PRELIMINARY PROXY MATERIALS
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 1)
Filed by the Registrant ( )
Filed by a Party other than the Registrant (X)
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for use of
Commission only (as
( ) Definitive Proxy Statement permitted by Rule 14a-6(e)(2))
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
PRIME MOTOR INNS LIMITED PARTNERSHIP
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
PRIME-AMERICAN REALTY CORP.
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
Title of Each Class of Aggregate Number of Per Unit Price or Proposed Maximum Amount of Filing
Securities to which Securities to which Other Underlying Aggregate Value of Fee
Transaction Applies Transaction Applies Value of Transaction
Transaction
<S> <C> <C> <C> <C>
</TABLE>
( ) Fee paid previously with preliminary materials: $_____.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount previously paid: $______
2) Form, Schedule or Registration Statement No.: ___________
3) Filing Party: ___________
4) Date Filed: _____________
PRIME-AMERICAN REALTY CORP.
GENERAL PARTNER OF PRIME MOTOR INNS LIMITED PARTNERSHIP
P.O. BOX 230
HAWTHORNE, NEW JERSEY 07507
February 18, 1998
To the Holders of Units of Limited Partnership Interest:
By now you have received the Notice of the adjournment of the Special
Meeting of Limited Partners of Prime Motor Inns Limited Partnership (the
"Partnership"), to February 24, 1998 at 6:00 P.M., New York City time, at the
Garden Room, Southgate Tower Hotel, 371 Seventh Avenue, New York, New York
10001. In addition, you should also have received a proxy statement,
supplemental proxy materials and a form of proxy from Davenport Management
Corporation ("DMC"). Please note that this Special Meeting was not called by
Prime-American Realty Corp. ("PARC"), the General Partner of the Partnership,
but by DMC on behalf of a group of dissident Unitholders who are seeking to
remove PARC as General Partner and to name DMC as the new General Partner of
the Partnership. The Special Meeting was adjourned because DMC has thus far
been unable to obtain the required vote to remove PARC.
The General Partner believes that the DMC program, including its so-
called "Plan of Action," is a thinly-veiled attempt to acquire control of the
assets of the Partnership without paying you anything for your equity and
without a coherent business or financing plan that can preserve the value of
your investment. Indeed, the "Plan of Action" acknowledges the prospect of
self-dealing transactions with one of the dissident Unitholders--including
transactions that would further leverage the Partnership, or dilute your
equity, through the acquisition of hotel properties from that Unitholder.
This Unitholder is already subject to judgments against him of more than $6
million to the Federal Deposit Insurance Corporation for default on a
financial obligation and of several hundred thousand dollars to the New York
City Department of Finance for unpaid taxes. EVEN WORSE, BECAUSE THE SO-
CALLED "PLAN OF ACTION" DOES NOT OFFER A COHERENT PLAN TO FINANCE THE RENEWAL
OF THE "HOLIDAY INN" FRANCHISES, IT COULD RESULT IN THE LOSS OF THE "HOLIDAY
INN" FRANCHISE, A DEFAULT UNDER THE PARTNERSHIP'S MORTGAGE LOANS AND THE
DESTRUCTION OF YOUR EQUITY VALUE.
THE GENERAL PARTNER URGES YOU TO REJECT EACH OF THE DMC PROPOSALS BY VOTING
"AGAINST" ALL PROPOSALS ON THE BLUE PROXY CARD.
IF YOUR UNITS ARE HELD IN THE NAME OF A BANK OR BROKERAGE FIRM,
ONLY THAT FIRM CAN EXECUTE A PROXY CARD ON YOUR BEHALF.
PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS
FOR A BLUE PROXY CARD TO BE VOTED "AGAINST" ALL THE DMC PROPOSALS.
IF YOU HAVE QUESTIONS OR NEED ASSISTANCE IN VOTING YOUR UNITS,
PLEASE CONTACT THE FIRM ASSISTING US IN THE SOLICITATION OF PROXIES:
GEORGESON & COMPANY INC.
