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DAVENPORT MANAGEMENT CORPORATION
December __, 1997
To the Unit Holders of Prime Motor Inns Limited Partnership:
The undersigned, Davenport Management Corporation, is seeking your support
to remove the present General Partner of Prime Motor Inns Limited Partnership
(the "Partnership") at a Special Meeting of Limited Partners to be held on
January 29, 1998, at 2:30 P.M. local time, at the Holiday Inn, Harmon Meadows
Sportsplex, 300 Plaza Drive, Secaucus, New Jersey 07094. The Special Meeting is
being called pursuant to Sections 1002(a) and 1504(b)(i) of the Amended and
Restated Agreement of Limited Partnership of the Partnership.
We believe that this action is necessary to revitalize the Partnership and
direct it toward a more viable future. DMC believes that the manner in which the
business and affairs of the Partnership have been conducted by the present
General Partner has been a principal cause of the Partnership's poor financial
performance and deprived the Partnership of the opportunity to grow and become
profitable. (See "Reasons for DMC's Proposals" in the accompanying Proxy
Statement.)
Unit holders will also be asked: (1) to approve DMC as the substitute
General Partner of the Partnership, in the event that the present General
Partner is removed; (2) to approve a proposal to request that the current
General Partner prepare and submit to the Limited Partners a proposal for the
conversion of the Partnership to a corporation; and (3) to adjourn the Special
Meeting in the event that there are not sufficient votes to remove the present
General Partner so that additional votes may be solicited in favor of such
action.
WE URGE YOU TO VOTE "FOR" EACH OF THE PROPOSALS DESCRIBED ABOVE BY
COMPLETING, SIGNING, DATING AND RETURNING PROMPTLY THE ENCLOSED GOLD PROXY CARD
IN THE POSTAGE-PAID ENVELOPE PROVIDED.
Very truly yours,
DAVENPORT MANAGEMENT CORPORATION
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PROXY STATEMENT
DAVENPORT MANAGEMENT CORPORATION
SPECIAL MEETING OF UNIT HOLDERS OF
PRIME MOTOR INNS LIMITED PARTNERSHIP
To be Held on January 29, 1998
GENERAL INFORMATION
This Proxy Statement and the accompanying Proxy Card are furnished by
Davenport Management Corporation ("DMC"), a Delaware corporation, to the holders
of units of limited partnership interests ("Units") in Prime Motor Inns Limited
Partnership, a Delaware limited partnership (the "Partnership"), in connection
with the solicitation of proxies to be voted at a Special Meeting of Unit
holders scheduled to be held on Thursday, January 29, 1998, at 2:30 P.M. local
time, at the Holiday Inn, Harmon Meadows Sportsplex, 300 Plaza Drive, Secaucus,
New Jersey 07094 and at any adjournment or postponement thereof (the "Special
Meeting").
Notice of the Special Meeting has been previously given by Prime-American
Realty Corp., the general partner of the Partnership, which stated that the
Special Meeting was called pursuant to Section 1504(b)(i) of the Amended and
Restated Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement").
At the Special Meeting, holders of Units will consider and vote upon DMC's
proposals: 1) to remove Prime-American Realty Corp. as the general partner of
the Partnership; 2) to elect DMC as the substitute general partner of the
Partnership; 3) to request that the present general partner prepare and submit
for approval to the Unit holders a proposal to convert the Partnership (and its
subsidiary limited partnership) to a corporation; and 4) to adjourn the Special
Meeting in the event that there are not sufficient votes to remove the present
general partner so that additional votes may be solicited in favor of such
action.
This Proxy Statement and the enclosed GOLD Proxy Card are being furnished
to Unit holders of the Partnership on or about December __, 1997.
Voting Securities and Record Date; Quorum
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DMC has fixed the close of business on December 5, 1997, as the record date
(the "Record Date") for determination of holders of Units entitled to notice of
and to vote at the Special Meeting. Based on information provided by the
Partnership, as of the Record Date, there were 4,000,000 Units issued and
outstanding. The presence in person or by proxy of Limited Partners collectively
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holding more than 50% of the Units shall constitute a quorum for the Special
Meeting. Each Unit entitles the record holder thereof to one vote; Unit holders
do not have cumulative voting rights. Abstentions with respect to any proposal
will be counted and will have the effect of votes in opposition to such
proposal. Broker non-votes are not counted as votes cast on any proposal, if
any, to which they relate, but will have the effect of votes in opposition to
such proposal. The Partnership has no other class of voting securities entitled
to vote at the Special Meeting.
Solicitation and Voting of Proxies
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Eligible Unit holders may vote at the Special Meeting in person or by means
of the enclosed GOLD Proxy Card. You may specify your voting choices by marking
the appropriate boxes on the Proxy Card. The persons named on the enclosed Proxy
Card, Jerome S. Sanzo and Martin W. Field, have been designated as proxies by
DMC. The proxy solicited hereby, if properly signed and returned to and not
revoked prior to or at the Special Meeting, will be voted by the proxies in
accordance with the instructions specified thereon. If you properly sign and
return your Proxy Card, but do not specify your choices, your Units will be
voted by the proxy holders FOR each of the proposals as recommended by DMC.
DMC encourages you to complete and return the GOLD Proxy Card in the
enclosed envelope as soon as possible even if you intend to attend the Special
Meeting. You must return a signed Proxy Card if you want the proxy holders to
vote your Units. Any Unit holder of record may revoke such holder's proxy at any
time before it is voted at the Special Meeting by giving written notice of
revocation to DMC c/o Regan & Associates, Inc., 15 Park Row, New York, NY 10038,
by submission of a proxy bearing a later date to Regan & Associates, Inc. or by
attending the Special Meeting in person and casting a ballot. A beneficial owner
of Units behind a broker or bank would need to vote or modify such owner's vote
through its respective broker or bank.
The GOLD Proxy Card also authorizes the proxy holders to vote the Units
represented with respect to any matters not known at the time this Proxy
Statement was printed which may properly be presented for consideration at the
Special Meeting.
Solicitation Expenses
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The solicitation of proxies will be made principally by mail, and, in
addition, following the mailing of proxy solicitation materials, proxies may be
solicited by directors, officers and employees of DMC personally, by telephone
or otherwise. Such persons will not receive fees or other compensation for
solicitation. DMC has also retained Regan & Associates, Inc. to assist it in the
solicitation of proxies in connection with the Special Meeting. DMC has agreed
to pay Regan & Associates, Inc. a
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fee of up to $13,000 in connection with this solicitation and to reimburse it
for certain expenses. DMC has also agreed to indemnify Regan & Associates, Inc.
against certain liabilities and expenses in connection with its engagement,
including certain liabilities under the Federal securities laws. DMC also will
reimburse brokers, banks, custodians and nominees at current New York Stock
Exchange approved rates for sending proxy materials to the beneficial owners of
Units and in obtaining their proxies. DMC will bear the entire cost of
soliciting proxies in connection herewith, estimated by DMC to be up to
approximately $75,000. Certain of the expenses incurred to date by or on behalf
of DMC, including certain fees paid to Regan & Associates, Inc., have been
advanced to DMC by Martin W. Field, a Unit holder. DMC may seek reimbursement
from the Partnership for such fees and expenses, and, in such event, does not
intend to seek Unit holder approval for such reimbursement at a subsequent
meeting unless such approval is required under Delaware law.
Davenport Management Corporation
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DMC was incorporated in September 1997 in the State of Delaware. DMC's
activities to date have consisted of the preparation of this Proxy Statement and
other activities related to the solicitation by DMC of proxies to be voted at
the Special Meeting. Jerome S. Sanzo, a Connecticut resident, is the sole
officer, director and stockholder of DMC. Mr. Sanzo provided DMC with its
initial capitalization of $10,000.00. Mr. Sanzo, individually and jointly with
his wife, beneficially owns a total of 7,000 Units; DMC owns no Units.
Certain Information Regarding the Partnership
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The Partnership, a Delaware limited partnership, is the sole limited
partner of its 99%-owned subsidiary, AMI Operating Partners, L.P. ("Operating
Partners"), also a Delaware limited partnership. Prime-American Realty Corp.
