PRIME MOTOR INNS LTD PARTNERSHIP, PRRN14A, 1997-12-16

PRIME MOTOR INNS LTD PARTNERSHIP
PRRN14A, 1997-12-16
HOTELS & MOTELS

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DAVENPORT MANAGEMENT CORPORATION

December __, 1997

To the Limited Partners, Holders of Depositary Receipts and Unit Holders of
Prime Motor Inns Limited Partnership:

The undersigned, Davenport Management Corporation, is seeking your support
to approve the removal of 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 the Proposals" in the accompanying Proxy
Statement.)

You 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 LIMITED PARTNERS,
HOLDERS OF DEPOSITARY RECEIPTS AND
UNIT HOLDERS OF PRIME MOTOR INNS
LIMITED PARTNERSHIP

To be Held on January 29, 1998

GENERAL INFORMATION

This Proxy Statement and the accompanying GOLD 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, limited partners of the Partnership ("Limited
Partners"), holders of Depositary Receipts and 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
- -----------------------------------------

The Partnership, at the request of DMC, has fixed the close of business
on December 5, 1997, as the record date (the "Record Date") for determination of
Limited Partners, holders of Depositary Receipts and holders of Units
(collectively, "Eligible Persons") 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. Under the
Partnership Agreement, 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.

DMC owns no Units; Jerome S. Sanzo, the sole officer, director and
stockholder of DMC, beneficially owns a total of 7,000 Units. Another
participant in this proxy solicitation, Martin W. Field, beneficially owns a
total of 157,500 Units. (Certain additional information regarding the beneficial
ownership of Units by Messrs. Sanzo and Field is set forth below in Appendix I.)

Solicitation and Voting of Proxies
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Eligible Persons 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.

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Solicitation Expenses
- ---------------------

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 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 $80,000. 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.

Certain Information Regarding the Partnership
- ---------------------------------------------

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 assets 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.

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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 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") as general partner of the Partnership, pursuant
to Section 1002(a) of the Partnership Agreement, for the reasons set forth below
under "Reasons for the Proposals." The effective date of the removal would be
determined subsequent to the Special Meeting by DMC; notice of the removal date
would be given to Prime-American in accordance with the provisions of Section
1002(b) of the Partnership Agreement, as described below.

Under the terms of Section 1002(a) of 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 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 the required
opinion would be rendered.

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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 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 Proposal 1, as described above, is
approved by Unit holders and Prime-American is removed as general partner. That
is, Proposal 1 must be approved and implemented as a condition to DMC becoming
the substitute 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. DMC intends to
satisfy such requirements on or before the date on which the Special Meeting is
held.

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

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counsel, requested that Brown & Wood LLP, counsel to 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 the required opinion would be rendered.

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, 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 also indicated that it
"believes that, as a result of its operating losses, it should not have any tax
liability for a substantial period of time and such 3.5% of gross revenues
payment would be substantially in excess of any corporate income tax that the
Partnership might foreseeable [sic] pay." (DMC believes that, accordingly, it
would be advantageous from a tax standpoint for the Partnership to be taxed as a
corporation rather than as a partnership after December 31, 1997.) 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 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 Unitholders and the General Partner." However, no such
proposal has been submitted to date. The Partnership reported substantially the
same information in its Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 (the "Third Quarter 10-Q"), with the exception that the
Partnership omitted a statement that it expected to submit a proposal regarding
the conversion to the Limited Partners. Counsel to the Partnership has
informally advised DMC that, in their view, in light of a pending offer to
purchase substantially all of the Partnership's assets submitted to the
Partnership by Servico, Inc., it would not be appropriate to make preparations
for the conversion at the present time inasmuch as, if the sale of substantially
all of the Partnership's assets to Servico, Inc. were approved and consummated,
it would be unnecessary for the Partnership to convert to corporate form. (See
"Background of the Proxy Solicitation - The Servico Offer.")

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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 conversion proposal to the Unit holders for
approval as promptly as possible. The vote on this Proposal 3 is not a vote on
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the conversion, but only a recommendation and request that a proposal to approve
- --------------
the conversion be prepared and presented at a future time to the Limited
Partners and Unit holders, 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 affords certain advantages over the partnership form
with respect to financing, liquidity and acquisition matters. It is also
generally recognized that equity holders in a corporation have greater voice in
the selection of management than in a limited partnership. In addition, DMC
believes that it is likely that the Partnership would incur fewer costs of tax
reporting and compliance. 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. It is generally recognized that lenders, for example,
are more hesitant to lend to limited partnerships than to
corporations.

