EQUITY INNS INC, S-4, 1998-05-22

EQUITY INNS INC
S-4, 1998-05-22
REAL ESTATE INVESTMENT TRUSTS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1998

REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

EQUITY INNS, INC.
(Exact name of registrant as specified in its charter)
---------------------

<TABLE>
<S> <C> <C>
TENNESSEE 7011 62-1550848
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification No.)
organization)
4735 SPOTTSWOOD, SUITE 102 PHILLIP H. MCNEILL, SR.
MEMPHIS, TENNESSEE 38117 EQUITY INNS, INC.
(901) 761-9651 4735 SPOTTSWOOD, SUITE 102
(Address, including zip code, and telephone MEMPHIS, TENNESSEE 38117
number, including (901) 761-9651
area code, of registrant's principal executive (Name, address, including zip code, and
offices) telephone number, including
area code, of agent for service)
</TABLE>

---------------------
COPIES TO:

<TABLE>
<S> <C>
DAVID C. WRIGHT, ESQ. JOHN A. GOOD, ESQ.
HUNTON & WILLIAMS BAKER, DONELSON, BEARMAN & CALDWELL
951 EAST BYRD STREET 165 MADISON AVENUE, 20TH FLOOR
RICHMOND, VIRGINIA 23219-4074 MEMPHIS, TENNESSEE 38103
(804) 788-8638 (901) 577-2148
</TABLE>

---------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective and upon
consummation of the transactions described in the enclosed Joint Proxy
Statement/Prospectus.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
- ---------------

If this Form is post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------
---------------------
CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
=====================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM MAXIMUM AMOUNT OF
SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED BE REGISTERED(1) PER SHARE(1) OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share.......................... 25,850,630 shares $19.96875 $516,204,768 $152,281
=====================================================================================================================
</TABLE>

(1) Determined pursuant to Rule 457(f)(1).
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

[LETTERHEAD OF EQUITY INNS, INC.]

, 1998

Fellow Shareholder of Equity Inns, Inc.:

We cordially invite you to attend a special meeting of shareholders of
Equity Inns, Inc. ("Equity Inns") to be held at the corporate offices of Equity
Inns, 4735 Spottswood, Suite 102, Memphis, Tennessee 38117 on July , 1998 at
2:00 p.m. local time (the "Equity Inns Special Meeting").

At the Equity Inns Special Meeting, you will be asked to consider and
approve three proposals. First, you will be asked to consider and vote upon a
proposal (the "Merger Proposal") to approve the Asset Sale Agreement and Plans
of Mergers dated as of April 21, 1998 (the "Merger Agreement") by and among RFS
Hotel Investors, Inc. ("RFS"), Equity Inns, RHI Acquisition, Inc., a
wholly-owned subsidiary of Equity Inns ("Merger Sub"), RFS Partnership, L.P.
("RFS OP") and Equity Inns Partnership, L.P. ("Equity Inns OP"), and the
issuance of shares of Equity Inns' common stock, $.01 par value per share (the
"Equity Inns Common Stock"), in connection with the transactions described
therein.

The Merger Agreement contemplates a merger of RFS with and into Merger Sub
(the "REIT Merger"), with Merger Sub surviving the REIT Merger. Moreover, RFS OP
will effect the sale of all its assets to Equity Inns OP by means of the merger
of RFS OP with and into Equity Inns OP (the "OP Merger"), with Equity Inns OP
surviving the OP Merger. In the REIT Merger, each issued and outstanding share
of common stock of RFS, $.01 par value per share, and each issued and
outstanding share of Series A preferred stock of RFS, $.01 par value per share,
will be converted into the right to receive from Equity Inns a number of shares
of Equity Inns Common Stock determined as follows (the "Exchange Ratio"): (i) if
the Average Price (as defined in the accompanying Joint Proxy
Statement/Prospectus) is equal to or greater than $14.00 but less than or equal
to $17.00, 1.5 shares of Equity Inns Common Stock, or (ii) if the Average Price
is greater than $17.00, the number of shares of Equity Inns Common Stock
determined by dividing $25.50 by the Average Price. If the Average Price is less
than $14.00, then either Equity Inns or RFS may terminate the Merger Agreement.
In the OP Merger, each outstanding unit of partnership interest in RFS OP will
be converted into the right to receive from Equity Inns OP a number of units of
partnership interest in Equity Inns OP ("Equity Inns OP Units") equal to the
Exchange Ratio. Each Equity Inns OP Unit is redeemable, at the option of the
holder, for one share of Equity Inns Common Stock or, at Equity Inns' option,
for cash. Under Tennessee law, which is the law governing the Merger Agreement
and the REIT Merger, the Merger Agreement and plan of merger contained therein
must be approved by holders of record of a majority of the shares of Equity Inns
Common Stock outstanding as of the close of business on 1998, the
record date for the Equity Inns Special Meeting (the "Equity Inns Record Date").
In addition, approval of the Equity Inns shareholders is required under the
rules of The New York Stock Exchange for the issuance of the shares of Equity
Inns Common Stock in the REIT Merger and upon the redemption of Equity Inns OP
Units issued in connection with the OP Merger.

The second proposal (the "Charter Amendment Proposal") you will be asked to
consider and vote upon is a proposal to amend Article 5 of Equity Inns' Second
Amended and Restated Charter to increase the number of authorized shares of
Equity Inns Common Stock from 100,000,000 shares to 200,000,000 shares (the
"Charter Amendment"). The Charter Amendment Proposal is conditioned upon the
approval of the Merger Proposal. If a quorum is present at the Equity Inns
Special Meeting and the Merger Proposal is approved, the Charter Amendment will
be approved if the votes cast in favor of the Charter Amendment Proposal exceed
the votes cast in opposition to the Charter Amendment Proposal.

The third proposal (the "Plan Amendment Proposal") you will be asked to
consider and vote upon is a proposal to amend the Equity Inns, Inc. 1994 Stock
Incentive Plan to increase the aggregate number of shares of Equity Inns Common
Stock reserved for issuance thereunder from 2,300,000 shares to 6,400,000 shares
and
<PAGE> 3

to increase the number of those shares that may be issued as restricted stock
amounts and in settlement of performance shares from 350,000 to 960,000 (the
"Plan Amendment"). The Plan Amendment Proposal is conditioned upon the approval
of the Merger Proposal. If a quorum is present at the Equity Inns Special
Meeting and the Merger Proposal is approved, the Plan Amendment will be approved
if the votes cast in favor of the Plan Amendment Proposal exceed the votes cast
in opposition to the Plan Amendment Proposal.

YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER PROPOSAL IS FAIR TO AND IN
THE BEST INTERESTS OF EQUITY INNS AND ITS SHAREHOLDERS. THE BOARD HAS
UNANIMOUSLY ADOPTED THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE APPROVAL OF THE MERGER PROPOSAL. MOREOVER, YOUR BOARD OF DIRECTORS
ALSO HAS UNANIMOUSLY ADOPTED THE CHARTER AMENDMENT PROPOSAL AND THE PLAN
AMENDMENT PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF
THE CHARTER AMENDMENT PROPOSAL AND THE PLAN AMENDMENT PROPOSAL.

In deciding to adopt the Merger Agreement and recommend the Merger
Proposal, your Board of Directors carefully reviewed and considered the terms
and conditions of the proposed REIT Merger and OP Merger, as well as a number of
other factors. In addition, your Board of Directors has received the written
opinion dated as of April 21, 1998, of Morgan Keegan & Company, Inc., Equity
Inns' financial advisor, as to the fairness, from a financial point of view, of
the Exchange Ratio to Equity Inns shareholders and Equity Inns OP unitholders.
The full text of the written opinion of Morgan Keegan & Company, Inc., dated as
of April 21, 1998, which sets forth the assumptions made, matters considered and
limitations on the review undertaken, is attached as Annex II-A to the
accompanying Joint Proxy Statement/Prospectus and should be read carefully in
its entirety.

The accompanying Joint Proxy Statement/Prospectus provides detailed
information concerning the proposals described above and the transactions
contemplated by the Merger Agreement and certain additional information. Such
information includes the information set forth under the heading "Risk Factors,"
which describes, among other things, benefits to certain RFS officers and
directors and potential adverse effects to public shareholders of Equity Inns,
all of which you are urged to read carefully. It is important that your Equity
Inns Common Stock be represented at the Equity Inns Special Meeting, regardless
of the number of shares you hold. Therefore, please complete, sign, date and
return your proxy card as soon as possible, whether or not you plan to attend
the Equity Inns Special Meeting. This will not prevent you from voting your
shares in person if you subsequently choose to attend the Equity Inns Special
Meeting. Your broker will vote your shares only if you instruct your broker how
to vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. If you do not tell your broker how
to vote, your shares will not be voted.

Your vote is important. Approval of the Merger Proposal requires the
affirmative vote of the holders of record of a majority of the shares of Equity
Inns Common Stock outstanding on the Equity Inns Record Date. FAILURE TO VOTE OR
RETURN YOUR PROXY CARD WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER
PROPOSAL. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE EQUITY INNS SPECIAL
MEETING IN PERSON AND REGARDLESS OF THE NUMBER OF SHARES YOU OWN, I URGE YOU TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED
PREPAID ENVELOPE AS SOON AS POSSIBLE. As a holder of record, you may, of course,
attend the Equity Inns Special Meeting and vote in person, even if you have
previously returned your proxy card.

Thank you.

Sincerely,

Phillip H. McNeill, Sr.
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 4

EQUITY INNS, INC.
4735 SPOTTSWOOD, SUITE 102
MEMPHIS, TENNESSEE 38117
---------------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY , 1998
---------------------

Notice is hereby given that a special meeting of the shareholders (the
"Equity Inns Special Meeting") of Equity Inns, Inc. ("Equity Inns") will be held
at the corporate offices of Equity Inns, 4735 Spottswood, Suite 102, Memphis,
Tennessee 38117 on July , 1998 at 2:00 p.m. local time.

The purposes of the Equity Inns Special Meeting are:

1. To consider and vote upon a proposal (the "Merger Proposal") to
approve the Asset Sale Agreement and Plans of Mergers dated as of April 21,
1998 (the "Merger Agreement") by and among RFS Hotel Investors, Inc.
("RFS"), Equity Inns, RHI Acquisition, Inc., a wholly-owned subsidiary of
Equity Inns ("Merger Sub"), RFS Partnership, L.P. ("RFS OP") and Equity
Inns Partnership, L.P. ("Equity Inns OP"), and the issuance of shares of
Equity Inns' common stock, $.01 par value per share (the "Equity Inns
Common Stock"), in connection with the proposed REIT Merger (defined below)
and upon redemption of Equity Inns OP Units (also defined below) issued in
connection with the OP Merger (also defined below);

2. To consider and vote upon a proposal (the "Charter Amendment
Proposal") to amend Article 5 of Equity Inns' Second Amended and Restated
Charter to increase the number of authorized shares of Equity Inns Common
Stock from 100,000,000 shares to 200,000,000 shares, which proposal is
conditioned upon approval of the Merger Proposal;

3. To consider and vote upon a proposal (the "Plan Amendment
Proposal") to amend the Equity Inns, Inc. 1994 Stock Incentive Plan to
increase the aggregate number of shares of Equity Inns Common Stock
reserved for issuance thereunder from 2,300,000 shares to 6,400,000 shares
and to increase the number of those shares that may be issued as restricted
stock awards and in settlement of performance shares from 350,000 to
960,000, which proposal is conditioned upon approval of the Merger
Proposal; and

4. To transact such other business as may properly come before the
Equity Inns Special Meeting or any adjournment or postponement thereof.

IT IS IMPORTANT THAT YOUR SHARES OF EQUITY INNS COMMON STOCK BE REPRESENTED
AT THE EQUITY INNS SPECIAL MEETING. PLEASE COMPLETE, SIGN, DATE AND RETURN THE
ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE SO THAT YOUR
SHARES OF EQUITY INNS COMMON STOCK WILL BE REPRESENTED AT THE EQUITY INNS
SPECIAL MEETING. SHAREHOLDERS ATTENDING THE EQUITY INNS SPECIAL MEETING MAY VOTE
PERSONALLY ON ALL MATTERS THAT ARE CONSIDERED, IN WHICH EVENT THE SIGNED PROXIES
ARE REVOKED. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBE IN THE
ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT IS VOTED AT
THE EQUITY INNS SPECIAL MEETING. PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES
WITH YOUR PROXY CARD.

Only Equity Inns shareholders of record at the close of business on
, 1998, the record date for the Equity Inns Special Meeting (the "Equity Inns
Record Date"), will be entitled to notice of and to vote at the Equity Inns
Special Meeting and any adjournment or postponement thereof.

The presence, in person or by proxy, of holders of a majority of the total
number of outstanding shares of Equity Inns Common Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the Equity
Inns Special Meeting. Under Tennessee law, which is the law governing the Merger
Agreement and the REIT Merger, the Merger Proposal must be approved by the
holders of record of a majority of the shares of Equity Inns Common Stock
outstanding on the Equity Inns Record Date. In addition, approval of the Equity
Inns shareholders is required under the rules of The New York Stock Exchange for
the issuance of the shares of Equity Inns Common Stock in the REIT Merger and
upon the redemption of Equity Inns OP Units issued in connection with the OP
Merger. If a quorum is present at the Equity Inns Special Meeting and the Merger
Proposal is approved, the Charter Amendment Proposal and the Plan Amendment
Proposal, respectively, will be approved if the votes cast in favor of the
Charter Amendment Proposal and the Plan Amendment Proposal, respectively, exceed
the votes cast in opposition to the Charter Amendment Proposal and the Plan
Amendment Proposal, respectively.

Enclosed as a part of this Notice of Special Meeting is a Joint Proxy
Statement/Prospectus, which contains further information regarding the REIT
Merger, the OP Merger, the Merger Agreement, the Charter Amendment Proposal and
the Plan Amendment Proposal.

By Order of the Board of Directors,

Howard A. Silver
Executive Vice President, Secretary,
Treasurer
and Chief Financial Officer
Memphis, Tennessee
, 1998
<PAGE> 6

[LETTERHEAD OF RFS HOTEL INVESTORS, INC.]

, 1998

Fellow Shareholder of RFS Hotel Investors, Inc.:

We cordially invite you to attend a special meeting of shareholders of RFS
Hotel Investors, Inc. ("RFS") to be held at the corporate offices of RFS, 850
Ridge Lake Boulevard, Suite 220, Memphis, Tennessee 38120 on July , 1998 at
2:00 p.m. local time (the "RFS Special Meeting").

At the RFS Special Meeting, you will be asked to consider and approve the
Asset Sale Agreement and Plans of Mergers dated as of April 21, 1998 (the
"Merger Agreement") by and among RFS, Equity Inns, Inc. ("Equity Inns"), RHI
Acquisition, Inc., a wholly-owned subsidiary of Equity Inns ("Merger Sub"), RFS
Partnership, L.P. ("RFS OP") and Equity Inns Partnership, L.P. ("Equity Inns
OP").

The Merger Agreement contemplates a merger of RFS with and into Merger Sub
(the "REIT Merger"), with Merger Sub surviving the REIT Merger. Moreover, RFS OP
will effect the sale of all its assets to Equity Inns OP by means of the merger
of RFS OP with and into Equity Inns OP (the "OP Merger"), with Equity Inns OP
surviving the OP Merger. In the REIT Merger, each issued and outstanding share
of common stock of RFS, $.01 par value per share (the "RFS Common Stock"), and
each issued and outstanding share of Series A preferred stock of RFS, $.01 par
value per share (the "RFS Preferred Stock" and, together with the RFS Common
Stock, the "RFS Capital Stock"), will be converted into the right to receive
from Equity Inns a number of shares of common stock of Equity Inns, $.01 par
value per share (the "Equity Inns Common Stock"), determined as follows (the
"Exchange Ratio"): (i) if the Average Price (as defined in the accompanying
Joint Proxy Statement/Prospectus) is equal to or greater than $14.00 but less
than or equal to $17.00, 1.5 shares of Equity Inns Common Stock, or (ii) if the
Average Price is greater than $17.00, the number of shares of Equity Inns Common
Stock determined by dividing $25.50 by the Average Price. If the Average Price
is less than $14.00, then either Equity Inns or RFS may terminate the Merger
Agreement. In the OP Merger, each outstanding unit of partnership interest in
RFS OP will be converted into the right to receive from Equity Inns OP a number
of units of partnership interest in Equity Inns OP ("Equity Inns OP Units")
equal to the Exchange Ratio. Each Equity Inns OP Unit is redeemable, at the
option of the holder, for one share of Equity Inns Common Stock or, at Equity
Inns' option, for cash. Under Tennessee law, which is the law governing the
Merger Agreement and the REIT Merger, the REIT Merger as described in the Merger
Agreement and plan of merger contained therein must be approved by holders of
record of a majority of the shares of RFS Capital Stock outstanding as of the
close of business on , 1998, the record date for the RFS
Special Meeting (the "RFS Record Date"), voting as a single group.

YOUR BOARD OF DIRECTORS BELIEVES THAT THE REIT MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF RFS AND ITS SHAREHOLDERS. THE BOARD HAS UNANIMOUSLY ADOPTED
THE MERGER AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL
OF THE MERGER AGREEMENT.

In deciding to adopt the Merger Agreement and recommend shareholder
approval thereof, your Board of Directors carefully reviewed and considered the
terms and conditions of the proposed REIT Merger and OP Merger, as well as a
number of other factors. In addition, your Board of Directors has received the
written opinion dated as of April 21, 1998, of Salomon Smith Barney, RFS'
financial advisor, as to the fairness, from a financial point of view, of the
Exchange Ratio to the RFS shareholders and RFS OP unit holders. The full text of
the written opinion of Salomon Smith Barney, dated as of April 21, 1998, which
sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached as Annex II-B to the accompanying Joint Proxy
Statement/Prospectus and should be read carefully in its entirety.

describes, among other things, benefits to certain RFS officers and directors
and potential adverse effects to public shareholders of RFS, all of which you
are urged to read carefully. It is important that your RFS Capital Stock be
represented at the RFS Special Meeting, regardless of the number of shares you
hold. Therefore, please complete, sign, date and return your proxy card as soon
as possible, whether or not you plan to attend the RFS Special Meeting. This
will not prevent you from voting your shares in person if you subsequently
choose to attend the RFS Special Meeting. Your broker will vote your shares only
if you instruct your broker how to vote. You should follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares. If you do not tell your broker how to vote, your shares will not be
voted.

Your vote is important. Approval of the Merger Agreement requires the
affirmative vote of the holders of record of a majority of the shares of RFS
Common Stock and RFS Preferred Stock outstanding on the RFS Record Date, voting
as a single group. FAILURE TO VOTE OR TO RETURN YOUR PROXY CARD WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE MERGER AGREEMENT. THEREFORE, WHETHER OR NOT
YOU PLAN TO ATTEND THE RFS SPECIAL MEETING IN PERSON AND REGARDLESS OF THE
NUMBER OF SHARES YOU OWN, I URGE YOU TO COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY CARD AND RETURN IT IN THE ENCLOSED PREPAID ENVELOPE AS SOON AS POSSIBLE.
As a holder of record, you may, of course, attend the RFS Special Meeting and
vote in person, even if you have previously returned your proxy card.

Thank you.

Sincerely,

Robert M. Solmson
Chairman of the Board, President and
Chief Executive Officer
<PAGE> 8

RFS HOTEL INVESTORS, INC.
850 RIDGE LAKE BOULEVARD, SUITE 220
MEMPHIS, TENNESSEE 38120
---------------------

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY , 1998
---------------------

Notice is hereby given that a special meeting of the shareholders (the "RFS
Special Meeting") of RFS Hotel Investors, Inc. ("RFS") will be held at the
corporate offices of RFS, 850 Ridge Lake Boulevard, Suite 220, Memphis,
Tennessee 38120 on July , 1998 at 2:00 p.m. local time.

The purposes of the RFS Special Meeting are:

1. To consider and vote upon a proposal to approve the Asset Sale
Agreement and Plans of Mergers dated as of April 21, 1998 (the "Merger
Agreement") by and among RFS, Equity Inns, Inc. ("Equity Inns"), RHI
Acquisition, Inc., a wholly-owned subsidiary of Equity Inns ("Merger Sub"),
RFS Partnership, L.P. ("RFS OP") and Equity Inns Partnership, L.P. ("Equity
Inns OP"); and

2. To transact such other business as may properly come before the RFS
Special Meeting or any adjournment or postponement thereof.

The Merger Agreement contemplates a merger of RFS with and into Merger Sub
(the "REIT Merger"), with Merger Sub surviving the REIT Merger. Moreover, RFS OP
will effect the sale of all its assets to Equity Inns OP by means of the merger
of RFS OP with and into Equity Inns OP (the "OP Merger"), with Equity Inns OP
surviving the OP Merger. In the REIT Merger, each issued and outstanding share
of common stock of RFS, $.01 par value per share (the "RFS Common Stock"), and
each issued and outstanding share of Series A preferred stock of RFS, $.01 par
value per share (the "RFS Preferred Stock" and, together with the RFS Common
Stock, the "RFS Capital Stock"), will be converted into the right to receive
from Equity Inns a number of shares of common stock of Equity Inns, $.01 par
value per share ("Equity Inns Common Stock"), determined as follows (the
"Exchange Ratio"): (i) if the Average Price (as defined in the accompanying
Joint Proxy Statement/Prospectus) is equal to or greater than $14.00 but less
than or equal to $17.00, 1.5 shares of Equity Inns Common Stock, or (ii) if the
Average Price is greater than $17.00, the number of shares of Equity Inns Common
Stock determined by dividing $25.50 by the Average Price. If the Average Price
is less than $14.00, then either RFS or Equity Inns may terminate the Merger
Agreement. In the OP Merger, each outstanding unit of partnership interest in
RFS OP will be converted into the right to receive from Equity Inns OP a number
of units of partnership interest in Equity Inns OP ("Equity Inns OP Units")
equal to the Exchange Ratio. Each Equity Inns OP Unit is redeemable, at the
option of the holder, for one share of Equity Inns Common Stock or, at Equity
Inns' option, for cash.

Holders of RFS Preferred Stock are entitled to assert dissenters' rights
under Chapter 23 of the Tennessee Business Corporation Act, as amended. A copy
of the applicable sections of such act are included as Annex III of the
accompanying Joint Proxy Statement/Prospectus.

IT IS IMPORTANT THAT YOUR SHARES OF RFS CAPITAL STOCK BE REPRESENTED AT THE
RFS SPECIAL MEETING. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY
CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES OF RFS
CAPITAL STOCK WILL BE REPRESENTED AT THE RFS SPECIAL MEETING. SHAREHOLDERS
ATTENDING THE RFS SPECIAL MEETING MAY VOTE PERSONALLY ON ALL MATTERS THAT ARE
CONSIDERED, IN WHICH EVENT THE SIGNED PROXIES ARE REVOKED. YOU MAY REVOKE YOUR
PROXY IN THE MANNER DESCRIBE IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT IS VOTED AT THE RFS SPECIAL MEETING.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD.

Only RFS shareholders of record at the close of business on ,
1998, the record date for the RFS Special Meeting (the "RFS Record Date"), will
be entitled to notice of and to vote at the RFS Special Meeting and any
adjournment or postponement thereof.
<PAGE> 9

The presence, in person or by proxy, of holders of at least a majority of
the total number of outstanding shares of RFS Capital Stock entitled to vote is
necessary to constitute a quorum for the transaction of business at the RFS
Special Meeting. Under Tennessee law, which is the law governing the Merger
Agreement and the REIT Merger, the Merger Agreement must be approved by the
holders of record of a majority of the shares of RFS Capital Stock outstanding
on the RFS Record Date, voting as a single group.

Enclosed as a part of this Notice of Special Meeting is a Joint Proxy
Statement/Prospectus, which contains further information regarding the REIT
Merger, the OP Merger and the Merger Agreement.

By Order of the Board of Directors,

Michael J. Pascal
Secretary, Treasurer and Chief
Financial Officer

Memphis, Tennessee
, 1998
<PAGE> 10

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED MAY 21, 1998
JOINT PROXY STATEMENT/PROSPECTUS

<TABLE>
<S> <C>
EQUITY INNS, INC. RFS HOTEL INVESTORS, INC.
SPECIAL MEETING TO BE HELD ON SPECIAL MEETING TO BE HELD ON
JULY , 1998 JULY , 1998
</TABLE>

---------------------

PROSPECTUS
EQUITY INNS, INC.
COMMON STOCK, $.01 PAR VALUE PER SHARE
---------------------

This Joint Proxy Statement/Prospectus (together with the Annexes attached
hereto, the "Joint Proxy Statement/ Prospectus") is being furnished to
shareholders of Equity Inns, Inc., a Tennessee corporation ("Equity Inns"), and
shareholders (including common and preferred shareholders) of RFS Hotel
Investors, Inc., a Tennessee corporation ("RFS"), in connection with the
solicitation of proxies by the Board of Directors of Equity Inns (the "Equity
Inns Board") for use at the special meeting of shareholders of Equity Inns
scheduled to be held at the corporate offices of Equity Inns, 4735 Spottswood,
Suite 102, Memphis, Tennessee 38117 on July , 1998 at 2:00 p.m. local time
(including any adjournment or postponement thereof) (the "Equity Inns Special
Meeting") and by the Board of Directors of RFS (the "RFS Board") for use at the
special meeting of shareholders of RFS scheduled to be held at the corporate
offices of RFS, 850 Ridge Lake Boulevard, Suite 220, Memphis, Tennessee 38120,
on July , 1998 at 2:00 p.m. local time (including any adjournment or
postponement thereof) (the "RFS Special Meeting" and, together with the Equity
Inns Special Meeting, the "Special Meetings").
The purpose of the Equity Inns Special Meeting is to consider and vote upon
three separate proposals (collectively, the "Equity Inns Proposals"):
- a proposal (the "Merger Proposal") to approve the Asset Sale
Agreement and Plans of Mergers dated as of April 21, 1998 (the
"Merger Agreement") by and among RFS, Equity Inns, RHI Acquisition,
Inc., a Tennessee corporation and a wholly-owned subsidiary of
Equity Inns ("Merger Sub"), RFS Partnership, L.P., a Tennessee
limited partnership ("RFS OP"), and Equity Inns Partnership, L.P., a
Tennessee limited partnership ("Equity Inns OP"), and the issuance
of shares of Equity Inns' common stock, $.01 par value per share
(the "Equity Inns Common Stock"), to common and preferred
shareholders of RFS in connection with the proposed REIT Merger
(defined below) and upon the redemption of units of partnership
interest in Equity Inns OP ("Equity Inns OP Units") issued to the
partners of RFS OP in connection with the OP Merger (also defined
below). The affirmative vote of the holders of record of a majority
of the shares of Equity Inns Common Stock outstanding as of the
close of business on the Equity Inns Record Date (defined below) is
required for approval of the Merger Proposal.
- a proposal (the "Charter Amendment Proposal") to amend Article 5 of
Equity Inns' Second Amended and Restated Charter (the "Equity Inns
Charter") to increase the number of authorized shares of Equity Inns
Common Stock from 100,000,000 shares to 200,000,000 shares (the
"Charter Amendment").
- a proposal (the "Plan Amendment Proposal") to amend the Equity Inns,
Inc. 1994 Stock Incentive Plan (the "Equity Inns Plan") to increase
the aggregate number of shares of Equity Inns Common Stock reserved
for issuance thereunder from 2,300,000 shares to 6,400,000 shares
and to increase the number of those shares that may be issued as
restricted stock awards and in settlement of performance shares from
350,000 to 960,000 (the "Plan Amendment").
The Charter Amendment Proposal and the Plan Amendment Proposal are
conditioned upon the approval of the Merger Proposal. If a quorum is present at
the Equity Inns Special Meeting and the Merger Proposal is approved, the votes
cast in favor of the Charter Amendment Proposal and the Plan Amendment Proposal,
respectively, must exceed the votes cast in opposition to the Charter Amendment
Proposal and the Plan Amendment Proposal, respectively, represented in person or
by proxy at the Equity Inns Special Meeting, to approve the Charter Amendment
Proposal and the Plan Amendment Proposal, respectively.
(Continued on next page)

FOR CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN EVALUATING THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE REIT MERGER,
SEE "RISK FACTORS" BEGINNING ON PAGE 19.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS IS , 1998.
<PAGE> 11

The purpose of the RFS Special Meeting is to consider and vote upon a
proposal (the "RFS Proposal") to approve the Merger Agreement. The affirmative
vote of the holders of record of a majority of the shares of RFS' common stock,
$.01 par value per share (the "RFS Common Stock"), and RFS' Series A preferred
stock, $.01 par value per share (the "RFS Preferred Stock" and, together with
the RFS Common Stock, the "RFS Capital Stock"), voting as a single group,
outstanding as of the close of business on the RFS Record Date (defined below)
is required for approval of the RFS Proposal. Holders of RFS Preferred Stock are
entitled to dissenters' rights under Chapter 23 of the Tennessee Business
Corporation Act, as amended (the "TBCA"). See "Summary -- Dissenters' Rights"
and "The REIT Merger -- Preferred Shareholders' Dissenters' Rights."

The Merger Agreement provides for the merger of RFS with and into Merger
Sub (the "REIT Merger"), with Merger Sub being the surviving corporation (the
"Surviving Corporation"), and for the sale by RFS OP of all its assets to Equity
Inns OP by means of the merger (the "OP Merger" and, together with the REIT
Merger and the CMBS Merger (as defined below), the "Mergers") of RFS OP with and
into Equity Inns OP, with Equity Inns OP being the surviving limited partnership
(the "Surviving OP"). In the REIT Merger, each issued and outstanding share of
RFS Capital Stock (except for shares of RFS Preferred Stock with respect to
which dissenters' rights shall have been perfected in accordance with the TBCA)
will be converted into the right to receive from Equity Inns a number of shares
of Equity Inns Common Stock determined as follows (the "Exchange Ratio"): (i) if
the Average Price (as defined below) is equal to or greater than $14.00 but less
than or equal to $17.00, 1.5 shares of Equity Inns Common Stock, or (ii) if the
Average Price is greater than $17.00, the number of shares of Equity Inns Common
Stock determined by dividing $25.50 by the Average Price. In the OP Merger, each
outstanding unit of partnership interest in RFS OP ("RFS OP Units") will be
converted into the right to receive from Equity Inns OP a number of Equity Inns
OP Units equal to the Exchange Ratio. Each Equity Inns OP Unit is redeemable at
the option of the holder for one share of Equity Inns Common Stock or, at Equity
Inns' option, for cash. It is a condition to consummation of the Mergers that
the Average Price be at least $14.00, and either Equity Inns or RFS may
terminate the Merger Agreement if the Average Price is less than $14.00. See
"Risk Factors -- Risks Associated with the Mergers -- Risks Resulting From Fixed
Exchange Ratio."

Assuming conversion of all Equity Inns OP Units and all RFS OP Units held
by limited partners of Equity Inns OP and RFS OP, based on the closing price of
the Equity Inns Common Stock on The New York Stock Exchange (the "NYSE") of
$14 3/8 per share on May 19, 1998 and the number of shares of capital stock of
Equity Inns and RFS outstanding on that date, approximately 52.7% of the shares
of Equity Inns Common Stock expected to be outstanding after the REIT Merger
would be issued to RFS shareholders.

This Joint Proxy Statement/Prospectus constitutes a prospectus of Equity
Inns with respect to the issuance of up to shares of Equity Inns
Common Stock to be issued to common and preferred shareholders of RFS in
connection with the REIT Merger. Such number of shares represents the estimated
maximum number of shares of Equity Inns Common Stock that could be issued in the
REIT Merger. The actual number of shares of Equity Inns Common Stock issued in
the REIT Merger will vary depending upon the Exchange Ratio. The outstanding
shares of Equity Inns Common Stock are, and the shares offered hereby will be,
listed on the NYSE under the symbol "ENN."

All information contained in this Joint Proxy Statement/Prospectus relating
to Equity Inns and its subsidiaries has been supplied by Equity Inns, and all
information relating to RFS and its subsidiaries has been supplied by RFS. This
Joint Proxy Statement/Prospectus and the accompanying forms of proxy cards are
first being mailed to shareholders of Equity Inns and RFS on or about
, 1998.

(ii)
<PAGE> 12

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Joint Proxy Statement/Prospectus constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, and can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. The statements under the caption "Risk Factors" in this
Joint Proxy Statement/Prospectus constitute cautionary statements identifying
important factors, including material risks and uncertainties, with respect to
such forward-looking statements that could cause actual results to differ
materially from those reflected in such forward-looking statements.

AVAILABLE INFORMATION

Both Equity Inns and RFS are subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by Equity Inns and RFS with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at its Regional Office at Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661 and Suite 1300, 7 World Trade Center, New York, New York
10048, and can also be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005. Copies of such material can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed fees. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding Equity Inns, RFS and other registrants that have
been filed electronically with the Commission. The address of such site is
http://www.sec.gov.

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE
AVAILABLE UPON REQUEST FROM HOWARD A. SILVER, SECRETARY, EQUITY INNS, INC., 4735
SPOTTSWOOD, SUITE 102, MEMPHIS, TENNESSEE 38117 (TELEPHONE (901) 761-9651; FAX
(901) 761-1485) AND MICHAEL J. PASCAL, SECRETARY, RFS HOTEL INVESTORS, INC., 850
RIDGE LAKE BOULEVARD, SUITE 220, MEMPHIS, TENNESSEE 38120 (TELEPHONE (901)
767-7005; FAX (901) 818-5260). IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1998.

This Joint Proxy Statement/Prospectus is part of a Registration Statement
on Form S-4 (Commission file number 333- ) (the "Registration Statement")
filed by Equity Inns with the Commission under the Securities Act of 1933, as
amended (the "Securities Act"). This Joint Proxy Statement/Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules of the Commission. For
further information, reference is made to the Registration Statement, including
the exhibits and schedules thereto, which may be inspected without charge at the
office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and
copies of which may be obtained from the Commission at prescribed rates.
Statements contained in this Joint Proxy Statement/Prospectus as to the contents
of any contract or other document referred to are not necessarily complete and
in each instance reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THE OFFER
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS JOINT PROXY
STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES,
NOR DOES IT CONSTITUTE AN OFFER TO OR SOLICITATION OF ANY PERSON IN ANY
JURISDICTION TO WHOM IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS AT ANY TIME DOES NOT IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.

(iii)
<PAGE> 13

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents (File No. 0-23290) filed by Equity Inns with the
Commission under the Exchange Act are hereby incorporated by reference in this
Joint Proxy Statement/Prospectus and made a part hereof: (i) Equity Inns' Annual
Report on Form 10-K for the fiscal year ended December 31, 1997; (ii) the proxy
statement for the annual meeting of Equity Inns' shareholders held on May 14,
1998; (iii) Equity Inns' Current Reports on Form 8-K dated January 20, 1998,
February 12, 1998, March 25, 1998 and April 21, 1998; (iv) Equity Inns'
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998; and (v) the
description of Equity Inns Common Stock contained in Equity Inns' Registration
Statement on Form 8-A, filed with the Commission on August 19, 1996.

The following documents (File No. 0-22164) filed by RFS with the Commission
under the Exchange Act are hereby incorporated by reference in this Joint Proxy
Statement/Prospectus and made a part hereof: (i) RFS' Annual Report on Form 10-K
for the fiscal year ended December 31, 1997; (ii) the proxy statement for the
annual meeting of shareholders of RFS held on April 30, 1998; (iii) RFS' Current
Reports on Form 8-K dated March 25, 1998 and April 21, 1998; (iv) RFS' Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998; and (v) the
description of RFS Common Stock contained in RFS' Registration Statement on Form
8-A, filed with the Commission on August 1, 1996.

All documents filed by Equity Inns and RFS pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the Special Meetings shall be
deemed to be incorporated by reference herein. Also incorporated by reference
herein is the Merger Agreement, which is attached to this Joint Proxy Statement/
Prospectus as Annex I.

Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement/Prospectus to the extent that a
statement contained herein, or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Joint Proxy
Statement/Prospectus.

Equity Inns and RFS will provide on written request and without charge to
each person to whom this Joint Proxy Statement/Prospectus is delivered a copy
(without exhibits) of any or all documents incorporated by reference into this
Joint Proxy Statement/Prospectus. Requests for such copies should be directed
(if to Equity Inns) to Equity Inns, Inc., 4735 Spottswood, Suite 102, Memphis,
Tennessee 38117, Attention: Secretary (telephone (901) 761-9651; fax (901)
761-1485) or (if to RFS) to RFS Hotel Investors, Inc., 850 Ridge Lake Boulevard,
Suite 220, Memphis, Tennessee 38120, Attention: Secretary (telephone (901)
767-7005; fax (901) 818-5260).

(iv)
<PAGE> 14

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS.......................... iii
AVAILABLE INFORMATION................. iii
INCORPORATION OF CERTAIN DOCUMENTS BY
REFERENCE........................... iv
QUESTIONS AND ANSWERS ABOUT THE EQUITY
INNS/RFS MERGERS AND OTHER RELATED
MATTERS............................. 1
SUMMARY............................... 4
General............................. 4
The Companies....................... 5
The Special Meetings................ 6
Recommendations to Shareholders..... 7
The Merger Agreement................ 8
What Equity Inns Shareholders Will
Receive in the REIT Merger....... 8
What RFS Shareholders Will Receive
in the REIT Merger............... 9
Conditions to the Mergers........... 9
Termination of the Merger
Agreement........................ 9
Fees and Expenses................... 9
Opinions of Financial Advisors...... 9
Termination of Promus Leases;
Substitute RFS Hotel Leases...... 10
Exchange Ratio...................... 10
Management and Operations After the
REIT Merger...................... 11
Effective Time of the REIT Merger... 11
Conduct of Business Pending the REIT
Merger........................... 11
Interests of Certain Persons in the
REIT Merger...................... 11
Federal Income Tax Consequences of
the REIT Merger.................. 11
Accounting Treatment................ 12
Regulatory Approvals................ 12
Federal Securities Laws
Consequences..................... 12
NYSE Listing........................ 12
Dissenters' Rights.................. 12
SUMMARY RISK FACTORS.................. 13
SELECTED COMPARATIVE PER SHARE DATA... 14
DISTRIBUTION POLICIES................. 14
COMPARATIVE MARKET DATA............... 15
SUMMARY CONSOLIDATED HISTORICAL AND
PRO FORMA FINANCIAL DATA............ 16
RISK FACTORS.......................... 19
Risks Associated with the Mergers... 19
Dilution to Pro Forma Earnings
Caused by the Mergers............ 20
Equity Inns Debt Policy; Risks of
Leverage......................... 20
Dependence Upon Lessees' Hotel
Operations....................... 21
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Benefits to Certain Officers and
Directors of RFS; Possible
Conflicts of Interest............ 21
Development Risks................... 22
Hotel Industry Risks................ 22
Limitations on Acquisitions and
Improvements..................... 23
Real Estate Investment Risks........ 23
Competition in Certain Hotel
Markets.......................... 24
Environmental Matters............... 24
Compliance with Americans with
Disabilities Act and Other
Changes in Governmental Rules and
Regulations...................... 25
Increase in Property Taxes.......... 26
Ground Leases....................... 26
Risks of Operating Hotels Under
Franchise Agreements............. 26
Ability of Board of Directors to
Change Certain Policies.......... 26
Limitation on Acquisition and Change
in Control....................... 27
Tax Risks........................... 27
Equity Inns Ownership Limitation.... 29
Effect of Market Interest Rates on
the Price of Equity Inns Common
Stock............................ 29
Reliance on Key Personnel and Board
of Directors..................... 30
Risks Relating to "Year 2000"
Issue............................ 30
SELECTED FINANCIAL INFORMATION........ 31
THE SPECIAL MEETINGS.................. 37
The Equity Inns Special Meeting..... 37
The RFS Special Meeting............. 38
THE COMPANIES......................... 40
Business of Equity Inns............. 40
Pending Acquisitions................ 40
Business of RFS..................... 40
The Combined Companies.............. 40
Indebtedness........................ 41
Liquidity and Financial Resources... 41
Executive Officers and Directors.... 41
THE REIT MERGER....................... 42
General............................. 42
Effective Time...................... 42
Terms of the REIT Merger............ 42
Background of the REIT Merger....... 43
Equity Inns' Reasons for the
Mergers; Recommendations of the
Equity Inns Board................ 46
RFS' Reasons for the Mergers;
Recommendations of the RFS
Board............................ 48
Opinion of Financial Advisor to
Equity Inns...................... 50
Opinion of Financial Advisor of
RFS.............................. 54
Interests of Certain Persons in the
REIT Merger...................... 57
Accounting Treatment................ 58
</TABLE>

(v)
<PAGE> 15

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Regulatory Approvals................ 58
Federal Securities Laws
Consequences..................... 58
Common Shareholders' Dissenters'
Rights........................... 58
Preferred Shareholders' Dissenters'
Rights........................... 58
THE MERGER AGREEMENT.................. 61
General............................. 61
Charter and Bylaws.................. 61
Board of Directors, Committees and
Officers......................... 61
Exchange of RFS Stock
Certificates..................... 62
Treatment of Stock Options and Other
Stock Based Compensation......... 63
The OP Merger....................... 63
The CMBS OP Merger.................. 64
Deliveries to Evidence the Asset
Sale............................. 64
Representations and Warranties...... 64
Conditions to the Mergers........... 66
Termination of Promus Leases;
Substitute RFS Hotel Leases...... 68
Certain Other Covenants............. 68
Indemnification..................... 75
Termination......................... 75
Fees and Expenses................... 76
Amendments.......................... 80
THE PLAN AMENDMENT PROPOSAL........... 80
OWNERSHIP OF RFS PRIOR TO THE REIT
MERGER.............................. 84
MANAGEMENT OF EQUITY INNS............. 86
Biographical Information About
Equity Inns' Current Directors
and Executive Officers........... 86
Management and Operations of Equity
Inns After the REIT Merger....... 87
Compensation Committee Interlocks
and Insider Participation........ 88
UNAUDITED PRO FORMA FINANCIAL
INFORMATION......................... 89
Equity Inns Pro Forma Consolidated
Balance Sheet at March 31,
1998............................. 90
Equity Inns Pro Forma Consolidated
Statement of Operations for the
Three Months Ended March 31,
1998............................. 92
Equity Inns Pro Forma Consolidated
Statement of Operations for the
Year Ended December 31, 1997..... 93
</TABLE>

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Notes to Equity Inns Pro Forma
Consolidated Statement of
Operations....................... 93
DESCRIPTION OF CAPITAL STOCK OF EQUITY
INNS................................ 96
Common Stock........................ 96
Preferred Stock..................... 96
Charter and Bylaw Provisions........ 96
Tennessee Anti-Takeover Statutes.... 100
Other Matters....................... 101
COMPARATIVE RIGHTS OF SHAREHOLDERS.... 101
FEDERAL INCOME TAX CONSIDERATIONS..... 103
Tax Considerations Relating to the
REIT Merger...................... 103
Taxation of Equity Inns and RFS..... 104
Requirements for Qualification...... 105
Partnership Anti-Abuse Rule......... 113
Failure to Qualify.................. 114
Taxation of Taxable U.S.
Shareholders..................... 114
Taxation of Shareholders on the
Disposition of the Equity Inns
Common Stock or RFS Capital
Stock............................ 115
Capital Gains and Losses............ 115
Information Reporting Requirements
and Backup Withholding........... 115
Taxation of Tax-Exempt
Shareholders..................... 116
Taxation of Non-U.S. Shareholders... 116
Other Tax Considerations............ 118
Proposed Tax Legislation............ 118
Tax Aspects of the Equity Inns OP,
the RFS OP and Their Subsidiary
Partnerships..................... 119
Classification as a Partnership..... 119
Income Taxation of the Hotel
Partnerships and their
Partners......................... 120
Sale of a Hotel Partnership's
Property......................... 122
EXPERTS............................... 122
LEGAL MATTERS......................... 122
SUBMISSION OF SHAREHOLDER PROPOSALS... 123
OTHER MATTERS......................... 123
GLOSSARY OF DEFINED TERMS............. 124
</TABLE>

Annex I -- Asset Sale Agreement and Plans of Mergers

Annex II-A -- Opinion of Morgan Keegan & Company, Inc.

Annex II-B -- Opinion of Salomon Smith Barney

Annex III -- Chapter 23 of the Tennessee Business Corporation Act

(vi)
<PAGE> 16

QUESTIONS AND ANSWERS
ABOUT THE EQUITY INNS/RFS MERGERS
AND OTHER RELATED MATTERS

Q: WHY ARE THE TWO COMPANIES PROPOSING THE REIT MERGER?

A: The Equity Inns Board and the RFS Board have determined that the REIT Merger
is in the best interests of the shareholders of their respective companies.
The Equity Inns Board determined that the Exchange Ratio is fair to the
Equity Inns shareholders from a financial point of view and that the REIT
Merger would create the potential for efficiencies and economies of scale
due to Equity Inns' increased size, would result in additional
diversification of hotel brands, segments and geography for Equity Inns,
would be accretive to Equity Inns' projected Funds From Operations (as
defined below) and would give Equity Inns better access to capital. The RFS
Board determined that the Exchange Ratio is fair to the RFS shareholders
from a financial point of view and that the REIT Merger would permit RFS
shareholders the opportunity, among others, to (i) realize a premium for
their shares of RFS Capital Stock relative to the market price of the RFS
Common Stock prior to the announcement of the REIT Merger; (ii) receive a
larger annual distribution on the exchanged shares; and (iii) enjoy the
potential benefits of participating in the ownership of a larger company
with opportunities for future growth.

Q: WHAT DO I GET IN THE REIT MERGER?

A: Equity Inns shareholders will continue to hold the shares of Equity Inns
Common Stock they now own.

Holders of RFS Common Stock and RFS Preferred Stock (except holders of RFS
Preferred Stock who shall perfect dissenters' rights under the TBCA) will
receive:

- If the Average Price is between $14.00 and $17.00 per share during the
Pricing Period (as defined below), 1.5 shares of Equity Inns Common Stock
for each share of RFS Capital Stock.

- If the Average Price is more than $17.00 per share during the Pricing
Period, the number of shares of Equity Inns Common Stock for each share of
RFS Capital Stock determined by dividing $25.50 by the Average Price.

"Average Price" is defined in the Merger Agreement as an amount equal to the
quotient of (i) the sum of the products of (A) the daily volume of shares of
Equity Inns Common Stock traded on the NYSE on each trading day during the
Pricing Period and (B) the closing price for the Equity Inns Common Stock on
the NYSE on each such trading day, and (ii) the total volume of shares of
Equity Inns Common Stock traded on the NYSE during the Pricing Period
(volumes and closing prices as reported by The Wall Street Journal or, if
not reported thereby, any other authoritative source selected by Equity
Inns). "Pricing Period" is defined in the Merger Agreement as the 20
consecutive trading days immediately preceding the fifth business day prior
to the closing date of the REIT Merger (the "Closing Date"), except that any
trading day on which trading of any newly-issued shares of Equity Inns
Common Stock (or securities convertible into such shares) shall commence on
a when-issued basis, shall be excluded and the next earliest trading day
shall be substituted therefore.

It is a condition to consummation of the REIT Merger that the Average Price
be at least $14.00, and either Equity Inns or RFS may terminate the Merger
Agreement if the Average Price is less than $14.00.

Holders of RFS Preferred Stock are entitled to dissenters' rights under
Chapter 23 of the TBCA.

No RFS shareholder will receive fractional shares of Equity Inns Common
Stock from Equity Inns as a result of the REIT Merger. Instead, RFS
shareholders will receive cash based on the market value of any fractional
shares of Equity Inns Common Stock.
<PAGE> 17

EXAMPLES

If you currently own 100 shares of Equity Inns Common Stock, after the REIT
Merger you will continue to own 100 shares of Equity Inns Common Stock.

If you currently own 100 shares of RFS Common Stock or 100 shares of RFS
Preferred Stock (and, in the case of a holder of RFS Preferred Stock, you
shall not have perfected dissenters' rights under the TBCA) and the Average
Price of Equity Inns Common Stock is between $14.00 and $17.00, you will be
entitled to receive 150 shares of Equity Inns Common Stock.

If you currently own 100 shares of RFS Common Stock or 100 shares of RFS
Preferred Stock (and, in the case of a holder of RFS Preferred Stock, you
shall not have perfected dissenters' rights under the TBCA) and the Average
Price of Equity Inns Common Stock is $18.00, you will be entitled to receive
141 shares of Equity Inns Common Stock ($25.50 divided by $18.00 times 100
shares) and a check for $12.00 (.6667 shares of Equity Inns Common Stock
times the Average Price).

Q: WHAT ARE THE TAX CONSEQUENCES OF THE REIT MERGER?

A: If you currently own shares of Equity Inns Common Stock, the REIT Merger
will have no effect on your federal income taxes. If you currently own
shares of RFS Common Stock or shares of RFS Preferred Stock, the REIT Merger
will be tax-free to you for federal income tax purposes except with respect
to cash paid in lieu of fractional shares or to a holder of RFS Preferred
Stock who exercises dissenters' rights under the TBCA. To review the tax
consequences to shareholders in greater detail, see the discussion under
"Federal Income Tax Considerations" beginning on page 103.

Q: WHAT DO I NEED TO DO NOW?

A: Please mail your completed, signed and dated proxy card in the enclosed
return envelope as soon as possible so that your shares may be represented
at the applicable Special Meeting. Both Special Meetings will take place on
July , 1998.

Q: IF MY SHARES ARE HELD BY MY BROKER, WILL MY BROKER VOTE MY SHARES FOR ME?

A: Your broker will vote your shares only if you instruct your broker how to
vote. You should follow the directions provided by your broker regarding how
to instruct your broker to vote your shares. If you do not tell your broker
how to vote, your shares will not be voted. Your failure to vote will have
the practical effect of being a vote against the REIT Merger.

Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?

A: Yes. You may change your vote at any time before your proxy is voted. You
may do this by sending a written notice stating that you would like to
revoke your proxy or by completing and submitting a new signed and dated
proxy card. You may also attend the applicable Special Meeting and vote in
person. Simply attending a Special Meeting, however, will not revoke your
proxy. If you have instructed a broker to vote your shares, you must follow
the directions received from your broker to change your vote.

Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?

A: No. After the REIT Merger is completed, Equity Inns will send RFS
shareholders written instructions for exchanging their RFS stock
certificates for Equity Inns stock certificates. Equity Inns shareholders
will keep their existing Equity Inns stock certificates.

Q: WHEN DO YOU EXPECT THE REIT MERGER TO BE COMPLETED?

A: We are working towards completing the REIT Merger as quickly as possible. We
expect to complete the REIT Merger promptly after the Special Meetings.

Q: WILL EQUITY INNS AND RFS SHAREHOLDERS RECEIVE ANY SPECIAL CASH
DISTRIBUTIONS?

A: RFS will declare a final distribution payable shortly before the Closing
Date in an amount equal to at least a pro rata quarterly distribution based
on the number of elapsed days in the quarter prior to the

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<PAGE> 18

Closing Date and based on at least RFS' then-current quarterly distribution
rate. Equity Inns will declare a special distribution payable on the same
date as the RFS final distribution in an amount equal to the RFS final
distribution divided by the Exchange Ratio. Following closing of the REIT
Merger, Equity Inns will pay a partial distribution for the remainder of the
quarter in which the closing of the REIT Merger occurs, in an amount
sufficient to ensure that pre-merger Equity Inns shareholders receive for
that quarter aggregate distributions, after taking into account the earlier
special distribution by Equity Inns referenced above, equal to Equity Inns'
then-current quarterly distribution rate. Thereafter, holders of shares of
Equity Inns Common Stock will receive distributions as declared by the
Equity Inns Board.

Q: WHOM SHOULD I CALL WITH QUESTIONS?

A: Equity Inns shareholders should contact Howard A. Silver, Executive Vice
President, Secretary, Treasurer and Chief Financial Officer, at Equity Inns
at (901) 761-9651. RFS shareholders should contact Michael J. Pascal,
Secretary, Treasurer and Chief Financial Officer, at RFS at (901) 767-7005.

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<PAGE> 19

SUMMARY

The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/ Prospectus (including the Annexes attached hereto)
relating to the Merger Agreement and the transactions contemplated thereby. This
summary is not intended to be a complete description of all material facts
regarding Equity Inns, RFS and the matters to be considered at the Special
Meetings and is qualified in all respects by the more detailed information and
financial statements appearing elsewhere or incorporated by reference in this
Joint Proxy Statement/Prospectus (including the Annexes attached hereto) and the
documents incorporated by reference or otherwise referred to herein.
SHAREHOLDERS OF EQUITY INNS AND RFS ARE URGED TO REVIEW THIS ENTIRE JOINT PROXY
STATEMENT/PROSPECTUS CAREFULLY, INCLUDING SUCH ANNEXES AND THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. Where the context requires, references in this
Joint Proxy Statement/Prospectus to "Equity Inns" shall be deemed to include
subsidiaries of Equity Inns, and references to "RFS" shall be deemed to include
subsidiaries of RFS. Capitalized terms used in this Joint Proxy
Statement/Prospectus and not otherwise defined have the meanings given to such
terms under "Glossary of Defined Terms," which begins on page 124 of this
Joint/Proxy Statement/Prospectus.

GENERAL

This Joint Proxy Statement/Prospectus relates to the Equity Inns Special
Meeting and the RFS Special Meeting. At the Equity Inns Special Meeting, the
Equity Inns shareholders will consider and vote upon the Merger Proposal, the
Charter Amendment Proposal and the Plan Amendment Proposal. At the RFS Special
Meeting, the RFS shareholders will consider and vote upon the RFS Proposal.

The REIT Merger will be effected pursuant to the Merger Agreement, a copy
of which is attached to this Joint Proxy Statement/Prospectus as Annex I. See
"The Merger Agreement" and "The Special Meetings." The Merger Agreement provides
that in the REIT Merger: (i) RFS will merge into Merger Sub, which will be the
Surviving Corporation; (ii) each issued and outstanding share of Equity Inns
Common Stock will remain issued and outstanding and will continue to represent
one share of Equity Inns Common Stock; (iii) each issued and outstanding share
of common stock of Merger Sub, $.01 par value per share, will remain issued and
outstanding and will continue to represent one share of common stock of the
Surviving Corporation, $.01 par value per share, all of which shares will be
owned by Equity Inns; and (iv) each issued and outstanding share of RFS Capital
Stock (except for shares of RFS Preferred Stock with respect to which
dissenters' rights shall have been perfected in accordance with the TBCA will be
converted into the right to receive from Equity Inns a number of shares of
Equity Inns Common Stock equal to the Exchange Ratio. It is a condition to
consummation of the Mergers that the Average Price be at least $14.00, and
either Equity Inns or RFS may terminate the Merger Agreement if the Average
Price is less than $14.00. See "-- Dissenters' Rights," "Risk Factors -- Risks
Associated with the Mergers -- Risks Resulting From Fixed Exchange Ratio;" "The
REIT Merger -- Terms of the REIT Merger;" "The REIT Merger -- Preferred
Shareholders' Dissenters' Rights" and "The Merger Agreement -- Conditions to the
Merger."

The Merger Agreement also contemplates, among other things, that
simultaneously with the effective time of the REIT Merger (the "Effective
Time"), RFS OP will sell to Equity Inns OP all of the real and personal property
of RFS OP, subject to all liabilities of RFS OP, which asset sale will be
consummated by means of the OP Merger. The Merger Agreement provides that the OP
Merger will occur at the Effective Time, with the result that (i) Equity Inns OP
will be the Surviving OP; (ii) each outstanding Equity Inns OP Unit that
represents an interest as a general partner in Equity Inns OP (an "Equity Inns
General Unit") and that represents an interest as a limited partner in Equity
Inns OP (an "Equity Inns Limited Unit"), respectively, will remain outstanding;
(iii) each outstanding RFS OP Unit held by RFS will be converted into the right
to receive from Equity Inns OP a number of Equity Inns General Units equal to
the Exchange Ratio; and (iv) each outstanding RFS OP Unit held by limited
partners of RFS OP will be converted into the right to receive from Equity Inns
OP a number of Equity Inns Limited Units equal to the Exchange Ratio. See "The
Merger Agreement -- The OP Merger."

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<PAGE> 20

THE COMPANIES

<TABLE>
<S> <C>
EQUITY INNS, INC. RFS HOTEL INVESTORS, INC.
4735 SPOTTSWOOD, SUITE 102 850 RIDGE LAKE BOULEVARD, SUITE 220
MEMPHIS, TENNESSEE 38117 MEMPHIS, TENNESSEE 38120
(901) 761-9651 (901) 767-7005
</TABLE>

Equity Inns. Equity Inns, a Tennessee corporation headquartered in
Memphis, Tennessee, is a self-administered and self-advised equity real estate
investment trust ("REIT") that currently owns, through subsidiaries, 95 hotels
(the "Equity Inns Current Hotels") with an aggregate of 11,574 rooms in 32
states. The Equity Inns Current Hotels operate as Hampton Inn(R) hotels (58),
Residence Inn(R) hotels (12), AmeriSuites(R) hotels (10), Homewood Suites(R)
hotels (6), Holiday Inn(R) hotels (4), Comfort Inn(R) hotels (3), one Hampton
Inn & Suites(R) hotel and one Holiday Inn Express(R) hotel. Equity Inns has
entered into agreements to acquire 10 additional hotels with an aggregate of
1,276 rooms in 8 states (the "Equity Inns Acquisition Hotels"). The Equity Inns
Current Hotels and the Equity Inns Acquisition Hotels are herein referred to
collectively as the "Equity Inns Hotels." Equity Inns leases 82 of the Equity
Inns Current Hotels to subsidiaries (collectively, the "Interstate Lessee") of
Interstate Hotels Company, a Pennsylvania corporation ("Interstate"), and leases
10 AmeriSuites(R) brand Equity Inns Current Hotels to a subsidiary (the "Prime
Lessee") of Prime Hospitality Corp., a Delaware corporation, ("Prime") (the
Interstate Lessee and the Prime Lessee are collectively referred to herein as
the "Equity Inns Lessees"). The Equity Inns Current Hotels are leased to the
Equity Inns Lessees pursuant to leases ("Percentage Leases") that provide for
annual rent equal to the greater of (i) a fixed annual base rent ("Base Rent")
or (ii) a percentage rent based on the gross revenues of the applicable hotel
("Percentage Rent"). Three Equity Inns Current Hotels currently are operated
pursuant to management agreements, two by Interstate and one by CapStar Hotel
Co. On December 2, 1997, Interstate announced that it had agreed to be acquired
by Patriot American Hospitality, Inc., a REIT. For further information
concerning Equity Inns, see "The Companies -- Business of Equity Inns."

RFS. RFS, a Tennessee corporation headquartered in Memphis, Tennessee, is
a self- administered and self-advised equity REIT that currently owns, through
subsidiaries, 62 hotels (the "RFS Hotels") with an aggregate of 8,932 rooms in
24 states. The RFS Hotels operate as Hampton Inn(R) hotels (20), Residence
Inn(R) hotels (14), Holiday Inn Express(R) hotels (6), Holiday Inn(R) hotels
(6), Comfort Inn(R) hotels (6), Sheraton Four Points(R) hotels (3), Sheraton(R)
hotels (2), one Hawthorn Suites(R) hotel, one Doubletree(R) hotel, one Courtyard
by Marriott(R) hotel, and two independent hotels. Subsidiaries of RFS lease 42
of the RFS Hotels to RFS, Inc. or DTR RFS Lessee, Inc. (collectively, the "RFS
OP Lessees"), Tennessee corporations and subsidiaries of Promus Hotels
Corporation, a Delaware corporation ("Promus"), 15 of the RFS Hotels to RFS
Leasing, Inc. (the "RFS CMBS Lessee" and, together with RFS OP Lessees, the
"Promus Lessees"), a Tennessee corporation and another subsidiary of Promus, and
3 of the RFS Hotels to Pinnacle Management, Inc. (1 hotel) and Landcom
Hospitality Management, Inc. (2 hotels) (collectively, the "Other RFS Lessees"
and, together with the Promus Lessees, the "RFS Lessees"). The RFS Hotels
subject to leases are leased to the RFS Lessees pursuant to Percentage Leases
that provide for annual rent equal to the greater of a Base Rent or a Percentage
Rent for the applicable hotel. Two of the RFS Hotels are owned by Ridge Lake
General Partner, Inc., a Tennessee corporation and a taxable subsidiary of RFS
("RFS C Corp."), and are operated by third parties pursuant to management
agreements. For further information concerning RFS, see "The
Companies -- Business of RFS."

Combined Companies. Following the Mergers, the RFS Hotels will be owned by
Equity Inns OP and other subsidiaries of Equity Inns. Immediately prior to the
Mergers, Equity Inns intends to require RFS to terminate all leases between RFS'
subsidiaries and the Promus Lessees with respect to the 57 RFS Hotels leased to
the Promus Lessees (the "Promus Leases"). Equity Inns intends to enter into new
Percentage Leases with respect to the RFS Hotels currently leased to the Promus
Lessees (the "Substitute RFS Hotel Leases") with one or more third party
lessees, effective as of the Closing Date. It is a condition to the consummation
of the Mergers that Equity Inns shall have entered into Substitute RFS Hotel
Leases effective as of the Closing Date. See "Risk Factors -- Risks Associated
with the Mergers -- Termination/Replacement of Promus Leases" and "The Merger
Agreement -- Termination of Promus Leases; Substitute RFS Hotel Leases."

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<PAGE> 21

Since its initial public offering in 1994, Equity Inns has expanded from an
externally advised REIT, which owned eight hotels in the southeastern United
States leased to an affiliated lessee, to a self-administered and self-advised
REIT which, upon completion of the Mergers and the acquisition of the Equity
Inns Acquisition Hotels, will own a portfolio of 167 hotels with 21,782 rooms in
34 states leased to multiple independent lessees. Following the Mergers, Equity
Inns intends to continue to pursue its aggressive growth strategy, including
acquisition and selective development of hotel properties. See "The
Companies -- The Combined Companies."

THE SPECIAL MEETINGS

Equity Inns Special Meeting. The Equity Inns Special Meeting will be held
at the corporate offices of Equity Inns, 4735 Spottswood, Suite 102, Memphis,
Tennessee 38117 on July , 1998 at 2:00 p.m. local time. At the Equity Inns
Special Meeting, shareholders of Equity Inns will consider and vote upon the
Equity Inns Proposals. Only Equity Inns' shareholders of record as of the close
of business on , 1998 (the "Equity Inns Record Date") are entitled
to notice of and to vote at the Equity Inns Special Meeting. As of the close of
business on the Equity Inns Record Date, shares of Equity Inns Common Stock
were outstanding. Each outstanding share of Equity Inns Common Stock is entitled
to one vote. A majority of the outstanding shares of Equity Inns Common Stock
must be present, in person or by proxy, at the Equity Inns Special Meeting in
order to constitute a quorum. Approval of the Merger Proposal requires the
affirmative vote of the holders of record of a majority of the shares of Equity
Inns Common Stock outstanding as of the close of business on the Equity Inns
Record Date. Accordingly, if you are an Equity Inns shareholder and fail to
return your proxy card or to vote in person at the Equity Inns Special Meeting,
the effect will be a vote against the Merger Proposal. If a quorum is present at
the Equity Inns Special Meeting and the Merger Proposal is approved, the Charter
Amendment Proposal and the Plan Amendment Proposal, respectively, will be
approved if the votes cast in favor of the Charter Amendment Proposal and the
Plan Amendment Proposal, respectively, exceed the votes cast in opposition to
the Charter Amendment Proposal and the Plan Amendment Proposal, respectively.
The Charter Amendment Proposal and the Plan Amendment Proposal are conditioned
upon the approval of the Merger Proposal.

The directors and executive officers of Equity Inns and their affiliates
beneficially owned as of the close of business on the Equity Inns Record Date
shares or approximately % of the outstanding shares of Equity Inns Common
Stock. The directors and executive officers of RFS and their affiliates
beneficially owned no shares of Equity Inns Common Stock as of the close of
business on the Equity Inns Record Date. See "The Special Meetings -- The Equity
Inns Special Meeting."

RFS Special Meeting. The RFS Special Meeting will be held at the corporate
offices of RFS, 850 Ridge Lake Boulevard, Suite 220, Memphis, Tennessee 38120 on
July , 1998 at 2:00 p.m. local time. At the RFS Special Meeting, shareholders
of RFS will consider and vote upon the RFS Proposal. Only RFS shareholders of
record as of the close of business on , 1998 (the "RFS Record Date")
are entitled to notice of and to vote at the RFS Special Meeting. As of the
close of business on the RFS Record Date, shares of RFS Common Stock and
973,684 shares of RFS Preferred Stock were outstanding. Each outstanding share
of RFS Capital Stock is entitled to one vote. A majority of the outstanding
shares of RFS Capital Stock must be present, in person or by proxy, at the RFS
Special Meeting in order to constitute a quorum. Approval of the RFS Proposal
requires the affirmative vote of the holders of record of a majority of the
shares of RFS Capital Stock outstanding as of the close of business on the RFS
Record Date, voting as a single group. Accordingly, if you are a RFS shareholder
and fail to return your proxy card or to vote in person at the RFS Special
Meeting, the effect will be a vote against the RFS Proposal.

The directors and executive officers of RFS and their affiliates
beneficially owned, as of the close of business on the RFS Record Date,
shares or approximately % of the outstanding shares of RFS Capital Stock.
The directors and executive officers of Equity Inns and their affiliates
beneficially owned no shares of RFS Capital Stock as of the close of business on
the RFS Record Date. See "The Special Meetings -- The RFS Special Meeting."

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<PAGE> 22

RECOMMENDATIONS TO SHAREHOLDERS

The Boards of Directors of both Equity Inns and RFS have unanimously
adopted the Merger Agreement. The Equity Inns Board recommends a vote FOR
approval of each of the Equity Inns Proposals, and the RFS Board recommends a
vote FOR approval of the RFS Proposal. See "The Special Meetings" and "The REIT
Merger."

The Equity Inns Board Recommendation

Factors that the Equity Inns Board considered in adopting the Merger
Agreement included, among others, the following:

- Critical Mass. Equity Inns will acquire from RFS 62 hotels with 8,932
rooms in 24 states, consisting of 33 limited service hotels, 14 full
service hotels and 15 extended stay/all-suites hotels, which are operated
under 9 hotel "flags." When combined with Equity Inns' existing portfolio
of hotels (including the Equity Inns Acquisition Hotels), the combined
companies will own 167 hotels with 21,782 rooms in 34 states consisting
of 95 limited service hotels, 18 full service hotels and 54 extended
stay/all-suites hotels. The increased size of Equity Inns' portfolio of
hotels is expected to result in increased operating efficiencies and
economies of scale.

- Brand and Property-Type Diversification. The Mergers will further
diversify Equity Inns' hotel portfolio from seven national franchise
brands to eleven. Also, as a percentage of total revenue, the
contribution from limited service properties will decrease from over 60%
to under 50%.

- Geographic Diversification. The Mergers will provide significant
geographic diversification of the combined companies' hotel properties
which should reduce exposure to fluctuating local economic and seasonal
cycles. The Mergers also will provide Equity Inns with entry into certain
new markets, most notably California, which is currently considered one
of the most attractive U.S. hotel markets.

- Potential Effect on FFO. The Equity Inns Board reviewed information
relating to the financial performance, business operations and prospects
of Equity Inns and RFS and current industry, economic and market
conditions, which indicated that the Mergers would be accretive to Equity
Inns' FFO per share in 1998 and future periods.

- Financial Synergies. The increased size and diversification of Equity
Inns' hotel portfolio together with the prospects of the combined
companies should increase Equity Inns' visibility to the financial
markets and enhance Equity Inns' credit rating, resulting in the combined
companies having access to debt or other financing on more attractive
terms. Equity Inns believes such financial synergies will enhance its
liquidity and increase institutional investor ownership of the combined
entity compared with institutional ownership of with RFS and Equity Inns
on a stand-alone basis.

See "The REIT Merger -- Equity Inns' Reasons for the Mergers;
Recommendations of the Equity Inns Board."

The RFS Board Recommendation

Factors that the RFS Board considered in adopting the Merger Agreement
included, among others, the following:

- Price Premium to Market. Based upon the Exchange Ratio, the RFS
shareholders will receive a value that substantially exceeds the market value of
the RFS Common Stock prior to announcement of the REIT Merger.

- Distribution Rates. The most recent quarterly distribution per share
paid on the RFS Common Stock was $.375. The fixed quarterly distribution per
share of RFS Preferred Stock is $.3625. The most recent quarterly distribution
per share paid on the Equity Inns Common Stock was $0.31 per share. Based on an
assumed Exchange Ratio of 1.5, the quarterly distribution with respect to each
share of RFS Common Stock, in effect, would increase by 24% from $.375 to $.465
(1.5 times $.31), and, with respect to each share of RFS Preferred Stock, by
28.3% from $.3625 to $.465.

7
<PAGE> 23

- Critical Mass. Equity Inns will acquire from RFS 62 hotels with 8,932
rooms in 24 states, consisting of 33 limited service hotels, 14 full service
hotels and 15 extended stay/all-suites hotels, which are operated under 9 hotel
"flags." When combined with Equity Inns' existing portfolio of hotels (including
the Equity Inns Acquisition Hotels), the combined companies will own 167 hotels
with 21,782 rooms in 34 states consisting of 95 limited service hotels, 18 full
service hotels and 54 extended stay/all-suites hotels.

- Operating Synergies. The potential strategic fit between the two
companies would create a combined entity that has the ability to capitalize on
the complementary expertise and philosophies of each company's management team.

- Financial Synergies. The increased size and further diversification of
Equity Inns' hotel portfolio together with the prospects of the combined
companies should increase the combined companies' visibility to the financial
markets and enhance Equity Inns' credit rating, resulting in the combined
companies having debt or other financing available on more attractive terms. The
RFS Board believes such financial synergies will enhance the combined companies'
liquidity and increase institutional investor ownership of the combined entity
as compared with institutional ownership of RFS or Equity Inns on a stand-alone
basis.

- Exchange Ratio. The RFS Board determined, and Salomon Brothers Inc. and
Smith Barney Inc., collectively doing business as Salomon Smith Barney ("Salomon
Smith Barney") issued its opinion to the effect, that the Exchange Ratio is fair
to the RFS shareholders and holders of RFS OP units from a financial point of
view.

- Certain Terms of the Merger Agreement. The RFS Board's belief that the
terms of the Merger Agreement, subject to certain restrictions, permit RFS to
terminate the Merger Agreement upon payment of a $20 million termination fee if
a superior proposal were made to RFS.

- Tax Treatment. The belief that the REIT Merger would be accomplished on
a tax-free basis to the RFS shareholders.

- Strategic Alternatives. The RFS Board's belief that the REIT Merger was
preferable to RFS' principal strategic alternatives, including remaining as an
independent REIT or pursuing merger discussions with companies other than Equity
Inns. In addition, the RFS Board believed that, in light of the process
conducted by RFS with the assistance of Salomon Smith Barney in the fall of
1997, as described in "The REIT Merger -- Background of the REIT Merger,"
continued pursuit of other merger or acquisition alternatives to the REIT Merger
might result in the termination of discussions with Equity Inns.

- Asset Quality. RFS believes its return on invested capital to be among
the highest in the hotel REIT industry and that its assets are of a very high
quality, particularly its full service hotels in California, and that its
inherent value has not been reflected in the market price of the RFS Common
Stock. The RFS Board believes that the premium over the market price of RFS
Common Stock prior to announcement of the Mergers represented by the Exchange
Ratio more closely reflects RFS' underlying asset values.

See "The REIT Merger -- RFS' Reasons for the Mergers; Recommendations of
the RFS Board."

THE MERGER AGREEMENT

The Merger Agreement is attached as Annex I to this Joint Proxy
Statement/Prospectus. The Merger Agreement is the legal document that governs
the Mergers. Shareholders of Equity Inns and RFS are encouraged to read it in
its entirety.

WHAT EQUITY INNS SHAREHOLDERS WILL RECEIVE IN THE REIT MERGER

Equity Inns shareholders will receive no additional shares of Equity Inns
Common Stock in the REIT Merger. Upon consummation of the REIT Merger, each
issued and outstanding share of Equity Inns Common Stock will remain issued and
outstanding. Equity Inns shareholders do not need to exchange their

8
<PAGE> 24

stock certificates evidencing Equity Inns Common Stock after the REIT Merger is
completed. See "The REIT Merger -- Terms of the REIT Merger."

WHAT RFS SHAREHOLDERS WILL RECEIVE IN THE REIT MERGER

Upon consummation of the REIT Merger, each issued and outstanding share of
RFS Capital Stock (except for shares of RFS Preferred Stock with respect to
which dissenters' rights shall have been perfected in accordance with the TBCA)
will be exchanged for a number of shares of Equity Inns Common Stock equal to
the Exchange Ratio. However, no fractional shares of Equity Inns Common Stock
will be issued in connection with the REIT Merger. In lieu of the issuance of
fractional shares of Equity Inns Common Stock, cash payments will be made to RFS
shareholders in respect of fractional shares of Equity Inns Common Stock that
otherwise would be issuable in an amount equal to such fractional part of a
share of Equity Inns Common Stock multiplied by the Average Price. RFS
shareholders should not send in their stock certificates until instructed to do
so after the REIT Merger is completed. See "-- Dissenters' Rights," "The REIT
Merger -- Terms of the REIT Merger;" "The REIT Merger -- Preferred Shareholders'
Dissenters' Rights" and "The Merger Agreement -- Exchange of RFS Stock
Certificates."

CONDITIONS TO THE MERGERS

The obligations of Equity Inns, Merger Sub, Equity Inns OP, RFS and RFS OP
to consummate the Mergers and the other transactions contemplated by the Merger
Agreement are subject to the satisfaction (or waiver) of certain conditions
specified in the Merger Agreement on or prior to the Closing Date, including,
without limitation, that the Average Price be greater than or equal to $14.00.
In the event the Average Price is less than $14.00, either Equity Inns or RFS
may terminate the Merger Agreement. See "The Merger Agreement -- Conditions to
the Mergers."

TERMINATION OF THE MERGER AGREEMENT

The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the RFS Proposal by the shareholders
of RFS or the Equity Inns Proposals by shareholders of Equity Inns, as the case
may be, in a number of circumstances specified in the Merger Agreement. See "The
Merger Agreement -- Termination."

FEES AND EXPENSES

The Merger Agreement provides for the payment by Equity Inns or RFS, as the
case may be, of a termination fee of $20 million if such party terminates the
Merger Agreement after receiving an acquisition proposal and enters into a
definitive agreement for or consummates a similar transaction with a third party
within certain time periods following such termination. Under certain other
circumstances, the Merger Agreement provides for Equity Inns and RFS to
reimburse the other for out-of pocket costs and expenses up to $5 million
incurred by the terminating party in connection with its pursuit of the
transactions contemplated in the Merger Agreement. See "The Merger
Agreement -- Fees and Expenses."

OPINIONS OF FINANCIAL ADVISORS

Equity Inns. Morgan Keegan & Company, Inc. ("Morgan Keegan") has acted as
financial advisor to Equity Inns in connection with the Mergers and has
delivered its opinion dated as of April 21, 1998 to the Equity Inns Board that,
as of the date of such opinion, based on Morgan Keegan's review and subject to
the considerations and limitations set forth in such opinion, the Exchange Ratio
is fair from a financial point of view to the shareholders of Equity Inns and
the partners of Equity Inns OP. A copy of the full text of the written opinion
of Morgan Keegan, which sets forth the assumptions made, procedures followed,
matters considered and limits of its review, is attached as Annex II-A to this
Joint Proxy Statement/Prospectus and should be read carefully in its entirety.
Equity Inns has agreed to pay certain fees to Morgan Keegan for its services in
connection with the Mergers, a portion of which are contingent upon consummation
of the Mergers. The opinion of Morgan Keegan is addressed to the Equity Inns
Board and addresses only the fairness

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<PAGE> 25

of the Exchange Ratio to the shareholders of Equity Inns and the partners of
Equity Inns OP from a financial point of view. The opinion of Morgan Keegan does
not constitute a recommendation to any shareholder of Equity Inns as to how such
shareholder should vote at the Equity Inns Special Meeting or otherwise act in
respect of the Mergers.

RFS. Salomon Brothers Inc. and Smith Barney Inc., collectively doing
business as Salomon Smith Barney ("Salomon Smith Barney") has acted as financial
advisor to RFS in connection with the Mergers and has delivered its opinion
dated as of April 21, 1998 to the RFS Board that, as of the date of such
opinion, based on Salomon Smith Barney's review and subject to the
considerations and limitations set forth in such opinion, the Exchange Ratio is
fair from a financial point of view to the holders of RFS Capital Stock and the
holders of RFS OP Units. A copy of the full text of the written opinion of
Salomon Smith Barney, which sets forth the assumptions made, procedures
followed, matters considered and limits of its review, is attached as Annex II-B
to this Joint Proxy Statement/Prospectus and should be read carefully in its
entirety. RFS has agreed to pay certain fees to Salomon Smith Barney for its
services in connection with the Mergers, a substantial portion of which are
contingent upon consummation of the REIT Merger. The opinion of Salomon Smith
Barney is addressed to the RFS Board and addresses only the fairness of the
Exchange Ratio to the RFS shareholders and partners of RFS OP from a financial
point of view. The opinion of Salomon Smith Barney does not constitute a
recommendation to any RFS shareholder as to how such holder should vote at the
RFS Special Meeting or otherwise act in respect of the Mergers.

TERMINATION OF PROMUS LEASES; SUBSTITUTE RFS HOTEL LEASES

RFS has agreed that, upon written notice from Equity Inns to RFS not less
than 30 days prior to the Closing Date, it will cause its subsidiaries to
terminate one or more of the 57 Promus Leases effective upon payment to the
Promus Lessees, at the closing of the Mergers (the "Closing"), of certain
amounts. See "The Merger Agreement -- Termination of Promus Leases; Substitute
RFS Hotel Leases." It is a condition to the consummation of the Mergers that
Equity Inns shall have entered into Substitute RFS Hotel Leases with respect to
Hotels previously subject to all terminated Promus Leases as of the Closing
Date. See "The Merger Amendment -- Conditions to the Mergers." The pro forma
lease revenue for these 57 hotels included in the pro forma financial
information herein is based on certain assumptions made by management of Equity
Inns with respect to the rent terms of such Substitute RFS Hotel Leases. See
"Risk Factors -- Risks Associated with the Mergers -- Termination/Replacement of
Promus Leases."

EXCHANGE RATIO

The Merger Agreement provides that the Exchange Ratio is determined in the
following manner: (i) if the Average Price is equal to or greater than $14.00
but less than or equal to $17.00, each share of RFS Capital Stock (except for
shares of RFS Preferred Stock with respect to which dissenters' rights shall
have been perfected in accordance with the TBCA) will be converted into the
right to receive 1.5 shares of Equity Inns Common Stock; or (ii) if the Average
Price is greater than $17.00, each share of RFS Capital Stock will be converted
into the right to receive the number of shares of Equity Inns Common Stock
determined by dividing $25.50 by the Average Price. "Average Price" is defined
in the Merger Agreement as an amount equal to the quotient of (i) the sum of the
products of (A) the daily volume of shares of the Equity Inns Common Stock
traded on the NYSE on each trading day during the Pricing Period and (B) the
closing price for the Equity Inns Common Stock on the NYSE on each such trading
day, and (ii) the total volume of shares of Equity Inns Common Stock traded on
the NYSE during the Pricing Period (volumes and closing prices as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by Equity Inns). "Pricing Period" is defined in the Merger
Agreement as the twenty (20) consecutive trading days immediately preceding the
fifth business day prior to the Closing Date, except that any trading day on
which trading of any newly-issued shares of Equity Inns Common Stock (or
securities convertible into Equity Inns Common Stock) shall commence on a
when-issued basis, shall be excluded from the Pricing Period and the next
earliest trading day shall be substituted therefor. See "The REIT
Merger -- Terms of the REIT Merger Shares of RFS Common Stock."

Assuming conversion of all Equity Inns OP Units and all RFS OP Units held
by limited partners of Equity Inn OP and RFS OP, based on an assumed Exchange
Ratio of 1.5 and the 28,418,239 shares of RFS

10
<PAGE> 26

Capital Stock outstanding on May 19, 1998, Equity Inns would issue a maximum of
42,627,358 shares of Equity Inns Common Stock in the REIT Merger, representing
approximately 52.7% of the shares expected to be outstanding immediately after
the Effective Time of the REIT Merger.

MANAGEMENT AND OPERATIONS AFTER THE REIT MERGER

Immediately following the REIT Merger, the Equity Inns Board will consist
of six persons, comprised of all four current directors of Equity Inns and two
current directors of RFS. Robert M. Solmson, RFS' Chairman of the Board, Chief
Executive Officer and President, and Bruce E. Campbell, Jr., a current member of
the RFS Board, will be appointed as Class II and Class I directors,
respectively, of Equity Inns effective as of the Effective Time. In addition,
the Equity Inns Board will create an executive committee consisting of two
current directors of Equity Inns and one current director of RFS. See "The
Merger Agreement -- Board of Directors, Committees and Directors." Following the
REIT Merger, the executive offices of Equity Inns will be located in Memphis,
Tennessee, the current administrative headquarters of Equity Inns.

EFFECTIVE TIME OF THE REIT MERGER

In accordance with the TBCA, the Effective Time of the REIT Merger will
occur upon the date the articles of merger relating to the REIT Merger (the
"Articles of Merger") are filed with the Secretary of State of the State of
Tennessee or on such later date as the parties to the Merger Agreement agree and
specify in the Articles of Merger. Subject to the fulfillment or waiver of the
other conditions set forth in the Merger Agreement, the parties to the Merger
Agreement expect to consummate the REIT Merger as soon as practicable following
the approval by the shareholders of RFS of the RFS Proposal at the RFS Special
Meeting and the approval by the shareholders of Equity Inns of the Merger
Proposal at the Equity Inns Special Meeting. The Merger Agreement provides that
the parties to the Merger Agreement shall cause the Effective Time to occur on
the Closing Date. RFS and Equity Inns each has the right, acting unilaterally,
to terminate the Merger Agreement should the REIT Merger not be consummated by
the close of business on October 15, 1998. See "The REIT Merger -- Effective
Time."

CONDUCT OF BUSINESS PENDING THE REIT MERGER

The Merger Agreement provides that, without the prior approval of the other
party or except as otherwise permitted in the Merger Agreement, Equity Inns and
RFS will operate their respective businesses in the ordinary course and refrain
from taking certain actions relating to the operation of their businesses
pending consummation of the REIT Merger. See "The Merger Agreement -- Certain
Other Covenant -- Conduct of Business Pending the Effective Time."

INTERESTS OF CERTAIN PERSONS IN THE REIT MERGER

Certain members of RFS management, as well as certain members of the RFS
Board, have interests in the REIT Merger in addition to their interests as
shareholders of RFS. These include, among other things, receipt by certain RFS
management employees of termination payments as a result of termination of their
employment with RFS upon completion of the REIT Merger, accelerated vesting of
grants of stock options and restricted RFS Common Stock, indemnification and
eligibility for and receipt of certain Equity Inns employee benefits, including
options for Equity Inns Common Stock. See "The REIT Merger -- Interests of
Certain Persons in the REIT Merger."

FEDERAL INCOME TAX CONSEQUENCES OF THE REIT MERGER

The REIT Merger is intended to qualify as a tax-free reorganization as
defined in Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), with the result that shareholders of Equity Inns and RFS should
recognize no gain or loss in the REIT Merger except with respect to the receipt
of cash by RFS shareholders in lieu of fractional shares of Equity Inns Common
Stock or by holders of RFS Preferred Stock who exercise dissenters' rights under
the TBCA. A condition to the consummation of the REIT Merger is the receipt by
each of Equity Inns and RFS of an opinion of counsel as to the qualification of
the REIT

11
<PAGE> 27

Merger as a tax-free reorganization and certain other federal income tax
matters. See "Federal Income Tax Considerations -- Tax Considerations Relating
to the REIT Merger."

ACCOUNTING TREATMENT

The transaction will be accounted for by Equity Inns under the purchase
method of accounting for business combinations. See "The REIT
Merger -- Accounting Treatment."

REGULATORY APPROVALS

Other than certain filings with the Commission, the Secretary of State of
the State of Tennessee and other state authorities as may be required in
connection with this Joint Proxy Statement/Prospectus, the Merger Agreement and
the related transactions thereto, neither the management of Equity Inns nor the
management of RFS believes that any filing with or approval of any governmental
authority is necessary in connection with the Mergers. See "The REIT
Merger -- Regulatory Approvals."

FEDERAL SECURITIES LAWS CONSEQUENCES

All shares of Equity Inns Common Stock to be issued to the RFS shareholders
in the REIT Merger will be freely transferable under the federal securities
laws, except that shares of Equity Inns Common Stock issued to persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
RFS prior to the consummation of the REIT Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of Equity Inns) or as otherwise permitted under the Securities Act.
See "The REIT Merger -- Federal Securities Law Consequences."

NYSE LISTING

It is a condition to the obligations of Equity Inns and RFS to consummate
the REIT Merger that, prior to the Effective Time, the shares of Equity Inns
Common Stock issuable in the REIT Merger be approved for listing on the NYSE as
of the Effective Time, subject to official notice of issuance. Following the
REIT Merger, the shares of Equity Inns Common Stock will continue to trade on
the NYSE under the symbol "ENN." See "The Merger Agreement -- Conditions to the
Mergers" and "The Merger Agreement -- Certain Other Covenants -- Listing
Application."

DISSENTERS' RIGHTS

Holders of Equity Inns Common Stock do not have statutory rights to
appraisal of their shares. See "The REIT Merger -- Common Shareholders'
Dissenters' Rights."

Under the TBCA, holders of RFS Preferred Stock outstanding and entitled to
vote at the Special Meeting who do not vote in favor of the Merger Agreement and
who comply with certain notice requirements and other procedures set forth in
Sections 48-23-201 through 209 of the TBCA will have the right to dissent from
the REIT Merger and to be paid cash for the fair value of their shares. (A vote
in favor of the REIT Merger cast by the holder of a proxy appointment solicited
by RFS will disqualify a shareholder of RFS Preferred Stock granting such proxy
from exercising dissenters' rights.) Tennessee law defines "fair value" to mean
the value of the shares of RFS Preferred Stock immediately before the
effectuation of the REIT Merger, excluding any appreciation or depreciation in
anticipation of the REIT Merger. In order for a holder of RFS Preferred Stock to
perfect dissenter's rights, such holder must deliver to RFS, before the vote on
the REIT Merger is taken, a written notice of the dissenter's intent to demand
payment for his shares. Neither a delivery of a proxy appointment directing a
vote against the Merger Agreement nor a failure to vote for the Merger Agreement
will constitute such written notice. Certain additional procedures must be
followed in order for an RFS preferred shareholder to exercise dissenters'
rights. Accordingly, holders of RFS Preferred Stock wishing to dissent from the
Merger Agreement are urged to read carefully "The REIT Merger -- Preferred
Shareholders Dissenters' Rights" and Annex III attached to this Joint Proxy
Statement/Prospectus and should consult with their own legal advisors. See "The
REIT Merger -- Preferred Shareholders' Dissenters' Rights".

12
<PAGE> 28

SUMMARY RISK FACTORS

In considering whether to approve the Merger Agreement, shareholders of
Equity Inns and RFS should carefully consider the matters discussed under "Risk
Factors" beginning on page 19. Such risks include, among others:

- risks associated with the REIT Merger, including the risks resulting from
assumptions in the pro forma financial information with respect to the
rent terms under Substitute RFS Hotel Leases for the 57 RFS Hotels
currently subject to the Promus Leases, from a fixed Exchange Ratio, the
possible adverse effects of a failure to consummate the REIT Merger, and
the effect of certain substantial payments which may be payable in the
event the REIT Merger is not consummated;

- risks associated with the dilution to Equity Inns' annual 1997 pro forma
earnings per share resulting from the REIT Merger, as compared to Equity
Inns on a pro forma basis without giving effect to the REIT Merger;

- risks associated with Equity Inns' debt policy and coverage, including
the possibility that Equity Inns may change its debt policy to permit
higher leverage and that Equity Inns may not be able to make scheduled
debt payments;

- risks associated with dependence on lessees, including the failure of
lessees to generate sufficient cash flow from the operation of the Hotels
to make rent payments to under Percentage Leases and lack of control over
operations of the Hotels;

- risks associated with certain conflicts of interest associated with the
REIT Merger;

- risks associated with the development and construction of hotel
properties, including the risks of unexpected increases in construction
costs or construction delays, failure to obtain or delays in obtaining
governmental permits and authorization, failure to secure adequate
financing, failure of newly developed hotels to perform as expected,
failure to obtain control of suitable development sites and competition
for sites from other competitors and developers of all-suites and
extended stay hotels, and abandonment of development;

- risks associated with the hotel industry, including operating risks that
may result in decreased amounts available for distribution to
shareholders, competition for guests and acquisitions within the hotel
industry, the seasonality of the hotel business, investment
concentrations in certain segments of the hotel industry, and emphasis on
certain hotel brands;

- risks associated with real estate investments and real estate financing
risks, including the risk of non-availability of financing and the risk
that such financing will not be available on favorable terms;

- risks associated with Equity Inns' and RFS' ownership of certain hotels
competing in the same local market;

- risks associated with franchise licenses and operating hotels pursuant to
franchise agreements;

- risks associated with the anti-takeover effect of limiting ownership of
the Equity Inns capital stock to 9.9% of the number of outstanding shares
of any class of stock and of certain other provisions contained in the
organizational documents of Equity Inns, which could delay, deter or
prevent a transaction that might involve a premium price for the Equity
Inns Common Stock;

- taxation of RFS shareholders and Equity Inns if the REIT Merger fails to
qualify as a tax-free reorganization and taxation of Equity Inns as a
regular corporation if it fails to qualify as a REIT; and

- risks relating to the "Year 2000" computer programming issue.

13
<PAGE> 29

SELECTED COMPARATIVE PER SHARE DATA

The following table sets forth selected historical per share data for
Equity Inns and RFS, selected unaudited pro forma per share data for Equity Inns
giving effect to the Mergers using the purchase method of accounting and the
equivalent unaudited pro forma per share amounts for RFS. The pro forma data is
not necessarily indicative of actual financial position or future operating
results or that which would have occurred or will occur upon consummation of the
Mergers.

The information shown below should be read in conjunction with (i) the
consolidated financial statements and notes thereto incorporated herein by
reference and (ii) the selected pro forma financial data included elsewhere in
this Joint Proxy Statement/Prospectus.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
----------------------------------------------------------
RFS
EQUITY INNS RFS EQUITY INNS PRO FORMA
HISTORICAL HISTORICAL PRO FORMA(1) EQUIVALENT(2)
----------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Basic net income per common share before
extraordinary items...................... $ .88 $ 1.35 $ .83 $ 1.25
Diluted net income per common share before
extraordinary items...................... .88 1.34 .83 1.25
Cash distributions per common share........ 1.14 1.47 1.14 1.71
Book value per common share at
year-end(3).............................. 10.33 14.85 13.10 19.65
</TABLE>

- ---------------

(1) The pro forma per share data for Equity Inns for the year ended December 31,
1997 is presented as if the Mergers and the transactions contemplated
thereby, and certain other recent transactions (which include the
transactions described in "Pro Forma Condensed Financial Information") had
occurred as of January 1, 1997.
(2) The RFS pro forma equivalent amounts are calculated by multiplying pro forma
net income per Equity Inns common share, pro forma cash
distributions/dividends per Equity Inns common share and pro forma book
value per Equity Inns common share (post-merger) by an assumed Exchange
Ratio of 1.5.
(3) Book value per common share was calculated using shareholders' equity as
reflected in the historical and pro forma financial statements divided by
the number of Equity Inns or RFS shares of common stock outstanding.

DISTRIBUTION POLICIES

Each of Equity Inns and RFS has adopted a policy of paying regular
quarterly distributions on common stock, and each has paid cash distributions on
its common stock each quarter since its inception.

Equity Inns intends to continue regular quarterly distributions to its
shareholders following the REIT Merger. Equity Inns' ability to make
distributions is dependent on the receipt of distributions from Equity Inns OP.
In order to qualify as a REIT for federal income tax purposes, Equity Inns must
distribute to shareholders annually at least 95% of its taxable income. Equity
Inns, through Equity Inns Trust, a Maryland REIT and a wholly-owned subsidiary
of Equity Inns ("Equity Inns Trust"), which serves as the sole general partner
of Equity Inns OP, intends to cause Equity Inns OP to distribute to its partners
sufficient amounts to permit Equity Inns to make regular quarterly distributions
to its shareholders. Equity Inns OP's primary source of revenue consists of rent
payments from the Equity Inns Lessees under Percentage Leases.

Future distributions paid by Equity Inns will be at the discretion of the
Equity Inns Board and will depend on the actual cash flow of Equity Inns, its
financial condition, capital requirements, the annual distribution requirements
under the REIT provisions of the Code and such other factors as the Equity Inns
Board deems relevant.

14
<PAGE> 30

COMPARATIVE MARKET DATA

The Equity Inns Common Stock and RFS Common Stock are listed on the NYSE.
The Equity Inns Common Stock began trading on the NYSE under the symbol "ENN" on
September 9, 1996. The Equity Inns Common Stock previously traded
over-the-counter and were quoted electronically through the Nasdaq National
Market System under the symbol "ENNS." The RFS Common Stock began trading on the
NYSE under the symbol "RFS" on September 6, 1996. The RFS Common Stock
previously traded over-the-counter and were quoted electronically through the
Nasdaq National Market System under the symbol "RFSI." The following table sets
forth (i) the quarterly high and low closing prices for the Equity Inns Common
Stock traded through the facilities of the NYSE and, prior to September 9, 1996,
the Nasdaq National Market System; (ii) the quarterly high and low closing
prices for RFS Common Stock traded through the facilities of the NYSE and, prior
to September 7, 1996, the Nasdaq National Market System; and (iii) and the
distributions declared per share.

<TABLE>
<CAPTION>
EQUITY INNS COMMON STOCK RFS COMMON STOCK
------------------------------------ -------------------------------------
DISTRIBUTIONS DISTRIBUTIONS
DECLARED PER DECLARED PER
HIGH LOW SHARE AND UNIT HIGH LOW SHARE AND UNIT
---- ---- -------------- ------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter................... $ 13 1/4 $ 11 1/2 $.28 $ 18 1/2 $15 3/8 $ .34
Second Quarter.................. 12 3/4 11 1/4 .28 18 14 7/8 .36
Third Quarter................... 13 11 .28 17 1/8 14 3/4 .36
Fourth Quarter.................. 13 1/8 11 1/8 .28 19 3/4 14 7/8 .36
YEAR ENDED DECEMBER 31, 1997
First Quarter................... $ 14 1/2 $ 12 1/2 $.28 $ 19 3/4 $16 3/4 $ .36
Second Quarter.................. 14 1/8 12 7/8 .28 18 7/8 17 1/4 .36
Third Quarter................... 15 13/16 13 1/4 .29 19 15/16 17 7/8 .375
Fourth Quarter.................. 16 9/16 14 1/8 .29 21 1/4 18 1/8 .375
YEAR ENDING DECEMBER 31, 1998
First Quarter................... $ 15 15/16 $ 14 7/16 $.31 $ 20 1/8 $17 7/16 $.375
Second Quarter (through May 19,
1998)......................... $ 16 1/16 $ 14 $.31 $ 21 3/8 $18 $.375
----- --------- ---- ---- -------- -----
</TABLE>

On April 20, 1998, the last full trading day prior to the public
announcement of the REIT Merger, the closing price of the Equity Inns Common
Stock on the NYSE was $15 3/8 per share and the closing price of the RFS Common
Stock on the NYSE was $19 1/2.

