assigned to each Property is also
restated on Exhibit 5.
Neither this Agreement nor any term hereof may be changed,
waived, discharged or terminated orally, but only by an instru-
ment in writing signed by a party against which enforcement of
the change, waiver, discharge or termination is sought.
This Agreement shall be construed in accordance with and
governed by the laws of the State of New York.
This Agreement may be executed simultaneously in several
counterparts, each of which is an original, but all of which
together shall constitute one instrument.
Unless otherwise specified herein, all defined terms,
noted by being capitalized, shall be given the same meaning as
set forth in a reference document in which the term is defined.
All of the terms, covenants, and conditions herein con-
tained inure to the benefit of and shall be binding upon the
parties hereto, their successors and assigns.
This Agreement represents the total agreement between the
parties and all prior agreements and/or understandings, whether
written or oral, are merged herein.
This Agreement shall only be effective when executed by
all parties.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement.
AMI OPERATING PARTNERS L.P.
By: Prime American Realty Corp, its
general partner
Date: 3/21/95 By: /s/ S. Leonard Okin
Its: Vice President
*MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY
Date: 3/22/95 By:/s/ Timothy Deane
THE HOKKAIDO TAKUSHOKU BANK, LTD.
Date: _________ By: ____________________________
DAIWA BANK TRUST COMPANY
Date: 3/24/95 By: /s/ Shuhei Kawabata
Executive Vice President
TRUST CO. OF THE WEST
TCW Asset Management Co., on behalf of
certain entities
Date: 3/27/95 By: /s/ Richard E. Masson
Managing Director
FOOTHILL CAPITAL CORPORATION
Date: 3/23/95 By: /s/ Jeff Nikora
*CENTURY LIFE OF AMERICA
Date: _________ By: /s/ Donald Heltner
Vice President
PAN AMERICAN LIFE INSURANCE
Date: _________ By: Luis Ingles, Jr. C.F.A.
Senior Vice President
*JACKSON NATIONAL LIFE INSURANCE COMPANY
By: PPM America, Inc.
Date: 3/29/95 By: /s/ John F. Abate
Its: Senior Vice President
*Executing in its capacity as both a Lender and a Priming
Lender.
<TABLE>
AMI PROPERTIES
1995 CAPITAL PLAN
EXHIBIT 1
<CAPTION>
HOTEL PROPERTY CAPITAL PLAN
<S> <C>
Belmont $110,900
Cromwell 91,600
Glen Burnie North 105,800
Glen Burnie South 86,500
Inner Harbor 390,500
Baltimore Int'l Airport 268,500
Moravia 100,800
Pikesville 148,550
East Hartford 119,500
Frederick 189,450
Hazleton 98,790
Lancaster Rt. 30 157,450
Lancaster Rt. 501 140,300
New Haven 98,300
York Arsenal Road 75,000
York Market Street 114,000
TOTAL CAPITAL BUDGET $2,295,490
</TABLE>
1995 OPERATING BUDGET COMBINED FOR ALL PROPERTIES
EXHIBIT 2
<TABLE>
<CAPTION>
16 INNS 1993 ACTUAL 1994 ACTUAL 1995 BUDGET VARIANCE
$ % $ % $ $
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ROOMS AVAILABLE 911456 911729 912184 455 0.0
REVENUE P.A.R. 34.68 37.03 38.70 1.67 4.5
TOTAL OCCUPIED 555372 564422 547396 -17026 -3.0
AVERAGE RATE 56.91 59.82 64.49 4.67 7.8
OCCUPANCY % 60.9 61.9 60.0 -1.9 -3.1
GROSS REVENUES 42213511 100.0 44474248 100.0 46202100 100.0 1727852 3.9
ROOMS REVENUE 31606595 100.0 33761194 100.0 35301400 100.0 1540206 4.6
LABOR COST 5808400 18.4 6297808 18.7 6225500 17.6 72308 1.1