WALL STREET PLAZA
NEW YORK, NY 10005
TOLL-FREE: 1-800-223-2064
BANKS & BROKERS CALL: 212-440-9600
INTERNET: HTTP://WWW.GEORGESON.COM
The General Partner is following a realistic plan of action that will
protect the Unitholders' equity through an alternative transaction to the
sell the Partnership's interest in its hotel properties to Servico, Inc., for
$8 million in cash. The net proceeds of the transaction will be distributed
to the Unitholders promptly after closing. This transaction is achievable
and represents an assured return to the Unitholders.
The DMC proposals, and the General Partner's reasons for urging
rejection of those proposals, are more completely described in the
accompanying Proxy Statement. I urge you to review carefully the Proxy
Statement.
Sincerely,
PRIME-AMERICAN REALTY CORP.
PRIME-AMERICAN REALTY CORP.
P.O. BOX 230
HAWTHORNE, NEW JERSEY 07507
SPECIAL MEETING OF LIMITED PARTNERS
of
PRIME MOTOR INNS LIMITED PARTNERSHIP
February 24, 1998
PROXY STATEMENT
___________________________
This Proxy Statement is being furnished to holders of units of limited
partnership interest ("Units") in Prime Motor Inns Limited Partnership, a
Delaware limited partnership (the "Partnership"), by Prime-American Realty
Corp., a Delaware corporation ("PARC"), as the general partner of the
Partnership (the "General Partner"). PARC is soliciting the proxies of
Unitholders to vote against, or abstain from voting in connection with, or to
revoke proxies previously given for, proposals made by Davenport Management
Corporation ("DMC"). Those proposals are to be considered at the Special
Meeting of Limited Partners (the "Special Meeting") that has been adjourned
to February 24, 1998, at 6:00 P.M. local time, at the Garden Room, Southgate
Tower Hotel, 371 Seventh Avenue, New York, New York 10001, and any
adjournments or postponements thereof.
At the Special Meeting, the Limited Partners will be asked to consider
and vote on (i) the removal of PARC as General Partner, (ii) the election of
DMC as the replacement General Partner, (iii) the request that PARC prepare
and submit to the Limited Partners a proposal for the conversion of the
Partnership to a corporation and (iv) the adjournment of the Special Meeting
if there are not sufficient votes to remove PARC (so that DMC may solicit
additional votes).
All information contained in this Proxy Statement concerning the
Partnership, AMI and the operations and properties of AMI has been furnished
by the General Partner. No person is authorized to make any representation
with respect to the matters described in this Proxy Statement other than
those contained herein and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Partnership or the General Partner or any other person.
_____________________________________
THIS PROXY STATEMENT IS FIRST BEING MAILED OR DELIVERED TO THE LIMITED
PARTNERS AND UNITHOLDERS ON OR ABOUT FEBRUARY __, 1998. A SOLICITATION WAS
FIRST MAILED OR DELIVERED TO THE LIMITED PARTNERS AND UNITHOLDERS PURSUANT TO
RULES 14A-11 AND 14A-12 UNDER THE SECURITIES EXCHANGE ACT OF 1934 ON OR ABOUT
JANUARY 16, 1998.
_____________________________________
THE DATE OF THIS PROXY STATEMENT IS FEBRUARY __, 1998.