("Prime-American"), a subsidiary of Prime Hospitality Corporation, is the
general partner of and holds as its principal asset, a 1% partnership interest
in each of the Partnership and Operating Partners (together, the
"Partnerships"). The business of the Partnerships is to operate and maintain
full-service hotels (the "Inns"), which are presently franchised as part of the
"Holiday Inn" system.
Except as otherwise expressly indicated below, all information regarding
the Partnerships set forth in this Proxy Statement has been taken from or based
upon publicly available reports and other documents on file with the Securities
and Exchange Commission (the "Commission") and other sources. Although DMC does
not have any knowledge that would indicate that any statement contained herein
based upon such reports or other documents is untrue, DMC does not take any
responsibility for the accuracy or completeness of the information contained in
such reports and other documents, or for
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any failure by the Partnership to disclose events that may affect the
significance or accuracy of any such information.
PROPOSAL 1 - TO REMOVE THE GENERAL PARTNER
DMC requests that you consent to the proposal to remove Prime-American
Realty Corp. ("Prime-American" or the "General Partner") as general partner of
the Partnership, effective as of ___________, 1998, pursuant to Section 1002(a)
of the Partnership Agreement, for the reasons set forth below under "Reasons for
DMC's Proposals."
Under the terms of Section 1002(a) the Partnership Agreement, the general
partner of the Partnership may be removed, with or without cause, only upon the
written consent of Limited Partners who collectively hold the right to vote more
than 80% of the Units.
Section 1002(a) further provides that the right of the Limited Partners to
remove the general partner shall not exist or be exercised unless the
Partnership shall have received an opinion of independent counsel (who may be
regular counsel to the Partnership or its general partner) acceptable to the
general partner that removal of the general partner and the selection of a
successor general partner will not result in (i) the loss of limited liability
of the Partnership as a limited partner in Operating Partners, or of any Limited
Partner in the Partnership; or (ii) the treatment of the Partnership or
Operating Partners as an association taxable as a corporation for federal income
tax purposes (unless the Partnership or Operating Partners is already treated in
all material respects as an association taxable as a corporation as a result of
changes in federal income tax laws). As more fully described under Proposal 3
below, the Partnership has reported that the Partnership, as a publicly-traded
partnership, will be taxable as a corporation after December 31, 1997. DMC has,
through its counsel, requested that Brown & Wood LLP, counsel to the General
Partner, the Partnership and Operating Partners, render the required opinion
prior to the Special Meeting. In an informal discussion, Brown & Wood LLP
advised counsel to DMC that, based on information then available, it anticipated
that it would be able to render the required opinion.
Under Section 1002(b) of the Partnership Agreement, notice of the proposed
removal and the removal of the General Partner must be served upon the General
Partner. The notice must set forth the date on which the removal shall become
effective, which date shall not be less than 60 days after the service of the
notice upon the General Partner.
Pursuant to Section 1004 of the Partnership Agreement, in the event that
Prime-American shall have been removed as general partner of the Partnership
pursuant to Section 1002, as contemplated by Proposal 1, Prime-American shall
also be removed as
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the general partner of Operating Partners. The interest of Prime-American as
general partner of the Partnership and its interest as general partner of
Operating Partners (its "combined interest") would then be converted into the
number of Units determined by dividing the fair market value of its combined
interest as of the effective date of such removal by the Unit Price (as defined
in the Partnership Agreement) as of such date.
PROPOSAL 2 - TO ELECT DMC AS A SUBSTITUTE GENERAL PARTNER
DMC requests that you vote to elect DMC as the substitute general partner
of the Partnership, in the event that Prime-American is to be removed as general
partner. As provided in Section 1002(d) of the Partnership Agreement, if DMC
were elected as the substitute general partner, DMC would be admitted to the
Partnership immediately prior to the effective date of the removal of Prime-
American as general partner and shall continue the business of the Partnership
without dissolution.
Under the terms of Section 1002(d) of the Partnership Agreement, a
substitute general partner may be elected only upon the written consent of
Limited Partners who collectively hold the right to vote more than 50% of the
Units. In addition, the person designated to be the substitute general partner
must accept and agree to be bound by all of the terms of the Partnership
Agreement and shall have provided the Partnership with satisfactory evidence of
its authority to become a general partner of the Partnership.
Finally, under Section 1002(d), DMC may be elected as a substitute general
partner only if counsel to the Partnership shall have rendered an opinion that
the admission of DMC to the Partnership is in conformity with the Delaware
Revised Uniform Limited Partnership Act ("RULPA") and that none of the actions
to be taken in connection with the admission of DMC as a substitute general
partner will cause the termination or dissolution of the Partnership or will
cause it to be classified other than as a partnership for federal income tax
purposes. DMC has, through its counsel, requested that Brown & Wood LLP, counsel
to the General Partner and the Partnership, render the required opinion prior to
the Special Meeting. In an informal discussion, Brown & Wood LLP advised
counsel to DMC that, based on information then available, it anticipated that it
would be able to render the required opinion.
As noted above, Prime-American serves as general partner of each of the
Partnership and Operating Partners. If Prime-American is removed as the general
partner of the Partnership and DMC is elected as the substitute general partner,
DMC will be deemed for all purposes to be elected successor general partner of
Operating Partners under Section 1004 of the Amended and Restated Agreement of
Limited Partnership of AMI Operating Partners, L.P. (the "AMI Partnership
Agreement"). However, as more fully described below,
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such action might require the consent of the lenders under certain credit
agreements to which Operating Partners is a party. (See "Reasons for the
Proposals - The DMC Plan of Action - 6. Removal of Prime-American as General
Partner of Operating Partners.")
PROPOSAL 3 - REGARDING CONVERSION OF THE PARTNERSHIP
TO A CORPORATION
In Item 2 of its Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 (the "Second Quarter 10-Q"), the Partnership reported that, under the
Internal Revenue Code, the Partnership, as a publicly traded partnership, will
be taxable as a corporation after December 31, 1997. The Partnership stated
that, as a publicly-traded partnership, it would be exempt from taxation as a
corporation if it satisfied certain conditions, including making payment in the
amount of 3.5% of its gross revenues. The Partnership further stated that the
General Partner was ". . . evaluating the consequences of the transition to
corporate form" including, among others, the possibility that transfer of title
to Partnership's hotels (the "Inns") might be required and the possible effect
of the conversion on the franchise agreements and the liquor licenses for the
Inns.
The Partnership further reported in the Second Quarter 10-Q that the
"General Partner expects to submit to the Limited Partners a proposal for the
merger of the Partnership into Operating Partners and for the conversion of the
surviving partnership to a corporation owned by and managed by a Board of
Directors elected by the Unit holders and the General Partner." However, no such
proposal has been submitted to date. Moreover, the Partnership omitted from its
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (the
"Third Quarter 10-Q") a statement that it expected to submit a proposal
regarding the conversion.
DMC proposes that for the reasons set forth below, the Unit holders
recommend and request that, as contemplated by the Second Quarter 10-Q, Prime-
American prepare and submit a proposed conversion to the Unit holders for
approval as promptly as possible. The vote on this Proposal 3 is not a vote on
--------------------------------------------
the conversion, but only a recommendation and request that a proposal to approve
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the conversion be prepared and presented at a future time to the Limited
Partners, together with the relevant material information regarding the
conversion as required under applicable laws. Approval of this Proposal 3 would
require the approval of holders of more than 50% of the Units.
Based on publicly available information regarding the Partnership, DMC does
not believe that it would be in the interests of the Partnership or the Unit
holders for the Partnership to continue to operate as a partnership while being
taxed as a corporation after December 31, 1997. It is generally recognized that
the corporate form generally affords certain advantages over
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the partnership form with respect to financing, liquidity and acquisition
matters. In addition, it is likely that the Partnership would incur fewer costs
of tax reporting and compliance and equity holders would have greater voice in
the selection of management in a corporation than a limited partnership.