15
<PAGE> 31

SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA

EQUITY INNS
HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
HISTORICAL
-------------------------------------
THREE MONTHS ENDED MARCH 1, 1994
MARCH 31, (UNAUDITED)
----------------------------- YEAR ENDED YEAR ENDED
HISTORICAL DECEMBER 31, 1997 DECEMBER 31, (INCEPTION)
PRO FORMA ----------------- ------------------------ ----------------- THROUGH
1998 1998 1997 PRO FORMA HISTORICAL 1996 1995 DECEMBER 31, 1994
--------- ------- ------- ----------- ---------- ------- ------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Percentage lease
revenues(1).............. $46,312 $21,407 $11,778 $193,605 $70,590 $38,314 $24,101 $9,505
Gain on sale of hotel
properties............... 523 666 666
Other income............... 256 170 17 625 505 116 44 293
------- ------- ------- -------- ------- ------- ------- ------
Total revenue........ 47,091 21,577 11,795 194,896 71,761 38,430 24,145 9,798
Expenses:
Real estate and personal
property taxes........... 5,359 2,433 1,310 20,027 6,688 3,693 2,158 983
Depreciation and
amortization............. 15,292 6,682 3,846 59,469 20,214 11,631 6,904 2,546
Advisory fees.............. 164
Interest................... 9,771 4,291 2,145 39,705 12,601 4,382 3,701 390
Amortization of loan
costs.................... 339 213 189 1,540 1,013 1,565 793 153
General and
administrative........... 1,666 1,410 935 5,167 4,142 1,975 1,438 407
Amortization of unearned
directors' and officers'
compensation............. 23 23 23 92 92 33 31 26
Rental expense............. 243 207 61 994 566 218 107 28
Loss on sale of hotel
properties............... 1,164
------- ------- ------- -------- ------- ------- ------- ------
Total expenses....... 32,693 15,259 8,509 128,158 45,316 23,497 15,132 4,697
Income before extraordinary
item and minority
interest................. 14,398 6,318 3,286 66,738 26,445 14,933 9,013 5,101
Extraordinary charge from
write-off of deferred
financing fees........... 1,984
------- ------- ------- -------- ------- ------- ------- ------
Income before minority
interest................. 14,398 6,318 3,286 66,738 24,461 14,933 9,013 5,101
Minority interest.......... 1,017 314 119 4,716 918 460 502 481
------- ------- ------- -------- ------- ------- ------- ------
Net income........... $13,381 $ 6,004 $ 3,167 $ 62,022 $23,543 $14,473 $ 8,511 $4,620
======= ======= ======= ======== ======= ======= ======= ======
Net income per share:(2)
Basic...................... $ .18 $ .17 $ .13 $ .83 $ .82 $ .69 $ .70 $ .60
======= ======= ======= ======== ======= ======= ======= ======
Diluted.................... $ .18 $ .17 $ .13 $ .83 $ .82 $ .69 $ .70 $ .60
======= ======= ======= ======== ======= ======= ======= ======
Weighted average number of
common shares
outstanding:(3)
Basic...................... 75,004 35,221 23,693 74,926 28,773 20,957 12,227 7,745
======= ======= ======= ======== ======= ======= ======= ======
Diluted.................... 80,847 37,160 24,595 80,769 29,963 21,657 12,920 8,551
======= ======= ======= ======== ======= ======= ======= ======
</TABLE>

16
<PAGE> 32

EQUITY INNS

HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
(IN THOUSANDS)

<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------
THREE MONTHS ENDED YEAR ENDED MARCH 1, 1994
MARCH 31, (UNAUDITED) DECEMBER 31, 1997
-------------------------------- ------------------------ YEAR ENDED
HISTORICAL DECEMBER 31, (INCEPTION)
PRO FORMA ------------------- -------------------- THROUGH
1998 1998 1997 PRO FORMA HISTORICAL 1996 1995 DECEMBER 31, 1994
---------- -------- -------- ----------- ---------- --------- -------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Investment in hotel
properties, net........ $1,582,369 $619,606 $355,059 $1,571,659 $ 617,072 $ 309,202 $218,429 $140,970
Total assets............. 1,664,496 647,584 377,162 1,631,353 635,525 317,880 225,067 145,555
Minority interest in..... 77,035 19,084 8,866 77,400 19,035 7,728 6,073 6,081
partnership............ 579,269 230,871 138,641 539,290 233,206 77,399 74,939 45,838
Shareholders' equity..... 977,924 375,147 220,028 981,637 360,172 222,951 137,493 89,802
Cash Flow Data:
Cash flows provided by
operating
activities(4).......... $ 30,052 $ 9,090 $ 6,440 $ 127,839 $ 50,402 $ 26,200 $ 17,517 $ 6,958
Cash flows provided by
(used in) investing
activities(5).......... (9,483) (9,146) (58,191) 8,415 (314,089) (101,175) (84,731) (145,613)
Cash flows provided by
(used in) financing
activities(6).......... 5,940 6,189 51,745 (218,942) 263,748 74,971 66,261 139,740
Other Data:
Funds from
operations(7).......... $ 29,030 $ 12,930 $ 7,071 $ 126,136 $ 45,748 $ 26,397 $ 15,804 $ 7,611
</TABLE>

- ---------------

(1) The pro forma information assumes Equity Inns owned and leased the Equity
Inns Current Hotels and the RFS Hotels throughout the periods presented. The
pro forma financial information excludes the pro forma effects of the Equity
Inns Acquisition Hotels. Amounts represent pro forma lease revenue from
Equity Inns' lessees, calculated by applying the rent provisions of the
Percentage Leases to the historical revenue of the Equity Inns Current
Hotels and three of the RFS Hotels. With respect to 57 of the RFS Hotels
currently subject to the Promus Leases, which leases Equity Inns is expected
to request to be terminated and to be replaced by Substitute RFS Hotel
Leases, pro forma lease revenues represent Equity Inns' management's
estimate of the rent provisions for such Substitute RFS Hotel Leases
following the Mergers. The actual rent provisions in such Substitute RFS
Hotel Leases may vary from the estimates used in developing the pro forma
lease payments. See "Risk Factors -- Risks Associated With the
Mergers -- Termination/Replacement of Promus Leases." For hotels that began
operations in the periods presented, an estimate for base rent payments has
been assumed for the period prior to opening.
(2) Net income per common share--basic, is computed by dividing net income by
the weighted average number of common shares outstanding. Net income per
common share--diluted, is computed by dividing income before minority
interest by the weighted average number of common shares and equivalents
outstanding. Common share equivalents that have a dilutive effect represent
stock options issued to officers and key employees and Equity Inns OP Units.
(3) The pro forma weighted average number of common shares outstanding, basic
and diluted, includes the common shares outstanding after the consummation
of the Mergers, the 1997 Offerings, the 1998 Offerings, and the RFS March
1998 common stock offering. See "Unaudited Pro Forma Financial Information."
(4) Pro forma cash provided by operating activities represents net income plus
minority interest, depreciation and amortization, amortization of loan
costs, and amortization of unearned directors' compensation. There are no
pro forma adjustments for changes in working capital items.
(5) Pro forma cash provided by (used in) investing activities assumes the
acquisition of the Equity Inns Current Hotels acquired after January 1, 1997
and the acquisition of the RFS Hotels had occurred prior to January 1, 1997,
and includes funds used for capital improvements required by franchisors and
the

17
<PAGE> 33

greater of funds used for additional capital expenditures or the amounts
required by the Percentage Leases and the terms of the Unsecured Line of
Credit (defined below) to be made available for capital improvements. Amount
also includes proceeds from the sales of hotel properties.
(6) Pro forma cash provided by financing activities is based on distributions
per share and per Equity Inns OP Unit of $.31 for the first quarter of 1998
and $1.14 for the year ended December 31, 1997. Additionally, pro forma cash
provided by financing activities assumes the Mergers, the 1997 Offerings,
the 1998 Offerings, the RFS March 1998 common stock offering, and borrowings
in connection with the acquisitions of the Equity Inns Current Hotels and
the RFS Hotels, had occurred prior to January 1, 1997. See "Unaudited Pro
Forma Financial Information."
(7) The following table computes Funds From Operations ("FFO") under the
National Association of Real Estate Investment Trusts ("NAREIT") definition.
FFO under the NAREIT definition consists of net income, (computed in
accordance with generally accepted accounting principles), excluding gains
(or losses) from debt restructurings and sales of property, plus
depreciation, and after adjustments for unconsolidated partnerships and
joint ventures.

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED HISTORICAL
MARCH 31, DECEMBER 31, 1997 -------------------------------------
---------------------------- ---------------------- YEAR ENDED MARCH 31, 1994
HISTORICAL DECEMBER 31, (INCEPTION)
PRO FORMA ---------------- ----------------- THROUGH
1998 1998 1997 PRO FORMA HISTORICAL 1996 1995 DECEMBER 31, 1994
--------- ------- ------ --------- ---------- ------- ------- -----------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before
extraordinary item
and minority
interest............ $14,398 $ 6,318 $3,286 $ 66,738 $26,445 $14,933 $ 9,013 $5,101
Less:
Gain on sale of
hotel
properties........ (523) (666) (666)
Add:
Depreciation of
buildings,
furniture and
fixtures.......... 15,155 6,612 3,785 58,900 19,969 11,464 6,791 2,510
Loss on sale of
hotel
properties........ 1,164
------- ------- ------ -------- ------- ------- ------- ------
Funds from
operations.......... $29,030 $12,930 $7,071 $126,136 $45,748 $26,397 $15,804 $7,611
======= ======= ====== ======== ======= ======= ======= ======
</TABLE>

Industry analysts generally consider FFO to be an appropriate measure of
the performance of an equity REIT. FFO should not be considered as an
alternative to net income or other measurements under generally accepted
accounting principles as an indicator of operating performance, or to cash flows
from operating, investing, or financing activities as a measure of liquidity.
FFO does not reflect working capital changes, cash expenditures for capital
improvements, or principal repayment of debt.

18
<PAGE> 34

RISK FACTORS

In considering whether to approve the Merger Agreement, shareholders of
Equity Inns and RFS should consider, in addition to the other information in
this Joint Proxy Statement/Prospectus, the following matters, together with the
other information provided herein:

RISKS ASSOCIATED WITH THE MERGERS

Termination/Replacement of Promus Leases. In accordance with the Merger
Agreement, Equity Inns intends to cause RFS to terminate all 57 of the Promus
Leases immediately prior to the Effective Time. Upon such termination RFS must
pay to the Promus Lessees certain termination amounts which are described in
"The Merger Agreement -- Termination of Promus Leases; Substitute RFS Hotel
Leases." Equity Inns intends to enter into the Substitute RFS Hotel Leases with
one or more new lessees, effective as of the Closing Date, with respect to all
Hotels previously subject to the terminated Promus Leases. The pro forma
financial information herein assumes the termination of the existing 57 Promus
Leases and the effectiveness of 57 Substitute RFS Hotel Leases to replace such
Promus Leases. The pro forma percentage lease revenue to Equity Inns, based on
Equity Inns' management's estimate of the rent terms for such Substitute RFS
Hotel Leases, is substantially greater than the historical revenue to RFS under
the existing Promus Leases. The pro forma lease revenue and other pro forma
financial information is based on estimates by the management of Equity Inns as
to the rent terms which new lessees will be willing to pay to lease these RFS
Hotels based on management's experience in negotiating hotel lease rent terms
with third party lessees. However, Equity Inns currently has no agreement or
understanding with any new lessee to lease any of these RFS Hotels on the rent
terms assumed in the pro forma financial information. As a result, there can be
no assurance that Equity Inns will be able to enter into such Substitute RFS
Hotel Leases with rent terms as favorable as those assumed in the pro forma
financial information herein. In the event Equity Inns is unable to find new
lessees for these RFS Hotels, or to enter into such Substitute RFS Hotel Leases
with rent terms substantially similar to those assumed in the preparation of the
pro forma financial information herein, the actual financial results of Equity
Inns following the Mergers could vary materially and adversely from the pro
forma financial information herein. See "Selected Comparative Per Share Data,"
"Summary Consolidated Historical and Pro Forma Financial Data," "Selected
Financial Information" and "Unaudited Pro Forma Financial Information."

Risks Resulting from Predetermined Exchange Ratio. Upon completion of the
REIT Merger, all outstanding shares of RFS Capital Stock will be converted into
shares of Equity Inns Common Stock based on the Exchange Ratio. The Exchange
Ratio will be determined in accordance with the Merger Agreement. Consequently,
the value of the shares of Equity Inns Common Stock to be received by the RFS
shareholders in the REIT Merger could vary depending upon fluctuations in the
value of Equity Inns Common Stock. The following factors could adversely affect
the values of the Equity Inns Common Stock or the RFS Capital Stock prior to
consummation of the REIT Merger: changes in the financial condition, operations
or prospects of Equity Inns or RFS; market speculation that the REIT Merger may
not be consummated; a delay in the consummation of the REIT Merger; regulatory
changes; a downturn in the hospitality or travel market; and a general economic
downturn. In addition, the trading price of Equity Inns Common Stock will vary.
Accordingly, the value of the merger consideration will fluctuate with such
changes in trading prices and may differ between the date of this Joint Proxy
Statement/Prospectus, the dates of the Special Meetings, or the Effective Time.
There can be no assurance that the market prices for the Equity Inns Common
Stock or the RFS Capital Stock will not decline between such dates. Moreover, it
is a condition to consummation of the Mergers that the Average Price be at least
$14.00, and either Equity Inns or RFS may terminate the Merger Agreement if the
Average Price is less than $14.00. There can be no assurance that the Average
Price will be at least $14.00. See "The REIT Merger -- Terms of the REIT Merger"
and "The Merger Agreement -- Conditions to the Mergers."

Possible Adverse Effect of Failure to Consummate the REIT Merger. The
consummation of the REIT Merger is subject to, among other things, approval of
the shareholders of Equity Inns and RFS. No assurance can be given that the REIT
Merger will be consummated. If the REIT Merger is not consummated, Equity Inns
will not acquire the RFS Hotels and will be required to write off, for financial
accounting purposes, all costs (including legal and accounting fees and payments
to financial advisors) incurred in connection with the

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<PAGE> 35

transaction. In addition, RFS may be required to write off, for financial
accounting purposes, substantial costs (including legal and accounting fees and
payments to financial advisors) incurred in connection with the transaction. Any
such write-off could have a material adverse effect on Equity Inns' and RFS',
respective, net income, FFO and ability to make distributions to their
shareholders.

Substantial Termination Payments if the REIT Merger Fails to Occur. The
Merger Agreement provides for the payment by Equity Inns or RFS of either (i) a
termination fee of $20 million if either party terminates the Merger Agreement
after receiving an acquisition proposal and enters into a definitive agreement
for or consummates a similar transaction with a third party within certain time
periods, or (ii) reimbursement of expenses of up to $5 million if the Merger
Agreement is terminated by either Equity Inns or RFS under certain other
circumstances. The obligation to make either of such termination payments may
adversely affect the ability of Equity Inns or RFS to engage in another similar
transaction in the event that the Mergers are not consummated and may have an
adverse impact on the financial condition or results of operations of the
company incurring such obligation. See "The Merger Agreement -- Fees and
Expenses."

DILUTION TO PRO FORMA EARNINGS CAUSED BY THE MERGERS

The pro forma financial statements included herein reflect dilution in net
income per share on a pro forma combined basis for the year ended December 31,
1997 when compared to Equity Inns on a pro forma basis without giving effect to
the REIT Merger. On a pro forma combined basis (post-merger) for Equity Inns,
assuming consummation of the Mergers and the other pro forma adjustments
disclosed at "Unaudited Pro Forma Financial Information," pro forma net income
per share of Equity Inns Common Stock would be $.83 and $.18 for the year ended
December 31, 1997 and for the three months ended March 31, 1998, respectively,
as compared to net income per share of $.99 and $.17 for the year ended December
31, 1997 and the three months ended March 31, 1998, respectively, on a pro forma
basis for Equity Inns without giving effect to the Mergers.

EQUITY INNS DEBT POLICY; RISKS OF LEVERAGE

Risks Associated with Changes in Debt Policy. Equity Inns recently amended
its Charter to remove any Charter limitation on the amount of indebtedness
Equity Inns may incur. In connection with such amendment, the Equity Inns Board
has implemented a policy which provides that Equity Inns may not incur
consolidated indebtedness in an amount in excess of approximately 45% of Equity
Inns' investment in hotel properties, at cost (the "Equity Inns Debt Policy").
The Equity Inns Debt Policy may be amended, revised or terminated at any time
without the approval of Equity Inns shareholders. Equity Inns currently has
mortgage debt financing and has available its $250 million unsecured line of
credit with The First National Bank of Chicago (the "Unsecured Line of Credit")
to provide, as necessary, working capital, funds for investments in additional
hotel properties and cash to pay distributions. At March 31, 1998, Equity Inns
had mortgage debt of approximately $230.9 million, approximately $145.0 million
of outstanding debt under the Unsecured Line of Credit, no outstanding debt
under its $5 million revolving credit facility (the "NBC Credit Line") with
National Bank of Commerce ("NBC"), and an outstanding letter of credit in the
amount of $2.3 million. At such date, Equity Inns had approximately $102.7
million available for borrowings under the Unsecured Line of Credit and
approximately $5.0 million available for borrowings under the NBC Credit Line.
Equity Inns may borrow additional amounts from the same or other lenders in the
future, or may issue corporate debt securities in public or private offerings.
Additional borrowings may be secured by mortgages on properties owned by Equity
Inns or its subsidiaries.

Risk Associated with Debt Service Obligations. There can be no assurance
that Equity Inns will be able to meet its debt service obligations and, to the
extent that it cannot, Equity Inns risks the loss of some or all of its assets,
including the Hotels, to foreclosure. Adverse economic conditions could result
in higher interest rates which could increase debt service requirements on
floating rate debt and could reduce the amounts available for distribution to
shareholders of Equity Inns. Equity Inns may obtain one or more forms of
interest rate protection (swap agreements, interest rate caps contracts, etc.)
to hedge against the possible adverse effects of interest rate fluctuations.
However, there can be no assurance that such hedging would be effective in
mitigating the adverse effects of interest rate fluctuations. Adverse economic
conditions could cause the

20
<PAGE> 36

terms on which borrowings become available to be unfavorable. In such
circumstances, if Equity Inns is in need of capital to repay indebtedness in
accordance with its terms or otherwise, it could be required to liquidate one or
more investments in hotel properties at times which may not permit realization
of the maximum return on such investments.

Risk Associated with Mortgage Bonds. In February 1997, a special purpose,
wholly-owned subsidiary of Equity Inns issued $88 million of fixed-rate,
collateralized bonds (the "Bonds") in three classes. The expected repayment
dates for Classes A, B and C of the Bonds are November 20, 2006, December 20,
2015 and February 20, 2017. Upon maturity of the Class A Bonds, Equity Inns is
required to use substantially all of its cash flow to amortize the remaining
outstanding principal amount of the Bonds. If the remaining principal amounts
cannot be refinanced, Equity Inns' ability to make required distributions to its
shareholders could be adversely affected and its status as a REIT could be
jeopardized. There can be no assurance that such refinancing will be available
or will be available on terms acceptable to Equity Inns.

DEPENDENCE UPON LESSEES' HOTEL OPERATIONS

The Interstate Lessee leases 82 of the Equity Inns Current Hotels, and the
Prime Lessee leases all ten of the AmeriSuites brand Equity Inns Current Hotels
pursuant to Percentage Leases. Equity Inns intends to enter into new Percentage
Leases with respect to substantially all of the RFS Hotels effective at the
Closing. The lessees control the daily operations of Equity Inns' hotels subject
to Percentage Leases. Neither Equity Inns nor Equity Inns OP has the authority
to require any leased hotel to be operated in a particular manner or to govern
any particular aspect of the daily operations of the hotel. Even if Equity Inns'
management believes its hotels subject to Percentage Leases are being operated
inefficiently or in a manner that does not result in an appropriate level of
Percentage Rent payments under such Percentage Leases, neither Equity Inns nor
its subsidiaries may require a change to the method of operation. Equity Inns is
dependent on lease payments from its lessees for substantially all of its
revenues. There can be no assurance that Equity Inns' lessees or other hotel
management companies and/or operators will be able to effectively or profitably
manage Equity Inns' hotels. Changes in economic conditions and other factors
could cause Equity Inns' lessees to experience financial difficulty from time to
time. Such financial difficulties could have a material adverse effect on the
lessees' ability to pay rent under Percentage Leases, which could have a
material adverse effect on Equity Inns' ability to make distributions to its
shareholders.

BENEFITS TO CERTAIN OFFICERS AND DIRECTORS OF RFS; POSSIBLE CONFLICTS OF
INTEREST

In considering the recommendation of the RFS Board with respect to the
Merger Agreement and the transactions contemplated thereby, the RFS shareholders
should be aware that certain members of the RFS Board and management of RFS have
certain interests in the Mergers that are in addition to the interests of the
RFS shareholders generally. Such interests include the following: (i) the
receipt of change in control payments in the aggregate amount of $4.1 million by
three executive officers of RFS, Robert M. Solmson, J. William Lovelace and
Michael J. Pascal, pursuant to their employment agreements with RFS as a result
of the Mergers; (ii) officers, directors and affiliates of RFS beneficially own
an aggregate of 1,044,200 shares of RFS Capital Stock, which will be
exchangeable at the Exchange Ratio for shares of Equity Inns Common Stock; (iii)
the accelerated vesting of all unvested options held by RFS employees and
directors, and the right to elect either to exchange their options to purchase
shares of RFS Common Stock for options to purchase a number of shares of Equity
Inns Common Stock equal to such number of shares of RFS Common Stock multiplied
by the Exchange Ratio (with an exercise price equal to the RFS option exercise
price divided by the Exchange Ratio), or to "cash out" their RFS options for an
amount equal to the difference between the exercise price for their RFS options
and an amount equal to the Exchange Ratio multiplied by the Average Price; (iv)
the appointment of Robert M. Solmson (RFS' Chairman, Chief Executive Office and
President) and Bruce E. Campbell, Jr. (a member of the RFS Board)as members of
the Equity Inns Board; and (v) the payment by Equity Inns to Mr. Solmson of
$95,000 for the purchase of his voting common stock, which represents Mr.
Solmson's cost for such voting stock, in RFS C Corp., a taxable subsidiary of
RFS, which holds ownership interests in the Sheraton hotel in Birmingham,
Alabama and the Hotel Rex in San Francisco. See "The REIT Merger -- Interests of
Certain Persons in the REIT Merger." No special procedures were put

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<PAGE> 37

into place to resolve any conflicts resulting from these interests. However, the
RFS Board was aware of these interests and considered them, among other matters,
in adopting the Merger Agreement and the transactions contemplated thereby.

DEVELOPMENT RISKS

As part of its growth strategy, Equity Inns intends to develop additional
hotels. Real estate development involves substantial risks, including the risk
that development costs will exceed budgeted or contracted amounts, the risk of
delays in completion of construction, the risk of failing to obtain all
necessary zoning and construction permits, the risk that financing might not be
available on favorable terms, the risk that developed properties will not
achieve desired revenue levels once opened, the risk of competition for suitable
development sites from competitors that may have greater financial resources
than Equity Inns, and the risks of incurring substantial costs in the event a
development project must be abandoned prior to completion. Although Equity Inns
intends to manage development to minimize such risks, there can be no assurance
that present or future developments will perform in accordance with Equity Inns'
expectations.

HOTEL INDUSTRY RISKS

Operating Risks

The Equity Inns Hotels and the RFS Hotels (collectively, the "Hotels") are
subject to all operating risks common to the hotel industry. These risks
include, among other things, competition from other hotels; over-building in the
hotel industry, which adversely affects occupancy and revenues; increases in
operating costs due to inflation and other factors, which increases have not
been, and may not be, offset by increased room rates; dependence on business and
commercial travelers and tourism; increases in energy costs and other expenses
affecting travel; and adverse effects of general and local economic conditions.
These factors could adversely affect the lessees' ability to make lease payments
and therefore Equity Inns' ability to make expected distributions to
shareholders. Further, decreases in room revenues of the Hotels would result in
decreased revenues to Equity Inns under its Percentage Leases and, therefore,
decreased amounts available for distribution to Equity Inns' shareholders.

Competition

Competition for Guests; Operations. The hotel industry is highly
competitive. The Hotels compete with other hotel properties in their geographic
markets. Many of Equity Inns' competitors have substantially greater marketing
and financial resources than Equity Inns and its lessees.

Competition for Acquisitions. Equity Inns will compete for investment
opportunities with entities which have substantially greater financial resources
than Equity Inns. These entities generally may be able to accept more risk than
Equity Inns can manage prudently. Competition generally may reduce the number of
suitable investment opportunities offered to Equity Inns and may increase the
bargaining power of property owners seeking to sell hotel properties. Further,
Equity Inns believes that competition from entities organized for purposes
substantially similar to Equity Inns' objectives has increased and will continue
to increase significantly in the future.

Seasonality of Hotel Business

The hotel industry is seasonal in nature. Generally, hotel revenues are
greater in the second and third calendar quarters than in the first and fourth
calendar quarters. This seasonality can be expected to cause quarterly
fluctuations in Equity Inns' lease revenues. Quarterly earnings may be adversely
affected by factors beyond Equity Inns' control, including poor weather
conditions and economic factors. Equity Inns may be required to enter into
short-term borrowing in the first and fourth calendar quarters in order to
offset such fluctuations in revenues and to fund Equity Inns' anticipated
obligations, including distributions to its shareholders.

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<PAGE> 38

Investment Concentration in Certain Segments of Single Industry

Equity Inns currently has a significant portion of its hotel interests in
limited service, all suites and extended stay hotel properties. Therefore, a
downturn in the hotel industry, in general, and the limited service, all suites
and extended stay segments, in particular, will have a material adverse effect
on Equity Inns' lease revenue and amounts available for distribution to its
shareholders.

Emphasis on Certain Hotels Brands

Because 79 Hotels will operate as Hampton Inn(R) and Hampton Inns &
Suites(R) hotels, 26 Hotels will operate as Residence Inn(R) hotels, 10 Hotels
will operate as AmeriSuites(R) hotels, and 10 Hotels will be operated as Holiday
Inn(R) hotels following consummation of the Mergers, Equity Inns is subject to
risks inherent in concentrating investments in these franchise brands, such as a
reduction in business following adverse publicity related to the brand, which
could have an adverse effect on Equity Inns' lease revenues and amounts
available for distribution to its shareholders.

Capital Expenditures

The Hotels have an ongoing need for renovations and other capital
improvements, including periodic replacement of furniture, fixtures and
equipment. Franchisors of the Hotels may also require periodic capital
improvements as a condition of retaining the franchise licenses. The cost of
such capital improvements could have an adverse effect on Equity Inns' financial
condition. Such renovations involve certain risks, including the possibility of
environmental problems, construction cost overruns and delays, the possibility
that Equity Inns will not have available cash to fund renovations or that
financing for renovations will not be available on favorable terms,
uncertainties as to market demand or deterioration in market demand after
commencement of renovation and the emergence of unanticipated competition from
other hotels. During the year ended December 31, 1997, Equity Inns spent
approximately $18.1 million for capital improvements to the Equity Inns Current
Hotels and, following consummation of the Mergers, expects to spend an
additional aggregate amount of approximately $25.0 million for capital
improvements to the Hotels during 1998. Equity Inns intends to fund such
improvements out of future cash from operations, present cash balances or the
remaining available borrowing capacity under the Unsecured Line of Credit.

LIMITATIONS ON ACQUISITIONS AND IMPROVEMENTS

Equity Inns intends to continue its current growth strategy, which includes
acquiring and improving hotel properties. Equity Inns generally cannot fund its
growth from cash from its operating activities because Equity Inns must
distribute to its shareholders at least 95% of its taxable income each year to
maintain its status as a REIT. Consequently, Equity Inns must rely primarily
upon the availability of debt or equity capital to fund hotel acquisitions and
improvements. There can be no assurance that Equity Inns will continue to have
access to the capital markets to fund future growth at an acceptable cost. In
addition, the Equity Inns Debt Policy currently limits outstanding indebtedness
to 45% of Equity Inns' investment in hotel properties, at its cost, which could
also limit Equity Inns' ability to incur additional indebtedness to fund its
continued growth.

REAL ESTATE INVESTMENT RISKS

General Risks of Investing in Real Estate

Equity Inns' investments in the Hotels after the Mergers will subject
Equity Inns to varying degrees of risk generally incident to the ownership of
real property. The underlying value of Equity Inns' real estate investments and
Equity Inns' income and ability to maintain distributions to its shareholders
depend upon the ability of the Equity Inns' lessees to operate the Hotels in a
manner sufficient to maintain or increase room revenues and to generate
sufficient income in excess of operating expenses to make rent payments under
Percentage Leases. Income from the Hotels may be adversely affected by adverse
changes in national economic conditions, changes in local market conditions due
to changes in general or local economic conditions and neighborhood
characteristics, competition from other hotel properties, changes in interest
rates and in the availability, cost and terms of mortgage funds, the impact of
present or future environmental

23
<PAGE> 39

legislation and compliance with environmental laws, the ongoing need for capital
improvements, particularly in older structures, changes in real property tax
rates and other operating expenses, changes in governmental rules and fiscal
policies, civil unrest, acts of God, including earthquakes, floods and other
natural disasters (which may result in uninsured losses), acts of war, adverse
changes in zoning laws, and other factors which are beyond the control of Equity
Inns.

Illiquidity of Real Estate

Real estate investments are relatively illiquid. The ability of Equity Inns
to vary its portfolio of hotels in response to changes in economic and other
conditions is limited. There can be no assurance that Equity Inns will be able
to dispose of an investment when it finds disposition advantageous or necessary
or that the sale price of any disposition will recoup or exceed the amount of
Equity Inns' investment.

Operational Risks of Rapid Growth

Beginning with Equity Inns' initial public offering in March 1994, Equity
Inns has acquired 104 hotels (of which 9 have been sold) and has contracted to
acquire an additional 10 hotels, increasing the size and geographic dispersion
of Equity Inns' hotel properties. Equity Inns' growth strategy also contemplates
acquisitions of additional hotels that meet Equity Inns' investment criteria,
further increasing the size and geographic diversification of its hotel
properties. Failure of Equity Inns and its lessees to effectively manage such
expanded operations could have a material adverse effect on the Hotels'
operating results. Deteriorating operations could negatively impact revenues at
the Hotels and, therefore, the lease payments under Percentage Leases and
amounts available for distribution to shareholders of Equity Inns.

Uninsured and Underinsured Losses

Each Percentage Lease relating to the Equity Inns Hotels specifies
comprehensive insurance to be maintained on each of the Hotels, including
liability, fire and extended coverage. Management of Equity Inns believes such
specified coverage is of the type and amount customarily obtained for or by an
owner of real property assets. However, there are certain types of losses,
generally of a catastrophic nature, such as earthquakes and floods, that may be
uninsurable or not economically insurable. The Equity Inns Board will use its
discretion in determining amounts, coverage limits and deductibility provisions
of insurance, with a view to maintaining appropriate insurance coverage on
Equity Inns' investments at a reasonable cost and on suitable terms. This may
result in insurance coverage that, in the event of a substantial loss, would not
be sufficient to pay the full current market value or current replacement cost
of Equity Inns' lost investment. Inflation, changes in building codes and
ordinances, environmental considerations and other factors also might make it
infeasible to use insurance proceeds to replace the property after such property
has been damaged or destroyed. Under such circumstances, the insurance proceeds
received by Equity Inns might not be adequate to restore its economic position
with respect to such property.

COMPETITION IN CERTAIN HOTEL MARKETS

Both Equity Inns and RFS currently own or operate hotels in certain local
markets. In several cases, such hotels are in direct competition for guests, so
that following the Mergers, Equity Inns will own competing hotels in certain
markets.

ENVIRONMENTAL MATTERS

Equity Inns' operating costs may be affected by the obligation to pay for
the cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of compliance with future legislation. Under
various federal, state and local environmental laws, ordinances and regulations,
a current or previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances on, under or in
such property. Such laws often impose liability whether or not the owner of
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. In addition, the presence of contamination from hazardous or
toxic substances, or the failure to remediate such contaminated

24
<PAGE> 40

property properly, may adversely affect the owner's ability to sell, use or
borrow using such real property as collateral. Persons who arrange for the
disposal or treatment of hazardous or toxic substances also may be liable for
the costs of removal or remediation of such substances at the disposal or
treatment facility, whether or not such facility is or ever was owned or
operated by such person. Certain environmental laws and common law principles
could be used to impose liability for releases of hazardous materials, including
asbestos-containing materials ("ACMs"), into the environment or work place, and
third parties may seek recovery from owners or operators of real properties for
personal injury or property damage associated with exposure to released ACMs or
other hazardous materials. Environmental laws also may impose restrictions on
the manner in which property may be used or transferred or in which businesses
may be operated, and these restrictions may require expenditures. In connection
with the ownership of the Hotels, Equity Inns may be potentially liable for any
such costs. The cost of defending against claims of liability or remediating
contaminated property or the cost of complying with environmental laws could
materially adversely affect Equity Inns' results of operations and financial
condition. Equity Inns and RFS obtained or will obtain Phase I environmental
site assessments ("ESAs") on each of the Hotels in connection with their
acquisition or certain financing transactions. The purpose of the Phase I ESAs
is to identify potential environmental contamination and conditions and
regulatory compliance concerns that are made apparent from historical reviews of
the Hotels, reviews of certain public records, preliminary investigations of the
sites and surrounding properties, and screening for the presence of hazardous
substances, toxic substances and storage tanks. The Phase I ESAs did not reveal
any environmental contamination or conditions or compliance concerns that Equity
Inns believes would have a material adverse effect on Equity Inns' business,
assets, results of operations or liquidity, nor is Equity Inns aware of any such
liability or concerns. Nevertheless, the Phase I ESAs generally did not include
invasive procedures such as soil and groundwater sampling to detect
contamination from former operations on the Hotels' sites or migrating from
neighboring properties or caused by other third parties. Furthermore, it is
possible that these Phase I ESAs do not reveal all environmental liabilities or
conditions or compliance concerns or that there are material environmental
liabilities or compliance concerns of which Equity Inns is unaware.

The Clean Water Act (the "CWA") prohibited the Environmental Protection
Agency (the "EPA") from requiring permits for all but a few (primarily
industrial and certain municipal) discharges of storm water prior to October 1,
1994. Even though the moratorium ended, the EPA has not yet issued permitting
regulations for non-industrial and non-municipal discharges of storm water. In
October 1994, EPA officials indicated that all storm water discharges without
permits were technically in violation of the CWA. The EPA proposed regulations
in December 1997 to exempt non-industrial facilities from the permitting
requirement. The EPA expects to finalize the proposal during 1998. Until that
time, it is possible, though Equity Inns believes it is unlikely, that a court
could determine that storm water drainage to a navigable waterway from one or
more of the Hotel properties is a discharge in violation of the CWA since
October 1, 1994. Penalties for non-compliance may be substantial. Although the
EPA has stated that it will not take enforcement action against those storm
water discharges formerly subject to the moratorium and Equity Inns is not aware
of any current or reasonably likely penalties to be imposed for its storm water
discharges, it is possible, given the uncertainty about the scope and timing of
EPA or state regulations on the subject, that liability may exist.

COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND OTHER CHANGES IN
GOVERNMENTAL RULES AND REGULATIONS

Under the Americans with Disabilities Act of 1990 (the "ADA"), all public
accommodations are required to meet certain federal requirements related to
access and use by disabled persons. While Equity Inns believes that the Hotels
are substantially in compliance with these requirements, a determination that
the Hotels are not in compliance with the ADA could result in imposition of
fines or an award of damages to private litigants. In addition, changes in
governmental rules and regulations or enforcement policies affecting the use and
operation of the Hotels, including changes to building codes and fire and life
safety codes, may occur. If Equity Inns were required to make substantial
modifications at the Hotels to comply with the ADA or other changes in
governmental rules and regulations, Equity Inns' ability to make distributions
to its shareholders could be adversely affected.

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<PAGE> 41

INCREASE IN PROPERTY TAXES

Each Hotel is subject to real and personal property taxes. The real and
personal property taxes on hotel properties in which Equity Inns invests may
increase or decrease as tax rates change and as the properties are assessed or
reassessed by taxing authorities. Moreover, there is a risk that some or all of
the RFS Hotels could be reappraised at a substantially higher value for property
tax purposes on account of the Mergers, which could result in significantly
higher property taxes. If property taxes increase, Equity Inns' ability to make
distributions to its shareholders could be adversely affected.

GROUND LEASES

Certain of the Hotels are subject to ground leases with third party
lessors. In addition, Equity Inns may acquire hotels in the future that are
subject to ground leases. Any proposed sale of a property that is subject to a
ground lease or any proposed assignment of a leasehold interest in the ground
lease may require the consent of third party lessors. As a result, Equity Inns
may not be able to sell, assign, transfer or convey its interest in any such
property in the future absent the consent of such third parties, even if such
transaction may be in the best interests of the shareholders of Equity Inns.

Under its existing ground lease and mortgages, RFS will be required to
obtain the consent of third parties to consummate the Mergers. Although RFS
expects to obtain such consents, there can be no assurance that they will be
obtained.

RISKS OF OPERATING HOTELS UNDER FRANCHISE AGREEMENTS

Substantially all of Hotels are subject to franchise agreements and the
franchise licenses are held by the lessees. Franchisors require certain capital
improvements to the Hotels as a condition to the transfer of the franchise
agreements for those Hotels. During the year ended December 31, 1997, Equity
Inns spent approximately $18.1 million for capital improvements to the Equity
Inns Current Hotels and, following consummation of the Mergers, expects to spend
an additional aggregate amount of approximately $25.0 million for capital
improvements to the Hotels during 1998. Equity Inns intends to fund such
improvements out of cash from operations, cash balances or available borrowing
capacity under the Unsecured Line of Credit. Failure to complete the
improvements in a manner satisfactory to the franchisors could result in the
cancellation of the franchise agreements. Generally, the continuation of hotel
franchises is subject to specified operating standards and other terms and
conditions. Franchisors periodically inspect their licensed properties to
confirm adherence to operating standards. The failure of a Hotel, Equity Inns or
the lessee to maintain such standards or adhere to such other terms and
conditions could result in the loss or cancellation of the franchise license. It
is possible that a franchisor could condition the continuation of a franchise
license on the completion of capital improvements which the Equity Inns Board
determines are too expensive or otherwise unwarranted in light of general
economic conditions or the operating results or prospects of the affected hotel.
In that event, the Equity Inns Board may elect to allow the franchise license to
lapse. The consent of certain franchisors to the transfer of the RFS Hotels
pursuant to the Mergers and the issuance of franchise licenses to the new
lessees have not yet been obtained. If such consent is withheld, the Mergers
could result in the termination of such franchise licenses. The loss of a
franchise license could have a material adverse effect upon the operations or
the underlying value of the hotel covered by the franchise because of the loss
of associated name recognition, marketing support and centralized reservation
systems provided by the franchisor.

ABILITY OF BOARD OF DIRECTORS TO CHANGE CERTAIN POLICIES

The major policies of Equity Inns, including the Equity Inns Debt Policy
and its policies with respect to acquisitions, financing, growth, operations and
distributions are determined by the Equity Inns Board. The Equity Inns Board may
amend or revise these and other policies from time to time without a vote of the
shareholders of Equity Inns.

26
<PAGE> 42

LIMITATION ON ACQUISITION AND CHANGE IN CONTROL

Certain provisions of Tennessee law and of the Equity Inns Charter and the
bylaws of Equity Inns as currently in effect (the "Equity Inns Bylaws") may have
the effect of discouraging a third party from making an acquisition proposal for
Equity Inns and could delay, defer or prevent a change in control of Equity Inns
or other transaction under circumstances that could give the holders of Equity
Inns Common Stock the opportunity to realize a premium over the then-prevailing
market price of the Equity Inns Common Stock. Such provisions include the
following:

Equity Inns Ownership Limitation

The Equity Inns Ownership Limitation (as defined below and as described
under "Description of Capital Stock of Equity Inns -- Charter and Bylaw
Provisions -- Restrictions on Transfer"), which provides that no person may own,
directly or indirectly, more than 9.9% of the outstanding shares of any class of
Equity Inns stock, may have the effect of precluding an acquisition of control
of Equity Inns by a third party without the approval of the Equity Inns Board,
even if the change of control is in the Equity Inns' shareholders' interests.

Staggered Board

The Equity Inns Board has three classes of directors. The current terms of
Equity Inns' directors expire in 1999, 2000 and 2001, respectively. Directors
for each class will be elected for a three-year term upon the expiration of that
class' term. The staggered terms of directors may affect the shareholders'
ability to change control of Equity Inns, even if such a change were in the
shareholders' interests. See "Description of Capital Stock of Equity
Inns -- Charter and Bylaw Provisions -- Staggered Board of Directors." The
foregoing may also discourage offers or other bids for the Equity Inns Common
Stock at a premium over the then-prevailing market price.

Authority to Issue Preferred Stock

The Equity Inns Charter authorizes the Equity Inns Board to issue up to
10,000,000 shares of Equity Inns' preferred stock, $.01 par value per share
("Equity Inns Preferred Stock") and to establish the preferences and rights of
any shares issued. See "Description of Capital Stock of Equity Inns -- Preferred
Stock." The issuance of Equity Inns Preferred Stock may have the effect of
delaying or preventing a change in control of Equity Inns even if a change in
control were in the shareholders' interests.

Tennessee Anti-Takeover Statutes

As a Tennessee corporation, Equity Inns is subject to various legislative
acts set forth in Chapter 103 of the TBCA, which impose certain restrictions and
require certain procedures with respect to certain takeover offers and business
combinations, including, but not limited to, combinations with interested
shareholders and share repurchases from certain shareholders. See "Description
of Capital Stock of Equity Inns -- Tennessee Anti-Takeover Statutes."

TAX RISKS

Failure of the REIT Merger to Qualify as a Tax-Free Reorganization Would
Subject RFS Shareholders to Federal Income Tax

The REIT Merger is intended to be a tax-free reorganization for federal
income tax purposes. Although Equity Inns and RFS will not request a ruling from
the U.S. Internal Revenue Service (the "Service" or the "IRS") that the REIT
Merger qualifies as a tax-free reorganization, Equity Inns will on the Closing
Date receive an opinion of its counsel, Baker, Donelson, Bearman & Caldwell
("Baker Donelson"), and RFS will receive an opinion of its counsel, Hunton &
Williams, that, based on certain assumptions and representations, the REIT
Merger will so qualify. Persons receiving this Joint Proxy Statement/Prospectus
should be aware that opinions of counsel are not binding on the Service or any
court. If the REIT Merger fails to qualify as a tax-free reorganization, such
transaction would be treated for federal income tax purposes as a taxable sale
by

27
<PAGE> 43

RFS of all its assets to Equity Inns, followed by a taxable liquidation of RFS.
In that event, each RFS shareholder would be subject to tax on the amount by
which the value of the Equity Inns Common Stock and cash received in the REIT
Merger exceeded his adjusted basis in his RFS Capital Stock. In addition, RFS
would likely incur a substantial tax liability that would be assumed by the
Surviving Corporation (a wholly-owned subsidiary of Equity Inns) by reason of
the REIT Merger, which could have a material adverse effect on Equity Inns'
financial condition.

Failure to Qualify as a REIT After the REIT Merger Would Subject Equity Inns
to Federal Income Tax

Each of Equity Inns and RFS has operated, and following the REIT Merger,
Equity Inns will continue to operate, in a manner that is intended to meet all
requirements for qualification as a REIT under sections 856 through 859 of the
Code. Although neither Equity Inns nor RFS intends to request a ruling from the
Service as to its REIT status, Equity Inns will receive (i) an opinion from
Baker Donelson, its counsel, upon the closing of the REIT Merger that, based on
certain assumptions and representations, Equity Inns so qualifies, and (ii) an
opinion from Hunton & Williams, RFS' counsel, upon the closing of the REIT
Merger that, based on certain assumptions and representations, RFS so qualifies.
RFS will receive an opinion from Baker Donelson, Equity Inns' counsel, upon the
closing of the REIT Merger that, based on certain assumptions and
representations, Equity Inns qualifies as a REIT. Persons receiving this Joint
Proxy Statement/Prospectus should be aware, however, that opinions of counsel
are not binding on the Service or any court. The REIT qualification opinions
represent the view's of Baker Donelson and Hunton & Williams, respectively,
based on their review and analysis of existing law, which includes no
controlling precedent. The continued qualification of Equity Inns as a REIT
after the REIT Merger will depend on (i) RFS' qualification as a REIT prior to
the REIT Merger and (ii) Equity Inns' satisfaction of certain asset, income,
organizational, and shareholder ownership requirements on a continuing basis.

If Equity Inns were to fail to qualify as a REIT in any taxable year, it
would be subject to federal income tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, and distributions
to its shareholders would not be deductible in computing its taxable income. Any
such corporate tax liability could be substantial and would reduce the amount of
cash available for distribution to shareholders, which in turn could have an
adverse impact on the value of, and trading prices for, the Equity Inns Common
Stock. In addition, Equity Inns might be required to liquidate certain
investments or borrow funds to pay the applicable tax. Unless entitled to relief
under certain Code provisions, Equity Inns would be precluded from reinstatement
as a REIT for the four taxable years following loss of REIT status.

Failure to Satisfy Distribution Requirements Will Result in the Imposition of
Corporate Income and/or Excise Tax

Each of Equity Inns and RFS must distribute annually at least 95% of its
taxable income (excluding any net capital gain) in order to maintain REIT status
and to avoid corporate income taxation of the earnings that it distributes. In
addition, each of Equity Inns and RFS will be subject to a 4% nondeductible
excise tax on the amount, if any, by which certain distributions paid by it with
respect to any calendar year are less than the sum of (i) 85% of its ordinary
income for that year, (ii) 95% of its capital gain net income for that year, and
(iii) 100% of its undistributed taxable income from prior REIT taxable years. To
the extent that Equity Inns or RFS elects to retain and pay income tax on the
net long-term capital gains it receives during a taxable year, such amounts will
be treated as having been distributed for purposes of the 4% excise tax.

Each of Equity Inns and RFS has made, and after the REIT Merger, Equity
Inns intends to continue to make, distributions to its shareholders to comply
with the 95% distribution requirement and to avoid both corporate income tax and
the nondeductible excise tax. However, differences in timing between the
recognition of taxable income and the actual receipt of cash could require
Equity Inns or RFS to borrow funds or sell assets on a short-term basis to meet
the 95% distribution requirement and to avoid corporate income tax and the
nondeductible excise tax. The requirement to distribute a substantial portion of
Equity Inns' or RFS' taxable income could cause Equity Inns or RFS (i) to sell
assets in adverse market conditions to meet those distribution requirements, or
(ii) to distribute amounts that would otherwise be spent on future acquisitions,

28
<PAGE> 44

capital expenditures, or repayment of debt. Gain from the disposition of any
asset held primarily for sale to customers in the ordinary course of business
generally will be subject to a 100% penalty tax.

Failure of Equity Inns OP or RFS OP to be Classified as a Partnership for
Federal Income Tax Purposes; Impact on REIT Status

Equity Inns believes that Equity Inns OP (and its subsidiary partnerships),
and RFS believes that RFS OP (and its subsidiary partnerships), will be
classified as a partnership for federal income tax purposes. However, neither
Equity Inns nor RFS intends to request a ruling from the Service that the Equity
Inns OP (and its subsidiary partnerships) or RFS OP (and its subsidiary
partnerships), as applicable, will be treated as a partnership for federal
income tax purposes. If the Service were to challenge successfully the tax
status of Equity Inns OP or RFS OP as a partnership for federal income tax
purposes, such partnership would be taxable as a corporation. In such event,
Equity Inns or RFS, as applicable, would cease to qualify as a REIT for a
variety of reasons. Furthermore, the imposition of a corporate tax on Equity
Inns OP or RFS OP would substantially reduce the amount of cash available for
distribution to Equity Inns or RFS and its shareholders.

EQUITY INNS OWNERSHIP LIMITATION

In order for Equity Inns to maintain its qualification as a REIT, no more
than 50% in value of its outstanding shares of capital stock may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of any taxable year. Furthermore,
if any holder of an equity interest in an Equity Inns Lessee owns, actually or
constructively, 10% or more of the stock of Equity Inns, such lessee could
become a related party tenant, which likely would result in loss of REIT status
for Equity Inns. For the purpose of preserving Equity Inns' REIT qualification,
the Equity Inns Charter prohibits direct or indirect ownership of more than 9.9%
of the outstanding shares of any class of Equity Inns stock by any person or
group (the "Equity Inns Ownership Limitation"), subject to adjustment as
described below. Generally, the capital stock owned by affiliated owners will be
aggregated for purposes of the Equity Inns Ownership Limitation.

Any transfer of shares that would prevent Equity Inns from continuing to
qualify as a REIT under the Code will be void ab initio, and the intended
transferee of such shares will be deemed never to have had an interest in such
shares. Further, if, in the opinion of the Equity Inns Board, (i) a transfer of
shares would result in any shareholder or group of shareholders acting together
owning shares in excess of the Equity Inns Ownership Limitation or (ii) a
proposed transfer of shares may jeopardize the qualification of Equity Inns as a
REIT under the Code, the Equity Inns Board may, in its sole discretion, refuse
to allow the shares to be transferred to the proposed transferee. Finally,
Equity Inns may, in the discretion of the Equity Inns Board, redeem any stock
held of record by any shareholder in excess of the Equity Inns Ownership
Limitation.

The Equity Inns Charter sets the redemption price of the stock to be
redeemed at the lesser of the market price on the date Equity Inns provides
written notice of redemption or the date such stock was purchased, subject to
certain provisions of Tennessee law. Therefore, the record holder of stock in
excess of the Equity Inns Ownership Limitation may experience a financial loss
when such shares are redeemed, if the market price falls between the date of
purchase and the date of notice of redemption. See "Description of Capital Stock
of Equity Inns -- Charter and Bylaw Provisions -- Restrictions on Transfer" and
"Federal Income Tax Considerations -- Requirements for Qualification."

EFFECT OF MARKET INTEREST RATES ON THE PRICE OF EQUITY INNS COMMON STOCK

One of the factors that may affect the price of shares of Equity Inns
Common Stock is the amount of its distributions to shareholders in comparison to
yields on other financial instruments. An increase in market interest rates
would provide higher yields on other financial instruments, which could
adversely affect the price of the shares of Equity Inns Common Stock.

29
<PAGE> 45

RELIANCE ON KEY PERSONNEL AND BOARD OF DIRECTORS

Shareholders of Equity Inns will have no right to participate in Equity
Inns' management except through the exercise of their voting rights. The Equity
Inns Board will be responsible for oversight of the management of Equity Inns.
Equity Inns' future success will be dependent in part on its ability to retain
key personnel.

RISKS RELATING TO "YEAR 2000" ISSUE

Many existing computer programs were designed to use only two digits to
identify a year in the date field without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could fail
or create erroneous results by or at the year 2000. Equity Inns is addressing
the "Year 2000" issue with respect to its operations. Failure of Equity Inns or
its lessees to properly or timely resolve the "Year 2000" issue could have a
material adverse effect on Equity Inns' business.

30
<PAGE> 46

SELECTED FINANCIAL INFORMATION

The following tables set forth selected consolidated historical and pro
forma financial information for Equity Inns and selected combined historical
financial data for the McNeill Initial Hotels that were the accounting
predecessor to Equity Inns.

With respect to Equity Inns, the following table sets forth (i) selected
consolidated historical operating and other financial information for the three
months ended March 31, 1998 and 1997 and the years ended December 31, 1997,
1996, 1995 and the period from March 1, 1994 (Inception) through December 31,
1994, (ii) selected consolidated historical balance sheet data as of March 31,
1998 and 1997, and December 31, 1997, 1996, 1995 and 1994, (iii) selected
consolidated pro forma operating and other financial information for the three
months ended March 31, 1998 and the year ended December 31, 1997, and (iv)
selected consolidated pro forma balance sheet data as of March 31, 1998.

The selected consolidated historical financial information for Equity Inns
has been derived from the consolidated historical financial statements of Equity
Inns audited by Coopers & Lybrand L.L.P., independent accountants, whose reports
with respect thereto are incorporated by reference in this Joint Proxy
Statement/Prospectus. The selected consolidated historical financial data as of
and for the three months ended March 31, 1998 and 1997 have been derived from
the unaudited consolidated financial statements of Equity Inns, which have been
prepared by management of Equity Inns on the same basis as the audited financial
statements of Equity Inns, and, in the opinion of management of Equity Inns,
include all adjustments consisting of normal recurring accruals that Equity Inns
considers necessary for a fair presentation of the results for such periods in
accordance with generally accepted accounting principles ("GAAP"). Such results
of operations for the three months ended March 31, 1998 are not necessarily
indicative of results to be anticipated for the entire year.

The selected combined historical financial data for McNeill Initial Hotels
are presented for the period from January 1, 1994 to February 28, 1994 and the
year ended December 31, 1993 and represent the historical financial data for
four hotels acquired by Equity Inns from affiliates of Equity Inns' Chairman of
the Board and Chief Executive Officer upon completion of Equity Inns' initial
public offering.

The pro forma operating and other information is presented as if the
following occurred on January 1, 1997: (i) the acquisition of 41 hotels acquired
by Equity Inns in 1997 (the "1997 Hotel Acquisitions"); (ii) the consummation of
Equity Inns' May and November 1997 common stock offerings (the "1997 Offerings")
and Equity Inns' February and March 1998 common stock offerings (the "1998
Offerings"); (iii) certain RFS transactions, including the acquisition of 9
hotels in 1997 and the consummation of a common stock offering in March 1998;
and (iv) the Mergers; and therefore incorporates certain assumptions that are
included in the notes to the pro forma financial statements included elsewhere
herein, including certain assumptions with respect to the rent terms under
Substitute RFS Hotel Leases for the 57 RFS Hotels currently subject to the
Promus Leases. The pro forma financial information excludes the pro forma
effects of the Equity Inns Acquisition Hotels. See "Unaudited Pro Forma
Financial Information." and "Risk Factors -- Risks Associated with the
Mergers -- Termination/Replacement of Promus Leases." The pro forma balance
sheet data is presented as if the Mergers had occurred as of March 31, 1998. The
pro forma financial information is not necessarily indicative of what the actual
financial position and results of operations would have been as of and for the
periods indicated, nor does it purport to represent the future financial
position and results of operations of Equity Inns.

31
<PAGE> 47

EQUITY INNS

SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

THREE MONTHS ENDED
MARCH 31, HISTORICAL
----------------------------------- -------------------
(UNAUDITED) YEAR ENDED YEAR ENDED
HISTORICAL DECEMBER 31, 1997 DECEMBER 31, 1997
PRO FORMA ---------------------- ----------------------- -------------------
1998 1998 1997 PRO FORMA HISTORICAL 1996 1995
---------- ----------- -------- ---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Percentage lease
revenues(1)............ $ 46,312 $ 21,407 $ 11,778 $ 193,605 $ 70,590 $ 38,314 $ 24,101
Gain on sale of hotel
properties............. 523 666 666
Other income............. 256 170 17 625 505 116 44
---------- -------- -------- ---------- -------- -------- --------
Total revenue...... 47,091 21,577 11,795 194,896 71,761 38,430 24,145
Expenses:
Real estate and personal
property taxes......... 5,359 2,433 1,310 20,027 6,688 3,693 2,158
Depreciation and
amortization........... 15,292 6,682 3,846 59,469 20,214 11,631 6,904
Advisory fees............
Interest................. 9,771 4,291 2,145 39,705 12,601 4,382 3,701
Amortization of loan
costs.................. 339 213 189 1,540 1,013 1,565 793
General and
administrative......... 1,666 1,410 935 5,167 4,142 1,975 1,438
Amortization of unearned
directors' and
officers'
compensation........... 23 23 23 92 92 33 31
Rental expense........... 243 207 61 994 566 218 107
Loss on sale of hotel
properties............. 1,164
---------- -------- -------- ---------- -------- -------- --------
Total expenses..... 32,693 15,259 8,509 128,158 45,316 23,497 15,132
Income before
extraordinary item and
minority interest...... 14,398 6,318 3,286 66,738 26,445 14,933 9,013
Extraordinary charge from
write-off of deferred
financing fees......... 1,984
---------- -------- -------- ---------- -------- -------- --------
Income before minority
interest............... 14,398 6,318 3,286 66,738 24,461 14,933 9,013
Minority interest........ 1,017 314 119 4,716 918 460 502
---------- -------- -------- ---------- -------- -------- --------
Net income......... $ 13,381 $ 6,004 $ 3,167 $ 62,022 $ 23,543 $ 14,473 $ 8,511
========== ======== ======== ========== ======== ======== ========
Net income per share:(2)
Basic.................... $ .18 $ .17 $ .13 $ .83 $ .82 $ .69 $ .70
========== ======== ======== ========== ======== ======== ========
Diluted.................. $ .18 $ .17 $ .13 $ .83 $ .82 .69 $ .70
========== ======== ======== ========== ======== ======== ========
Weighted average number
of common shares
outstanding:(3)
Basic.................... 75,004 35,221 23,693 74,926 28,773 20,957 12,227
========== ======== ======== ========== ======== ======== ========
Diluted.................. 80,847 37,160 24,595 80,769 29,963 21,657 12,920
========== ======== ======== ========== ======== ======== ========
Balance Sheet Data:
Investment in hotel
properties, net........ $1,582,369 $619,606 $355,059 $1,571,659 $617,072 $309,202 $218,429
Total assets............. 1,664,496 647,584 377,162 1,631,353 635,525 317,880 225,067
Minority interest in
partnership............ 77,035 19,084 8,866 77,400 19,035 7,728 6,073
Debt..................... 579,269 230,871 138,641 539,290 233,206 77,399 74,939
Shareholders' equity..... 977,924 375,147 220,028 981,637 360,172 222,951 137,493

HISTORICAL
-----------------
MARCH 1, 1994
(INCEPTION)
THROUGH
DECEMBER 31, 1994
-----------------

<S> <C>
Operating Data:
Percentage lease
revenues(1)............ $ 9,505
Gain on sale of hotel
properties.............
Other income............. 293
--------
Total revenue...... 9,798
Expenses:
Real estate and personal
property taxes......... 983
Depreciation and
amortization........... 2,546
Advisory fees............ 164
Interest................. 390
Amortization of loan
costs.................. 153
General and
administrative......... 407
Amortization of unearned
directors' and
officers'
compensation........... 26
Rental expense........... 28
Loss on sale of hotel
properties.............
--------
Total expenses..... 4,697
Income before
extraordinary item and
minority interest...... 5,101
Extraordinary charge from
write-off of deferred
financing fees.........
--------
Income before minority
interest............... 5,101
Minority interest........ 481
--------
Net income......... $ 4,620
========
Net income per share:(2)
Basic.................... $ .60
========
Diluted.................. $ .60
========
Weighted average number
of common shares
outstanding:(3)
Basic.................... 7,745
========
Diluted.................. 8,551
========
Balance Sheet Data:
Investment in hotel
properties, net........ $140,970
Total assets............. 145,555
Minority interest in
partnership............ 6,081
Debt..................... 45,838
Shareholders' equity..... 89,802
</TABLE>

32
<PAGE> 48
<TABLE>
<CAPTION>

HISTORICAL
-----------------
MARCH 1, 1994
(INCEPTION)
THROUGH
DECEMBER 31, 1994
-----------------
<S> <C>
Cash Flow Data:
Cash flows provided by
operating
activities(4).......... $ 6,958
Cash flows provided by
(used in) investing
activities(5)........ (145,613)
Cash flows provided by
(used in) financing
activities(6)........ 139,740
Other Data:
Funds from
operations(7).......... $ 7,611
</TABLE>

- ---------------

(1) The pro forma information assumes Equity Inns owned and leased the Equity
Inns Current Hotels and the RFS Hotels throughout the periods presented.
Amounts represent pro forma lease revenue from Equity Inns' lessees,
calculated by applying the rent provisions of the Percentage Leases to the
historical revenue of the Equity Inns Current Hotels and three of the RFS
Hotels. With respect to 57 of the RFS Hotels currently subject to the Promus
Leases, which leases Equity Inns is expected to request to be terminated and
to be replaced by Substitute RFS Hotel Leases, pro forma lease revenues
represent Equity Inns' management's estimate of the rent provisions for such
Substitute RFS Hotel Leases following the Mergers. The actual rent
provisions in such Substitute RFS Hotel Leases may vary from the estimates
used in developing the pro forma lease payments. See "Risk Factors -- Risks
Associated With the Mergers -- Termination/Replacement of Promus Leases."
For hotels that began operations in the periods presented, an estimate for
base rent payments has been assumed for the period prior to opening.
(2) Net income per common share--basic, is computed by dividing net income by
the weighted average number of common shares outstanding. Net income per
common share--diluted, is computed by dividing income before minority
interest by the weighted average number of common shares and equivalents
outstanding. Common share equivalents that have a dilutive effect represent
stock options issued to officers and key employees and Equity Inns OP Units.
(3) The pro forma weighted average number of common shares outstanding, basic
and diluted, includes the common shares outstanding after the consummation
of the Mergers, the 1997 Offerings, the 1998 Offerings, and the RFS March
1998 common stock offering. See "Unaudited Pro Forma Financial Information."
(4) Pro forma cash provided by operating activities represents net income plus
minority interest, depreciation and amortization, amortization of loan
costs, and amortization of unearned directors' compensation. There are no
pro forma adjustments for changes in working capital items.
(5) Pro forma cash provided by (used in) investing activities assumes the
acquisition of the Equity Inns Current Hotels acquired after January 1, 1997
and the acquisition of the RFS Hotels had occurred prior to January 1, 1997,
and includes funds used for capital improvements required by franchisors and
the greater of funds used for additional capital expenditures or the amounts
required by the Percentage Leases and the Unsecured Line of Credit to be
made available for capital improvements. Amount also includes proceeds from
the sales of hotel properties.
(6) Pro forma cash provided by financing activities is based on distributions
per share and per Equity Inns OP Unit of $.31 for the first quarter of 1998
and $1.14 for the year ended December 31, 1997. Additionally, pro forma cash
provided by financing activities assumes the Mergers, the 1997 Offerings,
the 1998 Offerings, the RFS March 1998 common stock offering, and borrowings
in connection with the acquisitions of the Equity Inns Current Hotels and
the RFS Hotels, had occurred prior to January 1, 1997. See "Unaudited Pro
Forma Financial Information."
(7) The following table computes FFO under the NAREIT definition. FFO under the
NAREIT definition consists of net income, (computed in accordance with
generally accepted accounting principles), excluding gains (or losses) from
debt restructurings and sales of property, plus depreciation, and after
adjustments for unconsolidated partnerships and joint ventures.

33
<PAGE> 49

EQUITY INNS

SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA

HISTORICAL
--------------------------------------
THREE MONTHS ENDED MARCH 31, MARCH 31, 1994
---------------------------- FOR THE YEAR ENDED FOR THE YEAR ENDED (INCEPTION)
PRO FORMA HISTORICAL DECEMBER 31, 1997 DECEMBER 31, THROUGH
--------- ---------------- ---------------------- ------------------- DECEMBER 31,
1998 1998 1997 PRO FORMA HISTORICAL 1996 1995 1994
--------- ------- ------ --------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Income before extraordinary
item and minority
interest................. $14,398 $ 6,318 $3,286 $ 66,738 $26,445 $14,933 $ 9,013 $5,101
Less:
Gain on sale of hotel
properties............. (523) (666) (666)
Add:
Depreciation of
buildings, furniture
and fixtures........... 15,155 6,612 3,785 58,900 19,969 11,464 6,791 2,510
Loss on sale of hotel
properties............. 1,164
------- ------- ------ -------- ------- ------- ------- ------
Funds from operations...... $29,030 $12,930 $7,071 $126,136 $45,748 $26,397 $15,804 $7,611
======= ======= ====== ======== ======= ======= ======= ======
</TABLE>

34
<PAGE> 50

MCNEILL INITIAL HOTELS

SELECTED COMBINED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 1, 1994
TO
FEBRUARY 28, YEAR ENDED
1994 DECEMBER 31, 1993
---------------- -----------------
<S> <C> <C>
Operating Data:
Room revenue.............................................. $1,026 $6,052
Other revenue............................................. 46 286
------ ------
Total revenue............................................. 1,072 6,338
Hotel operating expenses.................................. 657 3,628
Depreciation and amortization............................. 116 699
Interest.................................................. 218 1,036
Other corporate expenses.................................. 82 614
------ ------
Net income (loss)................................. $ (1) $ 361
====== ======
</TABLE>

35
<PAGE> 51

The following tables set forth selected consolidated historical financial
data for RFS for the years ended December 31, 1997, 1996, 1995, 1994 and the
period from August 13, 1993 (Inception) through December 31, 1993. The selected
balance sheet data for the period is presented as of December 31, 1997, 1996,
1995, 1994 and 1993.

The selected financial data set forth below is qualified in its entirety by
and should be read in conjunction with the consolidated financial statements and
notes thereto for RFS included in RFS' Annual Report on Form 10-K for the year
ended December 31, 1997, which has been incorporated herein by reference.

RFS

SELECTED HISTORICAL FINANCIAL AND OTHER DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
(UNAUDITED) FOR THE YEAR ENDED DECEMBER 31, AUGUST 13, 1993
------------------- ----------------------------------------- (INCEPTION) THROUGH
1998 1997 1997 1996 1995 1994 DECEMBER 31, 1993
-------- -------- -------- -------- -------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Percentage lease revenue............. $ 22,023 $ 17,863 $ 82,949 $ 61,594 $ 47,249 $ 21,666 $ 1,907
Gain on sale of hotel properties..... 523
Other income......................... 86 44 120 392 1,058 1,688 104
Total revenue................ 22,632 17,907 83,069 61,986 48,307 23,354 2,011
EXPENSES:
Real estate taxes and property and
casualty insurance................. 2,488 1,947 8,357 6,289 5,019 2,201 226
Depreciation and amortization........ 4,951 3,945 17,809 11,047 8,687 3,832 356
Advisory fees........................ 28 23
Interest............................. 3,548 1,938 11,562 3,204 592 25
Amortization of loan costs........... 243 144 913 398 310 116 16
General and administrative........... 1,409 1,184 4,499 4,237 2,007 2,457 154
Amortization of unearned officers'
and directors' compensation........ 196 184 738 632 427 308
Rental expense....................... 36 36 180 180 180 36
Loss on sale of hotel properties..... 1,164 244
Write-down of hotel property......... 668
-------- -------- -------- -------- -------- -------- -------
Total expenses............... 12,871 9,378 45,222 26,899 17,222 9,003 775
Income before minority interest...... 9,761 8,529 37,847 35,087 31,085 14,351 1,236
Minority interest.................... (936) (835) (3,615) (500) (439) (195) (28)
-------- -------- -------- -------- -------- -------- -------
Net income........................... 8,825 7,694 34,232 34,587 30,646 14,156 1,208
Preferred stock dividends............ (348) (348) (1,412) (1,195)
-------- -------- -------- -------- -------- -------- -------
Net income applicable to common
shareholders....................... $ 8,477 $ 7,346 $ 32,820 $ 33,392 $ 30,646 $ 14,156 $ 1,208
======== ======== ======== ======== ======== ======== =======
Net income per share:
Basic.............................. $ 0.35 $ 0.30 $ 1.35 $ 1.37 $ 1.26 $ 0.94 $ 0.25
======== ======== ======== ======== ======== ======== =======
Diluted............................ $ 0.35 $ 0.30 $ 1.34 $ 1.37 $ 1.26 $ 0.94 $ 0.25
======== ======== ======== ======== ======== ======== =======
Weighted average number of common
shares outstanding:
Basic.............................. 24,380 24,385 24,389 24,353 24,294 15,348 4,949
Diluted............................ 27,070 27,048 27,099 24,711 24,620 15,542 5,060
BALANCE SHEET DATA:
Investment in hotel properties,
net................................ $581,278 $514,751 $573,826 $415,618 $363,014 $294,509 $49,722
Hotels under development............. 13,831 13,220 15,739 7,325 1,083
Total assets......................... 637,202 546,872 617,128 499,129 376,926 346,870 80,754
Minority interests in partnership.... 36,170 36,268 36,235 4,551 4,509 5,218 1,215
Debt................................. 222,621 144,752 208,909 133,064 30,186 2,420
Shareholders' equity................. 370,625 362,650 362,070 357,482 338,813 335,893 78,807
</TABLE>

36
<PAGE> 52

THE SPECIAL MEETINGS

THE EQUITY INNS SPECIAL MEETING

Time, Place and Date. The Equity Inns Special Meeting will be held at the
corporate offices of Equity Inns, 4735 Spottswood, Suite 102, Memphis, Tennessee
38117 on July , 1998 at 2:00 p.m. local time.

Purpose. At the Equity Inns Special Meeting, holders of shares of Equity
Inns Common Stock will consider and vote upon the Equity Inns Proposals and
transact such other business as may properly come before the Equity Inns Special
Meeting or any adjournment or postponement thereof. A copy of the Merger
Agreement is attached to this Joint Proxy Statement/Prospectus as Annex I.

Record Date; Quorum. Only Equity Inns shareholders of record as of the
close of business on the Equity Inns Record Date are entitled to notice of and
to vote at the Equity Inns Special Meeting. As of the close of business on the
Equity Inns Record Date, shares of Equity Inns Common Stock. A majority
of the issued and outstanding shares of Equity Inns Common Stock must be
present, in person or by proxy, at the Equity Inns Special Meeting in order to
constitute a quorum. A quorum is necessary for effective shareholder action at
the Equity Inns Special Meeting.

Voting Rights; Votes Required for Approval. Each outstanding share of
Equity Inns Common Stock is entitled to one vote. The affirmative vote of the
holders of record of a majority of the shares of Equity Inns Common Stock
outstanding as of the close of business on the Equity Inns Record Date is
required to approve the Merger Proposal. Accordingly, if you are an Equity Inns
shareholder and fail to return your proxy card or to vote in person at the
Equity Inns Special Meeting, the effect will be a vote against the Merger
Proposal. If a quorum is present at the Equity Inns Special Meeting and the
Merger Proposal is approved, the Charter Amendment Proposal and the Plan
Amendment Proposal, respectively, will be approved if the votes cast in favor of
the Charter Amendment Proposal and Plan Amendment Proposal, respectively, exceed
the votes cast in opposition to the Charter Amendment Proposal and Plan
Amendment Proposal, respectively.

Proxies; Revocation and Solicitation of Proxies. Equity Inns Common Stock
represented by properly executed and unrevoked proxies will be voted at the
Equity Inns Special Meeting in accordance with the directions contained therein.
If no direction is made in a properly executed and unrevoked proxy, the named
holders of such proxy will vote all shares of Equity Inns Common Stock
represented by such proxy (i) FOR the approval of the Merger Proposal, (ii) FOR
the approval of the Charter Amendment Proposal, and (iii) FOR the approval of
the Plan Amendment Proposal. In the event of any vote to adjourn the Equity Inns
Special Meeting in order to allow Equity Inns to solicit votes in favor of the
Merger Proposal, proxies voting AGAINST approval of the Merger Proposal will be
voted AGAINST the motion to adjourn the Equity Inns Special Meeting.

Any Equity Inns shareholder giving a proxy has the power to revoke it by
delivering written notice of such revocation to the Secretary of Equity Inns or
by voting in person at the Equity Inns Special Meeting; however, mere attendance
at the Equity Inns Special Meeting will not in and of itself have the effect of
revoking the proxy. Any written notice revoking a proxy for the Equity Inns
Special Meeting should be sent to Equity Inns, Inc., 4735 Spottswood, Suite 102,
Memphis, Tennessee 38117, Attention: Secretary, or should be hand-delivered to
the Secretary at or before the taking of the vote at the Equity Inns Special
Meeting. Any Equity Inns shareholder may attend the Equity Inns Special Meeting
and vote in person, whether or not he has previously given a proxy.

Equity Inns will bear the costs of soliciting proxies from Equity Inns
shareholders. In addition to soliciting proxies by mail, directors, officers and
employees of Equity Inns may solicit proxies by telephone, in person or
otherwise, each without receiving additional compensation therefor. Arrangements
will also be made with brokerage firms and other custodians, nominees and
fiduciaries (collectively, "Fiduciaries") to forward solicitation materials to
the beneficial owners of Equity Inns Common Stock held of record by such
persons, and arrangements may be made with Fiduciaries to obtain authority to
sign proxies. Equity Inns will reimburse Fiduciaries for reasonable
out-of-pocket expenses incurred by them in connection therewith. Equity Inns

37
<PAGE> 53

expects to utilize the services of Corporate Communications to solicit proxies
for the Equity Inns Special Meeting and expects that the cost of such services
will not exceed $5,500, plus out-of-pocket expenses.

Shares represented at the Equity Inns Special Meeting but not voted for or
against a proposal, such as abstentions or "broker non-votes," will be counted
in determining a quorum. For purposes of determining the votes required for the
approval of the Merger Proposal, shares of Equity Inns Common Stock that are not
voted in favor of the Merger Proposal, including abstentions and "broker
non-votes", will have the same legal effect as a vote against the matter.
Abstentions and "broker non-votes," will have no effect on the outcome of the
vote on the Charter Amendment Proposal and the Plan Amendment Proposal. A
"broker non-vote" refers to shares represented at the Equity Inns Special
Meeting in person or by proxy by a broker or nominee where such broker or
nominee does not vote the shares because it (i) has not received voting
instructions on a particular matter from the beneficial owners or persons
entitled to vote and (ii) does not have discretionary voting power on such
matter.

THE EQUITY INNS BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT AND
APPROVED EACH OF THE CHARTER AMENDMENT PROPOSAL AND PLAN AMENDMENT PROPOSAL, AND
UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF EQUITY INNS APPROVE THE EQUITY
INNS PROPOSALS.

THE RFS SPECIAL MEETING

Time, Place and Date. The RFS Special Meeting will be held at the
corporate offices of RFS, 850 Ridge Lake Boulevard, Suite 220, Memphis,
Tennessee 38120 on July , 1998 at 2:00 p.m. local time.

Purpose. At the RFS Special Meeting, holders of shares of RFS Capital
Stock will consider and vote upon the RFS Proposal and transact such other
business as may properly come before the RFS Special Meeting or any adjournment
or postponement thereof. A copy of the Merger Agreement is attached to this
Joint Proxy Statement/Prospectus as Annex I.

Record Date; Quorum. Only RFS shareholders of record as of the close of
business on the RFS Record Date are entitled to notice of and to vote at the RFS
Special Meeting. As of the close of business on the RFS Record Date,
shares of RFS Common Stock and 973,684 shares of RFS Preferred Stock were
outstanding. A majority of the issued and outstanding shares of RFS Capital
Stock must be present, in person or by proxy, at the RFS Special Meeting in
order for a quorum to exist. A quorum is necessary for a valid RFS Special
Meeting.

Voting Rights; Votes Required for Approval. Each outstanding share of RFS
Capital Stock is entitled to one vote. The affirmative vote of the holders of
record of a majority of the shares of RFS Capital Stock outstanding as of the
close of business on the RFS Record Date, voting as a single group, is required
to approve the RFS Proposal. Accordingly, if you are a RFS shareholder and fail
to return your proxy card or to vote in person at the RFS Special Meeting, the
effect will be a vote against the RFS Proposal.

Proxies; Revocation and Solicitation of Proxies. RFS Capital Stock
represented by properly executed and unrevoked proxies will be voted at the RFS
Special Meeting in accordance with the directions contained therein. If no
direction is made in a properly executed and unrevoked proxy, the named holders
of such proxy will vote all shares of RFS Capital Stock represented by such
proxy FOR the approval of the RFS Proposal. In the event of any vote to adjourn
the RFS Special Meeting in order to allow RFS to solicit votes in favor of the
RFS Proposal, proxies voting AGAINST approval of the RFS Proposal will be voted
AGAINST the motion to adjourn the RFS Special Meeting.

Any RFS shareholder giving a proxy has the power to revoke it by delivering
written notice of such revocation to the Secretary of RFS or by voting in person
at the RFS Special Meeting; however, mere attendance at the RFS Special Meeting
will not in and of itself have the effect of revoking the proxy. Any written
notice revoking a proxy for the RFS Special Meeting should be sent to RFS Hotel
Investors, Inc., 850 Ridge Lake Boulevard, Suite 220, Memphis, Tennessee 38120,
Attention: Secretary, or should be hand-delivered to the Secretary at or before
the taking of the vote at the RFS Special Meeting. Any RFS

38
<PAGE> 54

shareholder may attend the RFS Special Meeting and vote in person, whether or
not he has previously given a proxy.

RFS will bear the costs of soliciting proxies from RFS shareholders. In
addition to soliciting proxies by mail, directors, officers and employees of RFS
may solicit proxies by telephone, in person or otherwise, each without receiving
additional compensation therefor. Arrangements will also be made with
Fiduciaries to forward solicitation materials to the beneficial owners of RFS
Capital Stock held of record by such persons, and arrangements may be made with
Fiduciaries to obtain authority to sign proxies. RFS will reimburse Fiduciaries
for reasonable out-of-pocket expenses incurred by them in connection therewith.
RFS expects to utilize the services of Corporate Investors Communications to
solicit proxies for the RFS Special Meeting and expects that the cost of such
services will not exceed $5,000, plus out-of-pocket expenses.

Shares represented at the RFS Special Meeting but not voted for or against
a proposal, such as abstentions or "broker non-votes," will be counted in
determining an quorum. For purposes of determining the votes required for the
approval of the RFS Proposal, shares of RFS Capital Stock that are not voted in
favor of the RFS Proposal, including abstentions and "broker non-votes," will
have the same legal effect as a vote against the matter. A "broker non-vote"
refers to shares represented at the RFS Special Meeting in person or by proxy by
a broker or nominee where such broker or nominee does not vote the shares
because it (i) has not received voting instructions on a particular matter from
the beneficial owners or persons entitled to vote and (ii) does not have
discretionary voting power on such matter.

THE RFS BOARD HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS OF RFS APPROVE THE RFS PROPOSAL.

39
<PAGE> 55

THE COMPANIES

BUSINESS OF EQUITY INNS

Equity Inns is a self-administered and self-advised equity REIT that
currently owns, through subsidiaries, the 95 Equity Inns Current Hotels with an
aggregate of 11,574 rooms in 32 states. The Equity Inns Current Hotels operate
as Hampton Inn(R) hotels (58), Residence Inn(R) hotels (12), AmeriSuites(R)
hotels (10), Homewood Suites(R) hotels (6), Holiday Inn(R) hotels (4), Comfort
Inn(R) hotels (3), one Hampton Inn & Suites(R) hotel and one Holiday Inn
Express(R) hotel. Equity Inns has entered into agreements to acquire the 10
Equity Inns Acquisition Hotels with an aggregate of 1,276 rooms in 8 states.
Equity Inns leases 82 of the Equity Inns Current Hotels to the Interstate Lessee
and leases 10 AmeriSuites(R) brand Equity Inns Current Hotels to the Prime
Lessee pursuant to Percentage Leases that provide for annual rent equal to the
greater of Base Rent or Percentage Rent for the applicable hotel. Three Equity
Inns Current Hotels are currently operated pursuant to management agreements,
two by Interstate and one by CapStar Hotel Co. On December 2, 1997, Interstate
announced that it had agreed to be acquired by Patriot American Hospitality,
Inc., a REIT.

Of the 11,574 rooms in the Equity Inns Current Hotels, approximately 63.5%
are limited service, approximately 19.5% are extended stay, approximately 12.6%
are all-suite, and approximately 4.4% are full service. Limited service hotels
generally do not contain restaurants or lounges and generally contain little
non-revenue-producing space. Extended stay/all-suite hotels generally contain
guest suites with a kitchen and living area separate from the bedroom but vary
with respect to providing on-site restaurant facilities. Full service hotels
generally provide on-site food and beverage services and may have banquet and
meeting facilities.

PENDING ACQUISITIONS

As part of its ongoing business, Equity Inns continuously seeks
opportunities to acquire additional hotel properties on favorable terms. Equity
Inns has entered into agreements to purchase the 10 Equity Inns Acquisition
Hotels with an aggregate of 1,276 rooms for purchase prices aggregating
approximately $101 million. There can be no assurance that Equity Inns will
complete such acquisitions.

BUSINESS OF RFS

RFS is a self-administered and self-advised equity REIT that currently
owns, through subsidiaries, the 62 RFS Hotels with an aggregate of 8,932 rooms
in 24 states. The RFS Hotels operate as Hampton Inn(R) hotels (20), Residence
Inn(R) hotels (14), Holiday Inn Express(R) hotels (6), Holiday Inn(R) hotels
(6), Comfort Inn(R) hotels (6), Sheraton Four Points(R) hotels (3), Sheraton(R)
hotels (2), one Hawthorn Suites(R) hotel, one Doubletree(R) hotel, one Courtyard
by Marriott(R)hotel, and two independent hotels. RFS leases 42 of the RFS Hotels
to the RFS OP Lessees, subsidiaries of Promus, 15 of the RFS Hotels to the RFS
CMBS Lessee, another subsidiary of Promus, and 3 of the RFS Hotels to the Other
RFS Lessees, pursuant to Percentage Leases that provide for annual rent equal to
the greater of a Base Rent or a Percentage Rent for the applicable hotel. Two of
the RFS Hotels are owned by RFS C Corp., a taxable subsidiary of RFS, and are
operated by third parties pursuant to management agreements. Of the 8,932 rooms
in the RFS Hotels, approximately 45% are limited service, approximately 25% are
extended stay, and approximately 30% are full service.

THE COMBINED COMPANIES

Following the Mergers, the RFS Hotels will be owned by Equity Inns OP and
other subsidiaries of Equity Inns. Immediately prior to the Mergers, Equity Inns
intends to require RFS to terminate all of the 57 Promus Leases. Equity Inns
intends to enter into the Substitute RFS Hotel Leases with one or more third
party lessees, effective as of the Closing Date, with respect to all Hotels
previously subject to the terminated Promus Leases. It is a condition to the
consummation of the Mergers that Equity Inns shall have entered into the
Substitute RFS Hotel Leases effective as of the Closing Date. See "Risk
Factors -- Risks Associated with the

40
<PAGE> 56

REIT Merger -- Termination/Replacement of Promus Leases" and "The Merger
Agreement -- Termination of Promus Leases; Substitute RFS Hotel Leases."

Since its initial public offering in 1994, Equity Inns has expanded from an
externally advised REIT which owned eight hotels in the southeastern United
States leased to an affiliated lessee, to a self-administered and self-advised
REIT which, upon completion of the Mergers and the acquisition of the Equity
Inns Acquisition Hotels, will own a portfolio of 167 hotels with 21,782 rooms in
34 states leased to multiple independent lessees. Following the Mergers, Equity
Inns intends to continue to pursue its aggressive growth strategy, including
acquisition and selective development of hotel properties.

INDEBTEDNESS

Assuming the consummation of the Mergers, Equity Inns will have
approximately $624 million of combined total indebtedness (approximately $126
million attributable to the Mergers), as compared to total indebtedness, without
giving effect to the Mergers, of approximately $266 million at April 30, 1998.

LIQUIDITY AND FINANCIAL RESOURCES

In addition to the Merger Agreement, Equity Inns has entered into
agreements to acquire the 10 Equity Inns Acquisition Hotels. In addition to the
shares of Equity Inns Common Stock and Equity Inns OP Units issuable in the
Mergers, Equity Inns will assume approximately $394 million of indebtedness in
connection with the Mergers. In addition, Equity Inns may undertake one or more
equity financings prior to the consummation of the Mergers.

Equity Inns is currently reviewing various alternatives with respect to
refinancing a significant portion of the indebtedness to be assumed in the
Mergers in order to lengthen the average maturity of such debt, convert certain
existing floating rate debt to fixed rate debt and convert certain existing
secured debt to unsecured debt. While Equity Inns expects to be able to obtain
the necessary financing for the Mergers and the related transactions thereto, no
assurance can be given that such financing will be available on terms favorable
to Equity Inns.

EXECUTIVE OFFICERS AND DIRECTORS

In connection with the consummation of the REIT Merger, the current Equity
Inns Board of four directors will be expanded by two members to include Robert
M. Solmson (RFS' Chairman, Chief Executive Officer and President) and Bruce E.
Campbell, Jr. (a current member of the RFS Board) who will be appointed as Class
II and Class I directors, respectively, of Equity Inns effective as of the
Effective Time. In addition, the Equity Inns Board will create an executive
committee consisting of Phillip H. McNeill, Sr., Chairman of the Board,
President, and Chief Executive Officer of Equity Inns, Mr. Solmson and William
W. Deupree, Jr., a current independent director of Equity Inns. See "The Merger
Agreement -- Board of Directors, Committees and Officers." The executive
committee will be responsible for more routine corporate decisions and will have
only such powers and authority as the Equity Inns Board may grant. The current
executive officers of Equity Inns will continue as the executive officers of
Equity Inns following the Mergers. See "Management of Equity Inns After the REIT
Merger."

41
<PAGE> 57

THE REIT MERGER

The detailed terms of the REIT Merger are contained in the Merger Agreement
attached as Annex I to this Joint Proxy Statement/Prospectus. The following
discussion describes the more important aspects of the REIT Merger and the terms
of the REIT Merger. This description is qualified in its entirety by reference
to the Merger Agreement, which is incorporated by reference herein and which RFS
and Equity Inns shareholders are urged to read carefully.

GENERAL

The plan of merger contained in the Merger Agreement provides that RFS will
be merged with and into Merger Sub, a wholly-owned subsidiary of Equity Inns,
with Merger Sub being the Surviving Corporation, and shares of RFS Capital Stock
(except for shares of RFS Preferred Stock with respect to which dissenters'
rights shall have been perfected in accordance with the TBCA) will be converted
into the right to receive a number of shares of Equity Inns Common Stock equal
to the Exchange Ratio. Simultaneously with the Effective Time of the REIT
Merger, RFS OP will be merged with and into Equity Inns OP pursuant to the OP
Merger. See "-- Preferred Shareholders' Dissenters' Rights."

EFFECTIVE TIME

In accordance with the TBCA, the Effective Time will occur upon the date
the Articles of Merger relating to the REIT Merger are filed with the Secretary
of State of the State of Tennessee or on such later date as the parties to the
Merger Agreement agree and specify in the Articles of Merger. Subject to the
fulfillment or waiver of the other conditions set forth in the Merger Agreement,
the parties to the Merger Agreement expect to consummate the REIT Merger as soon
as practicable following the approval by the RFS shareholders of the RFS
Proposal at the RFS Special Meeting and the approval by the Equity Inns
shareholders of the Merger Proposal at the Equity Inns Special Meeting.

TERMS OF THE REIT MERGER

Shares of RFS Capital Stock. The Merger Agreement provides that, as of the
Effective Time, by virtue of the REIT Merger and without any action on part of
any holder of RFS Capital Stock, each issued and outstanding share of RFS
Capital Stock (except for shares of RFS Preferred Stock with respect to which
dissenters' rights shall have been perfected in accordance with the TBCA) will
be converted into the right to receive from Equity Inns a number of shares of
Equity Inns Common Stock equal to the Exchange Ratio. It is a condition to
consummation of the Mergers that the Average Price be at least $14.00, and
either Equity Inns or RFS may terminate the Merger Agreement if the Average
Price is less than $14.00.

Pursuant to the Merger Agreement, as of the Effective Time, all shares of
RFS Capital Stock will no longer be outstanding and will automatically be
canceled and retired and all rights with respect thereto will cease to exist.
Each holder of a certificate representing any such shares of RFS Capital Stock
shall cease to have any rights with respect thereto, except the right to
receive, upon surrender of such certificate as described below, certificates
representing Equity Inns Common Stock required to be delivered by Equity Inns as
described below and any cash in lieu of fractional shares of Equity Inns Common
Stock as described below (the "Merger Consideration"), and the Final RFS
Distribution (as defined below), in each case without interest and less any
required withholding taxes. See "The Merger Agreement -- Exchange of RFS Stock
Certificates;" "-- Fractional Shares" and "-- Final RFS Distribution."

Shares of Equity Inns Common Stock. The Merger Agreement provides that as
of the Effective Time, each share of Equity Inns Common Stock issued and
outstanding immediately prior to the Effective Time will remain issued and
outstanding and will represent one share of Equity Inns Common Stock.

Shares of Common Stock of Merger Sub. The Merger Agreement provides that
as of the Effective Time, each share of common stock of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of common stock of the Surviving
Corporation, all of which will be owned by Equity Inns.

42
<PAGE> 58

Right of Termination. The Merger Agreement provides that if the Average
Price is less than $14.00, either RFS or Equity Inns may terminate the Merger
Agreement.

Fractional Shares. No fractional shares of Equity Inns Common Stock will
be issued to the holders of RFS Capital Stock pursuant to the REIT Merger. In
lieu of the issuance of any fractional shares of Equity Inns Common Stock, cash
payments will be made in an amount equal to such fractional part of a share of
Equity Inns Common Stock multiplied by the Average Price. Except for such cash
payments, any fractional share interest resulting from the REIT Merger will not
entitle the owner thereof to vote, to receive dividends or any other rights of a
shareholder of Equity Inns.

Final RFS Distribution. The Merger Agreement provides that to the extent
necessary to satisfy the 95% distribution requirement of Section 857(a)(1) of
the Code for the taxable year of RFS ending at the Closing Date and to avoid the
payment of tax with respect to undistributed income, RFS will declare a
distribution (the "Final RFS Distribution") to each holder of shares of RFS
Common Stock and, if necessary, RFS Preferred Stock, the record date for which
shall be approximately 5 business days prior to the Closing Date. RFS
anticipates that the Final RFS Distribution will be in an aggregate amount equal
to at least a pro rata quarterly distribution based on the number of elapsed
days in the quarter prior to the Closing Date and based on at least RFS'
then-current quarterly distribution rate. RFS will notify Equity Inns at least
10 days prior to the date for the RFS Special Meeting of the declaration of the
Final RFS Distribution, and Equity Inns will declare a distribution per share to
holders of Equity Inns Common Stock, the record date for which shall be
approximately 5 business days prior to the Closing Date, in an amount per share
of Equity Inns Common Stock equal to the quotient obtained by dividing (i) the
Final RFS Distribution per share of RFS Common Stock paid by RFS by (ii) the
Exchange Ratio. The Final RFS Distribution and the related Equity Inns special
distribution are expected to be paid on the close of business on the last
business day prior to the Closing Date. Furthermore, following the REIT Merger,
Equity Inns intends to pay a partial distribution for the remainder of the
quarter in which the closing of the REIT Merger occurs, in an amount sufficient
to ensure that pre-merger Equity Inns shareholders receive for that quarter
aggregate distributions, after taking into account the earlier special
distribution by Equity Inns described above, equal to Equity Inns' then-current
quarterly distribution rate. Thereafter, holders of Equity Inns Common Stock
will receive distributions as declared by the Equity Inns Board.

BACKGROUND OF THE REIT MERGER

Equity Inns is a self-administered and self-advised REIT that owns a
geographically diverse portfolio of limited service, extended stay/all-suite and
full service hotels. RFS is a self-administered and self-advised REIT that owns
a geographically diverse portfolio of limited service, full service and extended
stay hotels.

In August 1997, RFS' management determined to consider strategic
alternatives, including an alliance with another lodging company, to provide RFS
with sufficient scale and resources to continue to be a substantial participant
in the rapidly consolidating lodging industry in the United States.

On September 8, 1997, RFS' management met with representatives of Salomon
Smith Barney regarding possible recommendations with respect to strategic
alternatives available to RFS. Between October 10, 1997 and November 13, 1997,
Salomon Smith Barney prepared and distributed confidential memoranda to 16
potential strategic partners. On November 13, 1997, RFS received four first
round proposals. On November 17, 1997, Salomon Smith Barney notified three of
the four parties of the second round process. On November 24, 1997 and November
25, 1997, representatives of Salomon Smith Barney and RFS met with two of the
three interested parties to discuss synergistic opportunities and provide a
management overview. One of the two parties that met with the representatives of
Salomon Smith Barney was Equity Inns, and the other was another lodging industry
REIT (the "Alternative Bidder").

On December 6, 1997, RFS received second round indications of interest from
Equity Inns and the Alternative Bidder. On December 8, 1997, RFS received
amended second round indications of interest from Equity Inns and the
Alternative Bidder.

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On December 10, 1997 and December 15, 1997, the RFS Board met with
representatives of Salomon Smith Barney to discuss the proposals received.
Following the December 10, 1997 and December 15, 1997 RFS Board meetings,
discussions with Equity Inns and the Alternative Bidder terminated.

On or about March 17, 1998, Robert M. Solmson, RFS' Chairman, President and
Chief Executive Officer, met with Phillip H. McNeill, Sr., Equity Inns'
Chairman, President and Chief Executive Officer, and during that meeting
discussed a possible merger between the two companies. Mr. McNeill stated that
Equity Inns was interested in renewing discussions but only on the condition
that preliminary financial analysis of a prospective transaction be done by the
companies' respective chief financial officers and that preliminary negotiations
of business terms be conducted by Messrs. Solmson and McNeill without outside
assistance.

Between March 18, 1998 and March 30, 1998, the chief financial officers of
the companies prepared financial models of the present and future balance
sheets, FFO and cash flows resulting from a merger of RFS with Equity Inns, and,
based on those models, Messrs. Solmson and McNeill held a series of meetings to
negotiate the terms of a merger of the two companies.

On March 30, 1998, Mr. McNeill informed the Equity Inns Board of the
negotiations and obtained informal approval to continue negotiating the terms of
a merger transaction with RFS.

On March 31, 1998, Mr. Solmson informed the RFS Board of the negotiations
and obtained informal approval to continue negotiating the terms of a merger
transaction with Equity Inns.

On April 1, 1998, Messrs. Solmson and McNeill tentatively agreed on the
Exchange Ratio, the composition of the Equity Inns Board following any merger of
the companies, and the formation of an executive committee of the Equity Inns
Board on which both Messrs. Solmson and McNeill would serve following any
merger. To obtain advice and assistance in considering the possible transaction
and the issues that would be required to be considered if such a transaction
were to be pursued, RFS requested the assistance of Hunton & Williams, RFS'
outside counsel in respect of securities, transactional and finance matters, and
Salomon Smith Barney. Equity Inns requested the assistance of Baker Donelson as
special counsel with respect to the merger with RFS.

At a meeting on April 2, 1998, Messrs. McNeill and Solmson reached a
further tentative agreement on the terms of the merger, including the Exchange
Ratio and the termination provisions, including termination fees, substantially
as contained in the Merger Agreement.

On April 6, 1998, Hunton & Williams distributed to Messrs. Solmson and
McNeill, Baker Donelson, and both companies' independent accountants, Coopers &
Lybrand L.L.P. ("Coopers"), a summary of proposed transaction terms. In
addition, Mr. McNeill consulted with the Equity Inns Board and Mr. Solmson
consulted with the RFS Board, both on an informal basis, to inform the
respective boards of the status of the prospective transaction and obtain the
authorization to negotiate a definitive merger agreement.

On April 8, 1998, representatives of RFS, Equity Inns, Hunton & Williams,
Baker Donelson, and Coopers met at Baker Donelson's offices in Memphis,
Tennessee to discuss the transaction summary, assign responsibilities for
drafting the definitive merger agreement and to discuss the transaction
structure and associated issues. On the same day, RFS formally engaged Salomon
Smith Barney and Equity Inns formally engaged Morgan Keegan to act as their
respective financial advisors in respect of the prospective transaction.

On April 10, 1998, an initial draft of the Merger Agreement was distributed
to Equity Inns, RFS and their representatives, and Baker Donelson began its
legal due diligence with respect to RFS and its subsidiaries.

On April 14, 1998 representatives of Salomon Smith Barney met with Mr.
Solmson and RFS' chief financial officer and representatives of Coopers to
review the prospective transaction. In addition, on the same day,
representatives of Morgan Keegan met with Mr. McNeill, Equity Inns' chief
financial officer and representatives of Coopers for a due diligence review of
Equity Inns and the prospective transaction. That afternoon, Salomon Smith
Barney representatives held a meeting with Mr. McNeill and Equity Inns' chief
financial officer, and Morgan Keegan representatives held a similar meeting with
Mr. Solmson and RFS' chief financial officer. Later that day, Messrs. Solmson
and McNeill, the companies' respective chief financial

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<PAGE> 60

officers, representatives of Salomon Smith Barney and Morgan Keegan, and
representatives of Hunton & Williams and Baker Donelson held a meeting at RFS'
corporate offices to discuss the latest draft of the Merger Agreement, issues
relating to the transaction structure and timing of approval and execution of
the Merger Agreement.

On April 14, 1998, a meeting of the RFS Board was held at which time
representatives of Salomon Smith Barney presented a financial analysis of the
prospective transaction and the terms of the draft Merger Agreement were
discussed.

On April 16, 1998 a revised draft of the Merger Agreement was distributed
to the parties incorporating changes resulting from the meeting held two days
earlier.

On April 17, 1998 Baker Donelson distributed to each member of the Equity
Inns Board a written summary of the Merger Agreement together with a copy of the
latest draft of the Merger Agreement.

On April 17, 1998, Hunton & Williams distributed to each member of the RFS
Board a written summary of the Merger Agreement, together with a copy of the
latest draft of the Merger Agreement.

On April 18, 1998, Salomon Smith Barney discussed with the RFS directors
its updated financial analyses of the proposed terms of the Mergers.

A special meeting of the Equity Inns Board was held after closing of the
market on April 20, 1998 at which the possible transaction with RFS was reviewed
in detail with the Equity Inns Board by Equity Inns' senior management with the
assistance of Baker Donelson and Morgan Keegan. The presentations and
discussions at the meeting were wide-ranging and detailed and included, among
other things, (i) a presentation by management regarding the terms of the
proposed transaction and relative risks and benefits thereof; (ii) a
presentation by Morgan Keegan regarding the transaction and the fairness of the
Exchange Ratio from a financial point of view to the shareholders of Equity Inns
and the holders of Equity Inns OP Units; and (iii) a presentation by Baker
Donelson regarding the substance of the Merger Agreement and legal and tax
issues relating to the transaction. Thereafter, Morgan Keegan orally advised the
Equity Inns Board, which advice was subsequently confirmed in writing as of
April 21, 1998, of Morgan Keegan's opinion that, as of April 21, 1998, the
Exchange Ratio was fair from a financial point of view to the shareholders of
Equity Inns and the holders of Equity Inns OP Units. Thereafter, the Equity Inns
Board, by unanimous vote, adopted the Merger Agreement and related documents and
recommended to the Equity Inns shareholders that the Merger Proposal be
approved.