TABLE OF CONTENTS
PAGE
----
THE SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Matters to Be Considered . . . . . . . . . . . . . . . . . . . . . . . 1
Recommendations of the General Partner . . . . . . . . . . . . . . . . 1
Record Date; Units Entitled to Vote . . . . . . . . . . . . . . . . . 1
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effect of Abstentions . . . . . . . . . . . . . . . . . . . . . . . . 2
Proxies; Proxy Solicitation . . . . . . . . . . . . . . . . . . . . . 2
No Appraisal Rights . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE DMC PROPOSALS AND ITS "PLAN OF ACTION" . . . . . . . . . . . . . . . . 4
DMC's Plan to Remove PARC as General Partner . . . . . . . . . . . . . 5
DMC's Financing Plans . . . . . . . . . . . . . . . . . . . . . . . . 5
DMC's Plan to Renegotiate "Holiday Inn" Arrangements . . . . . . . . . 6
DMC's Plan to Sell and Replace Properties . . . . . . . . . . . . . . 6
The DMC "Plan of Action" . . . . . . . . . . . . . . . . . . . . . . . 7
DMC's Plan for Immediate Conversion of the Partnership
to a Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Real Beneficiary of DMC's Plan . . . . . . . . . . . . . . . . . . 7
AN ALTERNATIVE TRANSACTION . . . . . . . . . . . . . . . . . . . . . . . . 8
THE GENERAL PARTNER'S RECOMMENDATION . . . . . . . . . . . . . . . . . . . 9
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to Unitholders in connection
with the solicitation by PARC of votes against, abstentions in connection
with, or the revocation of proxies previously given for, the proposals made
by DMC. Those proposals are to be considered at the Special Meeting that has
been adjourned to February 24, 1998 at 6:00 p.m., local time, at the Garden
Room, Southgate Tower Hotel, 371 Seventh Avenue, New York, New York 10001,
and at any adjournment or postponement thereof. This Proxy Statement is
first being mailed to Limited Partners and Unitholders on or about February
__, 1998. A solicitation was first mailed or delivered to the Limited
Partners and Unitholders pursuant to Rules 14a-11 and 14a-12 under the
Securities Exchange Act of 1934 on or about January 16, 1998.
MATTERS TO BE CONSIDERED
At the Special Meeting, the Limited Partners will consider and vote on
proposals made by Davenport Management Corporation ("DMC") to (i) remove PARC
as General Partner, (ii) to elect DMC as the replacement General Partner,
(iii) to request that PARC prepare and submit to the Limited Partners a
proposal for the conversion of the Partnership to a corporation and (iv) to
adjourn the Special Meeting if there are not sufficient votes to remove PARC
(so that DMC may solicit additional votes). The proposals submitted by DMC,
and DMC's reasons for its proposals, are set forth in a proxy statement first
distributed by DMC on or about December 23, 1997, as supplemented by
additional materials first distributed by DMC on or about February 9, 1998.
RECOMMENDATIONS OF THE GENERAL PARTNER
The General Partner, believes that the Partnership has immediate needs that,
if not addressed, subject the Partnership to the risk of the loss of its
properties and the destruction of the Unitholders' equity. The General
Partner believes that the DMC proposals do not provide a coherent program to
address the pressing needs of the Partnership, involve grave risks to the
Unitholders and are not in your best interests. THE BOARD OF DIRECTORS OF
THE GENERAL PARTNER UNANIMOUSLY RECOMMENDS THAT UNITHOLDERS VOTE AGAINST
APPROVAL OF EACH OF THE DMC PROPOSALS. The Board of Directors also
recommends that the Unitholders not take any action until they have
considered the proposal for the sale of the Partnership's principal asset to
Servico, Inc. and its affiliates (collectively, "Servico") and the subsequent
dissolution of the Partnership, to be described in other proxy solicitation
materials to be distributed to the Limited Partners and the Unitholders as
soon as practicable. See "An Alternative Transaction" below.
RECORD DATE; UNITS ENTITLED TO VOTE
The General Partner, at the request of DMC, fixed the close of business
on December 5, 1997 as the record date (the "Record Date") for determining
the Unitholders who are entitled to notice of, and to vote on the matters to
be acted on at, the Special Meeting. As of the Record Date, 4,000,000 Units
were outstanding.
VOTE REQUIRED
Pursuant to the Partnership Agreement, the approval of DMC's proposal to
remove PARC as General Partner requires the consent of Limited Partners who
collectively hold the right to vote more than 80% of all Units and the
approval of DMC's other proposals requires the consent of Limited Partners
who collectively hold the right to vote more than 50% of all Units.