Specifically:
1. The conversion would be expected to provide the corporate successor to
the Partnership with potentially greater access to capital markets at
a potentially lower cost of capital and thereby enhance its ability to
fund operations and future growth.
2. The conversion might have the effect of expanding the Partnership's
potential investor base to a broader array of investors (e.g. pension
plans, mutual funds and other institutional investors) which do not
typically invest in publicly traded limited partnerships because of
tax, risk and other considerations. Conversion also could result in
increased research coverage of the Partnership by investment analysts.
These factors might result in greater trading activity and liquidity
for the common stock of the successor corporation, as compared to the
Units.
3. Operating in corporate form should provide the Partnership with
greater flexibility to consummate acquisitions, including the use of
capital stock as acquisition consideration.
4. The conversion would simplify the Partnership's organizational
structure and reduce significantly the costs of tax reporting for the
Partnership and Unit holders. The conversion would, e.g., eliminate
the costs incurred annually by the Partnership to prepare and send
individual Form K-1s to each Unit holder.
5. Management would be the responsibility of the board of directors of
the successor corporation, rather than of a general partner of the
Partnership. The board of directors would be elected directly by
holders of the common stock of the successor corporation.
Neither DMC nor anyone acting on its behalf has conducted or is conducting an
analysis regarding the tax savings, if any, which could potentially be realized
from being taxed as a corporation rather than as a partnership. DMC has no
knowledge as to whether Prime-American has made or caused to be made such an
analysis.
Pursuant to credit agreements relating to the Partnership's long-term
indebtedness (referred to below as the "Loan Agreements"), no merger or
consolidation involving Operating
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Partners may occur unless the unanimous consent of the lenders and mortgage note
holders is obtained. If a merger or consolidation were to occur without such
consent and the merger or consolidation was not otherwise corrected or reversed
within 30 days (or, under certain circumstances, such additional period of up to
30 or 60 days as the relevant Loan Agreement may permit) of receipt by Operating
Partners of a notice from the agent or servicer specifying the default and
requiring it to be remedied, an event of default will exist. In addition,
certain events representing a change in control of Operating Partners (including
the ownership of 50% or more of the limited partnership interest in the
Partnership by an entity that is not a "permitted transferee") will constitute
an event of default if the consent of the Required Lenders and the Required
Holders is not received or if the change in control is not otherwise remedied
within 10 days after a notice of default is received. In case of a default
under the Loan Agreements: (a) the lenders are relieved of any obligations to
make further advances under the Priming Loan Agreement without regard to any
required notice and cure period and (b) upon the expiration of any applicable
cure period, the lenders and mortgage note holders are entitled (but not
required) to take various other actions, including acceleration of the loans and
foreclosure against collateral.
Depending upon the manner in which the proposed conversion may be effected,
such conversion to corporate form might be deemed to involve a merger or
consolidation of Operating Partners and/or a concentration of ownership of the
limited partnership interest in the Partnership. In that event, the necessary
consents of the lenders and mortgage note holders, as outlined above, would be
sought in advance of such transaction.
PROPOSAL 4 - ADJOURNMENT OF THE SPECIAL MEETING
In the event that there are not sufficient votes to remove the present
General Partner at the time of the Special Meeting, Unit holders will consider
and vote upon a proposal to adjourn the Special Meeting in order to permit
further solicitation of proxies. In order to allow proxies that have been
received by DMC at the time of the Special Meeting to be voted for such
adjournment, if necessary, DMC has submitted the question of adjournment under
such circumstances to Unit holders as a separate matter for their consideration.
A majority of the Units present or represented at the Special Meeting is
required in order to approve any such adjournment. DMC recommends that Unit
holders vote their proxies in favor of such adjournment so that their proxies
may be used for such purpose in the event it should become necessary. If it is
necessary to adjourn the Special Meeting, no notice of the time and place of the
adjourned meeting is required to be given to Unit holders other than an
announcement of such time and place at the Special Meeting.
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REASONS FOR THE PROPOSALS
Introduction
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The troubled history of the Partnership and its operating difficulties,
poor financial condition and weak prospects are described in detail in the
publicly available annual and quarterly reports which the Partnership has filed
with the Securities and Exchange Commission, including the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "1996 10-K") and,
most recently, the Third Quarter 10-Q. DMC believes that the removal of Prime-
American as general partner of the Partnership is necessary in order to end the
conduct of the Partnership's business and affairs in a manner which has
resulted, and would, if not halted, continue to result in the diminishment of
Unit holder value as evidenced by the dramatic increase in the negative net
worth of the Partnership, as noted below. The deteriorating situation calls for
immediate and decisive action to improve the Partnership's prospects and to
return the Partnership to profitability. However, the Partnership does not
appear to have a viable plan to accomplish these objectives.
The following examples indicate the extremely poor condition of the
Partnership's business, operations and financial condition:
1. The Partnership has recorded a net loss in each of the past five
years, and no distributions were paid to Unit holders during that
period.
2. The total partners' deficit increased from $15,733,000 at December 31,
1995, to $17,921,000 at December 31, 1996. The deficit increased
further to $18,461,000, at June 30, 1997, as reported in the Second
Quarter 10-Q. (The total partners deficit decreased slightly to
$16,105,000, at September 30, 1997.) The magnitude of these deficits
reflects substantial increases in total partners deficit through the
years. For example, the present total partners' deficit is more than
twice the total partners deficit at December 31, 1992, which was
$7,565,000. (The year 1992 is useful for comparative purposes
inasmuch as Operating Partners filed for reorganization under Chapter
11 of the Bankruptcy code in February 1992; its prepackaged
reorganization plan was approved in May 1992.)
3. The Partnership's independent accountants, Coopers & Lybrand, LLP, in
their report dated February 21, 1997, on the Partnership's
consolidated financial statements for the year ended December 31,
1996, stated that "the Partnerships have incurred significant
operating losses and have a capital deficit at December 31, 1996.
These
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matters raise substantial doubt about the Partnership's ability to
continue as a going concern."
4. The Units were delisted by the New York Stock Exchange effective June
20, 1997, and presently trade on the Nasdaq Over-the-Counter Bulletin
Board. The Units were delisted because the aggregate market value of
the Units, the three-year average net income of the Partnership and
the net tangible assets of the Partnership available to the Units fell
below the exchange's continued listing criteria.
5. Holiday Inns, Inc. ("HII"), the franchisor for the Inns, has informed
the Partnership that it might not renew the franchise agreements for a
majority of the Inns because the Inns no longer meet the required
standards under the Franchise Agreements. As more fully described
below under "The DMC Plan of Action," the HII Product Improvement
Plans ("PIPs") would require capital expenditures for the Inns whose
franchises expire in 1997 in the aggregate amount of approximately
$13,000,000. (However, the Partnership has listed for sale two of the
Inns.) As reported in the Third Quarter 10-Q, it is anticipated that
capital improvements for the PIPs will be funded through additional
financing, if available, but that there can be no assurance that
additional financing will be available. Without additional financing,
the Partnership may lose its franchises.
In addition to the apparent lack of any viable plan to return the
Partnership to profitability, the Partnership, as noted above, has reported
that, as a publicly traded partnership, it will be taxable as a corporation
after December 31, 1997, and that Prime-American expected to submit to the
Limited Partners a proposal for the conversion of the Partnership and Operating
Partners, to a corporation in a multi-step transaction. As of the date of this
Proxy Statement, the General Partner has in fact not submitted any such
proposal, and a representative of the General Partner has indicated to Mr.
Sanzo's representatives that no such proposal is currently being prepared. DMC
and Mr. Sanzo believe that the Unit holders require more active and attentive
management focused on enhancing the value of the Unit holders' investment. Given
the poor financial and operational performance of the Partnership, the lack of
any apparent viable plan by the General Partner and its management for the
survivability and future development of the enterprise, and the fact that the
taxation status of the Partnership remains unaddressed, DMC recommends that the
present General Partner be removed immediately as a first step to improving the
status of the Unit holders' investment.