OTHER EXPENSES 2156683 6.8 2375429 7.0 2337400 6.6 38029 1.6
TOTAL EXPENSES 7965083 25.2 8673237 25.7 8562900 24.3 110337 1.3
OTHER INCOME 123316 0.4 131043 0.4 181600 0.5 50557 38.6
ROOMS PROFIT 23764828 75.2 25219000 74.7 26920100 76.3 1701100 6.7
PHONE REVENUE 1192855 100.0 1213584 100.0 1190100 100.0 -23484 -1.9
PHONE EXPENSES 522000 43.8 511874 42.2 525800 44.2 -13926 -2.7
PHONE PROFIT 670855 56.2 701710 57.8 664300 55.8 -37410 -5.3
FOOD REVENUE 6406947 100.0 6546762 100.0 6686100 100.0 139338 2.1
FOOD COST 2165893 33.8 2199453 33.6 2193600 32.8 5853 0.3
LABOR COST 3582068 55.9 3771193 57.6 3863200 57.8 -92007 -2.4
OTHER EXPENSES 559063 8.7 536116 8.2 523400 7.8 12716 2.4
TOTAL EXPENSES 6307024 98.4 6506762 99.4 6580200 98.4 -73438 -1.1
OTHER INCOME 956443 14.9 1104793 16.9 1113500 16.7 8707 0.8
FOOD PROFIT 1056366 16.5 1144793 17.5 1219400 18.2 74607 6.5
BEVERAGE REVENUE 1927355 100.0 1716872 100.0 1729400 100.0 12528 0.7
BEVERAGE COST 431905 22.4 400736 23.2 390000 22.6 10736 2.7
LABOR COST 473755 24.6 421342 24.5 459400 26.6 -38058 -9.0
ENTERTAINMENT 104894 5.4 43319 2.5 43500 2.5 -181 -0.4
OTHER EXPENSES 194740 10.1 136512 8.0 133300 7.7 3212 2.4
TOTAL EXPENSES 1205294 62.5 1001909 58.4 1026200 59.3 -24291 -2.4
BEVERAGE PROFIT 722061 37.5 714963 41.6 703200 40.7 -11763 -1.6
F&B PROFIT 1778427 21.3 1859756 22.5 1922600 22.8 62844 3.4
GROSS OPER INCO 26214110 62.1 27780466 62.5 29507000 63.9 1726534 6.2
ADMIN. & GENERAL 4477502 10.6 4721580 10.6 4816100 10.4 -94520 -2.0
FRANCHISE FEES 1264582 3.0 1326451 3.0 1412000 3.1 -85549 -6.4
MANAGEMENT FEES 1008522 2.4 1018471 2.3 1105700 2.4 -87229 -8.6
MARKETING 3228056 7.6 3244520 7.3 3326300 7.2 -81780 -2.5
UTILITIES 2978799 7.1 2875077 6.5 3067600 6.6 -192523 -6.7
R&M LABOR 1659535 3.9 1787349 4.0 1809100 3.9 -21751 -1.2
R&M OTHER 1134218 2.7 1266866 2.8 1256800 2.7 10066 0.8
R&M PROJECTS 221889 0.5 324695 0.7 416000 0.9 -91305 -28.1
TOTAL GEN. & UNAPPR. 15973103 37.8 16565009 37.2 17209600 37.2 -644591 -3.9
HOUSE PROFIT 10241007 24.3 11215457 25.2 12297400 26.6 1081943 9.6
NON-OPERATING INCO 179306 0.4 208567 0.5 163800 0.4 -44767 -21.5
GROSS OPERATING PRO 10420313 24.7 11424024 25.7 12461200 27.0 1037176 9.1
TAXES & OTHER 2099036 5.0 2361228 5.3 2460200 5.3 -98972 -4.2
PROFIT BEFORE RID 8321277 19.7 9062796 20.4 10001000 21.6 938204 10.4
RENT 62284 0.2 48350 0.1 47700 0.1 650 1.3
INTEREST 0 0.0 0 0.0 0 0.0 0 0.0
DEPREC. & AMORT. 0 0.0 0 0.0 0 0.0 0 0.0
TOTAL RID 62284 .02 48350 0.1 47700 0.1 650 1.3
NET INCOME 8256993 19.6 9014446 20.3 9953300 21.5 938854 10.4
</TABLE>
<TABLE>
EXHIBIT 3
PARTNERSHIP ADMINISTRATIVE EXPENSE
AND TRANSACTION COST BUDGET 1995
<CAPTION>
TOTALS
<C> <C>
1. Director's Costs: Fees and Expenses $170,000
Insurance 170,000
2. Coopers & Lybrand-1994 Audit & Taxes 43,000
3. Legal Costs 50,000
4. New York Stock Exchange Annual Fees 20,000
5. First Chicago Trust 20,000
6. Printing Costs 15,000
7. Winegardner & Hammons: Fees 36,000
Expenses Reimbursed 36,000
8. Miscellaneous 20,000
9. Contingiency 154,875
Total PMI Administrative Costs $826,875
AMI Costs:
Mass Mutual (Successor Servicer Fee) $135,000
Note: The 1995 PMI Administrative Expenses and Transaction costs cannot
exceed $826,875.