EFFECT OF ABSTENTIONS
For purposes of determining approval of the DMC proposals at the Special
Meeting, abstentions will have the same legal effect as a vote "against" the
proposals.
PROXIES; PROXY SOLICITATION
The voting of proxies in favor of the DMC proposals is described in the
proxy statement and form of proxy distributed by DMC. Unitholders who do not
support a DMC proposal can (1) vote "AGAINST" or "ABSTAIN" on the form of
proxy distributed by DMC, or (2) abstain (which has the same effect as voting
against the DMC proposals) by not returning the DMC proxy, (3) vote "AGAINST"
on the blue proxy card enclosed herewith and returning that proxy card to
PARC, c/o Georgeson & Company Inc., Wall Street Plaza, New York, NY 10005 as
described in this proxy statement. Unitholders who have voted for the DMC
proposals and wish to change their vote can do so by (a) giving written
notice of the revocation of their proxy to DMC c/o Regan & Associates, Inc.,
15 Park Row, New York, NY 10038, or (b) giving Regan & Associates, Inc. a
later-dated proxy showing a vote "AGAINST" or "ABSTAIN", or (c) giving a
later dated blue proxy card (enclosed with this proxy statement) marked
"AGAINST" or "ABSTAIN" to Georgeson & Company Inc., as described above, or
(d) attending the Special Meeting in person and casting a ballot. If your
Units are held in the name of a bank or brokerage firm, only that firm can
execute a proxy card on your behalf. Please contact the person responsible
for your account and give instructions for a blue proxy card to be voted
"AGAINST" ALL the DMC proposals. If you have questions or need assistance in
voting your shares, please contact Georgeson & Company Inc. at the address
set forth above or telephone, toll-free, to 1-800-223-2064 (banks and brokers
call 212-440-9600).
This Proxy Statement is being distributed on behalf of PARC and officers
and directors of PARC may solicit Unitholders to vote against the DMC
proposals, to abstain from voting in connection with, or to revoke proxies
previously given for the DMC proposals. Such solicitation may be made by
personal interview, telephone, telegram, mail or other means of
communication. In addition, PARC has retained Georgeson & Company Inc. to
assist in forwarding this Proxy Statement and the solicitation of Unitholders
to vote against the DMC proposals, to abstain from voting in connection with,
or to revoke proxies previously given for the DMC proposals The Partnership
will bear the expenses of such solicitation. The officers and directors of
PARC will not be additionally compensated for their solicitation of consents,
but may be reimbursed for their out-of-pocket expenses incurred in connection
with such solicitation. PARC will pay Georgeson & Company Inc. fees expected
to aggregate approximately $30,000 as compensation for its services and, in
addition, will reimburse Georgeson & Company Inc. for out-of-pocket expenses
incurred in connection with such services. Record holders of Units who
forward soliciting material to the beneficial owners of Units held of record
by them will be reimbursed for their reasonable expenses incurred in
forwarding such material.
NO APPRAISAL RIGHTS
If the owners of more than the required percentage of the outstanding
Units consent to vote to approve the DMC proposals, all Unitholders will be
bound by such approval (including those Unitholders who do not vote to
approve). Conversely, if the owners of the required percentage of the
outstanding Units do not consent to vote to approve the DMC proposals, all
Unitholders will be bound by such failure (including those Unitholders who do
vote to approve). Non-consenting Unitholders are not entitled to any rights
of appraisal or similar rights that may be available to dissenting
shareholders in a corporation.
THE DMC PROPOSALS AND ITS "PLAN OF ACTION"
In its proxy statement, DMC proposes removing PARC, and admitting DMC,
as General Partner of the Partnership, and outlines what it calls a "Plan of
Action" for the operation of the Partnership's subsidiary, AMI Operating
Partners, L.P. ("AMI"), and the full-service motor hotels ("Inns") owned by
AMI. PARC thinks that those proposals and the AMI "Plan of Action" reflect a
lack of preparation or appreciation of the business and position of the
Partnership and is potentially dangerous to the Partnership and to the
Unitholders' interests.