A special meeting of the RFS Board was held after closing of the market on
April 20, 1998 at which the terms of the Merger Agreement with Equity Inns were
reviewed in detail with the RFS Board by RFS' senior management with the
assistance of Hunton & Williams and Salomon Smith Barney. The presentations and
discussions at the meeting were wide-ranging and detailed and included, among
other things, (i) a presentation by management regarding the terms of the
proposed transaction and relative risks and benefits thereof; (ii) a
presentation by Salomon Smith Barney regarding the proposed transaction and the
fairness of the Exchange Ratio from a financial point of view to the holders of
RFS Capital Stock and the holders of RFS OP Units; and (iii) a presentation by
Hunton & Williams regarding the substance of the Merger Agreement and legal and
tax issues relating to the transaction. Thereafter, Salomon Smith Barney orally
advised the RFS Board, which advice was subsequently confirmed in writing as of
April 21, 1998, of Salomon Smith Barney's opinion that, as of April 21, 1998,
the Exchange Ratio was fair from a financial point of view to the holders of RFS
Capital Stock and the holders of RFS OP Units. Thereafter, the RFS Board, by
unanimous vote, adopted the Merger Agreement and related documents and
recommended to the RFS shareholders that the RFS Proposal be approved.

Following additional discussions of the terms of the definitive
documentation, the parties executed and delivered the Merger Agreement early in
the morning on April 21, 1998 and immediately issued press releases announcing
the transaction.

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EQUITY INNS' REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE EQUITY INNS BOARD

At a special meeting of the Equity Inns Board, held on April 20, 1998, the
Equity Inns Board received and considered the presentations of the senior
management of Equity Inns and its legal and financial advisors regarding the
proposed Mergers. On April 20, 1998, the Equity Inns Board unanimously adopted
the terms and conditions of the Merger Agreement and the other agreements to be
executed by Equity Inns and its subsidiaries in connection therewith, determined
that the Exchange Ratio was fair from a financial point of view to and that the
Mergers were in the best interests of Equity Inns and the Equity Inns
shareholders, and resolved to recommend that the Equity Inns shareholders vote
to approve the Merger Proposal.

In reaching its decision to adopt the Merger Agreement, the Equity Inns
Board considered a number of factors, including, without limitation, the factors
listed below. In view of the number and wide variety of factors considered in
connection with its evaluation of the Mergers, the Equity Inns Board did not
consider it practicable to, nor did it attempt to, quantify or otherwise assign
relative weights to the specific factors considered in reaching its decision.

Factors that the Equity Inns Board considered in adopting the Merger
Agreement included, among others, the following:

- Critical Mass. Equity Inns will acquire from RFS 62 hotels with 8,932
rooms in 24 states, consisting of 33 limited service hotels, 14 full
service hotels and 15 extended stay/all suites hotels, which are operated
under 9 hotel "flags." When combined with Equity Inns' existing portfolio
of hotels (including the Equity Inns Acquisition Hotels), the combined
companies will own 167 hotels with 21,782 rooms in 34 states consisting
of 95 limited service hotels, 18 full service hotels and 54 extended
stay/all-suites hotels. The increased size of Equity Inns' portfolio of
hotels is expected to result in increased operating efficiencies and
economies of scale.

- Brand and Property-Type Diversification. The Mergers will further
diversify Equity Inns' hotel portfolio from seven national franchise
brands to nine. Also, as a percentage of total revenue, the contribution
from limited service properties will decrease from over 60% to under 50%.

- Geographic Diversification. The Mergers will provide significant
geographic diversification of the combined companies' hotel properties
which should reduce exposure to fluctuating local economic and seasonal
cycles. The Mergers will also provide Equity Inns with entry into certain
new markets, most notably California, which is currently considered one
of the most attractive U.S. hotel markets.

- Potential Effect on FFO. The Equity Inns Board reviewed information
relating to the financial performance, business operations and prospects
of Equity Inns and RFS and current industry, economic and market
conditions. The Equity Inns Board viewed as favorable the analysis of the
management of Equity Inns which indicated that the Mergers would be
accretive to Equity Inns' FFO per share in 1998 and future periods.

The Equity Inns Board also considered the presentations and analyses of
Morgan Keegan, financial advisor to Equity Inns, and Morgan Keegan's opinion to
the effect that, as of April 21, 1998, the Exchange Ratio is fair from a
financial point of view to the shareholders of Equity Inns and the partners
Equity Inns OP.

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In making its decision with respect to the Merger Agreement and the
transactions contemplated thereby, the Equity Inns Board also examined the
following factors which it considered to be negative in its deliberations
regarding the Merger Agreement and the transactions contemplated thereby:

- Transaction Costs; Management Time. There will be significant
transaction costs involved with consummating the Mergers and substantial
management time and effort will be required to effectuate the Mergers and
successfully integrate the businesses of Equity Inns and RFS. If the
Mergers were not to be consummated, Equity Inns would be required to
write-off all transaction costs in the period when negotiations ceased,
which the Equity Inns Board believed could adversely affect the market
price of the Equity Inns Common Stock.

- Termination Fees; Expense Reimbursement. The Merger Agreement provides
for the payment by Equity Inns of a termination fee of $20 million if
Equity Inns terminates the Merger Agreement after receiving an
acquisition proposal and enters into a definitive agreement for or
consummates a similar transaction with a third party within certain time
periods. The obligation to make such termination payment may adversely
affect the ability of Equity Inns to engage in another similar
transaction in the event the Mergers are not consummated. In addition,
the Merger Agreement provides for the reimbursement by Equity Inns of up
to $5 million of transaction expenses incurred by RFS if the Merger
Agreement is terminated in certain circumstances. The reimbursement of
such expenses could have a material adverse effect on the financial
condition or results of operations of Equity Inns.

- Dilution to Earnings. The pro forma financial statements included herein
reflect dilution to Equity Inns' annual 1997 pro forma earnings per
share, as compared to Equity Inns on a pro forma basis without giving
effect to the Mergers.

- Pricing for a Corporate Acquisition. RFS represents a substantial
corporate acquisition and, as such, pricing for the acquisition was
greater than for a more traditional acquisition of an individual hotel or
portfolio of hotels. The Exchange Ratio represents a substantial premium
to the market price of the RFS Common Stock on the NYSE prior to
announcement of the REIT Merger.

- Certain Other Matters. The Equity Inns Board also considered several
other matters, including, among other things: (a) the increase in Equity
Inns' pro forma combined indebtedness following the Mergers and the
corresponding increase in Equity Inns' ratio of debt to total market
capitalization; (b) the benefits to be received in connection with the
Mergers by certain affiliates of RFS; and (c) the risk that the
anticipated benefits of the Mergers might not be fully realized.

The Equity Inns Board considered the factors listed immediately above to
represent the material potential risks and adverse consequences to the existing
shareholders of Equity Inns which could occur as a result of the Mergers. In
considering the Mergers, the Equity Inns Board balanced the impact of these
risks and consequences on the existing shareholders of Equity Inns with the
potential benefits of the REIT Merger, and determined that the potential
benefits considered by the Equity Inns Board described above outweighed such
potential risks and adverse consequences. Accordingly, the Equity Inns Board
voted unanimously to adopt the Merger Agreement and the transactions
contemplated thereby.

In the event the Mergers are not consummated for any reason, Equity Inns
will continue to pursue its business objectives of (i) increasing FFO and cash
available for distribution to holders of Equity Inns Common Stock; (ii)
increasing distributions per share of Equity Inns Common Stock; (iii) increasing
the value of its properties by continuing its growth through the active
acquisition and development of new hotels and other properties; and (iv) holding
its properties for long-term investment. In addition, Equity Inns may seek other
business combination opportunities and additional debt or equity financing.

THE EQUITY INNS BOARD BELIEVES THAT THE REIT MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF EQUITY INNS AND ITS SHAREHOLDERS. THE EQUITY INNS BOARD
UNANIMOUSLY RECOMMENDS THAT EQUITY INNS SHAREHOLDERS VOTE TO APPROVE THE MERGER
PROPOSAL.

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RFS' REASONS FOR THE MERGERS; RECOMMENDATIONS OF THE RFS BOARD

At a special meeting of the RFS Board, held on April 20, 1998, the RFS
Board received and considered the presentations of the senior management of RFS
and its legal and financial advisors regarding the proposed Mergers. On April
20, 1998, the RFS Board unanimously adopted the terms and conditions of the
Merger Agreement and the other agreements to be executed by RFS and its
subsidiaries in connection therewith, determined that the Exchange Ratio was
fair from a financial point of view to and that the Mergers were in the best
interests of RFS and the RFS shareholders, and resolved to recommend that the
RFS shareholders vote to approve the RFS Proposal.

In reaching its decision to adopt the Merger Agreement, the RFS Board
considered a number of factors, including, without limitation, the factors
listed below. In view of the number and wide variety of factors considered in
connection with its evaluation of the Mergers, the RFS Board did not consider it
practicable to, nor did it attempt to, quantify or otherwise assign relative
weights to the specific factors considered in reaching its decision.

Factors that the RFS Board considered in adopting the Merger Agreement
included, among others, the following:

- Price Premium to Market. Based upon the Exchange Ratio, the RFS
shareholders will receive a value that substantially exceeds the market
value of the RFS Common Stock prior to announcement of the REIT Merger.

- Distribution Rate. The most recent quarterly distribution per share paid
on the RFS Common Stock was $.375. The fixed quarterly distribution per
share of RFS Preferred Stock is $0.3625. The most recent quarterly
distribution per share paid on Equity Inns Common Stock was $.31 per
share. Based on an assumed Exchange Ratio of 1.5, the quarterly
distribution with respect to each share of RFS Common Stock, in effect,
would increase by 24% from $.375 to $.465 (1.5 times $.31), and, with
respect to each share of RFS Preferred Stock, by 28.3% from $0.3625 to
$.465.

- Operating Synergies. The potential strategic fit between the two
companies would create a combined entity that has the ability to
capitalize on the complementary expertise and philosophies of each
company's and management team.

- Financial Synergies. The increased size and further diversification of
Equity Inns' hotel portfolio together with the prospects of the combined
companies should increase the combined companies' visibility to the
financial markets and enhance Equity Inns' credit rating, resulting in
the combined companies having access to debt or other financing on more
attractive terms. Equity Inns believes such financial synergies will
enhance its liquidity and increase institutional investor ownership of
the combined entity as compared to institutional ownership of RFS and
Equity Inns on a stand-alone basis.

- Exchange Ratio. The RFS Board determined, and Salomon Smith Barney
issued its opinion to the effect that the Exchange Ratio is fair to the
RFS shareholders and holders of RFS OP Units from a financial point of
view.

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- Certain Terms of the Merger Agreement. The RFS Board's belief that the
terms of the Merger Agreement, subject to certain restrictions, permit
RFS to terminate the Merger Agreement upon payment of a $20 million
termination fee if a superior proposal were made to RFS.

- Tax Treatment. The belief that the Mergers would be accomplished on a
tax-free basis to the RFS shareholders and the limited partners of RFS
OP.

- Strategic Alternatives. The RFS Board's belief that the REIT Merger was
preferable to RFS' principal strategic alternatives, including remaining
as an independent REIT or pursuing discussions with companies other than
Equity Inns. In addition, the RFS Board believed that, in light of the
process conducted by RFS with the assistance of Salomon Smith Barney, as
described in "--Background of the REIT Merger," continued pursuit of
other merger or acquisition alternatives in the fall of 1997 to the REIT
Merger might result in the termination of discussions with Equity Inns.

- Asset Quality. RFS believes its return on invested capital to be among
the highest in the hotel REIT industry and that its assets are of a very
high quality, particularly its full service hotels in California, and
that its inherent value has not been reflected in the market price of the
RFS Common Stock. The RFS Board believes that the premium over the market
price of RFS Common Stock prior to announcement of the Mergers
represented by the Exchange Ratio more closely reflects RFS' underlying
asset values.

The RFS Board also considered the presentations and analyses of Salomon
Smith Barney, financial advisor to RFS, and Salomon Smith Barney's opinion to
the effect that, as of April 21, 1998, the Exchange Ratio is fair from a
financial point of view to the holders of RFS Capital Stock and the holders of
RFS OP Units.

In making its determination with respect to the Merger Agreement and the
transactions contemplated thereby, the RFS Board also examined the following
factors which it considered to be negative in its deliberations regarding the
Merger Agreement and the transactions contemplated thereby:

- Transaction Costs; Management Time. There will be significant
transaction costs involved with consummating the Mergers and substantial
management time and effort will be required to effectuate the Mergers and
successfully integrate the businesses of Equity Inns and RFS. If the
Mergers were not to be consummated, RFS would be required to write-off
all transaction costs in the period when negotiations ceased, which the
RFS Board believed could adversely affect the market price of the RFS
Common Stock.

- Termination Fees, Expense Reimbursement. The Merger Agreement provides
for the payment by RFS of a termination fee of $20 million if RFS
terminates the Merger Agreement after receiving an acquisition proposal
and enters into a definitive agreement for or consummates a similar
transaction with a third party within certain time periods. The
obligation to make such termination payment may adversely affect the
ability of RFS to engage in another similar transaction in the event the
Mergers are not consummated. In addition, the Merger Agreement provides
for the reimbursement by RFS of up to $5 million of transaction expenses
incurred by Equity Inns if the Merger Agreement is terminated in certain
circumstances. The reimbursement of such expenses could have a material
adverse effect on the financial condition or results of operations of
RFS.

- Conduct of Business Pending Closing. Pending closing of the Merger, the
Merger Agreement requires that RFS obtain the consent of Equity Inns
prior to undertaking purchases or sales of hotels, entering into certain
contracts or commitments to spend in excess of $100,000.

The RFS Board considered the factors listed immediately above to represent
the material potential risks and adverse consequences to the existing
shareholders of RFS which could occur as a result of the Mergers. In considering
the Mergers, the RFS Board balanced the impact of these risks and consequences
on the existing shareholders of RFS with the potential benefits of the Mergers,
and determined that the potential benefits considered by the RFS Board described
above outweighed such potential risks and consequences. Accordingly, the RFS
Board voted unanimously to adopt the Merger Agreement and the transactions
contemplated thereby.

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In the event the REIT Merger is not consummated for any reason, RFS will
continue to pursue its business objectives of (i) increasing FFO and cash
available for distribution to holders of RFS Common Stock; (ii) increasing
distributions per share of RFS Common Stock; (iii) increasing the value of its
properties by continuing its growth through the active acquisition and
development of new hotels and other properties; and (iv) holding its properties
for long-term investment. In addition, RFS may seek other business combination
opportunities and additional debt or equity financing.

THE RFS BOARD BELIEVES THAT THE REIT MERGER IS FAIR TO AND IN THE BEST
INTERESTS OF RFS AND ITS SHAREHOLDERS. THE RFS BOARD UNANIMOUSLY RECOMMENDS THAT
RFS SHAREHOLDERS VOTE TO APPROVE THE RFS PROPOSAL.

OPINION OF FINANCIAL ADVISOR TO EQUITY INNS

Morgan Keegan was retained by Equity Inns to deliver its opinion as to the
fairness, from a financial point of view, of the Exchange Ratio in the proposed
Mergers. On April 20, 1998, at a meeting of the Equity Inns Board held to
evaluate and adopt the Merger Agreement, Morgan Keegan delivered an oral opinion
(which opinion was subsequently confirmed by delivery of a written opinion dated
April 21, 1998) to the Equity Inns Board to the effect that, as of the date of
such opinion and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair, from a financial point of view, to the shareholders of
Equity Inns and the holders of Equity Inns OP Units.

In arriving at its opinion, Morgan Keegan reviewed the Merger Agreement and
related documents, and held discussions with senior officers of Equity Inns and
certain senior officers of RFS concerning the businesses, financial conditions
and prospects of Equity Inns and RFS. Morgan Keegan examined certain publicly
available business and financial information relating to Equity Inns and RFS as
well as certain financial forecasts and other information and data for Equity
Inns and RFS. Morgan Keegan reviewed the financial terms of the Mergers as set
forth in the Merger Agreement in relation to, among other things: current and
historical market prices and trading volumes of the Equity Inns Common Stock and
the RFS Common Stock; the historical and projected earnings and other operating
data of Equity Inns and RFS; and the capitalization and financial condition of
Equity Inns and RFS. Morgan Keegan analyzed certain financial, stock market and
other publicly available information relating to the businesses of other
companies whose operations Morgan Keegan considered relevant in evaluating those
of Equity Inns and RFS. Morgan Keegan also evaluated the potential pro forma
financial impact of the Mergers on Equity Inns.

In rendering its opinion, Morgan Keegan assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Morgan Keegan. With respect to financial forecasts
and other information and data provided to or otherwise reviewed by or discussed
with Morgan Keegan, the managements of Equity Inns and RFS advised Morgan Keegan
that such forecasts and other information and data were reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
managements of Equity Inns and RFS. Morgan Keegan assumed, with the consent of
Equity Inns, that the Mergers will be consummated on the terms and subject to
the conditions described in the Merger Agreement. Morgan Keegan also assumed,
with the consent of Equity Inns, that the REIT Merger will be treated as a tax-
free reorganization for federal income tax purposes and that the Mergers will
not adversely affect the REIT status of the combined entity resulting from the
Mergers. Morgan Keegan did not express any opinion as to what the value of the
shares of Equity Inns Common Stock actually will be when issued pursuant to the
REIT Merger or the price at which the shares of Equity Inns Common Stock will
trade subsequent to the Mergers. Morgan Keegan did not make and was not provided
with an independent evaluation or appraisal of the assets or liabilities
(contingent or otherwise) of Equity Inns or RFS nor did Morgan Keegan make any
physical inspection of the assets, properties or facilities of Equity Inns or
RFS. Morgan Keegan was not requested to consider, and Morgan Keegan's opinion
does not address, the relative merits of the Mergers as compared to any
alternative business strategies that might exist for Equity Inns or the
potential effect of any other transaction in which Equity Inns might engage.
Although Morgan Keegan evaluated the Exchange Ratio from a financial point of
view, Morgan Keegan was not asked to and did not recommend the specific
consideration payable in the Mergers, which was determined through negotiation
between Equity Inns and RFS.

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THE FULL TEXT OF THE WRITTEN OPINION OF MORGAN KEEGAN DATED AS OF APRIL 21,
1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX II-A AND SHOULD BE READ
CAREFULLY IN ITS ENTIRETY. THE OPINION OF MORGAN KEEGAN IS DIRECTED TO THE
EQUITY INNS BOARD AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW TO THE SHAREHOLDERS OF EQUITY INNS AND THE HOLDERS OF
EQUITY INNS OP UNITS, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGERS OR AND
DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE EQUITY INNS SPECIAL MEETING. THE SUMMARY OF THE
OPINION OF MORGAN KEEGAN SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.

At the meeting of the Equity Inns Board held on April 20, 1998, Morgan
Keegan presented certain financial analyses accompanied by written materials in
connection with the delivery of its fairness opinion. In preparing its opinion,
Morgan Keegan performed a variety of financial and comparative analyses,
including those described below. The summary of such analyses does not purport
to be a complete description of the analyses underlying Morgan Keegan's opinion.
The preparation of a fairness opinion is a complex analytic process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Accordingly, Morgan Keegan believes that its analyses must
be considered as a whole and that selecting portions of its analyses and
factors, without considering all analyses and factors, could create a misleading
or incomplete view of the processes underlying such analyses and opinion. In its
analyses, Morgan Keegan made numerous assumptions with respect to Equity Inns,
RFS, industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Equity
Inns and RFS. The estimates contained in such analyses and the valuation ranges
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. Morgan Keegan's opinion and analyses were only one of
several factors considered by the Equity Inns Board in its evaluation of the
Mergers and should not be viewed as determinative of the views of the Equity
Inns Board or management of Equity Inns with respect to the Exchange Ratio or
the proposed Mergers. The following is a summary of the material financial and
comparative analyses performed by Morgan Keegan in arriving at the Morgan Keegan
opinion.

Real Estate Analysis. Morgan Keegan performed analyses on each of the RFS
Hotels based upon 1998 and 1999 net operating income ("NOI") estimates provided
by RFS management. NOI was adjusted by 3% and 4% of the total revenue for
management fees and capital expenditure reserves, respectively ("Adjusted NOI").
Using the Adjusted NOI and the total transaction consideration, implied values
and 1999 market capitalization rates were determined for the various RFS hotel
sectors -- extended stay, full service and limited service. Capitalization rates
were applied based on each hotel sector and ranged from 9.3% to 11.0%. The 1999
capitalization rate for the overall RFS portfolio is 10.2%.

Pro Forma Merger Analysis. Morgan Keegan analyzed certain pro forma
effects resulting from the Mergers, including, among other things, the impact of
the Mergers on the estimated FFO per share of Equity Inns Common Stock in fiscal
years 1998 and 1999 based on internal estimates of the managements of Equity
Inns and RFS. The results of the pro forma merger analysis suggested that the
Mergers could be accretive to FFO per share of Equity Inns Common Stock after
giving effect to certain cost savings and other potential synergies anticipated
by the managements of Equity Inns and RFS to result from the Mergers. The actual
results achieved by the combined entity may vary from projected results and the
variations may be material.

Comparable Company Analysis. Using publicly available information
concerning historical and projected financial performance, including published
historical financial information and earnings and FFO estimates reported by
First Call Corporation ("First Call") (which is a data service that monitors and
publishes compilations of earnings and FFO estimates by selected research
analysts regarding companies of interest to institutional investors), Morgan
Keegan analyzed, among other things, the market values and trading multiples of
RFS and the following selected publicly-traded REITs in the lodging industry:
American

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General Hospitality Corporation; Boykin Lodging Trust, Inc.; Equity Inns; FelCor
Suite Hotels, Inc.; Hospitality Properties Trust; Humphrey Hospitality Trust;
Innkeepers USA Trust; Jameson Inns, Inc.; Sunstone Hotel Investors, Inc.; and
Winston Hotels, Inc. (collectively, the "Selected Companies"). Morgan Keegan
compared, among other things, market values as a multiple of estimated calendar
1998 and 1999 FFO. All multiples were based on closing stock prices as of April
17, 1998. FFO estimates for the Selected Companies were based on First Call
estimates, and FFO estimates for RFS were based on internal estimates of RFS'
management. Based on median market multiples, and the incorporation of
transaction synergies anticipated by management of Equity Inns and RFS, this
analysis indicated an implied exchange ratio of 1.6x, as compared to an
estimated Exchange Ratio of 1.5x.

No company or business used in the "Comparable Company Analysis" as a
comparison is identical to Equity Inns or RFS. Accordingly, an analysis of the
results of the foregoing is not entirely mathematical; rather, it involves
complex considerations and judgments concerning differences in financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the Selected Companies or the business segment
or company to which they are being compared.

Comparable Transaction Analysis. Morgan Keegan reviewed the financial
terms, to the extent publicly available, of 17 proposed, pending or completed
merger and acquisition transactions since July 1995 involving companies in the
lodging industry (the "Selected Acquisition Transactions"). Morgan Keegan
calculated various financial multiples based on certain publicly available
information for each of the Selected Acquisition Transactions and compared them
to corresponding financial multiples and premiums over market value for the
Mergers, based on the Exchange Ratio. The transactions reviewed (and the
effective dates) were: FelCor Suite Hotels/Bristol Hotel Co. (pending); Patriot
American Hospitality/Interstate Hotels Co. (pending); Whitehall Street Real
Estate LP IX/Chartwell Leisure Inc. (pending); Prime Hospitality Corp./Homegate
Hospitality, Inc. (pending); American General Hospitality Corporation/CapStar
Hotel Company (March 1998); Starwood Hotels/ITT Corporation (February 1998);
Starwood Hotels/Westin Hotels (January 1998); Patriot American
Hospitality/Wyndham Hotels (January 1998); Promus Hotel Corp./Doubletree Corp.
(December 1997); Sunstone Hotel Investors/Kahler Realty Corporation (October
1997); Equity Inns, Inc./ Growth Hotel Partnership (May 1997); Bristol Hotel
Company/Bass PLC (April 1997); Extended Stay America/Studio Plus Hotels, Inc.
(April 1997); Marriott International, Inc./Renaissance Hotel Group (March 1997);
Doubletree Corporation/Red Lion Hotels, Inc. (November 1996); Club Mediterranne
SA/Club Med, Inc. (August 1995); and Shareholders/Promus Hotel Corp. (July
1995).

Additionally, Morgan Keegan reviewed the financial terms, to the extent
publicly available, of 18 proposed, pending or completed merger and acquisition
transactions since December 1994 involving REITs not affiliated with the lodging
industry (the "Selected REIT Transactions"). Morgan Keegan calculated various
financial multiples based on certain publicly available information for each of
the Selected REIT Transactions and compared them to corresponding financial
multiples and premiums over market value for the REIT Merger, based on the
Exchange Ratio. The transactions reviewed (and the effective dates) were:
Vornado Realty Trust/Arbor Property Trust (pending); Equity Residential
Properties Trust/Evans Withycombe (pending); Equity Office Properties/Beacon
Properties Corp. (pending); Meditrust/Santa Anita Corporation (November 1997);
Post Properties/Columbus Realty Trust (October 1997); Patriot American
Hospitality, Inc./California Jockey Club/Bay Meadows (July 1997); Equity
Residential Properties Trust/ Welsford Residential Property Trust (May 1997);
Camden Property Trust/Paragon Group, Inc. (April 1997); Chateau Properties,
Inc./ROC Communities, Inc. (February 1997); United Dominion Realty Trust, Inc./
South West Property Inc. (January 1997); Highwoods Properties, Inc./Crocker
Property Trust, Inc. (September 1996); Simon Properties Group, Inc./Realty
Corporation (August 1996); EastGroup Properties/ Copley Properties Inc. (June
1996); Bradley Real Estate, Inc./Tucker Properties Corporation (March 1996); BRE
Properties, Inc./REIT of California (March 1996); Horizon Outlet Centers,
Inc./McArthur/Glen Realty Corporation (July 1995); Mid-America Apartment
Communities/America First REIT, Inc. (June 1995); and Wellsford Residential
Properties Trust/Holly Residential Properties, Inc. (December 1994).

All multiples for the Selected Acquisition Transactions and the Selected
REIT Transactions were based on public information available at the time of
announcement of such transaction, without taking into account

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differing market and other conditions during the period during which the
Selected Acquisition Transactions or the Selected REIT Transactions occurred.
Moreover, Morgan Keegan concluded that no Selected Acquisition Transaction was
identical to the REIT Merger, and, consequently, Morgan Keegan did not rely
heavily on the comparable transaction analysis in reaching its conclusion.
However, Morgan Keegan concluded that the implied premium of 8.1% being paid by
Equity Inns assuming synergies anticipated by management of Equity Inns and RFS
resulting from adjustments in leases following consummation of the Mergers
compared favorably to the median 24.3% premium paid in the Selected Acquisition
Transactions and 10.3% paid in the Selected REIT Transactions.

Trading Analysis. Morgan Keegan performed an analysis designed to
determine an implied trading ratio based upon the average trading prices of
shares of Equity Inns Common Stock and shares of RFS Common Stock over the 60
day, 30 day and year to date as of April 20, 1998. Morgan Keegan concluded that
the Exchange Ratio was higher than the implied trading ratio due to the premium
attributable to synergies anticipated by management of Equity Inns and RFS
resulting from the Mergers.

Contribution Analysis. Morgan Keegan analyzed the respective contributions
of Equity Inns and RFS to, among other things, FFO of the combined company for
fiscal years 1998 and 1999 based on internal estimates of the managements of
Equity Inns and RFS. Two analyses were performed, one assuming a conservative
acquisition schedule for Equity Inns and the other assuming an aggressive
acquisition schedule for Equity Inns. The conservative model indicated that (i)
in fiscal year 1998, Equity Inns and RFS would contribute approximately 49.81%
and 50.19%, respectively, of the FFO of the combined company, whereas the
historical shareholders of the respective companies would hold 50.41% and
49.59%, respectively, of the weighted average outstanding shares of Equity Inns
Common Stock and (ii) in fiscal year 1999, Equity Inns and RFS would contribute
approximately 51.06% and 48.94%, respectively, of the FFO of the combined
company, whereas the historical shareholders of the respective companies would
hold 53.98% and 46.02%, respectively, of the weighted average outstanding shares
of Equity Inns Common Stock. The aggressive model indicated that (i) in fiscal
year 1998, Equity Inns and RFS would contribute approximately 50.24% and 49.76%,
respectively, of the FFO of the combined company, whereas the historical
shareholders of the respective companies would hold 50.73% and 49.27%,
respectively, of the weighted average outstanding shares of Equity Inns Common
Stock; and (ii) in fiscal year 1999, Equity Inns and RFS would contribute
approximately 51.06% and 48.94%, respectively, of the FFO of the combined
company, whereas the historical shareholders of the respective companies would
hold 53.98% and 46.02%, respectively, of the weighted average outstanding shares
of Equity Inns Common Stock. Morgan Keegan concluded that in all events the RFS
contribution to estimated FFO compared favorably with the percentage ownership
retained by the historical Equity Inns shareholders following the Mergers.

Other Factors and Comparative Analyses. In rendering its opinion, Morgan
Keegan considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) the historical and
projected financial results of Equity Inns and RFS, (ii) the history of trading
prices and volume of shares of Equity Inns Common Stock and shares of RFS Common
Stock and the relationship of movements of such common stock and movements of
the common stock of various other lodging REIT companies, and (iii) the
relationship of movements of Equity Inns Common Stock, movements of the common
stock of various other hotel REIT companies and movements in a certain REIT
index.

Miscellaneous. The Equity Inns Board selected Morgan Keegan to render a
fairness opinion because Morgan Keegan is a nationally recognized investment
banking firm with substantial experience in transactions similar to the REIT
Merger and because it is familiar with Equity Inns and its business. Morgan
Keegan has from time to time rendered, and may in the future render, investment
banking, financial advisory and other services to Equity Inns for which it has
received, or will receive, customary compensation. Morgan Keegan is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private placements.

Pursuant to a letter agreement dated April 15, 1998, Equity Inns has agreed
to pay Morgan Keegan a transaction fee equal to $750,000, $250,000 of which was
paid on April 21, 1998 and the remainder of which

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will be payable upon consummation of the REIT Merger. The fees paid or payable
to Morgan Keegan are not contingent upon the contents of the opinion delivered.
In addition, Equity Inns has agreed to reimburse Morgan Keegan for its
reasonable out-of-pocket expenses, subject to certain limitations, and to
indemnify Morgan Keegan and certain related persons against certain liabilities
arising out of or in conjunction with its rendering of services under its
engagement, including certain liabilities under the federal securities laws.

In the ordinary course of its business, Morgan Keegan may actively trade in
the securities of Equity Inns and RFS for its own account and the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities. Morgan Keegan has in the past provided other investment banking
services to the Equity Inns and RFS unrelated to the Mergers, for which services
it has received compensation. Such investment banking services include acting as
managing underwriter of RFS' and Equity Inns' initial public offerings of shares
of common stock, acting as managing underwriter for several subsequent follow-on
offerings of shares of RFS Common Stock and Equity Inns Common Stock, and acting
as financial advisor to Equity Inns with respect to the sale of its affiliated
lessee.

OPINION OF FINANCIAL ADVISOR OF RFS

Salomon Smith Barney was retained by RFS to act as its financial advisor in
connection with the proposed Mergers. On April 20, 1998, at a meeting of the RFS
Board held to evaluate the proposed Mergers, Salomon Smith Barney delivered an
oral opinion (subsequently confirmed by delivery of a written opinion dated
April 21, 1998) to the RFS Board to the effect that, as of the date of such
opinion and based upon and subject to certain matters stated therein, the
Exchange Ratio was fair, from a financial point of view, to the holders of RFS
Capital Stock and the holders of RFS OP Units. No limitations were imposed by
the RFS Board upon Salomon Smith Barney with respect to investigations made or
the procedures followed by Salomon Smith Barney.

In arriving at its opinion, Salomon Smith Barney reviewed a draft of the
Merger Agreement and held discussions with certain senior officers, directors
and other representatives and advisors of RFS and certain senior officers and
other representatives and advisors of Equity Inns, including discussions
concerning the businesses, operations and prospects of RFS and Equity Inns.
Salomon Smith Barney examined certain publicly available business and financial
information relating to RFS and Equity Inns as well as certain financial
forecasts and other information and data for RFS and Equity Inns which were
provided to Salomon Smith Barney and prepared by the respective management of
RFS and Equity Inns, including information relating to certain strategic
implications and operational benefits anticipated to result from the Mergers.
Salomon Smith Barney reviewed the financial terms of the Mergers as set forth in
the Merger Agreement in relation to, among other things: (i) current and
historical market prices and trading volumes of shares of RFS Common Stock and
Equity Inns Common Stock; (ii) the historical and projected earnings and other
operating data of RFS and Equity Inns; and (iii) the capitalization and
financial condition of RFS and Equity Inns. Salomon Smith Barney considered, to
the extent publicly available, the financial terms of certain other similar
mergers recently effected which Salomon Smith Barney considered relevant in
evaluating the Mergers and analyzed certain financial, stock market and other
publicly available information relating to the businesses of other companies
whose operations Salomon Smith Barney considered relevant in evaluating those of
RFS and Equity Inns. Salomon Smith Barney also evaluated the potential pro forma
financial impact of the Mergers on Equity Inns. In addition to the foregoing,
Salomon Smith Barney conducted such other analyses and examinations and
considered such other financial, economic and market criteria as Salomon Smith
Barney deemed appropriate in arriving at its opinion.

In rendering its opinion, Salomon Smith Barney assumed and relied upon the
accuracy and completeness of all financial and other information and data
publicly available or furnished to or otherwise reviewed by or discussed with
Salomon Smith Barney and did not assume any responsibility for verification of
such information. With respect to financial forecasts and other information and
data provided to or otherwise reviewed by or discussed with Salomon Smith
Barney, the managements of RFS and Equity Inns advised Salomon Smith Barney, and
Salomon Smith Barney assumed with the permission of RFS, that such forecasts and
other information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of RFS and Equity
Inns as to the future financial performance

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of RFS and Equity Inns and the strategic implications and operational benefits
anticipated to result from the Mergers. Salomon Smith Barney assumed, with the
permission of RFS, that the Mergers would be treated as a tax-free
reorganization for federal income tax purposes, that the Mergers would not
adversely affect the REIT status of the combined entity resulting from the
Mergers and that each Equity Inns OP Unit would be convertible on a one-for-one
basis into Equity Inns Common Stock. Salomon Smith Barney's opinion, as set
forth therein, relates to the relative values of RFS and Equity Inns. Salomon
Smith Barney did not express any opinion as to what the value of shares Equity
Inns Common Stock or Equity Inns OP Units actually will be when issued pursuant
to the Mergers or the price at which shares of Equity Inns Common Stock will
trade subsequent to the Mergers. Salomon Smith Barney did not assume any
responsibility for any independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of RFS or Equity Inns nor did Salomon
Smith Barney make any physical inspection of the properties or assets of RFS or
Equity Inns. Salomon Smith Barney noted that its opinion was necessarily based
upon information available to Salomon Smith Barney, and financial, stock market
and other conditions and circumstances existing and disclosed to Salomon Smith
Barney as of the date of its opinion.

THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON SMITH BARNEY DATED AS OF
APRIL 21, 1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX II-B AND IS
INCORPORATED HEREIN BY REFERENCE. HOLDERS OF RFS COMMON STOCK ARE URGED TO READ
THIS OPINION CAREFULLY IN ITS ENTIRETY. SALOMON SMITH BARNEY'S OPINION IS
DIRECTED TO THE RFS BOARD AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO
FROM A FINANCIAL POINT OF VIEW TO HOLDERS OF RFS CAPITAL STOCK AND TO PARTNERS
OF RFS OP, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGERS OR RELATED
TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDERS AS TO
HOW SUCH SHAREHOLDERS SHOULD VOTE AT THE RFS SPECIAL MEETING. THE SUMMARY OF THE
OPINION OF SALOMON SMITH BARNEY SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.

In preparing its opinion to the RFS Board, Salomon Smith Barney performed a
variety of financial and comparative analyses, including those described below.
The summary of such analyses does not purport to be a complete description of
the analyses underlying Salomon Smith Barney's opinion. The preparation of a
financial opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to summary description. Salomon Smith
Barney believes that its analyses and factors must be considered as a whole and
that selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying such analyses and its opinion. In its analyses, Salomon
Smith Barney made numerous assumptions with respect to RFS, Equity Inns,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of RFS and
Equity Inns. The estimates contained in such analyses and the valuation ranges
resulting from any particular analysis are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by such analyses. In addition,
analyses relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty.

Salomon Smith Barney's opinion and financial analyses were only one of many
factors considered by the RFS Board in its evaluation of the Mergers and should
not be viewed as determinative of the views of the RFS Board or management with
respect to the Exchange Ratio or the Mergers.

The following is a summary of the material financial analyses performed by
Salomon Smith Barney in connection with its opinion dated as of April 21, 1998:

Selected REIT Transactions Analysis. Using publicly available information,
Salomon Smith Barney analyzed the purchase price and implied transactions
multiples paid in 23 selected transactions involving REITs, consisting of:
Security Capital Pacific, Inc./Security Capital Atlantic, Inc., FelCor Suites
Hotels, Inc./Bristol Hotel Co., CapStar Hotel Company/American General
Hospitality, Kimco Realty Corp.,/Price

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REIT Inc., AIMCO/Ambassador Apartments, Inc., Camden Property Trust/Oasis
Residential Inc., Prime Retail Inc./Horizon Group Inc., BRE Properties
Inc./Trammell Crow Residential (West), Simon DeBartolo Group Inc./ Retail
Property Trust, Cali Realty Corp./Mack Co., Patriot American Office, The
Meditrust Companies/Santa Anita Operating Co., Cornerstone Properties Inc./Dutch
Institutional Hldg. Prop., Post Properties Inc./Columbus Realty Trust,
Pennsylvania Real Estate Inv./Rubin Organization Inc., Walden Residential
Properties/Drever Partners Inc., Vornado Realty Trust/Mendik Company Inc.,
Camden Property Trust/Paragon Group Inc., United Dominion Realty/South West
Property Trust, Chateau Properties Inc./ ROC Communities, EastGroup
Properties/Copley Properties, Inc., Whitehall Street Real Estate/Rockefeller
Center Properties, Inc., BRE Properties/Real Estate Investment Trust of CA and
EastGroup Properties/ LNH REIT Inc. (collectively, the "Selected Transactions").
Salomon Smith Barney compared the purchase prices in such transactions as
multiples of, among other things, FFO for the last 12 months ("LTM FFO") and
estimated FFO for the fiscal year following each of the Selected Transactions
("Forward FFO"), and compared the transaction value in such transactions as
multiples of revenues and EBITDA, each for the last twelve months. All multiples
for the Selected Transactions were based on information publicly available at
the time of announcement of the transactions and Forward FFO was based on the
estimates of selected investment banking firms. Applying a range of multiples
for the Selected Transactions of Forward FFO of 7.8x to 12.0x to corresponding
financial data for RFS resulted in an average equity reference range for RFS of
approximately $20.62 to $31.73 per share on a fully diluted basis, as compared
to the $23.06 per share implied value provided in the Mergers.

Selected Company Analysis. Using publicly available information, Salomon
Smith Barney analyzed, among other things, the market values and trading
multiples of RFS, Equity Inns and seven selected publicly traded hotel REITs,
consisting of: American General, Boykin Lodging, FelCor Suite Hotels,
Hospitality Properties Trust, Innkeepers USA, Sunstone Hotel Investors and
Winston Hotels, and two paired share REITs, consisting of Patriot American and
Starwood Lodging (collectively, the "Selected SSB Companies"). Salomon Smith
Barney compared, among other things, market values as a multiple of estimated
calendar 1998 and 1999 FFO. All multiples were based on closing stock prices as
of April 17, 1998. FFO estimates for the Selected SSB Companies were based on
estimates of selected investment banking firms and FFO estimates for RFS and
Equity Inns were based on internal estimates of each company's management.
Applying a range of multiples for the Selected SSB Companies of estimated
calendar 1998 FFO of 7.6x to 9.6x to the estimated calendar 1998 FFO of RFS
resulted in an equity reference range of approximately $20.09 to $25.38, as
compared to the $23.06 per share implied value provided in the Mergers. No
transaction, company or business used as a comparison in the "Selected REIT
Transactions Analysis" or "Selected Company Analysis" is identical to RFS,
Equity Inns or the Mergers. Accordingly, an analysis of the results of the
foregoing is not entirely mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the Mergers, public trading
or other values of the Selected Transactions, the Selected SSB Companies or the
business segment, company or transactions to which they are being compared.

Pro Forma Analysis. Salomon Smith Barney analyzed certain pro forma
effects resulting from the Mergers, including, among other things, the impact of
the Mergers on the estimated FFO per share of Equity Inns for the fiscal years
ending 1998 and 1999, based on internal estimates of the management of RFS and
Equity Inns. The results of the pro forma analysis suggested that the Mergers
could be accretive to the FFO of Equity Inns after giving effect to certain cost
savings and other potential synergies anticipated by the management of RFS and
Equity Inns to result from the Mergers in each of the fiscal years analyzed. The
actual results achieved by the combined company may vary from projected results
and the variations may be material.

Net Asset Valuation Analysis. Salomon Smith Barney performed separate net
asset valuation analyses of each of the RFS Hotels and the Equity Inns Hotels,
based on internal estimates of the managements of RFS and Equity Inns. Gross
estimated value for the RFS Hotels and Equity Inns Hotels was estimated by
capitalizing estimated calendar 1998 NOI after reserves for recurring capital
expenditures. Capitalization rates were applied based on each hotel's market and
ranged from 8.4% to 12.5% in the case of the RFS Hotels and

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9.0% to 13.0% in the case of the Equity Inns Hotels. This analysis indicated an
implied exchange ratio of 1.18 to 1.54, as compared to the estimated Exchange
Ratio of 1.5.

Other Factors and Comparative Analyses. In rendering its opinion, Salomon
Smith Barney considered certain other factors and conducted certain other
comparative analyses, including, among other things, a review of: (i) the
historical and projected financial results of RFS and Equity Inns; (ii) the
history of trading prices and volume for shares of RFS Common Stock and shares
of Equity Inns Common Stock and the relationship of movements of such common
stock and movements of common stock of various other lodging REIT companies and
movements in the REIT index; (iii) premiums paid in selected stock-for-stock
transactions in the lodging REIT industry; and (iv) relative contribution
analysis.

Pursuant to the terms of Salomon Smith Barney's engagement, RFS has agreed
to pay Salomon Smith Barney for its services in connection with the Mergers an
aggregate financial advisory fee of approximately $4.5 million, a substantial
portion of which is contingent upon the consummation of the Mergers. RFS has
also agreed to reimburse Salomon Smith Barney for reasonable travel and other
reasonable out-of-pocket expenses incurred by Salomon Smith Barney in performing
its services, including the reasonable fees and expenses of its legal counsel,
and to indemnify Salomon Smith Barney and related persons against certain
liabilities, including liabilities under the federal securities laws, arising
out of Salomon Smith Barney's engagement.

Salomon Smith Barney has advised RFS that, in the ordinary course of
business, Salomon Smith Barney and its affiliates may actively trade or hold the
securities of RFS and Equity Inns for their own account or for the account of
their customers and, accordingly, may at any time hold a long or short position
in such securities. Salomon Smith Barney has in the past provided certain
investment banking services to RFS unrelated to the Mergers, for which services
Salomon Smith Barney has received compensation. In addition, Salomon Smith
Barney and its affiliates (including Travelers Group Inc. and its affiliates)
may maintain relationships with RFS and Equity Inns.

Salomon Smith Barney is a nationally recognized investment banking firm and
was selected by RFS based on Salomon Smith Barney's experience, expertise and
familiarity with RFS and its business. Salomon Smith Barney regularly engages in
the valuation of businesses and their securities in connection with mergers,
negotiated underwritings, competitive bids, secondary distributions of listed
and unlisted securities, private placements and valuations for estate, corporate
and other purposes.

INTERESTS OF CERTAIN PERSONS IN THE REIT MERGER

In considering the recommendation of the RFS Board with respect to the
Merger Agreement and the transactions contemplated thereby, the RFS shareholders
should be aware that certain members of the RFS Board and management of RFS have
certain interests in the Mergers that are in addition to the interests of the
RFS shareholders generally. Such interests include the following: (i) the
receipt of change in control payments in the aggregate amount of $4.1 million by
three executive officers of RFS, Robert M. Solmson, J. William Lovelace and
Michael J. Pascal, pursuant to their employment agreements with RFS as a result
of the Mergers; (ii) officers, directors and affiliates of RFS beneficially own
an aggregate of 1,044,200 shares of RFS Capital Stock of the outstanding RFS
Capital Stock, which will be exchangeable at the Exchange Ratio for shares of
Equity Inns Common Stock; (iii) the accelerated vesting of all unvested options
held by RFS employees and directors, and the right to elect either to exchange
their options to purchase shares of RFS Common Stock for options to purchase a
number of shares of Equity Inns Common Stock equal to such number of shares of
RFS Common Stock multiplied by the Exchange Ratio (with an exercise price equal
to the RFS option exercise price divided by the Exchange Ratio), or to "cash
out" their RFS options for an amount equal to the difference between the
exercise price for their RFS options and an amount equal to the Exchange Ratio
multiplied by the Average Price; (iv) the appointment of Robert M. Solmson (RFS'
Chairman, Chief Executive Office and President), and Bruce E. Campbell, Jr. (a
member of the RFS Board) as members of the Equity Inns Board; and (v) the
payment by Equity Inns to Mr. Solmson of $95,000 for the purchase of his voting
common stock, which represent Mr. Solmson's cost for such voting stock, in RFS C
Corp., a taxable subsidiary of RFS, which holds ownership interests in RFS'
Sheraton hotel in Birmingham,

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Alabama and the Hotel Rex in San Francisco. No special procedures were put into
place to resolve any conflicts resulting from these interests. However, the RFS
Board was aware of these interests and considered them, among other matters, in
adopting the Merger Agreement and the transactions contemplated thereby.

ACCOUNTING TREATMENT

The transaction will be accounted for by Equity Inns under the purchase
method of accounting for business combinations. Purchase accounting for a
business combination is similar to the accounting treatment used in the
acquisition of any asset group. The fair market value of the consideration (in
the case of the Mergers, the shares of Equity Inns Common Stock, the Equity Inns
OP Units, and assumed indebtedness) given by the acquiring entity is used as a
valuation basis for the transaction. The assets and liabilities of the acquired
entity are revalued to their relative fair market values as of the date of the
business combination. The financial statements of the acquiring entity reflect
combined operations only from the date of the business combination, not
retroactively.

REGULATORY APPROVALS

Other than (i) the Commission declaring effective the Registration
Statement containing this Joint Proxy Statement/Prospectus; (ii) approvals in
connection with compliance with applicable Blue Sky or state securities laws;
(iii) the acceptance for filing of the Articles of Merger by the Secretary of
State of the State of Tennessee; and (iv) the filing of such reports under
Section 13(a) of the Exchange Act as may be required in connection with the
Merger Agreement and the other related transactions, neither the management of
Equity Inns nor the management of RFS believes that any filing with or approval
of any governmental authority is necessary in connection with the Mergers.

FEDERAL SECURITIES LAWS CONSEQUENCES

All shares of Equity Inns Common Stock to be issued to the RFS shareholders
in the REIT Merger will be freely transferable under the federal securities
laws, except that shares of Equity Inns Common Stock issued to persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
RFS prior to the consummation of the REIT Merger may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of Equity Inns) or as otherwise permitted under the Securities Act.
Persons who may be deemed to be affiliates of Equity Inns or RFS generally
include individuals or entities that control, are controlled by, or are under
common control with, such parties.

COMMON SHAREHOLDERS' DISSENTERS' RIGHTS

Because the RFS Common Stock was listed on the NYSE on the RFS Record Date,
under Section 48-23-102(c) of the TBCA, holders of shares of RFS Common Stock
will not have statutory rights to demand and receive payment of the fair value
thereof in connection with the REIT Merger. Holders of shares of Equity Inns
Common Stock will not have statutory rights to dissent from and obtain payment
of the fair value of their shares of Equity Inns Common Stock in connection
with, or as a result of, the matters to be acted upon at the Equity Inns Special
Meeting.

PREFERRED SHAREHOLDERS' DISSENTERS' RIGHTS

Any holder of RFS Preferred Stock has the right to receive payment of the
fair value of his shares of RFS Preferred Stock upon compliance with Sections
48-23-202 and 48-23-204 of the TBCA. A shareholder may not dissent as to less
than all of the shares of RFS Preferred Stock that he beneficially owns. A
nominee or fiduciary may not dissent on behalf of a beneficial owner as to less
than all of the shares of RFS Preferred Stock such beneficial owner held of
record by such nominee or fiduciary. A beneficial owner asserting dissenters'
rights to shares of RFS Preferred Stock held on his behalf must notify RFS in
writing of the name and address of the record holder of the shares, if known to
him.

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Any holder of RFS Preferred Stock intending to enforce his dissenter's
rights may not vote in favor of the Merger Agreement (either personally or by
proxy) and must deliver to the corporate secretary of RFS before the time of the
vote a written notice of intent to demand payment for his shares (the "Objection
Notice"). The Objection Notice must state that such holder intends to demand
payment for his shares of RFS Preferred Stock if the REIT Merger is effected. A
vote against approval of the Merger Agreement will not, in and of itself,
constitute an Objection Notice satisfying the requirements of Section 48-23-202
of the TBCA.

If the Merger Agreement is approved by RFS' shareholders at the RFS Special
Meeting, each holder of RFS Preferred Stock who has filed an Objection Notice
will be notified by RFS of such approval no later than 10 days after the RFS
Special Meeting (the "Dissenters' Notice"). The Dissenters' Notice will (i)
state where the payment demand must be sent and where and when certificates for
certificated shares of RFS Preferred Stock (the "Series A Certificates") must be
deposited, (ii) inform holders of uncertificated shares (if any) to what extent
transfer of the shares will be restricted after the payment demand is received,
(iii) supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action and requires that the person asserting the dissenters'
rights certify whether or not he acquired beneficial ownership of the shares
before that date, (iv) set a date by which RFS must receive the payment demand,
which date may not be fewer than one nor more than two months after the date the
Dissenters' Notice was delivered and (v) be accompanied by a copy of Chapter 23
of the TBCA. Within the time prescribed in the Dissenters' Notice, a holder of
RFS Preferred Stock electing to dissent must make a demand for payment (the
"Payment Demand"), certify whether he (or the beneficial shareholder on whose
behalf he is asserting dissenter's rights acquired beneficial ownership of the
shares of RFS Preferred Stock before April 21, 1998 (the date of the first
public announcement of the terms of the Merger Agreement), and deposit the
Series A Certificates in accordance with the terms of the Dissenter's Notice.
Upon delivering the Payment Demand and depositing the Series A Certificates in
accordance with the Dissenter's Notice, the holder of RFS Preferred Stock will
retain all other rights of a holder of RFS Preferred Stock until these rights
are canceled or modified by consummation of the REIT Merger. FAILURE TO COMPLY
SUBSTANTIALLY WITH THESE PROCEDURES WILL CAUSE THE HOLDER OF RFS PREFERRED STOCK
TO LOSE HIS DISSENTER'S RIGHTS TO PAYMENT FOR THE SHARES. CONSEQUENTLY, ANY
HOLDER OF RFS PREFERRED STOCK WHO DESIRES TO EXERCISE HIS RIGHTS TO PAYMENT FOR
HIS SHARES OF RFS PREFERRED STOCK IS URGED TO CONSULT HIS LEGAL ADVISOR BEFORE
ATTEMPTING TO EXERCISE SUCH RIGHTS.

As soon as the REIT Merger is consummated, or upon later receipt of a
timely Payment Demand, RFS shall, pursuant to Section 48-23-206 of the TBCA, pay
to each dissenting holder of RFS Preferred Stock who has complied with the
requirements of Section 48-23-204 of the TBCA the amount that RFS estimates to
be the fair value of the shares of RFS Preferred Stock, plus accrued interest.
Such payment must be accompanied by (i) certain of RFS's financial statements,
(ii) a statement of RFS's estimate of the fair value of the shares of RFS
Preferred Stock, (iii) an explanation of how the interest was calculated, (iv) a
statement of the dissenter's right to demand payment under Section 48-23-209 of
the TBCA, and (v) a copy of Chapter 23 of the TBCA if not previously furnished.
As authorized by Section 48-23-208 of the TBCA, RFS intends to delay any
payments with respect to any shares (the "after-acquired shares") of RFS
Preferred Stock held by a dissenting holder of RFS Preferred Stock which were
not held by such holder on April 21, 1998, the date of the first public
announcement of the terms of the Merger Agreement. To the extent RFS elects to
withhold payment, after effecting the REIT Merger, the surviving corporation in
the REIT Merger must estimate the fair value of the shares of RFS Preferred
Stock with respect to which dissenters' rights shall have been perfected, plus
accrued interest, and pay such amount to each dissenter who agrees to accept it
in full satisfaction of his demand. RFS shall send with such payment a statement
of its estimate of the fair value of the shares, an explanation of how the
interest was calculated and a statement of the dissenter's right to demand
additional payment under Section 48-23-209 of the TBCA.

If (i) a dissenter believes that the amount paid in respect to his shares
of RFS Preferred Stock or offered under Section 48-23-208 of the TBCA is less
than the fair value of his shares of RFS Preferred Stock or that the interest
due is incorrectly calculated, (ii) RFS fails to make payment under Section
48-23-206 of the TBCA within two months after the date set for demanding
payment, or (iii) RFS, having failed to effect the REIT Merger, does not return
the deposited Series A Certificates or release the transfer restrictions imposed

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on uncertificated shares within two months after the date set for demanding
payment, the dissenter may notify RFS (or its successor in the REIT Merger) in
writing (which notice is invalid if not delivered to RFS within one month after
RFS made or offered payment for such shareholder's shares) of his own estimate
of the fair value of the shares of RFS Preferred Stock and the amount of
interest due and may demand payment of the difference between his estimate of
the fair value and the amount of any payment in respect to such shares already
received by the holder, or, in the alternative, if no payment has yet been made
by RFS, reject RFS's offer under Section 48-23-208 of the TBCA and demand
payment of the fair value of his shares of RFS Preferred Stock and interest due.

If RFS (or the surviving corporation) cannot agree on a fair value within 2
months after RFS receives the Payment Demand, RFS will institute judicial
proceedings in either the chancery or circuit court of Shelby County, Tennessee
(the "Court"), naming all dissenters (whether or not Tennessee residents) whose
demands remain unsettled as parties to the proceeding and serving such parties
with a copy of the petition. The Court will then undertake to establish the fair
value of the shares of RFS Preferred Stock immediately before the consummation
of the REIT Merger, excluding any appreciation or depreciation in anticipation
of the REIT Merger, and will determine the interest owing on the disputed
amount. The fair value of a dissenter's shares of RFS Preferred Stock may be
more than, less than or the same as the value inherent to the Exchange Ratio.
The Court may, in its discretion, appoint one or more persons as appraisers to
receive evidence and recommend decision on the question of fair value. Each
dissenter made a party to the proceeding is entitled to judgment for the amount
(if any) by which the court finds the fair value of his shares of RFS Preferred
Stock, plus accrued interest, exceeds the amount paid by RFS or the fair value,
plus accrued interest, of his after-acquired shares of RFS Preferred Stock for
which RFS elected to withhold payment under Section 48-23-208 of the TBCA.

The Court shall assess costs and expenses of such proceeding (including
reasonable compensation for and expenses of the appraiser but excluding fees and
expenses of counsel and experts) against RFS (or its successor in the REIT
Merger), except that the Court may assess such costs and expenses as it deems
appropriate against any or all of the dissenting holders of RFS Preferred Stock
if it finds that their demand for additional payment was arbitrary, vexatious or
not in good faith. The Court may award fees and expenses of counsel and experts
in amounts the Court finds equitable: (i) against RFS if the Court finds that
RFS did not comply substantially with the relevant requirements of the Act of
(ii) against RFS or any dissenting holder of RFS Preferred Stock, if the Court
finds that the party against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith.

The foregoing summary of the applicable provisions of Chapter 23 of the
TBCA is not intended to be a complete statement of such provisions, and is
qualified in its entirety by reference to such sections, which are included as
Annex III hereof.

For a discussion of certain tax consequences in connection with dissenting,
see "Federal Income Tax Considerations -- Tax Considerations Relating to the
REIT Merger."

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THE MERGER AGREEMENT

The following is a brief summary of the material provisions of the Merger
Agreement, a copy of which is attached as Annex I to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement.
ALL SHAREHOLDERS OF RFS AND EQUITY INNS ARE URGED TO READ THE MERGER AGREEMENT
CAREFULLY.

GENERAL

On April 21, 1998, Equity Inns, Merger Sub, Equity Inns OP, RFS and RFS OP
entered into the Merger Agreement. Each of the Equity Inns Board, the Board of
Directors of Merger Sub, and the RFS Board has approved and adopted the Merger
Agreement and the transactions contemplated thereby.

The Merger Agreement provides that in the REIT Merger (i) RFS will merge
into Merger Sub, which will be the Surviving Corporation, (ii) each issued and
outstanding share of Equity Inns Common Stock will remain issued and outstanding
and will represent one share of Equity Inns Common Stock, (iii) each issued and
outstanding share of common stock of Merger Sub, $.01 par value per share, will
remain issued and outstanding and will represent one share of common stock of
the Surviving Corporation, $.01 par value per share, all of which shares will be
owned by Equity Inns, and (iv) each issued and outstanding share of RFS Capital
Stock will be converted into the right to receive from Equity Inns a number of
shares of Equity Inns Common Stock equal to the Exchange Ratio. See "The REIT
Merger -- Terms of the REIT Merger."

The Merger Agreement also contemplates, among other things, that
simultaneously with the Effective Time of the of the REIT Merger, RFS OP will
sell, and Equity Inns OP will purchase, all of the real and personal property of
RFS OP, subject to all liabilities of RFS OP, which Asset Sale will be
consummated by means of the OP Merger, with Equity Inns OP being the Surviving
OP, and RFS OP Units will be converted into the right to receive a number of
Equity Inns OP Units equal to the Exchange Ratio. See "-- The OP Merger."

CHARTER AND BYLAWS

The Charter and Bylaws of Merger Sub as in effect immediately prior to the
Effective Time will be the Charter and Bylaws of the Surviving Corporation upon
consummation of the REIT Merger. The Equity Inns Charter and Equity Inns Bylaws
are not affected by the REIT Merger, but if the Charter Amendment Proposal is
approved by the shareholders of Equity Inns, the Amended Equity Inns Charter
will be the Charter of Equity Inns effective as of the Effective Time. See "The
Special Meetings -- The Equity Inns Special Meeting."

BOARD OF DIRECTORS, COMMITTEES AND OFFICERS

With respect to Merger Sub, the directors and officers of Merger Sub in
office immediately prior to the Effective Time will be the directors and
officers of the Surviving Corporation upon consummation of the REIT Merger.

With respect to Equity Inns, on or before the Closing Date, the Equity Inns
Board will take all action necessary to expand the number of directors on the
Equity Inns Board from the current four directors to six directors, and cause
Robert M. Solmson, RFS' Chairman of the Board, President and Chief Executive
Officer and Bruce E. Campbell, Jr., a current member of the RFS Board, to be
appointed as Class II and Class I directors, respectively, for terms expiring at
the 1999 annual meeting of shareholders of Equity Inns. In addition, the Equity
Inns Board will recommend in Equity Inns' proxy statement with respect to the
1999 annual meeting of shareholders of Equity Inns that Messrs. Campbell and
Solmson be nominated by the Equity Inns Board for election as Class I and Class
II directors, respectively, with terms expiring at Equity Inns' annual meetings
of shareholders in 2001 and 2002, respectively. If, prior to the Effective Time,
either of such persons declines or becomes unable to serve as a director of
Equity Inns, RFS will designate another person to serve in such person's stead,
which person shall be reasonably acceptable to the Equity Inns Board.

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Furthermore, on or before the Closing Date, the Equity Inns Board will take
all action necessary to form a three-member executive committee of the Equity
Inns Board and will cause Robert M. Solmson, Phillip H. McNeill, Sr. and William
W. Deupree to be appointed to serve as members of such executive committee.

EXCHANGE OF RFS STOCK CERTIFICATES

Prior to the Closing Date, Equity Inns will appoint, or will cause to be
appointed, SunTrust Bank or another bank or trust company to act as exchange
agent (the "Exchange Agent") for the exchange of the Merger Consideration upon
surrender of certificates representing issued and outstanding shares of RFS
Capital Stock.

Equity Inns will provide, or will cause to be provided, to the Exchange
Agent on or prior to the Closing Date, certificates representing the shares of
Equity Inns Common Stock into which the shares of RFS Capital Stock will be
converted pursuant to the terms of the Merger Agreement and the cash payable in
respect of fractional shares resulting from the exchange pursuant to the terms
of the Merger Agreement. See "The REIT Merger -- Terms of the REIT
Merger -- Fractional Shares."

As soon as reasonably practicable after the Closing, the Exchange Agent
will mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of RFS
Capital Stock (the "RFS Certificates"), whose shares were converted into the
right to receive the Merger Consideration pursuant to the terms of the Merger
Agreement, (i) a letter of transmittal (which will specify that delivery will be
effected, and risk of loss and title to the RFS Certificates will pass, only
upon delivery of the RFS Certificates to the Exchange Agent and will be in a
form and have such other provisions as Equity Inns reasonably specifies) and
(ii) instructions for use in effecting the surrender of the RFS Certificates in
exchange for the Merger Consideration. SHAREHOLDERS OF RFS SHOULD NOT SEND IN
THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL. Upon
surrender of an RFS Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Equity Inns, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such RFS Certificate
will be entitled to receive in exchange therefor the Merger Consideration and,
if any, all dividends or other distributions to which such holder is entitled,
and the RFS Certificate so surrendered will forthwith be canceled. In the event
of a transfer of ownership of shares of RFS Capital Stock which is not
registered in the transfer records of RFS, payment may be made to a person other
than the person in whose name the RFS Certificate so surrendered is registered
only if such certificate will be properly endorsed or otherwise be in proper
form for transfer and the person requesting such payment either shall pay any
transfer or other taxes required by reason of such payment being made to a
person other than the registered holder of such RFS Certificate or establish to
the satisfaction of Equity Inns that such tax or taxes have been paid or are not
applicable. Until such surrender, each RFS Certificate will be deemed at any
time after the Effective Time to represent only the right to receive upon such
surrender the Merger Consideration, without interest, and all dividends or other
distributions to which such holder is entitled. No interest will be paid or will
accrue on the Merger Consideration upon the surrender of any RFS Certificate. In
the event any RFS Certificate has been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming such RFS Certificate
to be lost, stolen or destroyed and, if required by Equity Inns or the Exchange
Agent, the posting by such person of a bond in such reasonable amount as Equity
Inns may direct as indemnity against any claim that may be made against it with
respect to such RFS Certificate, the Exchange Agent or Equity Inns will issue
with respect to such lost, stolen or destroyed RFS Certificate the shares of
Equity Inns Common Stock and cash in lieu of fractional shares and unpaid
dividends (including the Final RFS Distribution) pursuant to the terms of the
Merger Agreement.

All Merger Consideration paid upon the surrender of RFS Certificates in
accordance with the terms of the Merger Agreement will be deemed to have been
paid in full satisfaction of all rights pertaining to the shares of RFS Capital
Stock theretofore represented by such RFS Certificates, and at and after the
Effective Time there will be no further registration of transfers on the stock
transfer books of RFS of the shares of RFS Capital Stock which were outstanding
immediately prior to the Effective Time.

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None of Equity Inns, Merger Sub, RFS or the Exchange Agent will be liable
to any person in respect of any consideration or dividends delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Any portion of the Merger Consideration delivered to the Exchange Agent that
remains unclaimed for one year after the Closing will be redelivered by the
Exchange Agent to Equity Inns, upon demand, and any holders of RFS Certificates
who have not theretofore complied with the exchange procedures described above
may thereafter look only to Equity Inns for delivery of the Merger Consideration
and any unpaid dividends, subject to applicable escheat and other similar laws.

Equity Inns, RFS or the Exchange Agent shall be entitled to deduct and
withhold from the Merger Consideration otherwise payable pursuant to the terms
of the Merger Agreement to any holder of shares of RFS Capital Stock such
amounts as Equity Inns, RFS or the Exchange Agent is required to deduct and
withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that such amounts
are so withheld by Equity Inns, RFS or the Exchange Agent, any such withheld
amount will be treated for all purpose of the Merger Agreement as having been
paid to the shareholder of RFS in respect of which such deduction and
withholding was made by Equity Inns, RFS or the Exchange Agent.

TREATMENT OF STOCK OPTIONS AND OTHER STOCK BASED COMPENSATION

At or prior to the Effective Time, holders of the options to acquire shares
of RFS Common Stock (the "RFS Options") which have not been exercised as of the
Effective Time, including any unvested RFS Options with respect to which vesting
accelerates as a result of the transactions contemplated by the Merger
Agreement, may elect to either (i) exchange such RFS Options for fully vested
options to acquire a number of shares of Equity Inns Common Stock equal to (x)
the number of shares of RFS Common Stock subject to such RFS Options multiplied
by (y) the Exchange Ratio with an option exercise price per share of Equity Inns
Common Stock equal to (A) the exercise price for the RFS Options divided by (B)
the Exchange Ratio (rounded to the nearest cent); or (ii) sell all of the RFS
Options outstanding as of the Effective Time for a cash amount equal to (a) the
number of shares of RFS Common Stock subject to such RFS Options multiplied by
(b) the difference between the exercise price of each RFS Option and an amount
equal to the Exchange Ratio multiplied by the Average Price. Any options to
acquire Equity Inn Common Stock issued pursuant to clause (i) above will expire
on the expiration date of the RFS Options for which they are exchanged,
disregarding any termination of employment resulting from, or related to, Equity
Inns' acquisition of RFS and its subsidiaries pursuant to the Merger Agreement.
In addition, notwithstanding clause (i) above, each RFS Option which is an
"incentive stock option" will be adjusted as required by Section 424 of the
Code, so as not to constitute a modification, extension or renewal of the
option, within the meaning of Section 424(h) of the Code.

THE OP MERGER

The Merger Agreement contemplates, among other things, that simultaneously
with the Effective Time of the REIT Merger, RFS OP will sell, and Equity Inns OP
will purchase, all of the real and personal property of RFS OP, subject to all
liabilities of RFS OP, which Asset Sale will be consummated by means of the OP
Merger of RFS OP with and into Equity Inns OP, with Equity Inns OP being the
Surviving OP. In the OP Merger, RFS OP Units will be converted into the right to
receive Equity Inns OP Units. The OP Merger will become effective at the
Effective Time.

As of the Effective Time, by virtue of the OP Merger and without any action
on part of any holder of units of partnership interest of RFS OP, (i) each
outstanding RFS OP Unit held by RFS will be converted into the right to receive
from Equity Inns OP a number of Equity Inns General Units equal to the Exchange
Ratio, and (ii) each outstanding RFS OP Unit held by limited partners of RFS OP
will be converted into the right to receive from Equity Inns OP a number of
Equity Inns Limited Units equal to the Exchange Ratio (the "OP Merger
Consideration").

The Certificate of Limited Partnership and the Agreement of Limited
Partnership of Equity Inns OP as in effect immediately prior to the Effective
Time will be the Certificate of Limited Partnership and the

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Agreement of Limited Partnership of the Surviving OP. The sole general partner
of the Surviving OP will be Equity Inns Trust, and the limited partners of the
Surviving OP will be all persons who were at the date of the Merger Agreement or
who thereafter are admitted to either RFS OP or Equity Inns OP as limited
partners.

RFS owns directly approximately 90.5% of the equity interests of RFS OP,
RFS being the general partner of RFS OP. The remaining equity interests of RFS
OP are owned by certain limited partners of RFS OP. Equity Inns owns indirectly
approximately 94.9% of the equity interests of Equity Inns OP through Equity
Inns Trust, a wholly-owned subsidiary of Equity Inns and the sole general
partner of Equity Inns OP. The remaining equity interests of Equity Inns OP are
owned by certain limited partners of Equity Inns OP. The OP Merger will have, to
the extent applicable, the same economic and tax consequences for the limited
partners of RFS OP as the REIT Merger has for the holders of RFS Capital Stock.

THE CMBS OP MERGER

The Merger Agreement also contemplates, among other things, that RFS and
Equity Inns will cause RFS Financing Partnership, L.P., a Tennessee limited
partnership and a subsidiary partnership of RFS ("RFS CMBS OP") and a Tennessee
limited partnership to be created and organized by Equity Inns ("Equity Inns
CMBS OP") to enter into an agreement of merger between RFS CMBS OP and Equity
Inns CMBS OP prior to the Closing Date (the "CMBS Agreement of Merger"),
regarding the merger (the "CMBS OP Merger") of RFS CMBS OP with and into Equity
Inns CMBS OP, with Equity Inns CMBS OP being the surviving limited partnership
which will contain terms and conditions consistent with Article VI of the Merger
Agreement. Article VI of the Merger Agreement provides that simultaneously with
the Effective Time of the REIT Merger, RFS CMBS OP will sell, and Equity Inns
CMBS OP will purchase, all of the real and personal property of RFS CMBS OP,
subject to all liabilities of RFS CMBS OP, which (together with the sale of
assets from RFS OP to Equity Inns OP, the "Asset Sale") will be consummated by
means of, and units of partnership interest of RFS CMBS OP would be converted
into the right to receive units of partnership interest in Equity Inns CMBS OP
as set forth in the CMBS Agreement of Merger (the "CMBS OP Merger
Consideration").

RFS Financing Corporation, a Tennessee corporation and a wholly-owned
subsidiary of RFS, is the sole general partner of RFS CMBS OP, and RFS OP is the
sole limited partner of RFS CMBS OP. RFS CMBS OP is the issuer of the Series
1996-1 Commercial Mortgage Bonds, Class A and Class B, in the aggregate original
principal amount of $75,000,000 (collectively, the "CMBS Bonds"). RFS CMBS OP
was organized solely for the purpose of being the issuer of the CMBS Bonds and
owns the 15 RFS Hotels which serve as collateral for the CMBS Bonds. Equity Inns
has agreed to use its best efforts promptly after the date of the Merger
Agreement to create and establish Equity Inns CMBS OP with characteristics and
ownership structure substantially similar to the characteristics and ownership
structure of RFS CMBS OP, for the purpose of causing the CMBS Bonds to remain
outstanding after the CMBS OP Merger, with Equity Inns CMBS OP as the issuer
thereof rather than RFS CMBS OP. See "-- Certain Other Covenants -- CMBS Bonds."

DELIVERIES TO EVIDENCE THE ASSET SALE

At the Closing, but prior to the Effective Time, if requested by Equity
Inns to further evidence the Asset Sale being consummated by means of the OP
Merger and the CMBS OP Merger, RFS OP will, and RFS and RFS OP will cause RFS
CMBS OP to, deliver, or cause to be delivered, to Equity Inns OP or Equity Inns
CMBS OP, as applicable, certain conveyance instruments and documents, including
deeds conveying title to all real property owned by RFS OP and RFS CMBS OP,
including RFS Hotels and undeveloped parcels of real property, bills of sale
conveying title to the inventories owned by the RFS Lessees used in the
operation of RFS Hotels, and bills of sale conveying title to the tangible
personal property, the intangible personal property and partnership interests
owned by RFS OP and RFS CMBS OP.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties made
by RFS and RFS OP to Equity Inns, Merger Sub and Equity Inns OP relating to,
among other things: (i) the due organization, corporate or partnership powers,
and standing of RFS and its subsidiaries and similar corporate matters;

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(ii) the authorization, execution, delivery and enforceability of the Merger
Agreement and the other documents required thereby; (iii) the capital structure
of RFS; (iv) the lack of conflicts with or violations under laws, judgments,
orders, organizational documents of RFS and its subsidiaries, or material
contracts to which RFS or any of its subsidiaries is a party; (v) litigation
affecting RFS and its subsidiaries; (vi) the absence of certain changes
affecting RFS or its subsidiaries that are not in the ordinary course of their
business; (vii) the ownership of RFS' subsidiaries and other investment
interests; (viii) the identity of material contracts, leases, debt instruments
and commitments that RFS or any of its subsidiaries is a party, and the
enforceability and status thereof; (ix) consents, approvals or authorizations
required to be obtained by RFS or any of its subsidiaries; (x) employee benefit
plan matters; (xi) certain documents filed by RFS with the Commission, the
accuracy and completeness of the information contained therein (including
financial information), the compliance by RFS with applicable laws as to the
filing thereof, and undisclosed liabilities; (xii) special taxes or assessments;
(xiii) compliance with law and receipt of required permits; (xiv) insurance;
(xv) condemnation or eminent domain proceedings; (xvi) encumbrances on personal
property and condition thereof; (xvii) lack of acts of bankruptcy affecting RFS
or any of its subsidiaries; (xviii) encumbrances on real property, status of
title thereof, and existence of title insurance with respect thereto; (xix)
zoning affecting the RFS Hotels; (xx) hazardous substances affecting the RFS
Hotels; (xxi) furnishings of the RFS Hotels; (xxii) franchisors and franchise
agreements under which RFS Hotels are operated; (xxiii) mortgage documents
encumbering the RFS Hotels and other real property of RFS and its subsidiaries,
and absence of default hereunder; (xxiv) RFS' receipt of a fairness opinion;
(xxv) financial advisory, broker or finder fees with respect to the REIT Merger
or the transactions contemplated in the Merger Agreement; (xxvi) the ownership
of interests in Equity Inns by RFS or any of its subsidiaries; (xxvii) related
party transactions; (xxviii) the applicability of certain takeover statutes;
(xxix) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act"); (xxx) identity
of material agreements relating to development, rehabilitation, capital
improvement or construction of or additions to hotel properties and other real
estate, and the status thereof; (xxxi) tax matters; (xxxii) securities issued by
RFS convertible into shares of RFS Common Stock; (xxxiii) identity of
intellectual property owned or licensed by RFS or any of its subsidiaries, and
the lack of infringement on rights of other persons; (xxxiv) labor and
employment matters; and (xxxv) the letter agreement among RFS, RFS OP, RFS CMBS
OP and the Promus Lessees dated October 17, 1997 (the "Lease Termination
Agreement"), that provides for the determination of certain amounts payable to
the Promus Lessees in connection with the termination by RFS of the Promus
Leases, and amounts determined thereunder to terminate the Promus Leases.

The Merger Agreement contains various representations and warranties made
by Equity Inns, Merger Sub and Equity Inns OP to RFS and RFS OP relating to,
among other things: (i) the due organization, corporate or partnership powers,
and standing of Equity Inns and its subsidiaries and similar corporate matters;
(ii) the authorization, execution, delivery and enforceability of the Merger
Agreement and the other documents required thereby; (iii) the capital structures
of Equity Inns and Merger Sub; (iv) the lack of conflicts with or violations
under laws, judgments, orders, organizational documents of Equity Inns and its
subsidiaries, or material contracts to which Equity Inns or any of its
subsidiaries is a party; (v) litigation affecting Equity Inns and its
subsidiaries; (vi) the absence of certain changes affecting Equity Inns or its
subsidiaries that are not in the ordinary course of their business; (vii) the
ownership of Equity Inns' subsidiaries and other investment interests; (viii)
the identity of material contracts, leases, debt instruments and commitments
that Equity Inns or any of its subsidiaries is a party, and the enforceability
and status thereof; (ix) consents, approvals or authorizations required to be
obtained by Equity Inns or any of its subsidiaries; (x) employee benefit plan
matters; (xi) certain documents filed by Equity Inns with the Commission, the
accuracy and completeness of the information contained therein (including
financial information), the compliance by Equity Inns with applicable laws as to
the filing thereof, and undisclosed liabilities; (xii) encumbrances on the
Equity Inns Hotels and other assets of Equity Inns, status of title thereof, and
existence of title insurance with respect the Equity Inns Hotels; (xiii)
insurance; (xiv) encumbrances on personal property and condition thereof; (xv)
lack of acts of bankruptcy affecting Equity Inns or any of its subsidiaries;
(xvi) zoning affecting the Equity Inns Hotels; (xvii) hazardous substances
affecting the Equity Inns Hotels; (xviii) the enforceability of Equity Inns'
leases encumbering the Equity Inns Hotels, and lack of default thereunder; (xix)
Equity Inns' receipt of a fairness opinion; (xx) financial advisory,

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broker or finder fees with respect to the REIT Merger or the transactions
contemplated in the Merger Agreement; (xxi) the ownership by Equity Inns or any
of its subsidiaries of interests in RFS; (xxii) related party transactions;
(xxiii) the applicability of certain takeover statutes; (xxiv) the HSR Act;
(xxv) identity of material agreements relating to development, rehabilitation,
capital improvement or construction of or additions to hotel properties and
other real estate, and the status thereof; (xxvi) tax matters; (xxvii)
securities issued by Equity Inns convertible into shares of Equity Inns Common
Stock; (xxviii) reservation of sufficient number of shares of Equity Inns Common
Stock to perform Equity Inns' obligations under the Merger Agreement, and
authorization of the delivery and issuance of such shares; (xxvix) business
activities of Merger Sub; (xxx) identity of intellectual property owned or
licensed by Equity Inns or any of its subsidiaries, and the lack of infringement
on rights of other persons; (xxxi) labor and employment matters; (xxxii) special
taxes or assessments; (xxxiii) compliance with law and receipt of required
permits; (xxxiv) condemnation or eminent domain proceedings; (xxxv) furnishings
of the Equity Inns Hotels; (xxxvi) franchisors and franchise agreements under
which Equity Inns Hotels are operated; (xxxvii) mortgage documents encumbering
the Equity Inns Hotels, and absence of default hereunder; and (xxxviii) Equity
Inns' and Equity Inns OP's commitments to use their good faith best efforts to
enter into new leases with respect to those Promus Leases that Equity Inns
elects to be terminated pursuant to the Merger Agreement.

CONDITIONS TO THE MERGERS

The respective obligations of each party to the Merger Agreement to
consummate the Mergers, the Asset Sale and the other transactions contemplated
by the Merger Agreement are subject to the satisfaction or waiver at or prior to
the Closing Date of certain conditions, including that: (i) the Merger Agreement
shall have been approved by the shareholders of RFS and Equity Inns,
respectively, in the manner required by their respective organizational
documents, applicable law and applicable regulations of the NYSE; (ii) each
party to the Merger Agreement shall have obtained reasonable evidence of the
requisite approval of the partners of RFS OP and Equity Inns OP, respectively,
to the OP Merger to the extent required by each such partnership's Agreement of
Limited Partnership or the Tennessee Revised Uniform Limited Partnership Act
(the "TRULPA"); (iii) no injunction shall have been entered or enforced by any
court of competent jurisdiction or any governmental authority which prohibits
the consummation of the Mergers, the Asset Sale and the other transactions
contemplated by the Merger Agreement; (iv) all applicable requirements under
state securities or anti-takeover statutes, if any, relating to the issuance and
trading of the shares of Equity Inns Common Stock issuable under the Merger
Agreement, shall have been satisfied; (v) any waiting period applicable to the
Mergers under the HSR Act shall have terminated or expired; (vi) the
Registration Statement (of which this Joint Proxy Statement/Prospectus is a
part) shall have become effective under the Securities Act and no stop order
with respect thereto shall be in effect; (vii) Equity Inns shall have obtained
the approval for the listing of the shares of Equity Inns Common Stock issuable
under the Merger Agreement on the NYSE, subject to official notice of issuance;
(viii) the Average Price shall be equal to or greater than $14.00; (ix) Equity
Inns OP and its subsidiaries shall have entered into new leases with respect to
those Promus Leases that Equity Inns elects to terminate pursuant to the Merger
Agreement effective as of the Closing Date on terms reasonably acceptable to
Equity Inns; (x) each party to the Merger Agreement shall have obtained any and
all consents, approvals, authorizations, clearances, exemptions or waivers by
any person pursuant to any contract, law, order or permit required for
consummation of the Mergers, the Asset Sale or any of the other transactions
contemplated in the Merger Agreement, or for the prevention of a default under
any contract or permit of such party which, if not obtained or made, is
reasonably likely to have a material adverse effect on such party; and (xi) the
Closing shall have occurred on or before October 15, 1998.

The respective obligations of Equity Inns, Merger Sub and Equity Inns OP to
consummate the Mergers, the Asset Sale and the other transactions contemplated
by the Merger Agreement are further subject to the satisfaction or waiver at or
prior to the Closing Date of certain other conditions, including that: (i) RFS
and RFS OP shall have performed and complied in all material respects with all
of their obligations under the Merger Agreement that are to be performed or
complied with by them prior to or on the Closing Date; (ii) all proceedings,
corporate, partnership or other, to be taken by or at the direction of RFS and
RFS OP in connection with the transactions contemplated by the Merger Agreement,
and all documents incident thereto, shall be reasonably satisfactory to Equity
Inns; (iii) no investigation, suit, action or other proceeding shall be

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threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with the Merger
Agreement or the consummation of the transactions contemplated thereby; (iv) the
representations and warranties made by RFS and RFS OP in the Merger Agreement
shall be true and correct in all material respects as of the Effective Time
(with such exceptions, if any, necessary to give effect to events or
transactions contemplated by the Merger Agreement and except for representation
and warranties which are confined to a specific date), except where the failure
to be true and correct does not have a material adverse effect on RFS; (v)
Equity Inns shall have received the opinion of Baker Donelson, counsel to Equity
Inns, dated the Closing Date, to the effect that (a) the REIT Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, (b) Equity Inns and RFS will each be a party to
that reorganization within the meaning of Section 368(b) of the Code, and (c) no
gain or loss will be recognized for federal income tax purposes by Equity Inns,
Merger Sub, or RFS, on consummation of the REIT Merger; (vi) Equity Inns shall
have received (a) an opinion of Hunton & Williams, dated as of the Closing Date,
to the effect that, commencing with its taxable year ended December 31, 1993,
RFS was organized and has operated in conformity with the requirements for
qualification as a REIT under the Code and (b) an opinion of Baker Donelson,
dated as of the Closing Date, to the effect that, commencing with its taxable
year ending December 31, 1994, Equity Inns was organized and has operated in
conformity with the requirements for qualification as a REIT under the Code and
that, after giving effect to the REIT Merger, Equity Inns' proposed method of
operation will enable it to continue to meet the requirements for qualification
and taxation as a REIT under the Code; (vii) from the date of the Merger
Agreement through the Effective Time, there shall not have occurred any change
in the financial condition, business or operations of RFS and its subsidiaries
(taken as a whole) that would have or would be reasonably likely to have a
material adverse effect on RFS, other than any such change that affects both RFS
and Equity Inns in a substantially similar manner; (viii) Equity Inns shall have
received the opinion of Hunton & Williams, counsel to RFS, dated the Closing
Date, as to such other matters concerning RFS as are customary in connection
with the consummation of transactions such as the Mergers; (ix) RFS OP shall
have delivered to Equity Inns OP, on or before the Effective Time, all of the
documents and other information required of RFS OP and RFS CMBS OP relating to
the Asset Sale that are described above under "-- Deliveries to Evidence the
Asset Sale;" (x) good and marketable fee simple title to the real property owned
by RFS OP and RFS CMBS OP (including the RFS Hotels and undeveloped parcels of
real property) shall be insurable as such by the title company selected by
Equity Inns in connection with the Mergers, subject only to certain permitted
title exceptions; (xi) Equity Inns shall have received from RFS the executed
Articles of Merger; (xii) Equity Inns shall have received copies of resignations
by each director and officer of RFS and its subsidiaries; (xiii) all of the
shares of capital stock of RFS C Corp. owned by Mr. Solmson shall have been sold
to Equity Inns at Mr. Solmson's cost of such stock in accordance with a stock
purchase agreement to be executed between Mr. Solmson and Equity Inns pursuant
to the Merger Agreement; and (xiv) Equity Inns shall have received from RFS CMBS
OP the executed CMBS Agreement of Merger.

The respective obligations of RFS and RFS OP to consummate the Mergers, the
Asset Sale and the other transactions contemplated by the Merger Agreement are
further subject to the satisfaction or waiver at or prior to the Closing Date of
certain other conditions, including that: (i) Equity Inns, Merger Sub and Equity
Inns OP shall have performed and complied in all material respects with all of
their obligations under the Merger Agreement that are to be performed or
complied with by them prior to or on the Closing Date; (ii) all proceedings,
corporate, partnership or other, to be taken by or at the direction of Equity
Inns, Merger Sub and Equity Inns OP in connection with the transactions
contemplated by the Merger Agreement, and all documents incident thereto, shall
be reasonably satisfactory to RFS; (iii) no investigation, suit, action or other
proceeding shall be threatened or pending before any court or governmental
agency that seeks restraint, prohibition, damages or other relief in connection
with the Merger Agreement or the consummation of the transactions contemplated
thereby; (iv) the representations and warranties made by Equity Inns, Merger Sub
and Equity Inns OP in the Merger Agreement shall be true and correct in all
material respects as of the Effective Time (with such exceptions, if any,
necessary to give effect to events or transactions contemplated by the Merger
Agreement and except for representations and warranties which are confined to a
specific date), except where the failure to be true and correct does not have a
material adverse effect on Equity Inns; (v) RFS shall have received the opinion
of Hunton & Williams, counsel to RFS, dated the Closing Date, to

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the effect that (a) the REIT Merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code,
(b) Equity Inns and RFS will each be a party to that reorganization within the
meaning of Section 368(b) of the Code, (c) the exchange in the REIT Merger of
shares of Equity Inns Common Stock for shares of RFS Capital Stock will not give
rise to gain or loss to the shareholders of RFS with respect to such exchange
(except with respect to the receipt of cash in lieu of fractional shares), (d)
the transfer by RFS OP of all of its assets to Equity Inns OP in exchange for
partnership interests in Equity Inns OP will not cause RFS OP to recognize gain
or loss for federal income tax purposes (except to the extent that RFS OP
receives cash in the exchange), and (e) the distribution by RFS OP of
partnership interests in Equity Inns OP will not cause the partners of RFS OP to
recognize gain or loss for federal income tax purposes (except to the extent
that the partners of RFS OP receive cash in the distribution); (vi) RFS shall
have received an opinion of Baker Donelson, dated as of the Closing Date, that,
commencing with its taxable year ended December 31, 1994, Equity Inns was
organized and has operated in conformity with the requirements for qualification
as a REIT under the Code; (vii) from the date of the Merger Agreement through
the Effective Time, there shall not have occurred any change in the financial
condition, business or operations of Equity Inns and its subsidiaries (taken as
a whole) that would have or would be reasonably likely to have a material
adverse effect on Equity Inns, other than any such change that affects both
Equity Inns and RFS in a substantially similar manner; (viii) RFS shall have
received the opinion of Baker Donelson, counsel to Equity Inns, dated the
Closing Date, as to such other matters concerning Equity Inns as are customary
in connection with the consummation of transactions such as the Mergers; (ix)
RFS shall have received from Merger Sub the executed Articles of Merger and from
Equity Inns OP and Equity Inns CMBS OP the certificates of merger with respect
to the OP Merger and the CMBS OP Merger, respectively; and (x) RFS shall have
received from Equity Inns CMBS OP the executed CMBS Agreement of Merger.

TERMINATION OF PROMUS LEASES; SUBSTITUTE RFS HOTEL LEASES

RFS has agreed that, effective as of the Closing Date, but immediately
prior to the Effective Time, upon written notice from Equity Inns to RFS not
less than 30 days prior to the Closing Date, it will cause its subsidiaries to
terminate one or more of the 57 Promus Leases effective upon payment to the
Promus Lessees at the Closing of certain amounts determined pursuant to the
Lease Termination Agreement. Equity Inns and Equity Inns OP have agreed to use
their good faith best efforts to enter into effective as of the Closing Date
Substitute RFS Hotel Leases with respect to such terminated Promus Leases, on
terms reasonably acceptable to Equity Inns. Equity Inns has also agreed to keep
RFS advised as to the status of negotiations as to such Substitute RFS Hotel
Leases. It is a condition to the consummation of the Mergers that Equity Inns
shall have entered into, effective as of the Closing Date, Substitute RFS Hotel
Leases with respect to all terminated Promus Leases. See "-- Conditions to the
Mergers." The pro forma lease revenue for these 57 hotels included in the pro
forma information herein is based on certain assumptions made by management of
Equity Inns with respect to such Substitute RFS Hotel Leases. See "Risk
Factors -- Risks Associated with the Mergers-Termination/Replacement of Promus
Leases" and "Selected Financial Information."

CERTAIN OTHER COVENANTS

Acquisition Proposals. Each of Equity Inns and RFS has agreed that prior
to the Effective Time (i) that neither of them nor any of their subsidiaries'
will, and each of them will direct and use its reasonable best efforts to cause
its or any of its subsidiaries' respective officers, directors, trustees,
partners, employees, agents, affiliates and representatives not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its shareholders) by any person with respect to a merger,
acquisition, tender offer, exchange offer, consolidation or similar transaction
involving, or any purchase by any person of all or any significant portion of
the assets or any equity securities (or any debt securities convertible into
equity securities) of, such party or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement (any such proposal or offer
being hereinafter referred to as an "Acquisition Proposal" and any such proposed
transaction being hereinafter referred to as a "Competing Transaction"), or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition

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Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; (ii) that it or any of its subsidiaries will immediately
cease and cause to be terminated any activities existing at the date of the
Merger Agreement, discussions or negotiations with any persons conducted prior
to such date with respect to any of the foregoing and each will take, or cause
its subsidiaries to take, the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken by it in the Merger
Agreement with respect to any Acquisition Proposal or Competing Transaction; and
(iii) that it will notify the other party, in writing, immediately if any such
inquiries or proposals are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or continued
with, it or any of its subsidiaries. Notwithstanding the foregoing obligations,
the Board of Directors of such party is not prohibited from (a) furnishing
information to or entering into discussions or negotiations with, any person
that makes an unsolicited bona fide Acquisition Proposal, if, and only to the
extent that, (1) the Board of Directors of such party determines in good faith
based on the written advice of counsel that such action is required for the
Board of Directors to comply with its fiduciary duties to shareholders, (2)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person, such party provides written notice to the other
parties to the Merger Agreement to the effect that it is furnishing information
to, or entering into discussions or negotiations with, such person, and (3)
subject to any confidentiality agreement with such person, such party keeps the
other parties to the Merger Agreement informed of the status (but not the terms)
of any such discussions or negotiations; and (b) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to an
Acquisition Proposal.

Conduct of Business Pending the Effective Time. Equity Inns and RFS have
agreed that prior to the Effective Time, except as otherwise contemplated by the
Merger Agreement, unless the other party has consented in writing thereto, they:
(i) will use their reasonable efforts, and will cause each of their respective
subsidiaries to use their reasonable efforts, to preserve intact their business
organizations and goodwill and keep available the services of their respective
officers and employees; (ii) will confer on a regular basis with one or more
representatives of the other party to report operational matters of materiality
and any proposals to engage in material transactions (except the dispositions of
certain RFS Hotels and Equity Inns Hotels discussed below); (iii) will promptly
notify the other party of any material emergency or other material adverse
change in the condition (financial or otherwise), business, properties, assets,
liabilities, prospects or the normal course of their businesses or in the
operation of their properties, any material governmental complaints,
investigations or hearings, or the breach in any material respect of any
representation, warranty, covenant or agreement contained in the Merger
Agreement; (iv) will set the record date for the quarterly dividend payable with
respect to Equity Inns Common Stock and RFS Capital Stock, respectively, for the
second calendar quarter of 1998 to a date no later than June 30, 1998, and will
mutually agree upon the payment date for each dividend (and neither Equity Inns
nor RFS shall make the election permitted by Section 858(a) of the Code with
respect to such dividend), provided, however, that such record date for either
party will be modified to prevent the elimination of a dividend for the
shareholders of either party or to prevent the receipt by the shareholders of
either party of dividends from both Equity Inns and RFS; and (v) will promptly
deliver to the other complete, true and correct copies of any registration
statements, reports, proxy statements and information statements filed with the
Commission ("SEC Documents") subsequent to the date of the Merger Agreement.

RFS and RFS OP have agreed that prior to the Effective Time, except as
otherwise set forth in the Merger Agreement, unless Equity Inns has consented
(such consent not to be unreasonably withheld or delayed) in writing thereto,
they: (i) will, and will cause each of RFS' subsidiaries to, conduct their
operations according to their usual, regular and ordinary course in
substantially the same manner as prior to the date of the Merger Agreement; (ii)
will not, and will not permit any of RFS' subsidiaries to, amend their
organizational documents; (iii) will not (a) except pursuant to the exercise of
options, warrants, conversion rights and other contractual rights existing on
the date of the Merger Agreement and disclosed pursuant to the Merger Agreement,
issue any shares of RFS' capital stock or any units of partnership interests of
RFS OP other than with respect to redemption of RFS OP Units, or effect any
stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction, (b) grant, confer or award any option, warrant, conversion
right or other right not existing on the date of the Merger Agreement to acquire
any shares of RFS' capital stock or any units of partnership interests of RFS
OP, (c) increase materially any compensation or

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enter into or amend any employment agreement with any of their present or future
officers, directors, partners or employees, or (d) adopt any new employee
benefit plan or amend any existing employee benefit plan of RFS in any material
respect; (iv) will not (a) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of RFS' capital stock,
except a dividend not to exceed $.375 per share of RFS Common Stock and $.3625
per share of RFS Preferred Stock for the second calendar quarter of 1998 and any
Final RFS Distribution, or (b) except in connection with the use of shares of
RFS' capital stock to pay the exercise price or tax withholding in connection
with stock-based employee benefit plans of RFS, directly or indirectly redeem,
purchase or otherwise acquire any shares of RFS' capital stock or capital stock
of any of its subsidiaries, or make any commitment for any such action,
provided, however, that RFS may issue shares of RFS Common Stock in redemption
of RFS OP Units as contemplated by the Agreement of Limited Partnership of RFS
OP; (v) will not, and will not permit any of RFS' subsidiaries to, sell or
otherwise dispose of (a) any RFS Hotels or any of their capital stock of or
other interests in RFS' subsidiaries or (b) except in the ordinary course of
business consistent with past practice for reasonable and adequate
consideration, any of their other assets which are material, individually or in
the aggregate, provided, however, that RFS and its subsidiaries may sell certain
RFS Hotels identified on a schedule to the Merger Agreement for prices which
equal or exceed the prices set forth on such schedule; (vi) will not, and will
not permit any of RFS' subsidiaries to, make any loans, advances or capital
contributions to, investments in, or guarantees on behalf of, any person other
than RFS' subsidiaries, or impose, or suffer the imposition, on any RFS Hotel or
on any other assets of RFS or any of its subsidiaries of any lien or encumbrance
or permit such lien or encumbrance to exist, other than liens and encumbrances
(a) in effect on the date of the Merger Agreement that were disclosed on the
consolidated financial statements of RFS included in RFS' SEC Documents or (b)
arising after the date of the Merger Agreement in the ordinary course of
business consistent with past practice; (vii) will not, and will not permit any
of RFS' subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations, other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice (including, without limitation,
payments of outstanding principal amounts under credit lines) or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of RFS included in RFS' SEC Documents or incurred in the ordinary
course of business consistent with past practice; (viii) will not, and will not
permit any of RFS' subsidiaries to, enter into any contract which individually
may result in total payments or liability by or to them in excess of $100,000 in
the case of any one contract or in excess of $500,000 for all such contracts, or
modify, amend or terminate any contract or waive, release, compromise or assign
any material rights or claims thereunder, other than in the ordinary course of
business consistent with past practice, provided, however, that RFS may complete
the acquisitions of certain hotel properties identified on a schedule to the
Merger Agreement, the purchase of which will be funded through borrowings under
RFS OP's line of credit; (ix) will not, and will not permit any of RFS'
subsidiaries to, enter into any contract with any officer, director, partner,
employee or affiliate of RFS or any of RFS' subsidiaries, except to the extent
the same occur in the ordinary course of business consistent with past practice
and would not have a material adverse effect on RFS; (x) will not, and will not
permit any of RFS' subsidiaries to, take any action that would adversely effect
the status of title to the real property (xi) will not, and will not permit any
of RFS' subsidiaries to, release or modify any warranties or guarantees, if any,
of contractors, builders, architects, manufacturers, suppliers and installers
relating to the improvements and the personal property of RFS or its
subsidiaries; (xii) will, and will cause each of RFS' subsidiaries to, pay all
premiums then-due on, and will not cancel or voluntarily allow to expire, any of
the insurance policies relating to the assets of RFS or its subsidiaries unless
such policy is replaced, without any lapse of coverage, by another policy or
policies providing coverage at least as extensive as the policy or policies
being replaced; and (xiii) will not, and will not permit any of RFS'
subsidiaries to, amend or supplement any mortgage documents relating to
mortgages encumbering the assets of RFS or its subsidiaries in whole or in part,
and will, and will cause each of RFS' subsidiaries to, pay or make, as and when
due and payable, all payments of principal, interest and other amounts required
to be paid or made under such mortgage documents.