</TABLE>
<TABLE>
REVISED ALLOCATION AMOUNTS AND ALLOCATION PERCENTAGES
EXHIBIT 4
<CAPTION>
Revised
Hotel Property Allocation Percentage (1) Allocated Amount (2)
<S> <C> <C>
Inner Harbor 23.9% $16,335,396.61
BWI 11.3% 7,723,430.15
Belmont 3.0% 2,050,468.19
Cromwell 7.8% 5,331,217.30
Frederick 7.4% 5,057,821.54
Glen Burnie N. 2.6% 1,777,072.43
Glen Burnie S. 3.1% 2,118,817.14
Moravia 2.6% 1,777,072.43
Pikesville 2.6% 1,777,072.43
Hazleton 1.9% 1,298,629.85
Lancaster 30 9.6% 6,561,498.22
Lancaster 501 5.4% 3,690,842.76
York Arsenal 3.9% 2,665,608.66
York Market 3.9% 2,665,608.66
East Hartford 5.4% 3,690,842.76
New Haven 5.6% 3,827,540.61
100.0% $68,348,939.74
(1) The allocation percentage is the multiple which should be multiplied times
any additional Assigned Claim Amounts received by the Lenders in connection
with the Prime Bankruptcy, which product shall be subtracted form the current
Allocated Amount assigned to each Property to determine the revised Allocated
Amount.
(2) Revised to reflect payment to the Lenders in 1994 of Assignment Claim
Amounts of $1,025,042.68 (credited to the Partnership on February 1, 1995)
in connection with the Prime Bankruptcy.
</TABLE>
<TABLE>
REVISED ALLOCATED AMOUNTS AND ALLOCATION PERCENTAGES
EXHIBIT 5
<CAPTION>
Revised Allocated Amounts (2) (3)
Hotel Property Allocated Percentage (1) C1 C2
<S> <C> <C> <C>
Inner Harbor 23.9% $16,335,396.61 $12,989,396.61
BWI 11.3% 7,723,430.15 6,141,430.15
Belmont 3.0% 2,050,468.19 1,630,468.19
Cromwell 7.8% 5,331,217.30 4,239,217.30
Frederick 7.4% 5,057,821.54 4,021,821.54
Glen Burnie N. 2.6% 1,777,072.43 1,413,072.43
Glen Burnie S. 3.1% 2,118,817.14 1,684,817.14
Moravia 2.6% 1,777,072.43 1,413,072.43
Pikesville 2.6% 1,777,072.43 1,413,072.43
Hazleton 1.9% 1,298,629.85 1,032,629.85
Lancaster 30 9.6% 6,561,498.22 5,217,498.22
Lancaster 501 5.4% 3,690,842.76 2,934,842.76
York Arsenal 3.9% 2,665,608.66 2,119,608.66
York Market 3.9% 2,665,608.66 2,119,608.66
East Hartford 5.4% 3,690,842.76 2,934,842.76
New Haven 5.6% 3,827,540.61 3,043,540.61
100.0% $68,348,939.74 $54,348,939.74
(1) The allocation percentage is the multple which should be multiplied times
any additional Assigned Claim Amounts reveived by the Lenders in connection
with the Prime Bankruptcy, which shall be subtracted from the current Allocated
Amount assigned to each Property to determine the revised Allocated Amount.
(2) Revised to reflect payment to the Lenders in 1994 of Assignment Claim
Amounts of $1,025,042.68 (credited to the Partnership on February 1, 1995)
in connection with the Prime Bankruptcy.
(3) The Allocated Amount for each Property until such time as the Priming Loan
had been paid in full is shown under column C-1. After the Priming Loan is no
longer in existence and there are no other mortgage liens affecting any of the
Properties which are prior to or pari passu with the lien of the Mortgagees
securing the Loan, the Allocated Amount shall be the value allocated to each
Property as shown on column C-2.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1000
<CASH> 1368
<SECURITIES> 0
<RECEIVABLES> 900
<ALLOWANCES> (19)
<INVENTORY> 0
<CURRENT-ASSETS> 1377
<PP&E> 98863
<DEPRECIATION> 43982
<TOTAL-ASSETS> 60673
<CURRENT-LIABILITIES> 2923
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 60673
<SALES> 43130
<TOTAL-REVENUES> 43471
<CGS> 15481
<TOTAL-COSTS> 48144
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6069
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4673)
<EPS-PRIMARY> (1.16)
<EPS-DILUTED> (1.16)
</TABLE>