Any effort by DMC to act as General Partner without the consent of
the AMI's lenders would subject the Unitholders to the risk of
acceleration of AMI's existing mortgage indebtedness (the "Loans") and
foreclosure on the Inns. AMI's principal lender has advised PARC that
it would not, at this time, consent to the admission of DMC as a suc-
cessor General Partner. As a result, if the Unitholders did vote to
remove PARC and admit DMC as a successor general partner, it is not
clear when, if ever, DMC could in fact act as General Partner.
The "Holiday Inn" franchises for 11 Inns will expire on March 2,
1998. The loss of the "Holiday Inn" franchise will have an extremely
adverse impact on the operations and value of the affected Inns and will
constitute an Event of Default under the Loans. Holiday Hospital
Corporation ("HHC"), the franchisor of the "Holiday Inn" name and
system, has extended the franchises from time to time to permit PARC to
seek to arrange financing for the renewal costs and, lately, to provide
time for the Unitholders to consider the Servico transaction. PARC
believes that if the Unitholders voted to admit DMC as a substitute
General Partner and DMC were not able to demonstrate its ability to
provide assured financing for the franchise renewal costs for those Inns
(and PARC does not have any indication that DMC will be able to raise
financing on a timely basis, if at all), AMI will not be able to retain
the "Holiday Inn" affiliation for the affected Inns.
PARC believes that DMC's proposal to acquire properties will
subject the Unitholders to the risks of excess leverage and/or
substantial dilution of their interests.
PARC believes that DMC's insistence on immediate conversion of the
Partnership to corporate form will cost the Partnership time and money
that need not be spent at this time, if ever.
PARC BELIEVES THAT THE DMC PROPOSALS ARE NOT IN THE BEST INTERESTS OF
THE UNITHOLDERS AND URGES THAT THE UNITHOLDERS REJECT THE DMC PROPOSALS BY
VOTING "AGAINST" ALL THE DMC PROPOSALS ON THE BLUE PROXY CARD ENCLOSED WITH
THIS PROXY STATEMENT.
DMC'S PLAN TO REMOVE PARC AS GENERAL PARTNER
DMC proposes to remove PARC as the general partner of the Partnership and
AMI. AMI's principal lender has advised AMI that removal and replacement of
the general partner of either the Partnership or AMI requires the consent of
the lenders under the Loans. However, while DMC's proxy statement states
that "DMC anticipates that the requisite consents...would be sought" before
the replacement of PARC, AMI's principal lender has advised PARC that "based
upon the information regarding the identity and background of (DMC) received
to date, we would not at this time grant such consent." Replacement of PARC
without the requisite consent of the lenders will constitute an Event of
Default under the Loans and could result in acceleration of the Loans and
present the risk of the loss of the Unitholders' equity.
DMC'S FINANCING PLANS
DMC proposes, as part of its "Plan of Action," to refinance or
restructure AMI's the Loans and anticipates that that restructuring or
refinancing might include the conversion of some of the existing indebtedness
to equity. However, DMC has not presented to the Unitholders any actual
financing proposal. DMC does not even report having any indication of
interest by any financing source to provide such financing, nor does DMC
indicate the terms on which such financing might be arranged (or the effect
on the Unitholders of such arrangements--particularly the possible dilutive
effect of the conversion of debt to equity). DMC says only that "based on
the tenor of (Jerome Sanzo's) informal discussions and his knowledge of both
the capital markets and of the hotel industry and hotel finance, . . .
obtaining such financing might be possible..." (emphasis added).
PARC, however, has been in discussions with AMI's existing lenders and
other debt and equity investors since mid-1995 seeking to arrange financing
for the product improvement programs ("PIPs") and franchise renewal fees to
maintain AMI's expiring "Holiday Inn" franchises and/or to refinance AMI's
existing indebtedness on terms that would provide financing for the franchise
renewals or would enable AMI to generate internally the required funding.