Equity Inns, Merger Sub and Equity Inns OP have agreed that prior to the
Effective Time, except as otherwise set forth in the Merger Agreement, unless
RFS has consented (such consent not to be unreasonably withheld or delayed) in
writing thereto, they: (i) will, and will cause each of Equity Inns'
subsidiaries to,

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conduct their operations according to their usual, regular and ordinary course
in substantially the same manner as prior to the date of the Merger Agreement;
(ii) will not, and will not permit any Equity Inns' subsidiaries to, amend their
organizational documents, except as provided in the proxy statement with respect
to Equity Inns' 1998 annual meeting of shareholders; (iii) will not (a) except
pursuant to the exercise of options, warrants, conversion rights and other
contractual rights existing on the date of the Merger Agreement and disclosed
pursuant to the Merger Agreement or pursuant to the Merger Agreement with
respect to the Merger Consideration, the OP Merger Consideration and the CMBS OP
Merger Consideration, issue any shares of Equity Inns' or Merger Sub's capital
stock or any units of partnership interest of Equity Inns OP other than with
respect to redemption of Equity Inns OP Units, or effect any stock split,
reverse stock split, stock dividend, recapitalization or other similar
transaction, (b) grant, confer or award any option, warrant, conversion right or
other right not existing on the date of the Merger Agreement to acquire any
shares of Equity Inns' or Merger Sub's capital stock or any units of partnership
interest of Equity Inns OP, (c) increase materially any compensation or enter
into or amend any employment agreement with any of their present or future
officers, directors, partners or employees, or (d) adopt any new employee
benefit plan or amend any existing employee benefit plan of Equity Inns in any
material respect; provided, however, that Equity Inns may sell, from time to
time, shares of Equity Inns Common Stock or shares of Equity Inns Preferred
Stock at fair market values then prevailing in the market place for such
securities; (iv) will not (a) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of Equity Inns' or
Merger Sub's capital stock, except a dividend not to exceed $.31 per share of
Equity Inns Common Stock for the second calendar quarter of 1998 and any other
dividend by Equity Inns in connection with any Final RFS Distribution or other
distribution necessary for Equity Inns to maintain its ability to qualify to be
taxed as a REIT under the Code, or (b) except in connection with the use of
shares of Equity Inns capital stock to pay the exercise price or tax withholding
in connection with stock-based employee benefit plans of Equity Inns, directly
or indirectly redeem, purchase or otherwise acquire any shares of Equity Inns'
or Merger Sub's capital stock or capital stock of any Equity Inns' subsidiaries,
or make any commitment for any such action, provided, however, that Equity Inns
may issue shares of Equity Inns Common Stock in redemption of Equity Inns OP
Units as contemplated by the Agreement of Limited Partnership of Equity Inns OP;
(v) will not, and will not permit any Equity Inns' subsidiaries to, sell or
otherwise dispose of (a) any Equity Inns Hotels or any of their capital stock of
or other interests in Equity Inns' subsidiaries other than Equity Inns OP Units
issued in connection with the acquisition of certain hotel properties identified
on a schedule to the Merger Agreement or (b) except in the ordinary course of
business consistent with past practices for reasonable and adequate
consideration, any of their other assets which are material, individually or in
the aggregate, provided however, that Equity Inns and its subsidiaries may sell
certain Equity Inns Hotels identified on a schedule to the Merger Agreement for
prices which equal or exceed the prices set forth on such schedule; (vi) will
not, and will not permit any of Equity Inns' subsidiaries to, make any loans,
advances or capital contributions to, investments in, or guarantees on behalf
of, any person other than Equity Inns' subsidiaries, or impose, or suffer the
imposition, on any Equity Inns Hotel or any other assets of Equity Inns or any
of its subsidiaries of any lien or encumbrance or permit such lien or
encumbrance to exist, other than liens and encumbrances (a) in effect on the
date of the Merger Agreement that are disclosed on the consolidated financial
statements of Equity Inns included in Equity Inns' SEC Documents or (b) arising
after the date of the Merger Agreement in the ordinary course of business
consistent with past practice; (vii) will not, and will not permit any of Equity
Inns' subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations, other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice (including, without limitation,
payment of outstanding principal amounts under credit lines) or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of Equity Inns included in Equity Inns' SEC Documents or incurred in
the ordinary course of business consistent with past practice; (viii) will not,
and will not permit any of Equity Inns' subsidiaries to, enter into any contract
which individually may result in total payments or liability by or to them in
excess of $100,000 in the case of any one such contract or in excess of $500,000
for all such contracts, or modify, amend or terminate any contract, or waive,
release, compromise or assign any material rights in claims thereunder, other
than in the ordinary course of business consistent with past practice, provided,
however, that Equity Inns and its subsidiaries may complete the acquisitions of
certain hotel properties identified on a schedule to the Merger Agreement; (ix)
will not, and will not permit any of Equity Inns' subsidiaries to, enter into
any

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contract with any officer, director, partner, employee or affiliate of Equity
Inns or any of its subsidiaries, except as provided in the Merger Agreement and
except in the ordinary course of business consistent with past practice and
would not have a material adverse effect on Equity Inns; and (x) will, and will
cause each of Equity Inns' subsidiaries to, pay all premiums then-due on, and
will not cancel or voluntarily allow to expire, any of the insurance policies
with respect to the Equity Inns Hotels unless such policy is replaced, without
any lapse of coverage, by another policy or policies providing coverage at least
as extensive as the policy or policies being replaced.

Meeting of Shareholders. Each of Equity Inns and RFS has agreed to take
all action necessary in accordance with applicable law and its organizational
documents to convene a meeting of its shareholders as promptly as practicable
after the date of the Merger Agreement, but in any event, subject to
effectiveness of the Registration Statement (of which this Joint Proxy
Statement/Prospectus is a part) and related requirements as to the timing of
distribution of proxy materials to shareholders, no later than October 15, 1998,
to consider and vote upon or otherwise to obtain the consent of its shareholders
to (i) in the case of Equity Inns, the Equity Inns Proposals, and (ii) in the
case of RFS, the RFS Proposal. Equity Inns and RFS have further agreed that the
Equity Inns Board and the RFS Board will each recommend such approval, and that
they will each take all lawful action to solicit such approval, including,
without limitation, timely mailing of this Joint Proxy Statement/Prospectus to
its respective shareholders; provided, however, that such recommendation or
solicitation is subject to any action taken by, or upon authority of, the Equity
Inns Board or the RFS Board, as the case may be, in the exercise of its good
faith judgment as to its fiduciary duties to its shareholders imposed by law as
advised by counsel in writing. Equity Inns and RFS have agreed to coordinate and
cooperate with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day.

Filings; Other Actions. Subject to the terms and conditions provided in the
Merger Agreement, the parties to the Merger Agreement have agreed to: (i) use
all reasonable efforts to cooperate with one another in (a) determining which
filings are required to be made prior to the Effective Time with, and which
consents, approvals, permits or authorizations are required to be obtained prior
to the Effective Time from, governmental or regulatory authorities of the United
States, the several states, third party secured and unsecured lenders,
franchisors and rating agencies in connection with the execution, delivery and
performance of the Merger Agreement and the consummation of the transactions
contemplated thereby, and (b) timely making all such filings and timely seeking
all such consents, approvals, permits or authorizations; (ii) use all reasonable
efforts to obtain in writing any consents required from third parties in form
reasonably satisfactory to RFS and Equity Inns necessary to effectuate the
Mergers, the Asset Sale and the other transactions contemplated in the Merger
Agreement; and (iii) use all reasonable efforts to take, or cause to be taken,
all other action and do, or cause to be done, all other things necessary, proper
or appropriate to consummate and make effective the transactions contemplated by
the Merger Agreement. The parties to the Merger Agreement have also agreed that
if, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purpose of the Merger Agreement, the proper officers
and directors of Equity Inns and RFS will take, or cause their subsidiaries to
take, any necessary action.

Inspection of Records. Each of RFS and Equity Inns, from the date of the
Merger Agreement to the Effective Time, has agreed to allow all designated
officers, attorneys, accountants, investment bankers, financial advisers and
other representatives of the other access at all reasonable times to the records
and files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs of RFS and Equity Inns and their
respective subsidiaries.

Listing Application. Equity Inns has agreed to promptly (after the date of
the Merger Agreement) prepare and submit to the NYSE a listing application
covering the shares of Equity Inns Common Stock issuable in the REIT Merger, and
to use its best efforts to obtain, prior to the Effective Time, approval for the
listing of such shares of Equity Inns Common Stock, subject to official notice
of issuance.

Employees; Severance Benefits. At or before the Closing, RFS and its
subsidiaries will terminate the employment of all their employees, and will
satisfy all compensation, vacation pay, sick pay and other

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obligations under the Worker Adjustment, Retraining and Notification Act, and
will pay or make provision for the Severance Benefits discussed below. The
parties to the Merger Agreement have agreed that neither Equity Inns nor any of
its subsidiaries will have any obligation to employ former RFS' or RFS
subsidiaries' employees but may, in their sole discretion, offer employment to
such employees on terms and conditions established by them. Neither RFS nor RFS
OP makes any representation or warranty as to whether such employees will accept
employment with Equity Inns or any of its subsidiaries. Equity Inns has agreed
that RFS may pay to employees of RFS or its subsidiaries, at or prior to the
Effective Time, certain severance benefits disclosed on a schedule to the Merger
Agreement in an aggregate amount of approximately $735,000 (collectively, the
"Severance Benefits"), which amount does not include change in control payments
to Messrs. Solmson, Lovelace and Pascal aggregating approximately $4.1 million
pursuant to their employment agreements with RFS. Notwithstanding the foregoing,
the parties to the Merger Agreement have agreed that if RFS does not pay the
Severance Benefits prior to or at the Effective Time, Equity Inns will pay the
unpaid Severance Benefits to such employees within 3 business days of the
Closing.

Reorganization; Tax Treatment; and Transfer and Gain Taxes. The parties to
the Merger Agreement have agreed that from and after the date of the Merger
Agreement and until the Effective Time, neither Equity Inns nor RFS nor any of
their respective subsidiaries or other affiliates will (i) knowingly take any
action that, or knowingly fail to take any action the failure of which, would
jeopardize qualification of the REIT Merger as a reorganization within the
meaning of Section 368(a) of the Code; or (ii) enter into any contract,
agreement, commitment or arrangement with respect to the foregoing. Each of
Equity Inns, Merger Sub and RFS has further agreed that following the Effective
Time, each of them will use its best efforts to conduct its business in a manner
that would not jeopardize the characterization of the REIT Merger as a
reorganization within the meaning of Section 368(a) of the Code. Equity Inns and
RFS have agreed that if, based upon the advice of counsel in writing, they
determine that the transactions between Equity Inns OP and RFS OP under the
Merger Agreement could reasonably be expected to create a risk that the REIT
Merger would not qualify as a reorganization under the provisions of Section
368(a) of the Code, they will undertake to use reasonable best efforts to
negotiate and structure an alternative means to effect the REIT Merger, for
Equity Inns to acquire the interest in RFS OP owned by RFS, and for the holders
of RFS OP Units to receive Equity Inns OP Units (or the economic and tax
equivalent thereof) in exchange for their RFS OP Units. The parties to the
Merger Agreement have agreed that Equity Inns OP will use the "traditional
method" under Treasury Regulations Section 1.704-3(b) for purposes of making
allocations under Section 704(c) of the Code with respect to the properties of
or interests in RFS OP as of the Effective Time (with no curative allocations of
gross income with respect to depreciation to offset the effects of the "ceiling
rule" but with a curative allocation of gain upon disposition of such properties
to offset the effect of the "ceiling rule"). Equity Inns OP and RFS OP have
agreed to negotiate in good faith to agree upon the "Section 704(c) values" of
the properties of RFS, effective as of the Closing Date. For purposes of
allocating "excess nonrecourse liabilities" of Equity Inns OP pursuant to
Treasury Regulations Section 1.752-3(a)(3) following the Closing Date, Equity
Inns OP has agreed to use a methodology to be agreed upon between Equity Inns OP
and RFS OP. Each party to the Merger Agreement has agreed to cooperate in the
preparation, execution and filing of all returns, questionnaires, applications
or other documents regarding any real property transfer or gains, sales, use,
transfer, value added stock transfer and stamp taxes, any transfer, recording,
registration and other fees and any similar taxes which become payable in
connection with the transactions contemplated by the Merger Agreement (together
with any related interests, penalties or additions to tax, "Transfer and Gains
Taxes"). Equity Inns has agreed that from and after the Effective Time, it will
pay or cause Equity Inns OP, as appropriate, to pay or cause to be paid, without
deduction or withholding from any amounts payable to the holders of shares of
Equity Inns Common Stock, or Equity Inns OP Units, as applicable, all Transfer
and Gains Taxes (which term shall not in any event be construed to include for
these purposes any tax imposed under the Code).

Third-Party Consents. Each of the parties to the Merger Agreement has
agreed to take, and to cause their respective subsidiaries to take, all
necessary corporate and other action and to use its commercially reasonable
efforts to obtain, or cause its subsidiaries to obtain, the consents and
applicable approvals from third parties that may be required by any agreement,
lease, instrument, arrangement, judgment, decree, order or license to enable it
to carry out the transactions contemplated by the Merger Agreement. Each such
party

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has also agreed to cooperate with the other parties to the Merger Agreement in
supplying such information as may be reasonably requested by the others in
connection with obtaining consents or approvals to the transactions contemplated
by the Merger Agreement.

Representations, Warranties and Conditions. Each of the parties to the
Merger Agreement has agreed to use commercially reasonable efforts to ensure
that all conditions precedent to its obligations under the Merger Agreement are
fulfilled at or prior to the Closing. Each party to the Merger Agreement has
also agreed to use its best efforts to cause its representations and warranties
contained in the Merger Agreement to be true and correct on and as of the
Effective Time in all material respects. Equity Inns, Merger Sub and Equity Inns
OP, on the one hand, and RFS and RFS OP, on the other hand, each has agreed to
promptly notify the other in writing prior to the Effective Time (i) if any
representation or warranty contained in the Merger Agreement is discovered to be
or becomes untrue or (ii) if any party thereto fails to perform or comply with
any of its covenants or agreements contained in the Merger Agreement or it is
reasonably expected that it will be unable to perform or comply with any of its
covenants or agreements contained therein.

RFS Acquisition Opportunities. The parties to the Merger Agreement have
agreed that from the date of the Merger Agreement to the Effective Time, RFS or
its subsidiaries may propose potential acquisitions of one or more hotel
properties to Equity Inns or its subsidiaries, of which acquisition opportunity
Equity Inns is not otherwise aware (each, an "Acquisition Opportunity"). Such
parties have agreed that Equity Inns and its subsidiaries will have no
obligation to pursue, or otherwise take advantage of, any of Acquisition
Opportunity. Such parties have agreed further that in the event of a termination
of the Merger Agreement, Equity Inns will not permit its subsidiaries to take
any action to pursue, or otherwise take advantage of, any Acquisition
Opportunity which RFS or its subsidiaries presented to Equity Inns, and that
Equity Inns will cause its subsidiaries to, promptly upon such termination and
reimbursement by RFS for all out-of-pocket costs and expenses incurred by Equity
Inns or its subsidiaries related thereto, assign and transfer any and all of
their rights, title or interests in any Acquisition Opportunity to RFS (or its
designee), including, without limitation, any contracts and permits related to
such Acquisition Opportunity. In connection with any such assignment and
transfer, RFS has agreed to assume all of the obligations under such contracts
and to indemnify and hold harmless Equity Inns and its subsidiaries against any
claims by third parties thereunder.

CMBS Bonds. Equity Inns has agreed to use its best efforts to promptly
after the date of the Merger Agreement (i) create and establish Equity Inns CMBS
OP, as a Tennessee limited partnership, with characteristics and ownership
structure substantially similar to the characteristics and ownership structure
of RFS CMBS OP; (ii) cause the creation and establishment of a legal entity
("Equity Inns CMBS Lessee") with characteristics and ownership structure
substantially similar to the characteristics and ownership structure of RFS CMBS
Lessee; (iii) prepare and cause Equity Inns CMBS OP and Equity Inns CMBS Lessee
to enter into leases for each of the RFS Hotels owned by RFS CMBS OP that are
substantially similar to the Promus Leases currently in effect with respect to
such hotels, provided such new leases will provide for rent terms no less
favorable to Equity Inns CMBS OP than the rent terms contained in the
corresponding Promus Leases and will be effective upon the Effective Time; and
(iv) take such further action as may be reasonably required by rating agencies,
trustees or other third parties in connection with the transactions described in
this paragraph. RFS and Equity Inns have further agreed to use their best
efforts to obtain all necessary consents required to cause the CMBS Bonds to
remain outstanding after the Merger, with Equity Inns CMBS OP as the issuer
thereof rather than RFS CMBS OP, including, without limitation, consents of the
rating agency and trustee for the CMBS Bonds.

Transfer of RFS C Corp. Shares. RFS has agreed at the Closing to cause Mr.
Solmson to sell to Equity Inns (or such person as Equity Inns shall designate by
written notice delivered to him prior to the Closing) all of the shares of
capital stock of RFS C Corp. owned by Mr. Solmson for an aggregate consideration
of $95,000 paid to him in cash, representing Mr. Solmson's cost for such stock.
Mr. Solmson owns approximately 5% of the issued and outstanding shares of
capital stock of RFS C Corp. The only other shareholder of RFS C Corp. is RFS
OP.

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INDEMNIFICATION

Equity Inns has agreed, for a period of six years from the Effective Time,
to indemnify the directors, officers, employees and agents of RFS and its
subsidiaries who at any time prior to the Effective Time were entitled to
indemnification under the organizational documents of RFS, the organizational
documents of RFS' subsidiaries or employment or other agreements between RFS and
such persons, or between any RFS' subsidiary and such persons, existing on the
date of the Merger Agreement to the same extent as such directors, officers,
employees and agents are entitled to indemnification under such organizational
documents or employment or other agreements in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement). Equity Inns has also agreed
that if Equity Inns, the Surviving Corporation or any of its successors or
assigns shall consolidate with or merge into any other person and shall not be
the continuing or surviving person of such consolidation or merger or shall
transfer all or substantially all of its assets to any person, then and in each
case, proper provision will be made so that the successors and assigns of Equity
Inns or the Surviving Corporation, as the case may be, will assume the
obligations described in this paragraph.

TERMINATION

Termination by Mutual Consent; Delivery of Schedules and Exhibits. The
Merger Agreement may be terminated and the transactions contemplated therein may
be abandoned at any time prior to the Effective Time, before or after the
approval of the Merger Agreement by the shareholders of RFS or Equity Inns, by
the mutual written consent of Equity Inns and RFS. The Merger Agreement may also
be terminated and the transactions contemplated therein may be abandoned at any
time on or after the date of the Merger Agreement but within 15 business days of
such date: (a) by action of the RFS Board (i) in the event that Equity Inns
shall have failed to deliver to RFS within 10 business days of the date of the
Merger Agreement the Schedules and Exhibits to the Merger Agreement for which
Equity Inns is responsible, but which were not attached thereto at the date of
the Merger Agreement, in form and substance reasonably satisfactory to RFS, or
(ii) if such Schedules and Exhibits are delivered within such 10 day period, RFS
reasonably determines that information contained in such Schedules discloses
matters which could reasonably be expected to have a material adverse effect on
Equity Inns; or (b) by action of the Equity Inns Board (i) in the event that RFS
shall have failed to deliver to Equity Inns within 10 business days of the date
of the Merger Agreement the Schedules and Exhibits to the Merger Agreement for
which RFS is responsible, but which were not attached thereto at the date of the
Merger Agreement, in form and substance reasonably satisfactory to Equity Inns,
or (ii) if such Schedules and Exhibits are delivered within such 10 day period,
Equity Inns reasonably determines that information contained in such Schedules
discloses matters which could reasonably be expected to have a material adverse
effect on RFS.

Termination by Either Equity Inns or RFS. The Merger Agreement may be
terminated and the transactions contemplated therein may be abandoned at any
time prior to the Effective Time, before or after the approval of the Merger
Agreement by the shareholders of RFS or Equity Inns, by action of the RFS Board
or the Equity Inns Board if: (a) the Mergers shall not have been consummated by
October 15, 1998, or (b) a meeting of RFS' shareholders or a meeting of Equity
Inns' shareholders shall have been duly convened and held and the approval of
RFS' shareholders or the approval of Equity Inns' shareholders of the Merger
Agreement will not have been obtained at such meeting or at any adjournment
thereof, or (c) a United States federal or state court of competent jurisdiction
or United States federal or state governmental, regulatory or administrative
agency or commission will have issued an order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree, ruling
or other action shall have become final and non-appealable, provided, that the
party seeking to terminate the Merger Agreement pursuant to clause (c) above
shall have used its reasonable best efforts to remove such order, decree, ruling
or injunction, or (d) any of the conditions to close in the Merger Agreement
shall not have been satisfied or waived by the Effective Time, or (e) the
Average Price is less then $14.00; and provided, in the case of a termination
pursuant to clause (a) or (d) above, that the terminating party shall not have
proximately contributed to the occurrence of the failure referred to in said
clauses.

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Termination by RFS. The Merger Agreement may be terminated and the
transactions contemplated therein may be abandoned at any time prior to the
Effective Time, before or after the adoption and approval by the shareholders of
RFS of the Merger Agreement, by action of the RFS Board if: (a) the Equity Inns
Board withdraws, materially modifies or changes in a manner adverse to RFS its
recommendation to Equity Inns' shareholders of the Merger Agreement or the REIT
Merger, other than as a result of the occurrence of an event that, in the good
faith judgment of the Equity Inns Board, has or is reasonably likely to have a
material adverse effect on RFS; (b) the Equity Inns Board postpones the date
scheduled for the meeting of shareholders of Equity Inns to approve the Merger
Agreement and the transactions contemplated hereby beyond October 15, 1998, or
fails to set a date for such meeting by such date, except with the written
consent of RFS; (c) there has been a breach by Equity Inns, Merger Sub or Equity
Inns OP of any representation or warranty contained in the Merger Agreement
which would have or would be reasonably likely to have a material adverse effect
on Equity Inns, which breach is not curable or, if curable, either (i) is not
cured by the earlier of October 15, 1998, or the Closing Date, or (ii) is waived
by RFS; (d) there has been a material breach of any of the covenants or
agreements set forth in the Merger Agreement on the part of Equity Inns, Equity
Inns OP or Merger Sub, which breach is not curable or, if curable, either (i) is
not cured by the earlier of 30 days after written notice of such breach is given
by RFS to Equity Inns, or the Closing Date, or (ii) is waived by RFS; or (e) the
RFS Board determines that, in the exercise of its good faith judgment,
termination of this Agreement is required in the exercise of its fiduciary
duties to the RFS' shareholders by reason of an Acquisition Proposal being made.

Termination by Equity Inns. The Merger Agreement may be terminated and the
transactions contemplated therein may be abandoned at any time prior to the
Effective Time, before or after the approval by the shareholders of Equity Inns,
by action of the Equity Inns Board if: (a) the RFS Board withdraws, materially
modifies or changes in a manner adverse to Equity Inns its recommendation to
RFS' shareholders of the Merger Agreement or the REIT Merger, other than as a
result of the occurrence of an event that, in the good faith judgment of the RFS
Board, has or is reasonably likely to have a material adverse effect on Equity
Inns, (b) the RFS Board postpones the date scheduled for the meeting of
shareholders of RFS to approve the Merger Agreement and the transactions
contemplated thereby beyond October 15, 1998, or fails to set a date for such
meeting by such date, except with the written consent of Equity Inns; (c) there
has been a breach by RFS or RFS OP of any representation or warranty contained
in the Merger Agreement which would have or would be reasonably likely to have a
material adverse effect on RFS, which breach is not curable or, if curable,
either (i) is not cured by the earlier of October 15, 1998 or the Closing Date,
or (ii) is waived by Equity Inns; (d) there has been a material breach of any of
the covenants or agreements set forth in the Merger Agreement on the part of RFS
or RFS OP, which breach is not curable or, if curable, either (i) is not cured
the earlier of 30 days after written notice of such breach is given by Equity
Inns to RFS, or the Closing Date, or (ii) is waived by Equity Inns; or (e) the
Equity Inns Board determines that, in the exercise of its good faith judgment,
termination of the Merger Agreement is required in the exercise of its fiduciary
duties to Equity Inns' shareholders by reason of an Acquisition Proposal being
made.

FEES AND EXPENSES

Generally. The parties to the Merger Agreement have agreed that except as
otherwise specifically set forth in the following two paragraphs, all
out-of-pocket costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby ("Expenses") will be paid by
the party thereto incurring such Expenses, except that each of Equity Inns and
RFS will bear and pay one-half of (i) the Commission and Blue Sky filing fees
incurred in connection with the Registration Statement and this Joint Proxy
Statement/Prospectus, and (ii) the printing and distribution costs incurred in
connection with the printing and distribution to Equity Inns' and RFS'
shareholders of the Registration Statement and this Joint Proxy
Statement/Prospectus. Notwithstanding any other terms or conditions of the
Merger Agreement, Equity Inns has acknowledged in the Merger Agreement that all
unpaid Expenses incurred by RFS and its subsidiaries in connection with the
execution of the Merger Agreement and the performance of the transactions
contemplated thereby will be obligations of the Surviving Corporation upon
consummation of the REIT Merger and the Surviving Corporation has agreed to pay,
and Equity Inns has agreed to cause the Surviving Corporation to timely perform
and pay, such obligations in full.

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Termination Fee. If (i) RFS elects to terminate the Merger Agreement
pursuant to the provisions outlined above in clauses (a) or (b) under the
section " -- Termination -- Termination by Either Equity Inns or RFS" (provided,
in the case of termination pursuant to either of these clauses, that neither RFS
nor RFS OP will be the party who proximately contributed to a failure to
consummate the transactions under the Merger Agreement or be the breaching
party), or the provisions outlined above in clause (e) under the section
"-- Termination -- Termination by RFS", or (ii) Equity Inns elects to terminate
the Merger Agreement pursuant to the provisions outlined above in clauses (a) or
(b) under the section "Termination -- Termination by Either Equity Inns or RFS"
(provided, in the case of termination pursuant to either of these clauses, that
none of Equity Inns, Equity Inns OP or Merger Sub will be the party proximately
contributing to a failure to consummate the transactions under the Merger
Agreement or be the breaching party), or the provisions outlined above in clause
(e) under the section "-- Termination -- Termination by Equity Inns", and, in
any event, an Acquisition Proposal relating to RFS in the case of a termination
pursuant to clause (i) above or relating to Equity Inns in the case of a
termination pursuant to clause (ii) above (such party being sometimes
hereinafter referred to as the "Payor Party"), will have been made and notice of
same shall have been required pursuant to the Merger Agreement prior to such
termination (an "Acquisition Proposal Notice"), provided that the other party
(the "Entitled Party") was not in material breach of its obligations under the
Merger Agreement at the time of such termination, the Payor Party will at the
time of such termination deposit by wire transfer of same-day funds into an
interest bearing escrow account with an escrow agent selected by the Entitled
Party (the "Escrow Agent") and on such terms as the Entitled Party and the
Escrow Agent will agree, consistent with the terms of the termination provisions
in the Merger Agreement, for the benefit of the Entitled Party as reasonable
compensation to the Entitled Party for enhanced competitive risks resulting from
the Payor Party consummating a Competing Transaction, market risks in announcing
the REIT Merger, management time expended in pursuit of the Mergers and related
transactions, lost opportunities to consummate other mergers or acquisition
transactions, transaction costs and expenses, and other incidental costs and
losses, and not as a penalty or forfeiture, an amount equal to $20,000,000 (the
"Termination Fee"). If a Competing Transaction will be consummated within 1 year
following the date of such termination or a definitive agreement for a Competing
Transaction (a "Definitive Competing Acquisition Agreement") will be executed
and delivered by the Payor Party within 1 year following the date of such
termination with the party named in the Acquisition Proposal Notice and a
Competing Transaction with such party is consummated within 9 months following
the date of execution of the Definitive Competing Acquisition Agreement, the
Escrow Agent will, at the time any such Competing Transaction is consummated,
distribute to the Entitled Party out of the escrowed funds an amount equal to
the lesser of (A) $20,000,000, plus any accrued interest thereon or on any part
thereof through the date of payment (the "Maximum Termination Fee") and (B) the
sum of (1) the maximum amount that can be paid to the Entitled Party without
causing it to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute income
described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code
("Qualifying Income"), as determined by the Entitled Party's certified public
accountants, plus (2) in the event an Entitled Party receives a letter from such
Entitled Party's counsel indicating that the Entitled Party has received a
ruling from the IRS holding that the receipt by the Entitled Party of the
Maximum Termination Fee would either constitute Qualifying Income or would be
excluded from gross income within the meaning of Sections 856(c)(2) and (3) of
the Code, an amount equal to the Maximum Termination Fee less the amount payable
under clause (1) above. In the event no Competing Transaction is consummated or
no Definitive Competing Acquisition Agreement is executed, delivered and
consummated by Payor Party within the time periods described above in this
paragraph following the termination of the Merger Agreement, with the party
named in the Acquisition Proposal Notice, the Escrow Agent will return the
Termination Fee to the Payor Party, together with interest thereon from the date
of deposit through the date of return.

Moreover, if an Acquisition Proposal shall have been received by a Payor
Party so as to require an Acquisition Proposal Notice prior to that party's
shareholders voting on approval of the Merger Agreement, and the Merger
Agreement is not terminated pursuant to any of the provisions described above
under the section "- Termination," and the shareholders of the Payor Party vote
against approval of the Merger Agreement, and if a Competing Transaction with
the party named in such Acquisition Proposal Notice will be

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<PAGE> 93

consummated within 1 year following the date of such shareholder vote or a
Definitive Competing Acquisition Agreement will be executed and delivered by the
Payor Party within 1 year following the date of such shareholder vote with a
party named in such Acquisition Proposal Notice and a Competing Transaction with
such party is consummated within 9 months following the date of execution of
such Definitive Competing Acquisition Agreement, then, immediately upon
consummating such Competing Transaction or executing such Definitive Competing
Acquisition Agreement, the Payor Party will deliver to the Escrow Agent in same-
day funds for the benefit of the Entitled Party an amount equal to the
Termination Fee. Upon consummation of any such Competing Transaction, the Escrow
Agent will immediately disburse to the Entitled Party an amount equal to the
lesser of (A) the Maximum Termination Fee and (B) the sum of (1) the maximum
amount that can be paid to the Entitled Party without causing it to fail to meet
the requirements of Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute Qualified Income, as determined by the
Entitled Party's certified public accountants, plus (2) in the event an Entitled
Party receives a letter from such Entitled Party's counsel indicating that the
Entitled Party has received a ruling from the IRS holding that the receipt by
the Entitled Party of the Maximum Termination Fee would either constitute
Qualifying Income or would be excluded from gross income within the meaning of
Sections 856(c)(2) and (3) of the Code, an amount equal to the Maximum
Termination Fee less the amount payable under clause (1) above. In the event no
Competing Transaction is consummated or no Definitive Competing Acquisition
Agreement is executed, delivered and consummated by Payor Party within the time
periods described above in this paragraph with the party named in the
Acquisition Proposal Notice, the Escrow Agent will return the Termination Fee to
the Payor Party, together with interest thereon from the date of deposit through
the date of return.

In the event that the Entitled Party is not able to receive the Maximum
Termination Fee, the Escrow Agent will hold the unpaid amount in escrow and will
not release any portion thereof to the Entitled Party unless and until the Payor
Party receives, at any time or from time to time, any one or combination of the
following: (i) a letter from the Entitled Party's certified public accountants
indicating the maximum amount that can be paid at that time to the Entitled
Party without causing the Entitled Party to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code, determined as if the payment of such
amount did not constitute Qualifying Income or a subsequent such letter revising
or (in the case of later tax years) adding to that amount, in which case and at
each such time the Escrow Agent will release such revised or additional amount
to the Entitled Party, or (ii) a letter from the Entitled Party's counsel
indicating that the Entitled Party received a ruling from the IRS holding that
the receipt by the Entitled Party of the Maximum Termination Fee would either
constitute Qualifying Income or would be excluded from gross income within the
meaning of Sections 856(c)(2) and (3) of the Code, in which case the Escrow
Agent will release the remainder of the Maximum Termination Fee, plus any
interest accrued thereon, to the Entitled Party, or (iii) a letter from the
Entitled Party's counsel indicating that the Entitled Party received a ruling
from the IRS holding that the receipt by the Entitled Party of the remaining
balance of the Maximum Termination Fee following the receipt of and pursuant to
such ruling would not be deemed constructively received prior thereto, in which
case the Escrow Agent will release the remainder of the Maximum Termination Fee
to the Entitled Party. If the Maximum Termination Fee has not been distributed
to the Entitled Party pursuant to the provisions described in this paragraph by
the fifth anniversary of the date of termination, in the case of an escrow
established pursuant to the provisions described above in the first paragraph
under the section "-- Fees and Expenses -- Termination Fee," or the date of the
shareholder vote, in the case of an escrow established pursuant to pursuant to
the provisions described above in the second paragraph under the section
"-- Fees and Expenses -- Termination Fee," any remaining funds then in escrow,
including any interest accrued thereon, will be delivered by the Escrow Agent to
the Payor Party or its successor in interest.

In the event an Entitled Party has received the Maximum Termination Fee,
the Entitled Party shall not (i) assert or pursue in any manner, directly or
indirectly, any claim or cause of action based in whole or in part upon alleged
tortious or other interference with rights under the Merger Agreement against
any person submitting an Acquisition Proposal, or (ii) assert or pursue in any
manner, directly or indirectly, any claim or cause of action against the Payor
Party or any of its officers or directors based in whole or part upon its or
their receipt, consideration, recommendation or approval of an Acquisition
Proposal or the Payor Party's exercise of its right of termination under the
provisions outlined above in clause (e) under the section "-- Termination --

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Termination by RFS" or the provisions outlined above in clause (e) under the
section "-- Termination -- Termination by Equity Inns," as applicable.

Expense Reimbursement. If (i) RFS elects to terminate the Merger Agreement
pursuant to the provisions outlined above in clauses (a), (b), (c) or (d) under
the section "-- Termination -- Termination by RFS" or (ii) Equity Inns elects to
terminate the Merger Agreement pursuant to the provisions outlined above in
clauses (a), (b), (c) or (d) under the section "-- Termination -- Termination by
Equity Inns,", and, in any event, no Acquisition Proposal will have been made
prior to such termination, Equity Inns, in the case of termination in the events
set forth in clause (i) above, or RFS, in the case of termination in the events
set forth in clause (ii) above, provided that the Entitled Party was not in
material breach of its obligations under the Merger Agreement at the time of
such termination, as liquidated damages and not as a penalty or forfeiture, will
pay to the Entitled Party by wire transfer of same day funds on the business day
after receipt of notice of termination of the Merger Agreement an amount equal
to the lesser of (A) all documented Expenses incurred by the Entitled Party in
connection with its pursuit of the transactions contemplated in the Merger
Agreement, (B) $5,000,000 (the "Maximum Expense Reimbursement") and (C) the sum
of (1) the maximum amount that can be paid to the Entitled Party without causing
it to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code
determined as if the payment of such amount did not constitute Qualified Income,
as determined by the Entitled Party's certified public accountants, plus (2) in
the event an Entitled Party receives a letter from such Entitled Party's counsel
indicating that the Entitled Party has received a ruling from the IRS holding
that the receipt by the Entitled Party of the Maximum Expense Reimbursement
would either constitute Qualifying Income or would be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code, an amount equal to
the Maximum Expense Reimbursement less the amount payable under clause (1)
above.

In the event that the Entitled Party is not able to receive the Maximum
Expense Reimbursement in any tax year without causing it to fail to meet the
requirements of Section 856(c)(2) and (3) of the Code, determined as if the
payment of the Maximum Expense Reimbursement did not constitute Qualifying
Income, the Payor Party shall pay the unpaid amount of the Maximum Expense
Reimbursement at such time as the Payor Party receives, at any time or from time
to time, any one or combination of the following: (i) a letter from the Entitled
Party's certified public accountants indicating the maximum amount that can be
paid at that time to the Entitled Party without causing the Entitled Party to
fail to meet the requirements of Sections 856(c)(2) and (3) of the Code,
determined as if the payment of such amount did not constitute Qualifying Income
or a subsequent such letter revising or (in the case of later tax years) adding
to that amount, in which case and at each such time the Payor Party shall pay
such revised or additional amount to the Entitled Party subject to a total
maximum payment under described in this section "-- Expense Reimbursement" of an
amount equal to the Maximum Expense Reimbursement, or (ii) a letter from the
Entitled Party's counsel indicating that the Entitled Party received a ruling
from the IRS holding that the receipt by the Entitled Party of the Maximum
Expense Reimbursement would either constitute Qualifying Income or would be
excluded from gross income within the meaning of Sections 856(c)(2) and (3) of
the Code, in which case the Payor Party shall pay the remainder of the Maximum
Expense Reimbursement to the Entitled Party, or (iii) a letter from the Entitled
Party's counsel indicating that the Entitled Party received a ruling from the
IRS holding that the receipt by the Entitled Party of the remaining balance of
the Maximum Expense Reimbursement following the receipt of and pursuant to such
ruling would not be deemed constructively received prior thereto, in which case
the Payor Party shall release the remainder of the Maximum Expense Reimbursement
to the Entitled Party. The Payor Party's obligations described in this paragraph
will terminate 5 years from the date of the Merger Agreement.

If the Merger Agreement is terminated for any reason or under any
circumstances not addressed in two preceding paragraphs ("-- Termination Fee"
and "-- Expense Reimbursement"), no party to the Merger Agreement will be liable
to the other parties thereto for Expenses, except pursuant to the provisions
outlined above under the section "-- Fees and Expenses -- Generally." Except for
payments of the Maximum Termination Fee described above, in no event will any
party to the Merger Agreement be liable thereunder for any amount in excess of
the Maximum Expense Reimbursement.

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AMENDMENTS

The Merger Agreement may be amended by the parties thereto at any time
before or after approval of the Merger Agreement or any other matter presented
in connection with the REIT Merger by the shareholders of Equity Inns or RFS,
but after any such shareholder approval, no amendment will be made which by law
requires the further approval of shareholders without obtaining such further
approval. Furthermore, the Merger Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties to the Merger
Agreement.

THE PLAN AMENDMENT PROPOSAL

The Equity Inns Board adopted the Equity Inns Plan to provide incentives to
attract and retain executive officers and key employees, and associate the
interests of those individuals with the interests of shareholders. On
, 1998, the Equity Inns Board adopted an amendment to the Equity
Inns Plan that would increase the aggregate limit on the number of shares
issuable under the Equity Inns Plan and the number of shares that may be issued
pursuant to awards of performance shares and restricted stock. The amendment is
subject to shareholder approval and, in addition, is conditioned on the approval
of the Merger Proposal. The amendment is designed to ensure that Equity Inns can
continue to grant awards to officers and key employees at levels determined
appropriate by the Equity Inns Board and its Compensation Committee following
the Mergers.

Currently, the Equity Inns Plan provides that an aggregate of 2,300,000
shares of Equity Inns Common Stock may be issued under the Equity Inns Plan, no
more than 350,000 of which may be issued as restricted stock or in settlement of
an award of performance shares. If the Plan Amendment Proposal and the Merger
Proposal are approved by the Equity Inns shareholders at the Equity Inns Special
Meeting, the Equity Inns Plan would allow for the issuance of 6,400,000 shares
of Equity Inns Common Stock, of which 960,000 shares would be issuable as
restricted stock awards and in settlement of performance shares.

The proposed amendment to the Equity Inns Plan will be approved by the
shareholders of Equity Inns, if a quorum is present at the Equity Inns Special
Meeting, if the votes cast in favor of the Plan Amendment Proposal exceed the
votes cast in opposition to the Plan Amendment Proposal.

The following paragraphs summarize the more significant features of the
Equity Inns Plan. The summary is subject, in all respects, to the terms of the
Equity Inns Plan. Equity Inns will provide promptly, upon request and without
charge, a copy of the full text of the Equity Inns Plan to each Equity Inns
shareholder to whom a copy of this proxy statement is delivered. Requests should
be directed to Equity Inns, Inc., Attention: Corporate Secretary, 4735
Spottswood, Suite 102, Memphis, Tennessee 38117.

SUMMARY OF THE EQUITY INNS PLAN

Purpose and Administration. The Equity Inns Plan is administered by the
Compensation Committee of the Equity Inns Board (the "Equity Inns Compensation
Committee"). The Compensation Committee may delegate its authority to administer
the Equity Inns Plan to one or more officers of Equity Inns. The Equity Inns
Compensation Committee may not, however, delegate its authority with respect to
grants and awards to individuals subject to Section 16 of the Exchange Act. As
used in this summary, the term "Administrator" means the Equity Inns
Compensation Committee and any delegate, as appropriate.

The Administrator generally has the authority, within limitations described
in the Equity Inns Plan, (i) to establish rules and policies concerning the
Equity Inns Plan, (ii) to determine the persons to whom stock options, stock
appreciation rights ("SARs") and awards of restricted stock and performance
shares may be granted, (iii) to fix the number of shares of Equity Inns Common
Stock to be covered by each award, and (iv) to set the terms and provisions of
each award.

Eligibility. Each employee of the Company or an affiliate, including an
employee who is a member of the Equity Inns Board, is eligible to participate in
the Equity Inns Plan. The Administrator will select the individuals who will
participate in the Equity Inns Plan ("Equity Inns Participants") but no person
may

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participate in the Equity Inns Plan while he is a member of the Equity Inns
Compensation Committee. The Administrator may, from time to time, grant options,
SARs, restricted stock awards, or performance shares to Equity Inns
Participants. No Equity Inns Participant may be granted, in any calendar year,
options that cover more than 390,000 shares of Equity Inns Common Stock or SARs
that cover more than 390,000 shares of Equity Inns Common Stock. Options that
are granted with related SARs shall be treated as a single award for purposes of
applying the limitation in the preceding sentence. No Participant may be issued,
in any calendar year, more than 100,000 shares of Equity Inns Common Stock
pursuant to an award of restricted Stock or Performance Shares with respect to
more than 100,000 shares of Equity Inns Common Stock.

Stock Options. A stock option entitles a Equity Inns Participant to
purchase shares of Equity Inns Common Stock from Equity Inns at the option
price. The option price may be paid in cash, with shares of Equity Inns Common
Stock, or with a combination of cash and Equity Inns Common Stock. The option
price will be fixed by the Administrator at the time the option is granted, but
the price cannot be less than the shares' fair market value on the date of
grant. Options granted under the Equity Inns Plan can be incentive stock options
("ISOs") or nonqualified stock options. Differences between these two types of
options are discussed below under "-- Federal Income Taxes."

SARs. SARs may be granted in relation to option grants ("Corresponding
SARs") or independently of option grants. The difference between these two types
of SARs is that to exercise a Corresponding SAR, the Equity Inns Participant
must surrender unexercised that portion of the stock option to which the
Corresponding SAR relates and vice versa. SARs entitle the Equity Inns
Participant to receive a payment based on a formula determined by the
Administrator and set forth in an agreement. In the absence of such a
determination, the Equity Inns Participant will be entitled to receive the
excess of the fair market value of a share of Equity Inns Common Stock on the
date of exercise over the initial value of the SAR. The initial value of an SAR
that is granted independently of an option is the fair market value of a share
of Equity Inns Common Stock on the date of grant. The initial value of a
Corresponding SAR is the option price per share of the related option. The
amount payable upon the exercise of an SAR may be paid in cash, Equity Inns
Common Stock, or a combination of the two.

Restricted Stock Awards. Equity Inns Participants also may be awarded
shares of Equity Inns Common Stock pursuant to a restricted stock award. An
Equity Inns Participant's rights in a restricted stock award shall be
nontransferable or forfeitable or both unless certain conditions prescribed by
the Administrator, in its discretion, are satisfied. These conditions may
include, for example, a requirement that the Equity Inns Participant continue
employment with Equity Inns for a specified period or that Equity Inns or the
Equity Inns Participant achieve stated performance-related objectives including,
without limitation, earnings per share of Equity Inns Common Stock, Equity Inns'
return on assets, the fair market value of a share of Equity Inns Common Stock,
or FFO per share.

Performance Share Awards. The Equity Inns Plan also provides for the award
of performance shares. A performance share award entitles the Equity Inns
Participant to receive a payment equal to the fair market value of a specified
number of shares of Equity Inns Common Stock if certain standards are met. The
Administrator will prescribe the requirements that must be satisfied before a
performance share award is earned. By way of example and not limitation, those
standards may be based on the fair market value of a share of Equity Inns Common
Stock, Equity Inns' return on assets, earnings per share of Equity Inns Common
Stock, or FFO per share. To the extent that performance shares are earned, the
obligation may be settled in cash, in Equity Inns Common Stock, or by a
combination of the two. The period in which performance is measured shall be at
least one year.

Share Authorization. All awards made under the Equity Inns Plan will be
evidenced by written agreements between Equity Inns and the Equity Inns
Participant. A maximum of 2,300,000 shares of Equity Inns Common Stock may be
issued under the Equity Inns Plan. The maximum aggregate number of shares of
Equity Inns Common Stock that may be issued under the Equity Inns Plan pursuant
to an award of restricted stock and in full or partial settlement of an award of
performance shares is 350,000. If the Plan Amendment Proposal and the Merger
Proposal are approved by the Equity Inns shareholders, the maximum aggregate
number of shares of Equity Inns Common Stock issuable under the Equity Inns Plan
would be 6,400,000, of

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which 960,000 would be issuable pursuant to awards of restricted stock and in
settlement of performance shares.

Awards. To date, a total of 600,000 options and 25,000 shares of
restricted stock have been granted. In addition, a total of 66,279 shares of
Equity Inns Common Stock were issued on February 11, 1998 in settlement of
performance share awards under the 1994 Plan.

Of the total options granted under the Equity Inns Plan, Phillip H.
McNeill, Sr. has received options for 390,000 shares, David A. Levine has
received options for 150,000 shares, Howard A. Silver has received options for
45,000 shares, and Connie O. Parker has received an option for 15,000 shares.
Each of the awards was granted on July 6, 1994. All options are exercisable in
20% installments beginning on the first anniversary of the date of grant, expire
eight years from the date of grant, and have an exercise price equal to the fair
market value of a share of Equity Inns Common Stock on the date of grant. A
portion of these awards are ISOs (options for 37,500 shares in the case of
Messrs. McNeill, Levine and Silver, and an option for 15,000 shares in Ms.
Parker's case) with the balance of the awards taking the form of nonqualified
options.

Of the restricted stock granted to date, Mr. McNeill has received 10,000
shares and Messrs. Levine and Silver have each received 7,500 shares. These
awards were made in December 1996, and become vested in installments beginning
on the third anniversary of the date of grant. If certain performance objectives
are attained by Equity Inns, vesting of a portion of the awards may occur as of
the first or second anniversary of the date of grant.

The shares of Equity Inns Common Stock issued in settlement of performance
shares were received by Messrs. McNeill, Sr. (30,325 shares), Levine (18,292
shares), Silver (7,500 shares), Phillip H. McNeill, Jr. (6,097 shares), and J.
Ronald Cooper (4,065 shares). The Equity Inns Common Stock was fully vested on
issuance because the right to receive the shares was earned due to the Company's
achievement of performance objectives specified in the terms of the performance
share awards.

ADDITIONAL OPTIONS MAY ALSO BE GRANTED IN ACCORDANCE WITH SECTION 4.3 OF
THE MERGER AGREEMENT.

Except for the foregoing awards, neither the number of individuals who will
be selected to participate in the Equity Inns Plan nor the type or size of
awards that will be approved by the Equity Inns Compensation Committee can be
determined. Equity Inns is also unable to determine the number of individuals
who would have participated in the Equity Inns Plan or the type or size of
awards that would have been made under the Equity Inns Plan if the proposed
amendment to the Equity Inns Plan had been in effect in 1997.

Termination and Amendment. No option, SAR, award of restricted stock, or
performance shares may be granted under the Equity Inns Plan after July 5, 2004.
The Equity Inns Board may amend or terminate the Equity Inns Plan at any time,
but an amendment will not become effective without shareholder approval if the
amendment materially increases the aggregate number of shares that may be issued
under the Equity Inns Plan, changes the eligibility requirements, or increases
the benefits that may be provided under the Equity Inns Plan.

Federal Income Taxes. No income is recognized by a Equity Inns Participant
at the time an option is granted. If the option is an ISO, no income will be
recognized upon the Equity Inns Participant's exercise of the option. Income is
recognized by an Equity Inns Participant when he disposes of shares acquired
under an ISO. The exercise of a nonqualified stock option generally is a taxable
event that requires the Equity Inns Participant to recognize, as ordinary
income, the difference between the shares' fair market value and the option
price.

No income is recognized upon the grant of an SAR. The exercise of an SAR
generally is a taxable event. An Equity Inns Participant generally must
recognize income equal to any cash that is paid and the fair market value of
Equity Inns Common Stock that is received in settlement of an SAR.

An Equity Inns Participant will recognize income on account of a restricted
stock award on the first day that the shares are either transferable or not
subject to a substantial risk of forfeiture. The amount of income

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recognized by the Participant is equal to the fair market value of the Equity
Inns Common Stock received on that date.

An Equity Inns Participant will recognize income on account of the
settlement of a performance share award. An Equity Inns Participant will
recognize income equal to any cash that is paid and the fair market value of
Equity Inns Common Stock (on the date that the shares are first transferable or
not subject to a substantial risk of forfeiture) that is received in settlement
of the award.

The employer (either Equity Inns or its affiliate) will be entitled to
claim a federal income tax deduction on account of the exercise of a
nonqualified option or SAR, the vesting of a stock award and the settlement of a
performance share award. The amount of the deduction is equal to the ordinary
income recognized by the Equity Inns Participant. The employer will not be
entitled to a federal income tax deduction on account of the grant or exercise
of an ISO. The employer may claim a federal income tax deduction on account of
certain dispositions of Equity Inns Common Stock acquired upon the exercise of
an ISO.

THE EQUITY INNS BOARD RECOMMENDS A VOTE FOR APPROVAL OF THE PLAN AMENDMENT
PROPOSAL

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OWNERSHIP OF RFS PRIOR TO THE REIT MERGER

The following table sets forth the beneficial ownership of RFS Common Stock
as of May 19, 1998 by (i) each director, (ii) each executive officer and (iii)
all directors and executive officers of RFS as a group. Unless otherwise
indicated, such shares are owned directly, and the indicated person has sole
voting and investment power.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ------------------------ -------------------- ----------
<S> <C> <C>
Robert M. Solmson(1)(2)..................................... 649,695 2.4
J. William Lovelace(2)(3)................................... 136,100 *
Michael J. Pascal(2)(4)..................................... 108,500 *
Bruce E. Campbell, Jr.(5)(6)................................ 35,000 *
H. Lance Forsdick(5)(6)(7).................................. 448,573 1.6
Harry J. Phillips, Sr.(5)(6)................................ 46,000 *
Michael S. Starnes(5)(6).................................... 46,600 *
John W. Stokes, Jr.(5)(6)(8)................................ 32,000 *
R. Lee Jenkins(9)........................................... 20,000 *
All RFS directors and executive officers as a group (9
persons)(1)(2)(3)(4)(5)(6)(7)(8)(9)....................... 1,522,468 5.6
========= ===
</TABLE>

- ---------------

* Represents less than 1% of the outstanding shares of RFS Common Stock
(1) Includes 7,086 shares issuable to a trust of which Mr. Solmson's children
are beneficiaries and over which Mr. Solmson has sole investment and voting
power, upon the trust's exercise of rights to redeem units of partnership
interest in RFS Partnership, L.P. for shares of RFS Common Stock (the
"Redemption Rights"), 15,500 shares owned by Mr. Solmson's children, 10,000
shares owned by Mr. Solmson's wife and 15,000 shares of restricted RFS
Common Stock which vest at the Effective Date. Prior to vesting, Mr. Solmson
is entitled to vote and receive distributions with respect to unvested
shares of restricted RFS Common Stock. Any unvested shares at the time Mr.
Solmson ceases to be an officer will be forfeited, unless the termination of
Mr. Solmson's employment is the result of the REIT Merger, in which case the
shares will vest upon the Effective Time. Also includes 5,609 shares
issuable to Mr. Solmson upon exercise of his right to redeem units of
limited partnership interest in RFS OP, 175,000 shares issuable to Mr.
Solmson upon exercise of vested options granted under RFS' Amended and
Restated 1993 Restricted Stock and Stock Option Plan (the "RFS Plan").
(2) Does not include 20,000, 10,000 and 5,000 shares issuable upon exercise of
options granted under the RFS Plan in October 1998, or 20,000, 10,000 and
10,000 shares issuable upon exercise of options granted under the RFS Plan
in April 1994 to Messrs. Solmson, Lovelace and Pascal, respectively, which
options vest on the earlier of April 1999 or the Effective Time or 60,000,
40,000 and 60,000 shares issuable upon exercise of options granted under the
RFS Plan in February 1997 to Messrs. Solmson, Lovelace and Pascal,
respectively, which options vest on the earlier of 15,000, 10,000 and 15,000
shares per year in each of February 1999, 2000, 2001 and 2002 or the
Effective Time.
(3) Includes 3,000 shares of restricted RFS Common Stock which vest on the
earlier of October 1998 or the Effective Time and 6,000 shares of restricted
RFS Common Stock which vest on the earlier of 3,000 shares in each of April
1998 and 1999 or the Effective Time. Prior to vesting, Mr. Lovelace is
entitled to vote and receive distributions with respect to unvested shares
of restricted RFS Common Stock. Any unvested shares at the time Mr. Lovelace
ceases to be an officer will be forfeited, unless the termination of Mr.
Lovelace's employment is the result of the REIT Merger, in which case the
shares will vest upon the Effective Time. Also includes 90,000 shares
issuable to Mr. Lovelace upon exercise of vested options granted under the
RFS Plan.
(4) Includes 2,000 shares of restricted RFS Common Stock which will vest on the
earlier of October 1998 or the Effective Time and 2,000 shares of restricted
RFS Common Stock which vest on the earlier of April 1999 or the Effective
Time. Prior to vesting, Mr. Pascal is entitled to vote and receive
distributions with respect to unvested shares of restricted RFS Common
Stock. Any unvested shares at the time Mr. Pascal

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ceases to be an officer will be forfeited, unless the termination of Mr.
Pascal's employment is the result of the REIT Merger, in which case the
shares will vest upon the Effective Time. Also includes 75,000 shares
issuable to Mr. Pascal upon exercise of vested options granted under the RFS
Plan.
(5) Includes 1,000 shares of restricted RFS Common Stock which will vest on the
earlier of August 1998 or the Effective Time for Messrs. Campbell, Starnes
and Stokes and on the earlier of January 1999 or the Effective Time for Mr.
Phillips. Also includes 1,000 shares of restricted RFS Common Stock issued
under the RFS Plan which shares vest on the earlier of April 1999 or the
Effective Time for Messrs. Campbell, Forsdick, Starnes, Stokes and Phillips.
Prior to vesting, the director is entitled to vote and receive distributions
with respect to unvested shares. Any unvested shares at the time a director
ceases to be a director will be forfeited, unless the director ceases to be
a director as a result of the REIT Merger, in which case the shares vest
upon the Effective Time.
(6) Includes 20,000 shares issuable upon exercise of vested options granted
under the RFS Plan which options vest on the earlier of April 1998 or the
Effective Time. Does not include 5,000 shares issuable upon exercise of
options granted under the RFS Plan to each non-employee director which
options vest on the earlier of April 1999 or the Effective Time.
(7) Includes 20,573 shares issuable to Mr. Forsdick upon exercise of his right
to redeem units of limited partnership interest in RFS OP. Also includes
1,000 shares owned by Mr. Forsdick's wife.
(8) Includes 8,000 shares owned by Mr. Stokes' wife.
(9) Includes 8,000 shares of restricted RFS Common Stock which vest on the
earlier of 2,000 shares in each of September 1998, 1999, 2000 and 2001 or
the Effective Time. Prior to vesting, Mr. Jenkins is entitled to vote and
receive distributions with respect to unvested shares. Any unvested shares
at the time a director ceases to be a director will be forfeited. Also
includes 5,000 shares issuable upon exercise of vested options granted under
the RFS Plan. Does not include 20,000 shares issuable upon exercise of
options granted under the RFS Plan, which options vest on the earlier of
5,000 shares in each of September 1998, 1999, 2000 and 2001 or the Effective
Time.

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<PAGE> 101

MANAGEMENT OF EQUITY INNS

BIOGRAPHICAL INFORMATION ABOUT EQUITY INNS' CURRENT DIRECTORS AND EXECUTIVE
OFFICERS

Each of Equity Inns' current directors, listed below, serve as Class I, II
or III directors for a three-year term. The Equity Inns Board has set at four
the number of directors currently constituting the Equity Inns Board.

The executive officers of Equity Inns, listed below, serve in their
respective capacities for approximate one-year terms and are subject to
re-election annually by the Equity Inns Board normally in May of each year.

<TABLE>
<CAPTION>
NAME POSITION CLASS (IF DIRECTOR)
- ---- -------- -------------------
<S> <C> <C>
Phillip H. McNeill, Sr. ..... Chairman of the Board, President, Chief I
Executive Officer and Director
James A. Thomas, III......... Independent Director II
William W. Deupree, Jr. ..... Independent Director II
Joseph W. McLeary............ Independent Director III
Howard A. Silver............. Executive Vice President of Finance, --
Secretary, Treasurer and Chief Financial
Officer
Phillip H. McNeill, Jr. ..... Executive Vice President of Development --
J. Ronald Cooper............. Vice President, Assistant Secretary, --
Assistant Treasurer and Controller
Richard Mitchell............. Vice President -- Asset Management --
Bradley W. Barber............ Vice President --
Gregory Blair................ Assistant Vice President -- Development --
</TABLE>

Phillip H. McNeill, Sr. (age 59) is Chairman of the Board, President and
Chief Executive Officer of Equity Inns and has been Chairman of McNeill
Hospitality Corporation since 1984. From 1963 to 1977, he served in various
capacities, including President and Chief Executive Officer, with Schumacher
Mortgage Company, Inc., a mortgage banking firm and subsidiary of Time, Inc. Mr.
McNeill has served as President and Director of the Memphis Mortgage Bankers
Association and the Tennessee State Mortgage Bankers Association. He has served
as a member of the Board of Trustees of the University of Memphis Foundation and
as a Director of First Commercial Bank of Memphis. He is currently serving as a
member of the Board of Directors of National Commerce Bancorporation. Mr.
McNeill holds both a B.S. and a J.D. degree from the University of Memphis and
is a graduate of the Northwestern School of Mortgage Banking.

James A. Thomas, III (age 57) is Chairman of the Board of NewSouth Capital
Management, Inc., a registered investment advisory firm in Memphis, Tennessee,
which manages approximately $1.6 billion in investment assets, a position he has
held since January 1985. He is a director of First Commercial Bank of Memphis
and a member of the Board of Trustees of Rhodes College. Mr. Thomas has been a
director of Equity Inns since February 1994. He serves on the Audit and
Compensation Committees of the Equity Inns Board.

William W. Deupree, Jr. (age 56) is a Managing Director of Morgan Keegan
and its parent company Morgan Keegan, Inc., a NYSE listed company, positions he
has held since 1985. Mr. Deupree joined Morgan Keegan in 1972 and served as its
President from 1985 to 1996. He is also a director of NSA International, Inc., a
provider of water filtration devices. He is a member of the Regional Firms
Advisory Committee of the NYSE, as well as a member of the Board of Directors
for the Securities Industry Association. Mr. Deupree has been a director of
Equity Inns since February 1994. He serves on the Audit and Compensation
Committees of the Equity Inns Board.

Joseph W. McLeary (age 58) is Chairman of Executive Financial Services,
Inc., a private consulting and benefits administration firm, a position he has
had since 1997. From 1987 to 1997, he was Chairman and Chief Executive Officer
of Midland Financial Group, Inc., a publicly owned automobile insurance company.
From 1984 to 1987, he was president of McLeary & Co., a company organized to
manage a privately-held investment fund engaged in the acquisition of small
businesses in the Memphis, Tennessee area. From 1969 to

86
<PAGE> 102

1983, he was President and Chief Financial Officer and a Director of Cook
International, Inc., a publicly owned agricultural commodities firm. Prior to
1969, he was employed by the Federal Reserve Bank of Atlanta. He has been a
director of SCB Computer Technology, Inc., a computer consulting corporation
whose shares are traded on The Nasdaq Stock Market, since January 1996. Mr.
McLeary has been a director of Equity Inns since February 1994. He serves on the
Audit and Compensation Committees of the Equity Inns Board.

Howard A. Silver (age 43) is Executive Vice President of Finance,
Secretary, Treasurer and Chief Financial Officer of Equity Inns and has been a
certified public accountant since 1980. Mr. Silver joined Equity Inns in May
1994. From 1992 until joining Equity Inns, Mr. Silver served as Chief Financial
Officer of Alabaster Originals, L.P., Memphis, Tennessee, a fashion jewelry
wholesaler. From 1978 to 1985, Mr. Silver was a certified public accountant with
the national accounting firm of Coopers & Lybrand L.L.P., and from 1987 to 1992
Mr. Silver was employed as a certified public accountant with the national
accounting firm of Ernst & Young. Mr. Silver holds a B.S. in Accounting from the
University of Memphis.

Phillip H. McNeill, Jr. (age 36) is Executive Vice President of Development
of Equity Inns. From 1994 to 1996, he served as President of Trust Leasing,
Inc., formerly McNeill Hotel Co., Inc., the lessee of Equity Inns' hotels until
November 1996 (the "Equity Inns Former Lessee"), and from 1984 to 1996 served as
Vice President of Trust Management, Inc., formerly McNeill Hospitality
Corporation. Mr. McNeill is the son of Phillip H. McNeill, Sr., holds a B.B.A.
from the University of Memphis and is a graduate of the Northwestern School of
Mortgage Banking.

J. Ronald Cooper (age 49) is Vice President, Assistant Secretary, Assistant
Treasurer and Controller of Equity Inn. From 1994 to 1996, he was Controller and
Director of Financial Reporting for the Equity Inns Former Lessee and joined the
Equity Inns Former Lessee in October 1994. Mr. Cooper has been a certified
public accountant since 1972. From 1978 until joining the Equity Inns Former
Lessee, Mr. Cooper was employed as Secretary, Treasurer and Controller of Wall
Street Deli, Inc., a publicly-owned delicatessen company. Prior to that, Mr.
Cooper was a certified public accountant with the national accounting firm of
Coopers & Lybrand L.L.P. from 1970 to 1976. Mr. Cooper holds a B.S. degree in
accounting from Murray State University.

Richard F. Mitchell (age 53) is Vice President of Asset Management of
Equity Inns. From 1995 to 1996, he was Vice President of Operations for the
Equity Inns Former Lessee and joined the Equity Inns Former Lessee in 1994 as an
Area Manager. Prior to joining the Equity Inns Former Lessee, Mr. Mitchell held
various positions with North American Hospitality, Inc., including Director of
Training and Development. Mr. Mitchell has held management positions in a number
of hotels including Sheraton, Hampton Inn, Residence Inn and Best Western. He
holds a B.S. degree in Business Administration from the University of Kansas.

Bradley W. Barber (age 34) is a Vice President of Equity Inns. From January
1991 to October 1997, Mr. Barber was employed by Morgan Keegan & Company, Inc.
where he served as an analyst, associate and Associate Vice President in the
Corporate Finance division and from November 1995 to October 1997 as Vice
President and Assistant to the Director of the Equity Research division. From
1988 to January 1991, Mr. Barber was a research consultant with the University
of Memphis. Mr. Barber holds a B.B.A. from Freed-Hardeman University and a
M.B.A. from the University of Memphis.

Gregory Blair (age 35) is Assistant Vice President -- Development of Equity
Inns. From 1995 to December 1997, Mr. Blair served as Assistant Vice
President -- Development for the Equity Inns Former Lessee, and from 1985 to
1995 he served as Chief Engineer for the Hampton Inns hotel in Jackson,
Tennessee.

MANAGEMENT AND OPERATIONS OF EQUITY INNS AFTER THE REIT MERGER

From and after the Effective Time, the Equity Inns Board will consist of
six persons, four of whom are currently members of the Equity Inns Board and two
of whom will be former members of the RFS Board. As of the Effective Time, the
Equity Inns Board will adopt a resolution increasing the size of the Equity Inns

87
<PAGE> 103

Board from four to six members and the Equity Inns Board will elect the
following two current members of the RFS Board to serve on the Equity Inns
Board:

Bruce E. Campbell, Jr. (age 66) is Chairman of the Executive Committee of
the Board of Directors of National Commerce Bancorporation, a national bank
holding company. Mr. Campbell has held that position since 1993. Prior to 1993,
Mr. Campbell was Chairman and Chief Executive Officer of National Commerce
Bancorporation, positions he held since 1977. During such period, Mr. Campbell
was also Chairman and Chief Executive Officer of National Bank of Commerce,
Memphis, Tennessee, a wholly-owned national banking subsidiary of National
Commerce Bancorporation. He has been a director of RFS since 1993. Following the
REIT Merger, Mr. Campbell will serve as a Class I director of Equity Inns.

Robert M. Solmson (age 50) is Chairman, Chief Executive Officer and
President of RFS. Mr. Solmson has been Chairman and Chief Executive Officer
since RFS' formation in 1993 and President from 1993 to February 1996 and since
February 1998. Following the REIT Merger, Mr. Solmson will serve as a Class II
director of Equity Inns.

In addition, at the Effective Time, the Equity Inns Board will appoint
Messrs. McNeill, Solmson and Deupree to an executive committee of the Equity
Inns Board. The executive committee will be responsible for more routine
corporate decisions and will have only such powers and authority as the Equity
Inns Board may grant.

From and after the Effective Time, the current executive officers of Equity
Inns will continue to serve as the executive officers of Equity Inns.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Deupree, an Independent Director and a member of the Compensation
Committee of Equity Inns, is a Managing Director of Morgan Keegan and was
President of Morgan Keegan from 1985 to 1996. Morgan Keegan has acted as
financial advisor to Equity Inns in connection with the REIT Merger and has
rendered to the Equity Inns Board its opinion to the effect that, as of the date
of such opinion, based on Morgan Keegan's review and subject to the
considerations and limitations set forth in such opinion, the Exchange Ratio is
fair, from a financial point of view, to Equity Inns. Pursuant to a letter
agreement dated April 15, 1998, Equity Inns has agreed to pay Morgan Keegan a
transaction fee equal to $750,000, $250,000 of which was paid on April 21, 1998
and the remainder of which will be payable upon consummation of the Mergers. The
fees paid or payable to Morgan Keegan are not contingent upon the contents of
the opinion delivered. In addition, Equity Inns has agreed to reimburse Morgan
Keegan for its reasonable out-of-pocket expenses, subject to certain
limitations, and to indemnify Morgan Keegan and certain related persons against
certain liabilities arising out of or in conjunction with its rendering of
services under its engagement, including certain liabilities under the federal
securities laws. In addition, Morgan Keegan was a managing underwriter of Equity
Inns' initial public offering and certain follow-on public equity offerings and
received investment banking fees and other compensation in connection with those
public offerings. Morgan Keegan has also received fees in connection with
providing financial advisory services to Equity Inns.

Mr. Campbell, who is currently a director of RFS and who is scheduled to
become a director of Equity Inns following the REIT Merger, is Chairman of the
Executive Committee of the Board of Directors of National Commerce
Bancorporation, a national bank holding company and the parent of NBC. NBC has
provided the $5 million NBC Credit Line to Equity Inns.

88
<PAGE> 104

EQUITY INNS

UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

The following unaudited pro forma consolidated balance sheet as of March
31, 1998 gives effect to the Mergers as if such transactions had been
consummated on such date. The transaction will be accounted for by Equity Inns
under the purchase method of accounting for business combinations. The following
unaudited pro forma consolidated statements of operations of Equity Inns for the
year ended December 31, 1997 and the three months ended March 31, 1998 give
effect to the Mergers as if such transactions had been consummated on January 1,
1997 and as if all the hotels acquired in the Mergers had been leased to one of
Equity Inns' lessees, pursuant to Percentage Leases. Additionally, the pro forma
effects of the following items specific to Equity Inns and RFS are given effect
as if such transactions had been consummated on January 1, 1997:

Equity Inns, As Adjusted:

(i) the acquisition of 41 hotels acquired by Equity Inns in 1997
("the 1997 Hotel Acquisitions") and as if all such hotels had been
leased pursuant to Percentage Leases; and

(ii) the consummation of Equity Inns' May and November 1997 common
stock offerings ("the 1997 Offerings") and Equity Inns' February and
March 1998 common stock offerings ("the 1998 Offerings") and the
application of the net proceeds therefrom.

RFS, As Adjusted:

(i) the acquisition of 9 hotels acquired by RFS in 1997 and as if
all such hotels had been leased pursuant to Percentage Leases.
Additionally, 3 of the 9 properties acquired by RFS in 1997 were
properties which began operations in 1997, and two of the RFS
development properties opened in the first quarter of 1998. Accordingly,
the pro forma financial information reflects an estimate for base rent
only, depreciation and real estate and personal property taxes for the
period prior to their opening; and

(ii) the consummation of the RFS March 1998 common stock offering
and the application of the net proceeds therefrom.

The pro forma financial information excludes the pro forma effects of the
Equity Inns Acquisition Hotels. Such pro forma information is based in part upon
the historical consolidated financial statements of Equity Inns and RFS and
should be read in conjunction with such financial statements which are contained
herein or incorporated by reference. Certain historical RFS amounts have been
reclassified to conform with Equity Inns' presentation. In management's opinion,
all adjustments necessary to reflect the effects of these transactions have been
made.

The following unaudited pro forma financial information is not necessarily
indicative of the financial position or operating results that would have
occurred had such transactions been consummated on the date as of which, or at
the beginning of the periods for which, the transactions are being given effect,
nor is it necessarily indicative of future financial position or operating
results.

89
<PAGE> 105

EQUITY INNS

PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 1998

<TABLE>
<CAPTION>
EQUITY
INNS RFS MERGER
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Investment in hotel properties, net............. $619,606 $581,278 $381,485(A) $1,582,369
Hotels under development........................ 13,831 13,831
Cash and cash equivalents....................... 6,324 17,370 (1,500)(B) 22,194
Due from Lessees................................ 7,893 12,166 20,059
Note receivable................................. 3,884 3,884
Deferred expenses, net.......................... 7,147 3,775 (3,775)(A) 10,647
2,000(C)
1,500(B)
Deposits and other assets....................... 2,730 8,782 11,512
-------- -------- -------- ----------
Total Assets.......................... $647,584 $637,202 $379,710 $1,664,496
======== ======== ======== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Debt............................................ $230,871 $222,621 $125,777(D) $ 579,269
Accounts payable and accrued expenses........... 10,879 7,786 18,665
Distributions payable........................... 11,603 11,603
Minority interest in Partnership................ 19,084 36,170 (36,170)(F) 77,035
59,743(G)
(1,792)(E)
-------- -------- -------- ----------
Total Liabilities..................... 272,437 266,577 147,558 686,572
-------- -------- -------- ----------
Shareholders' Equity:
Preferred stock............................... 10 (10)(F)
Common stock.................................. 362 250 (250)(F) 750
388(G)
Treasury stock................................ (2,012) 2,012(F)
Additional paid-in capital.................... 407,099 373,307 (373,307)(F) 1,009,488
600,597(G)
1,792(E)
Unearned officers' and directors'
compensation.................................. (250) (598) 598(F) (250)
Predecessor basis assumed....................... (1,264) (1,264)
Distributions in excess of net earnings......... (30,800) (332) 332(F) (30,800)
-------- -------- -------- ----------
Total Shareholders' Equity............ 375,147 370,625 232,152 977,924
-------- -------- -------- ----------
Total Liabilities and Shareholders'
Equity.............................. $647,584 $637,202 $379,710 $1,664,496
======== ======== ======== ==========
</TABLE>

- ---------------

(A) Represents adjustments attributable to the application of purchase
accounting to RFS based upon the estimated value of Equity Inns Common
Stock and Equity Inns OP Units to be issued upon consummation of the
Mergers, and the estimated additional borrowings incurred to pay direct
costs of the Mergers.
(B) Represents an adjustment for additional financing fees incurred to
restructure credit facilities upon consummation of the Mergers.
(C) Represents an adjustment for new anticipated franchise fees incurred as a
result of the Mergers.
(D) Represents an adjustment for the estimated additional borrowings incurred
to pay direct costs of the Mergers, including lease termination fees
incurred by RFS in connection with the Mergers ($95,500),

90
<PAGE> 106

franchise agreements ($2,000), professional and advisory fees ($11,200),
employee severance related costs ($9,507), real estate property transfer
taxes ($7,220) and other miscellaneous costs ($350).
(E) Represents an adjustment to the minority interest in Equity Inns OP to
reflect the pro forma minority ownership percentage of 7.06% at March 31,
1998, following the Mergers.
(F) Represents an adjustment for the elimination of the historical shareholder
equity of RFS and minority interest ownership in RFS OP.
(G) Represents an adjustment for the estimated value of Equity Inns Common
Stock and Equity Inns OP Units to be issued upon consummation of the
Mergers. The adjustment assumes each share of RFS Capital Stock and each
RFS OP Unit or 25,848,819 shares and 2,569,609 Units, respectively, will be
exchanged for 1.5 shares of Equity Inns Common Stock or 1.5 Equity Inns OP
Units, as applicable. The adjustment assumes the shares and Units are
valued at $15.50 per share or Unit as of the date of the Mergers.

91
<PAGE> 107

EQUITY INNS

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
EQUITY INNS PRO FORMA EQUITY INNS RFS PRO FORMA RFS MERGER
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
----------- ----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Percentage lease revenues.... $21,407 $ $21,407 $22,023 $ 240(A) $22,263 $ 2,642(B)
Gain on sale of hotel
properties................. 523 523
Other income................. 170 170 86 86
------- ---- ------- ------- ----- ------- -------
Total Revenue.......... 21,577 21,577 22,632 240 22,872 2,642
Expenses:
Real estate and personal
property taxes............. 2,433 2,433 2,302 37(C) 2,339 587(H)
Property and casualty
insurance.................. 186 186 (186)(I)
Depreciation and
amortization............... 6,682 6,682 4,951 50(D) 5,001 3,609(J)
Interest..................... 4,291 (278)(E) 4,013 3,548 (180)(E) 3,368 2,390(K)
Amortization of loan costs... 213 213 243 243 (117)(L)
General and administrative... 1,410 1,410 1,409 1,409 (1,153)(M)
Amortization of unearned
directors' and officers'
compensation............... 23 23 196 196 (196)(N)
Rental expense............... 207 207 36 36
------- ---- ------- ------- ----- ------- -------
Total Expenses......... 15,259 (278) 14,981 12,871 (93) 12,778 4,934
Income before minority
interest................... 6,318 6,596 9,761 10,094
Minority interest............ 314 319 936 962
------- ------- ------- -------
Net income................... $ 6,004 $ 6,277 $ 8,825 $ 9,132
======= ======= ======= =======
Net income per share:
Basic...................... .17 .17
Diluted.................... .17 .17
Weighted average number of
common shares outstanding:
Basic...................... 35,221 36,231
======= =======
Diluted.................... 37,160 38,170
======= =======

PRO FORMA
---------
<S> <C>
Revenue:
Percentage lease revenues.... $46,312
Gain on sale of hotel
properties................. 523
Other income................. 256
-------
Total Revenue.......... 47,091
Expenses:
Real estate and personal
property taxes............. 5,359
Property and casualty
insurance..................
Depreciation and
amortization............... 15,292
Interest..................... 9,771
Amortization of loan costs... 339
General and administrative... 1,666
Amortization of unearned
directors' and officers'
compensation............... 23
Rental expense............... 243
-------
Total Expenses......... 32,693
Income before minority
interest................... 14,398
Minority interest............ 1,017
-------
Net income................... $13,381
=======
Net income per share:
Basic...................... .18
Diluted.................... .18
Weighted average number of
common shares outstanding:
Basic...................... 75,004
=======
Diluted.................... 80,847
=======
</TABLE>

See Notes to Pro Forma Consolidated Statement of Operations

92
<PAGE> 108

EQUITY INNS

PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
EQUITY INNS PRO FORMA EQUITY INNS RFS PRO FORMA RFS MERGER
HISTORICAL ADJUSTMENTS AS ADJUSTED HISTORICAL ADJUSTMENTS AS ADJUSTED ADJUSTMENTS
----------- ----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Percentage lease
revenues.......... $70,590 $25,476(A) $96,066 $82,949 $5,641(A) $88,590 $ 8,949(B)
Gain on sale of
hotel
properties........ 666 666
Other income........ 505 505 120 120
------- ------- ------- ------- ------ ------- -------
Total
Revenue..... 71,761 25,476 97,237 83,069 5,641 88,710 8,949
Expenses:
Real estate and
personal property
taxes............. 6,688 2,361(C) 9,049 7,613 1,016(C) 8,629 2,349(H)
Property and
casualty
insurance......... 744 744 (744)(I)
Depreciation and
amortization...... 20,214 6,620(D) 26,834 17,809 422(D) 18,231 14,404(J)
Interest............ 12,601 4,929(E) 17,530 11,562 1,142(E) 12,704 9,471(K)
Amortization of loan
costs............. 1,013 27(F) 1,040 913 913 (413)(L)
General and
administrative.... 4,142 4,142 4,499 4,499 (3,474)(M)
Amortization of
unearned
directors' and
officers'
compensation...... 92 92 738 738 (738)(N)
Rental expense...... 566 248(C) 814 180 180
Loss on sale of
hotel
properties........ 1,164 1,164
------- ------- ------- ------- ------ ------- -------
Total
Expenses.... 45,316 14,185 59,501 45,222 2,580 47,802 20,855
Income before
extraordinary item
and minority
interest............ 26,445 37,736 37,847 40,908
Extraordinary charge
from write-off of
deferred financing
fees................ 1,984 (1,984)(G)
------- ------- ------- ------- -------
Income before minority
interest............ 24,461 37,736 37,847 40,908
Minority interest..... 918 1,830 3,615 3,821
------- ------- ------- -------
Net income............ 23,543 35,906 34,232 37,087
Net income per share:
Basic............... .82 .99
Diluted............. .82 .99
Weighted average
number of common
shares outstanding:
Basic............... 28,773 36,152
======= =======
Diluted............. 29,963 38,056
======= =======

PRO FORMA
---------
<S> <C>
Revenue:
Percentage lease
revenues.......... $193,605
Gain on sale of
hotel
properties........ 666
Other income........ 625
--------
Total
Revenue..... 194,896
Expenses:
Real estate and
personal property
taxes............. 20,027
Property and
casualty
insurance.........
Depreciation and
amortization...... 59,469
Interest............ 39,705
Amortization of loan
costs............. 1,540
General and
administrative.... 5,167
Amortization of
unearned
directors' and
officers'
compensation...... 92
Rental expense...... 994
Loss on sale of
hotel
properties........ 1,164
--------
Total
Expenses.... 128,158
Income before
extraordinary item
and minority
interest............ 66,738
Extraordinary charge
from write-off of
deferred financing
fees................
--------
Income before minority
interest............ 66,738
Minority interest..... 4,716
--------
Net income............ 62,022
Net income per share:
Basic............... .83
Diluted............. .83
Weighted average
number of common
shares outstanding:
Basic............... 74,926
========
Diluted............. 80,769
========
</TABLE>

- ---------------

(A) As it relates to Equity Inns, amount represents pro forma lease revenue
calculated by applying the rent provisions of the percentage leases to the
historical results of operations of the 1997 Hotel Acquisitions for the
period prior to their acquisition. As it relates to RFS, the pro forma
adjustment for the three months ended March 31, 1998 represents an estimate
for base rent for the period prior to the opening of two hotels in 1998.
The pro forma adjustment for the year ended December 31, 1997 represents
pro forma lease revenue calculated by applying the rent provisions of the
percentage leases to the historical results of operations of 6 hotels
acquired by RFS in 1997 for the period prior to their acquisition, and an
estimate for base rent of $1,560 for the period prior to the opening of 3
hotels in 1997. Additionally assumes annual base rent of $960 for each of
two hotels opened in the first quarter of 1998.

93
<PAGE> 109

(B) Represents an adjustment to reflect the pro forma results of increased rent
from new leases which Equity Inns expects to enter into with respect to 57
of the RFS Hotels currently subject to Promus Leases, and based upon Equity
Inns' management's estimate of the new rent terms for such new leases. The
actual rent provisions of such new leases may vary from such estimate.
(C) As it relates to Equity Inns, amount represents a pro forma adjustment for
historical real estate and personal property taxes and rental expense of
the 1997 Hotel Acquisitions incurred during the period prior to their
respective dates of acquisition by Equity Inns. As it relates to RFS, the
pro forma adjustment for the three months ended March 31, 1998 represents
an estimate for real estate taxes for two hotels for the period prior to
their opening in 1998. The pro forma adjustment for the year ended December
31, 1997 represents an adjustment for historical real estate taxes of 6
hotels acquired by RFS in 1997 for the period prior to their acquisition,
and an estimate for real estate taxes of $195 for the period prior to the
opening of 3 hotels in 1997. Additionally, includes an estimate for annual
real estate taxes of $320 for two hotels that were opened in the first
quarter of 1998.
(D) As it relates to Equity Inns, amount represents an adjustment for
depreciation of buildings and improvements, and furniture, fixtures, and
equipment of the 1997 Hotel Acquisitions during the period prior to their
respective dates of acquisition by Equity Inns, based on their respective
acquisition costs. As it relates to RFS, amount represents an adjustment
for depreciation of buildings and improvements, and furniture, fixtures,
and equipment for two hotels opened in 1998, based on their respective
development costs. Depreciation and amortization is computed on a
straight-line basis over 31 years for building and improvements, 7 years
for furniture, fixtures and equipment, and 10-15 years for franchise
agreements.
(E) As it relates to Equity Inns, the pro forma adjustment for interest expense
for the three months ended March 31, 1998 represents a reduction in
interest expense caused by the decrease in the borrowing levels resulting
from the assumption that the 1998 Offerings had occurred prior to January
1, 1998, based on Equity Inns' borrowing rates. The pro forma adjustment
for the year ended December 31, 1997 represents interest expense related to
the acquisition costs of the 1997 Hotel Acquisitions as if they had been
acquired on January 1, 1997, based on Equity Inns' weighted average
interest rate incurred during the period on historical outstanding
borrowings. This increase in interest expense has been reduced by the
decrease in the borrowing levels caused by the assumption that the 1997
Offerings and the 1998 Offerings had occurred on January 1, 1997. As it
relates to RFS, the pro forma adjustment for interest expense for the three
months ended March 31, 1998 represents a reduction in interest expense
caused by the decrease in the borrowing levels resulting from the
assumption that the RFS March 1998 common stock offering had occurred prior
to January 1, 1998, based on RFS' borrowing rates. The pro forma adjustment
for the year ended December 31, 1997 represents interest expense related to
the acquisition costs of 9 hotels acquired by RFS during 1997 as if they
had been acquired on January 1, 1997, based on RFS' borrowing rates. This
increase in interest expense has been reduced by the decrease in the
borrowing levels caused by the assumption that the RFS March 1998 common
stock offering had occurred on January 1, 1997.
(F) Represents an adjustment for amortization expense on deferred loan costs
related to Equity Inns' issuance of the Bonds for the period in 1997 prior
to their issuance.
(G) Represents the elimination of the historical extraordinary charge incurred
by Equity Inns in 1997.
(H) Represents an adjustment for estimated incremental annual real estate taxes
of $2,000 based upon Equity Inns' estimates of property value reassessments
of the RFS Hotels which will result from consummation of the Mergers, and
an annual amount of $349 for personal property taxes previously paid by RFS
Lessees.
(I) Represents the elimination of RFS' historical property and casualty
insurance expense which will be paid by Equity Inns Lessees following
consummation of the Mergers.
(J) Represents an adjustment necessary to reflect incremental depreciation on
the RFS Hotels due to the step-up in cost basis attributable to the
application of purchase accounting. The adjustment reflects an assumed
allocation of the step-up in cost basis of approximately $46 to land, $335
to buildings and improvements, $2 to franchise agreements, and an amount
necessary to reflect an estimated useful life of 31 years for buildings and
improvements, 7 years for furniture, fixtures and equipment and 10 to 15
years for franchise agreements. RFS historical depreciation reflects a
useful life of 40 years for buildings and

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improvements. The estimated useful lives utilized by management are based
upon their knowledge of hotel properties and the hotel industry in general.
(K) Represents an adjustment for interest expense related to the estimated
additional borrowings of $125,777 incurred to pay direct costs of the
Mergers, based on Equity Inns' weighted average interest rate incurred
during the respective periods on historical outstanding borrowings.
(L) Represents (i) the elimination of the historical amortization of deferred
financing costs of RFS and (ii) the amortization of the estimated
incremental financing costs of $1,500 that will be incurred upon
consummation of the Mergers.
(M) Represents (i) the elimination of the historical amounts of general and
administrative expenses of RFS and (ii) the estimated incremental general
and administrative expenses to be incurred by Equity Inns.
(N) Represents elimination of the 1997 historical amortization expense of
unearned directors' and officers' compensation of RFS as a result of the
Mergers.

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DESCRIPTION OF CAPITAL STOCK OF EQUITY INNS

Under the Equity Inns Charter, the total number of shares of all classes of
stock that Equity Inns has authority to issue is 110,000,000, consisting of
100,000,000 shares of Equity Inns Common Stock and 10,000,000 shares of
preferred stock, $.01 per share par value (the "Equity Inns Preferred Stock").
If the Charter Amendment Proposal is approved by Equity Inns shareholders, the
authorized number of shares of Equity Inns Common Stock will increase to
200,000,000 shares. At May 19, 1998, 36,228,273 shares of Equity Inns Common
Stock were outstanding, and no shares of the Equity Inns Preferred Stock were
outstanding.

The following information with respect to the capital stock of Equity Inns
is subject to the detailed provisions of the Equity Inns Charter and Equity Inns
Bylaws as currently in effect. These statements do not purport to be complete or
to give full effect to the provisions of statutory or common law, and are
subject to, and are qualified in their entirety by reference to, the terms of
the Equity Inns Charter and Equity Inns Bylaws, which are exhibits to the
Registration Statement.

COMMON STOCK

Subject to the provisions of the Charter described under "-- Charter and
Bylaw Provisions -- Restrictions on Transfer," the holders of Equity Inns Common
Stock are entitled to one vote per share on all matters voted on by the
shareholders, including elections of directors. Except as otherwise required by
law or provided in any resolution adopted by the Equity Inns Board with respect
to any series of Preferred Stock, the holders of such shares of Equity Inns
Common Stock exclusively possess all voting power of Equity Inns. The Equity
Inns Charter does not provide for cumulative voting in the election of
directors. Subject to any preferential rights of any outstanding series of
Equity Inns Preferred Stock, the holders of Common Stock are entitled to such
dividends as may be declared from time to time by the Equity Inns Board from
funds available therefor, and upon liquidation are entitled to receive pro rata
all assets of Equity Inns available for distribution to such holders. All
outstanding shares of Equity Inns Common Stock are fully paid and nonassessable
and the holders thereof have no conversion, sinking fund, redemption rights or
any other preemptive rights to subscribe for any securities of Equity Inns.

PREFERRED STOCK

The Equity Inns Board is authorized to provide for the issuance of shares
of Equity Inns Preferred Stock in one or more series, to establish the number of
shares in each series and to fix the designation, powers, preferences and rights
of each such series and the qualifications, limitations or restrictions thereof.
Because the Equity Inns Board has the power to establish the preferences and
rights of each class or series of Equity Inns Preferred Stock, the Equity Inns
Board may afford the holders of any series or class of Equity Inns Preferred
Stock preferences, powers and rights, voting or otherwise, senior to the rights
of holders of Equity Inns Common Stock. The issuance of Equity Inns Preferred
Stock could have the effect of delaying or preventing a change in control of
Equity Inns.

CHARTER AND BYLAW PROVISIONS

Restrictions on Transfer

For Equity Inns to qualify as a REIT under the Code, it must meet certain
requirements concerning the ownership of its outstanding stock. Specifically,
not more than 50% in value of Equity Inns' outstanding stock may be owned,
directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities) during the last half of a taxable year, and Equity
Inns must be beneficially owned by 100 or more persons during at least 335 days
of a taxable year of twelve months or during a proportionate part of a shorter
taxable year. See "Federal Income Tax Considerations -- Requirements for
Qualification." Because the Equity Inns Board believes it is essential for
Equity Inns to continue to qualify as a REIT, the Equity Inns Charter contains
the Equity Inns Ownership Limitation (the "Equity Inns Ownership Limitation
Provision"). The Equity Inns Ownership Limitation Provision provides that,
subject to certain exceptions specified in the Equity Inns Charter, no
shareholder may own, or be deemed to own by virtue of the attribution provisions
of the Code, more than 9.9% of the outstanding shares of any class of stock of
Equity Inns. The Equity Inns

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Board may, but in no event is required to, waive the Equity Inns Ownership
Limitation if evidence satisfactory to the Equity Inns Board is presented that
such ownership will not jeopardize Equity Inns' status as a REIT. As a condition
of such waiver, the Equity Inns Board may require opinions of counsel
satisfactory to it and/or an undertaking from the applicant with respect to
preserving the REIT status of Equity Inns.

Any transfer of shares of Equity Inns Common Stock or Equity Inns Preferred
Stock that would (i) result in any person owning, directly or indirectly, Equity
Inns Common Stock or Equity Inns Preferred Stock in excess of the Equity Inns
Ownership Limitation, (ii) result in the shares of Equity Inns Common Stock and
Equity Inns Preferred Stock being owned by fewer than 100 persons (determined
without reference to any rules of attribution), (iii) result in Equity Inns
being "closely held" within the meaning of Section 856(h) of the Code, or (iv)
cause Equity Inns to own, directly or constructively, 10% or more of the
ownership interests in a tenant of Equity Inns' or its subsidiaries' real
property, within the meaning of Section 856 (d) (2) (B) of the Code, shall be
void ab initio, and the intended transferee will acquire no rights in such
shares of Equity Inns Common Stock or Equity Inns Preferred Stock.

Subject to certain exceptions described below, if any purported transfer of
shares of Equity Inns Common Stock or Equity Inns Preferred Stock would (i)
result in any person owning, directly or indirectly, shares of Equity Inns
Common Stock or Equity Inns Preferred Stock in excess of the Equity Inns
Ownership Limitation, (ii) result in the shares of Equity Inns Common Stock and
Equity Inns Preferred Stock being owned by fewer than 100 persons (determined
without reference to any rules of attribution), (iii) result in Equity Inns
being "closely held" within the meaning of Section 856(h) of the Code, or (iv)
cause Equity Inns to own, directly or constructively, 10% or more of the
ownership interests in a tenant of Equity Inns' or its subsidiaries' real
property, within the meaning of Section 856(d)(2)(B) of the Code, the shares of
Equity Inns Common Stock or Equity Inns Preferred Stock will be designated as
"Shares in Trust" and transferred automatically to a trust (the "Share Trust")
effective on the day before the purported transfer of such shares of Equity Inns
Common Stock or Equity Inns Preferred Stock. The record holder of the shares of
Equity Inns Common Stock or Equity Inns Preferred Stock that are designated as
Shares in Trust (the "Prohibited Owner") will be required to submit such number
of shares of Equity Inns Common Stock or Equity Inns Preferred Stock to the
Company for registration in the name of the Share Trust. The Share Trustee will
be designated by Equity Inns but will not be affiliated with Equity Inns. The
beneficiary of the Share Trust (the "Beneficiary") will be one or more
charitable organizations that are named by Equity Inns.

Shares in Trust will remain issued and outstanding shares of Equity Inns
Common Stock or Equity Inns Preferred Stock and will be entitled to the same
rights and privileges as all other shares of the same class or series. The Share
Trust will receive all dividends and distributions on the Shares in Trust and
will hold such dividends and distributions in trust for the benefit of the
Beneficiary. The Share Trustee will vote all Shares in Trust. The Share Trustee
will designate a Permitted Transferee of the Shares in Trust, provided that the
Permitted Transferee (i) purchases such Shares in Trust for valuable
consideration and (ii) acquires such Shares in Trust without such acquisition
resulting in a transfer to another Share Trust and resulting in the
redesignation of such Equity Inns Common Stock or Equity Inns Preferred Stock as
Shares in Trust.

The Prohibited Owner with respect to Shares in Trust will be required to
repay to the Share Trust the amount of any dividends or distributions received
by the Prohibited Owner (i) that are attributable to any Shares in Trust and
(ii) the record date of which was on or after the date that such shares became
Shares in Trust. The Prohibited Owner generally will receive from the Share
Trustee the lesser of (i) the price per share such Prohibited Owner paid for the
shares of Equity Inns Common Stock or Equity Inns Preferred Stock that were
designated as Shares in Trust (or, in the case of a gift or devise, the Market
Price per share on the date of such transfer) and (ii) the price per share
received by the Share Trustee from the sale of such Shares in Trust. Any amounts
received by the Share Trustee in excess of the amounts to be paid to the
Prohibited Owner will be distributed to the Beneficiary.

The Shares in Trust will be deemed to have been offered for sale to Equity
Inns, or its designee, at a price per share equal to the lesser of (i) the price
per share in the transaction that created such Shares in Trust (or, in the case
of a gift or devise, the Market Price per share on the date of such transfer) or
(ii) the Market Price per share on the date that Equity Inns, or its designee,
accepts such offer. Equity Inns will have the right to

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accept such offer for a period of ninety days after the later of (i) the date of
the purported transfer which resulted in such Shares in Trust and (ii) the date
Equity Inns determines in good faith that a transfer resulting in such Shares in
Trust occurred.

Any person who acquires or attempts to acquire shares of Equity Inns Common
Stock or Equity Inns Preferred Stock in violation, of the foregoing
restrictions, or any person who owned shares of Equity Inns Common Stock or
Equity Inns Preferred Stock that were transferred to a Share Trust, will be
required (i) to give immediately written notice to Equity Inns of such event and
(ii) to provide to Equity Inns such other information as Equity Inns may request
in order to determine the effect, if any, of such transfer on Equity Inns'
status as a REIT.

The Equity Inns Charter requires all persons who own, directly or
indirectly, more than 5% (or such lower percentages as required pursuant to
regulations under the Code) of the outstanding shares of Equity Inns Common
Stock and Equity Inns Preferred Stock, within 30 days after January 1 of each
year, to provide to Equity Inns a written statement or affidavit stating the
name and address of such direct or indirect owner, the number of shares of
Equity Inns Common Stock and Equity Inns Preferred Stock owned directly or
indirectly, and a description of how such shares are held. In addition, each
direct or indirect shareholder shall provide to Equity Inns such additional
information as Equity Inns may request in order to determine the effect, if any,
of such ownership on Equity Inns' status as a REIT and to ensure compliance with
the Equity Inns Ownership Limitation.

The Equity Inns Ownership Limitation generally will not apply to the
acquisition of shares of Equity Inns Common Stock or Equity Inns Preferred Stock
by an underwriter that participates in a public offering of such shares. In
addition, the Equity Inns Board, upon receipt of a ruling from the Service or an
opinion of counsel and upon such other conditions as the Equity Inns Board may
direct, may exempt a person from the Equity Inns Ownership Limitation under
certain circumstances. The foregoing restrictions will continue to apply until
(i) the Equity Inns Board determines that it is no longer in the best interests
of Equity Inns to attempt to qualify, or to continue to qualify, as a REIT and
(ii) there is an affirmative vote of two-thirds of the number of shares of
Equity Inns Common Stock entitled to vote on such matter at a special meeting of
the shareholders of Equity Inns.

The Equity Inns Ownership Limitation could delay, defer or prevent a
transaction or a change in control of Equity Inns that might involve a premium
price for the Equity Inns Common Stock or otherwise be in the best interest of
the shareholders of Equity Inns. See "Risk Factors -- Equity Inns Ownership
Limitation."

All certificates representing shares of Equity Inns Common Stock or Equity
Inns Preferred Stock will bear a legend referring to the restrictions described
above.

Staggered Board of Directors

The Equity Inns Charter provides that the Equity Inns Board is divided into
three classes of directors, each class constituting approximately one-third of
the total number of directors and with the classes serving staggered three-year
terms. The classification of directors will have the effect of making it more
difficult for shareholders to change the composition of the Equity Inns Board.
Equity Inns believes, however, that the longer time required to elect a majority
of a classified Equity Inns Board will help to ensure continuity and stability
of Equity Inns' management and policies.

The classification provisions also could have the effect of discouraging a
third party from accumulating large blocks of Equity Inns' stock or attempting
to obtain control of Equity Inns, even though such an attempt might be
beneficial to Equity Inns and its shareholders. Accordingly, shareholders could
be deprived of certain opportunities to sell their shares of Equity Inns Common
Stock at a higher market price than might otherwise be the case.