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 often do not 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

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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 on an annual basis directly by holders of the
common stock of the successor corporation. In contrast, the
general partner of the Partnership does not stand for
election, although, as provided in the Partnership Agreement,
the general partner may be removed and substitute general
partners may be elected.

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 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
relevant agent or servicer under the Loan Agreements 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 necessary number of lenders and
mortgage note holders under the Loan Agreements 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, DMC
anticipates that 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

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In the event that there are not sufficient votes to remove the present
general partner at the time of the Special Meeting, Eligible Persons will be
asked to 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 Eligible Persons 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 Eligible Persons 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 Eligible
Persons other than an announcement of such time and place at the Special
Meeting.

REASONS FOR THE PROPOSALS

Introduction
- ------------

The troubled history of the Partnership and its operating difficulties,
its 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 through recent years 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. Recently, however, the Partnership entered into a definitive
agreement with Servico, Inc. to sell substantially all of the Partnership's
assets to Servico, Inc. (See "Background of the Proposals - The Servico Offer.")

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 by

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approximately 13% 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 L.L.P., 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
matters raise substantial doubt about the Partnerships'
ability to continue as a going concern."

4. The Units were delisted by the New York Stock Exchange
("NYSE") 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 NYSE'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 Property 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

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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 noted above, Prime-American has in fact not submitted any such proposal, and
a representative of Prime-American has indicated to DMC'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 Prime-American 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 available information
regarding the Partnership and upon his extensive knowledge of and experience in
the hotel industry, hotel finance and the capital markets. (See "Certain
Information Regarding 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
with HII relating to certain of the Partnership's
properties.

. A review of the performance of the Managing Director of
Prime-American in his capacity as consultant to the
Partnership 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. However, 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.

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. 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 lenders 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 appearance and which are either losing money or, in the opinion of
Prime-American, 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 timely or
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 franchises 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

12
<PAGE>

If the Unit holders remove Prime-American as the general partner of the
Partnership and elect DMC as the substitute general partner, DMC will
immediately act to implement the plan described below. As noted above, 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 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 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 tenor of his informal discussions and his knowledge of both the capital
markets and of the hotel industry and hotel finance, that obtaining such
financing might be possible in connection with the implementation of DMC's
business plan. DMC intends to pursue

13
<PAGE>

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
Hazleton. DMC would also consider a disposition of the hotel at Frederick,
Maryland. 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- American], will not
produce a sufficient return to justify the costs to complete
the HII PIPs 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, if achieved, 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

14
<PAGE>

as potential acquisition candidates, although Mr. Sanzo did not indicate to
their owners that he 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 "Certain Information Regarding Participants in the Solicitation - Martin W.
Field" and "- Certain Related Interests of Participants in the Solicitation.")
Although an intensive analysis of these potential acquisition candidates has not
been completed, DMC believes that such potential acquisitions might 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 Agreement, 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 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.
------------------------------------------------------

In the Second Quarter 10-Q and the Third Quarter 10-Q, the
Partnership reported that 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

15
<PAGE>

by the manager of the Inns, 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.

During the process of disposition and acquisition of hotels, DMC would
attempt to negotiate appropriate arrangements with HII. These arrangements would
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 PIPs. As noted above, Mr. Sanzo has discussed with
representatives of the Partnership's lenders and potential new lenders financing
the PIP requirements for retained hotels as part of the general refinancing of
the senior secured debt.

4. Review of Contracts 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 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 Prime-American, entered into a Consulting Services
Agreement (the "Consulting Services Agreement") with the Partnership, Operating
Partners and Prime-American, 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 Prime-American, 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

16
<PAGE>

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. DMC notes that, as reported in the
1996 10-K, "Other" expenses increased 8.43%, from $7,718,000 at December 31,
1995 to $8,369,000 at December 31, 1996, while Total Revenues increased at a
significantly slower rate of 4.45% during the same period. In the Third Quarter
10-Q, the Partnership reported "Other" expenses in the amount of $6,624,000 for
the nine months ended September 30, 1997, which represents an increase of 8.9%
from the "Other" expenses in the amount of $6,082,000 for the nine months ended
September 30, 1996.

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. However, in the absence of information regarding the
nature of the "Other" category of expenses, no assurance can be given that the
amount of such expenses could be decreased.