AMI has met with numerous financing sources, including the existing lenders,
conventional mortgage lenders, and sponsors of securitization and conduit
transactions. AMI's existing lenders have declined to provide additional
financing, have refused to convert any portion of the existing debt to equity
or to sell the existing debt at a discount, have refused to allow any of net
proceeds of sale of Inns to be applied to fund PIPs or other franchise
renewal fees, and have not agreed to permit any additional indebtedness.
Despite extensive efforts from 1995 through the end of September, 1997,
PARC did not receive any financing proposals that would have provided
sufficient financing or that PARC considered in the best interests of the
Unitholders. While PARC did receive some financing proposals, those
proposals were in the nature of preliminary indications of interest, rather
than definitive proposals, and would not have provided funds sufficient to
repay the Loans, let alone finance franchise renewal costs. In any event,
those proposals were contingent upon the existing debt being purchased at a
discount (which the existing lenders have told PARC they will not consider)
and required that the new lenders receive a substantial equity interest in
the Partnership or AMI, to the detriment of the Unitholders. Based on its
experience, PARC believes that it is unlikely that DMC will be able to
arrange adequate financing on terms that are not disadvantageous to the
Unitholders. And without financing, the Unitholders face the imminent loss
of the Inns and their entire investment.
DMC'S PLAN TO RENEGOTIATE "HOLIDAY INN" ARRANGEMENTS
DMC states in its proxy statement that it will "attempt to negotiate
appropriate arrangements with (HHC)," including short-term franchise
extensions for Inns that will be sold, long-term extensions for the retained
Inns and an agreement regarding the PIPs. PARC has already negotiated
satisfactory arrangements with HHC and DMC never suggests what "appropriate
arrangements" it might negotiate or how those arrangements would differ from
those that PARC has already negotiated. HHC was willing to permit the Inns
that are to be sold to remain in the "Holiday Inn" system for a reasonable
period, not beyond June, 1998, in order to permit an orderly sale; HHC had
agreed to franchise renewals for the other Inns, subject to payment of re-
newal fees and the availability of funding for required PIPs; HHC had reached
substantial agreement with PARC on the nature and magnitude of, and the
schedule for, the PIPs for the renewed Inns; and HHC granted AMI extensions
of the franchises to allow time for the previously-announced transaction with
Servico, Inc. to be considered by the Unitholders.
Based on PARC's extensive negotiations with HHC and HHC's consistent
policies and practices, PARC thinks that there is no reason to believe that
DMC will be able to negotiate terms different from those already negotiated
by PARC. Further, PARC believes, also based on its extensive negotiations
with HHC and HHC's consistent policies and practices, that if DMC is not able
to demonstrate its ability to provide assured financing for the PIPs and
franchise renewal fees, HHC will not grant further extensions of the expiring
franchises. Based on DMC's apparent lack of any firm financing plan, PARC
believes that if the DMC "Plan of Action" is implemented, the Unitholders
face the very real risk of the loss of the "Holiday Inn" franchises (and the
loss of the Unitholders' equity) in the near term.
DMC'S PLAN TO SELL AND REPLACE PROPERTIES
Though DMC states in its proxy statement that the replacement of
underperforming Inns is "a key element of revamping the Partnership's
operations," DMC merely repeats PARC's existing plans for the sale of
underperforming Inns. Furthermore, DMC does not address the fact that the
net proceeds of the sale of Inns must be applied to the repayment of existing
debt and cannot be used to acquire replacement properties. DMC appears to
assume that the Partnership, after being converted to a corporation, could
acquire additional properties either with additional debt (leveraging the new
property 100%) or simply by issuing additional equity. Though DMC states
that the Partnership is over-leveraged, it does not give any indication of
the impact of 100% leverage (if that financing is in fact available) for its
new acquisition. Nor does DMC give any indication of how badly the existing
Unitholders would be diluted by the issuance of additional equity for
acquisitions (though common sense suggests that the interests of existing
Unitholder would probably be substantially diluted).