Number of Directors; Removal; Filling Vacancies

The Equity Inns Charter and the Equity Inns Bylaws provide that, subject to
any rights of holders of Equity Inns Preferred Stock to elect additional
directors under specified circumstances, the number of

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directors will consist of not less than three nor more than nine persons,
subject to increase or decrease by the affirmative vote of 80% of the members of
the entire Equity Inns Board. At all times a majority of the directors shall be
directors who are not officers or employees of Equity Inns, any Affiliates (as
defined below) of an officer or employee or any Affiliates of (i) any advisor to
Equity Inns under an advisory agreement, (ii) any lessee of any property of
Equity Inns, (iii) any subsidiary of Equity Inns, or (iv) any partnership which
is an Affiliate of Equity Inns ("Independent Directors"), except that upon the
death, removal or resignation of an Independent Director, such requirement shall
not be applicable for 60 days. "Affiliate" is defined as being (i) any person
that, directly or indirectly, controls or is controlled by or is under common
control with such person, (ii) any person that owns, beneficially, directly or
indirectly, five percent (5%) or more of the outstanding capital stock, shares
or equity interests of such person or (iii) any officer, director, employee,
partner or trustee of such person or any person controlling, controlled by or
under common control with such person (excluding trustees and persons serving in
similar capacities who are not otherwise an Affiliate of such person). There are
four directors currently, three of whom are Independent Directors. The holders
of Equity Inns Common Stock shall be entitled to vote on the election or removal
of directors, with each share entitled to one vote. The Equity Inns Bylaws
provide that, subject to any rights of holders of Equity Inns Preferred Stock,
and unless the Equity Inns Board otherwise determines, any vacancies will be
filled by the affirmative vote of a majority of the remaining directors, though
less than a quorum, provided that Independent Directors shall nominate and
approve directors to fill vacancies created by Independent Directors.
Accordingly, the Equity Inns Board could temporarily prevent any shareholder
entitled to vote from enlarging the Equity Inns Board and filling the new
directorships with such shareholder's own nominees. Any director so elected
shall hold office until the next annual meeting of shareholders.

A director may be removed with or without cause by the affirmative vote of
the holders of 75% of the outstanding shares entitled to vote in the election of
directors at a special meeting of the shareholders called for the purpose of
removing him.

Limitation of Liability; Indemnification

The Equity Inns Charter obligations Equity Inns to indemnify and advance
expenses to present and former directors and officers to the maximum extent
permitted by Tennessee law. The TBCA permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
settlements, penalties, fines or reasonable expenses incurred with respect to a
proceeding to which they may be made a party by reason of their service in those
or other capacities if (i) such persons conducted themselves in good faith, (ii)
they reasonably believed, in the case of conduct in their official capacities
with the corporation, that their conduct was in its best interests and, in all
other cases, that their conduct was at least not opposed to its best interests
and (iii) in the case of any criminal proceeding, they had no reasonable cause
to believe that their conduct was unlawful.

Any indemnification by Equity Inns pursuant to the provisions of the Equity
Inns Charter described above shall be paid out of the assets of Equity Inns and
shall not be recoverable from the shareholders. Equity Inns currently purchases
director and officer liability insurance for the purpose of providing a source
of funds to pay any indemnification described above. To the extent that the
foregoing indemnification provisions purport to include indemnification for
liabilities arising under the Securities Act, in the opinion of the Commission
such indemnification is contrary to public policy and is, therefore,
unenforceable.

The TBCA permits the charter of a Tennessee corporation to include a
provision eliminating or limiting the personal liability of its directors to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except that such provision cannot eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law
or (iii) for unlawful distributions that exceed what could have been distributed
without violating the TBCA or the corporation's charter. The Equity Inns Charter
contains a provisions eliminating the personal liability of its directors or
officers of Equity Inns or its shareholders for money damages to the maximum
extent permitted by Tennessee law from time to time.

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Amendment

The Equity Inns Charter may be amended by the affirmative vote of the
holders of a majority of the shares of the Common Stock present at a meeting at
which a quorum is present, with the shareholders voting as a class with one vote
per share; provided, however, that (i) the Equity Inns Charter provision
providing for the classification of the Equity Inns Board into three classes may
not be amended, altered, changed or repealed without the affirmative vote of at
least 80% of the members of the Equity Inns Board or the affirmative vote of
holders of at least 75% of the outstanding shares of capital stock entitled to
vote generally in the election of directors, voting separately as a class; (ii)
the provisions relating to the limitation on indebtedness may not be amended
without an affirmative vote of the holders of a majority of the outstanding
shares of Equity Inns Common Stock; and (iii) Equity Inns cannot take any action
intended to terminate its qualification as a REIT without the approval of the
holders of two-thirds of the outstanding shares of Equity Inns Common Stock. The
Equity Inns Bylaws may be amended by the Equity Inns Board or by vote of the
holders of a majority of the outstanding shares of Equity Inns Common Stock,
provided that provisions with respect to the staggered terms of the Equity Inns
Board cannot be amended without the affirmative vote of 80% of the members of
the entire Equity Inns Board or the holders of 75% of the outstanding shares of
capital stock entitled to vote generally in the election of directors, voting
separately as a class.

TENNESSEE ANTI-TAKEOVER STATUTES

In addition to certain of the provisions of the Equity Inns Charter
discussed above, Tennessee has adopted a series of statutes which may deter
takeover attempts or tender offers, including offers or attempts that might
result in the payment of a premium over the market price for the Equity Inns
Common Stock or that a shareholder might otherwise consider in its best
interest.

Under the Tennessee Investor Protection Act, unless a company's Equity Inns
Board has recommended a takeover offer to shareholders, no offeror beneficially
owning 5% or more of any class of equity securities of the offeree company, any
of which was purchased within one year prior to the proposed takeover offer, may
offer to acquire any class of equity securities of an offeree company pursuant
to a tender offer if, after the acquisition thereof, the offeror would be
directly or indirectly a beneficial owner of more than 10% of any class of
outstanding equity securities of the offeree company (a "Takeover Offer").
However, this prohibition does not apply if the offeror, before making such
purchase, has made a public announcement of his intention with respect to
changing or influencing the management or control of the offeree company, has
made a full, fair and effective disclosure of such intention to the person from
whom he intends to acquire such securities, and has filed with the Tennessee
Commissioner of Commerce and Insurance (the "Commissioner") and with the offeree
company a statement signifying such intentions and containing such additional
information as the Commissioner by rule prescribes. Such an offeror must provide
that any equity securities of an offeree company deposited or tendered pursuant
to a Takeover Offer may be withdrawn by or on behalf of an offeree at any time
within seven days from the date the Takeover Offer has become effective
following filing with the Commissioner and the offeree company and public
announcement of the terms or after 60 days from the date the Takeover Offer has
become effective. If an offeror makes a Takeover Offer for less than all the
outstanding equity securities of any class, and if the number of securities
tendered is greater than the number the offeror has offered to accept and pay
for, the securities shall be accepted pro rata. If an offeror varies the terms
of a Takeover Offer before its expiration date by increasing the consideration
offered to shareholders of the offeree company, the offeror shall pay the
increased consideration for all equity securities accepted, whether accepted
before or after the variation in the terms of the Takeover Offer.

Under the Tennessee Business Combination Act, subject to certain
exceptions, no Tennessee corporation may engage in any "business combination"
with an "interested shareholder" for a period of five years following the date
that such shareholder became an interested shareholder unless prior to such date
the Equity Inns Board of the corporation approved either the business
combination or the transaction which resulted in the shareholder becoming an
interested shareholder. Consummation of a business combination that is subject
to the five-year moratorium is permitted after such period when the transaction
(a)(i) complies with all applicable charter and bylaw requirements and (ii) is
approved by the holders of two-thirds of the voting stock not beneficially owned
by the interested shareholder, and (b) meets certain fair price criteria.
"Business

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combination" is defined by the statute as being any (i) Mergers or
consolidation; (ii) share exchange; (iii) sale, lease, exchange, mortgage,
pledge or other transfer of assets representing 10% or more of (A) the aggregate
market value of the corporation's consolidated assets, (B) the aggregate market
value of the corporation's shares, or (C) the corporation's consolidated net
income; (iv) issuance or transfer of shares from the corporation to the
interested shareholder; (v) plan of liquidation or dissolution proposed by the
interested shareholder; (vi) transaction or recapitalization which increases the
proportionate share of any outstanding voting securities owned or controlled by
the interested shareholder; or (vii) financing arrangement whereby any
interested shareholder receives, directly or indirectly, a benefit except
proportionately as a shareholder. "Interested shareholder" is defined as being
(i) any person that is the beneficial owner of 10% or more of the voting power
of any class or series of outstanding voting stock of the corporation or (ii) an
Affiliate or associate of the corporation who at any time within the five-year
period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the voting power of any class or
series of the outstanding stock of the corporation.

The Tennessee Greenmail Act prohibits a Tennessee corporation from
purchasing, directly or indirectly, any of its shares at a price above the
market value of such shares (defined as the average of the highest and lowest
closing market price for such shares during the 30 trading days preceding the
purchase and sale or preceding the commencement or announcement of a tender
offer if the seller of such shares has commenced a tender offer or announced an
intention to seek control of the corporation) from any person who holds more
than 3% of the class of securities to be purchased if such person has held such
shares for less than two years, unless the purchase has been approved by the
affirmative vote of a majority of the outstanding shares of each class of voting
stock issued by such corporation or the corporation makes an offer, of at least
equal value per share, to all holders of shares of such class.

OTHER MATTERS

The Equity Inns Common Stock is traded on the NYSE under the symbol "ENN."

The transfer agent and registrar for the Equity Inns Common Stock is
SunTrust Bank, Atlanta, Georgia.

COMPARATIVE RIGHTS OF SHAREHOLDERS

General. Both Equity Inns and RFS are incorporated under the laws of the
State of Tennessee. RFS shareholders, whose rights as shareholders are governed
by Tennessee law, the Amended and Restated Charter of RFS, as amended to date
(the "RFS Charter"), and the bylaws of RFS as currently in effect (the "RFS
Bylaws"), will become, upon consummation of the REIT Merger, shareholders of
Equity Inns, and their rights as shareholders will continue to be governed by
Tennessee law, including certain Tennessee laws which may deter takeover
attempts or tender offers, including offers or attempts that might result in the
payment of a premium over the market price for the Equity Inns Common Stock or
that a shareholder might otherwise consider in its best interest. Other rights
of shareholders will be governed and controlled by the provisions of the Equity
Inns Charter and the Equity Inns Bylaws.

The following summary, which does not purport to be a complete statement of
the differences between the rights of Equity Inns shareholders and the rights of
RFS shareholders, sets forth certain differences between the Equity Inns Charter
and the RFS Charter and between the Equity Inns Bylaws and the RFS Bylaws,
including differences which are material to RFS shareholders. The following
summary is qualified in its entirely by reference to the Equity Inns Charter and
Equity Inns Bylaws and the RFS Charter and the RFS Bylaws.

Authorized Capital. The authorized stock of Equity Inns consists of
100,000,000 shares of Equity Inns Common Stock and 10,000,000 shares of Equity
Inns Preferred Stock. If the required vote is obtained to approve the Charter
Amendment Proposal, the authorized Equity Inns Common Stock will increase to
200,000,000 shares. The authorized capital stock of RFS consists of 100,000,000
shares of RFS Common Stock and 5,000,000 shares of RFS Preferred Stock.

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For a description of the restrictions on transfer of shares of Equity Inns
Common Stock, see "Description of Capital Stock of Equity Inns -- Charter and
Bylaw Provisions -- Restrictions on Transfer."

RFS Restrictions on Transfer. For RFS to qualify as a REIT under the Code,
it must meet certain requirements concerning the ownership of its outstanding
stock. Specifically, no more than 50% in value of RFS' outstanding stock may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of a taxable year, and
RFS must be beneficially owned by 100 or more persons during at least 335 days
of a taxable year of twelve months or during a proportionate part of a shorter
taxable year. See "Federal Income Tax Considerations Requirements for
Qualification." Because the RFS Board believes it is essential for RFS to
continue as a REIT, the RFS Charter contains a provision limiting the ownership
of shares of RFS' stock (the "RFS Ownership Limitation Provision").

The RFS Ownership Limitation Provision provides that, subject to certain
exceptions specified in the RFS Charter, no shareholder may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.9% of the
outstanding shares of any class of RFS' Capital Stock (the "RFS Ownership
Limitation"). The RFS Board may, but in no event is required to, waive the RFS
Ownership Limitation if evidence satisfactory to the RFS Board is presented that
such ownership will not jeopardize RFS' status as a REIT. As a condition of such
waiver, the RFS Board may require opinions of counsel satisfactory to it and/or
an undertaking from the applicant with respect to preserving the REIT status of
RFS. If shares of stock in excess of the RFS Ownership Limitation are issued or
transferred to any person, or if a transfer or proposed transfer causes or would
cause RFS to be beneficially owned by fewer than 100 persons, such issuance or
transfer shall be null and void, and the intended transferee will acquire no
rights to the stock.

The RFS Ownership Limitation Provision will not be automatically removed
even if the REIT provisions of the Code are changed so as to no longer contain
any ownership concentration limitation or if the ownership concentration
limitation is increased. Except as otherwise described above, any change in the
RFS Ownership Limitation Provision would require an amendment to the RFS
Charter. Amendments to the RFS Charter require the affirmative vote of holders
owning a majority of the outstanding RFS Common Stock. In addition to preserving
RFS' status as a REIT, the RFS Ownership Limitation may have the effect of
precluding an acquisition of control of RFS without the approval of the RFS
Board. All certificates representing shares of RFS Common Stock and RFS
Preferred Stock will bear a legend referring to the restrictions described
above.

All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 9.9% of the outstanding shares of any class of RFS stock and
any shareholder requested by RFS must file an affidavit with RFS containing the
information specified in the RFS Charter with respect to their ownership of RFS
Common Stock upon demand of the RFS Board. In addition, each shareholder shall
upon demand be required to disclose the RFS in writing such information with
respect to the direct, indirect and constructive ownership of shares as the RFS
Board deems necessary to comply with the provisions of the Code applicable to a
REIT or to comply with the requirements of any taxing authority or governmental
agency.

Any transfer of shares which would prevent RFS from continuing to qualify
as a REIT under the Code will be void ab initio to the fullest extent permitted
under applicable law, and the intended transferee of such shares will be deemed
never to have had an interest in such shares. Further, if, in the opinion of the
RFS Board, (i) a transfer of shares would result in any shareholder or group of
shareholders acting together owning in excess of the RFS Ownership Limitation or
(ii) a proposed transfer of shares may jeopardize the qualification of RFS as a
REIT under the Code, the RFS Board may, in its sole discretion, refuse to allow
the shares to be transferred to the proposed transferee. Finally, RFS may, in
the discretion of the RFS Board, redeem any stock held of record by any
shareholder in excess of the RFS Ownership Limitation, for a price equal to the
lesser of (i) the market price on the date of notice of redemption; (ii) the
market price on the date of purchase; or (iii) the maximum price allowed under
the applicable provisions of Tennessee law.

Staggered Board. The provisions of the Equity Inns Charter and Equity Inns
Bylaws concerning its staggered board of directors are identical to the
provisions of the RFS Charter and RFS Bylaws concerning the RFS Board.

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Number of Directors, Removal, Filling Vacancies. The provisions of the
Equity Inns Charter and Equity Inns Bylaws concerning the number of directors,
removal and filling vacancies are identical to the provisions of the RFS Charter
and RFS Bylaws concerning the RFS Board. There are currently four directors on
the Equity Inns Board, three of whom are Independent Directors. There are
currently eight directors on the RFS Board, six of whom are Independent
Directors. Upon consummation of the REIT Merger, the number of directors on the
Equity Inns Board will be increased from four to six, five of whom will be
Independent Directors.

Limitation of Liability; Indemnification. The provisions of the Equity
Inns Charter and Equity Inns Bylaws concerning the limitation of liability and
indemnification of directors and officers of the Company are identical to the
provisions of the RFS Charter and RFS Bylaws concerning the limitation of
liability and indemnification of RFS directors and officers. Equity Inns
currently maintains director and officer liability insurance for the purpose of
providing a source of funds to pay any indemnification described in the Equity
Inns Charter. RFS currently does not maintain such insurance.

Charter and Bylaw Amendment. The provisions of the Equity Inns Charter and
Equity Inns Bylaws concerning amendment of the Equity Inns Charter and Equity
Inns Bylaws are identical to the provisions of the RFS Charter and RFS Bylaws
concerning amendment of the RFS Charter and RFS Bylaws, provided that Equity
Inns cannot take any action intended to terminate its qualification as a REIT
without the approval of the holders of two-thirds of the outstanding shares of
Equity Inns Common Stock.

FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material United States federal income tax
considerations of the REIT Merger to Equity Inns, RFS, and their respective
shareholders, as well as a summary of the material United States federal income
tax considerations that may be relevant to a holder of Equity Inns Common Stock
or RFS Common Stock. The summary is based on current law, is for general
information only, and is not tax advice. The discussion does not purport to deal
with all aspects of taxation that may be relevant to particular shareholders in
light of their personal investment or tax circumstances, or to certain types of
shareholders (including insurance companies, tax-exempt organizations (except as
discussed below), financial institutions or broker-dealers, and, except as
discussed below, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the federal
income tax laws.

The statements in this discussion are based on current provisions of the
Code, existing, temporary, and currently proposed Treasury regulations
promulgated under the Code ("Treasury Regulations"), the legislative history of
the Code, existing administrative rulings and practices of the Service, and
judicial decisions. No assurance can be given that future legislative, judicial,
or administrative actions or decisions, which may be retroactive in effect, will
not affect the accuracy of any statement in this Joint Proxy
Statement/Prospectus with respect to the transactions entered into or
contemplated prior to the effective date of such changes.

EACH EQUITY INNS SHAREHOLDER AND RFS SHAREHOLDER SHOULD CONSULT HIS OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE REIT MERGER AND
THE OWNERSHIP AND SALE OF EQUITY INNS COMMON STOCK AND RFS COMMON STOCK AND OF
THE ELECTION BY EACH OF EQUITY INNS AND RFS TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF THE REIT MERGER
AND SUCH OWNERSHIP, SALE, AND ELECTION, AND OF POTENTIAL CHANGES IN APPLICABLE
TAX LAWS.

TAX CONSIDERATIONS RELATING TO THE REIT MERGER

The REIT Merger is intended to be a reorganization under Section 368(a) of
the Code. Baker Donelson will deliver an opinion to Equity Inns and Hunton &
Williams will deliver an opinion to RFS, both dated the Closing Date, to the
effect that, based upon customary representations, assumptions and conditions,
the REIT Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. Assuming,
consistent with the above-described opinions, that the REIT Merger is treated
for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the

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Code, an RFS shareholder who receives solely Equity Inns Common Stock in
exchange for his shares of RFS Common Stock will not recognize any gain or loss
on the exchange. If an RFS shareholder receives Equity Inns Common Stock and
cash in lieu of a fractional share of Equity Inns Common Stock, the shareholder
will recognize taxable gain or loss solely with respect to such cash equal to
the difference between such cash amount and the tax basis allocated to such
shareholder's fractional share interest. Such gain or loss generally will
constitute capital gain or loss if the shareholder's RFS Common Stock was held
as a capital asset. A shareholder will have an aggregate tax basis in his shares
of Equity Inns Common Stock (including any fractional share interest treated as
received) received in the REIT Merger equal to his aggregate tax basis in the
shares of RFS Common Stock exchanged therefor. A shareholder's holding period
for shares of Equity Inns Common Stock (including any fractional share interest
treated as received) received in the REIT Merger will include his holding period
for the shares of RFS Common Stock exchanged therefor if such shares are held as
a capital asset at the effective date of the REIT Merger. No gain or loss should
be recognized by Equity Inns, RFS or Merger Sub as a result of the REIT Merger.

TAXATION OF EQUITY INNS AND RFS

Each of Equity Inns and RFS elected to be taxed as a REIT under Sections
856 through 860 of the Code beginning with its taxable year ended December 31,
1994 and December 31, 1993, respectively. Each of Equity Inns and RFS believes
that it has since its inception been organized and operated in such a manner as
to qualify for taxation as a REIT under the Code. Equity Inns' qualification as
a REIT after the REIT Merger will depend in part on RFS' qualification as a REIT
immediately prior to the REIT Merger. Equity Inns intends to continue to operate
in a manner so as to qualify as a REIT following the REIT Merger, but no
assurance can be given that Equity Inns will remain qualified as a REIT.

Baker Donelson has acted as counsel to Equity Inns in connection with the
REIT Merger. In the opinion of Baker Donelson, beginning with its taxable year
ended December 31, 1994, Equity Inns was organized and has operated in
conformity with the requirements for qualification as a REIT under the Code and,
after giving effect to the REIT Merger, Equity Inns' proposed method of
operation will enable it to continue to meet the requirements for qualification
and taxation as a REIT under the Code. Hunton & Williams has acted as counsel to
RFS in connection with the REIT Merger. In the opinion of Hunton & Williams,
beginning with its taxable year ended December 31, 1993, RFS was organized and
has operated in conformity with the requirements for qualification as a REIT
under the Code. Investors should be aware, however, that opinions of counsel are
not binding upon the Service or any court. It is a condition to Equity Inns' and
RFS' obligations under the Merger Agreement that Hunton & Williams and Baker
Donelson deliver opinions to the effect described above as of the Closing Date.
It must be emphasized that the tax opinions described in this paragraph are
based on various assumptions and are conditioned upon certain representations
made by Equity Inns and RFS as to factual matters, including representations
regarding the nature of Equity Inns' and RFS' properties and the conduct of
their business. Moreover, Equity Inns' continued qualification and taxation as a
REIT depend upon its ability to meet on a continuing basis, through actual
annual operating results, distributions, and stock ownership, the qualification
tests imposed under the Code discussed below. While Baker Donelson reviewed and
will review those matters to its satisfaction in connection with the foregoing
opinions, Baker Donelson will not review Equity Inns' compliance with those
tests on a continuing basis. Accordingly, no assurance can be given that the
actual results of Equity Inns' operations for any particular taxable year will
satisfy such requirements. For a discussion of the tax consequences of failure
to qualify as a REIT, see "-- Failure to Qualify."

The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following discussion sets forth the
material aspects of the Code sections that govern the federal income tax
treatment of a REIT and its shareholders. The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all of
which are subject to change prospectively or retrospectively.

If Equity Inns and RFS qualify for taxation as REITs, they generally will
not be subject to federal corporate income taxes on their net income that is
distributed currently to their shareholders. That treatment substantially
eliminates the "double taxation" (i.e., taxation at both the corporate and
shareholder levels) that

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generally results from an investment in a corporation. However, Equity Inns and
RFS will be subject to federal income tax in the following circumstances. First,
Equity Inns and RFS will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, each of Equity Inns and RFS may be subject
to the "alternative minimum tax" on its undistributed items of tax preference.
Third, if Equity Inns or RFS has (i) net income from the sale or other
disposition of "foreclosure property" that is held primarily for sale to
customers in the ordinary course of business or (ii) other non-qualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if Equity Inns or RFS has net income from
prohibited transactions (which are, in general, certain sales or other
dispositions of property (other than foreclosure property) held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax. Fifth, if Equity Inns or RFS should fail to satisfy the
75% gross income test or the 95% gross income test (as discussed below), and has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the gross income
attributable to the greater of the amount by which Equity Inns or RFS, as
applicable, fails the 75% or 95% gross income test, multiplied by a fraction
intended to reflect Equity Inns' or RFS' profitability. Sixth, if Equity Inns or
RFS should fail to distribute during each calendar year at least the sum of (i)
85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain
net income for such year, and (iii) any undistributed taxable income from prior
periods, Equity Inns or RFS would be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed. To the extent
that Equity Inns or RFS elects to retain and pay income tax on its net capital
gain, such retained amounts will be treated as having been distributed for
purposes of the 4% excise tax. Seventh, if Equity Inns or RFS acquires any asset
from a C corporation (i.e., a corporation generally subject to full
corporate-level tax) in a transaction in which the basis of the asset in Equity
Inns' or RFS' hands is determined by reference to the basis of the asset (or any
other asset) in the hands of the C corporation and Equity Inns or RFS recognizes
gain on the disposition of such asset during the 10-year period beginning on the
date on which such asset was acquired by Equity Inns or RFS, then to the extent
of such asset's "built-in gain" (i.e., the excess of the fair market value of
such asset at the time of acquisition by Equity Inns or RFS over the adjusted
basis in such asset at such time), such gain will be subject to tax at the
highest regular corporate rate applicable (as provided in Treasury Regulations
that have not yet been promulgated). The results described above with respect to
the recognition of "built-in-gain" assume that Equity Inns or RFS, as
applicable, would make an election pursuant to IRS Notice 88-19 if it were to
make any such acquisition.

REQUIREMENTS FOR QUALIFICATION

The Code defines a REIT as a corporation, trust or association (i) that is
managed by one or more directors or trustees; (ii) the beneficial ownership of
which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi) not
more than 50% in value of the outstanding stock of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable year (the "5/50 Rule");
(vii) that makes an election to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and other
administrative requirements established by the Service that must be met in order
to elect and to maintain REIT status; (viii) that uses a calendar year for
federal income tax purposes and complies with the recordkeeping requirements of
the Code and Treasury Regulations promulgated thereunder; and (ix) that meets
certain other tests, described below, regarding the nature of its income and
assets. The Code provides that conditions (i) to (iv), inclusive, must be met
during the entire taxable year and that condition (v) must be met during at
least 335 days of a taxable year of 12 months, or during a proportionate part of
a taxable year of less than 12 months. Each of Equity Inns and RFS believes that
it has issued sufficient shares of Equity Inns Common Stock or RFS Capital Stock
with sufficient diversity of ownership to allow it to satisfy requirements (v)
and (vi). In addition, each of Equity Inns' Charter and RFS' Charter provides
for restrictions regarding ownership and transfer of its outstanding stock that
are intended to assist Equity Inns and RFS in continuing to satisfy the share
ownership requirements

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described in (v) and (vi) above. Such transfer restrictions are described in
"Description of Capital Stock of Equity Inns -- Charter and Bylaw
Provisions -- Restrictions on Transfer" and "Comparative Rights of
Shareholders -- RFS Restrictions on Transfer."

For purposes of determining share ownership under the 5/50 Rule, a
supplemental unemployment compensation benefits plan, a private foundation, or a
portion of a trust permanently set aside or used exclusively for charitable
purposes is considered an individual, although a trust that is a qualified trust
under the Code Section 401(a) is not considered an individual and the
beneficiaries of such trust are treated as holding stock of a REIT in proportion
to their actuarial interests in the trust for purposes of the 5/50 Rule.

Equity Inns currently has two corporate subsidiaries, both of which have
been wholly owned by Equity Inns since the commencement of their existence, and
may have additional corporate subsidiaries in the future. RFS currently has one
corporate subsidiary which has been wholly owned by RFS since the commencement
of its existence and may have additional corporate subsidiaries in the future.
Code Section 856(i) provides that a corporation that is a "qualified REIT
subsidiary" shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" shall be treated as assets, liabilities, and items of income,
deduction, and credit of the REIT. A "qualified REIT subsidiary" is a
corporation, all of the capital stock of which is owned by the REIT. Thus, in
applying the requirements described herein, Equity Inns' and RFS' "qualified
REIT subsidiaries" will be ignored, and all assets, liabilities, and items of
income, deduction, and credit of such subsidiaries will be treated as assets,
liabilities and items of income, deduction, and credit of Equity Inns or RFS, as
applicable. All of Equity Inns' and RFS' corporate subsidiaries are qualified
REIT subsidiaries and will continue to be qualified REIT subsidiaries after the
REIT Merger. Therefore, no such qualified REIT subsidiary will be subject to
federal corporate income taxation, although it may be subject to state and local
taxation.

In the case of a REIT that is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the gross
income of the partnership attributable to such share. In addition, the character
of the assets and gross income of the partnership will retain the same character
in the hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income and asset tests, described below. Thus, Equity Inns'
proportionate share of the assets, liabilities, and items of income of the
Equity Inns OP (and its subsidiary partnerships) and RFS' proportionate share of
the assets, liabilities, and items of income of the RFS OP (and its subsidiary
partnerships) will be treated as assets and gross income of Equity Inns and RFS
for purposes of applying the requirements described herein.

Income Tests. In order for each of Equity Inns and RFS to maintain its
qualification as a REIT, two requirements relating to gross income must be
satisfied annually. First, at least 75% of each of Equity Inns' and RFS' gross
income (excluding gross income from prohibited transactions) for each taxable
year must consist of defined types of income derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or temporary
investment income. Second, at least 95% of each of Equity Inns' and RFS' gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived from such real property or temporary investments, and from
dividends, other types of interest, and gain from the sale or disposition of
stock or securities, or from any combination of the foregoing. The specific
application of these tests to Equity Inns and RFS is discussed below.

Rents received by Equity Inns and RFS will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" in satisfying the
gross income tests if Equity Inns, or an owner of 10% or more of Equity Inns, or
RFS, or an owner of 10% or more of RFS, directly or constructively owns 10% or
more of such tenant (a "Related Party Tenant"). Third, if rent attributable to
personal property leased in connection with a lease of real property is greater
than 15% of the total rent

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received under the lease, then the portion of rent attributable to such personal
property will not qualify as "rents from real property." Finally, for rents
received to qualify as "rents from real property," Equity Inns and RFS generally
must not operate or manage the property or furnish or render services to the
tenants of such property, other than through an "independent contractor" who is
adequately compensated and from whom Equity Inns or RFS, as applicable, derives
no revenue. The "independent contractor" requirement, however, does not apply to
the extent the services provided by Equity Inns or RFS are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered "rendered to the occupant." In addition, Equity
Inns and RFS may furnish or render a de minimis amount of "noncustomary
services" to the tenants of a hotel other than through an independent contractor
as long as the amount that Equity Inns or RFS receives that is attributable to
such services does not exceed 1% of its total receipts from the hotel. For that
purpose, the amount attributable to Equity Inns' or RFS' noncustomary services
will be at least equal to 150% of Equity Inns' or RFS' cost of providing the
services. The income that Equity Inns receives with respect to the three Equity
Inns Current Hotels that are operated pursuant to management agreements most
likely does not qualify as "rents from real property." However, Equity Inns'
receipt of such income will not cause it to fail to satisfy the 75% or 95% gross
income test.

Pursuant to the Percentage Leases by which the Equity Inns Current Hotels
are leased to the Equity Inns Lessees (the "the Equity Inns Percentage Leases"),
the Equity Inns Lessees lease from the Equity Inns OP the land, buildings,
improvements, furnishings and equipment comprising the Equity Inns Hotels for a
10-year period. The Equity Inns Percentage Leases provide that the Equity Inns
Lessees are obligated to pay to the Equity Inns OP (i) the greater of the Base
Rent or the Percentage Rent (collectively, the "Rents") and (ii) certain other
Additional Charges. The Percentage Rent is calculated by multiplying fixed
percentages by the room revenues for each of the Equity Inns Hotels in excess of
certain levels. Both the Base Rent and the threshold room revenue amount in each
Percentage Rent formula are adjusted for inflation. The adjustment is calculated
at the beginning of each calendar year based on the change in the U.S. Consumer
Price Index during the prior calendar year. The Base Rent accrues and is
required to be paid monthly and the Percentage Rent (if any) accrues and is
required to be paid quarterly.

Pursuant to the Percentage Leases by which the RFS Hotels are leased to the
RFS Lessees (the "RFS Percentage Leases" and, together with the Equity Inns
Percentage Leases, the "Leases"), the RFS Lessees (together with the Equity Inns
Lessees, the "Lessee") lease from the RFS OP or the RFS CMBS OP, as applicable,
the land, buildings, improvements, furnishings, and equipment comprising the RFS
Hotels, for terms of 15 years. The RFS Percentage Leases provide that the RFS
Lessees are obligated to pay to the RFS OP (i) the greater of Base Rent or
Percentage Rent and (ii) Additional Charges or other expenses, as defined in the
RFS Percentage Leases. Percentage Rent is calculated by multiplying fixed
percentages by room revenues (and food and beverage revenues, if applicable) for
each of the RFS Hotels. Both Base Rent and the thresholds in the Percentage Rent
formulas will be adjusted for inflation. Base Rent accrues and is required to be
paid monthly and Percentage Rent is payable quarterly.

In order for the Base Rent, the Percentage Rent, and the Additional Charges
to constitute "rents from real property," the Leases must be respected as true
leases for federal income tax purposes and not treated as service contracts,
joint ventures or some other type of arrangement. The determination of whether
the Leases are true leases depends on an analysis of all the surrounding facts
and circumstances. In making such a determination, courts have considered a
variety of factors, including the following: (i) the intent of the parties, (ii)
the form of the agreement, (iii) the degree of control over the property that is
retained by the property owner (e.g., whether the lessee has substantial control
over the operation of the property or whether the lessee was required simply to
use its best efforts to perform its obligations under the agreement), and (iv)
the extent to which the property owner retains the risk of loss with respect to
the property (e.g., whether the lessee bears the risk of increases in operating
expenses or the risk of damage to the property).

In addition, Code Section 7701(e) provides that a contract that purports to
be a service contract (or a partnership agreement) is treated instead as a lease
of property if the contract is properly treated as such, taking into account all
relevant factors, including whether or not: (i) the service recipient is in
physical possession of the property, (ii) the service recipient controls the
property, (iii) the service recipient has a significant economic or possessory
interest in the property (e.g., the property's use is likely to be dedicated to

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the service recipient for a substantial portion of the useful life of the
property, the recipient shares the risk that the property will decline in value,
the recipient shares in any appreciation in the value of the property, the
recipient shares in savings in the property's operating costs, or the recipient
bears the risk of damage to or loss of the property), (iv) the service provider
does not bear any risk of substantially diminished receipts or substantially
increased expenditures if there is nonperformance under the contract, (v) the
service provider does not use the property concurrently to provide significant
services to entities unrelated to the service recipient, and (vi) the total
contract price does not substantially exceed the rental value of the property
for the contract period. Since the determination whether a service contract
should be treated as a lease is inherently factual, the presence or absence of
any single factor may not be dispositive in every case.

Equity Inns believes that its Percentage Leases will be treated as true
leases for federal income tax purposes. Such belief is based, in part, on the
following facts: (i) the Equity Inns OP and the Equity Inns Lessees intend for
their relationship to be that of a lessor and lessee and such relationship is
documented by lease agreements, (ii) the Equity Inns Lessees have the right to
exclusive possession and use and quiet enjoyment of the Equity Inns Hotels
during the term of the Equity Inns Percentage Leases, (iii) the Equity Inns
Lessees bear the cost of, and are responsible for, day-to-day maintenance and
repair of the Equity Inns Hotels, other than the cost of maintaining underground
utilities and structural elements, and dictate how the Equity Inns Hotels are
operated, maintained, and improved, (iv) the Equity Inns Lessees bear all of the
costs and expenses of operating the Equity Inns Hotels (including the cost of
any inventory and supplies used in their operation) during the term of the
Equity Inns Percentage Leases (other than real and personal property taxes, and
the cost of replacement or refurbishment of furniture, fixtures and equipment,
to the extent such costs do not exceed the allowances for such costs provided by
the Equity Inns OP under each Equity Inns Percentage Lease), (v) the Equity Inns
Lessees benefit from any savings in the costs of operating the Equity Inns
Hotels during the term of the Equity Inns Percentage Leases, (vi) in the event
of damage or destruction to an Equity Inns Hotel, the Equity Inns Lessees will
be at economic risk because they will be obligated either (A) to restore the
property to its prior condition, in which event they will bear all costs of such
restoration or (B) purchase the Equity Inns Hotel for an amount generally equal
to the Equity Inns OP's investment in the Equity Inns Hotel, (vii) the Equity
Inns Lessees will indemnify the Equity Inns OP against all liabilities imposed
on the Equity Inns OP during the term of the Equity Inns Percentage Leases by
reason of (A) injury to persons or damage to property occurring at the Equity
Inns Hotels or (B) the Equity Inns Lessees' use, management, maintenance or
repair of the Equity Inns Hotels, (viii) the Equity Inns Lessees are obligated
to pay substantial fixed rent for the period of use of the Equity Inns Hotels,
and (ix) the Equity Inns Lessees stand to incur substantial losses (or reap
substantial gains) depending on how successfully they operate the Equity Inns
Hotels.

RFS believes that the RFS Percentage Leases will be treated as true leases
for federal income tax purposes. Such belief is based, in part, on the following
facts: (i) the RFS OP and the RFS Lessees intend for their relationship to be
that of a lessor and lessee and such relationship is documented by lease
agreements, (ii) the RFS Lessees have the right to the exclusive possession,
use, and quiet enjoyment of the RFS Hotels during the term of the RFS Percentage
Leases, (iii) the RFS Lessees bear the cost of, and are responsible for,
day-to-day maintenance and repair of the RFS Hotels, other than the cost of
maintaining underground utilities and structural elements, and dictate how the
RFS Hotels are operated, maintained, and improved, (iv) the RFS Lessees bear all
of the costs and expenses of operating the RFS Hotels (including the cost of any
inventory used in their operation) during the term of the RFS Percentage Leases
(other than real estate taxes and property and casualty insurance premiums), (v)
the RFS Lessees benefit from any savings in the costs of operating the RFS
Hotels during the term of the RFS Percentage Leases, (vi) the RFS Lessees have
indemnified the RFS OP against all liabilities imposed on the RFS OP during the
term of the RFS Percentage Leases by reason of (A) injury to persons or damage
to property occurring at the RFS Hotels, (B) the RFS Lessees' use, management,
maintenance or repair of the RFS Hotels, (C) any environmental liability caused
by acts or grossly negligent failures to act of the RFS Lessees, (D) taxes and
assessments in respect of the RFS Hotels that are the obligations of the RFS
Lessees, or (E) any breach of the RFS Percentage Leases or of any sublease of an
RFS Hotel by the RFS Lessees, (vii) the RFS Lessees are obligated to pay
substantial fixed rent for the period of use of the RFS Hotels, (viii) the RFS
Lessees stand to incur substantial losses (or reap substantial gains) depending
on how successfully they operates the RFS Hotels, (ix) the RFS OP cannot

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use the RFS Hotels concurrently to provide significant services to entities
unrelated to the RFS Lessees, and (x) the total contract price under the RFS
Percentage Leases does not substantially exceed the rental value of the RFS
Hotels for the term of the RFS Percentage Leases.

Investors should be aware that there are no controlling Treasury
Regulations, published rulings or judicial decisions involving leases with terms
substantially the same as the Leases that discuss whether such leases constitute
true leases for federal income tax purposes. If the Leases are recharacterized
as service contracts or partnership agreements, rather than true leases, part or
all of the payments that the Equity Inns or RFS OP, as applicable, receives from
the Lessee may not be considered rent or may not otherwise satisfy the various
requirements for qualification as "rents from real property." In that case,
Equity Inns or RFS likely would not be able to satisfy either the 75% or 95%
gross income tests and, as a result, would lose its REIT status.

In order for the Rents to constitute "rents from real property," several
other requirements also must be satisfied. One requirement is that the Rents
attributable to personal property leased in connection with the lease of the
real property comprising a Hotel must not be greater than 15% of the Rents
received under the Lease. The Rents attributable to the personal property in a
Hotel is the amount that bears the same ratio to total rent for the taxable year
as the average of the adjusted bases of the personal property in the Hotel at
the beginning and at the end of the taxable year bears to the average of the
aggregate adjusted bases of both the real and personal property comprising the
Hotel at the beginning and at the end of such taxable year (the "Adjusted Basis
Ratio"). With respect to each Hotel (or interest therein) that the Equity Inns
or RFS OP has acquired or will acquire in exchange for Units in, the initial
adjusted basis of both the real and personal property contained in such Hotel
generally was or will be the same as the adjusted bases of such property in the
hands of the previous owner. With respect to each Hotel (or interest therein)
that the Equity Inns or RFS OP has acquired or will acquire for cash, the
initial adjusted basis of the real and personal property contained in such Hotel
generally equaled or will equal the purchase price paid for the Hotel by the
Equity Inns or RFS OP. Such basis generally was or will be allocated among real
and personal property based on relative fair market values. With respect to each
of its Hotels, each of Equity Inns and RFS believes either that the Adjusted
Basis Ratio for the Hotel is less than 15% or that any income attributable to
excess personal property will not jeopardize Equity Inns' or RFS' ability to
qualify as a REIT. There can be no assurance, however, that the Service would
not challenge Equity Inns' or RFS' calculation of an Adjusted Basis Ratio, or
that a court would not uphold such assertion. If such a challenge were
successfully asserted, Equity Inns or RFS could fail to satisfy the 95% or 75%
gross income test and thus lose its REIT status.

Another requirement for qualification of the Rents as "rents from real
property" is that the Percentage Rent must not be based in whole or in part on
the income or profits of any person. The Percentage Rent, however, will qualify
as "rents from real property" if it is based on percentages of receipts or sales
and the percentages (i) are fixed at the time the Leases are entered into, (ii)
are not renegotiated during the term of the Percentage Leases in a manner that
has the effect of basing Percentage Rent on income or profits, and (iii) conform
with normal business practice. More generally, the Percentage Rent will not
qualify as "rents from real property" if, considering the Percentage Leases and
all the surrounding circumstances, the arrangement does not conform with normal
business practice, but is in reality used as a means of basing the Percentage
Rent on income or profits. Since the Percentage Rent is based on fixed
percentages of the gross revenues from the Hotels and the percentages (i) were
established at the inception of the Leases, (ii) according to the
representations of Equity Inns and RFS, will not be renegotiated during the
terms of the Leases in a manner that has the effect of basing the Percentage
Rent on income or profits, and (iii) conform with normal business practice, the
Percentage Rent should not be considered based in whole or in part on the income
or profits of any person.

A third requirement for qualification of the Rents as "rents from real
property" is that neither Equity Inns nor RFS may own, directly or
constructively, 10% or more of the Equity Inns Lessees or the RFS Lessees, as
applicable. The constructive ownership rules generally provide that, if 10% or
more in value of the stock of Equity Inns or RFS is owned, directly or
indirectly, by or for any person, Equity Inns or RFS, as applicable, is
considered as owning the stock owned, directly or indirectly, by or for such
person. Neither Equity Inns nor RFS owns, directly or constructively, any
ownership interests in its Lessee. In addition, each of Equity Inns' Charter and
RFS' Charter provides that no person may acquire stock of Equity Inns or RFS if
such person's

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acquisition of such stock would cause Equity Inns or RFS, as applicable, to
constructively own 10% or more of the ownership interests in any lessee. Thus,
Equity Inns and RFS never should own, actually or constructively, 10% of more of
their Lessees.

A fourth requirement for qualification of the Rents as "rents from real
property" is that, within the 1% de minimis exception described above, Equity
Inns and RFS cannot furnish or render non-customary services to the tenants of
their hotels, or manage or operate their hotels, other than through an
independent contractor who is adequately compensated and from whom Equity Inns
or RFS does not derive or receive any income. Provided that the Leases are
respected as true leases, Equity Inns and RFS should satisfy that requirement
because the Equity Inns and RFS OPs are not performing any services other than
customary ones for their Lessees. As described above, however, if the Leases are
recharacterized as service contracts or partnership agreements, the Rents likely
would be disqualified as "rents from real property" because Equity Inns or RFS,
as applicable, would be considered to furnish or render services to the
occupants of its hotels and to manage or operate such hotels other than through
an independent contractor who is adequately compensated and from whom Equity
Inns or RFS derives or receives no income.

If the Rents do not qualify as "rents from real property" because the rents
attributable to personal property exceed 15% of the total Rents for a taxable
year, the portion of the Rents that is attributable to personal property will
not be qualifying income for purposes of either the 75% or 95% gross income
tests. Thus, if the Rents attributable to personal property, plus any other
non-qualifying income, during a taxable year exceed 5% of Equity Inns' or RFS'
gross income during the year, Equity Inns or RFS, as applicable, would lose its
REIT status. If, however, the Rents do not qualify as "rents from real property"
because either (i) the Percentage Rent is considered based on income or profits
of the Lessee, (ii) Equity Inns or RFS owns, directly or constructively, 10% or
more of its Lessee, or (iii) Equity Inns or RFS furnishes non-customary services
to the tenants of its hotels, or manages or operates its hotels, other than
through a qualifying independent contractor, none of the Rents would qualify as
"rents from real property." In that case, Equity Inns or RFS, as applicable,
likely would lose its REIT status because it would be unable to satisfy either
the 75% or 95% gross income tests.

In addition to the Rents, the Lessee is required to pay to the Equity Inns
and RFS OPs the Additional Charges. To the extent that the Additional Charges
represent either (i) reimbursements of amounts that the Lessee is obligated to
pay to third parties or (ii) penalties for nonpayment or late payment of such
amounts, the Additional Charges should qualify as "rents from real property." To
the extent, however, that the Additional Charges represent interest that is
accrued on the late payment of the Rents or the Additional Charges, the
Additional Charges should not qualify as "rents from real property," but instead
should be treated as interest that qualifies for the 95% gross income test.

The term "interest," as defined for purposes of the 75% gross income test,
generally does not include any amount received or accrued (directly or
indirectly) if the determination of such amount depends in whole or in part on
the income or profits of any person. However, an amount received or accrued
generally will not be excluded from the term "interest" solely by reason of
being based on a fixed percentage or percentages of receipts or sales.
Furthermore, to the extent that interest from a loan that is based on the
residual cash proceeds from sale of the property securing the loan constitutes a
"shared appreciation provision" (as defined in the Code), income attributable to
such participation feature will be treated as gain from the sale of the secured
property.

The net income derived from any prohibited transaction is subject to a 100%
tax. The term "prohibited transaction" generally includes a sale or other
disposition of property (other than foreclosure property) that is held primarily
for sale to customers in the ordinary course of a trade or business. All
inventory required in the operation of the Equity Inns and RFS Hotels is
purchased by the Lessee or its designee as required by the terms of the Leases.
Accordingly, Equity Inns and RFS believe that no asset owned by Equity Inns, the
Equity Inns OP, RFS, or the RFS OP is held for sale to customers and that a sale
of any such asset will not be in the ordinary course of business of Equity Inns,
the Equity Inns OP, RFS, or the RFS OP. Whether property is held "primarily for
sale to customers in the ordinary course of a trade or business" depends,
however, on the facts and circumstances in effect from time to time, including
those related to a particular property.

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Nevertheless, Equity Inns and RFS will attempt to comply with the terms of
safe-harbor provisions in the Code prescribing when asset sales will not be
characterized as prohibited transactions. Complete assurance cannot be given,
however, that Equity Inns or RFS can comply with the safe-harbor provisions of
the Code or avoid owning property that may be characterized as property held
"primarily for sale to customers in the ordinary course of a trade or business."

Each of Equity Inns and RFS is subject to tax at the maximum corporate rate
on any income from foreclosure property (other than income that is qualifying
income for purposes of the 75% gross income test), less expenses directly
connected with the production of such income. However, gross income from such
foreclosure property will be qualifying income for purposes of the 75% and 95%
gross income tests. "Foreclosure property" is defined as any real property
(including interests in real property) and any personal property incident to
such real property (i) that is acquired by a REIT as the result of such REIT
having bid in such property at foreclosure, or having otherwise reduced such
property to ownership or possession by agreement or process of law, after there
was a default (or default was imminent) on a lease of such property or on an
indebtedness that such property secured and (ii) for which such REIT makes a
proper election to treat such property as foreclosure property. However, a REIT
will not be considered to have foreclosed on a property where such REIT takes
control of the property as a mortgagee-in-possession and cannot receive any
profit or sustain any loss except as a creditor of the mortgagor. Under the
Code, property generally ceases to be foreclosure property with respect to a
REIT at the close of the third taxable year following the taxable year in which
such REIT acquired such property (or longer if an extension is granted by the
Secretary of the Treasury). The foregoing grace period is terminated and
foreclosure property ceases to be foreclosure property on the first day (i) on
which a lease is entered into with respect to such property that, by its terms,
will give rise to income that does not qualify under the 75% gross income test
or any amount is received or accrued, directly or indirectly, pursuant to a
lease entered into on or after such day that will give rise to income that does
not qualify under the 75% gross income test, (ii) on which any construction
takes place on such property (other than completion of a building, or any other
improvement, where more than 10% of the construction of such building or other
improvement was completed before default became imminent), or (iii) that is more
than 90 days after the day on which such property was acquired by the REIT and
the property is used in a trade or business that is conducted by the REIT (other
than through an independent contractor from whom the REIT itself does not derive
or receive any income). As a result of the rules with respect to foreclosure
property, if the Lessee defaults on its obligations under a Lease for a hotel,
Equity Inns or RFS terminates the Lessee's leasehold interest, and Equity Inns
or RFS, as applicable, is unable to find a replacement Lessee for such hotel
within 90 days of such foreclosure, gross income from hotel operations conducted
by Equity Inns or RFS, as applicable, from such hotel would cease to qualify for
the 75% and 95% gross income tests. In such event, Equity Inns or RFS, as
applicable, likely would be unable to satisfy the 75% and 95% gross income tests
and, thus, would fail to qualify as a REIT.

It is possible that, from time to time, Equity Inns or RFS will enter into
hedging transactions with respect to one or more of its assets or liabilities.
Any such hedging transactions could take a variety of forms, including interest
rate swap contracts, interest rate cap or floor contracts, futures or forward
contracts, and options. To the extent that Equity Inns or RFS enters into an
interest rate swap or cap contract, option, futures contract, forward rate
agreement, or similar financial instrument to reduce the interest rate risks
with respect to indebtedness incurred or to be incurred to acquire or carry real
estate assets, any periodic income or gain from the disposition of such contract
should be qualifying income for purposes of the 95% gross income test. To the
extent that Equity Inns or RFS hedges with other types of financial instruments
or in other situations, it may not be entirely clear how the income from those
transactions will be treated for purposes of the various income tests that apply
to REITs under the Code. Each of Equity Inns and RFS intends to structure any
hedging transactions in a manner that does not jeopardize its status as a REIT.

If Equity Inns or RFS fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
Those relief provisions will be generally available if Equity Inns' or RFS', as
applicable, failure to meet such tests is due to reasonable cause and not due to
willful neglect, Equity Inns or RFS attaches a schedule of the sources of its
income to its return, and any incorrect information on the schedule was not due
to fraud with

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intent to evade tax. It is not possible, however, to state whether in all
circumstances Equity Inns and RFS would be entitled to the benefit of those
relief provisions. As discussed above in "Federal Income Tax
Considerations -- Taxation of Equity Inns," even if those relief provisions
apply, a tax would be imposed with respect to the gross income attributable to
the greater of the amount by which Equity Inns or RFS, as applicable, failed the
75% or 95% gross income test, multiplied by a fraction intended to reflect its
profitability.

Asset Tests. Each of Equity Inns and RFS, at the close of each quarter of
its taxable year, also must satisfy two tests relating to the nature of its
assets. First, at least 75% of the value of its total assets must be represented
by cash or cash items (including certain receivables), government securities,
"real estate assets," or, in cases where Equity Inns or RFS raises new capital
through stock or long-term (at least five-year) debt offerings, temporary
investments in shares or debt instruments during the one-year period following
Equity Inns' or RFS' receipt of such capital. The term "real estate assets"
includes interests in real property, interests in mortgages on real property to
the extent the mortgage balance does not exceed the value of the associated real
property, and shares of other REITs. For purposes of the 75% asset test, the
term "interest in real property" includes an interest in land and improvements
thereon, such as buildings or other inherently permanent structures (including
items that are structural components of such buildings or structures), a
leasehold in real property, and an option to acquire real property (or a
leasehold in real property). Second, of the investments not included in the 75%
asset class, the value of any one issuer's securities owned by each of Equity
Inns and RFS may not exceed 5% of the value of its total assets, and each of
Equity Inns and RFS may not own more than 10% of any one issuer's outstanding
voting securities (except for its ownership interest in any partnership or
qualified REIT subsidiary). See "- Proposed Tax Legislation."

For purposes of the asset tests, Equity Inns and RFS are deemed to own
their proportionate share of the assets of the Equity Inns OP (and its
subsidiary partnerships) and the RFS OP (and its subsidiary partnerships),
respectively, instead of their partnership interests in those partnerships.
Equity Inns believes that immediately after the REIT Merger, at least 75% of the
value of its total assets will be represented by real estate assets, cash and
cash items (including receivables), and government securities. RFS owns, and
after the REIT Merger Equity Inns will own, 100% of the nonvoting stock of RFS C
Corp., which represents 95% of the value of the outstanding stock of the RFS C
Corp. RFS does not own, and after the REIT Merger Equity Inns will not own, any
of the voting stock of the RFS C Corp. In addition, RFS believes, and Equity
Inns believes that after the REIT Merger, the value of its stock in the RFS C
Corp. will not exceed 5% of the value of its total assets. See "-- Proposed Tax
Legislation." Equity Inns has represented that after the REIT Merger, it will
not acquire or dispose, or cause the Equity Inns OP (or its subsidiary
partnerships) to acquire or dispose, of assets in a manner that would cause it
to violate the asset tests.

If Equity Inns or RFS should fail inadvertently to satisfy the asset tests
at the end of a calendar quarter, such a failure would not cause it to lose its
REIT status if (i) it satisfied all of the asset tests at the close of the
preceding calendar quarter and (ii) the discrepancy between the value of Equity
Inns' or RFS' assets and the asset test requirements arose from changes in the
market values of its assets and was not wholly or partly caused by an
acquisition of nonqualifying assets. If the condition described in clause (ii)
of the preceding sentence were not satisfied, Equity Inns still could avoid
disqualification by eliminating any discrepancy within 30 days after the close
of the calendar quarter in which it arose.

Distribution Requirements. Each of Equity Inns and RFS, in order to
qualify as a REIT under the Code, is required to distribute dividends (other
than capital gain dividends and retained capital gains) to its shareholders in
an amount at least equal to (i) the sum of (A) 95% of its "REIT taxable income"
(computed without regard to the dividends paid deduction and its net capital
gain) and (B) 95% of the net income (after tax), if any, from foreclosure
property, minus (ii) the sum of certain items of noncash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before Equity Inns or RFS timely files its
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. To the extent that Equity Inns or RFS does not
distribute all of its net capital gain or distributes at least 95%, but less
than 100%, of its "REIT taxable income," as adjusted, it will be subject to tax
thereon at regular ordinary and capital gains corporate tax rates. Furthermore,
if Equity Inns or RFS should fail to distribute during each calendar year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of
its REIT capital gain income for such year, and (iii) any

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undistributed taxable income from prior periods, Equity Inns or RFS would be
subject to a 4% nondeductible excise tax on the excess of such required
distribution over the amounts actually distributed. Each of Equity Inns and RFS
may elect to retain and pay income tax on the net long-term capital gain it
receives in a taxable year. Any such retained amounts would be treated as having
been distributed by Equity Inns or RFS for purposes of the 4% excise tax. Each
of Equity Inns and RFS intends to make timely distributions sufficient to
satisfy all annual distribution requirements.

It is possible that, from time to time, Equity Inns or RFS may experience
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of that income and deduction of
such expenses in arriving at its REIT taxable income. For example, under the
Leases, the Lessee may defer payment of the excess of the Percentage Rent over
the Base Rent for a period of up to 90 days after the end of the calendar year
in which such payment was due. In that case, the Equity Inns or RFS OP still
would be required to recognize as income the excess of the Percentage Rent over
the Base Rent in the calendar quarter to which it relates. Further, it is
possible that, from time to time, Equity Inns or RFS may be allocated a share of
net capital gain attributable to the sale of depreciated property which exceeds
its allocable share of cash attributable to that sale. Therefore, Equity Inns or
RFS may have less cash available for distribution than is necessary to meet its
annual 95% distribution requirement or to avoid corporate income tax or the
excise tax imposed on certain undistributed income. In such a situation, Equity
Inns or RFS, as applicable, may find it necessary to arrange for short-term (or
possibly long-term) borrowings or to raise funds through the issuance of
additional common or preferred stock.

Under certain circumstances, Equity Inns or RFS may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to its shareholders in a later year, which may be included in Equity
Inns' or RFS', as applicable, deduction for dividends paid for the earlier year.
Although Equity Inns or RFS may be able to avoid being taxed on amounts
distributed as deficiency dividends, it will be required to pay to the Service
interest based upon the amount of any deduction taken for deficiency dividends.

Recordkeeping Requirements. Pursuant to applicable Treasury Regulations,
each of Equity Inns and RFS must maintain certain records and request on an
annual basis certain information from its shareholders designed to disclose the
actual ownership of its outstanding shares. Each of Equity Inns and RFS has
complied and, after the REIT Merger, Equity Inns intends to continue to comply
with such requirements.

PARTNERSHIP ANTI-ABUSE RULE

The U.S. Department of the Treasury has issued a final regulation (the
"Anti-Abuse Rule") under the partnership provisions of the Code (the
"Partnership Provisions"), that authorizes the Service, in certain "abusive"
transactions involving partnerships, to disregard the form of the transaction
and recast it for federal tax purposes as the Service deems appropriate. The
Anti-Abuse Rule applies where a partnership is formed or availed of in
connection with a transaction (or series of related transactions), a principal
purpose of which is to reduce substantially the present value of the partners'
aggregate federal tax liability in a manner inconsistent with the intent of the
Partnership Provisions. The Anti-Abuse Rule states that the Partnership
Provisions are intended to permit taxpayers to conduct joint business (including
investment) activities through a flexible economic arrangement that accurately
reflects the partners' economic agreement and clearly reflects the partners'
income without incurring an entity-level tax. The purposes for structuring a
transaction involving a partnership are determined based on all of the facts and
circumstances, including a comparison of the purported business purpose for a
transaction and the claimed tax benefits resulting from the transaction. A
reduction in the present value of the partners' aggregate federal tax liability
through the use of a partnership does not, by itself, establish inconsistency
with the intent of the Partnership Provisions.

The Anti-Abuse Rule contains a example in which a corporation that elects
to be treated as a REIT is formed to be a general partner in a partnership. The
REIT contributes substantially all of the proceeds from a public offering to the
partnership. The limited partners of the partnership contribute all of their
real property assets to the partnership, subject to liabilities that exceed
their respective aggregate bases in the real property contributed. In addition,
the limited partners have the right, beginning two years after the formation of
the partnership, to require the redemption of their limited partnership
interests in exchange for cash or REIT

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stock (at the REIT's option) equal to the fair market value of their respective
interests in the partnership at the time of the redemption. The example
concludes that the use of the partnership is not inconsistent the intent of the
Partnership Provisions and, thus, cannot be recast by the Service. However,
because the Anti-Abuse Rule is extraordinarily broad in scope and is applied
based on an analysis of all of the facts and circumstances, there can be no
assurance that the Service will not attempt to apply the Anti-Abuse Rule to
Equity Inns. If the conditions of the Anti-Abuse Rule are met, the Service is
authorized to take appropriate enforcement action, including disregarding a
partnership for federal tax purposes or treating one or more of its partners as
non-partners. It is conceivable that the application of the Anti-Abuse Rule
could result in the loss of REIT status by Equity Inns or RFS.

FAILURE TO QUALIFY

If Equity Inns or RFS fails to qualify for taxation as a REIT in any
taxable year, and the relief provisions do not apply, Equity Inns or RFS, as
applicable, will be subject to tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Distributions to the
shareholders in any year in which Equity Inns or RFS fails to qualify will not
be deductible by Equity Inns or RFS, as applicable, nor will they be required to
be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to shareholders will be taxable as ordinary income
and, subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, Equity Inns or RFS, as applicable, also will be
disqualified from taxation as a REIT for the four taxable years following the
year during which Equity Inns or RFS, as applicable, ceased to qualify as a
REIT. It is not possible to state whether in all circumstances Equity Inns or
RFS would be entitled to such statutory relief.

TAXATION OF TAXABLE U.S. SHAREHOLDERS

As used herein, the term "U.S. Shareholder" means a holder of shares of
Equity Inns Common Stock or RFS Capital Stock who for United States federal
income tax purposes is (i) a citizen or resident of the United States, (ii) a
corporation, partnership, or other entity created or organized in or under the
laws of the United States or of any political subdivision thereof, (iii) an
estate whose income is subject to taxation in the United States regardless of
its connection with the conduct of a U.S. trade or business or (iv) a trust with
respect to which (A) a court within the United States is able to exercise
primary supervision over the administration of the trust and (B) one or more
United States persons have the authority to control all substantial decisions of
the trust.

As long as each of Equity Inns and RFS qualifies as a REIT, distributions
made by Equity Inns or RFS out of its current or accumulated earnings and
profits (and not designated as capital gain dividends or retained capital gains)
will constitute dividends taxable to its U.S. Shareholders as ordinary income.
For purposes of determining whether a distribution is made out of current or
accumulated earnings and profits, earnings and profits will be allocated first
to preferred stock and then to common stock. Such distributions out of current
or accumulated earnings and profits will not be eligible for the
dividends-received deduction in the case of U.S. Shareholders that are
corporations. Dividends paid to U.S. Shareholders will be treated as portfolio
income. Such income, therefore, will not be subject to reduction by losses from
passive activities (i.e., any interest in a rental activity or in a trade or
business in which the holder does not materially participate, such as certain
interests held as a limited partner) of any holder who is subject to the passive
activity loss rules. Such distributions will, however, be considered investment
income which may be offset by certain investment expense deductions.

Distributions made by Equity Inns or RFS that are properly designated as
capital gain dividends will be taxable to U.S. Shareholders as long-term capital
gains (to the extent that they do not exceed Equity Inns' or RFS', as
applicable, actual net capital gain for the taxable year) without regard to the
period for which a U.S. Shareholder has held his shares of Equity Inns Common
Stock or RFS Capital Stock. U.S. Shareholders that are corporations may,
however, be required to treat up to 20% of certain capital gain dividends as
ordinary income. Each of Equity Inns and RFS may elect to retain and pay income
tax on its net long-term capital gain. In that case, each shareholder will be
taxed on his proportionate share of the total long-term capital gains

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retained by Equity Inns or RFS and will receive a credit or refund for his
proportionate share of the tax paid by Equity Inns or RFS. Each shareholder will
increase the adjusted basis in his shares by the difference between his
allocable amount of Equity Inns' or RFS', as applicable, long-term capital gain
and the tax deemed paid by the shareholder.

Distributions in excess of Equity Inns' or RFS' current and accumulated
earnings and profits will be treated first as a tax-free return of capital to
each U.S. Shareholder to the extent of the shareholder's adjusted basis in his
shares of Equity Inns Common Stock or RFS Capital Stock. Distributions in excess
of Equity Inns' or RFS' current and accumulated earnings and profits that exceed
a U.S. Shareholder's adjusted basis in his shares will be taxable as capital
gains (provided that the shares have been held as a capital asset). Dividends
declared by Equity Inns or RFS in October, November, or December of any year and
payable to a shareholder of record on a specified date in any such month shall
be treated as both paid by Equity Inns or RFS, as applicable, and received by
the shareholder on December 31 of such year, provided that the dividend is
actually paid by Equity Inns or RFS, as applicable, on or before January 31 of
the following calendar year. Shareholders may not include in their own income
tax returns any net operating losses or capital losses of Equity Inns or RFS.

TAXATION OF SHAREHOLDERS ON THE DISPOSITION OF THE EQUITY INNS COMMON STOCK OR
RFS CAPITAL STOCK

In general, any gain or loss realized upon a taxable disposition of the
Equity Inns Common Stock or RFS Capital Stock by a shareholder who is not a
dealer in securities will be treated as long-term capital gain or loss if the
shares of Equity Inns Common Stock or RFS Capital Stock have been held for more
than one year and otherwise as short-term capital gain or loss. However, any
loss upon a sale or exchange of Equity Inns Common Stock or RFS Capital Stock by
a shareholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss to the
extent of distributions from Equity Inns or RFS required to be treated by such
shareholder as long-term capital gain. All or a portion of any loss realized
upon a taxable disposition of the Equity Inns Common Stock or RFS Capital Stock
may be disallowed if other shares of Equity Inns Common Stock or RFS Capital
Stock are purchased within 30 days before or after the disposition.

CAPITAL GAINS AND LOSSES

A capital asset generally must be held for more than one year in order for
gain or loss derived from its sale or exchange to be treated as long-term
capital gain or loss. The highest marginal individual income tax rate is 39.6%.
The maximum tax rate on net capital gains applicable to noncorporate taxpayers
is 28% for sales and exchanges of assets held for more than one year but not
more than 18 months, and 20% for sales and exchanges of assets held for more
than 18 months. The maximum tax rate on long-term capital gain from the sale or
exchange of "Section 1250 property" (i.e., depreciable real property) held for
more than 18 months is 25% to the extent that such gain would have been treated
as ordinary income if the property were "Section 1245 property." With respect to
distributions designated by Equity Inns or RFS as capital gain dividends and any
retained capital gains that Equity Inns or RFS is deemed to distribute, each of
Equity Inns and RFS may designate (subject to certain limits) whether such a
distribution is taxable to its noncorporate shareholders at a 20%, 25%, or 28%
rate. Thus, the tax rate differential between capital gain and ordinary income
for individuals may be significant. In addition, the characterization of income
as capital or ordinary may affect the deductibility of capital losses. Capital
losses not offset by capital gains may be deducted against an individual's
ordinary income only up to a maximum annual deduction of $3,000. Unused capital
losses may be carried forward. All net capital gain of a corporate taxpayer is
subject to tax at ordinary corporate rates. A corporate taxpayer can deduct
capital losses only to the extent of capital gains, with unused losses being
carried back three years and forward five years.

INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING

Each of Equity Inns and RFS reports to its U.S. shareholders and to the
Service the amount of distributions paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
shareholder may be subject to backup withholding at the rate of 31% with respect
to

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distributions paid unless such holder (i) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(ii) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with the applicable
requirements of the backup withholding rules. A shareholder who does not provide
Equity Inns or RFS with his correct taxpayer identification number also may be
subject to penalties imposed by the Service. Any amount paid as backup
withholding will be creditable against the shareholder's income tax liability.
In addition, Equity Inns or RFS may be required to withhold a portion of capital
gain distributions to any shareholders who fail to certify their non-foreign
status to Equity Inns or RFS, as applicable. The Service has issued final
regulations regarding the backup withholding rules as applied to Non-U.S.
Shareholders (defined below). Those regulations alter the current system of
backup withholding compliance and will be effective for distributions made after
December 31, 1999. See "-- Taxation of Non-U.S. Shareholders."

TAXATION OF TAX-EXEMPT SHAREHOLDERS

Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the Service has issued a published
ruling that dividend distributions from a REIT to an exempt employee pension
trust do not constitute UBTI, provided that the shares of Equity Inns or RFS are
not otherwise used in an unrelated trade or business of the exempt employee
pension trust. Based on that ruling, amounts distributed by Equity Inns or RFS
to Exempt Organizations generally should not constitute UBTI. However, if an
Exempt Organization finances its acquisition of the Equity Inns Common Stock or
RFS Capital Stock with debt, a portion of its income from Equity Inns or RFS, as
applicable, will constitute UBTI pursuant to the "debt-financed property" rules.
Furthermore, social clubs, voluntary employee benefit associations, supplemental
unemployment benefit trusts, and qualified group legal services plans that are
exempt from taxation under paragraphs (7), (9), (17), and (20), respectively, of
Code Section 501(c) are subject to different UBTI rules, which generally will
require them to characterize distributions from Equity Inns or RFS as UBTI.

Special rules apply to certain tax-exempt pension funds (including 401(k)
plans but excluding IRAs or government pension plans) that own more than 10%
(measured by value) of the stock of a "pension held REIT" at any time during a
taxable year. Such a pension fund must treat a certain percentage of all
dividends received from the "pension-held REIT" during the year as UBTI. The
percentage is equal to the ratio of Equity Inns' or RFS' gross income (less
direct expenses related thereto) derived from the conduct of unrelated trades or
businesses, determined as if Equity Inns or RFS, as applicable, were a
tax-exempt pension fund, to Equity Inns' or RFS' gross income (less direct
expenses related thereto) from all sources. The special rules will not apply to
require a pension fund to recharacterize a portion of its dividends as UBTI
unless the percentage computed is at least 5%. Each of Equity Inns and RFS will
be treated as a "pension held REIT" if (i) Equity Inns or RFS would fail to
satisfy the 5/50 Rule if the stock of Equity Inns or RFS held by such tax-
exempt pension funds were not treated as held directly by their respective
beneficiaries, and (ii) either (A) at least one tax-exempt pension fund holds
more than 25% (measured by value) of Equity Inns' stock or RFS' stock, as
applicable, or (B) one or more tax-exempt pension funds (each of which owns more
than 10% (measured by value) of Equity Inns' stock or RFS' stock, as applicable)
own in the aggregate more than 50% (measured by value) of Equity Inns' stock or
RFS' stock, as applicable.

TAXATION OF NON-U.S. SHAREHOLDERS

The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships, foreign trusts
and estates and other foreign shareholders (collectively, "Non-U.S.
Shareholders") are highly complex, and the following discussion is intended only
as a summary of such rules. PROSPECTIVE NON-U.S. SHAREHOLDERS SHOULD CONSULT
WITH THEIR OWN TAX ADVISORS TO DETERMINE THE IMPACT OF UNITED STATES FEDERAL,
STATE, AND LOCAL INCOME TAX LAWS ON AN INVESTMENT IN EQUITY INNS COMMON STOCK OR
RFS CAPITAL STOCK, INCLUDING ANY REPORTING REQUIREMENTS.

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In general, Non-U.S. Shareholders are subject to regular United States
income tax with respect to their investment in shares of Equity Inns Common
Stock or RFS Capital Stock in the same manner as a U.S. Shareholder if such
investment is "effectively connected" with the Non-U.S. Shareholder's conduct of
a trade or business in the United States. A corporate Non-U.S. Shareholder that
receives income with respect to its investment in Equity Inns Common Stock or
RFS Capital Stock that is (or is treated as) effectively connected with the
conduct of a trade or business in the United States also may be subject to the
30% branch profits tax imposed by the Code, which is payable in addition to
regular United States corporate income tax.

Distributions made by Equity Inns or RFS that are not attributable to gain
from the sale or exchange by Equity Inns or RFS of United States real property
interests and that are not designated by Equity Inns or RFS as capital gain
dividends or retained capital gains will be treated as dividends of ordinary
income to the extent made out of current or accumulated earnings and profits of
Equity Inns or RFS, as applicable. Generally, such distributions will be subject
to United States withholding tax at the rate of 30% on the gross amount of the
distributions unless the withholding tax is reduced or eliminated by an
applicable United States income tax treaty. Each of Equity Inns and RFS expects
to withhold United States income tax at the rate of 30% on the gross amount of
any such dividends paid to a Non-U.S. Shareholder unless a lower treaty rate
applies and the Non-U.S. Shareholder has filed IRS Form 1001 with Equity Inns or
RFS certifying the Non-U.S. Shareholder's entitlement to treaty benefits or (ii)
the Non-U.S. Shareholder files IRS Form 4224 with Equity Inns or RFS claiming
that the distribution is effectively connected income. The U.S. Treasury
Department has issued final regulations that modify the manner in which payors
comply with the withholding requirements. Those regulations are effective for
distributions made after December 31, 1999.

Distributions made by Equity Inns or RFS in excess of its current and
accumulated earnings and profits will be treated first as a tax-free return of
capital to each Non-U.S. Shareholder, reducing the adjusted basis which such
Non-U.S. Shareholder has in his shares of Equity Inns Common Stock or RFS
Capital Stock for U.S. tax purposes by the amount of such distribution (but not
below zero). Distributions in excess of Equity Inns' or RFS' current and
accumulated earnings and profits that exceed a Non-U.S. Shareholder's adjusted
basis in his shares will be treated as gain from the sale or exchange of such
shares, which will give rise to tax liability if the Non-U.S. Shareholder would
otherwise be subject to tax on any gain from the sale or disposition of its
Equity Inns Common Stock or RFS Capital Stock, as described below. Because it
generally cannot be determined at the time a distribution is made whether or not
a distribution will be in excess of Equity Inns' or RFS' current and accumulated
earnings and profits, the entire amount of a distribution normally will be
subject to withholding at the rate applicable to a dividend distribution.
However, the Non-U.S. Shareholder may seek a refund from the Service of any
amount withheld if it is subsequently determined that such distribution was, in
fact, in excess of Equity Inns' or RFS' then current and accumulated earnings
and profits.

Each of Equity Inns and RFS is required to withhold 10% of any distribution
in excess of Equity Inns' current and accumulated earnings and profits.
Consequently, although Equity Inns and RFS intend to withhold at a rate of 30%
on the entire amount of any distribution, to the extent that Equity Inns or RFS
does not do so, any portion of a distribution not subject to withholding at a
rate of 30% will be subject to withholding at a rate of 10%.

As long as each of Equity Inns and RFS qualifies as a REIT, distributions
made by Equity Inns or RFS that are attributable to gain from the sale or
exchange by Equity Inns or RFS, as applicable, of U.S. real property interests
(i.e., interests in U.S. property and corporations more than 50% of whose assets
are U.S. real property interests) will be taxed to a Non-U.S. Shareholder under
the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under
FIRPTA, such distributions are taxed to a Non-U.S. Shareholder as if such
distributions were gains "effectively connected" with the conduct of a trade or
business in the United States. Accordingly, a Non-U.S. Shareholder will be taxed
on such distributions at the same capital gain rates applicable to U.S.
Shareholders (subject to any applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals).
Distributions subject to FIRPTA also may be subject to the 30% branch profits
tax in the case of a corporate Non-U.S. Shareholder that is not entitled to
treaty relief or exemption. Each of Equity Inns and RFS will be required to
withhold tax from any distribution to a Non-U.S. Shareholder that could be
designated by Equity Inns or RFS, as applicable, as a capital gain dividend in
an amount equal to 35% of the gross distribution. The amount of tax withheld is
fully creditable

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against the Non-U.S. Shareholder's FIRPTA tax liability, and if such amount
exceeds the Non-U.S. Shareholder's federal income tax liability for the
applicable taxable year, the Non-U.S. Shareholder may seek a refund of the
excess from the Service.

Gain recognized by a Non-U.S. Shareholder upon the sale or exchange of
shares of Equity Inns Common Stock or RFS Capital Stock generally will not be
subject to United States taxation if Equity Inns or RFS, as applicable, is a
"domestically controlled REIT." A "domestically controlled REIT" is a REIT in
which at all times during a specified testing period less than 50% in value of
its stock is held directly or indirectly by Non-U.S. Shareholders. Because the
shares of Equity Inns Common Stock and RFS Common Stock are publicly traded, no
assurance can be given that Equity Inns or RFS is or will continue to be a
"domestically-controlled REIT." Nevertheless, a Non-U.S. Shareholder that owned,
actually or constructively, 5% or less of the outstanding Equity Inns Common
Stock or RFS Common Stock at all times during a specified testing period will
not be subject to tax under FIRPTA if the Equity Inns Common Stock or RFS Common
Stock, as applicable, is regularly traded on an established securities market.
Notwithstanding the foregoing, gain from the sale or exchange of shares of
Equity Inns Common Stock or RFS Capital Stock not otherwise subject to FIRPTA
will be taxable to a Non-U.S. Shareholder if the Non-U.S. Shareholder is a
nonresident alien individual who is present in the United States for 183 days or
more during the taxable year and has a "tax home" in the United States. In such
case, the nonresident alien individual will be subject to a 30% United States
withholding tax on the amount of such individual's gain. If gain on the sale or
exchange of shares of the Equity Inns Common Stock or RFS Capital Stock were
subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to
regular United States income tax with respect to such gain in the same manner as
a U.S. Shareholder (subject to any applicable alternative minimum tax, a special
alternative minimum tax in the case of nonresident alien individuals and the
possible application of the 30% branch profits tax in the case of non-U.S.
corporations).

OTHER TAX CONSIDERATIONS

Equity Inns, the Equity Inns OP, RFS, the RFS OP, or Equity Inns' or RFS'
shareholders may be subject to state and local tax in various states and
localities, including those states and localities in which it or they transact
business, own property, or reside. The state and local tax treatment in such
jurisdictions may differ from the federal income tax treatment described above.
Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws upon an investment in the
Equity Inns Common Stock or RFS Capital Stock.

PROPOSED TAX LEGISLATION

On February 2, 1998, President Clinton released his budget proposal for
fiscal year 1999 (the "Proposal"). One provision contained in the Proposal
potentially could affect Equity Inns and RFS if enacted in final form. The
Proposal would prohibit a REIT from owning, directly or indirectly, more than
10% of the voting power or value of all classes of a C corporation's stock
(other than the stock of a qualified REIT subsidiary). Currently, a REIT may own
no more than 10% of the voting stock of a C corporation, but its ownership of
the nonvoting stock of a C corporation is not limited (other than by the rule
that the value of a REIT's combined equity and debt interests in a C corporation
may not exceed 5% of the value of a REIT's total assets). That provision is
proposed to be effective with respect to stock in a C corporation acquired by a
REIT on or after the date of "first committee action". A REIT that owns stock in
a C corporation in excess of the new ownership limit prior to "first committee
action" would be "grandfathered," but only to the extent that the corporation
does not engage in a new trade or business or acquire substantial new assets on
or after the date of first committee action. RFS owns and, after the REIT
Merger, Equity Inns will own, 100% of the nonvoting stock of RFS C Corp., which
represents 95% of the value of the outstanding stock of RFS C Corp. If the
provision described in this paragraph is enacted as presently written, RFS and,
after the REIT Merger, Equity Inns would be grandfathered with respect to their
ownership of RFS C Corp., but only to the extent that RFS C Corp. does not
engage in a new trade or business or acquire substantial new assets on or after
the date of first committee action. In addition, the provision would severely
limit the use by Equity Inns and RFS

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of other taxable subsidiaries to conduct businesses the income from which would
be nonqualifying income if received directly by Equity Inns or RFS.

The provision described in this section was not included in Representative
Archer's or Senator Roth's proposed tax legislation, introduced on March 26,
1998, involving REITs. However, it is possible that legislation containing the
provision described in this section will be introduced in Congress and, although
it is not likely, that the effective date of any such legislation could be March
26, 1998. In addition, other legislation, as well as administrative
interpretations or court decisions, could change the tax laws with respect to
Equity Inns' or RFS' qualification as a REIT and the federal income tax
consequences of such qualification.

TAX ASPECTS OF THE EQUITY INNS OP, THE RFS OP AND THEIR SUBSIDIARY PARTNERSHIPS

The following discussion summarizes certain federal income tax
considerations applicable to Equity Inns' and RFS' investment in the Equity Inns
OP and the RFS OP and their subsidiary partnerships (each, a "Hotel
Partnership"). The discussion does not cover state or local tax laws or any
federal tax laws other than income tax laws.

CLASSIFICATION AS A PARTNERSHIP

Each of Equity Inns and RFS will be entitled to include in its income its
distributive share of the Equity Inns OP's and the RFS OP's income and to deduct
its distributive share of such partnerships' losses only if each Hotel
Partnership is classified for federal income tax purposes as a partnership
rather than as an association taxable as a corporation. An entity will be
classified as a partnership rather than as a corporation for federal income tax
purposes if the entity (i) is treated as a partnership under Treasury
regulations, effective January 1, 1997, relating to entity classification (the
"Check-the-Box Regulations") and (ii) is not a "publicly traded" partnership.

In general, under the Check-the-Box Regulations, an unincorporated entity
with at least two members may elect to be classified either as an association
taxable as a corporation or as a partnership. If such an entity fails to make an
election, it generally will be treated as a partnership for federal income tax
purposes. The federal income tax classification of an entity that was in
existence prior to January 1, 1997, such as the Hotel Partnerships, will be
respected for all periods prior to January 1, 1997 if (i) the entity had a
reasonable basis for its claimed classification, (ii) the entity and all members
of the entity recognized the federal tax consequences of any changes in the
entity's classification within the 60 months prior to January 1, 1997, and (iii)
neither the entity nor any of its members was notified in writing by a taxing
authority on or before May 8, 1996 that the classification of the entity was
under examination. Each Hotel Partnership in existence on January 1, 1997
reasonably claimed partnership classification under the Treasury Regulations
relating to entity classification in effect prior to January 1, 1997, and such
classification should be respected for federal income tax purposes. In addition,
no Hotel Partnership was notified by a taxing authority on or before May 8, 1996
that its classification was under examination. The Hotel Partnerships intend to
continue to be classified as partnerships and Equity Inns has represented that
no Hotel Partnership will elect to be treated as an association taxable as a
corporation for federal income tax purposes under the Check-the-Box Regulations.

A publicly traded partnership is a partnership whose interests are traded
on an established securities market or are readily tradable on a secondary
market (or the substantial equivalent thereof). A publicly traded partnership
will be treated as a corporation for federal income tax purposes unless at least
90% of such partnership's gross income for a taxable year consists of
"qualifying income" under Section 7704(d) of the Code, which generally includes
any income that is qualifying income for purposes of the 95% gross income test
applicable to REITs (the "90% Passive-Type Income Exception"). See "
Requirements for Qualification -- Income Tests." The U.S. Treasury Department
has issued regulations (the "PTP Regulations") that provide limited safe harbors
from the definition of a publicly traded partnership. Pursuant to one of those
safe harbors (the "Private Placement Exclusion"), interests in a partnership
will not be treated as readily tradable on a secondary market or the substantial
equivalent thereof if (i) all interests in the partnership were issued in a
transaction (or transactions) that was not required to be registered under the
Securities Act, and (ii) the partnership does not have more than 100 partners at
any time during the partnership's taxable year. In

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determining the number of partners in a partnership, a person owning an interest
in a flow-through entity (i.e., a partnership, grantor trust, or S corporation)
that owns an interest in the partnership is treated as a partner in such
partnership only if (a) substantially all of the value of the owner's interest
in the flow-through entity is attributable to the flow-through entity's interest
(direct or indirect) in the partnership and (b) a principal purpose of the use
of the flow-through entity is to permit the partnership to satisfy the
100-partner limitation. Each Hotel Partnership qualifies for the Private
Placement Exclusion. If a Hotel Partnership is considered a publicly traded
partnership under the PTP Regulations because it is deemed to have more than 100
partners, such Hotel Partnership should not be treated as a corporation because
it should be eligible for the 90% Passive-Type Income Exception.

Equity Inns and RFS believe that each Hotel Partnership will be treated as
a partnership for federal income tax purposes and not as a corporation or
association taxable as a corporation. Neither Equity Inns nor RFS has requested,
or intends to request, a ruling from the Service that the Hotel Partnerships
will be classified as partnerships for federal income tax purposes. If for any
reason a Hotel Partnership was taxable as a corporation, rather than as a
partnership, for federal income tax purposes, Equity Inns or RFS, as the case
may be, would not be able to satisfy the income and asset requirements for REIT
status. See "-- Requirements for Qualification -- Income Tests" and
"-- Requirements for Qualification -- Asset Tests." In addition, any change in a
Hotel Partnership's status for tax purposes might be treated as a taxable event,
in which case Equity Inns or RFS, as the case may be, might incur a tax
liability without any related cash distribution. See "Federal Income Tax
Considerations -- Requirements for Qualification -- Distribution Requirements."
Further, items of income and deduction of the Hotel Partnership would not pass
through to its partners, and its partners would be treated as shareholders for
tax purposes. Consequently, the Hotel Partnership would be required to pay
income tax at corporate tax rates on its net income, and distributions to its
partners would constitute dividends that would not be deductible in computing
the Hotel Partnership's taxable income.

INCOME TAXATION OF THE HOTEL PARTNERSHIPS AND THEIR PARTNERS

Partners, Not the Hotel Partnerships, Subject to Tax. A partnership is not
a taxable entity for federal income tax purposes. Rather, each of Equity Inns
and RFS is required to take into account its allocable share of the Hotel
Partnerships' income, gains, losses, deductions, and credits for any taxable
year of the Hotel Partnerships ending within or with the taxable year of Equity
Inns or RFS, without regard to whether Equity Inns or RFS, as the case may be,
has received or will receive any distribution from the Hotel Partnerships.

Partnership Allocations. Although a partnership agreement generally will
determine the allocation of income and losses among partners, such allocations
will be disregarded for tax purposes under Section 704(b) of the Code if they do
not comply with the provisions of Section 704(b) of the Code and the Treasury
Regulations promulgated thereunder. If an allocation is not recognized for
federal income tax purposes, the item subject to the allocation will be
reallocated in accordance with the partners' interests in the partnership, which
will be determined by taking into account all of the facts and circumstances
relating to the economic arrangement of the partners with respect to such item.
The Hotel Partnerships' allocations of taxable income and loss comply with the
requirements of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder.

Tax Allocations With Respect to Contributed Properties. Pursuant to
Section 704(c) of the Code, income, gain, loss, and deduction attributable to
appreciated or depreciated property that is contributed to a partnership in
exchange for an interest in the partnership must be allocated for federal income
tax purposes in a manner such that the contributor is charged with, or benefits
from, the unrealized gain or unrealized loss associated with the property at the
time of the contribution. The amount of such unrealized gain or unrealized loss
is generally equal to the difference between the fair market value of the
contributed property at the time of contribution and the adjusted tax basis of
such property at the time of contribution. The Treasury Department has issued
regulations requiring partnerships to use a "reasonable method" for allocating
items affected by Section 704(c) of the Code and outlining three reasonable
allocation methods.

Under the partnership agreements of the Hotel Partnerships, depreciation or
amortization deductions of the Hotel Partnerships generally are allocated among
the partners in accordance with their respective interests

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in the Hotel Partnerships, except to the extent that a Hotel Partnership is
required under Code Section 704(c) to use a method for allocating tax
depreciation deductions attributable to its hotels that results in Equity Inns
or RFS, as the case may be, receiving a disproportionately large share of such
deductions. In addition, gain on sale of a hotel contributed by a Limited
Partner or Limited Partners of a Hotel Partnership will be specially allocated
to such Limited Partners to the extent of any "built-in" gain with respect to
such hotel for federal income tax purposes. The application of Section 704(c) to
the Partnership is not entirely clear, however, and may be affected by Treasury
Regulations promulgated in the future.

Basis in Partnership Interest. Each of Equity Inns' and RFS' adjusted tax
basis in its partnership interest in the Equity Inns OP or RFS OP, as the case
may be, generally will be equal to (i) the amount of cash and the basis of any
other property contributed to the partnership by Equity Inns or RFS, as the case
may be, (ii) increased by (A) its allocable share of the partnership's income
and (B) its allocable share of indebtedness of the partnership, and (iii)
reduced, but not below zero, by (I) Equity Inns' or RFS', as the case may be,
allocable share of the partnership's loss and (II) the amount of cash
distributed to Equity Inns or RFS, as the case may be, and by constructive
distributions resulting from a reduction in Equity Inns' or RFS', as the case
may be, share of indebtedness of the partnership.

If the allocation of Equity Inns' or RFS' distributive share of a Hotel
Partnership's loss would reduce the adjusted tax basis of Equity Inns' or RFS',
as the case may be, partnership interest in such Hotel Partnership below zero,
the recognition of such loss will be deferred until such time as the recognition
of such loss would not reduce Equity Inns' or RFS, as the case may be, adjusted
tax basis below zero. To the extent that a Hotel Partnership's distributions, or
any decrease in Equity Inns' or RFS', as the case may be, share of the
indebtedness of the Hotel Partnership (such decrease being considered a
constructive cash distribution to the partners), would reduce Equity Inns' or
RFS', as the case may be, adjusted tax basis below zero, such distributions
(including such constructive distributions) will constitute taxable income to
Equity Inns or RFS, as the case may be. Such distributions and constructive
distributions normally will be characterized as capital gain, and, if Equity
Inns' or RFS' partnership interest in the Hotel Partnership has been held for
longer than the long-term capital gain holding period (currently one year), the
distributions and constructive distributions will constitute long-term capital
gain.

Depreciation Deductions Available to the Hotel Partnerships. To the extent
the Equity Inns or RFS OP has acquired properties for cash, such Hotel
Partnership's initial basis in such properties for federal income tax purposes
generally was equal to the purchase price paid by the partnership. The Hotel
Partnerships generally depreciate such depreciable property for federal income
tax purposes under either the modified accelerated cost recovery system of
depreciation ("MACRS") or the alternative depreciation system of depreciation
("ADS"). The Hotel Partnerships generally use MACRS for furnishings and
equipment. Under MACRS, the Hotel Partnerships generally depreciate such
furnishings and equipment over a seven-year recovery period using a 200%
declining balance method and a half-year convention. If, however, a Hotel
Partnership places more than 40% of its furnishings and equipment in service
during the last three months of a taxable year, a mid-quarter depreciation
convention must be used for the furnishings and equipment placed in service
during that year. The Hotel Partnerships generally use ADS for buildings and
improvements. Under ADS, the Hotel Partnerships generally depreciate such
buildings and improvements over a 40-year recovery period using a straight line
method and a mid-month convention. However, to the extent that a Hotel
Partnership has acquired properties in exchange for Units, the Hotel
Partnership's initial basis in each hotel for federal income tax purposes should
be the same as the transferor's basis in that hotel on the date of acquisition.
Although the law is not entirely clear, the Hotel Partnerships generally
depreciate such depreciable property for federal income tax purposes over the
same remaining useful lives and under the same methods used by the transferors.
The Hotel Partnerships' tax depreciation deductions are allocated among the
partners in accordance with their respective interests in the Hotel Partnership
(except to the extent that the Hotel Partnership is required under Code Section
704(c) to use a method for allocating depreciation deductions attributable to
contributed properties that results in Equity Inns or RFS receiving a
disproportionately large share of such deductions).

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SALE OF A HOTEL PARTNERSHIP'S PROPERTY

Generally, any gain realized by a Hotel Partnership on the sale of property
held for more than one year will be long-term capital gain, except for any
portion of such gain that is treated as depreciation or cost recovery recapture.
Any gain recognized by a Hotel Partnership on the disposition of its hotels will
be allocated first to the Limited Partners who contributed those hotels under
Section 704(c) of the Code to the extent of their "built-in gain" on those
hotels for federal income tax purposes. The Limited Partners' "built-in gain" on
the Current Hotels sold will equal the excess of the Limited Partners'
proportionate share of the book value of those hotels over the Limited Partners'
tax basis allocable to those hotels at the time of the sale. Any remaining gain
recognized by the Hotel Partnership on the disposition of the hotels will be
allocated among the partners in accordance with their respective percentage
interests in the Hotel Partnership.

Equity Inns' or RFS' share of any gain realized by the Equity Inns or RFS
OP, as applicable, on the sale of any property held by such Hotel Partnership as
inventory or other property held primarily for sale to customers in the ordinary
course of such Hotel Partnership's trade or business will be treated as income
from a prohibited transaction that is subject to a 100% penalty tax. See
"Federal Income Tax Considerations -- Requirements for Qualification -- Income
Tests." Such prohibited transaction income also may have an adverse effect upon
Equity Inns' or RFS' ability to satisfy the income tests for REIT status. See
"-- Requirements For Qualification -- Income Tests" above. Neither Equity Inns
nor RFS, however, presently intends to acquire or hold, directly or indirectly,
any property that represents inventory or other property held primarily for sale
to customers in the ordinary course of Equity Inns' or RFS' trade or business.

EXPERTS

The consolidated financial statements and financial statement schedule of
Equity Inns, Inc. as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, are incorporated in this Joint
Proxy Statement/Prospectus by reference to Equity Inns' Annual Report on Form
10-K. The above said financial statements have been so incorporated in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.

The consolidated financial statements and financial statement schedule of
RFS Hotel Investors, Inc. as of December 31, 1997 and 1996 and for each of the
three years in the period ended December 31, 1997 are incorporated in this Joint
Proxy Statement/Prospectus by reference to RFS' Annual Report on Form 10-K. The
above said financial statements have been so incorporated in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of said firm as experts in auditing and accounting.

The consolidated financial statements of RFS, Inc. as December 31, 1997 and
1996 and for the years then ended have been incorporated in this Joint Proxy
Statement/Prospectus by reference to RFS' Annual Report on Form 10-K, in
reliance on the report of KPMG Peat Marwick LLP, independent accountants, given
on the authority of said firm as experts in accounting and auditing.

LEGAL MATTERS

The legality of the Equity Inns Common Stock to be issued in the REIT
Merger will be passed on for Equity Inns by Baker, Donelson, Bearman & Caldwell,
Memphis, Tennessee.

Baker Donelson and Hunton & Williams, Richmond, Virginia, will deliver
opinions to Equity Inns and RFS, respectively, concerning certain federal income
tax consequences of the REIT Merger. See "Federal Income Tax
Considerations -- Tax Considerations Relating to the REIT Merger." Hunton &
Williams has served as counsel to Equity Inns since its initial public offering.

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SUBMISSION OF SHAREHOLDER PROPOSALS

If the REIT Merger is not consummated for any reason, Equity Inns and RFS
each expects to hold its 1999 Annual Meeting of Shareholders in May 1999. In
such event, any proposal of a shareholder that is intended to be presented at
the 1999 Annual Meeting of Shareholders of either Equity Inns or RFS must be
received, in the case of Equity Inns, at its main office in Memphis, Tennessee
no later than February 14, 1999, and, in the case of RFS, at its main office in
Memphis, Tennessee no later than January 30, 1999, in order that any such
proposal be timely received for inclusion in the proxy materials relating to the
respective meetings.

If the REIT Merger is consummated, Equity Inns expects to hold its 1999
Annual Meeting of Shareholders in May 1999. Any proposal by Equity Inns
shareholders to be presented at Equity Inns' 1999 Annual Meeting of Shareholders
must be received by Equity Inns no later than February 14, 1999 in order to be
included in Equity Inns' proxy materials relating to the meeting.

OTHER MATTERS

The Equity Inns Board does not intend to bring any matter before the Equity
Inns Special Meeting other than as specifically set forth in the Notice of
Special Meeting of Shareholders, nor does it know of any matter to be brought
before the Equity Inns Special Meeting by others. If, however, any other matters
properly come before the Special Meeting, it is the intention of the
proxyholders to vote such proxy in accordance with the decision of a majority of
the Equity Inns Board.

The RFS Board does not intend to bring any matter before the RFS Special
Meeting other than as specifically set forth in the Notice of Special Meeting of
Shareholders, nor does it know of any matter to be brought before the RFS
Special Meeting by others. If, however, any other matters properly come before
the RFS Special Meeting, it is the intention of the proxyholders to vote such
proxy in accordance with the decision of a majority of the RFS Board.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS
JOINT PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION OF AN OFFER, OR PROXY SOLICITATION, IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR THE ISSUANCE
OR SALE OF ANY SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH OR
INCORPORATED BY REFERENCE HEREIN SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

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GLOSSARY OF DEFINED TERMS

Unless otherwise defined herein, the following capitalized terms shall have
the meanings set forth below for the purposes of this Joint Proxy
Statement/Prospectus:

"ACMs" means asbestos-containing materials.

"Acquisition Opportunity" means any potential acquisitions of one or more
hotel properties that RFS or its subsidiaries may propose to Equity Inns or its
subsidiaries, of which acquisition opportunity Equity Inns is not otherwise
aware, from the date of the Merger Agreement to the Effective Time.

"Acquisition Proposal" has the meaning set forth in "The Merger
Agreement -- Certain Other Covenants -- Acquisition Proposal."

"Acquisition Proposal Notice" has the meaning set forth in "The Merger
Agreement -- Fees and Expenses -- Termination Fee."

"ADA" means the Americans with Disabilities Act of 1990.

"Adjusted Basis Ratio" has the meaning set forth in "Federal Income Tax
Considerations -- Requirements for Qualification -- Income Tests".

"Adjusted NOI" means NOI adjusted by 3% and 4% of the total revenues for
management fees and capital expenditure reserves, respectively.

"Administrator" means the Equity Inns Compensation Committee and any
delegate of the Equity Inns Compensation Committee.

"ADS" means the alternative depreciation system of depreciation.

"Affiliate" has the meaning set forth in "Description of Capital Stock of
Equity Inns -- Charter and Bylaw Provisions -- Number of Directors; Removal;
Filing Vacancies."

"Alternative Bidder" means a lodging industry REIT that made a bid for RFS
and met with representative of Salomon Smith Barney.

"Amended Equity Inns Charter" means the Equity Inns Charter, as amended by
the Charter Amendment following the Equity Inns Special Meeting and as to become
effective upon the Effective Time.

"Anti-Abuse Rule" has the meaning set forth in "Federal Income Tax
Considerations -- Partnership Anti-Abuse Rule."

"Articles of Merger" means the articles of merger between RFS and Merger
Sub relating to the REIT Merger to be filed with the Secretary of State of the
State of Tennessee.

"Asset Sale" means, collectively, the sale and purchase of assets
consummated by means of the OP Merger and the CMBS OP Merger.

"Average Price" means an amount equal to the quotient of (i) the sum of the
products of (A) the daily volume of shares of the Equity Inns Common Stock
traded on the NYSE on each trading day during the Pricing Period and (B) the
closing price for the Equity Inns Common Stock on the NYSE on each such trading
day, and (ii) the total volume of shares of Equity Inns Common Stock traded on
the NYSE during the Pricing Period (volumes and closing prices as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by Equity Inns).

"Baker Donelson" means Baker, Donelson, Bearman & Caldwell, Memphis,
Tennessee.

"Base Rent" means a fixed annual base rent for the applicable hotel
pursuant to a Percentage Lease.

"Bonds" means the $88 million of fixed-rate, collateralized bonds issued by
a wholly-owned subsidiary of Equity Inns.

"Bylaws" means, collectively, the Equity Inns Bylaws and the RFS Bylaws,
each as amended to date.

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"Charters" means, collectively, the Equity Inns Charter and the RFS
Charter, each as amended to date.

"Charter Amendment" means the proposed amendment to the Equity Inns Charter
to increase the number of authorized shares of Equity Inns Common Stock from
100,000,000 shares to 200,000,000 shares.

"Charter Amendment Proposal" means the proposal to be submitted to Equity
Inns' shareholders at the Equity Inns Special Meeting to approve the Charter
Amendment.

"Closing" means the closing of the Mergers.

"Closing Date" means the closing date of the Mergers.

"CMBS Agreement of Merger" means an agreement of merger between RFS CMBS OP
and Equity Inns CMBS OP that will be entered into prior to the Closing Date, and
which will contain terms and conditions consistent with Article VI of the Merger
Agreement and provide for the CMBS OP Merger.