Jerome S. Sanzo has devoted considerable time and energy to evaluating the
affairs of the Partnership based upon publicly
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available information regarding the Partnership and upon his extensive knowledge
of and experience in the hotel industry, hotel finance and the capital markets.
(See "Background and Experience of Participants in the Solicitation, Jerome S.
Sanzo.") Mr. Sanzo has developed a plan of action for the Partnership, the
essential elements of which consist of:
. Refinancing or restructuring the senior indebtedness of the Partnership.
. The sale or other disposition of the Partnership's underperforming
properties and their replacement with stronger properties.
. Renegotiation of the Partnership's franchise agreements relating to
certain of the Partnership's properties with HII.
. A review of the performance of the Managing Director of the General
Partner and of the current operational manager of the Partnership.
. An attempt to increase the efficiency of the operation of the
Partnership's properties, particularly through expense reduction and
control. Neither DMC nor any person acting on its behalf has
performed or caused to be performed any analysis of the extent to
which expense reduction and control could be effected.
. Conversion of the Partnership and Operating Partners, to corporate form.
A description of each of these elements is set forth below. (However, DMC does
not, at the present, have access to the books and records of the Partnership and
Operating Partners. Accordingly, the plan is subject to modification by DMC to
reflect additional information DMC would obtain if it were elected general
partner of the Partnership.) Based on a number of factors, including Mr.
Sanzo's knowledge and experience and informal discussions which Mr. Sanzo has
had with representatives of the Partnership's leaders and major international
investment banks, DMC believes that there is a significant likelihood that at
least some of the objectives described above could be achieved if promptly and
aggressively pursued. However, there can be no assurance that any of the
objectives could be attained.
DMC is aware that, as reported in the Third Quarter 10-Q, Prime-American
has taken and desires to take certain action which would be consistent with the
plan of action proposed by DMC. For example, the Partnership reported that it
sold the Glen Burnie South Inn in 1997, has entered into a contract to sell
another Inn and "has planned" to sell six other Inns which have a dated
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appearance and which are either losing money or, in the opinion of the General
Partner, will not produce a sufficient return to justify the costs to complete
the PIPs required by HII and the franchise fees for renewal of their franchises.
In addition, the Partnership reported that, commencing in August 1997 Prime-
American accelerated its efforts to arrange financing for the PIPs and the
franchise renewal fees or to enter into another transaction (including the sale
of Inns to protect the interests of the Unit holders) and will continue to seek
to make arrangements with HII for the renewal of the franchises for the Inns
which the Partnership desires to retain. However, DMC believes that the efforts
of Prime-American on behalf of the Partnership have not been adequate, as
indicated by, among other things, the dramatic increases in the total partners'
deficit over many years, the lack of distributions to Unit holders during that
period and the fact that the Partnership continues to be threatened with the
loss of the HII franchise for the Inns. DMC further believes that, in view of
the serious difficulties faced by the Partnership over many years, the efforts
of Prime-American to address the Partnership's difficulties should have been
"accelerated" long before August 1997. (As more fully described below under
"Background of DMC's Proxy Solicitation," it was in August 1997 that Mr. Sanzo
met with representatives of Prime-American for the second time to discuss the
future of the Partnership.)
THE DMC PLAN OF ACTION
If the Unit holders remove the present General Partner of the Partnership
and elect DMC as the new general partner, DMC will immediately act to implement
the plan described below. The plan will be subject to modification by DMC,
should it be elected general partner of the Partnership, to reflect, among other
factors, additional information regarding the business, operations and financial
condition of the Partnership and Operating Partners DMC would obtain after
gaining access to the books and records of the Partnership and taking into
account changing market and economic conditions.
1. Refinancing or Restructuring of Senior Indebtedness
---------------------------------------------------
At September 30, 1997, the Partnership had long term indebtedness in the
amount of $63,556,000, consisting of Mortgage Notes in the amount of $54,227,000
and borrowings under a Priming Loan in the amount of $9,329,000. (These credit
facilities are more fully described in the 1996 10-K.) The Partnership reported
in the 1996 10-K that it then was currently in compliance with all covenants and
requirements of the Restated Loan Agreement for the Mortgage Notes and of the
Priming Loan.
The Partnership incurred interest expense in the amount of $4,472,000 for
the nine months ended September 30, 1997. DMC
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believes that the onerous level of debt service has hindered the Partnership's
growth and performance. Mr. Sanzo has already had several informal discussions
with representatives of the Mortgage Note holders concerning the status of the
Partnership's senior debt and DMC's proposed plan of action for the Partnership.
No agreement or commitment has resulted from these discussions.
Mr. Sanzo also has had discussions with representatives of several major
international investment banks concerning their potential interest in
refinancing all of the Partnership's outstanding long-term indebtedness and
financing the acquisition of additional hotels by the Partnership (or a
corporate successor, in the event of a conversion of the Partnership to
corporate form). Such financing might be accomplished through a conduit or
securitized mortgage program and also might involve the conversion of some of
the Partnership's senior secured debt to equity. DMC believes that in the
current state of the capital markets, it may be possible to reach agreement with
existing and/or new lenders to refinance the Partnership's existing debt at
interest rates more favorable than those currently incurred by the Partnership.
While no commitments or agreements have been obtained, Mr. Sanzo believes based
on the terms of his informal discussion and his knowledge of the capital markets
and of the hotel industry and hotel finance, that obtaining such financing would
be possible in connection with the implementation of DMC's business plan. DMC
intends to pursue aggressively such financing in the event that it is elected as
general partner of the Partnership.
2. Sale and Replacement of Underperforming Properties
--------------------------------------------------
A key element of revamping the Partnership's operations is the replacement
of the Inns which are not profitable with physically and financially more
attractive properties. These dispositions may include the Holiday Inns known as
Pikesville, Lancaster Route 501, York-Market Street, Moravia and Hazelton. DMC
would also consider a disposition of the hotel at Frederick, Maryland, which it
believes would require the expenditure of approximately $2,000,000 for
improvements to maintain its HII franchise. In its Third Quarter 10-Q the
Partnership stated that:
Operating Partners sold the Glen Burnie South Inn in July, 1997, has
entered into a purchase contract for the Baltimore Pikesville Inn, and
has planned to sell the Baltimore Moravia Road, Baltimore Belmont,
Frederick MD, Lancaster Rt. 501, York Market Street and the Hazleton
Inns, which are "highway oriented" properties which, having exterior
corridors and being older properties (generally over 20 years old),
have a dated appearance. These Inns are either losing money or, in
the opinion of the General Partner [Prime-
14
<PAGE>
American], will not produce a sufficient return to justify the costs
to complete the HII PIP's and the franchise fees for renewal of their
franchises.
The Partnership further reported that the net proceeds of the sale of these Inns
would be applied to reduce the outstanding principal balance of the Priming
Loan, as required by the Priming Loan Agreement.
In conjunction with restructuring or refinancing the existing debt of the
Partnership, and conversion of the Partnership to a corporation (as discussed
below), DMC believes that the successor corporation would be well positioned to
bid for and acquire additional suitable properties either in exchange for shares
of common stock or other equity securities of the successor corporation or with
proceeds of financing obtained for such purpose. DMC believes such a course of
action, coupled with the improved operating efficiencies proposed below, would
be advantageous to the shareholders of the successor corporation. Such
acquisitions would provide the new corporation with the opportunity to expand
its revenue base, create greater economies of scale in its operations, improve
the net income allocable to shareholders, and enhance the market value of the
enterprise. DMC has already explored certain hotel properties within the Eastern
United States as potential acquisition candidates, although DMC has not
indicated that it was acting on behalf of the Partnership or the proposed
successor corporation. Mr. Sanzo has had discussions with Martin W. Field, a
Unit holder, concerning several profitable hotels owned or controlled by him.
(See "Appendix I" and "Certain Information Regarding Participants in the
Solicitation.") Although an intensive analysis of these potential acquisition
candidates has not been completed, DMC believes that such potential acquisitions
could be made on terms favorable to the enterprise and can enhance shareholder
value. However, there can be no assurance that these or subsequent efforts to
identify potential acquisition candidates and thereafter to consummate any such
acquisition on terms favorable to the successor corporation will be successful.