THE DMC "PLAN OF ACTION"
PARC believes that DMC's own description in its proxy statement of its
"Plan of Action" makes clear that DMC has not performed the analysis and
review of the operations of the Partnership sufficient to support its
election as the General Partner. DMC states:
"... Neither DMC nor any person acting on its behalf has performed
or caused to be performed any analysis of the extent to which
(Partnership) expense reduction and control could be
effected."
"... DMC has not conducted such review (of the W&H Management
Agreement and the Consulting Services Agreement) and cannot
predict the outcome of the review, if conducted."
While DMC lists its "Plan of Action", it admits that "... there can
be no assurance that any of the objectives could be attained."
DMC'S PLAN FOR IMMEDIATE CONVERSION OF THE PARTNERSHIP TO A CORPORATION
DMC recites at some length in its proxy statement the desirability of
converting the Partnership to corporate form (in some measure merely
repeating the disclosures heretofore made by PARC in its Quarterly Reports in
1997). However, there is no tax benefit to the conversion and many of the
purported benefits (such as the statement that the new corporation would have
greater access to the capital markets) are asserted without support and
appear intended merely to provide a basis for other elements of DMC's "Plan
of Action."
The formulation of the structure of the new corporation and the
development of the most tax-efficient mechanism for the conversion, and the
submission of the proposal to the Unitholders and the lenders for their
approval, will cost the Partnership time and money. However, the Partnership
has entered into an agreement with Servico to sell the Partnership's interest
in AMI to Servico and to dissolve. If the Unitholders approve that sale and
dissolution, it will not be necessary to expend the Partnership's limited
funds to consider conversion or to convert to corporate form.
THE REAL BENEFICIARY OF DMC'S PLAN
DMC's proxy statement states that, as part of DMC's plan to replace
"underperforming Inns," Jerome Sanzo, President of DMC, had "explored certain
hotel properties ... as potential acquisition candidates" and "has had
discussions with Martin W. Field ... concerning several profitable hotels
owned or controlled by him." That proxy statement indicates that certain of
DMC's proxy solicitation expenses have been advanced to DMC by Martin W.
Field and that "DMC may seek reimbursement from the Partnership for such fees
and expenses, and ... does not intend to seek limited partner approval for
such reimbursement ... unless such approval is required under Delaware law."
In addition, the DMC proxy statement says that "in view of Mr. Field's
experience and his present ownership of hotels, ... DMC might consider
engaging the services of Mr. Field either directly or through entities
controlled by Mr. Field, to manage or participate in the management of the
Partnership's Inns." Finally, DMC says in its proxy statement that, if the
Partnership converts to corporate form, "Mr. Field may be considered as a
potential candidate to serve on the Board of Directors of (the new
corporation) or as a consultant to (the new corporation)." During the summer
and early fall of 1997 Mr. Field and his wife acquired an approximately 4%
stake in the Partnership, and a trust established by Mr. Field for his
children acquired an approximately 3% stake in the Partnership. All in all,
it appears to PARC that a principal consequence of the DMC "Plan of Action"
is that Mr. Field and his affiliates will take over operation of the
Partnership and management of the Inns, with the prospect that they will seek
to sell their properties to the Partnership.
The judgment dockets of Federal District Courts in New York and Florida
show that in 1990 the Federal Deposit Insurance Corporation recovered a
judgment in Florida against Mr. Fields in the amount of $6 million for loans
on which Mr. Field defaulted in connection with a real estate venture, which
judgment was filed in New York in 1994. The judgment docket of the County
Clerk of New York County, New York, shows that in 1991 and 1992 the New York
City Department of Finance obtained several judgments against Mr. Fields,
totaling several hundred thousand dollars, for occupancy taxes unpaid by a
real estate venture.
AN ALTERNATIVE TRANSACTION
As reported to the Unitholders in the Quarterly Report on Form 10-Q for
the third quarter of 1997, PARC concluded that, because AMI had been unable
to raise the financing needed to finance the renewal of the "Holiday Inn"
franchises, there was an immediate risk of loss of the "Holiday Inn"
affiliation, decline in the value of the Inns and default under the Priming
and Mortgage Loans. In order to preserve Unitholder value, the Partnership
entered into an agreement to sell its limited partnership interest in AMI to
Servico for $8,000,000 in cash. Immediately following that transaction (and
as required by the terms of the agreement with Servico), the Partnership is
to dissolve and distribute the sale proceeds (net only of any taxes on the
sale and expenses not borne by AMI) to the Unitholders.