"CMBS Bonds" means the Series 1996-1 Commercial Mortgage Bonds, Class A and
Class B, in the aggregate original principal amount of $75,000,000 issued by RFS
CMBS OP.

"CMBS OP Merger" means the merger of RFS CMBS OP with and into Equity Inns
CMBS OP, pursuant to the CMBS Agreement of Merger, with Equity Inns CMBS OP
being the surviving limited partnership.

"Code" means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.

"Commission" means the Securities and Exchange Commission.

"Commissioner" means the Tennessee Commissioner of Commerce and Insurance.

"Competing Transaction" has the meaning set forth in "The Merger
Agreement -- Certain Other Covenants -- Acquisition Proposal."

"Coopers" means Coopers & Lybrand L.L.P., independent accountants.

"Corresponding SARs" means SARs granted in relation to option grants under
the Equity Inns Plan.

"CWA" means the Clean Water Act.

"Definitive Competing Acquisition Agreement" has the meaning set forth in
"The Merger Agreement -- Fees and Expenses Termination Fee."

"Effective Time" means the time at which the REIT Merger becomes effective.

"Entitled Party" has the meaning set forth in "The Merger Agreement -- Fees
and Expenses -- Termination Fee."

"EPA" means the Environmental Protection Agency.

"Escrow Agent" has the meaning set forth in "The Merger Agreement -- Fees
and Expenses -- Termination Fee."

"Equity Inns" means Equity Inns, Inc., a Tennessee corporation.

"Equity Inns Acquisition Hotels" means the 10 AmeriSuite(R) hotels with an
aggregate of 1,276 rooms which Equity Inns OP has entered into agreements to
acquire.

"Equity Inns Board" means the Board of Directors of Equity Inns.

"Equity Inns Bylaws" means the bylaws of Equity Inns as currently in
effect.

"Equity Inns CMBS Lessee" means a legal entity that Equity Inns has agreed
to cause to be created in connection with the CMBS Bonds.

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"Equity Inns CMBS OP" means a Tennessee limited partnership to be created
and established by Equity Inns pursuant to the Merger Agreement.

"Equity Inns Charter" means the Second Amended and Restated Charter of
Equity Inns, as amended to date.

"Equity Inns Common Stock" means the shares of common stock, $.01 par value
per share, of Equity Inns.

"Equity Inns Compensation Committee" means the Compensation Committee of
the Equity Inns Board.

"Equity Inns Current Hotels" means the 95 hotels with an aggregate of
11,574 rooms currently owned by subsidiaries of Equity Inns.

"Equity Inns Debt Policy" means the policy adopted by the Equity Inns Board
limiting consolidated indebtedness to approximately 45% of Equity Inns'
investment in hotel properties, at its cost.

"Equity Inns General Unit" means an outstanding Equity Inns OP Unit that
represents an interest as a general partner in Equity Inns OP.

"Equity Inns Former Lessee" means Trust Leasing, Inc. (f/k/a/ McNeill Hotel
Co., Inc.), a Tennessee corporation and the lessee of Equity Inns' hotels until
November 1996.

"Equity Inns Hotels" means the Equity Inns Current Hotels and the Equity
Inns Acquisition Hotels.

"Equity Inns Lessees" means, collectively, the Interstate Lessee and the
Prime Lessee.

"Equity Inns Limited Unit" means an outstanding Equity Inns OP Unit that
represents an interest as a limited partner in Equity Inns OP.

"Equity Inns OP" means Equity Inns Partnership, L.P., a Tennessee limited
partnership.

"Equity Inns OP Units" means units of partnership interest in Equity Inns
OP.

"Equity Inns Ownership Limitation" has the meaning set forth in "Risk
Factors -- Ownership Limitation."

"Equity Inns Ownership Limitation Provision" has the meanings set forth in
"Description of Capital Stock of Equity Inns -- Charter and Bylaw
Provisions -- Restrictions on Transfer."

"Equity Inns Participants" means individuals who participate in the Equity
Inns Plan.

"Equity Inns Percentage Leases" means the Percentage Leases pursuant to
which Equity Inns leases the Equity Inns Current Hotels.

"Equity Inns Plan" means the Equity Inns, Inc. 1994 Stock Incentive Plan,
as amended to date.

"Equity Inns Proposals" means the Merger Proposal, the Charter Amendment
Proposal and the Plan Amendment Proposal.

"Equity Inns Preferred Stock" means the shares of preferred stock, $.01 par
value per share, of Equity Inns.

"Equity Inns Record Date" means , 1998.

"Equity Inns Special Meeting" means the special meeting of shareholders of
Equity Inns scheduled for 2:00 p.m., local time, on July , 1998.

"Equity Inns Trust" means Equity Inns Trust, a Maryland REIT, a
wholly-owned subsidiary of Equity Inns and the sole general partner of Equity
Inns OP.

"ESA" means environmental site assessment.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

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"Exchange Agent" means SunTrust Bank or another bank or trust company
appointed by Equity Inns to act as the exchange agent for the exchange of the
Merger Consideration upon surrender of the RFS Certificates after the Closing.

"Exchange Ratio" means the ratio determined as follows: (A) if the Average
Price is equal to or greater than $14.00 but less than or equal to $17.00, 1.5,
or (B) if the Average Price is greater than $17.00, the number determined by
dividing $25.50 by the Average Price.

"Exempt Organizations" means tax-exempt entities, including qualified
employee pension and profit sharing trusts and individual retirement accounts,
which generally are exempt from federal income taxation.

"Expenses" mean all out-of-pocket costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby.

"FF&E" means furniture, fixtures and equipment.

"FFO" or "Funds From Operations" means net income (computed in accordance
with GAAP), excluding gains (or losses) from debt restructurings and sales of
property, plus depreciation, and after adjustments for unconsolidated
partnerships and joint ventures.

"Fiduciaries" means brokerage firms and other custodians, nominees and
fiduciaries.

"Final RFS Distribution" means the final dividend to be declared by RFS to
each holder of RFS Common Stock and, if necessary, RFS Preferred Stock, in
amount at least sufficient to satisfy the 95% distribution requirement of
Section 857(a)(1) of the Code for the taxable year of RFS ending at the Closing
Date.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980.

"First Call" means First Call Corporation.

"5/50 Rule" has the meaning set forth in "Federal Income Tax
Considerations -- Requirements for Qualification."

"Forward FFO" means the estimated FFO for the fiscal year following each of
the Selected Transactions, determined by Salomon Smith Barney for purposes of
rendering its fairness opinion.

"GAAP" means generally accepted accounting principles in the United States.

"Hotels" mean, collectively, the Equity Inns Hotels and the RFS Hotels.

"Hotel Partnerships" has the meaning set forth in "Federal Income Tax
Considerations -- Taxation of the Equity Inns OP, the RFS OP, and their
Subsidiary Partnerships."

"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended.

"Interstate" means Interstate Hotels Company, a Pennsylvania corporation.

"Interstate Lessee" means, collectively, the subsidiaries of Interstate
that lease 82 of the Equity Inns Current Hotels from Equity Inns.

"ISOs" means incentive stock options.

"Joint Proxy Statement/Prospectus" means this Joint Proxy
Statement/Prospectus, including Annex I, II-A and Annex II-B attached hereto.

"Lease Termination Agreement" means the letter agreement among RFS, RFS OP,
RFS CMBS OP and the Promus Lessees dated October 17, 1997, that provides for the
determination of certain amounts payable to the Promus Lessees in connection
with the termination by RFS of the Promus Leases.

"Lease" means, collectively, the Equity Inns Percentage Leases and the RFS
Percentage Leases.

"Lessee" means, collectively, the Equity Inns Lessees and the RFS Lessees.

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"Limited Partner" means a limited partner of Equity Inns OP or RFS OP, as
applicable.

"LTM FFO" means the comparison of purchase prices in the Selected
Transactions as multiples of, among other things, FFO for the last 12 months by
Salomon Smith Barney for purposes of rendering its fairness opinion.

"MACRS" means the modified accelerated cost recovery system of
depreciation.

"Market Price" means, on any date, the average of the Closing Price for the
five consecutive Trading Days ending on such date.

"Maximum Expense Reimbursement" has the meaning set forth in "The Merger
Agreement -- Fees and Expenses -- Expense Reimbursement."

"Maximum Termination Fee" has the meaning set forth in "The Merger
Agreement -- Fees and Expenses -- Termination Fee."

"Mergers" means, collectively, the REIT Merger, the OP Merger and the CMBS
OP Merger.

"Merger Agreement" means the Asset Sale Agreement and Plans of Mergers,
dated as of April 21, 1998, among RFS, RFS OP, Merger Sub, Equity Inns and
Equity Inns OP.

"Merger Consideration" means the certificates representing Equity Inns
Common Stock and any cash in lieu of fractional shares of Equity Inns Common
Stock required to be delivered to each shareholder of RFS as a result of the
REIT Merger.

"Merger Proposal" means the proposal to be submitted to Equity Inns'
shareholders at the Equity Inns Special Meeting to approve the Merger Agreement,
the issuance of shares of Equity Inns Common Stock in connection with the REIT
Merger and the issuance of Equity Inns Common Stock upon redemption of Equity
Inns OP Units issued in connection with the OP Merger.

"Merger Sub" means RHI Acquisition, Inc., a Tennessee corporation and a
wholly-owned subsidiary of Equity Inns.

"Morgan Keegan" means Morgan Keegan & Company, Inc., financial adviser to
Equity Inns.

"NAREIT" means the National Association of Real Estate Investment Trusts,
Inc.

"NBC" means National Bank of Commerce.

"NBC Credit Line" means Equity Inns' $5 million revolving credit facility
with NBC.

"NOI" means net operating income.

"Non-U.S. Shareholder" has the meaning set forth in "Federal Income Tax
Considerations -- Taxation of Non-U.S. Shareholders."

"NYSE" means the New York Stock Exchange.

"OP Merger" means the merger of RFS OP with and into Equity Inns OP,
pursuant to the Merger Agreement, with Equity Inns OP being the Surviving OP.

"OP Merger Consideration" means the right to receive from Equity Inns OP a
number of Equity Inns OP Units equal to the Exchange Ratio and any cash in lieu
of fractional Equity Inns OP Units required to be delivered to each holder of
RFS OP Units as a result of the OP Merger.

"Other RFS Lessees" means Pinnacle Management, Inc., which leases one RFS
Hotel from RFS OP, and Landcom Hospitality Management, Inc., which leases two
RFS Hotels from RFS OP.

"Payor Party" has the meaning set forth in "The Merger Agreement -- Fees
and Expenses -- Termination Fee."

"Percentage Lease" means a lease providing for annual rent equal to the
greater of Base Rent or Percentage Rent.

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"Percentage Rent" means percentage rent based upon the gross revenues of
the applicable hotel pursuant to a Percentage Lease.

"Permitted Transferee" means a permitted transferee under the Charters.

"Plan Amendment" means the proposed amendment to the Equity Inns Plan to
increase the number of shares of Equity Inns Common Stock reserved for insurance
thereunder from 2,300,000 shares to 6,400,000 shares.

"Plan Amendment Proposal" means the proposal to be submitted to Equity
Inns' shareholders at the Equity Inns Special Meeting to approve the Plan
Amendment.

"Pricing Period" means as the twenty (20) consecutive trading days
immediately preceding the fifth business day prior to the Closing Date, except
that any trading day on which trading of any newly-issued shares of Equity Inns
Common Stock (or securities convertible into Equity Inns Common Stock) shall
commence on a when-issued basis, shall be excluded from the Pricing Period and
the next earliest trading day shall be substituted therefor.

"Prime" means Prime Hospitality Corp., a Delaware corporation.

"Prime Lessee" means a subsidiary of Prime, which leases 10 of the Equity
Inns Current Hotels.

"Promus" means Promus Hotels Corporation, a Delaware corporation.

"Promus Leases" means the leases between RFS OP and RFS OP Lessee with
respect to 42 of the RFS Hotels and the leases between RFS CMBS OP and RFS CMBS
Lessee with respect to 15 of the RFS Hotels.

"Promus Lessees" means, collectively, the RFS OP Lessees and the RFS CMBS
Lessee.

"Proposal" means President Clinton's budget proposal for fiscal year 1999,
released on February 2, 1998.

"Qualifying Income" has the meaning set forth in "The Merger
Agreement -- Fees and Expenses -- Termination Fee."

"Registration Statement" means the Registration Statement on Form S-4 of
which this Joint Proxy Statement/Prospectus is a part.

"REIT" means a "real estate investment trust" under Sections 856 through
859 of the Code.

"REIT Merger" means the merger of RFS with and into Merger Sub, pursuant to
the Merger Agreement, with Merger Sub being the Surviving Corporation.

"Related Party Tenant" means a tenant of Equity Inns or RFS in which Equity
Inns or RFS, as applicable, owns, directly or indirectly, 10% or more of the
ownership interests.

"RFS" means RFS Hotel Investors, Inc., a Tennessee corporation.

"RFS Board" means the Board of Directors of RFS.

"RFS Bylaws" means the bylaws of RFS as currently in effect.

"RFS C Corp." means Ridge Lake General Partner, Inc., a Tennessee
corporation and a taxable subsidiary of RFS.

"RFS Capital Stock" means, collectively, the RFS Common Stock and the RFS
Preferred Stock.

"RFS Certificates" means the certificates that immediately prior to the
Effective Time represented outstanding shares of RFS Capital Stock.

"RFS Charter" means the Amended and Restated Charter of RFS, as amended to
date.

"RFS CMBS Lessee" means RFS Leasing, Inc., a Tennessee corporation and a
subsidiary of Promus, which leases 15 of the RFS Hotels from RFS CMBS OP.

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"RFS CMBS OP" means RFS Financing Partnership, L.P., a Tennessee limited
partnership wholly-owned by RFS and a special purpose entity formed to undertake
a commercial mortgage bond financing through issuance of the CMBS Bonds.

"RFS Common Stock" means the shares of common stock, $.01 par value per
share, of RFS.

"RFS Hotels" means the 62 hotels with an aggregate of 8,932 rooms currently
owned by subsidiaries of RFS.

"RFS Lessees" means, collectively, the Promus Lessees and the Non-Promus
Lessees.

"RFS OP" means RFS Partnership, L.P., a Tennessee limited partnership.

"RFS OP Lessees" means RFS, Inc. and DTR RFS Lessee, Inc., Tennessee
corporations and subsidiaries of Promus, which lease 42 of the RFS Hotels from
RFS OP.

"RFS OP Units" means units of partnership interest in RFS OP.

"RFS Options" means the option grants by RFS to acquire shares of RFS
Common Stock.

"RFS Ownership Limitation" and "RFS Ownership Limitation Provision" have
the meanings set forth in "Comparative Rights of Shareholders -- RFS
Restrictions on Transfer."

"RFS Percentage Leases" means the Percentage Leases pursuant to which RFS
leases the RFS Hotels.

"RFS Plan" means RFS' Amended and Restated 1993 Restricted Stock and Stock
Option Plan.

"RFS Preferred Stock" means the shares of Series A preferred stock, $.01
par value per share, of RFS.

"RFS Proposal" means the proposal to approve the Merger Agreement to be
submitted to RFS' shareholders at the RFS Special Meeting.

"RFS Record Date" means , 1998.

"RFS Special Meeting" means the special meeting of shareholders of RFS
scheduled for 2:00 p.m., local time, on July , 1998.

"Salomon Smith Barney" means Salomon Smith Barney Inc., financial advisor
to RFS.

"SARs" means stock appreciation rights.

"SEC Documents" means any registration statements, reports, proxy
statements and information statements filed with the Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Selected Acquisition Transactions" means the 17 proposed, pending or
completed merger and acquisition transactions since July 1995 involving
companies in the lodging industry selected by Morgan Keegan for purposes of
rendering its fairness opinion.

"Selected Companies" means the following publicly-traded REITs in the
lodging industry selected by Morgan Keegan for purposes of rendering its
fairness opinion: American General Hospitality Corporation; Boykin Lodging
Trust, Inc.; Equity Inns, Inc.; FelCor Suite Hotels, Inc.; Hospitality
Properties Trust; Humphrey Hospitality Trust; Innkeepers USA Trust; Jameson
Inns, Inc.; Sunstone Hotel Investors, Inc.; and Winston Hotels, Inc.

"Selected REIT Transactions" means the 18 proposed, pending or completed
merger and acquisition transactions since December 1994 involving REITs not
affiliated with the lodging industry selected by Morgan Keegan for purposes of
rendering its fairness opinion.

"Selected SSB Companies" means the following seven publicly traded hotel
REITs selected by Salomon Smith Barney for purposes of rendering its fairness
opinion: American General, Boykin Lodging, FelCor Suite Hotels, Hospitality
Properties Trust, Innkeepers USA, Sunstone Hotel Investors and Winston Hotels,
and two paired share REITs, consisting of Patriot American and Starwood Lodging.

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"Selected Transactions" means the 23 merger and acquisition transactions
involving REITs selected by Salomon Smith Barney for purposes of rendering its
fairness opinion.

"Service" or "IRS" means the U.S. Internal Revenue Service.

"Severance Benefits" means certain severance benefits disclosed on a
schedule to the Merger Agreement in an aggregate amount of approximately
$735,000 that Equity Inns has agreed that RFS may pay to employees of RFS or its
subsidiaries at or prior to the Effective Time (which does not include
substantial change in control payments to Messrs. Solmson, Lovelace and Pascal
pursuant to their employment agreements with RFS).

"Share Trusts", "Share Trustee" and "Shares in Trust" have the meanings set
forth in "Description of Capital Stock of Equity Inns -- Charter and Bylaw
Provisions -- Restrictions on Transfer."

"Special Meetings" means the Equity Inns Special Meeting and the RFS
Special Meeting.

"Substitute RFS Hotel Leases" means the new Percentage Leases Equity Inns
enters into with one or more third party lessees, effective as of the Closing
Date, with respect to the Promus Lessees that Equity Inns requests RFS to
terminate at the Closing.

"Surviving Corporation" means Merger Sub following the completion of the
REIT Merger.

"Surviving OP" means Equity Inns OP following the completion of the OP
Merger.

"Takeover Offer" has the meaning set forth in "Description of Capital Stock
of Equity Inns -- Tennessee Anti-Takeover Statutes."

"TBCA" means the Tennessee Business Corporation Act, as amended.

"Termination Fee" has the meaning set forth in "The Merger
Agreement -- Fees and Expenses -- Termination Fee."

"Trading Day" means a day on which the principal national securities
exchange on which the shares of Equity Inns Common Stock are listed or admitted
to trading is open for the transaction of business or, if the shares of Equity
Inns Common Stock are not listed or admitted to trading on any national
securities exchange, shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.

"Treasury Regulations" means the existing, temporary and currently
promulgated Treasury Department regulations promulgated under the Code.

"TRULPA" means the Tennessee Revised Uniform Limited Partnership Act.

"UBTI" means "unrelated business taxable income" as defined in Section
512(a)(1) of the Code.

"Unsecured Line of Credit" means Equity Inns' $250 million unsecured line
of credit with The First National Bank of Chicago.

"U.S. Shareholder" means a holder of shares of Equity Inns Common Stock or
RFS Common Stock that for United States federal income tax purposes is (i) a
citizen or resident of the United States, (ii) a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof, (iii) an estate whose income is subject to
United States taxation regardless of its connection with the conduct of a U.S.
trade or business or a trust with respect to which (A) a court within the United
States is able to exercise primary supervision over the administration of the
trust and (B) one or more United States persons have the authority to control
all substantial decisions of the trust.

131
<PAGE> 147

ANNEX I
ASSET SALE AGREEMENT

AND

PLANS OF MERGERS

AMONG

RFS HOTEL INVESTORS, INC., A TENNESSEE CORPORATION

("TARGET REIT"),

RHI ACQUISITION, INC., A TENNESSEE CORPORATION

("MERGER SUB"),

EQUITY INNS, INC., A TENNESSEE CORPORATION

("ACQUIROR REIT"),

RFS PARTNERSHIP, L.P., A TENNESSEE LIMITED PARTNERSHIP

("CONTRIBUTOR OP")

AND

EQUITY INNS PARTNERSHIP, L.P., A TENNESSEE LIMITED PARTNERSHIP

("ACQUIROR OP")

APRIL 21, 1998
<PAGE> 148

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS................................................... 2
1.1. [INTENTIONALLY OMITTED]..................................... 2
1.2. Acquiror CMBS OP............................................ 2
1.3. Acquiror CMBS OP Partner Approvals.......................... 2
1.4. Acquiror CMBS OP Partnership Agreement...................... 2
1.5. Acquiror OP................................................. 2
1.6. Acquiror OP General Units................................... 2
1.7. Acquiror OP Limited Units................................... 2
1.8. Acquiror OP Partner Approvals............................... 2
1.9. Acquiror OP Partnership Agreement........................... 2
1.10. Acquiror OP Units........................................... 2
1.11. Acquiror REIT............................................... 2
1.12. Acquiror REIT Charter....................................... 2
1.13. Acquiror REIT CMBS Lessee................................... 3
1.14. Acquiror REIT Common Stock.................................. 3
1.15. Acquiror REIT Employee Benefit Plans........................ 3
1.16. Acquiror REIT Employment Agreements......................... 3
1.17. Acquiror REIT Hotels........................................ 3
1.18. Acquiror REIT Leases........................................ 3
1.19. Acquiror REIT Lessee........................................ 3
1.20. Acquiror REIT Material Adverse Effect....................... 3
1.21. Acquiror REIT Options....................................... 3
1.22. Acquiror REIT Preferred Stock............................... 3
1.23. Acquiror REIT Restricted Stock Grants....................... 3
1.24. Acquiror REIT SEC Documents................................. 3
1.25. Acquiror REIT Subsidiaries.................................. 4
1.26. Acquisition Opportunity..................................... 4
1.27. Acquisition Proposal........................................ 4
1.27(a) Acquisition Proposal Notice................................. 4
1.28. Act of Bankruptcy........................................... 4
1.29. Affiliate................................................... 4
1.30. Agreement................................................... 4
1.31. Amended and Restated Acquiror OP Partnership Agreement...... 4
1.32. Articles of Merger.......................................... 4
1.33. Asset Sale.................................................. 5
1.34. Assumed Liabilities......................................... 5
1.35. Average Price............................................... 5
1.36. Bill of Sale (Inventory).................................... 5
1.37. Bill of Sale (Personal Property)............................ 5
1.38. Board....................................................... 5
1.39. Certificates................................................ 5
1.40. Certificates of Merger...................................... 5
1.41. Closing..................................................... 5
1.42. Closing Date................................................ 5
1.43. CMBS Agreement of Merger.................................... 5
1.44. CMBS Bonds.................................................. 6
1.45. CMBS OP Merger.............................................. 6
1.46. CMBS OP Merger Consideration................................ 6
1.47. OP Merger Consideration..................................... 6
1.48. CMBS OP Partner Approvals................................... 6
1.49. Code........................................................ 6
</TABLE>

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<TABLE>
<S> <C> <C>
1.49(a) Competing Transaction....................................... 6
1.50. Confidential Material....................................... 6
1.51. Contracts................................................... 6
1.52. Contributor CMBS OP......................................... 6
1.53. Contributor CMBS OP Partner Approvals....................... 6
1.54. Contributor CMBS OP Partnership Agreement................... 6
1.55. Contributor OP.............................................. 6
1.56. Contributor OP General Units................................ 7
1.57. Contributor OP Limited Units................................ 7
1.58. Contributor OP Partner Approvals............................ 7
1.59. Contributor OP Partnership Agreement........................ 7
1.60. Contributor OP Units........................................ 7
1.61. Deeds....................................................... 7
1.61(a) Definitive Competing Acquisition Agreement.................. 7
1.62. Effective Time.............................................. 7
1.63. Employee Benefit Plans...................................... 7
1.63(a) Entitled Party.............................................. 7
1.64. ERISA....................................................... 7
1.64(a) Escrow Agent................................................ 7
1.65. Exchange Act................................................ 8
1.66. Exchange Agent.............................................. 8
1.67. Exchange Ratio.............................................. 8
1.68. Expenses.................................................... 8
1.69. Final Target REIT Dividend.................................. 8
1.70. FIRPTA Certificate.......................................... 8
1.71. Form S-4.................................................... 8
1.72. Franchise Agreements........................................ 8
1.73. Franchisors................................................. 8
1.74. GAAP........................................................ 8
1.75. Hazardous Substance......................................... 8
1.76. HSR Act..................................................... 9
1.77. Improvements................................................ 9
1.78. Insurance Policies.......................................... 9
1.79. Intangible Personal Property................................ 9
1.80. Interests................................................... 9
1.81. Inventory................................................... 9
1.82. IRS......................................................... 9
1.83. Knowledge of Acquiror REIT.................................. 9
1.84. Knowledge of Target REIT.................................... 9
1.85. Land........................................................ 10
1.86. Lease Termination Agreement................................. 10
1.87. Termination Fee............................................. 10
1.88. Material.................................................... 10
1.89. Material Adverse Effect..................................... 10
1.89(a) Maximum Expense Reimbursement............................... 10
1.89(b) Maximum Termination Fee..................................... 10
1.90. Mergers..................................................... 10
1.91. Merger Consideration........................................ 10
1.92. Merger Sub.................................................. 10
1.93. Mortgage Documents.......................................... 10
1.94. Mortgage Notes.............................................. 10
1.95. Mortgages................................................... 11
1.96. NYSE........................................................ 11
</TABLE>

ii
<PAGE> 150
<TABLE>
<S> <C> <C>
1.97. OP Merger................................................... 11
1.98. OP Partner Approvals........................................ 11
1.99. Organizational Documents.................................... 11
1.90(a) Payor Party................................................. 11
1.100. Permit...................................................... 11
1.101. Permitted Title Exceptions.................................. 11
1.102. Person...................................................... 11
1.103. Personal Property........................................... 11
1.104. Plan of Merger.............................................. 11
1.105. Pricing Period.............................................. 12
1.106. Proxy Statement/Prospectus.................................. 12
1.107. Qualifying Income........................................... 12
1.108. Real Property............................................... 12
1.109. REIT........................................................ 12
1.110. REIT Merger................................................. 12
1.111. SEC......................................................... 12
1.112. SEC Documents............................................... 12
1.113. Securities Act.............................................. 12
1.114. Severance Benefits.......................................... 12
1.115. Shareholders and Shareholder................................ 12
1.116. Stock Purchase Agreement.................................... 12
1.117. Subsidiary.................................................. 13
1.118. Surviving Corporation....................................... 13
1.119. Surviving CMBS OP........................................... 13
1.120. Surviving OP................................................ 13
1.121. Takeover Statutes........................................... 13
1.122. Tangible Personal Property.................................. 13
1.123. Target C Corp............................................... 13
1.124. Target REIT................................................. 13
1.125. Target REIT Capital Stock................................... 13
1.126. Target REIT Charter......................................... 13
1.127. Target REIT CMBS Lessee..................................... 13
1.128. Target REIT Common Stock.................................... 13
1.129. Target REIT Employee Benefit Plans.......................... 14
1.130. Target REIT Employment Agreements........................... 14
1.131. Target REIT Hotels.......................................... 14
1.132. Target REIT Leases.......................................... 14
1.133. Target REIT Lessee.......................................... 14
1.134. Target REIT Material Adverse Effect......................... 14
1.135. Target REIT Options......................................... 14
1.136. Target REIT Preferred Stock................................. 14
1.137. Target REIT Restricted Stock Grants......................... 14
1.138. Target REIT SEC Documents................................... 14
1.139. Target REIT Subsidiaries.................................... 14
1.140. Tax Return.................................................. 15
1.141. Taxes....................................................... 15
1.142. Tennessee Act............................................... 15
1.143. Title Company............................................... 15
1.144. Transferred Assets.......................................... 15
1.145. TRULPA...................................................... 15
1.146. Undeveloped Land............................................ 15
1.147. Unit Certificates........................................... 15
</TABLE>

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<TABLE>
<S> <C> <C>
1.148. Utilities................................................... 15
1.149. Welfare Plans............................................... 15

ARTICLE II ASSET SALE AGREEMENT......................................... 16
2.1. Sale and Purchase........................................... 16
2.2. Effectuation of the Asset Sale.............................. 16
2.3. OP Partner Approvals........................................ 16
2.4. CMBS OP Partner Approvals................................... 16
2.5. Acquiror OP Partnership Agreement........................... 16
2.6. Contributor OP's and Contributor CMBS OP's Deliveries....... 16
2.7. Target REIT Lease Termination............................... 17
2.8. Schedules and Exhibits...................................... 17

ARTICLE III THE REIT MERGER............................................. 17
3.1. The REIT Merger............................................. 17
3.2. Closing..................................................... 18
3.3. Effective Time.............................................. 18
3.4. Effect of the REIT Merger................................... 18
3.5. Charter and Bylaws.......................................... 18
3.6. Officers and Directors...................................... 18
3.7. Employees................................................... 18

ARTICLE IV EFFECT OF REIT MERGER ON CAPITALIZATION; EXCHANGE OF
CERTIFICATES.......................................................... 19
4.1. Effect on Capitalization.................................... 19
4.2. Exchange of Certificates.................................... 20
4.3. Target REIT Options......................................... 21

ARTICLE V THE OP MERGER................................................. 22
5.1. The OP Merger............................................... 22
5.2. Effect of the OP Merger..................................... 23
5.3. Certificate of Limited Partnership and Partnership
Agreement................................................. 23
5.4. Effect on Partnership Interests............................. 23
5.5. Exchange of Certificates.................................... 23
ARTICLE VI THE CMBS OP MERGER........................................... 25
6.1. The CMBS OP Merger; CMBS Agreement of Merger................ 25
6.2. Effect of the CMBS OP Merger................................ 25
6.3. Certificate of Limited Partnership and Partnership
Agreement................................................. 25
6.4. Effect on Partnership Interests............................. 25

ARTICLE VII REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR OP AND TARGET
REIT.................................................................. 25
7.1. Organization................................................ 25
7.2. Authorization; Enforceability............................... 26
7.3. Capitalization.............................................. 26
7.4. No Violation or Conflict by Contributor OP or Target REIT... 27
7.5. No Litigation............................................... 27
7.6. Absence of Certain Changes.................................. 27
7.7. Subsidiaries................................................ 27
7.8. Contracts and Commitments................................... 27
7.9. Approvals and Consents...................................... 28
7.10. Target REIT Employee Benefit Plans.......................... 28
7.11. SEC Documents; Financial Statements; Undisclosed
Liabilities............................................... 29
</TABLE>

iv
<PAGE> 152
<TABLE>
<S> <C> <C>
7.12. No Special Taxes............................................ 29
7.13. Compliance with Existing Laws............................... 29
7.14. Insurance................................................... 30
7.15. Condemnation Proceedings.................................... 30
7.16. Personal Property........................................... 30
7.17. Bankruptcy.................................................. 30
7.18. Title to Real Property...................................... 30
7.19. Zoning...................................................... 30
7.20. Hazardous Substances........................................ 30
7.21. Room Furnishings............................................ 31
7.22. Franchisors; Franchise Agreements........................... 31
7.23. Mortgage Documents.......................................... 31
7.24. Opinion of Financial Advisor................................ 31
7.25. Financial Advisor........................................... 31
7.26. Acquiror REIT Share Ownership............................... 31
7.27. Related Party Transactions.................................. 31
7.28. Takeover Statutes........................................... 32
7.29. Hart-Scott-Rodino Antitrust Improvements Act of 1976........ 32
7.30. Development................................................. 32
7.31. Tax Matters................................................. 32
7.32. Convertible Securities...................................... 33
7.33. Updating of Representations and Warranties.................. 33
7.34. Reorganization.............................................. 33
7.35. Intellectual Property....................................... 33
7.36. Employees................................................... 33
7.37. Labor Relations............................................. 34
7.38. Termination of Certain Target REIT Leases................... 34

ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF ACQUIROR REIT, ACQUIROR
OP AND MERGER SUB..................................................... 34
8.1. Organization................................................ 34
8.2. Authorization; Enforceability............................... 35
8.3. Capitalization.............................................. 35
8.4. No Violation or Conflict by Acquiror OP, Acquiror REIT or
Merger Sub................................................ 36
8.5. No Litigation............................................... 36
8.6. Absence of Certain Changes.................................. 36
8.7. Subsidiaries................................................ 36
8.8. Contracts and Commitments................................... 36
8.9. Approvals and Consents...................................... 37
8.10. Acquiror REIT Employee Benefit Plans........................ 37
8.11. SEC Documents; Financial Statement; Undisclosed
Liabilities............................................... 38
8.12. Title to Properties and Assets.............................. 38
8.13. Insurance................................................... 38
8.14. Personal Property........................................... 38
8.15. Bankruptcy.................................................. 39
8.16. Zoning...................................................... 39
8.17. Hazardous Substances........................................ 39
8.18. Leases...................................................... 39
8.19. Opinion of Financial Advisor................................ 39
8.20. Financial Advisor........................................... 39
8.21. Target REIT Share Ownership................................. 39
8.22. Related Party Transactions.................................. 40
8.23. Takeover Statutes........................................... 40
</TABLE>

v
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<TABLE>
<S> <C> <C>
8.24. Hart-Scott-Rodino Antitrust Improvements Act of 1976........ 40
8.25. Development................................................. 40
8.26. Tax Matters................................................. 40
8.27. Convertible Securities...................................... 41
8.28. Acquiror REIT Common Stock.................................. 41
8.29. Interim Operations of Merger Sub............................ 41
8.30. Updating of Representations and Warranties.................. 41
8.31. Reorganization.............................................. 42
8.32. Intellectual Property....................................... 42
8.33. Employees................................................... 42
8.34. Labor Relations............................................. 42
8.35. No Special Taxes............................................ 42
8.36. Compliance with Existing Laws............................... 42
8.37. Condemnation Proceedings.................................... 43
8.38. Room Furnishings............................................ 43
8.39. Franchisors; Franchise Agreements........................... 43
8.40. Mortgage Documents.......................................... 43
8.41. New Leases.................................................. 43

ARTICLE IX CONDITIONS PRECEDENT TO CLOSING.............................. 44
9.1. Conditions Precedent to Obligations of Parties.............. 44
9.2. Conditions Precedent to the Obligations of Acquiror OP,
Acquiror REIT and Merger Sub.............................. 44
9.3. Conditions Precedent to the Obligations of Contributor OP
and Target REIT........................................... 46

ARTICLE X COVENANTS..................................................... 47
10.1. Acquisition Proposals....................................... 47
10.2. Conduct of Businesses....................................... 48
10.3. Meetings of Shareholders.................................... 52
10.4. Filings; Other Action....................................... 52
10.5. Inspection of Records....................................... 53
10.6. Publicity................................................... 53
10.7. Registration Statement...................................... 53
10.8. Listing Application......................................... 54
10.9. Further Action.............................................. 54
10.10. Expenses.................................................... 54
10.11. Indemnification............................................. 54
10.12. Governance.................................................. 54
10.13. Severance Benefits.......................................... 55
10.14. Reorganization.............................................. 55
10.15. Survival of Target REIT, Contributor OP and Contributor CMBS
OP Obligations............................................ 55
10.16. Third-Party Consents........................................ 55
10.17. Efforts to Fulfill Conditions............................... 55
10.18. Representations, Warranties and Conditions Prior to
Closing................................................... 56
10.19. Cooperation of the Parties.................................. 56
10.20. Amendment to Acquiror REIT Charter.......................... 56
10.21. Records..................................................... 56
10.22. Confidentiality............................................. 56
10.23. Acknowledgments............................................. 56
10.24. Target REIT Acquisition Opportunities....................... 57
10.25. CMBS Bonds.................................................. 57
10.26. Tax Treatment............................................... 57
10.27. Transfer and Gains Taxes.................................... 58
</TABLE>

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<TABLE>
<S> <C> <C>
10.28. Transfer of Target C Corp. Shares........................... 58
10.29. Existing Restrictions....................................... 58
10.30. Lease Termination/New Leases................................ 58

ARTICLE XI TERMINATION.................................................. 58
11.1. Termination by Mutual Consent............................... 58
11.2. Termination by Either Acquiror REIT or Target REIT.......... 59
11.3. Termination by Target REIT.................................. 59
11.4. Termination by Acquiror REIT................................ 59
11.5. Effect of Termination and Abandonment....................... 60
11.6. Expenses.................................................... 62
11.7. Extension; Waiver; Miscellaneous............................ 63

ARTICLE XII MISCELLANEOUS............................................... 63
12.1. Nonsurvival of Representations, Warranties and Agreements... 63
12.2. Notices..................................................... 63
12.3. Assignment; Binding Effect; Benefit......................... 64
12.4. Entire Agreement............................................ 64
12.5. Confidentiality............................................. 64
12.6. Amendment................................................... 66
12.7. Governing Law............................................... 66
12.8. Counterparts................................................ 66
12.9. Headings.................................................... 66
12.10. Interpretation.............................................. 67
12.11. Waivers..................................................... 67
12.12. Incorporation............................................... 67
12.13. Severability................................................ 67
12.14. Enforcement of Agreement.................................... 67
12.15. Non-Recourse................................................ 67
12.16. Arbitration................................................. 68
List of Schedules....................................................... 70
List of Exhibits........................................................ 72
</TABLE>

vii
<PAGE> 155

ASSET SALE AGREEMENT AND

PLANS OF MERGERS

ASSET SALE AGREEMENT AND PLANS OF MERGERS, made as of this 21st day of
April, 1998, by and among RFS HOTEL INVESTORS, INC., a Tennessee corporation
("Target REIT"), EQUITY INNS, INC., a Tennessee corporation ("Acquiror REIT"),
RHI ACQUISITION, INC., a Tennessee corporation and wholly-owned subsidiary of
Acquiror REIT ("Merger Sub"), EQUITY INNS PARTNERSHIP, L.P., a Tennessee limited
partnership ("Acquiror OP"), and RFS PARTNERSHIP, L.P., a Tennessee limited
partnership ("Contributor OP").

RECITALS

A. The Board of Directors of Acquiror REIT and the Board of Directors of
Target REIT have determined that a business combination on the terms described
herein between Acquiror REIT and Target REIT is in the best interests of their
respective Shareholders and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits, and accordingly
have agreed to effect a merger on the terms and conditions set forth herein.

B. For federal income tax purposes, it is intended that the REIT Merger (as
defined) shall qualify as tax-free reorganizations within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended, (the "Code"), and that
this Agreement (as defined herein) shall constitute a plan of reorganization
under Section 368 of the Code.

C. Acquiror REIT, as the sole shareholder of the general partners of
Acquiror OP and Acquiror CMBS OP, and Target REIT, as the general partner of
Contributor OP and as the sole shareholder of the general partner of Contributor
CMBS OP, deem it advisable and in the best interests of their respective limited
partners, subject to the conditions and other provisions contained herein, that
Contributor OP shall merge into Acquiror OP with the holders of partnership
interests in Contributor OP receiving units of limited partnership interest in
Acquiror OP and that Contributor CMBS OP shall merge into Acquiror CMBS OP with
the holders of partnership interests in Contributor CMBS OP receiving limited
partnership interests in Acquiror CMBS OP.

D. For federal income tax purposes, it is intended that the OP Merger (as
defined herein), regardless of form, be treated as a contribution by Contributor
OP of all of its assets to Acquiror OP in exchange for partnership interests in
Acquiror OP under Section 721 of the Code, and a distribution of such
partnership interests by Contributor OP to its partners under Section 731 of the
Code. For federal income tax purposes, it is intended that the CMBS OP Merger
(as defined herein), regardless of form, be treated as a contribution by
Contributor CMBS OP of all of its assets to Acquiror CMBS OP in exchange for
partnership interests in Acquiror CMBS OP under Section 721 of the Code, and a
distribution of such partnership interests by Contributor CMBS OP to its
partners under Section 731 of the Code.

E. Acquiror REIT acknowledges and agrees that it will benefit directly from
the merger of Target REIT into Merger Sub, Contributor OP into Acquiror OP and
Contributor CMBS OP into Acquiror CMBS OP as provided for herein.

F. The parties hereto desire to make certain representations, warranties
and agreements in connection with the transactions contemplated by this
Agreement.

NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
<PAGE> 156

ARTICLE I

DEFINITIONS

When used in this Agreement, the following terms shall have the meanings
specified:

1.1. [INTENTIONALLY OMITTED].

1.2. Acquiror CMBS OP.

"Acquiror CMBS OP" shall have the meaning provided in Section 10.25.

1.3. Acquiror CMBS OP Partner Approvals.

"Acquiror CMBS OP Partner Approvals" shall have the meaning provided in
Section 2.4.

1.4. Acquiror CMBS OP Partnership Agreement.

"Acquiror CMBS OP Partnership Agreement" shall mean the Agreement of
Limited Partnership of Acquiror CMBS OP to be entered into after the date hereof
upon organization of Acquiror CMBS OP as contemplated in Section 10.25.

1.5. Acquiror OP.

"Acquiror OP" shall mean Equity Inns Partnership, L.P., a Tennessee limited
partnership.

1.6. Acquiror OP General Units.

"Acquiror OP General Units" shall mean Acquiror OP Units representing an
interest as a general partner in Acquiror OP.

1.7. Acquiror OP Limited Units.

"Acquiror OP Limited Units" shall mean Acquiror OP Units that represent an
interest as a limited partner in Acquiror OP.

1.8. Acquiror OP Partner Approvals.

"Acquiror OP Partner Approvals" shall have the meaning provided in Section
2.3.

1.9. Acquiror OP Partnership Agreement.

"Acquiror OP Partnership Agreement" shall mean the Agreement of Limited
Partnership of Acquiror OP, as amended as of the date hereof.

1.10. Acquiror OP Units.

"Acquiror OP Units" shall mean units of partnership interest of Acquiror
OP, including Acquiror OP General Units and Acquiror OP Limited Units.

1.11. Acquiror REIT.

"Acquiror REIT" shall mean Equity Inns, Inc., a Tennessee corporation.

1.12. Acquiror REIT Charter.

"Acquiror REIT Charter" shall mean the Charter of Acquiror REIT, as amended
and restated as of the date hereof.

2
<PAGE> 157

1.13. Acquiror REIT CMBS Lessee.

"Acquiror REIT CMBS Lessee" shall have the meaning provided in Section
10.25.

1.14. Acquiror REIT Common Stock.

"Acquiror REIT Common Stock" shall mean the common stock of Acquiror REIT,
par value $.01 per share.

1.15. Acquiror REIT Employee Benefit Plans.

"Acquiror REIT Employee Benefit Plans" shall mean the employee benefit
plans of Acquiror REIT described on Schedule 8.10.

1.16. Acquiror REIT Employment Agreements.

"Acquiror REIT Employment Agreements" shall mean the employment agreements
described on Schedule 1.16.

1.17. Acquiror REIT Hotels.

"Acquiror REIT Hotels" shall mean all of the hotel properties owned by the
Acquiror REIT Subsidiaries as of the date hereof, as set forth on Schedule 1.17.

1.18. Acquiror REIT Leases.

"Acquiror REIT Leases" shall mean the lease agreements with respect to the
operation of the Acquiror REIT Hotels leased to third parties, as described in
Schedule 1.18.

1.19. Acquiror REIT Lessee.

"Acquiror REIT Lessee" shall mean, with respect to the Acquiror REIT
Hotels, affiliates of Interstate Hotels Company.

1.20. Acquiror REIT Material Adverse Effect.

"Acquiror REIT Material Adverse Effect" shall mean a Material Adverse
Effect with respect to Acquiror REIT and the Acquiror REIT Subsidiaries taken as
a whole.

1.21. Acquiror REIT Options.

"Acquiror REIT Options" shall mean the outstanding option grants to acquire
shares of Acquiror REIT Common Stock described in Schedule 1.21.

1.22. Acquiror REIT Preferred Stock.

"Acquiror REIT Preferred Stock" shall mean the preferred stock of Acquiror
REIT, $.01 par value per share.

1.23. Acquiror REIT Restricted Stock Grants.

"Acquiror REIT Restricted Stock Grants" shall mean the grants of shares of
Acquiror REIT Common Stock which are subject to vesting as described on Schedule
1.23 .

1.24. Acquiror REIT SEC Documents.

"Acquiror REIT SEC Documents" shall mean all registration statements,
reports, proxy statements and information statements filed by Acquiror REIT with
the SEC since the effective date of Acquiror REIT's initial registration
statement on Form S-11.
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1.25. Acquiror REIT Subsidiaries.

"Acquiror REIT Subsidiaries" shall mean the Subsidiaries of Acquiror REIT
described on Schedule 8.7, including, without limitation, Merger Sub, Acquiror
OP and Acquiror CMBS OP.

1.26. Acquisition Opportunity.

"Acquisition Opportunity" shall have the meaning provided in Section 10.24.

1.27. Acquisition Proposal.

"Acquisition Proposal" shall have the meaning provided in Section 10.1.

1.27(a) Acquisition Proposal Notice.

"Acquisition Proposal Notice" shall have the meaning provided in Section
11.5(a).

1.28. Act of Bankruptcy.

"Act of Bankruptcy" shall mean if a party hereto (or any of its
Subsidiaries) or any general partner thereof shall (a) apply for or consent to
the appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its property,
(b) admit in writing its inability to pay its debts as they become due, (c) make
a general assignment for the benefit of its creditors, (d) file a voluntary
petition or commence a voluntary case or proceeding under the Federal Bankruptcy
Code (as now or hereafter in effect), (e) be adjudicated a bankrupt or
insolvent, (f) file a petition seeking to take advantage of any other law
relating to bankruptcy, insolvency, reorganization, winding-up or composition or
adjustment of debts, (g) fail to controvert in a timely and appropriate manner,
or acquiesce in writing to, any petition filed against it in an involuntary case
or proceeding under the Federal Bankruptcy Code (as now or hereafter in effect),
or (h) take any corporate or partnership action for the purpose of effecting any
of the foregoing; or if a proceeding or case shall be commenced, without the
application or consent of a party hereto (or any of its Subsidiaries) or any
general partner thereof, in any court of competent jurisdiction seeking (1) the
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of debts, of such party or general partner, (2) the appointment of
a receiver, custodian, trustee or liquidator of such party or general partner or
all or any substantial part of its assets, or (3) other similar relief under any
law relating to bankruptcy, insolvency, reorganization, winding-up or
composition or adjustment of debts, and such proceeding or case shall continue
undismissed; or an order (including an order for relief entered in an
involuntary case under the Federal Bankruptcy Code, as now or hereafter in
effect) judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 consecutive
days.

1.29. Affiliate.

"Affiliate" shall mean, with respect to any Person, another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.

1.30. Agreement.

"Agreement" shall mean this Asset Sale Agreement and Plans of Mergers,
together with the Exhibits and Schedules attached hereto.

1.31. Amended and Restated Acquiror OP Partnership Agreement.

"Amended and Restated Acquiror OP Partnership Agreement" shall have the
meaning provided in Section 2.5.

1.32. Articles of Merger.

"Articles of Merger" shall have the meaning provided in Section 3.3.

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1.33. Asset Sale.

"Asset Sale" shall have the meaning provided in Section 2.1.

1.34. Assumed Liabilities.

"Assumed Liabilities" shall mean the liabilities of Contributor OP and
Contributor CMBS OP described on Schedule 1.34.

1.35. Average Price.

"Average Price" shall mean an amount equal to the quotient of (i) the sum
of the products of (A) the daily volume of shares of the Acquiror REIT Common
Stock traded on the NYSE on each trading day during the Pricing Period and (B)
the closing price for the Acquiror REIT Common Stock on the NYSE on each such
trading day, and (ii) the total volume of shares of Acquiror REIT Common Stock
traded on the NYSE during the Pricing Period (volumes and closing prices as
reported by The Wall Street Journal or, if not reported thereby, any other
authoritative source selected by Acquiror REIT).

1.36. Bill of Sale (Inventory).

"Bill of Sale (Inventory)" shall mean one or more bills of sale conveying
title to the Inventory owed by Target REIT Lessee or Target REIT CMBS Lessee
from Target REIT Lessee to Acquiror REIT Lessee or another designee of Acquiror
REIT, and from Target REIT CMBS Lessee to Acquiror REIT CMBS Lessee, in each
case without any additional consideration to such lessees.

1.37. Bill of Sale (Personal Property).

"Bill of Sale (Personal Property)" shall mean one or more bills of sale
conveying title to the Tangible Personal Property, Intangible Personal Property
and the Interests from Contributor OP (or its designee) to Acquiror OP (or its
designee), and from Contributor CMBS OP (or its designee) to Acquiror CMBS OP
(or its designee).

1.38. Board.

"Board" means, with respect to either Acquiror REIT or Target REIT, its
Board of Directors.

1.39. Certificates.

"Certificates" shall have the meaning provided in Section 4.2(c).

1.40. Certificates of Merger.

"Certificates of Merger" shall mean the certificates of merger referenced
in Sections 5.1(b) and 6.1(b).

1.41. Closing.

"Closing" shall mean the conference held on the Closing Date at which the
closing of the Mergers and the other transactions contemplated hereby (except as
otherwise provided herein) shall occur.

1.42. Closing Date.

"Closing Date" shall mean October 15, 1998, or such earlier date on which
the conditions set forth in Article IX shall have been satisfied or waived, or
such other date as may be mutually agreed by the parties hereto.

1.43. CMBS Agreement of Merger.

"CMBS Agreement of Merger" shall have the meaning provided in Section 6.1.

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1.44. CMBS Bonds.

"CMBS Bonds" shall have the meaning provided in Section 10.25.

1.45. CMBS OP Merger.

"CMBS OP Merger" shall mean the merger of Contributor CMBS OP with and into
Acquiror CMBS OP.

1.46. CMBS OP Merger Consideration.

"CMBS OP Merger Consideration" shall have the meaning provided in Section
6.4.

1.47. OP Merger Consideration.

"OP Merger Consideration" shall have the meaning provided in Section
5.4(b).

1.48. CMBS OP Partner Approvals.

"CMBS OP Partner Approvals" shall have the meaning provided in Section 2.4.

1.49. Code.

"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.

1.49(a) Competing Transaction.

"Competing Transaction" shall have the meaning provided in Section 10.1.

1.50. Confidential Material.

"Confidential Material" shall have the meaning provided in Section 12.5(a).

1.51. Contracts.

"Contracts" shall mean contracts, agreements, leases (including ground
leases), licenses, arrangements, understandings, relationships and commitments,
whether written or oral, but shall not include any Employee Benefit Plan.

1.52. Contributor CMBS OP.

"Contributor CMBS OP" shall mean RFS Financing Partnership, L.P., a
Tennessee limited partnership.

1.53. Contributor CMBS OP Partner Approvals.

"Contributor CMBS OP Partner Approvals" shall have the meaning provided in
Section 2.4.

1.54. Contributor CMBS OP Partnership Agreement.

"Contributor CMBS OP Partnership Agreement" shall mean the Agreement of
Limited Partnership of Contributor CMBS OP, as amended as of the date hereof.

1.55. Contributor OP.

"Contributor OP" shall mean RFS Partnership, L.P., a Tennessee limited
partnership.

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1.56. Contributor OP General Units.

"Contributor OP General Units" shall mean Contributor OP Units representing
an interest as a general partner in Contributor OP.

1.57. Contributor OP Limited Units.

"Contributor OP Limited Units" shall mean Contributor OP Units representing
an interest as a limited partner in Contributor OP.

1.58. Contributor OP Partner Approvals.

"Contributor OP Partner Approvals" shall have the meaning provided in
Section 2.3.

1.59. Contributor OP Partnership Agreement.

"Contributor OP Partnership Agreement" shall mean the Agreement of Limited
Partnership of Contributor OP, as amended as of the date hereof.

1.60. Contributor OP Units.

"Contributor OP Units" shall mean units of partnership interest of
Contributor OP.

1.61. Deeds.

"Deeds" shall mean deeds as may reasonably be required to be delivered in
the sole discretion of Acquiror REIT conveying title to the Real Property from
Contributor OP or the Target REIT Subsidiaries to Acquiror OP (or its designee),
and from Contributor CMBS OP to Acquiror CMBS OP (or its designee), subject only
to Permitted Title Exceptions.

1.61(a) Definitive Competing Acquisition Agreement.

"Definitive Competing Acquisition Agreement" shall have the meaning
provided in Section 11.5.

1.62. Effective Time.

"Effective Time" shall mean the time at which the Mergers are consummated
by the filing of the Articles of Merger and the Certificates of Merger with the
Secretary of State of the State of Tennessee, or such later date as is specified
in such filings.

1.63. Employee Benefit Plans.

"Employee Benefit Plans" shall mean the Acquiror REIT Employee Benefit
Plans and the Target REIT Employee Benefit Plans, which are described on
Schedules 8.10 and 7.10, respectively.

1.63(a) Entitled Party.

"Entitled Party" shall have the meaning provided in Section 11.5(a).

1.64. ERISA.

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

1.64(a) Escrow Agent.

"Escrow Agent" shall have the meaning provided in Section 11.5(a).

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1.65. Exchange Act.

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

1.66. Exchange Agent.

"Exchange Agent" shall have the meaning provided in Section 4.2(a).

1.67. Exchange Ratio.

"Exchange Ratio" shall have the meaning provided in Section 4.1(b).

1.68. Expenses.

"Expenses" shall have the meaning provided in Section 10.10.

1.69. Final Target REIT Dividend.

"Final Target REIT Dividend" shall have the meaning provided in Section
4.2(d).

1.70. FIRPTA Certificate.

"FIRTPA Certificate" shall mean the affidavit of Contributor OP and
Contributor CMBS OP under Section 1445 of the Code certifying that neither
Contributor OP nor Contributor CMBS OP is a foreign corporation, foreign
partnership, foreign trust, foreign estate or foreign person (as those terms are
defined in the Code), in form and substance reasonably satisfactory to the
Acquiror REIT.

1.71. Form S-4.

"Form S-4" shall have the meaning provided in Section 10.7.

1.72. Franchise Agreements.

"Franchise Agreements" shall mean those certain agreements and licenses to
operate the Target REIT Hotels as listed on Schedule 7.22 hereto.

1.73. Franchisors.

"Franchisors" shall mean the franchisors listed on Schedule 7.22, the
issuers of the franchise licenses under which the Target REIT Hotels are
currently operated.

1.74. GAAP.

"GAAP" shall mean generally accepted accounting principles used in the
United States, consistently applied during the periods involved.

1.75. Hazardous Substance.

"Hazardous Substance" shall mean any substance or material whose presence,
nature, quantity or intensity of existence, use, manufacture, disposal,
transportation, spill, release or effect, either by itself or in combination
with other materials is either: (1) potentially injurious to the public health,
safety or welfare, the environment or the Transferred Assets, (2) regulated,
monitored or defined as a hazardous or toxic substance or waste by any
governmental agency, or (3) a basis for liability of the owner of the
Transferred Assets to any governmental agency or third party, and Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil, or any products, by-products or components thereof, and
asbestos.

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1.76. HSR Act.

"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.

1.77. Improvements.

"Improvements" shall mean the Target REIT Hotels, together with all other
buildings, improvements, fixtures and other items affixed to the Land.

1.78. Insurance Policies.

"Insurance Policies" shall mean all policies of insurance relating to the
Transferred Assets, or any portion thereof.

1.79. Intangible Personal Property.

"Intangible Personal Property" shall mean all intangible personal property
owned or possessed by Contributor OP or Contributor CMBS OP, as applicable, and
used in connection with the ownership of the Transferred Assets, including,
without limitation, Contracts, general intangibles, business records relating to
the Transferred Assets, plans and specifications, surveys and title insurance
policies pertaining to the Real Property and the Personal Property, all
licenses, permits and approvals with respect to the construction, ownership,
operation, leasing, occupancy or maintenance of the Transferred Assets, any
unpaid award for taking by condemnation or any damage to the Land by reason of a
change of grade or location of or access to any street or highway.

1.80. Interests.

"Interests" shall mean the partnership interests Contributor OP holds in
any Target REIT Subsidiary that is a partnership.

1.81. Inventory.

"Inventory" shall mean all "inventories" used in the operation of the
Target REIT Hotels, including all inventories of merchandise and inventories of
supplies (as such terms are used in the Uniform System of Accounts for Hotels
(9th Revised Edition, 1996) as published by the Hotel Association of New York
City, Inc., as the same may be revised from time to time as of the date hereof)
and similar consumable supplies and any property of the type described in
Section 1221(1) of the Code.

1.82. IRS.

"IRS" shall mean the Internal Revenue Service.

1.83. Knowledge of Acquiror REIT.

"Knowledge of Acquiror REIT" shall mean the actual knowledge of the
Chairman of the Board, the Chief Executive Officer, the President, any Executive
Vice President, the Secretary and the Treasurer of Acquiror REIT.

1.84. Knowledge of Target REIT.

"Knowledge of Target REIT" shall mean the actual knowledge of the Chairman
of the Board, the Chief Executive Officer, the President, any Executive
Vice-President, the Secretary and the Treasurer of Target REIT.

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1.85. Land.

"Land" shall mean those certain parcels of real estate upon which the
Target REIT Hotels are located, together with all easements, rights, privileges,
remainders, reversions and appurtenances thereunto belonging or in any way
appertaining, and all of the estate, right, title, interest, claim or demand
whatsoever of Contributor OP, Contributor CMBS OP or any other Target REIT
Subsidiary, as applicable, therein, in the streets and ways adjacent thereto and
in the beds thereof, either at law or in equity, in possession or expectancy,
now or hereafter acquired.

1.86. Lease Termination Agreement.

"Lease Termination Agreement" shall have the meaning provided in Section
7.38.

1.87. Termination Fee.

"Termination Fee" shall have the meaning provided in Section 11.5(a).

1.88. Material.

"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.

1.89. Material Adverse Effect.

"Material Adverse Effect" shall mean, with respect to any entity or group
of entities, a material adverse effect on the business or assets (financial or
otherwise) as manifested by a material decline or deterioration of the financial
condition or results of operation of such entity or group of entities taken as a
whole.

1.89(a) Maximum Expense Reimbursement.

"Maximum Expense Reimbursement" shall have the meaning provided in Section
11.6(a).

1.89(b) Maximum Termination Fee.

"Maximum Termination Fee" shall have the meaning provided in Section
11.5(a).

1.90. Mergers.

"Mergers" shall mean collectively the REIT Merger, the OP Merger and the
CMBS OP Merger.

1.91. Merger Consideration.

"Merger Consideration" shall have the meaning provided in Section 4.1(d).

1.92. Merger Sub.

"Merger Sub" shall mean RHI Acquisition, Inc., a Tennessee corporation and
wholly-owned subsidiary of Acquiror REIT.

1.93. Mortgage Documents.

"Mortgage Documents" shall mean collectively the Mortgage Notes, the
Mortgages and all other documents executed or delivered in connection therewith,
including all modifications thereto.

1.94. Mortgage Notes.

"Mortgage Notes" shall have the meaning provided in Section 7.23.

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1.95. Mortgages.

"Mortgages" shall have the meaning provided in Section 7.23.

1.96. NYSE.

"NYSE" shall mean the New York Stock Exchange.

1.97. OP Merger.

"OP Merger" shall mean the merger of Contributor OP with and into Acquiror
OP.

1.98. OP Partner Approvals.

"OP Partner Approvals" shall have the meaning provided in Section 2.3.

1.99. Organizational Documents.

"Organizational Documents" shall mean with respect to a corporation, its
charter (or articles of incorporation) and bylaws, and all amendments thereto as
of the date hereof; with respect to a limited partnership, its certificate of
limited partnership and agreement of limited partnership and all amendments
thereto as of the date hereof; and with respect to a limited liability company
its articles of organization and operating agreement and all amendments thereto
as of the date hereof.

1.90(a) Payor Party.

"Payor Party" shall have the meaning provided in Section 11.5(a).

1.100. Permit.

"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, assets or
business.

1.101. Permitted Title Exceptions.

"Permitted Title Exceptions" shall mean those exceptions to the title to
the Real Property listed on the title insurance policies for the Target REIT
Hotels and the Undeveloped Land that do not: (a) constitute a mortgage, deed of
trust, lien, encumbrance or security interest on the Transferred Assets that
after the Closing would not secure one of the Assumed Liabilities, or (b)
materially and adversely affect the operations of the hotels on such Real
Property, create a material financial liability on the owner of the Transferred
Assets, or render title unmarketable.

1.102. Person.

"Person" shall mean an individual, corporation, partnership, limited
liability company, limited liability partnership, joint venture, association,
trust, non-incorporated organization or any other entity.

1.103. Personal Property.

"Personal Property" shall mean the Tangible Personal Property and the
Intangible Personal Property.

1.104. Plan of Merger.

"Plan of Merger" shall mean the Plan of Merger in substantially the form
attached hereto as Exhibit A.

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1.105. Pricing Period.

"Pricing Period" shall mean the twenty (20) consecutive trading days
immediately preceding the fifth business day prior to the Closing Date, except
that any trading day on which trading of any newly-issued shares of Acquiror
REIT Common Stock (or securities convertible into Acquiror REIT Common Stock)
shall commence on a when-issued basis, shall be excluded from the Pricing Period
and the next earliest trading day shall be substituted therefor.

1.106. Proxy Statement/Prospectus.

"Proxy Statement/Prospectus" shall have the meaning provided in Section
10.7.

1.107. Qualifying Income.

"Qualifying Income" shall have the meaning provided in Section 11.5(a).

1.108. Real Property.

"Real Property" shall mean the Land, the Improvements and the Undeveloped
Land.

1.109. REIT.

"REIT" shall mean a real estate investment trust under Sections 856 through
859 of the Code.

1.110. REIT Merger.

"REIT Merger" shall mean the merger of Target REIT with and into Merger
Sub.

1.111. SEC.

"SEC" shall mean the Securities and Exchange Commission of the United
States.

1.112. SEC Documents.

"SEC Documents" shall mean Acquiror REIT SEC Documents or Target REIT SEC
Documents, as the context indicates.

1.113. Securities Act.

"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

1.114. Severance Benefits.

"Severance Benefits" shall mean the payments and benefits for employees of
Target REIT and the Target REIT Subsidiaries as described in Section 10.13.

1.115. Shareholders and Shareholder.

"Shareholders" shall mean, with respect to Acquiror REIT, the holders of
Acquiror REIT Common Stock and, with respect to Target REIT, shall mean holders
of Target REIT Common Stock or Target REIT Preferred Stock, as the context
indicates. A "Shareholder" shall mean one of the Shareholders.

1.116. Stock Purchase Agreement.

"Stock Purchase Agreement" shall have the meaning provided in Section
10.28.

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1.117. Subsidiary.

"Subsidiary" of any Person shall mean any corporation, partnership, limited
liability company, limited liability partnership, joint venture or other legal
entity of which such Person (either directly or through or together with another
Subsidiary of such Person) owns 20% or more of the capital stock or other equity
interests of such corporation, partnership, limited liability company, limited
liability partnership, joint venture or other legal entity.

1.118. Surviving Corporation.

"Surviving Corporation" shall mean Merger Sub following completion of the
REIT Merger.

1.119. Surviving CMBS OP.

"Surviving CMBS OP" shall mean Acquiror CMBS OP following completion of the
CMBS OP Merger.

1.120. Surviving OP.

"Surviving OP" shall mean Acquiror OP following completion of the OP
Merger.

1.121. Takeover Statutes.

"Takeover Statutes" shall have the meaning provided in Section 7.28.

1.122. Tangible Personal Property.

"Tangible Personal Property" shall mean the items of tangible personal
property consisting of all furniture, fixtures, furnishings, machinery,
equipment and other tangible personal property situated on, attached to, or used
in the operation of Target REIT Hotels (including any capital leases of such
personal property), excluding (i) all Franchisor signage used thereon, (ii) the
Inventory owned by Target REIT Lessee or the Target REIT CMBS Lessee, and (iii)
tangible personal property leased pursuant to operating, as opposed to, capital
leases and set forth on Schedule 1.122.

1.123. Target C Corp.

"Target C Corp." shall mean Ridge Lake General Partner, Inc., a Tennessee
corporation.

1.124. Target REIT.

"Target REIT" shall mean RFS Hotels Investors, Inc., a Tennessee
corporation.

1.125. Target REIT Capital Stock.

"Target REIT Capital Stock" shall mean Target REIT Common Stock and Target
REIT Preferred Stock.

1.126. Target REIT Charter.

"Target REIT Charter" shall mean the Charter of Target REIT, as amended and
restated as of the date hereof.

1.127. Target REIT CMBS Lessee.

"Target REIT CMBS Lessee" shall mean, collectively, the parties described
in Schedule 1.133 as the lessee of the Target REIT Hotels described on Schedule
7.38 and owned by Contributor CMBS OP.

1.128. Target REIT Common Stock.

"Target REIT Common Stock" shall mean the common stock of Target REIT, par
value $.01 per share.
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1.129. Target REIT Employee Benefit Plans.

"Target REIT Employee Benefit Plans" shall mean the employee benefit plans
of Target REIT described on Schedule 7.10.

1.130. Target REIT Employment Agreements.

"Target REIT Employment Agreements" shall mean the employment agreements
described on Schedule 1.130.

1.131. Target REIT Hotels.

"Target REIT Hotels" shall mean all of the hotel properties owned by
Contributor OP, Contributor CMBS OP or the other Target REIT Subsidiaries as of
the date hereof, as set forth on Schedule 1.131.

1.132. Target REIT Leases.

"Target REIT Leases" shall mean the lease agreements with respect to the
operation of the Target REIT Hotels leased to third parties, as described in
Schedule 1.132.

1.133. Target REIT Lessee.

"Target REIT Lessee" shall mean, collectively, the parties described in
Schedule 1.133 as the lessee of the Target REIT Hotels described on Schedule
7.38 and owned by Contributor OP.

1.134. Target REIT Material Adverse Effect.

"Target REIT Material Adverse Effect" shall mean a Material Adverse Effect
with respect to Target REIT and the Target REIT Subsidiaries taken as a whole.

1.135. Target REIT Options.

"Target REIT Options" shall mean the outstanding option grants to acquire
shares of Target REIT Common Stock described in Schedule 4.3.

1.136. Target REIT Preferred Stock.

"Target REIT Preferred Stock" shall mean the Series A Preferred Stock of
Target REIT, $.01 par value per share.

1.137. Target REIT Restricted Stock Grants.

"Target REIT Restricted Stock Grants" shall mean the grants of shares of
Target REIT Common Stock which are subject to vesting as described on Schedule
1.137.

1.138. Target REIT SEC Documents.

"Target REIT SEC Documents" shall mean all registration statements,
reports, proxy statements and information statements filed by Target REIT with
the SEC since the effective date of Target REIT's initial registration statement
on Form S-11.

1.139. Target REIT Subsidiaries.

"Target REIT Subsidiaries" shall mean the Subsidiaries of Target REIT set
forth on Schedule 7.7, including, without limitation, Contributor OP and
Contributor CMBS OP.

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1.140. Tax Return.

"Tax Return" shall mean any report, return, information statement, payee
statement or other information required to be provided to any federal, state,
local or foreign governmental authority with respect to Taxes.

1.141. Taxes.

"Taxes" shall mean any and all taxes, levies, impositions, duties,
assessments, charges and withholdings imposed or required to be collected by or
paid over to any federal, state, local or foreign governmental authority or any
political subdivision thereof, including without limitation income, gross
receipts, ad valorem, value added, minimum, franchise, sales, use, excise,
license, real or personal property, unemployment, disability, stock transfer,
mortgage recording, estimated, withholding or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, and including any
interest, penalties, fines, assessments or additions to tax imposed in respect
of the foregoing, or in respect of any failure to comply with any requirement
regarding Tax Returns.

1.142. Tennessee Act.

"Tennessee Act" shall mean the Tennessee Business Corporation Act.

1.143. Title Company.

"Title Company" shall mean Lawyers Title Insurance Company.

1.144. Transferred Assets.

"Transferred Assets" shall mean collectively the Real Property, the
Tangible Personal Property, the Intangible Personal Property and the Interests.

1.145. TRULPA.

"TRULPA" shall mean the Tennessee Revised Uniform Limited Partnership Act.

1.146. Undeveloped Land.

"Undeveloped Land" shall mean those certain unimproved parcels of real
estate listed on Schedule 1.146 attached hereto, together with all easements,
rights, privileges, remainders, reversions and appurtenances thereunto belonging
or in any way appertaining, and all of the estate, right, title, interest, claim
or demand whatsoever of Contributor OP, Contributor CMBS OP or any other Target
REIT Subsidiary, as applicable, therein, in the streets and ways adjacent
thereto and in the beds thereof, either at law or in equity, in possession or
expectancy, now or hereafter acquired.

1.147. Unit Certificates.

"Unit Certificates" shall have the meaning provided in Section 5.5(a).

1.148. Utilities.

"Utilities" shall mean public sanitary and storm sewers, natural gas,
telephone, public water facilities, electrical facilities and all other utility
facilities and services necessary for the operation and occupancy of a property
as a hotel.

1.149. Welfare Plans.

"Welfare Plans" shall mean those Employee Benefit Plans that are employee
welfare benefit plans under section 3(1) of ERISA.

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ARTICLE II

ASSET SALE AGREEMENT

2.1. Sale and Purchase

Subject to the terms and conditions set forth in this Agreement, effective
as of the Closing Date, Contributor OP agrees to, and Target REIT agrees to
cause Contributor CMBS OP to, sell, and Acquiror OP agrees to, and Acquiror REIT
agrees to cause Acquiror CMBS OP to, purchase, the Transferred Assets, subject
to the Assumed Liabilities, in the manner, on the terms and subject to the
conditions and covenants set forth herein (collectively, the "Asset Sale").

2.2. Effectuation of the Asset Sale.

Subject to the terms and conditions set forth in this Agreement, the
parties hereto agree that the Asset Sale shall be effectuated by the OP Merger
provided for in Article V and the CMBS OP Merger provided for in Article VI.

2.3. OP Partner Approvals.

Target REIT shall obtain the requisite approval of the partners of
Contributor OP to the OP Merger and any other transactions contemplated by this
Agreement, to the extent required by the Contributor OP Partnership Agreement or
the TRULPA (collectively, the "Contributor OP Partner Approvals"). Acquiror REIT
shall obtain the requisite approval of the partners of Acquiror OP to the OP
Merger and any other transactions contemplated by the Agreement, to the extent
required by the Acquiror OP Partnership Agreement or the TRULPA (collectively,
the "Acquiror OP Partner Approvals," and together with the Contributor OP
Partner Approvals, the "OP Partner Approvals").

2.4. CMBS OP Partner Approvals.

Target REIT shall obtain the requisite approval of the partners of
Contributor CMBS OP to the CMBS OP Merger and the other transactions
contemplated by this Agreement, to the extent required by the Contributor CMBS
OP Partnership Agreement or the TRULPA (collectively, the "Contributor CMBS OP
Partner Approvals"). Acquiror REIT shall obtain the requisite approval of the
partners of Acquiror CMBS OP to the CMBS OP Merger and the other transactions
contemplated by this Agreement, to the extent required by the Acquiror CMBS OP
Partnership Agreement or the TRULPA (collectively, the "Acquiror CMBS Partner
Approvals," and together with the Contributor CMBS Partner Approvals, the "CMBS
OP Partner Approvals").

2.5. Acquiror OP Partnership Agreement.

Effective as of the Effective Time, Acquiror OP and Acquiror REIT shall
cause the Acquiror OP Partnership Agreement to be amended and restated in the
form of Exhibit B hereto (the "Amended and Restated Acquiror OP Partnership
Agreement"). The Acquiror OP Limited Units delivered to the limited partners of
Contributor OP as a result of the OP Merger shall have the characteristics
described in such Amended and Restated Acquiror OP Partnership Agreement.

2.6. Contributor OP's and Contributor CMBS OP's Deliveries.

At the Closing, but prior to the Effective Time, if requested by Acquiror
REIT to further evidence the Asset Sale being consummated by the OP Merger and
the CMBS OP Merger, Contributor OP shall, and Target REIT and Contributor OP
shall cause Contributor CMBS OP to, deliver, or cause to be delivered, to
Acquiror OP or Acquiror CMBS OP, as applicable, all of the following instruments
and documents, each of

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which shall have been duly executed by Contributor OP, Contributor CMBS OP, or
other appropriate party, and, where applicable, acknowledged on behalf of such
parties, and shall be dated as of the Closing Date:

(a) The Deeds.

(b) The Bill of Sale (Inventory).

(d) Such agreements, affidavits or other documents as may be
reasonably required by the Title Company to issue new owner's title
insurance policies for the Target REIT Hotels, or endorsements to all such
existing owner's title policies, together with an assignment of the
existing owner's title insurance policies consented to by the Title Company
(all subject only to the Permitted Title Exceptions).

(e) The FIRPTA Certificate.

(f) True, correct and complete copies of all warranties, if any, or if
locatable, of contractors, builders, roofers, architects, manufacturers,
suppliers and installers possessed by Contributor OP or Contributor CMBS OP
and relating to the Improvements and the Personal Property, or any part
thereof.

(g) All current real estate and personal property tax bills in
Contributor OP's or Contributor CMBS OP's possession or under their
control.

2.7. Target REIT Lease Termination.

Effective as of the Closing Date, but immediately prior to the Effective
Time, upon written notice from Acquiror REIT to Target REIT not less than thirty
(30) days prior to the Closing Date, Target REIT shall cause the Target REIT
Subsidiaries to terminate the Target REIT Leases described on Schedule 7.38
effective upon payment to the Target REIT Lessee or Target REIT CMBS Lessee, as
applicable, of the amounts set forth on Schedule 7.38 at the Closing.

2.8. Schedules and Exhibits.

Each of Target REIT and Acquiror REIT shall deliver any Schedules or
Exhibits described in this Agreement for which they are responsible but which
are not attached hereto at the date hereof within ten (10) business days
following the date of this Agreement. If such Schedules are not delivered by
such date or if either Target REIT or Acquiror REIT reasonably determines that
information contained in such Schedules discloses matters which could reasonably
be expected to have an Acquiror REIT Material Adverse Effect or a Target REIT
Material Adverse Effect, respectively, Target REIT or Acquiror REIT may elect to
terminate this Agreement after such date or the receipt of such Schedules by
written notice delivered to the other within fifteen (15) business days
following the date of this Agreement in accordance with Section 11.1. Failure to
so deliver such notice within such 15 day period shall constitute an irrevocable
waiver of such termination rights.

ARTICLE III

THE REIT MERGER
3.1. The REIT Merger.

Subject to the terms and conditions of this Agreement and the Plan of
Merger, at the Effective Time, Target REIT shall be merged with and into Merger
Sub in accordance with the provisions of, and with the effects provided in,
Sections 48-21-102, 48-21-104, 48-21-107 and 48-21-108 of the Tennessee Act and
in accordance with the Plan of Merger. Merger Sub shall be the Surviving
Corporation resulting from the REIT Merger and shall continue to be governed by
the laws of the State of Tennessee. The Plan of Merger provides for the terms
and conditions of the REIT Merger, which terms and conditions are incorporated
herein and made a part of this Agreement by reference.

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3.2. Closing.

Subject to the terms and conditions of this Agreement, the Closing shall
take place at the offices of Baker, Donelson, Bearman & Caldwell, 21st Floor,
First Tennessee Building, 165 Madison, Memphis, TN 38103, or such other location
as Acquiror REIT and Target REIT may agree, commencing at 9:00 a.m. local time
on the Closing Date. Subject to the provisions of Article XI, failure to
consummate the Closing on the date provided in this Section 3.2 will not result
in a termination of this Agreement and will not relieve any party of any
obligation under this Agreement.

3.3. Effective Time.

If all of the conditions set forth in Article IX have been fulfilled or
waived, the parties hereto shall cause, with respect to the REIT Merger,
articles of merger or other appropriate documents (the "Articles of Merger")
satisfying the requirements of the Tennessee Act, to be properly executed,
verified and delivered for filing with the Secretary of State of the State of
Tennessee in accordance with the Tennessee Act, on or before the Closing Date.
The REIT Merger shall become effective at the Effective Time. The parties hereto
shall cause the Effective Time to occur on the Closing Date.

3.4. Effect of the REIT Merger.

The REIT Merger shall have the effects specified in Section 48-21-108 of
the Tennessee Act.

3.5. Charter and Bylaws.

The Charter of Merger Sub as in effect immediately prior to the Effective
Time shall be the Charter of the Surviving Corporation, until duly amended in
accordance with applicable law. The Bylaws of Merger Sub as in effect
immediately prior to the Effective Time shall be the Bylaws of the Surviving
Corporation, until duly amended in accordance with applicable law.

3.6. Officers and Directors.

The directors of Merger Sub in office immediately prior to the Effective
Time shall be the directors of the Surviving Corporation until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified as provided in the Bylaws of the Surviving Corporation, as
the case may be. The officers of Merger Sub in office immediately prior to the
Effective Time shall be the officers of the Surviving Corporation until the
earlier of their resignation or removal.

3.7. Employees.

At or before the Closing, Target REIT and the Target REIT Subsidiaries will
terminate the employment of all their employees, and shall satisfy all
compensation, vacation pay, sick pay and other obligations under the Worker
Adjustment, Retraining and Notification Act, and, subject to the provisions of
Section 10.13, shall pay or make provision for the Severance Benefits. Neither
Acquiror REIT nor any Acquiror REIT Subsidiary shall have any obligation to
employ former Target REIT or Target REIT Subsidiary employees but may, in their
sole discretion, offer employment to such employees on terms and conditions
established by them. Neither Target REIT nor Contributor OP makes any
representation or warranty as to whether such employees shall accept employment
with Acquiror REIT or any Acquiror REIT Subsidiary.

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ARTICLE IV

EFFECT OF REIT MERGER ON CAPITALIZATION; EXCHANGE OF CERTIFICATES

4.1. Effect on Capitalization.

By virtue of the REIT Merger and except as otherwise provided herein or in
the Plan of Merger, without any action on the part of the holder of any shares
of Target REIT Capital Stock or the holder of any shares of Acquiror REIT Common
Stock:

(a) Cancellation of Treasury Stock. As of the Effective Time, any
shares of Target REIT Capital Stock that are owned by Target REIT or any
Target REIT Subsidiary shall automatically be canceled and retired and all
rights with respect thereto shall cease to exist, and no consideration
shall be delivered in exchange therefor.

(b) Conversion of Target REIT Common Stock and Target REIT Preferred
Stock. As of the Effective Time, each issued and outstanding share of
Target REIT Common Stock and each issued and outstanding share of Target
REIT Preferred Stock (other than any shares canceled in accordance with
Section 4.1(a)) shall be converted into the right to receive from Acquiror
REIT a number of fully paid and nonassessable shares of Acquiror REIT
Common Stock determined as follows (the "Exchange Ratio"):

(i) if the Average Price is equal to or greater than $14.00
but less than or equal to $17.00, 1.5 shares of Acquiror REIT Common
Stock; or

(ii) if the Average Price is greater than $17.00, the number
of shares of Acquiror REIT Common Stock determined by dividing $25.50 by
the Average Price.

The Exchange Ratio and the Average Price shall be adjusted to reflect fully
the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into
Acquiror REIT Common Stock or Target REIT Capital Stock), reorganization,
recapitalization or other like change with respect to Acquiror REIT Common
Stock or Target REIT Capital Stock occurring after the date hereof and
prior to the Effective Time.

(c) Right of Termination. If the Average Price is less than $14.00,
either of Target REIT or Acquiror REIT may terminate this Agreement in
accordance with the provisions of Section 11.2.

(d) Cancellation of Target REIT Capital Stock. As of the Effective
Time, all shares of Target REIT Capital Stock shall no longer be
outstanding and shall automatically be canceled and retired and all rights
with respect thereto shall cease to exist, and each holder of a certificate
representing any such shares of Target REIT Common Stock or Target REIT
Preferred Stock shall cease to have any rights with respect thereto, except
the right to receive, upon surrender of such certificate in accordance with
Section 4.2(c), certificates representing Acquiror REIT Common Stock
required to be delivered by Acquiror REIT pursuant to this Section 4.1(d)
and any cash in lieu of fractional shares of Acquiror REIT Common Stock to
be issued or paid in consideration therefor upon surrender of such
certificate (the "Merger Consideration") as set forth in Section 4.2(g),
and any dividends or other distributions to which such holder is entitled
pursuant to Section 4.2(d), in each case without interest and less any
required withholding taxes.

(e) Acquiror REIT Common Stock. As of the Effective Time, each share
of Acquiror REIT Common Stock issued and outstanding immediately prior to
the Effective Time shall remain issued and outstanding and shall represent
one validly issued, fully paid and nonassessable share of Acquiror REIT
Common Stock.

(f) Shares of Merger Sub. As of the Effective Time, each share of
common stock, par value $.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one share of common stock, par value $.01
per share, of the Surviving Corporation.

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4.2. Exchange of Certificates.

(a) Exchange Agent. Prior to the Closing, Acquiror REIT shall appoint, or
shall cause to be appointed, SunTrust Bank or another bank or trust company to
act as exchange agent (the "Exchange Agent") for the exchange of the Merger
Consideration upon surrender of certificates representing issued and outstanding
shares of Target REIT Common Stock and Target REIT Preferred Stock.

(b) Acquiror REIT to Provide Merger Consideration. Acquiror REIT shall
provide, or shall cause to be provided, to the Exchange Agent on or prior to the
Closing certificates representing the shares of Acquiror REIT Common Stock into
which the Target REIT Capital Stock shall be converted pursuant to Section
4.1(b) and the cash payable in respect of fractional shares pursuant to Section
4.2(g).

(c) Exchange Procedure. As soon as reasonably practicable after the
Closing, the Exchange Agent shall mail to each holder of record of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding shares of Target REIT Capital Stock (the "Certificates"), whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 4.1, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in a form and have such other provisions as Acquiror REIT reasonably specifies)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Acquiror REIT, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor the Merger Consideration into which the shares of Target REIT Capital
Stock theretofore represented by such Certificate shall have been converted
pursuant to Section 4.1(b) and all dividends or other distributions to which
such holder is entitled pursuant to Section 4.2(d), and the Certificate so
surrendered shall forthwith be canceled. In the event of a transfer of ownership
of shares of Target REIT Capital Stock which is not registered in the transfer
records of Target REIT, payment may be made to a Person other than the Person in
whose name the Certificate so surrendered is registered only if such certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
Person requesting such payment either shall pay any transfer or other taxes
required by reason of such payment being made to a Person other than the
registered holder of such Certificate or establish to the satisfaction of
Acquiror REIT that such tax or taxes have been paid or are not applicable. Until
surrender as contemplated by this Section 4.2, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive upon
such surrender the Merger Consideration, without interest, into which the shares
of Target REIT Capital Stock theretofore represented by such Certificate shall
have been converted pursuant to Section 4.1, and all dividends or other
distributions to which such holder is entitled pursuant to Section 4.2(d). No
interest will be paid or will accrue on the Merger Consideration upon the
surrender of any Certificate or on any cash payable pursuant to Section 4.2(d)
or Section 4.2(g).

In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by Acquiror REIT or
the Exchange Agent, the posting by such Person of a bond in such reasonable
amount as Acquiror REIT may direct as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent or Acquiror
REIT will issue with respect to such lost, stolen or destroyed Certificate the
shares of Acquiror REIT Common Stock and cash in lieu of fractional shares and
unpaid dividends and Final Target REIT Dividend as provided in Section 4.2(d)
deliverable in respect thereof pursuant to this Agreement.

(d) Record Dates for Final Dividends; Distributions with Respect to
Unexchanged Shares. To the extent necessary to satisfy the requirements of
Section 857(a)(1) of the Code for the taxable year of Target REIT ending at the
Closing Date (and to avoid the payment of tax with respect to undistributed
income), Target REIT shall declare a dividend (the "Final Target REIT Dividend")
to each holder of shares of Target REIT Common Stock and, if necessary, Target
REIT Preferred Stock, the record date for which shall be approximately 5
business days prior to the Closing Date, in an amount equal to the minimum
dividend

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sufficient (taking into account expected revenue and expenses through the day
prior to the Closing Date) to permit Target REIT to satisfy such requirements.
If Target REIT determines it necessary to declare the Final Target REIT
Dividend, it shall notify Acquiror REIT at least 10 days prior to the date for
the Target REIT shareholders' meeting described in Section 10.3, and Acquiror
REIT shall declare a dividend per share to holders of Acquiror REIT Common
Stock, the record date for which shall be approximately 5 business days prior to
the Closing Date, in an amount per share of Acquiror REIT Common Stock equal to
the quotient obtained by dividing (x) the Final Target REIT Dividend per share
of Target REIT Common Stock paid by Target REIT by (y) the Exchange Ratio. The
dividends payable hereunder to holders of Target REIT Common Stock, Target REIT
Preferred Stock (if necessary) and Acquiror REIT Common Stock shall be paid on
the close of business on the last business day prior to the Closing Date.

(e) No Further Ownership Rights in Shares of Target REIT Capital
Stock. All Merger Consideration paid upon the surrender of Certificates in
accordance with the terms of this Section 4.2 (including any cash paid pursuant
to Section 4.2(g)) shall be deemed to have been paid in full satisfaction of all
rights pertaining to the shares of Target REIT Capital Stock theretofore
represented by such Certificates, and at and after the Effective Time there
shall be no further registration of transfers on the stock transfer books of
Target REIT of the shares of Target REIT Capital Stock which were outstanding
immediately prior to the Effective Time.

(f) No Liability. None of Acquiror REIT, Merger Sub, Target REIT or the
Exchange Agent shall be liable to any Person in respect of any consideration or
dividends delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. Any portion of the Merger Consideration
delivered to the Exchange Agent pursuant to this Agreement that remains
unclaimed for one year after the Closing shall be redelivered by the Exchange
Agent to Acquiror REIT, upon demand, and any holders of Certificates who have
not theretofore complied with Section 4.2(c) shall thereafter look only to
Acquiror REIT for delivery of the Merger Consideration and any unpaid dividends,
subject to applicable escheat and other similar laws.

(g) No Fractional Shares. No certificates or scrip representing fractional
shares of Acquiror REIT Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote, to receive dividends or to any other rights of a
Shareholder of Acquiror REIT. In lieu of the issuance of any fractional shares
of Acquiror REIT Common Stock, cash payments will be made by Acquiror REIT to
the Exchange Agent for payment to holders in respect of any fractional shares of
Acquiror REIT Common Stock that otherwise would be issuable in an amount equal
to such fractional part of a share of Acquiror REIT Common Stock multiplied by
the Average Price.

(h) Withholding Rights. Acquiror REIT, Target REIT or the Exchange Agent
shall be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Target REIT
Capital Stock such amounts as Acquiror REIT, Target REIT or the Exchange Agent
is required to deduct and withhold with respect to the making of such payment
under the Code, or any provision of state, local or foreign tax law. To the
extent that such amounts are so withheld by Acquiror REIT, Target REIT or the
Exchange Agent, such withheld amount shall be treated for all purpose of this
Agreement as having been paid to the Shareholder of Target REIT in respect of
which such deduction and withholding was made by Acquiror REIT, Target REIT or
the Exchange Agent.

(i) No Appraisal Rights. The holders of Target REIT Capital Stock are not
entitled under applicable law to appraisal rights as a result of the REIT
Merger.

4.3. Target REIT Options.

At or prior to the Effective Time, holders of the currently exercisable
Target REIT Options described on Schedule 4.3 which have not been exercised as
of the Effective Time, including any unvested Target REIT Options with respect
to which vesting accelerates as a result of the transactions contemplated by
this Agreement as described in Schedule 4.3, may elect to either (i) exchange
such Target REIT Options for fully vested options to acquire a number of shares
of Acquiror REIT Common Stock equal to (x) the number of shares of Target REIT
Common Stock subject to such Target REIT Options multiplied by (y) the Exchange
Ratio with an option exercise price per share of Acquiror REIT Common Stock
equal to (A) the exercise price for the Target REIT Options divided by (B) the
Exchange Ratio (rounding to the nearest cent); or
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(ii) sell all of the Target REIT Options outstanding as of the Effective Time,
including any unvested Target REIT Options with respect to which vesting
accelerates as a result of the transactions contemplated hereby, for a cash
amount equal to (a) the number of shares of Target REIT Common Stock subject to
such Target REIT Options multiplied by (b) the difference between the exercise
price of each Target REIT Option and an amount equal to the Exchange Ratio
multiplied by the Average Price. Any options issued pursuant to clause (i) above
shall expire on the expiration date of the Target REIT Options for which they
are exchanged, disregarding any termination of employment resulting from, or
related to, Acquiror REIT's acquisition of Target REIT and its Subsidiaries
pursuant to this Agreement. Notwithstanding the provisions of clause (i) above,
Acquiror REIT shall not be obligated to issue any fraction of a share of
Acquiror REIT Common Stock upon exercise of such new options to acquire Acquiror
REIT Common Stock and any fraction of a share of Acquiror REIT Common Stock that
otherwise would be subject to such new options shall represent the right to
receive a cash payment upon exercise of such new option equal to the product of
such fraction and the difference between the market value of one share of
Acquiror REIT Common Stock at the time of exercise of such new option and the
per share exercise price of such new option. The market value of one share of
Acquiror REIT Common Stock at the time of exercise of such new option shall be
the last sale price of Acquiror REIT Common Stock on the NYSE (as reported by
The Wall Street Journal or, if not reported thereby, any other authoritative
source selected by Acquiror REIT) on the last trading day preceding the date of
exercise. In addition, notwithstanding clause (i) above, each Target REIT Option
which is an "incentive stock option" shall be adjusted as required by Section
424 of the Code, so as not to constitute a modification, extension or renewal of
the option, within the meaning of Section 424(h) of the Code. Acquiror REIT
agrees to take all necessary steps to effectuate the foregoing provisions of
this Section 4.3. As soon as practicable after the Effective Time, Acquiror REIT
shall deliver to the holders of the Target REIT Options who elect to exchange
their Target REIT Options as provided in clause (i) above an appropriate notice
setting forth such holder's rights pursuant to this Section 4.3. At or prior to
the Effective Time, Acquiror REIT shall take all corporate action necessary to
reserve for issuance sufficient number of shares of Acquiror REIT Common Stock
for delivery upon exercise of the new options provided for in this Section 4.3.
Nothing herein shall preclude any holder of Target REIT Options from exercising
any Target REIT Options which are currently vested or which vest by their terms
prior to the Effective Time, including those which vest as a result of the
transactions contemplated hereby. From and after the date of this Agreement, no
additional options shall be granted by Target REIT.

ARTICLE V

THE OP MERGER
5.1. The OP Merger.

(b) If all of the conditions set forth in Article IX have been fulfilled or
waived, the parties hereto shall cause, with respect to the OP Merger, a
certificate of merger or other appropriate documents satisfying the requirements
of the TRULPA, to be properly executed, verified and delivered for filing with
the Secretary of State of the State of Tennessee in accordance with the TRULPA,
on or before the Closing Date. The OP Merger shall become effective at the
Effective Time.

(c) The sole general partner of the Surviving OP shall be Equity Inns
Trust, and the limited partners of the Surviving OP shall be all Persons who are
now or who hereafter are admitted to either Contributor OP or Acquiror OP as
limited partners.

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5.2. Effect of the OP Merger.

The OP Merger shall have the effects specified in Section 61-2-211(f) of
the TRULPA.

5.3. Certificate of Limited Partnership and Partnership Agreement.

The Certificate of Limited Partnership of Acquiror OP as in effect
immediately prior to the Effective Time shall be the Certificate of Limited
Partnership of the Surviving OP, until duly amended in accordance with
applicable law. The Acquiror OP Partnership Agreement of Acquiror OP as in
effect immediately prior to the Effective Time shall be the partnership
agreement of the Surviving OP, until duly amended in accordance with applicable
law.

5.4. Effect on Partnership Interests.

By virtue of the OP Merger and except as otherwise provided herein, without
any action on the part of the holder of any units of partnership interest of
Contributor OP or the holder of any units of partnership interest of Acquiror
OP:

(a) Conversion of Contributor OP Units. As of the Effective Time, (i)
each issued and outstanding Contributor OP Unit held by Target REIT,
including preferred units of partnership interest, shall be converted into
the right to receive from Acquiror OP a number of validly issued, fully
paid and nonassessable Acquiror OP General Units equal to the Exchange
Ratio, and (ii) each issued and outstanding Contributor OP Unit held by
limited partners of Contributor OP shall be converted into the right to
receive from Acquiror OP a number of fully paid and nonassessable Acquiror
OP Limited Units equal to the Exchange Ratio. Neither Acquiror OP nor
Contributor OP shall effect any reorganization, recapitalization or other
like change with respect to Acquiror OP Units or Contributor OP Units after
the date hereof and prior to the Effective Time.

(b) Cancellation of Contributor OP Units. As of the Effective Time,
all Contributor OP Units shall no longer be outstanding and shall
automatically be canceled and retired and all rights with respect thereto
shall cease to exist, and each holder of any certificate representing any
such units of Contributor OP shall cease to have any rights with respect
thereto, except the right to receive, upon surrender of such certificate in
accordance with Section 5.5(a) and delivery of such documents as may be
reasonably required by Acquiror OP, certificates representing Acquiror OP
Units required to be issued by Acquiror OP pursuant to Section 5.4(a) and
any cash in lieu of fractional Acquiror OP Units paid by Acquiror OP
pursuant to Section 5.5(f) (the "OP Merger Consideration"), without
interest and less any required withholding taxes.

(c) Acquiror OP Units. As of the Effective Time, each Acquiror OP
Limited Unit and Acquiror OP General Unit, respectively, issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and shall represent one validly issued, fully paid and
nonassessable Acquiror OP Limited Unit and Acquiror OP General Unit,
respectively.

5.5. Exchange of Certificates.

(a) Exchange Procedure. As soon as reasonably practicable after the
Closing, Acquiror OP shall mail to each limited partner of record of Contributor
OP, whose Contributor OP Units were converted into the right to receive the OP
Merger Consideration pursuant to Section 5.4, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to any
certificates representing Contributor OP Units ("Unit Certificates") shall pass,
only upon delivery of the Unit Certificates to Acquiror OP and shall be in a
form and have such other provisions as Acquiror OP reasonably specifies) and
(ii) instructions for use in effecting the surrender of any Unit Certificates in
exchange for the OP Merger Consideration. Upon surrender of a Unit Certificate
for cancellation to Acquiror OP or to such other agent or agents as may be
appointed by Acquiror OP, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by Acquiror OP,
the holder of such Unit Certificate shall be entitled to receive in exchange
therefor the OP Merger Consideration into which the Contributor OP Units
theretofore represented

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by such Unit Certificate shall have been converted pursuant to Section 5.4 (a)
and all distributions to which such holder is entitled and the Unit Certificate
so surrendered shall forthwith be canceled. In the event of a transfer of
ownership of Contributor OP Units which is not registered in the transfer
records of Contributor OP, payment may be made to a Person other than the Person
in whose name the Unit Certificate so surrendered is registered only if such
certificate shall be properly endorsed or otherwise be in proper form for
transfer and the Person requesting such payment either shall pay any transfer or
other taxes required by reason of such payment being made to a Person other than
the registered holder of such Unit Certificate or establish to the satisfaction
of Acquiror OP that such tax or taxes have been paid or are not applicable.
Until surrender as contemplated by this Section 5.5(a), each Unit Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the OP Merger Consideration, without interest,
into which the Contributor OP Units theretofore represented by such Unit
Certificate shall have been converted pursuant to Section 5.4, and all
distributions to which such holder is entitled. No interest will be paid or will
accrue on the OP Merger Consideration upon the surrender of any Unit
Certificate. In the event any Unit Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Unit Certificate to be lost, stolen or destroyed and, if required by
Acquiror OP, the posting by such Person of a bond in such reasonable amount as
Acquiror OP may direct as indemnity against any claim that may be made against
it with respect to such Unit Certificate, Acquiror OP will issue with respect to
such lost, stolen or destroyed Unit Certificate the Acquiror OP Units and cash
in lieu of fractional units deliverable in respect thereof pursuant to this
Agreement. The certificates evidencing the Acquiror OP Units will bear
appropriate legends indicating (A) that the Acquiror OP Units have not been
registered under the Securities Act, and (B) that the Acquiror OP Partnership
Agreement restricts the transfer of the Acquiror OP Units.

(b) No Further Ownership Rights in Contributor OP Units. All OP Merger
Consideration paid upon the surrender of Unit Certificates in accordance with
the terms of this Section 5.5 shall be deemed to have been paid in full
satisfaction of all rights pertaining to the Contributor OP Units theretofore
represented by such Unit Certificates, and at and after the Effective Time there
shall be no further registration of transfers on the unit transfer books of
Contributor OP of Contributor OP Units which were outstanding immediately prior
to the Effective Time.

(c) No Liability. Neither Contributor OP nor Acquiror OP shall be liable
to any Person in respect of any consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.

(d) Withholding Rights. Acquiror OP or Contributor OP shall be entitled to
deduct and withhold from the OP Merger Consideration otherwise payable pursuant
to this Agreement to any holder of Contributor OP Units such amounts as Acquiror
OP or Target OP is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax
law. To the extent that such amounts are so withheld by Acquiror OP or Target
OP, such withheld amount shall be treated for all purpose of this Agreement as
having been paid to the partner of Acquiror OP in respect of which such
deduction and withholding was made by Acquiror OP or Target OP.

(e) No Appraisal Rights. The holders of Contributor OP Units are not
entitled under applicable law to appraisal rights as a result of the OP Merger.