Under the provisions of RULPA, the Partnership Agreement, and the AMI
Partnership, the holders of Units are not required or entitled to vote upon the
anticipated sale by Operating Partners of Inns, as described above. As a
general matter, the AMI Partnership Agreement authorizes the general partner of
Operating Partners to sell or transfer one or more Inns provided that such sale
or transfer: (a) does not represent the sale or transfer of all or
substantially all of the assets of Operating Partners, and (b) is approved by a
majority vote of the limited partners of Operating Partners. Accordingly, as
the sole limited partner of Operating Partners, the Partnership must consent to
any sale of Inns by Operating Partners. Neither the Partnership Agreement nor
the AMI Partnership Agreement requires the consent of Unit holders in order
15
<PAGE>
for the Partnership, as an entity, to approve the anticipated sale of Inns by
Operating Partners. Therefore, if DMC is elected as the new general partner of
the Partnership, it anticipates that it would exercise its authority on behalf
of the Partnership to approve any proposed sale by Operating Partners of
underperforming or older Inns.
3. Renegotiations of Arrangements with Holiday Inns, Inc.
------------------------------------------------------
The Partnership reported the following in its Quarterly Report:
The "Holiday Inn" franchises of ten of the Inns were to expire on June
30, 1997 and the franchises of two additional Inns will expire on December 31,
1997. Before the renewal of an expiring franchise for any "Holiday Inn"
property, the property is inspected by HII and that inspection forms the basis
for a PIP, the completion of which is a condition to the renewal of the
franchise for the property. Prior to December 31, 1995, HII had inspected and
prepared PIPs for ten of the Inns whose franchises expire in 1997. During the
second quarter of 1996, HII inspected and prepared PIPs for the remaining two
Inns whose franchises expire in 1997 (though HII had previously indicated that
it might not renew those franchises and, accordingly, had not prepared PIPs for
those Inns). Based on those PIPs, and on analyses by W&H, Operating Partners
estimated the cost of the capital expenditures to be in the range of
$13,000,000, although Operating Partners believed that the scope of work and
related costs would be subject to negotiation. In June 1997, the Partnership
requested that HII extend the expiration of the ten Inns. HII agreed to a number
of extensions of the franchise expirations for the ten Inns, most recently to
November 14, 1997, as reported in the Third Quarter 10-Q, and prepared revised
PIPs.
During the process of disposition and acquisition of hotels, DMC would
attempt to negotiate appropriate arrangements with HII. These arrangements will
include short term franchise extensions for the hotels proposed to be sold and
long term extensions for the retained hotels. An agreement with HII will also be
necessary regarding its PIP. Mr. Sanzo has discussed financing the PIP
requirements for retained hotels as part of the general refinancing of the
senior secured debt.
4. Review of Contract with Operational Manager and Consulting Services
-------------------------------------------------------------------
Agreement
---------
Operating Partners entered into a management agreement with Winegardner &
Hammons, Inc. ("W&H") pursuant to which W&H manages the Inns. Effective January
4, 1997, the initial term of the W&H Management Agreement was extended for four
years, through 2000, and a provision was added to the W&H Management Agreement
which grants to either the Partnership or W&H the right to terminate the
agreement, without penalty, at any time without cause, upon at
16
<PAGE>
least 90 days prior written notification to the other party. However, under the
Priming Loan and Restated Loan Agreements, approval by the Mortgage Lenders and
Priming Lenders would be required for the Partnership to elect to terminate the
W&H Management Agreement.
In its 1996 10-K, the Partnership reported that, in 1994, S. Leonard Okin,
Managing Director of the General Partner, entered into a Consulting Services
Agreement (the "Consulting Services Agreement") with the Partnership, Operating
Partners and the General Partner, giving him authority to make day to day
operating decisions for the Inns. 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 has been
extended on a yearly basis for a current term ending December 31, 1997. 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
reasons, for cause; by 30 days prior written notice from the Partnership,
Operating Partners, or the General Partner to Mr. Okin of their election not to
renew the agreement at the expiration of the initial or any renewal term; or 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.
Considering the required PIP renovations, dispositions of underperforming
hotels and potential acquisition of new hotels, DMC anticipates that it would
review the W&H Management Agreement and the Consulting Services Agreement to
determine whether each of the agreements should remain in effect or be
terminated. However, DMC has not conducted such review and cannot predict the
outcome of the review, if conducted.
5. Increased Efficiency of Operations
----------------------------------
DMC believes that new, aggressive management is needed to work toward
enhancement of Unit holder value through a fresh and vigorous approach to the
improvement of the Partnership's operations. Although there can be no assurance
given, DMC believes that those of the existing properties which would not be
disposed might be operated more efficiently through expanded and more thorough
attention to expense controls and reductions. As an example, as noted in the
1996 10-K, "Other" expenses increased 8.43% from $7,718,000 to $8,369,000 for
the year 1996, while Total Revenues increased at a significantly slower rate, to
4.45%. In the Quarter 10-Q, the Partnership reported "Other" expenses in the
amount of $6,624,000 for the nine months ended September 30, 1997.
17
<PAGE>
Notwithstanding the magnitude of the expenses under the category "Other,"
neither the 1996 10-K nor the Third Quarter 10-Q disclosed the nature of the
expenses reflected in the category of "Other" expenses. Furthermore, the
Partnership provided no explanation in the 1996 10-K for the much higher rate of
increase of "Other" expenses than the increase in revenues. If DMC were elected
general partner of the partnership, DMC would immediately evaluate the "Other"
category of expenses. DMC believes that expenses should be brought into line
with industry standards, although no assurance can be given that DMC will
succeed in this effort.
6. Removal of Prime-American as General Partner of Operating Partners.
------------------------------------------------------------------
Certain restrictions on the change in control of Operating Partners are set
forth in: (a) the Amended and Restated Loan Agreement among Massachusetts Mutual
Life Insurance Company, Century Life of America and Jackson National Life
Insurance Company, as lenders, AMI Operating Partners, L.P., as borrower, and
Norwest Bank Minnesota, N.A., as agent, dated as of June 12, 1992 (the "Priming
Loan Agreement") and (b) the Amended and Restated Loan Agreement dated as of
June 12, 1992, among AMI Operating Partners, L.P., as issuer, certain mortgage
note holders, and IBJ Schroder Bank and Trust Company, as services (the
"Subordinate Loan Agreement") (collectively, the Priming Loan Agreement and the
Subordinate Loan Agreement are referred to herein as the "Loan Agreements").
However, a change in the General Partner of the Partnership would not alone
violate any provision of either of the Loan Agreements.
Pursuant to each of the Loan Agreements, no change in the ownership
interest of any partner in Operating Partners may occur without the consent of
lenders having aggregate "percentage interests" of not less than 75% under the
Priming Loan Agreement (the "Required Lenders") and the consent of the holders
of certificates representing at least 51% of the aggregate unpaid principal
amount of the mortgage notes under the Subordinate Loan Agreement (the "Required
Holders"). (This restriction does not apply to transfers of limited partnership
interests in the Partnership, unless, as a result of such transfer, any entity
that is not a "permitted transferee" owns or controls 50% or more of the limited
partnership interest in the Partnership.)
If an unauthorized change in ownership interest shall occur and not be
corrected within 30 days (or, under certain circumstances, such additional
period of up to 30 or 60 days as the relevant Loan Agreement may permit) of
receipt by Operating Partners of a notice from the agent or services specifying
the default and requiring it to be remedied, then an event of default will
exist. In case of a default under the Loan Agreements: (a) the lenders are
relieved of any obligations to make further
18
<PAGE>
advances under the Priming Loan Agreement without regard to any required notice
and cure period and (b) upon the expiration of any applicable cure period, the
lenders and mortgage note holders are entitled (but not required) to take
various other actions, including acceleration of the loans and foreclosure
against collateral.