6. Removal of Prime-American as General Partner of Operating
---------------------------------------------------------
Partners.
- --------

17
<PAGE>

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 servicer (the
"Mortgage Loan Agreement") (collectively, the Priming Loan Agreement and the
Mortgage Loan Agreement are referred to herein as the "Loan Agreements").
However, based on a review of the Loan Agreements, DMC does not believe that a
change in the general partner of the Partnership alone would 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 Mortgage 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 of any partner in
Operating Partners 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 servicer under the Loan Agreements 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 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. At September 30, 1997, as reported in the
Third Quarter 10-Q, the long-term debt outstanding under the Loan Agreements was
$63,556,000, all of which would potentially be subject to acceleration.

18
<PAGE>

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 under "Proposal 1 - To Remove the General
Partner," pursuant to the Partnership Agreement, in the event that Prime-
American shall be removed as general partner of the Partnership, Prime-American
shall also be removed as general partner of Operating Partners. As further
described above under "Proposal 2 - To Elect DMC as a Substitute General
Partner," 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 any such action could
be deemed to constitute a "change in the ownership interest of any partner in
Operating Partners," such action would require the consents of the Required
Lenders and the Required Holders under the Loan Agreements. DMC anticipates that
the requisite consents to the change in general partner of Operating Partners
would be sought in advance of the effectiveness of such removal and
substitution; however, there can be no assurance that such consents, if sought,
would be obtained.

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. DMC anticipates that, in order to effect such a conversion, a
Delaware corporation ("Newco") will be formed into which the Partnership and
Operating Partners would be merged in a multi-step transaction. 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 has 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. As a result
of more recent conversations between Mr. Sanzo and Martin W. Field,

19
<PAGE>

an independent real estate owner, developer and manager, in 1997 Mr. Sanzo
reviewed and analyzed publicly available information regarding the business and
operations of the Partnership. (As more fully described below, Mr. Sanzo had met
Mr. Field during the performance of his duties as an executive and credit
officer at Banque Indosuez.) Based on his analysis, Mr. Sanzo believed, and
continues to believe, 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 (most recently in August 1997)
and several discussions with Mr. Okin, the 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 to be owned and controlled by Mr. Sanzo.

After an exchange of correspondence between representatives of DMC and
Prime-American, in late September 1997, Prime-American 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 to vote upon 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,
Prime-American consented to the postponement of the special meeting to a date to
be mutually agreed upon so that, in the

20
<PAGE>

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 might (but would not necessarily) be held to vote upon both the proposal
for the removal of the Prime-American and related proposals and the Servico
Offer (discussed below). Thereafter, representatives of DMC selected, with the
concurrence of Prime-American, the date of January 29, 1998, for the Special
Meeting.

By letter dated December 10, 1997, from counsel to DMC, DMC requested
that the Partnership provide it with a list of Unit holders as of December 5,
1997; the list was provided to counsel to DMC on December 15, 1997.

Invitation to Mr. Sanzo to Bid for Hotels.
- -----------------------------------------

By letter dated September 11, 1997, sent to Mr. Sanzo by W&H on behalf
of Prime-American (the "Offer Letter"), W&H offered to sell to Mr. Sanzo the
Inns owned by the Partnership by permitting him to acquire the equity in the
Partnerships that own the Inns. Mr. Sanzo rejected the offer by letter to Prime-
American 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 not receive value for the Inns which would reflect the
long-term prospects of the Partnership under new management.

The Servico Offer
- -----------------

21
<PAGE>

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 percent of Operating Partners which is not owned by the
Partnership.

In the Third Quarter 10-Q, the Partnership reported that, on November
7, 1997, it had signed a definitive agreement with Servico to sell to Servico
the Partnership's 99% limited partnership interest in Operating Partners. In a
Current Report on Form 8-K (the "Form 8-K"), filed with the Commission on or
about November 21, 1997, the Partnership provided certain additional information
regarding the proposed transaction with Servico and filed as an exhibit thereto
a copy of the definitive Acquisition Agreement dated as of November 7, 1997.

In the Form 8-K, the Partnership reported that, under the terms of the
Acquisition Agreement, Service Acquisition Corp., a wholly-owned subsidiary of
Servico ("SAC"), will acquire the 99% limited partnership interest of the
Partnership in Operating Partners, for a cash payment to the Partnership of
$8,000,000 and certain undertakings by Servico. Under the Acquisition Agreement,
SAC will take the Partnership's 99% limited partnership interest in Operating
Partners subject to the existing indebtedness and other obligations of Operating
Partners.