(f) No Fractional Units. No fractional Acquiror OP Units shall be issued
in connection with the OP Merger, and such fractional unit interests will not
entitle the owner thereof to vote, to receive distributions or any other rights
of a partner of Acquiror OP. In lieu of the issuance of any fractional Acquiror
OP Units, upon surrender for exchange of Unit Certificates, cash payments will
be made by Acquiror OP to such owners in respect of any fractional Acquiror OP
Units that otherwise would be issuable in an amount equal to such fractional
part of an Acquiror OP Unit multiplied by the Average Price.

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ARTICLE VI

THE CMBS OP MERGER

6.1. The CMBS OP Merger; CMBS Agreement of Merger.

(a) Subject to the terms and conditions of this Agreement, at the Effective
Time, and for the purpose of effecting the Asset Sale with respect to the
Transferred Assets owned by Contributor CMBS OP, Contributor CMBS OP shall be
merged with and into Acquiror CMBS OP in accordance with the provisions of, and
with the effects provided in, Section 61-2-211 of the TRULPA and in accordance
with the provisions of this Article VI and an agreement of merger between
Contributor CMBS OP and Acquisition CMBS OP that Target REIT and Acquiror REIT
shall cause to be entered into prior to the Closing Date, and which will contain
terms and conditions consistent with this Article VI (the "CMBS Agreement of
Merger"). Acquiror CMBS OP shall be the Surviving CMBS OP resulting from the
CMBS OP Merger and shall continue to be governed by the laws of the State of
Tennessee.

(b) If all of the conditions set forth in Article IX have been fulfilled or
waived, the parties hereto shall cause, with respect to the CMBS OP Merger, a
certificate of merger or other appropriate documents satisfying the requirements
of the TRULPA, to be properly executed, verified and delivered for filing with
the Secretary of State of the State of Tennessee in accordance with the TRULPA,
on or before the Closing Date. The CMBS OP Merger shall become effective at the
Effective Time.

6.2. Effect of the CMBS OP Merger.

The CMBS OP Merger shall have the effects specified in Section 61-2-211(f)
of the TRULPA.

6.3. Certificate of Limited Partnership and Partnership Agreement.

The Certificate of Limited Partnership of Acquiror CMBS OP as in effect
immediately prior to the Effective Time shall be the Certificate of Limited
Partnership of the Surviving CMBS OP, until duly amended in accordance with
applicable law. The Acquiror CMBS OP Partnership Agreement of Acquiror CMBS OP
as in effect immediately prior to the Effective Time shall be the partnership
agreement of the Surviving CMBS OP, until duly amended in accordance with
applicable law.

6.4. Effect on Partnership Interests.

By virtue of the CMBS OP Merger and except as otherwise provided herein,
without any action on the part of the holder of any units of partnership
interest of Contributor CMBS OP or the holder of any units of partnership
interest of Acquiror CMBS OP, as of the Effective Time, each issued and
outstanding unit of partnership interest in Contributor CMBS OP shall be
converted into the right to receive from Acquiror CMBS OP a number of validly
issued, fully paid and nonassessable units of partnership interest in Acquiror
CMBS OP, as set forth in the CMBS Agreement of Merger (the "CMBS OP Merger
Consideration").

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF
CONTRIBUTOR OP AND TARGET REIT

Contributor OP and Target REIT hereby represent and warrant, jointly and
severally, to Acquiror OP, Acquiror REIT and Merger Sub that:

7.1. Organization.

(a) Target REIT is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee and is duly qualified as
a foreign corporation to do business in, and is in good standing under the laws
of, each jurisdiction in which the failure to qualify would have a Target REIT
Material

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Adverse Effect. Target REIT has the power and authority to carry on its business
as it is now being conducted and to own or lease its assets.

(b) Each of the Target REIT Subsidiaries is a corporation or limited
partnership, as indicated on Schedule 7.7, duly organized, validly existing and
in good standing under the laws of the state of its formation and is duly
qualified as a foreign entity to do business in, and is in good standing under
the laws of, each jurisdiction in which the failure to qualify would have a
Target REIT Material Adverse Effect. Each of the Target REIT Subsidiaries has
the power and authority to carry on its business as it is now being conducted
and to own or lease its assets.

(c) The copies of the Organizational Documents of Contributor OP and Target
REIT, which have heretofore been made available to Acquiror REIT, are true,
complete and correct copies of the Organizational Documents of Contributor OP
and Target REIT, as amended and in effect on the date hereof.

(d) The copies of the Organizational Documents of the Target REIT
Subsidiaries, which have heretofore been made available to Acquiror REIT, are
true, complete and correct copies of such Organizational Documents of the Target
REIT Subsidiaries, as amended and in effect on the date hereof.

(e) The copies of the minute books and records of the material proceedings
of Target REIT and the Target REIT Subsidiaries, which have heretofore been made
available to Acquiror REIT, are copies of the original minute books and records
of Target REIT and the Target REIT Subsidiaries, contain all proceedings of the
Shareholders, partners, boards of directors and any committees thereof with
respect to Target REIT and the Target REIT Subsidiaries prior to the date
hereof, and are true, correct and complete in all material respects.

7.2. Authorization; Enforceability.

Target REIT has the corporate power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate the transactions
contemplated by this Agreement, subject to approval of this Agreement and the
Plan of Merger by the Shareholders of Target REIT as required by the Tennessee
Act. Contributor OP has the partnership power and authority to execute, deliver
and perform its obligations under this Agreement and to consummate the
transactions contemplated by this Agreement, subject to approval of this
Agreement and the OP Merger by the limited partners of Contributor OP as
required by the TRULPA. Subject to such Shareholder and limited partner
approvals, this Agreement is, and the other documents and instruments required
hereby will be, when executed and delivered by Contributor OP and Target REIT
and the other parties hereto and thereto, the valid and binding obligations of
Contributor OP and Target REIT, enforceable against Contributor OP and Target
REIT in accordance with their respective terms, except as may be limited by
bankruptcy or insolvency laws or similar laws or equitable principles affecting
rights of creditors generally. All necessary action on the part of the board of
directors of Target REIT and the general partner of Contributor OP has been
taken to authorize the execution and delivery of this Agreement and each
agreement or instrument executed in connection herewith, the performance of
their obligations hereunder and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Target REIT and Contributor OP.

7.3. Capitalization.

The authorized capital stock of Target REIT consists of 100,000,000 shares
of Target REIT Common Stock and 5,000,000 shares of Target REIT Preferred Stock.
As of the date hereof, (i) 24,876,946 shares of Target REIT Common Stock are
issued and outstanding, (ii) Target REIT has issued 41,000 shares of Target REIT
Common Stock pursuant to unvested Target REIT Restricted Stock Grants, the
vesting of which accelerates as a result of the transactions contemplated by
this Agreement, and (iii) 973,684 shares of Target REIT Preferred Stock are
issued and outstanding. All such issued and outstanding shares of Target REIT
Capital Stock are validly issued, fully paid, nonassessable and were not issued
in violation of any preemptive rights. An aggregate of 2,567,609 shares of
Target REIT Common Stock are reserved for issuance upon redemption of 2,567,609
outstanding Contributor OP Units. Neither Target REIT nor any Target REIT
Subsidiary has any outstanding bonds, debentures, notes or other obligations the
holders of which have the
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right to vote with the Shareholders of Target REIT on any matter. There are not
any existing options, warrants, calls, subscriptions, convertible securities, or
other rights, agreements or commitments which obligate Target REIT or any of the
Target REIT Subsidiaries to issue, transfer or sell any shares of capital stock,
partnership interests or other equity interests of Target REIT or any of the
Target REIT Subsidiaries, other than with respect to the Target REIT Options,
the Target REIT Restricted Stock Grants described on Schedule 1.137, and the
Contributor OP Units described on Schedule 7.7 and except as set forth in the
Target REIT Charter with respect to Target REIT Preferred Stock. There are no
agreements or understandings to which Target REIT is a party with respect to the
voting of any shares of Target REIT Capital Stock or which restrict the transfer
of any such shares, except as set forth in Target REIT's Organizational
Documents. Except as with respect to options issued pursuant to Section 4.3,
after the Closing, Acquiror REIT will have no obligation to issue, transfer or
sell any shares of capital stock or other equity interest of Acquiror REIT
pursuant to any Target REIT Benefit Plan.

7.4. No Violation or Conflict by Contributor OP or Target REIT.

Except as set forth on Schedule 7.4, the execution, delivery and
performance of this Agreement by Contributor OP and Target REIT do not and will
not conflict with or violate or constitute a breach or default under, (i) any
law, judgment, order or decree binding on Target REIT or any of the Target REIT
Subsidiaries, (ii) the Organizational Documents of Target REIT, Contributor OP,
or Contributor CMBS OP, or (iii) any Contract to which Target REIT or any of the
Target REIT Subsidiaries is a party or by which it is bound, the breach or
default of which would have a Target REIT Material Adverse Effect.

7.5. No Litigation.

Except as set forth on Schedule 7.5, there is no litigation or governmental
investigation pending or, to the Knowledge of Target REIT, proposed or
threatened against Target REIT or any of the Target REIT Subsidiaries, that (a)
is expected to have a Target REIT Material Adverse Effect, or (b) seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.

7.6. Absence of Certain Changes.

Except as set forth on Schedule 7.6, in the Target REIT SEC Documents, or
as contemplated by this Agreement, since December 31, 1997, there has not been
any sale, transfer or other disposition of material assets of Target REIT or the
Target REIT Subsidiaries, except in the ordinary course of business consistent
with past practice.

7.7. Subsidiaries.

All of the Target REIT Subsidiaries are disclosed on Schedule 7.7 hereto.
Schedule 7.7 also sets forth Target REIT's and Contributor OP's ownership of
equity interests in the Target REIT Subsidiaries, and to the Knowledge of Target
REIT, other Persons' ownership of equity interests in the Target REIT
Subsidiaries. Except as set forth on Schedule 7.7, Target REIT and Contributor
OP (directly or indirectly) have good and marketable title to all of the equity
interests in each of the Target REIT Subsidiaries as indicated on Schedule 7.7
free and clear of all liens, claims and encumbrances. Except for the Target REIT
Subsidiaries, Target REIT owns no ownership interest in any other corporation,
partnership, joint venture or other business organization or entity.

7.8. Contracts and Commitments.

Except as set forth on Schedule 7.8, Target REIT and the Target REIT
Subsidiaries are not a party to any Contract (a) involving remaining payment or
guarantee of obligations by Target REIT or any Target REIT Subsidiary in excess
of $25,000, or (b) with a remaining term in excess of one year and which cannot
be canceled by Target REIT or a Target REIT Subsidiary without penalty on prior
notice of 90 days or less. Schedule 7.8 sets forth the indebtedness (other than
trade payables arising in the ordinary course of business

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and obligations under the Employee Benefit Plans) of Target REIT and the Target
REIT Subsidiaries including the unpaid principal balance at March 31, 1998. With
respect to each Contract listed on Schedule 7.8 hereto: (i) the Contract is in
full force and effect, valid and enforceable in accordance with its terms, as
limited by applicable bankruptcy, reorganization, moratorium, or similar laws
and equitable principles affecting creditors' rights generally; (ii) neither
Target REIT nor any Target REIT Subsidiary is in material default thereunder;
(iii) neither Target REIT nor any Target REIT Subsidiary has repudiated or
waived any material provision of any such Contract; and (iv) no other party to
any such Contract is, to the Knowledge of Target REIT, in default in any
respect, or has repudiated or waived any material provision thereunder. Except
as disclosed on Schedule 7.8 hereto, all of the indebtedness set forth on
Schedule 7.8 hereto may be prepaid at borrower's sole option at any time without
penalty or premium. Except as set forth in Schedule 7.8, neither Target REIT nor
any Target REIT Subsidiary has entered into or is subject, directly or
indirectly, to any Tax Protection Agreements. As used herein, a "Tax Protection
Agreement" is an agreement, oral or written, (i) that has as one of its purposes
to permit a Person to take the position that such Person could defer federal
taxable income that otherwise might have been recognized upon a transfer of
property to the Contributor OP, Contributor CMBS OP or any other Target REIT
Subsidiary that is treated as a partnership for federal income tax purposes, and
(ii) that (A) prohibits or restricts in any manner the disposition of any assets
of Target REIT or any Target REIT Subsidiary, (B) requires that Target REIT or
any Target REIT Subsidiary maintain, or put in place, or replace, indebtedness,
whether or not secured by one or more of the Target REIT Hotels, or (C) requires
that Target REIT or any Target REIT Subsidiary offer to any Person at any time
the opportunity to guarantee or otherwise assume, directly or indirectly, the
risk of loss for federal income tax purposes for indebtedness or other
liabilities of Target REIT or any Target REIT Subsidiary.

7.9. Approvals and Consents.

Except as set forth on Schedule 7.9, no consent, approval or authorization
of, notice to, or filing with any governmental authority or any Person or entity
not a party to this Agreement is required to be obtained by Target REIT or any
Target REIT Subsidiary as a condition to the execution, delivery or performance
of this Agreement by Contributor OP or Target REIT, except where the failure to
obtain such consent, approval or authorization does not have a Target REIT
Material Adverse Effect.

7.10. Target REIT Employee Benefit Plans.

(a) Disclosure. Schedule 7.10 hereto sets forth a summary description of
all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently or previously adopted, maintained by, sponsored in whole or in
part by, contributed to, or required to be contributed to, by Target REIT or any
Target REIT Subsidiary or any entity which is considered a member of the same
controlled group as Target REIT under Section 4001 of ERISA or Section 414 of
the Code or Section 302 of ERISA (whether or not waived) for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate.

(b) Compliance with Law. The provisions of each Target REIT Employee
Benefit Plan and, to the Knowledge of Target REIT, the administration of each
Target REIT Employee Benefit Plan are and have been in all material respects in
compliance with all applicable laws, and neither Target REIT nor any Target REIT
Subsidiary has received any claim or notice alleging to the contrary with
respect to any Target REIT Employee Benefit Plan.

(c) Tax or Civil Liability. With respect to the Target REIT Employee
Benefit Plans, neither Target REIT nor any of the Target REIT Subsidiaries has
engaged in any "prohibited transaction" (as such term is defined in ERISA or the
Code), for which there is not an exception, that could subject Target REIT or
any
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Target REIT Subsidiary to an excise tax under Code Section 4975 or civil
liability under Section 502(i) of ERISA, except for a tax or liability that
would not have a Target REIT Material Adverse Effect.

(d) Claims and Liability. There is no action, claim or demand of any kind
(other than routine claims for benefits) that has been brought or, to the
Knowledge of Target REIT, threatened, against any Target REIT Employee Benefit
Plan or the assets thereof, or against any fiduciary of any such Target REIT
Employee Benefit Plan.

(e) Multiemployer Plans. Target REIT and the Target REIT Subsidiaries
neither maintain, participate in nor contribute to, and, except as set forth on
Schedule 7.10 hereto, have never maintained, participated in or contributed to,
any "multiemployer plans" as defined in Section 3(37) of ERISA. Target REIT and
the Target REIT Subsidiaries have no present liability under any multiemployer
plan.

(f) Reporting and Disclosure. Target REIT and the Target REIT Subsidiaries
have complied in all material respects with the reporting and disclosure
requirements of ERISA.

7.11. SEC Documents; Financial Statements; Undisclosed Liabilities.

The Target REIT SEC Documents constitute all forms, reports and documents
required to be filed by Target REIT with the SEC under applicable law. All of
the Target REIT SEC Documents (other than preliminary material) have been timely
filed, and, as of their respective filing dates or effective dates, as
applicable, complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act. None of the Target REIT SEC
Documents at the time of filing contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by later Target REIT SEC Documents filed and
publicly available prior to the date of this Agreement. The consolidated
financial statements of Target REIT and the Target REIT Subsidiaries included in
Target REIT SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by the applicable
rules and regulations of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP and the
applicable rules and regulations of the SEC, the consolidated financial position
of Target REIT and the Target REIT Subsidiaries, taken as a whole, as of the
dates thereof and the consolidated results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as disclosed in the consolidated financial
statements of Target REIT and the Target REIT Subsidiaries included in the
Target REIT SEC Documents or on Schedule 7.11, neither Target REIT nor any
Target REIT Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a consolidated balance sheet of Target REIT or in the notes thereto and which,
individually or in the aggregate, would have a Target REIT Material Adverse
Effect.

7.12. No Special Taxes.

Except as set forth in Schedule 7.12, neither Target REIT, Contributor OP,
nor Contributor CMBS OP has knowledge of, nor has received any notice of, any
special taxes or assessments relating to any of the Transferred Assets or any
part thereof or any planned public improvements that may result in a special tax
or assessment against a Target REIT Hotel which would have a Target REIT
Material Adverse Effect.

7.13. Compliance with Existing Laws.

Except as set forth on Schedule 7.13, neither Target REIT nor any Target
REIT Subsidiary has received any notice within the past twelve (12) months (or
since commencement of development or the date of acquisition of any Target REIT
Hotel if such development commenced or acquisition occurred within the past
twelve (12) months) of any existing or threatened violation of any provision of
any applicable building, zoning, subdivision, environmental or other
governmental ordinance, resolution, statute, rule, order or
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regulation, including but not limited to those of environmental agencies or
insurance boards of underwriters, with respect to the ownership, operation, use,
maintenance or condition of any Target REIT Hotel or any part thereof, or
requiring any repairs or alterations other than those that have been made prior
to the date hereof, except such violations as have been cured to the
satisfaction of the relevant authority or would have no Target REIT Material
Adverse Effect. Target REIT and each Target REIT Subsidiary have in effect all
Permits necessary for them to own, lease, or operate the Target REIT Hotels and
to carry on their businesses as now conducted, except for those Permits the
absence of which would have no Material Adverse Effect on any Target REIT Hotel,
and there has occurred no default under any such Permit other than defaults
which, singly or in the aggregate, would have no Material Adverse Effect on any
Target REIT Hotel. Except as disclosed on Schedule 7.13 hereto, neither Target
REIT nor any Target REIT Subsidiary is in violation of any laws, orders, or
Permits applicable to its business or employees conducting its business, except
for violations which would not have a Target REIT Material Adverse Effect.

7.14. Insurance.

All of the Insurance Policies are listed on Schedule 7.14, and all such
policies are valid and in full force and effect, all premiums for such policies
were paid when due and all future premiums for such policies (and any
replacements thereof) through the Closing Date shall be paid by Contributor OP,
Contributor CMBS OP or their lessees on or before the due date therefor.

7.15. Condemnation Proceedings.

Except as set forth on Schedule 7.15, neither Target REIT nor Contributor
OP has received any notice of any condemnation or eminent domain proceeding
pending or, to the Knowledge of Target REIT, threatened against the Transferred
Assets or any material part thereof.

7.16. Personal Property.

Subject only to the Permitted Title Exceptions and the Assumed Liabilities,
all of the Personal Property will be free and clear of all liens, encumbrances
and charges on the Closing Date and the Target REIT Subsidiaries have good and
marketable title thereto and the right to convey same in accordance with the
terms of this Agreement (except for capital leases of personal property entered
into in the ordinary cause of business). All of the Tangible Personal Property
is in good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business of the Target REIT Hotels consistent with past
practices.

7.17. Bankruptcy.

No Act of Bankruptcy has occurred with respect to Target REIT or any Target
REIT Subsidiary.

7.18. Title to Real Property.

Except for Permitted Title Exceptions and as set forth on Schedule 7.18,
the Target REIT Subsidiaries are the sole owners of good and marketable title to
the Real Property, free and clear of all liens, mortgages, security interests,
leases (except ground and other leases noticed on Schedule 7.18), encumbrances,
restrictions, conditions, and agreements. The Target REIT Subsidiaries have
title insurance polices insuring their fee simple titles or leasehold interests,
as the case may be, to the Target REIT Hotels.

7.19. Zoning.

Except as set forth on Schedule 7.19, to the Knowledge of Target REIT, the
current use and occupancy of the Target REIT Hotels for hotel purposes are
permitted under all laws applicable thereto.

7.20. Hazardous Substances.

To the Knowledge of Target REIT: except as set forth on Schedule 7.20,
there are no (a) Hazardous Substances on, under or in the Target REIT Hotels, or
any portion thereof, in violation of applicable law,

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(b) spills, releases, discharges, or disposal of Hazardous Substances in
violation of applicable law that have occurred or are presently occurring on or
onto the Target REIT Hotels, or any portion thereof, or (c) PCB (polychlorinated
biphenyls) transformers serving, or stored on, the Target REIT Hotels, or any
portion thereof. To the Knowledge of Target REIT, Target REIT and the Target
REIT Subsidiaries have complied with any applicable local, state and federal
environmental laws, regulations, ordinances and administrative and judicial
orders relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Substances, except for violations that
would not have a Target REIT Material Adverse Effect.

7.21. Room Furnishings.

All public spaces, lobbies, meeting rooms, and each room in each of the
Target REIT Hotels available for guest rental is generally furnished in
accordance with the applicable Franchisor's standards for the hotel and room
type.

7.22. Franchisors; Franchise Agreements.

The Target REIT Hotels are currently operated pursuant to Franchise
Agreements with the Franchisors as listed next to their name on Schedule 7.22.

7.23. Mortgage Documents.

All promissory notes, bonds and other evidences on indebtedness given by
Target REIT or any Target REIT Subsidiary that are secured by mortgages or
negative pledges encumbering the Real Property are listed on Schedule 7.23 (the
"Mortgage Notes"), together with a description of the corresponding mortgage
documents (the "Mortgages"). The Mortgage Documents are complete, are in full
force and effect and have not been modified or supplemented, except as otherwise
disclosed on Schedule 7.23, and no fact or circumstance has occurred that, by
itself or with the giving of notice or the passage of time or both, would
constitute a default under any of the Mortgage Documents. Neither Target REIT,
Contributor OP, nor Contributor CMBS OP has been advised nor have any of them
received any notice asserting that a default exists under any of the Mortgage
Documents.

7.24. Opinion of Financial Advisor.

Target REIT has retained Salomon Smith Barney Inc. to review the
transactions contemplated by this Agreement and to issue an opinion to the
effect that, as of the date of such opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of Target REIT Capital Stock and the
partners of Contributor OP, and Target REIT has received the opinion of Salomon
Smith Barney Inc. to such effect and such opinion has not been withdrawn or
materially modified.

7.25. Financial Advisor.

Except for fees payable to Salomon Smith Barney Inc., neither Target REIT
nor any Target REIT Subsidiary is committed to pay any financial advisory,
broker or finder fees or any similar fees in connection with the Mergers, the
Asset Sale or the transactions contemplated by this Agreement.

7.26. Acquiror REIT Share Ownership.

Neither Target REIT nor any of the Target REIT Subsidiaries owns any shares
of capital stock of Acquiror REIT or other securities convertible into any
capital stock of Acquiror REIT.

7.27. Related Party Transactions.

Except for the Target REIT Employment Agreements, the Target REIT Options,
Contributor OP Units, and the Target REIT Restricted Stock Grants, there are no
arrangements, agreements or contracts entered into by Target REIT or any of the
Target REIT Subsidiaries with any person who is an officer, director,

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employee or affiliate of Target REIT or any of the Target REIT Subsidiaries, any
relative of any of the foregoing persons or any entity of which any of the
foregoing persons is an Affiliate.

7.28. Takeover Statutes.

Target REIT has taken all actions required of Target REIT to exempt the
transactions contemplated hereby from the operation of any "fair price,"
"moratorium," "control share acquisition" or any other anti-takeover statute or
similar statute enacted under the state or federal laws of the United States or
similar statute or regulation ("Takeover Statutes").

7.29. Hart-Scott-Rodino Antitrust Improvements Act of 1976.

For purposes of determining compliance with the HSR Act, Target REIT
confirms that the conduct of its business, through the Target REIT Subsidiaries,
consists solely of investing in, owning and operating, real estate assets and
related personal property for the benefit of its Shareholders.

7.30. Development.

Set forth on Schedule 7.30 is a list of all material agreements entered
into by Target REIT or any of the Target REIT Subsidiaries relating to the
development, rehabilitation, capital improvement or construction of hotel
properties or additions thereto or other real estate properties which
development or construction has not been substantially completed as of the date
of this Agreement. Schedule 7.30 provides a description of each of Target REIT's
or its Subsidiaries' material development, rehabilitation, capital improvement
and construction projects, including budgeted amounts and costs incurred to date
for each such project.

7.31. Tax Matters.

Except as set forth in Schedule 7.31: (i) Target REIT and each of the
Target REIT Subsidiaries (a) has timely filed all material Tax Returns required
to be filed by any of them for tax periods ended prior to the date of this
Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired, and all such tax returns are
accurate and complete in all material respects, (b) has paid or accrued all
Taxes shown to be due and payable on such returns or which have become due and
payable pursuant to any assessment or deficiency notice received by any of them,
and (c) has properly accrued in accordance with and to the extent required by
GAAP all Taxes for such periods and periods subsequent to the periods covered by
such Tax Returns; (ii) neither Target REIT nor any of the Target REIT
Subsidiaries has received any notice that any federal, state and local income,
excise and franchise Tax Return of Target REIT or any such Target REIT
Subsidiary has been or will be examined by any taxing authority; (iii) neither
Target REIT nor any of its the Target REIT Subsidiaries has executed or filed
with the IRS or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other Taxes; (iv)
Target REIT (a) has qualified to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable years ended December 31, 1993, 1994,
1995, 1996 and 1997, and (b) has operated, and intends to continue to operate,
in such a manner as to qualify to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable year ending on the date of the Effective
Time; (v) each Target REIT Subsidiary that is a partnership, joint venture or
limited liability company (A) has been since its formation and continues to be
treated for federal income tax purposes as a partnership and not as a
corporation or an association taxable as a corporation and (B) has not since the
later of its formation or the acquisition by Target REIT of a direct or indirect
interest therein, owned any assets (including, without limitation, securities)
that would cause Target REIT to violate Section 856(c)(5) of the Code; and (vi)
neither Target REIT nor any of the Target REIT Subsidiaries holds any asset (a)
the disposition of which could be subject to rules similar to Section 1374 of
the Code as a result of an election under IRS Notice 88-19, or (b) that is
subject to a consent filed pursuant to Section 341(f) of the Code and
regulations thereunder. No Target REIT Subsidiary (other than Target C. Corp.)
is a corporation (or an entity that would, under applicable federal income tax
principles, be classified as an association taxable as a corporation). Neither
Contributor OP nor Contributor CMBS OP is a publicly traded partnership within
the meaning of Section 7704 of the Code. True, correct and complete copies of
all federal, state and local income or franchise Tax Returns filed by Target
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REIT and each of the Target REIT Subsidiaries and all communications with taxing
authorities relating thereto have been made available to Acquiror REIT or its
representatives.

7.32. Convertible Securities.

Except as set forth herein or in Schedule 7.32 hereto, Target REIT has no
outstanding options, warrants, or other securities exercisable for, or
convertible into, Target REIT Capital Stock, the terms of which would require
any anti-dilution adjustments by reason of the consummation of the transaction
contemplated hereby.

7.33. Updating of Representations and Warranties.

Between the date hereof and the Closing Date, Contributor OP and Target
REIT will promptly disclose to Acquiror REIT any information which, to the
Knowledge of Target REIT, (a) would render any representation or warranty of
either of them under this Article VII untrue, (b) renders any information set
forth in this Agreement no longer correct in all material respects, or (c)
arises after the date hereof and which would have been required to be included
in this Agreement if such information had existed on the date hereof.

Each of the representations, warranties and covenants contained in this
Article VII and its various subparagraphs are intended for the benefit of
Acquiror REIT, Acquiror OP and Merger Sub and may be waived in whole or in part,
by Acquiror REIT, but only by an instrument in writing signed by Acquiror REIT.
No investigation, audit, inspection, review or the like conducted by or on
behalf of Acquiror REIT, Merger Sub or Acquiror OP shall be deemed to terminate
the effect of any such representations, warranties and covenants, it being
understood that Acquiror REIT, Merger Sub and Acquiror OP have the right to rely
thereon and that each such representation, warranty and covenant constitutes a
material inducement to Acquiror REIT, Merger Sub and Acquiror OP to execute this
Agreement, agree to the Merger and to consummate the transactions contemplated
by this Agreement.

7.34. Reorganization.

Neither Target REIT nor any Target REIT Subsidiary has taken any action, or
agreed to take any action, or has any knowledge of any fact or circumstance that
is reasonably likely to prevent the REIT Merger, from qualifying for treatment
as a "reorganization" within the meaning of Section 368(a) of the Code.

7.35. Intellectual Property.

Schedule 7.35 contains a true, correct and complete listing of all
trademarks, service marks, trade names, service names, patents, copyrights and
computer software owned or licensed by or registered in the name of Target REIT
or any Target REIT Subsidiary. Either Target REIT or any Target REIT Subsidiary,
as shown therein, is the sole owner of all right, title and interest in all
intellectual property described in Schedule 7.35 hereto, except and excluding
proprietary rights that either Target REIT or any Target REIT Subsidiary are
entitled to exercise and sublicense, by reason of license or otherwise, which
are identified in Schedule 7.35 hereof. Except as provided on Schedule 7.35
hereof, neither Target REIT nor Contributing OP has any knowledge nor have they
received any written notice to the effect that any service rendered by either
Target REIT or any Target REIT Subsidiary with respect to their businesses
infringes on any intellectual property right or other legally-protectable right
of another Person.

7.36. Employees.

Except as set forth on Schedule 7.36 hereof, neither Target REIT nor any
Target REIT Subsidiary has any written employment contract with any person
currently engaged, or previously engaged, in the businesses of Target REIT nor
any Target REIT Subsidiary. Schedule 7.36 lists all current employees of Target
REIT and the Target REIT Subsidiaries, showing each such person's name and
position.

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7.37. Labor Relations.

Neither Target REIT nor any Target REIT Subsidiary is the subject of any
litigation or governmental investigation asserting that Target REIT or any
Target REIT Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel Target REIT or any Target REIT Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is Target REIT or any
Target REIT Subsidiary a party to or bound by any collective bargaining
agreement, contract, or other agreement or understanding with a labor union or
labor organization, nor is there any strike or other labor dispute involving
Target REIT or any Target REIT Subsidiary, pending or, to the Knowledge of
Target REIT, threatened, or, to the Knowledge of Target REIT, is there any
activity involving Target REIT's or any Target REIT Subsidiary's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.

7.38. Termination of Certain Target REIT Leases.

Target REIT, Contributor OP and Contributor CMBS OP have entered into a
letter agreement with the Target REIT Lessee dated October 17, 1997, a copy of
which is attached as Exhibit G hereto (the "Lease Termination Agreement"),
providing for the determination of certain amounts payable to the Target REIT
Lessee or the Target REIT CMBS Lessee, as applicable, in connection with the
termination by certain Target REIT Subsidiaries of the Target REIT Leases
described on Schedule 7.38 on or before December 31, 1998. Schedule 7.38 sets
forth the amounts determined pursuant to the Lease Termination Agreement for
termination of each of such Target REIT Leases. Target REIT or the Target REIT
Subsidiaries have the right to terminate such Target REIT Leases upon payment of
the amounts set forth in Schedule 7.38 and in accordance with the notice and
other provisions set forth in such Target REIT Leases.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES OF ACQUIROR REIT,
ACQUIROR OP AND MERGER SUB

Acquiror REIT, Acquiror OP and Merger Sub hereby represent and warrant,
jointly and severally, to Target REIT and Contributor OP that:

8.1. Organization.

(a) Acquiror REIT is a corporation duly organized, validly existing
and in good standing under the laws of the State of Tennessee and is duly
qualified as a foreign corporation to do business in, and is in good
standing under the laws of, each jurisdiction in which the failure to
qualify would have an Acquiror REIT Material Adverse Effect. Acquiror REIT
has the power and authority to carry on its business as it is now being
conducted and to own and lease its assets.

(b) Each of the Acquiror REIT Subsidiaries is a corporation, limited
liability company or limited partnership, as indicated on Schedule 8.7,
duly organized, validly existing and in good standing under the laws of the
state of its formation and is duly qualified as a foreign entity to do
business in, and is in good standing under the laws of, each jurisdiction
in which the failure to qualify would have an Acquiror REIT Material
Adverse Effect. Each of the Acquiror REIT Subsidiaries has the power and
authority to carry on its business as it is now being conducted and to own
or lease its assets.

(c) The copies of the Organizational Documents of Acquiror OP,
Acquiror REIT and Merger Sub, which have heretofore been made available to
Target REIT, are true, complete and correct copies of the Organizational
Documents of Acquiror OP, Acquiror REIT and Merger Sub, as amended and in
effect on the date hereof.

(d) The copies of the Organizational Documents of the Acquiror REIT
Subsidiaries, which have heretofore been made available to Target REIT, are
true, complete and correct copies of such

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Organizational Documents of the Acquiror REIT Subsidiaries, as amended and
in effect on the date hereof.

(e) The copies of the minute books and records of the material
proceedings of Acquiror REIT and the Acquiror REIT Subsidiaries, which have
heretofore been made available to Target REIT, are copies of the original
minute books and records of Acquiror REIT and the Acquiror REIT
Subsidiaries, contain all proceedings of the Shareholders, members,
partners, boards of directors and any committees thereof with respect to
Acquiror REIT and the Acquiror REIT Subsidiaries prior to the date hereof,
and are true, correct and complete in all material respects.

8.2. Authorization; Enforceability.

Each of Acquiror REIT and Merger Sub has the corporate power and authority
to execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated by this Agreement, subject to the
approval of the issuance of Acquiror REIT Common Stock contemplated herein by
the Shareholders of Acquiror REIT pursuant to applicable law and the rules of
the NYSE. Acquiror OP has the partnership power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated by this
Agreement, subject to approval of this Agreement and the OP Merger by the
limited partners of Acquiror OP as required by the TRULPA. Subject to such
Shareholder and limited partner approvals, this Agreement is, and the other
documents and instruments required hereby will be, when executed and delivered
by Acquiror OP, Acquiror REIT, Merger Sub and the other parties hereto and
thereto, the valid and binding obligations of Acquiror OP, Acquiror REIT and
Merger Sub, enforceable against Acquiror OP, Acquiror REIT and Merger Sub in
accordance with their respective terms, except as may be limited by bankruptcy
or insolvency laws or similar laws or equitable principles affecting rights of
creditors generally. All necessary action on the part of the board of directors
of Acquiror REIT and the board of directors and Shareholders of Merger Sub and
the general partner of Acquiror OP has been taken to authorize the execution and
delivery of this Agreement and each agreement or instrument executed in
connection herewith, the performance of their respective obligations hereunder
and the consummation of the transactions contemplated hereby. This Agreement has
been duly executed and delivered by each of Acquiror REIT, Acquiror OP and
Merger Sub.

8.3. Capitalization.

The authorized capital stock of Acquiror REIT consists of 50,000,000 shares
of Acquiror REIT Common Stock and 10,000,000 shares of Acquiror REIT Preferred
Stock. As of the date hereof, 36,234,030 shares of Acquiror REIT Common Stock
are issued and outstanding and no shares of Acquiror REIT Preferred Stock are
issued and outstanding. As of the date hereof, the authorized capital stock of
Merger Sub consists of 1,000 shares of common stock of Merger Sub, $.01 par
value per share, 1,000 shares of which common stock are issued and outstanding.
All such issued and outstanding shares of Acquiror REIT Common Stock and common
stock of Merger Sub are validly issued, fully paid, nonassessable and were not
issued in violation of any preemptive rights. An aggregate of 1,953,581 shares
of Acquiror REIT Common Stock are reserved for issuance upon redemption of
1,953,581 outstanding Acquiror OP Units. Neither Acquiror REIT nor any of the
Acquiror REIT Subsidiaries has any outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote with the Shareholders of
Acquiror REIT on any matter. There are not any existing options, warrants,
calls, subscriptions, convertible securities, or other rights, agreements or
commitments which obligate Acquiror REIT or any of the Acquiror REIT
Subsidiaries to issue, transfer or sell any shares of capital stock or other
equity interest of Acquiror REIT or any of the Acquiror Subsidiaries, other than
with respect to the Acquiror REIT Options, the Acquiror REIT Restricted Stock
Grants described on Schedule 1.23 and the Acquiror OP Units described on
Schedule 8.7. Except as set forth on Schedule 8.3, there are no agreements or
understandings to which Acquiror REIT is a party with respect to the voting of
any shares of Acquiror REIT Common Stock or which restrict the transfer of any
such shares, except as set forth in Acquiror REIT's Organizational Documents.

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8.4. No Violation or Conflict by Acquiror OP, Acquiror REIT or Merger Sub.

Except as set forth on Schedule 8.4, the execution, delivery and
performance of this Agreement by Acquiror OP, Acquiror REIT and Merger Sub do
not and will not conflict with or violate or constitute a breach or default
under, (i) any law, judgment, order or decree binding on Acquiror REIT or any of
the Acquiror REIT Subsidiaries, (ii) the Organizational Documents of Acquiror
REIT, Acquiror OP or Merger Sub, or (iii) any Contract to which Acquiror REIT or
any of the Acquiror REIT Subsidiaries is a party or by which it is bound, the
breach or default of which would have an Acquiror REIT Material Adverse Effect.

8.5. No Litigation.

Except as set forth on Schedule 8.5, there is no litigation or governmental
investigation pending or, to the Knowledge of Acquiror REIT, proposed or
threatened against Acquiror REIT or any of the Acquiror REIT Subsidiaries, that
(a) is expected to have an Acquiror REIT Material Adverse Effect, or (b) seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.

8.6. Absence of Certain Changes.

Except as set forth on Schedule 8.6, in the Acquiror REIT SEC Documents, or
as contemplated by this Agreement, since December 31, 1997, there has not been
any sale, transfer or other disposition of material assets of Acquiror REIT or
the Acquiror REIT Subsidiaries, except in the ordinary course of business
consistent with past practice.

8.7. Subsidiaries.

All of the Acquiror REIT Subsidiaries are disclosed on Schedule 8.7.
Schedule 8.7 also sets forth Acquiror REIT's and Acquiror OP's ownership of
equity interests in the Acquiror REIT Subsidiaries, and, to the Knowledge of
Acquiror REIT, other Persons' ownership of equity interests in the Acquiror REIT
Subsidiaries. Except as set forth on Schedule 8.7, Acquiror REIT and Acquiror OP
(directly or indirectly) have good and marketable title to all of the equity
interests in each of the Acquiror REIT Subsidiaries as indicated on Schedule 8.7
free and clear of all liens, claims and encumbrances. Except for the Acquiror
REIT Subsidiaries, Acquiror REIT owns no ownership interest in any other
corporation, partnership, joint venture or other business organization or
entity.

8.8. Contracts and Commitments.

Except as set forth on Schedule 8.8, Acquiror REIT and the Acquiror REIT
Subsidiaries are not a party to any Contract (a) involving remaining payment or
guarantee of obligations by Acquiror REIT or any Acquiror REIT Subsidiary in
excess of $25,000, or (b) with a remaining term in excess of one year and which
cannot be canceled by Acquiror REIT or an Acquiror REIT Subsidiary without
penalty on prior notice of 90 days or less. Schedule 8.8 sets forth the
indebtedness (other than trade payables arising in the ordinary course of
business and obligations under the Employee Benefit Plans) of Acquiror REIT and
the Acquiror REIT Subsidiaries, including the unpaid principal balance at March
31, 1998. With respect to each Contract listed on Schedule 8.8 hereto: (i) the
Contract is in full force and effect, valid and enforceable in accordance with
its terms, as limited by applicable bankruptcy, reorganization, moratorium, or
similar laws and equitable principles affecting creditors' rights generally;
(ii) neither Acquiror REIT nor any Acquiror REIT Subsidiary is in material
default thereunder; (iii) neither Acquiror REIT nor any Acquiror REIT Subsidiary
has repudiated or waived any material provision of any such Contract; and (iv)
no other party to any such Contract is, to the Knowledge of Acquiror REIT, in
default in any respect, or has repudiated or waived any material provision
thereunder. Except as set forth in Schedule 8.8, neither Acquiror REIT nor any
Acquiror REIT Subsidiary has entered into or is subject, directly or indirectly,
to any Tax Protection Agreements. As used herein, a "Tax Protection Agreement"
is an agreement, oral or written, (i) that has as one of its purposes to permit
a Person to take the position that such Person could defer federal taxable
income that otherwise might have been recognized upon a transfer of property to
the Acquiror OP or any other Acquiror REIT

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Subsidiary that is treated as a partnership for federal income tax purposes, and
(ii) that (A) prohibits or restricts in any manner the disposition of any assets
of Acquiror REIT or any Acquiror REIT Subsidiary, (B) requires that Acquiror
REIT or any Acquiror REIT Subsidiary maintain, or put in place, or replace,
indebtedness, whether or not secured by one or more of the Acquiror REIT Hotels,
or (C) requires that Acquiror REIT or any Acquiror REIT Subsidiary offer to any
Person at any time the opportunity to guarantee or otherwise assume, directly or
indirectly, the risk of loss for federal income tax purposes for indebtedness or
other liabilities of Acquiror REIT or any Acquiror REIT Subsidiary.

8.9. Approvals and Consents.

Except as set forth on Schedule 8.9, no consent, approval, or authorization
of, notice to, filing with any governmental authority or any Person or entity
not a party to this Agreement is required to be obtained by Acquiror REIT or any
Acquiror REIT Subsidiary as a condition to the execution, delivery or
performance of this Agreement by Acquiror OP, Acquiror REIT or Merger Sub,
except where the failure to obtain such consent, approval or authorization does
not have an Acquiror REIT Material Adverse Effect.

8.10. Acquiror REIT Employee Benefit Plans.

(a) Disclosure. Schedule 8.10 hereto sets forth a summary description of
all pension, retirement, profit-sharing, deferred compensation, stock option,
employee stock ownership, severance pay, vacation, bonus, or other incentive
plan, all other written employee programs, arrangements, or agreements, all
medical, vision, dental, or other health plans, all life insurance plans, and
all other employee benefit plans or fringe benefit plans, including, without
limitation, "employee benefit plans" as that term is defined in Section 3(3) of
ERISA, currently or previously maintained by, sponsored in whole or in part by,
or contributed to, or required to be contributed to, by Acquiror REIT or any
Acquiror REIT Subsidiary or any entity which is considered a member of the same
controlled group as Acquiror REIT under Section 4001 of ERISA or Section 414 of
the Code or Section 302 of ERISA (whether or not waived) for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate.

(b) Compliance with Law. The provisions of each Acquiror REIT Employee
Benefit Plan and, to the Knowledge of Acquiror REIT, the administration of each
Acquiror REIT Employee Benefit Plan are and have been in all material respects
in compliance with all applicable laws, and neither Acquiror REIT nor any
Acquiror REIT Subsidiary has received any claim or notice alleging to the
contrary with respect to any Acquiror REIT Employee Benefit Plan.

(c) Tax or Civil Liability. With respect to the Acquiror REIT Employee
Benefit Plans, neither Acquiror REIT nor any of the Acquiror REIT Subsidiaries
has engaged in any "prohibited transaction" (as such term is defined in ERISA or
the Code), for which there is not an exception, that could subject Acquiror REIT
or any Acquiror REIT Subsidiary to an excise tax under Code Section 4975 or
civil liability under Section 502(i) of ERISA, except for a tax or liability
that would not have an Acquiror REIT Material Adverse Effect.

(d) Claims and Liability. There is no action, claim or demand of any kind
(other than routine claims for benefits) that has been brought or, to the
Knowledge of Acquiror REIT, threatened, against any Acquiror REIT Employee
Benefit Plan or the assets thereof, or against any fiduciary of any such
Acquiror REIT Employee Benefit Plan.

(e) Multiemployer Plans. Acquiror REIT and the Acquiror REIT Subsidiaries
neither maintain nor participate in, and, except as set forth on Schedule 8.10
hereto, have never maintained or participated in, any "multiemployer plans" as
defined in Section 3(37) of ERISA. Acquiror REIT and the Acquiror REIT
Subsidiaries have no present liability under any multiemployer plan.

(f) Reporting and Disclosure. Acquiror REIT and the Acquiror REIT
Subsidiaries have complied in all material respects with the reporting and
disclosure requirements of ERISA.

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8.11. SEC Documents; Financial Statement; Undisclosed Liabilities.

The Acquiror REIT SEC Documents constitute all forms, reports and documents
required to be filed by Acquiror REIT with the SEC under applicable law. All of
the Acquiror REIT SEC Documents (other than preliminary material) have been
timely filed, and, as of their respective filing dates or effective dates, as
applicable, complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act. None of the Acquiror REIT SEC
Documents at the time of filing contained any untrue statement of a material
fact or omitted to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent such statements
have been modified or superseded by later Acquiror REIT SEC Documents filed and
publicly available prior to the date of this Agreement. The consolidated
financial statements of Acquiror REIT and the Acquiror REIT Subsidiaries
included in Acquiror REIT SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP (except, in the case of unaudited statements, as permitted by the
applicable rules and regulations of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto),
and fairly presented, in accordance with the applicable requirements of GAAP and
the applicable rules and regulations of the SEC, the consolidated financial
position of Acquiror REIT and the Acquiror REIT Subsidiaries, taken as a whole,
as of the dates thereof and the consolidated results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as disclosed in the consolidated
financial statements of Acquiror REIT and the Acquiror REIT Subsidiaries
included in the Acquiror REIT SEC Documents or on Schedule 8.11, neither
Acquiror REIT nor any Acquiror REIT Subsidiary has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of Acquiror
REIT or in the notes thereto and which, individually or in the aggregate, would
have an Acquiror REIT Material Adverse Effect.

8.12. Title to Properties and Assets.

Except as set forth on Schedule 8.12, the Acquiror REIT Subsidiaries are
the sole owners of good and marketable title to the Acquiror REIT Hotels and
other assets of Acquiror OP, free and clear of all liens, mortgages, security
interests, leases (except ground and other leases noticed on Schedule 8.12),
encumbrances, restrictions, conditions and agreements. Acquiror OP has title
insurance policies insuring its fee simple titles or leasehold interests, as the
case may be, to the Acquiror REIT Hotels.

8.13. Insurance.

All of the insurance policies with respect to the Acquiror REIT Hotels are
listed on Schedule 8.13, and all such policies are valid and in full force and
effect, all premiums for such policies were paid when due and all future
premiums for such policies (and any replacements thereof) shall be paid by
Acquiror OP or its lessee on or before the due date therefor.

8.14. Personal Property.

Except as disclosed in the consolidated financial statements of Acquiror
REIT and the Acquiror REIT Subsidiaries included in the Acquiror REIT SEC
Documents or on Schedule 8.14, each of Acquiror OP and the Acquiror Subsidiaries
has good and marketable title to all of the machinery, equipment, materials,
supplies and other personal property of every kind, tangible or intangible,
shown as assets in its records and books of account, free and clear of all
liens, encumbrances and charges (except for capital leases of personal property
entered into in the ordinary cause of business). All of such tangible personal
property is in good condition, reasonable wear and tear excepted, and are usable
in the ordinary course of business of the Acquiror REIT Hotels consistent with
past practices.

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8.15. Bankruptcy.

No Act of Bankruptcy has occurred with respect to Acquiror REIT or any
Acquiror REIT Subsidiary.

8.16. Zoning.

Except as set forth on Schedule 8.16, to the Knowledge of Acquiror REIT,
the current use and occupancy of the Acquiror REIT Hotels for hotel purposes are
permitted under all laws applicable thereto.

8.17. Hazardous Substances.

To the Knowledge of Acquiror REIT: except as set forth on Schedule 8.17,
there are no (a) Hazardous Substances on, under or in the Acquiror REIT Hotels,
or any portion thereof, in violation of applicable law, (b) spills, releases,
discharges, or disposal of Hazardous Substances in violation of applicable law
that have occurred or are presently occurring on or onto any of the Acquiror
REIT Hotels, or any portion thereof, or (c) PCB (polychlorinated biphenyls)
transformers serving, or stored on, any Acquiror REIT Hotels, or any portion
thereof. To the Knowledge of Acquiror REIT, Acquiror REIT and the Acquiror REIT
Subsidiaries have complied with any applicable local, state and federal
environmental laws, regulations, ordinances and administrative and judicial
orders relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Substances, except for violations which
would not have an Acquiror REIT Material Adverse Effect.

8.18. Leases.

Each Acquiror REIT Lease is in full force and effect, valid and enforceable
in accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or other similar laws and equitable
principles affecting creditors' rights generally and (b) as may be limited in
the jurisdiction where the relevant Acquiror REIT Hotel is located if such
limitation would not deprive the Acquiror REIT Subsidiaries, in total, of the
principal benefits contemplated by the Acquiror REIT Leases; and no Acquiror
REIT Subsidiary is in material default under any Acquiror REIT Lease, no
Acquiror Subsidiary has repudiated or waived any material provision of any such
Acquiror REIT Lease, and no other party to any such Acquiror REIT Lease is, to
the Knowledge of Acquiror REIT, in default in any respect, or has repudiated or
waived any material provision thereunder. No event or occurrence exists which
with notice or the passage of time, or both, would constitute an event of
default under any Acquiror REIT Lease. The Acquiror REIT Leases will not
adversely affect the tax qualification of Acquiror REIT as a REIT for federal
income tax purposes.

8.19. Opinion of Financial Advisor.

Acquiror REIT has retained Morgan Keegan & Company, Inc. to review the
transactions contemplated by this Agreement and to issue an opinion to the
effect that, as of the date of such opinion, the Exchange Ratio is fair, from a
financial point of view, to the holders of Acquiror REIT Common Stock and the
partners of Acquiror OP, and Acquiror REIT has received the opinion of Morgan
Keegan & Company, Inc. to such effect and such opinion has not been withdrawn or
materially modified.

8.20. Financial Advisor.

Except for fees payable to Bear, Stearns & Co., Inc. and Morgan Keegan &
Company, Inc., Acquiror REIT is not committed to pay any financial advisory,
broker or finder fees or any similar fees in connection with the Mergers, the
Asset Sale or the transactions contemplated by this Agreement.

8.21. Target REIT Share Ownership.

Neither Acquiror REIT nor any of the Acquiror REIT Subsidiaries owns any
shares of capital stock of Target REIT or other securities convertible into
capital stock of Target REIT.

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8.22. Related Party Transactions.

Except for the Acquiror REIT Employment Agreements, the Acquiror REIT
Options, Acquiror OP Units and the Acquiror REIT Restricted Stock Grants, there
are no arrangements, agreements, or contracts entered into by Acquiror REIT or
any of the Acquiror REIT Subsidiaries with any person who is an officer,
director, employee or affiliate of Acquiror REIT or any of the Acquiror REIT
Subsidiaries, any relative of any of the foregoing persons or any entity of
which any of the foregoing persons is an Affiliate.

8.23. Takeover Statutes.

Acquiror REIT and Merger Sub have taken all actions required of Acquiror
REIT and Merger Sub to exempt the transactions contemplated hereby from the
operation of any Takeover Statutes.

8.24. Hart-Scott-Rodino Antitrust Improvements Act of 1976.

For purposes of determining compliance with the HSR Act, Acquiror REIT and
Merger Sub confirm that the conduct of their business, through the Acquiror REIT
Subsidiaries, consists solely of investing in, owning and operating, real
estate, assets and related personal property for the benefit of the Shareholders
of Acquiror REIT.

8.25. Development.

Set forth on Schedule 8.25 is a list of all material agreements entered
into by Acquiror REIT or any of the Acquiror REIT Subsidiaries relating to the
development, rehabilitation, capital improvement or construction of hotel
properties or additions thereto or other real estate properties which
development or construction has not been substantially completed as of the date
of this Agreement. Schedule 8.25 provides a description of each of Acquiror
REIT's or its Subsidiaries' material development, rehabilitation, capital
improvement and construction projects, including budgeted amounts and costs
incurred to date for each such project.

8.26. Tax Matters.

Except as set forth in Schedule 8.26, (i) Acquiror REIT and each of the
Acquiror REIT Subsidiaries (a) has timely filed all material Tax Returns
required to be filed by any of them for tax periods ended prior to the date of
this Agreement, or requests for extensions have been timely filed and any such
request has been granted and has not expired, and all such tax returns are
accurate and complete in all material respects, (b) has paid or accrued all
Taxes shown to be due and payable on such returns or which have become due and
payable pursuant to any assessment or deficiency notice received by any of them,
and (c) has properly accrued in accordance with and to the extent required by
GAAP all Taxes for such periods and periods subsequent to the periods covered by
such Tax Returns; (ii) neither Acquiror REIT nor any of the Acquiror REIT
Subsidiaries has received any notice that any federal, state and local income,
excise and franchise Tax Return of Acquiror REIT or any such Acquiror REIT
Subsidiary has been or will be examined by any taxing authority; (iii) neither
Acquiror REIT nor any of the Acquiror REIT Subsidiaries has executed or filed
with the IRS or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any income or other Taxes; (iv)
Acquiror REIT (a) has qualified to be taxed as a REIT pursuant to Sections 856
through 859 of the Code for its taxable years ended December 31, 1994, 1995,
1996 and 1997, and (b) has operated, and intends to continue to operate, in such
a manner as to qualify to be taxed as a REIT pursuant to Sections 856 through
859 of the Code for its taxable year ending after the Closing Date; (v) each
Acquiror REIT Subsidiary that is a partnership, joint venture or limited
liability company (A) has been since its formation and continues to be treated
for federal income tax purposes as a partnership and not as a corporation or an
association taxable as a corporation and (B) has not since the later of its
formation or the acquisition by Acquiror REIT of a direct or indirect interest
therein, owned any assets (including, without limitation, securities) that would
cause Acquiror REIT to violate Section 856(c)(5) of the Code; (vi) Acquiror REIT
represents that each of the Acquiror REIT Subsidiaries which is a corporation
for federal income tax purposes and of which all the outstanding capital stock
is owned solely by Acquiror REIT (or by Acquiror REIT and one or more of the
Acquiror REIT Subsidiaries or by one or more of the Acquiror REIT

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Subsidiaries) is a "Qualified REIT Subsidiary" as defined in Section 856 of the
Code; and (vi) neither Acquiror REIT nor any of the Acquiror REIT Subsidiaries
holds any asset, (a) the disposition of which could be subject to rules similar
to Section 1374 of the Code as a result of an election under IRS Notice 88-19,
or (b) that is subject to a consent filed pursuant to Section 341(f) of the Code
and regulations thereunder. No Acquiror REIT Subsidiary (other than Acquiror C.
Corp.) is a corporation (or an entity that would, under applicable federal
income tax principles, be classified as an association taxable as a
corporation). Acquiror OP is not a publicly traded partnership within the
meaning of Section 7704 of the Code. True, correct and complete copies of all
federal, state and local income or franchise Tax Returns filed by Acquiror REIT
and each of the Acquiror REIT Subsidiaries and all communications with taxing
authorities relating thereto have been made available to Target REIT or its
representatives.

8.27. Convertible Securities.

Except as set forth herein or in Schedule 8.27 hereto, Acquiror REIT has no
outstanding options, warrants or other securities exercisable for, or
convertible into, Acquiror REIT Common Stock, the terms of which would require
any anti-dilution adjustments by reason of the consummation of the transactions
contemplated hereby.

8.28. Acquiror REIT Common Stock.

Acquiror REIT has reserved for issuance a sufficient number of shares of
Acquiror REIT Common Stock to perform its obligations hereunder. The issuance
and delivery by Acquiror REIT of shares of Acquiror REIT Common Stock in
connection with the REIT Merger and this Agreement have been duly and validly
authorized by all necessary corporate action on the part of Acquiror REIT,
except for the approval of such issuance and delivery by Acquiror REIT's
Shareholders as contemplated by this Agreement. The shares of Acquiror REIT
Common Stock to be issued in connection with the REIT Merger, when issued in
accordance with the terms of this Agreement and the Plan of Merger, will be
validly issued, fully paid and nonassessable and not issued in violation of any
preemptive rights.

8.29. Interim Operations of Merger Sub.

Merger Sub was formed solely for the purpose of engaging in the REIT Merger
and has not engaged in any business activities or conducted any operations other
than as contemplated by this Agreement.

8.30. Updating of Representations and Warranties.

Between the date hereof and the Closing Date, Acquiror OP, Acquiror REIT
and Merger Sub will promptly disclose to Target REIT any information which, to
the Knowledge of Acquiror REIT, (a) would render any representation or warranty
of any of them under this Article VIII untrue, (b) renders any information set
forth in this Agreement no longer correct in all material respects, or (c)
arises after the date hereof and which would have been required to be included
in this Agreement if such information had existed on the date hereof.

Each of the representations, warranties and covenants contained in this
Article VIII and its various subparagraphs are intended for the benefit of
Target REIT and Contributor OP and may be waived in whole or in part, by Target
REIT, but only by an instrument in writing signed by Target REIT. No
investigation, audit, inspection, review or the like conducted by or on behalf
of Target REIT or Contributor OP shall be deemed to terminate the effect of any
such representations, warranties and covenants, it being understood that Target
REIT and Contributor OP have the right to rely thereon and that each such
representation, warranty and covenant constitutes a material inducement to
Target REIT and Contributor OP to execute this Agreement, agree to the Mergers
and to consummate the transactions contemplated by this Agreement.

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8.31. Reorganization.

Neither Acquiror REIT nor any Acquiror REIT Subsidiary has taken any
action, or agreed to take any action, or has any knowledge of any fact or
circumstance that is reasonably likely to prevent the REIT Merger, from
qualifying for treatment as a "reorganization" within the meaning of Section
368(a) of the Code.

8.32. Intellectual Property.

Schedule 8.32 contains a true, correct and complete listing of all
trademarks, service marks, trade names, service names, patents, copyrights and
computer software owned or licensed by or registered in the name of Acquiror
REIT or any Acquiror REIT Subsidiary. Either Acquiror REIT or any Acquiror REIT
Subsidiary, as shown therein, is the sole owner of all right, title and interest
in all intellectual property described in Schedule 8.32 hereto, except and
excluding proprietary rights that either Acquiror REIT or any Acquiror REIT
Subsidiary are entitled to exercise and sublicense, by reason of license or
otherwise, which are identified in Schedule 8.32 hereof. Except as provided on
Schedule 8.32 hereof, neither Acquiror REIT nor Acquiror OP has any knowledge
nor have they received any written notice to the effect that any service
rendered by either Acquiror REIT or any Acquiror REIT Subsidiary with respect to
their businesses infringes on any intellectual property right or other
legally-protectable right of another Person.

8.33. Employees.

Except as set forth on Schedule 8.33 hereof, neither Acquiror REIT nor any
Acquiror REIT Subsidiary has any written employment contract with any person
currently engaged, or previously engaged, in the businesses of Acquiror REIT nor
any Acquiror REIT Subsidiary.

8.34. Labor Relations.

Neither Acquiror REIT nor any Acquiror REIT Subsidiary is the subject of
any litigation or governmental investigation asserting that Acquiror REIT or any
Acquiror REIT Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act or comparable state law) or seeking
to compel Acquiror REIT or any Acquiror REIT Subsidiary to bargain with any
labor organization as to wages or conditions of employment, nor is Acquiror REIT
or any Acquiror REIT Subsidiary a party to or bound by any collective bargaining
agreement, contract, or other agreement or understanding with a labor union or
labor organization, nor is there any strike or other labor dispute involving
Acquiror REIT or any Acquiror REIT Subsidiary, pending or, to the Knowledge of
Acquiror REIT, threatened, or, to the Knowledge of Acquiror REIT, is there any
activity involving Acquiror REIT's or any Acquiror REIT Subsidiary's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.

8.35. No Special Taxes.

Except as set forth in Schedule 8.35, neither Acquiror REIT nor Acquiror OP
has knowledge of, nor has received any notice of, any special taxes or
assessments relating to any of the Acquiror REIT Hotels or any part thereof or
any planned public improvements that may result in a special tax or assessment
against an Acquiror REIT Hotel which would have an Acquiror REIT Material
Adverse Effect.

8.36. Compliance with Existing Laws.

Except as set forth on Schedule 8.36, neither Acquiror REIT nor any
Acquiror REIT Subsidiary has received notice within the past twelve (12) months
(or since commencement of development or the date of acquisition of any Acquiror
REIT Hotel if such development commenced or acquisition occurred within the past
twelve (12) months) of any existing or threatened violation of any provision of
any applicable building, zoning, subdivision, environmental or other
governmental ordinance, resolution, statute, rule, order or regulation,
including but not limited to those of environmental agencies or insurance boards
of underwriters, with respect to the ownership, operation, use, maintenance or
condition of an Acquiror REIT Hotel or any part thereof, or requiring any
repairs or alterations other than those that have been made prior to the date
hereof, except such violations as have been cured to the satisfaction of the
relevant authority or would have no
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Acquiror REIT Material Adverse Effect. Acquiror REIT and each Acquiror REIT
Subsidiary have in effect all Permits necessary for them to own, lease, or
operate the Acquiror REIT Hotels and to carry on their businesses as now
conducted, except for those Permits the absence of which would have no Material
Adverse Effect on any Acquiror REIT Hotel, and there has occurred no default
under any such Permit other than defaults which, singly or in the aggregate,
would have no Material Adverse Effect on any Acquiror REIT Hotel. Except as
disclosed on Schedule 8.36 hereto, neither Acquiror REIT nor any Acquiror REIT
Subsidiary is in violation of any laws, orders, or Permits applicable to its
business or employees conducting its business, except for violations which would
not have an Acquiror REIT Material Adverse Effect.

8.37. Condemnation Proceedings.

Except as set forth on Schedule 8.37, neither Acquiror REIT nor Acquiror OP
has received notice of any condemnation or eminent domain proceeding pending or,
to the Knowledge of Acquiror REIT, threatened against the Acquiror REIT Hotels
or any material part thereof.

8.38. Room Furnishings.

All public spaces, lobbies, meeting rooms, and each room in each of the
Acquiror REIT Hotels available for guest rental is generally furnished in
accordance with the applicable franchisor's standards for the hotel and room
type.

8.39. Franchisors; Franchise Agreements.

The Acquiror REIT Hotels are currently operated pursuant to franchise
agreements with the franchisors as listed next to their name on Schedule 8.39.

8.40. Mortgage Documents.

All promissory notes, bonds and other evidences of indebtedness given by
Acquiror REIT or any Acquiror REIT Subsidiary that are secured by mortgages or
negative pledges encumbering the Acquiror REIT Hotels are listed on Schedule
8.40, together with a description of the corresponding mortgage documents. Such
mortgage documents are complete, are in full force and effect and have not been
modified or supplemented, except as otherwise disclosed on Schedule 8.40, and no
fact or circumstance has occurred that, by itself or with the giving of notice
or the passage of time or both, would constitute a default under any of such
mortgage documents. Neither Acquiror REIT nor Acquiror OP has been advised nor
received any notice asserting that a default exists under any of such mortgage
documents.

8.41. New Leases.

Acquiror REIT and Acquiror OP will use their good faith best efforts, and
will cause Acquiror CMBS OP to use its good faith best efforts, to enter into
new leases with respect to the Target REIT Hotels described on Schedule 7.38 (as
soon as practical after the date hereof concerning those hotels owned by
Contributor CMBS OP) on terms reasonably acceptable to Acquiror REIT effective
as of the Closing Date and will keep Target REIT and Contributor OP advised as
to the status of negotiations as to such new leases.

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ARTICLE IX

CONDITIONS PRECEDENT TO CLOSING

9.1. Conditions Precedent to Obligations of Parties.

The respective obligations of each party hereto to consummate the Mergers,
the Asset Sale and the other transactions contemplated hereby are subject to the
satisfaction at or prior to the Closing Date of the following conditions:

(a) This Agreement and the transactions contemplated hereby shall have
been approved by the Shareholders of Target REIT and the Shareholders of
Acquiror REIT in the manner required by the Acquiror REIT Charter, the
Target REIT Charter and by applicable law and applicable regulations of the
NYSE.

(b) Each party hereto shall have obtained reasonable evidence of the
OP Partner Approvals.

(c) No order, decree or injunction shall have been enacted, entered,
promulgated or enforced by any United States court of competent
jurisdiction or any United States governmental authority which prohibits
the consummation of the Mergers, the Asset Sale and the other transactions
contemplated hereby; provided, however, that in case of the existence of
such order, decree or injunction, the parties hereto shall use their
reasonable best efforts to have any such order, decree or injunction
vacated or reversed.

(d) All applicable requirements under state securities or Takeover
Statutes, if any, relating to the issuance and trading of the shares of
Acquiror REIT Common Stock issuable hereunder, shall have been satisfied.

(e) Any waiting period applicable to the Mergers under the HSR Act, as
applicable, shall have terminated or expired.

(f) The Form S-4 shall have become effective under the Securities Act
and no stop order with respect thereto shall be in effect.

(g) Acquiror REIT shall have obtained the approval for the listing of
the shares Acquiror REIT Common Stock issuable hereunder on the NYSE,
subject to official notice of issuance.

(h) The Average Price shall be equal to or greater than $14.00.

(i) Acquiror OP and Acquiror CMBS OP shall have entered into new
leases with respect to the Target REIT Hotels described on Schedule 7.38
effective as of the Closing Date on terms reasonably acceptable to Acquiror
REIT.

(j) Each party hereto shall have obtained any and all consents,
approvals, authorizations, clearances, exemptions or waivers by any Person
pursuant to any Contract, law, order or Permit required for consummation of
the Mergers, the Asset Sale or any of the other transactions contemplated
herein, or for the prevention of a default under any Contract or Permit of
such party which, if not obtained or made, is reasonably likely to have a
Material Adverse Effect on such party.

(k) The Closing shall have occurred on or before October 15, 1998.

9.2. Conditions Precedent to the Obligations of Acquiror OP, Acquiror REIT
and Merger Sub.

Each and every obligation hereunder of Acquiror OP, Acquiror REIT and
Merger Sub to be performed on the Closing Date shall be subject to the
satisfaction prior to or at the Closing of the express conditions precedent set
forth below:

(a) Target REIT and Contributor OP shall have performed and complied
in all material respects with all of their obligations under this Agreement
that are to be performed or complied with by them prior to or on the
Closing Date.

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(b) All proceedings, corporate, partnership or other, to be taken by
or at the direction of Target REIT and Contributor OP in connection with
the transactions contemplated by this Agreement, and all documents incident
thereto, shall be reasonably satisfactory in form and substance to Acquiror
REIT, Acquiror OP and Merger Sub, and Target REIT and Contributor OP shall
have made available to Acquiror REIT, Merger Sub and Acquiror OP for
examination the originals or complete, true and correct copies of all
documents that Acquiror REIT, Acquiror OP and Merger Sub may reasonably
request in connection with the transactions contemplated by this Agreement.

(c) No investigation, suit, action or other proceeding shall be
threatened or pending before any court or governmental agency that seeks
restraint, prohibition, damages or other relief in connection with this
Agreement or the consummation of the transactions contemplated hereby.

(d) The representations and warranties made by Contributor OP and
Target REIT in this Agreement shall be true and correct in all material
respects as of the Effective Time with the same force and effect as though
such representations and warranties had been made on the and as of the
Effective Time (with such exceptions, if any, necessary to give effect to
events or transactions contemplated hereby and provided that representation
and warranties which are confined to a specific date shall speak only as of
such date), except where the failure to be true and correct does not have a
Target REIT Material Adverse Effect.

(e) Acquiror REIT shall have received the opinion of Baker, Donelson,
Bearman & Caldwell, counsel to Acquiror REIT, Acquiror OP and Merger Sub,
dated the Closing Date, to the effect that (i) the REIT Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, (ii) Acquiror REIT and Target REIT
will each be a party to that reorganization within the meaning of Section
368(b) of the Code, and (iii) no gain or loss will be recognized for
federal income tax purposes by Acquiror REIT, Merger Sub, or Target REIT,
on consummation of the REIT Merger. In rendering its opinion, said counsel
shall be entitled to rely as to any factual matter upon certificates given
by executive officers of Acquiror REIT and Target REIT and shall be
entitled to assume that the covenants of Section 10.14 shall be fully
complied with.

(f) Acquiror REIT shall have received (i) an opinion of Hunton &
Williams, dated as of the Closing Date, to the effect that, commencing with
its taxable year ended December 31, 1993, Target REIT was organized and has
operated in conformity with the requirements for qualification as a REIT
under the Code (with customary exceptions, assumptions and qualifications
and based upon customary representations) and (ii) an opinion of Baker,
Donelson, Bearman & Caldwell, dated as of the Closing Date, to the effect
that, commencing with its taxable year ending December 31, 1994, Acquiror
REIT was organized and has operated in conformity with the requirements for
qualification as a REIT under the Code and that, after giving effect to the
REIT Merger, Acquiror REIT's proposed method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT
under the Code (with customary exceptions, assumptions and qualifications
and based upon customary representations and based upon and subject to the
opinion of counsel to Target REIT described in clause (i) above).

(g) From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of Target REIT and the Target REIT Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have a Target REIT
Material Adverse Effect, other than any such change that affects both
Target REIT and Acquiror REIT in a substantially similar manner.

(h) Acquiror REIT shall have received the opinion of Hunton &
Williams, counsel to Target REIT and Contributor OP, dated the Closing
Date, as to the matters set forth in Exhibit C.

(i) Target REIT and Contributor OP shall have delivered to Acquiror
REIT an officer's certificate, given as of the Effective Time, in
substantially the form attached hereto as Exhibit D.

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(j) Contributor OP shall have delivered to Acquiror OP, on or before
the Effective Time, all of the documents and other information required of
Contributor OP and Contributor CMBS OP pursuant to Section 2.6.

(k) Good and marketable fee simple title to the Real Property shall be
insurable as such by the Title Company subject only to Permitted Title
Exceptions.

(l) Acquiror REIT shall have received from Target REIT the executed
Articles of Merger.

(m) Acquiror REIT shall have received copies of resignations by each
director and officer of Target REIT and the Target REIT Subsidiaries.

(n) All of the shares of capital stock of the Target C Corp. owned by
Mr. Solmson shall have been transferred to Acquiror REIT, or its designees
or assigns, in accordance with the Stock Purchase Agreement.

(o) Acquiror REIT shall have received from Contributor CMBS OP the
executed CMBS Agreement of Merger.

9.3. Conditions Precedent to the Obligations of Contributor OP and Target
REIT.

Each and every obligation hereunder of Contributor OP and Target REIT to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the express conditions precedent set forth below:

(a) Acquiror OP, Acquiror REIT and Merger Sub shall have performed and
complied in all material respects with all of their obligations under this
Agreement that are to be performed or complied with by them prior to or on
the Closing Date.

(b) All proceedings, corporate, partnership or other, to be taken by
or at the direction of Acquiror OP, Acquiror REIT and Merger Sub in
connection with the transactions contemplated by this Agreement, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to Target REIT and Contributor OP, and Acquiror REIT, Acquiror OP
and Merger Sub shall have made available to Target REIT and Contributor OP
for examination the originals or complete, true and correct copies of all
documents that Target REIT and Contributor OP may reasonably request in
connection with the transactions contemplated by this Agreement.

(d) The representations and warranties made by Acquiror OP, Acquiror
REIT and Merger Sub in this Agreement shall be true and correct in all
material respects as of the Effective Time with the same force and effect
as though such representations and warranties had been made on and as of
the Effective Time (with such exceptions, if any, necessary to give effect
to events or transactions contemplated hereby and provided that
representations and warranties which are confined to a specific date shall
speak only as of such date), except where the failure to be true and
correct does not have an Acquiror REIT Material Adverse Effect.

(e) Target REIT shall have received the opinion of Hunton & Williams,
counsel to Target REIT and Contributor OP, dated the Closing Date, to the
effect that (i) the REIT Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Code, (ii) Acquiror REIT and Target REIT will each be a party to that
reorganization within the meaning of Section 368(b) of the Code, (iii) the
exchange in the REIT Merger of Acquiror REIT Common Stock for Target REIT
Capital Stock will not give rise to gain or loss to the Shareholders of
Target REIT with respect to such exchange (except with respect to the
receipt of cash in lieu of fractional shares), (iv) the transfer by
Contributor OP of all of its assets to Acquiror OP in exchange for limited
partnership interests in Acquiror OP will not cause Contributor OP to
recognize gain or loss for federal income tax purposes

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(except to the extent that Contributor OP receives cash in the exchange),
and (v) the distribution by Contributor OP of limited partnership interests
in Acquiror OP will not cause the partners of Contributor OP to recognize
gain or loss for federal income tax purposes (except to the extent that the
partners of Contributor OP receive cash in the distribution). In rendering
its opinion, said counsel shall be entitled to rely as to any factual
matter upon certificates given by executive officers of Acquiror REIT and
Target REIT and shall be entitled to assume that the covenants of Section
10.14 shall be fully complied with.

(f) Target REIT shall have received an opinion of Baker, Donelson,
Bearman & Caldwell, dated as of the Closing Date, that, commencing with its
taxable year ended December 31, 1994, Acquiror REIT was organized and has
operated in conformity with the requirements for qualification as a REIT
under the Code (with customary exceptions, assumptions and qualifications
and based upon customary representations).

(g) From the date of the Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business or
operations of Acquiror REIT and the Acquiror REIT Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have an Acquiror
REIT Material Adverse Effect, other than any such change that affects both
Acquiror REIT and Target REIT in a substantially similar manner.

(h) Target REIT shall have received the opinion of Baker, Donelson,
Bearman & Caldwell, counsel to Acquiror REIT, Merger Sub and Acquiror OP,
dated the Closing Date, as to the matters set forth in Exhibit E.

(i) Acquiror REIT, Acquiror OP and Merger Sub shall have delivered to
Target REIT an officer's certificate, given as of the Effective Time, in
substantially the form attached hereto as Exhibit F.

(j) Target REIT shall have received from Merger Sub the executed
Articles of Merger and from Acquiror OP and Acquiror CMBS OP the
Certificates of Merger.

(k) Target REIT shall have received from Acquiror CMBS OP the executed
CMBS Agreement of Merger.

ARTICLE X

COVENANTS
10.1. Acquisition Proposals.

Prior to the Effective Time, Acquiror REIT and Target REIT each agree (a)
that neither of them nor any of their Subsidiaries' shall, and each of them
shall direct and use its reasonable best efforts to cause its or any of its
Subsidiaries' respective officers, directors, trustees, partners, employees,
agents, affiliates and representatives (including, without limitation, any
investment banker, financial adviser, attorney or accountant retained by it or
any of its Subsidiaries) not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer (including, without limitation, any proposal or offer to its Shareholders)
by any Person with respect to a merger, acquisition, tender offer, exchange
offer, consolidation or similar transaction involving, or any purchase by any
Person of all or any significant portion of the assets or any equity securities
(or any debt securities convertible into equity securities) of, such party or
any of its Subsidiaries, other than the transactions contemplated by this
Agreement (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal" and any such proposed transaction being hereinafter
referred to as a "Competing Transaction"), or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any Person relating to an Acquisition Proposal, or otherwise
facilitate any effort or attempt to make or implement an Acquisition Proposal;
(b) that it or any of its Subsidiaries will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any Persons
conducted heretofore with respect to any of the foregoing and each will take, or
cause its Subsidiaries to take, the necessary steps to inform the individuals or
entities referred to above of the obligations undertaken in this Section 10.1;
and (c) that it will notify the other party, in writing in accordance with
Section 12.2, immediately if any such inquiries or proposals are received by,
any

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such information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it or any of its Subsidiaries;
provided, however, that nothing contained in this Section 10.1 shall prohibit
the Board of Directors of such party from (i) furnishing information to or
entering into discussions or negotiations with, any Person that makes an
unsolicited bona fide Acquisition Proposal, if, and only to the extent that, (A)
the Board of Directors of such party determines in good faith based on the
written advice of counsel that such action is required for the Board of
Directors to comply with its fiduciary duties to Shareholders, (B) prior to
furnishing such information to, or entering into discussions or negotiations
with, such Person, such party provides written notice to the other parties to
this Agreement to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such Person, and (C) subject to any
confidentiality agreement with such Person (which such party determined in good
faith was required to be executed in order for the Board of Directors to comply
with its fiduciary duties to Shareholders imposed by law as advised by counsel
in writing), such party keeps the other parties to this Agreement informed of
the status (but not the terms) of any such discussions or negotiations; and (ii)
to the extent applicable, complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal.

Nothing in this Section 10.1 shall (x) permit any party hereto to terminate
this Agreement (except as specifically provided in Article XI hereof), (y)
permit any party hereto to enter into any agreement with respect to an
Acquisition Proposal or with respect to any Competing Transaction during the
term of this Agreement (it being agreed that during the term of this Agreement,
no party hereto shall enter into any agreement with any Person that provides
for, or in any way facilitates, an Acquisition Proposal or with respect to any
Competing Transaction (other than a confidentiality agreement in customary
form)), or (z) affect any other obligation under this Agreement of any party
hereto.

10.2. Conduct of Businesses.

(a) Prior to the Effective Time, except as otherwise contemplated by
this Agreement, unless the other party has consented in writing thereto,
Acquiror REIT and Target REIT:

(i) Shall use their reasonable efforts, and shall cause each of
their respective Subsidiaries to use their reasonable efforts, to
preserve intact their business organizations and goodwill and keep
available the services of their respective officers and employees;

(ii) Shall confer on a regular basis with one or more
representatives of the other party to report operational matters of
materiality and, subject to Sections 10.2(b)(v) and 10.2(c)(v), any
proposals to engage in material transactions;

(iii) Shall promptly notify the other party of any material
emergency or other material adverse change in the condition (financial
or otherwise), business, properties, assets, liabilities, prospects or
the normal course of their businesses or in the operation of their
properties, any material governmental complaints, investigations or
hearings (or communications indicating that the same may be
contemplated), or the breach in any material respect of any
representation, warranty, covenant or agreement contained herein;

(iv) Shall set the record date for the quarterly dividend payable
with respect to Acquiror REIT Common Stock, Acquiror REIT Preferred
Stock and Target REIT Capital Stock, respectively, for the second
calendar quarter of 1998 to a date no later than June 30, 1998, and
shall mutually agree upon the payment date for each dividend (and
neither Acquiror REIT nor Target REIT shall make the election permitted
by Section 858(a) of the Code with respect to such dividend); provided,
however, that such record date for either party shall be modified to
prevent the elimination of a dividend for the Shareholders of either
party or to prevent the receipt by the Shareholders of either party of
dividends from both Acquiror REIT and Target REIT; and

(v) Shall promptly deliver to the other complete, true and correct
copies of any SEC Documents filed with the SEC subsequent to the date of
this Agreement.

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(b) Prior to the Effective Time, except as otherwise set forth herein,
unless Acquiror REIT, Merger Sub and Acquiror OP have consented (such
consent not to be unreasonably withheld or delayed) in writing thereto,
Contributor OP and Target REIT:

(i) Shall, and shall cause each of the Target REIT Subsidiaries to,
conduct their operations according to their usual, regular and ordinary
course in substantially the same manner as heretofore conducted;

(ii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, amend their Organizational Documents;

(iii) Shall not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights (including any
existing dividend reinvestment plan) existing on the date hereof and
disclosed pursuant to this Agreement, issue any shares of Target REIT's
capital stock or any units of partnership interests of Contributor OP
other than with respect to redemption of Contributor OP Units, or effect
any stock split, reverse stock split, stock dividend, recapitalization
or other similar transaction, (B) grant, confer or award any option,
warrant, conversion right or other right not existing on the date hereof
to acquire any shares of Target REIT's capital stock or any units of
partnership interests of Contributor OP, (C) increase materially any
compensation or enter into or amend any employment agreement with any of
their present or future officers, directors, partners or employees, or
(D) adopt any new employee benefit plan (including any stock option,
stock benefit or stock purchase plan) or amend any existing Target REIT
Employee Benefit Plan in any material respect;

(iv) Shall not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of Target
REIT's capital stock, except (a) a dividend not to exceed $.375 per
share of Target REIT's Common Stock and $.3625 per share of Target REIT
Preferred Stock for the second calendar quarter of 1998 and (b) any
Final Target REIT Dividend pursuant to Section 4.2(d), or (B) except in
connection with the use of shares of Target REIT's capital stock to pay
the exercise price or tax withholding in connection with stock-based
employee benefit plans of Target REIT, directly or indirectly redeem,
purchase or otherwise acquire any shares of Target REIT's capital stock
or capital stock of any of the Target REIT Subsidiaries, or make any
commitment for any such action, provided, however, that Target REIT may
issue shares of Target REIT Common Stock in redemption of Contributor OP
Units as contemplated by the Contributor OP Partnership Agreement;

(v) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, sell or otherwise dispose of (A) any Target REIT Hotels
or any of their capital stock of or other interests in the Target REIT
Subsidiaries or (B) except in the ordinary course of business consistent
with past practice for reasonable and adequate consideration, any of
their other assets which are material, individually or in the aggregate;
provided, however, that Target REIT and the Target REIT Subsidiaries may
sell the Target REIT Hotels set forth on Schedule 10.2(b)(v) hereto for
prices which equal or exceed the prices set forth opposite the name of
such Target REIT Hotels on Schedule 10.2(b)(v) hereto or which, in the
aggregate, equal or exceed the prices for all Target REIT Hotels set
forth on Schedule 10.2(b)(v);

(vi) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, make any loans, advances or capital contributions to,
investments in, or guarantees on behalf of, any Person other than the
Target REIT Subsidiaries, or impose, or suffer the imposition, on any
Target REIT Hotel or on any other assets of Target REIT or any Target
REIT Subsidiary of any lien or encumbrance or permit such lien or
encumbrance to exist, other than liens and encumbrances (A) in effect on
the date hereof that are disclosed on the consolidated financial
statements of Target REIT and the Target REIT Subsidiaries included in
the Target REIT SEC Documents or (B) arising hereafter in the ordinary
course of business consistent with past practice;

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(vii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice (including,
without limitation, payments of outstanding principal amounts under
credit lines) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of Target REIT
and the Target REIT Subsidiaries included in the Target REIT SEC
Documents or incurred in the ordinary course of business consistent with
past practice;

(viii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, enter into any Contract which individually may result
in total payments or liability by or to them in excess of $100,000 in
the case of any one Contract or in excess of $500,000 for all such
Contracts, or modify, amend or terminate any Contract or waive, release,
compromise or assign any material rights or claims thereunder, other
than in the ordinary course of business consistent with past practice;
provided, however, that Target REIT and the Target REIT Subsidiaries may
complete the acquisitions of the hotel properties described in Schedule
10.2(b)(viii), the purchase of which will be funded through borrowings
under Contributor OP's line of credit;

(ix) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, enter into any Contract with any officer, director,
partner, employee or affiliate of Target REIT or any of the Target REIT
Subsidiaries, except to the extent the same occur in the ordinary course
of business consistent with past practice and would not have an Target
REIT Material Adverse Effect;

(x) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, take any action that would adversely effect the status
of title to the real property;

(xi) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, release or modify any warranties or guarantees, if any,
of contractors, builders, architects, manufacturers, suppliers and
installers relating to the Improvements and the Personal Property or any
part thereof;

(xii) Shall, and shall cause each of the Target REIT Subsidiaries
to, pay all premiums then-due on, and shall not cancel or voluntarily
allow to expire, any of the Insurance Policies unless such policy is
replaced, without any lapse of coverage, by another policy or policies
providing coverage at least as extensive as the policy or policies being
replaced; and

(xiii) Shall not, and shall not permit any of the Target REIT
Subsidiaries to, amend or supplement the Mortgage Documents in whole or
in part, and shall, and shall cause each of the Target REIT Subsidiaries
to, pay or make, as and when due and payable, all payments of principal,
interest and other amounts required to be paid or made under the
Mortgage Documents.

(c) Prior to the Effective Time, except as otherwise set forth herein,
unless Target REIT and Contributor OP have consented (such consent not to
be unreasonably withheld or delayed) in writing thereto, Acquiror OP,
Acquiror REIT and Merger Sub:

(i) Shall, and shall cause each of the Acquiror REIT Subsidiaries
to, conduct their operations according to their usual, regular and
ordinary course in substantially the same manner as heretofore
conducted;

(ii) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, amend their Organizational Documents, except as
provided in the proxy statement with respect to Acquiror REIT's 1998
annual meeting of shareholders;

(iii) Shall not (A) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights (including any
existing dividend reinvestment plan) existing on the date hereof and
disclosed pursuant to this Agreement or pursuant to this Agreement with
respect to the Merger Consideration, the OP Merger Consideration and the
CMBS OP Merger Consideration, issue any shares of Acquiror REIT's or
Merger Sub's capital stock or any units of partnership interest of
Acquiror OP other than with respect to redemption of Acquiror OP Units,
or effect any
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stock split, reverse stock split, stock dividend, recapitalization or
other similar transaction, (B) grant, confer or award any option,
warrant, conversion right or other right not existing on the date hereof
to acquire any shares of Acquiror REIT's or Merger Sub's capital stock
or any units of partnership interest of Acquiror OP, (C) increase
materially any compensation or enter into or amend any employment
agreement with any of their present or future officers, directors,
partners or employees, or (D) adopt any new employee benefit plan
(including any stock option, stock benefit or stock purchase plan) or
amend any existing Acquiror REIT Employee Benefit Plan in any material
respect; provided, however, that Acquiror REIT may sell, from time to
time, shares of Acquiror REIT Common Stock or shares of Acquiror REIT
Preferred Stock at fair market values then prevailing in the market
place for such securities;

(iv) Shall not (A) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of Acquiror
REIT's or Merger Sub's capital stock, except (subject to Section
10.2(a)(iv) a dividend not to exceed $.31 per share of Acquiror REIT
Common Share for the second calendar quarter of 1998 and any other
dividend pursuant to Section 4.2(d) or other distribution necessary for
Acquiror REIT to maintain its ability to qualify to be taxed as a REIT
under the Code, or (B) except in connection with the use of shares of
Acquiror REIT capital stock to pay the exercise price or tax withholding
in connection with stock-based employee benefit plans of Acquiror REIT,
directly or indirectly redeem, purchase or otherwise acquire any shares
of Acquiror REIT's or Merger Sub's capital stock or capital stock of any
of the Acquiror REIT Subsidiaries, or make any commitment for any such
action, provided, however, that Acquiror REIT may issue shares of
Acquiror REIT Common Stock in redemption of Acquiror OP Units as
contemplated by the Acquiror OP Partnership Agreement;

(v) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, sell or otherwise dispose of (A) any Acquiror REIT
Hotels or any of their capital stock of or other interests in the
Acquiror REIT Subsidiaries other than Acquiror OP Units issued in
connection with the acquisition of hotel properties as described in
Section 10.2(c)(viii) or (B) except in the ordinary course of business
consistent with past practices for reasonable and adequate
consideration, any of their other assets which are material,
individually or in the aggregate; provided however, that Acquiror REIT
and the Acquiror REIT Subsidiaries may sell the Acquiror REIT Hotels set
forth on Schedule 10.2(c)(v) for prices which equal or exceed the prices
set forth opposite the name of such Acquiror REIT Hotels set forth on
Schedule 10.2(c)(v) hereto or which, in the aggregate, equal or exceed
the prices for all Acquiror REIT Hotels set forth on Schedule
10.2(c)(v);

(vi) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, make any loans, advances or capital contributions to,
investments in, or guarantees on behalf of, any Person other than the
Acquiror REIT Subsidiaries, or impose, or suffer the imposition, on any
Acquiror REIT Hotel or any other assets of Acquiror REIT or any Acquiror
REIT Subsidiary of any lien or encumbrance or permit such lien or
encumbrance to exist, other than liens and encumbrances (A) in effect on
the date hereof that are disclosed on the consolidated financial
statements of Acquiror REIT and the Acquiror REIT Subsidiaries included
in the Acquiror REIT SEC Document or (B) arising hereafter in the
ordinary course of business consistent with past practice;

(vii) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business consistent with past practice (including,
without limitation, payment of outstanding principal amounts under
credit lines) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of Acquiror
REIT and the Acquiror REIT Subsidiaries included in the Acquiror REIT
SEC Documents or incurred in the ordinary course of business consistent
with past practice;

(viii) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, enter into any Contract which individually may result
in total payments or liability by or to them in excess of

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$100,000 in the case of any one such Contract or in excess of $500,000
for all such Contracts, or modify, amend or terminate any Contract, or
waive, release, compromise or assign any material rights in claims
thereunder, other than in the ordinary course of business consistent
with past practice, provided, however, that Acquiror REIT and the
Acquiror REIT Subsidiaries may complete the acquisitions of the hotel
properties described in Schedule 10.2(c)(viii);

(ix) Shall not, and shall not permit any of the Acquiror REIT
Subsidiaries to, enter into any Contract with any officer, director,
partner, employee or affiliate of Acquiror REIT or any of the Acquiror
REIT Subsidiaries, except as herein provided and except in the ordinary
course of business consistent with past practice and would not have an
Acquiror REIT Material Adverse Effect; and

(x) Shall, and shall cause each of the Acquiror REIT Subsidiaries
to, pay all premiums then-due on, and shall not cancel or voluntarily
allow to expire, any of the insurance policies with respect to the
Acquiror REIT Hotels unless such policy is replaced, without any lapse
of coverage, by another policy or policies providing coverage at least
as extensive as the policy or policies being replaced.

10.3. Meetings of Shareholders.

Each of Acquiror REIT and Target REIT will take all action necessary in
accordance with applicable law and its Organizational Documents to convene a
meeting of its Shareholders as promptly as practicable, but in any event,
subject to effectiveness of the Form S-4 and related requirements as to the
timing of distribution of proxy materials to Shareholders, no later than October
15, 1998, to consider and vote upon or otherwise to obtain the consent of its
Shareholders to (i) in the case of Acquiror REIT, the approval of this
Agreement, the issuance of the Acquiror REIT Common Stock pursuant to the REIT
Merger and the amendment of its Charter as provided in Section 10.20 hereof, and
(ii) in the case of Target REIT, the approval of this Agreement and the
transactions contemplated hereby. The Board of Directors of Acquiror REIT and
the Board of Directors of Target REIT shall each recommend such approval, and
Acquiror REIT and Target REIT shall each take all lawful action to solicit such
approval, including, without limitation, timely mailing of the Proxy
Statement/Prospectus to its respective Shareholders; provided, however, that
such recommendation or solicitation is subject to any action taken by, or upon
authority of, the Board of Directors of Acquiror REIT or the Board of Directors
of Target REIT, as the case may be, in the exercise of its good faith judgment
as to its fiduciary duties to its Shareholders imposed by law as advised by
counsel in writing. Acquiror REIT and Target REIT shall coordinate and cooperate
with respect to the timing of such meetings and shall use their best efforts to
hold such meetings on the same day.

10.4. Filings; Other Action.

Subject to the terms and conditions herein provided, the parties hereto
shall: (a) use all reasonable efforts to cooperate with one another in (i)
determining which filings are required to be made prior to the Effective Time
with, and which consents, approvals, permits or authorizations are required to
be obtained prior to the Effective Time from, governmental or regulatory
authorities of the United States, the several states, third party secured and
unsecured lenders, franchisors and rating agencies in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, and (ii) timely making all such filings
and timely seeking all such consents, approvals, permits or authorizations; (b)
use all reasonable efforts to obtain in writing any consents required from third
parties in form reasonably satisfactory to Target REIT and Acquiror REIT
necessary to effectuate the Mergers, the Asset Sale and the other transactions
contemplated herein; and (c) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Acquiror REIT and Target REIT
shall take, or cause the Subsidiaries of Acquiror REIT and Target REIT to take,
any necessary action.

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10.5. Inspection of Records.

From the date hereof to the Effective Time, each of Target REIT and
Acquiror REIT shall allow all designated officers, attorneys, accountants,
investment bankers, financial advisers and other representatives of the other
access at all reasonable times to the records and files, correspondence, audits
and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs of Target REIT and Acquiror REIT and their respective
Subsidiaries.

10.6. Publicity.

The initial press release relating to this Agreement and the transactions
contemplated hereby shall be a joint release and thereafter, prior to the
Effective Time, Target REIT and Acquiror REIT shall, subject to their respective
legal obligations (including requirements of stock exchanges and other similar
regulatory bodies), provide each other with copies of any proposed press release
a sufficient amount of time prior to the proposed release to allow for review
and discussion thereof, consult with each other, and use reasonable efforts to
agree upon the text of any press release, before issuing any such press release
or otherwise making public statements with respect to the transactions
contemplated hereby and in making any filings with any federal or state
governmental or regulatory agency or with any national securities exchange with
respect thereto.

10.7. Registration Statement.

Acquiror REIT and Target REIT shall cooperate and promptly prepare and
Acquiror REIT shall file with the SEC as soon as practicable a Registration
Statement on Form S-4 (together with any pre-effective or post-effective
amendments, the "Form S-4") under the Securities Act, with respect to the
Acquiror REIT Common Stock issuable in the REIT Merger, a portion of which
Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the Shareholders of Target REIT and of Acquiror REIT
in connection with the REIT Merger (the "Proxy Statement/Prospectus"). The
respective parties will cause the Proxy Statement/Prospectus and the Form S-4 to
comply as to form in all material respects with the applicable provisions of the
Securities Act and the Exchange Act. Acquiror REIT shall use all reasonable
efforts and Target REIT will cooperate with Acquiror REIT to have the Form S-4
declared effective by the SEC as promptly as practicable. Acquiror REIT shall
use its best efforts to obtain, prior to the effective date of the Form S-4, all
necessary state securities law or "Blue Sky" permits or approvals required to
carry out the transactions contemplated by this Agreement and will pay all
expenses incident thereto. Acquiror REIT agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of Shareholders of
Acquiror REIT and Target REIT, or, in the case of the Form S-4 and each
amendment or supplement thereto, at the time it is filed or becomes effective,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by Acquiror REIT in reliance upon and in conformity with
written information concerning Target REIT or the Target REIT Subsidiaries
furnished to Acquiror REIT by Target REIT specifically for use in the Proxy
Statement/Prospectus or the Form S-4. Target REIT agrees that the written
information provided by it specifically for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the respective meetings of Shareholders of
Acquiror REIT and Target REIT, or, in the case of written information provided
by Target REIT specifically for inclusion in the Form S-4 or any amendments or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Acquiror
REIT will advise Target REIT, promptly after it receives notice thereof, of the
time when the Form S-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the shares of Acquiror REIT Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment

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of the Proxy Statement/Prospectus or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information.

10.8. Listing Application.

Acquiror REIT shall promptly prepare and submit to the NYSE a listing
application covering the shares of Acquiror REIT Common Stock issuable in the
REIT Merger, and shall use its best efforts to obtain, prior to the Effective
Time, approval for the listing of such shares of Acquiror REIT Common Stock,
subject to official notice of issuance.

10.9. Further Action.

Each party hereto shall, subject to the fulfillment at or before the
Effective Time of each of the conditions of performances set forth herein or the
waiver thereof, perform such further acts and execute such documents as may
reasonably be required to effect the Mergers and the Asset Sale.

10.10. Expenses.

Except as otherwise specifically set forth herein, all out-of-pocket costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby ("Expenses") shall be paid by the party hereto incurring
such Expenses, except that each of Acquiror REIT and Target REIT shall bear and
pay one-half of (i) the SEC and Blue Sky filing fees incurred in connection with
the Form S-4 and the Proxy Statement/Prospectus, and (ii) the printing and
distribution costs incurred in connection with the printing and distribution to
the Shareholders of the Form S-4 and the Proxy Statement/Prospectus. However,
notwithstanding any other terms or conditions of this Agreement, Acquiror REIT
acknowledges that all unpaid Expenses incurred by Target REIT and the Target
REIT Subsidiaries in connection with the execution of this Agreement and the
performance of the transactions contemplated hereby will be obligations of
Merger Sub upon consummation of the REIT Merger and Merger Sub agrees to pay,
and Acquiror REIT agrees to cause Merger Sub to timely perform and pay, such
obligations in full.

10.11. Indemnification.

For a period of six years from and after the Effective Time, Acquiror REIT
shall indemnify the directors, officers, employees and agents of Target REIT and
the Target REIT Subsidiaries who at any time prior to the Effective Time were
entitled to indemnification under the Organizational Documents of Target REIT,
Organizational Documents of the Target REIT Subsidiaries or employment or other
agreements between Target REIT and such persons, or between any Target REIT
Subsidiary and such persons, existing on the date hereof to the same extent as
such directors, officers, employees and agents are entitled to indemnification
under such Organizational Documents or employment or other agreements in respect
of actions or omissions occurring at or prior to the Effective Time (including,
without limitation, the transactions contemplated by this Agreement). If
Acquiror REIT, the Surviving Corporation or any of its successors or assigns
shall consolidate with or merge into any other Person and shall not be the
continuing or surviving Person of such consideration or merger or shall transfer
all or substantially all of its assets to any Person, then and in each case,
proper provision shall be made so that the successors and assigns of Acquiror
REIT or the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Section 10.11.

10.12. Governance.

On or before the Closing Date, Acquiror REIT's Board shall take all action
necessary to expand the number of directorships on Acquiror REIT's Board from
the current four directorships to six directorships, and cause Robert M. Solmson
and Bruce E. Campbell, Jr. to be appointed as directors of Acquiror REIT to fill
such two new directorships effective as of the Effective Time for terms expiring
at the 1999 annual meeting of Shareholders of Acquiror REIT; provided that,
notwithstanding the foregoing, Acquiror REIT's Board shall recommend in Acquiror
REIT's proxy statement with respect to the 1999 annual meeting of Shareholders
of Acquiror REIT that Messr. Campbell and Solmson shall be nominated by the
Board of Acquiror REIT for

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election as Class I and Class II directors, respectively, with terms expiring at
Acquiror REIT's annual meetings of shareholders in 2001 and 2002, respectively.
If, prior to the Effective Time, either of such persons shall decline or be
unable to serve as a director of Acquiror REIT, Target REIT shall designate
another person to serve in such person's stead, which person shall be reasonably
acceptable to Acquiror REIT's Board.