DMC is seeking the removal of Prime-American as general partner of the
Partnership and the appointment of DMC as the new general partner of the
Partnership. As described above, if DMC were elected as substitute general
partner of the Partnership, DMC, pursuant to the AMI Partnership Agreement,
would also become substitute general partner of Operating Partners. To the
extent that such action could be deemed to constitute a "change in the ownership
interest" of Prime-American in Operating Partners, DMC anticipates that the
requisite consents of the lenders and mortgage note holders under the Loan
Agreements to the change in general partner of Operating Partners would be
sought in advance of the effectiveness of such removal and substitution.
7. Conversion of Partnership to a Corporation
------------------------------------------
As noted above, DMC believes that it would be in the best interests of Unit
holders for the Partnership and Operating Partners to convert into a
corporation. In order to effect such a conversion, a Delaware corporation
("Newco") will be formed into which the Partnership and Operating Partners would
be merged. Shares of common stock of Newco will be issued proportionally to the
Unit holders of the Partnership. A substantial amount of additional common stock
would be authorized and would be available for use in acquisitions and other
transactions.
Newco would be managed by a Board of Directors elected by the former Unit
holders who had received common stock in the Conversion. Mr. Sanzo would seek to
be nominated to serve on the Board of Directors of Newco and to serve as an
executive officer of Newco.
Neither DMC nor Mr. Sanzo have made any agreements or arrangements
whatsoever with any person regarding the operation of the Partnership or the
management of any successor corporation.
BACKGROUND OF DMC's PROXY SOLICITATION
Prior Discussions with Partnership
- ----------------------------------
Mr. Sanzo first became aware of the Partnership in the early 1990's while
performing his duties as a senior officer of Banque Indosuez, where he was
responsible for the lending to the hotel industry of his employer. During the
course of conversations between Mr. Sanzo and Martin W. Field, Mr. Sanzo
reviewed and
19
<PAGE>
analyzed publicly available information regarding the business and operations of
the Partnership. Based on his analysis, Mr. Sanzo believed that the Partnership
would have the potential for good long-term prospects in the hands of new
management.
During 1997, Mr. Sanzo had two meetings and several discussions with Mr.
Okin, Managing Director of Prime-American, and with representatives of Prime-
American and the Partnership to discuss the troubled financial condition and
poor prospects of the Partnership. During these discussions, Mr. Sanzo requested
the resignation of Prime-American and proposed a plan of action essentially
similar to the DMC Plan of Action described in this Proxy Statement. Prime-
American has not responded positively to Mr. Sanzo's proposals.
The Special Meeting
- -------------------
By letter to Prime-American, dated June 19, 1997 (the "June Letter"), on
behalf of persons holding more than 25% of the Units, a special meeting of
Limited Partners was requested for: (i) consideration of the question of the
removal of the General Partner of the Partnership pursuant to Section 1002 of
the Partnership Agreement; and (ii) the election of a new General Partner as
provided in Section 1002(d). In a separate letter of the same date, counsel to
the General Partner and Partnership were informed that certain individuals
intended to propose that the General Partner be replaced by a new corporate
general partner owned and controlled by Mr. Sanzo.
After and exchange of correspondence between representatives of DMC and
Prime-American in late September 1997, the General Partner gave notice that a
special meeting of all partners of the Partnership would be held on November 5,
1997, at the request of certain Unit holders for the removal of Prime-American
as General Partner, and if Prime-American is removed, the election of DMC as the
substitute General Partner.
By letter dated October 9, 1997, counsel to DMC requested that Prime-
American amend the notice to state that, at the special meeting, a proposal
would be voted upon to request that the General Partner put the Conversion
before the Unit holders for consideration and vote.
In October 1997, at the request of representatives of DMC, DMC and Prime
American agreed that the special meeting should be postponed to a date to be
mutually agreed upon so that, in the event that Prime-American should determine
that a special meeting should be held to consider and vote upon the Servico
Offer, described below, a single special meeting could be held to vote upon both
the proposal for the removal of the Prime-American and related proposals and the
Servico Offer.
20
<PAGE>
Invitation to Mr. Sanzo to Bid for Hotels.
- ------------------------------------------
By letter dated September 11, 1997, sent to Mr. Sanzo by W&H on behalf of
the General Partner (the "Offer Letter"), W&H offered to sell to Mr. Sanzo the
Inns owned by the Partnership by acquiring the equity in the Partnerships that
own the Inns. Mr. Sanzo rejected the offer by letter to the General Partner
dated September 25, 1997. Mr. Sanzo stated, among other things, that he firmly
believed that
. . . the highest value to the unit holders would be achieved through
a restructure of the Partnership's affairs. Such a restructure could
include, but might not be limited to, changes in the Partnership's
debt structure, asset mix and operations.
A sale of the hotel properties at this time would most likely be
regarded by the market as a distress or "fire" sale, and accordingly,
could not be expected to generate full value for the Unit holders.
The Partnership is presently attempting to sell a number of Inns at a time
when the Partnership has not been able to refinance its existing long term
indebtedness on more favorable terms and when it is faced with the imminent
expiration of the HII franchises for the Inns. Moreover, it is a matter of
public record that many of the Partnership's properties are in distressed
condition and that the Partnership does not have resources sufficient to fund
the PIPs required by HII. Mr. Sanzo believes, that under such circumstances,
the Partnership could receive value for the Inns which would reflect the long-
term prospects of the Partnership under new management.
The Servico Offer
- -----------------
On September 30, 1997, Servico, Inc., an owner and operator of hotels
("Servico"), announced that it had made an offer (the "Servico Offer") to
purchase the 99% partnership interest which the Partnership owns in Operating
Partners for $8,000,000 in cash. Servico also made an offer to purchase the
remaining one per cent of Operating Partners which is not owned by the
Partnership.
The Partnership thereafter filed a Current Report on Form 8-K with the
Commission to report that on November 7, 1997, the Partnership, Prime-American
and Servico had entered into an Acquisition Agreement.
Mr. Sanzo has informed the General Partner that he opposes the Servico
Offer.
CERTAIN INFORMATION REGARDING PARTICIPANTS IN THE SOLICITATION
Jerome S. Sanzo
- ---------------
21
<PAGE>
Mr. Sanzo, age 44, has worked for nearly two decades in banking and the
capital markets in the United States and internationally. His experience has
included work in senior and subordinated debt underwriting, real estate finance,
real estate investment management, hotel management, project finance, corporate
finance, and other related activities. Mr. Sanzo has worked in the capital
markets in the U.S., Asia, and the South Pacific, and in particular, over 13
years experience in real estate matters in this country and abroad.
For the past eight years, Mr. Sanzo was originally head of all North
American Real Estate Finance and then Manager of all Asset Based and Corporate
Finance activities in North America for Banque Indosuez, now known as Credit
Agricole Indosuez ("Indosuez"). In the latter function, Mr. Sanzo was
responsible for all Commercial and Corporate Finance activities, in addition to
all Real Estate Debt and Equity activities, in North America for Indosuez. This
included at its peak a loan portfolio of approximately $2 billion, and
portfolios of real estate properties owned by clients of Indosuez, and by
Indosuez directly, aggregating over $90 million in value as measured by property
sales.
During the period of 1990 through 1997, Mr. Sanzo was President of several
Indosuez subsidiaries which owned buildings in California, Texas, Illinois,
Michigan, Virginia, New Jersey, New York and Connecticut. These included office
buildings, warehouses, shopping centers, and hotels. On behalf of a group of
foreign financial institutions including Indosuez, Mr. Sanzo was President and
Director of Conference Center Interests, Inc., which from 1992 through 1994
owned a 340 room, luxury conference center/resort near a major airport in
Virginia. During this period, Mr. Sanzo had ultimate responsibility over all
management negotiation, hiring and termination issues, budgets, marketing
efforts, operational issues, and capital expenditure requests.
During the 1990's, Mr. Sanzo was President and Director of two of the
Indosuez subsidiaries referred to above: Emily Morgan Properties, Inc. which
owned an approximately 135 room hotel in Texas, and Airport Hotel, Inc., which
owned an approximately 100 room airport hotel in Michigan. He had essentially
the same responsibilities and success with both of these properties, i.e.,
control and responsibility of all management, operational, capital expenditure,
and divestment issues.