The Partnership further reported that it understands that Servico has
agreed with Prime Hospitality, Inc. ("Prime"), the parent company of Prime-
American, to acquire Prime-American's 1% general partnership interest in
Operating Partners in exchange for a warrant to acquire stock of Servico. The
Partnership understands that, as part of such transaction, Prime-American and
Prime will waive any rights that they may have to receive any distributions by
the Partnership of the proceeds of the sale of Partnership's limited partnership
interest in Operating Partners. The Partnership also understands that Servico
has agreed to retain S. Leonard Okin, a Vice President of Prime-American, as a
consultant following the transaction.

The Partnership reported that the transaction with Servico is subject
to the approval of holders of a majority of the "Depositary Units" and that a
meeting of Unit holders will be scheduled to consider the transaction. As of the
date hereof, the Partnership had not yet filed preliminary proxy solicitation
materials with the Commission regarding the transaction and DMC has no knowledge
as to when the Partnership will solicit votes on such matter.

Mr. Sanzo has informed Prime-American that he opposes the
Servico Offer.

CERTAIN INFORMATION REGARDING PARTICIPANTS IN THE SOLICITATION

Jerome S. Sanzo
- ---------------

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 United States, Asia, and the South Pacific, and in particular,
has over 13 years experience in real estate matters in this country and
abroad.

Mr. Sanzo is presently a business consultant whose activities are
conducted through his wholly-owned company, Bennelong Holdings LLC, 52 Davenport
Ridge Road, Stamford, CT 06903. He is also the sole officer and director of
DMC, which was organized primarily to conduct this proxy solicitation.

During the past eight years, until June 1997, Mr. Sanzo initially was
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

22
<PAGE>

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.

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 addition, during the period of 1990 through 1997, as part of Mr.
Sanzo's duties as an executive of Indosuez, Mr. Sanzo served as President and a
director of a number of Indosuez subsidiaries which owned buildings in Texas,
Illinois, Michigan, Virginia, New Jersey, and New York. These included office
buildings, warehouses, shopping centers, and hotels. In addition, on behalf of a
group of foreign financial institutions including Indosuez, Mr. Sanzo was
President and a director of Conference Center Interests, Inc. ("CCI"), 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. (Mr. Sanzo did not receive compensation from such subsidiaries of
Indosuez or from CCI.)

During the 1990's, two of the Indosuez subsidiaries of which Mr. Sanzo
was President and a director, owned hotels: 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 with respect to these properties, i.e., control and
responsibility of all management, operational, capital expenditure, and
divestment issues.

In 1994, Mr. Sanzo was also named the executive in charge of all North
American restructuring and workout activities, including 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.

23
<PAGE>

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 an independent 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 five hotels in Pennsylvania and New
York, all of which are part of the Holiday Inn Worldwide system. Two of these
hotels operate as Holiday Inns; all five of the hotels are operating profitably.
Mr. Field's executive offices are located at c/o Valley Forge Hilton, 251 West
DeKalb Pike, King of Prussia, PA 19406.

Further information regarding beneficial ownership of Units and other
matters with respect to the participants in this proxy solicitation is set forth
in Appendix I to this Proxy Statement.

Certain Related Interests of Participants in the Solicitation
- -------------------------------------------------------------

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, including Operating Partners,
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.

As noted above, Mr. Field has more than 30 years of experience in the
ownership, management and renovation of hotels. He presently owns or operates
five 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, 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 or as a consultant to 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
Contracts 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.")

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.

<TABLE>
<CAPTION>
Ownership of Units
-----------------------------------------------
Number Percentage
of Units Total No. of of Units
Name and Address of Owner Held Units Held Outstanding
- ------------------------- ---- ---------- -----------
<S> <C> <C> <C>
S. Leonard Okin
c/o Prime-American Realty Corp.
P.O. Box 230 1,000 1,000 0.025%
Hawthorne, NJ 07507-0230 ----- ----- ------

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)
------- ------- ------
</TABLE>

(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.

24
<PAGE>

DMC has been informed by Martin W. Field that, on the date hereof, Mr.
Field and his wife, Kathleen P. Field, may be deemed to hold beneficially a
total of 157,500 Units.