On or before the Closing Date, Acquiror REIT's Board shall take all action
necessary to form a three (3) member executive committee of such Board, and
cause Robert M. Solmson, Phillip H. McNeill, Sr. and William W. Deupree to be
appointed to serve as members of such executive committee.

10.13. Severance Benefits.

Acquiror REIT agrees that Target REIT may pay to employees of Target REIT
or the Target REIT Subsidiaries, at or prior to the Effective Time, the
severance benefits described in Schedule 10.13 (the "Severance Benefits"),
provided that, if Target REIT does not pay the Severance Benefits prior to or at
the Effective Time, Acquiror OP, Merger Sub or Acquiror REIT will pay the
Severance Benefits to such employees within three (3) business days at the
Closing.

10.14. Reorganization.

From and after the date hereof and until the Effective Time, neither
Acquiror REIT nor Target REIT nor any of their respective Subsidiaries or other
affiliates shall (i) knowingly take any action that, or knowingly fail to take
any action the failure of which, would jeopardize qualification of the REIT
Merger as a reorganization within the meaning of Section 368(a) of the Code; or
(ii) enter into any contract, agreement, commitment or arrangement with respect
to the foregoing. Each of Acquiror REIT and Target REIT shall use its reasonable
best efforts before the Effective Time to obtain the opinions of counsel
referred to in Sections 9.2(e) and 9.3(e). Following the Effective Time, each of
Acquiror REIT, Acquiror OP and Merger Sub shall use its best efforts to conduct
its business in a manner that would not jeopardize the characterization of the
REIT Merger as a reorganization within the meaning of Section 368(a) of the
Code.

10.15. Survival of Target REIT, Contributor OP and Contributor CMBS OP
Obligations.

All of the obligations of Target REIT, Contributor OP and Contributor CMBS
OP that are outstanding at the Closing shall survive the Closing and shall not
be merged therein. Upon the consummation of the Mergers, such obligations shall
be assumed, automatically, by the Surviving Corporation, the Surviving OP and
the Surviving CMBS OP, respectively; provided, however, that such assumption
shall not impose upon or expose the Surviving Corporation, the Surviving OP and
the Surviving CMBS OP, respectively, to any liability for which Target REIT,
Contributor OP and Contributor CMBS OP was not liable, and provided, further,
that the Surviving Corporation, the Surviving OP and the Surviving CMBS OP,
respectively, shall be entitled to the same defenses, offsets and counterclaims
to which Target REIT, Contributor OP and Contributor CMBS OP would have been
entitled but for the Mergers.

10.16. Third-Party Consents.

Acquiror REIT, Acquiror OP, Merger Sub, Contributor OP and Target REIT each
shall take, and shall cause their respective Subsidiaries to take, all necessary
corporate and other action and will use its commercially reasonable efforts to
obtain, or cause its Subsidiaries to obtain, the consents and applicable
approvals from third parties that may be required by any agreement, lease,
instrument, arrangement, judgment, decree, order or license to enable it to
carry out the transactions contemplated by this Agreement.

10.17. Efforts to Fulfill Conditions.

Acquiror REIT, Acquiror OP, Merger Sub, Contributor OP and Target REIT each
shall use commercially reasonable efforts to ensure that all conditions
precedent to its obligations hereunder are fulfilled at or prior to the Closing.

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10.18. Representations, Warranties and Conditions Prior to Closing.

Each party hereto shall use its best efforts to cause its representations
and warranties contained in this Agreement to be true and correct on and as of
the Effective Time in all material respects. Prior to Closing, Acquiror OP,
Acquiror REIT and Merger Sub, on the one hand, and Contributor OP and Target
REIT, on the other hand, each shall promptly notify the other in writing (i) if
any representation or warranty contained in this Agreement is discovered to be
or becomes untrue or (ii) if any party hereto fails to perform or comply with
any of its covenants or agreements contained in this Agreement or it is
reasonably expected that it will be unable to perform or comply with any of its
covenants or agreements contained in this Agreement.

10.19. Cooperation of the Parties.

Each party hereto will cooperate with the other parties hereto in supplying
such information as may be reasonably requested by the others in connection with
obtaining consents or approvals to the transactions contemplated by this
Agreement. The parties hereto will execute and deliver to counsel for Acquiror
REIT and Target REIT certificates of executive officers with respect to matters
reasonably requested by such counsel in connection with the opinions of such
counsel pursuant to Sections 9.2(e) and (f) and 9.3(e) and (f) hereof.

10.20. Amendment to Acquiror REIT Charter.

If required to consummate the transactions contemplated herein, Acquiror
REIT's Board shall recommend to its Shareholders in the Proxy
Statement/Prospectus an amendment to the Acquiror REIT Charter and, if all the
conditions to the Mergers set forth in Article IX shall have been fulfilled or
waived (and this Agreement shall not have been terminated as provided in Article
XI below), Acquiror REIT shall promptly after the Effective Time cause articles
of amendment effectuating such amendment and satisfying the requirements of the
Tennessee Act to be filed in accordance with the Tennessee Act.

10.21. Records.

Acquiror REIT, Acquiror OP and Merger Sub shall preserve and keep, free of
charge, all books, papers and records of Target REIT and the Target REIT
Subsidiaries relating to periods prior to the Closing Date for a period of no
less than seven years following the Closing Date. Acquiror REIT, Acquiror OP and
Merger Sub agree to permit any officer of Target REIT and the attorneys,
accountants and advisors of Target REIT, access to the records of Target REIT
from and after the Closing Date for all reasonable purposes. Any such
examination shall be performed at the place where the records of Acquiror REIT
are regularly maintained and shall not unreasonably interfere with Acquiror
REIT's normal business activities.

10.22. Confidentiality.

The parties hereto shall, and shall cause their respective representatives
and agents to, keep the existence and terms of this Agreement strictly
confidential, except (a) to the extent disclosure must be made to enable such
parties to perform acts necessary to consummate Closing or take actions
permitted under this Agreement, (b) disclosure to attorneys, accountants and
other professionals who are similarly bound to confidentiality, and (c) such
confidentiality no longer shall apply from and after consummation of Closing.

10.23. Acknowledgments.

Acquiror OP, Acquiror REIT and Merger Sub have conducted an independent
investigation of the financial condition, results of operations, assets,
liabilities, properties and operations of Target REIT and the Target REIT
Subsidiaries. Contributor OP and Target REIT have conducted an independent
investigation of the financial condition, results of operations, assets,
liabilities, properties and operations of Acquiror REIT and the Acquiror REIT
Subsidiaries. The representations and warranties made by the parties hereto in
this Agreement and in any certificate delivered hereunder constitute the sole
and exclusive representations and warranties of such parties in connection with
the transactions contemplated under this Agreement, and the parties hereto
understand, acknowledge and agree that all other representations and warranties
of any kind or
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nature (including, but not limited to, any relating to the future or historical
financial condition, results or operations, assets or liabilities of any entity)
are specifically disclaimed by such parties.

10.24. Target REIT Acquisition Opportunities.

From the date hereof to the Effective Time, Target REIT or its Subsidiaries
may propose potential acquisitions of one or more hotel properties to Acquiror
REIT or its Subsidiaries, of which acquisition opportunity Acquiror REIT is not
otherwise aware (each, "Acquisition Opportunity"). Acquiror REIT and its
Subsidiaries shall have no obligation to pursue, or otherwise take advantage of,
any of Acquisition Opportunity. The parties hereto agree that in the event of a
termination of this Agreement pursuant to Article XI hereof, Acquiror REIT shall
not permit its Subsidiaries to take any action to pursue, or otherwise take
advantage of, any Acquisition Opportunity which Target REIT or its subsidiaries
presented to Acquiror REIT, and shall cause its Subsidiaries to, promptly upon
such termination and reimbursement by Target REIT for all out-of-pocket costs
and expenses incurred by Acquiror REIT or its Subsidiaries related thereto,
assign and transfer any and all of their rights, title or interests in any
Acquisition Opportunity to Target REIT (or its designee), including, without
limitation, any and all Contracts and Permits (as permitted by law) related to
such Acquisition Opportunity. In connection with any such assignment and
transfer, Target REIT shall assume all of the obligations under such Contracts
and shall indemnify and hold harmless Acquiror REIT and its Subsidiaries against
any claims by third parties thereunder.

10.25. CMBS Bonds.

The parties hereto shall to cooperate to use their best efforts to cause
Contributor CMBS OP's Series 1996-1 Commercial Mortgage Bonds, Class A and Class
B, in the aggregate original principal amount of $75,000,000 (collectively, the
"CMBS Bonds"), to remain outstanding after the Mergers, with Acquiror CMBS OP as
the issuer thereof rather than Contributor CMBS OP. Accordingly, Acquiror REIT
agrees to use its best efforts to promptly (a) create and establish a Tennessee
limited partnership ("Acquiror CMBS OP") with characteristics and ownership
structure substantially similar to the characteristics and ownership structure
of Contributor CMBS OP; (b) cause the creation and establishment of a legal
entity ("Acquiror REIT CMBS Lessee") with characteristics and ownership
structure substantially similar to the characteristics and ownership structure
of Target REIT CMBS Lessee; (c) prepare and cause Acquiror CMBS OP and Acquiror
REIT CMBS Lessee to enter into leases for each of the Target REIT Hotels owned
by Contributor CMBS OP that are substantially similar to the Target REIT Leases
currently in effect with respect to such hotels, provided such new leases shall
provide for rent terms no less favorable to Acquiror CMBS OP than the rent terms
contained in the corresponding Target REIT Leases and shall be effective upon
the Effective Time; and (d) take such further action as may be reasonably
required by rating agencies, trustees or other third parties in connection with
the transactions contemplated by this Section 10.25. Target REIT and Acquiror
REIT agree to use their best efforts to obtain all necessary consents required
to cause the CMBS Bonds to remain outstanding after the Mergers, with Acquiror
CMBS OP as the issuer thereof rather than Contributor CMBS OP, including,
without limitation, consents of the rating agency and trustee for the CMBS
Bonds.

10.26. Tax Treatment.

If, based upon the advice of counsel in writing, Acquiror REIT and Target
REIT determine that the transactions between the Acquiror OP and the Contributor
OP hereunder could reasonably be expected to create a risk that the REIT Merger
would not qualify as a reorganization under the provisions of Section 368(a) of
the Code, Acquiror REIT and Target REIT undertake to use reasonable best efforts
to negotiate and structure an alternative means to effect the REIT Merger, for
Acquiror REIT to acquire the interest in Contributor OP owned by Target REIT,
and for the holders of Contributor OP Units to receive Acquiror OP Units (or the
economic and tax equivalent thereof) in exchange for their Contributor OP Units.
Acquiror OP will use the "traditional method" under Treasury Regulations Section
1.704-3(b) for purposes of making allocations under Section 704(c) of the Code
with respect to the properties of or interests in the Contributor OP as of the
Effective Time (with no curative allocations of gross income with respect to
depreciation to offset the effects of the "ceiling rule" but with a curative
allocation of gain upon disposition of

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such properties to offset the effect of the "ceiling rule"). Acquiror OP and
Contributor OP shall negotiate in good faith to agree upon the "Section 704(c)
values" of the properties of Contributor OP, effective as of the Closing Date.
For purposes of allocating "excess nonrecourse liabilities" of the Acquiror OP
pursuant to Treasury Regulations Section 1.752-3(a)(3) following the Closing
Date, Acquiror OP shall use a methodology to be agreed upon between Acquiror OP
and Contributor OP.

10.27. Transfer and Gains Taxes.

Each party hereto shall cooperate in the preparation, execution and filing
of all returns, questionnaires, applications or other documents regarding any
real property transfer or gains, sales, use, transfer, value added stock
transfer and stamp taxes, any transfer, recording, registration and other fees
and any similar taxes which become payable in connection with the transactions
contemplated by this Agreement (together with any related interests, penalties
or additions to tax, "Transfer and Gains Taxes"). From and after the Effective
Time, Acquiror REIT shall pay or cause Acquiror OP, as appropriate, to pay or
cause to be paid, without deduction or withholding from any amounts payable to
the holders of Acquiror REIT Common Stock, or Acquiror OP Units, as applicable,
all Transfer and Gains Taxes (which term shall not in any event be construed to
include for these purposes any tax imposed under the Code).

10.28. Transfer of Target C Corp. Shares.

At the Closing and pursuant to the Stock Purchase Agreement, Target REIT
shall cause Robert M. Solmson to transfer to Acquiror REIT or such Person as
Acquiror REIT shall designate by written notice delivered to him prior to the
Closing, all of the shares of capital stock of the Target C Corp. owned by him
for an aggregate consideration of $95,000 paid to him in cash and in accordance
with a Stock Purchase Agreement (the "Stock Purchase Agreement") to be executed
between Mr. Solmson and Acquiror REIT.

10.29. Existing Restrictions.

Acquiror REIT, Acquiror OP and Acquiror CMBS OP shall assume the
obligations of Target REIT, Contributor OP, Contributor CMBS OP or the
applicable Target REIT Subsidiary, as the case may be, under the Tax Protection
Agreements described in Schedule 7.8.

10.30. Lease Termination/New Leases.

Acquiror REIT and Acquiror OP shall use their good faith best efforts, and
will cause Acquiror CMBS OP to use its good faith best efforts, to enter into
new leases with respect to the Target REIT Hotels described on Schedule 7.38 (as
soon as practical after the date hereof concerning those hotels owned by
Contributor CMBS OP) on terms reasonably acceptable to Acquiror REIT effective
as of the Closing Date and will keep Target REIT and Contributor OP advised as
to the status of negotiations as to such new Leases.

ARTICLE XI

TERMINATION

11.1. Termination by Mutual Consent.

This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
approval of this Agreement by the Shareholders of Target REIT or Acquiror REIT,
by the mutual written consent of Acquiror REIT and Target REIT. This Agreement
may also be terminated and the transactions contemplated herein may be abandoned
at any time on or after the date hereof (a) by action of the Board of Target
REIT in the event that Acquiror REIT shall have failed to deliver to Target REIT
the Schedules and Exhibits for which it is responsible as described in Section
2.8 in form and substance reasonably satisfactory to Target REIT, or (b) by
action of the Board of Acquiror REIT in the event that Target REIT shall have
failed to deliver to Acquiror REIT the Schedules and Exhibits for

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which it is responsible as described in Section 2.8 in form and substance
reasonably satisfactory to Acquiror REIT.

11.2. Termination by Either Acquiror REIT or Target REIT.

This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
approval of this Agreement by the Shareholders of Target REIT or Acquiror REIT,
by action of the Board of Target REIT or the Board of Acquiror REIT if (a) the
Mergers shall not have been consummated by October 15, 1998, or (b) a meeting of
Target REIT's Shareholders or a meeting of Acquiror REIT's Shareholders shall
have been duly convened and held and the approval of Target REIT's Shareholders
or the approval of Acquiror REIT's Shareholders required by Section 9.1(a) shall
not have been obtained at such meeting or at any adjournment thereof, or (c) a
United States federal or state court of competent jurisdiction or United States
federal or state governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and non-appealable, provided, that the party seeking to
terminate this Agreement pursuant to this clause (c) shall have used its
reasonable best efforts to remove such order, decree, ruling or injunction, or
(d) any of the conditions set forth in Article IX shall not have been satisfied
or waived by the Effective Time, or (e) the Average Price is less then $14.00;
and provided, in the case of a termination pursuant to clause (a) or (d) above,
that the terminating party shall not have proximately contributed (including,
without limitation, failure to use all reasonable efforts to satisfy the
conditions set forth in Article IX) to the occurrence of the failure referred to
in said clauses.

11.3. Termination by Target REIT.

This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
adoption and approval by the Shareholders of Target REIT referred to in Section
9.1(a), by action of the Board of Target REIT if (a) the Board of Acquiror REIT
withdraws, materially modifies or changes in a manner adverse to Target REIT its
recommendation to Acquiror REIT's Shareholders of this Agreement or the REIT
Merger, other than as a result of the occurrence of an event that, in the good
faith judgment of the Board of Acquiror REIT, has or is reasonably likely to
have a Target REIT Material Adverse Effect, (b) the Board of Acquiror REIT
postpones the date scheduled for the meeting of Shareholders of Acquiror REIT to
approve this Agreement and the transactions contemplated hereby beyond the date
set forth in Section 11.2(a), or fails to set a date for such meeting by such
date, except with the written consent of Target REIT, (c) there has been a
breach by Acquiror REIT, Acquiror OP or Merger Sub of any representation or
warranty contained in this Agreement which would have or would be reasonably
likely to have an Acquiror REIT Material Adverse Effect, which breach is not
curable or, if curable, either (i) is not cured by the earlier of (A) the date
set forth in Section 11.2(a) or (B) the Closing Date, or (ii) is waived by
Target REIT, (d) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Acquiror REIT, Acquiror OP
or Merger Sub, which breach is not curable or, if curable, either (i) is not
cured by the earlier of (A) 30 days after written notice of such breach is given
by Target REIT to Acquiror REIT, or (B) the Closing Date, or (ii) is waived by
Target REIT, or (e) the Target REIT Board determines that, in the exercise of
its good faith judgment, termination of this Agreement is required in the
exercise of its fiduciary duties to the Target REIT Shareholders by reason of an
Acquisition Proposal being made.

11.4. Termination by Acquiror REIT.

This Agreement may be terminated and the transactions contemplated herein
may be abandoned at any time prior to the Effective Time, before or after the
approval by the Shareholders of Acquiror REIT referred to in Section 9.1(a), by
action of the Board of Acquiror REIT if (a) the Board of Target REIT withdraws,
materially modifies or changes in a manner adverse to Acquiror REIT its
recommendation to Target REIT's Shareholders of this Agreement or the REIT
Merger, other than as a result of the occurrence of an event that,

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in the good faith judgment of the Board of Target REIT, has or is reasonably
likely to have an Acquiror REIT Material Adverse Effect, (b) the Board of Target
REIT postpones the date scheduled for the meeting of Shareholders of Target REIT
to approve this Agreement and the transactions contemplated hereby beyond the
date set forth in Section 11.2(a), or fails to set a date for such meeting by
such date, except with the written consent of Acquiror REIT, (c) there has been
a breach by Target REIT or Contributor OP of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a Target REIT Material Adverse Effect, which breach is not curable or, if
curable, either (i) is not cured by the earlier of (A) the date set forth in
Section 11.2(a) or (B) the Closing Date, or (ii) is waived by Acquiror REIT, (d)
there has been a material breach of any of the covenants or agreements set forth
in this Agreement on the part of Target REIT or Contributor OP, which breach is
not curable or, if curable, either (i) is not cured the earlier of (A) thirty
(30) days after written notice of such breach is given by Acquiror REIT to
Target REIT, or (B) the Closing Date, or (ii) is waived by Acquiror REIT, or (e)
the Acquiror REIT Board determines that, in the exercise of its good faith
judgment, termination of this Agreement is required in the exercise of its
fiduciary duties to the Acquiror REIT Shareholders by reason of an Acquisition
Proposal being made.

11.5. Effect of Termination and Abandonment.

(a) If (i) Target REIT elects to terminate this Agreement pursuant to
Section 11.2(a), 11.2(b) (provided, in the case of termination pursuant to
either of these sections, that neither Target REIT nor Contributor OP shall be
the party who proximately contributed to a failure to consummate the
transactions hereunder or be the breaching party), or 11.3(e), or (ii) Acquiror
REIT elects to terminate this Agreement pursuant to Section 11.2(a), 11.2(b)
(provided, in the case of termination pursuant to either of these sections, that
none of Acquiror REIT, Acquiror OP or Merger Sub shall be the party proximately
contributing to a failure to consummate the transactions hereunder or be the
breaching party), or 11.4(e), and, in any event, an Acquisition Proposal
relating to Target REIT in the case of a termination pursuant to clause (i)
above or relating to Acquiror REIT in the case of a termination pursuant to
clause (ii) above (such party being sometimes hereinafter referred to as the
"Payor Party"), shall have been made and notice of same shall have been required
pursuant to Section 10.1 prior to such termination (an "Acquisition Proposal
Notice"), provided that the other party (the "Entitled Party") was not in
material breach of its obligations hereunder at the time of such termination,
the Payor Party shall at the time of such termination deposit by wire transfer
of same-day funds into an interest bearing escrow account with an escrow agent
selected by the Entitled Party (the "Escrow Agent") and on such terms as the
Entitled Party and the Escrow Agent shall agree, consistent with the terms of
this Article XI, for the benefit of the Entitled Party as reasonable
compensation to the Entitled Party for enhanced competitive risks resulting from
the Payor Party consummating a Competing Transaction, market risks in announcing
the REIT Merger, management time expended in pursuit of the Mergers and related
transactions, lost opportunities to consummate other merger or acquisition
transactions, transaction costs and expenses, and other incidental costs and
losses, and not as a penalty or forfeiture, an amount equal to $20,000,000 (the
"Termination Fee"). If a Competing Transaction shall be consummated within one
(1) year following the date of such termination or a definitive agreement for a
Competing Transaction (a "Definitive Competing Acquisition Agreement") shall be
executed and delivered by the Payor Party within one (1) year following the date
of such termination with the party named in the Acquisition Proposal Notice and
a Competing Transaction with such party is consummated within nine (9) months
following the date of execution of the Definitive Competing Acquisition
Agreement, the Escrow Agent shall, at the time any such Competing Transaction is
consummated, distribute to the Entitled Party out of the escrowed funds an
amount equal to the lesser of (A) $20,000,000, plus any accrued interest thereon
or on any part thereof through the date of payment (the "Maximum Termination
Fee") and (B) the sum of (1) the maximum amount that can be paid to the Entitled
Party without causing it to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute income described in Sections 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of
the Code ("Qualifying Income"), as determined by the Entitled Party's certified
public accountants, plus (2) in the event an Entitled Party receives a letter
from such Entitled Party's counsel indicating that the Entitled Party has
received a ruling from the IRS described in Section 11.5(c)(ii) or (iii), an
amount equal to the Maximum Termination

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Fee less the amount payable under clause (1) above. In the event no Competing
Transaction is consummated or no Definitive Competing Acquisition Agreement is
executed, delivered and consummated by Payor Party within the time periods
described above in this Section 11.5(a) following the termination of this
Agreement, with the party named in the Acquisition Notice, the Escrow Agent
shall return the Termination Fee to the Payor Party, together with interest
thereon from the date of deposit through the date of return.

(b) Moreover, if an Acquisition Proposal shall have been received by a
Payor Party so as to require an Acquisition Proposal Notice prior to that
party's Shareholders voting on approval of this Agreement, and this Agreement is
not terminated pursuant to Sections 11.1 through 11.4 above, and the
Shareholders of the Payor Party vote against approval of this Agreement, and if
a Competing Transaction with the party named in such Acquisition Proposal Notice
shall be consummated within one (1) year following the date of such shareholder
vote or a Definitive Competing Acquisition Agreement shall be executed and
delivered by the Payor Party within one (1) year following the date of such
shareholder vote with a party named in such Acquisition Proposal Notice and a
Competing Transaction with such party is consummated within nine (9) months
following the date of execution of such Definitive Competing Acquisition
Agreement, then, immediately upon consummating such Competing Transaction or
executing such Definitive Competing Acquisition Agreement, the Payor Party shall
deliver to the Escrow Agent in same-day funds for the benefit of the Entitled
Party an amount equal to the Termination Fee. Upon consummation of any such
Competing Transaction, the Escrow Agent shall immediately disburse to the
Entitled Party an amount equal to the lesser of (A) the Maximum Termination Fee
and (B) the sum of (i) the maximum amount that can be paid to the Entitled Party
without causing it to fail to meet the requirements of Sections 856(c)(2) and
(3) of the Code determined as if the payment of such amount did not constitute
Qualifying Income, as determined by the Entitled Party's certified public
accountants, plus (ii) in the event an Entitled Party receives a letter from
such Entitled Party's counsel indicating that the Entitled Party has received a
ruling from the IRS described in Section 11.5(c)(ii) or (iii), an amount equal
to the Maximum Termination Fee less the amount payable under clause (1) above.
In the event no Competing Transaction is consummated or no Definitive Competing
Acquisition Agreement is executed, delivered and consummated by Payor Party
within the time periods described above in this Section 11.5(b), with the party
named in the Acquisition Proposal Notice, the Escrow Agent shall return the
Termination Fee to the Payor Party, together with interest thereon from the date
of deposit through the date of return.

(c) In the event that the Entitled Party is not able to receive the Maximum
Termination Fee, the Escrow Agent shall hold the unpaid amount in escrow and
shall not release any portion thereof to the Entitled Party unless and until the
Payor Party receives, at any time or from time to time, any one or combination
of the following: (i) a letter from the Entitled Party's certified public
accountants indicating the maximum amount that can be paid at that time to the
Entitled Party without causing the Entitled Party to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code, determined as if the
payment of such amount did not constitute Qualifying Income or a subsequent such
letter revising or (in the case of later tax years) adding to that amount, in
which case and at each such time the Escrow Agent shall release such revised or
additional amount to the Entitled Party, or (ii) a letter from the Entitled
Party's counsel indicating that the Entitled Party received a ruling from the
IRS holding that the receipt by the Entitled Party of the Maximum Termination
Fee would either constitute Qualifying Income or would be excluded from gross
income within the meaning of Sections 856(c)(2) and (3) of the Code, in which
case the Escrow Agent shall release the remainder of the Maximum Termination
Fee, plus any interest accrued thereon, to the Entitled Party, or (iii) a letter
from the Entitled Party's counsel indicating that the Entitled Party received a
ruling from the IRS holding that the receipt by the Entitled Party of the
remaining balance of the Maximum Termination Fee following the receipt of and
pursuant to such ruling would not be deemed constructively received prior
thereto, in which case the Escrow Agent shall release the remainder of the
Maximum Termination Fee to the Entitled Party. If the Maximum Termination Fee
has not been distributed to the Entitled Party pursuant to this Section 11.5(c)
by the fifth anniversary of the date of termination, in the case of an escrow
established pursuant to Section 11(a), or the date of the Shareholder vote, in
the case of an escrow established pursuant to Section 11(b), any remaining funds
then in escrow, including any interest accrued thereon, shall be delivered by
the Escrow Agent to the Payor Party or its successor in interest.

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(d) In the event of termination of this Agreement and the abandonment of
the Mergers pursuant to this Article XI, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
11.5 or Section 11.6 and except for the provisions of Sections 12.4, 12.5, 12.6,
12.7, 12.15 and 12.16. In the event an Entitled Party has received the Maximum
Termination Fee pursuant to this Section 11.5, the Entitled Party shall not (i)
assert or pursue in any manner, directly or indirectly, any claim or cause of
action based in whole or in part upon alleged tortious or other interference
with rights under this Agreement against any entity or person submitting an
Acquisition Proposal, or (ii) assert or pursue in any manner, directly or
indirectly, any claim or cause of action against the Payor Party or any of its
officers or directors based in whole or part upon its or their receipt,
consideration, recommendation or approval of an Acquisition Proposal or the
Payor Party's exercise of its right of termination under Section 11.3(e) or
11.4(e), as applicable. Notwithstanding the foregoing, in the event an Entitled
Party is required to file suit or an arbitration proceeding to seek all or a
portion of such Maximum Termination Fee, and it ultimately succeeds, the
Entitled Party shall be entitled to receive from the Payor Party all expenses,
including attorneys' fees and expenses, which it has incurred in enforcing its
rights hereunder.

11.6. Expenses.

(a) If (i) Target REIT elects to terminate this Agreement pursuant to
Section 11.3(a), 11.3(b), 11.3(c) or 11.3(d) or (ii) Acquiror REIT elects to
terminate this Agreement pursuant to Section 11.4(a), 11.4(b), 11.4(c) or
11.4(d), and, in any event, no Acquisition Proposal shall have been made prior
to such termination, Acquiror REIT, in the case of termination in the events set
forth in clause (i) above, or Target REIT, in the case of termination in the
events set forth in clause (ii) above, provided that the Entitled Party was not
in material breach of its obligations hereunder at the time of such termination,
as liquidated damages and not as a penalty or forfeiture, shall pay to the
Entitled Party by wire transfer of same day funds on the business day after
receipt of notice of termination of this Agreement an amount equal to the lesser
of (A) all documented Expenses incurred by the Entitled Party in connection with
its pursuit of the transactions contemplated herein, (B) $5,000,000 (the
"Maximum Expense Reimbursement") and (C) the sum of (1) the maximum amount that
can be paid to the Entitled Party without causing it to fail to meet the
requirements of Sections 856(c)(2) and (3) of the Code determined as if the
payment of such amount did not constitute Qualifying Income, as determined by
the Entitled Party's certified public accountants, plus (2) in the event an
Entitled Party receives a letter from such Entitled Party's counsel indicating
that the Entitled Party has received a ruling from the IRS described in Section
11.5(c)(ii) or (iii), an amount equal to the Maximum Expense Reimbursement less
the amount payable under clause (1) above.

(b) In the event that the Entitled Party is not able to receive the Maximum
Expense Reimbursement in any tax year without causing it to fail to meet the
requirements of Section 856(c)(2) and (3) of the Code, determined as if the
payment of the Maximum Expense Reimbursement did not constitute Qualifying
Income, the Payor Party shall pay the unpaid amount of the Maximum Expense
Reimbursement at such time as the Payor Party receives, at any time or from time
to time, any one or combination of the following: (i) a letter from the Entitled
Party's certified public accountants indicating the maximum amount that can be
paid at that time to the Entitled Party without causing the Entitled Party to
fail to meet the requirements of Sections 856(c)(2) and (3) of the Code,
determined as if the payment of such amount did not constitute Qualifying Income
or a subsequent such letter revising or (in the case of later tax years) adding
to that amount, in which case and at each such time the Payor Party shall pay
such revised or additional amount to the Entitled Party subject to a total
maximum payment under this Section 11.6 of an amount equal to the Maximum
Expense Reimbursement, or (ii) a letter from the Entitled Party's counsel
indicating that the Entitled Party received a ruling from the IRS holding that
the receipt by the Entitled Party of the Maximum Expense Reimbursement would
either constitute Qualifying Income or would be excluded from gross income
within the meaning of Sections 856(c)(2) and (3) of the Code, in which case the
Payor Party shall pay the remainder of the Maximum Expense Reimbursement to the
Entitled Party, or (iii) a letter from the Entitled Party's counsel indicating
that the Entitled Party received a ruling from the IRS holding that the receipt
by the Entitled Party of the remaining balance of the Maximum Expense
Reimbursement following the receipt of and pursuant to such ruling would not be
deemed constructively received prior thereto, in which case the

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Payor Party shall release the remainder of the Maximum Expense Reimbursement to
the Entitled Party. The Payor Party's obligations under this Section 11.6(b)
shall terminate five (5) years from the date hereof.

(c) If this Agreement is terminated for any reason or under any
circumstances not addressed in subsection (a) or (b) of this Section 11.6, no
party hereto shall be liable to the other parties hereto for Expenses, except as
provided in Section 10.10.

(d) Except for payments as provided in Section 11.5, in no event shall any
party be liable hereunder for any amount in excess of the Maximum Expense
Reimbursement.

11.7. Extension; Waiver; Miscellaneous.

At any time prior to the Effective Time, any party hereto, by action taken
by its Board, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in instrument in
writing signed on behalf of such party.

Acquiror REIT and Target REIT agree to amend Sections 11.5 and 11.6 above
at the request of the other party in order to (i) permit receipt of the Maximum
Termination Fee or the Maximum Expense Reimbursement by such other party
hereunder without causing such other party to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code or (ii) improve such other party's
chances of securing a favorable ruling from the IRS described in Section 11.5 or
11.6, provided that no such amendment may result in any additional cost or
expense to such other party.

ARTICLE XII

MISCELLANEOUS

12.1. Nonsurvival of Representations, Warranties and Agreements.

All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger;
provided, however, that the agreements contained in Articles II, III, IV and XI,
the last sentence of Section 10.4 and Sections 10.8, 10.10, 10.11, 10.12, 10.13,
10.15, 10.20, 10.21, 10.24, 10.25, 10.27, 10.28, 10.29 and 10.30 and this
Article XII shall survive the Mergers. No third party (other than counsel for
Acquiror REIT and Target REIT with respect to delivery of their opinions
hereunder) is entitled to rely on any of the representations, warranties and
agreements contained in this Agreement and the parties hereto assume no
liability to any third party because of any reliance on the representations,
warranties and agreements contained in this Agreement.

12.2. Notices.

Any notice required to be given hereunder shall be in writing and shall be
sent by facsimile transmission (confirmed by any of the methods that follow),
courier service (with proof of service), hand delivery or certified or
registered mail (return receipt requested and first-class postage) and addressed
as follows:

If to Acquiror OP, Acquiror REIT or Merger Sub:

Equity Inns, Inc.
4735 Spottswood, Suite 102
Memphis, TN 38117
Facsimile No. 901/761-3945
Attention: Phillip H. McNeill, Sr.
Chairman of the Board and
Chief Executive Officer

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with a copy to:

Baker, Donelson, Bearman & Caldwell
20th Floor, First Tennessee Building
165 Madison
Memphis, TN 38103
Facsimile No. 901/577-2303
Attention: John A. Good, Esq.

If to Contributor OP or Target REIT:

RFS Hotel Investors, Inc. 850 Ridge Lake Boulevard, Suite 220
Memphis, TN 38120
Facsimile No. 901/818-5260
Attention: Robert M. Solmson
Chairman of the Board and
Chief Executive Officer

with a copy to:
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, VA 23219
Facsimile No. 804/788-8218
Attention: David C. Wright, Esq.

or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
delivered.

12.3. Assignment; Binding Effect; Benefit.

Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties
hereto. Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto or their respective heirs,
successors, executors, administrators or assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

12.4. Entire Agreement.

This Agreement (including the Exhibits and the Schedules attached hereto)
and any documents and instruments delivered by the parties hereto in connection
herewith constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect hereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.

12.5. Confidentiality.

(a) As used in Section 12.5, "Confidential Material" means, with respect to
any party hereto (the "Providing Party"), all information (written or oral)
furnished (whether before or after the date hereof) by the Providing Party and
its directors, trustees, officers, employees, affiliates or representatives of
advisors, including counsel, lenders and financial advisors (collectively, the
"Providing Party Representatives") to any other party hereto (the "Receiving
Party") or such Receiving Party's directors, officers, employees, affiliates or
representatives of advisors, including counsel, lenders and financial advisors
or the Receiving Party's potential sources of financing for the transactions
contemplated by this Agreement (collectively "the

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Receiving Party Representatives") and all analyses, compilations, forecasts and
other studies or other documents prepared by the Providing Party or the
Providing Party Representatives in connection with its or their review of the
transactions contemplated by this Agreement which contain or reflect such
information. The term "Confidential Material" does not include, however,
information which (i) at the time of disclosure or thereafter is generally
available to and known by the public other than as a result of a disclosure
directly or indirectly by the Receiving Party or the Receiving Party
Representatives in violation of this Section 12.5, (ii) at the time of
disclosure was available on a nonconfidential basis from a source other than the
Providing Party or the Providing Party Representatives, providing that such
source is not and was not bound by a confidentiality agreement with the
Providing Party, (iii) was known by the Receiving Party prior to receiving the
Confidential Material from the Providing Party or has been independently
acquired or developed by the Receiving Party without violating any of its
obligations under this Section 12.5, or (iv) is contained in any Target REIT SEC
Documents or Acquiror REIT SEC Documents, the Form S-4 or the Proxy
Statement/Prospectus.

(b) Subject to paragraph (c) below or except as required by law, the
Confidential Material will be kept confidential and will not, without the prior
written consent of the Providing Party, be disclosed by the Receiving Party or
the Receiving Party Representatives, in whole or in part and will not be used by
the Receiving Party or the Receiving Party Representatives, directly or
indirectly, for any purpose other than in connection with this Agreement, the
Mergers, the Asset Sale or the evaluating, negotiating or advising with respect
to a transaction contemplated herein. Moreover, each Receiving Party agrees to
transmit Confidential Material to the Receiving Party Representatives only if
and to the extent that such representatives need to know the Confidential
Material for purposes of such transaction and are informed by the Receiving
Party of the confidential nature of the Confidential Material and of the terms
of this Section 12.5.

(c) In the event that either the Receiving Party, the Receiving Party
Representatives or anyone to whom such Receiving Party or such representatives
supply the Confidential Material, are requested or required (by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demand, any informal or formal investigation by any government or
governmental agency or authority or otherwise in connection with legal
processes) to disclose any Confidential Material, such Receiving Party agrees
(i) to immediately notify the Providing Party of the existence, terms and
circumstances surrounding such a request, (ii) to consult with the Providing
Party on the advisability of taking legally available steps to resist or narrow
such request, and (iii) if disclosure of such information is required, to
furnish only that portion of the Confidential Material which, in the opinion of
the Receiving Party's counsel, such Receiving Party is legally compelled to
disclose and to cooperate with any action by the Providing Party to obtain an
appropriate protective order or otherwise reliable assurances that confidential
treatment will be accorded the Confidential Material (it being agreed that the
Providing Party shall reimburse the Receiving Party for all reasonable out-
of-pocket expenses incurred by the Receiving Party in connection with such
cooperation).

(d) In the event of termination of this Agreement in accordance with its
terms, promptly upon request from the Providing Party, the Receiving Party
shall, except to the extent prevented by law, redeliver to the Providing Party
or destroy all tangible Confidential Material and will not retain any copies,
extracts or other reproductions thereof in whole or in part. Any such
destruction shall be certified in writing to the Providing Party by an
authorized officer of the Receiving Party supervising the same. Notwithstanding
the foregoing, the Receiving Party and one of the Receiving Party
Representatives designated by the Receiving Party shall be permitted to retain
one permanent file copy of each document constituting the Confidential Material.

(e) Each party hereto further agrees that if this Agreement is terminated
in accordance with its terms, until two (2) years after such termination, (1) it
will not offer to hire or hire any person currently or formerly employed by any
other party with whom such party has had contact prior hereto other than persons
whose employment shall have been terminated by such other party prior to the
date of such offer to hire or hiring and (2) neither it nor its Affiliates shall
directly or indirectly, (a) (A) solicit, seek or offer to effect or effect, (B)
negotiate with or provide any information to the Board of Directors of the other
party, any director or officer of such other party or any stockholder of such
other party with respect to, (C) make any statement or proposal, whether written
or oral, either alone or in concert with others, to the Board of Directors of
such other party, any director or officer of such other party or any shareholder
of the other party or any other person with respect
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to, or (D) make any public announcement (except as required by law in respect of
actions permitted hereto) or proposal or offer whatsoever (including, but not
limited to, any "solicitation" of "proxies" as such terms are defined or used in
Regulation 14a of the Exchange Act) with respect to, (i) any form of business
combination or similar or other extraordinary transaction involving such other
party or any Affiliate thereof, including, without limitation, a merger, tender
offer or exchange offer or liquidation of such other party's assets, (ii) any
form of restructuring, recapitalization or similar transaction with respect to
such other party or any Affiliate thereto, (iii) any purchase of any securities
or assets, or rights or options to acquire any securities or assets (through
purchase, exchange, conversion or otherwise), of such other party or any
Affiliate thereof, (iv) any proposal to seek representation on the Board of
Directors of such other party or otherwise to seek to control or influence the
management, Board of Directors or policies of such other party or any Affiliate
thereof, (v) any request or proposal to waive, terminate or amend the provisions
of this Section 12.5 or (vi) any proposal or other statement inconsistent with
the terms of this Section 12.5, or (b) instigate, encourage, join, act in
concert with or assist (including, but not limited to, providing or assisting in
any way in the obtaining of financing for, or acting as a joint or co-bidder for
such other party with) any third party to do any of the foregoing, unless and
until such party has received the prior written invitation or approval of a
majority of the Board of Directors of such other party to do any of the
foregoing; provided that without such invitation or approval, any party hereto
may at any time, on a confidential non-public basis, submit to the Chief
Executive Officer or, if none, the President of any other party, a proposal to
(a) amend any of the provisions of this Section 12.5(e), or (b) effect a
business combination or other extraordinary transaction with such other party
providing for the acquisition or all or substantially all of the assets or the
securities of such other party, including without limitation, a merger, tender
offer or exchange offer. Each party hereto agrees that it will not agree with
any third party to waive its rights under this Section 12.5.

12.6. Amendment.

This Agreement may be amended by the parties hereto at any time before or
after approval of this Agreement or any other matter presented in connection
with the REIT Merger by the Shareholders of Acquiror REIT or Target REIT, but
after any such Shareholder approval, no amendment shall be made which by law
requires the further approval of Shareholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.

12.7. Governing Law.

This Agreement shall be governed by and construed in accordance with the
laws of the State of Tennessee without regard to its rules of conflict of laws.
Each of the parties hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Tennessee and of the
United States District Court, Western District of Tennessee (collectively, the
"Tennessee Courts") for any litigation arising out of or relating to this
Agreement and the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in such courts), waives any objection to
the laying of venue of any such litigation in the Tennessee Courts and agrees
not to plead or claim in any Tennessee Court that such litigation brought
therein has been brought in an inconvenient forum.

12.8. Counterparts.

This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts shall together constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.

12.9. Headings.

Heading of the Articles and Sections of this Agreement are for the
convenience of the parties only and shall be given no substantive or
interpretive effect whatsoever.

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12.10. Interpretation.

In this Agreement, unless the context otherwise requires, words describing
the singular number shall include the plural and vice versa, and words denoting
any gender shall include all genders and words denoting natural persons shall
include corporations and partnerships and vice versa. Neither this Agreement nor
any uncertainty or ambiguity herein shall be construed or resolved against any
party hereto, whether under any rule of construction or otherwise.

12.11. Waivers.

Except as provided in this Agreement, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party hereto, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.

12.12. Incorporation.

The Schedules and all Exhibits attached hereto and thereto and referred to
herein and therein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.

12.13. Severability.

Any term or provision of this Agreement which is invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.

12.14. Enforcement of Agreement.

The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any Tennessee Court, this being in addition to any other remedy to
which they are entitled to at law or in equity.

12.15. Non-Recourse.

None of the officers, directors, limited partners or Shareholders of
Acquiror REIT, Acquiror OP or Merger Sub shall be personally bound or have any
personal liability hereunder. Target REIT and Contributor OP shall look solely
to the assets of Acquiror REIT, Acquiror OP and Merger Sub for satisfaction of
any liability of Acquiror REIT, Acquiror OP or Merger Sub with respect to this
Agreement. Neither Target REIT nor Contributor OP will seek recourse or commence
any action against any of the Shareholders of Acquiror REIT or any of their
personal assets, and will not commence any action for money judgments against
any of the directors, officers or limited partners of Acquiror REIT, Acquiror OP
or Merger Sub or seek recourse against their personal assets, for the
performance or payment of any obligation of Acquiror REIT, Acquiror OP or Merger
Sub hereunder or thereunder. None of the directors, officers, limited partners
or Shareholders of Target REIT and Contributor OP shall be personally bound or
have any personal liability hereunder. Acquiror REIT, Acquiror OP and Merger Sub
shall look solely to the assets of Target REIT and Contributor OP for
satisfaction of any liability of Target REIT or Contributor OP with respect to
this Agreement. Neither Acquiror REIT, Acquiror OP nor Merger Sub will seek
recourse or commence any action against any of the Shareholders of the Target
REIT or any of their personal assets, and will not commence any action for money
judgments against any of the directors, officers or limited partners of Target
REIT or Contributor OP or seek

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recourse against any of their personal assets, for the performance or payment of
any obligation of Target REIT or Contributor OP hereunder or thereunder.

12.16. Arbitration.

If any disputes between Contributor OP or Target REIT, on the one hand, and
Acquiror REIT, Acquiror OP or Merger Sub, on the other hand, are not resolved by
the parties hereto within 60 days, either Acquiror REIT or Target REIT may
submit the dispute to binding arbitration in accordance with the rules of the
American Arbitration Association (the "AAA").

Acquiror REIT and Target REIT each shall select one arbitrator from a list
of arbitrators maintained by the AAA, and the two arbitrators so selected shall
select a third arbitrator. Should either Acquiror REIT or Target REIT fail to
select an arbitrator within ten days after arbitration is sought by the other
party, or if the two arbitrators shall fail to select a third arbitrator within
15 days after arbitration is sought, the AAA shall select the arbitrator.
Expenses of arbitration shall be submitted to the arbitrators for determination
as to which parties shall bear such expenses.

[SIGNATURES ON THE FOLLOWING PAGE]

IN WITNESS WHEREOF, each party has caused this Agreement to be duly
executed on its behalf as of the day and year first above written.

TARGET REIT:

RFS HOTEL INVESTORS, INC.

By: /s/ ROBERT M. SOLMSON
------------------------------------
Name: Robert M. Solmson

--------------------------------------
Title: Chairman

--------------------------------------

CONTRIBUTOR OP:

RFS PARTNERSHIP, L.P.

By: RFS Hotel Investors, Inc., General
Partner

By: /s/ ROBERT M. SOLMSON
------------------------------------
Name: Robert M. Solmson

--------------------------------------
Title: Chairman

--------------------------------------

ACQUIROR REIT:

EQUITY INNS, INC.

By: /s/ PHILLIP H. MCNEILL, SR.
------------------------------------
Name: Phillip H. McNeill, Sr.

--------------------------------------
Title: Chairman of the Board

--------------------------------------

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MERGER SUB:

RHI ACQUISITIONS, INC.

By: /s/ PHILLIP H. MCNEILL, SR.
------------------------------------
Name: Phillip H. McNeill, Sr.

--------------------------------------
Title: Chairman of the Board

--------------------------------------

ACQUIROR OP:

EQUITY INNS PARTNERSHIP, L.P.

By: Equity Inns Trust, General Partner

By: /s/ PHILLIP H. MCNEILL, SR.
------------------------------------
Name: Phillip H. McNeill, Sr.

--------------------------------------
Title: Chairman of the Board

--------------------------------------

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LIST OF SCHEDULES

<TABLE>
<S> <C>
1.16 Acquiror REIT Employment Agreements
1.17 Acquiror REIT Hotels
1.18 Acquiror REIT Leases
1.21 Acquiror REIT Options
1.23 Acquiror REIT Restricted Stock Grants
1.34 Assumed Liabilities
1.122 Tangible Personal Property Subject to Operating Leases
1.130 Target REIT Employment Agreements
1.131 Target REIT Hotels
1.132 Target REIT Leases
1.133 Target REIT Lessees
1.137 Target REIT Restricted Stock Grants
1.146 Undeveloped Land
4.3 Target REIT Options
7.4 No Violation or Conflict by Contributor OP or Target REIT
7.5 No Litigation
7.6 Absence of Certain Changes
7.7 Target REIT Subsidiaries
7.8 Contracts and Commitments
7.9 Approvals and Consents
7.10 Target REIT Employee Benefit Plans
7.11 Undisclosed Liabilities
7.12 No Special Taxes
7.13 Compliance with Existing Laws
7.14 Insurance
7.15 Condemnation Proceedings
7.18 Title to Real Property
7.19 Zoning
7.20 Hazardous Substances
7.22 Franchisors; Franchise Agreements
7.23 Mortgage Documents
7.30 Development
7.31 Tax Matters
7.32 Convertible Securities
7.35 Intellectual Property
7.36 Employees
7.38 Lease Termination Amounts
8.3 Capitalization
8.4 No Violation or Conflict by Acquiror REIT, Acquiror OP or
Merger Sub
8.5 No Litigation
8.6 Absence of Certain Changes
8.7 Acquiror REIT Subsidiaries
8.8 Contracts and Commitments
8.9 Approvals and Consents
8.10 Acquiror REIT Employee Benefit Plans
8.11 Undisclosed Liabilities
8.12 Title to Properties and Assets
8.13 Insurance
8.14 Personal Property
8.16 Zoning
8.17 Hazardous Substances
</TABLE>

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<TABLE>
<S> <C>
8.25 Development
8.26 Tax Matters
8.27 Convertible Securities
8.32 Intellectual Property
8.33 Employees
8.35 No Special Taxes
8.36 Compliance with Existing Laws
8.37 Condemnation Proceedings
8.39 Franchisors; Franchise Agreements
8.40 Mortgage Documents
10.2(b)(v) Disposition of Target REIT Hotels
10.2(b)(viii) Hotel Properties Under Contract by Target REIT
10.2(c)(v) Disposition of Acquiror REIT Hotels
10.2(c)(viii) Hotel Properties Under Contract by Acquiror REIT
10.13 Severance Benefits
</TABLE>

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LIST OF EXHIBITS

<TABLE>
<S> <C>
A Form of Plan of Merger
B Form of Amended and Restated Acquiror OP Partnership
Agreement
C Matters As To Which Hunton & Williams Shall Opine
D Form of Target REIT and Contributor OP Officer's Certificate
E Matters As To Which Baker, Donelson, Bearman & Caldwell
Shall Opine
F Form of Acquiror REIT, Merger Sub and Acquiror OP Officer's
Certificate
G Lease Termination Letter
</TABLE>

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ANNEX II-A

[MORGAN KEEGAN & COMPANY, INC. LETTERHEAD]

April 21, 1998

Board of Directors
Equity Inns, Inc.
4735 Spottswood Avenue
Suite 102
Memphis, TN 38117

Gentlemen:

You have requested our opinion as to the fairness, from a financial point
of view, to the holders of Equity Inns, Inc. ("Acquiror REIT" or the "Company")
Common Stock and the holders of Equity Inns Partnership, L.P. Units of the
Exchange Ratio (as defined below) set forth in that certain Asset Sale Agreement
and Plans of Merger, dated as of April 21, 1998 (the "Merger Agreement"), by and
among the Company, RFS Hotel Investors, Inc. ("Target REIT"), RHI Acquisition,
Inc., a wholly-owned subsidiary of Acquiror REIT ("Merger Sub"), Equity Inns
Partnership, L.P. ("Acquiror OP") and RFS Partnership, L.P. ("Contributor OP").
As more fully described in the Merger Agreement, (i) Target REIT will merge with
and into Merger Sub (the "REIT Merger"), (ii) Contributor OP will merge with and
into Acquiror OP (the "OP Merger"), and (iii) RFS Financing Partnership, L.P.
will merge with and into a limited partnership to be created by Acquiror REIT
(the "CMBS OP Merger"). The REIT Merger, the OP Merger, the CMBS OP Merger and
the other transactions contemplated by the Merger Agreement are collectively
referred to herein as the "Transaction". In the REIT Merger, each issued and
outstanding share of Target REIT Common Stock and Target REIT Preferred Stock
will be converted into the right to receive 1.5 shares (the "Exchange Ratio") of
Acquiror REIT Common Stock, subject to the collar provisions described in the
Merger Agreement. In the OP Merger, each issued and outstanding Contributor OP
Limited Unit and Contributor OP General Unit will be converted into the right to
receive a number of Acquiror OP Limited Units and Acquiror OP General Units,
respectively, equal to the Exchange Ratio. We are not expressing any opinion as
to the price at which the Acquiror REIT Common Stock will trade subsequent to
the Transaction. Further, our opinion does not address the relative merits of
the Transaction and the other business strategies being considered by the
Company's Board of Directors, nor does it address the Board's decision to
proceed with the Transaction. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to them in the Merger Agreement.

In connection with our review of the Transaction, and in arriving at our
opinion, we have, among other things:

(i) reviewed certain publicly available consolidated financial
statements of the Company and Target REIT and certain other relevant
financial and operating data of the Company made available to us from
published sources and by officers of the Company and Target REIT,
respectively;

(ii) reviewed certain internal financial and operating information,
including certain projections, relating to the Company and Target REIT
prepared by the managements of the Company and Target REIT, respectively;

(iii) discussed the business, financial condition and prospects of the
Company with certain officers of the Company;

(iv) discussed the business, financial condition and prospects of
Target REIT with certain officers of Target REIT;
<PAGE> 228

(v) reviewed the financial terms of the Transaction;

(vi) reviewed the financial terms, to the extent publicly available,
of certain similar transactions we deemed relevant;

(vii) reviewed certain publicly available information relating to
certain companies we deemed appropriate in analyzing the Company and Target
REIT;

(viii) reviewed the trading history of the Company's Common Stock and
Target REIT's Common Stock;

(ix) reviewed an executed copy of the Merger Agreement, dated April
21, 1998 and certain related documents;

(x) reviewed the potential pro forma financial impact of the
Transaction on the Company; and

(xi) performed such other analyses and examinations and considered
such other information, financial studies, analysis and investigations and
financial, economic and market data as we deemed relevant.

We have not independently verified any of the information concerning the
Company or Target REIT considered by us in connection with our review of the
Transaction and, for purposes of the opinion set forth herein, we have assumed
and relied upon the accuracy and completeness of all such information. With
respect to the financial forecasts and projections made available to us and used
in our analysis, we have assumed that they have been reasonably prepared on
bases reflecting the best currently available estimates and judgments of the
managements of the Company and Target REIT as to the expected future financial
performance of their respective companies. We have not been engaged to assess
the achievability of such projections or assumptions. In addition, we have not
conducted a physical inspection or appraisal of any of the assets, properties,
or facilities of either the Company or Target REIT nor have we been furnished
with any such evaluation or appraisal. Our opinion is necessarily based upon
market, economic, financial and other conditions as they exist on, and can be
evaluated as of, the date of this letter. Any change in such conditions would
require a reevaluation of this opinion.

In connection with our opinion, we have assumed that the Transaction will
be consummated on the terms and subject to the conditions described in the
Merger Agreement. Specifically, we have assumed that the Acquiror OP Limited
Units issued pursuant to the OP Merger (as described in the Amended and Restated
Acquiror OP Partnership Agreement to be attached as Exhibit B to the Merger
Agreement) will be identical in all material respects to the Acquiror OP Limited
Units outstanding as of the date hereof. Upon advice of the Company and its
advisors, we have assumed, with your consent, that the Transaction will be
treated as a tax-free reorganization for federal income tax purposes. We have
also assumed that the transactions contemplated by the Merger Agreement will
comply with applicable laws, including, without limitation, laws relating to the
payment of dividends, bankruptcy, insolvency, reorganization, fraudulent
conveyance, fraudulent transfer or other similar laws now or hereafter in effect
affecting creditors' rights generally. We have also assumed, with your consent,
(i) that Acquiror REIT and Target REIT are each qualified under the Internal
Revenue Code of 1986, as amended, for taxation as a real estate investment trust
("REIT"), (ii) that Acquiror REIT will continue to operate after consummation of
the Transaction in a manner so as to remain qualified as a REIT, and (iii) that
Acquiror OP and Contributor OP each qualify as a partnership for federal income
tax purposes. We also have assumed that all necessary governmental and
regulatory approvals and third-party consents will be obtained on terms and
conditions that will not have a material adverse effect on the Company or Target
REIT.

Morgan Keegan & Company, Inc., as part of its investment banking services,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, corporate restructurings, strategic
alliances, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. We have acted as financial advisor to the Board of Directors of the
Company in connection with the Transaction and will receive a fee for our
services, a portion of which is contingent upon consummation of the Transaction.
In addition, the Company has agreed to

2
<PAGE> 229

indemnify us for certain liabilities arising out of the rendering of this
opinion. In the ordinary course of business, we may trade in the debt and equity
securities of the Company and Target REIT for our own account or for the
accounts of our customers and, accordingly, may at any time hold a long or short
position in such securities. Morgan Keegan has in the past provided other
investment banking services to the Company unrelated to the proposed
Transaction, for which services we have received compensation. Such investment
banking services include acting as managing underwriter of the Company's initial
public offering of Common Stock, acting as managing underwriter for several
subsequent follow-on offerings of Common Stock and acting as financial advisor
to the Company with respect to the sale of its affiliated Lessee.

This letter and the opinion stated herein are solely for the use of the
Company' Board of Directors and may not be reproduced, summarized, excerpted
from or otherwise publicly referred to in any manner without prior written
consent.

Based upon and subject to the foregoing and such other matters as we deem
relevant, we are of the opinion that as of the date hereof, the Exchange Ratio
is fair to the Company's shareholders and the Acquiror OP's unitholders from a
financial point of view.

We hereby consent to the inclusion of the full text of our opinion and
summary thereof in any disclosure document or proxy statement relating to the
Transaction that the Company must file under the Securities Act of 1933, as
amended, and distribute to its shareholders. This opinion is not intended to be
and does not constitute a recommendation to any shareholder of the Company as to
how such shareholder should vote with respect to the Transaction.

Sincerely,

/s/ MORGAN KEEGAN & COMPANY, INC.
--------------------------------------

MORGAN KEEGAN & COMPANY, INC.

3
<PAGE> 230

ANNEX II-B

[SALOMON SMITH BARNEY LETTERHEAD]

April 21, 1998

The Board of Directors
RFS Hotel Investors, Inc.
850 Ridge Lake Boulevard
Suite 220
Memphis, Tennessee 38120
Members of the Board:

You have requested our opinion as to the fairness, from a financial point
of view, to the holders of the common stock, par value $.01 per share ("RFS
Common Stock"), of RFS Hotel Investors, Inc. ("RFS"), the holders of the Series
A Preferred Stock, par value $.01 per share ("RFS Preferred Stock" and together
with RFS Common Stock, "RFS Capital Stock"), and the partners of RFS
Partnership, L.P. ("Contributor OP"), of the Exchange Ratio (as defined below)
set forth in the Asset Sale Agreement and Plans of Mergers (the "Acquisition
Agreement"), dated as of April 21, 1998, by and among RFS, Equity Inns, Inc.
("Equity Inns"), RHI Acquisition, Inc. ("Merger Sub"), Equity Inns Partnership,
L.P. ("Acquiror OP") and Contributor OP, pursuant to the terms of and subject to
the conditions set forth in the Acquisition Agreement. As more fully described
in the Acquisition Agreement, (i) RFS will be merged with and into Merger Sub
(the "REIT Merger") and each then outstanding share of RFS Capital Stock will be
converted into the right to receive a number of shares of common stock, par
value $.01 per share, of Equity Inns ("Equity Inns Common Stock") equal to (A)
if the Average Price is equal to or greater than $14.00 but less than or equal
to $17.00, 1.5, or (B) if the Average Price is greater than $17.00, the number
determined by dividing $25.50 by the Average Price (the "Exchange Ratio"); (ii)
Contributor OP will be merged with and into Acquiror OP, pursuant to which each
then outstanding partnership interest of Contributor OP will be converted into
the right to receive that number of units of Acquiror OP equal to the Exchange
Ratio; (iii) RFS Financing Partnership, L.P. ("Contributor CMBS OP") will be
merged with and into a substantially similar partnership newly created by Equity
Inns ("Acquiror CMBS OP"); and (iv) Acquiror OP and Acquiror CMBS OP will
purchase certain assets, and assume certain liabilities, of Contributor OP and
Contributor CMBS OP (collectively, the "Transaction"). Capitalized terms not
defined herein shall have their respective meanings set forth in the Acquisition
Agreement.

In arriving at our opinion, we reviewed the Acquisition Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of RFS and certain senior officers and other representatives and
advisors of Equity Inns, including discussions concerning the businesses,
operations and prospects of RFS and Equity Inns. We examined certain publicly
available business and financial information relating to RFS and Equity Inns as
well as certain financial forecasts and other information and data for RFS and
Equity Inns which were provided to us and prepared by the respective managements
of RFS and Equity Inns, including information relating to certain strategic
implications and operational benefits anticipated to result from the
Transaction. We reviewed the financial terms of the Transactions as set forth in
the Acquisition Agreement in relation to, among other things: current and
historical market prices and trading volumes of the RFS Common Stock and the
Equity Inns Common Stock; the historical and projected earnings and other
operating data of RFS and Equity Inns; and the capitalization and financial
condition of RFS and Equity Inns. We considered, to the extent publicly
available, the financial terms of certain other transactions recently effected
which we considered relevant in evaluating the Transaction and analyzed certain
financial, stock market and other publicly available information relating to the
business of other companies whose operations we considered relevant in
evaluating those of RFS and Equity Inns. We also valuated the potential pro
forma financial impact of the Transaction on Equity Inns. In addition to the
foregoing, we conducted such other analyses and examinations and considered such
other financial, economic and market criteria as we deemed appropriate in
arriving at our opinion.
<PAGE> 231
RFS Hotel Investors, Inc.
April 21, 1998
Page 2

In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of all financial and other information and data publicly available
or furnished to or otherwise reviewed by or discussed with us, and have not
assumed any responsibility for independent verification of such information.
With respect to financial forecasts and other information and data provided to
or otherwise reviewed by or discussed with us, we have been advised by the
managements of RFS and Equity Inns, and we have assumed with your permission,
that such forecasts and other information and data were reasonably prepared on
bases reflecting the best currently available estimates and judgements of the
managements of RFS and Equity Inns as to the future financial performance of RFS
and Equity Inns and the strategic implications and operational benefits
anticipated to result from the Transaction. We have assumed, with your
permission, that the Transaction will be treated as a tax-free reorganization
for federal income tax purposes, that the Transaction will not adversely affect
the real estate investment trust status of the combined entity resulting from
the Transaction and that each unit of Acquiror OP is convertible on a
one-for-one basis into Equity Inns Common Stock. Our opinion, as set forth
herein, relates to the relative values of RFS and Equity Inns. We are not
expressing any opinion as to what the value of the Equity Inns Common Stock or
the units of Acquiror OP actually will be when issued pursuant to the
Transaction or the price at which the Equity Inns Common Stock will trade
subsequent to the Transaction. We have not assumed any responsibility for, and
have not been furnished with, any independent evaluation or appraisal of the
assets or liabilities (contingent or otherwise) of RFS or Equity Inns nor have
we made any physical inspection of the properties or assets of RFS and Equity
Inns. Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of April 20, 1998.

Salomon Brothers Inc and Smith Barney Inc., collectively doing business as
Salomon Smith Barney ("Salomon Smith Barney"), has acted as financial advisor to
RFS in connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation of
the Transaction. We have in the past provided investment banking services to
RFS, for which services we have received compensation. In the ordinary course of
our business, we and our affiliates may actively trade or hold the securities of
RFS and Equity Inns for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
In addition, we and our affiliates may maintain relationships with RFS and
Equity Inns.

Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of RFS in its evaluation of the proposed
Transaction, and is not on behalf of and is not intended to confer rights or
remedies upon any other entity or persons. Our opinion is not intended to be and
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the proposed Transaction. Our opinion may not be
published or otherwise used or referred to, nor shall any public reference to
Salomon Smith Barney be made, without prior written consent.

Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Exchange Ratio is fair, from
a financial point of view, to the holders of RFS Capital Stock and the partners
of Contributor OP.

Very truly yours,

/s/ SALOMON SMITH BARNEY
- --------------------------------------

Salomon Smith Barney

2
<PAGE> 232

ANNEX III

DISSENTERS' RIGHTS

PART 1

RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES.
48-23-101. Definitions.
48-23-102. Right to dissent.
48-23-103. Dissent by nominees and beneficial owners.

PART 2

PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.
48-23-201. Notice of dissenters' rights.
48-23-202. Notice of intent to demand payment.
48-23-203. Dissenters' notice.
48-23-204. Duty to demand payment.
48-23-205. Share restrictions.
48-23-206. Payment.
48-23-207. Failure to take action.
48-23-208. After-acquired shares.
48-23-209. Procedure if shareholder dissatisfied with payment or offer.

PART 3

JUDICIAL APPRAISAL OF SHARES.
48-23-301. Court action.
48-23-302. Court costs and counsel fees.

PART 1

RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
48-23-101. Definitions.

As used in this chapter, unless the context otherwise requires:

(1) "Beneficial shareholder" means the person who is a beneficial
owner of shares held by a nominee as the record shareholder;

(2) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer;

(3) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under sec. 48-23-102 and who exercises that right when and
in the manner required by part 2 of this chapter;

(4) "Fair value", with respect to a dissenter's shares, means the
value of the shares immediately before the effectuation of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action;

(5) "Interest" means interest from the effective date of the corporate
action that gave rise to the shareholder's right to dissent until the date
of payment, at the average auction rate paid on United States treasury
bills with a maturity of six (6) months (or the closest maturity thereto)
as of the auction date for such treasury bills closest to such effective
date;

(6) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation; and
<PAGE> 233

(7) "Shareholder" means the record shareholder or the beneficial
shareholder.

48-23-102. Right to dissent.

(a) A shareholder is entitled to dissent from, and obtain payment of the
fair value of the shareholder's shares in the event of, any of the following
corporate actions:

(1) Consummation of a plan of merger to which the corporation is a
party:

(A) If shareholder approval is required for the merger by
sec. 48-21-104 or the charter and the shareholder is entitled to vote on
the merger; or

(B) If the corporation is a subsidiary that is merged with its
parent under sec. 48-21-105;

(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;

(3) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one (1) year after the date of sale;

(4) An amendment of the charter that materially and adversely affects
rights in respect of a dissenter's shares because it:

(A) Alters or abolishes a preferential right of the shares;

(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;

(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights; or

(E) Reduces the number of shares owned by the shareholder to a
fraction of a share, if the fractional share is to be acquired for cash
under sec. 48-16-104; or

(5) Any corporate action taken pursuant to a shareholder vote to the
extent the charter, bylaws, or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.

(b) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action is unlawful or
fraudulent with respect to the shareholder or the corporation.

(c) Notwithstanding the provisions of subsection (a), no shareholder may
dissent as to any shares of a security which, as of the date of the effectuation
of the transaction which would otherwise give rise to dissenters' rights, is
listed on an exchange registered under sec. 6 of the Securities Exchange Act of
1934, as amended, or is a "national market system security," as defined in rules
promulgated pursuant to the Securities Exchange Act of 1934, as amended.

48-23-103. Dissent by nominees and beneficial owners.

(a) A record shareholder may assert dissenters' rights as to fewer than all
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
(1) person and notifies the corporation in writing of the name and address of
each person on whose behalf the record shareholder asserts dissenters' rights.
The rights of a partial dissenter under this subsection

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<PAGE> 234

are determined as if the shares as to which the partial dissenter dissents and
the partial dissenter's other shares were registered in the names of different
shareholders.

(b) A beneficial shareholder may assert dissenters' rights as to shares of
any one (1) or more classes held on the beneficial shareholder's behalf only if
the beneficial shareholder:

(1) Submits to the corporation the record shareholder's written
consent to the dissent not later than the time the beneficial shareholder
asserts dissenters' rights; and

(2) Does so with respect to all shares of the same class of which the
person is the beneficial shareholder or over which the person has power to
direct the vote.

PART 2

PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS

48-23-201. Notice of dissenters' rights.

(a) If proposed corporate action creating dissenters' rights under
sec. 48-23-102 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this chapter and be accompanied by a copy of this chapter.

(b) If corporate action creating dissenters' rights under sec. 48-23-102 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in sec. 48-23-203.

48-23-202. Notice of intent to demand payment.

(a) If proposed corporate action creating dissenters' rights under
sec. 48-23-102 is submitted to a vote at a shareholders' meeting, a shareholder
who wishes to assert dissenters' rights must:

(1) Deliver to the corporation, before the vote is taken, written
notice of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effectuated; and

(2) Not vote the shareholder's shares in favor of the proposed action.
No such written notice of intent to demand payment is required of any
shareholder to whom the corporation failed to provide the notice required
by sec. 48-23-201.

(b) A shareholder who does not satisfy the requirements of subsection (a)
is not entitled to payment for the shareholder's shares under this chapter.

48-23-203. Dissenters' notice.

(a) If proposed corporate action creating dissenters' rights under
sec. 48-23-102 is authorized at a shareholders' meeting, the corporation shall
deliver a written dissenters' notice to all shareholders who satisfied the
requirements of sec. 48-23-202.

(b) The dissenters' notice must be sent no later than ten (10) days after
the corporate action was authorized by the shareholders or effectuated,
whichever is the first to occur, and must:

(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;

(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;

(3) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the principal terms
of the proposed corporate action and requires that the

3
<PAGE> 235

person asserting dissenters' rights certify whether or not the person
asserting dissenters' rights acquired beneficial ownership of the shares
before that date;

(4) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than one (1) nor more than two (2)
months after the date the subsection (a) notice is delivered; and

(5) Be accompanied by a copy of this chapter if the corporation has
not previously sent a copy of this chapter to the shareholder pursuant to
sec. 48-23-201.

48-23-204. Duty to demand payment.

(a) A shareholder sent a dissenters' notice described in sec. 48-23-203
must demand payment, certify whether the shareholder acquired beneficial
ownership of the shares before the date required to be set forth in the
dissenters' notice pursuant to sec. 48-23-203(b)(3), and deposit the
shareholder's certificates in accordance with the terms of the notice.

(b) The shareholder who demands payment and deposits the shareholder's
share certificates under subsection (a) retains all other rights of a
shareholder until these rights are canceled or modified by the effectuation of
the proposed corporate action.

(c) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.

(d) A demand for payment filed by a shareholder may not be withdrawn unless
the corporation with which it was filed, or the surviving corporation, consents
thereto.

48-23-205. Share restrictions.

(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is effectuated or the restrictions released under sec. 48-23-207.

(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are canceled or modified by the effectuation of the proposed corporate
action.

48-23-206. Payment.

(a) Except as provided in sec. 48-23-208, as soon as the proposed corporate
action is effectuated, or upon receipt of a payment demand, whichever is later,
the corporation shall pay each dissenter who complied with sec. 48-23-204 the
amount the corporation estimates to be the fair value of each dissenter's
shares, plus accrued interest.

(b) The payment must be accompanied by:

(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen (16) months before the date of payment, an
income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial
statements, if any;

(2) A statement of the corporation's estimate of the fair value of the
shares;

(3) An explanation of how the interest was calculated;

(4) A statement of the dissenter's right to demand payment under
sec. 48-23-209; and

(5) A copy of this chapter if the corporation has not previously sent
a copy of this chapter to the shareholder pursuant to sec. 48-23-201 or
sec. 48-23-203.

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<PAGE> 236

48-23-207. Failure to take action.

(a) If the corporation does not effectuate the proposed action that gave
rise to the dissenters' rights within two (2) months after the date set for
demanding payment and depositing share certificates, the corporation shall
return the deposited certificates and release the transfer restrictions imposed
on uncertificated shares.

(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation effectuates the proposed action, it must send a
new dissenters' notice under sec. 48-23-203 and repeat the payment demand
procedure.

48-23-208. After-acquired shares.

(a) A corporation may elect to withhold payment required by sec. 48-23-206
from a dissenter unless the dissenter was the beneficial owner of the shares
before the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the principal terms of the
proposed corporate action.

(b) To the extent the corporation elects to withhold payment under
subsection (a), after effectuating the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and shall pay this
amount to each dissenter who agrees to accept it in full satisfaction of the
dissenter's demand. The corporation shall send with its offer a statement of its
estimate of the fair value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenter's right to demand payment under
sec. 48-23-209.

48-23-209. Procedure if shareholder dissatisfied with payment or offer.

(a) A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate (less any payment under
sec. 48-23-206), or reject the corporation's offer under sec. 48-23-208 and
demand payment of the fair value of the dissenter's shares and interest due, if:

(1) The dissenter believes that the amount paid under sec. 48-23-206
or offered under sec. 48-23-208 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;

(2) The corporation fails to make payment under sec. 48-23-206 within
two (2) months after the date set for demanding payment; or

(3) The corporation, having failed to effectuate the proposed action,
does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within two (2) months after
the date set for demanding payment.

(b) A dissenter waives the dissenter's right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's demand
in writing under subsection (a) within one (1) month after the corporation made
or offered payment for the dissenter's shares.

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<PAGE> 237

PART 3

JUDICIAL APPRAISAL OF SHARES

48-23-301. Court action.

(a) If a demand for payment under sec. 48-23-209 remains unsettled, the
corporation shall commence a proceeding within two (2) months after receiving
the payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the two-month period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.

(b) The corporation shall commence the proceeding in a court of record
having equity jurisdiction in the county where the corporation's principal
office (or, if none in this state, its registered office) is located. If the
corporation is a foreign corporation without a registered office in this state,
it shall commence the proceeding in the county in this state where the
registered office of the domestic corporation merged with or whose shares were
acquired by the foreign corporation was located.

(c) The corporation shall make all dissenters (whether or not residents of
this state) whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.

(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) is plenary and exclusive. The court may appoint one (1) or
more persons as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described in the order
appointing them, or in any amendment to it. The dissenters are entitled to the
same discovery rights as parties in other civil proceedings.

(e) Each dissenter made a party to the proceeding is entitled to judgment:

(1) For the amount, if any, by which the court finds the fair value of
the dissenter's shares, plus accrued interest, exceeds the amount paid by
the corporation; or

(2) For the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under sec. 48-23-208.

48-23-302. Court costs and counsel fees.

(a) The court in an appraisal proceeding commenced under sec. 48-23-301
shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court. The court shall
assess the costs against the corporation, except that the court may assess costs
against all or some of the dissenters, in amounts the court finds equitable, to
the extent the court finds the dissenters acted arbitrarily, vexatiously, or not
in good faith in demanding payment under sec. 48-23-209.

(b) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable against:

(1) The corporation and in favor of any or all dissenters if the court
finds the corporation did not substantially comply with the requirements of
part 2 of this chapter; or

(2) Either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this chapter.

(c) If the court finds that the services of counsel for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the corporation, the court may
award to these counsel reasonable fees to be paid out of the amounts awarded to
the dissenters who were benefited.

6
<PAGE> 238

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Equity Inns Charter obligates Equity Inns to indemnify and advance
expenses to present and former directors and officers to the maximum extent
permitted by Tennessee law. The Tennessee Business Corporation Act, as amended
("TBCA"), permits a corporation to indemnify its present and former directors
and officers, among others, against judgments, settlements, penalties, fines or
reasonable expenses incurred with respect to a proceeding to which they may be
made a party by reason of their service in those or other capacities if (i) such
persons conducted themselves in good faith, (ii) they reasonably believed, in
the case of conduct in their official capacities with the corporation, that
their conduct was in its best interests and, in all other cases, that their
conduct was at least not opposed to its best interests and (iii) in the case of
any criminal proceeding, they had no reasonable cause to believe that their
conduct was unlawful.

Any indemnification by Equity Inns pursuant to the provisions of the
Charter described above shall be paid out of the assets of Equity Inns and shall
not be recoverable from the shareholders. To the extent that the foregoing
indemnification provisions purport to include indemnification for liabilities
arising under the Securities Act of 1933, in the opinion of the Securities and
Exchange Commission such indemnification is contrary to public policy and is,
therefore, unenforceable. Equity Inns currently purchases director and officer
liability insurance for the purpose of providing a source of funds to pay any
indemnification described above.

The TBCA permits the charter of a Tennessee corporation to include a
provision eliminating or limiting the personal liability of its directors to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except that such provision cannot eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of the law
or (iii) for unlawful distributions that exceed what could have been distributed
without violating the TBCA or the corporation's charter. The Equity Inns Charter
contains a provision eliminating the personal liability of its directors or
officers to Equity Inns or its shareholders for money damages to the maximum
extent permitted by Tennessee law from time to time.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
*2 -- Asset Sale Agreement and Plans of Mergers among RFS Hotel
Investors, Inc., RHI Acquisition, Inc., Equity Inns, Inc.,
RFS Partnership, L.P. and Equity Inns Partnership, L.P.
dated as of April 21, 1998 (attached to the Joint Proxy
Statement/Prospectus as Annex I)
3.1(a) -- Charter of Equity Inns, Inc. (incorporated by reference to
Exhibit 3.1 to Equity Inns, Inc.'s Registration Statement on
Form S-11 (Registration No. 33-73304))
3.1(b) -- Articles of Amendment to the Charter of Equity Inns, Inc.
(incorporated by reference to Exhibit 3.1 to Equity Inns,
Inc.'s Current Report on Form 8-K (Registration No. 0-23290)
filed with the Securities and Exchange Commission on April
27, 1995)
3.1(c) -- Articles of Amendment to the Charter of Equity Inns, Inc.
(incorporated by reference to Exhibit 3.1 to Equity Inns,
Inc.'s Current Report on Form 8-K (Registration No. 0-23290)
filed with the Securities and Exchange Commission on May 31,
1996)
3.1(d) -- Second Amended and Restated Charter of Equity Inns, Inc.
(incorporated by reference to Exhibit 3.1 to Equity Inns,
Inc.'s Current Report on Form 8-K dated October 15, 1997
(Registration No. 0-23290) filed with the Securities and
Exchange Commission on October 23, 1997)
</TABLE>

II-1
<PAGE> 239

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.2 -- By-Laws of Equity Inns, Inc. (incorporated by reference to
Exhibit 3.2 to Equity Inns, Inc.'s Registration Statement on
Form S-11 (Registration No. 33-73304))
4.1 -- Form of Share Certificate for Equity Inns, Inc.'s Common
Stock, $.01 par value (incorporated by reference to Exhibit
4.1 to Equity Inns, Inc.'s Registration Statement on Form
S-11 (Registration No. 33-73304))
**5.1 -- Opinion of Baker, Donelson, Bearman & Caldwell
**8.1 -- Opinion of Hunton & Williams as to certain federal income
tax matters
**8.2 -- Opinion of Baker, Donelson, Bearman & Caldwell as to certain
federal income tax matters
10.1 -- Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
reference to Exhibit 10.29(a) to Equity Inns, Inc.'s
Registration Statement on Form S-11 (Registration No.
33-80318))
*23.1(a) -- Consent of Coopers & Lybrand L.L.P. as to Equity Inns, Inc.
*23.1(b) -- Consent of Coopers & Lybrand L.L.P. as to RFS Hotel
Investors, Inc.
*23.2 -- Consent of KPMG Peat Marwick LLP
*23.3 -- Consent of Morgan Keegan & Company, Inc. (included in Annex
II-A to the Joint Proxy Statement/Prospectus)
*23.4 -- Consent of Salomon Smith Barney
**23.5 -- Consent of Hunton & Williams (included in Exhibit 8.1)
**23.6 -- Consent of Baker, Donelson, Bearman & Caldwell (included in
Exhibits 5.1 and 8.2)
*25 -- Powers of Attorney (located on signature pages hereto)
*99.1 -- Form of Equity Inns Proxy
*99.2(a) -- Form of RFS Proxy for holders of RFS Common Stock
*99.2(b) -- Form of RFS Proxy for holders of RFS Preferred Stock
*99.3 -- Consent of Robert M. Solmson to be named as a person about
to become a director
*99.4 -- Consent of Bruce E. Campbell, Jr. to be named as a person
about to become a director
</TABLE>

- ---------------

* Filed herewith.
** To be filed by amendment.

(b) Financial Statement Schedules

No financial statement schedules are required to be filed pursuant to Item
21(b) of this Form.

The fairness opinions of Morgan Keegan & Company, Inc. and Salomon Smith
Barney are included as Annexes II-A and II-B, respectively, to the Joint Proxy
Statement/Prospectus.

UNDERTAKINGS

(a) The undersigned registrant hereby undertakes as follows:

1. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

2. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.

II-2
<PAGE> 240

3. That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

4. That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the registrant undertakes
that such reoffering prospectus will contain the information called for by
the applicable registration form with respect to reofferings by persons who
may be deemed underwriters, in addition to the information called for by
the other items of the applicable form.

5. That every prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for the purposes of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

6. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.

(c) The undersigned registrant hereby undertakes to supply by means of the
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.

II-3
<PAGE> 241

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-4 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Memphis,
State of Tennessee, on the 19th day of May, 1998.

EQUITY INNS, INC.
a Tennessee corporation
(Registrant)

By: /s/ Phillip H. McNeill, Sr.
------------------------------------
PHILLIP H. MCNEILL, SR.
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
Phillip H. McNeill, Sr. and Howard A. Silver, and each or either of them, his
true and lawful attorney-in-fact with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and to cause the same to be filed, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting to said attorneys-in-fact
and agents, and each of them, full power and authority to and perform each and
every act and thing whatsoever requisite or desirable to be done in and about
the premises, as fully to all intents and purposes as the undersigned might or
could do in person, hereby ratify and confirming all acts and things that said
attorneys-in-fact and agents, or either of them, or their substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 19th day of May, 1998 by the
following persons in the capacities indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ Phillip H. McNeill, Sr. Chairman of the Board, President and Chief
- ----------------------------------------------------- Executive Officer (Principal Executive
PHILLIP H. MCNEILL, SR. Officer)

/s/ James A. Thomas, III Director
- -----------------------------------------------------
JAMES A. THOMAS, III

/s/ William W. Deupree, JR. Director
- -----------------------------------------------------
WILLIAM W. DEUPREE, JR.

/s/ Joseph W. McCleary Director
- -----------------------------------------------------
JOSEPH W. MCLEARY

/s/ Howard A. Silver Executive Vice President, Secretary, Treasurer
- ----------------------------------------------------- and Chief Financial Officer (Principal
HOWARD A. SILVER Accounting Officer and Principal Financial
Officer)
</TABLE>

II-4
<PAGE> 242

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <C> <S>
*2 -- Asset Sale Agreement and Plans of Mergers among RFS Hotel
Investors, Inc., RHI Acquisition, Inc., Equity Inns, Inc.,
RFS Partnership, L.P. and Equity Inns Partnership, L.P.
dated as of April 21, 1998 (attached to the Joint Proxy
Statement/Prospectus as Annex I)
3.1(a) -- Charter of Equity Inns, Inc. (incorporated by reference to
Exhibit 3.1 to Equity Inns, Inc.'s Registration Statement on
Form S-11 (Registration No. 33-73304))
3.1(b) -- Articles of Amendment to the Charter of Equity Inns, Inc.
(incorporated by reference to Exhibit 3.1 to Equity Inns,
Inc.'s Current Report on Form 8-K (Registration No. 0-23290)
filed with the Securities and Exchange Commission on April
27, 1995)
3.1(c) -- Articles of Amendment to the Charter of Equity Inns, Inc.
(incorporated by reference to Exhibit 3.1 to Equity Inns,
Inc.'s Current Report on Form 8-K (Registration No. 0-23290)
filed with the Securities and Exchange Commission on May 31,
1996)
3.1(d) -- Second Amended and Restated Charter of Equity Inns, Inc.
(incorporated by reference to Exhibit 3.1 to Equity Inns,
Inc.'s Current Report on Form 8-K dated October 15, 1997
(Registration No. 0-23290) filed with the Securities and
Exchange Commission on October 23, 1997)
3.2 -- By-Laws of Equity Inns, Inc.(incorporated by reference to
Exhibit 3.2 to Equity Inns, Inc.'s Registration Statement on
Form S-11 (Registration No. 33-73304))
4.1 -- Form of Share Certificate for Equity Inns, Inc.'s Common
Stock, $.01 par value (incorporated by reference to Exhibit
4.1 to Equity Inns, Inc.'s Registration Statement on Form
S-11 (Registration No. 33-73304))
**5.1 -- Opinion of Baker, Donelson, Bearman & Caldwell
**8.1 -- Opinion of Hunton & Williams as to certain federal income
matters
**8.2 -- Opinion of Baker, Donelson, Bearman & Caldwell as to certain
federal income tax matters
10.1 -- Equity Inns, Inc. 1994 Stock Incentive Plan (incorporated by
reference to Equity Inns, Inc.'s Registration Statement on
Form S-11 (Registration No. 33-80318)).
*23.1(a) -- Consent of Coopers & Lybrand L.L.P. as to Equity Inns, Inc.
*23.1(b) -- Consent of Coopers & Lybrand L.L.P. as to RFS Hotel
Investors, Inc.
*23.2 -- Consent of KPMG Peat Marwick LLP
*23.3 -- Consent of Morgan Keegan & Company, Inc. (included in Annex
II-A to the Joint Proxy Statement/Prospectus.
*23.4 -- Consent of Salomon Smith Barney
**23.5 -- Consent of Hunton & Williams (included in Exhibit 8.1)
**23.6 -- Consent of Baker, Donelson, Bearman & Caldwell (included in
Exhibits 5.1 and 8.2)
*25 -- Powers of Attorney (located on signature pages hereto)
*99.1 -- Form of Equity Inns Proxy
*99.2(a) -- Form of RFS Proxy for holders of RFS Common Stock
*99.2(b) -- Form of RFS Proxy for holders of RFS Preferred Stock
*99.3 -- Consent of Robert M. Solmson to be named as a person about
to become a director
*99.4 -- Consent of Bruce E. Campbell, Jr. to be named as a person
about to become a director
</TABLE>

- ---------------

* Filed herewith.
** To be filed by amendment.

<PAGE> 1

EXHIBIT 23.1(A)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement
of Equity Inns, Inc. on Form S-4 of our report dated January 22, 1998 on our
audits of the consolidated financial statements and financial statement schedule
of Equity Inns, Inc. as of December 31, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997 which report is included in Equity
Inns' Annual Report on Form 10-K. We also consent to the reference to our firm
under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.

COOPERS & LYBRAND L.L.P.

Memphis, Tennessee
May 18, 1998

<PAGE> 1

EXHIBIT 23.1(B)

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in this Form S-4 of our report
dated January 20, 1998 except for Note 13 as to which the date is February 28,
1998 on our audits on the consolidated financial statements and financial
statement schedule of RFS Hotel Investors, Inc as of December 31, 1997 and 1996,
and for each of the three years in the period ended December 31, 1997 which
report is included in RFS Hotel Investors, Inc.'s Annual Report on Form 10-K. We
also consent to the references to our firm under the caption "Experts."

/s/ Coopers & Lybrand L.L.P.

COOPERS & LYBRAND L.L.P.

Memphis, Tennessee
May 15, 1998

<PAGE> 1

EXHIBIT 23.2

ACCOUNTANT'S CONSENT

The Board of Directors
RFS, Inc.:

We consent to incorporation by reference in the Registration Statement on
Form S-4 of Equity Inns, Inc. of our report dated January 23, 1998, relating to
the consolidated balance sheets of RFS, Inc. and subsidiary as of December 31,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended, which report is
included in the 1997 annual report on Form 10-K of RFS Hotel Investors, Inc.

/s/ KPMG Peat Marwick LLP
Memphis, Tennessee
May 18, 1998

<PAGE> 1

EXHIBIT 23.4

[SALOMON SMITH BARNEY LETTERHEAD]

The Board of Directors
RFS Hotel Investors, Inc.
850 Ridge Lake Boulevard
Suite 220
Memphis, Tennessee 38120

Members of the Board:

We hereby consent to the (i) inclusion of our opinion letter to the Board
of Directors of RFS Hotel Investors, Inc. ("RFS"), dated April 21, 1998, as
Annex II-B to the Joint Proxy Statement/Prospectus of Equity Inns, Inc. ("Equity
Inns") and RFS, dated May 20, 1998, relating to the proposed transaction
involving RFS and Equity Inns and (ii) references made to our firm and such
opinion in such Joint Proxy Statement/Prospectus under the captions entitled
"SUMMARY -- Opinions of Financial Advisors," "THE REIT MERGER -- Background of
the REIT Merger," "-- RFS' Reasons for the Merger; Recommendations of the RFS
Board" and "Opinion of Financial Advisor of RFS." In giving such consent, we do
not admit that we come within the category of persons whose consent is required
under, and we do not admit that we are "experts" for purposes of, the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.

By: /s/ Salomon Smith Barney
------------------------------------
SALOMON SMITH BARNEY

New York, New York
May 20, 1998

<PAGE> 1

EXHIBIT 99.1
EQUITY INNS, INC.
1998 SPECIAL MEETING OF SHAREHOLDERS

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF EQUITY INNS, INC.

The undersigned hereby appoints Phillip H. McNeill, Sr., and Howard A.
Silver, and each of them, attorneys and agents with full power of substitution
to vote all shares of common stock, $.01 par value per share ("Equity Inns
Common Stock") of Equity Inns, Inc. ("Equity Inns"), which the undersigned would
be entitled to vote if personally present at the special meeting of the
shareholders (the "Special Meeting") of Equity Inns held at the corporate
offices of Equity Inns on July , 1998 at 2:00 p.m. local time, and including at
any adjournments or postponements thereof as follows:

THE BOARD OF DIRECTORS OF EQUITY INNS RECOMMENDS A VOTE FOR APPROVAL OF THE
PROPOSALS SET FORTH BELOW UNDER ITEMS 1-3.

1. Proposal (the "Merger Proposal") to approve the Asset Sale Agreement and
Plans of Mergers, dated as of April 21, 1998 (the "Merger Agreement") among RFS
Hotel Investors, Inc. ("RFS"), Equity Inns, RHI Acquisition, Inc., a wholly
owned subsidiary of Equity Inns ("Merger Sub"), RFS Partnership, L.P. ("RFS
OP"), and Equity Inns Partnership, L.P. ("Equity Inns OP"), and the issuance of
shares of Equity Inns Common Stock, in connection with the proposed merger of
RFS with and into Merger Sub and upon redemption of units of partnership
interest in Equity Inns OP issued in connection with the merger of RFS OP with
and into Equity Inns OP;

[ ] FOR [ ] AGAINST [ ] ABSTAIN

2. Proposal (the "Charter Amendment Proposal") to amend Article 5 of Equity
Inns' Second Amended and Restated Charter to increase the number of authorized
shares of Equity Inns Common Stock from 100,000,000 shares to 200,000,000
shares, which proposal is conditioned upon approval of the Merger Proposal;

[ ] FOR [ ] AGAINST [ ] ABSTAIN

3. Proposal (the "Plan Amendment Proposal") to amend Equity Inns, Inc. 1994
Stock Incentive Plan to increase the aggregate number of shares of Equity Inns
Common Stock reserved for issuance thereunder from 2,300,000 shares to 6,400,000
shares and to increase the number of those shares that may be issued as
restricted stock awards and in settlement of performance shares from 350,000 to
960,000, which proposal is conditioned upon approval of the Merger Proposal; and

[ ] FOR [ ] AGAINST [ ] ABSTAIN

4. In their discretion, the proxies (and if the undersigned is a proxy, any
substitute proxies) are authorized to vote upon such other business that may
properly come before the Special Meeting or any adjournments or postponements
thereof.

(Continued and to be dated and signed on reverse side)

(Continued from other side)

The undersigned hereby revokes any other proxy or proxies heretofore given to
vote or act with respect to the shares of Equity Inns Common Stock held by the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this proxy will be voted as directed above.
If a proxy is submitted and no directions are given, the proxy will be voted for
the approval of the Merger Proposal and for the additional Proposals referred to
herein. Nonvoting shares (including broker non-votes) and abstentions will have
the effect of a vote against the Merger Proposal and will have no effect on the
vote to approve the Charter Amendment Proposal and the Plan Amendment Proposal.

You may revoke your proxy at any time before it is voted.

This proxy will be valid until the sooner of one year from the date indicated
below and the completion of the Special Meeting.

DATED:
, 1998
--------------------------------

PLEASE SIGN EXACTLY AS NAME
APPEARS ON THIS PROXY.

--------------------------------
(Signature)

--------------------------------
(Signature, if held jointly)

--------------------------------
(Title)

WHEN SHARES ARE HELD JOINTLY,
JOINT OWNERS SHOULD EACH SIGN.
EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC., SHOULD INDICATE
THE CAPACITY IN WHICH SIGNING.

IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE!
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL HOWARD A. SILVER,
SECRETARY, AT
(901) 761-9651.

<PAGE> 1

EXHIBIT 99.2(A)
RFS HOTEL INVESTORS, INC.
1998 SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RFS HOTEL INVESTORS, INC.

The undersigned hereby appoints Robert M. Solmson and Michael J. Pascal, and
each of them, attorneys and agents with full power of substitution to vote all
shares of common stock, $.01 par value per share ("RFS Common Stock") of RFS
Hotel Investors, Inc. ("RFS"), which the undersigned would be entitled to vote
if personally present at the special meeting of the shareholders (the "Special
Meeting") of RFS held at the corporate offices of RFS on July , 1998 at 2:00
p.m. local time, and including at any adjournments or postponements thereof, as
follows:

THE BOARD OF DIRECTORS OF RFS RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER
PROPOSAL SET FORTH BELOW.

1. Proposal (the "Merger Proposal") to approve the Asset Sale Agreement and
Plans of Mergers dated as of April 21, 1998, by and among RFS, Equity Inns,
Inc., RHI Acquisitions, Inc., RFS Partnership, L.P., and Equity Inns
Partnership, L.P.; and

[ ] FOR [ ] AGAINST [ ] ABSTAIN

2. In their discretion, the proxies (and if the undersigned is a proxy, any
substitute proxies) are authorized to vote upon such other business as may
properly come before the Special Meeting or any adjournment or postponement
thereof.

The undersigned hereby revokes any other proxy or proxies heretofore given to
vote or act with respect to the shares of RFS Common Stock held by the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this proxy will be voted as directed above.
If a proxy is submitted and no directions are given, the proxy will be voted for
the approval of the Merger Proposal. Nonvoting shares (including broker
non-votes) and abstentions will have the effect of a vote against the Merger
Proposal.

You may revoke your proxy at any time before it is voted.

(continued and to be signed on reverse side)

(continued from other side)

This proxy will be valid until the sooner of one year from the date indicated
below and the completion of the Special Meeting.

DATED: , 1998
--------------------

PLEASE SIGN EXACTLY AS NAME
APPEARS ON THIS PROXY.

--------------------------------
(Signature)

--------------------------------
(Signature, if held jointly)

--------------------------------
(Title)

WHEN SHARES ARE HELD JOINTLY,
JOINT OWNERS SHOULD EACH SIGN.
EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC., SHOULD INDICATE
THE CAPACITY IN WHICH SIGNING.

IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE!
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL MICHAEL J. PASCAL,
SECRETARY, AT (901) 767-7005.

<PAGE> 1

EXHIBIT 99.2(B)
RFS HOTEL INVESTORS, INC.
1998 SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
RFS HOTEL INVESTORS, INC.

The undersigned hereby appoints Robert M. Solmson and Michael J. Pascal, and
each of them, attorneys and agents with full power of substitution to vote all
shares of Series A preferred stock, $.01 par value per share ("RFS Preferred
Stock") of RFS Hotel Investors, Inc. ("RFS"), which the undersigned would be
entitled to vote if personally present at the special meeting of the
shareholders (the "Special Meeting") of RFS held at the corporate offices of RFS
on July , 1998 at 2:00 p.m. local time, and including at any adjournments or
postponements thereof, as follows:

THE BOARD OF DIRECTORS OF RFS RECOMMENDS A VOTE FOR APPROVAL OF THE MERGER
PROPOSAL SET FORTH BELOW.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

The undersigned hereby revokes any other proxy or proxies heretofore given to
vote or act with respect to the shares of RFS Preferred Stock held by the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this proxy will be voted as directed above.
If a proxy is submitted and no directions are given, the proxy will be voted for
the approval of the Merger Proposal. Nonvoting shares (including broker
non-votes) and abstentions will have the effect of a vote against the Merger
Proposal.

You may revoke your proxy at any time before it is voted.

(continued and to be signed on reverse side)

(continued from other side)

This proxy will be valid until the sooner of one year from the date indicated
below and the completion of the Special Meeting.

DATED: , 1998
--------------------

PLEASE SIGN EXACTLY AS NAME
APPEARS ON THIS PROXY.

--------------------------------
(Signature)

--------------------------------
(Signature, if held jointly)

--------------------------------
(Title)

WHEN SHARES ARE HELD JOINTLY,
JOINT OWNERS SHOULD EACH SIGN.
EXECUTORS, ADMINISTRATORS,
TRUSTEES, ETC., SHOULD INDICATE
THE CAPACITY IN WHICH SIGNING.

IMPORTANT: PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE!
IF YOU NEED ASSISTANCE WITH THIS PROXY CARD, PLEASE CALL MICHAEL J. PASCAL,
SECRETARY, AT (901) 767-7005.

<PAGE> 1

EXHIBIT 99.3

Consent of Person About to Become a Director
(pursuant to Rule 438 under the Securities Act of 1933, as amended)

In connection with a Form S-4 filed by Equity Inns, Inc. with the
Securities and Exchange Commission (File No. 333- ) (the "Registration
Statement"), I, Robert M. Solmson, expect to be elected to the Board of
Directors of Equity Inns, Inc., as described therein. As of the effective time
of the Registration Statement, I will not be a member of the Board of Directors
of Equity Inns, Inc., and I am not required to sign the Registration Statement.

I hereby consent to being named in the Registration Statement as a future
member of Equity Inns, Inc.'s Board of Directors, and to the filing of the
Registration Statement as contemplated by Equity Inns, Inc.

/s/ Robert M. Solmson

--------------------------------------
ROBERT M. SOLMSON

May 15, 1998

<PAGE> 1

EXHIBIT 99.4

Consent of Person About to Become a Director
(pursuant to Rule 438 under the Securities Act of 1933, as amended)

In connection with a Form S-4 filed by Equity Inns, Inc. with the
Securities and Exchange Commission (File No. 333- ) (the "Registration
Statement"), I, Bruce E. Campbell, Jr., expect to be elected to the Board of
Directors of Equity Inns, Inc., as described therein. As of the effective time
of the Registration Statement, I will not be a member of the Board of Directors
of Equity Inns, Inc., and I am not required to sign the Registration Statement.

/s/ Bruce E. Campbell, Jr.

--------------------------------------
BRUCE E. CAMPBELL, Jr.

May 15, 1998