Further, during the period of 1989 through 1997, all North American hotel
related financing activities for Indosuez reported to Mr. Sanzo. At its peak, an
aggregate of over $250 million in loans and letters of credit for borrowers and
developers in the hospitality industry were the responsibility of Mr. Sanzo.
In 1994, Mr. Sanzo was also named the executive in charge of all North
American restructuring and workout activities, including
22
<PAGE>
corporate and real estate debtors in non-performing or underperforming
situations.
In addition to those activities, Mr. Sanzo was named Managing Director and
elected to the Managing Board of two real estate investment funds which were
owned by overseas investors and publicly traded on the Amsterdam Stock Exchange.
These funds, IPNA II N.V. and IPNA III N.V., owned real properties across the
U.S., and as Managing Director, Mr. Sanzo was responsible for formulating and
executing all business and capital strategies, including leasing, operations,
capital structure, tax, capital expenditure, property management, and all other
related activities of these funds.
While at Indosuez, Mr. Sanzo served as the bank officer in charge of
certain credit facilities for two of Mr. Field's hotels.
Mr. Sanzo has a net worth of not less than $500,000. Mr. Sanzo is not
obligated to provide additional capital to DMC. In addition, mr. Sanzo does not
believe that he would, in his capacity as sole stockholder, officer and director
of DMC, be liable for any indebtedness or other obligations of DMC.
Martin W. Field
- ---------------
Mr. Field is a real estate developer and manager who has more than 30 years
of experience in the ownership, management and renovation of hotels. Mr. Field
presently owns or operates 5 hotels in Pennsylvania and New York. All of these
hotels are operating profitably; 4 of the hotels operate as Holiday Inns.
For further information regarding securities ownership and other data with
respect to participants in this proxy solicitation, see Appendix I to this Proxy
Statement.
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE
PARTNERSHIP
As reported by the Partnership in the 1996 10-K, the following table sets
forth, as of December 31, 1996, the number of Units 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 outstanding
Units.
Ownership of Units
-------------------------------------
Number Percentage
of Units Total No. of of Units
Name and Address of Owner Held Units Held Outstanding
- --------------------------------- -------- ------------- ------------
S. Leonard Okin
c/o Prime-American Realty Corp.
P.O. Box 230 1,000 1,000 0.025%
Hawthorne, NJ 07507-0230 ------- ---------- ---------
23
<PAGE>
Jerome & Marcella Yunger, as
Trustees
5039 Mesa View Drive
Las Vegas, NV 89120 174,800
Roxanne Rose Yunger
5039 Mesa View Drive
Las Vegas, NV 89120 129,400 304,200 (1) 7.605% (1)
------- ---------- ---------
(1) 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.
DMC has been informed by Martin W. Field that, at December __, 1997, Mr.
Field and his wife, Kathleen P. Field, may be deemed to hold beneficially a
total of 157,500 Units.
DMC further understands that, at December ___, 1997, a trust organized by
Mr. Field in 1993 for the benefit of certain of his children (the "Trust") held
117,600 Units, constituting approximately 2.9% of the Units. The trustee of the
Trust, who is unaffiliated with Mr. Field, has sole dispositive and voting power
with respect to Units held by the Trust. Accordingly, Mr. Field disclaims
beneficial ownership of the Units held by the Trust.
ADDITIONAL INFORMATION REGARDING THE PARTNERSHIP
Certain additional information regarding the Partnership and its business
and financial condition and concerning the General Partner and the officers and
directors of the General Partner is set forth in the 1996 10-K. Reference is
also made to the Partnership's Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997.
PLEASE INDICATE YOUR SUPPORT OF DMC'S PROPOSALS TO REMOVE THE GENERAL PARTNER
AND TO ELECT DMC AS THE NEW GENERAL PARTNER BY COMPLETING, SIGNING AND DATING
THE ENCLOSED GOLD PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE. (NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES).
If you have any questions or require any additional information concerning
this Proxy Statement or the Special Meeting, please contact Regan & Associates,
Inc., 15 Park Row, New York, New York 10038, tel. no. (800) 737-3426. If any of
your Units are held in the name of a brokerage firm, bank, bank nominee or other
institution, only it may vote such shares and only upon receipt of your specific
instructions. Accordingly, please contact the person responsible for your
account and instruct that person to indicate a vote "FOR" DMC's proposals and to
sign, date and return the enclosed proxy card as soon as possible.
24
<PAGE>
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THE ACCOMPANYING GOLD PROXY
CARD PROMPTLY.
25
<PAGE>
APPENDIX I
This Appendix I sets forth certain information regarding the participants in
this proxy solicitation.
A. The following table sets forth, with respect to each participant, such
participant's (i) name and business address, (ii) present principal occupation
or employment and (iii) the name, principal business and address of any
corporation or other organization in which such employment is carried on.
NAME AND BUSINESS PRINCIPAL OCCUPATION
ADDRESS OR EMPLOYMENT
Jerome S. Sanzo Business Consultant
c/o Davenport Management Corp. Bennelong Holdings LLC
52 Davenport Ridge Road 52 Davenport Ridge Road
Stamford, CT 06903 Stamford, CT 06903
President, Secretary, and
Treasurer
Davenport Management Corp.
Martin W. Field Real estate developer and
c/o Valley Forge Hilton manager.
251 West DeKalb Pike
King of Prussia, PA 19406
B. The following paragraphs and tables provide certain information with
respect to ownership of Units by the participants and associates of the
participants.
Jerome S. Sanzo
---------------
Mr. Sanzo presently owns beneficially a total of 7,000 Units, of which
5,000 Units are held by Mr. Sanzo individually and 2,000 Units are held by Mr.
Sanzo jointly with his wife. Mr. Sanzo does not presently own any Units of
record but not beneficially. Mr. Sanzo has made the following purchases and
sales of Units during the past two years:
Date Purchase or Sale Number of Units
- ------------------- ---------------- ----------------
November 25, 1996 Purchase 1,000
June 19, 1997 Purchase 700
August 15, 1997 Purchase 1,000
August 26, 1997 Purchase 5,000
August 27, 1997 Sale (1,000)
August 27, 1997 Purchase 300
------
Total: 7,000
26
<PAGE>
Martin W. Field
- -------------------
Mr. Field presently owns beneficially a total of 157,500 Units, all of
which are held jointly by Mr. Field and his wife, Kathleen P. Field. Mr. Field
does not presently own any Units of record but not beneficially. Mr. Field and
associates of Mr. Field have made the following purchases and sales of Units
during the past two years:
Martin W. Field and Kathleen P. Field:
-------------------------------------
Date Purchase or Sale Number of Units
- ------------------------- ---------------- ---------------
October 6, 1997 Purchase 85,000
October 15, 1997 Purchase 14,500
October 17, 1997 Purchase 5,000
-------
Total: 104,500
CLBW Associates, LP:
- -------------------------
Date Purchase or Sale Number of Units
- ------------------------- ---------------- ---------------
November 6, 1997 Purchase 2,500
November 7, 1997 Purchase 7,500
November 13, 1997 Purchase 2,000
November 19, 1997 Purchase 16,000
-------
Total: 28,000
Prussia Associates, LP:
- -------------------------
Date Purchase or Sale Number of Units
- ------------------------- ---------------- ---------------
October 22, 1997 Purchase 10,000
October 27, 1997 Purchase 8,000
October 28, 1997 Purchase 7,000
-------
Total: 25,000
As the sole general partner of CLBW Associates, LP and Prussia Associates,
LP, Martin W. Field has sole voting and dispositive power over the Units held by
such entities. CLBW Associates, LP and Prussia Associates, LP are "associates"
of Mr. Field, as defined in Rule 14a-1 under the Securities Exchange Act of
1934, as amended. The business address of CLBW Associates, LP is 4100
Presidential Boulevard, Philadelphia, PA 19131. The business address of
Prussia Associates, LP is 251 West DeKalb Pike, King of Prussia, PA 19406. The
holdings of CLBW Associates, LP and Prussia Associates, LP identified above
represent the total number of Units beneficially owned by such entities at
present.