The sale of the Partnership's interest in AMI and the Partnership's
subsequent dissolution both are subject to the consent of the Unitholders.
The Partnership has filed with the Securities and Exchange Commission, and in
the near future will distribute to the Unitholders, proxy materials in
connection with the solicitation of consents to that sale and dissolution.
THE GENERAL PARTNER'S RECOMMENDATION
The Board of Directors of the General Partner's has unanimously
determined that, for the reasons set forth above, the DMC proposals will not
address the financing and operating needs of AMI and the Inns or protect the
interests of the Unitholders. THE GENERAL PARTNER URGES THAT THE UNITHOLDERS
RETURN THE BLUE PROXY CARD ENCLOSED WITH THIS PROXY STATEMENT MARKED
"AGAINST." If your Units are held in the name of a bank or brokerage firm,
only that firm can execute a proxy card on your behalf. Please contact the
person responsible for your account and GIVE INSTRUCTIONS FOR A BLUE PROXY
CARD TO BE VOTED "AGAINST" ALL THE DMC PROPOSALS. If you have questions or
need assistance in voting your shares, please contact Georgeson & Company
Inc., Wall Street Plaza, New York, NY 10005, or telephone, toll-free, to 1-
800-223-2064 (banks and brokers call 212-440-9600). Unitholders who vote
against the DMC proposals and wish to change their vote can do so by (a)
giving written notice of the revocation of their proxy to PARC, c/o Georgeson
& Company Inc. at the address set forth above or (b) giving Georgeson &
Company Inc. a later-dated proxy showing a vote "FOR", or (c) attending the
Special Meeting in person and casting a ballot.
PROXY
PRIME-AMERICAN REALTY CORP.
THIS PROXY IS BEING SOLICITED ON BEHALF OF PRIME-AMERICAN REALTY CORP.,
THE GENERAL PARTNER OF PRIME MOTOR INNS LIMITED PARTNERSHIP, FOR USE AT A
SPECIAL MEETING OF LIMITED PARTNERS SCHEDULED TO BE HELD ON FEBRUARY 24,
1998.
The undersigned hereby appoints S. Leonard Okin, Robert Familant and
Seymour G. Siegel, and each of them, 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 December 5, 1997 by the undersigned at the Special
Meeting of Limited Partners to be held at 6:00 P.M., local time, on February
24, 1998, and any postponement or adjournment thereof.
PRIME-AMERICAN REALTY CORP. RECOMMENDS A VOTE "AGAINST"
EACH OF THE FOLLOWING PROPOSALS:
1. PROPOSAL TO REMOVE PRIM-AMERICAN REALTY CORP. AS GENERAL PARTNER OF THE
PARTNERSHIP
( ) FOR ( ) AGAINST ( ) ABSTAIN
-- -- --
2. PROPSAL TO APPOINT DAVENPORT MANAGEMENT CORPORATION AS THE SUBSTITUTE
GENERAL PARTNER OF THE PARTNERSHIP, WITH THE SUBSTITUTION TO TAKE EFFECT
ONLY IF 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 PROXIES NAMED ABOVE ARE HEREBY AUTHORIZED, IN THEIR DISCRETION, TO
VOTE UPON ANY AND ALL OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING
OR ANY ADJOURNMENT OR POSTPONMENT THEREOF.
THE UNITS REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSINGED UNIT HOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED "AGAINST" THE PROPOSALS SET FORTH ABOVE.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
Dated: , 1998
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(Signature)
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(Title)
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(Signature)
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(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. If a trust, please
sign by the trustee (if a corporate trustee, in
full corporate name by authorized officer).
PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
