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Exhibit 8.2
[VINSON & ELKINS L.L.P.]
October 24, 1997
Homegate Hospitality, Inc.
111 Congress Avenue, Suite 2600
Austin, Texas 78701
Gentlemen:
You have requested our opinion with respect to certain federal income
tax consequences of the planned merger (the "Merger") of PH Sub Corporation
("Sub"), a wholly-owned subsidiary of Prime Hospitality Corp. ("Prime"), with
and into Homegate Hospitality, Inc. ("Homegate") pursuant to an Agreement and
Plan of Merger dated July 25, 1997 (the "Merger Agreement"). Defined terms
used in the Merger Agreement have the same meaning when used herein, unless
otherwise defined herein.
In rendering this opinion, we have examined and are relying upon
(without any independent investigation or review thereof) the truth and
accuracy at all relevant times of the statements, covenants, and
representations contained in (i) the Merger Agreement (including all disclosure
schedules thereto), (ii) the Proxy Statement/Prospectus (which was included in
the Registration Statement filed by Prime with the Securities and Exchange
Commission (the "Registration Statement) on the date hereof), and (iii) the
Officers' Certificates dated the date hereof which were provided to us by
Homegate and Prime. Any inaccuracy in any of the aforementioned statements,
representations, and assumptions or breach of any of the aforementioned
covenants could adversely affect our opinion.
On the basis of and subject to the foregoing, and subject to the
limitations set forth below, it is our opinion that, under presently applicable
federal income tax law, the Merger will be treated as a reorganization within
the meaning of section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and Homegate, Sub and Prime will each be a party to that
reorganization within the meaning of Section 368(b) of the Code. As a result,
the following U.S. federal income tax consequences will occur:
(a) no gain or loss will be recognized by Homegate, Sub or Prime
in connection with the Merger;
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(b) no gain or loss will be recognized by Homegate stockholders
upon their exchange of Homegate Common Stock for Prime Common Stock, except
that a Homegate stockholder who receives cash proceeds in lieu of a
fractional share interest in Prime Common Stock will recognize gain or loss
equal to the difference between the amount of cash received and the tax
basis allocated to the fractional share interest;
(c) the tax basis of the shares of Prime Common Stock received
by a Homegate stockholder will be equal to the tax basis of the Homegate
Common Stock surrendered in exchange therefor, reduced by any tax basis
allocated to a fractional share interest in Prime Common Stock for which
cash is received; and
(d) the holding period of the shares of Prime Common Stock
received by a Homegate stockholder will include the holding period or
periods during which the Homegate Common Stock surrendered in exchange
therefor was held, provided that such Homegate Common Stock was held as a
capital asset by such stockholder within the meaning of Section 1221 of the
Code at the Effective Date.
Our opinion is based on our interpretation of the Code, applicable Treasury
regulations, judicial authority, and administrative rulings and practice, all as
in effect as of the date hereof. There can be no assurance that future
legislative, judicial or administrative changes or interpretations will not
adversely affect the accuracy of the conclusions set forth herein. We do not
undertake to advise you as to any such future changes or interpretations unless
we are specifically retained to do so. Our opinion will not be binding upon the
Internal Revenue Service (the "IRS"), and the IRS will not be precluded from
adopting a contrary position.
No opinion is expressed as to any matter not specifically addressed above,
including, without limitation, the tax consequences of the Merger under any
foreign, state, or local tax law. Moreover, tax consequences which are different
from or in addition to those described herein may apply to holders of Homegate
Common Stock who are subject to special treatment under the U.S. federal income
tax laws, such as persons who acquired their shares in compensatory transactions
in exchange for services rendered.
If the IRS successfully challenged the status of the Merger as a
reorganization, a holder of Homegate Common Stock would recognize gain or loss
in an amount equal to the difference between the stockholder's tax basis in his
or her shares and the fair market value, as of the Effective Time, of Prime
Common Stock received in exchange therefor. In such event, the stockholder's tax
basis in Prime Common Stock so received would be equal to its fair market value
as of the Effective Time and the holding period for such stock would begin on
the day after the Effective Time.
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We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. This opinion is being delivered to you solely for that
purpose, and may be relied upon by Homegate as provided in the Registration
Statement. It may not be relied upon or used for any other purpose and may not
otherwise be distributed or made available to anyone without our prior written
consent.
Very truly yours,
/s/ Vinson & Elkins L.L.P.
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Vinson & Elkins L.L.P.
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