DMC further understands that, on the date hereof, 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.

YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THE ACCOMPANYING
GOLD PROXY CARD PROMPTLY.

25
<PAGE>

APPENDIX I

A. Set forth below is certain information with respect to ownership of
Units by the participants in this proxy solicitation 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
---- ---------------- ---------------
<S> <C> <C>
October 6, 1997 Purchase 85,000
October 15, 1997 Purchase 14,500
October 17, 1997 Purchase 5,000
-------

Total: 104,500

</TABLE>

CLBW Associates, LP:
-------------------

Date Purchase or Sale Number of Units
---- ---------------- ---------------
<S> <C> <C>
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

</TABLE>

Prussia Associates, LP:
----------------------

Date Purchase or Sale Number of Units
---- ---------------- ---------------
<S> <C> <C>
October 22, 1997 Purchase 10,000
October 27, 1997 Purchase 8,000
October 28, 1997 Purchase 7,000
------

Total: 25,000

</TABLE>

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. Each of these limited partnerships was
organized to hold one of the hotels owned by Mr. Field. 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.

B. All of the Units described above in Paragraph A 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.

C. 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. (Certain
information regarding the purchases effected by Mr. Selig is set forth below in
this Paragraph C.) 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.
Messrs. Field (together with his spouse) and Selig filed a Statement on Schedule
13D dated October 17, 1997 (the "Statement"), reporting beneficial ownership as
a "group," but only until October 15, 1997 (the date of the purchase of Units
from Mr. Selig by the Trust), of a total of 217,000 Units, then constituting
approximately 5.4% of the outstanding Units. The Statement further reported
that, as of October 15, 1997, Mr. Field ceased to be the beneficial owner of
more than five percent of the outstanding Units.

28
<PAGE>

Purchases and sales of Units by Mr. Selig during the past two years are
as follows:

Date Purchase or Sale Number of Units
---- ---------------- ---------------
<S> <C> <C>
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)

</TABLE>

D. No participant owns beneficially, directly or indirectly, any securities of
any parent or subsidiary of the Partnership.

E. 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. See also "Certain
Information Regarding Participants in the Solicitation - Certain Related
Interests of Participants in the Solicitation."

29
<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.

30
<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.

31
<PAGE>

[LETTERHEAD OF DILWORTH, PAXSON, KALISH & KAUFFMAN LLP]

DIRECT DIAL NUMBER: Merritt A. Cole
(215) 575-7250

December 15, 1997

VIA EDGAR TRANSMISSION AND FACSIMILE
- ------------------------------------

James J. Moloney, Esq.
Special Counsel
Office of Mergers & Acquisitions
Securities and Exchange Commission
450 Fifth Street, N.W. Mail Stop 3-3
Washington, DC 20549

Re: Prime Motor Inns Limited Partnership
Revised Preliminary Proxy Statement filed by
Davenport Management Corporation
File No. 1-9311
-----------------------------------------------------

Dear Mr. Moloney:

On behalf of Davenport Management Corporation ("DMC"), we are filing
concurrently herewith via EDGAR transmission DMC's second revised preliminary
proxy statement.

The revised preliminary proxy statement reflects the comments set forth in
the staff's letter dated December 10, 1997 (the "Second Comment Letter"),
regarding the proxy statement and form of proxy as filed on December 8, 1997.

In order to facilitate your review of DMC's responses to the Second Comment
Letter, we are transmitting to you by facsimile the following:

1. a copy of the Second Comment Letter on which we have marked in the
left hand margin, with respect to each comment, the number of the page
---------
in the revised proxy statement on which the response to the comment
appears; and
<PAGE>

2. a copy of the revised proxy statement which has been marked with the
number of each staff comment in the right hand margin opposite the
----------
paragraph in which DMC's response to the comment appears. We have
also manually marked this copy to note certain additional
modifications which we have made in the text.

If you have any questions regarding the responses to the Second Comment
Letter or otherwise concerning the revised preliminary proxy statement, please
contact the undersigned at the telephone number indicated above, or, in my
absence, Gary E. Murphy, Esq. of this office at tel. (215) 575-7274.

Very truly yours,

/s/ Merritt A. cole

Merritt A. Cole
For: Dilworth, Paxson, Kalish & Kauffman LLP

MAC:pab
Enclosures
cc: Jerome S. Sanzo, President
Davenport Management Corporation
(w/encls.)