27
<PAGE>
A son-in-law of Mr. Field beneficially holds a total of 5,000 Units. Mr.
Field disclaims beneficial ownership of such Units.
A family trust established by Mr. Field for the benefit of the children of
Martin W. Field and Kathleen P. Field (the "Trust") beneficially holds a total
of 117,600 Units. Robert Broder, the sole trustee of the Trust, has sole power
to vote, or to direct the vote, and to dispose, or to direct the disposition of,
all Units held by the Trust. Mr. Broder caused the Trust to acquire such Units
at the request of Mr. Field. Mr. Broder will make independent determinations
regarding the voting, holding and disposition of the Units held by the Trust
based, in part, on the advice of Mr. Field. Mr. Field disclaims beneficial
ownership of the Units held by the Trust.
C. All of the Units described above in Paragraph B were purchased with
personal funds or working capital, and not with funds borrowed or otherwise
obtained for the purpose of acquiring or holding such Units.
D. Except as disclosed below or elsewhere in this Proxy Statement, none of the
participants is, or was within the past year, a party to any contract,
arrangements or understandings with any person with respect to Units.
At the request of Mr. Field, Joseph Selig purchased a total of 117,600
Units on behalf of Mr. Field during the period from June 13, 1997 through
October 3, 1997, with the informal understanding that Mr. Field or his designee
could purchase such Units from Mr. Selig upon Mr. Field's request. Mr. Field
subsequently recommended to Robert Broder, the trustee of the Trust, that the
Trust purchase such Units from Mr. Selig. After evaluating considerations which
he deemed relevant, in addition to Mr. Field's recommendation, Mr. Broder
determined to cause the Trust to purchase the Units from Mr. Selig. The
purchase was effected on October 15, 1997. As indicated above, Mr. Field
disclaims beneficial ownership of the Units held by the Trust.
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Purchases and sales of Units by Mr. Selig during the past two years are as
follows:
Date Purchase or Sale Number of Units
- ------------------------- ---------------- ----------------
June 13, 1997 Purchase 300
June 16, 1997 Purchase 19,700
June 16, 1997 Purchase 10,000
June 17, 1997 Purchase 2,000
June 18, 1997 Purchase 21,000
June 18, 1997 Purchase 9,200
June 18, 1997 Purchase 200
August 15, 1997 Sale (20,000)
August 26, 1997 Purchase 46,000
September 16, 1997 Purchase 12,700
September 22, 1997 Purchase 10,000
September 23, 1997 Purchase 4,000
October 3, 1997 Purchase 2,500
October 15, 1997 Sale (117,600)
E. No participant owns beneficially, directly or indirectly, any securities of
any parent or subsidiary of the Partnership.
F. None of the participants or associates of the participants has had any
transaction, or series of similar transactions, since January 1, 1996, or any
currently proposed transaction, or series of similar transactions, to which the
Partnership or any of its subsidiaries was or is to be a party, in which the
amount involved exceeds $60,000 and in which such participant (or associate)
had, or will have, a direct or indirect material interest.
G. The following paragraphs describe certain arrangements or understandings
regarding future employment or future transactions. Except as disclosed below
or elsewhere in this Proxy Statement, no participant or associate of a
participant has any arrangement or understanding with any person with respect to
any future employment by the Partnership or its affiliates or with respect to
any future transactions to which the Partnership or any of its affiliates will
or may be a party.
In the event that the Partnership and Operating Partners convert into a
corporation, referred to herein as "Newco," Mr. Sanzo would seek to be nominated
to serve on the Board of Directors of Newco and to serve as an executive officer
of Newco.
Mr. Field has more than 30 years of experience in the ownership, management
and renovation of hotels. He presently owns or operates 5 hotels located in
Pennsylvania and New York; two of the hotels operate as Holiday Inns. In view
of Mr. Field's experience and his present ownership of hotels, including two
Holiday Inns, DMC might consider engaging the services of Mr. Field, either
directly or through entities controlled by Mr. Field,
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<PAGE>
to manage or participate in the management of the Partnership's Inns. In the
event that the Partnership and Operating Partners convert into a corporation,
referred to above as "Newco," Mr. Field may be considered as a potential
candidate to serve on the Board of Directors of Newco. Neither DMC nor Mr.
Sanzo have made any commitments to or agreements with Mr. Field regarding these
matters. Furthermore, there can be no assurance that Mr. Field would accept any
management role or position with the Partnership, operating partners or Newco,
if offered to him. (See "The DMC Plan of Action - Review of Contract with
Operational Manager and Consulting Services Agreement.")
DMC would seek to replace the Partnership's underperforming and older
hotels with physically and financially more attractive properties with the
object of increasing the Partnership's revenues and profits. Mr. Sanzo has had
informal discussions with certain hotel owners, including Mr. Field, concerning
the potential acquisition of profitable hotels owned by them. However, no
arrangements have been made or agreements entered into with Mr. Field regarding
the potential sale of any hotels owned by him to either the Partnership or
Newco. Furthermore, there can be no assurance that Mr. Field would consider or
accept any offer made by the Partnership or Newco to purchase any of his hotels.
(See "The DMC Plan of Action - Sale and Replacement of Underperforming
Properties.")
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<PAGE>
PROXY
DAVENPORT MANAGEMENT CORPORATION
THIS PROXY IS BEING SOLICITED ON BEHALF OF DAVENPORT MANAGEMENT CORPORATION FOR
USE AT A SPECIAL MEETING OF UNIT HOLDERS OF PRIME MOTOR INNS LIMITED PARTNERSHIP
SCHEDULED TO BE HELD ON JANUARY 29, 1998.
The undersigned hereby appoints Jerome S. Sanzo and Martin W. Field as proxies
of the undersigned, with full power of substitution, to vote, as specified
herein, all units of limited partnership interest ("Units") of Prime Motor Inns
Limited Partnership (the "Partnership") owned on the record date by the
undersigned at the Special Meeting of Unit Holders to be held, at 2:30 P.M.,
local time on January 29, 1998, and any postponement or adjournment thereof.
DAVENPORT MANAGEMENT CORPORATION RECOMMENDS A VOTE "FOR" EACH OF THE FOLLOWING
PROPOSALS:
1. PROPOSAL TO REMOVE PRIME-AMERICAN REALTY CORP. AS CURRENT GENERAL PARTNER
OF THE PARTNERSHIP
___ FOR ___ AGAINST ___ ABSTAIN
2. PROPOSAL TO APPOINT DAVENPORT MANAGEMENT CORPORATION AS THE NEW GENERAL
PARTNER OF THE PARTNERSHIP, IN THE EVENT THAT PRIME AMERICAN REALTY CORP.
IS REMOVED AS GENERAL PARTNER.
___ FOR ___ AGAINST ___ ABSTAIN
3. PROPOSAL TO REQUEST THAT THE GENERAL PARTNER PREPARE AND SUBMIT TO THE
LIMITED PARTNERS A PROPOSAL FOR THE CONVERSION OF THE PARTNERSHIP TO A
CORPORATION
___ FOR ___ AGAINST ___ ABSTAIN
4. PROPOSAL TO ADJOURN THE SPECIAL MEETING TO PERMIT FURTHER SOLICITATION OF
PROXIES IN THE EVENT THAT THERE ARE NOT SUFFICIENT VOTES TO REMOVE PRIME-
AMERICAN REALTY CORP. AS GENERAL PARTNER OF THE PARTNERSHIP
___ FOR ___ AGAINST ___ ABSTAIN
THE UNITS REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED UNIT HOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED "FOR" THE PROPOSALS SET FORTH ABOVE.
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<PAGE>
Dated: ________________, 199_
_____________________________
(Signature)
_____________________________
(Title)
_____________________________
(Signature)
_____________________________
(Title)
IMPORTANT: Each joint owner should sign.
Executors, administrators, trustees and
others signing in a representative capacity
should give full title. If a corporation,
please sign in full corporate name by
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
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